TaxTMI 
TaxTMI 
2020 (7) TMI 331
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....and such there was no assessment order dated 28.12.2016 in existence which could have been cancelled. As such the order passed u/s 263 dated 28.03.2019 is perverse, illegal, abinitio void and fit to be cancelled. iii. For that in any view of the matter, Ld. CIT was not justified in passing order u/s 263 on simply change of opinion and only for re-verification. iv. For that other grounds, if any, will be argued/taken up at the time of hearing" 2. Facts of the case which can be stated quite shortly are as follows:The assessee is mainly engaged in the business of Iron Ore Mining at Barbil, Orissa.Intheassessee`s case a search and seizure operation was carried out in the business and residential premises of Padam Kumar Jain group of cases at Ranchi on 03.07.2014. Soon after completion of search and seizure a notice under section 153A of the Income Tax Act was issued to the assessee on 09.02.2015. In response to the notice under section 153A, the assessee filed its return of income for assessment year 2012-13 on 02.10.2016 declaring total income of Rs. 15,34,97,400/-. Thereafter, the original assessment order u/s 153A/143(3) was completed by the Assessing Officer on....
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....gure, which itself clarifies that the disclosure is based on fact and calculation made by the assessee for his undisclosed income. The family members of the assessee have made disclosure separately. On careful consideration of above facts and circumstances, I am of the opinion that assessment order passed by the AO is erroneous and prejudicial to the interest of revenue. I, therefore, cancel the order of the AO passed u/s 143(3) of the I.T. Act for A.Y. 2012-13 and direct the AO to pass a fresh order after examination the issue discussed above. Due opportunity of being heard to be given before passing fresh order." 4. Thereafter, the assessing officer framed the assessment order under section 143(3) r.w.s. 263 of the Act, in pursuance of the direction of ld PCIT in first 263 order. 5. Subsequently, Ld PCIT has again exercised his jurisdiction under section 263 of the Act (hereinafter referred to as the "second 263 order") to revise the original assessment order passed by the assessing officer under section 153A/143(3) dated 28.12.2016. The second 263 order was passed by the ld PCIT on 28.03.2019 observing as follows: "Subsequently, on a careful examination o....
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.... (ii) As per statement of accounts, the assessee has claimed exemption of Rs. 5,25,00,000/- u/s 35(1)(ii) of the I.T. Act, 1961 on account of expenditure incurred on scientific research amounting to Rs. 3,00,00,000/- during the year in respect of one organization namely, Bioved Research Society of 252A/4A. Om Gayatri Nagar, Tellargang, Allahabad - 211004 (UP). As per the assessee's explanation and other related materials available on record, the exemption claimed by the assessee appears to be justifiable to the extent of Rs. 3,76,25,000/- whereas the AO has also allowed the balance amount of exemption claimed by the assessee to the tune of Rs. 1,48,75,000/- at the time of assessment, which was prima facie not admissible to the assessee. As per the submission, the assessee has stated that exemption of one and three fourth times of Rs. 3 crores, amounting to Rs. 5,25,00,000/- was rightly claimed by the assessee because the expenditure was incurred in respect of such institute of scientific research which was approved and specified by notification in the Official Gazette by the Central Government. But the available case records prima facie indicate that the AO has omitted to properly ....
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.... confirmation and other details were produced before the AO, who on being satisfied with the submissions allowed the same. But the available case records prima facie indicate that the AO has omitted to properly appreciate and examine the supportive details and evidences before accepting the assessee's claim of expenditure on 'Loss and damage' of Rs. 4,00,00,000/- at the time of assessment. Therefore, the apparent omission on the part of the AO to properly examine the issue clearly renders the assessment order erroneous in so far as it is prejudicial to the interest of revenue. (v) As per the statement of accounts, the assessee has further claimed to have made payments of Rs. 8,40,68,190/- to M/s. Core Mineral & Rs. 1,05,28,110/- to M/s. Rajat Minerals as 'Incentive on sales' during the year. However, as per the related materials available on records. It is observed that the AO has allowed the expenses on account of incentive on sales amounting to a total of Rs. 9,45,96,300/- (being Rs. 8,40,68,190/- plus Rs. 1,05,28,110/-) at the time of assessment without considering supportive evidences thereof, which indicates that the admissibility of the expenditure during the year wa....
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....o prejudicial to the interest of the revenue. The main condition to be satisfied for invoking action u/s 263 is that the AO has failed to make required enquiry and investigation on issues having a substantial bearing on the income of the assessee. The mere fact that the assessee has complied with the requisition made by the AO during assessment does not itself vitiate the action u/s 263. Consequently, in exercise of the jurisdiction conferred by section 263 of the Act, the said order of assessment u/s 153A/143(3) dated 28.12.2016 passed by the AO is cancelled. The Assessing Officer is directed to pass a fresh assessment order and recomputed the assesse's income after making proper enquiries on above lines discussed in paragraphs aforesaid, and after giving the assessee due opportunity of being heard." 6. Aggrieved by the second 263 order of Ld. PCIT, the assessee is in appeal before us. 7. The Learned Counsels, Shri M.K. Choudhary and Shri Devesh Podder, appearing on behalf of the assessee submitted before us that in assessee`scase the original assessment order u/s 153A/143(3) was passed by Ld. AO on dated 28.12.2016. The said assessment order was duly cancelled by CIT, Centr....
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....eady noted in our above para and the same is not being repeated for the sake of brevity. 9. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ldPCIT and other materials brought on record.First of all, we have to see whether the requisite jurisdiction necessary to assume revisional jurisdiction is there existing before the ldPr. CIT to exercise his power. For that, we have to examine as to whether in the first place the order of the Assessing Officer found fault by the Principal CIT is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedents laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following....
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.... time of original assessment u/s 153A read with section 143(3) of the Act dated 28.12.2016, the Assessing Officer asked the assessee about thefollowingdocuments and information, by way of issue of notice under section 142(1) of the Act, dated 20.06.2016, which were furnished by the assessee during the original assessment proceedings, the copy of notice u/s 142(1) of the Act is reproduced below for ready reference: "Sub: Income Tax assessment in your case AY 2012-13 notice u/s 142(1) reg. Following details / explanations / clarifications may be furnished on or before 01.07.2016 at 11.30 AM. Please note that all questions are required to the replied in the same order of questions by mentioning the serial number of questions. With respect to the above, you are requested to furnish the following details: (1) Brief note on nature of business and business activities carried on during the relevant previous year. Please state the Pvt. Ltd. companies in which you are share holder/director (alongwith the percentage of share holding in such companies) and partnership firm in which you are partner. Also state the details of proprietorship concern. ....
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....lain the basis of arriving at such amount of the exact natuRe, basis and legal stand taken by you in view of such claims from Ankit Metal & Power Ltd. You are also required to explain the basis of arriving at such amount of Rs. 4.00 crores to paid as damages. You are also directed to furnish a copy of your contract with Ankit Metal & Power Ltd. reg. the same. (8) Give the complete address and PAN of "Vedika Organic" to whom you have claimed to have paid "Sample testing fees" during the year. (9) On perusal of the P&L account, it is seen that you have debited and amount of Rs. 3,00,00,000/- as donation to Bioved Research Society. This society has confirmed having received only Rs. 1,50,00,000/- from you. Your claim is thus disproved. Donation is not an expense incidental to business. You are hence directed to explain as to why it should be allowed to be debited. You are also directed to furnish copy of 80G certificate if any, in such cases. (10) From the impounded documents, and as corroborated by the statement of Mr. Samar Das Gupta, it is seen that he has incurred an expense of Rs. 86,30,170/- in cash on receipt of such cash from you. You are required to....
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....ails of all investments made by you during the year including investments on government securities along with documentary evidence. (25) Please give details of bank accounts maintained by you in following Performa: A/c No. Type of Account Name of the Bank Address of the Branch (26) Please also furnish copies of bank statements and a copy of 26AS copies of quarterly 26Q and copies of challans for TDS done. (27) Please furnish the detail documentary evidence of deduction claimed under chapter VIA. (28) Please furnish the details of exempt income earned and expenses incurred for earning same. Also furnish the detail documentary evidence of LTCG claimed. Also furnish the computation of STCG & LTCG, if any. (29) Please furnish the evidence of TDS done on interest paid in lieu of unsecured loan. (30) Please furnish the detail evidence of secured loan received. Please furnish the evidence of TDS done on interest paid on same (NBFC). (31) Please furnish details of unsecured loan taken in the format given below, also furnish the copies of confirmation. Sl. No. Name & complete address of person from whom unsecured ....
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....and rupees for each such failure." 11. We note that by way of issue of notice under section 142(1) of the Act, as noted above, the assessing officer, during the original assessment proceedings u/s 153A/143(3) of the Act ( that is, before first 263 order) sought the following documents and details information: (i).An amount received of Rs. 6,50,00,000/- from M/s. Core Minerals / M/s. Orient Resources. (ii) "Mines development" expenses of Rs. 2,31,97,746/-. (iii). Amount paid to employer of Mr. Niraj Sharma, Rs. 9,60,000/-. (iv). Amount debited of Rs. 9,45,96,300/- under the head 'Incentive on sale'. (v). Amount claimed in profit and loss account, Rs. 4 crores as loss & damage expences. (vi). Amount debited to profit and loss account of Rs. 3,00,00,000/- as donation to Bioved Research Society. (vii) Expenses incurred of Rs. 86,30,170/- , by the statement of Mr. Samar Das Gupta. (viii).Advances recoverable of Rs. 96,79,129/- shown in balance sheet. (ix).Details of sundry debtors of Rs. 51,87,35,951/-. (x).Details of purchases of Rs. 65,33,41,701/-. (xi)Compensation paid to employees o....
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....xamination of details filed by you it is seen that you have claimed expenses of Rs. 9,45,96,300/- under the head incentive on sales. During the course of search and seizure operation you have clarified that such amount had been paid to Core Minerals and Rajat Minerals Private Limited. You have stated that payments are in the nature of trade discount given to bulk buyers and discounts is given by issue of credit notes and the same is adjusted against payment receivable from the buyers, examination of accounts of different years it has been observed that in some of the years a substantial amount has been debited in the P & L account under the head incentive on sales. The comparative figure of the sale vis a vis the incentive on sale is given as under: Nature of entry AY 2009-10 AY 2010-11 AY 2011-12 AY 2012-13 AY 2013-14 Sale of iron ore 1081057218 696180874 1388863944 1371798854 0 Incentive on sales 26724112 0 145692391 945996300 0 Percentage of incentive 2.50% 0 10.50% 6.90% 0 On perusal of above table it is very apparent that there is neither any consistency nor any rational in giving the substantial ....
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....ad been paid to M/s. Ankit Metal & Power Limited for failure to supply the material in this connection you are requested to furnish following details. a. Copy of agreement paper with the above said party for supply of materials. b. Copy of ledger account along with copy of purchase order. 4. In addition to the above, this is to bring to your notice that in the course of search & seizure operation in the business/office and residential premises of your group, you have voluntarily disclosed and admitted an undisclosed income of Rs. 11,60,00,000/- (Rupees eleven crore and sixty lakhs). In this regard you are requested to furnish the following information: a. Assessment Year wise break-up of the above mentioned additional income disclosed. b. Specify the basis and substantiate the manner in which such undisclosed income has been derived. c. Treatment of the undisclosed income as mentioned above in the balance sheet with complete particulars of assets shown therein. d. Information as to whether the above noted undisclosed income has any nexus with any of the receipts / payments mentioned in the seized documents. You....
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....ention that we have provided a discount of Rs. 84068190.00 to M/s. Core Minerals and of Rs. 10528110.00 to Rajat Mineral Private Limited during the relevant previous year 2011-12, this is duly reflected in our books of accounts. It may be possible that M/s. Core Minerals and Rajat Minerals Private Limited haves treated it differently in their books of accounts, but our balances are tallying as confirmed by them. Further we would like to mention that we have provided discounts against the receivables due from them for the sales. If you don't show it as discount and no payment has been received by us, then alternatively it is bad debts. Therefore, the amount should not be disallowed under any circumstances. 2. As required in para 2 of your notice, we would like to bring to your notice that the assessee has claimed the following expenses under the head "Mines Development" Expense for a total of Rs. 2,31,97,746.00 during the relevant previous year 2011-12: Expenses Amount in (Rs.) Overburden Removal 1,97,75,000.00 Road Maintenance 7,38,000.00 Sample Testing Fee 10,04,746.00 Supervision Charge 9,60,000.00 Free plantation & D.G. Set 7....
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....re in the year 2014-15 related to the transaction of FY 2014-15. Therefore we have almost declared the admitted amount of disclosures. Now we request you to look into the matter and complete the proceeding without making any further additions". 15. Therefore, while passing the assessment order in pursuance of first 263 order, the Assessing Officer had discussed and examined the following issues: (i)..Incentives on sales amounting to Rs. 9,45,96,300/-, (ii).Mines development expenses to the tune of Rs. 2,31,97,746/-, (iii).Loss and damage expenses to the tune of Rs. 4,00,00,000/-. (iv).Undisclosed income to the tune of Rs. 11,60,00,000/-. Therefore, having examined these expenses, the Assessing Officer has framed the consequential assessment order under section 143(3) read with section 263 of the Act dated 31.12.2018,(that is, second assessment order under section 143(3) r.w.s. 263 of the Act). 16. However, subsequently the Ld. PCIT has exercised again his jurisdiction under section 263 of the Act (vide his second 263 order dated 28.03.2019) to revise the original assessment order dated 28.12.2016 which was passed by the assessing officer under section 153A/143(....
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....otal amount of estimated additions of Rs. 11,42,917/- instead of Rs. 5,97,716/-. (ii) Omission to properly verify the admissibility of exemption claimed to the tune of Rs. 1,48,75,000/- for expenditure incurred on 'Scientific research' 35(i) (ii) of the I.T. Act, 1961, (iii) Omission to properly verify admissibility of receipts on account of 'Advance received' to the tune of Rs. 6,66,00,000/-, (iv) Omission to properly verify the admissibility of expenditure of Rs. 4,00,00,000/- under the head 'Loss and damage' and (v) Omission to properly verify the admissibility of expenditure under the head 'incentive on sales', amounting to a total of Rs. 9,45,96,300/-. We note that first issue "estimated additions of Rs. 11,42,917/- instead of Rs. 5,97,716/-" is only typographical mistake. The correct total of the estimated addition should be at Rs. 11,42,917/-. In the assessment order due to typographical mistake the assessing officer mentioned the total at Rs. 5,97,716/- which is an apparent mistake which can be rectified by assessing officer suo-moto under section 154 of the Act or it can be rectified by the assessing officer on....
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..../s 143(3) r.w.s. 263 of the Act which was framed by the assessing officer in pursuance of the direction given by ld PCIT, by his first 263 order. Therefore, the said loss and damage expenses of Rs. 4,00,00,000/- has been examined by the assessing officer twice. Again, in second 263 order, ld PCIT has directed the assessing officer to examine the said loss and damage expenses of Rs. 4,00,00,000/-, this means the assessing officer would examine third time said loss and damage expenses of Rs. 4,00,00,000/-. Likewise, the sales incentive expenses of Rs. 9,45,96,300/- has been examined by assessing officer in the original assessment u/s 153A/143(3) of the Act dated 28.12.2016, the said expenditure has also been examined by the assessing officer in the second assessment order passed by the assessing officer u/s 143(3) r.w.s. 263 of the Act which was framed by the assessing officer in pursuance of the direction given by ld PCIT, by his first 263 order. Therefore, the saidsalesincentive expenses of Rs. 9,45,96,300/- has been examined by the assessing officer twice. Again, in second 263 order, ld PCIT has directed the assessing officer to examine the said,sales incentive expenses of R....
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....actual position, the order passed by the AO under section 153A / 143(3) dated 28.12.2016 should not be erroneous. We note that Coordinate Bench of I.T.A.T., Kolkata in the case of Plastic Concern vs. ACIT [61 TTJ 87 (Cal) has held that mere possibility of gathering more material to prove the claim of the assessee wrong would not make the concluded assessment erroneous so long as the ld. A.O. had acted judiciously and conducted enquiries in the course of assessment proceedings. We note that Ld. A.O. having examined the books of accounts, documents relating to various expenses, bills & vouchers/invoices and the bank statements etc. and having satisfied himself about the correctness of the same and explanation of the assessee in regard to these expenses and completed the assessment and, therefore, there cannot be a reason to say that the A.O. has failed to conduct necessary enquiry before accepting the claim of the assessee. 20. We note that Ld. Pr. C.I.T. on analysis of assessment records derived satisfaction for issuing the impugned show-cause notice u/s. 263 of the Act. The expression 'record ' as used in section 263 of the Act is comprehensive enough to include the whole rec....
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....ults in any loss of revenue or when two views are possible and the A.O. adopts one of them with which the C.I.T. does not agree, then it would not be an order prejudicial to the interest of revenue for invoking the jurisdiction u/s. 263 of the Act. In other words, the Ld. Pr. C.I.T. on the same set of facts and evidences on record was of the opinion that the A.O. should have examined the various expenses, as explained above, and Assessing Officer should havetaken the stand which the Ld. Pr. C.I.T. hinted in the impugned order u/s 263 of the Act. This is not permissible under law. For better appreciation, the relevant portion of the judgment in the case of Malabar Industrial Co. Ltd. vs. CIT (supra) is quoted below : "The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax ....
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....ersons. These variations in the perceptions of the Assessing Officer vis-a-vis that of the Commissioner, cannot render an order erroneous and prejudicial to the interest of the revenue." The aforesaid position gets further strength from the decision of Hon'ble jurisdictional High Court in the case of CIT vs. J.L. Morrison (India) Ltd. (2014) 366 ITR 593 (Cal), the relevant finding of which is applicable to the facts of the present assessee is quoted below : "85. Whether the assessment order dated March 28, 2008, was passed without application of mind is basically a question of fact. The learned Tribunal has held that the assessment order was not passed without application of mind. The records of the assessment including the order-sheets go to show thatheard from time to time. In deciding the question the court has to bear in mind the presumption in law laid down in Section 114 clause (e) of the Evidence Act: "that judicial and official acts have been regularly performed. 86. Therefore, the court has to start with the presumption that the assessment order dated March 28, 2008, was regularly passed. There is evidence to show that the Assessing Officer had require....