M/s. Subhlabh Steels (P) Ltd., , Kolkata V. Principal CIT - 1, , Kolkata

ITA 2047/KOL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2345 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-01-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 28-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM BILASH MEENA
• Keywords: Business income; Opportunity of being heard; Principle of natural justice; Non compliance; Set aside
• Section: 143(3); 142(1); 143(2); 22; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A, BENC H KOLKATA BEFORE SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM ./ITA NO.2047/KOL/2018 ( / ASSESSMENT YEAR:2013-14) M/S SUBHLABH STEELS (P) LTD. 2 ND FLOOR, ROOM NO. 202, 1, BRITISH INDIA STREET, KOLKATA- 700069 VS. PCIT-1, KOLKATA ./ ./PAN/GIR NO.: AAECA 4597 P (APPELLANT) .. (RESPONDENT) APPELLANTBY : SHRI RAVI TULSIYAN, FCA RESPONDENT BY :SHRI RAM BILASH MEENA, CIT / DATE OF HEARING : 29/01/2020 /DATE OF PRONOUNCEMENT : 20/03/2020 / O R D E R DR. A.L. SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAI NING TO ASSESSMENT YEAR 2013-14, IS DIRECTED AGAINST THE ORDER PASSED BY TH E PR. COMMISSIONER OF INCOME TAX-1, KOLKATA UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 26/03/2018. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1. THAT THE LD. PRINCIPAL CIT-1, KOLKATA ON THE FAC TS AND CIRCUMSTANCES OF THE CASE AND IN LAW ERRED IN ASSUMING JURISDICTION U/S 263 O F THE ACT IN ORDER TO IMPOSE HIS OWN VIEWS ON THE A.O. ON THE SAME SET OF FACTS & EV IDENCES CONSIDERED BY THE A.O. BY HOLDING THAT THE ORDER PASSED BY THE A.O. U /S 143(3) OF THE ACT ON 09.02.2016 WAS ERRONEOUS INASMUCH AS IT WAS PREJUDI CIAL TO THE INTEREST OF REVENUE. M/S SUBHLABH STEELS (P) LTD. ITA NO.2047/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 2 22 2 2. THAT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. PR. CIT ERRED IN ASSUMING JURISDICTION U/S 263 OF THE ACT ON THE ALL EGED GROUND OF A.OS FAILURE TO EXAMINE THE ENTIRE TRADING OF GOODS IN ABSENCE OF B ILLS/CHALLANS FOR PURCHASES AND SALES IN SPITE OF THE FACT THAT THE A.O. AFTER PROP ER SCRUTINY REJECTED THE AUDITED BOOKS OF ACCOUNT, TREATED THE ENTIRE TRANSACTION AS PAPER TRANSACTION AND TOOK A PLAUSIBLE VIEW IN REDUCING THE GROSS LOSS OF RS.8,7 4,38,653/- DECLARED BY THE APPELLANT TO NIL. 3. THAT, THE LD. PR. CIT GROSSLY ERRED ON FACTS AND IN LAW IN INVOKING JURISDICTION U/S. 263 OF THE ACT AND REFERRING THE CASE BACK TO THE A.O. FOR FRESH EXAMINATION OF ESTIMATING THE NP AT 1% ON THE TURNOVER DECLARED BY THE APPELLANT SIMPLY BY DIFFERING WITH THE PLAUSIBLE VIEW TAKEN BY THE A.O. , EVEN THOUGH THE DISALLOWANCE OF LOSS MADE IN 143(3) ASSESSMENT IS ALREADY A SUBJ ECT MATTER OF APPEAL BEFORE THE LD. CIT(A) AND THE MATTER IS THUS DEBATABLE. 4. THAT, THE LD. PR. CIT FURTHER ERRED IN NOT APPRE CIATING THAT THE JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED BY THE A.O. WHILE TAKING A POSSIBLE VIEW IN THE MATTER AND FURTHERMORE WITHOUT APPLICAT ION OF MIND THE QUESTIONS/QUERIES RAISED IN THE NOTICE U/S. 142(1) OF THE ACT COULD NOT HAVE BEEN FORMULATED AND HENCE JURISDICTION INVOKED U/S. 263 OF THE ACT WAS BEYOND THE SANCTION OF LAW. 5. THAT, THE LD. PR. CIT ACTED BEYOND THE SCOPE OF PROVISIONS OF SEC.263 OF THE ACT IN ASSUMING THAT THE A.O. HAD TAKEN THE TRADING RES ULT AT NIL WITHOUT INVESTIGATION IN SPITE OF THE FACT THAT AFTER THOROUGH SCRUTINY T HE A.O. HAD REJECTED THE BOOK RESULTS AND TREATED THE ENTIRE PURCHASE AND SALE AS PAPER TRANSACTIONS AND HENCE DIRECTION TO ESTIMATE NP AT 1% ON NON-EXISTING PAPE R TRANSACTION IS WITHOUT ANY VALID REASON AND BASIS AND HENCE BAD IN LAW. 6. THAT, THEREFORE, AS THE ASSESSMENT ORDER U/S. 14 3(3) OF THE ACT IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE RE VENUE AND MOREOVER THE SAID ASSESSMENT IS ALREADY A SUBJECT MATTER OF APPEAL BE FORE THE LD. CIT(A) AND THE MATTER IS THUS DEBATABLE, THE IMPUGNED ORDER U/S.26 3 OF THE ACT OF THE LD. PR. CIT DIRECTING TO REFRAME THE ASSESSMENT AS PER HIS GUID ELINES ON THE SAME SET OF FACTS AND EVIDENCE ON RECORD IS LIABLE TO BE QUASHED AND THE APPELLANT BE GIVEN SUCH RELIEF(S) AS PRAYED FOR. 7.THAT THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, MODIFY, SUBSTITUTE, ADD TO, ABRIDGE AND/ OR RESCIND ANY OR ALL OF THE ABOVE GRO UNDS. 3. BRIEF FACTS QUA THE ISSUE ARE THAT THE ASSESSEE IS A RESIDENT COMPANY AND FILED ITS RETURN OF INCOME FOR THE A.Y. 2013-14 WHICH WAS ASS ESSED U/S. 143(3) ON 09.02.2016 AT A TOTAL INCOME OF RS.3,61,73,584/-. L ATER ON, LD PRINCIPAL COMMISSIONER OF INCOME-1, KOLKATA ( IN SHORT PCIT ) HAS EXERCISED HIS REVISIONAL JURISDICTION UNDER SECTION 263 OF THE INCOME TAX AC T ON THE FOLLOWING GROUNDS: FROM THE ASSESSMENT ORDER FOR THE YEAR 2013-14, IT IS SEEN THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WAS REJECTED AS BECAUSE THE ASSESSEE C OMPANY FAILED TO PRODUCE COPIES OF BILLS FOR PURCHASES AND SALES AS WELL AS COULD NOT PRODUCE ANYDOCUMENTS IN SUPPORT OF M/S SUBHLABH STEELS (P) LTD. ITA NO.2047/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 3 33 3 OTHER PAYMENTS, CHALLANS ETC. ACCORDINGLY, THE ENTI RETRADING OF GOODS COULD NOT EXAMINE AND WERE TREATED AS PAPER TRANSACTION/ ACCOMMODATIO N ENTRIES AND THE BUSINESS INCOME OF THE ASSESSEE COMPANY WAS COMPARED AS NIL. IT WAS ALSO SEEN FROM THE ASSESSMENT ORDER FOR THE A.Y.2011-12 DATED: 30 03.2014 OF THE SAID ASSESSES COMPANY THAT THE BOOKS OF ACCOUNTS WE RE ALSO REJECTED ON THE SAME GROUND AND THE BUSINESS INCOME WAS COMPUTED ON ESTIMATED B ASIS AT THE RATE 1% OF TOTAL SALES. THE ORDER FOR THE A.Y. 2011-12 WHICH HAS ALSO BEEN HELD SEVERAL TIMES THAT THE METHOD ADOPTED BY THE A.O. HAS TO BE FOLLOWED IN SUCCEEDIN G YEAR UNLESS THERE IS SIGNIFICANT CHANGE. ALTHOUGH NO SCENARIO HAS CHANGED, THE DEPAR TMENT COMPUTED THE BUSINESS INCOME ON ESTIMATE BASIS AT THE RATE 1% OF TOTAL SA LES I.E. OF RS. 7,68,30,34,008/- WHICH COMES TO RS. 7,68,30,340/-. IN RESULTING UNDERASSES SMENT OF INCOME OF RS. 7,68,30,008/ - AND UNDER CHARGE OF TAX OF RS. 2,29,27,604/-. BASED ON THE ABOVE GROUNDS THE JURISDICTIONAL PRINC IPAL COMMISSIONER OF INCOME TAX (PCIT) WAS SATISFIED THAT IT WAS A CASE OF ERRO NEOUS ASSESSMENT INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. TH EREFORE, LD PCIT ISSUED A SHOW CAUSE NOTICE U/S 263 OF THE ACT TO THE ASSESSEE. 4. IN RESPONSE TO THE SHOW NOTICE OF LD. PCIT U/S 2 63 OF THE ACT, THE ASSESSEE SUBMITTED WRITTEN SUBMISSION BEFORE HIM WHICH IS RE PRODUCED BELOW: THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING OF IRON & STEELS. FOR THE RELEVANT ASSESSMENT YEAR, RETURN OF INCOME WAS FILED BY THE ASSESSEE COMPANY ON 30/09/2013 AT A TOTAL INCOME OF NIL AND CARRIED FORWARD LOSS OFRS. 5,65,64,157/-. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY UN DER CASS AND ACCORDINGLY NOTICES U/S. 143(2) & U/S. 142(1) WERE SERVED ON TH E ASSESSEE. THEREAFTER, ON TRANSFER OF JURISDICTION OVER THIS C ASE TO THE DCIT , CIRCLE 1(2), NOTICE U/S. 142(1) ALONG WITH QUESTIONNAIRE WERE DU LY SERVED ON THE ASSESSEE. IN RESPONSE TO THE ABOVE, THE AR OF THE ASSESSEE COMPA NY APPEARED FROM TIME TO TIME AND PRODUCED DETAILS AND DOCUMENTS AS PER QUESTIONN AIRE ISSUED. FROM PERUSAL OF THE DETAILS FILED, THE AO ALLEGED T HAT ASSESSEE HAS MADE FAKE CLAIM OF INPUT TAX CREDIT. AGAIN, ON EXAMINATION OF THE ACCOUNTS OF THE RELEVA NT ASSESSMENT YEAR AND FROM PERUSAL OF THE RECORDS OF A.Y. 2011-12, WHEREIN THE BOOK OF ACCOUNTS OF THE ASSESSEE COMPANY WAS REJECTED AND THE PROFIT WAS CO MPUTED @1% OF TOTAL SALES ENGAGED IN THE SAME LINE OF BUSINESS, THE AO OBSERV ED THAT DURING THE RELEVANT YEAR ALSO THE ASSESSEE HAS FAILED TO PRODUCE COPY O F BILLS OF PURCHASE AND SALE OF GOODS TO EXAMINE THE ACTUAL PURCHASES AND SALES. TH E AO FURTHER HELD THAT NO LABOUR PAYMENT WAS MADE FOR LOADING AND UNLOADING O F GOODS AND NO TRANSPORTATION COST WAS CLAIMED BY ASSESSEE FOR INW ARD AND OUTWARD MOVEMENT OF GOODS. M/S SUBHLABH STEELS (P) LTD. ITA NO.2047/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 4 44 4 FINALLY, THE LD.AO ARRIVED AT THE CONCLUSION THAT I N ABSENCE OF BILLS, EVIDENCING THE PURCHASE AND SALE OF GOODS, THE ENTIRE TRADING OF GOODS COULD NOT BE EXAMINED, WHICHUNDER SUCH CIRCUMSTANCES WERE TO BE TREATED AS PAPER TRANSACTIONS. IN VIEW OF THE ABOVE AND IN VIEW OF THE FACT THAT S INCE BOTH THE PURCHASES AND SALES ARE BOGUS, THERE IS NO POINT OF MAKING AD HOC ADDITION AS DONE BY THE PREDECESSOR AO IN THE PRECEDING AY 2011-12 AGAINST WHICH THE ASSESSEE HAS ALREADY FILED AN APPEAL WHICH IS PENDING FOR DISPOS AL, THE LD.AO REJECTED THE ENTIRE TRADING RESULT OF THE ASSESSEE COMPANY AS DI SCLOSED IN ITS ACCOUNTS FOR THE RELEVANT ASSESSMENT YEAR AND THE RESULTANT LOSS CLA IMED FROM BUSINESS ACTIVITIES OF THE ASSESSEE WAS DISALLOWED, THEREBY COMPUTING THE BUSINESS INCOME OF THE ASSESSEE FROM TRADING ACTIVITY AS NIL. AS SUCH, IT IS CLEAR FROM THE ABOVE THAT THE LD.AO AFTER HAVING TAKEN NOTE OF THE DETAILS SUBMITTED IN COURSE OF THE ASSESSMENT PROCE EDING AND AFTER CONDUCTING PROPER ENQUIRY IN THIS REGARD, HAS COMPLETED THE AS SESSMENT THEREBY DISALLOWING THE ENTIRE LOSS CLAIMED FROM BUSINESS ACTIVITIES. 5. HOWEVER, THE LD. PCIT REJECTED THE CONTENTION OF THE ASSESSEE AND HELD AS FOLLOWS: 11. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN THE LIGHT OF THE AFORESAID DECISIONS OF HONBLE SUPREME COURT AN D HONBLE HIGH COURT, AND IN ACCORDANCE WITH THE AMENDMENT MADE IN SECTION 26 3 OF THE ACT WITH EFFECT FROM 01.06.2015, I HOLD THAT THE IMPUGNED ASSESSMENT ORD ER DATED 09.02.2016 PASSED BY THE A.O. IS ERRONEOUS IN SO FAR AS IT IS PREJUDI CIAL TO THE INTERESTS OF THE REVENUE. I FURTHER HOLD, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, THAT THE IMPUGNED ASSESSMENT ORDER DATED 09.02.2016 IS LIABLE TO SET-ASIDE. THEREFORE, I SET ASIDE THE SAID ASSESSMENT ORDER DI RECTING THE A.O. TO FRAME THE ASSESSMENT AFRESH AFTER CONSIDERING THE AFORESAID O BSERVATIONS, HONBLE SUPREME COURT AND HONBLE HIGH COURT DECISIONS AND AS PER L AW. 12. IN THE RESULT, THE ASSESSMENT ORDER U/S 143(3) DATED 09.02.2016 FOR A.Y. 2013- 14 IS SET-ASIDE TO THE FILE OF THE ASSESSING OFFICE R WITH A DIRECTION TO PASS A FRESH ASSESSMENT ORDER AFTER CONSIDERING THE AFORESAID OB SERVATIONS, AS PER LAW AND AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE A SSESSEE. 6. AGGRIEVED BY THE ORDER OF LD. PCIT, THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LD. COUNSEL, SHRI RAVI TULSIYAN, BEGINS BY P OINTING OUT THAT AFTER CONDUCTING PROPER ENQUIRY AND TAKING NOTE OF THE DE TAILS SUBMITTED BY THE ASSESSEE, THE A.O. HAD FRAMED THE ASSESSMENT ORDER HOLDING TH AT BOTH THE SALES AND PURCHASES WERE BOGUS.THE ENTIRE TRADING RESULT OF T HE ASSESSEE COMPANY AND THE RESULTANT LOSS CLAIMED BY THE ASSESSEE WAS DISALLOW ED. AS FAR AS ADDITION OF 1% OF M/S SUBHLABH STEELS (P) LTD. ITA NO.2047/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 5 55 5 TURNOVER DONE BY THE PREDECESSOR OF THE AO IN AY 20 11-12 IS CONCERNED, THE SAME WAS A SUBJECT MATTER OF APPEAL WHICH HAS STILL NOT BEEN DISPOSED OF. THE INITIATION OF PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 RELATING TO A.Y. 2011-12 WAS ALSO CHALLENGED BY ASSESSEE AS IT FAILE D TO MEET THE TWIN CONDITIONS OF THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE IN TEREST OF REVENUE. IN THE ASSESSEE`S CASE UNDER CONSIDERATION, THE AO HAS TAK EN ONE OF THE POSSIBLE VIEWS THEREFORE, ORDER PASSED BY AO U/S 143(3) OF THE ACT IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 8. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE HA S PRIMARILY REITERATED THE STAND TAKEN BY THE LD PCIT, WHICH WE HAVE ALREADY NOTED I N OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 9. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GON E THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCU MENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LDPCIT AND OTHER MATERIALS AVAILABLE ON RECORD. FIR ST, WE HAVE TO SEE WHETHER THE REQUISITE JURISDICTION NECESSARY TO ASSUME REVISION AL JURISDICTION IS THERE EXISTING BEFORE THE PR. CIT TO EXERCISE HIS POWER. FOR THAT, WE HAVE TO EXAMINE AS TO WHETHER IN THE FIRST PLACE THE ORDER OF THE ASSESSI NG OFFICER FOUND FAULT BY THE PRINCIPAL CIT IS ERRONEOUS AS WELL AS PREJUDICIAL T O THE INTEREST OF THE REVENUE. FOR THAT, LET US TAKE THE GUIDANCE OF JUDICIAL PRECEDEN CE LAID DOWN BY THE HONBLE APEX COURT IN MALABAR INDUSTRIES LTD. VS. CIT [2000 ] 243 ITR 83(SC) WHEREIN THEIR LORDSHIP HAVE HELD THAT TWIN CONDITIONS NEEDS TO BE SATISFIED BEFORE EXERCISING REVISIONAL JURISDICTION U/S 263 OF THE A CT BY THE CIT. THE TWIN CONDITIONS ARE THAT THE ORDER OF THE ASSESSING OFFI CER MUST BE ERRONEOUS AND SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN T HE FOLLOWING CIRCUMSTANCES, THE ORDER OF THE AO CAN BE HELD TO BE ERRONEOUS ORDER, THAT IS (I) IF THE ASSESSING OFFICERS ORDER WAS PASSED ON INCORRECT ASSUMPTION OF FACT; OR (II) INCORRECT APPLICATION OF LAW; OR (III)ASSESSING OFFICERS ORD ER IS IN VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE; OR (IV) IF THE ORDER IS PASSED BY THE ASSESSING OFFICER WITHOUT APPLICATION OF MIND; (V) IF THE AO HAS NOT INVESTIG ATED THE ISSUE BEFORE HIM; THEN M/S SUBHLABH STEELS (P) LTD. ITA NO.2047/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 6 66 6 THE ORDER PASSED BY THE ASSESSING OFFICER CAN BE TE RMED AS ERRONEOUS ORDER. COMING NEXT TO THE SECOND LIMB, WHICH IS REQUIRED T O BE EXAMINED AS TO WHETHER THE ACTIONS OF THE AO CAN BE TERMED AS PREJUDICIAL TO THE INTEREST OF REVENUE. WHEN THIS ASPECT IS EXAMINED ONE HAS TO UNDERSTAND WHAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES (SUPRA) HELD THAT THIS PHRASE I.E. PREJUDICIAL TO THEINTEREST OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. THEIR LORDSHIP HELD THAT IT HAS TO BE REMEMBERED THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF ASS ESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVEN UE. WHEN THE ASSESSING OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND I T HAS RESULTED IN LOSS TO THE REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE AS SESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT B E TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. 10. TAKING NOTE OF THE AFORESAID DICTUM OF LAW LAID DOWN BY THE HONBLE APEX COURT, LET US EXAMINE WHETHER ORDER PASSED BY THE A O IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IT IS ABUNDANTLY CLEAR THAT RECOURSE TO SECTION 263(1) OF THE INCOME TAX ACT, 1961CANNOT BE TAKEN BY THE PRIN CIPAL COMMISSIONER IF EITHER OF THE ABOVE CONDITIONS ARE NOT SATISFIED, I.E. IF THE IMPUGNED ASSESSMENT ORDER IS ERRONEOUS BUT NOT PREJUDICIAL TO THE INTEREST OF TH E REVENUE; OR IF THE IMPUGNED ASSESSMENT ORDER IS PREJUDICIAL TO THE INTEREST OF THE REVENUE BUT NOT ERRONEOUS. WE NOTE THAT FINANCE ACT, 2015 INSERTED EXPLANATIO N 2 IN THE SECTION 263 OF THE ACT W.E.F 01-06-2015, WHICH READS AS FOLLOWS: [EXPLANATION 2.- FOR THE PURPOSES OF THIS SECTION , IT IS HEREBY DECLARED THAT AN ORDER PASSED BY THE AO SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, IF IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER,- I) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VER IFICATION WHICH SHOULD HAVE BEEN MADE; II) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQ UIRING INTO THE CLAIM; M/S SUBHLABH STEELS (P) LTD. ITA NO.2047/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 7 77 7 III) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH ANY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; OR IV) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WITH AN Y DECISION WHICH IS PREJUDICIAL TO THE ASSESSEE, RENDERED BY THE JURISD ICTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OT HER PERSON.] FROM A BARE READING OF THE ABOVE, IT STANDS CLEAR T HAT IF AN ASSESSMENT ORDER IS PASSED IN NON COMPLIANCE TO ANY OF THE AFOREMENTION ED CLAUSES OF EXPLANATION 2 TO SECTION 263(1) OF THE INCOME TAX ACT, 1961 THE ASSE SSMENT ORDER SO PASSED BY THE LD. AO SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN LIGHT OF THE ABOVE, LD COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE LD. PCIT HAD ISSUED THE SHOW CAUSE NOTICE IN ASSESSEE`S CASE, SEEKING TO INVOKE THE POWERS OF REVISION PROVIDED U/S 263(1) OF THE INCOM E TAX ACT, 1961ON THE ALLEGED PREMISE THAT IN THE ASSESSEE'S CASE WHILE PASSING T HE ASSESSMENT ORDERS FOR BOTH A.Y.S. 2013-14 AND 2011-12, BOOKS OF ACCOUNTS OF TH E ASSESSEE WERE REJECTED AS THE ASSESSEE FAILED TO PRODUCE COPIES OF BILLS FOR PURCHASES AND SALES AS WELL, AND ASSESSEE COULD NOT PRODUCE ANY DOCUMENTS IN SUPPORT OF OTHER PAYMENTS, CHALLANS ETC., HOWEVER FOR THE A.Y. 2011-12 BUSINESS INCOME WAS COMPUTED ON ESTIMATED BASIS @ 1% OF TOTAL SALES WHEREAS FOR THE A.Y. 2013 -14 BUSINESS INCOME WAS COMPUTED AS NIL. IT WAS THUS ALLEGED THAT SINCE THERE IS NO CHANGE I N SCENARIO BETWEEN A.Y. 2011-12 AND A.Y. 2013-14, THEREFORE IN THEASSESSEE'S CASE F OR THE A.Y. 2013-14, THE AO SHOULD HAVE COMPUTED BUSINESS INCOME @ 1% OF SALES AMOUNTING TO RS.768,30,34,008/- WHICH COMES TO RS.7,68,30,340/-. ON THE BASIS OF THE ABOVE ALLEGED REASONING, THE LD . PCIT PASSED THE IMPUGNED ORDER U/S 263(1) OF THE INCOME TAX ACT, 1961 ON 26. 03.2018, SETTING ASIDE THE ASSESSMENT ORDER PASSED IN THE ASSESSEES CASE FOR THE RELEVANT A.Y. ON 09.02.2016 FOR A FRESH ASSESSMENT BY OBSERVING THAT THE AO HAS FAILED TO MAKE ANY ENQUIRY IN THE ASSESSEES CASE WITH REGARD TO REJECTION OF BOO KS OF ACCOUNTS AND TREATMENT OF BUSINESS INCOME IN LINE WITH THE ASSESSMENT ORDER P ASSED FOR THE A.Y. 2011-12 RENDERING THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 09.02.2016 AS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF THE REVENUE. M/S SUBHLABH STEELS (P) LTD. ITA NO.2047/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 8 88 8 11. WE NOTE THAT PAGE 3, PARA 6 OF THE ASSESSMENT O RDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 09,02.2016 BY THE LD. AO FO R THEA.Y. 2013-14, WHEREIN THE LD. AO REFERRING TO THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 FOR THE A.Y, 2011-12HELD AS FOLLOWS: FURTHER ON EXAMINATION OF RECORD OF PRECEDING YEAR VIZ: ASSESSMENT ORDER 2011-12 IT OBSERVED THAT DEPUTY COMMISSIONER OF SALES TAX BURE AU (INVESTIGATION)(UNIT-1) ON DATED 4.3.2014 MADE INVESTIGATION AND FOUND HUGE QU ANTITY OF INPUT TAX CREDIT CLAIMED BY DEALER ON PURCHASE WHICH WERE INVALID AS PER THE PROVISION OF WB VAT ACT 2003 ON ACCOUNT, TRANSPORT AGENCY WAS FAKE, VEHICLE USED FO R TRANSPORTATION IS FAKE, TAX INVOICES RELATED TO DEALERS PURCHASE WERE FOUND INVALID, BOO K ADJUSTMENT NO PAYMENT WAS MADE. MOST OF THE TRANSACTION ARE MERELY PAPER TRANSACTIO N. THE ENQUIRY WAS ALSO MADE BY THE INCOME TAX DEPARTMENT AND IT GATHERED THAT SOME PAR TIES ARE NOT EXISTING, TRANSPORT AGENCY ARE FAKE, THEREFORE THE BOOKS OF ACCOUNTS OF ASSESSEE COMPANY WAS REJECTED AND PROFIT WAS COMPUTED @ 1% OF TOTAL SALES ENGAGED IN THE SAME LINE OF BUSINESS. FROM THE ABOVE IT IS EVIDENT THAT THE LD. AO WHILE PASSING THE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 09.02.201 6 FOR THE RELEVANT ASSESSMENT YEAR HAD DULY REFERRED AND CONSIDERED THE ASSESSMEN T ORDER PASSED IN THE ASSESSEES CASE FOR THE A.Y. 2011-12. HAVING OBSERVED THE ABOVE IN PAGE 3, PARA 6 OF THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 09.02.2016 FO R THE RELEVANT ASSESSMENT YEAR, THE LD. AO FURTHER OBSERVED THE FOLLOWING IN CONTINUATION IN PAGE 4 OF THE SAID ASSESSMENT ORDER: DURING THE YEAR UNDER CONSIDERATION NO SCENARIO HA S CHANGED. DURING THE YEAR ASSESSEE PURCHASED AND SOLD IRON & METAL, ARMED CABLES AND C LAIMED DIRECT TRADING LOSS OF RS. 8,74,38,653/- ON TRADING OF GOODS. THE ASSESSEE COM PANY HAS NOT PRODUCED COPY OF BILLS FOR PURCHASE AND SALES OF SUCH GOODS. .. FROM THE LIST OF DEBTOR SUBMITTED BY ASSESSEE IT IS SEEN THAT MOST OF GOODS SOLD TO TWOGROUP, VIZ. SPS GROUP 224A, AJC BOSE ROAD KOL KATA & BHOLANATH GROUP 1, BRITISH INDIA STREET, KOLKATA. NO ACTUAL PAYMENT WA S RECEIVED AND MADE BUT MOST OF ENTRIES ARE MADE THROUGH ADJUSTMENT ENTRIES OF TRAN SFER OF BALANCE TO DEBTOR/CREDITOR/ADVANCE. FROM THE AFORESAID ADJUSTM ENT ENTRIES IN THE BOOKS OF ACCOUNTS IT IS DEAR THAT NO ACTUAL PURCHASE & SALE WAS MADE BUT ACCOMMODATION ENTRY WITH AFORESAID TWO GROUP WAS MADE ON PAPER ONLY AND WITH OTHER TWO PARTIES. THE ASSESSEE EVEN FAILED TO FURNISH ANY CHALLAN FOR TRANSPORTATI ON OF IRON & METAL PRODUCT AND ARMED CABLE TO ASSESSEE GODOWN DESTINATION AND FROM ASSES SEE GODOWN. THE ASSESSEE COMPANY NOT DEPLOYED ANY STAFF, LABOUR, NOR CLAIMED ANY ELE CTRICITY CHARGES, TELEPHONE CHARGES, TRAVELLING & CONVEYANCE ETC.. WHICH CLEARLY SIGNIFI ES THAT ASSESSEE COMPANY NOT ENGAGED IN ANY ACTUAL TRADING ACTIVITY.. M/S SUBHLABH STEELS (P) LTD. ITA NO.2047/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 9 99 9 THE ENTIRE TRADING RESULT OF ASSESSEE C OMPANY DISCLOSED HAS BEEN REJECTED AND THE LOSS CLAIMED FROM BUSINESS AC TIVITIES OF ASSESSEE COMPANY HAS BEEN DISALLOWED AND THEREBY BUSINESS INCOME OF ASSESSEE COMPANY FROM TRADING ACTIVITY COMPUTED AS NIL. THE ABOVE FINDING OF THE ASSESSING OFFICER ESTABLIS HES BEYOND DOUBT THAT THE LD. AO HAD CONDUCTED DETAILED ENQUIRIES AND INVESTIGATI ONS BEFORE PASSING THE ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 09.02.2016 IN THE ASSESSEES CASE FOR THE RELEVANT ASSESSMENT YEAR AN D THAT TOO IN LIGHT OF THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE INCOME TA X ACT, 1961 IN THE ASSESSEES CASE FOR THE A.Y. 2011-12. THE LD. AO ON EXAMINATIO N OF THE ASSESSEES ACCOUNTS OF THE RELEVANT ASSESSMENT YEAR AND FROM PERUSAL OF THE RECORDS OF A.Y. 2011-12, WHEREIN THE BOOK OF ACCOUNTS OF THE ASSESSEE COMPAN Y WAS REJECTED AND THE PROFIT WAS COMPUTED @1% OF TOTAL SALES ENGAGED IN THE SAME LINE OF BUSINESS, OBSERVED THAT DURING THE RELEVANT YEAR ALSO THE ASSESSEE HAS FAILED TO PRODUCE COPY OF BILLS OF PURCHASE AND SALE OF GOODS TO EXAMINE THE ACTUAL PU RCHASES AND SALES. THE AO FURTHER HELD THAT NO LABOUR PAYMENT WAS MADE FOR LO ADING AND UNLOADING OF GOODS AND NO TRANSPORTATION COST WAS CLAIMED BY ASSESSEE FOR INWARD AND OUTWARD MOVEMENT OF GOODS. FINALLY, THE LD.AO ARRIVED AT TH E CONCLUSION THAT IN ABSENCE OF BILLS EVIDENCING THE PURCHASE AND SALE OF GOODS, THE ENTIRE TRADING OF GOODS COULD NOT BE EXAMINED, WHICH UNDER SUCH CIRCUMSTANC ES WERE TO BE TREATED AS PAPER TRANSACTIONS, IMPLYING THAT THERE WAS NEITHER ANY SALE NOR PURCHASE. THEREFORE, THE LD. AO HAD RIGHTLY ASSESSED THE BUSI NESS INCOME AT NIL SINCE NO INCOME CAN ARISE OUT OF NON EXISTENT SALES AND PURC HASES. THEREFORE, ORDER PASSED BY THE AO SHOULD NOT BE ERRONEOUS. 12. WE NOTE THAT ANOTHER STAND OF THE LD PCIT WAS T HAT THAT SUFFICIENT/PROPER ENQUIRIES WERE NOT CONDUCTED BY THE LD. AO DURING T HE ASSESSEES ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 FOR THE RELEVANT ASSESSMENT YEAR. WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE HELD TO BE AT FAULT AND SUBJECTED TO REVISION PROCEEDINGS U/S 263(1) OF THE INCOME TAX ACT, 1961F OR INADEQUATE ENQUIRY' BEING CONDUCTED BY THE LD. AO.IN OTHER WORDS, FRESH ENQUI RY CANNOT BE CONDUCTED ON COMPLETED ASSESSMENTS ON THE PREMISE THAT THE ENQUI RIES AND INVESTIGATIONS M/S SUBHLABH STEELS (P) LTD. ITA NO.2047/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 1 11 10 00 0 CONDUCTED DURING ASSESSMENT WERE NOT PROPER/INCOMPL ETE/INADEQUATE. FOR THAT WE RELY ON THE JUDGMENT OF THE HONBLE DELHI HIGH COUR T IN THE CASE OF COMMISSIONER OF INCOME-TAX VS. SUNBEAM AUTO LTD. RE PORTED IN [2011] 332 ITR 0167-(DEL), WHEREIN IT WAS HELD AS FOLLOWS: THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS N OT REQUIRED TO GIVE A DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC . WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION HA S TO BE SEEN. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCAS ION TO THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 OF THE INCOME-TAX ACT, 196 1, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF LACK OF INQUIRY THAT SUCH A COURSE OF ACTION WOULD BE OPEN.AN ORDER CANNOT BE TERMED ERRONEOUS U NLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME-TAX OFFICER ACTING IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, IT CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSION ER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABOR ATELY. SECTION 263 DOES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMI SSIONER FOR THAT OF THE INCOME-TAX OFFICER WHO PASSED THE ORDER UNLESS THE DECISION IS HELD TO BE ERRONEOUS. WHERE THE INCOME-TAX OFFICER HAS EXERCISED THE QUASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION SUCH A CONCLUS ION CANNOT BE FOUND TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATIS FIED WITH THE CONCLUSION. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION A LESSER TAX THAN WHAT WA S JUST HAS BEEN IMPOSED. ON THE IDENTICAL FACTS, THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF GRASIM INDUSTRIES LTD. VS. CIT REPORTED IN (2010) 321 ITR 0092 (BOM) HELD AS FOLLOWS: THE ABOVE JUDICIAL PRECEDENTS CLARIFY THAT IF A QU ERY WAS RAISED AT THE TIME OF ASSESSMENT AND THE SAME WAS RESPONDED TO BY THE ASS ESSEE WOULD NOT LEAD TO THE CONCLUSION THAT THE AO HAS NOT APPLIED HIS MIND TO RENDER THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. ON THE IDENTICAL FACTS OUR VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. LEISURE WEAR EXPORTS P VT. LTD. REPORTED IN (2012) 341 ITR 166 (DELHI)WHEREIN IT WAS HELD AS FOLLOWS: THE POWER OF REVISION IS NOT MEANT TO BE EXERCISED FOR THE PURPOSE OF DIRECTING THE ASSESSING OFFICER TO HOLD ANOTHER INVESTIGATION WIT HOUT DESCRIBING AS TO HOW THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS. FROM THIS IT AL SO FOLLOWS THAT WHERE THE ASSESSMENT ORDER HAS BEEN PASSED BY THE ASSESSING OFFICER AFTE R TAKING INTO ACCOUNT THE ASSESSEE'S SUBMISSIONS AND DOCUMENTS FURNISHED BY HIM AND NO M ATERIAL WHATSOEVER HAS BEEN BROUGHT ON RECORD BY THE COMMISSIONER WHICH SHOWED THAT THERE WAS ANY DISCREPANCY OR FALSITY IN EVIDENCE FURNISHED BY THE ASSESSEE, THE ORDER OF THE ASSESSING OFFICER CANNOT BE SET ASIDE FOR MAKING DEEP INQUIRY ONLY ON THE PRESU MPTION AND ASSUMPTION THAT SOMETHING NEW MAY COME OUT. ' M/S SUBHLABH STEELS (P) LTD. ITA NO.2047/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 1 11 11 11 1 13. WE NOTE THAT THE ASSESSING OFFICER HAS CONSIDERED T HE DOCUMENTS AND SUBMISSIONS MADE BY ASSESSEE AND AO HAS ALSO CONSID ERED THE ASSESSMENT ORDER FOR A.Y. 2011-12 PASSED IN ASSESSEE`S CASE AND TAKI NG INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES THE AO HAS ADOPTED ONE OF THE COU RSES PERMISSIBLE IN LAW AND EVEN IF IT HAS RESULTED IN LOSS TO THE REVENUE, THE SAID DECISION OF THE ASSESSING OFFICER CANNOT BE TREATED AS ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE AS HELD BY HONBLE SUPREME COURT IN MALABAR INDUSTR IES LTD. VS. CIT (SUPRA). SINCE THE ORDER OF THE ASSESSING OFFICER CANNOT BE HELD TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE, IN THE FACTS AND CIRCUMSTANCES NARRATED ABOVE, THE USURPATION OF JURISDICTION EXERCISING RE VISIONAL JURISDICTION BY THE PRINCIPAL CIT IS NULL IN THE EYES OF LAW AND, TH EREFORE, WE ARE INCLINED TO QUASH THE VERY ASSUMPTION OF JURISDICTION TO INVOKE REVIS IONAL JURISDICTION U/S 263 BY THE PRINCIPAL CIT. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT ON 20.03.2020 SD/- ( S.S.GODARA ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; / DATE: 20/03/2020 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. M/S SUBHLABH STEELS (P) LTD. 2. PCIT-1, KOLKATA. 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATABENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES M/S SUBHLABH STEELS (P) LTD. ITA NO.2047/KOL/2018 ASSESSMENT YEAR:2013-14 P PP PA AA AG GG GE EE E | || | 1 11 12 22 2