TaxTMI 
TaxTMI 
2022 (8) TMI 31
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....d on facts to set aside the assessment order passed under section 143[3] r.w.s. 153C of the Act dated 19/12/2019 and direct the assessing officer to modify the original assessment passed by the learned assessing officer, on the facts and circumstance of the case 3. The learned Principal Commissioner of Income tax is not justified in passing an order under section 263 of the Act, as the order passed under section 143[3] r.w.s. 153C of the Act, was pursuant to proper enquiry by the learned assessing officer on the facts and circumstances of the case. 4. The learned Principal Commissioner of Income tax has passed an unsustainable order which is based purely on assumptions and presumptions. The order is arbitrary and full of surmises, without considering the relevant material and considering irrelevant materials. Consequently, the order passed is a perverse order on the facts and circumstance of the case. 5. The learned Principal Commissioner of Income tax has grossly erred in revising the order passed by the learned Assessing officer without appreciating that there is no error, much less prejudicial to the interests of the Revenue to warrant a revision and t....
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....sion proceedings under section 263 of the Act, and the impugned order passed under section 263 of the Act requires to be quashed on the facts and circumstances of the case. 9. The Appellant craves leave to add, alter, substitute and delete any or all the grounds of appeal urged above. 10. For the above and other grounds to be urged during the hearing of the appeal, the Appellant prays that the appeal be allowed in the interest of equity and justice." 11. The brief facts of the case are that the assessee is a partnership firm engaged in the business of production of fish meal and extraction of fish oil and is exporting the finished goods to various countries. For the AY 2017-18, the assessee filed return of income on 26.10.2017 declaring a total income of Rs.2,42,18,160, which was processed u/s. 143(1) of the Act on 15.12.2017. 12. A search and seizure action u/s. 132 of the Act was carried out in the case of the associate concern of the assessee i.e., M/s. Mukka Sea Food Industries P. Ltd. and also at the residence of one of the partners of the assessee firm on 18.2.2018. The registered office of the assessee and the factory of the assessee firm at Ullal wer....
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....e contentions of the assessee are not acceptable for the following reasons: • The assessee has only filed the ledger extract of the parties as appearing in the books of the assessee, signed by the alleged suppliers. • The assessee has not furnished any explanation as to why the difference pointed out in the show cause notice should not be assessed to tax except stating that these parties are genuine and they have confirmed the sale. • It is pertinent to note that the accountant of the assessee firm on the date of search/survey had confirmed that no raw materials were received in respect of the purchase bills in respect of the parties referred to above. • The accountant has also stated that these purchases were recorded at the instance of the partner K.Mohammed Harris. • The statement of the accountant was confirmed by the partner who admitted that the firm was inflating its purchases to reduce its income. • Further it is very significant to note that parties who have issued these bills include employees of Mukka Sea Foods Industries Private Limited, associate concern of the assessee firm. • T....
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....declared additional income of Rs. 2,25,57,180 on the issue of inflated purchases for this year. The assessee has not furnished any reason till date as to why the declaration u/s 132(4) has not been adhered to in toto. 7.4 The basis for the declaration of Rs. 2,25,57,180 as additional income is explained by the partner in reply to Question No. 24 of the statement, is as follows: Raghav Pooiarev 44,04,412 Abdul Rasheed 66,88,221 SayeedEbrahim 60,72,877 Katakeri Ebrahim Sayeed 53,91,670 TOTAL 2,25,57,180 7.5 In view of the above discussion the following conclusions emerge: • The evidence of bogus booking of purchases were found and accepted during survey/search. • The claim of the assessee that declaration was made in order to conclude the proceedings and to avoid panic among fishermen considering the nature of the trade is not acceptable. • The fact that purchase inflation is being done to draw cash for the benefit of the partners is amply proved. • There is scope for manipulation as the alleged suppliers are employees of associated firms of the assessee or its sister concerns ....
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.... operandi of the assessee, confirmed by the partner himself during survey proceedings and the quantum being partly declared by him in the return of income substantiates the finding of purchase inflation as a mode to divert money for the benefit of partners. 7.11 In view of the discussion above it is evident that it is not the case of the assessee that the purchase inflation was not pointed out without evidence nor is the case that the statement was taken under coercion. So also several judicial decisions have held that admission by a person is a good piece of evidence and the same can be used against a person who makes it. The admission made in statement has great evidentiary value and is binding on a person who makes it. 7.12 The purchases as per books from the parties from whom bogus bills were admitted to have been taken [referred to in the statement u/s 132(4)] during the relevant assessment year is Rs. 86,47,146. The assessee has admitted Rs. 8,64,276 as additional income in the return of income filed in response to notice u/s 153C. The details of the purchase parties where inflation in purchases was accepted but not admitted in the return of income filed in ....
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....on done by the AO during assessment proceedings on this issue. During the course of current proceedings, the assessee has submitted details in this regard which require thorough verification and enquiries by the Assessing Officer. The assessee is claiming that there was higher income assessed to tax for AY 2016-17, hence addition for AY 2017-18 was restricted to Rs.86,47,616/- to the extent of expenditure booked in the accounts. These facts were never placed before the AO and the AO has also failed to make the enquiries & verification in this regard before passing the assessment order. Hence, the submissions made by the assessee are not acceptable at this stage. 12. Hence, it is held that the Assessment Order passed by the Assessing Officer is erroneous so far as it is pre-judicial to the interest of the Revenue as per the provisions of Clause (a) of Explanation (2) to the Section 263 of the Income Tax Act, 1961. The claims of the assessee made during current proceedings require in depth enquiry and investigation by the Assessing Officer. Hence, the assessment order dated 19.12.2019 is hereby set-aside to the file of the Assessing Officer for passing a fresh assessment Ord....
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..... 143 [3] r.w.s. 153C of the Act is neither erroneous nor prejudicial to the interests of the revenue. Reliance is placed on the decision of the Hon'ble Apex Court in the case of Malabar Industrial Co., Ltd., Vs. CIT, reported in 243 ITR 83, wherein it is held as under:- " ........ 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 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 Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial ....
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....s case needs to be considered in the light of the explanation (2) to Section 263 of the Act, we notice that the Hon'ble Gujarat High Court in the case of Shreeji Prints (P) Ltd. (130 taxmann.com 293 - Guj) while considering the explanation of Section 263 of the Act has held that : - "4. Being aggrieved by the order passed by the PCIT under section 263 of the Act, 1961, the assessee went before the Tribunal. The Tribunal, after considering the submissions made by the assessee and after considering the scope of power to be exercised by the PCIT under section 263 of the Act, 1961 came to be conclusion that the Assessing Officer has made inquiries in detail about two unsecured loans taken by the respondent assessee and observed as under: "13 In the light of the aforesaid judicial precedents in the present case what has to be seen is whether the AO has made enquiries about two loans taken from GTPL and PAFPL. If the answer is affirmative, then second question arises whether the acceptance of the claim by the AO was a plausible view or on the facts of the finding on the facts that the said funding of the AO can be termed as sustainable in law. We find that vide notice i....
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....eet, profit and loss account and bank statement. The assessee further explained that both the these unsecured loans stands fully repaid as on the date and there is no capital creation by the assessee on this count. In view of these facts and circumstances, we are of the considered opinion that the order of the Assessing Officer is not erroneous nor it is prejudicial to the interest of revenue. It was also brought to the notice of the PCIT that entire share capital of GTPL being already tax, all the investment made by the said company recorded in its balance sheet stands explained tax in its hands itself and hence, "there is no question of adding the same amount in the hands of the assessee. As regards loans from PAFPL, it was submitted that assessee company has made voluntary disclosure of income of Rs. 1.5 crore under IDS 2016 in September 2016 and the said loan was repaid before making declaration. In view of these facts and circumstances, we find that the AO has made due enquiries. Since we find that the AO had made enquiries regarding unsecured loans and accepted the claim of the assessee after detailed enquiries." 15. The Pr.CIT had observed that Explanation 2 of sect....
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....he assessee's claim of loan similar view were also expressed by the Hon'ble Delhi High Court in the case of CIT v. Vodafone Essar South Ltd. [2013] 212 taxman 0184. We observe the Pr.CIT has drawn support from newly inserted Explanation 2 below section 263(1) of the Act introduced by Finance Act, 2015 w.e.f. 1-6-2015 for his action. The Explanation 2 inter alia provides that the order passed without making inquiries or verification 'which should have been made' will be deemed to be erroneous insofar as it is prejudicial to the interest of the Revenue. It is on this basis, the assessment order passed by the AO under section 143(3) of the Act has been set aside with a direction to the AO to pass a fresh assessment order. It will be therefore imperative to dwell upon the impact of Explanation 2 for the purposes of section 263 of the Act. The aim and object of introduction of aforesaid Explanation by Finance Act, 2015 was explained in CBDT Circular No. 19/2015 [F.NO.142I14/2015T PL], Dated 27-11-2015 which is reproduced hereunder: "53. Revision of order that is erroneous in so far as it is prejudicial to the interests of revenue. 53.1 The provisions co....
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....e tax payer concerned for no fault on his part. Apparently, this is not intended by the Explanation. Howsoever wide the scope of Explanation 2(a) may be, its limits are implicit in it. It is only in a very gross case of inadequacy in inquiry or where inquiry is per se mandated on the basis of record available before the AO and such inquiry was not conducted, the revisional power so conferred can be exercised to invalidate the action of AO. The AO in the present case has not accepted the submissions of the assessee on various issues summarily but has shown appetite for inquiry and verifications. The AO has passed after making due enquiries issues involved impliedly after due application of mind. Therefore, the Explanation 2 to section 263 of the Act do not, in our view, thwart the assessment process in the facts and the context of the case. Consequently, we find that the foundation for exercise of revisional jurisdiction is sorely missing in the present case. 18. In the light of above facts and legal position, we are of the considered view that the AO had made detailed enquiries and after applying his mind and accepted the genuineness of loans received from GTPL and PAFPL, ....