M/S OM DEVELOPERS, Nagpur V. PRINCIPAL COMMISSIONER F INCOME TAX-II, Nagpur

ITA 140/NAG/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2217 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 03-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 24-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D RAVI KUMAR
• Assessee Lawyers: A S DANI
• Keywords: Capital asset; Opportunity of being heard; Assessment record
• Section: 143(3); 142(1); 148; 263; 10

Judgement Text

1 ITA NO. 140/NAG/2015 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO.140/NAG/2015. ASSESSMENT YEAR : 2009 - 10. M/S OM DEVELOPERS, PRINCIPAL COMMISSIONER OF NAGPUR. VS. INCOME TAX - 2, NAGPUR. PAN AABFO3754C. APPELLANT. RESPONDENT. APPELLANT BY : SHRI A.S. DANI. RESPONDENT BY : SHRI D. RAVI KUMAR. DATE OF HEARING : 0 3 - 05 - 2016 DATE OF PRONOUNCEMENT : 31 ST MAY, 2016 O R D E R PER SHRI SHAMIM YAHYA, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED U/S 263 OF I.T. ACT BY THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX - 2, NAGPUR DATED 24 - 02 - 2015 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10. THE GROUNDS OF APPEAL READ AS UNDER : 1) WRONG PRESUMPTION BY THE PCIT - 2 THAT THE AGRICULTURAL LAND IN QUESTION BELONGED TO THE GOVERNMENT. THE LEARNED PCIT HAS ERRED IN ASSUMING THAT THE AGRICULTURAL LAND PURCHASED AND LATER SOLD BY THE APPELLANT WAS BELONGING TO THE GOVERNMENT AND, THEREFORE, LED TO ILLEGAL A CTIVITIES AND CALCULATION OF INCORRECT INCOME BY THE APPELLANT. THE FACT THAT THE NOTIFICATION DATED 07.10.1991 REFERRED TO BY THE LEARNED PCIT DOES NOT ACQUIRE THE LAND IN QUESTION BUT NOTIFIES THE GOVERNMENTS INTENTION ONLY, TO ACQUIRE THE SAME IN FUTUR E. THE OWNERSHIP RIGHTS OF THE TRANSACTING PARTIES ARE 2 ITA NO. 140/NAG/2015 NOT AT ALL INTERFERED WITH EITHER BY THE SAID NOTIFICATION OR BY THE COMMUNICATION OF THE TOWN PLANNING DEPARTMENT. 2) DATE OF PURCHASE OF LAND WRONGLY CONSIDERED AS OF SALE DEED DATE, RATHER THAN THE DA TE OF POSSESSION OF LAND IN PART PERFORMANCE OF THE CONTRACT. THE LEARNED PCIT HAS ERRED IN UNDERSTANDING THAT THE DATES OF PURCHASE (TRANSFER) OF LAND BY THE APPELLANT WERE 30.08.2006 AND 07.10.2006 RESPECTIVELY. THESE WERE MERELY THE DATES OF REGISTRATIO N OF SALE DEEDS. THE LEARNED PCIT HAS NOT APPRECIATED THAT THE POSSESSION OF LAND IN QUESTION WAS TAKEN BY THE APPELLANT ON 09.02.2004 IN TERMS OF SEC. 2(47)(V) OF THE INCOME TAX ACT, 1961 AND NOT ON 30.08.2006 AND 07.10.2006. 3) LONG TERM CAPITAL ASSET WRONG LY CONSIDERED AS SHORT TERM CAPITAL ASSET. THE LEARNED PCIT HAS ERRED IN CLAIMING THAT THE TRANSACTION OF SALE OF LAND HAS GIVEN RISE TO SHORT TERM CAPITAL GAIN/LOSS INSTEAD OF LONG TERM CAPITAL GAIN/LOSS WRONGLY CONSIDERING THE HOLDING OF THE ASSET FOR LESS THAN 36 MONTHS. 