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TMI Blog2021 (5) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... T given under section 153D - As decided in DR. ASHOK KUMAR, PROP. SS. NURSING HOME [ 2012 (8) TMI 429 - ALLAHABAD HIGH COURT] tribunal has not committed any error of law in setting aside the order of CIT passed under Section 263 of Income Tax Act. Also see SHRI SURENDRA L. HIRANANDANI VERSUS PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL I MUMBAI [ 2018 (2) TMI 2025 - ITAT MUMBAI] Since in the present case A.O. passed the impugned assessment order after getting approval from the JCIT under section 153D of the I.T. Act, therefore, following the above decisions, we are of the view that the Learned PCIT has no power to revised the Order under section 263 of the I.T. Act, without revising the approval of the JCIT under section . Nature of receipt - compensation for non-delivery of the Villa under Builder-Buyer Agreement - Whether the compensation received by the Assessee is capital receipt of revenue receipt? - Whether such compensation is taxable under the Head Capital Gains ? - whether amount received for giving-up that right would amount to capital receipt under section 2(47) of the Income Tax Act for relinquishment of the asset or extinguishment of any right therein.? - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n granted in the Award is reasonable which is ultimately paid to the assessee. Issue No. 3 is, therefore, decided in favour of the assessee. Whether copies of documents, emails and Power Presentations found from Computer of Shri Gaurav Jain, Ex-Employee of M3M Group seized in search from his residence on 21.07.2016 is admissible in evidence? - HELD THAT:- As copies of the documents, emails and Power Presentations found from the Computer of Shri Gaurav Jain Ex-employee of M3M Group who is a third party. No incriminating material was found from the possession of the Assessee or MIPL. No corroborative evidence has been brought on record to support the material found from the Computer of Shri Gaurav Jain. Therefore, in the absence of any corroborative evidence, same is not admissible in evidence. Further, no Certificate under section 65B(4) of the Evidence Act have been brought on record to prove the contents of copies of documents, emails and Power Presentation found from the Computer of Shri Gaurav Jain. Therefore, same is not admissible in evidence. The decisions relied upon by the Learned Counsel for the Assessee squarely apply to the facts and circumstances of the case. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort of Registered Valuer Mr. M.N. Bhagat in October, 2012 to the Investigation Wing for change in area/construction etc., already on record and considered in A.Y. 2013-2014 which have become final. Considering the facts of the case above, it is clear that conditions of Section 263 of the Income Tax Act are not satisfied in the present case. Whether cryptic Order of the assessment can be revised under section 263? - HELD THAT:- In the present case the issue based on BBA was coming-up from A.Y. 2010-2011 and with reference to Section 54F of the Income Tax Act, 1961, the issue have been examined by the Revenue Department in A.Ys. 2010-2011 and 2013-2014 and assessment orders have been passed under section 153A of the Income Tax Act, 1961. Those Orders have become final and cannot be commented upon in the present proceedings. The copies of the show cause notice, Order-Sheets, replies submitted by the assessee along with documentary evidences in the proceedings for the assessment year under appeal are filed in the Paper Book which shows that A.O. examined the issue in detail after conducting detailed enquiry. The A.O. also discussed the matter in issue with his Administrative Seni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-Smt. Abha Bansal-A.Y. 2017-2018. 3. Briefly the facts of the case are that a search and seizure operation under section 132 of the Income Tax Act, 1961 was conducted at the premises of M3M group on 21.07.2016. The group is controlled by two brothers, namely Sh. Roop Kumar and Sh. Basant Bansal. The Bansal family, their close relatives and associates are involved in the affairs of M3M group of companies. Sh. Pankaj Bansal is son of Sh. Basant Bansal and Smt. Abha Bansal is wife of Sh. Basant Bansal. Two main companies of the group, inter-alia, are M/s. M3M India Holding Pvt. Ltd. ('MIHPL') and M/s. M3M India Pvt. Ltd. ('MIPL'). Sh. Roop Kumar and Sh. Pankaj Bansal are Directors of MIHPL and hold 50% shares each in the company. Sh. Roop Kumar and Sh. Pankaj Bansal are Directors of MIPL. MIHPL holds 93% shares of MIPL and the balance is held by various key management personnel ('KMP') of the group. Sh. Roop Kumar, Sh. Basant Bansal, Sh. Pankaj Bansal and Smt. Abha Bansal are, inter-alia, key management personnel and their relatives. In the case of assessee a notice under section 142(1) of the Act was issued and served upon the assessee on 05.01.2018 requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asant Bansal, Sh. Roop Kumar, Sh. Pankaj Bansal Smt. Abha Bansal, who had booked four villas in one of its projects, namely M3M Golf Estate at Gurgaon for consideration of ₹ 541.51 crore (₹ 161.59 crore from Sh. Basant Bansal, ₹ 161.59 crore from Sh. Roop Kumar, ₹ 118.43 crore from Sh. Pankaj Bansal and ₹ 118.43 crore from Smt. Abha Bansal) in FY 2009-10. The compensation was claimed to have been paid as per the Award dated 16.03.2017 granted by the Sole Arbitrator Hon'ble Justice Manmohan Singh Liberhan (Retd.) in the arbitration matter between the KMPs and MIPL. 3. From perusal of records, it is noted that the four KMPs of M3M group had earned substantial capital gains on account of sale of 10,000 shares of M/s. Dignity Buildcon Pvt. Ltd. (3000 shares each by Sh. Roop Kumar and Sh. Basant Bansal and 2000 shares each by Sh. Pankaj Bansal and Smt. Abha Bansal) on 14.10.2009 during the F.Y. 2009-10. These shares were acquired by the KMPs in November, 2007. Out of the consideration received an amount of ₹ 541 crore was invested by the KMPs in four villas of the project M3M Golf Estate on 31.03.2010 and exemption under section 54F of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sq.ft. The present circle rate in the area is also ₹ 5,500/- per sq.ft. It clearly demonstrates that the villas were booked at artificial high circle rates with the purpose to claim the deduction u/s. 54F of the Act and not to pay the tax in respect of the long-term capital gains which accrued to the KMPs on account of sale of shares. d. Further, the booking rates of M3M Golf Estate project were called for during the course of the proceedings in the case of MIPL for the purpose of working of POCM. The same is tabulated as under- Also, in the earlier search conducted on this group on 30.06.2011, certain incriminating documents indicating the rates of the project were seized as Page No. 4/ Annexure - A3/Party No. 4 (page No. 95 of annexure). The content of the document is reproduced as under for reference- Following units are available for resale as per the info collected from brokers. In lot of cases the specific unit number is not being disclosed as the broker is insisting on a face-to-face meeting for discussing the same. As stated earlier and seen from above, the rates on which the KMPs booked villas to claim exemption u/s. 54F of the Act wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as per the terms and conditions of the Buyer's Agreement dated 30.03.2010. This aspect has apparently not been considered and discussed in the arbitration award as the transaction is between interested parties which is not at arm's length. 4. From perusal of the records, it could not be ascertained whether the location of villas was subsequently changed after holding a meeting of the directors and recording its minutes. It is also not known whether these four villas were proposed to be constructed on any disputed portion of the land. It is also not known whether any building/ tower etc. has been constructed on the initially allotted/changed location of the proposed four villas. 5. A survey under section 133A of the Act was conducted in the case of M3M group on 15.10.2012 to verify genuineness of the exemption claimed u/s. 54F of the Act. During the course of survey and subsequently, the following statements, inter-alia, were recorded:- a. Statement of Sh. Hoop Kumar u/s. 131 on 30.10.2012. b Statement of Sh. Basant Bansal u/s. 131 on 14.11.2012. c. Statement of Sh. Pankaj Bansal u/s. 131 on 05.11.2012. d. Statement of Smt. Abha Bansal u/s. 131 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the alleged new location it was found that it was a partly constructed concrete structure which was nowhere near the completion stage. The layout of the structure at the new place was also different. No separate or modified Buyer's Agreement was entered into by MIPL and Manglam with the KMPs for change in location. On verification, it was found that nominal investment of ₹ 6.49 crore in construction was made against huge amount of ₹ 541crore received as consideration for purchase of the villas. The videography and photography of these structures were also done during the course of survey proceedings. The structure had no correlation with the original layout plan of the villa. It was also difficult to know whether the structure being constructed was that of villas or four residential/ commercial towers. It was also found that these four towers which were claimed to be the villas had a composite/ contiguous base structure meaning thereby that these were not independent structures but four towers which were connected with each other. The partially constructed four towers are not villas as these were multi-storeyed buildings having 6 to 8 floors and contiguous foundat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the area so as to put forward his grievances regarding the construction by the builder company on the land which he had agreed to purchase from the seller. 5.7.3 Sh. Duli Chand is agriculturist and did not file return of income. Moreover, from 2005 till August 2012, no efforts were made by him to know the status of the sale/purchase deal of the land. No rational explanation could be forwarded by him for delay of seven years. The period of almost seven years is too long a period to mature a sale/purchase deal of a land. It appears to be an afterthought and managed. 5.7.4 In view of the above, it appears that the stay from the Civil Court, Gurgaon to stop the construction was managed with an apparent motive to show that there existed reasonable circumstances because of which the construction of the four villas was stopped. However, it is important to note here that, as mentioned earlier, the construction of the four towers which did not resemble villas were still at the primitive stage. 5.8 It is not known whether he is known to M3M group and its KMPs. It is strange to note that the court proceedings were continuing and allegedly not concluded despite a meagre amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Golf Estate. Further, the claim of the assessee that due to the injunction order the project could not be started is not correct. On perusal of computation of revenue recognised on the basis of PoCM for various AYs it is seen that the project M3M Golf Estate is in full swing and MIPL has worked out profit on booking and sale of units in this project and offered the same for taxation in A.Y. 2017-18. A chart of booking and cancellation of units in the project M3M Golf Estate extracted from the submission furnished is as under: The working given by the assessee company in respect of project M3M Golf Estate can be reproduced as under: It may be noted that total cost incurred in respect of the project M3M Golf Estate is ₹ 1506 crore and total value of area sold is only ₹ 2176 crore whereas four villas sold to the KMPs in 2010 were worth ₹ 541 crore. 5.12 A perusal of the above working clearly indicates that the construction of the project M3M Golf Estate is on full swing and MIPL has itself recognised revenue from this project in the FY 2016-17. It is beyond comprehension as to under what circumstances other units of this project are being c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erns which is not at the arm's length. 6.4 From perusal of the minutes of the meeting of the Board of Directors of MIPL it may be noted that the subject of payment of commission was raised and deliberated in the meeting of the Board of Directors of the company wherein it was agreed to refer the matter for arbitration to pay compensation and decide the quantum of compensation. However, the conditions of the Builder Buyer Agreement dated 30.03.2010 referred to supra was nowhere discussed in the said meeting. From perusal of the copy of the plaint filed before the Sole Arbitrator and it may be noted that in the plaint filed before the Sole Arbitrator clause 54 of Builder-Buyer Agreement was reproduced (para 14 /page 9 of plaint). However, the conditions of the agreement relating to payment of compensation referred to supra were neither discussed nor brought to the notice of the Arbitrator In the Arbitration Award dated 17.03.2017 also these conditions have nowhere been discussed. Further, as per the revised rate applicable w.e.f. 11.10.2010 the circle rate of residential group housing societies at Gurgaon varied between ₹ 3,250/- to ₹ 4,000/- per sq.ft. onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of Accounting Guidelines, 2012 (Revised) issued by the ICAI for recognition of revenue under the PoCM in respect of the project M3M Golf Estate in FY 2015-16 relevant to AY 2016-17. However, no profit was offered in this year for taxation. In the FY 2016-17 relevant to AY 2017-18, in which the amount of consideration of ₹ 541.51 crore for booking of villas was claimed to be refunded and compensation of ₹ 441.84 crore paid to the KMPs, MIPL has itself recognised the revenue in respect of the project M3M Golf Estate under the PoCM. It is also strange to note that no actual payment of consideration as well as compensation was made to the KMPs and these amounts are still shown in the balance sheet of the MIPL as advances received from them. It only shows that the assessee has created an artificial bogus entry of compensation of ₹ 441 crores claimed to be paid to the KMPs and directly debited it to the profit and loss account instead of taking it to the work in progress with the intent to reduce its tax liability. Such payment of compensation is neither in accordance with the buyer's agreement nor the act of MIPL to directly debit such compensation to the P L a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search, various documents were found in the computer of Sh. Gaurav Jain at his residence which were in form of power point presentations, briefs for opinion, email exchanges etc. Perusal of these documents clearly indicate that the entire scheme was designed in connivance between the company MIPL and its KMPs with the sole intention to evade the taxes. The details of these documents which are enclosed as Annexure- (page No. 1 to 82) are as under:- 8.2 The document at Sr. No. 5 in the above table is an e-mail sent on 30.11.2011 by Mr. M.P. Varshney to Mr. Basant Bansal, Roop Bansal, Pankaj Bansal, Mr. Gaurav Jain and Suresh Chawla. This email indicates various options and planning explored to evade taxes. (i) The Option 4 of the strategy is reproduced as under- Strategy ............... ............... Option -4: Postpone Tax liability indefinitely. If the decision to postpone payment of capital gains liability beyond filing of return under section 153A or not paying by way of advance tax is taken, necessary stay/injunction from court/ statutory authority will have to be secured and order from CBDT will have to obtained under section 119(2)(b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 4 and 6 of email dated 27.09.2013 (S. No. 7) which is reproduced as under: -----------Option -4: Postpone Tax liability indefinitely till stay is operative. If the decision to postpone liability of capital gains by not paying by way of advance tax or with the return to be filed under section 153A is taken, necessary stay/injunction from court/ statutory authority will have to be secured and order from CBDT will have to obtained under section 119(2)(b) on the ground of 'genuine hardship' for the period the stay is operative. However, the liability to pay tax will get revived once the stay order is vacated and limitation to frame assessment will run after excluding the period covered under stay. In such case, if the stay and CBDTs order is obtained, there may not be liability to pay interest for the period of stay. However, the risk of being charged of interest for the period not covered under the stay may still be there if the Assessing Officer holds that the capital gains arose in the year of transfer, i.e., A.Y. 2010-11. However, keeping the facts in view and due to high stakes involved, it would be in fitness of things that some construction is started a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority, there could be a case for claiming refund of investment by the promoters from the investee company. After the amount is refunded by the company, the deduction claimed can be surrendered by promoters by getting the refunded amount taxed in the relevant A.Y. of its receipt (i.e. A.Y. 2013-14) on the strength of the case of Ranjit Narang V. CIT (Supra) by showing it in the return of income. Though tax will have to be paid by the individual promoters, this will reduce corresponding liability of receiving the amount as sale proceeds in case of the Company. Since the taxability will arise in the third year, i.e. A.Y. 2013-14 interest on promoters may not be chargeable. In such case, tax can be paid after the period prescribed for construction (14.10.2012) gets over, i.e., in December 2012 and March 2013 instalment of advance tax. In case, capital gains are paid late, say, by way of self-assessment tax, interest will have to be paid for the delay. In this arrangement, liability to pay interest for capital gains (for the time the amount was with the company) shall get postponed by three years (from A.Y. 2010-11 to A.Y. 2013-14) and the liability to pay tax on income from sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at any juncture, so exit strategy need to be worked out. As per proposal the transaction would result in wealth creation in the hands of the investors, allowance of business expenditure in the hands of M Ltd. and the transaction is to be effectuated in a tax efficient manner with the understanding of the tax risk/ litigation exposure. vii) The issues for consideration were implications of section 2(24)(i)/(iv) and documentation to be prepared to demonstrate the payment of high compensation to the individual investor, make a robust analysis and documentation to support that rights in residential villa is a capital asset taking guidance from judicial pronouncements and the case so far. There is a risk that the tax department will contend that this is only a sham and a tax planning devise. viii) Some of the thoughts mentioned in the documents on which the planning needs to be done were - demonstrating that the intention was to use the villa as capital asset was not for trading, demonstrating and documenting that the compensation is a deductible business expenses for M Ltd., the investor claimed exemption u/s. 54F and this matter was assessed which is to be carefully levera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be termed as Real in view of the surrounding circumstances of this case. Reliance is placed on the following judgments: McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 (SC) Sumati Dayal v. CIT [1995] 214 ITR 801 (SC) In the case of Longanathan (K.R.) v. UOI [1988] 174 ITR 645, the Hon'ble Madras High Court has observed as under: As pointed out by the Supreme Court in McDowell the proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax and whether the transaction is such that the judicial process may accord its approval to it. It is neither fair nor desirable to expect the Legislature to intervene and take care of every device and scheme to avoid taxation. It is up to the court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and to expose the devices for what they really are and to refuse to give judicial benediction. I am convinced that the execution of the three separate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen it cannot be considered to be a part of tax planning or legitimate avoidance of tax liability. Since in this case the transaction has been used as a mere ruse for tax evasion or to circumvent tax obligations, it is necessary to lift the veil from the transaction. 10. On perusal of the records, it is seen that the AO has not considered the aforementioned facts and the circumstances in which the payment of compensation of ₹ 441 crores was made and passed the order without application of mind. The AO has also failed to consider the information and documents which were already available on record especially on account of survey u/s. 133A of the Act conducted in the case of the assessee on 15.10.2012. The AO has also failed to consider various documents found in the computer of Sh. Gaurav Jain at his residence and confront the same to the assessee. The compensation was required to be taxed as revenue receipts or income u/s. 2(24)(i) or benefit or perquisite u/s. 2(24)(vi) of the Act as the KMPs were either Directors of MIPL or their relatives. However, the AO without considering the facts of the case taxed the compensation under the head long-term capital gains and also al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act cannot be subject matter of revision u/s. 263 of the Act. (ii) That without prejudice assuming for the sake of an argument that approval u/s. 153D of the Act is not valid on account of allegations stated in the notice (though the same is seriously disputed) then the approval u/s. 153D of the Act is not a valid approval and therefore order of assessment u/s. 153B(1)(b)/143(3) of the Act is a vitiated order which cannot be subject matter of revision u/s. 263 of the Act. (iii) That the contention that order dated 18.12.2018 u/s. 153B(1)(b)/143(3) of the Act is invalid can be raised even in collateral proceedings and ex consequenti since the instant order is a vitiated order therefore the same cannot be subject matter of revision u/s. 263 of the Act. (iv) That notice dated 05.01.2018 u/s. 142(1) of the Act was an invalid notice and therefore the impugned order of assessment dated 18.12.2018 u/s. 153B(1)(b)/143(3) of the Act pursuant to illegal notice is a vitiated order therefore the same cannot be subject matter of revision u/s. 263 of the Act. (v) That claim of the assessee that compensation received of ₹ 91.33 crore by the assessee during the Financial Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and apply the test of human probability, in the present case also, in spite of being an apparent transaction, the same cannot be termed as real in view of the surrounding circumstances of this case is factually incorrect, legally misconceived and untenable. (xii) That reference section 2(24)(vi) of the Act supports the claim of the assessee. (xiii) That section 2(24)(i) of the Act is not applicable on the facts of the assessee. (xiv) That without prejudice and in the alternative compensation so received is capital receipt. (xv) That once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the assessee then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because PCIT holds a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible view but on the contrary was a possible view. (xvi) That for holding that the order passed by learned Assessing Officer is not only prejudicial to the interest of revenue but is also erroneous by PCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble ITAT. If the assessee felt aggrieved with the order passed u/s. 153B(1)(b) r.w.s. 143(3), the objection was required to be raised before the AO and an appeal was required to be filed before the CIT(A) against the original assessment order. The assessee had neither raised any objection before the AO nor filed an appeal before the CIT(A) against the original order. Hence, the order dated 18.12.2018 passed u/s. 153B(1)(b) r.w.s. 143(3) of the Act had achieved finality as no appeal was filed by the assessee against this order. In the revisionary proceedings u/s. 263 of the Act the legality of this order can neither be challenged nor examined. Having failed to challenge the legality of the original order in the appellate proceedings the assessee is precluded from agitating the same in the revisionary proceedings. 4.1 The contention of the assessee regarding the illegality of the assessment order passed by the AO could have been a subject matter of the appeal before the first appellate authority which is the CIT (Appeal) in such cases and the same ought to have been contested by the assessee before him within the stipulated time as per the provisions of the Act. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the observations in the above referred to decisions and authorities cited by the learned counsel for the revenue, in particular in A.R. Antulay v. R.S. Nayak [1988] 2 SCC 622, we agree with his contention and hold that the Tribunal was not justified in holding that the above referred to second assessment order of the ITO was non est in any absolute sense, since it would bind the parties unless set aside. Till it was set aside by the Commissioner under section 263, it bound the parties and the question is only whether the Commissioner was right in setting it aside under section 263 and ordering fresh assessment. [Para 16] While deciding the issue, Hon'ble Madras High Court has relied upon the decision of Hon'ble Supreme Court in the case of A.R. Antulay v. R.S. Nayak Anr. on 29 April, 1988, 1988 AIR 1531 : 1988 SCR Supl. (1) 1 wherein it was held as under:- 19. One of the well-known principles of law is that decision made by a competent court should be taken as final subject to further proceedings contemplated by the law of procedure. In the absence of any further proceedings, the direction of the Constitution Bench on 16th of February, 1984 became final and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be independent and not borrowed or dictated satisfaction. Law in this regard is now well-settled. [Para 8] As per the provisions of section 153D of the Act prior approval of the Joint Commissioner of Income Tax is required to pass an order u/s. 153B(1)(b) r.w.s. 143(3) of the Act whereas the jurisdiction to pass an order u/s. 263 of the Act is vested in Pr. Commissioner or Commissioner of Income Tax who is a higher Income-tax authority than the Joint Commissioner of Income Tax in hierarchy. In this regard, it is worthwhile to reproduce the observation of Hon'ble Madras High Court in the case of Srinivasan v. ACIT (2013) 29 taxmann.com 279 where it was held as under:- As already pointed out, passing of an order under Section 158BC rests on the previous approval of the Commissioner. On a reading of Section 158BG, particularly the proviso, reveal the mandatory nature of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ITO as per the direction given by the IAC under section 144A. Explanation 1(c) to section 263 specifically provide the details of the order/ matter which cannot be subject matter of revision u/s. 263 of the Act. Hon'ble Karnataka High Court in the case of Devas Multimedia Pvt. Ltd. v. PCIT, 111 taxmann.com 494 has held as under:- It is undisputed that Draft Assessment Order was notified by the Assessing Officer in view of the fact that assessee's business involved International Money Transaction. The assessee was entitled to have an opportunity to look into Draft Assessment Order. He had option either to accept or to submit objections on variations. If objections were filed, in such an event, the Assessing Officer is required to forward Draft Assessment Order and objections raised by the assessee before the DRP to examine the objections raised by the assessee. DRP drew proceedings and forwarded to the Assessing Officer. Consequently, Assessing Officer passed the final assessment order. In this background, where assessment order has attained finality and respondent/Principal Commissioner is not permitted to invoke section 263 or not, sub-clause (c) of Expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T u/s. 153D of the Act. 6.2 Further in the approval letter the JCIT is not required to record the detailed reasons for according approval. The statute also does not provide for any format for the manner in which approval is to be granted. Reliance is placed on the judgment of the Hon'ble ITAT Delhi (Special Bench) in the case of Kailash Moudgil v. Deputy Commissioner of Income-tax, [2000] 72 ITD 97 (Delhi) (SB), wherein it was held as under: In answer to question No. 2(a), we hold that provisions of section 158BC do not require the Commissioner to record his reasons in writing while approving the order of the Assessing Officer under section 158BG proviso and for that reason, the assessment order passed under section 158BC does not suffer from any infirmity. In answer to question No. 2(b), we hold that the approval of the Commissioner without recording any reasons in writing for approving the order would not render the order of the Assessing Officer void ah initio and would not invalidate the assessment order. Assuming without admitting that some infirmity is there, it is curable under law, since the order of assessment passed under section 158BC is made appealable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally provides for the same. Therefore, in the absence of any provision for opportunity of hearing in section 158BG, there is no need for the Joint Commissioner to give a hearing to the assessee before granting previous approval under section 158BG. The first question is, therefore, answered against the assessee. In view of the above the submission of the assessee that the JCIT has granted the approval u/s. 153D in mechanical manner without application of mind has no meaning as the approval is an administrative action which is required to be based on existence of set of circumstances and on subjective satisfaction. Further, approval u/s. 153D being an official act provided under the statute, it is to be presumed that before according approval, the JCIT has looked into the records, applied his mind and he did not find any reason to disapprove the order passed by the Assessing Authority and thereafter he has accorded approval. 6.4 On perusal of the record, it may however, be seen that the AO did not consider the facts and the circumstances in entirety under which the payment of compensation of ₹ 441 crore was made. The AO also failed to consider the information and do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02.08.2017 a notice u/s. 143(2) could be issued upto 30.09.2018. In the assessment order it is clearly mentioned that notice u/s. 143(2) along with a questionnaire was issued and served on 16.08.2018 which was not disputed by the assessee. In view of the above the jurisdiction to assess the income u/s. 143(3) was properly assumed by the AO and the assessment order passed by him on 18.12.2018 is not a vitiated order. 7.2 It was also submitted by the assessee that section 153B(1)(b) does not provide for framing an order of assessment. It merely provides for time limit for completion of assessment for the assessment year relevant to the previous year in which, search is conducted under section 132 of the Act. In other words, the submission of the assessee is that the order of assessment framed under section 153B(1)(b) of the Act is without jurisdiction as no order of assessment can be framed under section 153B(1)(b) of the Act and even on this ground, said order of assessment is a nullity, which cannot be revised u/s. 263 of the Act. 7.3 I have considered the above submission. It may be mentioned that the assessment order in this case was duly framed under section 153B(1)(b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isite u/s. 2(24)(iv) of the Act as the KMPs were either Directors of MIPL or their relatives. However, the AO without considering the facts of the case taxed the compensation under the head long-term capital gains and also allowed the benefit of indexation as a result causing huge loss to the revenue. Instead of taxing the entire amount of compensation of ₹ 441 crore @ 30% the AO accepted the returned income in which nominal amount of less than ₹ 40 crore was offered for taxation under the head long-term capital gains at the reduced rate of 20%. 9. In respect of ground No. (vi) and (vii) it was submitted that an arbitral award is final and binding on the parties and persons claiming under them respectively and the business loss consequent to such award should be duly allowed as deduction. It was also submitted that an arbitral award is admissible as evidence in income tax proceedings. The assessee has extensively quoted from the arbitral award. 9.1 I have considered the submission of the assessee. Although, in this case the compensation was paid in accordance with the arbitral award, however, if the facts and circumstances are viewed in entirety, the transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e awards made by the arbitrators. In the assessment proceedings, the assessee claimed allowance of compensation. The ITO rejected the claim and the AAC confirmed the order of the /TO. On a review of the facts, the Tribunal reached the conclusion that the transactions entered into and the agreements made by the assessee with the selling agents and the managing agent and the resolutions passed were all sham and colourable transactions with a view to appropriate the funds of a flourishing concern to their own use by those who controlled the assessee-company and the managing agents and selling agents. The Tribunal, therefore, dismissed the assessee's appeal. The High Court refused to call statement of the case. On appeal to the Supreme Court: The finding of the Tribunal was amply borne out by the evidence. The High Court was, therefore, right in refusing to call for a statement of the case. 9.2 On perusal of the arbitral award it may be noted that the following facts were neither considered nor brought on the record during the arbitration proceedings:- a. In the Builder Buyer Agreement ('BBA') it is printed that third license was granted on 06.05.2010 where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order of arbitration award was passed on 17.03.2017 awarding huge compensation of ₹ 441 crore by MIPL to the KMPs. MIPL thereby reduced its profit by ₹ 441 crore on which it was liable to pay tax @ 30%. i. The submission of the assessee that the conclusion of arbitration proceedings within a period of two months and not seeking cross examination or allowing cross examination are irrelevant consideration has no merit as the impugned transaction was between the interested parties which is not at the arm's length. j. The submission of the assessee that Manglam was a confirming party to the agreement and hence not required to be party to the arbitration proceedings has no sound basis. From perusal of the BBA it may be noticed that the land on which the project M3M Golf Estate was being constructed is owned by Manglam and the basis of grant of the arbitral award is the order passed in the case of Dulichand v. Manglam. k. During the arbitration proceedings the fact that no such compensation was ever paid to any of the allottees by MIPL was never considered. l. The submission of the assessee that the claim of exemption u/s. 54F was duly allowed in AY 2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax in terms of computation u/s. 48 of the Act because the sale consideration would get offset by the indexed cost. Over and above the indexed cost, an amount of ₹ 40 crore was given as compensation on which the KMPs paid tax under the head Long-term Capital Gains @ 20%. The compensation awarded is not on the basis of market rate/ booking rate of the project. As discussed earlier, no such compensation was ever paid by MIPL to any other allottee of the project. The KMPs over the period of time never asked MIPL to return back the booking amount which even after award of compensation was with the MIPL and was not refunded back. As discussed earlier the application for compensation was filed during the fag end of FY 2016-17 with the sole intention to reduce the taxability of MIPL as the assessee was required to pay tax in respect of the project M3M Golf Estate for the first time under the PoCM. 10. In ground No. (viii) it was submitted by the assessee that the documents and information which were already available on record especially on account of survey conducted on 15.10.2012 u/s. 133A of the Act in the case of assessee are not record and cannot be relied upon for initiatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enquiry he may come in possession of new material and he would be entitled to take that new material into account. If the material, which was not available to the Assessing Officer when he made the assessment could, thus, be taken into consideration by the Commissioner after holding an enquiry, there is no reason why the material which had already come on record though subsequently to the making of the assessment cannot be taken into consideration by him. Moreover, in view of the clear words used in clause lb) of the Explanation to section 263(1), it has to be held that while calling for and examining the record of any proceeding under section 263(1) it is and it was open to the Commissioner not only to consider the record of that proceeding but also the record relating to that proceeding available to him at the time of examination. Therefore, in the instant case, it was open to the Commissioner to take into consideration all the records available at the time of examination by him and, thus, to consider the valuation report submitted by the DVO subsequent to the passing of the assessment order and so, the order passed by him was legal. Hon'ble Gujarat High Court in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat section 54F allows a period of three years for construction of residential property, the time limit available for such construction would be 14.10.2012, i.e. the issue should be examined in the assessment for the FY 2012-13 relevant to AY 2013-14. It is interesting to read issue No. 3 on page 36 which mentioned that conditions prescribed u/s. 54F are violated when no construction takes place before 14.10.2012. In that case, the AO can hold that non-compliance to section 54F took place in the year capital gain arose, then there would be liability to pay interest, besides running the risk of penalty and prosecution. The second part of discussion in issue No. 3 is more interesting which says that if investment is made and part construction takes place before some stay is granted by a court of law or an environment or other statutory authority, which legally stops the construction of villas, the adherence to time limit would be beyond the control of either the assessee or the company or the contractor executing the project. However, in such case, since section 54F does not provide for any exceptional circumstance which can extend the prescribed time limit, CBDT will have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of villas at the original location. In accordance with the tax planning as mentioned in the e-mails, it was claimed that the location of villas was shifted to K-Block which consisted of four towers having basement, stilt, six floors which nowhere resembled the villas in design and structure. It was also claimed that the construction of K-Block was allegedly stopped because of an injunction order dated 04.09.2012 passed in the case of Dulichand v. Manglam wherein status quo order was passed with regard to land upon which these four towers were being developed. Subsequently, the claim for deduction u/s. 54F was surrendered by the KMPs and offered for taxation in the returns filed for AY 2013-14. 10.6 The discussion made in these e-mails amply indicate that the apparent was not real and the entire planning was done with the intent to evade the taxes - firstly the tax payment in the AY 2010-11 on capital gains accrued on 14.10.2009 in respect of sale consideration of ₹ 541 crore received on account of sale of shares was avoided by claiming exemption u/s. 54F on account of investment in villas. These villas were never constructed. Earlier search u/s. 132 was conducted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitral award. On perusal of problem statement/ proposal on page No. 3 and 4 of annexure it may be seen that the issue of invoking/triggering tax liability on MIPL under PoCM through villa construction was duly dealt with therein. Accordingly, it was decided by MIPL that the KMPs would be provided with a refund of a booking amount plus compensation. The working of compensation is on page No. 7 of annexure. It is also mentioned that compensation would be tax deductible in the hands of MIPL and compensation shall be taxable in the hands of the investor as Long-term Capital Gain. On page no. 12 of the annexure, it is mentioned that there is a risk that the tax department will contend that this is only a sham and tax planning devise. It is also mentioned that manner of arriving at the compensation needs to be planned to negotiate the facts that the investors are related parties and there is no specific clause in the BBA dealing with the scenario. It demonstrates that the officials of MIPL were aware that in the BBA there is no specific clause for payment of compensation which was never considered during the arbitration proceedings. On page No. 15 of annexure, it is mentioned that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th in the following paragraphs. a. It is submitted that the license for M/s. M3M Golf Estate has been granted in phased manner and thus mere fact the small portion of the area was sanctioned on 06.05.2010 does not in any manner be a basis to draw adverse inference. The assessee has not submitted any reply to the fact as to how a BBA can be signed on 31.03.2010 in which the date of third license granted on 06.05.2010 is printed. b. The submission of the assessee that the booking rates of MIPL cannot be determinative for the payment of compensation is absurd. In fact, as per the power point presentation discussed above, information such as compensation claims paid to other investors, assured returns provided under various schemes and projects to customers and escalation in market rate of project from date of investment to date of paying compensation were to be documented as these are relevant factors. It may be seen that over the period of six years there was no substantial increase in the booking rate of the project M3M Golf Estate. Further, no such compensation was paid to any other investor. These facts were conveniently ignored as these did not fit to the scheme of tax ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e surrounding circumstances. Further, there are a number of facts which were not brought on record during the arbitration proceedings as the transaction was between the related parties. e. It was submitted by the assessee that perusal of the BBA would show that Manglam was a confirming party to the agreement and not required to be party to the arbitration proceedings. The claim was between the claimants i.e. the assessee, family members and the respondent company namely MIPL It is well settled law that all authorities who are to implement an order or judicially enforce an award should not attribute motives to the parties post the award, except to the extent stated in the award. In this regard, it is worth noting that Manglam is not only a confirming party but also owns the land on which the project M3M Golf Estate was constructed. Further, allegedly the construction of K-Block towers which were termed as villas was stopped because of injunction granted in the case of Dulichand v. Manglam. Hence, the submission of the assessee that Manglam was merely a confirming party has no legs to stand as it was very much an interested party affected by the award of compensation. f. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and scheme to avoid taxation. It is up to the court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and to expose the devices for what they really are and to refuse to give judicial benediction. I am convinced that the execution of the three separate deeds of sale is a legal device adopted by the vendors and the vendees in collusion to escape liability for the tax. Similarly, in the case of Nayantara G. Agarwal v. CIT [1994] 207 ITR 639, the Hon'ble Bombay High Court has observed as under: The courts in such a case should not lay undue emphasis on the language of each individual document as that is not determinative of the controversy. What is really necessary to be considered in such cases is the true nature and effect of the transaction. If on such a consideration, the court arrives at a finding that the true nature is transfer of land and the various steps originating from the affidavit and formation of partnership and culminating into dissolution of the same, in the process leaving the land with the company, are nothing but a device to avoid capital gains tax leviable under section 45 of the Act on transfer of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very 'receipt' represent benefit or perquisite. It was submitted that section 2(24) defines 'income' and sub-clause (i) thereof reads profits and gains' but the same is inapplicable. Further, since the receipt in the instant case falls under the head capital gains and heads of income are mutually exclusive, such a receipt cannot now be changed under any other head. In any case entering into agreements for allotment of villas is not the business of assessee and thus compensation for cancellation of such agreement is not business. 12.2 I have considered the submission of the assessee. In the case of Juggilal Kamlapat v. CIT [1969] 73 ITR 702 Hon'ble Supreme Court held as under:- In the instant case the Appellate Tribunal had found that the transaction of termination of the managing agency was a colourable transaction and the real purpose was to hand the amount to the assessee-firm. It was also found that the payment was collusive and the partners of the firm continued to run and enjoy the benefit of managing agency as shareholders and directors of the newly formed company by reason of their holding a majority of shares in that company. It was also hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount. It was obvious that there was an intimate connection in this case between the managing agency business of the assessee-firm and the payment of was, therefore, proper material before the Appellate Tribunal in support of its finding that the receipt by the assessee-firm was a receipt in the course of its managing agency business and was hence a revenue receipt. For the reasons expressed, it was held that the judgment of the High Court, was correct and these appeals was to be dismissed. Similarly, in the case of K. Ramasamy v. CIT [2003] 261 ITR 358 Hon'ble Madras High Court has held as under:- The Supreme Court in the case of Juggilal Kamlapat v. CIT [1969] 73 ITR 702 held that in cases where the same persons entered into transactions though by introducing a corporate personality into some of those transactions, the income-tax authorities are entitled to pierce the veil of the corporate personality and look at the reality of the transactions. [Para 8] In the instant case, despite the formation of the company and the agreement, the persons who ran the business in reality were the same. Instead of running the business of the hotels as partners of the firm, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.3 The compensation paid to the assessee can also be taxed under the section 2(24)(iv) as value of any benefit obtained from the company MIPL either by a director or by a person who has a substantial interest in the company, or by a relative of a director or such person. Reliance is placed on the judgment of Hon'ble Bombay High Court in the case of CIT v. Shri Ramnath A. Podar [1978] 112 ITR 436, analyzing section 2(24)(iv) of the Income Tax Act, 1961, made the following pertinent observations: Section 2(24) (iv) of the Income-tax Act, 1961, merely defines the expression 'income'. The value of any benefit or perquisite received by any of the persons falling within the four categories mentioned therein would become the income of such person; in other words, if the benefit or perquisite is received by a director it will be the income of the director, if the benefit or perquisite is received by a person who is substantially interested in the company it will be the income of such person having substantial interest in the company; if the same is received by a relative of the director or if the same is received by a relative of such person having substantial intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. In respect of ground No. (xv) it was submitted by the assessee that once the AO on examination of facts on record and after making all possible enquiries had accepted the claim of the assessee, then such an order of assessment cannot be alleged as erroneous and prejudicial to the interest of Revenue. Further in a case, where two views are possible and the AO has taken a view with which PCIT does not agree, the said order cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Assessing Officer is unsustainable in law. 14.1 I have considered the submission of the assessee. The AO passed the order on wrong assumption of facts and without application of mind which makes the order erroneous in so far as it is prejudicial to the interest of revenue. The AO failed to view the entire transaction in proper prospective as admittedly he failed to consider the information and documents which were already available on record especially on account of survey u/s. 133A conducted in the case of the assessee on 15.10.2012 and also various documents found in the computer of Sh. Gaurav Jain, Ex VP Finance of M3M group during the searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. In respect of ground Nos. (xx) and (xxi), the assessee submitted that explanation 2 to section 263 of the Act does not change its scope. No material was brought on record by the PCIT by making enquiries or verification to substantiate inference. There was no prima-facie material on record to show that the tax which was lawfully eligible has not been imposed or that by application of the relevant statute on an incorrect or an incomplete interpretation, a lesser tax than what was just, has been imposed. 17.1 As discussed in the earlier paragraphs the show cause has been issued after proper examination, enquiries and due verification of the facts. The show cause notice amply demonstrate that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interests of the revenue. The submission of the assessee, hence, is not acceptable. 18. In view of the above, I hold that the assessment order dated 18.12.2018 passed by the AO u/s. 153B(1)(b) r.w.s. 143(3) of the Act is erroneous in so far as it is prejudicial to the interests of the revenue. The assessment order is set aside on the issue of taxability of compensation under the head Long-term Capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment under section 153B read with section 143(3) of the I.T. Act, 1961 Dated 18.12.2018 in the present case and has accepted the returned income after examining the issue in detail after calling for the explanation of assessee by issuing statutory notices and questionnaire. The A.O. discussed the matter with the Joint Commissioner of Income Tax [ JCIT ]. The assessee also placed on record Arbitration Award and other details before A.O. for completion of the assessment along with BBA, Copy of the Plaint and Copy of the Civil Suit etc., The A.O. also discussed the draft Order with the JCIT and ultimately, obtained the approval of the JCIT in accordance with Section 153D of the I.T. Act, 1961 and after getting the approval of JCIT under section 153D of the I.T. Act, 1961, the A.O. framed the assessment order Dated 18.12.2018, which the Learned PCIT considered it to be erroneous in so far as it is prejudicial to the interests of Revenue. Copy of the Notice under section 263, explanation of assessee before Learned PCIT and findings of Learned PCIT under section 263 of the Act are reproduced above. 5. Learned Representatives of both the Parties have argued the appeal as well as pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal following the decision of Hon'ble Allahabad High Court (supra) and other decisions of the Coordinate Benches of the Tribunal, had decided the issue in favour of the assessee. Learned Counsel for the Assessee submitted that same view have been taken by different Benches of the Tribunal that once approval have been obtained under section 153D of the I.T. Act, then, CIT cannot exercise jurisdiction under section 263 of the I.T. Act. The citation of the Orders of different Benches of the Tribunal are as under: 1. ITA.No.637 to 641/Pune/2018 Dated 14.11.2018 M/s. BU Bhandari Schemes vs., PCIT 2. ITA.Nos.596, 597 599/Pune/2015 Vishwa Infraways (P) Ltd., vs., CIT (Central). 3. ITA.Nos.1102 to 1107/Pune/2014 Rasi Kalal M. Dhariwal HUF vs., CIT. 4. ITA.Nos.967 968/Pune/2016 Shri Ramamoorthy Vasudevan vs., PCIT 5. 2017 (1) TMI 260 (Pune) Dhariwal Industries vs., CIT 6. ITA.Nos.1150-1151/Hyd./2015 Dated 09.08.2017 Smt. Nama Chinnamma vs., DCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to vs., CIT, Karnataka (Central) [2015] 56 taxmann.com 170 (Panaji-Tribu.) in which it was decided that the power of revision under section 263 of the I.T. Act is very much available to the PCIT while reviewing the Order of the A.O. approved under section 153D of the I.T. Act. The Ld. D.R. also relied upon Judgment of the Hon'ble Chhattisgarh High Court in the case of Param Transport Pvt. Ltd., 102 taxmann.com 327 (Chhattisgarh-HC) in which it was held that revisional powers can be exercised by the Commissioner in all cases where assessment is made and once he exercises his revisional powers, then the provision of Section 153(2A) of the I.T. Act will also apply. The Court did not agree with the view that revisional powers of 263 could not be applicable to assessments under search and seizure. The Ld. D.R, therefore, submitted that Learned PCIT has rightly exercised the jurisdiction under section 263 of the I.T. Act. 9. We have considered the rival submissions. It is not in dispute that search was conducted in the case of assessee on 21.07.2016. The A.O. proceeded to pass the assessment order under section 153B(1)(b) of the I.T. Act read with Section 143(3) of the I.T. Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 153 of the Act cannot revise without revising the approval of ACIT. We find that as per the decision of Hon'ble Allahabad High Court in the case of CIT Vs. Dr. Ashok Kumar in I.T. Appeal No. 192 of 2000 wherein it is held that the assessment order approved by the ACIT u/s. 153D of the Act cannot subject to revision u/s. 263 of the Act. The learned DR could not file any evidence to show that such permission was revised by ACIT in present case, therefore, CIT cannot revise the order passed by AO u/s. 153 of the Act. As per section 153A of the Act. 26. Tribunal in case of Trinity Infra ventures Ltd. v. DCIT CC 2(1) in ITA. Nos. 584-589/Hyd/2015 dated 04.12.2015 wherein, the Hon'ble Tribunal has held that the assessment order passed u/s. 143(3) r.w.s. 153A of the Act cannot be revised without revising the approval of Addl. CIT: 5.4. The Ld. Counsel for the assessee has further submitted that the assessment under section 143(3) read with section 153C was passed after getting approval of Addl. CIT under section 153D of the IT Act and therefore such an assessment cannot be revised without revising the directions of the Addl. CIT under section 153D of the IT Act. The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h of the Tribunal in the case of M/s. Trinity Infra Ventures Ltd. (Supra) had an occasion to decide an identical issue and it held that the assessment order approved by the Addl. CIT u/s. 153D cannot be subject to revision u/s. 263 of the I.T. Act. The relevant observation of the Tribunal at Para 5.4 of the order reads as under. 28. Since in the instant case also the Assessing Officer has passed the order after obtaining necessary approval from Addl. CIT u/s. 153D of the I.T. Act, therefore, respectfully following the above-mentioned decisions of the Coordinate Benches of the Tribunal we are of the considered opinion that the CIT has no power to revise the order u/s. 263 of the I.T. Act in the instant case since the same has been passed with the approval of the Addl. CIT u/s. 153D of the I.T. Act. We respectfully following the decision of ACIT Vs. Dr. Ashok Kumar, ITA 192 of 2000. We find that in the instant case the original approval was granted by Addl. CIT and this assessment order is cannot be revise without approval of Addl. CIT. 9.3. Since in the present case A.O. passed the impugned assessment order after getting approval from the JCIT under section 153D of the I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e revised without revising the approval under section 153D of the I.T. Act and Explanation-1 to Section 263 of the I.T. Act has also not been considered. Therefore, this decision relied upon by the Ld. D.R. would not apply to this case. Further the Judgment in the case of Param Transport Pvt. Ltd., of Hon'ble Chhattisgarh High Court (supra) is not with regard to approval obtained under section 153D of the I.T. Act because in this case it was held that revisional power under section 263 of the I.T. Act is applicable to assessments under search and seizure. However, it is not explained by the Ld. D.R. whether in this case the approval under section 153D have been revised by the Learned PCIT. It may also be noted that it is well settled Law that if two views are possible, then the view which is in favour of the assessee should be made applicable. We rely upon Judgment of Hon'ble Supreme Court in the case of CIT vs., Vegetable Products 88 ITR 192 (SC). It may also be noted here that the Hon'ble Allahabad High Court is one of the jurisdictional High Court of Delhi Bench, therefore, preference shall have to be given to the Judgment of the Hon'ble Allahabad High Court as r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly misconceived and without jurisdiction. The compensation did not arise in the course of any trading activity, but arises on cancellation of the agreement. It is not related to any stock-in-trade. It is, therefore, capital receipt. The Arbitrator has dealt with the issue based on the material on record i.e., the Builder-Buyer Agreement, plan approved, payments made by assessee and the time being essence of the contract to deliver possession of the demised property to the assessee. The Arbitration Award dealt with contractual obligation and the time being essence for Builder-Buyer Agreement. The Arbitration Award in Para-9 specifically mentioned it was earlier opined by me that although the claimants being in a position to influence the decision of the Respondent-Company, that would not absolve the Respondent-Company from its contractual obligations and as such the claimants were entitled to compensation on account of the non-delivery of the Villas booked by them. The Arbitration Award also in para-13 find mentioned In view of the same, there is no doubt that the claimants being the purchaser of the units [viz., Villas] in the Project to be developed by the Respondent-Company a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement for payment of compensation. These provisions clearly provide for general compensation to be provided in case of breach of an obligation on the part of the promisor. It may also be noted here that Section 74 of the Indian Contract Act provides for 'Breach of Contract' where penalty is stipulated in the agreement. Therefore, these are different provisions under the Act which have been misconstrued by the Learned PCIT that there is no clause in the agreement for making compensation to the assessee because Section 74 of the Indian Contract Act may not apply in the case of the assessee, but, certainly provisions of Sections 55 and 73 of the Indian Contract Act would apply which have been taken care by the Sole Arbitrator in the matter. 9.8. It may also be noted here that the Learned PCIT considered the transaction under agreement to be 'sham', but, he did not dispute execution of the Builder-Buyer Agreement, substantial payment made by assessee, delay in handing-over the possession of the demise property to the assessee and that the same issue have also been considered in preceding A.Ys. 2010-2011 and 2013-2014. The Builder-Buyer Agreement was correctly exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt expanded by the assessee immobile. The eventual receipt of the amounts determined as compensation or damages, therefore, fell into the capital stream. 9.10. The Hon'ble Supreme Court in the case of CIT vs., D.P. Sandu Bros, Chembur P. Ltd., [2005] 273 ITR 1 (SC) held as under: Held, (i) that the tenancy right was a capital asset, surrender of the tenancy right was a transfer and the consideration received therefor was a capital receipt within the meaning of section 45. 9.11. The Hon'ble Delhi High Court in the case of Saras Metals Pvt. Ltd., vs., CIT Another [2017] 399 ITR 270 (Del.) held as under: The main object for which the assessee-company was incorporated was to carry on the business of manufacturing, processing, importing, exporting and dealing in all kinds of ferrous and non-ferrous material meant for industrial and non-industrial use and to carry on the business of casting, fabrication, cold or hot rolling, re-rolling, sheeting, stamping, pressing, etc., of all kinds of steel and other metals. According to the assessee by a resolution of its board of directors dated October 24, 2005 it decided to commence the business of dealing in immovab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s stock-in-trade . The assessment as short-term capital gains was justified. 9.12. Learned Counsel for the Assessee also argued that the decision considered by the Learned PCIT of Madras High Court in the case of K.R. Sreenath vs., ACIT 268 ITR 436 (Mad.) is in favour of the assessee. We find the submissions of the Learned Counsel for the Assessee to be correct and it was wrongly considered in favour of the Revenue by the Learned PCIT because in this case the CIT took a view that assessee had acquired a legal right from the earlier agreement Dated 03.04.1986 and so the amount received for giving-up that right is liable to capital gain. The view of the CIT is confirmed by the ITAT and Hon'ble High Court considering the provisions of Section 2(47)(i)(ii) of the I.T. Act, 1961 and did not find any merit in the appeal and same were dismissed. This Judgment will support the claim of the assessee in the present appeal. Considering the totality of the facts and circumstances of the case and discussion above, it is clear that the compensation received by the assessee on cancellation of the Builder-Buyer Agreement is capital receipt and taxable as capital gains. The view of the A.O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Arbitration Award has been duly allowed as deduction. It was also held that in the transaction of payment of compensation as per outcome of the Arbitration Award cannot be held as a colourable device. Learned Counsel for the Assessee submitted that Arbitration Award is admissible evidence in Income Tax proceedings and relied upon unreported decision of the Tribunal in the written submissions. Learned Counsel for the Assessee submitted that the Learned PCIT relied upon Judgment of the Hon'ble Supreme Court in the case of Madhowji Dharamshi Manufacturing Co. Ltd., vs., CIT 78 ITR 62 in which the assessment year involved was 1951-1952 which was prior to enactment of Arbitration and Conciliation Act, 1996 which do not deal with Sections 35 and 36 of this Act. Thus, this Judgment would not support the case of the Revenue. He has submitted that investment made by assessee in A.Y. 2010-2011 is not disputed by the Learned PCIT and considered in that assessment year. Learned PCIT did not dispute the BBA, cancellation of agreement and Arbitration Award given by the Sole Arbitrator. The Learned PCIT has merely disputed the transaction to be coloured and sham without assigning any valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made investment in A.Y. 2010-2011 and claimed exemption under section 54F which have been accepted. The assessee surrendered the exempt income under section 54F in A.Y. 2013-2014 which have been accepted in assessment order under section 153A of the I.T. Act, 1961 with the approval of JCIT under section 153D of the I.T. Act, 1961. The Investigation Wing got the report of M.N. Bhagat, Government Registered Valuer with regard to construction on Group Housing Scheme, M3M Golf Estate, Gurgaon and assessment have been framed for A.Y. 2013-2014. Therefore, no adverse inference should be drawn against the assessee. The assessee during the assessment proceedings for the A.Ys. 2010-2011 and 2013-2014 has filed detailed reply, all material before A.O. and assessments have been framed accordingly. All details of the cost incurred by the builder etc., were also produced which have been examined. (g) (h) The findings in these paras are not relevant. It was submitted that nature of payment in the hands of buyer is not deciding/relevant factor for deciding the nature of receipt in the hands of assessee. Learned Counsel for the Assessee rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that Award can be challenged by the Learned PCIT. 12. We have considered the rival submissions. The Learned PCIT has observed in the impugned order that certain facts were not considered and brought on record during the Arbitration Proceedings in Para-9.2 of the impugned order under section 263 of the I.T. Act. Learned Counsel for the Assessee explained each para above to show that all the material facts and documentary evidences have been considered by the Arbitrator and all facts were brought to the notice of the Arbitrator. These details were explained in the written submissions which have not been rebutted by the Revenue. We may also note that BBA Dated 31.03.2010 have not been disputed by the Revenue Department. The investment can be made much earlier because licenses were granted to the Builder on 16.10.2007 and 28.08.2009. The BBA have been considered in preceding of A.Ys. 2010-2011 and 2013-2014 and have been accepted in the assessment orders under section 153A of the I.T. Act, 1961. Therefore, same cannot be subject to dispute in the present proceedings merely because the date of 06.05.2010 have been mentioned in the BBA. The Learned PCIT cannot dispute the correctn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under section 153A of the I.T. Act with respect to claim of assessee under section 54F of the I.T. Act, 1961. Therefore, those Orders have become final and cannot be challenged in the present proceedings by the Learned PCIT. Merely because report is given by M/s. Grant Thornton India LLP is no ground to challenge its finding because it is based on various factors like location, commercial viability etc., and based on the precedence in which compensation is paid by the Builders to the Buyers. No defect have been pointed-out in the report of this party. The rates of the construction are based on facts and advance booking rate for the assessee and other family Members were also the same. The intention can be seen on facts which is not disputed by the Learned PCIT. Considering these facts on record, it is clear that all material facts and evidences have been considered by the Arbitrator before granting Award in the matter. The Learned PCIT did not dispute the above facts. The case Law relied upon by the Learned PCIT are based on finding of fact recorded by the Tribunal. All the facts were before A.O. as well as before the Arbitrator. The issue of documents seized from the residence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the third parties, consumer and precedence as in public domain, in which compensation is paid by the Builders to the Customers. Ultimately, it is a fact that there was a delay of 07 years in not handing-over possession of the Villas by the Builder to the Assessee. Therefore, the Arbitrator considering the entire material facts on record rightly considered that time was the essence of the agreement and that there is a contractual obligation of the Builder to pay compensation to the assessee on account of non-delivering of the Villas. Therefore, the Award is based on scientific examination of the relevant facts and as such the Learned PCIT was not justified in rejecting the Arbitration Award in the matter. It may be reiterated again that Arbitration Award is final and binding on the parties and enforceable as it were the Decree of the Court. Therefore, considering the facts and circumstances of the case, we do not find any justification for the Learned PCIT to reject the Arbitration Award or to hold that agreement and transaction was coloured and sham. We, therefore, hold that Arbitration Award is final, binding and is admissible in Income Tax proceedings in the case of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... davit along with hard/printed copies of the printouts/emails duly certified by the Concerned Officer/Employee and, therefore, it was held that the Affidavit is sufficient compliance of Section 65B of the Indian Evidence Act. He has also relied upon Judgment of the Hon'ble Supreme Court in the case of Anwar PV s., PK Basheer [2014] 10 SCC 473 (SC) in which it was held that An electronic record by way of secondary evidence shall not be admitted in evidence unless the requirements under section 65B are satisfied. Thus, in the case of CDs, VCDs, Chip etc., - the same shall be accompanied by the Certificate in terms of Section 65B of the Indian Evidence Act obtained at the time of taking the documents, without which, the secondary evidence pertaining to that electronic record is inadmissible . Learned Counsel for the Assessee submitted that in the case of the assessee the requirement of Section 65B(4) are not satisfied in the absence of the Certificate required by Law. Therefore, the material found from the computer of Shri Gaura Jain is not admissible in evidence. 14. The Ld. D.R. relied upon the impugned order under section 263 of the I.T. Act and submitted that contents of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady declared in the return of income. Therefore, there is nothing wrong for the A.O. to accept that compensation received by assessee as capital receipt on account of which capital gain arises. Therefore, there is nothing wrong in the assessment order so as to exercise jurisdiction under section 263 of the Income Tax Act. It may further be noted that the Learned PCIT while giving findings at Pages-53 and 54 of the impugned order has mentioned that additionally compensation is taxable under sections 2(24)(iv) and 2(28A) of the Income Tax Act on account of value of any benefit or perquisite or interest. The Learned PCIT has, however, not issued any show cause notice on these two items. Since no notices have been given under section 263 of the I.T. Act as to the taxability of the compensation under these Sections, the Learned PCIT was not justified in holding that the compensation is taxable under sections 2(24) (iv) and (28A) of the Income Tax Act, 1961. Since no notice have been given to the assessee for applying these provisions, therefore, Learned PCIT cannot use these Sections to hold that income is taxable under sections 2(24) (iv) and (28A) of the Income Tax Act, 1961. In supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of Hon'ble Supreme Court in the cases of CIT vs., Max India Ltd., [2007] 295 ITR 282 (SC) and Malabar Industrial Co. Ltd., vs., CIT [2000] 243 ITR 83 (SC). He has submitted that since compensation received by assessee is for non-delivery of the Villas and, therefore, determination of capital gain on cancellation of BBA for allotment of Villas by the A.O. based on the claim of assessee is in accordance with Law. Therefore, proceedings under section 263 of the I.T. Act, 1961 by the Learned PCIT are not valid. The Learned PCIT has to be proceeded by some minimal enquiry which has not been done in the present case and relied upon Judgment of the Hon'ble Delhi High Court in the case of PCIT s., Delhi Airport Metro Express Private Limited [2017] 398 ITR 8 (Del.). There is no lack of enquiry or lack of investigation on the part of the A.O. Mere allegation of wrong opinion cannot confer jurisdiction by the Learned PCIT. The A.O. passed the assessment order after taking into consideration submissions of the assessee and documentary evidences produced before him. Therefore, the Learned PCIT should not have invoked the jurisdiction under section 263 of the I.T. Act. He has referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order referred to in this sub- section and passed by the Assessing Officer had been the subject matter of any appeal, [filed on or before or after the 1st day of June, 1988], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.] [Explanation-2] For the purpose of this section, it is hereby declared that an order passed by the Assessing officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,- (a) The Order is passed without making inquiries or verification which should have been made; (b) The order is passed allowing any relief without inquiring into the claim; (c) The order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) The order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.94 crores was capital expenditure. This itself would be an indication of application of mind by the Assessing Officer while passing the order. The fact that the assessment order did not contain any discussion with regard to the balance amount of expenditure of ₹ 1.76 crores, i.e., ₹ 2.94 crores less ₹ 17.98 lakhs claimed as revenue expenditure would not by itself indicate non-application of mind to this issue by the Assessing Officer in view of the specific queries made during the assessment proceedings and the assessee's response to it. Moreover, from the nature of expenditure as explained by the assessee to the Assessing Officer during the assessment proceedings the view that the expenses were in the realm of revenue expenditure, was a possible view. Therefore, there was no fault in the order of the Tribunal having followed the binding decision of the Supreme Court while allowing the appeal before it. 19.3. The Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd., vs., CIT [2000] 243 ITR 83 (SC) held as under: Every loss of revenue as a consequence of an Order of the Assessing Officer, cannot be treated as prejudicial to the intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttled Law that even if two views are possible, one view of the A.O. cannot be revised under section 263 of the Income Tax Act, to which, the Learned PCIT did not agree. We have already held that view of the A.O. that compensation received by assessee on cancellation of the BBA is capital receipt and liable for capital gain is in accordance with Law and is sustainable and if the Learned PCIT did not agree with the same view, the same is not revisable under section 263 of the Income Tax Act, 1961. The Learned PCIT is not entitled to re-appreciate the same evidences and material nor come to a different conclusion. The Learned PCIT did not make any independent enquiry as to how the assessment order is erroneous and prejudicial to the interests of Revenue. The Learned PCIT has not pointed-out as to how there is an incorrect application of Law or incorrect application of facts. It is also not explained as to how there was non-application of mind on the part of the A.O. and as to how the compensation is taxable as revenue receipt when it is inextricable link to the allotment of Villa. The Learned PCIT has referred to the rates of sales unofficially obtained from some broker in the notice. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessable only in the hands of the beneficiaries. The Commissioner having failed to point out any error, no error can be inferred from the orders of the Income-tax Officer for the simple reason that they are bereft of details. If the order is not erroneous, then it cannot be prejudicial to the interest of the Revenue. There is nothing to show in the order of the Commissioner that the Income-tax Officer would have reached a different conclusion had he passed a detailed order. So, the conclusion of the Commissioner that the orders of the Income-tax Officer are erroneous and prejudicial to the interest of the Revenue are based merely on suspicion and surmises in the absence of any enquiry having been made by him. 22.1. The Hon'ble Bombay High Court in the case of CIT vs., Gabriel India Ltd., [1993] 203 ITR 108 (Bom.) held as under: Held, that the Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 is vitiated, so same cannot be revised under section 263 of the Income Tax Act, 1961? 23. Learned Counsel for the Assessee submitted that it is well settled if approval under section 153D of the Income Tax Act, 1961 has been granted in a mechanical manner, the Order of assessment is illegal and void ab-initio and, therefore, same cannot be subject matter of revision under section 263 of the Income Tax Act, 1961. He has submitted that even Learned PCIT himself at Page-36 in Para-6.5 of the impugned order has stated as under: 6.5. Without prejudice to the above, since the A.O. and the JCIT both failed to consider the claim made by assessee in the return of income properly and framed the assessment order mechanically without application of mind itself, makes the assessment order erroneous in so far as it is prejudicial to the interest of the Revenue. 23.1. He has submitted that on the face of these findings of the Learned PCIT no proceeding under section 263 of the I.T. Act, 1961 lie. He has relied upon the Orders of ITAT, Delhi Bench in the cases of M/s. M3M India Holdings vs., DCIT 71 ITR 51 (Tribu.); Shri Sanjay Duggal vs., ACIT in ITA. No. 1813/Del./2019 Dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cancellation of BBA through Arbitration Award is capital receipt and liable for tax as capital gain. Therefore, the Learned PCIT was not justified in invoking the jurisdiction under section 263 of the Income Tax Act, 1961. We, accordingly, set aside the impugned order of the Learned PCIT passed under section 263 of the Income Tax Act, 1961 and restore the assessment order. Appeal of the Assessee allowed. 26. In the result, ITA. No. 383/Del./2021 of the assessee allowed. ITA. No. 384/Del./2021-Shri Pankaj Bansal - A.Y. 2017-18 ITA. No. 385/Del./2021-Shri Basant Bansal - A.Y. 2017-18 ITA. No. 386/Del./2021-Shri Roop Kumar Bansal - A.Y. 2017-18. 27. In these remaining appeals, the issue is same under section 263 of the Income Tax Act, 1961 on same facts as have been considered in the case of Smt. Abha Bansal in ITA. No. 383/Del./2021 for the A.Y. 2017-2018 (supra). We, therefore, following reasons for decision in the case of Smt. Abha Bansal (supra), set aside the impugned orders of the Learned PCIT passed under section 263 of the Income Tax Act, 1961 and restore the assessment orders. All the appeals of the Assessees are allowed. 28. In the result, all the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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