TaxTMI 
TaxTMI 
2020 (9) TMI 816
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....g jurisdiction u/s 263 of the Act by wrongly and incorrectly holding that the subjected assessment order passed on dated 29.12.2017 was without making proper enquiries. Such finding and the assumption of jurisdiction, both are contrary to the provisions of law and facts on record. Hence the proceedings initiated u/s 263 of the Act and the impugned order dated 19.03.2020 kindly be quashed. 3. That the learned Pr. CIT-3 Jaipur erred in law as well as on the facts of the case in setting aside the assessment order dated 29.12.2017 with reference to all the following issues, merely on suspicion, surmises & conjectures, and in wrongly alleging lack of proper enquiry and non-application of mind by the AO which is nothing but a pretense. The subjected assessment order is neither erroneous nor prejudicial to the interest of the Revenue nor it has been shown so: i) Alleged short offer of coaching fee revenue by Rs. 2.20 crore for taxation out of total surrender of Rs. 3.00 crore during the course of survey. ii) Alleged abnormal increase in salary, Celebration, legal and rent expenses iii) Alleged various expenses of Rs. 3,34,500/-in violation of section 40....
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....nt record of assessee company and opined that assessing officer failed to verify various issues during the course of assessment proceedings. The show cause notice issued by Pr. CIT -3 is also reproduced herein below: - 2. Perusal of the assessment record reveals the following issues which the AO has not verified: 1. A survey action vide u/s 133A of the Act was carried out in this case on 19.02.2015 wherein the assessee company offered a sum of Rs. 3.00 Crs., for taxation out of the surrendered amount the assessee recorded Rs. 2,20,00,000/- as coaching fee advance under the head revenue from operation. 2. Accordingly, the assessee has offered only Rs. 20,09,434/- out of surrendered Rs. 3.00 Crs., in the computation of total income and Rs. 59,90,566/- as coaching fees (JEE-surrendered) under the head revenue from operation. 3. There is an abnormal increase in salary & wages, celebration & festival expenses, legal & professional charges and rent for which the case was converted into complete scrutiny. No determined addition was made under these heads except a lump sum addition of Rs. 6,00,000/- 4. Salary expenses have been allowed without o....
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.... the head-wise undisclosed surrendered income as per the applicable provisions of Sec. 68 to 69D read with Section 115BBE of the Income Tax Act, 1961. Accordingly, the AO has not brought to tax the surrendered income as per applicable provisions of the Act. 14.The AO has not verified the amount of Rs. 45,85,897/- under the head "Staff Payable". 15.The AO has not at all verified all the issues enumerated from (1) to (14) and has not asked for the reasons for substantially high expenditure debited in the Profit & Loss Account. 3. Necessary powers have been conferred upon the undersigned by the Income Tax Act, 1961 Act to review the assessment made by the assessing officer if the order passed by the assessing officer is found to be erroneous in so far as it is prejudicial to the interest of revenue. Further the Explanation (2) to Section 263, which was inserted by the Finance Act, 2015 w.e.f. 01.06.2015, provides and reads as follows:- " For the purpose of this section, it is hereby declared that an order passed by the AO shall be deemed to be erroneous in so far as it is prejudicial to the interest of the revenue, if in the opinion of the ....
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....s of accounts and other documents maintained by the assessee were examined by the survey team deputed by the Revenue, statements were recorded and the assessee surrendered an amount of Rs. 3.00 crore which was subsequently offered to tax in the return of income. Thereafter, the return of income filed by the assessee has been subjected to the scrutiny assessment under section 143(3) of the Act. The AO in his order passed under section 143(3) of the Act has stated that survey has been conducted wherein the assessee has surrendered an amount of Rs. 3.00 crore which has been offered to tax in the return of income. Our attention was invited to the notice issued by the A.O. under section 143(2) on 13.04.2016, and consequently notice u/s 142(1) along with questionnaire was issued on 5.06.2017. Another notice u/s 142(1) of the Act alongwith detailed questionnaire was issued on 20.12.2017 upon conversion of case from limited scrutiny to complete scrutiny in addition to queries/clarification/documents sought during personal hearing(s) and assessee company's submissions were examined. 6. The ld AR has further contended that the A.O. had made sufficient inquires and also considered the ....
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....t of revenue. The Karnataka High Court after considering various judicial pronouncement in the case of CIT Vs. Gokul Das Exports (2011) 333 ITR 214 (Kar) has held that assessing officer taking one out of two views the assessment order is not prejudicial to interest of revenue. In view of the above judicial pronouncements and various other judgements on the issue the assessment order passed by A.O. cannot be treated as an erroneous and prejudicial to the interest of revenue. In the case of CIT Vs. Vodafone Essar South Ltd. (2013) 2012 Taxman 184 Hon'ble Delhi High Court held that assessing officer before passing assessment order made an enquiry and directed his mind on all aspects. View adopted by him was clearly one among two plausible views that could have been taken. Commissioner did not specifically furnish any reasons to say why original order was unsupportable in law. Commissioner could not have validity exercised his revisionary power u/s 263 in instant case. 7. Reliance was placed by the ld AR on the decision of Jurisdictional Jaipur bench of ITAT in the case of Vinay Kumar Sogani ITA No. 444/JP/2018 Date of Pronouncement: 26/07/2018 (Held : ..once the assessee has pr....
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....s elucidated and explained the scope of provision of 263 of the Act and the same has been extracted by hon'ble Delhi High Court in the case of CIT vs. Goetze (India) Ltd 361 ITR 505 which read as under:- "Thus, in cases of wrong opinion or finding on merits, the Commissioner of Income tax has to come to conclusion and himself decided that the order is erroneous by conducting necessary enquiry if required and necessary, before the order under section 263 is passed. In such cases the order of the AO will be erroneous because the order is not sustainable in law and the said finding must be recorded. The Commissioner of income-tax cannot remand the matter to the AO to decide whether the findings recorded dare erroneous. In cases where there is inadequate enquiry but not lack of entry again the CIT must give and record a finding that the order/enquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the AO making the order unsustainable in law/ In some cases possibly though purely the CIT can also show and establish that the facts on record or inference drawn from facts on....
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....mitted that impugned order u/s 263 passed Ld. Pr. CIT - 3 Jaipur is wrong, bad in law and without jurisdiction and therefore, deserves to be cancelled/set aside. 9. On the other hand, it was contended by the ld CIT-DR that the assessee has offered Rs. 3.00 crores as net income in addition to the regular income during the course of survey and also paid taxes thereon. However, while framing the assessment, the A.O. has not considered the net income offered by the assessee nor the amount of tax which have already been paid by the assessee during the course of survey. 10. The ld CIT-DR has further contended that the investment made in the construction was not examined by the A.O. while framing the assessment in so fact as no enquiry was raised with regard to huge construction expenditure so incurred by the assessee nor the capital work in progress was examined. Our attention was invited to the opening balance under the head building, work in progress and the closing balance which was not matching with the figure given in the balance sheet. As per the ld.DR increase in cash in hand as compared to the cash found during the course of survey was not looked into. As per the ld DR, ....
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....f survey. ii) Alleged abnormal increase in salary, Celebration, legal and rent expenses iii) Alleged various expenses of Rs. 3,34,500/-in violation of section 40A(3). iv) Alleged non-verification of claim of depreciation on computer and furniture and vehicle running expenses, advertisement expenses v) Abnormal increase in Cash in hand post survey vi) Outstanding liabilities in sundry creditors for advertisement and rent expenses and staff payable vii) Alleged non-verification of construction in building and non-reconciliation of trial balance viii) Alleged non-application of provisions of section 68 to 69D read with section 115BBE In reply to these queries of the ld. Pr.CIT, the assessee has filed detailed submission. From the record we found that during the course of the survey action u/s 133A of the Act on 19.02.2015, while recording statement u/s 133A, Mr. Rajesh Kularia Director of the company offered a sum of Rs. 3.00 crore. The said offered amount was duly declared and tax was paid thereon as per detail hereunder Particulars Amount Head/Group of Inclusion Coaching Fee Advance 2,20,00,000/- Rec....
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....in advance for the period subsequent to the accounting period is shown as current Liability" 16. It is also evident from the audited financial statements read with aforesaid accounting policy that the Rs. 2.20 crore forming part of offer of income during the course of survey action was declared under the head Revenue from Operation and offered to tax. Had the said receipt have been treated as advance the same would not have been included in the revenue from operation and would have been shown in the accounting head of Current liability as per accounting policy adopted by the assessee company. Thus, the amount of Rs. 2.20 crore being part of offered income during the course of survey action, has been duly offered by assessee to tax in the return of income filed for the year. 17. We also gone through the reply of the assessee to the questionnaire dated 20-12-2017, detailing nature and implication of impounded documents during survey proceedings. As per sub para a) to d) of para 6 of the said reply letter, nature and implication of the impounded papers vide Annexure A-1 to A-6 were explained. On perusal of the said reply as well as in reply to question no. 21 of the statement re....
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....ween teaching and non teaching staff and as such not further pressed by the AO, specifically about qualification of employees and nature of duty. 21. It is clear from the record that the assessee company is running PMT and IIT entrance examination coaching division in the medical and engineering stream and teaching staff was employed with a minimum qualification of Post Graduate in Science/ Graduate or Post Graduate in engineering B.Tech. A statement containing Name of employee, its complete address, Qualification, Permanent Account Number, Gross salary paid/credited during the year, mode of payment and outstanding salary at the end of year was also filed before the ld. Pr.CIT in support of the salary expenses. The details are verifiable with corresponding detail filed during the course of assessment proceedings, containing name of employee and respective annual salary thereof. As such no adverse inference needs to be drawn merely on the basis of non-availability of detail of qualification and nature of duty since the salary expenses details were examined by the AO with related details as per books of accounts produced during assessment proceedings. 22. With regard to ld. Pr.....
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....ng of the Rent expenses of Rs. 66.96 lacs in the year under assessment in comparison to Rs. 49.20 lac in the preceding assessment year. It was specifically submitted in the said reply letter that increase in Rent by Rs. 16.50 lac was on account of Rent expenses of Alwar Brach, which was opened and operationalized during the year from May 2014 at a rent of Rs. 1.50 lacs per month. TDS as applicable was duly deducted and deposited on the said rent expenses. Remaining amount of increase in rent i.e. Rs. 17.76 lacs minus 16.50 lacs i.e. Rs. 1.26 lacs was on account of annual 5 percent increase of lease rent of Institute Building. A table showing name of landlord, address of rented premises, rent amount for the whole year and TDS deducted thereon was placed on record. We also observe that the said details along with confirmation of the respective land lord of premises running on rent at Sikar were also filed along with reply letter to the questionnaire dated 20-12-2017 Name of Landlord Address of rented premises Purpose of use Amount of Rent TDS Amount Jagpal Singh HUF Jyoti Nagar Piprali Road Sikar Class room coaching building ½ portion 12,00,000/- ....
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....ribution expenses of Rs. 1,10,000/- and Rs. 1,53,000/- were on account of cash prize distributed to students who were declared Diamond and Star student of Guru Kripa Career Institute Pvt Ltd. Cash prizes of Rs. 11,000/- each was paid to 11 students, who were declared as Diamond and Rs. 5100/- each was paid to 30 students who were declared as Stars. Documentary evidence in support of these payments in the form of Sheet containing name of student and their respective signature in acknowledgment was produced as bills/voucher with books of account during the course of assessment proceedings. 29. From the record, we found that the festival expenses of Rs. 37,500/- and 34,000/-was incurred on the festival of Deepawali to non-teaching staff and casual workers like, sweeper, postman, electrician from JVVNL etc. The details of said payment with name and amount was forming part of the voucher of payment and was duly examined by the Tax Auditor as well as by the AO during scrutiny assessment. Individual payment to said payees is not exceeding Rs. 1000/- per payee and the same is evident from the copy of voucher produced with supporting detail. We also found that each cash payment exceed....
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....ses ledger accounts with 2nd reply letter to the notice/questionnaire dated 20-12-2017. During the instant assessment year vehicle running expenses were incurred for Rs. 12,21,778/- in comparison to Rs. 4,39,248/- in the preceding assessment year. In the year under assessment Tata Bus for transportation of the students was purchased and increase in vehicle running expenses was also on account of said bus running expenses. Vehicle running expenses were duly examined by the AO during the assessment proceedings as verifiable from the para 4 of the assessment order, wherein AO has made a lump sum addition of Rs. 6.00 lacs on account of possible personal use of motor vehicle (BMW Car) and telephone/mobile expenses. 34. The ld. Pr.CIT has also alleged that that there is abnormal increase in cash in hand from Rs. 81,43,641/- on the date of survey to Rs. 2.17 crore as on 31.03.2015 has not been verified. In this respect we observe from the record that the assessee company had submitted that said increase in cash was on account of amount offered and accounted for in the books of accounts of Rs. 2.20 crore under the head Coaching Fee(advance). The said offered income was recorded in th....
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....l for students and their bills/vouchers were produced for verification along with books of accounts during the course of assessment proceedings. 38. It has also been observed by Ld. Pr.CIT that there is abnormal increase in other expenses, whereas in fact in the assessment year under consideration other expenses, referring note no.22 of the audited financial statements have come down to Rs. 605.98 lacs from Rs. 676.54 lacs in the preceding year. Detail of advertisement expenses pre and post survey were duly filed before the A.O.. From the perusal of the said ledger account it is apparent that there is no abnormality of the advertisement expenses post survey 39. With regard to observation of the ld. Pr.CIT that there is increase in cash balance, in this regard we found that cash balance of Rs. 2.16 crore as on 31-03-2015 was arising out of the offered amount of Rs. 2.20 crore and Rs. 59.91 lacs during survey proceedings. The said cash balance duly reflected in the cash book produced during the course of assessment proceedings. The cash balance at the end of the year of Rs. 2,16,59,171/- was lying at Sikar (inadvertently in grouping to the audited financial statements, written ....
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.... offered for taxation by the assessee company and were duly incorporated in the total income in its return of income. 42. The ld. Pr.CIT has also alleged that while framing assessment order the AO failed to tax the head-wise undisclosed surrendered income as per applicable provisions of Sec.68 to 69D read with Section 115BBE of the Income Tax Act. In this respect we observe that assessable income of the assessee company has been taxed @ 30 percent plus applicable surcharge and cess in accordance with extant provisions applicable u/s 115BBE for the year under assessment. Provisions for charging higher rate of tax i.e. 60 percent was introduced by the Taxation Laws (Second Amendment) Act, 2016 w.e.f. 1-4-2017 i.e. applicable from the A.Y. 2017-18. As such the assessable income of the assessee company has been rightly taxed as per applicable provisions of Section 115BBE for instant A.Y. 2015-16. For this purpose we place reliance on recent decision of Hon'ble Kerala High Court in the case of Vijaya Hospitality and Resorts Ltd. v. Commissioner of Income-tax, [2020]114 taxmann.com 91 (Kerala), wherein it was held as under:- Section 115BBE, read with sections 68, 71 and 263, of the....