Prashant Prabhakar Degaonkar, Solapur V. Pr. Commissioner of Income-Tax -6 , Pune

ITA 453/PUN/2020

AI Insights

The case involves Prashant Prabhakar Degaonkar (HUF), who appealed against the revisionary order of the Pr. Commissioner of Income Tax-6, Pune. The revision was based on the grounds that the original assessment order did not adequately investigate the discrepancies in the agricultural income reported, particularly concerning the expenses claimed and the income from the sale of jaggery. The ITAT found that the PCIT had rightly invoked section 263 due to the lack of inquiry and non-application of mind in the original assessment, which was deemed prejudicial to the interests of the revenue.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 136272 (ITAT-PUNE)
• Duration Of Justice: 13 year(s) 7 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-12-2022
• Assessment Year: misc
• Appeal Filed On: 30-04-2009
• Other Referred Cases: Malabar Industries Vs CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order; Opportunity of being heard; Principle of natural justice; Assessment record; Audi alteram partem
• Section: 263; 143(3); 143(1); 13

Judgement Text

॥ आयकर अपीलीय न्यायाधिकरण, पुणे “बी” न्यायपीठ, पुणे में ॥ ITAT-Pune Page 1 of 17 IN THE INCOME TAX APPELLATE TRIBUNAL, PUNE “B” BENCH, PUNE BEFORE HON’BLE SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No. 453/PUN/2020 धििाारण वर्ा / Assessment Year : 2015-16 Prashant Prabhakar Degaonkar (HUF) 256/257, East Mangalwar Peth, Solapur–413 002 PAN: AAHHP5930P . . . . . . . अपीलार्थी / Appellant बिाम / V/s Pr. Commissioner of Income Tax-6 Pune . . . . . . . . प्रत्यर्थी / Respondent द्वारा / Represented Assessee by : Shri S. N. Puranik Revenue by : Shri P. R. Mane सुनवाई की तारीख / Date of conclusive Hearing : 05/12/2022 घोषणा की तारीख / Date of Pronouncement : 05/12/2022 आदेश / ORDER PER G. D. PADMAHSHALI, AM; Present appeal of the appellant assessee is assailed against the revisionary order of Pr. Commissioner of Income Tax-6, Pune [for short “PCIT”] dt. 11/03/2020 passed u/s 263 of the Income-tax Act, 1961 [for short “the Act”], which sprung out of assessment order dt. 30/06/2017 passed u/s 143(3) by the Income Tax Officer, Ward-1(2), Solapur [for short “AO”] for assessment year [for short “AY”] 2015-16. Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 2 of 17 2. The subject matter of present litigation is twofold, it assailed firstly against violation of principle of natural justice and secondly against assumption of revisionary jurisdiction in the dearth of satisfaction of requisite twin conditions laid in section 263 of the Act. 3. Before attending the facts of instant lis, its apt to reproduce the grounds of appeal raised by the appellant through memorandum are; ―1. Pr. Commissioner of Income Tax has erred in invoking Sec.263 and passing order u/s. 263 which is without jurisdiction & bad in law. Appellant prays to cancel the same. 2. Pr. Commissioner has erred in Passing the Order u/s. 263 without giving proper opportunity of being heard, in spite of AR attending. Appellant prays for cancellation of the Order u/s.263 for violation of natural Justice. 3. Pr. Commissioner has erred both on fact and law in passing the order under Sec. 263 and setting aside Order u/s.143(3). Order u/s.263 may please be cancelled. Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 3 of 17 4. Appellant prays to add, alter, amend, take additional grounds, submit additional evidence and / or during appellate Proceedings. 4. Pithily stated facts borne out of case records are; 4.1 The appellant assessee is a resident Hindu Undivided Family, has e-filed its return of income [for short “ITR”] for AY 2015-16 declaring total income of ₹1,80,000/- coupled with agricultural income of ₹31,26,351/- which was initially processed u/s 143(1) of the Act and later subjected to regular assessment u/s 143(3) of the Act. 4.2 During the course of scrutiny proceeding, the learned authorised representative for the assessee [for short “AR”] in response to questionnaire, put forth the required information and documents sought which inter-alia included 7/12 extracts, bank pass books, sale bills & expense vouchers etc. Discerning therefrom the disproportionate expense incurred in earning agricultural income, the assessee was put to notice to explain the disparity Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 4 of 17 therein and finding no force in the submission of the appellant, the Ld. AO drawing a basis from judicial precedents, estimated related agriculture expense @20% of reported agricultural receipts and consequently restricted agricultural income to recomputed figure of ₹29,81,750/-. 4.3 The Ld. PCIT perusing case records and order of his lower tax authority, contending one as erroneous and prejudicial to the interest of revenue for failure to make necessary inquiry into the claim of the appellant and non-application for mind in carrying out the assessment, has assumed the revisionary jurisdiction vested in him u/s 263 of the Act by service of show cause notice [for short “SCN”] dt. 18/12/2019 and called upon the assessee to substantiate legitimacy of a lease agreement entered on a plain paper, production of sugarcane qua area of cultivation and inexigibility of income derived from the sale of jaggery etc. In the event appellant’s failure, the Ld. PCIT concluded the Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 5 of 17 proceedings directing the Ld. AO for de-nova assessment after conducting necessary inquiry in terms of his directions according reasonable opportunity of being heard to the assessee. 4.4 Pending such proceedings before the Ld. AO, the appellant agitating the impugned revisionary order on the grounds of appeal reproduced at para 3 hereinbefore. 5. During the course of physical hearing, the Ld. AR adverting to affidavit filed by Karta of the appellant (placed at page 44 to 47 of paper book) as well the affidavit of learned Chartered Accountant (placed at page 34 to 37 of paper book) who represented the appellant before tax authorities below [for short “TAB”], has alleged the violation of principle of natural justice for not according inspection of case records and reasonable opportunity to refute against the discrepancies noted in revisionary proceedings. Insofar as the merits of the case are concerned, Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 6 of 17 adverting to questionnaire and submission made in response thereto, it is remonstrated that, the action of Ld. AO is neither erroneous nor prejudicial to the interest of the revenue so has to incite 263 action against the appellant. It is further contended that, the Ld. AO after considering the submission and necessary enquiry into the claim of the appellant, has framed the assessment restricting the agricultural income at the reduced amount of ₹29,81,750/- thereby leaving no scope warranting any revision. Au contraire the learned departmental representative [for short “DR”] adverting to explanation 2 to section 263(1), in support of action of Ld. PCIT vehemently contended that, ostensibly the order of assessment suffers from blatant error in treating the income from sale of jaggery as agricultural and in the event nothing more is required to prove erroneousness therein, hence the revisionary 263 order needs sustenance. 6. After hearing to rival contentions of both the parties; and subject to the provisions of rule 18 of Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 7 of 17 Income Tax Appellate Tribunal Rules, 1963 [for short “ITAT, Rules”] perused the material placed on records till the date of conclusive hearing and duly considered the facts of the case in the light of settled legal position forewarned to either parties. 7. From the records, prima-facie it transpired that, the primary issue in the present controversy is twofold; a. Firstly, as to whether there was violation of principle of ‘Audi Alteram Partem’ in revisionary proceedings? b. Secondly, as to whether order passed u/s 143(3) can be said to be erroneous and prejudicial to the interest of the revenue within the realm of section 263 of the Act? 8. We shall first deal with ground number 2 of appeal memo, which alleges the violation of principal of natural justice for passing an ex-parte order without according sufficient opportunity to contest against the discrepancies notified. In the evince of records, it remained an undisputed fact that, the assumption of Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 8 of 17 revisionary jurisdiction was initiated by service of SCN dt. 18/12/2019 and upon appellant’s email request, same was adjourned by re-fixing the hearing vide notice dt. 13/01/2020, however said hearing remained un-responded. Considering the reasons communicated which led to non-attendance to rescheduled hearing, the Ld. PCIT vide email dt. 28/01/2020 accorded further opportunity to the appellant, nonetheless the assessee continued to opt- out from making any representation which resulted into ex-parte culmination. Thus, due service of SCN and reasonable opportunity of fair hearing against various discrepancies vis-a-vis proposition communicated and prima-facie unbiased approach while dealing with revisionary proceedings apparently stands established and in fortiori, the Ld. AR did not controvert factual plexus penned at para 4 of the impugned revisionary order, in the event we are left with nothing but to disapprove the contention of any such alleged violation, ergo the ground number 2 of the appeal merits dismissal. Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 9 of 17 9. The ground number 4 being general remained quiescent, whereas ground number 1 and 3 are directed against assumption of revisionary jurisdiction, and before we proceed for adjudication on this count, let us first reproduce the text of section 263 of revisionary proceedings such as; ―263. Revision of orders prejudicial to revenue – (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, 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 1] . . . . . . . [Explanation 2] —For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 10 of 17 opinion of the Principal Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) . . . . . . . ‖ (Emphasis supplied) 10. Nota bene, a plain reading of section 263 of the Act envisages four phases in exercising revisionary powers viz; Firstly calling and examining of records of any proceedings under this Act without requiring him to showcase any reason as it is represents a part Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 11 of 17 of his administrative control over TAB. In second phase, the revisionary authority would evaluate order passed by TAB for forming an opinion thereon to the effect that, whether such order is erroneous in so far as it is prejudicial to the interest of the Revenue or not and if this phase concludes the satisfaction of twin conditions, then it would trigger further phases otherwise revisionary jurisdiction meets dead end here. In third stage, the assessee is put to show cause notice pointing out reasons for formation of belief that the action u/s 263 is required and reasonable & sufficient opportunity is accorded to the assessee to rebute the belief and the jurisdiction by producing evidential material in support its claim. In fourth phase, the authority conducts necessary “inquiry” into material placed before him and after hearing the assessee, the revisionary proceedings is concluded by an express order either dropping the revisionary proceedings or directing the assessing officer for modification of assessment or for de-nova assessment as the case may be. Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 12 of 17 11. In the extant case, we observed that, the Ld. PCIT perusing the assessment records identified certain discrepancies as expounded at para 3.1 of the impugned order which inter-alia relates to the area of sugarcane cultivation, violation of sharing of agriculture income in terms of lease agreement, non- verification of sale of agri-produce and jaggery etc., and finally taxability thereof. For the reason invoking the revisionary jurisdiction u/s 263 of the Act, the appellant was put to notices and upon no-response thereto, the Ld. PCIT setting aside 143(3) order of assessment, remanded the file back to the Ld. AO for de-nova assessment. 12. During the course hearing, from the enquiry report placed at page 6 of paper book it transpired that, for the assessment year under consideration the appellant cultivated 24 acres of own land with the crops like Udid for 10 acres, 6 acres with Soybeans, Bajari and Mug 4 acres each. And insofar as the claim of leasing of 14 acres of agri-land used for sugarcane Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 13 of 17 crop cultivation by the appellant is concerned, it is glaring on the face of agreement (placed at page 15 to 20) that, it was entered in individual capacity of Mr Prashant Deogaonkar, which is used / cultivated by him personally and this very fact per-se finds reinforced in the evince his affidavit dt. 01/07/2017 placed alongwith written submission, consequently the claim of cultivation of additional area of 14 acre vis-à-vis cultivation of sugarcane over 28 acres of land by the appellant does rendered baseless, however this fact remained un-inquired into. We also observed that, the Ld. AO while scrutinising the agricultural income disapproved the quantum of expenditure incurred being at lower side and then evaluated the same in the light of judicial precedents, however in doing so, the Ld. AO turned blind eye to the nature and taxability of income arising from sale of jaggery and framed the assessment accepting returned income merely restricting agricultural income to his recomputed figure, thus unveiling non-application of mind while computing the correct taxable income. Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 14 of 17 13. Having said so, it pertinent to take note of certain fundamental tests propounded to judge the revisionary action in various judicial precedents including the landmark decision of Hon'ble Supreme Court in “Malabar Industries Vs CIT” reported in 243 ITR 83 and two of such test are; a. Lack of inquiry or insufficient inquiry will suffice the requirement as to order being erroneous. b. Where the order is passed without application of mind, will fall under the category of erroneous order. 14. Now we will examine the present case in the touchstone of judicial precedents. As can be noticed from the assessment order that, there is complete absence of any inquiry into the size of agricultural land belonging assessee i.e. ownership, size of agricultural land leased with respect to the lessor and lessee, area under cultivation in the evince of 7/12 extracts and the crops cultivated as claimed by the appellant vis-à-vis emanating from the revenue records. Further it is vouched that, the Ld. AO while Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 15 of 17 completing the assessment proceedings u/s 143(3) of the Act, has neither assigned any reasons for coming to a conclusion nor there was any whisper on the count of taxability of income arising from sale of jaggery, on the contrary the Ld. AO left the elephant in the room unattended in bringing to tax income from sale of jaggery, therefore hit by proviso to section 263 of the Act, this ispo-facto showed both lack of inquiry into nature of exempted income claimed to have earned by the appellant and non- application of mind, in such circumstances, we find force in the action of Ld. PCIT as ex-legem. 15. In nutshell, in the light of aforestated discussion, we countenance the conclusion drawn by the Ld. PCIT in the light of decision of the Hon’ble Supreme Court in “Malabar Industrial Co Ltd. Vs CIT” reported in 243 ITR 83, wherein their Lordship vide para 9 held that; ―There must be some grievous error in the Order passed by the Income-tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 16 of 17 reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration. In our view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue.‖ (Emphasis supplied) 16. Ergo, finding no infirmity with revisionary order, the ground number 1 & 3 of the appeal stands dismissed. 17. Resultantly, the appeal of the assessee is DISMISSED in aforestated terms. In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Monday 05 th day of December, 2022. -S/d- -S/d- S. S. VISWANETHRA RAVI G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / PUNE ; ददनाांक / Dated : 08 th day of December, 2022. Prashant Prabhakar Degaonkar (HUF) ITA No. 453/PUN/2020 A.Y. 2015-16 ITAT-Pune Page 17 of 17 आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : 1.अपीलाथी / The Appellant. 2. प्रत्यथी / The Respondent. 3. The ITO Ward-1(2) Solapur (MH-India) 4. The Pr. CIT, Pune(MH-India) 5. DR, ITAT, Pune Bench ‘B’, Pune 6.गार्डफ़ाइल / Guard File. आदेशानुसार / By Order वररष्ठ दनजी सदिव / Sr. Private Secretary आयकर अपीलीय न्यायादधकरण, पुणे / ITAT, Pune.