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TaxTMI 
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2023 (1) TMI 129
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.... common reason for reopening of the assessment is stated in brief. The revenue carried out survey operations u/s 133A of the Act in the hands of both the assessees on 03-05-2018. During the course of survey operations, it was found that the above said companies have paid consultancy/retainership fees to a person named Shri Deepak Kochhar. A statement was taken during the course of survey on oath u/s 131 of the Act from Shri Gaurang Gandhi, the managing director of both these companies. The DDIT (inv.) appears to have taken the view that the payments made to Shri Deepak Kochhar as consultancy fees were only accommodation entries. Based on the report from DDIT (Inv.), the AO reopened the assessments of all the three years under consideration in the hands of both the assessees. 3. During the course of assessment proceedings, the AO raised various queries with regard to the payments made to Shri Deepak Kochhar. He also noticed that both these companies have taken loans from its sister concern named M/s Aarem Management Services P Ltd. It was further noticed that the above said sister concern, in turn, had received funds from Shri Deepak Kochchar. The AO noticed that the loan taken fro....
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....e on the report of DDIT (Inv), which in turn, has placed reliance on the Statement given by Shri Gaurang Gandhi, the Managing director of these two companies. Hence the statement given by Shri Gaurang Gandhi formed the basis for reopening of assessment by the AO as well as the initiation of revision proceedings by Ld PCIT. It was submitted that the copies of the said statement were not furnished to the assessees. 7. It was contended that the, merely on the basis of some view expressed by DDIT (Inv), it cannot be said that the payments made to Shri Deepak Kochhar were merely accommodation entries and it cannot be considered that this fact has been conclusive established. It was submitted that these assessees as well as Shri Deepak Kochhar have all along maintained the stand that the payments were given/received on account of services rendered. It was further submitted that the Ld PCIT has also not arrived at any conclusion that the impugned payments made to Shri Deepak Kochhar was not genuine. He has merely placed reliance on the report given by DDIT (Inv.). It was submitted that the AO has extracted a portion of statements given by Shri Gaurang Gandhi and Shri Deepak Kochhar in th....
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....sment orders of all the three years in the hands of both the assessees herein and directed the AO to pass fresh assessment orders on the issues discussed in the revision orders passed by him, after giving due opportunity to the assessee. Both the assessees are aggrieved by the orders passed by Ld PCIT. 10. Before us, the Ld A.R reiterated the contentions made before Ld PCIT. He submitted that the basic material relied upon by the AO for reopening the assessments and by Ld PCIT for initiation of revision proceedings is the statement given by Shri Gaurang Gandhi. He submitted that the statement of Shri Gandhi has not been given to the assessee either by AO or by Ld CIT(A). Accordingly, he contended that there was clear violation of principles of natural justice. He submitted that the AO has extracted certain questions and answers from the statements given by Shri Gaurang Gandhi and Shri Deepak Kochhar. A perusal of the same would show that the said statements do not support the view taken by the tax authorities. Both the parties have confirmed about the payment of consultancy fees. Further the AO has raised various queries during the course of assessment proceedings and the assessee....
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....he Hon'ble Supreme Court. The relevant observations are extracted below: "Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the 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 interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be "erroneous in so far as it is prejudicial to the interests of the Revenue". This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held that the provision "cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer" and "it is only when an order is erroneous that the section will be attracted". The Supreme Court held that an incorrect assumption of fact or an ....
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.... matters or orders which are already concluded. 14. We shall now refer to the notice issued by Ld PCIT. Identical notices have been issued in all the three years in the hands of both the assessees. Hence we extract below the notice dated 13-08-2021 issued in the hands of M/s Pioneer Investcorp Limited for AY 2012-13:- "3. During the course of assessment after considering the submissions made by you, the A.O. arrived at the conclusion that the commission paid to Shri Deepak Kocchhar during the year under consideration is not genuine and accordingly, added 3% of receipts of Rs. 4,25,00,000/- i.e., Rs.12,75,000/- and 3% of payments of Rs.4,25,00,000/- i.e. Rs.12,75,000/- totalling to Rs.25,50,000/-. However, it is noted that no justification has been given by the A.O. in the assessment order as to why merely 3% of receipts of commission Rs.4,25,00,000/- i.e. Rs. 12,75,000/- and 3% of payment of Rs.4,25,00,000/- i.e. Rs. 12,75,000/- should be disallowed instead of adding the total commission at Rs.4,68,77,500/-. Considering the fact that, the AO had concluded in the assessment proceedings that payment of commission to Shri Deepak Kochchar was false/not genuine, concocted and an arr....
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....efore the CIT(A) on 28.01.2020. Post filing of appeal the assessee opted for VsV Scheme and the same was accepted by the Department. Therefore, it has been argued that the issue under consideration is settled under VSV and has attained finality. The assessee has referred to the decision of the Hon'ble Supreme Court in the case of Killick Ninon Ltd. V Deputy Commissioner of Income Tax (2002)125 taxman 1055(SC). 5.1.2 In this regard, it is observed that the decision referred by the assessee is in respect of KVSS and the decision of the Apex Court was in respect of peculiar facts of the case. The decision was in respect of reopening of the issue by the AO In the instant case, the proceedings u/s.263 has been initiated by the Pr. CIT, who is a supervisory authority, who has been given duty in the Income-tax Act to correct the errors in assessment made by the AO, which are prejudicial to the interest of revenue. 5.1.3 Moreover, VsV Scheme is under a separate enactment. Under the VsV Act, in Sec. 5(3) it has been provided that no matter covered by such order shall be reopened in any other proceeding under the income tax Act. Thus, the bar to reopen any proceeding is limited to ....
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....of assessee and challenging the notice for use or word 'appears to be true' is a misplaced semantic. It is nothing but lack of understanding the meaning of the phrase. 5.4 In its reply filed on 10.03.2022, the assessee, inter-alia, has also stated that it has withdrawn appeal filed before CIT(A) and therefore the subject matter has attended finality. In this regard, it is observed that there is no bar for revisionary proceedings in respect of matters which have not considered and decided in appeal. Since the appeal has been withdrawn, the issue is not considered and decided. Moreover, as already discussed, the issue in this revisionary proceeding is not exactly the same as in the appeal filed before the CIT(A). Therefore, the contention of the assessee on this issue is not tenable. 5.5 The assessee has referred to various judicial decisions in its reply, the same were perused and considered. It is noticed that in all the referred cases, the enquiries were made by the AO and thereafter assessment orders were passed. The assessee has further contended that the AO after due inquiry and verification of information concluded that only 6% of total receipts of Rs.4,25,00,000/- ought....
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....sessment order on the issues discussed in this order after giving due opportunity to the assessee. The AO is also directed not to make any addition on the issue of commission of RS.25,50,000/-, which has become final in view of the VsV declaration filed by the assessee." 16. A perusal of the impugned revision orders passed by Ld PCIT would show that the Ld PCIT has not discussed anything about the genuineness or otherwise of the consultancy fees paid to Shri Deepak Kochhar. In most of the paragraphs, the Ld PCIT has addressed the contention of the assessee that the settlement of disputed addition of commission income under VSV Act, 2020 will not bar him to initiate revision proceedings in respect of consultancy fees paid to Shri Deepak Kochhar. In paragraph 5.1.4, the Ld PCIT has expressed the view that the AO has failed to examine the applicability of sec. 68 of the Act on the amounts received by the assessee. Admittedly, the revision proceedings were initiated on the reasoning that the AO has not disallowed the consultancy fee paid to Shri Deepak Kochhar and not in respect amounts received by the assessee from other concern. As stated earlier, the Ld PCIT has taken the view tha....
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....s of report given by DDIT (Inv.) only, the Ld PCIT has entertained the view that the AO has failed to make disallowance of consultancy fees paid to Shri Deepak Kochhar. Whether Ld PCIT can simply rely upon the report of DDIT (Inv.) and hold the assessment order to be erroneous is the question that requires examination. In this regard, we may gainfully refer to the decisions rendered by Hon'ble Bombay High Court in the case of Gabriel India Ltd (supra), wherein, inter alia, held as under:- "From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an income tax officer acting in accordance with the law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where the Income tax officer while making an assessment examines the accounts, makes enquiries, applies his mind to the fac....
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....stablish 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/ssie to the Assessing Officer would imply and mean the Commissioner of Income tax has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question...." Similar view has been expressed by Hon'ble Madras High Court in the case of CIT Vs. Amalgamations Ltd (238 ITR 963). 20. The law interpreted by the Hon'ble High Courts, in the above said cases, would make it clear that the Ld Pr. CIT, before holding an order to be erroneous, should have conducted necessary enquiries or verification in order to show that th....