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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI KULDIP SINGH, HONBLE & SHRI S. RIFAUR RAHMAN, HONBLEShri Mandar Vaidya Shri Jagadish Jangid
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, MUMBAI
BEFORE SHRI KULDIP SINGH, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER
ITA NO. 1675/MUM/2022 (A.Y: 2010-11) M/s. Aadi Industries Limited v. Pr.CIT – 14 421, 4th Floor Room No. 426, 4th Floor Kailash Plaza, Vallabh Baug Lane Aayakar Bhavan, M.K. Road Mumbai - 400020 Near R-Odeon Mall, Ghatkopar(E) Mumbai - 400075 PAN: AAACJ8256G (Appellant) (Respondent) Assessee Represented by : Shri Mandar Vaidya Department Represented by : Shri Jagadish Jangid
Date of Hearing : 05.09.2022 Date of Pronouncement : 24.11.2022
O R D E R PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the assessee against order of the Learned Pr. Commissioner of Income Tax-14, Mumbai [hereinafter in short “Ld.Pr.CIT”] passed u/s. 263 of the Income-tax Act, 1961 (in short “Act”) dated 19.03.2020 for the A.Y.2010-11.
2 ITA NO. 1675/MUM/2022 (A.Y: 2010-11) M/s. Aadi Industries Limited 2. The present appeal is filed by the assessee with a delay of 766 days and assessee also filed an affidavit in this regard and prayed for condonation of delay. Assessee filed an affidavit dated 22.06.2022 and submitted as under: - “2. The said assessment was set aside by the Ld. Pr. CIT-14, vide his order dated 19th March 2020 under which, certain directions were given to the Ld. AO by the Ld. Pr. CIT. In pursuance of the said order u/s. 263, the Ld. Ld. AO, DCIT- 14(1)(1) passed an order of assessment u/s. 143(3) dated 29th September 2021, complying with the directions ordained by the Ld. PCIT. Against the said assessment order dated 29th Sept 2021, the company has filed an appeal before the Ld. CIT(Appeals)- National Faceless Appeal Centre. 3. I say that I was under a bonafide impression that the directions issued by the Ld. PCIT can be disputed in the assessment on production of necessary documents and the additions (if any) made in the assessment in pursuance to and compliance with the directions issued u/s. 263, can be challenged in appeal before the CIT(A). And hence the company did not challenge the order passed u/s. 263 by the ld. PCIT. 4. I say that the appeal filed before the Ld. CIT(Appeals) was within time period provided in the Act and there was no delay. Hereto attached is a copy of the appeal (Form 35) dated 29th October 2021 filed before the CIT(A)-Faceless Centre (Being appeal no. NFAC/2009-10/10053097). 5. I say that subsequently, the company received a notice dated 2nd May 2022 from CIT(A), Faceless Centre for hearing/submission of written submissions. I say that when the said notice was received, we approached our counsel for preparing/setting up our case before the said authority. That was when we were informed by our counsel that the directions issued by the PCIT-14 in his order u/s. 263 can only be challenged before the Hon'ble Income tax Appellate Tribunal and not before the CIT(A), even though the actual order making the additions is. passed by the Ld. AO. I say that in view of the above, the
3 ITA NO. 1675/MUM/2022 (A.Y: 2010-11) M/s. Aadi Industries Limited company now desires to challenge the order of the Ld. PCIT-14 passed u/s. 263, by way of appeal before this Hon'ble Tribunal and hence this appeal is sought to be filed by the company. 7. I say that there is no delay in filing the appeal since the company was bonafide pursuing a remedy before an inappropriate forum and was made aware of the correct legal position only in May 2022 when the company sought legal counsel. And hence this appeal came to be filed in June 2022. 8. I pray that the Hon'ble Tribunal may kindly be pleased to condone the delay in filing the appeal and oblige.”
Ld. DR objected for the condonation of delay and however, he has not filed any submissions against the affidavit as well as the facts described in the above affidavit.
Considered the submissions of both parties, we found that the reasons brought on record by the assessee are relating to filing the appeal before First Appellate Authority instead of Second Appellate Authority, considering the issue involved are outside the purview of the First Appellate Authority. It is fact on record that assessee has failed to file the appeal in time considering the above default. For the sake of overall justice, the Hon'ble Supreme Court in the case of Collector, Land Acquisition v. MST. Katiju and others, [1987]167 ITR 471, held as under:- “3. The legislature has conferred the power to condone delay by enacting s. 5 of the Limitation Act of 1963 in order to enable the Courts to do substantial justice to parties by disposing of matters on "merits". The expression "sufficient cause" employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner which subserves the ends
4 ITA NO. 1675/MUM/2022 (A.Y: 2010-11) M/s. Aadi Industries Limited of justice—that being the life-purpose of the existence of the institution of Courts. It is common knowledge that this Court has been making a justifiably liberal approach in matters instituted in this Court. But the message does not appear to have percolated down to all the other Courts in the hierarchy. 4. And such a liberal approach is adopted on principle as it is realized that: 1. Ordinarily, a litigant does not stand to benefit by lodging an appeal late. 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. 3. "Every day's delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense and pragmatic manner. 4. When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right in injustice being done because of a non- deliberate delay. 5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. 6. It must be grasped that the judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.” 5. Respectfully following the ratio laid down in the above judgment, we observe that the assessee has approached wrong forum and delayed in the filing appeal before us. Therefore, assessee needs another opportunity. Moreover, the order passed by Ld.CIT(A) on 19.03.2020.
5 ITA NO. 1675/MUM/2022 (A.Y: 2010-11) M/s. Aadi Industries Limited immediately thereafter, the pandemic period commenced hence we condone the delay in filing the appeal and decide the appeal on merits.
Brief facts of the case are, assessee has filed return of income for A.Y.2010-11 on 14.10.2010 declaring total income of ₹.1,99,89,697/- and summary assessment u/s. 143(1) of the Act was made on 29.08.2011. Subsequently, information received from DDIT(Inv.), Unit – 2(1), Mumbai that during the course of the enquiry, it was revealed by Shri Chandrakant J. Dherai that he is running a proprietary concern in the name and style of M/s. Bhumi Sales Corporation. It is also revealed by Shri Chandrakant J. Dherai that he is engaged in providing and issue of bogus bills to various parties. It was observed by the DDIT(Inv.) that bank statement of M/s.Bhumi Sales Corporation held with Axis Bank Limited has various transactions with assessee. In order to verify the transactions, summons were issued to the assessee company and it was observed that assessee has obtained accommodation entries to the extent of ₹.72,52,414/- during the period from 2009-2010 relevant to the present assessment year. In order to verify the same, assessment was reopened with the above reasons. Accordingly, notices u/s. 148 of the Act was issued and served on the assessee. Notices u/s. 143(2) and 142(1) were issued and served on the assessee.
6 ITA NO. 1675/MUM/2022 (A.Y: 2010-11) M/s. Aadi Industries Limited 7. In response assessee has submitted that M/s. Bhumi Sales Corporation is their customer and assessee has sold goods to M/s. Bhumi Sales Corporation and it has also submitted copy of ledger account and sales bills in the books of the assessee. It was submitted that assessee has sold the goods to the above said party and not obtained any accommodation entries from them.
After considering the above submissions, Assessing Officer observed in the Assessment Order that assessee has submitted Books of Accounts, bank statement, auditor certificate etc., and after considering the same he is of the view that assessee has made sales to M/s. Bhumi Sales Corporation amounting to ₹.79,30,000/- and accordingly, he did not made additions.
In the revision proceedings u/s. 263 of the Act, Ld. Pr.CIT observed in his order dated 19.03.2020 that on reference/proposal u/s. 263 of the Act was submitted by the DCIT-14(1)(1), Mumbai vide letter dated 08.03.2019, it is stated that the case of the assessee was reopened u/s.147 of the Act on the basis of a specific information received that the assessee has obtained accommodation entries /bogus bills to the tune of ₹.72,52,414/- during the period 2009-10 relevant A.Y. 2010-11 from Shri Chandrakant J. Dherai. The proprietary concern i.e. M/s. Bhumi Sales
7 ITA NO. 1675/MUM/2022 (A.Y: 2010-11) M/s. Aadi Industries Limited Corporation appeared in the list of hawala dealers published by the Sales Tax Department and the same was admitted by Shri Chandrakant J. Dherai vide affidavit dated 26.08.2016 filed before DDIT(Inv.), Unit - 2(1), Mumbai. It was stated that this proves that the proprietary concern M/s.Bhumi Sales Corporation is only a paper concern engaged in providing accommodation entries without physical movement of goods. Thus, actual goods were not sold to the M/s. Bhumi Sales Corporation and only accommodation entries were taken.
It was further stated that the assessment was reopened after recording the reasons that assessee has obtained accommodation entries and Assessing Officer has recorded that he has reason to believe the income has escaped assessment for the present assessment year.
In the re-assessment proceedings, Ld. Pr.CIT observed that no specific questionnaire has been issued by the Assessing Officer except general notice, the assessee on its part has given two submissions, and it was submitted that assessee was not making any purchase from M/s. Bhumi Sales Corporation but was in fact only making sales to M/s. Bhumi Sales Corporation and it was observed that this is an unsigned letter which has been accepted by the Assessing Officer.
8 ITA NO. 1675/MUM/2022 (A.Y: 2010-11) M/s. Aadi Industries Limited 12. As a matter of record there is a certificate by the Chartered Accountant dated 18.12.2017 wherein it has been certified that Aadi Industries has sold goods to M/s. Bhumi Sales Corporation. Beyond this there are certain confirmations and section 133(6) notices on record. However, Assessing Officer in Para No. 6 admitted and accepted these evidences and recorded in the Assessment Order.
Aggrieved assessee is in appeal before us raising following grounds: “1. The Ld Pr. CIT misdirected himself in invoking the jurisdiction u/s. 263 at the behest of the Ld. AO viz. DCIT- 14(1)(1). 2. Without prejudice, the Ld. Pr.CIT fell in error of law in directing the Ld. AO to complete/frame the assessment in a particular manner, which is beyond the scope & powers u/s. 263. 3. The Ld. CIT erred in not realising that assessment cannot be completed under the aegis of a superior authority. 4. The Ld. CIT erred in taking recourse to the jurisdiction u/s.263 even after agreeing on the factual conclusion reached by the Ld. AO which indicates that there was no lack of inquiry by the Ld. AO. In the circumstances, it is submitted that, the same amounts to substituting the judgement of the Ld. AO, which is beyond the scope of the jurisdiction u/s. 263. 5. The Ld. CIT fell in error of law in directing the Ld. AO to reject the books of the assessee. It is submitted that the power to reject the books is the sole discretion and the judgement of the Ld. AO u/s. 145 and cannot be exercised at the behest of a superior authority. 6. The assessee craves leave to add, modify, amend grounds(s) of appeal.”
9 ITA NO. 1675/MUM/2022 (A.Y: 2010-11) M/s. Aadi Industries Limited 14. In brief, assessee has aggrieved with the revision order passed u/s.263 of the Act and in the above grounds of appeal assessee objected for initiation of 263 proceedings as well as directing the Assessing Officer to complete or reframe the assessment in a particular manner. All the above grounds are relating to revision proceedings only.
At the time of hearing, Ld. AR brought to our notice Para No. 4 of the Assessment Order and submitted that Assessing Officer has duly verified the submissions made by the assessee that assessee has only sold the goods and not purchased as alleged by the investigation wing that it has provided accommodation entries and the same was accepted by the Assessing Officer and taken one of the possible views. Further, he brought to our notice Page No. 13A of the Paper Book to submit that notice was issued for the reason that Assessing Officer failed to disallow the sales expenses which is erroneous as well as prejudicial to the interest of the Revenue. He submitted that the issues raised in notice issued u/s.263 of the Act are different than the issue raised in the revision proceedings in this regard he relied on the decision of the Hon'ble Supreme Court in the case of CIT v. Greenworld Corporation [2019] 314 ITR 81 (SC). He also brought to our notice decision of the Hon'ble Supreme Court wherein it was held that jurisdiction u/s. 263 can be
10 ITA NO. 1675/MUM/2022 (A.Y: 2010-11) M/s. Aadi Industries Limited exercised only when both the following conditions are satisfied that (i) the order of the Assessing Officer should be erroneous and (ii) it is to be prejudicial to the interest of the Revenue. These conditions are conjunctive. An order of the assessment passed by the Assessing Officer should not be interfered with only because another view is possible. Further, he brought to our notice the ratio in the above decision that commissioner, or for that matter, any higher authority may have supervisory jurisdiction over the Assessing Officer, it is difficult to conceive that even the merits of the decision should be discussed and should be rendered by the higher authority, who is the supervisory authority. It is one thing to say that while making the orders of the assessment, the Assessing Officer should be bound by the statutory circulars issued by the CBDT but it is another thing to say that the assessing authority exercising quasi-judicial functions, keeping in view the scheme contained in the Act, would lose his independence to pass an independent order of the assessment.
Further, he brought to our notice Para No. 2 of the order passed u/s. 263 of the Act that the proposal u/s. 263 was submitted by the DCIT 14(1)(1), Mumbai, vide letter dated 08.03.2019. In the said proposal it was stated that the case was reopened u/s. 147 of the Act on the basis
11 ITA NO. 1675/MUM/2022 (A.Y: 2010-11) M/s. Aadi Industries Limited of specific information received that the assessee has obtained accommodation entries/bogus bills to the tune of ₹.72,52,414/- during the period 2009-10 relevant to A.Y. 2010-11 from Shri Chandrakant J. Dherai who was running the proprietary concern in the name of M/s. Bhumi Sales Corporation. He submitted that the revision proceedings u/s. 263 of the Act can only be initiated by the Ld. Pr.CIT suomoto and it cannot be revised on the behest of the any assessing authority under the Act. In the given case the revision proceedings were initiated on the behest and reference made by DCIT, in this regard he relied on the decision of the Vinay Pratap Thacker v. CIT in ITA.No. 2939/Mum/2011 dated 27.02.2013 in which Coordinate Bench has decided the issue in favour of the assessee that 263 proceedings cannot be initiated based on the proposals or reference from assessing officer.
Further, he submitted that 263 order passed by the Ld. Pr.CIT beyond the issues raised in notice issued u/s.263 of the Act. In this regard he relied on the case of Pr.CIT v. M/s. Universal Music India Pvt. Ltd., in Income Tax Appeal No. 238 of 2018 (Bombay High Court).
On the other hand, Ld. DR objected to the submissions made by the Ld. AR objecting the reference of proposal by the Assessing Officer before the Ld. Pr.CIT. He submitted that Assessing Officer can initiate or give
12 ITA NO. 1675/MUM/2022 (A.Y: 2010-11) M/s. Aadi Industries Limited reference/proposal to Pr.CIT with regard to initiation of revision processing and only Ld. Pr.CIT can apply his mind and take a proper decision. Therefore, this is within the internal procedures laid down by the department.
With regard to initiation of revision proceedings on the wrong finding that the bogus purchases were issued by the assessee in reality assessee has only sold. In this regard, Ld.DR submitted that Ld. Pr.CIT has only given a direction. Therefore, there is no prejudicial caused to the assessee since the issue is only direction were given to make a proper verification.
Considered the rival submissions and material placed on record, Ld.AR has submitted and contested three different issues relating to initiation of revision proceedings u/s. 263 of the Act. Without going into other issues raised by the Ld. AR we are inclined to focus on the issue of reference made by the Assessing Officer in order to initiate the revision proceedings u/s. 263 of the Act. This issue is squarely considered by the Coordinate Bench in the case of Vinay Pratap Thacker v. CIT (supra) wherein the Coordinate Bench has held as under: - “23. We have seen from the impugned order of the CIT, dated 11.02.2011, the CIT admits, “A proposal was received on 10.06.2010 from the AO under section 263 of the Income Tax
13 ITA NO. 1675/MUM/2022 (A.Y: 2010-11) M/s. Aadi Industries Limited Act, 1961, pointing out some discrepancies/short comings in the assessment order”. This clearly shows that in so far as the CIT was concerned, he did not apply his own mind, which the Hon’ble Supreme Court of India has said in ICICI Bank (supra) that there should be an independent application of mind. 24. On perusal of the SCN and the impugned order, we find that there is a departure from the reasons taken to invoke the provisions under section 263, this also finds favour with the arguments advanced by the AR and get covered by the decisions cited by him. 25. We also have to accept the arguments of the AR with respect of applicability of section 50C on lease hold properties, because, this is an undisputed fact that the impugned property was a leased property, even though, it is a long lease, but the title of the same shall always remain with the actual owner, in the present case, BMA. Though the issue is squarely covered by the cited decisions, but going by the submissions of the DR that it is a case of deemed ownership, itself creates a doubt that whether there has to be an application of section 50C or not. This doubt, in our considered opinion is fatal to invocation of provisions of section 263, because provision of section 263 cannot be invoked where the issue becomes debatable, because if the issue is debatable it goes out of the scope of administration provisions but would fall in the realm of judicial provisions, which is not the purpose and context of section 263, which, in our opinion is to deal only on two realms simultaneously, i.e. whether the order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue. 26. In the instant case, the CIT, by invoking the jurisdiction under section 263 stepped on the correctness and questioned the applicability of section 50C on leased property in the SCN, he, therefore transgressed into the judicial territory, which he cannot. 27. We are aware of the decision of Hon’ble Bombay High Court in the case of Gabrial India Ltd., reported in 203 ITR 108, wherein, the Hon’ble Bombay High Court held, “CIT cannot revise order merely because he disagrees with the conclusion arrived at by the ITO”. We are also aware of the case of CIT vs Sunbeam Auto Ltd., reported in 227 CTR 133, wherein the Hon’ble Delhi High Court drew a distinction between “Lack of inquiry” and “inadequate enquiry” and held that in the case of inadequate enquiry, provisions under section 263 cannot be invoked. In our opinion, in the instant case, this is neither the case of inadequate enquiry nor lack of enquiry at the regular assessment stage.
14 ITA NO. 1675/MUM/2022 (A.Y: 2010-11) M/s. Aadi Industries Limited 28. Taking into consideration the entire gamut of facts and judicial decisions, placed before us, we are of the considered opinion that the CIT could not have invoked the jurisdiction under section 263 without his own independent application of mind; on otherwise debatable issues and by merely disagreeing on the view taken by the AO. 29. In the result, we set aside the order of the CIT dated 11.02.2011, passed under section 263 and annul the initiation of revision proceedings and as a consequence, we restore the order passed by the AO, under section 143(3) dated 15.12.2008.” 21. Respectfully following the above said decision, we are also of the opinion that Ld. Pr.CIT could not have invoked the jurisdiction u/s. 263 of the Act without his own independent application of mind, particularly when the issue is arising from the Assessment Order passed by Assessing Officer, which Assessing Officer himself cannot review by referring the issues to Pr.CIT. It means he is adopting to use the back door entry to reassess the completed assessment. Accordingly, we are also set-aside the order passed u/s. 263 of the Act and annul the initiation of revision proceedings, as a consequence, we restore the order passed u/s. 143(3) r.w.s. 147 of the Act.
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 24th November, 2022.
Sd/- Sd/- (KULDIP SINGH) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 24/11/2022 Giridhar, Sr.PS
15 ITA NO. 1675/MUM/2022 (A.Y: 2010-11) M/s. Aadi Industries Limited Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum