TaxTMI 
TaxTMI 
2020 (12) TMI 548
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....planation given by the assessee to Assessing Officer, he could discern that was on account of receipt of gift of residential flat at Apartment no. A0703, 7th Floor, Project RMZ Latitude, Bangalore. In this respect, further details was that assessee's daughter Ms. Ankita Kejriwal by gift dated 29.08.2014 [which has been notarized as gift declaration on 20.01.2015] had gifted the residential flat to assessee; which action was followed subsequently on 16.03.2015 by a supplementary agreement wherein the assessee was nominated as purchaser in her place (donor Ms. Ankita Kejriwal) wherein she was the confirming party. According to ld. PCIT, gift deed which has not been registered with the respective Sub-Registrar office is void, since registration is mandatory as per section 17 of Registration Act, 1908 and Section 123 of the Transfer of Property Act. Therefore, according to ld. PCIT the assessment framed by the Assessing Officer was carried out without proper verification/examination of the issues stated above and since no addition was made in this regard, he issued show cause notice conveying his intention to exercise his revisional jurisdiction u/s. 263 of the Act. Pursuant to sho....
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....ssee. 3. Aggrieved by the aforesaid action of the ld. PCIT, the assessee is before us. 4. Assailing the action of the Ld. PCIT to invoke the revisional jurisdiction by finding fault with the scrutiny assessment order passed by AO on account of non-application of mind was according to him patently wrong. According to him, the assessee had filed his ROI declaring total income of Rs. 17,42,030/-. According to him, in the assessee's Balance Sheet as on 31.03.2015, opening balance under Capital Account was Rs. 97,94,441/- and closing balance was to the tune of Rs. 3,42,31,441/-. Thereafter, the case was selected for limited scrutiny on the issue of 'increase in capital during the year'. According to Ld. AR, the AO had issued notices u/. 143(2) of the Act dated 29.07.2016 requiring the assessee to produce evidence in support of the said increase in capital account. Further notice u/s. 142(1) of the Act dated 21.02.2017 with questionnaire was also issued to provide further relevant documents. Pursuant to the statutory notice of AO, the assessee filed his replies vide letter dated 19.08.2016 and 15.03.2017 wherein the assessee had explained the reason for increase in capital ....
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....o her father was not covered u/s. 56(2)(vii) of the Act and therefore, technical requirement of relevant Registration Act or Transfer of Property Act for the said gift was neutral from the income-tax point of view. Upon consideration of the above, the AO after making enquiries/verification which he deemed fit for the purpose of scrutiny of the assessment passed the assessment order u/s. 143(3) dated 23.08.2017 assessing the income as per ROI filed by the appellant. Therefore, according to Ld. AR since the assessment order having been passed with proper enquiry and verification cannot be interfered with and the jurisdictional requirement for invoking revisional jurisdiction u/s. 263 of the Act was totally absent on the facts of this case. Thus, according to the Ld. AR, in view of the aforesaid facts and after taking into consideration of all facts the AO being satisfied with the explanation and supporting evidences, the AO took a plausible view and found nothing irregular in the gift having been made by a daughter to her father out of natural love and affection, which was the only reason for increase in capital of the appellant during the assessment year under appeal. Therefore, acc....
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....xplained above. And that being so, the action of the Ld. Pr. CIT in issuing Show Cause Notice u/s. 263 of the Act and passing order on the alleged ground of assessment order being erroneous and prejudicial to the interest of the revenue is beyond the sanction of law and needs to be quashed. 7. Per contra, the Ld. CIT DR vehemently opposing the plea of the Ld. AR contended that the Ld. Pr. CIT has rightly exercised his revisional jurisdiction since the assessment order does not mention as to whether the AO has enquired about the source of fund of Ms. Ankita Kejriwal (daughter/donor) to purchase the flat and so the Ld. Pr. CIT wants the AO to verify this fact, so there is nothing wrong in such an action. According to Ld. CIT DR, as per Section 17 of the Registration Act, 1908 and Section 123 of the Transfer of Property Act, it was mandatory to register a gift deed at the respective Sub-Registrar office and since the gift deed in this case was not registered, transfer of immovable property/flat cannot take place since it renders the transfer void, which fact has not been appreciated by AO, goes on to show non-application of mind on the part of AO, which renders the assessment order e....
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....ssessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue "unless the view taken by the Assessing Officer is unsustainable in law". 9. With the aforesaid ratio in mind when we examine whether the Ld. PCIT had jurisdiction to invoke revisional jurisdiction u/s. 263 of the Act, we note that in the show cause notice issued by the ld. PCIT, he was of the opinion that the Assessing Officer has passed the assessment order without proper verification/examination of the increase in capital and without making any addition in this regard. Thereafter, in the impugned order, he was of the opinion that Assessing Officer has accepted the increase in capital without proper application of mind and he has not verified the source of increase in capital i.e. the Assessing Officer has not ascertained the capacity of the daughter (donor) to purchase the flat and gift it to assessee. We note from the perusal of the page no. 1 to 3 of paper book that the assess....
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.... with the aforesaid exercise the AO accepted the increase in capital. 10. For interfering with the aforesaid action of AO, the main fault which the ld. PCIT notes is in respect of deficiency of the gift instrument dated 29.08.2014, which according to him, since has not been registered as per Section 17 of the Registration Act, 1908, therefore, transfer is void and therefore, no transfer of the flat could have taken place by virtue of non-registered gift instrument. Since this legal defect has not been taken into consideration by the AO, according to Ld. Pr. CIT the order of AO is bad for non-application of mind. It is true that non-registration of gift deed of immovable property falls foul of section 17 of the Registration Act 1908 and consequently affect the transfer of the immovable property (flat in this case) by virtue of section 49 of Registration Act, 1908 so no transfer of flat takes place in the eyes of law. When we agree with the contention of ld. Pr. CIT on this score, the legal effect of such a contention is that in the balance sheet the capital account of the assessee, the gifted item of flat given by his daughter Ms. Ankita Kejriwal to the tune of Rs. 2,29,82,161/- wi....