By K. B. Bhujle, Advocate
Principal
CIT vs. H. Nagraj; 406 ITR 242 (Karn): Date of order: 29th May, 2018
A.
Y. 2008-09 and 2009-10
The
assessee firm was in the business of purchasing agricultural lands, converting
them for non-agricultural purposes and selling them. In the relevant years, the
assessee had claimed expenditure for developing lands. The assessee had
furnished names and addresses of parties to whom the amounts had been paid
along with permanent account numbers, bills and vouchers. Considering the
details furnished in support of the development expenses, the Assessing Officer
made addition of Rs. 2,38,16,700/- and Rs. 4,25,72,383/- for the A. Ys. 2008-09
and 2009-10 respectively. The Commissioner (Appeals) confirmed the additions to
the extent of Rs. 12,50,000/- for A. Y. 2008-09 and allowed the appeal in
respect of the balance. As regards A. Y. 2009-10, an addition of Rs. 2 crores
was confirmed and balance of Rs. 1,92,72,383/- was deleted.
By
exercising his powers of revision u/s. 263 of the Act, the Commissioner
proceeded to hold that the properties purchased by the assessee and the
subsequent sale made in favour of B did not tally in respect of both the
assessment orders and therefore, directed reconsideration of the entire
material. The Commissioner further found that the development expenses
consisting of labour charges and work-in-progress had to be added for the A. Y.
2008-09. Similarly, in respect of payment towards commission, the Commissioner
found that the cheque payments and the tax deducted at source made for claiming
expenditure had to be verified. The Tribunal set aside the order of the
Commissioner.
On appeal
by the Revenue, the Karnataka High Court upheld the decision of the Tribunal
and held as under:
“i) The revisional authority cannot, by acting
u/s. 263, interfere and upset the order passed by the Appellate Commissioner.
ii) When the development expense as considered
by the Assessing Officer were the subject matter of appeal and the Commissioner
(Appeals) had found that for both the assessment years, the expenses incurred
had to be accepted disallowing the claim of Rs. 50 lakhs for the A. Y. 2008-09
and Rs. 2 crores for the A. Y. 2009-10, the question of the Commissioner
(Administration) exercising revisional jurisdiction u/s. 263 to once again
examine the very same issue so as to disallow the labour charges and
work-in-progress did not arise, as the order of assessment made by the
Assessing Officer merged with the order of the Appellate Commissioner.
iii) When the Assessing Officer scrutinised the
returns for the A. Ys. 2008-09 and 2009-10, he considered the purchase of lands
from villagers and thereafter sale of the same to B. He had dealt with the same
in the assessment order and had proceeded to arrive at a conclusion that for
the A. Y. 2008-09, there was unexplained income of Rs. 1,25,66,700/- and for
the A. Y. 2009-10, there was unexplained income in a sum of Rs. 1,92,72,383. He
had thus proceeded to treat these two items as undisclosed profit for the
respective years.
iv) The order passed by the Assessing Officer
merged with that of the Appellate Commissioner for both the assessment years.
Therefore, there was no scope for the Commissioner to exercise jurisdiction
u/s. 263 to reexamine the purchase made by the assessee in respect of the lands
in question. Similar was the factual matrix involved in respect of commission
expenses claimed by the assessee for the two assessment years. The assessee had
submitted full details regarding payment of commission. After considering the
material, the Assessing Officer chose not to make any addition on the item
pertaining to commission.
v) The Tribunal was right in holding that the
Commissioner was not justified in exercising the revisional powers u/s. 263 to
upset the order passed by the Assessing Officer which stood merged with the
order passed by the Commissioner (Appeals).”
