Nirmala Devi Chordia, Jaipur vs Assessee

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

vk;dj vihy la-@ITA No. 150/JP/2015 fu/kZkj.k o"kZ@Assessment Year : 2006-07

Smt. Nirmala Devi Chordia cuke The CIT 1631, Sonthiwalon Ka Vs. Jaipur 1 Rasta, Jaipur Jaipur

LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABLPC 1432 A vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri Siddharth Ranka, Advocate. jktLo dh vksj ls@ Revenue by : Smt. Rolee Agarwal, CIT - DR

lquokbZ dh rkjh[k@ Date of Hearing : 14/05/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 29 /05/2015

vkns'k@ ORDER

PER R.P. TOLANI, JM

The assessee has filed an appeal challenging the validity of revision

order passed u/s 263 dated 30-01-2015 passed by CIT, Jaipur 1. Sole

ground the impugned order is assailed on the ground that the assessment

order passed by the AO u/s 147/148 has been wrongly set aside by ld.

CIT holding it to be erroneous and prejudicial to the interest of Revenue.

2.1 Assessee is regularly assessed to tax and filed the return of income

for the impugned assessment year 2006-07. The AO got information that 2 ITA No. 150/JP/2015 Smt. Nirmala Devi Chordia vs. CIT -1, Jaipur

the assessee had invested Rs. 68.00 lacs in NABARD Bonds. AO issued

notice u/s 148 by recording the reasons that the assessee had not filed the

return of income and NABARD investment of Rs.68.00 lacs was to be

verified. The assessee filed an objection dated 11-04-2013 pointing out

that return was filed by the assessee and notice u/s 148 was thus invalid

being issued on wrong recording of reasons. However, to remain on safe

side, the assessee requested to consider her original return as filed in

response to notice u/s 148 of the Act. The original return was filed along

with profit and loss account, balance sheet, capital account, details of

shares sold by the assessee and computation of income with detailed

annexure of disclosure about long term capital gains. In sums and

substance, assessee claims to have filed all the relevant details in return as

well as before the AO in reassessment proceedings. The AO framed the

assessment order u/s 148 of the Act on 15-03-2014 and the claim of

LTCG along with particulars of returned income of the assessee were

accepted by following observations.

''On 03-09-2013, notice u/s 143(2) was issued. In response Shri N.K. Baid, Advocate and A/R attended from time to time and furnished the requisite documents. To verify the source of the amount invested in the Bonds of NABARD, letters u/s 133(6) was also issued to the companies whose shares were transferred by the assessee for a consideration of Rs. 67,99,500/-. The reply verifying the transaction was received on 11-02-2014 and nothing adverse was found. The case was discussed and after discussion, the 3 ITA No. 150/JP/2015 Smt. Nirmala Devi Chordia vs. CIT -1, Jaipur

returned income as declared by the assessee at Rs. 11,31,647/- is accepted.''

2.2 The ld. CIT- Jaipur 1, called for the record and issued a notice u/s

263 of the Act alleging that reassessment order was erroneous and

prejudicial to the interest of the Revenue as no evidence of sale/ transfer

of shares was filed by the assessee and the sale was accepted by the AO

without proper enquiries and investigation. No enquiries were made at the

end of Shri N.K. Gupta, purchaser of the shares, to verify his identity and

creditworthiness. The assessee has claimed deduction u/s 54EC of the Act

which is allowable against Long term capital gain however assessee had

not filed any documentary evidence to prove date of acquisition so as to

hold a view that the gains were Long term capital gain.

2.3 In reply to 263 notice, assessee filed detailed written submission

duly supported by a plethora of case laws and along with copies of the

documents filed before the AO. It was demonstrated that most of the

information and papers were already filed along with return which ld. AO

by an error has held to be not filed. During the course of reassessment

proceedings also all the necessary enquiries were made which is evident

from AO's observation that the assessee attended the proceedings from

time to time and furnished requisite documents. To verify the source of

amount for investment in Bonds letters u/s 133(6) were issued to 4 ITA No. 150/JP/2015 Smt. Nirmala Devi Chordia vs. CIT -1, Jaipur

companies whose shares were transferred to assessee which were duly

complied with confirming assessee's version. Thus in reassessment

assessee's claim about LTCG, NABARD bonds and income were

accepted by ld. AO after due discussions, inquiries and verification and

accepting. To satisfy ld. CIT, the assessee furnished some more

documents which were pointed out by him.

2.4 The ld. CIT however, came to conclusion that the order passed by

the AO was erroneous and prejudicial to the interest of Revenue and set

aside the assessment back to the file of the AO to frame the same afresh

after making proper enquiries by following observation.

''4........ it is evident from records as well as admission of the A/R during these proceedings that the assessment was completed without required enquiries and investigation. AO ought to have verified the date & cost of acquisition of the shares sold to ascertain whether the assets sold were short term or long term capital assets and whether assessee was eligible for deduction u/s 54EC of the Act. AO should have also enquired about the genuineness of sale price shown by the assessee after examining the financial position and profits of companies whose shares were sold by the assessee. He should have also enquired about the creditworthiness of Shri N.K. Gupta, the purchaser of shares for Rs. 67,99,500/- since the transaction was of unlisted equity shares and was off market transaction.

It is a settled position of law that failure to make proper enquiries by AO, will make the assessment order erroneous as well as prejudicial to the interest of Revenue which can be revised u/s 263 of the Act. It is held by the Courts in various decisions that unlike the Civil Court which 5 ITA No. 150/JP/2015 Smt. Nirmala Devi Chordia vs. CIT -1, Jaipur

is neutral to give a decision on the basis of evidence produced before it, an Assessing Officer is not only an adjudicator but is also an investigator. He can not remain passive on the face of a return which is apparently in order but calls for further enquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke enquiry. If there is a failure to make such enquiry, order is erroneous and prejudicial to the interest of Revenue. Reliance is placed on the following case laws:-

(i) Rampyari Devi Saraogi vs. CIT (SC) 67 ITR 84 (ii) Malabar Industrial Co. Ltd. vs. CIT (SC) 243 ITR 83

(iii) Swarup Vegetable Products Industries Ltd. vs. CIT (All.) 187 ITR 412.

(iv) Gee Vee Enterprises vs. Addl. CIT & Ors (Del.) 99 ITR 375.

(v) Rajalakshmi Mills Ltd. vs. ITO (ITAT, SB-Chennai) 121 ITD 343; 313 ITR (AT) 182

(vi) SRM Systems & Software (P) Ltd. vs. ACIT 2010- TIOL-646-HC-MAD-IT

5. Considering all the facts and circumstances of the case and judicial pronouncements, as discussed above, I hold that the reassessment order dated 15-03-2014 for A.Y. 2006-07, was erroneous in so far as prejudicial to the interest of Revenue in terms of Section 263 of the I.T. Act. I therefore, set aside the assessment order to be made afresh after making proper enquiries on the issues discussed above. AO should allow reasonable opportunity of hearing to the assessee.''

2.5 Aggrieved, the assessee is before us.

2.6 The ld. Counsel for the assessee Shri Siddharth Ranka, Advocate

vehemently contends that notice u/s 263 of the Act and the ld. CIT order 6 ITA No. 150/JP/2015 Smt. Nirmala Devi Chordia vs. CIT -1, Jaipur

dated 30-01-2015 are devoid of any merits and unjustified as they do not

conform to the provisions of Section 263 inasmuch as:-

(i) 148 assessment itself was based on wrong reasons that the assessee has not filed the return of income whereas the same was already on the record of the AO. It shows that the Department before issuing notice u/s 148 of the Act did not bother to verify a very crucial fact, this caused undue harassment of a lady.

(ii) In 148 proceedings, all the due compliance was made as asked by the AO which is evident from the host of information and copies of accounts filed along with original return.

(iii) The data about purchase of shares was on record as evident from the statement of capital gains and capital accounts filed by the assessee which in turn is further verifiable from earlier returns of the assessee. It has not been disputed that the assessee filed all the relevant statement i.e. profit and loss account, capital account, balance sheet and has filed all the relevant details asked for by ld. AO. The order passed by the AO clearly reflects that the same has been passed after due verification, enquiries including issuance of statutory letters u/s 133(6) along with confirmation of details with a clear finding of ld. AO that no adverse material was found in this behalf.

(iv) The gains were long term in nature which is clearly evident from the dates of acquisition manifest from the record itself i.e. from computation of income, statement of capital gain and past record of the assessee.

(v) Ld. CIT may hold a particular view about the manner in which the enquiries should have been conducted by AO however such 7 ITA No. 150/JP/2015 Smt. Nirmala Devi Chordia vs. CIT -1, Jaipur

view cannot make AOs inquiries as improper since clear mention of inquiries and finding thereon is crisply mentioned in the order.

(vi) The revision power may be recourse in case of lack of inquiry but not for change of perception about the manner of enquiry. If the AO's order and record reflects that reasonable inquiries were conducted , the order cannot be held as erroneous and prejudicial to the interest of Revenue merely because ld. CIT holds another plausible view about the manner of inquiry. Reliance is placed as under:-

(1) Malabar Industrial Co. Ltd. vs. CIT , 243 ITR 83 (SC) (2) CIT vs. Max. India Ltd., 295 ITR 282 (SC)

The Hon'ble Rajasthan High Court in following case has clearly held that

jurisdiction u/s 263 cannot be invoked for making roving enquiries or to

go into the process of assessment again and again merely on the basis that

more enquiry ought to have been conducted to find something.

(1) CIT vs. Ganpat Ram Bishnoi, 296 ITR 292(Raj.) (2) CIT vs. Jain Construction Co., 257 itr336 (Raja.) (3) Jeewanram Choudhary vs. CIT,153 TTJ 195(Jodhpur )

Further reliance is placed by the ld. AR in the case of CIT vs. Gabriel

India Ltd. , 203 ITR 108 (Bom) wherein the Hon'ble Court held as under:

''The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in the matters or orders which are already concluded. The power u/s 263 can be exercised only when the order is erroneous and due to this, prejudice has been caused to the interests of the Revenue. The order cannot be branded as erroneous by the Commissioner because according to him the order should have been written more elaborately. The Court observed that when ITO has exercise the quasi judicial power vested in him in accordance with the law and arrived at a conclusion, such a conclusion cannot be termed to be 8 ITA No. 150/JP/2015 Smt. Nirmala Devi Chordia vs. CIT -1, Jaipur

erroneous simply because the Commissioner does not feel satisfied with the conclusion. The Court held that in order to exercise power u/s 263, the order must be presented in material before the CIT and if that order was erroneous in so far as it is prejudicial to the interest of the Revenue.''

Ld. Counsel for the assessee placed reliance of Hon'ble Delhi High

Court in the case of CIT vs. Sun Beam Auto Ltd. (2011) 332 ITR 167

wherein the Hon'ble Bench observed as under:-

''If there is some enquiry by the AO in the original proceedings even if inadequate that cannot be clothe the Commissioner with jurisdiction u/s 263 merely because he can form another opinion.

Ld. counsel for the assessee is right in his submission that one has to keep in mind the distinction between the 'lack of enquiry' and 'inadequate enquiry''. If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders u/s 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of 'lack of enquiry.'

2.7 Alternatively it is further contended that Hon'ble Delhi High Court

in the case of CIT vs. Vikas Polymers (2010) 194 Taxman 57 held that if

the ld. CIT is of the view that sufficient enquiries were not considered

assessee produces further documents before ld. CIT to meet his desire for

further inquiries, in such case ld. CIT has duty to verify those documents

and come to conclusion. It is pleaded that assessee submitted copious

documents before ld. CIT(A) on each and every suspicion raised.

2.8 The ld. AR of the assessee also placed decision of ITAT Jaipur

Bench in the case of M/s. Motisons Jewellers vs. CIT (ITA No. 9 ITA No. 150/JP/2015 Smt. Nirmala Devi Chordia vs. CIT -1, Jaipur

280/JP/2014 for the assessment year 2009-10 dated 19-02-2015) giving

reference of para 2.17 of its order as under:-

''2.17 Apropos the inflated profits and expenditure, the ld. Counsel for the assessee has contended that separate books of account for SEZ Unit are maintained along with profit and loss account , expenses vouchers etc. The books of account of the assessee have been upheld by the AO, ld. CIT has not considered upholding of the accounts by AO to be an error. This leads to a very vague situation when the books of account of the assessee are upheld and not challenged at the same time allegations are raised about contents thereof. The ld. CIT while passing the order u/s 263 of the Act has not referred to any other mistake. In consideration of the foregoing facts, we are of the view that the order passed by the AO is neither erroneous nor prejudicial to the interest of Revenue. We may add that Hon'ble Delhi High Court in the cases of CIT vs. Sunbeam Auto and CIT vs. DLF (supra) has held that revision proceedings cannot be initiated to make roving enquiries. There is no prescribed proforma of an assessment order in IT Act which prescribed how the assessment order should be passed. Thus the contents of the body of the assessment order depend on the discretion of quasi judicial authority i.e. AO.

The order does not become erroneous as long as record reflects that relevant enquiries were made. Therefore, no adverse inference can be drawn in this behalf as the assessee has been able to demonstrate conducting of relevant enquiries and compliance during the course of assessment proceedings. The Hon'ble Delhi High Court in the case of CIT vs. Vikas Polymers (2010) 236 CTR 476 held that if the CIT is of the view that the some documents ought to have been placed on record by the AO. which are produced by the assessee before CIT, in that case the ld. CIT himself should decide the matter on the material made available. In this case if in the perception of ld CIT some documents were not placed on record they were forthwith supplied by the assessee. Consequently, no case is made out for setting the assessment to frame the same denovo. We find merit in the contentions of assessee that it has no control over AO as to what copies should be placed on record or in which manner assessment order should be passed. Our views are fortified by decisions of Hon'ble Apex Court in the cases of CIT vs. Max India Ltd. (2007) 295 ITR 282 and M/s. Malabar Industrial Co. Ltd. vs. CIT (2000) 10 ITA No. 150/JP/2015 Smt. Nirmala Devi Chordia vs. CIT -1, Jaipur

243 ITR 83 (SC) and other Hon'ble High Court judgements. Thus in view of the entirety of the facts and circumstances of the case, we are of the view that impugned assessment order is neither erroneous nor prejudicial to the interest of Revenue which is upheld. Hence, order passed u/s 263 of the Act by ld. CIT is quashed''.

It is vehemently contends that the notice and 263 order are untenable and

bad in law, besides series of events indicate the harassment faced by a

leady assessee.

2.9 Ld. DR Ms. Rolee Agrawal supported the order of ld. CIT and

contends that various documents filed by the assessee before the ld. CIT

were not filed before the AO, the assessment order does not demonstrate

that adequate inquiries were made by AO. Thus substantial relief has

been given without proper verification, in these circumstances ld. CIT in

exercise of his statutory power was justified in setting aside the

reassessment.

2.10 Ld. Counsel for the assessee in his rejoinder contends that original

records were furnished before the AO and the enquiries conducted by the

AO were sufficient to demonstrate proper disclosure of the facts along

with return of income during assessment proceedings. The crisps recitals

in the assessment order demonstrate that the AO has undertaken proper

enquiries, verification and applied her mind before passing the order.

Besides the ld. CIT cannot shy away from verifying the documents 11 ITA No. 150/JP/2015 Smt. Nirmala Devi Chordia vs. CIT -1, Jaipur

furnished by the assessee on his queries. This amounts to abdication from

statutory obligation as held by Hon'ble Delhi High Court in Vikas

Polymers (supra)

2.11 We have heard the rival contentions and perused the materials

available on record. We find from the record that the assessee had already

filed the return of income despite that she has been wrongly accused of

not filing the same; this subjected the assessee to rigor of avoidable 148

proceedings. The record and submissions filed during the course of

assessment proceedings did not in any manner indicate that proper

enquiries and verification were not conducted. The order of the AO

though short yet crisp and clear in arriving at proper findings reflecting

reasonable discharge of assessment which cannot be held as erroneous. In

our considered view, the case laws cited by the ld. AR in the case of CIT

vs. Sun Beam Auto Ltd. (Delh), Malabar Industrial Co. Ltd. vs. CIT (SC)

and CIT vs. Max India Ltd. (supra) support assessee's contentions. We

are of view that 263 proceedings cannot be invoked where reasonable

inquiries are conducted with application of mind; there is conspicuous

difference between the cases of lack of enquiry and perception about the

level of enquiry. In this case it emerges that ld. CIT carried a different

perception about the manner of enquiry which ought to have been

conducted by the AO; however it is not 'sufficient to hold the assessment 12 ITA No. 150/JP/2015 Smt. Nirmala Devi Chordia vs. CIT -1, Jaipur

order as erroneous and thereby prejudicial to the interest of revenue. The

plethora of case laws cited by the assessee do not support such type of

exercise of power u/s 263 of the Act. Hence 263 order holding the AO's

order as erroneous cannot be sustained merely because the ld. CIT holds

different plausible view about manner of inquiry. Consequently, we are

unable to uphold the impugned order u/s 263 of the Act passed by the ld.

CIT which is quashed. Thus the appeal of the assessee is allowed.

3.0 In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 29 /05/2015.

Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 29 /05/ 2015 *Mishra

vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Smt. Nirmla Devi Chordia, Jaipur

2. vk;dj vk;qDr CIT-1, Jaipur

3. vk;dj vk;qDr@ CIT

4. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

5. xkMZ QkbZy@ Guard File (ITA No.150/JP/2015)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@ Assistant. Registrar