TaxTMI 
TaxTMI 
2025 (3) TMI 2126
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.... assessment by invoking provisions of section 263 of I.T. Act 1961 considering the facts and evidence on record. 4) Any other ground shall be prayed at the time of hearing." 3. The Registry has pointed out that there is a delay of 331 days in filing the present appeal by the assessee before the Tribunal. While going through the record available before us, we find that the learned Counsel for the assessee, Shri Dewani, has filed an application dated nil, seeking condonation of delay in filing the present appeal before the Tribunal, which is even supported by a sworn Affidavit. The contents of the application seeking condonation of delay of 331 days is hereby reproduced below:- "1. In the case of assessee, order u/s 263 of I.T. Act 1961 has been passed by Hon'ble Principal Commissioner of Income Tax-2, Nagpur on 23/03/2022 for Asstt. Year 2017-18. The due date of submission of appeal before Hon'ble ITAT against order passed by Hon'ble Principal Commissioner of Income Tax-2, Nagpur was 22/05/2022. 2. It is respectfully submitted that order u/s 263 was passed on 23/03/2022 wherein assessment framed was set aside. The assessee entertained mistak....
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....elay in filing of appeal and we are satisfied that the delay of 331 days in filing the appeal is due to reasonable/sufficient cause. Consequently, we condone the delay and admit the same for adjudication on merits. 6. Insofar as the merits of the case are concerned, the facts are, the assessee is an Individual. For the year under consideration, on 31/01/2018, the assessee filed his return of income electronically, disclosing total income of Rs. 12,96,33,940. During the course of regular assessment framed under section 143(3) of the Income Tax Act, 1961 ("the Act"), reasons for selection under CASS was to verify capital gain declared in the return of income filed by the assessee. The Assessing Officer noted that the assessee, during the year, has derived income from business of trading in Iron & Steel, income from house property, income from capital gain and income from other sources. Necessary enquiries were conducted by the Assessing Officer by issuing statutory notices in response to which the assessee furnished details of sources of income, capital introduction and specific details of capital gain were called and examined. The assessee, in response to the notice issued under ....
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....mitted that the entire issues relating to the income from LTCG was duly and fully covered in the assessment proceedings u/s 143(3) of the I.T. Act, 1961. The issue relating to LTCG were thoroughly and fully looked into by the Ld. AO in the assessment proceedings. Since the issue based on which the revision proceedings is sought to be carried out has itself been dealt with during the course of the assessment proceedings in details and to the satisfaction of the Ld. AO, hence, the order u/s 143(3) is neither erroneous nor prejudicial to the interest of the Revenue and hence the carrying out of the revision proceedings are not justified. Further, the assessee in support of his claim furnished working of Indexed Cost of acquisition and Indexed Cost of Improvement. However, he has failed to submit documentary evidence in this regard except copy of the sale deed of the land sold." 9. The learned PCIT further noted vide Para-2 to 8 of the impugned order and the same is enumerated below for ready reference:- "2. On examination of the case records, it is observed that the assessee has shown taxable LTCG on sale of his share in Non Agricultural land bearing 1) Khasara No. 16 havi....
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....rting documents / evidence has been furnished in this regard. It is further observed, on perusal of the sale deed in respect of above mentioned land that all the above mentioned land sold by the assessee is 'Non Agricultural land' and these land were acquired by the assessee as 'duly converted Non Agricultural land'. Thus, there is no change in the nature of land purchased and land sold and therefore does not seem to be any tangible improvement made by the assessee during the holding period. Therefore, the claim of Rs. 7,72,61,368/- as cost of improvement with indexation remained unexplained. The AO has not called for supporting evidence in this regard nor has he verified this crucial aspect during the course of assessment proceedings. 6. The AO has also failed to verify the issue as per CASS criteria that the sale consideration of the property shown in ITR is less than the sales consideration reported in form 26QB. 7. Therefore, the issues with respect to cost of acquisition with indexation claimed at Rs. 1,10,53,125/-, cost of improvement with indexation claimed at Rs. 7,72,61,368/-, expenditure wholly and exclusively in connection with transfer ....
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.... is directed to inquire into these issues. Therefore, in exercise of power vested in me u/s. 263 of the I.T. Act, 1961, I hereby set aside the order dated 18.12.2019 of the ACIT, Circle-3, Nagpur, passed u/s. 143(3) of the IT Act, 1961 in this case for the Assessment Order after giving conducting necessary inquiries year 2017-18 with a direction to pass a fresh opportunity of being heard to the assessee and conducting necessary enquiries." Consequent upon issuance of the impugned order so passed by the learned PCIT, the assessee filed appeal before the Tribunal. 11. Before us, the learned Counsel for the assessee, assailing the impugned order passed by the learned PCIT vehemently argued in support of its claim. He furnished a detailed submission which reads as under:- "B) Order u/s 263 has been passed by PCIT, Nagpur-2 on 23/03/2022 wherein assessment framed u/s 143(3) has been set aside for making necessary enquiries. PCIT-2 has concluded that capital gain is not been examined thoroughly and thus it is lack of enquiry. It is for this reason it is concluded that order passed is erroneous. (Para-7 to 10 of order u/s 263). C) In the regular assessment framed u....
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....is unjustified and consequent order passed is not in accordance with law. G) In notice u/s 263 it has been noted that no supporting documents are submitted (P-13). It is not necessary for A.O. to obtain all the documents verified and place on record. Query raised at para 3 is verifiable with reference to sale deed and documents annexed thereto. Indexed cost of acquisition is verifiable with reference to return of income. Sale consideration as reported in ITR and as reported in Form 26QB was explained to be on account of assessee holding only 90% of property. In the course of revision proceedings conclusion of PCIT at para 7 that there is lack of enquiry is not correct. H) Before PCIT written submission was made along with documentary evidence (P-15-18). Copy of purchase deed, sale deed and other documentary evidence was placed on record to explain entire issues raised in the notice u/s 263 of I.T. Act 1961. It was submitted that in case any further explanation or details are needed to provide opportunity for furnishing the same. Hon'ble PCIT has not made any enquiry herself. It has found no mistake in any of submission made. In fact no further query is raised ....
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....s 263 of I.T. Act 1961 is not in accordance with law. Reliance on: 1) ITA No. 1287/Pun/2017 in the case of M/s. Alfa Laval Lund AB vide order dated 02/11/2021.(P-78-84) (82, 83) [Vol.-1] K) Order passed u/s 263 of I.T. Act 1961 consequent upon audit objection is bad in law and unsustainable. Reliance on: i) 2024) 162 taxmann.com 759 (Delhi-Trib) Ahlcon Parenterals (India) Ltd. vs. PCIT(P-64-67) (67) [Vol.-1] ii) (2008) 296 ITR 0238 (P & H) CIT vs. Sohana Woollen Mills (P-68-72) (68, 71) [Vol.- I] iii) (2018) 103 CCH 0112 (Mum.HC) CIT vs. Maharashtra Hybrid Seeds Co. Ltd. (P-73-77) (77) [Vol.1] L) In the case of two co-owners for assessment of capital gain computation as declared by assessee has been accepted by the department. In the case of assessee it cannot be made differently. Order passed u/s 263 of I.T. Act 1961 is not in accordance with law. Reliance on: i)(2023) 151 taxmann.com 493 (Surat-Trib.) BhikhabhaiRajhabhaiDhameliya vs. PCIT - (P-41-51) (41, 48, 51) [Vol.-I] M) Fresh assessment is made u/s 143(3) / 263 on 20/03/2023. Appeal is filed by assessee in respect to addition m....
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....of improvement with indexations and an amount of Rs. 1,01,70,000/- as expenditure wholly and exclusively in connection with transfer. However, in the online submission submitted by the assessee no documents or explanation has been submitted by the assessee with regard to claim of cost of acquisition with indexation, cost of improvement with indexation and expenditure wholly and exclusively in connection with transfer. The assessee has only uploaded the scanned copy of the sale deed dated 29.09.2016 made in respect of the above land. From the contents of the sale deed it is seen that on page 8 it is mentioned that the expenses on preparation of the sale deed including the cost of stamp duty and registration fees will be paid by the assessee. Based on above the claim of expenditure wholly and exclusively in connection with transfer can be deducted however no details of the same has been furnished. However no purchase deed of the land has been filed/uploaded in support of the claim of cost of acquisition and as there is no details of when the land was purchased the claim of indexation remains unexplained. Further, the assessee has claim a huge amount of Rs. 7,72,61,3....
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....n of various issues including the capital gain/loss on sale of property. Thus, it was imperative for the Assessing Officer to verify the issue of scrutiny in detail. ii. The assessee has shown long term capital gain on sale of his share of non agricultural land. The working of capital gain has been given on page number 2 of the Order under Section 263. It is pertinent to mention that the assessment Order is just a 2 paragraph order having no discussion of the very issue for which the case was selected for scrutiny. iii. On going through the questionnaire issued by the AO, it is clear that there is no question which mentions the indexed cost of acquisition, indexed cost of improvement, and indexed cost of any other expenses wholly and exclusively related to transfer of Capital Asset. No supporting documents or explanation with regard to the deductions related to the transfer have been called by the AO. This is clear from the notices issued by the AO available in the assessment records. iv. The failure of the Assessing Officer in calling for the details related to the deductions claimed by the assessee have been discussed in detail by the Principal Commissi....
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....,61,368/-, expenditure wholly and exclusively in connection with transfer claimed at Rs. 1,01,70,000/- and difference in sale consideration as per income tax return and the amount reported in Form 26QB during the course of assessment proceedings. viii. During the course of proceedings initiated under section 263 against the assessee, the assessee filed interest details before the PCIT. However assessee has failed to prove with evidence as to how the payments were made wholly and exclusively for the purpose of acquiring or improving said property or anyway having direct nexus with the transfer of asset. Further Assessee has failed to provide bank statement, It is pertinent to mention that even if assessee had provided bank statement, it would also not be sufficient for claiming deduction because assessee had to prove with evidence as to how the said interest was wholly and exclusively expended for either acquisition or improvement or transfer of property. ix. Without prejudice to the above, it is further important to note that in consequence to the order passed by Principal Commissioner of Income Tax under section 263, further order has been passed by the Assessing....
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....essing Officer. It is pertinent to note that during the course of assessment proceedings, the Assessing Officer had issued notice under section 142(1) of Act, on 16/09/2019. In the aforesaid notice, the assessee was called upon to provide details regarding the source of income as mentioned in Para-1 of the said notice. At Para-4, the assessee was called upon to explain sale consideration of property reported in Schedule CG of the return of income at less than the sale consideration of the property reported in Form 26QB. The assessee was called upon to explain the capital introduced being very high as compared to profit after tax and thus was required to explain source of capital introduced in Capital Account. A detailed reply has been submitted by the assessee during the course of assessment proceedings, wherein, it was clearly explained that the assessee has earned income from capital gain on sale of property and securities during the year under consideration. Details of computation of capital gain are evident from the copy of income tax return placed on record on record in Paper Book Page-34 to 82, wherein, at Page-65 & 66, working of capital gain is disclosed. It clearly gives t....
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....bmit the same. In the impugned order passed by learned PCIT-2, Nagpur, no mistake or defect in the details submitted along with documentary evidence placed on record in the course of proceedings under section 263 of Act is found. The learned PCIT-2, Nagpur, has made no enquiry, if any, which was considered necessary to be conducted considering the facts and evidence on record. The learned PCIT has not called for any further details, if any, required by him to be considered even though the assessee had offered in the letter to be provided on being so called. The learned PCIT-2, Nagpur, has merely, by referring to reply submitted at Para-9 has noted the submission of the assessee in brief in impugned order passed under section 263 of Act. It is not the complete submission and documentary evidence, as has been submitted by the assessee before the learned PCIT-2, Nagpur, during the proceedings under section 263 of Act. Conclusion drawn by the learned PCIT, without specifying any mistake in the computation of income in setting aside the assessment to make further enquiries is unjustified. The learned PCIT cannot term the impugned order passed as erroneous in the absence of any mistake f....
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....o certain conditions. Instantly, we are confronted with a situation in which the revision was initiated on the basis of the AO sending a proposal to the CIT and not on the CIT suo motu calling for and examining the record of the assessment proceedings and thereafter considering the assessment order erroneous and prejudicial to the interests of the revenue. The AO recommending a revision to the CIT has no statutory sanction and is a course of action unknown to the law. If AO, after passing an assessment order, finds something amiss in it to the detriment of the Revenue, he has ample power to either reassess the earlier assessment in terms of section 147 or carry out rectification u/s 154 of the Act. He can't usurp the power of the CIT and recommend a revision. No overlapping of powers of the authorities under the Act can be permitted. As the revision proceedings in this case have triggered with the AO sending a proposal to the Id. CIT and then the latter passing the order u/s 263 of the Act on the basis of such a proposal, we hold that it became a case of jurisdiction deficit resulting into vitiating the impugned order. Without going into the merits of the case, we quash the imp....
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....e could be no justification to say that the order passed by the Assessing Officer is erroneous inasmuch as it is prejudicial to the interests of Revenue. Assumption of jurisdiction under section 263 is unjustified and consequent order passed is bad-in-law. On facts, it cannot be said that there is lack of enquiry for capital gain declared/assessed. Words used in Para-7 of the impugned order passed under section 263 of the Act as "thoroughly" clearly suggests that it is not the case of no inquiry. Degree of examination and the extent thereof cannot be a scope of revision. In the judgment of the Hon'ble Delhi High Court rendered in ITO v/s DG Housing Projects Ltd., [2012] 343 ITR 329 (Del.), the Hon'ble Court held as under:- "Held: Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. S. 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the Revenue. The expression ....
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.... condition or requirement which must be satisfied for exercise of jurisdiction under s. 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. This distinction must be kept in mind by the CIT while exercising jurisdiction under s. 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the ....