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2021 (6) TMI 445
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....aw, and in any view of the matter, the ld. Pr. CIT-2, Bhopal, has erred in setting aside the impugned assessment order dated 26.04.2017 passed u/s. 143(3) of the Income Tax Act,1961 holding it to be erroneous and prejudicial to the interest of the Revenue for complete lack of enquiry on the part of the Ld. Assessing Officer on all the stated issues. 3. That, the appellant craves leave to add, amend, delete any grounds of appeal before and/or at the time of hearing. 2. Brief facts of the case as culled out from the records are that the assessee is a partnership firm engaged in the business of trading of two wheelers their part and accessories. The assessee is an authorized dealer of M/s. Bajaj Auto Ltd., Pune. The case was selected through CASS for complete scrutiny for the following reasons: a) Low Income shown by large contractors. b) Mismatch in amount paid to related persons u/s. 40A(2)(b) reported in Audit Report and ITR. c) Higher Turnover reported in Service Tax Return compared to ITR and assessee has deposited large amount of cash in saving bank account. Statutory notice u/s. 143(2) of the Act and 142(1) of the Act were duly served u....
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....ation required to be given is only in regard to amount disallowable, whereas, in Audit Report details of payment made are required to be mentioned. iii. As regards, higher turnover return in Service Tax Return as compared to ITR and alleged deposit of large amount of cash in Saving Bank Account is concerned, the assessee says that there is no mismatch and the auditor has shown total receipt of services amounting to Rs. 66.95 lacs and receipts from other services at Rs. 24.72 lacs. However, at the time of filing of Service Tax Return the assessee has shown total services in his return. In regard to deposit of cash the assessee says that the assessee firm does not have any Saving Bank Account. Thereafter, the allegation of cash deposit is not correct. 5. It was also submitted before the Ld. Pr. CIT that all details required by Ld. AO were filed. Ld. AO was aware of the issues involved in reasons for complete scrutiny and raised specific queries. In response of which replies were filed and Ld. AO examined each and every aspect with the books of account and relevant records with due application of mind. 6. However, Ld. Pr. CIT was not satisfied with this reply a....
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....ounsel for the assessee submitted that there was no mismatch between the turnover reported in Service Tax Return compared to ITR. Copies of half yearly return filed under Rule 7 of Service Tax Rules were placed before the ld. AO as well as Ld. Pr. CIT to draw attention to the fact that there is no mismatch. Further as regards the cash deposited in Saving Bank Account it was submitted that the assessee is a partnership firm and cannot open Saving Bank Account. Details of all Bank Account held by assessee were filed before lower authorities. Ld. Pr. CIT made no further enquiry to bring out the information as to which is the Saving Bank Account in which cash was deposited and account not disclosed by the assessee. In support of the above contention Ld. Senior Counsel for the assessee has relied on following judgment: 1. Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, (2000) 243 ITR 83 (SC) 2. CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom). 3. Micro Inks Limited v. CIT (2018) 407 ITR 681 (Guj) (HC). 4. D.G. Housing Projects Ltd.-[2012] 20 taxmann.com 587 (Delhi). 8. Per contra Ld. Departmental Representative (DR) referred to the fi....
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....es not mean "incidental" or "collateral" examination of any matter by the Income -tax Officer in the process of assessment. There must be something in the assessment order to show that the Income-tax Officer applied his mind to the particular subject-matter or the particular source of income with a view to its taxability or to 'its taxability and not to any incidental connection. Related question arises: can a AO pass an order without giving any proper reasons whatsoever? The issue stands settled by the Hon'ble S.C. Ld. Pr. CIT was relied following decisions: 1. CIT vs. Toyota Motor Corpn. (2008) 306 ITR 49(Delhi) dated April 2, 2008. 2. Toyota Motor Corporation vs. CIT (2008) 306 ITR 52 (SC). 3. Pr. CIT vs. India Finance Ltd. (2016) 389 ITR 242 (Calcutta). 4. State Bank of Indore v. CIT (1998) 64 ITD 209 (Indore). 5. S.N. Mukherjee vs. Union of India (1990) AIR 1984 : 1990 Supl. (1) 44 DID, 28th August, 1990. 6. Boston Analytics P. Ltd. Mumbai vs. ITO I.T.A.T. Mumbai B Bench ITA No. 2745/Mum/2012. 6. Based on the above, it is clear that, there is complete lack of enquiry on the part of the assessing officer on ....
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.... 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 Commissioner under Section 144-A; (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 th....
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....s absent--if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-- recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous." 14. The Hon'ble Bombay High Court in the case of Gabriel India Ltd. 203 ITR 108 has held as under: "The power of suo motu revision under subsection (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub10 section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions....
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.... 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. We, therefore, hold that in order to exercise power under sub-section (1) of section 263 of the Act there must be material before the Commissioner to consider that the order passed by the Income-tax Officer was erroneous in so far as it is prejudicial to the interests of the Revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the Income-tax Officer without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the Revenue. An order can be said to be ....
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.... "loss" in the new proviso. We express no opinion on the scope of the said amendment of 2005. Suffice it to state that in this particular case when the order of the Commissioner was passed under Section 263 of the Income Tax Act, 1961, two views on the said word "profits" existed. It is not in dispute that when the order of the Commissioner was passed there were two views on the word "profits" in that section. The problem with Section 80HHC is that it has been amended eleven times. Different views existed on the day when the Commissioner passed the above order. Moreover, the mechanics of the section have become so complicated over the years that two views were inherently possible. Therefore, subsequent amendment in 2005 even though retrospective will not attract the provision of Section 263 particularly when as stated above we have to% take into account the position of law as it stood on the date when the Commissioner passed the order dated March 5, 1997, in purported exercise of his powers under Section 263 of the Income Tax Act. 3. For the above reasons, civil appeals filed by the department stand dismissed." 16. It is a settled position of law that powers u/s. 263 of the Act ....
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.... queries by the Assessing Office and details. A.Y. 2009-10 supplied by the assessee, we are unable to accept such a condition. In that view of the matter, the observation of the Tribunal that the Assessing Officer having made inquiries and when two views are possible, revisional powers could not be exercised, called for no interference. Since with respect to computation and assertions of other aspects of deduction under section 54F of the Act, the Tribunal has remanded the proceedings, nothing stated in this order would affect either side in considerations of such claim. 7. No question of law arises. Tax Appeals are dismissed." 19. Now examining the facts of the case in the light of the above decisions and discussions made hereinabove including the submissions made before lower authorities and before us by both the sides. We will analyze the facts referring to each of the reasons: i. As regards "low income shown by large contractors" we observe that prima facie going through records it appears that the assessee is a trader and authorized dealer of M/s. Bajaj Auto Ltd. and also sales accessories and spare parts. No documents are placed before us which could prov....
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....the considered view that with regard to second issue of mismatch u/s. 40A(2)(b) of the Act the finding of Ld. Pr. CIT of setting aside the order of Ld. AO needs to be partly accepted only with regard to the payment of legal fee and rent to Deepak Nanwani and in the set aside proceedings Ld. AO should examine these transactions in the light of the provision of section 40A(2)(a) of the Act. iii. As regard to 3rd issue "Higher turnover reported in Service Tax Return compared to ITR and assessee has deposited large amount of cash in saving bank account", it comprises of two parts; firstly, the higher turnover reported in Service Tax Return compared to ITR and secondly large cash deposited in Saving Bank Account. So far as mismatch of turnover in the Services Tax Return and ITR is concerned, we observe that in the profit and loss account service charges of Rs. 66,95,750/- is shown on credit side being service charges received. In the services tax returns we find that the return for first six months shows a taxable receipt of Rs. 26,47,323/- and for second half of the year service receipt of Rs. 15,19,842/- which total to Rs. 42,38,165/-. But apart from the taxable services asse....
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....ucted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing Officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. 17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erro....
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....unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue. 19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and v....