M/s Bhumi Cotton P Ltd., Jalna V. Principal Commissioner of Income-Tax-1, Aurangabad

ITA 42/PUN/2022

AI Insights

The case involves M/s. Bhumi Cotton P. Ltd., which appealed against the order of the Pr. Commissioner of Income Tax-1, Aurangabad, setting aside the assessment order for the assessment year 2014-15. The original assessment had not examined the genuineness of the assessee's claim for exemption under section 10(38) for long-term capital gains, which was crucial given the context of penny stocks. The Tribunal dismissed the appeal, agreeing with the PCIT that the assessment was erroneous and prejudicial to the interests of the Revenue, necessitating a re-assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137152 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-12-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 16-01-2022
• Other Referred Cases: Cognizance for Extension of Limitation (2021) 438 ITR 296 (SC), Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC), CIT vs. Max India Ltd., 295 ITR 282 (SC), PCIT vs. Swati Bajaj, 446 ITR 56 (Calcutta)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: HARI KRISHAN
• Keywords: Revision of order; Opportunity of being heard; Capital Gains
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A”, PUNE BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI S. S. VISWANETHRA RAVI, JUDICIAL MEMBER आयकर अपील सं. / ITA No.42/PUN/2022 िनधाᭅरण वषᭅ / Assessment Year : 2014-15 M/s. Bhumi Cotton P. Ltd., Shop No.1, Runwal Complex, Old Mondha Opposite Hanuman Mandir, Jalna- 431203. PAN : AADCB4659E Vs. Pr.CIT-1, Aurangabad. Appellant Respondent आदेश / ORDER PER INTURI RAMA RAO, AM: This is an appeal filed by the assessee directed against the order of the ld. Pr. Commissioner of Income Tax- 1, Aurangabad [‘the PCIT’] dated 22.03.2019 for the assessment year 2014-15. 2. At the outset, there is a delay of 972 days in filing the present appeal. The appellant has filed an affidavit dated 14.01.2022 stating the following averments :- “1. The revision order dated 22-03-2019 passed by the Pr. Commissioner of Income Tax-1, Aurangabad was received on 22-03-2019. Accordingly the appeal was required to be filed before the Hon'ble Tribunal by 21-05- 2019. Assessee by : Shri Hari Krishan Revenue by : Shri Keyur Patel Date of hearing : 14.12.2022 Date of pronouncement : 11.01.2023 ITA No.42/PUN/2022 2 2. The appeal however has been filed on 17-01-2022. In this way there is a delay of 972 in filing of the appeal. The. Hon'ble Supreme Court vide its judgement in the case of Cognizance for Extension of Limitation (2021) 438 ITR 296 (SC) has held that because of COVID-19 situation, in calculating/reckoning the date of limitation for filing the appeals, the period from 15-03-2020 to 30-09-2021 i.e. 564 days is to be excluded. As such there is actual delay of only 308 days in filing of this appeal. 3. Since the Pr. Commissioner of Income Tax vide the impugned revisional order has only set aside the assessment order dated 29-12-2016 on some issues, with the direction to the Assessing Officer to pass the assessment order afresh after giving the assessee a reasonable opportunity of being heard as per law, the assessee did not deem it fit to file the appeal against the impugned revision order dated 22-03-2019. Subsequently while preparing the appeal against the order of the Commissioner of Income Tax (Appeals) dated 18-11-2021 (in respect of the assessment order dated 26-12-2019 passed u/s 143(3) r.w.s. 263 in pursuance of the revision order of the Pr. Commissioner of Income Tax), it transpired that the assessee has a cause of action on legal grounds against the impugned revision order of the Pr. Commissioner of Income Tax. Accordingly the appeal under consideration has been filed on 17- 01-2022. 4. It is respectfully submitted that the delay has not been caused on account of any palpable negligence, or malafide on the part of the assessee. The delay was not caused deliberately by the assessee. The delay is absolutely unintentional and is due to the bonafide reasons. It is further submitted that the assessee has not obtained any undue benefit because of the delay in filing the return of income. Whatever is stated above is true to the best of my knowledge and belief.” 3. Considering the averments made in the affidavit, we are of the considered opinion that the appellant was prevented from causing the appearance before the ld. CIT(A) on account of difficulties faced by the appellant on account of Covid-19 Pandemic, the Hon’ble Supreme Court taking the cognizance of the difficulty faced by the country extended the various limitations prescribed under the Statute. Therefore, we are of the considered opinion that it is fit ITA No.42/PUN/2022 3 case for condoning the delay. Hence, we condone the delay of 972 days and admit the appeal for adjudication. 4. Briefly, the facts of the case are that the appellant is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of ginning and pressing of raw cotton. The Return of Income for the assessment year 2014-15 was filed on 28.11.2014 declaring total income of Rs.Nil. Against the said return of income, the assessment was completed by the Asstt. Commissioner of Income Tax, Jalna Circle, Jalna (‘the Assessing Officer’) vide order dated 29.12.2016 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at a loss of Rs.9,12,528/- after making addition of Rs.11,38,806/- u/s 14A and addition of Rs.1,04,153/- u/s 36(1)(iii) of the Act. 5. Subsequently, on scrutiny of the assessment record, the ld. PCIT observed that the Assessing Officer had failed to examine the genuineness of claim of long term capital gains of Rs.3,04,31,527/- in respect of sale of M/s. NCL Research & Financial Services Ltd.. It is stated that as per the Investigation Report in respect of penny stock submitted to the Director of the Income Tax Department, Kolkata, the shares of M/s. NCL Research & Financial Services Ltd. were also used to generate bogus long term capital gains. Accordingly, the ld. PCIT issued a show cause notice to the ITA No.42/PUN/2022 4 appellant calling upon to the appellant as to why the assessment should not be treated as “erroneous and prejudicial to the interests of the Revenue”, as the Assessing Officer had failed to verify the genuineness of claim for exemption under the head “long term capital gains” in respect of M/s. NCL Research & Financial Services Ltd.. Despite several opportunities given by the ld. PCIT to the appellant, the appellant had chosen not to respond to the show cause notice. In the circumstances, the ld. PCIT set-aside the assessment order with a direction to re-do the assessment after giving an opportunity of hearing to the appellant. 6. Being aggrieved, the appellant is in appeal before us in the present appeal. 7. It is submitted that the ld. PCIT had not granted reasonable opportunity of hearing to the appellant while passing the impugned order. It is further submitted that the order of the ld. PCIT cannot be sustained in view of the direction of the ld. PCIT that in one hand to disallow the claim for exemption u/s 10(38) and on the other hand, assessment order was remanded to the Assessing Officer for examination of the claim. It is further submitted that the copy of Report of the Investigation Wing of the Director of the Income Tax Department, Kolkata was not furnished to the appellant. It is further submitted that the assessment was selected for scrutiny under ITA No.42/PUN/2022 5 limited security and the Assessing Officer could not have examined the genuineness of the capital gains. Non-examination of the claim for exemption u/s 10(38) does not render the assessment order erroneous and prejudicial to the interests of the Revenue. 8. On the other hand, ld. CIT-DR placed reliance on the order of the ld. PCIT. 9. We heard the rival submissions and perused the material on record. The issue in the present appeal relates to the validity of assumption of jurisdiction u/s 263 by the ld. PCIT. The Parliament had conferred the power of revision on the Commissioner of Income Tax u/s 263 of the Act in case the assessment order passed is erroneous and prejudicial to the interests of revenue. In order to invoke the power of revision, the above two conditions are required to be satisfied cumulatively. References in this regard can be made to the decision of the Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT, 243 ITR 83 (SC) and in the case of CIT vs. Max India Ltd., 295 ITR 282 (SC). The error in the assessment order should be one that it is not debatable or plausible view. In a case where the Assessing Officer examined the claim took one of the plausible views, the assessment order cannot be termed as an “erroneous”. ITA No.42/PUN/2022 6 10. In the present case, the appellant took a plea that the issue was examined by the Assessing Officer, but preliminary objection taken before us is that the case was selected for limited scrutiny, therefore, the question of examination of issue of genuineness of claim for exemption u/s 10(38) does not arise. The submission made by the assessee is contrary to the material on record. The appellant filed a copy of the scrutiny notice placed at page no.35 of the Paper Book which clearly mentioned that the case was selected for scrutiny under CASS. However, there was no mention in the said notice, the case was selected for limited scrutiny. In-fact, the Assessing Officer had issued various queries vide letter dated 31.10.2016. On mere perusal of the said notice, it would be clear that there was no query from the Assessing Officer as to the genuineness of the claim for exemption u/s 10(38) under the head “long term capital gains”. The appellant cannot be blow hot and cold one hand say that the case was selected for limited scrutiny and on the other hand the issue was examined by the Assessing Officer. Thus, the contentions made in this behalf by the appellant are devoid of any merit. It can be safely concluded that the Assessing Officer had failed to examine the genuineness of claim for exemption u/s 10(38) of the Act. 11. As regards, the plea that no reasonable opportunity was given by the ld. PCIT during the course of proceedings before him, the ITA No.42/PUN/2022 7 appellant could not demonstrate before us that the notice was received after expiry of the date of hearing of the proceedings u/s 263 of the Act. On any event, it is established the fact that the shares of M/s. NCL Research & Financial Services Ltd. were reported as penny stock by the Investigation Wing of the Income Tax Department, Kolkata, the transactions of purchase and sale of shares in M/s. NCL Research & Financial Services Ltd. are part of the fraud played by the operators involved in the penny stock. 12. As regards to the argument that the ld. PCIT was not clear in his finding, therefore, the order should be declared null and void, cannot be accepted for the reason that the ld. PCIT has only set- aside the assessment to re-do the assessment after giving an opportunity of hearing to the appellant, since this issue was not examined by the Assessing Officer during the course of assessment proceedings. We also make it clear that even the information received after the completion of assessment constitutes a part of the record for initiation of proceedings u/s 263 of the Act. In light of above discussions, the ratio of the judgement of the Hon’ble Calcutta High Court in the case of PCIT vs. Swati Bajaj, 446 ITR 56 (Calcutta) is squarely applicable, wherein, it has held that failure of the Assessing Officer taking into the report of the Investigation Wing of the Income Tax Department and accepted the claim for ITA No.42/PUN/2022 8 exemptions on account of long term capital gains and the exemption arisen from transaction with penny stock, renders the assessment erroneous and prejudicial to the interests of the Revenue. Therefore, the ld. PCIT was justified in setting aside the assessment order of the Assessing Officer. Thus, the grounds of appeal filed by the assessee stand dismissed. 13. In the result, the appeal filed by the assessee stands dismissed. Order pronounced on this 11 th day of January, 2023. Sd/- Sd/- (S. S. VISWANETHRA RAVI) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 11 th January, 2023. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr. CIT-1, Aurangabad. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “A” बᱶच, पुणे / DR, ITAT, “A” Bench, Pune. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.