Shri Rajinder Singh, Ludhiana V. Pr. CIT-3, Ludhiana

ITA 816/CHANDI/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8668 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 23-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Set aside
• Section: 147; 263; 143(3)

Judgement Text

आयकर अपीलीय अिधकरण,च᭛डीगढ़ ᭠यायपीठ, च᭛डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, “B”, CHANDIGARH BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER आयकर अपील सं./ ITA No. 816/CHD/2019 िनधाᭅरण वषᭅ / Assessment Year : 2014-15 Shri Rajinder Singh, 246-H, BRS Nagar, Ludhiana बनाम The PCIT- 3, Ludhiana ̾थायी लेखा सं./PAN NO: AJWPS5772J अपीलाथᱮ/Appellant ᮧ᭜यथᱮ/Respondent िनधाᭅᳯरती कᳱ ओर से/Assessee by : Sh. Jasleen Singh Khera, Advocate राज᭭व कᳱ ओर से/ Revenue by : Sh. Sarabjeet Singh, CIT DR सुनवाई कᳱ तारीख/Date of Hearing : 17.05.2022 उदघोषणा कᳱ तारीख/Date of Pronouncement : 10.08.2022 आदेश/Order Per Sudhanshu Srivastava, Judicial Member: This appeal is preferred by the assessee against the order dated 28.03.2019 passed u/s 263 of the Income Tax Act, 1961 (hereinafter called 'the Act') by the Ld. Principal Commissioner of Income Tax-3, Ludhiana [hereinafter referred to as ‘[PCIT]’ and pertains to assessment year 2014-15. 2 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana 2.0 The brief facts of the case are that the assessee is an agriculturist and the return of income for the year under consideration was filed declaring an income of Rs. 17,31,660/-. After initially processing the return u/s 143(1) of the Act, the case was selected for limited scrutiny under CASS guidelines for the reason of ‘Large Agricultural Income’. Subsequently, the assessment was completed u/s 143(3) of the Act vide order dated 28.07.2016 at the returned income with the observation “Large Agricultural Income Stands Explained”. 2.1 Thereafter, the Ld. PCIT proceeded to issue a Show Cause Notice dated 06.03.2019 u/s 263 of the Act. The reason mentioned for the issuance of Show Cause Notice was that it was noticed that the assessee had shown gross agricultural income of Rs.45,42,902/- in the computation of income whereas Form ‘J’ / vouchers for agricultural receipts were furnished only to the tune of Rs. 37,17,517/- during the course of assessment proceedings. Thus, the assessee had failed to produce documentary evidence in respect of agricultural receipts 3 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana of Rs. 8,25,385/-. It was alleged in this show causes notice that the assessment had been completed without appreciating the facts of the case and the issue had not been examined in the light of documentary evidences. The assessee was required to show cause as to why the impugned assessment should not be set aside as being erroneous in so far as it was prejudicial to the interest of the Revenue. 2.2 In response to the Show Cause Notice, the assessee filed detailed submissions and also drew attention to the various queries raised by the Assessing Officer (AO) and the replies thereto submitted by the assessee during the course of assessment proceedings. However, the explanations and submissions of the assessee were not accepted by the Ld. PCIT and he observed that not a shred of investigation had been conducted by the AO and that he had blindly accepted the claim of the assessee by completely relying upon the documents furnished by the assessee and, therefore, it was apparent that the AO had blindly accepted the claims of the assessee without 4 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana conducting any inquiry. The Ld. PCIT, vide the impugned order, proceeded to hold that the assessment order was erroneous and prejudicial to the interest of Revenue and he, accordingly, set aside the assessment order to the file of the AO for passing a fresh order in respect of the issue highlighted in the order passed u/s 263 of the Act. 2.3 Now, the assessee has approached this Tribunal and has challenged the order passed u/s 263 of the Act by raising the following grounds of appeal:- 1. That the Ld. Pr. Commissioner of Income Tax has wrongly assumed jurisdiction u/s 263 of the Act to set- aside the assessment order dated 28.07.2016 passed by the AO in as much as the order is neither erroneous nor prejudicial to the interest of Revenue and as such the assumption of jurisdiction u/s 263 of the Act is beyond his competence. 2. That the Ld. Pr. CIT has erred in failing to consider the various replies and submissions placed on record in proceedings before him which is arbitrary and unjustified. 5 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana 3. That the assessment order having been passed by the AO after due application of mind and taking into consideration the various replies, material on record, explanation provided and discussions and the action resorted to by the Pr. Commissioner of Income Tax is unwarranted and uncalled for. 4. That the order of Pr. CIT is erroneous, arbitrary, opposed to the f acts of the case and is unsustainable in law. 5. That the appellant craves for permission to amend or add any other ground of appeal before the appeal is finally heard and disposed off. 3.0 The Ld. AR submitted that the assessee is an agriculturist having more than 118 acres of agricultural land in Kutch District of Gujarat which had been jointly purchased by him and his wife during Financial Years 2003-04 and 2004-05. It was submitted that since then the assessee has been taking regular steps to develop the land holding into a model agricultural Farm and for this purpose additional tube wells were also installed. It was submitted that within 10 to 12 years from the year of purchase, the land has developed into a very fertile and 6 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana productive land giving good yield of cotton, wheat as well as other crops. It was further submitted that, as is the general practice in agriculture, the entire produce is usually sold in cash as most of the produce is sold in unorganized markets. It was submitted that during the year under consideration, the crop of cotton had been sold to M/s Jaykishan Fibers Pvt. Ltd and M/s S.K. Traders and copies of the vouchers issued were placed at pages 71 to 80 of the paper book. It was further submitted that the factum of the assessee having earned agricultural income had been accepted by the Income Tax Department every year right from the date of purchase of land. It was further submitted that the assessee’s case was reopened u/s 147 of the Act in assessment year 2010-11 and, thereafter, after considering the explanations and replies of the assessee, the returned income of the assessee was accepted. 3.1 It was submitted that during the year under consideration, the AO had issued a detailed questionnaire requiring the assessee to furnish various 7 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana details and evidences in respect of agricultural income. Our attention was drawn to copy of questionnaire placed at page 9 of the paper book. It was further submitted that in response thereto, the assessee had filed detailed replies as well as documentary evidences and it was only after considering the replies and documentary evidences filed by the assessee that the AO had completed the assessment at returned income. He drew our attention to the observations of the AO in the assessment order that “Large Agricultural Income Stands Explained And The Assessment Is Finalized At The Returned Income Of The Assessee”. 3.2 The Ld. AR submitted that subsequently, the Ld. PCIT proceeded to issue a Show Cause Notice u/s 263 of the Act allegingthat the assessment had been completed without verifying the facts in the light of the documentary evidences placed on record. Pointing out to the impugned order, the Ld. AR submitted that in the said impugned order, it has been alleged that not a shred of investigation had been conducted by the AO who had 8 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana blindly accepted the claim of the assessee in spite of the fact that this issue had specifically been flagged for the purpose of scrutiny. The Ld. AR submitted that the allegations of the Ld. PCIT were far from facts as a perusal of the questionnaire issued by the AO and further query letters issued as well as detailed replies filed by the assessee including documentary evidences etc. would prove that the AO had conducted a thorough inquiry vis-à-vis, the issue of large agricultural receipts and it was only after that she was fully satisfied with the correctness of the claim of the assessee that the returned income of the assessee was accepted. It was further submitted that as far as the observation of the Ld. PCIT in the impugned order that the sale proceeds of some agricultural income in cash had been accepted by the AO without conducting an inquiry was concerned, even this issue was duly explained before the AO that the coastal area of the Kutch District in Gujarat did not have any organized market for sale / purchase of Wheat and Sarson Crop and, therefore, sales in cash was not an exception. It was also submitted that the AO had tested 9 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana this claim of the assessee of having sold the produce in cash by referring to earlier assessment orders in the case of the assessee as well as his family members. 3.3 The Ld. AR submitted that, thus, the observations of the Ld. PCIT did not have any sound basis and such baseless allegations could not be made the basis of revisionary proceedings u/s 263 of the Act. It was further submitted that all these documentary evidences were also filed before the Ld. PCIT but the same were not considered at all and he proceeded to set aside the assessment order without considering the explanations or the evidences filed by the assessee or even the case laws relied upon by the assessee. 3.4 The Ld. AR submitted that, thus, on the facts of the case, there was no lack of inquiry by the AO as has been alleged in the impugned order and prayed that the impugned order should be set aside. 4.0 In response, the Ld. CIT DR submitted that the Ld. PCIT, in the impugned order has made a very relevant observation that the AO had blindly accepted the version 10 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana of the assessee regarding cash sales without making any inquiry and, therefore, the Ld. PCIT was perfectly justified in setting aside the assessment order. It was further submitted that apparently the AO had not even cared to verify as to whether there were complete evidences / J Forms in respect of the agricultural produce sold and he had simply accepted the documents and figures filed by the assessee without any application of mind. It was further submitted that the fact remaied that cash sales and cash expenditure were not verified by the AO. It was further submitted that the vouchers submitted by the assessee would show that he has sold the cotton crop throughout the year which does not seem to be possible and, thus, apparently, even these vouchers submitted by the assessee were fabricated but the AO had failed to inquire into this aspect also. While vehemently supporting the order of the Ld. PCIT, the Ld. CIT DR submitted that the appeal of the assessee deserves to be dismissed. 11 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana 5.0 We have heard the rival submissions and have also gone through the records as well as various documentary evidences filed by the assessee in the form of paper book. We have also gone through the questionnaires issued by the AO and also the replies filed by the assessee in response to the queries raised by the AO from time to time. Copies of all the questionnaire and the replies filed by the assessee have been filed by the assessee in the paper book and the contents of the same are not disputed. We have carefully perused the questionnaire as well as replies furnished by the assessee in response to the various queries raised by the AO and a perusal of these replies would show that the AO has indeed conducted an in depth inquiry in respect of the various issues which the Ld. PCIT has pointed out in the impugned order. It is evident that the assessee has duly responded to the queries raised by the AO and has also substantiated such replies with necessary documentary evidences. Although, the extent of the inquiry having been conducted by the AO may not be apparent from a 12 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana reading of the assessment order but that would not mean that the AO did not conduct any inquiry on the issue. It would also not mean that the AO has not applied his mind to the issue of large agricultural produce before him. It is settled law that elaborate discussion of the issue in the body of the assessment order would not mean that there has been a lack of inquiry or non- application of mind. Therefore, if the records prove otherwise, non-mentioning of the issues examined by the AO would not make the assessment order erroneous and prejudicial to the interest of the Revenue. It is also settled law that the AO having conducted necessary inquiries and having completed the assessment after application of mind to the facts and material on record, the assessment order passed cannot be considered erroneous and prejudicial to the interest of the Revenue and would not confer power on the Ld. PCIT to invoke the power of revisionary jurisdiction u/s 263 of the Act. 5.1 At this juncture, it will be appropriate to refer to the judgment of the Hon'ble Apex Court in the case of 13 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana Malabar Malabar Industries vs. CIT (2000) 243 ITR 83 (SC) wherein the Hon'ble Apex Court has held as under: “A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, if is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase "prejudicial to the interests of the 14 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana Revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax officer, the Revenue is losing tax lawf ully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income- tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law." 5.2 Similar were the observations of the Hon'ble Delhi High Court in the case of ITO Vs. DG Housing Projects 15 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana Ltd [2012] 343 ITR 329 (Del). In this case, the Hon'ble Delhi High Court went on to observe that in case where there is in-adequate inquiry but no lack of inquiry, the CIT must give and record a finding that the order/enquiry made is erroneous and that this can happen only if an inquiry and verification is conducted by the CIT. The Hon'ble Delhi High Court in the case of ITO Vs. DG Housing Projects Ltd (supra) also held that in most cases of alleged ‘inadequate inquires’ it will be difficult to hold that the order of the Assessing officer, who had conducted enquiries and had acted as a Investigator, is erroneous, without the CIT conducting verification /inquiry himself. 5.3 However, in the present cases, no such inquiry has been carried out by the Ld. PCIT and he has simply directed the Assessing officer to carry out detailed inquires. In our considered opinion, the Ld. PCIT, without making further inquiries on his own account, has simply stated in the impugned orders that the Assessing officer was required to make more inquiries. 16 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana The Ld. PCIT has not pointed out as to what further inquiries was the Assessing officer required to make and as to how without those inquires the order of the Assessing officer were erroneous in so far as prejudicial to the interest of the Revenue. 5.4 Therefore, in view of the above cited judicial precedent and respectfully following the same and on the facts of this case, we are not inclined to agree with the observations of the Ld. PCIT that the assessment order was passed without conducting any inquiry by the AO and, therefore, the same was erroneous in so far as being prejudicial to the interest of the Revenue. We hold that the Ld. PCIT has incorrectly and under wrong presumption of facts assumed jurisdiction u/s 263 of the Act and the impugned order is liable to be set aside. We order accordingly. 6.0 In the final result, the appeal of the assessee stands allowed. 17 816-Chd-2019 (A.Y. 2014-15) – Shri Rajinder Singh, Ludhiana Order pronounced on 10.08.2022 Sd/- Sd/- ( N. K. SAINI) (SUDHANSHU SRIVASTAVA) Vice President Judicial Member Dated : 10.08.2022 “आर.के.” आदेशकᳱᮧितिलिपअᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकरआयुᲦ/ CIT 4. आयकरआयुᲦ (अपील)/ The CIT(A) 5. िवभागीयᮧितिनिध, आयकरअपीलीयआिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 6. गाडᭅफाईल/ Guard File आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar