TaxTMI 
TaxTMI 
2017 (10) TMI 381
X X X X Extracts X X X X
X X X X Extracts X X X X
....ter referred to as the Commissioner), who set aside the order dated 28.3.2013 (Annexure A-4) (Page-276), passed by the Assessing Officer, in accepting the Revised Return filed by the Assessee. 2. Parties agreed for admission of the appeal on the following Substantial Questions of Law, which we are called upon to decide: "i) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in upholding the validity of the revisionary order dated 18.03.2014 passed under section 263 of the Act? ii) Whether on the facts and in the circumstances of the case, the impugned order of the Tribunal dated 8.12.2016 admitting and considering the additional evidences in gross violation of the procedure laid down in ITAT Rules and in violation of principles of natural justice and fair play, is illegal and bad in law?" 3. The facts, leading to the filing of the instant appeal are as under. 4. The Assessee is regularly assessed to income tax. On 19.7.2010, Assessee filed a Return, declaring net taxable income, for the Financial Year 2009-2010 - Assessment Year 2010-2011 (hereinafter referred to as the relevant year) to be Rs. 7,22,943/- (Page-262). In t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 15. In view of the above, I treat the income (which has been declared as additional agricultural income in the revised return) of Rs. 2,65,82,500/- as income earned from undisclosed sources and add this amount u/s 68 of the Income Tax Act 1961 to the taxable income of the assessee. 16. Further, keeping in view the discussions as above, I am satisfied that the assessee has furnished inaccurate particulars of his income amounting of Rs. 2,65,82,550/- and has suppressed his taxable income by Rs. 2,65,92,550/- therefore, penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 are being initiated separately. 17. With above remarks the taxable income of the assessee is computed as under: &....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arising for consideration in the present appeal: "Proposition I: Section 263 of the Income Tax Act, 1961 ("the Act") permits the CIT to revise the order only if it is: (a) Erroneous; and (b) Prejudicial to the interest of Revenue. If the assessing officer takes a plausible view, the CIT cannot hold that order to be erroneous merely because he disagrees with that view. In the present case, first condition, viz. order being "erroneous" is not satisfied. Proposition II: Without prejudice to proposition (I), in a case where the CIT has correctly come to the conclusion that the order is erroneous but there is some enquiry by the assessing officer, then the CIT cannot remit the matter to the assessing officer but he should decide it himself. Remit is permissible only in a case of no enquiry. Proposition III: The Appellate Tribunal (ITAT) was obliged to examine the correctness of the exercise of jurisdiction by the CIT under section 263 of the Act; in such a case rule permitting filing of additional evidence does not apply. In the present case, ITAT erred in permitting the additional evidence while examining ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Tax, West Bengal, (1973) 88 ITR 323 : (1973) 3 SCC 482; (3) Syed Abdul Khader v. Rami Reddy and others, AIR 1979 SC 553; (4) State of Rajasthan v. T.N. Sahani and others, (2001) 10 SCC 619; (5) Thakur V. Hari Prasad v. Commissioner of Income-Tax, (1987) 167 ITR 603; (6) T.M.S. Mohamed Abdul Kader v. Commissioner of Gift-Tax, Madras, (1968) 70 ITR 237(Madras); (7) Commissioner of Income Tax v. Emery Stone Mfg. Co., (1995) 213 ITR 843 (Rajasthan); (8) Sunanda Ram Deka v. Commissioner of Income-Tax, (1994) 210 ITR 988; (9) Amjad Ali Nazir Ali v. Commissioner of Income-Tax, Kanpur, (1977) 110 ITR 419(Allahabad); (10) Addl. Commissioner of Income-Tax, Lucknow v. Radhey Shyam, (1980) 123 ITR 125 (Allahabad); (11) Sasi Enterprises v. Assistant Commissioner of Income Tax, (2014) 5 SCC 139 and (12) Commissioner of Income Tax, Mumbai v. Amitabh Bachhan, (2016) 11 SCC 748. 20. We shall first deal with the preliminary objections. 21. With vehemence, Mr. Kuthiala, learned Senior Counsel, has highlighted the conduct of the Assessee, who, according to the Revenue, has not only tried to procrastinate the proceedings of assessment but suppressed, misled and mis-stated true facts. Also, an end....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... prescribed manner. Law provides (subsection (5) of Section 139) that wherever an Assessee "discovers any omission or any wrong statement" in an already furnished return, he may furnish a revised return, within the period of limitation prescribed therein. 29. Section 142 of the Act postulates an inquiry before assessment. 30. Assessment is carried out in terms of Section 143. 31. Under Section 147 of the Act, the Assessing Officer, if he has reason to believe that any income chargeable to tax has escaped assessment for the Assessment Year, may subject to all just exceptions, assess or reassess such income. 32. Under Section 263 of the Act, the Commissioner is empowered to call for and examine the record of any proceedings under the Act and on consideration, if the order passed by the Assessing Officer is found to be erroneous, insofar as it is prejudicial to the interest of Revenue, may, after giving the Assessee an opportunity of hearing and making or causing to make such inquiry, as may be deemed necessary, pass any order, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. 33. Clause (b) of sub-section (1) of Sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Orchard; (b) vide agreement dated 15.6.2008, he appointed Shri Anand Chauhan as his Agent to manage it for a period of three years; (c) consideration being payment of commission @ 2% on net sale proceeds, after deduction of all expenses; (d) said Agent stood authorized to make investments of the sale proceeds in Government securities, mutual funds, schemes of LIC; (e) which was actually so done by him; (f) In the year 2011-12, when accounts were settled, professional advise was sought and (g) since there was no regular assessment and there being a "mistake/defect/omission" in the original return, a revised return was filed within the stipulated period of time. 38. The Assessing Officer has observed that: (a) notices were issued to the Agent who appeared and placed on record documents i.e. (i) his Income Tax Return for the relevant year, (ii) copies of account of gross apple receipts for the relevant year, and (iii) copies of bills of sale proceeds of horticulture produce issued by the vendor, i.e. M/s Universal Apple Association, Parwanoo; also explained the shortfall in the income, in the relevant year, matching it with the investment made in the LIC, to be routed through one ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fully aware of the income from agricultural source, for after all policies were purchased not in the name of the Agent, in an escrow account, for and on behalf of the Assessee, but in the name of the Assessee and his family members. After all, for purchase of such policies of huge amounts, requisite formalities are required to be completed by the applicant (purchaser of the policy). It is not the case of Assessee that anyone of his family members is a minor or that no forms were filled up by the respective purchasers. 45. What is contended is that in relation to the income in question, Assessee was adopting mercantile system of accounting and as such exact amount of income could be ascertained only with the settlement of account, after a period of three years, which was sometime in the month of September, 2011. 46. At this juncture, one fact, which is not disputed, to which our attention is invited by the Revenue, is that in relation to the years preceding and succeeding to the relevant year, income from agricultural source, is marginal, bordering what was originally declared by the Assessee. Income, grossly disproportionate is only with respect to the relevant year. 47. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urn. S. Raman Chettiar's case [1965] 55 ITR 630 (SC) does not throw light on this controversy. In order to answer the question posed, it will be useful to concentrate on the language of Section 139(5) of the Act. It is apparent that a revised return can be filed only where any person discovers any omission or any wrong statement therein. The use of the word "discovers", in our view, connotes discovery of some omission or wrong statement in the return, of which the assessee was not aware at the time of filing of the original return. It cannot cover a case where the omission or wrong statement contained in the first return is deliberate, for, in that case, it cannot be said that the revised return was filed by the assessee on discovery of any omission or wrong statement, as he would all the time have knowledge of the omission or wrong statement in the original return. This being so, on the language of Section 139(5), an assessee who had deliberately made any omission or wrong statement in his original return cannot avail himself of the advantage given by this subsection of filing a revised return. In cases where an assessee has deliberately omitted particulars of his income or ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....wants it to be assessed in his or her hands in order to enable someone else who would have been assessed to a larger amount an assessment so made can certainly be erroneous and prejudicial to the interests of the revenue. It so-and we think it is so-the Commissioner under S. 33B has ample jurisdiction to cancel the assessment and may initiate proceedings for assessment under the provisions of the Act against some other assessee who according to the income-tax authorities is liable for the income thereof.........." [Emphasis supplied] 58. The Apex Court in Kwality Steel Suppliers Complex (supra), while reiterating the aforesaid principle, clarified that in exercise of its revisional jurisdiction, Commissioner must exercise proper application of mind. In the given facts, Court found the view taken by the Assessing Officer to be a plausible one, inasmuch as family business, with the death of one of the partners continued to be carried on by the son of the deceased with his mother being another partner, accepting the book value of the stock-in-trade to be plausible and permissible view. 59. A Division Bench of the Rajasthan High Court, in Emery Stone Mfg. Co. (supra), ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rdance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not 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 interest 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." 61. In Commissioner of Income-Tax v. Vikas Polymers, (2012) 341 ITR 537(Delhi), Court reiterated the principle of order of the Commissioner fulfilling the twin test o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owers for revising the order under section 263 merely on the basis that the order under consideration is erroneous. If the material in that regard is available on the record of the assessee concerned the Commissioner cannot exercise his power by ignoring that material which links the income concerned with the tax realization made thereon. The two questions are inter-linked and the authority exercising the powers under section 263 is under an obligation to consider the entire material about existence of income and the tax which is realizable in accordance with law and further what tax has in fact been realized under the assessment order." [Emphasis supplied] 63. The ratio and the decision stands reiterated subsequently in Commissioner of Income-Tax v. New Delhi Television Ltd., (2014) 360 ITR 44 (Delhi). 64. In Malabar Industrial Co. Ltd. (supra), the Apex Court (two-Judge Bench), clarified that pre-requisite for the Commissioner to suo motu exercise its jurisdiction is that the order of Income Tax Officer is erroneous, insofar as it is prejudicial to the interests of Revenue. The Court laid down twin conditions for the Commissioner to be satisfied - (i) the order sou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ew taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from. However, the above is not the situation in the present case in view of the reasons stated by the learned C.I.T. on the basis of which the said authority felt that the matter needed further investigation, a view with which we wholly agree. Making a claim which would prima facie disclose that the expenses in respect of which deduction has been claimed has been incurred and thereafter abandoning/withdrawing the same gives rise to the necessity of further enquiry in the interest of the Revenue." [Emphasis supplied] 68. Applying the aforesaid principles, we further proceed to discuss facts. 69. Perusal of order dated 28.3.2013, passed by the Assessing Officer, reveals that the original return filed by the Assessee was selected for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as accepted as gospel truth and no inquiry with regard thereto conducted at all. The Assessing Officer does not record that the Assessee was adopting the mercantile system of accounting. 72. Also, the fact that income from agricultural source was disproportionately high, only in the year in question and neither in the preceding or succeeding years there was such huge income from the orchard. Validity of the return, fulfilling the condition prescribed under Section 139(5) was not examined, more so in the factual backdrop when the revised return came to be filed only after issuance of notice for scrutiny. Also, what took the Assessee more than six months to revise the return was not considered. 73. No doubt, views of the Officer assessing the Agent's income were solicited, but then such assessment could not be a binding precedent, for the Assessing Officer is obliged to independently inquire correctness of the returns of income declared by the Assessee. What is crucial is that in the return of the Assessee or the Agent, there is no reference of shortfall of Rs. 1 crore, which amount was routed through Shri M.R.Sharma, who also was not called during the course of inquiry. 74.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ving sale proceeds. 3. Find the details of Rs. 43,84,396/- income from other sources. 4. Keep in mind the agriculture income shown in immediate proceeding and succeeding year from the years in which the income has been received i.e. A.Y. 2008-09, 2012-13, while examining the genuineness of the revised agriculture income in the year 2010- 11." "1. Call for and examine the details of Income/ Expenditure Account in view of Col. 4 of M.O.U. 2. Coordinate the proceedings and share the information with ITO, Ward-1, Shimla regarding the investigation made by him in the case of Sh. Anand Chauhan, who as per MOU is looking after the Orchards of M/s Vir Bhadra Singh (HUF)." 79. The said Officer in her report observed the Assessing Officer not to have conducted any independent inquiry, before accepting the return. Presumably, the Assessing Officer "remained passive in his own inquiries and has relied only on the conclusions drawn by ITO, Ward-1, Shimla, in the case of Sh. Anand Chauhan". 80. Well, the observations of the Additional Commissioner of Income Tax have not weighed with us at all. 81. However, perusal of the order reflects the Commissione....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d profits and gains that have accrued or arisen or are deemed to have accrued or arisen being also liable to be charged for income-tax the assessability of these profits which are thus credited in the books of account arises not because they are received but because they have accrued or arisen. (Followed in Commissioner of Income Tax, Chennail v. Bilahari Investment (P) Ltd., (2008) 4 SCC 232) 84. If the method of accounting consistently followed by the Assessee is not emanating from the record, Assessing Officer was duty bound to adopt such appropriate method as may be found fit for determining the issue. [Commissioner of Income-tax, Calcutta v. M/s British Paints India Ltd., AIR 1991 SC 1338 : 1992 Supp (1) SCC 55; Sanjeev Woollen Mills v. Commissioner of Income Tax, Mumbai, (2005) 13 SCC 307; & M/s Standard Triumph Motor Co. Ltd. v. Commissioner of Income Tax, Madras, 1993 Supp (3) SCC 315. 85. Emphatically, Mr.Chidambaram invites attention to the following reasons adopted by the Commissioner, emphasizing that the Officer passed the order without returning any positive findings, for he was too presumptuous and unsure with regard to the status of inquiries so condu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ying upon Sunbeam Auto Ltd. (supra) Mr.Chidambaram, argued that it is not open for the Commissioner to remit/remand the matter back to the authority. We find said decision to have been rendered in the given facts and circumstances, for the issue in question is no longer res integra in view of the law laid down by the Apex Court in Commissioner of Income Tax, Shillong vs. Assam Travels Shipping Service, Dibhrugarh, 1993 Supp (4) SCC 206, wherein the Court categorically held that "The expression "as it thinks fit" is wide enough to include the power of remand to the authority competent to make the requisite order in accordance with law in such a case even though the Tribunal itself could not have made the order enhancing the amount of penalty." 90. Ambit and scope of power exercised by the authorities under Sections 263 and 254 are totally different and distinct. We have already discussed the scope of the former and now proceed to discuss about the latter. 91. The Income Tax Appellate Tribunal is not a Court but is a Tribunal exercising judicial powers. The Tribunal's powers in dealing with the appeals are of the widest amplitude and have in certain cases held similar to and id....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ench) in Commissioner of Income-Tax, Madras v. Mahalakshmi Textile Mills Ltd., (1967) 66 ITR 710 : AIR 1968 SC 101, has held thus: "By the first question the jurisdiction of the Tribunal to allow a plea inconsistent with the plea raised before the Departmental authorities is canvassed. Under sub-section (4) of Section 33 of the Indian Income-tax Act, 1922, the Appellate Tribunal is competent to pass such orders on the appeal "as it thinks fit." There is nothing in the Income-tax Act which restricts the Tribunal to the determination of questions raised before the departmental authorities. All questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal. If for reasons recorded by the Departmental authorities in rejecting a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the Departmental authorities and the Tribunal, and indeed they would be under a duty to grant that relief. The right of the assessee to relief is not restricted to the plea raised by him." (Also: Shree Hari Chemicals Export Ltd. v. Union of India and another, (2006) 1 SCC 396) 95.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the tribunal also. 6. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income Tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal [vide e.g. CIT v. Anand Prasad, (1981) 128 ITR 388 (Del): CIT v. Karamchand Premchand (P) Ltd., (1969) 74 ITR 254 (Guj) and CIT v. Cellulose Products of India Ltd., (1985) 151 ITR 499 (Guj)]. Undoubtedly, the Tribunal will have the discretion a to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liabil....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... but what was collected during the course of proceedings pertaining only to the Agent and his submissions/statements during the course of adjudication thereof. 103. The question, which arises for consideration, is as to whether prior to the decision, the authority ought to have passed a separate order, accepting the additional evidence on record. 104. In Text Hundered India Pvt. Ltd. (supra), the Delhi High Court held the power of the Tribunal wide enough to admit additional evidence at its discretion for doing substantial justice in the matter. However, party intending to lead evidence before the Tribunal, for the first time, has to show that it was prevented by sufficient cause to do so and that it could have material bearing on the issue for just decision of the case and the ends of justice demands admission thereof. The Court on an undisputed statement held Rule 29 of the Rules, akin to Order 41 Rule 27 of the Code of Civil Procedure, and thus observed: "13. ..........This can be done even when application is filed by one of the parties to the appeal and it need not to be a suo motu action of the Tribunal. The aforesaid rule is made enabling the Tribunal to admit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... evidence, would be necessary to pronounce judgment in a more satisfactory manner, has to be considered by the Court at the time of hearing of the appeal on merits. The appellate Court has the power to allow additional evidence not only if it requires such evidence "to enable it to pronounce judgment" but also for "any other substantial cause". Though the general rule is that ordinarily, the appellate Court should not travel outside the record of the lower court and additional evidence, whether oral or documentary is not admitted, but Section 107 CPC, which carves out an exception to the general rule, enables an appellate court to take additional evidence or to require such evidence to be taken subject to such conditions and limitations as may be prescribed. These conditions are prescribed under Order 41 Rule 27 CPC. 108. A Division Bench of the Madras High Court in T.M.S. Mohamed Abdul Kader (supra), has held the expression "such orders as it deems fit" to be wide enough to call for fresh evidence from the authorities under the Act. To similar effect is the judgment rendered by a Division Bench of Andhra Pradesh High Court, in Thakur V. Hari Prasad (supra). 109. In Thakur V.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cumstances of a case so warranted." 110. In view of the aforesaid decision, we find reliance on Maruti Udyog Limited (supra) to be misplaced, also for the reason that it came to be delivered in the attending facts and circumstances and distinguished in Rasiklal M. Parikh vs. Assistant Commissioner of Income Tax, (2017) 393 ITR 536 (Bom). 111. In the instant case, there are no elements of surprise. In fact, the Assessee was fully aware that the Revenue had placed additional material in support of its case. No doubt, Assessee had protested, but then, himself took time to rebut the same. It is not that surreptitiously, such material came to be placed on record or accepted by the Tribunal. The matter was pending for more than 1½ year and written submissions filed. The Chartered Accountant appearing for the Assessee took time to rebut the same. Thus, adequate opportunity was afforded to the Assessee. Enough time (more than a fortnight) was afforded to the Assessee to rebut the same, which, for unexplainable reasons he chose not to do so. And the protest is also not with vehemence. No written application was filed opposing the same. No other remedy was taken recourse to. We ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt income to have incurred the expenditure (Rs. 69.12 lakhs approximately) (Page-123) so reflected in the books of account, thus believing the plea of the transactions in question being not genuine, if not false. 116. It is in this backdrop, Tribunal found the inquiry conducted by the Assessing Officer not to be in accordance with law (Pages 137 to 148) and the view taken by the Officer not to be a plausible one (Pages 148- 153), holding that since it was a case of "no inquiry", Commissioner rightly remitted the case back to the Assessing Officer, for carrying out assessment in accordance with law (Pages 153-158). 117. At this juncture, it be also observed that by the very same order, the Tribunal also decided the appeals filed by the Agent (Pages 159 to 200), inter alia, observing as under, to which no challenge is laid: "An overview of the above features indicates that the agricultural produce was not proved; transportation of the same to UAA was also not proved; bills issued by UAA were not genuine; cash received from UAA shown at Rs. 1.00 crore did not appear in their books of account; the expenses claimed were not backed by any vouchers/bills; and all the expens....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng years, (b) investment of huge amount of Rs. 3.8 crore was carried out by the Assessee himself, be from whatever source and there was no reference thereof in the original return. As such, omission or wrong statement cannot be said to be bonafide. Prima facie returns, being invalid, ought to have been rejected. 120. The case in hand being that of no inquiry, and the amplitude of the powers of the Commissioner being wide enough to pass "such order" as the circumstances of the case justify, including (a) cancelling the assessment, (b) modifying the order of assessment, (c) directing fresh assessment, as such, the Commissioner was well within his right to pass an appropriate order of remission. 121. Scope of the Tribunal to examine correctness of the exercise of jurisdiction by the Commissioner is wide enough and not limited and restricted to the record as defined under clause (b) of sub-section (1) of Section 263 of the Act. In any case, even this definition is inclusive. It includes all records relating to any proceedings under the Act, be that of the Assessee or a third party, available at the time of examination by the Commissioner. The record need not pertain to the procee....