M/S. DEEPA EXPORTS, Jetpur, Dist. Rajkot V. The Pr. CIT-1, Rajkot, Rajkot

ITA 74/RJT/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5365 (ITAT-RAJKOT)
• Duration Of Justice: 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 03-04-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 263; 143(3)

Judgement Text

आयकर अपीलीय अिधकरण, राजकोट Ɋायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं./ITA No. 74/Rjt/2022 िनधाᭅरण वषᭅ/Asstt. Years: 2017-2018 M/s. Deepa Exports, Nr. Saran Paul, Bhidbhanjan Road, Jetpur, Rajkot-360370. PAN: AACFD1843Q Vs. The Principal Commissioner of Income Tax, Rajkot-1, Rajkot. (Applicant) (Respondent) Assessee by : Shri Mehul Ranpura, A.R Revenue by : Shri Sanjeev Jain, CIT.D.R सुनवाई कᳱ तारीख/Date of Hearing : 30/06/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 20/07/2022 आदेश/O R D E R PER BENCH : The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Principal Commissioner of Income, Rajkot-1, dated 02/02/2022 arising in the matter of assessment order passed under s. 263 of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2017-18. ITA no.74/Rjt/2022 A.Y. 2017-18 2 2. The only interconnected issue raised by the assessee is that the learned Principal CIT erred in holding the assessment framed under section 143(3) of the Act as erroneous insofar prejudicial to the interest of Revenue. 3. The brief facts are that the assessee is a partnership firm and claim to be engaged in the business of manufacturing and export of cotton textile. The PCIT on examination of the case records of the assessee, found that there was difference in closing balance of sundry creditor namely M/s Amul Print for Rs. 3,04,172/- only as compared to amount shown by the assessee and amount shown in contra ledger of the party. The same has not been verified by the AO or called for explanation from the assessee. Thus, the ld. PCIT issued show cause notice proposing to revise the assessment order. 4. The assessee before the ld. PCIT submitted that the difference in closing balance is arising due to debit note issue by way it which not credited by the party in its books of accounts. The details of debit note and reconciliation sheet was also submitted. 5. However, the ld. PCIT found that the assessee first time explained the reason of difference in closing balance of the party as discussed above in response to the notice issued under section 263 of the Act which establishes that the AO has not made inquiries with respect to sundry creditor and contra ledger of sundry creditor. The learned PCIT held that the explanation furnished by assessee was not present at the time of assessment proceeding. Therefore, the same is required to be verified at the AO level. Accordingly, the PCIT was of the view that the order passed by the AO was erroneous insofar prejudicial to the interest of revenue on account of non- verification of the balance of sundry creditor. Thus, the learned PCIT held the assessment framed under section 143(3) of the Act as erroneous insofar prejudicial interest of revenue. ITA no.74/Rjt/2022 A.Y. 2017-18 3 6. Being aggrieved by the order of the learned PCIT, the assessee is in appeal before us. 7. The learned AR before us filed a paper book running from pages 1 to 59 and contended that the assessee has claimed less expenses by showing lesser amount of sundry creditor balance. Therefore, the mismatch the balance as pointed out by the learned PCIT can result in the error but same does not cause prejudice to the revenue. Thus, the assessment framed by the AO under the provisions of section 143(3) of the Act cannot be subject matter of revision under the provisions of section 263 of the Act. 8. On the contrary, the learned DR before us vehemently supported the order of the authorities below. 9. We have heard the rival contentions of both the parties and perused the materials available on record. At the threshold, we note that the assessee has shown lower outstanding balance in its books of account due to the reason that it issued certain debits notes which means that the assessee has reduced its expenses by issuing debit notes inter alia increased profit and increased tax liability i.e. there is no loss of tax to the revenue due to difference in closing balances of trade payable. The provision of section 263 of the Act provides that commissioner by exercising his power may revise the order of the AO on fulfilment of twin conditions that there is an error in the order and such error is causing prejudice to the Revenue. These twin conditions must be fulfilled before exercising the power under 263 of the Act. In holding so we draw support and guidance from the judgment of Hon’ble Supreme Court in case of Malabar Industrial Co. Ltd vs. CIT reported in 243 ITR 83 where it was held as under: “A bare reading of section 263(1) makes it clear that the pre-requisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be ITA no.74/Rjt/2022 A.Y. 2017-18 4 revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1).” 9.1 As discussed above, the assessee indeed reduced the expenses which resulted in excess tax liability causing no prejudice to the Revenue. Thus, it is culled out that the AO has not made further inquiry or applied his mind correctly with regard to difference in closing balance which may be held as erroneous but the same do not cause any prejudice to the Revenue as there is no loss of tax to the Revenue. Hence twin condition necessary to exercise the power under section 263 of the Act did not met. Therefore, in view of the above and after considering the facts in totality, we hold that there is no error in the assessment framed by the AO under section 143(3) of the Act causing prejudice to the interest of revenue. Thus, the revisional order passed by the learned PCIT is not sustainable and therefore we quash the same. Hence the ground of appeal of the assessee is allowed. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the Court on 20/07/2022 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 20/07/2022 Manish