Income Tax Appellate Tribunal - Delhi
Ashish Gupta Mandi Jawahar Ganj, Shamli ... vs The Pr. Cit (Central) Kanp At Meerut, ... on 27 February, 2025
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'A', NEW DELHI
Before Sh. Satbeer Singh Godara, Judicial Member
&
Sh. Avdhesh Kumar Mishra, Accountant Member
ITA No. 3385/Del/2023 : Asstt. Year : 2016-17
Mohit Gupta, Vs Pr. CIT(Central),
S/o Sh. Suresh Chand Goel, KNP at Meerut,
Mandi Jawahar Ganj, Shamli, Uttar Pradesh-208001
Uttar Pradesh-247776
(APPELLANT) (RESPONDENT)
PAN No. AEZPG0976J
ITA No. 3386/Del/2023 : Asstt. Year : 2016-17
Ashish Gupta, Vs Pr. CIT(Central),
Mandi Jawahar Ganj, Shamli, KNP at Meerut,
Uttar Pradesh-247776 Uttar Pradesh-208001
(APPELLANT) (RESPONDENT)
PAN No. ACRPG3086D
Assessee by : Sh. Sudhir K. Sehgal, AR
Revenue by : Sh. Sanjeev Kaushal, CIT DR
Date of Hearing: 14.01.2025 Date of Pronouncement: 27.02.2025
ORDER
Per Satbeer Singh Godara, Judicial Member:
These twin assessees' as many appeals i.e . ITA No. 3385 & 3386/Del/2023, for A.Y . 2016-17 arise against the PCIT(Centra l), KNP at Meerut's DIN & order Nos.
ITBA/COM/F/17/2023-24/1057872265(1) and IT BA / COM / F / 17/2023-24/1057874609(1) dated 10.11.2023, in proceedings u/s 263 of the Income Tax Act, 1961 (in short "the Act"), respectively.
2 ITA Nos. 3385 & 3386/Del/2023Mohit Gupta & Ashish Gupta
2. Heard both the assessees as well as the department at length. Case files perused.
3. Learned counsel representing the instant twin assessees submits at the o utset that all the relevant facts in both these appeals are very much identical. The Revenue's is equally fair in not disputing the assessees fo regoing averments . We thus, treat the former assessee Sh. Mohit Gupta's appeal ITA No. 3385/Del/2023 as the "lead" case.
4. It is next noticed that the learned PCIT(Central), KNP at Meerut has passed his impugned order assuming his revisiona l jurisdiction u/s 263 of the Act thereby terming the Asses sing Officer's corresponding section 143(3) r.w.s. 153A assessment framed on 30.12.2019; as an erroneous one ca us ing prejudice to the interest of the Revenue.
5. Bo th the learned representatives are very much ad-idem during the course of hear ing that this is the second round of revision proceedings u/s 263 of the Act s ince the tribuna l's earlier order in earlier identical twin appeals IT A Nos. 709 & 710/Del/2022 dated 01.11.2022, had restored back the matter to the learned PCIT for his afresh appropriate adjud icatio n as under:
3 ITA Nos. 3385 & 3386/Del/2023Mohit Gupta & Ashish Gupta "2 . For t he s ake of re fer ence, we are referri ng to t he case of Ashish Gupta i n ITA No .710/Del/2022. The grounds of appeal read as under:-
"1 . U nder the fac ts a nd circumsta nc es of the c ase , order passed by the Ld. PCIT u/s 263 is illegal & bad in la w. H e has further err ed in exceedi ng his jurisdictio n i n pas sing t he orde r u/s 263 i gnori ng that a n order pass ed u/s 143(3) r/w s ec. 153D ca nnot be rev ise d without revising the approva l of the Addl . CIT.
2. The Ld. PC IT has erred on facts a nd in la w i n holdi ng t hat the order pass ed by AO is err oneous and prejudicial to the interest of r evenue as per cla us e (a) of Expla na tio n 2 to sec tion 263 as t here is non applicatio n of mi nd on part of the A O si nce he ha s not made necess ary v erificati on of fa cts /enqui ri es wi th ref erenc e to:-
(i) differ ence between t he s ta mp duty value of land purc has ed by the firm M/s Gupta Sons & M/s Agarwal Sons a nd act ual sales considera tio n wit h r eferenc e to the ass es see's s ha re i n these firms whic h is ass ess abl e u/s 56(2 )(vii)(b) of t he Act ignoring that this iss ue has bee n exa mi ned by the AO i n detail in c ours e of as sessment pr oce edings
(ii) variati on of Rs .1,49,0001- between t he ret urn filed u/s 139(1) & 153 A ignoring that t he differenc e is on ac co unt of cl aim of deduc tion u/s 80C of t he Act on account of t uition fe es of c hild duly reflected i n the return filed u/s 153A of the Act.
3. The Ld. PC IT has erred on facts a nd in la w i n pass i ng the order u/s 263 wit hout r ebutti ng the vari ous c ontenti ons rais ed by the as sess ee."
3. Brief fac ts of the case are tha t t he a ss esse e filed his r eturn of income on 30.08.2016 havi ng total inc ome of Rs.5,52,640/- u/s 139 (1 ) of the Ac t. A se arc h a nd seizure oper ati on was carried out by the Inv es ti gation Wi ng i n the c as e on 30.11.2017 at t he r esidential premises of the assess ee a t Ha veli, Ja wa har Ga nj, Ma ndi, Shamli. Thereafter on 19.12.2019, order u/s 143(3) / 153A of the IT Act wa s pas se d by ACIT, C entra l Mee rut and two a dditions on a ccount o f unexplai ned i nvestment of Rs.5,54,000/- and on unex plained e xpendit ure of Rs.2,00,000/- were made in the total return inc ome of Rs.4,03,640/-, a ssess i ng it o n Rs. 11,57,640/-.
4. La ter on order u/s 263 of the Act was pass ed by PC IT mai nly on account of followi ng reasons :-
4 ITA Nos. 3385 & 3386/Del/2023Mohit Gupta & Ashish Gupta
a) Firms M/s . Gupta Sons and M/s. A ga rwal Sons had purc has ed la nd i n the F. Y. 2015-16. The said land is par t of an orc hard which was a lready i n poss ession o f Gupta family (S hri Ra hul G upta & ot hers ). S hri Ashis h G upta a nd ot her fa mily members o f the entire Gupta fa mily ha ve 38% share i n the Bagh, and the land has bee n register ed a muc h below val ue of the mar ket value as per land registr y o ffice. Apar t from usi ng t hes e firms to acquire the s aid ba gh, no ot her bus iness is carri ed out by t hes e firms till date. The total share of different members of Gupta Family in la nd deal of Sir Sha di Lal Garde n is 38 % of total land area of 40.201 Hect .
b) M/s Gupta S ons was crea ted on 15.10.2015 and M/s A garwal S ons was created on 11.02.2015.
c) Total stamp duty val ue of the la nd purchase d by the firm Gupta Sons is Rs.3 ,96,95,560/-. S hri Ashis h Gup ta has 5% share i n t he s aid firm, M/s Gupta So ns . Thus, the deemed c ontributi on of S hri Ashis h G upta is Rs.19,84,778/-. Si nce , it was found tha t the firms wer e created for the pur pos e of onl y registeri ng t he land as no busi nes s ac tiv ities ha ve bee n c arried out, the amount tha t wa s receiv ed by seller of land ma y be tr ea te d as r eceiv ed by t he part ner of the firm i.e. the tra nsaction was car ried out not bet ween the firm a nd the individuals but bet ween the two i ndividuals onl y. He nce, t he sec tion 56(2 )(vii)(b) is applicable in the c as e of individual. Tot al sal es co nsiderati on is Rs.19,00,000/- and sta mp d uty val ue is Rs.3,96,95,560/-. Differenc e betwee n stamp duty value and s ale conside ration is Rs.3,77,95,560/-. The 5% of t his value of Rs.3 ,77,99,560/- come to Rs.18,89,778/-.
Further, the tot al sta mp duty value of the l and purc has ed by t he firm Agarwal Sons is Rs.28,03,94,000/- a nd total sales co nsidera tion is Rs.1,00,00,000/-. Difference between st amp duty value and sale c onsidera tion is Rs.27,03,94,000/-. Shri Ashish Gupta has 1% shar e c ontributi on in M/s Agarwal Sons. The 1% this v alue of Rs.27,03,94,000/- c omes t o Rs .27,03,940/-.
The tota l of Rs. 45,93,718/- (1889778+2703940) is dee med i nc ome of the a ss ess ee as per prov ision of sec tion 56(2 )(vi i)(b) of the Act .
5 ITA Nos. 3385 & 3386/Del/2023Mohit Gupta & Ashish Gupta
d) The ass ess ment considering t he addition u/s 56(2)(vii)(b) of the Act has alrea dy been pas sed by the assessi ng t he officer i n t he c ases of S hri Shas hi Bala part ner in the firm M/s Aga rwa l Sons a nd M/s Goel S ons, Manisha Gupta par tner in t he firm M/s Gupta S ons and M/s Agarwal sons in the cas es of Yoges h Bi ndal , S us hil Garg, Dr. Anguri Gar d & Na randra K umar Mittal pa rtner i n the firm M/s Agarwal Sons .
e) Furt her, on per usal of records differ ence of income amounti ng t o Rs.1,49,000/- was a lso left out from assessment as me nti oned in the s how caus e.
4. Aft er the a bove o bserv ation, ld. Pr.CIT invoked t he prov isions of cla use (a ) of Expla nat ion 2 t o s ecti on 263 of the Ac t and hel d t hat there is lack of verificati on a nd enquiries which wer e r equi red to be made . He furt her obs erv ed t hat the assessee is liable to be ta xed as per sec tion 56(2 )(vii)(b) i n res pect of his s hare of la nd computed on the ba sis o f his profit sha ri ng rati o i n t he two firms, nam ely, M/s. A ggar wal Sons a nd M/s . Gupta Sons. Tha t Expl anatio n 2 enjoi ns upon the AO to c onduc t nec essary enquiri es a nd verification before passi ng a n as sessment order and t he fai lure to do s o, woul d l ead to invocati on of pro vi sions of section 263 of the Act. That the fai lur e of AO to do s o has rendered the a ss es sme nt order pass ed to be erroneous i nso far as it is prejudicial to the interest of Revenue. T hereafter , ld. Pr.CIT ref erred t o case laws for the propositio n that lac k of prop er enqui ry can gi ve r ise to ex ercise of jurisdiction u/s 263 of the Act. H e c oncluded as under:-
"In v iew of the di sc ussion above, it is clear that there is non-application o f mi nd on the part of t he Assessi ng Officer i na smuc h as the nec ess ary verificati on of facts /e nqui ries whic h should have been made, have not been made, ma king t he order erroneous and prejudicial to i nt eres t of rev enue withi n t he mea ni ng of sec tion 263 read wit h Cla use (a ) of Explanati on 2 thereunder. I, therefore, under the powers co nferred u/s 263 of the Inc ome Tax Act, 1961, here by s et as ide the orde r pa ssed by Assessi ng O ffic er u/s 153A/143(3) for A.Y. 2016-17 with direction to pass fr es h order after c onduc ti ng pr oper enquiri es, a nd c onsid eri ng discussion i n paras abov e, a fte r providing o pportunity to the ass essee al so. "
5. Against the abo ve order , assess ee has fil ed appeal before us . We have hea rd both t he parties a nd perus ed the rec or ds.
6 ITA Nos. 3385 & 3386/Del/2023Mohit Gupta & Ashish Gupta
6. Ld. C ouns el o f the a ssesse e stat ed t hat due enquiry has be en ma de b y t he AO a nd a ssesse e has duly given explanati on. That upon accepta nc e of as sess ee's explanati on, no a ddition i n t his regard has been made. Ld. C ouns el further placed relia nc e on the f ollowi ng c ase laws :-
i. ITAT, Mumbai B ench i n cas e of S ir D orabji Ta ta Trust vs . DC IT (E) (2021) 188 I TD 38;
ii. ITAT, D el hi B ench i n c ase of Bra hma C enter Developme nt (P) Ltd. vs. PC IT (2020) 185 DTR 353/77 ITR (Tri b. ) 156;
iii. ITAT, Del hi B enc h in c ase of ETT Ltd. vs . C IT (2019) 177 DTR 3 13;
iv. ITAT, Del hi Benc h in c ase of Amira Pure Foods Pvt.
Ltd. vs. PC IT (2017) 51 CCH 473/63 ITR (Trib.) 355;
v. ITAT, S urat Bench i n cas e of Nilka nth St one Indus tri es vs. PC IT (2021) 189 ITD 718;
vi. Ho n'bl e Kar nataka High Court in c ase of CIT vs .
Int ernatio nal Society for Krishna Consc ious ness (2020) 272 ta xma n 534;
vii. Ho n'bl e Andhra Pr adesh Hi gh Cour t in ca se of PCIT vs. Decc an Jewell ers Pv t. Ltd. (2 021) 206 DTR 257/283 taxm an 5 78; and viii. ITAT, D elhi Bench in c ase of Smt. Abha B ansal vs .
PC IT (2021) 208 DTR 265.
7. Per c ontra , l d. DR for the Rev enue relie d upo n t he order of ld. Pr.CIT .
8. As regards ground no.1, ld. DR for t he R ev enue ref erred t o the decisio n of the c oordi na t e Benc h of the ITAT i n the case of Kapil Me hta i n ITA No.533/Del/2 021 order dat ed 11.01.2021. ITAT has rejected similar argument i n t his regard as under :-
"6 .11 On a plai n readi ng of the s ecti on, we do not find that there is a ny fetters on the powers of PC IT or CIT f or r evisi ng ' any order pass ed by t he AO "exc ept as provided i n explana tion 1 (c)" of t he section.
6.12 However, here t he argument of the as sess ee is that powers gra nt ed to the PCI T a nd CI T u/s 263 beco mes oti ose if t he a uthority below the ra nk of PC IT/ CIT i.e Joi nt Commis sioner of Inc ome ta x, has a pproved the order u/s 153D o f the Act. The natural c or ollary of the argument is that if t he l ower a uthority , u/s 153D, has approv ed the order, the Higher Authority i.e., PC IT a nd CIT l os e their power t o revi s e suc h orders . . It is obvious and as gla ring as the day light that Pr. Commiss i oner of Income Tax is way hi gh abov e t he 7 ITA Nos. 3385 & 3386/Del/2023 Mohit Gupta & Ashish Gupta Joi nt C ommissioner of Inc ome Ta x. Referenc e to s ec tion 116 of the Income Tax Act, where the Inc ome Tax a uthorities i n thei r hierarchi al order are listed, c l ears a ny doubt a bout it.
6.13 The H on'bl e Del hi High C ourt in NIIT Ltd. Vs. Union of India in WPC No. 172-179/2009 date d 11th December , 2009 in para N o. 20 ha s cat egorically held tha t:-
"20. The l egal posi tion which ca nnot be di sputed is tha t when a particular a uthority is ves t ed with the power to dischar ge statut or y func tion, like t he Commis si o ner who is empowered to pa ss orde rs under Secti on 263 o f t he Act, it is t hat a uthority whi c h i s to apply its i nde pendent mi nd and arriv e at its own conclusi on wi thout bei ng i nfluenced by a ny ot her a ut hority , much less the hi gher a uthority. Unfettered discr etion lies in the Commissione r of Inc ome T ax to pass orders under Section 263 of the Act . He is suppos ed to exam ine the rec ords produc ed be for e him to arrive at a c oncl usi o n whe ther the a ss essme nt order passed by the AO suffers from infirmiti es a nd nee ds to be revis ed under Section 2 63 of the Act. The parameters which are la id down in Secti on 263 of t he Act need to be ful filled in exercis ing such a dis c retio n. It is the C ommissioner who ha s to s atisfy hi ms elf, on the basis of available r eco rds, t ha t in a given cas e the conditions stipul at ed unde r Section 263 of the Ac t a re satisfi ed. In ar riving at this c onclusion, he is not to be controlled ev en by a hi gher authority. Likewis e, t he hi gher authority is not to i nte rfer e with t he independenc e of his unfettered di screti on which is stat utorily c onferred upon the Co mmissione r."
6.14 Thus, ev en the aut hority above PC IT a nd CIT cannot deprive the powers of the revision a nd thus the re is no rea son that lower aut hority exercising power s granted to it ca n prev ent the PC IT or the CIT t o exerc ise rev isiona ry powers. Ther efor e, it is apparent that none of the lo wer aut horities or eve n a superi or aut hority c annot put spokes i n exercising the power of the Pr. C ommiss io ner of Inc ome Tax. Such is the manda te of the Hon'bl e Del hi High C ourt.
6.15 No w we co me to the decision of the H on'ble Supreme C ourt in T.N. Civil Supplies C orpn. Ltd Vs Commissi o ner of Inc ome -tax [2003] 260 ITR 82 (SC) wherei n t he Ass ess ing Offic er pas sed a n or der on t he directio n of the I nspe cti ng Assi sta nt C ommiss ioner under Secti on 144B of the Act, whic h wa s subject to revision under S ecti on 263 of the Act . The H on'ble Supreme Co urt in that pa rticular case has ca t egorically hel d tha t t he 8 ITA Nos. 3385 & 3386/Del/2023 Mohit Gupta & Ashish Gupta orders are to be revis ed a re orders pass ed by the Inco me Tax Officer. Hon'ble S upreme Court further hel d that prov isions of S ec tion 263 did not e xclude 'orders pas s ed by the Asse ssing Of fi cer on the directi on of a s uperi or aut hority ei the r under S ec ti on 144A or Sectio n 144B of the Ac t. The Hon'ble Suprem e C our t hel d t hat :-
"2 . The power to revise orders of t he Inc ome-ta x Officer under sec ti on 263 of the Income -tax Act, 1961 was sought to be limited by t he a ppellant-as s ess ee by contending tha t t he phrase "order pa ss ed by the Income-t ax Of ficer" i n secti on 263 excl uded thos e orders passe d by the Income-ta x Offic er purs uant to the directions of the Inspecti ng As sista nt Commis si o ner under section 144B which was t hen incl uded i n t he Ac t.
3. The Hi gh C ourt i n its decision has follo wed its earlier decision i n which it had refe rred to a nd r elied upon t he reas oni ng of s evera l other Hi gh C ourts on the s ame iss ue t o nega tiv e the cont entions of t he as sessee.
Given the uniformity of interpr eta ti on by t he s ev eral High C ourts , it would not be appr opriat e to interfere with the decision o f the High Court.
4. In any event we a re of the vi ew t ha t ha vi ng regard to the s ubs equent amend ments to the Act iss ued from ti me to tim e there was no sc ope f or limiting the phr ase 'order pas sed by the Income-tax Officer ' i n section 263 t o exc lude orders pas sed by t he Income- tax Offic er on t he directi ons of a superior authorit y eit her under s ectio n 144A or 144B."
6.16 Categorically her e the orders are not pass ed ev en unde r the i ns truc tions of the superi or authorit y or under t he dire ction of the supe rior a uthority, but mer ely an approva l was gra nte d by t he Joi nt Commis si o ner of Income Tax under Secti on 153D of the Act to pass t he orde rs. Provisio ns of S ecti on 153D speak a bout "prior approval for ass essm ent i n the c as e of sea rc h". They also prov ide for obtai ni ng the pri or appr ov al o f t he Joint C ommissione r for merely pa ssi ng a n or der. Therefor e, the dec isio n of the H on'bl e Supreme C our t clearly lays do wn tha t 'a ny order pass ed by t he Ass essi ng Officer ' ca n be revised under Secti on 263 of t he Act irrespective of the fact t hat a ny a ut hority has gra nted any direction to the Assessi ng Officer.
9 ITA Nos. 3385 & 3386/Del/2023Mohit Gupta & Ashish Gupta 6.17 Ther efore, na tura l corol lar y woul d be s how tha t all or ders of sea rch a nd seizure pas s ed under Secti on 153A or under Sec tion 153C of t he Act a re required to be passed after pri or approv al of the Joi nt Commis si o ner except as provided under Secti on 154BA(12). T heref ore, if t he argume nt of the L d. AR is to be ac cepted then in such cases where t he as sessment has been framed under Secti on 153A or Secti on 153C, the same will go out of t he a mbit o f the prov isions of Secti on 263 of the Act and s uc h a vi ew is directly c ontrary to the deci sion of the Hon'ble Supreme C ourt i n T . N .Civil Corporati on Vs . C IT 260 ITR 82, H on'ble Punj ab & Hary ana High Co urt Os ho Forgi ng Ltd. Vs . CIT (s upra ) and Ho n'ble Del hi Hi gh Court i n NIIT Ltd. Vs. Union of India (s upr a).
6.18 The po wer of the Commissi oner und er Secti on 263 of the Act is in t he nature of supervisory jurisdictio n. This po wer i s grant ed to correc t a n error , whic h is prej udicial to t he interest of the Rev enue i n the order of t he Assessi ng O fficer , even if it is appr ov ed by the Joi nt C ommissio ner, who is als o fall ing bel ow t he rank of the Pr. C ommis sioner. If t he argument of the ld. AR is a ccept ed the n t he supervisory a uthor ity of t he Pr. C ommis sione r grant ed under the Ac t is hampered.
6.19 Ther efore, on prov isions of Sec tion 263 of t he Act give un-f ett ered ri ght to the Commiss i oner of Income Tax to revis e any order pas sed by t he Assessi ng Offic er. Whatev er was t o be excl uded by t he law has alr eady been provided under tha t Sectio n a nd the only exc eption a re the iss ues 'dec ided and considered' i n t he a ppell ate orders. Therefore, t he rea soni ng of the ar guments adva nc ed by t he Ld. AR on this line also fails a nd we dismiss the sa me."
9. We fi nd that the a b ove pr opo siti on is duly applicabl e i n the ground rais ed by the a ss ess ee i n this regard wherei n it is ur ged tha t the jurisdiction exer cised by Pr.CI T is wrong inasmuch as that i s without revi s ing the approval of t he Addl . CIT. As alrea dy held by t he ITAT a bov e, there are no such fetters to the powers of ld. Pr.CIT and more so for the officer who is bel ow in rank to the Pr. Commissi oner. Hence, ground no.1 stands dismiss ed.
10. No w, we c ome to order passed under sec ti on 263 of the Act. In this regar d, i n the order pas s ed u/s 263 of the Act, ld. Pr.CI T has alrea dy made a c omputati on of additi on which as per him sho ul d ha ve been ma de. B ut in the same breadth, he is i nvoki ng t he provisi ons of 10 ITA Nos. 3385 & 3386/Del/2023 Mohit Gupta & Ashish Gupta claus e (a) of Explana ti on 2 to s ection 263 of the Act holdi ng a nd direc ting t he AO t o ma ke proper enquiry. We find that this is quit e c ontradictory on the part o f t he ld. Pr.CI T. In one pa rt of the order , he is c omputi ng t he additi on whic h should have been done in the ha nds of t he as sess ee. Therea fter, he is st ati ng t hat there is la ck of further enqui r y and henc e he is i nvoki ng the pr ovisions of s ecti on 263 a nd direc ti ng the AO t o mak e proper enquir y. In our conside red opi ni o n, s uc h c ontradictory order is not l egally sustai na bl e. We not e that i n the c as e of Kapurc hand S hrima l vs. CIT 1 31 ITR 451, Ho n'bl e Supreme C ourt ha s held t hat it is the duty of appellat e aut hority t o correct the er rors in t he orders of the aut horities bel ow and remand the matter bac k to t hem with or without directi on unl ess prohibited by la w. In t he pres ent c as e, we find t ha t t he a bove said rati o is fully applicabl e and t he ord er pass ed by the ld. P r.C IT is contradict ory i n itself. H ence, we remit the iss ue bac k to the file of l d. Pr. CIT to consider the iss ue a fres h aft er givi ng a n appropr iate oppor tunity of bei ng hea rd to t he as sess ee a nd i n t he light of our observation herei nabove.
11. In the r esult, thi s appeal filed by the as ses s ee is partly allowed for stati sti cal purposes.
12. Our abov e orde r applies muta tis mutandis to b oth the appeals.
13. In the r esult, both the a ppeals a r e pa rtly all owed for statistical pur poses."
6. Suffice to say, learned PCIT herein has once again passed his instant twin consequential revisio n orders reiter ating his very stand that the Assessing Officer had no t completed the foregoing search assessment(s) after d ue verification of a ll the relevant facts as under:
"4 . In purs uance of t he o rder dated 01.11.2022 pass ed by the Hon'ble I.T.A.T., Bench-A, Ne w Del hi, afre sh show-cause notice u/s 263 of t he Income Tax Act , 1961 was is sued to the assess ee through ITBA under DIN & Notic e No. ITBA / CO M /F /17 / 2023- 24 / 1053994148(1)dat ed27.06.2023requiring him to explain as to why t he order da ted 19.12.2019 pas sed by the DC IT, C entral Circle- Me erut under Secti on 153A7143(3 ) of the Inc ome Tax Act should no t be c ons idered as 11 ITA Nos. 3385 & 3386/Del/2023 Mohit Gupta & Ashish Gupta err oneous i n s o far as it is prej udicial to the i nterests of the rev enue on the follo wi ng gr ounds:
(i) "R eturn of i nc ome u/s 139(1) was filed on 31.12.2016 showing income of R s. 24,15,870/-. Late r on ret urn u/s 153A(1 )(a) o f the Inc ome Tax Ac t, 1961 wa s filed on 01.03 .2019 showi ng tota l i nc ome of Rs.22,69,470/- meaning thereby sho rt dis closure of inc ome of Rs. 1,46,400/-. Disc ussi on o n this p oi nt has not been made i n the assessm ent order, therefore, t here is under a ss ess me nt of i nc ome of Rs. 1 ,46,400/-.
(ii) A sea rch & s eizure opera tion ca rried out on 30.11.2017 in y our cas e a t residential premises situated at Hav eli, Ja wahar Ganj Ma ndi, Shaml i. The group/ fa mily has purcha sed a ba gh named as Sir S hadi Lal Enclav e l ocated at oppo site B egrajpur Industri al Area near Muns urpur , Muzaf farna ga r. This orchar d i s s pread ov er about 585 Bigha s and is adjac ent to Na tional Highway 58. The said Ba gh wa s purc hased in t he na me of c ertai n firms. However, on t he s pot enq uiry of the addr ess of the firms it was found tha t no firms run on the said address. It was al so found t ha t no ot her pr ofit ear ni ng ac tiviti es were carryi ng o ut by t he fir ms. The said ba gh has been acqui r ed at a ve ry la w consider ati on of the s um of Rs. 1,97,74,000/- whe reas t he S ta mp D uty Value of the tot al la nd is R s. 52,05,11,000/-. The registr ati on deeds executed a re as ma ny as 17 deeds. In the purc has e deed the said bagh shown to be purchas ed in the name of different firms a nd out of the s aid concer ns , m os t of them namely M/s Agga rwal Sons, Goel Sons, G upta S ons, Bindal& S ons etc were f ormed in F.Y. 2015-16.
(iii ) As regards the ver y low price of purc has e, y ou have submitt ed that t he de al was ma de 10-12 years ago . S hri Rajat Lal (25% share of said ba gh) is one of the amo ngst thr ee s el lers, who fixed t he dea l as s ta ted o f prop erty (Orc hard) at Muzaffa rnagar. The other s eller is Smt. S udha Si ngha nia (25% Sha r e), who is sister of S hri Rajat Lal a nd the thir d one is Shri Vivek Vishwa natha n (50% shar e). S hri Rajat Lal in his s tat ement has stated tha t a v er bal a greement for sale of the prop er ty was made in the y ear 2010 with L ate Rames h C ha nd Gupt a. Also Smt. S uma n Gupta i n her s ta te ment on oa th s aid tha t the agre ement for sal e was ma de duri ng the lifetime o f her husba nd. The Payment a gai nst the purc has e of land was made before t he registrati on. In view of t he state ment of Smt. S uman Gupta and a lso indic ated in a clea r-c ut ma nner by the s eized doc uments (Pg 9 of LP-1 as pertai ni ng to Smt. Suma n Gupt a). Ther ein, i nt er-alia, it has been s hown that c ash a mount 12 ITA Nos. 3385 & 3386/Del/2023 Mohit Gupta & Ashish Gupta of Rs. 1.25 C ror e was given to t he s eller i.e., Shri Vivek Vishwa nathan & Smt. S udha Singhania i n F.Y. 2012-
13.When queried for tra ns fer of s aid land at suc h a low proc ess , Shri Raja t L al clear ly stated tha t clea r titl e dee ds for said lands wer e not i n t heir poss es sion. In the Tri al Balance of RCSC as on 31.0 3.201l and i n other seized docum ents too, c redit bala nce as payabl e to these sell ers has been s hown. The name o f Shri Vivek Vishwa nathan & S mt. S udha Si ngha ni a t herein shown as sundry cr editors.
(iv ) As pe r i ncrimi nati ng doc ume nts found duri ng the searc h p roceedi ngs at t he residence of the ass ess ee, a ledger marked as RCSC pertaini ng to F.Y. 2014-15 to 2015-16 was found a nd sei zed. In the s eiz ed book a ledger acco unt i n t he name of land Sir Shadi Lal Ga rden (la nd account) was found a nd sei zed. I n the sa id ledger, it is c learly writt en that the cost of the 38% shar e of the land is Rs. 8.738 Cr. In t his r egard the assess ee has stat ed t hat the ac tua l amo unt is 38% of t he Rs . 8.738 Cr. The evide nce found during search does not support the submis sion of the assessee. I n the ledger o f RCSC costing for 38% clearly shown at 8 .738 Crores a nd the entry is bro ught forwa rd a s on 01.04.2014, in i tself shows that this entr y was als o p res ent i n ledger o f earlier fi nanci al yea rs too. The sai d i nv es tment of Rs . 8.738 Cr ores is c lea rly expe nded in cas h. In view of t his and also i n vi ew of other entries i n the s eiz ed doc uments, whe rein, it has been cl early e ma nat ed t hat amo unt was paid in cash befor e the tra nsfer of l and in 2015-16, a nd therefore Rs. 8 .738 Cror es is the unex plained invest ment in purcha se of land at Sir Shadi Lal Ga raden.
(v ) Further, you have sta ted that the e ntire considera tio n for the land was paid as ba ck as F.Y. 2005-06. This s ubmission is a lso not acc eptabl e bec aus e the s eized i ncrimi nati ng doc ument LP-1, Page-3 , whi ch is a ledger pertaini ng to S mt. S uman Gupta for F.Y. 2012-13, s how tha t a pa yment of Rs. 1.25 Cr. wa s made in F.Y. 2012- 13 to S hri Vivek Vishwa natha n and Smt . Sudha Singhani a, who a re the c o-sellers of this la nd. It shows that the amount o ther than sal e deeds is unacc ounted paym ent fro m undiscl osed s ourc es .
(vi ) you are one of the par tners i n t wo firms named as M/s G oel Sons and M/s A gar wal Sons, a nd thes e two firms purcha sed part of the la nd area of Shadi Lal Bagh in the year 2015-16 releva nt t o t he A.Y. 2016-17. The to tal stamp dut y v al ue o f the l and purchas ed by t he firm Goel So ns is Rs . 7,08,88,560/-. S hri Mohi t Gupta has 60% share i n the sai d firm, M/s Goel Sons. Thus , the 13 ITA Nos. 3385 & 3386/Del/2023 Mohit Gupta & Ashish Gupta dee med contribution of Shri Mohi t Gupta is Rs.4,25,33,136/-. As per s ecti on 56 (2)(v ii)(b), the val ue of land shall b e taken as per stamp dut y v al ue and ta x is als o pay able o n that i ncome. Si nc e, it wa s found t hat the firm was created for t he purpos e of onl y r egis teri ng the land and as no busi ness activities ha ve bee n carri ed out henc e the amount t hat wa s r ecei ved by s eller of land may be treated as rec eive d from the partner of the firm i.e., the tra nsac ti on was carried out not between the firm and the i ndiv idua l but betwee n t he two i ndividua ls only . Henc e, the section 56(2 )(vii)(b) is applic abl e in the c as e of indiv idual. Total sale c onsidera tion is Rs.31,00,000/- a nd stamp duty val ue is Rs.7,08,88,560/-. Differenc e between sta mp d uty val ue and sal e c onsideration i s Rs. 6,77,88,560/- The 60% of this val ue R s. 6 ,77,88,560/- c omes to Rs. 4,06,73,136/- This a mount of R s. 4,06,73,136/- i s deemed i ncome of the assess ee as per provis ion of s ection 56(2 )(vii)(b) of the Act , 1961, and i t should be t axed as i ncome from ot her sourc es. The tot al stamp duty val ue o f t he land purc has ed in the fi rm A gar w al sons is Rs . 28,03,94,000/- and total sale c onsideration is Rs . 1,00,00,000/-. Diff erence between stamp duty val ue and sale c ons ideration is Rs. 27,03,94,000/- S hri Mohit Gupta has 12.5% sha r e contributio n i n M/s A ga rwal Sons. Then The 12.5% of thi s v alue of Rs .
27,03,94,000/- c omes to Rs. 3,37,99,250/-. The t otal inc ome of Rs. 7,44,72,380/-(40673136+33799250) is dee med i nc ome of the assessee a s per provisions o f sec tion 56(2 )(vii)(b) of t he Income Ta x Ac t, 1961 whi ch hav e been esc aped to as sessment .
(vi i) As per sec. 56(2)(vii)(b) of the Ac t, the v al ue of land s hall be take n as per s tam p duty value and tax is als o pay able o n that i ncome. Si nc e, it wa s found t hat the firm was created for t he purpos e of onl y r egis teri ng the land and as no busi ness activities ha ve bee n carri ed out henc e the amount t hat wa s r ecei ved by s eller of land shall be trea ted a s received fr om the par tner of the firm i.e., tra nsac tio n was carried out not between the firm and the individ ual but b etwee n the t wo individual s only . He nce, the provisions of section 56(2)(vii)(b) of the Act 1961 are cl early applicable i n y our case.
(vi ii) In view of above -mentioned fac ts and circums tanc es, you hav e i nc ome under the applicabl e prov isions of the Income Ta x At , menti oned i n pa ras above, was not di sclosed i n t he return of Inc ome, and whic h has be en under-a ssessed by the ass ess i ng officer whil e passi ng assess ment order . Therefore, the order pass ed b y t he Assess i ng Officer has bee n rendered err oneous i n so far as it is prej udicial to the interest of 14 ITA Nos. 3385 & 3386/Del/2023 Mohit Gupta & Ashish Gupta the rev enue i n the li ght of Expla nation 2 t o S ec tion 263 of the I ncome Tax Act, 1961.
(ix) You are, ther efore, i n terms of s ubs ecti on (1 ) of Secti on 263 of the Inc ome Tax Act, 1961, requi red to show caus e as to why t he order dat ed 19.12.2019 for A.Y. 2016-17 passed by DCIT, Ce ntral Circle, Meerut, u/s 143(3 ) r.w.s . 153A of the Income Tax Ac t, 1961 shoul d not be c onsidered as erroneous in s o far as it is prejudicial to the interes ts of t he reve nue. Y ou are required to furnis h y our reply before the undersigned via email on or before 07.03.2022 along wit h doc umenta ry ev idences, upon whi ch you wis h t o rely i n s upport of your written s ubmission. Pl ease note that the limita tion under the Act for passi ng the fi nal order ex pires on 31.03.2022. Plea s e als o note that i n case of fail ure to comply, it shall be presumed t hat you have nothi ng to say i n this regar d a nd t he mat ter will be decided on merits on the basis of t he material a vai lable on rec ord".
5. Vide the above show ca use notic e t he da te of complianc e was fixed for04.07.2Q23 a nd the ass ess e e was s pecific ally as ked to s ubmit his r eply alongwith doc ument ary evidenc es , if any, by email on or befor e the dat e fixed for complia nce. In respo nse to this notice, the assess ee vide his ap plication dat ed 03.07.2023 sought an adjournment which was a llowed and the next dat e of hea ring w as fixed on 25.07.2023. Ho wever , the as sess ee sought a nother adjournm ent vide his applicatio n dated 25.07.2023 whic h was a lso allowed and the ne xt date of hearing was fix ed on 14.08.2023.The cas e was fur ther adj ourned to 11.10.2023 on t he request of the ass essee.
6. On 12.10.2023, Shri Rahul Gupta , Advocate and Authorized Repr esentative of the a s sess ee a ttendi ng the proc eedi ngs on beha lf o f the ass essee a nd e xplai ned the issues i nv olv ed. The AR of t he a ssesse e a lso filed a detailed reply dated 11.10.2023 of the ass es see, S hri Ashis h Gupta . The submi ssions made by AR were exami ned and the r eleva nt issues argued ex tens ivel y in the light of the observati on ma de by the Hon' bl e ITAT vide thei r or der dated 19.12.2022. In s upport of his contentions, the as sessee has also plac ed relianc e on vari ous j udicial prono uncements which are as under :
[i] Sir Dorabji Ta ta Trust Vs. D CIT(E) 188ITD 38 dt.28.12,2020 [Mum.][Trib.] [ii] Brahma C enter De velopment (P ) Lt d. Vs. PC IT [2020] 185 DTR 3 53/77 I TR(Trib.)156 (Del h)(Trib.) 15 ITA Nos. 3385 & 3386/Del/2023 Mohit Gupta & Ashish Gupta [iii ] ETT Ltd. Vs . CI T (2019) 177 D TR 313 (Del . ) (Trib.) [iv ] Amira Pure Foods Pvt. Ltd. Vs. PC IT (2017) 51 CCH 473/63ITR (Trib.) 355 (Del. ) (Trib.) [v ] Nilkanth Stone Industries Vs. PC IT (2021) 189 ITD 718 (Sur at) Trib.
[vi ] CIT Vs. Interna tional Society for Kris hna Conscious ness (2020) 272 Ta xma n 534 (Kar.)(HC) [vi i] PC IT Vs. Decca n Je wellers Pvt. Ltd. (2021) 206 DTR 257/283 Taxman 578 (AP) (HC )
7. The as sessee's reply was car efully considered and exami ned in t he light of details/m ateri al available on rec ords as wel l as t he la w laid down by vari ous judicial forums i n this regard . Thus, before coming t o a logical conclusi on, it woul d be appropria te to di scus s t he fac tual and legal aspects of the case whic h are as under :
8. Fr om perus al of the s eized documents , it is found tha t t he abov e firms, M/s. A ggar wal Sons , M/s . Goel had purc has ed la nd i n the F.Y. 2015-16. The said la nd is part of an orc hard whi ch was already in posses sion of G upta fa mily (S hri Ra hul Gupta & others). Shri Mohit G upta and othe r family members of the entire Gupta fa mily has 38% share i n the B agh, and the la nd has been register ed a t much bel ow val ue of the ma rket val ue as per land re gi stry offic e. Thus , it is crystal c lea r t hat these firms ha v e been form ed to a cquire t he impugned bagh and in actuality t he firms ar e not doi ng a ny rea l bus i nes s. Apa rt f rom usi ng thes e firms to a cquir e the said b agh, no any b usi nes s c arrie d out by thes e firms till dat e. It is establis hed that t he firms cr eated a re paper firms and it wa s c reat ed to esca pe from t ax liability as per sec ti on 56(2)(vii)(b) as .dur ing the y ear under considera tio n t he firm does not fall withi n the ambit of sec tion 56(2)(vi i)(b). It is also found that the total share of differ ent members of G upta famil y in land deal of Sir Shadi L al Bagh Gar den is 38% of total la nd area of 40.201 hec ta re a s per i ncrimi nating doc uments found duri ng the c ourse of searc h pertai ni ng to ye ars befor e 2015-16. On examinati on of the profit-s hari ng r ati o of the par tners b el ongi ng to Gupta fami ly in t he t hree firms namely M/s A ggar wal S ons, M/s Goel S ons and M/s Gupta S ons is als o 38%. It i s shows that everythi ng ha s bee n done in a planned ma nner.
9. M/s Aggarwal Sons was crea ted on 11.02.2015. The de tails of t he pa rt ners, their shar e ca pital and profit-s haring ratio i s as under:
16 ITA Nos. 3385 & 3386/Del/2023Mohit Gupta & Ashish Gupta SI. Name of the Share capit al Ratio Profit Sharing No. Partners 1 Rahul Gupta 778625 2.5 2.5 2 ShashhBala 1245800 4 4 3 Manisha Gupta 934350 3 3 4 Suman Gupta 934350 3 3 5 Ashish Gupta 311450 1 1 6 Mohit Gupta 3893125 12.5 12.5 7 Megha Gupta 3737400 12 12 8 Yogesh Bindal 1245800 4 4 9 Sant osh Bin dal 1245800 4 4 10 Abh ishek Gupta 2504100 8 8 11 Sushil Garg 310200 1 1 12 Neha Gupta 2791800 9 9 13 Priyank Gar g 2803050 9 9 14 Dr. Anguri Garg 2803050 9 9 15 Narendra Kumar 2810300 9 9 Mittal 16 Bharat Mittal 2795800 9 9 Total 3,11,45,000 M/s Goel So ns wa s created on 15.10,2015. The details of the partners, t heir shar e ca pi tal and pr ofit-s hari ng ratio is as under:
SI. Name o f t he Part n ers Share capit al Ratio Profit Sharing No. 1 Rahul Gupta 241720 5 5 2 Shash i Bala 963880 20 20 3 Mohit Gupta 2891640 60 60 4 Priyanka Gu pta 728160 15 15 Total 4825400 The ass ess ments consideri ng the additio ns u/s 56(2)(vii)(b) of the I.T. Act ha v e a lrea dy been pass ed by the Assessi ng Offi cer i n t he ca se of Shas hi Bala part ner in the Fir m M/s A grawa l Sons & M/s-Goel S ons , Ma nisha Gupta partner i n the Firm M/s Gupta sons & M/s Agr a wal Sons a nd i n the c ases of Yo gesh Bi nda l, S us hil Garg, Dr. Anguri Gard & Narendra Kumar Mittal partners in the Fir m M/s A graw al Sons .
10. The a ss ess ee is a part ner i n two firms named as M/s Goel S ons and M/s A garwal Sons , a nd thes e t wo firms pur chas ed part of t he la nd a rea of Sha di Lal B agh in t he y ear 2015-16 releva nt t o the A .Y. 2016-17. The to tal s tamp duty v alue of the sa id purc has ed by the fi rm M/s. G oel Sons is Rs.7,08,88,560/-. Shri Mohit Gupta has 60% share i n t he said firm M/s Goel Son. Thus , the dee med c ont ribution of S hri Mohit Gupta is Rs.4,25,33,136/- as per s ec tion 56(2)(viii)(b) t he v alue of la nd sha ll be take n as per stamp duty val ue a nd tax is 17 ITA Nos. 3385 & 3386/Del/2023 Mohit Gupta & Ashish Gupta als o payabal e on t hat incom e. Sinc e, it was found that the firms wer e creat ed for the purpo se of onl y re gis t ering the l and a nd as no busi ness ac tivi ti es have bee n c ar ri ed out, henc e, the am ount tha t was receiv ed by s ell er of land may be treated as receiv ed by t he par tner of t he firm fee. the transa ction was carried out not bet ween the firm a nd the i ndi v id ual but between the two i ndividuals only . Hence, the section 56 (2)(vi ii)(b ) of the I.T. Act, 1961 is applicable in t he c ase of individual a nd the differenc e of sale considera tio n a nd stamp val ue s hould hav e been added as inc ome from ot her s ourc es of t he as sess ee as per his partnership rati o.
11. Further, on perusal of rec ords it is als o seen that there is a differenc e i n the i ncome dec lared by t he as sess ee i n the return of income u/s 139(1) a nd i n t he ret urn u/s 153A(1)(a) of the Income Ta x Act, 1961. Thus , the re is short disclosur e o f i ncome whic h wa s l eft from assess ment and the sa me should ha ve be en a dded to the total inc ome of the ass essee per para -3 (i) above. Ho wever, t he sa me was not done by t he Ass ess ing Officer.
12. As regar ds the iss ue of deemed inc ome u/s .56(2 )(viii)(b ) of t he I.T. Act , 1961, the ass ess ee vide his reply da ted 1 1.10.2023 has stated that the co rrec t amo unt of s ta mp dut y val ue of la nd purc has ed by M/s . Goel S ons i s onl y Rs.3 ,96,95,560/- The ass es se e has further stated t ha t "Y our goodself has co nsidered tha t in M/s. G oel Sons, 3 sal e de eds has bee n exec ut ed for Rs.31 lacs but for stam p dut y purpos e its va lue is as sess ed at Rs. 7 ,08,88,560/-. This is factually inc orrect. In fact i n M/s. Goel S ons , onl y 2 sale deeds were execut ed for Rs . 19 lacs , the v al ue of whic h for st amp pur pose was ass ess ed a t Rs . 3,9 6,95,560/- See S ale dee d at PB 59-76). At Pg 10 of your earlier order you hav e incl uded one more sal e deed of Rs. 12 lac s havi ng stamp duty v al ue at Rs. 3,11,93,000/-. Howev er, it can be noted tha t the a rea as per t he first sal e deed a nd the thir d sale deed is sam e. From where the third sal e deed is included is not known. This is not e xist ent. In the Balanc e S heet of Goel sons, the c os t of la nd i s r eflected at Rs. 47,19,920/- c omprisi ng of cost of la nd Rs . 19 lacs and stamp duty pa id Rs. 28,19,920/-(PB 77 -78) .......... ."
12.1. The abov e menti o ned reply of the ass es se e has bee n c onsid er ed and it is seen tha t the a ssess ee's contentions with rega rd to the deemed i nco me u/s .56(2 )(viii)(b ) of t he I.T. Act, 1 961 are c ontrary to the fact s of the pres ent ca se ke epi ng i n view the fi ndings of the A O i n t he c ase of M/s. Go el Sons for A.Y. 2016-17 wherei n t he AO has observ ed as under :
18 ITA Nos. 3385 & 3386/Del/2023Mohit Gupta & Ashish Gupta "The cas e was heard a nd discus sed. On the bas is of the reply file by the ass ess ee a nd ex ami nation of papers /doc ume nts seized a nd submitted, t he i nc ome of the as ses s is determined as under-
The firm was crea ted on 15 10 2015. The detai ls of the part ners their s hare ca pital and profit s ha ri ng i s as under:
Name of the partners Share ca pital Ratio Profit Sharing Rahul Gupta 241720 5 5 Mohit Gupta 2891640 60 60 Shashi Bala 963880 20 20 Pri yanka Gupta 728160 15 15 Total 4825400 Fr om per us al of the seized documents , it is f ound that the asses se e had purc hased la nd in t he FY 2015-16 The said land i s part of an orchard which was al ready in pos session of Gupta Fa mily (S hri Ra hul Gupta & Other s) as per seiz ed doc ument found duri ng the co urse of searc h. Shri Rahul Gupta and ot her fa mily members of the entire Gupta family has 38% s hare i n the Ba gh as per seized doc ument named a s RCSC. Sh. Ra hul Gupta in his reply has also admitted that Gupta fa mily has 38% s ha re in the Orc hard known as Sir S hadi Lal Gard en The s aid bagh got registered in t he name of three firms in whic h the Gupta family memb ers are pa rtners A ma ng t he thr ee firms , one of the firms is M/s Goel Sons The bagh is named as Si r Sha di Lal Encla ve located at opposi te Begraj pur Industri al area near Mansur pur, Muzaff amagar. This orchar d is s pread over about 585 Bigha s and is adjac ent to Na ti onal Highway 58.
The firm was c reated by furnishi ng f alse a ddr ess es a nd came i nto existence i n Febr uary, 20 15 In t his re ga rd, a n on the spot enquir ies at t he a ddr ess of the a ss esse e fi rm given in the deed and the r eturn, was carried o ut by the Investi ga tion Wing It was fo und that no suc h firms were carryi ng out a ny business at the gi ven address es . At t he stat ed addr ess es, no offices of the sa me or not even any name boa rd of s aid c oncern found.
The details of t he land that was purc hased i n the na me of the firms a nd when it registere d and is whos e na me it was r egis tered is as under:
19 ITA Nos. 3385 & 3386/Del/2023
Mohit Gupta & Ashish Gupta
Seller name Purcha ser Sale Area Stamp Duty Sale
Name Con si deratio Paid Con si deration as
n per Stamp Duty
Shri Vivek M/s. G oel S ons 228000/- Khasra No. 417620/- 5964670/-
Vis hwan athan S/ o th rough Rah ul 820, 843, dt. 22.01.2016
Priya Vishwanathan Gupta 849,
859/981,
860/982,
860B & 881
(1/2 Part of
1.366
Hectare &
full part of
1.648
Hectare)
Shri Vivek M/s. G ole S ons 1672000/- Khasra No. 2361300/- 33730890/-
Vis hwan athan S/ o th rough Rah ul 16, 17 2224 dt. 22.01.2016
Priya Vishwanatha n Gupta 25 26 27 28
29 30 31 32
33 34 35 36
37 38 39 40
41 42 43 44
45 46 & 47
(full part of
17.8573
Hectare ka
19/100 part)
Shri Vivek M/s. Gole Sons 1200000/- Khasra No. 2184000/- 31193000/-
Vis hwan athan S/o 859/981, dt.21.09.2015
Priya Vishw anathan 860/982,
843, 860B,
849, 881 &
820 (1/2
Part of
1.366
Hectare &
full part of
1.648
Hectare)
3 1 0 0 0 0 0 /- 4962920/- 70888560/-
Fr om t he abov e i t is clea r t ha t the land has been register ed at much bel ow val ue of t he market v al ue as per la nd registry offic e. Thus, i t i s crystal clea r that these firms hav e been formed to a cquire the im pugned bagh a nd i n ac tuality t he firms a re not doi ng a ny r eal bus i nes s. Apa rt fro m usi ng these firms t o acqui r e the said bagh, no a ny busi ness c arried out by t hese firms till dat e. It is es ta blished tha t the firms created a re paper firms and it was created by esca pe fr om the ta x liabili ty as per s ec tion 56(2)(vii)(b) as during the year under considera tio n the firms does not fal l wit hi n the 'a mbit of sec tion 56(2)(vii) (b) A c olorable device has been us ed to defaul t the pa yment of t ax liabi lity........."
12.2. Fr om the above details in t he assessm ent order of M/s Goel Sons, it is no ticed t hat the purc has e considera tio n in respec t of 3 sale dee ds, is Rs.7.08.88,560/-, a nd not Rs .3,96,0 0,000/-.20 ITA Nos. 3385 & 3386/Del/2023
Mohit Gupta & Ashish Gupta
13. In v iew of t he foregoi ng fa cts , the value of land shall be taken a s per sta mp duty va lue and ta x was al s o pay abl e on that i nc ome. Since, i t was found tha t the firms were c rea t ed for the purpose of onl y regis teri ng the land and as no bus iness a ctivities have been ca rried o ut henc e the a mount tha t was r eceived by s ell er of la nd may be trea ted as rec eiv ed fr om the part ner of the firm i.e., trans acti on was carri ed out not betwe en the firm and t he i ndividual but between t he two individuals only. He nce, the sec tion 56(2 )(v ii)(b) of t he Ac t 1961 is applicabl e in the c ase of individual. Thus, after ins erti on of Expla nati on-2 , the position of l aw a s re gards to under what circumstances an or der can be d eemed to be err oneous & prejudicial both, ha s c hanged s ubs ta ntiv ely. Ther efore after 0 1.06 2015 the propositions giv en by courts will hav e t o be i nt erpret ed with r eferenc e to t he dee mi ng fiction now pr ovided i n t he sta tute itself explai ni ng the c onditions wherein a n order c an be dee med to be erro neous & prejudi cial. To avoid any confusi on, it wo uld serv e t he purpos e if the s aid prov isions are revis ited a nd I cite them as unde r:
"[Expla na tion 2 --F or the purpos es of this s ecti on, it is hereby declar ed that a n order passed by the Ass ess i ng Officer shall be deemed to be erroneo us i n s o far as it is prejudicial to t he int erests of the r evenue, i f, i n t he opi ni on of the Principal [C hi ef Co mmi ssioner or Chief Commissi o ner or f P rincipal ] C ommis sioner or Commissi o ner,--
(a) the order is pas sed without making inqui ries or ve rificati o n which should hav e been m ade;
[Emphasis s upplied]
(b) the o rder is passed al lowi ng a ny relief without inqui ri ng i nto the claim;
(c ) the order has not been made i n ac corda nc e wi th a ny direc ti on or instr uction iss ued by the Board under s ection 119; or
(d) the order ha s not been pass ed i n a cc ordanc e wi th a ny decision whic h is prej udicial to t he ass ess ee, rend er ed by t he jurisdicti ona l H igh Court or Supreme C ourt i n the case of t he ass ess ee or a ny ot her person.]"
14. As per c laus e (a) of Explanation-2 to Section 263, lac k o f veri ficati on/enquiries which were required to be made i s one of the condi tions to deem an order to be err oneous & prej udicial bo th. The assessee is liabl e to be ta xed as pe r sec tion 56(2)(vii)(b) in respec t of his sha re 21 ITA Nos. 3385 & 3386/Del/2023 Mohit Gupta & Ashish Gupta of la nd c ompute d o n the basis of hi s profit-s ha ri ng ratio in the two fi rms namely M/s Aggarw al Sons & M/s Gupta Sons. Explanation-2 enjoins upon the Assessi ng Offic er to conduc t nec essar y enqui ries a nd verifica ti ons before passi ng a n ass ess ment order a nd the failure to do so, woul d lead to invocatio n of the provi sions of Secti on 263 of t he Income Tax -Act, 1961. The fa ilure of the ass ess ing Officer t o do s o has re ndered the assess ment order pass ed by him Officer deemed to be er roneous i n so far as it is prej udicial to the i nterests of the revenue.
15. Even on l egal fo oting, the cas e la ws c ited by the as sess ee in support of his contenti on do not help his ca use in t hese proc eedi ngs. The assessee has ta ken shelter of cer tai n ca se la ws t o ma ke out a c ase that issues whi ch have already b een examined i n detail do not come wit hi n the purview of Sec tio n 263 of the Inco me Tax Ac t, 1961. Wit h due respect t o the judi cial prono uncements c ited, the sa me are disti nguishabl e not only on facts but on the position of law too. Facts borne out of rec ords clearly s how t hat t he Assessi ng Of ficer did not make any enquiries or i ndepe ndent v erific ati on. The reply a nd doc ume nts filed by the ass ess ee have been simply ac cept ed as such wi thout enqui ries to rea ch a prude nt sa tisfa ctio n. The assess ee has mer ely c ited c a se laws witho ut el aborati ng how the fac ts and legal propositi on l aid down by the Hon' ble C ourts in these decisi ons s upported hi s p oi nt of vi ew.
16. Besides , t here a re sev eral cas e la ws wher e it has bee n held that lack of enquiry/verification of ma terial av ailabl e on rec ord would r ender the order er roneous . A few s uc h c as e laws a re menti oned a s foll ows :-
A. The Punjab & Har yana Hi gh C ourt in the cas e of PCIT , Ludhiana vs. V enus Wo ollen Mi lls [2019] 412 ITR 188 [P&H ] c oncur red wit h the vi ew t hat where the Assessi ng Offic er merely accept ed t he reply of the as ses see without appl yi ng his mind as to t he correctness of t he c laim, s uc h an assess ment woul d be erroneous i n so fa r it was prej udi cia l to the i nte rest of the rev enue and woul d b e hit by t he provi sions of Secti on 263 of t he Incom e Ta x Ac t, 1961.
B. In CIT vs . Bal larpur Indus tries [2017] 85 taxmann.c om 10 [Bombay] the Hon'ble High C ourt of Bo mbay held that abs enc e of exami nation of t he clai m of deducti on ma de by the ass essee while pas si ng an as ses sment order and allowed the claim made would render the order of the Asses sing Officer err oneous and would invite the ex ercise of revi sional j uris dicti on under Section 263.22 ITA Nos. 3385 & 3386/Del/2023
Mohit Gupta & Ashish Gupta
17. Ther e is a ca tena of ot her decisions wherei n the Courts hav e held that when the Ass essing O ffic er fails to ma ke enquiri es whic h s houl d have b een done in t he bac kgr ound of relevant material ra ising s us picion, t he order pass ed by the AO is liable to be s et aside u/s 263. The decis ions relied for this pr op ositi on a r e as under:
Gee Vee Enterpri ses v. Add/. C IT [1975] 99 ITR 375 (Del hi ), Addl. C IT v. Mukur Corpn. [1978] 111 ITR 312 (Guj.), A ddl. C IT v. Krishna Narayan Nai k [1984] 150 ITR 513/[1983] 15 Taxman 535 (Bo m.), CIT v . Precision Fi nanc e (P .) Ltd. [1994] 208 ITR 465/[1995] 82 Taxman 31 (CIT v. Emer y Stone Mfg. C o. [1995] 213 ITR 843/83 Taxman 643 (Raj.), D uggal & C o. Vs. CIT [1996] 220 ITR 456/[1994] 77 Taxma n 331 (Del.) CIT Vs Anand Kumar Jai n 370 I TR 140(Allahabad ), Malabar Ind. C o. L td. 243 ITR 83(SC ), Ramp yari devi Saraogi Vs CIT 67 ITR 84(S C), Tara Devi A ga rwal Vs CIT 88 ITR 323(SC ), CIT Vs So uth Indi a S hippi ng Cor pora ti on 233 ITR 5 46(Ma d).
18. In v iew of t he discuss ions a bove, it is clea r tha t there is no n-application of mind on the pa rt of the Asses si ng Officer in as muc h as the nec es sa ry ve rificati o n of facts/e nqui ries whic h s hould ha ve been made, hav e not been made, ma ki ng the order erroneous and prej udicia l to interest of rev enue withi n the m ea ning of s ection 263 read wi th Cla us e (a ) of Expla na ti on-2 there und er. I, therefore, under the powers co nferr ed u/s 263 of the Inc ome Ta x Act , 1961, hereby s et as ide t he order pa ss ed by Assessi ng Officer u/s 1153A/143[3] for A.Y.2016-17 with dir ecti on to pa ss fre sh orde r aft er conduc ti ng proper enqui ries, i nc ludi ng t hird party enquiries and i nv esti gati ons etc. int o the clai m of t he as sess ee, after provi di ng opportunity t o the ass ess ee als o."
6.1 This leaves both the assessees aggrieved.
7. Before we could proceed further, we sought to know from both the parties as to what is the additio n soug ht to be made in the impugned twin cases. We are informed in light of the learned PCIT's revision above directio ns that the a ddition which is sought to be made herein is that u/s 56(2)(vii)(b) of the Act which is applicable in case o f an individual or an HUF; as the 23 ITA Nos. 3385 & 3386/Del/2023 Mohit Gupta & Ashish Gupta case may be, is found to have "received" a capital asset at a lower price than that adopted by the stamp authorities in clause (b) sub-clause s (i) & ( ii) thereof. That being the c ase, we notice that it is no t the se twin assess ees but the ir partnership firm M/s Goyal Sons, which had infact acted as the purchaser of the capital asse t representing a share in an orchard measuring 585 bhigas, adjacent to National Highway No. 58 .
8. Faced w ith this situation, we inv ite the learned C IT DR's kind attention to para 12.1 of the impugned revisionary directions ind icating share hold ing in the said partnership firm who has actually acted as the purchaser or "received" the asset(s) in the relevant previo us year. This clinching fact has gone un-rebutted from the departmental side. All what the learned C IT DR has reiterated is that o nce the se assessees have routed the ir impugned purchases through the partnership firm, the addition herein u/s 56( 2)(vii)(b) of the Act o ught to be made in their hands only.
9. We find no mer it in the Revenue' s instant arguments. This is for the precise reason that both these indiv iduals/assessee happen to be partner of the partnership fir ms M/s Goyal So ns, they co uld not be themselves treated as the actual purchaser for the purpose of invo lving the relevant statutory provisio ns 24 ITA Nos. 3385 & 3386/Del/2023 Mohit Gupta & Ashish Gupta u/s 56(2)(vii)(b) of the Act. We wish to reiterate here that the legislature has inserted section 56(2)(x) of the Ac t dealing with "any person" including a partnership fir m, to cover such a mischief 01 .04.2017 onwards by the Finance Ac t, 2017 which admittedly does not carry any retrospective effect as the case in A.Y . 2016-17 only. We conclude in light of all these facts that even if the learned Assessing Officer had failed to verify all the relevant facts for the purpose of mak ing impugned sec tion 56(2)(vii)(b) addition in assessees hands, his twin search a ssessme nts co uld ne ither be held to be er roneous ones nor those causing prejud ice to the interest of the Revenue, which forms a condition precedent for exercise o f section 263 revision jurisdiction as held in Malabar Industr ial Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC). We accordingly reverse the learned PCIT revisio nary directions in both t hese cases for this precise reason alone.
10. All other p leadings on merits as well as in law , identical in both these cases, stand rendered academic.
25 ITA Nos. 3385 & 3386/Del/2023Mohit Gupta & Ashish Gupta
11. These tw in assessees as many appeals ITA Nos. 3385 & 3386/Del/2023 are allowed in above terms. A copy of this common order be placed in the respective ca se files.
Order Pronounced in the Open Court o n 27/02/2025.
Sd/- Sd/-
(Avdhesh Kumar Mishra) (Satbeer Singh Godara)
Accountant Member Judicial Member
Dated: 27/02/2025
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR