M/s. Stylo Tablewares , Shaper-Veraval, Dist. Rajkot V. The Pr. CIT-1, Rajkot, Rajkot

ITA 140/RJT/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 9485 (ITAT-RAJKOT)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 28-04-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order
• Section: 148; 263; 143(3); 142(1); 22; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member M/s. StyloTablewares, Plot No. 1 6 and 20, Survey No. 211, Nr. Roto Leaner Pvt. Ltd., Narmada Ro ad, Veav al-sh apar, Rajkot-3600 24 PAN: AB CFS649 4D Vs The Pr. Commi ssioner o f Inco me Tax, Rajkot-1, Aayak ar Bhawan, Race Course Rin g Ro ad, Rajkot-360 001 (Appellant) (Respond ent) Asses see by : Shri M ehul Ranp ura, A. R. Revenue by : Shri S anjeev Jain, CIT -D. R. Date of hearing : 01-07 -2022 Date of pron ouncement: 30-09-20 22 आदेश/ORDER PER BENCH:- This appeal has been filed by the Assessee against the order passed by the Ld. Pr. CIT-1, Rajkot in Order No. ITBA/REV/F/REV5/2021- 22/1040259336(1) vide order dated 02.03.2022 passed for Assessment Year 2017-18. 2. The assessee has taken the following grounds of appeals:- “1. The grounds of appeal mentioned hereunder are without prejudice to one another. ITA No. 140/Rjt/2022 Assessment Year: 2017-18 ITA No. 140/Rjt/2022 (M/s. Stylo Tablewares vs. PCIT) A.Y. 2017-18 2 2. The order passed by Pr. Commissioner of Income-tax, Rajkot-1 [hereinafter referred as to the “PCIT”] is bad in law, invalid and requires to be quashed, the same may kindly be quashed. 3. The Ld. PCIT erred in law and on facts in arriving at a conclusion to the effect that the assessment order passed by the AO was erroneous as well as prejudicial to the interest of the revenue on the ground that such order was passed without making proper enquiries/verification regarding reconciliation of purchase value as per books and purchase value as per data of custom department. The order passed by PCIT is requires to be quashed and may kindly be quashed. 4. The learned Pr. CIT erred on facts as also in law in setting aside the assessment order dated 13.12.2019 passed u/s. 143(3) of the Income Tax Act, 1961 directing the AO pass a fresh assessment order. The order passed u/s 263 of the Act by the learned Pr. CIT is totally unjustified on facts as also in law therefore the same may kindly be quashed. 5. Your Honour’s appellant craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal.” 3. The brief facts of the case are that the assessee filed the Return of Income for Assessment Year 2017-18 on 13.10.2017 declaring total income of Rs. 5,93,72,520/-. The assessment was completed under Section 143(3) of the Income-tax Act on 13.12.2019 accepting the returned income of the ITA No. 140/Rjt/2022 (M/s. Stylo Tablewares vs. PCIT) A.Y. 2017-18 3 assessee. Subsequently, on examination of the records/ details submitted by the assessee firm during the course of assessment proceedings for A.Y. 2017-18, Ld. Pr. CIT noticed that as per Annexure-15 (Import made for F.Y. 2016-17) as per the submission of the assessee, the invoice value shown is Rs. 13,28,10,825/-, and as per the data available in ITS the invoice value is Rs. 14,33,60,154/-, the assessable value for purpose of payment of Custom is Rs. 14,87,45,618/- and duty paid thereon is Rs. 3,12,65,377/-.Thus, there is a huge difference in invoice value and the duty paid as per the Annexure- 15 and the ITS data available. 4. In view of the above, Ld. Pr. CIT inferred that assessee firm has shown less invoice value to the tune of Rs. 1,05,49,329/- and shown less duty paid to the tune of Rs. 2,49,70,580/- in submission made by the assessee firm during the course of assessment proceedings as compared to ITS data available with the Department. In view of the all above facts, Ld. Pr. CIT came to the conclusion that the purchase value/invoice values have wrongly mentioned to reduce the net profit of the Firm and the same has not been verified by the AO at the time of finalizing the assessment under Section 143(3) of the I.T. Act on 13.12.2019. Therefore, Ld. Pr. Ld. CIT(A), after taking on record the submission filed by the assessee, set aside the order of AO as erroneous as well as prejudicial to the interest of Revenue. The Ld. Pr. CIT made the following observations, while passing the order passed u/s 263 of the Act order: 8. I have gone through the records and the submissions made by the assessee during the proceedings. The assessee has submitted that the issue raised in the present proceedings has been verified in detail by the AO. Further it was submitted that the custom duty has already ITA No. 140/Rjt/2022 (M/s. Stylo Tablewares vs. PCIT) A.Y. 2017-18 4 paid on import of the materials but also on the acquisition of new plant and machineries, die and patterns etc. imported for repairing of existing plant and machinery. Further he submitted the reconciliation of the assessable value and custom duty payment. It was further submitted that there was no difference in the invoice value / assessable value and custom duty as alleged. Assessee’s submission has been examined and found not acceptable for the reason that the reconciliation for the difference in the assessable value and custom duty has been provided first time in the present proceedings which is subject to verification by the AO in the further proceedings to be carried out as per directions in the subsequent paras of this order. Had those details been furnished in the assessment proceedings, the same would have been the part of the records but no such reconciliation was found on record. Even AO has not called for specifically reconciliation for such differences. Thus, this issue has been raised first time in the present proceedings therefore assessee’s contention to this extent is untenable. Thus, the assessee’s objection in this regard are baseless. 9. The above facts will indicate that AO has not conducted any inquiries/verification in respect of issues mentioned at above para. It may be mentioned that two essentials condition for invoking the provisions of Section 263 of I.T. Act are that the order passed by the AO is erroneous and prejudicial to the interest of Revenue. 10. In view of the above discussion it is apparent that such cases where the assessment has been completed without conducting any inquiries/verification or incorrect application of law tantamount to erroneous orders as also order prejudicial to the interest of Revenue. 11. From the above, it is evident that there was incorrect application of law. It is settled position that incorrect application of law constitutes an error and as such the assessment is erroneous and ITA No. 140/Rjt/2022 (M/s. Stylo Tablewares vs. PCIT) A.Y. 2017-18 5 prejudicial to the interests of the Revenue since there is loss of Revenue. 5. The assessee is in appeal before against the order passed by Ld. Pr. CIT. Before us, Ld. Counsel for the assessee submitted that the issues raised in the notice under Section 263 supra has been verified in detail by the AO in the course of assessment proceedings. The AO issued notice under Section 142(1) of the Act dated 28.09.2019 wherein he has called for details of all purchases including raw materials, details of assets acquired during the previous year, details of expenses incurred etc. In response to said notice the assessee vide letter dated 30.11.2019 furnished the details called by the AO. Ld. Counsel for the assessee submitted the assessee has not only paid customs duty on import of raw materials but there is payment of customs duty on acquisition of new Plant & Machinery, Die & Patterns and machinery parts imported for repairing of existing plant and machinery. In this regard details pertaining to issue related customs duty under revision were furnished before the AO at para i(i) of letter dated 30.11.2019, details or purchase have been furnished along with all the details of supplier at Annexure-5 (ii)and copies of accounts of all expenses have been furnished, which includes accounts of Customs Duty Expense and Machinery Repairing Expense were furnished before Ld. Assessing Officer during the course of assessment proceedings. The assessee also submitted reconciliation before Ld. Pr. CIT during the course of order passed u/s 263 of the Act proceedings and submitted that there is no difference in invoice Value / assessable value and custom duty as alleged in the show cause notice and custom duty paid during the relevant previous year is matching with the records of the custom department and there is no case of ITA No. 140/Rjt/2022 (M/s. Stylo Tablewares vs. PCIT) A.Y. 2017-18 6 wrongly mentioning of the purchase value/invoice value to reduce net profit of the firm as alleged. The Ld. Counsel for the assessee submitted that the AO has finalized the assessment after considering the details furnished and after due application of mind, the assessment order cannot be termed as erroneous or prejudicial to the interest of Revenue. As such any modification thereto would be tantamount to change of opinion which is not permitted tinder the Act in response, Ld. Departmental Representative relied on the observations made by Ld. Pr. CIT in the order passed u/s 263 of the Act order. 7. We have heard the rival contentions and perused the material on record. On going the assessment records, the Ld. Assessing Officer vide notices dated 28-09-2019 had called for various details and in response thereto, the assessee had filed detailed reply on 30-09-2019. However, we also observe that there is a substantial difference between the invoice value of import of machinery (Rs. 13,28,10,825/-) and the invoice value as per the data available on ITS (Rs. 14,33,60,154/-) amounting to Rs. 1,05,49,329/-, for which a reconciliation should have been sought from the assessee. Further, Ld. Pr. CIT also observed that the assessee has paid lesser duty of Rs. 2,49,70,850/- as compared to what should have been paid as per ITS data available with the Department. Now, Ld. Counsel for the assessee has submitted a Chart before the Ld. Pr. CIT giving a reconciliation of the difference pointed out by Ld. Pr. CIT and submitted that all difference has been duly explained. However, the issue for consideration is whether this aspect should have been enquired during the course of assessment proceedings. In our view, this glaring difference should have been enquired during the course of assessment proceedings, which the Ld. Assessing ITA No. 140/Rjt/2022 (M/s. Stylo Tablewares vs. PCIT) A.Y. 2017-18 7 Officer omitted to do. In the case of L.A. Developers v. CIT [2022] 142 taxmann.com 280 (Cuttack - Trib.), assessee filed its return of income under section 153C and same was completed under section 143(3). Thereafter, assessment was reopened by issue of a notice under section 148 and a reassessment order was passed by Assessing Officer. The Commissioner noted that there was a glaring difference in valuation of current assets and current liabilities as shown in assessee's balance sheet as compared to its cash flow statement, and said information was very much available during reassessment proceedings. He therefore invoked provision of section 263 in order to set-aside/modify assessment order passed by Assessing Officer. It was noted that Assessing Officer had called for details regarding difference arising in books of account however had not applied his mind to issue or formed any opinion towards same. The ITAT held that failure on part of Assessing Officer to examine or make addition in respect of difference between cash flow and balance sheet had clearly made assessment order erroneous and consequently prejudicial to interest of revenue. Therefore, Commissioner was right in invoking his powers u/s 263 of the Act. In view of the above facts and the judicial precedents on the subject, in our considered view, reconciliation should have been sought by Ld. Assessing Officer during the course of assessment proceedings. Non- seeking of such reconciliation, which apparently should have been sought, in our view, indicates non-application of mind to the given set of facts by Ld. Assessing Officer during the course of assessment proceedings. Accordingly, we find no infirmity in the order of Ld. Pr. Ld. CIT(A), who, in our view, in the instant set of facts has correctly concluded that the order ITA No. 140/Rjt/2022 (M/s. Stylo Tablewares vs. PCIT) A.Y. 2017-18 8 passed by Ld. Assessing Officer is erroneous and prejudicial to the interests of the Revenue. 8. In the result, appeal of the assessee is dismissed. Order pronounced in the open court on 30-09-2022 Sd/- Sd/- (WASEEM AHMED) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 30/09/2022 Tanmay, Sr. PS TRUE COPY आदेशक त ल पअ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order, Assistant Registrar, Income Tax Appellate Tribunal, Rajkot Strengthened preparation & delivery of orders in the ITAT 1) Date of dictation 27/09/2022(Reproduce from order) 2) Date on which the typed draft is placed before the Dictating Member & Other Member 27/09/2022 3) Date on which the approved draft comes to the Sr. P.S./P.S. /09/2022 4) Date on which the fair order is placed before the Dictating Member for pronouncement /09/2022 5) Date on which the fair order comes back to the Sr. P.S./P.S. 30 /09/2022 6) Date on which the file goes to the Bench Clerk 30/09/2022 7) Date on which the file goes the Head Clerk 8) Date on which the file goes to the Assistant Registrar for signature on the order 9) Date of Dispatch of the order