TaxTMI 
TaxTMI 
TaxTMI 
2019 (3) TMI 681
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the other hand, Shri Rajeshwar Yadav, ld. CITDR, strongly defended the impugned order by explaining that first of all a certificate has been filed by the assessee in the indexed paper book by explaining that so far as page-10 of the paper book is concerned, the loan confirmation and bank statement/balance-sheet of loan transactions were only filed before the Assessing Officer and the balance sheet copies of Assessment Year 2014-15 of the lender M/s Anubhav Vimaya Pvt. Ld., copy of balance sheet of 2015-16 reflecting 50% of the receipt of loan from the assessee, bank statement of the lender i.e. M/s Anubhav Vimaya Pvt. Ld. showing receipt of Rs. 1 crore were not filed before the Ld. Assessing Officer. This claim of the Ld. CIT-DR was not confronted by the Ld. counsel for the assessee. It was also explained by the ld. CITDR that no proper application was made before the ld. Assessing Officer and the documents filed before the Ld. Commissioner of Income Tax (Appeal), for the first time is an additional evidence and the ld. Assessing Officer could not examine the authenticity of the same. From the page-12 of the paper book, it was explained that these documents were filed only before....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner undersection 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 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 subITA section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessment framed under section 143(3) of the Act should not be revised or modified. The assessee vide letter dated 03/08/2018 filed written submissions. Before the Ld. Pr. Commissioner, the assessee submitted that the Ld. Assessing Officer duly examined the issue involved, raised appropriate queries, called for relevant details and on examination of such details allowed relief to the assessee. Identical plea was raised before this Tribunal. 2.4. Now, we shall deal with the cases and the ratio laid down therein and also some other cases which are available on the issue in hand, so that we can reach to a justifiable conclusion. Before this Tribunal, the assessee has relied upon the decision of Kwality Steel Suppliers Complex ((Supra)), the issue is with respect to dissolution of the firm owing to death of the partner, therefore, it is on different facts. Even in the case of Dwarkadhish Investment Pvt. Ltd. ((Supra)), the facts are with respect to cash credit under section 68 of the Act, wherein, it was held that the initial burden is upon the assessee to prove identity of creditors. In the case of CIT vs Vikas Polymers ((supra)), on going through the assessment record of the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o far as, the case of Metacaps Engineering and Mahendra Construction COMPANY (J.V.) (2017) 86 taxman.com 128 (Mum. ITAT) is concerned, therein the assessee was awarded as civil construction contract of a project. As the assessee had insufficient capital and infrastructure, it sub-contracted the project to subcontractor 'Urja" on back to back basis. The entire responsibility and completion of contract was taken over by the sub-contractor. Revisional jurisdiction was invoked mainly on the ground of excessive expenses on labour payment, etc. In that situation, a particular view was taken. 2.9. There are certain decisions, which favour of the case of the Revenue and one such decision is Arvee International vs Addl. CIT (2006) 8 SOT 452 (Mum. Trib.), wherein, the assessment was framed without application of mind. It was held that mere allegation that Assessing Officer has taken a view in the matter will not put the matter beyond the purview of section 263 unless the view so taken by the Assessing Officer is a judicial view based on proper enquiry and legal aspect. 2.10. In the case of Horizon Investment Company Ltd. vs CIT (ITA No.1593/Mum/2013), wherein, it was clear that there was a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....does not bring into existence an additional advantage or benefit of an enduring nature or change the nature, character or the identity of the building itself, the expenditure must be regarded as a revenue expenditure. On the other hand, if it does, it will be in the nature of a capital expenditure. Guniting is nothing but a modern process of plastering by a machine. The company had used this modern process. The process of guniting had not improved the original condition of building nor had extended its original life. The finding of the Tribunal was that the object of the repairs was to maintain and preserve the building. The court also agreed with the finding of the Tribunal, namely, that the process of guniting had not brought into existence any new benefit or advantage of enduring nature to the company. In view of aforesaid, it could be concluded that the entire repair expenditure incurred by the assessee on its office premises (building in question) was revenue expenditure and allowable as deduction. Reference was answered in favour of the assessee. 2.12. In CIT v. Oxford University Press 108 ITR 166 (Bom.), wherein, the Hon'ble High Court held as under:- "This court ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to why the guniting process had been employed, it became very clear that by employing this method, which was nothing but an improved method of plastering and repairing work, all that the assessee had done was to preserve and maintain the already existing asset. No new asset or new advantage as such could be said to have been brought into existence by reason of expenditure incurred for doing the guinting work. As a result of guniting work done the assessee had not changed the nature of the asset, viz., the building as a whole, and the same in no way increased the accommodation or earning capacity of the building; in that sense no new advantage of enduring benefit had been brought into existence. The repairs also could not be regarded as heavy structural repairs, for, according to the assessee's architects, what could not be achieved by the ordinary method of plastering was achieved by a sophisticated method of process of guniting. In this view of the matter, it seemed very clear that the expenditure incurred for guniting work done as also the expenditure being the architects' fees paid in connection therewith would have to be regarded as expenditure of a revenue nature. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....diture but disallowed the rest as being in the nature of ex-gratia payment. On cross appeals, the Tribunal upheld the order of the AAC. On reference : HELD-II In the instant case the AAC held that since the gratuity fixed for non-covenanted staff was subject to a maximum of 12 months' salary, in respect of covenanted staff the members thereof could at least expect that much gratuity if not more and, having regard to this aspect of the matter, the AAC held that part of the gratuity paid to the heirs of deceased to the extent of Rs. 24,000 being 12 months' salary could be regarded as proper and legitimate business expenditure while that part which was in excess of 12 months' salary was to be regarded as ex gratia payment and he, therefore, disallowed the excess amount. The matter was carried in further appeal to the Tribunal, the Tribunal had confirmed this finding of the AAC. In this view of the matter, it was held that the Tribunal was right in allowing a deduction of the expenditure only to the extent of Rs. 24,000 being the part of the gratuity amount paid by the assessee to the heirs of deceased." 2.13. The Hon'ble Calcutta High Court in CIT vs J.K. Indus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om 217 (Delhi) (para 4), iv. CIT v. Durga Prasad More [19711] 82 ITR 540 (SC) (para 6), v. CIT v. Precision Finance (P.) Ltd. [1994] 208 ITR 465/[1995] 82 Taxman 31 (Cal.) (para 6), vi. ITO v. DG Housing Projects Ltd. [2012] 343 ITR 329/212 Taxman 132 (Mag.)/[2012] 20 taxmann.com 587 (Delhi) (para 7), vii. DIT v. Jyoti Foundation [2013] 35 ITR 388/219 Taxman 105/38 taxmann.com 180 (Delhi) (para 7), viii. CIT v. Steller Investment Ltd. [1991] 192 ITR 287/59 Taxman 568 (Delhi) (para 8), ix. CIT v. Sophia Finance Ltd. [1994] 205 ITR 98/70 Taxman 69 (Delhi) (FB) (para 8), x. CIT v. Divine Leasing & Finance Ltd. [2008] 299 ITR 268/[2007] 158 Taxman 440 (Delhi)(para 8), xi. Lotus Capital Financial Services Ltd. v. ITO [IT Appeal No. 479 (Kol.) of 2011] (para 8), xii. CIT v. Lotus Capital Financial Services (P.) Ltd. [ITAT No. 125 of 2012] (para 8), xiii. CIT v. Dataware (P.) Ltd. [ITAT No. 263 of 2011] (para 8), xiv. CIT v. Roseberry Mercantile (P.) Ltd. [G.A. No. 3296 of 2010, dated 10-1-2011] (para 8), xv. CIT v. Sanchati Projects (P.) Ltd. [ITAT No. 140 of 2011] (para 8), xvi. CIT v. Samir Bio-Tech. (P.) Ltd. [2010] 325 ITR 294 (Delhi) (para 8), ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... xli. Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC) (para 27). 2.15. In CIT vs Fine Jewellery (India) Ltd. and CIT vs Nirav Modi ((supra)), no doubt these cases throw light on the issue but were decided by Hon'ble jurisdictional High Court to the peculiar facts of the case and on the basis of factual finding recorded by the Tribunal. 2.16. Admittedly, an incorrect assumption of fact or an incorrect application of law would satisfy the requirement of order being erroneous u/s. 263 of the Act. The phrase "prejudicial to the interest of the Revenue" u/s. 263, has to be read in conjunction with the expression "erroneous" order by the Assessing Officer. Every loss of Revenue as a consequence of assessment order cannot be termed as prejudicial to the interest of Revenue, meaning thereby, "prejudice" must be prejudice to the Revenue administration. At the same time, if another view is possible, revision is not permissible. Our view is fortified by the decision from Himachal Pradesh Financial Corp. (186 Taxmann 105)(HP), Bismillah Trading Co. (248 ITR 292)(Ker.) and CIT vs. Green World Corpn. (314 ITR 81)(SC). For invoking revisional jurisdiction u/s. 263 of the Act, the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(157 ITR 112) (Mad.), Gee Vee Enterprises vs Addl. CIT (99 ITR 375)(Del.), Thalibai F Jain vs ITO 101 ITR 1 (Karn.) and CIT vs HPFC 186 Taxman 105 (HP), CIT vs Pushpa Devi 164 ITR 639 (Patna). We are aware that before the Ld. Commissioner invokes the revisional jurisdiction u/s 263 of the Act, he should get satisfied that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Hon'ble Gujarat High Court in CIT vs M. M.Khambatbala 198 ITR 144 (Guj.) even went to the extent that revisional powers can be exercised even if the issue is debatable. The Hon'ble jurisdictional High Court in CIT vs Gabriel India Ltd. (1993) 203 ITR 108 (Bom.) concluded that powers u/s 263 cannot be exercised for starting fishing and roving enquiries. For making a valid order u/s 263(1), it is essential that the Commissioner has to record an express finding that prejudice has been caused to the interest of the Revenue. Our view find support from the ratio laid down in Bhargwa Engineering Corporation vs CIT (1996) 134 taxation 493, 494 (All.), CIT vs Digvijay Traders (1997) 137 CTR (MP) 224, CIT vs Regional Agro Industrial Development Cooperative Society Ltd. (19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oner of Income Tax-1, Mumbai ("C.I.T." for short) under Section 263 of the Act was reversed. The assessment year in question is 2001-2002 and the assessment order is dated 30th March, 2004. 3. After the assessment as above was finalized, a show cause notice dated 7th November, 2005 under Section 263 of the Act was issued by the learned C.I.T. detailing as many as eleven (11) issues/grounds on which the assessment order was proposed to be revised under Section 263 of the Act. The respondent - assessee filed his reply to the said show cause notice on consideration of which by order dated 20th March, 2006 the learned C.I.T. set aside the order of assessment dated 30th March, 2004 and directed a fresh assessment to be made. Aggrieved, the respondent - assessee challenged the said order before the learned Tribunal which was allowed by the order dated 28th August, 2007. 4. Aggrieved by the order dated 28th August, 2007 of the learned Tribunal, the Revenue filed an appeal under Section 260A of the Act before the High Court of Bombay. The aforesaid appeal i.e. ITA No. 293 of 2008 was summarily dismissed by the High Court by the impugned order dated 7th August, 2008 holding that as th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tioned in the show cause notice dated 7th November, 2005. In fact, on as many as seven/eight (07/08) issues mentioned in the said show cause notice the learned C.I.T. did not record any finding whereas conclusions adverse to the assessee were recorded on issues not specifically mentioned in the said notice before proceeding to hold that the assessment needs to be set aside. However, three (03) of the issues, details of which are noticed herein below, are common to the show cause notice as well as the revisional order of the learned C.I.T. 7. On appeal, the learned Tribunal took the view that the learned C.I.T. exercising powers under Section 263 of the Act could not have gone beyond the issues mentioned in the show cause notice dated 7th November, 2005. The learned Tribunal, therefore, thought it proper to take the view that in respect of the issues not mentioned in the show cause notice the findings as recorded in the revisional order dated 20th March, 2006 have to be understood to be in breach of the principles of natural justice. The learned Tribunal also specifically considered the three (03) common issues mentioned above and on such consideration arrived at the conclusion t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e power/jurisdiction under the different provisions of the Act would naturally be different. The power and jurisdiction of the Revenue to deal with a concluded assessment, therefore, must be understood in the context of the provisions of the relevant Sections noticed above. While doing so it must also be borne in mind that the legislature had not vested in the Revenue any specific power to question an order of assessment by means of an appeal. 10. Reverting to the specific provisions of Section 263 of the Act what has to be seen is that a satisfaction that an order passed by the Authority under the Act is erroneous and prejudicial to the interest of the Revenue is the basic pre-condition for exercise of jurisdiction under Section 263 of the Act. Both are twin conditions that have to be conjointly present. Once such satisfaction is reached, jurisdiction to exercise the power would be available subject to observance of the principles of natural justice which is implicit in the requirement cast by the Section to give the assessee an opportunity of being heard. It is in the context of the above position that this Court has repeatedly held that unlike the power of reopening an assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....because of the contravention of any of the principles of natural justice. The scope of these appeals is very narrow. All that we have to see is whether before assuming jurisdiction the Commissioner was required to issue a notice and if he was so required what that notice should have contained? Our answer to that question has already been made clear. In our judgment no notice was required to be issued by the Commissioner before assuming jurisdiction to proceed under Section 33-B. Therefore the question what that notice should contain does not arise for consideration. It is not necessary nor proper for us in this case to consider as to the nature of the enquiry to be held under Section 33-B. Therefore, we refrain from spelling out what principles of natural justice should be observed in an enquiry under Section 33-B. This Court in Gita Devi Aggarwal v. CIT, West Bengal ruled that Section 33-B does not in express terms require a notice to be served on the assessee as in the case of Section 34. Section 33-B merely requires that an opportunity of being heard should be given to the assessee and the stringent requirement of service of notice under Section 34 cannot, therefore, be applied ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the order of the AO was erroneous on some other grounds also or on any additional grounds not mentioned in the show cause notice, he ought to have given another show cause notice to the assessee on those grounds and given him a reasonable opportunity of hearing before coming to the conclusion and passing the final revision order. In the case on hand, the CIT has not done so. Thus, the order u/s 263 is violative of principles of natural justice as far as the reasons, which formed the basis for the revision but were not part of the show cause notice issued u/s 263 are concerned. The order of the CIT passed u/s 263 is therefore liable to be quashed insofar as those grounds are concerned." 13. The above ground which had led the learned Tribunal to interfere with the order of the learned C.I.T. seems to be contrary to the settled position in law, as indicated above and the two decisions of this Court in Gita Devi Aggarwal (supra) and Electro House (supra). The learned Tribunal in its order dated 28th August, 2007 had not recorded any finding that in course of the suo motu revisional proceedings, hearing of which was spread over many days and attended to by the authorized represent....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al authority had come to its conclusions in the matter on the basis of the record of the assessment proceedings which was open for scrutiny by the assessee and available to his authorized representative at all times it is difficult to see as to how the requirement of giving of a reasonable opportunity of being heard as contemplated by Section 263 of the Act had been breached in the present case. The order of the learned Tribunal insofar as the first issue i.e. the revisional order going beyond the show cause notice is concerned, therefore, cannot have our acceptance. The High Court having failed to fully deal with the matter in its cryptic order dated 7th August, 2008 we are of the view that the said orders are not tenable and are liable to be interfered with. 15. This will bring us to a consideration of the second limb of the case as dealt with by the learned Tribunal, namely, that tenability of the order of the learned C.I.T. on the three (03) issues mentioned in the show cause notice and also dealt with in the revisional order dated 20th March, 2006. The aforesaid three (03) issues are: "(i) Assessee maintaining 5 bank accounts and AO not examining the 5th bank account, bo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es claimed should not be treated as unexplained expenditure. In reply, the assessee by letter dated 24th March, 2004 submitted that the claim was made as a standard deduction and that the assessee had been wrongly advised to make the said claim and as the same has been withdrawn, Section 69-C will have no application. The record of the assessment proceedings disclose that the said stand was accepted by the Assessing Officer and the matter was not pursued any further. 19. The learned C.I.T. took the view that notwithstanding the withdrawal of the claim by the assessee, in view of the earlier stand taken that the said expenses were incurred for security purposes of the assessee, the Assessing Officer ought to have proceeded with the matter as the assessee was following the cash system of accounting and the filing of the re-revised return, prima facie, indicated that the additional expenses claimed had been incurred. In this regard, the following findings/reasons recorded by the learned C.I.T. in the order dated 20th March, 2006 would be of particular relevance: "Withdrawal of claim by assessee can be for variety of reasons and this does not mean that Assessing Officer should ab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aking 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. The notice issued under Section 69-C of the Act could not have been simply dropped on the ground that the claim has been withdrawn. We, therefore, are of the opinion that the learned C.I.T. was perfectly justified in coming to his conclusions insofar as the issue No. (iii) is concerned and in passing the impugned order on that basis. The learned Tribunal as well as the High Court, therefore, ought not to have interfered with the said conclusion. 22. In the light of the discussions that have preceded and for the reasons alluded we are of the opinion that the present is a fit case for exercise of the suo motu revisional powers of the learned C.I.T. under Section 263 of the Act. The order of the learned C.I.T., therefore, is restored and those of the learned Tribunal dated 28th August, 2007 and the High Court dated 7th August, 2008 are set aside. The appeal of the Revenue is allowed. SLP(C) No.861 of 2013 23. Leave granted. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ubhav Vinimay" amounting to Rs. 2 crores and the confirmation of the loan transactions were furnished on 27/12/2016 and the assessment order was passed on 29/12/2016 itself. It was observed by the Ld. Pr. CIT that the creditworthiness/genuineness of the transactions of the lender was never verified/examine by the ld. Assessing Officer and even in the loan confirmation documents, the address of the lender is not mentioned and further the assessee company neither filed the return of income of M/s Anubhav Vinimay Pvt. Ltd. nor the bank statement. It was further observed that the Ld. Assessing Officer raised any query with respect to the genuineness of the loan, therefore, the assessment was held to be erroneous and prejudicial to the interest of the Revenue, accordingly, a show cause notice was issued and on consideration of submissions of the assessee, it was observed as under :- i. The order is passed without making inquiries or verification which should have been made; ii. The order is passed allowing any relief without inquiring into the claim; iii. The order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or ....