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TMI Blog2016 (3) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... ion u/s.263 should not be upheld. In view of the above discussion, we allow the appeal of the assessee and quash the order passed by the ld. Commissioner under section 263 of the Income Tax. Revision u/s 263 - operation of weighbridge and income therefrom wrongly mentioned as per CIT(A) - as per CIT(A) expenditure is in higher side as compared to income from the operation of weigh-bridge - Held that:- The assessee has placed on record computation of income, details of expenditure and all other details called for by the AO. The assessee has an income of ₹ 906/- under the head “Business Income”. This income was earned by the assessee from renting of weigh-bridge. In our opinion, the ld.Commissioner was of the view that against an income of ₹ 906/- from the operation of weigh-bridge, the expenditure of ₹ 2,98,212/- towards salary and ₹ 1,16,067/- towards depreciation of weigh-bridge are prima facie on the higher side and this aspect has been accepted by the AO without verification. In our opinion, the assessee has placed on record the details. If the logic of the ld.Commissioner is accepted that against a miniscule income, expenses of more than ₹ 4,16, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Date :18th September, 2014 To, Principal Officer Jay Agriculture Horticulture Products P. Ltd. Ambuja Tower, Opp. Memnagar Satation Vijay Char Rasta Navrangpura Ahemdabad. Sir, Sub: Notice u/s.263 of the I.T.Act 1961 A.Y.2010-11. Kindly refer to the above. 1. The assessee filed its return of income for A.Y.2010-11 on 28 Sept 2010 declaring income of ₹ 9100/-. The assessee is a company which has not commenced its business during the AY 2010-11 and has only Long Term Capital Gain during the year. The assessment u/s.143(3) of the Act was finalized on 31/10/2012 by the ITO.Wd.4(2), Ahmedabad accepting the returned income at ₹ 9,100/-. 2. A perusal of the case records, shows that : i) In computation of income, assessee computed book profit of ₹ 2,07,15,478/- and tax liability of ₹ 36,33,544/- (including interest). Assessee claimed to have payment made as ₹ 34,00,000/- as advance tax payment and ₹ 2,35,000/- as self-assessment tax. However, no proof in this respect was furnished by assessee, ii) In the assessment order, the income was computed at ₹ 79,100/- without any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inquiry was made to check veracity of assessee's claim w.r.t the date and quantity of acquisition of shares or w.r.t the date and quantity of buyback offer in the company in which assessee claimed to have purchased equity shares, vi) Since the acquisition of shares pertained to foreign company, inquiry ought to have been made w.r.t the source of investment and whether such investment was made with RBI approval and on what terms and conditions. 4. Clearly, all the above mentioned factors ought to have been verified by the AO before finalization of the assessment proceedings and failure to do so resulted in non-assessment of the profit from the sale of equity shares. 5. Considering the facts and circumstances as mentioned above, it is clearly established that the order dated 31/10/2012 passed by the ITO. Wd.4(2), Ahmedabad is erroneous in so far as it is prejudicial to the interest of Revenue. 6. You are, therefore, hereby given an opportunity to represent your case and show cause as to why the assessment order dated 31.10.2012 should not be set aside and income assessable to tax be modified to the extent of under assessment for the year under consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copy of intimation filed by company for buyback of shares to RBI in compliance to FEMA dated 08-07-09 18 13 Copy of abstract of article of DTAA 19 20 14 Copy of computation of income, tax challans and Form no. 26AS 21 to 26 6. After analysis of the record, the ld.Commissioner has held that the AO failed to carry out adequate inquiry, and therefore, the assessment order is erroneous and prejudicial to the interest of the Revenue. Accordingly, the ld.Commissioner has set aside the assessment order with direction to the AO to pass a fresh assessment order determining the total taxable income of the assessee. While impugning the order of the ld.Commissioner, ld.counsel for the assessees has raised three fold submissions, viz. (a) That there is a distinction between inadequacy or lack of inquiry. The inadequacy of inquiry cannot be a ground to take action under section 263 of the Income Tax, because if the AO after conducting an inquiry adopted one of the possible views in law than that view cannot be