M/S. MAA TARINI INDUSTRIES LTD.,SUNDARGARH vs. PR. CIT, SAMBALPUR

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK

BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

ITA No.292/CTK/2019 Assessment Year : 2014-2015

Maa Tarini Industries Ltd., Qr. Vs. Pr. CIT, Sambalpur No.N-4/12, Ground Floor, Civil Township, Rourkela-769004 PAN/GIR No.AACCM 6126 E (Appellant) .. ( Respondent)

Assessee by : Shri M.R.Sahu, AR Revenue by : Shri M.K.Gautam, CIT DR Date of Hearing : 20 /02/ 2020 Date of Pronouncement : 17 /03/2020

O R D E R Per C.M.Garg,JM This is an appeal filed by the assessee against the order u/s.263 of the Act

of the Pr. CIT(A), Sambalpur dated 29.3.2019 for the assessment year 2014-15.

“ Ground No.l- Initiation of revision proceedings under section 263 of the Act: a. On the facts and circumstances of the case and in law, the learned Pr. CIT( Ld. Pr.CIT) has erred in holding that the order by the Assessing Officer (AO), Rourkela is erroneous as well as prejudicial to the interests of revenue.

b. The Ld. Pr.CIT has erred in not appreciating the fact that the AO has passed the assessment order dated 30/12/2016 under section 143(3) of the Act after application of mind and after scrutinizing the submissions field by the Appellant as asked by the AO on the basis of the CBDT Instructions for limited scrutiny and accordingly, the order passed by the AO is not erroneous and prejudicial to the interest of revenue.

c. The Ld. Pr.CIT without ensuring the fact regarding conversion of limited scrutiny in to comprehensive scrutiny by AO, has based on irrelevant

P a g e 1 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

considerations, erred in concluding that assessment order is erroneous and prejudicial to the interest of revenue.

d. The Ld. Pr.CIT erred in initiating proceedings under section 263 of the Act and hence the impugned order is bad in law and void ab initio.

Ground No.2- Order dated 29.03.2019 under section 263 was passed without following rules of natural justice and without application of mind:

a. On the facts and circumstances of the case and in law, the learned Pr. CIT( Ld. Pr.CIT) has passed the order under section 263 without following the rules of natural justice that is "audi alteram partem" by issuing show cause notice dated 12/03/2019 and hence the impugned order is bad in law and invalid.

b. On the facts and circumstances of the case and in law, the learned Pr. CIT( Ld. Pr.CIT) has passed the order under section 263 without application of mind which is evident from the fact of noting in show cause notice dated 12/03/2019 the address for personal presence at" Cuttack" , accordingly the impugned order is not valid and deserves to be quashed. Ground No.3- Order dated 29.03.2019 passed under section 263 was barred by limitation:

a)That the order passed by Pr.CIT,Sambalpur under section 263 of the V.T Act on 29/03/2019 out to have been cancelled/annulled because the revision order is barred by limitation as the impugned order passed under section 263 has been antedated as if it was passed on 29/03/2019 as against the actual fact that it was not passed on 29/03/2019.

4.Maintainability/Validity of Revisionary Proceedings towards addition on account of services provided under the head 00440262 (Transport of goods by road) of Rs.16,91,91,234/- on the basis of service tax return filed by the appellant:

Without prejudice to ground no.1, 2 & 3 - a. That in view of the documents including written replies dated 14/10/2016 and dated 22/12/2016 submitted before the AO during course of scrutiny assessment to the notice dated 10/08/2016 issued under section 142(1), he has not brought on record and cogent and conclusive material which would prove or show that the course followed by the AO was unsustainable in law. The order passed by Pr.CIT therefore, deserves to be quashed.

b.That on facts and circumstances of the case and in law, when the AO after conducting necessary enquiries , which the circumstances demanded , had accepted the documents, then it was not open to the Pr.CIT to treat

P a g e 2 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

the assessment order erroneous and prejudicial to the interest of revenue within meaning of section 263 of the Act. There fore the Pr.CIT order under section 263 setting aside the assessment be cancelled and AO's order under section 143(3) dated 30.12.2016 be restored.

Without prejudice to ground no.1,2 &. 3 - a. That on facts and circumstances of the case and in law, when the AO after conducting necessary enquiries and scrutinizing the tax audit report up loaded by tax auditor in the system accepted adjustment of unabsorbed depreciation, then it was not open to the Pr.CIT to treat the assessment order erroneous and prejudicial to the interest of revenue within meaning of section 263 of the Act. Therefore the Pr.CIT order under section 263 setting aside the assessment be cancelled and AO's order under section 143(3) dated 30.12.2016 be restored. b. That on facts and circumstances of the case and in law, when the AO has not converted the limited scrutiny in to comprehensive scrutiny following procedures laid down by CBDT Instruction No.7/2014 dated 26/09/2014, disallowance of adjustment on account of unabsorbed depreciation is a serious procedure irregularity, then it was not open to the Pr.CIT to treat the assessment order erroneous and prejudicial to the interest of revenue within meaning of section 263 of the Act. There fore the Pr.CIT order under section 263 setting aside the assessment be cancelled and AO's order under section 143(3) dated 30.12.2016 be restored.

6.That the Pr.CIT has further grossly erred in relying on the judgments totally inapplicable to the facts of the case of the assessee-appellant and has further, placed reliance on the provisions not applicable on the facts of the assessee-appellant. 7. That the assessee craves the right to amend, add, delete, replace , all or any of the grounds of appeal either during the course of hearing or at any time before hearing of this appeal.

RELIEF PRAYED:

a. The Appellant prays that appropriate relief be granted based on the said grounds of appeal and the facts and circumstances of the case. b. The Appellant prays cancelling the Pr.CIT order under section 263 setting aside the assessment and restoring the order of the AO dated 30.12.2016 passed under section 143(3).”

P a g e 3 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

assessee has filed condonation petition dated 11.9.2019 stating the reasons for

filing the appeal late before the Tribunal. After considering the petition and

considering the rival submissions, we are satisfied that there was reasonable cause

in filing the appeal late before the Tribunal. Hence, we condone the delay of 69

days and admit the appeal for adjudication.

iron & steel. The assessment was completed u/s.143(3) of the Act on 30.12.2016

accepting the returned income of Rs.1,43,94,360/-. Thereafter, on perusal of

26AS statement, the Pr. CIT observed that the assessee had received

Rs.16,91,82,966/- from M/s. Triveni Earthmover, S.S. Earthmover and S.S.

Earthmovers & Logistics on account of works contract, whereas in profit and loss

account, same was disclosed at Rs.15,69,31,397/-. Thus, the assessee had

understated the gross receipts from contract by Rs.1,22,51,569/-, which should

have been added to the total income of the assessee. Ld Pr. CIT observed that

the Assessing officer has not verified the said issue during scrutiny proceeding

rendering the assessment order erroneous and prejudicial to the interest of the

revenue.

shown Rs.8,45,95,617/- as gross value of service provided under the head

00440262 (transport of goods by road) and a sum of Rs.15,69,31,397/- as gross

value of service provided under the head 00440402 (service provided in relation to

mining of minerals, oil or gas) as is revealed from service tax return. However, the

P a g e 4 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

assessee had not accounted for the receipt of Rs.8,45,95,617/- in its income.

Moreover, this amount of Rs.8,45,95,617/- had been grouped in “note 19”under

the head “cost of materials consumed”. Thus, the income credited to P&L account

was understated to the tune of Rs.16,91,91,234/- and the same was not taken as

income, which, according to Ld. PR. CIT, the assessment order is erroneous and

prejudicial to the interest of revenue.

depreciation has been allowed to be set off, which was liable to be added back to

the total income of the assessee. Further, the Pr. CIT observed that the MAT credit

of Rs.26,33,135/- was not admissible in assessment year 2014-15 and MAT credit

of Rs.,19,40,110/- carried forward to next assessment year was also inadmissible.

case of Malbar Industrial Co. Ltd vs CIT, 243 ITR 83 (SC) and other decisions on

the issue, observed that the Assessing Officer has completed the assessment

without enquiry or verification, which rendered the assessment order erroneous

and prejudicial to the interest of the revenue and directed the AO to reframe the

assessment after conducting necessary enquiry/verification by calling for all

relevant documents/past records and in accordance with law.

officer after due application of mind had passed the assessment order u/s.143(3)

of the Act, therefore, ld Pr. CIT had exceeded his jurisdiction and in the garb of

P a g e 5 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

revisional powers vested with him under section 263 of the Act, sought to review

the assessment order.

assessment order dtd 30.12.2016, paper book filed by the assessee pertaining to

213 pages and another paper book containing case laws of 145 pages and other

relevant materials placed on the record of the Tribunal.

proceedings u/s.263 of the Act is void ab initio and invalid as the same is contrary

to the relevant provisions and CBDT instruction. Ld counsel submitted that the AO

has passed the assessment order dated 30.12.2016 u/s.143(3) of the Act after due

application of mind and scrutinizing all the submissions filed by the assessee as

asked by the AO on the basis of CBDT instruction for limited scrutiny. He

submitted that the order passed by the AO cannot be held as erroneous and

prejudicial to the interest of the revenue. Ld A.R. vehemently pointed out that

Pr. CIT without ensuring the fact regarding conversion of limited scrutiny into

comprehensive scrutiny by AO has passed impugned revisional order on the basis

of irrelevant consideration and thus, he has grossly erred in holding that the

impugned assessment order is erroneous and prejudicial to the interest of the

revenue. Ld A.R. pointed out that as per copy of the notice and annexure

available at pages 42 and 43 of assessee’s paper book, it is apparent that the

assessee’s case for assessment year 2014-15 is limited scrutiny only on turnover

reported in service tax return compared to income tax return of the assessee and

mismatch in the amount paid to the related person u/s.40A(2)(b) of the Act

P a g e 6 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

reported in audit report and ITR. Further, drawing our attention towards APB

Pages 46 to 48 and page 49, ld counsel submitted that the Assessing Officer issued

notice u/s.142(1) of the Act alongwith questionnaire dated 10.8.2016, on the said

two issues for which the case was selected for limited scrutiny and the assessee

filed its reply dated 14.10.2016, copy of the notice alongwith questionnaire is

available at pages 49 to 104 of APB. Ld A.R. also drew our attention towards

annexure to the said reply and submitted that a letter dated 20.12.2016 in

compliance to CASS. Ld A.R. submitted that as per note sheet entry dated

16.12.2016, reply to which are available at annexure 2 to 3 at APB Pages 80 to

104 and hence, it is very much clear that the AO has gone into deep in making the

assessment for which case was selected for scrutiny. Therefore, he finally

concluded that the impugned assessment order cannot be alleged as erroneous

and prejudicial to the interest of the revenue.

dated 22.12.2016 and submitted that the AO asked the AR of the assessee to

furnish details and explanation in respect of to reasons of CASS selection, which

were verified and examined by the AO and all relevant papers were taken on

record and same were also forwarded to JCIT for kind perusal and approval of

refund, which was received on 29.12.2016 vide letter No.1688 dated 29.12.2016,

which was placed on record.

dated 1.5.2019 and submitted that Pr. CIT proceeded to invoke revisional power

u/s.263 of the Act only on the basis of audit objection, which is not a valid reason

P a g e 7 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

to revise the scrutiny assessment order. Ld A.R. also drew our attention towards

revisional order dtd 29.3.2019 passed u/s.263 of the Act by Pr.CIT and submitted

that in para 13 of the revisional order, the AO is directed to reframe the

assessment keeping in view four points, out of which two points are pertaining to

issue of limited scrutiny and as per para 4 & 5 of the show cause notice issued to

the assessee u/s.263 of the Act, wherein, other two issues placed in show cause

notice u/s. 263 of the Act para 6,7,8 & 9, these issues were not part of limited

scrutiny. Therefore, on these later issues containing in para 6 to 9, , the

assessment order cannot be alleged as erroneous and prejudicial to the interest of

the revenue. In the limited scrutiny case, the AO cannot go beyond the issues for

which case has been selected for limited scrutiny.

29.12.2015 para 3 and submitted that in the case of limited scrutiny, the AO

cannot travel beyond the issues for which case has been selected for scrutiny. Ld

counsel submitted that as per clause (d) of para 3 of said circular, the AO can only

be allowed to travel beyond the scope of scrutiny with the approval of the Pr. CIT

to convert from limited scrutiny to complete scrutiny, otherwise, the AO cannot be

expected to examine and verify other issues and all those other issues, Pr. CIT was

not correct in holding the assessment as erroneous and prejudicial to the interest

of the revenue. Ld A.R. further drew our attention towards order of ITAT Mumbai

‘D’ Bench in the case of M/s. R.& H Property Developer Pvt Ltd vs Pr. CIT in ITA

No.1906/Mum/2019 for the A.Y. 2014-15 order dated 30.7.2019 and submitted

that as per para 8 of this order, the AO is required to confine himself the issues for

which the case was selected for limited scrutiny and the assessment order cannot

P a g e 8 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

be held to be erroneous and prejudicial to the interest of the revenue by picking up

other issues, for which the case was not selected for limited scrutiny.

Pr. CIT has not followed the principles of natural justice while passing revisionary

order u/s.263 of the Act. Ld counsel submitted that the notice u/s.263 of the Act

was issued on 12.3.2019 fixing the date of hearing on 19.3.2019 and subsequently

second show cause notice dated 27.3.2019 fixing the date of hearing after one

day i.e. on 29.3.2019 and thereafter the impugned order has been passed on the

same date i.e. 29.3.2019 without affording due opportunity to the assessee. Ld

A.R. further submitted that the assessee has been placed at Sundargarh and the

hearing was conducted by Pr. CIT at Aayakar Bhavan, Cuttack about 300 kms

away. Therefore, it was not practically possible and convenient to the assessee to

properly contest the proceedings by way of filing relevant documents and reply

within a period of six days to the first notice and then one day only to the second

notice. Therefore, it is a clear case of violation of principles of natural justice. Ld

counsel submitted that between the period from 12.3.2019 to 19.3.2019, there

were to holidays i.e. on 16.3.2019 and 17.3.2019 and the assessee could only get

four working days to reply the show cause notice issued by Pr. CIT and thus, the

order has been passed without following the principles of natural justice and

without application of mind.

second show cause notice on 27.3.2019 fixing the date of hearing on 29.3.2019

and on the very same date, impugned revisionary order u/s.263 has been passed

P a g e 9 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

in a hasty manner without affording opportunity to the assessee. Whereas, the

assessee received copy of said impugned order on 6.5.2019 through its A.R. and

on receipt of said notice, the same was handed over to C.A. for further necessary

action. Ld A.R. further submitted that the order was received by the AO on

1.5.2019, which is also apparent from note sheet dated 1.5.2019. (APB page 110)

Therefore, the Pr. CIT has apparently violated the principles of natural justice by

passing the impugned revisional order which is barred by limitation as the

impugned order has been passed ante dated. Ld A.R. strenuously contended that

as if it was passed on 29.3.2019, as against the actual fact that it was not passed

on 29.3.2019 because the copy of the same was received by the AO on 1.5.2019

and by the assessee through it’s A.R. on 6.5.2019, the copy of the same would

have been received by the AO and AR much earlier within a period of 1-2 weeks

from 29.3.2019, thus, the order has been passed ante dated subsequently after

expiry of limitation period on 31.3.2019.

appeal, ld A.R. submitted that the assessee is a service provider and incurred

expenditure towards transportation charges and in views of the documents

including written reply filed by the assessee dated 14.10.2016 and dated

22.12.2016 to the notice dated 10.8.20`16 issued u/s.142(1) of the Act, Pr. CIT

has not brought on record any cogent and conclusive material or reason which

could prove that the course followed by the AO was unsustainable in law and

hence, revisionary order deserves to be quashed.

P a g e 10 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

service tax as on receipt of service and service tax liability of the assessee has

been shown in the P&L account and the AO has made enquiry on this point, which

is also apparent from Note sheet of the AO dated 16.12.2016 available at page 108

of APB. Ld counsel submitted that the return of service tax at pages 52 to 66 of

APB for financial year 2014-14 relevant to A.Y 2014-15 available at page 160 of

APB for financial year 2011-12 relevant to assessment year 2012-13 and,

therefore, it cannot be presumed that the AO has not made any enquiry on this

issue.

of Jaswinder Singh vs CIT, 56 SOT 85 (Chandigarh), ld counsel submitted that the

revisionary proceedings initiated on the basis of audit objection is not maintainable

in law. Further, ld A,R placed reliance on the proposition laid down by Hon’ble

Delhi High Court in the case of CIT vs Anil Kumar Sharma(2010) 194 Taxman 504

(Delhi) wherein, it was held that where it was discernible from record that AO

had applied his mind to issue in question, the Commissioner could not invoke

section 263 merely because he had different opinion.

Spectra Shares & Scrips Pvt Ltd vs CIT, (2013) 36 taxmann.com 348 (AP), ld A.R.

submitted that the Assessing Officer in the assessment order is not required to

give detailed reasons and once it is clear that there was application of mind by an

enquiry, the ld CIT merely because he entertains a different opinion in the matter,

cannot invoke his powers u/s.263 of the Act.

P a g e 11 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

Superintendent (Audit), Central Excise, Customs & S.Tax, Bhubaneswar-II dated

28.9.2013, it is ample clear that the assessee has been registered as a service

recipient under the Service Category – “Goods transport Agency Service”. Hence,

ld Pr. CIT was not correct in holding that the assessee is a service provider.

under Limited Scrutiny case only on two issues i.e.(i) higher turnover report in

service tax return compared to ITR and (ii) mismatch in amount paid to related

persons u/s.40A(2)(b) reported in audit report and ITR alongwith questionnaire

and the assessee filed all possible replies, which were accepted by the AO as the

same wee supported by cogent and relevant documents and hence, the impugned

order cannot be alleged as erroneous and prejudicial to the interest of the revenue

by picking up another two issues which were not within the ambit and scope of

limited scrutiny by the AO. Ld A.R. submitted that the impugned order is against

principle of natural justice, therefore, same deserves to be quashed on this point

also.

assessment order even on two issues for which case was selected for ‘Limited

Scrutiny’. Therefore, it is a case of inadequate and insufficient inquiry by the AO.

Ld CIT DR vehemently pointed out that there is no deliberation by the AO in the

assessment order on these issues. Merely because the assessee has replied to the

notice u/s 142(1) of the Act and reply of the assessee alongwith all material was

taken on record for consideration, it cannot be held that the AO has examined the

P a g e 12 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

issues by issuing notice by considering explanation and documents of the assessee

on the issue. It is the duty of the AO, as an adjudicator, that the issues should

be taken to a logical end and conclusion and without such exercise, the

assessment order has to be held as erroneous and prejudicial to the interest of the

revenue being passed without sufficient and inadequate enquiry on the issues for

which case was selected for limited scrutiny. Ld CIT DR also submitted that in

addition to regular notice, the assessee was also serviced notice on mail by Pr. CIT

and he got sufficient time to reply the same personally or electronically, therefore,

it cannot be alleged that revisional order has been passed in violation of natural

justice. Without providing sufficient time and opportunity to the assessee On the

allegation of ante dated order, Ld CIT DR strenuously contended that such

allegation against the Sr. Revenue Officer cannot be made in absence of any self-

speaking material or documents and this kind of practice should not be adopted by

the honest taxpayer.

revising the assessment order, which has also been mentioned in show cause

notice issued under section 263 of the Act, therefore, it cannot be alleged that the

order is passed in violation of principles of natural justice. However, Ld CIT DR, in

all fairness, submitted that in pursuance to the impugned revisional order u/s.263

of the Act, the AO has passed the reassessment order after allowing due

opportunity to the assessee. Therefore, no prejudice has been caused to the

assessee in this regard. Ld CIT DR submitted that keeping in view the entire facts,

the revisional order may kindly be upheld.

P a g e 13 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

admittedly and undisputedly, from the copy of the notice by the AO u/s. 142(1) of

the Act dated 13.1.2015, it is ample clear that the case of the assessee for

assessment year 2014-15 was selected for Limited Scrutiny only on two issues i.e.

higher turnover report in service tax return compared to ITR and mismatch in

amount paid to related persons u/s.40A(2)(b) reported in audit report and ITR.

principles of natural justice as alleged by ld A.R. against the impugned order.

Admittedly, the ld Pr.CIT issued notice u/s.263 of the Act on 12.3.2019 fixing the

date of hearing on 19.3.2019 and second show cause notice was issued on

27.3.2019 fixing the date of hearing on 29.3.2019 and the impugned order u/s.263

was passed on 29.3.2019. We are not in agreement with the contention of ld A.R.

that the assessee was not given due opportunity of hearing by ld. Pr. CIT as the

assessee was allowed to file his replies twice personally or electronically alongwith

relevant documents and explanation to the issues agitated by Pr. CIT in the notice

u/.s.263 of the Act. Merely because during the intervening period, some public

holidays are falling, it cannot be alleged that Ld. Pr. CIT has violated principles of

natural justice. The assessee has been given due opportunity of hearing by the

revisional authority. Therefore, we decline to accept the contention of ld A.R. that

the assessee was not allowed due opportunity of hearing to explain his case before

ld. Pr. CIT.

such kind of allegation is being levelled against a Senior Revenue Officer without

P a g e 14 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

any cogent, relevant and self speaking evidence to show that the order was not

actually passed on 29.3.2019 and the same was passed on some later date (ante

dated). Merely because the AO received the copy of the order on 1.5.2019 and

the assessee received the copy of order through its AR on 6.5.2019, it cannot be

safely presumed that the order has been passed ante dated and same was not

passed on 29.3.2019 i.e. on the date of mentioning in the impugned order. We

are unable to see any evidence except service of notice in the second week of

May, 2019, which could show and satisfy us that Pr. CIT has passed ante dated

order. Therefore, we decline to accept this contention of ld A.R. that the order has

been passed ante dated and thus, both the contentions and grounds agitated by

the assessee are hereby dismissed.

28 .So far as sufficiency and adequacy of enquiry on the issues of ‘ Limited

Scrutiny’ are concerned, we observe that the AO issued notice u/s.143(2) and

u/s.142(1) of the Act which were replied by the assessee and copies of these

notices and replies have been placed on record at APB pages 42 to 113, which

shows that the AO makes some inquiry on the issues picked up by him by way of

issuing notices and taking on record replies, explanation and relevant documents

submitted by the assessee in compliance to the said notice. However, we are

unable to find any deliberation in the assessment order regarding these issues

which could show and satisfy us that the AO not only made sufficient and

adequate enquiries on the issues for which the case was selected for limited

scrutiny but also made deliberation by application of mind and thereafter

adjudicated the issues by way of inserting deliberation in the assessment order.

P a g e 15 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

14.7.2016 regarding scope of enquiry in cases under ‘ Limited Scrutiny’ selected

through CASS 2015 and 2016 but in the same instruction/circular, in paras 2 to 6,

it has also been provided that in a case which was originally earmarked for ‘

Limited scrutiny’, the AO shall be required to form a reasonable view that there is

possibility of under assessment of income if the case is not examined under

‘Complete scrutiny’ and the case may be converted from limited scrutiny to

complete scrutiny, which requires administrative approval from pr. CIT/CIT/Pr.

DIT/DIT, as prescribed in para 3(d) of earlier instruction dated 29.12.2015.

we clearly observe that the assessee company had shown gross turnover /revenue

from operation of Rs.63,97,71,157/- for financial year 2013-14 but as per

statement in 26AS, the assessee had shown Rs.16,91,82,966/- from works contract

bit it had disclosed its gross receipts in the profit and loss account only

Rs.15,69,31,397/- resulting that the gross receipts is understated by

Rs.1,22,51,569/- which should have been verified by the AO during scrutiny

proceedings. The AO by way of notice u/s.142(1) initiated enquiry on this issue

but after filing reply of the assessee in compliance to the said notice, the AO as an

adjudicator and investigator did not bother to deliberate this issue in the

assessment order and in our humble opinion,until and unless inquiry started by the

AO is terminated to a logical and plausible end, such kind of enquiry has to be held

as inadequate and insufficient inquiry on the issues, which makes the assessment

order as erroneous and prejudicial to the interest of the revenue.

P a g e 16 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

tax return of the assessee, the assessee had shown Rs. Rs.8,45,95,617/- as gross

value of service provided under the head 00440262 (transport of goods by road)

and a sum of Rs.15,69,31,397/- as gross value of service provided under the head

00440402 (service provided in relation to mining of minerals, oil or gas) as is

revealed from service tax return. However, the assessee had not accounted for

the receipt of Rs.8,45,95,617/- in its income. Moreover, this amount of

Rs.8,45,95,617/- had been grouped in “note 19”under the head “cost of materials

consumed”. Thus, the income credited to P&L account was understated to the

tune of Rs.16,91,91,234/- which were not enquired by the AO.

of Rs.1,34,85,465/- and MAT credit of Rs.26,33,135/- was not under Limited

Scrutiny, hence, the AO has not enquired into the matter while passing the

assessment order. Although both the issues were not under limited scrutiny but

from the spirit and mandate of section 263 of the Act, which provides revisional

powers to Pr. CIT/CIT in the cases where the assessment order or any other

proceedings under this Act, passed by the AO is erroneous and prejudicial to the

interests of the revenue. This section is itself a mini code wherein proceedings for

revision has also been provided and as per this provision, the first and foremost

requirement for invoking the revisional proceedings is that the ld. Pr. CIT/CIT shall

call and examine the assessment records of any proceedings under this Act, which

include scrutiny assessment records and if after applying his mind to such record

or proceedings, he consider that any order passed by the AO is erroneous and

prejudicial to the interest of the revenue, then, he may, after giving the assessee

P a g e 17 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

an opportunity of being heard and after making or causing to be made such

enquiry, he deems necessary, pass such order thereon, as the circumstances of

the case justify, which includes an order of enhancement or modification

assessment or cancelling the assessment with a direction to pass fresh assessment

order. Since both the issues were not considered by the AO in the original

assessment order, Ld. Pr. CIT consider it necessary to direct the AO to enquiry the

matter and reframe the assessment accordingly.

Delhi High Court held as under :-

“It is not necessary for the Commissioner to make further inquiries before canceling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and function of the Income- tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is duty to ascertain the truth of the facts stated in the return which the circumstances of the case are such as to provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word “erroneous” in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct.”

ITR 456], held as under:

P a g e 18 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

“ The ITO is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls further enquiry. It is incumbent on the AO to further investigate the facts stated in the return when circumstances would make such an enquiry prudent. The work ‘ erroneous’ in section 263 includes the failure to make such enquiry.”

“that it was not quite certain whether the tress sold in the previous year relevant to the assessment year were trees standing at the time of acquisition or trees which grew on roots and trunk existing on the date of acquisition or on roots and trunks of trees existing at the time of acquisition and cut subsequently. This was a matter which had to be investigated by the Income-tax Officer after calling upon the assessee to furnish relevant data. The Inspecting Assistant Commissioner had no such data before him in order to enable him to conclude that there was no cost of acquisition. It was also to be considered whether the spontaneous growth required any care or attention by way of protection from animals and the like and, if so, whether the assessee did not incur any cost in that regard. Any decision either way without considering these aspects would certainly be erroneous and any decision in favour of the assessee without considering these aspects would be prejudicial to the interests of the Revenue. The order passed by the Commissioner of Income-tax and the order passed by the Tribunal sustaining the same as a whole were valid.”

“that the words “prejudicial to the interests of the revenue’ in section 263 have not been defined but they must mean that the orders of assessment challenged are such as are not in accordance with law, in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized. In the present case, it was obvious that the Income-tax Officer had committed an error in not making enquiry into the details as regards both the deductions and also that want of such enquiry had resulted in prejudice to the interests of the revenue. To this extent, the initiation of action under section 263 by the Commissioner was quite proper.”

P a g e 19 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

“Even assuming that the Income-tax Officer had called for the particulars, which were also furnished by the assessee, if the Income-tax Officer without probing into the matter further had allowed the claim of the assessee for weighted deduction and if the Commissioner on the basis of materials formed an opinion that the grant of allowance made by the officer was erroneous and not warranted by law, the jurisdiction of the Commissioner under section 263 of the Act was not ousted. The Commissioner may not have recorded his final conclusion, but the question for exercising the power of revision by the Commissioner is whether the order of the Assessing Officer can be regarded as erroneous and prejudicial to the interests of the Revenue. It may be erroneous in law or in fact. It may be erroneous in the sense that the Income-tax Officer had passed the order without properly conducting the inquiry in completion of the assessment and the order may also be erroneous when the expenditure allowed was against the provisions of law.”

evident that their Lordships have taken the unanimous view that the Income-tax

Officer is not only an adjudicator but also an investigator. It is his duty to

ascertain the truth of the facts stated in the return. When the circumstances of the

case are such so as to provoke an enquiry, it is his duty to make proper enquiry.

Failure to make enquiry in such circumstances would make the assessment order

erroneous and prejudicial to the interest of the revenue. we concur with the

submissions of Ld. CIT-DR that it was a case of lack of inquiry and there was no

application of mind by AO on the issues which formed subject matter of revisional

jurisdiction u/s 263. Therefore, we do not find any illegality in the action of Ld. Pr.

CIT in exercising the said jurisdiction.

distinguishable on facts.

P a g e 20 | 21

ITA No.2 92/CTK/201 9 Assessm ent Y ear : 20 14- 201 5

the order of ld Pr. CIT by directing the AO to reframe the assessment after

conducting proper enquiry on the issues and, therefore, we affirm the same.

Order pronounced on 17 /03/2020.

Sd/- sd/- (Laxmi Prasad Sahu) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER

Cuttack; Dated /03/2020 B.K.Parida, SPS Copy of the Order forwarded to : 1. The Appellant : Maa Tarini Industries Ltd., Qr. No.N- 4/12, Ground Floor, Civil Township, Rourkela-769004

By order

Sr.Pvt.secretary ITAT, Cuttack

P a g e 21 | 21