TaxTMI 
TaxTMI 
2010 (4) TMI 1071
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....ital account for each assessment year for which returns of income were filed along with the capital accounts. The case was referred to the DVO for ascertaining the cost of construction of the residential house. The learned DVO estimated the cost at higher figure. On the basis of this report the learned Assessing Officer has added Rs. 4,48,577. The estimated cost has been given at Rs. 4,61,532 by the Government approved valuer as against shown at Rs. 4,50,000 by the assessee. But the learned Assessing Officer has made an addition of Rs. 4,48,577 in this regard. The assessee has claimed to have received assets through a Will of his mother, Smt. Maro Devi. The assessee received gold ornaments weighing 20 Tolas and cash of Rs. 4,50,000 as per this Will. The learned Assessing Officer disbelieved the amount of Rs. 50,000 because the cash was not counted on the date of Will, only it was counted after her death. Therefore, further addition of Rs. 50,000 was also made. This was subjected to appeal before the learned CIT(A) who has held on this issue as under : "4.3 I have considered the grounds taken by the Assessing Officer on the basis of which the addition has been made vis-a-vis the g....
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....constructed in a span of 4 years starting from 1996 to 2000. The Departmental Valuer's report placed in the Assessing Officer's record also points out the construction done in these 4 years as has been quoted above in this order and as per which even the difference noted by the DVO in the year under consideration is that of only Rs. 80,900 as against which the Assessing Officer has added the entire difference relating to all the 4 years. The entire addition is, however, deleted on the basis of discussion made as above. The appellant would thus get a relief of Rs. 4,48,577. 3.2 I have considered the grounds taken by the Assessing Officer on the basis of which the addition has been made vis-a-vis the grounds taken by the appellant before the Assessing Officer and during the course of appeal proceedings. The appellant has admittedly received the amount as per the Will of his mother, Smt. More Devi who died in the year 1989-90 and, therefore, the difference, if any, in the actual amount stated to have been received by the appellant as against the same receivable as per Will was liable to be added in the income of the year in which the same was actually received. Not only this, the ap....
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....Dayal Bajpai AIR 1978 All. 268. The observations of the learned CIT in his order 'that these case laws are not applicable in the case of the appellant because the probate is not required if the Will made by the Hindu is relating to immovable property situated in UP, whereas the Will of Maro Devi is related with cash and jewellery, i.e., the movable property' are not correct and bad in the eye of law. (5) That the learned CIT has erred on facts of the case by making the observation that the appellant has not furnished any evidence to prove that the cash and jewellery were actually owned by Smt. Maro Devi and she was capable enough to dispose of legally. That the appellant had submitted affidavit of Smt. Neelam Prabha Jain sister of Smt. Nemshri Jain before the learned CIT. She had stated on oath that her father had died in the year 1959. They were five sisters and having no brother, hence her mother had no trust on anybody. Two sisters had expired during lifetime of Smt. Maro Devi. The Will was written by her and had been also witnessed by her. A statement of Smt. Neelam Prabha Jain was also recorded under section 131 of the Income-tax Act, 1961 and she confirmed that ....
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....lar issue has been examined by learned CIT(A) while dealing with the appeal, it is treated as merged and the same issue cannot be a subject of revision. Hence, we hold accordingly by setting aside the impugned revisional order and by restoring the assessment order in question. Consequently, the assessee succeeds in his appeal. 5. As a result, appeal of the assessee is allowed. PER SANJAY ARORA, ACCOUNTANT MEMBER. - I have perused the order proposed by my learned Brother and also discussed the same with him. However, being unable to, with respect, bring myself in agreement therewith I proceed to write my own separate order as under : 2.1 The appeal raises a single issue, i.e., of the maintainability of the order dated 23-2-2005 by the revisional authority under the Act. Per the same, the assessment order under section 143(3), dated 28-3-2003 stands assailed for want of due enquiry by the Assessing Officer with regard to the acceptance of the Will by the assessee's mother as per which gold weighing 20 Tolas and cash in the sum of Rs. 4 lakhs stood bequeathed to the assessee. And, consequently, cancelling the assessment as made for framing a fresh order on due examination of the i....
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....e up each of the objections raised by the assessee; the first and the principal being that the learned CIT is non-suited in the matter as the impugned order stands merged in the appellate order(s); the relevant matter having been considered and decided by the first (as also, second) appellate authority. The revenue has met this charge with reference to the provision of section 263(1)(c) itself, relying further on the decision in the case of CIT v. Shri Arbuda Mills Ltd. [1998] 231 ITR 50 1 (SC). In this regard, section 263(1), or its relevant part, reads as : "263. Revision of orders prejudicial to Revenue.-(1) The CIT may call for and examine the record of any proceedings under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation.-For the r....
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.... 263(1)(c) itself for the purpose, stating it to be sufficient in itself, so as to dissolve any vestige of doubt, if any, in the matter, that may have survived. 4.3 The legal ground or bar as raised by the assessee in the matter having been met, what, nevertheless, remains to decide the issue at hand, is whether the charge of lack of proper inquiry in the matter by the Assessing Officer before passing his order, is, in the facts and circumstances of the case, valid. This is as, if so, the action by the learned CIT assumes legality, else not; the law in the matter being trite, so that an order passed without due inquiry is per se erroneous insofar as it is prejudicial to the interest of the revenue, as it denotes non-application of mind in framing the assessment. As explained by the Hon'ble Delhi High Court in the case of Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375, this is even if the facts stated in the assessment order were to be correct; the raison detre which forms the basis of the legal challenge, is the lack of proper inquiry into and, thus, examination of the issues under reference a finding of fact, as the same only connotes a non-application of mind in the matter w....
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.... the Will, is at Rs. 4.50 lakhs, i.e., the exact amount which the assessee claims, several years later, to have been invested by him on the construction of the house property during the period relevant to assessment year 1996-97 to assessment year 1999-2000, and which only implies that the assessee retained the bequeathed cash of Rs. 4.50 lakhs as such, not even preferring to keep it in bank, if not put to more productive purposes (and thus, earning a minimum return thereon, so as to be in the least compensated for the inflation to that extent), till the time of its investment in the house property, that is, and which he was perforce the circumstances, required or called upon to explain on its detection by the revenue, and which is quixotic indeed. 4.4.2 Also, there is nothing on record to exhibit the inquiry afore-referred, including the assessee's representation before the learned CIT in the section 263 proceedings, and even before us, the assessee's case being confined primarily to the jurisdictional aspect of the matter, which stands discussed at para Nos. 4.1 and 4.2 of this order. Further, as regards the non-probate of the Will, which, though admitted, stands explained by th....
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....ection 263(1)(c) of the Income-tax Act, 1961 were applicable in the matter. (3)That the learned CIT has erred in the eye of law by not accepting the observations of Hon'ble Supreme Court in the case of CIT v. Shri Arbuda Mills Ltd. [1998] 147 CTR 474 /[1998] 231 ITR 50 that the powers of CIT shall extend and shall be deemed to have extended to matters not considered and decided in appeal filed by the assessee to CIT(A). In the case of the appellant the Assessing Officer had duly considered the Will of Smt. Maro Devi, mother of Smt. Nemshri Jain and the same was considered by the learned CIT(A) in her appeal order. The addition made by the Assessing Officer on account of difference of amount of Rs. 50,000 between the amount shown in the Will and the capital statement submitted by the appellant was deleted by the learned CIT(A). (4)That the learned CIT has erred in the eye of law by not accepting the plea of the appellant that as per law it is not compulsory to obtain probate of Will in the State of Uttar Pradesh. In this regard the appellant had mentioned decisions of Hon'ble High Court of Allahabad in the case of Atma Prakash v. D.J. Saharanpur (Allahabad Rent Cas....
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....red the matter to the DVO for ascertaining the cost of the construction of the residential house. The Valuation Officer estimated the cost of construction at Rs. 8,31,800. The assessee has shown the investment at Rs. 4,50,000 during the four assessment years. The Assessing Officer made the addition of Rs. 4,48,577 in an order passed under section 143(3). While enquiring the source of the investment, the assessee claimed to have received the assets through a Will of his mother Smt. Maro Devi. He claimed that he received 20 Tolas of gold and cash of Rs. 4,50,000 as per the Will. The Assessing Officer accepted the Will as genuine but restricted the cash received by the assessee at Rs. 4,00,000 through the Will as against Rs. 4,50,000 claimed by the assessee and made the addition of Rs. 50,000. The assessee, against the order passed under section 143(3), went in appeal before the CIT(A) and the CIT(A) deleted the addition of Rs. 50,000 and Rs. 4,48,577 as per para Nos. 3.2 and 4.3 of his order dated 8-7-2003. At the cost of repetition, the relevant observations of the CIT(A) in para Nos. 3.2 and 4.3 are reproduced as under : "3.2 I have considered the grounds taken by the Assessing O....
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....en margin for self-supervision but the Assessing Officer has further added that sum on the ground that the appellant-assessee was not having technical knowledge or was not an engineer. Obviously, for supervision of the building, technical expertise of being a civil engineer is not needed and the property being used by the appellant for his business purposes on the first floor of which construction was done, it cannot be said that the appellant-assessee was not available for self-supervision. Considering the differences reconciled by the Government approved valuer, there remains a difference of only 3 per cent which is also liable to be ignored as the report is based on estimation and as has been held in several judgments, a difference upto a reasonable percentage of about 10 to 15 per cent needs to be ignored if no specific discrepancy has been noted in the books of the appellant. Last but not the least is that the Assessing Officer has added the entire difference in the value of the property in the year under consideration while admittedly the property was constructed in a span of 4 years starting from 1996 to 2000. The Departmental valuer's report placed in the Assessing Officer'....
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....xamine whether the Will has been probated or not, whether the bequest of cash and jewellery was as per Hindu Succession Act and whether the said cash and jewellery were part of her "Stridhan" or self-acquired property which she could legally bequeath or was it part of HUF and did the said cash and jewellery factually exist. The Hon'ble Tribunal vide order dated 6-9-2007 had dismissed the appeal of the revenue. The assessee filed an appeal before the Tribunal against the order of the CIT passed under section 263 of the Act. Both the learned JM as well as learned AM passed their separate orders. 5. The learned JM was of the view that the order of the Assessing Officer had merged with the order of the CIT(A) and, therefore, the CIT was not having any jurisdiction to pass the impugned order under section 263 of the Act. 6. Learned AM, on the other hand, took the view that the order of the CIT(A) has not merged with the order of the Assessing Officer and it is the case where there had not been proper enquiry by the Assessing Officer and, therefore, the order passed under section 263 of the Act was valid one. 7. Before me, the learned Authorised Representative supported the order of t....
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....d void and must be annulled. 8. Learned Departmental Representative, on the other hand, relied on the order of the learned AM and contended that there had not been merger of the order of CIT(A) in the order of the Assessing Officer on the issues on the basis of which the CIT invoked provision of section 263 of the Act. 9. I have carefully considered the rival submissions and perused the material on record. The assessment for the assessment year 2000-01 was completed by the Assessing Officer under section 143(3) vide order dated 28-3-2003 making the addition of Rs. 50,000 on the basis of the Will which was produced by the assessee before the Assessing Officer. When the matter went before the CIT(A), the CIT(A) deleted the addition by observing as under : "3.2 I have considered the grounds taken by the Assessing Officer on the basis of which the addition has been made vis-a-vis the grounds taken by the appellant before the Assessing Officer and during the course of appeal proceedings. The appellant has admittedly received the amount as per the Will of his mother, Smt. Maro Devi who died in the year 1989-90 and therefore, the difference, if any, in the actual amount stated to have....
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.... deemed always to have extended to such matters as had not been considered and decided in such appeal." 11. In the case of Shri Arbuda Mills Ltd. (supra), the Apex Court also had an occasion to consider the said amendment. The relevant facts reveal that the assessment year in that case was 1975-76 ending on 31-12-1974. The assessment was completed under section 143(3) read with section 144B, on 31-3-1978, in which net business loss was computed at Rs. 3,61,086 and the income under the head "Capital gains" at Rs. 38,874. The ITO had made certain additions and disallowances while computing the loss and income as above and had also accepted, inter alia, the following three claims : (i)Deduction of a sum of Rs. 23,82,621 by way of provision for gratuity. (ii)Depreciation on Rs. 4,21,000 which was paid by the assessee to United Textile Industries as consideration for transfer of installed property of 17,480 spindles and 400 looms of Old Manek Chowk Mills. (iii)Loss on account of difference in exchange rate which was referable to the purchase of machinery, etc., as revenue expenditure. For the purposes of the present matter, it is only these three items of claim whi....
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....the assessee Smt. Maro Devi left Rs. 4,50,000. Against this addition, the assessee went in appeal before the CIT(A). Thus, the subject-matter before the CIT(A) relates to the amount received by the assessee through the Will. When the assessee came in appeal before the CIT(A), the CIT(A) allowed the relief to the assessee and deleted the addition of Rs. 50,000. The subject-matter of dispute is not dependent upon whether the particular argument has been considered therein or not. The word 'matter' is wider than the word 'point'. Once a particular matter has been considered and decided in appeal and if any point relating to that remains unconsidered, it cannot be said that the subject-matter of appeal had not been considered and decided in such appeal. The subject-matter in appeal before the CIT(A) relates to the addition of Rs. 50,000 on the basis of the will of the mother of the assessee. A subject-matter may consist of number of arguments and number of points. If any point, in my opinion, has not been referred to by the CIT(A) in his order, it cannot be said that the matter relating to the addition on the basis of the Will has not been considered. Hon'ble Allahabad High Court in th....
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.... the CIT(A) and, therefore, the CIT does not have jurisdiction to undertake revision in view of Explanation (c) to section 263(1). When the matter travelled to the High Court, the Hon'ble High Court has held as under : "Thus the CIT is entitled to revise an assessment order insofar as the order is erroneous and prejudicial to the interest of revenue, but Explanation (c) places embargo on CIT in case of subject-matter of any appeal which has been considered and decided in such appeal. In other words, before CIT exercises the jurisdiction under section 263 of the Act, the CIT is required to ascertain whether the order referred to in sub-section (1) of section 263 of the Act had been the subject-matter of any appeal and if yes, the revisional powers shall be available only if such subject-matter had not been considered and decided in such appeal. 14. The facts of the present case reveal that the assessee claimed relief under section 80-I of the Act. The Assessing Officer reworked such claim after making necessary inquiries and partially reduced the claim made by the assessee. The assessee carried the matter in appeal before CIT(A) who allowed the appeal on this count directing the ....
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....hat the assessment order was silent as regards eligibility or otherwise of section 80-I of the Act cannot thus be accepted. As noted hereinbefore, the entire section lays down a complete codified scheme in itself for deciding not only the eligibility but also for the computation of the relief to which the assessee is entitled to. When the section talks of profits and gains derived from an industrial undertaking, the requirement is in relation to the industrial undertaking to which the section applies and which fulfils all the conditions laid down in sub-section (2) of section 80-I of the Act. It is not possible to read the provisions in any other manner whatsoever. Hence, the contention that the eligibility or otherwise under section 80-I of the Act was never the subject-matter of appeal requires to be rejected. The Tribunal thus committed an error in law in coming to the conclusion that the prohibition imposed by Explanation (c) to section 263 of the Act would not be applicable. 17. In fact, the Tribunal's order on this count does not discuss as to why and how Explanation (c) to section 263 of the Act does not apply in the facts of the present case. The order only records 9. Cons....
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....ecifically mentioned that the entire matter was scrutinized and accepted while passing the assessment order. Our attention was also drawn to Annex of 'D'. A submission made by the assessee to the ITO, Surat, dated 18th Oct., 1976, regarding the assessment year 1974-75 giving detailed chronological date of the constitution of the firm on 11th Nov., 1968, induction of four more partners on 7th Nov., 1972, the creation of goodwill in the books of account of the firm by debiting the goodwill account and crediting the old partners' capital accounts in their profit sharing ratio on that date formation of a private limited company in the name of Rayon Silk Mills (P) Ltd., and its induction into the firm as partner by the deed of partnership dated 27th Oct., 1973, and the dissolution of the partnership firm on 23rd Feb., 1974, leaving the private limited company as a sole proprietor thereof and the valuation of the business at the book value as on that date. After giving the chronological sequence of events, the assessee also contended in his submissions before the ITO that there was no actual transfer of any asset inasmuch as when a partner is admitted into the firm no transfer takes plac....