CHINTAMANI COMMODITIES,JHILMIL INDUSTRIAL AREA V. PCIT, DELHI

ITA 2610/DEL/2024

AI Insights

The case involves Chintamani Commodities, a partnership firm engaged in the business of copper trading, which faced reassessment under Section 147 r.w.s 144B of the Income Tax Act, 1961, leading to the addition of alleged bogus purchases amounting to Rs.3,42,48,621. The PCIT later issued a show cause under Section 263, questioning the non-inclusion of commission expenses related to these purchases. The Tribunal's decision centered on the validity of the PCIT's jurisdiction to reassess when the matter was already pending before the CIT(A).

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 30437 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-09-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 22-05-2024
• Other Referred Cases: M/s Uma Glass Work Vs. PCIT, Agra, CIT Vs. Van Resorts & Hotels Pvt. Ltd., DCIT Vs. Jyoti Foundation, DIT Vs. Jyoti Foundation
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: R.S. SINGHVI; RAJAT GARG
• Keywords: Set aside; Unexplained cash credit; Bogus purchase; Reopening of assessment; Accommodation entries; Bogus
• Section: 147; 263; 68; 69C; 20

Judgement Text

"1 ITA No.2610/Del/2024 Chintamani Commodities THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, DELHI BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER & SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER ITA No. 2610/Del/2024 (Assessment Year 2013-14) Chintamani Commodities A-20, Jhilmil Industrial Area, Shahdhra Delhi - 110095 Vs. PCIT, 20 Room No. 106, Vikas Bhawan, I P Estate Delhi – 110002 \u0001थायीलेखासं./जीआइआरसं./PAN/GIR No:AAGFC9374B Appellant .. Respondent Appellant by : Sh. R.S. Singhvi, CA & Sh. Rajat Garg, CA Respondent by : Sh. Surender Pal, CIT, DR Date of Hearing 17.09.2024 Date of Pronouncement 28.11.2024 O R D E R PER MADHUMITA ROY, JM: The instant appeal filed by the assessee is directed against the order dated 30.03.2024 passed by the PCIT, Delhi-20 under Section 263 of the Income Tax Act, 1961, holding the assessment order passed under 2 ITA No.2610/Del/2024 Chintamani Commodities Section 147 r.w.s 144B dated 22.03.2022 erroneous inasmuch as it is prejudicial to the interest of revenue and thereby setting aside the limited issue “expenditure incurred on commission” paid by the assessee in order to obtain the accommodation entries of Rs.342,48,621/- that had already been added by the AO in the said assessment order. 2. The brief facts leading to the case are that the assessee, a partnership firm, engaged in the business of purchase and sale of copper, filed its return of income for the year under consideration on 27.09.2013 declaring total income at Rs.40,42,755/-. Subsequently, the case was reopened on the basis of the information received from the DDIT(Investigation), Unit 6, (2) Delhi, that the assessee is a beneficiary of accommodation entry to the tune of Rs.3,32,48,621/- provided by two companies namely M/s Moral Alloys Pvt. Ltd. and M/s Brilliant Metals Pvt. Ltd. during the year under consideration on account of purchase of copper from these two companies. The said reassessment proceeding was culminated in an order of addition of the entire amount of alleged bogus purchase of Rs.3,42,48,621/- under Section 68 of the Act. Being aggrieved by and/or dissatisfied with the said order passed by the Ld. AO the assessee preferred an appeal before the First Appellate Authority which is still pending. 3. In the meantime, show cause dated 24.02.2024 under Section 263 of the Act was issued directing the assessee to explain as to why the expenditure incurred on account of commission paid in obtaining the above bogus purchases being undisclosed expenditure under Section 69C of the Act should not be added in the hands of the assessee. The 3 ITA No.2610/Del/2024 Chintamani Commodities said show cause dated 24.02.2024 was issued with the following contents: 4 ITA No.2610/Del/2024 Chintamani Commodities 4. The assessee on 01.03.2024 duly replied to the said show cause notice under Section 263 of the Act by PCIT, Delhi-20 in relation to the said assessment order under Section 147 of the Act dated 22.03.2022 to this effect that the reassessment order under Section 147 is beyond jurisdiction and there was no case of unexplained cash credit in respect of purchases made by the assessee from the above two parties mentioned hereinabove and the provision of Section 68 are inapplicable to the said case. Moreso, in the show cause the addition has been mentioned as made under Section 69C of the Act towards alleged bogus purchases whereas the addition was made by the Assessing Officer was under Section 68 of the Act. Therefore, the observation made by the Ld. PCIT in the show cause notice under Section 263 of the Act is also factually 5 ITA No.2610/Del/2024 Chintamani Commodities incorrect. Further that the fact of pending of the appeal before the CIT(A) against the said assessment order dated 22.03.2022 passed by the Ld. AO under Section 147 r.w.s 144B of the Act has also been mentioned in the said reply filed by the assessee, supporting documents whereof being form No. 35 was also enclosed raising the issue that since principle issue of reopening of assessment as well as addition on merits is the subject matter of appeal pending before the Ld. CIT(A), assumption of jurisdiction under Section 263 of the Act in respect of such assessment order is invalid and total disregard to the scheme of the Act. 5. At the time of hearing of the instant appeal, the Ld. Counsel appearing for the assessee vehemently argued reiterating the above contention made before the PCIT. It was submitted by him that the issue of notional commission is directly arising from the addition on account of alleged accommodation entries and the same being under challenge before the Ld. CIT(A), the revisionary proceeding under Section 263 should not be exercised in respect of the said issue which has direct nexus with the issue in appeal as per Clause (c) of Explanation 1 of Section 263 of the Act. Further that the First Appellate Authority is vested with co-terminus power with AO and such issue raised in the revisionary proceeding being directly connected and consequential to the addition of accommodation entry, the same falls well within the scope of appellate proceeding before the Ld. CIT(A). In that view of the matter, the exercise of power under Section 263 by the PCIT in respect of the issue of addition of notional commission is without jurisdiction, not maintainable and therefore, liable to be quashed. In this regard, he has relied upon the judgment passed by the Coordinate Bench in the case of M/s Uma Glass Work Vs. PCIT, Agra in ITA Nos. 17 & 18/Agra/2021 a copy whereof has been duly submitted before us by the Ld. A.R. 6 ITA No.2610/Del/2024 Chintamani Commodities 6. On the other hand, the Ld. D.R vehemently argued in support of the order passed by the Ld. PCIT under Section 263 of the Act, holding the Assessment order under Section 147 r.w.s 144B of the Act dated 22.03.2022 as erroneous so far as it is prejudicial to the interest of revenue as the AO did not raise issue of commission and no inquiry was made by the Assessing Officer in the said reassessment proceeding against the assessee which ought to have been raised by the said officer. 7. We have heard rival submissions made by the respective parties, and we have also perused the relevant material available on record. It appears from the order passed by the Ld. PCIT that the main contention raised by him is the expenditure incurred on account of consequential commission paid in obtaining the bogus purchases by the assessee being undisclosed expenditure under Section 69C of the Act which according to the PCIT ought to have been added in the hands of the assessee. On the contrary, addition had been made in the hands of the assessee only in regard to the accommodation entry in the form of bogus purchases made by the assessee from the two parties namely M/s Moral Alloys Pvt. Ltd. and M/s Brilliant Metals Pvt. Ltd. wherein, it is evident that the provision invoked while making addition though was under Section 68 of the Act, the PCIT wrongly mentioned the same under Section 69C of the Act which is factually incorrect as rightly pointed out by the Ld. Counsel for the assessee appearing before us. Furthermore, the submission made on the legal ground that once the order passed by the Ld. AO under Section 147 r.w.s 144B of the Act is under challenge and pending before the Ld. First Appellate Authority, assumption of jurisdiction under Section 263 in respect of such assessment order is invalid and in total disregard to the scheme of the act particularly when the alleged expenditure incurred 7 ITA No.2610/Del/2024 Chintamani Commodities by the assessee in obtaining the accommodation entry by way of alleged bogus purchase made by the assessee from the two parties mentioned hereinabove is connected and consequential to the issue of addition made by the Ld. AO under Section 147 of the Act is found to be acceptable as the First Appellate Authority vested with the co-terminus power with AO, the same falls well within the scope of Appellate proceedings before the Ld. CIT(A). In this regard, we have considered the judgment passed by the Coordinate Bench in the case of M/s Uma Glass Work (supra). The provision of law particularly clause (c) of Explanation 1 to Section 263 of the Act when provides that in the event the appeal is pending before the CIT(A), the exercise of jurisdiction invoking the provision of Section 263 of the Act by the CIT(A) is barred. In that view of the matter, in the case of CIT Vs. Van Resorts & Hotels Pvt. Ltd. reported in (2019) 111 taxmann.com 62 (All) exercising jurisdiction under Section 263 of the Act by the PCIT in remanding the matter to the Assessing Officer has found to be not sustainable in the eyes of law as held by the ITAT and confirmed by the jurisdictional High Court was considered by the Coordinate Bench. 8. On identical situation of fact, the order passed by the DCIT Vs. Jyoti Foundation reported in (2018) 38 taxmann.com 180 (Delhi) was also duly considered by the Coordinate Bench in the said judgment and finally the assumption of jurisdiction under Section 263 of the Act by the PCIT during the pendency of the appeal against the said assessment order which has been found to be erroneous, so far as, it is prejudicial to the interest of revenue was also found to be bad in law and therefore, set aside. 8 ITA No.2610/Del/2024 Chintamani Commodities 9. It was further contended by the Ld. A.R that when the PCIT opined that further inquiry was required, such inquiry should have been conducted by the said revisionary authority himself to record finding that the assessment order under Section 147 of the Act r.w.s 144B of the Act was erroneous, and, so far as, it is prejudicial to the interest of revenue. In this regard, he has relied upon the judgment passed by the jurisdictional High Court in the case of DIT Vs. Jyoti Foundation (2013) 38 taxmann.com 180 (Delhi) a copy whereof has also been submitted before us has been duly considered. In this particular case, the revisionary authority opined that further inquiry was required but though such inquiry should have been conducted by the revisionary authority himself to record finding that assessment order passed by the Assessing Officer was erroneous, in so far as, it is prejudicial to the interest of revenue, instead set aside the order and directed the assessing officer to conduct the said inquiry; the same was found to be bad in law and, therefore, as quashed by the ITAT has been upheld. 10. Thus, considering the entire aspect of the matter, the appeal preferred by the assessee challenging the order passed by the Ld. AO since pending before the Ld. CIT(A), the exercise of jurisdiction under Section 263 of the Act in terms of clause (c) of Explanation 1 of Section 263 of the Act is found to be without jurisdiction; such proceeding could not be exercised in respect of the said issue which has direct nexus with the issue in appeal. Needless to mention, that the CIT(A) is vested with co-terminus power with AO and the issue raised in the revisionary proceeding being directly connected and consequential to the addition on accommodation entry, the same falls well within the scope of appellate proceeding pending before the Ld. CIT(A). The ratio laid down by the 9 ITA No.2610/Del/2024 Chintamani Commodities Coordinate Bench in M/s Uma Glass Work (supra) therefore, squarely applicable in the case in hand. 11. Further that while holding the assessment order erroneous, without making independent inquiry by the PCIT to record such finding which ought to have been done by him setting aside the issue to the file of the AO is not sustainable as held by the jurisdictional High Court in the case of M/s Jyoti Foundation (supra) is rightly relied upon by the Ld. AR. Relying upon the ratio laid down by the jurisdictional High Court, the order impugned passed by the Ld. PCIT is found to be without jurisdiction and therefore, quashed. 12 . Assessee’s appeal is therefore, allowed. Order pronounced in the open court on 28.11.2024 Sd/- Sd/- (Brajesh Kumar Singh) (Madhumita Roy) Accountant Member Judicial Member Date 28.11.2024 Rohit: PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "