Shri Hari Ram Nichani, Gwalior V. CIT, Gwalior

ITA 90/AGR/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 2443 (ITAT-AGRA)
• Duration Of Justice: 2 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-02-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 13-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HOMI RAJVANSH
• Assessee Lawyers: K C AGARWAL
• Keywords: Gift; Principle of natural justice
• Section: 143(1); 147; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE SHRI P.K. BANSAL, ACCOUNTANT MEMBER AND SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 90/AGRA/2009 ASSTT. YEAR : 2002-03 SHRI HARI RAM NICHANI, VS. COMMISSIONER OF INCO ME-TAX, PROP. OF M/S. HARIRAM ROCHIRAM, GWALIOR. GHODA CHOWK, JAYENDRAGANJ, LASHKAR, GWALOIOR. (PAN : AALPN 1898 E) (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI K.C. AGARWAL, ADVOCATE. FOR RESPONDENT : SHRI HOMI RAJVANSH, CIT/DR ORDER PER P.K. BANSAL, A.M. : THIS APPEAL HAS BEEN FILED AGAINST THE ORDER OF CI T, GWALIOR DATED 08.12.2008 PASSED U/S. 263 OF THE INCOME-TAX ACT. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE SUBM ITTED THE RETURN OF INCOME ON 31.10.2002 DECLARING THE INCOME AT RS.1,75,340/-, WHICH WAS PR OCESSED U/S. 143(1) ON 02.02.2003. ALONG WITH THE RETURN, THE ASSESSEE FILED CAPITAL ACCOUNT AND THE COMPUTATION OF THE INCOME. IN THE CAPITAL ACCOUNT, THE ASSESSEE HAS SHOWN THE GIFT RE CEIVED AMOUNTING TO RS.3,00,000/-. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE U /S. 148(2) BY RECORDING REASONS ON 30.12.2004. IN THE REASONS RECORDED, THE ASSESSING OFFICER WAS OF THE VIEW THAT ON ACCOUNT OF NON-DISCLOSURE OF FULL AND TRUE FACTS ABOUT THE ALL EGED GIFT, A SUM OF RS.3,00,000/- SHOULD HAVE BEEN TAXED AS THE INCOME OF THE ASSESSEE AND TO THA T EXTENT, THEREFORE, THE INCOME ESCAPED ASSESSMENT. SUBSEQUENTLY, AFTER EXAMINING THE SUBMI SSIONS OF THE ASSESSEE ALONG WITH THE 2 DOCUMENTS FILED, THE ASSESSING OFFICER DROPPED THE PROCEEDINGS INITIATED U/S. 147 VIDE ORDER SHEET ENTRY DATED 27.02.2006. BUT THE CIT INITIATED ACTION U/S. 263 VIDE ISSUING NOTICE DATED 25.03.2008 ON 27.03.2008, AS ACCORDING TO HIM, THE GIFT OF AN UNUSUAL AMOUNT OF RS.3,00,000/- BY A CLOSE RELATIVE CONSTITUTES AN UN-NATURAL TRANS ACTION AND CREDITWORTHINESS OF THE DONOR AND GENUINENESS OF THE TRANSACTION WAS NOT ESTABLISHED IN THIS CASE. THEREFORE, IN HIS OPINION, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ACCEPTING TH IS GIFT OF RS.3,00,000/- AS A GENUINE GIFT VIDE A ENTRY ON THE ORDER SHEET. THEREFORE, THE CIT WAS OF THE VIEW THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. A NOTICE DATED 25.03.2008 FIXING THE DATE ON 28.03.2008 WAS SERVED THROUGH AFFIXTURE ON 27.03.2008 AND IN THE ABSENCE OF APPEARANCE AND SUBMISSIONS ON BEHALF OF THE ASSESSEE, HE CANCELLED THE ORDER DATED 27.02.2006 U/S. 263 OF THE ACT. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE SAME. UNDER SECTION 263(1), THE CIT CAN PASS AN ORDER ENHANCING OR MODI FYING ASSESSMENT OR CANCELING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT, IF HE CONSIDERS THAT AN ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS P REJUDICIAL TO THE INTEREST OF THE REVENUE. BOTH THE CONDITIONS THAT THE ORDER PASSED BY THE ASSESSI NG OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE MUST BE SATISFIED. THIS IS NOT A CASE WHERE THE ASSESSING OFFICER HAS NOT EXAMINED THE TRANSACTION CARRIED OUT BY THE ASSESSE E. THE CIT ITSELF NOTICED IN THE ORDER THAT THE ASSESSING OFFICER HAS POINTED OUT THAT DONOR IS CLO SE RELATIVE OF THE DONOR AND HAS GIVEN THE GIFT AS THE FINANCIAL ASSISTANCE IN DISTRESS TO THE ASSE SSEE. IN OUR OPINION, IF THE ASSESSING OFFICER HAS ACCEPTED THE TRANSACTION TO BE GENUINE ONE OR TAKEN A VIEW WHICH IS NOT UNSUSTAINABLE IN LAW, IT CANNOT BE SAID THAT THERE IS AN ERROR IN THE ORDER PASSED BY THE ASSESSING OFFICER. THE GIFT 3 RECEIVED FROM A CLOSE RELATIVE CANNOT BE AN UNUSUAL OR UNNATURAL TRANSACTION. WHETHER A TRANSACTION IS UNNATURAL OR NOT, IT WILL DEPEND ON FACTS AND CIRCUMSTANCES OF THE CASE. THE CIT CANNOT THRUST UPON THE ASSESSEE HIS OPINION BY PASS ING ORDER U/S. 263 OF THE ACT UNLESS AND UNTIL AN ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEO US AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. OUR AFORESAID VIEW IS DULY SUPPORTED BY TH E DECISION OF THE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES, 243 ITR 83 (SC), IN WHICH IT WAS HELD : A BARE READING OF SECTION 263 OF THE INCOME-TAX ACT, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICTION B Y 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, IT 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 RE QUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE THE SAME CATEGORY FAL L ORDERS PASSED WITH OUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE 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 TH E ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE INCOME-TAX OFFICE R, THE REVENUE IS LOSING TAX LAWFULLY 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 CONSE QUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN L AW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OF FICER HAS TAKEN ONE VIEW WITH WHICH THE 4 COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY T HE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. 4. RESPECTFULLY FOLLOWING THE PRINCIPLE OF LAW LAID DOWN BY HONBLE SUPREME COURT IN THE AFORESAID CASE LAW, WE, ACCORDINGLY, QUASH THE ORDE R PASSED U/S. 263 OF THE INCOME-TAX ACT. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.03.11. SD/- SD/- (H.S. SIDHU) (P.K. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25 TH MARCH, 2011 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY