TaxTMI 
TaxTMI 
2023 (4) TMI 228
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....l in law, the learned CIT erred in initiating revision proceedings u/s 263 of the Act, on the same issue which was already considered and detailed enquiry in the course of assessment proceedings u/s 143(3) of the Act and therefore, the jurisdiction assumed to invoke the provisions of Sec. 263 of the Act is bad in law and liable for void ab initio. (3) On the facts and in the circumstances of the case as well in law, and without prejudice to the other grounds, the learned CIT erred in appreciating the fact that complete details in relation to the matters for which proceedings u/s 263 of the Act has been initiated were submitted before the Assessing Officer during the course of assessment proceedings. (4) On the facts and in the circumstances of the case as well as in law, the learned CIT erred in restoring the matter back to the Assessing Officer, without giving a clear findings on the issue on which the proceedings u/s 263 of the Act, was initiated and hence, not justified. (5) The appellant craves leave to add, amend, alter, delete, change or modify any ground of appeal before or at the time of hearing." 3. In the assessee's appeal under consideration, Learned Principal Com....
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....e A.Y 2013-14 in his case, the capital gains from sale of the 129, Palanpur district Surat, plot has been wrongly accepted by the AO as Long Term Capital Gains. 6. It was also observed by Ld. PCIT that, besides the transaction in respect of the land at Palanpur as discussed in the preceding paras, there is another plot of land situated in Asarma Village which has been sold during the year by the assessee and short term capital gain of Rs.2,08,797/- has been shown. This plot of land has been shown as purchased on 17/07/2007 at cost of Rs.86,666/- and sold on 29/06/2012 for Rs.40,70,500/-. The Asarma village plot sale registration deed shows the registered sale value at Rs.81,41,000/- and stamp duty paid of Rs.5,44,500/-. Since, in the state of Gujarat, the stamp duty is 4.9 % of the Jantri value, the estimated value of the property by the Sub-Registrar office is Rs.1,11,12,245/-. The AO during the course of assessment had referred the case for valuation to the Valuation Cell of the department. As per the valuation report of the Valuation Officer, Valuation Cell, the Fair Market Value of the property is Rs.1,00,01,800/- as on 29/06/2012. It was noticed that the share of assessee in ....
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....y the assessee and other co-purchasers on various dates in February and March-2008 to the sellers of the land. In fact, the registered sale value as per the purchase deed is Rs.8,50,000/- only. From the payment details mentioned on page-15 of the purchase deed it is seen that the sum of Rs.8,50,000/- has been paid to four co-sellers of the property. Contrary to this fact found mentioned in the purchase deed, the assessee in the computation of long term capital gains submitted with the computation of income for the year has claimed the purchase cost of the said land at Rs.24,09,024/- and the indexed cost of acquisition at Rs.35,26,612./-. It was thus observed that the assessee has claimed higher amount as purchase cost than what is mentioned in the purchase deed. On the other hand, if the claim of the assessee that the purchase cost is Rs.24,09,024/- is accepted as correct then only part of the payment to extent of Rs 8,50,000/- can be said to have been received during February and March-2008. It cannot be said that the purchase consideration has been wholly paid in year, 2008. It is only on 17.05.2010, when the purchase deed was registered that the purchase can be said to have been....
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.... to verify the above discussed facts relating to correct date of purchase and the correct purchase consideration and to calculate the correct capital gains that has accrued to the assessee from sale of the land. 9. The facts relating to second issue raised by ld PCIT are as follows: "With regard to the sale transaction by the assessee of the other plot of land at Village Asarma, the contention of the assessee is that the question of enhancement of the sale consideration on the basis of the valuation made by the DVO, at Rs.1,00,01,800/- vis-a-vis the sale consideration claimed by the assessee of Rs. 81,41,000 /- does not arise, since the detailed explanation duly substantiated by cogent evidence was given to the AO vide submissions dated 6.8.2015, 04.01.2016, and 22.3.2016 and the same has been rightfully accepted by the AO. The assessee has argued that it is not a case of non-application of judicious and fair mind on the part of the AO as the matter has been duly considered by the AO at the time of assessment proceedings. The assessee has also contended that even after consideration of the report of the DVO and enhancement of Rs.9,30,400/- to the sale consideration share of the ....
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....the AO after due verification, there would be no tax liability." 12. However, Ld. PCIT rejected the contention of assessee and observed that as per provisions of section 54B(1) of the Act, subject to the provisions of section 54B(2) of the Act, where the capital gain arises from the transfer of a capital asset being land which, in the two year immediately preceding the date of which the transfer took place was being used by the assessee being an individual or his parents or a Hindu undivided family for agricultural purpose, and the assessee has with in a period of two years after the date, purchased any other land for being used for agricultural purposes. Then the capital gains would be charged to tax in accordance with the provisions of those sections. In the above context it is observed in respect of the capital gains from sale of the Asarma Village which has been treated by the assessee as exempt u/s 54B that the AO has not raised any effective query either vide any letter or vide any notice or vide any note sheet entry to enquire about satisfaction of the conditions specified for allowance of deduction u/s54B of the Act. The only question asked by the AO with regard to deducti....
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....n the Jantri value and the registered value. The AO has not applied his mind to this aspect which is required to be verified thoroughly. In the light of the above discussions, the assessment order in the case of the assessee dated 28.03.2016 passed u/s 143(3) of the I T Act for A.Y. 2013- 14 was found to be erroneous and prejudicial to the interest of revenue and accordingly the same was set aside with directions to the assessing officer to frame the assessment afresh in accordance with the discussion and directions of Ld. PCIT. 14. Aggrieved by the order of Ld. PCIT, the assessee is in appeal before us. 15. Regarding first issue, Ld. Counsel for the assessee submitted that the main issue is that the assessee has shown Long Term Capital Gain instead of short term capital account. The Ld. Counsel submitted that assessee purchased property on 17.04.2008, however the documents were released on a later date by registering authority. The Ld. PCIT has exercised his jurisdiction based on the audit objection only. The Ld. Counsel took us through page no.22 of the paper book wherein the details of sales and purchases are mentioned. The Ld. Counsel submitted that during the assessment proc....
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...., and perused the fact of the case including the findings of the ldPCIT and other materials brought on record. We note that Assessing Officer has asked from the assessee, during the assessment stage, by way of a letter dated 25.02.2016, to submit the details in respect of agricultural land and the exemption claimed by the assessee under section 54B of the Act. The relevant para of letter dated 25.02.2016, of assessing officer ( to the extent useful for our analysis), is reproduced below: "3......The agricultural land should be used by the individual or his parents for agricultural purpose at least for a period of two years immediately preceding the date of transfer.From the submitted details and documents, it is found that you had not shown any agriculture income in last two years i.e.2012-13 & 2013-14, also not submitted the proof of Agriculture activity or agriculture income from the land bearing R.S. No. Block No. 197 & R.S. No. 86/1, Sp. Mtr.12346/ of Olpad, till date to this office. 4. Thus, the amount claimed as exemption in the computation of income for the AY.2013-14 is not offered for the taxation has thereby escaped from the assessment. In this circumstances, you are ....
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....re assessee has rightly offered the capital gain in the assessment year 2013-14. Having examined these facts, the assessing officer had allowed the claim of the assessee. 14. The Assessing Officer has also discussed the issue of agricultural land and exemption under section 54B of the Act in his order, vide para no.4 & 5 of the assessment order wherein the Assessing Officer after taking into account entire facts of the assessee, framed the assessment under section 143(3) of the Act, dated 11.03.2016, therefore order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the Revenue. 15. We note that Hon`ble Bombay High Court in the case of Mrs. Parveen P. Bharuchavs 2 Union Of India, WRIT PETITION NO. 10437 OF 2011, dated 27 June, 2012 held that an investment made in Bonds out of advance received for transfer of land before the actual date of transfer would be entitled to the benefit of exemption under Section 54B of the Act. The findings of the Hon`ble Court is as follows: "8 The Tribunal in the case of Ramesh NarhariJakhdi (supra) while construing Section 54B of the said Act applied the Circular No.359 dated 10.5.1983 to hold that an investm....
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....d as to the eligibility otherwise under section-80-I of the Act requires to be noted to be rejected. An assessment order cannot not incorporate reasons for making/granting a claim of deduction. If it does so, an assessment order would cease to be an order and become an epic tome. The reasons are not far to seek. Firstly, it would cast an almost impossible burden on the Assessing Officer, considering the workload that he carries and the period of limitation within which an order is required to be made; and secondly the order is an appealable order. An appeal lies, would be filed, only against disallowances which an assessee feels aggrieved with". 10 Further the reasons recorded by Respondent No.1 for reopening the assessment do not state that the deduction under Section 54E was not considered in the assessment proceedings. In fact from the reasons, it appears that all facts were available on record and according to the respondents was only erroneously SNC 16 WP 10437-11(final).doc granted. This is a clear case of review of an order. The application of law or interpretation of a statue leading to a particular conclusion cannot lead to a conclusion that tax has escaped assessment fo....
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....tice and not sufficiency of reasons in issuing a notice for reassessment. We are considering the jurisdiction to issue a notice under Section 148 to reopen proceedings. In view of what is stated earlier, we do not find any merit in this contention." 16. We note that Coordinate Bench of ITAT Ahmedabad in the case of Rahul G. Patel [2018] 97 taxmann.com598 (Ahd.Trib) held that where assessee invests earnest money or advance received on sale of capital assets in specified assets before date of transfer of asset, amount received will qualify for exemption under section 54EC of the Act. The important findings of the Coordinate Bench is reproduced below: "19. In the next ground of appeal, grievance of the assessee is that the ld.CIT(A) has erred in not granting deduction/exemption under section 54EC of the Act amounting to Rs.50 lakhs. 20. Brief facts of the case are that after agreement to sell the assessee has received sale consideration from the vendee. He has made investment in NHAI bonds and claimed deduction under section 54EC. The ld.AO has observed that such investments were made before the registration of sale deed, and therefore, he is not entitled for the exemption. The ....
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....ein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer's order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer's order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the....
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....8 of Paper Book-1) [Specific Queries raised at Point No: (9), (11), (13) and (14)] 04-01-2016 (At Page No: 19 - 23 of Paper Book-1) [Appellant's replies are at Point No: (8), (10), (12) and (13)] 3 18-03-2016 (SCN) (At Page No: 174 - 177 of Paper Book-1) 22-03-2016 (At Page No: 178 - 183 of Paper Book-1) On perusal of the above notices and the explanations with evidences made through various written submissions, the AO has made the inquiry in respect of the LTCG earned on the piece of agriculture land in question and the appellant had offered the detailed explanations substantiated by the cogent and authentic evidences such as registered purchase deed, registered sale deed, computation of LTCG etc., which has, after the examination and verification of the same, rightfully been accepted by the AO. On going through the copy of the purchase deed of the said land, we find that direct possession of the land in question had been handed over/transferred to the appellant being one of the coowners/ purchaser of the land on 17-04-2008 only and not on 17-05-2010 as presumed by PCIT. As a matter of fact, the payment consideration as also the possession of the said land had been completed ....
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....OF AGRICULTURE LAND DATE AMOUNT (Rs.) DATE AMOUNT (Rs.) 15-12-2011 10,50,000/- 19-04-2012 43,00,000/- 21-12-2011 18,00,000/- 30-04-2012 25,00,000/- 19-01-2012 12,20,500/- 30-04-2012 29,00,000/- 30-04-2012 21,25,000/- It is very much evident from the above details that the entire sale consideration of agriculture land in question sold was received on or before 19-01-2012 and out of the said sale proceeds, the appellant had made payments towards the purchase consideration of the another/new agriculture land purchased. This very fact has not at all been disputed by the Pr. CIT. Hence, we note that there is no question of absence of any inquiry nor any point of "lack of inquiry" and thus, the action of the Pr. CIT to assume the jurisdiction u/s 263 of the Act (under Explanation 2(a) thereto) being without jurisdiction, bad in law and thus, liable to be quashed. 22. From the above facts of the assessee`s case, we note that assessee during the assessment stage has submitted all the documents, details and the explanations required by the Assessing Officer and just because the Assessing Officer does not bring these facts in his assessment order....
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.... 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 insofar 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 in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. [See: Parashuram Pottery Works Co. Ltd. v. ITO[1977] 106 ITR 1 (SC) at page 10]. ****** From the aforesaid definitions it is clear that an order cannot be ....
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....ight of the aforesaid principle, we find that the Assessing Officer had called for explanation on this very items, from the assessee and the assessee had furnished his explanation vide letter dated 26-9- 2002. This fact is even taken note of by the Commissioner himself in Para 3 of his order dated 3-11-2004. This order also reproduces the reply of the respondent in Para 3 of the order in the following manner : "The tools and dies have a very short life and can produce up to maximum 1 lakh permissible shorts and have to be replaced thereafter to retain the accuracy. Most of the parts manufactured are for the automobile industries which have to work on complete accuracy at high speed for a longer period. Since it is an ongoing procedure, a company had produced 10,75,000 sets whose selling rates is inclusive of the reimbursement of the dies cost. The purchase orders indicating the costing includes the reimbursement of dies cost are being produced before your honour. Since the sale rate includes the reimbursement of dies cost and to have the matching effect the cost of the dies has been claimed as a revenue expenditure." 14. This clearly shows that the Assessing Officer had underta....
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....tion 263 of the Act when two views are possible and following observations of the Tribunal, in this backdrop, become relevant : "38. Still further, the Hon'ble Supreme Court in Malabar Industrial Co. Ltd.'s case (supra) has held that when two views are possible and the Assessing Officer has taken one of the possible view, then the order cannot be held to be prejudicial to the interest of the Revenue. Since the CIT could not come to a definite finding that the expenditure in question was a capital expenditure in the proceedings under section 263, in our opinion, the order of the Assessing Officer could not be held to be erroneous." 18. Let us look into the matter from another angel. What was the material/information available with the Assessing Officer on the basis of which he allowed the expenditure as revenue? It was disclosed to him that the assessee is a manufacturer of car parts. In the manufacturing process, dyes are fitted in machines by which the car parts are manufactured. These dyes are thus the components of the machines. These dyes need constant replacement, as their life is not more than a year. The assessee had also explained that since these parts are manu....
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....of the assessee that a part of the machine (out of 25 machines) needed repairs. The entire machine had been replaced. Therefore, the expenditure incurred by the assessee did not fall within the meaning of "current repairs" in section." In the present case, finding is just the opposite, viz., dyes and tools are part of the machines. Replacing these dyes the purpose is to maintain the existing assets, viz., machine and not to bring a new asset. Moreover, case at hand is not a case of "repairs of machinery" which was the situation is in Saravana Spg. Mills (P.) Ltd.'s case (supra). The present case proceeded on the controversy right from the order of Assessing Officer till ITAT as to whether this expenditure was revenue or capital in nature. Even before us, arguments rested on this aspect. 20. Likewise, whether the Commissioner should have recorded definite finding or not, may not be very relevant factor in the present case where on the facts of this case we have found that the opinion of the Assessing Officer in treating the expenditure as revenue expenditure was plausible and thus there was no material before the CIT to vary that opinion and ask for fresh inquiry. 21. Thus....