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TMI Blog2023 (4) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... he Sub Registrar. Hence, so far first issue is concerned, order passed by the assessing officer is neither erroneous nor prejudicial to the interest of Revenue. Applicability of section 50C - Enhancement of the sale consideration on the basis of the valuation made by the DVO vis-a-vis the sale consideration claimed by the assessee does not arise, since the detailed explanation duly substantiated by cogent evidence was given to the AO vide submissions dated 6.8.2015, 04.01.2016, and 22.3.2016 and the same has been rightfully accepted by the AO - as argued that it is not a case of non-application of judicious and fair mind on the part of the AO as the matter has been duly considered by the AO at the time of assessment proceedings. Assessee has also contended that even after consideration of the report of the DVO and enhancement to the sale consideration share of the assessee, the difference between the valuation by the DVO and the actual sale consideration would be below 10 %. Deduction u/s 54B - AO had conducted the in-depth examination and verification of corroborative documents/materials submitted during the course of assessment proceedings and after application of fair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of the case as well in law, the learned CIT erred in initiating revision proceedings u/s 263 of the Act, on the same issue which was already considered and detailed enquiry in the course of assessment proceedings u/s 143(3) of the Act and therefore, the jurisdiction assumed to invoke the provisions of Sec. 263 of the Act is bad in law and liable for void ab initio. (3) On the facts and in the circumstances of the case as well in law, and without prejudice to the other grounds, the learned CIT erred in appreciating the fact that complete details in relation to the matters for which proceedings u/s 263 of the Act has been initiated were submitted before the Assessing Officer during the course of assessment proceedings. (4) On the facts and in the circumstances of the case as well as in law, the learned CIT erred in restoring the matter back to the Assessing Officer, without giving a clear findings on the issue on which the proceedings u/s 263 of the Act, was initiated and hence, not justified. (5) The appellant craves leave to add, amend, alter, delete, change or modify any ground of appeal before or at the time of hearing. 3. In the assessee s appeal un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order u/s 143(3) dated 28.03.2016 for the A.Y 2013-14 in his case, the capital gains from sale of the 129, Palanpur district Surat, plot has been wrongly accepted by the AO as Long Term Capital Gains. 6. It was also observed by Ld. PCIT that, besides the transaction in respect of the land at Palanpur as discussed in the preceding paras, there is another plot of land situated in Asarma Village which has been sold during the year by the assessee and short term capital gain of Rs.2,08,797/- has been shown. This plot of land has been shown as purchased on 17/07/2007 at cost of Rs.86,666/- and sold on 29/06/2012 for Rs.40,70,500/-. The Asarma village plot sale registration deed shows the registered sale value at Rs.81,41,000/- and stamp duty paid of Rs.5,44,500/-. Since, in the state of Gujarat, the stamp duty is 4.9 % of the Jantri value, the estimated value of the property by the Sub-Registrar office is Rs.1,11,12,245/-. The AO during the course of assessment had referred the case for valuation to the Valuation Cell of the department. As per the valuation report of the Valuation Officer, Valuation Cell, the Fair Market Value of the property is Rs.1,00,01,800/- as on 29/06/2012. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2010 that an amount of Rs.8,50,000/- has been paid by the assessee and other co-purchasers on various dates in February and March-2008 to the sellers of the land. In fact, the registered sale value as per the purchase deed is Rs.8,50,000/- only. From the payment details mentioned on page-15 of the purchase deed it is seen that the sum of Rs.8,50,000/- has been paid to four co-sellers of the property. Contrary to this fact found mentioned in the purchase deed, the assessee in the computation of long term capital gains submitted with the computation of income for the year has claimed the purchase cost of the said land at Rs.24,09,024/- and the indexed cost of acquisition at Rs.35,26,612./-. It was thus observed that the assessee has claimed higher amount as purchase cost than what is mentioned in the purchase deed. On the other hand, if the claim of the assessee that the purchase cost is Rs.24,09,024/- is accepted as correct then only part of the payment to extent of Rs 8,50,000/- can be said to have been received during February and March-2008. It cannot be said that the purchase consideration has been wholly paid in year, 2008. It is only on 17.05.2010, when the purchase deed was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.2010. Therefore, Ld. PCIT directed to Assessing Officer to verify the above discussed facts relating to correct date of purchase and the correct purchase consideration and to calculate the correct capital gains that has accrued to the assessee from sale of the land. 9. The facts relating to second issue raised by ld PCIT are as follows: With regard to the sale transaction by the assessee of the other plot of land at Village Asarma, the contention of the assessee is that the question of enhancement of the sale consideration on the basis of the valuation made by the DVO, at Rs.1,00,01,800/- vis-a-vis the sale consideration claimed by the assessee of Rs. 81,41,000 /- does not arise, since the detailed explanation duly substantiated by cogent evidence was given to the AO vide submissions dated 6.8.2015, 04.01.2016, and 22.3.2016 and the same has been rightfully accepted by the AO. The assessee has argued that it is not a case of non-application of judicious and fair mind on the part of the AO as the matter has been duly considered by the AO at the time of assessment proceedings. The assessee has also contended that even after consideration of the report of the DVO and enhanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause, after deduction u/s 54B of the Act which has been allowed by the AO after due verification, there would be no tax liability. 12. However, Ld. PCIT rejected the contention of assessee and observed that as per provisions of section 54B(1) of the Act, subject to the provisions of section 54B(2) of the Act, where the capital gain arises from the transfer of a capital asset being land which, in the two year immediately preceding the date of which the transfer took place was being used by the assessee being an individual or his parents or a Hindu undivided family for agricultural purpose, and the assessee has with in a period of two years after the date, purchased any other land for being used for agricultural purposes. Then the capital gains would be charged to tax in accordance with the provisions of those sections. In the above context it is observed in respect of the capital gains from sale of the Asarma Village which has been treated by the assessee as exempt u/s 54B that the AO has not raised any effective query either vide any letter or vide any notice or vide any note sheet entry to enquire about satisfaction of the conditions specified for allowance of deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,54,61,200/- only marking thereby a difference of Rs. 3,39,28,595/- between the Jantri value and the registered value. The AO has not applied his mind to this aspect which is required to be verified thoroughly. In the light of the above discussions, the assessment order in the case of the assessee dated 28.03.2016 passed u/s 143(3) of the I T Act for A.Y. 2013- 14 was found to be erroneous and prejudicial to the interest of revenue and accordingly the same was set aside with directions to the assessing officer to frame the assessment afresh in accordance with the discussion and directions of Ld. PCIT. 14. Aggrieved by the order of Ld. PCIT, the assessee is in appeal before us. 15. Regarding first issue, Ld. Counsel for the assessee submitted that the main issue is that the assessee has shown Long Term Capital Gain instead of short term capital account. The Ld. Counsel submitted that assessee purchased property on 17.04.2008, however the documents were released on a later date by registering authority. The Ld. PCIT has exercised his jurisdiction based on the audit objection only. The Ld. Counsel took us through page no.22 of the paper book wherein the details of sales and purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ldPCIT and other materials brought on record. We note that Assessing Officer has asked from the assessee, during the assessment stage, by way of a letter dated 25.02.2016, to submit the details in respect of agricultural land and the exemption claimed by the assessee under section 54B of the Act. The relevant para of letter dated 25.02.2016, of assessing officer ( to the extent useful for our analysis), is reproduced below: 3 The agricultural land should be used by the individual or his parents for agricultural purpose at least for a period of two years immediately preceding the date of transfer.From the submitted details and documents, it is found that you had not shown any agriculture income in last two years i.e.2012-13 2013-14, also not submitted the proof of Agriculture activity or agriculture income from the land bearing R.S. No. Block No. 197 R.S. No. 86/1, Sp. Mtr.12346/ of Olpad, till date to this office. 4. Thus, the amount claimed as exemption in the computation of income for the AY.2013-14 is not offered for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by assessee, was utilized by him to purchase the another agricultural land on 20.04.2012, therefore assessee has rightly offered the capital gain in the assessment year 2013-14. Having examined these facts, the assessing officer had allowed the claim of the assessee. 14. The Assessing Officer has also discussed the issue of agricultural land and exemption under section 54B of the Act in his order, vide para no.4 5 of the assessment order wherein the Assessing Officer after taking into account entire facts of the assessee, framed the assessment under section 143(3) of the Act, dated 11.03.2016, therefore order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the Revenue. 15. We note that Hon`ble Bombay High Court in the case of Mrs. Parveen P. Bharuchavs 2 Union Of India, WRIT PETITION NO. 10437 OF 2011, dated 27 June, 2012 held that an investment made in Bonds out of advance received for transfer of land before the actual date of transfer would be entitled to the benefit of exemption under Section 54B of the Act. The findings of the Hon`ble Court is as follows: 8 The Tribunal in the case of Ramesh NarhariJakhdi (supra) while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67. The contention on behalf of the Revenue that the assessment order does not reflect any application of mind as to the eligibility otherwise under section-80-I of the Act requires to be noted to be rejected. An assessment order cannot not incorporate reasons for making/granting a claim of deduction. If it does so, an assessment order would cease to be an order and become an epic tome. The reasons are not far to seek. Firstly, it would cast an almost impossible burden on the Assessing Officer, considering the workload that he carries and the period of limitation within which an order is required to be made; and secondly the order is an appealable order. An appeal lies, would be filed, only against disallowances which an assessee feels aggrieved with . 10 Further the reasons recorded by Respondent No.1 for reopening the assessment do not state that the deduction under Section 54E was not considered in the assessment proceedings. In fact from the reasons, it appears that all facts were available on record and according to the respondents was only erroneously SNC 16 WP 10437-11(final).doc granted. This is a clear case of review of an order. The application of law or interpretat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as allowed in the original assessment proceedings are valid. 12 The issue here is one of jurisdiction to issue notice and not sufficiency of reasons in issuing a notice for reassessment. We are considering the jurisdiction to issue a notice under Section 148 to reopen proceedings. In view of what is stated earlier, we do not find any merit in this contention. 16. We note that Coordinate Bench of ITAT Ahmedabad in the case of Rahul G. Patel [2018] 97 taxmann.com598 (Ahd.Trib) held that where assessee invests earnest money or advance received on sale of capital assets in specified assets before date of transfer of asset, amount received will qualify for exemption under section 54EC of the Act. The important findings of the Coordinate Bench is reproduced below: 19. In the next ground of appeal, grievance of the assessee is that the ld.CIT(A) has erred in not granting deduction/exemption under section 54EC of the Act amounting to Rs.50 lakhs. 20. Brief facts of the case are that after agreement to sell the assessee has received sale consideration from the vendee. He has made investment in NHAI bonds and claimed deduction under section 54EC . The ld.AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous. 18. We are very much conscious of Hon'ble Apex Court s landmark decision in the case of Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sr. No: Notice u/s 142(1) /SCN Written Submission 1 29-07-2015 (At Page No: 12 -13 of Paper Book-1) 06-08-2015 (At Page No: 14 - 15 of Paper Book-1) 2 01-12-2015 (At Page No: 17 -18 of Paper Book-1) [Specific Queries raised at Point No: (9), (11), (13) and (14)] 04-01-2016 (At Page No: 19 - 23 of Paper Book-1) [Appellant s replies are at Point No: (8), (10), (12) and (13)] 3 18-03-2016 (SCN) (At Page No: 174 177 of Paper Book-1) 22-03-2016 (At Page No: 178 183 of Paper Book-1) On perusal of the above notices and the explanations with evidences made through various written submissions, the AO has made the inquiry in respect of the LTCG earned on the piece of agriculture land in question and the appellant had offered the detailed explanations substantiated by the cogent and authentic evidences such as registered purchase deed, registered sale deed, computation of LTCG etc., which has, after the examination and verifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rame work of the provisions of the law and thus, there is no force in the inferences drawn by the Pr. CIT taking shelter under Explanation 2(a) of section 263 the Act. The assessee submitted a detailed chart showing the actual sale consideration received for the sale of agriculture land in question and the corresponding payments made towards the purchase of another/new agriculture land, which is as under: SALE OF AGRICULTURE LAND PURCHASE OF AGRICULTURE LAND DATE AMOUNT (Rs.) DATE AMOUNT (Rs.) 15-12-2011 10,50,000/- 19-04-2012 43,00,000/- 21-12-2011 18,00,000/- 30-04-2012 25,00,000/- 19-01-2012 12,20,500/- 30-04-2012 29,00,000/- 30-04-2012 21,25,000/- It is very much evident from the above details that the entire sale considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of lack of inquiry , that such a course of action would be open. In Gabriel India Ltd.'s case (supra), law on this aspect was discussed in the following manner: . . . From a reading of sub-section (1) of section, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is 'erroneous insofar as it is prejudicial to the interests of the revenue'. It is not an arbitrary or unchartered power. It can be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous insofar as it is prejudicial to the interests of the revenue must be based on materials on the record of the proceedings called for by him. If there are no materials on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. ****** We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. 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 detailed explanation on that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard . . . (pp. 113-117) 13. When we examine the matter in the light of the aforesaid principle, we find that the Assessing Officer had called for explanation on this very items, from the assessee and the assessee had furnished his explanation vide letter dated 26-9- 2002. This fact is even taken note of by the Commissioner himself in Para 3 of his order dated 3-11-2004. This ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a definite finding and therefore, it is not necessary that in all cases the Commissioner is bound to express final view, as held by this Court in Gee Vee Enterprises' case (supra). But, the least that was expected was to record a finding that order sought to be revised was erroneous and prejudicial to the interest of the revenue. [see : Seshasayee Paper Board Ltd.'s case (supra)]. No basis for this is disclosed. In sum and substance, accounting practice of the assessee is questioned. However, that basis of the order vanishes in thin air when we find that this very accounting practice, followed for number of years, had the approval of the income-tax authorities. Interestingly, even for future assessment years, the same very accounting practice is accepted. 17. It is in this context the question that assumes importance is as to whether powers could be exercised under section 263 of the Act when two views are possible and following observations of the Tribunal, in this backdrop, become relevant : 38. Still further, the Hon'ble Supreme Court in Malabar Industrial Co. Ltd.'s case (supra) has held that when two views are possible and the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d perspective, it also becomes clear that the judgments under which Mr. Sanjeev Sabharwal, learned counsel for the revenue, had taken umbrage would not be applicable in the instant case and, therefore, would not come to his rescue. In Saravana Spg. Mills (P.) Ltd.'s case (supra) where the Supreme Court expounded the principle of current repairs , clear finding recorded was that ring frames would constitute independent and separate machine capable of independent and specific functions, as is clear from the following observations : In our view, the Assessing Officer was right in holding that each machine including the Ring Frame was an independent and separate machine capable of independent and specific function and, therefore, the expenditure incurred for replacement of the new machine would not come within the meaning of the words current repairs . In the present case it is not the case of the assessee that a part of the machine (out of 25 machines) needed repairs. The entire machine had been replaced. Therefore, the expenditure incurred by the assessee did not fall within the meaning of current repairs in section. In the present case, finding is just the opposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. Ltd.'s case (supra), we are of the view that having regard to the facts and circumstances of the case, the Tribunal was justified in setting aside the order passed by the Commissioner under section 263. We, therefore, answer both the questions in the affirmative, i.e., in favour of the assessee and against the revenue. The reference is, accordingly, disposed of with no order as to costs. 24. Thus, from the assessee`s facts, it is abundantly clear that during the assessment stage, the Assessing Officer asked the assessee to furnish the details and documents which are placed in paper book submitted by assessee. In response, the assessee submitted reply. Thus all the documents, details and the explanations required by the Assessing Officer were submitted by the assessee. Just because the Assessing Officer does not bring these documents and details in his assessment order does not mean that assessing officer has not conducted proper enquiry during the assessment stage. In fact, assessing officer has applied his mind. The Learned Counsel for the assessee is right in his submission that one has to keep in mind the distinction between lack of inquiry and inadequate inquir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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