Ms. Dhara Jagdishchandra Patel, Ahmedabad V. The CIT, A'bad-III, Ahmedabad

ITA 1116/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5997 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 24-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L MEENA
• Keywords: Capital asset; Revision of order; Loose papers; Opportunity of being heard; Principle of natural justice; Cost of acquisition; Prejudicial to interest; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 54B; 142(1); 133A; 32; 131; 148; 263; 63

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL , C BENCH, AHMEDABAD BEFORE SHRI S.S. GODARA , JUDICIAL MEMBER AND SHRI MANISH BORAD , ACCOUNTANT MEMBER ./ ITA NO. 1116 / AHD /201 4 / ASSTT. YEAR: 20 09 - 20 10 M/S.DHARA JAGDISHCHANDRA PATEL, 11, MANICHANDRA SOCIETY, NR.SURDHARA CIRCLE, THALTEJ, AHMEDABAD - 380 054 P AN :AHKPP8968M VS COMMISSIONER OF INCOME TAX AHMEDABAD - III (APPLICANT) (RESPONENT) ASSESSEE BY : SHRI DHIREN SHAH , AR REVENUE BY : SHRI S.L. MEENA , SR. DR / DATE OF HEARING : 24 / 03 / 201 7 / DATE OF PRONOUNCEMENT: 03 / 05 /201 7 / O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER THIS APPEAL BY A SSESSEE FOR A.Y.2009 - 10 IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) - III , AHMEDABAD (IN SH ORT, LD.CIT(A)) ARISING OUT OF ORDER U/S. 263 (3) THE INCOME TAX ACT,1961 (HEREIN AFTER RE FER RED TO AS ACT) FRAMED ON 29/03/2014 BY CIT - III, AHMEDABAD. 2 . THE ASSESSEE HAS RAISED FOLLOWING GROUND S OF APPEAL: 1. THE LD.CIT HAS ERRED IN LAW AND ON FACTS IN PASSING THE ORDER U/S.263 OF THE ACT BY HOLDING THAT THE ASSESSMENT ORDER PASSED U/S.143(3) DATED 30/08/2011 BY THE A.O IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE HENCE SAME IS DIRECTED MODIFIED. 2. THE LD.CIT HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE A.O TO MODIFY THE ASST. ORDER AS PER PARA 7 OF THE ORDER U/S.263 OF THE ACT AS UNDER ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 2 (I) HE ASSESSING OFFICER WILL RE - COMPUTE ASSESSEE'S TOTAL INCOME BY DISALLOWING CLAIM OF DEDUCTION ON SELF SERVING, FABRICATED AND BOGUS DOCUMENTS CREATED BY THE ASSESSEE WITH THE HELP OF SHRI TUSHAR SHAH & SHRI JASHBHAI D. PATEL, AMOUNTING TO RS. 3,81,58,0137 - AGAINST THE INCOME CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAIN. 3. 3. THE LD. CIT HAS ERRED IN LAW AND ON FACTS IN FAILING TO CONSIDER / APPRECIATE THE FACT THAT THE ASST. ORDER DATED 30 - 08 - 2011 FOR THE ASST. YEAR 2009 - 10 PASSED U/S. 143(3) OF THE ACT BY THE A.O. IS AFTER CALLING FOR THE DETAILS AND EXPLANA TION AND AFTER APPLYING HIS MIND AND HENCE, THE ORDER PASSED BY THE LD. A.O. IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. 4. 4. THE LD. CIT HAS ERRED IN LAW AND ON FACTS IN FAILING TO PROPERLY CONSIDER THE VARIOUS CASE LAWS RELIED UPON BY THE APPELLANT. 3. BRIEFLY STATED FACTS AS CULLED OUT FROM THE RECORDS ARE THAT THE ASSESSEE IS AN INDIVIDUAL . SHE FILED HER RETURN OF INCOME FOR A.Y. 2009 - 10 ON 08/03/2010, DECLARING TOTAL INCOME AT RS.1 , 03 , 79 , 640/ - . CASE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND NOTICE U/ S.143 ( 2) OF THE ACT FOLLOWED BY NOTICE U/S.142(1) OF THE ACT WAS ISSUED , CALLING FOR NECESSARY DETAILS WHICH WERE DULY FILED BY THE AUTHORIZED REPRESENTATIVE ON BEHALF OF THE ASSESSEE. ORDER U/S.143(3) OF THE ACT WAS FRAMED ON 30/ 08/2011 ACCEPTING RETURN OF INCOME AS ASSESSED INCOME AT RS.1,03,79,640/ - . THEREAFTER SURVEY U/S.133A OF THE ACT WAS CONDUCTED ON 27/08/2008 AT THE PREMISES OF MR. BHALUBHAI A PATEL, WHEREIN CERTAIN LOOSE PAPERS (A - 1/ 13 A - 1/11) WERE FOUND AND IMPOUNDED CONT AINING SOME INFORMATION ABOUT LAND AT SURVEY NOS.334,335 & 344 AT SARKHEJ AHMEDABAD. THESE DOCUMENTS ALSO INCLUDED THE DETAILS OF LAND AT SURVEY NO.335 & 334 WHICH WAS JOINTLY OWNED BY ASSESSEE AND T W O OTHER PERSONS. FURTHER THIS INFORMATION WAS HAVING LI NK WITH INCOME TAX RETURN FILED BY THE ASSESSEE SHOWING SHORT TERM CAPITAL GAIN OF RS.95,06,960/ - EARNED FROM SELLING ONE THIRD SHARE IN THE LAND AT SARKHEJ, AHMEDABAD, BEARING SURVEY NO.335 AND 344. LD.CIT ACCORDINGLY INITIATED PROCEEDINGS U/S.263 OF THE ACT AND OBSERVED THAT ASSESSEE HAS CLAIMED DEDUCTION OF RS.3,81,58,013/ - ON ACCOUNT OF TRANSFER EXPENSES . ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 3 4. LD.CIT ALSO NOTICE D THAT LD.ASSESSING OFFICER (IN SHORT LD.AO) HAS ONLY CALLED FOR PRIMARY DETAILS WITH RESPECT TO THE CLAIM OF TRANSFER EXPENSE S RELATING TO DETA ILS OF PAYMENTS, BANK ACCOUNT EXTRACT AND ACCOUNTS COPIES OF M/S.PRERNA INFRABUILD LTD. TO WHOM TRANSFER EXPENSES OF RS.3,81,58,013/ - WERE PAID AS COMPENSATION CONSEQUENT TO ARBITRATION AWARD FOR TERMIN ATION OF DEVELOPMENT AGREEMENT. 4.1 LD.CIT ISSUED SHOW CAUSE U/S.263 OF ACT ON 18/07/2013 AND SUBSEQUENTLY ANOTHER NOTICE DATE D 26/12/2013 WAS ISSUED IN VIEW OF CHANGE IN INCUMBENT. LD. CIT - III AFTER CONSIDERING THE REPLY DATED 05/08/2013 VIS - - VIS FACT OF THE CASE ISSUED FRESH NOTICE TO THE ASSESSEE U/S.263 OF THE ACT DATED 31/01/2014 WHICH READS AS FOLLOWS : PLEASE REFER TO THIS OFFICE NOTICE U/S. 263 OF THE INCOME TAX ACT, 1961 DATED 18/07/2013 AND THE LAST HEARING TAKEN PLACE IN YOUR CASE ON 20/01/2014 WHICH HAS BEEN ATTENDED BY SHR I DHIREN SHAH, C. A. AND A.R. ON YOUR BEHALF. 2. DURING THE COURSE OF REVISIONARY PROCEEDINGS U/S. 263 OF THE ACT, IT HAS BEEN CONTENDED BY SHRI DHIREN SHAH, C. A. THAT DETAILED SUBMISSIONS HAD EA RLIER BEEN MADE ON 5/8/2013 BEFORE THE THEN CYT, AHMEDABAD - III, AHMEDABAD AND THE SAME ARE REQUIRED TO BE CONSIDERED WHILE CONCLUDING THE PROCEEDINGS U/S. 263 OF THE INCOME TAX ACT, 1961. THEREFORE, THE SUBMI SSIONS MADE VIDE LETTER DATED 5/8/2013 HAVE BEEN CAREFULLY PERUSED AL ONG WITH THE DETAILS ALREADY FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND IT IS NOTICED THAT THE AGRICULTURAL LAND BEARING SURVEY NO. 335 & 344 WERE SOLD FOR RS.14,39, 9 2,414/ - WHICH WERE PURCHASED IN M ARCH 2006 F OR RS.9,97,000/ - . YOU WERE OWNER OF THE SAID LAND FOR R 1/3 RD SHARE. YOU HAVE THEREFORE, EARNED SHORT TERM CAPITAL GAIN OF RS. 4,76,6 4,973/ - (RS.4,79,97,306/ - - RS. 3,32,333/ - ). AGAINST THIS SHORT TERM CAPITAL GAIN YOU HAVE SHOWN TRANSFER EXPENSES OF RS. 3,81,58,013/ - BY WAY OF COMPENSATION FOR TERMINATION OF DEVELOPMENT AGREEMENT ENTERED INTO WITH PREJNA INFRABUILD LTD. IT HAS BEEN CONTENDED THAT THE SAID AGREEMENT DATED 29/03/2007 WAS SUBSEQUENTLY TERMINATED ON 3/5/2008. THE TER MINATION AGREEMENT WAS SIGNED IN CONSEQUENCE OF THE ARBITRATION AWARD DATED 29/4/2008 BY ARBITRATOR SHRI JASHBHAI DHAYABHAI PATEL, ADVOCATE OF CHETAN SHAH ASSOCIATES, AHMEDABAD AND BY WHICH COMPENSATION OF RS. 3,81,58 ,013/ - WAS GRANTED TO PRERNA INFRABUILD LTD. IN RESPECT OF THE AFORESAID LAND AT SURVEY NO, 335 & 344 OF SARKHEJ. 5. ON PERUSAL OF THE CASE RECORDS INCLUDING THE AFORESAID DOCUMENTS NAMELY, THE DEVELOPMENT AGREEMENT DATED 29/3/2007, ARBITRATI ON AGREEMENT DATED 1/3/2008, ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 4 ARBITRATION AWARD DATED 29/4/2008, TERMINATION AGREEMENT DATED 1/5/2008 AND VARIOUS FINANCIAL TRANSACTIONS CARRIED OUT BY YOU WITH RESPECT TO THE LAND IN QUESTION, FOLLOWING PECULIARITIES ARE NOTICED (A) IT IS CLAIMED BY YOU THAT YOU HAVE ENTERED INTO DEVELOPMENT AGREEMENT WITH PRERNA INFRABUILD LIMITED ON 29/3/2007, HOWEVER, A LOOSE PAPERS (A - L/13) FOUND AND IMPOUNDED DURING THE COURSE OF SURVEY CONDUCTED U/S. 133A ON 27/8/2008 AT THE PREMIS ES OF M/S. BHAILALBHAI A. PATEL (THE FLAGSHIP FIRM OF YOUR FATHER AND HIS BROTHER HITENDRA PATEL) REFLECTS THAT IT IS DATED 19/10/2007 AND IS RELATED TO LAND BEARING NO. 335 & 344 ALONG WITH OTHER SURVEY NOS. AND SIGNED BY YOUR FATHER SHRI JAGDISHBHAI B. P ATEL, SHRI HITENDRDABHAI B. PATEL WHO IS FATHER OF CO - OWNER MS. JANKIBEN PATEL, SHRI AJAY M. PATEL, SHRI MAHESH K. PATEL. THE CONTENTS OF THESE PAPERS WHICH ARE EXTREMELY DESCRIPTIVE, HAVE BEEN CAREFULLY PERUSED AND IT IS NOTICED THAT THE LAND MENTIONED IN THE LOOSE PAPERS IN POSSESSION OF THE DEPARTMENT PERTAINED TO LAND BEARING SURVEY NO. 335 & 344 WITH OTHER SURVEY NOS. AD - MEASURING 2,50,000 SQ. YARD. AS PER THE SAID LOOSE PAPER, IT WAS AGREED BETWEEN THESE PERSONS THAT THE LAND MENT IONED IN THE LOOSE PAPER WAS JOINTLY OWNED BY TWO GROUPS, ONE BEING YOU AND YOUR FAMILY AND EXPENSES WERE TO BE BORNE IN EQUAL SHARING RATIO OF 50% BY THE T WO GROUPS. THE EXPENSES WERE PROPOSED TO BE INCURRED FOR CONVERSION OF LAND TO NON - AGRICULTURAL LAND, FROM NAVISARAT TO JUNISARAT (FOR LAND AT SURVEY NO. 336 & 337) AND SOLVE ANY PROBLEM OF LAND IN RESPECT OF ANY SURVEY NOS. MENTIONED ABOVE. IT WAS ALSO AGREED THAT THE LIABILITY ON ACCOUNT O F INCOME TAX ON LONG TERM CAPITAL GAIN / SHORT TERM CAPITAL GAIN IS TO BE SHARED IN EQUAL RATIO. THERE WAS ALSO AGREEMENT THAT THE RATIO WITH RESPECT TO CASH TRANSACTION WAS ALSO TO BE EQUAL. SIMILARLY, PAGE NO. A - L/11 IMPOUNDED FROM THE SAME PREMISES AL SO CONTAINS DETAILS OF THE DEVELOPMENT EXPENDITURE INCURRED IN CASH OF RS.1,30,03,000/ - DURING THE PERIOD FROM OCTOBER TO DECEMBER, 2007 FOR OF LAND AT SARKHEJ. AS PER THE IMPOUNDED LOOSE PAPER, THE DEVELOPMENT EXPENSES OF RS.1,3 0,03,000/ - WAS CONTRIBUTED BY S.HRI JAGDISHCHANDRA B. PATEL AND HITENDRA B. PATEL EQUALLY. FROM THE ABOVE, IT IS UNDISPUTED THAT THESE IMPOUNDED PAPERS PERTAINING TO THE LAND AT SURVEY NO. 335 & 344 OF SARKHEJ AND WHICH ARE OWNED BY YOU WITH CO - OWNERS MS. JANKI HITENDRA PATEF AND SHRI PARIMAL SURESHBHAI PATEL EQUALLY, DID NOT INDICATE EXISTENCE OF ANY DEVELOPMENT AGREEMENT WITH PRERNA INFRANBUILD LIMITED WHICH IS DATED 29/3/2007, I.E. MUCH PRIOR TO THE PAPER SIGNED ON 19/10/2007. SIMILARLY, DURING THE SAME PERIOD EXPENDITURE OF RS. 1,30,3,000/ - WAS INCURRED BETWEEN OCTOBER TO DECEMBER, 2007 FOR THE SAME LAND. ALTHOUGH THE EXPENDITURE AS PER THE IMPOUNDED PAGE WAS INCURRED BY SHRI JAGDISHCHANDRA B. PATEL AND HITENDRA B. PATEL WHO HAVE BOTH SIGNED THE AFORESAID PAPER AS WELL AS INCURRED THE EXPENSES ON YOUR BEHALF FOR THE LAND IN QUESTION. THIS FACTS INDICATE THAT IN FACT THE DEVELOPMENT WITH RESPECT TO THE LAND IN QUESTION WAS CARRIED OUT BY YOU AND YOUR FAMILY INCLUDING YOUR FATHER, WHEREAS THE ALLEGED DEVELOPMENT AGREEMENT WITH PRERNA INFRABUILD LTD. WAS NOTHING BUT AN ARTIFICIAL DOCUMENT IN THE NATURE OF - COLORABLE DEVICE' WITH THE ONLY INTENT OF REDU CING YOUR TAX LIABILITY FOR THE YEAR UNDER CONSIDERATION ON ACCOUNT OF HUGE CAPITAL GAIN EARNED ON TRANSFER/ SALE OF THE LAND IN QUESTION. A COPY OF THE IMPOUNDED DOCUMENTS ARE ENCLOSED FOR READY REFERENCE. (B) FURTHER, ON PERUSAL OF THE ALLEGED DEVELOPMENT AGREEMENT DATED 29/3/2007 WITH PRERNA INFRABUILD LTD., IT IS SEEN THAT ALTHOUGH IN CLAUSE 2.7 OF THE AGREEMENT, IT IS AGREED THAT THE AMOUNT REQUIRED TO BE PAID BY THE DEVELOP ER (PRERNA INFRABUILD LTD.) TO THE OWNER (ASSESSEE) WAS TO BE AS PER CLAUSE 8.1(A) ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 5 OF THE SAID AGREEMENT. HOWEVER, IN CLAUSE 8.1(A) OF THE SAID AGREEMENT, THERE IS NO MENTION OF ANY CONSIDERATION TO BE PAID BY THE DEVELOPER TO THE LAND OWNER. F URTHER, NO CONSIDERATION IS EVER RECEIVED BY YOU FOR GIVING ALLEGED PORTION OF LAND OR FOR GIVING RIGHT FOR LAND DEVELOPMENT FROM PRERNA INFRABUILD LIMITED. HENCE, THE SAID DEVELOPMENT AGREEMENT NOT CONTAINING MENTION OF ANY CONSIDERATION I S NOT ENFORCEABLE IN COURT OF LAW AND INDIAN CONTRACT ACT, SINCE THE SAME DOES NOT CREATE ANY RIGHT ON THE PART OF THE DEVELOPER WITH RESPECT TO THE LAND IN QUESTION. IT IS ALSO SEEN THAT AS PER CLAUSE 13 OF THE SAID AGREEMENT, IT WAS AGREED THAT IN CASE O F DISPUTE WITH RESPECT TO THE LAND IN QUESTION, THE SAME WOULD BE REFERRED FOR ARBITRATION AND FEES OF ARBITRATOR SHALL BE BORNE AND PAID BY THE PARTY TO WHOM IT MAY BE DIRECTED BY THE MEDIATOR IN HIS FINAL ORDER. HOWEVER, ON PERUSAL OF THE FINAL ORDER O F AWARD BY THE ARBITRATOR, THERE IS NO MENTION OF ANY REMUNERATION OR ARBITRATION FEES PAID OR TO BE PAID TO ALLEGED ARBITRATOR SHRI JASHBHAI DHAYABHAI PATE) AND PARTY BY WHOM SUCH LIABILITY WAS TO BE BORNE AND PAID./ON PERUSAL OF THE AWARD DATED 29/4/2008 , IT IS SEEN THAT IN PARA(D) OF THE AWARD, IT IS ORDERED THAT OWNER WAS TO PAY RS.3.81 CRORES AS COMPENSATION TO PRERNA INFRABUILD LTD. 'IN ADDITION TO ALL OTHER AMOUNTS TO BE PAID BY THE OWNER TO THE COMPANY THAT MAY HAVE BEEN PAID, CONTRIBUTED OR SPENT O R ARRANGED BY THE COMPANY FOR THE SAID PROPERTY IN PURSUANCE OF THE DEVELOPMENT AGREEMENT,' HOWEVER, NO SUCH AMOUNTS HAVE BEEN FOUND TO HAVE BEEN PAID BY THE COMPANY NAMELY; PRERNA INFRABUILD LTD., EITHER TO YOU AS OWNER OR WITH RESPECT TO THE PRO PERTY IN QUESTION. HENCE, BOTH THE'/DEVELOPMENT AGREEMENT AS WELL AS THE ENTIRE PAPER TRAIL CREATED WITH RESPECT TO THE ARBITRATION HAVE BEEN CREATED AS AN AFTERTHOUGHT AND HAVE NO LEGAL OR FACTUAL SUPPORT TO PROVE THEM TO BE GENUINE. (C) ANOTHER INDICATOR TO THIS FACT THAT THE DEVELOPMENT AGREEMENT AND SUBSEQUENT ARBITRATION PROCEEDINGS ETC. WITH PRERNA INFRABUILD LTD. ARE NOT IN THE NATURE OF GENUINE TRANSACTIONS IS THE FACT THAT AS PER THE REGISTERED DEED OF SALE FOR LAND BEARING SURVEY NO. 335 & 344 WITH APPLE WOOD ESTATES PVT. LIMITED DATED 14/5/2008, IT IS CATEGORICALLY STATED THAT ASSESSEE HAS NOT MADE ANY OTHER AGREEMENT WITH ANY OTHER PARTY ORAL OR WRITTEN. THIS FACT COMBINED WITH THE FACT THAT ENTIRE PAYMENT AGAINST SALE CONSIDERATION OF LAND I.E. RS. 14,39,92,414/ - WAS PAID TO THE LAND OWNERS INCLUDING YOURSELF PRIOR TO THIS DATE AND THERE IS NO PAYMENT TO THE ALLEGED DEVE LOPMENT COMPANY I.E. PRERNA INFRABUILD LIMITED BEFORE SALE OF LANDS TO THE APPL E WOOD ESTATES PVT. LTD. IN FACT, THE PAYMENT HAS BEEN CLAIMED TO HAVE BEEN MADE TO PRERNA INFRABUILD LIMITED ON 1/2/2010 I.E. ALMOST AFTER 1 I/A YEAR FROM THE RECEIPT OF PAYMENT FROM APPLE WOOD ESTATE PVT. LTD. (D) ON CROSS VERIFICATION FROM THE RECO RDS OF PRERNA INFRABUILD LTD., IT IS SEEN THAT EVEN THE SAID COMPANY DID NOT SHO W INCOME OF RS. 3,81,58,013/ - RE CEIVED FROM YOU IN A.YS. 2009 - 10 OR 2010 - 11, ALTHOUGH THE COMPANY FOLLOWS MERCANTILE SYSTEM OF ACCOUN TING AND HE NCE WAS OBLIGATED TO RECOGNIZED THE INCOME FROM THE ABOVE ALLEGED TRANSACTION IN THE YEAR IN WHICH IT WAS CRYSTALLIZED I.E. ASSESSMENT YEAR 2009 - 10 RELEVANT TO PREVIOUS YEAR 2008 - 09 IN WHICH THE AWARD WAS GRANTED ON 29/4/2008 AND ALSO THE TERMINATION AGR EEMENT SIGNED ON 1/5/2008. (E) SIMILARLY, PAYMENT OF COMPENSATION FOR TERMINATION OF DEVELOPMENT AGREEMENT OF RS.10,61,47,415/ - HAS BEEN PAID BY YOUR FATHER SHRI JAGDISHCHANDRA B, PATEL ON 6/2/2010 TO PRERNA INFRABUILD LIMITED FOR TERMINATION OF DEVEL OPMENT AGREEMENT DATED 29/3/2007 UNDER THE DOCUMENTS PREPARED IN THE SIMILAR MANNER AS DONE IN ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 6 YOUR CASE. THAT PAYMENT HAS ALSO NOT BEEN DECLARED BY PRERNA INFRABUILD LIMITED AS INCOME FOR A. YS. 2009 - 10 & 2010 - 11. (F) THE FINAL NAIL IN THE AFORESAID THEORY IS THE FACT THAT COMPENSATION PAID BY YOUR FATHER SHRI JAGDISHCHANDRA B. PATEL TO PRERNA INFRABUILD LIMITED HAS CLAIMED TO HAVE PAID IN TURN TO M/S. KABIR CONSTRUCTION UNDER THE PROPRIETORSHIP OF SHRI N. M. SHAH HAVING PAN NO. ASDDS 6222K, AFTER DEDUCTING 2.5% OF THE COMMISSION AND PAYMENT OF COMPENSATION PAID BY YOU WERE IN TURN PAID TO M/S. SAGAR DEVELOPERS HAVING PAN NO. AQZPS 3749K UNDER THE PROPRIETORSHIP OF SHRI RAJIV DINESHBHAI SHAH AND M/S, SAGAR INFRASTRUCTURE HAVING PAN NO. ADDPA 7838C UNDER PROPRIETORSHIP OF SHRI RAJNIKANT C. ADANI IN THE MONTH OF MARCH, 2010. IN FACT, AS PER THE DATA BASE OF THE DEPARTMENT, ALL THESE THREE PERSONS NAMELY; SHRI N. M. SH AH, SHRI RAJIV DINESH SHAH & SHRI RAJNIKANT C. ADANI ARE ADJUSTMENT ENTRY PROVIDERS AND ARE NOT FILING THEIR INCOME TAX RETURNS FOR LAST MANY YEARS. ALSO, THERE IS NO REFERENCE OF THESE THREE PERSONS IN EITHER THE ARBITRATION AWARD ISSUED IN FAVOUR OF PRER NA INFRABUILD LIMITED OR IN THE DEVELOPMENT AGREEMENT WITH PRERNA INFRABUILD LIMITED, BY WHICH THE COMPANY HAD NO RIGHT TO TRANSFER THE DEVELOPMENT RIGHT TO ANY OTHER PARTIES. IN THIS REGARD, YOU ARE REQUIRED TO PRODUCE THE COPY OF STATEMENT OF BANK ACCOUN T FROM WHICH THE PAYMENTS OF RS. 3,81,58,013/ - HAVE BEEN MADE AND RELEASED TO PRERNA INFRABUILD LIMITED. 4.1. FROM THE FACTS ENUMERATED ABOVE, IT IS EVIDENT THAT THE DEVELOPMENT WITH AGREEMENT WITH PRERNA INFRABUILD LTD., TERMINATION AGREEMENT DATED 3/5/2008 AND ARBITRATION AWARD DATED 3/5/2008 AND ARBITRATION AWARD DATED 29/4/2008 WERE IN, THE NATURE OF FABRICATED DOCUMENTS TO PROVE THE AFOREMENTIONED 'SHAM TRANSACT ION' TO BE GENUINE ONE, WITH INTENTION TO AVOID THE INCOME TAX LIABILITY IN YOUR CASE ON THE HUGE INCOME EARNED BY YOU ON SALE OF AGRICULTURAL LAND BEARING SURVEY NO. 335 & 344. FURTHER, IT IS CLEAR FROM THE ABOVE FACTS THAT YOU HAVE WITH MOTIVE TO EVADE I NCOME TAX ON THE SHORT TERM CAPITAL GAIN SIPHONED THE AFORESAID AMOUNT OF RS.3,81,58,013/ - THROUGH PRERNA INFRABUILD LIMITED AND OTHER ADJUSTMENT ENTRY PROVIDERS. 4.2. IT IS ALSO PERTINENT TO MENTION HERE THAT ALTHOUGH THE LAND AT SURVEY NO. 335 & 344 OF SARKHEJ WAS OWNED EQUALLY BY YOU WITH CO - OWNERS MS. JANKIBEN HITENDRA PATEL AND SHRI PARIMAL SURESH PATEL, IT IS ONLY YOU WHO CLAIMED TO HAVE PAID THE COMPENSATION TO PRERNA INFRABUILD LTD. ON THE BASISOF FABRICATED AND SHAM DEVELOPMENT AGREEMENT. SIMI LAR IS THE SITUATION WITH R ESPECT TO THE LAND SOLD TO APPLEWOOD ESTATES PVT. LTD. DURING THE YEAR UNDER CONSIDERATION BY YOUR FATHER SHRI JAGDISHCHANDRA B. PATEL WITH HIS CO - OWNERS - NAMELY; S/ SHRI HITENDRA B. PATEL, AJAY PATEL AND PARIMAL SURESH PATEL I.E . ONLY YOUR FATHER SHRI JAGDISHCHANDRA B. PATEL CLAIMED COMPENSATION OF RS.10,61,47,415/ - ONCE AGAIN TO SAME PRERNA INFRABUILD LTD. IN RESPECT OF ANOTHER FABRICATED AN D SHAM DEVELOPMENT AGREEMENT. 4.3. ON PERUSAL OF THE RETURNS OF INCOME FOR THE YEAR UNDER CONSIDERATION OF % ALL THESE CO - OWNERS VIS - A - VIS THE RETURNS OF INCOME FILED BY YOU AND YOUR % FATHER SHRI JAGDISHCHANDRA B. PATEL, THE REA SONS FOR MAKING FRAUDULENT CLAIM ON ACCOUNT OF THE COMPENSATION PAID TO PR ERNA INFRABUILD BECOME_APPARENT . ALL THE CO - OWNERS BARRING YOU AND YOUR FATHER HAVE MADE INVESTMENTS IN AGRICULTURAL LAND OR DEPOSITED THE SALE PROCEEDS IN CAPITAL GAIN DEPOSIT ACCOUNT WITH BANKS AND HENCE CLAIMED DEDUCTION U/S. 54B OF THE I.T. ACT TO R EDUCE THEIR TAX LIABILITY ON SALE OF THE LAND TO APPLEWOOD ESTATES PVT. LTD. SINCE NO SUCH INVESTMENTS WERE MADE BY YOU OR YOUR FATHER, THE TAX LIABILITY ON THE SALE PROCEEDS OF THE AFORESAID LAND WOULD ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 7 HAVE BEEN HUGE. HENCE, WITH THE INTENT TO DEFRAUD THE REVENUE OF ITS ELIGIBLE TAX ES, THE ENTIRE EXERCISE OF CREATING DOCUMENTARY TRAIL OF DEVELOPMENT AGREEMENT, ARBITRATION AWARD AND PAYMENT; OF COMPENSATION ON TERMINATION OF DEVELOPMENT AGREEMENT WITH ABETMENT BY PRERNA INFRABUILD LTD. 5. FROM THE ABOVE FACTS, IT IS CLEAR THAT THE APPARENT ASPECTS OF THE TRANSFER IN - GUISE OF TERMINATION OF DEVELOPMENT RIGHTS BY PREPARING FALSE AND FABRICATED EVIDENCE AND BY SHOWING THIS FACT AFTER ALMOST TWO YEARS FROM THE DATE OF SALE OF AGRICULTURAL LAND (BY FILING EVEN THE RETURN OF INCOME IN ASS ESSEE'S CASE ON 08/03/2010) HAS NOT BEEN EXAMINED BY THE AO, THEREFORE, MAKING ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. YOU ARE, THEREFORE, REQUESTED TO EXPLAIN WHY THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER SHOULD N OT BE CANCELLED AND BE MODIFIED U/S. 263 OF THE I. T. ACT, 1961, BY DISALLOWING THE SAID AMOUNT OF RS.3,81,58,013/ - . 6. YOU ARE REQUESTED TO APPEAR BEFORE ME EITHER PERSONALLY OR THROUGH YOUR AUTHORISED REPRSENTATIVE ON 11 TH FEBRUARY, 2014 AT 3:30 PM AT M Y OFFICE SITUATED AT THE ABOVE ADDRESS, ALONG WITH A WRITTEN REPLY WITH DETAILS AND DOCUMENTS ON WHICH YOU MAY REPLY AND IN PARTICULARLY, THOSE REFERRED TO IN THIS NOTICE. 4. I N RESPONSE TO THE ABOVE NOTICE ASSESSEE FILED FOLLOWING DETAILS: ''THAT THE ASSESSEE HAS 'FILED' HER RETURN OF INCOME ON 8/3/2010 DECLARING, TOTAL OF RS. 1,03, 79,6401 - . THE RETURNED INCOME COMPRISES OF THE PROFITS AND GAINS OF BUSINESS AND PROFESSION, CAPITAL GAIN AND INCOME FROM OTHER SOURCES. 2. IN RESPECT OF THE SHORT - TERM C APITAL GAIN OF RS.9506960/ - , THE COMPUTATION OF THE SAME WAS ATTACHED WITH THE RETURN OF INCOME. FOR YOUR HONOUR'S READY REFERENCE, COPY OF RETURN OF INCOME ALONG WITH COMPUTATION OF TOTAL INCOME IS ATTACHED HEREWITH AS PER EXHIBIT - L. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS FILED ALI .THE REQUIRED DETAILS IN CONNECTION WITH THE SHORT - TERM CAPITAL GAIN OF RS. 95,06,960/ - VIDE ITS LETTER DATED 27/8/2011. THE DETAILS FILED BY T HE ASSESSEE INCLUDES FOLLOWING: COPY OF THE DEVELOPMENT AGREEMENT WITH PRERNALNFRABUILD LTD. DATED 29/03/2007. COPIES OF LEGAL COMMUNICATION BETWEEN THE ASSESSEE AND PRERNALNFRABUILD LTD. I CONNECTION WITH THE DISPUTES IN RELATION TO THE LAND FOR WHICH THE DEVELOPMENT AGREEMENT WAS EXECUTED. COPY OF ARBITRAT ION AGREEMENT DATED 01/03/2008 ENTERED INTO BETWEEN THE ASSESSEE AND PRERNALNFRABUILD LTD. COPIES OF WRITTEN REPRESENTATION FILED BEFORE THE ARBITRATOR BY THE ASSESSEE AND PRER NALNFRABUILD LTD. COPIES OF ARBITRATION AWARD DATED 29/04/2008 GIVEN BY THE ARBITRATOR SHRI JASHBHAIDAHYABHAI PATEL, ADVOCATE OF CHETAN SHAH ASSOCIATES, AHRNEDABAD. COPY OF TERMINATION AGREEMENT DATED 01/05/2008 TERMINATING THE DEVELOPMENT RIGHTS ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 8 O F PRERNALNFRABUILD LTD. IN RESPECT OF THE IMPU GNED LAND. F OR READY REFERENCE, THE COPY OF THE SUBMISSION DATED 27/08/2011 ALONG WITH RELEVANT ENCLOSURES ARE ATTACHED HEREWITH AS PER EXHIBIT - 11. 5 . HOWEVER LD.CIT AFTER THOROUGH INQUIRIES CALLING VARIOUS INFORMATION CONCLUDED THAT THE ALLEGED TRANSACTIONS OF P AYING TRANSFER EXPENSES OF RS.3,81,58,013/ - IS SHAM TRANSACTION AND PASSED ORDER U/S.263 OF THE ACT TREATING THE ASSESSMENT ORDER DATED 30/08/2011 FRAMED U/S.143(3) OF THE ACT AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND DIRECTED IT TO MODIFY BY OBSERVING AS FOLLOWS: - 5. IN LIGHT OF THE FACTS NARRATED ABOVE, CORROBORATES THE DEPARTMENT'S STAND THAT THE DEVELOPMENT AGREEMENT, ARBITRATION AWARD AND TERMINATION AGREEMENT IN RESPECT OF THE LAND AT SURVEY NO. 335 & 344 OF SARKHEJ CO - OWNED BY ASSESSEE HAD BEEN ARTIFICIALLY CREATED AS AN AFTERTHOUGHT AND HAD NO LEGAL OR FACTUAL SUPPORT TO PROVE THEM TO BE GENUINE. IT IS HELD THAT THE AMOUNT OF RS.3, 81,58,013/ - CLAIMED TO HAVE BEEN PAID TO PRERNA INFRABUILD LTD. W AS CLAIMED ON THE BASIS OF F ORGED AND FABRICATED DOCUMENTS P REPARED BY ASSESSEE WITH THE HELP OF SHRI TUSHAR S. SHAH AND JASHBHAI D. PATEL. THE AMOUNT OF RS.3.81 CRORES CLAIMED }O HAVE BEEN PAID TO PRERNA INFRABUILD LTD. WAS NEVER PAID TO THAT COMPANY AND HAD ALSO NOT BEEN RECEIVED BY THAT COMPANY WHICH COULD HAVE BEEN DEPOSITED IN THE BANK ACCOUNT OF THAT COMPANY. THERE WAS NO GENUINE DEVELOPMENT AGREEMENT, CANCELLATION OF DEVELOPMENT AGREEMENT, CORRESPONDENCE FOR APPOINTING OF ARBITRATOR, AND ARBITRATION AWARD BY SHRI JASHBHAI D. PATEL, ADVOCATE, ETC. ON THE BASIS OF WHICH ASSESSEE CLAIMED THE EXPENDITURE, OF RS.3.81 CRORES IN QUESTION AS SHRI VIJAY SHAH, MANAGING DIRECTOR OF PRERNA INFRABUILD LTD. HAS DENIED TO HAVE RECEIVED SUCH PAYMENT BASED ON THE FABR ICATED DOCUMENTS. THE ABOVE REVEALATIONS COUPLED WITH THE FACT THAT THERE WAS HUGE TIME GAP OF MORE THAN TWO YEARS FROM THE DATE OF ALLEGED DEVELOPMENT AGREEMENT IN 2007 WITH PRERNA INFRABUILD LIMITED AND SUBSEQUENT SO CALLED ARBITRATION PROCEEDINGS WHICH CONCLUDED IN MARCH, 2008 TILL THE ALLEGED PAYMENT MADE TO PRERNA INFRABUILD LIMITED IN FEBRUARY, 2010, ALSO PROVE THAT THE SAID TRANSACTION OF COMPENSATION PAYMENT WAS CREATED BY ASSESSEE WITH THE INTENTION TO DEFRAUD THE REVENUE AND EVADE THE TAX LIABLE T O BE PAID ON THE CAPITAL GAIN BY CREATING FABRICATED DOCUMENTS DULY ABETTED BY SHRI TUSHAR SHAH AND SHRI JASHBHAI D. PATEL. HENCE, IT IS ASSESSEE WHO CREATED SELF SERVING EVIDENCE WITH THE HELP OF SHRI TUSHAR SHAH, SHRI JASHBHAI D. PATEL AND SHROFF WHO DIS COUNTED THE CHEQUES ISSUED BY ASSESSEE IN THE NAME OF PRERNA INFRABUILD LIMITED. 