2022 (10) TMI 900 - AT - Income Tax

Tribunal quashes PCIT's revisionary orders citing lack of incriminating material, limitation bar

The Tribunal quashed the Principal Commissioner of Income Tax's revisionary orders for various assessment years, citing issues already examined by the ... Revision u/s 263 by CIT - Period of limitation - as per PCIT there is difference in contract receipts as per 26AS and figures reflected in the profit and loss account - A.Y.2010-11 - HELD THAT:- The revision order passed by the ld. PCIT u/s.263 of the Act deserves to be quashed it is barred by limitation. A.Y.2009-10 being unabated assessment as on the date of search on 21/07/2017 and admittedly there was no incriminating material found during the course of search relatable to mismatch in gross receipts and mismatch in TDS credit. Hence, the ld. AO could not have disturbed the earlier concluded assessments in view of the decision of Continental Warehousing Corporation [2015 (5) TMI 656 - BOMBAY HIGH COURT] Explanation 2 to Section 263 of the Act has been invoked only in the revision order passed in the 263 of the Act without giving show-cause notice to the assessee in that regard. Hence, by placing reliance on the decision of the Hon’ble Gujarat High Court in the case of Shreeji Prints Pvt. Ltd. [2021 (9) TMI 108 - SUPREME COURT] the order passed by the ld. PCIT u/s.263 of the Act becomes unsustainable in the eyes of law; Adequate enquiries with regard to the disputed issues were already carried out by the Assessing Officer in three independent proceedings; Even on merits, the assessee had furnished detailed reconciliation statement explaining the mismatch in receipts and mismatch in TDS credit before the ld. AO in three independent proceedings and before the ld. PCIT in Section 263 proceedings; PCIT had never pointed out by any error in the order of the ld. AO by making preliminary enquiries with regard to submissions made by the assessee before him. Reliance in this regard is placed on the decision of Jabalpur Tribunal in the case of Jashn Beneficiary Trust vs. ACIT [2017 (8) TMI 362 - ITAT JABALPUR] We find that this is purely a legal issue raised by the assessee and it does not require examination of any fresh facts. Hence, the said additional ground is admitted herein. But in view of the decision rendered by us hereinabove wherein 263 order passed by the ld. PCIT is quashed the adjudication of additional ground becomes academic in nature and hence, it is left open. Direction given by the ld. PCIT to the ld. AO to verify with regard to taxability of share of profit from AOP in the sum of Rs.3.43 Crores while computing book profit u/s.115JB - A.Y.2011-12 - We find that the said sum has already been added by the ld. AO in the second search assessment completed on 19/06/2019. This goes to prove complete non-application of the mind on the part of the ld. PCIT. Hence, the revision order passed u/s 263 of the Act by the ld. PCIT in respect of these two issues i.e. (c) above is hereby quashed. Direction given by the ld. PCIT to the ld. AO to verify with regard to adding back the non-genuine purchases while computing book profit u/s 115JB we hold that the ld. AO could only add those list of items that had been stipulated in Explanation 1 to section 115JB(2) of the Act and he cannot tinker with the audited accounts of the assessee which had been approved by the shareholders in Annual General Meeting. Reliance in this regard is placed on the decision of Apollo Tyres Ltd [2002 (5) TMI 5 - SUPREME COURT]. Hence we hold that the ld. AO had correctly followed the ratio decidendi of Hon’ble Apex Court in Apollo Tyres Ltd referred supra. Hence there cannot be any addition to book profit u/s 115JB of the Act in respect of alleged non-genuine purchases. Accordingly, there cannot be any error in the order of the ld. AO in this regard. Hence the revision order u/s 263 of the Act passed by the ld. PCIT in this regard deserves to be quashed and is hereby quashed. Nature of transactions entered by the assessee with its Subsidiaries / Associates and consequently to verify whether the assessee company had failed to comply with the provisions of section 92E - A.Y.2015-16 - We find that the ld. AO in the original scrutiny assessment proceedings framed u/s 143(3) of the Act on 07/11/2016 had duly examined this aspect which is evident from the reply given by the assessee vide letter dated 11/07/2016 in response to notice u/s 142(1) of the Act letter dated 04/07/2016. In this letter, the assessee had duly furnished the complete details of related party transactions before the ld. AO. The ld. AO after examination of the same had come to a conscious conclusion that the domestic transfer pricing issues cannot be made applicable to the assessee in the instant case and hence there was no need to refer the case to Learned Transfer Pricing Officer. We hold that the ld. PCIT is only trying to substitute his view , which is patently illegal, in the place of view already taken by the ld. AO, which, in our considered opinion, cannot be done by invoking revision jurisdiction u/s 263 of the Act. Hence we have no hesitation in quashing the revision order passed u/s 263. Mismatch in gross receipts and mismatch in TDS credit for various assessment years - We find that the revenue declared by the assessee in its profit and loss account from Asst Years 2011-12 to 2017-18 is much more than the revenue reflected in Form 26AS. This goes to prove that there would always be mismatch in revenue with corresponding impact in TDS. Hence the revenue reconciliation statement and TDS reconciliation statement filed by the assessee assumes greater importance, which had been duly verified by the ld. AO in all the assessment years. We find that the assessee had duly explained as to why certain receipts though subjected to TDS, would not be liable to be offered to tax such as mobilization advance. This had been completely ignored by the ld. PCIT while exercising his revision jurisdiction u/s 263 of the Act. This goes to prove that the revision jurisdiction u/s 263 of the Act had been exercised by the ld. PCIT in a mechanical and cavalier manner for all the assessment years under consideration and hence they deserve to be quashed. Issues Involved:1. Justification of invoking revisionary jurisdiction u/s.263 by the Principal Commissioner of Income Tax (PCIT) for various assessment years.2. Mismatch of receipts as per Form 26AS with receipts as per profit and loss account.3. Mismatch of TDS credit as per Form 26AS and TDS claimed by the assessee.4. Verification of computation of book profits u/s.115JB of the Act.5. Verification of unbilled revenue and transactions with subsidiaries/associates.6. Applicability of the time limit for invoking revision jurisdiction u/s.263.7. Examination of the adequacy of enquiries conducted by the Assessing Officer (AO).Issue-Wise Detailed Analysis:1. Justification of Invoking Revisionary Jurisdiction u/s.263:The PCIT invoked revisionary jurisdiction u/s.263 for several assessment years, alleging discrepancies in receipts and TDS credits. The Tribunal found that the PCIT's invocation was not justified as the issues had already been examined in previous assessments and rectification orders. The Tribunal quashed the PCIT's order for being barred by limitation and for lack of incriminating material found during the search.2. Mismatch of Receipts as per Form 26AS with Receipts as per Profit and Loss Account:The PCIT identified mismatches between the receipts reported in Form 26AS and the profit and loss account. The Tribunal noted that the assessee had provided detailed reconciliation statements explaining the differences, which were accepted by the AO in previous assessments. The Tribunal held that the PCIT's order was not sustainable as the AO had already conducted adequate enquiries.3. Mismatch of TDS Credit as per Form 26AS and TDS Claimed by the Assessee:The PCIT pointed out mismatches in TDS credits. The Tribunal found that the AO had verified the TDS credits and granted them after due examination. The Tribunal held that the PCIT's order was erroneous as the AO had already addressed the issue in previous assessments.4. Verification of Computation of Book Profits u/s.115JB:For certain assessment years, the PCIT directed the AO to verify the computation of book profits, including the taxability of share of profit from AOP and alleged non-genuine purchases. The Tribunal found that the AO had already added these amounts in the assessments, indicating non-application of mind by the PCIT. The Tribunal quashed the PCIT's order on this ground.5. Verification of Unbilled Revenue and Transactions with Subsidiaries/Associates:The PCIT directed verification of unbilled revenue and transactions with subsidiaries/associates. The Tribunal noted that the assessee had provided detailed explanations, and the AO had examined these issues in previous assessments. The Tribunal held that the PCIT's directions were redundant and amounted to roving and fishing enquiries, which are not permissible under section 263.6. Applicability of the Time Limit for Invoking Revision Jurisdiction u/s.263:The Tribunal emphasized that the time limit for invoking revision jurisdiction u/s.263 had expired. The issues identified by the PCIT were already examined in assessments completed years earlier. The Tribunal cited the Supreme Court's decision in CIT vs. Alagendran Finance Ltd., holding that the PCIT's order was barred by limitation.7. Examination of the Adequacy of Enquiries Conducted by the AO:The Tribunal found that the AO had conducted adequate enquiries and verified the reconciliation statements provided by the assessee. The PCIT's order failed to point out any specific errors or lack of enquiry by the AO. The Tribunal held that the PCIT's invocation of Explanation 2 to Section 263, without proper show-cause notice, was unsustainable.Conclusion:The Tribunal quashed the PCIT's revisionary orders for all the assessment years, finding them barred by limitation, redundant, and based on issues already examined by the AO. The Tribunal emphasized the adequacy of the AO's enquiries and the lack of incriminating material found during the search. The Tribunal also criticized the PCIT for invoking revision jurisdiction in a mechanical and cavalier manner. All appeals by the assessee were partly allowed.