Madhu Sudan Sharivastava, Kolkata V. P.C.I.T.,Kolkata-17, Kolkata

ITA 2600/KOL/2019

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0204 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 07-09-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 15-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Revision of order; Cost of acquisition; Set aside
• Section: 56(2)(vii)(b); 143(3); 50C; 73

Judgement Text

आयकर अपील य अ धकरण, कोलकाता पीठ ‘सी’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH: KOLKATA ी राजपाल यादव,उपा य (कोलकाता े ) एवं ी राजेश क ु मार, लेखा सद य के सम [Before Shri Rajpal Yadav, Vice-President (KZ)& Shri Rajesh Kumar, Accountant Member] I.T.A. No. 2600/Kol/2019 Assessment Year: 2014-15 Madhu Sudan Shrivastava (PAN: AJJPS 7974 H) Vs. PCIT, Kolkata-17 Appellant / (अपीलाथ!) Respondent / ("#यथ!) Date of Hearing / स ु नवाई क& 'त(थ 08.09.2022 Date of Pronouncement / आदेश उ*घोषणा क& 'त(थ 19.10.2022 For the Appellant / 'नधा/0रती क& ओर से Shri N. S. Saini, A.R For the Respondent / राज व क& ओर से Shri Amol Sudhir Kamat, CIT ORDER/ आदेश Per Shri Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the Ld. Principal Commissioner of Income Tax-17, Kolkata [hereinafter referred to as ‘PCIT’] passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act)dated 12.03.2019 for the assessment year 2014-15. 2. The common issue raised in various grounds of appeal by the assessee is against exercise of jurisdiction u/s 263 of the Act by PCIT thereby setting aside the assessment order which has been passed after making due enquiries. 2 ITA No. 2600/Kol/2019 AY: 2014-15 Madhu Sudan Shrivastava 3. Facts in brief are that the return was filed on 27.09.2014 electronically disclosing an income of Rs. 4,60,270/-. The case was selected under CASS for scrutiny and statutory notices were duly issued and served on the assessee. The assessee himself appeared during the assessment proceedings from time to time and produced necessary details before the AO and the assessment was finally framed accepting the returned income vide order dated 21.12.2016 passed u/s 143(3) of the Act. The PCIT upon perusal of the said order observed that the AO has failed to make necessary enquiry and verification in respect of certain items of income during the assessment proceedings which has rendered the order framed u/s 143(3) of the Act as erroneous as well as prejudicial to the interest of the revenue. According to PCIT, the AO has not examined the issue of taxable long term capital gain of Rs. 34,24,929/- and income from other sources of Rs. 1,81,73,804/-. Consequently, the PCIT issued the show cause notice u/s 263 of the Act to the assessee to show cause as to why the assessment should not be cancelled and revised for the following reasons: “Reason for this notice 3. During the course of assessment proceedings it was seen that you had computed long term capital loss of Rs.21,150/- On sale of immovable property. Total consideration of the property was Rs.16,04,72,169/-. A.D.S.R. Cossipore, Govt. of West Bengal also valued the property at Rs. 16,04,72,169/- Being 1/40 share holder in that joint property , your part out of the sale consideration should have been Rs. 16,04,72,169/40, i.e., Rs.40,11,804/-. But, you had calculated your portion at Rs.5,65,725/- by considering total payment of Rs.2,26,29,000/- to vendors by the purchasers. You had also claimed that Rs. 13,78,43,169/- was paid by the purchases to the confirming parties. Section 50C of the Income Tax Act, 1961 does not say anything about confirming parties whatsoever. As such, your share out of sale of the immovable property would be Rs.40,11,804/- as per provision of Section 50C of the Income Tax Act, 1961. Accordingly, taxable Long Term Capital Gain would be Rs.34,24,929/-[ Rs.40,11,804/- minus Indexed cost of acquisition as provided by you of Rs.5,86,875/-]. This LTCG of Rs.34,24,929/- should have been added to your total income in the assessment. 4. You along with your wife , jointly purchased a property from vendors (total 27 in number) at a price of Rs.9,50,000/-. The stamp valuation authority had determined the value of the property at Rs.1,91,23,804/-. Your submission before the AO was that you had purchased the property from family members, as such, provision of Section 56(2)(vii)(b) of the Income Tax Act, 1961 does not apply in your case. The concerned A.O.inadvertently allowed exemption without examining your claim. Failure on the part of the AO resulted under assessment of yourincome to the tune of Rs. 1,81,73,804/- as per provision Section 56(2)(vii)(b)of the Income Tax Act,1961. 3 ITA No. 2600/Kol/2019 AY: 2014-15 Madhu Sudan Shrivastava 5. The above mentioned amount of Rs. 34,24,929/- as Long Term Capital Gain and Rs. 1,81,73,804/-as Income from other sources should have been added to your total income in the assessment u/s 143(3) dated 21.12.2016.” 