Income Tax Appellate Tribunal - Delhi
Virandra Kumar Gupta, New Delhi vs Cit, International Texation, New Delhi on 11 October, 2019
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "F" NEW DELHI
BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
I.T.A. No.2055/DEL/2019
Assessment Year: 2014-15
Shri Virender Kumar vs. Commissioner of Income Tax
Gupta, (International Taxation)
46A, Friends Colony East, New Delhi.
New Delhi.
TAN/PAN: AAYPK 3135G
(Appellant) (Respondent)
Appellant by: Shri V.P. Gupta, Adv.
Respondent by: Shri Sulekha Verma, Sr.D.R.
Date of hearing: 15 07 2019
Date of pronouncement: 11 10 2019
ORDER
PER AMIT SHUKLA, JM:
The aforesaid appeal has been filed by the assessee against the impugned order dated 31.01.2019, passed by Commissioner of Income Tax (International Taxation)-3, New Delhi in his revisionary jurisdiction u/s. 263 cancelling the assessment order dated 07.012.2016, passed u/s.143(3) for the Assessment Year 2014-15. In the grounds of appeal, the assessee has raised the following grounds:
"1. That the Commissioner of Income-tax (Intl. Tax) -3, New Delhi, erred in passing the order dated 31.01.2019 u/s 263 of the Act setting aside the assessment order passed by the Assessing Officer, Circle-2, Dehradun, in the facts and circumstances of the case of the appellant.I.T.A. No.2055/DEL/2019 2
2. That the Commissioner of Income-tax also erred in holding that the assessment order passed by the Assessing Officer dated 07.12.2016 was erroneous as well as prejudicial to the interest of revenue without properly considering and appreciating the submissions made by the appellant in respect of each of the issues mentioned in the show cause notice dated 03.10.2018 and, accordingly, the order under reference deserves to be quashed.
3. That the Commissioner of Income-tax also erred in passing the order u/s 263 of the Act directing the Assessing Officer to carry out the verification whereas the Assessing Officer had already made necessary verification while passing the order u/s. 143(3) of the Act dated 07.12.2016 and the appellant had duly submitted evidence in reply to show cause notice dated 03.10.2018.
4. That the Commissioner of Income-tax also erred in passing the order u/s 263 of the Act on the ground that the Assessing Officer had not initiated proceedings u/s *201 of the Act in respect of non-deduction of tax at source by purchasers of plots of land from the appellant without appreciating that on this ground the order passed by the Assessing Officer in the case of Appellant could not be held to be erroneous and prejudicial to the interest of revenue.
5. That the order passed by the Commissioner of Income-tax is illegal, unjustified, unwarranted and same deserves to be quashed and order passed by the Assessing Officer u/s. 143(3) of the Act dated 07.12.2016 after making necessary verification and collecting necessary details is to be restored."
2. The facts in brief are that assessee is an individual and an American citizen who is residing in USA since July 1983. He has filed his return of income in the status of non-resident in the Assessment Year 2014-15 on 08.09.2014 declaring taxable income of Rs.38,36,020/- and Long Term Capital Gain Loss of Rs.96,25,104/- on sale of pieces of land to 32 I.T.A. No.2055/DEL/2019 3 buyers. The assessee had inherited ancestral land in outer part of Roorkee city admeasuring 16,561 sq. mtrs and small piece of land admeasuring 114.6 sq. mtrs. within the city of Roorkee. The land was devolved to the assessee on family partition amongst brothers as per award of Sole Arbitrator registered on 28.11.1983. The assessee's case was selected for scrutiny on the ground of 'Long Term Capital Gain and cash deposits in bank account and assessee have also transferred one or more properties during the year".
3. As brought on record by the ld. counsel for the assessee that during the course of assessment proceedings before the Assessing Officer, the assessee had submitted all the relevant documents vide letter dated 03.11.2016 along with copy of valuation report, statement of computation of capital gain, copies of sale deeds, bank statements, etc. All these documents have also been placed in the paper book before us from pages 21 to 450. Thereafter, the Assessing Officer specifically required the assessee to furnish further details and explanation vide letter dated 18.11.2016 along with the copy of awards and details regarding mode of sale consideration receipt from each of the buyers of the land. All these documents were furnished before the Assessing Officer. The copies of which are appearing from pages 451 to 469 of paper book. After examining all these details and inquiry by the Assessing Officer, he accepted the return of income and also the Long Term Capital Loss vide order dated 07.12.2016 passed u/s. 143(3). Thereafter, Ld. CIT on perusal of the I.T.A. No.2055/DEL/2019 4 assessment records came to a prima facie conclusion that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of revenue. Accordingly, the show cause notice u/s.263 dated 03.10.2018 was issued to the assessee, the content of which has been reproduced in the impugned order.
4. In sums and substance, the relevant observations of the Ld. CIT in the show cause notice were that;
Firstly, there were cash deposits amounting to Rs.1,07,81,000/- in the savings bank account of the assessee in Punjab National Bank and the Assessing Officer did not get the details of the said bank account and did not examine the deposits along with the source.
Secondly, the important issue involved in the case was that there was a low capital gain return by the assessee and in fact there was a capital loss of more than Rs.96 lac from the transaction of sale of property and Assessing Officer has failed to examine the said loss. The assessee had adopted the value of the property sold as on 01.04.1981 on the basis of the Valuer's report which is arbitrary.
Thirdly, the fair market value adopted 32 years back was not based on inquiries. The details of any inquiries are not disclosed in the report and Assessing Officer has not questioned the said valuation report nor has he conducted any inquiry from the concern registered I.T.A. No.2055/DEL/2019 5 authority to find out the actual rate prevailing on 01.04.1981.
Fourthly, as per the valuation report, 2172 sq. mtrs. land was valued at Rs.1225/- per sq. mtrs., whereas the assessee has claimed 2035.47 sq. mtrs of land at Rs.1225/- per sq. mtrs and thereby wrongly reduced his capital gain. He also pointed out that valuation report was unreliable. The Assessing Officer did not reconcile the area of land claimed to have been sold by the assessee that the area of land is arbitrary as per the arbitration award.
The assessee had claimed to sell the property to 32 different persons on different dates and on different circle rates and no TDS was deducted by any of the persons to whom land was sold. Thus, there was a clear default on the part of the purchaser as per the provision of Section 195, and therefore, proceedings u/s.201 has been initiated in all purchases.
No inquiries were conducted by the Assessing Officer on any of the purchases regarding the genuineness of the transaction of the payment made.
4. In response, the assessee filed the detailed submission and reply explaining the position in respect of each of the observation made by the Ld. CIT in his show cause notice giving reference to the documents already submitted during the course of assessment proceedings which were also I.T.A. No.2055/DEL/2019 6 submitted before the Ld. CIT. The relevant reply of the assessee has been incorporated in the impugned order from pages 3 to 6. However, the Ld. CIT rejected the assessee's explanation and canceled the assessment order after observing and holding as under:
"a. It is evident from the records that during the year under consideration, the assessee was maintaining two banks accounts namely, with Punjab National Bank and Deutsche Bank. Cash amounting to Rs. 1,07,81,000/- was deposited in the bank account maintained with Punjab National Bank. During the proceedings under section 263 of the Act, the assessee submitted the details of credit entries of both the bank accounts with narration and claimed that the cash deposited in the bank accounts is from the sale proceeds received by the assessee. The. AO is directed to verify and examine the detail of each credit entry (cash/RTGS/NEFTj along .with the creditworthiness of the payer in respect of both the bank accounts and to conduct the enquiry of payers for credit entries exceeding Rs. 10,00,000/-.
b. From the perusal of the assessment records,, it was observed that the assessee had sold a property to 32 different persons on different dates and on different circle rates claiming a long-term capital loss of Rs. 96,25,104/- thereon. The cost of acquisition of the land was valued as on 01.04.1981 adopting the rate decided by a valuer which is totally arbitrary. During the original assessment proceedings, the AO failed to conduct the enquiry from the concerned Registration Authority regarding the rate of land prevail during 01.04.1981. As the assessee himself claimed to be an NRI, the TDS was not deducted by any I.T.A. No.2055/DEL/2019 7 purchaser for the purchase of land from the assessee. The AO did not initiate any penalty proceedings u/s 201 of the Act and is now directed to initiate the proceedings under section 201 /201 (1)(A) of the Act in the case of the purchasers. The AO is directed to verify the sale of land as per the map provided by the assessee during the proceedings under section 263 of the Act and to conduct the enquiry7 from local Land and Urban Development Authorities and from Registration Authority to know the correct and fair value of land as on 01.04.1981 and to calculate the capital gain or loss as per the law. The AO is also required to reconcile the area of land claimed to have been sold by the assessee with the area that come to his share as per the Arbitration Award and to verify by conducting enquires whether the assessee did colonization of the land by engaging in commercial activity.
In view of the above discussion, the assessment framed by the AO vide order dated 23.12.2016 is held to be erroneous as well as prejudicial to the interest of Revenue. The assessment so framed is hereby cancelled and set aside with the directions to the AO to frame the assessment afresh as directed above after granting due opportunity of being heard to the assessee."
5. Before us, the ld. counsel for the assessee submitted that the Ld. CIT has wrongly observed that the copy of map and the bank statement was given during the revisionary proceedings. However, the fact of the matter is that all these documents were duly submitted before the Assessing Officer along with copy of valuation report and map of the area and also the award. The complete details regarding sale I.T.A. No.2055/DEL/2019 8 consideration received from sale through sale deed deposited in the bank account were also submitted. The Assessing Officer had examined all the cash deposits in the bank account after reconciling it with the sale deed, has accepted the computation of the capital gain. The assessee had sold small piece of land of Rs.114.6 sq. mtrs. and also aggregate area of land of 6207.08 sq. mtrs out of the area in the valuation report of 16561 sq. mtrs. The entire saleable area sold during the year has been mentioned in each of the sale deed. Balance area of the land was sold in the subsequent years. The observation of the ld. CIT to the fact that TDS was not deducted by the purchaser, are not relevant at all and this cannot be basis for holding the order as erroneous. He submitted that Explanation-2 inserted in Section 263 w.e.f. 01.06.2015 is not applicable in the present case, because inquiry has been conducted by the Assessing Officer during the course of assessment proceedings. In support, he relied upon the various decisions of the Tribunal and also the judgment of Hon'ble Delhi High Court.
6. On the other hand, ld. CIT-DR strongly relied upon the observation of the ld. CIT and submitted that the points which has been raised in the show cause notice have neither been examined by the Assessing Officer nor have been inquired, and therefore, such an assessment order without carrying out proper inquiry is deemed to be erroneous and prejudicial to the interest of revenue. In his write up, he has cited catena of judgments, the list of which as under:
I.T.A. No.2055/DEL/2019 91. Deniel Merchant Pvt. Ltd. vs. ITO (Appeal No.2396/2017 (SC)
2. Malabar Industrial Co. Ltd. vs. CIT [2000] 243 ITR 83 (SC)
3. Rajmandir Estates (P) Ltd. vs. PCIT (2016) 386 ITR 162 (Calcutta)
4. Rajmandir Estates (P) Ltd. vs. PCIT (2017) 77 taxmann.com 285 (SC)
5. Shree Manjunathesware Packing Products & Camphor Works vs. CIT (1998) 231 ITR 53 (SC)
6. CIT vs. Amitabh Bachchan 384 ITR 200 dated May 11, 2016 (SC)
7. PTC Impex (India) Pvt. Ltd. vs. CIT, ITA No.2860/Del/2010 dated 03.04.2018 (Tribunal)
8. CIT vs. Infosys Technologies Ltd., 341 ITR 293 (Kar.)
9. Gee Vee Enterprises vs. Addl. CIT, 99 ITR 375 (Del.)
10. Perfetti Van Melle India Pvt. Ltd., ITA No.3046/Del/2016 for A.Y. 2009-10 order dated 11.01.2019 (Delhi.)
11. Ramesh Kumar, ITA No.1982/Del/2018 for Assessment Year 2014-15 dated 25.01.2019."
7. We have heard the rival submissions and also perused the relevant findings given in the impugned order as well as material referred to before us. It is a trite position of law that revisionary jurisdiction u/s.263 can be exercised only when the order passed by the Assessing Officer is not only erroneous but also prejudicial to the interest of revenue. Both the conditions are not mutually exclusive but have to be satisfied together. Further Explanation-2 inserted by the I.T.A. No.2055/DEL/2019 10 Finance Act, 2015 w.e.f. 01.06.2015, provides that the order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of revenue;
firstly, the order is passed without making inquiries or verification;
secondly, order is passed without inquiring into the claim;
thirdly, order has not been made in accordance with any order, direction or instruction issued by CBDT; and lastly, order has not been passed in accordance with any direction which is prejudicial to the assessee rendered by the Hon'ble Jurisdictional High Court or Hon'ble Supreme Court.
Thus, it is sine quo non that for treating the order passed by the Assessing Officer to be erroneous and prejudicial to the interest of Revenue, the order passed by the Assessing Officer is without making inquiries or verification or is not in accordance with order/instruction passed by the CBDT or Hon'ble Jurisdictional High Court or Hon'ble Supreme Court. It is also quite settled law that the ld. CIT while exercising his revisionary jurisdiction u/s. 263 and reaching to a conclusion that inquiries or verifications has not been done by the Assessing Officer, then it is incumbent upon the CIT himself to undertake minimal inquiry so as to come to a conclusion that inquiry by Assessing Officer is not correct or the I.T.A. No.2055/DEL/2019 11 assessment order passed was erroneous and prejudicial to the interest of revenue. This legal position has been explained by the Hon'ble Jurisdictional High Court in the case of ITO vs. DG Housing Projects Ltd., (2012) 343 ITR 329 (Delhi) and DIT vs. Jyoti Foundation, 357 ITR 388 (Del.). Again this principle has been reiterated again in the judgment of PCIT vs. Modi Care Ltd. in ITA No. 759/216, vide judgment and order dated 14th September, 2017.
8. If he analyze the aforesaid principle of law on the facts of the present case, we find that the assessee, who is a non resident and citizen of USA, had declared Long Term Capital Loss of Rs.96,25,104/- on sale of various pieces of land to 32 parties, which was devolved upon him in family partition amongst brothers as per award of Sole Arbitrator way back in 28.11.1983. The assessee's case was selected for scrutiny precisely to examine the Long Term Capital Gain and the cash deposits in the bank account. Since the selection of the case was precisely on same issue, therefore, Assessing Officer had asked the assessee to submit various documents and details along with bank statement, copy of sale deeds, Valuation report, etc. to ascertain the value of the land as on 01.04.1981 and also to verify the source of cash deposits from the sale deed. In response, the assessee vide reply dated 03.11.2016 submitted a Valuation report of the Government Approved Valuer for determining the Fair Market Value of the property as on 01.04.1981. In the said valuation report, the registered valuer had mentioned that though no sale I.T.A. No.2055/DEL/2019 12 transaction of the similar land in the locality was made available for the year 1981, however various inquiries were made from the property dealers and the persons residing in the locality and after due inquiry and verification the land rate was found to be around Rs. 1200 to Rs. 1400 per sq. mtr for area on the main road and between Rs.500 to 560 for the back side of the road. After examining the location of the land, he has valued the land near the road at Rs.1225 per sq. mtr and the land at the back side was valued at Rs.500 per sq. mtr. He also noted that out of 16561 sq. mtr, the salable land was only 13670 sq. mtr and he has determined the value as on 01.04.1981 at Rs.77,29,410/-. Along with valuation report, he has also given the lay out plan of the map of the land. Apart from that, the copy of sale deed of all the 32 buyers have also been filed wherein the sale consideration received as per the circle rate and also the calculation of amount given in cash and cheque has been duly mentioned. The cash receipt on the sale of such land has been deposited in the bank account of the assessee with PNB, Roorkee. The assessee has also given the detail of the Deutsche Bank, New Delhi along with copy of bank statement showing the nature of transactions. It was categorically mentioned that the cash received on the sale of land as mentioned in the sale deed were deposited in the PNB, Roorkee. Thereafter, the Assessing Officer had asked for further details, in response to which the assessee had submitted the manner in which land was inherited from his forefathers and how it was acquired much I.T.A. No.2055/DEL/2019 13 before 01.04.1981. The details of the partitions amongst the brothers, along with arbitration award whereby various pieces of land were inherited by all the brothers were also submitted. Explain regarding amount received on sale consideration and area of land sold, circle rate and the amount received as per the circle rate along with details of cash received were also furnished which were also tallied from the bank account. If the cash deposits in the bank account are duly reconciled and matched with the sale deed wherein the cash consideration has been mentioned, then the source of the cash deposit stands approved.
9. As regards the observation of the ld. CIT that there was certain discrepancies in the valuation report, the ld. CIT could not have simply rejected the valuation report on his own and in case if he had any doubt, then he should have carried out some minimal inquiry himself to find out, whether Fair Market Value determined by the valuation officer as on 01.04.1981 is erroneous or not and then he could have held the said report is not reliable. Simply based on certain premise and presumption ld. CIT cannot reject the valuation report valued by an expert duly approved by the Government of India. From the perusal of the impugned order, it appears that one of the main charges of the ld. CIT is that, the Fair Market Value of the property as on 01.04.1981 has been inflated for which no inquiry has been done by the Assessing Officer. First of all, if the Government Approved Valuer on the basis of his own inquiry has ascertain the Fair Market Value I.T.A. No.2055/DEL/2019 14 and has given the range and has adopted the minimum rate prevailing at that time, then to hold that some further inquiry should have been done is not correct. And if he had any doubt then it was incumbent upon the ld. CIT to himself verify and could have conducted his own inquiry to bring something on the record that the valuation adopted by the registered valuer is not tenable or has been valued at a higher rate.
10. As far as the discrepancies of the area of land mentioned in the Registered Valuer's report, assessee before the ld. CIT has explained in the following manner:
i) The assessee had inherited the grove land measuring 16,561 sq mtr, whereas the saleable area was only 13,670 sq. mtr.
after leaving the land for measuring 2,891 sq. mtr. For the common utilities which resulted in land use of approx. 121.15% of the sellable area. While computing the capital Gains the cost of acquisition was taken by grossing up the saleable area of the unit, concerned.
ii) In regard to cost of acquisition for sale of plot size of 14.600sq. mtr., it is stated that this particular plot is not the part of valuation report. It was separate and independent plot located at 30 Civil Lines, Roork.ee, Tehsil Roorkee, Distt. Haridwar, Uttrakhand. The valuation report is relating to a large piece of land which was located outside the locality. This particular piece of land which was within the locality was sold for a total consideration of Rs. 13.50 lacs i.e. that is @ of 11780/ sq. mtr. the aforesaid sale consideration was at much higher sales consideration or even notified rate for the area for I.T.A. No.2055/DEL/2019 15 which the valuation report relate. In facts considering the location of this particular plot fair market value as on 01/04/1981 was even more that a Rs. 1225/sq. mtr. that is the higher rate mentioned in the valuation report. Since this was a small piece of land no separate valuation report was obtained and the rate 1000/sq. mtr. was adopted on a conservative side and in fact higher amount of capital gain was offered.
iii) In regard to the area which was available with the assessee for sale as per award/family settlement in 2013, when the valuation report was obtained was the area as mentioned in the valuation report. Map of the area which was available to the assessee on the basis of valuation report was given by the valuer is also attached as Annexure 5 for your ready reference. All the sale transaction made during the year for which valuation report was given by the valuer and the same dully has been reconciled by the Assessing Officer.
iv) In regard to the observation that the assessee has sold front area of 2305.47 sq. mtr. as against front area mentioned in the valuation report of 2172 sq. mtr., we may submit that front area sold as per the Sale Deeds in only 1902.99 sq. mtrs The aforesaid figure of 2305.47 sq. mtrs. was including the common area. You will kindly appreciate that though in the Sale Deed the area was mentioned on net basis, the assessee had also utilized the area on common facilities like roads etc. and that area was also be considered for the purpose of determining the capital gain. It is also slated that sale consideration even on the basis of gross area i.e. 2305.47 sq.mtr. on average basis for the front area comes Rs. 6,678/-
I.T.A. No.2055/DEL/2019 16as against average rate of sale consideration of other area at Rs. 5,009/ -per sq. mtrs. The Valuer had mentioned the front area taking in strict view about it but actually the front area sold by the assessee including the common area was higher and since the assessee had charged higher rate from the customers for the front area, cost of acquisition has been considered at a higher rate in respect of total area sold including the common area. It may further be slated that as per details already submitted, there was capita loss of Rs. 96,25,108/- which has not even being earned over for set off in subsequent years in terms of provisions of Section 80 of the Act. Though the assessee has correctly applied the rate of 1225 against sale consideration of the front area, even after a minor adjustment is made as per your observation this will not make any difference in the amount of taxable income and therefore, it cannot be said that order passed by the Assessing Officer is prejudicial to the interest of Revenue."
On such an explanation there is no rebuttal or any reasons given to reject such an explanation which has been duly explained properly. Thus, this ground taken by the ld. CIT cannot be upheld.
11. Lastly, with regard to the fact that no TDS was deducted by any of the purchasers, first of all, is not relevant to the issue arising from the assessment order; and secondly, nowhere it has been brought on record by the ld. CIT that any particular sale of land had gone beyond the threshold of deducting TDS, i.e., more than Rs.50 lacs. Thus, there was no occasion to invoke or initiate any proceedings u/s.201.
I.T.A. No.2055/DEL/2019 1712. Simply setting aside the assessment order without undertaking any prima facie minimal inquiry to hold that verification and inquiry conducted by the Assessing Officer is not correct or inadequate; it cannot be held that assessment order is erroneous and prejudicial to the interest of revenue. This has been held so in the catena of judgment by the Hon'ble Jurisdictional High Court as cited above. Here in this case, the ld. CIT has failed to conduct any kind of inquiry or verification himself and has simply on premise has expressed his opinion that Assessing Officer should have conducted inquiry in a particular manner. Such an action by the Ld. CIT cannot be upheld under Explanation 2 to Section 263. Explanation 2 does not envisage that Assessing Officer should go to the last point of inquiry on the issue. What is expected from the Assessing Officer to carry out reasonable and pragmatic inquiry so as to justify his actions and which manifests his application of mind. If inquiry is found to be fleeting or eyewash then it can be held that inquiry has not been done by the Assessing Officer. Here in this case, we find that Assessing Officer has examined all the relevant documents asked by him from time to time and after verifying the documents and copy of sale deed he has reached to a conclusion that the source of cash deposits in the bank account has been explained which were tallying from the copy of sale deeds. Even the computation of Long Term Capital Gain/loss was found to be correct in view of the documents furnished and from the Approved Valuer's report. If the I.T.A. No.2055/DEL/2019 18 assessee has sold the land at a price mentioned in the sale deed, then onus is not on the assessee to show that from where the purchasers have paid the money. Thus, the onus as cast upon the assessee stood duly discharged and Assessing Officer has correctly allowed the claim of Long Term Capital Loss. Accordingly, revisionary order passed u/s.263 by the ld. CIT cancelling the assessment order is not sustainable and hence is quashed. Thus, the appeal of the assessee is allowed.
13. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 11th October, 2019.
Sd/- Sd/-
[PRASHANT MAHARISHI] [AMIT SHUKLA]
[ACCOUNTANT MEMBER] JUDICIAL MEMBER
DATED: 11th October, 2019
PKK:
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
Assistant Registrar