TaxTMI 
TaxTMI 
2018 (6) TMI 966
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.... 2. That the Ld. Pr. CIT has erred in acquiring jurisdiction u/s 263 to revise the assessment order which was subjected to appeal filed by assessee, and was fixed for hearing for 04.05.2016. During the course of hearing the assessee (appellant) expired on 30.04.2016 cremated on 01.05.2016 and Ld. AR has withdrawn his Power of Attorney due to death as well as the appeal.. 3. That the Ld. Pr. CIT has erred in acquiring jurisdiction u/s 263 on the basis mentioned in notice as - "The valuation of property as on 01.04.1981 has been adopted by the A.O. without considering the report of Valuation Officer, Meerut". The Ld. Pr. Commissioner has erred in invoking provision-of section 263, on the basis of Valuation Report of DVO, Meerut under section 55A of the Act, when no reference is made by assessing officer and the valuation report was not the part of records of assessment till the completion of assessment. 4. That the Ld Pr. CIT has erred in taking into consideration the valuation report, which was not referred by the assessing officer for valuation to Valuation Officer, Meerut under section 55A of the Act. No reference is placed on records of ....
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....ly, it cannot be taken into consideration by the, Ld. Pr. CIT for the purposes of invoking his jurisdiction under this section and has exceeded the revisional jurisdiction in passing the impugned order." 3. Brief facts of the case shows that the assessee is an individual who sold jointly with four others an immovable property whose value as per stamp duty rate is Rs. 1.93 croes at Muzaffarnagar during the Financial Year 2008-09. Therefore, notice u/s 148 was issued on 18.03.2014. In response to which the assessee filed a return of income on 12.01.2015 declaring income of Rs. 12500/- only. As the assessment was reopened to determine the long term capital gain the ld AO made an addition of Rs. 136036/- as per working given by assessee to the total income of the assessee as chargeable to capital gains. As assessee has also claimed deduction of expenditure of Rs. 246000/- for improvement of the asset for which no details were produced, the ld AO did not allow 50% of such cost of improvement expenditure. The assessment was passed u/s 143(3) read with section 147 of the Act on 20.03.2015 determining total income of the assessee of Rs. 271536/-. Subsequently, the ld CIT u/s 263 of the ....
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....e assessing officer or Narendra Kumar Gill. The provision of section 55A(a) authorize the assessing officer to refer for valuation only when the value as claimed is less than its fair market value. The provision of relevant to assessment year 2009-10 is referred as under- Reference to Valuation Officer. 55A. With a view to ascertaining the fair market value of a capital asset for the purposes of this Chapter, the Assessing Officer may refer the valuation of capital asset to a Valuation Officer- (a) In a case where the value of the asset as claimed by the assessee is in accordance with the estimate made by a registered valuer, if the Assessing Officer is of opinion that the value so claimed is less than its fair market value; of b) In any other case, if the Assessing Officer is of opinion- (i) that the fair market value of the asset exceeds the value of the asset as claimed by the assessee by more than such percentage of the value of the asset as so claimed or by mode than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to ....
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....f judgments of different Courts, which are not applicable in the case of the assessee as fact of the case of the assessee are different. Hence, the A.O. wflSTmmg-HV applying the cost of acquisition of the property sold by the assessee, as on 1.4.1981, determined by the Registered Valuer. 5. Thus, bv accepting the unsubstantiated, varying and disjointed claims of the assessee, failing to conduct detailed an legitimate inquiries, the AO utterly failed to conduct meaning full investigation essential to determine the total income of the assessee. Hence, when the AO has failed to take notice of all the relevant facts and has failed to examine the correctness or otherwise of the claims and assertions by the assessee, it is evident that he has failed to apply his mind and discharge his duty as an assessing officer during the scrutiny proceedings u/s 143(3)/147 of the Income Tax Act, 1961. Consequently, the assessment order, passed by the AO on 20.03.2015, is rendered erroneous in so far as it is prejudicial to the interest of the revenue. 5.1 It is beyond dispute that, under section 263, the Commissioner does have the power to set aside the assessment order and send the ....
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.... inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this contract. It is because it is incumbent on the Income Tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made arid not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." 6. On the facts of the present case, it is evident that the AO accepted the version of the assessee without making any inquiry or verification, whereas it is a well settled law that mere failure to make inquiries makes an order erroneous. In order that the Commissioner may consider an order to be "erroneous" for the purposes of section 263, the error of law may not be apparent on the fact of the order. The Commissioner may consider an order of the AO to be erroneous not only if it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo-typed order which simply accepts what the assessee h....
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....eed, assessee had 1 /4th share in the property. Hence, assessee had income chargeable to tax of Rs. 35,98,412/- for which it is necessary to issue notice u/s 148 of the Act. e) During the assessment proceeding u/s 143(3) r/w section 147, assessee had produced sale deed and purchase deed. f) Thereafter, AO had issued a notice-dated 13.10.2014 u/s 142(1) alongwith a long questionnaire, requiring the assessee to showPage cause as to why capital gain be not taken as per provisions of section 50C of the income Tax Act. g) In compliance thereto, assessee contended that there was no capital gain. h) Thereafter, assessee filed the report from registered valuer valuing the property at Rs. 1.81 crores (1.69 crores towards land and Rs. 12,07,0171- towards improvement of land & construction of building). For arriving at the value of cost the registered valuer took the rate at Rs. 24,500/- sq mtr as specified in the circle rate. The said rate was prescribed as the rate for commercial property on GT Road by the relevant authorities. i) That during the proceeding, AO sent a letter to the Tehsildar of the Area for inquiring about the commercial rate of ....
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....t, in the case of co-owner i.e. Shri Narendra Kumar Gill, his AO had referred the valuation to 29.03.2015 whereas assessment in the case of assessee had been framecfW 20.03.2015. DVO had filed the report on 08.01.2016. Thus the Valuation report of the DVO Meerut did not constitute part of record of the assessee‟s case. e) That the Ld. Pr. CIT has alleged that the AO had completed the assessment without examining the reason for which notice u/s 148 was issued. Infact, AO had made the detailed inquiry in r/o circle rate as on date of sale as well as cost as on 01.04.1981 and thereafter had arrived at a figure of capital gain. For determining fair market value as on 01.04.1981, AO had made inquiry from the area Tehsildar, who vide letter-dated 02.02.2015 had informed that the commercial rate of the area was not available, however on inquiry from the neighbours it was gathered that the commercial rate of the area was Rs. 2,000/- to Rs. 3,000/- per sq yd as on 01.04.1981. Thus after considering the details, the AO had framed tte assessment. f) The DVO in the case of co-owner, had taken the value of land as on 01.01.1981 at 100/- per sq yd and was adjusted at 140%....
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....evised is erroneous and ii) it is prejudicial to the interest of Revenue. If one of them is absent, recourse cannot be had to section 263(1) of the Act. I) 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 e.g. when an Assessing Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it 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. m) That this is not the case where no inquiry had been made by the Assessing Officer. The grievance of the CIT u/s 263 of the Act is that no proper inquiry had been made by the Assessing Officer in respect of the issues stated in the notice. There is a distinction between lack of inquiry and inadequate inquiry. The former confer power on the CIT to in....
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....ut the Commissioner had directed a re-inquiry for merely a change of opinion which is impermissible u/s 263 of the Act. CIT was required to arrive at a definite conclusion as is held by the Hon‟ble Delhi High Court in CIT v. International Travel House Ltd. Even otherwise Hon‟ble Supreme Court in ACIT v. Dharia Construction Co., (2010) 328 ITR 515 have held that the opinion of DVO is not an information on the basis of which the assessment can be reopened. q) Lack of inquiry and inadequate inquiry It is the lack of inquiry on the part of Assessing Officer which confers jurisdiction on the CIT to assume jurisdiction u/s 263 of the Act. Following cases are relied upon : (2010) 320 ITR 674 (Del) CIT vs Ashish Rajpal Hon‟ble Jurisdictional High Court in this case have held that where the Assessing Officer during the scrutiny assessment proceeding raised a query which was answered by the assessee to the satisfaction of the Assessing Officer but the same was not reflected in the assessment order by him, a conclusion cannot be drawn by the Commissioner that no proper inquiry with respect to the issue was made by the Assessing Officer, an....
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....t the order was erroneous and the claim u/s 80HHF was wrongly allowed. (2014) 41 Taxmann.com 34 (Del) CIT vs Galileo India (P) Ltd. In this case, assessee, after netting interest paid on loan obtained against interest earned from deposits, offered T94,47,712/- as disallowance u/s 14A. Question was whether a higher disallowance of more than T94 lac would have been made. Assessing Officer had conducted inquiry and accepted disallowance which was surrendered by the assessee. vyho/e Commissioner had not given or formed any opinion as to whether or not said disallowance was satisfactory or not, though Assessing Officer had applied his mind and accepted offer made by the assessee, section 263 would not be invoked by the Commissioner for initiating revision proceeding. r) Lack of discussion in the assessment order It is submitted that where the Assessing Officer had made a query which had been duly explained by the assessee to the satisfaction of Assessing Officer then no revision is permissible by the CIT on the ground that there is no discussion on the issue in the assessment order which lead to assumption that Assessing Officer did not apply his mind....
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....nadequate inquiry". It is only in case of lack of inquiry the Commissioner is empowered to exercise his revisional powers by calling for and examining the records of any proceeding under the Act and passing orders thereon. The powers under section 263 cannot be invoked for making roving and fishing inquiry. Hon'ble Court have held that during the proceeding under section 263, the assessee must be called, his explanation sought for and examined by the Commissioner and thereafter if the Commissioner still feels that the order is erroneous and prejudicial to the interest of revenue, he may pass revisional orders. If, on the other hand, the Commissioner is satisfied after hearing the assessee that the orders are not erroneous and prejudicial to the interest of the revenue, he may choose not to exercise his power of revision. This is for the reason that if a query was raised during the course of scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer was reflected in the assessment order, that would not, by itself, lead to the conclusion that the order of the Assessing Officer is called for int....
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....f PCIT vs Delhi Airport Metro Express Pvt. Ltd. (ITA No.705 of 2017 decided on 05.09.2015) and ITO vs DG Housing Project Ltd. (343 ITR 329), it was held that if the Ld. PCIT is of the view that AO did not undertake any inquiry, it becomes incumbent on the Ld. PCIT to conduct such inquiry. Similar view has been taken by the Jurisdictional High Court in the case of Pr. CIT vs Modicare Ltd. (ITA No.759 of 2016 decided on 14.09.2017) and have held that the exercise u/s 263 could not have been outsourced by the CIT to the AO. CIT has himself to undertake a minimal inquiry and give reasons for coming to the conclusion that the assessment order was erroneous and prejudicial to the interest of Revenue. v) The order in the case of Smt. Sangeeta Jain v. PCIT, (ITA No. 3888/Del/2017 decided on 15.02.2018) is squarely applicable to the present case. In this case also the certificate from the Tehsildar was relied upon. The „G‟ Bench of this Hon‟ble Tribunal has quashed the order of CIT u/s 263 of the Act holding that certificate issued by the public officers are generally to ba believed by the other officers, unless there is some material which suggest that the certif....
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....ificate from Tehsildar of the Circle rate of the property as at 01.04.1981 granted the assessee the deduction of cost of acquisition for indexation purposes. The ld AO obtained such letter on 02.02.2015. Based on it the ld Assessing Officer completed the long term capital gain u/s 50C of Rs. 136036/-. The ld Assessing Officer further disallowed the expenses for improvement of Rs. 123000/-. The computation of the capital gain provided by the assessee as placed at page No. 90 of the paper book shows that assessee has taken sale proceeds of Rs. 19393650/- u/s 50C of the Act. Further, the value of land as on 01.04.1981 was considered at Rs. 2484000/- and cost of improvement as on 01.04.1981 was considered at Rs. 754747/-. Accordingly, the cost of acquisition as on 01.04.1981 was derived at Rs. 3238747/- which was indexed at Rs. 18849508/- resulting into the net capital gain of Rs. 544142/-. 25% thereof i.e. Rs. 136036/- was offered by the assessee as his share which was accepted by the ld AO. The ld Assessing Officer made addition of Rs. 123000/- as per para No. 5 of his order in a casual manner. The ld CIT noted that AO has accepted the valuation of the property as on 01.04.1981 witho....