HIMANSHU KUKREJA V. THE PRINCIPAL COMMISSIONER OF INCOME TAX CENTRAL CIRCLE DEHRAUDN

ITA/48/2022

AI Insights

Himanshu Kukreja, the appellant, contested the orders of the PCIT and the Income Tax Appellate Tribunal regarding his income tax assessment for the year 2016-17. The primary issue was the AO's failure to investigate the source of funds used for purchasing properties worth Rs.8,64,15,000, which were allegedly bought for the Kulwant Kaur Kukreja Educational Society but remained under the appellant's name. The PCIT found the AO's initial assessment to be lacking, leading to a revision under Section 263 of the Income Tax Act, which the Tribunal and subsequently the High Court upheld.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 671718 (HC-UTTARAKHAND)
• Appeal Type: Others
• Pronouncement Date: 27-07-2022
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: H M BHATIA
• Assessee Lawyers: PULAK MULLICK
• Keywords: Assessment Year 2016-17; Bank Account; Educational Society; Erroneous order; Income Tax; Prejudicial to the interest of revenue; Property Purchase; Source of investment
• Section: 142(1); 143(2); 263; 13(1)(c)

Judgement Text

"IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL THE CHIEF JUSTICE SHRI VIPIN SANGHI AND JUSTICE SHRI RAMESH CHANDRA KHULBE Income Tax Appeal No.48 OF 2022 27TH JULY, 2022 Himanshu Kukreja …… Appellant. Vs. The Principal Commissioner of Income Tax, Central Circle, Dehradun ……Respondent Presence: - Shri Pulak Raj Mullick, learned counsel for the appellant. Shri H.M. Bhatia, learned counsel for the respondent. JUDGMENT: (Per Shri Vipin Sanghi, Chief Justice) The present appeal is directed against the order dated 25.03.2022 passed by the Income Tax Appellate Tribunal, Dehradun Bench, Dehradun in ITA No.11/DDN/2021 for the assessment year 2016-17 and SA No.02/DDN/2021 for the assessment year 2016-17. 2. The Tribunal has rejected the said appeal preferred by the assessee / appellant under Section 263 of the Income Tax Act wherein the appellant had assailed the order passed by the learned PCIT, Dehradun relating to the assessment year 2016-17. 3. The assessee, who is an individual, filed his income tax return on 31.12.2016 showing total income of Rs.10,02,000/-. The assessee has shown income from running hostel. The assesee’s case was selected for scrutiny to examine the issue whether invested income relating to properties were duly disclosed. Accordingly, a notice under Section 143(2) of the I.T. Act was served on the assessee through e-filing portal on 18.09.2017. The AO also issued notice under Section 142(1) of the I.T. Act along with a questionnaire dated 09.02.2018 and 19.07.2018 which were duly served on the assessee. After considering the reply filed by the assessee, the AO completed the assessment accepting the returned income of Rs.10,02,000/-. 4. Subsequently, the learned PCIT perused the record and noted and, was of the view, that the order passed by the AO was erroneous and prejudicial to the interest of the revenue, since, the AO has not examined the issue with regard to the source of investment made by the assessee to the tune of Rs.8,64,15,000/- whereby the assessee had purchased properties in his name. 5. It was claimed by the assessee verbally before the Assessing Officer that the said payment was made from the bank account of Kulwant Kaur Kukreja 2 Educational Society. He claimed that the land had been purchased on behalf of the society. The AO has allowed this stand of the assessee without calling for any record. The property purchased by the assessee, claimed to have been purchased for the aforesaid society, was not transferred in the name of the society and remained the property of the assessee. 6. The PCIT was of the view that the AO has not called for, and examined the record, as well as the violation of the provisions of Section 13(1) (c) of the Income Tax Act, which prohibits any trust/society from diverting its income directly or indirectly for the benefit of any person referred to in Sub-Section (3). 7. Consequently, the PCIT issued show-cause notice to the assessee to explain as to why the order passed by the AO should not be revised under Section 263 of the I.T. Act, since the order appears to be erroneous and prejudicial to the interest of the revenue. The PCIT considered the explanation furnished by the assessee but rejected the same. The assessment order passed by the AO was cancelled with direction to pass a fresh order after affording proper opportunity of being heard to the assessee. 8. The reasons adopted by the PCIT have been 3 extracted in the impugned order, which reads as follows:- “4. The assessee's submission has been carefully examined. It is noticed that the assessee has not provided any justification against violation of the provision of section 13(1) of I.T. Act which prohibits any trust/society from diverting its income directly or indirectly for the benefit of any person referred to in Sub-Section (3). Further, the assessee has not submitted the bank statements of either himself or the society to specify the nature of transaction made for the purchase of property and the source thereof. Moreover, the assessee has neither submitted any document stating that the property has been subsequently transferred to the society nor any statement of the current ownership of the property and status thereof in support of his claim that the property belongs to the society. During the assessment proceedings, the A.O. had not enquired into or called for any documentary evidence relevant to the above issues. 5. After careful consideration of the facts and circumstances of the case, I hold that the assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 dated 18.07.2017 is erroneous and also prejudicial to the interest of revenue in view of the facts narrated in para-2 hereinbefore. Accordingly, the assessment order dated 18.07.2018 is cancelled with the direction to the Assessing Officer to pass a fresh assessment order after due verification and after affording proper opportunity of being heard to the assessee.\" 9. Aggrieved by the order of the PCIT, the assessee preferred the appeal which has been dismissed by the Tribunal. 10. The relevant extracts from the impugned order passed by the PCIT reads as follows:- “7. We have considered the rival arguments made by both the sides, perused the orders of the AO and Id. PCIT and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find that the case of the assessee was selected under limited scrutiny to examine the issue as to whether investments and income relating to properties are duly disclosed. A perusal of the reply given by the assessee during the course of assessment proceedings show that the assessee has purchased two properties, the details of which are as under: 4 Date Purchase Price (Rs.) 24.06.2015 4,73,00,000/- 24.06.2015 3,50,00,000/- 8. However, it is surprising to note that neither the AO has called for the bank account from which such huge amounts of more than Rs.8 crores has been paid to the seller nor the assessee has filed any document before us that he has filed the bank account before the AO from which the payments were made. The submissions of Id. Counsel for the assessee that he has verbally explained the issue to the AO during the course of assessment proceedings cannot be accepted as proper inquiry by the AO during the course of assessment proceedings in absence of any query raised by the AO to this effect. So far as, the arguments of the Id. Counsel for the assessee that the Assessment Order in the case of Kulwant Kaur Kukreja Educational Society was passed u/s 143(3) of the I.T. Act and no action u/s 147/263 of the I.T. Act has been taken is concerned, we find the said order is dated 27.12.2018 i.e. after the passing the order of the assessee on 02.11.2018. In our opinion, when the case was selected for limited scrutiny for the purpose of verification of investment in properties and the AO failed to examine the issue for which the case was selected by not asking for the bank account, the source, the applicability of provisions of Section 13(1)(c) of the I.T. Act etc. therefore, the order passed by the AO without examining the basic details in our opinion, makes the order erroneous as well as prejudicial to the interest of the revenue. We, therefore, uphold the order of the Id. PCIT in cancelling the assessment under the provisions of Section 263 of the I.T. Act with a direction to the AO to pass the fresh Assessment Order after due verification and after affording proper opportunity of being heard to the assessee. Accordingly, the grounds raised by the assessee are dismissed.” 11. The submission of the learned counsel for the appellant / assessee is that the Income Tax Return filed by the aforesaid society was accepted and, therefore, the order passed by the PCIT revising the assessment under Section 263 was incongruous. He submits that it was the 5 case of the appellant/ assessee that the monies for purchase of the land amounting to Rs.8,64,15,000/- was sourced from the said society, however, the aspect of violation of Section 14(1) (c) of the Income Tax Act was not raised by the AO, while completing the assessment of the aforesaid society. 12. We have perused the record and heard learned counsel for the appellant and, we are of the view that no substantial question of law arises for our consideration in the present appeal. The order passed by the PCIT under Section 263 of the Income Tax Act, as well as the order passed by the Tribunal are completely justified in the facts of the case. In fact, we are shocked to see the manner in which the AO dealt with the case after issuance of notices under Section 143(2) & 142(1) of the Income Tax Act along with questionnaire to the assessee. 13. The least that the AO was called upon to do was to require the assessee to make good his claim that the amount of Rs.8,64,15,000/- was sourced from Kulwant Kaur Kukreja Educational Society. The violation of Section 13(1) (c) of the Income Tax Act also required examination after examination of the first aspect as aforesaid. 14. We also fail to appreciate / understand as to what is the reason for the assessee to avoid the inquiry 6 and scrutiny with regard to the source of funds through which the land was purchased by the assessee for Rs.8,64,15,000/-. 15. We, therefore, dismiss this appeal and we also direct the Principal Commissioner of Income Tax, Dehradun to administratively examine whether any action is called for against the AO in the light of the manner in which he has conducted himself while dealing with the proceedings after issuance of the notices under Section 143(2) and Section 142(1) of the Income Tax Act. ________________ VIPIN SANGHI, C.J. ________________________ RAMESH CHANDRA KHULBE, J. Dated: 27th July, 2022 BS/SS 7 "