TaxTMI 
TaxTMI 
2021 (2) TMI 32
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....oss of Rs. 16,95,929/-. The book profit was declared at Rs. 3,84,00,911/-. The case of the assesse was selected for scrutiny assessment and the notice under s.143(2) of the Act was issued on 31.08.2015, which was duly served upon the assessee. Though ld.AO has made two additions amounting to Rs. 15.15 Crore but ultimately income was determined at nil after setting off brought forward loss. 4. Dissatisfying with the additions, assessee went in appeal before the first appellate authority. During the pendency of appeal, learned Administrative Commissioner took cognizance under s.263 of the Income Tax Act and issued a show cause notice inviting the explanation of assessee as to why the assessment order should not be treated as erroneous and prejudicial to the interest of the Revenue. Copy of this notice has been placed on page no.1 of the paper book which reads as under: "NOTICE U/S 263(1) OF THE IT ACT Sub: Proceedings u/s 263 of the I-T Act in the case of M/s. ITT Corporation Pvt. Ltd., PAN: AABCI7013D for A.Y.201415 -Reg. Sir, With reference to the assessment order u/s. 144 r.w.s. 92CA of the I,T. Act dated 30,12.2017 for A.Y. 2014-15, it is to be noted that the same i....
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....n which has been reproduced by the learned Commissioner and thereafter he arrived at conclusion that assessment order passed by the AO is erroneous and prejudicial to the interest of the Revenue, therefore it requires to be set aside. Accordingly, learned Commissioner has set aside the assessment order directing the AO to pass a fresh assessment order after conducting proper inquiries/verifications of the issues taken up in Section 263 proceedings. 4.2 Shri Dhinal Shah, learned counsel for the assessee while impugning the order of the CIT took us through this show cause notice issued under s.263 of the Act. Thereafter, he took us through the findings of the CIT. Appraising us the scope of the action under s.263 of the Act, he put reliance on the following judgments, their copies have been placed in paper book: "1. Malabar Industrial Co. Ltd. v. CIT (243 ITR 83) (SC) 2. CIT Vs. Reliance Communication Limited (SC) 3. CIT v. Reliance Communication Limited (ITA No. 1816 of 201 3) (Bombay HC) 4. CIT v. Arvind Jewellers (259 ITR 502) (Gujarat HC) 5. CIT v. R.K. Construction (313 ITR 65) (Guj HC) 6. CIT v. Fine Jewellery (India) Ltd. (55 taxmann.com 514) (Mum HC) 7. C....
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....u/s 142(2A) of the Act. For instance in the audited balance sheet u/s 142(2A) of the Act, the share capital as on 31.03.2013 has been certified at Rs. 181,58,80,000/- and, the same has been declared at Rs. 159,66,40,000/- in the balance sheet audited u/s 44AB of the Act. Likewise, each ingredient of balance sheet differs. Even total of balance sheet as at 31.03.2013 is Rs. 159,66,40,000/- in the balance sheet provided by the assesses, i.e. audited u/s 44AB of the Act, whereas, the total of balance sheet is Rs. 181,58,80,000/- in the balance sheet audited u/s 142(2A) of the Act. 4. On the narrated backdrop, it can be said that the opening values of the year under consideration, i.e. A,Y. 2014-15 is entirely different then the values certified by the auditor under special audit u/s 142(2A) of the Act, Accordingly, this office is of considered opinion that the books of account do not reflect true and fair picture of state of affairs of business, and, in the interest of the revenue, your books of account is required to be audited by an accountant defined u/s 288(2) of the Act, duly nominated by the Principal Chief Commissioner of Income-tax, Ahmedabad. You are hereby given an opportu....
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....4 itself their impact will not percolate to the AY 2014-15. If one goes by the approach of the CIT then every year special audit of the accounts will be required. Once the effect of the special audit has been given in the year in which such audit was held, then in subsequent year the balance sheet is not required to be disturbed. He also explained that so far as the case laws relied upon by the learned Commissioner are concerned, they are not applicable on the facts of the present case. The learned counsel for the assessee has filed gist of his arguments and also annexed Annexure-1 exhibiting the details of additions made during the assessment proceedings for AYs. 2012013 & 2013-14. For example, in AY 2012-13, as per provisional accounts of the assessee, a sum of Rs. 5,74,62,209/- have been shown as advance recoverable in cash or kind or for value. The special auditor in its report has quantified this amount at Rs. 10.94 Crore. The difference of Rs. 5.19 Crore was added. He made reference to other items also and submitted that once it is assessed on this basis, though the report submitted by the assessee as well as by the special auditor were provisional, then no effect would come ....
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....ing aside the assessment order. 7. With the assistance of ld.representative, we have gone thrugh the record. Section 263 has a direct bearing on the controversy, therefore, it is pertinent to take note of this section. It reads as under:- "263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. [Explanation.- For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Com....
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.... an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 263 is required on a particular order of the Assessing Officer. At this stage the opportunity to the assessee would be given. The learned Commissioner has to conduct an inquiry as he may deem fit. After hearing the assessee, he will pass the order. This is the 4th compartment of this section. The learned Commissioner may annul the order of the Assessing Officer. He may enhance the assessed income by modifying the order. He may set aside the order and direct the Assessing Officer to pass a fresh order. At this stage, before considering the multi-fold contentions of the ld. Representatives, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the CIT taken u/s 263. The ....
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....om the above principles, we deem it appropriate to make reference to the decision of the Hon'ble Delhi High Court in the case of Gee Vee Enterprises Ltd vs. Addl. Commissioner of Income Tax (99 ITR 375). In the case of Gee Vee Enterprise (supra), the Hon'ble court has expounded the approach of ld. Assessing Officer while passing assessment order. The observation of the Hon'ble court on pages 386 of journal read as under:- "... it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and function of the Income-tax Officer is very diffident from that of a civil court. The statement made in a pleading proved by the minimum amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer i....