BRAJESH KHANDELWAL, DHAMTARI V. PRINCIPAL COMMISSIONER OF INCOME TAX, -I, RAIPUR

ITA 117/RPR/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3572 (ITAT-RAIPUR)
• Duration Of Justice: 2 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 28-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Assessee Lawyers: SUNIL K AGRAWAL
• Keywords: TDS; Set aside
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI N. K. CHOUDHRY, JUDICIAL MEMBER ./ I.T.A. NO. 117/RPR/2019) ( ASSESSMENT YEAR : 2014-15) SHRI BRAJESH KHANDELWAL PROP. M/S. KHANDELWAL AGRO, INDUSTRIAL WARD, DHAMTARI, CHHATTISGARH - 493773 / VS. PRINCIPAL COMMISSIONER OF INCOME TAX-1 C. R. BUILDING, CIVIL LINES, RAIPUR, CHHATTISGARH - 492001 ./ ./PAN/GIR NO. : AEUPK4379J ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SUNIL K. AGRAWAL, C.A. / RESPONDENT BY : SHRI R. K. SINGH, CIT.DR DATE OF HEARING 29/07/2021 / DATE OF PRONOUNCEMENT 14/10/2021 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE PRINCIPAL COMMISS IONER OF INCOME TAX-1, RAIPUR (PCIT IN SHORT), DATED 29.03.2019 P ASSED UNDER S.263(1) OF THE INCOME TAX ACT, 1961 (THE ACT) WHER EBY THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER (A O) DATED 03.10.2016 UNDER S. 143(3) OF THE ACT CONCERNING AY 2014-15 WAS SOUGHT TO BE SET ASIDE FOR REFRAMING ASSESSMENT IN TERMS OF SUPERVISORY DIRECTIONS. ITA NO. 117/RPR/2019 (SHRI BRAJESH KHANDELWAL VS. PCIT) A.Y. 2014-15 - 2 - 2. AS PER ITS GROUNDS OF APPEAL, THE ASSESSEE HAS C HALLENGED THE REVISIONAL ACTION OF THE PCIT WHEREBY THE ASSESSING OFFICER (A.O.) WAS DIRECTED TO PASS THE ASSESSMENT ORDER DE NOVO AFTER MAKING ENQUIRIES ON THE POINTS SET OUT IN THE NOTICE WHICH HAS ALREADY EXAMINED AND CONSIDERED DURING THE ORIGINAL ASSESSM ENT PROCEEDINGS CONCERNING A.Y. 2015-16. THE ASSESSEE HAS CHALLENG ED THE ASSUMPTION OF JURISDICTION BY THE PCIT UNDER SECTIO N 263 OF THE ACT ON THE GROUND THAT THE ASSESSMENT ORDER UNDER REVIS ION IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE RE VENUE. 3. BRIEFLY STATED, THE ASSESSEE IS ENGAGED IN THE B USINESS OF FLOUR AND RICE MILL IN PROPRIETARY CONCERN M/S. KHANDELWA L AGRO, DHAMTARI (CG). FOR THE A.Y. 2014-15 IN QUESTION, T HE ASSESSEE FILED RETURN OF INCOME DECLARING TAXABLE INCOME AT RS.9,11,650/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR LIMITED S CRUTINY UNDER CASS ON CERTAIN POINTS. THE ASSESSMENT WAS CARRIED OUT VIDE ORDER DATED 03.10.201 WHEREBY THE INCOME RETURNED WAS ASS ESSED AS SUCH. 4. AFTER COMPLETION OF THE ASSESSMENT, THE PCIT IN EXERCISE OF REVISIONARY POWERS ISSUED SHOW CAUSE NOTICE DATED 0 4.02.2019 PROPOSING REVISIONARY PROCEEDINGS UNDER S.263 OF TH E ACT. AS PER SHOW CAUSE NOTICE, THE PCIT ESSENTIALLY ALLEGED THA T THE AO HAS FAILED TO VERIFY THE GENUINENESS AND CREDITWORTHINE SS OF THE LENDERS WHO HAVE GIVEN LOANS TO THE ASSESSEE DURING THE YEA R. THIS LACK OF ENQUIRY HAS RENDERED THE ORDER AS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE. THE PCIT HAS ALSO ALLEGED THAT THE ASSESSEE HAS FAILED TO VERIFY HUGE INTEREST PAYMENT MADE DUR ING THE YEAR. THE PCIT ACCORDINGLY SET ASIDE THE ASSESSMENT ORDER ON THE AFORESAID ISSUE AND RESTORED THE MATTER FOR FRESH A SSESSMENT BY PASSING THE REVISIONAL ORDER IN EXERCISE OF POWERS CONFERRED UNDER S.263 OF THE ACT. ITA NO. 117/RPR/2019 (SHRI BRAJESH KHANDELWAL VS. PCIT) A.Y. 2014-15 - 3 - 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS ON CHALLENGE TO THE JURISDICTION ACQUIRED UNDER S.263 OF THE ACT AND CONSEQUENTIAL REVISIONAL ORDER PASSED THEREON. IN DEFENSE OF THE ASSESSMENT ORDER, THE ASSESSEE CONTENDS THAT; (I) THE CASE WAS SELECTED FOR LIMITED SCRUTINY FOR BELOW MENTIONED REASONS: (A) SUBSTANTIAL INCREASE IN CAPITAL IN A YEAR. (B) HUGE INTEREST PAID WHICH ARE NOT COMMENSURATE T O LOANS RAISED AND ASSESSEE HAS SHOWN LESS TURNOVER. (C) MISMATCH IN SALES TURNOVER REPORTED IN AUDIT RE PORT AND ITR. (D) MISMATCH IN AMOUNT PAID TO RELATED TO PERSONS U /S 40A(2)(B) REPORTED IN AUDIT REPORT AND ITR. (E) MISMATCH BETWEEN INCOME/RECEIPT CREDITED TO P&L A/C. WITH REFERENCE TO ABOVE POINTS, THE PCIT HAS ALLEGE D THAT THE AO HAS NOT CONDUCTED ANY SPECIFIC ENQUIRY WITH REFERENCE TO PO INT NOS. A & B ABOVE. (II) IT IS CONTENDED THAT THE VERIFICATION OF INCRE ASE IN CAPITAL REQUIRED IN LIMITED SCRUTINY DOES NOT INCLUDE VERIFICATION S ON UNSECURED LOANS. THE SCOPE OF ENQUIRY IN THE LIMITED SCRUTINY THUS D ID NOT ENCOMPASS A DETAILED AND SCRUPULOUS ENQUIRY INTO NATURE AND SOU RCE OF LOANS TAKEN IN THIS YEAR. (III) VIDE QUESTIONNAIRE DATED 29.06.2016 & 20.07.2 016, THE REQUISITE ENQUIRIES WERE MADE BY THE AO TOWARDS CAPITAL ACCOU NT OF THE ASSESSEE AND ALSO FUNDS BORROWED DURING THE YEAR TOGETHER WI TH BANK STATEMENT ETC. THE ASSESSEE WAS SPECIFICALLY ASKED VIDE QUES TION NO.3 OF QUESTIONNAIRE DATED 20.07.2016 BY THE AO TOWARDS GE NUINENESS, IDENTITY AND CREDITWORTHINESS OF THE LENDER. IT IS THUS AFT ER MAKING POINTED ENQUIRIES, THE ASSESSMENT WAS CARRIED OUT. (IV) THE RELEVANT EVIDENCES TOWARDS LOANS TAKEN FRO M THE VARIOUS LENDERS WERE DULY FURNISHED. MOST OF THE LOANS WER E EITHER SQUARED UP IN THE SAME YEAR OR PARTLY OR FULLY REPAID IN THE SUBS EQUENT ASSESSMENT YEARS. THE INTEREST WAS ALSO CREDITED IN THE LENDE RS ACCOUNTS AND TDS WAS DEDUCTED THEREON. THE INCOME TAX RETURN OF THE LENDERS WERE ALSO FILED, MOST OF WHICH WERE ASSESSABLE WITH THE SAME AO. (V) IT IS NOT IN EVERY CASE THAT EVERY EVIDENCE PRO DUCED HAS TO BE TESTED BY CROSS EXAMINATION OF THE PERSONS UNDER S. 131/S.133(6) OF THE ACT. IF THERE IS NOTHING SUSPICIOUS ON RECORD TO I NDICATE THAT THE ITA NO. 117/RPR/2019 (SHRI BRAJESH KHANDELWAL VS. PCIT) A.Y. 2014-15 - 4 - EVIDENCE PRODUCED IS NOT RELIABLE AND THE AO WAS SA TISFIED IN EXERCISE OF STATUTORY DESERTION AVAILABLE TO HIM, IT IS NOT OPE N TO THE PCIT TO EXERCISE POWERS OF REVISION IN THE NAME OF ADEQUATE ENQUIRY FOR THE PURPOSES OF SUBSTITUTION OF HIS VIEW WITH THAT OF A O. (VI) THE POWERS UNDER S.263 OF THE ACT CANNOT BE EX ERCISED TO MERELY FIND OUT THE PROBABILITY OF ORDER BEING ERRONEOUS. 7. ON CUMULATIVE READING OF THE FACTS BROUGHT OUT O N RECORD, IT APPEARS THAT THE LIMITED SCRUTINY WAS NOT STRICTLY MEANT FOR VERIFICATION OF LOANS WHICH IS INHERENTLY DIFFERENT FROM CAPITAL OF THE ASSESSEE. THE AO WAS EXPECTED TO VERIFY INCREA SE IN CAPITAL AND NOT ON PROCUREMENT OF LOANS. NOTWITHSTANDING, THE ASSESSEE HAS PRESENTED THE RELEVANT DATA BEFORE THE AO IN SUPPOR T OF LOANS OBTAINED. THE INTEREST WAS PAID ON THE LOANS AND R EPAYMENT WAS ALSO MADE AS CLAIMED. IN SUCH SITUATION, THE VIEW T AKEN BY THE AO TOWARDS BONAFIDES OF LOANS APPEARS QUITE REASONABLE AND PLAUSIBLE. THIS BEING AS A RATIONAL VIEW TAKEN BY THE AO CANNO T BE BRUSHED ASIDE IN EXERCISE OF REVISIONAL POWERS. INDULGENCE WITH THE ORDER OF AO ON ALLEGATIONS OF INADEQUACY IN ENQUIRY FROM THE POINT OF VIEW OF PCIT WOULD RENDER THE TASK OF AO ARDUOUS AND EXT REMELY DIFFICULT. FURTHER, THE OBSERVATIONS MADE BY THE P CIT APPEAR TO BE IN THE REALM OF SUSPICION AND SURMISES. FOR INSTAN CE, THE PCIT HAS OBSERVED THAT ASSESSEE HAS MERELY CREDITED THE INTE REST AMOUNT IN THE ACCOUNT OF LENDER AND HAS NOT BEEN ACTUALLY PAI D DURING THE YEAR. THE PCIT HAS IGNORED THE FACT OF DEDUCTION OF TDS A ND CONSEQUENT TAXABILITY OF SUCH INTEREST IN THE HANDS OF LENDER. THE FACT OF REPAYMENT OF LOAN HAS NOT BEEN TAKEN INTO ACCOUNT D ESPITE SUCH FACTS HAVING BEEN BROUGHT TO HIS NOTICE IN THE REVISIONAL PROCEEDINGS. APPARENTLY, THE EXERCISE OF POWER BY THE PCIT ON IT EMS UNCONNECTED TO LIMITED SCRUTINY IS APPARENTLY UNJUS TIFIED AND NONETHELESS, THE ASSESSEE HAS PLACED REASONABLE EVI DENCES TO SUPPORT THE FACTUM OF RECEIPT OF LOAN. THE SCOPE OF SECTIO N 263 OF THE ACT DOES NOT PERMIT THE PCIT TO SUBSTITUTE HIS VIEW WIT H THAT OF AO IN ITA NO. 117/RPR/2019 (SHRI BRAJESH KHANDELWAL VS. PCIT) A.Y. 2014-15 - 5 - THE GARB OF DIRECTIONS TOWARDS ENQUIRY ON FACTS ALR EADY ON RECORD. THE REVISIONAL ACTION IN THE INSTANT CASE IS CLEARL Y NOT JUSTIFIED. THE REVISIONAL ORDER IS ACCORDINGLY SET ASIDE AND THE A SSESSMENT ORDER IS RESTORED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . SD/- SD/- (N. K. CHOUDHRY) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S. K. SINHA / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+4 / DR, ITAT, RAIPUR 5. 267 8 / GUARD FILE. BY ORDER 4 SR. PRIVATE SECRETARY ITAT 4 RAIPUR (ON TOUR) ORDER PRONOUNCED ON 14 / 1 0/2021 BY PLACING THE RESULT ON THE NOTICE BOARD AS PER RULE 34(4 ) OF THE INCOME TAX (APPELLATE TRIBUNAL) RULE, 1963.