AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 44
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....p; (1) For that in the facts and in the circumstances of the case, initiation of proceedings u/s 263 of the Income Tax Act, 1961 was without jurisdiction and the CIT erred in holding that the assessment order was erroneous an prejudicial to the interest of revenue and in setting it aside for fresh assessment. 2. For that none of the reasons stated by the CIT for treating the assessment order as erroneous and prejudicial to the interest of revenue is valid or legal and none of the decisions relied upon by him is applicable in the facts and circumstances of the instant case. 3. For that the assessment under sections 1471143(3) was made after due enquiry and examination of the facts as well as the law and the CIT was not justified in holding to the contrary. 4. For that further and in any event and without prejudice to the aforesai....
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....at Delhi Administration initiated an acquisition proceedings in respect of house property at 3, Tilak Marg, New Delhi, in which the assessee had 1/4th share. The said acquisition proceeding was quashed by the Delhi High Court. Appeal was filed before the Divisional Bench, Delhi High Court. By an interim order, the Hon'ble High Court (Divisional Bench) ordered Delhi Administration to pay Rs. 4, 00, 00, 0001- (Rs. Four Crores) which the Co-owners were allowed to withdraw. Finally the Divisional Bench of the Hon'ble Delhi High Court also quashed the acquisition proceedings, and an arbitrator was appointed to finalise the matter regarding damages. The matter ultimately went to the Supreme Court who, in the F Y 2004-05 (Asst. Yr.2005-06) upheld the decision of the Hon'ble Delhi High Court. The arbitrator finalized the damages at Rs. 24.36 crores in which assessee's shares is Rs. 6.09 crores. Assessee got the damages in the FY 2008-09 relevant to the A.Y2009-10. A sum of Rs. 1 crore out of damages has already been taxed in the Asst. Yr. 2005-06. The balance amount i.e. Rs. 5. 09 crores is to be taxed in the- A. Y 2009-1 O. On perusal of the return filed for the Asst. Yr. 2009....
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....r discussing the points involved at length. Similar types of enquiries were made for share in compensation in the case of other assesses while making assessment under section 143. In those case also, Assessing Officer accepted the said amount as capital receipt while completing assessment under section 143(3). 6. Subsequently CIT invoked jurisdiction under section 263 and issued show-cause notice to the assessee dated 13.03.2014 which states as under:- "You have shown your 1/4th share as co-owner of property at 3, Tilak Marg, New Delhi. However, as per copy of award dated 30.09.2006 passed by Hon 'ble Justice Leila Seth (Retd.), the arbitrator, there are three claimants namely Shri Dhanraj Bagaria, Shri Krishna Parshad Bagaria and Shri Sudharshan Parshad Bagaria. Thus you should have shown your share as 1/3rd instead of 1/4th . The Assessing Officer neither raised any query nor took any cognizance of this fact determining your share of income and receipt of money as award. The Assessing Officer has accepted your share as 1/4th instead of 1/3rd which is erroneous and prejudicial to the interest of the revenue. (ii)....
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....ng assessment proceedings. (vi) You are maintaining huge bank balances in the individual bank account and making huge payments and receipts from this account. You have not maintained any books of accounts in respect of these bank deposits. The perusal of bank statement reveals that there is no narration to each debit and credit entry in the said bank accounts statements. Thus it can safely be held that the Assessing Officer has merely placed these statements on record rather than have a close and deep look in to the nature of transactions in these bank statements. For example, from the bank account no. 336-1-011828-7, he has transferred funds of Rs. 3,12, 50, 000/-10 Mody Seva Trust by DD. This amount has not been received back in the said account during the year and it does not appear as investment/debtors in the balance sheet of the assessee. The acceptance of the accounts without proper examination and observations show that the Assessing Officer passed the order without making due enquiries and investigation of the huge amounts involved making the assessment order as erroneous and prejudicial to the interest of the revenue. (vii) The shares transactions by the assessee has be....
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....ble and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. This view has been well settled by the Apex Court in the cases of Malabar Industrial Co. Ltd. -Vs-. Commissioner of Income Tax 243-ITR- 83, Commissioner of Income Tax (Central), Ludhiana -Vs- Max India Ltd 295-ITR-282, Commissioner of Income Tax", Shimla -Vs- Greenworld Corporation 314-ITR- 81.The Learned Commissioner of Income Tax exercised his powers u/s 263 of the IT Act 1961 merely to substitute his view with that of the assessing officer which is beyond the scope of his powers u/s 263 of the I.T. Act 1961. In the case of CIT -Vs- MAX India Ltd. 295-ITR-282 (SC) the Hon'ble Supreme Court has held that the phrase" prejudicial to the interest of the Revenue" in sec.263 of the Income tax Act, 1961 has to be read in conjunction with the expression "erroneous" order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the Revenue". It has a/so been held....
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....ore the Ld. JCIT, Range- 43, Kolkata, copy of which is enclosed for your ready reference as Annexure-B. i) Your observation that the award dtd. 30. 09. 2006 clearly reveals that "the said payments are not mesne profits but fair rent" is also misconceived. This point has been thoroughly considered by the Addl. CIT in his assessment order dtd.27.12.2011 at Para-3 and therefore the order was neither erroneous nor prejudicial to the interest of revenue. It is further mentioned here that property at 3, Tilak Marg, New Delhi was acquired by the Delhi Administration (in short 'the DA') in the year 1987 under the Land Acquisition Act, 1894. The acquisition proceedings was subject to litigation between the owners of the property and the Delhi Administration whereupon the Hon. Delhi High Court by their order dtd. 2 7. 05.1994 held that the acquisition was wrongful and the property should be restored back to the owners. The appeal filed by the DA against this order of the single - Judge was also dismissed by the Division Bench of the Court by their order dtd.22, 03,2002 and upheld by the Hon 'ble Supreme Court's order dtd.28.04.2004. For continued wrongful occupation of the s....
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....t. What would be the damages will be determined by the Arbitrator. In similar circumstances in Banwari Lal's case (Supra) also this Court appointed Arbitrator to determine the damaged payable by the Delhi Administration instead of making the petitioners run to the Civil Court for that purpose. I accordingly appoint Ms. Leila Seth, retired Chief Justice of Himachal Pradesh High Court as the Arbitrator who will enter upon the reference within four weeks of the communication of this order to her She may make the award within four months thereafter. The arbitrator will not be obliged to give reasons for his conclusions ". It is relevant to submit that the Delhi High Court in the above decision has expressly stated that the possession of the Delhi Administration was in the nature of a tress-passer w. e.f. 10.03.1987. And the Court thus directed the appointment of an Arbitrator to determine the damages payable by the Delhi Administration instead of making the assessee run to the Civil Court. The legal basis for grant of such damages by the Court for wrongful possession is enshrined in the provisions of the Civil Procedure Code Order 20 Rule 12. The damages for wrongful possession o....
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....cupation of the property. The basis of fair rental adopted by the Ld. Arbitrator was only to arrive at the amount of damages to be awarded which is clearly stated in the last part of Para-22 reading as under. "Consequently damages will be claimable not on the basis of mesne profits but on the basis of fair rent. So, the fair rent will have to be ascertained ". It is thus clear that the determination of the damages made on the basis of fair rent was only a method for determining the damages, and it cannot be said that as the damages were calculated on the basis of fair rent method, the receipt was not the damages / mesne profit. There was no contract or agreement between the assessee and the Delhi Administration so as to claim the Delhi Administration was a tenant / lessee in this case. It was a clear case of illegal occupation and trespass as held by the Delhi High Court by their order dtd. 27.05.1994, a copy of which is enclosed in Paper Book filed herewith. In fact the Arbitrator has travelled beyond the direction of the court and has acted in excess of jurisdiction The role of the arbitra....
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....al to the interest of revenue. With regards to your query Nos. (iii) to (viii) I state that these issues are not the part of reasons recorded for initiating the proceedings u/s. 147 and therefore considerations of these points now in proceedings uls.263 is wrong, illegal, without jurisdiction and in any case barred by limitation. I object to raising these issues now. Without prejudice to my objection I submit my explanation on these points as under. ii) Your observation that I am residing at 165, Chittaranjan Avenue, Kolkata and therefore rental income u/s.23(1) of the l T. Act, 1961 should have been assessed in respect of the two residential properties namely 18G, Alipore Road and 814B, Alipore Park Road is wrong, incorrect and misconceived. A specific query was raised by the JCIT in his notice u/s.142(1) dtd.24.10.2011 at SI. No.9 with regard to these properties and in response to the said query an explanation was given in my reply dtd.22.11.2011 filed with and considered by the JCIT. A copy of the said notice dtd.24.10.2011 & reply dtd.22.11.2011 are enclosed herewith for your kind perusal as Annexures-D & E. Therefore your allegation that "the rental income uls.23(1) of Incom....
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....A.O passed the order without making any enquiry and investigation of the huge amounts involved is wrong and misconceived and on this count the assessment order is not erroneous and prejudicial to the interest of revenue. vii) The various enquiries were raised by the JCIT with regard to share transactions as per Annexure to notice u/s.142(1) dtd.24.10.2011. All the details and particulars with regard to share transactions were accordingly filed and examined by the A.O. The transactions were fully supported by the bills, contract notes and payment by account payee cheques. The allegation of third party verification is wholly ill -conceived and the assessment order on this count cannot be termed as erroneous and prejudicial to the interest of revenue. viii) The payment of Rs. 11,00,000/- was made to my mother Smt. Manju Devi Bagaria and not to my wife as stated in your show-cause notice. A copy of loan confirmation is enclosed as Annexure-F. This fact is available in details of loan given filed with the A.O. on 17.10.2011 along with vide letter dtd.15.1O.2011. Since the payment of Rs. 11,00,000/- was not made to wife, the question of any application of sec. 64 of the I.T. Act, 1961....
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....lity of Rs. 23.79 crores after giving a due opportunity to the assessee. 27. Issue No. 3 - Rental Income From House properties:- the assessee has stated in his reply that the requisite information was furnished by him vide his letter dated 22.11.2011. The letter has been seen and it is observed that there is no reference to the property mentioned as 165, Chittranjan Avenue, Kolkata for which it has been contended that the assessee's m-other is residing in this house. Further, it has been noticed that the assessee has not brought any document! evidence to show that the property at 8/B, Alipore Road is acquired for the purpose of business. The assessing officer did not enquire at all what steps were taken by him to show that it is meant for real estate business. By doing this the assessee has not merely evaded the income tax but also wealth tax. Section 22 of the Income Tax Act charges the annual value of the ownership of the property irrespective of the fact whether or not any income was actually received or accrued to the assessee. Further, section 23(2) of the Income Tax Act makes it clear that the property i....
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....; 30. Issue No. 6:- On the issue of non-verification of bank accounts, it has been contended that the assessing officer duly verified all the bank accounts. The submissions of the assessee do not match with the documents available on the record. It is only during the course of proceedings under section 263 of the income tax Act 1961, that the assessee has given explanation to certain entries as one narrated in the show cause. Therefore, it can be held that the order of the assessing officer on this issue is also erroneous and prejudicial to the interest of revenue as he has not conducted any enquiries on the entries and verified its genuineness in the books of accounts. 31. Issue No. 7:- On the issue of non-verification of share transactions, the assessee submitted that all the documents were provided to the assessing officer and it was verified. The query was with reference to third party verification. The assessing officer should have verified from the third which he had not done. Since, no specific reply has been given to this query, it is h....
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....eported in 209 Taxman 174 (Gauhati); [2012] 341 ITR 434 (Gauhati); (7)CIT -vs.- Deepak Kumar Garg in IT Appeal Nos. 47, 52 & 64 of 2006 dated 11.05.2007 reported in [2008] 299 ITR 435 (MP); (8) CIT -vs.- Assam Tea House reported in 344 ITR 507 (P&H); (9) CIT -vs.- Export House (2002) 175 CTR (P&H) 137; (2002) 256 ITR 603 (P&H); (10) B.S. Bajaj & Sons -vs.- CIT (1996) 135 CTR (P&H) 491; (1996) 222 ITR 418 (P&H); (11) Panchaman Traders -vs.- CIT & Another reported in 283 ITR 50 (Ker.); (12) Rajendra Kantilal Shah -vs.- CIT in ITA No. 2370/Ahd./2009 dated 06.09.2013 (ITAT, Ahmedabad); (13) ACIT -vs.- M/s. Sri ASL Finvest Limited in ITA No. 1001/Hyd./12 dated 17.12.2013 (ITAT, Hyderabad); (14) Rampyari Devi Saraogi -vs.- CIT (1968) 67 ITR 84 (SC); (15) Smt. Tara Devi Agarwal -vs.- CIT (1973) 88 ITR 323 (SC); (16) Gee Vee Enterprise -vs.- Addl. CIT (1975) 99 ITR 375 (Del.) After discussing all the decisions, ultimately the CIT set aside the assessment and directed the Assessing Officer to pass a fresh assessment order and re-compute the assessee's income after making further enquiries and giving due opportunity to the assessee by observing as under:- ....
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....e joint owners who have declared the share in receipt of Rs. 23.79 Crores and has claimed it as non taxable being capital receipt. It is not out of place to mention that the receipt of Rs. 23.79 crores has not been taken into consideration in the sale price of the property sold at RS.86.25 crores. This has not been given deduction from the cost of accusation or increase the sale price while determining the capital gain on the sale of the property during the assessment year 2007 -OB. This receipt of money is after the sale. It may also be mentioned that the property is a leasehold property but still the cost price of the property as owner has been taken as on 01.04.1981 while determining capital gain. The Assessing Officer in the assessment year 2007- 08 has even accepted the cost as on 01.04.1981 at Rs. 11,91,26,763/- against the value of land of Rs. 1,69,96,660/- as per the notification issued vide letter No. J/22011/3180- LD/(DOI) dated 21.10.1981 by the Ministry of Works and Housing, Govt. of India. The assessee has claimed it to be a sale of house property while as per sale deed it is actually sale of leasehold rights. The Assessing Officer has not looked into these aspects whi....
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....e following reasons under section 148 of the Income Tax Act :- "It appears from the record that Delhi Administration initiated an acquisition proceeding in respect of house property at 3, Tilak Marg, New Delhi, in which the assessee had 1/4th share. The said acquisition proceeding was quashed by the Delhi High Court. Appeal was filed before the Divisional Bench, Delhi High Court. By an interim order, the Hon'ble High Court (Divisional Bench) ordered Delhi Administration to pay Rs. 4,00,00,000/- (Rs. Four crores) which the co-owners were allowed to withdraw. Finally the Divisional Bench of the Hon'ble Delhi High Court also quashed the acquisition proceedings, and an arbitrator was appointed to finalise the matter regarding damages. The matter ultimately went to the Supreme Court, who, in the FY 2004- 05 (Asst. Yr. 2005-06 upheld the decision of the Hon'ble Delhi High Court. The arbitrator finalized the damages at Rs. 24.36 crores in which assessee's shares is Rs. 6.09 crores. Assessee got the damages in the FY 2008-09 relevant to the AY 2009-10. A sum of Rs. 1 crore out of damages has already been taxed in the ass....
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....sation received by the assessee as per the order of the Court, it was pointed out that the said income has been treated by the Assessing Officer to be the capital receipt after examining and verifying the issue in detail. It is not a case that the Assessing Officer has not made any enquiry or not applied his mind. The Assessing Officer had enquired of about the share of the ownership of assessee and the nature of the income whether it is capital receipt or revenue receipt. After making various queries, going through the facts, decision of Delhi High Court, Supreme Court and award, the Assessing Officer has taken a conscious decision. Our attention was also drawn towards the assessment order for the assessment year 2005-06, in which the assessee has received Rs. 1,00,00,000/- out of Rs. 4,00,00,000/- allowed as compensation. The Assessing Officer treated the said receipt as revenue receipt in that assessment year but when the matter went before the CIT(Appeals), CIT(Appeals) deleted the addition. In this regard, our attention was drawn towards the assessment order for the assessment year as well as the appellate order for the assessment year 2005-06, the copy of which are available ....
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.... his wife at a nominal interest. That on this issue the assessment order is not erroneous as well as prejudicial to the interest of the revenue. The first two issues in the show-cause notice are common in all cases relate to the share of the assessee in the property at 3, Tilak Marg, New Delhi and also about the nature of the damages received by the assessee towards the wrongful compensation. These issues arise out of the order passed by the assessing Officer under section 143(3)/147, in respect of which CIT exercised jurisdiction under section 263. This is an undisputed fact as agreed by ld. D.R. during the course of hearing that these issues have duly been examined by the Assessing Officer by raising various queries and inviting the reply of the assessee, Notices under section 142 dated 13.06.2011, 25.08.2011, 24.10.2011 were issued and the information were sought for which were duly complied with by the assessee. It is not denied by the Revenue that the Assessing Officer completed the assessment without making any enquiry. We also noted that the revenue even on merit in the case of two co-owners namely Krishna Prasad Bagaria and Ranglal Bagaria, HUF has accepted the plea that th....
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....ion of fact or incorrect application of law in the order passed by the Assessing Officer. If the Assessing Officer after making the enquiries and examining the records, taken one of the possible views, it cannot be said that the order passed by the Assessing Officer is erroneous until and unless view taken by Assessing Officer is unsustainable in law. It is also apparently clear that the powers of the CIT are three-fold. One is prior to the initiation of the proceedings under section 263, second at the time of initiation of the proceedings, third the final outcome after the initiation of the proceeding. Power of the CIT prior to the initiation includes 'call for and examine the records' of any proceedings under this Act. The word 'record' is very important, because on the basis of the record of the proceedings the CIT wil l form an opinion that the order passed is erroneous as well as prejudicial to the interest of the Revenue and once he forms an opinion, he has to give an opportunity to the assessee of being heard and after making or causing the enquiry he can pass an order. Moreover the inquiry is conducted once the CIT forms an opinion on the basis of record that the order pas....
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....06) upheld the decision of the Hon'ble Delhi High Court. The arbitrator finalized the damages at Rs. 24.36 crores in which assessee's shares is Rs. 6.09 crores. Assessee got the damages in the FY 2008- 09 relevant to the A.Y2009-10. A sum of Rs. 1 crore out of damages has already been taxed in the Asst. Yr. 2005-06. The balance amount i.e. Rs. 5. 09 crores is to be taxed in the- A. Y 2009-1 O. On perusal of the return filed for the Asst. Yr. 2009-00, it appears that the assessee did not show this income. In view of the above, I have reason to believe that income chargeable to tax has escaped assessment by Rs. 5.09 crores within the meaning in section 147 of the I.T. Act 1961". 20. The reasons recorded clearly state that Delhi Administ ration initiated the acquisition proceeding in respect of the house property being 3, Tilak Marg, New Delhi in which the assessee had 1/4t h share and the said acquisition proceeding was quashed by the Hon'ble Delhi High Court and by an interim order Hon'ble Delhi High Court has ordered Delhi Administration to pay Rs. 4,00,00,000/- to the co-owners. The co-owners withdrew the said amount. Ultimately Divisional Bench of Hon'ble High Court al ....
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....on Bench of the Delhi high Court against the judgment of the single judge and also prayed for stay of operation of the quashing order whereupon the Division Bench of the Court passed an interim order directing the Delhi Administration to deposit Rs. 4 crores on ad hoc basis towards compensation for wrongful occupation and holding over the property. The Delhi Administration deposited Rs. 4 crore in pursuance of the Court's order, out of which the appellant withdrew Rs. 1 crore being his 1/4t h share during FY 1995-96. Later, the total compensation payabvle as per Arbitrator's award was determined at Rs. 24.36 crore. Accordingly, the Delhi Administration deposited a further sum of Rs. 20.36 crore (total compensation amount Rs. 24.36 crore - Rs. 4 crore paid earlier during 1995-96) in the Court which was received by the owners on April 2, 2008. The appellant's share in the total damages/ compensation of Rs. 24.36 crores of which Rs. 4 crore was receiv ed during FY 1995-96 formed a part) amounted to Rs. 6.09 crore. The matter was being agitated by the Delhi Administrative with its SLP being finally dismissed by the Hon'ble Supreme Court on 22.04.2004, i.e. the financial year relevant t....
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.... earlier during 1995-96) in the Court which was received by the owners on April 2, 2008. (3) A copy of the order of Arbitration has been made available. After receiving the above order, the nature of the amount determined as payable by the DA as commented by the Arbitrator was taken up for discussion in course of hearing. There the arbitrator award made runs as "The respondent shall pay to the Claimants an amount for use and occupation of the premises...." and further "The respondent shall pay the amounts as indicated above, within two months failing which the respondent shall pay interest by 12% per annum from the date of the award till payment". The assessee now in his present submission clarifies that "it is again stated that the arbitrator has merely devised a formula on fair rent basis for determining the damages. There was no such direction by the Court rather the Court's direction was explicit that the arbitrator will not be obliged to give reasons for his conclusions. Thus, observations made by the arbitrator in para 22 of the award about manner of determining the damages or the nature of damages is redundant and of no effect, being outside the scope of the High Court's o....
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....nt of late payment of compensation though sometime described in their context as damage. And it is not necessary that in the I.T. Act that has to be accepted as such without probing into the true nature of the receipt although it is equally admitted that it is not always beyond any controversy. To my opinion, with all the due respect to the various authorities covered by the assessee in his written submission, the interest component has essentially the nature of revenue receipt. (6) Incidentally, it may be mentioned that, considering the nature of his case and the complexity involved the assessee has volunteered to offer the said income for purchase of peace while he maintains his earlier claim of the said interest along with the other amount as representing capital receipt. The submission of the assessee is as under, vide his letter dated 21.12.2011:- "Please refer to the discussion my Authorized Representative had with you, I still maintain that the amount of Rs. 14.12 lac received by me in excess of calculation as per para 40 of the Arbitration award is part of the damages and not liable to tax as discuss....
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....egard as under:- "Held, that the Income Tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the Income Tax Officer on being satisfied with the explanation of the assessee. This decision of the Income Tax Officer could not be held to be 'erroneous' simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the disallowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income Tax Officer to re-examine the matter. That was not permissibl e. The Tribunal was justified in setting aside the order passed by the Commissioner of Income Tax under section 263". 24. Similar view has been taken by the ....
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....come Tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the revenue, but orders which are passed after inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interest of the revenue because the revisionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken". 27. Thus in view of settled law as discussed above, we are of the firm view that it is a case where due inquiry was conducted by the Assessing Officer as is apparent from assessment order on these two issues on which CIT invoked jurisdiction under section 263. It is not the case of ld. D.R. that the views taken by Assessing Officer are unsustainable in law. 28. It is a settled law that if the AO has taken one of the possible views, it cannot be said that there is an error in the order passed unless and until the view taken by the AO is unsustainable in law. The said view has been taken by the Hon'ble Supreme Cou....
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.... assessee in the property as well as the nature of the receipt of the compensation. As has been discussed by us in the preceding paragraphs, these issues have duly been examined and considered by the Assessing Officer in framing the assessment under section 147 read with sect ion 143(3). Thus, in our considered opinion, these issues cannot be sufficient ground for setting aside assessment. While making assessment order, it is the satisfaction of the Assessing Officer who made the enquiry and it should be a touchstone of the assessment order passed by him, the CIT cannot substitute his view in place of finding of the Assessing Officer until and unless the view taken by the Assessing Officer is unsustainable in law. No cogent material or evidence was brought to our knowledge by the ld. D.R., which may prove that the decision taken by the Assessing Officer is not sustainable in law on these two issues. The order passed by CIT is illegal without jurisdiction on these issues. So far as these issues are concerned, the order passed by the CIT cannot be sustained if such type of order is sustained then this wil l permit the illegality to continue and the subsequent actions carried out on t....