Shri Trilochan Singh Anand, Chandigarh V. Pr.CIT-1, Chandigarh

ITA 160/CHANDI/2021

AI Insights

This case involves an appeal by Shri Trilochan Singh Anand against the order of the PCIT, Chandigarh-1, which pertained to the Assessment Year 2011-12. The primary contention was regarding the invocation of Section 263 of the Income Tax Act, 1961, by the PCIT, which challenged the earlier assessment order passed by the ACIT, Circle 3(1), Chandigarh. The PCIT's order was based on the grounds that the assessment was erroneous and prejudicial to the interest of the revenue, particularly concerning the non-verification of the sale of goodwill and the claim of exemption under Section 54F. The Tribunal noted procedural lapses in the issuance of show cause notices and the lack of opportunity given to the assessee to present his case, which led to the decision to set aside the matter for a fresh assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127731 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-03-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 14-06-2021
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Salary income; Opportunity of being heard; Principle of natural justice; Reasonable cause; Competent authority; Assessment record; Set aside
• Section: 148; 263; 54F; 143(1); 143(2); 139(1); 13

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “बी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी आकाश द प जैन, उपा य एवं ी $व%म 'संह यादव, लेखा सद,य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM ITA NO. 160/Chd/ 2021 Assessment Year : 2011-12 Shri Trilochan Singh Anand SCO 28, Sector -20D Chandigarh The PCIT Chandigarh-1 PAN NO: ACYPA5572F Appellant Respondent ! " Assessee by : Shri S.K. Bhasin, CA # ! " Revenue by : Smt. Kusum, CIT, DR $ % ! & Date of Hearing : 16/03/2023 '()* ! & Date of Pronouncement : 20/03/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the Assessee against the order of the Ld. Pr. CIT, Chandigarh-1 dt. 19/03/2021 pertaining to Assessment Year 2011-12, wherein the assessee has taken the following grounds of appeal: 1. The learned PCIT, Chandigarh -1 has errored in invoking the provisions of Section 263of Income Tax Act 1961 w.r.t an additional ground against the orders of ACIT, Circle 3(1), Chandigarh under section 143 (3) r.w.s 147 of Income Tax Act 1961 inspite of the fact reasons which lead Ld AO to believe that the income of the assessee chargeable to tax for AY 2011-12 has escaped assessment, cease to survive. 2. Learned PCIT, Chandigarh -1 has errored in invoking the provisions of Section 263 of Income Tax Act 1961 w.r.t an additional ground against the orders of ACIT, Circle 3(1), Chandigarh under section 143 (3) r.w.s 147 of Income Tax Act 1961 inspite of the fact that due diligence was exercised by Ld. AO while initiating proceedings u/s 147_pf Income Tax Act 1961 and by competent authority while giving necessary approval u/s 151 of Income Tax Act 1961. 3. Ld. PCIT, Chandigarh-I has errored in passing order u/s 263 with regard to an issue which was ten years old within 13 days of issuing notice without making any 2 enquiries/investigations and without giving any opportunity of being heard to me against law of natural justice. 4. The appellant craves leave to add or amend any ground of appeal. 2. At the outset it is noted that there is a delay in filing the present appeal by 28 days. After hearing both the parties and considering the material available on the record, we find that there was a reasonable cause for delayed filing of the present appeal. The delay so happened is hereby condoned and the appeal is admitted for adjudication. 3. Briefly the facts of the case are that the assessee filed his original return of income declaring total income of Rs. 1,88,71,180/- which was processed under section 143(1) of the Act. Subsequently, the case of the assessee was reopened under section 147 of the Act and as per the reasons recorded prior to the reopening of the assessment, the AO was in receipt of certain information wherein the assessee had made payment of Credit Card amounting to Rs. 25,34,737/-. Notice under section 148 was issued in response to which the assessee submitted that return filed under section 139(1) may be treated as return filed under section 148. Subsequently, notice under section 143(2) and 142(1) were issued alongwith questionnaire and the details of necessary documentation as called for during the course of assessment proceedings were furnished and the returned income was accepted. 4. The AO recorded the findings that the assessee is an individual having income from salary, house property, business and profession and income from other sources during the year under consideration. It was held by the AO that during the course of assessment proceedings, the Counsel of the assessee submitted all the documentation called for and on perusal of the details submitted, nothing adverse has been found in this regard vis-à-vis the reasons for 3 which the case was reopened and accordingly the return of income was accepted. 5. Subsequently, the assessment records were called for and examined by the Ld. Pr. CIT and it was noticed that the assessee has shown Long Term Capital Gain (LTCG) on sale of Goodwill at Nil on sale consideration of Goodwill of M/s Electrotech Corporation amounting to Rs. 1,98,87,060/- by claiming exemption under section 54F of the Act basis investment in property of Emaar Commonwealth Games, New Delhi. It was also noticed that the assessee had not shown any income from Capital Gain in its ITR and no documentary proof for sale of Goodwill to M/s Electrotech Corporation and for claim of exemption under section 54F of the Act was called for and verified by the AO, accordingly, a show cause dt. 06/03/2021 was issued through ITBA Portal and thereafter subsequent show cause dt. 13/03/2021 was issued again through the ITBA Portal. However, there were no response and no written submission were filed and basis material available on record, the Ld. Pr. CIT has recorded his findings which are contained in para 5.1 of the impugned order which read as under: “5.1. The facts of the case are that the assessee, as per the computation of [ income, has shown NIL capital gain on sale of goodwill of M/s Electrotech Corporation for Rs. 1,98,87,060/-, by claiming exemption u/s 54F of the Income Tax Act, 1961 on account of investment in property at Emaar Commonwealth Games at New Delhi. It is of interest that the assessee has shown net profit under the head "Business and Profession" from M/s Electrotech Corporation even during the year. The Assessing Officer has failed to enquire as to whom the goodwill has been sold, when it was sold and as to how was it valued. The Assessing Officer has also failed to call for relevant details of the property against which deduction u/s 54F has been claimed by the assessee and thus has claimed the entire long term capital gain earned on sale of goodwill as exempt. The AO did not question as to when and in which property was the investment made, how much was the investment and where are the documents in respect of the same. Thus no documentary proof for purchase and sale were called upon by the AO and thus the AO has failed to verify the authenticity of purchase and sale while scrutinizing the assessees case and also the claim of NIL capital gain. The AO also failed to verify whether the sale of goodwill was genuine or just a accommodation entry to explain source of investment in the house property and how much was the total investment made in house property and what was the source thereof. The assessment made by the assessing officer is held to be erroneous in so far as it is prejudicial to the interest of revenue.” 4 6. And basis the aforesaid findings, the Ld. Pr. CIT has recorded his satisfaction that the assessee order passed by the AO was not only erroneous but also prejudicial to the interest of the Revenue and same was set aside to the file of the AO to pass a fresh order after making necessary inquiry / investigation after providing due opportunity to the assessee. 7. Against the said findings and the direction of the Ld. PCIT, the assessee is in appeal before us. 8. During the course of hearing, the Ld. AR submitted that the assessee doesn’t want to press Ground No. 1 & 2 of his appeal, hence the same are dismissed as not pressed by the Ld. AR on behalf of the assessee. 9. Regarding Ground No. 3, it was contended that the Ld. Pr. CIT issued show cause dt. 06/03/2021 which was not received by the assessee. Thereafter even the second show cause which was issued through ITBA Portal on 13/03/2021 was not received by the assessee and nor his Consultant could visit the IT portal and thereafter the Ld. Pr. CIT passed the revisionary order under section 263 of the Act on 19/03/2021 which was received by the assessee on his email. It was submitted that the Ld. Pr. CIT decided the issue which is 10 years old within 13 days without making any inquiry and without giving any opportunity of being heard to the assessee. 10. Further on merits, it was submitted that during the previous year 2009-10 relevant to Assessment Year 2010-11, the assessee sold the assets and Goodwill of M/s Electrotech Corporation for Rs. 1,84,65,000/- as per Clause 5.1 of sale agreement dt. 01/07/2009 submitted as part of the assessee’s paper book. It was submitted that out of the sale consideration of Rs. 1,84,65,000/- after adjusting the value of Rs. 1,83,34,589.85 towards the assets of M/s Electrotech 5 Corporation was valued as Goodwill and shown as addition in the capital account of the assessee in balance sheet of M/s Electrotech Corporation for the year ended 31/03/2010. It was submitted that the assessee treated the consideration of Goodwill of Rs. 1,83,34,589.85 as LTCG and claimed exemption under section 54F by investing Rs. 1,98,87,060/- in property at Emaar Commonwealth games in New Delhi in the previous year 2009-10 relevant to assessment year 2010-11. It was submitted that the copy of the title deed are placed in the assessee’s paper book and the same can also be cross verified from the computation of income for A.Y. 2010-11 submitted as part of the assessee’s paper book. In light of above, it was submitted that the Ld. Pr. CIT has erred in invoking the provisions of section 263 of the Act as the whole transaction of LTCG and claim of exemption under section 54F of the Act pertaining to A.Y. 2010-11and not to A.Y 2011-12 as so held by the Ld. Pr. CIT. It was accordingly submitted that both the initiation of the proceedings and the subsequent order therefore deserves to be set aside. 11. Per contra the Ld. DR submitted that since it is a factual matter which requires necessary verification and given the fact that the assessee has also pleaded lack of opportunity by the Ld. Pr. CIT, it would be appropriate that the matter is set aside to the file of the Ld. Pr. CIT to pass a fresh order after hearing the assessee. 12. After hearing both the parties and considering the material available on the record, we find that firstly the order has been passed by the Ld. Pr. CIT exparte qua the assessee though two show cause notices have been issued through the ITBA Portal but somehow the assessee has failed to access the ITBA Portal as so admitted by him and even the Consultant has not visited the ITBA Portal to verify any communication from the Department. We find that the assessee need to be more vigilant and respond to the electronic communication, otherwise the whole purpose of bringing in the electronic 6 communication which is to bring faster and transparent communication would be defeated. At the same time we hold that the assessee deserves one more opportunity before the matter is decided against him and the assessee couldn’t be punished unheard as the same would be against the canons of natural justice and therefore, deserve one more opportunity to put forth his submissions and be heard on merits of the case. 13. Further, it is the assessee’s contention that the whole transaction relating to LTCG and claim of exemption under section 54F pertaining to A.Y. 2010-11 and not to impugned A.Y. 2011-12 which again as per the Ld. DR requires factual examination from the assessment records from the previous and the current assessment records as also the fact that there must be some basis for ld PCIT to hold that these transactions pertains to assessment year under consideration and which has remain unverified by the AO and which needs to be brought on record. 14. Therefore, in the entirety of facts and circumstances of the case and in the interest of substantial justice and fair play, we set-aside the matter to the file of the ld PCIT to decide the matter a fresh as per law after providing reasonable opportunity to the assessee and to ensure in timely completion of the proceedings preferably within two months of receipt of this order. 15. The assessee would at liberty to raise necessary contentions as raised before us and the same are thus left open and the Ld. PCIT is hereby directed to examine the same as per record and decide as per law. It goes without saying that the assessee would not abuse this opportunity and shall ensure that he and/or authorized representative on his behalf attend to the proceedings and respond to the communications from the office of the ld CIT(A) and provide necessary information/documentation as called for and/or as advised in support in his submissions. 7 16. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the open Court on 20/03/2023. Sd/- Sd/- आकाश द प जैन $व%म 'संह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा य / VICE PRESIDENT लेखा सद,य/ ACCOUNTANT MEMBER AG Date: 20/03/2023 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File ( + $ By order, ; # Assistant Registrar