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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI INTURI RAMA RAO & SHRI PARTHA SARATHI CHAUDHURY
आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM:
This appeal preferred by the assessee emanates from the revisionary jurisdiction order of the Ld. Pr. Commissioner of Income Tax-2, Aurangabad dated 22.03.2019 passed u/s.263 of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) for the assessment year 2010-11 as per the revise and concise grounds of appeal on record.
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Though the assessee has raised multiple grounds of appeal, the crux of the grievance of the assessee pertains to the assumption of revisionary jurisdiction u/s.263 of the Act by the Ld. Pr. Commissioner of Income Tax.
It is evident from record that the order passed u/s.263 of the Act by the Ld. Pr. Commissioner of Income Tax dated 22.03.2019 was directed against the assessment order passed u/s.143(3) r.w.s.147 of the Act dated 29.12.2016. The Pr. Commissioner of Income Tax has found the assessment order to be erroneous so far as it is prejudicial to the interest of the revenue on four grounds:
(A) Contravention of the provisions of Section 297 and 314 (1B) of the Company Act, 1956 :
On verification of assessment records, it was found out by the Pr. Commissioner of Income Tax that the assessee had paid an amount of Rs.2,00,19,537/- towards the salary of directors without taking the prior approval of Central Government and contravened the provision of Section 297 and 314(1B) of the Company Act, 1956.
The Pr. Commissioner of Income Tax was of the opinion that in the instant case remuneration to directors was allowed by the Assessing Officer without verification of their eligibility for remuneration. The Assessing Officer did not call for any explanation and details from the assessee during the assessment proceedings.
(B) Reasonableness of Director‟s remuneration paid within the meaning of Section 40A(2)(b) of the Act.
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Without prejudice to the issue No.1, as per provisions of Section 40A(2) of the Act where the assessee incurred any expenditure in respect of which payments has been made any person referred to in clause (b) of this sub section and the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which payment is made so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as deduction.
The Pr. Commissioner of Income Tax had opined that in this issue also, the Assessing Officer has not examined while conducting market enquiries etc.
(C) Sale of immovable property involving transaction amount of Rs.55,85,000/- by the assessee :
It was noticed from the AIR transactions reported in the Individual Transaction Statement that the assessee company has sold immovable property involving transaction amount of Rs.55,85,000/- on 10.02.2010. However, neither the details of this transaction nor of the income from capital gains are available on records.
This issue has been communicated to the assessee vide notice u/s.263 of the Act dated 05.03.2019 and in reply, the assessee mentioned that there were no such transactions made by the company during the assessment year 2020-11. This issue was set aside to the file of the Assessing Officer with directions to verify the veracity of this AIR transaction as reported in ITS by conducting necessary inquiry.
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(D) Undisclosed TDS :
The Pr. Commissioner of Income Tax observed that total tax deducted at source u/s.194C of the Act was at Rs.32,46,462/- on the total receipts of Rs.2,63,03,971/-. However, while going through the ITR details, it was seen that total disclosed TDS was at Rs.32,22,480/- and undisclosed TDS was at Rs.23,982/-. Therefore, income of Rs.23,98,200/- remained to be disclosed in the ITR for the said assessment year.
This issue has been communicated to the assessee vide notice u/s.263 of the Act dated 05.03.2019 and in reply, the assessee mentioned that there TDS as per 26AS was Rs.32,45,462/- and as per return of income filed was Rs.32,22,480/-, hence the difference was of Rs.22,982/- for which assessee has submitted party wise details for this amount of difference. It has also been mentioned that income from party on which TDS has not been claimed was included in total gross receipts of Rs.6,85,87,267/-. The assessee is eligible to get refund of such TDS as it is not claimed in its return of income, however, receipts in respect of above TDS has already been offered for taxation by the company. This issue was set aside to the file of the Assessing Officer with directions to verify the claim of the assessee that income from party on which TDS has not been claimed was included in total gross receipts of Rs.6,85,87,267/-.
3.1 Therefore, the Ld. Pr. Commissioner of Income Tax observed failure on the part of the Assessing Officer to examine above issues rendering assessment order passed u/s.143(3) r.w.s.147 of the Act dated 29.12.2016 as erroneous so far as it is prejudicial to the interest of the revenue.
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We have perused the relevant documents on records and heard the rival contentions. We have also analyzed the facts and circumstances in this case and judicial pronouncements placed before us on record. In this case, the revisionary jurisdiction order passed u/s.263 of the Act by the Ld. Pr. Commissioner of Income Tax dated 22.03.2019 was against the order of assessment passed u/s.143(3) r.w.s.147 of the Act dated 29.12.2016.
The Ld. Counsel for the assessee brought to our notice at Page 106 of the factual paper book, the reasons recorded u/s.147 of the Act for issue of notice u/s.148 of the Act in respect of assessment year 2010-11 and therein, the grounds for re-opening of assessment was that the assessee had paid an amount of Rs.2,00,19,537/- towards the salary of directors without taking the prior approval of the Central Government and contravened the provisions of Section 297 and 314(1B) of the Company Act, 1956 and hence, the amount of Rs.2,00,19,537/- was incorrectly allowed in the assessment order and that the said amount has escaped assessment within the meaning of Explanation 2(c) to Section 147 of the Act.
5.1 Thereafter, the assessee has furnished reply to the Assessing Officer running from Pages 119 onwards of the factual paper book wherein the assessee has categorically stated that original assessment was completed u/s.143(3) of the Act on 21.03.2013 wherein the assessed income was of Rs.(-) 6,25,277/-. Thereafter, notice u/s.147/148 of the Act was issued by the Department since it was noticed by the Assessing Officer that amount of Rs.2,00,19,537/- towards salary of directors have been made by the assessee without complying with the provisions of Section 297 and 314(1B) of the Company Act, 1956 and hence, the said amount was incorrectly allowed in
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the assessment order and the same being escaping the assessment within the meaning of Explanation 2(c) to Section 147 of the Act. It was further clarified by the assessee through detailed submissions that in their case, Section 297 and 314(1B) of the Company Act, 1956 is not applicable with respect to the payments of remuneration to directors. These submissions were filed before the Assessing Officer who had examined and verified the same and had passed assessment order u/s.143(3) r.w.s.147 of the Act dated 29.12.2016 wherein he has accepted the original assessment passed u/s.143(3) of the Act dated 21.03.2013 wherein total loss was at (-) Rs.6,25,277/-. That thereafter, against this assessment order once again on the same issue, the Ld. Pr. Commissioner of Income Tax vide order dated 22.03.2019 had assumed revisionary jurisdiction u/s.263 of the Act alleging the said assessment order dated 29.12.2016 to be erroneous and prejudicial to the interest of the revenue.
The Ld. DR conceded to the fact that in the case of the assessee while paying remuneration to the directors, the provisions of Section 297 and 314 (1B) of the Company Act, 1956 was not applicable. It is also evident from record that the Assessing Officer while passing assessment order u/s.143(3) r.w.s 147 of the Act had examined all the facts on records and applied his mind and thereafter, has accepted the original assessment passed u/s.143(3) of the Act dated 21.03.2013.
Now the law is quite settled that where the Assessing Officer had applied due application of mind and inquiry, the Commissioner of Income Tax is not justified in assuming jurisdiction u/s.263 of the Act as held by the Hon‟ble Bombay High Court in the case of CIT Vs. Gabriel India Ltd. (203
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ITR 108). It is equally settled that the provisions of section 263 are not recourse for roving enquiries. It is clearly demonstrated before us that there was due enquiry by the Assessing Officer and application of mind.
In the case of CIT Vs. Reliance Communication Ltd. (296 ITR 217), the Hon‟ble Bombay High Court has held that when the assessee had filed entire details and submissions from time to time before the Assessing Officer who satisfied himself with the assessee‟s reply furnished in support of its stand, in such scenario, the Commissioner of Income Tax was not justified in invoking the provisions of Section 263 of the Act.
In the present facts and situation of the instant case, when re-opening of the assessment proceedings started, it was on the basis that some income had escaped assessment on the amount of remuneration to the directors since the assessee did not comply with Section 297 and 314(1B) of the Company Act, 1956. The assessee gave detailed reply to the Assessing Officer satisfying him that these provisions are not applicable in his case. The Assessing Officer therefore, stopped the re-opening proceedings and accepted the original assessment passed u/s.143(3) of the Act with the total loss shown of (-) Rs.6,25,277/- dated 29.12.2016 vide order u/s.143(3) r.w.s 147 of the Act. Therefore, it cannot be said that the Assessing Officer has not applied his mind and has not made any enquiry.
Now the next question arises, whether the Ld. Pr. Commissioner of Income Tax in exercising of his power vested u/s.263 of the Act can revise that reassessment order with the intention of bringing into tax some other
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items which do not form part of the reasons recorded at the time of issuing notice u/s.148 of the Act.
In answer to this, we find the Hon‟ble Jurisdictional High Court in the case of CIT Vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 ( Bom.) and the Hon‟ble Rajasthan High Court in the case of CIT Vs. Shri Ram Singh (2008) 306 ITR 343 (Raj.) has held that when no addition was made regarding the item in respect of which reasons were recorded for reopening of the assessment, the Commissioner could not exercise his jurisdiction u/s.263 of the Act in order to bring to tax other items of additions. The Hon‟ble Jurisdictional High Court vide Para 14 of the said decision has held as follows:
“14. For exercise of power under Section 263 of the Act, it is mandatory that the order passed by the Assessing Officer should be erroneous and prejudicial to the interests of the Revenue. In the present case, the Assessing Officer did not make any addition for the reasons recorded at the time of issue of notice under Section 148 of the act. This position is not disputed and disturbed by the Commissioner of Income- tax in his order under Section 263 of the Act. Sequitur is that the Assessing Officer could not have made an addition on account of share application money in the assessment proceedings under Section 147/148. Accordingly, the assessment order is not erroneous. Thus, the Commissioner of Income-tax could not have exercised jurisdiction under Section 263 of the Act”.
Reverting to the facts of the present case, the proceedings undertaken u/s.147/148 of the Act was prima facie on the issue of remuneration of Rs.2,00,19,537/- paid to the directors of the assessee. The Pr. Commissioner of Income Tax in his order surpassed his jurisdiction asking the Assessing Officer to examine the issue of sale of immovable property by the assessee and issue of undisclosed TDS to be verified by the Assessing Officer which were not at all the items forming part of the reasons recorded at the time of issuance of notice u/s.148 of the Act.
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Taking totality of facts and circumstances and the legal position into consideration, we are of the considered view that the Pr. Commissioner of Income Tax was not correct in law while resorting to passing order u/s.263 of the Act and in view thereof, we quash the order passed u/s.263 of the Act by the Ld. Pr. Commissioner of Income Tax.
In the result, appeal of the assessee is allowed. 13.
Order pronounced on 11th day of January, 2021.
Sd/- Sd/- INTURI RAMA RAO PARTHA SARATHI CHAUDHURY ACCOUNTANT MEMBER JUDICIAL MEMBER ऩुणे / Pune; ददनाांक / Dated : 11th January, 2021. SB आदेश की प्रनिलऱपप अग्रेपषि / Copy of the Order forwarded to : अऩीऱाथी / The Appellant. 1. प्रत्यथी / The Respondent. 2. 3. The Pr. CIT-2, Aurangabad. , आयकर अऩीऱीय अधधकरण, “ए” बेंच, 4. ववभागीय प्रतततनधध ऩुणे / DR, ITAT, “A” Bench, Pune. गार्ड फ़ाइऱ / Guard File. 5.
आदेशानुसार / BY ORDER, // True Copy // तनजी सधचव / Private Secretary आयकर अऩीऱीय अधधकरण, ऩुणे / ITAT, Pune.
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Date 1 Draft dictated on 11.01.2021 Sr.PS/PS 2 Draft placed before author 11.01.2021 Sr.PS/PS 3 Draft proposed and placed JM/AM before the second Member 4 Draft discussed/approved by AM/JM second Member 5 Approved draft comes to the Sr.PS/PS Sr. PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order