ARMANI EXPORTS, MUM V. PCIT-20, MUM

ITA 24/MUM/2023

AI Insights

Armani Exports appealed against the order of the PCIT, which invoked section 263 of the Income Tax Act, 1961, for the second time concerning the assessment year 2014-15. The PCIT's order set aside the earlier assessment order, citing discrepancies and lack of thorough investigation into several financial entries, including a significant investment in unlisted equities. The ITAT dismissed the appeal, agreeing with the PCIT that the assessment order was erroneous as it failed to investigate the source of the investment, which was crucial for ensuring compliance with tax regulations.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124827 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-02-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 03-01-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Earning of tax free income
• Section: 263; 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND MS. KAVITHA RAJAGOPAL, JM IT A N o. 24 /M u m/ 2 02 3 ( A s s e ss me nt Y ea r: 20 1 4- 15 ) Armani Exports 209-C, Building No.2, Mittal Industrial Estate, Andheri Kurla Road, Andheri (E), Mumbai-400 059 V s. PCIT-20 Room No. 418, Piramal Chamber, Lal Baug, Parel, Mumbai-400 12 P A N / G I R N o. AA G F A 0528 F (Appellant) : (Respondent) Assessee by : Shri Anil Thakkar Revenue by : Smt. Shailja Rai D a te o f H e a r i n g : 01.03.2023 D ate of P ro n ou n ce me n t : 30.05.2023 O R D E R Per Kavitha Rajagopal, J M: This appeal has been filed by the assessee, challenging the order of the learned Principal Commissioner of Income Tax (‘ld.PCIT for short), passed u/s.263 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2014-15. 2. The appeal is filed belatedly by 220 days. The learned Authorised Representative (ld. AR for short) for the assessee stated that the assessee was initially unaware that section 263 order can be appealed before the ITAT and, hence, has filed this present appeal with a delay. The ld. AR prayed for condoning the said delay. The learned Departmental Representative (ld. DR for short) for the Revenue opposed for condoning the delay. 2 ITA No. 2 4 / M u m / 2 0 2 3 ( A . Y . 2 0 1 4 - 1 5 ) Armani Exports vs. PCIT 3. Having heard both the sides, we deem it fit to condone the delay in filing the present appeal in order to give the assessee an opportunity to present its case. Hence, delay is hereby condoned. 4. The assessee challenged this appeal on the ground that the ld. PCIT has reviewed the order u/s. 263 for the second time as the first order u/s. 263 of the Act was already passed on 27.03.2019. The assessee has raised the ground that the ld. PCIT has erred in not directing the Assessing Officer (A.O. for short) specifically that all the earlier orders passed by the A.O. u/s. 143(3) and 143(3) r.w.s. 263 of the Act stands cancelled while passing the second order passed u/s. 143(3) r.w.s. 263 of the Act. 5. The brief facts are that the assessee is a partnership firm engaged in the business of export of suiting and shirting to various states of USA, Europe, Gulf, Vietnam, Srilanka and other countries. The assessee filed its return of income dated 25.09.2014, declaring total income at Rs.1,28,29,630/- as income from business or profession. The assessee’s case was selected for scrutiny and the assessment order dated 26.06.2016 was passed u/s. 143(3) of the Act where the A.O. had accepted the returned income filed by the assessee. The ld. PCIT passed the revision order u/s. 263 of the Act dated 30.03.2019 setting aside the assessment order for the verification of the following limited issues relevant to the impugned year: i. Large commission of Rs.61,80,281/- as expenses and low net profit on total turnover of Rs.54,00,99,330/- ii. Large interest expenses of Rs.84,94,819/- relatable to exempt income u/s. 14A. iii. Source of investment of RS.1,20,00,000/- in unlisted equities. iv. Mismatch in sales turnover reported in Audit report and ITR. v. Mismatch in amount paid to related persons u/s. 40A(2)(b) reported in Audit report and ITR 2. 3 ITA No. 2 4 / M u m / 2 0 2 3 ( A . Y . 2 0 1 4 - 1 5 ) Armani Exports vs. PCIT 6. It is observed that the assessee has not complied with the notices u/s. 142(1) of the Act except for the notice dated 25.12.2019 which is prior to the assessment being time barred on 31.12.2019. The A.O. passed the assessment order dated 31.12.2019 by rejecting the books of accounts of the assessee and profit of 8% amounting to Rs.4,32,07,946/- towards the business turnover of Rs.54,99,00,329/- was estimated and an addition of Rs.3,03,78,320/- was made after deducting the declared income of the assessee on the ground that the details furnished by the assessee in the last hour was not verifiable from the third party and, hence, the impugned addition was made. 7. The ld. PCIT had again invoked the provision of section 263 of the Act by issuing notice dated 11.03.2022 for the reason of certain discrepancy was evidenced in the assessment order passed u/s. 143(3) of the Act r.w.s. 263 of the Act dated 31.12.2019 rendering it as erroneous and prejudicial to the interest of the revenue. The ld. PCIT issued the notice on a query of source of investment of Rs.1,20,00,000/- in securities for which the assessee vide its reply dated 23.12.2109 submitted that the assessee firm had not made any investment in the current year and that the investment made in M/s.Armani Industries Pvt. Ltd. was made in F.Y. 2011-12 for the purpose of promoting its own processing unit in the name and style of M/s. Armani Industries Pvt. Ltd. at Bilvara and the capital investment of Rs.1,20,00,000/- was made by the assessee firm from its own funds. The ld. PCIT observed that the impugned investment was not reflected in the balance sheet submitted by the assessee for the A.Y. 2012-13 and also as per the scrutiny assessment proceeding for A.Y. 2012-13, the opening amount of loan given to M/s. Armani Industries Pvt. Ltd. and closing balance of loan amount was Rs.14,46,432/- and 4 ITA No. 2 4 / M u m / 2 0 2 3 ( A . Y . 2 0 1 4 - 1 5 ) Armani Exports vs. PCIT Rs.11,62,500/- respectively. It is also observed that the assessee has given Rs.3,81,61,068/- and received back Rs.3,84,45,000/- which according to the ld. PCIT was contradictory as per the submissions made during the assessment proceedings for A.Y. 2014-15 and 2012-13. For this reason, the ld. PCIT proposed to invoke the provision of section 263 of the Act and to enhance, cancel, and modify the earlier assessment order dated 31.12.2109 passed u/s. 143(3) r.w.s. 263 of the Act as being erroneous and prejudicial to the interest of the Revenue. 8. The assessee is in appeal before us, challenging the impugned order of the ld. PCIT passed u/s. 263 of the Act. 9. The ld. AR for the assessee contended that this issue of investment made by the assessee was before the A.O. in the earlier assessment proceeding where the A.O.’s order dated 31.12.2019 was passed u/s. 143(3) r.w.s. 263 of the Act. The ld. AR further stated that the assessee has furnished all the details pertaining to the impugned investment, whereas the same was not considered by the A.O. during the assessment proceeding and the A.O. has erroneously stated that the assessee has not filed any details neither before the ld. PCIT nor before the A.O. The A.O. has specified that there was no sufficient time available for conducting the third party verification and, hence, the details filed by the assessee was not verifiable. The ld. AR contended that this finding of the A.O. was a false allegation, as the A.O. had sufficient time to conclude the assessment but had rather choose not to verify the details filed by the assessee. The ld. AR further stated that the impugned investment was made during the financial year 2011-12 and not during the impugned assessment year. The ld. AR further contended that all the details were 5 ITA No. 2 4 / M u m / 2 0 2 3 ( A . Y . 2 0 1 4 - 1 5 ) Armani Exports vs. PCIT furnished by the assessee to substantiate the investment made in M/s. Armani Industries (I) Pvt. Ltd. The ld. AR stated that the assessment order dated 31.12.2019 passed u/s. 143(3) r.w.s. 263 of the Act was not erroneous insofar as it is prejudicial to the interest of the Revenue. The ld. DR, on the other hand, controverted the said fact and stated that though the issue of investment was raised in first section 263 proceeding, no addition was made by the A.O. on the said investment. The ld. DR further stated that the second section 263 proceeding was initiated solely for the purpose of enquiring the impugned investment of Rs.1,20,00,000/- made by the assessee company in M/s. Armani Industries (I) Pvt. Ltd. The ld. DR further stated that the A.O. in its order dated 31.12.2019 has not considered this issue and thereby making the order erroneous and prejudicial to the interest of the Revenue. The ld. DR relied on the order of the ld. PCIT. 11. We have heard the rival submissions and perused the materials available on record. It is evident that there has been two section 263 proceedings carried out in the case of the assessee where in the first section 263 proceeding there were about five issues raised by the ld. PCIT and the A.O. vide order dated 31.12.2019 has made various additions/disallowances. Though the issue of source of investment of Rs.1,20,00,000/- in unlisted equities was part of the proceeding, no enquiry is said to have been made on this issue and thereby no addition to this extent was made. On perusal of the records, we do not find any documentary evidences furnished by the assessee in support of its claim that the impugned investment was made in F.Y.2011-12 by way of furnishing the bank statement or any other supporting documents to explain the source of the investment made by the assessee in M/s. Armani Industries (I) Pvt. Ltd. It is also pertinent to point 6 ITA No. 2 4 / M u m / 2 0 2 3 ( A . Y . 2 0 1 4 - 1 5 ) Armani Exports vs. PCIT out that there was no bar on limitation by the ld. PCIT to invoke section 263 for the second time considering the order dated 31.12.2019 to be erroneous insofar as it is prejudicial to the interest of the Revenue for the reason that the A.O. has not gone into the issue of the impugned investment which was part of the first section 263 proceeding. It is apparent that the A.O. has not enquired into the issue of investment made by the assessee and it does not fall in the case where the assessee has enquired into the issue and taken one of the plausible view. 12. From the above observation, we are of the considered view that the order of the ld. PCIT invoking section 263 is valid since the assessment order sought to be revised was erroneous insofar as it is prejudicial to the interest of the Revenue. 13. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open court on 30.05.2023 Sd/- Sd/- (Prashant Maharishi) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 30.05.2023 Roshani , Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT - concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai