Case Law Details
Dr. Kalpana Alexander Vs. ACIT (ITAT Hyderabad)
There is nothing to contradict the opinion of the learned PCIT that there is failure on the part of the learned Assessing Officer to make the minimum enquiry, let alone sufficient enquiry on this aspect. Assessment order held erroneous.
Facts-
The assessee is an individual, and a medical practitioner at M/s. Matrika Hospital, Hyderabad. For the AY.2015-16, she filed her ROI declaring an income of Rs.46,80,710. It was noticed that the assessee did not declare any income towards capital gains, after claiming deduction of Rs.37,27,774 u/s. 54 of the Act and Rs.47,77,180 u/s. 54EC of the Act.
It was picked up for scrutiny to verify the large deduction claimed u/s. 54 of the Act. Assessment was completed u/s. 143(3) of the Act by order dt.29-08-2017 determining the taxable income at Rs.46,97,502 as against the returned income of Rs.46,80,710.
Assessment order was set aside and is erroneous in law insofar as it is prejudicial to the interest of Revenue. It was set aside and the learned AO was directed to redo the assessment after examining the issue of deduction claimed u/s. 54 of the Act to the extent of Rs.37,27,774 and the sources for investment to the extent of Rs.13,25,000 in specified bonds.
Being aggrieved, the assessee preferred the present appeal.
Conclusion-
It is pertinent to note that neither the notice u/s. 143(2) of the Act calls for any information on this aspect, nor does the assessment order refer to any enquiries or material giving rise to the subjective satisfaction of the learned Assessing Officer on this aspect. There is nothing to contradict the opinion of the learned PCIT that there is failure on the part of the learned Assessing Officer to make the minimum enquiry, let alone sufficient enquiry on this aspect.
Having conducted the necessary enquiries, if the learned Assessing Officer reaches a conclusion, it should find its reflection on record either in the notice or questionnaire, if any, or the assessment order. Absolutely there is no support to the contention of the assessee that the learned Assessing Officer called for the material, applied his mind thereto and reached a plausible conclusion. It is, therefore, clear that for want of conducting enquiries, the assessment order is erroneous.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
Aggrieved by the order dated 24-03-2021, u/s. 263 of the Income tax Act, 1961 (“the Act”) passed by the Principal Commissioner of Income Tax, Hyderabad (“learned PCIT”) in the case of Dr.Kalpana Alexander (“the assessee”) for the AY.2015-16, assessee preferred this appeal.
2. Briefly stated facts relevant for the disposal of this appeal are that the assessee is an individual, and a medical practitioner at M/s.Matrika Hospital, Hyderabad. For the AY.2015-16, she filed her return of income on 30-09-2015 declaring an income of Rs.46,80,710/- which comprises of Rs.2,74,233/- towards income from house property, Rs.29,01,285/-towards income from business and profession and Rs.15,15,191/- towards income from other sources. It was noticed that the assessee did not declare any income towards capital gains, after claiming deduction of Rs.37,27,774/- u/s. 54 of the Act and Rs.47,77,180/- u/s. 54EC of the Act.
3. It was picked up for scrutiny to verify the large deduction claimed u/s. 54 of the Act and tax credit in ITR which is less than the tax credit in Form 26AS. Assessment was completed u/s. 143(3) of the Act by order dt.29-08-2017 determining the taxable income at Rs.46,97,502/- as against the returned income of Rs.46,80,710/-.
4. Subsequently, the learned PCIT perused the assessment record and found that the learned Assessing Officer did not comply with the purpose of selection of the case for scrutiny by making a reasonable enquiry into the aspects of deductions claimed and the tax credit discrepancy. On an examination of record, the learned PCIT recorded that during the assessment year, the assessee sold two properties, namely, the property at Sainikpuri and another property at Bengaluru; that the assessee is holding half a share in the property at Sainikpuri which was sold for Rs.63,50,000/- wherein the assessee’s share could be worked out to Rs.36.75 lakhs, whereas the assessee claimed deduction stating that she made an investment of Rs.50 lakhs in bonds to claim the benefit u/s. 54EC of the Act. On this score, learned PCIT was of the opinion that the learned Assessing Officer should have made and enquiry into the aspect of the sources of Rs.13.25 lakhs, namely, the difference between the invested amount of Rs.50 lakhs and the sale consideration of Rs.36.75 lakhs. This is one discrepancy which led the learned PCIT to believe that there is no enquiry on the aspect of investment.
5. Another aspect noticed by the learned PCIT is that the assessee claimed deduction to the extent of Rs.37,27,774/- to have formed the long term capital gains received from both the properties and claimed to have invested Rs.37.50 lakhs in a residential property at the sixth floor of the building belongs to a firm, namely, M/s.Matrika Hospital. Assessee and her daughter are the partners of such firm. On enquiries, learned PCIT came to know that there is no transfer of property as required by law, through a registered sale deed in favour of the assessee; and further that the said property was shown as the commercial property of firm in their books, claiming depreciation upto AY.2014-15. Learned PCIT, therefore, formed an opinion that there should have been an enquiry by the learned Assessing Officer in respect of the nature of property acquired and whether really the transfer took place so as to enable the assessee to claim deduction u/s. 54 of the Act.
6. Learned PCIT accordingly, found that the assessment order is erroneous in law insofar as it is prejudicial to the interest of Revenue. She, therefore, set aside the assessment order and directed the learned Assessing Officer to redo the assessment after examining the issue of deduction claimed u/s. 54 of the Act to the extent of Rs.37,27,774/- and the sources for investment to the extent of Rs.13,25,000/- in specified bonds.
7. Assessee is, therefore, aggrieved and filed this appeal with a delay of 85 days and places reliance on the order dt.27-04-2021 of the Hon’ble Apex Court in the case of In Re Cognizance for Extension of Limitation in Miscellaneous Application No.665/2021 in SMW(C) No.3/2020 in support of their prayer that, for the purpose of reckoning the period of limitation, the period subsequent to 15-03-2020 has to be excluded.
8. Learned AR contended that the sale consideration in respect of the Sainikpuri property was also in respect of the furniture in the house and, therefore, the share of assessee was to the extent of Rs.70 lakhs whereas the learned PCIT failed to consider the value of fixtures and fittings. Assessee further contends that the building acquired by the assessee at the sixth floor of M/s.Matrika Hospital is in fact a residential unit and merely because the municipal taxes categorises the same as commercial, the nature of property would not get changed. Assessee submits that the investment made by the assessee in the bonds in excess of the sale consideration of so called half a share of the assessee in the Sainikpuri property was made by way of bank cheque and the sale consideration was also deposited directly in the bank and, therefore, the genuineness of the transaction was not to be suspected by the learned Assessing Officer. Lastly, assessee contends that the assessee had the tax benefit @20% in respect of exemptions claimed for capital gains whereas the Matrika Hospital suffered taxes to the tune of 30% and, therefore, there is no prejudice to the Revenue at all. It is argued by the Ld.AR that the amount of consideration in respect of sixth floor was adjusted by the firm, M/s.Matrika Hospital under the head plant and machinery as the hospital building was claimed as plant since the inception and, therefore, the reference to the written down value under the head building was wrongly made by the learned PCIT to reach a conclusion that there is prejudice to the interest of Revenue. For all these reasons, it is contended on behalf of the assessee that the learned Assessing Officer examined the issue with all due diligence and after obtaining the relevant material from the assessee and, therefore, it cannot be said that there is no proper examination of the issue at the end of the learned Assessing Officer.
9. Per contra, it is submitted on behalf of the Revenue that the very purpose of picking up the case of assessee for this assessment year was to verify the issues relating to the deductions claimed u/s. 54 and 54EC of the Act and also the discrepancy in respect of the tax credit. If the learned Assessing Officer examined the issue and reached a conclusion that the assessee making the deposit of Rs.50 lakhs in the bonds and the assessee legally acquiring the residential house so as to claim the deduction u/s. 54 of the Act was proper, then whether or not such a conclusion reached by the learned Assessing Officer would not be amenable for revision by the learned PCIT. However, in this case, neither the notice issued u/s. 143(2) of the Act nor the assessment order speak anything on the enquiries so made and unexplained discrepancies pointed out by the learned PCIT justifies the action taken by the learned PCIT to set aside the assessment order with a direction to redo the assessment, keeping in view the mandate for assessment. He submits that in this case, it is not the question of sufficiency of enquiries but it is the lack of enquiries that prompted the learned PCIT to exercise jurisdiction u/s. 263 of the Act. Learned DR submitted that the twin conditions of Section 263 of the Act, namely, erroneous order and prejudicial to the interest of Revenue are satisfied in this case and, therefore, no interference with the impugned order is warranted.
10. Insofar as the delay aspect is concerned, the period under consideration is ordered to be excluded by the Hon’ble Apex Court in view of the pandemic and in view of the same, the Revenue does not object the condonation of delay. As a matter of fact, in view of the exclusion of the period of pandemic for calculation of the period of limitation, there cannot be any delay at all. With this view of the matter, we proceed to decide the appeal on merits.
11. It could be seen from the record that the return filed by the assessee was picked up for scrutiny for verification of the large deduction claimed u/s.54 of the Act and also the discrepancy in the tax credit appearing in Form 26AS and ITR. Notice dt.19-09-2016 issued by the learned Assessing Officer pursuant thereto, u/s. 143(2) of the Act is filed and it shows that the learned Assessing Officer simply stated that in view of the reasons for picking up the scrutiny on the aspect of deduction claimed under the head capital gains and tax credit mismatch, the assessee was given an opportunity to produce any evidence she desires. This notice does not specify any questionnaire having a bearing on the determination of the issues involved. Learned Assessing Officer did not refer to the amount of sale consideration receivable/received by the assessee nor did he obtain any explanation from the assessee as to the excess amount that was kept in deposit in bonds. Learned Assessing Officer also did not make any enquiry into the aspect of transfer of title in the property claimed to have been acquired by the assessee. In all fairness, the learned Assessing Officer should have called for material to show how the assessee got Rs.70 lakhs whereas the entire sale consideration received was Rs.63.50 lakhs in respect of the property at Sainikpuri wherein, without any dispute the assessee had only half a share. If the assessee got any additional amount towards the furniture and fixtures in the said property and the learned Assessing Officer having dealt with this issue by applying his mind, certainly this aspect would not be amenable for revision u/s. 263 of the Act. It is pertinent to note that neither the notice u/s. 143(2) of the Act calls for any information on this aspect, nor does the assessment order refer to any enquiries or material giving rise to the subjective satisfaction of the learned Assessing Officer on this aspect. There is nothing to contradict the opinion of the learned PCIT that there is failure on the part of the learned Assessing Officer to make the minimum enquiry, let alone sufficient enquiry on this aspect.
12. Insofar as the acquisition of residential property by the assessee isconcerned, law requires that the transfer of title shall take place on the registration of an instrument duly stamped. Assessee is the partner of the firm, M/s.Matrika Hospital which is the transferor of the property. In fact, the land originally belongs to the assessee which was transferred to the firm wherefrom the assessee acquired it back. When once the document evidencing the transfer is not properly stamped or registered even after sufficient time, and that too when the transferee claims to have paid the entire sale consideration, it should have provoked a doubt in the mind of the learned Assessing Officer to look at the genuineness of the transaction. Learned Assessing Officer should have verified whether the payment of sale consideration, as claimed by the assessee, is supported by any evidence. Learned PCIT recorded at paragraph No.2(d) at point 4 that the firm did not disclose any capital gains for the relevant year in respect of the sale of undivided portion of land purported to have been transferred under the agreement of sale. At least the cursory consideration of the circumstances would definitely put the learned Assessing Officer on guard prompting him to probe into the matter. Having conducted the necessary enquiries, if the learned Assessing Officer reaches a conclusion, it should find its reflection on record either in the notice or questionnaire, if any, or the assessment order. Absolutely there is no support to the contention of the assessee that the learned Assessing Officer called for the material, applied his mind thereto and reached a plausible conclusion. It is, therefore, clear that for want of conducting enquiries, the assessment order is erroneous.
13. Now coming to the aspect of prejudice, contention of the assessee is that insofar as the acquisition of sixth floor of the hospital building is concerned, assessee gains the tax benefit at 20% whereas the hospital suffers the tax burden at 30% and there is no prejudice to the interest of Revenue. On this aspect, learned PCIT commented that the tax laws have to be applied correctly and anything done to the contrary would perpetuate the error. The assessee claiming 20% of tax in respect of the capital gains assumes that there is accrual of capital gains in a legal way. Here in this case, the acquisition of property is itself in doubt and, therefore, it would not be reasonable to jump to the conclusion that in this transaction Revenue is not put to prejudice. It is an admitted fact that the learned Assessing Officer did not make any enquiries into the additional amount that was put in bonds out of the sale consideration of them Sainikpuri property and also there is no enquiry into the acquisition of the sixth floor of M/s.Matrika Hospital.
14. All these factors well justify the order of the learned PCIT in exercise of section 263 of the Act and the irresistible conclusion that flows from our discussion is that the assessment order is not only erroneous but also prejudice to the interest of Revenue. There are no grounds to interfere with the impugned order and the same is, therefore, upheld. Appeal is devoid of any merits and is liable to be dismissed. Grounds of appeal are accordingly dismissed.
15. In the result, the appeal of assessee is dismissed.
Order pronounced in the open court on this the 31st day of May, 2022
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