Income Tax Appellate Tribunal - Chandigarh
Sh. Tarsem Singla, Ludhiana vs Dcit, Ludhiana on 21 May, 2018
I N T HE I N CO M E T A X A P PE L L A T E T RI BU N A L
D I VISI O N B E NC H , C H A N DI GA R H
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND Ms. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No. 366/CHD/2012
Assessment Year : 2007-08
(u/s 263)
Mr Amarjeet Dhall, Vs. The CIT,
2350,Dugri Urban Estate, Central Circle,
Phase I, Ludhiana Ludhiana
PAN No. ABMPD5923E
ITA No. 148/CHD/2014
Assessment Year : 2007-08
[U/s 153A / 143(3)]
Mr Amarjeet Dhall, Vs. The DCIT (CC-1),
2350,Dugri Urban Estate, Ludhiana
Phase I, Ludhiana
PAN No. ABMPD5923E
Appellant by : Sh. Parikshit Aggarwal, CA
Respondent by : Sh. Gulshan Raj, CIT DR
ITA No. 263/CHD/2012
Assessment Year : 2007-08
(u/s 263)
Shri Tarsem Singla, Vs. The CIT (Central),
S/o Sh Jagadish Rai Singla, C.R.Building
3206, Phase-II, Ludhiana Civil Lines, Ludhiana
PAN No. ADVPS7247M
ITA No. 369/CHD/2014
Assessment Year : 2007-08
(u/s 153A/ 143 (3)]
Shri Tarsem Singla, Vs. The DCIT,
S/o Sh Jagadish Rai Singla, Central Circle-III,
3206, Phase-II, Dugri, Ludhiana
Civil Lines, Ludhiana
PAN No. ADVPS7247M
366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014
Sh. Amarjit Dhall & Sh.Tarsem Singla
2
&
ITA No. 459/CHD/2014
Assessment Year : 2007-08
(u/s 153A/ 143 (3)]
The DCIT, Vs. Shri Tarsem Singla,
Central Circle-III, S/o Sh Jagadish Rai Singla
Ludhiana 3206, Phase-II, Dugri,
Civil Lines, Ludhiana
PAN No. ADVPS7247M
(Appellant) (Respondent)
Appellant by : Sh. Ajay Jain, C.A.
Respondent by : Sh. Gulshan Raj, CIT DR
Date of Hearing : 23.02.2018
Date of Pronouncement: 21.05.2018
ORDER
Per Sanjay Garg, Judicial Member:
These appeals have been preferred by the different assessees who were parties to the same transaction of sale of land. ITA No. 366/Chd/2012 and 263/Chd/2012 are appeals preferred by the assessee Shri Amarjeet Dhall, purchaser and Shri Tarsem Singla, Seller respectively challenging the revision order of the Commissioner of Income Tax (herein referred to ' CIT') passed u/s 263 of Income-tax Act, 1961 (in short 'the Act') whereas ITA Nos.148/chd/2014 &369/Chd/2014 have been preferred by the above said assessees respectively agitating the action of CIT (Appeals) in upholding the additions made by the Assessing officer in the assessment proceedings carried out u/s 143(3) read with section 153A of the Act in compliance of the directions issued by the CIT in his order passed u/s 263 of the Act. The revenue has come in appeal 366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 3 vide ITA No. 459/Chd/2014 agitating against the partial deletion of the addition by the CIT(A) in the case of assesse Tarsem Singla (seller). For the sake of convenience, the facts have been culled out from ITA No.366/Chd/2012 in the case of Sh. Amarjeet Dhall.
2. The brief facts as culled out from the impugned order of CIT dated 31.1.2012 are that a search action u/s 132 of the Income Tax Act was carried out at the residential premises of Shri Amarjit Dhall and his family members on 26.8.2008. During the search operation, some incriminating documents were found and seized. From these papers, it was gathered that the assessee had entered into some transactions of purchase of land @ Rs. 2850/- per square yard with Sh. Tarsem Singla. Two sale deeds were also found which showed the purchase of 14 kanas ½ Marla of land by the assessee Shri Amarjit Dhall at Village Dolo Khurd. One registration deed dated 7.11.2006 was between Shri Jagjiwan Pal and Shri Amarjit Dhall for 7 Kanal ½ marla for Rs. 4,70,000/- and another registered deed dated 13.12.2006 was between Shri Tarsem Singla and Shri Amarjit Dhall for Rs. 4,74,000/- for 7 Kanals.
3. During the course of assessment proceedings carried out by the Assessing Officer (AO) u/s 153A of the Income Tax Act (in short 'the Act'), when asked, assessee explained that rate of Rs. 2,850/- per sq. yd. mentioned in the seized documents was not the purchase consideration of the said property but these were the details and calculations of proposed budget/expenditure in respect of the contract proposed to be entered into by the assessee with Shri Tarsem 366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 4 Singla for construction of a Farm House on the said land. Since the transaction did not mature due to dispute on the scope of work, its cost and other items and conditions between both the parties, the said contract was cancelled. The Assessing officer accepted the assessee's explanation and made no addition on account of the same. The assessment was completed u/s 153A read with section 143(3) of the Act by the Assessing officer vide order dated 24.12.2010.
4. Subsequently, the Ld. CIT received a proposal from the Assessing officer for taking appropriate remedial action in the matter stating that the version of the assessee had been accepted without making discrete inquiries and without ascertaining the facts with regard to the market rate of the land prevailing at that time. The Ld. CIT after considering the facts issued show cause notice to the assessee u/s 263(1) of the Act seeking assessee's objection against the proposed action u/s 263 of the Act. The assessee explained that the title deed of the respective properties was registered in the name of assessee on 7.11.2006 and 14.12.2006 whereas as per the seized documents the alleged payment was dated 8/12/2006, 22/12/2006 and 26/12/2006 and 13.1.2007 which dates were subsequent to the date of registration of sale deeds in question. It was the case of the assessee that had the purchase consideration been passed on the dates as alleged by the Department, the seller would have got the title deeds transferred in the name of the assessee only after receiving full and final payment because there was no regular dealing between the parties to the deal. It was also submitted that the assessee had purchased agricultural land from two different 366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 5 sellers on different dates and not from Shri Tarsem Singla only as was alleged by the Department. That the assessee withdrew only a sum of Rs. 10 lacs from the bank for the above deal and there was no evidence that the assessee was possessed with any cash which allegedly exchanged the hands. That even in the seized documents, there was no mention of payment of Rs. 4.75 lacs made to Shri Jagjiwan Pal on 7.11.2006 and Rs. 4.75 lacs made to Shri Tarsem Singla on 14.12.2006.
There were different measurements at page 99 of the seized documents and back side of that page, suggested that the assessee and the seller Sh. Tarsem Singh were not sure about the size of the combined plot. Had both plots been sold by Mr. Tarsem Singla, there would have been only one measurement. That there was no evidence that any consideration was passed except the consideration written in the sale deed. Regarding the calculation mentioned in the seized documents, it was explained that a project of farm house was discussed with Shri Tarsem Singla and the assessee got the map of the proposed farm house prepared from his architect/consultant, which included servant quarter, swimming pool, tennis court, gymnasium, sewerage works etc. The average cost of Rs. 2,850/- per sq. yard was worked out in for the construction of the said farm house project on the entire land including the land purchased by the assessee from Sh. Jagjiwan Pal. However, later on the project of construction of the farm house including the above mentioned works was cancelled and the amounts estimated relating to this work were reduced from the total contract and no amount in respect of 366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 6 farmhouse project was paid. The Ld. CIT did not agree with the above explanation given by the assessee and initiated revisionary proceedings u/s 263 of the Act.
5. During the revision proceedings, the Ld. CIT conducted/got conducted enquiries in respect of the matter. He directed the DCIT(HQ)(C) to record statement of the assesse. Statement of seller Tarsem Singla was also recorded. Inquiries were also got conducted through the DDIT(Inv.) Chandigarh who recorded the statement of the concerned architect / consultant about the estimate of farm house prepared by them. The statement of Smt. Anupam Sharma partner in M/s Vivek Consultants was recorded u/s 131 of the Act and thereafter at the request of the assessee she was also cross examined.
Thereafter considering the reply / objections of the assessee on various issues, the Ld. CIT rebutted/tried to rebut the same with his own reasoning and assumptions and held that the Assessing Officer had not made proper and adequate inquiries on these issues. The Ld. CIT, therefore, concluded that it was a case of further enquiry which the Assessing officer had failed to make and, therefore, the order of the Assessing officer was erroneous in so far as it was prejudicial to the interest of Revenue. The Ld. CIT, therefore, held that it was apparent that the Assessing officer had not properly appreciated the facts of the case and committed a grievous error in not conducting proper inquiries with regard to the entries made in the above documents and thereby not making the addition. He, therefore, set aside the order dated 24.12.2010 passed by the Assessing officer u/s 153A read with section 143(3) of the Act and directed the Assessing 366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 7 officer to make fresh assessment de novo after affording an opportunity of hearing to the assessee.
Being aggrieved by the above action, the assessee has come in appeal before us.
6. The first contention raised by the counsel for the assessee has been that the Assessing officer during the assessment proceedings had made the adequate inquires and that after having satisfied from the explanation of the assessee, he did not choose to make any addition on this issue. The assessment order in question was passed by the Assessing officer after getting the prior approval from the Addl. CIT (Central Range - Ludhiana) as per the provisions of section 153D of the Act which showed that not only the Assessing officer but his higher officer i.e. concerned Addl. CIT had also applied his mind. Thereafter, there was nothing new that came into the knowledge of the Assessing officer that prompted him to make a proposal to the Ld. CIT to exercise his revisionary jurisdiction u/s 263 of the Income Tax Act. He has further contended that it cannot be said that the order of the Assessing officer was erroneous and prejudicial to the interest of Revenue. That the action of CIT u/s 263 of the Act was nothing but change of opinion that too was on the basis of proposal of the Assessing officer . That even the said documents seized during the search action could not be related to the sale deed in question as neither the dates nor the area mentioned in the said document matched with the date and area mentioned in the sale deed executed by Sh. Tarsem Singla in favour of the assesse. The assessee vide two separate sale deeds had purchased the propert y 366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 8 form two persons i.e. from Shri Tarsem Singla and Shri Jagjiwan Pal. The area mentioned in the alleged documents also included the land purchased by the assessee from Shri Jagjiwan Pal. That the price mentioned in the sale deed was higher than the Collector rate. That a search action was also carried out at the premises of seller Sh. Tarsem Singla by the Income Tax authorities but nothing incriminating was found. That a survey action was also carried out by the Department at the premises of the consultant / Architect and even there nothing incriminating was found against the assessee. That during the original assessment proceedings u/s 153A, the Assessing officer had properly enquired the matter and accepted the explanation of the assessee about the alleged seized documents and the view formed by the Assessing officer was one of the possible view especially in the absence of any corroborative evidence to prove that the own money had exchanged hands. He has further relied upon a catena of judgements to stress that where the AO has applied his mind and the view taken by him is one of the possible views, then the order cannot be said to be erroneous or prejudicial to the interest of Revenue, even, if the Commissioner has a different view from that of the Assessing officer and that where the AO has made enquiries in respect of the claim of the assessee, order cannot be said to be erroneous even if the details of enquiries made do not find mention in the assessment order.
7. The Ld. Counsel has further submitted that the entire exercise has been made by the CIT merely on assumptions. That the assessee simultaneously had purchased land from Shri Jagjiwan Pal which was 366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 9 also adjoining to the land purchased from Shri Tersam Singla and was also almost on same rate, however, the purchase price in respect of land purchased from Shri Jagjiwan Pal has been accepted. That a revision order has also been passed in the case of Shri Tersam Singla making the addition in his case, however, no addition has been made in the case of other seller Shri Jagjiwan Pal. That when the Department has accepted the sale price of the land in the case of one of the assessee Shri Jagjiwan Pal, then additions were not warranted in the case of other assessees in respect of the same transaction. That the sale price mentioned in the registered deed was to be accepted in the absence of any other evidence. That the Department has estimated the sale price at a rate which is 60 - 70 times higher than the Collectorate rate and the difference in valuation pointed out by the Department is extraordinary high and otherwise seems to be improbable. In respect of the consequential appeal of the assessee against the order of the CIT(A) confirming the additions made by the Assessing officer in the assessment made by the AO in compliance of the directions of CIT, the Ld. counsel has summited that no further inquiries have been made by the Assessing officer while framing the assessment in question. The Assessing officer onl y repeated the observations of the CIT as contained in the order passed u/s 263 of the Act and made the impugned additions. Even Ld. CIT(A) also reiterated the version of the CIT u/s 263 of the Act and, hence, the additions made by the lower authorities were not based on any cogent and convincing evidence.
366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 10
8. The Ld. DR On the other hand, has relied on the findings of the lower authorities and has submitted that the lower authorities has rightly made the additions in the hands of the assessee on the basis of incriminating documents found during the search action.
9. Before adjudicating upon the issue as to whether the CIT was justified in invoking his revisionary jurisdiction under section 263 of the Income Tax Act or whether the order passed him was a legally valid order or not, w e deem it necessary to reproduce the relevant provisions of section 263 of the Act.
"Section 263(1) in The Income- Tax Act:
(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the 2 Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he, may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. ........."
10. The sum and substance of the above reproduced section 263(1) can be summarized in the following points:
1) The Commissioner may call for and examine the record of any proceeding under the Act;
2) If he considers that the order passed by the AO is
(i) erroneous; and
(ii) is prejudicial to the interest of Revenue;
3) He has to give an opportunity of hearing in this respect to the assessee; and
4) He has to make or cause to make such enquiry as he deems necessary;
5) He may pass such order thereon as the circumstances of the
case justify including,
366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014
Sh. Amarjit Dhall & Sh.Tarsem Singla
11
(i) an order enhancing or,
(ii) modifying the assessment or
(iii) cancelling the assessment and directing a fresh assessment.
11. It is important to note here that in the proceedings carried out u/s 263 of the Act, the Ld. CIT conducted / got conducted so man y inquiries himself and through his subordinate officials which included recording of statements of assessee, of the seller and even of the architect / consultant and still he did not choose to make addition on the basis of the evidence / conclusion of those inquires but was of the view that it was the case of further inquiries and, therefore, remanded the matter to the Assessing officer for de novo assessment. However, a perusal of the assessment order passed by the Assessing officer u/s 153A of the Act read with Rule 143(3) and section 263 of the Act reveals that the Assessing officer did not chose to make any further enquires and even no new evidence came into his possession pointing any exchange of on money between the assesse Shri Amarjeet Dhall and Sh. Tarsem Singla. He made the impugned additions on the basis of observations made by the CIT(A) in the order passed u/s 263 of the Act. The moot point which is to be considered here is that when the Ld. CIT himself was of the view that it a case of further enquiry and did not think it appropriate to made addition on the basis of evidence /enquiries made during proceedings u/s 263 of the Act, then can the Assessing officer be said to be justified in making additions solely based on the observation made by the CIT in his order u/s 263 of the Act?. Further, a perusal of 366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 12 the entire order of the CIT passed u/s 263 of the Act also reveals that no cogent and convincing evidence was found from the inquiries made during the proceedings before him, rather, he had made certain assumptions and presumptions from which he derived certain conclusions negating the explanation given by the assessee. However, no convincing, reliable or corroborative evidence was found to conclude that on money had been passed on by the assessee to the sellers. The ld. CIT, therefore, concluded that it was a case of further inquiry and that is why he remanded the matter back to the file of the Assessing officer to make de novo assessment.
12. A specific question was raised by this Bench during the course of hearing as to whether any fresh inquiries were made by the Assessing officer or any new material evidence has come to the knowledge or possession of the assesse during the assessment proceedings carried out in compliance of the directions of the CIT justif ying the impugned additions, to which the Ld. DR has been fair enough to admit that it does not so reveal from the order of the Assessing officer.
Even in appeal, the Ld. CIT(A) has also repeated the observations of the CIT made in the order passed u/s 263 of the Act. Under the circumstances, without any new evidence, coming on the file, the additions made by the Assessing officer cannot be held to be sustainable in the eyes of the law.
The another important fact in this case is that the area mentioned in the alleged document did not match with the area of the sale deed executed by Shri Tersam Singla in favour of the assessee.
366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 13 If the area of the land sold by Shri Jagjiwan Pal is included, then surprisingly, the Department has not chosen to take any remedial action or to make any addition in the case of Shri Jagjiwan Pal. The entire addition has been made on account of unexplained investment taking into consideration the land purchased by the assesse from Sh. Tarsem Singla as well Sh. Shri Jagjiwan Pal. On the other hand, the corresponding addition has been made into the income of Shri Tersam Singla. The action of the Department in accepting the sale price as such in the case of one seller (Jagjiwan Pal) without making any further addition, whereas, making addition in the case of the another seller (Tarsem Singla) assuming the sale price 60 - 70 times higher than the collector rate and without bringing any evidence on the file about the market rate, cannot be held to be justified. It is also to be noted that the sale price mentioned in the sale deed is more than Collector rate. Neither the dates nor the area mentioned in the said document matched with the date and area mentioned in the sale deed executed by Sh. Tarsem Singla in favour of the assesse. The alleged dates of payment mentioned in the seized document are after the dates of the execution of the registered sale deeds. There being no evidence on the file from which it can be gathered that any on money has been passed to the seller. In view of the above discussion, the addition made/confirmed by the lower authorities can not be held to be justified. The same are accordingly ordered to be deleted.
13. Since we have set aside the additions made by the lower authorities on merits, hence, at this stage any discussion about the 366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 14 validity of the order passed u/s 263 of the Act will be rendered academic in nature. This issue is left open to be adjudicated at an appropriate stage, if need be.
14 Now coming to the appeals of the assesse i.e. ITA No.263/Chd/12 challenging the exercise of revision Jurisdiction b y the CIT under section 263 of the Act and the cross appeals relating to the quantum additions i.e ITA Nos. 369/Chd/2014 by the assessee and 459/Chd/2014 by the Revenue in the case of Shri Tarsem Singla. ITA Nos. No.263/Chd/12 & 369/Chd/2014 and ITA No. 459/Chd/2014:
15. The Assessing Officer in this case of Tarsem Singla (seller) made the addition on the basis of conclusion arrived at in the case of Shri Amarjeet Dhall (Purchaser). This was done pursuant to the directions issued by the CIT in the order passed under section 263 of the Act based on the findings of the CIT in the order passed u/s 263 in the case of purchaser Sh. Amarjeet Dhall.
However, in appeal before the CIT(A) against quantum additions made by the Assessing Officer, the Ld. CIT(A) restricted the additions to the extent of property sold by Shri Tarsem Singla and deleted the additions relating to the land purchased by Shri Amarjeet Dhall from Shri Jagjiwan Pal holding that the additions cannot be made in the hands of the assessee Shri Tarsem Singla in respect of land sold by Shri Jagjiwan Pal. Thus the assessee, apart from challanging the validity of the order passed u/s 263 of the Act by the CIT, has also come in appeal challenging the confirmation of 366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 15 addition up to the extent of the area of land sold by him, whereas, the Revenue has come in appeal challenging the action of the CIT(A) in deleting the remaining additions relating to the land sold by Shri Jagjiwan Pal.
16. In view of our observations and findings given above, since, we have deleted the additions made in the case of Shri Amarjeet Singh Dhall, the consequential additions made in the case of assessee, Shri Tarsem Singla are not sustainable in the eyes of law.
Even, there is an interesting fact in this case. The search action was carried out in the premises of Shri Tarsem Singla and no incriminating material was found. Therefore, the AO in the proceedings carried out u/s 153A of the Act did not make any additions on this issue. However, the additions were subsequently made in the case of the assessee Shri Tarsem Singla on the basis of directions issued by Ld. CIT in an order passed u/s 263 of the Act taking into consideration his (CIT's) observation made in the case of purchaser Shri Amarjeet Dhall. As per the settled law, the additions cannot be made u/s 153A of the Act in the absence of any incriminating material found during the search action. Reliance in this respect can be placed on v a r i o u s j u d i c i a l d e c i s i o n s i n c l u d i n g t h e d e c i s i o n o f the Hon'ble Bombay High Court in the case of 'CIT Vs. Murli Agro Products Pvt Ltd', (2014) 49 taxman.com 172 (Bom.), ITA No.36 of 2009 and in the case of 'CIT Vs. Continental Warehousing Corporation' ITA No. 523 of 2013 reported in (2015) 279 CTR 0389 (Bombay) and of the Hon'ble Delhi High Court in the case of 'CIT Vs. Kabul Chawla' 234 Taxman 300 (Delhi) and 366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 16 subsequent decision of the Delhi High Court in the case of 'Principal CIT Vs. Meeta Gutgutia Prop M/s Ferns 'N' Petals", ITA 306/2017 and others decided vide order dated 25.5.2017.
17. In this case, the addition has been made on the basis of incriminating material found in the course of search made at the premises of other person namely Shri Amarjeet Dhall, hence, the assessment in the case of the assesse Tarsem Singla could have been made in the assessment framed u/s 153C of the Act and not u/s 153A of the Act. Admittedly, no action has been initiated in the case of assessee Shri Tarsem Singla by the Income Tax authorities u/s 153C of the Act. The addition so made, thus, are not sustainable in the eyes of law in view of this legal proposition also.
In view of this, the additions made in the case of Shri Tarsem Singla are also ordered to be deleted. There is no merit in the appeal of the Revenue and the same is accordingly dismissed.
18. In view of discussion made above, the appeals filed by both the assessees u/s 263 of the Act (ITA Nos. 366/Chd/2012 & 263/Chd/2012) are dismissed having become infructuous and being rendered academic in nature and the issue taken therein as to the validity of the proceedings carried out u/s 263 of the Act is left open to be adjudicated at an appropriate stage, if need so.
The appeals bearing ITA Nos. 148/Chd/2014 and ITA No. 369/Chd/2014 challenging the additions on merits are hereby 366 & 263-Chd/2012, 148 & 263 & 459-Chd/.2014 Sh. Amarjit Dhall & Sh.Tarsem Singla 17 allowed. The appeal of the revenue bearing ITA No. 459/Chd/2014 is hereby dismissed.
Order pronounced in the Open Court on 21.05.2018 Sd/- Sd/-
(ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 21.05.2018 Rkk Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR