Amra Ram Kumawat, Jodhpur V. CIT,Range-1, , Jodhpur

ITA 44/JODH/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7256 (ITAT-JODHPUR)
• Duration Of Justice: 2 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 18-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANCHITA KUMAR
• Assessee Lawyers: ABHINAV KOTHARI
• Keywords: Capital asset; Gift; Revision of order; Principle of natural justice; Fair market value; Set aside
• Section: 56(2)(vii)(b); 143(3); 207; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, JODHPUR BENCH, JODHPUR BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER ITA NO. 44/JODH/2019 ASSESSMENT YEAR: 2014-15 AMRA RAM KUMAWAT, B-107, SHASTRI NAGAR, JODHPUR. VS. CIT, RANGE-1, JODHPUR. PAN NO. AAVPK 9064 B ASSESSEE BY SHRI AMIT KOTHARI, CA & SHRI ABHINAV KOTHARI, CA REVENUE BY SMT. SANCHITA KUMAR, CIT-DR DATE OF HEARING 09/08/2021 DATE OF PRONOUNCEMENT 06/09/2021 O R D E R PER: SANDEEP GOSAIN, J.M. THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. PR.CIT-1, JODHPUR DATED 08/02/2019 FOR A.Y. 2014-15 PASSED U/S 263 OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT) WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED: 1. THE LD. CIT-I, HAS ERRED IN INITIATING THE PROCEEDINGS U/S 263 WHICH IS BAD IN LAW AND BAD ON FACTS. 2. THE ORDER PASSED IS CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE AND IS WITHOUT PROVIDING ADEQUATE OPPORTUNITY OF HEARING TO THE APPELLANT. 2 ITA 44/JODH/2019 AMRA RAM KUMWAT VS CIT 3. A. THE LD. CIT-I HAS ERRED IN OBSERVING THAT THE INCOME OF RS. 11,05,000/- OUGHT TO HAVE BEEN CONSIDERED AS INCOME U/S 56(2)(VII)(B) OF THE ACT. SUCH OBSERVATION SO MADE IS BAD IN LAW AND BAD ON FACTS. B. THE APPLICATION OF SECTION 56(2)(VII)(B) IN THE FACTS AND CIRCUMSTANCES OF THE CASE IS BAD IN LAW AND BAD ON FACTS. 4. THE APPELLANT PRAY FOR SUITABLE COSTS. 5. THE APPELLANT CRAVE LIBERTY TO ADD, AMEND, ALTER, OR MODIFY ANY OF THE GROUND OF APPEAL ON OR BEFORE ITS HEARING BEFORE YOUR HONOUR. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD FILED RETURN OF INCOME FOR A.Y. 2014-15 ON 11.10.2014 AT TOTAL INCOME OF RS. 12,08,650/-. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND ORDER U/S 143(3) WAS MADE ON 29.12.2016 IN WHICH THE RETURNED INCOME WAS ACCEPTED. 3. THE LD PCIT OBSERVED THAT THE ASSESSEE HAD PURCHASED A PROPERTY JOINTLY WITH ONE PERSON IN WHICH THERE WAS DIFFERENCE IN THE VALUE AS ADOPTED FOR STAMP DUTY PURPOSES AND AS PER PROVISIONS OF SECTION 56(2)(VII)(B) INCOME RS. 11,05,000/- WAS LIABLE TO BE INCLUDED IN THE HANDS OF THE ASSESSEE AND ACCORDINGLY THE NOTICE U/S 263 HAD BEEN ISSUED TO THE ASSESSEE. THE CONTENTION OF THE PCIT IN HIS ORDER WAS THAT AFTER THE INSERTION OF THE EXPLANATION TO SECTION 263, THE SCOPE OF POWERS U/S 263 ARE WIDENED AND IF THERE IS NO PROPER ENQUIRY BY THE AO THE ASSESSMENT CAN BE SUBJECTED TO 263 PROCEEDINGS. THE PCIT HAD REFERRED TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAE OF GEE VEE ENTERPRISES V. ADDL. CIT REPORTED IN 99 ITR 375 (DEL) TO SUPPORT HIS CONTENTION THAT WHERE NO ENQUIRY IS BEING MADE, THE ORDER CAN BE SAID TO ERRONEOUS. SIMILAR 3 ITA 44/JODH/2019 AMRA RAM KUMWAT VS CIT RELIANCE WAS ALSO PLACE ON THE DECISION OF CALCUTTA HIGH COURT IN THE CAE OF CIT VS. MAITHAN INTERNATIONAL REPORTED IN 375 ITR 123(CAL). IN THESE FACTS THE LD. PCIT SET ASIDE THE ORDER PASSED BY THE AO TO PASS A FRESH ORDER IN ACCORDANCE WITH LAW. 4. THE CONTENTION OF THE ASSESSEE HAD BEEN THAT SINCE HE IS CARRYING ON BUSINESS AS A DEALER AND INVESTOR IN REAL ESTATE, THE AMOUNT PAID REPRESENTS ACTUAL CONSIDERATION PAID IN NORMAL COURSE OF TRADE AND CANNOT BE REGARDED AS GIFT AS CONTEMPLATED IN SECTION 56(2)(VII). 5. THE ASSESSEE FURTHER CONTENDS THAT THE ORDER PASSED BY AO CANNOT BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. THE MAIN CONTENTION OF THE ASSESSEE HAD BEEN THAT THE CASE WAS SELECTED FOR LIMITED SCRUTINY AND THE ISSUE INVOLVED WAS EXAMINED AND FOUND TO BE CORRECT AND NO ADDITION WAS BEING MADE. THE ASSESSEE ALSO RELIED UPON THE CIRCULAR DATED 29 TH DECEMBER, 2015 ISSUED BY CBDT WITH REGARD TO ISSUES AND SCOPE OF SCRUTINY CASES SELECTED THROUGH CASS. IT WAS STRESSED THAT THE LIMITED SCRUTINY CASES ON SPECIFIC ISSUE BASED ENQUIRY IS TO BE CONDUCTED ONLY IN THOSE SCRUTINY CASES WHICH HAVE BEEN SELECTED ON THE PARAMETER AND IN SUCH CASES, THE ASSESSING OFFICER, SHALL ALSO CONFINE THE QUESTIONNAIRE ONLY TO THE SPECIFIC ISSUES. 6. THE ASSESSEE ALSO REFERRED TO THE DECISION IN THE CASE OF GIFT LAND HANDICRAFTS VS. CIT REPORTED IN 108 TTJ (DEL) 312 IN WHICH IT WAS HELD THAT THE 4 ITA 44/JODH/2019 AMRA RAM KUMWAT VS CIT CASES OF LIMITED SCRUTINY CANNOT EXCEED JURISDICTION BEYOND THE NOTICE ISSUED FOR SUCH LIMITED SCRUTINY AND THEREFORE THE CIT WAS NOT JUSTIFIED IN INVOKING JURISDICTION U/S 263 ON ISSUES OTHER THAN THOSE DECIDED IN LIMITED SCRUTINY ASSESSMENT. RELIANCE WAS ALSO PLACED ON THE DECISION IN THE CASE OF NAYEK PAPER CONVERTERS VS. ACIT (2005) 93 TTJ (CAL) 574 IN WHICH ALSO THE CASE WAS SELECTED FOR LIMITED SCRUTINY AND EXERCISE OF REVISIONS JURISDICTION BY CIT DIRECTING TO MAKE COMPREHENSIVE SCRUTINY ASSESSMENT WAS HELD TO BE INVALID. THE ASSESSEE ALSO REFERRED TO THE DECISION OF AJIT GUPTA VS. ITO REPORTED IN 108 TTJ (DEL) 301 IN WHICH ALSO THE PROCEEDINGS OR REVISION WERE HELD TO BE NOT VALID AND CIT CANNOT DIRECT AO TO LOOK INTO MATTERS WHICH THE AO IS NO ELIGIBLE TO DO. 7. THE ASSESSEE ALSO CONTENDS THAT THE DEEMING FICTION HAS TO BE CONSTRUED STRICTLY AND REFERRED TO THE DECISION OF K.P.VARGHESE V. ITO REPORTED IN 131 ITR 597 (SC), WHICH IS IN CONTEXT OF SECTION 52(2) AND PRINCIPLES OF WHICH ALSO APPLY TO THE PROVISIONS OF SECTION 56(2)(VIIA). IT WAS HELD BY THE HONBLE SUPREME COURT THAT THE RULES OF INTERPRETATION HAVE TO BE BORNE IN MIND WHILE INTERPRETING A STATUTORY PROVISION AND IT IS MORE THAN A MERE READING OF MATHEMATICAL FORMULAE AND IT IS AN ATTEMPT TO DISCOVER THE INTENT OF THE LEGISLATURE FROM THE LANGUAGE USED BY IT. IN THE SAID CASE IT WAS HELD THAT CERTAIN MARGINS WHICH WERE PROVIDED IN THE SECTION FOR THE DIFFERENCE IN FAIR MARKET VALUE OF ASSET AND THE CONSIDERATION DECLARED IN RESPECT OF TRANSFER OF PROPERTY IS CLEARLY IS TO SAVE THE ASSESSEE FROM THE RIGOUR OF THE SECTION IN MARGINAL CASES WHERE DIFFERENCE IN 5 ITA 44/JODH/2019 AMRA RAM KUMWAT VS CIT SUBJECTIVE VALUATION BY DIFFERENT INDIVIDUALS MAY RESULT IN AN APPARENT DISPARITY BETWEEN THE FAIR MARKET VALUE AND THE DECLARED CONSIDERATION. IT WAS ALSO HELD THAT IT IS A WELL-KNOWN FACT THAT THE DETERMINATION OF FAIR MARKET VALUE OF A CAPITAL ASSET IS GENERALLY A MATTER OF ESTIMATE BASED TO SOME EXTENT ON GUESS WORK AND DESPITE THE UTMOST BONA FIDES, THE ESTIMATE OF THE FAIR MARKET VALUE IS BOUND TO VARY FROM INDIVIDUAL TO INDIVIDUAL. THIS CONDITION OF 15 PER CENT OR MORE DIFFERENCE IN THE SAID SECTION WAS MERELY INTENDED TO BE A SAFEGUARD AGAINST THE UNDUE HARDSHIP WHICH WOULD BE OCCASIONED TO THE ASSESSEE IF THE INFLEXIBLE RULE OF THUMB ENACTED IN SECTION IS APPLIED IN MARGINAL CASES. IT IS A WELL SETTLED RULE OF INTERPRETATION THAT THE COURT SHOULD AS FAR AS POSSIBLE AVOID THAT CONSTRUCTION WHICH ATTRIBUTES IRRATIONALITY TO THE LEGISLATURE. 8. THE ASSESSEE FURTHER CONTENDED THAT THE STAMP VALUE OF A GENERAL AREA CANNOT OVERRIDE THE SPECIFIC INSTANCE OF THE PROPERTY AND UNLESS IT IS SAID THAT THE INCOME HAS REALLY ACCRUED OR RECEIVED, IT CANNOT BE TAXED AT ALL. THE ASSESSEE FURTHER REFRRED TO THE CENTRAL GOVERNMENT NOTIFICATION NO A.50050/112/2015-AD.I DATED 27TH OCTOBER, 2015 CONSTITUTED A 10-MEMBER COMMITTEE UNDER THE CHAIRMANSHIP OF JUSTICE R.V. EASWAR, WHICH SUBMITTED ITS OPINION ON VALIDITY OF SEC. 56(2)(VII)(B)(II) STATING THAT THE THIS PROVISION WORKS ON THE ASSUMPTION THAT THE BUYER OF THE PROPERTY WOULD HAVE PAID CONSIDERATION MORE THAN THE STATED CONSIDERATION AND SUCH PRESUMPTION IS NOT IN ACCORDANCE WITH JUDICIAL INTERPRETATION AND THEREFORE DESERVES TO BE DELETED. 6 ITA 44/JODH/2019 AMRA RAM KUMWAT VS CIT 9. THE ASSESSEE FURTHER SUBMITS THAT THE AO EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD MADE ENQUIRY ON THIS ASPECT WHICH IS EVIDENT FROM THE QUERY LETTER ISSUED BY HIM ON 6.12.2016 WHICH WAS PLACED AT PAGE 26 OF THE PAPER BOOK. THE REPLY WAS ALSO SUBMITTED BY THE ASSESSEE WHICH IS AT PAGES 15 AND 16 AND THE MAIN CONTENTION WAS THAT AGREEMENT FOR PURCHASE WAS MADE EARLIER AND SINCE HE IS REAL ESTATE BUSINESS, THE PROPERTY ARE BOOKED AND TRIED TO BE SOLD DIRECTLY BUT IF THE WILLING BUYERS ARE NOT AVAILABLE AFTER SOME TIME THE SAME IS BEING PURCHASED. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, IT IS HUMBLY SUBMITTED THAT THE ADDITION U/S 56(2)(VII)(B)(II) MAY NOT BE MADE IN THE CASE OF ASSESSEE AND THE PROPOSED PROCEEDINGS MAY KINDLY BE DROPPED. 10. THE ASSESSEE ALSO RELIED ON THE DECISION OF ITAT JAIPUR BENCH IN THE CASE OF CIT VS. ASHOK AGARWAL HUF REPORTED IN (2020) 207 TTJ (JP) 608 IN WHICH ALSO IT WAS HELD THAT THE PLOTS OF LAND WERE IN THE NATURE OF STOCK IN TRADE AND ASSESSEE WAS REAL ESTATE DEVELOPER. THESE STOCK IN TRADE DO NOT FALL IN THE DEFINITION OF CAPITAL ASSET AS PER PROVISIONS OF SECTION 56(2)(VII)(B) OF THE ACT. SIMILAR VIEW WAS ALSO TAKEN IN THE CASE OF PREM CHAND JAIN VS. ACIT REPORTED IN (2020) 207 TTJ (JP) 629. 11. ON THE OTHER HAND, THE LD. CIT-DR HAS VEHEMENTLY SUPPORTED THE ORDER OF THE LD. PCIT. 7 ITA 44/JODH/2019 AMRA RAM KUMWAT VS CIT 12. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED ON RECORD AND WE FIND THAT THE ASSESSMENT ORDER CANNOT BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. THE SELECTION OF THE CASE WAS FOR LIMITED SCRUTINY AND THE LD. PCIT HAS NOT SHOWN ON WHAT ISSUE THE ORDER WAS ERRONEOUS ON THE ISSUES ON WHICH THE SELECTION OF THE CASE WAS MADE. OTHER ISSUES CANNOT BE CONSIDERED FOR SETTING ASIDE THE ORDER. FURTHER WE FIND THAT THE COORDINATE JAIPUR BENCH ON SIMILAR ISSUE IN THE CASE OF REAL ESTATE DEALER HAD TAKEN A VIEW THAT FOR THE PURPOSE OF SECTION 56(2)(VII)(B) THE TERM CAPITAL ASSET WOULD NOT INCLUDE THE STOCK IN TRADE. THIS IS ONE POSSIBLE VIEW WHICH IF TAKEN CANNOT BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. IN THESE CIRCUMSTANCES WE HOLD THAT THE ASSESSMENT ORDER CANNOT BE SET ASIDE, AND ACCORDINGLY THE REVISION ORDER MADE IS QUASHED. 13. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06/09/2021. SD/- SD/- (VIKRAM SINGH YADAV) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR DATED 06/09/2021 *RANJAN COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 8 ITA 44/JODH/2019 AMRA RAM KUMWAT VS CIT 3. THE CIT 4. THE CIT (A) 5. THE DR 6. GUARD FILE ASSISTANT REGISTRAR JODHPUR BENCH