B N Prasanna Kumar, Mandya V. Principal Commissioner Of Income Tax, Mysore

ITA 466/BANG/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5893 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Appeal Filed On: 02-06-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Revision of order; Period of limitation; Revenue expenditure
• Section: 147; 131; 263; 143(3); 153A; 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “C”, BANGALORE Before Shri George George K, JM & Ms.Padmavathy S, AM ITA No.466/Bang/2020 : Asst.Year 2017-2018 Sri.Ashish Prasanna Kumar Jain Legal Representative of B N Prasanna Kumar C/o.Veertarag Traders Mahaveera Road, Bellur Nagamangala Taluk Mandya – 571 418 Karnataka PAN : ADKPP8824E. v. The Principal Commissioner of Income-tax, Mysore. (Appellant) (Respondent) Appellant by : Sri.Ravi Shankar, Advocate Respondent by : Sri.Srinivas T.Bidari, CIT-DR Date of Hearing : 14.07.2022 Date of Pronouncement : 19.07.2022 O R D E R Per George George K, JM : This appeal at the instance of the assessee is directed against Principal Commissioner of Income-tax’s (PCIT) order dated 08.03.2020. The relevant assessment year is 2017- 2018. 2. The Registry has noted delay of 24 days in filing this appeal before the Tribunal. The order of the PCIT dated 08.03.2020 was received by the assessee on 11.03.2020, hence, the appeal ought to have been filed on or before 11.05.2020. The appeal in the instant case was filed before the ITAT on 03.06.2020, hence, the delay of 24 days was noted by the Registry. The Hon’ble Apex Court in Cognizance ITA No.466/Bang/2020. Sri.Ashish Prasanna Kumar Jain. 2 For Extension of Limitation (in Miscellaneous Application No.21 of 2022 dated 10.01.2022), due to the pandemic situation had excluded the period from 15.03.2020 to 28.02.2022 in computing the period of limitation for any suit, appeal, application or proceedings. Further, as per the judgment of the Hon’ble Apex Court, notwithstanding the actual balance period of limitation, all persons shall have a limitation period of 90 days from 01.03.2022. Further, the Hon’ble Supreme Court held that in the event the actual balance period of limitation remaining, with effect from 01.03.2022 is greater than 90 days, that larger period shall apply. In this case, the appeal has been filed before the ITAT on 03.06.2020 (i.e. well within the period of limitation contemplated by the Hon’ble Apex Court). Therefore, in view of the above judgment of the Hon’ble Apex Court, there is no delay in filing this appeal and we proceed to dispose of the same on merits. 3. Though several grounds are raised, the issues argued by the learned AR are two folds, namely – (i) PCIT’s order passed u/s 263 of the I.T.Act is bad in law; and (ii) the provisions of section 69A was not attracted, hence, section 115BBE of the I.T.Act has no application. 4. The brief facts of the case are as follows: The assessee an individual, is engaged in the business of whole sale trading of copra and copra kowt. For the ITA No.466/Bang/2020. Sri.Ashish Prasanna Kumar Jain. 3 assessment year 2017-2018, the return of income was filed on 24.10.2017 declaring total income of Rs.26,76,650. The assessment was completed u/s 143(3) r.w.s. 153A of the I.T.Act vide order dated 27.12.2018. In the assessment completed, the income declared in the return of income was accepted. 5. The PCIT issued show cause notice u/s 263 of the I.T.Act for reversing the assessment order dated 27.12.2018. The PCIT was of the view that seized cash of Rs.21,70,550 (the source of which was not specifically explained), ought to have been taxed at the rate of 60% under the provisions of section 115BBE of the I.T.Act. Further, the PCIT was also of the view that penalty u/s 271AAC of the I.T.Act is required to be levied. The assessee filed objections vide reply dated 05.03.2020. It was submitted that cash seized was declared as unaccounted business sales. It was further stated that to avoid litigation and to have peace of mind, he agreed to declare the entire amount as unaccounted business receipts. It was submitted that the A.O. had called for the details and after his satisfaction the assessment order was passed u/s 143(3) r.w.s. 153A of the I.T.Act. Therefore, it was submitted that the assessment order was not erroneous nor prejudicial to the interest of the revenue warranting interference u/s 263 of the I.T.Act. 6. The PCIT, however, rejected the contentions of the assessee and passed the impugned order u/s 263 of the ITA No.466/Bang/2020. Sri.Ashish Prasanna Kumar Jain. 4 I.T.Act on 08.03.2020. The PCIT after extracting the deposition of assessee recorded u/s 131 of the I.T.Act, held that the assessee himself admits that Rs.21,70,550 represented unaccounted cash of his business, hence, the same ought to be brought to tax u/s 69A of the I.T.Act. The PCIT also has directed the A.O. to invoke the penal provisions u/s 271AAC of the I.T.Act. The relevant finding of the PCIT reads as follows:- “9. Thus, when the assessee himself in his deposition has admitted that the cash of Rs.21,70,050/- represents unaccounted cash of his business, the same ought to have been brought to tax u/s 69A of the Income-tax Act, 1961, invoking the provisions of section 115BBE. 10. Therefore the assessment order passed by ITO, W-1, Mandya for AY 2017-18 on 27.12.2018 is held to be erroneous and prejudicial to the interest of revenue and the AO is directed to revise the assessment order accordingly and also invoke penal provisions u/s 271AAC.” 7. Aggrieved, the assessee has filed the present appeal before the Tribunal. The assessee has filed a paper book enclosing therein copies of notice issued u/s 263 of the I.T.Act, the objections filed, the sworn statement recorded from the assessee and his son, sworn statement recorded by the police party, the case laws relied on, etc. The learned AR reiterated the submissions made before the PCIT. 8. The learned Departmental Representative supported the order of the PCIT. 9. We have heard rival submissions and perused the material on record. Admittedly, the assessee is earning income ITA No.466/Bang/2020. Sri.Ashish Prasanna Kumar Jain. 5 from business of wholesale trading of copra and copra products. The goods are sold in different States and the same is reflected in the trading account of the assessee. The assessee’s son while collecting the sale proceeds in the State of Maharashtra was stopped by the Election Authorities and a sum of Rs.21,71,050 was seized. In a deposition u/s 131(1)(d) of the I.T.Act, it was stated on oath that the cash seized pertains to the sale proceeds of the business of his father (the assessee). The assessee was also required to appear in Aurangabad, Maharashtra and a statement was recorded on 16.12.2016. The assessee reiterated that the cash seized was the business income of the assesee and agreed to include the sale proceeds in the return of income. The assessee, accordingly, increased his turnover to the extent of cash seized and offered the excess income over the expenditure in the return of income to tax. The return was selected for scrutiny and assessment was passed u/s 143(3) r.w.s. 153A of the I.T.Act (order dated 27.12.2018). Thereafter the impugned order u/s 263 of the I.T.Act was passed, wherein PCIT held that the entire amount was required to be taxed u/s 69A r.w.s. 115BBE of the I.T.Act. The PCIT also directed the A.O. to initiate penalty u/s 271AAC of the I.T.Act. 9.1 As mentioned earlier, the cash seized was admittedly part of the sales turnover and included in the VAT return. The return filed by the assessee was accompanied by 3CB, 3CD report and Form VAT 240 as well. The A.O. accepted the explanation of assessee that cash seized was his business ITA No.466/Bang/2020. Sri.Ashish Prasanna Kumar Jain. 6 receipt and thereafter assessment was concluded u/s 143(3) r.w.s. 153A of the I.T.Act. Therefore, the sale proceeds being cash seized shall not be subject to the rigor of section 69A of the I.T. Act and application of section 115BBE of the I.T.Act for the rate purpose. Moreover, section 271AAC of the I.T.Act gives discretion to the A.O. to levy or not to levy penalty. The A.O. had exercised his discretion in not initiating the penalty under the said section. The Chandigarh Bench of the Tribunal in the case of Amarjeet Dhall v. CIT reported in (2014) 46 taxmann.com 168 (Chandigarh-Trib.) had held that when A.O. has discretionary power to initiate penalty proceedings and not levied the penalty, the PCIT in his revisionary jurisdiction cannot direct the A.O. to initiate penalty proceedings. The gist of the findings of the Tribunal reads as follows:-  In view of the decision of Punjab and Haryana High Court in the case of CIT v. Subhash Kumar Jain (2011) 355 ITR 364/199 Taxman 39, power under section 263 cannot be used for directing the Assessing Officer to initiate penalty proceedings. The matter could be examined from another angle. Both section 271 and 271AAA start with the expression `may’. (para 10)  Thus, it is not always necessary for the Assessing Officer to initiate penalty proceedings if he is satisfied that the particular case is not fit for levy of penalty then the Assessing Officer has power not to initiate penalty proceedings because legislature has used the expression `may’ in penal provision which shows that the Assessing Officer has discretionary power to initiate the penalty proceedings.  In other words, in any such situation of not initiating penalty proceedings the Assessing Officer adopted one of the legal possible view. Whenever one of the legal possible view is adopted by the Assessing Officer then such assessment order cannot be called erroneous and prejudicial to the interest of the revenue. ITA No.466/Bang/2020. Sri.Ashish Prasanna Kumar Jain. 7  In instant case, the Assessing Officer may be satisfied that since the assessee has surrendered the amount and has offered the surrendered amount by paying tax therefore this is not a fit case for levy of penalty and accordingly he may not be initiated penalty proceedings. Therefore such order cannot be called erroneous and prejudicial to the interest of the revenue (para 11)  In view of the above, it is held that the assessment order passed by the Assessing Officer was not erroneous and prejudicial to the interest of the revenue and accordingly impugned revisionary order is quashed. 9.2 In the instant case, the assessee has offered the entire cash seized as part of the income and paid duly the taxes thereon. The A.O. had taken a conscious decision while passing the assessment order u/s 143(3) r.w.s. 153A of the I.T.Act. When two views are possible and the A.O. adopts one of the views, the PCIT cannot treat the assessment order as erroneous and prejudicial to the interest of the revenue. In support of the above proposition, we rely on the judgment of the Hon’ble Apex Court in the case of CIT v. Max India Limited reported in (2007) 295 ITR 282 (SC). The Hon’ble Delhi High Court in the case of CIT v. Sunbeam Auto Limited reported in (2011) 332 ITR 167 (Delhi) had held that lack of inquiry or inadequate inquiry by the A.O. cannot be a reason to invoke the revisionary powers u/s 263 of the I.T.Act. The relevant finding of the Hon’ble Delhi High Court reads as follows:- “..... therefore one has to see from the record whether there was application of mind before allowing the expenditure in question as revenue expenditure. If there was an enquiry, even inadequate that would not by itself give occasion to the CIT to pass order u/s 263, merely because he has different opinion in the matter. It is only in cases of lack of enquiry that such a course of action would be open. (p14a 12 to 15).... In sum and substance the accounting practice of the assessee is questioned.......It is clear that view taken by the A.O. was one of the possible views and therefore, the assessment ITA No.466/Bang/2020. Sri.Ashish Prasanna Kumar Jain. 8 order passed by the A.O. could not be held to be prejudicial to the Revenue. Thus from whatever angle the matter is to be looked into, the conclusion could be that the order of the Tribunal does not call for any interference (paras 16, 18 & 21). ....the A.O. having made enquiries, elicited replies and thereafter allowed the expenditure....it cannot be said that it is a case of lack of enquiry.” 9.3 In the instant case, on perusal of the assessment order, it is clear that the enquiry was made by the Assessing Officer, and accordingly, the assessment order was concluded. The shortfall of enquiry or inadequacy of enquiry cannot be termed as total lack of enquiry. Hence, the order of the assessment cannot be held to erroneous. 9.4 Lastly, it is to be mentioned that the impugned order u/s 263 of the I.T.Act was passed on the proposal of the A.O.. This is evident from the order giving effect to the order passed u/s 263 of the I.T.Act, which reads as follows:- “The assessee Sri.B.N.Prasanna Kumar is engaged in the business of wholesale trading of Copra and Copra Kowt under the name and style M/s.Veetrag Traders at Mahaveer road, Bellur Nagamangala Taluk, Manyda District. In the instant case, the AO completed the assessment by bringing to tax unaccounted cash of Rs.21,71,050/-. The AO passed assessment order u/s 143(3) r.w.s. 153A on 27.12.2018 by raising a demand of Rs.NIL. However, the addition made should have been brought ot tax u/s 69A at 60% under the provision of section 115BBE of the I.T.Act. Further, same was taxed at 30%. Since, there was mistake in calculation of tax, the case was referred to Pr.Commissioner of Income Tax, Mysore for passing order u/s 263.” (Emphasis supplied) 9.5 On identical facts, the Pune Bench of the Tribunal in the case of Alfa Laval Lund AB v. CIT in ITA No.1287/Pun/2017 (order dated 02.11.2021), had held that when revisionary proceedings have been triggered by the A.O. by sending a ITA No.466/Bang/2020. Sri.Ashish Prasanna Kumar Jain. 9 proposal to the PCIT and then the latter passing the order u/s 263 of the I.T.Act, there is jurisdictional deficit resulting into vitiating the impugned order. The relevant finding of the Pune Bench of the Tribunal in the case of Alfa Laval Lund AB v. CIT (supra), reads as follows:- “3. We have heard both the sides through Virtual Court and gone through the relevant material on record. It can be seen from para 4 of the ld. CIT‟s order that: “A proposal for revision u/s 263 of the IT Act, 1961 was received from DCIT(IT)-1, Pune through the Jt.CIT(IT), Pune vide letter No. Pn/Jt.CIT(IT)/263/2016-17/61 dated 23.05.2016”. It is thus manifest that the edifice of the revision in the extant case has been laid on the bedrock of receipt of the proposal from the AO. At this stage, it would be worthwhile to have a glance at sub-section (1) of section 263 of the Act, which runs as under:- “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 in so far 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.” 4. Sub-section (1) of section 263 of the Act is an enabling provision which confers jurisdiction on the CIT to revise an assessment order which he considers erroneous and prejudicial to the interests of revenue. The process of revision u/s 263 of the Act initiates only when the CIT calls for and examines the record of any proceeding under this Act and considers that any order passed by the AO is erroneous and prejudicial to the interests of the revenue. The twin conditions of – (i) the CIT calling for and examining the record; succeeded by (ii) his considering the assessment order as erroneous etc. – are sine qua non for the exercise of power under this section. The use of the word `and’ between the expression `call for and examine the record ....‟ and the expression `if he considers that any order ... is erroneous ...‟ abundantly demonstrates that both these conditions must be cumulatively fulfilled by the CIT and in the same order, that is, the first followed by the second. In other words, the kicking in point for invoking jurisdiction u/s 263 is calling for and examining the record of any proceedings under the Act by the CIT leading him to consider the assessment order erroneous etc. A communication from the AO is not `the record of any proceedings under this Act’. To put it simply, the consideration that the assessment order is erroneous and ITA No.466/Bang/2020. Sri.Ashish Prasanna Kumar Jain. 10 prejudicial to the interests of the revenue should flow from and be the consequence of his examination of the record of proceedings. If such a consideration is not preceded by the examination of record of the proceedings under the Act, the condition for revision does not get magnetized. 5. It is trite that a power which vests exclusively in one authority, cannot be invoked or cause to be invoked by another, either directly or indirectly. Section 263 of the Act confers power on the CIT to revise an assessment order, subject to certain conditions. Instantly, we are confronted with a situation in which the revision was initiated on the basis of the AO sending a proposal to the CIT and not on the CIT suo motu calling for and examining the record of the assessment proceedings and thereafter considering the assessment order erroneous and prejudicial to the interests of the revenue. The AO recommending a revision to the CIT has no statutory sanction and is a course of action unknown to the law. If AO, after passing an assessment order, finds something amiss in it to the detriment of the Revenue, he has ample power to either reassess the earlier assessment in terms of section 147 or carry out rectification u/s 154 of the Act. He cannot usurp the power of the CIT and recommend a revision. No overlapping of powers of the authorities under the Act can be permitted. As the revision proceedings in this case have triggered with the AO sending a proposal to the ld. CIT and then the latter passing the order u/s 263 of the Act on the basis of such a proposal, we hold that it became a case of jurisdiction deficit resulting into vitiating the impugned order. Without going into the merits of the case, we quash the impugned order on this legal issue itself.” 9.6 For the aforesaid reasoning and the judicial pronouncement, cited supra, we hold that the PCIT is not justified in passing the impugned order u/s 263 of the I.T.Act. It is ordered accordingly. 10. In the result, the appeal filed by the assessee is partly allowed. Order pronounced on this 19 th day of July, 2022. Sd/- (Padmavathy S) Sd/- (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 19 th July, 2022. Devadas G* ITA No.466/Bang/2020. Sri.Ashish Prasanna Kumar Jain. 11 Copy to : 1. The Appellant. 2. The Respondent. 3. The PCIT, Mysore 4. The CCIT-1 , Bangalore. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore