TaxTMI 
TaxTMI 
2022 (6) TMI 1422
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....ce of the assessee is that, the ld. CIT(A) has erred in taking action u/s 263 of the Act and setting aside the assessment order for passing de-novo assessment order. 3. The brief facts of the case are that the assessee has filed its return of income electronically on 28/11/2015 declaring total income at Rs. 5,13,71,110/-. The assessee has also shown income of Rs. 381,18,39,146/- u/s 115JB (MAT). The case was selected for scrutiny assessment and notice u/s 143(2) of the Act was issued and served upon the assessee on 07/04/2016. After going through the details submitted by the assessee, the Assessing Officer passed a scrutiny assessment order on 31/05/2017 u/s 143(3) of the Act. 4. Before adjudicating the specific issue discussed in the impugned order, we would like to make a mention that earlier a notice u/s 263 of the Act was issued on 11/06/2019 by the ld. Pr. CIT-1, Patna. According to the assessee, this notice was later on dropped after the reply of the assessee. We will discuss the relevancy of this aspect in later part of this order. On perusal of the assessment order, the ld. CIT found that the assessment order is erroneous as well as prejudicial to the interest of the ....
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.... Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. (2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.- In computing the period of limitation for the purposes of subsection (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an o....
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..... 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law. (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his an....
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....ore allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open". 9. In the case of Gee Vee Enterprise vs. Commissioner of Income Tax reported in 99 ITR page 375, 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. T....
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....PTER-II RELAXATION OF CERTAIN PROVISIONS OF SPECIFIED ACT 3.(1) Where, anytime limit has been specified in, or prescribed or notified under, the specified Act which falls during the period from the 20th day of March, 2020 to the 29 day of June, 2020 or such other date after the 29th day of June 2020 as the Central Government may, by notification, specify in this behalf, for the completion of such action as - (a) Completion of any proceeding or passing of any order or issuance of any notice, intimation, notification, sanction or approval or such other action, whatever name called, by any authority, commission or tribunal, by whatever name called, under the provisions of the specified Act; or" 11. The ld. Counsel for the assessee further submitted that completion of any proceeding or passing of any order, pre-supposes initiation of proceedings and/or pendency of any proceedings by issuing of a notice on or before 20/03/2020, is absent in the present case. He pointed out that the proceedings on the first reason is based on the letter of CIT D/R, (ITAT, Mumbai Bench) dt. 14/10/2020 and, therefore, the order has to be construed as passed beyond the period of limi....
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....rusal of the assessment record for the A.Y. 2015-16 in your case, it is noticed that the amount of Rs. 145,89,03,359/- was allowed as deduction u/s 35(2AB) of the Income Tax Act, 1961 in the order u/s 143 (3) dated 31.05.2017. In order to claim above deduction u/s 35(2AB) of the Income Tax Act, 1961, it is mandatory for the assessee to enter into an agreement with DSIR by fulfilling the criteria in Form 3CK as prescribed in Income Tax Rule, 1962. Consequent upon the agreement, the DSIR is required to submit a report in Form 3CL under Income Tax Rules, 1962 with regard to annual expenditure incurred by the assessee on Research and Development. As per the letter of DSIR dated- 24.01.2018, it is found that the amount of R & D expenditure incurred by the assessee is only Rs. 6061.72 lac. However the entire claim has been allowed. The overlooking of these facts has made the assessment in this case erroneous in so far as it is prejudicial to the interests of the revenue. 2. On the facts and in the circumstances of the case as discussed above, it is observed that the Assessing Officer (AO) passed the order u/s 143(3) of the Income Tax Act, 1961 dated 31.05.2017 without proper app....
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....have reproduced in the impugned order. He drew our attentions towards page no. 9 to 11 of the impugned order. The ld. Pr. CIT took note of all such details and thereafter changed the scope of enquiry. He brought to our notice findings of the ld. Pr. CIT on page no. 18 to 19 of the impugned order wherein the ld. Pr. CIT has noticed the computation of income of Rs. 20,17,86,432/-. But thereafter the ld. Pr. CIT has observed that the Assessing Officer failed to make an enquiry as to why the assessee has offered net income and not the gross income. He put emphasis on the last paragraph of page no. 19 of the impugned order. The finding of the ld. Pr. CIT in this regard, reads as under:- "5. The contention of the assessee has been examined with reference to the material on record. The CIT(DR), ITAT-7, Bench-A, Mumbai Vide letter dated 14.10.2020, addressed to ITO, Ward-23(1) (2), Mumbai and a copy endorsed to PCIT-1, Patna communicated that the AOP namely Avenue Venture Real Estate Fund (for short "AVREF") has filed its return of income for the A.Y 2015-16 on 29.08.2015 declaring total income at Nil. Assessment u/s 143(3) of the IT Act, 1961 was made assessing total income of AV....
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.... on sale/redemption of current investment 1,97,94,000/- 1,97,94,000/- Total Income - before reducing the exempted income [A] 34,12,14,977/- 20,17,86,432/- As per notice u/s 263- after reducing the exempted income Less : Expense Investment Management Fee 5,61,80,000/- 5,61,80,000/- Trusteeship Fee 2,24,720/- 2,24,720/- Auditors' Remuneration 5,07,845/- 5,07,845/- Legal & Professional Fee 5,61,800/- 5,61,800/- Total of Expense [B] :: 5,74,74,365/- 5,74,74,365/- Difference [A-B] 28,37,40,612/- 14,43,12,067/- Assessee has been asked to substantiate with accounts, details etc. showing that the payments made by it to AVREF was disallowed or added back to its income. The assessee vide letter dated 26.03.2021 submitted the working of the same and expressed that in the absence of specific head in the ITR it has been shown under the head "other income" and sub head "interest income". Further it has been clarified that the assessee has shown interest income of Rs. 1332214996/- under the Schedule of P &L Account in the ITR. The same is verifiable. The assessee failed to clarify why the net of r....
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....ssessee has not included Rs.20,17,86,432/- in its disclosed income. When the assessee has demonstrated that it has disclosed the income and it is part the computation of income then, the ld. Pr. CIT changed the scope of enquiry and held that it is not discernable as to how the Assessing Officer has accepted this return. He should not have allowed the expenditure relatable to earning of this income. It suggests that he has initiated the action without properly analyzing the record and the computation of income filed by the assessee. In other words, a show-cause notice to the assessee would have been in different terms. 20. In the letter of the CIT D/R, it is discernible that a trust, namely, AVREF was setup under the provisions of the Indian Trust Act, 1882. The trust was required to manage the real estate portfolio for the assessee and the assessee is the sole beneficiary. The assessment order in the case of the Trust was passed on 28th December, 2017 i.e., much after the assessment of the assessee. The income was offered in the hands of the assessee in the capacity of the beneficiary. The letter makes a reference about two CBDT Circulars which authorize the Income Tax Officer t....
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....6 to the DCIT Central Circle- Patna. Copy of this letter is placed on page 93 & 94 of the impugned order. It read as under:- 22. This letter is dt. 11/04/2016. Notice u/s 143(2) of the Act was issued on 07/04/2016. The Assessing Officer was conducting the enquiry. In other words, scrutiny assessment was being carried out when the Assessing Officer received this letter. It was brought to the notice of the Assessing Officer according to the ld. Counsel for the assessee and the assessee filed reply on this issue. The reply was brought to the notice of the ld. Pr. CIT and relevant part of the reply is available at page 46 to 48 of the paper book. We deem it proper to take cognizance of this reply which reads as under:- "8. Transaction with Reynolds Petro Chems Ltd. That as required the petitioner is enclosing here with the details of transaction with the aforesaid party along with bills raised during the year under consideration. The petitioner has paid commission to the aforesaid party amounting to Rs. 1.61 crore. Similar query was raised in the immediately preceding year i.e. A.Y. 2014-15 wherein, the department has served the petitioner with copy of Deputy....
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....he services rendered. Ans. I introduce overseas agents to local pharma companies to import their product. These agents provide all the infrastructure to local companies and negotiate the price. Since they are introduced by me I get my referral commission." The other director Sanjay Parasmal Jain in answer to question no.16 has categorically admitted that he is acting as director in the company for namesake only and is not fully aware of business activity or basic functions of all the companies and is signing the document as per instruction of Sri Somani. With regard to the business activity of Reynolds Petro Chems Ltd., he has clearly stated in answer to question no. 18 that he is not exactly aware of the activities carried out by RPCL and has also stated that Sri Kabra and Sri Somani can tell about the activities. Further, he has categorically stated that he left RPCL in the month of July, 2014 and is doing part time accounts work with different client/parties. The Deputy Director (Inv.) in para-3 of the report has placed heavy reliance on the statement of Mr Somani (question no.17 at page 4). The copy of the statement supplied to the petitioner contains first pa....
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....nt. In the circumstances, it is prayed that your honour would be kind enough to allow the expenditure claimed by the petitioner." 23. Apart from the above reply, the assessee has filed copies of the invoices issued by Reynolds Petro Chems Ltd., details of TDS etc. After going through these replies, the Assessing Officer has accepted the stand of the assessee. On the strength of these details, it was submitted by the ld. Counsel for the assessee that even though there is no discussion made by the Assessing Officer in the assessment order but, it does not mean that enquiry was not conducted. He submitted that passing of an assessment order is the prerogative of the Assessing Officer and the assessee has no control over the language or the manner in which the assessment order is to be drafted. But on account of nondiscussion of an issue, the assessee should not suffer a second round of proceedings. It has to be examined whether the details were filed by the assessee before the Assessing Officer and the Assessing Officer has applied his mind on all these details and after being satisfied with the contention, he had taken a plausible view accepting the stand of the assessee, without ....
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....001 F.No. PCIT-1/Pat/263/Alkem Lab-2015-16/2020-21/03 Dated, Patna the 15th January, 2021. M/s Alkem Laboratories Limited (PAN:AABCA9521E) Reg. Office, Exhibition Road, Patna Sub: Notice u/s 263 of the Income-tax Act, 1961 for A.Y. 2015-16- Reg. Please refer to the above. In your case assessment u/s 143(3) of the IT Act, 1961 was completed on 31.05.2017 determining total income at Rs 5,13,71,110/- against the returned income of Rs 5,13,71,110/-. On examination of scrutiny assessment records it is found that the AO has completed assessment without conducting enquiry and verification on the following issues enumerated below: 2. (i) It is learnt that M/s Avenue Venture Real Estate Fund (AVREF) (PAN:AADTA6083E) before the Hon'ble ITAT, Mumbai stated that for A.Y 2015- 16 it has earned/received taxable income of Rs 20,17,86,432/- and same was offered to tax by the beneficiary M/s Alkem Laboratories Limited. As per the original Return of Income filed on 28.112015, you have not included Rs 20,17,86,432/-in disclosed income. (H) The issue of claim of deduction under section 35(2AB) was not examined and verified by the Assessing Of....
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....1 assessing total income at Rs. 20,17,86,430/-, was completed by the jurisdictional Assessing Officer i.e. Income tax Officer, Ward 23(1)(2), Mumbai, on 28:12.2017. The assessee claimed a refund of Rs.6,38,56,139/- for the year under consideration and stated the reason before the AO, that during F.Y. 2014-15, Avenue Venture Real Estate Fund (for short "AVREF") has earned taxable income of INR 20,17,86,432/- which has been offered to tax by the beneficiary of this income i.e. M/s Alkem Laboratories Limited (for short "ALKEM"). To support the assessee submitted copy of ITR-V and computation of income of ALKEM to show that the beneficiary has offered the income in its computation for A.Y. 2015-16. On verification, the AO noticed that ALKEM has shown loss of Rs.1,78,17,85,552/-in its return and that though AVREF has claimed its income to be NIL, it has on its own worked out tax liability during the year and also deposited advance tax on the income so determined. Fed to be true -LOPy По M. K. SINGH Income Tax Officer (Hg.) (Admn.) Office of the Commissioner of Income Ta-1 Patna A. O. shriba Pl. dicaments 1| Page ....
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....stments (13,10,00,000) 84,28,545 Less: Dividend exempt under section 10 (35) of the Act Capital gains on redemption of mutual fund units (84,28,545) 1,97,94,000 Capital gains on sale of equity shares Interest on debentures Premium on redemption of debentures 69,30,840 8,29,60,495 9,21,01,097 20,17,86,432 7. Total For the period under consideration, the assessee has an amount of Rs. 1,75,06,159/- as credit on account of taxes deducted at source (TDS) which is primarily in relation to its ertified to be tone copy toke Mar M. K. SINGH Income Tax Officer (Hqrs.) (Admn.) 21 Page Document 4 A investment in the debentures of Assetz Whitefield Homes Pvt. Ltd. and India Golf Assets Pvt. Ltd.. 8. Further, the Appellant has also paid advance tax amounting to Rs.4,63,50,000/- for the period under consideration. 9. Before the learned CIT(A) the assessee argued that the learned AO has erroneously taxed the same amount of Rs.20, 17,86,432/- in the hands of the Appellant which has already been offered to tax income by the beneficiary i.e, ALKEM and assessed to tax by the tax authorities, as well. T....
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....d Sugar Co. Ltd. [1979] 118 ITR 50 (SC) CIT v. Trustees of Miss Gargiben Trust (1981] 130 1TR 479 (BOM.) Trustees of Chaturbhuj Raghavji Trust v. CIT (1963) 50 ITR 693 (BOM.) CIT v. Dr. David Joseph (1995] 124 CTR 146 (Kerala) iit. iv. V. vi. vii. viii. Tokarshilalji Kapadia Family Trust v. ITO (2002) 83 ITD 734 (HYD.) ITO v. AC Jhaveri Trust [1990] 32 ITD 471 (BOM) Hindalco Industries Ltd. v. DCIT [2010] 40SOT34 (MUM) ACIT v. Smt. Uma J. Kothari [1994] 48 ITD 131 (MAD.) The learned CIT(A) has upheld the action of the learned AO, in assessing the income of the Trust in the hands of the assessee at maximum marginal rate by applying provisions of section 161 (1A), with following observations: 4.3.6. However, when AOs of both the beneficiary and the Trust Fund have proceeded to tax the said income, it is relevant to find the correct hand in which to assess the said incomes, in light of the Trust deed and the Contribution agreement, both dated 31.07.2012. As per Trust deed, clause 6.11 on tax liability, it is stated that the income of the Trust shall be generally offered by the Trustee as representative assessee of the c....
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....00,00,000 41tuss ertified to be tone lopy M. K SINGH Income Tax Officer (Hqrs.) (Admin.) Office of the Sr. Commissioner of Income Tax-1 Patna Document 6 and Class B units, to M/s Avenue Venture Partners LLP for a total consideration of Rs. 1,00,000 on account of it being the investment manager of the AVREF. However, the entire income under consideration is the one arising from class A units contributed by ALKEM, whose name is listed as a beneficiary in the Trust deed. 17. It is seen that beneficiary of this income i.e. ALKEM, has filed its return of income on 28.11.2015 electronically, declaring total income at Rs. 5,13,71,110/- and deemed total income u/s 115JB (MAT) of Rs. 3,81,18,39,146/- and an assessment u/s 143(3) of the Act, 1961, was completed by the jurisdictional Assessing Officer i.e. ACIT, Circle-1. Patna, on 31.05.2017, who accepted the ALKEM's income offered to tax without making any adjustments. However, this case was selected for limited scrutiny through CASS and it appears from the assessment order the issue whether the said amount of Rs. 20,17,86,432/- is the Income in the hands of the Trust or Incom....
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.... respect to a particular income. The expression 'wrong person' is used as the opposite of the expression 'right person'. Merely because a wrong Officer Hess (Adm.faxed with respect to a particular income, the Assessing Officer is not Commissioner of Income from taxing the right person with respect to that income. This is so Patna 51Page Document 7 20. irrespective of the fact which course is more beneficial to the revenue...." Therefore, to protect the interest of Revenue, remedial action u/s 263 is required to be initiated in the case of M/s Alkem Laboratories Limited for AY 2015-16 at the earliest. Accordingly, a proposal for remedial action may be submitted to the jurisdictional CIT at the earliest. 21. The case is now fixed for hearing before Bench "A", ITAT, Mumbai on 07.12.2020. Dr. RAJEEV HARIT Commissioner of Income Tax (DR), ITAT-7, Bench 'A', Mumbai. Copy to: 1. CCIT-5, Mumbai, for favour of information. 2. CIT-1, Patna, for favour of information. 3. Addl. CIT- 23(1), Mumbai, for necessary action. Addl. CIT-1, Patna, for necessary action. 5. ACIT, Circle - 1, Patna, for necessary action. 4. ....
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....this transaction we are facilitating purchase inflation in the case of our sale parties and booking bogus commission in the case of out suppliers." The statements of Directors of M/s Reynolds Petro Chems Limited Sh. Sanjay Parasmal Jain and Sh. Sumit Kabra are also recorded during the course of survey action. In his statement recorded during the course of survey action stated that one of the directors Sh.Sanjay Parasmal Jain stated that "Sir I am not exactly aware of the activities carried out by Reynolds Petro Chems Ltd. however we show in the income tax return as trading of chemical and fabrics. But Shri Sumit Kabra & Shri Jagdish Chandra Somani can very well tell about this." Document 9 9. 10. 8. 6. 7. The other director Sh. Sumit Kabra also accepted and confirmed the modus operadi followed in inflation of purchases of raw materials as explained and accepted at the time of search/survey action conducted in the case of M/s IPCA Laboratories Ltd. The A Y wise quantification of commission expenses claimed as paid to M/s Reynolds Petro Chems Limited by M/s Alkem Labtoratories Ltd. is as under: S.No....