Case Law Details
Sunita Goyal Vs PCIT (ITAT Chandigarh)
In the absence of any evidence or fact rebutting the claim of the assessee, the order passed after due enquiries as per record by the AO cannot be set aside on mere inferences and presumptions. The suspicions of the ld. PCIT cannot be the basis for setting aside a validly passed assessment order. Law requires the ld. PCIT to meet the twin conditions of pointing to the error in the order passed and that too such an error which can be termed to be prejudicial to the interests of the Revenue. These mandatory conditions in the facts of the present case are not satisfied. Hence, on a consideration of the peculiar facts and circumstances of the present case which are borne out from the record, the impugned section 263 order cannot be upheld.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
The present appeal has been filed by the assessee wherein the correctness of the order dated 02.09.2021 passed by ld. PCIT Panchkula pertaining to 2012-13 assessment year is assailed on the following grounds :
1. That the Ld. CIT has erred in concluding proceedings under Section 263 of the Income Tax Act, 1961 without proper perusal of Assessment record.
2. Whether on the facts and circumstances of the case and in law, the Ld. CIT has exceeded legislative jurisdiction u/s 263 of the Income Tax Act, 1961 thus the order passed by the Ld. CIT is bad in the eyes of the law.
3. That the Ld. CIT has erred in substituting an alternative view as against the firm view adopted by the Ld. AO at the time of original assessment u/s 143(3) read with section 147 of the Income Tax Act, 1961.
4. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.
2. The relevant facts of the case are that as per information received by the tax administration, it was noted that the assessee had made an investment of Rs.5,06,562/- towards purchase of immovable property from M/s Bajwa Developers Ltd. Since the assessee had not filed any return of income u/s 139(1) and 139(4) of the Act, proceedings were initiated u/s 147 by issuance of notice dated 28.03.2019 after recording of reasons. In response thereto, the assessee filed her return declaring income of Rs.1,34,401/-. Notices u/s 143(2) and 142(1) were issued to the assessee and considering the reply, the returned income was accepted by the AO by an order dated 23.11.2019. This order was subjected to the Revisionary proceedings by the ld. PCIT this order is under challenge in the present proceedings.
3. The ld. AR inviting attention to the assessment order and the reply given to the ld. PCIT submitted that the issue had been enquired into by the AO in detail specifically on this point. It was submitted that only after considering the replies of the assessee, the returned income of the assessee was accepted. The sources of investment for the specific property it was argued were all considered by the AO exhaustively. It was submitted that merely because the AO does not record these, this fact by itself cannot be a factor to reopen a validly concluded assessment proceedings by the ld. PCIT exercising Revisionary powers u/s 263 arbitrarily. Heavy reliance was placed upon the following orders passed by the AO :
In response to these notices authorised representative of assessee furnished reply along with documents/information called for including the documentary evidence regarding the source of investment for purchase of immovable property on behalf of assessee. The reply of the assessee and documents submitted has been considered and no adverse inference is drawn in the case.
3.1 The ld. AR further invited attention to para 6 of the impugned order and submitted that the assessee had explained that the amount of Rs. 1 lakh came from her nephew. Affidavit of the nephew, it was submitted, had been made available to the AO. It was submitted, that it has also been filed before the ld. PCIT wherein the relationship with the assessee and the PAN of the assessee’s nephew were clearly spelt out. The contents thereof have not been upset by the ld. PCIT. For
ready reference, the said affidavit extracted in the impugned order is reproduced hereunder :
AFFIDAVIT
I Sahil Gupta S/o Sh. Chander Kumar /o Jalandhar City, Punjab, do hereby state on oath and solemnly affirm as under:
1. That I have given a gift of Rs. 1,00,000/- in cash to smt. Sunita Goyal, out of natural love and affection in FY 2011-12
2. That I have given this amount out of my income and personal savings.
3. That I’m filling my ITR regularly with IT department and my PAN is BMPPG9865D.
4. That Smt. Sunita Goyal is my Massi.
(Sd/-)
(Deponent)
It is certified that above stated facts are true and correct to best of my knowledge and nothing here has been concealed.
(Sd/-)
(Deponent)
3.2 It was submitted that this affidavit is available before the AO. This fact, it was submitted, is evident from the observations of the ld. PCIT itself as the ld. PCIT discards it noting that the Affidavit was prepared just a few days before the passing of the assessment order. It was submitted that what is wrong in that. Evidence when called forth by the AO was addressed by the assessee as per record. The ld. PCIT, it was assailed further, holds that “The Assessing Officer simply placed this non-descript piece of paper on the assessment records, as the noting sheet entry dated 20-11-2019 in the file reads as under “Sh. Dinesh Chandel, Advocate attended. Furnished details asked for. Case discussed and assessed.”. It was argued what was wrong in accepting this. The suspicion in ld. PCIT’s mind, it was submitted, is the sole reason. The ld. PCIT, it was submitted, ignoring the fact that the relationship was demonstrated and identity of the nephew by way of his PAN number stood quoted concluded that the affidavit is a bald self serving document without upsetting its contents. It was his submission that the AO has looked into the relevant data on the basis of PAN details available and apparently was satisfied and accepted the flow of money from the said nephew and in the order passed by the ld. PCIT neither the relationship has been upset nor the fact that the said amount was not available to Shri Sahil Gupta, whose PAN details were available even to the ld. PCIT. It was argued that no evidence to rebut the affidavit has been taken into consideration to upset the validly passed order by the AO has been placed on record.
3.3 Inviting attention to para 7 of the impugned order, it was submitted, that an amount of Rs.3,25,000/- had been received by the assessee as earnest money from Shri Yashpal for the contemplated sale of House No.l49, New Darshani Bagi, Manimajra, 0-3 Marlas owned by the assessee. It was submitted that the evidence placed on record was discarded by the ld. PCIT holding that it was on a plain piece of paper with the Revenue Stamp of Rs.1/-. The fact that it was the earnest money for a specific property which was forfeited by the purchaser as he was unable to complete the transaction within the stipulated time has not been disputed by the ld. PCIT. The relevant document extracted in the impugned order at page 8 relied upon by the ld. AR, for ready reference is extracted hereunder :
Earnest Money
Received a sum of Rs. 3,25,000/- ( Rs. Three Lakh Twenty Five Thousand rupees only) in shape of cash from Sh. Yashpal S/o Late Roshan Lal R/o village Manimajra, Chandigarh against the sale of House no. 149 situated in New Darshani Bagh, Manimajra, Chandigarh measuring 0-3 Marlas approximately or 18”x42” in Khasra no. 73/54(6K-9M), Khewat no. 331, Khautani no. 389, Hadbast no. 375. That the total sale price of the above said property under sale is fixed at Rs. 9,25,000/-(Nine Lakhs Twenty Five thousand Rupees only/-). Balance amount after deducting the earnest money from the total sale price is Rs. 600000/-(Rs. Six Lakhs Eighty Thousand Rupees onlyl-) which shall be paid on or before 10lh February 2012. That in case the said seller back out from this bargain then the said seller shall be liable to return double of the amount received by him today. In case the said purchaser back out from this bargain then his money shall stand forfeited in favor of the said seller. In case the said purchaser does not accept such liquidated damages then the purchaser has the right to get the sale affected through court of law under Specific Relief Act at the risk and cost of said seller. In witness of whereof both the parties have set their hands on this deed at Chandigarh on the day, month, year mentioned above in presence of witness, Dated: 24th November 2011. SELLER – Sd/-Witness No:1
Sd/- PURCHASER – Sd/-
[Pawan Kumar, H.No. 112/1, Manimajra]
(emphasis supplied)
3.4 Referring to page 9 of the impugned order, it was submitted that the fact that this evidence was available to the AO was known to the ld. PCIT also. The ld. PCIT at page 9 of her order it was submitted, herself has observed, “Once again the assessing officer did not care to raise any query about this non-descript piece of paper, and simply placed the same on the assessment record on the date of the last hearing i.e 20.11.2019 while recording on the noting sheet “case discussed and assessed.” The AO did not care to evaluate the evidentiary value of this piece of paper, or ascertain the identity of the so-called purchaser, his capacity to invest an amount of Rs. 9.25 lac in the property, his capacity to pay Rs. 3.25 lac as advance, and the genuineness of the entire transaction. The AO did not even try to enquire if the deal had actually materialized or not. The evidence, it was submitted, was not upset by the ld. PCIT. It was discarded holding it to be “in house production to concoct a cock and bull story”. The fact that the property continues in the possession of the assessee, it was submitted, has also been accepted by the ld. PCIT.
3.5 Referring to para 8 of the impugned order, it was submitted, that the ld. PCIT also takes note of the fact that the evidence of gift, earnest money and savings from rent etc. were facts explained to the AO and enquired into by the AO. This fact, it was submitted, is evidenced from para 8 of the impugned order itself. For ready reference, it is extracted hereunder :
“8. It is also pertinent to note that in her initial first response to the notices dated 16.7.2019 and 01.08.2019 of the assessing officer for the assessment proceedings, the assessee had submitted that she “had received income from rent and construction business during the relevant year.” It was only in response to the last notice dated 12.11.2019 of the AO that the assessee presented her concocted story about the gift and the earnest money as the sources of cash that was invested in the given property.”
3.6 The ld. AR further invited attention to para 9 to show that the ld. PCIT was aware that the AO had enquired into the issues even on 20.11.2019, and 23.06.2019 wherein the assessee was found to have explained the remaining balance available out of personal savings. For ready reference, relevant extract from para 9 reads as under :
“9. It is further pertinent to note that during the course of the final hearing held by the AO on 20.11.2019, the assessee claimed that “the balance of Rs. 1,36,000!– was paid out of personal savings and income” on 23.06.2011. An amount of Rs. 8000!– was claimed to have been paid on 12.01.2011, and of Rs. 100 on 12.12.2011 out of personal savings…..”
3.7 Accordingly, it was his submission that the conjectures and surmises resorted to by the ld. PCIT to set aside the validly passed assessment order is not supported by any evidence.
The impugned order, it was submitted, operates purely on suspicions as no contrary fact supporting the action has been brought on record. The evidences filed, it was submitted, have been dismissed as self serving bald games.
3.8 The decisions relied upon by the ld. PCIT, it was submitted, are fact specific and were distinguishable on facts. Reliance instead was placed upon the following decisions;
1. Krypton Datamatics Ltd. V. DCIT, Central Circle, Patiala, (65 com 324),(Chandigarh – Trib.)
2. CIT v. Krishna Capbox (2015) (Allahabad) 60 com 243
3. Principal Commissioner of Income-tax, Bathinda v. Jiwan Kumar (2017) 82 com 221
4. Narain Singla v Principal Commissioner of Income-tax, (Central) Ludhiana (2015) 62 com 255
5. Pawan Kumar Vs. ITAT (2015) 62 com 260 (Chandigarh)
3.9 Relying on the above facts and law, it was his submission that the Revisionary Power has been wrongly exercised by the ld. PCIT in a casual manner without pointing out any error in the order let alone such an error which can be said to be prejudicial to the interests of the Revenue.
3.10 In the facts of the present case, it was his submission that it is not a case of no enquiry as repeatedly the ld. PCIT makes a reference to the various dates on which hearing was fixed vide specific notices issued to the assessee. The AO considering the smallness of the amounts involved and considering the supporting evidences chose possibly not to discuss it in the order. This fact cannot be held against the assessee.
3.11 It was also reiterated that merely because the assessment order is short, the fact remains that the sources of money have been enquired into by the AO. This fact, it was submitted, is evident from the impugned order itself which have been highlighted in various paras of the order. Attention was invited in the said background to the reply of the assessee to the Show Cause Notice issued by the ld. PCIT which is also extracted at pages 4 and 5 of the impugned order. Referring to the same, it was his submission that the present case is a case of arbitrary exercise of power and based entirely on suspicions. For ready reference, reply extracted in the impugned order heavily relied upon in the present proceedings is reproduced hereunder :
“this is in reference to your above stated letter and show cause letter u/s 263 wherein it has been show caused as to why the assessment order dated 23.11.2019 not be cancelled for making fresh assessment.
In this regard it is humbly submitted that we had cooperated with the department at the time of assessment proceedings and all the documents as demanded by the Id. AO were submitted.
As regards yours specific query, we submit the copy of allotment letter in the name of the assessee issued from the office of the Municipal Corporation Chandigarh duly evidencing the ownership of the said property.
As regards the capital gains on the sale of the said property is concerned it is humbly submitted that the said earnest money was forfeited thereafter due to non-payment of balance amount. The said property is still in the possession of the assessee and has not been sold. Thus no capital gains arose to the assessee. The said fact was put to the Authorized Representative of the Assessee at the time of assessment and the fact was duly disclosed to the Ld. AO.
It must also be noted that the PAN of Sh. Sahil Gupta is duly mentioned in the affidavit submitted with department at the time of assessment proceedings and his identity was established by the affidavit on record, It is most humbly submitted that the Ld. AO had may many verbal queries at the time of assessment which were answered to her satisfaction. However, the same may not have been recorded in the assessment order.
Thus, it is not a case of no enquiry or non-application of mind by the Ld. AO and necessary evidence filed by the assessee was duly perused after which an opinion with respect to acceptance of evidence has been formed. The reason for re-opening of assessment was clearly laid down in the notice under section 148 of the Act and the same were put forth to the assessee at the time of assessment.
It is hereby submitted that the jurisdiction assumed by your good office under section 263 of the Act is bad in law as you are placing reliance on Explanation 2 of Section 263 of the Act to allege that enquiries have not been made in the subject case. The clear perusal of the assessment file shows that the Ld. AO had formed an opinion with respect to escapement of income, called for the necessary evidence, discussed the matter with the Authorized Representative of the assessee and after proper perusal arrived at the conclusion that there is no escapement of income.
In the light of the above submissions on the facts and circumstances of the case, it is most humbly prayed that the proceedings under section 263 be dropped.
It is prayed that if any adverse action, prejudicial to the interest of the assessee is preferred after considering the reply above, an opportunity to represent and defend the revision of order through personal hearing may kindly be allowed in the interest of justice.
3.12 Accordingly on the basis of these facts and submissions, it was his prayer that in the absence of any incorrect fact taken into consideration by the AO to pass an order after due enquiry, the impugned order may be quashed. The AO considering the smallness of the amount in the case of a gift of Rs. 1 lac from the nephew whose PAN details were available to the AO and in the absence of evidence to the contrary were enquired into has been accepted by him. No infirmity in the acceptance of the said claim, it was submitted, has been pointed out by the ld. PCIT except for the suspicion of the ld. PCIT. The arbitrary whim that it should have been enquired into to a greater degree, it was submitted, is contrary to the legal position. It was his submission that in the absence of any incorrectness of acceptance of assessee’s claim by the AO, the decision of the ld. PCIT for holding the belief that a greater enquiry should have been carried out wherein possibly something contrary might be unearthed is an arbitrary and whimsical exercise of power.
3.13. Similarly the fact that the earnest money was available to the assessee on account of forfeiture and the specific property owned by the assessee continued to remain with the assessee. This claim, it was re-iterated has been examined by the AO. The entire details were available to the ld. PCIT also and this claim has not been upset. Accordingly, the desire to further look into the matter, it was argued, is a whimsical exercise of power. It was argued that the power has been exercised in a very casual manner. All the documents, it was submitted, have been found to be available with the AO. It was submitted, that the assessee cannot dictate to the AO how to write the order. The AO looking into the smallness of the amounts may have chosen not to go any further into discussion etc. on the issues in the order. The ld. PCIT in the circumstances was required to show the error committed by the AO. The name of the person who forfeited the earnest money was available and the name and address of the witness to the said Agreement was also available. The ownership of the specific property with the assessee was not disputed. Accordingly, it was his prayer that the impugned order may be quashed.
4. The ld. CIT-DR on the other hand heavily relying upon the impugned order submitted that the AO in the facts of the present case blindly accepted whatever evidence was placed before him. No effort to carry out any enquiry u/s 133(6) was made by the AO. It was also his submission that the present case is not a case where the assessee has filed his return. It is a case wherein on account of investigation in the specific property , notice was issued to the assessee u/s 148 and as a result of this, assessment was concluded u/s 143(3)/147 of the Act. Thus, it was his prayer that the present case is a fit case for upholding the order passed by the ld. PCIT in exercising her Revisionary Powers. The order passed by the AO was passed without carrying out full and proper enquiries.
5. We have heard the rival submissions and perused the material available on record. In the facts of the present case, admittedly enquiries on the relevant facts were carried out by the AO. It is seen that these have been noticed by the ld. PCIT also in her order. However, these have been discarded on the grounds of being bald documents. The ld. PCIT having gone through the records of the AO has noticed that supporting documents have been called forth which have been examined and the case of the assessee has been accepted. It is inferred by the ld. PCIT that on account of this exercise, there is an error in the order which is prejudicial to the interests of the Revenue. We find on going through the impugned order that there is no basis for the said inference. The relationship of Shri Sahil Gupta as the nephew of the assessee has not been assailed. His PAN details made available to the AO and presumably enquired into have not been upset by the ld. PCIT. The fact that he has given a gift of Rs. One Lac accepted by the AO has not been shown to be an incorrect decision of the AO. Thus, the decision to further enquire into the said issue stated on an affidavit which have remained unrebutted, we find cannot be upheld. Without upsetting the contents of the affidavit, the exercise in the peculiar facts of the present case is an arbitrary exercise of power. Hence, cannot be sustained in law. Similarly, the documents relied upon in support of the earnest money available to the assessee, we find are dismissed as a “cock and bull story” without any evidence to come to the said conclusion. The fact that transaction for the property was being contemplated is an evidence on record which remains unrebutted. In pursuance thereof, earnest money has been received which remains unrebutted. The name of the purchaser and the address etc. of the witness and the parties to the document is available to the ld. PCIT as was available to the AO. The terms and conditions stated to have been honored therein vis-a-vis the parties to the agreement is evidence available on record. The document records that that in case the seller backs out, double the amount of earnest money is to be paid and in case sale is not completed on account of the purchaser, then earnest money is to be forfeited. Sale did not fructify. The evidence is available on record. The ownership of the said asset continues to remain vested with the assessee. In the absence of any evidence or fact rebutting the claim of the assessee, the order passed after due enquiries as per record by the AO cannot be set aside on mere inferences and presumptions. The suspicions of the ld. PCIT cannot be the basis for setting aside a validly passed assessment order. Law requires the ld. PCIT to meet the twin conditions of pointing to the error in the order passed and that too such an error which can be termed to be prejudicial to the interests of the Revenue. These mandatory conditions in the facts of the present case are not satisfied. Hence, on a consideration of the peculiar facts and circumstances of the present case which are borne out Page 15 of 15 from the record, the impugned order cannot be upheld. Accordingly, allowing the grounds of the assessee, for the reasons given hereinabove, the impugned order is quashed.
6. In the result, the appeal of the assessee is allowed.
Order pronounced on 6th July,2022.