4. The said notice was replied by the assessee by submitting that the capital gain has correctly been computed by subtracting the payments made to confirming parties of Rs. 13,78,43,169/- and the balance of Rs. 2,26,00,000/- were received by 28 persons including the assessee and thus the net consideration falling to the assesse’s share worked out to Rs. 5,65,725/- and after reducing the cost of acquisition nothing was left in the hands of the assessee. On the second issue the assessee submitted that the provisions of Section 56(2)(viib) of the Act did not apply to the assessee’s case as the purchase was made by the assesse from family members and therefore the issues raised by the ld. PCIT do not have any merit. The reply of the assessee did not find favour with ld. PCIT and he finally set aside the assessment order dated 21.12.2016 by directing the AO to frame assessment fresh after taking into consideration the various issues pointed out in the order passed u/s 263 of the Act after doing necessary enquiries and after giving a fair hearing to the assessee. 4. The Ld. A.R submitted before the Bench that the order passed by PCIT is patently wrong and against the facts on records. The Ld. A.R. submitted before us that there were 28 absolute owners in the impugned property through succession from one Late Deokinandan Prasad Shrivastav and details thereof are available in the conveyance deed dated 06.08.2013 filed at page no. 69 to 73 of PB. There were four grandsons of Late Shri Deokinandan Prasad Shrivastav who entered into an agreement to sell the property on 10.04.2007 duly notarized with the three unrelated buyers namely i) Jagdamba Industries Ltd., ii) Maa Chandi Durga Cement Ltd. and iii) Maa Amba Sponge Iron Ltd. for a total sale consideration of Rs. 2.26 crores subject to fulfillment of certain specific conditions as stated in para 3 to 8 of the said agreement the copy of which is available at page nos. 52 to 54 of the PB. Thus there were three sets of parties to the Registration of Conveyance Deed which was effected during the year namely: 4 ITA No. 2600/Kol/2019 AY: 2014-15 Madhu Sudan Shrivastava i) 28 owners/ vendors including the assessee. ii) Confirming parties [third party to whom the property was sold earlier ] iii) Purchasersto whom the property was sold by the confirming party. The Ld. A.R submitted that the first event of sale of land by 28 parties including the assessee to three buyers [confirming parties] for Rs. 2.26 crores was duly reported by the assessee and examined by the AO in the assessment framed u/s 143(3) of the Act and similarly second sale made by the confirming parties to the purchases hasbeen duly reported and shown in their respective returns of income which the ld. PCIT has hopelessly failed to appreciate correctly during the proceedings u/s 263 of the Act. The ld. A.R submitted that out of total sale consideration of 16.04 crores, Rs. 13.78 crores was paid to confirming parties and remaining 2.26 crores was apportioned amongst 28 parties including the assessee. The Ld. A.R. submitted that the total consideration of Rs. 16.04 crores was duly shown by all the parties in their respective return of income and thus there is no prejudice caused to the revenue of any kind whatsoever. The Ld. A.R. submitted that for invoking jurisdiction u/s 263 of the Act, the PCIT has to satisfy twin conditions as envisaged u/s 263 and i.e. first assessment order has to be erroneous and secondly it has to be prejudicial to the interest of revenue. The ld counsel contended that in the present case, since the order is not erroneous and prejudicial to the interest of the revenue, the revisionary jurisdiction Section 263 of the Act has wrongly been invoked. The Ld. Counsel of the assessee relied in defense of his contentions and arguments on the decision of Ho’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs CIT [2000] 243 ITR 83 (SC) wherein the Hon’ble Court has held that for the purpose of invoking jurisdiction u/s 263 of the Act , the twin conditions have to be satisfied. The Hon’ble court specifically held that it would not be suffice to invoke the provisions of section 263 of the Act if one of the two conditions is satisfied. The Ld. A.R. argued that since these conditions are not satisfied , exercise of jurisdiction u/s 263 of the Act and consequent order of PCIT is wrong and required to be quashed. On the second issue stated in the show cause notice that Rs. 1,91,23,804/- which representing the stamp value of property acquired 5 ITA No. 2600/Kol/2019 AY: 2014-15 Madhu Sudan Shrivastava by the assessee jointly with his wife at Rs. 9,50,000/- from vendors (27 nos.), the Ld. Counsel for the assessee submitted that the PCIT himself referred to the family members involved in the transaction of sale and purchase of property and therefore the provisions of Section 56(2)(vii)(b) do not apply since the sale and purchase is amongst the relatives only. The Ld. A.R. submitted that the PCIT did not make any enquiry and simply set aside the issue back to the file of the AO. The Ld. Counsel for the assessee submitted that the exercise of jurisdiction under section 263 of the Act by the PCIT is contrary to the provisions of the Act as he observed that the AO has not made any enquiry then he has to investigate the issue and point out the mistake before setting aside and cancelling the assessment. In defense of his argument, the Ld. Counsel for the assessee relied on the decision of Hon’ble Delhi High Court in the case of ITO vs. D.G Housing Projects Ltd. [2012] 343 ITR 329 (Del-HC). Finally the Ld. Counsel for the assessee submitted that in view of these facts the order of PCIT may kindly be quashed. 5. The Ld. D.R. on the other hand relied on the order of PCIT by submitting that there is no prejudice caused to the assessee by exercise of jurisdiction u/s 263 of the Act as the PCIT has not given any final direction to AO to make the addition, however the AO was given free hand to investigate and look into these issues and frame the assessment denovo after doing necessary enquiry. 6. After hearing the rival submissions and perusing the material on record, we find that jurisdiction u/s 263 of the Act was exercised for two reasons as discussed and stated hereinabove in the show cause notice. So far as the issue no. 1 is concerned, we find that there is no mistake in the order of AO and no prejudice is caused to the revenue as the assessee has duly shown the sale consideration falling to his share. Similarly all other 27 co-owners have also shown the sale in their returns.Besides the confirming parties have also disclosed the sale transaction in their respective returns of income. The said fact was examined and enquired by the AO in the case of assessee during assessment proceedings which culminated u/s 143(3) of the Act. We note that at the time of sale by the confirming parties vide sale deed dated 06.08.2013 out of 6 ITA No. 2600/Kol/2019 AY: 2014-15 Madhu Sudan Shrivastava total consideration of Rs. 16.04 crores, Rs. 13.78 crores was paid to confirming parties and therefore the assessee’s contentions that it has correctly shown the transaction of sale in its return has legal force and merit. Considering these facts we are of the view that the facts were not correctly appreciated by ld. PCIT. In our opinion, the assessment framed by the AO is neither erroneous nor prejudicial to the interest of the revenue so far as the first issue is concerned. The case of the assesse is squarely covered by the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co (supra) wherein the Hon’ble Court has held that in order to invoke the provisions u/s 263 of the Act, the PCIT has to be first satisfy twin conditions i.e. the order of AO sought to be revised has to be erroneous as well as prejudicial to the interest of Revenue and if one of them is absent i.e if the order is erroneous but is not prejudicial to the Revenue or vice versa , recourse cannot be had to Section 263(1) of the Act. Similarly in respect of second issue proposed by the PCIT, we note that the sale and purchase were amongst the family members which was also acknowledged by the PCIT in the impugned order. Once this is established that the transaction is between family members , the provisions of Section 56(2)(viib) of the Act does not apply. On this issue also , the PCIT has made a finding that the AO has not made any enquiry without making any enquiry himself as to how the assessment order is erroneous and prejudicial to the interest of the revenue which is contrary to the ratio laid down by the Hon’ble Delhi High Court in the case of D.G. Housing Projects Ltd. (supra) wherein the Court has held as under: “In cases of wrong opinion or finding on the merits, the Commissioner of Income-Tax has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. The commissioner of Income Tax cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous.” In view of the above facts and circumstances, the assumption of jurisdiction u/s 263 of the Act by the Ld. PCIT and consequent order are invalid and are quashed. The appeal of the assessee is allowed. 7 ITA No. 2600/Kol/2019 AY: 2014-15 Madhu Sudan Shrivastava 7. In the result, the appeal of the assessee is allowed. Order is pronounced in the open court on 19 th October, 2022 Sd/- Sd/- (Rajpal Yadav /राजपाल यादव) (Rajesh Kumar / राजेश क ु मार) Vice-President /उपा य Accountant Member / लेखा सद य Dated: 19 th October, 2022 SB, Sr. PS Copy of the order forwarded to: 1. Appellant- Madhu Sudan Shrivastava, 64, Dum Dum Road, Melabagan, North 24 Parganas, Kolkata-700074. 2. Respondent – PCIT, Kol-17 3. PCIT- , Kolkata 4. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata