Income Tax Appellate Tribunal - Delhi
Sunil Kumar, Rohtak vs Pcit, Rohtak on 16 October, 2023
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "B" DELHI
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER
&
SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
I.T.A. No.3560/DEL/2019
Assessment Year 2009-10
Sunil Kumar, Principal Commissioner of Income
H.No. 921/21, Prem Nagar, Jail Vs. Tax,
Road, Rohtak Rohtak
Haryana.
TAN/PAN: ATWPK1908N
(Appellant) (Respondent)
Appellant by: Shri Navin Gupta, Adv.
Respondent by: Shri T. James Singson, CIT-DR
Date of hearing: 10 10 2023
Date of pronouncement: 16 10 2023
ORDER
PER PRADIP KUMAR KEDIA, A.M.:
The captioned appeal by the assessee is directed against the revisional order passed by the Principal Commissioner of Income Tax, Rohtak (Pr.CIT) dated 26.03.2019 whereby the assessment order passed by the Assessing Officer dated 28.12.2016 under Section 143(3) r.w. Section 147 of the Act has been held to be erroneous in so far as it is prejudicial to the interest of the Revenue within the meaning of Section 263 of the Act.
2. Facts in brief are that assessment under Section 143(3) r.w. Section 147 of the Act for AY 2009-10 was computed by the Assessing Officer determining the total income of the assessee at Rs.3,73,530/- as against the returned income of Rs.2,22,530/-. Thereafter, the Pr.CIT in exercise of revisionary power, issued I.T.A. No.3560/Del/2019 2 notice under Section 263(1) of the Act dated 14.02.2019 requiring the assessee to show cause as to why the assessment so framed under Section 143(3) r.w. Section 147 should not be set aside or modified. It was alleged by the Pr.CIT that examination of records revealed that the re-assessment order so passed is erroneous in so far as prejudicial to the interest of the Revenue for the reasons that Assessing Officer has failed to conduct inquiry / examination towards purchase of land in cash amounting to Rs.25 lakhs. The show cause notice referred above is reproduced hereunder:
"1. In th is rega rd , it is to in fo rm you tha t orig inal a ssessmen t in yo u r ca se was co mpleted at an in come o f Rs.3 ,73 ,530 /- a s aga in st retu rn ed in co me o f Rs.2,22 ,53 0/- b y th e th en AO vid e o rd er pa ssed u /s. 1 43(3 )/147 on 28 .1 2.2016 fo r the abo ve mention ed a ssessmen t yea r. 2 . Th e a ssessmen t of your ca se fo r th e AY 2009 -10 wa s mad e u/s. 14 3(3)/1 47. Du ring the cou rse o f examin ation o f th e details fu rn ish ed b y you , it is no ticed tha t you a re d o in g th e jo b of p rop erty d ealer and pu rcha sed ag ricultural La n d for Rs.25,00 ,0 00 /- in cash on 1 .11 .2018 and return ed the same amou nt in ca sh on 03 .02.20 19 . S in ce you deals in sa le an d pu rcha se o f p rop erty, it is u su a l busin ess o f yo ur an d thu s you can not ma ke pu rcha se o f exceed in g Rs. 2 0,000 /- in ca sh . Th e purcha se in ca sh o f la nd a mou nting to Rs.25,00 ,00 0 /- n eed s to b e add ed b a ck to you r ta xab le inco me. Th e A.O. seems to n o t verified a nd mad e enq uiry a bou t su ch fact resu lting thereb y revenu e lo ss to th e g o vernmen t.
3 . You a re, therefo re, given an o pportunity of b ein g h ea rd and requested to attend my o ffice a t Roo m No . 1 01 , Aa ya ka r Bha wan, Opposite Ma n sa ro va r Park, Roh ta k on 20 -03 -2 019 a t 11 .30 a .m. to show cause as to wh y an app ro p ria te o rd er und er sectio n 263 of th e In come Ta x Act, 19 61 no t b e pa ssed settin g asid e/mod ifying th e o rder u /s 143 (3 ) passed in you r ca se for th e assessmen t year 2009 -10. In case you do no t wish to a va il th e opp o rtu n ity o f b ein g h ea rd in person o r th rough autho rized representa tive in suppo rt o f you r cla im, yo u ma y send you r written rep ly so a s to rea ch th is o ffice o n o r b efo re the stip ula ted da te, wh ich will b e du ly con sid ered before an y su ch o rd er is pa ssed . In case of fa ilu re, th e d ecision wou ld b e ta ken on merits."
3. In response, the assessee filed a reply and submitted that the show cause notice issued seeking to revise the re-assessment order is premised on fundamental error in appreciation of facts correctly. It was submitted before the Pr.CIT that while the show cause notice refers to alleged purchase of agricultural land in cash, the assessee I.T.A. No.3560/Del/2019 3 has never purchased any land. The assessee has rather obtained advance for sale of ancestral land which was eventually returned as the deal could not materialize. The reply of the assessee before the Pr.CIT is reproduced hereunder:
"Fu rth er to yo u r qu ery rega rding p u rcha se o f ag ricu ltu re la nd fo r Rs. 25 .00 La kh s, it is h ereby cla rified tha t no ag ricu ltu re lan d wa s ever pu rcha sed b y th e a ssessee du ring th e relevan t previou s yea r. Th e wh o le ag reemen t ha s b een misu ndersto od and ha s b een tu rn ed up side d own by th e lea rned d epartmenta l aud ito r. Th e ag reement wa s n o t fo r pu rch ase bu t for sa le o f an cestra l a gricu ltu re lan d situ a ted a t Villa g e Khanda Kh eri, d istrict Hissa r. Th e a ssessee along with h is mo th er S mt. Ra jba la an d h is b ro th er La te S h. Din esh jo in tly inh erited pa ren tal ag ricu ltu re la nd o f a round 9 .50 Acres. Th e ag reement wa s don e fo r sa le o f pa rt o f th is a n cestra l a g ricu ltu re la nd an d th e a mou n t o f Rs.25 .0 0 Lakhs wa s received as an advance against th e sa le agreemen t of th is very piece o f an cestra l. "La ter o n th e d ea l wen t so ur and th e ad vance received wa s return ed by th e a ssessee to the in tend ed pu rch a ser. Th e cop y of sa le ag reemen t, co p y o f con firma tio n of a ccoun ts fro m the intend ed bu yer and Ja mdban d i o f th e ancestra l ag ricu ltu re lan d d ep ictin g sha re o f th e a ssessee, h is mo th er Smt. Ra ja bala and h is b roth er La te Sh. Din esh was p ro du ced to the a ssessin g o fficer a t th e time of scru tin y p ro ceed ing s and were a ccep ted . The same d ocumen ts are reprodu ced h ere a s well for you r read y referen ce.
The sa le o f an cestra l ag ricu ltu re la nd ha ving jo in t o wn ersh ip of o ther fa mily memb ers canno t b e treated a s sa le o f sto ck in trad e. Fu rth er in vo king o f sec. 40 A(3 ) is no t va lid at a ll as sectio n 40(3 ) is app lica b le on cash pu rchase o f bu siness goo ds wherein in th is ca se th ere is no pu rcha se bu t ag reemen t fo r sa le o f ag ricu ltu re land . I, th erefo re wou ld requ est yo u r good self n o t to add th e amoun t o f Rs.2 5 .00 La kh s to th e ta xab le In come."
4. The Pr.CIT however held that the re-assessment order dated 28.12.2016 is erroneous in so far as prejudicial to the interest of the Revenue and consequently set aside the re-assessment order with a direction to make fresh assessment after making proper inquiries/investigations.
5. Aggrieved by the revisional order of the Pr.CIT under Section 263, the assessee preferred appeal before the Tribunal.
6. The ld. counsel for the assessee reiterated the submissions made before the Pr.CIT and pointed out that the whole proceedings I.T.A. No.3560/Del/2019 4 under Section 263 is based on erroneous assumption of facts and Section 40A(3) applicable to cash purchases of business goods, is apparently not applicable since there is no purchase but an MOU was prepared for sale of agricultural land. The ld. counsel submitted that wrong assertions were admittedly made in audit enquiry subsequent to re-assessment order by the representative of the assessee, out of inadvertence and factual mistake. The current version of the assessee towards proposed sale of land in any case is backed by documentary evidences and a mere error in representation dehors the facts on record, carries no weight in the eyes of law. Such assertions disregarding the facts is not decisive in determining the issue and the assessee is entitled to demonstrate the correct facts which the assessee has done in the instant case. The ld. counsel thus submitted that no prejudice was caused to the Revenue per se while framing the re-assessment order and therefore, the revisionary power exercised under Section 263 is outside the sanction of law.
7. The ld. DR for the Revenue, on the other hand, heavily relied upon a reply dated 14 t h June, 2018 after the closure of the assessment in response to audit query wherein the representative of the assessee has stated in unequivocal terms that assessee paid advance in cash of Rs.25 lakhs for purchase of agricultural land during the Financial Year 2009-10. The ld. CIT-DR thus submitted that in the wake of such assertions, the Pr.CIT was justified in setting aside the erroneous re-assessment order framed without enquiry to the prejudice of the Revenue.
8. We have carefully considered the rival submissions.
9. The Pr.CIT in the present case has purported to act in exercise of power under Section 263 on the ground that re-assessment order accepting the cash advance in a commercial and business transaction I.T.A. No.3560/Del/2019 5 is without proper inquiry having regard to the provisions of Section 40A(3) of the Act and therefore erroneous in so far as prejudicial to the interest of the Revenue. The assessee has strongly contested the show cause notice issued in the impugned revisionary proceedings and asserted that an erroneous reply in a post re-assessment proceedings before the Assessing Officer by itself, is not capable of determining the issue.
9.1 We observe that the assessee has pointed out the correct facts before the Pr.CIT without any shield. In the circumstances where the genesis of action under Section 263 is based on a correspondence after the re-assessment order has been framed, a minimal inquiry by the Pr.CIT was incumbent before setting aside the re-assessment order and providing any direction to the Assessing Officer.
9.2 In terms of Explanation-I to Section 263 of the Act, an independent and a new proceedings sets in motion on receipt of new material (communication to Assessing Officer post re-assessment) coming on record post assessment and hence the responsibility of revisionary authority towards observance of principles of natural justice, in such situation, would be akin to that of Assessing Officer. The Pr.CIT cannot merely set aside the assessment on the basis of a new fact (albeit incorrect) coming on record without exerting himself and provide some basis to dislodge the response of the assessee on such new material. The Pr.CIT, under the circumstances, is under bounden duty to take into account the perspective of the assessee on such fresh material and is required to pass a speaking order thereon. The Pr.CIT thus is not expected to sit solely in the capacity of revisionary authority qua the new fact coming to the light post assessment/re-assessment order but is required to assume the task of Assessing Officer in tandem and discharge quasi judicial functions in a reasonable manner.
I.T.A. No.3560/Del/2019 69.3 The Pr.CIT, in the instant case, has failed to do so. There is not even an iota of any discussion as to how reply of the assessee is without any substance particularly when the assessee has furnished evidences to corroborate his version before the Pr.CIT.
9.4 In paragraph 3 of the revisionary order, the Pr.CIT has abruptly observed that the re-assessment order is erroneous in so far as it is prejudicial to the interest of the Revenue "in view o f following observations" but however no observations thereafter has been found to be made. Thus, findings of Pr.CIT suffer from apparent error and incompleteness. The Pr.CIT has summarily set aside the re-assessment order and shifted the responsibility on the Assessing Officer to examine or verify the facts. The opportunity contemplated under Section 263 is thus rendered illusory and merely an empty formality resulting in miscarriage of justice in contravention of express intendment of provision of Section 263 of the Act.
10. Looking from any angle, the directions towards verification of impugned transactions without observance of natural justice and without speaking order on the point based on some degree of inquiry by Pr.CIT himself, are unsustainable in law and deserves to be quashed.
11. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 16/10/2023
Sd/- Sd/-
[KUL BHARAT] [PRADIP KUMAR KEDIA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
DATED: /09/2023
Prabhat