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2022 (8) TMI 1496
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....ate enquiry. Ld. PCIT has held that the AO failed to enquire the 'cash deposited in bank' thoroughly, while all the aspects related to 'Cash deposited during the year including demonetization period', were enquired by the AO in the assessment proceedings and Section 131 proceedings. b) On the facts and circumstances of the case, the Ld. PCIT has erred both on facts and in law in ignoring the fact that the issue raised by her in notice u/s 263 was before the AO and as such the jurisdiction on this issue under section 263 cannot be assumed by her. c) On the facts and circumstances of the case, the Ld. PCIT has erred both on facts and in law assuming jurisdiction u/s 263 in the absence of twin conditions of the order passed by the A.O. being erroneous as well as prejudicial to the interest of the Revenue, being satisfied. d) On the facts and circumstances of the case, the Ld. PCIT has erred both on facts and in law in ignoring the fact that the proceedings u/s 263 cannot be used for sustaining opinion of the A.O. by that of the PCIT. e) On the facts and circumstances of the case, the Ld. PCIT has erred both on facts and in law in set....
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....rnal communication cannot be considered and thus, he submitted not to accept the additional ground at this stage. 5.2 We have heard rival contentions and perused the material brought on record in the prayer petition filed by the assessee for raising the additional ground before us. The bench of the view that since, the additional ground being technical and legal ground be admitted in the interest of justice and the same is thus admitted as it does not involve any factual issue for this additional ground. 6. Since, the additional ground raised by the assessee is purely on the legal issue challenging the jurisdiction of the ld. Pr. CIT and as the controversy goes to the root of the case we are inclined to entertain this ground first. The foremost controversy raised by the Assessee relates to initiation of proceeding based on the report of the AO is validly initiated proceeding u/s. 263 of the Act, or not? 7. On this legal ground the ld. AR for assessee submitted a detailed written submissions which is reiterated here in below :- "2.1 Section 263 reads as follows: 263. (1) The Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Co....
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....mitation is getting barred on 31/03/2022 for initiating of the action u/s 263 of the I. T. Act, 1961" Yours faithfully (PK Kalyania) Income Tax Officer, Ward 1(4),Jaipur _____________________________________________________ Above letter from AO to Ld. PCIT clearly brings out that AO, who completed the assessment proceedings and passed an order u/s 143(3) is revealing to Ld. PCIT that his order is erroneous and prejudicial to the interest of revenue. 2.1.4 Office of the Ld. PCIT-1, Jaipur has reverted back to the Addl. CIT with the following reply vide letter No. 22 dated 24/06/2020 (Please see attachment No. 3) ______________________________________________________ No. : Pr. CIT-1/ITO(T&J)/JPR/2020-21/122 Dated 24/06/2020 The Addl. Commissioner of Income Tax, Range-1, Jaipur Sir, Subject: Approval for taking remedial action in the case of Om Prakash Agarwal-ABWPA2846D AY 2017-18 reg Kindly refer to your proposal for approval for taking remedial action u/s 263 of the IT Act vide letter No. 324 dated 11/06/2020 In this....
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....nt places reliance on the following judgements i) Span Overseas Ltd. Vs. Commissioner of Income Tax in ITA No. 1223/PN/2013 for assessment year 2008-09 decided on 21-12- 2015; ii) Alfa Laval AB Vs. CIT(IT/TP), Pune by ITAT, Bench C ITA No. 1287/PUN/2017 AY 2012-13 pronounced on 02/11/2021 (Please see attachment No. 7 to 12) (iii) Rajesh Chandrakant Shah (HUF) Vs. PCIT-6, Pune AY 2011-12 ITA No. 1028/PUN/2016 pronounced on 06/02/2019 (iv) Hindustan Lever Ltd. Vs. CIT, Kol-II, High court of Calcutta ITA No. 193 of 2002 judgement on 04/02/2011 (Please see attachment No. 13 to 16) 2.1.8 The fact remains that a notice such as the one issued in the above case is ultra vires the provisions of the Income-tax Act 1961, and also does violence to the mandate of the Supreme Court in the case of Bhavnagar University v. Palitana Sugar Mill (P.) Ltd. [Appeal (Civil) 8003 of 2002, dated 3-12-2002]. "....It is well settled that when a statutory authority is required to do a thing in a particular manner, the same must be done in that manner or not at all. The State and other authorities while acting under the said Act a....
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.... of invoking Section 263 of the Income Tax Act for reopening of the assessment on the basis of a proposal given by the assessing officer himself after passing of the order of the assessment on the basis of the precedent of Gauhati High Court which has not been approved by a Division Bench of our High Court. We, therefore, set aside the order passed by the Commissioner of Income Tax under section 263 of the Act which has been affirmed by the Tribunal below and direct the assessing officer to act accordingly. The appeal is, thus, allowed." 9. Per contra, the ld. DR relied on the orders of the lower authorities and submitted that review of the case was done by JCIT and not AO. Based on the JCIT review the AO send a proposal as this is administrative process to review the work done by the subordinate officer. The finding is of the JCIT and AO has followed the direction given by the higher officer and he has not his own done the review. Merely based on the proposal the proceeding u/s. 263 is not completed. The proposal received by him is duly considered and the Pr. CIT as per provision of the section 263 of the evaluate the order of the lower authorities and after that....
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....he stage when he makes up his mind and issues a show-cause notice to the assessee under section 263. Thereafter, the CIT is required to give an opportunity of hearing to the assessee before arriving at a conclusion that an order passed by the Assessing Officer was erroneous and prejudicial to the interest of the revenue. In the present case, the CIT has given adequate and reasonable opportunity to the assessee and has also given convincing reasons in the order passed by him which fully support the order of the CIT. 3.6 The learned Sr. DR also submitted that the Explanation b inserted below section 263, which defines 'records' include all records relating to any proceedings under the Act available at the time of examination by the Commissioner. The proposal sent by the ACIT vide letter dated 23rd June, 1995 to the CIT was a part of 'record' and the CIT could take into consideration the said proposal at the time of initiating action under section 263. 4. We have carefully considered the submissions made by the learned representatives of the parties and have gone through the order of the learned CIT as well as all other documents to which our attention was drawn duri....
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....sessing Officer is erroneous insofar as it is prejudicial to the interest of the revenue, then subsequent proceeding acquires quasi-judicial character. Thereafter, he has to give the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, he may pass such orders 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. It will be worthwhile to compare the language of section 263 with the language used in section 264 of the Act. In section 264, the Commissioner may, either of his own motion or on an application by the assessee for revision, call for the records of any proceeding under this Act. However, in section 263 the expression "on his own motion" is absent. It is nowhere provided as to under what circumstances and on the basis of what type of information and source, the CIT may call for and examine the record of any proceedings for the purposes of section 263. In the absence of any express provision in section 263, providing that CIT can act under section 263 only on his own motion or suo motu and also in vie....
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....o trench upon the powers which are expressly reserved by the Act or by the Rules to other authorities or to ignore the limitations inherent in the exercise of those powers. For instance, the power to reassess escaped turnover is primarily vested by rule 17 in the Assessing Officer and is to be exercised subject to certain limitations, and the revising authority will not be competent to make an enquiry for reassessing a taxpayer. Similarly, the power to make a best judgment assessment is vested by section 9(2) (b) in the assessing authority and has to be exercised in the manner provided. It would not be open to the revising authority to assume that power. The revisional power has to be exercised for ascertaining whether the order passed is illegal or improper or the proceeding recorded is irregular and it is in aid of that power that such orders may be passed as the authority may think fit......." 4.9 The Hon'ble Gujarat High Court in the case of Orient Trading Co. v. CIT [1985] 152 ITR 26, 20 Taxman 330 at page 35 has also held as under : "However till a reassessment order is made by the ITO, it is open to the Commissioner to revise the assessment order. In th....
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....t this argument made on behalf of the Assessee." 10. In the rejoinder the ld. AR of the assessee that the judgment relied upon by the ld. DR old one where as the decision of the ITAT he has relied upon are recent one. Not only that he has submitted that in the decision relied upon there may be mistake where in this case it is purely a change of opinion of the AO/JCIT/PCIT on the very same issue that has already been examined and the law does not give power to review the order already passed. Moreover, the AO cannot exercise the route of 263 when he has specific power of 154 or 147 in the present case. The ld. AR also submitted that when two views are possible the view that is favourable to the assessee be taken considering the Apex Court decision in the Vegetable Products and based on the decision relied upon the view which is favorable be taken. 11. We have gone through the rival submission placed on record, contentions raised before us during the hearing and the decisions relied upon by both the parties. As it is evident from the forwarding letter of the assessing officer, he has in detailed mentioned the review on the assessment records and after that he has written as und....
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....losures was also submitted (Please See PB No. 20-21 for reply to summon) : AO further asked for following additional details during the discussions for submission on 23/03/2017: 1. Day to day cash summary from 1.4.2015 to 21.3.2016for comparison of cash summary of current year 2. Sale Register from 1.4.2016 to 31.12.2.16 3. Cash Book from 1.10.2016 to 31.12.2016 4. Extract of audited Balance Sheet as on 31.03.2016 for pening balance Rs. 4513263.39 The said details were also submitted on 23/03/2017. 1.2 Indepth inquiry was conducted by the AO also during the scrutiny proceedings u/s 143(3) as revealed from the notices issued u/s 142(2) from time to time: First Notice u/s 142(1) No: ITBA/AST/F/142(1)/2018-19/1014983216(1) Dtd05/02/2019 (Please See PB No. 22-23) 1) Please furnish a brief note regarding business/income earning activities. 2) Please furnish copy of Audit Report u/s 44AB of the IT Act, 1961 along with its enclosures for the relevant period. 3) Please furnish computation of ....
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....ccounts of FY 2015-16 and 2016-17 alongwith complete bills/ vouchers(as mentioned in his assessment order also).If there was any doubt for the opening balance as on 01/4/2016, then the Assessment Year 2016-17 should had been also been reopened/reviewed and there can not be any point of investigating AY 2017-18 for verifying the Cash Balance as on 01/04/2016. Further the demonetisation was declared on 08/11/2016, while the ITR and audit report for AY 2016-17 were already filed on 13/10/2016, which rules out the possibility of manipulation, if any, in opening balance. ii) Average Cash balance was higher than earlier years Yes,AO thoroughly examined the cash book and receipts/payment entries of earlier year and assessment year i.e. 2015-16 and 2016-17 and tallied the cash deposited during the assessment year. iii) New loans were taken while cash was available on the date of loan Yes, examined. Taking or repaying business loans is a matter of prudence of businessmen. All loan transactions have taken place thru bank and duly signed confirmations of lendersalongwith address, PAN etc. were submitted to AO. TDS was deducted on Interest payment. iv) On 08/11/20....
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....es, influenced by the national and international factors. viii) Assessee had shown receipt of 10 New loans of Rs.21.99 Lacs during the year. Out of 10 Loans, 8 loans have not claimed interest. AO has examined the genuineness of the loans. Confirmations from all lenders were submitted. Most of the loans were from relatives and friends. ix) GP rate was 1.40 % as against the 1.63% in preceding year. Yes, examined. GP /NP rates of AY 2015-16, 2016-17 and 2017-18 were examined by the AO x) Drawings of the assessee were only Rs. 268897/- AO had examined the Books of accounts including capital account, showing the drawings . 1.4 Assessee submitted a detailed reply on 28/02/2022 (Please See PB No. 33-41). However, the Ld. PCIT had mentioned in her order on page No. 4 that : "....in view of the above discrepancies, the A. O. failed to examine properly the cash deposited during the demonetisation period and thus, the order passed by the AO appeared to be erroneous and prejudicial to the interest of the revenue" Ld. PCIT reiterates in the para (vii) on the page No. 6 of her order: "(vii) In view of the ....
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....the business. Moreover, there are no guidelines in any business regarding levels of cash and bank balance, loans, inventory, Debtors/Creditors etc. to be maintained by such business. It is to be worked out individually and it keeps on changing as per the business requirement. 1.7 Ld. PCIT had relied upon following case laws to support the invocation of Section 263 (as mentioned on page No. 7 of the order dated 26/03/2022) Citation of the Case Factual Matrix and whether applicable upon the facts of the appellant 1 Gee Vee Enterprises 99 ITR 375(Delhi HC) 1975 Some of directors and shareholders of assessee-company formed partnership firm - ITO granted registration to said firm and made very first assessment on that basis apparently without ascertaining truth of facts on which registration was granted and returns were made - Subsequently, Commissioner acting under section 263 cancelled assessment and directed ITO to make fresh assessment - Petitioner had not filed any appeal against such order of Commissioner nor it had given any explanation as to why he did not file appeal against order under section 263 nor any exceptional circumstances were shown to persuad....
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....ly covered by the judgment of this Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 as also by the judgment of the Calcutta High Court in the case of Russell Properties (P.) Ltd. v. A. Chowdhury, Addl. CIT [1977] 109 ITR 229" 1.8.3 Greenworld Corporation - [2009] 181 Taxman 111 , 314 ITR 81 (SC) Held at para No. 29: "The scope of provisions of section 263 of the Act is no longer res integra. The power to exercise of suo motu of revision in terms of section 263(1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein, viz., (1) the order is erroneous; (2) by virtue of the order being erroneous prejudice has been caused to the interest of the revenue, exist." 1.8.4 PCIT v. V. Dhana Reddy & Co. -[2018] 100 taxmann.com 58(SC) SLP of the revenue dismissed against thejudgement in the case of by [2018] 100 taxmann.com 357 (Andhra Pradesh & Telangana) PCIT-I v. V. Dhanna Reddy & Co. Hon'ble High Court held at para 5 of the judgement: " In our opinion, as the AO had opined that renting of the godowns is integral inthe business of t....
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....r had carried out detailed inquiries. The Commissioner was incorrect in holding that no inquiries were carried out. The revisional powers, therefore, could not have been exercised" 1.8.7 PCIT v. SumatichandTolamalGouti-[2019]111taxmann.com 287 (SC)SLP filed against decision of High Court was dismissed by Hon'ble Supreme Court in the case of PCITv. Sumatichand Tolamal [2019] 111 taxmann.com 286 (Bombay) Hon'ble High Court held at para 2 of the judgement: "The Commissioner took the order of the assessment in revision under Section 263 of the Income Tax Act, 1961 ("the Act" for short) on the ground that the Assessing Officer had not carried out any enquiries as to the nature of expenditure being capital or not. The assessee carried the matter in Appeal before the Tribunal. The Tribunal, by the impugned judgment allowed the assessee's Appeal holding that the Assessing Officer had carried out detailed enquiries and taken a view which was a plausible view The Tribunal, therefore held that the Commissioner erroneously exercised the revision powers" 1.8.8 PCIT v. Shreeji Prints (P.) Ltd. (2021) 282 Taxman 464 (SC) SLP filed again....
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....to the interest of the Revenue has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of the order of the AO cannot be treated as prejudicial to the interest of the Revenue. It is pertinent to mention that if the AO has adopted one of the two or more courses permissible in law and it has resulted in loss of revenue, or where two views are possible and AO has taken one view with which the Pr. CIT does not agree, it cannot be treated as an erroneous order and it is prejudicial to the interest of the Revenue, unless the view taken by the AO is totally unsustainable in law. In this process even the AO has no power to revie his own order taking the route of proceeding under section 263 of the Act. In this regard, we draw strength from the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1: (2000) 243 ITR 83 (SC). We also draw strength from the decision of the Hon'ble Supreme Court in the case of CIT vs. Max India Ltd. (2007) 213 CTR (SC) 266: (2007) 295 ITR 282 (SC) wherein it was held that: "The phrase 'prejudicial to the interests of the Revenue'....
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....fer the matter to PCIT where he establishes that there is an error apparent on record where in this case merely the AO has agreed to review the order in his proposal which is not permitted under the law and therefore, the facts relied upon by the ld. DR are factually different and with the fact of this case and thus, based on our detailed observations and relying on the decision of co ordinate bench of Pune ITAT in the case of Alfa Laval Lund AB in ITA no. 1287/PUN/2017 where in the bench in para 5 observed as under:- "5. It is trite that a power which vests exclusively in one authority, can‟t be invoked or cause to be invoked by another, either directly or indirectly. Section 263 of the Act confers power on the CIT to revise an assessment order, subject to certain conditions. Instantly, we are confronted with a situation in which the revision was initiated on the basis of the AO sending a proposal to the CIT and not on the CIT suo motu calling for and examining the record of the assessment proceedings and thereafter considering the assessment order erroneous and prejudicial to the interests of the revenue. The AO recommending a revision to the CIT has no statutory s....