AI Insights
Parashnath Investment Ltd. appealed against the order of the Principal Commissioner of Income Tax, Kolkata-2, which set aside their assessment order dated 18.12.2018 under section 263 of the Income Tax Act, 1961. The original assessment had not made any additions concerning the reopening reasons, which alleged a bogus loss on currency derivatives. The Tribunal examined whether the revisionary proceedings were valid and whether the assessment order was erroneous or prejudicial to the interests of the revenue. The Tribunal concluded that the assessment order was not erroneous as it had taken a possible view after verification, and thus, the revision under section 263 was not justified.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 128707 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 9 month(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-04-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
29-01-2023
Assessment Year
2011-2012
Appeal Filed On
20-06-2021
Judgement Text
आयकर अपीलीय अधिकरण कोलकाता 'ए' पीठ, कोलकाता म ें IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘A” BENCH, KOLKATA श्री राजपाल यादव, उपाध्यक्ष (कोलकाता क्ष े त्र) एवं डॉ. मनीष बोरड, ल े खा सदस्य क े समक्ष Before SRI RAJPAL YADAV, VICE PRESIDENT & DR. MANISH BORAD, ACCOUNTANT MEMBER I.T.A. No.: 188/KOL/2021 Assessment Year: 2011-12 Parashnath Investment Ltd.....................................Appellant [PAN: AACCP 2234 J] Vs. Pr. CIT-2, Kolkata.................................................Respondent Appearances by: Sh. Miraj D. Shah, A/R, appeared on behalf of the Assessee. Sh. Subhrajyoti Bhattacharjee, CIT (D/R), appeared on behalf of the Revenue. Date of concluding the hearing : January 30 th , 2023 Date of pronouncing the order : April 17 th , 2023 ORDER Per Manish Borad, Accountant Member: This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2011-12 is directed against the order passed u/s 263 of the Income Tax Act, 1961 (in short the I.T.A. No.: 188/KOL/2021 Assessment Year: 2011-12 Parashnath Investment Ltd. Page 2 of 11 “Act”) by ld. Pr. Commissioner of Income Tax, Kolkata-2, Kolkata [in short “ld. Pr. CIT”] dated 04.03.2021. 2. Registry has informed that the appeal filed by the assessee is time barred by 33 days. At the time of hearing, ld. Counsel for the assessee stated that the delay was on account of COVID-19 restrictions. We, therefore, in view of the judgment of The Hon’ble Supreme Court vide Miscellaneous Application No. 21 of 2022 find that the limitation period in filing appeal between 15.03.2020 till 28.02.2022 has been excluded for calculating the limitation period. Since the period of limitation in the case of the Revenue falls during this period, the same deserves to be extended and we, therefore, condone the delay and admit the appeal for adjudication. 3. The assessee is in appeal before this Tribunal raising the following grounds: “1) For that on the facts and circumstances of the case Ld. Pr. CIT, Kolkata-2 grossly erred in setting aside the assessment dated 18.12.2018. 2) For that on the facts and circumstances of the case the order of Ld. Pr. CIT, Kolkata-2 setting aside the assessment order dt. 18.12.2018 is highly arbitrary, unjustified, unwarranted to the facts and untenable in law. 3) For that on the facts and circumstances of the case, Ld. Pr. CIT, Kolkata-2 wrongly assumed the jurisdiction U/s 263 to set aside the assessment when twin condition prescribed in sec 263 i.e. order being erroneous so far as prejudicial to the interest of revenue, for assuming jurisdiction U/s 263 was not satisfied. 4) For that on the facts and circumstances of the case Ld. Assessing Officer after verification taken a possible view and Ld. Pr. CIT cannot I.T.A. No.: 188/KOL/2021 Assessment Year: 2011-12 Parashnath Investment Ltd. Page 3 of 11 find fault in such circumstances when such possible view is not unlawful. 5) For that on the facts and circumstances of the case, order U/s 263 passed by Ld. PCIT, Kolkata-2 is bad in law and liable to be cancelled. 6) We may add, alter, amend or withdraw any grounds of appeal on or before the date of hearing.” 4. The assessee is a limited company. Income of Rs. 4,49,390/- declared in the e-return filed for AY 2011-12 on 15.09.2011. Case of the assessee reopened u/s 147 of the Act and the reason for reopening was for alleging that assessee claimed bogus loss on currency derivatives at Rs. 15,41,050/-. Reassessment proceedings were carried out after providing of valid notices and ld. AO did not make any addition on the issue for which the assessee’s case was reopened and completed the assessment making disallowance u/s 14A of the Act at Rs. 6,951/- and income assessed at Rs. 4,56,341/-. 5. This assessment order dated 18.12.2018 is the subject matter of the revisionary proceedings carried out by ld. Pr. CIT issuing show cause notice to the assessee for the alleged bogus loss on currency derivatives taken as accommodation entry from M/s. Marigold Vinijya Pvt. Ltd. and after considering the submissions of the assessee held the assessment order dated 18.12.2018 as erroneous and prejudicial to the interests of the Revenue observing as follows: “5. I have considered the facts of the case and gone through submission of the assessee and details available on record. On perusal of assessment record and assessment order, the issue of loss claim of Rs.15,41,051/- in transaction of currency derivatives M/s. Mariegold Vanijya Pvt. Ltd. was not properly done. The assessing I.T.A. No.: 188/KOL/2021 Assessment Year: 2011-12 Parashnath Investment Ltd. Page 4 of 11 officer without making any verification/investigation accepted the assessee company’s alleged loss on currency derivatives without making any disallowance of loss of Rs. 15,41,050/-. The Assessing Officer has erred in not verifying the details of transactions in the above-mentioned currency derivatives and thus, this resulted in excess claim of loss. The assessee has failed to completely disclose its true and correct income by non-furnishing of details as required under provisions of I.T. Act, 1961. The Assessing Officer has also failed to verify whether the alleged loss claim of Rs. 15,41,051/- was in accordance with the provision of I.T. Act, 1961. The A.O. has passed the assessment order without making enquiries or verification which should have been made in the instant case. Clause (a) of Explanation - 2 to Section 263(1) is attracted in this case. Accordingly, it is held that the assessment order is erroneous insofar as it is prejudicial to the interest of the revenue.” 6. Aggrieved, the assessee is now in appeal before this Tribunal. At the outset, ld. Counsel for the assessee submitted that the assessment proceedings u/s 147 of the Act are itself bad in law since no addition was made for the reasons recorded for issuing notice u/s 148 of the Act and since the assessment in itself is bad in law, the subsequent revisionary proceedings cannot be carried out on such invalid assessment proceedings. Reliance placed on the judgment of Hon'ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd. reported in IT APPEAL NOS. (L) 1526 OF 2008 AND 1714 OF 2009 dated 12.04.2010. 7. On the other hand, ld. D/R vehemently argued supporting the order of ld. Pr. CIT. 8. We have heard rival contentions and perused the records placed before us. The assessee has challenged the jurisdiction assumed by ld. Pr. CIT u/s 263 of the Act and also challenged the finding holding the assessment order framed u/s 143(3) r.w.s. 147 I.T.A. No.: 188/KOL/2021 Assessment Year: 2011-12 Parashnath Investment Ltd. Page 5 of 11 of the Act dated 18.12.2018 as erroneous and prejudicial to the interests of the Revenue. 9. Since the issue before us pertains to the invocation of jurisdiction u/s 263 of the Act we find that the provision of Section 263 of the Act has direct bearing on the issue raised before us, therefore, it is pertinent to take note of this section which reads as under: "263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1 st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Chief Commissioner or Director General or Commissioner authorized by the Board in this behalf under section 120; (b) record shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Commissioner; I.T.A. No.: 188/KOL/2021 Assessment Year: 2011-12 Parashnath Investment Ltd. Page 6 of 11 (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1 st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation- In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 9.1. On a bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the I.T.A. No.: 188/KOL/2021 Assessment Year: 2011-12 Parashnath Investment Ltd. Page 7 of 11 Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4 th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken u/s 263. 9.2. Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) has laid down following ratio with regard to provisions of section 263 of the Act: “There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, I.T.A. No.: 188/KOL/2021 Assessment Year: 2011-12 Parashnath Investment Ltd. Page 8 of 11 when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC). [Emphasis Supplied]” 10. On examining the facts of the case, we notice that ld. Pr. CIT in para 2 of the impugned order has stated that the reopening proceedings were initiated by ld. AO issuing notice u/s 148 of the Act for the reason that the assessee is alleged to have taken accommodation entry from M/s. Marigold Vinijya Pvt. Ltd. at Rs. 15,41,050/- towards bogus loss on currency derivatives. So, it remains an established fact that the assessee’s case was reopened to examine the very same issue about taking bogus loss on currency derivatives from M/s. Marigold Vinijya Pvt. Ltd. at Rs. 15,41,050/-. However, on perusal of the assessment order dated 18.12.2018 we notice that ld. AO has made no addition on account of the reason for which reopening was made and this in itself renders the reassessment proceedings as bad in law and for this proposition, we place reliance on the judgment of Hon'ble Bombay High Court in the case of Jet Airways (I) Ltd. (supra) which reads as under: “16. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under section 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that I.T.A. No.: 188/KOL/2021 Assessment Year: 2011-12 Parashnath Investment Ltd. Page 9 of 11 when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Explanation 3 by the Finance Act (No. 2) of 2009. However, Explanation 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of section 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Section 147 has this effect that the Assessing Officer has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee. 17. We have approached the issue of interpretation that has arisen for decision in these appeals, both as a matter of first principle, based on the language used in section 147(1) and on the basis of the precedent on the subject. We agree with the submission which has been urged on behalf of the assessee that section 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the Assessing Officer may assess or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words "and also" are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion of Explanation 3 to section 147. Parliament must be regarded as being aware of the interpretation that was placed on the words "and also" by the Rajasthan High Court in Shri Ram Singh's case (supra). Parliament has not taken away the basis of that decision. While it is open to I.T.A. No.: 188/KOL/2021 Assessment Year: 2011-12 Parashnath Investment Ltd. Page 10 of 11 Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section 147(1) as they stood after the amendment of 1-4-1989 continue to hold the field. 18. In that view of the matter and for the reasons that we have indicated, we do not regard the decision of the Tribunal in the present case as being in error. The question of law shall, accordingly, stand answered against the revenue and in favour of the assessee. The appeal is, accordingly, dismissed. There shall be no order as to costs.” 11. Once an assessment proceeding is held as bad in law that cannot be a subject matter of revisionary proceedings since the reassessment proceedings in the instant case were only on the issue of taking accommodation entry towards bogus loss on currency derivatives and ld. AO has called for the details from the assessee to examine the said issue and after conducting the necessary enquiry has not made any addition on this issue. 12. Therefore, under the given facts and circumstances of the case the assessee deserves to get relief on two counts; firstly, since the assessment order u/s 147 r.w.s. 143(3) of the Act is bad in law, the same cannot be the subject matter of the revisionary proceedings and secondly, even on merits also since the issue for which ld. Pr. CIT has issued the show cause notice u/s 263 of the Act has already been examined by ld. AO as the reopening proceedings have been carried out to examine the very same issue as referred in the show cause notice, therefore, it can be safely assumed that ld. AO has conducted a thorough enquiry and taken one of the views permissible in law and has found the claim of the assessee as genuine and thus, had not made any addition on this issue. Therefore, the impugned revisionary proceedings carried out I.T.A. No.: 188/KOL/2021 Assessment Year: 2011-12 Parashnath Investment Ltd. Page 11 of 11 u/s 263 of the Act are quashed and all the grounds raised by the assessee are allowed. 13. In the result, the appeal filed by the assessee is allowed. Kolkata, the 17 th April, 2023 Sd/- Sd/- [Rajpal Yadav] [Manish Borad] Vice President Accountant Member Dated: 17.04.2023 Bidhan (P.S.) Copy of the order forwarded to: 1. Parashnath Investment Ltd. 53, Choraria House, Radha Bazar Lane, 2 nd Floor, Kolkata-700 001. 2. Pr. CIT-2, Kolkata. 3. CIT(A)- 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata
Other Referred Cases
CIT vs. Jet Airways (I) Ltd.
Laws Referred To
Income Tax Act, 1961
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