2019 (9) TMI 946 - AT - Income Tax

Tribunal overturns Tax Commissioner's decision, restoring original assessment.

Dipal Piyush Palkhiwala Versus ITO Ward-4 (4), Ahmedabad

The Tribunal quashed the Commissioner of Income Tax's order under Section 263, restoring the Assessing Officer's original assessment. It held that the AO ... Revision u/s 263 - Capital gain computation on joint property sold - sale consideration received from sale of immovable property jointly hold by the assessee’s family members - HELD THAT:- Selection of the assessee’s case for scrutiny proceedings notice u/s 142(1) of the Act was issued on 18.06.2012 . At point No.7 Ld. AO has asked to “furnish the complete details of capital gain if any”. We find that against specific query raised by the AO assessee has duly replied with the documentary evidences about the alleged transaction and informing that he has not received any consideration from the sale of property. The fact that he has a dispute with his family is also mentioned. Now on the basis of these information's AO was satisfied and find the reply of the assessee to be genuine and did not raise further inquiry into the matter. Now root cause of this appeal lies on this point. That why the Ld. AO did not inquired further about the alleged transaction and its genuineness. It is not a case that no inquiry was done but it is a case that incomplete inquiry was done. Whether an inquiry was incomplete or complete depends on the person who is examining the transactions. It may be complete for one but may be incomplete for another. As per assessee sufficient inquiry was conducted and all the information relevant thereto was supplied. On the other hand, Ld DR has submitted that the Ld.AO has not inquired about various documents which could prove that the assessee has relinquished his rights in the property. If detailed inquiry has been conducted by the AO and one of the legally permissible view is taken by the AO which may not be revenue favouring, cannot give power to the CIT to assume jurisdiction u/s 263 and to set aside the order of the Ld. AO. In the instant case the assessee had prepared an affidavit on 23.11.2007 duly notarized relinquishing his rights from all the properties jointly held with his father’s family. Genuineness of this affidavit has not been doubted by the revenue authorities. In the sale deed assessee has not signed as a seller as has been alleged by the CIT which itself shows that the Ld. CIT has not examined the documents properly. The total sale consideration which was primarily credited in the joint account held in the name of family members has been immediately withdrawn and deposited in the bank account of assessee’s father. All the series of documents and transactions also come to conclusion that the assessee was not liable to pay any tax on the capital gain from sale of alleged property. AO in this case on examining the sale deed came to a conclusion at the first stage which was well within his power as it is not mandatory that for each and every aspect the Ld. AO has to doubt the transaction and call for information again and again. It is on the discretion, wisdom and understanding of facts by the Ld. AO which may prompt him to call for more information if any required. In our considered view and in the given facts and circumstances of the case we observe that for the alleged transaction of capital gain sufficient inquiry was conducted by the Ld. AO before accepting the contention made by the assessee. They are the conclusive evidence about the correspondence between Ld. AO and the assessee. Unexplained Cash deposits in bank account held by the assessee and allegation of ld. CIT that the Ld. AO has not inquired with the assessee, we find that all the bank accounts in name of assessee were placed before the Ld. AO.There were certain cash withdrawals in the past which were claimed by the assessee as the source to cover up the alleged cash deposit. The same were found to be satisfactory by the Ld. AO. In the given facts and circumstances of the case and detailed discussion hereinabove, are of the considered view that Ld. AO conducted sufficient inquiry of the impugned transaction and took one of the permissible view provided in the law and therefore Ld. CIT erred in assuming jurisdiction u/s 263 of the Act. We accordingly quash the order of Ld. CIT u/s 263 - Decided in favour of assessee. Issues Involved:1. Jurisdiction under Section 263 of the Income Tax Act.2. Erroneous and prejudicial assessment orders.3. Capital gains from the sale of jointly owned property.4. Cash deposits in personal bank accounts.5. Procedural fairness and opportunity of being heard.Detailed Analysis:1. Jurisdiction under Section 263 of the Income Tax Act:The assessee challenged the order under Section 263 of the Act, arguing that the Commissioner of Income Tax (CIT) wrongly assumed jurisdiction. The Tribunal examined Section 263, which allows the CIT to revise an assessment order if it is erroneous and prejudicial to the interests of the revenue. The Tribunal noted that the CIT must record satisfaction that the order is erroneous and prejudicial, and that the CIT's power under Section 263 includes calling for records, issuing a show cause notice, conducting inquiries, and passing orders. The Tribunal emphasized that the CIT cannot invoke Section 263 to correct every mistake or error by the Assessing Officer (AO) and that an order is not erroneous if the AO has adopted one of the permissible legal courses.2. Erroneous and Prejudicial Assessment Orders:The CIT held that the AO's order was erroneous and prejudicial to the revenue because the AO did not make inquiries about the capital gains from the sale of jointly owned property and frequent cash deposits in the assessee's bank account. The Tribunal referred to several judgments, including Malabar Industrial Co. Ltd. vs. CIT and CIT vs. Sun Beam Auto Ltd., to differentiate between lack of inquiry and inadequate inquiry. The Tribunal concluded that if the AO has conducted inquiries and applied his mind, the CIT cannot invoke Section 263 merely because he has a different opinion.3. Capital Gains from the Sale of Jointly Owned Property:The Tribunal found that the AO had made specific inquiries about the capital gains from the sale of a jointly owned property and the assessee had provided detailed responses, including an affidavit stating that he had relinquished his rights in the property. The Tribunal noted that the AO was satisfied with the assessee's explanation and did not find it necessary to make further inquiries. The Tribunal held that the AO's decision was within his discretion and the CIT's assumption of jurisdiction under Section 263 was not justified.4. Cash Deposits in Personal Bank Accounts:Regarding the cash deposits in the assessee's bank account, the Tribunal found that the AO had examined the bank statements and the assessee had explained that the deposits were made from past cash withdrawals. The Tribunal concluded that the AO had conducted sufficient inquiries and accepted the assessee's explanation, and therefore, the CIT's order under Section 263 was not warranted.5. Procedural Fairness and Opportunity of Being Heard:The assessee argued that the CIT's order was bad in law as proper opportunity of being heard was not given. The Tribunal emphasized the importance of procedural fairness and noted that the CIT must provide the assessee with an opportunity to be heard before passing an order under Section 263. The Tribunal found that the CIT had not properly considered the assessee's submissions and had not provided sufficient reasons for invoking Section 263.Conclusion:The Tribunal quashed the CIT's order under Section 263, restoring the AO's original assessment order. The Tribunal held that the AO had conducted sufficient inquiries and taken a permissible view, and the CIT had erred in assuming jurisdiction under Section 263. Consequently, the subsequent assessment proceedings carried out under Section 143(3) read with Section 263 became infructuous, and the related appeal was dismissed as infructuous. The Tribunal allowed the assessee's appeal challenging the order under Section 263 and dismissed the appeal related to the subsequent assessment proceedings.