TaxTMI 
TaxTMI 
2021 (10) TMI 1291
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....first two years and in third year only Gr No. 1, 3 & 4): "1.On the facts and in circumstances of the case as well as law on the subject, the learned Pr.CIT has erred in passing the order u/s. 263, although the assessment order passed u/s.143(3) r.w.s 153C of the I. T. Act, 1961 was neither erroneous nor prejudicial to the interest of the revenue. 2. On the facts and in the circumstances of the case as well as law on the subject, the learned Pr CIT has erred in passing ex-parte order under section 263 without providing reasonable opportunity to the assessee. It was practically impossible to file reply in bulk cases of group in short time when the proceedings u/s 263 was initiated at the fag end of limitation period in the month of March, 2021. The first notice u/s 263 was issued only on 08.03.2021. 3. It is therefore prayed that above order passed by Pr. CIT u/s. 263 may please be quashed or modified as your honours deem it proper. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal." 2. Brief facts of the case are that the assessee is a partnership firm. There is four partners....
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....e ld. PCIT before passing the order under section 263 of the Act, issued separate show cause notices under section 263 of the Act dated 08.03.2021. In the show cause notice, the ld. PCIT identified following common issues; • (i) Non-verification of cash loan received ( in AY 2015-16, 2016-17 & 2017-18), • (ii) Non-verification of cash paid ( in AY 2015-16, 2016-17 & 2017-18), • (iii) Understatement of income of the project ( in AY 2015-16, 2016-17 & 2017-18), • (iv) Non-initiation of penalty under section 271D of the Act ( in AY 2015-16, 2016-17 & 2017-18), • (v) Non-verification of unsecured loan ( in AY 2015-16, 2016-17 & 2017-18) • (vi) Non-verification of claim of expenses and liability ( in AY 2015-16, 2016-17 & 2017-18), • (vii) Non-mentioning reference of seized document/evidence in the satisfaction note under section 153C of the Act (in AY 2015-16, 2016-17), • (viii) Non-disallowance under section 40A(3) ( in AY 2015-16, 2016-17 & 2017-18), • (ix) non verification of CASS (in AY 207-18 only) 5. The ld. PCIT recorded that the assessee was given opportunity ....
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.... During the course of search proceedings in assessee group, certain incriminating material in the form of papers and documents were found. The assessee and its group i.e. Radhika Construction, Radhika Corporation, Radhika Infrastructure, AmrutSarovar and Shyam Textile Park all are engaged in construction and development of various projects. On the basis of material found in the course of search and survey action, the assessee prepared books of accounts. The books of accounts so prepared were produced during the course of assessment proceedings. Before issuing the notice under section 153C of the Act, the assessee made disclosure under income disclosure scheme (IDS) 2016. The ld AR for the assessee filed the following bifurcation of amount disclosed in IDS; Name of firms Discloser amount AY's Radhika Construction Rs. 3.50 Crore 2015-16 Rs. 53 Lakhs 2016-17 Total (1) Rs. 4.03 Crore Amrut Sarovar Rs. 2.05 Crore 2014-15 Rs. 1.55 Crore 2015-16 Rs. 1.90 Crore 2016-17 Total (2) Rs. 5.50 Crore Satyam Textile Park ....
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....imitation period exercised its power under section 263 of the Act and issued show cause notice. The copy of show cause notice is also placed on record. In the show cause notice for all three assessment years, the ld. PCIT basically identified eight issues. 11. On the first & second issues identified by ld PCIT, which relates to nonverification of cash loan received and repaid ( in AY 2015-16, 2016-17 & 2017- 18), the ld AR for the assessee submits that in the show cause notice and in the order under section . 263 raised the issue that cash loan received in all these three years were not verified by the assessing officer. In fact, the very issue has been raised by the assessing officer in the show case notice in Para 3 issued on 07.12.2018 (copy of which is placed at Page No 70 to 80 of the Paper Book) . The assessing officer in the show cause notice has tabulated the amount of alleged cash loan taken by the assessee, mentioning the date, amount, name of the party and financial year. The total of this table has been mentioned by the assessing officer at Rs. 16,09,44,705/-. This includes the amount of Rs. 7,62,09,970/-. Similarly, the details of alleged cash loan repaid of Rs. 3,0....
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....ted basis of Rs. 4,03,00,000/-by taking 15% of estimated unaccounted booking advance for the entire project, although the income as per seized material was computed at Rs. 1,01,58,131/- only. Such working is is extracted below. Sr no. Particulars AY 2015-16 AY 2016-17 Total A Income as per seized material Net profit Rs. 98,97,751/- Rs. 2,60,380/- Rs. 1,01,58,131/- B Asset as per seized material -cash -bank Rs. 1,63,52,481/-Rs. 50,000/- Rs. 94,77,177/- --- Rs. 2,58,29,658/- Rs. 50,000/- Rs. 1,64,02,481/- Rs. 94,77,177/- Rs. 2,58,79,658/- C Net profit % Unaccounted booking advances for entire project Net profit @ 15% Rs. 23,28,40,000/ Rs. 3,49,26,000/- Rs. 1233345737/- Rs. 23,69,550/- Rs. 1,57,97,000/- Rs. 3,72,95,550/- D Net profit Residential 258027Sq ft X Rs. 100/- Per sq feet Commercial 6394 sq ft X Rs. 200 per sq feet R....
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....he ld.AR for the assessee submits that non-initiation of penalty proceedings, the revision proceedings under section 263 of the Act cannot be revoked. To support his submissions, the ld.AR relied upon the decision of Hon'ble Gujarat High Court in CIT vs. Dr. Suresh G. Shah [2007] 289 ITR 110 (Guj) and CIT vs. Parmanand N Patel 287 ITR 3 (Guj). Thus, the ld.AR submits that this issue of non-initiation is outside the scope of section 263 of the Income Tax Act. 15. On fifth issue which relates to unsecured loan as identified ld. PCIT (in all three AYs). The ld.AR of the assessee submits that Regarding the issue of non verification unsecured loan in all three subject assessment years as mentioned by the PCIT in the show cause notice and revision order. The ld AR for the assessee submitted that the issue was raised in notice under section. 142(1) issued on 03.12.2018. In reply to this notice, assessee vide letter, copy of which is placed at Page 62 to 64 of the paper book submitted the details of unsecured loans were under compilation and the same would be furnished shortly. Thereafter, assessee furnished the details as called for. The finding of the PCIT that assessing officer has n....
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....d PCIT in regard to non verification claim of expense and liability in his show cause notice. The ld AR for the assessee submits that books of accounts of the assessee were audited under section 44AB of the Act. During the course of assessment proceedings the assessee filed tax audit report together with financial statement. Assessee produced the books of accounts prepared on the basis of seized material in course of assessment proceedings. The assessing officer through notice u/s. 142(1), issued on 03.12.2018 asked the assessee to furnish the details of outstanding sundry creditors which is furnished by the assessee. Further in course of assessment proceedings assessee filed details of expenses incurred, copy of which are also filed on record. During the search and survey action conducted in various cases of group, no evidence was found indicating that assessee debited bogus expenses or credited bogus liability. Further it is case of completed assessment for AY 2015-16 & 2016-17 as submitted earlier and so no adverse inference can be drawn for matter disclosed in the audited accounts as per the decisions of various superior courts. 18. So far as AY 2017-18 is concerned, the ld ....
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....on [2018] 95 taxmann.com 20(Guj). The ld.AR for assessee further submits that once income is declared under IDS, the provision of Income Tax is not required to be considered as per section 195 of Finance Act, 2016, except provision of chapter XV, section 119, 158 and 189 of Income Tax Act. The ld.AR for the assessee accordingly submits that identification of this issue is misplaced. Thus, the assessment order cannot be granted as erroneous and insofar as prejudicial to the interest of the Revenue. 21. On the ninth issue, identified by ld PCIT, which relates to non verification of CASS (in AY 207-18 only), the ld AR for the assessee submits that in the notice issued under section 263 the ld PCIT raised this issue that the item under the CASS were not verified by the assessing officer. The ld AR for the assessee submits that the assessment of the present case has not been made under CASS but the assessment has been made consequent survey hence, the said query is not relevant. The assessee is response to the notice under section 263 made exhaustive submission in reply dated 23.03.2021 before PCIT. The PCIT didn't make any comment or direction on this issue on order passed under sec....
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....the AO did not make elaborate discussion. The ld. PCIT himself even after initiating the proceedings and considering the submission of assessee have not given any finding as to how the claims are not allowable. The ld. PCIT has not given any finding as to what other enquiry was required to be made by the AO. If the assessment order is revised in such an approach, there would no end for such enquiries. The ld.AR of the assessee further submitted that assessee made declaration under IDS which is more than the income that can be accessed on the basis of impounded / seized materials. The assessee was eligible to make declaration under IDS as declaration was filed before issue of notice u/s. 153C. By declaring the income under IDS, the assessee in fact paid more tax than the tax payable as per normal provision. The assessing officer is not competent to disregard the IDS declaration which was accepted by the PCIT. It is not the case of PCIT that assessee has made any misrepresentation of any facts in IDS declaration. The declaration under IDS was neither revoked nor the tax paid by the assessee, was refunded to it. It is well settled that the whole suppressed gross receipts cannot be tax....
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....€¢ Copies of reply filed in response to notice under section 263 for AY 2017-18. 27. To buttress his all submissions, the ld.AR of the assessee relied upon the following decisions: Sr. No. Particulars 1. CIT vs. Max India Ltd. [295 ITR 0282 (SC)] 2. Malabar Industries Co. Ltd. vs CIT 243 ITR 0083] (SC) 3. CIT vs M. Mittai Stainless Steel Pvt Ltd [263 ITR 0255] (SC) 4. CIT vs Amit Corporation [81 CCH 0069] (Guj HC) 5. CIT vs Arvind Jewellers [259 ITR 05021 (Guj HC) 6. Bilag Industries Pvt. Ltd. vs. CIT(A) [SCA No. 24128 of 2005] (Guj HC) 7. CIT vs. R K Construction Co. [313 ITR 0065] (Guj HC) 8. CIT vs. Nirma Chemicals Works. Pvt. Ltd. [309 STR 0067] (Guj HC) 9. Rayon Silk Mills vs. CIT(A) [221 ITR 0155] (Guj HC) 10. PCIT vs. Shreeji Prints Pvt. Ltd. [Tax Appeal No. 828 of 2019] (Guj) 11. CIT vs. Nirav Modi [390 ITR 0292 (Bom. HC)] 12. CIT vs Gabriel India Ltd. [203 ITR 108(Bom) 13. Moil Ltd. vs CIT [ 81 taxmann.com 420 (Bom. HC)] 14. CIT vs. Fine Jewellery India Ltd. [55 texmann.com 514 ] (Bom HC) ....
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....e duty of the AO to ascertain all the facts on the basis of material available on record. The AO in not carrying out further verification or enquiries to assess total income of the assessee as evident from the incriminating material and to verify if it has any co-relation with the disclosure made in the IDS as claimed by assessee. Failure on the part of AO to carry out such enquiries as discussed shown that assessment order passed by AO is erroneous insofar as prejudicial to the interest of the Revenue. The ld. CIT-DR for the revenue submits that the twin condition as enunciated in section 263 are fulfilled in the present case. The ld. CIT-DR for the revenue prayed for upholding the order of ld. PCIT. 29. In rejoinder submission, the ld.AR of the assessee submits that on careful perusal of show cause notice under section 263 of the Act issued by the ld. PCIT, it is clearly discernible that the ld. PCIT identified issues only on the basis notice issued by AO under section 142(1) of the Act. No new issues are identified by ld. PCIT. The ld. PCIT has not made any enquiry of his own before holding that assessment order is erroneous or erroneous and insofar as prejudicial to the inte....
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.... 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. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the Income-tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction ....
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.... more elaborately. This section does not visualize a case of substitution of the judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be erroneous. Cases may be visualized where the ITO while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the ITO. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is preju....
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.... claim of the assessee was erroneous, he simply asked the ITO to re-examine the matter, which was not permissible. 33. The Hon'ble Jurisdictional High Court in CIT Vs Arvind Jewellers (259 ITR 502), while relying on the decision of Hon'ble Apex Court has taken a view that the provisions of section 263 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 section will be attracted and incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. The Supreme Court has also made it clear that the phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer and that 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. It was further emphatically stated that when an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the ITO has taken one view with which the Commissioner does not agree,....
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.... of assessment. The Commissioner has mentioned that the Income-tax Officer has not examined the cash credits of the partners or deposits of Chit Fund. Assuming this to be so (though there does not appear to be any justification for the aforesaid observation), this may make the order erroneous, but how it is prejudicial to the interest of the revenue has not been stated by the Commissioner as he did not deal with the explanation given by the assessee in the course of section 263 proceedings. (*underline by us) 35. Now adverting to the facts of the present case. We find the there is no dispute that the AO while passing the assessment order accepted the claims of the assessee in non- speaking order. It is not the case of ld PCIT that the AO is not authorised (empowered) to accepted the return of income in nonspeaking order. We have seen that the AO while passing the assessment order recorded that "the Authorized representative of the assessee vide various order sheet entries have furnished the relevant details and information called for. After affording ample and adequate opportunities of being heard to the assessee, assessment proceedings have been completed on the basis of the su....