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TMI Blog2019 (1) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of the Revenue, he has directed to issue the show-cause notice. There is no dispute that a proposal has been sent by the ITO Ward 1(1), Alwar, however, the same has been duly examined along with the assessment records by the Pr. CIT and after duly application of mind and on being satisfied that the matter calls for his intervention, the ld Pr CIT has exercised his jurisdiction under section 263 of the Act. For cash deposit found deposited in the bank account of the assessee Pr CIT has given a specific finding that the AO has not ascertained whether the assessee was having in his possession and ownership as many number of plots of land in respect of which the assessee has received the advance from 76 persons. Pr CIT has held that the affidavits from these buyers and the statement of 5 of these buyers recorded by the AO nowhere narrate the plot serial number, area of plot, site plan, locality etc. And thereafter, he has held that by merely receiving the affidavits and taking the statements of 5 persons on face value without any further examination, the genuineness of the transaction and creditworthiness of these 76 buyers were not substantially proved. Thereafter, he has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - ITA. No. 215/JP/2018 - - - Dated:- 31-12-2018 - SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SINGH YADAV, AM For The Assessee : Shri Siddharth Ranka (Adv.) For The Revenue : Shri Varinder Mehta (CIT) ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. Pr. CIT, Alwar passed U/s 263 of the Act dated 29.11.2017 quashing the assessment order passed under section 143(3) by the Assessing officer pertaining to Assessment Year 2013-14. 2. At the outset, the ld. AR submitted that the present appeal has been filed by the assessee with a delay of 10 days and an application has been filed with a request to condone the said delay. It was submitted that the order of the ld. Pr. CIT dated 29.11.2017 was served on the assessee on 04.12.2017, thereafter the assessee approached his local Counsel in Alwar for an opinion to challenge the order passed U/s 263 of the Act who referred the assessee to another Counsel in Jaipur. Thereafter, on the basis of opinion of the Counsel based in Jaipur, the assessee has filed the present appeal on 12.02.2018 though with a delay of 10 days and an affidavit in support of the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pr. CIT. It was submitted that the show cause notice was not issued by the ld. Pr CIT and the proceedings based on the illegal show cause notice and consequential order passed by the ld. Pr. CIT is not valid and liable to be quashed. Referring to the provisions of Section 263 of the Act, it was submitted by the ld. AR that it is Pr. CIT who has to be satisfied that the order passed by the AO is erroneous and prejudicial to the interest of the Revenue, however, in the instant case, the same is not discernable from the show cause notice. It was accordingly submitted that in absence of a valid show cause notice and absence of satisfaction so recorded by the ld Pr. CIT, the jurisdiction assumed by the ld. Pr. CIT is void and bad in law and the consequent order passed U/s 263 of the Act is not sustainable. 5. In support, reliance was placed by the ld AR on the decision of the Coordinate Bench in case of Modern School Society vs. CIT(E) in ITA No. 1118/JP/2018 dated 20.12.2017. It was further submitted that the said order of the Coordinate Bench has since been affirmed by the Hon ble Rajasthan High Court in D.B. ITA No. 172/2018 dated 31.07.2018. Further, referring to the Revenue s pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and examined by the Assessing Officer and assumption of jurisdiction by the ld. Pr. CIT is not warranted in the facts and circumstances of the case and hence the order passed by the ld. Pr. CIT may be quashed. In support, reliance was placed on various decisions. 8. Per contra, the ld. CIT-DR submitted that there is no illegality in the assumption of jurisdiction by the ld. Pr. CIT U/s 263 of the Act as what is required for such assumption of jurisdiction is that the order passed by the Assessing officer is erroneous in so far as it is prejudicial to the interest of the Revenue and the same is clearly apparent on reading of the order passed by the Pr.CIT. Regarding issuance of show cause notice, it was submitted that the same has been signed by the ITO (Technical) for and on behalf of the Pr. CIT, Alwar and it is wrong to assume that merely because the show-cause notice has been signed by the ITO (Technical), he has assumed jurisdiction u/s 263 of the Act. Regarding satisfaction of ld. Pr. CIT U/s 263, the ld. CIT-DR drawn our reference to page 5 of the order sheet of the case records available in the Revenue s paperbook at page 12 to 14 and submitted that the proper satisfact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision, the Hon ble Supreme Court has laid down a clear legal proposition that Section 263 does not in express form require a notice to be served as in the case of Section 147. Section 263 merely requires that an opportunity of being heard should be given to the assessee and the stringent requirement of service of notice U/s 147 cannot therefore be applied to the proceedings . 13. It was further submitted by the ld CIT-DR that the decision of Hon ble Rajasthan High Court in case of CIT vs. Modern School Society in DBITA No. 172/2018 dated 31.07.2018 relied upon by the ld AR pertains to Section 10(23C)(ii) of the IT Act whereas, in the instant case, the matter pertains to Section 263 of the Act and the same is thus distinguishable. It was accordingly submitted that there is no irregularity in issuance of the show cause notice and assumption of jurisdiction by the ld. Pr CIT and the contentions so advanced by the ld. AR should be dismissed. 14. It was further submitted by the ld CIT-DR that it is wrong to say that merely because the assessee has raised certain grounds of appeal before the ld. CIT(A), the ld. Pr. CIT cannot assume the jurisdiction U/s 263 of the Act and in supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng details: Plot s Area 2854.03 sq. yds. Shop s Area 637.79 sq. yds. Road s Area 1491.18 sq. yds. Total Area 4983 sq. yds. It was undisputed fact that the assessee has sold 1858.44 sq. yds during the year and if the area relating to roads (1491.18 sq. yds.) is excluded from the total area, still the assessee should have 1633.38 sq. yds. of unsold area. It is difficult to understand how the AO can allow the entire cost of acquisition when the significant unsold area is still available with the assessee. It appears from the replies filed by the assessee before the AO as appearing on PB-1 and PB-4 that no enquiries were made by the AO in this regard. 16. Further, reliance was placed by the ld CIT-DR on the various decisions including the decision of the Hon ble Supreme Court in case of CIT Vs. Amitabh Bachchan 69 taxmann.com 170. 17. It was accordingly submitted by the ld CIT-DR that the ld. PCIT was justified in exercising his jurisdiction U/s 263 of the Act as the relevant assessment order was made without making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his income ... . Thus it is evident that whereas section 148 specifically requires serving a notice on the assessee, section 263 simply talks of giving an opportunity of being heard. So long as the assessee stands informed of the proceedings against him, there can be no irregularity in this regard. This requirement has nothing to do with the assumption of jurisdiction of the Pr. CIT rather it falls in the realm of principle of natural justice. Breach of the principles of natural justice may prejudice the legality of the order made but cannot affect the assumption of jurisdiction by the Pr CIT. A satisfaction that an order passed by the AO under the Act is erroneous and prejudicial to the interest of the Revenue is the basic pre-condition for exercise of jurisdiction under section 263. Both are twin conditions that have to be conjointly present. Once such satisfaction is reached, jurisdiction to exercise the power would be available subject to observance of the principles of natural justice. Therefore, so long as the order passed by the AO is erroneous and prejudicial to the interest of the Revenue, the jurisdiction vests with the Pr. CIT to revise such an order, of course, subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with amounts and rate of interest and as to when the interest income was received. It was not necessary to further detail the reasons given by the Commissioner because on the face of the record the orders were prejudicial to the interest of the revenue, and even if the facts which the Commissioner introduced regarding the enquiries made by him had been indicated to the assessee, the result would have been the same. The assessee, had not in any way suffered from the failure of the Commissioner to indicate the results of the enquiries. Moreover, the assessee would have full opportunity of showing to the ITO whether he had jurisdiction or not and whether the income assessed in the assessment orders which were originally passed was correct or not. The appeal was liable to be dismissed and decision of High Court was to be affirmed. 21. Thereafter, in case of Gita Devi Aggarwal vs CIT (1970) 76 ITR 496, the Hon ble Supreme Court has again held as under: In this state of facts the High Court had taken the view that an opportunity was given to the appellant as required by section 33B of the 1922 Act. Section 33B of the Act does not in express terms require a notice to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice was required to be issued by the Commissioner before assuming jurisdiction to proceed under section 33B. Therefore the question what that notice should contain does not arise for consideration. It is not necessary nor proper for us in this case to consider as to the nature of the enquiry to be held under section 33B. Therefore, we refrain from spelling out what principles of natural justice should be observed in an enquiry under section 33B. This court in Gita Devi Aggarwal v. Commissioner of Income-tax [1970] 76 ITR 496 (SC) ruled that section 33B does not in express terms require a notice to be served on the assessee as in the case of section 34. Section 33B merely requires that an opportunity of being heard should be given to the assessee and the stringent requirement of service of notice under section 34 cannot, therefore, be applied to a proceeding under section 33B. 23. The above legal proposition has been reiterated by the Hon ble Supreme Court in its latest decision in case of CIT vs Amitabh Bachchan (2016) 384 ITR 200 as under: 9. Under the Act different shades of power have been conferred on different authorities to deal with orders of assessment passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served on the assessee. Rather, what is required under the said provision is an opportunity of hearing to the assessee. The two requirements are different; the first would comprehend a prior notice detailing the specific grounds on which revision of the assessment order is tentatively being proposed. Such a notice is not required. What is contemplated by Section 263, is an opportunity of hearing to be afforded to the assessee. Failure to give such an opportunity would render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principles of natural justice. Reference in this regard may be illustratively made to the decisions of this Court in Gita Devi Aggarwal v. CIT [1970] 76 ITR 496 and in CIT v. Electro House [1971] 82 ITR 824 (SC). Paragraph 4 of the decision in Electro House (supra) being illumination of the issue indicated above may be usefully reproduced hereunder: This section unlike Section 34 does not prescribe any notice to be given. It only requires the Commissioner to give an opportunity to the assessee of being heard. The section does not speak of any notice. It is unfortunate that the High Court fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a given case and in most cases it is so done a notice proposing the revisional exercise is given to the assessee indicating therein broadly or even specifically the grounds on which the exercise is felt necessary. But there is nothing in the section (Section 263) to raise the said notice to the status of a mandatory show cause notice affecting the initiation of the exercise in the absence thereof or to require the C.I.T. to confine himself to the terms of the notice and foreclosing consideration of any other issue or question of fact. This is not the purport of Section 263 . Of course, there can be no dispute that while the C.I.T. is free to exercise his jurisdiction on consideration of all relevant facts, a full opportunity to controvert the same and to explain the circumstances surrounding such facts, as may be considered relevant by the assessee, must be afforded to him by the C.I.T. prior to the finalization of the decision. 12. In the present case, there is no dispute that in the order dated 20th March, 2006 passed by the learned C.I.T. under Section 263 of the Act findings have been recorded on issues that are not specifically mentioned in the show cause notice date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his conclusions as recorded in the order dated 20th March, 2006. Despite the absence of any such finding in the order of the learned Tribunal, before holding the same to be legally unsustainable the Court will have to be satisfied that in the course of the revisional proceeding the assessee, actually and really, did not have the opportunity to contest the facts on the basis of which the learned C.I.T. had concluded that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. The above is the question to which the Court, therefore, will have to turn to. 14. To determine the above question we have read and considered the order of the Assessing Officer dated 30th March, 2004; as well as the order of the learned C.I.T. dated 20th March, 2006. From the above consideration, it appears that the learned C.I.T. in the course of the revisional proceedings had scrutinized the record of the proceedings before the Assessing Officer and noted the various dates on which opportunities to produce the books of account and other relevant documents were afforded to the assessee which requirement was not complied with by the assessee. In these circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that issuance of show-cause notice and stringent conditions of service of notice as required U/s. 148 of the Act cannot be read into the provisions of Sec. 263 of the Act, mere fact that show-cause notice has been issued by ITO(Technical) loses its relevance so far as assumption of jurisdiction U/s 263 is concerned. As far as affording opportunity to the assessee is concerned, such show-cause notice dated 6.10.2017 has been issued by the ITO(Technical) duly authenticated as issued for and on behalf of the ld Pr CIT, Alwar detailing the reasons/grounds which are proposed for initiating the revisionary proceedings. Further, there is no dispute that such show-cause notice dated 6.10.2017 has been duly served on the assessee and the assessee has been duly represented through its AR before the Pr.CIT in the revisionary proceedings and the principle of natural justice have thus been duly adhered to. The decision relied upon by the learned ARs taking a contrary view, in our considered opinion, have to be read subject to the consistent and settled legal position as clearly enuncitiated by the Hon'ble Supreme Court and which has been reiterated from time to time as we have discussed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to learned counsel, the Commissioner did not himself call for any records but certain records were placed before him and he acted thereon. From this point of view, submits counsel for the assessee, the Commissioner's consolidated order cannot be sustained. In our opinion, there is no substance in this contention. At page 26 of the paper book we find the notice under section 33B. The opening words of this notice are: On calling for and examining your case for the assessment years 1956-57, 1957-58, 1958-59, 1959-60, 1960-61 and 1961-62 and other connected records......... . These statements in the notice were challenged before the authorities below. It is possible, as the departmental representative himself conceded before the Tribunal, that the records were put up before the Commissioner by his subordinates but that was no reason why he was debarred from exercising the powers under section 33B. All that the section requires is that before issuing a notice under section 33B he must call for all relevant papers and documents, examine them and then issue the notice if he is satisfied that the interests of the revenue have suffered. Going through the records of the tax author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record at page 11 of the Revenue s paperbook. In order to appreciate the rival contentions, we deem it appropriate to reproduce the same in verbatim as under:- Office Note: The case was selected in scrutiny with a CASS reason, cash deposit in savings bank account(s) is more than the turnover. While scrutinizing the case it was observed that the assessee had sold a land during the year under consideration. A big piece of land was cut into several plots and sold by the assessee. For such plots, the assessee had received cash from people to whom such land was supposed to be sold and the same amount was deposited in his bank account. However, many deals for such plots were cancelled due to some or the other reason and then the amount was repaid to the persons from whom such amount was received. Therefore, the cash deposit in the saving bank account of the assessee was explained by him and no negative inference is drawn for the same. For the lands which was sold by the assessee no capital gain was offered by him, considering the land to be agriculture in nature. In the assessment order it has been established that such land was not and agriculture land, but a capital ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding such an order erroneous and prejudicial to the interest of the Revenue. The said findings are contained at para 2(a) and the same are reproduced as under:- 2 (a) On the issue regarding the cash deposits made in bank account out of the advances shown to be taken against the agreements of sale of plots, it is quite clear from the assesseement record that the assessee had claimed the sources of huge cash, amounting to ₹ 1,11,25,000/-, deposited in his Bank Account, as advances received from 76 persons to the extent of ₹ 98,35,000/- against agreement of sale of the pieces of land, whereas, in addition to this amount the assessee had shown the sales consideration of plots to the extent of ₹ 27,80,000/- against sales deed executed during the year, in favour of 20 persons. The names of these persons in favour of whom the sale- deeds were executed during the year, are different from the name of persons from whom the advances in cash had been shown to be received during the year. The version of cash deposited in banks accounts as given by the assessee is that out of cash receipts of advances made from 76 persons of several amounts against agreement made for sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... detailed examination found that it is case of lack of adequate enquiry on part of the Assessing officer and held the assessment order so passed to be erroneous. The ld Pr CIT has given a specific finding that the Assessing officer has not ascertained whether the assessee was having in his possession and ownership as many number of plots of land in respect of which the assessee has received the advance from 76 persons. Further, ld Pr CIT has held that the affidavits from these buyers and the statement of 5 of these buyers recorded by the AO nowhere narrate the plot serial number, area of plot, site plan, locality etc. And thereafter, he has held that by merely receiving the affidavits and taking the statements of 5 persons on face value without any further examination, the genuineness of the transaction and creditworthiness of these 76 buyers were not substantially proved. Thereafter, he has finally held that the order passed by the Assessing officer based on incorrect and mistaken assumption of facts by way of accepting the statement of the assessee on face value and without due verification is erroneous as well as prejudicial to the interest of the Revenue and he has set-aside the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order passed by the Assessing Officer U/s 143(3) of the Act was also subject matter of appeal before the ld. CIT(A) wherein the assessee has challenged the assessment of long term capital gain on sale of agricultural land which in turn include determination of cost of acquisition for working out such capital gains. Therefore, the present ground relating to cost of acquisition raised by the ld. Pr. CIT in invoking his jurisdiction U/s 263 of the Act was very much the subject matter of appeal before the ld CIT(A) and to this extent, we agree with the contention of the ld AR that the ld Pr. CIT cannot exercise his jurisdiction under Section 263 of the Act as far as this matter is concerned and to this extent, order of the ld Pr CIT stand modified. 33. We may add that we have gone through various decisions and authorities quoted by the ld AR and which have been not been specifically discussed, however we find that the same are distinguishable and doesn t support the case of the assessee. 34. In light of above discussions and in the entirety of facts and circumstances of the case, we modify the order of the ld Pr CIT to the limited extent of issue relating to cost of acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X
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