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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI AMARJIT SINGH, JM
This appeal is filed by B.R.TV (the assessee/ appellant) for AY 2015-16 against the order passed on 17.03.2021 by the Pr. Commissioner of income-tax-8, Mumbai (the learned PCIT) under section 263 of The Income-Tax Act, 1961 (the Act), wherein it has been held that assessment order passed under section 143(3) of the Act on 21.12.2017 by the Income-tax Officer 16(1)(1), Mumbai (the learned Assessing Officer) is erroneous and prejudicial to the interest of the Revenue.
Therefore, assessee is aggrieved and has raised following grounds of appeal:-
2. Whether on the facts and in the circumstances of the case and in law the Pr. CIT was not justified in passing the order without sending any intimation of the notice by email or SMS to the appellant, thereby depriving the appellant a reasonable opportunity to defend its case.
3. Without Prejudice on the facts and in the circumstances of the case and in law the Pr. CIT has grossly erred in holding that the AO has not made proper enquiry in regard to the difference in the receipts as reflected in the 26AS statement and the profit and loss account, ignoring the admitted fact (para 4) that the case was selected for scrutiny under CASS to verify the mismatch between the receipts as per 26AS and Profit and loss account failing to see that the AO has not only enquired into the same but has accepted the explanation of the appellant.
4. The Pr. CIT has grossly erred in holding that the order of the AO is erroneous and prejudicial of the interest of the revenue having failed to appreciate that the appellant has accounted for the receipt on yearly basis as per the contract and that the entire receipt has been offered for tax by the appellant over the period of the contract.
The brief fact of the case shows that assessee is a partnership firm carrying on business of cable TV Productions. It filed its return of income on 30th September, 2015 declaring nil income. Case of assessee was selected for scrutiny in limited scrutiny case for examining (1) contract fees and receipt mismatch, (2) sales turnover mismatch, (3) sundry creditor (4) tax credit mismatch. During the course of assessment proceedings, the learned Assessing Officer asked queries and passed an assessment order at Rs. Nil i.e. at returned income.
Subsequently, the learned PCIT noted that assessee has shown receipt of Rs.84,50,648/- in its books of account, however on verification of 26AS it was found that assessee has total receipt of Rs.1,41,74,000/-. It was further noted that on 20th November, 2017, assessee submitted the details but the learned Assessing Officer accepted those details without making any enquiry and therefore, in terms of explanation (2) (a) of Section 263 of the income-tax Act, assessment order passed by the learned Assessing Officer is erroneous and prejudicial to the interest of the Revenue as it was made without conducting adequate enquires. Therefore, notice under section 263 of the Act was issued on 5th March, 2021.
i. The case selected for scrutiny under CASS. One of the reasons for selection of scrutiny was, 'Contract receipt/fees mismatch'. It can be seen from the 26AS of the assessee that it received receipts of Rs.1,41,74,000/- during the year. However, from the P and L submitted by the assessee it can be seen that total receipts offered are only Rs.84,50,648/-. AO raised the query about mismatch in receipts in its notice u/s 142(1) dated 25-09-2017. To which assessee replied that, "The amount is received from 3 parties i.e. Epic Television Networks Pvt. Ltd, Reliance Big Entertainment Pvt. Ltd and Goodwork Communication Pvt. Ltd. Payment is received for rights to be exploited over the period as mentioned in the agreement and accordingly income will be offered in subsequent years'. However, from the records it can be seen that no copy of any agreement was submitted by the assessee based on which payment received during the year was not offered for taxation by the assessee. AO has not inquired into this issue further. Hence, AO has failed to verify whether as per the terms of agreement the revenue received from above 3 parties was offered for tax in subsequent assessment years.
Reliance is placed on, Hon'ble Kolkata High Court's judgment in the case of Rajmandir Estates Private Limited vs. Pr. CIT 386 ITR 162 (Cal) which has been affirmed by the Hon'ble Supreme Court, as also in the case of Daniel Merchants Private Limited vs. ITO pronounced by the Hon'ble Supreme Court on 29.11.2017, that the CIT is entitled to revise the assessment order u/s 263 of the Act on the ground that the Assessing Officer did not make any proper inquiry while accepting the explanation of the assessee.
Further reliance is placed on Malbar Industrial Ltd. vs CIT (2000) 243 ITR 83(SC). As per this judgment the order of the AO can be held to be erroneous, i.e. i) If the AO's order is passed without application of mind or ii) If the AO has not investigated the issue before him.
Reliance is also placed on Ld. Mumbai ITAT's judgement in the case of Laxmi Ventures (India) Pvt. Ltd vs. Principal Commissioner of Income Tax-7, Mumbai (ITA No.2199/MUM/2018), where it has Reliance is also placed on Mahalakshmi Liquor Promoters (P) Ltd vs. Commissioner of Income Tax [2013] 29 taxmann.com 70, the Ld. Tribunal found that there was no enquiry by the Assessing Officer on the issues raised by the CIT. It was held that the lack of enquiry or inadequate enquiry by the Assessing Officer was a valid reason for revision of the assessment order.
The Ld Tribunal, therefore, concluded that an order becomes erroneous because inquiries, which ought to have been made on the facts of the case, were not made and not because there is anything wrong with the order if all the facts stated or the claims made in the return are assumed to be correct. Thus, it is mere failure on the part of the Assessing Officer to make the necessary inquiries or to examine the claim made by the assessee in accordance with law, which renders the resultant order erroneous and prejudicial to the interest of the revenue. Nothing more la required to be established in such a case. ..... If the Assessing Officer passes an order mechanically
The Ld. ITAT, Mumbai in Anuj Jayaendra Shah vs. PCIT-35, Mumbai [2016] reported in 67 taxmann.com 38, held as under:
"10. Now, as can be seen above, the amendment to section 263 of the Act by insertion of Explanation 2 to Section 263 is declaratory in nature and is inserted to provide clarity on the issue as to which orders passed by the AO shall constitute erroneous and prejudicial to the interest of Revenue whereby it is provided, inter alia, that if the order is passed without making inquiries or verification by the AO which, should have been made or the order is passed allowing any relief without inquiring into the claim; the In conclusion, the assessing officer has failed to make necessary enquiry and bring on record all facts necessary for determining the true character and nature of the income. Omission to do so has resulted in an order which is erroneous and prejudicial to the interest of revenue. In view of this I am of the view that the assessment order dt. 21/12/2017 is erroneous and prejudicial to the interest of revenue as per provisions of Explanation 2(a) to section 263(1) of the Income Tax Act. 1961 and requires to be revised and set aside. Accordingly, the assessment is revised and set aside to the file of the Assessing Officer. The Assessing Officer is directed to frame the order de novo, as per observation made in this order above.”
Assessee aggrieved with that order is in appeal before us.
Learned Authorized Representative submitted that case was selected for limited scrutiny for mismatch in receipt shown as income by assessee as well as receipt as per form no.26 AS. It was stated that assessee submitted complete details vide letter dated 17th October, 2017. He submitted that entire consideration received by the assessee is not chargeable to tax in the current year i.e. in the year of receipt; he submitted that according to the method of accounting followed, income of the assessee would be chargeable to tax as per agreement. He further
The learned CIT Departmental Representative submitted that Assessing Officer has accepted the explanation of the assessee without verification and therefore, the order is erroneous and so far as prejudicial to the interest of the Revenue. He therefore supported the order of the learned PCIT.
We have carefully considered the rival contentions and perused the orders of the lower authorities. We have also perused the paper book submitted by assessee as well as the decision of the co-ordinate Bench rendered in the case of the assessee for earlier years.
The fact shows that on the return of income filed by the assessee, a notice under section 143(2) of the Act was issued for limited scrutiny for examining the mismatch of receipts as per form no 26AS as well as income shown by the assessee. The learned Assessing Officer raised a specific query vide notice dated 25th September, 2017. According to paragraph no. 3, the learned Assessing Officer asked assessee that as per form no. 26AS, assessee has received Rs.1,41,74,070/-, however, in the profit and loss account, the gross receipt shown is only
The order passed by the learned PCIT was passed ex- parte. Assessee submitted that no notices are received by the assessee at all and therefore there is no reasonable opportunity of hearing was granted to the assessee. This is challenged as per ground no. 1 and 2 of the appeal. However, we have already held that the order passed by the learned Assessing Officer was made after due enquiries which was found to be satisfactorily explained by the assessee and order of learned PCIT is not sustainable, we do not find it proper to once again restore the matter
In view of this the order passed by the learned PCIT holding the order passed by the learned Assessing Officer is erroneous and prejudicial to the interest of the Revenue is quashed. Ground no 3 –5 are allowed.
Resultantly, appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 28.04.2022.