P Mahidhar Reddy, Nellore Dist. V. ITO, Ward-1, Guntur

ITA 778/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74476 (ITAT-HYDERABAD)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 16-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Assessee Lawyers: GIRISH S SUNDAR
• Keywords: Reopening of assessment; Unexplained investment; Capital asset; Depreciation; Business expenditure; Audit objection
• Section: 142(1); 69; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.778/HYD/13 : ASSTT. YEAR 2007 - 08 SHRI P.MAHIDHAR REDDY, JARUGUMALLE VILLAGE, KOTA MANDAL, SPSR NELLORE DISTRICT. ( PAN - AGPPM 32893 L) V/S. INCOME - TAX OFFICER, WARD - I, GU D UR, (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GIRISH S.SUNDAR RESPONDENT BY : SHRI D.SUDHAKAR RAO CIT - DR DATE OF HEARING 17.12.2013 DATE OF PRONOUNCEMENT 21.1.20 14 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX GUNTUR DATED 15.3.2013 PASSED UNDER S.263 OF THE INCOME - TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2007 - 08. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007 - 08 ON 4.4.2008 ADMITTING TOTAL INCOME OF R S.2,32,010/ - , BESIDES AGRICULTURAL INCOME OF RS.2,00,000/ - . THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S.143 (3) READ WITH SECTION.147 ON 23.12.10. 3. SUBSEQUENTLY, A NOTICE U/S.263 OF I.T. ACT 1961 WAS ISSUED TO THE ASSESSEE ON 14.02.2013 , CALL ING FOR HIS OBJECTIONS, IF ANY, TO THE REVISION OF THE ASSESSMENT MADE EARLIER IN TERMS OF S .263. THE SAID SHOW - CAUSE NOTICE INTER - ALIA READ AS UNDER: I TA NO. 778/ HYD/2013 SHRI P.MAHIDHAR REDDY, JARUGUMALLE VILLAGE, NELLORE DISTRICT. 2 IN YOUR CASE, ASSESSMENT U/S.142(3) R.W.S. 147 OF THE INCOME - TAX ACT, WAS COMPLETED ON 23.12.2010 DE TERMINING THE ASSESSEES INCOME AT RS.15,60,893/ - . WHILE COMPLETING THE ASSESSMENT THE AO DISALLOWED AN AMOUNT OF RS.12,78,883/ - U/S.69 OF THE IT ACT TOWARDS UNEXPLAINED INVESTMENT IN PURCHASE OF TATA SAFARI CAR. ON EXAMINATION OF THE ASST. RECORDS FOR TH E ASST. YEAR 2007 - 08, IT IS NOTICE THAT YOU HAVE SOLD AGRICULTURAL LAND FOR A CONSIDERATION OF RS.8,55,500/ - AND SHOWN THE SAME IN THE STATUS OF HUF FOR THE ASST. YEAR 2007 - 08. HOWEVER, A PERUSAL OF SALE DEED DATED 06.01.2007, IT REVEALS THAT YOU HAVE PUR CHASED THE LAND ON 20.01.2005 FOR A CONSIDERATION OF RS.1,95,000/ - WITH YOUR OWN FUNDS AND SOLD THE SAME IN THE STATUS OF INDIVIDUAL STATUS BY QUOTING PAN: AGPPM3293L. FURTHER, IT IS OBSERVED THAT, ON EXAMINATION OF THE RETURNS OF INCOME FOR THE ASST. YEA RS 2005 - 06 TO 2007 - 08 WHICH WERE BELATEDLY FILED ON 10.12.2010 IN THE STATUS OF HUF, THE LAND WAS SHOWN AS STOCK - IN - TRADE THOUGH YOU ARE NOT DOING REAL ESTATE BUSINESS. IN VIEW OF THE ABOVE, THE TRANSACTION SHOULD BE TAXED IN THE STATUS OF INDIVIDUAL ONLY BUT NOT IN THE STATUS OF HUF. HENCE, THE SHORT TERM CAPITAL GAIN OF RS.6,60,500/ - NEEDS TO BE TAXED. FURTHER, ON VERIFICATION OF COMPUTATION OF TOTAL INCOME, YOU HAVE CLAIMED AN AMOUNT OF RS.2,46,240/ - TOWARDS HOUSING LOAN REPAYMENT UNDER CHAPTER VI. HO WEVER, AS SEEN FROM THE CAPITAL ACCOUNT YOU HAVE NOT DEBITED ANY AMOUNT UNDER THE HEAD REPAYMENT OF LOAN. HENCE, THE AMOUNT OF RS.2,46,240/ - NEEDS TO BE TAXED AS PER THE PROVISIONS OF SEC. 69 OF THE INCOME - TAX ACT. 4. AS THE ASSESSEE HAS NOT RESPONDED TO THE NOTICES ISSUED AND SOUGHT ADJOURNMENTS TIME AND AGAIN, T HE COMMISSIONER OF INCOME - TAX PROCEEDED TO CONCLUDE THE PROCEEDINGS INITIATED UNDER S.263 OF THE ACT, ON THE BASIS OF INFORMATION A V AILABLE ON RECORD INCLU D IN G THE SUBMI S SIONS MADE BY THE ASSES SEE DURING THE ASSESSMENT PROCEEDINGS. THE COMMISSIONER OF INCOME - TAX ACCORDINGLY PASSED THE IMPUGNED ORDERS UNDER S.263 OF THE ACT, DECIDING ON BOTH THE ISSUES CONSIDERED BY HIM IN THE FOLLOWING MANNER - A PERUSAL OF THE DOCUMENTS AVAILABLE ON RECORD SHOW THAT THE PAN OF THE SELLER I.E., P. MAHIDHAR REDDY IS THAT OF THE ASSESSEE IN HIS INDIVIDUAL STATUS AND NOT THAT OF HIS HUF. FURTHER, PAGE 2 OF THE REGISTERED SALE DEED OF THE PROPERTY MENTIONS THAT IT WAS EARLIER I TA NO. 778/ HYD/2013 SHRI P.MAHIDHAR REDDY, JARUGUMALLE VILLAGE, NELLORE DISTRICT. 3 ACQUIRED BY THE ASSESSEE USING HIS SELF EARNED MONEY INDICATING THAT IT WAS PURCHASED IN HIS INDIVIDUAL STATUS. FURTHER, THERE IS NO EVIDENCE TO SUPPORT THE CLAIM THAT THIS PROPERTY BELONGS TO P. MAHIDHAR REDDY, HUF AND MOREOVER THE RETURN OF INCOME FOR THE ASSESSEES HUF FOR ASST. YEAR 20 05 - 06 I.E., THE YEAR IN WHICH THE PROPERTY WAS PURCHASED AS WELL AS ASST. YEAR 2007 - 08, DURING WHICH THE PROPERTY WAS SOLD, WERE FILED BELATEDLY ON 10.12.2010 JUST PRIOR TO THE COMPLETION OF SCRUTINY ASSESSMENT IN THE ASSESSEES INDIVIDUAL CASE FOR ASST. Y EAR 2007 - 08. IN THE RETURN OF INCOME OF THE ASSESSEES HUF FOR ASST. YEAR 2005 - 06, THE PROPERTY HAS BEEN SHOWN AS STOCK IN TRADE THOUGH THE ASSESSEE NOR HIS HUF IS ENGAGED IN THE BUSINESS OF REAL ESTATE. FOR ASST. YEAR 2007 - 08 I.E., THE YEAR IN WHICH THE PROPERTY WAS SOLD, THE HUF HAS CLAIMED BUSINESS EXPENDITURE TOWARDS OPENING STOCK IN TRADE, EVICTION CHARGES, SITE IMPROVEMENT EXPENSES, BROKERAGE, SALARY, TRAVELING EXPENSES ETC., AND OFFERED A PROFIT OF RS.1,31,870/ - AGAINST SALE CONSIDERATION OF RS.8,5 5,500/ - . THE SUBMISSION OF THE ASSESSEE BEFORE THE ASSESSSING OFFICER THAT THE PROPERTY BELONGS TO THE HUF APPEARS TO BE AN AFTER THOUGHT TO AVOID PAYING TAXES ON THE GAINS ACCRUING AS A RESULT OF SALE OF THE PROPERTY. IN THT HANDS OF THE ASSESSEE, THE S ALE OF THE PROPERTY LEADS TO SHORT TERM CAPITAL GAINS. TO AVOID PAYING TAXES ON SHORT TERM CAPITAL GAIN, THE ASSESSEE CREATED A FICTION THAT THE PROPERTY BELONGS TO HIS HUF AND A FURTHER FICTION THAT THE HUF IS DEALING IN REAL ESTATE. HE HAS THUS CLAIMED BUSINESS EXPENSES IN THE CASE OF HUF, WHICH WOULD OTHERWISE NOT BE ALLOWABLE IN HIS INDIVIDUAL HANDS. THE ASSESSEES CLAIM APPEARS WRONG AND HENCE TO THIS EXTENT THE ASSESSMENT ORDER U/S.143 (3) R.W.S.147 DATED 23.12.2010 IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. THE ASSESSING OFFICER IS DIRECTED TO TREAT THE AGRICULTURAL LAND SOLD IN THE ASST. YEAR 2007 - 08 FOR RS.8,55,000/ - AS A CAPITAL ASSET BELONGING TO THE ASSESSEE AND TO BRING THE AMOUNT TO TAX IN HIS HANDS AS SHORT TERM CAPITAL GAIN S. AS REGARDS THE SECOND ISSUE MENTIONED IN THE SHOW - CAUSE NOTICE, THE ASSESSEE HAS CLAIMED RS.2,46,240/ - AS REPAYMENT OF HOUSING LOAN. HOWEVER, HIS CAPITAL ACCOUNT DOES NOT REFLECT ANY REPAYMENT OF HOUSING LOAN AND HENCE THE ENTIRE AMOUNT OF HOUSING LOA N REPAYMENT I.E., RS.2,46,240/ - APPEARS TO BE OUTSIDE THE REGULAR BOOKS OF ACCOUNTS. THIS PAYMENT SHOULD BE TREATED AS UNEXPLAINED INVESTMENT U/S.69 OF THE INCOME - TAX ACT. FAILURE TO DO SO HAS MADE THE ORDER DATED 23.12.2010 ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE AND HENCE THE A.O. IS DIRECTED TO MODIFY HIS ORDER AND TAX THE AMOUNT OF HOUSING LOAN REPAYMENT I.E., RS.2,46,240/ - AS UNEXPLAINED INVESTMENT U/S.69. THE ASSESSEE MAY LEAD ANY EVIDENCE TO SUBSTANTIATE HIS CLAIM BEFORE THE ASSESSIN G OFFICER. I TA NO. 778/ HYD/2013 SHRI P.MAHIDHAR REDDY, JARUGUMALLE VILLAGE, NELLORE DISTRICT. 4 5. AGGRIEVED BY THE ORDER OF THE COMMISSIONER OF INCOME - TAX PASSED UNDER S.263 AND THE DIRECTIONS GIVEN BY THE COMMISSIONER OF INCOME - TAX TO THE ASSESSING OFFICER ON THE ISSUES INVOLVED, ASSESSEE PREFERRED THE ASSESSEE IS ON APPEAL BEFORE US . 6. THE ASSESSEE IN THE GROUNDS ORIGINALLY RAISED CONTESTED NTO ONLY THE LEGALITY OF THE INITIATION OF TEHE PROCEEDINGS UDNDER S.263 OF THE ACT, BUT ALSO THE MERITS OF THE DECISION OF THE COMMISSIONER ON THE ISSUES DEALT WITH. ASSESSEE HAS ALSO RAISE D AN ADDITIONAL GROUND , WHICH READS AS FOLLOWS 3. THE COMMISSIONER OF INCOME - TAX ERRED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT AS A REMEDIAL ACTION FOR AUDIT OBJECTION. 7. THE LEARNED COUNSEL FOR THE ASSESSEE, NARRATING THE PRIOR ASS ESSMENT PROCEEDINGS, SUBMITTED THAT THE ASSESSING OFFICER , BEING UNDER THE IMPRESSION THAT THE INCOME HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 2007 - 08 WITHIN THE MEANING OF S. 147 OF INCOME - TAX ACT 1961 ISSUED NOTICE TO REOPEN THE ASSESSMENT. IN REPL Y TO THE SHOW - CAUSE NOTICE ISSUED U/S.147, THE ASSESSEE FILED A LETTER ON 7.7.10 STATING THAT THE RETURN FILED ORIGINALLY ON 4.4.08 MAY BE TREATED AS THE RETURN FILED U/S.148 OF THE I.T. ACT. THE CASE HAS BEEN TAKEN UP FOR SCRUTINY AND ACCORDINGLY NOTICES U/S.143(2) & 142(1) WERE ISSUED TO THE ASSESSEE STATING THE REASONS FOR ISSUE OF NOTICE U/S.148. IT IS SUBMITTED BY THE LEARNED COUNSEL, THAT T HEREAFTER, THE ASSESSING OFFICER ULTIMATELY COMPLETED THE ASSESSMENT ON A TOTAL INCOME OF R S .15,60,893, AS A G AIN S T RETURNED IN C OM E OF RS.2,32,010, AFTER MAKING THE ADDITION BY WAY OF DISALLOWANCE OF 50% EXPENDITURE CLAIMED ON IMPROVEMENTS, WORKING OUT TO R S .50,000 ; AND OF R S .12,78,883 UN D ER S.69 OF THE ACT, VIDE ORDER OF ASSESSMENT DATED 27.12.2010 PASSED UNDER S.143(3) R E AD WITH S.147 OF THE ACT. HE THUS, SUBMITTED THAT THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT AFTER DETAILED CONSIDERATION OF THE ISSUES INVOLVED, AND ON DUE APPLICATION OF I TA NO. 778/ HYD/2013 SHRI P.MAHIDHAR REDDY, JARUGUMALLE VILLAGE, NELLORE DISTRICT. 5 MIND IN RELATION TO SUCH ISSUES IN THE LIGHT OF CONTENTIONS OF THE ASSESSEE. IT IS, THEREFORE, SUBMITTED THAT SUCH AN ASSESSMENT MADE ON DUE APPLICATION OF MIND TO THE ISSUES INVOLVED, CANNOT BE SAID TO BE EITHER ERRONEOUS OR PREJU DI CIAL TO THE IN T ER E STS OF THE REVENUE. 8 . FURTHER, T HE LEARNED COUNSEL FOR THE A SSESSEE , FURTHER RELIED ON THE DECISION IN THE CASE OF SPECTRA SHARES & SCRIPS (P) LTD. VS. CIT - III, HYDERABAD [2013]36 TAXMANN.COM 348 (ANDHRA PRADESH) AND SUBMIT TED THAT ONCE IT IS CLEAR THAT THERE WAS APPLICATION OF MIND BY AN ENQUIRY, COMMISSIONER, ME RELY BECAUSE HE ENTERTAINS A DIFFERENT OPINION IN THE MATTER, CANNOT INVOKE HIS POWER U/S.263. 9. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE DECISION OF THE GAUHATI HIGH COURT IN THE CASE OF B & A PLANTATION & INDUSTRIES LTD. VS CIT ( 290 I TR 395 ); AND ALSO THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS. LUCAS TVS LTD (249 ITR 302) , WH EREIN IT HAS BEEN HELD THAT REOPENING OF ASSESSMENT ON THE BASIS OF AUDITED REPORT WOULD BE BAD IN LAW. THE LEARNED COUNSEL ALSO RELIED UPON THE DECISIO N OF THE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF CIT V/S. SOHANA WOOLLEN MILLS (296 ITR 238); AND OF THE GAUHATI HIGH COURT IN THE CASE OF BONGAIGAON REFINERY AND PETROCHEMICALS V/S. UNION OF INDIA (287 ITR 120), WHEREIN THE LEGALITY AND VALIDITY OF THE INITIATION OF THE PROCEEDINGS UNDER S.263 OF THE ACT, PURSUANT TO AN A UDIT OBJECTION, HAS BEEN EXAMINED AND DECIDED IN FAVOUR OF THE ASSESSEE. 10 . LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE CONTRARY, STRONGLY SUPPORTED THE IMPUGNED ORDER OF THE COMMISSIONER AND SUBMITTED THAT THE SAME IS LIABLE TO BE SUSTAINED NOT ONLY ON LEGALITY AND JURISDICTIONAL COUNT, BUT ALSO ON HIS DECISION ON THE ISSUES INVOLVED. IN THIS BEHALF, HE R ELIED ON THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS. P.V.S. BEEDIES PVT LTD. ( 237 ITR 13 ) WHEREIN IT HAS BEEN HELD THAT REOPENING OF ASSESSMENT ON THE BASIS OF FACTUAL ERROR POINTED OUT BY THE I TA NO. 778/ HYD/2013 SHRI P.MAHIDHAR REDDY, JARUGUMALLE VILLAGE, NELLORE DISTRICT. 6 AUDIT PARTY IS VALID IN LAW . RELIANCE WAS ALSO PLACED ON THE DECISION IN THE CASE OF INDIAN AND EASTERN NEWSPAPER SOCIETY V S. CIT (1979) 119 ITR 996 (SC) , WHEREIN, OBSERVING THAT AN AUDITED REPORT BROUGHT TO THE ATTENTION OF ASSESSING OFFICER THE RELEVANT PROVISION OF LAW, BUT HAS NOT INTERPRETED THE SAID PROVISIONS , IT WAS HELD THAT AUDIT REPORT SHOULD BE RE GARD ED AS A COMMUN ICATION OF LAW AND NOT INTERPRETATION OF LAW . RELIANCE WAS ALSO PLACED ON THE DECISION OF THE MADRAS HIGH COURT I N THE CASE OF CIT VS. FIRST LEASING CO. OF INDIA LTD ( 241 ITR 248 ) . 1 1 . WE HEARD BOTH THE PARTIES AND PERUSED THE IMPUGNED ORDERS OF THE LOW ER AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD . WE HAVE ALSO GONE THROUGH THE DECISIONS RELIED UPON BY THE PARTIES. IT IS THE NON - TAXING OF THE CAPITAL GAINS ARISING OUT OF SALE OF AGRICULTURAL LAND SOLD DURING THE ASSESSMENT YEAR 2007 - 08, AND TH E REPAYMENT OF HOUSING LOAN TO THE EXTENT OF RS.2,46,240 WHICH WAS NOT REFLECTED IN THE CAPITAL ACCOUNT AND HENCE NOT ALLOWABLE, WHICH PROMPTED THE COMMISSIONER OF INCOME - TAX TO INVOKE THE REVISIONARY JURISDICTION UNDER S.263 OF THE ACT. IT MAY EB TRUE TH AT THE COMMISSIONER OF INCOME - TAX WAS PROMPTED IN EXERCISING THE REVISIONARY JURISDICTION BY THE AUDIT OBJECTION RAISED IN THIS BEHALF. HOWEVER, MERELY ON THAT COUNT, THE LEGALITY AND VALIDITY OF THE JURISDICTION EXERCISED UNDER S.263 OF THE ACT CANNOT BE QUESTIONED. IT IS SETTLED POSITION OF LAW, AS ENUNCIATED BY VARIOUS COURTS IN THE CASE - LAW REFERRED TO BY THE LEARNED DEPARTMENTAL REPRESENTATIVE BEFORE US AND DISCUSSED ABOVE, THAT MERELY BECAUSE A PROCEEDING UNDER S.147/148 IS INITIATED BASED ON AN AUDI T OBJECTION, IT CANNOT BE QUESTIONED ON GROUNDS OF LEGALITY OR VALIDITY. 1 2 . HOWEVER, IT IS EVIDENT FROM THE MATERIAL ON RECORD AND THE CONTENTIONS OF THE PARTIES BEFORE US, THAT THE ISSUES THAT GAVE RISE TO THE PRESENT PROCEEDINGS UNDER S.263 OF THE ACT WERE SUBJECT MATTER OF DEBATE BEFORE THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS. DURING THE COURSE OF SCRUTINY ASSESSMENT , PROCEEDINGS THE ASSESSEES I TA NO. 778/ HYD/2013 SHRI P.MAHIDHAR REDDY, JARUGUMALLE VILLAGE, NELLORE DISTRICT. 7 AUTHORIZED REPRESENTATIVE PRODUCED THE INFORMATION AS CALLED FOR BY THE ASSESSIN G OFFICER AND STATED THAT NO BOOKS OF ACCOUNT HAVE BEEN MAINTAINED. HOWEVER, I N THE ASSESSMENT PROCEEDINGS , THE ASSESSEE CLAIMED IMPROVEMENT OF RS.1,00,000 ON HOUSE PROPERTY WHICH WAS SOLD ON 26.4.2006 FOR A TOTAL SALE CONSIDERATION OF RS.13,07,000/ - . THE ASSESSEES AUTHORIZED REPRESENTATIVE , THEREUPON WAS ASKED BY THE ASSESSING OFFICER, TO PRODUCE EVIDENCE , FOR THE EXPENDITURE INCURRED ON SUCH HOUSE PROPERTY AS CLAIMED BY THE ASSESSEE. THE ASSESSEES AUTHORIZED REPRESENTATIVE , IN RESPONSE, EXPRESSED HIS I NABILITY TO PRODUCE ANY EVIDENCE AGAINST THE CLAIM. CONSIDERING ALL THE ASPECTS , AN AMOUNT OF RS.50,000/ - WAS DISALLOWED BY THE ASSESSING OFFICER, FROM SUCH EXPENDITURE CLAIMED BY THE ASSESSEE ON THE IMPROVEMENTS AND T HAT WAS ADDED BACK TO THE INCOME RETU RNED BY THE ASSESSEE. EVEN WITH REGARD TO OTHER ISSUE OF CAPITAL GAINS ON SALE OF AGRICULTURAL LAND ON 06.01.2007 FOR RS.8,55,500/ - , THE ASSESSEES AUTHORISED REPRESENTATIVE STATED THAT THE PROPERTY WAS PURCHASED IN THE HUF STATUS ON 20.1.2005 AND FURNIS HED THE EVIDENCE TO THIS EFFECT. THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER OBSERVED THAT THE DOCUMENT IS PLACED ON RECORD AND VERIFIED. THE ASSESSING OFFICER ALSO STATED THAT THE ASSESSEE SHOWED THE SALE OF AGRICULTURAL LAND IN THE RETURN OF INCOME F OR THE ASSESSMENT YEAR 2007 - 08 IN THE STATUS OF HUF AND HENCE THE SAME WAS ACCEPTED BY THE ASSESSING OFFICER. 1 3 . I T IS CLEAR FROM THE DISCUSSION IN THE PRECEDING PARA THAT THE ASSESSING OFFICER HAS ALREADY DONE THOROUGH ENQUIRY AND IT IS ONLY AFTER DE TAILED CONSIDERATION OF THE MATTER IN THE LIGHT OF EVIDENCE AND DEBATE AND DELIBERATIONS ON THE ISSUES INVOLVED, ARRIVED AT HIS OWN CONCLUSIONS ON THE POINTS AT ISSUES, AND ACCORDINGLY COMPLETED THE ASSESSMENT. THAT BEING SO, SUCH AN ASSESSMENT CANNOT BE TERMED AS EITHER ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF REVENUE MERELY BECAUSE THE CONCLUSIONS DRAWN BY THE ASSESSING OFFICER ARE NOT ACCEPTABLE TO THE COMMISSIONER OF INCOME - TAX, EVEN IF THE SAME ARE SUPPORTED BY THE AUDIT OBJECTIONS. WE ARE SUPPOR TED IN THIS BEHALF, BY THE DECISION OF T HE CO - ORDINATE BENCH OF I TA NO. 778/ HYD/2013 SHRI P.MAHIDHAR REDDY, JARUGUMALLE VILLAGE, NELLORE DISTRICT. 8 TRIBUNAL IN THE CASE OF NEW CYBERABAD CITY PROJECTS (P) LTD V/ S ITO - 16(2), HYDERABAD, (2013) 33 TAXMANN.COM.380(HYDERABAD TRIB . ) OBSERVED AS FOLLOWS: 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. FIRST WE WILL ADJUDICATE THE LEGALITY OF INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT. IN THIS CASE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT VIDE ORDER DATED 18.9.2009. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE IS IN PRE - OPERATIVE STAGE AND IT HAS NOT COMMENCED ITS COMMERCIAL ACTIVITIES. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE HAS NOT PREPARED PROFIT AND LOSS ACCOUNT FOR THE FINANCIAL YEAR RELEVANT TO THE A.Y. 2007 - 08. THE ASSESSEE WAS SUBJECTED TO STATUTORY AUDIT UNDER COMPANIES ACT, 1956 AND FURNISHED AUDIT REPORT FROM M/S. PRICEWATER HOUSE, HYDERABAD VIDE THEIR AUDIT REPORT DATED 27 TH NOVEMBER, 2007. THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT U/S.143(3) OF THE ACT MADE PROPER SCRUTINY AND PASSED THE ASSESSMENT ORDER DATED 18.9.2009. TO INVOKE THE PROVISIONS OF SECTION 263 OF THE ACT IT REQUIRES TWO PREREQUISITE CONDITIONS WHICH MUST BE PRESENT BEFORE THE CIT CAN EXERCISE REVISIONAL JURISDICTION POWER CONFERRED ON HIM. FIRST C ONDITION IS THAT THE ORDER PASSED BY THE ITO MUST BE ERRONEOUS AND THE SECOND CONDITION IS THAT THE ERROR MUST BE SUCH THAT IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IF THE ORDER IS ERRONEOUS BUT IT IS NOT PREJUDICIAL TO THE INTEREST OF THE REVENU E, THE CIT CANNOT EXERCISE REVISIONAL JURISDICTION U/S.263(1) OF THE ACT. THE REVISIONAL AUTHORITY IS REQUIRED TO GIVE FINDINGS THAT THE ORDER SOUGHT TO BE REVISED IS PREJUDICIAL TO THE INTEREST OF REVENUE AS WELL AS ERRONEOUS. IF ONE OF THAT IS ABSENT, THE REVISIONAL AUTHORITY CANNOT EXERCISE THE POWER U/S.263 OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE IS HAVING NO TAXABLE INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND THE RETURNED INCOME IS NIL AND THE ASSESSEE IS ALSO HAVING NO CLAIM OF CA RRIED FORWARD LOSS OR DEPRECIATION IN THE ASSESSMENT YEAR UNDER CONSIDERATION. EVEN ASSUMING THAT THERE ARE CERTAIN ERRORS IN THE CLAIM OF THE ASSESSEE WHILE FILING THE RETURN OF INCOME AND IT WAS NOT NOTICED BY THE ASSESSING OFFICER WHILE PASSING THE ASS ESSMENT ORDER U/S.143(3) OF THE ACT, IT DOES NOT RESULT IN TAXABLE INCOME EVEN AFTER CONSIDERING THE ISSUE RAISED BY THE CIT. THE ORDER OF THE ASSESSING OFFICER I TA NO. 778/ HYD/2013 SHRI P.MAHIDHAR REDDY, JARUGUMALLE VILLAGE, NELLORE DISTRICT. 9 MAY ERRONEOUS BUT THAT ITSELF CANNOT LEAD TO THE CONCLUSION THAT THE CIT CAN EXERCISE HIS POWE RS U/S.263 OF THE ACT. THIS IS BECAUSE THE ORDER SOUGHT TO BE REVISED SHALL BE PREJUDICIAL TO THE INTEREST OF THE REVENUE BUT IN THE PRESENT CASE THIS IS MISSING. 12. THE ASSESSMENT ORDER PASSED CANNOT BE TERMED AS ERRONEOUS INASMUCH AS THE ASSESSING O FFICER HAS PASSED THE ORDER AFTER APPLICATION OF HIS MIND ON THE VERY SAME ISSUE, AFTER CONSIDERING ALL THE INFORMATION, EXPLANATION FILED. THE COMMISSIONER OF INCOME TAX CANNOT SUBSTITUTE HIS OWN VIEWS ON THE ISSUE IN EXERCISE OF THE JURISDICTION UNDER S ECTION 263 OF INCOME TAX ACT, 1961. SIMPLY BECAUSE THE COMMISSIONER OF INCOME TAX FELT THAT THE ASSESSMENT ORDER IS ERRONEOUS THAT ITSELF WOULD NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER OF SUO MOTO REVISION BECAUSE THE FIRST REQUIREMENT OF SEC TION, NAMELY, THE ORDER IS PREJUDICIAL TO THE INTEREST OF REVENUE IS LACKING. EVEN ASSUMING THAT THE ENQUIRIES MADE BY THE ASSESSING OFFICER ARE INADEQUATE, THE JURISDICTION UNDER SEC. 263 OF INCOME TAX ACT, 1961 CANNOT BE ASSUMED AS IT WAS ONLY IN THE CASES OF LACK OF ENQUIRIES THAT THE JURISDICTION UNDER SEC. 263 OF INCOME TAX ACT, 1961 CAN BE ASSUMED. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING DECISIONS: CIT V. ANIL KUMAR SHARMA [2011]335 ITR 83/[2010]194 TAXMAN 504 (DELHI); CIT V. SUNBEAM AUTO LTD. [2011]332 ITR 167/[2010]189 TAXMAN 436 (DELHI) CIT V. GABRIEL INDIA LTD [1993]203 ITR 108/71 TAXMAN 585 (BOM) 13. FROM THE READING OF SUB - SECTION (1) OF SECTION 263, IT IS CLEAR THAT THE POWER OF SUO MOTO REVISION CAN BE EXERCISED BY THE COMMIS SIONER ONLY IF, ON EXAMINATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT, HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE INCOME - TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT IS NOT AN ARBITRARY OR UNCHARTERED POWER, IT CAN BE EXERCISED ONLY ON FULFILLMENT OF THE REQUIREMENTS LAID DOWN BY SUB - SECTION (1). THE CONSIDERATION OF THE COMMISSIONER, AS TO WHETHER AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, MUST BE BASED ON I TA NO. 778/ HYD/2013 SHRI P.MAHIDHAR REDDY, JARUGUMALLE VILLAGE, NELLORE DISTRICT. 10 MATERIALS ON THE RECORD OF THE PROCEEDINGS CALLED FOR BY HIM. IF THERE ARE NO MATERIALS ON RECORD ON THE BASIS OF WHICH IT CAN BE SAID THAT THE COMMISSIONER ACTING IN A REASONABLE MANNER COULD HAVE COME TO SUCH A CONCLUSION, THE VERY INITIATION OF PROCEEDINGS BY HIM WILL BE ILLEGAL AND WITHOUT JURISDICTION. THE COMMISSIONER CANNOT INITIATE PROCEEDINGS WITH A VIEW TO STARTING FISHING AND ROVING ENQUIRIES IN MATTERS OR ORDERS WHICH ARE ALREADY CONCLUDED. SUCH ACTION WILL BE AGAINST THE WELL - ACCEP TED POLICY OF LAW THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDINGS, THAT STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE AND THAT LAPSE OF TIME MUST INDUCE REPOSE IN AND SET AT REST JUDICIAL AND QUASI - JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SPHERES OF HUMAN ACTIVITY. PARASHURAM POTTERY WORKS CO LTD. V. ITO [1977]106 ITR 1 (SC) AT PAGE 10. 14. FROM THE PROVISIONS OF SECTION 263(1) IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME - TAX OFFICER ACTING IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME - TAX OFFICER, WHO PASSED THE ORDER UNLESS THE DECISION OF HELD TO BE ERRONEOUS. CASES MAY BE VISUALIZED WHERE THE INCOME - TAX OFFICER WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATE HIMSELF. THE COMMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE O PINION THAT THE ASSESSMENT MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEFT TO THE COMMISSIONER HE WOULD HAVE ESTIMATED THE INCOME AT A FIGURE HIGHER THAN THE ONE DETERMINED BY THE INCOME - TAX OFFICER. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE - EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. IT IS BECAUSE THE INCOME - TAX OFFICER HAS EXERCISED THE QUASI - JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE FORMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX I TA NO. 778/ HYD/2013 SHRI P.MAHIDHAR REDDY, JARUGUMALLE VILLAGE, NELLORE DISTRICT. 11 WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE R ELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. 15. IN OUR OPINION, IN THE PRESENT CASE, THE LEARNED ASSESSING OFFICER AFTER DULY CONSIDERING THE EXPLANATION AND INFORMATION FILED IN RESPONSE TO THE NOTICE ISSUED U/S.143(2) OF THE ACT, ON BEING SATISFIED WITH SUCH EXPLANATION CHOSE NOT TO MAKE ANY FURTHER ENQUIRY. ENDLESS ENQUIRY IS NOT POSSIBLE AND IT IS FOR THE LEARNED ASSESSING OFFICER TO DECIDE WHEN TO END THE ENQUIRY. THE LEARNED CIT CAN NOT TRANSGRESS THE JURISDICTION UNDER SECTION 263 OF I.T. ACT, 1961 BY MENTIONING THAT NO PROPER ENQUIRY WAS MADE. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF HONBLE AGRA BENCH OF ITAT IN THE CASE OF RISHI KUMAR GUPTA V. CIT [2005] 90 TTJ (AGRA) 645 WHEREIN HELD THAT THE ASSESSING OFFICER HAVING MADE THE ASSESSMENT AFTER ENQUIRY, AS ADMITTED BY THE CIT IN HIS NOTICE AS WELL AS IN HIS ORDER U/S.263, HE WAS NOT JUSTIFIED IN SETTING ASIDE THE ASSESSMENT ON THE GROUND THAT THE ASSESSING OFFICER HAD F AILED TO MAKE PROPER ENQUIRY. 1 4 . IN THE LIGHT OF THE FOREGOING DISCUSSION, SINCE THERE WAS DUE APPLICATION OF MIND BY THE ASSESSING OFFICER IN THE INSTANT CASE DURING THE COURSE OF REGULAR ASSESSMENT, IN RELATION TO THE ISSUES WHICH WERE SUBJECT MATTE R OF REVISION, WE ARE OF THE VIEW THAT THE IMPUGNED ORDER OF THE COMMISSIONER OF INCOME - TAX PASSED UNDER S.263 OF THE ACT, CANNOT BE SUSTAINED. WE ACCORDINGLY CANCEL THE SAME. 1 5 . IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED I N THE COURT ON 21 ST JANUARY, 2014 SD/ - SD/ - (CHANDRA POOJARI ) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/ - 21 ST JANUARY, 2014 I TA NO. 778/ HYD/2013 SHRI P.MAHIDHAR REDDY, JARUGUMALLE VILLAGE, NELLORE DISTRICT. 12 COPY FORWARDED TO: 1. SHRI P.MAHIDHAR REDDY, JARUGUMALLE VILLAGE, KOTA MANDAL, SPSR NELLORE DISTRICT. 2. INCOME TAX OFFICER WARD I, GU D UR. 3. COMMISSIONER OF INCOME - TAX GUNTUR 4. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S