Shri Harshadbhai L. Patel, Surat V. Pr. Commissioner of Income Tax-3, Surat

ITA 254/SRT/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 2385 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-03-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 04-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Revision of order; Principle of natural justice; Assessment record; Prejudicial to interest; Reassessment proceedings
• Section: 147; 263; 63; 143(3); 50C; 2(14); 48; 2(A)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A.L.SAINI, AM आयकरअपीलसं./ITA No.254/SRT/2018 (िनधाŊरणवषŊ / Assessment Year: (2012-13) (Virtual Court Hearing) Shri Harshadbhai L Patel 26, Haridarshan Society, Nr. Gajera School, Amba Talavadi, Katargam, Surat Vs. The Principal Commissioner of Income Tax-3, Room No.425, 4 th Floor, Aayakar Bhawan, Majura Gate, Surat ̾थायीलेखासं./जीआइआरसं./PAN/GIR No.: ABEPP 7149 Q (Appellant ) (Respondent) Assessee by : Shri P.M.Jagasheth, C.A Respondent by : Shri H.P.Meena– CIT-DR सुनवाई की तारीख/ Date of Hearing : 08/03/2022 घोषणा की तारीख/Date of Pronouncement : 25/03/2022 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: By way of this appeal, the assessee has challenged correctness of the order dated 21.03.2018, passed by the Learned Principal Commissioner of Income Tax, (ld.PCIT) under section 263 of the Income tax Act, 1961, in the matter of assessment under section 143(3) read with section 147 of the Income Tax Act 1961, for the assessment year 2012-13, on the following grounds: “1. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of the Income Tax has grievously erred in initiating the proceedings u/s 263 of the Act, 1961. 2. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of the income Tax has grievously erred in assuming jurisdiction u/s 263 of the Act, 1961. 3. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of the income Tax has erred in violating the principles of natural justice by not the mentioning the grounds for initiating action u/s 263 of Income Tax Act,1961 in the show cause notice issued. As such the order passed u/s 263 is void ab-initio. The action of the Ld. CIT was wholly unreasonable, uncalled for the bad in law. Page | 2 ITA No.254/SRT/2018 A.Y. 12-13 Sh. Harshadbhai L Patel 4. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of the Income Tax has erred in not passing a speaking order against the submissions of your appellant. As such, the order passed u/s 263 is void ab-initio. The action of the Ld CIT was wholly unreasonable, uncalled for the bad in law. 5. On the facts and in the circumstances of the case as well as law on the subject, that the order of u/s 263 is merely ‘change in opinion’. The order u/s 143(3) r.w.s. 147 passed by the Ld AO does not in any way represent erroneous order. The action of the Ld. CIT was wholly unreasonable, uncalled for and bad in law. 6. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax has grievously erred in assuming that the assessing officer had not verified the chargeability of capital gain during the course of proceeding and not made proper inquiry or verification finalized the order of dropping the proceedings initiated u/s 147 of the I.T. Act is contrary to the fact of the case. 7. On the facts and in the circumstances of the case as well as law on the subject, the entire proceedings are bad-in-law and invalid as assessment order u/s 143(3) r.w.s. 147 of the Act for the same year were framed, wherein due inquiry was made. 8. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax has grievously erred in setting aside the assessment order framed u/s 143 r.w.s. 147 of the Act without pointing out as to how the order is erroneous and prejudicial to interest of revenue. 9. It is therefore prayed that the above proposed proceedings may please be revoked as learned members of the tribunal may deem it proper.” 2. Although, this appeal filed by the Assessee for Assessment Year 2012-13, contains multiple ground of appeals. However, at the time of hearing we have carefully perused all the grounds raised by the Assessee. Most of the grounds raised by the Assessee, are either academic in nature or contentious in nature. However, to meet the end of justice, we confine ourselves to the core of the controversy and main grievance of the Assessee. The solitary grievance of the assessee is that order passed by the assessing officer under section 143(3) r.w.s. 147 of the Act, is neither erroneous nor prejudicial to the interest of Revenue, hence jurisdiction exercised by the ld.PCIT is bad in law. 3. Appeal arises this way. The assessee, before us is an individual and has filed its return of income for the assessment year 2012-13 on 31.03.2013, Page | 3 ITA No.254/SRT/2018 A.Y. 12-13 Sh. Harshadbhai L Patel declaring