M/S. Shreee jagannath Promoters & Developers Pvt. Ltd., Cuttack V. Principal CIT (Central), Visakhapatnam

ITA 300/CTK/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 9922 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 22-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Revision of order; Search and seizure; Assessment record; Set aside
• Section: 263

Judgement Text

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK BEFORE SHRI C.M. GARG, JM & SHRI ARUN KHODPIA, AM आयकर अपीऱ सं./ITA No.299&300/CTK/2019 (नििाारण वषा / AYs. :2010-2011 & 2011-2012) M/s Shree Jagannath Promoters & Developers Pvt. Ltd., Osiya Tower, Haripur Road, Cuttack. Vs Pr.CIT(Central), Visakhapatnam PAN No. : AAM CS 3510 Q (अऩीलाथी /Appellant) .. (प्रत्यथी / Respondent) ननधाारिती की ओर से /Assessee by : Shri B.Panda, Sr. Adv. & B.R.Panda, Advocate िाजस्व की ओर से /Revenue by : Shri M.K.Gautam, CIT-DR स ु नवाई की तािीख / Date of Hearing : 25/05/2022 घोषणा की तािीख/Date of Pronouncement : 06/07/2022 आदेश / O R D E R Per Arun Khodpia, AM: These are appeals filed by the assessee against the separate orders of the Pr. CIT (Central), Visakhapatnam dated 26.3.2019 for the assessment years 2010-11 & 2011-12, respectively. 2. Both the appeals are barred by limitation by 114 days. The assessee has filed condonation petitions 23.9.2019 supported by affidavits, wherein, it is stated that the order u/s.263 passed by Pr. CIT was received by the office of the assessee on 3.4.2019. However, due to occurrence of ‘Fani’ cyclone, the files and other relevant papers of the assessee company were misplaced and could not be traced out. It was in this backdrop that the Director of the company had forgotten to file appeal ITA No.299&300/CTK/2019 2 before the Tribunal within the stipulated period as prescribed by the Act. Hence, there was delay of 114 days in filing the appeals. Ld counsel for the assessee also reiterated the submissions stated in the condonation petitions and requested to condone the delay. Ld CIT DR opposed the condonation petition. 3. After hearing both the parties and considering the condonation petition, we are satisfied that the assessee was prevented by sufficient cause in filing the appeals within the stipulated period. Hence, we condone the delay of 114 days in both the appeals and admit the same for adjudication. 4. Facts being similar in both the assessment years under appeal, we take up for adjudication appeal for the assessment year 2010-2011 and decisions would apply mutatis mutandis to the assessment year 2011-12. 5. To consider the issues better, we are taking first ITA No. 300/CTK/2019 for the AY 2011-12, for adjudication. Facts of the case are that the assessee is a private limited company, filed the return of income disclosing the taxable income at Rs.6,05,510/- for the AY 2011-12. There was a search and seizure operation in the business premises in the case of Shree Jagannath Transport Corporation Ltd., & Group on 10.9.2014. In response to notice u/s.153C of the Act, the assessee filed return of income on 7.12.2016 disclosing total income at Rs.6,20,810/-. The Assessing Officer passed the assessment order u/s.153C of the Act dated 18.12.2016 determining the total income at Rs.6,20,810/-. ITA No.299&300/CTK/2019 3 6. Thereafter, the Pr. CIT (Central) Visakhapatnam by virtue of powers conferred under section 263 of the Act, called for the assessment record and reviewed the same. He noticed that the following issues have not been considered and examined by the AO while passing the assessment order: i) Irregular allowance of capital loss as Business loss. So the claim of Rs. 14,44,631/- shown as loss on sale of share and was allowed though it was a capital loss. The claim ought to have been disallowed U/s.37 of the I.T. Act. ii) Non addition of excess claim of inventory. The assessee has shown the value of land as on 31.03.2010 at Rs.85,86,400/- and purchased two pieces of land during financial year 2010-11 Rs.2,79,30,000/- so the value of land as on 31.03.2011 should be at Rs.3,65,15,400/- but it had shown at Rs.3,76,14,326/- so the excess value of land exhibited at Rs. 10,97,926/-implies the lands were purchased from undisclosed sources.” 7. The Ld PCIT further observed and decided as under:- 3. A notice was issued to the assessee to show cause as to why the assessment order dated 28.12.2016 passed u/s.153C of the Act should not be revised as per the provisions of section 263 to consider the issues mentioned above. The case was fixed for hearing on 25.03.2019. On 25.03.2019, Sri Punam Pandia, director of the assessee-company filed a letter in this office and sought time of three days to submit the details. 4. I have considered the letter filed by the assessee received in this office on 25.03.2019 requesting for adjournment of three days to submit the details. But this case is getting barred by limitation on29th March, which is the last working day during this financial year. Hence adjournment cannot be granted to the assessee. Anyhow, no adverse inference is being taken now and the case is only set aside to the file of the Assessing Officer and the assessee is at liberty to furnish all his arguments before the Assessing Officer. It is a settled law that the Pr.CIT need not pass a detailed Revision Order u/s.263 of I.T.Act and the file can be set aside to the Assessing Officer for verification and passing an assessment order as per law. 5. in view of the same, the assessment order passed by the Assessing Officer on 28.12.2016 is hereby cancelled and the AO is directed to pass fresh assessment order on the issues mentioned in the show cause notice as per law after giving opportunity to the ITA No.299&300/CTK/2019 4 assessee. Hence, the principles of natural justice are also not violated. The assessee is requested to co-operate with the Assessing Officer in furnishing the details to complete the assessment at the earliest. 8. Ld A.R. of the assessee submitted as under :- 1. That This appeal is filed by the appellant against the order of the Id. Pr. CIT Central U/s.263 of the IT. Act holding the earlier order passed by the AO is erroneous so far as prejudicial to the interest of the revenue needs for further verifications and examination of the matter afresh without application of mind or found any new information that earlier order passed was lack of enquiry. 2. That the facts leading to the issues are that the appellant filed its return of income disclosing the taxable income at Rs.6,05,510/- subsequently the case was reopened U/s.153C of the IT. Act following to the search conducted u/s132 of the IT. Act, consequently the Appellant filed revised return disclosing Income at Rs.6,20,810/- and the Id. AD passed the assessment order U/s.153C of the IT. Act vide dated 18.12.2016 determined the total income at Rs.6,20,810/-. 3. That later on the Id. Pr. CIT exercised his jurisdiction U/s263 of the IT. Act reviewed the assessment order passed U/s.153C of the IT. Act with findings that there were some deficiencies and irregularities crept in the order passed by the AD therefore a show cause notice U/s.263 of the IT. Act issued to the Assessee- Appellant with following reasons:- i) Irregular allowance of capital loss as Business loss. So the claim of Rs.14,44,631/- shown as loss on sale of share and was allowed though it was a capital loss. The claim ought to have been disallowed Ujs.37 of the IT.Act. ii) Non addition of excess claim of inventory. The assessee has shown the value of land as on 31.03.2010 at Rs.85,86,400/- and purchased two pieces of land during financial year 2010-11 Rs.2,79,30,000j- so the value of land as on 31.03.2011 should be at Rs.3,65,15,400/- but it had shown at Rs.3,76,14,326/- so the excess value of land exhibited at Rs.10,97,926/- implies the lands were purchased from undisclosed sources. 4. That the appellant in pursuance to the show cause notice fixing the date for compliance on 25.03.2019 filed a time petition through its Director seeking time of three days to submit the details, but the Id. CIT did not considered the time petition because of the case is getting time barred and simple set aside the case to the AO to verification of the matter afresh after ITA No.299&300/CTK/2019 5 cancelling the earlier order passed by the AO and it is further directed to coordinate the AO in furnishing the information to complete the assessment proceedings without detecting or establishing the elements of erroneous and prejudicial in the order passed by the Id. AO U/s.153C of the IT Act. 5. That in case of the issue NO.1 the appellant was engaged in business of further option transactions and suffered loss from the aforesaid transactions and claimed to set off such loss against profit of trading business. The Id. CIT invoked to Sec. 73 of the IT Act treated loss claimed by the appellant is wrong and not allowable to adjustment against the business income - out it is adjustable under head of the capital gain income the future options are derivatives transactions falling under exception to speculative transactions as defined U/s.43(S) of the IT. Act and taxability head of such transactions is determined on the basis of purchase of investment and since the transactions are entered on regular or frequently manner these are taxable under head of profit and gain as normal business income and in case loss arises that will be set off against the business income not under the head of the capital gain. Therefore the findings of the Id. CIT is wrong and misinterpreted the 5ec.43(S) of the IT.Act. So in view of the facts of the case the AD has rightly allowed the claim of the appellant. 6. That in case of the second issue is concerned the appellant has shown total land cost at Rs.3,76,14,326/- including previous year of Rs.8S,86,400/- land current year of Rs.2,90,27,926j- inclusive stamp duty etc. of Rs.19,27,926/- which have been shown in the balance sheet and the AO after verifying the balance sheet has accepted the transactions. Therefore no excess unaccounted money were incurred for purchase of the land. So the observations of the Id. CIT is non application of mind and the view taken in this case is also indicates the Id. CIT has not gone into the matter properly. Hence the proposal made for addition of Rs.l0,97,926/- is required for liable to be deleted. 7. That the objections made stating the order passed without verifications by the AO is not correct and even the Pr. CIT has not specifically brought to the notice that there was no enquire made and further non discussions in the assessment order itself was not indicative of facts that the AO did not apply his mind in lawful manner. Therefore the order passed Ujs.263 of the IT Act in confused and hastily is liable to be quashed and vacated. 8. That the view taken by the AO was one of the possible views and the assessment order passed by the AO could not be held to be erroneous and prejudicial. It is for the AO to decide the extent of enquiry to be made as it is his satisfaction as what is required under the law. The Pr. CIT adopted principles holding that the assessment order passed without verification and some deficiency are there for reopen of the matter Ujs.263 of the LT. ITA No.299&300/CTK/2019 6 Act is liable to be quashed entirely as in the case of CIT -Vs- Leisure Wear Exports Pvt. Ltd. reported in 341 ITR 166 (Delhi) "The power of revision is not meant to be exercised for the purpose of directing the Assessing Officer to hold another investigation without describing as to how the order of the Assessing Officer is erroneous. From this it also follows that where the assessment order has been passed by the Assessing" Officer after taking into account the assessee's submissions and documents furnished by him and no material whatsoever has been brought on record by the Commissioner which showed that there was any discrepancy or falsity in evidence furnished by the assessee, the order of the Assessing Officer cannot be set aside for making deep inquiry only on the presumption and assumption that something new may come out." . 9. That the Id. AO after scrutiny of document and examined the accounts and through inquired the matter applied the mind to the facts of the case and then satisfied with the details passed the order. Thus mere reasons of non- satisfactions with the manner of verification carried out by the AD the assessment order could not be held to be erroneous and prejudicial to the interest of the revenue. In the case of Hari Iron Trading Co. -Vs- CIT reported in 263 ITR 437 held that- 'In the absence of any suggestion by the Commissioner as to how the inquiry was not proper, we are unable to uphold the action taken by him under section 263 of the Act." 10. That, there must be some prima facie material on record to show that tax which was lawfully eligible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. The Id. AO on being satisfied with the explanation of the assesse, allowed the loss claimed by the appellant, which cannot be held to be 'erroneous' simply because 'in his order he did not make an elaborate discussion in that regard. Therefore, the order passed Ujs.263 of the IT Act is based merely on change of opinion, hence not sustainable and liable to be quashed in toto. 9. Replying to above, ld CIT DR supported the order of the Pr. CIT. He submitted that the issues as raised by the Pr. CIT in the revision order has not been examined and discussed by the AO while passing the assessment order. He submitted that Pr. CIT has only set aside the ITA No.299&300/CTK/2019 7 assessment order with a direction to pass the assessment order afresh after considering and examining the above two issues. Hence, the assessee is at liberty to show the details and clarify the position before the Assessing Officer. 10. We have heard the rival submissions and perused the record of the case. In the present case as the Ld PCIT has not considered the request of the assessee under the time limitation. Further the PCIT has not arrived at any conclusion on the issues raised under proceedings initiated u/s 263 only the issues were set aside to the files of AO with directions to verify and pass a fresh assessment order as per law. 11. Our considered view on this issue is that, if Pr. CIT/CIT is of the view that any enquiry is necessary in the matter, then he should either himself make such enquiry or may get such enquiry conducted. 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 by Pr. CIT/CIT. If the Pr. CIT/CIT is of the view that the AO did not undertake any enquiry, it becomes incumbent on the Pr. CIT/CIT to conduct such enquiry. If the Pr. CIT/CIT does not conduct such basic exercise then the Pr. CIT/CIT is not justified in setting aside the order u/s. 263 of the Act. Ld PCITs stand to set aside the case back to the files of AO on count of the limitation of time is not acceptable. 12. Further, legal position as explained in the case of CIT Vs Leisure Wear Exports Pvt. Ltd. reported in 341 ITR 166 (Delhi) it is held that: ITA No.299&300/CTK/2019 8 Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interest of revenue - Assessment year 2001-02 - Whether for making a valid order under section 263 it is essential that Commissioner has to record an express finding to effect that order passed by Assessing Officer is erroneous which has caused loss to revenue - Held, yes - Whether where assessment order has been passed by Assessing Officer after taking into account assessee's submissions and documents furnished by him and no material whatsoever has been brought on record by Commissioner which showed that there was any discrepancy or falsity in evidences furnished by assessee, order of Assessing Officer cannot be set aside for making deep inquiry only on presumption and assumption that something new may come out - Held, yes 13. Also in case of, Hari Iron Trading Co. Vs. CIT, 263 ITR 437/[2003] 131 Taxman 535 (Punjab & Haryana), it is held that : Held :The Assessing Officer had duly raised the issue of not showing surrendered amount in return by assessee, in the notices, whereby he had required the assessee to produce the relevant books and bills for his verification. The record also showed that the contention of the assessee was found to be correct on verification and, therefore, the Assessing Officer had accepted the contention of the assessee that surrender had been made due to a bona fide mistake in calculation of stock as per books and that in fact there was no discrepancy in stock. The record also showed that purchases from various parties had duly been verified as the Assessing Officer had placed on record certified copies from such parties. [Para 6] In the light of the above factual background, it could not be appreciated as to how the Commissioner had recorded a finding that the assessment had been framed without application of mind or that difference the stock had not been properly examined. Unfortunately, his order was totally non-speaking and it did not convey as to what according to him should have been the proper examination by the Assessing Officer. The assessee had filed a detailed reply to his notice under section 263(1) which had been rejected without giving any reasons whatsoever. The Commissioner did not appear to have either perused the records or applied his mind to the detailed reply filed by the assessee. He had not discussed even a single contention raised therein. The Tribunal had done no better. The Tribunal had based its findings entirely on the fact that there was no mention in the assessment order about the inquiries made by the Assessing Officer about the discrepancy in stock. That was not the correct approach as was evident from the provisions of sub-section (1) of section 263. ITA No.299&300/CTK/2019 9 A perusal of section 263 shows that the Commissioner can exercise powers under sub-section (1) of section 263 only after examining ‘the record of any proceedings under the Act’. The expression ‘record’ has also been defined in clause (b) of the Explanation so as to include all records relating to any proceedings available at the time of examination by the Commissioner. Thus, it was not only the assessment order but the entire record which had to be examined before arriving at a conclusion as to whether the Assessing Officer had examined any issue or not. The assessee had no control over the way an assessment order was drafted. The assessee on its part had produced enough material on record to show that the matter had been discussed in detail by the Assessing Officer. The least that the Tribunal could have done was to refer to the assessment record to verify the contentions of the assessee. Instead of doing that, the Tribunal had merely been swayed by the fact that the Assessing Officer had not mentioned anything in the assessment order. During the course of assessment proceedings, the Assessing Officer examined numerous issues. Generally, the issues which are accepted do not find mention in the assessment order and only such points are taken note of on which the assessee’s explanations are rejected and additions/disallowances are made. On examination the records of the instant case, it was found that the Assessing Officer had made full inquiries before accepting the claim of the assessee and amount on account of discrepancy in stock. Not only that, he had even gone a step further and appended an office note with the assessment order to explain why the addition for allegation discrepancy in stock was not being made. In the absence of any suggestion by the Commissioner as to how the inquiry was not proper, the action taken by him under section 263 could not be upheld. [Para 7] The Commissioner had not bothered to examine the specific objections raised by the assessee in its reply in the impugned order and the Tribunal had rejected the same summarily by observing that the objections were not supported by any material. Both the authorities had failed to take the trouble of even referring to the assessment record. The letters written by the Assessing Officer to the Commissioner supported the contention of the petitioner that the case was being monitored by the Commissioner from time to time and the assessment order had been passed after a draft order along with the survey file had been forwarded to the Commissioner for his approval. Once the assessment order had been passed with the approval of the Commissioner the successor Commissioner could not possibly say that the matter had been decided without application of mind by the Assessing Officer. [Para 8] Consequently, the appeal was allowed, findings of the Tribunal were reversed and the order of the Commissioner was set aside. [Para 9] 14. Respectfully following the above legal pronouncement and on perusal of the fact of the case it is our considered view that the the PCIT’s ITA No.299&300/CTK/2019 10 action to initiating proceedings u/s 263 are not according to law and was not able to establish that the order of AO was erroneous and prejudicial to the interest of revenue, therefore order passed u/s 263 for the AY 2011- 12 is not sustainable, hence quashed. 15. Ld. AO of the assessee further stated regarding order u/s 263 by the Ld PCIT for AY 2010-11, which is also challenge by the assessee before ITAT under appeal number 299/CTK/2019 was a copy paste of the order for the AY 2011-12 of the same assessee. Even the facts and figures of the same are matching with the facts and figures of the order for AY 2011-12, the said order is passed under haste by the Ld PCIT without application of mind, therefore, the same is not sustainable and liable to be quashed. 16. Ld DR also accepted the fact mentioned by the Ld AO that the order passed for AY 2010-11 is ditto copy of the order of AY 2011-12 except the AY in its headings. No further argument advanced by the Ld DR. 17. We have perused the material available and observed that the order u/s 263 of the was passed for AY 2010-11 by the Ld PCIT is entirely akin to the order passed for AY 2011-12 and hence cannot be considered as a valid order, therefore not sustainable, accordingly quashed. 18. In the result, both appeals of the assessee are allowed. Order pronounced in the open court on 06/07/ 2022. Sd/- (C.M.GARG) Sd/- (ARUN KHODPIA) न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER कटक Cuttack; ददनाांक Dated 06/07/2022 ITA No.299&300/CTK/2019 11 Prakash Kumar Mishra, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : आदेशाि ु सार/ BY ORDER, (Assistant Registrar) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack 1. अऩीलाथी / The Appellant- 2. प्रत्यथी / The Respondent- 3. आयकि आय ु क्त(अऩील) / The CIT(A), 4. आयकि आय ु क्त / CIT 5. ववभागीय प्रनतननधध, आयकि अऩीलीय अधधकिण, कटक / DR, ITAT, Cuttack 6. गार्ा पाईल / Guard file. सत्यावऩत प्रनत //True Copy//