Shri Hari Gems, Mumbai V. Pr. Commissioner of Income Tax (Central), Surat

ITA 200/SRT/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0983 (ITAT-SURAT)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-10-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 29-06-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Opportunity of being heard; Period of limitation; Reasonable cause; Assessment record; Condonation of delay; Set aside
• Section: 263; 143(3); 142(1); 143(2); 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 200/Srt/2022 (Assessment Year: 2017-18) (Physical hearing) Shri Hari Gems, 601, Shreeji Krupa Building, Bhagat Singh Road, Vile Parle West Mumbai, Mumbai-400057 (Maharashtra) PAN No. AAKFS 8410 N Vs. Pr.C.I.T.(Central) Surat. Appellant/ assessee Respondent/ revenue Assessee represented by Shri Nitin Gheewala, AR Department represented by Shri Ashok B Koli, CIT-DR Date of hearing 12/10/2022 Date of pronouncement 12/10/2022 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of the learned Principal Commissioner of Income Tax (Central), Surat (in short, the ld. PCIT) dated 17/02/2022 passed under Section 263 of the Income Tax Act, 1961 (in short, the Act) for the Assessment Year (AY) 2017-18. The assessee has raised following grounds of appeal: “1. On the facts and in the circumstances of the case, the order dated 17/02/2022 passed by the learned Pr.CIT u/s 263 of the I.t. Act is bad in law and ab initio void. ITA No.200/Srt/2022 Shri Hari Gems Vs PCIT 2 2. On the facts and in the circumstances of the case, the learned Pr.CIT erred in setting aside the assessment order dated 17/12/2019 passed by the Assessing Officer u/s 143(3) of the I.T. Act. 3. In law and in facts of the case, the ld. CIT has erred in directing the AO to pass a fresh assessment order after considering issues that reconsidering are examined during assessment proceedings. 4. On the facts and in the circumstances of the case, the learned Pr.CIT erred in giving direction to Ld. AO to examine the issue which have been examined by him while passing assessment order u/s 143(3) and such direction is without pointing out any error in the assessment order passed by ld. AO, therefore such direction is ultra vires and beyond the scope of Section 263 of Income tax Act, 1961. 5. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.” 2. Perusal of record shows that the ld. Pr. CIT passed his order on 17/02/2022 and this appeal is filed on 30/06/2022, thus, there is a delay of 73 days in filing the present appeal. The assessee has filed his affidavit for explaining the cause of delay in filing the appeal. The learned Authorised Representative (ld. AR) of the assessee submits that the due to Nationwide Covid pandemic Hon'ble Supreme Court in Suo moto Writ Petition No. 3/2020 in order dated 10/01/2022 has extended the period of limitation for taking resource of law between the period starting 15/03/2020 till 28/02/2022 and further allowed 90 days’ time from 01/3/2022 to take recourse of law if the time period for filing appeal is such period. The ld. AR submits that though the limitation period is ITA No.200/Srt/2022 Shri Hari Gems Vs PCIT 3 substantially covered and keeping in view the decision of Hon'ble Apex Court, there is delay of about 32 only days in filing the present appeal. The ld. AR further submits that during the revision proceeding, the assessee conceded the issue of proposed show cause notice issued by the ld. PCIT under Section 263 of the Act for making addition/disallowance of ESI/PF contribution of employees which was deposited beyond due date under the relevant statutory provision. Thus, the assessee was under impression that the ld. PCIT has given direction to the Assessing Officer to pass fresh assessment order by making addition on the issue of late deposit of ESI/PF contribution only. However, on issuance of notice of Assessing Officer for de novo assessment, they came to know that the ld. PCIT has given direction beyond his jurisdiction under Section 263 and set-aside the entire assessment order. The ld. AR submits that non-filing of appeal within statutory period was neither intentional nor deliberate but due to bonafide impression that there is no adverse direction against the assessee as the assessee has already agreed for such addition, which was subject matter of notice under section 263. The assessee has very good case on merit and is likely to succeed, if the delay is condoned and the assessee is granted opportunity to contest the case on merit. The ld. AR further submits that a technical consideration should not be considered against ITA No.200/Srt/2022 Shri Hari Gems Vs PCIT 4 cause of substantial justice and prayed to condone the delay of about 32 days in filing the present appeal. 3. On the other hand, the learned Commissioner of Income Tax- Departmental Representative (ld. CIT-DR) for the revenue strongly opposed the prayer of assessee for seeking condonation of delay. The ld. CIT-DR for the revenue submits that the ld. PCIT while passing the order under Section 263 has set aside the assessment order and directed the Assessing Officer to pass a fresh assessment order. The assessee shall get reasonable opportunity as per direction of ld. PCIT. The explanation offered by the assessee that there is no finding against the assessee is misplaced. The assessee has prepaid a concocted story to frame the application for condonation of delay. The contents of affidavit are not correct. The assessee has failed to show any reasonable cause, which may entitle the assessee for seeking condonation of delay. 4. We have considered the rival submissions of both the parties and perused the application of assessee for condonation of delay which is supported by affidavit of assessee. We find that in the application, the assessee has categorically contended that the Hon'ble Apex Court in suo moto writ petition No. 3/2020 has extended the period of limitation for 90 days w.e.f. 01/3/2022 and if such period is excluded, the delay is only 32 days and not 73 days as worked out by registry of this Tribunal. Considering the ITA No.200/Srt/2022 Shri Hari Gems Vs PCIT 5 contents of decision of Hon'ble Apex Court in suo moto writ petition (supra) on the subject of cognizance for extension of limitation, we find merit in the contention of ld. AR for the assessee that there is only delay of 32 days only. 5. We find that before the ld. PCIT, the assessee conceded on the proposed show cause notice for making addition/disallowance of delay in depositing of employees’ contribution towards ESI/PF under the relevant statutory provision. The assessee in his affidavit has clearly mentioned that such fact was communicated to his consultant that direction of ld. PCIT is beyond the scope of Section 263 of the Act and that immediately filed appeal that there is no malafide intention in filing appeal belatedly. On perusal of contents of affidavit, we find convincing force that appeal is filed on the advice of consultant that direction of ld. PCIT is beyond the scope of Section 263 of the Act and that such direction was realised when the Assessing officer informed that the assessment order is set aside on the issue which were already examined during the course of assessment proceedings. In our view, the assessee has sufficiently explained the delay of 32 days in filing the present appeal. The Hon'ble Supreme Court in the case of Collector, Land Acquisition Vs Mst. Katiji & Ors. 167 ITR 471 (SC) has held that when technical consideration and substantial justice are petted against each other, the cause of justice must prevail. Keeping in ITA No.200/Srt/2022 Shri Hari Gems Vs PCIT 6 view such principle, we condone the delay in filing the appeal and admit the appeal for hearing and adjudication. Now adverting to the merit of the case. 6. Brief facts of the case are that the assessee is engaged in the business of manufacturing and processing of polished diamonds and also traded in rough diamonds, filed its return of income for the A.Y. 2017-18 on 14/03/2018 declaring income of Rs. 16.49 crores. The case was selected for scrutiny. The Assessing Officer after serving statutory notices under Section 143(2) and 142(1) of the Act, proceeded for assessment. The Assessing Officer in para 2 of his assessment order recorded that questionnaire was issued to the assessee on 16/07/2019. The assessee made his submission in electronics way. The submission of assessee was verified and that the returned income of assessee was accepted. Subsequently, the ld. PCIT revised the assessment order by exercising his jurisdiction under Section 263 vide order dated 17/02/2022. 7. Before passing the order under Section 263 of the Act, the ld. PCIT took his view that on perusal of assessment record, more specifically column No. 20(b) of audit report, he noted that the assessee has received contribution from employees towards ESI and PF and not deposited aggregate of amount of Rs. 2,26,146/- within the prescribed time limit. The Assessing Officer did not take this fact into consideration while ITA No.200/Srt/2022 Shri Hari Gems Vs PCIT 7 completing the assessment under Section 143(3) of the Act, thus the assessment order is erroneous in so far as it is prejudicial to the interests of revenue. In the show cause notice, the ld. PCIT referred the actual date of payment/deposit of employees’ contribution of ESI and PF as well as due date for depositing of such contribution with the prescribed authorities. 8. In response to notice under Section 263, the representative of assessee attended the hearing before the ld. PCIT on 08/02/2022 and stated that the assessee has no objection to the proposed revision and that they have already filed their letter. The ld. PCIT also recorded such admission on the order sheet dated 08/02/2022 and got the signature of ld. AR of assessee. The ld. PCIT after referring the provisions of Section 2(24)(x) and Section 36 noted that the Assessing Officer allowed such decision without making any enquiry and allowed relief to the assessee. The ld. PCIT held that the assessment order is erroneous and so far as prejudicial to the interest of revenue. Ld. PCIT set aside the assessment order by giving following direction: “Therefore, the said assessment order is set aside with direction to the Assessing Officer to pass a fresh assessment order after taking into consideration the issues as may have been already considered together with the issue discussed hereinabove also. Needless, to mention that while passing the fresh assessment order, consequent to this order ITA No.200/Srt/2022 Shri Hari Gems Vs PCIT 8 being passed under Section 263 of the Act, the Ld. AO shall grant reasonable and sufficient opportunity of being heard to the assessee.” 9. Further aggrieved, the assessee has filed the present appeal before this Tribunal. 10. We have heard the submission of the ld. AR of the assessee and the ld. CIT-DR for the revenue. The ld. AR of the assessee submits that the ld. PCIT issued show cause notice for proposed revision on the issue of delay in deposit of ESI and PF contribution of employees with the prescribed authority. During the revision proceedings, the assessee admitted/agreed/ conceded for making disallowance of such amount due to delay in deposit of such contribution with the prescribed authorities. No other issue was examined by the ld. PCIT nor any further show cause notice or opportunity to revise the assessment order on any other issue was issued. Once the assessee accepted/agreed for addition by giving no objection for proposed revision, the revision proceeding was liable to be dropped by giving direction to the Assessing Officer to make addition thereof, unless there is other issues selected by PCIT for his examination. However, the ld. PCIT exceeded his jurisdiction in setting aside the assessment order with direction to Assessing officer to pass fresh assessment order after taking into consideration which may have already been considered together with the issue discussed. The ld. AR submits that no other issue was discussed ITA No.200/Srt/2022 Shri Hari Gems Vs PCIT 9 nor any opportunity or show cause on any other issue for treating the assessment order erroneous as well as prejudicial to the interest of revenue. It is the precondition for passing revision order that the assessment order must be held as erroneous and in so far as prejudicial to the interest of revenue. There is no such direction of ld. PCIT on any other issue. 11. The ld. AR in alternative and without prejudice submission submitted that the Assessing Officer in the assessment order clearly mentioned that the detailed questionnaire was issued on 16/07/2019, the assessee made submission which was verified and kept on record thereby the Assessing Officer accepted the explanation on various issues. There is no examination of any other issue by the ld. PCIT except issue of delay in deposit of employees’ contribution towards ESI and PF. Thus, the ld. PCIT exceeded his jurisdiction without giving opportunity on any other issue which was examined during the assessment proceedings. The ld. AR submits that the order of ld. PCIT is liable to be quashed as the assessee has already given no objection for making the proposed revision on the issue identified by the ld. PCIT 12. On the other hand, the ld. CIT-DR for the revenue supported the order of ld. PCIT. The ld. CIT-DR submits that as per direction of ld. PCIT, the assessee will get opportunity in order giving effect proceeding. The ld. ITA No.200/Srt/2022 Shri Hari Gems Vs PCIT 10 CIT-DR further submits that once the assessment order is found to be erroneous and prejudicial to the revenue on any issue and the assessment order is set aside, the Assessing Officer may proceed for fresh assessment order to examine the other issues. 13. We have considered the rival submissions of both the parties and have seen the order of ld. PCIT carefully. We find that there is very short controversy in the present appeal. We find that the ld. PCIT issued proposed show cause notice under Section 263 on the issue of delay in deposit of employees’ contribution to ESI and PF with the prescribed authority. Before ld. PCIT, the assessee agreed for making addition/disallowance by giving no objection in writing. We further noted that no other issue was raised or examined by the ld. PCIT. The ld. PCIT instead of directing the ld. PCIT to make addition on the basis of admission of assessee on the proposed issue, set aside the entire assessment order with direction to pass fresh assessment order after taking into consideration as may have been already considered in the assessment order. We find that no such issue was considered by the ld. PCIT. 14. We are conscious of the fact that no specific notice is required to be issued by the ld. PCIT before setting aside the assessment order on any particular issue if the assessee is given opportunity of hearing on such proposed revision. Admittedly, in the present case, no other issue is examined nor any ITA No.200/Srt/2022 Shri Hari Gems Vs PCIT 11 opportunity on other issue for setting aside the assessment order was granted to the assessee nor the ld. PCIT has given his finding that as to why the remaining part of assessment order is erroneous and in so far as prejudicial to the interest of revenue, therefore, in our view, the ld. PCIT was not justified in setting aside the entire assessment order, particularly when the assessee agreed for addition/disallowance of the proposed issue identified by the ld. PCIT in his show cause. Hence, we quash the order of ld. PCIT passed under Section 263 of the Act, except on the direction to disallowed the deduction of ESI and PF contribution of employee, which was agreed by the assessee. In the result, grounds raised by the assessee in its appeal are allowed. 15. In the result, this appeal of assessee is allowed. Order pronounced in the open court on 12/10/2022 and the result was also placed on the Notice Board. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 12/10/2022 *Ranjan Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) By order 4. CIT 5. DR 6. Guard File Sr. Private Secretary, ITAT, Surat