KOMARA GOUNDER CHINNUSAMY,NAMAKKAL vs. ITO, WARD -2, THIRUCHENGODE

आदेश / O R D E R

PER G. MANJUNATHA, ACCOUNTANT MEMBER:

This appeal filed by the assessee is directed against the order of the Principal Commissioner of Income Tax, Coimbatore, dated 13.06.2022 and pertains to assessment year 2011-12.

2. The assessee has raised the following grounds of appeal:

Mr.Komara Gounder Chinnusamy :: 2 ::

The revision proceedings u/s.263 has been initiated by PCIT on the basis of Audit objection and not on the basis of any fresh materials coming in to the possession of PCIT other than those available at the time of completion of Scrutiny assessment.

6. A reading of the assessment order dated 29.12.2018 in page 3 para 6 the subject matter of proceedings u/s.263 has been verified by the assessing officer. After due application of mind and examination of facts the AO has come to a conclusion that an addition of Rs.1,25,000/- to the returned income is justified in respect of trade discount of Rs.23,16,261 received by the assessee. In view of this there is no error or prejudice in the assessment order so as to enable the PCIT to 4.invoke his powers u/s 263 of the Act.

7. From the above fact it could be seen that the PCIT has invoked powers u/s.263 of the Act to redo the assessment on an alternate possible view which is bad in law.

8. In view of the above grounds and other submissions to be made at the time of Appeal' hearing, the order U/S 263 passed by PCIT Coimbatore-1 may be cancelled and justice rendered.

Mr.Komara Gounder Chinnusamy :: 3 :: from M/s.SKM Animal Feeds and Foods (India) Pvt. Ltd., Erode, amounting to Rs.23,16,261/-.

4. The case has been, subsequently taken up for revision u/s.263 of the Act, and accordingly, show cause notice issued and called upon the assessee to explain, as to why, the assessment order passed by the AO u/s.143(3) dated 29.12.2018, shall not be revised for the reasons stated in show cause notice. The PCIT, in the said show cause notice observed that although, the assessee had received trade discount of Rs.23,16,261/-, but the AO has wrongly estimated gross profit of 5.4% and made addition of Rs.1.25 lakhs instead of making addition towards entire amount of trade discount of Rs.23,16,261/-. In response, the assessee submitted that the AO has considered the issue of trade discount received by the assessee and after considering the explanation furnished by the assessee that trade discount has been passed to the customers has fairly estimated GP of 5.4% and made addition of Rs.1.25 lakhs. Since, the AO was already considered the issue and has taken one passible view, the PCIT cannot substitute his view and set aside the assessment order passed by the AO u/s.143(3) r.w.s.147 of the Act. The PCIT, however, was not convinced with the explanation furnished by the assessee and according to the PCIT, the AO has not carried out required enquiries he ought to have been carried out in terms of s.263 of the Act, and thus, opined that the assessment order passed by the AO is erroneous in so far as it is prejudicial to the interest of the Revenue and hence, set aside the assessment order passed by the AO

Mr.Komara Gounder Chinnusamy :: 4 :: and direct the AO to re-do the assessment afresh after verification of the facts discussed above with regard to the issue of trade discount received by the assessee. Aggrieved by the order of the PCIT, the assessee is in appeal before us.

5. The Ld.AR for the assessee submitted that the PCIT erred in invoking jurisdiction u/s.263 of the Act, and setting aside the assessment order passed by the AO u/s.143(3) r.w.s.147 of the Act dated 29.12.2018, without appreciating the fact that the AO has considered the issue of trade discount received from M/s.SKM Animal Feeds and Foods (India) Pvt. Ltd., and after considering relevant submissions of the assessee, has estimated gross profit on trade discount. Therefore, once the AO has considered the issue, there is no scope for the PCIT to revise assessment order on very same issue.

Mr.Komara Gounder Chinnusamy :: 5 ::

According to the PCIT, although, the assessee has received trade discount of Rs.23,16,261/-, but the AO has estimated gross profit of 5.4% on said trade discount instead of making addition towards full amount of trade discount received by the assessee. We find that the assessee has received trade discount from M/s.SKM Animal Feeds and Foods (India) Pvt. Ltd., and argued before the AO that trade discount received from the supplier of feeds, has been passed to the customers while selling the product. The AO after considering relevant submissions of the assessee has estimated gross profit of 5.4% on trade discount received by the assessee. From the above, what is clear that the AO has considered issue of trade discount received by the assessee during the course of assessment proceedings, and has taken one of the possible view. In our considered view, once the AO has taken view on the issue, then there is no scope for the PCIT to substitute his view and direct the AO to make assessment in a particular manner. In our considered view, the issue has been thoroughly dealt with and after being satisfied with the explanation of the assessee, the AO has completed the assessment. Hence, we are of the considered view that the PCIT is completely erred in setting aside the assessment order passed by the AO

Mr.Komara Gounder Chinnusamy :: 6 :: u/s.143(3) r.w.s.147 of the Act, and thus, we quashed the order passed by the PCIT u/s.263 of the Act.

Order pronounced on the 21st day of September, 2022, in Chennai.