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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI ABY T. VARKEY, JM & SHRI GAGAN GOYAL, AM
O R D E R
PER ABY T. VARKEY, JM:
This is an appeal preferred by the assessee against the order of the Ld. Principal Commissioner of Income Tax-17, [hereinafter referred to as the “PCIT”], Mumbai dated 09.03.2021 for assessment year 2010-11 passed under section 263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
None appeared on behalf of the assessee despite the notice has been posted at the addition given by assessee at Form 36 filed before us. And this is the ninth (9th ) time appeal is listed for hearing and none has appeared throughout on behalf of assessee. So we proceed ex- parte. The grounds of appeal
of the assessee reads as under: -
1. In facts and circumstances of the case, the Ld. PCIT, Mumbai-17 erred in set asiding the order passed u/s 143(3) dated 28.12.2019 and ITA Ns. 1719/Mum/2021 A.Ys. 2010-11 Dnyanraj Yashvant Nikam redirecting the Assessing Officer to pass revise order by invoking provisions of section 263 of the Income Tax Act, 1961. 2. The appellant craves leaves to add, alter and modify any of the grounds of appeal during the course of hearing of appeal.” .
3. From the perusal of the grounds of appeal, it is discerned that the assessee is aggrieved by action of the Ld. PCIT setting aside the order of the AO passed u/s 143(3) of the Act dated 28.12.2019 and directing the AO to pass the assessment order de-novo.
Brief facts is that the AO has noted that the assessee has returned an income of Rs.4,86,797/- as per the return of income filed on 26.12.2010. According to the AO, the assessee is running a business of clearing and forwarding agency in the name & style of M/s. D.N. International and partner at M/s. Y. G. Nikam & Sons. Later, the case was taken us for scrutiny and since there was no response to the notices issued u/s 142(1) & 143(2) of the Act, the AO passed the best judgment assessment u/s 144 of the Act and determined the income at Rs.64,69,400/- (i.e first round). On appeal, the Ld. CIT(A) confirmed the same, which action of the Ld. CIT(A) was challenged before this Tribunal; and the Tribunal vide order dated 20.07.2018 (ITA. No.1068/Mum/2017) was pleased to set aside the order of the Ld. CIT(A) as well as that of AO and directed the AO to frame fresh assessment. Pursuant to the same, the AO in the second round, has framed assessment vide order dated 28.12.2019 and had added inter-alia Rs.6,98,807/-. Thus, computed the total income of the ITA Ns. 1719/Mum/2021 A.Ys. 2010-11 Dnyanraj Yashvant Nikam assessee at Rs.11,58,140/-. This action of the AO has been interfered by the Ld. PCIT by the impugned order dated 09.03.2021 u/s 263 of the Act. This action of the Ld. PCIT has been challenged by the assessee before us. It is noted that the Ld. PCIT has found fault with the action of AO on the ground that even though the AO (second round) has called for details of sundry creditors & advances shown in the balance-sheet along with supporting documents; the same was not submitted by the assessee. According to the Ld. PCIT in the first round of assessment u/s 144 of the Act, the AO had found discrepancy in this regard to the tune of Rs.24,31,071/- which has not been considered for addition during the second round u/s 143(3) of the Act (pursuant to the order of ITAT). Therefore, according to the Ld. PCIT, order passed by the AO in second round [assessment order dated 28.12.2019] is erroneous in so far as prejudicial to the interest of revenue. Therefore, Ld. PCIT issued show cause notice u/s 263 of the Act dated 23.02.2021 and fixed the case for hearing on 02.03.2021 wherein the assessee has given submission as under: - “I wish to state that my business activities are totally stopped since past 7 years. I am totally jobless. Information is called from the 15 parties. However, I wish to state that most of parties have closed their business. I could not trace these parties in spite of my best search. Nevertheless, I do honour the notice received by the department. I assure your honour my full co-operation in the matter. I also assure your honour to comply to the notice to the best possible from my end. I don’t have any staff or any assistant to support me in the matter. Due to pandemic situation my consultant is also not attending his office being Senior Citizen, I will have to hire a new consultant. Considering ITA Ns. 1719/Mum/2021 A.Ys. 2010-11 Dnyanraj Yashvant Nikam all these genuine difficulties, I request your honour to kindly consider the fact more sympathetically and grant me an extension of at least 20 days or so, which may please be granted. I assure my full cooperation in the matter and oblige.”
The Ld. PCIT has noted that on 2.03.2021(when the case fixed for hearing), the assessee has shown his inability to produce any other relevant details even if time is further granted and urged Ld. PCIT to decide the case on its merits. Thereafter, the Ld. PCIT was of the opinion that the AO has not examined the issues (sundry creditors & advances shown in balance-sheet of Rs.24,31,071/-) properly; and that AO in the second round has not applied his mind as required in the facts and circumstances of the case for the purpose of determining the genuineness of the claims of the creditors/advances. Therefore, applying the Explanation-2 to Section 263 of the Act (deeming provision), the Ld. PCIT was of the opinion that since the AO has not properly inquired or verified in respect of sundry creditors, the action/omission of the AO was erroneous as well as prejudicial to the revenue. Therefore, he set aside the order of the AO and directed him to frame denovo assessment keeping in mind the observation made by him in the impugned order. This action of the Ld. PCIT has been challenged before us by raising the grounds of appeal (supra) wherein the assessee has challenged the invocation of jurisdiction u/s 263 of the Act.
We have heard the Ld. CIT-DR and carefully perused the records. We note that the Ld. PCIT has interdicted the AO’s order
ITA Ns. 1719/Mum/2021 A.Ys. 2010-11 Dnyanraj Yashvant Nikam dated 28.12.2019 for AY. 2010-11 on the ground of non- inquiry/verification in respect of sundry creditors and advances shown in the balance-sheet; and has applied Explanation-2 to Section 263 of the Act to hold that since the AO has not inquired on the issue of genuineness of the sundry creditors and advances shown in the balance-sheet, the AO’s order is erroneous as well as prejudicial to the revenue. It is noted that the Ld. PCIT has given show cause notice to the assessee vide show cause notice dated 23.02.2021 and assessee has replied vide letter dated 24.02.2021(supra). Thus, assessee has been given an opportunity to rebut/explain the fault on which he proposed the revisional action (i.e, the failure on the part of assessee to submit details before AO regarding the sundry creditors/advances when asked by AO during second round vide notice dated 03.12.2019). However, the assessee couldn’t bring to the notice of the Ld. PCIT that the issue regarding sundry creditor was in fact inquired by AO and the assessee had furnished the details called for by the AO vide notice dated 03.12.2019 and thus able to show/demonsrate that AO has discharged his duty as an investigator as well as adjudicator on the issue which was found fault with by the Ld. PCIT. As discussed, since the assessee failed to bring anything on record to rebut the issue/fault pointed out by the Ld. PCIT, even-though AO asked for details of sundry creditors/advances in the second round. Despite the assessee not replying to give details of sundry creditors and advances shown in the balance-sheet, the AO has omitted to take any action regarding this issue, which he ought to have done. Therefore, exercise of jurisdiction by Ld PCIT u/s 263 of the Act in the aforesaid facts cannot be faulted..
ITA Ns. 1719/Mum/2021 A.Ys. 2010-11 Dnyanraj Yashvant Nikam Therefore, we uphold the impugned order and dismiss the appeal of the assessee. 7. In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on this 01/12/2022.