6. HOWEVER, IT IS NOW CLEAR THAT THE ASSESSMENT - ORDER WAS PASSED IN THIS CASE FOR THE YEAR UNDER CONSIDERATION WITHOUT MAKING RELEVANT INQUIRIES AND CROSS VERIFICATIONS WITH RESPECT TO ASSESSEE'S CLAIM OF DEDUCTION AMOUNTING TO RS.3,81,58,0137 - AND THEREBY ALLOWED INELIGIBLE CLAIM TO THE ASSESSEE AGAINST INCOME CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAIN. HAD THE ASSESSING OFFICER ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 9 CARRIED OUT EVEN PRELIMINARY INQUIRIES AS T HE GENUINENESS OF THE AUTHORISATION BY PRERNA INFRABUILD LIMITED TO ENTER INTO THE AGREEMENT WITH ASSESSEE BY VERIFYING THE COMPANY'S ANNUAL REPORT AND MINUTES BOOK, INQUIRY AS TO WHETHER THE ALLEGED AMOUNT WAS ACTUALLY RECEIVED BY THE COMPANY AND REFLECTE D IN ITS BOOKS OF ACCOUNTS, HE WOULD HAVE REACHED THE CONCLUSION THAT ALL OTHER DOCUMENTARY EVIDENCE IN THE NATURE OF DEVELOPMENT AGREEMENT TO THE TERMINATION AGREEMENT FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WERE SHAM, FABRICATED AND BOGUS CREAT ED WITH A VIEW TO CLAIM THE DEDUCTION AGAINST INCOME CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAIN. THEREFORE, THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER ACIT, CIRCLE - 6, AHMEDABAD IN THIS CASE, IS HELD AS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE'. IN THIS REGARD RELIANCE IS PLACED ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD VS CIT(SC) 243 ITR 83. 7. IN VIEW OF THE DISCUSSION MADE IN THE AFORESAID PARAGRAPHS, THE ASSESSMENT ORDE R PASSED ON 30/08/201 1, U/S. 143(3) OF THE ACT BY THE ASSESSING OFFICER IS TREATED AS ERRONEOUS AND PREJUDICIAL TO INTEREST OF REVENUE HENCE SAME IS DIRECTED TO BE MODIFIED AS UNDER: (IJ) THE ASSESSING OFFICER WILL RECOMPUTE ASSESSEE'S TOTAL INCOME BY DISALLOWING CLAIM OF DEDUCTION BASED ON SELF SERVING, FABRICATED AND BOGUS DOCUMENTS CREATED BY THE ASSESSEE WITH HELP OF SHRI TUSHAR SHAH & SHRI JASHBHAI D. PATEL, AMOUNTING TO RS.3,81,58,013/ - AGAINST THE INCOME CHARGEABLE TO TAX UNDER THE HEAD CAPIT AL GAIN. 8. THEREFORE, THE ASSESSING OFFICER WOULD PASS APPROPRIATE ORDER AFTER PROVIDING OPPORTUNITY OF BEING HEARD FOR GIVING EFFECT TO THIS ORDER. 9. THIS ORDER WILL BE GIVEN EFFECT EXPEDITIOUSLY. 5 AGGR IE VED ASSESSEE IS N OW IN APPEAL BEFORE THE TRIBUNAL CHALLENGING THE VALIDITY OF THE ORDER OF THE LD.CIT PASSED U/S.263 OF THE ACT . 6. LD.COUNSEL SUBMITTED THAT ASSESSEE HAS ONE THIRD SHARE OF OWNERSHIP IN AGRICULTURE LAND AT SURVEY NOS.335 AND 344 AT SARKHEJ, AHMEDABAD, ALONG WITH SHRI PARIMAL SURESH PATEL AND MS. JANKI HITENDRA PATEL. THE LAND IN QUESTION WAS SOLD FOR RS.14,39,92,414/ - AND THIS LAND WAS PURCHASED IN MARCH 2006 FOR RS.9,97,000/ - . THE ASSESSEES SHARE FROM SHORT TERM CAPITAL GAIN AMOUNTED TO RS.4,76,64,973/ - (RS.4,79,97,306 RS.3,32,333/ - ). AGAINST THIS CAPITAL GAIN OF RS.4,76,64,973/ - , ASSESSEE CLAIMED DEDUCTION ON ACC OUNT OF TRANSFER EXPENSES OF RS.3,81,58,013/ - PAID TOWARDS COMPENSATION FOR TERMINATION OF DEVELOPMENT AGREEMENT DATED 29/03/2007 ENTERED INTO WITH PRERNA INFRABUILD LIMITED. ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 10 TERMINATION AGREEMENT DATED 03/05/2008 WAS SIGNED BY BOTH ASSESSEE AND PRERNA INF RABUILD LIMITED IN CONSEQUENCE OF ARBITRATION AWARD DATED 29/04/2008 GIVEN BY ARBITRATOR SHRI JASHBHAI DAYABHAI PATEL, ADVOCATE. LD.AR FURTHER SUBMITTED THAT COMPENSATION OF RS.3,81,58,013/ - CLAIMED AS TRANSFER EXPENSES WAS PAID VIDE CHEQUE NO.221175 - 78 OF DENA BANK VEJALPUR DATED 02/02/2010, 03/02/2010, 03/02/2010 AND 06/02/2010 FOR RS.90,00,000/ - , RS.1,10,00,000/ - , RS,1,00,00,000/ - , AND RS.81,58,013/ - RESPECTIVELY. IT WAS ALSO CONTENDED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS NECESSARY INFORMATI ON WHICH WERE CALLED UP BY LD.AO IN RELATION TO THE TRANSACTION OF SALE OF LAND AND EARNING SHORT TERM CAPITAL GAIN WERE DULY PROVIDED AND LD.AO AFTER MAKING ADEQUATE ENQUIRY ON THE BASIS OF DOCUMENTS FILED BEFORE HIM, ACCEPTED THE TRANSACTIONS AS GENUINE AND THEREFORE ORDER U/S.143(3) OF THE ACT DATED 30/08/2011 IS NOT ERRONEOUS AND PRE - JUDICIAL TO THE INTEREST OF REVENUE AND THE PROCEEDINGS U/S.263 OF THE ACT INITIATED BY LD.CIT NEEDS TO BE QUASHED. 7. LD.COUNSEL FOR THE ASSESSEE REFERRED TO THE DETAILED REPLY DATED 28/02/2014 GIVING POINT - WISE REBUTTAL TO THE ISSUES RAISED BY LD.CIT IN THE SHOW CAUSE NOTICE AND FURTHER REFERRED TO VARIOUS DOCUMENTS FILED IN THE PAPER BOOKS RECITING THAT ALL THE SERIES OF EVENTS OCCURRED DURING THE COMPLETION OF T HE TRANSACTIONS OF SALE OF ONE THIRD SHARES OF AGRICULTURE LAND ARE GENUINE. MORE SPECIFICALLY REFERRING TO THE TRANSFER EXPENSES OF RS.3 , 81 , 58 , 013/ - LD.COUNSEL ADDED THAT ALLEGED PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQ UES OF DENA BANK WHICH IS DULY CERTIFIED BY THE BANK IN ITS CHEQUE REALIZATION CERTIFICATE S DATED 08/01/2013 MENTIONING THAT CHEQUE WERE ISSUED BY DHARA JAGDISHBHAI PATEL AND PAYEE IS M/S.PRERNA INFRA BUILD LIMITED. LD.COUNSEL FURTHER REFERRED TO THE ALLEGATION OF LD.CIT IN THE IMP UG NED ORDER THAT MR.VIJAY SHAH CHAIRMAN AND MANAGING DIRECTOR OF M/S.PRERN A INFRA BUILD LIMITED HAS REFUSED TO HAVE ENTERED IN TO ANY SUCH TRANSACTION S OF RECEIVING COMPENSATION ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 11 FOR TERMINATION OF DEVELOPMENT AGREEMENT , B Y SUBMITTING AS FOLLOWING SUBMISSIONS: 3.2. IN RESPONSE TO THE NOTICE, ASSESSEE FILED REPLY DATED 15/03/2014 & 21/03/2014 TO INFORM THAT ASSESSEE INTENDED TO CROSS - EXAMINE SHRI VIJAY C. SHAH, MANAGING DIRECTOR AND CHAIRMAN OF PRERNA INFRABUILD LIMITED. ASSESSEE ALSO REQUESTED TO ALLOW HER FATHER SHRI JAGDISHCHANDRA B. PATEL TO REMAIN PRESENT DURING THE CROSS EXAMINATION SINCE IT HAS ALREADY BEEN PLACED ON RECORD THAT AFFAIRS OF THE ASSESSEE ARE LOOKED AFTER BY HIM. ASSESSEE ALSO REQUESTED THAT THEY INTENDED TO VERIFY THE BOOKS OF ACCOUNTS O F PRERNA INFRABUILD LIMITED FOR F.YS. 2009 - 10 & 2010 - 11 AT THE TIME OF CROSS EXAMINATION. SUBSEQUENTLY, ANOTHER REPLY HAS BEEN FILED BY THE ASSESSEE DATED 25/3/2014, WHEREIN ASSESSEE HAS RAISED NUMBER OF CONTENTIONS WHICH ARE LISTED HEREUNDER: (I) IT IS CLAIMED THAT DURING THE COURSE OF RE - ASSESSSMENT PROCEEDINGS U/S. 148 OF THE ACT IN THE CASE OF PRERNA INFRABUILD LIMITED, STATEMENTS U/S. 131 WERE RECORDED FROM HER FATHER SHRI JAGDISHCHANDRA B. PATEL WITH RESPECT TO THE TRANSACTIONS CARRIED OUT WITH PRERNA INFRABUILD LIMITED. (II) ASSESSING OFFICER OF PRERNA INFRABUILD LIMITED ALSO RECORDED STATEMENTS FROM SHRI TUSHAR S. SHAH, AS AUTHORISED REPRESENTATIVE OF PRERNA INFRABUILD LIMITED WHICH WAS ALSO CONFRONTED TO SHRI JAGDISHCHANDRA B. PATEL DURING THE CROSS EXAMINATION PROCEEDINGS. (III) TUSHAR SHAH AS AUTHORISED REPRESENTATIVE OF THE COMPANY STATED THAT ACCOUNT PAYEE CHEQUES ISSUED BY ASSESSEE IN THE NAME OF PRERNA INFRABUILD LIMITED WERE DIRECTLY PAID TO KABIR CONSTRUCTION. HOWEVER, ASSESSEE HAD MADE PAYMENT TO PRERNA INFRABUILD LIMITED ONLY. (IV) I T IS FURTHER CONTENDED THAT SHRI TUSHAR SHAH, AUTHORISED REPRESENTATIVE OF THE COMPANY HAD STATED THAT THE PAYMENTS RECEIVED FROM SHRI JAGDISHCHANDRA B. PATEL AND ASSESSEE IN PURUSANCE OF ARBITRATION AWARD WERE BY WAY OF ACCOUNT PAYEE CHEQUES ONLY. (V) IT IS FURTHER CONTENDED THAT THE SAID AMONT HAD BEEN ACCOUNTED FOR IN ITS BOOKS OF ACCOUNTS BY PRERNA INFRABUILD LIMITED IN F. Y. 2009 - 10, UNDER THE HEAD LAND DEVELOPMENT RIGHTS. (VI) ASSESSEE HAS FURTHER CONTENDED THAT THE STATEMENT OF SHRI VIJAY SHAH, DENYING AWARENESS WITH RESPECT TO DEVELOPMENT AGREEMENT WITH THE ASSESSEE IS A SELF SERVING STATEMENT TO AVOID TAX LIABILITY AND HENCE NO ADVERSE INFERENCE CAN BE DRAWN ON THE BASIS O F SUCH STATEMENT. (VII) IT IS ALSO CONTENDED THAT THE STATEMENT OF SHRI VIJAY SHAH, DENYING KNOWLEDGE AND RELATIONSHIP WITH SHRI TUSHAR SHAH IS ALSO SELF SERVING STATEMENT, SINCE THE SAID PERSON, SHRI TUSHAR SHAH DURING THE COURSE OF STATEMENT RECORDED U/S. 131 OF THE ACT HAS ALSO PRODUCED THE BANK STATEMENT OF THE COMPANY AS WELL AS AUDITED ACCOUNTS OF THE COMPANY FOR F. Y. 2009 - 10 & 2010 - 11 WHICH WOULD BE POSSIBLE ONLY IF, AUTHORISED BY THE COMPANY MANAGEMENT INCLUDING SHRI VIJAY SHAH. ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 12 (VIII) IT IS FURTHER CONTENDED THAT AT THE TIME OF RECORDING STATEMENT FROM SHRI VIJAY SHAH, CHAIRMAN AND MANAGING DIRECTOR OF PRERNA INFRABUILD LIMITED, HE HAS NOT BEEN CONFRONTED WITH THE STATEMENT RECOR DED FROM SHRI TUSHAR SHAH AND THEREFORE, NO ADVERSE INFER ENCE CAN BE DRAWN FROM THE SAME IN THE ASSESSEE'S CASE. (IX) IT IS ALSO STATED THAT SHRI VIJAY SHAH HAS PRODUCED ANNUAL REPORT OF THE COMPANY FOR F.Y. 2007 - 08, BUT NO SUCH ANNUAL REPORTS FOR THE SUBSEQUENT YEARS HAVE BEEN PRODUCED IN WHICH THE AMOUNTS RECEIVED BY THE COMPANY FROM THE ASSESSEE HAVE BEEN REFLECTED WHICH INTENDS TO MISGUIDE THE DEPARTMENT. (X) IN RESPECT OF OPPORTUNITY TO CROSS - EXAMINE SHRI VIJAY SHAH, SHRI SUBHASH HINDOCHA AND SHRI ANIL KADIA, TWO STATEMENTS WERE RECORDED U/S. 131 OF THE ACT DURING THE COURSE OF PROCEEDINGS IN ASSESSEE'S CASE. IT IS STATED THAT THE STATEMENTS OF SHRI SUBHASH HINDOCHA AND SHRI ANIL KADIA HAVE CATEGORICALLY STATED THAT THEY DO NOT KNOW ASSESSEE OR HER FATHER SHRI JAGDISHCHANDRA B. PATE L NOR HAVE GIVEN ANY ADVERSE STATEMENT AGAINST THE ASSESSEE AND, THEREFORE ASSESSEE DO NOT INTEND TO CROSS EXAMINE THEM. (XI) ASSESSEE HAS ALSO RESERVED HER RIGHT TO AVAIL THE OPPORTUNITV OF CROS S EXAMINATION OF MR. VIJAY C. SHAH OF PRERNA INFRABU ILD LTD. AT APPROPRIATE TIME AND BEFORE APPROPRIATE FORUM, WHICH IS REQUIRED TO BE GRANTED IN THE INTEREST OF NATURAL JUSTICE AND EQUITY. (XII) WITH RESPECT TO THE INQUIRY WITH THE PERSONS NAMELY ANIL MUKESHKUMAR KTRAIA AND SUBHASH BHARATBHAI HINDOCHA WHO H AVE RECEIVED THE PAYMENTS, ASSESSEE HAS CONTENDED THAT THESE PERSONS HAVE CATEGORICALLY DENIED - KNOWLEDGE OR RELATION WITH ASSESSEE OR HER FATHER SHRI JAGDISHCHANDRA B. PATEL AND HENCE NO ADVERSE INFERENCE CAN BE DRAWN FROM THE SAME. (XIII) WITH RESPECT TO THE SHOW CAUSE NOTICE REGARDING NON - ATTENDENCE BY SHRI JASHBHAI D. PATEL, ARBITRATOR, FOR CROSS - EXAMINATION U/S. 131 OF THE ACT BY THE ASSESSING OFFICER, THE ASSESSEE WOULD LIKE TO SUBMIT THAT ASSESSEE'S FATHER SHRI JAGDISHCHANDRA B. PATEL ENQUIRED WITH THE SOLE ARBITRATOR SHRI JASHBHAI D. PATEL AND HE HAS INFORMED THAT THE SUMMONS U/S. 131 OF THE I.T. ACT, 1961 WAS ALSO ISSUED TO SHRI JASHBHAI D. PATEL, SOLE ARBITRATOR IN THE CASE OF PRERNA INFRABUILD LTD BY THE ITO, WARD 5(2), AHMEDABAD AND HE HAS ALSO BEEN EXAMINED BY THE ITO, WARD 5(2), AHMEDABAD, BY RECORDING HIS STATEMENT IN RESPECT OF ARBITRATION AWARD RENDERED BY HIM IN RESPECT OF DISPUTES BETWEEN SHRI JAGDISHCHANDRA B. PATEL AND M/S. PRERNA INFRABUILD LTD., AND DHARABEN JAGDISHCHANDRA PATEL A ND M/S. PRERNA INFRABUIID LTD. (XIV) IT IS CONTENDED THAT SHRI JASHBHAI D. PATEL HAS ALSO APPEARED BEFORE THE ITO, WARD 5(2), AHMEDABAD, IN THE CASE OF M/S. PRERNA INFRABUILD LTD., IN RESPECT OF SUMMONS ISSUED U/S. 131 OF THE ACT AND HIS STATEMENT WAS R ECORDED. IN VIEW OF THE AFORESAID FACTS, THE OBSERVATION THAT AS SHRI JASHBHAR D. PATEL DID NOT PLAY ANY ROLE IN THE SO - CALLED AWARD IS MERELY ON SURMISES AND CONJECTURES AS WELL AS UNJUSTIFIED AND BAD IN LAW. (XV) IT IS FURTHER CONTENDED THAT THE COMPE NSATION AMOUNT AS PER ARBITRATION AWARD AGGREGATING TO RS. 3,81,58,013/ - HAD BEEN PAID BY ACCOUNT PAYEE CHEQUES IN FAVOUR OF M/S. PRERNA INFRABUILD LTD., FOR WHICH NECESSARY BANK CERTIFICATE OF HER BANKERS DENA BANK HAS ALSO BEEN PLACED ON RECORD STATING T HAT SHE HAD ALREADY ISSUED THE ACCOUNT PAYEE CHEQUES IN FAVOUR OF M/S. PRERNA INFRABUILD LTD., AND AS PER THE ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 13 INFORMATION AVAILABLE TO HER FATHER SHRI JAGDISHCHANDRA B. PATEL THAT THE INCOME TAX DEPARTMENT DID CALL THE MANAGER OF DENA BANK BRANCH WHERE ASS ESSEE'S BANK ACCOUNT IS OPERATED AND HE HAS ALREADY PLACED ON RECORD OF THE I.T. DEPARTMENT THE PHOTO COPY OF ACCOUNT PAYEE CHEQUES ISSUED BY HER IN FAVOUR OF M/S. PRERNA INFRABUILD LTD. , WHICH HAS' GONE INTO CLEARING. HOWEVER, THE AFORESAID FACTS WHICH A RE IN FAVOUR OF THE ASSESSEE, HAVE NOT BEEN REFERRED TO IN SHOW - CAUSE LETTER REGARDING THE SAME. (XVI) ASSESSEE FURTHER CONTENDED THAT THE DEPARTMENT'S PROPOSITION THAT THE AMOUNT OF RS.3,81,58,013/ - CLAIMED TO HAVE BEEN PAID TO PRERNA INFRABUILD LTD. WA S CLAIMED ON THE BASIS OF FORGED AND FABRICATED DOCUMENTS PREPARED BY THE ASSESSEE WITH THE HELP OF TUSHAR S. SHAH AND JASHBHAI D. PATEI WAS MERELY BASED ON SURMISES AND CONJECTURES AND WITH A SUSPICIOUS MIND AGAINST THE ASSESSEE AND DISREGARDING THE FACTS AVAILABLE ON RECORD DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS DURING THE COURSE OF PROCEEDINGS U/S.263 OF THE ACT. THE ASSESSEE SUBMITED THAT ALL THE DOCUMENTS ARE EXECUTED BY THE ASSESSEE AND SHRI TUSHAR S. SHAH, AUTHORIZED PERSON OF THE COM PANY PRERNA INFRABUILD LTD AT THE RELEVANT POINT OF TIME ONLY & MERE DENIAL BY VIJAY SHAH, CHAIRMAN OF THE COMPANY IN HIS STATEMENT RECORDED U/S.131 OF THE ACT DATED 11/3/2014 IS SELF - SERVING ANSWER TO SAVE HIMSELF AS WELL AS HIS COMPANY FROM TAX LIABILITY . FURTHER, THE DEPOSITING OF 7 CHEQUES AGGREGATING TO RS.7.85 CRORES IN THE BANK ACCOUNT OF PRERNA INFRABUILD LTD. WHICH HAS BEEN RECEIVED FROM ASSESSEE'S FATHER SHRI JAGDISHCHANDRA B. PATEL IN PURSUANCE OF THE ARBITRATION AWARD CLEARLY ESTABLISHES THAT TH ERE WAS A DEVEIOPMENT AGREEMENT BETWEEN THE ASSESSEE AND PRERNA INFRABUILD LTD. AS WELL AS BETWEEN JAGDISHCHANDRA B. PATEL AND PRERNA INFRABUILD LTD. AND THEREFORE MERELY DENYING THE FACT THAT TUSHAR S. SHAH IS NOT DIRECTOR OR AUTHORIZED PERSON OF THE COMP ANY BY SHRI VIJAY SHAH, CHAIRMAN OF PRERNA INFRABUILD LTD. IS CONTRADICTORY AND SELF SERVING STATEMENT. FURTHER, THE STATEMENT OF VIJAY SHAH RECORDED U/S.131 OF THE ACT BY ACIT, CIRCLE - 5, IS ALSO NOT COMPLETE IN ALL RESPECT BECAUSE IN RESPECT OF THE DEPOSI T OF THE CHEQUES AGGREGATING TO RS.7.85 CRORES IN THE BANK ACCOUNT OF PRERNA INFRABUILD LTD. WHICH WERE GIVEN BY FATHER OF THE ASSESSEE SHRI JAGDISHCHANDRA B. PATEL IN PURSUANCE OF THE ARBITRATION AWARD, NO PROPER QUESTION HAS BEEN ASKED TO BRING OUT THE N ATURE OF TRANSACTION FOR WHICH THE SAID AMOUNT HAS BEEN RECEIVED BY THE SAID COMPANY FROM JAGDISHCHANDICI B. PATEL. ACCORDINGLY THE PROPOSITION TO TREAT THE VARIOUS DOCUMENTS STATED HEREIN ABOVE AS FORGED AND FABRICATED IS UNSUSTAINABLE ON THE FACTS OF THE CASE AND THEREFORE NO ADVERSE INFERENCE IS REQUIRED TO BE DRAWN. (XVII) AS REGARDS PROPOSITION THAT THE AMOUNT OF RS.3.81 CRORES CLAIMED BY THE ASSESSEE AS PAID TO PRERNA INFRABUILD LTD. WAS NEVER PAID TO THAT COMPANY AND HAD ALSO NOT BEEN RECEIVED B Y THAT COMPANY WHICH COULD HAVE BEEN DEPOSITED IN THE BANK ACCOUNT OF THAT COMPANY, THE ASSESSEE WOULD LIKE TO SUBMIT THAT SHE HAS PAID ACCOUNT PAYEE CHEQUES IN THE NAME OF PRERNA INFRABUILD LTD. WHICH HAS BEEN GOT CLEARED IN HER BANK ACCOUNT AS CLEARING. FURTHER, THE ASSESSEE HAS ALSO FILED THE CHEQUE REALIZATION CERTIFICATE FROM HER BANKER DENA BANK CERTIFYING THE FACT THAT CHEQUES WERE DRAWN IN THE NAME OF PRERNA INFRABUILD LTD. VIDE EXHIBIT - 11 OF MY EARLIER SUBMISSION DATED 28/2/2014. THE ASSE SSEE IS NOT IN A POSITION TO CLARIFY AS TO HOW THE ACCOUNT PAYEE CHEQUES DRAWN IN THE NAME OF PRERNA INFRABUILD LTD. HAVE NOT BEEN DEPOSITED/CLEARED IN THE BANK ACCOUNT OF THE SAID COMPANY PRERNA INFRABUILD LTD. HOWEVER, IT IS IMPORTANT TO TAKE NOTE OF TH E FACT THAT IN THE REASSESSMENT PROCEEDINGS OF SAID COMPANY PRERNA INFRABUILD LTD., THE PERSON SHRI TUSHAR SHAH, WHO ATTENDED THE HEARING OF THE SAID COMPANY HAS CATEGORICALLY ADMITTED THE RECEIPT OF THE COMPENSATION BY ACCOUNT PAYEE CHEQUE ON BEHALF OF ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 14 THE COMPANY FROM THE. ASSESSEE. FURTHER,HE HAS ALSO CONFIRMED IN HIS STATEMENT IN REASSESSMENT PROCEEDINGS THAT THECHEQUES RECEIVED FROM THE ASSESSEE (DHARA J. PATEI) BY THE COMPANY PRERNA INFRABUILD LTD, HAVE BEEN DIRECTLY GIVEN TO THE PARTY NAMELY KABIR CONSTRUCTION. INVIEW OF THE AFORESAID FACTS AND THE STATEMENT OF TUSHAR SHAH DURING THE COURSE OF REASSESSMENT PROCEEDINGS OF THE SAID COMPANY PRERNA INFRABUILD LTD., IT CANNOT BE SAID THAT THE AMOUNT OF RS.3.81 CRORES HAS NOT BEEN PAID BY THE ASS ESSEE TO PRERNA INFRABUILD LTD. JUST BECAUSE THE SAID AMOUNT HAS NOT BEENDEPOSITED/CLEARED IN THE BANK ACCOUNT OF THE SAID COMPANY. WITH RESPECT TO THE SHOWCAUSE NOTICE, THAT THERE WAS NO GENUINE DEVEL OPMENT AGREEMENT,CANCELLATION OF DEVELOPMENT AGREEMENT, CORRESPONDENCE FOR APPOINTING ARBITRATOR AND ARBITRATION AWARD BY JASHBHAI D. PATE!, ADVOCATE, ETC. ON THE BASIS OF WHICH ASSESSEE'S CLAIM OF EXPENDITURE OF RS.3.81 CRORES IS IN QUESTION AS SHRI VIJAY SHAH, MANAGING DIRECTOR OF PRERNA INFRABUILD LTD. HAS DENIED TO HAVE SUCH PAYMENT BASED ON FABRICATED DOCUMENTS, THE ASSESSEE HAS TO SUBMIT THAT THE SAME IS AGAIN ON SURMISES AND CONJECTURES AND DISREGARDING THE FACTS AND EVIDENCES AVAILABLE O N RECORD. IT IS REITERATED THAT ALL THE DOCUMENTS REFERRED TO BY ASSESSEE HAVE BEEN EXECUTED BY THE ASSESSEE AS WELL AS PRERNA INFRABUILD LTD.. AT THE RELEVANT POINT OF TIME AND THE STATEMENT OF VIJAY SHAH, MANAGING DIRECTOR OF PRERNA INFRABUILD LTD. THAT SUCH DOCUMENTS ARE FABRICATED DOCUMENTS IS A SELF SERVING STATEMENT TO SAVE HIMSELF AND HIS COMPANY FROM THE TAX LIABILITY. IN VIEW OF THE ABOVE FACTS AND SUBMISSION, IT IS CONTENDED BY THE ASSESSEE THAT THE SHOWCAUSE GIVEN TO REJECT THE CLAIM O F DEDUCTION OF RS.3.81 CRORES IN COMPUTING THE CAPITAL GAIN AS DECLARED AND ACCEPTED IN THE REGULAR ASSESSMENT PROCEEDINGS IS REQUIRED TO BE DROPPED/QUASHED AND THE A.O. SHOULD NOT BE DIRECTED TO MODIFY THE ASSESSED INCOME AS SHOW - CAUSE D.' 8 . LEARNED A.R FURTHER REFERRED AND RELIED UPON FOLLOWING JUDICIAL PRONOUNCEMENT S WHEREIN PROCEEDINGS U/S.263 OF THE ACT HAS BEEN HELD AS INVALID. (I) COMMISSIONER OF INCOME - TAX VS. R.K. CONSTRUCTION CO. [2009] 313 ITR 65 (GUJ) (II] COMMISSIONER OF INCOME TAX VS. ARVIND JEWELLERS, (2003) 259 ITR 502 (GUJ.) (III)MALABAR INDUSTRIAL CO. LTD. V. COMMISSIONER OF INCOME - TAX (2000) 243 ITR 83 (SC) (IV) COMMISSIONER OF INCOME - TAX V. GABRIEL INDIA LTD. 203 ITR 108 (HC BOMBAY) (V) M COMMISSIONER OF INCOME - TAX VS. VIKAS POLYMERS (2013) 341 ITR 537 (HCDELHI) (VI) COMMISSIONER OF INCOME - TAX V. KELVINATOR OF INDIA LTD..[2011] 332 ITR 231 (DELHI) (VII) COMMISSIONER OF INCOME - TAX V. G.K. KABRA (1995) 21 1 ITR 336 (AP HIGH COURT) (VI) CO MMISSIONER OF INCOME - TAX V. R.K. METAL WORKS, 1 12 ITR 445 (HC. P&H) ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 15 ( VII ) H.H. MAHARAJA RAJA PAWER DEWAS V. COMMISSIONER OF INCOME - TAX, 138ITR518(HC - MP) (X) COMMISSIONER OF INCOME - TAX, U.P. V. LATE SUNDER LAL (THROUGH BANKEY BEHARI LAL) 96 ITR 310. (XI) COMMISSIONER OF INCOME - TAX, BIHAR V. SHANTILAL AGARWALLA, 142ITR778 (HC PATNA) (XII) GUPTA INTERNATIONAL VS. INCOME TAX OFFICER, (201 0) 2 ITR (TRIB) 428 (DEL) (XIII) REGENCY PARK PROPERTY MANAGEMENT SERVICES (P) LTD. VS. COMMISSIONER OF INCOME - TA X, (2010) 130TTJ (DEL) (XIV ) PURANLAL AGRAWAL (HUF) VS. COMMISSIONER OF INCOME - TAX, (2010) 131 TTJ (NAG) 78. 9 . LD.AR ALSO REFERRED TO THE FOLLOWING CASE LAWS RELATING TO PROCEEDINGS U/S.263 OF THE ACT FAVORING ASSESSEE. 1 COMMISSIONER OF INCOME TAX VS. GM MITTAL STAINLESS STEEL PVT LTD. (2003) 130 TAXMAN 67 (SC) 2 COMMISSIONER OF INCOME TAX VS. SUNBEAM AUTO LTD. (2010) 189 TAXMAN 436 (DELHI H.C.) 3 COMMISSIONER OF INCOME - TAX VS. KRISHNA CAPBOX (P) LTD. (2015) 60 TAXMANN.COM 243 (ALLAHABAD H.C.). 4 COMMISSIONER OF INCOME - TAX VS. FINE JEWELLERY (INDIA) LTD. (2015) 372 ITR 303 (BOM H.C.). 5 COMMISSIONER OF INCOME - TAX - IV VS. HOTZ INDUSTRIES LTD. (2014) 49 TAXMANN.COM 267 (DELHI H.C.) 6 COMMISSIONER OF INCOME - TAX VS. VODAFONE ESSAR SOUTH LTD. (2012) 28 TAXMANN.COM 273 (DELHI H.C.) 7 NARAIN SINGLA VS. PR.COMMISSIONER OF INCOME - TAX, (CENTRAL), LUDHIANA (2015) 62 TAXMANN.COM 255 (CHANDIGARH - TRIB) 8 VEGESINA KAMALA VS. ITO, WARD - 1, PALAKAD (2016) 66 TAXMANN.COM 280 (VISAKHAPATANAM - TRIB) ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 16 9 LANCO KONDAPALLI POWER LTD. VS. JT.COMMISSIONER OF INCOME - TAX (2014) 50 TAXMANN.COM 442 (HYDERABAD - TRIB) 10 NARAYAN TATU RANE VS. ITO WARD - 27(1)(1), MUMBAI (2016) 70 TAXMANN.COM 227 (MUMBAI - TRIB) 10 . ON THE OTHER HAND LEARNED D EPARTMENTAL R EPRESENTATIVES VEHEMENTLY ARGUED SUPPORTING THE ORDER OF LD.CIT AND FURTHER ADDED THAT LD.A O HAS NOT CONDUCTED SUFFICIENT E NQUIRY WITH REGARD TO THE IMPUGNED TRANSACTIONS OF PAYING HUGE TRANSFER EXPENSES FOR CANCELLI NG THE DEVELOPMENT AGREEMENT. HE FURTHER ADDED THAT MANAGING DIRECTOR OF THE COMPANY M/S.PRERNA INFRABUILD LTD. WHO IS ALLEGED TO HAVE RECEIVED THE COMPENSATION OF RS.3.81 CRORES HAS REFUSED TO HAVE RECEIVED ANY SUCH AMOUNT AND EVEN NOT HAVE ENTERED INTO A NY SUCH TRANSACTION OF DEVELOPMENT AGREEMENT WITH THE ASSESSEE. LD.DR RAISED SERIOUS DOUBT ABOUT GENUINENESS OF THE EXPENDITURE AND FURTHER SUBMITTED THAT AS THE E NQUIRY WAS INADEQUATE AS HE DID NOT TOUCHED UPON CRUCIAL ASPECT S OF THE TRANSACTION DURING TH E COU RSE OF ASSESSMENT PROCEEDINGS AND THEREFORE T HE ORDER PASSED U/S.143(3) OF THE ACT BY LD.AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 11 . WE H AVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS PLACED BEFORE US AND GONE THROUGH TH E VARIOUS JUDGMENTS AND DECISIONS RELIED BY THE LD.CO UNSEL. IN THIS APPEAL ASSESSEE HAS CHALLENGED THE ORDER U/S.263 PASSED BY LD.CIT CLAIMING IT TO BE VOID AND FURTHER DESERVES TO BE CANCELLED. 11 .1 WE NOTICE THAT ASSESEE IN HER INCOME TAX RETURN FOR A.Y . 2009 - 10 H AS SHOWN SHORT TERM CAPITAL GAIN OF RS.95,06,960/ - FROM SELLING ONE THIRD SHARES IN THE LAND BEARING SURVEY NO.344 AND 355 AT SARKHEJ, AHMEDABAD. THIS SHORT TERM CAPITAL GAIN WAS CALCULATED AFTER CLAIMING TRANSFER EXPENSES OF ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 17 RS.3,81,58,013/ - P AID TO M/S.PRERNA INFRBUILD LTD. FROM PERUSAL OF THE ORDER OF LD.CIT U/S.263 OF THE ACT WE FIND THAT THE CONTROVERSY IS REVOLVING ROUND THE COMPENSATION OF RS.3,81,58,013/ - . LD.COUNSEL HAS SUBMITTED THAT THE ASSESSE OWNED ONE THIRD SHARE IN ITS SURVEY NO. MOUJE, SARKHEJ, AHMEDABAD, ALONG WITH OTHER TWO CO - OWNERS SMT.JANKIBEN HITENDRABHAI AND SHRI PARIMALBHAI SURESHBHAI AND THIS LAND WAS ACQUIRED IN THE MARCH 2006 AND THEREAFTER ON 29/03/2007 ASSESSEE ENTERED INTO AN AGREEMENT WITH PRERNA INFRABUILD LTD. A SS IGNING DEVELOPMENT RIGHTS OF HER ONE THIRD SHARE IN THE LAND REFERRED ABOVE AT SARKHEJ, AHMEDABAD. FURTHER IN THIS DEVELOPMENT AGREEMENT A SSESSEE ACCEPTED THE CONDITION FOR GETTING ASSIGNED DEVELOPMENT RIGHTS IN RESPECT OF 2/3 SHARES OF OTHER CO - OWNERS I N FAVOUR OF PRERNA INFRABUILD LTD. AND ALSO TO GET NO OBJECTION PERMISSION OF DIFFERE NT SURVEY NOS. THEREAFTER IN OCTOBER, 2007 ASSESSEE ALONG WITH THE OTHER TWO CO - OWNERS ENTERED INTO MOU FOR THE SALE OF LAND TO OTHER COMPANY (OTHER THAN PRERNA INFRABUILD LTD.) BECAUSE THE OTHER TWO CO - OWNERS DID NOT AGREE TO ASSIGN THE DEVELOPMENT RIGHTS OF THEIR 2/3 SHARES IN FAVOUR OF PRERNA INFRABUILD LTD. IN ORDER TO COPE UP WITH THIS SITUATION AND T O SAFEGUARD HERSELF FROM POSSIBLE DISPUT E AND LITIGATION WITH PRERNA INFRABUILD LTD . A MATTER WAS PLACED BEFORE ARBITRATOR MR. JASHBHAI DAHA BHAI PATEL, ADVOCATE. ARBITRATOR GAVE ARBITRATION AWARD ON 29/04/2008 MENTIONING SUM OF RS.3.81 CRORES AS COMPENSATION TO BE PAID BY ASSESSEE TO PRERNA INFRABUILD LTD. FOR TERMINATION O F DEVELOPMENT AGREEMENT. THEREAFTER TERMINATION AGREEMENT WAS SIGNED ON 03/05/2008, HOWEVER, PAYMENT OF ARBITRATION AWARD I.E COMPENSATION OF RS.3,81,58,013/ - WAS PAID BY ACCOUNT PAYEE CHEQUE DURING THE FINANCIAL YEAR 2009 - 10 TO THE ACCOUNT OF PRERNA INFRA BUILD LTD . LD.COUNSEL HAS PLACED COPIES OF CHEQUE REALIZATION CERTIFICATES ISSUED BY DENA BANK, CERTIFYING THAT SUM OF RS.3,81,58,013/ - HAS BEEN RECEIVED BY PRERNA INFRABUILD LTD. ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 18 11 .2 WE OBSERVE THAT ASSESSEE HAS CLAIMED TRANSFER EXPENSES OF RS.3,81,58, 013/ - WHILE COMPUTING SHORT TERM CAPITAL DURING A.Y. 2009 - 10. HOWEVER, ONGOING THROUGH THE FINDINGS OF LD.CIT IN IMPUGNED ORDER U/S.263 OF THE ACT IT APPEARS THAT LD.CIT FURTHER NOT BELIEVED TO HAVE SOMETHING BLACK IN PULSES RATHER BELIEVED THE TOTAL PULSES TO BE BLACK . THE REASON FOR THIS IS THAT LD.CIT HAS TREATED TOTAL TRANSACTIONS STARTING FROM THE SIGNING OF DEVELOPMENT AGREEMENT TILL THE PAYMENT OF COMPENSATION AMOUNT BY ACCOUNT PAYEE CHEQUE AS SHAM AND BOGUS IN NATURE WHICH WERE ALL SUPPORTED BY WRITTEN DOCUMENT, DULY SIGNED, VERIFIED AND PAYMENTS CERTIFIED BY BANK . IT LOOKS THAT T HIS VIEW OF LD.CIT EMINATED OUT OF THE STATEMENT GIVEN BY MANAGING DIRECTOR, MR.VIJAY SHAH OF PRERNA INFR ABUILD LTD. WHO HAS CATEGORICALLY S TATED NOT TO HAVE ENTERED INTO ANY SUCH TRANSACTION OR RECEIVED ANY SUCH PAYMENT S . 12 . IN THIS APPEAL W E ARE DEALING WITH THE ISSUE AS TO WHETHER LD.CIT HAS CORRECTLY ASSUMED POWER U/S.263 OF THE ACT . IN ORDER TO EXAMINE THIS ASPECT WE WILL LIKE TO GO THROUGH CERTAIN PRINCIPLE S LAID DOWN BY HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. COMMISSIONER OF INCOME - TAX (2000) 2 43 ITR 83 (SC) RELATING TO JUSTIFICATION/VALIDITY OF POWER EXERCISED BY LD.CIT U/S.263 OF THE ACT. IN THIS CASE, IT HAS BEEN HELD AS UNDER: A BARE READING OF PROVISIONS OF SECTION 263 OF THE INCOME - TAX ACT, 1961 MAKES IT CLEAR THAT THE PREREQUISITE TO EXERCISE OF JURISDICTION BY THE CIT SUO MOTU UNDER IT, IS THAT THE ORDER OF THE (TO IS ERRONEOUS INSOFAR AS IT IS P REJUDICIAL TO THE INTERESTS OF THE REVENUE. THE CIT HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE. ORDER OF THE AO SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT IF THE ORDE R OF THE ITO IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO S. 263(1). THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MI STAKE OR ERROR COMMITTED BY THE AO; 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 CATEGOR Y FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 19 ACT. UNDERSTOOD IN ITS ORDINARY MEANING I T IS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENT RUSTED TO THE REVENUE. I DUE TO AN ERRONEOUS ORDER OF THE ITO, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEO US ORDER PASSED BY THE AO. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVE NUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTAINABLE IN LAW 12 .1 FROM GOING THROUGH THE PRINCIPLE LAID DOWN BY HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. V. COMMISSIONER OF INCOME - TAX (SUPRA) W E OBSERVE THAT POWER U/S. 2 63 OF THE ACT CAN BE EXERCISED BY LD.COMMISSIONER ON SATISF ACTION OF TWIN CONDITION NAMELY.1) THE ORDER OF ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS. 2) IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. IF LD.AO HAS TA KEN ONE OF THE COURSES PERMISSIBLE IN LAW THAN SUCH ORDER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERES T OF REVENUE . ALSO IF LD. ASSESSING OFFICER ADOPT S ONE OF THE COURSES PERMISS IBLE IN LAW AND IT HAS RESULTED IN LOSS TO THE REVENUE THAN ALSO IT CAN NOT BE TREATED AS ERRONEOUS ORDER OR PREJUDICIAL TO THE INTEREST OF REVENUE. 12.2 FROM THE ABOVE STATED PR INCIPLE WE UNDERSTAND THAT IF THE CASE OF ASSESSEE IS PICK ED UP FOR SCRUTINY ASSESSMENT BY ISSUING NOTICE U/S.143(2) OF THE ACT AND VARIOUS INFORMATION ARE CALLED FOR BY ISSUING NOTICE U/S.142(1) OF THE ACT AND THE ASSESSEE MAKES SUBMISSION WITH EVIDENCES AND DETAILS TO THE SATISFACTION OF ASSESSING OFFICER. FURTHER LD.AO , AFTER MAKING ADEQUATE ENQU IRY AND EXAMINING THE RECORD , TAK ES A PARTICULAR VIEW WHICH IS PERMISSIBLE IN LAW AND THERE IS SPECIFIC MENTIONING OF THE OBSERVATION OF THE IMPUGNED TRANSACTION IN THE BODY OF ORDER THAN SUCH ORDER U/S.143(3) OF THE ACT CANNOT BE TERMED AS ERRONEOUS OR PREJUDI CIAL TO THE INTEREST OF REVENUE . FURTHER IN SUCH CASE LD. ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 20 COMMISSIONER OF INCOME TAX CANNOT ASSUME POW ER U/S.263(3) OF THE ACT AN D CAN NOT GI VE INSTRUCTIONS TO THE ASSESSING OFFIC ER TO CONDUCT ENQUIRY IN PARTICULAR MODE . 13 . NOW LET US EXAMINE THE FACTS OF THE CA S E IN THE LIGHT OF RATIO LAID DOWN BY HONBLE APEX COURT, JURISDICTIONAL HIGH COURT AND OTHER HONBLE COURT . SPECIFIC QUE RY WAS RAISED BY THE LD.AO ABOUT THE TRANSACTION OF SHORT TERM CAPITAL GAIN ENTERED INTO BY THE ASSESSEE IN THE NOTICE U/S.142(1) OF THE ACT ON 03/05/2011. IN RESPONSE THERE TO , ASSESSEE FILED DETAILED SUBMISSIONS ON 27/08/2011 SHOWING ALL NECESSARY DETAILS ABOUT IMPUGNED TRANSACTION OF SALE OF ONE THIRD SHARE IN THE AGRICULTURE LAND AND ALSO REFERRED TO DEVELOPMENT A GREEMENT, TERMINATION AGREEMENT AND ARBITRATION AWARD. THE REPLY OF ASSESEE IS REPRODUCED BELOW: - WITH REFERENCE TO CAPTIONED SUBJECT, I CRAVE LIBERTY TO SUBMIT AS UNDER: - 1. THAT IN THE COMPUTATION OF TOTAL INCOME, THE ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN OF RS.95,06,9607 - AND THE COMPUTATION OF SHORT TERM CAPITAL GAIN HAS BEEN ATTACHED AS PART OF THE STATEM ENT OF TOTAL INCOME. 2. THAT THE ASSESSEE ACQUIRED 1/3 RD SHARE IN THE DIFFERENT SURVEY NOS. AGRICULTURAL LAND SITUATED AT MOUJE SARKHEJ, REGN. DIST. AHMEDABAD AND SUB - DIST AHMEDABAD, ALONG WIT H OTHER TWO CO - OWNERS NAMELY SMT. JANKIBEN HIT ENDRABHA I AND SHRI PARIMALBHAI SURESHBHAI IN THE MONTH OF MARCH, 2006 AND THE PARTICULARS OF AGRICULTURAL LAND HAS ALREADY BEEN STATED IN THE STATEMENT OF SHORT TERM CAPITAL GAIN ATTACHED WITH THE STATEMENT OF TOTAL INCOME. FOR YOUR HONOUR'S READY REFERE NCE PURPOSE, XEROX COPY OF THE STATEMENT OF SHORT TERM CAPITAL GAIN ATTACHED WITH THE COMPUTATION STATEMENT OF TOTAL INCOME IS ATTACHED HEREWITH AS PER EXHIBIT - I ALONG WITH COPY OF PURCHASE DEED OF AGRICULTURAL LAND WHEREIN THE ASSESSEE ACQUIRED L/3 RD S HARE IN THE AGRICULTURAL LAND ALONG WITH OTHER TWO CO - OWNERS AS PER EXHIBIT - II. 3. THAT THE ASSESSEE ENTERED INTO AN AGREEMENT WITH PRERNA INFRABUILD LTD., FOR ASSIGNING THE DEVELOPMENT RIGHTS OF HIS L/3 RD SHARE IN THE DIFFERENT SURVEY NOS. AGRICULTURAL LAND SITUATE AT MOUJE SARKHEJ, IN THE REGISTRATION DISTRICT AHMEDABAD AND SUB DISTRICT AHMEDABAD LAND BEARING SURVEY NO. 335 AND SURVEY NO. 344 (HEREINAFTER REFERRED TO AS THE 'AFORESAID AGRICULTURAL LAND ') BY A DEVELOPMENT AGREEMENT DATED 29 - 3 - 2007 AND IN THE SAID DEVELOPMENT AGREEMENT, THE ASSESSEE ACCEPTED THE OBLIGATION OF GETTING THE ASSIGNMENT OF DEVELOPMENT RIGHTS IN RESPECT OF 2/3 RD SHARE OF OTHER CO - OWNERS IN FAVOUR OF PRERNA INFRABUILD LTD AND AL SO TO GET THE N.A. PERMISSION OF DIFFERENT SURVEY NOS AGRICULTURAL LAND FOR WHICH THE ASSESSEE ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 21 ENTERED INTO A DEVELOPMENT AGREEMENT WITH PRERNA INFRABUILD LTD. THE COPY OF THE DEVELOPMENT AGREEMENT IS ATTACHED HEREWITH AS PER EXHIBIT - III. 4. SUBSE QUENT TO THE ENTERING INTO THE DEVELOPMENT AGREEMENT DATED 29 - 03 - 2007, IN THE. MONTH OF OCTOBER, 2007, THE ASSESSEE ALONG WITH OTHER TWO CO - OWNERS ENTERED INTO AN MOU FOR THE SALE OF THE LAND TO OTHER COMPANY AS THE OTHER TWO CO - OWNERS DID NOT AGREE WITH THE ASSESSEE TO ASSIGN THE DEVELOPMENT RIGHTS OF THEIR 2/3 RD SHARE IN THE AFORESAID LAND IN FAVOUR OF PRERNA INFRABUILD LTD. THAT THE DECISION OF THE ASSESSEE AND OTHER TWO CO - OWNERS TO SALE THE AFORESAID DIFFERENT SURVEY NOS. LAND TO OTHER PARTIES CAME TO THE KNOWLEDGE OF PRERNA INFRABUILD LTD AND THEY RAISED AN OBJECTION BY COMMUNICATING TO THE ASSESSEE WITH RESPECT TO THE MOU ENTERED INTO BY THE ASSESSEE AND OTHER TWO CO - OWNERS FOR THE SALE OF LAND TO OTHER PARTIES AND THE DISPUTE AROSE BETWEEN THE ASSES SEE AND PRERNA INFRABUILD LTD. PRERNA INFRABUILD LTD GAVE LEGAL NOTICE THROUGH THEIR ADVOCATE AND THE ASSESSEE HAS ALSO GIVEN THE WRITTEN REPLY THROUGH HIS ADVOCATE TO PRERNA INFRABUILD LTD. THE LEGAL COMMUNICATION BETWEEN THE ASSESSEE AND PRERNA INFRABUIL D LTD IS ATTACHED HEREWITH AS PER EXHIBIT - IV. 5. THAT THE ASSESSEE ON REALIZING THE FACT THAT PRERNA INFRABUILD LTD MAY GO TO THE LITIGATION BY FILING THE SUIT IN THE COURTS OF LAW WHICH MAY RESULT INTO LONG DRAWN LITIGATION AND WHEREBY L/3 RD SHARE IN THE AFORESAID AGRICULTURAL LAND BELONGING TO THE ASSESSEE COULD NOT BE SOLD BY THE ASSESSEE AND ALSO BY OTHER TWO CO - OWNERS, AN ALTERNATIVE REMEDY OF SOLVING THE DISPUTE BY WAY OF APPOINTING AN ARBITRATOR WAS SORTED OUT BY THE DISPUTING PARTIES I .E. THE ASSESSEE AND PRERNA INFRABUILA' LTD ANA' THEY HAVE ENTERED INTO AN ARBITRATION AGREEMENT FOR APPOINTING AN ARBITRATOR. THE COPY OF IHE ARBITRATION AGREEMENT IS ATTACHED HEREWITH AS PER EXHIBIT - V. 6. THAT THE ADVOCATE OF THE ASSESSEE AND AD VOCATE OF PRERNA INFRABUILD LTD MADE WRITTEN REPRESENTATION BEFORE THE ARBITRATOR BY PRESENTING THEIR CASES AND THE ARBITRATOR HAS FINALLY GIVEN THE ARBITRATION AWARD DATED 29 - 04 - 2008 WHEREIN THE ARBITRATOR AWARDED A SUM OF RS. 3.81 CRORE AS AND BY WAY OF COMPENSATION FOR TERMINATION OF DEVELOPMENT AGREEMENT DATED 29 - 3 - 2007 TO BE PAID TO THE COMPANY PRERNA INFRABUILD LTD VIDE ARBITRATION AWARD DATED 29 - 04 - 2008. THIS AMOUNT OF RS. 3.81 CRORE IS IN ADDITION TO ALL OTHER AMOUNT WHICH WA S PAYABLE BY THE ASSESSEE TO THE SAID COMPANY THAT MAY HAVE, BEEN PAID, CONTRIBUTED SPENT OR ARRANGED BY THE SAID COMPANY FOR THE AFORESAID AGRICULTURE LAND IN PURSUANCE OF THE DEVELOPMENT AGREEMENT DATED 29 - 03 - 2007. A COPY OF ARBITRATION AWARD IS ATTACHED HEREWITH AS PER EXHIBIT - VI. SUBSEQUENT TO THE ARBITRATION AWARD, A TERMINATION AGREEMENT WAS ALSO ENTERED INTO BETWEEN THE ASSESSEE AND PRERNA INFRABUILD LTD. ON 01 - 05 - 2008. THE COPY OF THE TERMINATION AGREEMENT DATED 01 - OS - 2008 IS ATTACHED HEREWITH AS PER EXHIBIT - VII. 7. FRO M VERIFICATION OF AFORESAID FACTS, THE DISPUTE BETWEEN THE ASSESSEE AND THE DEVELOPER COMPANY PRERNA INFRABUILD LTD AND THE ARBITRATION AWARD, IT GETS ESTABLISHES THAT UNLESS AND UNTIL THE ASSESSEE WOULD HAVE NOT AGREED TO PAY COMPENSATION TO PRERNA INFRABUILD LTD, FOR TERMINATION OF DEVELOPMENT AGREEMENT THE ASSESSEE'S L/3 RD SHARE IN THE AFORESAID LAND COULD NOT HAVE BEEN FREELY MARKETABLE AND THE ASSESSEE COULD NOT HAVE SOLD L/3 RD SHARE IN THE AFORESAID LAND ALONGWITH OTHER TWO CO - OWNE RS AND THEREFORE, THE COMPENSATION PAID TO PRERNA INFRABUILD LTD AS PER THE ARBITRATION AWARD IS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF AFORESAID AGRICULTURAL LAND AND THEREFORE, THE SAID EXPENDITURE IS DEDUCTI BLE AS PER THE PROVISIONS OF SECTION 48(1] OF THE ACT IN THE COMPUTATION OF CAPITAL GAIN AS AN EXPENDITURE INCURRED ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 22 IN CONNECTION WITH ASSESSEE'S L/3 RD SHARE IN THE AFORESAID AGRICULTURAL LAND. IN SUPPORT OF THE AFORESAID CONTENTION, THE ASSESSEE RELIES UPON THE FOLLOWING DECISION OF VARIOUS HIGH COURTS: - I) CIT VS. SHAKUNFALA KANFILAL 190 ITR 56 (BOM.) WHEREIN, IT HAS BEEN HELD AS UNDER: SECTION 48 OF THE INCOME - TAX ACT, 1961 BROADLY CONTEMPLATES THREE AMOUNTS FOR THE PURP OSE OF COMPUTING INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS. THE FIRST IS THE FULL VALUE OF THE CONSIDERATION FOR WHICH THE CAPITAL ASSETS HAS BEEN TRANSFERRED, THE SECOND IS THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH T RANSFER AND THE THIRD AND THE LAST IS THE COST OF ACQUISITION OF THE CAPITAL ASSET INCLUDING THE COST OF ANY IMPROVEMENT THERETO. THE EXPRESSION FULL VALUE OF CONSIDERATION CONTEMPLATES BOTH ADDITIONS TO, AS WELL AS DEDUCTIONS FROM , THE APPARENT VALUE. WHAT IT MEANS IS THE REAL AND EFFECTIVE CONSIDERATION. SO FAR AS CLAUSE (I) OF SECTION 48 IS CONCERNED, THE EXPRESSION USED BY THE LEGISLATURE IN ITS WISDOM IS THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUC H TRANSFER. THE EXPRESSION IN CONNECTION WITH SUCH TRANSFER IS WIDER THAN THE EXPRESSION FOR THE TRANSFER. ANY AMOUNT THE PAYMENT OF WHICH IS ABSOLUTELY NECESSARY TO EFFECT THE TRANSFER WILL BE AN EXPENDITURE COVERED BY THIS CLAUSE. IN OTHER WOR DS, IF, WITHOUT REMOVING ANY ENCUMBRANCE, SALE OR TRANSFER COULD NOT BE EFFECTED, THE AMOUNT PAID FOR REMOVING THAT ENCUMBRANCE WILL FALL UNDER CLAUSE (I). II) CIT VS. ABRAR ALVI 247 ITR 312 (BOM.) WHEREIN IT HAS BEEN HELD AS UN DER: - HELD, DISMISSING THE APPEAL, (I) THAT THE ORDER OF REMAND BY THE TRIBUNAL WAS JUSTIFIED. (II) THAT THE TRIBUNAL FOUND THAT THERE WAS ACRIMONIOUS DISPUTE BETWEEN THE ASSESSEE AND HIS SON, WHO HAD FILED A SUIT TO RESTRAIN THE TRANSFER. THE ASSESSEE PAID RS.8 LAKHS TO HIS SON TO EFFECT THE TRANSFER. THE TRIBUNAL RIGHTLY ALLOWED THE EXPENDITURE INCURRED BY THE ASSESSEE TO REMOVE THE ENCUMBRANCE TO THE TRANSFER. III ) CIT VS. BRAD FORD TRADING CO.PVT. LTD. 261 ITR 222 (MAD.) WH EREIN IF HAS BEEN HELD AS UNDER: - HELD, THAT IT WAS CLEAR FROM THE PROCEEDINGS IN THE LITIGATION THAT A SUM OF RS. 2 LAKHS WAS PAID TO THE HOTELIER IN SETTLEMENT OF HIS CLAIM AGAINST THE HOTEL UNDERTAKING WHICH WAS TO BE TRANSFERRED IN FAVOUR OF ITC AND HE RECEIVED THE MONEY IN FULL AND FINAL SETTLEMENT OF HIS CLAIMS AGAINST ALL THE RESPONDENTS IN THE COMPANY PETITION INCLUDING THE ASSESSEE COMPANY. UNLESS THE AMOUNT OF RS. 2 LAKHS WAS PAID, THE TRANSFER OF PROPERTY WOULD NOT HAVE TAKEN PLACE AT ALL. THEREFORE, THE PAYMENT HAD O N INTIMATE CONNECTION WITH THE TRANSFER OF THE UNDERTAKING AS BY ALLOWING THE LITIGATION TO GO ON THE HANDS OF THE ASSESSEE - COMPANY WOULD BE TIED AGAINST THE TRANSFER OF THE UNDERTAKING IN FAVOUR OF ITC AND THE ASSESSEE COMPANY WOULD NOT HAVE REALIZED THE SALE CONSIDERATION FROM THE PROSPECTIVE PURCHASER. THOUGH THE SUM OF RS. 1.5 LAKHS WAS PAID BY THE ASSESSEE COMPANY ONLY TO SETTLE THE CLAIM OF THE HOTELIER, THE MONEY WAS RECEIVED BY THE ASSESSEE COMPANY IN CONNECTION WITH THE TRANSFER OF THE HOTEL UNDE RTAKING AND IT WOULD FORM PART OF SALE CONSIDERATION. IN THE CASE OF PAYMENT OF RS.50,000 AND THE LITIGATION EXPENDITURE OF A SUM OF RS.16,000, THE SAME ANALOGY WOULD APPLY AND THOSE AMOUNTS WERE ALSO DEDUCTIBLE'. ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 23 IV) GOPEE NALH PAUL & SONS & ANOTHE R VS. DC1T 278 ITR 240, WHEREIN IT HAS BEEN HELD AS UNDER: - HELD; THAT THE SALE CONSIDERATION RECEIVABLE BY THE ASSESSEE WAS LESS THE LIABILITY TO THE BANK. THUS MEETING THIS LIABILITY OF ONE OF THE FIRMS, WHEN THE ENTIRE ASSETS WERE BEING SOLD, WAS AN ABSOLUTE NECESSITY TO EFFECT THE TRANSFER. IN OTHER WORDS, IT WAS AN ENCUMBRANCE WITHOUT REMOVING WHICH THE SALE OR TRANSFER COULD NOT BE EFFECTED AND THE AMOUNT SPENT FOR REMOVING THIS ENCUMBRANCE WOULD DEFINITELY ATTRACT CLAUSE (I) OF SECTION 48(1). THE ASSESSEE WAS ENTITLED TO THE DEDUCTION OF THE SUM OF RS. 15,59,425/ - ' IN THE PRESENT CASE OF THE ASSESEE, THERE WAS AN ENCUMBRANCE ON THE L/3 RD SHARE IN THE AFORESAID AGRICULTURE LAND IN THE FORM OF DEVELOPMENT RIGHTS HOLD BY PRERNA INFRABULD LTD. UNDER THE DEVELOPMENT AGREEMENT DATED 29 - 03 - 2007. WITHOUT REMOVING / RELEASING OF THE SAID DEVELOPMENT RIGHTS, THE ASSESSEE WOULD NOT BE IN A POSITION TO SALE/TRANSFER THE AFORESAID AGRICULTURE LAND ALONG WITH OTHER TWO CO - OWNERS TO OTHER PARTY (PURCHASER). LITIGATIONS WERE ALREADY STARTED AS STATED HEREINABOVE. IN ORDER - TO SALE/TRANSFER THE L/3 RD SHARE OF THE ASSESSEE IN THE A FORESAID AGRICULTURE LAND, IT WAS NECESSARY ON THE PART OF THE ASSESSEE TO REMOVE SUCH ENCUMBRANCE I.E. DEVELOPMENT RIGHTS OF PRERNA INFRABUILD LTD. HENCE, THE PAYMENT MADE BY THE ASSESSEE TO PRERNA INFRABUILD LTD., IN TERMS OF ARBITRATION AWARD IS AN EXPE NDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE TRANSFER OF AFORESAID AGRICULTURE LAND AND ACCORDINGLY, AS PER THE JUDGMENT RENDERED IN THE AFORESAID CASES, THE SAME IS A DEDUCTIBLE EXPENDITURE U./S. 48(1) OF THE ACT IN COMPUTATION OF CAPITAL GAIN IN CONNECTION WITH SALE OF 1/3 RD SHARE OF THE ASSESSEE IN THE SAID AGRICULTURE LAND. 8. IN VIEW OF THE AFORESAID FACTS AND LEGAL SUBMISSION, THE ASSESSEE SUBMITS THAT THE COMPENSATION PAID TO PRERNA INFRABUILD LTD IS DEDUCTIBLE WHILE COMPUTING THE CAPITAL GAIN IN THE CASE OF THE ASSESSEE AS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH THE SALE/TRANSFER OF ASSESSEE'S L/3 RD SHARE IN THE AFORESAID AGRICULTURAL LAND AND ACCORDINGLY, THE SAME HAS BEEN DEDUCTED AS 'TRANS FER EXPENSES' 'IN THE COMPUTATION OF SHORT TERM CAPITAL GAIN ATTACHED WITH THE COMPUTATION OF TOTAL INCOME FOR DETERMINING THE SHORT TERM CAPITAL GAIN TAXABLE IN THE HANDS OF THE ASSESSEE. I HOPE THE AFORESAID DETAILS AND EXPLANATION WILL SUFFICE YOUR HON OUR'S REQUIREMENT AND I SHALL BE HAPPY TO FURNISH ANY OTHER DETAILS AND EXPLANATION THAT MAY BE REQUIRED BY YOUR HONOUR. THANKING YOU, YOURS FAITHFULLY, (DHARABEN J. PATEL) 14 . ASSESSMENT WAS COMPLETED U /S.143(3) OF THE ACT ON 30/08/2011 , WHEREIN LD.AO HAS SPECIFICALLY MENTIONED ABOUT THE IMPUGNED TRANSACTION IN THE BODY OF ASSESSMENT ORDER ITSELF WHICH READS AS UNDER ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 24 THE ASSESSEE IS PARTNER IN A FIRM M /S. PROCON ENTERPRISES ENGAGED IN THE MANUFACTURING OF PAVER BLOCK FOOT PATH BESIDES THE R OAD. APART FROM THE ASSESSEE HAS SHOWN RS.95,06,960 / - AS INCO ME FROM SHORT TERM CAPITAL GAIN AFTER CLAIMING TRANSFER LI CENSES OF RS.3 ,81,58,013/ - AND INCOME, FROM OTHER SOURCES AMOUNTING TO RS. 8,65,333/ . AFTER GOING THROUGH THE DETAILS FURNISHED BY THE ASSESSEE IN SUPPORT OF CLAIMS MADE IN THE RETURN OF INCOME, THE ASSESSMENT IS COMPLETED AS UNDER: 14 .1 FROM THE ABOVE IT CAN BE SEEN THAT SPECIFIC QUERY WAS RAISED IN THE ASSESSMENT PROCEEDINGS. THE ASSES SEE HAS GIVEN A SPECIFIC REPLY WHICH WAS ACCEP TED BY THE LD.AO AND HE MENTIONED HIS FINDINGS WITH REGARD TO THE SPECIFIC ISSUE IN THE ASSESSMENT ORDER ITSELF WHICH ARE ENOUGH TO PROVE THAT LD.AO HAS MADE ADEQUATE ENQUIRY AND FULL APPLICATION OF MIND IN ADJ UDICATING THE ISSUE AND FRAMED ASSESSMENT ORDER ACCORDINGLY . 15 . WE FURTHER OBS ERVE THAT LD.CIT HAS MAINLY RELIED UPON ORAL STATEMENT GIVEN BY THE MANAGING DIRECTOR OF COMPANY M/S. PRERNA INFRABUILD LTD. WHEREIN HE HAS DENIED TO HAVE ENTERED INTO ANY DEVE LOPMENT AGREEMENT , TERMINATION AGREEMENT AND RECEIVING OF COMPENSATION BY WAY OF ARBITRATION AWARD. HE HAS ALSO D ENIED TO HAVE ANY CONNECTION WITH MR.TUSHAR SHAH WHO IS ALLEGED TO HAVE SIGNED VARIOU S AGREEMENT AND ATTENDED PROCEEDINGS BEFORE THE LOWER AUT HORITIES ON BEHALF OF PRERNA INFRABUILD LTD. WE ALSO OBSERVE THAT LD.COUNSEL HAS MENTIONED THAT PROCEEDINGS U/S.148 OF THE ACT WERE INITIATED IN THE CASE OF PRERNA INFRABUILD LTD. AND IN THE ASSESSMENT PROCEEDINGS IN THIS CASE IT WAS ACCEPTED THAT THE IMP UGNED TRANSACTION HAS BEEN SHOWN BY PRERNA INFRABUILD LTD. IN THE BOOKS OF ACCOUNTS FOR FINANCIAL YEAR 2009 - 10. COPIES OF ANNUAL REPORT OF THE LIMITED COMPANY PRERNA INFRABUILD LTD. HAS BEEN PLACED ON RECORDS AND O N PERUSAL OF THE SAME , WE FIND THAT DURING THE FINANCIAL YEAR ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 25 2009 - 10 IN SCHEDULE 13 FOR THE SALE DURING THE YEAR COMPANY HAS SHOWN INCOME FROM LAND DEVELOPMENT RIGHTS (NET) . FURTHER LD.COUNSEL REFERRED TO THE DIRECTORS REPORTS OF PRERNA INFRABUILD LTD. FOR FINANCIAL YEAR 2008 - 09 IN WHICH UNDER THE HEAD COMPAN YS PERFORMANCE AND FUTURE OUTLOOK IT HAS BEEN MENTIONED THAT HOWEVER IT HAS ACQUIRED KACHHA LAND AS REPORTED UNDER SCHEDULE 5 OF THE BALANCE S HEET, THE COMPANY HAS ONLY ONE BUSINESS SEGMENT NAMELY REAL ESTATE DEVELOPMENT FURTHER IN SCHEDULE 19 NOTES FORMING PART OF ACCOUNTS AS ON 31/03/2009 AT SERIAL NO. 4 UNDER REVENUE RECOGNITION HEAD IT IS MENTIONED THAT COMPANY HAS ENTERED INTO AGREEMENT WITH HOUSING SOCIETY, NON - TRADING CORPORATION AND PARTNERSHIP FIRM FOR DEVELOPMENT OF PROPERTIES. INCOME FROM PROPERTY DEVELOPMENT ACTIVITY IS RECOGNIZED IN TERMS OF ARRANGEMENT WITH DEVELOPERS, WHERE APPLICABLE . ALSO FOR FINANCIAL YEAR 2009 - 10 IN SCHEDU LE 21 FOR NOTES FORMING PART OF ACCOUNTS IT IS MENTIONED THAT DURING THE YEAR COMPANY HAS SOLD THE RIGHTS OF DEVELOPMENT OF LAND AND CONSTRUCTION THERETO AND PROFIT DERIVED FROM IT IS SHOWN AS DEVELOPMENT RIGHTS(NET) .F ROM THE ABOVE PHRASES MENTIONE D IN THE COMPANYS AN NUAL REPORT, IT IS QUITE CLEARE THAT THIS COMPANY HAS ENTERED IN TO LAND DEVELOPMENT AGREEMENT RIGHTS WHICH NEGATE ORAL STATEMENT GIVEN BY THE MANAGING DIRECTOR OF PRERNA INFRABUILD LTD. 15 .1 FROM GOING THRO UGH THE ABOVE DISCUSSIONS ABOVE AND FACTS REVEALED FROM THE ANNUAL REPORT OF PRERNA INFRABUILD LTD. AND CERTIFICATES ISSUED BY DENA BANK, SHOWING THE PAYEE NAME AS PRERNA INFRABUILD LTD. ARE SUFFICIENT EVIDE NCES TO PROVE THAT THE IMPUGNED TRANSACTION HAS SO ME NEXUS WITH PRERNA INFR ABUILD LTD. ALONG WITH THESE DOCUMENTS WE ALSO FIND THERE DEVELOPMENT AGREEMENT, ARBITRATION AWARD AND TERMINATION AGREEMENT PLACED BEFORE US . ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 26 16 . DURING THE COURSE OF HEARING LD.COUNSEL MENTIONED THAT SIMILAR TYPE OF ISSUE ALSO CAME UP IN THE CASE OF ASSESSEES FATHER MR.JAGDISH CHANDRA PATEL WHO ALSO CLAIMED TRANSFER EXPENSES OF RS.10.61 CRORES PAID TO PRERNA INFRABUILD LTD. FOR TERMINATING THE DEVELOPMENT AGREEMENT. IN THE CASE OF SHRI JAGDISH CHANDRA PATEL FOR A.Y.2009 - 1 0 LD.AO DISALLOWED THE TRANSFER EXPENSES BUT WHEN THE MATER CAME UP B EFORE LD.CIT(A) - 15 AHMEDABAD, LD.CIT(A) VIDE HIS ORDER DATED 13/08/2012 DELETED THE IMPUGNED ADDITION BY OBSERVING AS FOLLOWS: - 5.(5.1.) I HAVE PERUSED THE FACTS OF THE CASE AS ENUMERAT ED BY A.O. AND AS SUBMITTED BY APPELLANT. I HAVE PERUSED THE CASE LAWS RELIED ON BY BOTH A.O. AS WELL AS APPELLANT. AFTER CAREFUL CONSIDERATION OF FACTS, SUBMISSION, RATIO OF CASE LAWS RELIED ON AND CONTENTIONS OF BOTH A.O. AS WELL AS APPELLANT, THE FOLLOW ING ISSUES EMERGES FOR THE MAIN GROUND OF APPEAL. (A) THERE IS NO DISPUTE IN RESPECT OF FACTS AND FIGURES RELATED TO SALE OF LAND IN QUESTION. EVEN THE COMPUTATION OF CAPITAL GAIN WITH INDEXATION IS NOT DISPUTED BY A.O. (B) THERE IS NO DISPUTE IN RESPECT OF VARIOUS AGREEMENTS ENTERED IN TO BY APPELLANT AND ARBITRAGE SETTLEMENT AND ITS AMOUNT. (C) THE OTHER TWO CO - OWNERS RETURN OF INCOME HAS FOLLOWING DETAILS IN THEIR RESPECTIVE RETURN OF INCOME. (I) SHRI AJAYBHAI HARIBHAI PATEL, PAN: ABXPP1822D FILED RETURN OF INCOME FOR A.Y. 2009 - 10 ON 17.12.2009 WITH DY. CIT, CIR - 9, AHMEDABAD DECLARING THERE IN TOTAL INCOME OF RS. 13,52,14,894. THIS INCLUDE LONG TERM CAPITAL GAIN OF RS. 13,46,04,395 AS WORKED OUT IN THE ANNEXURE ATTACHED WITH COMPUTATION OF INCOME. IT IS EV IDENT THAT NO COST WAS CLAIMED FOR TRANSFER OF LAND BY THE CO - OWNER IN RESPECT OF IMPUGNED LAND SALE HAVIN G THE CO - OWNERSHIP OF APPELLANT. (II) SHRI HITENDRA KUMAR BHAILALBHAI PATEL PAN: AFUPP4221K FILED RETURN OF INCOME FOR A.Y. 09 - 10 ON 30.09.09 DECLARING THE RE IN TOTAL INCOME OF RS. 6,68,33,280. THIS INCLUDES LONG TERM CAPITAL GAIN FROM SALE OF LAND AT RS. 6,89,28,317. THIS CO - OWNER ALSO NOT CLAIMED ANY COST OF TRANSFER OF LAND. (D) THE APPELLANT'S RETURN OF INCOME F OR A.Y. 03 - 04,04 - 05,07 - 08 AND 08 - 09 WERE ALSO EXAMINED TO VERIFY THE FACTS ABOUT SOURCES AND PROPER DISCLOSURE OF PURCHASE/ACQUIRING OF SUCH LAND FOR GENUINE CLAIM OF LONG TERM CAPITAL GAIN AND IMPROVEMENT COST. THE A.O. ALSO NOT DISPUTED ANY OF SUCH FACT AND ACCEPTED THE FACTS AND FIGURES RELATE D TO SUCH LAND. 5.2. IT IS THEREFORE ONLY DISPUTE IS ABOUT ALLOW ABILITY OF RS. 10,61,47,415 AS TRANSFER EXPENSES RELATED TO SALE OF LAND ON WHETHER THE SAME IS COMPENSATION FOR BREACH OF CONTRACT. IT IS IN THIS RESPECT SECTION 48(I) OF ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 27 THE ACT PROVIDE U NDER THE MODE OF COMPUTATION THAT OUT OF THE CAPITAL GAIN AS COMPUTED UNDER SECTION 48 OF THE ACT, DEDUCTION FROM THE FULL VALUE OF THE CONSIDERATION IS TO BE GIVEN FOR ' EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER'. THE IM PORTANT PHRASES HE RE TO BE CONSIDERED ARE ' EXPENDITURE', 'INCURRED', 'WHOLLY AND EXCLUSIVELY' AND ' IN CONNECTION WITH SUCH TRANSFER'. IT IS THEREFORE, THERE SHOULD BE A POSITIVE EXPENDITURE BEING ACTUALLY INCURRED IS ELIGIBLE FOR SUCH DEDUCTION. THE AIL IMPORTANT PHRASE ' IN CONNECTION WITH SUCH TRANSFER' IS NOT DEFINED BUT HAS TO BE INTERPRETED WITH VARIOUS JUDICIAL PRONOUNCEMENT. HON'BLE KERALA HIGH COURT IN THE CASE OF V.A. VASUMATHI V CIT (1980) 123 ITR 94 AND IN THE CASE OF CIT VS DR. P RAJENDRAN (19 81) 127 ITR 810 OBSERVED THAT ' THE WORD' IN CONNECTION WITH SUCH TRANSFER' OCCURRING IS THAT SECTION MEAN INTRINSICALLY RELATED TO THE TRANSFER. THESE WORDS ARE VERY WIDE IN THEIR AMBIT. THERE IS NO WARRANT FOR IMPORTING A RESTRICTION THAT, TO QUALIFY FOR DEDUCTION, THE EXPENDITURE MUST NECESSARILY HAVE BEEN INCURRED PRIOR TO THE PASSING OF TITLE. IT IS IMMATERIAL WHETHER THE ELIGIBLE EXPENDITURE WAS INCURRED PRIOR OR SUBSEQUENT TO THE PASSING OF TITLE. IN THIS VIEW OF THE MATTER EXPENDITURE INCURRED BY TH E ASSESSEE IN CONDUCTING THE LAND ACQUISITION REFERENCE PROCEEDINGS BEFORE THE CIVIL COURT WAS HELD TO BE ELIGIBLE EXPENDITURE U/S. 48(L)(A)(I)'. IT IS IN THIS REGARD HON'BIE BOMBAY HIGH COURT IS JUDGMENT IN THE CASE OF C!T V SHAKUNTALA KANTILAL (SUPRA) HA S LAID THE RATIO WHERE THE EXPENDITURE TO REMOVE ENCUMBRANCE TO LAND WAS ALLOWED AS DEDUCTION. SUCH ENCUMBRANCE CAN BE RELATED TO TITLE OR OTHERWISE TO EFFECT THE PEACEFUL TRANSFER OF ASSET. HON'BIE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT V SMT LAXMID EVI RATANI (2008) 261 ITR 363 HELD THAT' THE COMPENSATION FOR GIVING UP THE RIGHT TO SPECIFIC PERFORMANCE FOR ANY CONTRACTUAL RIGHT RELATING TO CAPITAL ASSET WOULD BE LIABLE FOR CAPITAL GAIN TAX ' SIMILAR VIEW ARE TAKEN BY OTHER HIGH COURTS I.E. HON'BIE MA DRAS HIGH COURT IN K.R. SRINATH V ACIT (2004) 268 ITR 436(MAD), HON'BIE BOMBAY HIGH COURT IN CIT V VIJAY FLEXIBLE CONTAINERS (1990) 186 ITR 693, TATA TELESERVICES LTD.(1980 122 ITR 594 AND CIT V STERLING INVESTMENT CORPORATION LTD. (1980) 123 ITR 441. IT I S THEREFORE, THE COMPENSATION PAID BY APPELLANT FOR BREACH OF DEVELOPMENT RIGHT TO M/S. PRERNA INFRABUILD PVT, LTD CANNOT BE SEPARATED OUT FROM TRANSFER OF LAND SINCE THE SAME RESULT IN TO CAPITAL GAIN IN THE HANDS OF M/S. PRERNA INFRABUILD PVT. LTD. 5.3. THE A.O. RELIED ON THE CASE LAWS WHERE THE ISSUE OF MORTGAGING OF PROPERTY UNDER TRANSFER IS INVOLVED. IN OTHER WORD THERE WAS ALREADY A DEBT ON THE PROPERTY IN THE FORM OF SUCH MORTGAGE AND THE RATIO OF ALMOST ALL SUCH CASES RIGHTLY HELD THAT REPAYMENT O R DISCHARGE OF SUCH DEBT CANNOT BE A PART OF EXPENDITURE RELATED TO SALE OF LAND. IN FACT IT IS AN APPLICATION OF SUCH SALE CONSIDERATION. THE RATIO ALSO HIGHLIGHT THE EXPENDITURE CHARACTER OF SUCH REPAYMENT/DISCHARGE OF BURDEN AS REVENUE AND NOT AS CAPITA L ON THE CONTRARY IN THE CASE OF CHATURBHUJ DWARKADAS KAPADIA V CIT(2003) 260 ITR 491, HON'BIE BOMBAY HIGH COURT OBSERVED AND HELD THAT ' DEVELOPMENT AGREEMENT IS NOT AN AGREEMENT FOR SALE, BECAUSE IT IS AN EXECUTORY CONTRACT WITH THE DEVELOPER NOT BEING T HE INTENDED PURCHASER, SO THAT A NOT FOR SPECIFIC PERFORMANCE SHOULD NOT ORDINARILY LIE ON THE BASIS OF A DEVELOPMENT AGREEMENT, WHICH IS ESSENTIALLY A BUSINESS AGREEMENT. BUT IN THE CONTENT OF PREEMPTIVE PURCHASE OF PROPERTY UNDER CHAPTER XX - C, DEVELOPMEN T AGREEMENT HAS BEEN UNDERSTOOD TO BE AN AGREEMENT FOR SALE REQUIRING NO OBJECTION CERTIFICATE UNDER THIS CHAPTER AS HELD IN ASHOK LEYLAND FINANCE LTD V APPROPRIATE AUTH. (1998) 230 ITR 398 (MAD), ASHISH MUKHERJI VS UNION OF INDIA (1999) 236 ITR 793(DELHI) . 5.4. THE ESSENCE OF ARGUMENT OF A.O. THAT APPELLANT HAS DIVERTED CAPITAL GAIN AT SOURCE BY SUCH COMPENSATION CAN BE VIEWED IN THE LIGHT OF RATIO OF HON'BLE SUPREME COURT IN THE CASE OF MISS DHAN DADABHOY KAPADIA V CIT (1967) 63 ITR 651, WHERE ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 28 IN IT WAS POINTED OUT THAT THE CAPITAL GAIN HAS TO BE COMPUTED ON THE BASIS OF COMMERCIAL PRACTICE WHICH AN ORDINARY MAN OF BUSINESS WILL ADOPT IN COMPUTATION FOR BUSINESS PURPOSE. THIS CONCEPT IS SOME TIME REFERRED AS THE REAL INCOME CONCEPT. PROBABLY THERE IS NO J USTIFICATION FOR COMPUTING CAPITAL GAIN ON A DIFFERENT BASIS. ON SUCH A VIEW IT WOULD BE UNNECESSARY TO STRETCH THE CONCEPT OF COST, IMPROVEMENT AND/OR SALE EXPENSES TO COVER SITUATION WHERE THEY CANNOT POSSIBLY COVER THE SAME, BUT ALL THE SAME ENTITLED TO DEDUCTION TO ARRIVE AT THE TRUE CAPITAL GAIN. SIMILAR VIEWS WERE TAKEN BY ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT V BILQUIS JAHAN BEGAM (1984) 150 ITR 508 (AP). HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V DAHIHA RAN' (1992) 197 ITR 123 CONSIDERED THESE TEST AND RATIO AND HELD IN FAVOR OF APPELLANT. HON'BLE SUPREME COURT AFFIRMED THIS HON'BLE GUJARAT HIGH COURT JUDGMENT VIDE 93 TAX MAN 423(SC). 5.5. HON'BLE SUPREME COURT IN THE CASE OF R M ARUNACHALAM V CIT(1997) 227 ITR 222,237 AFFIRMED THE FULL BENCH JUDGMENT OF HON'BLE MADRAS HIGH COURT IN THE CASE OF SMT. S. VALLIAMMAI V CIT (1981) 127 ITR 713 IN WHICH HON'BLE MADRAS HIGH COURT HELD THAT COST OF MAKING THE TITLE COMPLETE AND PERFECT CAN BE TREATED AS THE 'COST OF ACQUISITION'. 5.6. CONSIDERING THE ABOVE DISCUSSED LEGAL PROPOSITION, FOLLOWING FACTS OF THE CASE HAS TO BE CONSIDERED. (I) LANDS WERE DISPUTED, AS THE APPELLANT, AS PER CONDITIONS OF DEVELOPMENT AGREEMENT WAS NOT IN POSITION TO ASSIGN SHARE OF OTHER CO - OWNERS FOR DEVELOPMENT PURPOSE, AT THE SAME TIME THE CO - OWNERS WERE NOT READY TO SALE THEIR SHARE TO THE DEVELOPER. (II) LAND OWNERS GET BETTER PROPOSAL FOR SALE OF LAND AND FAST MONEY, FOR WHICH IT WAS MUST FOR APPELLANT TO GET DEVELOPMENT AGREEMENT TERMINATED, SO THAT HE CAN GET CLEAR TITLE AND POSSESSION OVER THE LAND, TO BE SOLD TO OTHER PARTIES. (III) APPELLANT WAS UNDER DUE PRESSURE OF COMPROMISE, AS HE KNOWS THAT IN CASE OF LITIGATION AND COURT CASE, THE LAND WILL BE BEYOND HIS CONTROL IN THE NEXT 7 - 10 YEARS AND THERE WILL BE NO MO NEY TILL DECISION OF COURT OF LAW. (IV) TO GIVE CLEAR TITLE, POSSESSION AND OWNERSHIP RIGHTS TO BUYERS IN SALE, IT WAS MUST FOR THE APPELLANT TO ARRIVE ON COMPROMISE TO AVOID DISPUTES AND LITIGATIONS, THEREFORE, THE APPELLANT ACCEPTED ARBITRATION AWARD FOR PAYMENT OF COMPENSATION OF RS. 10.61 CRORES TO THE DEVELOPER FOR TERMINATION OF DEVELOPMENT AGREEMENT. 5.7 CONSIDERING THE ABOVE DISCUSSION AND REASONING, I AM INCLINED TO ACCEPT THE CONTENTION OF THE APPELLANT, FROM WHERE, IT IS EVIDENT THAT THE APPELLANT WAS NOT ABLE TO FULFILL THE CONDITIONS OF DEVELOPMENT AGREEMENT AS THE CO - OWNERS WERE NEITHER AGREE TO GIVE THEIR SHARE OF LAND FOR DEVELOPMENT PURPOSE NOR READY TO SALE THEIR PORTION OF LAND TO DEVELOPER. DUE TO THIS, THE DEVELOPMENT AGREEMENT B ECOME HURDLE AND DUE TO DEVELOPMENT AGREEMENT, THE LANDS BECOME DISPUTED. TO AVOID SUCH LEGAL JUGGLERIES AND TO HAVE CLEAR AND PEACEFUL TITLE OVER LAND THE APPELLANT AGREED FOR AWARD OF COMPENSATION OF RS, 10.61 CRORES FOR REMOVING ENCUMBRANCE ON LAND DUE TO DEVELOPMENT AGREEMENT, SO THAT LAND CAN BE SOLD TO OTHER PARTIES AND IF THE COMPROMISE IS NOT ARRIVE, THERE WILL BE LONG LEGAL LITIGATIONS AND THE LAND WILL BE UNDER DISPUTE FOR YEARS TO COME. THE PURPOSE OF AGREEING TO SUCH AWARD IS FOR SALE LAND WITH CLEAR TITLE AND IN CONNECTION TO SALE OF LAND. IN VIEW OF THE ABOVE, I HOLD THAT THE EXPENDITURE FOR TERMINATION OF DEVELOPMENT AGREEMENT IS IN CONNECTION WITH TRANSFER OF LAND I.E. SALES. THE A.O. IS DIRECTED TO ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 29 ALLOW SUCH EXPENSES AS DEDUCTION FROM SALE PROCEEDS OF LANDS, THE GROUND OF APPEAL OF APPELLANT IS ALLOWED. 17 . FROM GOING THROUGH THE ORDER OF LD.CIT(A) IN THE CASE OF ASSESSEES FATHER SHRI JAGDISH CHANDRA PATEL, WE OBSERVE THAT LD.CIT(A) HAS DELETED THE IMPUGNED DISALLOWANCE AND ALLOW ED T HE CLAIM OF TRANSFER EXPENSES WHICH HAVE BEEN INCURRED IN VERBATIM SIMILAR CIRCUMSTANCES AND PAID TO THE SAME COMPANY AND ALL THE EVENT S OF THIS TRANSACTION OF PAYING TRANSFER EXPENSES HAS HAPPENED IN THE SIMILAR FASHION A S THAT OF THE ASSESSEE . LD.CIT(A) HAS ADJUDICATED AND INTROSPECTED ALL THE FACTS AND TRANSACTION ENTERED INTO AND FRAMED A VIEW THAT THE TRANSFER EXPENSES WERE GENUINE. THIS ORDER OF LD.CIT(A) IN THE CASE OF ASSESSEES FATHER GIVES SUPPORT TO THE CONTENTIONS OF LD.COUNSEL THAT LD.AO HAS TA KEN ONE OF THE VIEW PERMISSIBLE IN LAW. 18 . WE FURTHER OBSERVE HONBLE JURIDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. ARVIND JEWELLERS, (2003) 259 ITR 502 (GUJ.) IN THIS CASE, IT HAS BEEN HELD AS UNDER: HELD, THAT THE FINDING OF FACT BY THE TRIBUNAL WAS THAT THE ASSESSEE HAD PRODUCED RELEVANT MATERIAL AND OFFERED EXPLANATIONS IN PURSUANCE OF THE NOTICES ISSUED UNDER SECTION 142(1) AS WELL AS SECTION 143(2) OF THE ACT AND AFTER CONSIDERING THE MATERIAL AND EXPLANATIONS, THE INCO ME - TAX OFFICER HAD COME TO A DEFINITE CONCLUSION. SINCE THE MATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERED BY THE INCOME - TAX OFFICER AND A PARTICULAR VIEW WAS TAKEN, THE MERE FACT THAT DIFFERENT VIEW CAN BE TAKEN SHOULD NOT BE THE BASIS FOR AN ACTION UNDER SECTION 263. THE ORDER OF REVISION WAS NOT JUSTIFIED. 18 .1 IT WAS FURTHER OBSERVED BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS. R.K. CONSTRUCTION CO. [2009] 313 JTR 65 (GUJ) IN THIS CASE, IT HAS BEEN HELD AS UNDER : AS FAR AS LAW IS CONCERNED, THE AO HAS TAKEN A PARTICULAR VIEW ON THE BASIS OF EVIDENCE PRODUCED BEFORE HIM. ON THE BASIS OF THE SAID MATERIAL AND MATERIALS WHICH WERE COLLECTED BY THE CIT IN REVISIONAL PROCEEDINGS, THE CIT HAS TAKEN A DIFFERENT VIEW. HOWEVER, IN THE REVISIONAL PROCEEDINGS UNDER S. 263, IT IS NOT OPEN FOR THE CIT TO TAKE SUCH A DIFFERENT VIEW IN VIEW OF THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (SUPRA). THERE IS NOTHI NG ON RECORD TO SUGGEST THAT THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE AT LAW. THIS COURT HAS ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 30 ALSO TAKEN THE SAME VIEW IN CASE OF CIT VS. ARVIND JEWELLERS (SUPRA) WHEREBY THE ORDER PASSED BY THE CIT UNDER S. 263 OF THE ACT WAS QUASHED AND SET ASIDE. 18 .2 IT WAS FURTHER OBSERVED BY JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX V. GABRIEL INDIA LTD. 203 ITR 108 (HC BOMBAY). IN THIS CASE, IT HAS BEEN HELD AS UNDER: THE POWER OF SUO MOTU REVISION UNDER SUB - S. (1) OF S. 263 OF THE IN COME - TAX ACT, 1961, IS IN THE NATURE OF SUPERVISORY JURISDICTION AND CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPECIFIED THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE POWER OF REVISION UNDER THIS SUB - SECTION, VIZ., (I) ..THE ORDER IS ERRONEOUS; (II) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE MUST HAS BEEN CAUSED TO THE INTERESTS OF THE REVENUE. AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN ITO ACTING IN ACCORDANCE WITH LAW MA KES CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DOES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISS IONER FOR THAT OF THE ITO, WHO PASSED THE ORDER, UNLESS THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WHERE ITO WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE A ND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATES HIMSELF. THE COMMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEFT TO THE COMMISSI ONER, HE WOULD HAVE ESTIMATED THE INCOME AT A HIGHER FIGURE THAN THE ONE DETERMINED BY THE ITO. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE - EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. THIS IS BECAUSE THE ITO HAS EXER CISED THE QUASI - JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SUCH A CAS E THAT IN THE OPINION OF THE COMMISSIONER THE ORDER IN QUESTION IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. BUT THAT BY ITSELF WILL NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER OF SUO MOTU REVISION BECAUSE THE FIRST REQUIREMENT, NAMELY, THE ORD ER IS ERRONEOUS, IS ABSENT. SIMILARLY IF AN ORDER IS ERRONEOUS BUT NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE, THEN ALSO THE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVERY ERRONEOUS ORDER CANNOT BE SUBJECT - MATTER OF REVISION BECAUSE THE SECOND REQUIREMENT ALSO MUST BE FULFILLED. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS 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. WHEN EXERCISE OF STATUTORY POWER IS DEPENDENT UPON THE EXISTENCE OF CERTAIN OBJECTIVE FACTS, THE AUTHORITY BEFORE EXERCISING SUCH POWER MUST HAVE MATERIALS ON RECORDS TO SATISFY IT IN THAT REGARD. IF THE AC TION OF THE AUTHORITY IS CHALLENGED BEFORE (HE COURT, IT WOULD BE OPEN TO THE COURTS TO EXAMINE WHETHER THE RELEVANT OBJECTIVE FACTORS WERE AVAILABLE FROM THE RECORDS CALLED FOR AND EXAMINED BY SUCH AUTHORITY. HELD, THE ITO IN THIS CASE HAD MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSESSEE. THE ASSESSEE HAD GIVEN DETAILED EXPLANATION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE ARE PART OF THE RECORD OF THE CASE. EVIDENTLY, T HE CLAIM WAS ALLOWED BY THE ITO ON BEING SATISFIED WITH THE EXPLANATION ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 31 OF THE ASSESSEE. THIS DECISION OF THE ITO CANNOT BE HELD TO BE 'ERRONEOUS' SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. MOREOVER, IN THE INSTANT CASE, THE COMMISSIONER HIMSELF, EVEN AFTER INITIATING PROCEEDINGS FOR REVISION AND HEARING THE ASSESSEE, COULD NOT SAY THAT THE ALLOWANCE OF THE CLAIM OF THE ASSESSEE WAS ERRONEOUS AND THAT THE EXPENDITURE WAS NOT REVENUE EXPENDITURE BUT AN EXPENDITURE OF CAPITAL NATURE. HE SIMPLY ASKED THE ITO TO RE - EXAMINE THE MATTER. THAT WAS NOT PERMISSIBLE. THE TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE THE ORDER PASSED BY THE COMMISSIONER OF INCOME - TAX UNDER SECTION 263. 18 .3 IT WAS ALSO OBSERVED BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS. VIKAS POLYMERS (2013) 341 ITR 537 (HC DELHI) IN THIS CASE, IT HAS BEEN HELD AS UNDER: THE POWER OF SUO MOTU REVISION EXERCISABLE BY THE CIT IS UNDOUBTEDLY SUPERVISORY IN NATURE. THE OPENING WORDS OF S. 263 EMPOWER THE CIT TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDINGS UNDER THE ACT. A BARE READING OF S. 263 ALSO MAKES IT CLEAR THAT THE CIT HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE AO SOUGHT TO BE REVI SED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IF ONE OF THEM IS ABSENT IF THE ORDER OF THE ITO IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO S. 263(1). MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC) APPLIED. IT IS ALSO TRITE THAT THERE IS A FINE THOUGH SUBTLE DISTINCTION BETWEEN 'LACK OF INQUIRY' AND 'INADEQUATE INQUIRY'. IT IS ONLY IN CASES OF 'LACK OF INQUIRY' THAT THE CIT IS EMPOWERED TO EXERCISE HIS REVISIONAL POWERS BY CALLING FOR AND EXAMINING THE RECORDS OF ANY PROCEEDINGS UNDER THE ACT AND PASSING ORDERS THEREON. IN THE ULTIMATE ANALYSIS IT IS A PRE - REQUISITE THAT THE CIT MUST GIVE REASON S TO JUSTIFY THE EXERCISE OF SUO MOTU REVISJONAL POWERS BY HIM TO REOPEN A CONCLUDED ASSESSMENT. A BARE REITERATION BY HIM THAT THE ORDER OF THE ITO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, WILL NOT SUFFICE. THE EXERCISE OF THE POWER BEING QUASI JUDICIAL IN NATURE, THE REASONS MUST BE SUCH AS TO SHOW THAT THE ENHANCEMENT OR MODIFICATION OF THE ASSESSMENT OR CANCELLATION OF THE ASSESSMENT OR DIRECTIONS ISSUED FOR A FRESH ASSESSMENT WERE CALLED FOR, AND MUST IRRESISTIBLY LEAD TO THE CONCLUSION THAT THE ORDER OF THE ITO WAS NOT ONLY ERRONEOUS BUT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THUS, WHILE THE ITO IS NOT CALLED UPON TO WRITE AN ELABORATE JUDGMENT GIVING DETAILED REASONS IN RESPECT OF EACH AND EVERY DISALLOWANCE, DEDUCTION, ETC., IT IS INCUMBENT UPON THE CIT NOT TO EXERCISE HIS SUO MOTU REVISIONAL POWERS UNLESS SUPPORTED BY ADEQUATE REASONS FOR DOING SO. CIT VS. GABRIAL INDIA LTD. (1993) 114 CTR (BOM) 81 : (1993) 203 ITR 108 (BOM) RELIED ON. EXERCISE OF REVISIONAL POWER BY THE CIT IN THE INSTANT CASE WAS UNCALLED FOR AND UNJUSTIFIED. IT WAS MORE IN THE NATURE OF ROVING AND FISHING ENQUIRY. THE CIT HAS PROCEEDED ON THE ASSUMPTION THAT NO SUCH INFORMATION, AS WAS FURNISHED TO HIM, WAS FURNISHED AT THE TIME OF ASSESSM ENT. THE CIT HAS MENTIONED THAT THE ITO HAS NOT EXAMINED THE CASH CREDITS OF THE PARTNERS OR DEPOSITS OF CHIT FUND. ASSUMING THIS TO BE SO (THOUGH THERE DOES NOT APPEAR TO BE ANY JUSTIFICATION FOR THE AFORESAID OBSERVATION), THIS MAY MAKE THE ORDER ERRONEO US, BUT HOW IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE HAS NOT BEEN STATED BY THE CIT AS HE DID NOT DEAL WITH THE EXPLANATION GIVEN BY THE ASSESSEE IN THE COURSE OF S. 263 PROCEEDINGS. PROVISIONS ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 32 OF S. 263, WHEN READ AS A COMPOSITE WHOLE MAKE IT INCU MBENT 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 FULFILMEN T 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 CIRCUMSTA NCES 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 SU FFICE. THE ASSESSEE MUST BE CALLED, HIS EXPLANATION SOUGHT FOR AND EXAMINED BY THE CIT AND THEREAFTER IF THE CIT STILL FEELS THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, THE CIT MAY PASS REVISION ORDERS. IF, ON THE OTHER HAND THE CIT IS SATISFIED, AFTER HEARING THE ASSESSEE, THAT THE ORDERS ARE NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE MAY CHOOSE NOT TO EXERCISE HIS POWER OF REVISION. THIS IS FOR THE REASON THAT IF A QUERY IS RAISED DURING THE COURSE OF SCRUTINY BY THE AO, WHICH WAS ANSWERED TO THE SATISFACTION OF THE AO, BUT NEITHER THE QUERY NOR THE ANSWER WAS REFLECTED IN THE ASSESSMENT ORDER, THIS WOULD NOT BY ITSELF LEAD TO THE CONCLUSION THAT THE ORDER OF THE AO CALLED FOR INTERFERENCE AND REVISION. IN THE INSTANT CASE, FOR EXAMPLE, THE CIT HAS OBSERVED IN THE ORDER PASSED BY HIM THAT THE ASSESSEE HAS NOT FILED CERTAIN DOCUMENTS ON THE RECORD AT THE TIME OF ASSESSMENT. ASSUMING IT TO BE SO, THIS DOES NOT JUSTIFY THE CONCLUSION ARRIVED AT BY THE CIT T HAT THE AO HAD SHIRKED HIS RESPONSIBILITY OF EXAMINING AND INVESTIGATING THE CASE. MORE SO, IN VIEW OF THE FACT THAT THE ASSESSEE EXPLAINED THAT THE CAPITAL INVESTMENT MADE BY THE PARTNERS, WHICH HAD BEEN CALLED INTO QUESTION BY THE CIT WAS DULY REFLECTED IN THE RESPECTIVE ASSESSMENTS OF THE PARTNERS WHO WERE INCOME - TAX ASSESSEES AND THE UNSECURED LOAN TAKEN FROM SC (P) LTD. WAS DULY REFLECTED IN THE ASSESSMENT ORDER OF THE SAID CHIT FUND WHICH WAS ALSO AN ASSESSEE. CONCLUSION : MERELY ON THE BASIS THAT T HE AO HAS NOT EXAMINED THE CN.SH CREDITS OF THE PARTNERS OR DEPOSITS FROM SC (P) LTD., CIT WAS NOT JUSTIFIED IN INVOKING HIS SUO MOTU POWERS, ESPECIALLY WHERE THE ASSESSEE HAD EXPLAINED THAT THE CAPITAL INVESTMENT MADE BY THE PARTNERS, WHICH HAD BEEN CALLE D INTO QUESTION BY THE CIT WAS DULY REFLECTED IN THE RESPECTIVE ASSESSMENTS OF THE PARTNERS AND THE UNSECURED LOAN TAKEN FROM THE SC (P) LTD. WAS DULY REFLECTED IN THE ASSESSMENT ORDER OF THE SAID PERSON. 18 .4 FROM GOING THROUGH THE ABOVE JUDGMENT S WE FIND THAT THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS GABRIEL INDIA LIMITED IS SQUARELY APPLICABLE ON THE FACTS OF THE ASSESSEE , SO MUCH SO THAT IN THIS JUDGMENT ALSO THE ITO HAS MADE ENQUIRY IN REGARD TO NATURE OF EXPENDITURE INCUR RED BY THE ASSESSEE. THE ASSES S EE HAD GIVEN DETAILED EXPLA NATION IN THIS REGARD BY LETTER IN WRITING AND ALL PART OF THE RECORD, EVIDENTLY THE C LAIM WAS ALLOWED BY THE ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 33 ASSESSING OFFICER ON BEING SATISFIED WITH THE EXPLANATION OF ASSESSEE. IN THESE FACTS HO NBLE COURT HOLD THE ORDER OF TRIBUNAL AS JUSTIFIED, SETTING ASIDE THE ORDER PASSED BY LD.CIT(A) U/S.263 OF THE ACT. 18.5 IN THE CASE OF ASSESEE ALSO THE FACTS ARE SIMILAR AND T HERE IS A CLAIM OF EXPENDITURE OF TRANSFER EXPENSES INCURRED IN THE COURSE OF SELLING AGRICULTURE LAND. SPECIFIC QUERY WAS RAISED ABOUT IMPUGNED TRANSACTION OF SHORT TERM CAPITAL GAIN BY THE ASSESSING OFFICER. ASSESSEE REPLIED TO THIS QUERY BY FURNISHING ALL THE RELATED DOCUMENTS INCLUDING DEVELOPMENT AGREEMENT, TERMINATION AGREEMEN T, ARBITRATION AGREEMENT, ARBITRATION AWARD, DETAILS OF PAYMENT BY ACCOUN T PAYEE CHEQUE. ON THE BASIS OF THESE DETAILS LD.AO HAS COMPLETED THE ASSESSMENT PROCEEDINGS AND HAS ALSO MADE DUE OBSERVATION IN THE BODY OF ASSES SMENT ORDER AND HAS ACCEPTED THE RE TURN ED INCOM E SHOWN BY THE ASSESSEE AND ACCEPTED THE IMPUGNED TRANSACTION OF PAYMENT OF TRANSFER EXPENSES PAID TO PRERNA INFRABUILD LTD. FOR TERMINATION OF DEVELOPMENT AGREEMENT AS GENUINE. 18.6 WE FURTHER FIND THAT LD.CIT HAS GIVEN MORE WEIGHTAGE TO THE ORAL STATEMENT OF THE MANAGING DIRECTOR OF THE PAYEE COMPANY M/S. PRERNA INFRABUI LD PVT. LTD. AND HAS COMPLETELY IGNORED THE EVIDENCES PLACED ON RECORD BEFORE ASSESSING OFFICER AND AS WELL AS BEFORE HIM. IT IS PERTINENT TO NOTE THAT DIRECT EVIDENCES ARE EVIDENCES BASED ON FACT S AND DOCUMENTS. IN CASE DIRECT EVIDENCES IS NO T AVAILABLE THAN LAW RECOGNIZE SUBSTITUTE IN THE SHAPE OF CIRCUMSTANTIAL EVIDENCE. CIRCUMSTANTIAL EVIDENCE IS ALSO DIRECT EVIDENCE OF FACT FROM WHICH PERSON MAY REASONABLY INFERRED EXISTING OR NON - EXISTING OF ANOTHER FACT. IN THIS CASE IT SEEMS THAT LD.CIT HAS GIVEN MORE WEIGHTAGE TO CIRCUMSTANTIAL AND ORAL EVIDE NCE OVER THE DIRECT EVIDENCE. ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 34 18.7 IN THE CASE OF ASSESSEE WHEN THERE ARE DIRECT EVIDENCES AVAILABLE IN THE FORM OF SALE AGREEMENT, DEVELOPMENT AGREEMENT, TERMINATION AGREEMENT FOR TERMINATING DEVELOPMENT AGREEMENT, ARBITRATION AGREEMENT BETWEEN ASSESSEE AND LIMITED COMPANY , PASSING OF CONSIDERATIONS AS PER ARBITRATION AWARD BY ACCOUNT PAYEE CHEQUE FROM THE ACCOUNT OF ASSESSEE TO THE ACCOUNT OF COMPANY WHICH IS FURTHER CERTIFIED BY THE BANKERS CERTIFICATE . THE FACT THAT PAYEE COMPANY I.E M/S.PRERNA INFRA B UILD LTD. RECEIVE R EVENUE FROM LAND D EVELOPMENT RIGHTS APPEARS IN ITS FINANCIAL STATEMENT REGULARLY . LD.CIT HAS COMPLETELY IGNORED ALL THESE DIRECT EVIDENCES AN D HAS GIVEN WEIGHTAGE TO THE ORAL STATEMENT OF THE MANAGING DIRECTOR OF THE COMPANY WITHOUT PLAC ING ON RECORD THE BANK DETAILS AND FINANCIAL TRANSACTIONS OF THE PAYEE COMPANY RELATING TO REVENUE FROM LAND DEVELOPMENT RIGHTS. IT SEEMS THAT LD.CIT WANTS ASSESSING OFFICER TO ENQUIRE THE ASSESSEES CASE IN DIFFERENT MANNER, WHICH WE FIND NOT JUSTIFIED AS LD.AO HAS ALREADY CONDUCTED SUFFICIENT ENQUIRY. 19. WE ARE ALSO OF THE OPINION THAT LD.CIT CAN INITIATE PROCEEDINGS U/S.263 OF THE ACT ONLY IF NO ENQUIRIES HAS BEEN CONDUCTED BY ASSESSING OFFICER. LD.CIT CANNOT GIVE SPECIFIC INSTRUCTION TO THE ASSES SING OFFICER TO CHANGE TH E MODE OF ENQUIRY OR INTENSIFY E NQUIRY. IF THE ASSESSING OFFICER HAS CARRIED OUT THE PROCESS USUALLY TAKEN UP IN THE ASSESSMENT PROCEEDINGS AND ASSESSE HAS FILED COMPLETE DETAILS TO THE SATISFACTION OF ASSESSING OFFICER AND LD.AO H AS TAKEN THE PERMISSIBLE VIEW WHICH FIND S IT PLACE IN THE BODY OF ASSESSMENT ORDER ALSO THAN IT CANNOT BE SAID THAT NO ENQUIRY OR INADEQUATE ENQUIRY WAS CONDUCTED BY THE ASSESSING OFFICER. THAT THE VIEW TAKEN BY LD.AO ACCEPTING THE RETURNED INCOME OF ASSES SEE U/S.143(3) OF THE ACT AFTER ENTERTAINING THE DETAILED REPLY OF ASSESSEE, AND IT GETS DUE SUPPORT FROM THE FACT THAT SIMILAR TYPE OF HAS BEEN TAKEN BY LD.CIT(A) I N THE CASE OF ASSESSEES FATHER ADJUDICATING SIMILAR FACTS DELETING THE ADDITION MADE BY LD.AO AND HOLDING THE TRANSFER EXPENSES PAID ITA NO.1116/AHD/2014 ASSTT. YEAR 2009 - 10 35 TO M/S.PRERNA INFRABUILD LTD. AS GENUINE . THERE IS NOTHING ON RECORD TO SUGGEST THAT THE VIEW TAKEN BY THE LD.AO IS UNSUSTAINABLE IN LAW. 20 . CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT OF JUDICIAL DECISIONS DISCUSSED ABOVE AND IN OUR UNDERSTANDING OF LAW , WE FIND THAT ASSESSMENT ORDER U/S.143(3) OF THE ACT FRAMED ON 30/08/2011 IS NEITHER ERRONEOUS NOT PREJUDICIAL TO THE INTEREST OF REVENUE . WE THEREFORE SET ASIDE THE IMPUGNED ORDER PASSED BY THE L D.CIT U/S.263 OF THE ACT AND RESTORE THAT OF THE ASSESSING OFFICER DATED 30/08/2011 PASSED U/S.143(3) OF THE ACT. 21. IN THE RESULT APPEAL OF THE ASESSEE IS ALLOW ED . ORDER PRONOUNCED IN THE COURT ON 3 RD MAY , 2017 AT AHMEDABAD. SD/ - SD/ - ( S.S.GODARA ) JUDICIAL MEMBER (MANISH BORA D ) ACCOUNTANT MEMBER TRUE COPY A HMEDABAD; DATED 03 / 05 /2017 MANISH / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , / DR, ITAT, 6. / GUARD FILE .