Commissioner Of Income Tax, Kota v. Shri Gopi Lal

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 132 / 2014 Commissioner of Income Tax, Kota ----Appellant Versus Shri Gopi Lal S/o Sh. Ram Chandra, Village Borkhera, Kota. ----Respondent Connected With D.B. Income Tax Appeal No. 139 / 2014 C I T, Kota ----Appellant Versus Shri Ram Sukh S/o Sh. Ram Chandra, Village Borkhera, Kota. ----Respondent _____________________________________________________ For Appellant(s) : Mrs. Parinitoo Jain with Ms. Shiva GoyalFor Respondent(s) : Mr. Aditya Bohra for Mr. Gunjan Pathak _____________________________________________________ HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 06/02/2018 1.In both these appeals common question of law and facts areinvolved hence they are decided by this common judgment. 2.By way of these appeals, the appellant has challenged thejudgment and order of the tribunal whereby tribunal has allowedthe appeal of the assessee. 3.This court while admitting the appeals framed followingsubstantial question of law:- 3.1Appeal No.132/2014 & 139/2014 admitted on 14.9.2015:- “Whether the Tribunal was legally justifiedin setting aside the order passed u/s 263 bythe CIT by which the assessing officer wasdirected to pass a fresh assessment orderconsidering that the transaction were anadventure in the nature of trade anddeduction u/s 54F and 54B were notallowable?” 4.The facts of the case are that the Assessing Officer came toknow that the assessee alongwith two other co-owners had soldland and received his share of Rs.82.50 lacs in December, 2006.According to him, the ground had converted their ancestralagricultural land into various small plots before selling the same todifferent persons and therefore the selling activities were clearlyan adventure in the nature of trade. The nature and volume oftransactions indicated that the assessee was enjoying the taxableincome during the previous year relevant to assessment yearunder consideration but had not filed any return of income. He,therefore, initiated the proceedings u/s 147 of the IT Act, 1961(hereinafter referred to as the Act) by issue notice u/s 148 of theAct on 29.10.2009. Since the assessee failed to comply with thenotice, the AO asked the assessee to explain as to why theassessment proceedings in his case should not be finalized as perthe provisions of Section 144 of the Act . The assessee requestedto consider the return of income filed by him on 4.3.2010 before the ITO Ward 2(1), Kota, in response to the notice issued to himu/s 148 of the Act. 5.We have heard counsel for the appellant. 6.Taking into consideration, the tribunal while considering the matter has observed as under:- “12. We have considered the submissions of boththe parties and carefully gone through thematerial available on record. In the present case,it is noticed that the Assessing Officer issued thenotice u/s 148 of the Act dated 29/10/2009 onlyon this basis that the assessee sold the land invarious small plots to different persons, so it wasan adventure in nature of trade, therefore, theprovisions of Section 54B and 54F of the Act werenot applicable. Thereafter, the Ld. CIT on theproposal dated 04/03/2011 moved by the DCIT,Circle- Sawai Madhopur issued a show causenotice dated 01/1/2013 and consequently passedthe order u/s 263 of the Act on 06/3/2013. 13. In the present case, the Ld. CIT exercised hisrevisionary powers of the Ld. CIT u/s 263 of theAct. The said powers may be summarized asunder:- (i) “The CIT must record satisfaction that theorder of the AO is erroneous and prejudicial to theinterests of the Revenue. Both the conditionsmust be fulfilled. 13. In the present case, the Ld. CIT exercised hisrevisionary powers of the Ld. CIT u/s 263 of theAct. The said powers may be summarized asunder:- (i) “The CIT must record satisfaction that theorder of the AO is erroneous and prejudicial to theinterests of the Revenue. Both the conditionsmust be fulfilled. (ii) Sec. 263 cannot be invoked to correct eachand every type of mistake or error committed bythe AO and it is only when an order is erroneous,that the section will be attracted. (iii) An incorrect assumption of facts or anincorrect application of law will suffice for therequirement or order being erroneous. (iv) if the order is passed without application ofmind, such order will fall under the category oferroneous order. (v) Every loss of revenue cannotbe treated as prejudicial to the interest of theRevenue and if the AO has adopted one of thecourses permissible under law or where two viewsare possible andthe AO has taken one view -withwhich the CIT does not agree, it cannot be treated as an erroneous order, unless the viewtaken by the AO is unsustainable under the law. (vi) If while making the assessment, the AOexamines the accounts, makes enquiries, applieshis mind to the facts and circumstances of thecase and determines the income, the CIT, whileexercising his power under s. 263, is notpermitted to substitute his estimate of income inplace of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vestedin him and if he exercises such power inaccordance with law and arrives at a conclusion,such conclusion cannot be termed to be erroneoussimply because the CIT does not feel satisfiedwith the conclusion. (viii) The CIT, before exercising his jurisdictionunder s. 263, must have material on record toarrive at a satisfaction. (ix) If the AO has made enquiries during thecourse of assessment proceedings on the relevantissues and the assessee has given detailedexplanation by a letter in writing and the AOallowed the claim on being satisfied with theexplanation of the assessee, the decision of theAO cannot be held to be erroneous simplybecause in his order he does not make anelaborate discussion in that regard. 14. In the present case, the Assessing Officerduring the course of assessment proceedings,made the enquiries relating to the sale ofancestral agricultural land by the assessee & theco-owners and thoroughly examined this fact asto whether it was adventure in nature of trade forsale of capital asset. The issue regarding thedevelopment expenditure was also thoroughlyexamined by theAssessing Officer, the above saidfact is also clear from the reason for reopeningthe assessment itself, as mentioned at page Nos.1 and 2 of the assessment order, which read asunder:- “The group has converted their ancestralagricultural land into various small plots beforeselling the same to different persons andtherefore the selling activities were clearly anadventure in the nature of trade. The nature andvolume of transactions indicated that theassessee was enjoying the taxable income duringthe previous year relevant to assessment. Year 2007-08 however, he had not filed any return ofincome for the A.Y. 2007-08. Therefore,proceedings u/s 147 of the Income Tax Act, 1961were initiated in his case by issuing notice u/s 148on 29/10/2009.” 15. In the instant case, after issuing the noticeu/s 148 of the Act and during the course ofassessment proceedings, the Assessing Officermade the proper enquiries, discussed thesubmissions of the assessee and examined thecircumstances in which the land was old in pieces.He also examined the claim of the assessee fordevelopment charges incurred on the land andthereafter computed the income of the assessee.So, it can be said that the Assessing Officer aftermaking proper enquiry and examining the case,framed the assessment u/s 147/143(3) of the Act. 2007-08 however, he had not filed any return ofincome for the A.Y. 2007-08. Therefore,proceedings u/s 147 of the Income Tax Act, 1961were initiated in his case by issuing notice u/s 148on 29/10/2009.” 15. In the instant case, after issuing the noticeu/s 148 of the Act and during the course ofassessment proceedings, the Assessing Officermade the proper enquiries, discussed thesubmissions of the assessee and examined thecircumstances in which the land was old in pieces.He also examined the claim of the assessee fordevelopment charges incurred on the land andthereafter computed the income of the assessee.So, it can be said that the Assessing Officer aftermaking proper enquiry and examining the case,framed the assessment u/s 147/143(3) of the Act. 16. On a similar issue, the Hon'ble jurisdictionalHigh Court in the case of CIT Vs. Sohan Khan(2008) 304 ITR 194 (Raj.) held as under:- “that the most significant consideration toconclude whether the transaction gave rise tocapital gains or not would be the regularity oftransactions of purchase and sale. The mere factthat there was a series of transactions of sale onlyby selling part of the land, purchased in one go,or purchased once upon a time, piecemeal, wouldnot render the activity of sale “adventure inthenature of trade”. There was nothing to showthat the land was purchased with the intention tosell it at a profit, or with requisite intention, tobring it within the parameters of “stock-in-trade”.It was also not shown that the assessee was aregular dealer in real estate. The transaction wasto a capital asset only and not a transaction ofany “stock-in-trade. Therefore, the sale proceedswere liable to be taxed as capital gains.” In the present case also, the land in question wasan ancestral land and was not converted as stockin trade. The assessee after making certaindevelopment, sold the land in pieces to fetchmaximum price and the Assessing Officer afterproper examination and on being satisfied, was ofthe view that it was not an adventure in trade. Healso reduced the claim of the assessee fordevelopment expenditure and after taking apossible view worked out the capital gain. Thesaid view was in consonance with the ratio laiddown by the Hon'ble Jurisdictional High Court in the aforesaid referred to case, therefore, it cannotbe said that the assessment order passed by theAssessing Officer was either erroneous orprejudicial to the interest of the revenue. We,therefore, considering the totality of the facts asdiscussed hereinabove are of the view that the Ld.CIT by invoking the provisions of Section 263 ofthe Act was not justified in setting aside theassessment order passed by the Assessing Officer.Accordingly, the impugned order is set aside andthe assessment order framed by the AssessingOfficer is restored. 17. In other appeals i.e. ITA Nos. 422 &423/JP/2013, the facts are similar even theassessees are co-owner of the land in questionand the brothers of Shri Nathu Lal, whose appealhas been adjudicated in ITA No. 421/JP/2013 inthe former part of this order, therefore, ourfindings in the cases of these assessees shallapply mutatis mutandis.” 7.We are in complete agreement with the view taken by thetribunal. No case is made out for interference. 8.In that view of the matter, the issue is answered in favour ofthe assessee and against the department. 9.The appeals stand dismissed. (VIJAY KUMAR VYAS)J. (K.S.JHAVERI)J. Brijesh 99-100.