TaxTMI 
TaxTMI 
2022 (4) TMI 284
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....has erred in holding that the AO did not examine the details of ''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 we....
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....to penalty u/s 271B. Thus, the proceedings relating to penalty u/s 271B had been initiated. During the course 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 ....
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....r 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/- 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 o....
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....the A.Y. 2013-14 in your case in erroneous and prejudicial to the interest of the revenue for the reasons mentioned earlier on in this notice. Therefore, I intend to commence proceedings u/s 263 of the 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....
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....was declared. It is also noticed that land at Gayatri Enclave has been shown as investment and not as closing stock by the assessee in his balance sheet. 3) On the issue of taxability of income as per the declared head of income in return 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....
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.... observation be accepted for action however they can help formulate an opinion if on record at the time of examination of the assessment orders. In the present case all information on record was considered. For taking the said information into consideration reliance 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 verifi....
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....hich are subversive of the administration of revenue. There must be some grievous error in the Order passed by the Income-tax Officer, which might set a bad trend or pattern for similar assessments, which is to be considered as prejudicial to the interests of Revenue Administration. 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 he....
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....n now be treated as his income from business when information available in return of income and audited books of account indicate to the facts that the assessee's income is from capital gains and not from business & profession. He has grossly erred in overlooking the fact that could have 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 asse....
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....e assessee denovo in accordance with law after making the necessary enquiries, examination and verification in respect of the claim made by the assessee regarding the issue under discussion. The AO is directed to finalize the assessment keeping in view the information available in income tax returns and 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....
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....Ltd.Vs CIT 284 ITR 323 (SC), whereas the AO has accepted the claim of the assessee without having any revised return of income. In fact, in the instant case, the assessee has not filed any revised computation of income. 2. It may be mentioned that first notice u/s 143(2) was issued by the AO on 02.09.2014 and the case was transferred to the 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 ....
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....t appears that the AO has accepted the submissions of the assessee on its face value without examining these basic facts, which are very relevant for deciding whether, the assessee was engaged in real estate business or not. 1. Mehulbhai Durlabhjibhai Vithalani vs ACIT , Circle - 2(2), Surat. 2. Crompton Greaves Ltd. vs CIT -6, Mumbai.'' 10 We have heard the 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 du....
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....tural justice, a final opportunity is being provided before finalizing the assessment, to you to place your cards on the following issues. 1. During the FY 2012-13, you have sold two properties viz. C- 62 and C-64, Gayatri Enclave Jhujharpura, Jaipur for Rs. 50,51,000/- and Rs. 50,00,000/- respectively. The DLC of these properties as assessed by the Sub-Registrar is Rs. 1,06,15,216 and Rs. 1,06,16,150/- respectively. 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 pro....
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.... the assessee Shri Harshad Mehta by observing as under:- ''10. Keeping the above discussion in view by the virtue of the powers conferred on the undersigned under the provisions of Section 263 of the IT Act 1961 I hold that the order under Section 143(3) dated 29/3/2016 for assessment year 2013-14 passed by the assessing officer is erroneous insofar as it is prejudicial to the interest of revenue as the order has been passed by the assessing officer in a routine and perfunctory manner without making enquiries /verification which ought to have been made before accepting the submission made by the assessee regarding his claim to treat his income as business income when the income declared was under the head 'Capital Gains'. It is therefore liable to revision under explanation (2) clause (a), clause (b) of section 263 of the Income Tax Act. Hence the assessment order is set aside on this issue with a direction to the assessing officer to assess the case of the assessee denovo in accordance with law after making the necessary enquiries, examination and verification in respect of the claim made by the assessee regarding the issue under discussion. The AO is directed to ....