TaxTMI 
TaxTMI 
2022 (11) TMI 359
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....ary and against the facts of the case. Relief may please be granted by quashing the order passed u/s 263. 2. In the facts and circumstances of the facts and in law, the ld. PCIT has erred in holding that the order passed u/s 143(3) dated 18-10-2018 is erroneous and prejudicial to the interest of the Revenue. The action of the ld. PCIT is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the order passed u/s 263 and holding the order passed u/s 143(3) dated 18-10-2018 as not erroneous and prejudicial to the interest of Revenue. 3. The assessee craves it right to add, amend, or alter any of the grounds on or before the hearing. 3. At the outset of the hearing, the Bench noted that there is delay of 289 days in filing the appeal for which the ld. AR of the assessee filed an application dated 12-03-2022- for condonation of delay by taking the resort of Hon'ble Supreme Court order dated 10 JAN 2022 (Civil Original Jurisdiction - MA No. 21 of 2022 in MA No. 665 of 2021 in Suo Motu Writ Petition (C) No. 3 of 2020 - In Re: Cognizance for Extension of Limitation due to outbreak of COVID-19. The ld. AR further submitted that u....
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....n, the assessee debited transfer expenses, indexed cost of acquisition and indexed cost of improvement. The AO thus noted that the assessee furnished documentary evidences of all such expenses except documentary evidences of indexed cost of construction expenditure on account of RIICO norms of Rs.1,13,175/- for which the AO issued notice u/s 142(1) of the Act on 5-10-2018 demanding the documentary evidences for the aforesaid expenses. In response to the notice, the assessee filed the reply on 13-10-2018 narrating it as under:- ''Out of total cost of construction, the assessee firm has paid Rs.1,13,175/- for construction expenditure on account of RIICO norms. Copy of ledger account evidencing the same has already been submitted for your verification.'' Taking into consideration the present facts and circumstances of the case, the AO observed that the assessee has simply submitted the ledger account of the construction expenses on account of RIICO norms of Rs.1,13,175/- but the assessee did not submit any bills/vouchers and also did not furnish the bank statement from where the amount of expenses was debited. He further observed that the primary onus lies with the assessee to sub....
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....12,49,882/- and thereafter from 2004 to 2005 there are only cash payments against the vouchers. 4. The shop under construction ledger shows opening balance of Rs. 12,49,882/-as on 01.04.1981. However, you have claimed indexation from F.Yr. 2000-01. It is not clear as to in which period the construction was actually under taken. AO allowed the indexed cost without examining the claim on the basis of proper evidences. AO has disallowed only Rs. 1,13,175/- against the claim of Rs. 97,71,650/-. Besides this, AO made no efforts to ascertain whether the building portion of asset sold was a depreciable asset or not, AO failed to obtain the bifurcation of sales pertaining to building and land and if the factory premises was the depreciable asset it should have been subjected to short term capital gain. 3. In view of the above, it appears that the assessment order passed u/s 143(3)of the I.T. act 1961 in your case for A.Y. 2016-17 on 18-10-2018 is erroneous in so far as it is prejudicial to the interest of the revenue. 4. I, accordingly, propose to modify the order on the above issue under the power vested with me u/s 263 of the I.T. Act, 1961. You are, hereby, allowed an opportuni....
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..... It is also seen from the ledger account of Shop under Construction that there is an opening balance as on 01.04.1981 of 12,49,882/- and thereafter from 2004 to 2005 there are only cash payments against the vouchers 6. You have claimed indexed cost of interest amounting to Rs. 1,69,335/- for FY 2007-08 Rs. 2,04,754 for FY 2008- 09, Rs 1,28,106 for FY 2009-10 and Rs. 66,863/- for FY 2010-11 aggregating Rs 5,69,058/-. There are no documentary evidences about the loans taken by you and so utilized towards construction on which these interest payments have been made. There is no copy of bank statement or interest certificate on record. Our humble submissions in respect of all the above issues are as under: 1. FMV of land of Rs. 59,910/- as on 01/04/1981. During the course of assessment proceedings, vide letter dated 3 October, 2018 (P.B.: 6 to 8), a submission was made regarding the basis of estimation. It was submitted that Fair Market Value as on 01/04/1981 is taken @ Rs. 15 per sq. mtr. It was also explained that the value is very meager and most reasonable. Looking to the meager valuation adopted, the LD AO, after applying his mind, accepted the said valuation to be fair. Th....
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.... Rs. 12,49,882. Further construction was done in FY 2004-05 for Rs. 6,48,172 Total Cost of Rs. 18,98,054 (12,49,882+6,48,172) is evidenced from Balance Sheet as at 31.03.2005 Paid to RIICO and construction activity 6,48,172 Thus, the Id. AO has rightly allowed the indexation from FY 2000-01. It is humbly submitted that there is no error in the order of Id. AO, nor any prejudice is caused to the revenue on account of allowing the indexation of shop under construction amounting to Rs. 12.49,882 from FY 2000-01 5. Shop Construction in F.Y. 2004-05 Shop construction again took place in FY 2004-05 for a sum of Rs. 6,48,172/-. Out of Rs. 6,48,172/-, Rs. 3.41,005 was paid to RIICO as evidenced by ledger account submitted to AO (P.B.: 27 to 28). It was submitted that AY 2005-06 was assessed u/s 143(3) (P.B.: 49 to 55) and copy of the assessment order was submitted. The verification of supportings and vouchers of construction was done during the course of assessment proceeding u/s 143(3). Ld. AO accepting the history of the case, which stood verified u/s 143(3) was well within the judicial norms: Thus complete enquiry was conducted and judicious view was taken. Therefore, there....
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....rence to such enquiries has not been made in the order of the assessment, but the same is apparent from the record of the proceedings, in the present case, without anything to say how and why the enquiry conducted by the Assessing Officer was not in accordance with law, the invocation of jurisdiction by the CIT was unsustainable. As the exercise of jurisdiction by the CIT is founded on no maternal, it was liable to be set aside Jurisdiction under section 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something. In view of above submissions, it is humbly submitted that the order passed u/s 143(3) dated 18.10.2018 by the AO was based on exhaustive enquiries conducted with reference to above matters. The order was neither passed in haste nor without enquiry. The order was passed after due enquiry and deliberation and the AO was alive to and examined all relevant issues of fact and law. The order of assessment cannot be termed as erroneous or prejudicial to the interest of the revenue and revisional jurisdiction u/s 263 cannot be invoked. There can be ....
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....ger account of "shop under construction reflects all cash payments and interest capitalization through journal entry. Thus, assessees' explanation with regard to claim of indexed cost of interest is not tenable and without any foundation. The ledger account of shop under construction lacks credibility and does not support the claim of the assessee. Assessee has claimed indexed cost of building No. 01 on the amount of Rs. 12,49,882/- from F.Yr. 2000-01 on building No. 02 on the amount of Rs. 6,48,172/ from F.Yr. 2004-05. It is seen that the amount Rs. 12,49,882/- is the opening balance as on 01.04.1981 of shop under construction ledger A/c. For building No. 02 indexation from 2004-05 has been claimed on amount of Rs. 6,48,172/-. From the ledger A/c of 'shop under construction', it is seen that all the expenses are incurred in cash through various vouchers and there is no supporting evidences as to what these payments were made for. The claim of indexed cost with respect to this expenditure is not supported by any credible documentary evidence. AR has submitted that FMV of land as on 01.04.1981 was taken @ Rs. 15 per sq.metre which was very reasonable However, it is seen ....
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..... On that basis the Commissioner of Income Tax had, after setting aside the order of the Assessing Officer, simply directed the Assessing Officer to carry thorough and detailed Inquiry. It is this order which is uphold by the High Court. We see no reason to interfere with the order of the High Court. The Special Leave Petitions are dismissed." Reliance has been placed on the following judicial pronouncements in this regard: 1. In the case of M/s Gee Vee Enterprises 99 ITR 375 (Delhi High Court)[1995]. It was held that the Assessing officer (AO) is not only an adjudicator but also an investigator, and failure of the AO to conduct the required inquiring and accepting the statement of the assessee without due verification renders the order erroneous as well as prejudicial to the interests of the revenue. Absence of proper inquiring by the AO would render the assessment order erroneous as well as prejudicial to the interest of revenue as held in following cases: Jagdish Kumar Gulati vs CIT 269 ITR 71 (Allahabad) Duggal & Co. 220 ITR 456 (Delhi) K. A. Rama Swami Chettiar vs CIT 220 ITR 657 (Mad) (b) Hon'ble Supreme Court in the case of Tara Devi Agarwal vs. CIT [(1....
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....or any error or prejudice to revenue. The assessee firm has paid tax of Rs. 5,29,95,059/-. 6. Ld. PCIT had raised four issues in the Show Cause Notice dated 16/3/2021 (PB 63-65): (i) FMV of land as on 1/4/1981 is INR 59,910. (ii) Indexation of book value of building. (iii) Interest forming cost of building. (iv) Indexation of shop - INR 12,49,882. 7. The FMV of land as on 1/4/1981, was taken @ Rs. 15 per sq. meter (15* 3994= 59,910). The said valuation was most reasonable. The land was sold @ Rs. 60250 per sq. meter (PB 13). Therefore, the FMV of the same as on 1/4/1981 constituted just 0.02% (15/60250*100= .02%). Similarly, the indexed cost of acquisition to sale consideration is just 0.27% (647627 / 240638500*100 = 0.27%). In this view of the matter, ld. AO, accepted the FMV looking to the facts and applying his judicial wisdom in this regard. There is no error on his part in accepting this valuation. 8. The indexation of building was taken from the year 1981-82 because after purchase of land in year 1972 the building was constructed i.e. it existed prior to 1/4/1981. RIICO does not allow to remain the land vacant or unused. Reference of 31/3/2005 was only to....
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....s order which is reproduced below: "4. During the assessment proceedings, it has been noticed that the assessee firm sold a property situated at E-101, Road No. 8, VKI Area, Jaipur having sales consideration of Rs. 24,06,38,500/- to M/s Prem Motors Pvt. Ltd. and computed long term capital gain of Rs. 22,94,16,850/-. In the computation of capital gain, the assessee debited transfer expenses, indexed cost of acquisition and indexed cost of improvement. The assessee furnish documentary evidences of all such expenses, but, failed to furnish documentary evidences of indexed cost of construction expenditure on account of RIICO norms of Rs. 1,13,175/-. In this regard, notice u/s 142(1) of the Act issued to the assessee on 05.10.2018 specially asking the documentary evidences for the aforesaid expenses. 16. During the assessment proceedings it was also submitted that for the intervening period A.Y. 2005-06, the assessment was completed vide order under section 143(3), therefore, the factual position till that time stood examined by the Department. The assessment order for A.Y. 2005-06 was also filed before Id. AO (PB 49-55). 17. Ld. PCIT did not consider, in correct perspective ou....
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....ledger account and has allowed the claim to the assessee. Even the interest has been allowed as cost even though the loan was taken after the construction has been completed and the purpose of the capitalization of loan after the construction is not called for and placed on record. So, these issues are not examined by the AO in the assessment proceeding and therefore, he supported the order of the PCIT in the proceeding u/s. 263. 10. In the rejoinder the ld. AR of the assessee submitted that all the details were very well examined by the AO and placed on record merely the same is not discussed does not hold the order prejudicial to the interest of the revenue. As regards the claim of depreciation the same is added back while computing the capital gain. The building was old and minor construction was of no use and therefore, the AO has considered it being very minor amount. Relying on the judgement of Hon'ble Madras High Court the ld. AR of the assessee submitted that deprecation asset along is not transferred here the major part of asset is appreciation of land price and not the building and therefore, ld. AO has appreciated these facts and considered this aspect and when two view....
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....to consideration the submissions of the assessee but found that the assessee could not submit the proof of genuineness of transactions relating to indexed cost of expenses of construction of Rs.1,13,175/- which he disallowed and added the same to the total income of the assessee for the year under consideration and made the assessee ineligible to get deduction of indexed cost of improvement as per provisions of Section 48 of the Act. Against the assessment order dated 18-10-2018, a show cause notice u/s 263 of the Act was issued on 16-03-2021 to the assessee by the ld. PCIT which was replied by the assessee vide letter dated 25-03-2021 (PB-56-62) but he did not find favour. However, the ld. Pr. CIT, Jaipur 1 held that the order passed by the AO was erroneous in so far as it is prejudicial to the interest of revenue and thus set aside the assessment order dated 18-10-2018. Basically, it is noted that issues raised by the ld. Pr. CIT(A) in his show cause notice dated 16-03-2021 are as under:- (i) FMV of land as on 1/4/1981 is INR 59,910. (ii) Indexation of book value of building. (iii) Interest forming cost of building. (iv) Indexation of shop - INR 12,49,882. 13. From ....
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....e assessee demonstrated us that while calculating the effect of the depreciation claimed for one year is already given and the same is considered by the AO by taking a plausible view. Thus, it is found that the AO has rightly allowed the claim of the assessee and there is no infirmity in his order. As regards the capitalization of interest cost, it is noted that borrowing from SBBJ was duly reflected in the balance sheet as on 31-03-2002 as Loan (SBBJ) amounting to Rs.13,33,301.25 (PB-46). The loan was taken in the name of partner but it was availed by the firm and duly appearing the in the books of the firm this fact is also not disputed by the revenue. The bank statement was furnished by the assessee and considered by the AO while passing the order and the ld. PCIT is finding fault from the same is taking a different view on the matter for which the AO has already applied his mind. It is also notable that SBBJ had merged with SBI at the time when the assessee took the copy of the bank statement of earlier period. All these transactions are duly recorded in the audited books of accounts and has duly submitted in the assessment proceedings and the same is duly considered by the AO ....
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....Corporation (2009) 314 ITR 81 held that the jurisdiction u/s 263 can be exercised only when both the conditions are satisfied. First order of the AO should be erroneous and second it should be prejudicial to the interest of the Revenue. These two conditions are conjunctive. Further it is also noteworthy that once the AO has taken a plausible view then the ld. Pr.CIT - 1 should not interfere with the order of the AO as held by the Hon'ble Rajasthan High Court in the case of CIT vs. Chambal Fertilizers and Chemicals Ltd. (2013) 258 CTR 540. It is also notable that ld.Pr CIT cannot invoke his powers to correct each and every mistake or error committed by the AO. Every loss to the Revenue cannot be treated as prejudicial to the interest of the Revenue. If the AO has adopted the one of the courses permissible under the law or where two views are possible and the AO takes one view to which the ld. Pr CIT -1 does not agree then in that situation also the order cannot be held as erroneous and prejudicial to the interest of the Revenue. The AO is a quasi-judicial authority and his order cannot be held as erroneous only for the reason that the ld. Pr. CIT does not feel satisfied with his....