PRATIMA PRAMOD NAGRECHA, MUMBAI V. CIT 23, MUMBAI

ITA 3647/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88523 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 20-11-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 09-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS PARMINDER KAUR
• Assessee Lawyers: K SHIVARAM
• Keywords: Capital asset; Principle of natural justice; Competent authority
• Section: 143(3); 2(14); 142(1); 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C MUMBAI . . , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.3647/MUM/2013 (A.Y.2008-09) MRS. PRATIMA PRAMOD NAGRECHA 601, AVDHOOT DARSHAN OFF NAVGHAR MITHAGAR X ROAD, MULUND-(W) MUMBAI- 81. GIR NO./PAN : AADPN 7292 C (APPELLANT ) VS. THE INCOME TAX OFFICER - 23(3) (1), C-10,3 RD FLOOR PRATYAKSHAKAR BHAVAN BANDRA KURLA COMPLEX BANDRA (E) MUMBAI-400 051. (RESPONDENT) APPELLANT BY : SHRI K. SHIVARAM AND SHRI RAHUL HAKANI RESPONDENT BY : MRS. PARMINDER KAUR CIT - DR DATE OF HE ARING : 26 /02/2015 DATE OF PRONOUNCEMENT : 04 /0 3 /2015 ORDER PER CHANDRA POOJARI, A.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 28/3/2013 PASSED UNDER SECTION 263 OF THE INCOME TA X ACT, 1961. 2. FACTS OF THE CASE ARE THAT THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED ON 19.11.2010. ON PERUSAL OF THE ASSESSME NT RECORDS IT WAS NOTICED THAT THE ASSESSEE HAD CLAIMED COMPENSATION RECEIVED OF RS.53,00,000/- FROM RELIANCE GAS TRANSPORTATION INF RASTRUCTURE LTD. (RGTI 2 ITA NO.3647/M /13 LTD.) AS AGRICULTURAL INCOME AND WHICH WAS ACCEPTED BY THE AO IN THE ASSESSMENT ORDER PASSED BY HIM ON 19.11.2010. THE A SSESSEE HAD RECEIVED COMPENSATION FOR ACQUISITION OF RIGHT OF U SER IN LAND, FOR LAYING PIPELINE FOR TRANSPORTATION OF PETROLEUM, IN THE PO RTION OF THE LAND BELONGING TO THE ASSESSEE . THE END USE HOWEVER WAS CLEARLY FOR NON AGRICULTURAL PURPOSES. AS PER THE JUDICIAL DECISION IN THIS REGARD THE COMPENSATION RECEIVED CANNOT BE ASSESSED AS AGRICUL TURAL INCOME. AS THE IMPUGNED ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDI CIAL TO THE INTERESTS OF REVENUE, THE ASSESSEE WAS ASKED TO FURNISH AN EX PLANATION AS TO WHY THE ASSESSMENT ORDER SHOULD NOT BE SET ASIDE/MODIFI ED OR A SUITABLE ORDER UNDER SECTION 263 OF THE IT ACT BE PASSED. 3. AFTER HEARING THE LD. COUNSEL FOR THE ASSESSEE C IT OBSERVED THAT THE ASSESSEE FILED MOST OF THE SUBMISSIONS WHICH WERE F ILED BEFORE THE AO. FROM THE SUBMISSIONS IT IS SEEN THAT THE TWO PIECES OF LAND WERE DESCRIBED IN THE 7/12 EXTRACTS AS GAIRAN (I.E. LAND FOR CAT TLE REARING) AND RANSHET(I.E. OPEN LAND WITH WEEDS ONLY). THIS SHO WS THAT THE LAND WAS NOT UTILIZED FOR CULTIVATION/AGRICULTURAL PURPOSES. AS AGAINST THESE THE ASSESSEE HAD PRODUCED FOUR PANCHNAMAS SIGNED BY TAL ATI OF PUNE DATED 24/4/2007, WHEREIN IT WAS STATED THAT THE PIPELINE HAD BEEN LAID DOWN IN THESE AREAS. THE NUMBER OF TREES, THEIR AGE ETC. WE RE ALSO GIVEN IN THESE PANCHNAMA. HOWEVER, IT WAS OBSERVED BY THE CIT THAT THIS DOCUMENT DID NOT BEAR THE ANY SEAL OR STAMP OF THE AUTHORITIES/T ALATI AND THE AO DID NOT SEEM TO HAVE APPLIED HIS MIND TO THE CONTRADICTION MANIFEST IN THESE SUBMISSIONS OF THE ASSESSEE. 3 ITA NO.3647/M /13 3.1 THE CIT OBSERVED THAT THE ASSESSEE RECEIVED NOT ICE DATED 19/4/2005 FROM OFFICER OF RELIANCE GAS TRANSPORTATION INFRAST RUCTURE LTD. (RGTICL) PROJECT FOR ACQUIRING THE RIGHT OF USER OF LAND WHE REIN IT WAS SPECIFICALLY MENTIONED THAT ANY OBJECTION SHOULD BE BROUGHT TO T HE NOTICE OF RELIANCE GAS TRANSPORTATION INFRASTRUCTURE LTD.(RGTIL )WITHI N 21 DAYS. IT WAS AFTER A SPAN OF TWO YEARS VIDE LETTER DATED 17/4/2007, TH E ASSESSEE HAD APPLIED FOR COMPENSATION. IT WAS SEEN FROM THE PANCHNAMAS D ATED 24.4.2007, THAT THE PIPELINE HAD BEEN LAID DOWN. 3.2 CHRONOLOGY OF EVENTS TAKEN FROM ASSESSEES SUBM ISSION ARE AS FOLLOWS:- A) RGTIL ISSUED NOTICE DATED 19.4.2005 TO BE REPLIE D WITHIN 21 DAYS. B) ASSESSEE DID NOT REPLY C) ANOTHER NOTICE WAS SENT BY RGTIL DATED 2.5.2006 SEEKING DOCUMENTARY EVIDENCE FOR CROPS ON THE LAND, FOR THE PURPOSE OF DETERMINING C OMPENSATION. D) NO REPLY WAS RECEIVED FROM ASSESSEE, NEITHER ANY DOCUMENTARY EVIDENCE FILED. E) ASSESSEE SENT LETTER ON 17.4.2007 BUT NEVER ME NTIONED ABOUT THE NOTICE RECEIVED BY HER. F) ASSESSEE SIMPLY INFORMED THAT MERE 10 ACRES OF L AND WERE TAKEN ON WHICH THERE WERE TREES AND FRUITS. SINCE THE WORK OF PIPELINE HAD BE EN COMPLETED, ASSESSEE REQUESTED FOR COMPENSATION FOR LAND AND TREES. G) ASSESSEE PREPARED FOUR PANCHNAMAS FOR BOTH THE L ANDS ON 25.4.2007, GIVING THE NUMBER OF TREES, AGE OF TREES ETC. TWO PANCHAS SIGN THE DOCUMENT, AND THE SAME IS SIGNED BY TALATI BUT THERE IS NO OFFICIAL SEAL AFFI XED TO IT. TALATI IS FROM PUNE AND NOT FROM KARJAT, THE LAND IS LOCATED IN MANDVONE VILLAG E WHICH ARE IN KARJAT TALUKA. H) BEFORE THE DIGGING WORK FOR PIPELINE STARTED OR AT ANY POINT OF TIME, UPON RECEIVING THE NOTICE, THE ASSESSEE HAD NOT LODGED HER CLAIM O F EXISTENCE OF SPECIFIC TREES ON THE LANDS. 4 ITA NO.3647/M /13 I) IT WAS FURTHER OBSERVED BY THE CIT THAT AFTER TH E WORK OF PIPELINE IS OVER, THE ASSESSEE CANNOT MAKE A PANCHNAMA STATING THAT SO MA NY TREES AGED SO MANY YEARS EXISTED ON THE LAND. THIS APPEARS TO BE AN AFTER TH OUGHT. J) SIMILARLY THE PANCHNAMAS DID NOT BEAR ANY OFFICI AL STAMP OR SEAL OF THE RELEVANT GOVT. OFFICE. IF THE TALATI CERTIFIES ANYTHING, IT SHOULD BE BASED ON LAND RECORDS. AUTHENTICITY OF ASSESSEES CLAIM WAS NOT GOT VERIFIED BY THE AO BY MAKING ENQUIRIES WITH THE TALATI OF KARJAT. THE ASSESSEE SHOULD HAVE PRODUCED AUTHENTIC RECORDS IN SUPPORT OF FRUIT BEARING TREES CLAIMED TO HAVE EXISTED ON THE LAND. K) ON 27.10.2007 THE ASSESSEE ISSUED SEVERAL RECEIP TS FOR HAVING RECEIVED COMPENSATION. 3.2.1 CIT ALSO OBSERVED THAT THE ASSESSEE DID NOT PRODUCE THE ORDER PASSED BY THE COMPETENT AUTHORITY DETERMINING THE C OMPENSATION TO BE PAID FOR LAND AND TREES. 3.3 FURTHER IT WAS OBSERVED BY THE LD.CIT THAT THE ASSESSEE HAD MENTIONED THAT SHE HAD RECEIVED RS.8,69,812/- VIDE CHEQUE NO.001224 DATED 27/10/2007 DRAWN ON BANK OF INDIA AS PER XERO X COPY OF THE CHEQUE ON RECORD AND ANOTHER CHEQUE OF THE SAME AMOUNT VID E CHEQUE NO.001228 DATED 27/10/2007. THE AO NEVER VERIFIED AS TO WHY THE AMOUNT OF RS.8,69,812/- RECEIVED BY CHEQUE NO.001224 IS NOT A CCOUNTED FOR BY THE ASSESSEE IN THE TOTAL COMPENSATION AMOUNT RECEIVED. 3.4 THE ASSESSEES ONLY PROOF OF AGRICULTURAL PRODU CE IS THE PANCHNAMAS AND THE RECEIPTS DATED 27/10/2007 ISSUED BY THE ASS ESSEE. IN ALL THESE RECEIPTS DATED 27/10/2007 THERE WAS ONLY MENTION OF FRUITS AND FOREST TREES AND NO SPECIFIC DETAILS OF TREES WERE GIVEN. NO OTH ER RELEVANT RECORDS IN SUPPORT OF TREES FROWN ON LAND WERE PRODUCED BY THE ASSESSEE . SALE BILLS OF THE AGRICULTURAL PRODUCE WERE ALSO NOT PRODUCED. THE PANCHNAMAS DATED 24.4.2007 APPEARED TO BE SELF-SERVING AND SELF-GENE RATED DOCUMENTS. THE 5 ITA NO.3647/M /13 AO HAD NOT MADE ANY EFFORT TO CHECK THE GENUINENESS OF THESE DOCUMENTS SUBMITTED BY THE ASSESSEE. THE AO SHOULD HAVE VERIF IED THE SAME FROM THE LAND REVENUE RECORDS OF THE GRAM PANCHAYAT OF MANDV ANE VILLAGE, KARJAT TALUKA ABOUT THE STATUS OR EXISTENCE OF CULTIVATION , AT ANY TIME, ON THESE LANDS. THE ASSESSEE HAD NOT PRODUCED ANY AUTHENTIC RECORDS SUCH AS PROOF OF EXPENSES INCURRED FOR CULTIVATION, MANPOWER EMPL OYED, SALE OF PRODUCE TO APMC ETC. THE LD. CIT WAS OF THE OPINION THAT ME RE CLAIM OF THE ASSESSEE THAT IN THE EARLIER YEARS ALSO SHE HAD SHO WN AGRICULTURAL INCOME IN HER RETURNS COULD NOT BE TAKEN AS PROOF, IN THE ABS ENCE OF MAINTENANCE OF ACCOUNTS, SALES BILLS OF THE PRODUCE ETC. FOR YESTE R YEARS. 3.5 LD. CIT OBSERVED THAT THE ASSESSEE HAD ALSO CLA IMED THAT THERE WAS NO TRANSFER OF LAND AS SHE HAD RETAINED OWNERSHIP O F THE LAND AND THE SAME LANDS WERE SHOWN AS ASSETS IN HER RETURNS. IT WAS T HUS, CONTENDED BY THE ASSESSEE THAT THERE IS NO LIABILITY TO PAY CAPITAL GAIN TAX, THERE BEING NO TRANSFER/CONVEYANCE OF THE LAND. 3.6 AS PER THE PROVISIONS OF SECTION 2(47)(II) AND (III) OF THE ACT THE EXTINGUISHMENT OF RIGHT THEREIN OR THE COMPULSOR Y ACQUISITION THEREOF UNDER ANY LAW AMOUNTS TO TRANSFER OF CAPITAL ASSET . 3.7 IT WAS OBSERVED BY THE LD. CIT THAT IN THE CASE OF THE ASSESSEE THE AGRICULTURAL LAND ON BEING ACQUIRED BY THE GOVT. HA D LOST ITS CHARACTER OF AGRICULTURAL LAND, AS IT WAS USED FOR LAYING PIPELI NE AND MOREOVER COMPULSORY ACQUISITION UNDER ANY LAW IS NOTHING BUT A TRANSFER. THEREFORE, 6 ITA NO.3647/M /13 THE COMPENSATION RECEIVED BY THE ASSESSEE ON SUCH T RANSFER IS LIABLE FOR TAX ON CAPITAL GAINS. 3.8 THE LD. CIT WHILE SETTING ASIDE THE ASSESSMEN T ORDER DATED 19.11.2010 FOR FRESH ASSESSMENT DIRECTED THE AO TO VERIFY THE SITUATION OF THE LAND WITH REFERENCE TO ACTUAL DISTANCE FROM MUN ICIPAL LIMITS, BY MAKING INDEPENDENT ENQUIRIES. THE ASSESSEE WAS DIRECTED TO PRODUCE BEFORE DOCUMENTARY EVIDENCE WHICH EXISTED DURING THE PERIO D WHEN THE TREES WERE GROWN/EXISTED AND NOT THE PANCHNAMAS PREPARED SUBSEQUENT TO THE FELLING OF THE TREES, IN SUPPORT OF HER CLAIM OF AG RICULTURAL PRODUCE. THE ASSESSEE WAS ALSO DIRECTED TO PRODUCE ORDER OF THE COMPETENT AUTHORITY DETERMINING THE FULL AND FINAL COMPENSATION, WITH I NTEREST IF ANY, BEFORE THE AO ALONG WITH PARTICULARS OF THE APPEAL FILED AND P ROGRESS IF ANY. THE ASSESSEE HAD SHOWN RS.18,92,800/- TOWARDS LAND BASE D ON THE RECEIPTS ISSUED BY THE ASSESSEE AND THE BALANCE AMOUNT TOWAR DS TREES WHICH NEEDS TO BE VERIFIED BY THE AO. LD. CIT FURTHER DIRECTED THE AO TO EXAMINE THE CORRECTNESS OF THE COMPENSATION AMOUNT RECEIVED BY THE ASSESSEE, BIFURCATE THE AMOUNT TOWARD AGRICULTURAL PRODUCE BA SED ON DOCUMENTARY EVIDENCE, APPORTION THE AMOUNT TOWARDS LAND AND THE N ASSESS CAPITAL GAIN. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF MATERIAL PLACED BEFORE US AND ALSO GONE THROUGH ALL THE JU DGEMENTS CITED BY THE PARTIES BEFORE US. FIRST WE TAKE UP THE LEGAL ISSUE WITH REFERENCE TO THE JURISDICTION OF INVOKING THE PROVISIONS OF SECTIO N 263 OF THE ACT BY THE 7 ITA NO.3647/M /13 LEARNED CIT. THE SCHEME OF THE IT ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THI S 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 WI LL 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 SATISFI ED THAT THE ORDER OF THE ASSESSING OFFICERS SOUGHT TO BE REVISED IS (I)ERR ONEOUS; AND ALSO (II) PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE W ORD ERRONEOUS HAS NOT BEEN DEFINED IN THE INCOME TAX ACT. IT HAS BEEN HOW EVER DEFINED AT PAGE 562 IN BLACKS LAW DICTIONARY (SEVENTH EDITION) TH US; ERRONEOUS, ADJ. INVOLVING ERROR, DEVIATING FROM THE LAW. THE WOR D ERROR HAS BEEN DEFINED AT THE SAME PAGE IN THE SAME DICTIONARY TH US: ERROR NO. 1 : A PSYCHOLOGICAL STATE THAT DOES NOT CONFORM TO OBJEC TIVE REALITY; A BRIEF THAT WHAT IS FALSE IS TRUE OR THAT WHAT IS TRUE IS FALS E. 4.1 AT PAGE 649/650 IN P. RAMANATHA AIYERS LAW LE XICON REPRINT 2002, THE WORD ERROR HAS BEEN DEFINED TO MEAN- ERROR: A MISTAKEN JUDGEMENT OR DEVIATION FROM THE TR UTH 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 JU DGEMENT OR IN THE EXECUTION UPON THE SAME, IN A COURT OF RECORD; W HICH IN THE CIVIL LAW IS CALLED A NULLITYIE (TERMES DE LA LEY). SOMETHING INCORRECTLY DONE THROUGH IGNORANCE OR INA DVERTENCE S.99 CPC AND S.215 CR.PC. ERROR, FAULT, ERROR RESPECTS THE ACT; FAULT RESPE CT THE AGENT, AN ERROR MAY LAY IN THE JUDGEMENT, OR IN THE CONDUCT, BUT A FAULT LIES IN THE WILL OR INTENTION. 8 ITA NO.3647/M /13 4.2 AT PAGE 650 OF THE AFORESAID LAW LEXICON, THE SCOPE OF ERROR, MISTAKE, BLUNDER, AND HALLUCINATION HAS BEEN EXPLAI NED THUS: AN ERROR IS ANY DEVIATION FROM THE STANDARD OR C OURSE OF RIGHT, TRUTH, JUSTICE OR ACCURACY, WHICH IS NOT INTENTIONAL. A MI STAKE IS AN ERROR COMMITTED UNDER A MISAPPREHENSION OF MISCONCEPTION OF THE NATURE OF A CASE. AN ERROR MAY BE FROM THE ABSENCE OF KNOWLEDGE , A MISTAKE IS FROM INSUFFICIENT OR FALSE OBSERVATION. BLUNDER IS A PR ACTICAL ERROR OF A PECULIARLY GROSS OR AWKWARD KIND, COMMITTED THROUGH GLARING IG NORANCE, HEEDLESSNESS, OR AWKWARDNESS. AN ERROR MAY BE OVER LOOKED OR ATONED FOR, A MISTAKE MAY BE RECTIFIED, BUT THE SHAME OR RIDICULE WHICH IS OCCASIONED BY A BLUNDER, WHO CAN COUNTERACT. STRIC TLY SPEAKING, HALLUCINATION IS AN ILLUSION OF THE PERCEPTION, A P HANTASM OF THE IMAGINATION. THE ONE COMES OF DISORDERED VISION, T HE OTHER OF DISCARDED IMAGINATION. IT IS EXTENDED IN MEDICAL SCIENCE TO M ATTERS OF SENSATION, WHETHER THERE IS NO CORRESPONDING CAUSE TO PRODUCE IT. IN ITS ORDINARY USE IT DENOTES AN UNACCOUNTABLE ERROR IN JUDGEMENT OR F ACT, ESPECIALLY IN ONE REMARKABLE OTHERWISE FOR ACCURATE INFORMATION AND R IGHT DECISION. IT IS EXCEPTIONAL ERROR OR MISTAKE IN THOSE OTHERWISE NOT LIKELY TO BE DECEIVED. 