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Income Tax Appellate Tribunal, G BENCH, MUMBAI
order : 24.01.2023 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Appellant/Assessee has challenged the order, dated 16.03.2022, passed by the Ld. Principal Commissioner of Income Tax- Mumbai-1 [hereinafter referred to as „the PCIT‟] under Section 263 of the Income Tax Act, 1961 [hereinafter referred to as „the Act‟] pertaining to the Assessment Year 2017-18, whereby the PCIT had set aside the Assessment Order dated 04.12.2019, passed under Section 143(3) of the Act holding the same to be erroneous in so far as prejudicial to the interest of the Revenue.
The Appellant has raised following grounds of appeal: Assessment Year: 2017-18 “
1. On the facts and in the circumstances of the case, the learned CIT erred in passing an order u/s 263 of the Act, which is contrary to the facts and evidence on record hence it should be cancel.
2. The CIT erred in stating that the assessment order passed by the assessing officer is erroneous and prejudicial to the interest of the revenue.
3. (a) On the facts and in the circumstances of the case, the learned CIT erred in stating that, the assessment was completed without necessary enquiries. (b) The learned CIT failed to appreciate that, the appellant has furnish details of cash deposits made and after going through the explanations and details on record the same was accepted as business income. (c) The learned CIT erred in observing that, the income declared should be assessed u/s 68 of the I T Act.
4. On the facts and in the circumstances of the case, the learned CIT without giving reasonable opportunity of being heard and make submissions, passed order which should be cancelled.
5. The appellant prays that, the order passed u/s 263 be cancelled.”
3. The relevant facts, in brief, are that a survey action was carried out in the case of the Appellant wherein a disclosure of additional income of INR 2,15,00,000/- was made by the Appellant. The aforesaid additional income was shown under the head „Other Incomes‟ in Note-17 to the financial statement of the Appellant for the previous year relevant to the Assessment Year 2017-18 in the statement of Profit & Loss Account, after taking into consideration revenue from operation amounting to INR 33,44,85,945/- and Other Incomes of INR 2,95,40,339/- (which included additional income of INR 2,15,00,000/-), Net Profits for the year were computed at INR 4,20,03,820/-. The aforesaid Net Profits as Profit & Loss statement were offered to tax in the return of income for the 2 Assessment Year: 2017-18 Assessment Year 2017-18 filed on 07.11.2017 wherein income under normal provisions was declared at INR 4,22,16,700/-.
The case of the Appellant was selected for scrutiny to verify cash deposits during demonetization period during the previous year relevant to the Assessment Year 2017-18. The Assessing Officer completed the assessment vide order, dated 04.12.2019, under Section 143(3) of the Act accepting the return income of INR 4,22,16,700/- as assessed income.
Subsequently, notice under Section 263(1) of the Act was issued to the Appellant by the PCIT, and vide order, dated 16.03.2022, the PCIT set aside the Assessment Order, dated 04.12.2019, holding the same to be erroneous in so far as it is prejudicial to the interest of Revenue invoking the provisions of Explanation 2 to Section 263 (1) of the Act with the direction to the Assessing Officer for reframe assessment denovo.
Being aggrieved, the Appellant has preferred the present appeal against the order, dated 16.03.2022, passed by the PCIT.
The Ld. Authorised Representative for the Appellant submitted that during the assessment proceedings specific query was raised by the Assessing Officer about the source of cash deposited during the demonetization period. Taking us through the notice issued under Section 142(1) of the Act, he submitted that reference was also made to the provisions of Section 115BBE of the Act providing for levy of tax at the rate of 60%. In response to the aforesaid notice reply dated 13.11.2019 was filed by the Appellant. The Assessing Officer after considering the reply accepted the income returned by the Appellant. He 3 Assessment Year: 2017-18 submitted that the additional income of INR 2,15,00,000/- was disclosed in the Profit & loss Account and offered to tax as normal business income. The view taken by the Assessing Officer to tax additional income disclosed during survey as business income is a plausible view taken by the Assessing Officer and therefore, the PCIT was not justified in exercising power of review under Section 263 of the Act.
Per contra, the Ld. Departmental Representative submitted that in the notice issued under Section 142(1) of the Act the Appellant was asked to furnish point-wise details regarding the cash deposited during the demonetization period along with the detail of source. However, the Appellant failed to provide the same and merely stated that the cash deposits were out of the additional income disclosed during the survey. The Assessing Officer, without carrying out any inquiry or investigation which he was required to do, accepted the return filed by the Appellant. Taking us through the assessment order, he submitted that the same is absolutely silent in this regard. He submitted that the PCIT, after taking note of the aforesaid, invoked provisions of Explanation 2 to Section 263(1) of the Act and set arise the Assessment Order, dated 04.12.2019, which was passed without carrying out the necessary enquiry. He further submitted that even in response to notice dated 20.01.2022 issued by the PCIT, the Appellant had failed to provide necessary details/explanation. Further, Ld. Departmental Representative supported the order passed by the PCIT and submitted that the Assessing Officer had incorrectly applied the rate applicable to normal business income to the additional income disclosed by the Appellant as a result of survey proceedings which should have been taxed 4 Assessment Year: 2017-18 at the higher rate of 60% prescribed in Section 115BBE of Act. He submitted that for the aforesaid reasons the assessment order passed was erroneous to the extent prejudicial to the interest of Revenue and was, therefore, correctly set aside by the PCIT.
In rejoinder, the Ld. Authorised Representative for the Appellant pressed into service Ground No. 4 and submitted that the director of the Appellant who was taking care of the tax/accounting matters was not keeping good heath at the relevant time and therefore, the Appellant had sought time to file reply. Further, the assessment and survey records were also not readily available. A letter was also written to the Assessing Officer for 29.01.2022 for obtaining copy of the survey documents. Therefore, the Appellant had sought time. However, the PCIT passed the order without granting reasonable opportunity to the Appellant.
We have considered the rival submissions and perused the material on record. We would first take up Ground No. 4 raised by the Appellant wherein it has been contended by the Appellant that the PCIT proceeded to passed order of revision under Section 263 of the Act without granting the Appellant reasonable opportunity. It is admitted position that in response to notice, dated 20.01.2022, issued under Section 263(1) of the Act, the Appellant sought time to file reply. Apart from the fact that the concerned director was not available on account of infirmity, the Appellant also cited non-availability of assessment/survey records as a reason for seeking time. The Appellant also wrote a letter dated 29.01.2022, to the Assessing Officer seeking copy of the documents relating to Assessment Year: 2017-18 survey. In paragraph 7 of the order impugned, the PCIT has stated that the Assessing Officer was directed to furnish the documents relating to survey. However, the Assessing Officer vide letter, dated 08.03.2022, reported that the survey documents were not available and the same would be produced on retrieval. In the aforesaid facts and circumstances, the PCIT proceeded to pass the order under Section 263 of the Act without any details/submissions having been submitted by the Appellant. As rightly observed by the PCIT the Assessment Order, dated 04.12.2019, does not refer to the survey proceedings or the cash found therein. However, while exercising powers under Section 263 of the Act, examination by the PCIT is not confined to the assessment order, and he is empowered to call for and examine the „record‟ as specified in Explanation 1(b) to Section 263(1) of the Act. In our view, „record‟ would include the documents relating to survey proceedings. Unlike the assessment related to assessment proceedings, the documents related to the survey proceeding were also not available with the Appellant online. The PCIT had rightly called for the same and also directed the Assessing Officer to furnish the same to the Appellant. However, the same were not traceable. We note that the Appellant has placed on record statement of Sh. Pradip Kajaria, wherein reference has been made to the impounded material. During the course of hearing, it was submitted on behalf of the Appellant wanted to rely upon the aforesaid document/material to explain that the additional income disclosed was in the nature of business income. Further, in our view, the documents pertaining to survey proceedings would be relevant to the determination of the issue whether the Assessing Officer had failed to conduct inquiry/verification. 6 Assessment Year: 2017-18 Accordingly, in view of the aforesaid, we set aside the order, dated 16.03.2022, passed by the PCIT under Section 263 of the Act and restore the issue back to the PCIT for passing order under Section 263 of the Act after examining the documents/material relating to survey proceedings forming part of the „record‟. The Appellant would be provided a copy of the documents/material impounded during survey proceedings and granted reasonable opportunity of being heard. Thus, Ground No. 4 raised by the Appellant is partly allowed.
Since we have set aside the order, dated 16.03.2022, passed by the PCIT and remanded the issue back to the PCIT, Ground No. 1 to 3 raised by the Appellant are disposed off as being infructuous.
In the result, the present appeal is partly allowed. Order pronounced on 24.01.2023.