Shri Laljibhai Thakarshibhai Chotaliya, Rajkot V. The Pr. CIT-1, Rajkot, Rajkot

ITA 141/RJT/2022

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8771 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-11-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 28-04-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Reassessment proceedings
• Section: 147; 68; 148; 263; 44AD; 143(3); 133A; 205; 64

Judgement Text

ITA No.141/RJT/2022 Assessment Year: 2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted through E-Court at Ahmedabad) BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.141/RJT/2022 Assessment Year: 2012-13 Shri Laljibhai Thakarshibhai Chotaliya, 321-A, Raghuvir Complex, Soni Bazar, Savjibhai Street, Rajkot – 360 001, Gujarat. [PAN – AQVPC 8489 J] Vs. The Principal Commissioner of Income Tax – 1, Rajkot. (Appellant) (Respondent) Assessee by Shri Sumit Shingala, AR Revenue by Shri Shramdeep Sinha CIT (DR) Da te o f He a r in g 30.11.2023 Da te o f P ro n o u n ce m e n t 09.02.2024 O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER : This appeal is filed by the Assessee against the order dated 28.02.2022 passed by the Principal Commissioner of Income Tax, Rajkot-1 for the Assessment Year 2012-13. 2. The Assessee has raised the following grounds of appeal:- “1. Ld. PCIT has erred in law as well as in facts in exercising jurisdiction under Section 263 and holding that order of AO is erroneous and prejudicial to the interest of the Revenue. 2. Ld. PCIT has erred in law as well as in facts in exercising jurisdiction under Section 263 when matter is already pending in appeal before CIT(A), on very same issue” ITA No.141/RJT/2022 Assessment Year: 2012-13 2 3. Return of income for Assessment Year 2012-13 was filed on 06.07.2012 declaring total income at Rs.1,92,150/-. The case was reopened and notice under Section 148 of the Income Tax Act, 1961 was issued on 15.02.2019. In response to the said notice, the assessee filed return of income on 11.09.2019 declaring total income of Rs.1,92,150/-. The assessment was completed under Section 143(3) read with Section 147 of the Income Tax Act, 1961 on 28.11.2019 determining total assessed income of Rs.24,60,450/-. The PCIT issued show cause notice dated 11.01.2022 proposing to subject the assessment order for revision under Section 263 of the Act as the PCIT observed that survey action under Section 133A carried out on 18.09.2014 in the case of National Shroff & Co. and Ellora & Co. which are engaged in the business of Shroff/Angadiya and the assessee was one of the beneficiaries and the assessee entered into cash transactions of Rs.2,83,53,701/- during the relevant Assessment Year. The assessee filed its submission and after taking cognisance of the same, the PCIT invoked Section 263 of the Act and directed the Assessing Officer to make fresh assessment after conducting necessary verification and enquiries. 4. Being aggrieved by the order under Section 263 of the Act passed by the PCIT, the assessee filed appeal before us. 5. The Ld. AR submitted that against the reassessment order the assessee filed appeal before the CIT(A) which is pending before the CIT(A). During the pendency of such first appeal, the PCIT exercised his power under Section 263 of the Act and directed for fresh assessment while setting aside the reassessment order dated 28.11.2019. The assessee relied upon the decision of Hon’ble Allahabad High Court in the case of CIT vs. Vam Resorts and Hotels P. Ltd. (2020) 186 DTR 205 to contend that during the pendency of appeal before the CIT(A) jurisdiction under Section 263 cannot be exercised on the issue which is contested before the CIT(A). The Ld. AR further submitted that alternate allegation of the Assessing Officer in reassessment proceedings was that assessee received cash from M/s. National shroff & Co. who was engaged in the business of cash carrying services for commission on which the Assessing Officer estimated a profit margin and brought the same to tax. The said action of the Assessing Officer i.e. to tax only profit element and not the receipts itself, is in accordance with law laid down, time and ITA No.141/RJT/2022 Assessment Year: 2012-13 3 again, by various judicial pronouncements, and therefore it is one of plausible view. The Ld. AR submitted that the issue is squirrely covered by the decision of Parin Furniture Limited vs. PCIT (ITA No.86-89/RJT/2022), CIT vs. Vam Resorts and Hotels P. Ltd (supra), CIT vs. President Industries (2022) 258 ITR 654 (Guj), CIT vs. President Industries (2002) 258 ITR 654 (Guj) and PCIT vs. V. Dhana Reddy & Co. (2018) 100 taxmann.com 358 (SC). The Ld. AR submitted that throughout the reassessment proceedings as well as before PCIT the assessee denied having any transactions with National Shroff and thus based on the reasons recorded and underlying third party material, the Assessing Officer was left with no course but to treat the same as business receipts because the assessee had proved the existence of business. The Ld. AR submitted that there was no error committed by the Assessing Officer which was prejudicial to the interest of Revenue for invoking Section 263 of the Act. The Ld. AR further submitted that adopting GP/NP and action under Section 263 cannot be taken. 6. The Ld. DR submitted that there is a mistake of law in respect of not taking cognisance of section 44AD of the Act on the part of the Assessing Officer. In fact, the reason for reopening was under Section 68 but the actual invocation of Section as well as the finding as per Income Tax Statute is not considered and taken into account by the Assessing Officer and, therefore, the PCIT was rightly taxing the entire amount. The Ld. DR relied upon the decision of Smt. Rekha Krishna Rai (2013) 33 taxmann.com 64 (Karnataka HC). The Ld. DR relied upon the order of PCIT. 7. We have heard both the parties and perused all the relevant material available on record. The contention of the Ld. DR that Section 44AD should have been applied appears to be not justifiable and it is the realisation of expenses incurred that only form part of the profit included in the consideration of sales and, therefore, unless there is finding to that effect the investment by way of including cost in respect of which the sale have been made by the assessee and that has also not been disclosed. In the present case, the assessee has categorically before the Assessing Officer as well as before the PCIT submitted that the assessee has not carried out any transaction with National Shroff. In fact, the assessee is challenging the said assessment order before the CIT(A). The case of the revenue/PCIT that the ITA No.141/RJT/2022 Assessment Year: 2012-13 4 Assessing Officer should have taken precaution of examining and made enquiry with regard to the reasons recorded and arrive at to make addition of gross profit rate at 8% appears to be second opinion and thus invocation of Section 263 does not permit the second option. In fact, Section 263 categorically stated that where the Assessing officer is erroneous and assessment order is prejudicial to the interest of Revenue but in this assessee’s case both these aspects are missing and, therefore, invocation of Section 263 by PCIT is not justifiable. 8. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on this 09 th February, 2024. . Sd/- Sd/- (ANNAPURNA GUPTA) (SUCHITRA KAMBLE) Accountant Member Judicial Member Ahmedabad, the 09 th day of February, 2024 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Rajkot Bench, Rajkot