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TMI Blog2025 (3) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... ho has actually acted as the purchaser or "received" the asset(s) in the relevant previous year. This clinching fact has gone un-rebutted from the departmental side. All what the learned CIT DR has reiterated is that once these assessee's have routed their impugned purchases through the partnership firm, the addition herein u/s 56(2)(vii)(b) of the Act ought to be made in their hands only. We find no merit in the Revenue's instant arguments. This is for the precise reason that both these individuals/assessee happen to be partner of the partnership firms M/s Goyal Sons, they could not be themselves treated as the actual purchaser for the purpose of involving the relevant statutory provisions u/s 56(2)(vii)(b) of the Act. We wish to reiterate here that the legislature has inserted section 56(2)(x) of the Act dealing with "any person" including a partnership firm, to cover such a mischief 01.04.2017 onwards by the Finance Act, 2017 which admittedly does not carry any retrospective effect as the case in A.Y. 2016-17 only. We conclude in light of all these facts that even if the learned Assessing Officer had failed to verify all the relevant facts for the purpose of making impugned se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the Ld. PCIT u/s 263 is illegal & bad in law. He has further erred in exceeding his jurisdiction in passing the order u/s 263 ignoring that an order passed u/s 143(3) r/w sec. 153D cannot be revised without revising the approval of the Addl. CIT. 2. The Ld. PCIT has erred on facts and in law in holding that the order passed by AO is erroneous and prejudicial to the interest of revenue as per clause (a) of Explanation 2 to section 263 as there is non application of mind on part of the AO since he has not made necessary verification of facts/enquiries with reference to:- (i) difference between the stamp duty value of land purchased by the firm M/s Gupta Sons & M/s Agarwal Sons and actual sales consideration with reference to the assessee's share in these firms which is assessable u/s 56(2)(vii)(b) of the Act ignoring that this issue has been examined by the AO in detail in course of assessment proceedings (ii) variation of Rs.1,49,0001- between the return filed u/s 139(1) & 153 A ignoring that the difference is on account of claim of deduction u/s 80C of the Act on account of tuition fees of child duly reflected in the return filed u/s 153A of the Act. 3. The Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and sale consideration is Rs.3,77,95,560/-. The 5% of this value of Rs.3,77,99,560/- come to Rs.18,89,778/-. Further, the total stamp duty value of the land purchased by the firm Agarwal Sons is Rs.28,03,94,000/- and total sales consideration is Rs.1,00,00,000/-. Difference between stamp duty value and sale consideration is Rs.27,03,94,000/-. Shri Ashish Gupta has 1% share contribution in M/s Agarwal Sons. The 1% this value of Rs.27,03,94,000/- comes to Rs.27,03,940/-. The total of Rs. 45,93,718/- (1889778+2703940) is deemed income of the assessee as per provision of section 56(2)(vii)(b) of the Act. d) The assessment considering the addition u/s 56(2)(vii)(b) of the Act has already been passed by the assessing the officer in the cases of Shri Shashi Bala partner in the firm M/s Agarwal Sons and M/s Goel Sons, Manisha Gupta partner in the firm M/s Gupta Sons and M/s Agarwal sons in the cases of Yogesh Bindal, Sushil Garg, Dr. Anguri Gard & Narandra Kumar Mittal partner in the firm M/s Agarwal Sons. e) Further, on perusal of records difference of income amounting to Rs.1,49,000/- was also left out from assessment as mentioned in the show cause. 4. After the above observa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Foods Pvt. Ltd. vs. PCIT (2017) 51 CCH 473/63 ITR (Trib.) 355; v. ITAT, Surat Bench in case of Nilkanth Stone Industries vs. PCIT (2021) 189 ITD 718; vi. Hon'ble Karnataka High Court in case of CIT vs. International Society for Krishna Consciousness (2020) 272 taxman 534; vii. Hon'ble Andhra Pradesh High Court in case of PCIT vs. Deccan Jewellers Pvt. Ltd. (2021) 206 DTR 257/283 taxman 578; and viii. ITAT, Delhi Bench in case of Smt. Abha Bansal vs. PCIT (2021) 208 DTR 265. 7. Per contra, ld. DR for the Revenue relied upon the order of ld. Pr.CIT. 8. As regards ground no.1, ld. DR for the Revenue referred to the decision of the coordinate Bench of the ITAT in the case of Kapil Mehta in ITA No.533/Del/2021 order dated 11.01.2021. ITAT has rejected similar argument in this regard as under :- "6.11 On a plain reading of the section, we do not find that there is any fetters on the powers of PCIT or CIT for revising ' any order passed by the AO "except as provided in explanation 1(c)" of the section. 6.12 However, here the argument of the assessee is that powers granted to the PCIT and CIT u/s 263 becomes otiose if the authority below the rank of PCIT/ CIT i.e Joint Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi High Court. 6.15 Now we come to the decision of the Hon'ble Supreme Court in T.N. Civil Supplies Corpn. Ltd Vs Commissioner of Income-tax [2003] 260 ITR 82 (SC) wherein the Assessing Officer passed an order on the direction of the Inspecting Assistant Commissioner under Section 144B of the Act, which was subject to revision under Section 263 of the Act. The Hon'ble Supreme Court in that particular case has categorically held that the orders are to be revised are orders passed by the Income Tax Officer. Hon'ble Supreme Court further held that provisions of Section 263 did not exclude 'orders passed by the Assessing Officer on the direction of a superior authority either under Section 144A or Section 144B of the Act. The Hon'ble Supreme Court held that :- "2. The power to revise orders of the Income-tax Officer under section 263 of the Income-tax Act, 1961 was sought to be limited by the appellant-assessee by contending that the phrase "order passed by the Income-tax Officer" in section 263 excluded those orders passed by the Income-tax Officer pursuant to the directions of the Inspecting Assistant Commissioner under section 144B which was then included in the Act. 3. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest of the Revenue in the order of the Assessing Officer, even if it is approved by the Joint Commissioner, who is also falling below the rank of the Pr. Commissioner. If the argument of the ld. AR is accepted then the supervisory authority of the Pr. Commissioner granted under the Act is hampered. 6.19 Therefore, on provisions of Section 263 of the Act give un-fettered right to the Commissioner of Income Tax to revise any order passed by the Assessing Officer. Whatever was to be excluded by the law has already been provided under that Section and the only exception are the issues 'decided and considered' in the appellate orders. Therefore, the reasoning of the arguments advanced by the Ld. AR on this line also fails and we dismiss the same." 9. We find that the above proposition is duly applicable in the ground raised by the assessee in this regard wherein it is urged that the jurisdiction exercised by Pr.CIT is wrong inasmuch as that is without revising the approval of the Addl. CIT. As already held by the ITAT above, there are no such fetters to the powers of ld. Pr.CIT and more so for the officer who is below in rank to the Pr. Commissioner. Hence, ground no.1 stands dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act should not be considered as erroneous in so far as it is prejudicial to the interests of the revenue on the following grounds: (i) "Return of income u/s 139(1) was filed on 31.12.2016 showing income of Rs. 24,15,870/-. Later on return u/s 153A(1)(a) of the Income Tax Act, 1961 was filed on 01.03.2019 showing total income of Rs.22,69,470/- meaning thereby short disclosure of income of Rs. 1,46,400/-. Discussion on this point has not been made in the assessment order, therefore, there is under assessment of income of Rs. 1,46,400/-. (ii) A search & seizure operation carried out on 30.11.2017 in your case at residential premises situated at Haveli, Jawahar Ganj Mandi, Shamli. The group/ family has purchased a bagh named as Sir Shadi Lal Enclave located at opposite Begrajpur Industrial Area near Munsurpur, Muzaffarnagar. This orchard is spread over about 585 Bighas and is adjacent to National Highway 58. The said Bagh was purchased in the name of certain firms. However, on the spot enquiry of the address of the firms it was found that no firms run on the said address. It was also found that no other profit earning activities were carrying out by the firms. The said bagh ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence found during search does not support the submission of the assessee. In the ledger of RCSC costing for 38% clearly shown at 8.738 Crores and the entry is brought forward as on 01.04.2014, in itself shows that this entry was also present in ledger of earlier financial years too. The said investment of Rs. 8.738 Crores is clearly expended in cash. In view of this and also in view of other entries in the seized documents, wherein, it has been clearly emanated that amount was paid in cash before the transfer of land in 2015-16, and therefore Rs. 8.738 Crores is the unexplained investment in purchase of land at Sir Shadi Lal Garaden. (v) Further, you have stated that the entire consideration for the land was paid as back as F.Y. 2005-06. This submission is also not acceptable because the seized incriminating document LP-1, Page-3, which is a ledger pertaining to Smt. Suman Gupta for F.Y. 2012-13, show that a payment of Rs. 1.25 Cr. was made in F.Y. 2012- 13 to Shri Vivek Vishwanathan and Smt. Sudha Singhania, who are the co-sellers of this land. It shows that the amount other than sale deeds is unaccounted payment from undisclosed sources. (vi) you are one of the partners i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the firm and the individual but between the two individuals only. Hence, the provisions of section 56(2)(vii)(b) of the Act 1961 are clearly applicable in your case. (viii) In view of above-mentioned facts and circumstances, you have income under the applicable provisions of the Income Tax At, mentioned in paras above, was not disclosed in the return of Income, and which has been under-assessed by the assessing officer while passing assessment order. Therefore, the order passed by the Assessing Officer has been rendered erroneous in so far as it is prejudicial to the interest of the revenue in the light of Explanation 2 to Section 263 of the Income Tax Act, 1961. (ix) You are, therefore, in terms of subsection (1) of Section 263 of the Income Tax Act, 1961, required to show cause as to why the order dated 19.12.2019 for A.Y. 2016-17 passed by DCIT, Central Circle, Meerut, u/s 143(3) r.w.s. 153A of the Income Tax Act, 1961 should not be considered as erroneous in so far as it is prejudicial to the interests of the revenue. You are required to furnish your reply before the undersigned via email on or before 07.03.2022 along with documentary evidences, upon which you wish to rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion, it would be appropriate to discuss the factual and legal aspects of the case which are as under: 8. From perusal of the seized documents, it is found that the above firms, M/s. Aggarwal Sons, M/s. Goel had purchased land in the F.Y. 2015-16. The said land is part of an orchard which was already in possession of Gupta family (Shri Rahul Gupta & others). Shri Mohit Gupta and other family members of the entire Gupta family has 38% share in the Bagh, and the land has been registered at much below value of the market value as per land registry office. Thus, it is crystal clear that these firms have been formed to acquire the impugned bagh and in actuality the firms are not doing any real business. Apart from using these firms to acquire the said bagh, no any business carried out by these firms till date. It is established that the firms created are paper firms and it was created to escape from tax liability as per section 56(2)(vii)(b) as during the year under consideration the firm does not fall within the ambit of section 56(2)(vii)(b). It is also found that the total share of different members of Gupta family in land deal of Sir Shadi Lal Bagh Garden is 38% of total land a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Gupta is Rs.4,25,33,136/- as per section 56(2)(viii)(b) the value of land shall be taken as per stamp duty value and tax is also payabale on that income. Since, it was found that the firms were created for the purpose of only registering the land and as no business activities have been carried out, hence, the amount that was received by seller of land may be treated as received by the partner of the firm fee. the transaction was carried out not between the firm and the individual but between the two individuals only. Hence, the section 56(2)(viii)(b) of the I.T. Act, 1961 is applicable in the case of individual and the difference of sale consideration and stamp value should have been added as income from other sources of the assessee as per his partnership ratio. 11. Further, on perusal of records it is also seen that there is a difference in the income declared by the assessee in the return of income u/s 139(1) and in the return u/s 153A(1)(a) of the Income Tax Act, 1961. Thus, there is short disclosure of income which was left from assessment and the same should have been added to the total income of the assessee per para-3(i) above. However, the same was not done by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pta family has 38% share in the Bagh as per seized document named as RCSC. Sh. Rahul Gupta in his reply has also admitted that Gupta family has 38% share in the Orchard known as Sir Shadi Lal Garden The said bagh got registered in the name of three firms in which the Gupta family members are partners Amang the three firms, one of the firms is M/s Goel Sons The bagh is named as Sir Shadi Lal Enclave located at opposite Begrajpur Industrial area near Mansurpur, Muzaffamagar. This orchard is spread over about 585 Bighas and is adjacent to National Highway 58. The firm was created by furnishing false addresses and came into existence in February, 2015 In this regard, an on the spot enquiries at the address of the assessee firm given in the deed and the return, was carried out by the Investigation Wing It was found that no such firms were carrying out any business at the given addresses. At the stated addresses, no offices of the same or not even any name board of said concern found. The details of the land that was purchased in the name of the firms and when it registered and is whose name it was registered is as under: Seller name Purchaser Name Sale Consideration Area St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Explanation-2, the position of law as regards to under what circumstances an order can be deemed to be erroneous & prejudicial both, has changed substantively. Therefore after 01.06 2015 the propositions given by courts will have to be interpreted with reference to the deeming fiction now provided in the statute itself explaining the conditions wherein an order can be deemed to be erroneous & prejudicial. To avoid any confusion, it would serve the purpose if the said provisions are revisited and I cite them as under: "[Explanation 2-For the purposes 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 [Chief Commissioner or Chief Commissioner or f Principal] Commissioner or Commissioner,- (a) the order is passed without making inquiries or verification which should have been made; [Emphasis supplied] (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any direction or instruction issued by the Board under section 119; or (d) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as to the correctness of the claim, such an assessment would be erroneous in so far it was prejudicial to the interest of the revenue and would be hit by the provisions of Section 263 of the Income Tax Act, 1961. B. In CIT vs. Ballarpur Industries [2017] 85 taxmann.com 10 [Bombay] the Hon'ble High Court of Bombay held that absence of examination of the claim of deduction made by the assessee while passing an assessment order and allowed the claim made would render the order of the Assessing Officer erroneous and would invite the exercise of revisional jurisdiction under Section 263. 17. There is a catena of other decisions wherein the Courts have held that when the Assessing Officer fails to make enquiries which should have been done in the background of relevant material raising suspicion, the order passed by the AO is liable to be set aside u/s 263. The decisions relied for this proposition are as under: Gee Vee Enterprises v. Add/. CIT [1975] 99 ITR 375 (Delhi), Addl. CIT v. Mukur Corpn. [1978] 111 ITR 312 (Guj.), Addl. CIT v. Krishna Narayan Naik [1984] 150 ITR 513/[1983] 15 Taxman 535 (Bom.), CIT v. Precision Finance (P.) Ltd. [1994] 208 ITR 465/[1995] 82 Taxman 31 (CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have routed their impugned purchases through the partnership firm, the addition herein u/s 56(2)(vii)(b) of the Act ought to be made in their hands only. 9. We find no merit in the Revenue's instant arguments. This is for the precise reason that both these individuals/assessee happen to be partner of the partnership firms M/s Goyal Sons, they could not be themselves treated as the actual purchaser for the purpose of involving the relevant statutory provisions u/s 56(2)(vii)(b) of the Act. We wish to reiterate here that the legislature has inserted section 56(2)(x) of the Act dealing with "any person" including a partnership firm, to cover such a mischief 01.04.2017 onwards by the Finance Act, 2017 which admittedly does not carry any retrospective effect as the case in A.Y. 2016-17 only. We conclude in light of all these facts that even if the learned Assessing Officer had failed to verify all the relevant facts for the purpose of making impugned section 56(2)(vii)(b) addition in assessee's hands, his twin search assessments could neither be held to be erroneous ones nor those causing prejudice to the interest of the Revenue, which forms a condition precedent for exercise of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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