DHWANI FINSERVE PVT LTD,RAJKOT V. PRINCIPAL COMMISSONER OF INCOME TAX-1, RAJKOT

ITA 389/RJT/2024

AI Insights

The case involves Dhwani Finserve Pvt. Ltd., which appealed against the order of the Principal Commissioner of Income Tax-1, Rajkot, passed under section 263 of the Income Tax Act, 1961, for the Assessment Year 2017-18. The PCIT-1 had commented on certain documents not submitted by the assessee during the original assessment but did not address the documents that were submitted. The Tribunal found that the PCIT-1 had not adequately considered the documents submitted by the assessee during the revisionary proceedings and thus remanded the matter back for a detailed examination of those documents.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 47088 (ITAT-RAJKOT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Other Referred Cases: CIT v. Infosys Technologies Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY PUNGLIA; LD.
• Assessee Lawyers: NAIMISH VAYAWALA; BHAVIK NAGOARI; LD. ARS
• Keywords: Set aside; Opportunity of being heard; Corroborative evidences; Principle of natural justice; Revision of order
• Section: 263

Judgement Text

" आयकर अपीलीय अिधकरण, राजकोट Ɋायपीठ, राजकोट । IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH: RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER & SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No.389/Rjt/2024 (िनधाŊरण वषŊ / Assessment Year : 2017-18) Dhwani Finserve Pvt.Ltd. A-204, Kadamb Hights Opp. Arjun Party Plot Kalawad Road Rajkot Sau Uni Area S.O., Rajkot–360 005 (Gujarat) बनाम/ Vs. The Principal Commissioner of Income Tax-1 Rajkot – 360 001 ˕ायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAECD 1108 M (अपीलाथŎ /Appellant) .. (ŮȑथŎ / Respondent) Assessee by : Shri Naimish Vayawala & Shri Bhavik Nagoari, Ld. ARs Revenue by : Shri Sanjay Punglia, Ld. CIT-DR सुनवाई की तारीख /Date of Hearing 09 /04/2025 घोषणा की तारीख /Date of Pronouncement 11 /04/2025 आदेश / O R D E R PER DR.ARJUNLAL SAINI, ACCOUNTANT MEMBER: By way of this appeal, the assessee has challenged the correctness of the order of the Learned Principal Commissioner of Income Tax-1, Rajkot [(in short “Ld.PCIT”] passed u/s.263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act] dated 31/03/2024 for Assessment Year (AY) 2017-18. 2 Dhwani Finserve Pvt.Ltd. vs. Pr.CIT-1 ITA No.389/Rjt/2024 (AY : 2017-18) 2. At the outset, the Ld.counsel for the assessee submitted that during the revisionary proceedings u/s.263 of the Act, the Ld.PCIT did not provide fair opportunity of hearing to the assessee. The Ld.counsel for the assessee has submitted that the relevant documents and evidences before the Ld.PCIT along with written submission were filed, which is reproduced by the Ld.PCIT in his order, vide Page Nos.4 to 15 of the revision order passed by the Ld.PCIT. Before the Ld.PCIT, the assessee has submitted the PAN of the depositor, Audit Report, Income-tax Return, copy of bank statement, copy of confirmation evidences regarding re- payment of loan in respect of Bell Indus Fibrecom Pvt.Ltd., in respect of MKR Trading Pvt.Ltd., in respect of Olwin Garments Pvt.Ltd. and in respect of Win And Grow Investment Advisory Services Pvt.Ltd. The Ld.PCIT did not make any comment on these documents which was a part of the assessment report and which were submitted before the AO. However, the Ld.PCIT vide para No.4.2 of his order has made the comments on the other documents which were not submitted before the AO. Therefore, the Ld.counsel for the assessee submitted that the Ld.PCIT ought to have made comment on the documents and evidences submitted by the assessee before him during the revisionary proceedings u/s.263 of the Act. However, the Ld.PCIT put his comments on other documents, which are given in para No.4.2 of the order of Ld.PCIT, which is reproduced below:- “4.2. Based on detailed findings during the course of search and subsequent investigation and the statements recorded as discussed above, it is clear that the loans/advances received by the assessee from Olwin Garments Pvt. Ltd, MKR Trading Pvt. Co, Bell Indus Fibrecom Private Limited & Win And Grow Investment Advisory Services Private Limited is a fictitious in nature. During the course of assessment proceedings, 3 Dhwani Finserve Pvt.Ltd. vs. Pr.CIT-1 ITA No.389/Rjt/2024 (AY : 2017-18) neither assessee has submitted following documents in support of its claim nor has AO called for. (a) Copy of agreement, (b) Terms & Conditions, (c) Copies of correspondences in respect of the transactions (Receipt/payments/ reminder etc.), (d) Person who was contacted, how known etc., (e) Due diligence done, (f) copy of application form if any, (g) Security mortgaged against loan, (h) other supporting evidences. 4.3. In its reply the assessee has mainly contended that loans taken by it during the year under consideration from Olwin Garments Pvt. Ltd, MKR Trading Pvt. Co, Bell Indus Fibrecom Private Limited & Win And Grow Investment Advisory Services Private Limited were genuine transactions and in support of its claim, it has furnished various document during the course of assessment proceedings as well during the proceedings u/s 263 of the I.T. Act. The contention of the assessee was examined However, from evidences and statements recorded during the course of search, it is clear on the basis of above analysis, documentary evidences, circumstantial evidences, human conduct and preponderance of probabilities is that what is apparent in this case is not real, that these financial transactions were sham ones and that this entire edifice was only a colourable device used to evade tax.” 3. Therefore, the Ld.counsel for the assessee submitted that no doubt that the Ld.PCIT made comments on other documents which were not submitted by the assessee before the AO and neither the AO has asked from the assessee during the assessment proceedings. However, the Ld.PCIT, atleast, should make comment on the documents submitted during the course of proceedings u/s263 of the Act by the assessee before him. Therefore, the Ld.counsel for the assessee prayed before the Bench that the matter may be remanded back to the file of Ld.PCIT to examine the relevant documents and evidences submitted by the assessee during the revisionary proceedings before him and should ensure the comment on these documents and if there is any patent error, the Ld.PCIT should let it know to the AO to revise the assessment order. Since not even a single comment has been made by the Ld.PCIT on the documents submitted 4 Dhwani Finserve Pvt.Ltd. vs. Pr.CIT-1 ITA No.389/Rjt/2024 (AY : 2017-18) before him, during the revisionary proceedings by the assessee, therefore, the matter may be remanded back to the file of ld.PCIT to give findings on the documents submitted by the assessee during revisionary proceedings u/s.263 of the Act. 4. On the other hand, the Ld.DR appeared for the revenue submitted that in para No.4.2 of the order of the ld.PCIT, the Ld.PCIT has pointed out that during the course of assessment proceedings neither the assessee has submitted some required documents in support of its claim, nor the AO is called for documents, such as, copy of agreement (b) Terms & Conditions, (c) Copies of correspondences in respect of the transactions (Receipt/payments/ reminder etc.), (d) Person who was contacted, how known etc., (e) Due diligence done, (f) copy of application form if any, (g) Security mortgaged against loan, (h) other supporting evidences. Therefore, as per ld.CIT-DR, these documents were also utmost necessary to be submitted by the assessee before the AO to prove its claim. Since neither the assessee submitted these documents before the AO, nor the Assessing Officer has asked the assessee to submit these documents during the course of assessment proceedings to verify the claim of the assessee, therefore, the Ld.PCIT wanted that these documents are essential to be examined by the AO, therefore, the order passed by the AO was erroneous and prejudicial to the interests of the Revenue. The Ld.CIT-DR submitted that these are additional documents required by the Ld.PCIT, which were to be submitted by the assessee during the course of assessment proceedings and the AO should also asked the assessee to submit these documents for verification of the genuineness of the claim. Without verification of the documents highlighted by the Ld.PCIT, as per his order contained at paragraph number 4.2, the AO cannot reach at a conclusion 5 Dhwani Finserve Pvt.Ltd. vs. Pr.CIT-1 ITA No.389/Rjt/2024 (AY : 2017-18) to verify the claim of the assessee. Therefore, on these additional documents which were asked by the Ld.PCIT in para 4.2 of his order, which also vital important to be submitted by the assessee during the course of assessment proceedings, however, the AO failed to ask the documents during assessment proceedings. However, the Ld.DR did not have objection, if the matter is remitted back to the file of Ld.PCIT to examine the documents already submitted by assessee, before Ld.PCIT. 5. We have heard both the sides and perused the material available on record as well as the orders of the authorities below. Section 263 of the Act, enables the Commissioner to have a look at the orders or proceedings of the lower authorities and to effect a correction, if so needed, particularly if the order or proceeding is erroneous and prejudicial to the interest of the Revenue. This provision occurs in a taxing statute whose object is to raise revenue for the State and an enabling provision conferring jurisdiction on the Commissioner to revise the order of the lower authorities in certain circumstances particularly when it is erroneous and prejudicial subject to certain exceptions. One can at once realize that the provision is intended to plug leakage to the Revenue by an erroneous order passed by the lower authorities, whether by mistake or in ignorance or even by design. It makes little difference as to for what reasons the order is passed by the lower authority, so long as it becomes erroneous and prejudicial to the interest of the Revenue. Ultimately, the object is to ensure that leakage of the revenue is plugged and some tax due to the State not reaching the coffers of the State is prevented by exercise of revisional jurisdiction of the Commissioner [CIT v. Infosys Technologies Ltd. 2012] 17 taxmann.com 203/205 Taxman 98 (Kar.)]In the instant case, we find that the Ld.PCIT in 6 Dhwani Finserve Pvt.Ltd. vs. Pr.CIT-1 ITA No.389/Rjt/2024 (AY : 2017-18) his order vide paragraph No.4.2 (reproduced above) has stated that without examining the genuineness of the transactions, the AO ought to have examined the documents which were listed in paragraph No.4.2 of the Ld.PCIT’s order and these documents are essential and neither the AO has asked the assessee during the course of assessment proceedings to submit these documents, nor the assessee has submitted these essential documents before AO and, therefore, on this count also, the order passed by the AO is erroneous and prejudicial to the interests of the revenue. 6. However, we note that the Ld.PCIT has not made any specific comment in his order or did not mention any error about the documents already submitted by the assessee during the revisionary proceedings u/s.263 of the Act. Therefore, we are of the view that it was the duty of the Ld.PCIT to examine the documents and the details submitted by the assessee, during the revisionary proceedings u/s.263 of the Act, and find out any patent error, if any, in these documents and that patent error should be informed to the AO to correct the same. Since the Ld.PCIT has a supervisory role and it is his duty to examine the documents which were submitted by the assessee, during the proceedings u/s.263 of the Act, before him and his findings whether assessee’s documents are relevant or irrelevant. Since no finding has been given by the Ld.PCIT, therefore, it is against the principles of natural justice and, hence, we are of the considered view that the matter may be remanded back to the file of the ld.PCIT. Therefore, we set aside the order of the Ld.PCIT and remit the issue back to the file of Ld.PCIT to provide the findings on the documents submitted by the assessee during the course of proceedings u/s.263 of the Act and also grant a reasonable opportunity of being heard to the assessee. 7 Dhwani Finserve Pvt.Ltd. vs. Pr.CIT-1 ITA No.389/Rjt/2024 (AY : 2017-18) We also direct the assessee to submit the relevant documents and evidences, if any, which were not submitted before the Ld.PCIT and assessee should participate in the revisionary proceedings and should not seek any frivolous adjournments. 6. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 11 / 04 /2025 at Rajkot. Sd/- Sd/- (DINESH MOHAN SINHA) (DR. ARJUNLAL SAINI JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT; Dated 11 / 04 /2025 टȣ.सी.नायर, व.Ǔन.स./T.C. NAIR, Sr. PS आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंͬधत आयकर आयुÈत / Concerned Pr.CIT 4. आयकर आयुÈत(अपील) / The CIT(A)-concerned. 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,राजोकट/DR,ITAT, Rajkot 6. गाड[ फाईल / Guard file. आदेशानुसार/ BY ORDER, स×याͪपत ĤǓत //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलȣय अͬधकरण, राजोकट / ITAT, Rajkot 1. Date of dictation .. 09/04/2025 (dictation-pad attached at the end of this File) 2. Date on which the typed draft is placed before the Dictating Member … 09/04/2025 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….11.4.25 7. Date on which the file goes to the Bench Clerk…………………11.4.25 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order……………… "