Income Tax Appellate Tribunal - Hyderabad
Y. Chakradhar, Hyd, Bangalore vs Assessee on 4 February, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH 'B', HYDERABAD
BEFORE SMT. ASHA VIJAYARAGHAVAN, J.M. AND
SHRI B.R.BASKARAN, A.M.
ITA No.579/Hyd/2011
(Assessment year 2006-07)
Shri Y.Chakradhar, Bangalore. V/s. Director of Income-tax
(International Taxation), Bangalore
( PAN - ABEPY 0691 G )
(Appellant) (Respondent)
Appellant by : Shri C.V.Narasimham
Respondent by : Shri D.Sudhakara Rao, CIT-DR
Date of Hearing 26.12.2012
Date of Pronouncement 04.01.2013
ORDER
Per B.R.Baskaran, Accountant Member:
This appeal filed by the assessee is directed against the order dated 4.2.2011 passed by the Director of Income-tax (International Taxation), Bangalore, passed under S.263 of the Act, and it relates to assessment year 2006-07.
2. Assessee is challenging the validity of the revision order passed by the Director of Income-tax.
3. The facts relating to the case are stated in brief : Assessment for the year under consideration was completed by the Assistant Director of Income-tax (International Taxation) Hyderabad on 30.12.2008 under 2 ITA No.579/Hyd/2011 Shri Y.Chakradhar, Bangalore S.143(3) of the Act. The assessee has declared capital gains on the portion of land given for development. The cost of said land was declared by the assessee at Rs.42,78,458, which included a sum of Rs.15 lakhs paid to a person, named Shri E.Sattayya, for settlement of a dispute out of court, over the title of the said land. During the course of assessment proceedings, the assessing officer raised a query with regard to the said payment of Rs.15- lakhs and the assessee has also furnished the reply. Accordingly, the assessing officer accepted the cost of acquisition of land at Rs.42,78,458.
4. In the revision proceedings, the learned Director took the view that the said sum of Rs.15 lakhs cannot be considered as part of cost of the land or cost of improvement of the land. For the said proposition, the learned Director took support form the decision of the Hon'ble Madras High Court in the case of CIT V/s. Indira (1979)119 ITR 837. Accordingly, the learned Director set aside the assessment order and directed the assessing officer to review the income from capital gains, after excluding the amount of Rs.15 lakhs referred to supra from the cost of the land.
5. Aggrieved by the said order, assessee is in appeal before us.
6. The learned counsel appearing for the assessee submitted that the assessing officer has raised a specific query during the course of hearing with regard to the payment of Rs.15 lakhs and the assessee has also furnished a reply, and after applying his mind, the assessing officer has accepted the claim of the assessee. He further submitted that the decision rendered by the Hon'ble Madras High Court in the case of CIT V/s. Indira (supra), does not apply to the facts of the instant case. He further subtitled that the assessee therein obtained the property by way of gift and hence, the payment made by the assessee does not fit into the definition of 'cost of 3 ITA No.579/Hyd/2011 Shri Y.Chakradhar, Bangalore assessment' as defined under S.49 of the Act. The learned Authorised Representative, submitted that various courts have held that the amount paid by an assessee to clear the title of a property would form part of the cost of the asset, and in this regard, the learned Authorised Representative placed reliance on the following decisions-
(a) CIT V/s. Bradford Trading Co. P. Ltd. (261 ITR 222)-Mad.
(b) CIT V/s. Piroja C. Patel (242 ITR 582)-Bom.
(c) Naozar Chenoy V/s. CIT (234 ITR 95)-AP
7. On the contrary, the learned Departmental Representative submitted that the payment made by the assessee does not fall under the category of cost of improvement. However, the assessing officer did not examine the validity of the said claim and hence, the Director was right in invoking the provisions of S.263 of the Act in the instant case.
8. We have heard the rival submissions and carefully perused the records. The scope for revision under S.263 has been succinctly explained by the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra) as under-
"6. A bare reading of this provision makes it clear that the pre- requisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied with 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 ITO 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).
7. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the 4 ITA No.579/Hyd/2011 Shri Y.Chakradhar, Bangalore 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 High Court of Calcutta in Dawjee Dadabhov & Co. v. S.P. Jain [1957] 31 ITR 872, the High Court of Karnataka in CIT v. T. Narayana Pai [1975] 98 ITR 422, the High Court of Bombay in CIT v. Gabriel India Ltd. [1993] 203 ITR 208 and the High Court of Gujarat in CIT v. Smt. Minalben S. Parikh [1995] 215 ITR 81/79 Taxman 184 treated loss of tax as 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 of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC)."
In the facts of the present case, as already noted above, the assessing officer, in the course of assessment, has examined the issue in relation to which the Director has exercised his jurisdiction under S.263, after calling for the requisite details from the assessee, and has taken one of the possible views in the matter. Further, while the Director in the impugned order under S.263, in support of the view taken by him drew support from the decision of the Hon'ble Madras High Court in the case of Indira (supra), a contrary view has also been approved by the Courts in the cases, relied upon by the 5 ITA No.579/Hyd/2011 Shri Y.Chakradhar, Bangalore learned counsel for the assessee, in the cases noted above. In this view of the matter, it has to be observed that the issue in question is a debatable one, on which both the views are possible, and since the assessing officer has taken one of the possible views, permissible under law, impugned order of assessment cannot be said to be either erroneous or prejudicial to the interests of the Revenue. Consequently, in our considered view, exercise of revisionary jurisdiction under S.263 of the Act is not permissible in the facts and circumstances of the present case. We accordingly, set aside the impugned order of the Director of Income-tax, passed under S.263 of the Act, allowing the grounds of the assessee in this appeal.
9. In the result, assessee's appeal is allowed.
Order pronounced in the Court on 04.01.2013
Sd/- Sd/-
(Asha Vijayaraghavan) (B,R.Baskaran)
Judicial Member Accoutnant Member
Dated/- 04th January, 2013
Copy forwarded to:
1. Shri Y.Chakradhar (Bangalore), C/o. Patel Mohan Ramesh & Co., Chartered Accountants, 163/1, "Sai Mandir"., 4th Main, 7th Cross, Chamrajpet, Bangalore 560 018.
2. Director of Income-tax(International Taxation), Bangalore
3. Asst. Director of Income-tax(International Taxation)=I, Hyderabad
4. Departmental Representative, ITAT, Hyderabad.
B.V.S.