Ajay Deshmukh, Pune V. Principal Commissioner of Income-Tax - 2, Pune

ITA 665/PUN/2022

AI Insights

The case involves Ajay Vasant Deshmukh, the appellant, who contested the order passed by the Pr. C.I.T.-2, Pune under section 263 of the Income-tax Act, 1961. The primary issue was the assumption of revisionary jurisdiction by the Pr. C.I.T. and the subsequent order which deemed the original assessment as erroneous and prejudicial to the interest of the revenue. The original assessment was completed under section 144, where the assessee's non-compliance led to a best judgment assessment. The Pr. C.I.T. later found that the Assessing Officer had not adequately justified the limited addition made to the assessee's income concerning sundry creditors. The Tribunal found that the Pr. C.I.T. had erred in not admitting additional evidences provided by the assessee during the section 263 proceedings, which led to the setting aside of the Pr. C.I.T.'s order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302281 (ITAT-PUNE)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-03-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 01-09-2022
• Other Referred Cases: C.I.T. Vs. Gabriel India Ltd. (1993) 203 ITR 08 (Bom), Spaceway Design Industries vs State Of Karnataka (2001) 123 STC 607 (Karnataka)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Additional evidence
• Section: 263; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘A’ BENCH, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA No. 665/PUN/2022 : A.Y. 2017-18 Ajay Vasant Deshmukh Shop No. 6/7/8/9/20 Shantanu Complex Pune Paud Road, Pirangut Opp. PDCC Bank, Pune-411 042 PAN: ACJPD3866C Appellant Vs. Pr. C.I.T. -2, Pune. Respondent Applicant by : Shri V.L. Jain Respondent by : Shri Keyur Patel – CIT DR Date of Hearing : 20-03-2023 Date of Pronouncement : 20-03-2023 ORDER PER SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER This appeal preferred by the assessee emanates from order of the ld. Pr. C.I.T.-2, Pune, dated 14-03-2022 for A.Y.2017-18 as per the grounds of appeal on record. 2. The solitary grievance of the assessee is the assumption of revisionary jurisdiction by the ld. Pr. C.I.T. and passing order u/s 263 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”). In this case, the relevant facts are that during the assessment proceedings ample opportunities were given to the assessee while issuing statutory notices/questionnaire and letters issued from time to time by the A.O but the assessee did not comply with any of those notices. Same is evident from paras 2, 3, 4 and 5 of the assessment order dated 28-11- 2019. Given the fact that the assessee evaded all the notices of hearing, there was no option left for the A.O but to proceed and pass best judgment assessment u/s 2 I.T.A. No. 665 of 2022 Ajay Deshmukh A.Y. 2017-18 144 of the Act. The assessee had e-filed his return of income for A.Y. 2017-18 on 25-10-2017 declaring total income (loss) of Rs. (-) 47,44,929/-. The assessment was completed u/s 144 of the Act on total income of Rs. 40,70,070/- which included an addition u/s 41(1) of the Act of an adhoc amount of Rs. 20.00 lakhs being a portion of sundry creditors included in current liabilities for which no details and explanation were filed by the assessee. It was observed by the ld. Pr. CIT in his order passed u/s 263 of the Act that in quantifying the addition made in his best judgment assessment, the A.O had not said anything about the facts of the case which warranted addition for only an amount of Rs. 20.00 lakhs as against total sundry creditors of Rs.94,91,817/- about which the A.O has already categorically held that identity and credit-worthiness had not been established and further that the entire current liability cannot be accepted as genuine. In other words, why the A.O has restricted the addition only to Rs. 20.00 lakhs when he has already held the identity and credit worthiness had not been established for the total sundry creditors of Rs.94,91,817/- nothing is brought out by the A.O in his assessment order. This has triggered the assumption of revisionary jurisdiction and passing an order u/s 263 of the Act by the ld. Pr. CIT and as per the reasoning given in his order he has held the assessment order as erroneous and prejudicial to the interest of revenue. 3. We observe from the facts of the case that during the course of proceedings u/s 263 of the Act various additional evidences/documents have been furnished before the ld. Pr. CIT as evident at para 5.11 of his order. It is also observed at para 5.12 that the ld. Pr. CIT has declined to admit these evidences furnished before him only on the ground that the assessee should have furnished these documents before the A.O and since the assessee has not complied with the proceedings before the A.O. resulting the assessment order passed u/s 144 of the 3 I.T.A. No. 665 of 2022 Ajay Deshmukh A.Y. 2017-18 Act and that the assessee has not given valid reasons for non-furnishing of evidences at the assessment stage, these additional evidences were refused to be admitted by the ld. Pr. CIT. 4. We are of the considered view that the ld. Pr. CIT should have admitted the additional evidences and then pass order u/s 263 of the Act. As a quasi-judicial authority it is a legal responsibility on the ld. Pr. CIT to invoke jurisdiction/s 263 of the Act and passing the order considering all the submissions and evidences placed before him and then establishing the assessment order as erroneous and prejudicial. Without accepting the evidences outright the order passed u/s 263 gets the colour of ex parte order and is vitiated. The power of suo motu revision order u/s 263 can be exercised by the CIT only if on examination of the record in proceedings under the Act he considers any order passed by the A.O is erroneous in so far as it is prejudicial to the interest of revenue. It is not an arbitrary or unchartered power. It is for the Commissioner to arrive at a conclusion that the order passed by the A.O is erroneous in so far as it is prejudicial to the interest of revenue by considering all the material on records on the basis of which it can be said that the Commissioner has acted in a reasonable manner and has come to the said conclusion. It is within this legal ambit the ld. Pr. CIT should have considered the evidences filed before him by the assessee while passing the order u/s 263 of the Act. Our view is fortified by the decision of the Hon‟ble Bombay High Court in the case of C.I.T. Vs. Gabriel India Ltd. (1993) 203 ITR 08 (Bom). The Hon‟ble Karntaka High Court in the case of Spaceway Design Industries vs State Of Karnataka ( 2001) 123 STC 607 (Karnataka) observed that since the power for the Commissioner u/s 263 is quasi-judicial in nature it therefore follows that in making all orders under this section the Commissioner must pass a speaking order giving 4 I.T.A. No. 665 of 2022 Ajay Deshmukh A.Y. 2017-18 reasons otherwise the order may be vitiated. In the present case of the assessee, the Pr. Commissioner has not accepted any evidences filed and therefore, the order does not get the colour of legitimacy insofar as it is not a speaking order on facts and law and tend to be vitiated as per law. With these observations we set aside the order of the ld. Pr. CIT and remand the matter back to his file to consider the evidences/documents filed by the assessee and then pass the order as per law while complying with the provisions of natural justice. Grounds of appeal of the assessee are allowed for statistical purposes. 5. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in the open court on this 20 th day of March 2023. Sd/- sd/- (R.S. SYAL) (PARTHA SARATHI CHAUDHURY) VICE PRESIDENT JUDICIAL MEMBER Pune; Dated, the ___ day of March 2023. Ankam Copy of the Order forwarded to : 1. The Appellant. 2. The Respondent. 3. The Pr. CIT-2, Pune. 4. D.R.ITAT „A‟ Bench 5. Guard File BY ORDER, /// TRUE COPY /// Sr. Private Secretary ITAT, Pune. 5 I.T.A. No. 665 of 2022 Ajay Deshmukh A.Y. 2017-18 Date 1 Draft dictated on 20-03-2023 Sr.PS 2 Draft placed before author 20-03-2023 Sr.PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on 20-03-2023 Sr.PS/PS 7 Date of uploading of order 20-03-2023 Sr.PS/PS 8 File sent to Bench Clerk 20-03-2023 Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order