TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 284
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....''audited accounts'' and the sreturn of assessee for A.Y. 2012-13 and A.Y. 2013-14, the reasons of CASS, and failed to make requisite enquiries, as seen from entries on order sheet and lack of discussions in the assessment order. 4. The ld. PCIT, Jaipur-1 has erred in holding that the claim of assessee of his income being from business and not from capital gain and not liable to provisions of Section 50C, was accepted by AO without critical examination. 5. The ld. PCIT, Jaipur-1 has erred in setting aside the order u/s 143(3) on the basis of an audit objection which she says had only supplemented her decision. 6. The ld. PCIT, Jaipur-1 has erred in holding that the AO's order suffered from lack of enquiry and non-application of mind only because the AO, conscious of all facts and information, chose one of the possible views in law by opting to accept the contentions of the assessee and this was not an error. Therefore, the order of the assessment did not suffer from any lack of enquiry and nonapplication of mind. 7. The ld. PCIT, Jaipur-1 has erred in referring to decisions, which were not relevant to the facts and circumstances of the assessee. 8. The ld. PCIT, Jaipur-1 ....
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....urse of assessment proceeding, the AO found from the records that the assessee is engaged in purchase and sale of residential and commercial plots. During the relevant year, the assessee sold two plots through registered sale deeds for a sale consideration of Rs. 1,00,51,000/- after claiming certain indirect expenses. Hence, the assessee had shown a net profit of Rs. 54,48,935/- which gives a Net profit rate of 54.21%. On examination of the details filed by the assessee, the AO noted that assessee has claimed interest payment of Rs. 6,85,141/-(net) in his P&L account for which the assessee was asked to provide the details of interest payment. The assessee produced an abstract of Interest received and paid which showed payment of interest of Rs. 6,34,122/- to Raj Laxmi Bank. The AO asked the assessee to produce bank statement but the assessee provided copy of Loan ledger account in the name of Smt. Kamla Mehta. The AO noted that since the loan had not been taken by the assessee for his business purposes ,therefore, the interest paid on it, cannot be allowed u/s 36(1)(iii) of the Act. Thus, the payment of interest of Rs. 6,34,122/- was disallowed by the AO and added to the total inco....
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....,216/- In the return of income filed in ITR-2 in Part B-TI (3)(c) short-term gains have been shown at Rs. 64,871,787/-, in Schedule CG full value of consideration shown at Rs. 1,12,01,000/- (as against value adopted by Sub registrar at Rs. 2,12,31,366/-) and after claiming cost of acquisition at Rs. 47,19,213/- short term capital gains have been shown at Rs. 64,81,787/-. However, in schedule BFLA (iii) of return of income filed short term capital gains was declared at Rs. 59,48,935/-. From the entries in the return of income for A.Y. 2012-13, it is apparent that income under the head 'Short-term capital gains' has been declared. In spite of your declaration of income under the head 'Short-term capital gain', the AO has without going into the details of such declaration in your return of income has mechanically levied tax under the head 'Income from Business' whereas income was liable to be taxed as short term capital gains as per the provisions of Sec. 50C of the Income Tax Act, 1961 As per the provisions of Sec. 50C of the Act, income from short term capital gains is worked out as under:- Plot No. C-62 Value adopted by Sub-registrar 10615216 ....
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....IT Act, 1961 in your case. You are accordingly, in the interest of natural justice, given an opportunity on or before 23.02.2018 either in person or through your authorized representative, to explain your case and also show cause why order passed dated 29.03.2016 u/s. 143(3) of the IT Act 1961 by the AO, should not be set aside for reassessment / revision in view of the fact that requisite and proper inquiries were not conducted regarding the taxability of income under the declared head of income as per the prevalent law on the issue and the assessment order was passed mechanically rendering it both erroneous and prejudicial to the interest of revenue. Your case is posted for .hearing on 23.02.2018 at 12 noon, affording you an opportunity of being heard regarding the issue raised." 6. In response to the said show cause notice, the assessee filed the detailed reply. The same is extracted herein below for the sake of brevity. ''8. Reply of the assessee was received on 05.03.2018. The same is discussed as under:- On the issue of not-conducting proper inquiries regarding taxability of income under declared head of income making the order erroneous and prejudicial to the interest....
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....n of income, the assessee in his reply the assessee submits that return of income/computation was filed incorrectly by inadvertence by the preparer of the return. Further, to substantiate his claim that his declared income was from business & profession and not from capital gains the AR tries to take help of AO's initiation of penalty u/s 271B i.e. for unaudited books of accounts. However, this contention does not hold ground as from the copies of balance sheet and profit & loss account submitted during the assessment proceedings and during the hearing u/s 263 of the Act, as it is apparent that the books of accounts of the assessee were prepared by a professional. They not being audited is another issue and cannot be taken as an excuse. Therefore, it is obvious that the return of income for A.Y. 2012-13 & 2013-14 have been filed on oath as per the books of accounts so prepared wherein the nature of assessee's income for A.Y. 2012-13 is not from business & profession but from income on any other account. Similarly, income for A.Y. 2013-14 is from capital gains and not from business & profession which finds strength from the fact that the assessee filed his return of income i....
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....liance is placed on the pronouncement of the Hon'ble Court in the case of CIT v. K. Ramachandran (Dr.) [2004] 139 Taxman 320 (Mad.) (HC) wherein the Hon'ble court has held that ''Record" does not mean only the record available with ITO at time of passing of assessment order. It would include the records available with the Commissioner at the time of passing of the order by the Commissioner. Reliance is also placed on the judgment of the Hon'ble Apex Court in the case of CIT vs Shre Manjunathaswara Packing Products and Camphor works (1198)231 ITR 53 (SC) which states that it was open to the CIT not only to consider the records of that proceeding but also to the records relating to that proceeding available to him at the time of examination. Keeping this is view the observation of the audit was perused and it is seen that they too refer to the erroneous adoption of assesses statement by the AO in haste without verification thereby causing the income of the assessee being under assessed and thus supplement the independent opinion formed that this is a case for invocation of sec 263 of the IT act. 5) The contention that the order u/s 143(3) dated 29.03.2016 was passed aft....
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....stration. Reliance is also placed on the following judicial pronouncements:-In the case of CIT v. Bhagwan Das [2005] 272 ITR 367 (AII.)(HC), the High Court held that non-application of mind by thee Assessing Officer was prejudicial to the interest of the revenue. In Bharat Overseas Bank Ltd. v. CIT [2013] 152 TTJ 546 (Chennai) (Trib.) it was held that when the order of the Assessing Officer was silent on the claim made by assessee, and allowed such claim, without any discussion, it was held that such an order was erroneous and prejudicial to the interest of revenue. A routine acceptance of material submitted by the assessee without further analysis indicates a failure on the part of the assessing officer in making a correct assessment in the case of the assessee. Therefore, it is to be construed that the order passed by the assessing officer was both the erroneous and prejudicial to the interest of revenue and hence liable for initiation of section 263 of the Income Tax Act. It is stated that judicial authorities have delivered judgements in favour or against initiation of section 263 of the Income Tax Act which are very case specific that is to say that each case would need to be ....
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....ve been gathered from returns of income for A.Y. 2012-13 & 2013-14 and audited books of accounts produced before him. I find that the AO has committed grave error in his order dated 29/3/2016 passed in the case of the assessee by accepting the claim of the assessee in a mechanical manner. In the assessment under discussion it is seen that the records are silent regarding further enquiry/verification done by the assessing officer while assessing the case under 143 (3) of the Income Tax Act 1961 on 29/3/2016 to conclude that the assessee derives his income from business & profession as against the declared head of capital gains in return of income for the year under consideration. The assessment has been made in a routine manner. As there has been no proper inquiry made or facts verified it is clear that there has been no application of mind to relevant material available and this action of the assessing officer is definitely an action which is erroneous and prejudicial to the interest of revenue. The assessing officer has not called upon the assessee to establish/prove the claim or discharge the burden of proof placed on it. The assessing officer before accepting the statement of th....
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.... audited books of accounts and the details regarding the assessee's income for assessment years 2012-13 which indicated the receipt of income from sale of investments in this case. Provisions of section 50C which are clearly applicable to this case are to be invoked for calculation of STCG. It is clear that the income for A.Y. 2013-14 has been under-assessed as detailed above in this order due to an erroneous order made by the AO which is prejudicial to the interest of revenue to the extent of Rs. 1,75,56,478/-. An opportunity is to be allowed to the assessee to state its case in the interest of natural justice.'' 8 During the course of hearing, the ld.AR of the assessee put emphasis on the assessment order of the AO and submitted that the record was before the AO during assessment proceeding. The ld.AR of the assessee also filed the Trading and P&L account for the year ending 31st March 2013. Further, the ld.AR of the assessee filed the written submission and relied on various case laws, some of which are mentioned as under:- 1. Adani Exports vs DCIT, 240 ITR 224 (Guj) 2. Pr.CIT-3, New Delhi vs Delhi Airport Metro Express Pvt. Ltd. (ITA No.705/2017 dated 5-09-2017) 3. C....
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....present AO on 05.02.2016 and thereafter assessment proceedings were initiated. In fact, the AO has issued questionnaire u/s 142(1) on 10.03.2016 (PB-53,54) fixing the date of hearing for 14.03.2016 and the assessment order was passed on 29.03.2016 i.e. within a period of just 19 days and thus, it cannot said that the assessment proceedings continued for 2 years. In its reply to show cause notice, the assessee has explained that it was engaged in real estate business, which has been accepted by the AO on its face value without examining the facts in a right perspective.lt is noted from the balance sheet of the assessee as on 31.03.2012 (PB-7) that 'Land at Gayatri Enclave' was shown at Rs. (-) 39,55,000/-. It is difficult to understand how the stock-in-trade could be in negative, if contention of the assessee that it was engaged in real estate business is accepted. Further, from the copy of profit and loss account of the assessee for the FY 2011-12 (PB-11), there was no sale or purchase and indirect income of Rs. 58,87,791/- has been declared and net profit was declared at Rs. 51,49,594/- without having any reference to opening and closing stock. The kind attention of the Ho....
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....rival contentions and perused the materials available on record. Firstly, it is imperative to go through Section 263 of the Act under which the Ld. Pr. CIT passed the order. ''Section 263 (1): -The Commissioner may call for and examine the record of any proceeding under this Act and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after or causing to be made such enquiry as he deems necessary pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. '' We find from the available records that the assessee during the year under consideration had sold following two commercial properties situated at Gayatri Enclave, Village,Jhujharpura,Tehsil-Sanganer. Plot No. Date of Sale Sale Consideration received Value adopted by Sub-Registrar for registration purposes. C-64 18-09-2012 Rs. 50,00,000 Rs. 1,06,16,150 C-62 18-09-2012 Rs. 50,00,000 Rs. 1,06,15,216 The assessee in the retu....
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....tively. The balance sheet submitted by you shows that these properties do not appear in your balance sheet meaning thereby that the investment of the same is out of books. The implies that the entire sale consideration as per sec 50C of the I.T. Act, 1961 will be assessed as your short term capital without providing you the benefit of cost of acquisition. In that view of the matter, please state as to why not the aggregate DLC value of these properties i.e. Rs. 2,12,31,366/- not be assessed as short term capital gain.'' The assessee also filed a detailed reply to the said show cause notice which is filed in assessee's paper book pages 10 to 13. All the submission is related to the facts that about how the property is acquired and what are the issues in that property. As regards the applicability of Section 50C of the Act, the reply of the assessee is reproduced herein below:- ''Your assertion that the aggregate value as assessed by Sub- Registrar as per DLC rate is liable to provision of section 50C without indexation, benefits and assessable as short term capital gains is for removed from the facts and circumstances, in which these properties were acquired /sold. Firstly, t....