Appeal details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 6600 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 7 month(s) 3 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-11-2016
Appeal Filed By
Assessee
Bench Allotted
F
Next Hearing Date
04-10-2016
Assessment Year
2010-2011
Appeal Filed On
27-04-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F, NEW DELHI) BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER I.T.A. NO.2460/DEL/2015 (ASSESSMENT YEAR 2010-11) MOHIT GUPTA, VS. CIT, FARIDABAD HOUSE NO.834, SECTOR 28, FARIDABAD GIR / PAN :ABZPG7696Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VED JAIN, ADV., SHRI ASHISH CHADHA, ADV. RESPONDENT BY : SHRI R L MEENA, CIT DR DATE OF HEARING : 04.10.2016 DATE OF PRONOUNCEMENT : 30.11.2016 ORDER PER BEENA A. PILLAI, JM: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED31.03.2015 PASSED BY LD. CIT , FARIDABAD U/S 263(1) OF THE ACT, FOR THE ASSESSMENT YEAR 2010-11 ON THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX CIT UNDER SECTION 263 OF THE ACT IS BAD, BOTH I N THE EYE OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED CIT ANNULLING THE ASSESSMENT ORDER PASSED BY THE AO. IS UNTENABLE IN 2 I.T.A.NO.2460./DEL/2015 THE ABSENCE OF ORDER OF THE AO. BEING ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 3 (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CONTENTION OF THE APPELLANT THAT THE INCOME AS PER REVISED RETURN WAS BEFORE THE AO. IN PROCEEDINGS UNDER SECTION 143(3) OF THE ACT AND WAS CONSIDERED AFTER APPLICATION OF MIND BY HIM AS SUCH THE SAME CANNOT BE THE MATTER FOR REASSESSMENT UNDER SECTION 263 OF THE ACT. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO. HAVING TAKEN ONE OF THE POSSIBLE VIEWS THE LEARNED CIT WAS NOT JUSTIFIED IN HOLDING THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF THE REVENUE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORING THE CONTENTION OF THE APPELLANT THAT THE PROCEEDING UNDER SECTION 263 CANNOT BE USED FOR SUBSTITUTING OPTION OF THE AO. BY THAT OF THE CIT . 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT HAS ERRED BOTH ON FACTS AND IN LAW IN INVOKING REVISIONARY POWER UNDER SECTION 263 OF THE ACT DESPITE THE FACT THAT EVEN AFTER THOROUGH EXAMINATION, NO SPECIFIC FINDINGS HAVE BEEN GIVEN O N THE ISSUE OF HOW THE ORDER IS ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF REVENUE. 2. ADMITTEDLY, THE BRIEF FACTS OF THE CASE ARE AS U NDER: 2.1 THE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOM E ON 28.07.2010 DECLARING AN INCOME OF RS.13,53,170/-. THE SAME WAS PROCESSED AS SUCH ON 09.04.2011. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AN D NOTICE U/S 143(2) WAS ISSUED TO THE ASSESSEE ON 26- 3 I.T.A.NO.2460./DEL/2015 29.08.2011. THE ASSESSEE THEN REVISED RETURN OF IN COME ON 09.09.2011, DECLARING AN INCOME OF RS.14,88,380/ -. ASSESSMENT WAS COMPLETE BY LD. A.O. AT AN INCOME OF RS.1,82,41,869/- VIDE ORDER DATED 04.03.2013 BY MAK ING VARIOUS ADDITIONS. 2.2 AGGRIEVED BY THE ORDER OF LD. A.O., ASSESSEE PR EFERRED AN APPEAL BEFORE LD. CIT(A). LD. CIT(A) VIDE ORDER DATED 03.07.2014, DECIDED THE APPEAL BY DELETING CERTAIN ADDITIONS. HE SUSTAINED ADDITIONS AMOUNTING TO RS.6,57,527/- MADE BY THE LD. A.O. SUBSEQUENTLY, LD . CIT ISSUED SHOW CAUSE NOTICE INVOKING THE PROVISION S OF SECTION 263 ON 01 ST OCTOBER, 2014, ON THE FOLLOWING GROUNDS:- INCUME TAX DEPARTMENT OFFICE OF THE COMMISSIONER OF INCOME TAX, NEW C.G.O. COMPLEX. B-BLOCK, NH-IV, FARIDABAD 0129-2420710. (F) 0129-2412418 F. 0, CIT/FBD/JUDI/2014-15/ 5117 DT: 01.10.2014 TO SH. MOHIT GUPTA, H. O. 634, SECTOR- 28, FARIDABAD. PAN NO.-ABZPG7696Q) SIR, SUB: SHOW CAUSE NOTICE U/S 263 OF THE I.T. ACT, 1961 FOR THE A. Y. 2010-11 -REGARDING- PLEASE REFER TO THE ASSESSMENT ORDER DATED 04.03.2013 PASSED UNDER SECTION; 43(3) FOR THE ABOV E MENTIONED ASSESSMENT YEAR IN YOUR CASE. 4 I.T.A.NO.2460./DEL/2015 2. ASSESSMENT RECORD FOR THE A. Y. 2010-11 WERE CALLED FOR AND EXAMINED. EXAMINATION OF THE SAID ASSESSMENT RECORD REVEALED THAT ASSESSMENT FOR THE ASSESSMENT YEAR 2010-11 WAS MADE BY THE ITO, WARD-I(3), FARIDABAD (ASSESSING OFFICER) U/S 143(3) OF THE LT. ACT, 1961 ON 04.03.2013 ON A TOTAL INCOME O F RS.L,82,41,870/-. 3.1. ORIGINAL RETURN OF INCOME IN YOUR CASE WAS FIL ED U/S 139(1) ON 28.07.2010 DECLARING INCOME FROM SALARY AT RS.15,39,0001- AND INCOME FROM OTHER SOURCES AT RS.64,177/- WHICH CONSTITUTED GROSS TOTA L INCOME OF RS.16,03,177/-. AFTER CLAIMING (CURRENT YEAR) LOSS OF RS.L,50,000/- UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND DEDUCTION UNDER CHAPTER VI- A AT RS.1,00,000/- TOTAL INCOME HAS BEEN DECLARED A T RS. I 3,53,177/-. 3.2 THEREAFTER, THE CASE WAS SELECTED UNDER SCRUTIN Y THROUGH CASS. THE REASON FOR SELECTION UNDER SCRUTI NY WAS THAT THE INTEREST INCOME ON WHICH TDS WAS DEDUCTED AND REFLECTED ON THE COMPUTER SYSTEM OF TH E DEPARTMENT AS PER FORM 26AS. HOWEVER, THE SAID INTEREST INCOME WAS NOT SHOWN -IN THE RETURN OF INCOME FILED ON 28.07.2010. NOTICE U/S 143(2) WAS ISSUED ON 29.08.2011 FIXING THE CASE FAR HEARING ON 13.09.2011. 3.3 AFTER RECEIPT OF THE NOTICE U/S 143(2) DATED 29.08.2011, YOU REVISED YOU!' RETURN OF INCOME ON 09.09.2011, DECLARING INCOME FROM OTHER SOURCES AT RS.5,76,236/- AGAINST THE FIGURE OF RS.64, 177/- SHOWN IN THE ORIGINAL RETURN OF INCOME. IT IS CLEAR THAT ADDITIONAL INCOME UNDER THE HEAD, 'INCOME FROM OTHE R SOURCES' AMOUNTING TO RS.5, 12,059/- WAS DECLARED AFTER RECEIPT OF NOTICE U/S 143(2) WHICH TANTAMOUNT S TO THE CONCEALED INCOME WITHIN THE MEANING OF SECTI ON 274 R.W.S. 271(1)(C) OF THE I.T ACT. THE ASSESSING OFFICER OUGHT TO HAVE INITIATED PENALTY PROCEEDINGS 5 I.T.A.NO.2460./DEL/2015 U/S 271 (1)(C), IN THE FACTS AND CIRCUMSTANCES OF T HE CASE. HOWEVER, THE AO FAILED TO DO SO. 4. ON GOING THROUGH THE COMPUTATION OF INCOME FILED DURING ASSESSMENT PROCEEDINGS IT MAY BE SEEN THAT AS PER REVISED COMPUTATION, INTEREST OF RS.5,20,767 /- HAS BEEN DECLARED AS INTEREST RECEIVED FROM RPS INFRASTRUCTURE LTD. HOWEVER, AS PER FINAL BALANCE SHEET FILED BY YOU FOR THE PERIOD ENDING 011 31.03.2010, IT HAS BEEN NOTICED THAT NO INVESTMENT IN THE NAME OF M/S RPS INFRASTRUCTURE LTD. IS REFLECTE D. ON GOING THROUGH THE ASSESSMENT RECORDS IT HAS BEEN NOTICED THAT NO DETAILS SHOW THAT THE 1I1VESTMENT MADE WITH M/S RPS INFRASTRUCTURE LTD. WAS LIQUIDATE D DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEA R UNDER CONSIDERATION. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO OUGHT TO HAVE ENQUIRED THE ISSUE FURTHER TO OBTAIN DETAILS OF THE SAID INVESTMENT ACCOUNT. HOWEVER, THE A.O. FAILED TO DO SO. 5. AS PER REVISED RETURN OF INCOME FILED U/S 139(5) OF THE I.T ACT, 1961 ON 09.09.2011 YOU HAVE CLAIMED (CURRENT YEAR) LOSS OF RS.6,52,381/- ON ACCOUNT OF LONG TERM CAPITAL LOSS TO BE CARRY FORWARDED IN THE SUBSEQUENT ASSESSMENT YEARS. HOWEVER, AS THE REVISED RETURN OF INCOME IN WHICH LOSS WAS CLAIMED FOR THE FIRST TIME, WAS NOT FILED WITHIN THE PERIOD SPE CIFIED U/S 139(1), THE LOSS CANNOT BE CARRY FORWARDED AS P ER PROVISIONS OF SECTION 139(3) OF THE I.T. ACT. HOWEV ER, THE AO FAILED TO POINT OUT THAT THIS LOSS IS NOT TO BE CARRY FORWARDED WHILE PASSING THE ASSESSMENT ORDER. 6. AS PER BALANCE SHEET FILED BY YOU FOR THE YEAR ENDING 31.03.2010 YOU HAVE DECLARED A LOAN OF RS.L,99,33,167/- AS ON 31.03.2010 ADVANCED TO M/S DAMCO SOLUTIONS P. LTD. AS PER COPY OF THIS LOAN ACCOUNT IN THE BOOKS OF M/S DAMCO SOLUTIONS PVT. LT D. AVAILABLE ON RECORD, THERE IS AN ENTRY OF RS.94,33,334/- ON 04.03.2010 WHICH IS SHOWN TO HAVE BEEN RECEIVED FROM YOU. NARRATION OF THIS ENTR Y IN THE SAID ACCOUNT DOES NOT HAVE DETAILS OF CHEQUE AN D 6 I.T.A.NO.2460./DEL/2015 ISSUING BANK WHEREAS NARRATION IN RESPECT OF OTHER ENTRIES MENTIONED THESE DETAILS. NO CORRESPONDING ENTRY IS LOCATABLE IN THE STATEMENT OF YOUR BANK ACCOUNT AVAILABLE ON RECORD. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO OUGHT TO HAVE ENQUIRED THE ISSUE FURTHER BY OBTAINING AND EXAMINI NG DETAILS AND SOURCE OF THE SAID INVESTMENT. HOWEVER, THE AO FAILED TO DO SO. 7. AS PER BALANCE SHEET AS ON 31.03.2010 YOU HAVE DECLARED LOAN FROM HDFC BANK LTD. AT RS.72,00,000/- AND ANOTHER LOAN FROM DEUCHE BANK AT RS.32,38,256/-. HOWEVER, THE SOURCES OF REPAYMENT O F THE INSTALLMENTS OF THIS LOAN ACCOUNT ARE NOT EXPLA INED AS PER THE MATERIAL AVAILABLE ON RECORD. THE AO OUG HT TO HAVE ENQUIRED THE ISSUE FURTHER BY OBTAINING DET AILS OF THE SAID REPAYMENTS OF LOAN AND INTEREST. HOWEVE R, THE AO FAILED TO DO SO. 7.1 FROM THE ABOVE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, IT APPEARS TO ME THAT THE ABOVE ACTS OF OMISSION AND COMMISSION BY THE AO, PRIMA FACIE, NOT ONLY RENDER THE ASSESSMENT ORDER PASSED U/S 143(3) ON 04.03.2013 AS ERRONEOUS BUT ALSO PRE-JUDICIAL TO THE INTEREST OF THE REVENUE WITHIN THE MEANING OF SECTION 263 OF THE LT ACT, 1961. YOU ARE, THEREFORE , AFFORDED AN OPPORTUNITY OF BEING HEARD TO SHOW CAUS E AS TO WHY AN APPROPRIATE ORDER U/S 263 OF THE ACT, SUITABLY MODIFYING/ENHANCING/CANCELLING THE ORDER UNDER REFERENCE TO BE MADE AFRESH, -BE NOT MADE FOR THE SAID ASSESSMENT YEAR. 7.2 FOR THIS PURPOSE, YOUR CASE IS FIXED FOR HEARI NG AT 11.00 A.M. ON 15.10.2014 IN MY OFFICE AT 2ND FLOOR, 'B'- BLOCK, NEW C.G.O COMPLEX, FARIDABAD. 7.3 YOU MAY ATTEND EITHER IN PERSON OR THOUGH THE AUTHORIZED REPRESENTATIVE. PLEASE NOTE IN CASE YOU DO NOT WISH TO AVAIL OF THIS OPPORTUNITY IN PERSON OR THROUGH THE AUTHORIZED REPRESENTATIVE, YOU MAY FURNISH WRITTEN ARGUMENTS ON OR BEFORE THE AFORESAI D 7 I.T.A.NO.2460./DEL/2015 TIME AND DATE, WHICH MAY ALSO BE CONSIDERED APPROPRIATELY BEFORE CONSIDERING TO MAKE ORDER U/S 263 OF THE ACT. IN CASE OF FAILURE ON YOUR PART TO AVAIL OF THIS OPPORTUNITY I SHALL BE CONSTRAINED TO PASS THE ORDE R U/S 263 OF THE ACT ON MERITS OF THE CASE. YOURS FAITHFULLY, (ASHOK KUMAR SAROHA COMMISSIONER OF INCOME TAX, FARIDABAD. 2.3 AGAINST WHICH THE ASSESSEE FILED REPLY DATED 17.10.2014. IT WAS SUBMITTED BEFORE THE LD. CIT TH AT AS THE FIRST APPELLATE AUTHORITY PASSED THE ORDER AND HELD THE ASSESSMENT ORDER STOOD MERGED WITH IT AND HENCE, TH ERE IS NO JURISDICTION TO INVOKE THE PROVISIONS OF SECTION 263 OF THE ACT. IT WAS ALSO SUBMITTED THAT SECTION 263 HA S BEEN INITIATED AGAINST THE ADDITIONS THAT HAVE BEEN DELE TED BY LD. CIT (A). 2.4 LD. CIT PASSED THE ORDER U/S 263 SETTING ASIDE THE ASSESSMENT ORDER AND HELD AS UNDER: 6. IN VIEW OF ALL THE ABOVE MENTIONED FACTS AND LE GAL POSITION, IT IS HELD THAT THE IMPUGNED ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. THE RE HAS BEEN NON-APPLICATION OF MIND ON PART OF THE AO. THE ITO HAS TAKEN A VIEW WHICH IS UNSUSTAINABLE BY ACCEPTING THE REVISED RETURN, WHICH WAS NOT ACCEPTABLE U/S 139(5) AS THE SAME WAS FILED AFTER DETECTION OF CONCEALMENT BY THE DEPARTMENT. THE ASSESSMENT ORDER PASSED U/S 143(3) VIDE ORDER DATED 04.03.2013 FOR THE ASSESSMENT YEAR 2010-11, IS HEREBY CANCELLED/SET ASIDE U/S 263(1) OF THE INCOME TAX ACT, 1961 AND IS RESTORED TO THE FILE OF AO FOR 8 I.T.A.NO.2460./DEL/2015 MAKING A FRESH ASSESSMENT WITHOUT GIVING THE BENEFI T OF REVISED RETURN FILED BY THE ASSESSEE. THE AO IS DIRECTED TO MAKE A JUDICIOUS AND SPEAKING ORDER AS PER LAW AFTER PROVIDING DUE OPPORTUNITY OF BEING HE ARD TO THE ASSESSEE. ANY ADVERSE INFERENCE MADE WOULD REQUIRE RE-COMPUTATION OF INCOME AND TAX THEREON. 2.5 AGGRIEVED BY THE ORDER OF LD. CIT, THE ASSESSEE IS IN APPEAL BEFORE US NOW. 3. LD. A.R. SUBMITTED THAT THE ASSESSEE IS A MERCHANDISE EXPORTER AND DERIVE INCOME FROM SALARY FROM M/S. DEMCO SOLUTIONS PVT. LTD. OTHER THAN SALARY, ASSESSEE HAS DECLARED INCOME OF RS.5,71,597/- UNDER THE HEAD INCOME FROM OTHER SOURCES AND INCOME OF RS.4,639/- BY WAY OF CLUBBING OF MINOR INCOME. LD. A.R. SUBMITTED THAT BY WAY OF RAISED INCOME, ASSESSEE HA S DECLARED AGRICULTURAL INCOME AND ADDITIONAL INCOME OF RS.1,39,207/-, WAS ALSO ADDED. HE SUBMITTED THAT T HE REVISED RETURN OF INCOME WAS FILED WITHIN THE PERIO D OF LIMITATION U/S 139(5) OF THE ACT I.E. WITHIN THE PE RIOD OF ONE YEAR FROM THE END OF RELEVANT ASSESSMENT YEAR. HE SUBMITTED THAT LD. A.O. COMPLETED THE ASSESSMENT ON THE INCOME DECLARED IN THE REVISED RETURN AND MADE HUGE ADDITION AGAINST WHICH APPEAL WAS FILED BEFORE THE 1 ST APPELLATE AUTHORITY. HE SUBMITTED THAT THE A.O. AT THE TIME OF ASSESSMENT PROCEEDINGS, MADE DETAILED INQUI RY ON EACH ISSUE. LD. A.R. SUBMITTED THAT THE ISSUE UNDE R CONSIDERATION IS SQUARELY COVERED BY THE DECISION O F HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT 9 I.T.A.NO.2460./DEL/2015 CENTRAL, LUDHIANA VS RAKESH NARAIN TRIVEDI REPORTED IN 290/2014 DATED 29 TH OCTOBER 2015, WHEREIN LD. A.R. RELIED UPON THE DECISION HELD BY HONBLE COURT AS U NDER: THE ORDER PASSED BY CIT IS UNTENABLE. THE CIT IN I TS POWER U/S 263 CANNOT SET ASIDE THE ORDER FOR INITIA TING PENALTY PROCEEDINGS U/S 271(1)(C). THIS ISSUE IS SQUARELY COVERED BY THE JURISDICTION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT(CENTRAL) LUDHIANA VS. RAKESH NAIN TRIVEDI ITA NO. 290/2014 DATED 29.10.2015, WHEREIN HON'BLE HIGH COURT HELD AS UNDER; 'INITIATION OF PROCEEDINGS UNDER SECTION 263 OF THE ACT WAS NOT JUSTIFIED AND WE UPHOLD THE ORDER OF THE TRIBUNAL CANCELLING THE REVISIONAL ORDER PASSED BY THE CIT AS WHERE THE CIT FINDS THAT THE ASSESSING OFFICER HAD NOT INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IN THE ASSESSMENT ORDER, HE CANNOT DIRECT THE ASSESSING OFFICER TO INITIATE PENALTY PROCEEDINGS UNDER SECTION 271 (1 )(C) OF THE ACT IN EXERCISE OF REVISION POWER UNDER SECTION 263 OF THE ACT. ' 3.1 LD. A.R. FURTHER SUBMITTED THAT LD A.O. TOOK A VIEW ON THE BASIS OF REVISED RETURN AND MADE ADDITIONS THEREON. HE FURTHER RELIED UPON THE DECISION OF HON 'BLE HIGH COURT IN THE CASE OF CITVS GABRIEL INDIA LTD. REPORTED IN 203 ITR 108 WHEREIN HON'BLE BOMBAY HIGH COURT HAS HELD THAT IN A CASE, WHERE ITO HAS MADE INQUIRIES IN REGARD TO THE NATURE OF HIS INCOME BY THE ASSESSEE AND THE ASSESSEE HAS GIVEN DETAILED EXPLAN ATION IN THAT REGARD BY WAY OF WRITTEN SUBMISSIONS, WHICH WERE PLACED ON RECORD, THEN THE DECISION OF ITO CANNOT B E HELD 10 I.T.A.NO.2460./DEL/2015 TO BE ERRONEOUS, AS RECORDED IN HIS ORDER, HE DID N OT MAKE ELABORATE DISCUSSION IN THIS REGARD. 3.2 LD. A.R. FURTHER EMPHASIZED THAT LD. CIT HAS ER RED IN CANCELLING AND SETTING ASIDE THE ASSESSMENT ORDE R WHEN IT STOOD MERGED WITH THE ORDER OF LD. CIT (A). HE S UBMITTED THAT LD. CIT DO NOT HAVE JURISDICTION TO SET ASIDE THE ASSESSMENT ORDER AFTER THE FIRST APPELLATE AUTHORIT Y HAS CONSIDERED THE ADDITION IN ITS ORDER. FURTHER, THE LD. A.R. PLACED RELIANCE UPON THE FOLLOWING JUDGEMENTS: I) SHEENA EXPORTS, C/O M/S. RRA TAXINDIA VS CIT (I.T.A.NO. 6001-2/DEL/2-013 DATED 15/10/2014) II) RANKA JEWELLERS VS ACIT (2010) 328 ITR 148 (BOM ). III) SLUM REHABILITATION AUTHORITY VS DIT (I.T.A.NO . 2435/MUM/2014 DATED 30.10.2015 ITAT MUMBAI) 4. ON THE CONTRARY LD. D.R. RELIED UPON THE ORDER PASSED BY LD. CIT. 5. WE HAVE PERUSED THE RECORDS PLACED BEFORE US, JUDGEMENTS RELIED UPON BY BOTH THE SIDES AND ORDERS PASSED BY AUTHORITIES BELOW. 5.1 IN ORDER TO INITIATE PROCEEDINGS U/S 263 OF TH E ACT, LD. CIT HAS TO ESTABLISH THAT THE ASSESSMENT ORDER PASSED IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE. IT IS OBSERVED FROM THE ASSESSMENT ORDER THAT THE A.O. HAS ISSUED NOTICE U/S 143(2) ON 29.08.2011 AND THE ASSE SSEE REVISED ITS RETURN ON 09.09.2011 DECLARING ADDITION AL INCOME VIS A VIS THE ORIGINAL RETURN OF INCOME. 5. 2 PROVISIONS OF SECTION 263 ARE REPRODUCED HEREUNDER FOR READY REFERENCE: REVISION OF ORDERS PREJUDICIAL TO REVENUE. 11 I.T.A.NO.2460./DEL/2015 263 (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD' OF ANY PROCEEDING UNDER THIS AC T, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN B Y THE [ASSESSING] OFFICER IS ERRONEOUS IN SO FAR AS' IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE', HE MA Y, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT' AND DIRECTING A FRESH ASSESSMENT. ' EXPLANATION .-FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB-SECTION ,- (A) AN ORDER PASSED [ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988] BY THE ASSESSING OFFICER SHALL INCLUDE- (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMMISSIONER [OR DEPUTY COMMISSIONER] OR THE INCOME- TAX OFFICER ON THE BASIS OF THE DIRECTIONS ISSUED BY THE '[JOINT] COMMISSIONER UNDER SECTION 144A; (II) AN ORDER MADE BY THE 4[JOINT] COMMISSIONER IN EXERCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMMISSIONER OR DIRECTOR GENERAL OR COMMISSIONER AUTHORIZED BY THE BOARD IN THIS BEHALF UNDER SECTION 120; (B) 'RECORD' [SHALL INCLUDE AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED] ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER; 12 I.T.A.NO.2460./DEL/2015 (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AND PASSED ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF ANY APPEAL ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988], THE POWERS COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEND [AND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED] TO SUCH MATTERS AS HAD NO CONSIDERED AND DECIDED IN SUCH APPEAL.] 5.3 ON CO-JOINT READING OF REVISED RETURN OF INCOME ALONG WITH REVISED BALANCE SHEET AS ON 31/03/2010 VIS--VIS THE ORIGINAL RETURN OF INCOME AND THE BALANCE SHEET AS ON 31/03/2009 REVEALS THAT, MOST OF THE ADDITIONS MADE BY THE LD.AO ARE BASED ON ACCOUNT OF DISCREPANCIES NOT ICED IN THE TWO DIFFERENT VERSIONS OF BALANCE SHEET FILE D BY THE ASSESSEE. THE ADDITIONS MADE BY LD. AO RELATED TO B OTH LIABILITIES AS WELL AS ASSET SIDE OF THE BALANCE SH EET. AS REGARDS THE LIABILITY SIDE, ADDITIONS WERE MADE FOR THE REASON THAT SOURCE OF CERTAIN ITEMS COULD NOT BE ADEQUATELY EXPLAINED, AND IN SOME CASES THE GENUINE NESS OF THE TRANSACTIONS COULD NOT BE ESTABLISHED BY THE ASSESSEE, WHICH LED LD.AO HOLD IT AS UNDISCLOSED IN COME IN THE HANDS OF ASSESSEE. SIMILARLY ON THE ASSET SI DE OF THE BALANCE SHEET LD. AO ON SIMILAR REASONS MADE ADDITI ONS FOR UNDISCLOSED INVESTMENT IN THE HANDS OF THE ASSE SSEE. BEFORE LD. CIT (A) ASSESSEE EXPRESSED HIS INABILITY TO EXPLAIN THE GENUINENESS AND SOURCE OF VARIOUS ENTRI ES IN THE REVISED BALANCE SHEET AND SUBMITTED ADDITIONAL EVIDENCE DURING THE APPELLATE PROCEEDINGS. IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE HAD NEV ER 13 I.T.A.NO.2460./DEL/2015 MAINTAINED PROPER BOOKS OF ACCOUNTS AND SUDDENLY WA S REQUIRED TO COMPILE ALL THE DETAILS DURING THE COUR SE OF ASSESSMENT PROCEEDINGS. IT WAS SUBMITTED BY THE ASS ESSEE THAT AS THE EXERCISE WAS VERY DIFFICULT WITHIN THE LIMITED PERIOD ALLOWED BY THE LD. AO, THE ASSESSEE WAS PREV ENTED BY SUFFICIENT CAUSE TO FILE THE DETAILS BEFORE THE LD. AO AS MOST OF THE DETAILS WERE TO BE COLLECTED FROM 3 RD PARTIES AND PROCUREMENT OF THE SAME TOOK SOME TIME. THE LD. CIT (A) REMANDED THE ADDITIONAL EVIDENCE FILED BY THE A SSESSEE TO THE LD. AO FOR HIS EXAMINATION BOTH WITH REGARD TO ITS ADMISSIBILITY AND THE MERITS OF THE ADDITION IN LIG HT OF THE ADDITIONAL EVIDENCE SUBMITTED. THE LD.AO DID NOT OF FER ANY COMMENTS ON THIS ISSUE AND THUS LD.CIT (A) ADMI TTED ADDITIONAL EVIDENCE ON THE BASIS OF THE PROVISIONS CONTAINED UNDER RULE 46A IN THE LIGHT OF EXPLANATIO N GIVEN BY ASSESSEE. WHILE ADMITTING THE ADDITIONAL EVIDENC E THE LD. CIT(A) CONSIDERED THE REASONABLE CAUSE WHICH PRECLUDED THE ASSESSEE FROM FILING ADDITIONAL DETAI LS BEFORE THE ASSESSMENT PROCEEDINGS. LD.CIT (A) IN HIS ORDER AT PARA 3.3 TO 3.11 DEALT W ITH EACH AND EVERY DIFFERENCE IN THE BALANCE SHEET/COMPUTATI ON OF INCOME FILED ALONGWITH ORIGINAL RETURN OF INCOME VIS--VIS REVISED BALANCE SHEET/COMPUTATION FILED ALONG WITH THE REVISED RETURN OF INCOME ON 9/09/2011, EXCEPT FOR T HE INCOME DECLARED UNDER THE HEAD INCOME FROM OTHER SOURCES IN THE REVISED COMPUTATION OF INCOME BEING INTEREST RECEIVED FROM RPS INFRASTRUCTURE LTD. 14 I.T.A.NO.2460./DEL/2015 WITH THESE FACTUAL BACKGROUND, LET US ANALYSE THE G ROUNDS ON WHICH THE NOTICE UNDER SECTION 263 HAS BEEN ISSU ED POST THE ORDER PASSED BY THE 1 ST APPELLATE AUTHORITY. ON PERUSAL OF THE NOTICE UNDER SECTION 263 DATED 1/10/ 2014 WHICH IS PLACED AT PAGE 153 OF THE PAPER BOOK, IT I S OBSERVED THAT THE LD.CIT INITIATED SUCH PROCEEDINGS ON THE FOLLOWING COUNTS AS UNDER: IT IS AFTER THE RECEIPT OF NOTICE UNDER SECTION 143 (2) DATED 29/08/2011 THAT THE ASSESSEE HAS REVISED THE INCOME ON 9/09/2011 DECLARING INCOME FROM OTHER SOURCES AT RS.5,76, 236/- AGAINST THE FIGURE OF RS.64,177 SHOWN IN THE ORIGINAL RETURN OF INCOME. THE LD.CIT IS OF THE OPINION THAT AS ADDITIONAL INC OME UNDER THE HEAD INCOME FROM OTHER SOURCES AMOUNTING TO RS.5,12,059/-WAS DECLARED AFTER THE RECEIPT OF NOTICE UNDER SECTION 143(2), TANTAMOUNT TO CONCEALED INCOME WITHIN THE MEANING OF SECTION 274 READ WITH SECTION 271 (1) (C) OF THE ACT, FOR WHICH THE ASSESSING OFFICER HAS NOT INITIATED PENALTY PROCEEDINGS. ON GOING THROUGH THE COMPUTATION OF INCOME FILED DURING THE ASSESSMENT PROCEEDINGS IT MAY BE SEEN THAT REPRODUCE PARA 4 AT PAGE 154 OF PAPER BOOK (4. ON GOING THROUGH THE COMPUTATION OF INCOME FILED DURING ASSESSMENT PROCEEDINGS IT MAY BE 15 I.T.A.NO.2460./DEL/2015 SEEN THAT) AS PER REVISED COMPUTATION, INTEREST OF RS.5,20,767/- HAS BEEN DECLARED AS INTEREST RECEIVE D FROM RPS INFRASTRUCTURE LTD. HOWEVER, AS PER FINAL BALANCE SHEET FILED BY YOU FOR THE PERIOD ENDING ON 31.03.2010, IT HAS BEEN NOTICED THAT NO INVESTMENT IN THE NAME OF M/S RPS INFRASTRUCTURE LTD. IS REFLECTED. ON GOING THROUGH THE ASSESSMENT RECORDS IT HAS BEEN NOTICED THAT NO DETAILS SHOW THAT THE INVESTMENT MADE WITH M/S RPS INFRASTRUCTURE LTD. WAS LIQUIDATED DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO OUGHT TO HAVE ENQUIRED THE ISSUE FURTHER TO OBTAIN DETAILS OF THE SAID INVESTMENT ACCOUNT. HOWEVER, THE AO FAILED TO DO SO. REPRODUCE PARAGRAPH 5 AT PAGE 154 OF PAPER BOOK 5. AS PER REVISED RETURN OF INCOME FILED U/S 139(5) OF THE IT ACT. 1961 ON 09.09.2011 YOU HAVE CLAIMED (CURRENT YEAR) LOSS OF RS.6,52,381/- ON ACCOUNT OF LONG TERM CAPITAL LOSS TO BE CARRY FORWARDED IN THE SUBSEQUENT ASSESSMENT YEARS. HOWEVER, AS THE REVISED RETURN OF INCOME IN WHICH LOSS WAS CLAIMED FOR THE FIRST TIME, WAS NOT FIFED WITHIN THE PERIOD SPECIFIED U/S 139(1), THE LOSS CANNOT BE CARRY FORWARDED AS PER PROVISIONS OF SECTION 139(3) OF TH E I.T. ACT. HOWEVER, THE AO FAILED TO POINT OUT THAT THIS LOSS IS NOT TO BE CARRY FORWARDED WHILE PASSING THE ASSESSMENT ORDER. 16 I.T.A.NO.2460./DEL/2015 PARA 6 6. AS PER BALANCE SHEET TILED BY YOU FOR THE YEAR ENDING 31.03.2010 YOU HAVE DECLARED A LOAN OF RS.1,99,33,1677- AS ON 31.03.2010 ADVANCED TO M/S DAMCO SOLUTIONS PVT. LTD. AS PER COPY OF THIS LOAN ACCOUNT IN THE BOOKS OF M/S DAMCO SOLUTIONS PVT. LTD. AVAILABLE ON RECORD, THERE IS AN ENTRY OF RS.94,33,334/- ON 04.03.2010 WHICH IS SHOWN TO HAVE BEEN RECEIVED FROM YOU. NARRATION OF THIS ENTR Y IN THE SAID ACCOUNT, DOES NOT HAVE DETAILS OF CHEQU E AND ISSUING BANK WHEREAS NARRATION IN RESPECT OF OTHER ENTRIES MENTION THESE DETAILS. NO CORRESPONDING ENTRY IS LOCATABLE IN THE STATEMENT O F YOUR BANK ACCOUNT AVAILABLE ON RECORD. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO OUGHT TO HAVE ENQUIRED THE ISSUE FURTHER BY OBTAINING AND .EXAMINING DETAILS AND SOURCE OF THE SAID INVESTMEN T. HOWEVER, THE AO FAILED TO DO SO. PARA 7 7. AS PER BALANCE SHEET AS ON 31.03.2010 YOU HAVE DECLARED LOAN FROM HDFC BANK LTD. AT RS.72.00,0007- AND ANOTHER LOAN FROM DEUCHE BANK AT RS.32,38,2567-. HOWEVER, THE SOURCES OF REPAYMENT OF THE INSTALLMENTS OF THIS LOAN ACCOUNT ARE NOT EXPLAINED AS PER THE MATERIAL AVAILABLE ON RECORD. THE AO OUGHT TO HAVE ENQUIRED THE ISSUE FURTHER BY OBTAINING DETAILS OF THE SAID REPAYMENTS OF LOAN AND INTEREST. HOWEVER, THE AO FAILED TO DO SO. 7.1 FROM THE ABOVE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, IT APPEARS TO ME THAT THE ABOVE ACTS OF OMISSION AND COMMISSION BY THE AO. PRIMA FACIE, NOT ONLY RENDER THE ASSESSMENT ORDER PASSED U/S 143(3) ON 04.03.2013 AS ERRONEOUS BUT ALSO PRE- JUDICIAL TO THE INTEREST OF THE REVENUE WITHIN THE MEANING OF SECTION 263 OF THE I.T ACT, 1961. YOU AR E, THEREFORE, AFFORDED AN OPPORTUNITY OF BEING HEARD T O SHOW CAUSE AS TO WHY AN APPROPRIATE ORDER U/S 263 17 I.T.A.NO.2460./DEL/2015 OF THE ACT, SUITABLY MODIFYING/ENHANCING/CANCELLING THE ORDER UNDER REFERENCE TO BE MADE AFRESH, BE NOT MADE FOR THE SAID ASSESSMENT YEAR. 7.2 FOR THIS PURPOSE, YOUR CASE IS FIXED FOR HEARIN G AT 11.00 A.M. ON 15.10.2014 IN MY OFFICE AT 2 ND FLOOR, 'B'- BLOCK. NEW C.G.O COMPLEX, FARIDABAD. 7.3 YOU MAY ATTEND EITHER IN PERSON OR THOUGH THE AUTHORIZED REPRESENTATIVE. PLEASE NOTE IN CASE YOU DO NOT WISH TO AVAIL OF THIS OPPORTUNITY IN PERSON OR THROUGH THE AUTHORIZED REPRESENTATIVE, YOU MAY FURNISH WRITTEN ARGUMENTS ON OR BEFORE THE AFORESAI D TIME AND DATE, WHICH MAY ALSO BE CONSIDERED APPROPRIATELY BEFORE CONSIDERING TO MAKE ORDER U/S 263 OF THE ACT. IN CASE OF FAILURE ON YOUR PART TO AVAIL OF THIS OPPORTUNITY I SHALL BE CONSTRAINED TO PASS THE ORDER U/S 263 OF THE ACT ON MERITS OF THE CASE. 6. ON A CAREFUL READING OF THE ORDER PASSED BY LD. CIT (A) IT CAN BE DISCERNED THAT THE LD.CIT(A) HAS NO D OUBT CONSIDERED IN DETAIL VARIOUS DISCREPANCIES IN TWO D IFFERENT VERSIONS OF BALANCE SHEET, WHICH HAS BEEN RAISED BY THE LD.CIT IN POINT NO. 4 AND 5 ABOVE. HOWEVER NEITHER LD.AO NOR LD.CIT (A), HAS DEALT WIT H THE ISSUE RELATING TO INTEREST FROM RPS INFRASTRUCT URE LTD., DECLARED BY THE ASSESSEE IN THE REVISED RETURN, WHI CH WAS ADMITTEDLY NOT SHOWN IN THE REVISED BALANCE SHEET A S ON 31/03/2010. FURTHER, WHETHER THE RETURN FILED ON 9/09/2011 COULD BE CONSIDERED AS A REVISED RETURN U NDER SECTION 139 (5) OF THE ACT HAS ALSO NOT BEEN CONSID ERED BY AUTHORITIES BELOW. ON CAREFUL PERUSAL OF THE COMPUT ATION PLACED AT PAGE 2 AND ORIGINAL COMPUTATION PLACED AT PAGE 18 I.T.A.NO.2460./DEL/2015 5 IT CAN FURTHER BE DISCERNED THAT THE ASSESSEE IN THE REVISED COMPUTATION HAS SET OFF THE LOSS FROM INCOM E FROM HOUSE PROPERTY IN THE GROSS TOTAL INCOME WHEREAS TH E SAME HAS BEEN CARRY FORWARD IN THE REVISED RETURN. IT IS OBSERVED ON PERUSAL OF THE ORDERS THAT THE NEITHER LD. AO NOR LD. CIT (A) VERIFIED ALL THESE ISSUES ON MERITS . IN FACT THESE ISSUES WERE NOT AT ALL RAISED/CONSIDERED BY L D.CIT (A). THERE IS NOTHING IN THE ORDER OF THE ASSESSING OFFICER ALL LD. CIT (A) TO INDICATE THAT THEY WOULD HAVE AP PLIED THEIR MIND ON THESE ISSUES. THUS IN RESPECT OF THES E ISSUES THE ORDER OF LD. AO HAS ATTAINED FINALITY AN D HAS NOT MERGED WITH THE ORDER OF LD. CIT (A). IN OUR CO NSIDERED OPINION UNLESS THE APPELLATE AUTHORITY HAS APPLIED HIS MIND TO THE ORIGINAL ASSESSMENT ORDER ON ANY ISSUE ARISING IN APPEAL WHILE PASSING THE APPELLATE ORDER ONE SHOULD BE CAREFUL IN APPLYING THE DOCTRINE OF MERGE R TO THE APPELLATE ORDER. IT IS PERTINENT TO NOTE THAT THERE CANNOT BE MUCH A MERGER OF A QUESTION/ISSUE WHICH WAS NOT EVE N A PART OF THE ORDER WHICH IS SAID TO HAVE MERGED. MER GER CAN BE OF SOMETHING, WHICH EXISTED AT THE TIME WHEN THE SUBSEQUENT ORDER WAS PASSED. BUT WHAT DID NOT EXIST WHEN THE ORDER OF THE HIGHER AUTHORITY WAS PASSED, CANNOT BE CONSIDERED TO HAVE BEEN MERGED IN THAT ORDER. TH IS VIEW WAS TAKEN BY HONBLE BOMBAY HIGH COURT IN THE CASE OF WARNER-LAMBERT CO VS. CIT REPORTED IN (1994)205 ITR 395. 19 I.T.A.NO.2460./DEL/2015 ADVERTING TO THE FACTS OF THE PRESENT CASE, THE LD. AO HAS NOT DEALT WITH THE INTEREST DECLARED BY THE ASSESSE E IN THE REVISED COMPUTATION AMOUNTING TO RS.5,20,767/-, AS RECEIVED FROM RPS INFRASTRUCTURE LTD., WHICH DID NO T REFLECT IN THE REVISED BALANCE SHEET. FURTHER THE L D. AO DID NOT DEAL WITH THE ISSUE WHETHER THE RETURN FILE D BY THE ASSESSEE ON 09/09/2011 AMOUNTED TO A REVISED RETURN UNDER SECTION 139(5) OF THE ACT. THESE TWO ISSUES H AS NEITHER DEALT BY LD.CIT(A) SUO MOTO NOR HAS BEEN CALLED UPON BY THE ASSESSEE TO DECIDE IN THE ORDER PASSED BY HIM. UNDER SUCH CIRCUMSTANCES THERE IS NO QUESTION OF THAT PART OF THE ASSESSMENT ORDER HAVING BEEN MERGE D OR BEING SUPERSEDED BY THE ORDER PASSED BY LD. CIT (A) . THUS IN OUR CONSIDERED OPINION ONE OF THE CONDITION S PRECEDED AND FOR INVOKING THE JURISDICTION UNDER SE CTION 263(1) EXISTS, IN RESPECT OF DISCLOSURE OF INTEREST RECEIVED FROM M/S.RPS INFRASTRUCTURE LTD. AND VERIFICATION O F PERIOD OF LIMITATION WITHIN WHICH THE ASSESSEE IS S UPPOSED TO WHICH IS ASSESSEE CAN FILE A REVISED RETURN UNDE R SECTION 139 (5) OF THE ACT. IN RESPECT OF THE BALANCE ISSUE BEING ITEM NO. 3.1, 3.3, 6, 7 OF NOTICE DATED 01/10/2014 ISSUED BY LD. CIT, IT IS OBSERVED FROM THE ORDER PASSED BY THE LD. CIT (A ) THAT THEY HAVE BEEN DEALT BY LD. CIT (A) IN DETAIL ON ME RITS AND THEREFORE THE PRINCIPLE OF MERGER APPLIES. HOWEVER IN RESPECT OF ITEM NO. 3.2, 4 AND 5 MENTIONED IN THE N OTICE DATED 01/10/2014 ISSUED BY LD. CIT THE PRINCIPLE OF 20 I.T.A.NO.2460./DEL/2015 MERGER CANNOT BE APPLIED AND THE ORDER PASSED BY LD . CIT IN RESPECT OF THESE ISSUES ARE UPHELD. ACCORDINGLY THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 30.11.2016. SD/- SD/- (N. K. SAINI) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 30.11.2016 SP. COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI)
Mehul