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TMI Blog2018 (6) TMI 966X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. - Decided in favour of assessee. - ITA No. 931/Del/2017 - - - Dated:- 18-6-2018 - SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Smt Prem Lata Bansal, Sr. Adv Shri Ram Avatar Bansal, Adv Shri Ydhvir Dalal, Adv For The Revenue : Shri Sanjit Singh, CIT Dr ORDER PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against the order of the ld Pr. Commissioner of Income Tax, Muzaffarnagar passed order u/s 263 of the Act on 05.01.2017 for the Assessment Year 2009-10, holding that assessment order passed by the ld AO u/s 263 of the Act on 20.03.2015 is erroneous and prejudicial to the interest of the revenue. The assessee has raised nine grounds of appeal as under:- 2. The assessee has raised the following grounds of appeal:- 1. That on facts and in the circumstances of the case and in law the Ld. Pr. CIT erred in revising the assessment order passed by Ld. Income Tax Officer u/s 143(3)/147 on 20.03.2015. 2. That the Ld. Pr. CIT has erred in acquiring jurisdiction u/s 263 to revise the assessment order which was subjected to appeal filed by assessee, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure and erred in holding that amended provisions are applicable on the assessment proceedings for year 2009-10 in spite of the amendment on 01.07.2012. 8. That the reference to Valuation Officer by Assessing officer of coowner of the property sold in the year 2009-10 for determination of fair market value as on 01.04.198 is illegal, beyond the preview of section 55A and the valuation report is not applicable for the year 2009-10 due to relevant time provision which are amended subsequently from 01.07.2012. 9. That the power of revision cannot be invoked by Ld. Pr. CIT on a new material which was not before the assessing authority. There is no reference or the valuation report is the part of records of assessment. The material (Valuation Report) which were not in existence at the time the assessment was made but afterwards came into existence in the case of Co-owner (Narendra Kumar Gill) cannot form part of the record of the proceeding of Ld. ITO at the time he passes the order and, accordingly, it cannot be taken into consideration by the, Ld. Pr. CIT for the purposes of invoking his jurisdiction under this section and has exceeded the revisional jurisdiction in passing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission as under:- The applicant is served with the notice u/s 263 to revise the assessment order passed by ITO, Ward-1(2'), Muzaffarnagar u/s 143/147 dated 20.03.2015 on the basis and reason mentioned as:- The valuation of property as on 01.04.1981 has been adopted by the A.O. without considering the report of valuation officer, Meerut In this reference the applicant submits following objections:- ' 1. The assessing officer has not referred for valuation to valuation officer, Meerut under section 55A of the Act. No. reference is placed on records of assessment. The assessment is completed on the basis of valuation report of Govt, approved valuer and valuation given by Tehsildar, Muzaffarnagar as on 01.04.1981. Therefore the reason mentioned in the notice is not relevant to the case ofSmt. Giri Raj Kaur. 2. The reference is made by ITO, Ward 2(1) Muzaffarnagar in the case of Sri Narendra Kumar Gill without acquiring jurisdiction under section 55A by the assessing officer or Narendra Kumar Gill. The provision of section 55A(a) authorize the assessing officer to refer for valuation only when the value as claimed is less than its fair marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by assessing officer. 4. The ld CIT decided the issue vide order dated 05.01.2017 as under: 4. As mentioned in notice issued u/s 263 for the year under consideration, it is obvious that the A.O. has not taken due cognizance of the reason for which the action u/s 147 was initiated. The explanation submitted by the assessee is not found satisfactory as in section 55 A, as amended w.e.f. 01.07.2012, there is no mention of assessment year for which it is applicable. Therefore, the A.O. was empowered to refer the matter of valuation to the DVO by exercising the powers given to him under section 55A, as amended, in all such cases where assessment proceedings were pending as on the date of amendment and also in the cases selected for assessment under scrutiny thereafter. Further, section 55A of the Income Tax Act, 1961 lays down the procedure for determining the fair market value of capital asset. The counsel of the assessee has also relied upon the number of judgments of different Courts, which are not applicable in the case of the assessee as fact of the case of the assessee are different. Hence, the A.O. wflSTmmg-HV applying the cost of acquisition of the property so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessed in his return. 5.2 The Hon'ble Court has further observed as under:- The reason is obvious. The position and function of the Income Tax Officer is very‟ different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted 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 an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duly to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word erroneous in section 263 emerges out of this contract. It is because it is incumbent on the Income Tax Officer to further investigate the facts stated in the return when circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act on the following grounds : i) AO failed to conduct meaningful investigation to determine the total income of the assessee. ii) AO has simply accepted what the assessee had stated in his return. iii) AO failed to examine the case properly on the issue for which the notice u/s 148 was issued and other issues also which renders the assessment order erroneous in so far as it is prejudicial to the interest of revenue. c) In so far as inquiry by the AO is concerned, it is submitted that the AO had made the inquiries in respect of issue for which 148 notice had been issued. d) Reasons are at page 109 which states that as per the information available, assessee had sold an immovable property at a sale consideration of ₹ 50,00,000/- whereas stamp duty had been paid on circle rate at ₹ 1,93,93,650/-. Hence the difference of ₹ 35,98,412/- is taxable u/s 50C of the Income Tax Act. As per sale deed, assessee had 1 /4th share in the property. Hence, assessee had income chargeable to tax of ₹ 35,98,412/- for which it is necessary to issue notice u/s 148 of the Act. e) During the assessment proceeding u/s 143(3) r/w section 147, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not passed in his case. n) The assessee objected to proceeding u/s 263 of the Act and requested to drop the proceeding. However, the Ld. Pr. CIT passed the order-dated 05.01.2017 u/s 263 of the Act, validity of which is under challenge in the present appeal. CONTENTIONS a) That the Ld. CIT has erred in invoking the jurisdiction u/s 263 of the Act. b) That infact during the assessment proceeding u/s 147 of the Act, AO had made full inquiry in respect of sale consideration as well as cost as on 01.04.1981 and thereafter had framed the assessment. Therefore, no jurisdiction u/s 263 can be invoked by the Pr. CIT. c) Ld. Pr. CIT has alleged that the Assessing Officer had adopted the valuation of property as on 01.04.1981 without considering the report of Valuation Officer, Meerut. d) It is submitted that when the assessment order was passed in the case of assessee, valuation report was not existing. Infact, in the case of co-owner i.e. Shri Narendra Kumar Gill, his AO had referred the valuation to 29.03.2015 whereas assessment in the case of assessee had been framecfW 20.03.2015. DVO had filed the report on 08.01.2016. Thus the Valuation report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontended before the Ld. CIT that the amendment in section 55A w.e.f. 01.07.2012 was not applicable to the present case as it pertains to 2009-10. j) That the Ld. Pr. CIT has misdirected herself in ignoring the material fact that all possible inquiries had been made by the AO during the assessment proceeding and thereafter had framed the assessment. In such circumstances invoking the powers u/s 263 of the Act is nothing but a change of opinion. There is no error of law or fact in the assessment order which can be revised by the Ld. Pr. CIT by invoking powers u/s 263 of the Act. k) That a bare reading of section 263 makes it clear that the prerequisite for exercise of jurisdiction u/s 263 by the CIT, suo moto, is that the order of the Assessing Officer is erroneous in so far as it is prejudicial to the interest of Revenue. The Commissioner has to satisfy himself with twin conditions namely the order of the Assessing Officer sought to be revised is erroneous and ii) it is prejudicial to the interest of Revenue. If one of them is absent, recourse cannot be had to section 263(1) of the Act. I) That the phrase prejudicial to the interest of revenue has to be read in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as taken a view which is permissible in law and therefore, the Ld. CIT cannot substitute his own view treating the view taken by the Assessing Officer as erroneous. o) A bald statement that the Assessment Order is erroneous in so far as it is prejudicial to interest of revenue, without giving any reason is not sufficient to invoke the powers u/s 263 of the Act. p) The Ld. CIT had not considered the fact that the reference in the case of co-owner itself is incorrect. The reference was made for determination of the fair market value of the property at Mohalla Rampuri, Roorkee Road, Muzaffarnagar, as on 01.04.1981 and the valuer had picked up the value of the residential area at rupees 100 per sq. yard. Whereas, the property was a commercial property and the AO of the assessee had correctly asked the Tehsildar to inform the commercial rate of property situated at GT Road. The AO had already examined this aspect but the Commissioner had directed a re-inquiry for merely a change of opinion which is impermissible u/s 263 of the Act. CIT was required to arrive at a definite conclusion as is held by the Hon‟ble Delhi High Court in CIT v. International Travel House L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed deduction u/s 80HH. Assessing Officer delved deep into question of deduction, conducted investigation and accepted claim of assessee on being satisfied that conditions stipulated in section 80HHF were fulfilled. Hon'ble Jurisdictional High Court held that once assessee‟s claim u/s 80HHF was considered and examined by AO, Commissioner cannot set aside order without recording contrary finding. It is not the case of no investigation . Commissioner in his order, has been tentative and hesitant and did not decide whether the claim u/s 80HHF had been rightly allowed by the Assessing Officer. He has noted the stand of the assessee, before him and before AO, but refrained from forming any opinion as to whether the acceptance of the claim by the AO was erroneous or not. Power of review u/s 263 can be invoked only if the order is erroneous and for this the Commissioner must record the reason that the order was erroneous and the claim u/s 80HHF was wrongly allowed. ( 2014) 41 Taxmann.com 34 (Del) CIT vs Galileo India (P) Ltd. In this case, assessee, after netting interest paid on loan obtained against interest earned from deposits, offered T94,47,712/- as disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accordance with law. Hon'ble Court have also discussed the meaning of the term prejudicial to the interest of Revenue as that the order of assessment challenged is such as is not in accordance with law, in consequence whereof the lawful revenue due to the state has not been realized or cannot be realized. Hon'ble Court have also held that it is trite law that it is quasijudicial power hedged in with limitation and not an unbridled and unchartered arbitrary power. The exercise of the power is limited to cases where the Commissioner on examining the records comes to the conclusion that the earlier finding of the ITO was erroneous and prejudicial to the interest of revenue and that fresh determination of the case is warranted. It is further held that it is also trite that there is a fine, though subtle distinction between lack of inquiry and inadequate inquiry . It is only in case of lack of inquiry the Commissioner is empowered to exercise his revisional powers by calling for and examining the records of any proceeding under the Act and passing orders thereon. The powers under section 263 cannot be invoked for making roving and fishing inquiry. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear from the above that where two view are possible and the Assessing Officer has taken one view and the Commissioner again revised the said order on the ground that he does not agree with the view taken by the Assessing Officer, in such circumstances the assessment order cannot be treated as an order erroneous or prejudicial to the interest of Revenue. Reason is simple. While exercising the revisionary jurisdiction, the Commissioner is not sitting in appeal. This has been eloquently explained by the Supreme Court in the case of Malabar Industrial Company Ltd. u) In Amira Pure Foods Pvt. Ltd. vs the Pr. CIT, ITA No.3205/Del/2017 decided on 29.11.2017, ITAT has discussed the law on section 263 r/w explanation to newly inserted by the Finance Act 2015 w.e.f. 01.06.2015. After discussing the law pronunciated by the Jurisdictional High Court in the case of PCIT vs Delhi Airport Metro Express Pvt. Ltd. (ITA No.705 of 2017 decided on 05.09.2015) and ITO vs DG Housing Project Ltd. (343 ITR 329), it was held that if the Ld. PCIT is of the view that AO did not undertake any inquiry, it becomes incumbent on the Ld. PCIT to conduct such inquiry. Similar view has been taken by the Juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities. The brief facts of the case is that reopening of the assessment was made u/s 148 of the Act stating the reason that as per information available with the ld AO, the assessee has sold an immovable property in the joint name of three persons situated at Muzaffarnagar admeasuring 689.70 sq meter during the FY 2008-09 at sale consideration of ₹ 50 lacs whereas the stamp duty has been paid on the circle rate at ₹ 19393650/- and there is a difference in consideration of ₹ 3598412/- to the extent to the share of the assessee (1/4th) taxable under the provisions of section 50C of the Act. Therefore, the ld AO had a reason to believe that assessee has income chargeable to tax of ₹ 3598412/- . Hence, such reasons were recorded on 14.03.2013 and notice u/s 148 was issued. The ld Assessing Officer completed the assessment by obtaining certificate from Tehsildar of the Circle rate of the property as at 01.04.1981 granted the assessee the deduction of cost of acquisition for indexation purposes. The ld AO obtained such letter on 02.02.2015. Based on it the ld Assessing Officer completed the long term capital gain u/s 50C of ₹ 136036/-. The ld Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and FMV taken therein as at 01.04.1981 of the impugned property. While at the time of examination of records by the ld CIT, the above information was available. But that does not make the order of the ld AO erroneous and prejudicial to the interest of revenue. Perhaps that could have given an option to the ld AO to reopen the proceedings u/s 147 of the Act as there was some tangible material. But certainly the revision u/s 263 of the Act is not legally sustainable. As the ld AO has made inquiry about the fair market value of property as at 01.04.1981, it cannot be said that he has not made any inquiry. The order of the ld CIT also does not suggest what further inquiry the ld AO should have done. The nature of enquiry suggested by the ld CIT is also not legally sustainable in view of the decision of several courts. Further, introduction of explanation 2 to section 263 of the Act introduced w.e.f. 01.06.2015 also does not come to the help of the revenue because it could not be shown that the order is passed without making enquiries or verification which should have been made. In the order of the ld CIT there is no legally sustainable suggestion about what enquiry or verification A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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