Loading judgment…
Facts
The assessee's income was initially assessed, then reopened under Section 147. A reassessment order was passed, and subsequently, a rectification order under Section 154 was issued to correct a double taxation issue. The PCIT initiated proceedings under Section 263, viewing the rectification order as erroneous and prejudicial to revenue.
Held
The Tribunal found that the PCIT's reasoning in the Section 263 order was not forceful. The original assessment order itself, before rectification, had addressed the issue of double taxation. The Tribunal concluded that the rectification under Section 154 was justified to correct the double taxation.
Key Issues
Whether the PCIT was justified in invoking Section 263 to revise an order passed under Section 154, which rectified an apparent error leading to double taxation.
Sections Cited
263, 147, 154, 143(3), 133(6), 68, 115BBE, 144B, 80G
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, HON’BLE & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE
Assessee by : Shri Madhur Agrawal & Mr. Hitesh Trivedi, A/R Revenue by : Smt. Sanyogita Nagpal, CIT D/R सुनवाई की तारीख/Date of Hearing : 05/05/2025 घोषणा की तारीख /Date of Pronouncement: 07/05/2025 आदेश/O R D E R
PER NARENDRA KUMAR BILLAIYA, AM:
This appeal by the assessee is preferred against the order of the Principal Commissioner of Income Tax, Mumbai – 4, [hereinafter “the ld. PCIT”] dated 26/03/2025 pertaining to AY 2014-15.
The sum and substance of the grievance of the assessee is that the ld. PCIT erred in assuming jurisdiction u/s 263 of the Act and further erred in holding that the assessment order dated 02/05/2023 is not only erroneous but prejudicial to the interest of the revenue.
2 3. Representatives of both the sides were heard at length. Case records carefully perused and relevant documentary evidence brought on record, duly considered in light of Rule 18(6) of ITAT Rules, 1963.
Briefly stated the facts of the case are that the assessee filed its return of income on 27/11/2014 declaring total income at Rs.2,35,95,190/-.
Subsequently, the assessment was reopened u/s 147 of the Act and the re-assessment order was framed on 02/05/2023 assessing total income at Rs. 3,01,92,910/-, after making additions interalia of Rs.65,97,720/- as unexplained credit.
Vide application dated 09/05/2023, the assessee moved an application for rectification u/s 154 of the Act stating that the amount of Rs. 65,97,720/- added as unexplained cash credit is already accounted in his financial statement as sale consideration and offered to income. However, while computing the total income, the AO has not reduced the amount from the business income and also added the same as income from other sources resulting into double taxation of the said income. 6.1. The contention of the assessee was accepted by the AO, who vide order dated 25/05/2023 framed u/s 154 of the Act, rectified the mistake mentioned hereinabove and re-computed the total taxable income at Rs. 2,35,95,190/-.
Assuming jurisdiction conferred upon him by the provisions u/s 263 of the Act, the ld. PCIT issued following showcause notice to the assessee:-
We have given a thoughtful consideration to the aforementioned showcause notice of the ld. PCIT. The ld. PCIT holding that the rectification order dated 25/05/2023 framed u/s 154 of the Act is erroneous as well as prejudicial to the interest of the revenue and accordingly set-aside the same. While doing so, the ld. PCIT observed as under:- “3.1 After going through the assessment records, Audit Memo, proposal of the A.O for section 263 proceeding and assessee's submission, following facts emerge: (i)`The assessment u/s. 147 r.w.s 144B of the Act was passed on 02/05/2023 determining total income of Rs. 3,01,92,910/- as against returned income of Rs. 2,35,95,910/- whereby addition of 65,97,720/- was made u/s. 68 rws 115BBE of the Act. Later on, rectification order u/s. 154 of the Act was passed on 25/05/2023 whereby additional of Rs.65,97,720/- was reduced from turnover on account of the fact that this amount added u/s. 68 of the Act was part of sales turnover. It was noted that the Assessing Officer has discussed in detail in the assessment order, the addition of Rs.65,97,720/- received from 3rd party in installments below Rs.50,000/- which was claimed by the assessee as sale receipts against sales made to parties – M/s. Krishna Trading Co. The A.O had noted in the assessment order that there was no co-relation of fund movement established between the purchase parties M/s. Keshar Trading Co., M/s. Sri Hari Foods Products and M/s Shri Krishna Trading Co. vis-à-vis M/s. Renuka Mata Multi State Urban Co-op. Credit Society Ltd. This finding in the assessment order indicate that the A.O had consciously not reduced sales turnover by Rs.65,97,720/-. Thus there was no mistake apparent from record for the later A.O to resort to rectification u/s. 154 of the Act. (ii) In the reply filed by the assessee vide letter dt. 12/03/2025, the assessee contended that Rs.65,97,720/- was sale consideration duly recorded in the total sales turnover. As the same amount was added u/s. 68 of the Act, this led to double addition. Therefore, the order u/s. 154 was justified whereby Rs.65,97,720/- was reduced from sales turnover. This contention of the assessee is not acceptable because -
1. 1. The Assessing Officer had passed order u/s. 147 r.w.s 144B with complete discussion on the issues involved and there was no case for any mistake apparent from record.
2. The Assessing Officer has treated the receipts of Rs.65,97,720/- as unexplained credit u/s. 68 of the Act. This amount could not have been linked to the sales turnover from 3 parties - M/s. Keshar Trading Co., M/s. Sri Hari Foods Products and M/s. Shri Krishna Trading Co., when clear finding was given that the amount of Rs.65,97,720/- was not received from these three parties. Thus, the Assessing Officer passing the order dated 02/05/2023 had consciously not reduced this amount of Rs.65,97,720/- from sales turnover. Therefore, there is no case of double addition and no action u/s 154 was allowable.”
The aforementioned reasoning given by the ld. PCIT was considered carefully. However, we do not find any force in the aforementioned observations of the ld. PCIT. The AO while framing the assessment order dated 02/05/2023 u/s 147 r.w.s. 144B of the Act categorically held as under:- “On perusal of submission, it is found two points on which assessee emphasis. The same is mentioned below:-
=> In case any proposed adjustment is made of the amount of Rs.65,97,720/-, the sale considered offered in the profit and loss account and computation of total income be omitted first and then only the proposed addition be made, which will have no impact on the total income; any addition made without reducing the sale consideration already offered as income in the computation of total income will result into double taxation of same income; 7 3.4. The contention mentioned by the assessee is right. The profit shown on total receipt from the above proposed variation from sale consideration receipt is to be deducted from the total amount which have not been made in the show cause notice sent to the assessee with proposed variation.”
Basis the aforementioned observations, in his order rectifying the mistake the mistake, the AO observed as under:- “2.1. However, while working out the total taxable income, business income was not reduced which resulted into double taxation of income. In the income tax computation form also, business income is taxed at Rs.5,49,38,639/- as against Rs.46,07,771/- after reduction of Rs.65,97,720/- as above. Also, the long-term capital loss is also taxed at Rs. 15,694/- as against Rs. Nil after set-off of brought forward loss.”
Considering the aforementioned facts, we find that the assessee has furnished complete details of purchase invoices, relevant extract of bank statements reflecting payment made for purchases and receipt of sale consideration for sale of goods, sale invoices, delivery challans, sales register and ledger account. Further we find that the sales made to M/s. Keshar Trading Co., M/s. Sri Hari Foods Products and M/s. Shri Krishna Trading Co., were credit sales have not been reflected as trade debtors in the balance sheet because the sale consideration was received from M/s. Renuka Mata Multi State Urban Co-op. Credit Society Ltd. and the credit received from M/s. Renuka Mata Multi State Urban Co-op. Credit Society Ltd., is not shown as trade creditors/unsecured loans in the balance sheet, it can be safely concluded that the consideration received from the credit society is the sales realization of the sales made to three parties mentioned hereinabove.