TaxTMI 
TaxTMI 
2022 (4) TMI 234
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....) is illegal, invalid and not sustainable in law. 2. That on the facts and in the circumstances of the case and in law, the Ld. Pr.CIT grossly erred in passing the order under section 263 even though the assessment order under section 143(3) dated 19th November 2018 passed by the Assessing Officer (AO) was neither erroneous nor prejudicial to the interest of the Revenue. 3. That on the facts and in the circumstances of the case and in law, the AO after due examination of the relevant facts having already followed one of the course permissible in law, the Ld. Pr. CIT was unjustified in setting aside the assessment on the issue of allowing exemption of LTCG of Rs. 1,79,16,066/- on sale of agricultural land and directing the AO to re-adjudicate the same issue after re-examination of the facts. 4. For that on the facts and in the circumstances of the case, the order of the CIT passed u/s 263 be cancelled since the assessment order u/s 143(3) dated 19.11.2018 was neither erroneous nor prejudicial to the interest of the revenue. 5. The Appellant craves leave to add, alter, amend and/or withdraw any of the grounds or ground of appeal either before or at....
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....o the interest of the revenue for the following reasons: The assessee being an individual had claimed exemption u/s. 54B on long term capital gain on sale of agricultural land for Rs. 1,79,16,066/-. But there is no agricultural income accounted for the relevant F.Y in the return of Income. Therefore the long term capital gain should be added back to the total income of the assessee. Since there was no reflection of agricultural income or loss in the return income for the F.Y. 2015-16, the assessee should not get exemption u/s.54B on LTCG for Rs. 1,79,16,066/- on sale of agricultural land during the relevant F.Y. AO has passed the impugned assessment order without any application of mind nor conducting any enquiries or verifications which should have been made in this case." [emphasis supplied by us] The assessee furnished its reply dated 05.02.2021 before the Ld. PCIT as reproduced in the impugned order, explaining its case against the SCN. 5. On 19.02.2021, the Ld. PCIT passed the impugned order, inter alia, observing in Para 2 as under: "2. On a perusal of the assessment record of the assessee, it was observed as under: In the in....
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....ourt, and in accordance with the amendment made in Section-263 of the Act with effect from 01.06.2015, I hold that the impugned assessment order dated 19.11.2018 passed by the A.O. is erroneous in so far as it is prejudicial to the interests of the revenue. I further hold, after giving the assessee an opportunity of being heard, that the impugned assessment order dated 19.11.2018 is liable to setaside. Therefore, I set aside the said assessment order directing the A.O. to frame the assessment afresh after considering the aforesaid observations, Hon'ble Supreme Court and Hon'ble High Court decisions and as per law. 12. In the result, the assessment order u/s 143(3) dated 19.11.2018 for A. Y. 2015-16 is set-aside to the file of the Assessing Officer with a direction to pass a fresh assessment order after considering the aforesaid observations, as per law and after giving an opportunity of being heard to the assessee." [emphasis supplied by us] 6. Learned Counsels for the assessee Shri N.S. Saini and Ms. Priyanka Salarpuria, represented the matter and took us through the facts of the case corroborating with the material placed on record in the paper book and writte....
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....nvoke section 263 that "Since there was no reflection of agricultural income or loss in the return income for the F.Y. 2015-16, the assessee should not get exemption u/s.54B on LTCG for Rs. 1,79,16,066/- on sale of agricultural land during the relevant F.Y. AO has passed the impugned assessment order without any application of mind nor conducting any enquiries or verifications' which should have been made in this case." By taking the bench through these records, the Ld. Counsel strongly contended that the very foundation on which the Ld. PCIT has assumed the jurisdiction to invoke provisions of section 263 is on an absolutely incorrect set of verifiable facts and therefore the impugned order is liable to be quashed ab initio. 7.2 Learned Counsel further submitted that Ld. PCIT has grossly erred in assuming his jurisdiction and initiating proceedings u/s. 263 of the Act since in the assessment order passed by the Ld. AO, in respect of all the three reasons because of which the scrutiny selection of the case was done, he had not only made adequate enquiries but also undertaken necessary verification of the details which were furnished during the course of assessment proceeding....
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....nature of land being 'Karkhana' and 'Sali' TOGETHER WITH the sheds and structures constructed thereon, containing a total area of 10,000 sq. ft., be the same a little more or less, situate, lying at and being the divided and demarcated parts or portions of C. S./R. S. Dag Nos. 3189 (11.0 decimals) and 3187 (38.5 decimals), and the entire C.S/R.S Dag Nos. 3188(9.0 decimals) and 3214/4062 (25.0decimals), R. S. Khatian Nos. 1018, 1028, 1382 and 1979, Mouza: Chamrail, J.L No. previously 5 now 105, P. S. Liluah, District Sub Registrar, Howrah, Additional District Sub Registrar, Howrah, within the limits of Chamrail Gram Panchayat and butted and bounded in the manner following, i.e. to say. ON THE NORTH: By C S/R. S. Dag Nos. 3215 and 3216; ON THE EAST: Partly by part of C. S./R. S. Dag No. 3196(P) and part of C. S/R. S. Dag No. 3212(P), C. S. Dag Nos. 3213, and C. S. Dag No. 3214; ON THE WEST: By part of C. S/R. S. Dag No. 3187(P) and C. S./R. S Dag No. 3190; ON THE SOUTH: By C. S./R. S. Dag No 3189(P); The details of the said land with shed are as below: C.S./R.S. Dag No. R.S Khatian No. L.R Dag No. L.R Khatian No. Nature ....
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....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 debatable. The matter cannot be re....
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....and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding record....
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....n,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or aft....
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.... is a part of his/her administrative control to call for the records and examine them. ii. The PCIT on an analysis of both, the records and the order passed by the Assessing Officer arrives at a consideration that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. This is exercised by calling for and examining the records relating to any proceeding under this Act available at the time of examination by the PCIT. Till this stage, assistance of the assessee is not required by the PCIT. iii. If after calling for and examining the records and the assessment order, the PCIT considers that the order of the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue, he/she is bound to give an opportunity of being heard to the assessee by issuing a show cause notice pointing out the reasons for arriving at such a consideration that action u/s 263 is required on a particular issue. The PCIT has to conduct an inquiry as he may deem fit and after hearing the assessee, he/she will pass the order as deem fit. iv. The PCIT can annul or enhance or modify the assessment as a result of inquiry condu....
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....s no reflection of agriculture income or loss in the return income for the F.Y. 2015-16, the assessee should not get exemption u/s 54B on LTCG for Rs. 1,79,16,066/- on sale of land during the relevant F.Y." [emphasis supplied by us] 11.3 As noted above, Ld. Counsel took us through the return of income to demonstrate that there is no claim made by the assessee u/s 54B in the return. Even in the computation of income there is no such claim u/s 54B towards LTCG on sale of agriculture land. Ld. PCIT has detected the claim of section 54B and because there is no reflection of agriculture income in the return of the assessee, he formed a considered opinion that assessee should not get exemption u/s 54B on the LTCG of Rs. 1,79,16,066/- in respect of sale of land. We already noted above that for the exercise of statutory power, relevant objective factors must be available from the records when called for and examined by an authority. The consideration arrived at by the Ld. PCIT of exercising revisionary powers vested in him by section 263 of the Act is not based on relevant objective factors as found from the perusal of the return of income of the assessee. The very basis, in other words....
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....y with the observation given by the Ld. PCIT as noted in Para 5 (supra) of the impugned order. While complying with the observations by the Ld. AO, it is undisputed fact that there is no claim u/s 54B made by the assessee in her return of income, which itself will create a hurdle for the Ld. AO in taking up the matter further to enquire on earning of agriculture income so as to fulfill the directions of the Ld. PCIT given in the impugned order. 11.4 Exercise of revisionary power u/s 263 of the Act is a quasi-judicial power hedged in with limitation and has to be exercised subject to the same and within its scope and ambit. So far as calling for the records and examining the same is concerned, undoubtedly, it is an administrative act, but on examination 'to consider' or in other words, to form an opinion that the particular order is erroneous in so far as it is prejudicial to the interests of the revenue, is a quasi-judicial act because on this consideration or opinion the whole machinery of re-examination and reconsideration of an order of assessment, is set again in motion. It is an important decision and the same cannot be based on the whims or caprice of the revising authorit....
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.... shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner. 11.8 Record shall include all the documentary evidences which were submitted before Ld. AO and also those submitted before Ld. PCIT against the SCN issued to invoke the provisions of section 263. Ld. PCIT is required to examine all the documentary evidences including those which were before Ld. AO and submitted before him. We find that in the return of income as well as the computation of income of the assessee on record, there is no claim of exemption made by the assessee u/s 54B of the Act. For the above finding of ours, we find force from the decision of Hon'ble Bombay High Court in the case Gabriel India Ltd. [1993] 203 ITR 108 (Bom) wherein it is observed as under (page 113) - " . . . From a rending of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is 'errone....
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.... in the course of assessment, reveals that Ld. AO did enquire in to the claim of assessee in respect of exemption on long term capital gain on sale of captioned agriculture land which was one of the three reasons for selection of the case of assessee for scrutiny assessment under CASS. Here, in support of our finding, we would like to refer the judgment of Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar Sharma [2011] 335 ITR 83 (Del) wherein it has been held dismissing the appeal "that the present case would not be one of, "lack of inquiry" even if the inquiry was termed inadequate. The Tribunal found that complete details were filed before the Assessing Officer and that he applied his mind to the relevant material and fact, although such application of mind is not discernable from the assessment order. The Tribunal held that, the Commissioner in proceedings under Section 263 also had all these details and material available before him, but not been able to point out defects conclusively in the material, for arriving at a conclusion that particular income had escaped assessment on account of non application of mind by the Assessing Officer. The Tribunal was right ....
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.... will be difficult to hold that the order of the AO, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/enquiry himself. The order of the AO may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the AO to decide whether the order was erroneous. This is not permissible. An order is erroneous, unless the CIT holds and records reason why it is erroneous. Therefore, CIT must after recording reasons, hold that order is erroneous. The jurisdictional pre-condition stipulated is that CIT must come to the conclusion that the order is erroneous and is unsustainable in law. It was further observed by the Hon'ble High Court that the material, which the CIT can rely up on includes not only the records as it stands at the time when the order in question was passed by the AO but also records as it stands at the time of the examination by the CIT. Nothing prohibits CIT from collecting and relying new/additional material which evidence to show and state that the order of the AO is erroneous. 12.3 We find that Ld. PCIT in th....