Sh. Ashwani Oberoi, Ambala Cantt V. Pr. C.I.T., Panchkula

ITA 369/CHANDI/2022

AI Insights

The case involves Ashwani Oberoi, who appealed against the order of the PCIT, Panchkula, which was passed under section 263 of the Income Tax Act. The PCIT's order was based on the grounds that the Assessing Officer had not thoroughly investigated the assessee's claim of license fee payments to the Municipal Corporation, Ambala. The Tribunal noted that the entire issue arose from an audit objection, which the Assessing Officer had addressed and was satisfied with the assessee's explanations. The Tribunal concluded that the PCIT's revision was unjustified as it constituted a mere change of opinion and was not based on any new facts or evidence.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124622 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-10-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 18-04-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Audit objection; Reassessment proceedings; Set aside
• Section: 147; 148; 263; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH CHANDIGARH Before Shri Sanjay Garg, Judicial Member & Shri Vikram Singh Yadav, Accountant Member I.T.A. No.369/CHANDI/2022 Assessment Year: 2012-13 Ashwani Oberoi, Ambala.................. ..................................................... Appellant C/o Rajiv Goeal and Associates, 179, Bank Road, Ambala Cantt, Haryana-133001. [PAN:AACPO3105A] vs. PCIT, Panchkula........................................................................................ Respondent Appearances by: Shri Rohit Goyal, CA, appeared on behalf of the appellant. Shri Vivek Nangia, CIT, DR, appeared on behalf of the Respondent. Date of concluding the hearing : October 18, 2022 Date of pronouncing the order : January 12 , 2023 ORDER Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 30.03.2022 of the Principal Commissioner of Income Tax, Panchkula [hereinafter referred to as ‘PCIT’] agitating the action of the PCIT in passing the impugned order u/s 263 of the Income Tax Act (hereinafter referred to as the ‘Act’) exercising his revision jurisdiction. 2. The brief facts of the case are that the assessee had filed his income tax return for the assessment year 2012-13 on 17.09.2012 declaring business income of Rs.77,44,480/- along with the agricultural income of Rs.10.89,264/-. The case of the assessee was selected for scrutiny through CASS for the reason ‘Large other expenses claimed in the P&L A/c’. The assessment u/s 143(3) of the Act was completed by the Assessing Officer (in short “the A.O”) on 30.03.2015 by making total addition of Rs.2,67,323/- after disallowing certain expenses personal in nature. Later on, it was noticed that the issue pertaining to the assessee’s claim of licence fee payments to the Municipal Corporation, Ambala during the year under consideration I.T.A. No.369/CHANDI/2022 Assessment Year: 2012-13 Ashwani Oberoi 2 was not properly verified by the AO. Therefore, remedial action was taken in the case of assessee by initiating proceedings u/s 147 of the Act. Subsequently assessment u/s 143(3) r.w.s. 147, of the Act was completed on 29.08.2019 at an income of Rs.81,05,971, without making any fresh addition to the income earlier assessed. In the given assessment order, the A0 concluded that as per the Agreement between the assessee and the Municipal Corporation, Ambala, the assessee had to pay Rs.1,68,30,000/- for a period of three years in 30 monthly instalments i.e. @ Rs.5,61,000/- per month starting from 01.06.2010, and thus, the license fees payable to the tune of Rs. 67,32,000/- for 12 months was allowable to the assessee for the year under consideration. 3. Thereafter, the ld. PCIT, exercising his revision jurisdiction u/s 263 of the Act, observed that even though, proceedings u/s 147 of the Act were initiated by the assessing officer on the basis of assessee's claim of the licence fee payment only, yet, the issue pertaining to the assessee's claim of payment of license fee to the Municipal Corporation, Ambala during the year under consideration was not thoroughly investigated and verified by the assessing officer. The assessee had claimed the license fee payment amounting to Rs.1,23,42,000/- during the year under consideration out of which licence fee to the tune of Rs.56,10,000/- pertained to the preceding previous year 2010-11. He observed that the assessing officer had not at all examined the said claim of the assessee even though, it was clearly mentioned in the reasons recorded u/s 148 that the license fee to the tune of Rs. 56,10,000/- pertained to the preceding year 2010- 11. The assessee however explained that the agreement with the Municipal Corporation was executed on 28.02.2011 and that no work could be executed in Financial year 2010-11. That the amount of I.T.A. No.369/CHANDI/2022 Assessment Year: 2012-13 Ashwani Oberoi 3 Rs.56,10,000/-, in fact, pertained to the financial year relevant to assessment year under consideration. However, the ld. PCIT observed as under: “13. Given the fact that it had come to the notice of the Assessing Officer, during the course of reassessment proceedings, that the assessee’s agreement with the Municipal Corporation, Ambala had run into trouble, and that the assessee had not been able to earn his right of outdoor advertising projects within the municipal limits of Municipal corporation, Ambala City, despite the payment of the license fee to the Municipal Corporation, as a result of which the Hon'ble Punjab and Haryana High Court had agreed to appoint an independent arbitrator to resolve the dispute, it was known to the assessing officer that no advertisement work was actually carried out by the assessee even during the assessment year 2012-13.Hence the assessee's claim of expenditure of Rs. 67,32,000/- on account of the license fee for the AY 2012-13 was also clearly not allowable to the assessee. Thus the license fee paid by the assessee to the tune of Rs. 67,32,000/- during the year under consideration, and of Rs. 56,10,000/- during the preceding year simply stood as assessee's outstanding disputed claims/recoverables from the Municipal Corporation, Ambala. Hence the total amount of Rs. 1,23,42,000/- should have been reflected by the assessee in his balance sheet under the head Sr. debtors/advances/amounts recoverable, instead of claiming the same as a direct expenditure in the profit and loss account. The assessee's claim for award of cost along with interest before the Arbitral Tribunal unequivocally endorses this position. Thus it is apparent that the assessment order was passed by the assessing officer, by mechanically placing on records all the documents submitted by the assessee during the course of reassessment proceedings, without examining the same, and without a correct appreciation of facts and law.” The ld. PCIT dealing with the submissions of the assessee held that the order passed by the Assessing Officer 143(3) read with section 147 of the Act dated 29.08.2019 was erroneous and prejudicial to the interest of the Revenue and set aside the said assessment for de novo assessment. 5. Being aggrieved, the assessee has come in appeal before us. 6. At the outset, the ld. counsel for the assessee has invited our attention to the audit objections raised by ITO(Audit) on 20.06.2016 I.T.A. No.369/CHANDI/2022 Assessment Year: 2012-13 Ashwani Oberoi 4 vide which it was observed that the total amount paid by the assessee was Rs.67,32,000/- to the municipal corporation and that 2/3 of which, amounting to Rs.44,88,000/-, was to be disallowed being deferred revenue expenditure. The ld. counsel has further invited our attention to the reply of the Assessing Officer to said audit objection dated 06.12.2016, whereby, the Assessing Officer did not admit to the said audit objection and stated that the auditor had taken wrong figures. That as per the mercantile style of accounting, the assessee claimed an expenditure of Rs.1,23,42,000/- which was allowable for the year under consideration. That the payments made during the financial year 2011-12 were advance payments as the agreement with the municipal corporation had been executed only on 28.02.2011. 7. However, since the audit objection was not settled, the Assessing Officer proposed to reopen the assessment u/s 147 r.w.s 148 of the Act. Even during the reassessment proceedings, the assessee duly explained that the total amount of fees paid to the municipal corporation was allowable to the assessee as per mercantile system of accounting and not 1/3 of the amount paid. The Assessing Officer accepted the said contention and completed the assessment without any addition. 8. Thereafter, the Assessing Officer requested the CCIT to settle audit objection vide letter dated 04.03.2021. However, ITO(Audit) wrote letter dated 06.10.2021 to CCIT declining to settle the objection. Thereafter, the Assessing Officer again wrote letter to CCIT dated 08.03.2022 to settle audit objections as no further action survived in the case. However, the PCIT, in view of the said objection, again issued notice u/s 263 of the Act and passed the impugned revision order u/s 263 of the Act. I.T.A. No.369/CHANDI/2022 Assessment Year: 2012-13 Ashwani Oberoi 5 9. The only contention raised in the revision order is that the amount of Rs.56,10,000/- pertained to the prior year expenses, whereas, the claim of the assessee is that the said amount pertained to the year under consideration as the agreement with the municipal corporation was executed only on 28.02.2011, itself, and that the amount paid to the municipal corporation in the earlier year was advance payment only. It is further pertinent to mention here that even the assessee was not allowed to use space for advertising, hoarding etc. as per the agreement and a litigation was ensued between the parties. Finally, the parties went to Hon’ble High Court wherein, arbitrator was appointed and the Arbitration Tribunal finally had passed order dated 21.07.2021 passing an award in favour of assessee. The assessee has claimed that this award has been included as income by the assessee and there will be no loss to revenue. As noticed above, the assessee, in this case, has been subjected to multiple litigation only because of non-settlement of audit objection. Firstly, the audit party mistook the figures and held that 2/3 of the expenditure was a deferred revenue expenditure which was to be disallowed. However, the said objection was not admitted by the Assessing Officer. Since, the said audit objection was not settled by the audit party, therefore, the assessee was subjected to reassessment proceedings. Even no addition was made in the reassessment proceedings and the Assessing Officer time and again wrote letters to the CCIT to settle the audit objection. However, since the ITO(Audit) did not agree to settle the objection, the ld. PCIT initiated the revision proceedings u/s 263 of the Act stating that the expenditure of Rs.56,10,000/- pertained to the earlier year as against earlier objection that the 2/3 of the total expenditure booked on account of the municipal fees was not allowable being deferred revenue I.T.A. No.369/CHANDI/2022 Assessment Year: 2012-13 Ashwani Oberoi 6 expenditure. Even, since the assessee had to litigate as the agreement did not mature and arbitration award has been passed, about which the assessee has claimed that the award amount will be offered for taxation. Under the circumstances, any expenditure incurred by the assessee has also to be deducted and to be allowed. The assessee explained that the agreement with municipal corporation was entered on 28.02.2011 and that no amount was incurred in the financial year 2010-11 and the expenditure was rightly booked in the year 2011-12, therefore, we do not find justification on the part of the ld. PCIT in exercising his revision jurisdiction u/s 263 of the Act in this case. 10. As noted above, the entire exercise seems to have been done because of audit objection only. Since, the Assessing Officer had duly enquired about the matter and was satisfied with the explanation given by the assessee, the ld. PCIT, in our view, has wrongly exercised his revision jurisdiction on the issue which is nothing but change of opinion, that too, at the instance of audit party. In this case, even the Assessing Officer did not admit to the audit objections rather requested to settle the audit objection. Therefore, the revision jurisdiction exercised by the ld. PCIT cannot be held to be justified. The revision order passed u/s 263 of the Act is, therefore, quashed. 11. In the result, the appeal of the assessee is hereby allowed. Chandigarh, the 12 th January, 2023. Sd/- Sd/- [Shri Vikram Singh Yadav] [Sanjay Garg] Accountant Member Judicial Member Dated: 12.01.2023. RS I.T.A. No.369/CHANDI/2022 Assessment Year: 2012-13 Ashwani Oberoi 7 Copy of the order forwarded to: 1. Ashwani Oberoi 2. PCIT, Panchkula 3. CIT(A)- 4. CIT- , 5. CIT(DR), ITAT, Chandigarh //True copy// By order Assistant Registrar 1. Date of Dictation.............................................. 2. Date on which the typed order is placed before the dictating Member and other Member..................................................... 3. Date on which the order came back to Sr. PS.......................................... 4. Date on which the file goes to the Bench Clerk....................................... 5. Date on which the file goes to the O.S....................................... 6. Date on dispatch of the order.............................................