Vikas Sahakari Sakhar Karkhana Ltd, Latur V. Commissioner of Income-tax -2, Aurangabad

ITA 841/PUN/2019

AI Insights

The case involves Vikas Sahakari Sakhar Karkhana Ltd., a cooperative society engaged in sugar manufacturing, which appealed against the order of the Principal Commissioner of Income Tax-2, Aurangabad. The appeal was directed against the order passed under section 263 of the Income Tax Act, 1961, which was based on the assessment order under section 143(3) that disallowed excess sugarcane price over the Fair Remunerative Price (FRP). The Tribunal examined whether the assessment order was erroneous and prejudicial to the interests of the revenue, focusing on the lack of specific inquiries by the Assessing Officer regarding the issues raised by the Principal Commissioner.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134361 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2023
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-12-2022
• Assessment Year: 2014-2015
• Appeal Filed On: 29-05-2019
• Other Referred Cases: Hindumal Balmukund Investment Co. (P.) Ltd. v. Pr.CIT, Rampyari Devi Sarogi v. CIT, Sesa Starlite Ltd. vs CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order; Principle of natural justice; Wrong claim; Revised return; TDS
• Section: 263; 2; 143(3); 10B; 80P; 113

Judgement Text

आयकर अपीलीय अिधकरण “बी” ɊायपीठपुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “B” :: PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.841/PUN/2019 िनधाᭅरण वषᭅ / Assessment Year :2014-15 Vikas Sahakari Sakhar Karkhana Ltd., Vaishali Nagar, A/p- Niwali, Tal &Dist – Latur – 413531. PAN: AAATV 2893 E V s The Commissioner of Income Tax-2, Aurangabad – 431002. Appellant/ Assessee Respondent /Revenue Assessee by Shri Pramod Shingte – AR Revenue by Shri Rajeev Kumar – DR Commissioner of Income Tax Date of hearing 20/12/2022 Date of pronouncement 14/03/2023 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This appeal filed by the Assessee is directed against the order of ld.Pr.Commissioner of Income Tax-2, Aurangabad dated 26.03.2019 emanating from the order of the ITO, Ward-2, Latur passed under section 143(3)of the I.T.Act, 1961 dated 30.12.2016. The Assessee has raised the following grounds of appeal: “On the facts and circumstances of the case and in law the Ld. Pr.CIT-2, Aurangabad erred in passing the order u/s. 263 of the ITA No.841/PUN/2019 Vikas Sahakari Sakhar Karkhana Ltd., [A] 2 Income Tax Act 1961, by disregarding appellants contention and also erred in not appreciating the fact that error pointed out shall be apparent and manifest and not arising out of complex rules of interpretation and based on highly debatable issues. Your appellant craves for to add, alter, amend, modify, delete all above or any grounds of appeal before or during the course of hearing in the interest of natural justice.” 2. Brief Facts : Brief facts of the case are that the assessee filed Return of Income electronically on 22/09/2014 for AY 2014-15. Then assessee revised Return on 29/09/2015 electronically. The assessee is a co-operative society engaged in the business of manufacturing Sugar and By- Products. The Assessing Officer(ITO), Ward-2, Latur passed assessment order u/s 143(3) of the Act disallowing Excess Sugarcane price in excess of FRP of Rs.10,25,49,152/-. The AO assessed the Total Income at Rs.10,25,49,152/-. The Pr.Commissioner of Income Tax -2, Aurangabad on perusal of the records decided that the assessment order is erroneous and prejudicial to the interest of revenue, after giving opportunity to the assessee. The Pr.Commissioner of Income tax passed order u/s.263 on 26/03/2019. Aggrieved by the order u/s 263, the Assessee filed appeal before this Tribunal. ITA No.841/PUN/2019 Vikas Sahakari Sakhar Karkhana Ltd., [A] 3 Submission of ld.Authorised Representative(AR) for the Assessee: 3. The Ld.AR filed a factual paper book and a case law paper book. The Ld.AR submitted that the Pr.CIT has invoked 263 on three grounds, wrong claim of 80P on Interest, TDS mismatch, Interest on Income Tax refund of Rs.5,38,818/- which was allegedly not disclosed. The Ld.AR submitted that the Assessee had filed copy of statement of Total Income which shows deduction claimed by assessee u/s.80P(2)(d). The AO has verified all these facts and hence the order is not erroneous & prejudicial. The Ld.AR submitted that the Interest on Income tax refund has already offered for taxation for AY 2014-15. The Ld.AR submitted that the AO has verified all these issues hence the assessment order is not erroneous and prejudicial to the interest of revenue. Submission of Ld.Departmental Revenue (DR): 4. The Ld.DR relied on the order of the Pr.CIT. Ld.CIT(DR) Deepak