Vijayalakshmi Enterprises, Hyderabad V. ITO Ward 15(1), Hyderabad

ITA 244/Hyd/2021

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3039 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 02-04-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 17-06-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Revision of order; Set aside
• Section: 263; 143(3); 48; 13; 22; 20

Judgement Text

ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 1 of 22 आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad Before Shri R.K. Panda, Vice-President AND Shri K. Narasimha Chary, Judicial Member आ.अपी.सं /ITA Nos.244 & 245/Hyd/2021 (िनधाŊरण वषŊ/Assessment Years: 2015-16 & 2016-17) Vijayalakshmi Enterprises Hyderabad PAN:AANFV2591E Vs. Income Tax Officer Ward 15(1) Hyderabad (Appellant) (Respondent) िनधाŊįरती Ȫारा/Assessee by: Shri K.A. Sai Prasad, CA राज̾ व Ȫारा/Revenue by: : Smt. TH Vijaya Lakshmi CIT (DR) सुनवाई की तारीख/Date of hearing: 03/04/2024 घोषणा की तारीख/Pronouncement: 12/04/2024 आदेश/ORDER Per R.K. Panda, Vice-President. Both these appeals filed by the assessee are directed against the separate orders dated 30/03/2021 of the learned Pr.CIT-4, Hyderabad, relating to A.Ys. 2015-16 & 2016-17. Since common issues are involved in these two appeals, therefore, for the sake of convenience, these were heard together and are being disposed of by this common order. ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 2 of 22 2. Although a number of grounds have been raised by the assessee in these two appeals, however, the grounds of the assessee are in two folds i.e. one relates to the action of the learned Pr.CIT in assuming the jurisdiction u/s 263 of the Act holding that the assessment order passed by the Assessing Officer u/s 143(3) was erroneous in so far as it is prejudicial to the interest of the Revenue and the other relates to the direction issued by the learned Pr.CIT for adoption of SRO value of the land instead of the value recorded by the assessee in its books of accounts. ITA No.244/Hyd/2021 – A.Y 2015-16 3. Facts of the case, in brief, are that the assessee firm filed its return of income for the A.Y. 2015-16 on 6.7.2016 declaring total income at Rs.Nil. The case of the assessee was selected for limited scrutiny for examination of “Whether -the share capital is genuine and from disclosed sources “. After considering the submission of the assessee, the Assessing Officer completed the assessment u/s 143(3) of the Act on 29.12.2017 by accepting the income returned. 4. Subsequently the learned Pr.CIT by invoking the powers vested u/s 263 of the Act called for the assessment record, examined the return of income for the A.Y 2015-16 and set aside the order of the Assessing Officer with a direction to redo the assessment. The relevant part of the order of the learned Pr.CIT is reproduced as under : ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 3 of 22 ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 4 of 22 5. Aggrieved with such order of the learned Pr.CIT the assessee is in appeal before the Tribunal. The ld. AR of the assessee ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 5 of 22 filed the detailed written submission as under: - ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 6 of 22 ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 7 of 22 ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 8 of 22 ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 9 of 22 ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 10 of 22 ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 11 of 22 6. The learned DR, on the other hand, heavily relied on the order of the learned Pr.CIT and submitted that learned Pr.CIT was justified in invoking section 263 of the Act. 7. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned PCIT and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. 8. With regards to the ground of the assessee that “the action of the learned Pr.CIT in assuming the jurisdiction u/s 263 of the Act holding that the assessment order passed by the Assessing Officer u/s 143(3) was erroneous in so far as it is prejudicial to the interest of the Revenue”, it is an admitted fact that the case of the assessee was selected for limited scrutiny for examination of “Whether the share capital is genuine and from disclosed sources“. We find the Assessing Officer during the assessement proceedings issued query letters (PB page no.13 to 19) reproduced as under: ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 12 of 22 ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 13 of 22 8.1 Similarly, the Assessing Officer vide letter dated 24.11.2017 has issued the following letter to the assessee: ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 14 of 22 8.2 We find the assessee duly replied to all the queries of the Assessing Officer along with the information and supporting documents (Paper Book Page No.6 to 10) the details of which are as under: ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 15 of 22 ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 16 of 22 ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 17 of 22 ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 18 of 22 8.3 We find the Assessing Officer upon being satisfied, completed the assessment u/s 143(3) of the Act on 29.12.2017 by accepting the income returned. The relevant para of the assessment order, wherein the AO has examined each any every document submitted by assessee during scrutiny proceedings, is reproduced below: “2. In response to the notices issued, Sri Maruti Nagendram, CA and AR of the assessee appeared, discussed the case and produced the details/ information called for. After examination of the details submitted/produced, material available on the record and after discussion with the AR, the assessment is completed by accepting the income returned”. ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 19 of 22 9. Under these circumstances it has to be seen as to whether the order of the Assessing Officer is erroneous so far as it is prejudicial to the interest of the Revenue. 10. It is well settled law that the prerequisites to exercise of jurisdiction by the Ld. Pr.CIT under section 263 of the Act that to establish order of the AO is to be erroneous insofar as it is prejudicial to the interest of the Revenue is concerned, the Ld. Pr.CIT has to satisfy of twin conditions simultaneously, 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 any one of them is absent, s. 263 cannot be invoked. This provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous as also prejudicial to Revenue's interest, that the provision will be attracted. An incorrect assumption of the fact or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase 'prejudicial to the interest of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. However, every loss of revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the PCIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. We draw strength from case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) and also from the ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 20 of 22 case of CIT vs. Max India Ltd. (2007) 295 ITR 282 (SC). In the light of judicial precedents, we are of the considered view that the necessary enquiries and examination as reasonably expected have been carried out by the AO in discharge of his quasi-judicial function and he has taken a prudent, judicious and reasonable view in accepting the explanation of the assessee in support of the cash deposits after considering the entire material available on record and the order so passed under s. 143(3) of the Act cannot be held as erroneous insofar as prejudicial to the interest of Revenue. The impugned order passed by the learned Pr.CIT under section 263 is accordingly set aside and the order of the AO is sustained. 11. With regards to the ground of the assessee “that the direction issued by the learned Pr.CIT for adoption of SRO value of the land instead of the value recorded by the assessee in its books of accounts”, we needs to reproduce the relevant portion of section 45(3) as under: Section 45(3): The profits or gains arising from the transfer of a capital asset by a person to a firm or other association of persons or body of individuals (not being a company or a co- operative society) in which he is or becomes a partner or member, by way of capital contribution or otherwise, shall be chargeable to tax as his income of the previous year in which such transfer takes place and, for the purposes of section 48, the amount recorded in the books of account of the firm, association or body as the value of the capital asset shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 21 of 22 11.1 Hence as per the provisions of Section 45(3) of the Act, profits or gains arising from the transfer of a capital asset by a person who is a partner to the firm by way of capital contributions shall be chargeable to tax in the year in which such transfer takes places and the value recorded in the books of accounts of the firm shall be deemed to be full value of consideration accrued as a result of such transfer for the purpose of Section 48 of the Act. Hence when any capital asset is brought as capital into a partnership firm, capital gain if any will arise in the hands of the partner and not in the hands of the partnership firm. Further the value recorded in the books of accounts of the firm shall be deemed to be full value of consideration accrued as a result of such transfer for the purpose of Section 48 of the Act. Hence the learned AO has not done any mistake by accepting the value recorded in the books of the partnership firm. Therefore, on account of this ground also the impugned order passed by the learned Pr. CIT under section 263 is not sustainable. In view of the above discussion, the grounds raised by the assessee are allowed. 12. In the result, this appeal of the assessee is allowed. ITA No.245/Hyd/2021 for the A.Y 2016-17 13. Since identical grounds are raised by the assessee in the second appeal i.e. ITA No.245/Hyd/2021 for the A.Y 2016-17, following similar reasonings, the appeal of the assessee for the A.Y 2016-17 is also allowed. ITA Nos 244 and 245 of 2021 Vijayalakshmi Enterprises Page 22 of 22 14. To sum up, both the appeals filed by the assessee are allowed. Order pronounced in the Open Court on 12 th April, 2024. Sd/- Sd/- (K. NARASIMHA CHARY) JUDICIAL MEMBER (R.K. PANDA) VICE-PRESIDENT Hyderabad, dated 12 th April, 2024 Vinodan/sps Copy to: S.No Addresses 1 Vijayalakshmi Enterprises C/o CH Parthasarathy & Co. 1-1- 298/2/B/3, 1 st Floor Ashok Nagar, Hyderabad 500020 2 Income Tax Officer Ward 15(1) IT Towers, AC Guards, Masab Tank, Hydrabad 500004 3 Pr. CIT-4, Hyderabad 4 DR, ITAT Hyderabad Benches 5 Guard File By Order