SHRI AMRIT PARKASH SEHGAL (HUF), JALANDHAR V. INCOME TAX OFFICER WARD-2(1), JALANDHAR

ITA 12/ASR/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3800 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 08-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Revision of order; Depreciation; Audit objection; Deemed to accrue or arise in india; Corroborative evidences; Prejudicial to interest; Set aside
• Section: 263; 144; 154; 2; 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 12/Asr/2020 Assessment Year: 2014-15 Amrit Parkash Sehgal HUF Prop. M/s Jagdambey Engg. & Welding Works, A-6 Industrial Focal Point, Bye Pass, Jalandhar (Punjab) [PAN: AABHA 6745H] Vs. Income Tax Officer Ward-2(1), Jalandhar (Appellant) (Respondent) Appellant by : Sh. Surinder Mahajan, CA Respondent by: Sh. Amlendu Nath Misra, CIT DR Date of Hearing: 05.07.2022 Date of Pronouncement: 24.08.2022 ORDER Per Dr. M. L. Meena, A.M.: The appeal has been filed by the assessee against the order dated 25.03.2019 passed by the Ld. Pr. Commissioner of Income Tax-1, Jalandhar in respect of the Assessment Year 2014-15. 2. The assessee has raised the following grounds of appeal: ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO 2 “1. That on the facts and circumstances of the case, Learned Pr. Commissioner of Income Tax, Jalandhar-1 (‘Ld. CIT’) has grossly erred in law in assuming jurisdiction u/s 263 of the income Tax Act, 1961 (‘the Act’). The order passed u/s 263 of the Act directing the Assessing Officer to pass fresh order after necessary enquiries/investigations income is illegal and bad in law. 2. That on the facts and circumstances of the case, Learned Pr. Commissioner of Income Tax, Jalandhar-1 (‘Ld. CIT’) has grossly erred in law in passing order u/s 263 of the Act even though the assessment order u/s 143(3) of the Act dated 30.11.2016 passed by the Assessing Officer was neither erroneous nor prejudicial to interest of revenue. 3. That order u/s 263 of the Act passed by the Learned Commissioner of Income Tax, Jalandhar-1 (‘Ld. CIT’) is illegal and bad in law since proceedings initiated u/s 154/155 of the Act on the issue of taxability of repair and maintenance of machinery expenses Rs. 93,69,787/-, repair and maintenance of building expenses Rs. 12,88,783/- and interest on deposits Rs. 20,33,441/- were filed by the Assessing Officer which clearly implies that Assessing Officer has applied his mind not only at the time of assessment proceedings but also during rectification proceedings u/s 154/155 of the Act warranting no action u/s 263 of the Act. 4. That on the facts and circumstances of the case, Learned Pr. Commissioner of Income Tax, Jalandhar-1 (‘Ld. CIT’) has grossly erred in law in passing order u/s 263 of the Act, when the assessment has already been concluded by the Assessing Officer u/s 143(3) of the Act and u/s 154 of the Act after seeking explanations and making all the enquiries necessary for completion of assessment for specific issue of taxability of repair and maintenance of machinery expenses Rs. 93,69,787/-, repair and maintenance of building expenses Rs. 12,88,783/- and interest on deposits Rs. 20,33,441/-. 5. That the order of the Learned Commissioner of Income Tax, Jalandhar-1 (‘Ld. CIT’) u/s 263 is arbitrary, unjust, is based on assumptions & presumptions since no error existed or prejudice was caused to revenue, therefore, the order of the Learned Commissioner of Income Tax, Jalandhar- l(‘Ld. CIT’) passed u/s 263 of the Act deserves to be quashed. ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO 3 6. That on the facts & circumstances of the case, Learned Commissioner of Income Tax, Jalandhar-1 (‘Ld. CIT’) has grossly erred in setting aside the assessment framed with the directions to pass fresh order after making necessary enquiries/investigations. Non issuance of specific directions for assessment to be framed clearly proves that it is a case of only change of opinion and the assessment framed is neither erroneous nor prejudicial to the interest of the revenue. 7. That the Appellant requests for leave to add or amend the grounds of appeal before the appeal is heard or disposed off.” 3. There was a delay of 227 days in filing this appeal against the impugned order passed u/s 263 of the Act vide order dated 19.03.2019 as the appeal was required to be filed on or before 27.05.2019 but it has been filed on 09.01.2020. 4. The ld. counsel Mr. Surinder Mahajan explained reason for a delay on account of the death of Sh. Ravi D. Sharma Chartered Accountants, Jalandhar who was looking after the tax matters relating to filling of the Income Tax return and appeals. In support, an affidavit of the appellant assessee is filed before us which is placed on record. The appellant assessee has stated in the affidavit that the original assessment proceedings were attended by Sh. Ravi D. Sharma, Chartered Accountant and the assessee was under the impression that appeal is to be filed on receipt of the consequential assessment order in compliance to the order of the PCIT u/s 263 of the Act. Accordingly, the AO passed the assessment ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO 4 order on 27.12.2019, in compliance to the direction of the PCIT u/s 263 of the Act, The appellant assessee has contacted M/s Surinder Mahajan & Associates the present counsel, on 06.01.2020 who has filed the appeal before the Tribunal with the application of condonation of delay with the support of an affidavit and prayer to condone the delay due to good and sufficient reasons of the death of the regular counsel of the appellant, Sh. Ravi D. Sharma with a request to condone the delay and allow the matter to be adjudicated on merits. 4.1 The ld. DR has objected to the condonation application filed by the assessee. He argued that the appellant assessee is a business concern which is looked after by group of employees and battery of lawyers having knowledge of tax matters however, the DR failed to submit in rebuttal that what prejudice would be caused to the department by condoning the delay on account of mistaken belief, in view of the death of the assessee’s regular Chartered Accountant, Sh. Ravi D. Sharma. 5. Under the similar circumstances, ITAT Kolkata Bench in the case of Sahabuddin Quadiri v. DCIT in ITA No. 1617/KOL/2016 condoned the delay of 409 days in filing appeal against order u/s 263 of the Act by observation as under: ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO 5 “We are of the considered opinion that assessee was under a bona fide belief that the impugned order of Id CIT under section 263 of the Act was not appealable before this Tribunal since he was not advised by his Tax Consultant about this legal right. Later on, when a Senior Lawyer advised assessee to file an appeal, the assessee immediately took steps to file the appeal. Therefore, the delay caused. We note that delay was because of the wrong advice of the Tax Professional for which assessees cannot be penalized.” 6. Accordingly, we hold that there was a bonafide reason for the said delay of 227 days in filing this appeal due to mistaken unbelief, and we, therefore, hereby condoned the delay and admit the appeal to be heard on merits. 7. The assessee has filed return declaring an income of Rs. 25,08,770/- (APB pg. no. 4-7) and that the assessment was framed u/s 143(3) of the Act by making an addition of Rs.4,26,748/- (APB pg. no. 66-67). Subsequently, proceedings u/s 154 of the Act were initiated based on audit objection by issuing a notice dated 08.06.2018 (APB pg. no. 68-71) which were filed. Afterwards, a notice u/s 263 of the Act dated 28.02.2019 was issued to the assessee (APB pg. no. 116-117). 8. The ld. PCIT after considering the reply of the assessee to the show cause notice observed that expenditure of Rs. 93,96,787/- claimed by the assessee on account of current repair and maintenance of machinery, most expenses are in respect of moving parts which are subject to daily wear ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO 6 and tear, however, the copy of ledger account filed by the assessee shows that substantial amounts have been reflected in the account which do not seem to be in the nature of repair and maintenance of machinery; that expenditure of Rs.12,88,783/- on account of current repairs and maintenance of building, however, the copy of the ledger account filed by the assessee shows that substantial amounts have been reflected in the account which do not seem to be in the nature of repair and maintenance of building and that appellant claimed of deduction of interest on deposits to the extent of Rs. 20,33,441/- in the computation of income which is explained by the assessee as related to the old deposits raised and invested in the business and these were borrowed by Amrit Parkash Sehgal HUF during financial year 2006-07 and invested in the proprietary business through capital account. Thus, the Ld. PCIT held that the Assessing Officer has failed to make any enquiry and make verifications of the claim of the assessee in respect of the aforesaid current repairs and maintenance of machinery, current repairs and maintenance of building and deduction of the interest out of the business income of the assessee. Accordingly, the PCIT concluded that the AO passed an assessment order u/s 143(3) of the Act without making required enquiries and verification that rendered the assessment order to be erroneous and prejudicial to the ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO 7 interest of the Revenue and accordingly, he set aside the case to the file of the AO for fresh assessment. 9. The counsel for the assessee has submitted that the assessment was framed after due verification of the claim made in the profit and loss account by the appellant assessee by way of queries raised in respect of expenses claimed on account of current repairs and maintenance of machinery, current repairs and maintenance of building and the interest (APB pg. no. 8 to 65) by way of issuing a notice u/s 142(1) of the Act. The counsel has argued that based on audit objection, vide audit memo CHD/IT/001/2017-18 dated 24.01.2018 proceedings u/s 154 of the Act were initiated, by way of notice dated 08.06.2018 on the issue of machinery repairs and maintenance of building, repairs and maintenance and interest paid which were being duly considered by the AO, while framing the assessment u/s 143(3) (APB pg. 68 to 71) and that in the proceeding’s u/s 154 of the act which were filed (APB, Pg. 72-115). The ld. AR also argued that the assessee has filed detailed replies to notice of the 142(1) of the Act along with annexure A, B & C. 10. The ld. AR vehemently argued that the ld. PCIT has initiated proceedings u/s 263 of the Act on the same issues of machinery repairs and maintenance, building repairs and maintenance and interest paid ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO 8 which was already verified during the assessment proceedings u/s 144 of the Act and the proceedings u/s 154 of the Act as above. The ld. PCIT has merely stated that the appellant assessee failed to produce copy of the ledger account to establish and substantiate that the expense amounts have been reflected in the accounts which do not seem to be in the nature of current repairs and maintenance, however, the Ld. PCIT has not established the contrary on the record with the support of corroborative evidences in order to hold the assessment order to be erroneous and prejudicial to the interest of the Revenue. The ld. AR further argued that proceedings u/s 263 cannot be invoked on the basis of the audit objection. For this purpose, the Ld. AR placed reliance on the judgment of the Hon’ble jurisdictional Punjab & Haryana High Court in the case of CIT v. Sohana Woollen Mills (2009) 296 ITR 0238 (APB pg. 56-59) para 7, and other judgement as per CLPB-II. 11. The Ld. CIT DR supported the impugned order. However, he could not file any case law in rebuttal. 12. We have heard the rival contentions and perused the material on record. Admittedly, the Ld. PCIT passed order u/s 263 of the Act, holding the assessment order erroneous and prejudicious to the interest of revenue by observing that the AO failed to verify the appellants claims related ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO 9 current repairs and maintenance of machinery, current repairs and maintenance of building and deduction of the interest out of the business income of the assessee. The PCIT further observed that the copy of ledger account filed by the assessee shows that substantial amounts have been reflected in the account which do not seem to be in the nature of repair and maintenance. The Ld. Counsel argued that the AO, even in the assessment order passed u/s 143(3) r.w.s. 263 of the Act on 26.12.2019, has allowed 30% of machinery repair and maintenance expenses as revenue expenses and balance 70% were treated as capital expenses. The counsel made a reference to the provisions of section 263 of the Act and contended that jurisdiction therein cannot be exercised if the CIT finds that order of the AO was erroneous and prejudicial to the interest of the Revenue, because merely a audit objection or a different view could be taken; are not enough to show that the order of the AO was erroneous or prejudicial to the interest of the Revenue. 13. In the present case, the assessee’s claimed expenses under the head current repairs and maintenance of machinery, current repairs and maintenance of building and interest claimed on creditors was accounted for in the ledger, produced for verification during the course of scrutiny assessment proceedings u/s 143(3) and 154 before the AO and duly ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO 10 stands verified to his satisfaction. The ld. PCIT has merely stated that the AO has failed to make necessary enquiry and investigation, however he has not specified the particular head of the account or the expense with the support of the corroborative evidences being brought on record to hold that how the assessment order was to be erroneous and prejudicial to the interest of the revenue. In our view, such vague observation made by the ld. PCIT, merely doubting the assessment proceedings cannot hold the assessment order erroneous and prejudicial to the interest of the Revenue and that to base on the audit objection in particular. 14. Hon’ble jurisdictional Punjab & Haryana High Court in the case of CIT v. Sohana Woollen Mills (2009) 296 ITR 0238 (APB pg. 56-59) vide para 7, observed as under: “7. A reference to the provisions of s. 263 of the Act shows that jurisdiction there under can be exercised if the CIT finds that the order of the AO was erroneous and prejudicial to the interest of Revenue. Mere audit objection and merely because a different view could be taken; were not enough to say that the order of the AO was erroneous or prejudicial to the interest of the Revenue. The jurisdiction could be exercised if the CIT was satisfied that the basis for exercise of jurisdiction existed. No rigid rule could be laid down about the situation when the jurisdiction can be exercised. Whether satisfaction of the CIT for exercising jurisdiction was called for or not, has to be decided having regard to a given fact situation.” 15. From the conjoint reading of the assessment order passed u/s 144 of the act and the replies filed, it is abundantly clear that the Assessing ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO 11 Authority has made enquiry about the expenses claimed by the appellant assessee in respect of current repairs and maintenance of machinery, current repairs and maintenance of building and interest claimed during the course of assessment proceedings as well as 154 proceedings. The AO was satisfied from the reply of the assessee and after consideration of the reply, the AO has filed the proceedings u/s 154. The observation of the PCIT that no enquiries or verification were made, is factually incorrect as the sufficient enquiries were seen to be made as above. In the case of Dev Raj Hi Tech Machines Ltd. v. DCIT (2015) 174 TTJ 0009 (Asr), the coordinated bench vide para 7, on lack of enquiry and inadequate enquiry has held as under: “7. We have heard the rival parties and have gone through the material placed on record. The only question to be answered by us in the present appeal is as to whether the surrender made by assessee can be considered as business income or can be taxed as deemed income under section 69A of the Act. In this respect, let us examine the surrender letter which is placed at paper book page 46. From the above surrender letter it is apparent that assessee had made a surrender as additional income over and above the normal profits of the concern and since the income has been declared as business income, the same has to be assessed under the head business income and not as deemed income under the provisions of section 69A . The Assessing Officer had taken a plausible view while accepting the contention of the assessee. As regards the enquiries during the assessment proceedings, we find that Assessing Officer vide letter dated 15.07.2011 placed at paper book page 35 raised this issue vide para-11. The assessee filed a detailed reply under the heading justification of taxable income wherein it explained as to why the taxable income had decreased as compared to surrendered income. As per paper book page-39, the main reason for decrease in taxable profits was due to increase in depreciation and increase in bank interest. The Assessing Officer after considering this explanation had ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO 12 passed the assessment order, however, he did not mention the fact of considering this explanation in the assessment order. The only none mentioning of certain enquiries and explanations thereof, in the assessment order in itself does not give a right to Commissioner to pass order under section 263 . The Hon'ble Bombay High Court in the case of CIT vs. Gabriel India Ltd. (supra) has held that where the Assessing Officer had made enquiries in regard to nature of expenditure incurred by assessee and assessee had given detailed explanation in that regard and Assessing Officer had accepted the explanation of the assessee, the decision of Assessing Officer could not be held to be erroneous simply because in his order he did not make an elaborate discussion in this regard. In the present case, the Assessing Officer raised an enquiry and assessee filed detailed reply and thereafter, Assessing Officer accepted the explanation and did not make any addition on that account. The order of Assessing Officer cannot be said to be erroneous as he has taken a plausible view, keeping in view the facts and circumstances of the case. The Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar Sharma 335 ITR 83 has held as under: "There is a distinction between "lack of inquiry" and 'inadequate inquiry" If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Income-tax Act, 1961, merely because he has a different opinion in the matter: “Held, dismissing the appeal, that the present case would not be one of "lack of inquiry" even if the inquiry was termed inadequate. The Tribunal found that complete details were filed before the Assessing Officer and that he applied his mind to the relevant material and facts, although such application of mind was not discernible from the assessment order. The Tribunal held that the Commissioner in proceedings under section 263 also had all these details and material available before him, but had not been able to point out defects conclusively in the material, for arriving at a conclusion that particular income had escaped assessment on account of non-application of mind by the Assessing Officer. The Tribunal was right and the order of revision was not valid." 16. In our view, the Ld. PCIT’s has merely relied upon the explanation 2 to section 263 of the Act on imaginary foundation which is not sufficient to hold that the Assessing Officer did not make sufficient enquiry. Without ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO 13 prejudice to above, in the matter where there can be two plausible views on the issue, then the one taken by the AO held to be justified. Accordingly, we hold that the order passed by the PCIT was not in accordance with the law and as such, it is quashed. 17. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 24.08.2022. Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr.PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T. True Copy By Order