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TMI Blog2017 (5) TMI 834X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of gold in 1999 which was quite similar to the basis taken by the valuer in the revised valuation report of Mr.P.K.Desai dated 10/08/2011 submitted during the course of assessment proceedings. In such case, where there is adequate enquiry and observations of the Ld.AO are clearly mentioned in the body of assessment order and view taken by him is permissible in law such order cannot be said to be erroneous or prejudicial to the interest of Revenue. CIT-A has wrongly assumed the jurisdiction u/s.263 of the AcT - Decided in favour of assessee. - ITA No.1710/Ahd/2014 - - - Dated:- 15-5-2017 - SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Assessee : Mr. Suresh Modiani, AR For The Revenue : Ms. Vibha Bhalla, CIT.DRORDER PER MANISH BORAD, ACCOUNTANT MEMBER: This appeal by the Assessee for Asst. Year 2009-10 is directed against the order u/s.263 of the Income Tax Act, 1961 (in short the Act ) of the Learned Commissioner of Income Tax-I, Baroda (in short Ld.CIT ), framed on 25/03/2014 by Commissioner of Income-tax-I, Baroda. 2. Through the sole ground, assesse has challenged the validity of the order of Ld.CIT(A) u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit should have been allowed accordingly. Accordingly Ld.CIT issued notice u/s.263 of the Act on 18/12/2013 are read as follows: It was found that the assessment order passed u/s 143(3) of the Act dated 29.09.2011 by the Assessing Officer, Asst. Commissioner of Income Tax, Circle-2(2), Baroda for A.Y. 2009-10 was erroneous in so far as it was prejudicial to the interest of the revenue on account of the following: 1. Whereas it is noticed that you had computed LTCG on sale of land at Revenue survey no 165 of Gotri, Vadodara. The land hold (admeasuring 6,677 sq mts) jointly with your brother and sold it for consideration of ₹ 1,97,60,000/- on 22.09.2008. You had shown fair market value of the said land at Rs.l9,36,300/- as on 01.04,. 1981 on the basis of valuation report of a private valuer who had taken rate of then un-irrigated agricultural land at 290 per sq mt. the same was accepted by Assessing Officer and LTCG was worked out at ₹ 25,46,017/- after allowing deduction of ₹ 11,99,359/- u/s. 54F. It was however noticed that in his valuation report, the private valuer had stated that as Jantri rate was prescribed only from 01..04.2006 for the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above issue is based on Audit Objection raised by the Revenue Audit party. We may be permitted to submit on facts of the case and in view of direct decisions available on the subject, that the above matter does not warrant any action u/s 263. It seems full facts have not been placed before your honour. Kindly permit us to elaborate on the above point as below: ( i) The assessee had sold an agricultural land bearing RS No. 165 situated at Gotri, Vadodara. Since the land was acquired prior to 01.04.1981, the Fair Market Value as on 01.04.1981 was adopted for the purpose of computation of capital a din tax. ii) For filing the return of income, assessee obtained a Valuation Report according to which such value as on 01,04.1981 mas ₹ 380/- per square meter. During the Assessment proceedings, the Assessing Officer stated that in case of another assessee assessed by him earlier, the FMV as on 01.04.1981 adopted was less than the value adopted by the valuer of the assessee. Hence, at the instance of the Assessing Officer, the assessee approached another Valuer and obtained another valuation report. ( ii) During the course of assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken mere fact that different view could be taken, should not have been basis for an action under section 263.The Commissioner was unjustified in arriving at a conclusion that order passed by ITO was erroneous and prejudicial to interest of revenue. Copies of orders in the above referred cases are enclosed, marked-as: Annexure-2 5. After going through the submission of assessee Ld.CIT inclined to held that order passed by the Ld.AO dated 29/09/2011 suffers from serious infirmities and error and prejudicial to the interest of Revenue. Ld.CIT accordingly set aside the order of Ld.AO for framing afresh after working out capital gain by observing as follows: 3.1. I have examined this contention and as noted above, I Find that the long term capital gains worked out by the Assessing Officer on the basis of registered valuer's report contains basic infirmities. Since there is glaring error in the registered valuer's report making that report the basis of working of capital gains has resulted into an erroneous order which is prejudicial to the interest of revenue. Merely because an erroneous order has been passed after due deliberations, it will not take the said order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view the above facts, it is hereby held that the order passed by the Assessing Officer suffers from serious infirmities and error which is also prejudicial to the interest of revenue. Accordingly the order is set aside to be framed afresh after working out capital gains in view of the above discussion and after bringing evidence on record as also giving assessee an opportunity of being heard. 6. Aggrieved assessee is now in appeal before the Tribunal. 7. Ld.Counsel for the assessee submitted that the appellant sold 50% share of agriculture land jointly held with his brother and 50% share of the sale consideration is ₹ 93,80,000/- which is not disputed at any stage. Agriculture land in question which was acquired prior to 01/04/1981. Assessee in order to calculate the index cost of acquisition applying the rate of ₹ 380 Per sq.mt. as on 01/04/1981 on the basis of valuation report of the valuer M/s. Space Age Consulting. During the assessment proceedings after discussion with the Ld.AO a fresh valuation report was obtained from Mr.P.K. Desai who valued the land at ₹ 290 per sq.mt. as on 01/04/1981 in place of ₹ 380 per sq.mt mentioned in the earlier va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect that the jantri value adopted in case of seller cannot be used for assessment of purchaser to presume that he paid extra consideration. These decisions include the following: - ITO V. Optec Disc Manufacturing -11 DTR 2640- ITAT Chandigarh Bench - CIT V. Fitwell Logic System P. Ltd. 1 ITR 286-ITAT Delhi Bench - CIT V. Smt. Anshu Jain- 36 SOT 263- ITAT Jaipur Bench - CIT V. Smt. Shweta Bhuchar- 192 Taxman 67-Punjab and Haryana High Court. - CIT V. Chandni Bhuchar-323 ITR 510-Punjab and Haryana High Court - CIT V. Raj Kumar Bimla Devi -279 ITR 360-Allahabad High Court - ITO V. Harley Street Pharmaceutical Ltd.- 38 SOT 486-ITAT Ahmedabad Bench - ITO V. Venu Protein Industries (195 Taxman 14(Magazine)-ITAT Ahmedabad Bench. - Rekhaben Rajendra Shah V ACIT IT Appeal No.3069 (Ahd) of 2008 dated 9-4-2010-ITAT Ahmedabad Bench - Inderlok Hotels P. Ltd. V. ITO- 32 SOT 419-ITAT Mumbai Bench 7.2 Ld.Counsel further referred and relied on the judgment of Hon ble High Court in case of CIT V/s Amit Corporation(2012) 21 Taxman.com 64 (Guj.), CIT V/s Arvind Jewellers(2002) 124 Taxman 615(Guj.) and CIT V/s Sarvana Developers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antri rate of land in question as on 01/04/1999 wherein per sq.mt. of land stood at ₹ 220 per sq.mt. Ld.CIT was of the view that assessee should have calculated the index cost by taking the basis of rate as on 01/04/1999 and therefore Ld.AO order u/s.143(3) of the Act is erroneous and prejudicial to the interest of Revenue. 9.1 Now before moving further to examine as to whether Ld.CIT has correctly assumed power u/s.263 of the Act, we find it necessary to first go through the ratio laid down by the Hon ble Supreme Court in the case of Malabar Industrial Company 243 ITR 83 relating to justification/validity of power exercised by Ld.CIT u/s.263 of the Act wherein Hon ble Apex court as observe as follows: A bare reading of provisions of section 263 of the Income-tax Act, 1961 makes it clear that the prerequisite to exercise of jurisdiction by the CIT suo motu under it, is that the order of the (TO is erroneous insofar as it is prejudicial to the interests of the Revenue. The CIT has to be satisfied of twin conditions, namely, (i) the. order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /1981 by the valuer, the quality of land and basis of reasonability of the adopting the rate for valuation purpose. In reply to this specific query assessee submitted letter dated 22/09/2011. The content of this letter are reproduce below: Apropos to the subject matter and reference and as per instructions and authority from our above referred valued client, most respectfully we submit as under: 1.Please find enclosed a Valuation Report dated 10.08.2011 in respect pf Agricultural land bearing RS No. 165 situated, at Gotri, Vadodara, The same is marked as Annexure1. 2. At the time of filing the return of Income, your assessee had offered tax on long term capital gain (LTCG) on sale of the said agricultural land on the basis of valuation report dated 08.03.2008. As per this valuation report the Fair Market Value (FMV) assessed as on 01.04.1981 for the purpose of LTCG was ₹ 380 per sq. mts. A copy of this report was furnished vide our submission dated 28.01.2011. 3.As per the Valuation Report dated 10.08.2011 the FMV assessed as on 11.04.1981 is ₹ 290 per sq. mts Without prejudice to the valuation report dated 08.03.2008, the assessee offers t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... going through the above series of events occurred during the course of assessment proceedings we observe that to a specific query raised during the assessment proceedings the assessee has given a specific reply which was accepted by the Ld.AO which resulted in fetching more Revenue to the income tax department because of applying the rate of land as on 01/04/1981 at ₹ 290 per sq.mt. as against ₹ 380 per sq.mt. originally shown by the assessee in the income tax return. We further observe that the Jurisdictional High Court in case of CIT V/s Amit Corporation (supra) has held that during course of framing of assessment, Assessing Officer had access to all records of assessee, and after perusing said records, he framed assessment, said assessment could not be re-opened in exercise of revision power under section 263 for making further inquiries . 11.1 We further observe in jurisdictional High Court in case of CIT V/s. Arvind Jewellers (supra) wherein it was held that It was held that since material was there on record and said material was considered by ITO and a particular view was taken mere fact that different view could be taken, should not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 251.11/- which is lower than ₹ 299.41/-accepted by the department for the assessment year 2007-08 while concluding the assessment under Section 143(3) of the Act. One mode of computation which we have examined, stated above at para. 14, works out to ₹ 296.68/- per sq. ft. The development charges of ₹ 251.11/- per sq. ft. claimed by the assessee is just and reasonable ate does not result in any loss to the revenue. Thus, the CIT invoking the provisions of Section 263 of the Act, is uncalled for as the order passed by the Assessing Officer is no way prejudicial to the interest of the revenue. The revenue has miserably failed to satisfy us that the valuation of the work-in-progress accepted by the Assessing Officer, is erroneous and prejudicial to the interest of the revenue. Yet another important aspect which is significant to notice is that the Assessing Officer, accepting the valuation of the work-in-progress of the assessee for the assessment year 2007-08, while concluding the assessment under Section 143(3) of the Act. CIT, committed an error in taking the amount incurred in the current year of ₹ 4,12,60,000/- and dividing it by entire area of the project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. Is one of them is absent - if the order of the ITO is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to s. 263(1) of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the Revenue's is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not (conferred) to loss of tax. 19. In the light of the Judgments discussed above, we are of the firm view that the twin test propounded by the Hon'ble Courts for invoking the provision of Section 263 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases where the order is passed by the Assessing Officer is without making inquiries or verifications but the same is not applicable to the case on hand. 23. For the foregoing reasons, the substantial questions of law raised in both the appeals are answered in favour of the assessee and against the revenue. Accordingly, the appeals stand dismissed. 13. Respectfully following the principles laid down by Hon ble Apex Court in Malabar Industrial Company (supra) judgment of Hon ble Jurisdictional High Court and Hon ble Karnataka High Court as discussed above and considering the totality of the facts as discussed above we are of the considered opinion that Ld.CIT has wrongly assumed the jurisdiction u/s.263 of the Act and impugned order u/s.263 of the Act deserves to be quashed. Because, assessment order was passed by the Ld.AO after taking into consideration all the details and conducting a proper inquiry. We are therefore of the view that assessment order u/s.143(3) of the Act dated 29/09/2011 is neither erroneous nor prejudicial to the interest of Revenue and thus needs to be restored back. Accordingly \the order of Ld.CIT u/s.263 of the Act dated 25/03/2014 is quashed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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