EVON TECHNOLOGIES PVT LTD, Dehradun V. ITO Ward 1(3), Dehradun

ITA 2142/DEL/2019

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5967 (ITAT-DEHRADUN)
• Duration Of Justice: 3 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 10-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Set aside
• Section: 263; 143(3); 142(1); 115JB; 13

Judgement Text

1 ITA No. 2142/Del./2019 Evon Technologies P. ltd. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘DB’ : NEW DELHI) BEFORE SH. R.K.PANDA, ACCOUNTANT MEMBER AND SH. ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.2142/Del/2019 (Assessment Year : 2014-15) EVON TECHNOLOGIES (P) LTD. IT PARK, SAHASTRADHARA ROAD, DEHRADUN PAN – AACCE1863G Vs. ITO Ward 1(3) Dehradun (APPELLANT) (RESPONDENT) Assessee by Sh. S.K.Matta, CA Revenue by Shri N.S. Jangpangi, CIT, DR Date of hearing: 21.03.2022 Date of Pronouncement: 28.03.2022 ORDER PER ANUBHAV SHARMA, JM: The present appeal is preferred by the assessee against order dated 20.02.2019 u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as “The Act) passed by Principal Commissioner of Income Tax, Dehradun ( hereinafter 2 ITA No. 2142/Del./2019 Evon Technologies P. ltd. referred as Ld. Revisional Authority) in regard to the assessee who had filed return of income for assessment year 2014-15 declaring NIL income after deduction u/s 80-IC amounting to Rs. 1,48,06,156/- and it was selected for compete scrutiny for the reason of mismatch in amount paid to related persons u/s 40A(2)(b) reported in Audit Report and large deduction claimed under Chapter VI-A. Income Tax Officer, Ward 1 (3), Dehradun (hereinafter referred to as the “Ld. AO”). Considering the written submissions, requisite information/ details called vide questionnaire / notice u/s 142(1) and Ld AO had allowed claim of deduction u/s 80-IC of Rs. 1,48,06,156/-. 2. However, the Ld. Revisional Authority considered the assessee not eligible for deduction u/s 80-IC of the Income Tax Act as assessee was engaged in computer programming and Data processing. Further Apart from the above. Further it has also been observed that no independent verification in respect of sundry creditors have been made, which should have been made. As per records, initial date of production is in March 2011 (FY 2010-11) as mentioned in DIC Ack. Part II and in Form-II for DIC registration. The assessee itself mentioned date of production started in March 2011 but in Auditor’s certificate Form 10CCB, it is mentioned as dated 01.04.2011 (FY 2011- 12) which seems to have been accepted by the AO as reflects from the office note to the assessment order dated 08.09.2016. Ld Revisional authority also observed that from the records, it also emerged that one of the sister concern of the assessee M/s Evon Technologies (Firm) is also operating at the same address, as such the AO has not examined the sales of the assessee from angle of segregation of transactions or assets. Besides, in the assessment order, the AO has charged tax as per provisions of Section 115JC of the Act, whereas it should have been as per Section 115 JB of the Act. 3 ITA No. 2142/Del./2019 Evon Technologies P. ltd. 2.1 The Ld Revisional authority further observed that one of the reasons for selection of case under Complete scrutiny through Computer Assisted Scrutiny Selection (CASS) was ‘Mismatch in amount paid to related persons u/s 40A(2)(b) reported in Audit Report and ITR. During the assessment proceedings, the AO verified the issue to the extent of mismatch only, whereas being the case under complete scrutiny the AO should have also examined the admissibility of such expenses as per the provisions of the Income Tax Act, 1961 which was not done. 2.2 Thus finding the assessment order u/s 143(3) dated 08.09.2016 passed by the Ld. AO to be erroneous and also prejudicial to the interest of the direction were issued to AO to examine the eligibility of deduction u/s 80 IC for activity of assessee in view of Excise classification 84.71 and sub class 30006/7 amongst other issues. 3. The assessee has come in appeal before the Tribunal raising following grounds of appeal; “1. The Ld. Principal Commissioner of Income Tax , Dehradun has erred in passing an order u/s 263 of the Income Tax Act, 1961. 2. The order passed is arbitrary, against the provision of law and facts of the case. 3. Any other ground arising at the time of or before hearing of appeal.” 4. Heard the arguments. On behalf of the appellant it was submitted that the Ld. Assessing Officer has raised all the relevant queries to which satisfactory replies were filed by the assessee and there was no case of lack of inquiry which justified invocation of power u/s 263 of the Act. Ld. AR submitted that by notice dated 08.07.2016 at query no. 15 the Ld. AO had asked assessee to justify claim of 4 ITA No. 2142/Del./2019 Evon Technologies P. ltd. deduction under Chapter 6A with complete documentary evidence to which by reply dated 05.08.2016 the submissions were made. It was submitted that further in compliance of order sheet entry copies of bills of additions in fix assets, list of debtors and note on justification of claim of deduction u/s 80-IC of the Act were submitted. Ld. AR submitted that the Ld. Revisional Authority has fallen in error while holding that assessee company is engaged in computer programming and data processing which is not covered for deduction u/s 80-IC of the Act. Lastly . it was submitted by Ld. AR that only because the Ld. Revisional Authority had a possible different view the same was not sufficient for interference by invoking provisions of Section 263 of the Act. In this context, the judgment of Hon’ble Supreme Court of India in CIT vs. Amitabh Bachchan 2016, 384 ITR 200 (SC) was relied. 4.1 On the other hand, Ld. CIT-DR submitted that there is no illegality in the impugned order and he stands with the order passed by Ld. Revisional Authority. 5. After considering the arguments and the matter on record it can be observed that grounds raised in appeal are common in nature and arise from the question of exercise of revisional powers by the PCIT. It can be observed from the paper book that in consequence to notice u/s 142(1) of the Act the Ld. AO had raised query on as many as 19 points and the same were replied substantially by relevant information and documents on 05.08.2016 ( page 225 of the paper book). Detail note was submitted on justification of claim of deduction u/s 80-IC of the Act submitting that the nature of business activity of the assessee falls in category 13 of Part C to Schedule 14 of the Act. The reply dated 05.08.2016 shows that at Sl. No. 7 list of trade payable of Rs. 10,19,811/- was submitted before the Assessing Officer. 6. However, the Ld. Revisional Authority has interpreted the provisions of description of activity as mentioned in Sl. No. 13 of Part C of Schedule XIV of 5 ITA No. 2142/Del./2019 Evon Technologies P. ltd. the Act in a manner as it was approached for interpretation of the scope of this provision in context to the nature of business activity. Which is not the purpose of vesting revisional powers under the Act. A favourable interpretation given by the ld. Assessing Officer in favour of the assessee based upon consideration of the response of assessee cannot justify use of revisional powers and justify another interpretation. 7. Further, it is settled position of law that for the purpose of exercising jurisdiction u./s. 263 of the Act, the conclusion that the order of the AO is erroneous and prejudicial to the interest of the revenue has to be preceded by some minimal enquiry. If the Revisional authority is of the view that the AO did not undertake any enquiry, it becomes incumbent on the Revisional Authority to conduct such enquiry. If the Revisional Autjhority does not conduct such basic exercise then the he is not justified in setting aside the order u/s. 263 of the Act. Reliance can be placed for this on the judgement of Hon’ble Delhi High Court in PCIT Vs. Delhi Airport Metro Express Private Limited vide ITA No.705/2017 order dated 05.09.2017 as relied by Coordinate bench of Delhi ITAT in M/S. Dwarkadhis Buildwell Pvt. vs Cit, Hisar vide ITA No.3097/Del/2014 decided on 1 July, 2019. 8. However, it appears from the record that when the show cause notice u/s 263 of the Act was issued the Ld. Revisional Authority had then merely raised query seeking explanation from assessee to satisfy how the business of computer programming, data processing entitles benefit of deduction u/s 80- IC of the Act. But without any further query from the assessee or inquiries on his own part made following observations in para 2.6 and 2.7 with regard to disputed questions of fact, for which no show cause was issued :- 6 ITA No. 2142/Del./2019 Evon Technologies P. ltd. “2.6 Apart from the above, it has also been observed that no independent verification in respect of sundry creditors have been made, which should have been made. As per records, initial date of production is in March 2011 (FY 2010-11) as mentioned in DIC Ack. Part II and in Form-II for DIC registration the assessee itself mentioned date of production started in March 2011 but in Auditor’s certificate Form 10CCB, it is mentioned as dated 01.04.2011 (FY 2011-12) which seems to have been accepted by the AO as reflects from the office note to the assessment order dated 08.09.2016. From the records, it also emerged that one of the sister concern of the assessee M/s. Evon Technologies (Firm) is also operating at the same address as such the AO has not examined the sales of the assessee from angle of segregation of transactions or assets. Besides, in the assessment order, the AO has charged tax as per provisions of Section 115JC of the Act, whereas it should have been as per Section 115JB of the Act. 2.7 One of the reasons for selection of case under Complete scrutiny through Computer Assisted Scrutiny Selection (CASS) was ‘Mismatch in amount paid to related persons u/s 40A(2)(b) reported in Audit Report and ITR. During the assessment proceedings, the AO verified the issue to the extent of mismatch only, whereas being the case under complete scrutiny the AO should have also examined the admissibility of such expenses as per the provisions of the Income Tax Act, 1961 which was not done.” 9. In the case in hand the Ld Revisional Authority has done no homework on any aspect for which further enquiry was expected from the ld. AO but restricted to interpretation of relevant entry of nature of business activity and held that enquiry done by Ld. AO in “complete scrutiny” proceedings were not satisfactory. In fact specifically with regard to observations made in para 2.7, as reproduced above, it can be observed that in notice dated 8/7/16 the Ld. AO had specifically put a query no (xvii) “ Furnish details of amounts paid to related persons covered u/s 40A(2)(b) and furnish a comparative chart of the same shown in the Balance Sheet and in Audit Report.” This certainly included admissibility of such expenses as per the provisions of the Act. To which the assessee in letter dated 5/8/16 had 7 ITA No. 2142/Del./2019 Evon Technologies P. ltd. given details of payments which were considered by ld. AO while passing assessment order. Ld. Revisional authority has not enquired and discussed a word as to how any of these expenses were not admissible and concluded that the enquiry conducted by Ld. AO was not satisfactory. 10. Thus, the bench is of the considered view that Ld. Revisional Authority exceeded its jurisdiction vested u/s 263 of the Act. Accordingly the appeal is allowed and the impugned order dated 20.02.2019 of the ld. Revisional Authority is set aside. Order pronounced and signed in open court on this 28 th day of March, 2022. Sd/- Sd/- (R.K.PANDA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 28 .03.2022 *Binita, SR.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI