TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 234
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....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 the time of appeal hearing. 3. Brief facts as culled out from records are that....
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....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 instant case, the assessment was completed at an income of Rs. 71,855/-. The assessment was completed u/s. 143(3) on 19.11.2018. Subsequently it is detecte....
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.... 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 written submission. Ld. CIT(DR) Shri Sudipta Guha represented the matter for the Revenue. 7. At the outset, Learned Counsel for the assessee submitted that Ld. PCIT has grossly erred in assuming hi....
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....6,066/- 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 proceedings and on the basis of which he had taken permissible views. 7.3 Ld. Counsel submitted that during the assessment proceedings all the three reasons stated above for selection of cased of the assesse....
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....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 of Land Area (Decimal) 3189 1079 3213 1517 Sali/Karkhana 11.0 3188 1018 3212 1517 Sali 9.0 3187 1028 3211 183 Sali 38.5 3214/4062 1382 3230 183 Sali 25.0 Total: 83.5 Decimals On the query relating to the 'shed' on the captioned ....
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.... 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 remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Ass....
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....ding 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 recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the....
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....rcise 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 after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. Explanation 2.-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far ....
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....his 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 conducted and hearing the assessee by directing the Assessing Officer for a fresh assessment or to make such enquiries as he/she deem necessary. 11. At this juncture, before arriving at our conclusions on the multi-fold contentions of the Ld. Representatives, we deem it pertinent to take note of the fundamental four steps propounded above in the context of facts and circumstance of the present case before us. 11.1 Let us look at the rightful exercise of the first and second steps of ....
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..... 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, the foundation of the impugned exercise of revisionary power carried out by the Ld. PCIT is missing from the material on record. In Para 5 of the impugned order, Ld. PCIT specifically noted without any ambiguity that, "On perusal of the assessment record and assessment order, it is observed that there is no reflection of agriculture income or loss in the return of income for the F.Y. 2015-16 and hence the assessee should not get exemption u/s. 54B on LTCG for Rs. 1,79,16,066/- on the sa....
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....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 authority. There must be materials available from the records called for by the Ld. PCIT. 11.5 We find that in the present facts and circumstances, the legal maxim 'sublato fundamento cadit opus' is applicable, meaning thereby - 'a foundation being removed, the superstructure falls'. Once the basis of a proceeding is gone, the action taken thereon would fall to the ground. Thus, in the absence of such foundation, exercise of a suo motu power is impermissible. It should not be presumed that initiation of power und....
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.... 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 'erroneous in so far as it is prejudicial to the interests of the Revenue'. It is not an arbitrary or unchartered power, it can be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting ....
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....e 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 and the order of revision was not valid". 12.2 The issue regarding whether the assessment order is erroneous or prejudicial on the ground of insufficiency of enquiry has been dealt by the Hon'ble Delhi High Court in the judgment of ITO v. DG Housing Projects Ltd. (supra), which has been followed by various co-ordinate benches of the ITAT in various cases. Hon'ble High Court while adverting to the issue held that in cases of wrong opinion for finding on merit, the CIT has to come to the conclusion and himself decide that order is e....
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.... 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 the present case has not carried out any enquiry of his own and has merely set aside the assessment to the file of the AO to re-examine the issue of claim of deduction u/s 54B towards LTCG on sale of agriculture land since no agriculture income has been reflected in the return of income by the assessee. Therefore, it is contrary to the guidelines as mandated in the Hon'ble Delhi High Court decision in the case of ITO v. DG Housing Projects Ltd. (supra). Therefore, the consideration arrived at by the Ld. PCIT invoking provisions of sectio....