4) COMPENSATION PAID ON RETURN OF DEPOSITS TO THE PROSPECTIVE BUYERS WRONGLY CONSIDERED AS INTEREST ON DEPOSITS. THE LEARNED PCIT HAS ERRED IN CONCLUDING THAT THE COMPENSATION PAID ON RETURN OF MONEY RECEIVED FROM THE PROSPECTIVE BUYERS W AS INTEREST ON DEPOSITS. THIS IS BECAUSE THE MONEY RETURNED REPRESENTED AMOUNT RETURNED ON CANCELLATION OF A BUSINESS DEAL AND, THEREFORE, INVOKING OF SEC. 271 E (PENALTY LEVIABLE ON A POSSIBLE RETURN OF MONEY IN CASH) IS ABSOLUTELY INAPPLICABLE. 5) A WRONG C ONCLUSION BY THE LEARNED PCIT THAT SETTING ASIDE THE A.O. ORDER U/S 263 WAS IMPERATIVE BECAUSE IT WAS PASSED WITHOUT APPLICATION OF MIND AND WITHOUT APPROPRIATE ENQUIRIES. THE LEARNED PCIT HAS ERRED IN CONCLUDING THAT THERE WERE NO APPROPRIATE ENQUIRIES AND APPLICATION OF MIND ON THE PART OF THE A.O. THIS PRESUMPTION IS ERRONEOUS IN THE LIGHT OF THE RECORD OF 9 HEARING GIVEN BY THE A.O. OVER A PERIOD OF 3 MONTHS, WHO COLLECT ED EVERY POSSIBLE INFORMATION THAT WAS RELEVANT FOR MAKING AN OPINION WHETHER OR NOT THE RETURN FILED BY THE APPELLANT CLAIMING A LONG TERM CAPITAL LOSS WAS CORRECT OR NOT. SHE HAS ERRED IN SETTING ASIDE THE ASSESSMENT ORDER ON THE GROUND THAT NIT IS A HAL F PAGE ORDER AND IN BRANDING IT AS 3 ITA NO. 140/NAG/2015 ERRONEOUS SIMPLY BECAUSE IT IS NOT ELABORATE. THESE COULD NOT BE VALID REASONS FOR SETTING ASIDE THE ORDER U/S 263. 2. IN THIS CASE THE ASSESSMENT WAS REOPENED UPON RECEIPT OF AIR REPORT THAT THE ASSESSEE HAS SOLD IMMOVA BLE PROPERTY FOR RS.2,87,75,000/ - . IT WAS OBSERVED THAT THE ENTIRE SALE CONSIDERATION HAS BEEN RECEIVED BY THE ASSESSEE FIRM AND IT HAS NOT FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2009 - 10. CONSIDERING THESE FACTS THE ASSESSMENT WAS REOPENED. 3. CONS EQUENT TO THE ABOVE REOPENING, THE AO PASSED THE FOLLOWING ASSESSMENT ORDER : IN THIS CASE ON THE BASIS OF AIR INFORMATION, THE CASE WAS REOPENED FOR THE ASSESSMENT YEAR 2009 - 10 AND NOTICE U/S 148 OF THE I.T. ACT WAS ISSUED ON 14.12.2011 AND DULY SERVED ON 18.12.2011. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FIRM HAS FILED ITS RETURN OF INCOME FOR A.Y.2009 - 10 ON 17.01.2012 DECLARING LONG TERM CAPITAL LOSS OF RS.50,943/ - CONSEQUENTLY, A NOTICE U/S. 143(2) WAS ISSUED ON 23.01.2012. IN RESPONSE TO THE NO TICE SHRI SANDESH JOPAT ITP ATTENDED FROM TIME TO TIME AND EXPLAINED THE RETURN. 1 THE ASSESSEE FIRM DERIVES INCOME FROM DEVELOPING AND PLOTTING THE AGRICULTURAL LAND. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE COUNSEL FOR THE ASSESSEE WAS ASKED TO FU RNISH COPIES OF BANK STATEMENT, COPIES OF PURCHASE DEED AND SALE DEED OF LAND, PROFIT AND LOSS ACCOUNT, BALANCE SHEET, FIXED ASSETS A/C ETC. BOOKS OF ACCOUNT PRODUCED WERE TEST CHECKED AND VARIOUS DOCUMENTS FILED WERE VERIFIED AND PLACED ON RECORD. AFTER DISCUSSION AND VERIFICATION, THE TOTAL INCOME OF THE ASSESSED IS ACCEPTED. SUBJECT TO THE ABOVE REMARKS, THE TOTAL INCOME OF THE ASSESSEE FIRM IS COMPUTED AS UNDER : - COMPUTATION OF INCOME TOTAL INCOME AS PER RETURN LONG TERM CAPITAL GAIN LOSS : ( - ) RS.50493/ - TOTAL ASSESSED INCOME (LOSS) : ( - ) RS.50493/ - AS THE ASSESSEE FIRM HAS NOT FILED ITS RETURN OF INCOME WITHIN DUE TIME, LONG TERM CAPITAL LOSS NOT ALLOWED TO CARRY FORWARD FOR THE NEXT ASSESSMENT YEAR. 4 ITA NO. 140/NAG/2015 ASSESSED U/S. 143(3) R.V.S. 147 OF TH E I T ACT, 1961, CREDIT TO PREPAID TAXES HAS BEEN GIVEN. INTEREST CHARGED AS APPLICABLE. ISSUE DEMAND NOTICE AND CHALLAN ACCORDINGLY. 4. THEREAFTER THE LEARNED CIT INVOKED HIS POWERS U/S 263 OF I.T. ACT. THE LEARNED CIT OBSERVED AS UNDER : . ~ 02. FACTS OF THE ' CASE ARE THAT THE ASSESSEE FIRM DERIVES INCOME FROM DEVELOPING AND PLOTTING THE AGRICULTURAL LAND. ASSESSMENT RECORD REVEALS THAT ASSESSEE ENTERED INTO A PURCHASE AGREEMENT IN RESPECT OF BOKHARA LAND FOR WHICH DEED WAS EXECUTED ON 30/08/2006 & 07/10/2006 FOR SALE CONSIDERATION OF RS.60 LACS & RS.58 LACS RESPECTIVELY. THIS LAND IS DEVELOPED BY THE ASSESSEE AS A LAY - OUT FOR SALE OF PLOTS TO THE PROSPECTIVE BUYERS. ASSESSEE FIRM RECEIVED ADVANCES FROM THE PROSPECTIVE BUYERS WHICH IS SHOWN IN THE BALANCE SHEET. SUBSEQUENTLY ASSESSEE SOLD THIS LAND TO SHRI Y.V.S.S.RAJU ON 25/08/2008 FOR RS.2,87,75,000/ - AND COMPUTED LOSS UNDER THE HEAD CAPITAL GAIN. BEFORE SELLING THE LAND TO SHRI Y.V.S.S.RAJU, ASSESSEE 0 , CANCELLED THE BOOKING OF PLOTS WITH VARIOUS CUSTOMERS AND RETURNED THEIR ADVANCES ALONG WITH SOME COMPENSATION AND THAT COMPENSATION OF RS.1,27,02,874/ - HAS BEEN REDUCED FROM THE SALE CONSIDERATION WHILE COMPUTIN G THE CAPITAL GAIN. WHILE PAS SING THE ORDER U/S 143(3) R . W. S . 148, AO ACCEPTED THE WORKING OF CAPITAL GAIN IN WHICH EXPENSES ON TRANSFER OF LAND CLAIMED BY THE ASSESSEE OF RS.1,27,02,874/ - IS ALLOWED AS IT IS WITHOUT MAKING ANY DISCUSSION IN THE ASSESSMENT ORDER . 03. IT IS SEEN THAT WHEN ASSESSEE BOOKED PLOTS TO CERTAIN BUYERS, HE CAME TO KNOW DURING THE COURSE OF OBTAINING NOC THAT THE LAND WAS BELONGING TO GOVERNMENT. THIS LAND WAS RESERVED FOR COAL MINING ACTIVITY BY GOVERNMENT W.E . F . 07/10/1991 . DESPITE THE LAND BELONGING TO THE GOVERNMENT, ASSESSEE BOUGHT THE LAND, DID LAYOUT, COLLECTED MONEY FROM VARIOUS PEOPLE AND RESOLD THE LAND TO ONE SHRI Y.V.S.S.RAJU.THIS SHOWS THAT ASSESSEE IS NOT ONLY ENGAGED IN ILLEGAL ACTIVITIES BUT ALSO NOT OFFERING THE INCOME CORRECTLY. HE CAN NOT SALE THE PLOTS OF GOVERNMENT LAND TO THE PEOPLE . HE JUST RECEIVED ADVANCES FROM VARIOUS PERSONS AND RETURNED IT TO THEM ALONG WITH SOME MORE AMOUNT WHICH CAN BE CALLED EITHER COMPENSATION AS STATED BY THE ASSESSEE OR AS INTEREST O N THE DEPOSITS SO RECEIVED FROM THE CUSTOMERS. 04 . IN THE SHOW CAUSE NOTICE IX] 263 IT WAS POINTED OUT TO THE ASSESSEE THAT HE HAS NOT ONLY EVADED PAYMENT OF TAX ON RS.31,46,206/ - AS THE PROFIT SHOWN IN THE BALANCE SHEET BUT ALSO WRONGLY CLAIMED ADDITI ONAL AMOUNT OF RS . 1 , 27,02 , 874/ - PAID TO VARIOUS PERSONS FROM WHOM DEPOSIT WAS TAKEN IN THE NAME OF BOOKING OF LAND BELONGING TO GOVERNMENT . IT WAS ALSO POINTED OUT 5 ITA NO. 140/NAG/2015 I N THE SHOW CAUSE NOTICE THAT AMOUNT RECEIVED FROM CUSTOMERS IS IN THE FORM O F LOAN, HEN CE REPAYMENT OF LOAN / DEPOSIT IN CASH ABOVE RS . 20,000/ - ATTRACTS PENALTY U] S 271 T FOR CONTRAVENTION OF SEC . 271E OF I . T.ACT, 1961 . 05 . DURING THE COURSE OF PROCEEDINGS IX] S 263 THE LEARNED COUNSEL OF THE APPELLANT SUBMITTED THAT THE ASSESSEE WAS NOT KNOWING THE FACT THAT LAND BELONGED TO THE GOVERNMENT AT THE TIME OF PURCHASE DEED ON 30/08/2006 AND 07/10/2006 . WHEN ASSESSEE APPROACHED COLLECTOR, NAGPUR FOR OBTAINING NON - AGRICULTURE PERMISSION AND ALSO PERMISSION FROM TOWN PLANNING DEPARTMENT, THEN HE CAME TO KNOW ON 12/01/2006 THAT THE LAND IS VESTED WITH THE MINISTRY OF COAL AND IS RESERVED FOR COAL MINING ACTIVITY. IT IS ALSO SUBMITTED THAT ASSESSEE HAS RIGHTLY CLAIMED COMPENSATION PAID TO PROSPECTIVE BUYERS AS THEY RELATE TO SURRENDER AND CAN CELLATION OF AGREEMENTS TO DELIVER THE UNENCUMBERED POSSESSION AND TITLE OF LAND . HE ALSO FILED THAT ASSESSEE HAS CALCULATED LONG TERM CAPITAL LOSS AFTER ALLOWING INDEXATION OF COST AND COST OF IMPROVEMENT AS MENTIONED ABOVE. IT IS ALSO SUBMITTED THAT ALL THESE SUBMISSION HAVE BEEN MADE BEFORE THE ITO AT THE TIME OF PROCEEDINGS U ] S 143(3) R . W.S. 148. WITH REGARD TO APPLICABILITY OF PROVISIONS OF SEC.269T IT IS SUBMITTED THAT ASSESSEE HAS NOT REPAID THE LOAN OR DEPOSITS BUT REPAID THE BOOKED AMOUNT AGAINST CANCELLATION OF AGREEMENT, HENCE PROVISIONS OF SEC.271E OF I . T.ACT,1961 ARE NOT ATTRACTED. COUNSEL OF THE ASSESSEE ALSO RELIED ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF GABRIEL INDIA LTD. 203 IT R 108 AND CIT VS. ARVIND JEWELLERS 259 ITR 502 . THEREAFTER THE LEARNED CIT FURTHER HELD AS UNDER : ASSESSEE PURCHASED LAND ON 30/08/2006 & 07/10/2006, AS STATED ABOVE. I HAVE GONE THROUGH THE ALLEGED AGREEMENTS ON THE STAMP PAPER OF RS.100/ - WITH PROSPECTIVE BUYERS AND FIND THAT EITHER THESE AGREEMENTS ARE OF THE DATES BEFORE ALLEGED PURCHASE OF GOVERNMENT LAND OR AFTER KNOWING FROM TOWN PLANNING DEPARTMENT (12/01/2006) THAT THE LAND BELONGS TO GOVERNMENT AND HENCE NO NOC CAN BE GRANTED. DATE OF AG REEMENT WITH SOME OF ALLEGED PROSPECTIVE BUYERS ON THE STAMP PAPER OF RS.100/ - ARE AS UNDER: - S.N. NAMES OF BUYER DATE OF AGREEMENT 1 UDRIKABAI 04/07/2006 2 SANGEETA 29/03/2005 3 MEERABAI 04/07/2005 4 SWATI 29/03/2005 5 PREMLAL 04/03/2005 6 OMPRAKASH CHAUHAN 09/03/2005 7 DHAMMA DAKSHI 15/04/2004 6 ITA NO. 140/NAG/2015 8 MANOHAR ARORA 11/03/2005 9 SURENDRA ARORA 11/03/2005 10 SUKH DAYAL ARORA 11/03/2005 11 JAGDISH ARORA 11/03/2005 12 PRADEEP ARORA 11/03/2005 13 ANURADHA ARORA 11/03/2005 14 SUSHMA ARORA 11/03/2005 15 MANOHAR RAO 26 /0 8 /2005 16 VINOD GAURKHEDE 1 5 / 12 /2005 17 SUDHAKAR 15 / 12 /2005 OTHER AGREEMENTS ARE ALSO ENTERED ON STAMP PAPER OF RS.100/ - ON THE DATES BEFORE THE PURCHASE AGREEMENT OR AFTER THE DATE WHEN TOWN PLANNING DEPARTMENT REFUSED NOC TO THE ASSESSEE ON 12/01/2006. THIS CONDUCT OF ASSESSEE ITSELF PROVES THAT ALLEGED AGREEMENTS ON THE STAMP PAPER OF RS.100/ - ARE NOT FOR BOOKING OF PLOTS AS ASSESSEE WAS NOT AUTHORISED TO DO SO BEFORE PURCHASE OF LAND OR AFTER COMING TO KNOW FROM THE T OWN PLANNING DEPARTMENT THAT THE LAND IS NOT TRADEABLE LAND. THUS ALL THE AGREEMENTS ARE AFTER THOUGHT TO CLAIM EXPENDITURE TO LOWER THE CAPITAL GAIN. THE COMPENSATION OF RS.1,27,02,874/ - PAID TO THE SO CALLED ALLEGED BUYERS IS NOTHING BUT INTEREST ON DEPO SITS TAKEN FROM THEM. THE ASSESSEE PURCHASED LAND ON 30/08/2006 & 07/10/2006 AND SOLD IT ON 25/08/2008 I.E. IN LESS THAN 36 MONTHS THUS IT IS NOT A LONG TERM CAPITAL ASSET BUT SALE HAS BEEN MADE IN LESS THAN 36 MONTHS. WHILE PASSING THE ORDER U/S.143(3) R. W.S 148, AO HAS NEITHER LOOKED INTO THE DATES OF BOOKING AS WELL AS DATE OF SALE OF LAND TO CALCULATE IT AS SHORT TERM CAPITAL GAIN NOR INVESTIGATED THE ASPECT THAT THE DEPOSITS TAKEN FROM VARIOUS PERSONS IS NOT AGAINST SALE OF PLOTS BUT MERE DEPOSITS ON I NTERESTS. ASSESSEE WAS NOT ABLE TO SELL THE PLOTS BEFORE THE DATE OF PURCHASE OR AFTER THE DATE OF INTIMATION FROM TOWN PLANNING DEPARTMENT THAT THE LAND BELONGS TO GOVERNMENT. AO HAS NOT RAISED A SINGLE QUERY. NOTHING TO THIS SORT IS ALSO FOUND EITHER IN THE NOTICE U/S. 142(1) OR IN THE ORDER SHEET. AO JUST OBTAINED THE DOCUMENTS, KEPT IN THE RECORD AND PASSED THE ORDER WITHOUT APPLICATION OF MIND. ORDER PASSED BY THE AO IS IN HALF PAGE WHERE NOTHING HAS BEEN DISCUSSED IN THIS REGARD. IT IS WORTHWHILE TO M ENTION THAT THE INCOME - TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED I N THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. THE MEANING TO BE GIVEN TO THE WORD ERRONEOUS IN SEC.263 EMERGES OUT OF THIS CONTEXT. IT IS BECAUSE IT IS INCUMBENT ON THE ITO TO FURTHER INVESTIGATE THE FACTS STATED IN T HE RETURN WHEN CIRCUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT THAT THE WORD ERRONEOUS IN SEC.263 INCLUDES THE FAILURE TO MAKE SUCH AN INQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT 7 ITA NO. 140/NAG/2015 5. THE LEARNED CIT FURTHER REFERRED TO SEVERAL CASE LAWS INCLUDING THAT OF HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL COMPANY VS. CIT. THE LEARNED CIT O BSERVED THAT IT IS CLEAR THAT THE AO HAS NOT APPLIED HIS MIND TO THE ASPECT OF ALLOWABILITY OF INTEREST PAID TO DEPOSITORS AND TAXABILITY OF GAIN AS SHORT TERM CAPITAL GAIN. THAT HE HAS NOT INVESTIGATED ABOUT THE APPLICABILITY OF SECTION 271E OF I.T. ACT. LEARNED CIT OBSERVED THAT THE AOS ORDER IS CRYPTIC. HENCE THE LEARNED CIT HELD THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND IT STANDS SET ASIDE. LEARNED CIT CONCLUDED AS UNDER : THE AO IS DIRECTED TO OBTAIN ALL THE NECESSARY DOCUMENTS FROM GOVERNMENT AS WELL AS FROM THE ASSESSEE, MAKE INVESTIGATION FROM THE ALLEGED PROSPECTIVE BUYERS AND THEN PASS THE ORDER DENOVO AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSESSEE REITERATED THE FACTS OF THE CASE AS MENTIONED ABOVE. LEARNED COUNSEL SUBMITTED THAT THE SEQUENCE OF EVENTS MENTIONED IN THE FACTS OF THE CASE ARE CORRECT. LEARNED COUNSEL SUBMITTED THAT THE LEARNED CITS OBSERVATION THAT THERE IS NO DISCUSSION IN ASSESSMENT ORDER FOR PAYMENT OF COMPENSATION OF RS.1,27,02,874/ - ON CANCELLATION OF BOOKINGS IS NOT RELEVANT. HE SU BMITTED THAT NO SUCH DISCUSSION IS MANDATORY IF THE ADEQUATE DETAILS ARE FURNISHED IN THE COMPUTATION SHEET AND APPROPRIATE ENQUIRIES WITH REGARD THERETO ARE MADE DURING THE COURSE OF ASSESSMENT. LEARNED COUNSEL FURTHER SUBMITTED THAT THE LEARNED CIT IS WR ONG IN OBSERVING THAT THERE WAS NO PROPER ENQUIRY ON 8 ITA NO. 140/NAG/2015 THE PART OF THE AO. IN THIS REGARD LEARNED COUNSEL REFERRED TO THE NOTI NG IN THE ORDER SHEET FOR THE FOLLOWING : VERIFICATION OF CANCELLATION DEEDS OF PLOTS (03.02.2012 VERIFICATION OF PURCHASE A ND SALE DEEDS OF LAND AND COPIES OF AGREEMENTS. VERIFICATION OF WORKING OF LONG TERM CAPITAL LOSS (10.02.2012). VERIFICATION OF LIST OF PLOT OWNERS WHO RECEIVED CANCELLATION AMOUNT AGAINST PLOT BOOKINGS (21.02.2012). SUBMISSION OF COPIES OF CONFIRMATION FROM THE PLOT OWNERS ON CANCELLATION OF ARRANGEMENT AGAINST PAYMENT. (12.04.2012) (30.04.2012). FROM THE ABOVE , LEARNED COUNSEL SUBMITTED THAT THE AFORESAID RECORD OF HEARING DOES NOT SHOW ANY FAILURE ON THE PART OF THE AO TO COLLECT AND VERIFY THE INFORMATION SO AS TO ENABLE HIM TO ASSESS THE INCOME OF THE ASSESSEE IN A RIGHT MANNER. LEARNED COUNSEL FURTHER PLACED SEVERAL CASE LAWS IN SUPPORT OF HIS PROPOSITION. 7. PER CONTRA LEARNED D.R. SUBMITTED THAT THE ASSESSMENT IN THIS CASE WAS REOPENED AS THE ASSESSEE HAS FAILED TO FURNISH ANY RETURN AND DECLARE THE RECEIPT OF RS.2,87,75,000/ - ON IMMOVABLE PROPERTY SALE AND THE CONSEQUENT GAINS. THEREAFTER INSPSITE OF THE CASE BEING REOPENED, THE AO DID NOT EXAMINE THIS ASPECT OF ASSESSEES TRANSACTION. THE AO HAS SIMPLY ACCEPTED THE ASSESSEES RETURN OF INCOME WHICH SHOWED LONG TERM CAPITAL LOSS. LEARNED D.R. FURTHER SUBMI TTED THAT THE AO HAS NOT MADE ANY ENQUIRY BUT HAS SIMPLY PASSED A CRYPTIC ASSESSMENT ORDER IN WHICH HE HAS ACCEPTED THE ASSESSEES RETURN OF INCOME. THE LEARNED D.R. SUBMITTED THAT ON THE OTHER HAND LEARNED CIT HAS FOUND THAT THE ASSESSEE HAD TRIED TO SALE A PIECE OF LAND ILLEGALLY AS THE LAND BELONG ED TO 9 ITA NO. 140/NAG/2015 GOVERNMENT. HE CLAIMED THAT IN THE GARB OF SELLING THOSE ILLEGAL PLOTS OF LAND THE ASSESSEE HAS OBTAINED CASH DEPOSITS/LOANS. THEREAFTER THE ASSESSEE HAS REPAID THOSE LOANS ALSO OSTENSIBLY ON THE GROUND TH AT THE PLOTS COULD NOT BE SOLD AS THEY BELONG TO GOVERNMENT. HOWEVER, LEARNED D.R. SUBMITTED THAT THOSE PLOTS WERE NOT SALEABLE BEING GOVERNMENT LANDS. LEARNED D.R. SUBMITTED THAT THE SO CALLED COMPENSATION PAID IS ONLY AN INTEREST ON CASH LOANS. HENCE HE PLEADED THAT THIS SO CALLED AMOUNT OF COMPENSATION IS NOT AT ALL DEDUCTIBLE. NO VERIFICATION/EXAMINATION OF THE JUSTIFICATION OF INTEREST PAID IN THE GARB OF COMPENSATION IS ON RECORD. LEARNED D.R. FURTHER POINTED OUT THAT IN THE ENTIRE ASSESSMENT FILE AN D IN THE ORDER SHEET THERE IS NO MENTION OR COPY OF ANY QUERY/LETTER ISSUED TO THE ASSESSEE. THE ENTRIES MADE IN THE ORDER SHEET SIMPLY MENTIONED RECEIPT OF CERTAIN DOCUMENTS FILED BY THE ASSESSEE. THERE IS NO MENTION WHATSOEVER AS TO WHAT WAS THE QUERY MA DE AND IN WHAT CONNECTION THOSE SUBMISSIONS WERE MADE BY THE ASSESSEE. HENCE LEARNED D.R. PLEADED THAT THE LEARNED CIT IS CORRECT IN PASSING THE ORDER U/S 263 AND DIRECTING THE AO TO PASS AN ORDER DENOVO. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS. AS PER THE FACTS OF THIS CASE THE ASSESSEES CASE WAS REOPENED DUE TO THE REASON THAT THE ASSESSEE HAD NOT FILED ANY RETURN BUT HAS SOLD IMMOVABLE PROPERTY RESULTING IN A RECEIPT OF RS.2,87,75,000/ - . IN THE ASSESSMENT ORDER PASSED THE AO HAS SIMPLY ACCEPTED THE LONG TERM CAPITAL LOSS RETURN OF RS.50,943/ - . THERE IS NO DISCUSSION ON ANY ASPECT WHATSOEVER IN THE ASSESSMENT ORDER. ON THE OTHER HAND, FACTS OF THE CASE AS NARRATED ABOVE CLEARLY INDICATE THAT THE ASSESSEE HAD ENTERED INTO A PURCHASE AGREEMENT FOR A LAND WHICH ACTUALLY BELONG ED TO GOVERNMENT AND WAS NOT SALEABLE. HOWEVER, THE ASSESSEE PROCEEDED TO OBTAIN HUGE CASH AMOUNT S AGAINST THE PROSPECTIVE SALE OF THOSE LANDS. THEREAFTER ON THE GROUND THAT SINCE THE LAND WAS NOT SALEABLE, THE ASSESSEE RETURNE D THOSE AMOUNT OF CASH AND IN THE PROCESS ALSO PAID A SUM OF RS.1,27,02,874/ - CLAIMING THE SAME TO BE COMPENSATION. THE 10 ITA NO. 140/NAG/2015 AGREEMENTS FOR ALLEGED SALE OF THOSE LANDS WERE ALL MADE ON A STAMP PAPER OF RS.100/ - THE VERACITY OF WHICH HAS BEEN RIGHTLY DOUBTED BY THE LEARNED CIT AS MENTIONED ABOVE. FROM THE DATES OF AGREEMENT AS SHOWN IN THE CITS ORDER REPRODUCED ABOVE, THE ASSESSEE HAS MADE THOSE AGREEMENTS EVEN AFTER KNOWING FROM THE TOWN PLANNING DEPARTMENT VID E LETTER DATED 12 - 01 - 2006 THAT THE LANDS BELONG TO THE GOVERNMENT AND HENCE NO NOC CAN BE GRANTED. THESE FACTS CLEARLY INDICATE THAT THE ISSUE OF ASSESSEE OBTAINING CASH DEPOSITS/LOANS FOR PLOT OF LAND WHICH WAS NOT SALEABLE AND THE REPAYMENT THEREOF IN C ASH WITH INTEREST BY CLAIMING IT TO BE COMPENSATION NEEDS INVESTIGATION AND ENQUIRY BY THE AO . HOWEVER, THE AO CHOSE NOT TO MAKE ANY ENQUIRY WHA T SOEVER. NO LETTER/QUERY ISSUED BY THE AO IN THIS REGARD IS ON RECORD. THE ORDER SHEET ENTRY AS MENTIONED BY THE LEARNED COUNSEL OF THE ASSESSEE SIMPLY MENTIONED RECEIPT OF CERTAIN DOCUMENTS BY THE AO. THERE IS NO DISCUSSION WHATSOEVER AS TO IN WHAT CONNECTION AND IN W HAT CONTEXT THESE DOCUMENTS HAVE BEEN RECEIVED. THIS ITSELF SPEAKS VOLUMES TO THE LEVEL OF ENQUIRY AND APPLICATION OF MIND BY THE AO IN THE FACTS OF THE CASE. CLEARLY THERE IS NO APPLICATION OF MIND WHATSOEVER BY THE AO IN PASSING THE ASSESSMENT ORDER. HENCE THE ASSESSMENT ORDER HAS CLEARLY NOT BEEN MADE BY MAKING ANY ENQUIRY OR EXAMINATION WHICH WAS WA RRANTED ON THE FACTS OF THE CASE. IN THE SE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, LEARNED CIT IS CORRECT IN INVOKING HER JURISDICTION U/S 263 OF I.T. ACT. LEARNED CIT HAS RIGHTLY DIRECTED THE AO TO MAKE INVESTIGATION AND EXAMINATION AND PASS THE ORDER DENOVO. IN OUR CONSIDERED OPINION THERE IS NO INFIRMITY IN SUCH AN ORDER AND ACCORDINGLY WE UPHOLD THE SAME. 11 ITA NO. 140/NAG/2015 9. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF MAY,2016. SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR DATED: 31 ST MAY, 2016. COPY FORWARDED TO : 1. M/S OM DEVELOPERS, C/O M.K. KATOLE, FLAT NO. 501, SPRINGDALE APARTMENT, NEAR MENTAL HOSPITAL, RAJNAGAR, NAGPUR 440 013. 2. PRINCIPAL C.I.T. - 2, NAGPUR. 3. I.T.O., WARD - 7(2), NAGPUR. 4. D.R., ITAT, NAGPUR . 5. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGIS TRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.