Ashok Madhusudan Lanjekar, Ratnagiri V. Income-tax Officer,

ITA 733/PUN/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9196 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Assessment record
• Section: 143(3); 54F; 54; 263

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.733/PUN/2014 / ASSESSMENT YEAR : 2009-10 ASHOK MADHUSUDHAN LANJEKAR, LANJEKAR HOUSE, NEAR MARUTI MANDIR, RATNAGIRI 415612. PAN : AAHPL9862E. . / APPELLANT V/S INCOME TAX OFFICER, WARD-3, RATNAGIRI. . / RESPONDENT / ASSESSEE BY : SHRI M.K. KULKARNI. / REVENUE BY : SHRI RAJEEV KUMAR. / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY ASSESSEE IS EMANATING OUT OF THE ORD ER OF COMMISSIONER OF INCOME-TAX II, KOLHAPUR DT.07.03.2014 FOR A.Y. 2009-10. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS AN INDIVIDUAL HAVING INCOME FROM BUSINESS AND OT HER SOURCES . ASSESSEE ELECTRONICALLY FILED THE RETURN OF INCOME FOR A.Y. 2009-10 ON 22.06.2010 DEC L AR I NG TOTAL INCOME OF RS . 18 , 50,050/- / DATE OF HEARING : 25.05.2017 / DATE OF PRONOUNCEMENT: 14.07.2017 2 THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE A SSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DA TED 30 . 12.2011 AND THE TOTAL I NCOME WAS DETERMINED AT RS . 20,43 , 520/- . SUBSEQUENTLY , ON EXAMINATION OF RECORDS OF ASSESSMENT, LD . CIT NOTICED THAT ASSESSEE HAD CLA I MED EXCESS DEDUCTION OF RS.14,94,348 U/S 54 OF THE ACT AND THE CLAI M HAS ALLOWED BY AO WITHOUT PROPE R VERIFICATION OF THE P R OVISIONS OF THE INCOME TAX ACT . HE ACCO R DINGLY ISSUED NOT I CE ON 20 .0 1 . 2014 AND CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ORDER U/S 263 OF THE ACT NOT BE PASSED. IN RESPONSE TO THE NOTIC E OF CIT, ASSESSEE INTER-ALIA OBJECTED TO THE INITIATION OF PROCEEDIN GS U/S 263 THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPT ABLE TO THE LD CIT . CIT OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAD GIVEN CALCULATION OF CAPITAL GA I NS AND THE ALLOWABLE DEDUCTION U/S 54F WAS WORKED OUT AT RS 37,59,885/- WHEREAS AS PER THE COMPUTATION O F I NCOME ENCLOSED ALONGWITH THE RETURN OF INCOME, ASSESSEE HAD CLAIMED ALLOW ABLE DEDUCTION U/S 54 AT RS.52,54,233/- AND THUS THERE WAS A DIFFERENCE IN CLAIM TO THE EXTENT OF RS.14 , 94,348/ - BETWEEN BOTH THE WORKINGS . CIT THUS CONCLUDED THAT AO HAD FAILED TO VERIFY THE COMPUTAT I ON AND THE VARIATION OF RS.14 L ACS WAS NOT LOOKED INTO BY THE AO . HE THEREFORE HELD THAT THE ORDER PASSED BY AO U/S 143(3) OF THE ACT WAS ERRONEOUS AND PREJUDICIAL TO THE INT EREST OF THE REVENUE AS CONTEMP L ATED U/S 263 OF THE ACT AND ACCORDINGLY SET ASIDE THE AFORESAID ORDER PASSED BY AO AND D I RECTED THE AO TO PASS A DENOVO ORDER . 3 3. AGGRIEVED BY THE ORDER OF LD.CIT, ASSESSEE IS NOW IN A PPEAL BEFORE US AND RAISED THE FOLLOW I NG GROUNDS. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE ACTION INITIATED BY CIT-II, KOLHPAUR UNDER S. 263 OF THE A CT IS CONTRARY TO PROVISIONS OF LAW AND NOT SUSTAINABLE. THE APPAR ENT PERUSAL OF ASSESSMENT ORDER WOULD NOT SUGGEST THAT IT WAS B ASED ON INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICAT ION OF LAW . THE PROVISIONS OF S. 263(1) INVOKED TO SET ASIDE THE AS SESSMENT COMPLETED UNDER S. 143(3) OF THE ACT ARE NOT JUSTIF IABLE. IT BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE ORDER OF THE CIT-II, KOLHPUR IS BASED ON CALCULATION SHEE T SUBMITTED BY THE ASSESSEE FOR COMPUTAT I ON OF DEDUCTION UNDER S. 54F WHICH WAS RS. 37,59,885/- WHILE THE COMPUTATION STATEMENT ENCLOSED WITH THE RETURN OF INCOME SHOWED THE CLAIM AT RS. 5 2,54,233/- WHICH WAS PART AND PARCEL OF ASSESSMENT RECORDS. TH E ACTION U/S 263 IS TO BE INVOKED ON THE BASIS OF ASSESSMENT AND NOT ON THE BASIS OF CALCULATION SHEET SUBMITTED WHICH WAS NOT PART OF RECORD. IT HAS NOT BEEN POINTED OUT AS TO HOW THE C OMPUTATION DECLARED IN THE RETURN WAS NOT ACCORDING TO L AW. IN VIEW OF THIS ASSESSMENT CORRECTLY COMPLETED AS PER LAW CAN NOT B E CALLED ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS O F REVENUE. THE ORDER OF CIT BE QUASHED. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE PRECEDENTS RELIED UPON BY CIT-II, KOLHAPUR IN HIS O RDER UNDER S. 263 ARE DISTINGUISHABLE ON FACTS AND LAW. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW IT IS NOT THE ISSUE OF TAKING ONE VIEW OR THE OTHER BY THE A. O. IT IS THE ISSUE THE A. O. HAS TAKEN THE CORRECT VIEW SUSTAINA BLE IN LAW. IT HAS BEEN JUDICIALLY HELD THAT AO. NEED NOT DISCUSS ALL THE FACTS AND ARGUMENTS IN THE ASSESSMENT ORDER. IN VIEW OF T HIS ASSESSMENT ORDER WAS NEITHER ERRONEOUS NOR PREJUDIC IAL TO THE INTERESTS OF REVENUE. THE ORDER PASSED UNDER S. 263 BEING NOT SUSTAINABLE BE QUASHED. 4. BEFORE US, THE LD. A . R . REITERATED THE SUBMISSIONS MADE BEFORE CIT AND FURTHER SUBMITTED THAT IN THE PRESENT CA SE, THE PRE-REQUISITE CONDITIONS SPECIFIED U/S 263 WERE NOT SATISFIED AND THEREFORE THE PROCEEDINGS U/S 263 LACKS JURISDICTION AND ARE BAD IN LAW . HE SUBMITTED THAT U/S 263, THE CIT CAN REVISE AN ORDER PASSED BY THE AO ONLY ON THE SATISFACTION OF TWIN CONDITIO NS NAMELY (I) THE ORDER IS ERRONEOUS AND (II) I T IS PREJUDICIAL TO THE 4 INTEREST OF REVENUE . IF ONE OF THEM IS ABSENT I . E . I F EITHER THE ORDER OF THE REVENUE IS ERRONEOUS BUT IS NOT P R EJUDICIAL TO THE INTEREST OF THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUD I CIA L TO THE INTEREST OF REVENUE - RECOURSE CANNOT BE HAD TO SEC.2 63(1) . HE FURTHER SUBMITTED THAT THE ERROR ENVISAGED BY SEC.263 IS NOT ONE WHICH DEPENDS ON POSSIB I LITY OR GUESSWORK BUT I T SHOULD BE AN ACTUAL ERROR E I THER OF FACTS OR OF LAW . HE FURTHER SUBMITTED THAT WHEN TWO VIEWS ARE POSSIBLE AND THE AO HAS TAKEN ONE V IEW WITH WHICH THE CIT DOES NOT AGREE, THE ORDER OF THE AO CANN OT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIA L TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW AND FOR THE AFORESAID PROPOSITION HE RELIED ON THE DECISION IN THE CASE OF MALABAR INDUSTRIAL CO. LTD., VS CIT (2000) 243 ITR 83 (SC). 5. WITH RESPECT TO THE ISSUE OF CAPITAL GAINS HE POINTED T O THE COMPUTATION OF INCOME AND POINTED OUT THAT THE LONG TERM CAPITAL GAINS EARNED BY THE ASSESSEE (AFTER CONSIDERING THE INDEX ATION) WAS RS. 1,02,54,233/- AGAINST WHICH ASSESSEE HAD PURCHASED FLAT AT VILE PARLE, MUMBAI FOR RS 1,10,00,000/- (AND HAD CLAIMED DEDUCTION OF RS.52,54,233/- U/S 54 OF THE ACT) AND HAD F URTHER INVESTED RS.50 LACS AND HAD THUS NO CAPITAL GAINS WHICH W AS TAXABLE. HE FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE HAD FURNISHED ALL THE R EQUIRED DETAILS (LIKE COMPUTATION OF LONG TERM CAPITAL GAINS, DETAILS OF INVESTMENT IN PROPERTY AT VILE PARLE, COPY OF INVESTMENTS M ADE IN REC BONDS). THE LD . A.R . THEREFORE SUBMITTED THAT AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, AO HAD MADE AMENDMENT TO THE CLAIM OF INDEXATION AS CLAIMED BY THE ASS ESSEE 5 AND HAD DISALLOWED THE EXCESS CLAIM OF INDEXATION TO THE EXTENT OF RS.1,93,444/- . HE THEREFORE SUBMITTED THAT AO HAD APPLIED HIS MIND TO THE FACTS OF THE CASE . HE SUBMITTED THAT THE VIEW OF THE AO IS NOT UNSUSTAINABLE IN LAW AND IN SUCH A SITUATION, TH E ORDER OF AO CANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AS CONTEMPLATED U/S 263 OF THE ACT . HE SUBMITTED THAT WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, THE O RDER OF AO CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE I TO IS UNSUSTAINABLE IN LAW . THE LD AR FURTHER PLACING RELIANCE ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. GABR IEL INDIA LTD (1993) 203 ITR 108 (BOM) SUBMITTED THAT HON'BLE BOMBAY HIGH COURT HAS HELD THAT THE SECTION DOES NOT V ISUALISE A CASE OF SUBSTITUTION OF JUDGMENT OF THE COMMISSIONER FOR T HAT OF THE ITO, WHO PASSED THE ORDER, UNLESS THE DECISION IS HE LD TO BE ERRONEOUS . THE LD AR THUS SUBMITTED THAT THE ORDER OF THE LD CIT PASSED U/S 263 OF THE ACT NEEDS TO BE SET ASIDE , BOTH ON THE GROUND OF JURISDICTION AND ON FACTS. 6. THE LD . D . R . ON THE OTHER HAND SUPPORTED THE ORDER OF LD.CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT CASE IS ABO VE THE INVOKING OF PROVISIONS OF SECTION 263 BY CIT . SE.263(1) OF THE ACT, THE POWERS UNDER WHICH CIT HAS ASS UMED POWER FOR REVISION READS AS UNDER : ' THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECOR D OF ANY PROCEEDING UNDER THIS ACT , AND IF HE CONSIDERS THAT ANY ORDER 6 PASSED THEREIN BY THE ITO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVI NG THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR C AUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY , INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLIN G THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT . ' 8. THE READING OF THE ABOVE PROVISIONS MAKES IT VERY CLEA R THAT THE POWE R OF SUO MOTU R EVIS I ON U/S 263(1) IS IN THE NATURE OF SUPERVISORY JURISDICTION AND THE SAME CAN BE EXERCISED O NLY I F THE C I RCUMSTANCES SPECIFIED THEREIN EXIST . TWO CIRCUMSTANCES MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE POWER OF REV ISION U/S 263, NAMELY (I) THE ORDER IS ERRONEOUS (II) BY VIRTUE OF BEING ERRONEOUS ; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT - IF THE ORDER OF THE ITO IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS B UT IS PREJUDICIAL TO THE REVENUE-RECOURSE CANNOT BE HAD TO S EC.263(1). IT WAS FURTHER HELD THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY T HE AO; WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED I N LOSS OF R EVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE C I T DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PRE JUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY T HE ITO IS UNSUSTAINABLE IN LAW . 9. IN THE CASE OF CIT VS. GABRIEL INDIA LTD (1993) 203 IT R 108 (BOM), THE HON'BLE BOMBAY HIGH COURT HAS HELD AS UNDER: ' AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN ITO ACTING IN ACCORDANCE WITH LAW MAKES CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDE D AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE ACCORD ING TO HIM THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY . THIS SECTION DOES NOT VISUALISE A CASE OF SUBSTITUTION OF JUDGME NT OF THE 7 COMMISSIONER FOR THAT OF THE ITO, WHO PASSED THE ORD ER , UNLESS THE DECISION IS HELD TO BE ERRONEOUS . CASES MAY BE VISUALISED WHERE ITO WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNT S , MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUM STANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATES HIMSELF. THE COMMISSION ER, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND, LEFT TO THE COMMISSIONER, HE WOULD HAVE ESTIMATED THE INCOM E AT A HIGHER F I GURE THAN THE ONE DETERMINED BY THE ITO . THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOUNTS A ND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE . IT IS BECAUSE THE ITO HAS EXERCISED THE QUASI-JUDICIAL POWER VESTED I N HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEE L SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF THE COMM ISSIONER THE ORDER IN QUESTION IS PREJUDICIAL TO THE INTEREST OF THE REVENUE . BUT THAT BY ITSELF WILL NOT BE ENOUGH TO VEST THE COMMI SSIONER WITH THE POWER OF SUO MOTU REVISION BECAUSE THE FIRST REQU I REMENT, NAMELY, THE ORDER IS ERRONEOUS, IS ABSENT . SIMILARLY IF AN ORDER I S ERRONEOUS BUT NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE, THEN ALSO THE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED . ANY AND EVERY ERRONEOUS ORDER CANNOT BE SUBJECT-MATTER OF REVISIO N BECAUSE THE SECOND REQUIREMENT ALSO MUST BE FULFILLED.' 10. IN THE PRESENT CASE FOR AY 2006-07, IT IS SEEN THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO HAD RAISED QUE RY WITH RESPECT TO THE CAPITAL GAINS, THE ISSUE OF CAPITAL GAINS WAS EXAMINED BY THE AO AND THEREAFTER HE DISALLOWED THE EXCE SS DEDUCTION ON ACCOUNT OF WRONG INDEXATION OF RS.1,93 , 444/- . THUS IT IS SEEN THAT DURING THE COURSE OF ASSESSMENT PROCEE DINGS RELEVANT QUERIES WITH RESPECT TO CLAIM OF CAPITAL GAINS WA S EXAMINED BY THE AO AND AFTER CONSIDERING THE REPLY OF AS SESSEE ADDITION BY DISALLOWING THE WRONG INDEXATION WAS MADE BY AO AND THEREAFTER HE ALLOWED THE REDUCED THE CLAIM OF THE D EDUCTION TO ASSESSEE. IN SUCH A SITUATION, WE ARE OF THE VIEW THAT PROVISIONS OF SEC.263 CANNOT BE RESORTED TO. BEFORE US , REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO DEMONSTRATE THAT TH E VIEW TAKEN BY THE AO WAS AN IMPERMISSIBLE VIEW AND WAS CONTRA RY TO LAW OR WAS UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES NECESSITATING THE EXERCISING OF REVISIONARY POWERS U/S 263 . IN THE 8 VIEW OF THE AFORESAID FACTS , WE ARE OF THE VIEW THAT IN THE PRESENT CASE, CIT WAS NOT JUSTIFIED IN RESORTING TO THE REVISIONARY POWERS U/S 263 OF THE ACT . WE THEREFORE SET ASIDE THE ORDERS OF CIT AND THUS THE GROUND OF ASSESSEE ARE ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED ON 14 TH JULY, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; ! DATED : 14 TH JULY, 2017. YAMINI #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . 4. 5. CIT(A)-II, KOLHAPUR. #$% &&'(,* '(, / DR, ITAT, A PUNE; %,-./ GUARD FILE. / BY ORDER , //TRUE COPY// /01&2'3 / SR. PRIVATE SECRETARY * '(, / ITAT, PUNE