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Income Tax Appellate Tribunal, BANGALORE BENCHES “B”, BANGALORE
Before: Smt. Beena Pillai, JM & Shri Laxmi Prasad Sahu, AM
This is an appeal filed by the assessee against the order passed by the Principal Commissioner of Income Tax-1, Bengaluru order dated 18.03.2022, DIN No. ITBA/COM/F/17/2019-20/1026749836(1) for the assessment year 2015-16 with the following grounds of appeal:-
1. The order of the learned Pr.Commissioner of Income Tax, Bangalore passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as”Act”) dated 18.03.2020 for AY 2015-16 in so far as it is against the Appellant is opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the Appellant’s case 2. The learned Pr.Commissioner of Income tax failed to consider the entire objections dated 09.03.2020 filed in response the notice issued under section 263 of the Act and consequently the order passed is in violation of the principles of natural justice and required to be set aside on the facts and circumstances of the case.
Embassy ANL Consortium 3. The learned Pr.Commissioner of Income Tax erred in invoking clause(a) to Explanation-2 to section 263 of the Act while passing order under section 263 of the Act which was not put in the notice under section 263 of the Act and consequently the order passed u/s. 263 of the Act is in violation of the principles of natural justice and requires to be quashed on the facts and circumstances of the case.
4. The Learned Principal Commissioner of Income Tax is not justified in exercising revisionary powers under section 263 of the Act as the entire proceeding is without jurisdiction and not in accordance with law on the facts and circumstances of the case.
5. The learned Pr. Commissioner of Income-tax has grossly erred directing the Assessing Officer to verify the submissions of the appellant without appreciating that there is no error, much less prejudicial to the interests of the Revenue to warrant a revision and therefore the order passed by the learned Pr.Commissioner of Income tax is ultra vires to the scope of section 263 and requires to be cancelled under the facts and circumstances of the Appellants case.
6. The learned Pr. Commissioner of Income tax erred in holding that he is of the opinion that twin conditions contemplated in section 263 of the Act are satisfied in the present case on the facts and circumstances of the cae.
7. The Learned Pr.Commissioner of Income tax is not justified in law in directing the Assessing Officer to verify the claim of the appellant of pre- construction interest under section 24(b) when the details for the same were furnished and the learned Pr.Commissioner of Income tax has not shown how the same leads to the order of the Assessing Officer being erroneous or prejducial to the interest of the revenue.
The learned Pr.Commissioner of Inocme tax is not justified in law in directing the Assessing Officer to verify to mismatch in income under the income from other sources when the details for the same were furnished and the learned Pr.Commissioner of Income Tax has not shown how the same leads to the order of the Assessing Officer being erroneous or prejudicial to the interest of the revenue.
9. The learned Pr.Commissioner of Income tax is not justified in law in directing the Assessing Officer to verify to mismatch in turnover when the details for the same were furnished and the learned Pr.CIT has not shown how the same leads to the order of the AO being erroneous or prejudicial to the interest of the revenue.
The learned Pr.Commissioner of Income Tax is not justified in invoking the provisions of Explanation 2(a) to section 263 of the Act for the impugned assessment year on the facts and circumstances of the case.
The appellant craves leave of this Hon’ble Tribunal, to add, alter, delete, amend, or substitute any or all of the above grounds of appeal
as may be necessary at the time of hearing.
12. For these and other grounds that may be urged at the time of hearing of appeal, the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity.
Embassy ANL Consortium 2. It is pointed out that the appeal filed by the assessee is time barred by 464 days. In this regard, the assessee stated that the order passed u/s 263 of the Act was received on 18.03.2020 and the appeal filed against the said order was on 24.08.2021. The assessee submitted that because of the COVID-19 pandemic, the appeal could not be filed in time and the ld. AR also submitted that the Hon’ble Supreme Court held in MA No.665 of 2021 order dated SMW(C) 3 of 2020 dated 23.09.2021 that the period from 15.03.2020 to 02.10.2021 has to be excluded for computing the period of limitation. When the above period is excluded, the appeal is deemed to be filed within the time, hence, we proceed to dispose of the matter on merits.
The sole issue involved in these grounds is for challenging the order passed by the ld. Pr.CIT u/s 263 of the Income Tax Act.
The brief facts of the case are that the assessee filed return of income on 29.07.2016 declaring gross total income of Rs.1,64,34,650/-. The gross total income includes income from house property of Rs.51,62,700/- and income from other sources of Rs.1,12,77,875/-. The case was selected for scrutiny under CASS for verification on the following points:- i. Deduction from income from other sources ii. Interest expenses iii. Income from heads of income other than business/profession mismatch iv. Sundry creditors v. Change in annual lettable value of house property vi. Sales Turnover Mismatch vii. Refund claim 3.1 The statutory notices were issued to the assessee for calling details and the assessee submitted the same. The assessment was completed after accepting the returned income filed by the assessee. Later on, the ld.Pr.CIT observed that the AO has not discharged his duty for assessing the income as per the I.T Act and he did not even verify the following three points, which is as under:- a. Incorrect claim of pre-construction interest u/s. 24(b): It is noticed from the statement of total income under computation of income from house property that a deduction of Rs.2,82,93,661/- u/s 24(b) of the Act is towards interest on borrowed capital and a sum of Rs.2,66,89,424/- is towards preconstruction interest. It is seen that assessee had taken a loan of Rs.90 crores from HDFC Bank on 31.12.2013. As per the provisions of section 24(b) of the Act, prior period shall be allowed in five equal installments. However, no details of pre-construction interest expense for the period from 31.13.2013 till 31.03.2014 has been furnished. Hence, the claim of interest of Rs.2,66,89,424/- needs to be verified. b. Mismatch in interest income offered to tax: In the audited financial statements, assessee has shown interest income of Rs.1,52,46,538/- under the head other income in P&L a/c. However, in the computation of income, the assessee has reduced interest income of Rs.1,52,46,538/- from income from business and profession and offered only Rs.1,12,77,875/- as income from other sources. However, the total receipts as per 26AS statement is Rs.4,82,50,329/-, whereas in computation of income, assessee has considered only Rs.4,04,07,580/-. The short declaration of interest receipts needs to be verified. c. Mismatch in Turnover: It is seen from the audited financial statements that the revenue from operations being lease rent has been declared as Rs.8,59,22,550/-, however, as per 26AS statement rent received is Rs.8,63,37,610/-. The short declaration of the receipts needs to be verified.
4. Accordingly, the show-cause notice was issued to the assessee and assessee submitted reply. The ld.Pr.CIT after considering the reply and relying on the judgment of Hon’ble
Embassy ANL Consortium Supreme Court in the case of M/s.Deniel Merchants Pvt.Ltd. vs ITO vide order dated 29.11.2017 held that the order passed by the AO is erroneous and prejudicial to the interest of the revenue. Accordingly, he directed the AO to verify the submissions made by the assessee and give effect in accordance with law.
Aggrieved from the above order, the assessee filed appeal before the Income tax Appellate Tribunal.
The ld. AR reiterated the submissions made before the lower authorities and he further submitted that all the details as required by the AO as per the notice issued by him u/s. 142(1) of the Act were replied. The AO verified the details and found it satisfactory, thereafter, he passed the order, hence, the order passed by the AO is not erroneous and prejudicial to the interest of the revenue. He further submitted that the interest u/s. 24(b) of the Act has been claimed rightly on the loan taken and all the details were submitted during the course of assessments as well as before the ld.Pr.CIT. The books of accounts have been audited duly by a Chartered Accountant and he has also not pointed out any mistakes. He also referred to paper book at page no. 18, which is the details of the interest expenses and interest for the pre-construction period has been claimed as per the provisions of the Income tax Act for the year under consideration. Further, in respect of interest income, he referred to page No.24, in which he has given details of the interest for the pre-construction period. He further submitted that there is no miss-match in the interest income offered to tax and he tried to reconcile the differences as observed by the ld.Pr.CIT and submitted that out of Rs. 70,90,955/- propose to be added to the income of Rs.56,07,671/
Embassy ANL Consortium for the AY 2015-16 and the difference of Rs. 14,83,287/- as interest income offered for tax in the AY 2016-17. A sum of Rs.14,83,287/- is excess credit reflecting in Form 26AS, for which a confirmation letter from the concern party was produced. Further, he submitted in respect of miss-match in turnover, it was a difference for VAT tax. The VAT tax has been paid separately. He further submitted that after reconciling VAT tax difference, how the order passed by the AO is erroneous and prejudicial to the interest of the revenue. Every details were filed before the revenue authorities, therefore, the ld.Pr.CIT was not justified in exercising his powers as per section 263 of the Act.
On the other hand, the ld. DR relied on the order of the ld.Pr.CIT and he submitted that the AO has passed order without verifying the documents and no further details were called for. He has simply accepted the written submissions filed during the course of assessment proceedings and the interest paid during the pre construction period has also not been verified by the AO and even the difference in the turnover & interest income as observed by the ld.Pr.CIT has also not verified by the AO. The assessment order passed by the AO is very vague. Even in the case of sundry creditors, no confirmation etc., were produced & verified by the AO. Firstly, the AO is an investigating officer, thereafter he is an adjudicating officer, but he has forgotten his duty and passed order in hurry. After going through the findings recorded by the ld.Pr.CIT, the assessment order passed by the AO is erroneous and prejudicial to the interest of the revenue. Therefore, the order of the ld.Pr.CIT should be upheld.
Embassy ANL Consortium 8. After considering the rival submissions and perused the material available on record, the case was selected for scrutiny for verifying certain points as noted (supra). On perusal of the assessment order, we did not find any observation or findings on the issue for the reason for selection of scrutiny, which were required to be done by the AO. The AO has raised questions and replies submitted by the assessee, however from the paper book posted before us, no details pertaining to interest from ING Vysya bank was filed before the AO was accepted and passed the assessment order. We also noticed from reply submitted by the assessee before the ld.Pr.CIT that assessee had availed loan from ING Vysya Bank incurred during the FY 2005, 2006 and 2007 for construction purpose but no documents was submitted during the course of hearing before the AO and assessee has claimed it as expenditure for the interest incurred during the construction period of Rs.2,66,89,424/-, which is a 1/5th of Rs.13,34,47,122/-. We further noted that in respect of interest income, the assessee has filed only reconciliation statement but no external documents/evidences fled and we also noted that the ld.Pr.CIT observed that there is a difference in the turnover declared but the assessee submitted that difference due to inclusive of VAT tax. In this regard, he has submitted reconciliation but no details regarding proof of payments of tax etc. were submitted during the course of proceedings. The AO should have examined all these things with the supporting/external documents but he did not do so. We found substance on the submissions of the ld. DR and also on the order of the ld.Pr.CIT, hence, the order passed by the AO is erroneous & prejudicial to the interest of revenue. The case laws relied by the ld. AR is not applicable in the present facts of the case.
In the result, the appeal filed by the assessee is dismissed.
Order pronounced on this 13th day of March, 2023.