Sh. Mahabir Singh, Sirsa V. Commssioner of Income Tax, Hissar

ITA 402/CHANDI/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1636 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGAL SH MANJIT SINGH
• Keywords: Capital asset; Source of fund; Additional evidence; Assessment record
• Section: 2(14); 80HHC; 147; 131; 263; 144; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO.402/CHD/2015 ASSESSMENT YEAR:2007-08 SH. MAHABIR SINGH, VS. THE CIT S/O SH. HET RAM, 1311, VPO BANI HISSAR TEHSIL RANIA, DISTT. SIRSA PAN NO. CDVPM5319N (APPELLANT) (RESPONDENT) APPELLANT BY : SH. VINEET KRISHAN RESPONDENT BY : SH. RAVI SARANGAL SH. MANJIT SINGH DATE OF HEARING : 19/08/2015 DATE OF PRONOUNCEMENT :20/10/2015 ORDER PER ANNAPURNA MEHROTRA A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT, HISAR DT. 30/03/2015 PASSED U/S 263 OF THE INCOME T AX ACT 1961. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT FO R THE IMPUGNED ASSESSMENT YEAR, ASSESSMENT U/S 144/147 WAS FRAMED ON THE ASSE SSEE VIDE ORDER DT. 22/03/2013 AT AN INCOME OF RS. 3,05,15,895/- WHICH INCLUDED SHORT TERM CAPITAL GAIN OF RS. 3,03,25,000/- ON SALE OF LAND WHICH WAS HELD TO BE LOCATED WITHIN THE AREA OF 5 KM. FROM THE MUNICIPAL LIMITS OF DHARUHER A, AND RS. 1,90,895/- BEING INTEREST EARNED FROM BANK DEPOSITS. AGRICULTURAL IN COME OF RS. 5,00,000 WAS ALSO CONSIDERED FOR RATE PURPOSES. AGGRIEVED BY THE SAME , THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A), WHO VIDE HIS ORDER DT. 11/08 /2014 ALLOWED THE ASSESSEES APPEAL BY HOLDING THAT THE DISPUTED LAND WAS NOT A CAPITAL ASSET AS PER SECTION 2 2(14)(III) OF THE INCOME TAX ACT, SINCE IT WAS LOCA TED AT A DISTANCE OF MORE THAN 5 KMS FROM THE LIMITS OF TEHSIL DHARUHERA AS REQUIR ED VIDE NOTIFICATION NO. 9447 DT. 06/01/1994. THEREAFTER NOTICE U/S 263 OF THE INCOME TAX ACT, 19 61DT. 18/11/2014 WAS ISSUED TO THE ASSESSEE AND ORDER PASSED ON 30/03/2015 HOLD ING THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON TWO COUNTS: 1. THAT THE LD. AO HAD FAILED TO EXAMINE THE SOURCE OF INVESTMENT OF RS. 26,01,250/- MADE IN THE PURCHASE OF TWO SHOPS (DSS NO. 121-P AND 127) RESULTING IN UNDER ASSESSMENT OF INCOME TO THE EXTE NT OF RS. 13,64,000/- . 2. THAT THE LD. AO HAD FAILED TO EXAMINE THE EXACT USE OF LAND SOLD BY THE ASSESSEE, WHICH WAS A FACTORY LAND, COVERED UND ER THE DEFINITION OF ASSET AS DEFINED BY SECTION 2(14) OF THE INCOM E TAX ACT, AND THE SALE OF WHICH CLEARLY ATTRACTED PROVISIONS REGARDIN G CAPITAL GAINS, RESULTING IN UNDER-ASSESSMENT OF INCOME TO THE EXTE NT OF RS. 3,08,15,895/-. 3. AGGRIEVED BY THE SAME, THE ASSESSEE FILED THE PR ESENT APPEAL BEFORE US, TAKING THE FOLLOWING GROUNDS: 1. THAT THE ORDER PASSED UNDER SECTION 263 OF THE I NCOME TAX ACT, 1961 BY COMMISSIONER OF INCOME TAX, HISAR DATED 30/03/2015 IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THAT THE MATTER REGARDING TAXABILITY OF SALE PRO CEEDS FROM SALE OF AGRICULTURE LAND HAVING MERGED WITH THE ORDER OF LD . COMMISSIONER OF INCOME TAX (APPEALS), ROHTAK WAS BEYOND THE JURISDICTION OF LD . COMMISSIONER OF INCOME TAX, HISSAR UNDER SECTION 263. 3. THAT THE ORDER PASSED UNDER SECTION 263 BY COMMI SSIONER OF INCOME TAX, HISSAR IS VOID AB INITIO AS THE LD. ASSESSING OFFIC ER HAD DULY APPLIED HIS MIND TO THE FACTS OF THE CASE AND IT IS ONLY A CHANGE OF OPINIO N. 4. A) THAT THE LD. ASSESSING OFFICER HAS TAXED THE SALE PROCEEDS FROM SALE OF AGRICULTURE LAND AS SHORT TERM CAPITAL, SAME CANNOT BE PREJUDICIAL TO THE INTEREST OF REVENUE. B) THAT THE LD. COMMISSIONER OF INCOME TAX, HISSAR WANTS TO REPLACE HIS OPINION TO THAT OF LD. ASSESSING OFFICER WHICH IS N OT PERMISSIBLE UNDER LAW AND IS ILLEGAL. 5. THAT THE LD. ASSESSING OFFICER ACCEPTED THE SOUR CE OF PURCHASE OF TWO SHOPS (DSSS NO. 121-P AND 127) AFTER PROPER ENQUIRY AND APPLICATION OF MIND AND THE ORDER PASSED BY THE LD. ASSESSING OFFICER IS NE ITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. 6. THAT THE ORDER PASSED BY THE LD. ASSESSING OFFIC ER WAS NEITHER ERRONEOUS NOR PREJUDICED TO THE INTEREST OF REVENUE. 7. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX, HISSAR GRAVELLY ERRED IN TREATING THE A GRICULTURE LAND AS FACTORY LAND. 3 4. IN GROUND NO. 1,3 & 6 THE ASSESSEE HAS CHALLENGE D THE VALIDITY OF THE PROCEEDINGS U/S 263 AND THE SAME HAVING BEEN RAISED IN SPECIFIC GROUNDS ALSO ARE BEING DEALT WITH THEREIN. 5. IN GROUND NO. 2,4, & 7 THE ASSESSEE HAS AGITATED THE ORDER PASSED U/S 263 ON THE ISSUE OF SALE OF LAND. 6. THE FACTS OF THE CASE ARE THAT DURING ASSESSMENT PROCEEDINGS U/S 147, IT WAS FOUND THAT THE ASSESSEE HAD SOLD LAND AT VILLAG E MALPURA, TEHSIL DHARUHERA FOR RS. 3,56,25,000/- ON 28/11/2006, WHICH WAS PURC HASED FOR RS. 53,00,000/- ON 30/01/2006. THE AO TAXED THE GAIN EARNED FROM THE T RANSACTION, AMOUNTING TO RS. 3,03,25,000/- AS SHORT TERM CAPITAL GAIN BY HOL DING AS FOLLOWS: FROM THE INFORMATION AVAILABLE AT RECORD IT IS AL SO OBSERVED THAT THE ASSESSEE HAS PURCHASED THE LAND AT VILLAGE MALPURA, TEHSIL DHARU HERA FOR RS. 53,00,000/- ON 30/01/2006 AND THE SAME WAS SOLD BY HIM FOR RS. 3,56,25,000/- ON 28/11/2006. FROM THESE TRANSACTIONS HE EARNED SHORT TERM CAPITAL GAIN OF RS. 3,03,25,00 0/- DURING THE PERIOD UNDER CONSIDERATION AS THE VILLAGE MALPURA IS SITUATED AT A DISTANCE OF 3.1 KM FROM TEHSIL DHARUHERA WHICH IS WITHIN THE AREA OF 5 KM FROM THE MUNICIPAL LIMIT OF DHARUHERA (REWARI) AS PER NOTIFICATION DATED 06/01/1994. CONSIDERING ALL THE FACTS AND CIRCUMSTANCES ON THIS ISSUE, IT IS HELD THAT THE ASSESSEE HAS EARNED RS. 3,03,25,000/- AS SHORT TERM CAPITAL GAIN ON SALE OF LAND SITUATED AT VILLAGE, MALPURA, WHICH IS NOT DISCLOSED TO THE DEPARTMENT. ACCORDINGLY AN ADDITION OF RS. 3,03,25,000/- IS TO BE MADE UNDER THE HEAD CAPITAL GAIN (SHORT TERM). 7. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT(A), WHO DELETED THE ADDITION VIDE HIS ORDER DT. 11/08/2014, BY HOLDING AS FOLLOWS: I HAVE CONSIDERED BOTH THE VIEWS OF THE AO AND TH E APPELLANT AS SUBMITTED BEFORE ME. THE APPELLANT FILED ADDITIONAL EVIDENCE WHICH WAS SENT TO THE AO FOR HIS COMMENTS AND REPORT. THE APPELLANT FILED A COPY OF CERTIFICATE OF NAYAB TESILDAR STATING DISTANCE OF 5.4 KM OF VILLAGE MALP URA FROM TEHSIL DHARUHERA, DISTT. REWARI AND ALSO A COPY OF HARYANA GOVERNMENT NOTIFI CATION NO. 18/02/2007- 3CI DATED 5 TH APRIL 2007 STATING THAT DHARUHERA BECAME A MUNICIP ALITY ONLY ON 20 TH JULY 2007. THE AO IN HIS REMAND REPORT HAS ONLY COM MENTED THAT THE DISTANCE OF 5.4 KM IS OF VILLAGE MALPURA FROM TEHSIL DHARUHERA AND NOT THE DISTANCE OF DISPUTED LAND FROM DHARUHERA. THE AO ALSO STATED IN HIS REMAND REPORT THAT THE DISTANCE OF THE DISPUTED LAND FROM THE MUNICIPALITY OF DHARUHERA IS 1/2 KM AND FROM THE OFFICE OF THE MUNICIPAL COMMITTEE DHARUHER A 1-1/2 KM. AS PER THE REPORT CALLED FROM THE TEHSILDAR DHARUHERA DATED 05/05/201 4 WHERE IN THE TEHSILDAR HAS ALSO STATED THAT MUNICIPAL COMMITTEE DHARUHERA WAS ESTABLISHED IN 2007. THE APPELLANT SUBMITTED THAT THE AS PER INFORMATION RE CEIVED UNDER RTI ACT 2005, THE REPORT SUBMITTED TO INCOME TAX OFFICER SIRSA WAS FO R THE YEAR 2014 INSTEAD OF THE YEAR 2006-07 AND ALSO FILED A CERTIFICATE FROM THE NAIB TEHSILDAR DHARUHERA. THE APPELLANT ALSO FILED A CERTIFICATE FROM THE NAIB TE HSILDAR DHARUHERA STATING THAT THE DISTANCE OF DISPUTED LAND FROM VILLAGE MALPURA ABADI DEH IS 2 ACRES. FROM THE ABOVE STATED FACTS IT IS APPARENT THAT THE MUNICIPAL COMMITTEE DHARUHERA WAS ESTABLISHED ON 20/07/2007 WHERE AS TH E DISPUTED LAND WAS SOLD 4 ON 28/11/2006, HENCE THE REPORT OF TEHSILDAR DATED 06/0/2014 HAS NO RELEVANCE. FURTHER AS PER THE CERTIFICATE FROM THE NAIB TEHSIL DAR DHARUHERA DATED 19/05/2014 FILED BY THE APPELLANT AND PLACE ON RECORD, THE DIS TANCE OF DISPUTED LAND FROM VILLAGE MALPURA ABADI DEH IS 2 ACRES. HENCE AT TH E TIME OF SALE OF THE DISPUTED LAND I.E. ON 28/11/2006 THE DISTANCE WAS MORE THAN 5 KM FROM THE LIMITS OF TEHL DHARUHERA AS REQUIRED VIDE NOTIFICATION NO. 9447 DA TED 06 JANUARY 1994 AND THE SAME WAS NOT A CAPITAL ASSET AS PER THE PROVISIONS OF SEC 2(14) OF THE I T ACT 1961. THEREAFTER A NOTICE WAS ISSUED ON 18/11/2014, INITI ATING PROCEEDING U/S 263 ON THE ISSUE OF CAPITAL GAIN EARNED ON SALE OF LAND BY STATING AT POINT NO 3 TO 3.5 OF THE NOTICE AS FOLLOWS: 3. FROM THE MATERIAL PLACED ON RECORD, IT IS REVEAL ED THAT THE AO (ITO, WARD- 2, SIRSA), EXAMINED THE ASSESSSEE ON 11/02/2010 WIT H REGARD TO SOURCE AND DESTINATION OF WITHDRAWAL OF AN AMOUNT OF RS. 1,05, 00,000/- FROM HIS BANK ACCOUNT #121001000008641 WITH HDFC, SIRSA. DURING EXAMINATI ON, IT WAS DEPOSED BY THE ASSESSEE THAT HE HAD PURCHASED A PIECE OF LAND AT D HARUHERA IN JANUARY, 2006 FROM A COMPANY VIDE REGISTRATION DEEDS NO. 3288 DAT ED 30/01/2006 AND 3289 DATED 30/01/2006 AND SOLD THE SAID PIECE OF LAND TO (ANOTHER COMPANY) M/S. GATEWAY IMPEX(P) LTD. ON 28/11/2006 FOR A TOTAL CON SIDERATION OF RS. 3,56,25,000/- AND THIS AMOUNT WAS DEPOSITED BY THE ASSESSEE IN HI S BANK ACCOUNT. THE ASSESSEE ALSO PROMISED TO SUBMIT COPIES OF REGISTRA TION DEEDS OF THE PURCHASE AND SALE OF THE SAID PIECE OF LAND AND A COPY OF ST ATEMENT OF ABOVE MENTIONED BANK ACCOUNT, LATER ON. HOWEVER, IN SPITE OF REPEAT ED OPPORTUNITIES PROVIDED TO THE ASSESSEE, HE DID NOT FURNISH THE ABOVE STATED D OCUMENTS. 3.1 THE AO COMPLETED THE ASSESSMENT DETERMINING SHO RT TERM CAPITAL GAINS OF RS. 3,03,25,000/- OUT OF PURCHASE AND SALE OF AB OVE LAND. TO ARRIVE AT THE ABOVE INCOME, THE AO OBSERVED THAT THE PIECE OF LAN D SOLD BY THE ASSESSEE IS SITUATED AT DISTANCE OF 3.1 K.M FROM TEHSIL (OFFICE ) DHARUHERA AND HENCE, IT IS WITHIN PRESCRIBED DISTANCE (I.E. 5 K.M. IN CASE OF DHARUHERA) FROM THE MUNICIPAL LIMIT OF DHARUHERA AS PER NOTIFICATION DATED 06/01/ 1994. 3.2 THE DOCUMENTS/INFORMATION PLACED ON RECORD SUGG EST THAT EXCEPT ASCERTAINING DISTANCE OF LOCATION OF THE LAND FROM DHARUHERA MUNICIPAL LIMIT, THE AO DID NOT MAKE THE ANY OTHER RELEVANT INQUIRIES RE GARDING PURCHASE AND SALE OF LAND BY THE ASSESSEE IN AS MUCH AS THE EXACT NATURE OF USE OF THE SAID LAND HAS NOT BEEN INQUIRED INTO. AS STATED ABOVE NEITHER COP IES OF PURCHASE AND SALE DEEDS OF THE SAID PIECE OF LAND WERE SUBMITTED BY T HE ASSESSEE AS PROMISED DURING THE COURSE OF RECORDING OF STATEMENT NOR THE AO TOOK ANY STEPS TO PROCURE THE SAME FROM THE RELEVANT QUARTERS. SINCE, THE STA TEMENT GIVEN BY THE ASSESSEE CLEARLY STATED THAT THE SAID LAND WAS PURCHASED BY HIM FROM A COMPANY AND ALSO SOLED TO ANOTHER COMPANY THEREFORE, IT WAS INCUMBEN T UPON THE AO TO EXAMINE THE EXACT USE OF LAND I.E. INDUSTRIAL / AGRICULTURA L/URBAN ETC. HOWEVER, THE AO DID NOT EXAMINE THE ASSESSABILITY OF SHORT TERM CAPITAL GAINS IN THE LIGHT OF EXACT USE OF THE SAID PIECE OF LAND WHICH IS ONE OF THE MOST RELEVANT PRE-REQUISITES TO ASSESS THE SHORT TERM CAPITAL GAINS. ENQUIRY REVEALED THAT LAND SOLD BY THE ASSESSEE WAS FACTORY 3.3 AS PER THE ENQUIRY MADE BY THIS OFFICE, IT HAS BEEN FOUND THAT SAID PIECE OF LAND WAS ACTUALLY A FACTORY BELONGING TO M/S S IDCO ELECTRONICS PVT. LTD. THIS IS EVIDENCED BY REVENUE RECORD OF GOVERNMENT OF HARYAN A. COPY OF JAMABANDI OF VILLAGE MALPURA FOR THE YEAR 2004-05 IS ENCLOSED (AT ANNEXURE-2). THEREFORE THE SAID LAND IS CLEARLY COVERED BY THE DEFINITION OF CAPITAL ASSET AS DEFINED BY SECTION 2(14) OF THE INCOME TAX ACT, 1961. SALE OF THE SAID PIECE OF LAND, THEREFORE, CLEARLY ATTRACTS PROVISIONS REGARDING C APITAL GAIN. AO HAS FAILED TO MAKE PROPER ENQUIRY TO BRING THIS RELEVANT FACT ON RECORD. THE AO WAS DUTY BOUND TO CARRY OUT SUCH ENQUIRY IN THE FACTS AND CI RCUMSTANCES OF THE CASE. 3.4 ABOVE STATED FAILURE ON THE PART OF THE AO, REN DERED THE ASSESSMENT ORDER DT. 22/03/2013 AS ERRONEOUS AS WELL AS PREJUD ICIAL TO THE INTEREST OF THE REVENUE. 5 8. DURING PROCEEDINGS BEFORE THE LD. COMMISSIONER T HE ASSESSEE ARGUED THAT THE PROCEEDINGS U/S 263 COULD NOT BE RESORTED TO, SINCE THE ISSUE OF GAIN ON SALE OF LAND HAD BEEN EXAMINED BY THE LD. AO. THE A SSESSEE STATED THAT ALL NECESSARY DOCUMENTS PERTAINING TO PURCHASE AND SALE OF THE SAID PIECE OF LAND AND ALSO THE COPY OF BANK STATEMENT WERE SUBMITTED ON 19/02/2010 WHEN THE STATEMENT OF THE ASSESSEE WAS RECORDED U/S 131 OF T HE INCOME TAX ACT, 1961. FURTHER THE ASSESSEE ARGUED THAT NATURE OF USE OF L AND WAS ALSO EXPLAINED, AS BEING AGRICULTURAL BY VIRTUE OF COPY OF GIRDWARI OF THE SAID LAND WHICH WAS PLACED AS ADDITIONAL EVIDENCE BEFORE THE LD. CIT(A) AND ACCEPTED BY HIM. THE ASSESSEE FURTHER STATED THAT THE ISSUE OF TAXABILIT Y OF CAPITAL GAINS ON SALE OF LAND WAS SUBJECT MATTER OF APPEAL BEFORE THE CIT(A) AND AS PER THE PROVISIONS OF THE EXPLANATION 1(C) TO SECTION 263(1) THE ORDER OF THE LD. AO COULD NOT BE REVISED U/S 263 ON THIS MATTER. IN SUPPORT OF HIS ABOVE CON TENTIONS HE RELIED UPON THE FOLLOWING JUDICIAL DECISIONS: CIT VS. SHALIMAR HOUSING AND FINANCE LTD. [2010] 32 0 ITR 157(MP) CIT VS. JAYKUMAR B. PATIL [1999] 236 ITR 469 (SC) CIT VS. SHRI. ARBUDA MILLS LTD. [1998] 231 ITR 50 ( SC) MALABAR INDUSTRIAL CO. LTD. VS. CIT [2000] 243 ITR 83 (SC) CIT VS. MAX INDIA LTD. [2007]295 ITR 282 (SC) 9. THE LD. CIT REJECTED THE CONTENTIONS OF THE ASSE SSEE AND STATED THAT THE NATURE OF USE OF LAND WAS NEITHER CONSIDERED BY THE AO NOR ADJUDICATED BY THE CIT(A). THE LD. CIT STATED THAT DESPITE THE COPY OF GIRDWARI BEING PLACED BEFORE THE LD. CIT(A) AND BEING REMANDED TO THE AO, THE SA ME WAS NOT COMMENTED UPON IN THE REMAND REPORT OF THE AO. LD CIT FURTHER STATED THAT INQUIRIES MADE BY HIS OFFICE REVEALED THAT THE IMPUGNED LAND WAS A CTUALLY A FACTORY BELONGING TO M/S SIDCO ELECTRODES LTD, WHICH WAS EVIDENCED BY THE COPY OF JAMABANDI OF VILLAGE MALPURA FOR THE AY 2004-05. THEREFORE THE L D. CIT HELD THAT THE IMPUGNED LAND WAS A CAPITAL ASSET AS DEFINED BY SECTION 2(14 ) OF THE INCOME TAX ACT, 1961 6 AND FAILURE TO EXAMINE THE ACTUAL USE OF LAND HAD R ENDERED THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. SINCE IT HAD RESULTED IN UNDER ASSESSMENT OF INCOME TO THE EXTEN T OF RS. 3,08,15,895/-. 10. BEFORE US THE LD. AR REITERATED THE ARGUMENTS M ADE BEFORE THE LD. CIT AND STATED THAT THE ISSUE OF LAND HAD ALREADY BEEN EXAMINED BY THE AO WHILE RECORDING THE ASSESSEES STATEMENT ON 19/02/2010. TH E LD. AR DREW OUR ATTENTION TO Q. NO. 10 RECORDED ON 19/02/2010 WHEREIN THE ASS ESSEE WAS ASKED TO PRODUCE COPY OF BANK PASS BOOK AND PURCHASE AND SAL E DEED OF LAND SOLD, IN REPLY TO WHICH, THE ASSESSEE STATED THAT HE WAS SUB MITTING THE SAME. LD. AR STATED THAT AFTER EXAMINING THE SAME, AND APPLYING HIS MIND THE AO HAD PASSED ORDER U/S 147, TAXING THE INCOME AS SHORT TE RM CAPITAL GAINS FROM LAND SITUATED WITHIN MUNICIPAL LIMITS. LD. AR THEREFORE STATED THAT SINCE THE AO HAD CONDUCTED ADEQUATE INQUIRY DURING ASSESSMENT PROCEE DINGS THE ORDER CANNOT BE SAID TO BE ERRONEOUS AND THE PROCEEDINGS U/S 263 WERE BAD. LD. AR PLACED RELIANCE ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MUNJAL CASTINGS 303 ITR 23 (P&H) IN SUPPORT OF HIS CONTENTION. LD. AR FURTHER SUBMITTED THAT THE NATURE OF LAND BEING AGRICULTURA L OR NOT WAS ALSO EXAMINED DURING APPELLATE PROCEEDING. LD. AR DREW OUR ATTENT ION