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TMI Blog2023 (2) TMI 1060X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiries and after consideration of materials placed on record accepted the genuineness of the claim of the assessee. At this juncture, it is also important to note that the learned PCIT in his order passed under section 263 of the Act has made reference to the explanation 2 of section 263 of the Act. It was attempted by the learned PCIT to hold that there were certain necessary enquiries which should have been made by the AO during the assessment proceedings but not conducted by him. In this regard, we make our observation that the learned PCIT has not invoked the explanation 2 of section 263 of the Act in the show cause notice about the same. Therefore, the opportunity with respect to the explanation 2 of section 263 of the Act was not afforded to the assessee. Thus, on this count the learned PCIT erred in taking the recourse of such provisions while deciding the issue against the assessee. Thus we hold that there is no error in the assessment framed by the AO under section 143(3) causing prejudice to the interest of revenue. Thus, the revisional order passed by the learned PCIT is not sustainable and therefore we quash the same. Hence, the ground of appeal of the assessee is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal." 3. The only effective issue raised by the assessee is that the learned Pr. CIT erred in holding the assessment order framed under section 143(3) of the Act as erroneous insofar prejudicial to the interest of Revenue. 4. The brief facts are that the assessee is an individual and during the year under consideration has transferred certain inherited agricultural lands for Rs. 3,82,50,000/- only. The assessee on the basis of valuation report by the Government approved valuer adopted the cost of acquisition as on 1st April 1981 at Rs. 740 per Sq. Mts. Accordingly, the assessee claimed indexed cost of acquisition at Rs. 3,22,04,800/- only. The assessee against the capital gain also claimed deduction under section 54F of the Act. The claim of the assessee was allowed by the AO in the assessment order framed under section 143(3) of the Act dated 13th December 2017. 5. Subsequently, the learned Pr. CIT found that the valuer without adopting realistic approach or scientific method valued the property at unrealistic value at Rs. 740 per Sq. Mts. The learned Pr. CIT also found that the Jant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee held that those cases were pronounced before the insertion of explanation- 2 to section 263 of the Act w.e.f. 1st June 2015. The provision of explanation-2 provided that an order of the AO shall be deemed to be erroneous insofar prejudicial to the interest of the Revenue if same is passed without making inquiry which should have been made. Hence, the learned Pr. CIT by exercising the power conferred under section 263 of the AO set aside the order of the AO being erroneous and prejudicial to the interest of revenue with the direction to make fresh assessment to the extent of above discussion. 9. Being aggrieved by the order of the learned PCIT, the assessee is in appeal before us. 10. The learned AR before us filed a paper book running from pages 1 to 134 and contended that the appellant during the assessment proceeding furnished all the necessary details about the computation of capital gain on sale of agricultural property. The learned AR in support of his contention drew our attention on pages 8 to 16 and pages 17 to 68 of the paper book where the notice under section 142(1) of the Act and reply of assessee along with documentary evidences were placed. Thus, the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax by invoking revisionary powers under section 263 of the Act cannot impose his own understanding to the extent of inquiry. There are a number of judgments by various Hon'ble High Courts in this regard. 14. Delhi High Court in the case of CIT Vs. Sunbeam Auto 332 ITR 167 (Del.), made a distinction between lack of inquiry and inadequate inquiry. The Hon'ble court held that where the AO has made inquiry prior to the completion of assessment, the same cannot be set aside u/s 263 of the Act on the ground of inadequate inquiry. The relevant observation of Hon'ble Delhi High Court reads as under: "15. Thus, even the Commissioner conceded the position that the Assessing Officer made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the Commissioner was that the Assessing Officer should have made further inquires rather than accepting the explanation. Therefore, it cannot be said that it is a case of 'lack of inquiry'." 15. The Hon'ble Bombay High Court in case of Gabriel India Ltd. [1993] 203 ITR 108 (Bom), discussed the law on this aspect in length in the following manner: "The consideration of the Commissioner as to whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out by a prudent officer. Hence, in our view, the question as to whether the amendment brought in by way of Explanation 2(a) shall have retrospective or prospective application shall not be relevant." 17. The Hon'ble Supreme Court in recent case of Principal Commissioner of Income-tax 2 v. Shree Gayatri Associates [2019] 106 taxmann.com 31 (SC), held that where Pr. CIT passed a revised order after making addition to assessee's income under section 69A in respect of on-money receipts, however, said order was set aside by Tribunal holding that AO had made detailed enquiries in respect of such on-money receipts and said view was also confirmed by High Court, SLP filed against decision of High Court was liable to be dismissed. The facts of this case were that pursuant to search proceedings, assessee filed its return declaring certain unaccounted income. The Assessing Officer completed assessment by making addition of said amount to assessee's income. The Principal Commissioner passed a revised order under section 263 on ground that Assessing Officer had failed to carry out proper inquiries with respect to assessee's on money receipt. In appeal, the Tribunal took a view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of revenue; or where two views are possible and the Assessing Officer has taken one view with which the Commissioner of Income-tax does not agree, it cannot be treated as an erroneous order causing prejudice to the interests of the Revenue unless the view taken by the Assessing Officer is unsustainable in law, or the AO has completely omitted to make any enquiry altogether or the order demonstrates non-application of mind. 20. Now in the facts before us, we note that the AO during the course of assessment proceedings, raises specific query on the issue of computation of capital gain and required the assessee to furnish supporting evidences which can be verified from the notice issued under section 142(1) of the Act dated 14-06 2017. The relevant question reads as under: "2. On verification of information available with this office, it is seen that during the financial year relevant to assessment year under consideration you have sold the following immovable properties: Sr. No. Description of property sold Amount Date Remarks 1. Agricultural land 38250000 17/4/2014 Please explain how the said transitions and the profit earned there on are reflected in your Boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the assessment proceedings but not conducted by him. In this regard, we make our observation that the learned PCIT has not invoked the explanation 2 of section 263 of the Act in the show cause notice about the same. Therefore, the opportunity with respect to the explanation 2 of section 263 of the Act was not afforded to the assessee. Thus, on this count the learned PCIT erred in taking the recourse of such provisions while deciding the issue against the assessee. In holding so, we find support and guidance from the judgment of Hon'ble Gujarat High Court in the case of PCIT Vs. Shreeji Prints Pvt. Ltd. reported in 130 taxmann.com 293 wherein it was held as under: 5 The Tribunal has found that in the order passed by the PCIT, Explanation 2 of section 263 of the Act, 1961 is made applicable. The Tribunal observed that the PCIT has not mentioned in the show cause notice to invoke the Explanation 2 of section 263 of the Act 1961. Therefore, by invocation of Explanation in the order without confronting the assessee and giving an opportunity of being heard to the assessee is not appropriate and sustainable in law. 21.1 In view of the above and after considering the facts in tot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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