Jain Carrying Corporation, Bikaner V. Principal C.I.T., Bikaner

ITA 134/JODH/2018

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8228 (ITAT-JODHPUR)
• Duration Of Justice: 5 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-01-2024
• Assessment Year: 2013-2014
• Appeal Filed On: 26-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Audit objection; Principle of natural justice; Assessment record; Commercial expediency; Borrowed satisfaction; TDS; Set aside
• Section: 263; 143(3); 194C; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE: DR. S. SEETHALAKSHMI, JJUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. No.134/Jodh/2018 Assessment Year: 2013-14 M/s Jain Carrying Corporation Jain House, Ind. Area, Rani Bazar, Bikaner. [PAN:AAAFJ9388G] (Appellant) Vs . Principal CIT, Bikaner. (Respondent) Appellant by Sh. Rajendra Jain, Adv. & Sh. Smt. Raksha Birla, C.A. Respondent by Smt. Alka Rajvanshi Jain, CIT-DR Date of Hearing 30.01.2024 Date of Pronouncement 18.03.2024 ORDER Per:DR. S. Seethalakshmi, JM: This appeal filed by assessee is arising out of the order of the Learned Principal Commissioner of Income Tax, Bikaner (here in after “ PCIT” ) dated 12.03.2018 for assessment year 2013-14, which in turn arise from the order dated 22.03.2016 passed under section 143(3) of the Income Tax Act, 1961 (here in after “ Act”), by the AO. I.T.A. No.134 /Jodh/2018 M/s Jain Carrying Corporation 2 2. In this appeal, the assessee has raised following grounds: - “1. The ld. Principal CIT, Bikaner was wrong in law as well as in facts by setting aside the order passed for further examination to AO u/s 263 of I.T. Act without considering the facts and circumstances of the case and acted without jurisdiction and hence it is liable to be cancelled. 2. That issues raised in the order passed u/s 263 of I.T. Act by Ld. Principal Commissioner CIT, Bikaner relating to payment of freight, transport receipt, closing stock (WIP), misc. expenses have already been examined in detail by AO at the time of assessment and direction for further examination in wrong and against the principal of natural justice. 3. The reply submitted at the time of notice issued u/s 263 of I.T. Act have not properly been examined and order was passed on the basis of presumption and surmises. 4. The appellant reserve its right to add, alter and amend any grounds of appeal as and when occasion may arise. 5. No reasonable opportunity has been provided to the assessee while passing the order u/s 263 of I.T. Act.” 3. Brief fact of the case is that the return of income for the assessment year under consideration was filed by the assessee on 07.09.2013 declaring a total income of Rs. 96,56,200/-. Subsequently, the case was selected for scrutiny through CASS and a notice under section 143(2) was issued on 08.09.2014 and the assessment was completed under section 143(3) of the Income Tax Act, 1961 on 22.03.2016 at a total income of Rs. 1,01,08,423/-. 3.1 On culmination of the assessment proceedings on examination of assessment record for the year under consideration the ld. PCIT found that the I.T.A. No.134 /Jodh/2018 M/s Jain Carrying Corporation 3 order passed u/s 143(3) of the Act dated 22.03.2016 was erroneous and prejudicial to the interest of the revenue in as much as certain issues were not properly examined by the AO and the version of the assessee was accepted on face value. Accordingly, a show cause notice under section 263 of IT Act, 1961 was issued on 01.12.2017. 3.2 In response to the aforesaid show cause notice, detailed written reply has been filed on behalf of the assessee firm on 15.02.2018. the reply filed by the assessee firm is placed on record and due consideration thereof has been taken by the PCIT. On a careful perusal of the reply filed on behalf of the assessee firm. The ld. PCIT find that all the mistakes and infirmities pointed out in the show cause notice had been denied and an attempt has been made to suggest that the impugned assessment order has been passed after proper and detailed examination of all the issues raised in the show cause notice and there is no justification for exercising jurisdiction u/s 263 of the IT Act, 1961. The issues raised in the show cause notice is that during the year under consideration the assessee firm had made a total payment of Rs. 25,83,98,970/- to 1949 truck owners, out of which payment of Rs. 1,71,07,035/- was made to 593 persons no details of whom were available. A perusal of the details filed during assessment proceedings suggests that in the columns meant for furnishing names and addresses of these 593 recipients it has been mentioned as "Not Available" I.T.A. No.134 /Jodh/2018 M/s Jain Carrying Corporation 4 which means even the names and addresses of these 593 recipients were not available with the assessee. In this situation, it is not understood as to on what basis the assessee has claimed that the individual payment and the aggregate payments during the financial year were below the thresh hold limit of Rs. 30,000/- and Rs. 75000/- respectively as prescribed u/s 194C of the IT Act, 1961. It must be appreciated that the assessing officer, while doing an assessment, exercises his quasi judicial authority and while doing so, he has to perform functions of both, the investigator and the adjudicator. In this background it was incumbent upon the assessing officer to insist upon furnishing of names and complete addresses of 593 persons against whom the assessee firm had claimed expenditure of Rs. 1,71,07,035/- However, neither the AO asked for such information nor the same was provided by the assessee in the course of assessment. In this situation, I fail to understand as to on what basis the assessee is claiming that the individual payment was within the limit of Rs. 30,000/- and aggregate payments were within the limit of Rs. 75,000/- and hence, the provisions of Sec. 40(a)(ai) of the IT Act, 1961 were not attracted to the facts of the present case. It has to be remembered that the applicability of specific provisions of law is always dependent on the facts of individual case and exceptions from rigors of provisions of Sec. 194C are not available without supporting evidence. Therefore, the submissions made on I.T.A. No.134 /Jodh/2018 M/s Jain Carrying Corporation 5 behalf of the assessee firm are not acceptable in the absence of requisite evidence. 3.3 Further, it may be relevant to mention here that the impugned assessment order was also subjected to scrutiny by the C & AG and therefore, the ld. PCIT stated that he has no hesitation in holding that the AO has not examined the issue in question properly and the allowance of payment of Rs. 1,71,07,035/- is without any basis. I also hold that the action of the AO was erroneous in as much as prejudicial to the interest of the Revenue. 3.4 As regards the transportation receipts of Rs. 82569235/- from M/s ACC Ltd. Tikaria, the ld. PCIT find that the issue in question was not examined by the AO in as much as no question with regard to the transportation receipts and the expenses claimed against such receipts was raised in the course of assessment proceedings. The submission of the assessee that in order to carry out the transportation of goods on behalf of M/s ACC Ltd., the assessee firm has deployed its own bulker (trucks) and therefore the expenses were on lower side as compared to expenses incurred in connection with transportation business with other clients appears to not have been furnished before the AO. Infact, the AO perhaps, did not even notice this discrepancy in the course of assessment proceedings. Fact remains that during the year under consideration there has I.T.A. No.134 /Jodh/2018 M/s Jain Carrying Corporation 6 been decline in the net profit rate which has close nexus with the expenses incurred on various heads including the transportation/freight payable to third parties and the maintenance charges incurred in connection with the lauries/bulkers/trucks owned by the assessee firm. In the absence of head wise and branch wise analysis of the receipts and expenses, no reasonable, let alone, permissible view could have been taken by the AO. Therefore, the ld. PCIT was not in agreement with the assessee firm that the view taken by the AO was one of the views permissible in law. 3.5 The ld. PCIT noted that the statutory auditors have in sch. -10 pointed out that the increase/decrease in the work done has not been certified by the management. Therefore, it was incumbent upon the AO to examine this issue further so as to satisfy himself as to the correctness of the valuation of closing stock/W.I.P of Rs. 99,54,285/-. Further, it was also necessary on his part to examine as to what liabilities have been incurred against the closing stock/ W.I.P However, on a perusal of the assessment records, the ld. PCIT do not find any evidence suggesting any enquiry having been made by the AO in this regard. The submission of the Ld Counsel for the assessee that the closing stock of this F.Y would be taken as opening stock of the next F.Y, does not take away the fact that the AO has failed to perform his quasi judicial functions with due diligence and care. There is no gain saying that the ld. AO is tasked with the I.T.A. No.134 /Jodh/2018 M/s Jain Carrying Corporation 7 primary responsibility of examining the relevant facts with reference to evidence being placed before him. Therefore, if the AO does not perform this important function, then the revenue has to suffer. Therefore, in light of the observations made by the statutory auditors and in the absence of any evidence suggesting examination of the issue of closing stock/ W.I.P, the ld. PCIT holds that the issue in question was not properly examined by the AO and which has caused prejudice to the interest of revenue. 3.6 The issue of miscellaneous expenses debited to the profit-loss account is directly linked with other issues discussed herein before and the same does not call for any separate discussion.In light of the aforesaid, the PCIT notes that he has no hesitation in holding that the impugnedorder is erroneous and prejudicial to the interest of the revenue. At this stage, he consider it appreciate to refer to the significant observations made in various orders of the Hon’ble Courts regarding the responsibility of the AO while doing assessment:-  Gee Vee Enterprises vs Addl. CIT, Delhi 1 and others (99 ITR 375)  CIT vs Jawahar Bhattacharjee [341 ITR 434 (Gau.)]  Jagadish Kumar Gulati vs. CIT [269 ITR 71 (All.)] 3.7 It is well settled that if the Assessing Officer fails to make a proper enquiry this is erroneous and prejudicial to the interests of the Revenue vide K. I.T.A. No.134 /Jodh/2018 M/s Jain Carrying Corporation 8 A. Ramaswamy Chettiar v. CIT [1996] 220 ITR 657 (Mad); Addl. CIT v. Mukur Corporation [1978] 111 ITR 312 (Guj); Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi); Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC); CIT v. Active Traders (P.) Ltd. [1995] 214 ITR 583 (Cal); Swarup Vegetable Products Industries Ltd. (No. 1) v. CIT [1991] 187 ITR 412 (All); CIT v. Rampiyari Khemka [1967] 63 ITR 367 (Cal); Bagsu Devi Bafna v. CIT [1967] 63 ITR 333 (Cal); CIT v. Kiran Debi Singhee [1967] 65 ITR 501 (Cal); CIT v. Mahavar Traders [1996] 220 ITR 167 (MP); CIT v. Everest Cold Storage [1996] 220 ITR 241 (MP) and Duggal and Co. v. CIT [1996] 220 ITR 456 (Delhi), etc. Based on this observation, the ld. PCIT held that the impugned order passed by the ld. AO dated 22.03.2016 is set aside with the direction to do the assessment afresh after proper examination of the aforementioned issues and having allowed proper opportunity to the assessees of not only being heard but also to have proper access to the material available with the AO. 4. Aggrieved from the above order of the ld. PCIT assessee preferred an appeal before this tribunal on the grounds as stated here in above in para 2. Apropos to the grounds of the appeal so raised the ld. AR of the assessee. He has relied upon the following submissions/ evidences:- S. No. Particulars Page No. I.T.A. No.134 /Jodh/2018 M/s Jain Carrying Corporation 9 01 Copy of replies to AO during the assessment proceeding 1-5 02 Copy of decision of Hon’ble ITAT, Delhi E Bench in the case of Majestic Properties Pvt. Ltd v/s PCIT in ITAT No. 3088/Del/2018 dt. 10/08/2023. 6-11 03 Copy of decision of Hon’ble ITAT, Mumbai Bench in the case of Grasim Industries Ltd. v/s PCIT in ITA No. 1964/Mum/2019 dt. 24/05/2021 12-26 5. The ld. AR of the assessee vehemently argued that the issue in question, that the ld. PCIT is trying to examine has already been examined by the ld. Assessing Officer and at the time of original assessment proceedings for this contention, he relied a detailed reply submitted at page 2 to 10 of his paper book wherein the relied in para 8, 12,15, 18 and 21 has been relied in relation to the assessee which has been raised by the ld. PCIT, the relevant para from the reply of the assessee is reproduced for the sake of convenience here in below :- “8. Photocopy of TDS returns together with challans evidencing the payment thereof is being submitted herewith for your verification. The assessee has duly discharged its liability of deducting the tax in adherence to the rules and limits specified in the Act. 12. Ledger account of Direct & Transportation expense and Indirect & Administrative expenses claimed during the year under consideration is being attached herewith. Details of expenses like Office Rent, Telephone expenses, Travelling expenses, Office expenses, Printing & Stationery expenses, Tyre & tube expenses, Claim & Discount expenses. Mess expenses and Conveyance expenses are being attached herewith delineating the expenses incurred at respective branches also. The Expenses have been incurred and spent wholly and exclusively for the purpose of business prudence and commercial expediency. The assessee as discussed earlier has taken contract involving various geographical locations. In order to ensure smooth and hassle free execution of work the assessee has to setup bases at strategic locations. As such offices are taken on the rent basis at such places. 15 Quantitative details of opening and closing stock is being furnished with a caption "Statement of Transportation Quantity and Amount Receipt & payment". The valuation has been done on the basis of payment made to the transporters for the execution of transportation contracts which constitutes cost in the hands of the I.T.A. No.134 /Jodh/2018 M/s Jain Carrying Corporation 10 assessee. The cost of the work executed but not billed partakes the character of work in progress. 18. Details of receipts such as Transportation receipts, Job Work receipts, Wagon Loading Receipts, Handling charges receipts and Hiring charges for Plant & Machinery is being produced herewith. 21. Details of Freight paid along with the counterpart address, PAN, amount and truck number is being attached herewith.” 5.1 The ld. AR vehemently argued that the ld. PCIT at page 10 of his order specifically stated that the proceedings is initiated on account of scrutiny of record of C & AG and therefore, relying on the judgements in case of Majestic Properties Pvt. Ltd vs. PCIT (supra) and Grasim Industries Ltd. vs. PCIT (supra) the order passed merely on account of audit objection, the order cannot be passed on the issue which are already settled. 6. Per contra, the ld. DR representing the Revenue has relied upon the detailed observations made by the ld. PCIT and therefore, she supported the order of the ld. PCIT of all the four issues on which the detailed observation has been made in the order of the ld. PCIT. Therefore, invoking of explanation to section 263 of the Act and relying on the various judgements cited in the order of the ld. PCIT the order is required to be sustained. I.T.A. No.134 /Jodh/2018 M/s Jain Carrying Corporation 11 7. We have heard the rival contentions, perused the material placed on record and gone through the judicial precedent cited by both the parties to drive home their respective contentions. The bench noted the ld. PCIT has raised four issues, on four issue the ld. AO has raised the issue, the assessee submitted the reply and the ld. AO has taken a plausible view on the matter. The ld. AO taken a view based on the submission made by the assessee which the ld. PCIT merely based on the audit objection and PCIT’s observation that the view taken by the ld. AO on which the ld. PCIT is not in agreement cannot hold the order liable to be sustained. On the first issue that has been flagged by the PCIT we note that the allegation made is to justify the audit objection raised even the ld PCIT stated that he has no hesitation in holding that the AO has not examined the issue in question properly but he failed point where the ld. AO has called for the details and based on the details called for he has taken a view based on the record produced before him which merely there is audit objection the order passed after examination of the issue cannot be taken again. To drive home to this contention we take support on a decision of apex court in the case of Parashuram Pottery Works Co. Ltd Vs ITO [ 1977] 106 ITR 1 “At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human I.T.A. No.134 /Jodh/2018 M/s Jain Carrying Corporation 12 activity”. On the second issue we note that the ld. PCIT is trying to justify the claim of the assessee with the net profit rate and the expenses incurred by the assessee and merely based on the contention that the ld. PCIT is not in agreement with the view taken by the AO the assessment cannot be hold liable to be sustained u/s. 263 of the Act. As regards the opening and closing stock we note that the ld.AO has called for the details and has examined the issue. Merely in the audit report the auditor has stated that increase / decrease has not been certified by them the order which is passed after examination of the issue cannot be a base to again given the second inning to the ld. AO and review of the order passed after the examination of the issue is not permitted under the law. As regards the fourth issue there is no observation recorded by the ld. PCIT has simply stated that the issue does not require separate discussion. Thus, we note that on all the four issue the ld. AO has called for the details, examined the issue and the plausible view on the matter is taken. Merely there is an audit objection, adverse remark of the auditor and the ld. PCIT is not in agreement with the view of the AO the order cannot be sustained as liable to quash as the twin condition provided u/s. 263 of the Act that the order should be erroneous and prejudicial to the interest of the revenue fails and therefore, we do not agree with the finding of the ld. PCITwherein he could not point out any mistake / error in order which is prejudicial to the interest of the revenue. The AO while framing the assessment had taken a possible view, and revenue did not demonstrate the error I.T.A. No.134 /Jodh/2018 M/s Jain Carrying Corporation 13 remain on the part of the ld. AO. In fact, when the ld. AO has conducted the required enquiry and not violated any of the conditions mentioned for revision of order as required by Explanation 2 of Section 263 of the Act, the order passed by the Assessing Officer could not be deemed to be erroneous so as to be prejudicial to the interests of the revenue and to support the view we take support on the jurisdictional Hon’ble Rajasthan High Court decision in PCIT v. Manna Trust (2022) 1 TMI 693 [Compilation 42-44] wherein it has been held that “We are broadly in agreement with the view of the Tribunal. It is well settled through a series of judgments that power under Section 263 of the Act can be exercised only when twin conditions of the order of assessing officer being erroneous and prejudicial to the interest of revenue are satisfied. The Jurisdiction of the Commissioner under Section 263 of the Act is restricted and cannot be equated with the appellate jurisdiction. The Commissioner does not sit in appeal.” 8. The bench also noted from the order of the PCIT that the reasons for taking the proceeding u/s. 263 is not an independent view of the ld. PCIT but it is borrowed from the audit memo issued by the C&AG. Thus, it is undisputed that the action u/s. 263 based on the audit objection and it has been held in various case law cited by the ld. AR of the assessee holding that proceedings u/s. 263 at the instance of Revenue Audit is impermissible. The ld. AR of the I.T.A. No.134 /Jodh/2018 M/s Jain Carrying Corporation 14 assessee has relied upon the decision in the case of M/s. Grasim Industries Ltd., in ITA no. 1964/Mum/2019 wherein the co-ordinate bench while dealing with the similar set of facts held that- “9. We hold that a possible view has been taken by the ld AO in the matter and merely because the ld PCIT is of a different view on the same issue, he cannot resort to invoke revision proceedings u/s 263 of the Act. This is only a case wherein the ld PCIT is trying to substitute his view in lieu of a possible view already taken by the ld AO on the impugned issue on the allowability of LTCL. Reliance in this regard is placed on the decisions of Hon’ble Jurisdictional High Court in the case of Gabriel India Ltd reported in 203 ITR 108 (Bom) and in the case of Nirav Modi reported in 390 ITR 292 (Bom). It is also pertinent to note that the Special Leave Petition (SLP) preferred by the Revenue before the Hon’ble Supreme Court against the judgement of Nirav Modi was dismissed in 77 taxmann.com 15 (SC). 10. We also find that the Explanation 2 to section 263 of the Act , which was heavily relied upon by the ld DR before us, would not apply to the facts of the instant case as full enquiry was already made by the ld AO in the original assessment proceedings itself. Infact the stand of the assessee was accepted by the ld AO in the assessment proceedings and also before the Revenue Audit Party which is evident from the reply to audit objection as reproduced supra. Reliance in this regard is placed on the following decisions, the operative portion are not reproduced for the sake of brevity:- a) Decision of Co-ordinate Bench of this Tribunal in the case of Narayan Tatu Rane vs ITO reported in 70 taxmann.com 227 (Mumbai) ( Paras 19 & 20) b) Decision of Co-ordinate Bench of Delhi Tribunal in the case of Hero Honda Motors Ltd vs DCIT in ITA No. 2148/Del/2009 dated 2.2.2017 (Paras 14 to 17) 11. In view of the aforesaid elaborate observations and respectfully following the various judicial precedents relied upon hereinabove, we hold that – a) Adequate enquiries were indeed carried out by the ld AO in the original assessment proceedings and hence the ld PCIT was not justified in invoking revisionary jurisdiction u/s 263 of the Act ; I.T.A. No.134 /Jodh/2018 M/s Jain Carrying Corporation 15 b) A possible view has been taken by the ld AO on the issue of LTCL on the facts of the case and also by placing reliance on the available case laws on the subject and hence the ld PCIT was not justified in invoking revisionary jurisdiction u/s 263 of the Act merely because he is of a completely different view and opinion on the issue of allowability of LTCL to be carried forward to subsequent years; c) The ld AO had defended his original assessment order before the Revenue Audit Party by accepting the contentions of the assessee and by stating that there was no misrepresentation of facts by the assessee. The evidences in this regard are already on record and already reproduced elsewhere in this order. Hence it could be safely concluded that the revision proceedings u/s 263 of the Act had been apparently triggered only based on borrowed satisfaction i.e Audit Objection and not based on independent application of mind by the ld PCIT. Infact the show cause notice issued by the ld PCIT u/s 263 of the Act also uses the same language used by the Revenue Audit Party in its Audit Objection. Hence revision proceedings could not be invoked by the ld PCIT based on borrowed satisfaction. 12. Since the revision order passed by the ld PCIT u/s 263 of the Act is hereby directed to be quashed, the other arguments advanced by the ld AR on the applicability of provisions of section 170(2) of the Act and on merits of the case need not be gone into and they are left open.” Respectfully following that decision of the co-ordinate bench and since the ld. PCIT based on the borrowed information and has not established as to how the view taken by the ld. AO is not correct when the issue raised has already been form part of the proceeding before the ld. AO. Based on the discussion so recorded we are of the considered view that the proceeding initiated u/s. 263 is merely based on the audit objection, PCIT is not agreement with the ld. AO and the observation on the stock, in the audit reportalready filed by the assessee. Thus, there is clear absence of his satisfaction and there is no independent view I.T.A. No.134 /Jodh/2018 M/s Jain Carrying Corporation 16 of the ld. PCIT even on merits thus, the assessee which has been completed there cannot be the second inning to the revenue without justifying the twin condition to the order passed by the ld. AO. 9. In the light of the discussion so recorded we considered the ground raised by the assessee and quash the order of the PCIT, Bikaner. In the result the appeal of the assessee is allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- (Rathod Kamlesh Jayantbhai) (DR. S. Seethalakshmi) Accountant Member Judicial Member Dated 18/03/2024 Santosh (On Tour) Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order