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Income Tax Appellate Tribunal, CUTTACK BENCH, CUTTACK
Before: SHRI C.M. GARG, JM & SHRI MANISH BORAD,
Per MANISH BORAD, AM: The captioned appeal filed at the instance of assessee is directed against the order passed U/S 263 of the Act by the Ld. Commissioner of Income Tax, Cuttack (in short „the CIT‟), dated 30.03.2018 for the assessment year 2013-2014. 2. Brief facts of the case as culled out from the records are that the assessee is an individual engaged in the business of sale & repairing of shoes/chapel. Income of Rs.2,04,400/- declared in return of income filed manually on 12.05.2014 for A.Y.2013-14. Case selected for scrutiny through CASS followed by notices u/s 142(1) & 143(2) of the Act. During the course of assessment proceeding Ld. AO confronted the 2 assessee about the deposits of Rs.1,22,48,373/- made in various bank accounts held in his name. Gross receipts shown from the business were Rs.9,39,468/-. Assessee submitted that the alleged deposit are unaccounted sales. Considering the same Ld. AO computed the income @ 8% of the undisclosed receipts of Rs.1,10,29,608/- thereby, making an addition of Rs.8,82,369/-. Addition for undisclosed bank interest of Rs.53,708/- was also made. Income assessed at Rs.10,90,040/-. Additions made by the Assessing Officer were challenged by the assessee before Ld. CIT(A). In between the filing of appeal by the assessee before the ld. CIT(A) and the same being heard by order dated 10.01.2019, Ld. Pr. CIT invoked the provisions of section 263 of the Act and on examining the assessment records issued following show cause notice to the assessee: To Sri Manoj Kumar Das S/o: Premchand Das, Ward No.12, Ichinda Rairangpur, Mayurbhanj-757043 Sir, Sub- Show cause Notice U/s 263 of the Income Tax Act, 1961 for the Assessment year 2013-14 – Assessment order dated. 10.02.2016 – U/s 143(3) of the I.T. Act- order erroneous and prejudicial to the interest of revenue- Matter regarding. Please refer to the above. This is to inform you that Principal Commissioner of Income tax, Cuttack in exercise of statutory power vested on him u/s. 263(1) of the I.T Act, 1961 has called for your assessment records for the A/Y: 2013-14 and he has examined the records of 3 assessment including the materials available in the return of income filed for the A/Y: 2013-14 and the documents produced before the A.O. during the course of assessment proceedings. On such scrutiny, the finding of the A.O as recorded in the assessment order framed u/s 143(3) of the I.T Act, 1961 dated.10.02.2016 is considered to be erroneous in so far as it is prejudicial to the interest of revenue for the following reasons: It is noticed that the you have deposited total of Rs. 1,22,48,373/- in different bank accounts during the F.Y. 2012-13, but you have shown gross sales/receipt of Rs. 9,39,468/- only in your Return of income. Further during i.e.{1,22,48,373- (939468+279298)} remained unexplained and unverified. Since you could not explain the source of deposit of Rs.. 1,10,29,608/-, the entire amount of Rs. 1,10,29,608/- ought to have been added to the total income u/s 69 of the I.T Act as unexplained investment. However the AO estimated profit @8% amounting to Rs. 8,32,369/- on such deposit of Rs. 1,10,29,608/- treating the same as receipts of the business without any proper enquiry. So the balance amount of Rs. 1,01,47,239/- (Rs. 1,10,29,608 – Rs.8,82,369)is prime-facie required to be added to the total income. Thus, the manner in which the Assessing Officer completed the assessment without proper enquiry or verification has rendered his assessment order both erroneous and prejudicial to the interest of revenue. In view of the above circumstances you are directed to show- cause as to why the assessment order framed u/s 143(3) of the I.T Act, 1961 on dated. 10.02.2016 for the A/Y: 2013-14 shall not to be cancelled/modified in the light of the above discussion. Reply to the above show- cause along with audited books of account for the financial year 2012-13 & necessary evidence in support of the contentions if any, either in person or through your Authorized Representative is required to be produced by you before the undersigned on 08.02.2018 at 12.00 Noon Your faithfully, (Debendra Narayan Kar) Principal Commissioner of Income Tax, Cuttak Charge,Cuttack
In response to the above show cause notice following submission were made on behalf of the assessee:-
In response to the show cause notice , Shri Bivash Panda, Advocate, and Authorised representative ( in short the A.R) of the assessee appeared. He has furnished written submission and has made oral submission as well. The gist of his submission is as under:
4 (1) The assessee had disclosed the gross sales/receipts of Rs. 9,39,468/- the Ld. Assessing Officer during the scrutiny assessment proceedings found that there were bank deposits Rs. 1,22,48,373/- in different Bank Account (including the joint account) and the assessee had faced the show cause notice issued on dated 04.01.2016 by the Assessing Officer on such differential amount of Rs. 1,13,08,906/-. The assessee submitted a reconciliation statement and furnished the explanation on the deposits of Rs. 2,79,298/- in reply to the said show cause but the Assessing Officer, basing upon the submission filed, came to hold that the gross undisclosed sale was to be Rs. 1,10,29,608/- so he estimated net profit @ 8% on the gross sales at Rs.8,82,369/- and added to the income of the assessee. (2) The Assessing Officer had applied his mind to the quantum of deposits in the banks and gone through the facts of the case before completion of assessment and estimated the taxable income.
Therefore to invoke the provisions of section 263 of the Act is not justified. When the Ld. Assessing Officer had taken one of the two views permissible under the law which results in a loss of revenue, it cannot be treated as erroneous order or prejudicial to the interest of revenue, unless the view taken by the Assessing Officer is completely unsustainable and not acceptable under law. [CIT v. Max India Limited (2007) 295 ITR 282 (SC) and Malabar Industrial Co. Ltd. v. C0IT (2000) 243 ITR 83 (SC)]
However, Ld. Pr. CIT was not satisfied with the submissions made by the assessee and proceeded to hold the assessment order dated 10.02.2016 as erroneous and prejudicial to the interest of revenue and gave direction to make modification in the assessment order to the following extent: i.The AO is directed to add the amount of unexplained investment/deposit of Rs.1,10,29,608/- to the assessee’s total income u/s 69 of I.T Act, 1961 and exclude estimated income of Rs. 8,82,369/- brought to tax earlier. ii. The AO is also directed to calculate tax liability of the assessee as per she provision of section u/s. 115BBE of the I.T. Act.
Aggrieved assessee is now in appeal before this Tribunal raising following grounds of appeal:
5 A. For that, the suo motu revision order of Id. Principal err passed vide dtd.30.03.2018 is absurd, wrong, unjust, illegal and improper in the facts and circumstances of the case and illegally reviewed the order of Assessment by invoking powers u/s. 263 of the Act despite the fact that the conditions stipulated .for invoking such extra-ordinary juri iction had not satisfied or attracted in the facts of the case. B. For that, the Id. Principal err had grossly erred in the facts and in the law to hold that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of revenue without appreciating that the scrutiny order of Assessment passed after proper enquiry made by the Ld. Assessing Officer, thus the order is neither erroneous nor prejudicial to the interest of revenue. C. For that, in the facts and in the law, the Id. Principal err has erred in law in not appreciating the fact that the Id. AO had passed the assessment order u/s. 143(3) of the Act, after verifying, examining and conducting due enquiry also in analyzing the facts of the case and after issue of show-cause notice and the written submissions filed by the appellant along with. documentary evidences adequately furnished in support thereof. Thus, the action of the Id. Principal CIT in considering the assessment order as erroneous- and prejudicial to the interest of the revenue is nothing but a change in opinion and beyond the facts of the case and over the settled principles of law held on the same set of facts leading to unlawful and erratic revision of a lawfully concluded the scrutiny Assessment. D. For that, the Id. Principal err has failed to point out any error in the order of the Assessing Officer in assessing the undisclosed sale, taking the whole deposits including the joint account which is sine qua-non for initiation of proceedings u/s 263 of the Act, thus, the order passed by a quasi judicial authority without the contents of the record and done nothing to the inquiry and investigations which cannot be revised in mechanical manner. Hence the unreasoned and erratic order passed should be quashed and vacated being lack of judicial sanctity and therefore the Ld. Principal CIT had failed to exercise the whole materials and enquiry made in the assessment stage.
6 E. For that the Id. AO had analyzed the entire evidence on records and the assessed income was made in accordance with law which cannot be held as erroneous and prejudicial to the interest of revenue unless the view taken by the Ld. AO held as unsustainable in law by the judicial forums. Thus passing impugned order directing the Ld. AO to add the deposits of Rs.1,10,29,608/- U/s.69 of the IT Act is wrong in toto. Hence the order passed should be deleted and quashed. F. For that the forums should have appreciated that in every loss of revenue it cannot attract the proceeding of Section 263 of the LT. Act and one of the approved and accepted methods under the law having been adopted by the Ld. A.O. left no room to invoke Section 263 of the Act by the Ld. Principal CIT who proceeded beyond the facts and materials available in the records and statements furnished. Hence the order of the Ld. Principal CIT has to be quashed and vacated. The other grounds will be urged at the time of hearing.
Further the assessee vide letter dated 16/10/2020 has filed additional grounds of appeal, which is as follows :- G) For that the presumption and observation of the Ld. Pr. C.IT holding that the amount of Rs.1,10,29,608/- is an unexplained amount found to be added in the hands of the Appellant entirely is illegal and finding of the Ld. Pr. CIT is totally wrong and absurd in toto. H) For that the quantum of the said amount having further been reduced by Rs.2,00,615.95 and the net amount stood at Rs.1,08,28,992/- held by the Hon'ble Bench in the ITA NO.148/CTK/2019 keeping in view of the observation in the Forums below that the said amount to be mere the sale price, such sale receipts as undisclosed sale got deposited in the bank account of the appellant and, therefore the order of 263 of the IT Act is entirely wrong and absurd passed u/s.263 of the LT Act. I)For that the passing of order U/s.263 of the IT Act during the pendency of First Appeal before the Id. CIT(Appeals) is not legally maintainable and has to be quashed in toto And all other grounds submitted at the time of filing of appeal may please be adjudicated in its own merit.
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That the additional grounds urqed before the Hon'ble Bench •• very essential involving the points of law as well as juri iction of the dispute may please be adjudicated keeping in view of the decision of the Hon'ble Bench held in respect of this Appellant in ITA NO.148/CTK/2019 for the same Assessment Year. " PRAYER It is therefore prayed that the additional grounds urged here submitted before the Hon'ble Forum invoking ITAT rule 1963 may please be entertained and allowed to be adjudicated at the time of hearing.
Ld. counsel for the assessee submitted that the issue raised in show cause notice by Ld. Pr. CIT stands duly adjudicated by the ld. AO during the course of assessment proceedings and addition has also been made on the alleged unaccounted receipts in the bank account by applying net profit rate of 8%. It was further submitted by the ld. counsel for the assessee that the addition made by the ld. AO on the undisclosed receipts was subject matter of appeal before the Ld. CIT(A) and the same was pending to be decided. Ld. Pr. CIT erred in issuing show cause notice on the very same issue which was subject matter of appeal before the Ld. Pr. CIT. Further the assessee being dissatisfied with Ld. CIT(A) order dated 10.01.2019 preferred an appeal before the Tribunal but failed to succeed on the issue of estimation of net profit @ 8% and thus the finding arrived by the ld. AO was confirmed by 8 the Hon'ble Tribunal except for the change of turnover which was adopted by the Hon'ble Tribunal at Rs.1,08,28,992/- as against Rs.1,10,29,609/-. Reliance placed on the following decisions: i. Shri Manoj Kumar Das vs. ITO (ITANo.148/CTK/2019) DATED 25.07.2019 ii. CIT vs. Vam Resorts & Hotels P.Ltd. (2019) 418 ITR 723(All) iii. CIT vs. Max India ltd. (2007) 295 ITR 282(SC) iv. Rakshit Transport vs. CIT (ITANo.809/KOl/2012
Per contra Ld. DR vehemently argued supporting the order of Ld. Pr. CIT and relied on the following decisions: taxmann.com 25(Delhi) ii. J.K. Tyres & Industries Ltd. vs. CIT (2012) 19 taxmann.com 277 (KOl)
We have heard rival contentions and perused the records placed before us and carefully gone through the decisions referred and relied by both the sides. As far as the legal issue raised in ground no.I filed by the assessee in the additional grounds of appeal stating that the passing of order u/s 263 of the Act during the pendency of first appeal before the Ld. CIT(A) is not legally maintainable and has to be quashed in toto, we observe that explanation (C) to sub-section(1) of section 263 of the Act needs to be perused. “(C) Where any order referred to in his sub-section and passed by the assessing officer had been the subject
9 matter or any appeal on or before or after the 1st day of June, 1988. The powers of the Pr. Commission or commission 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.”
We also find that the decision relied by the ld. DR on this issue in the case of J.K. Typre & Industries Ltd. vs. CIT (2012) 19 taxmann.com 277(KOl), Coordinate bench had held that “Merely if an issue is pending consideration before Commissioenr (Appeals), commissioner’s juri iction under section 263 does not get curtailed qua assessment order”. Explanation (c) to section 263(1) of the Act is very specific in this regard as it shows that powers of Pr. CIT or CIT under this sub-section shall extend and shall be deemed always to have extended to such matter as had not been considered and decided in such appeal.
Examining the fact of the instant case in light of the above decision as well as Explanation (C) to 263(1) of the Act, we find that the assessment order u/s 143(3) of the Act was passed on 10.02.2016 against which the assessee preferred an appeal before ld. CIT(A) who passed the order on 10.01.2019. The date of impugned order u/s 263 of the Act is 30.03.2018. It means that when the order u/s 263 of the Act was passed the issue of estimation of profit on undisclosed
10 receipts was pending, in other words Ld. CIT(A) has not decided this issue. Therefore, ld. Pr. CIT was well within his juri iction to examine the issue in the instant appeal. The decisions relied by the ld. counsel for the assessee are distinguishable and not applicable. Therefore ground no. I raised by the assessee is dismissed.
As far as the remaining grounds are concerned, sole grievance of the assessee is that the ld. Pr. CIT erred in assuming juri iction by issuing the show cause notice for the issue which has already been examined in detail by the Ld. AO. We find that the finding of Ld. Pr. CIT is only limited towards the treatment of unaccounted receipts. Ld. Pr. CIT has himself observed in the impugned order that “the AO has committed a clerical mistake by treating such unexplained deposit as business without making any further enquiry and he estimated income of Rs.8,82,369/- @ 8% of such deposit of Rs.1,10,29,608/-. We further find that in para 7 of the impugned order Ld. Pr. CIT goes a step further stating that Ld. AO erred in estimating profit @8% of the unexplained deposit, rather Ld. AO should have invoked section 69 of the Act and taxed the total unexplained deposit. These finding of Ld. Pr. CIT make it ample clear that the issue for which the 11 show cause notice was issued has already been examined by the ld. AO in detail and he has made proper application of mind on the addition by treating the undisclosed receipts as unaccounted business receipts and estimating a net profit of 8% of such receipts. It is not a case of no enquiry or inadequate enquiry. It is a case where Ld. Pr. CIT wants to impose his decision on the decision taken by the ld. AO after examining the facts in dispute before us.
Hon'ble Apex Court in the case of CIT vs. Max India ltd. 2007 295 ITR 282, dismiss the revenue‟s appeal holding that the Ld. CIT erred in invoking the section 263 of the Act observing as follows:
At this stage we may clarify that under paragraph 10 of the judgment in the case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 this Court has taken the view that the phrase "prejudicial to the interests of the revenue " under Section 263 has to be read in conjunction with the expression "erroneous" order passed by the assessing officer. Every loss of revenue as a consequence of an order of the assessing officer cannot be treated as prejudicial to the interests of the revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue ; or where two views are possible and the Income Tax Officer has taken one view witjrv which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue , unless the view taken by the Income Tax Officer is unsustainable in law. According to the learned Additional Solicitor General, on an interpretation of the provision of Section 80HHC(3) as it then stood the view taken by the assessing officer was unsustainable in law and therefore the Commissioner was right in invoking Section 263 of the Income Tax Act. In this connection, he has further submitted that in fact the 2005 amendment which is clarificatory and retrospective in nature itself indicates that the view taken by the assessing officer at the relevant time was unsustainable in law.
12 We find no merit in the said contentions. Firstly, it is not in dispute that when the order of the Commissioner was passed there were two views on the word "profits" in that section. The problem with Section 80HHC is that it has been amended eleven times. (ITANo.809/KOl/2012 observing as follows:
We have considered the rival submissions. A perusal of the assessment order dated 29.12.2009 in the present case which is the subject matter of the revision u/s. 263 of the I. T. Act, 1961, it is noticed that the AO had done a detailed examination and had applied his mind on the issue of the disallowance of the transport charges on which TDS was not allegedly deducted. A perusal of the order sheet noting recorded in the course of assessment also clearly supports this view. Further, a perusal of the order passed u/s. 263 of the I. T. Act, 1961 clearly shows that the Ld. CIT has directed the re-examination and re-verification of an issue which is already being verified and assessed by the AO. The powers u/s. 263 of the I. T. Act, 1961 cannot be used for directing a reverification. Once an opinion has been formed by the AO the Ld. CIT by taking recourse to the powers u/s. 263 of the I. T. Act, 1961 cannot take a stand that the examination done by the AO was not adequate. Adequate enquiry is a subjective issue and just because the Ld. CIT feels that the AO should have done more enquiries does not make it a case for invoking the powers u/s. 263 of the I. T. Act, 1961. This view of ours also finds support from the decision of the coordinate Bench of this Tribunal in the case of Elite Shoe Company in ITA No.772/Kol/2011 dated 22.05.2012 where under similar circumstances the revision order passed u/s. 263 of the I. T. Act, 1961 have been quashed. In view of the above, we are of the view that the revision as directed by the Ld. CIT by invoking his powers
13 u/s. 263 of the I. T. Act, 1961 cannot be sustained and consequently the said order stands quashed.
In light of the above judgments and decisions we find that the same are squarely applicable on the facts of the instant case so much show that the issue of undisclosed deposits in bank which has been raised by the Ld. Pr. CIT in the impugned order, has already been dealt by the ld. AO in detail and he took one of the plausible view of estimating profit @ 8% on the undisclosed receipts. This decision of the Ld. AO had subsequently been confirmed by the Ld. CIT(A) as well as by this Tribunal in its order dated 25.07.2019. Therefore, Ld. AO took one of the permissible view, therefore, it cannot be said that the order of the Ld. AO is erroneous so far as prejudicial to the interest of revenue.
Under these given facts and circumstances, are of the view that Ld. Pr. CIT was not justified in invoking power u/s 263 of the Act and the same cannot be sustained. We, accordingly quash the impugned order passed u/s 263 of the Act and restore the assessment order claimed u/s 143(3) of the act dated 10.02.2016. Thus, ground no. a to h are allowed.
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In the result, Appeal of the assessee in ITANo.195/CTK/2018 is partly allowed
Order pronounced as per Rule 34 of I.T.A.T., Rules 1963 on 23.12.2021. (सी.एम.गगा) (मिीष बोरड़) (C.M.GARG) (MANISH BORAD) ऱेखा सदस्य / ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 23/12/2021 Patel, Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : 1. अऩीलाथी / The Appellant- प्रत्यथी / The Respondent-
Pr.CIT Cuttack आयकि आयुक्त(अऩील) / The CIT(A), 3. 4. आयकि आयुक्त / CIT 5. ववभागीय प्रनतननधध, आयकि अऩीलीय अधधकिण, कटक / DR, ITAT, Cuttack गार्ा पाईल / Guard file. 6. सत्यावऩत प्रनत ////
आदेशािुसार/ BY ORDER,
(Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack