Nilesh Khodidas Patel, Nashik V. Pr. Commissioner of Income-tax -2, Nashik

ITA 422/PUN/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7323 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 15-03-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KESANG Y SHERPA
• Keywords: Capital asset; Tangible material; Revised return; Revenue expenditure; Capital Gains
• Section: 119; 6; 10; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI R.S.SYAL, VP AND SHRI PARTHA SARATHI CHAUDHURY , JM . / I TA NO. 421 /PUN/20 19 / ASSESSMENT YEAR : 2011 - 12 SHRI HARESH KHODIDAS PATEL, PLOT NO.51, NEELKAMAL HOUSE, COLLEGE ROAD, THATTE WADI, NASHIK - 422 005. PAN : AAMPP6495N ....... / APPELLANT / V/S. THE PR. COMMISSIONER OF INCOME TAX - 2, NASHIK. / RESPONDENT . / ITA NO. 422/PUN/2019 / ASSESSMENT YEAR : 2011 - 12 SHRI NILESH KHODIDAS PATEL, PLOT NO.51, NEELKAMAL HOUSE, COLLEGE ROAD, THATTE WADI, NASHIK - 422 005. PAN : ABFPP0974N ....... / APPELLANT / V/S. THE PR. COMMISSIONER OF INCOME TAX - 2, NASHIK. / RESPONDENT 2 ITA NO S . 421 & 422 /PUN/20 19 A.Y .2011 - 12 A SSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SMT. KESANG Y SHERPA / DATE OF HEARING : 0 1 .0 9 .2020 / DATE OF PRONOUNCEMENT : 03 .0 9 .2020 / ORDER PER PARTHA SARATHI CHAUDHU RY, JM : THESE TWO APPEALS PREFERRED BY DIFFERENT ASSESSEES EMANATES FROM THE SEPARATE ORDERS OF THE LD. PR. COMMISSIONER OF INCOME TAX - 2, NASHIK DATED 29.01.2019 FOR ASSESSMENT YEAR 2011 - 12 AS PER THE GROUNDS OF APPEAL ON RECORD. 2. AT THE VERY OUTSET, THE LD. AR OF THE ASSESSEE SUBMITTED THAT IN THESE CASE S, THE ASSESSEE IS AGGRIEVED REGARDING THE REVISIONARY JURISDICTION UNDERTAKEN BY THE LD. PR. COMMISSIONER OF INC OME TAX U/S.263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) AND THAT THE FACTS AND ISSUES FOR BOTH THESE APPEALS ARE IDENTICAL. 3. THE LD. DR CONCEDED TO THESE ARGUMENTS OF THE LD. AR ON FACTS. 4. AFTER HEARING THE SUBMISSIONS OF BOTH THE PARTIES HEREIN , THE FACTS BEING SIMILAR, GR OUNDS COMMON, BOTH THESE CASES WE RE HEARD TOGETHER AND DISPOSED OF VIDE THIS CONSOLIDATED ORDER. THE LD. AR OF THE ASSESSEE FURTHER SUBMITTED THAT ITA NO.422/PUN/2019 FOR ASSESSMENT YEAR 2011 - 12 MAY BE TA KEN AS LEAD CASE FOR DECIDING THESE APPEALS. 3 ITA NO S . 421 & 422 /PUN/20 19 A.Y .2011 - 12 ITA NO.422/PUN/2019 ( SHRI NILESH KHODIDAS PATEL) A.Y.2011 - 12 5. THE FACTS IN THIS CASE AS PLACED ON RECORD, IN THE NOTICE U/S.263 OF THE ACT FOR ASSESSMENT YEAR 2011 - 12 DATED 11.12.2018, IT IS STATED THAT THE ASSESSMENT PROCEEDINGS IN THIS CASE WERE COMPLETED U/S.143(3) R.W.S.147 OF THE ACT WITHOUT CONSIDERING RELEVANT PROVISIONS OF THE ACT WHICH PRIMA FACIE WARRANTED ON THE FA C TS AND IN THE CIRCUMSTANCES OF THIS CASE. FURTHER, IT IS ALSO NOTED THAT INFORMATION WAS RECEIVED FROM ITO (I & CI) THAT ASSESSEE ALONG WITH OTHER S HAD SOLD NON AGRICULTURAL LAND AT SURVEY NO.298 /1 ADMEASURING 0.90 HECTARE AT VILLAGE - NAROLI, UNION TERRITORY OF DADRA & NAGAR HAVELI FOR A TOTAL CONSIDERATION OF RS.1,44,00,000/ - ON WHICH, THE SHARE OF THE ASSESSEE BEING 50%. DURING THE COURSE OF VERIFICATION, IT WAS OBSERVED BY THE ITO (I & CI) THAT THE ASSESSEE HAD TAKEN LOAN FROM THE BANK FOR MAKING INVESTMENT IN THE PROPERTY AND THE INTEREST PAID ON SUCH LOAN WAS CLAIMED AS COST OF IMPROVEMENT. SINCE, THE NEXUS BETWEEN THE PARTICULAR PROPERTY ACQUIRED AND THE LOAN AMOUNT OBTAINED FOR SUCH PURCHASE WAS NOT PROVED, THE ITO (I & CI) FORWARDED THE INFORMATION TO THE ASSESSING OFFICER. 5.1 SUBSEQUENTLY, ASSESSMENT PROCEEDINGS FOR THE ASSESSEE WERE RE - OPENED BY THE ISSUANCE OF NOTICE U/S.148 OF THE ACT ON 30.03.2016 AND THE ASSESSEE FILED REVISED RETURN OF INCOME IN RESPECT OF THE SAID NOTICE ON 31.03.2016 DECLARING TOTAL INCOME OF RS.58,52,590/ - . THE ASSESSING OFFICER FINALIZED THE ASSESSMENT U/S.143(3) R.W.S.147 OF THE ACT DATED 13.10.2016 ACCEPTING THE R ETURNED INCOME. DURING THE COURSE OF THE RE - ASSESSMENT PROCEEDINGS, IT WAS CONTENDED BEFORE THE ASSESSING OFFICER THAT THE INTEREST HAS NOT BEEN CLAIMED AS REVENUE EXPENDITURE AND HAS BEEN CAPITALIZED IN THE COST OF ASSETS. PLACING RELIANCE ON THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF S. 4 ITA NO S . 421 & 422 /PUN/20 19 A.Y .2011 - 12 BALAN ALIAS SHANMUGAM BALKRISHNA CHETTAIR VS. DCIT (2009) 120 ITD 469, IT WAS CLAIMED THAT THE ASSESSEE IS ENTITLED TO CLAIM INTEREST AS COST OF CAPITAL ASSET FOR COMPUTATION OF CAPITAL GAINS. THE ASSESS ING OFFICER ACCEPTED THE SAID CONTENTION AND ACCEPTED THE RETURNED INCOME WHILE FINALIZING THE ASSESSMENT PROCEEDINGS U/S.143(3) R.W.S.147 OF THE ACT. 5.2 THE PR. COMMISSIONER OF INCOME TAX ON PERUSAL OF THE MATERIALS AVAILABLE ON RECORDS, NOTICED THAT N O TANGIBLE MATERIAL WAS AVAILABLE TO PROVE THE NEXUS BETWEEN THE PARTICULAR PROPERTY ACQUIRED AND THE LOAN AMOUNT OBTAINED FOR SUCH PURPOSE AND THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL (SUPRA.) RELIED ON WAS SUBSTANTIALLY DIFFERENT ON FACTS. THEREFOR E, THE PR. COMMISSIONER OF INCOME TAX WAS OF THE OPINION THAT THE ASSESSMENT ORDER PASSED U/S.143(3) R.W.S.147 OF THE ACT DATED 13.10.2016 WAS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 6. AT THE TIME OF VIRTUAL HEARING, THE LD. AR OF THE ASSESSEE VEHEMENTLY ARGUED THAT THE ORDER PASSED BY THE LD. PR. COMMISSIONER OF INCOME TAX U/S.263 OF THE ACT IS BAD IN LAW SINCE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER WAS NOT ONLY COMPLETED U/S.143(3) OF THE ACT BUT WAS RE - OP ENED AFTER ISSUANCE OF NOTICE U/S.148 OF THE ACT AND COMPLETED U/S.143(3) R.W.S.147/148 OF THE ACT AFTER VERIFYING EACH AND EVERY DETAILS OF THE TRANSACTIONS IN QUESTION. IN THIS REGARD, THE LD. AR REFERRED TO THE REASONS FOR RE - OPENING OF THE CASE U/S. 14 7/148 OF THE ACT ISSUED BY THE ASSESSING OFFICER WHICH IS PLACED AT PAGES 118 & 119 OF THE PAPER BOOK. 6.1 THE LD. AR OF THE ASSESSEE FURTHER RELIED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF THE COMMISSIONER OF INCOME - TAX V S . GABRIEL INDIA LTD, 203 ITR 108 AND SUBMITTED THAT IF AFTER DETAILED ENQUIRY, 5 ITA NO S . 421 & 422 /PUN/20 19 A.Y .2011 - 12 THE ASSESSING OFFICER HAS FORMED AN OPINION, WHICH MAY NOT BE APPROPRIATE ACCORDING TO THE OPINION OF THE LD. PR. COMMISSIONER OF INCOME TAX BUT NONETHELESS, IT IS STILL AN OPINI ON FORMED WITH REASONS AND VERIFICATION AND THEREFORE, ASSESSMENT ORDER CANNOT BE MADE A SUBJECT MATTER OF REVISIONARY JURISDICTION VIDE ORDER U/S.263 OF THE ACT STATING THAT THE SAME IS ERRONEOUS SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 7. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE ORDER PASSED U/S.263 OF THE ACT BY THE LD. PR. COMMISSIONER OF INCOME TAX FOR THE REASONS THAT AS EVIDENT FROM THE NOTICE U/S.263 OF THE ACT, THE ONLY PURPOSE OF THE LD. PR. COMMISSIONER OF INCOME TAX FOR PASSING ORDER WAS THAT THE NEXUS BETWEEN PARTICULAR PROPERTY ACQUIRED AND THE LOAN AMOUNT OBTAINED FOR SUCH PURPOSE , WAS NOT PROVED AND THE INTEREST PAID ON SUCH LOAN CLAIMED AS COST OF IMPROVEMENT IN THE PROPERTY, THESE FACTS WERE ACCEPTED BY THE ASSESSI NG OFFICER WITHOUT ANY INDEPENDENT ENQUIRY AND AS SUCH NO REASONS W ERE FORMED BY THE ASSESSING OFFICER IN HIS ORDER. THAT FURTHER, THE PURPOSE OF LOAN TAKEN VIS - - VIS PROPERTY WAS ALSO NOT EXAMINED IN THE ORDER OF THE ASSESSING OFFICER. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE ORDER OF THE ASSESSING OFFICER PASSED U/S.143(3) R.W.S. 147/148 OF THE ACT DATED 13.10.2016 AND THE ORDER OF THE LD. PR. COMMISSIONER OF INCOME TAX U/S.263 OF THE ACT AS WELL AS OTHER RELEVANT DOCUMENTS PLACE D ON RECORD. WE HAVE ALSO FULLY CONSIDERED THE JUDICIAL PRONOUNCEMENTS PLACED ON RECORD BY THE LD. AR. WE FIND THERE IS SPECIFIC QUESTION RAISED IN THE NOTICE U/S.263 OF THE ACT ISSUED BY THE LD. PR. COMMISSIONER OF INCOME TAX, WHEREIN, ON VERIFICATION OF THE ASSESSMENT ORDER, HE FOUND THAT THERE WAS NO TANGIBLE MATERIAL AVAILABLE ON RECORD TO PROVE THE NEXUS BETWEEN THE PARTICULAR PROPERTY ACQUIRED AND THE LOAN AMOUNT OBTAINED FOR SUCH PURPOSE. THE ASSESSEE HAS CLAIMED THE 6 ITA NO S . 421 & 422 /PUN/20 19 A.Y .2011 - 12 INTEREST ON SUCH LOAN AS COST OF CAPITAL ASSET FOR COMPUTATION OF CAPITAL GAINS. THIS WAS ACCEPTED BY THE ASSESSING OFFICER WHILE FINALIZING THE ASSESSMENT PROCEEDINGS U/S.143(3) R.W.S.147 OF THE ACT. THIS WAS DONE BY THE ASSESSING OFFICER WITHOUT ANY FACTUAL VERIFICATION. THAT FROM THE ORDER OF THE ASSESSING OFFICER, WE COULD NOT FIND OUT ANY REASONING GIVEN BY HIM WHICH CAN SHOW THAT THERE IS NEXUS BETWEEN THE PARTICULAR PROPERTY ACQUIRED AND THE LOAN OBTAINED FOR SUCH PURPOSE BY THE ASSESSEE . THEREAFTER, THE ASSESSEE HAS ALSO CLAIMED I NTEREST ON SUCH LOAN AS COST OF IMPROVEMENT OF THE PROPERTY. HOWEVER, IN THE ENTIRE ORDER OF THE ASSESSING OFFICER, THERE IS NO DISCUSSION OR EXAMINATION OF FACTS WHEREIN, HE HAS CATEGORICALLY GIVEN FINDINGS THROUGH ENQUIRY THAT SUCH A NEXUS WHETHER AT ALL EXISTS OR NOT. IN BOTH THESE CASES BEFORE US AS RIGHTLY POINTED OUT BY THE LD. DR THAT THE ONLY REASON OF THE LD. PR. COMMISSIONER OF INCOME TAX FOR PASSING ORDER U/S.263 OF THE ACT WAS THAT THESE AFORESTATED FACTS WERE NOT EXAMINED BY THE ASSESSING OFFIC ER BEFORE ACCEPTING THE RETURNED INCOME AND FINALIZING THE ASSESSMENT. 9. THAT BEFORE US, THREE HEARING S WERE ACCORDED TO THE LD. AR OF THE ASSESSEE AND ON EACH HEARING, THOUGH THE QUESTION WAS RAISED FROM THE BENCH TO DEMONSTRATE THE NEXUS BETWEEN THE PROPERTY ACQUIRED AND LOAN TAKEN FOR THE SAID PURPOSE BUT THE LD. AR FAILED TO DEMONSTRATE FROM THE ORDER O F THE ASSESSING OFFICER NOR COULD PROVIDE ANY EVIDENCE THAT INDEPENDENT ENQUIRY AND VERIFICATION S WERE CONDUCTED BY THE ASSESSING OFFICER ON THIS ISSUE. THE LD. AR OF THE ASSESSEE VEHEMENTLY ARGUED THAT THE VIEW TAKEN BY THE ASSESSING OFFICER MAY NOT BE A PROPER ONE AS PER THE LD. PR. COMMISSIONER OF INCOME TAX IS CONCERNED , NONETHELESS, IT IS DEFINITELY AN APPROPRIATE VIEW. WE DO NOT AGREE WITH THE CONTENTION OF THE LD. AR SINCE TAKING A VIEW SHOULD BE BACKED BY REASONS AND THAT REASONS SHOULD BE DEMONSTRA TED IN THE ORDER ITSELF WITH EVIDENCES BROUGHT ON RECORD AND 7 ITA NO S . 421 & 422 /PUN/20 19 A.Y .2011 - 12 INDEPENDENT ENQUIRY CONDUCTED. IN THIS CASE, THE ASSESSING OFFICER HAS NOT AT ALL GONE INTO THE AREA OF EXAMINATION OF FACTS CONCERNING THE SAID NEXUS WHICH IS THE SUBJECT MATTER OF ORDER U/S.263 OF THE ACT BY THE LD. PR. COMMISSIONER OF INCOME TAX AND THEREFORE, ON THIS ISSUE, THE ASSESSING OFFICER HAS NOT FORMED ANY VIEW. WHEN NO VIEW HAS BEEN TAKEN, NO ENQUIRY HAS BEEN CONDUCTED, WHEN NO REASONS ON FACTS HAS BEEN PLACED ON RECORD, THE ORDER OF ASSESSMENT IS BOUND TO BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 10. T HE HONBLE SUPREME COURT IN THE CASE OF RAMPYARI DEVI SAROGI V S . CIT (1968) 67 ITR 84 ( SC) AND TARA DEVI AGGARWAL V. CIT (1973) 88 ITR 323 (SC) HAS HELD THAT WHERE ASSESSING OFFICER HAS ACCEPTED A PARTICULAR CONTENTION/ISSUE WITHOUT ANY ENQUIRY OR EVIDENCE WHATSOEVER, THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 11. I N THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT, KERALA STATE, 243 ITR 83 (SC) , T HE HONBLE APEX COURT WHILE UPHOLDING THE JUDGMENT OF THE HONBLE HIGH COURT OBSERVED THAT INDEED, THE HIGH COURT RECORDED THE FINDING THAT THE ITO FAILED TO APPLY HIS MIND TO THE CASE IN ALL PERSPECTIVE AND THE ORDER PASSED BY HIM WAS ERRONEOUS . THEREFORE, THE HONBLE HIGH COURT HAS RIGHTLY HELD EXERCISE OF THE JURISDICTION BY THE COMMISSIONER U /S.263 WAS JUSTIFIED. TAKING THE TOTALITY OF FACTS AND CIRCUMSTANCES AND JUDICIAL PRONOUNC EMENTS INTO CONSIDERATION, WE UPHOLD THE ORDER PASSED U/S.263 OF THE ACT BY THE LD. PR. COMMISSIONER OF INCOME TAX. 8 ITA NO S . 421 & 422 /PUN/20 19 A.Y .2011 - 12 12. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.422/PUN/2019 IS DISMISSED. ITA NO.42 1 /PUN/2019 ( SHRI HARESH KHODIDAS PATEL) A.Y.2011 - 12 13. SINCE PARTIES HEREIN HAVE AGREED THAT IN ITA NO.421/PUN/2019 FOR ASSESSMENT YEAR 2011 - 12, THE FACTS ARE ABSOLUTELY SIMILAR, ISSUES COMMON AS WITH THE FACTS AND ISSUES APPEARING IN ITA NO.422/PUN/201 9 FOR ASSESSMENT YEAR 2011 - 12, T HEREFORE , OUR DECISION RENDERED IN ITA NO.422/PUN/2019 SHALL APPLY MUTATIS - MUTANDIS TO ITA NO. 421 /P UN/2019 FOR THE ASSESSMENT YEAR 2011 - 12 . THUS, IN THIS CASE ALSO, WE UPHOLD THE ORDER PASSED U/S.263 OF THE ACT BY THE LD. PR. COMMISSIONER OF INCOME TAX. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO.421/PUN/2019 IS DISMISSED. 15. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEES IN ITA NO.421/PUN/2019 & 422/PUN/2019 ARE DISMISSED . ORDER PRO NOUNCED ON 03RD DAY OF SEPTEMBER, 20 20 . SD/ - SD/ - R.S.SYAL PARTHA SARATHI CHAUDHURY VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 03 RD SEPTEMBER , 2020. SB 9 ITA NO S . 421 & 422 /PUN/20 19 A.Y .2011 - 12 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE PR. CIT - 2, NASHIK. 4 . , , / DR, ITAT, A BENCH, PUNE. 5 . / GUARD FILE. // TRUE COPY // / BY ORDER, / PRIVATE SECRETARY , / ITAT, PUNE . 10 ITA NO S . 421 & 422 /PUN/20 19 A.Y .2011 - 12 DATE 1 DRAFT DICTATED ON 0 1 .0 9 .2020 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 01 .0 9 .2020 SR.PS/PS 3 DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 DATE OF UPLOADING OF ORDER SR.PS/PS 8 FILE SENT TO BENCH CLERK SR.PS/PS 9 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10 DATE ON WHICH FILE GOES TO THE A.R 11 DATE OF DISPATCH OF ORDER