Income Tax Appellate Tribunal - Ahmedabad
M/S. Gayatri Enterprise,, Vadodara vs Income Tax Officer,Ward-1(2)(4),, ... on 28 February, 2019
आयकर अपील य अ धकरण, अहमदाबाद यायपीठ 'C' अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No. 825/Ahd/2016 ( नधा रण वष / Assessment Year : 2011-12) M/s. Gayatri Enterprise बनाम/ The Income Tax Officer 2, Shilp Apartment, Mane Vs. Ward 1(2)(4), Baroda Nagar, Munj Mahuda, Aaykar Bhavan, Race Akota, Vadodara Course, Vadodara -
390007 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAHFG1662R (अपीलाथ /Appellant) .. ( यथ / Respondent) अपीलाथ ओर से /Appellant by Shri Bhavin Marfatia, :
A.R. यथ क ओर से/Respondent by : Aparna M. Agarwal, CIT.D.R. सन ु वाई क तार ख / Date of 27/02/2019 Hearing घोषणा क तार ख /Date of 28/02/2019 Pronouncement आदे श/O R D E R PER PRADIP KUMAR KEDIA - AM:
The captioned appeal has been filed at the instance of the Assessee against the order of the Principal Commissioner of Income Tax-1, Vadodara ('Pr.CIT' in short), dated 15.02.2016 arising in the assessment order dated 28.11.2013 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2011-12.
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2. The assessee in the present appeal has challenged revisional jurisdiction of the Pr.CIT invoked under s.263 of the Act whereby order of the AO under s. 143(3) of the Act dated 28.11.2013 is sought to be set aside by the Pr.CIT for fresh assessment on the ground of lack of inquiry into certain vital aspects.
3. Briefly stated, the assessee, a partnership firm, is engaged in the business of construction. The return of income of the assessee for AY 2011-12 was subjected to scrutiny assessment and consequently, assessment order was framed under s.143(3) of the Act. The AO merely accepted the return of income of Rs.31,450/- as assessed income without any adjustment. On verification of assessment records, the Pr.CIT found that the assessment order passed by the AO is erroneous and prejudicial to the interest of the Revenue. The Pr.CIT accordingly invoked revisional jurisdiction conferred under s.263 of the Act to show cause the assessee on the infirmity in the assessment order which is broadly narrated hereunder:
"With reference to the assessment order u/s 143(3) of the IT Act, passed by the Assessing Officer on 28.11.2013 for A.Y. 2011-12, it is to be noted that the same was erroneous is so far as it was prejudicial to the interest of revenue on account of the following:
On verification of P&L account, Balance sheet, computation of Income & submissions in respect of construction business, it is revealed that investment of Rs.1,17,93,542/- is made in the land situated at Survey No. 183 & 184 at Village Tandalja. The break-up of the said investment as shown in the books comprises of:
P a r ticu la rs A mo u n t s in R s.
Co st o f La n d 4 5 ,6 1 ,0 0 0 /-
Co st o f Co n st ru c tio n & Lev el in g E xp en s e s 4 2 ,4 7 ,3 3 2 /-
E lec t ric E xp en s es 8 6 ,7 6 0 /-
F en cin g E xp en s es 1 ,4 9 ,6 0 0 /-
NA E xp en se s 1 ,3 3 ,5 4 0 /-
R a ja Ch i tth i e xp en se s 2 ,7 9 ,0 1 0 /-
Do cu m en t R eg i s tra tio n E xp en se s 2 3 ,3 6 ,3 0 0 /-
To ta l 1 ,1 7 ,9 3 ,5 4 2 /-
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From the registered document to this effect (bearing No. 4153/2011 (BRA-3/ATA), dated 29.03.2011), it is noticed that against the consideration of Rs.45,61,000/- declared/shown, Rs.22,90,300/- is paid as stamp duty. The prevailing Stamp Duty rate in Guajrat is @ 4.90% ad-volrem on consideration or market value as per Jantri Rate. Accordingly, the value of the alleged property comes to Rs.4,67,40,816/- (22,90,300*100/4.90), as against Rs.45,61,000/- declared/shown. It may therefore be presumed that Rs.4,21,79,800/- (4,67,40,800 - 45,61,000) is undisclosed investment.
2. In view of above, you are being granted an opportunity of being heard and to show cause as to why the aforesaid assessment made by the Assessing Officer for A.Y. 2011-12 should not be enhanced or cacelled with a direction to make fresh assessment in accordance with the provisions of law in this regard. For this purpose, you may appear before the undersigned, in person or through your authorized representative or file written submission on 29.01.2016 at 11:00 A.M./P.M. In case of non compliance, the matter will be decided on merits."
4. The Pr.CIT, in essence, alleged that against the cost of land shown to be purchased by the assessee at Rs.45,61,000/-, the assessee has paid whopping stamp duty of Rs.22,90,300/- whereas the stamp duty rate is about 4.9% ad-volrem on sale consideration for market value as per circle/jantri rate. Based on the stamp duty paid, the Pr.CIT found that the cost of the land comes to Rs.4,67,40,816/- as against the purchase price declared at Rs.45,61,000/-. It was thus alleged that the AO committed error in not assessing undisclosed income of Rs.4,21,71,800/- on being aforesaid land. It is thus essentially the case of the Pr.CIT that the AO has wrongly accepted the grossly understated cost of land purchase without making an y requisite inquiry in this regard. The Pr.CIT accordingly passed order under s.263 of the Act and set aside the assessment passed under s.143(3) of the Act with direction to the AO to make requisite inquiries and verifications in this regard.
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5. Aggrieved by the action of the Pr.CIT, cancelling the assessment earlier made, the assessee preferred appeal before the Tribunal and challenged the usurpation of revisional jurisdiction by the Pr.CIT.
6. The learned AR for the assessee submitted at the outset that the necessary background for exercise of revisional power of Pr.CIT does not exist. The learned AR referred to a notice issued by the AO under s.142(1) of the Act dated 18.10.2013 to submit that the AO had initiated inquiry on investments of Rs.1.17 crore as appearing in the balance sheet on 31.03.2011 with source thereof. The learned AR thereafter referred to MOU (memorandum of understanding) / Banakhat dated 31.08.2007 to point out that the agreement for purchase of land made way back in August 2007. A formal agreement for purchase of the land was ultimately made on 29 t h March, 2011 to give effect earlier Banakhat. It was submitted that the land was originally agricultural land which was converted into non-agricultural land by the assessee and thereafter the actual registration was carried out in the FY 2010-11 concerning AY 2011-12 in question. The learned AR further emphasized that the payment of sale consideration of Rs.45,61,000/- was made in FY 2007-08 and possession of the land was taken. Only remaining amount of Rs.99,000/- was paid to the seller in FY 2010-11 (AY 2011-12) on 26.02.2011. In these circumstances, it was contended that the transaction do not relate to FY 2010-11 in question and therefore, the application of provision of Section 69B of the Act in AY 2011-12 is farfetched and cannot be subject matter of review under s.263 of the Act. The learned AR also pointed out that no material was found by the Pr.CIT to enable him to allege any element of undisclosed investment in the land purchased. The learned AR accordingly submitted that the Pr.CIT has over- reached its power of review and consequent order passed under s.263 of the Act is bad in law. To support its contention towards non- I T A N o . 8 2 5 / Ah d / 1 6 [ M / s . Ga y a t r i E n t e r p r i s e v s . I T O ] A. Y . 2 0 1 1 - 1 2 - 5 -
applicability of Section 263 of the Act, the learned AR for the assessee referred to the and relied upon and the decision of the co- ordinate bench in Dilshad Trading Co. (P) Ltd. vs. ITO (1994) 49 ITD 348 (Bom.) and CIT vs. Amit Corporation (2012) 21 taxmann.com 64 (Guj); CIT vs. Arvind Jewellers (2003) 259 ITR 502 (Guj) & (2015) CIT vs. Fine Jewellery (India) Ltd. (2015) 372 ITR 303 (Bom).
7. The learned CIT-DR, on the other hand, supported the revisional order of the Pr.CIT and submitted that the Pr.CIT was well within its power to exercise supervisory jurisdiction of review against the palpably wrong order passed by the AO without considering a glaring and obvious payment of stamp duty totally disproportionate qua the cost of purchase of land as declared by the assessee. It was submitted that the AO has not made any inquiry into claim of the assessee towards bonafides of cost of purchase declared and assessment order has been passed in a cryptic & non-descript manner. The agreement has been registered and therefore the stamp duty was paid during the year. Therefore, it was thus contended that the cause of action against the assessee did arise in the FY 2010-11 to the concerning AY 2011-
12. The learned CIT-DR referred to the judgment of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) to contend that the Pr.CIT was entitled to cancel the order of the AO where the Revenue is loosing its lawful share of taxes owing to an apparently erroneous order passed by the AO. The learned DR contended that owing to lack of inquiry on the vital aspect of cost of purchase declared vis-à-vis notified jantri rate (as revealed from the stamp duty paid by the assessee) without demur, the assessment order suffered from error which was pre-judicial to interest of Revenue. The learned CIT-DR submitted that the Pr.CIT has merely set aside the order of the AO for making requisite inquiry on the distinct possibility of revenue leakage in the backdrop of the fact that onus is I T A N o . 8 2 5 / Ah d / 1 6 [ M / s . Ga y a t r i E n t e r p r i s e v s . I T O ] A. Y . 2 0 1 1 - 1 2 - 6 -
squarely on the assessee to justif y the correctness of declared cost of purchase on the face of substantially higher jantri value. The learned DR accordingly submitted that no interference with the order of the Pr.CIT is called for in the peculiar facts and the circumstances of the case.
8. We have examined the issue and perused the revisional order of the Pr.CIT passed under s.263 of the Act as well as the case laws cited. From the amount of stamp duty paid (Rs.22.90 Laksh) and cost of land declared at the rate of (Rs.45.61 Lakhs), the Pr.CIT found it self-evident that the value declared towards the consideration of purchase is abysmally low. The Pr.CIT re-computed the jantri value of the land at Rs.467.40 Lakhs as against Rs.45.61 Lakhs declared by the assessee. On these facts, the Pr.CIT was of the prima facie view that element of undisclosed income overtly exists in the purchase of land. The question that arises is whether the Pr.CIT was justified in setting aside the assessment order where the cost of purchase of land has been accepted summarily without any tangible inquiry in this regard on the fact of such documents. A perusal of the questionnaires issued and reply made by the assessee thereon clearly shows that no relevant meaningful inquiry was conducted in respect to correctness of the cost of purchase of land. What was inquired was source of cost of purchase declared. The issue raised by the Pr.CIT is altogether different and quite valid for that matter. A bare look at the assessment order also gives the infallible impression that the assessment order was passed in a routine and perfunctory manner without any discussion on any aspect of the assessment whatsoever. The preponderance of evidence clearly indicates unrealistically lower costs of purchases declared formally which would warrant an inquir y with the competent registering authority as well as with other comparable cases and by other realistic means. The Pr.CIT in I T A N o . 8 2 5 / Ah d / 1 6 [ M / s . Ga y a t r i E n t e r p r i s e v s . I T O ] A. Y . 2 0 1 1 - 1 2 - 7 -
discharge of its solemn duty under s.263 of the Act could not remain oblivious of the facts objectively drawn. There is an apparent plausibility in the action of the Pr.CIT by resorting to powers under s.263 of the Act which is of wide amplitude. The circumstances clearly exist which demands inquiry which was not done by the AO while discharging of statutory function. Thus, armed with fairly extensive powers, the Pr.CIT, in our view, has taken action compatible with circumstances. While holding so, we are alive to the plea on behalf of the assessee that reasonable inquiry was made into various aspects concerning cost of land and also the purchase was made in the preceding years except for mere registration of the document in the current year. We are not impressed by such line of arguments when tested on the touch stone of Section 263 of the Act. The purchase transaction culminated and stood consummated during the year under review. Therefore, the cause of action did exist in relation to the assessment order in question. Hence, the Pr.CIT was fully justified in invoking its power under s.263 of the Act to set aside the assessment framed without any application of mind on the crucial aspect which is self-revealing from the stamp duty payment itself.
9. The judicial precedents relied upon on behalf of the assessee are not found to be of any assistance. The decisions referred too are broadly based on the circumstances where either relevant material was not found or where it was found is a matter of fact that there was no failure on the part of the AO is to make inquiries. Needless to say, the scope of Section 263 of the Act is quite different. In order to invoke Section 263 of the Act, the competent authority is required to find that order sought to be revised is erroneous and caused prejudice to the Revenue. A lack of inquiry on a pertinent point which demonstrates possible revenue leakage of staggering amount would definitely tantamount to the order being both erroneous as well as I T A N o . 8 2 5 / Ah d / 1 6 [ M / s . Ga y a t r i E n t e r p r i s e v s . I T O ] A. Y . 2 0 1 1 - 1 2 - 8 -
prejudicial to the interest of the Revenue. Consequent upon the action of Pr.CIT, the assessment order is merely cancelled and set aside to the file of the AO for making relevant inquiries as specified for which objective material is available at the threshold. The assessee has not estopped in any manner from dealing with the inquiry as specified to the AO and to rebut the perception that the prima facie belief on error in the original order is not correct. The assessee is not prevented from supporting its case in any manner before the AO in the proceedings pursuant to Section 263 of the Act. We thus do not see any justifiable reason to interfere with the revisional action of the Pr.CIT.
10. In the result, the appeal of the assessee is dismissed.
This Order pronounced in Open Court on 28/02/2019
Sd/- Sd/-
(MAHAVIR PRASAD) (PRADIP KUMAR KEDIA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad: Dated 28/02/2019
True Copy
S. K. SINHA
आदे श क त!ल"प अ#े"षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं*धत आयकर आय,
ु त / Concerned CIT
4. आयकर आयु,त- अपील / CIT (A)
5. 0वभागीय 3त3न*ध, आयकर अपील य अ*धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड9 फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपील य अ*धकरण, अहमदाबाद ।