HOTEL BABYLON INTERNATIONAL PVT. LTD., RAIPUR,RAIPUR V. PRINCIPAL COMMISSIONER OF INCOME TAX(CENTRAL), BHOPAL, BHOPAL

ITA 242/RPR/2024

AI Insights

The case involves Hotel Babylon International P. Ltd., which appealed against the order of the Principal Commissioner of Income Tax (Central), Bhopal. The PCIT had invoked revisional proceedings under section 263 of the Income Tax Act, 1961, following a survey under section 133A and subsequent reassessment under sections 147 and 143(3). The primary issue was the taxability of processing fees amounting to Rs.3,51,409, which the PCIT presumed to be capital in nature and thus not allowable under section 37(1). The Tribunal dismissed the appeal, supporting the PCIT's decision to set aside the original assessment order and direct a de novo assessment.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 29777 (ITAT-RAIPUR)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Next Hearing Date: 25-09-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 24-05-2024
• Other Referred Cases: Daniel Merchants Pvt. Ltd. vs. ITO [2017TIOL-2526-H.C Kolkata IT]
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S.L.ANURAGI
• Keywords: Set aside; Opportunity of being heard; Additional evidence; Reassessment proceedings; Revision of order
• Section: 147; 143(3); 263; 48; 2(A); 133A; 37(1)

Judgement Text

" आयकर अपीलीय अिधकरण, रायपुर Ɋायपीठ, रायपुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR ŵी रिवश सूद, Ɋाियक सद˟ एवं ŵी अŜण खोड़िपया, लेखा सद˟ क े समƗ । BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM (ITA No. 242/RPR/2024) (Assessment Year: 2016-17) आदेश / O R D E R Per Arun Khodpia, AM: The aforesaid appeal is filed by the assessee against the order of Principal Commissioner of Income Tax (Central), Bhopal at Jaba (for short, “ld. PCIT”), passed u/s 263 of the Income Tax Act, 1961 (for short, “the Act”), for the AY 2016-17, dated 29.03.2024, arises from the order u/s 147 r.w.s. 143(3) of the Act passed by the Assistant Commissioner of Income Tax, Central Circle-2, Raipur (for short, “ld. AO”), dated 27.03.2022. Hotel Babylon International P. Ltd., Rajiv Gandhi Marg, VIP Road, Raipur CG V S PCIT (Central), Bhopal, Aayakar Bhawan, 48 Arera Hills, Bhopal, Madhya Pradesh, 462011 PAN: AABCH2709M (अपीलाथŎ/Appellant) . . (ŮȑथŎ / Respondent) िनधाŊįरती की ओर से / Assessee by : None. राजˢ की ओर से / Revenue by : Shri S.L. Anuragi, CIT-DR सुनवाई की तारीख / Date of Hearing : 25.09.2024 घोषणा की तारीख / Date of Pronouncement : 17.10.2024 ITA No. 242/RPR/2024 Hotel Babylon International P. Ltd. 2 2. The grounds of appeal assailed by the assessee are extracted as under: “1. That on the facts and in the circumstances of the case, the order u/s 263 appealed against is opposed to facts and law on several grounds and hence the same may very kindly be quashed. 2. That having regard to the facts and circumstances of the case, Ld. Principal CIT(Central) has erred in law and on facts assuming jurisdiction in passing the order u/s 263, more so when the assessment order u/s 143(3) r.w. order u/s 147 dt. 27.03.2022 was neither erroneous nor prejudicial to the interest of Revenue. Thus, order passed by Ld. Principal CIT(Central) is bad in law, erroneous and may kindly be quashed. 3. That on the facts and on the circumstances of the case, Hon. Principal CIT(Central) was not justified in law in treating the Assessment Order u/s 143(3) r.w.s. 148 dated 27.03.2022 as erroneous and prejudicial to the interest of the revenue directing AO to reframe the assessment de novo w.r.t. the issue of taxability of expenses of Rs.3,51,409/- debited in the P & L account as processing fees u/s 37(1) of the I.T. Act presuming it to be capital in nature. 4. That on the facts and on the circumstances of the case, Hon. Principal CIT(Central) was not justified in law and fact in passing the Order u/s 263 by rejecting the submission of the Assessee mechanically. 5. That on the facts and on the circumstances of the case, Hon. Principal CIT(Central) was not justified in law and fact in passing the Order u/s 263 since allowability of proceeding Fee was not the subject matter of Reassessment proceedings u/s 147, hence the Order passed u/s 147 is neither prejudicial not erroneous. 6. The assessee craves leave to add, urge, alter or withdraw any grounds before or at the time of hearing of this appeal.” ITA No. 242/RPR/2024 Hotel Babylon International P. Ltd. 3 3. The brief facts of the case are that, a survey action u/s 133A of the Act was conducted on Babylon Group, Raipur on 30.05.2017 and the case of the present assessee was covered under the said survey action. During the survey action, it was found that the assessee had provided loans to Babylon Continental, another group concern. Accordingly, the case of the assessee was selected for re-assessment u/s 147 of the Act. Assessment proceeding u/s 147 of the Act have been initiated and during the said proceeding the assessee had made necessary submissions from time to time before the ld. AO. The assessment u/s 147 of the Act was finally culminated accepting the returned income of the assessee filed in response to notice u/s 148 of the Act at Rs.79,26,760/-. Subsequently, the case of the assessee was picked up for revisional proceedings u/s 263 of the Act by the ld. PCIT, for which a notice dated 14.03.2024 was issued. For the sake of clarity of the facts, the contents of the said notice and reasons for commencing the revisional proceedings are culled out hereunder: ITA No. 242/RPR/2024 Hotel Babylon International P. Ltd. 4 ITA No. 242/RPR/2024 Hotel Babylon International P. Ltd. 5 4. In response to the said notice, assessee furnished a detailed reply before the ld. PCIT, however, the response of the assessee was not found plausible and convincing by the ld. PCIT, therefore, he rejected the contention of the assessee, elaborating all the contentions of the assessee a/w reasons and comments by the ld. PCIT for not accepting the reply of the assessee, the same is extracted herein as under for the sake of clarity: ITA No. 242/RPR/2024 Hotel Babylon International P. Ltd. 6 ITA No. 242/RPR/2024 Hotel Babylon International P. Ltd. 7 ITA No. 242/RPR/2024 Hotel Babylon International P. Ltd. 8 5. Based on the aforesaid exhaustive reasonings, after following the certain judicial pronouncements, ld. PCIT have recorded his satisfaction that the order ITA No. 242/RPR/2024 Hotel Babylon International P. Ltd. 9 passed by the assessing officer u/s 147 r.w.s. 143(3) of the Act, dated 27.03.2022 is erroneous in so far as it is prejudicial to the interest of revenue including in terms of explanation 2(a) & (b) of the Sec. 263 of the Act, therefore, the order passed by the assessing officer is set aside by the ld. PCIT and the AO was directed to re-frame the assessment de novo to the extent directed (leaving the other issues in the original assessment order as such) after conducting proper inquiries in the light of the directions/discussions noted in the order u/s 263 of the Act, after affording reasonable opportunity of being heard to the assessee. 6. Aggrieved with the aforesaid order of the ld. PCIT passed u/s 263 of the Act, the assessee preferred the present appeal before the Tribunal, which is under consideration before us. 7. The case was taken up for hearing on 25.09.2024. The learned authorized representative for the assessee was not present, however, an application for adjournment was submitted, which was not found acceptable for the reason that the issue assailed in the present case can be decided on the basis of facts available on record. 8. At the outset, ld. CIT-DR vehemently supported the order of ld. PCIT and have submitted that the issue which was the cause of action for invoking ITA No. 242/RPR/2024 Hotel Babylon International P. Ltd. 10 revisionary action u/s 263 was regarding taxability of processing fees debited in the P & L account u/s 37(1) of the Act, as same is in the nature of capital expenditure in the present case. Necessary enquiry and examination of facts qua the issue were not conducted by the Ld AO, as left his attention, therefore, the order of Ld AO was proved to be erroneous and prejudicial to the interest of revenue, thus, ld. PCIT has rightly initiated the proceeding u/s 263 of the Act and set aside the issue to the files of the ld. AO for re-examining the same with conducting proper inquiry, after affording the assessee reasonable opportunity of being heard, therefore, there was no prejudice to the assessee, as remedy available is to furnish all the necessary information before the AO. 9. We have considered the rival submissions, perused the materials available on record and case law relied upon by the ld. PCIT in his order u/s 263 of the Act. 10. Before us, the assessee had submitted an application for admission of additional evidence in terms of Rule 29 dated 24.09.2024, specifying that such evidence are of vital significance and necessary evidence, which the assessee failed to submit before the ld. PCIT, but without any wilful default / negligence on the part of the assessee. ITA No. 242/RPR/2024 Hotel Babylon International P. Ltd. 11 11. Apropos, additional evidence, we observe that such additional evidence which were never produced before the revenue authorities can not be accepted at this stage and even if accepted for any inevitability, the matter needs to be restored to the ld AO for examination and verification of the same, which the Ld PCIT had already directed. Further, furnishing of additional evidence is all the more a reason which shows that necessary examination of assessee’s records was not carried out by the ld. AO and assessee was unable to place requisite details before the Ld PCIT. 12. On perusal of the order of the ld. PCIT, it is clearly emanating that the ld. PCIT is well within his power to invoke the revisional proceeding in which the reliance was placed in the case of Daniel Merchants Pvt. Ltd. vs. ITO [2017TIOL-2526-H.C Kolkata IT]. The matter thereafter was carried before the Hon’ble Apex Court in the case, which was decided on 30.11.2017, wherein, view of Hon’ble Kolkata High Court has been approved, having held as under: “we find that the Commissioner of Income Tax had passed an order under Section 263 of the Income Tax Act, 1961 with the observations that the Assessing Officer did not make any proper inquiry while making the assessment and accepting the explanation of the assessee(s) insofar as receipt of share application money is concerned. On that basis the Commissioner of Income Tax had, after setting aside the order of the Assessing Officer, simply directed the Assessing Officer to carry thorough and ITA No. 242/RPR/2024 Hotel Babylon International P. Ltd. 12 detailed inquiry. It is this order which is upheld by the High Court. We see no reason to interfere with the order of the High Court.” 13. Also as the assessee itself has admitted that all the necessary information could not be furnished before the ld. PCIT, therefore, certain additional evidences are furnished before us to be considered U/r 29 of the ITAT Rules, however, at this stage, as the matter is already been restored back to the file of the AO and the assessee had full opportunity to submit whatever evidences / explanations / contentions before the ld. AO, therefore, it does not deem necessary to allow such additional evidence. 14. In back drop of the aforesaid facts, circumstances and observations in the present case, respectfully following the principle of law laid down in the case of Daniel Marchants Pvt. Ltd (supra), we do not find any infirmity in the order of the ld. PCIT passed u/s 263 read with explanation 2(a) & (b) of Section 263 of the Act. 15. We, thus, in terms of our aforesaid observations upheld the order of the ld. PCIT. 16. In result, the appeal filed by the assessee in ITA No. 242/RPR/2024 is rendered as dismissed in terms of our aforesaid observations. ITA No. 242/RPR/2024 Hotel Babylon International P. Ltd. 13 Order pronounced in the open court on 17/10/2024. Sd/- (RAVISH SOOD) Sd/- (ARUN KHODPIA) Ɋाियक सद˟ / JUDICIAL MEMBER लेखा सद˟ / ACCOUNTANT MEMBER रायपुर/Raipur; िदनांक Dated 17/10/2024 Hem आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : आदेशानुसार/ BY ORDER, //True copy// (Private Secretary) आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur 1. अपीलाथŎ / The Appellant- 2. ŮȑथŎ / The Respondent- 3. आयकर आयुƅ(अपील) / The CIT(A), 4. The Pr. CIT -1, Raipur, (C.G.) 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur 6. गाडŊ फाईल / Guard file. "