HARISH SUBRAMANIAM IYER, MUMBAI V. PR CIT -27, NAVI MUMBAI

ITA 873/MUM/2021

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 3179 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2016-2017
• Appeal Filed On: 20-05-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AZHAR ZAIN
• Keywords: Capital asset; Earning of tax free income; Capital Gains
• Section: 263; 143(3); 142(1); 22

Judgement Text

म ु ंबई ठ “एच ” , ए ं !!" !# , $% $ म& IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H”, MUMBAI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI GAGAN GOYAL, ACCOUNTANT MEMBER ं.873/म ु ं/2021 ( ". . 2016-17) ITA NO.873/MUM/2021(A.Y.2016-17) Harish Subramaniam Iyer, A-10, Sidhpura Industrial Estate, LBS Marg, Ghatkopar (West), Mumbai 400 086 PAN: AAAPI-3669-R ...... - /Appellant ब" म Vs. Principal Commissioner of Income Tax 27, 401, 4 th Floor, Tower No.6, Vashi Rly. Station Commercial Complex, Vashi, Navi Mumbai 400 703 ..... . / /Respondent - 0 / Appellant by : Shri Vijay Mehta . / 0 /Respondent by : Shri Azhar Zain ु " ई 1 / / Date of hearing : 02/02/2022 2#3 1 / / Date of pronouncement : 02/05/2022 $श/ ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed against the order of Principal Commissioner of Income Tax Mumbai-27 [in short 'the PCIT’] dated 25/03/2021 for the assessment year 2016-17 passed u/s. 263 of the Income Tax Act,1961 ( in short 'the Act'). 2 ITA NO.873/MUM/2021(A.Y.2016-17) 2. The assessee in appeal has assailed jurisdiction assumed by PCIT u/s. 263 of the Act in setting aside the assessment order dated 23/05/2018 passed u/s. 143(3) of the Act. 3. Shri Vijay Mehta appearing on behalf of the assessee submitted that the PCIT invoked revisionary powers on the following seven points: (i) No details or ITR of partnership firm examined by the Assessing Officer. (ii) Inconsistency in respect of nature of capital asset on which short term capital gains was claimed. No cross verification of bills and bank statement. No third party enquiry by the Assessing Officer. (iii) Short term capital gains of Rs.1,41,221/- on sale of shares. No query raised by the Assessing Officer. No supporting documents furnished by the assessee. (iv) Long term capital loss of Rs.1,45,895/-. No enquiry made by the Assessing Officer on the issue and no documents on record. (v) Rs.12,98,672/- claimed as exempt income(Interest). No documents substantiating the same found on record. (vii) Carry forward of long term capital loss of Rs.3,55,562/- pertaining to assessment year 2013-14 allowed without making verification. (vii) In Balance Sheet, liabilities and assets of Rs.14.35 crores not verified by the Assessing Officer. Loan of Rs.12.24 crores shown as receivable from Ms. Sudha H. Iyer not verified. Security deposits of 3 ITA NO.873/MUM/2021(A.Y.2016-17) Rs.3.00 crores received from Vikas Laboratories Pvt. Ltd. not examined/ verified by the Assessing Officer. 3.1 The ld. Authorized Representative for the assessee submitted that the objections raised by PCIT vide show cause notice dated 08/03/2019 allegedly making the assessment order erroneous and prejudicial to the interest of Revenue were countered by the assessee vide reply dated 10/04/2019 at page 72 to 75 of the paper book. Thereafter, the assessee filed another reply dated 01/03/2021 and 12./03/2021. The same are at pages 77 to 85 of the paper book. The assessee had pointed that during the assessment proceedings the assessee had furnished all the details to the Assessing Officer on the issues raised in the revision proceedings. The ld. Authorized Representative for the assessee submitted that the Assessing Officer had issued notice u/s. 142(1) dated 04/01/2018. The same is at pages 16 to 22 of the paper book. A perusal of the said notice would show that the Assessing Officer had raised queries on all the issue which have been raised by the PCIT in revision proceedings. The assessee vide reply dated 15/01/2018 had furnished details in respect of all the queries. Along with the reply the assessee had filed various documents to substantiate his contentions. Since, the Assessing Officer had examined the issue during the course of assessment proceedings it is not a case of lack of enquiry. Merely for the reason that the Assessing Officer had taken a view which does not coincide with the view of the PCIT, would not make the assessment order erroneous. The ld.Authorized Representative for the assessee submitted that the PCIT while passing the impugned order has not taken into consideration the reply furnished by the assessee in response to show cause notice issued u/s. 263 of the Act. No findings have been given by 4 ITA NO.873/MUM/2021(A.Y.2016-17) the PCIT on the submissions of the assessee. In the impugned order the PCIT has reproduced reply of the assessee dated 10/04/2019, 01/03/2021 and dated 12/03/2021. Thereafter, the PCIT has referred to some case laws in Para-7 of the impugned order and in Para-8 of the order, the PCIT holds that the order dated 23/05/2018 passed u/s. 143(3) of the Act is erroneous and prejudicial to the interest of Revenue as the Assessing Officer has failed to verify various issues pointed in the order. The ld. Authorized Representative for the assessee contended that if the PCIT would have applied his mind on the replies furnished by the assessee on various dates, it would have been evident that the Assessing Officer had made detailed enquiries on all the issues and in response to the query raised by the Assessing Officer the assessee had furnished information / details supported by cogent evidence. The ld. Authorized Representative for the assessee asserted that the impugned order has been passed in a mechanical manner without appreciating the documents on record and facts of the case, therefore, it is not sustainable. 4. Per contra, Shri Azhar Zain representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. The ld. Departmental Representative submitted that the Assessing Officer has failed to make enquiries during the course of assessment proceedings in respect of the issues pointed by the PCIT. 5. We have heard the submissions made by rival sides and examined the orders of authorities below. We have considered the documents furnished by the assessee in the paper book. The PCIT has exercised his revisionary powers 5 ITA NO.873/MUM/2021(A.Y.2016-17) on the pretext that various issues as pointed in SCN under section 263 of the Act purportedly, not been examined by Assessing Officer during the assessment proceedings. 6. The first issue raised by the PCIT in revision proceedings is with respect to salary/remuneration received by the assessee from partnership firm. The objection of PCIT is that the Assessing Officer has not examined the ITR or the other details of partnership firm. In the return of income the assessee has in Schedule -IF has mentioned the name of the partnership firm and the percentage of assessee’s share in the partnership firm along with capital balance in the said firm. In the Balance Sheet of the assessee again the name of the partnership firm along with the capital introduced by the assessee has been clearly mentioned. In response to the notice u/s. 142(1) the assessee had furnished all these details before the Assessing Officer. The Assessing Officer after examining the same accepted the contentions of the assessee. Hence, it is not a case where no enquiry was made by the Assessing Officer during assessment proceedings on this issue. Merely for the reason that ITR of partnership firm was not placed on record would not make the assessment erroneous. 7. The second issue raised by the PCIT in the revision proceedings is short term capital gains from sale of gold bars. The ld. Authorized Representative for the assessee pointed that the assessee had purchased gold bars. The purchase invoice of the same is available at pages 58 to 59 of the paper book. The assessee has also placed on record sales bills of the gold bars at pages 55 to 57 of the paper book. The ld. Authorized Representative for the assessee pointed that these purchase bills and sale bills were furnished before the Assessing 6 ITA NO.873/MUM/2021(A.Y.2016-17) Officer during the course of assessment proceedings. the assessee has drawn our attention to the bank statement at pages 45 and 46 of the paper book to show that the sale proceeds of jewellery were directly credited to the bank account of assessee maintained with ICICI Bank. The ld. Authorized Representative of the assessee admitted that in return of income there was error in mentioning the amount of capital gains from sale of gold bars in wrong column. Instead of mentioning the amount in section A5 of Schedule CG the amount was punched in section A1 meant for disclosing capital gain from sale of land. The assessee in reply to notice under section 142(1) of the Act had furnished the details of capital assets sold. Thus, we find that the objection raised by PCIT with regard to short term capital gains arising on sale of gold bars lack merit. 8. The third objection of the PCIT is with regard to short term capital gains of Rs.1,41,221/- on sale of equity shares. The assessee on pages 60 to 62 of the paper book has furnished statement of account of mutual funds. In computation of income starting at page 33 of the paper book the assessee had shown short term capital gain on purchase and sale of securities. We find that in reply to notice under section 142(1) of the Act the assessee had again furnished details of short term capital gain on sale of shares/mutual funds. The Assessing Officer after examining has accepted the same. Hence, it cannot be said that the Assessing Officer has made no enquiries with regard to short term capital gains on sale of shares.. The assessee had furnished documentary evidence to substantiate the query raised by the Assessing Officer by way of notice issued u/s. 142(1) of the Act. We find no merit in issue No.3 raised by the PCIT in revision proceedings. 7 ITA NO.873/MUM/2021(A.Y.2016-17) 9. The fourth issue raised by PCIT in revision proceedings is with regard to long term capital loss of Rs.1,45,895/-. The allegation of the PCIT was that no enquires made by the Assessing Officer and no documents were furnished by the assessee. The assessee has pointed that in response to the notice issued u/s. 142(1) of the Act, the assessee had given details of capital assets sold/purchased, short term capital gains, long term capital gains , etc. We find that the assessee had tabulated short term capital gains /long term capital gains in the reply. The assessee has also placed on record redemption advice of preference shares issued by L&T Finance indicating amount of redemption along with copy of cheque issued on 25/03/2013 for purchase of preference shares. Thus, the assessee had furnished the details of the redemption of preference shares during the course of assessment proceedings. From records it is evident that the issue was examined by the Assessing Officer during assessment proceedings. 10. The fifth issue raised by PCIT in revision proceedings is interest income claimed as exempt. The assessee had furnished the details of exempt income before the Assessing Officer in response to the notice issued u/s. 142(1) of the Act. This fact is evident from the reply dated 15/01/2018. The ld. Authorized Representative for the assessee has further referred to the interest income credited to the bank account of the assessee with ICICI Bank. The bank statement is at pages 45 to 47 of the paper books. We find that before the Assessing Officer the assessee had furnished bank statement, hence, the findings of the PCIT that the issue was not examined by the Assessing Officer is contrary to the documents on record. 8 ITA NO.873/MUM/2021(A.Y.2016-17) 11. The sixth issue raised in revision proceedings is with regard to carry forward of long term capital loss Rs.3.55,562/- pertaining to assessment year 2013-14. The ld. Authorized Representative for the assessee has pointed that the assessee has not claimed the loss in the assessment year under appeal. Thus, the Assessing Officer has allowed the loss to be carry forward. The assessee had furnished the statement of long term capital gains / long term capital loss earned during the period relevant to the assessment year under appeal. The Assessing Officer after examining the same accepted the contentions of the assessee. We find that the assessee had furnished details of short term capital gains /long term capital gains before the Assessing Officer. Hence, it cannot be said that Assessing Officer has not examined the issue. In any case the assessee has not claimed long term capital loss in the impugned assessment year, therefore, the issue raised by PCIT is without merit. 12. The last issue in revision is with respect to loan of Rs.12.24 crores received from Ms. Sudha H. Iyer and liability of Rs.3.00 crores on account of security deposit received from Vikas Laboratories Pvt. Ltd. The ld. Authorized Representative for the assessee has pointed that the correct amount of loan from Ms. Sudha H. Iyer is Rs.1.22 crores and not Rs.12.24 crores. The ld. Authorized Representative for the assessee referred to question No.10 in the notice issued u/s. 142(1) of the Act. He pointed that in response to said query, the assessee in reply tabulated the details of loans and advances ( at page 25 of the paper book). The assessee pointed that no fresh loan was raised during the period relevant to assessment year under appeal. Even the security deposit referred to by the PCIT was not taken by the assessee during the period under consideration. The loan from Ms. Sudha H. Iyer and security 9 ITA NO.873/MUM/2021(A.Y.2016-17) deposit from Vikas Laboratories Pvt. Ltd. was taken in the preceding assessment years wherein the same were accepted by the Department. In reply to the notice u/s. 263 of the Act, the assessee had pointed that Ms. Sudha H. Iyer’s account in the books of assessee was furnished to the Assessing Officer for verification, hence, it cannot be said that the issue was not examined during the assessment proceedings. Similarly, security deposit account in the books of account of the assessee was furnished to the Assessing Officer and the Assessing Officer after verification accepted the same. 13. In view of the explanation furnished by the assessee and the documents furnished by the assessee before the Assessing Officer as well as the PCIT we are of the considered view that it is not a case of no enquiry. Lack of enquiry and inadequate enquiry stand on different pedestal. The Hon’ble Bombay High Court in the case of CIT vs. Nirav Modi reported as 390 ITR 292, has held: “9. ............Once the Assessing Officer is satisfied with the explanation offered on inquiry, it is not open to the CIT in exercise of his revsional powers direct that further enquiry has to be done. At the very highest, the case of the Revenue is that this is a case of inadequate inquiry and not of "no enquiry." It is well settled that the jurisdiction under Section 263 of the Act can be exercised by the CIT only when it is a case of lack of enquiry and not one of inadequate enquiry.” 14. Thus, from the above it is evident that the PCIT has erred in exercising the jurisdiction u/s. 263 of the Act. The assessment order has been passed by the Assessing Officer after making enquiries/verification. The Assessing Officer has taken one of the possible views on the submissions made by the assessee, therefore, the assessment order cannot be said to be erroneous. The twin conditions necessary for invoking jurisdiction u/s. 263 of the Act are not satisfied, therefore, the impugned order is quashed and the appeal of the assessee is allowed. 10 ITA NO.873/MUM/2021(A.Y.2016-17) 15. In the result, the appeal by assessee is allowed. Order pronounced in the open court on Monday the 02 nd day of May, 2022. Sd/- Sd/- ( GAGAN GOYAL ) (VIKAS AWASTHY) $% /ACCOUNTANT MEMBER /JUDICIAL MEMBER म ु ंबई/ Mumbai, 5 " ं /Dated 02/05/2022 Vm, Sr. PS(O/S) त ल प अ े षतCopy of the Order forwarded to : 1. -/The Appellant , 2. . / / The Respondent. 3. ु 6/( )/ The CIT(A)- 4. ु 6/ CIT 5. 7 ! . / " , . . ., म ु बंई/DR, ITAT, Mumbai 6. ! 89 : ; /Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai