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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM
IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकरअपीलसं./ITA No.86/SRT/2020 (�नधा�रणवष� / Assessment Years: (2015-16) (Virtual Court Hearing) Trividh Corporation, Vs. The PCIT, Surat. TP No.25, FP No.103, Aashtha Medicare & Residency, Abrama Road, Mota Varachha, Surat-395005. �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAHFT0894N (Assessee) (Respondent) Assessee by : Shri Rajesh Upadhyay, AR Revenue by : Shri S. T. Bidari, CIT(DR) सुनवाईक�तार�ख/ Date of Hearing : 13/05/2021 घोषणाक�तार�ख/Date of Pronouncement : 24/05/2021 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee, pertaining to the Assessment Year (AY) 2015-16, is directed against the order passed by the Learned Principal Commissioner of Income Tax, Surat [in short “the ld. PCIT”], under section 263 of the Income Tax Act, 1961, [hereinafter referred to as the “Act”]. Grievances raised by the assessee are as follows: “1. Ld. Principal CIT has erred in law and on facts to invoke provisions of section 263 of the Act and finally ‘Set-aside’ AO’s assessment completed u/s 143(3) of the Act and also direct the AO to frame the assessment ‘Denovo’.” 2. The relevant material facts, as culled out from the material on record, are as follows. The assessee before us is a firm. It has filed its return of income for assessment year 2015-16 on 13.10.2015 declaring total income at Rs. 4,42,80,220/-. The assessee`s case was selected for scrutiny and statutory notice u/s 143(2) of the Act was issued to the assessee. The assessee is engaged in the business of construction and project development activities. The Id Assessing
ITA No.86/SRT/2020 Assessment Years.2015-16 Trividh Corporation Officer (herein after referred to ‘AO’) finalized the assessment u/s 143(3) of the Income Tax Act, on 11.12.2017, accepting the returned income of the assessee.
Then after, Learned Principal Commissioner of Income Tax, Surat [in short “the ld. PCIT”], has exercised his jurisdiction under section 263 of the Income Tax Act, 1961. On verification of the records of the Income-tax assessment proceedings for the assessment year 2015-16, it was noticed by the ld PCIT that survey action u/s 133A of the Act was carried out in assessee`s case on 04.12.2014. During the course of survey proceedings, statement of Shri Odhavjibhai Shamjibhai Pagdar, partner of the firm was recorded on oath u/s 131 of the Act. In reply to Q.No.21 to 23 of the statement, Shri Odhavjibhai Shamjibhai Pagdar has admitted receipt of unaccounted income of the firm in the form of ‘on-money’ of Rs.4,75,00,000/- and disclosed the same as income of the firm for F.Y. 2014-15 relevant to A.Y.2015- 16. The assessee-firm has shown the amount of Rs.4,75,00,000/- in the profit and loss account under the head 'Income Disclosed' and computed the income accordingly. However, against the disclosed income of Rs.4,75,00,000/-, the firm has shown total income of Rs.4,42,80,220/- in the return of income for A.Y.2015- 16 which is less by Rs.32,19,780/- (Rs.4,75,00,000- Rs.4,42,80,220). The assessee - firm has claimed this amount of Rs.32,19,780/- as expenses against the disclosed income, which the ld PCIT objected stating that it is irregular in view of the provisions of section 115BBE of the Act. Despite such facts and circumstances and specific provisions of law in section 115BBE(2) of the Act, the Assessing Officer has completed assessment determining total income at Rs.4,42,80,220/- and thereby allowing assessee's erroneous claim to the tune of Rs.32,19,780/-, rendering the assessment so completed as erroneous in so far it is prejudicial to the interest of Revenue.
Therefore, in view of the above facts, the ld. PCIT has issued a show cause notice under section 263 of the Act, which is reproduced below: “On verification of the records of the Income-tax assessment proceedings in your case for the assessment year 2015-16, it is noticed that the assessment made by the Assessing Officer u/s 143(3) of the I. T. Act dated 11.12.2017, is erroneous in so far as it is prejudicial to the interest of revenue on the following ground:
ITA No.86/SRT/2020 Assessment Years.2015-16 Trividh Corporation
It is seen from the records that survey action u/s 133A was carried out in your case on 04.12.2014. During the course of survey proceedings, statement of Shri Odhavjibhai Shamjibhai Pagdar, partner of the firm was recorded on oath u/s 131 of the Act. In reply to Q.No.21 to 23 of the statement, Shri Odhavjibhai Shamjibhai Pagdar has admitted receipt of unaccounted income of the firm in the form of on-money of Rs. 4,75,00,000/- and disclosed the same as income over and above the regular income of the firm for F.Y. 2014-15 relevant to A.Y.2015-16. You have shown the amount of Rs.4,75.00.000/- in the profit and loss account under the head 'Income Disclosed' and computed the income accordingly. However, against the disclosed income of Rs.4,75,00,000/-, the firm has shown total income of Rs.4,42,80,220/-in the return of income for A. Y.2015-16 which is less by Rs.32,19,780/-. You have claimed this amount of Rs.32,19,780/- as expenses against the disclosed income which is irregular in view of the provisions of section 115BBE of the Act. As per the provisions of section 115BBE(2) of the I. T. Act, no deduction in respect of any expenditure or allowance shall be allowed to the assesses under any provision of the Act in computing the income referred to in clause (a) of sub-section(1) i.e. the amount of income-tax calculated on income referred to in section 68, section 69, section 69A, section 696, section 69C or section 69D, at the rate of thirty per cent. Despite such facts and circumstances and specific provisions of law in section 115BBE(2) of the Act, Assessing Officer has completed assessment determining total income at Rs.4,42,80,220/- and thereby allowing your erroneous claim to the tune of Rs.32,19,780/-, rendering the assessment so completed as erroneous in so far it is prejudicial to the interest of Revenue. 3. The undersigned, therefore, propose to pass an order u/s 263 of the Act against the assessment order passed u/s 143(3) dated 11.12.2017 by the Assessing Officer for the A.Y. 2015-16, in so far as it is erroneous as well as prejudicial to the interest of revenue. 4. In case, you have any objection to the proposed action, you are requested to appear before me either personally or through your authorized representative on 09.01.2020 at 12.15 PM along with written submission at the office of the undersigned at Room No. 227. Aayakar Bhavan. Maiura Gate. Surat and to show cause as to whv such order should not be passed. In case of non compliance on your part, the matter will be decided on merits and material available on record.” 5. The assessee could not appear against the above said show cause notice, therefore the ld. PCIT has again issued show cause notice. Thereafter, in response to the show cause notice, the assessee has appeared before the ld. PCIT and submitted the written submission, which is reproduced below:
“I, undersign, Rajesh H. Upadhyay, AR for M/s Trividh Corporation have to made following reply w.r.f. above sated subject in the case of our client M/s Trividh Corporation. 01 A letter of authority on stamp paper of Rs. 300/- is enclosed.
ITA No.86/SRT/2020 Assessment Years.2015-16 Trividh Corporation 02. It is true that there was a survey u/s 133A of the Act at the business premises of M/s Trividh Corporation on 04.12.2014. During the course of survey proceedings, Annexure A-1 and A-2 were found pertains to the firm's business, which were also impounded. On the basis these two Annexures, certain questions, were asked to Shri. Odhavjibhai Shamjibhai Pagdar, one of the partners of the firm. He stated that receipts noted papers are pertain to the project of the firm 'namely ' Astha Medicare & Residency'. He has also stated that it has received ' on money ' against the booking of flats, shops and offices. It is necessary to bring to your honour's notice that the assessee firm, M/s Trividh Corporation is engaged in building construction and project development activity. It has developed project namely, 'Ashtha Medicine & Residency ' at Anrama Road, Mota Varachha, Surat-395 010. There are two types of property in the said project i.e. (i) Residential Flats and (ii) Shops & Offices. In all there are 80 flats. 19 shops and 25 offices in this project. Computation of income under the head Business or Profession is made as under Profit as per Profit and Loss a/c 4,42,74,530 Add: Service tax penalty 1,500 TDS penalty 3,000 TDS interest 1,185 Interest paid to Partners 37,80,279 Sub- total 4,80,60,494 Less: Interest as per Deed u/s 37,80,279 40(b) Total Income 4,42,80,215 Total Income ( rounding off) 4,42,80,220
There is no other activity or other source of income available to the firm in A Y 2015-16. On money receipts w.r.f. the business of the firm amounts to Business Income. Accordingly, the same is credited to the profit and loss account for the year under revision. Ld. ACIT has also taken a note of this aspect in his body of order. It is further to explain that income of the firm for A Y 2015-16 was Rs.4,80,60,494/-and an amount of Rs.37,80,279/-has been paid to the partners in form of interest. Therefore, returned income is arrived at Rs. 4,42,80,220/-. It is humbly argued that interest to partners of the firm is nothing but a portion of profit of the firm. But due to specific provision of the Act, it has been given to the partners in form of interest. Thus, there is no claim of expenses of Rs. 32,19,780/- as shown at para 2 of your show cause notice. The assessee has shown disclosed income + regular income and therefore, its income was at Rs. 4,80,60,494/- as against disclosure of Rs.4,75,00,000/-. As assessment of income has been made as Business Income and not as income from Other Sources i.e u/s 68/69/69A/69B/69C of the I Act, provisions of section 115BBE(2) of the act has no application. Alternatively, and without prejudice to our above submission, it is to submit with due respect that even if the said provisions is made applicable in the case of the assessee firm, it has to be applied upon the taxable income of the firm as per Law. In that case also interest on partners capital is allowable to the firm. So, the net result would by the same. Page | 4
ITA No.86/SRT/2020 Assessment Years.2015-16 Trividh Corporation
In view of the above, order of the ACIT, is neither erroneous and prejudicial to the interest of the revenue but it is a plausible views, on facts of the case, prayed to be accepted.” 6. However, ld. PCIT has rejected the contention of the assessee and held that in respect of either non-applicability of sections 68, 69, 69A to 69D or in respect of allowance of claim of expenses u/s 40(b) of the Act is not found to be acceptable and are accordingly rejected. Therefore, the assessment order u/s 143(3) of the Act, passed on 11.12.2017 (for A.Y. 2015-16) was found to be erroneous in so far as it is prejudicial to the interest of Revenue. Therefore, ld PCIT has set-aside the assessment order with the direction to frame the assessment de novo.
Aggrieved by the order of the ld. PCIT, the assessee is in appeal before us.
Shri Rajesh Upadhyay, Learned Counsel for the assessee, begins by pointing out that issue relating to “on money” of Rs.4,75,00,000/- has been discussed and examined by the Assessing Officer in the order passed by him under section 143(3) of the Income Tax Act, dated 11.12.2017, therefore order passed by the Assessing Officer should not be erroneous and prejudicial to the interest of the Revenue. The Ld Counsel contended that source of income for such disclosure (during the survey) of Rs.4,75,00,000/- was the construction business activity undertaken by the assessee in the year under consideration i.e. previous year relevant to A.Y. 2015-16 and ‘on-money’ receipts amounts to business income and once such source is not disputed, the deduction so claimed u/s 40(b)of the Act is to be allowed. Since, it is income of the business of the assessee which was discussed during the survey, therefore assessee was entitled to claim the expenditure against the said income and that is why, the assessee has claimed expenditure towards partners’s interest payable to them at Rs.32,19,780/-. Since, the Assessing Officer has passed the order after due application of mind and after scrutinize the claim of the assessee, therefore the order passed by the Assessing Officer should not be erroneous and prejudicial to the interest of the Revenue, hence order passed by the ld PCIT may be quashed. 9. On the other hand, the Learned Departmental Representative (in short “the ld. DR”) submits that ‘on money’ is assessable under section 69A of the Act, Page | 5
ITA No.86/SRT/2020 Assessment Years.2015-16 Trividh Corporation therefore no expenditure should be claimed against the ‘on money’ so disclosed by the assessee. Besides, ld DR also relied on the order of the ld. PCIT, particularly Para Nos.4 and 4.1 of the order of the ld PCIT.
We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. PCIT and other material brought on record. It is undisputed fact in this case that a survey u/s 133A of the Act was carried out at the business premises of the assessee on 04.12.2014. During the survey, certain facts were discovered and statement of Shri Odhavjibhai Shamjibhai Pagdar, one the partners of the firm, was recorded on oath u/s 131 of the Act. In the statement so recorded, an amount of Rs.4,75,00,000/- was disclosed as 'income over and above regular income of the assessee firm' ( for F.Y. 2014-15 relevant to AY 2015-16). It is also undisputed in this case that the said amount of Rs.4,75,00,000/- has been disclosed in the profit and loss account under the head 'income disclosed'. However, after claiming deduction u/s 40(b) of the Act towards interest paid to partners at Rs.37,80,279/- net income in the return was declared at Rs.4,42,80,220/- by the assessee, which was accepted by the AO in the impugned assessment order passed u/s 143(3) of the Act on 11.12.2017.
We note that Assessing Officer, during the assessment stage while passing the order under section 143(3) of the Act, dated 11.12.2017, has examined and adjudicated the issue relating to ‘on money’ of Rs.4,75,00,000/- observing as follows:
“3. During the year, the assessee was engaged in the business of construction and project developer activity. In this case, a survey action u/s 133A of the I.T. Act was carried out by the Department on 04.12.2014. During the course of survey proceedings, a statement on oath u/s 131 of the I.T. Act of Shri Odhayjibhai Shamjibhai Pagdar, partner of the firm was recorded and in reply to Question No.21 to 23 of the statement, Shri Odhavjibhai Shamjibhai Pagdar, partner of the firm had admitted receipt of unaccounted income of the firm in the form of 'On- Money' of Rs.4,75,00,000/- and disclosed the same over and above its regular income for F.Y.2014-15 relevant to A.Y.2015-16. The assessee firm has shown an amount of Rs.4,75,00,000/- in the Profit & Loss account under the head "Income Disclosed" and computed its income accordingly. The assessee firm has paid due taxes thereon. Page | 6
ITA No.86/SRT/2020 Assessment Years.2015-16 Trividh Corporation
Subject to the above remarks, the total income of the assessee is computed as under:” Total income as per return of income Rs.4,42,80,220/- Total Assessed income Rs.4,42,80,220/-
Thus, it is abundantly clear from the order of assessing officer, as noted above, that assessing officer has examined the issue of ‘on-money’ and applied his mind, therefore, his order should not be subjected to revision proceedings under section 263 of the Act.
We have gone through the assessee`s paper book page no.36, wherein the assessee has shown income disclosed during the survey proceedings at Rs.4,75,00,000/- in the profit and loss account and vide paper book page no.34, the assessee after having included said income disclosed during the survey in the profit and loss account, has claimed interest expenditure. We have gone through page no.85 of the paper book wherein, in answer to question no.21, the assessee has stated that the income of Rs.4,75,00,000/- belongs to their business firm Trividh Corporation. In the answer during survey proceedings, the assessee also stated that amount of Rs.4,75,00,000/- was received on account of booking and selling of residence units, residential flats / units in the Astha Medicare and Residency and therefore it is a cash amount received by M/s Trividh Corporation in connection with the project of Astha Medicare and Residency. Therefore, it is income of that project from business and thus assessee claimed expenditure, which has been thoroughly examined by the assessing officer.Since, the Assessing Officer has passed the order after due application of mind and after scrutinizing the claim of the assessee, therefore the order passed by the Assessing Officer should not be erroneous and prejudicial to the interest of the Revenue.
Thus, it is abundantly clear that during the assessment stage, the assessee submitted the books of accounts and other documents.. The books of accounts of the assessee are audited by a chartered accountant. The assessing officer examined the books of accounts, survey documents and evidences submitted by the assessee and applied his mind. The assessing officer conducted sufficient inquiry. To gather
ITA No.86/SRT/2020 Assessment Years.2015-16 Trividh Corporation
more information and then prove the claim of the assessee wrong is not the object of section 263 of the Act. The object of section 263 is to examine whether order passed by the AO is erroneous as well as prejudicial to the interest of revenue. Therefore, based on this factual position, the order passed by the AO under section 143(3) should not be erroneous. We note that Coordinate Bench of I.T.A.T., Kolkata in the case of Plastic Concern vs. ACIT [61 TTJ 87 (Cal) has held that mere possibility of gathering more material to prove the claim of the assessee wrong would not make the concluded assessment erroneous so long as the ld. A.O. had acted judiciously and conducted enquiries in the course of assessment proceedings. Therefore, based on the factual position narrated above, we quash the order of ld PCIT under section 263 of the Act, dated 03.03.2020.
In the result, the appeal of the assessee is allowed.
Order is pronounced on 24/05/2021 by placing result on Notice Board.
Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat �दनांक/ Date: 24/05/2021 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat