Narendra Kumar Sahoo, Dhenkanal V. Principal CIT-2, Bhubaneswar

ITA 231/CTK/2019

AI Insights

This case involves an appeal by Sri Narendra Kumar Sahoo against the order passed under section 263 of the Income Tax Act by the CIT-2, Bhubaneswar, concerning the assessment year 2014-15. The original assessment was a 'Limited Scrutiny assessment' due to discrepancies between the assessee's bank deposits and reported sales. The CIT invoked section 263, directing the Assessing Officer to consider the capital required for the turnover from scrap sales, which was not part of the limited scrutiny. The tribunal found that the CIT's order lacked proper verification and that the Assessing Officer had already considered all relevant aspects in his assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300379 (ITAT-CUTTACK)
• Duration Of Justice: 3 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-06-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 09-07-2019
• Other Referred Cases: Pr. CIT vs Orissa State Police Housing & Welfare Corporation Ltd., Pr. CIT vs Shark Mines and Minerals Pvt Ltd., Surjit Motors vs ITO, ACIT vs Shubham Construction
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 207

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BEFORE AND Sri Narendra Kumar Sahoo, At/PO: Gandia, Dist: Denkanal. PAN/GIR No. (Appellant Per Bench This is an appeal filed by the assessee ag the Act passed by the ld CIT assessment year 2. Shri P.K.Mishra, ld AR appeared for the assessee and Shri M.K.Gautam, ld Pr. CIT (OSD) appeared for the revenue. 3. It was submitted by ld AR that in this case there is a delay of 19 days in filing the appeal, IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK (Through virtual hearing) BEFORE S/SHRI GEORGE MATHAN, JUDICIAL AND RAJESH KUMAR, ACCOUNTANT MEMBER ITA No.231/CTK/2019 Assessment Year : 2014-15 Sri Narendra Kumar Sahoo, At/PO: Gandia, Dist: Vs. Income Tax Officer, Dhenkanal Ward, Dhenkanal PAN/GIR No.BGCPS 4276 B (Appellant) .. ( Respondent Assessee by : Shri P.K.Mishra, AR Revenue by : Shri M.K.Gautam, Pr. CIT (OSD) Date of Hearing : 26 /0 Date of Pronouncement : 26/0 O R D E R This is an appeal filed by the assessee against the order u/s.263 of the Act passed by the ld CIT-2, Bhubaneswar dated assessment year 2014-15. Shri P.K.Mishra, ld AR appeared for the assessee and Shri M.K.Gautam, ld Pr. CIT (OSD) appeared for the revenue. It was submitted by ld AR that in this case there is a delay of 19 days in filing the appeal, for which, an affidavit has been filed explaining the Page1 | 6 IN THE INCOME TAX APPELLATE TRIBUNAL, JUDICIAL MEMBER , ACCOUNTANT MEMBER Income Tax Officer, Dhenkanal Ward, Dhenkanal Respondent) P.K.Mishra, AR Pr. CIT (OSD) 06/2023 /06/2023 ainst the order u/s.263 of dated 26.3.2019 for the Shri P.K.Mishra, ld AR appeared for the assessee and Shri M.K.Gautam, ld Pr. CIT (OSD) appeared for the revenue. It was submitted by ld AR that in this case there is a delay of 19 days for which, an affidavit has been filed explaining the ITA No.231/CTK/2019 Assessment Year : 2014-15 Page2 | 6 reasons as being the illness of the counsel of the assessee. The affidavit filed by the assessee has not been found to be false. Consequently, the delay in filing the appeal is condoned and the appeal is being disposed of on merits. 4. It was submitted by ld AR that the original assessment in the case of the assessee came to be completed u/s.143(3) on 30.12.2016. It was the submission that the assessment was a ‘Limited Scrutiny assessment’ as has been specifically mentioned in page 2 para 2 of the assessment order. It was the submission that the assessee is a dealer in retail sale of IMFL and scrap business. During the relevant assessment year, the assessee had sold scrap in the form of empty bottle, empty cartoons and other scrap materials to an extent of Rs.27,85,785/-. It was the submission that the total turnover of the assessee was shown at Rs.5.03 crores whereas the sales of the assessee was only Rs.4.75 crores. It was the submission that it was on account of the cash deposits in the saving bank account being more than the turnover, the limited scrutiny had been invoked. It was the submission that the amount of Rs.27,85,785/- being the difference between the total turnover and the sales disclosed was the receipts from the sale of scraps. It was the submission that the assessee had in the course of assessment intimated the Assessing Officer that the assessee had purchased scrap of Rs.26,03,287/- and had sold the same at Rs.27,85,785/- and the transaction was not routed through the regular books of account maintain ITA No.231/CTK/2019 Assessment Year : 2014-15 Page3 | 6 by the assessee. The Assessing Officer had consequently estimated the income of the assessee on the said sales of Rs.27,85,785/- by applying the same G.P. rate as was disclosed by the assessee in its audited report. It was the submission that the actual profit between the purchase and sale was to an extent of Rs.1,82,498 (Rs.27,85,785 – Rs.26,03,287/- but by estimating the income of the assessee, the addition of Rs.2,81,921/- had been adopted by the Assessing Officer. It was the submission that the ld CIT was of the view that the capital required in respect of the said turnover of Rs.27,85,785/- had not been considered by the Assessing Officer and invoked his powers u/s.263 and directed the Assessing Officer to consider the issue. It was the submission that no enquiry had been done by the ld CIT before passing order u/s.263 of the Act. It was the submission that the Assessing Officer when estimated the income of the assessee at Rs.2,81,921/- had taken into consideration all possible additions. It was the submission that the said sale of scrap included the sale of Empty bottles and Empty Cartoons, which had arisen in the course of business of the assessee being retail sale of IMFL. It was the submission that as no enquiry had been made, the order passed u/s.263 by CIT-2, Bhubaneswar is liable to be quashed in view of the decision of the Hon’ble Jurisdictional High court in the case of Pr. CIT vs Orissa State Police Housing & Welfare Corporation Ltd., (2022) 139 taxmann.com 207 (Orissa) as also the decision in the case of Pr. CIT vs Shark Mines and Minerals Pvt Ltd., (2023) 151 ITA No.231/CTK/2019 Assessment Year : 2014-15 Page4 | 6 taxmann.com 71 (Orissa) insofar as the ld CIT has invoked his powers u/s.263 to direct the AO to enter into the areas which is not part of the ‘Limited Scrutiny’. 5. In reply, ld Pr. CIT (OSD) submitted that the purchase and sale of the scrap materials has not been recorded in the trading account of the assessee. It was the submission that the ‘Limited Scrutiny’, admittedly was in respect of the deposit in the bank account to an extent of Rs.5.03 crores whereas the sale shown as per the audited accounts of Rs.4.75 crores. It was the submission that the sale of scrap to an extent of Rs.27,85,785/- would include a portion of capital expenditure which must have been outside the books. Ld Pr. CIT (OSD) relied upon the decision of the Hon’ble P&H High Court in the case of Surjit Motors vs ITO, (2007) 165 TAXMAN 228 (P&H) to submit that when purchase and sales are made outside the books, the Assessing Officer was right in making the addition in respect of unexplained and unaccounted purchases also. He placed reliance on the decision of the Co-ordinate Bench of this Tribunal in the case of ACIT vs Shubham Construction (2002) 77 TTJ 520 (Nagpur) to support his arguments that when it is an admitted fact that the purchases were not recorded in the regular books of account the source of investment in these purchases also remained unexplained. It was the submission that the order passed u/s.263 is liable to be upheld. ITA No.231/CTK/2019 Assessment Year : 2014-15 Page5 | 6 6. We have considered the rival submissions. A perusal of the order passed u/s.263 of the Act clearly shows that the Ld CIT in page 3 of his order mentions that after carefully going through the records, it is found that the issue has not been verified properly by the Assessing Officer. Consequently, he has invoked his powers u/s.263 of the Act on account of lack of proper enquiry and verification of the issues. Admittedly, the assessment is a Limited Scrutiny assessment. The assessment has been done for a very specific purpose that the deposits in the bank account exceeded the sales. The Assessing Officer has taken a possible view in regard to the difference between what has been recorded in the books and in respect of deposits in the bank account. Where the view has been consciously taken by the Assessing Officer unless it is shown that the view is erroneous and prejudicial to the interest of the revenue, the powers u/s.263 of the Act cannot be invoked. In the present case, the Assessing Officer was very well aware that the actual profit from transaction was only Rs.1,82,498/- but the Assessing Officer has consciously taken an estimation of the income from the sale of scrap. Once the estimation is done, in effect, it wipes out the possibility of all other additions in relation to such estimation. In these circumstances, as it is noticed that the Pr. CIT (OSD) has not been able to point out any specific error in the view as arrived at by the Assessing Officer, the order u/s.263 is unsustainable and consequently, same stands quashed. ITA No.231/CTK/2019 Assessment Year : 2014-15 Page6 | 6 7. In the result, appeal of the assessee stands allowed. Order dictated and pronounced in the open court on 26 /06/2023. Sd/- sd/- (Rajesh Kumar) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 26 /06/2023 B.K.Parida, SPS (OS) Copy of the Order forwarded to : By order Sr.Pvt.secretary ITAT, Cuttack 1. The Appellant : Sri Narendra Kumar Sahoo, At/PO: Gandia, Dist: Denkanal 2. The Respondent: Income Tax Officer, Dhenkanal Ward, Dhenkanal 3. The CIT(A)-, 4. Pr.CIT-2, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//