Garg filed written submission. TheLd.DR submitted that AO had not conducted any inquiries regarding the issues mentioned in the 263 Order. The Ld.DR invited our attention to the Notices issued u/s.142 by the AO to demonstrate that no question was asked about the impugned issues. Therefore, the assessment order is erroneous and prejudicial. Ld.DR submitted that the assessee in the ITA No.841/PUN/2019 Vikas Sahakari Sakhar Karkhana Ltd., [A] 4 computation of Income had merely mentioned section 80P and had not specified the subsection under which deduction is claimed. Neither the AO had asked the assessee about the specific subsection of section 80P. The AO has not mentioned anything about the deduction u/s 80P in the assessment order. Findings and Analysis: 5. We have heard both the parties and perused the records. On perusal of the Notices u/s 142 dated 06/06/2016, 27/04/2016 (page 112, 113 of Paper Book), Notice u/s.143(2), it is observed that no specific question had been asked by the AO regarding deduction claimed by assessee u/s.80P, TDS mismatch, Interest on Income tax Refund. The assessee vide reply dated 14/09/2015 filed copy of return, computation of Income, Audit report and sought adjournment. The assessee vide reply dated 05/12/2016 filed note explaining Sugarcane price debited and FRP, amount of Harvesting and Transportation expenses paid. The replies submitted by the assessee during assessment proceedings vide letter dated 21/06/2016 and 14/09/2015 are reproduced here as under : ITA No.841/PUN/2019 Vikas Sahakari Sakhar Karkhana Ltd., [A] 5 . ITA No.841/PUN/2019 Vikas Sahakari Sakhar Karkhana Ltd., [A] 6 6. Thus, it is observed from the Notices issued by the AO that AO had not asked any question regarding impugned issues raised by Pr.CIT. Also, the assessee had not filed any details, any reply regarding the impugned issues mentioned by the Pr.CIT in the notices u/s.263. On perusal of the replies of the assessee made during assessment proceedings, which is on page 114,115,109,110 of the Assessee’s paper Book, it is observed that no where assessee had specifically filed details of Interest Income earned from various sources. As per the computation of income the assessee has merely mentioned deduction u/s 80P without specifying any subsection. The AO has not even mentioned a single word about deduction u/s.80P in the assessment order. On reading the assessment order one will not understand that any deduction has been claimed by the assessee. The AO in the computation of Income in the assessment order has started with Retuned Income and then added the disallowance. The computation of the AO in the assessment order is reproduced here as under : ITA No.841/PUN/2019 Vikas Sahakari Sakhar Karkhana Ltd., [A] 7 7. Thus, on perusal of the Assessment order, the notices, the replies filed by the assessee , it is clear that no inquiries were conducted by the AO regarding the issue of 80P deduction claimed by the assessee, TDS mismatch, Interest on Income Tax Refund. 7.1 Section 263 of the Act is reproduced here as under : Revision of orders prejudicial to revenue. 263. (1) The Principal Commissioner or 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. Explanation 1.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,— (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include— (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income- tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief ITA No.841/PUN/2019 Vikas Sahakari Sakhar Karkhana Ltd., [A] 8 Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or] Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. 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; (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. ITA No.841/PUN/2019 Vikas Sahakari Sakhar Karkhana Ltd., [A] 9 8. The Pune Bench of the Tribunal had an occasion to deal with identical issue in deciding the validity of the order passed u/s.263 of the Act in Hindumal Balmukund Investment Co. (P.) Ltd. v. Pr.CIT [IT Appeal No. 562 (Pun.) of 2019 dated 3-8-2020]. The Tribunal on this issue has held and observed as follows: "8. We also find that the Assessing Officer while accepting the documents submitted by the Ld. AR, has not conducted any specific enquiry as to the facts of the case. There is no iota of evidence brought on record by the Assessing Officer justifying that there was mistake committed by the assessee vis-à-vis his filing of original as well as revised return of income. The Ld. AR of the assessee also argued that the view taken by the Assessing Officer may not be a proper one as per the Ld. Pr. Commissioner of Income-tax is concerned nonetheless, it is definitely an appropriate view. We do not agree with the contention of the Ld. AR since taking a view should be backed by reasons and that reasons should be demonstrated in the order itself with evidences brought on record and independent enquiry conducted. In this case, the Assessing Officer has only done the work of extraction of submissions of the Ld. AR and nothing else and therefore, in fact the Assessing Officer has not formed any view. When no view has been taken, no enquiry has been conducted, when no reasons on facts has been placed on record, the order of assessment is bound to be erroneous insofar as prejudicial to the interest of the revenue. Taking the totality of facts and circumstances into consideration and aforesaid case laws, we uphold the order passed u/s.263 of the Act by the Ld. Pr. Commissioner of Income Tax." ITA No.841/PUN/2019 Vikas Sahakari Sakhar Karkhana Ltd., [A] 10 8.1 In the case of Rampyari Devi Sarogi v. CIT [1968] 67 ITR 84 (SC), the Hon'ble Supreme Court has held that the Commissioner can regard the AO's order as erroneous on the ground, that in the circumstances of the case, the AO should have made further inquiries before accepting the statement made by the Assessee in his return. Besides, the Hon'ble Supreme Court, in the facts of the said case, held that the Assessee had not suffered in any way from the failure of the Commissioner to indicate results of inquiries since, the Assessee would have full opportunity of showing the AO whether he has jurisdiction or not, and whether the income assessed in the assessment orders which were originally passed was correct or not. 8.2 In the case under consideration also the assessee have full opportunity to explain his stand before the AO. 8.3 The Hon’ble Bombay High Court in the case of Sesa Starlite Ltd. vs CIT 430 ITR 121 (Bom) has held as under : Quote, “45. In a case of this nature, it is not sufficient that the AO merely raises queries or poses questions. If such queries are answered, it is the duty of the AO to consider such answers and based thereon, to take further steps to arrive at a reasoned decision. Perusal of the impugned order does not indicate that the AO has even adverted to, much less, considered the responses filed by the Assessee. There is not even finding in the assessment order that the Assessee was entitled to deduction under section 10B of the IT Act on account of the answers furnished by the Assessee to the queries raised by the AO. In respect of such order, the CIT ITA No.841/PUN/2019 Vikas Sahakari Sakhar Karkhana Ltd., [A] 11 was entitled to exercise the revision jurisdiction since the order is both, erroneous as well as prejudicial to the interests of the Revenue.” Unquote. 9. The explanation 2 to section 263 has introduced a deeming provision. The explanation 2 of Section 263, defines an order passed by AO shall be deemed to be erroneous in so far as it is prejudicial to the interest of Revenue, if in the opinion of Pr.CIT, the assessment order is passed without making any inquiry or verification which should have been done. Also, if relief has been allowed by AO without making any inquiry. In the case under consideration, we have already held that the AO has failed to make necessary inquiries on the impugned issues. In the case under consideration, the AO has not uttered a single word whether the assessee was eligible or not for deduction u/s 80P. The AO has not given findings that assessee was eligible for deduction u/s 80P of the Act. The AO has not done any TDS reconciliation. The AO has also not verified about Interest on Income Tax refund.When no view has been taken, no enquiry has been conducted, when no reasons on facts has been placed on record, the order of assessment is bound to be erroneous insofar as prejudicial to the interest of the revenue.Therefore, as per the Section 263 read with the explanation 2, and respectfully following Hon’ble High Court (supra), the Assessment Order is erroneous and prejudicial to the interest of Revenue. ITA No.841/PUN/2019 Vikas Sahakari Sakhar Karkhana Ltd., [A] 12 10. Therefore, in these facts and circumstances of the case, we are of the opinion that the Pr.CIT has rightly invoked provisions of section 263 of the Act. Hence, the order u/s.263 is upheld. It will not be inappropriate to mention here that the ITAT Pune in ITA No.1911/PUN/2018 in assessee’s own case for AY 2013-14 has upheld the order u/s.263 on identical facts. Thus, the grounds of appeal of the Assessee are dismissed. 11. In the result, appeal of the Assessee is Dismissed. Order pronounced in the open Court on 14 th March, 2023. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 14 th Mar, 2023/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, “बी” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.