disturbed. But, if there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old shares. Remittance letter dated 23.6.2009 was sent by Royale Exports Ltd. through SBI, Colombo. A copy of the letter dated 23.6.2009 with regard to inward remittance of US dollar 5,07,935 was forwarded by the assessee to Punjab National Bank, which is placed at page no.16 of the paper book. The assessee intimated RBI about such buy-back vide letter dated 8.7.2009. In response thereto, certificate of foreign inward remittance was received from PNB as per which, a sum of ₹ 2,46,38,132/- was credited against inward remittance made by Royale Exports Ltd. The cost of 6,25,074 shares sold by assessee work out to ₹ 29,08,205/-, and hence profit on sale of such shares as per the book is ₹ 2,17,29,927/-. The long term capital gain on such shares as per DTAA was taxable in Sri Lanka and not in India. Hence, the assessee was not liable for any capital gain on sale of shares held in Sri Lankan Company. While filing the return of income, the assessee has disclosed all these facts. It offered income at book profit, because, under the regular provision no capital gain was to be taxable in the hands of the assessee. The ld.AO had issued a show cause notice under section 143(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his last proposition, the ld.counsel for the assessee drew our attention towards Article 13(4) and (5) of the DTAA between Republic of India and Republic of Sri Lanka. On strength of this Article, he submitted that gain from alienation of stock/shares of the company may be taxed in the contracting State in which they have been issued. Thus, the gain from buy-back of shares of Sri Lankan is taxable in the country in which they have been issued. Had the ld.Commissioner has considered this issue, then, probably, he would not have set aside the assessment order and restore this issue to the file of the AO, because, ultimately, even after carrying out the whole exercise the result will be the same, which will be adopted by the AO. No long term capital gain would be taxable in the hands of the assessee. In support of his contentions, the decision of the Hon ble Karnataka High Court in the case of CIT vs. D.G. Gopala Gowda, 354 ITR 501 was brought to our notice. 11. On the other hand, the ld.CIT-DR relied upon the order of the CIT and contended that the AO has not carried any inquiry, therefore, CIT was justified in taking cognizance under section 263 of the Income Tax. 12. On our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 14. On a bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be open . 16. In the case of Gee Vee Enterprise vs. Commissioner of Income Tax reported in 99 ITR page 375, the Hon ble court has expounded the approach of ld. Assessing Officer while passing assessment order. The observation of the Hon ble court on pages 386 of journal read as under:- it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and function of the Income-tax Officer is very diffident from that of a civil court. The statement made in a pleading proved by the minimum amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only on adjudicator but also an investigator. He cannot remain passive in the face of the return which is apparently in order but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee or taken on rent. If the same is taken on rent, then kindly submit for each rented premises the details of rent paid and TDS deducted thereon, details of the land lord and submit a copy of rental agreement, if any. 3. The case is fixed for hearing on 22.8.2012 at 1.00, PM. You are requested to submit all the same date. I am also enclosing a notice u/s 142(1) of the IT Act, notice u/s 143(2) of the IT Act dated 5.9.2011 and you are requested to submit any details/explanations/evidences which you want to product in support of various claimed by you in the R/I filed on the same date. Kindly note this is time barring case and hence no adjournment will be granted. In case of non/partial compliance of the notice u/s.142(1), the case will be decided on the facts available on the record. Yours faithfully, Sd/- ITO 18. During the course of the assessment proceedings, the assessee further submitted the details vide letter dated 22.10.2012. It reads as under: Pramodkumar Dad Associates CHARTERED ACCOUNTANTS KAISER 110-112, Ashwamegh Avenue Nr. Mithakhali Under Bridge Navrangpura, AHMEDABAD 380 009 Phone No. (O) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cases of alleged inadequate investigation , it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upheld. The facts in that case are noticed by Hon ble Court in para-2 which read as under: 2. The assessee had purchased a site at Rupena Agrahara in the financial year 1995-96 for a consideration of ₹ 3,46,520/-. He started construction of the building in April 1999. He agreed to sell the said property under the agreement dated 9-9-2000 in unfinished condition. Under the terms of agreement, the assessee should complete the construction of the building before execution of sale deed with the help of the funds provided by the purchaser. On 22-11-2000 the assessee executed a sale deed in favour of the purchaser for a consideration of ₹ 1,38,00,000/-. The assessee received a sum of ₹ 40,00,000/- at the time of agreement. The total cost of construction was ₹ 1,04,30,425/-. Thereafter, the assessee purchased another property at Koramangala. The Assessing Officer computed the income from the long term capital gains at ₹ 22,17,940/- for the sale of the property. However, the assessee was exempted from paying tax since the fund was utilized fully towards purchase of another property at Koramangala. The Commissioner of Income Tax issued notice under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 of the Act. We have gone through the order passed by the revisional authority. It is a very cryptic order. It neither points out an error nor prejudice which has caused to the revenue. After declaring that the order is prejudicial, it refers to the notice being issued to the assessee and the assessee filing reply to the said notice and then review authority feels that it is a matter to be readjudicated by the Assessing Authority and therefore, the matter was remanded for fresh consideration. This is not the way, the revisional authority should exercise their power under Section 263 of the Act. The order of revisional authority should indicate the error committed by the Assessing Authority and consequential prejudice caused to the revenue because of the erroneous order. Unless these two conditions exist, the revisional authority does not get jurisdiction to pass any order under Section 263 of the Act. Once these two conditions are set out in the order, then it is open to the revisional authority to consider the case on merits and pass final order or in its view, requires some adjudication or enquiry, the matter can be remanded to Assessing Authority. But such remand should be on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 263 of the Income Tax. 24. Now we take up the ITA No.606/Ahd/2015. In this case, the assessee has filed its return of income on 12.10.2010 declaring total income at ₹ 6,10,690/-. The case of the assessee was selected for scrutiny assessment and assessment order was passed under section 143(3) on 31.10.2012. The ld.AO has accepted the income disclosed by the assessee. After perusal of the record, the ld.Commissioner harboured a belief that the AO has not conducted adequate inquiry, therefore, he took cognizance under section 263 of the Income Tax Act on 11.12.2014. The contents of the notice issued by the ld.Commissioner read as under: OFFICE OF THE COMMISSIONER OF INCOME-TAX, AHMEDABAD-2 1st Floor, Navjeevan Trust Building B/h. Gujarat Vidyapith, Ahmedabad 380 014. No.CIT-2/ABD/Tech/263/20/2014-15 Date :11th December, 2014 To, Principal Officer Jay Infra Properties P. Ltd. Ambuja Tower, Opp. Memnagar Station Vijay Char Rasta Navrangpura Ahmedabad. Sir, Sub : Notice u/s 263 of the I. T. Act 1961 for A.Y. 2010-11 PAN: AABCJ6891L Kindly refer to the above 1. The assessment u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position of law, we have discussed in the aforegoing paragraphs, while disposing of the appeal being ITA No.605/Ahd/2015. Let us examine the facts of the present case. 26. Notice issued by the ld.AO on 9.8.2012 is available at page no.96 of the paper book, which reads as under: Date : 9 August, 2012 The Principal Officer JAY INFRA PROPERTIES P.LTD. AMBUJA TOWER, OPP MEMANAGAR FIRE STATION NR. VIJAY CHAR RASTA NAVRANGPRUA, AHMEDABAD. Sir/Madam, Sub: Scrutiny assessment for the A.Y.2010-11. Ref: (i) Return of income filed in your own case for A.Y.2010-11 (ii) Notice u/s.143(2) of the IT Act, dated 5.9.2011. Kindly refer to the above. 2. Please find herewith the formal/statutory notice u/s 142(1) of the IT Act 1961, calling for details enclosed with this letter. You are requested to submit the following details in respect of your assessment for A.Y. 2010-11 relevant to F.Y. 2009-10. (a) Copy of Capital Account, Balance Sheet, Profit and Loss Account etc. along with Audit Report (if applicable) along with its enclosures. (b) Copy of return of income. (c) Statement of Total Income. (d) Complete detail ..... X X X X Extracts X X X X X X X X Extracts X X X X
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