Sh. Gurmail Singh, Jagraon V. DCIT, Moga

ITA 235/CHANDI/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5381 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PKA
• Keywords: Revision of order; Principle of natural justice; Cost of acquisition; Assessment record
• Section: 143(3); 54F; 80HHC; 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.235 /CHD/2011 ASSESSMENT YEAR: 2006-07 SH.GURMAIL SINGH, VS. THE D.C.I.T., S/O SAWAN SINGH, CIRCLE MOGA, 175, MOHALLA HARGOBINDPURA, MOGA. JAGRAON. PAN NO. AIMPS1331C ITA NO.236 /CHD/2011 ASSESSMENT YEAR: 2006-07 SH.KULWANT SINGH, VS. THE D.C.I.T., S/O SAWAN SINGH, CIRCLE MOGA, MOHALLA HARGOBINDPURA, MOGA. JAGRAON. PAN NO. ADLPS1643P ITA NO.300 /CHD/2011 ASSESSMENT YEAR: 2006-07 SH.BHUPINDER SINGH, VS. THE INCOME-TAX OFFICER- III, S/O GURMEL SINGH, MOGA HQ, C/O SMILE DENTAL CARE, JAGRAON. LAJPAT ROAD, JAGRAON. PAN NO. ADHPS4145K ITA NO.301 /CHD/2011 ASSESSMENT YEAR: 2006-07 SH.RAMANDEEP SINGH, VS. THE D.C.I.T., S/O KULWANT SINGH, CIRCLE MOGA, 218, MOHALLA HARGOBINDPURA, MOGA. JAGRAON. PAN NO. ADNPS1329J ITA NO.302 /CHD/2011 ASSESSMENT YEAR: 2006-07 SH.HARCHARAN SINGH, VS. THE D.C.I.T., S/O SAWAN SINGH, CIRCLE MOGA, 174-175, MOHALLA HARGOBINDPURA, MOGA. JAGRAON. PAN NO. ADNPS1330D 2 ITA NO.303 /CHD/2011 ASSESSMENT YEAR: 2006-07 SH.SATPAL SINGH, VS. THE INCOME-TAX OFFICER-IV, S/O GURDEV SINGH, MOGA HQ, C/O HARCHARAN SINGH & BROS., JAGRAON. JAGRAON. PAN NO. ADNPS1328K ITA NO.304 /CHD/2011 ASSESSMENT YEAR: 2006-07 SH.GURPREET SINGH, VS. THE D.C.I.T., S/O GURDEV SINGH, CIRCLE MOGA, THROUGH G.P.A. SATPAL SINGH, MOGA. C/O SARDAR CLOTH HOUSE, JAGRAON. PAN NO. BNXPS3720A ITA NO.305 /CHD/2011 ASSESSMENT YEAR: 2006-07 SH.SUKHPAL SINGH, VS. THE D.C.I.T., S/O HARCHARAN SINGH, CIRCLE MOGA, 174-175, MOHALLA HARGOBINDPURA, MOGA. JAGRAON. PAN NO. ADNPS1327G ITA NO.306 /CHD/2011 ASSESSMENT YEAR: 2006-07 SMT.NARINDER KAUR, VS. THE D.C.I.T., W/O KULWANT SINGH, CIRCLE MOGA, 238, MOHALLA HARGOBINDPURA, MOGA. JAGRAON. PAN NO. ABYPK0536A (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI SUBHASH AGGARWAL/ASHISH AGGA RWAL RESPONDENT BY: SHRI BINOD KUMAR, CIT DR O R D E R PER BENCH THE NINE APPEALS FILED BY DIFFERENT ASSESSEES ARE AGAINST THE ORDER/S OF THE COMMISSIONER OF INCOME-TAX, DATED 28 .02.2011, RELATING TO 3 ASSESSMENT YEARS 2006-07 AGAINST THE ORDER PASSED U NDER SECTION 263 OF THE I.T. ACT, 1961. 2. COMMON GROUNDS OF APPEAL HAVE BEEN RAISED IN ALL THE APPEALS WHICH READ AS UNDER : I) THAT THE INITIATION OF PROCEEDINGS U/S 263 BY CI T-III ARE AGAINST THE FACTS AND BAD IN LAW. II) THAT THE LD. CIT-III HAS FAILED TO POINT OUT HO W THE ORDER PASSED BY THE DCIT IS ERRONEOUS IN AS MUCH AS PREJU DICIAL TO THE INTEREST OF THE REVENUE. III) THAT IT HAS BEEN IGNORED THAT THE DCIT PASSED THE O RDER AFTER DUE APPLICATION OF MIND. IV) THAT THE LD. CIT FAILED TO GET THE STRUCTURE AND TH E AMOUNT SPENT ON THE STRUCTURE VERIFIED INSPITE OF THE SPEC IFIC REQUEST MADE TO THE CIT(A) AND FURTHER ERRED IN COMPUTING THE LONG TERM CAPITAL GAINS WITHOUT GIVIN G ANY CREDIT FOR THE AMOUNT SPENT ON THE CONSTRUCTION AS PER THE INSPECTORS REPORT FILED ON THE DIRECTIONS OF THE A O AND DULY VERIFIED BY THE AO. V) THAT THE CIT-III HAS ERRED IN ENHANCING THE LTCG BY A SUM OFRS.1,04,628/- AND HAS FURTHER ERRED IN DIRECT ING THE AO TO RECOMPUTED THE TAX AND INTEREST PAYABLE BY TH E ASSESSEE ON THE ENHANCED INCOME. VI) THAT THE LD. CIT-III HAS ERRED IN INITIATING THE PROCEEDINGS U/S 271(1)(C) OF THE INCOME-TAX ACT,196 1. 3. THE PRESENT NINE APPEALS INVOLVING SAME ISSUE W ERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDE R FOR THE SAKE OF CONVENIENCE. 4. THE ISSUE RAISED IN THE APPEALS IS AGAINST THE I NVOKING OF JURISDICTION U/S 263 OF THE INCOME-TAX ACT. A REFE RENCE IS MADE TO THE 4 FACTS ARISING IN ITA NO.235/CHD/2011 IN ORDER TO AD JUDICATE THE ISSUE RAISED BEFORE US. 5. THE BRIEF FACTS IN ITA NO.235/CHD/2011 ARE THAT THE ASSESSEE HAD SHOWN INCOME FROM LONG TERM CAPITAL GAIN ON SALE OF LAND IN THE RETURN OF INCOME FILED ON 26.09.2006. THE ASSESSMENT WAS COM PLETED U/S 143(3) OF THE INCOME-TAX ACT VIDE ORDER DATED 29.09.2008 IN W HICH THE LONG TERM CAPITAL GAIN WAS ASSESSED AFTER REJECTING THE CLAIM OF THE ASSESSEE U/S 54F OF THE INCOME-TAX ACT. THE CIT ON THE PERUSAL OF T HE ASSESSMENT RECORDS NOTED THAT THE AO HAD PASSED THE ORDER ACCEPTING TH E COST OF ACQUISITION OF THE LAND SOLD BY IT, WITHOUT MAKING PROPER ENQUI RY. THE SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESSEE U/S 263(1) OF THE INCOME-TAX ACT IN WHICH IT WAS REQUISITIONED BY THE CIT AS UNDER : THE DCIT CIRCLE MOGA PASSED ORDER IN THIS CASE FOR A.Y. 2006-07 U/S 143(3) OF THE IT ACT ON 29.9.2008. IN T HIS CASE THE ASSESSEE HAD SHOWN LONG TERM CAPITAL GAIN ON SA LE OF LAND. THE COST OF LAND PURCHASED IN FEBRUARY 1978 WAS SHOWN AT RS.13,570/- AND THE AMOUNT SPENT ON RAISIN G THE LEVEL OF LAND, CONSTRUCTION OF BOUNDARY WALL, BUILD ING A ROOM AND PUTTING A GATE ETC. IN THE FINANCIAL YEAR 1980- 81 WAS TAKEN AT RS.2,00,000/-. HIS SHARE OF IMPROVEMENT O F LAND OUT OF RS.2,00,000/- WAS TAKEN BY THE ASSESSEE AT RS.30 ,700/-. THUS THE COST OF THE LAND INCLUDING IMPROVEMENT WAS TAKEN BY THE ASSESSEE AT RS.56670/-. THE INDEXED COST WAS TAKEN BY THE ASSESSEE AT RS.276,680/- (55670X497/100). THE A O VIDE LETTER DATED 26.8.2008 HAD ASKED THE ASSESSEE TO FU RNISH THE BASIS OF INDEXED COST CALCULATED AT RS.276680/- WIT H DOCUMENTARY EVIDENCE LIKE PURCHASE DEED INDICATING COST, DATE OF PURCHASE AND OWNERSHIP ALONGWITH RATIO OF H IS SHARE IN THE PROPERTY. THE ASSESSEE VIDE LETTER DATED 6. 9.2008 FURNISHED THE CALCULATION OF THE INDEXED COST, THE GIST OF WHICH IS GIVEN ABOVE. IT IS ALSO NOTICED THAT VIDE ORDER SHEET NOTING DATED 13.8.08 THE ASSESSEE WAS ASKED TO GIVE THE BASIS OF INDEXED COST WITH DOCUMENTARY EVIDENCE. 5 6. THE CIT VIDE PARA 2 OF THE SAID NOTICE REFERRED TO THE REPORT SUBMITTED BY THE INSPECTOR OF INCOME TAX DURING ASSESSMENT PR OCEEDINGS, WHICH IS REPRODUCED AT PAGE 2 OF THE ORDER U/S 263 OF THE AC T AND NOTED THAT EXCEPT FOR THE REPORT, THERE WAS NOTHING ON RECORD TO SHOW ON WHAT BASIS AND ON BASIS OF WHICH DOCUMENTS, THE INSPECTOR HAD CALCULATED THE C OST OF CONSTRUCTION AT RS.200,850/-. AS PER THE CIT, THE REPORT OF THE IN SPECTOR WAS WITHOUT ANY VERIFIABLE BASIS AND THE AO HAD ACCEPTED THE SAID R EPORT WITHOUT APPLYING HIS OWN MIND. THE CIT FURTHER OBSERVED THAT THE AO FAILED TO EXAMINE AND ENQUIRE THE BASIS OF COST OF IMPROVEMENT TAKEN BY T HE ASSESSEE AT RS.2,00,000/-. THE CIT ALSO NOTED THE ASSESSEE TO HAVE FAILED TO FURNISH ANY EVIDENCE OF IMPROVEMENT OF LAND AND SUPPORTING EVID ENCE FOR THE EXPENSES INCURRED AND EVEN THE SALE DEED WAS FOUND NOT TO HA VE MENTIONED ABOUT THE ALLEGED IMPROVEMENT ON THE LAND AND THE SALE PRICE ALSO DID NOT REFER TO THE BOUNDARY WALL, GATE ROOM/STRUCTURE ON THE LAND. TH E CIT WAS OF THE VIEW THAT THE AO HAD PASSED THE ORDER IN A PERFUNCTORY MANNER AND WAS ERRONEOUS IN ACCEPTING THE CLAIM OF THE ASSESSEE, WHERE THE ASSE SSEE HAD NO EVIDENCE TO FURNISH IN RESPECT OF COST. THUS, THE IMPUGNED ORD ER PASSED BY THE AO, AS PER THE CIT, WAS ERRONEOUS AND PREJUDICIAL TO THE INTER ESTS OF THE REVENUE AND AN OPPORTUNITY WAS AFFORDED TO THE ASSESSEE TO SHOW CA USE AS TO WHY THE IMPUGNED ORDER BE NOT ENHANCED/MODIFIED/CANCELLED O R SET ASIDE FOR FRESH ASSESSMENT U/S 263 OF THE ACT. THE SAID NOTICE IS REPRODUCED BY THE CIT AT PAGES 1 TO 3 OF HIS ORDER PASSED U/S 263 OF THE ACT . 7. THE ASSESSEE VIDE HIS REPLY DATED 19.1.2011 POIN TED OUT THAT DETAILED ENQUIRIES WERE MADE BY THE AO IN REGARD TO THE VARI OUS ASPECTS OF THE CASE AS WAS EVIDENT FROM THE ORDER-SHEET ENTRIES OF THE AO. A REFERENCE WAS MADE TO A SPECIFIC QUERY RAISED BY THE AO DURING THE ASSESS MENT PROCEEDINGS VIDE NOTICE DATED 26.06.2008 IN WHICH THE NATURE OF LAND SOLD AND ALSO THE BASIS OF INDEXED COST INCLUDING THE DOCUMENTARY EVIDENCE LIK E PURCHASE DEED WAS 6 ASKED FOR. THE ASSESSEE HAD FILED A REPLY DATED 6. 9.2008 IN WHICH THE COST OF THE PROPERTY ALONGWITH COST OF CONSTRUCTION OF BOUN DARY WALL/GATE ETC. YEAR- WISE WAS EXPLAINED. THE TOTAL COST OF LAND PURCHAS ED IN FEB.,1978 WAS RS.18240/-. THE AMOUNT SPENT ON THE ADDITIONAL CON STRUCTION WAS RS.2,00,000/- IN THE FINANCIAL YEAR 1980-81 AND THE SHARE OF THE ASSESSEE IN THE SAID RS.2,00,000/- WAS 97/684/- I.E. RS.28,363/-. T HE SAID COST WAS FURTHER INDEXED TO COMPUTE THE LONG TERM CAPITAL GAIN ON TH E SALE OF ASSET. THE LD. AR FURTHER POINTED OUT THAT IT WAS NOT DENIED AS THE A BOVESAID ITEMS LIKE BOUNDARY WALL/ROOM/GATE ETC. EXISTED EVEN AT THE TIME WHEN T HE ASSESSMENT PROCEEDINGS WERE TAKEN UP. THE AO HAD DEPUTED THE INSPECTOR TO VERIFY THE ABOVE FACTS AND ALSO TO MAKE ESTIMATE OF THE EXPENDITURE INCURR ED AND AFTER DUE VERIFICATION, THE AO FRAMED THE ASSESSMENT. THE AS SESSEE, THUS POINTED OUT THAT SUCH ASSESSMENT WAS MADE AFTER ENQUIRY AND DUE APPLICATION OF MIND, IT CANNOT BE SAID THAT THE ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. IN A SUBSEQUENT COMMU NICATION FILED BEFORE THE CIT, IT WAS POINTED OUT THAT IN ADDITION TO THE AO, THE FULL FACTS WERE IN THE KNOWLEDGE OF ADDL.CIT, MOGA RANGE, MOGA WHO WAS MON ITORING THE CASES AND HAD ISSUED DIRECTIONS U/S 144A OF THE ACT. THE CIT HELD THAT THOUGH QUERIES WERE MADE BY THE AO WITH REGARD TO THE INDEXED COST INCLUDING THE COST OF IMPROVEMENT, BUT ASSESSEE HAD NOT FURNISHED ANY EVI DENCE OF INCURRING ANY FINANCIAL COST OVER THE COST OF IMPROVEMENT CLAIMED AND ONUS WAS NOT DISCHARGED BY THE ASSESSEE. FURTHER THERE WAS NOTH ING ON RECORD THAT THE AO HAD MADE ANY DETAILED ENQUIRY AND VERIFICATION ON T HE ASPECT OF COST OF IMPROVEMENT EXCEPT FOR THE COPY OF REPORT OF THE IN SPECTOR, THERE WAS NO EVIDENCE THAT THE BOUNDARY WALL, GATE EXISTED ON TH E PLOT. THE CIT THUS HELD THAT THE ORDER PASSED BY THE AO WAS ERRONEOUS AND P REJUDICIAL TO THE INTERESTS OF REVENUE AND THE INCOME FROM LONG TERM CAPITAL GA IN WAS UNDER ASSESSED. ACCORDINGLY, THE CIT HELD THAT THERE WAS NO BASIS F OR DEDUCTION OF COST INDEXED ON ACCOUNT OF IMPROVEMENT OF RS.152579/- AN D THE INCOME FROM LONG 7 TERM CAPITAL GAIN WAS ENHANCED BY THE SAID AMOUNT. THE ASSESSEE WAS DIRECTED TO TAKE THE INCOME FROM LONG TERM CAPITAL GAIN AT T HE ENHANCED FIGURE WHILE RE- COMPUTING THE TOTAL INCOME OF THE ASSESSEE, WHILE G IVING EFFECT TO THE ORDER PASSED U/S 263 OF THE ACT. THE AO WAS DIRECTED TO RE-COMPUTE THE TAX AND INTEREST PAYABLE BY THE ASSESSEE ON THE ENHANCED IN COME AND ALSO PENALTY PROCEEDINGS WERE INITIATED U/S 271(1)(C) OF THE ACT . 8. THE LD. AR FOR THE ASSESSEE MADE A REFERENCE TO THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT AND POINTED OUT THAT T HE PROCEEDINGS WERE CONDUCTED BY THE AO ON VARIOUS DATES OF HEARING UND ER WHICH QUERIES WERE RAISED AND REPLIES WERE FURNISHED BEFORE THE AO. A REFERENCE WAS MADE TO THE NOTICE ISSUED BY THE AO PLACED AT PAGE 7 OF THE PAP ER BOOK AND THE REPLIES FURNISHED AT PAGES 8-9 AND THEREAFTER AT PAGE 11 OF THE PAPER BOOK. THE LD. AR FOR THE ASSESSEE ALSO REFERRED TO THE DIRECTIONS IS SUED U/S 144A OF THE ACT BY THE ADDL.CIT, MOGA PLACED AT PAGES 12-14 OF THE PAP ER BOOK. THE ASSESSEE HAS ALSO ANNEXED WITH THE PAPER BOOK PHOTO COPY OF THE ORDER-SHEET ENTRIES AT PAGES 17-20 OF THE PAPER BOOK. FURTHER A REFERENCE WAS MADE TO THE REPORT OF THE INSPECTOR SUBMITTED DURING THE ASSESSMENT PROCE EDINGS IN WHICH IT WAS REPORTED THAT THE BOUNDARY WALL EXISTED ON THE DATE OF HIS VISIT WHICH WAS AFTER THE DATE OF SALE OF THE SAID PROPERTY. LD. AR FOR T HE ASSESSEE PLACED RELIANCE ON THE VARIOUS CASE LAWS AS UNDER: 1. CIT V MUNJAL CASTINGS (2008) 303 ITR 23 (P&H) 2. MRS. KHATIZA OOMERBHOY V ITO (2006) 100 ITD 173 (MUM) 9. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON TH E ORDER OF THE CIT PASSED U/S 263 OF THE ACT. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE CIT UNDER SECTION 263 OF THE ACT IS EMPOWERED TO REVISE SUCH ORDER PASSED BY THE ASSESSING OFFICER WHICH ARE ERRONEOUS AND PREJU DICIAL TO THE INTEREST OF 8 REVENUE. THE TWIN CONDITIONS OF THE ORDER BEING ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ARE TO BE SATISFIED SIMU LTANEOUSLY FOR THE CIT TO EXERCISE HIS POWERS U/S 263 OF THE ACT. IF EITHER OF THE CONDITIONS ARE NOT SATISFIED, THEN THE CIT CANNOT TAKE RECOURSE TO SEC TION 263 OF THE ACT. 11. THE HON'BLE SUPREME COURT IN MALABAR INDUSTRIES COMPANY LTD V CIT [243 ITR 83 (SC)] HELD AS UNDER:- THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE O R ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONL Y WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTR ACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL OR DERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL J USTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REV ENUE' IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN T HE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IM PORT AND IS NOT CONFINED TO LOSS OF TAX. THE HIGH COURT OF CALCUTTA IN DAWJEE DADABHOY AND CO. V. S. P. JAIN [1957] 31 ITR 872 , THE HIGH COURT OF KARNATAKA IN CIT V. T. NARAYANA PAI [1975] 98 ITR 422 , THE HIGH COURT OF BOMBAY IN CIT V. GABRIEL INDIA LTD. [1993] 203 ITR 108 AND THE HIGH COURT OF GUJARAT IN CIT V. SMT. MINALB EN S. PARIKH [1995] 215 ITR 81 TREATED LOSS OF TAX AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. MR. ABRAHAM RELIED ON THE JUDGMENT OF THE DIVISION BENCH OF THE HIGH COURT OF MADRAS IN VENKATAKRISHNA RICE COMPANY V. CIT [1987] 163 ITR 129 INTERPRETING 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE.' THE HIGH COURT HELD (PAGE 138) : 'IN THIS CONTEXT, IT MUST B E REGARDED AS INVOLVING A CONCEPTION OF ACTS OR ORDER S WHICH ARE SUBVERSIVE OF THE ADMINISTRATION OF REVEN UE. THERE MUST BE SOME GRIEVOUS ERROR IN THE ORDER PASS ED BY THE INCOME-TAX OFFICER, WHICH MIGHT SET A BAD TREND OR PATTERN FOR SIMILAR ASSESSMENTS, WHICH ON A BROAD RECKONING, THE COMMISSIONER MIGHT THINK TO BE PREJUDICIAL TO THE INTERESTS OF REVENUE ADMINISTRAT ION.' IN OUR VIEW, THIS INTERPRETATION IS TOO NARROW TO M ERIT ACCEPTANCE. THE SCHEME OF THE ACT IS TO LEVY AND CO LLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AN D THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRO NEOUS ORDER OF THE INCOME-TAX OFFICER, THE REVENUE IS LOS ING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 9 THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REV ENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORD ER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVE NUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE. FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND I T HAS RESULTED IN LOSS OF REVENUE ; OR WHERE TWO VIEWS AR E POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE V IEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANN OT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE IN TERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME -TAX OFFICER IS UNSUSTAINABLE IN LAW. 12. FURTHER, THE HON'BLE SUPREME COURT IN MAX IN DIA LTD [295 ITR 282 (SC) ] UPHELD THE JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE SAID CASE, WHEREIN IT WAS HELD THAT IF THE VIEW EXPRESSED BY THE ASSESSING OFFICER WAS A POSSIBLE VIEW, THE CIT WOULD HAVE NO JURISDICTION TO INTERFERE BY WITH SUCH A VIEW EXERCISING THE POWER U/S 263 OF THE ACT. THE HON'BLE SUPREME COURT IN THE SAID CASE FURTHER CLARIFIED TH AT WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VI EW WITH WHICH THE CIT DOES NOT AGREE, THE ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER WAS UNSUSTAINABLE. THE CO URT HELD AS UNDER : THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE IN SECTION 263 OF THE INCOME-TAX ACT,1961, HAS TO BE READ IN C ONJUNCTION WITH THE EXPRESSION ERRONEOUS ORDER PASSED BY THE AO. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE AO CAN NOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EX AMPLE, WHEN THE AO ADOPTS ONE OF TWO COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE REVENUE, UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. 13. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT V MUNJAL CASTINGS, 303 ITR 23 (P&H). 10 14. THE HON'BLE DELHI HIGH COURT IN THE CIT VS. HONDA SIEL POWER PRODUCTS LTD. REPORTED IN [(2010) 41 DTR (DEL) 353] HAD EXERCISED HIS JURISDICTION U/S 263 OF THE ACT IN RESPECT OF DEDUC TION CLAIMED U/S 80HHC OF THE ACT IN RESPECT OF THE PROFITS OF BUSINESS ON WH ICH DEDUCTION WAS ALREADY ALLOWED U/S 80IB OF THE ACT. THE HON'BLE COURT REF ERRED TO THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN CIT V MAX INDIA LTD (SUPRA), HARI IRON & TRADING COMPANY [ 263 ITR 437 (P&H)] AND THE RATIO PROPOUNDED BY HON'BLE BOMBAY HIGH COURT IN GODREJ AGROVET LTD V ACIT [290 ITR 252 (BOM)] AND HELD AS UNDER:- 18. FROM THE AFORESAID DISCUSSION, IT IS APPARENT T HAT THE EXPRESSION PREJUDICIAL TO THE INTEREST OF REVENUE A PPEARING IN SECTION 263 HAS TO BE READ IN CONJUNCTION WITH THE EXPRESSION ERRONEOUS AND THAT EVERY LOSS OF REVENUE AS A CON SEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN CASES WHERE THE ASSESSING OFFICER ADOPTS ONE OF THE COURSES PERMISSIBLE IN LA W OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS T AKEN ONE VIEW, THE COMMISSIONER OF INCOME-TAX CANNOT EXERCISE HIS POWERS UNDER SECTION 263 TO DIFFER WITH THE VIEW OF THE ASSESSIN G OFFICER EVEN IF THERE HAS BEEN A LOSS OF REVENUE . OF COURSE, IF THE ASSESSING OFFICER TAKES A VIEW WHICH IS PATENTLY UNSUSTAINABL E IN LAW, THE COMMISSIONER OF INCOME-TAX CAN EXERCISE HIS POWERS UNDER SECTION 263 WHERE A LOSS OF REVENUE RESULTS AS A CO NSEQUENCE OF THE VIEW ADOPTED BY THE ASSESSING OFFICER. IT IS AL SO CLEAR THAT WHILE PASSING AN ORDER UNDER SECTION 263, THE COMMI SSIONER OF INCOME-TAX HAS TO EXAMINE NOT ONLY THE ASSESSMENT O RDER, BUT THE ENTIRE RECORD OF THE PROFITS. SINCE THE ASSESSEE HA S NO CONTROL OVER THE WAY AN ASSESSMENT ORDER IS DRAFTED AND SINCE, G ENERALLY, THE ISSUES WHICH ARE ACCEPTED BY THE ASSESSING OFFICER DO NOT FIND MENTION IN THE ASSESSMENT ORDER AND ONLY THOSE POIN TS ARE TAKEN NOTE OF ON WHICH THE ASSESSEES EXPLANATIONS ARE RE JECTED AND ADDITIONS / DISALLOWANCES ARE MADE, THE MERE ABSENC E OF THE DISCUSSION OF THE PROVISIONS OF SECTION 80IB(13) RE AD WITH SECTION 80IA(9) WOULD NOT MEAN THAT THE ASSESSING OFFICER H AD NOT APPLIED HIS MIND TO THE SAID PROVISIONS . AS POINTED OUT IN KELVINATOR OF INDIA (SUPRA), WHEN A REGULAR ASSESSMENT IS MADE UNDER SECTION 143(3), A PRESUMPTION CAN BE RAISED T HAT THE ORDER HAS BEEN PASSED UPON AN APPLICATION OF MIND. NO DOU BT, THIS PRESUMPTION IS REBUTTABLE, BUT THERE MUST BE SOME M ATERIAL TO INDICATE THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND. (UNDERLINE PROVIDED BY US) 15. THE HON'BLE COURT FURTHER HELD AS UNDER:- 22. FROM THE DECISIONS CITED BY THE LEARNED COUNSEL FOR THE REVENUE, IT IS APPARENT THAT FAILURE TO MAKE AN ENQUIRY ON T HE PART OF THE 11 ASSESSING OFFICER WOULD BE A GROUND FOR INVOKING TH E POWERS UNDER SECTION 263. THE SUPREME COURT IN MALABAR INDUSTRIA L COMPANY LTD (SUPRA) ALSO NOTED THAT THE CASES WHICH FELL IN THE CATEGORY OF NON- APPLICATION OF THE PRINCIPLES OF NATURAL JUSTICE OR NON-APPLICATION OF MIND WOULD ALSO SATISFY THE REQUIREMENT OF THE ORDE R BEING ERRONEOUS AND WOULD, THEREFORE, BE AMENABLE TO CORR ECTION UNDER THE REVISIONAL JURISDICTION OF SECTION 263 OF THE S AID ACT. IN THE CASE OF GEE VEE ENTERPRISES [99 ITR 375 (DEL), THE ASSESSING OFFICER S ORDER WAS HELD TO BE ERRONEOUS BECAUSE THE RELEVA NT ENQUIRY WAS NOT MADE. AGAIN, IN MALABAR INDUSTRIAL COMPANY LTD (SUPRA), THE ASSESSING OFFICER S ORDER WAS HELD TO BE ERRONEOUS BECAUSE IT HAD BEEN MADE WITHOUT APPLICATION OF MIN D AND THE ASSESSING OFFICER HAD MERELY ACCEPTED THE ENTRIES I N THE STATEMENT OF ACCOUNTS FILED BY THE ASSESSEE IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY ENQUIRY. SIMILARLY, IN DEEPAK KUMAR GARG [299 ITR 435 (MP)] (SUPRA), THE ASSESSING OFFICER ACCEPTED THE VERSION OF THE ASSESSEE AND FOR WANT O F TIME DID NOT CONDUCT ANY PROPER ENQUIRY. ON THESE FACTS, IT WAS FOUND THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 23. IN THE FACTS OF THE PRESENT CASE, WE FIND THAT THERE IS NO MATERIAL TO INDICATE THAT THE ASSESSING OFFICER HAD NOT APPL IED HIS MIND TO THE PROVISIONS OF SECTION 80IB(13) READ WITH SECTIO N 80IA(9). THE PRESUMPTION THAT THE ASSESSMENT ORDERS PASSED UNDER SECTION 143(3) PASSED BY THE ASSESSING OFFICER HAD BEEN PASSED UPO N AN APPLICATION OF MIND, HAS NOT BEEN REBUTTED BY THE R EVENUE. NO ADDITIONAL FACTS WERE NECESSARY BEFORE THE ASSESSIN G OFFICER FOR THE PURPOSE OF CONSTRUING THE PROVISIONS OF SECTION 80I B(13) READ WITH SECTION 80IA(9). IT WAS ONLY A LEGAL CONSIDERATION AS TO WHETHER THE DEDUCTION UNDER SECTION 80HHC WAS TO BE COMPUTED AF TER REDUCING THE AMOUNT OF DEDUCTION UNDER SECTION 80IB FROM THE PROFITS AND GAINS . THERE IS NO DOUBT THAT THE ASSESSING OFFICER HAD ALLOWED THE DEDUCTION UNDER SECTION 80HHC WITHOUT REDUCING THE AMOUNT OF DEDUCTION ALLOWED UNDER SECTION 80IB FROM THE PROFI TS AND GAINS. HE DID NOT SAY SO IN SO MANY WORDS, BUT THAT WAS TH E END RESULT OF HIS ASSESSMENT ORDER. SINCE HE WAS HOLDING IN FAVOU R OF THE ASSESSEE, AS HAS BEEN OBSERVED IN HARI IRON TRADING COMPANY (SUPRA) AND EICHER LIMITED (SUPRA), GENERALLY, THE ISSUES WHICH ARE ACCEPTED BY THE ASSESSING OFFICER, DO NOT FIND MENT ION IN THE ASSESSMENT ORDER, IT CANNOT BE SAID THAT THE ASSESS ING OFFICER HAD NOT APPLIED HIS MIND. IT CANNOT ALSO BE SAID THAT T HE ASSESSING OFFICER HAD FAILED TO MAKE ANY ENQUIRY BECAUSE NO F URTHER ENQUIRY WAS NECESSARY AND ALL THE FACTS WERE BEFORE THE ASS ESSING OFFICER. CONSEQUENTLY, WE ARE OF THE VIEW THAT THE DECISIONS CITED BY THE LEARNED COUNSEL FOR THE REVENUE, WHEREIN ASSESSMENT ORDERS WERE FOUND TO BE ERRONEOUS FOR WANT OF AN ENQUIRY OR PRO PER ENQUIRY, WOULD HAVE NO APPLICATION TO THE PRESENT APPEALS. IT IS ALSO TRUE THAT THE VALIDITY OF AN ORDER UNDER SECTION 263 HAS TO BE TESTED WITH REGARD TO THE POSITION OF LAW AS IT EXISTS ON THE DATE ON WHICH SUCH AN ORDER IS MADE BY THE COMMISSIONER OF INCOME-TAX. FROM THE NARRATION OF FACTS IN THE TRIBUNALS ORDER, IT IS CLEAR THAT ON THE DATE WHEN THE COMMISSIONER OF INCOME-TAX PAS SED HIS ORDERS UNDER SECTION 263, THE VIEW TAKEN BY THE ASSESSING OFFICER WAS IN CONSONANCE WITH THE VIEWS TAKEN BY SEVERAL BENCHES OF THE INCOME- 12 TAX APPELLATE TRIBUNAL. THEREFORE, THE CONCLUSION O F THE TRIBUNAL THAT THE COMMISSIONER OF INCOME-TAX COULD NOT HAVE INVOKED HIS JURISDICTION UNDER SECTION 263 OF THE SAID ACT WAS CORRECT. AS A RESULT, WE ANSWER THE QUESTION AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE INCOME-TAX APPELLA TE TRIBUNAL WAS CORRECT IN LAW IN CANCELLING THE ORDER PASSED BY TH E COMMISSIONER OF INCOME-TAX UNDER SECTION 263 AND IN RESTORING TH E ORDER OF THE ASSESSING OFFICER BY HOLDING THAT THE ASSESSING OFF ICER HAD TAKEN A POSSIBLE VIEW AT THE RELEVANT POINT OF TIME. THE AP PEALS ARE ACCORDINGLY DISMISSED (UNDERLINE PROVIDED BY US) 16. IN THE FACTS OF THE PRESENT CASE BEFORE US, THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. THE ISSUE CONSIDE RED BY THE AO WAS THE INCOME FROM LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE ON THE SALE OF ITS PLOT OF LAND. THE AO DURING THE ASSESSMENT PROCEED INGS HAD RAISED QUERIES IN RESPECT OF THE SAID TRANSACTION INCLUDING THE COST OF IMPROVEMENT. FURTHER QUERIES WERE RAISED BY THE AO IN RESPECT OF THE DED UCTION CLAIMED BY THE ASSESSEE U/S 54F OF THE ACT. THE ASSESSEE JOINTLY OWNED THE SAID PROPERTY ALONGWITH 8 OTHER CO-OWNERS. THE CAPITAL GAINS WAS COMPUTED AFTER INDEXING THE COST OF LAND PURCHASED IN FEB.,1978 AT RS.18,24 0/- AND FURTHER COST OF CONSTRUCTION TOTALING RS.2,00,000/- SPENT IN THE FI NANCIAL YEAR 1980-81. THE SHARE OF THE ASSESSEE IN THE SAID PROPERTY WAS 97/6 84 AND HIS SHARE IN THE COST OF CONSTRUCTION WAS RS.28,363. THE ADDITIONAL COS T OF CONSTRUCTION CLAIMED BY THE ASSESSEE WAS ON ACCOUNT OF BOUNDARY WALL/ROO M AND GATE ERECTED ON THE SAID PLOT OF LAND. THE AO, DURING THE COURSE OF AS SESSMENT PROCEEDINGS DEPUTED AN INSPECTOR TO VERIFY THE STAND OF THE ASS ESSEE AND ALSO TO MAKE ESTIMATE OF THE EXPENDITURE INCURRED. THE INSPECTOR VIDE ITS REPORT STATED THAT THE SAID ITEMS I.E. BOUNDARY WALL/ROOM/GATE WERE EX ISTING ON THE SAID PLOT OF LAND AND HE REPORTED AS UNDER : AS DIRECTED I VISITED THE SITE OF PLOT OWNED BY S/ SHRI HARCHARAN SINGHM KULWANT SINGH, GURMAIL SINGH, NARINDER KAUR, RAMANDEEP SINGH, SATPAL SINGH, GURPREET SINGH, BHUP INDER SINGH AND SUKHPAL SINGH (9 PERSONS) ALL RESIDENTS OF MOHA LLA 13 HARGOBINDPURA, JAGRAON. THE PLOT MEASURING 684 MARL AS SOLD BY ALL THE ABOVE PERSONS IS SITUATED AT JAGRAON-MOGA G T ROAD AT A DISTANCE OF ABOUT 3 KMS FROM JAGRAON ON LEFT SIDE O F THE ROAD. THE PLOT HAS BEEN COVERED WITH A BOUNDARY WALL AND ONE CONSTRUCTED WITH GATE FITTED AT THE FRONT SIDE OF T HE ROAD. ONE HAND PUMP WAS ALSO INSTALLED ALONGWITH ELECTRIC CON NECTION. AT PRESENT THERE IS NO IRON GATE, HAND PUMP AND ELECTR IC CONNECTION IN THE BOUNDARY WALL OF THE PLOT. THE BOUNDARY WALL WAS ERECTED DURING THE YEAR 1980 AND OTHER EQUIPMENT SUCH AS HA ND PUMP AND ELECTRIC CONNECTION WERE ALSO INSTALLED IN THE SAME YEAR. 17. THEREAFTER, AN ESTIMATE WAS MADE BY THE INSPECT OR VIZ-A-VIZ THE COST OF THE BOUNDARY WALL/GATE ETC. THE AO, AFTER MAKING E NQUIRIES IN THE CASE ACCEPTED THE STAND OF THE ASSESSEE AND COMPUTED THE INCOME FROM LONG TERM CAPITAL GAIN IN THE HANDS OF THE ASSESSEE, THOUGH T HE ASSESSEE WAS NOT ALLOWED THE BENEFIT OF DEDUCTION CLAIMED U/S 54F OF THE INC OME-TAX ACT. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE, WHERE THE A O AFTER CONDUCTING ENQUIRIES, AS REFERRED IN THE ASSESSMENT ORDER, HAD ADOPTED ONE OF THE VIEW POSSIBLE IN THE CASE AND HAD COME TO A CONCLUSION F OR COMPUTING THE INCOME IN THE HANDS OF THE ASSESSEE , WE FIND NO MERIT IN THE ORDER OF THE CIT INVOKING JURISDICTION U/S 263 OF THE ACT. THE CIT WHILE ISS UING SHOW CAUSE NOTICE HAD ELABORATELY REFERRED TO THE FACTUAL ASPECTS CONSIDE RED BY THE AO DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS VIZ-A-VIZ COST OF LAND AND THE AMOUNT SPENT ON COST OF CONSTRUCTION. IN VIEW OF THE RATIO S LAID DOWN BY THE HON'BLE SUPREME COURT AND THE HON'BLE PUNJAB & HARYANA HIGH COURT AS REFERRED BY US IN THE PARAS HEREIN ABOVE, WE FIND NO MERIT IN T HE ORDER PASSED BY THE CIT IN HOLDING THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. THE VIEW TAKEN BY THE AO IN ONE OF THE POSSIBLE VIEW AND CANNOT BE HELD TO BE ERRONEOUS AND FURTHER PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ACCORDINGLY, WE CANCEL THE ORDER PASSED BY CIT U/S 263 OF THE INCOME-TAX 14 ACT. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ITA NO.235/CHD/2011 ARE THUS ALLOWED. 17. IT IS AN ADMITTED POSITION THAT THE FACTS IN IT A NOS. 236, 300 TO 306/CHD/2011 ARE SIMILAR TO THE FACTS IN ITA NO.235 /CHD/2011. THEREFORE, THE DECISION IN ITA 235/CHD/2011 APPLIES MUTATIS MUTAND IS IN ITA NOS. 236, 300 TO 306/CHD/2011 ALSO AS ALL THE ABOVESAID ASSESSEES ARE CO-OWNERS OF THE SAME PIECE OF LAND. 18. IN THE RESULT, APPEAL OF THE ASSESSEES IN ITA NOS.235/CHD/2011 & ITA 236,300 TO 306/CHD/2011 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JUNE 2011. SD/- SD/- ( D.K.SRIVASTAVA) (SUSHMA CHOWLA) JUDICIAL MEMBER JUDICIAL MEMBER DATED : 21 ST JUNE,2011 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH