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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
आदेश / O R D E R PER KUL BHARAT, J.M: This appeal by the assessee is directed against order of the Pr. CIT(Central), Bhopal dated 15.03.2018 pertaining to the assessment year 2012-13. The assessee has raised following grounds of appeal:
1a. That, on the facts and in the circumstances of the case, the Ld. CIT grossly erred in invoking the provisions of section 263 of the Income Tax Act, 1961 in the appellant’s case without considering the material fact that the assessment order passed by the Learned Assessing Officer under the provisions of section 153A of the Act was itself illegal and a nullity being emanated from a void-ab-initio process. 1b. That, on the facts and in the circumstances of the case, the Ld. CIT grossly erred in invoking the provisions of section 263 of the Income Tax Act, 1961 in the appellant’s case without considering the material fact that no valid search under the provisions of section 132 of the Act had ever been carried out in the premises of the appellant firm which was a pre-condition for framing the assessment order under section 153A which remained to be the subject matter of the impugned order under section 263 of the Act. 2a. That without prejudice to the above, the Ld. CIT grossly erred in invoking the provisions of section 263 of the Income Tax Act, 1961 in the appellants case without considering the material fact that the assessment order passed by the Learned Assessing Officer was neither erroneous nor prejudicial to the interest of the Revenue. 2b. That, without prejudice to the above, the Ld. CIT grossly erred, both on facts and in law, in assuming the jurisdiction u/s 263 of the Income Tax Act, 1961 without considering the material fact that during the course of the assessment proceedings, on the issue of alleged unaccounted profit from sale of land, the AO had raised specific queries, to which the appellant had replied fully with support of documentary evidences and finally, the AO had chosen to make addition to the extent of Rs.1,36,28,906/- by fully applying his mind, 2 thereby giving no scope for any presumption that the assessment order so passed was erroneous. 3.That, without prejudice to the above, the Learned CIT grossly erred, both on facts and in law, in invoking the provisions of section 263 of the Income Tax Act, 1961 in the appellant’s case without considering the material fact that an appeal of the appellant on the same issue was already pending before the Hon'ble CIT(A) and therefore, on the same issue, revisionary powers under s.263 could not have been assumed.
4. That without prejudice to the above, the Ld.CIT grossly erred, both the facts and in law, in invoking the provisions of section 263 of the Income Tax Act, 9161 in the appellants case without having any material on record relevant to the assessment year under consideration showing any understatement of sales consideration by the appellant firm.
5. That, without prejudice to the above, the Ld. CIT grossly erred, both on facts and in law, in setting aside the assessment order passed by Assessing Officer under section 144 of the Income Tax Act, 1961 merely for conducting enquiries and investigation without first forming any objective opinion that the original assessment order passed by the AO was prejudicial to the interest of the Revenue.
That the appellant further craves leave to add, alter and/or amend any of the foregoing grounds of appeal as and when considered necessary.
2. At the outset, Ld. counsel for the assessee submitted that he does not wish to press ground numbers 1a & 1b of the appeal. Hence, these grounds are dismissed as not pressed.
Facts giving rise to the present appeal are that the search and seizure operations u/s 132 of the Income Tax Act 1961(hereinafter called as ‘the Act’) was conducted 04.10.2013 at the business premises of M/s RNR Devcon, a partnership firm, i.e. the assessee herein. Subsequently, assessment order u/s 144 r.w. section 153A of the Act was passed on 30.03.2016 for A.Y. 2012-13 and thereby, the assessing total income at Rs.2,21,29,330/-. Thereafter the Ld. Pr. CIT invoking provisions of section 263 of the Act issued show cause notice calling upon the assessee as to why the assessment so framed should not be revised. The basis of issuance of notice was that while computing the unaccounted sales ought to have been taken at Rs.3.89 Crores however the AO has made addition only of Rs.1,36,28,906/-. In response to the notice issued the assessee filed its objection. The objections of the assessee were that assessment order passed by the AO itself is a illegal, void-ab-initio and a nullity and therefore, the provisions u/s 263 of the Act cannot be invoked in respect of such order. Further, another objection was that an appeal was pending before the Ld. CIT(A) in respect of the same issue, therefore, invoking the provisions of section 263 of the Act is illegal and contrary to the settled law. It was also submitted before the Ld. CIT(A) that the AO had examined the issue thoroughly during the assessment proceedings. Therefore, the assessment order cannot be termed as erroneous and prejudicial to the interest of revenue.
Ld. Pr. CIT did not accept the objections of the assessee and proceeded to revise the assessment order by way of the impugned order, the assessment order dated 30.03.2006 was set aside and the Assessing Officer was directed to reframe the assessment after examining the issues and carrying out the necessary inquiries. 5
Aggrieved by this order the assessee is in present appeal.
Ground Nos. 2a, 2b, 3, 4 & 5 are against invoking the provisions of u/s 263 and revising the assessment order.
6. Ld. AR for the assessee Shri Anil Kamal Garg, vehemently argued that looking to the facts of the present case and judicial pronouncement the impugned order would fail in judicial scrutiny being illegal and unjustified exercise of powers vested under section 263 of the Act. He contended that issue in question is related to undisclosed sales. He submitted that this issue has been examined by the Assessing Officer and made addition to the tune of Rs.1,36,28,906/-. The assessee has challenged this before Ld. CIT(A) and appeal is pending for adjudication before the ld. CIT(A). He submitted that Ld. CIT(A) has co-terminus power with the Assessing Officer and he is empowered to make enhancement if the facts of the case suggests so. He submitted that undisputedly where the issue is under consideration of two different authorities of the same rank give rise to the multiplicity of litigation. Therefore, to avoid multiplicity of litigation and hardship to the parties, the courts have held that where an appeal is pending before the Ld. CIT(A) on the same issue, powers u/s 263 should be exercised.
In support of this proposition Ld. AR relied upon the judgment of Hon'ble Gujarat High Court rendered in the case of JMC Project (India) Ltd. vs. Pr. CIT (2016) 136 DTR 279 (Guj). He further relied upon the decision of Hon'ble Madras High Court rendered in the case of Smt. Renuka Philip vs. ITO 2018 (12) TMI 129 and also decision of the Coordinate Bench of I.T.A.T., Jaipur rendered in the case of GAD Fashion vs. Pr. CIT (2018) 53 CCH 374 (Jaipur Trib). It is further contended that it is not the allegation of the Ld. Pr. CIT that the AO while passing the order did not conduct 7 any enquiry. The stand of the Pr. CIT is that the AO ought to have taken some other view, on a particular issue, than what was taken by him. It is further submitted that in the present case issue is related to the estimation of profit/gain in the hands of assessee, for the relevant assessment year, in respect of transfer of land admeasuring1.620 hectare situated at village Mayakhedi which was sold by the assessee under the registered deed dated 30.01.2012 for a total consideration of Rs.2,35,80,000/-.
As per Ld. Pr. CIT the quantification of unaccounted income from sale of land ought to have been made at a higher amount than that was made by the assessing officer. It is contended that only point of difference is that methodology adopted by the AO and Ld. Pr. CIT. It is related to the estimation of total market value (sales value) of land admeasuring 3.93 hectares. The assessing officer adopted the value at Rs.1817.43 lakhs whereas the Ld. Pr. 8 CIT is of the view that valuation ought to have been at Rs.2250.00 lakhs and instead of taking figure of the net sales the gross amount ought to have been taken. He submitted that without admitting the sanctity of the excel sheet alleged to have recovered during the course of search.
He contended that the excel sheet is to be considered in entirety. It is submitted that if AO presumed that the valuation of total sales amount at Rs.2250 lakhs on the basis of the excel sheet, and then the AO was also duty bound to give the credit for various expenses at Rs.432.57 lakhs as reflected in the same excel sheet. Thus, in any eventuality, the net sales amount could not have been taken more than Rs.1817.43 lakhs as shown in the seized excel sheet and this is what exactly, the Ld. AO has done while passing the subject assessment order. He submitted that prima facie, if reliance is placed on the excel sheet, then no fault could be found with the working of the Ld. AO. He submitted that it is settled law that against any unaccounted income, noted on a loose paper, unaccounted expenditure noted on the same loose paper. The set off such expenditure is required to be given for computing the unaccounted income.
In support of this contention Ld. counsel for the assesse has placed reliance on the decision of the Hon'ble Kerala High Court rendered in the case of CIT(central) Cochin vs. P.D. Abraham @ Appachan (2012) 252 CTR (Ker) 407. The reliance was also placed on the decision of the Coordinate Bench, I.T.A.T., Pune, rendered in the case of Ramanlal P.
Chordiya vs. ACIT (2004) 87 TTJ 713 (Pune).
Ld. counsel for the assessee further reiterated the submissions as made in the written synopsis.
Ld. CIT-DR vehemently opposed the submissions and relied on the order of the authorities below and reiterated the submissions as made in the para-wise reply to the synopsis. It is contended that Ld. Pr. CIT has clearly established that how the assessment order passed by the AO was erroneous and prejudicial to the interest of revenue. The AO had adopted erroneous calculation for the purpose of computing unaccounted receipt in the hands of assessee firm which resulted in under assessment of Rs.2.53 crores in the year under consideration. It is further contended that the exercise of power u/s 263 is legally correct and in accordance with the settled proposition of law as the assessment order passed by the AO is ex-facie erroneous and prejudicial to the interest of the Revenue.
Ld. CIT-DR submitted that it is settled law that if the AO has not properly applied his mind and did not make proper inquiries before passing the assessment order the Pr. CIT would be within the ambit of power to exercise revisionary powers as against such erroneous and prejudicial order.
Further reliance was placed upon the decision of Hon'ble Supreme court in the case of Daniel Merchants Pvt. Ltd. vs. ITO (SC) SLP(C) No.28632/2017. Ld. CIT-DR submitted that as per the seized documents the AO should have taken gross sales value of Rs.22.50 crores for computing pro-rata sale amount of the land admeasuring 1.60 hectares sold during the A.Y. 2012-13. However, the AO did not compute in such a manner which resulted in under assessment of Rs.2.53 crores. It is submitted by the Ld. CIT-DR that all the expenses of Rs.4.33 crores claimed by the assessee firm are unaccounted and not supported with any evidence, the same could not be allowed for deduction from total sales of Rs. 22.50 crores. Since no corroborative evidence in regard to these expenses has been furnished during the assessment proceedings, it clearly proves that the expenses of Rs.4.33 crores have been incurred from unaccounted source which may be deemed as unexplained expenses.
Hence, the AO is not correct in adopting the total sale value of Rs.18.17 crores instead of Rs.22.50 cr.
The AO adopted wrong methodology and did not make proper application of mind while passing assessment order.
The assessee cannot be allowed to set-off unaccounted expenses from the total sale receipts. This was the reason why the provision of section 263 has been invoked. In respect of the objection of the Ld. counsel for the assessee regarding pendency of appeal before the Ld. CIT(A), in respect of the same assessment Ld. CIT-DR relied upon the provisions of section 263 and contended that ware reading of the assessment order passed u/s 153A/144 as well as the impugned order passed u/s 263. It is crystal clear that the revision proceedings u/s 263 is with regard to under assessment of income to the tune of Rs.2.53 crore in addition to the addition of Rs.1.36 crore made by the AO.
Ld. CIT-DR submitted that as per clause (c) of Explanation 1 to section 263(1), the powers of Pr. CIT shall extend to such matters as had not been considered and decided in such appeal. Hence, the arguments on this count cannot be considered and deserves to be rejected. In respect of the decision of the Hon'ble Gujarat High Court, Ld. CIT-DR submitted that the same has been on the different set of fact and would not be applicable on the facts of the present case. Similarly decision of the Coordinate Bench as relied by the assessee in the case of GAD Fashion vs. Pr.
CIT(supra) would not help the assessee. Therefore, the Ld. CIT-DR submitted that there is no merit in the contention of the Ld. counsel for the assessee.
We have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. The objection of the assessee against invoking the provisions of section 263 of the Act are 14 three fold firstly similar issue was pending for adjudication before Ld. Pr. CIT. Therefore, Ld. Pr. CIT was not justified in proposing and revising the assessment order which was appealed before Ld. Pr. CIT on the same issue. This objection of the assessee was rejected by the Ld. Pr. CIT observing as under:
The Assessing Officer made an addition of Rs.1,36,28,906/- on account of profit arising from valuation/sale of the subject land and against such addition, the assessee is in appeal before the Hon'ble CIT(A)-III, Indore before whom the appellate proceedings are still pending for adjudication with respect to the addition made by the A.O. From the discussion made above, it is abundantly clear that the present proceedings are with regard to the under assessment of Rs.2.53 Cr in addition to addition already made by the A.O. Therefore, the submission of the assessee is not acceptable on this count. Moreover, as clarified in clause (c) of Explanation 1 to section 263(1), the powers of Pr. CIT under section 263 “shall extend to such matters as had not been considered and decided in such appeal.
In the instant case the issue has not been decided by the CIT(A) as on date.”
From the above finding, it is clear that the objection is not properly adjudicated. Ld. Pr. CIT has relied upon clause (c) of explanation (1) to section 263 of the Act. For the sake of clarity, explanation (1) to section 263 of the Act is reproduced as under:
263(1) The [Principal Commissioner or] Commissioner may call for and considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. [Explanation 1]—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,-- (a) an order passed [on or before or after the 1st day of June, 1988] by the Assessing Officer shall include— (i) an order of assessment made by the Assistant Commissioner [or Deputy Commissioner] or the Income-tax Officer on the basis of the directions issued by the [Joint] Commissioner under section 144A; (ii) an order made by the [Joint] Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred by the Board or by the [Principal Chief Commissioner or] Chief Commissioner or [Principal Director General or] Director General or [Principal Commissioner or] Commissioner authorised by the Board in this behalf under section 120; (b) “record” [shall include and shall be deemed always to have included] all records relating to any proceeding under this Act available at the time of examination by the [Principal Commissioner or] Commissioner; (c) Where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988] the powers of the [Principal Commissioner or] Commissioner under the sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.] 15. From the above explanation, it is clear that Ld. Pr. CIT can invoke provisions of section 263 of the Act also where any assessment order sought to be revised had been subject matter of any appeal. The powers of Ld. Pr. CIT u/s 263(1) of the Act would extent to said matters as had not been considered and decided in such appeal. It is the contention of the revenue that the issue in question was neither considered nor decided by the Ld. CIT(A), therefore, Ld. Pr. CIT rightly exercised his jurisdiction u/s 263 of the Act. Ld. Counsel for the assessee has relied upon the judgement of the Hon'ble Gujarat High Court rendered in the case of JMC Projects India Pvt. Ltd. Vs. Pr. CIT (2016)
136 DTR 0279 (Guj.) and also the decision of the Hon'ble Madras High Court in the case of Smt. Renuka Philip Vs. ITO (2018) 12 TMI 129 and also the decision of the coordinate bench in the case of GAD Fashion Vs. Pr. CIT (supra). To controvert the contention of the revenue that as per explanation (1) to section 263 of the Act authorises the Ld. Pr. CIT to exercise jurisdiction in the matter where the subject matter has not been decided in appeal or considered in such appeal. The Hon'ble Gujarat High Court in the case of JMC Projects India Ltd. Vs. Pr. CIT (supra) has held as under:
Under the circumstances, we do not think that the powers under section 263 of the Act can be exercised when, though addition has been made, on the footing of the premises which are not to the satisfaction of the Commissioner and, therefore, to make additions on better premises with better reasoning on different application of legal principles.
In the result, in our opinion, the Commissioner lacked jurisdiction to issue the impugned notice. When the question is the very foundation of the notice and jurisdiction of the Commissioner to exercise such powers, the question of relegating the petitioner to alternative remedy or to permit the Commissioner to complete the proceedings and thereafter to direct the petitioner to take appeal route does not arise.”
Further, the Hon'ble Madras High Court in the case of Smt. Renuka Philip Vs. ITO in Tax case appeal No.286 of 2012 after examining the law held as under:
16. Further, the coordinate bench of this Tribunal in the case of GAD Fashion Vs. Pr. CIT (supra), wherein the coordinate bench of this Tribunal held as under:
“Accordingly, when the addition made by the A.O. was the subject matter of appeal before the Ld. CIT(A) and this issue was pending before the Ld. CIT(A) then, the Pr. CIT has not powered to invoke the jurisdiction of u/s 263 of the Act on the same issue. In view of the above facts and circumstances of the case the issue which was the subject matter of appeal before the Ld. CIT(A) at the time of issuing the show cause notice then, the initiation of proceedings u/s 263 itself is not valid. Further, it is apparent and manifest from the record that the Ld. Pr. CIT issued the show cause notice on 29.3.2018 and passed the impugned order on 31.3.2018 as failing which the time limit available would have expired. Thus passing the revision order in such a haste without considering the relevant material as well as reply filed by the assessee is otherwise not sustainable in law. We find that the Pr. CIT while passing the impugned order has not even made any reference to the reply filed by the assessee thus such an order passed in violation of principle of natural justice is not sustainable and liable to quash. Accordingly, we set aside the impugned order passed u/s 263 of the Act.” 20
17. In the present case there is no dispute with regard to the fact that the same issue i.e. valuation of land is pending consideration of the Ld. CIT(A). Ld. Pr. CIT heavily relied on the explanation (1) to clause (c) to section 263 of the Act. As per this clause, jurisdiction u/s 263(1) of the Act would extend to the matters as had not been considered and decided. Admittedly, the issue has not been decided as the matter is still pending consideration before the Ld. CIT(A) as submitted by the Ld. representatives of the parties. Whether the pendency of issue before the Ld. CIT(A) for consideration would oust the jurisdiction of Ld. Pr. CIT for invoking jurisdiction u/s 263 of the Act, this issue was under consideration before the Hon'ble High Court of Madras in the case of Renuka Philip Vs. ITO (supra), wherein the Hon'ble High Court decided the issue against the revenue by observing as under:
Therefore, in the process of considering as to what relief the assessee is entitled to, the Assessing Officer held that the assessee is entitled to claim deduction under Section 54F of the Act and assigned certain reasons for that. Therefore, the larger issue was pending before the Commissioner of Appeals, and in such circumstances, the Commissioner could not exercise power under Section 263 of the Act on account of the statutory bar. Therefore, on this ground also, the assumption of jurisdiction under Section 263 of the Act was wholly erroneous.
In the present case as well, the larger issue regarding valuation adopted by the A.O. is pending before the Ld. CIT(A). Therefore, respectfully following the judgement of the Hon'ble Madras High Court, we hold that Ld. Pr. CIT was not justified to invoke the jurisdiction u/s 263(1) of the Act when the similar issue was pending before Ld. CIT(A).
Therefore, the impugned order is set aside and the grond raised qua this issue is allowed. Moreover, the revenue has not brought to our notice any other contrary binding precedents. However, it is made clear that the revenue would be at liberty to approach Ld. CIT(A) for expediting disposal of the appeal. The other objections of the assessee are on merit of addition made by the assessing officer.
Since we have set aside the impugned order on the ground that similar issue is pending before Ld. CIT(A), the remaining grounds have become of academic interest only.
However, the assessee would be at liberty to make submissions before Ld. CIT(A). Appeal of the assessee is allowed in the terms indicated herein above.
Order was pronounced in the open court on 19 .11.2019.