TO PAGE 7OF THE CIT(A) ORDER WHEREIN IT WAS STATED THAT COPY OF GIRDWARI O F LAND WAS SUBMITTED TO THE LD. CIT(A) AS ADDITIONAL EVIDENCE. LD. AR FURTHER D REW OUR ATTENTION TO PAGE 9 OF THE ORDER, WHEREIN IT WAS MENTIONED THAT THE AO IN HIS REMAND REPORT WHILE DEALING WITH THE GIRDWARI OF THE LAND HAD STATED TH AT THERE IS NO MEANING THAT THE SAID LAND WAS USED FOR AGRICULTURE. LD. AR FURT HER STATED THAT THE LD. CIT(A) HAD AFTER EXAMINING ALL DOCUMENTS AND SUBMISSIONS H ELD THE LAND TO BE NOT A CAPITAL ASSET. LD. AR DREW OUR ATTENTION TO PAGE 11 OF CIT(A) ORDER WHEREIN IT HAS BEEN HELD THAT THE IMPUGNED LAND WAS NOT A CAPITAL ASSET AS PER THE PROVISIONS OF SECTION 2(14)(III) OF THE INCOME TAX ACT. LD. AR THEREFORE PLEADED THAT EVEN 7 ON MERITS THE ISSUE HAVING BEEN SETTLED IN FAVOUR O F THE ORDER OF THE AO COULD NOT BE SAID TO ERRONEOUS. THE LD. AR FURTHER CONTE NDED THAT THE IMPUGNED ISSUE HAD BEEN DEALT WITH DURING APPELLATE PROCEEDINGS AL SO AND BY VIRTUE OF THE EXPLANATION 1(C) TO SECTION 263(1) WHICH STATED TH AT THE POWER OF REVISION U/S 263 , DOES NOT EXTEND TO MATTERS DEALT WITH IN APPE AL, THE PROCEEDING U/S 263 WAS INVALID. LD. AR RELIED UPON THE DECISION OF TH E KARNATAKA HIGH COURT IN THE CASE OF DCIT VS. VARMA INDUSTRIAL LTD. 250 ITR 472 AND CIT VS. SHRI. ARBUDA MILLS LTD. 231 ITR 50. 11. LD. AR FURTHER ARGUED THAT SINCE THE CAPITAL G AIN FROM THE SALE OF THE IMPUGNED LAND HAD ALREADY BEEN TAXED IN THE ORDER P ASSED U/S 144/147, THE SAME COULD NOT BE SAID TO BE PREJUDICIAL TO THE INT EREST OF THE REVENUE, FOR NOT HAVING BEEN TAXED AS BEING FACTORY LAND. HE FURTHER ARGUED THAT CIT CAN INVOKE SECTION 263 ONLY WHEN THE TWIN CONDITIONS OF THE OR DER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE IS SATIS FIED. LD. AR PLACED RELIANCE ON THE DECISION OF THE APEX COURT IN MALABAR INDUSTRIA L CO. LTD. VS. CIT 243 ITR 83. 12. LD. DR ON THE OTHER HAND CONTESTED THAT IT WAS INCORRECT ON THE PART OF THE LD. AR TO STATE THAT THE ISSUE HAD BEEN DEALT W ITH BY THE AO DURING PROCEEDINGS U/S 147. LD. DR STATED THAT THE REASONS FOR REOPENING DID NOT DEAL WITH THIS ISSUE. LD. DR DREW OUR ATTENTION TO THE C OPY OF REASONS WHICH STATED AS FOLLOWS: DURING THE FINANCIAL YEAR 2006-07 ASSESSEE HAD EN JOYING THE INTEREST INCOME FROM BANKS AMOUNTING TO RS. 190895/-, IN RESPECT OF WHICH HE WAS ASSESSABLE UNDER THE INCOME TAX ACT AS THE INCOME DURING THE A BOVE SAID PERIOD EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOM E TAX. THE ASSESSEE HAD NOT FILED HIS RETURN OF INCOME FOR THE ASSESSMENT Y EAR 2007-08 RELATES TO THE FINANCIAL YEAR 2006-07. KEEPING IN VIEW THE FACTS STATED ABOVE, I HAVE, TH EREFORE, REASONS TO BELIEVE THAT INCOME TO THE EXTENT OF RS. 190895/- I S CHARGEABLE TO TAX FOR THE ASSESSMENT YEAR 2007-08 AND ANY OTHER INCOME CHARGE ABLE TO TAX WHICH MAY COME TO NOTICE SUBSEQUENTLY DURING THE COURSE OF AS SESSMENT PROCEEDINGS HAS ESCAPED ASSESSMENT IN VIEW OF EXPLANATION 2 CLAUSE (A) OF SECTION 147 OF THE INCOME TAX ACT, 1961. LD. DR FURTHER STATED THAT THE STATEMENT REFERRED T O BY THE LD. AR DT. 19/02/2010 WAS NOT REFERRED IN THE ASSESSMENT ORDER AND HENCE IT COULD NOT BE SAID THAT 8 INQUIRY WITH RESPECT TO THE SALE OF LAND WAS MADE D URING ASSESSMENT PROCEEDINGS. LD. DR ALSO STATED THAT DUE TO THE NO N CO-OPERATIVE ATTITUDE OF THE ASSESSEE, THE ORDER WAS PASSED U/S 144, ON THE BASIS OF AVAILABLE MATERIAL AND HENCE IT COULD NOT BE SAID THAT THE ISSUE OF NA TURE OF USER OF LAND WAS EXAMINED BY THE AO WHILE PASSING ORDER U/S 147 OF T HE ACT. LD. DR FURTHER STATED THAT SINCE THE ONLY ISSUE IN APPEAL BEFORE THE LD. CIT(A) WAS REGARDING THE DISTANCE OF LAND FROM THE MUNICIPAL L IMITS OF DHARUHERA, IT COULD NOT BE SAID THAT THE NATURE OF LAND, WHETHER AGRICU LTURAL OR NOT, HAD ALSO BEEN ADJUDICATED UPON BY THE LD. CIT(A). LD. DR DREW OU R ATTENTION TO THE GROUNDS OF APPEAL BEFORE LD. CIT(A) TO AUGMENT HIS SUBMISSI ON. LD. DR FURTHER RELIED UPON THE NOTICE ISSUED U/S 2 63(1) AT POINT NO. 3-3.4 TO EMPHASIZE THAT NO ENQUIRY WAS CONDUCTED BY THE AO O N THE IMPUGNED ISSUE AND THEREFORE THE ORDER OF THE LD. CIT PASSED U/S 2 63, HOLDING THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE WAS CORRECT. LD. DR RELIED UPON THE DECISION OF HONBLE DELHI H IGH COURT IN CASE OF GEE VEE ENTERPRISES VS. ACIT, DELHI I, AND OTHERS [1975] 99 ITR 375 AND DECISION OF HONBLE SUPREME COURT IN CASE OF MALABAR INDUSTRIAL CO. L TD. VS. CIT [2000] 243 ITR 83 IN SUPPORT OF HIS CONTENTION. 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND ALSO THE DOCUMENTS PLACED BEF ORE US. 14. WE FIND THAT THE ISSUE OF TAXABILITY OF THE IMP UGNED CAPITAL GAINS WAS THE SUBJECT MATTER OF APPEAL BEFORE THE LD. CIT(A). WE ALSO FIND THAT DURING APPELLATE PROCEEDINGS, THE GIRDWARI OF THE SAID LAN D HAD BEEN PRODUCED BEFORE THE CIT(A) AS ADDITIONAL EVIDENCE TO PROVE T HAT THE SAID LAND WAS AGRICULTURAL IN NATURE. THE LD. CIT(A) HAD ADMITTED THIS PIECE OF EVIDENCE AND SENT IT TO THE AO FOR HIS COMMENTS. THEREAFTER THE LD. CIT(A) HAD HELD THAT THE LAND WAS NOT A CAPITAL ASSET AS PER THE PROVISIONS OF SECTION 2(14) OF THE INCOME 9 TAX ACT, 1961. SECTION 2(14) EXCLUDES AGRICULTURAL LAND LOCATED IN NOTIFIED URBAN AREAS FROM THE DEFINITION OF CAPITAL ASSET. CLEARLY THE LD. CIT(A) HAD EXAMINED THE IMPUGNED LAND IN ALL ITS ASPECTS I.E. NATURE OF LAND, WHETHER AGRICULTURAL OR NOT AND DISTANCE OF LAND FROM MUNICIPAL / TEHSIL LI MITS, WHILE HOLDING THAT THE IMPUGNED LAND WAS NOT A CAPITAL ASSET AS PER THE DE FINITION U/S 2(14) OF THE INCOME TAX ACT. THE ARGUMENT OF THE LD. DR THAT THE ONLY ISSUE BEFORE THE LD. CIT(A) WAS REGARDING THE DISTANCE OF THE LAND FROM THE MUNICIPAL / TEHSIL LIMITS TO CATEGORIZE IT AS A CAPITAL ASSET, DOES NOT HOLD GRO UND, FOR THE REASON THAT UNDENIABLY THE POWERS OF THE LD. CIT(A) ARE COTERMI NUS WITH THAT OF THE AO AND ON THE SUBJECT MATTER OF APPEAL BEFORE IT, THE ENTI RE ISSUE IS OPEN BEFORE IT FOR ADJUDICATION. THE SUBJECT MATTER OF APPEAL IN THE P RESENT CASE WAS THE TAXABILITY OF CAPITAL GAINS ON THE SALE OF LAND AND THE ENTIRE ISSUE WAS BEFORE THE LD. CIT(A) FOR ADJUDICATION. FURTHER AS IS EVIDENT FROM THE FACTS STATED ABOVE THE ISSUE HAD BEEN EXAMINED AND DEALT WITH ON BOTH THE ASPECT OF DISTANCE AS WELL AS NATURE OF LAND BY THE LD. CIT(A), WHILE HOLDING THE LAND TO BE NOT A CAPITAL ASSET U/S 2(14) OF THE INCOME TAX ACT. THEREFORE WE HOLD THAT THE ORDER OF THE AO HAD MERGED WITH THE ORDER OF THE LD. CIT(A) ON T HE ISSUE OF TAXABILITY OF CAPITAL GAINS ON THE SALE OF LAND AND THE LD. CIT C OULD NOT HAVE EXERCISED POWERS U/S 263 ON THIS ASPECT AS STATED IN EXPLANAT ION 1(C) TO SECTION 263 OF THE INCOME TAX ACT, 1961. THE GUJARAT HIGH COURT WHILE DEALING WITH AN IDENTICAL ISSUE IN THE CASE OF CIT VS. NIRMA CHEMICAL WORKS ( P) LTD. (2009) 309 ITR 0067 HELD AS FOLLOWS: THE CONTENTION ON BEHALF OF THE REVENUE THAT UNDER THE PROVISIONS OF S. 80-I AN ASSESSEE BECOMES ELIGIBLE ONLY IF THE ASSESSEE FULF ILS ALL THE CONDITIONS STIPULATED BY SUB-S. (2) OF S. 80-I AND THAT COMPUTATION UNDER S. 80-I(1) IS INDEPENDENT OF ELIGIBILITY UNDER SUB-S. (2) OF THE SAID SECTION CA NNOT BE ACCEPTED. SEC. 80-I(1) STIPULATES THAT AN ASSESSEE IS ENTITLED TO DEDUCTIO N FROM PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERTAKING AT THE STIPULATED PE RCENTAGE WHERE GROSS TOTAL INCOME OF THE ASSESSEE INCLUDES ANY PROFITS AND GAI NS DERIVED FROM AN INDUSTRIAL UNDERTAKING IN ACCORDANCE WITH AND SUBJECT TO THE P ROVISIONS OF THIS SECTION. MEANING THEREBY, WHILE COMPUTING THE DEDUCTIBLE AMO UNT FROM THE TAXABLE INCOME THE ASSESSING AUTHORITY IS REQUIRED TO ENSUR E THAT THE PROFITS AND GAINS ARE DERIVED FROM AN INDUSTRIAL UNDERTAKING; SUCH PROFIT S AND GAINS ARE INCLUDED IN THE GROSS TOTAL INCOME OF THE ASSESSEE; AND THE ALLOWAN CE HAS TO BE MADE IN 10 ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF S. 80-I. THEREFORE, TO CONTEND THAT SUB-S. (1) OF S. 80-I HAS TO BE INDEPENDENTLY CONSIDERED I.E. INDEPENDENT OF OTHER SUB-SECTIONS OF S. 80-I IS NOT A CORRECT PROP OSITION, ESPECIALLY WHEN THE PROVISION ITSELF SAYS THAT IT HAS TO BE 'IN ACCORDA NCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION.' THE PROVISION DOES NOT USE THE PHRASEOLOGY IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF TH E SUB-SECTION BUT REFERS TO THE ENTIRE SECTION, WHICH INCLUDES SUB-S. (2). THEREFOR E, WHEN THE DEDUCTION UNDER S. 80-I WAS GRANTED BY THE AO AFTER DISALLOWING A PART OF THE CLAIM WHICH WAS CARRIED IN APPEAL BEFORE CIT(A), THE APPELLATE AUTH ORITY WAS DUTY-BOUND TO EXAMINE WHETHER THE CLAIM MADE BY THE ASSESSEE WAS IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF S. 80-I. THE REQUIREME NT OF FULFILMENT OF CONDITIONS STIPULATED BY SUB-S. (2) OF S. 80-I IS THEREFORE VE RY MUCH SUBJECT-MATTER OF THE APPEAL IN RELATION TO THE INCOME FROM WAREHOUSING W HICH HAD BEEN DISALLOWED BY THE AO. THE STAND OF THE REVENUE THAT THE ASSESS MENT ORDER WAS SILENT AS REGARDS ELIGIBILITY OR OTHERWISE OF S. 80-I CANNOT THUS BE ACCEPTED. THE ENTIRE SECTION LAYS DOWN A COMPLETE CODIFIED SCHEME IN ITS ELF FOR DECIDING NOT ONLY THE ELIGIBILITY BUT ALSO FOR THE COMPUTATION OF THE REL IEF TO WHICH THE ASSESSEE IS ENTITLED. WHEN THE SECTION TALKS OF PROFITS AND GAI NS DERIVED FROM AN INDUSTRIAL UNDERTAKING THE REQUIREMENT IS IN RELATION TO THE I NDUSTRIAL UNDERTAKING TO WHICH THE SECTION APPLIES AND WHICH FULFILS ALL THE CONDI TIONS LAID DOWN IN SUB-S. (2) OF S. 80-I. IT IS NOT POSSIBLE TO READ THE PROVISIONS IN ANY OTHER MANNER WHATSOEVER. HENCE, THE CONTENTION THAT THE ELIGIBILITY OR OTHER WISE UNDER S. 80-I WAS NEVER THE SUBJECT-MATTER OF APPEAL REQUIRES TO BE REJECTED. T HE TRIBUNAL THUS COMMITTED AN ERROR IN LAW IN COMING TO THE CONCLUSION THAT THE P ROHIBITION IMPOSED BY EXPLN. (C) TO S. 263 WOULD NOT BE APPLICABLE. FURTHER THE MUMBAI BENCH OF THE ITAT IN THE CASE OF SONAL GARMENTS VS. JCIT 95 ITD 363 (MUM) HAS HELD THAT ON AN ISSUE OR SUBJECT MATTER DECIDED BY THE CIT(A), THE CIT COULD NOT REVISE THE ORDER ON THE B ASIS THAT ANOTHER ASPECT OF THE ISSUE WAS NOT DEALT WITH BY HOLDING AS FOLLOWS: IT HAS BEEN DEMONSTRATED BY THE CHRONOLOGY OF EVENT S THAT COMPUTATION OF DEDUCTION UNDER S. 80HHC WAS A SUBJECT-MATTER OF AP PEAL BEFORE CIT(A). THE CIT(A) HAS GIVEN SOME FINDINGS ON THE COMPUTATION O F DEDUCTION UNDER S. 80HHC. THEREFORE, THE ASSESSMENT ORDER HAD MERGED WITH THE ORDER OF CIT(A). THUS, UNDER EXPLN. (C) TO S. 263(1), SUCH ACTION OF CIT WAS NOT PERMISSIBLE. THE WORD 'MATTER IS CERTAINLY A WORD OF WIDE IMPORT AND REPRESENTS A SU BJECT OR SITUATION THAT ONE NEEDS TO THINK ABOUT, DISCUSS OR DEAL WITH. THUS, I T IS DIFFICULT TO ACCEPT THE SUBMISSION OF THE DEPARTMENT THAT THE ISSUE OF DEPR ECIATION BEING OPTIONAL OR THE ISSUE THAT ASSESSEE WAS AT ALL ENTITLED TO DEDUCTIO N UNDER S. 80HHC OR NOT WAS NOT A SUBJECT-MATTER OF APPEAL FILED BY THE ASSESSEE BE FORE CIT(A). A MATTER MAY HAVE MANY ASPECTS AND THE ABOVE-MENTIONED TWO FACTO RS MAY BE THE ASPECTS OF THE MATTER BUT NOT ENTIRE 'MATTER ITSELF. THE ' MATTER IN THE PRESENT CASE IS 'DEDUCTION UNDER S. 80HHC. THEREFORE, ASSESSMENT O RDER SO AS IT RELATES TO DEDUCTION UNDER S. 80HHC HAD MERGED WITH THE ORDER OF CIT(A), THEREFORE, EXERCISE OF POWER BY CIT UNDER S. 263 WAS EVEN NOT AVAILABLE UNDER EXPLN. (C) TO S. 263 15. IN VIEW OF THE ABOVE WE FIND THAT THE TAXABILIT Y OF CAPITAL GAINS HAVING BEEN EXAMINED BY THE LD. CIT(A), THE CITS JURISDIC TION TO EXAMINE THAT ISSUE OR ANY OTHER ASPECT RELATED TO THAT ISSUE U/S 263 STAN DS OUSTED. 16. FURTHER WE FIND THAT IN THE PRESENT CASE THE LD . AO HAD IN THE ASSESSMENT ORDER PASSED U/S 144/147 DT. 22/03/2013 HELD THE IM PUGNED LAND TO BE AN URBAN 11 LAND AND THUS A CAPITAL ASSET AS DEFINED U/S 2(14) OF THE INCOME TAX ACT, 1961, AND ASSESSED THE GAIN EARNED ON TRANSFER OF THE LAN D TO BE A SHORT TERM CAPITAL GAIN TO BE SUBJECT TO TAX. WE FIND THAT EVEN IF TH E AO HAD CONDUCTED AN ENQUIRY & APPLIED HIS MIND ON THE ASPECT OF NATURE OF LAND, BEING AGRICULTURAL OR NOT, IT WOULD NOT HAVE ALTERED THE CONCLUSION ARRIV ED AT BY THE AO, SINCE AS PER SECTION 2(14) ALL URBAN LANDS WHETHER AGRICULTURAL OR NOT ARE CAPITAL ASSETS. THE GAIN ON TRANSFER OF LAND WOULD IN ANY SITUATION, ST ILL HAVE BEEN ASSESSED AS SHORT TERM CAPITAL GAIN AND SAME TAXES LEVIED THEREON. TH EREFORE VIS--VIS THE ORDER PASSED BY THE AO, NO LOSS HAS BEEN CAUSED TO THE RE VENUE AND AS A CONSEQUENCE THE ORDER OF THE AO CANNOT BE TERMED AS BEING PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE PHRASE PREJUDICIAL TO THE INTEREST OF REVENUE HAS BEEN EXPLAINED BY THE CALCUTTA HIGH COURT IN THE CA SE OF DAWJEE DADABHOY & CO. VS. S.P. JAIN & ANR . (1957) 31 ITR 872 THUS : THE WORDS PREJUDICIAL TO THE INTERESTS OF THE RE VENUE HAVE NOT BEEN DEFINED, BUT IT MUST MEAN THAT THE ORDERS OF ASSESSMENT CHAL LENGED ARE SUCH AS NOT IN ACCORDANCE WITH LAW, IN CONSEQUENCE WHEREOF THE LAW FUL REVENUE DUE TO THE STATE HAS NOT BEEN REALIZED OR CANNOT BE REALIZED. IT CAN MEAN NOTHING ELSE. THE GUJARAT HIGH COURT IN CIT VS. SMT. MINALBEN S. PARIKH (1995) 215 ITR 81 (GUJ) HAD ELABORATED ON THE MEANING OF THE WORD PREJUDICI AL TO THE INTEREST OF REVENUE BY HOLDING : THAT THE WORDS PREJUDICIAL TO THE INTEREST OF REVE NUE IN THE STATUTE, MUST MEAN THAT THE ORDER UNDER CONSIDERATION ARE SUCH AS ARE NOT IN ACCORDANCE WITH LAW AND IN CONSEQUENCE WHEREOF, THE LAWFUL REVENUE DUE TO THE STATE HAS NOT BEEN REALISED OR CANNOT BE REALISED. IT CAN WELL BE SAID THAT THE WELL-SETTLED PRINCIPLE IN CONSIDERING THE QUESTION WHETHER AN ORDER IS PREJUD ICIAL TO THE INTEREST OF THE REVENUE OR NOT IS TO ADDRESS ONESELF WHETHER THE LE GITIMATE REVENUE DUE TO THE EXCHEQUER HAS BEEN REALISED OR NOT OR CAN BE REALIS ED OR NOT IF THE ORDERS UNDER CONSIDERATION ARE ALLOWED TO STAND. FOR ARRIVING AT THIS CONCLUSION, IT BECOMES NECESSARY AND RELEVANT TO CONSIDER WHETHER THE INCO ME IN RESPECT OF WHICH TAX IS TO BE REALISED, HAS BEEN SUBJECTED TO TAX OR NOT, O R IF IT IS SUBJECTED TO TAX, WHETHER IT HAS BEEN SUBJECTED TO TAX AT A RATE AT W HICH IT COULD YIELD THE MAXIMUM REVENUE IN ACCORDANCE WITH LAW OR NOT. IF I NCOME IN QUESTION HAS BEEN TAXED AND LEGITIMATE REVENUE DUE IN RESPECT OF THAT INCOME HAS BEEN REALISED THOUGH AS A RESULT OF ERRONEOUS ORDER HAVING BEEN MADE IN THAT RESPECT, THE CIT CANNOT EXERCISE POWERS FOR REVISING THE ORDER UNDER S.263 MERELY ON THE BASIS THAT THE ORDER UNDER CONSIDERATION IS ERRONEOUS. IF THE MATERIAL IN THAT REGARD IS AVAILABLE ON THE RECORD OF THE ASSESSEE CONCERNED, THE CIT CANNOT EXERCISE HIS POWERS BY IGNORING THAT MATERIAL WHICH LINKS THE IN COME CONCERNED WITH THE TAX REALIZATION MADE THEREON. THE TWO QUESTIONS ARE INT ERPRETED-LINKED AND THE AUTHORITY EXERCISING POWERS UNDER S. 263 IS UNDER O BLIGATION TO CONSIDER THE ENTIRE MATERIAL ABOUT THE EXISTENCE OF INCOME AND THE TAX WHICH IS REALIZABLE IN 12 ACCORDANCE WITH LAW AND FURTHER WHAT TAX HAS IN FAC T BEEN REALISED UNDER THE ALLEGED ASSESSMENT ORDERS. 17. IN VIEW OF THE SAME WE FIND THAT SINCE THE CAPI TAL GAIN ON SALE OF THE IMPUGNED LAND HAD BEEN SUBJECTED TO TAX IN THE ORDE R OF THE AO NO LOSS HAD BEEN CAUSED TO THE REVENUE BY NOT INVESTIGATING INT O THE NATURE OF LAND AND HENCE THE ORDER OF THE AO WAS NOT PREJUDICIAL TO TH E INTEREST OF THE REVENUE ON THE IMPUGNED ISSUE. FURTHER, IT IS SETTLED LAW THAT FOR EXERCISING JURISDICTION U/S 263, THE CIT HAS TO BE SATISFIED OF TWIN CONDITIONS I.E. (I) THE ORDER SOUGHT TO BE REVISED IS ERRONEOUS AND (II) IT IS PREJUDICIAL TO THE INTE REST OF THE REVENUE, AND IF ONE OF THE CONDITIONS IS ABSENT, RECOURSE CANNOT BE HAD TO SECTION 263 AS HELD BY THE APEX COURT IN CASE OF MALABAR INDUSTRIAL CO. LTD. V S. CIT 243 ITR 83(SC). IN THE PRESENT CASE, SINCE THE ORDER SOUGHT TO BE REVISED IS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE, THE PROCEEDINGS U/S 263 ON THIS ISSUE IS LIABLE TO BE QUASHED. 18. IN THE BACKDROP OF THE ABOVE DISCUSSION WE HOLD THAT THE PROCEEDING U/S 263, ON THE ISSUE OF TAXABILITY OF CAPITAL GAINS EA RNED ON SALE OF LAND ARE LIABLE TO BE QUASHED FOR THE REASON THAT THE ORDER OF THE AO HAD CAUSED NO PREJUDICE TO THE INTEREST OF THE REVENUE AND ALSO FOR THE REASON THAT THE IMPUGNED ISSUE WAS THE SUBJECT MATTER OF APPEAL BEFORE THE CIT(A) AND BY VIRTUE OF EXPLANATION 1(C) TO SECTION 263 COULD NOT HAVE BEEN DEALT WITH BY TH E LD. CIT IN PROCEEDING U/S 263. 19. THE GROUNDS OF APPEAL OF THE ASSESSEE ARE THERE FORE ALLOWED. 20. IN GROUND NO. 5 THE ASSESSEE HAS CHALLENGED THE ORDER PASSED U/S 263 ON THE ISSUE OF PURCHASE OF TWO SHOPS. 21. BRIEFLY STATED THE LD. CIT INITIATED PROCEEDING S U/S 263 BY STATING AT POINT 2 OF THE NOTICE AS FOLLOWS : ON A PERUSAL OF THE ASSESSMENT RECORDS, IT IS NOTIC ED THAT ASSESSMENT IN YOUR CASE WAS COMPLETED BY ITO, WARD-2, SIRSA. WHILE COMPLETI NG THE ASSESSMENT THE AO CONSIDERED THE ISSUE OF ASSESSABILITY OF SHORT TERM CAPITAL GAINS. INCOME FROM OTHER SOURCES AND AGRICULTURAL INCOME, ONLY. HOWEVER, FRO M PERUSAL OF THE DOCUMENTS 13 PLACED ON RECORD IT S REVEALED THAT YOU HAVE MADE I NVESTMENT IN CERTAIN PROPERTIES NAMELY DSS NO. 121-P AND 127 IN SECTOR-2 0, PART-2, SIRSA AO CALLED FOR INFORMATION REGARDING OWNERSHIP OF THESE PROPERTIES FROM ESTATE OFFICER, HUDA. THE SAID INFORMATION WAS RECEIVED BY THE AO ON 21/0 3/2013 CONFIRMING THE PURCHASE OF ABOVE SAID TWO DSS BY YOU ON 27/02/2007 FOR RS. 46,40,000/- AND RS. 37,65,000/- RESPECTIVELY I.E. DURING THE PERIOD REL EVANT TO THE ASSESSMENT YEAR 2007-08 FOR WHICH THE ASSESSMENT HAS BEEN FRAMED BY THE AO. HOWEVER, EXAMINATION OF THE ASSESSMENT ORDER AND OTHER MATER IAL PLACED ON RECORD REVEALS THAT THE AO DID NOT CONSIDER THE ISSUE AS T O WHETHER THE INVESTMENT MADE BY YOU IN THE PURCHASE OF AFORESAID PROPERTIES IS F ROM EXPLAINED SOURCES OF INCOME. BEFORE COMPLETING THE ASSESSMENT, IT WAS IN CUMBENT UPON THE AO TO EXAMINE THE SAID ISSUE. SINCE, THE AO FAILED TO EXA MINE THE ISSUE, THE ORDER PASSED BY HIM IS PRIMA-FACIE ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF REVENUE. 22. IN PROCEEDINGS BEFORE THE CIT THE ASSESSEE SUBM ITTED THAT THE ISSUE OF PURCHASE OF TWO SCOS WAS DULY EXAMINED IN THE STAT EMENT RECORDED AT Q.NO. 16 AND ALSO COPIES OF BANK STATEMENT WERE ALSO SUBM ITTED. THE ASSESSEE WAS ALLOWED TO INSPECT THE CASE RECORDS AND LOCATE THE BANK STATEMENTS BUT THE SAME COULD NOT BE LOCATED. THEREAFTER THE ASSESSEE SUBMITTED THE BANK STATEMENT AND DETAILS OF PAYMENT MADE FOR PURCHASE OF THE TWO SHOPS. ON PERUSING THE SAME, THE LD. CIT FOUND THAT DURING TH E YEAR THE ASSESSEE HAD MADE PAYMENT OF RS. 6,96,000/- AND 5,41,250/- TO HU DA FOR THE SHOPS. LD. CIT HELD THAT AS PER ENQUIRIES MADE, THE STANDARD PROCE DURE IN SUCH CASES IS THE ALLOTTEE IS REQUIRED TO PAY 25% OF THE TOTAL COST O F SHOPS ALLOTTED AT THE TIME OF ALLOTMENT. THUS HE HELD THAT THE ASSESSEE MUST HAVE PAID 11,60,000/- & 14,41,250/- IN RESPECT OF THE TWO SHOPS BUT SINCE O NLY 6,96,000/- AND 541,250/- HAS BEEN EXPLAINED AND SHOWN TO HAVE BEEN MADE THRO UGH BANK, THE BALANCE INVESTMENT OF 13,64,000/- REMAINED UNEXPLAINED RESU LTING IN UNDER ASSESSMENT TO THAT EXTENT. LD. CIT FURTHER HELD THAT SINCE THIS I SSUE HAS NEITHER BEEN DISCUSSED IN THE ASSESSMENT ORDER NOR ANY OFFICE NOTE FOUND APPE NDED TO THE ASSESSMENT ORDER, THE ISSUE WAS NOT CONSIDERED BY THE AO AT AL L. HE THEREFORE HELD THAT ON ACCOUNT OF NON-EXAMINATION OF THE SOURCE OF PURCHAS E OF DSS 121 P & 127, THE ASSESSMENT ORDER HAD BEEN RENDERED ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF THE REVENUE. 14 23. BEFORE US THE LD. AR ARGUED THAT THE ORDER PASS ED U/S 263 ON THIS ISSUE WAS BAD IN LAW, SINCE THE ISSUE HAD ALREADY BEEN EXAMIN ED DURING ASSESSMENT PROCEEDINGS AND NO ADDITION WAS MADE REGARDING THE SAME. LD. AR DREW OUR ATTENTION TO THE STATEMENT RECORDED OF THE ASSESSEE ON 11/02/2010 AND 19/02/2010, WHEREIN AT Q. NO. 16 THE ASSESSEE WAS A SKED WHETHER HE HAD PURCHASED/SOLD ANY OTHER PROPERTY, IN RESPONSE TO W HICH THE ASSESSEE HAD ADMITTED PURCHASING TWO SCOS THROUGH AUCTION AT SE CTOR 20 SIRSA. THE ASSESSEE FURTHER STATED THAT THE PAYMENTS FOR THESE SCOS WA S MADE FROM HIS BANK ACCOUNT AND THE ASSESSEE ALSO STATED THAT HE HAD SU BMITTED THE BANK STATEMENTS. THE LD. AR FURTHER STATED THAT DETAILS OF PAYMENTS FOR THE PURCHASE OF THE SHOPS AND BANK STATEMENT SHOWING PAYMENT FOR THE SAME WAS ALSO FILED TO THE CIT DURING REVISIONARY PROCEEDINGS TO PROVE SOURCE OF THE INVESTMENT. THE LD. AR ALSO ARGUED THAT THE CIT HAS MERELY ESTIMATE D THE PAYMENT MADE IN SUCH CASES AT THE TIME OF ALLOTMENT AT THE TIME OF ALLOTMENT AT 25% OF THE TOTAL COST AND THUS PRESUMED THAT THE ASSESSEE MUST HAVE PAID 11,60,000/- AND 14,41,250/- FOR THE TWO SHOPS RESPECTIVELY. THE LD. AR ARGUED THAT THERE IS NO BASIS AT ALL FOR THE ESTIMATE AND THEREFORE THE LD. CIT HAD ERRED IN HOLDING THAT THE ASSESSEE HAD NOT EXPLAINED THE SOURCE OF INVEST MENT IN THE TWO SHOPS TO THE EXTENT OF RS. 13,64,000/-. LD. AR FURTHER STATED TH AT THE ASSESSEE WAS AN AGRICULTURAL AND HAD NO OTHER SOURCE OF INCOME AND NO PART OF INTEREST IN SHOPS WAS UNEXPLAINABLE OR UNEXPLAINED. 24. LD DR ON THE OTHER HAND ARGUED THAT THE IMPUGNE D ISSUE WAS NOT EXAMINED DURING ASSESSMENT PROCEEDINGS. LD. DR STAT ED THAT NEITHER ANY COPY OF BANK STATEMENT WAS SUBMITTED ON 19/02/2014, AS W AS BORNE OUT FROM RECORDS ALSO NOR WAS THERE ANY DISCUSSION ON THE ISSUE IN T HE ASSESSMENT ORDER. LD. DR FURTHER STATED THAT NO OFFICE NOTE WAS FOUND APPEND ED TO THE ASSESSMENT ORDER ALSO TO SUGGEST EVEN REMOTELY THAT THE ISSUE WAS CO NSIDERED BY THE AO. LD. DR 15 DREW OUR ATTENTION TO PAGE 7 OF THE ORDER OF THE LD . CIT, WHEREIN IT WAS STATED THAT THE ISSUE OF NON-SUBMISSION OF BANK STATEMENT WAS CONFRONTED TO THE ASSESSEE WHO WAS ALSO ALLOWED INSPECTION OF THE CAS E RECORDS TO LOCATE THE SAME, WHICH COULD NOT BE LOCATED. THE LD. DR FURTHE R STATED THAT THIS IS FURTHER AUGMENTED BY THE FACT THAT THE ASSESSMENT WAS FOUND U/S 144 OF THE ACT. 25. THE LD. DR DREW OUR ATTENTION TO PARA 12.2 OF T HE CIT ORDER TO SHOW THAT NO EFFORTS WERE MADE EVEN DURING PROCEEDINGS U/S 263 T O EXPLAIN THE SOURCE OF INVESTMENT IN THE TWO SHOPS EXCEPT FILING OF BANK S TATEMENT OF HDFC BANK AND CANARA BANK. LD. DR CONTENDED THAT DESPITE HAVING I NFORMATION OF PURCHASE OF TWO SHOPS, THE AO HAD NOT EXAMINED THE ISSUE OF SOU RCE OF THE SAME, AND THUS THE ORDER PASSED BY THE AO WAS ALLEGEDLY FOUND TO B E ERRONEOUS. 26. THE LD. DR ALSO DREW OUR ATTENTION TO PARA 8.1 10 AND 12.1-12.2 OF THE CIT ORDER TO PARA 8.1 -10 AND 12.1- 12.2 OF THE CIT ORD ER TO DEMONSTRATE THE NON- COOPERATIVE ATTITUDE OF THE ASSESSEE. 27. WE HAVE HEARD THE RIVAL SUBMISSIONS CAREFULLY A ND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE LD. CIT HAS HELD THE SAME TO BE PR EJUDICIAL TO THE INTEREST OF THE REVENUE FOR THE REASON THAT AT THE TIME OF ALLOTMEN T THE ASSESSEE MUST HAVE PAID 25% OF THE TOTAL COST, THIS BEING THE STANDARD PROCEDURE AS PER THE LD. CIT, AND THUS THE ASSESSEE MUST HAVE PAID 11,60,000/- & RS. 14,41,250/- DURING THE IMPUGNED ASSESSMENT YEAR , WHILE IT HAS SHOWN ONLY RS. 6,96,000/- & RS. 541,250/- HAVING BEEN PAID FROM ITS BANK ACCOUNT. THUS THE LD . CIT HELD THAT THE BALANCE INVESTMENT OF 13,64,000/- REMAINED UNEXPLAINED AND UNDER ASSESSED CAUSING PREJUDICE TO THE INTEREST OF THE REVENUE. 28. WE FIND THAT THE FINDING OF THE LD. CIT THAT TH E ASSESSEE MUST HAVE PAID RS. 11,60,000/- AND RS. 14,41,250/- WITH RESPECT TO THE TWO SHOPS PURCHASED, IS MERELY BASED ON PRESUMPTIONS. THE LD. CIT HAS NOT B ROUGHT ANY COGENT MATERIAL 16 IN SUPPORT OF HIS CONTENTION THAT 25% OF THE COSTS IS COLLECTED ON ALLOTMENT. WE FIND IT TO BE MERELY A BALD AND UNSUBSTANTIATED ASS ERTION AND A HYPOTHETICAL ESTIMATION. THE LD. CIT HAS HELD THE AOS ORDER PRE JUDICIAL TO THE INTEREST OF THE REVENUE, SINCE BASED ON THIS PRESUMPTION, THE LD. C IT FOUND THAT THE SOURCE OF INVESTMENT OF RS. 13,64,000/- REMAINED UNEXPLAINED RESULTING IN UNDER ASSESSMENT OF THE INCOME OF THE ASSESSEE. THUS THE ENTIRE QUESTION OF HOLDING THE ORDER PREJUDICIAL TO THE INTEREST OF REVENUE TU RNED ON THIS HYPOTHETICAL ESTIMATION. AND SINCE THE SAME HAS NO BASIS, THE CO NTENTION OF THE LD. CIT, THAT THE AO ERRED BY NOT INVESTIGATING THE SOURCE OF INV ESTMENT IN TWO SHOPS CAUSING PREJUDICE TO THE REVENUE, IS WITHOUT ANY FOUNDATION . THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GABRIEL INDIA LTD. (1993) 203 I TR 108, HAS HELD THAT THE SATISFACTION OF THE CIT TO THE EFFECT THAT THE ORDE R IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE MUST BE BASED ON SOME M ATERIAL ON RECORD OTHERWISE IT WILL AMOUNT TO ARBITRARY EXERCISE OF P OWER. 29. IN VIEW OF THE SAME WE HOLD THAT THERE IS NO BA SIS FOR HOLDING THE ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE AND FURT HER IN THE ABSENCE OF SATISFACTION OF ONE OF THE TWIN CONDITION OF THE OR DER REVISED BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE HOLD THE ORDER PASSED U/S 263 FAILS ON THIS GROUND AND IS LIABLE TO BE QUASHED. 30. THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOW ED. 31. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :20/10/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR