M/s Humara India Credit Cooperative Society Limited , Kolkata V. PCIT-9, Kolkata

ITA 192/KOL/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9132 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 21-06-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEVI SHARAN SINGH
• Keywords: Revision of order; Principle of natural justice; Reasonable cause; Reassessment proceedings; Set aside
• Section: 147; 263; 143(3); 142(1); 143(2); 139(4); 73; 72

Judgement Text

1 ITA No. 192/Kol/2021 Humara India Credit Cooperative Society Ltd. AY: 2016-17 आयकर अपील य अधीकरण, यायपीठ –“A” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA [Before Shri P. M. Jagtap, VP (KZ) & Shri A. T. Varkey, Judicial Member] I.T.A. No. 192/Kol/2021 Assessment Year: 2014-15 Humara India Credit Cooperative Society Ltd. (PAN: AAAAJ 8186 M) Vs. PCIT-9, Kolkata Appellant Respondent Date of Hearing (Virtual) 02.12.2021 Date of Pronouncement 15.12.2021 For the Appellant Shri Gaurab Bansal, CA For the Respondent Shri Devi Sharan Singh, CIT DR ORDER Per Shri A. T. Varkey, JM: This appeal has been preferred by the assessee against the order of Ld. PCIT-9, Kolkata dated 08.03.2021 for assessment year 2016-17 passed u/s. 263 of the Income Tax Act, 1961 (hereinafter referred to as the said Act). 2. At the outset, there is a delay of 39 days of filing of the appeal. We note that on 22 nd June, 2021 the assessee filed the appeal but it was time barred by 39 days. A petition for condoning the delay has been filed vide letter dated 07.09.2021. We have gone through the same and find from the reasons given therein that there was reasonable cause for not filing the appeal on time and there was no deliberate omission on the part of the assessee to have delayed filing the appeal on time and though the Ld. D.R. objected for condoning the delay, we taking note of the cause of delay being reasonable, condone the delay and admit the appeal for hearing. 3. At the outset, the Ld. A.R. of the Assessee Shri Gaurav Bansal submitted that the assessee is challenging usurpation of jurisdiction by the Ld. PCIT to exercise his revisional jurisdiction without satisfying the condition precedent as prescribed u/s 263 of the Act i.e. without holding validly that the AO’s order was erroneous as well as prejudicial to the 2 ITA No. 192/Kol/2021 Humara India Credit Cooperative Society Ltd. AY: 2016-17 revenue. According to Ld. A.R, the Ld. PCIT had issued show cause notice (SCN) dated 20.01.2021 wherein he had raised only one issue i.e. erroneous carry forward of loss u/s 80 of the Act (refer page 123-124 of PB) and pursuant to which (SCN) the assessee promptly objected against such interference and brought to the notice of the Ld. PCIT that there was no error on the part of the AO on this issue and explained about it. However, the Ld. PCIT having accepted this contention of the assessee dropped the issue however erroneously have set aside the assessment order for de novo assessment, which action according to Ld. A.R is patently without jurisdiction because the fault on which the Ld. PCIT wanted to exercise his revisional jurisdiction being non-existing (as pointed out by the assessee while objecting to SCN), the Ld. PCIT should have dropped the revisional proceedings; and later in case if he found any other fault, he should then after having put the assessee again on notice either by serving notice(SCN) or after giving an opportunity to the assessee [i.e. by confronting the assessee with the new fault during the revisional hearing] the Ld. PCIT could have invoked the revisional jurisdiction second time when the invocation of the first revisional action was found to be based on non-existent ground (since assessee had not factually carry forwarded the loss as alleged by Ld. PCIT in the SCN for initiating the Section 263 proceeding). Therefore according to Ld AR, when assessee pointed out to Ld. PCIT that assessee had not carried forwarded the loss u/s 80 of the Act and when the Ld. PCIT realized that assessee’s objection was factually valid, he should have dropped the issue on which he found the AO’s order to be erroneous; and as stated before, according to him, the Ld. PCIT could have freshly initiated revisional proceeding provided he found any new fault and that too only after confronting the assessee as envisaged in Section 263 of the Act and in the present case admittedly this exercise has not been carried out by the Ld. PCIT before passing the impugned order. So according to Ld. A.R. the impugned order is bad in law for want of jurisdiction on the ratio of decisions though in the context of reopening u/s 147 of the Act as held by the Hon’ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd. in 331 ITR 236 and the Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs. CIT (336 ITR 136) and the Hon’ble jurisdictional Calcuta High Court in the case of CIT vs. M/s Infinity Infotech Parks Ltd. in ITAT No. 60 of 2014 GA No. 1736 of 2014. 3 ITA No. 192/Kol/2021 Humara India Credit Cooperative Society Ltd. AY: 2016-17 4. In order to appreciate the contention of Ld AR, we may look at the brief facts of the case as noted by the AO in the assessment order, The AO noted that the assessee has filed the return of income for AY 2016-17 disclosing total income as NIL and the case was selected for scrutiny through CASS and he had issued statutory notice u/s 143(2) on 08.08.2018 and notice u/s 142(1) along with questionnaire. The AO noted that all correspondences were heard through E-assessment procedure and the assessee complied with the requisition issued by the AO. The AO noted that the assessee society was incorporated on 30.07.2013 and by laws have been registered in AY 2015-16. The AO noted that the assessee being a cooperative society is engaged in accepting deposits raising loans receiving grants and also making loans and advances, credit facility to its members. According to AO, pursuant to his query the assessee had filed various documents to explain the questionnaire raised which has been checked and examined by him. And thereafter the AO being satisfied with the explanation and records submitted by the assessee accepted the return of income of the assessee by order dated 12.12.2018. This action of the AO has been proposed to be interfered by the Ld. PCIT-9, Kolkata who conveyed his desire through a Show cause notice (SCN) dated 20.01.2021 wherein he has brought to the notice of the AO the following error supposed to have been made by the AO while framing the assessment order dated 12.12.2018. The sole fault/error pointed out by the Ld. PCIT by SCN is as under: Erroneous carry forward of loss u/s 80 of the Income Tax Act: From the examination of the records, it is further unearthed that, during the year under consideration, the assessee filed the return of income beyond the due date on 28/03/2017 claiming a net loss of Rs. 232,88,87,118/-. In this connection, it is to be mentioned here that Section 80 of the I. T. Act mandates that "notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of sub-section (3) of section 139, shall be carried forward and set off under sub-section (1) of section 72 or sub-section (2) of section 73 or sub-section (2) of section 73A or sub-section (1) or sub-section (3) of section 74 or sub-section (3) of section 74A." In this case, the assessee had filed the return of income belatedly u/s 139(4) of the Act. Hence, the AO was required to disallow the carry forward of such loss. Failure to do so has rendered the impugned order erroneous in so far as it is prejudicial to the interests of the revenue. 4. In the light of the above, it is clear that the AO has, while passing the order u/s 143(3) of the Act, failed to make proper and the required enquiry/verification under clause (a) of Explanation 2 to section 263 of the I.T. Act, 1961 in respect of 1he above issues. As such. the assessment order 4 ITA No. 192/Kol/2021 Humara India Credit Cooperative Society Ltd. AY: 2016-17 u/s 143(3) of the I.T. Act, 1961 dated 12/12/2018 is erroneous and prejudicial to the/ interests of Revenue.”[Emphasis given by us] 5. According to Ld. A.R., a perusal of the SCN (supra) would clearly show that the only issue that has been brought to the notice of the assessee is about the erroneous carry forward of loss and nothing else. For buttressing this contention the Ld. A.R drew our attention to the impugned revisional order of the Ld. PCIT dated 08.03.2021 and took us through the content of the same and from which we note that the Ld. PCIT acknowledges to have issued SCN dated 20.01.2021 [Refer page 123-124 of PB] and in pursuance to the same, the assessee had filed letter/objection dated 27.1.2021 wherein it had requested Ld. PCIT to drop the proceedings since the AO had ignored while framing the assessment order dated 12.12.2018 the loss claimed and the AO ultimately assessed the income at NIL and in view of the such an order of the AO, the assessee had not carried forward loss of Rs. 2,32,88,87,118/-, So, the failure of AO/error of AO as pointed out by the Ld. PCIT in the SCN (supra) being non-existing, the erroneous presumption of Ld. PCIT to invoke the revisional jurisdiction being found to be factually wrong, the assessee prayed for dropping of the revision proceedings. It is noted that the Ld. PCIT has reproduced the assessee’s reply/objection/prayer to drop the proceedings at para 4 of his impugned order; and thereafter from a perusal of para 5 to the concluding para at 9 we note that the Ld. PCIT has not mentioned about any other issues which he found fault with being confronted with the assessee [other than a reference at the beginning of impugned order about a proposal made by the AO to Ld. PCIT which was supposed to be “Note not for the assessee” wherein he has recorded certain observations which according to AO says about lack of verification due to paucity of time]. 6. We note that though certain observations have been made by the AO in the “Notes not for the assessee” it was stated that there was lack of verification, however the Ld. PCIT while proposing the revisional action has not confronted these issues other than the issue of carry forward loss by way of show cause notice dated 20.01.2021. So we note that other than the issue of carry forward of loss, no other issues were confronted to the assessee either by SCN or the assessee was given an opportunity to rebut/clarify/explain during the revisional proceedings which was the basis on which the Ld. PCIT found the order of AO to be 5 ITA No. 192/Kol/2021 Humara India Credit Cooperative Society Ltd. AY: 2016-17 erroneous in so far as prejudicial to revenue and which could have justified his action to set aside the assessment order dated 12.12.2018 by passing the impugned order. 7. In the facts and circumstances discussed (surpa) we note that the Ld. PCIT has invoked his jurisdiction wherein he confronted the assessee by issue of SCN dated 20.01.2021 for the only issue i.e. ‘erroneously carry forward of loss’ and pursuant to which the assessee brought to the notice of the Ld. PCIT that the AO had not allowed the loss to be carried forwarded and the AO while passing the assessment order dated 12.12.2018 has ignored the assessee’s claim for carry forward of loss and determined the assessee’s income at ‘Nil’. So resultantly the assessee had not claimed the loss to be carried forwarded. To verify this fact, we directed the Ld. CITDR to find out from the AO and therefore appeal was fixed after few days and when the matter was finally heard on 2 nd December, 2021,the AO was also present during the proceedings and the Ld. CITDR Shri Devi Saran Singh confirmed that the assessee had not carried forward the losses of Rs. 2,32,88,87,118/- which fact is also evident from a perusal of the return of income filed for subsequent AY 2017-18 wherein the assessee has shown income of Rs. 1,31,82,639/- and has not carried forwarded any loss for AY 2016-17; and thus we find that the assessee’s contention before Ld. PCIT that it has not carried forward the loss of Rs. 232 crores was correct and the Ld. PCIT has also reproduced the assessee’s averment to that effect at para 4 of the impugned order. Further on a perusal of the impugned order reveals that there was no whisper of the Ld. PCIT to have confronted the assessee with any other issues which he found fault/error with the AO’s action while framing assessment order dated 12.12.2018. Even though we note that in Section 263 proceedings the serving of show cause notice is not necessary as held by the Hon’ble Supreme Court in the case of Amitabh Bachhan in Civil Appeal No. 5009 of 2016 dated 11.05.2016, however the Hon’ble Supreme Court also clarified in the same order that during the revisional proceedings an opportunity of hearing should be granted to the assessee. The Hon’ble Supreme Court in this regard observed “no notice is required what is contemplated by Section 263” is an opportunity of hearing to be given to the assessee failure to give such an opportunity could render the revisional order legally fragile not on the ground of lack of jurisdiction but on the ground of violation of principal of natural justice and the Hon’ble Supreme Court referred to the earlier decision of its own in Geeta 6 ITA No. 192/Kol/2021 Humara India Credit Cooperative Society Ltd. AY: 2016-17 Devi Agarwal vs. CIT in (1970) 76 ITR 496, so according to us even though notice as such is required in revisional proceedings, the Ld. PCIT before holding the AO’s action on any issue as erroneous insofar as prejudicial to the revenue is bound by law to give opportunity to assessee to rebut/clarify/explain the issue, failure to do so makes the order fragile for violation of natural justice. In the facts discussed (supra) this omission on the part of Ld. PCIT according to us not only makes the impugned order fragile for violation of natural justice, the Ld. PCIT lacks of jurisdiction to pass the impugned order because firstly the Ld. PCIT tried to usurp the power of revisional jurisdiction by confronting the assessee with only one issue by erroneous carry forward of losses however when assessee brought to his notice that the AO had not allowed the assessee’s claim and the assessee also has not carried forwarded the loss in question, and pleaded for dropping the case, in such an event the Ld. PCIT should have dropped the revisional proceedings, since the jurisdictional fact on the basis/foundation on which he usurped the power being not existing/absent. Thereafter if the Ld. PCIT finds any other issues on which he finds the AO’s action was erroneous insofar as prejudicial to the revenue then he should have again confronted the assessee afresh with the new issue either through SCN or summon the assessee and during the hearing before him, the Ld. PCIT should given an opportunity to assessee to explain/controvert/rebut/clarify/explain the new issue and after hearing the assessee on the new issue and if he finds the AO erred on the new issue, then he could have proceeded and passed the order. Otherwise, he cannot. Because, it will be bad for want of jurisdiction. However, in the present case, even though the jurisdictional fact (claim of loss carried forward) was absent, still the Ld. PCIT went ahead with the revisional proceedings without dropping it and passed the impugned order dated 08.03.2021 wherein he had set aside the order of the AO dated 12.12.2018 and directed for fresh assessment, without confronting the assessee on any fact which according to him was the new jurisdictional fact which was erroneous insofar as prejudicial to the revenue. So therefore as per the ratio laid by the Hon’ble Bombay High Court in the case of Jet Airways India Pvt. Ltd. (supra) and the Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. (supra) which ratios were concurred by the Hon’ble jurisdictional Calcutta High Court in the case of M/s Infinity Infotech Parks Ltd. (supra) though in the context of reopening u/s 147 of the Act wherein the ratio held was that if the AO reopens the assessment of an assessee on ‘x’ 7 ITA No. 192/Kol/2021 Humara India Credit Cooperative Society Ltd. AY: 2016-17 ground and if he finds during the reassessment proceedings, that ‘x’ ground is absent/non- existing, then the AO should drop the proceedings and cannot make any other addition unless the AO makes an addition on ‘x’ ground. We thus find merit in the contention of Ld. A.R. that jurisdictional fact to exercise the revisional jurisdiction being absent/non-existing in this case, the Ld. PCIT ought to have dropped the proceedings and if he found any other issues/error on the part of the AO while framing the assessment order, then he ought to have given opportunity to the assessee and confronted it to the assessee and thereafter he could have made fresh endeavour to exercise revisional jurisdiction, which is not the case before us. Therefore the impugned order of Ld. PCIT dated 08.03.2021 is bad for want of jurisdiction and therefore stands quashed. 8. In the result, the appeal of an assessee is allowed. Order is pronounced in the open court on 15 December, 2021. Sd/- Sd/- (P. M. Jagtap) (A. T. Varkey) Vice-President Judicial Member Dated: 15 December, 2021 SB, Sr. PS Copy of the order forwarded to: 1. Appellant- M/s Humara India Credit Cooperative Society Ltd., 101, 227/2, Mangal Jyoti, AJC Bose Road, Kolkata-700020 2. Respondent – PCIT-9, Kolkata 3. The CIT(A) , Kolkata 4. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order Senior Private Secretary/DDO ITAT, Kolkata Benches, Kolkata