total income to the tune of Rs.10,40,500/-, along with agriculture income of Rs. 2,25,000/-. The case of assessee was reopened on the basis of information that assessee has sold a piece of land at Vill: Baleshwar, Tal. Palsana, Dist Surat, Block No.360, for a consideration of Rs.22,00,000/-, on which stamp duty of Rs.2,97,500/- was paid. The Stamp Valuation authority had valued the property at Rs.60,70,500/- as per jantri rate. Thus, there was a difference of Rs.38,70,500/- ( Rs.60,70,500-Rs.22,00,000). The re-assessment proceedings were dropped, by assessing officer, vide order dated 18.01.2016, on the ground that land sold in question was an agricultural land. 4. After this, Learned Principal Commissioner of Income Tax, (ld.PCIT), has exercised his jurisdiction under section 263 of the Income tax Act, 1961. The Ld PCIT, on examination of case records, noticed that during the year under consideration the assessee had sold immovable property (agriculture land) located at Block No.360 , Baleshwar, Taluka: Palsana, Dist: Surat to Shri Rakesh kumar Dharam chand jain (non-farmer) for residential purpose at Rs.22,00,000/-. The assessee had made an application before the Dy. Collector Kamrej, authority to sell the property to non-farmer. The permission was granted for the above land by Dy. Collector, Kamrej on 20/03/2012 and registered deed was executed on 30.03.2012, in the office of sub-registrar, Palsana, Surat. It was clearly mentioned in the registered sale deed as well as in Form No. 6 that the land was sold to non- farmer for residential purpose after obtaining the order of Dy. Collector who had charged the premium thereon. Therefore, ld PCIT was of the view that said land was out of the ambit of agricultural land and comes under the purview of capital asset under section 2(14) of the Income Tax Act. The sub-registrar-Valuation authority had valued the land at Rs.60,70,500/-. Thus, capital gain is chargeable under section 48 r.w.s 50C of the Act, on difference amount of Rs.38,70,500/- ( Rs.60,70,500-Rs.22,00,000). 5. On verification of records it was observed by ld PCIT that assessing officer had not verified the chargeability of capital gain during the course of Page | 4 ITA No.254/SRT/2018 A.Y. 12-13 Sh. Harshadbhai L Patel reassessment proceedings and finalized the order of reassessment by dropping the reassessment proceedings initiated u/s 147 of the Act. Thus, the action of Assessing Officer in passing order of reassessment by dropping of proceedings u/s 147 of the Act was without making proper enquiries or verification, which should have been made on this issue. Therefore, ld PCIT noted that reassessment order passed by the assessing officer is erroneous and prejudicial to the interest of revenue as per Explanation 2(a) to section 263 of the Act. Therefore, ld PCIT issued a show -cause notice dated 12.02.2018 to the assessee, to explain the transaction. 6. In response to the show cause notice issued by Ld. PCIT u/s 263 of the Act, the assessee submitted written submission, which is reproduced below: "1. In respect of contention regarding your claim that the assessing officer had not verified the chargeability of capital gain during the course of proceeding and not made proper inquiry or verification finalized the order of dropping the proceedings initiated u/s 147 of the I .T.Act, is contrary to the fact of the case. 2. The assessee, during the year in concern sale agriculture land situated at Block No.360, Baleshwar, Taluka Palsana. Surat to Shri Rakeshkumar D. Jain for Rs.22,00,000/- on 30/03/2012. But Shri Rakeshkumar D. Jain was a non- agriculturist and wanted to use land for residential purpose, the assessee has to take permission u/s 63 of Ganot Dhara from Dy, Collector for selling agriculture land to non-agriculturist on behalf of Shri Rakeshkumar D. Jain. The assessee has got approval to sale on 20/03/2012, subject to conditions to be fulfilled by Shri Rakeshkumar D. Jain and after that sale deed has been made on 30/03/2012. At the time of sale, the land was agriculture land. Permission for conversion of agriculture land to non-agriculture land had been granted on 17/09/2012, as per Gam Namuno 6 entry No,5629 dated 07/11/2013. Hence, status of the land was agriculture land on 30/03/2012, when it was sold by the assessee and later on order for conversion of same into non-agriculture land has been passed in favor of purchasee Shri Rakeshkumar D. Jain. 3. Further as per letter issued by Superintendent of Stamp's Office, stamp duty on land should be charged on basis of purpose of use of property and hence in case of the assessee stamp duty has been charged and paid as per non agriculture futuristic use i.e., residence status of land instead of actual status of the land. 4. It is an accepted fact that Income Tax is on real income and not on fictitious assumption. The assessee has received Rs. 22,00,000/- as sale consideration and same has been offered for capital gain in return of income. 5. The Honorable Supreme Court has laid down various pre-conditions for invoking action U/s 263 in: Page | 5 ITA No.254/SRT/2018 A.Y. 12-13 Sh. Harshadbhai L Patel 1. CIT v Max India Ltd (2007 LL 1101-3) 2. Malabarlnd. V CIT 243 ITR 830 The principals have been followed in various other jurisdictional pronouncements by the jurisdictional High Court and 1TAT: 1. Pr.CIT V. CLP India Pvt Ltd. (TA 593 of 2017) 2. Mrs. Khatiza S. OmerBhoy VITO (110 TT] 1095) 3. Lalitaben Patel V. CIT(ITA NO. 1175/AHD/2014) 6. The Id. AO exercised his quasi judicial power in accordance with law and arrived at a conclusion that the fact presented by the assessee during the assessment proceeding in his reply dated 16/01/2016 was genuine and shown correct capital gain in his return of income. Hence the Id. A. O. deemed it right as regard to the veracity of the same. Thus the issue has been adequately inquired and dealt upon and then order for dropping assessment proceeding initiated u/s 147 of the I.T Act. Hence the question of having a contrary view as against one of the legal, valid and fully dealt upon issue by the Ld AO based on the Law and the judicial pronouncements does not arise. 7. We thus request your Honour to squash the proposed proceedings u/s 263 of the Act.” 7. However, Ld. PCIT rejected the contention of assessee and held that in assessee`s case clause (a) & (b) of the above Explanation 2 of Section 263 of the I.T.Act, 1961 are clearly applicable since nowhere in the assessment record, there is evidence that assessing officer has examined the issue of capital gain, and assessing officer had passed assessment order without making inquiries or verification which should have been made in this case. Therefore, ld PCIT held that assessment order passed by the assessing officer is erroneous as well as prejudicial to interest of the revenue, hence ld PCIT set-aside the order of assessing officer and directed the assessing officer to look into the issue of capital gain earned by the assessee during the AY 2012-13 and make fresh assessment on this issue. 8. Aggrieved by the order of Ld.PCIT, the assessee is in appeal before us. 9. Shri P.M.Jagasheth, Learned Authorized Representative (AR) for the assessee pleads that during re-assessment proceedings, assessee submitted reply to the question asked by the assessing officer, stating that assessee, sold agriculture Page | 6 ITA No.254/SRT/2018 A.Y. 12-13 Sh. Harshadbhai L Patel land and at the time of selling the land the status of the land was agricultural land and the assessing officer after getting the said reply dropped the reassessment proceedings u/s 147 of the Act. The Ld. AR further argues that during the year under consideration, the assessee sold agricultural land to Shri Rakeshkumar D Jain for a consideration of Rs.22 lakh on 30.03.2012. However, Shri Rakeshkumar D Jain was a non-agriculturist and wanted to use the said land as residential purposes. Therefore, he took permission and converted the land for non- agricultural purposes. Hence, the revision proceeding on such issue is not sustainable in the eyes of law. Therefore, order passed by assessing officer is neither erroneous nor prejudicial to the interest of Revenue, hence ld AR prays the Bench that order passed by ld. PCIT under section 263 of the Act may be quashed. 10. On the other hand, Ld. CIT-DR for the Revenue heavily relied on the findings of Ld. PCIT and stated that it is a mater of under valuation of sale consideration. The sale consideration i.e. value per Stamp valuation authority was at Rs.60,70,500/- (per jantriy rate). However, it was sold at Rs.22,00,000/-, therefore there is under valuation to the extent of Rs.38,70,500/-. He stated that Ld.PCIT has rightly invoked the jurisdiction u/s 263 of the Act, therefore, order passed by Ld. PCIT should be upheld. 11. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. First, we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is there existing before the Pr. CIT to exercise his power. For that, we have to examine as to whether in the first place the order of the Assessing Officer found fault by the Principal CIT is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedents laid down by the Hon’ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that Page | 7 ITA No.254/SRT/2018 A.Y. 12-13 Sh. Harshadbhai L Patel the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer’s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon’ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. “prejudicial to the interest of the revenue’’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue “unless the view taken by the Assessing Officer is unsustainable in law”. 12. Taking note of the aforesaid dictum of law laid down by the Hon’ble Apex Court, let us examine, whether order passed by the assessing officer is erroneous. The assessee submits before the Bench, the reason of re-opening the assessment which is placed at paper book pages 7 to 8. The re-assessment proceedings initiated by the AO was dropped by him after getting the satisfaction on the basis of documents submitted by the assessee (vide pb 9 to 10). During re-assessment proceedings, the assessee filed reply on dated 14.11.2014 which is placed at paper book page-9 to 10, wherein the assessee has replied the query asked by assessing officer, about sale of agricultural land. The assessee also narrated the fact before Page | 8 ITA No.254/SRT/2018 A.Y. 12-13 Sh. Harshadbhai L Patel the assessing officer that necessary permission had been taken to convert the land into non-agricultural status, (vide assessee`s reply dated 16.01.2016, which is placed at paper book page-12). The assessee submitted the copy of Gujarat Tenancy & Agricultural Land Act, 1948, which is placed at paper book pages-13- 15. The assessee submitted order of Jilla Panchayat Office Revenue Department, Surat dated 17.07.2012, which is placed at paper book page nos. 16-20. The assessee submitted the Circular No. Stamp Tantrik-3-2003/6279 of Inspector General of Registration and Superintendent of Stamps, Gujarat Rajya, Gandhinagar, which is placed at paper book pages 22-23. The assessee also submitted the sale deed, which is placed at paper book page nos. 25-26. The assessee, during the assessment, sold agriculture land situated at Block No.360, Baleshwar, Taluka Palsana. Surat to Shri Rakeshkumar D. Jain for Rs.22,00,000/- on 30/03/2012. However, Shri Rakeshkumar D. Jain was a non-agriculturist and wanted to use the said land for residential purpose, therefore the assessee has to take permission u/s 63 of Ganot Dhara from Dy, Collector for selling agriculture land to non-agriculturist on behalf of Shri Rakeshkumar D. Jain. The assessee has got approval to sale on 20/03/2012, subject to conditions to be fulfilled by Shri Rakesh kumar D. Jain and after that sale deed has been made on 30/03/2012. At the time of sale, the land was agriculture land. Permission for conversion of agriculture land to non-agriculture land had been granted on 17/09/2012, as per Gam Namuno 6 entry No.5629 dated 07/11/2013. Hence, status of the land was agriculture land on 30/03/2012, when it was sold by the assessee and later on, order for conversion of land into non-agriculture land has been passed in favor of purchases, (Shri Rakesh kumar D. Jain). 13. From the above facts, it is abundantly clear that when the land was sold by the assessee, the status of land was agricultural land. This fact has been adequately inquired and examined by the assessing officer during the reassessment proceedings and having examined the said fact, the assessing officer has dropped the re-assessment proceeding initiated u/s 147 of the Income Tax Act. Hence, assessing officer, having examined the assessee`s fact (that land is an agricultural land therefore it is not subject to capital gain tax), and legal position in relation to Page | 9 ITA No.254/SRT/2018 A.Y. 12-13 Sh. Harshadbhai L Patel the fact, decided not to initiate the reassessment proceedings under section 147 of the Act, therefore, such order passed by the assessing officer is neither erroneous nor prejudicial to the interest of revenue. 14. In view of the facts of the case and judicial pronouncements relied upon, it is well established that the impugned order passed u/s. 143(3) r.w.s.147 of the Act dated 18.10.2016, was passed by assessing officer, after calling for relevant information and after detailed examination of the same. The Assessing Officer has passed the assessment order after calling for details on the issue and after considering the reply and documents and after verification of the same and after due application of mind passed the assessment order, so it cannot be termed as erroneous and prejudicial to the interest of the revenue. So, the Ld. PCIT’s finding fault, with the order of the Assessing Officer is erroneous as well as prejudicial to the interest of revenue, on account of lack of inquiry, has to fail. Based on these facts and circumstances, we quash the order dated 21.03.2018 passed by the ld PCIT under section 263 of the Act. 15. In the result, the appeal of the assessee is allowed. Order is pronounced on 25/03/2022 by placing the result on the Notice Board. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat/िदनांक/ Date: 25/03/2022 Dkp Outsourcing Sr.P.S. Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat