Ita/396/2019 Of Ramesh Kumar v. Commissioner Of Income Tax

ITA No. 396 of 2019}1] IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH ITA No. 396 of 2019.Date of decision: February 19,2020 Sh. Ramesh Kumar .. Appellant Vv Commissioner of Income Tax .. Respondent CORAM:HON'BLE MR. JUSTICE AJAY TEWARIHON'BLE MR. JUSTICE AVNEBEESH JHINGHON'BLE MR. JUSTICE AVNEBEESH JHING Present:Mr. B. M. Monga and Mr. Rohit Kaura, Advocatesfor the appellant.for the appellant. AVNEESH JHINGAN, J. The assessee is in appeal under Section 260A of the IncomeTax Act, 1961 (for short, ‘the Act’) against the order dated 25.1.2019 passedby the Income Tax Appellate Tribunal, New Delhi (for short, 'the Tribunal’)claiming following substantial questions of law: “A. Whether the Ld. Income Tax Appellate Tribunal isjustified in confirming the order passed by CIT u/s 263thereby setting aside the order u/s 143(3) which is againstjustified in confirming the order passed by CIT u/s 263thereby setting aside the order u/s 143(3) which is against the well settled law and out of the purview of Section263?263? B.Whether the Ld. ITAT was justified in upholding theorder passed by the CIT u/s 263 specifically when theoriginal order u/s 143(3) was not at all erroneous orderand reasonable, plausible and correct view was expressedby passing an order after taking into consideration reply,evidences and other relevant documents ?order passed by the CIT u/s 263 specifically when theoriginal order u/s 143(3) was not at all erroneous orderand reasonable, plausible and correct view was expressedby passing an order after taking into consideration reply,evidences and other relevant documents ? ITA No. 396 of 2019A The relevant facts are that return filed for the assessment year2014-15 declaring income otf=16,36,340/- was processed under Section143(1) of the Act. Subsequently, there being an information from theInvestigation Wing about suspicious long term capital gain on shares, thecase was Selected for scrutiny. Notice along with questionnaire was issued,information/documents and evidence were taken on record and order dated24.2.2016 was passed. It would be relevant to produce the assessment orderin toto: “Return declaring total income amounting to Rs.16,36,340/-was e-filed by the assessee on 29.9.2014, which wasprocessed u/s 143(1) of the Income Tax Act, 1961 on thereturned income. The assessee is a partner in a Firm dealing inPetroleum Products and derives income from rent, sharetrading and interest during the year under consideration. Lateron, the case of the assessee was Selected for scrutiny)assessment u/s 143(3) of the Income Tax Act, 1961 throughCASS system of ITD for verification of suspicious long termcapital gain on shares (inputs from investigation Wing),Statutory notice u/s 143(2) of the Income Tax Act, 1961 dated18.9.2015 was issued and served upon the _ assessee.Subsequent notices u/s 143(2) and 142(1) of the Income TaxAct, 1961 alongwith questionnaire were issued and servedupon the assessee. Sh. Ashok Kumar Goyal & Sh. SatishKumar Goyal, Chartered Accountants, counsels for theassesssee furnished Power of Attorney duly signed by theassessee and accepted by them and attended the assessment ITA No. 396 of 2019}3] proceedings from time to time and furnished the requisiteinformation/documents/evidence. The requisite details/information/documents/evidence filed by the counsel havebeen placed on record. The books of a/c alongwith originalvouchers and other documents were produced by the assessee,which were examined. 2. The case was discussed with the counsel for the assessee,and after discussion the tollowing additions are made in thetaxable income of the assessee on agreed basis subject to nopenal action: 1) An amount of Rs. 44,148/- on a/c of interest paid on car loan (being inadmissible expense) is added in the taxable income of the assessee| Total Addition - Rs. 44,148/- 3. The taxable income of the assessee is recomputed is as| under: Income returned by the assesseeRs.16,36,340/- ADD:- proceedings from time to time and furnished the requisiteinformation/documents/evidence. The requisite details/information/documents/evidence filed by the counsel havebeen placed on record. The books of a/c alongwith originalvouchers and other documents were produced by the assessee,which were examined. 2. The case was discussed with the counsel for the assessee,and after discussion the tollowing additions are made in thetaxable income of the assessee on agreed basis subject to nopenal action: 1) An amount of Rs. 44,148/- on a/c of interest paid on car loan (being inadmissible expense) is added in the taxable income of the assessee| Total Addition - Rs. 44,148/- 3. The taxable income of the assessee is recomputed is as| under: Income returned by the assesseeRs.16,36,340/- ADD:- Addition as discussed in para 2 above: Rs. 44,148/- Total Income assessed: Rs.16,80,490/- Assessed. Issue requisite documents.” The proceedings were initiated under Section 263 of the Actand notice was issued on 13.12.2017. There was long term capital gain of410,99,599/-, claimed by the assessee as exempt under Section 10(38) of theAct. The assessee took a stand before the Principal Commissioner ofIncome Tax (for short, 'PCIT") that the Assessing Officer had conducted theenquiries and passed the assessment order, therefore invoking of Section ITA No. 396 of 2019|4] 263 of the Act is bad. The contention was rejected. Vide order dated28.2.2018, the order of assessment was set aside and the matter remittedback to the Assessing Officer to pass fresh order after providing opportunityof hearing to the assessee. Aggrieved, the appeal was filed, the Tribunaldismissed the appeal on 25.1.2019, hence the present appeal. Learned counsel for the assessee argued that the pre-requisitetwin conditions of Section 263 of the Act are not fulfilled. It is contendedthat revision cannot be done on mere change of opinion, the PCIT erred inre-opening the matter as at the most it was a case of inadequate enquiry andthe same cannot be a reason for revision. The contentions raised lack merit. Section 263 of the Act givesa supervisory power to PCIT and the two requirements are that the orderpassed by the Assessing Officer is erroneous and is prejudicial to theinterest of the revenue. Explanation 2 to Section 263 of the Act was addedby Finance Act, 2015 w.e.f. 1.6.2015. As per the added explanation, infollowing four situations, the order of the Assessing Officer shall be deemedto be erroneous: “(a) the order is passed without making inquiries orverification which should have been made;verification which should have been made; 8;9the order is passed allowing any relief without inquiringinto the claim;into the claim; 839the order has not been made in accordance with anyorder, direction or instruction issued by the Board undersection 119; or|order, direction or instruction issued by the Board undersection 119; or| 8,9the order has not been passed in accordance with anydecision which is prejudicial to the assessee, rendereddecision which is prejudicial to the assessee, rendered ITA No. 396 of 2019}>] by the jurisdictional High Court or Supreme Court in thecase of the assessee or any other person.” In the present case, a cursory look at the assessment order isgood enough to hold the same to be erroneous. There was a speciticinformation provided to the Assessing Officer about suspicious long termcapital gain. Without going by the length of the order, there is not even awhisper that an enquiry was held with regard to the long term capital gainwhat to say about recording of satisfaction. 8,9the order has not been passed in accordance with anydecision which is prejudicial to the assessee, rendereddecision which is prejudicial to the assessee, rendered ITA No. 396 of 2019}>] by the jurisdictional High Court or Supreme Court in thecase of the assessee or any other person.” In the present case, a cursory look at the assessment order isgood enough to hold the same to be erroneous. There was a speciticinformation provided to the Assessing Officer about suspicious long termcapital gain. Without going by the length of the order, there is not even awhisper that an enquiry was held with regard to the long term capital gainwhat to say about recording of satisfaction. The contention of learned counsel for the assessee that it was acase of change of opinion or case of inadequate enquiry is not wellfounded. There is no enquiry at all by the Assessing Officer, there is noquestion of change of opinion. The information which was with theAssessing Officer from the Investigation Wing was not examined and thetransaction was not verified. There was material on record before the PCITthat the tax leviable was not imposed as the Assessing Officer had notapplied his mind while allowing exemption of long term capital gain. Supreme Court 1n |M/s Malabar Industrial Co. Ltd. v. Commissioner of [Incom1tax, Kerala State52000(2) SCC 718held asunder: “11, In the instant case, the Commissioner noted that theIncome-tax Officer passed the order of nil assessmentwithout application of mind. Indeed, the High Courtrecorded the finding that the Income-tax Officer failed toapply his mind to the case in all perspective and the orderpassed by him was erroneous. It appears that the resolutionpassed by the board of the appellant-company was not ITA No. 396 of 2019Ke placed before the Assessing Officer. Thus, there was nomaterial to support the claim of the appellant that the saidamount represented compensation for loss of agriculturalincome. He accepted the entry in the statement of theaccount filed by the appellant in the absence of anysupporting material and without making any inquiry. Onthese facts the conclusion that the order of the Income-taxOfficer was erroneous is irresistible. We are, therefore, ofthe opinion that the High Court has rightly held that theexercise of the jurisdiction by the Commissioner undersection 263(1) was justified.” It would be worth mentioning that the present case is squarelycovered within the four corners of explanation 2 to Section 263 of the Act.Be that as it may, even otherwise for the reasons mentioned above, theorder of the Assessing Officer is erroneous. The appeal is dismissed. (AVNEESH JHINGAN) (AJAY TEWARIT)JUDGE JUDGE February 19,20206D Whether speaking/reasoned:Yes/NoWhether reportable:Yes/No