Income Tax Appellate Tribunal - Jodhpur
Ramesh Raj Bhra, Jalore vs Pr. Cit-I,, Jodhpur on 15 September, 2021
IN THE INCOME TAX APPELLATE TRIBUNAL, JODHPUR BENCH,
JODHPUR
BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND
SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER
ITA No. 31/JODH/2021
(Assessment Year 2016-17)
Ramesh Raj Bohra, Vs. Pr.CIT-1,
M-10, Shivaji Nagar, Jalore, Jodhpur.
Rajasthan.
PAN No. AAPPB 7135 G
ITA No. 32/JODH/2021
(Assessment Year 2016-17)
Pushp Raj Bohra, Vs. Pr.CIT-1,
M-09, Shivaji Nagar, Jalore, Jodhpur.
Rajasthan.
PAN No. AANPB 4456 C
Assessee by Shri Gautam Chand Baid, CA &
Shri Mayank Taparia, Adv.
Revenue by Smt. Sanchita Kumar, CIT-DR
Date of Hearing 12/08/2021
Date of Pronouncement 15/09/2021
ORDER
PER: SANDEEP GOSAIN, J.M. Both these appeals have been filed by the assessees against the separate orders passed by the ld. Pr.CIT-1, Jodhpur U/s 263 of the Income Tax Act, 1961 (in short, the Act) dated 26/03/2021 for the A.Y. 2016-17.
2. Common issues are involved in both these appeals, therefore, both are clubbed and heard together and for the sake of convenience, a common order is being passed.
2ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
3. For deciding the appeals, we take ITA No. 31/Jodh/2021 for the A.Y. 2016-17 as a lead case, wherein the assessee has raised following grounds of appeal:
"1. That on the facts and in the circumstances of the case, order framed by ld. Pr.CIT, invoking provisions of Section 263 is void ab initio as such other (communication) framed contrary to the CBDT Circular No. 19/2019 dated 14/08/2019 which laid mandate of quoting computer Generated Document Identification Number (DIN) in the body of order (communication). In exceptional circumstances, a DIN can generate afterword with prior written approval of the Chief Commissioner of Income Tax. Any communication without quotation of DIN in the body of order shall be treated as invalid and shall be deemed to have never been issued. Considering mandate of CBDT, order under consideration may kindly be declared as null and void ab initio.
2. That on the facts and in the circumstances of the case, Ld. Pr. CIT erred in holding that gain arising from transfer of capital assets and declared as Capital Gain ought to be taxed as Business Income overriding the binding Judgement of Hon'ble ITAT in assessee's own case for AY 2015-16 [158/Jodh/2019] in which gain from sale of part of assets under consideration were treated as Capital Gain as against assessment of such gain as Business Income by Ld. AO. Considering specific judgement of ITAT in assessee's own case for same property, direction of Ld. Pr. CIT is contrary to principal of Binding Precedence. Necessary direction to set aside the order of Pr. CIT may kindly be issued.
3. That on the facts and in the circumstances of the case, various direction of Ld. Pr. CIT invoking power u/s 263 resulted in enhancement of Limited Scrutiny scope of proceeding u/s 143(3) which is not permissible under law. Assessment Order framed by assessing officer in Limited Scrutiny scope is neither erroneous nor it is prejudicial to the interests of the revenue so that lead to invocation of power u/s 263 by the Ld. Necessary order may kindly be issued to set aside such autocratic directions being beyond the scope of power assigned to Pr. CIT u/s 263.
4. That on the facts and in the circumstances of the case, Ld. Pr. CIT erred in directing the AO to examine and verify source of investment 3 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
made by assessee and his brother in purchase of land despite the fact that purchase of land was made in earlier year and source of investment has no relevance in the computation of taxable income for the year under consideration and source of investment of brother of assessee has no relevance with assessment of assessee. Necessary order may kindly be issued to set aside such autocratic direction being beyond the scope of power assigned to Pr. CIT u/s 263.
5. The appellant crave liberty to add, amend, alter, modify, or delete any of the ground of appeal on or before its hearing before your honour."
4. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.
5. The brief facts of the case are that the assessee filed his return of income for the year under consideration on 05/08/2016 declaring total income of Rs. 29,75,040/-. The case of the assessee was selected for limited scrutiny through CASS. Necessary notices were issued to the assessee. The assessee is director in companies, M/s Fateh Granites Ltd. and M/s Fateh Agro Builders Pvt. Ltd. and receiving salary in the capacity of the director.
The assessee is also earning income from capital gains and income from other sources during the year under consideration. The A.O. after considering the reply of the assessee, submissions and necessary verification, accepted the returned income of the assessee. Later on, the ld.
Pr.CIT passed order U/s 263 of the Act holding that the assessment order passed is based on incorrect/ mistaken assumption of the facts of the case by way of accepting the statement of the assessee without due verification/ 4 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
erroneous application of provisions of the Act and cancel the assessment order with the direction to the A.O. to pass the assessment order afresh.
6. Against the impugned order passed by the ld. Pr.CIT, the assessee has preferred the present appeal before the ITAT on the grounds mentioned above.
7. All the grounds of appeal are interrelated and interconnected but at the outset, the ld AR appearing on behalf of the assesse while pressing ground No. 2 of the appeal has submitted before us that the ld. PCIT erred in holding that the gain arising from transfer of capital asset and declared as capital gain ought to be taxed as business income overriding the binding decision of the Hon'ble ITAT in assessee's own case for the A.Y. 2015-16 in ITA No. 157/Jodh/2019 in which gain from sale of part of assets under consideration were treated as capital gain as against the assessment of such gain as business income by the A.O. As per the ld. AR, considering specific judgment of Hon'ble ITAT in assessee's own case for the same property, directions issued by the ld. PCIT is contrary to the principle of binding precedence. The ld. AR also relied upon the written submissions submitted before the ld. PCIT as well as before us which are reproduced below:
Submissions before the ld. PCIT:
"1. At the very outset, it is pertinent to mention here that case of assessee was selected for limited scrutiny and the issues for examination as identified by CASS are as under:-5
ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
a. Whether investment and income relating to properties are duly disclosed.
b. Whether deduction from capital gains has been claimed correctly.
A copy of Notice u/s 143(2) is enclosed herewith and marked as "Annexure- 1".
2. After the issuance of Notice u/s 143(2), detailed questionnaire vide Notices u/s 142(1) and letters was issued with respect to the issues involved as stated herein supra Para 1. A Copy of said Notices are enclosed herewith and marked as Annexure-2.
3. Thereafter detailed written submissions were filed by assessee with all documentary evidences in support of Income/deductions as claimed in computation of total income as per Notice u/s 143(2) and Notices u/s 142(1). Copies of replies made before Ld. AO are enclosed herewith and marked as "Annexure-3".
4. That after detailed verification and examination of submissions and documents so submitted, the Ld. AO was pleased to pass an order accepting the returned income of assessee. A copy of assessment order u/s dated 13.11.2018 is enclosed herewith and marked as "Annexure-4".
5. That it is imperative to bring to your kind consideration that facts of case has been wrongly construed as it can be discern from your show cause notice dated 13.03.2020, wherein it has been stated as under;
"3. On perusal of relevant assessment record for the A.Y 2016-17, it is noticed that you have sold various flats during the previous year2015-16 and declared in your return of income short term gains of Rs. 63,977/- against sale consideration of Rs. 1,64,27,600/- and NIL Long term capital against the sale consideration of Rs. 1,74,17,173/- after taking the benefits of indexing cost, exemption u/s 54, u/s 54F and u/s 54EC of total Rs. 1,72,21,289/- and the same was considered in scrutiny assessment.
Further, it was observed that you have frequently purchased land arid convert into flats by construction of RCC on basement, ground floor and first floor in a apartments scheme Fateh Rooyal residency (FRR) aawasiya youjana, Jalore (Raj.( and other apartments scheme and then sold to various persons. You have sold Semi constructed buildings on various dates during the previous year the cost of acquisition of lands 6 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
were born by you and your brother, Sh. Pushp Raj Bohra jointly. Sh. Pushp Raj Bohra is also engaged in the activity of sale of land conversion into Flats acquisition of land in FRR apartment scheme."
That it can be clearly discern from the above that wrong facts has been construed by your good self as assessee had purchased the lands long back and not engaged into regular purchasing of lands. Secondly, assessee has not constructed any flats/apartments on the said land. This fact is also misconstrued.
It is also worthwhile to mention here that since the purchased lands were big in size and as assessee wants to purchase a new residential property in Bangalore which was costing higher than the land value at Jalore. Thus, in order to fetch higher prices, assessee with his brother plans to sell the land by splitting into smaller plots and by constructing building on few plots. The said purchased lands were shown as capital asset and not as inventory. It is also worthwhile to mention here that mere conversion of land into plots does not itself by virtue to be construed as business asset. For construing this as business asset there are lot other parameters which needs to be considered, which are lacking in the case of assessee.
6. It is worthwhile to mention here that it is well settled legal position that revisionary powers under section 263 cannot override the scope as envisaged under Notice u/s 143(2). In other words when the present case in hand has been selected for "Limited scrutiny" then the revisionary powers so initiated; for the reasons that nature of transaction is business income, is illegal and beyond the scope of revision under section 263 of the Act.
The above preposition is held by Hon'ble Tribunal in the case of The Deccan Paver Mills Co. Ltd. vs The Commissioner of Income Tax-IV, Pune [ITA Nos.1013 & 1635/PUN/2014], that:-
"40. Now, coming to the aspect of book profits which was considered by the Commissioner and the order of the Assessing Officer was held to be erroneous and prejudicial to the interest of revenue. In this regard, it may be pointed out that the case of assessee was picked up for scrutiny under CASS for the limited purpose of verifying the Chapter VI-A deduction. Once the case is picked up for specific purpose under CASS, then it is outside the purview of the Assessing Officer to look into any other aspect other than the aspect for which it is picked up. Hence, the 7 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
Assessing Officer has not formed any opinion in respect of computation of book profits in the hands of assessee. Once, no such opinion has been formed by the Assessing Officer, the Commissioner has erred in holding the order of the Assessing Officer to be erroneous and prejudicial to the interest of revenue in this regard. Accordingly, we reverse the findings of the Commissioner. Accordingly, we hold that the order passed by the Commissioner under section 263 of the Act is invalid and the same is quashed for both the assessment years." (Emphasis supplie d) The same view was upheld by Hon'ble tribunal in the case of Mrs. Sonali Hemant Bhaysar Vs. Pr. CIT-29, Mumbai {ITA No. 742/M/2019} dated 17.05.2019. (Emphas is supplied)
7. That it is worthwhile to mention here that the same activity on same land was carried on by assessee in the previous year i.e. A.Y 2015-16 (P.Y 2014-15), wherein the Ld AO has treated the activity as business income instead of capital gains. The matter was challenged in appeal before Hon'ble Commissioner (Appeals) and carried before the Hon'ble ITAT. It is pleased to inform your Honour that the Hon'ble ITAT has had finally decided and concluded that the activity of assessee is to be taxed under the head Capital gains by treating the assets/income as capital asset/income instead of business assets and all expenses borne by assessee to be construed as part of cost of improvement. A copy of the order of Hon'ble Tribunal, Jodhpur {ITA NO. 157/Jodh/2019} with identical facts and for same assessee is enclosed herewith and marked as "Annexure-5", which is having jurisdictional binding effect on assessee's case.
8. Thus, by any sight of imagination the order passed Ld. \O for the AX 2016-17; treating the assets as capital asset and allowing the claim of exemption u/s 54F/etc. cannot be termed as improper or made without verification or prejudicial to the interest of revenue. Moreover, it is emphatically submitted that Ld. AO has duly made all inquiries and was of same view as of Hon'ble tribunal that such asset is capital asset and thereby allowed the exemption under the head "Capital Gains".
9. It is pertinent to mention here that Hon'ble Rajasthan High court in the case of COMMISSIONER OF INCOME-TAX. VERSUS. TAN CONSTRUCTION CO. (IT Appeal No. 60 of 20121 has held :-
"It is clear that the learned CIT had merely on a change of opinion and to substitute his own opinion about the 8 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
deficiencies in the maintenance of the record by the assessee invoked the revisional jurisdiction and set aside the assessment order. This is not permissible under section 263 of the Act.
Once the order of the assessing authority stood merged with higher appellate authority, the parallel authority on the administrative side, namely, CIT, even cannot revise later on the order passed by the assessing authority, which stood merged with the order of appellate authority in the case of the present assessee itself, this Court on previous occasion in CIT v. Jain Construction Co. [1999 (9) TM1 26 - RAJASTHAN High Court], quashed the revisional order under section 263 of the Act. Findings arrived at by the Tribunal essentially remain findings of fact, which do not give rise to any substantial question of law, requiring consideration by this Court. Mere alleged insufficiency of the enquiry in the opinion of the CIT by the assessing authority, could not permit him to invoke the revisional jurisdiction under section 263 of the Act and, therefore, the essential twin conditions for invoking the revisional jurisdiction, namely, the ii77pugned assessment being erroneous as well as prejudicial to the interest of Revenue, were not at all satisfied in the present case. ( E m p h a s i s s u p p l i e d )
10. Moreover, It is well settled legal position and as held by Hon'ble Rajasthan High court in the case of Commissioner Of Income Tax, Kota Versus Shri Parmanand, Prop. Parmanaand Contractor, Rangbari, Kota ID.B. Income Tax Appeal No. 137/2014] that:
"T he as s e s s e e has c l e arl y e xpl ai ne d t he de bi t and c re di t e nt ri e s as di s c us s e d i n t he w ri t t e n s ubmi s s i on - and al s o e xpl ai ne d t he c os t of i mprov eme nt s hown by t he as s e s s e e and t he s t at us of t he l and e t c .
T he re f ore , t hi s i s not a c as e of no veri f i c at i on or no prope r v e ri f i c at i on. T he ve ri f i c ati on done by t he A O i s al s o t o be t re at e d as p ro pe r u nl e s s s ome s pe c i f i c i ns t ruc t i on or pre s c ri pt i on: of a part i c ul ar s e c t i o n of t he A c t has not be e n c arri e d by t he A O or e l s e t he A O has n ot c ond uc t e d e nqui ry as de m an de d by l aw . In ou r c ons i de re d o pi ni on, t hi s i s not s uc h a c as e . T he t w i n 9 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
c ondi t i ons of Se c t i on 2 6 3 as di s c us s e d abov e i n de t ai l are not f ound t o c oe xi s t .
Therefore, we set aside the impugned orde r dt. 07.03.2013 passe d by the Id. CIT and al l ows t he appeal of the assessee." (E mphas is s uppl ie d)
11. Accordingly, It is well settled legal position as held in the case of THE COMMISSIONER OF INCOME TAX, CHENNAI V/s M/S. A.R. BUILDERS & DEVELOPERS P LTD 1 2020 (3) TMI 53 - MADRAS HIGH COURT} that "it is very clear that time and again the Honourable Supreme Court as well as this court, when two views are possible, if the Assessing Officer had taken one of the plausible views, the CIT has no authority to set aside the order of the Assessing Officer and adopt its one of the other views. Therefore Principal Commissioner of Income Tax could not substitute a lawful view taken by the Assessing Officer." (Emphasis supplied) Considering the facts and circumstances your good self is humbly requested to drop the proceedings for revision so initiated and oblige."
Submissions before this Bench:
1. CBDT Circular No 19/2019 dated 14/08/2019 [PB Pg 35-36] laid that no communication shall be issued by any income-tax authority to the assessee or any other person, on or after the 1st day of October, 2019 unless a computer-generated Document Identification Number (DIN) has been allotted and is duly quoted in the body of such communication. Relevant portion of circular reproduced as under:
"2. In order to prevent such instances and to maintain proper audit trail of all communication, the Board in exercise of power under section 119 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), has decided that no communication shall be issued by any income-tax authority relating to assessment, appeals, orders, statutory or otherwise, exemptions, enquiry, investigation, verification of information, penalty, prosecution, rectification, approval etc. to the assessee or any other person, on or after the 1st day of October, 2019 unless a computer-generated Document Identification Number (DIN) has been allotted and is duly quoted in the body of such communication.
3. In exceptional circumstances such as, --
(i) when there are technical difficulties in generating/allotting/quoting the DIN and issuance of communication electronically; or
(ii) when communication regarding enquiry, verification etc. is required to be issued by an income-tax authority, who is outside the office, for discharging his official duties; or 10 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
(iii) when due to delay in PAN migration, PAN is lying with non-jurisdictional Assessing Officer; or
(iv) when PAN of assessee is not available and where a proceeding under the Act (other than verification under section 131 or section 133 of the Act) is sought to be initiated; or
(v) When the functionality to issue communication is not available in the system, the communication may be issued manually but only after recording reasons in writing in the tile and with prior written approval of the Chief Commissioner / Director General of income-tax. In cases where manual communication 'is required to be issued due to delay in PAN migration. the proposal seeking approval for issuance of manual communication shall include the reason for delay in PAN migration. The communication issued under aforesaid circumstances shall state the fact that the communication is issued manually without a DIN and the date of obtaining of the written approval of the Chief Commissioner / Director General of Income-Tax for issue of manual communication in the following format-
.. This communication issues manually without a DIN on account of reason/reasons given in para 3(i)/3 (ii)/3(iii)/3(iv)/3(v) of the CBDT Circular No ...dated ..... (strike off those which are not applicable) and with the approval of the Chief Commissioner / Director General of Income Tax vide number .... dated ....
4. Any communication which is not in conformity with Para-2 and Para-3 above, shall be treated as invalid and shall be deemed to have never been issued."
2. In the case under consideration order u/s 263 made on 26/03/2021. Since the order framed after 01/10/2019, as per CBDT Circular No 19/2019 dated 14/08/2019, a computer-generated Document Identification Number (DIN) must be allotted to it and same must be duly quoted in the body of order itself. From the bare perusal of order u/s 263 it can be observed that neither a computer generated DIN quoted in the body of order nor it has been stated that Order has been issued manually without a DIN in exceptional situation after obtaining written approval of the Chief Commissioner of Income-Tax. Considering the factual position absence of quotation of Computer Generated DIN in the body of assessment order shall be treated as invalid and shall be deemed to have never been issued, as per binding CBDT Circular. Considering the position, it is requested to declare the assessment order as null and void ab initio.
11ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
3. It may pertinent to mention that the circular specify five exceptional circumstances wherein order can be issued manually. But for same there is binding condition that order issued manually only after recording reasons in writing in the tile and with prior written approval of the Chief Commissioner /Director General of income-tax. The communication issued under exceptional circumstances shall state the fact that the communication is issued manually without a DIN and the date of obtaining of the written approval of the Chief Commissioner / Director General of Income-Tax for issue of manual communication. In the case under consideration, in manual order u/s 263 no information has been provided that order has been issued manually without a DIN, neither it has been provided that order has been issued manually after getting prior written permission of Chief Commissioner of Income Tax. In such circumstances the order under consideration being in contravention to CBDT circular may kindly be declared as void ab initio and be treated as never been issued.
4. It may pertinent to mention that a separate Intimation Letter dated 26/03/2021 bearing DIN ITBA/REV/S/91/2020-21/1031803672(1) communicating that "This is to inform you that Order u/s 263 dated 26/03/2021 is having Document No. (DIN) ITBA/REV/V/REV5/2020- 21/1031803643(1)." In this regard it is to submit that generation of DIN separately does not comply the requirement of CBDT circular.
5. Absence of DIN in the body of order and issuance of manual order without stating the fact that the communication is issued manually without a DIN and absence of any reference of date of obtaining of the written approval of the Chief Commissioner make the order void ab initio and shall be treated as invalid and shall be deemed to have never been issued. Though in the case under consideration so subsequent DIN has been generated for the Order, if any DIN generated in the circumstances under consideration (non mentioning in the order about manual order and information about obtaining permission of CCIT) does not change the void Order into a sustainable one.
12ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
Considering above facts and circumstances and binding CBDT circular the assessment order may kindly be declared as null and void and shall be treated as never been issued.
Summary of order u/s 263 Pg 1-2 Para 2 Show cause notice reproduced.
Pg 2 "Further, it was observed that you have frequently purchased land and convert into the flats by construction of RCC on basement, ground floor and first floor in a apartment scheme Fateh Rooral Residency (FRR) Aawasiya Youjana, Jalore (Raj) and other apartments scheme and then sold to various persons. You have sold semi Constructed building on various dates during the previous year the cost of acquisition of lands were born by you and your brother, Sh. Ramesh Raj Bohra jointly. Sh. Ramesh Raj Bohra is also engaged in the activity of sale of land conversion into flats acquisition of land in FRR Apartment Scheme.
The activity of purchase land and then convert into flats and sold after construction with other co-owner which shows clearly that you have engaged in the activity of real estate business/ building developer and the income was chargeable to tax under the head of income from business and profession instead under the head income from capital gains. Thus the income was chargeable to tax under the head of income from business and the benefit of cost of indexing, exemption u/s 54, 54F and 54EC amounting was not allowable to you."
Pg 3-10 Para 4 Submission of assessee reproduced Pg 4-5 "5. That it is imperative to bring to your kind consideration that facts of case has been wrongly construed as it can be discern from your show cause notice dated 13.03.2020, wherein it has been stated as under; ...
...
That it can be clearly discern from the above that wrong facts has been construed by your good self as assessee had purchased the lands long back and not engaged into regular purchasing of lands. Secondly, assessee has not constructed any flats/apartments on the said land. This fact is also mis- construed.
It is also worthwhile to mention here that since the purchased lands were big in size and as assessee wants to purchase a new residential property in Bangalore which was costing higher than the land value at jalore. Thus, in order to fetch higher prices, assessee with his brother plans to sell the land by splitting into smaller plots and by constructing building on few plots. The said purchased lands were shown as capital asset and not as inventory. It is also worthwhile to mention here that mere conversion of land into plots does not itself by virtue to be construed as business asset.
13ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
For construing this as business asset there are lot other parameters which needs to be considered, which are lacking in the case of assessee.
Pg 10-13 Para 5 Observation of Ld Pr. CIT about history of the case Pg 14 "While making assessment, the AO failed to examine and verify the nature of sale transactions claimed by the assessee in the ITR after examining the purpose of investment in land, construction of house properties/ villas thereon and later on sales of individual house property/ villa to various parties.
The AO is directed to examine and verify the source of investment made by the assessee and his brother Shri Ramesh Raj Bohra in purchase of land, ... The AO is also directed to examine and verify the nature of sales transactions of the house properties..."
Pg 14-15 After clear direction to the AO for examination of the nature of the transaction, Ld. Pr. CIT consider it appropriate to discuss about the order Hon'ble ITAT in assessee's own case for AY 2015-16 in which sale of part of property took place and Ld. AO while framing assessment u/s 143(3) assessed gain as business income and on appeal Hon'ble ITAT held that investment in the property was long back and without any motive of business of real estate and therefore gain has to be assessed as capital gain.
Pg 15 Judgement of Delhi High Court in the case of Vardan Buildcon vs ACIT in ITA No. 429/2011 referred to overrule ITAT judgement in assessee's own case for AY 2015-16.
Pg 16 "It is observed that assessee purchase land frequently ..." This observation has been specifically objected during the 263 proceeding as factually incorrect, but without bringing any factual material on record which shows that assessee frequently purchased land and sale same after development same as real estate.
Pg 17-18 Para 6-8 Reference made to Explanation 2 to 263(1) Pg 18-20 Para 9-10 Judicial pronouncements referred
- Gee Vee Enterprises 99 ITR 375 (Delhi)
- Jagdish Kumar Gulati vs CIT 269 ITR 71
- Duggal & Co 220 ITR 456 (Delhi
- K.A. Rama Swami Chettiar vs CIT 220 ITR 657
- Malabar Industrial Co Ltd. 243 ITR 83 (SC)
- CIT vs Jawahar Bhattacharjce 342 ITR 74
- CIT vs Amitabh Bachchan Civil Appeal 5009 of 2016
- Rameshwar Prasad Sharma ITA No 449/JP/2019 Pg 20 Para 11From the above discussion, the order u/s 143(3) dated 13/11/2018 for the AY 2016-17 passed by the Assessing Officer is found to be erroneous in so far as it is prejudicial to the interest of revenue, as I am 14 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
of the opinion that the assessment order was passed by the Assessing Officer without making proper inquiries and verifications which should have been made.
Pg 20 Para 12... In this regard, I am of the opinion that the order passed is based on incorrect/ mistaken assumption of the facts of the case by way of accepting the statement of the assessee without due verification/ erroneous application of provisions of the Act. I, therefore, cancel the assessment order passed by the AO u/s 143(3) on 13/11/2018 with the direction to the Assessing Officer to pass the assessment order afresh after considering the above mentioned issues, apart from other issues discussed in the assessment order dated 13/11/2018 and also the issues which may subsequently come into the notice of Assessing Officer, during the assessment proceedings u/s 143(3) r.w.s. 263 of the Income Tax Act, 1961.
6. Income Tax Return filed for the assessment year under consideration was selected for limited scrutiny. Scope of limited scrutiny as per notice u/s 143(2) was as under:
"i. Whether investment and income relating to properties are duly disclosed.
ii. Whether deduction from capital gains has been claimed correctly."
7. During the year under consideration assessee declared gain earned on following immovable properties under capital gain head while filing return of income:
S. Property Description No.
1. FATEH ROYAL RESIDENCY PLOT B-02
2. FATEH ROYAL RESIDENCY PLOT G-03
3. FATEH ROYAL RESIDENCY PLOT B-05
4. FATEH ROYAL RESIDENCY PLOT B-08
5. FATEH ROYAL RESIDENCY PLOT A-13
6. FATEH ROYAL RESIDENCY PLOT A-11
7. FATEH ROYAL RESIDENCY PLOT A-08
8. FATEH ROYAL RESIDENCY PLOT B-01
9. FATEH ROYAL RESIDENCY PLOT G-08
10. FATEH ROYAL RESIDENCY PLOT A-12
11. FATEH ROYAL RESIDENCY PLOT B-03
12. FATEH ROYAL RESIDENCY PLOT A-07
13. FATEH ROYAL RESIDENCY PLOT B-07
14. FATEH ROYAL RESIDENCY PLOT B-09
15. FATEH ROYAL RESIDENCY PLOT A-06
16. FATEH ROYAL RESIDENCY PLOT A-03 15 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
17. FATEH ROYAL RESIDENCY PLOT G-09
18. FATEH ROYAL RESIDENCY PLOT A-02
19. FATEH ROYAL RESIDENCY PLOT A1
20. FATEH ROYAL RESIDENCY PLOT A-04
8. That brief background of transactions with reference to Fateh Royal Residency are as under:
8.1. The Fateh Royal Residency Township has been planned on the Khasra No 2010, 1962, 2011, 2012, 2013, 2014, 2015 & 2016 at Railway station by pass road, Jalore. These properties owned by Pushp Raj Bohra, Ramesh Raj Bohra (assessee) and Lata Bohra w/o Dinesh Bohra detail of which are as under:
Khasra No Owner Area in Date of
Hectare Purchase
2011, 2012, Pushp Raj Bohra (assessee) 1.55 02/11/1995
2013 & 2014
1962 Pushp Raj Bohra (assessee) 0.33 28/01/2011
2015 & 2016 Ramesh Raj Bohra 2.27 27/10/1995
2010 Lata Bohra w/o Dinesh 1.57 15/09/1994
Bohra
Total Area 5.72
8.2. Property (2.27 Hectare) under the scheme has been purchased by the assessee in the year 1995. The investment so made in property is shown as capital investment in balance sheet. Intention of assessee at the time of purchase can be clearly discern from this, moreover, a general inference can be drawn from this that why assessee purchase land with the motive of business around 20 years back, when the main stream line of family business of assessee is granites manufacturing and trading since 1986. Further in case property purchased with business intention as to why no action for realisation of money invested, not taken for such a long period.
8.3. That from the time of Purchase of land in the year 1995 till the conversion of the land for township, such land has been cultivated by the assessee and agricultural income from the same has been duly shown in the return of income filed by the assessee.16
ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
8.4. Three persons whose lands were involved are family member and no outside person is involved.
8.5. Main force behind sale of property is requirement of fund for purchase of house property at Bengaluru.
8.6. No expenditure has been incurred for the development of the land for the purpose of sale of till the approval of the plan from the local authority.
8.7. The township was planned to realisation of better value of the investment which is not possible in case of sale of land as such and such action by no mean can be considered as a transaction of business nature.
9. During the assessment proceeding Ld. AO sough detail about the properties owned by the assessee. Detail so sought include detail of investment (nature), name of the person in whose name investment held, date of purchase, amount of purchase consideration and source of such investment. Similar detail about property sold were also sought.
10. Detail about the ownership of property, period of holding, circumstances under which property sold after converting into plots, utilization of sale realization for purchase of residential house property along with all supporting documents have been produced.
11. Ld. AO having examined all documents and after consideration of submission of assessee frame assessment on returned income.
12. Irrespective of the fact that Ld. AO had made required inquiry before framing assessment, Ld. Pr. CIT invoking power u/s 263 issued show cause notice stating that he is of the view that while passing the assessment order proper inquiries and verification was not done by the AO.
13. In the show cause notice so issued it has been stated that assessee frequently purchase land and convert into flats by construction of RCC.
14. In the reply it was submitted before Ld. Pr. CIT that factual finding recorded that assessee is frequently purchase land and convert into flats by 17 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
construction of RCC is incorrect. It was requested to consider correct factual position of the case under consideration.
15. Even though it was specifically submitted that observation recorded in the show cause notice that assessee frequently purchase land and convert into flats by construction of RCC is factually incorrect and request was made to consider correct factual position, Ld. Pr. CIT framed order u/s 263 in autocratic manner and again repeat the observation that assessee frequently purchase land and convert into flats by construction of RCC without any supporting factual evidence and without any recording that claim of the assessee that he did not frequently purchase land and convert into flats by construction of RCC is incorrect jump to conclusion that AO framed assessment without proper inquiry. This demonstrate that the statutory requirement of hearing opportunity to assessee has been fulfilled for the name sack and in reality, submission made by the assessee not at all considered while invoking power u/s 263 except to reproducing same in the order u/s 263. Merely reproduction of the submission of assessee and recording a finding that submission of the assessee has been considered cannot be treated as compliance of statutory provision of providing hearing opportunity.
16. It may pertinent to mention that neither factual incorrect finding recorded in show cause notice, referred by assessee has been considered nor various binding judicial pronouncements quoted by the assessee has been dealt with by Ld. Pr. CIT while framing order u/s 263.
17. Further to this the judgement of the ITAT in the assessee's own case [PB Pg. 37 - 52] has been denied to follow in an autocratic manner. It may pertinent to mention here that before discussion about the judgement of ITAT in the assessee's own case Ld. AO has been directed to reframe assessment by examination of nature of sale transaction. The order of the ITAT denied to follow referring the judgement of Delhi High Court in the case of Vardan Buildcon vs. ACIT [ITA No. 429/2011 dated 24/02/2011] [PB 18 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
Pg. 53 - 59]. From the bare perusal of the judgement of Delhi High Court referred, your honor will found that a judicious person cannot overrule reasoned ITAT judgement on the finding of such case as there are substantial difference in the fact of the case before Delhi High Court in fact of case under consideration. Further to this though the judgement in the case of assessee was of ITAT, it may pertinent to mention that such judgement is a detailed judgement and pronounced in favor of assessee considering judgement of jurisdictional High Court of Rajasthan in the case of CIT vs Sohan Khan [2008] 304 ITR 194 (Raj) and therefore even if there is applicable Delhi High Court judgement in case same is in contradiction of Rajasthan High Court Judgement no adverse action can be taken in case of assessee within Jurisdiction of Rajasthan High Court.
18. Ld. Pr. CIT at Page 11 of the order recorded that:
"(iv) It is all the more pertinent to mention here that the assessee and his two brothers are directors in Fateh Agro Builders Private Limited. The company was engaged in business of Builders- Property Developers. And that the company has projected in Jalore namely Fateh Royal Residency and Fateh Hills and at Banglore in the names of Perfect Charm, Perfect Charisma and Perfect Bansankari."
18.1. Above finding is partial finding. The company Fateh Agro Builders Pvt Ltd was incorporated in year 1986 (earlier it's name was Fateh Granite and Marble Pvt Ltd) and it was engaged in the business of Mining Work, Production of Granite Slabs, Tiles and Blocks. During the financial year 2014-15 for the first time company started new line of business of Builders
- Property Development. Property sold by assessee i.e. Fateh Royal Residency and Fateh Hills were initial projects of the company in the business line of Builders - Property Development. Considering complete factual finding, it cannot be said that since assessee is one of the director of the company Fateh Agro Builders Pvt Ltd which is also buyer of the property under consideration, transaction is of the nature of business transaction. Fact that company after acquiring such property treating same as business transaction support the submission of assessee that when the assessee along with other family members who were co-owner of property under 19 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
consideration decided that it is better to execute such transaction as business transaction they transfer remaining land of project to the company. Therefore transfer of property under consideration by assessee is realization of investment and cannot be held as business transaction.
19. Had the Ld. Pr. CIT consider the correct factual finding in judicious manner, there is no reason to held the assessment order framed by the Ld. AO as erroneous so as to prejudicial to the interest of revenue. It may pertinent to mention though Ld. Pr. CIT repeatedly recorded that necessary inquiry were not carried by the Ld. AO, but in entire order running over 20 pages it has been stated that what further inquiry required from the end of Ld. AO. He sought entire detail about the property under consideration (regarding purchase of property as well as sell of property). After consideration of details required for adjudication of the case under consideration, Ld. AO framed assessment.
20. Intention of assessee at the time of purchase of property and Time period of holding of property not at all considered by the Ld. Pr. CIT in determination of nature of transaction under consideration.
21. It may pertinent to mention that for the capital gain earned out of sale of these capital assets assessee claimed exemption u/s 54F for investment in residential property at Bengaluru. Further residential property purchased at Bengaluru was for personal use of assessee and not merely a capital investment.
22. Reliance is placed on following judicial pronouncements:
22.1. CIT vs A.R. Builders & Developers Private Limited [2020 (3) TMI 53 - Madras High Court] [PB Pg 60-65] 22.2. CIT v. KWALITY STEEL SUPPLIERS COMPLEX [2017] 395 ITR 1 (SC) [PB Pg 66-74] 22.3. CIT vs Jain Construction Co [2012 (11) TMI 1071 Rajasthan High Court] [PB Pg 75-86] 20 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
22.4. Pr. CIT v. N. K. PROTEINS LTD. [2020] 429 ITR 493 (Guj) [PB Pg 87-
92] In light of above submission and judicial pronouncements relied upon the order u/s 263 may kindly be declared as without authority as the assessment order under consideration neither erroneous nor prejudicious to the interest of revenue.
23. Return of income filed by assessee selected for limited scrutiny and as per notice u/s 143(2) dated 04/07/2017 following issues were identified for examination [PB Pg 1-2]:
"i. Whether investment and income relating to properties are duly disclosed. ii. Whether deduction from capital gains has been claimed correctly."
24. Various direction of Ld. Pr. CIT through order u/s 263 are as under:
24.1. The AO is directed to examine and verify the source of investment made by the assessee and his brother Shri Pushp Raj Bohra in purchase of land, ... [Pg 14] 24.2. The AO is also directed to examine and verify the nature of sales transactions of the house properties... [Pg 14] 24.3. I, therefore, cancel the assessment order passed by the AO u/s 143(3) on 13/11/2018 with the direction to the Assessing Officer to pass the assessment order afresh after considering the above mentioned issues, apart from other issues discussed in the assessment order dated 13/11/2018 and also the issues which may subsequently come into the notice of Assessing Officer, during the assessment proceedings u/s 143(3) r.w.s. 263 of the Income Tax Act, 1961. [Pg 20 para 12]
25. The case was selected for limited scrutiny by CASS but the Ld. Pr.
CIT while exercising power u/s 263 convert this limited scrutiny assessment case into complete scrutiny case. As per the procedure laid by CBDT through instruction No 20/2015 dated 29/12/2015 and Instruction No 5/2016 dated 14/07/2016 the scope of enquiry in the cases selected for limited scrutiny should be restricted to the issue for which case has been 21 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
selected for limited scrutiny. By the order u/s 263 Ld. Pr. CIT enhanced the scope the assessment proceeding from Limited to Complete. This is not permissible as held by ITAT Chandigarh Bench in the case of Taj Paul Bhardwaj vs Pr. CIT [ITA No. 463/CHD/2019] [PB Pg 93-109]. In light of above submission and judgement relied upon direction of Ld. Pr. CIT u/s 263 to the extend it enhance the scope the Limited Assessment proceeding may kindly be struck down.
26. Ld. Pr. CIT while exercising the power u/s 263 issued direction that "The AO is directed to examine and verify the source of investment made by the assessee and his brother Shri Ramesh Raj Bohra in purchase of land".
27. Direction of examination of the source of investment has no relevance with the assessment of income for the AY 2016-17 and therefore issuance of such direction is beyond the scope of power u/s 263. Similarly, there is no authority available with Ld. Pr. CIT while exercising power available u/s 263 so as he can direct the assessing officer to investigate about person other than the assessee.
As direction given by the Ld. Pr. CIT is contrary to the provisions of section 263, same may kindly be struck down."
8. On the other hand, the ld. CIT-DR has vehemently supported the order of the ld. Pr.CIT and submitted that the ld. Pr.CIT has passed a speaking order discussing all the facts and circumstances of the case. She has further submitted that the A.O. has passed order on a mechanical way without application of mind. Therefore, she prayed for upholding the order of the ld. Pr.CIT.
9. We have considered the rival contentions and carefully perused the material placed on record. From perusal of the record, we noticed that 22 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
accordingly to the ld. PCIT, the activity of purchasing land by the assesse and then converting it into flats and selling after construction to other co-
owners comes under the ambit of business activity, therefore, the income of the assesse is to be charged to tax under the head business and profession instead of income from capital gain. Thus, according to the ld. PCIT, the income are chargeable to tax under the head of income from business and the benefits of cost of indexing, exemption U/s 54, 54F and 54EC of the Act was not allowable. It is pertinent to mention here that the ld. PCIT while deciding this issue has completely ignored and overlooked the specific assertions made by the assessee by filing its written submissions dated 11/02/2021 wherein it was specifically pleaded as to why the ld. PCIT has misconstrued the facts of the present case. Apart from this, the ld. PCIT has ignored the very important fact that the same activity on the same land was carried out by the assesse in the previous year i.e. A.Y. 2015-16 as well wherein also the then A.O. had treated the activity of the assessee as business activity and the income of the assesse was considered as business income instead of capital gains. The said order passed by the A.O. was challenged before the ld. CIT(A) and thereafter before the ITAT. The Coordinate Bench of the ITAT after considering the entire facts and circumstances of the case of the assessee had finally decided and concluded that the activities of the assessee is to be taxed under the head capital gains by treating the assets/income as capital asset/income instead of business asset/income and all the expenses borne by the assessee were also 23 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
construed as part of cost of improvement. The copy of order of the Coordinate Bench of ITAT dated 20/03/2020 in assessee's own for the A.Y. 2015-16 in ITA No. 157/Jodh/2019 have been perused by us which at based on identical facts and moreover the said copy was also placed on record by the assessee before the ld. PCIT with submissions that the order of the ITAT is having jurisdictional binding effect in assessee's case for the A.Y. 2016-17.
Even otherwise, nothing has been placed on record by the revenue to demonstrate as to whether the order of the Coordinate Bench of the ITAT dated 20/03/2020 in ITA No. 157/Jodh/2019 has ever been challenged before any competent court of jurisdiction, thus, we can very well presume that the said order passed by the Coordinate Bench has attained finality and is having binding effect in assessee's own case for subsequent year under identical circumstances. Thus, the order of the A.O. for the year under consideration treating the asset as capital asset and allowing the claim of exemption U/s 54F of the Act etc. cannot be termed as improper or made without verification or prejudicial to the interest of Revenue. Moreover, after perusal of the record, we found that the A.O. had carried out all the required verifications and had taken the same view as has been taken by the Coordinate bench of the ITAT in assessee's own case. At this stage, we draw strength from the decision of the Hon'ble Supreme Court in the case of Union of India Vs Kamalakshmi Finance Corpn. Ltd. 72 Taxman-
Magaxine Page 43 wherein it was held that the order passed by the Income Tax Appellate Tribunal are having binding effect upon all the 24 ITA 31 & 32/Jodh/2021 Ramesh Raj Bohra Vs Pr.CIT & one anr.
subordinate authorities under the jurisdiction of the said Tribunal, therefore, in order to judicial discipline, the ld. PCIT was not empowered to invoke the provisions of Section 263 of the Act more particularly when he was made aware of the fact that identical issue had already been decided and attained finality by the decision of the Coordinate Bench of the ITAT in assessee's own case for the A.Y. 2015-16 under the identical facts and circumstances.
Therefore, order passed by the A.O. cannot be termed as erroneous and prejudicial to the interest of the Revenue, hence, we quash the order passed U/s 263 of the Act.
10. Now we take ITA No. 32/Jodh/2021 for the A.Y. 2016-17. In this appeal also, the grounds are identical to the grounds of ITA No. 31/Jodh/2021. The facts and submissions of both the parties are also identical to the facts and submissions made in ITA No. 31/Jodh/2021, therefore, our finding given in ITA No. 31/Jodh/2021 for the A.Y. 2016-17 shall apply mutatis mutandis in this appeal also.
11. In this result, both these appeals of the assessee are allowed.
(VIKRAM SINGH YADAV) (SANDEEP GOSAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Jodhpur
Dated 15/09/2021
*Ranjan
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
25
ITA 31 & 32/Jodh/2021
Ramesh Raj Bohra Vs Pr.CIT & one anr.
4. The CIT (A)
5. The DR
6. Guard File
Assistant Registrar
Jodhpur Bench