Bombay High Court
Commissioner Of Income Tax - 16 vs Chandan Magraj Parmar on 16 November, 2021
Bench: K. R. Shriram, Amit B. Borkar
1 907-ITXA 1570-17.odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO.1570 OF 2017
Commissioner of Income Tax-16, Mumbai ] ... Appellant
Versus
Chandan Magraj Parmar ] ... Respondent
Mr. Suresh Kumar for Appellant.
Mr. Madhur Agrawal i/b Mr. Atul K. Jasani for Respondent.
CORAM :- K. R. SHRIRAM &
AMIT B. BORKAR, JJ.
DATE :- 16 NOVEMBER, 2021
P. C. :-
1. This is an Appeal filed under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') impugning an order dated 30/11/2015 passed by the Income Tax Appellate Tribunal (hereinafter referred to as 'ITAT'). The Appellant has proposed the following questions of law :-
"(i) Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal erred in holding that the order of Pr.CIT dated 28.3.2016 passed u/s. 263 is not erroneous as well as prejudicial to the interest of revenue ?
(ii) Whether on the facts and in the circumstances of the case and in law, the order passed by the Hon'ble Tribunal is perverse and not supported by the order Digitally signed URS 1 of 9 UMESH by UMESH RAMESH RAMESH SHINDE Date:
SHINDE 2021.11.18 15:19:55 +0530
2 907-ITXA 1570-17.odt passed by the AO u/s. 143(3) with regard to the inquiry made by the AO in respect of the capital gain ?
(iii) Whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal failed to consider the principle of the preponderance of probability surrounding circumstances, as enumerated by the Apex Court in Durga Prasad More 82 ITD 520 and Sumati Dayal (SC). The Hon'ble Tribunal failed to take into account the provision of Explanation - 2 to section 263 of the Act."
2. As regards Question No.(i), Mr. Suresh Kumar states that there is a typographical error inasmuch as it should be the order of the Assessing Officer dated 26/02/2014 instead of "the order of Pr.CIT dated 28/03/2016 passed under Section 263 of the Act".
3. Respondent had filed return of income on 29/07/2011 for AY 2011-12 declaring total income of Rs.2,21,280/-. The assessment was completed on 26/02/2014 under Section 143(3) of the Act determining the income of Assessee at Rs.7,06,540/-. The assessment order was revised by the Principal Commissioner under Section 263 of the Act holding that in the return of income, Respondent has shown Long Term Capital Gain (LTCG) of Rs.6,77,95,890/- in respect of sale of agricultural land which was claimed as exempted. Respondent had purchased pieces of land admeasuring 8 Hectares and 36 Guntha on 17/02/2010 for a consideration of Rs.54,87,320/-. On 15/04/2010, Respondent joined a URS 2 of 9 3 907-ITXA 1570-17.odt firm M/s. Synergy Developers as partner and the said land was given as Respondent's share of capital in the said partnership firm on agreed value of Rs.7,32,83,210/-. According to Principal Commissioner, during the course of assessment, the Assessing Officer (AO) did not raise any query nor make any inquiry regarding circumstances in which the seller of land, within 2 months, sold the land for a price 1335% higher than the purchase price. According to Principal Commissioner, the AO simply accepted the transaction as genuine on the basis of papers filed in the course of assessment and therefore, failure on the part of AO to examine the unusual transaction from the point of view of genuineness, rendered the order erroneous and prejudicial to the interest of Revenue. Based on this opinion that the Principal Commissioner had formed, a show-cause notice dated 15/03/2015 was issued calling upon Respondent to show cause as to why the order dated 26/02/2014 should not revised and gain shown as exempt LTCG be taxed as unexplained cash credit under Section 68 of the Act. Respondent contested the revision proceedings and gave detailed explanation for the reason Respondent could fetch such unusual price escalation in the value of the land. The Principal Commissioner once again issued notice dated 20/11/2015 under Section 263 of the Act. In this notice, the Principal Commissioner mentioned that the exemption is allowable to Respondent only if land is situated beyond 8 kms from local limits of any Municipality or any Cantonment Board referred in the URS 3 of 9 4 907-ITXA 1570-17.odt proviso to Section 2(1A) and Section 2(14) of the Act. The notice further mentioned that the AO neither raised any specific query nor discussed the matter in the assessment order and thus, the assessment order was erroneous as well as prejudicial to the interest of Revenue. Respondent filed reply to the show-cause notice and gave detained explanation. Respondent also filed various notifications to show that the place where the land was situated was not a notified Municipal area / urban area etc. Respondent's explanation was not accepted by the Principal Commissioner who concluded that AO has not made any inquiry nor any such evidence produced by Respondent was considered in the course of assessment and passed an order setting aside the assessment order dated 26/02/2014 passed by AO.
4. Aggrieved by this order of Principal Commissioner, Respondent preferred an Appeal before the ITAT and ITAT, by its order dated 30/11/2016 impugned in this Appeal, accepted the contentions of Respondent and quashed the order passed by Principal Commissioner.
5. Both Mr. Suresh Kumar and Mr. Agrawal, in unison, stated that the fact that the land was situated beyond 8 kms from local limits of any Municipality or any Cantonment Board referred in the proviso to Section 2(1A) and Section 2(14) of the Act is not disputed. The definition URS 4 of 9 5 907-ITXA 1570-17.odt of 'Capital Asset' under Section 2(14) of the Act that was prevalent during the AY 2011-12 read as under :
"(14) ["capital asset means---
(a) property of any kind held by an assessee, whether or not connected with his business or profession;
.....
but does not include---
.....
[(iii) agricultural land in India, not being land situate---
(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand; or
(b) in any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item
(a), as the Central Government ma, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations specifying in this behalf by notification in the Official Gazette." There has been an amendment to the definition with effect from 01/04/2014 with which we are not concerned for the present.
Therefore, 'Capital Asset' means property of any kind held by an Assessee, whether or not connected with his business or profession but does not include agricultural land in India not being land situated in any URS 5 of 9 6 907-ITXA 1570-17.odt area within such distance, not being more than 8 kms, from the local limits of any Municipality or Cantonment Board referred to in Item (a) as the Central Government may, having regard the extent of, and scope for, urbanization of that area and other relevant considerations specifying in this behalf by notification in the Official Gazette.
6. Hence, in view of the admitted position, certainly, the land which is the subject-matter of this proceeding, would not fall within the definition of 'Capital Assets'.
7. When it is not disputed that the land concerned would not fall under the definition of capital asset, the question of any capital gains arising also will not arise. Moreover, we also find that the ITAT has come to a factual finding that the AO has raised queries with regard to the claim of capital gain on transfer of land, Respondent vide its reply dated 31/01/2014 furnished the details in respect of distance of agricultural land from municipal limits, record of population as per last census and the AO after considering the reply of Respondent, accepted the claim of Respondent. The ITAT has given a finding that the claim of capital gain was accepted by AO after necessary inquiry and the order under Section 143(3) of the Act was passed. It is true that the AO has not passed any written detailed order while accepting the explanation of capital gains of URS 6 of 9 7 907-ITXA 1570-17.odt Respondent but the fact is AO had raised queries and Respondent has given detailed reply means the AO has passed this order after making necessary inquiries. We agree with the view of the ITAT that the order of the AO cannot be branded as erroneous merely because the order does not contain the details which Principal Commissioner feels should have been included. The Principal Commissioner cannot decide how elaborate an order of the AO should be. Where the AO, during the scrutiny assessment proceedings, has raised a query which was answered by the Assessee to the satisfaction of the AO but the same was not reflected in the AO by him, the Commissioner cannot conclude that no proper inquiry with respect to the issue was made by the AO and enable him to assume jurisdiction under Section 263 of the Act. We are supported in this view by the Judgment of this Court in Commissioner of Income-Tax Vs. Gabriel India Ltd.1 where the Court has held as under :-
"The power of suo motu revision under sub-section (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub- section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions "erroneous", "erroneous assessment" and "erroneous judgment" have been defined in Black's Law Dictionary. According to the definition, "erroneous" means "involving error; deviating from the law".
1 203 ITR 108 URS 7 of 9 8 907-ITXA 1570-17.odt "Erroneous assessment" refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, "erroneous judgment"
means "one rendered according to course and practice of court, but contrary to law, upon mistaken view of law; or upon erroneous application of legal principles.
From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income Tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income Tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income Tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income Tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income Tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo URS 8 of 9
9 907-ITXA 1570-17.odt motu revision because the first requirement, viz., that the order is erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to the interests of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed."
Many other High Courts have taken the same view and those Judgments have been referred to in the impugned order.
8. In our view, the ITAT has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that questions as pressed raise any substantial questions of law.
9. The Appeal is devoid of merit and is dismissed with no order as to costs.
(AMIT B. BORKAR, J.) (K. R. SHRIRAM, J.) URS 9 of 9