Balvinder Kumar Nanda, Delhi V. Pr, CIT-16, New Delhi

ITA 485/DEL/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1646 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 27-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRINSATPAL GULATI
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Revision of order; Opportunity of being heard; Cost of acquisition; Assessment record; Set aside; Capital Gains
• Section: 54; 263; 142(1); 143(1); 143(2); 13

Judgement Text

ITA NO. 485/DEL/2020 BALVINDER KUMAR 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO.-485/DEL/2020 (ASSESSMENT YEAR: 2015-16) BALVINDER KUMAR 686, OLD LAJPAT RAI MARKET, DELHI. VS. PR. CIT - 16 DRUM SHAPE BUILDING, I.P. ESTATE, NEW DELHI. PAN NO. AABPN9884E APPELLANT RESPONDENT ASSESSEE BY SHRI RAKESH GUPTA, ADV. REVENUE BY SHRINSATPAL GULATI, CIT DR DATE OF HEARING: 02.12.2020 DATE OF PRONOUNCEMENT : 10 .12.2020 ORDER PER K. NARASIMHA CHARY, JM AGGRIEVED BY THE ORDER DATED 20/12/2019 UNDER SECTI ON 263 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) PASSED B Y THE PRINCIPAL COMMISSIONER OF INCOME TAX-16, NEW DELHI (LD. PCIT ) IN THE CASE OF SH. BALVINDER KUMAR NANDA (THE ASSESSEE) FOR THE ASSE SSMENT YEAR 2015-16, THE ASSESSEE FILED THIS APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF PURCHASING THE SALES OF ELECTRON ICS COMPONENTS. HE HAS FILED HIS RETURN OF INCOME ON 18.08.2015, DECLARING TOTAL INCOME OF RS. 5,07,98,490/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT, AND THEREAFTER, IT WAS SELECTED FOR LIMITED SCRUTINY THROUGH CASS ON THE ISSUE OF INCREASE IN CAPITAL' . NOTICE U/S 143(2) OF THE ACT WAS ISSUED ON 19.09.2016, ASSESSE E ENTERED APPEARANCE AND DURING THE COURSE OF HEARING, THE ASSESSEE WAS REQU IRED TO EXPLAIN SUBSTANTIAL ITA NO. 485/DEL/2020 BALVINDER KUMAR 2 INCREASE IN THE CAPITAL ACCOUNT. REQUISITE DETAILS WERE FILED BY THE ASSESSEE. VIDE ORDER DATED 16/8/2017, AS COULD BE SEEN FROM T HE IMPUGNED ORDER, THE INCOME OF THE ASSESSEE WAS ASSESSED AT A TOTAL INCO ME OF RS. 5,07,98.490/- AS SHOWN IN THE RETURNED INCOME, OBSERVING THAT NO DIS CREPANCY WAS FOUND ON THE ISSUE UNDER CONSIDERATION. 3. SUBSEQUENTLY, LD. PRINCIPAL COMMISSIONER OF INCO ME TAX , DELHI - 16, NEW DELHI (HEREINAFTER CALLED THE PCIT) ISSUED A NOTI CE U/S 263 ON 10.05.2019 STATING THAT THE ASSESSMENT ORDER WAS FOUND TO BE E RRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, INASMU CH AS THE COMPUTATION SHOWN BY THE ASSESSEE WAS ACCEPTED BY THE LEARNED ASSESSI NG OFFICER WITHOUT SEEKING ANY DETAILS REGARDING THE WORKING OF INDEXED COST O F ACQUISITION AT RS. 4,92,06,793/-. LD. PCIT FURTHER STATED THAT THE OWN ERSHIP OVER 2/3 RD OF THE PROPERTY WAS ACQUIRED BY THE ASSESSEE ON 21.11.2012 , BUT WHILE INDEXING THE COST OF ACQUISITION, THE BASE YEAR WAS TAKEN AS F.Y . 2007 - 08, AND THEREFORE, THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF INDEXAT ION FROM F.Y. 2007 - 08 TO THE YEAR TILL HE BECAME THE OWNER. ACCORDING TO THE LD. PCIT TWO DIFFERENT AMOUNTS WERE CLAIMED IN THE SAME YEAR, BUT THE AO DID NOT E XAMINE WHETHER, IT WAS A CASE OF MULTIPLE CLAIMS FOR THE SAME AMOUNT, AND TH E LEARNED ASSESSING OFFICER SHOULD HAVE CALLED FOR THE BILLS REGARDING COST OF ACQUISITION ALSO. 4. ASSESSEE HAD COMPUTED CAPITAL GAINS AT RS. 4,63, 18,027/-, WHILE THE LD. PCIT COMPUTED THE CAPITAL GAINS AT RS. 5,79,33,606/ , AND THE ASSESSEE WAS REQUIRED TO SHOW-CAUSE THAT WHY THE COMPUTATION MAD E BY THE LD. PCIT MAY NOT BE SUBSTITUTED IN PLACE OF THE COMPUTATION MADE BY THE ASSESSEE. THE ASSESSEE FURNISHED WRITTEN SUBMISSIONS EXPLAINING H IS COMPUTATION. LD. PCIT, HOWEVER, DID NOT AGREE WITH THE ASSESSEE AND PASSED THE REVISIONARY ORDER ON 20.12.2019, SETTING ASIDE THE MATTER TO THE FILE OF THE LD. AO WITH THE DIRECTION TO MAKE FRESH ASSESSMENT AS PER LAW AFTER GIVING TH E ASSESSEE AN OPPORTUNITY OF BEING HEARD. 5. IT IS SUBMITTED ON BEHALF OF THE ASSESSEE THAT T HERE IS NO DISPUTE THAT THE ITA NO. 485/DEL/2020 BALVINDER KUMAR 3 CASE OF ASSESSEE WAS PICKED UP FOR ASSESSMENT UNDER THE CATEGORY OF LIMITED SCRUTINY; THAT THE LD. PCIT DID NOT CALL FOR RECORD , BUT WENT BY THE REVENUE DONE BY THE LEARNER JOINT COMMISSIONER THEREBY ABDICATIN G HIS JURISDICTION WHICH RESULTED IN LACK OF APPLICATION OF MIND ON THE PART OF THE LD. PCIT; THAT THE LD. PCIT REMANDED THE MATTER TO THE FILE OF THE LEARNED ASSESSING OFFICER TO EXAMINE THE SAME UNDER SECTION 54 OF THE ACT WHEREA S THE CLAIM OF THE ASSESSEE WAS UNDER SECTION 54 EC OF THE ACT, WHICH CLEARLY ESTABLISHES THE WANT OF APPLICATION OF MIND BY THE LD. PCIT; AND THE LD. PCIT WENT WRONG IN DECIDING THE ISSUE RELATING TO THE INDEXATION OF THE COST OF ACQUISITION HAS TO BE COMPUTED. HE FURTHER SUBMITTED THAT THE AMBIT OF TH E ASSESSMENT FOR LIMITED SCRUTINY UNDER CASS WAS ADMITTEDLY IN RELATION TO T HE VERIFICATION OF INCREASE IN CAPITAL' IN RESPONSE TO WHICH THE ASSESSEE HAD FURN ISHED DOCUMENTS REGARDING TRANSACTIONS IN THE PROPERTY TO SHOW THE INCREASE I N CAPITAL, LEARNED ASSESSING OFFICER COULD NOT HAVE TRAVELLED BEYOND INQUIRY INT O THE INCREASE IN CAPITAL IN VIEW OF THE CBDT INSTRUCTION NO. 7/2014, 20/2015 AN D 5/2016 AND ALSO THE CBDT LETTER DATED 13 NO. 2017, AND THUS, COMPUTATIO N OF CAPITAL GAINS WAS BEYOND THE PURVIEW OF THE ASSESSMENT AND, THEREFORE , LD. PCIT COULD NOT HAVE AT ALL ENTERED INTO THE FIELD OF COMPUTATION OF CAP ITAL GAINS BY HOLDING THAT THE ORDER OF THE LEARNED ASSESSING OFFICER WAS ERRONEOU S AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. LD. AR ALSO ARGUED AT LEN GTH ON THE MERITS OF THE OBSERVATIONS MADE BY THE LD. PCIT. 6. LD. AR ALSO PLACED RELIANCE ON THE DECISIONS REP ORTED IN DECCAN PAPER MILLS CO. LTD. VS. CIT IN ITA 1013 AND 1635/PUN/201 5, AAKASH GANGA PROMOTERS & DEVELOPERS VS. PCIT IN ITA NO.164/CTK/2019, M/S R .H. PROPERTY VS. PCIT IN ITA NO. 1906/MUM/2019 AND SONALI HEMANT BHAVSAR VS. PCITINITA NO.742/M/2019 IN SUPPORT OF HIS CONTENTIONS. 7. LD. DR PLACING RELIANCE ON THE IMPUGNED ORDER AN D SUBMITTED THAT WHEN THERE WAS PATENT ERROR ON THE FACE OF THE COMPUTATI ON OF INCOME, FAILURE OF THE LEARNED ASSESSING OFFICER TO LOOK INTO THAT ASPECT BY CALLING FOR THE RELEVANT ITA NO. 485/DEL/2020 BALVINDER KUMAR 4 MATERIAL ENDED UP IN MISCARRIAGE OF JUSTICE AND THE REFORE THE LD. PCIT IS JUSTIFIED IN INTERFERING WITH THE SAME UNDER SECTION 263 OF T HE ACT. 8. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. THERE IS NO DISPUTE THAT THE CASE O F THE ASSESSEE WAS PICKED UP FOR SCRUTINY UNDER THE CATEGORY OF LIMITED SCRUTINY . THIS FACT IS ESTABLISHED FROM THE ASSESSMENT ORDER AND ALSO THE NOTICE ISSUED UND ER SECTION 143(2) OF THE ACT. IT IS ALSO NOT IN DISPUTE THAT THE CBDT ISSUED THE INSTRUCTIONS RELIED UPON BY THE ASSESSEE AND FOR THE SAKE OF CONVENIENCE WE EXT RACT THE RELEVANT PORTIONS THEREOF HEREUNDER: - CBDT INSTRUCTION NO. 7/2014 THE REASON(S) FOR SELECTION OF CASES UNDER CASS ARE DISPLAYED TO THE ASSESSING OFFICER IN AST APPLICATION AND NOTICE U/S 143(2), A FTER GENERATION FROM AST, IS ISSUED TO THE TAXPAYER WITH THE REMARK '.SELECTED U NDER COMPUTER AIDED SCRUTINY SELECTION (CASS)'. THE FUNCTIONALITY IN AS T IS BEING MODIFIED SUITABLY TO FLAG THE REASONS FOR SCRUTINY SELECTION IN AIR/CIB/ 26AS CASES. THIS FUNCTIONALITY IS EXPECTED TO BE OPERATIONALIZED BY 15TH OCTOBER, 2014. FURTHER, THE ASSESSING OFFICER WHILE ISSUING NOTICE UNDER SECTION 142(1) O F THE ACT WHICH IS ENCLOSED WITH THE FIRST QUESTIONNAIRE WOULD PROCEED TO VERIF YONLY THE SPECIFIC ASPECTS REQUIRING EXAMINATION/VERIFICATION. IN SUCH CASES, ALL EFFORTS WOULD BE MADE TO ENSURE THAT ASSESSMENT PROCEEDINGS ARE COMPLETED EX PEDITIOUSLY IN MINIMUM POSSIBLE NUMBER OF HEARINGS WITHOUT UNNECESSARILY D RAGGING THE CASE TILL THE TIME-BARRING DATE. CBDT INSTRUCTION NO. 20/2015 3. AS FAR AS THE RETURNS SELECTED FOR SCRUTINY THRO UGH CASS-2015 ARE CONCERNED, TWO TYPE OF CASES HAVE BEEN SELECTED FOR SCRUTINY I N THE CURRENT FINANCIAL YEAR- ONE IS'LIMITED SCRUTINY' AND OTHER IS COMPLETE SCRU TINY'. THE ASSESSEES CONCERNED HAVE DULY BEEN INTIMATED ABOUT THEIR CASE S FALLING EITHER IN 'LIMITED SCRUTINY' OR 'COMPLETE SCRUTINY' THROUGH NOTICES IS SUED UNDER SECTION 143(2) OF THE INCOME-TAX ACT, 1961 ('ACT'). THE PROCEDURE FOR HANDLING 'LIMITED SCRUTINY' CASES SHALL BE AS UNDER: (A) .... (B) THE QUESTIONNAIRE UNDER SECTION 142(1) OF THE ACT IN 1LIMITED SCRUTINY * CASES SHALLRE NUT IN CONFINED ONLY TO THE SPECIFIC REASONS/ISSUES FOR WH ICH CASE HAS BEEN PICKED UPFORSCRUTINY.FURTHER, THE SCOPE OF ENQUIRY SHALL BE RESTRICTED TO THE LIMITED SCRUTINY ISSUES. CBDT INSTRUCTION NO. 5/2016 4. IT IS FURTHER CLARIFIED THAT IN CASES UNDER 'LI MITED SCRUTINY \ THE SCRUTINY ASSESSMENT PROCEEDINGS WOULD INITIALLY BE CONFINED ONLY TO ISS UES UNDER 'LIMITED SCRUTINY' AND QUESTIONNAIRES, ENQUIRY, INVESTIGATION ETC. WOULD BE RESTRICTED TO SUCH ISSUES. ONLY UPON COMERS ION OF CASE TO ITA NO. 485/DEL/2020 BALVINDER KUMAR 5 'COMPLETE SCRUTINY' AFTER FOLLOWING THE PROCEDURE O UTLINED ABOVE, THE AO MAY EXAMINE THE ADDITIONAL ISSUES BESIDES THE ISSUE(S) INVOLVED IN 'LIMITED SCRUTINY'. THE AO SHALL ALSO EXPEDITIOUSLY INTIMATE THE TAXPAY ER CONCERNED REGARDING CONDUCTING 'COMPLETE SCRUTINY' IN SUCH CASES. CBDT LETTER DATED 30.11.2017 J INSTANCES HAVE COME TO NOTICE OF CBDT WHERE SOME ASSESSING OFFICERS ARE TRAVELLING BEYOND THEIR JURISDICTION WHILE MAKING A SSESSMENTS IN LIMITED SCRUTINY CASES BY INITIATING INQUIRIES ON NEW ISSUE S WITHOUT COMPLYING WITH MANDATORY REQUIREMENTS OF THE RELEVANT CBDT INSTRUC TIONS DATED 26-9-2014, 29-12-2015 AND 14-7-2016. THESE INSTANCES HAVE BEEN VIEWED VERY SERIOUSLY BY THE CBDT AND IN ONE CASE THE CENTRAL INSPECTION TEA M OF THE CBDT WAS TASKED WITH EXAMINATION OF ASSESSMENT RECORDS ON RECEIPT O FA I LEE AT IONS OF SEVERAL IRREGULARITIES.AMONGST OTHER IRREGULARITIES, IT WAS FOUND THAT NO REASONS HAD BEEN RECORDED FOR EXPANDING THE SCOPE OF LIMITED SC RUTINY, NO APPROVAL WAS TAKEN FROM THE PCIT FOR THE CONVERSION OF THE LIMIT ED SCRUTINY CASE TO A COMPLETE SCRUTINY CASE AND THE ORDER SHEET WAS MAI NTAINED VERY PERFUNCTORILY. THIS GAVE RISE TO A VERY STRONG SUSPICION OF MALA F IDE INTENTIONS. 9. THE ABOVE CBDT INSTRUCTIONS AND THE LETTER CLEAR LY ESTABLISH THAT ITS NOT OPEN FOR THE LEARNED ASSESSING OFFICER TO TRAVELLER S BEYOND THE REASON FOR SELECTION OF THE MATTER FOR LIMITED SCRUTINY AND ON THAT ASPECT THE ASSESSMENT ORDER IN THIS CASE IS IN ACCORDANCE WITH THE INSTRU CTIONS GOVERNING THE FIELD. IN SUCH CIRCUMSTANCES IT HAS TO BE SEEN WHETHER THE LD. PCI T IS JUSTIFIED IN HOLDING THE ASSESSMENT ORDER TO BE ERRONEOUS INSOFAR AS IT IS P REJUDICIAL TO THE INTEREST OF THE REVENUE FOR THE LEARNED ASSESSING OFFICER NOT CONSI DERING THE ASPECTS WHICH ARE BEYOND THE PURVIEW OF LIMITED SCRUTINY. 10. IN THE DECCAN PAPER MILLS CO. LTD. VS. CIT IN I TA 1013 AND 1635/PUN/2015, PUNE BENCH OF THE TRIBUNAL HELD, THAT, 40. NOW, COMING TO THE ASPECT OF BOOK PROFITS WHIC H WAS CONSIDERED BY THE COMMISSIONER AND THE ORDER OF THE ASSESSING OFFICER WAS HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. IN THIS REGARD, IT MAY BE POINTED OUT THAT THE CASE OF ASSESSEE WAS PICKED UP FOR SCRUTINY UNDER CASS FOR THE LIMITED PURPOSE OF VERIFYING THE CHAPT ER VI-A DEDUCTION. ONCE THE CASE IS PICKED UP FOR SPECIFIC PURPOSE UNDER CA SS, THEN IT IS OUTSIDE THE PURVIEW OF THE ASSESSING OFFICER TO LOOK INTO A NY OTHER ASPECT OTHER THAN THE ASPECT FOR WHICH IT IS PICKED UP. HENCE, THE AS SESSING OFFICER HAS NOT FORMED ANY OPINION IN RESPECT OF COMPUTATION OF BOO K PROFITS IN THE HANDS OF ASSESSEE. ONCE, NO SUCH OPINION HAS BEEN FORMED BY THE ASSESSING OFFICER, THE COMMISSIONER HAS ERRED IN HOLDING THE ORDER OF THE ASSESSING OFFICER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF REVENUE IN THIS REGARD. ACCORDINGLY, WE REVERSE THE FINDINGS OF THE COMMISSIONER. ITA NO. 485/DEL/2020 BALVINDER KUMAR 6 ACCORDINGLY, WE HOLD THAT THE ORDER PASSED BY THE C OMMISSIONER UNDER SECTION 263 OF THE ACT IS INVALID AND THE SAME IS Q UASHED FOR BOTH THE ASSESSMENT YEARS. IN M/S R.H. PROPERTY VS. PCIT, ITA NO. 1906/MUM/201 9 IT WAS HELD THAT,- AS A MATTER OF FACT, WHAT CANNOT BE DONE DIRECTLY CANNOT BE DONE INDIRECTLY . ACCORDINGLY, IN TERMS OF OUR AFORESAID OBSERVATIONS, WE ARE OF T HE CONSIDERED VIEW THAT AS THE A. O HADAPTLY CONFINED HIMSELF TO THE ISSUE FOR WHICH TH E CASE OF THE ASSESSEE WAS SELECTED FORLIMITED SCRUTINY, THEREFORE, NO INFJRMITY CAN BE ATTRIBUTED TO HIS ORDER FOR THE REASON. THAT HE HAD FAILED TO DWELLUPON CERTAIN OTHER ISSUES WHICH WERE CLEARLY BEYOND THEREALM OF THE REASON FOR WHICH THE CASE OF THE ASSESSEE WAS SELEC TED FOR LIMITED SCRUTINYAS PER THE AIR INFORMATION. WE THUS NOT BEING ABLE TO CONCUR WITH THE VIEW TAKEN BY THE F J R. CIT THAT THE ORDER PASSED BY THE A.O UNDER SEC. 143(3), DATED 10 .10.2016IS ERRONEOUS, THEREFORE, SET ASIDE HIS ORDER AND RESTORE THE ORDER PASSED BY THE A.O. AS WEHAVE QUASHED THE ORDER PASSED BY THE PR. CIT U NDER SEC. 263 ON THE GROUND OF INVALIDASSUMPTION OF JURISDICTION BY HIM, THEREFORE , WE REFRAIN FROM ADVERTING TO AND THEREINADJUDICATING THE CONTENTIONS ADVANCED BY THE ID. A. RON THE MERITS OF THE CASE, WHICH THUSARE LEFT OPEN. 11. SIMILARLY, IS THE VIEW TAKEN CONSISTENTLY BY TH E BENCHES OF THIS TRIBUNAL IN THE OTHER TWO CASES ALSO, RELIED UPON BY THE ASSESS EE. IN THE CIRCUMSTANCES, IN VIEW OF THE CONSISTENT VIEW TAKEN IN SIMILAR MATTER S WE ARE OF THE CONSIDERED OPINION THAT WHEN THE ASSESSING OFFICER IS BOUND TO FOLLOW THE CBDT INSTRUCTIONS AND WHILE FOLLOWING SUCH INSTRUCTIONS AND AFTER VER IFICATION OF THE MATERIAL FURNISHED BY THE ASSESSEE ON THE ASPECT COVERED BY THE LIMITED SCRUTINY, IS NOT OPEN FOR THE LD. PCIT TO SAY THAT NOT ADVERTING TO THE OTHER ASPECTS OF THE COMPETITION WOULD RENDER THE ASSESSMENT ORDER ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. WITH THIS VIEW OF THE MATT ER WE FIND THAT THE IMPUGNED ORDER CANNOT BE SUSTAINED AND, THEREFORE, THE SAME IS LIABLE TO BE QUASHED. WE ACCORDINGLY QUASH THE SAME. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 10/12/2020 SD/- SD/- (ANIL CHATURVEDI) (K. NARSIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10.12.2020 *KAVITA ARORA, SR. PS ITA NO. 485/DEL/2020 BALVINDER KUMAR 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI