TaxTMI 
TaxTMI 
2024 (9) TMI 782
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.... in violation of principles of natural justice and the provisions of the Act and is devoid of merits and are contrary to facts on record and applicable law and has been completed without adequate inquiries and as such is liable to be quashed. 1.2. The Ld. CIT has finalized the Impugned Order with improper conclusions as a result of misapplying the provisions of the Act and by adopting faulty assessment procedure to finalize the adjustment, without considering the information, arguments and evidence provided by the Appellant. 2. Grounds on validity of revisionary proceedings under section 263 of the Act 2.1. The impugned order passed by the Ld. CIT is without jurisdiction as the twin conditions prescribed under section 263 of the Act, ie. the order of the Ld. AO shall be 'erroneous' and 'prejudicial to the interests of the revenue', are not satisfied. 2.2. The Id. CIT erred in concluding that the reassessment order passed under section 143(3) read with section 147 for the impugned AY is erroneous and prejudicial to the interests of the revenue, without appreciating the material on record and submissions made by the Appellant. ....
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....preview of the amendment made in Finance Act 2019. The grounds of appeal raised by the Appellant herein are without prejudice to each other. The Appellant craves leave to add to and/or to alter, amend, rescind, modify the grounds herein above or produce further documents before or at the time of hearing of this Appeal''. 3. Brief facts of the case are as under:- ''Keller (M) SDN BHD ("Keller Malaysia" or "the Company" or "the Appellant"), is company incorporated under the laws of Malaysia and had established a branch office in India on September 21, 2017, for the purpose of carrying out a construction project awarded by Rail Vikas Nigam Ltd. Owing to the project, the Appellant was cast with a liability under section 139(1) of the Act to furnish its return of income for the subject AY. However, the Appellant was under a bona fide belief that it did not have any obligation to furnish its return of income in India since appropriate withholding of taxes had been deducted. On being aware that the bona fide belief was incorrect in law and that the Appellant had an obligation to furnish a return of income under the Act, the time limit for furnishing ....
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....nt 3 03-Aug 23 Appellant's response to above CBDT notice In the appellant's response it was clarified that 148 return be considered as the return for the purpose of condonation of delay II Reassessment proceedings under Section 148 of the Act 4 31-Mar 23 Notice under section 148 of the Act 5 28-Apr 23 Income tax return filed in response to notice under section 148 6 09- June 22 to 18 Oct 22 (a) Notice under section 142(1) of the Act dated 09-Jun-22 and 07-Oct-22 were issued against which Appellant filed response dated 20-Jun-22 and 18-Oct-22 respectively b) Notice under section 143(2) dated 03- Oct-22 against which assessee had filed response dated 07-Oct-22. Query was issued on subcontracting expense 7 18- Mar 23 Show cause notice ("SCN) issued by AO 8 21 Mar 23 Response to SCN 9 10 Mar23 Notice under section 133(6) of the Act issued on Keller Ground Engineering India Private Limited ("Keller India") Query was raised as to whether Keller India offered the unbilled revenue to tax 10 20 Mar23 Response filed by Keller India against notice under section 133(6) of the A....
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....r.w.s 147 of the IT Act, 1961 is completed as under: Returned Income: Rs. 44,86,960/- Assessed Income: Rs. 44,86,960/- Income Tax computation sheet and demand notice enclosed''. The ld. AR further referred the paper book consisting of pages (1-375). The ld. AR specifically pointed out page 232 and page 256 at point 3 which speaks of other expenses (sub contract expenses). The ld. AR contended that in reassessment proceeding, the assessee pursuant to notice u/s. 133 (6) of the Act has filed reply dated 20.03.2023 and explained the queries raised by the ld. AO. The ld. AR taken us to the paper book and referred documents relied upon in connection with reassessment proceedings which are as under:- Sl.no Particulars Page No. I. Documents relied upon in connection with delay condonation proceedings before the Central Board of Direct Taxes ("CBDT") 1 Application dated January 18, 2021, for condonation of delay filed before the CBDT 1 1.1. Form 26AS of the Appellant for AY 2018-19 5 1.2. Form 26AS of the Appellant for AY 2019-20 9 1.3. Tax Audit Report in Form 3CA and 3CD of....
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....section 133(6) dated March 10, 2023, issued on Keller Ground Engineering India Private Limited ("Keller India") 258 9.2. Extract of the ledger of the Appellant maintained by Keller India in its books for FY 2017- 18 260 9.3. ROI of Keller India for AY 2018-19 along with statement of computation of Total Income 262 IV. Documents relied upon in connection with rectification proceedings 10 Submission dated August 02, 2023, filed with the Ld. AO in response to the notice issued under section 154 of the Act 340 10.1. Notice under section 154 of the Act dated July 26, 2023, issued by the Ld. AO 345 10.2. Circular No. 9 of 2015 issued by the CBDT 347 11 Order under section 154 of the Act dated August 08, 2023 issued by the Ld. AO, received vide mail dated August 24, 2023 349 V. Documents relied upon in connection with proceedings under section 263 of the Act 12 Submission dated August 31, 2023, filed with the Ld. Commissioner of Income Tax ("Ld. CIT"), in response to the SCN dated August 18, 2023 361 12.1. SCN under Section 263 of the Act....
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....9 Karnataka State Cooperative Apex Bank Ltd. HC-Karnataka 130 taxmann.com 114 149 20 C. Kishan Rao & Co. ITAT Hyderabad 3 ITD 474 155 The ld.Counsel further submitted that the issue which is sought to be revised is already investigated and enquired by the ld.AO in earlier reassessment proceedings. He furthermore, argued that on same material ld. CIT has taken a different view than AO. In fact, the ld.AO on same material available before him already duly inquired and judicially had taken a cogent view in reassessment proceedings. For refund issue, ld. AR referred two cases as Cargo Service India (P.) Ltd Vs DCIT [(2021) 132 taxmann.com 237 (Mumbai-Trib)] & Trinity Charitable Trust Vs ITO [(2014) 51 taxmann.com 44 (Cochin-Trib.)]. 7. Per contra, the ld. CIT- DR relied upon the order of CIT and contended that in reassessment proceedings enquiry was not done properly. He further contended that prejudice is done while granting refund to assessee. 8. We have heard the rival submissions and gone through the record, paper books and impugned order. We may refer recent judgment of the Hon'ble Delhi High Court dated 01.03.2024 passed in ITA No.1428/2018 in ....
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....issioner or Commissioner, '(a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under Section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.] ***' 19. A bare reading of sub-Section (1) of Section 263 of the Act makes it abundantly clear that the said provision lays down a two-pronged test to exercise the revisional authority i.e., firstly, the assessment order must be erroneous and secondly, it must be prejudicial to the interests of the Revenue. Further, Explanation 2 to Section 263 of the Act delineates certain conditions and circumstances when the order passed by the AO can be said to be erroneous and prejudicial to the Revenue. 20. Clause (a) of Explanation 2 to Section 263 of the Act further stipulates that if an order is passed without making an enquiry or verificati....
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.... However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before 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 a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. In Gabriel India Ltd. (1993) 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113) ** 23. A similar view was taken by this Court in the case of CIT v. Anil Kumar Sharma [2010 SCC OnLine Del 838], wherein, it was held that once it is in....
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....s of tax as prejudicial to the interests of the Revenue. 9. Mr. Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Co.v.CIT[(1987) 163 ITR 129(Mad)] interpreting 'prejudicial to the interests of the Revenue'. The High Court held: ' ''In this context, (it must) be regarded as involving a conception of acts or orders which are subversive of the administration of revenue. There must be some grievous error in the order passed by the Income Tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration''. In our view this interpretation is too narrow to merit acceptance. 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. 10. The phrase ''prejudicial to the interests of the Revenue'' has to be read in conjunction with an erroneou....
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....ercised the power in accordance with law. Rather, in our considered opinion, the facts of the case do not indicate that the twin conditions contained in Section 263 of the Act are fulfilled in its letter and spirit. 28. Notably, the ITAT, while making a categorical finding that the CIT had failed to point out any definite or specific error in the assessment order, has satisfactorily explained both the claims in question in Paragraph 8.2 of its order, which reads as under:- ''8.2 In the Impugned Order, the Ld. Commissioner of Income Tax-IV, Delhi held that the AO had not examined the aforesaid two issues properly and, therefore, set aside the issues for further inquiries to be conducted by the AO. As regards the first issue is concerned, we note that out of total provision of Rs. 1114.68 lacs, a sum of Rs. 7,60,76,105/- was suo moto added back in the computation of income and a further sum of Rs. 73,46,160- was disallowed by the AO in the original assessment order dated 30.3.2005. Therefore, out of Rs. 1114.68 lacs, Rs. 834.22 lacs already stood disallowed in the original assessment order. The balance amount represented actual write off which was palpably clear fro....
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.... the AO in reassessment proceedings; (ii) The ld. CIT cannot sit in appeal on the reassessment order 23.03.2023 reversing findings of the AO and impose his own view of decision making process on same material; (iii) There is legal presumption as per Section 114(f) of the Evidence Act that AO passed the reassessment order properly to the best of his ability. Section 114(f) of the evidence Act says: 'The Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case'. (iv) The issue of sub-contract expenses admittedly was duly deliberated upon by the AO in Section 147 proceedings after the questionnaire dated 18.03.2023 (Pg 238 of PB) ; The ld.CIT wrong in saying that AO has not done proper enquiry. As discussed supra and as seen from the paper books filed it is clearly discernible that AO has done properly each and every inquiry pertaining to sub-contract etc.; (v) The issue of refund was consequential to reassessment order dated 23.03.2023 and there is no specific order....