Dies & Tools Limited, Kolkata V. PCIT-1, KOLKATA

ITA 101/KOL/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5873 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 21-03-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRAVEEN KISHORE
• Keywords: Revision of order; Opportunity of being heard; Principle of natural justice; Accommodation entries; Assessment record; Set aside
• Section: 147; 148; 263; 69C; 143(3); 142(1); 133(6); 143(1); 143(2); 208

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCH “A”, KOLKATA BEFORE SHRI MANISH BORAD, HON’BLE ACCOUNTANT MEMBER AND SHRI SONJOY SARMA, HON’BLE JUDICIAL MEMBER ITA No.101/Kol/2021 Assessment Year: 2014-15 Dies & Tools Limited 35, Jessore Road, Nager Bazar, Kolkata – 700 028. PAN: AAACD 8884 E Vs. Pr. CIT, Kolkata-1 (Appellant) (Respondent) Present for: Appellant by : Shri K.K. Khemka, Advocate Respondent by : Shri Praveen Kishore, CIT Date of Hearing : 27.04.2022 Date of Pronouncement : 19.07.2022 O R D E R PER SONJOY SARMA, JM: This is an appeal preferred by the assessee against the order of ld. PCIT, Kolkata – 1 dated 08.10.2018 u/s 263 of the Income-tax Act, 1961. The assessee has taken the following grounds of appeal: “i. That the order under section 263 passed by the CIT is invalid and bad in law and on facts, void ab initio wrong and illegal. ii. That the PCIT invoked section 263 without considering the facts and documents on record and the AO’s observations and satisfaction on the issue of alleged accommodation purchase entries as per report of investigation wing, as made in the assessment order under section 147. iii. That the assessment order passed by the ao under section 147 is neither erroneous nor prejudicial to the interest of revenue and as such the proceedings under section 263 and the notice under section 263(1) is invalid and bad in law. iv. That the PCIT also passed the order under section 263 mechanically without considering the reassessment order under section 147, assessment records and the assessee’s submissions on the notice under section 263(1) and as such the order is invalid and bad in law. ITA No.101/KOL/2021 Dies & Tools Limited A.Y. 2014-15 2 v. That the PCIT has erred in law in invoking provisions of section 263 only on the plea that notice under section 133(6) was not issued to purchase parties when the ao was clearly satisfied with details and documents filed before him. vi. That the appellant craves leave to amend or alter any grounds of appeal and to take additional grounds before or at the time of hearing of the appeal”. 2. From the perusal of the grounds raised by the assessee, we find that the solitary grievance of the assessee is that the ld. PCIT erred in invoking the revisionary jurisdiction without satisfying the condition precedent laid down u/s 263 of the I.T. Act without validly holding that the ld. Assessing Officer (in short ‘the AO’) order is erroneous as well as prejudicial to the interest of the revenue. 3. The brief facts of the case are that the assessee is a company filed original return of income for A.Y. 2014-15 on 29.11.2014 declaring a total income of Rs. Nil. Subsequently, the case was duly processed u/s 143(1) on 24.12.2014. Soon after the case was selected for reopening on the basis of reason “information has been received from the DIT (Investigation), Kolkata that the assessee-company has received accommodation entry through bogus bills raised by various jamakharchi companies managed and controlled by Sanjiw Kumar Singh during the F.Y. 2013-14 relevant to A.Y. 2014-15. Such bogus bills to the tune of Rs. 6,73,874/- were received from M/s. Tarama Merchants Pvt. Ltd., M/s. Shree Shail Overseas, M/s. Rajpur Trading Pvt. Ltd., M/s. Gangotri Trading Co., M/s. Baba International and M/s. Durga Sales. Soon after the case of the assessee was reopened and notice u/s 148 was issued in due course to the assessee, in response to that the assessee-company submitted its e-return by showing the same income on 05.04.2018. Immediately after it, notice u/s 143(2) and 142(1) were issued and duly served upon the assessee-company. The assessee-company in adherence to said notice filed necessary documents, papers in ITBA module. The AO examined the submission of the assessee-company and has been verified all the IT details and the AO did not find discrepancies and assessment order was passed on 08.10.2018. ITA No.101/KOL/2021 Dies & Tools Limited A.Y. 2014-15 3 Subsequently, the ld. PCIT on perusal of assessment records of the assessee, the ld. PCIT observed as under: “It is observed that the AO had in his custody, a credible information that the assessee had transacted in the accommodation entry through different concerns for Rs. 6,73,874/- during the relevant assessment year. But no notice u/s 133(6) of the act was sent to the bogus parties, no evidence of transportation of goods purchased was placed in the folder, no VAT/sale tax payments have been made in the impugned transactions, no tax audit report of the assessee has been placed in the assessment record and no bills were produced by the assessee. Therefore, the entire transactions for Rs. 6,73874/- entered in to by the assessee appear to be bogus and thus should have been disallowed u/s 69C of the Act.” 4. Further, the ld. PCIT was satisfied that it was a case of erroneous assessment insofar as it was prejudicial to the interest of revenue. A show cause notice was issued upon the assessee on 15.01.2021. In response to the notice of the ld. PCIT, written submission was filed by the assessee on 05.02.2021 stating as follows: “We are in receipt of your notice u/s. 263(1) in respect of order u/s. 143(3)/147 dt. 08/10/2018, Sir, in the 2 nd paragraph of your notice you had observed as under: A. The assessment records of the assessee company were called for and on the basis of verification of materials on record it was found that order is, prima facia, erroneous insofar as it is prejudicial to the "interest of the Revenue'. The reasons given by you are CONDENSED as under- a. Creditable information that the assessee had transacted in the accommodation entry Rs.6,73,874/- b. No notice u/s 133(6) was sent. c. No evidence of transportation of goods d. No VAT/Sale Tax payments made. e. No Tax Audit Report on records. f. No Bills were produced by the assessee. g. Transaction of Rs. 6,73, 874/- appear to be bogus. h. No application of mind or conducting any enquiries or verification. i The entire transaction of Rs.6,73, 874/- should have been disallowed u/s.69C of the Act. B. FACTS: The sum of Rs. 6,73,874/- as referred to relates to the following parties which were asked / enquired by ld. AO during 147 proceedings before him: Opening balance During the year Total 1. During Sales 45830 80370/- 126200/- 2. Gangotri Trading Co. X 69237/- 69237/- ITA No.101/KOL/2021 Dies & Tools Limited A.Y. 2014-15 4 3. Ragpur Trading 13822/- 12318/- 137040/- 4. Shree Shail Overseas 98446/- 170311/- 26875/- 5. Rara Ma Merchant X 6. 158098/- 517911/- 676009/- c. The assessee filed/produced the following papers & documents before the AO: i. Bank statement for the period 01.04.2013 to 31.03.2014 ii. Tax Audit Report filed on line on 28.11.2014 III. Durga sales – Rs. 80,370/- 1. Ledger copy of the party 2. Conformation of a/c from party 3. Xerox copy of goods receipt issued to party after receipt. Goods and bills and copy of relevant road challans: [1. The items supplied to us wqs not exceeding 3.2 kgs/21 kgs/4 kgs. which could be supplied through MUTIAS and / or Thella] [2. All payments by A/c payee cheques only] Total Rs. 1,25,200/- was paid by through cheques, balance NIL. [3. The opening balance of Rs. 45,830/- accepted during earlier year.] IV. Gangotri Trading Co. Rs. 69,237/- A. Ledger copy of the party B. Confirmation of a/c from party C. Xerox copy of goods receipt issued to party after receipt of goods and bills and copy of relevant road challan. [1. The items supplied to us was not exceeding 28 kgs. which could be supplied through MUTIAS. [2. VAT charged @5% VAT No. & CST No. available on bill] [3. Payments by a/c payee cheque only Rs. 69,277/- was paid cheque, balance nil] V. Raipur Trading Pvt. Ltd. Rs. 1,23,218/- A. Ledger copy of the party B. Conformation of a/c from party C. Xerox copy of goods and bills and copy of relevant road challans [1. The items supplied to us was not exceeding 35 kgs./123 kgs/16 kgs which could be supplied through MUTIAS and/or Thella] [2. All payments by A/c payee cheques only] Total purchase & Op. balance of Rs. 1,37,040/- were paid by three cheques, balance Nil. [3. The opening balance Rs. 13,822/- accepting during earlier year] & total of Rs. 1,37,040/- were paid by three cheques, Balance Nil] [4. VAT charged VAT No. & CST No. available on bills.] VI. Shree Shail Overseas – Rs. 1,70,311/- D. Ledger copy of the party E. Conformation of a/c from party ITA No.101/KOL/2021 Dies & Tools Limited A.Y. 2014-15 5 F. Xerox copy of goods receipt issued to party after receipt of goods and bills and copy of relevant road challan. [1. The items supplied to us was not exceeding 230 pcs./at a time which could be supplied through MUTIAS and/or Thella] [2. VAT charged @5% VAT No. available on bill] [3. All payments by a/c payee cheques only] purchase & opening balance totaling of Rs. 2,68,757/- balance Nil] [4. The opening balance Rs. 98,446/- accepting during earlir year] VI. Tarama Merchant Rs. 74,775/- A. Ledger copy of the party B. Confirmation of a/c from party C Xerox copy of goods receipt issued to party after receipt of goods receipt issued to party after receipt of goods and bills and copy of relevant road challans. [1. The items supplied to us not exceeding 28 kgs which could be supplied through MUTIAS and/or Thella] [2. VAT charged VAT No. & CST No. available on bills] [3. Payments by a/c payee cheques only] opening balance Nil. Rs. 74,775/- paid by cheque. Closing balance Nil. 5. During the course of revisionary proceedings, the assessee submitted that: (a) The alleged credible information of assessee’s getting accommodation entries has not been provided to the assessee. Nothing has been intimated how such information is “credible” and what evidence is there that the assesssee got the alleged accommodation entries. No opportunity has been given to the assessee to cross-examine any person's statement and to made submission on the information. There is nothing to indicate that the AO make any enquiry or verification before re- opening the assessment u/s.147 and to issue notice u/s.148 even if there was any information since no enquiry or information was made by the AO before recording his reasons for satisfaction, and thus the reassessment proceeding is on borrowed satisfaction and is invalid and bad in law. The notice u/s.148 issued by the AO is invalid and ab initio void and as such assessment order passed by the AO is invalid and bad in law. Such invalid & unlawful assessment order cannot be made subject to revision u/s.263. (b) That no notice u/s.133(6) was issued is a matter of AO and his satisfaction on the basis of details & documents produced/filed before his . It is clear that he was satisfied about the genuineness of the purchases made and that is why he did not made further verification. (c ) There is evidence of transportation of the goods and that have been produced / submitted before AO. Kindly see the challans included, in some cases it was by Thela or coolie. ITA No.101/KOL/2021 Dies & Tools Limited A.Y. 2014-15 6 (d) The assessee paid by cheque as per Bills and it is not known whether the parties paid VAT/ Sales Tax or not. (e) The Audit Report was filed on line. Assessee cannot be blamed for not placing copy of TAR has not been placed by AO on record. (f) All Bills were all produced / filed during hearing. (g) It has been stated that the transaction of Rs.6,73,874/-‘appears’ to be bogus. Thus only a doubt has been expressed. In view of all the details, documents filed and payments by cheques before AO the transactions are on the other hand genuine. (h) The AO was aware of the information and as such it cannot be said that the AO had no application of mind. The AO was apparently satisfied with all the requisite bills, documents etc. filed and found the same in order. (i) The observation that the entire cannot of Rs.6,73,874/- should have been disallowed u/s.69 of the Act is without any basis and wrong on facts and in law. The purchases from the five parties are evidenced by bills, challans and they were all paid off by a/c payee cheques leaving NIL balance in each case. Therefore, the purchases are genuine and all the payments were made by a/c payee cheques from assessee’s own bank a/c. As such the purchases are all from explained sources and accordingly the same cannot be disallowed u/s.69C of the Act. E. It is also submitted that non proper enquiries made by the AO does not give proper to CIT AO invoke section 263. Reliance is placed on the order of Hon’ble ITAT, C-Bench, Kolkata dated 20.09.2017 in the case of Saregama India Ltd. in ITA No. 1254/Kol/2014. It is further submitted that it is AO’s prerogative to make enquiry to the extent of enquiry. Reliance is placed on the decision of Hon’ble ITAT, Chandigarh Bench dated 15.03.2016 in the case of Vardhman Industries Ltd. 982 taxmann.com 118 (Chand)]. F. In view of the submission made above, the assessment order u/s 143(3) / 147 dated 08.10.2018 passed by the ITO, Ward-7(1) is neither erroneous nor prejudicial to the interest of revenue. G. Accordingly, the proceedings u/s 263 of the Act initiated by the notice dated 14.01.2021 may kindly be dropped. ITA No.101/KOL/2021 Dies & Tools Limited A.Y. 2014-15 7 6. After gone through the submission made by the assessee, the ld. PCIT passed the following order: “5. I have considered the facts of the case and gone through the submission of the assessee and the details available on record . There is credible information that the assessee has taken accommodation entry through different concerns for Rs.6,73,874/-.On perusal of the assessment record and assessment order, it is observed that no notice u/s.133(6) of the I T Act, 1961 was sent by the A.O. and no enquiries regarding physical existence or creditworthiness of the parties was made. Thus, the identity and creditworthiness of the parties and the genuineness of the transactions were not established. The Jurisdictional High Court in CIT vs Precision Finance Pvt. Ltd. 1994 208 ITR 465 Cal has stated that payment by account payee cheque is not sacrosanct and cannot make a bogus transaction as genuine. Hence, the submission of the assessee that all the transactions with the alleged parties were done through account payee cheque only does not establish the genuineness of the transaction. During the assessment proceedings the A.O has failed to bring tax on Rs. 6,73,874/- and as such the assessment order appears to be erroneous and prejudicial to the interest of revenue. 6. Hon’ble Delhi High Court in the case of GEE VEE Enterprise vs. Addl.CIT reported in 99 ITR 375, 386 (Del) has held that the CIT may consider the order of the Assessing Officer to be erroneous not only if it contain some apparent error of reasoning or of law or of fact on the face of it but also because the Assessing Officer has failed to make enquiries which are called for in the circumstances of the case and it is an order which simply accepted what the assessee has stated in his return of income on the said issue. It is not necessary for the CIT to make further enquiries before cancelling the assessment order. The Commissioner can regard the order erroneous on the ground that the Assessing Officer should have made further enquiries. 7. Hon’ble Karnataka High Court in the case of Thalibai F. Jain vs ITO 101 ITR 1, 6 (Karn) has held that where to enquiries made by the Assessing Officer on the relevant issue, assessment must be held to be prejudicial to the interests of the revenue and what is prejudicial to the interest of the revenue must be held to be erroneous though the converse may not always be true. 8. Hon'ble Supreme Court in the case of Malabar Industrial Co. Pvt. Ltd vs. CIT reported in (2000) 243 ITR 83, 87-88(SC) affirming the Hon’ble Kerala High Court decision (198 ITR 611) has held that the phrase “Prejudicial to the Interests of the Revenue" is of wide import and is not confined to only loss of taxes. If the A.O. has ITA No.101/KOL/2021 Dies & Tools Limited A.Y. 2014-15 8 accepted the claim of the assessee without any enquiries then such assessment order passed by the A.O. was held to be erroneous. 9. In this regard it is mentioned that mere non enquiry would also render a particular order passed by lower authority as erroneous and prejudicial to the interests of Revenue. This position has been clearly confirmed by Hon’ble Supreme Court in the case of Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 & Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC). The reasoning for this proposition has been explained by Hon’ble Delhi High Court in the case of Gee Vee Enterprise v. Addl. CIT [1975] 99 ITR 375 in the following para: “It is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income- tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and function of the Income-tax Officer is very different from that of civil court. The statements made in the pleading proved by the minimum I amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which come before it. The Income- tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word “erroneous” in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct.” 10. Further to this it is noticed that there is no appeal right available to the Revenue from the order of assessment passed by Assessing Officer and i.e. why revisionary powers have been given to the Commissioner and such power were held to be of wide amplitude by the Hon’ble Supreme Court in the case of CIT v. Shree Manjunathesware Packing Products & Camphor Works [1998] 231 ITR 53/96 Taxman 1. Therefore, normally when Assessing Officer has not made any enquiry on a particular issue, then such order in view of the above detailed discussion has to be construed as erroneous and prejudicial to the interest of Revenue and therefore, the impugned assessment order is erroneous and prejudicial to the interest of Revenue as Assessing Officer has failed to make any enquiry. ITA No.101/KOL/2021 Dies & Tools Limited A.Y. 2014-15 9 11. Having regard to the facts and circumstances of the case and in the light of the aforesaid decisions of Hon’ble Supreme Court and Hon’ble High Court, and in accordance with the amendment made in Section-263 of the Act with effect from 01.06.2015, I hold that the impugned assessment order dated 08.10.2018 passed by the AO is erroneous in so far as it is prejudicial to the interest of the revenue. I further hold, after giving the assessee an opportunity of being heard, that the impugned assessment order dated 08.10.2018 is liable to set aside. Therefore, I set aside the said assessment order directing the AO to frame the assessment afresh after considering the aforesaid observations, Hon’ble Supreme Court and Hon’ble High Court decisions and as per law. 12. In the result, the assessment order u/s 147/143(3) dated 08.10.2018 for A.Y. 2014-15 is set aside to the file of the Assessing Officer with a direction to pass a fresh assessment order after considering the aforesaid observations, as per law and after giving an opportunity of being heard to the assessee.” 7. Aggrieved by the above order passed by the PCIT, the assessee is in appeal before the Tribunal. The ld. counsel for the assessee reiterated the submission made by the assessee before the ld. PCIT during the revisionary proceeding. Reference was also made various documents filed in the Paper Book dated 07.03.2022 containing 98 pages. 8. Per contra, the ld. DR vehemently argued supporting the order of ld. PCIT. 9. We have heard rival contentions and perused the records placed before us. The assumption of jurisdiction u/s 263 of the Act by ld. PCIT has been challenged before us by the assessee. Before we advert to the facts and law involved in this issue before us, let us revisit the law governing the issue before us. The assessee has challenged in the first place, the very usurpation of jurisdiction by ld. PCIT to invoke his revisional powers enjoyed u/s 263 of the Act. Therefore, first we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is existing in this case before the PCIT rightfully exercises his revisional power. For that, we have to examine as to whether in the first place the order of the Assessing Officer found fault by the Principal CIT is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedence laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have ITA No.101/KOL/2021 Dies & Tools Limited A.Y. 2014-15 10 held that twin conditions need to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the ld. PCIT. The twin conditions are that the order of the ld. AO must be erroneous insofar as prejudicial to the interests of the Revenue. In the following circumstances, the order of the ld. AO can be held to be erroneous order, that is (i) if the ld. AO’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii) Ld. AO’s order is in violation of the principle of natural justice; or (iv) if the order is passed by the ld. AO without application of mind; (v) if the AO has not investigated the issue before him; [because AO has to discharge dual role of an investigator as well as that of an adjudicator] then in aforesaid any event the order passed by the ld. AO can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the ld. AO can be termed as prejudicial to the interests of Revenue. When this aspect is examined, one has to understand what is prejudicial to the interests of the Revenue. The Hon’ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. “prejudicial to the interests of the revenue” has to be read in conjunction with an erroneous order passed by the ld. AO. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of ld. AO cannot be treated as prejudicial to the interests of the Revenue. When the ld. AO adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the ld. AO has taken one view with which the ld. PCIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue “unless the view taken by the ld. AO is unsustainable in law”. 10. Keeping in view the aforesaid judicial position of law in mind, we notice that ld. PCIT has alleged accommodation entry of Rs. 6,73,874/- cannot be termed as bogus. We further find that the ld. AO while completing the assessment u/s 147 of the Act has examined this transaction in detail and has also discussed the issue in assessment order at para 5 and same reads as under: “5. During the consideration year the assessee company was engaged in the business of manufacturing and facility for cutting tools and machine parts. The transaction as per information of benefit received by the assessee company in the form of bogus bills raised by various jamakharchi companies, it is found that regarding all raw ITA No.101/KOL/2021 Dies & Tools Limited A.Y. 2014-15 11 material, finish goods purchasing from respective parties made through banking channels. The AR of the assessee company produced related bills and vouchers and VAT return. 6. The submission of the assessee company has been verified as well as ITD details. No such discrepancies detected.” 11. Under these given facts and circumstances of the case where the issue raised in the show cause notice has been examined properly by the ld. AO after conducting necessary enquiry and has also examined the facts properly their hardly remains any scope for ld. PCIT to exercise jurisdiction u/s 263 of the Act. Therefore, since the ld. AO has made necessary enquiry, applied his mind on the issue, examined the facts properly and has taken a possible view, we cannot agree with the finding of the ld. PCIT of setting aside the assessment order. Accordingly, the proceedings u/s 263 of the Act are quashed and the assessment order dated 24.12.2018 u/s 143(3) of the Act is restored. Thus, all the grounds raised by the assessee are allowed. 12. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 19.07.2022. Sd/- Sd/- (MANISH BORAD) (SONJOY SARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Kolkata, Dated: 19.07.2022. Biswajit, Sr. P.S. Copy to: 1. The Appellant: Dies & Tools Limited. 2. The Respondent: Pr. CIT-1, Kolkata. 3. The CIT, Concerned, Kolkata 4. The CIT (A) Concerned, Kolkata 5. The DR Concerned Benc //True Copy// [ By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata