Basavraj R Balekundaragi, Belgavi V. Pr. Commissioner of Income Tax, , Hubbali

ITA 81/PAN/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4243 (ITAT-PANAJI)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: WT(D)
• Assessment Year: 2015-2016
• Appeal Filed On: 23-08-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRA BHAT JHA
• Keywords: Reopening of assessment; Revision of order; Opportunity of being heard; Principle of natural justice; Assessment record; TDS
• Section: 6; 263; 139; 143(3); 244A; 40(a)(ia); 143(2); 44AB; 13

Judgement Text

ITAT-Panaji Page 1 of 13 आयकर अपीलीय न्यायाधिकरण, पणजी न्यायपीठ, पणजी में। IN THE INCOME TAX APPELLATE TRIBUNAL, PANAJI BENCH, PANAJI (Through Virtual Court) BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI JAMLAPPA D BATTULL, ACCOUNTANT MEMBER आयकर अपील स ं . / ITA No. : 81/PAN/2020 कर धििाारण वर्ा / Assessment Year : 2015-2016 Basavraj R Balekundaragi Plot 49, Rani Channamma Nagar Belagavi, Karnataka – 590 006. PAN : AERPB 6006 J . . . . . . . अपीलार्थी / Appellant बिाम / V/s Pr. Commissioner of Income-Tax, Hubbali (Karnataka) . . . . . . . प्रत्यर्थी / Respondent }kjk / Appearances Assessee by : Shri Pramod Vaidhya Revenue by : Shri Prabhat Jha स ु नवाई की तारीख / Date of conclusive Hearing : 10/02/2022 घोषणा की तारीख / Date of Pronouncement : 20/04/2022 आदेश / ORDER PER JAMLAPPA D BATTULL, AM; The present appeal of the assessee assailed against the revisionary order of Principal Commissioner of Income Tax - Appeals, Hubbali [for short “PCIT”] passed u/s 263 of the Income Tax Act, [for short “the Act”] vide order dt 19/03/2020 for the assessment year [for short “AY”] 2015-2016, which in turn emanated out of the assessment order dt 01/12/2017 passed by the Assessing Officer [for short “AO”] u/s 143(3) of the Act. ITA No. 81/PAN/2020 Basavraj R Balekundaragi, AY : 2015-2016 ITAT-Panaji Page 2 of 13 2. The primary grievance loops round the validity of assumption of revisionary jurisdiction alleging on twofold grounds namely; nonsatisfaction of necessary twin conditions and non-applicability of provisions for the reasoned order of assessment. 3. Before advancing the matter on facts for adjudication, it is essential to reproduce grounds assailed by the appellant assessee as; “1. On the facts and circumstance of the case and in law the Pr. Commissioner of Income Tax (Pr. CIT) erred in passing order u/s 263 on pointes on which A.O. had taken a view after verification of full details asked for and submitted during limited scrutiny assessment u/s 143(3) of the Act. 2. The order u/s 263 is not justifiable as the same is passed on pointes verified by A.O. during the assessment proceedings and a view is taken by him after verification of details asked for and accordingly submitted during assessment u/s 143(3). 3. The Pr. CIT erred in not appreciating that both the twin conditions, order being erroneous and order being prejudicial to the interest of revenue should be fulfilled for action u/s 263 as held by SC in the case of Malabar Industrial Co V CIT 243 ITR 83 and CIT V Max India 295 ITR 282. 4. The Pr. CIT erred holding that A.O. has not examined loans and interest payments and loans and advances given are not verified by A.O. when the full details in respect of the same asked for and submitted were verified by A.O. 5. The Pr. CIT erred in not appreciating that the assessee lend money without interest out of sale of developed plots on ancestral land and there was no divergence of fund for non-business purpose and the same was verified by A.O. based on details submitted. The A.O. had verified full details in respect of sale of ancestral land and capital gain arising there from and the same were noted by Pr. CIT at para 6 in order u/s 263 itself and no discrepancy was found. ITA No. 81/PAN/2020 Basavraj R Balekundaragi, AY : 2015-2016 ITAT-Panaji Page 3 of 13 6. The Pr. CIT erred in holding that interest payment of Rs. 3,75,000/- to co- operative societies without TDS is liable to be disallowed @30% u/s 40(a)(ia) ignoring the provisions of section 194A(3)(iii)(a) and possible view thereon. 7. The Pr. CIT erred directing the A.O. to bring to tax interest on refund Rs.63024/- and Rs.63024/- for A.Y.:2012-13 even after admitting in the order u/s 263 prima facie it appears that there is a mistake in ITS data in regard to interest u/s 244A of the At. The Pr. CIT failed to appreciate that interest of Rs.63024/- for A.Y.:2012-13 appearing thrice in the system was correctly taxed by A.O. once after verification of details. 8. The Pr. CIT erred in directing the A.O. to verify date of return for A.Y.: 2014- 15 when the same was verified by A.O. as having filed within the due date and set off of c/f loss of Rs.97,516/- was allowed. 9. Reasons assigned for setting aside the assessment order in limited scrutiny assessment and directing the A.O. to verify points not covered by it and also to verify points already covered and verified in assessment proceedings in wrong and contrary to law and facts of the case. 10. The appellant craves leave to add, alter, amend or modify any grounds of appeal.” (Emphasis supplied) 5. Now its turn to state the facts of the case pithily as; 4.1 The assessee is an individual engaged in manufacturing and trading of submersible pump sets and for AY 2015-16 e-filed his return of income [for short “ROI/ITR”] u/s 139 of the Act on 30/09/2015 declaring total income of ₹23,54,500/-, the same was subjected to limited scrutiny under CASS and with a solitary addition of ₹88,640/- the income was finally assessed to tax at ₹24,43,140/- u/s 143(3) of the Act. ITA No. 81/PAN/2020 Basavraj R Balekundaragi, AY : 2015-2016 ITAT-Panaji Page 4 of 13 4.2 Subsequently, Ld PCIT after perusal of case records, noted that the reasons selection of limited scrutiny u/s 143(2) was threefold, however except touching part of one of the issues thereof, the Ld. AO culminated the assessment proceedings bring to tax the amount of interest on refund, consequently invoking the provisions of section 263(1) of the Act, prefiguring the absence of proper inquiries and verification as regards to Interest expense, cash deposit and capital account transaction held the order as erroneous and prejudicial to the interest of revenue and set-aside the same with a direction to decide the issues on merits giving opportunity of being heard to the assessee. 4.3 Pending such direction before the Ld. AO, the appellant assessee opposed the revisionary action of Ld. PCIT before this Tribunal for evenhandedness on the grounds assailed at foregoing para 3. 5. After hearing to the rival contention of both the parties to the appeal; perused material placed on record and duly considered the facts of the case in the light of settled legal position and the case law relied upon by the appellant assessee as well the respondent revenue. 6. It is evidently discernible form the records are that; 6.1 The assessee filed his return of u/s 139 on 30/09/2015 and by service of statutory notice dt 25/07/2016 u/s 143(2) of the Act the assessee’s return was selected for limited scrutiny exclusively to inquire and verify three issues viz; (1) Interest expenses (2) Cash Deposits and (3) Increase in capital etc. In the event of change in the incumbent, a ITA No. 81/PAN/2020 Basavraj R Balekundaragi, AY : 2015-2016 ITAT-Panaji Page 5 of 13 notice u/s 129 of the Act was served by 21/06/2016. In response to notices, thereto the appellant through his representative submitted replies inter-alia consisting of return of income with computation, financial statements and audit report u/s 44AB of the Act. In addition to above the appellant also filed copy of return of income, financial statement relating to immediately preceding assessment year for verification of his claim of set-off etc. Nota bene, finding out the non- disclosure of receipt of interest on refund, Ld. AO treating same as concealment carried out the solitary addition and completed the assessment u/s 143(3) of the Act, without reference to issues of limited scrutiny as laid in the statutory notice u/s 143(2) of the Act. 6.2 With a period of two years from the end of assessment year in which the assessment was framed, the assessment records were perused and identifying as many seven issues remained unsubstantiated during the course of assessment proceedings, the Ld. PCIT by issue of SCN dt 12/07/2019 invoked the revisionary jurisdiction u/s 263(1) of the Act, proposed to set-aside and revise the order of assessment, however the appellant did not make any submission in reply thereto. In furtherance of proceedings, Ld. PCIT issued multiple notices and on the request of the appellant the proceedings were adjourned from time to time, but in sum and substance, the assessee failed to make any submission during the course of revisionary proceedings. In the absence of replies from the appellant, the Ld. PCIT on the basis of records available, in pleno carried out the verification ITA No. 81/PAN/2020 Basavraj R Balekundaragi, AY : 2015-2016 ITAT-Panaji Page 6 of 13 and upon finding the assessment erroneous and prejudicial to the interest of the revenue, by an order, directed the Ld. AO to decide the issues raised therein on merits after giving due opportunity of hearing. 7. During the course of the hearing, the learned counsel for the assessee [for short “AR”] at the outset confirmed for non-pressing of ground number 8 and thereupon ceteris paribus reiterated all the contentions as put forth before Ld. AO and adverting the paper book, submitted that, in response to queries raised during the course of original assessment proceedings, the due submission were made and acknowledge by the Ld. AO and after considering them, with due verification the proceedings were completed. On a specific query by the bench on non-appearance vis-à-vis non submission before the revisionary authority, the Ld. AO opted for silence, however adverting the legal compilation contended that, the Ld. PCIT passed the 263 order without authority and on the issues which were duly examined by the Ld. AO during the course of original assessment. Au contraire, the learned representative of revenue [for short “DR”], supported the order of Ld. PCIT stating that, each issue of limited scrutiny comprising of multiple items of remained unexamined and unverified by the Ld. AO in the absence of inquiries and hence the order of necessarily be termed as erroneous and prejudicial to the interest of the revenue. The Ld. DR arguendo further contended that, the revisionary action directing to decide the issues on merits would in no case cause prejudicial to the interest of the assessee if, ITA No. 81/PAN/2020 Basavraj R Balekundaragi, AY : 2015-2016 ITAT-Panaji Page 7 of 13 necessary and acceptable evidence are produced in support of claims made, hence prayed before bench for dismissal of appeal. 8. Albeit, there are as many as ten grounds are raised before us, whereas the ground number eight is withdrawn as not pressed. The bone of contention in remaining grounds of appeal is addressed by the Ld. AR on twofold submission viz; as regards to conduction of due verification by the Ld. AO and taking possible view thereon and secondly absence of twin condition to assume revisionary jurisdiction u/s 263 of the Act. We would address the second part of the grievance first and for doing so, it is necessary to reproduce the relevant portion of the applicable provision of law to reach to adjudication; 8.1 “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 opinion of the Principal Commissioner or Commissioner,— (a) the order is passed without making inquiries or verification which should have been made; ITA No. 81/PAN/2020 Basavraj R Balekundaragi, AY : 2015-2016 ITAT-Panaji Page 8 of 13 (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) . . . . . . . (3) . . . . . . . ” (Emphasis supplied) 8.2 It is trite law that, the section 263 of the Act, empowers the revisionary authority to revise any order passed under the provisions of Act, and so long as the order sought to be revised is valid & legal in the eyes of law, it shall be well within the realm of the revisionary authority to revise it, subject to fulfilment of twofold condition laid therein. In sum and substance challenges the revisionary jurisdiction on non-satisfaction of twin condition laid in section 263 of the Act, and in relation hereto a plain reading of this provision makes it clear that, the precondition to exercise revisionary jurisdiction by the PCIT/CIT suo moto under it is that, the order of AO must be erroneous insofar as it is prejudicial to the interests of the revenue is concern. Consequently, the provision mandates the satisfaction of existence of twofold conditions before invocation and these explicitly are; (i) the order of the assessing officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If any one of two is absent or unsatisfied, that is where the order of the assessing officer is erroneous but is not prejudicial to the revenue or where order is not erroneous but is prejudicial to the revenue, then the recourse to ITA No. 81/PAN/2020 Basavraj R Balekundaragi, AY : 2015-2016 ITAT-Panaji Page 9 of 13 Section 263(1) of the Act fails. Albeit the foresaid twin satisfaction drawn from the assessment records may trigger the revisionary jurisdiction, yet such shall not automatically empower the revisionary tax authorities to conclude the revision proceedings without obeying additional dual riders such as; (i) making or causing to be made such enquiry as necessary and (ii) according an opportunity of being heard to the assessee following the principle of natural justice. In the light of provision of law, it is of paramount importance to note that, an incorrect assumption of facts or an incorrect application of law or passing an order without application of mind or without applying the principle of natural justice, shall discretely be sufficient to hold the order being erroneous. Albeit the term prejudicial to the interests of the revenue is not at all defined in the Act, but is needs to be understood in its ordinary meaning and it is of wide import and is not confined to mere loss to ex-chequer. 9. In the light of aforestated discussion of law and considering the judicial precedents, and the upon careful consideration of factual matrix as enumerated in the proceeding paragraphs, the adjudication calls to examination of multiple issues which were brought on record by Ld. PCIT such as verification of interest expense on borrowed capital / loans vis-à- vis interest free loans & advances advanced to person other than debtors, verification of interest payment without deducting tax at source [for short “TDS”] and allowability of related expense connected therewith, verification of taxation interest on refund, verification of sale of plots & ITA No. 81/PAN/2020 Basavraj R Balekundaragi, AY : 2015-2016 ITAT-Panaji Page 10 of 13 consequent capital gain, verification of claim of interest expense, verification of brought forward losses for there being set-off etc. In the absence of any reply from the appellant even after according several opportunities, the Ld. PCIT concluded the proceedings on the basis of available records and ultimately directed the Ld. AO to decide the issues raised on merits. However during the course of hearing, the Ld. AO taken us through the submission made during the course of original proceedings, to the extent establishing on records the submission were made and verified, however in the light of non-speaking assessment order touching only interest on refund issues, there was nothing on record that, to showcase the due inquiries into the other issues were made by the Ld. AO and after due application of mind the assessment was culminated. Indeed, the order of assessment is cryptic which ended before it started and in this context it mindful to quote para 12 from the judgement of Hon’ble Apex Court rendered in the light of re-opening of assessment in the case of “ITO Vs M/s Techspan India Pvt Ltd” reported at 404 ITR 10; “12. Before interfering with the proposed re-opening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed re-assessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial intervention on an assumed change of opinion even in cases where the order of assessment does not address itself to a given aspect sought to be examined in the re-assessment proceedings.” ITA No. 81/PAN/2020 Basavraj R Balekundaragi, AY : 2015-2016 ITAT-Panaji Page 11 of 13 (Emphasis supplied) 9.1 We have perused the income tax return of the assessee filed for both the AY 2014-2015 and 2015-16, and to state that, both were un-accompanied by statement of income hence the verification of claim as to eligibility of set-off losses, claim of capital gain, interest etc could not be carried out. The Ld. AR adverting the date of filing of return for the immediately preceding AY 2014-2015 brought to the notice that the return for of loss for the preceding AY was filed on 29/09/2015, hence at the outset of hearing the ground number eight was withdrawn as not pressed. In these facts we also find force in the action of Ld. PCIT by the judicial pronouncement of Hon’ble Supreme Court the in the celebrated case of “Malabar Industrial Co Ltd. Vs CIT” reported in 243 ITR 83, the para 9 of which read as; “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 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) 9.2 Before the Ld. PCIT there was same tangible material in the form of assessment records, verification of which revealed the absence of necessary and adequate inquiries into the issues of limited scrutiny which remained unattended by the Ld. AO and hence the action of Ld. PCIT also find force by negative application of decision rendered by ITA No. 81/PAN/2020 Basavraj R Balekundaragi, AY : 2015-2016 ITAT-Panaji Page 12 of 13 Hon’ble Bombay High Court in the case of “CIT Vs Gabriel India Ltd” reported at 203 ITR 108, which indeed relied by the appellant, wherein the Hon’ble lordship’s at para 14 have held as; “We, therefore, hold that in order to exercise power under sub-section (1) of section 263 of the Act there must be material before the Commissioner to consider that the order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue.” 9.3 In omnibus, in the light of aforestated judicial precedents we are of the considered view that, the action of Ld. PCIT is perfectly sustainable in law, to the effect holding the order of assessment as erroneous & prejudicial to the interest of revenue in the absence of necessary inquiries into issues, ergo we find no infirmity with the direction of 263 revisionary order, thus the grounds raised of the appellant are dismissed. 10. Resultantly, the appeal of the assessee is dismissed, in terms of aforestated observation. Order pronounced in open court on this Wednesday 20 th day of April, 2022. -S/d- -S/d- RAVISH SOOD JAMLAPPA D BATTULL JUDICIAL MEMBER ACCOUNTANT MEMBER पणजी / PANAJI ; दिना ां क / Dated : 20 th April, 2022 ITA No. 81/PAN/2020 Basavraj R Balekundaragi, AY : 2015-2016 ITAT-Panaji Page 13 of 13 आदेश की प्रधिधलधप अग्रेधर्ि / Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The Pr. CIT- Hubbali (Karnataka) 4. The CIT, Belagavi (Karnataka) 5. दवभागीय प्रदतदनदि, आयकर अपीलीय न्यायादिकरण, पणजी बेंच, पणजी / DR, ITAT, Panaji Bench, Panaji. 6. गार्डफ़ाइल / Guard File. आिेशान ु सार / BY ORDER, दनजीसदचव / Private Secretary आयकर अपीलीय न्यायादिकरण, पणजी / ITAT, Panaji.