2013 (2) TMI 838

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....e developer. In accordance with the agreement, the total compensation received by the two co-owners was Rs. 6,17,50,000/- along with two flats on 6th & 7th floor. 3. The assessee, being 1/3rd shareholder, received Rs. 2,05,83,887/-, as the compensation against his share. The assessee deposited Rs. 1,00,00,000/- with NABARD under section 54EC and balance Rs. 17,18,283/- he offered to tax as LTCG. 4. The case was picked up for scrutiny and details were called for, which were furnished by the assessee, explaining the LTCG and its deployment. 5. As seen in the order under section 263, the CIT in para 3 says, "A proposal was received on 10.06.2010 from the AO under section 263, pointing out some discrepancies/shortcomings in the assessment order." 6. It is observed that the impugned proceedings were triggered as a consequence of Audit Objection dated 06.01.2010, which was supplied to the assessee by the AO, wherein the computation of LTCG was worked out. In accordance with this Audit Objection note, the CIT, issued a show cause notice (SCN) dated 22.10.2010, on the assessee. This SCN, according to the AR is verbatim of the Audit Objection Note. 7. The AR submitted that on th....

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.... the Assessing Officer can be faulted". The AR, submitted that in the instant case as well, the facts are identical that SCN was verbatim with the Audit Objection. The Hon'ble Bombay High Court observes, the AO cannot blindly follow the opinion of the audit authority, and later on, it was observed that there was no independent application of mind by the AO. The AR submitted that in the present case, there was no independent application of mind by the CIT, invoking the revision proceedings under section 263. 10. The AR, further submitted that the CIT faulted in travelling beyond the SCN and supported his arguments by referring to the decision of Geometric Software Solutions Co. Ltd. vs. ACIT, reported in 32 SOT 428 (Mum), in ITA No. 3464/Mum/2008, it was held, "The Commissioner had revised the assessment order under section 143(3) by issuing show-cause notice only with regard to not reducing the expenditure incurred in the foreign currency from the total export turnover while computing the deduction under section 10A, but in the revision order, the assessment was set aside on another ground also that some of the sale proceeds were yet to be received by the assessee. The ....

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....ommissioner exceeded his jurisdiction in seeking recourse of his power under section 263. At the least, it must be held that the question as to whether the liability of the assessee had ceased in the previous year relevant to the Assessment Year 1982-83, was an issue on which a possible view was that there was no final or irrevocable remission or cessation of liability, within the meaning of section 41(1) of the Act, during Assessment Year 1982-83 - order of CIT and ITAT reversed". 14. He also referred to the case of Malabar Industries Ltd., reported in 243 ITR 83, wherein the Hon'ble Supreme Court held, "An order of assessment passed by an ITO should not be interfered with only because another view is possible; when a statute provides for different hierarchies, providing for forums in relation to passing of an order as also appellate or original order; by no stretch of imagination a higher authority can interfere with the independence which is the basic feature of any statutory scheme involving adjudicatory process. The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Ev....

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....inder, the AR once again touched upon all the points and reiterated the submissions made. The AR, countering the arguments on receipt and payment of 64,00,000/-, submitted that it was an adjustment made by the two contracting parties, which is an accepted financial principal and squarely covered by the decision of J.B. Boda & Co. Ltd. vs CBDT, reported in 223 ITR 271, wherein the Hon'ble Supreme Court held, "A two-way traffic is unnecessary. To insist on a formal remittance first and thereafter to receive the commission from the foreign reinsurer, will be an empty formality and a meaningless ritual, on the facts of this case". 22. We have heard the contentions of both the parties and have also perused the material placed before us, including the case laws cited by either side. On going through the submissions of the assessee, SCN and Audit Objection, we find that the issue had been dealt with by the AO in regular assessment proceedings and thereafter an audit objection was raised, which was used by the AO to convince the CIT to invoke his jurisdiction under section 263. When we read the section, which reads, as, "(1) The Commissioner may call for and examine th....

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....ons of the DR that it is a case of deemed ownership, itself creates a doubt that whether there has to be an application of section 50C or not. This doubt, in our considered opinion is fatal to invocation of provisions of section 263, because provision of section 263 cannot be invoked where the issue becomes debatable, because if the issue is debatable it goes out of the scope of administration provisions but would fall in the realm of judicial provisions, which is not the purpose and context of section 263, which, in our opinion is to deal only on two realms simultaneously, i.e. whether the order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue. 26. In the instant case, the CIT, by invoking the jurisdiction under section 263 stepped on the correctness and questioned the applicability of section 50C on leased property in the SCN, he, therefore transgressed into the judicial territory, which he cannot. 27. We are aware of the decision of Hon'ble Bombay High Court in the case of Gabrial India Ltd., reported in 203 ITR 108, wherein, the Hon'ble Bombay High Court held, "CIT cannot revise order merely because he disagrees with the conclusion a....