TaxTMI 
TaxTMI 
TaxTMI 
2015 (7) TMI 616
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.... considering for taxation alleged income of Rs. 1 cr being alleged unaccounted payment for purchase of property no. 56/7 DB Gupta Road, Karol Bagh, New Delhi. c. Not making a reference to valuation cell for verifying the sale consideration of other properties sold by the appellant during the year under consideration. c. Failure to conduct necessary / proper enquiry and verification on issues mentioned above. 3. That on facts and in law the CIT erred in assuming jurisdiction to pass revisional order u/s 263 on issues, which were subject matter of appeal. 4. That on facts and in law the CIT erred in selling aside the order of assessment dated 28th December 2011 for a de novo adjudication on issues mentioned above." 2. Briefly stated the facts giving rise to this appeal are that a search and seizure operation was carried out in Mahesh Mehta group of cases on 30.6.2009. During the course of search at the residential premises at BA-17A, DDA Flats, Phase-I, Ashok Vihar, Delhi, certain documents belonging to the assessee were found and seized. On the basis of said documents so seized and after recording satisfaction, proceedings u/s 153C of the Act were initiated and the notice ....
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....passed u/s 263 of the Act, assessee's paper book spread over 205 pages and judgements and citations relied by both the parties. 7. Ld. counsel of the assessee submitted that the only issue in this appeal is against the assumption of jurisdiction u/s 263 of the Act by the ld. CIT, which according to the appellant assessee was not in accordance with law and valid. Ld. counsel of the assessee has also filed written submissions which are being reproduced below for the sake of brevity and clarity in our observations and conclusion:- "SMT. MAYA GUPTA The only issue in this appeal is against the assumption of jurisdiction u/s 263 by Ld. CIT, which according to the appellant, was not in accordance with law. Ld. CIT assumed jurisdiction u/s 263 on the following grounds on which AO during the course of assessment proceeding has applied his mind and has taken a conscious decision which can not be said to be erroneous merely because Ld. CIT holds otherwise in view of umpteen number of judicial decisions including the decisions which say that absence of enquiry and not inadequate enquiry can be the ground of holding an order as erroneous. Proceeding under section 263 PB 188-190 is the....
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.... PB 11-14 is the copy of questionnaire dated 30.06.2011 issued by Ld. A.O. during the course of assessment proceeding to show that Ld A.O. asked question relating to details of all properties and investment made, utilization of money, loans taken. PB 15-16 is the copy of assessee's submissions dated 15.11.2011 filed to Ld. A.O. during the course of assessment submitting the copy of bank accounts, statements of assets and liabilities, confirmation of loan. PB 152-153 is further submissions dated 02.12.2011 field to td. A.O. during the course of assessment proceeding submitting the copy of bank accounts, and further submitting about the loan from HDFC bank and about the payment of interest on housing loan. PB 156-157 is further submission of the assessee dated 05.12.2011 filed during the course of assessment proceeding again submitting about the claim of the interest of housing loan. PB 158 is the copy of HDFC bank statement showing the amount of interest. 2) On the issue of Rs. 2 Crores as alleged unaccounted payment PB 183-187 is the copy of assessment order passed u/s 143(3) I 153C with prior approval of Additional CIT, and a plain reading of this order would clear....
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....roperty No. 783/161, DB Gupta Road, Karol Bag new Delhi, & further submitting about the loan from HDFC bank and about the payment of interest on housing loan. PB 154-155 is the copy of affidavit of the assessee filed during the course of assessment proceeding before Ld. A.O., inter alia, submitting that undisclosed investment of Rs. 2 Crore made by the assessee in Purchase of 56/7, DB Gupta Road, Karol Bag, New Delhi was retained by Mr. Mehta against the unaccounted sale consideration of Rs. 2 Crore to be received in respect of sale of Property No. 7831161, DB Gupta Road, Karol Bag, New Delhi PB 156-157 is further submission of the assessee dated 05.12.2011 filed during the course of assessment proceeding again submitting about the adjustment of Rs. 2 Crore made by Mr. Mehta. PB 181-182 is the copy of order sheet entries showing the proceedings before Ld. A.O. and specific query regarding the adjustment of Rs. 2 Crore 3) Sale of other properties PB 183-187 is the copy of assessment order passed u/s 143(3) / 153C with prior approval of Additional CIT, and a plain reading of this order would clearly show that the issue of Rs. 2 Crore was clearly discussed and mind by applie....
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.... to the actual sale consideration, and not on the basis of valuation put by the valuation officer. - Valuation of property-Reference of Departmental Valuation Officer for valuation of investment -Additional solely on basis of valuation report-Not permissible-Income tax Act, 1961-CIT vs. Lahsa Construction P. Ltd. 3571TR 671 (Delhi) - S. 69B-Unexplained investment-Investment in property- No evidence that extra consideration received-Addition to income based solely on report of District Valuation Officer -Not valid- CIT vs. Sadhna Gupta 352 ITR 595 (Delhi) 4) The impugned assessment order was passed with prior approval of an higher authority i.e. Additional Commissioner in terms of section 153D and therefore in view of the following judicial decisions, jurisdiction could not be assumed u/s 263 Goyal Iron & Steel Works (India) vs. Commissioner of Income Tax* (2002) 76 TTJ(Agra) 578 Mehta Cut Piece Cloth House vs. Income Tax Officer (1985) 23 TT J (CHD) 211 Income Tax Officer vs. Arora Alloys Ltd. (2011) 12 ITR (Trib) 263 (Chd) 8. Ld. counsel of the assessee during argument before us reiterated and elaborated the above written submissions and submitted that the issue of c....
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....usband clearly stated that the amount of Rs. 2 crore to be paid by the assessee's husband was never paid but was retained by Mr. Mehta to be set off against the payment of Rs. 2 crore which he was to make. Ld. counsel vehemently contended that this statement of assessee's husband was recorded on oath and was properly considered by the AO while passing the impugned assessment order. Ld. counsel submitted that during the course of assessment proceedings, the assessee submitted calculation of capital gain on sale of property No. 782/161, DB Gupta Road, New Delhi, supported by details of all bank accounts of the assessee, details of all properties and investment made, utilisation of money and specially about the purchase of property no. 56/7, DB Gupta Road, Karol Bagh, New Delhi involving the alleged unaccounted payment of Rs. 2 crore. Ld. counsel vehemently contended that in the written submission dated 2.12.2011, the assessee filed copies of bank account, affidavit of the assessee in respect of additional income from sale of property no. 783/161 DB Gupta Road, Karol Bagh, New Delhi and also the details of loan from HDFC Bank and payment of interest on housing loan. Ld. counsel finall....
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....able as per third proviso to section 24(b) of the Act, the second issue of Rs. 1 crore being unaccounted cash payment on purchase of property no.56/7, Deshbandhu Gutpa Road, Karol Bagh, New Delhi was not considered for taxation and third and last issue wherein the AO completed the assessment proceedings without making any inquiries/investigation on the issue of capital gain/income accrued to the assessee along with her husband. Ld. DR elaborately took us through the contents of the notice u/s 263 of the Act (supra) and submitted that in view of ratio of the decision of Hon'ble Jurisdictional High Court of Delhi in the case of Duggal & Co. vs CIT (1996) 220 ITR 456 (Del), the CIT(A) was competent to exercise his power u/s 263 of the Act where the ITO/AO while allowing deduction for interest and on other issues omitted to inquire into the matter in a proper way. 12. Ld. DR has also drawn our attention towards operative para 5.1 to 7 of the impugned order and submitted that from the discussion therein, it is clear that the AO has failed to conduct proper inquiry and verification on all three issues raised in the notice u/s 263 of the Act. Ld. DR vehemently contended that in various j....
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....hbandhu Gupta Road Karol Bagh submitted that the AO made detailed inquiry and after considering the reply and other relevant documents submitted by the assessee during assessment proceedings in the light of statement of assesasee's husband Shri Uday Kumar Vaish recorded on 18.8.2009 u/s 133 of the Act and held that the assessee has shown a capital gain at Rs. 1,40,00,057 and offered additional income of Rs. 1 crore as part of income under capital gain. Ld. counsel has further drawn our attention towards reply of the assessee dated 3.3.2014 submitted before the CIT(A) replying to the notice dated 263 of the Act which is available at pages 191-194 of the assessee's paper book and submitted that the assessee has not either diverted its head of income which she actually earned under the capital gain nor withdrawn her stand which the spouse of the assessee gave in his statement before the survey team. Ld. counsel vehemently contended that the AO in fact has not given relief of special rate of income tax on long term capital gain and taxed the same amount at maximum rate of tax and shifted Rs. 1 crore to income from other sources instead of income from capital gain which attracts higher ....
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....ed consideration of Rs. 1 crore which was paid by the assessee as unaccounted consideration towards purchase of property at 56/7, Deshbandhu Gupta Road, Karol Bagh. Ld. counsel also pointed out that the CIT was very casual in mentioning facts in the notice issued to the assessee u/s 263 of the Act as the CIT wrongly mentioned that the assessee has purchased the property at 783/161, Deshbandhu Gupta Road, Karol Bagh which shows non-application of mind and wrong appreciation of facts by the CIT prior to invoking provisions of section 263 of the Act and issuance of notice under this provision. Ld. counsel reiterated its reply to the notice u/s 263 of the Act and parted with the argument with a last submission that the assessee offered an amount of Rs. 1,40,00,057 under the head of capital gain as the source of investment but the AO segregated Rs. 1 crore from this amount and taxed the same under the head of income from other sources which attracts higher tax rate, then this action of the assessee cannot be said to be erroneous and prejudicial to the interest of revenue. But on the other hand, this action of the AO imposed higher tax liability on the assessee which brings more revenue ....
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....person to whom interest is payable on the capital borrowed, specifying the amount of interest payable by the assessee for the purpose of such acquisition or construction of property was conversion of the whole or in part of the capital borrowed which remains to be repaid as a new loan. Meaning thereby that for making claim u/s 24(b) of the Act, a certificate specifying the amount of interest payable by the assessee has to be submitted before the AO. From careful reading of section 24 and all three proviso attached to this provisions, we note that there is no mentioning of any proforma on which required certificate has to be given. In absence of any prescribed proforma, the amount of interest payable may be substantiated by way of furnishing a normal certificate, statement of loan account and other supportive evidence or details pertinent to payment of interest which was claimed as deduction u/s 24(b) of the Act. In the present case, the assessee furnished all required detail before the AO during assessment proceedings along with reply dated 2.12.2011 and 5.12.2011. From a reply dated 5.12.2011 we note that in para 1, the assessee has mentioned details of claim of interest and has s....
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....rest paid by the assessee. 22. While considering the second issue of Rs. 1 crore being unaccounted cash payment on purchase of property no. 56/7, Deshbandhu Gupta Road, Karol Bagh, New Delhi, from relevant part of the notice u/s 263 of the Act on this issue, we note that the CIT has raised and agitated this issue with following facts and observations:- "2.2.1 In para 5.3 page no. 2 of the assessment order the A 0 stated that "During the course of survey Sh. Uday Kumar Vaish admitted to purchase the property jointly with his wife Smt. Maya Gupta from M/s Honest Estates Pvt. Ltd. against Rs. 4.51 crore consisting of 1st Floor, IInd Floor and IIIrd Floor with its terrace/roof rights. The registry was done of Rs. 2.51 crore whereas the amount paid to Sh. Mahesh Mehta on behalf of M/s Honest Estate Pvt. Ltd. was Rs. 4. 51 crore." The same fact is repealed in a way or the other in the assessment order in para 5.4, page no. 2, in para 5.7 page no. 4. in para 5.8, page no. 4 etc. This is a clear case of concealed unaccounted transaction of Rs. 1 crore (the other 1 crore shared by the assessee's husband), the source of which was not enquired & examined. 2.2.2 The assessee has furnis....
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....g to search of Mr. Mahesh Mehta, details of all bank accounts of the assessee, properties and investment made, utilization of money and there is a specific query about the provisions of property no. 56/7, DB Gupta Road, Karol Bagh, involving the alleged unaccounted payment of Rs. 2 crore out of which Rs. 1 crore pertains to the assessee. We further observe from the copy of the assessee's submissions dated 15.11.11filed before the AO replying to the questionnaire and notice dated 30.6.11, the assessee submitted copies of bank account, statement of assets and liabilities and a detailed note on the properties purchased by the assessee and property sold during the period under consideration. In assessee's paper book page 17 to 73, we observe that the assessee jointly purchased property no. 56/7, DB Gupta Road, with her spouse from M/s Honest Estates Pvt. Ltd. wherein three separate sale deeds have been executed in favour of the assessee, first sale deed was registered on 11.7.2008 and remaining two sale deeds were registered on 17.7.2008. From sale deeds pertaining to property bearing no. 783/160, 161 & 162, DB Gupta Road, New Delhi available from pages 74 to 171 of the asessee's paper....
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....hrough Mr. Mahesh Mehta who is the authorised director of M/s Honest Estate (P) Ltd. and he entered into property transaction with the assessee for purchase of property in individual capacity and for sale of property in the representative capacity as director of the said company. This fact and contention of the assessee has not been demolished by the CIT and without bringing out any allegation that the purchase of property and sale of property was with different persons and entities, it cannot be held that the assessee had entered into property transaction with different persons/entities. Further, as we have already noted that the sale of property no. 783/161 was made to Shri Mahesh Mehta and purchase of property no. 56/7, DB Gupta Road was also made from M/s Honest Estates (P) Ltd. in which Mr. Mahesh Mehta is a director representative of the transaction, then in totality of the facts and circumstances, especially when the sale deeds of both the transactions are registered and executed on the same date i.e. 17.7.2011, then the half share of sale consideration received by the assessee amounting to Rs. 1 crore attracts capital gain which has been offered by the assessee in the state....
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....o do with the capital gain and consideration arising therefrom. Ld. counsel further pointed out that as far as property at sl. No.1, 3, 4 & 5 are concerned, assessee was holding these properties jointly with her husband and the assessee filed statement of short term capital gain in regard to all these four properties which was properly verified, examined and accepted by the AO. Ld. counsel vehemently contended that the CIT did not peruse the statements and calculation of income filed by the assessee along with her husband and the CIT has ignored statement of capital gain filed by the assessee at the time of framing impugned notice u/s 263 of the Act as well as impugned order. 28. Replying to the above, ld. DR submitted that mere query and reply of the assessee are not sufficient to meet the requirement of proper verification and examination of the details filed by the assessee along with return of income and merely because some details have been filed along with return of income and some queries were raised by the AO which do not amount to an adequate and proper examination of the issue. Ld. DR pointed out that there was an understatement of consideration pertaining to property at....
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....l gain arising from other four properties listed at Sl. No. 1, 3, 4 & 5 is concerned, we note that the assessee declared sale consideration and capital gain in the statement filed along with her return of income. The AO properly considered understatement of consideration and capital gain accrued to the assessee after properly considering the statement of assessee's husband Shri Uday Kumar Vaish recorded u/s 133 of the Act. We are unable to see any other incriminating material or evidence which could establish the allegation of understatement of sale consideration and capital gain on other properties. Per contra, from the assessment order, we note that the AO took a favourable view to the revenue by placing Rs. 1 crore under the head of income from other sources instead of income from capital gains as declared by the assessee. Without making any deliberation on the merit of this action of the AO, we are of the view that decision taken by the AO cannot be held as unsustainable or not in accordance with law. 30. From operative part of the impugned order, we note that the CIT has remitted all three issues to the file of AO by holding that the AO has failed to conduct proper examinatio....
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....in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatabl....
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....3 (SC), had observed that the phrase „prejudicial to the interest of Revenue‟ has to be read in conjunction with an 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 Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to Revenue; or two views were possible and the Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue." 32. In view of above, as per ratio laid down by Hon'ble Jurisdictional High Court, it is amply clear that in the cases where there is inadequate inquiry but not lack of inquiry, again the CIT must give and record a finding that the order/inq....
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....ately hereinabove that the AO raised queries on all three issues and also considered explanation, evidence and other relevant material placed before him before framing impugned assessment order. The view taken by the AO on all three issues agitated and alleged by the CIT in the notice u/s 263 of the Act cannot be held as unsustainable and not in accordance with law. Per contra, from careful and logical analysis of the action of the AO, we observe that in regard to understatement of sale consideration received by the assessee and understatement of purchase consideration paid by the assessee, undisputedly both transactions were undertaken by the assessee and her husband jointly with Mr. Mahesh Mehta and his other group entities on the same date i.e. 17th July, 2008, hence, the share of Rs. 1 crore paid by the assessee towards unaccounted purchase price of property no. 56/7, DB Gupta Road, the source of said investment is self speaking and explained when the revenue authorities have noted that the assessee had received unaccounted consideration of Rs. 1 crore on sale of property to Mr. Mahesh Mehta on the very same date. In this situation, the addition on account of unexplained invest....