Sunil Chhagan Bhaybhang, Nashik V. Principal Commissioner of Income-tax : 1,

ITA 932/PUN/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2595 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-12-2018
• Assessment Year: 2007-2008
• Appeal Filed On: 06-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S B PRASAD
• Keywords: Opportunity of being heard; Audit objection
• Section: 69; 263; 40A(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.932/PUN/2016 / ASSESSMENT YEAR : 2007-08 SHRI SUNIL CHHAGAN BHAYBHANG, KAMLKANT ARCADE, PATIL LANE NO.4, COLLEGE ROAD, NASHIK 422 005 PAN : ABRPB9456F ....... / APPELLANT / V/S. PR. COMMISSIONER OF INCOME-TAX-1, NASHIK / RESPONDENT ASSESSEE BY : SHRI PRAMOD SHINGTE REVENUE BY : SHRI S.B. PRASAD / DATE OF HEARING : 18-12-2018 / DATE OF PRONOUNCEMENT : 07-03-2019 / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF PRINCIPAL COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK DATED 30-03-2016 PASSED UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. SHRI PRAMOD SHINGTE APPEARING ON BEHALF OF THE ASSESSE E SUBMITTED THAT THIS IS SECOND ROUND OF LITIGATION BEFORE THE TRIBUNAL. IN THE FIRST ROUND, THE ASSESSEE HAD APPROACHED THE T RIBUNAL IN ITA NO.215/PN/2011 ASSAILING THE ORDER OF CIT(A) CONFIRMING ADDIT ION OF RS.41,15,000/- UNDER SECTION 69 IN RESPECT OF LAND PURCHAS ED FROM 2 ITA NO. 932/PUN/2016 SHRI SUNIL CHHAGAN BHAYBHANG PINGLE FAMILY. THE TRIBUNAL VIDE ORDER DATED 11-06-2012 HAD RESTORED THE ISSUE BACK TO THE FILE OF AO WITH SPECIFIC DIRECTIONS TO V ERIFY THE FATE OF ADDITIONS IN RESPECT OF ALLEGED ON-MONEY PAYMENT BY T HE ASSESSEE IN THE HANDS OF VENDORS OF THE LAND. CONSEQUENT TO THE DIRECTIONS OF THE TRIBUNAL, THE ASSESSMENT ORDER DATED 28-03-2014 WA S PASSED BY THE AO U/S.143(3) R.W.S.254 OF THE ACT. THE AO AFTER MAKING DETAILED ENQUIRY AND VERIFYING THE LAND TRANSACTION THREADBARE M ADE NO ADDITION IN THE HANDS OF ASSESSEE. THEREAFTER, THE PR. CIT INVOKED THE PROVISIONS OF SECTION 263 QUA THE SAME LAND TRANSACTION B ETWEEN THE ASSESSEE AND PINGLE FAMILY ON THE GROUND OF LACK OF ENQUIRY BY THE AO. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT SHOW CA USE NOTICE U/S.263 WAS ISSUED TO THE ASSESSEE ON 29-02-2016. SAM E IS PLACED AT PAGE 65 OF THE PAPER BOOK. THE TRIGGER POINT FOR INVOKIN G THE PROVISIONS OF SECTION 263 IS INTERNAL AUDIT OBJECTION AND N OT THE INDEPENDENT VIEW OF THE PR. CIT. THE INTERNAL AUDIT OBJECT ION REPORT OF THE DEPARTMENT IS AT PAGES 48 TO 52 OF THE PAPER BOOK . THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE REPLY O F THE AO DATED 09-03-2015 TO INTERNAL AUDIT IS AT PAGES 53 TO 58 OF T HE PAPER BOOK. A PERUSAL OF THE SAME WOULD SHOW THAT THE PROVISIONS OF SEC TION 263 HAVE BEEN INVOKED AS A MATTER OF PRECAUTION TO PROTEC T THE INTEREST OF REVENUE. THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED TH AT THE PROCEEDINGS CARRIED OUT UNDER SECTION 263 ON THE BASIS OF INTERNAL AUDIT REPORT IS NOT SUSTAINABLE. TO SUPPORT HIS CONTENTIO N, RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RANKA JEWELLERS VS. ADDL.CIT REPORTED AS 328 ITR 148. T HE LD. AUTHORIZED REPRESENTATIVE FINALLY SUBMITTED THAT AT THE M OST IT CAN BE A CASE OF INADEQUATE ENQUIRY NOT LACK OF ENQUIRY. EVEN UN DER SUCH CIRCUMSTANCES, INVOKING OF PROVISIONS OF SECTION 263 IS BAD IN LAW. 3 ITA NO. 932/PUN/2016 SHRI SUNIL CHHAGAN BHAYBHANG 3. SHRI S.B. PRASAD, REPRESENTING THE DEPARTMENT VEHEMEN TLY DEFENDED THE IMPUGNED ORDER. THE LD. DEPARTMENTAL REPRES ENTATIVE SUBMITTED THAT THE AO FAILED TO CONDUCT PROPER ENQUIRY IN RESPECT OF LAND TRANSACTION DESPITE CATEGORIC DIRECTIONS FROM THE TR IBUNAL, THEREFORE, THE PR. CIT WAS CONSTRAINED TO INVOKE THE PRO VISIONS OF SECTION 263. 4. HEARD BOTH SIDES. ORDERS OF THE AUTHORITIES BELOW PER USED. WE HAVE ALSO CONSIDERED THE DOCUMENTS FURNISHED BY THE ASS ESSEE IN THE FORM OF PAPER BOOK. A PERUSAL OF DOCUMENTS ON RECORD REVEALED THAT THE ISSUE RELATING TO PURCHASE OF LAND BY THE ASSESSEE FR OM PINGLE FAMILY HAD TRAVELLED TO THE TRIBUNAL EARLIER IN AN APPEAL FILE D BY THE ASSESSEE IN ITA NO.215/PN/2011 (SUPRA). THE TRIBUNAL VIDE ORDER DATED 11-06-2012 RESTORED THE ISSUE BACK TO THE FILE OF AO WITH THE FOLLOWING DIRECTIONS : 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND IN THE INSTANT CASE THE AO MADE ADDITION ON THE BASIS OF THE STATEMENT O F MR. DEEPAK PINGLE, ONE OF THE SELLERS THAT HE HAS RECEIVED EXTRA M ONEY OVER AND ABOVE THE CHEQUE AMOUNT TOWARDS SALE OF THE AGRI CULTURAL LAND. HOWEVER, IT APPEARS THAT NO OPPORTUNITY FOR CROSS EX AMINING THE ABOVE PARTY BY THE ASSESSEE WAS AFFORDED BY THE AO. IT IS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE WAS GIVEN AN OPPORTUNITY TO CROSS EXAMINE THE SAID PARTY AND THE A SSESSEE HAS DENIED OR REFUSED TO CROSS EXAMINE THE PARTY. THERE FORE, WE, IN THE INTEREST OF JUSTICE, DEEM IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO VERIFY AS TO WHAT HAS HAPPENED IN THE HANDS OF THE SELLERS IN CASE THEY HAV E RECEIVED ANY EXTRA MONEY OVER AND ABOVE THE SALE PRICE. FURTHE R THE AO SHALL ALSO GIVE OPPORTUNITY TO THE ASSESSEE TO CROSS EXA MINE THE SELLER WHOSE STATEMENT WAS THE BASIS FOR THE ADDITION IN THE IMPUGNED APPEAL. ACCORDINGLY, WE RESTORE THE ISSUE TO T HE FILE OF THE AO FOR ADJUDICATION OF THE ISSUE AFRESH AND IN A CCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED B Y THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 4 ITA NO. 932/PUN/2016 SHRI SUNIL CHHAGAN BHAYBHANG CONSEQUENT TO THE DIRECTIONS OF TRIBUNAL, THE AO CONDUCT ED ENQUIRIES AND AGAIN SUMMONED DEEPAK V. PINGLE, ONE OF THE SELLERS OF PROPERTY U/S.131 OF THE ACT. OPPORTUNITY WAS GIVEN TO THE ASSES SEE TO CROSS EXAMINE DEEPAK V. PINGLE. IT WAS THEREAFTER THAT THE AO PASSED A ASSESSMENT ORDER U/S.143(3) R.W.S. 254 ACCEPTING RETURNED INCOME, WHICH IS NOW SUBJECT MATTER OF REVISION U/S.263. 5. THE LD. AUTHORIZED REPRESENTATIVE HAS ASSERTED THAT THE REVISION PROCEEDINGS U/S.263 HAVE BEEN INITIATED CONSEQUENT TO TH E OBJECTION RAISED BY THE INTERNAL AUDIT DEPARTMENT. A PERUSAL OF TH E REPLY BY THE AO TO THE INTERNAL AUDIT OBJECTION AT PAGES 53 TO 58 OF THE PAPER BOOK REVEALS THAT INITIALLY THE AO HAS DEFENDED THE ASSESSMENT ORDER AND HAS REFUTED THE OBJECTIONS OF ITO (INTERNAL AUDIT). HOWE VER, IN THE LATTER PART OF THE REPLY, AS A MATTER OF PRECAUTION AND TO PROTECT THE INTEREST OF REVENUE, APPROVAL WAS SOUGHT FOR SUBMITTING PR OPOSAL U/S.263. 6. THE INTENT OF SECTION 263 IS NOT TO SUBSTITUTE THE OP INION OF AO BUT TO PROTECT THE INTEREST OF REVENUE WHERE THE ORDER IS ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THUS, TWIN CONDITIONS AS SET OUT IN SECTION 263 HAVE TO BE SATISFIED TO ASSUME REVISIONAL JU RISDICTION U/S.263 OF THE ACT. IT IS A WELL SETTLED LAW THAT WHERE THE ENQUIRY HAS BEEN CONDUCTED BY THE AO AND HAS PASSED ASSESSMENT ORDER TAKING ONE OF THE POSSIBLE VIEWS, THE PROVISIONS OF SECTION 263 CAN NOT BE INVOKED BY THE CIT TO SUBSTITUTE HIS VIEW OR TO MEET WITH THE OBJEC TIONS RAISED BY INTERNAL AUDIT PARTY. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RANKA JEWELLERS VS. ACIT (SUPRA) HAS HELD THAT WHE RE THE AO HAS APPLIED HIS MIND ON THE ISSUE AND HAS TAKEN A POSSIBL E VIEW, THE 5 ITA NO. 932/PUN/2016 SHRI SUNIL CHHAGAN BHAYBHANG CIT IS NOT JUSTIFIED IN EXERCISING POWER OF REVISION U/S.263. THE RELEVANT EXTRACT OF THE FINDINGS ON THE ISSUE ARE AS UNDER : 9. THE ORDER THAT HAS BEEN PASSED BY THE CIT UNDER S. 263 PROCEEDS ON THE BASIS THAT THE AO DID NOT CONSIDER T HE APPLICABILITY OF S. 40A(3) WHILE DETERMINING THE UNDISCL OSED INCOME AND HENCE, THE ORDER APPEARS TO BE ERRONEOUS A ND TO BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THERE IS M ERIT IN THE SUBMISSION OF THE ASSESSEE THAT THIS FINDING IS CON TRARY TO THE RECORD. THE RECORD SHOWS THAT THE AO HAD APPLIED HIS MIND TO THE ISSUE OF THE VIOLATION OF S. 40A(3) DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS BY CALLING FOR A SPECIAL AUDIT ON SEVERAL ITEMS INCLUDING THE QUESTION AS REGARDS CASH TRANSACT IONS WHICH FELL WITHIN THE PURVIEW OF S. 40A(3). SIMILARLY, THE TRIBUNA L ALSO PROCEEDED ON THE BASIS THAT THE RECORD BEFORE IT DID NOT CONTAIN ANY DISCUSSION ON THE ISSUE. THIS ASPECT OF THE FIND ING OF THE TRIBUNAL SUFFERS FROM THE SAME ERROR AS THE ORDER PA SSED BY THE AO. THOUGH THE ASSESSMENT ORDER DID NOT CONTAIN A SPE CIFIC REFERENCE TO THE APPLICABILITY OF S. 40A(3), THE RESPONS E OF THE AO TO THE AUDIT QUERY SHOWS THAT IT WAS HIS VIEW THAT TH OSE PROVISIONS WERE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE AO SUPPORTED HIS VIEW WITH REFERENCE TO DECISIONS OF THE TRIBUNAL. THIS VIEW OF THE AO WAS ALSO AFFIRMED BY THE CIT. IN THE CIRCUMSTANCES, THE EXERCISE OF THE POWER UNDER S. 263 CANNOT BE SUSTAINED. THE REVISIONAL JURISDICTION COULD NOT HAVE BEEN EXERCISED WHERE A POSSIBLE VIEW WAS TAKEN ON THE APPL ICABILITY OF S. 40A(3) BASED ON DECISIONS OF THE TRIBUNALS. IT IS A SETTLED PRINCIPLE OF LAW THAT IF THE VIEW WHICH WAS TAKEN BY TH E AO IS A POSSIBLE VIEW, IT WOULD NOT BE WITHIN THE JURISDICTION OF THE REVISIONAL AUTHORITY TO EXERCISE THE POWER UNDER S. 263. 7. THE LD. DR HAS POINTED THAT DURING FIRST APPELLATE PROCEEDING THE ASSESSEE HAD CONCEDED THAT DISALLOWANCE U/S.69 OF TH E ACT SHOULD BE RESTRICTED TO RS.34,65,000/- AND NOT RS.41,15,000/-. R EFERENCE WAS MADE TO LETTER DATED 25-03-2010 FROM ASSESSEE AT PAGE 107 OF THE PAPER BOOK. WE HAVE EXAMINED THE SAID LETTER FROM ASS ESSEE AND OBSERVE THAT THE CONCESSION WAS MADE WITHOUT PREJUDICE TO THE MAIN RELIEF SOUGHT IN GROUND NOS. 1 TO 3 OF THE APPEAL SEEKING D ELETION OF ENTIRE ADDITION OF RS.41,15,000/-. THUS, SUCH CONCESSION WOU LD NOT BE DETRIMENTAL TO THE MAIN RELIEF SOUGHT BY ASSESSEE. BE THAT AS IT MAY, NOW THE AO HAS GRANTED RELIEF TO ASSESSEE IN FRESH P ROCEEDINGS, THE ASSESSEE IS AT LIBERTY TO RAISE FRESH PLEAS CONSEQUE NT TO OPPORTUNITY 6 ITA NO. 932/PUN/2016 SHRI SUNIL CHHAGAN BHAYBHANG OF CROSS-EXAMINATION OF VENDOR OF PROPERTY, THE OPPORTUN ITY THAT WAS EARLIER DENIED TO THE ASSESSEE. BASED ON FRESH EVIDENCE THE AO GRANTED RELIEF TO THE ASSESSEE. 8. WE FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE. IN TH E PRESENT CASE, IT CANNOT BE SAID THAT NO ENQUIRY WAS CARRIED OUT BY THE AO, AT THE MOST IT IS A CASE OF INADEQUATE ENQUIRY. EVEN IN THAT CASE, THE PROVISIONS OF SECTION 263 CANNOT BE INVOKED. THE EXPLANAT ION 2(1) TO SECTION 263 INSERTED BY THE FINANCE ACT 2015 W.E.F. 01-04- 2015 WOULD NOT CHANGE THE MATRIX OF CASE AS THE AMENDMENT WOULD NOT APPLY RETROSPECTIVELY. THUS, IN THE FACTS OF THE CASE, IMPUGNED ORDER IS SET ASIDE AND THE APPEAL OF ASSESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 07 TH DAY OF MARCH, 2019. SD/- SD/- (D. KARUNAKARA RAO) (VIKAS AWASTHY) ACCOUNTANT MEMBER JU DICIAL MEMBER / PUNE; / DATED : 07 TH MARCH 2019 SATISH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)-I, NASHIK 4. , , $ , / DR, ITAT, A BENCH, PUNE. 5. ' / GUARD FILE. / BY ORDER, // // SENIOR PRIVATE SECRETARY, , / ITAT, PUNE 7 ITA NO. 932/PUN/2016 SHRI SUNIL CHHAGAN BHAYBHANG DATE 1. DRAFT DICTATED ON 01-03-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 01-03-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER.