PRINCIPAL COMMISSIONER OF INCOME TAX vs. M/S GIRNAR TEXTILES

Court No. - 35 Case :- INCOME TAX APPEAL No. - 233 of 2015 Appellant :- Principal Commissioner Of Income Tax Respondent :- M/S Girnar Textiles Counsel for Appellant :- Manu Ghildyal S.C. Counsel for Respondent :- Prateek Chandra Hon'ble Bharati Sapru,J. Hon'ble Piyush Agrawal,J. (Delivered by Hon'ble Piyush Agrawal,J.) The present appeal has been filed under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as "the Act") against the order dated 30th March, 2015 passed by the Tribunal in ITA No. 3376/Del/2013 for the assessment year 2008-09. The appeal was admitted vide this Court's order dated 22nd September, 2015 on the following substantial question of law, which reads as follows:- "Whether the Tribunal was justified in holding that the Commissioner of Income Tax had passed an order which was not covered by the grounds mentioned in the notice under Section 263 of the Income Tax Act" The brief facts of the case are the respondent is a partnership firm engaged in the manufacturing and export of home furnishing. On 5.10.2010, an assessment order under Section 143(3) of the Act was passed on a total income of Rs. 19,35,120/-. Thereafter, a proceeding under Section 263 was initiated by CIT on the ground that the respondent has taken an unsecured loan from M/s Kabir Oldtax for a sum of Rs. 57,80,000/-

and

neither

proper examination/verification was done by the Assessing Authority nor the creditworthiness

nor other details were sought by the Assessing Authority. Further, there were Sundry Creditors of Rs. 10,81,49,561/- which were unexplained. The respondent-assessee paid Rs. 13,05,900/- towards designing charges on which no proper inquiry was made, as to whether, TDS was made on these payment or not. The respondent has shown fire loss of Rs. 62,58,623/- for which the Assessing Authority has neither taken any detail nor made any inquiry. On the basis of the above said facts notice was issued, the respondent submitted a detailed reply. In spite of the reply, having been submitted by the respondent, an order under Section 263 was passed on 18.3.2013 in which four directions were given by the Assessing Authority. On 17.2.2014, the Assessing Authority passed an order under Section 263/143(3) of the Act and partly modified the earlier assessment order. The respondent being aggrieved by the order under Section 263 preferred an appeal before the Tribunal, New Delhi, but, by the impugned order, the Tribunal had allowed the appeal filed by the respondent and set aside the order passed under Section 263. Heard Mr. Manu Ghildyal, learned counsel for the Revenue and Ms. Saubhagya Agrawal, learned counsel for the respondent. It was argued on behalf of the Revenue that

the Tribunal was not justified in setting aside the order of the CIT passed under section 263 and Assessing Authority without proper examination/verification, has allowed certain claims of the respondent. Rebutting the argument of the Revenue, the counsel for the respondent has argued that the Tribunal being a last court of fact and law has rightly allowed the appeal and set aside the order of CIT, passed under Section 263 of the Act. On perusal of the record, it reveals that the proceeding has been initiated under Section 263 as the assessment order has been passed without making proper requisite and desired inquiries and therefore, order is alleged to be irrelevant and prejudicial to the interest of Revenue. The record of the case also reveals that the proceeding under Section 263 was initiated after issuing notice by pointing out four issues therein and while passing order under Section 263, CIT directed the Assessing Authority to make inquiry not only on the four points but also enlarge the scope of inquiry to entire Sundry Creditors and also estimate net profit at the rate of Rs. 5% of gross turn over of the Assessee which were not mentioned in the notice under Section 263 of the Act. In the impugned order, the Tribunal has recorded a finding of fact which is quoted as below:- "16. Under these clear facts and circumstances of the

present case we hold that the issue is covered on all four corners in favour of assessee by decision of the coordinate bench of in the case of B.S. Sangwan (supra) and we are inclined to hold that the revision u/s 263 of the Act can only be passed on the ground on which assessee has been given reasonable opportunity of being heard in the notice u/s 263 of the Act and it is not allowable and open to the CIT to set out one reason for revising the assessment order but actually revising the assessment order on some other ground in addition to grounds which found place in the notice u/s 263 of the Act, by passing final order u/s 263 of the Act. We may further point out that the AO did not make any addition on any one out of four issues, which were raised and pointed out in the notice u/s 263 of the Act, in the order framed u/s 263 read with section 1 in pursuant to the impugned order. Hence, impugned order u/s 263 of the Act is not valid and sustainable and therefore, we quash the same and all subsequent proceedings and order passed in pursuant thereto. Accordingly, ground no. 1 and 2 of the assessee are allowed." In view of the finding of fact recorded by the Tribunal, we do not find any substance in the present appeal which gives arise to substantial question of law and, hence, the appeal is dismissed. The question of law is answered in favour of the respondent-assessee and against the department. Order Date :- 11.3.2019 SY