- (1.) THIS appeal by the Revenue is directed against the order dt. 4th Oct., 2005 passed by the Income -tax Appellate Tribunal, Jodhpur Bench, Jodhpur ('the Tribunal') in ITA No. 412/JDPR/2005 [reported as Harisingh & Associates (AOP) vs. ITO : (2005) 98 TTJ (Jd) 628 - -Ed.] relating to the asst. yr. 1996 -97. By the order impugned, the Tribunal has allowed the appeal filed by the assessee and has set aside the order passed by the Commissioner of Income -tax -II, Jodhpur ('the CIT) on 24th March, 2005 in exercise of his powers under s. 263 of the IT Act, 1961 ('the Act'). This appeal has been admitted on the following substantial question of law: 1. Whether in the facts and circumstances of the case, the Tribunal was legally justified in setting aside the order passed by the CIT -II, Jodhpur under s. 263 of the Act treating the said order as invalid and without jurisdiction ? The sum and substance of the case, so far relevant for the appeal, is that the assessee, an AOP came into being in the year 1993 to carry on the business of purchase and sale of agricultural land. It had filed the return of income for the asst. yr. 1996 -97 declaring net loss of Rs. 64,298 but ultimately, the income of the assessee was assessed at Rs. 42,78,794 under s. 143(3)/148 by the order dt 31st March, 2004.
(2.) AGAINST the assessment order dt. 31st March, 2004, the assessee preferred an appeal which was pending before the CIT(A) -II, Jodhpur. However, during the pendency of this appeal, the CIT -II, Jodhpur proceeded to issue a show -cause notice under s. 263 on 1st March, 2005 and ultimately, set aside the assessment order, treating the same as erroneous and prejudicial to the interest of Revenue. The only ground on which the learned CIT set aside the order of the AO was that the addition of Rs. 38,17,000 ought to have been towards undisclosed income of AOP instead of being taxed under the head 'Income from business'. The related parts of the order impugned read as under: I have carefully considered the submissions and it is clear from the assessment order that the AO was in dilemma and he has mentioned two contradictory things in different paras of the assessment order. The AO had the suspicion and he had stated that it might be possible that M/s. Hari Singh & Associates have used their undisclosed income and invested in the purchase of land. He further stated, 'I am of the view the learned AO should have made the addition of Rs. 38,17,000 considering the same as undisclosed income of the AOP instead of treating the same as business income of the assessee and to this extent the order passed by the AO is erroneous and requires to be set aside under s. 263 of the IT Act.'......... 'The order of the AO is erroneous in treating Rs. 38.17 lakhs as business income as money received as advance cannot be treated as income. I, therefore, set aside this order passed by the AO in considering Rs. 38.17 lakhs as business income whereas the addition should have been considering the same as undisclosed income of the AOP and to this extent the order of the AO is erroneous and is set aside, insofar as it is prejudicial to the interest of Revenue. In appeal, the Tribunal found such an approach of the CIT erroneous and wholly without jurisdiction. The Tribunal also observed that when the matter was pending in appeal, passing of the revisional order under s. 263 of the Act was unjustified. The Tribunal found that so far the amount of Rs. 38,17,000 was concerned, it could have been treated by the AO as income from other sources or income from undisclosed sources; and the AO opted for one of the legally permissible option available before him. The Tribunal, inter alia, observed as under: 9. In the given case the learned AO has discussed both the options available before him, as discussed in the impugned order itself. The learned AO opted for one course of action out of two legally possible options before him. So the order cannot be said to be erroneous. It may be prejudicial to the interest of the Revenue. Therefore, one conditions of the two sine qua non is missing, and which ousts the jurisdiction of the learned CIT. The learned CIT cannot substitute his own option under s. 263 of the Act. The above decision of the Hon'ble apex Court further held that when an ITO has adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the ITO has taken one view with which the learned CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue, unless the view taken by the ITO is unsustainable in law. In this case the AOP received as signing (advance) money of Rs. 38,17,000 for the sale of agricultural land and the learned AO considered the same as business income and taxed the same under the head 'Income from business' that is sale of agricultural land. This view of the learned AO is legally permissible view. Nothing has been argued by the Department that it is not a legally permissible act of the learned AO.
(3.) AGGRIEVED by the order aforesaid, the Revenue has preferred this appeal which has been admitted on the question of law as noticed at the outset.;