M/S. AKSHAR DEVELOPERS ,MUMBAI V. CENTRAL CIRCLE 4, NAVI MUMBAI

ITA 1560/MUM/2024

AI Insights

The case involves M/s. Akshar Developers, who appealed against the order of the PCIT, Pune, which had assumed jurisdiction under Section 263 of the Income Tax Act and found the assessment order for AY 2018-19 to be erroneous and prejudicial to the interest of the revenue. The original assessment order had made certain additions to the income of the assessee, which the PCIT later contested. The Tribunal examined the proceedings and found that the issues raised by the PCIT had been adequately addressed during the original assessment, and thus, the revision under Section 263 was not justified.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 472753 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-10-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 01-04-2024
• Other Referred Cases: Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, Gabriel India Ltd vs. Commissioner of Income Tax, CIT vs. Nirma Chemical Works Ltd, CIT vs. Sunbeam Auto
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K.R. SUBHASH; DR
• Assessee Lawyers: R I TI KA AGAR WA L; AR
• Keywords: Set aside; Revenue expenditure; Unexplained cash credit; Gift; Capital expenditure; TDS; Revision of order
• Section: 143(3); 263; 40(a)(ia)

Judgement Text

" | आयकर अपीलीय अिधकरण \fा यपीठ, मुंबई | IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, HON’BLE ACCOUNTANT MEMBER & SHRI RAJ KUMAR CHAUHAN, HON’BLE JUDICIAL MEMBER I.T.A. No. 1560/Mum/2024 Assessment Year: 2018-19 M/s. Akshar Developers Unit No. 0047, O Wing Ground Floor Akshar Business Park Plot No. 03, Sector 25 Vashi Navi Mumbai -400075 [PAN: AAKFA0455B] Vs Pr. Commissioner of Income Tax, (Central), Pune अपीला थ\u0016/ (Appellant) \u0017\u0018 यथ\u0016/ (Respondent) Assessee by : Ms. Ritika Agarwal, A/R Revenue by : Dr. K.R. Subhash, CIT, D/R सुनवाई की तारीख/Date of Hearing : 08/10/2024 घोषणा की तारीख/Date of Pronouncement : 11/10/2024 आदेश/O R D E R PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assessee is preferred against the order dated 13/03/2024 passed by ld. PCIT [hereinafter ‘ld. PCIT’] pertaining to AY 2018-19. 2. The sum and substance of the grievance of the assessee is that the ld. PCIT erred in assuming jurisdiction u/s 263 of the Act and further erred in holding that the assessment order dated 29/09/2021 is not only erroneous but prejudicial to the interest of the revenue. 3. Representatives of both the sides were heard at length. Case records carefully perused and the relevant documentary evidence brought on record duly considered. I.T.A. No. 1560/Mum/2024 2 4. Briefly stated the facts of the case are that the return of income was originally filed on 31/10/2018 declaring total income at Rs.94,90,890/-. The return of income was selected for scrutiny through CASS and accordingly statutory notices were issued and served upon the assessee. During the course of scrutiny assessment proceedings, the notices u/s 142(1) of the Act dated 04/11/2020 required the assessee interalia to furnish details of unsecured loans/deposits taken during the year including squared up loans and also details of loans/advances and deposits given, including the accounts squared up during the year. Vide reply dated 18/11/2020, the assessee complied with the queries raised by the AO. 4.1. Again, a showcause notice was issued on 11/06/2021, which reads as under:- I.T.A. No. 1560/Mum/2024 3 4.2. On 06/09/2021, another showcause notice was issued which is as under:- I.T.A. No. 1560/Mum/2024 4 4.3. The assessee filed a detailed reply which reads as follows:- I.T.A. No. 1560/Mum/2024 5 I.T.A. No. 1560/Mum/2024 6 I.T.A. No. 1560/Mum/2024 7 4.4. Exhibit 102 to 105 are the evidence for uploading the documents with the Income Tax Department. The detailed reply relating to query relating to TDS reads as under:- I.T.A. No. 1560/Mum/2024 8 I.T.A. No. 1560/Mum/2024 9 I.T.A. No. 1560/Mum/2024 10 I.T.A. No. 1560/Mum/2024 11 4.5. After considering the detailed submissions, the assessment order was framed u/s 143(3) of the Act vide order dated 29/09/2021 wherein addition of Rs.6,31,002/- was made u/s 40(a)(ia) of the Act and Rs.1,00,00,000/- as unexplained credit u/s 115BBE of the Act. 5. Assuming jurisdiction conferred upon him by the provisions of Section 263 of the Act, the ld. PCIT (Central), Pune issued the following notice:- I.T.A. No. 1560/Mum/2024 12 I.T.A. No. 1560/Mum/2024 13 6. A perusal of the notice u/s 263 of the Act with respect to the queries raised during the assessment proceedings, reveals that all the issues raised by the ld. PCIT were considered by the AO while making thorough enquiry during the assessment proceedings. Specific queries were raised by the AO to which specific replies were filed by the assessee. I.T.A. No. 1560/Mum/2024 14 7. In the light of the afore-stated facts the Hon'ble Supreme Court in Malabar Industrial Co. Ltd., 243 ITR 83, has laid down the following ratio: \"A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far 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 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 Income-tax Officer 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) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order 7 is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous \". 8. The Hon'ble Bombay High Court in the case of Gabriel India Ltd 203 ITR 108 has held as under: \"The power of suo motu revision under subsection (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub-section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions \"erroneous\", \"erroneous assessment\" and \"erroneous judgment\" have been defined in Black's Law Dictionary. According to the definition, \"erroneous\" means \"involving error; deviating from the law\". \"Erroneous assessment\" refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, \"erroneous judgment\" means \"one rendered according to course and 8 practice of court, but contrary to law, upon mistaken view of law; or upon erroneous application of legal principles\". 12. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the I.T.A. No. 1560/Mum/2024 15 lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the Income-tax Officer has exercised the quasi- judicial power vested in him in accordance with law and arrived at conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not 9 feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, viz., that the order is erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to the interests of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. 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. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue. An order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the 10 record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the court it would be open to the courts to examine whether the relevant objective factors were available from the records called for and examined by such authority. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income tax Officer cannot be held to be \"erroneous\" simply because in his order he did not make an elaborate discussion in that regard. Moreover, in the instant case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income- 11 tax Officer to re- examine the matter. That, in our opinion, is not permissible. Hence the provisions of section 263 of the Act were not I.T.A. No. 1560/Mum/2024 16 applicable to the instant case and, therefore, the commissioner was not justified in setting aside the assessment order.\" 9. It is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the decision of Hon'ble High Court of Bombay in the case of CIT vs. Nirav Modi, [2016] 71 Taxmann.com 272 (Bombay)\". 10. The Hon'ble High Court of Gujarat in the case of CIT vs. Nirma Chemical Works Ltd. 309 ITR 67 has observed as under: \"if assessment order were to incorporate the reasons for upholding the claim made by an assessee, the result would be an epitome and not an assessment order. In this case, during the assessment proceedings for both the Assessment Years, the Assessing Officer issued a query memo to the assessee, calling upon him to justify the genuineness of the gifts. The Respondent Assessee responded to the same by giving evidence of the communications received from his father and his sister i.e. the donors of the gifts along with the statement of their Bank accounts. On perusal, the Assessing Officer was satisfied about the creditworthiness/capacity of the donors, the source from where these funds have come and also the creditworthiness/ capacity of the donor. Once the Assessing Officer was satisfied with regard to the same, there was no further requirement on the part of the Assessing Officer to disclose his satisfaction in the Assessment Order passed thereon. Thus, this objection on the part of the Revenue cannot be accepted.\" I.T.A. No. 1560/Mum/2024 17 11. We find that the Hon'ble Delhi High Court in the case of CIT Vs Sunbeam Auto reported in 332 ITR 167 has held as held as under: \"12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the CIT under s. 263 of the IT Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the AO did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the AO had not applied his mind on the issue. There are judgments galore laying down the principle that the AO in the assessing order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission 14 that one has to keep in mind the distinction between \"lack of inquiry\" and \"inadequate inquiry\". If there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders under s. 263 of the Act, merely because he has different opinion in the matter. It is only in cases of \"lack of inquiry\" that such a course of action would be open\". 12. Considering the facts of the case in totality, in light of the judicial decisions discussed hereinabove, we do not find any error or infirmity in the assessment order which could make it erroneous and prejudicial to the interest of the revenue. Therefore, we set aside the order of the PCIT and restore that of the Assessing Officer dated 29/09/2021. Order pronounced in the Court on 11th October, 2024 at Mumbai. Sd/- Sd/- (RAJ KUMAR CHAUHAN) (NARENDRA KUMAR BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 11/10/2024 * * * *SC SrPs SC SrPs SC SrPs SC SrPs I.T.A. No. 1560/Mum/2024 18 आदेश की \u0014ितिलिप अ\u0019ेिषत /Copy of the Order forwarded to : 1. अपीलाथ\u001b / The Appellant 2. \u0014\u001cथ\u001b / The Respondent 3. संबंिधत आयकर आयु! / Concerned Pr. CIT 4. आयकर आयु! ) अपील ( / The CIT(A)- 5. िवभागीय \u0014ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 6. गाड% फाई/ Guard file. आदेशानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Mumbai "