Mangalore Institute of Oncology Private LImited, Mangaluru V. The Principal Commissioner Of Income Tax, Panaji

ITA 234/BANG/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5300 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 31-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SRIRAM
• Keywords: Revision of order; Fair market value; TDS
• Section: 56; 263; 154; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH : BANGALORE BEFORE SHRI. CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No. 234/Bang/2021 Assessment Year : 2015-16 M/s. Mangalore Institute of Oncology Pvt. Ltd., 225/16(5), Pumpwell, Mangaluru – 575 002. PAN: AAGCM1157P Vs. The Principal Commissioner of Income-tax, Panaji, Goa – 403 001. APPELLANT RESPONDENT Assessee by : Shri Sriram, CA Revenue by : Dr. Manjunath Karkihalli, CIT DR Date of Hearing : 21-03-2022 Date of Pronouncement : 04-04-2022 ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal is filed by assessee against order dated 31/03/2021 passed by the Ld.PCIT u/s. 263 of the Act for Assessment Year 2015-16 on following grounds of appeal: “1. The Order of the Learned Principal Commissioner Income Tax [in so far as prejudicial to the interest of the Appellant], is not justified in law and on facts and circumstances of the case. 2. The Learned Principal Commissioner of Income Tax has erred in issuing notice under Section 263 dated 28.02.2020, served on the appellant via e-mail, without generating/allotting/quoting of document Identification Number (DIN) as required by the CBDT Circular No. 19/2019 dt. 14-08-2019 and without affixing seal on the notice, is non-est rendering the entire revision proceedings and impugned order thereon invalid and therefore liable to be quashed. Page 2 of 8 ITA No. 234/Bang/2021 3. As regards setting aside the original assessment order for framing a fresh, vide revision order u/s 263 3.1. Under the facts and circumstances of the case, the Learned Principal Commissioner of Income tax, is not justified in law while concluding that the assessment order dt. 18.05.2017 is "erroneous" as per section 263 of The Income Tax Act, and thereby passing an order thereon setting aside the original assessment order. 3.2. Under the facts and circumstances of the case, the Learned Principal Commissioner of Income tax, is not justified in law while concluding that the assessment order dt. 18.05.2017 is "prejudicial to the interest of the revenue" as per section 263 of The Income Tax Act, and thereby passing an order thereon setting aside the original assessment order. 3.3. Alternatively, under the facts and circumstances of the case, the notion/concept/ratio under which the Learned Principal Commissioner of Income tax, has decided that the original assessment order dt. 18.05.2017 is "erroneous, in so far as it is prejudicial to the interest of the revenue" is not judicial as it is opposed to the notion/concept/ratio as laid down under clause (viib) to sub-section 2 of section 56 read with sub-rule 2 to Rule 11UA, and hence the entire impugned order is liable to be set-aside. For the above grounds and for such other grounds which may be allowed by the Honourable Members to be urged at the time of hearing, it is prayed that the aforesaid appeal be allowed.” 2. Brief facts of the case are as under: The assessee is a private limited company and is engaged in the business of healthcare services, providing cancer treatments for patients and having its hospitals in Mangaluru. For the year under consideration, the assessee filed its return of income on 09/05/2015 declaring male income after paying MAT at ₹5,80,080/- under section 115JB of the Act. 3. The case of assessee was selected for limited scrutiny under CASS, due to high ratio of refund to TDS, and the huge share premium received by the assessee during the year. The representative of assessee filed requisite details during the scrutiny proceedings. The Ld.AO after perusing the submissions Page 3 of 8 ITA No. 234/Bang/2021 advanced, accepted the returned income and past order under section 143 (3) on 18/05/2017. 4. Subsequently, the assessee received notice under section 263 of the Act to verify the allotment of shares on premium. The Ld.Pr.CIT called for details which were duly furnished by the assessee from time to time. The Ld.Pr.CIT was of the opinion that, the share premium received during the year has not been properly examined in respect of applicability of section 56 (2) (vii) of the Act. He was of the view that, the basis of working out of FMV of shares issued, was not verified, and the report required to be submitted under Rule 11 by assessee, was not obtained and examined, thereby causing the assessment order to be erroneous and prejudicial to the interests of the revenue. 5. The Ld.AR on behalf of assessee filed various details justifying the DCF method adopted by the assessee. After considering all the submissions filed by assessee, the Ld.Pr.CIT held the assessment order dated 18/05/2017 to be erroneous and prejudicial to the interest of the revenue. He directed the Ld.AO to reframe the assessment order afresh. Aggrieved by the order of the Ld.Pr.CIT, assessee filed the present appeal before the Tribunal. 6. At the outset, the Ld.AR drew attention to the application for admission of additional ground dated 22/11/2021. Assessee has raised the following additional ground, challenging the very basis of initiation of revision proceedings under section 263 by the Ld.Pr.CIT: “1. The initiation and completion of revision proceedings under section 263 by the Learned Principal Commissioner of Income Tax, at the instance of a proposal sent by the Page 4 of 8 ITA No. 234/Bang/2021 learned assessing officer, is bad in law, as the provisions of 263 empowers the "Principal Commissioner may call for and examine the records of any proceedings....." and hence, initiation of proceedings u/s 263 either directly or indirectly at the instance/proposal of assessing officer, would render the entire revision proceedings and impugned order thereon invalid and therefore the revision proceedings u/s 263 is liable to be quashed.” 7. It is submitted that the additional ground raised by assessee is a legal issue that goes to the root cause of the proceedings. It is also submitted are no new records needs to be verified in order to adjudicate these grounds. The Ld.AR prayed for the admission of additional ground so raised by assessee. On the contrary the Ld.CIT.DR though opposed admission of the additional ground, could not bring anything on record which would challenge such a right available to assessee under the act. We have perused the submissions advanced by both sides in light of records placed before us. We note that the additional ground is directly connected with the main issue of disallowance and no new facts needs to be investigated for adjudicating the same. Considering the submissions and respectfully following the decisions of Hon’ble Supreme Court in case of National Thermal Power Co. Ltd. Vs. CIT reported in (1998) 229 ITR 383 and Jute Corporation of India Ltd. Vs. CIT reported in 187 ITR 688, we are admitting the additional ground raised by the assessee. Accordingly we admit the additional ground raised by assessee. 8. The Ld.AR submitted that, the revisionary proceedings are to be initiated at the instance of the Principal Commissioner of Income tax, after examination of the records of the assessment Page 5 of 8 ITA No. 234/Bang/2021 proceedings by the Pr.CIT. He submitted that, in the present facts of the case, the revisionary proceeding was initiated at the instance of a proposal sent by the Ld.AO, which is against the statutory norms. In support he placed reliance on the order sheet noting obtained under the RTI application. The said order sheet noting dated 27/09/2018 states that, “proposal under section 263 sent on the basis of examination of issue relating to allotment of shares on premium.” 9. The Ld.AR submitted that, on an application made by assessee under the RTI Act, the Ld.AO vide letter dated 17/03/2022 provided with the following details:  Copy of communication from the office of Pr.CIT Mangalore, for return of income tax records under section 263 for assessment year 2016-17 dated 16/09/2020;  Copy of the proposal under section 263 for assessment 2015-16 sent from the office of Dy.CIT, Circle 2 (1), Mangalore, dated 27/09/2018, to the office of the Pr.CIT, Mangalore to Joint.CIT, Range-2, Mangalore. The Ld.AR thus submitted that, the proposal for revision under section 263 was sent by the Ld.AO on 27/09/2018 and initiation of the proceedings under section 263 by the Ld.Pr.CIT was made based on the same. 10. The Ld.AO relied on the above details placed at page 13-27 of the paper book. He submitted that from the communications at the relevant pages, indicate that there is no prior communication from the office of the Principal CIT, asking for sending of any proposal by the Ld.AO, for revision under section 263 of the Act for assessment in 2015-16. Page 6 of 8 ITA No. 234/Bang/2021 11. The Ld.AR thus submits that, the entire basis of invoking the revisionary proceedings does not have any legs to stand in the eyes of law as it is not as per the procedure laid down under the act. The Ld.AR referring to the provisions of section 263 submitted that, it is clear that entire power under the section 263, lies with the Principal Chief Commissioner himself. The powers envisaged under section 263, have to be exercised by the Principal Chief Commissioner independently, and do not provide any scope to delegate such power to any other officer, especially to the assessing officer. 12. The Ld.AR further submitted that, the assessing officer does not have powers to review his own order. He submitted that the Ld.AO after completion of the assessment proceedings, if finds out certain additional information/documents, that bears to the income of the assessee having escaped the assessment proceedings, he may reopen the assessment under section 147. Further the act also envisages right on the assessing officer to rectify any mistakes that is apparent on record under section 154 of the act. Apart from these provisions, revisionary provisions are not granted to the assessing officer under the Act. In support of the submissions, he placed reliance on the decision of Hon’ble Jaipur Tribunal in case of the Dharmendra Kumar Bansal vs.CIT reported in 152 ITD 406. 13. He submitted that the present facts of the case on receipt of the proposal under section 263 of the Act, from the assessing officer, notice under section 263 was issued by the Ld.Pr.CIT which is not as per the scheme of the Act. The Ld.AR Page 7 of 8 ITA No. 234/Bang/2021 thus prayed for quashing of the order passed under section 263 as it is bad in law. He placed reliance on:  Decision of Hon’ble Supreme Court in case of Malabar Industrial Co. Ltd. vs. CIT reported in (2000) 243 ITR 83  Decision of Hon’ble Delhi High Court in case of CIT vs Honda Siel Power Products Ltd., reported in (2011) 333 ITR 547  Decision of Hon’ble Delhi High Court in case of CIT vs. Vikas Polymers reported in (2012) 341 ITR 537. On the contrary, the Ld.CIT.DR strongly supported the impugned order and submitted that there was no mistake in initiating the revisionary proceedings under section 263 of the Act and the same deserves to be upheld. We have perused the submissions advanced were both sides in light of records placed before us. 14. It is well-settled that, the Pr.CIT while exercising the revisionary power under section 263 of the Act, may call for examine the records of any proceedings, and thereafter, if he considers that any assessment order passed, is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard, and after making or causing to be made such enquiry, as it deems necessary, pass such order thereon, as the circumstances of the case justify. Various judicial proceedings relied by the Ld.AR emphasises that, the Ld.Pr.CIT himself has to apply his mind first by examining the record of any proceedings himself and his satisfaction is a must. 15. In the present facts of the case, admittedly, we see that, the Ld.Pr.CIT has not called for the records for verifying/examining. Page 8 of 8 ITA No. 234/Bang/2021 We also note that the notice under section 263 was issued by the Ld.Pr.CIT mechanically without application of his mind, but referred to the report of assessing officer, and therefore is bad in law. Based on the above, we are of the opinion that the order passed under section 263 of the Act by the Ld.Pr.CIT is bad in law and cannot be sustained in the eyes of law and deserves to be quashed. Accordingly the additional ground raised by assessee stands allowed. 16. As we have quashed the order passed under section 263 of the Act, which is the subject matter of challenge in the present appeal, the issues alleged by assessee on merits of the case becomes academic at this stage and therefore are not adjudicated upon. In the result appeal filed by assessee stands allowed. Order pronounced in open court on 04 th April, 2022. Sd/- Sd/- (CHANDRA POOJARI) (BEENA PILLAI) Accountant Member Judicial Member Bangalore, Dated, the 04 th April, 2022. /MS / Copy to: 1. Appellant 4. CIT(A) 2. Respondent 5. DR, ITAT, Bangalore 3. CIT 6. Guard file By order Assistant Registrar, ITAT, Bangalore