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Facts
The assessee's original assessment for A.Y. 2012-13 was reopened u/s 148 beyond four years. The Ld. AO subsequently passed a best judgment assessment, making additions related to alleged cash withdrawals. The Ld. PCIT then invoked revisional powers u/s 263, deeming the reassessment order erroneous and prejudicial to revenue, and directed a de novo assessment.
Held
The Tribunal ruled that the reassessment proceedings initiated u/s 148 were invalid as they were commenced beyond four years without any failure by the assessee to disclose material facts or new tangible material. Consequently, the revisional order passed by the PCIT u/s 263, being based on an invalid reassessment, was held to be without jurisdiction and quashed.
Key Issues
Whether the reassessment proceedings u/s 148 initiated beyond four years were valid in the absence of the assessee's failure to disclose material facts, and whether the PCIT's revisional jurisdiction u/s 263 could be invoked based on an invalid reassessment order.
Sections Cited
263, 143(3), 144, 147, 144B, 143(1), 143(2), 142(1), 148, 234A, 139, 151
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE MS. KAVITHA RAJAGOPAL, JM AND SHRI. GIRISH AGARWAL, AM (Assessment Year: 2012-13) Railroad Logistics India Pvt. Ltd. The Principal Commissioner of C/O Metal Trim, Gala No.1, Tankiwala Income Tax PCIT, Mumbai-3 Room No. 612, 6th Floor, Aayakar Indl. Estate, Steel Made Compound, Marol Vs. Maroshi Road, Marol, Andheri (E) , Bhavan, Maharishi Karve Road, Mumbai – 400 059. Mumbai-400020 PAN/GIR No. AACCR3484J (Assessee) : (Respondent) Assessee by : Shri. Satish R. Mody Respondent by : Shri. Tushar Mohite Sr. AR Date of Hearing : 18.10.2024 Date of Pronouncement : 13.01.2025 O R D E R PER KAVITHA RAJAGOPAL, J M:
This appeal has been filed by the assessee, challenging the order of the learned Principal Commissioner of Income Tax (‘ld. PCIT) for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.263 of the Income Tax Act, 1961 (‘the Act'), dated 09.03.2022 relevant to the Assessment Year (‘A.Y.’ for short) 2012-13.
It is observed that this appeal had been filed belatedly with the delay of 460 days for which the assessee has filed an application for condonation of the said delay along with an affidavit. Upon perusal of the said and after hearing both sides we deem it fit to condone the delay on the ground that there was ‘sufficient cause’ for the said delay. Delay condoned.
The assessee has challenged this appeal on the following grounds of appeal:
(A.Y. 2012-13) Railroad Logistics India Pvt. Ltd. 1. “ The Learned Principal Commissioner of Income Tax,PCIT,Mumbai-3 erred in passing the order u/s. 263 of the I.T.Act, 1961 for A.Y. 2012-13 Dated 09-03-2012 directing the Income-tax Officer to pass the order u/s. 143(3) / 144 read with Sec. 147 ,263 and 144B of the Act, considering the entire payments made for business purposes as not allowable deduction against Income, the order passed by the then Income-tax Officer being neither erroneous and prejudicial to the interest of revenue .
2. The Learned Principal Commissioner of Income Tax,PCIT,Mumbai-3 has erred in directing the Income-tax Officer to pass the order u/s. 147 r.w.s 263 of the Act when such order cannot be passed as the time for passing the order u/s. 147 was beyond time limit prescribed under the provisions of the Act 3. The Learned Principal Commissioner of Income Tax,PCIT,Mumbai-3 erred in exercising his powers u/s. 263 of the Act as the order dated 12/12/2019 was subject matter of appeal which was pending before CIT(A) as on date of passing of Order u/s.263 of The I T Act Dated 09-03-2022.
The Appellant reserves right to add, amend, alter the above grounds of appeal
as and when found necessary.”
4. Brief facts of the case are that the assessee is engaged in the business of transport of vehicle in trailer trucks. During the year under consideration, the assessee filed its return of income declaring total income at Rs. 3,87,21,060/- and the same was processed u/s. 143(1) of the Act. The assessee’s case was selected for scrutiny and notices u/s. 143(2) and 142(1) of the Act were duly issued and served upon the assessee. The learned Assessing Officer ('ld. A.O.' for short) observed that the assessee has credited Rs. 82,55,90,497/- in its P & L Account towards transportation, enroute, interest, dividend, etc. and after debiting various expenses, operating cost, employing benefits, finance cost, the assessee had returned the total income at Rs. 3.87 crore. The ld. AO passed the assessment order u/s. 143(3) of the Act on 03.11.2014 declaring total income at Rs. 3,91,95,479/- after making certain additions/disallowances. The assessee’s case was subsequently reopened vide notice u/s. 148 of the Act dated 27.03.2019 for the reason that the assessee had received payment from customers through banking channel and the same was withdrawn through self paid cheques for making payment to convoy in-charge at the time of (A.Y. 2012-13) Railroad Logistics India Pvt. Ltd. allotment of vehicles by way of cash. The ld. AO further stated that the vouchers produced by the assessee are self made without any corresponding verification from the person to whom payments have been made and also no proof of payment of Octroi charges/Toll taxes paid during the transportation of vehicles, thereby, holding that income has escaped the assessment. The ld. AO has sought for information from the assessee that the total receipt was Rs. 157,53,54,063/- whereas in the ITR the total receipt are only Rs. 3,87,21,060/- and further there was a huge cash withdrawal from the bank account and payments to convoy in-charge were made in cash for which cash book was sought for along with details of expenses incurred along with all supporting documentary evidences. The ld. AO then passed the assessment order u/s. 144 r.w. 147 of the Act being the best judgment assessment dated 12.12.2019 for the reason that the assessee has not complied with the notices and has also not furnished any documentary evidence. The learned Assessing Officer (ld. A.O. for short) determined the total income at Rs. 5,04,23,260 after making a disallowance of Rs. 1,17,02,199 being 20% of the alleged cash withdrawal.
5. Subsequent to this, the ld. PCIT invoked the revisionary powers u/s. 263 of the Act for the reason that since the assessee was non compliant during the reassessment proceedings the ld. AO ought to have added the entire unexplained expenditure amounting to Rs. 5,85,10,996/- as bogus transaction and also interest u/s. 234A for the period from 04/2019 to 11/2019 for the delay in filing the return of income in response to notice u/s. 148 which has also not been charged by the ld. AO, thereby making the assessment order erroneous in so far prejudicial to the interest of the (A.Y. 2012-13) Railroad Logistics India Pvt. Ltd. revenue. The ld. PCIT set aside the impugned assessment order and directed to ld. AO for a de novo assessment.
Aggrieved the assessee was in appeal before us challenging the impugned order of the ld. PCIT.
The learned Authorised Representative (ld. AR for short) for the assessee contended that the notice u/s. 148 of the Act was without jurisdiction and was passed beyond the time limit prescribed under the provisions of the Act. The ld. AR further stated that the assessment was reopened beyond 4 years from the assessment year and as such there was no failure on the part of the assessee in disclosing truly and fully all material facts necessary for the assessment either during the filing of return u/s. 139 or in response to notice u/s. 148 of the Act. The ld. AR also challenged the reassessment on the ground that the ld. AO has wrongly assumed jurisdiction u/s. 147 of the Act on an unabated or concluded assessment without any tangible material on record. The ld. AR submitted that the proceeding before the ld. PCIT is a collateral proceeding were the validity of the reassessment order could be challenged during the appellate proceeding against order passed u/s. 263 of the Act. The ld. AR relied on various decisions in support of his contentions.
The ld. AR further argued on the ground that the approval obtained u/s. 151 of the Act is also not a valid approval as the ld. PCIT has failed to specifically record his satisfaction that it is a fit case for issuance of notice u/s. 148 of the Act and has merely written as “YES” in the proforma attached in the paperbook. The ld. AR relied on various decisions of the Hon’ble High Court and the Tribunal which has decided (A.Y. 2012-13) Railroad Logistics India Pvt. Ltd. this issue in favour of the assessee. The ld. AR prayed that the order passed u/s. 263 is bad in law and is liable to be quashed.
The learned Departmental Representative (ld. DR for short) on the other hand controverted the said fact and contended that the assessee has failed to furnish any documentary evidences before the ld. AO in the reassessment proceeding, in failure of which the ld. DR stated that the ld. PCIT was right in invoking the revisionary powers u/s. 263 of the Act. The ld. DR further opposed, that the assessee cannot challenge the validity of the reassessment proceeding in an appeal u/s. 263 of the Act and the same has to be challenged before the ld. CIT(A) by a regular appeal. The ld. DR contended that it is not a collateral proceeding as argued by the ld. AR and relied on the order of the ld. PCIT.
We have heard the rival submissions and perused the materials available on record. Though the ld. AR has argued extensively on various grounds, we would proceed to decide the first issue which is whether or not the assessee is entitled to raise the grounds challenging the reassessment proceeding at the appellate stage in a revisionary proceeding. For this, the ld. AR has relied on the decision of the coordinate bench in the case of and relied on the decisions of the Tribunal in the case of Maruti Clean Coal and Power Limited Vs. The Pr. Commissioner of Income Tax - 1, Raipur (C.G.), order dated 31.10.2022. which on identical facts has held that the revisionary proceeding to be a collateral proceeding in which the assessee could challenge the validity of the reassessment order which is nothing but the very basis of the revisionary proceeding. The said decision has relied on the coordinate bench’s decision in the case of West Life Development Ltd. Vs. Principle (A.Y. 2012-13) Railroad Logistics India Pvt. Ltd. Commissioner of Income Tax – 5, Mumbai, ITA No. 688/M/2016 [2017] 88 taxmann.com 439, order dated 24.06.2016 which has held that the assessee can challenge the validity of the reassessment proceeding that the same is non-est in the eyes of law and that the subsequent revisionary order passed u/s. 263 of the Act would be liable to be quashed on the basis that if the assessment order passed u/s. 147 is itself held to be illegal and void then the ld. PCIT will have no jurisdiction to invoke the revisionary powers u/s. 263 of the Act. In the present case, the assessee has challenged the reassessment proceedings on the ground that the same is barred by limitation which is beyond 4 years from the end of relevant assessment year unless if any income chargeable to tax as escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment while filing the returns u/s. 139 or in response to notice u/s. 142(1) or Section 148 of the Act. Here in the present case, the assessee filed its return of income dated 29.09.2012 and was assessed u/s. 143(3) of the Act and subsequently the assessee’s case was reopened vide notice u/s. 148 dated 27.03.2019 where the addition was made on the 20% of the total withdrawal of Rs. 5,85,10,996/-.
It is evident that there has been no new tangible material available for the ld. AO for reopening assessee’s case as even during the original assessment proceedings, the ld. AO was well within the knowledge of the financials of the assessee. It is not a case where the assessee has suppressed material facts or has not furnished the complete details during the original assessment proceeding. Therefore, in a unabated assessment or a concluded assessment, the ld. AO does not have locus standi to reopen the assessee’s case after the expiry of 4 years unless it is proved that there was (A.Y. 2012-13) Railroad Logistics India Pvt. Ltd. failure on the part of the assessee to file its return of income or to respond to notice u/s. 142(1) or 148 or to disclose fully and truly all material facts. The relevant extract of Section 147 is cited hereinunder for ease of reference: “147. Income escaping assessment-If the Assessing Officer has reason to believe" that any income chargeable to tax has escaped assessment" for any assessment year, he may", subject to the provisions of sections 148 to 153, assess or reassess" such" income "and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings" under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year), unless any income chargeable to tax by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.”
From the assessment order, it is apparent that the assessee has made compliance to all the notices issued by the ld. AO during the assessment as well as to notice u/s. 148 during the reassessment proceedings. The ld. AR also relied on the decision of the Hon’ble Jurisdictional High Court in the case of Bombay Stock Exchange Ltd. Vs. Deputy Director of Income Tax, (Exemption)-1)(2), Mumbai, Writ Petition No. 2468 of 2011, order dated 12.06.2014, wherein it was held that in order to initiate reassessment proceeding, the ld. AO should specifically state in the reasons for reopening as to which fact or material was not disclosed by the assessee which was required for the assessment in order to protect assessee against arbitrary reopening of a concluded assessment. Going by the proposition laid down by the Hon’ble Jurisdictional High Court, we deem it fit to hold that, ex-facie, there is no suppression of relevant facts by the assessee in the present case which warrants the reassessment (A.Y. 2012-13) Railroad Logistics India Pvt. Ltd. and therefore the reopening of assessment is invalid and unsustainable. As we have held the validity of reassessment proceeding to be non-est, the subsequent revisionary order passed u/s. 263 is without jurisdiction and is liable to be quashed and the arguments raised by the ld. AR on the other issues require no further adjudication.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 13.01.2025 Sd/- Sd/- (GIRISH AGARWAL) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 13.01.2025 Karishma J. Pawar (Stenographer) Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,