4.3. 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 TH E AFORESAID CATEGORY OF 'ERRORS' IF IT IS, INTER ALIA, BASED ON AN INCORREC T 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 BAS ED ON NO OR INSUFFICIENT MATERIALS SO AS TO AFFECT THE MERITS OF THE CASE AN D THEREBY CAUSE PREJUDICE TO THE INTEREST OF THE REVENUE. 4.4. SECTION 263 OF THE INCOME-TAX ACT SEEKS TO REM OVE THE PREJUDICE CAUSED TO THE REVENUE BY THE ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. IT EMPOWERS THE COMMISSIONER TO INITIATE S UO MOTO PROCEEDINGS 9 ITA NO.3647/M /13 EITHER WHERE THE ASSESSING OFFICER TAKES A WRONG DE CISION WITHOUT CONSIDERING THE MATERIALS AVAILABLE ON RECORD OR HE TAKES A DECISION WITHOUT MAKING AN ENQUIRY INTO THE MATTERS, WHERE SUCH INQU IRY WAS PRIMA FACIE WARRANT ED. THE COMMISSIONER WILL BE WELL WITHIN H IS POWERS TO REGARD AN ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUM STANCES OF THE CASE, THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER INQU IRIES BEFORE ACCEPTING THE CLAIM MADE BY THE ASSESSEE IN HIS RETURN. THE R EASON IS OBVIOUS. UNLIKE THE CIVIL COURT WHICH IS NEUTRAL IN GIVING A DECIS ION ON THE BASIS OF EVIDENCE PRODUCED BEFORE IT, THE ROLE OF AN ASSESS ING 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 CARR Y OUT INVESTIGATION WHERE THE FACTS OF THE CASE SO REQUIRE AND ALSO DECIDE TH E MATTER JUDICIOUSLY ON THE BASIS OF MATERIALS COLLECTED BY HIM AS ALSO TH OSE PRODUCED BY THE ASSESSEE BEFORE HIM. THE SCHEME OF ASSESSMENT HAS U NDERGONE RADICAL CHANGES IN RECENT YEARS. IT DESERVES TO BE NOTED TH AT THE PRESENT ASSESSMENT WAS MADE UNDER SECTION 143(3) OF THE I NCOME-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 SECTIO N 143. BULK OF THE RETURNS FILED BY THE ASSESSEES ACROSS THE COUNTRY I S ACCEPTED BY THE DEPARTMENT UNDER SECTION 143(1) WITHOUT ANY SCRUTIN Y. ONLY A FEW CASES ARE PICKED UP FOR SCRUTINY. THE ASSESSING OFFICER I S THEREFORE, REQUIRED TO ACT FAIRLY WHILE ACCEPTING OR REJECTING THE CLAIM OF THE ASSESSEE IN CASES OF 10 ITA NO.3647/M /13 SCRUTINY ASSESSMENTS. HE SHOULD BE FAIR NOT ONLY T O 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 T HAT HE IS NOT SUBJECTED TO ANY AMOUNT OF TAX IN EXCESS OF WHAT IS LEGITIMATEL Y DUE FROM HIM, AND ON THE OTHER HAND, HE HAS A DUTY TO PROTECT THE INTER ESTS OF THE REVENUE AND TO SEE THAT NO ONE DODGED THE REVENUE AND ESCAPED WITHOUT PAYING THE LEGITIMATE TAX. THE ASSESSING OFFICER IS NOT EXPECT ED TO PUT BLINKERS ON HIS EYES AND MECHANICALLY ACCEPT WHAT THE ASSESSEE CLAI MS 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 CIRCUMSTANCE S OF THE CASE ARE SUCH AS TO PROVOKE INQUIRY. ARBITRARINESS IN EITHER ACCE PTING OR REJECTING THE CLAIM HAS NO PLACE. THE ORDER PASSED BY THE ASSESS ING OFFICER BECOMES ERRONEOUS BECAUSE AN ENQUIRY HAS NOT BEEN MADE OR GENUINENESS OF THE CLAIM HAS NOT BEEN EXAMINED WHERE THE INQUIRIES OU GHT TO HAVE BEE N MADE AND THE GENUINENESS OF THE CLAIM OUGHT TO HAVE BEEN EXAMINED AND NOT BECAUSE THERE IS ANYTHING WRONG WITH HIS ORDE R IF ALL THE FACTS STATED OR CLAIM MAD E THEREIN ARE ASSUMED TO BE CORRECT. THE COMMISSIONER MAY CONSIDER AN ORDER OF THE ASSESSING OFFICER TO BE E RRONEOUS 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 ORDE R WHICH SIMPLY ACCEPT S WHAT THE ASSESSEE HAS STATED IN HIS RETURN AND FAIL S TO MAKE ENQUIRIES OR EXAMINE THE GENUINENESS OF THE CLAIM WHICH ARE CAL LED FOR IN THE CIRCUMSTANCES OF THE CA SE. IN TAKING THE AFORESAI D VIEW, WE ARE SUPPORTED BY THE DECISIONS OF THE HON'BLE SUPREME COURT IN RAMPYARI DEVI SARAOGI 11 ITA NO.3647/M /13 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) . 4.5 IN MALABAR INDUSTRIAL CO. LTD. CASE THE HON'BLE SUPREME 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 CO MMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERR ONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQU IREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL TH E ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. IN OUR HUMBLE VIEW, ARBITRARI NESS IN DECISION- MAKING WOULD ALWAYS NEED CORRECTION REGARDLESS OF WHETHER IT CAUSES PREJUDICE TO AN ASSESSEE OR TO THE STATE EXC HEQUER. THE LEGISLATURE HAS TAKEN AMPLE CARE TO PROVIDE FOR TH E MECHANISM TO HAVE SUCH PREJUDICE REMOVED. WHILE AN ASSESSEE CAN HAVE IT CORRECTED THROUGH REVISIONAL JURISDICTION OF THE C OMMISSIONER UNDER SECTION 264 OR THROUGH APPEALS AND OTHER MEA NS OF JUDICIAL REVIEW, THE PREJUDICE CAUSED TO THE STATE EXCHEQUER CAN ALSO BE CORRECTED BY INVOKING REVISIONAL JURISDICTION OF T HE COMMISSIONER UNDER SECTION 263. ARBITRARINESS IN DECISION-MAKIN G CAUSING PREJUDICE TO EITHER PARTY CANNOT THEREFORE BE ALLO WED TO STAND AND STARE AT THE LEGAL SYSTEM. IT IS DIFFICULT TO COUN TENANCE SUCH ARBITRARINESS IN THE ACTIONS OF THE ASSESSING OFFI CER. IT IS THE DUTY OF THE ASSESSING OFFICER TO ADEQUATELY PROTECT THE INTEREST OF BOTH THE PARTIES, NAMELY, THE ASSESSEE AS WELL AS THE S TATE. IF HE FAILS TO DISCHARGE HIS DUTIES FAIRLY, HIS ARBITRARY ACTI ONS 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 PLAY. HE IS THE INVESTIGATOR, PROSECUTOR AS WELL AS ADJUDICATOR. A S AN ADJUDICATOR HE IS AN ARBITRATOR BETWEEN THE REVENUE AND THE TA XPAYER AND HE HAS TO BE FAIR TO BOTH. HIS DUTY TO ACT FAIRLY REQ UIRES THAT WHEN HE ENQUIRES INTO A SUBSTANTIAL MATTER LIKE THE PRESEN T ONE, HE MUST RECORD A FINDING ON THE RELEVANT ISSUE GIVING, HOW SOEVER BRIEFLY, HIS REASONS THEREFOR. IN S.N. MUKHERJEE V. UNION O F INDIA AIR 1990 SC 1984, IT HAS BEEN OBSERVED BY THE HON'BLE SUPRE ME COURT AS FOLLOWS: REASONS, WHEN RECORDED BY AN ADMINISTRAT IVE AUTHORITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI-JU DICIAL FUNCTIONS, 12 ITA NO.3647/M /13 WOULD NO DOUBT FACILITATE THE EXERCISE OF ITS JURI SDICTION BY THE APPELLATE OR SUPERVISORY AUTHORITY. BUT THE OTHER CONSIDERATIONS, REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH TH IS COURT IN HOLDING THAT AN ADMINISTRATIVE AUTHORITY MUST RECO RD REASONS FOR ITS DECISION ARE OF NO LESS SIGNIFICANCE. THESE CONSID ERATIONS 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 AL L DECISIONS AND ITS APPLICATION CANNOT BE CONFINED TO DECISIONS WH ICH ARE SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IN OUR OPINIO N, THEREFORE, THE REQUIREMENT THAT REASONS BE RECORDED SHOULD GOVERN THE DECISIONS OF AN ADMINISTRATIVE AUTHORITY EXERCISING QUASI-JU DICIAL FUNCTIONS IRRESPECTIVE OF THE FACT MAY, HOWEVER, BE ADDED TH AT IT IS NOT REQUIRED THAT THE REASONS SHOULD BE AS ELABORATE A S IN THE DECISION OF A COURT OF LAW. THE EXTENT AND NATURE OF THE RE ASONS WOULD DEPEND ON PARTICULAR FACTS AND CIRCUMSTANCES. WHAT IS NECESSARY IS THAT THE REASONS ARE CLEAR AND EXPLICIT SO AS TO I NDICATE THAT THE AUTHORITY HAS GIVEN DUE CONSIDERATION TO THE POINT S IN CONTROVERSY. THE NEED FOR RECORDING OF REASONS IS GREATER IN A CASE WHERE THE ORDER IS PASSED AT THE ORIGINAL STAGE. THE APPELLA TE OR REVISIONAL AUTHORITY, IF IT AFFIRMS SUCH AN ORDER, NEED NOT G IVE SEPARATE REASONS IF THE APPELLATE OR REVISIONAL AUTHORITY A GREES WITH THE REASONS CONTAINED IN THE ORDER UNDER CHALLENGE. 4.6 SIMILAR VIEW WAS EARLIER TAKEN BY THE HONBLE 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 ASSESSE E, THE ITO ACTS IN A QUASI- JUDICIAL CAPACITY. AN ASSESSMENT ORDER IS AM ENABLE 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. IT WAS HELD THAT ORDERS, WHICH ARE SUBVERSIVE OF THE A DMINISTRATION OF REVENUE, MUST BE REGARDED AS ERRONEOUS AND PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. IF THE ASSESSING OFFICERS ARE ALLOWED TO MAKE ASSESSMENTS IN AN ARBITRARY MANNER, THE ADMINISTRATION OF REVENUE IS BOUND TO SUFFER. IF WITHOUT DISCUSSING THE NATURE OF THE TRANSACTION AN D MATERIALS ON RECORD, 13 ITA NO.3647/M /13 THE ASSESSING OFFICER HAD MADE CERTAIN ADDITION TO THE INCOME OF THE ASSESSEE, THE SAME WOULD HAVE BEEN CONSIDERED ERRON EOUS BY ANY APPELLATE AUTHORITY AS BEING VIOLATIVE OF THE PRIN CIPLES OF NATURAL JUSTICE WHICH REQUIRE THAT THE AUTHORITY MUST INDICATE THE REASONS FOR AN ADVERSE ORDER. AS A MATTER OF FACT SUCH ORDERS ARE PREJUDI CIAL TO THE INTERESTS OF BOTH THE PARTIES, BECAUSE EVEN THE ASSESSEE IS DE PRIVED OF THE BENEFIT OF A POSITIVE FINDING IN HIS FAVOUR, THOUGH HE MAY HA VE SUFFICIENTLY ESTABLISHED HIS CASE. 4.7 IN VIEW OF THE FOREGOING, IT CAN SAFELY BE SAI D THAT AN ORDER PASSED BY THE ASSESSING OFFICER BECOMES ERRONEOUS AND PREJ UDICIAL TO THE INTERESTS OF THE REVENUE UNDER SECTION 263 IN THE FOLLOWING CASES: (I) THE ORDER SOUGHT TO BE REVISED CONTAINS ERROR OF REASONING O R OF LAW OR OF FACT ON THE FACE OF IT. (II) THE ORDER SOUGHT TO BE REVISE D PROCEEDS ON INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW . IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. (III) THE ORDER PASSE D 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 CASE. 5. IN THIS CASE THE AO ISSUED NOTICE TO THE ASSESSE E UNDER SECTION 143(3) ON 6.8.2009 AND NOTICE UNDER SECTION 142(1) NOTICE ON 27/7/2010. THE ASSESSEE PARTICIPATED IN THE ASSESSMENT PROCEED INGS. TO VARIOUS ENQUIRIES OF THE AO THE ASSESSEE FURNISHED INFORMAT ION TO THE SATISFACTION 14 ITA NO.3647/M /13 OF THE AO SPECIFICALLY VIDE ASSESSEES COUNSEL DATE D 27/7/2010. THE ASSESSEE FURNISHED FULL DETAILS OF INCOME DERIVED A T RS.53,23,339/- FROM AGRICULTURAL LAND LOCATED AT MONDVANE VILLAGE AND I T WAS STATED TO THE AO THAT THE SAID AMOUNT OF RS.53,23,339/- RECEIVED AS COMPENSATION ON ACQUISITION OF RIGHTS OF USE FROM THE OWNER OF THE LAND WAS EXEMPT IN VIEW OF AGRICULTURAL LAND UNDER SECTION 10(1) READ WITH SECTION 2(1A) AND SECTION 2(14) OF THE I.T. ACT. 5.1 AFTER CONSIDERING THE REPLY OF THE ASSESSEE AND MATERIAL BROUGHT ON RECORD THE AO CAME TO THE CONCLUSION THAT THE IMPUG NED RECEIPT IS NOT TAXABLE AND TREATED AS EXEMPT FROM TAX. FOR THIS VI EW OF THE AO, CIT CANNOT FIND FAULT AND HE CANNOT IMPOSE HIS VIEW ON AO WHEN THE AO HAS TAKEN ONE POSSIBLE VIEW. MORE SO, WHEN A TRANSFER O F LAND IN SIMILAR AREA WAS CONSIDERED, BY CO-ORDINATE BENCH OF THIS TRIBUN AL IN THE CASE OF ITO VS. AMRUTILAL B. SHAH 22 ITR (TRIB.) 668(MUM.) , IT WAS HELD AS FOLLOWS: 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE ORD ERS OF THE REVENUE AUTHORITIES AND THE PAPERS FILED BEFORE US. WE FIND THAT IT IS NOT THE CASE OF THE REVENUE THAT THE LAND IN QUESTION I S LOCATED WITHIN 8 KMS FROM THE MUNICIPAL LIMITS OF JAMNAGAR OR NOT. THE L AND IN QUESTION IS LOCATED BEYOND 8 KMS OF THE MUNICIPAL LIMITS OF THE JAMNAGA R. IT IS ALSO AN UNDISPUTED FACT THAT THE LAND IN QUESTION WAS LOCAT ED BEYOND 19 KRNS FROM THE CENTRE OF THE CITY OF JAMNAGAR. ON THIS ISSUE A LONE, THE DEFINITION OF CAPITAL ASSET PROVIDED IN SECTION 2(14)(III) IS NOT MET. THERE IS NO NOTIFICATION ISSUED BY THE CENTRAL GOVERNMENT IN THIS REGARD CAL LING THE SAME BEING A CAPITAL ASSET. UNDER THESE CIRCUMSTANCES, THE LAND IN QUESTION IS RIGHTLY HELD BY THE ASSESSEE AS AGRICULTURAL LAND. IT IS BO RNE OUT FROM THE RECORDS OF THE REVENUE DEPARTMENT THAT THE LANDS IN QUESTION ARE DESCRIBED BY THE DISTRICT COLLECTOR, JAMNAGAR AS AGRICULTURAL LANDS AS EVIDENT FROM THE EXTRACTION GIVEN ABOVE. AS SUCH, THERE IS NO INCRIM INATING MATERIAL IN THE POSSESSION OF THE ASSESSING OFFICER TO HOLD THAT TH E LAND IN QUESTION IS CAPITAL ASSET WITHIN THE MEANING OF SECTION 2(14) O F THE ACT. REGARDING THE ONUS RELATED ISSUES, WE FIND THAT THE SAME KEEP CHA NGING DEPENDING ON THE 15 ITA NO.3647/M /13 INFORMATION FURNISHED BY THE ASSESSEE AND ALSO GATH ERED BY THE REVENUE FROM TIME TO TIME. CONSIDERING THE FACT THAT THE AS SESSING OFFICER HAS NO INFORMATION CONTRARY TO THE CLAIM OF THE ASSESSEE, WE ARE OF THE OPINION THAT THE DECISION OF THE COMMISSIONER OF INCOME-TAX (APP EALS) DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUNDS RAIS ED BY THE REVENUE ARE DISMISSED. 5.2 IN VIEW OF THE ABOVE DISCUSSION WE ARE INCLINED TO ANNUL THE ORDER PASSED BY LD. CIT U/S. 263 AND ALLOW THE APPEAL OF THE ASSESSEE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 3647/MUM/13 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/03/2015 !' # $%& 04/03/2015 ! ' SD/- SD/- ( . . / I.P. BANSAL) ( / CHANDRA POOJARI ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; $% DATED 04/03/2015 . % . ./JV, SR. PS ()* ()* ()* ()* +*') +*') +*') +*') / COPY OF THE ORDER FORWARDED TO : 1. ,- / THE APPELLANT 2. (.,- / THE RESPONDENT. 3. / ( ) / THE CIT(A)- 4. / / CIT 5. *0' ()% , , / DR, ITAT, MUMBAI 6. '1 2 / GUARD FILE. % % % % / BY ORDER, .*) () //TRUE COPY// 3 33 3 / 4 4 4 4 5 5 5 5 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI.