Income Tax Appellate Tribunal - Ahmedabad
Smt. Lalitaben Govindbhai Patel,, ... vs The Cit, A'Bad-I,, Ahmedabad on 17 May, 2017
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'C' अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
"C" BENCH, AHMEDABAD
BEFORE SHRI S.S. GODARA, JM, AND SHRI MANISH BORAD, AM
आयकर अपील सं./ITA.No.1175/AHD/2014
( नधा रण वष / Asstt Year :2009-10)
Smt. Lalitaben Vs. The Commissioner of Income
Govindbhai Patel, Tax, Ahmedabad-I,
Ganesh House, nr. PAN : AEAPP9516L
Dharnidhar Derasar,
Paldi, Bhatta, Ahd.-
380007
(Appellant) (Respondent)
अपीलाथ ओर से / Appellant by: Shri Dhiren Shah, A.R.
यथ क ओर से/Respondent by: Shri S.L. Meena,, Sr. D.R
सन
ु वाई क तार ख / Date of Hearing 24-03-2017
घोषणा क तार ख /Date of Pronouncement 17-05-2017
आदे श / O R D E R
PER MANISH BORAD, ACCOUNTANT MEMBER
This appeal for assessment year 2009-10 is directed against the order of Commissioner of Income Tax -I dated 05.03.2014 passed u/s. 263 of Income Tax Act. The assessee has challenged the validity of the order passed u/s. 263 of the Act learned Commissioner of Income Tax by raising following grounds:-
1. The Ld. CIT has erred in law and on facts in passing the order u/s. 263 of the Act by holding that the assessment order passed u/s. 143(3) dated 28-12-2011 was erroneous and prejudicial to the interest of revenue. Hence the said assessment for A.Y. 2009-10 dated 28-12-2011 is cancelled and the AO is directed to make fresh assessment of the total ITA.No.1175/Ahd/2014 Assessment year 2009-10 -2- income of the assessee for the said assessment year, after allowing opportunity to the assessee as per law.
2. The Ld. CIT has erred in law and on facts in making an observation that" in view of the above facts and applicable provisions of law, it is amply clear that STCG on sale of land was required to be considered at Rs. 4,09,82,337/- and not Rs. 5,04,668/- as shown in the return of income. Under the circumstances, it is evident that the AO has erred in accepting the figure of STCG of Rs. 5,04,668/- shown by the assessee in the return of income and as a result thereof, there was substantial loss of revenue to the exchequer since the income of the assessee was assessed at a lower figure".
3. The Ld. C1T has erred in law and on facts in failing to consider the fact that during the course of assessment proceedings, the AO has verified all the details filed before the Ld. A.O in respect of sale of land and hence the assessment order passed u/s.
143(3) of the Act cannot be considered as erroneous and prejudicial to the interest of revenue.
4. The Ld. CIT has erred in law and on facts in failing to properly consider the various case laws relied upon by the appellant.
2. Briefly stated facts as called out in the records are that, the assessee is an individual and has earned short term capital gain and income from other sources. Return income for assessment year 2009-10 was filled on 28.03.2011 declaring total income at Rs. 5,04,668/-. Case was selected for scrutiny assessment. Notice u/s. 143(3) of the Income Tax Act followed by 142(1) of the Act was duly served upon assessee along with questionnaire calling necessary details and mainly required information about the transaction of sale of capital assets giving rise to short term capital gain from sale of agricultural land admeasuring 49,169 sq. mtrs. situated at village Godhavi. Necessary details about cost of acquisition including conversion charges, details of bank payment, agreement for sale, proof of handing over of possession were submitted. Learned Assessing Officer after examining these details was satisfied with the working of short term capital gain shown by the assessee and accordingly accepted the declared income as assessed income.
3. Subsequently learned Commissioner of Income Tax (Appeals)-A-1 assuming the jurisdiction cast upon him perused the assessment records and observed that assessee has claimed that the land was sold to Melody ITA.No.1175/Ahd/2014 Assessment year 2009-10 -3- Complex Pvt. Ltd. vide sale agreement dated 15.09.2008 for Rs. 38,74,431/- and this amount has been shown as the sale consideration. Learned Commissioner of Income Tax (Appeals) further observe that the actual transfer took place vide Kabja Karar dated 23.03.2009 in favor of the Gatil Properties Limited for a consideration of Rs. 4,43,52,100/-. Learned Commissioner of Income Tax (Appeals) was of the view that assessee should have shown short term capital gain at Rs. 4,09,82,337/- instead of Rs. 5,04,668/- disclosed in the return of income. Learned Commissioner of Income Tax (Appeals) accordingly issued show cause notice u/s. 263 of the Act dated 04.12.2013 which reads as follows:-
The assessee had purchased agricultural land at Godhavi village admeasuring 49,169 Sq Mis. during FY 2007-08. The cost of acquisition including conversion charges of Rs. 2,21,338/- was Rs.33,69,763/-. The Banakhat/Agreement for sale of this (and with Melody Complex Pvt Ltd. is dtd. 15.09.2008 for Rs.38,74,431/-. In the said agreement it is mentioned on page-4 that the seller would continue to posses the land till execution of Sale deed. Possession has been handed over vide Kabja karar dated 23.03.2009 by the assessee to Gatil Properties Ltd. for a consideration of Rs.4,43,52,100/-. Hence as per the provisions of section 2(47)(v) of the IT Act 1961 and 53A of Transfer of property Act the transfer of asset took place on 25.03.2009.
The assessee had claimed that the said land was sold to Melody complex Pvt Ltd. vide initial agreement dated 15.09.2008 for Rs.38,74,431/-. It is evident that the actual transfer took place vide Kabja Karar dated 23.03.2009 in favor of Gatil Properties Ltd. for a consideration of Rs.4,43,52,100/-. The STCG would therefore be Rs.4,09,82,337/- instead of Rs. 5,04,668/- disclosed by the assessee in the return of income.
2. In view of the above, it appears to the undersigned that the order dated 28.12.2011 passed under section 143(3) of the I.T. Act, 1961 by the ITO Ward 2(1), Ahmedabad is erroneous and prejudicial to the interests of Revenue within the meaning of Section 263(1) of the I.T. Act, 1961.
3. You are, therefore, requested to show cause as to why appropriate order under section 263(1) of the I.T. Act, 1961 be not passed in your case to eliminate the above error. For this purpose, the hearing in your case is fixed on 18/12/2013 at 12.30 P.M. at the above address. You may attend personally or through an authorized representative on the scheduled date and time or submit your written reply with supporting evidences. In case nothing is heard ITA.No.1175/Ahd/2014 Assessment year 2009-10 -4- from you by the said date, it shall be presumed that you have nothing to state in this matter which shall then be decided on merits.
4. Against the above referred show cause notice, learned Authorised Representative of the assessee gave detailed submission contending that the order framed by learned Assessing Officer u/s. 143(3) of the Act is neither erroneous nor prejudicial to the interest of revenue and he has conducted sufficient inquiry before framing assessment order and has completed the assessment by adopting one of the permissible courses provided under law.
Learned Authorised Representative submitted following submissions before learned Commissioner of Income Tax (Appeals)-1.
5. In response to the show cause notice dated 04-12-2013, the AR of the assessee has contended that during the F.Y.2008-09, the assessee had agreed to sell agricultural land at Godhavi village admeasuring 49,169 sq. mtrs. vide Agreement to sale/banakhat dated 15-9-2008. As per the said agreement, the land admeasuring 49,169 sq. mtrs. was sold to Melody Complex Pvt. Ltd. for a total consideration of Rs.38,74,431/-. After this agreement, Melody Complex Pvt. Ltd., had executed a Banakhat dated 25-3-2009 whereby the said land was sold to Gatil Properties Pvt, Ltd. for a consideration of Rs.4,43,52,100/-. The assessee has received sale consideration of Rs.38,74,431/- as per Banakhat dated 15-9- 2008 and the confirming party i.e. Melody Complex Pvt. Ltd. received its share of sale consideration of Rs.4,04,77,669/- from the ultimate purchaser (total sale consideration of Rs.4,43,52,100/-). The assessee has stated that Melody Complex Pvt. Ltd., has acquired the rights of the property vide agreement of sale dated 15- 9-2008 as per the provisions of section 2(14). The said right is an enforceable right which has been transferred within the meaning of section 2(47)(ii) of the Act while executing the agreement dated 25-3-2009 as a confirming party. The assessee has placed reliance on ITAT Madras Bench decision in the case of K.R. Srinath whereby it is held that when there is relinquishment of right it amounts to transfer u/s 2(47). The assessee has also relied on other judgments on similar lines.
5.1 The AR has further contended that the Banakhat/Agreement to sale dated 25-3-2009 has not been taken into consideration in the notice u/s 263 and that is why the entire consideration of Rs.4,43,52,100/- is considered in the hands of the assessee which is a factually incorrect observation.
5.2 It is further contended that during the course of assessment proceedings, the AO has verified all the details filed before him pertaining to sale of land and hence the assessment order passed cannot be considered as erroneous and ITA.No.1175/Ahd/2014 Assessment year 2009-10 -5- prejudicial to the interest of revenue. The AR has placed reliance on the Supreme Court judgment in the case of Malabar Industrial Company (243 ITR 83) wherein it is held that when two views are possible on a issue and the AO has adopted one view with which the CIT does not agree, then such order cannot be treated as erroneous order unless the view taken by the AO is unsustainable in law. The AO has also placed reliance on Gujarat High Court order in the case of Arvind Jewellers (259 ITR 502). Several other judgments on similar lines have also been quoted.
5. However learned Commissioner of Income Tax (Appeals) was not convinced with the submissions made by the Authorised Representative of the assessee and was of the firm belief that assessee should have offered short term capital gain by taking the sale consideration of Rs. 4,43,52,100/. Learned Commissioner of Income Tax (Appeals) in his order u/s. 263 set aside the assessment order dated 28.12.2011 and directed the Assessing Officer to make fresh assessment in light of his following observations:-
6. I have considered the facts of the case and the submissions made by the AR of the assessee. So far as the objection of the assessee against proceedings u/s 263 is concerned on the ground that action u/s 263 is not possible in cases where the A.O, had already examined the issue, this proposal is untenable for the reason that the power u/s 263 is intended to correct the wrong assessment made by the assessing authority. As a matter of fact, it appears that no such inquiries have been conducted by the AO. The AO has simply accepted the claims of the assessee and failed to make any enquiry which were called in the circumstances of the case. Even assuming that every claim, which is allowed to an assessee, need not be elaborately dealt within an assessment order but the chain of events should show that there was application of mind. The view taken by the AO should not be a mere view but a judicial view. Being a quasi-judicial authority, the AO cannot take a view, either against or in favour of the assessee/revenue, without making proper enquiries and without proper examination of the claim made by the assessee in the light of applicable law. Reference is made to the decision of Delhi High Court in the case of GEE VEE Enterprises v. Addl CIT (99 ITR 375), wherein after considering the decision of Supreme Court in the cases of Ram Pyari Devi Saraogi v CIT (67 ITR 84) and Smt. Tara Devi Agarwal v CIT (88 ITR
323), it was held that " the position and function of the Income-tax Officer is very different from that of a Civil Court. The statements made in a pleading proved by minimum amount of evidence may be accepted by a civil court in absence of any rebuttal. The Civil Court is neutral. It is simply given decision on the basis of the pleadings and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face ITA.No.1175/Ahd/2014 Assessment year 2009-10 -6- of a return which is apparent in the order but call for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct". Moreover, in the case of Malabar Industrial Co. ltd. (243 ITR 83) the Supreme Court has clearly spelt out that incorrect assumption of facts and incorrect application of law as also non application of mind will satisfy the requirement of the order being erroneous. As per the provisions of section 263(1), any proceeding under the Income Tax Act and any order passed therein comes within the ambit of revision u/s 263. If the stand taken by the A.O. were final, then there was no need to have section 263 on the statute book at all. Such interpretation would render the section superfluous which could never be the intention of the legislature. Further, in Swarup Vegetable Products vs. CIT, 187 ITR 412 (All.), it was held that it was beyond dispute that u/s 263 the Commissioner does have the power to set aside the assessment order and send the matter for fresh assessment if he is satisfied that further enquiry is necessary and that the impugned order is erroneous and prejudicial to the interests of revenue. The Supreme Court has held in CIT vs Shree Manjunathesware Packing Products & Camphor Works, 231 ITR 53, that the revisional power conferred on the Commissioner u/s 263 is of wide amplitude.
6.1 It is a settled legal position that any order passed by the AO without proper inquiry and investigation is erroneous and prejudicial to the interest of revenue. The following judicial pronouncements endorse the above contention:
(i) The Madras High Court in the case of CIT vs. Seshasayee Paper & Boards Ltd., (2000) 242 ITR 490 (Madras) has held that failure of the AO to make an inquiry before granting deduction would render the assessment erroneous and prejudicial to the interest of revenue.
(ii) The Madras High Court, in the case of CIT vs. South India Shipping Corporation Ltd. (1998) 233 ITR 546 (Mad.) has held that the order of the AO may be erroneous in law or in fact. It may be erroneous in the sense that the AO had passed the order without properly conducting the inquiry in completion of the assessment and the order may also be erroneous when the expenditure allowed as against the provisions of law.
(iii) The Gauhati High Court n the case of Tarajan Tea Co. Pvt. Ltd. (1994) 205 ITR 45, 61 (Gau.) wherein it was held that a decision taken without ITA.No.1175/Ahd/2014 Assessment year 2009-10 -7- considering the relevant aspect of a particular point would certainly be erroneous and such a decision in favour of the assessee without such consideration would be prejudicial to the interest of revenue so as to empower the Commissioner to exercise his revisional powers u/s 263 of the Act. Simply because the facts have been disclosed by the assessee in the course of assessment proceedings, it does not give him the immunity from the revisional jurisdiction which the Commissioner can exercise u/s 263 of the Act.
(iv) In the case of Mannulal Matadeen Vs CIT reported at (2005) 277 ITR 346 (All), the Allahabad High Court had held that the order of revision was valid as the AO had not made necessary enquiries before allowing deduction of interest.
7. Coming to the arguments on merit, the assessee's assumption that there is an inadvertent mistake in the notice u/s 263 as the Banakhat/Agreement to sale dated 25-3-2009 has not been taken into consideration is misplaced. The assessee has not contemplated the contents of the notice u/s 263 thoroughly. The Banakhat/Agreement to sale dated 15-9-2008 as well as 25-3-2009 are the prime documents on the basis of which notice u/s.263 dated 4-12-2013 has been issued. Hence, there is no inadvertent mistake as pointed out by the assessee.
7.1 The assessee has explained all the factual aspects of the transaction of sale of land executed by the assessee during the previous year. The assessee has thus concluded that Melody Complex Pvt. Ltd., had acquired all the rights of the land belonging to the assessee and has accordingly relinquished these rights in favour of Gatil Properties Ltd. The assessee has resorted to the provisions of section 2(14) and section 2(47) of the Income-tax Act and contended that transfer includes relinquishment of a capital asset as defined under section 2(14). The submissions made by the assessee have been considered. It is seen that the assessee had purchased land at Godhavi Village during the F.Y.2007-08. The same was converted into non-agricultural land by paying conversion charges of Rs.2,21,338/-. Accordingly, the cost of acquisition was Rs.33,69,763/- which has been shown in the return of income. During the year under consideration, the assessee had commenced the process of selling this non-agricultural land by entering into an agreement for sale with Melody Complex Pvt. Ltd. As per this agreement dated 15-9-2008, the assessee had agreed to sell the land to Melody Complex Pvt. Ltd. subject to fulfillment of certain conditions. As per condition "No.5 mentioned in the said agreement, the possession of the said land was to be handed over by the assessee at the time of executing sale deed. It is further stated that all the Government taxes pertaining to the land will be paid by the assessee till the date of execution of sale deed and only after that the responsibility of paying such taxes would be on the purchaser. After executing this agreement for sale, the assessee has executed a Kabja Karar (possession deed) on 25-3-2009. In this deed, the assessee is featured as a seller and the actual purchaser is Gatil Properties Ltd. and Melody Complex Pvt Ltd., is a confirming party. As per the ITA.No.1175/Ahd/2014 Assessment year 2009-10 -8- details of the payment made by Gatil Properties Ltd., it is seen that almost the entire payment of Rs.4,43,52,100/- has been made by Gatil Properties Ltd., on 25- 3-2009. It is also mentioned that the confirming party has already paid Rs.1,00,000/- to the assessee on 15-9-2008. Vide this possession document, the assessee has handed over the possession of the said land to Gatil Properties Ltd.
8. From the above facts, it is evident that the land was in possession of the assessee upto 25-03-2009 and the actual sale of land has thus taken place on 25- 3-2009 between the assessee and Gatil Properties Ltd. In other words, the assessee is the seller of land at Godhavi Village admeasuring 49,169 sq. mtrs. and Gatil Properties Ltd., is the purchaser of the land who has made payment of Rs.4,43,52,100/- in lieu of the transfer of land in its favour by the assessee. The assessee could not have possessed the land if the Agreement dated 15-09-2008 was final. As per the provisions of section 2(47)(v), any transaction involving the allowing of the possession of any immovable property to be taken or retained in any part performance of a contract of the nature referred to in section 53 A of the Transfer of Property Act, 1882 shall be considered as a transfer of a capital asset. In this case, the possession of the land has been handed over by the assessee by executing the possession document dated 25-3-2009 therefore, it is clear that the actual transfer of capital asset took place on 25-3-2009 between the assessee and Gatil Properties Ltd. Since Gatil Properties Ltd., has made the payment of Rs.4,43,52,100/-, the said amount is required to be treated as sale consideration for the purpose of computation of capital gain in the case of the assessee. Accordingly, STCG in the case of the assessee will be Rs.4,09,82,337/- (Sale consideration Rs.4,43,52,100/- minus cost of acquisition Rs.33,69,763/-). From the assessment records, it is seen that the AO has simply called for certain documents of sale/purchase of property but has not gone into the details of the chain of transactions executed by the assessee with different entities. The AO was expected to conduct a thorough inquiry to unearth the actual profit made by the assessee in the form of STCG. It is obvious that such inquiry has not been conducted during assessment proceeding which has resulted in acceptance of incorrect computation of capital gain shown by the assessee in the return of income.
9. In view of the above facts and applicable provisions of law, it is amply clear that STCG on sale of land was required to be considered at Rs.4,09,82,337/- and not Rs.5,04,668/- as shown in the return of income. Under these circumstances, it is evident that the AO has erred in accepting the figure of STCG of Rs.5,04,668/- shown by the assessee in the return of income. As a result thereof, there was substantial loss of revenue to the exchequer since the income of the assessee was assessed at a lower figure. Accordingly, it is held that the assessment order passed u/s 143(3) dated 28-12-2011 was erroneous and prejudicial to the interest of revenue. Hence, the said assessment for A.Y.2009-10 dated 28-12-2011 is cancelled and the AO is directed to make fresh assessment of ITA.No.1175/Ahd/2014 Assessment year 2009-10 -9- the total income of the assessee for the said assessment year, after allowing opportunity to the assessee as per law.
6. Aggrieved assessee is now in appeal before the Tribunal challenging the validity of the order u/s. 263 of the Act.
7. Learned Authorised Representative of the counsel reiterated the submission made before the learned Commissioner of Income Tax (Appeals) strongly challenging the validity of the order u/s. 263 of the Act and further submitted that impugned transaction of short term capital gain earned from sale of agricultural land was adequately dealt by the learned Assessing Officer in light of details documents and evidence supplied during the course of assessment proceedings which inter alia included copies of purchase deed in respect of land sold, copy of agreement to sale dated 15.09.2008 entered with Melody Complex Pvt. Ltd., copy of agreement to sale dated 25.03.2009 with the Gatil properties Ltd. wherein Melody Complex Pvt. Ltd. is shown as confirming party and the copy of possession letter dated 25.03.2009. He further submitted that out of the total sale consideration of Rs. 4,43,52,100/- assessee has received her share of Rs. 38,74,431/- which has been duly offered to tax and the remaining sum of Rs. 4,04,77,669/- has been received by the confirming party i.e. Melody Complex Pvt. Ltd. through account payee cheques and is a part of revenue/income of Melody Complex Pvt. Ltd. Therefore the total sale consideration of Rs. 4,43,52,100/- has been duly acknowledged as revenue by both the parties i.e. the assessee and Melody Complex Pvt. Ltd. as per the agreement to sale dated 15.09.2008 and 25.03.2009. Further learned Assessing Officer has adjudicated the issues in detail and accepted the declared income as assessed income. In these circumstances learned Commissioner of Income Tax (Appeals) has erred in setting aside holding the order of learned Assessing Officer as erroneous and prejudicial to the interest of revenue.
8. In support of his contention learned Authorised Representative referred and relied on following judgment:-
(1) Malabar Industrial Co. reported at 243 ITR 83 (Supreme Court) ITA.No.1175/Ahd/2014 Assessment year 2009-10
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(2) Arvind Jewellers reported at 259 ITR 502 (Gujrat High Court) (3) CIT VS. R.K. Construction Co. [2009] 313 ITR 65 (Guj.) (4) Commissioner of Income Tax vs. Gabriel India Ltd. 203 ITR 108 (HC Bombay).
(5) Commissioner of Income-tax-l vs. Amit Corpn. [2012] 21 taxmann.com 64 (Guj.)
9. On the other hand learned Departmental Representative vehemently argued supporting the order of learned Commissioner of Income Tax (Appeals).
10. We have heard the rival contentions and perused the record placed before us. Solitary grievance of the assessee in this appeal is challenging the validity of order u/s. 263 of the Act framed by the learned Commissioner of Income Tax (Appeals) and has urged that the said order is void and deserves to be cancelled.
11. We find that the issue in this appeal eminates out of transaction of sale of agricultural land admeasuring 49,169 sq. mtrs. situated at village Godhavi purchased by assessee at a cost of Rs. 33,69,763/- on 15.09.2008. Assessee entered into an agreement to sale of this land to Melody Complex Pvt. Ltd. for consideration of Rs. 38,74,431/- and received an amount of Rs. 1,00,000/- as a part payment and it was agreed that possession would be handed over on receiving balance consideration of Rs. 37,74,431/-. Subsequently on 25.03.2009 assessee entered into another agreement for sale of the impugned agricultural land with Gatil Properties Limited and the sale consideration mentioned in this new agreement to sale dated 25.03.2009 was at Rs. 4,43,52,100/-. In the agreement dated 25.03.2009 assessee is shown as seller and Melody Complex Pvt. Ltd. as a confirming party. Assessee received the balance sale consideration of Rs. 37,74,431/- as agreed in agreement dated 15.09.2008 and Melody Complex Pvt. Ltd. received Rs. 4,04,77,669/- as a confirming party. Possession was handed over on 25.03.2009 to Gatil Properties Limited.
12. Assessee in her return of income has shown the transaction of sale of agricultural land at consideration of Rs. 38,74,431/- and after taking cost of acquisition of Rs. 33,69,763/-, offered the remaining amount of Rs. 5,04,668/- to tax as short term capital gain. Learned Assessing Officer after examining the details of the impugned transaction of sale of agricultural land accepted the declared income as assessed income. Thereafter learned ITA.No.1175/Ahd/2014 Assessment year 2009-10
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Commissioner of Income Tax (Appeals) assuming its power u/s. 263 of the Act called for the assessment records which has all the details including the agreement to sale dated 15.09.2008 and 25.03.2009. After going through all these documents learned Commissioner of Income Tax (Appeals) took a view that learned Assessing Officer has not examined the transaction properly as the assessee was liable to pay tax on the short term capital gain after taking the sale consideration at Rs. 4,43,52,100/- as against Rs. 38,74,431/- shown by the assessee and he accordingly worked out that the short term capital gain at Rs. 4,09,82,337/- instead of Rs. 5,04,668/- disclosed by the assessee in the return of income. Learned Commissioner of Income Tax (Appeals) set aside the order of Assessing Officer and directed to assess afresh on the basis of observations made by him. Now assessee is in appeal challenging the validity of order of learned Commissioner of Income Tax (Appeals) u/s. 263 of the Act.
13. Before adjudicating the fact vis-à-vis the impugned order u/s 263 of the Act, we will first like to go through land mark judgment of Hon'ble Apex Court in the case of Malabar Industrial Co. (supra) wherein following ratio has been laid down:-
"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 motto under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interest 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 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 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 ITA.No.1175/Ahd/2014 Assessment year 2009-10
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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 consequence or 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 Revenue unless the view taken by the Income-tax Officer is unsustainable in law."
14. We further observe that Hon'ble jurisdictional High Court in the case of Arvind jewelers (supra) has laid another independent ratio by holding that, "if there is material on record and the said material is considered by the Assessing Officer while framing assessment in a particular view is taken merely because different view can be taken that should not be based on action u/s. 263 of the Act."
15. We further observe that the Hon'ble jurisdictional High Court in the case of Commissioner of Income-tax-l vs. Amit Corpn. [2012] 21 taxmann.com 64 (Guj.) has held that jurisdiction under section 263 does not permit latitude to the authority to exercise powers for further inquiry on processed issues adjudicated upon in assessment. Para 5 reads as under: -
"We are of the opinion that the Tribunal committed no error. When, during the course of framing of the assessment, the Assessing Officer had access to all the records of the assessee, after perusing such record the Assessing Officer framed the assessment, such assessment could not have been re-opened in exercise of revision power under Section 263 of the Act for making further inquiries. In the facts of the case, in our opinion, Tribunal rightly interfered with such order. No question of law arises. Tax Appeal is, therefore, dismissed".
16. Now in light of the ratio laid down by Hon'ble Apex Court and Hon'ble jurisdictional High Court as referred above, we will first examine that whether there was sufficient inquiry of the impugned transaction by the learned Assessing Officer and whether all the relevant facts were placed before him for examining the impugned transaction.
17. From perusal of record we find that notice u/s. 143(2) of the Act and 142(1) of the Act along with detailed questionnaire were issued to assessee ITA.No.1175/Ahd/2014 Assessment year 2009-10
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on 05.10.2011 and in response thereto assessee filed reply dated 14.10.2011 which reads as follows:-
1. Your honour has asked the details of nature of business/ source of income. In this regard, I have to state that I have not carried out any business activity during the year under consideration. It is to be taken note of that during the year under consideration, I have earned only capital gain income, interest income and sitting fees income.
2. Your honour has asked to furnish all the bank account statements operated during the year under consideration. In this regard, I am enclosing the copy of bank statement herewith as per Exhibit - I.
3. Your honour has asked to furnish working of Capital Gain along with the documentary evidences. In this regard, I have inform your honour that Copy of ledger account of Land along with deeds of the same have been attached herewith as per Exhibit
- II. Your honour has also asked the details and documentary evidences regarding Exemption claimed u/s 54. In this regard, I have inform your honour that we I have earned income of Short Term Capital Gain. So the question of exemption does not arise.
Further, I have to inform your honour that the working of short-term capital gain is shown in statement of total income.
4. Your honour has asked to furnish details of Interest income along with TDS certificates thereof. In this regard, I have inform your honour that I have only saving bank interest income of Rs. 2256/-. So the question of TDS does not arise.
5. Your honour has asked to furnish details regarding source of cash deposit, if any, in saving bank account exceeding Rs. 10000/-. In this regard, I have inform your honour that I have cash deposit exceeding Rs.10000/- on 24/03/2009 at the said cash shown in my book of account.
6. Your honour has asked to furnish details of unsecured loans In this regard, I have inform your honour that copy of ledger account is enclosed herewith as per Exhibit-Ill. Further, your honour has also asked the confirmation of loan account from the parties. In this regard, I have inform your honour I have accepted loan from only one party during the year under consideration. Confirmation for the same will be provided in next hearing. Remaining loans accounts are carried forward from A.Y. OS-09. The case for A.Y. 08-09 was also covered under scrutiny assessement. Copy of the Order for the A.Y. 08-09 is enclosed herewith as per Exhibit - IV.
7. Your honour has asked to furnish details of dividend income. In this regard, I have inform your honour that copy of ledger account for the same has been enclosed herewith as per Exhibit - V.
8. Your honour has asked to furnish details of movable and immovable assets. In this regard, I have inform your honour that details for all the assets is available from my ITA.No.1175/Ahd/2014 Assessment year 2009-10
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personal Balance Sheet. Copy of balance sheet is already submitted to your honour. So your honour is requested to refer the same.
9. Your honour has asked to furnish details of investment in land. In this regard, I have inform your honour that details for all the Land is provided as per Exhibit -II. I hope the above details/explanations will suffice your honour's requirements. I shall be happy to furnish any other details/explanations that may be required by your honour.
18 From going through the above reply of assessee dated 14.10.2011 we notice that in para three assessee has given the detail of the transaction leading to short term capital gain attaching the copies of ledger account of land along with all the deeds of agreement to sale. Further after examining the relevant details learned Assessing Officer accepted the declared income of the assessee as assessed income and the relevant extract from the assessment order u/s. 143(3) dated 28.12.2011 the mentioned below.
Relevant portion of the order u/s. 143(3) dated 28.12.2011
2. The case was selected for scrutiny through Manually and notice u/s. 143(2) was issued on 29/09/2011 which was duly served upon the assessee through R.P.A.D. Thereafter due to change of incumbent fresh notices u/s. 143[2] and u/s.!42(1) along with detailed questionnaire were issued on 05/10/2011 which were duly served upon the assessee. In response to the notices issued u/s.143(2)7142(1), Shri Chandrakant P. Raval, I.T.P. & A.R. of the assessee from M/s. Dhiren Shah & Co. C.As. attended from time to time. The case was discussed with him. Detail/submission filed during the course of assessment proceedings are verified and kept on record.
2.1 The assessee has not carried out any business activity during the year under consideration. She has earned only capital gain income, Interest income and sitting fees income.
19. From perusal the reply submitted by the assessee before the learned Assessing Officer and the finding given by learned Assessing Officer in the order u/s. 143(3) of the Act, we observe that the impugned transaction with all relevant facts and figures were filed before the learned Assessing Officer in the computation of income. Necessary details were called for u/s. 143(2) and 142(1) of the Act. Specific reply supported with evidence were filed by the assessee in the assessment proceedings. Learned Assessing Officer has examined all the available records and has accepted the transaction to be ITA.No.1175/Ahd/2014 Assessment year 2009-10
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bonafide and genuine. Assessment order of learned Assessing Officer cannot be termed erroneous because it has adjudicated the correct facts which is not disputed at any stage by the revenue.
20. Another principle laid down by the Hon'ble Apex Court as referred above in the case of Malabar Industrial Co. Ltd. is to examine as to whether the order of learned Assessing Officer is prejudicial to the interest of revenue. It was further held that every loss of revenue cannot be treated as prejudicial if the Assessing Officer had adopted one of the courses permissible in law which may have resulted in loss of revenue. Also it was held that where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree it cannot be treated as an erroneous order prejudicial to the interest of revenue. Now in the present case in order to examine as to whether the decision taken by the learned Assessing Officer in the assessment proceedings order u/s. 143(3) was permissible in law or not, we observe that Coordinate bench in the case of Sapna Ben, Deepak Bhai Patel Vs. Commissioner of Income Tax vide ITA No. 2414/A/2013 dated 13.01.2016 in which the author of this order was one of the signatory and in this order similar facts came for adjudication in which assessee entered into agreement for sale of land to a party and thereafter another agreement to sale was entered at a very high amount with the secured party and in this agreement the first party was a confirming party. In this case also assessee offered short term capital gain on the agreed sale consideration shown in the first agreement to sale whereas Assessing Officer was of the view that assessee should have offered short term capital gain by taking the higher sale consideration shown in the second agreement to sale because the possession was handed over at the time of getting consideration as per the second agreement to sale. Coordinate bench allowed the assessee's appeal after making detailed discussion by observing as follows:-
23. The first reason assigned by the ld.First Appellate Authority for ignoring the agreement dated 4.4.2008 and 2.3.2009 for holding them invalid and non-
genuine is that for harbouring any "transfer" within the meaning of clause (v) of section 2(47), there must be a transaction under which the possession of immovable property is allowed to be taken or allowed to be retained. There is no dispute with regard to the above finding of the ld.CIT(A). We also concur with ITA.No.1175/Ahd/2014 Assessment year 2009-10
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regard to the observation of the ld.First Appellate Authority that Section 53A of the Transfer of Property Act (TPA), 1982 is not source by which the title to the immovable property can be acquired, but it only served as a shield to defend one's lawful possession obtained in pursuance to a contract. According to the ld.First Appellate Authority, sections 17 and 49 of the Indian Registration Act have been amended by Act No.2001 whereby it has been laid down that the registration of sale agreement/contract for the purpose of section 53A is mandatory. The ld.DR while putting reliance upon the order of the ld.CIT(A) also brought to our notice copy of the Govt. of Gujarat Extraordinary Gazette Notification published on Saturday, February, 2002 whereby amendment of the Indian Registration Act in section 17 of the Registration Act has been published. The ld.CIT(A), while construing the impact of sections 17 and 49 of Indian Registration Act along with section 53A of TPA within the meaning of section 2(47) of the Income Tax Act has concluded that the "transfer" within the section 2(47) of the Income Tax Act can only be completed, if in part performance of the contract, possession has been handed over as per section 53A of the TPA. Once the agreement was not registered then it will lose its evidentiary value within the meaning of Section 53A of the TPA. In other words, the rights flowing from an agreement can only be recognized if it was duly registered. If the agreement was not registered, then the rights would not accrue to the parties to the agreement. If no rights would accrue, then it will be construed that the possession was not delivered by the assessee vide agreement dated 4.4.2008 and 2.3.2009, meaning thereby, no transfer has taken place. The ld.First Appellate Authority further put reliance upon the judgment of the Hon'ble Supreme Court in the case of Suraj Lamp & Industries Pvt. Ltd. Vs. State of Haryana, 14 taxmann.com 103.
24. On due consideration of the above reasoning, we are of the view that as far as the judgment of the Hon'ble Supreme Court in the case of Suraj Lamp & Industries (supra) is concerned, it is altogether in different context. There is no dispute with regard to the proposition that transfer of an immovable property having value of more than Rs.100/- can only be completed by way of registered sale deed, as contemplated in section 17 of the Registration Act. This judgment deals with the concept of power of attorney, lease, licence etc. Definition of expression "transfer" provided in section 2(47) is more wider than in the general law. As observed earlier, while dealing with the issue no.(ii), the expression "transfer" employed in section 2(47) includes (a) any transaction which allows possession to be taken/retained in part performance of a contract of the nature referred to in section 53A of the TPA, and (b) any transaction entered into in any manner which has the effect of transferring, or enabling the enjoyment of, any immovable property. In these two eventualities, profits on account of capital gains would be taxable in the year in which such transactions are entered into, even if a transfer of immovable property is not effective or completed under the general law. In the present case, there is a fine distinction which remained un- noticed at the end of the ld. CIT(A). According to the assessee, the rights which have been alienated by her by virtue of agreement dated 4.4.2008 are the rights of capital nature. These rights have been alienated in favour of SDS. The ld.CIT(A) has referred to sections 17 and 49 of the Indian Registration Act, but, ITA.No.1175/Ahd/2014 Assessment year 2009-10
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failed to notice the proviso appended to section 49 which has been incorporated by way of amendment subsequently. Thus, it is pertinent to take note of section 49 along with proviso which reads as under:
"49. Effect of non-registration of documents required to be registered.--No document required by section 17 or by any provision of the Transfer of Property Act, 1882 (4 of 1882), to be registered shall--
(a) affect any immovable property comprised therein, or
(b) confer any power to adopt, or
(c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered :
Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (1 of 1877), or as evidence of part performance of a contract for the purposes of section 53A of the Transfer of Property Act, 1882 (4 of 1882) or as evidence of any collateral transaction not required to be effected by registered instrument."
25. Section 53A of the T.P. Act provide a shield to defend the possession taken by virtue of the agreement. The vendee can claim protection of the possession even against the owner i.e. vendor, during the period sale deed was not registered.
The person who has acquired the possession on execution of agreement as referred to in section 53A may not be able to protect his possession on account of non-registration of the agreement, but for all other collateral purposes, i.e. for tendering the agreement into evidence for suit for specific performance, etc. it is to be treated as valid agreement. A controversy in this aspect had arisen whether such non-registered agreement can be entertained in evidence or not in a suit for specific performance. A reference was made before the Division Bench of Punjab & Haryana High Court in regular Second appeal No.4946 of 2011 in the case of Ram Kishan Vs. Bijeder Mann. The Hon'ble High Court has resolved the controversy and held that such unregistered agreement can be produced as evidence in suit for specific performance. It can be made basis of suit for specific performance. The finding recorded by the Hon'ble Punjab & Haryana High Court in this case reported in (2013) 1 PLR 195 as under:
"11. A conjoint appraisal of sections 53A of the Transfer of Property Act, 1882, sections 17(1A) and 49 of the Indian Registration Act, 1908, particularly the proviso to section 49 of the Indian Registration Act, in our considered opinion, leaves no ambiguity that, though, a contract accompanied by delivery of possession or executed in favour of a per- son in possession, is compulsorily registrable under section 17(1A) of the Registration Act, 1908, but the failure to register such a contract would only deprive the person in possession of any benefit conferred by section 53A of the 1882 Act. The proviso to section 49 of the Indian Registration Act clearly postulates that non-registration of such a ITA.No.1175/Ahd/2014 Assessment year 2009-10
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contract would not prohibit the filing of a suit for specific performance based upon such an agreement or the leading of such an unregistered agreement into evidence.
12. A suit for specific performance based upon an unregistered agreement to sell accompanied by delivery of possession or executed in favour of a person who is already in possession, cannot, therefore, be said to be barred by section 17(1A) of the Registration Act, 1908.
13. Section 17(1A) merely declares that such an unregistered contract shall not be pressed into service for the purpose of section 53A of the Transfer of Property Act, 1882. Section 17(1A) of the Registration Act, 1908, does not, whether in specific terms or by necessary intent, prohibit the filing of a suit for specific performance based upon an unregistered agreement to sell, that records delivery of possession or is executed in favour of a person to whom possession is delivered and the proviso to section 49 of the Indian Registration Act, 1908, put paid to any argument to the contrary.
14. We, therefore, hold that :
(a) a suit for specific performance, based upon an unregistered contract/agreement to sell that contains a clause recording part per- formance of the contract by delivery of possession or has been executed with a person, who is already in possession shall not be dismissed for want of registration of the contract/agreement;
(b) the proviso to section 49 of the Registration Act, legitimises such a contract to the extent that, even though unregistered, it can form the basis of a suit for specific performance and be led into evidence as proof of the agreement or part performance of a contract."
26. Thus, if the assessee refused to honour her agreement dated 4.4.2008, SDS has a right to get this agreement enforced by way of suit for specific performance and the assessee could be persuaded to execute the sale deed in favour of SDS by virtue of this agreement. The validity of this agreement under general law viz. Specific Relief Act as well as Indian Registration Act has not been effected. This aspect has not been appreciated by the ld.CIT(A) while holding that since the agreements are unregistered, therefore, they are non- genuine.
27. Let us examine the issue with different angles. For example, the assessee refuses to honour her agreement dated 4.4.2008 and SDS/Capital Consultancy files a suit for specific performance. A decree for performance of the contract is being granted in favour of the SDS. In that situation, the assessee has to register sale deed in favour of SDS. On such registration she would get the amounts only agreed upon by way of agreement dated 4.4.2008. She could be charged for capital gain on this amount only. Even for argument's sake, the reasons of the Revenue authorities are being accepted that the agreements dated 4.4.2008 and 2.3.2009 are unregistered, therefore they shall not goad the adjudicator to construe part performance of the contract u/s.53A of T.P. Act and no transfer of ITA.No.1175/Ahd/2014 Assessment year 2009-10
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the land could be construed within the meaning of section2(47)(v) of the Act. In that situation, only the year of taxability could be shifted i.e. effective date for transfer of capital asset could be taken to 27.1.2010. How the AO can bring the amount for taxation in the hands of the assessee ? Under issue No.(i), we have discussed the nature of right acquired by SDS by virtue of agreement dated 4.4.2008. Suppose the agreement was not honored and suit for specific performance was filed by the assessee for persuading the SDS to purchase the land in dispute. During the pendency of the Civil Suit SDS assigned his right to a third party and ultimately that third party agreed for purchase of suit land. A settlement is arrived. The assessee would get only a consideration agreed upon by virtue of agreement dated 4.4.2008, and other consideration will go to SDS for assigning his right accrued under this agreement. The right to obtain registration of sale deed acquired by him by virtue of agreement dated 4.4.2008, is a capital right, therefore, the transfer would result capital gain. It will be taxed in the hands of SDS. This aspect has been dealt with in a large number judgment discussed by us in issue no.(i). Thus, the ld. Revenue Authorities have failed to notice distinction between a valid and genuine contract under the general law vis-à-vis a contract having effected for the purpose of section 53A of TP Act.
28. Next reason assigned by the ld.First Appellate Authority in the impugned order is section 63 of Gujarat/Bombay Tenancy and Agriculture Land Act, 1948 which prohibits non-agriculturists to purchase the agriculture land. As per ld. CIT(A), since SDS was not proved to be an agriculturist, therefore, he was not competent to purchase the agriculture land. Once he was prohibited by the provisions of Tenancy Act, then he cannot purchase agriculture land, meaning thereby, he will be disqualified even to enter into an agreement for purchase of the land. On consideration of all these reasons, we are of the view that the assessee and the SDS are duly eligible to enter into any contract as per the Indian Contract Act. The effect of the contract may not be given by virtue of Gujarat/Bombay Tenancy and Agriculture Land Act, as per clause (c) of Section 63 referred by the ld.CIT(A). But the ld.CIT(A) failed to note proviso appended to his section. The proviso authorizes the Controling Officer to grant permission for such sales. The sale could be executed after the agreement and after getting approval. As far as this section is concerned, it does not create any disqualification for entering into contract, it creates disqualification for enforcing that contract. The contractee can enforce contract in favour of a person who is an agriculturist. It is important to note that the land transacted by the parties was within the vicinity of Ahmedabad City. It was going to be converted into urban land under the Town Planning scheme and ultimately before the agreement dated 2.3.2009, the status of the land was changed from agriculture land. When SDS has assigned his right under the agreement dated 2.3.2009, the land was already converted into a non-agriculture land. Thus, this section has no bearing as a corroborative piece of evidence to goad any authority to conclude that agreements were not genuine.
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29. Next reasoning given by the ld.First Appellate Authority is that there is a huge change in the price of land between a short span of time. When the assessee acquired the land, she incurred a cost of Rs.67,96,432/-. She had acquired the land in between 18.12.2007 utpo 4.3.2008. She had agreed to sell this land on 4.4.2008 to SDS for consideration of Rs.76,75,413/-. The rate of land upto this stage was Rs.62.03 per sq.meters, whereas, when the agreement dated 2.9.2009 was executed, it was at the rate of Rs.860/- per sq.meter. According to the ld.CIT(A) appreciation in the price of real estate does take place over a period of time. However, it is also a fact that such appreciation also happens in slow process, and in any case, it does not happen in such a manner. The ld.CIT(A) further observed that nothing has prevented the assessee from retracting the contract entered into with SDS so as to earn this gain by herself.
30. We have duly considered this reasoning of the ld.First Appellate authority, but, we find that as per the agreement dated 2.3.2009, the vendor, i.e. SDS has to obtain permission which are necessary under the existing law at his cost for converting the land into non-agriculture land. The land was converted into non- agriculture land authorizing the owners to construct dwelling units on the land. This permission was granted by the District Panchyat and District Development Officer, Ahmedabad by its order no.Masal/Bakhap/SR-131/Vashi-1526 to 1552 dated 12.9.2008. This was a significant change in the character of the land. The moment, it was converted into non-agriculture land, its value increase many folds. It is also pertinent to note that as per section 40jj(i) of the Gujarat Town and Country Planning Act, 1976, the land falling within the scheme of development, would vests upto 40% in the development authorities for utilisation of roads, park, schools, drainage etc. Thus, once the land is being converted into non-agriculture land, the whole nature of the land would change. As far as observation of the ld.CIT(A) is concerned, that nothing prevented the assessee to retract from the agreement is concerned, we fail to understand the basis of making such observation. She entered into a lawful contract, which is of binding nature, and how can she retract ? The moment she retracts, then other party can file suit for specific performance. Even if the court does not grant specific performance of the contract, then, would compensate the contractee for damage ? The damages again would be quantified considering the market value of the land. It is also pertinent to note that the assessee has purchased the land from 18.12.2007 to 4.3.2008. She had purchased the agriculture land from non- associate vendors. The purchase cost shown by the assessee was at Rs.67,96,432/-. No circumstances have changed, and therefore, she has sold the land on 4.4.2008 at a price of Rs.76,75,413/-. There is no substantial change or appreciation of the value of the land in just short span. The ld.Revenue authorities have failed to compare this figure while evaluating the evidence. The change in the value taken place only at the moment, when, the land was converted into a non-agriculture land. From analysis of the orders, it revealed that approach of the Revenue authorities for appreciating the genuineness and veracity of the agreement is guided by the tax liability. According to the Revenue authorities, since tax liability has been avoided by the parties, therefore, their agreements are not genuine. In our opinion, genuineness of any agreement is ITA.No.1175/Ahd/2014 Assessment year 2009-10
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not depended upon the actual payment of tax resulted on account of execution of these agreements. It is other way round. First genuineness of the agreements has to be ascertained, and then, in consequence of these agreements, if any tax liability has arisen, it is to be fastened upon the right persons. According to the AO, SDS has shown Rs.9,87,33,247/- on account of profit on sale of land, and against this, he claimed loss of Rs.9,17,78,957/- from his business of trading of shares and securities. These losses have been allowed to SDS in a scrutiny assessment order passed in his case u/s.143(3) of the I.T.Act. The department did not raise any objection in his assessment proceedings and did not doubt the transactions. Now, the stand of the Revenue is, since if it is taxable in the hands of the SDS, then no taxes would be collected on these transactions, because gain would be set off against brought forward loss. Even if transaction is shifted to the assessment year, in which sale deed registered, in that case, SDS will bring his losses of earlier year to A.Y.2010-11. Therefore, the agreement ought to be suspected and ought to be ignored, only then taxes could be fasted upon the assessee. With this angle, when the AO has started inquiry, obviously he would reach on the conclusion that the agreement are non-genuine.
31. At this stage, for fortifying ourself on our finding, we would like to note the observations of the Hon'ble Supreme Court judgment in the case of Union of India Vs. Azadi Bachao Andola, (2003) 132 taxmann 373 (SC). The Hon'ble Supreme Court while referring to the decision of the Hon'ble Gujarat High Court in the case of Banyan & Berry Vs. CIT, 222 ITR 831 made the following observations.
"134. We may also refer to the judgment of Gujarat High Court in Banyan and Berry v. Commissioner of Income-Tax where referring to McDowell , the Court observed:
".....The court nowhere said that every action or inaction on the part of the taxpayer which results in reduction of tax liability to which he may be subjected in future, is to be viewed with suspicion and be treated as a device for avoidance of tax irrespective of legitimacy or genuineness of the act; an inference which unfortunately, in our opinion, the Tribunal apparently appears to have drawn from the enunciation made in McDowell case (1985) 154 ITR 148 (SC). The ratio of any decision has to be understood in the context it has been made. The facts and circumstances which lead to McDowell's decision leave us in no doubt that the principle enunciated in the above case has not affected the freedom of the citizen to act in a manner according to his requirements, his wishes in the manner of doing any trade, activity or planning his affairs with circumspection, within the framework of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity."
This accords with our own view of the matter.
In CWT v. Arvind Narottam , a case under theWealth Tax Act, three trust deeds for the benefit of the assessee, his wife and children in identical terms were ITA.No.1175/Ahd/2014 Assessment year 2009-10
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prepared under section 21(2) of the Wealth Tax Act. Revenue placed reliance on McDowell . Both the learned Judges of the Bench of this Court gave separate opinions.
Chief Justice Pathak, in his opinion said (at p.486):
"Reliance was also placed by learned counsel for the Revenue on McDowell and Company Ltd. v. CTO (1985) 154 ITR 148(SC). That decision cannot advance the case of the Revenue because the language of the deeds of settlement is plain and admits of no ambiguity."
Justice S. Mukherjee said, after noticing McDowell's case, (at page
487):
"Where the true effect on the construction of the deeds is clear, as in this case, the appeal to discourage tax avoidance is not a relevant consideration. But since it was made, it has to be noted and rejected."
In Mathuram Agrawal v. State of Madhya Pradesh another Constitution Bench had occasion to consider the issue. The Bench observed:
"The intention of the legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic results sought to be obtained by making the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation which does not follow from the plain, unambiguous language of the statute. Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of the legislature."
The Constitution Bench reiterated the observations in Bank of Chettinad Ltd. v. CIT , quoting with approval the observations of Lord Russell of Killowen in IRC v. Duke of Westminster and the observations of Lord Simonds in Russell v. Scott It thus appears to us that not only is the principle in Duke of Westminster alive and kicking in England, but it also seems to have acquired judicial benediction of the Constitutional Bench in India, notwithstanding the temporary turbulence created in the wake of McDowell .
.....
144. If the Court finds that notwithstanding a series of legal steps taken by an assessee, the intended legal result has not been achieved, the Court might be justified in overlooking the intermediate steps, but it would not be permissible for the Court to treat the intervening legal steps as non-est based upon some hypothetical assessment of the 'real motive' of the assessee. In our view, the court ITA.No.1175/Ahd/2014 Assessment year 2009-10
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must deal with what is tangible in an objective manner and cannot afford to chase a will-o'- the-wisp."
32. Next reasoning assigned by the AO is that funds have been provided by Ganesh plantation to SDS. Husband and father-in-law of the assessee were holding voting power of more than 20% in the Ganesh Plantation Ltd. Therefore, the transactions are arranged in the family itself. The assessee has pointed out that Capital Consultancy is a proprietary concern of SDS. This concern has taken unsecured loan from the company in F.Y.2006-07 relevant to the Asstt.Year 2007-08. In F.Y.2006-07, the interest of Rs.1,77,534/- was charged from SDS by Ganesh Plantation. In F.Y.2007-08 an interest of Rs.61,74,961/- was charged. Thus, according to the assessee, the funds were provided on interest in the ordinary course of business. Similarly, the AO has raised a point that the funds to the assessee were provided by Tarang Reality Pvt. Ltd. which is also family concern. The assessee has contended that she has taken loan from Tarang Reality Pvt. Ltd. of Rs.66,55,000/- and on receipt of sale consideration of Rs.73,75,413/-, she had repaid the loan to Tarang Reality Pvt. Ltd. In the case of the assessee, no phenomenal rise in the value of the land has arisen. She has purchased at Rs.67,96,342/- for the period starting from 18.12.2007 upto 4.3.2008. She had agreed to sell this property on 4.4.2008, just in a span of 3-4 months. She has earned small amount of capital gain which has been offered for taxation. An analysis of all the facts and circumstances, discussed by the ld.Revenue authorities, we are of the view that setting of surrounding facts and circumstances, even as a whole, does not suggest that agreement dated 4.4.2008 or 2.3.2009 are sham or bogus. Their enforceability in the law cannot be ignored. The alleged gains on sale of property calculated in the hands of the assessee are not sustainable. We allow the appeal of the assessee and delete the addition of Rs.6,83,09,792/- from the hands of the assessee.
33. In the result, appeal of the assessee is allowed.
21. From going through the above discussion of the coordinate bench in ITA No. 2414/A/2013, we find that the Tribunal has allowed the assessee's appeal by accepting that the assessee was liable to pay tax on short term capital gain calculated by taking the sale consideration as mentioned in the first agreement to sale in the appeal. Before us also the facts are verbatim similar to those discussed in the decision of Tribunal is referred above and learned Assessing Officer has taken the similar view as has been taken by the coordinate bench adjudicating similar facts. This gives force to the contention of learned counsel that learned Assessing Officer has taken one of the legally permissible view while framing the assessment u/s. 143(3) of the Act.
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22. As regards the issue that the learned Assessing Officer has not made proper discussion in the body of assessment order about impugned transaction and details received and the basis for taking the decision, we observe that in the judgment of Hon'ble High Court Mumbai in the case Commissioner of Income Tax Vs. GABRIEL INDIA LTD. 203 ITR 108 (HC BOMBAY) it was held that the decision of the Income Tax Officer cannot be held to be erroneous simply because in his order, he had not made any elaborate discussion in that record. Relevant finding of the Hon'ble Court is as under :-
(ii) COMMISSIONER OF INCOME-TAX v. GABRIEL INDIA LTD. 203 ITR 108 (HC BOMBAY).
In this case, it has been held as under :
The power of suo motu revision under sub-s. (1) of s. 263 of the Income-tax Act, 1961, is in the nature of supervisory jurisdiction and 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 must has been caused to the interests of the Revenue. An order cannot be termed as erroneous unless it is not in accordance with law. If an ITO acting in accordance with law makes 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 ITO, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where ITO 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 estimates 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 higher figure than the one determined by the ITO. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. This is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a 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 ITA.No.1175/Ahd/2014 Assessment year 2009-10
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such a case that in the opinion of the Commissioner the order in question is prejudicial to the interest of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, namely, the order is erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interest of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be 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. When exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on records to satisfy it in that regard. If the action of the authority is challenged before the Court, it would be open to the Courts to examine whether the relevant objective factors were available from the records called for and examined by such authority. Held, The ITO in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the ITO on being satisfied with the explanation of the assessee. This decision of the ITO cannot be held to be "erroneous" simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner- himself, even after initiating proceedings for revision and hearing the assessee, could not 'say thai the allowance of the claim of the assessee was erroneous and that the A expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the ITO to re-examine the matter. That was not permissible. The Tribunal was justified in setting aside the order passed by the Commissioner of Income-tax under section 263.
23. In light of ratios laid down by Hon'ble Apex Court, Jurisdictional High Court, other High Courts, coordinate bench decision and detailed discussions and the given facts and circumstances of the case, we are of the considered opinion that the impugned transaction of sale of agricultural land forming the basis of the order of learned Commissioner of Income Tax (Appeals) u/s. 263 of the Act has been properly adjudicated by learned Assessing Officer during the course of assessment proceedings u/s. 143(3) of the Act by way of calling specific information and the assessee has duly supplied all the information and learned Assessing Officer after taking one of the legally permissible view has accepted the bonafideness, genuineness and correctness of the transaction ITA.No.1175/Ahd/2014 Assessment year 2009-10
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shown by the assessee. We are therefore of the view that the order u/s. 143(3) of the Act dated 28.12.2011 is neither erroneous nor prejudicial to the interest of revenue and needs to be restored back.
24. We accordingly hold that the order of learned Commissioner of Income Tax (Appeals) u/s. 263 of the Act deserves to be quashed.
25. Accordingly in the result the appeal filed by the assessee is allowed.
Order pronounced in the Court on 17th May, 2017 at Ahmedabad.
Sd/- Sd/-
(S.S. GODARA) (MANISH BOARD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mukul Kumar
Dated, 17 /05/2017
आदे श क त ल!प अ"े!षत/Copy of the Order forwarded to :
1. अपीलाथ% / The Appellant
2. &यथ% / The Respondent.
3. संबं धत आयकर आयु*त / Concerned CIT
4. आयकर आय*
ु त(अपील) / The CIT(A)-
5. !वभागीय त न ध, आयकर अपील य अ धकरण, अहमदाबाद /DR,ITAT,
Ahmedabad.
6. गाड फाईल / Guard file.
आदे शानस
ु ार/ BY ORDER,
सहायक पंजीकार (Asstt.Registrar)
आयकर अपील य अ धकरण
ITAT, Ahmedabad