Ramanamurthy Mathod Srinivasmurthy, Bangalore V. Deputy Commissioner Of Income Tax, Circle-2(1), Bangalore

ITA 281/BANG/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8535 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 19-04-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMER SINGH MEENA
• Assessee Lawyers: PADAMCHAND KHINCHA
• Keywords: Capital asset; Revision of order; Opportunity of being heard; Assessment record; Capital Gains
• Section: 263; 143(3); 142(1); 143(1); 143(2); 264; 43; 48; 73; 13; 119; 22

Judgement Text

ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore IN THE INCOME TAX APPELLATE TRIBUNAL “A’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No.281/Bang/2022 Assessment Year: 2017-18 Ramanamurthy Mathod Srinivasmurthy T-306, III Floor, Suraj Plaza, 8 th F Main, III Block, Jayanagar Bangalore 560 011 PAN NO : ADFPS2042E Vs. Deputy Commissioner of Income-tax Circle-2(1) Bangalore APPELLANT RESPONDENT Appellant by : Shri Padamchand Khincha, A.R. Respondent by : Shri Sumer Singh Meena, D.R. Date of Hearing : 11.07.2022 Date of Pronouncement : 11.07.2022 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal by assessee is directed against the order of CIT (International Taxation), Bengaluru passed u/s 263 of the Act dated 23.3.2022. The assessee has raised the following grounds of appeal:- 1. General ground: 1.1. The learned Commissioner of Income Tax, International Taxation, Bengaluru (hereinafter referred to as CIT (IT) for short) has erred in passing the revision order under section 263 in the manner passed by him. The order so passed is bad in law and liable to be quashed. 2. Ground relating to Section 263: ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 2 of 26 2.1. The learned CIT (IT) has erred in holding the assessment order passed under section 143(3) as erroneous and prejudicial to the interest of revenue under section 263. 2.2. The learned CIT (IT) has erred in concluding that the learned assessing officer has passed order under section 143(3) without making proper inquiries or verification. 2.3. The learned CIT (IT) has erred in not appreciating the fact that the assessment order under section 143(3) was passed after examining all facts relating to the issue on which revision order is passed. 2.4. The learned CIT (IT) has erred in not appreciating the fact that the learned assessing officer had made enquiries during the regular assessment regarding capital asset being long term capital asset in nature. 2.5 Without prejudice, the learned CIT(T) has failed to appreciate that inadequate inquiry, if any, cannot lead to revision under section 263. 2.6. Without prejudice, the learned CIT (IT) has erred in not appreciating that revision under section 263 cannot be made where two views are possible and the AO has accepted one of the possible views while passing the assessment order. 2.7. Based on facts and circumstances of the case and law applicable, the revision order passed by the.CIT (IT) is bad in law and liable to be deleted. 3. Ground relating to treating long term capital asset as short term capital asset: 3.1. The learned CIT (IT) has erred in treating the long term capital asset as short term capital assets in nature. 3.2. The learned CIT (IT) has. erred in not appreciating the fact that the appellant's right to property was not affected by any clause of sale agreement. 3.3. Based on the facts and circumstances of the case, the appellant had the right to property from the date of entering into sale agreement and hence the said capital asset was long term in nature. 4. Prayer: 4.1. Based on the above grounds and other grounds adduced at the time of hearing, the appellant prays that the order passed under section 263 be quashed or in alternative the above grounds and relief prayed thereof be allowed. ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 3 of 26 2. Ground Nos.1 & 2 are with regard to assumption of jurisdiction by CIT u/s 263 of the Act . Facts of the issue are that the assessee, a non-resident individual filed his return of income on 18.06.2017 declaring income of Rs. 7,70,970/- and claimed long-term capital loss of Rs. 37,86,057/-. Assessment u/s. 143(3) was completed on 13.12.2019, accepting the returned income filed by the assessee and allowing the long-term capital loss to be carried forward. During the course of assessment proceedings, the assessee vide letter dated 01.10.2019, claimed reduced long-term capital loss from sale of property amounting to Rs.32,95,204/- instead of Rs.37,86,057/- claimed in the return of income. But while passing the assessment order the assessing officer allowed Rs.37,86,057 to be carried forward as long term capital loss. Subsequently, however, the assessing officer rectified the order u/s. 143(3) on 17.02.2022 reducing the carry forward long-term capital loss from37,86,057/- to 32,95,204/-. On examination of the assessment records, it came to notice that there are certain mistakes committed by the assessing officer while passing the assessment order which have made the assessment order erroneous and prejudicial to the interest of the revenue. Facts of the case are mentioned below. 2.1 Vide agreement for purchase dated 01.04.2010 the assessee, Mr. Ramanamurthy and his wife Mrs. Vaishali Murthy entered into an agreement with the developer, UKN Esperanza for purchase of unit 22 in the project "Esperanza by UKN", Sy No. 3712, Tubarahalli Village, Varthur Hobli, Bengaluru South Taluk, Bengaluru 2.3 Vide agreement dated 08.09.2016, the assessee and his wife assigned the property in favour of M/s. Wellborn Floorings ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 4 of 26 (P) Limited for a consideration of Rs.2,50,00,000/- with the developer/ owner UKN Esperanza being confirming party. Subsequently, a deed of sale dated 14.10.2016 was entered into through which M/s. UKN Esperanza, the seller sold the property to the purchaser, M/s. Wellborn Floorings (P) Limited. The assessee and his wife were confirming party in the deed of sale. While calculating the capital gains the assessee adopted 01.04.201 0 as the date of purchase of the property and 14.10.2016 as the date of sale of the property. After indexation the assessee claimed a loss of Rs. 32,95,204/-. However, from the agreement for the purchase of the property it comes to notice that the assessee has made final payment of Rs. 22,06,200/- on 23.12.2013. Accordingly, as per the agreement of purchase the assessee became owner of the property only on 23.12.2013 which was sold on 14.10.2016 after a gap of approximately 34 months. Hence the sale of the property will give rise to short- term capital gains instead of long-term capital gains. In the assessment order, however, the assessing officer has allowed the loss as long-term capital loss instead of short-term capital loss which has made the assessment order erroneous and prejudicial to the interest of the revenue. 2.4 Another mistake the assessing officer has made is that the assessee has shown payment of Rs. 13,42,788/- to Developer during the F.Y. 2012-13 for which no evidence was furnished. The developer's letter dated 08.09.2016 also does not acknowledge the receipt of the same. However, the Assessing officer has erroneously accepted the indexed value of Rs. 13,42,788/- amounting to Rs16,08,722/-. ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 5 of 26 3. Accordingly, CIT observed that in case of assessee, the ownership of the property will be transferred to the assessee only after making full and complete payment to the developer. As assessee has made complete payment only on 23.12.2013, he cannot treat himself as the owner of the property as on 1.4.2010 itself. Therefore, date of acquisition of the property is treated as 23.12.2013 and date of transfer of property is 14.10.2016. This implies that assessee held the property for a period of less than 36 months which makes it a short term asset and the gain or loss earned by virtue of the transfer of property will be treated as short term capital gain or loss. So it is a case of short term capital loss. Hence, AO by treating it as long term capital loss passed erroneous order, which is prejudicial to the interest of revenue. Further, CIT observed that claiming payment made for property during the financial year 2012- 13 amounting to Rs.13,42,788/- as payment to developer for which the assessee has produced no evidence and the developer not acknowledged the same. Hence, while calculating the indexed cost, the AO allowed the deduction at Rs.16,08,722/-. This also is erroneous and prejudicial to the interest of revenue. However, before CIT, the assessee has not pressed this issue, even before us assessee has not pressed this issue. Accordingly, this issue is not considered for adjudication and dismissed as not pressed. 4. Coming to the main issue on assuming jurisdiction u/s 263 of the Act by CIT, the Ld. D.R. submitted that the AO has examined the every issue relating to the period of holdings of the capital asset while deciding the issue relating to the capital loss at the time of assessment. Further, he drew our attention to the notice issued by AO u/s 142(1) of the Act dated 1.11.2019 calling for the details of the transfer of property on 14.10.2016. He submitted that AO examined this issue whether it is a short term capital gain or long term capital ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 6 of 26 gain and he stated in his letter that he proposed to complete the short term capital gain/loss as against long term capital gains/loss computed by the assessee. On furnishing necessary details of assessee, he was convinced and came to conclusion that the impugned transfer of property resulted in long term capital loss and same was allowed by AO in his assessment order passed u/s 143(3) of the Act dated 13.12.2019. Further, he submitted that AO has examined the issue by raising specific question and same has been duly replied by the assessee. He also placed reliance on the various judgements as follows:- 1. Malabar Industrial Co Ltd v CT [2000] 243 ITR 83 (SC) 2. Principal Commissioner of Income-tax, Surat-2 v. Shreeji Prints (P.) Ltd. (2021) 130 taxmann.com 294 (SC) 3. CIT, Central Circle v. D.G. Gopala. Gowda [2013] 34 taxmann.com 154 (Karnataka) 4. 4.CIT v Saravana Developers [2016] 68 taxmann.com 148 (Kamataka) 5. Commissioner of Income-tax v. Honda Siel Power Products Ltd 194 Taxman 175 (Delhi) 6. CIT v. Cyber Park Development & Construction Ltd. [2020] 121 taxmann. com 172 (Karnataka) 7. KR. Satyanarayana v. Commissioner oflncome Tax, Mysuru [2021] 126 taxmann. com 22 (Kamnataka) 8. Commissioner of Incom ----- e-tax v. International Society Eor Krishna Consciousness [2020] 117 taxmann.com 799 (Kamataka) 9. Commissioner of Income-tax, Bangalore v. Kurlon Ltd. [2014] 52 taxmann. com 92 (Karnataka) 10. CIT v. Gokuldas Exports [2012] 20 laxmann.com 491 (Karnataka) 11. Commissioner of Income-tax (Central), Ludhiana v. Max India Ltd. 166 Taxman 188 (SC) Case laws on right to obtain conveyance is a capital asset u/s 2(14) 12. CIT v. Tata Services Limited [1979] 1 Taxman 427 (Born.) 13. CIT v. Ved Prakash & Sons (HUF) [1994] 73 Tax.man 70 (Punj. & Har.) 14. Gulshan Malik v. CIT [20141 43 taxmann.com 200 (Delhi) 15. CIT v. Vijay Flexible Containers [1990] 48 Taxman 86 (Bombay) 16. CIT v Smt Laxmidevi Ratani [2005] 147 Tax.man 642 (MP) 17. CIT v. H. Anil Kumar [2012] 20 taxmann. com 430 (Karnataka) ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 7 of 26 18. Chandrashekar Naganagouda Patil V. DCIT, Circle 6(2)(1) Bangalore (2020] 117 taxmann.com 520 (Bangalore - Trib.) 19. Mahendrasingh Ramsingh Jadav v. Income-tax Officer (2021] 125 taxmann. com 434 (Bangalore - Trib.) 20. H.H. Acharya Swami Ganeshdasji V. Deputy Commissioner of Income-Tax [2001] 119 Taxman 146 (Mum.) (Mag.) 21. Praveen Gupta v. Assistant Commissioner of Income-tax [2012] 20 taxmann.com 308 (Delhi) 22. Shiv Kumar Jatia v. Income Tax Officer, Ward-10(2), New Delhi (2021) 127 taxmann.com 179 (Delhi - Trib.) 5. The Ld. D.R. relied on the order of Ld. CIT. 6. We have carefully considered the rival submissions in the light of material placed before us and also gone through all the judgements cited by the parties before us. First, we take up the legal issue with reference to the jurisdiction of invoking the provisions of section 263 of the Act by the learned CIT. The scheme of the IT Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to erroneous order of the assessing officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interest of the revenue. As held in the case of Malabar Industries Co. Ltd., Vs. CIT (243 ITR 83 (SC), the Commissioner can exercise revision jurisdictional u/s 263 if he is satisfied that the order of the assessing officer sought to be revised is (i)erroneous; and also (ii) prejudicial to the interests of the revenue. The word ‘erroneous’ has not been defined in the Income Tax Act. It has been however defined at page 562 in Black’s Law Dictionary (seventh Edition) thus’; ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 8 of 26 ‘erroneous, adj. Involving error, deviating from the law’. The word ‘error’ has been defined at the same page in the same dictionary thus: ‘error No. 1 : A psychological state that does not conform to Objective reality; a brief that what is false is true or that what is true is false’. At page 649/650 in P. Ramanatha Aiyer’s Law Lexicon Reprint 2002, the word ‘error’ has been defined to mean- ‘Error: A mistaken judgement or deviation from the truth in matters of fact, and from the law in matters of judgement ‘error’ is a fault in judgement, or in the process or proceeding to judgement or in the execution upon the same, in a Court of Record; which in the Ci vil Law is called a Nullityie” (termes de la l ey). Something incorrectly done through ignorance or inadvertence S.99 CPC and S.215 Cr.PC. ‘Error, Fault, Error respects the act; fault respect the agent, an error may lay in the judgement, or in the conduct, but a fault lies in the will or intention.” 7. At page 650 of the aforesaid Law Lexicon, the scope of Error, Mistake, Blunder, and Hallucination has been explained thus: “An error is any deviation from the standard or course of right, truth, justice or accuracy, which is not intentional. A mistake is an error committed under a misapprehension of misconception of the nature of a case. An error may be f rom the absence of knowledge, a mistake is from insufficient or false observation. Blunder is a practical error of a p eculiarly gross or awkward kind, committed through glaring ignorance, heedlessness, or awkwardness. An error may be overlooked or atoned for, a mistake may be rectified, but the shame or ridicule which is occasioned by a blunder, who c an counteract. Strictly speaking, Hallucination is an illusion of the perception, a phantasm of the imagination. The one comes of disordered vision, the ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 9 of 26 other of discarded imagination. It is extended in medical science to matters of sensation, whether there is no corresponding cause to p roduce it. In its ordinary use it denotes an unaccountable error in judgement or fact, especially in one remarkable otherwise f or accurate information and right decision. It is exceptional error or mistake in those otherwise not likely to be deceived.” 8. In order to ascertain whether an order sought to be revised under Section 263 is erroneous, it should be seen whether it suffers from any of the aforesaid forms of error. In our view, an order sought to be revised under Section 263 would be erroneous and fall in the aforesaid category of "errors" if it is, inter alia, based on an incorrect assumption of facts or an incorrect application of law or non-application of mind to something which was obvious and required application of mind or based on no or insufficient materials so as to affect the merits of the case and thereby cause prejudice to the interest of the revenue. 9. Section 263 of the Income-tax Act seeks to remove the prejudice caused to the revenue by the erroneous order passed by the Assessing Officer. It empowers the Commissioner to initiate suo moto proceedings either where the Assessing Officer takes a wrong decision without considering the materials available on record or he takes a decision without making an enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner will be well within his powers to regard an order as erroneous on the ground that in the circumstances of the case, the Assessing Officer should have made further inquiries before accepting the claim made by the ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 10 of 26 assessee in his return. The reason is obvious. Unlike the Civil Court which is neutral in giving a decision on the basis of evidence produced before it, the role of an Assessing Officer under the Income-tax Act is not only that of an adjudicator but also of an investigator. He cannot remain passive in the face of a return, which is apparently in order but calls for further enquiry. He must discharge both the roles effectively. In other words, he must carry out investigation where the facts of the case so require and also decide the matter judiciously on the basis of materials collected by him as also those produced by the assessee before him. The scheme of assessment has undergone radical changes in recent years. It deserves to be noted that the present assessment was made under Section 143(3) of the Income-tax Act. In other words, the Assessing Officer was statutorily required to make the assessment under Section 143(3) after scrutiny and not in a summary manner as contemplated by Sub-section (1) of Section 143. Bulk of the returns filed by the assessees across the country is accepted by the Department under Section 143(1) without any scrutiny. Only a few cases are picked up for scrutiny. The Assessing Officer is therefore, required to act fairly while accepting or rejecting the claim of the assessee in cases of scrutiny assessments. He should be fair not only to the assessee but also to the Public Exchequer. The Assessing Officer has got to protect, on one hand, the interest of the assessee in the sense that he is not subjected to any amount of tax in excess of what is legitimately due from him, and on the other ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 11 of 26 hand, he has a duty to protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. The Assessing Officer is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return when the circumstances of the case are such as to provoke inquiry. Arbitrariness in either accepting or rejecting the claim has no place. The order passed by the Assessing Officer becomes erroneous because an enquiry has not been made or genuineness of the claim has not been examined where the inquiries ought to have been made and the genuineness of the claim ought to have been examined and not because there is anything wrong with his order if all the facts stated or claim made therein are assumed to be correct. The Commissioner may consider an order of the Assessing Officer to be erroneous not only when it contains some apparent error of reasoning or of law or of fact on the face of it but also when it is a stereo-typed order which simply accepts what the assessee has stated in his return and fails to make enquiries or examine the genuineness of the claim which are called for in the circumstances of the case. In taking the aforesaid view, we are supported by the decisions of the Hon'ble Supreme Court in Rampyari Devi Saraogi v. CIT (67 ITR 84) (SC), Smt. Tara Devi Aggarwal v. CIT (88 ITR 323) (SC), and Malabar Industrial Co. Ltd's case ( 243 ITR 83) (SC). ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 12 of 26 10. In Malabar Industrial Co. Ltd. case the Hon'ble Court has held as under: “There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. 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 the orders passed without applying the principles of natural justice or without application of mind. In our humble view, arbitrariness in decision-making would always need correction regardless of whether it causes prejudice to an assessee or to the State Exchequer. The Legislature has taken ample care to provide for the mechanism to have such prejudice removed. While an assessee can have it corrected through revisional jurisdiction of the Commissioner under Section 264 or through appeals and other means of judicial review, the prejudice caused to the State Exchequer can also be corrected by invoking revisional jurisdiction of the Commissioner under Section 263. Arbitrariness in decision-making causing prejudice to either p arty cannot therefore be allowed to stand and stare at the legal system. It is difficult to countenance such arbitrariness in the actions of the Assessing Officer. It is the duty of the Assessing Officer to adequately p rotect the interest of both the parties, namely, the assessee as well as the State. If he fails to discharge his duties fairly, his arbitrary actions culminating in erroneous orders can always be corrected either at the instance of the assessee, if the assessee is prejudiced or at the instance of the Commissioner, if the revenue is prejudiced. While making an assessment, the ITO has a varied role to p lay. He is the investigator, prosecutor as well as adjudicator. As an adjudicator he is an arbitrator between the revenue and the taxpayer and he has to be fair to both. His duty to act fairly requires that when he enquires into a substantial matter like the present one, he must record a finding on the relevant issue giving, howsoever briefly, his reasons therefor. In S.N. Mukherjee v. Union of I ndia AIR 1990 SC 1984, it has been observed by the Hon'ble Supreme Court as follows: ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 13 of 26 “Reasons, when recorded by an administrative authority in an order passed by it while exercising quasi-judicial functions, would no doubt facilitate the exercise of its jurisdiction by the appellate or supervisory authority. But the other considerations, referred to above, which have also weighed with this Court in holding that an administrative authority must record reasons for its decision are of no less significance. These considerations show that the recording of reasons by an administrative authority serves a salutary purpose, namely, it excludes chances or arbitrariness and ensures a degree of fairness in the process of decision-making. The said purpose would apply equally to all decisions and its application cannot be confined to decisions which are subject to appeal, revision or judicial review. In our opinion, therefore, the requirement that reasons be recorded should govern the decisions of an administrative authority exercising quasi-judicial functions irrespective of the fact may, however, be added that it is not required that the reasons should be as elaborate as in the decision of a court of law. The extent and nature of the reasons would depend on particular facts and circumstances. What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consideration to the points in controversy. The need for recording of reasons is greater in a case where the order is passed at the original stage. The appellate or revisional authority, if it affirms such order, need not give separate reasons if the appellate or revisional authority agrees with the reasons contained in the order under challenge.” 11. Similar view was earlier taken by the Hon'ble Supreme Court in Siemens Engg. & Mfg. Co. Ltd. v. Union of India AIR 1976 SC 1785. It is settled law that while making assessment on assessee, the ITO acts in a quasi-judicial capacity. An assessment order is amenable to appeal by the assessee and to revision by the Commissioner under Sections 263 and 264. Therefore, a reasoned order on a substantial issue is legally necessary. The judgments on which reliance was placed by the learned Counsel for the assessee also points ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 14 of 26 to the same direction. They have held that orders, which are subversive of the administration of revenue, must be regarded as erroneous and prejudicial to the interests of the revenue. If the Assessing Officers are allowed to make assessments in an arbitrary manner, as has been done in the case before us, the administration of revenue is bound to suffer. If without discussing the nature of the transaction and materials on record, the Assessing Officer had made certain addition to the income of the assessee, the same would have been considered erroneous by any appellate authority as being violative of the principles of natural justice which require that the authority must indicate the reasons for an adverse order. We find no reason why the same view should not be taken when an order is against the interests of the revenue. As a matter of fact such orders are prejudicial to the interests of both the parties, because even the assessee is deprived of the benefit of a positive finding in his favour, though he may have sufficiently established his case. 12. In view of the foregoing, it can safely be said that an order passed by the Assessing Officer becomes erroneous and prejudicial to the interests of the Revenue under Section 263 in the following cases: (i) The order sought to be revised contains error of reasoning or of law or of fact on the face of it. (ii) The order sought to be revised proceeds on inc orrect assumption of facts or incorrect application of law. In the same category fall orders ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 15 of 26 passed without applying the principles of natural justice or without application of mind. (iii) The order passed by the Assessing Officer is a stereotype order which simply accepts what the assessee has stated in his return or where he fails to make the requisite enquiries or examine the genuineness of the claim which is called for in the circumstances of the c ase. 13. Adverting the facts of present case, to see whether the case before us covered by the aforesaid principles. Perusal of the assessment order passed by the AO though have no discussion about the impugned issue, but the AO has issued notice u/s 142(1) of the Act on 2.7.2019 as follows:- ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 16 of 26 ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 17 of 26 14. The assessee replied to the notice as follows:- ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 18 of 26 15. The AO has issued second notice u/s 143(2) of the Act on 4.9.2018, wherein he issued a questionnaire on various issues. 1. Copy of sale deed of the property (Sale deed dated 06.02.2017). 2. 50% of the cost of the property is taken at Rs.1.02 Crs, whereas the total cost as per the sale deed is Rs.1.79crores only. Improvement cost claim if any evidence for the same. 3. Date of taking possession / handing over the possession of the flat by the developer to you. Copy of handing over possession letter to be furnished. ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 19 of 26 4. Purchase cost, payment schedule as per actual date of payment to be furnished, along with instrument numbers 5. Agreement towards the purchase of that was entered on 10/04/2010.However the property was registered only on 14.10.2016 Reason? 6. Details of foreign remittances made by you and the source for the same 16. The AO further issued notice u/s 142(1) of the Act on 1.11.2019 which is as follows:- ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 20 of 26 ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 21 of 26 17. The assessee filed reply to the above as below:- ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 22 of 26 18. Finally, the AO passed the assessment order on 13.12.2019. As seen from the facts of present case, as stated above, in this case, the Income Tax Officer had made enquiries in regard to the capital loss suffered by assessee in respect of impugned property and he ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 23 of 26 came to the conclusion that assessee incurred long term capital loss. As against CIT was of the opinion that it is a short term capital loss. 19. While coming to the conclusion, AO considered detailed explanation given by the assessee. All these are the part of records. Eventually, the claim of the assessee allowed by the AO on being satisfied with the explanation given by the assessee. Such decision of the AO cannot be held to be erroneous simply because iin his order, he did make an elaborate discussion in that regard. In our opinion, it is clear that in the ultimate analysis, it is a pre-requisite that CIT himself give reasons to justify the exercise of revisionary powers by him to revising concluded assessment. A bare reiteration by him that the order of AO is erroneous in so far as it is prejudicial to the interest of revenue, will not suffice. The exercise of power being quasi-judicial in nature, the reason musts be such as to how that revision or modification of the assessment or cancellation of assessment or direction issued for a fresh assessment were called for, and most irresistible lead to the conclusion that the order of the Income Tax officer was not only erroneous but was prejudicial to the interest of revenue. Thus, while AO is not called upon to right an elaborate judgement giving detailed reasons to in respect of each and every disallowance, deduction, etc., it is incumbent upon CIT not to exercise his revisionary powers unless supported by adequate reasons by doing so. Applying the aforesaid view, we are of the opinion that exercise of revisionary powers by CIT in the instant case was uncalled for and unjustified. The action of the CIT in this case is nothing but in the nature of roving and fishing enquiry, which is not permitted under the provisions of section 263 of the Act. The CIT in this case has proceeded on the assumption that no such information as was furnished to him was furnished at the time of assessment. According to the CIT, the AO has not examined the ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 24 of 26 issue properly, hence he assumed the jurisdiction u/s 263 of the Act. We, by going through the entire facts and circumstances of the case and case records, furnished before us, we are of the opinion that the AO considered the entire issue in proper perspective and taken a conscious decision that loss arising out of the transfer of impugned property is nothing but long term capital loss and allowed the same. 20. We are, thus of the opinion that section 263 of the Act when read as a whole make it clear that CIT before exercising revisionary power to : (i) call for and examine the record, (ii) give the assessee an opportunity of being heard and thereafter to make or cause to be made such enquiry as he deems necessary. It is only a fulfillment of these twin conditions that the CIT may pass an order exercising his power of revision. On examination of the provisions of section 263 of the Act, it envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous in so far as prejudicial to the interest of revenue, he after giving assessee an opportunity of being heard after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justified. The twin requirement of section is manifestly for a purpose. Merely because the CIT considers on examination of record that order have been erroneously passed so as to prejudice to the interest of revenue will not suffice. The assessee must be called, the explanations sought for and examined by the CIT, and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the revenue, the CIT may pass revisional order. If on the other hand, the CIT satisfies, after hearing the assessee, the orders are not erroneous or prejudicial to the interest of revenue, he may chose not to exercise his power of revision. This is for the reason that if a query is raised, during the course of scrutiny by the AO, which was not answered to the ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 25 of 26 satisfaction of the AO, but neither the query nor the answers were reflected in the assessment order, this would not by itself lead to the conclusion that order of AO called for interference and revision. In the instant case, the assessee has filed all the necessary details, which helps the AO to come to right conclusion with regard to the income or loss i.e. short term/long term capital loss arising out of the transfer of capital asset. Being so, in our opinion, the conclusion arrived by the CIT that AO has not examined the issue is not proper. Being so, we are of the opinion that CIT not justified in invoking the provisions of section 263 of the Act, so as to revise the order of the AO on this issue. Accordingly, we allow the legal issue raised by the assessee with regard to the invoking the provisions of section 263 of the Act by CIT on this issue relating to long term capital loss. Since we have allowed the legal ground raised by the assessee, we refrain from going into the other grounds raised by the assessee with regard to the treating the loss from transfer of long term capital asset or short-term capital asset. Further, we make it clear that we have allowed the legal issue in relation to assumption of jurisdiction with reference to loss on transfer of capital asset i.e., short term or long term and other issue is sustained. 21. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 11 th Jul, 2022 Sd/- (Beena Pillai) Judicial Member Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 11 th Jul, 2022. VG/SPS ITA No.281/Bang/2022 Ramanamurthy Mathod Srinivasmurthy, Bangalore Page 26 of 26 Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.