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TMI Blog2025 (1) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... e, in the year under consideration, none of the conditions laid down in this Section are fulfilled for recognizing revenue. It is also seen that another anomaly has crept into the impugned order when the ld. Pr. CIT has resorted to several assumptions, without backing of facts, leading him to conclude that the fiscal behaviour of the appellant was allegedly not in keeping with what a prudent businessman would normally do. Thus, for example, he has presumed that just because the advance amount paid by the appellant has not been returned back then he has mentioned that no prudent businessman would block his capital for an indefinite period. Thus it is held that not only was the impugned issue considered by the ld. AO but also the provisions of Section 45(5A) of the Act would lead to the conclusion that the adverse inference drawn by the ld. CIT(A) was not justified. Also, the impugned order is based on a number of assumptions which could not possibly be used to draw any adverse conclusion against the appellant. Hence, his action cannot be supported and considering the tests discussed (supra), this matter is decided in favour of the appellant and the order of ld. Pr. CIT is quashed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s u/s 56(2)(X) of the Income Tax Act, 1961 is applicable and an addition of Rs. 1,74,94,805/-(Rs.2,14,53,305/- minus Rs. 39,58,500/-) is being made. In view of the encompassing facts and circumstances of the case and respectfully following the ratio of judgments of Hon ble judicial authorities as discussed in detail in the preceding paragraphs, the Assessing Officer is directed to tax income as per provisions of section 69 and section 56(2)(X) the Income Tax Act, 1961 and give necessary effects as per law and pass necessary Order accordingly. 1.1. Aggrieved with this action of ld. Pr. CIT, the appellant is before us through the following grounds of appeal: 1. FOR THAT the impugned order passed by the Ld. PCIT-13, Kolkata u/s 263 dated 27.03.2024 is illegal, unlawful and contrary to the provisions of the law and accordingly, the same is liable to be struck down in appeal. 2. FOR THAT the Ld. PCIT erred in law and misconceived the unambiguous provisions of Sec. 45(5A) of the Income Tax Act and made unlawful addition of Rs. 1,74,94,805/- u/s 56(2)(x) without applying his mind in the case in hand and such order of the Ld. PCIT is beyond his jurisdiction and liable to be struck down in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of ld. AO, it was averred that considering the provisions of Section 45(5A) of the Act there was no question of taxability of any amount in the assessment year under consideration. Since as per this Section capital gains from transfer of a capital asset would be taxable in the year in which certificate of completion for the whole or part of the project would be issued by the competent authority. 2.1. Before the ld. Pr. CIT, the assessee filed a comprehensive reply as under: This is to bring to your kind attention that I am in receipt of statutory communication in relation to partial modification of letter dated 08.05.2023 vide DIN- ITBA/COM/S/91/2023-24/1052649727(1), whereby the amount of Rs. 3,37,000/- (Set-Forth Value) has been proposed to be modified thereby treating it as Rs. 1,37,65,503/-. In relation to the same, I would like to state that this modification will have no effect at all as due to Non-Sanctioning of Building Sanction plan by the Howrah Municipal Corporation, the Joint Development Agreement could not be proceeded further with. The copy of such Joint Development Agreement (JDA) is annexed for your perusal. As per the records of Howrah Municipal Corporation, this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dopted or assessed or assessable by any authority of the Government for the purpose of payment of stamp duty in respect of an immovable property being land or building or both.] Therefore, the order of the Assessing Authority, being no erroneous, your Honor has no jurisdiction to revise the same under the grab of Section 263 of the Income Tax Act, 1961. Section 263 cannot be invoked for adding Stamp Value under JDA where taxation is triggered after completion u/s 45 (5A) of the Act. This, being the rule of the land, Stamp Duty Value is only attracted at the time of completion. Even otherwise without prejudice to the right and contentions, Stamp Duty Value of land can only be applied after obtaining Valuation Report from the DVO as directed by the Hon ble Calcutta High Court in the case of Sunil Kumar Agarwal. Copy is enclosed. In this view of the matter, I request to drop the proceedings wrongly proposed to be initiated u/s 263 of the Act as your assumption of jurisdiction u/s 263 is unlawful and illegal and beyond any stretch of imagination, does the Assessing Authority s Order being perfectly legal after full inquiry of the matter, the Ld. PCIT cannot now sit to review the matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect the Assessing Officer to pass a fresh order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the ld. Pr. CIT taken u/s 263. 11. Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) has laid down following ratio with regard to provisions of section 263 of the Act: There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion taken by the AO is erroneous as well as prejudicial to the interests of the Revenue. The concept of prejudicial to the interests of the Revenue has to be correctly and soundly understood. It precisely means an order which has not been passed in consonance with the principles of law which has in ultimate eventuate affected realization of lawful revenue either by the State has not been realized or it has gone beyond realization. These two basic ingredients have to be satisfied as sine qua non for exercise of such power. On a perusal of the material brought on record and the order passed by the CIT it is perceptible that the said authority has not kept in view the requirement of s. 263 of the Act inasmuch as the order does not reflect any kind of satisfaction. As is manifest the said authority has been governed by a singular factor that the order of the AO is wrong. That may be so but that is not enough. What was the sequitur or consequence of such order qua prejudicial to the interest of the Revenue should have been focused upon. That having not been done, in our considered opinion, exercise of jurisdiction under s. 263 of the Act is totally erroneous and cannot withstand scruti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are thus of the opinion that the provisions of s. 263 of the Act, when read as a composite whole make it incumbent upon the CIT before exercising revisional powers to: (i) call for and examine the record, and (ii) give the assessee an opportunity of being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only on fulfilment of these twin conditions that the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 and has propounded the following broader principle to judge the action of CIT taken under section 263: (i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law (vi) If while making the assessment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not. 3.2. Our attention was drawn also to the case of PCIT vs. Usha Polychem India (P) Ltd. reported in [2023] 149 taxmann.com 240 (Cal) wherein the Hon'ble Calcutta High Court has held that where the Principal Commissioner invoked revision jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e PCIT erred in exercising its jurisdiction. Our view is supported by the decision in the case of Pr. CIT v. Anindita Steels Ltd. [2022] 137 taxmann.com 203 (Cal.). 6. The learned standing counsel for the appellant relied upon the decision of the Hon'ble Supreme Court in Malabar Industrial Co. Ltd. v. CIT [2000] 109 Taxman 66/243 ITR 83/[2000] 2 Supreme Court Cases 718 and, in particular two paragraphs 10 and 11 of the said decision. 7. In fact, the said decision would support the case of the respondent assessee and would lead us to affirm such an order. 8. Thus, in the light of the factual aspect brought out by the Tribunal while granting relief to the assessee, we find no substantial questions of law, much less substantial questions of law arising for consideration in this appeal. The decisions mentioned above will need to be applied to the facts of this case. 3.3. In this case, it also deserves to be mentioned that on the very same ground that the ld. Pr. CIT has invoked the provisions of Section u/s 263 of the Act, the ld. AO had also enquired and apparently been satisfied by the assessee's contention. Thus, the ld. Pr. CIT is seen to have taken an adverse note of the J ..... X X X X Extracts X X X X X X X X Extracts X X X X
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