ARMANI EXPORTS,MUM vs. PCIT-20, MUM

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI

BEFORE SHRI PRASHANT MAHARISHI, AM AND MS. KAVITHA RAJAGOPAL, JM ITA No. 24/Mum/2023 (Assessment Year: 2014-15) Armani Exports PCIT-20 209-C, Building No.2, Room No. 418, Piramal Chamber, Vs. Mittal Industrial Estate, Andheri Kurla Lal Baug, Parel, Mumbai-400 12 Road, Andheri (E), Mumbai-400 059 PAN/GIR No. AAGFA 0528 F (Appellant) : (Respondent)

Assessee by : Shri Anil Thakkar Revenue by : Smt. Shailja Rai

Date of Hearing : 01.03.2023 Date of Pronouncement : 30.05.2023

O R D E R Per Kavitha Rajagopal, J M:

This appeal has been filed by the assessee, challenging the order of the learned

Principal Commissioner of Income Tax (‘ld.PCIT for short), passed u/s.263 of the

Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short)

2014-15.

(ld. AR for short) for the assessee stated that the assessee was initially unaware that

section 263 order can be appealed before the ITAT and, hence, has filed this present

appeal with a delay. The ld. AR prayed for condoning the said delay. The learned

Departmental Representative (ld. DR for short) for the Revenue opposed for condoning

the delay.

2 ITA No. 24/Mum/2023 (A.Y.2014-15) Armani Exports vs. PCIT 3. Having heard both the sides, we deem it fit to condone the delay in filing the

present appeal in order to give the assessee an opportunity to present its case. Hence,

delay is hereby condoned.

the order u/s. 263 for the second time as the first order u/s. 263 of the Act was already

passed on 27.03.2019. The assessee has raised the ground that the ld. PCIT has erred in

not directing the Assessing Officer (A.O. for short) specifically that all the earlier orders

passed by the A.O. u/s. 143(3) and 143(3) r.w.s. 263 of the Act stands cancelled while

passing the second order passed u/s. 143(3) r.w.s. 263 of the Act.

of export of suiting and shirting to various states of USA, Europe, Gulf, Vietnam,

Srilanka and other countries. The assessee filed its return of income dated 25.09.2014,

declaring total income at Rs.1,28,29,630/- as income from business or profession. The

assessee’s case was selected for scrutiny and the assessment order dated 26.06.2016 was

passed u/s. 143(3) of the Act where the A.O. had accepted the returned income filed by

the assessee. The ld. PCIT passed the revision order u/s. 263 of the Act dated 30.03.2019

setting aside the assessment order for the verification of the following limited issues

relevant to the impugned year: i. Large commission of Rs.61,80,281/- as expenses and low net profit on total turnover of Rs.54,00,99,330/- ii. Large interest expenses of Rs.84,94,819/- relatable to exempt income u/s. 14A. iii. Source of investment of RS.1,20,00,000/- in unlisted equities. iv. Mismatch in sales turnover reported in Audit report and ITR. v. Mismatch in amount paid to related persons u/s. 40A(2)(b) reported in Audit report and ITR 2.

3 ITA No. 24/Mum/2023 (A.Y.2014-15) Armani Exports vs. PCIT 6. It is observed that the assessee has not complied with the notices u/s. 142(1) of the

Act except for the notice dated 25.12.2019 which is prior to the assessment being time

barred on 31.12.2019. The A.O. passed the assessment order dated 31.12.2019 by

rejecting the books of accounts of the assessee and profit of 8% amounting to

Rs.4,32,07,946/- towards the business turnover of Rs.54,99,00,329/- was estimated and

an addition of Rs.3,03,78,320/- was made after deducting the declared income of the

assessee on the ground that the details furnished by the assessee in the last hour was not

verifiable from the third party and, hence, the impugned addition was made.

notice dated 11.03.2022 for the reason of certain discrepancy was evidenced in the

assessment order passed u/s. 143(3) of the Act r.w.s. 263 of the Act dated 31.12.2019

rendering it as erroneous and prejudicial to the interest of the revenue. The ld. PCIT

issued the notice on a query of source of investment of Rs.1,20,00,000/- in securities for

which the assessee vide its reply dated 23.12.2109 submitted that the assessee firm had

not made any investment in the current year and that the investment made in M/s.Armani

Industries Pvt. Ltd. was made in F.Y. 2011-12 for the purpose of promoting its own

processing unit in the name and style of M/s. Armani Industries Pvt. Ltd. at Bilvara and

the capital investment of Rs.1,20,00,000/- was made by the assessee firm from its own

funds. The ld. PCIT observed that the impugned investment was not reflected in the

balance sheet submitted by the assessee for the A.Y. 2012-13 and also as per the scrutiny

assessment proceeding for A.Y. 2012-13, the opening amount of loan given to M/s.

Armani Industries Pvt. Ltd. and closing balance of loan amount was Rs.14,46,432/- and

4 ITA No. 24/Mum/2023 (A.Y.2014-15) Armani Exports vs. PCIT Rs.11,62,500/- respectively. It is also observed that the assessee has given

Rs.3,81,61,068/- and received back Rs.3,84,45,000/- which according to the ld. PCIT was

contradictory as per the submissions made during the assessment proceedings for A.Y.

2014-15 and 2012-13. For this reason, the ld. PCIT proposed to invoke the provision of

section 263 of the Act and to enhance, cancel, and modify the earlier assessment order

dated 31.12.2109 passed u/s. 143(3) r.w.s. 263 of the Act as being erroneous and

prejudicial to the interest of the Revenue.

PCIT passed u/s. 263 of the Act.

assessee was before the A.O. in the earlier assessment proceeding where the A.O.’s order

dated 31.12.2019 was passed u/s. 143(3) r.w.s. 263 of the Act. The ld. AR further stated

that the assessee has furnished all the details pertaining to the impugned investment,

whereas the same was not considered by the A.O. during the assessment proceeding and

the A.O. has erroneously stated that the assessee has not filed any details neither before

the ld. PCIT nor before the A.O. The A.O. has specified that there was no sufficient time

available for conducting the third party verification and, hence, the details filed by the

assessee was not verifiable. The ld. AR contended that this finding of the A.O. was a

false allegation, as the A.O. had sufficient time to conclude the assessment but had rather

choose not to verify the details filed by the assessee. The ld. AR further stated that the

impugned investment was made during the financial year 2011-12 and not during the

impugned assessment year. The ld. AR further contended that all the details were

5 ITA No. 24/Mum/2023 (A.Y.2014-15) Armani Exports vs. PCIT furnished by the assessee to substantiate the investment made in M/s. Armani Industries

(I) Pvt. Ltd. The ld. AR stated that the assessment order dated 31.12.2019 passed u/s.

143(3) r.w.s. 263 of the Act was not erroneous insofar as it is prejudicial to the interest of

the Revenue. The ld. DR, on the other hand, controverted the said fact and stated that

though the issue of investment was raised in first section 263 proceeding, no addition was

made by the A.O. on the said investment. The ld. DR further stated that the second

section 263 proceeding was initiated solely for the purpose of enquiring the impugned

investment of Rs.1,20,00,000/- made by the assessee company in M/s. Armani Industries

(I) Pvt. Ltd. The ld. DR further stated that the A.O. in its order dated 31.12.2019 has not

considered this issue and thereby making the order erroneous and prejudicial to the

interest of the Revenue. The ld. DR relied on the order of the ld. PCIT.

record. It is evident that there has been two section 263 proceedings carried out in the

case of the assessee where in the first section 263 proceeding there were about five issues

raised by the ld. PCIT and the A.O. vide order dated 31.12.2019 has made various

additions/disallowances. Though the issue of source of investment of Rs.1,20,00,000/- in

unlisted equities was part of the proceeding, no enquiry is said to have been made on this

issue and thereby no addition to this extent was made. On perusal of the records, we do

not find any documentary evidences furnished by the assessee in support of its claim that

the impugned investment was made in F.Y.2011-12 by way of furnishing the bank

statement or any other supporting documents to explain the source of the investment

made by the assessee in M/s. Armani Industries (I) Pvt. Ltd. It is also pertinent to point

6 ITA No. 24/Mum/2023 (A.Y.2014-15) Armani Exports vs. PCIT out that there was no bar on limitation by the ld. PCIT to invoke section 263 for the

second time considering the order dated 31.12.2019 to be erroneous insofar as it is

prejudicial to the interest of the Revenue for the reason that the A.O. has not gone into

the issue of the impugned investment which was part of the first section 263 proceeding.

It is apparent that the A.O. has not enquired into the issue of investment made by the

assessee and it does not fall in the case where the assessee has enquired into the issue and

taken one of the plausible view.

PCIT invoking section 263 is valid since the assessment order sought to be revised was

erroneous insofar as it is prejudicial to the interest of the Revenue.

Order pronounced in the open court on 30.05.2023

Sd/- Sd/-

(Prashant Maharishi) (Kavitha Rajagopal) Accountant Member Judicial Member Mumbai; Dated : 30.05.2023 Roshani, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT - concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai