JAYACHANDRA BEARINGS INDIA PVT LTD, COIMBATORE V. VRAJAN,ITO, COIMBATORE

ITA 139/CHNY/2022

AI Insights

The case involves Jayachandra Bearings India Pvt. Ltd., which appealed against the revisional jurisdiction exercised by the Principal Commissioner of Income Tax, Coimbatore-1, under section 263 of the Income Tax Act. The appeal contested the validity of the revisional order which was based on the grounds that the original assessment did not adequately address the substantial reductions in business income due to claimed exceptional and extraordinary items. The Tribunal found that the original assessing officer did not inquire into these items during the assessment, leading to an erroneous order that was prejudicial to the interests of the revenue. Consequently, the Tribunal upheld the revisional order and directed a fresh assessment.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 133954 (ITAT-CHENNAI)
• Duration Of Justice: 13 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-12-2022
• Assessment Year: misc
• Appeal Filed On: 02-05-2009
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S. SENTHIL KUMARAN LD
• Assessee Lawyers: K. VISHVA PADMANABHAN LD
• Keywords: Business income; Revision of order; Depreciation; Principle of natural justice; Additional depreciation; Set aside
• Section: 263; 143(3)

Judgement Text

आयकर अपीलीय अिधकरण ‘बी’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI माननीय +ी महावीर िसंह, उपा12 एवं माननीय +ी मनोज कु मार अ7वाल ,लेखा सद: के सम2। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No.139/Chny/2022 (िनधाCरण वषC / Assessment Year: 2015-16) Jayachandra Bearings India Pvt. Ltd. 1002, Avinashi Road, Coimbatore – 641 018. बनाम / V s. ITO Corporate Ward-2, Coimbatore. थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AAB CJ -6 2 2 2 -H (अपीलाथ /Appellant) : ( थ / Respondent) अपीलाथ की ओरसे/ Appellant by : Shri K. Vishva Padmanabhan (CA)-Ld. AR थ की ओरसे/Respondent by : Shri S. Senthil Kumaran (CIT)–Ld. DR सुनवाई की तारीख/Date of Hearing : 05-12-2022 घोषणा की तारीख /Date of Pronouncement : 05-12-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. By way of this appeal, the assessee contest validity of revisional jurisdiction u/s 263 as exercised by learned Principal Commissioner of Income Tax, Coimbatore-1 [PCIT] vide order dated 25-02-2020 against an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 21-12-2017 for Assessment Year (AY) 2015-16. The grounds taken by the assessee are as under: 1. For that the order of the Principal Commissioner of Income Tax is without jurisdiction, contrary to law, facts and circumstances of the case and at any rate is opposed to the principles of equity, natural justice and fair play. 2. For that the order of the Principal Commissioner of Income Tax passed u/s.263 is bad in law. ITA No.139/Chny/2022 - 2 - 3. For that the provisions of section 263 are not invocable in the facts and circumstances of the case. 4. For that the Principal Commissioner of Income Tax failed to appreciate that there was no error or prejudice much less both to warrant the invocation of the powers conferred u/s.263. 5. For that the Principal Commissioner of Income Tax having considering the case of the appellant was one of limited scrutiny, erred in invoking the provisions of section 263 of the Income Tax Act. 6. For that the Principal Commissioner of Income Tax failed to appreciate that the Assessing Officer had called for details regarding reduction in business profit including the details of exceptional item and extraordinary item during the course of assessment proceedings and that the same were considered by the Assessing Officer. 7. For that the Principal Commissioner of Income Tax failed to* appreciate that the Assessing Officer has applied his mind while passing the assessment order u/s. 143(3). 8. For that the Principal Commissioner of Income Tax cannot invoke the provisions of section 263 to substitute his view on the issue which has already been considered by the Assessing Officer. 9. For that the Principal Commissioner of Income Tax failed to consider the explanations and submissions filed by the appellant during the course of revisionary proceedings. PRAYER For these grounds and such other grounds that may be adduced before or during the hearing of the appeal, it is prayed that the Hon'ble Tribunal may be pleased to (a) Quash the order passed u/s.263 and / or (b) Pass such other orders as the Hon'ble Tribunal may deem fit. 2. The Registry has noted delay of 677 days in the appeal, the condonation of which has been sought by Ld. AR. Considering the fact that the impugned order was passed during lockdown arising out of Covid-19 and the period as available before assessee to prefer appeal fall within lockdown situation arising out of Covid-19 Pandemic, we condone the delay and admit the appeal for adjudication on merits. Having heard rival submissions, the appeal is disposed-off as under. 3. The assessee being resident corporate assessee was assessed u/s. 143(3) on 21-12-2017. The case was selected for limited scrutiny, inter-alia, for the reason of large increase in sundry creditors and reduction in business income as compared to preceding year. The Ld. ITA No.139/Chny/2022 - 3 - AO after considering the assessee’s reply framed the assessment and made addition of Rs.1.82 Lacs. 4. Subsequently, upon perusal of case records, Ld. Pr.CIT sought revision of the order u/s 263 on the ground that the profits were arrived after reducing exceptional item of Rs.27.04 Lacs and extraordinary items of Rs.41.89 Lacs. However, no details were available on record to substantiate the above claims of the assessee. Accordingly, the assessee was put to show-cause notice. The assessee submitted that the expenses were in conformity with the provisions of the Companies Act, 2013. The exceptional items were nothing but amount arising out of change in method of depreciation and loss of stock / receivables. The same were disclosed as such as per Accounting Standard-5 issued by ICAI. However, Ld. Pr. CIT rejected the plea of the assessee by observing as under: - 5. The submissions of the assesses, the issue on hand, the facts of the case and the assessment records have been carefully perused. For the assessment year 2015-16, the Profit & loss Account showed exceptional item of Rs.27,04,506 and extraordinary items of Rs.41,89,765. Upon perusal of the miscellaneous records, it was noticed that there were no details available. The assessment order passed supra, though was for a limited purpose, the AO could have raised this issue and examined after obtaining necessary prior sanction from the prescribed authorities to probe further. This was also not done. In the present proceedings, it was stated that as per AS-5 and the change in method of depreciation as per Companies Act, 2013, separate disclosure have to be made in the profit and loss account. It was also claimed by the AR that the exceptional item claimed was only additional depreciation charged due to change in Companies Act method of charging depreciation. And for extraordinary item, it was claimed that there was loss of stock of material value due to theft in its Chennai Branch. The AR had submitted some details in support of this claim too. Since these are the clarifications made by the assessee now in response to the show cause notice u/s 263 of the Act issued, the same requires further examination and verification of the details by the AO afresh. 6. In view of the discussions above the order of assessment passed by the AO u/s.143(3) dated 21-12-2017 is made without verification of the facts and proper examination of the issue on hand. The order so made, suffers in as much as it is erroneous and prejudicial to the interest of revenue, requiring an intervention to cure the order made erroneous and prejudicial to the interest of revenue. In order ITA No.139/Chny/2022 - 4 - to remedy the said error in the order of assessment in the instant case made on 21-12-2017 for the assessment year 2015-16, the recourse would be to resort to provisions of sec.263 of the Act. Accordingly, the order of the AO dated 21-12- 2017 for the assessment year 2015-16 in the case of the captioned assessee is, set aside, in exercise of the powers vested in me u/s.263 of the Act. 7. The assessing officer, is hereby directed to re-do the assessment afresh after verification of the facts discussed above in accordance with law. The assessing officer shall give adequate opportunity of being heard to the assessee in this regard before passing the fresh assessment order. Aggrieved as aforesaid, the assessee is in further appeal before us. 5. From the facts, it emerges that one of reason to scrutinize the return of income was large increase in sundry creditors and reduction in business income as compared to preceding years. It is undisputed fact that the assessee has debited exceptional items in the Profit & Loss Account which has reduced the business income of the assessee. Another fact is that both the items as flagged by Ld. Pr. CIT was never examined by Ld. AO during the course of regular assessment proceedings and no query was raised, in this regard. No details were furnished by the assessee. Therefore, it was a case of no enquiry by Ld. AO and therefore, Ld. Pr. CIT was perfectly justified in revising the order. Therefore, finding no reason to interfere in the same, we dismiss the appeal. 6. The appeal stands dismissed. Order pronounced on 05 th December, 2022. Sd/- (MAHAVIR SINGH) उपा12 /VICE PRESIDENT Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद: / ACCOUNTANT MEMBER चे*ई / Chennai; िदनांक / Dated : 05-12-2022 EDN/- आदेश की Vितिलिप अ 7ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु (अपील)/CIT(A) 4. आयकर आयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF