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Income Tax Appellate Tribunal, MUMBAI BENCH “C” MUMBAI
ITA No. 1782/Mum/2020 A.Y. 2010-11 1 OmKailash Finance & Investment Pvt. Ltd. Vs. Pr.CIT-4
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C” MUMBAI BEFORE SHRI SHAMIM YAHYA (ACCOUNTANT MEMBER) AND SHRI RAVISH SOOD (JUDICIAL MEMBER) ITA No.1782/MUM/2020 (Assessment Year: 2010-11) Om Kailash Finance & Principal Commissioner Investment Pvt. Ltd., Vs. of Income Tax – 4 (Pr. 101/A, Ritvi Park, CIT-4), 629, 6th Floor, S.V. Road, Santacruz Aayakar Bhavan, M.K. (West), Mumbai – 400 054 Road, Churchgate, Mumbai – 400 020 PAN No.AAACOO496P (Assessee) (Revenue) Assessee by : Shri Rakesh Joshi, A.R Revenue by : Shri R.K. Sahu, CIT D.R Date of Hearing : 01/09/2021 Date of pronouncement : 20/09/2021 ORDER PER RAVISH SOOD, J.M: The present appeal filed by the assessee is directed against the order passed by the Principal Commissioner of Income Tax-4 (for short “Pr.CIT”), Mumbai under section 263 of the Income Tax Act, 1961 (for short „Act‟) dated 18.02.2020, which in turn arises from the order passed by the A.O u/s 143(3) r.w Sec 147 of the Act dated 28.12.2017. 2. The assessee has assailed the impugned order on the following grounds before us: “1. On the facts and in the circumstances of the case, the learned Pr.CIT grossly erred in invoking the provisions of section 263 of the Income Tax Act, 1961 without
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considering the material fact that the Assessment Order passed by the learned Assessing Officer was neither erroneous nor prejudicial to the interest of the Revenue.
The learned Pr. CIT grossly erred, both on facts and in law, in assuming the jurisdiction u/s 263 of the Income Tax Act, 1961 without considering the material fact that during the course of the assessment proceedings, the appellant had brought on record all the materials and evidences relating to the concerning issue and the same were duly verified by the AO after proper application of his mind. 3. Without prejudice to the above, the learned Pr.CIT has grossly erred in giving a direction to the AO to assess the income in the hands of the assessee by disallowing bad debts u/s 36(2) amounting to Rs. 48,43,750/-, whereas as per the facts and circumstances the addition should not be made.” Also, the assessee has raised before us the following additional grounds of appeal:
“1. Ld. Pr. CIT erred in not appreciate the fact that issue of claim of Bad debt referred to in the show cause notice u/s 263 of the Act, the same was not the ground on which the assessment was reopened and, therefore, the revisionary power with regard to this issue was time barred as the period of limitation provided for under sub-section (2) of section 263 of the Act would begin to run from the date of original assessment order and not from the order of reassessment as held by the Apex Court in the case of CIT Vs. Alagendran Finance Ltd. [(2007)] 293 ITR 1 (SC)].” 3. Briefly stated, the assessee company which is engaged in the business of finance and investment had filed its return of income for Assessment Year (A.Y) 2010-11 on 24.09.2010 declaring a total income of Rs. Nil (after set-off of brought forward business loss of Rs. 22,12,602/-). The return of income filed by the assessee company was initially processed as such u/s 143(1) of the Act. Subsequently, the case of the assessee company was reopened u/s 147 of the Act. Assessment was thereafter framed by the Assessing Officer (A.O) vide his order passed u/s 143(3) r.w.s. 147 dated 28.12.2017 and the returned income was accepted as such.
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After the culmination of the assessment proceedings it was observed by the Pr. CIT that the A.O while framing the assessment vide his order passed under Sec. 143(3) r.w.s 147, dated 28.12.2017 had allowed the assessee‟s claim for deduction of „bad debts‟ of Rs. 48,43,750/-. On a perusal of the records, it was noticed by the Pr. CIT that the assessee had claimed provision of doubtful debt of Rs. 48,43,750/- in its „balance sheet‟. Observing that the assessee had failed to write off the bad debts as per the mandate of law, the Pr. CIT was of the view that the A.O had wrongly allowed its claim for deduction of the same. Backed by his aforesaid conviction, the Pr.CIT was of the view that failure on the part of the A.O to disallow the assessee‟s claim for deduction of bad debts had rendered the assessment order passed by him as erroneous insofar it was prejudicial to the interest of the revenue within the meaning of Sec. 263 of the Act. Accordingly, the Pr.CIT issued a „Show cause‟ notice (SCN‟) to the assessee and called upon it explain as to why the order passed by the AO u/s 143(3) r.w.s. 147 dated 28.07.2012 may not be revised u/s 263 of the Act. In reply, it was submitted by the assessee that the „bad debts‟ to the tune of Rs. 48,43,750/- were debited under the head “administrative expenses” and a provision for doubtful debt for the said amount was made in the „balance sheet‟. It was further stated by the assessee that the provision for doubtful debt of Rs. 48,43,750/- made in A.Y 2010-11 was written back in the A.Y 2017-18 and corresponding claim in the Profit & loss account or computation of income was not made in the A.Y 2018-19. It was the claim of the assessee that the proposal for writing off was completed in A.Y 2018-19 and it had claimed these expenses only once i.e in A.Y 2010-11. Backed by his aforesaid contentions it was submitted by the assessee that as its claim for deduction of “bad debts” was in order, therefore, the revisional proceedings be dropped. However the Pr.CIT did not find favor with the contentions advanced by the assessee. Being of the view that the order passed by the A.O u/s 143(3) r.w.s. 147, dated 28.12.2017 was erroneous in so far it was prejudicial to the interest of the revenue, the Pr.CIT set-aside the assessment order to the file of the A.O with a direction to frame a fresh assessment as per the provisions of the Act.
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Aggrieved, the assessee has assailed before us the order passed by the Pr.CIT u/s 263 of the Act. At the very outset it was submitted by the Ld. A.R that the appeal filed by the assessee in the present case involved a delay of 110 days. Elaborating on the reasons leading to aforesaid delay, it was submitted by the Ld. A.R that the same had occurred, for the reason, that the assessee was prevented from filing the appeal within the stipulated time period due to the lock down that was imposed pursuant to the Covid-19 pandemic that had struck the country. It was fairly submitted by Ld. A.R that though the order passed by the Pr. CIT u/s 263 was received by the assessee on 18.02.2020, however, the appeal could be filed with the Tribunal only on 04.09.2020 which had thus resulted to a delay of 110 days in filing of the same. It was submitted by the Ld. A.R that the Hon‟ble Supreme Court vide its order passed in a suo motto writ petition [Civil No. 3/2020 dated 23.03.2020] had after taking cognizance of the situation arising out of the challenge faced by the country on account of Covid-19 pandemic and the resultant difficulties that may be faced by the litigants across the country in filing their petitions/applications/suits/appeals/all other proceedings within the period of limitation prescribed under the general law or Special Laws, whether condonable or not, had extended the same w.e.f 05th March, 2020 till further order/s to be passed by the Court. Ld. A.R drawing support from the aforesaid factual position a/w the aforesaid order of the Hon‟ble Apex Court submitted that the delay involved in filing of the present appeal be condoned. 6. Per contra, the Ld. D.R though objected to the seeking of condonation of the delay involved in filing of the present appeal by the assessee, however, he failed to come forth with any plausible reasoning to justify his said objection. 7. We have heard the Ld. Authorized Representatives for both the parties qua the issue pertaining to the delay involved in filing of the present appeal. After giving a thoughtful consideration, we are of the considered view that as the assessee was for justifiable reasons prevented from filing the present appeal within the prescribed time period, therefore, the delay of 110 days
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therein involved in filing of the same merits to be condoned. Accordingly, we herein condone the delay of 110 days involved in filing of the present appeal by the assessee company. 8. Apropos the validity of the order passed by the Pr. CIT u/s 263 of the Act, dated 18.02.2020, it was submitted by the Ld. Authorized Representative (for short „A.R‟) for the assessee that the Pr.CIT had exceeded his jurisdiction and passed the order u/s 263 of the Act. Elaborating on his aforesaid contention, it was submitted by the Ld. A.R that as the A.O held a bonafide belief that the assessee had raised an ingenuine claim of having received an advance of Rs. 1 crore from a concern viz. M/s Halwasiya Group i.e an entity which was allegedly involved in circular transactions, therefore, for the said standalone reason its case was reopened under Section 147 of the Act. In order to buttress his aforesaid claim the Ld. A.R had drawn of our attention to the assessment order wherein the “reasons to believe” on the basis of which the case of the assessee was reopened were reproduced. It was submitted by the Ld. A.R that the A.O vide his order passed u/s 143(3) r.w.s. 147, dated 28.12.2017 had not made any addition qua the aforesaid amount of Rs. 1 crore on the basis of which the case of the assessee was reopened and had accepted the returned income of the assessee company. Backed by the aforesaid facts, the Ld. A.R had assailed the impugned order passed by the Pr.CIT under Sec. 263 of the Act on two fold basis viz (i). that now when the A.O had not made any addition qua the basis on which its case was reopened under Sec. 147 of the Act, therefore, it was not open to him to have independently assessed some other income; and (ii). that as in respect of an issue which was not the subject matter of reassessment the limitation for passing the order u/s 263(2) was to be reckoned from the date of initial processing of the assessee‟s return u/s 143(1) of the Act, therefore, the revisional order having been passed much beyond the prescribed period of two years was barred by limitation. It was the claim of the Ld. A.R that the Pr. CIT in exercise of his revisional jurisdiction u/s 263 of the Act had exceeded his jurisdiction by dubbing the order passed
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by the A.O under Sec. 143(3) r.w.s 147, dated 28.12.2017 as erroneous. It was submitted by the ld. A.R that the order passed by the A.O u/s 143(3) r.w.s 147, dated 28.12.2017 was held by the Pr. CIT as erroneous, for the reason, that there was a failure on his part to assess an amount which as per the mandate of law he could not have assessed on a standalone basis i.e in absence of assessing of the amount on the basis of which the case of the assesee was reopened. In other words, it was the claim of the ld. A.R that the Pr. CIT had held the order passed by the A.O under Sec. 143(3) r.w.s 147, dated 28.12.2017 as erroneous because he had failed to make an addition which in the backdrop of his limited scope of jurisdiction he could not have legally made in the hands of the assessee. In support of his aforesaid contention the Ld. A.R had relied upon the judgment of the Hon‟ble High Court of Bombay in the case of CIT vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom). Apart from that, it was submitted by the ld. A.R that even otherwise as the limitation for passing the impugned order u/s 263(2) of the Act was to be reckoned from the date of the initial intimation passed u/s 143(1) of the Act, therefore, the same having been passed much beyond the prescribed time period was barred by limitation. In support of his aforesaid contention the ld. A.R had drawn support from the judgment of the Hon‟ble Supreme Court in the case of CIT vs. Alagendran Finance Ltd. (2007) 293 ITR (SC). Also, the Ld. A.R had advanced his contentions qua the merits of the case. 9. Per Contra, the Ld. Departmental Representative (for short „D.R‟) relied on the order passed by the Pr. CIT under Sec. 263 of the Act. It was submitted by the Ld. D.R that the Pr.CIT had rightly exercised his jurisdiction u/s 263 of the Act and had passed the order within the stipulated time period as per the mandate of law. 10. We have heard the Ld. Authorized Representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. As is
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discernible from the records, the case of the assessee was reopened u/s 147 of the Act for the solitary reason that the A.O held a bonafide belief that the assessee had raised a bogus claim of having received an advance of Rs. 1 crore from M/s Halwasiya Group (supra). However, the AO thereafter while framing the reassessment vide his order passed u/s 143(3) r.w.s. 147, dated 28.12.2017 had found favor with the submissions of the assessee qua the genuineness of the aforesaid advance and had not made any addition in respect of the said amount. In fact, the A.O vide his order passed u/s 143(3) r.w.s. 147, dated 28.12.2017 had accepted the returned income of the assessee. 11. In the backdrop of the aforesaid facts, it is a matter of a fact borne from the record that the A.O while framing the reassessment vide his order passed under Sec. 143(3) r.w.s 147, dated 28.12.2017 had not made any addition qua the amount which he initially was of the belief had escaped assessment and had accepted the returned income of the assessee. Backed by the aforesaid facts, we find substantial force in the claim of Ld. A.R that now when the A.O had not made any addition qua the reason/basis on which its case was reopened under Sec. 147 of the Act, therefore, he could not have independently assessed some other income of the assessee. In sum and substance, in case no addition qua the reason/basis on which the case of an assessee was reopened is made by the A.O while framing the reassessment, then, it would not be permissible for him to independently assess some other income in the hands of the assessee. Our aforesaid view is fortified by the judgment of Hon‟ble High Court of Bombay in the case of CIT vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bombay). In its aforesaid order the Hon‟ble High Court had concluded that though the A.O may assessee or reassess the income in respect of any issue which comes to his notice subsequently in the course of the proceedings though the reasons for such issue were not included in the notice, however, if after issuing the notice u/s 148 the A.O accepted the contention of the assessee and holds that the income which he has initially formed a reason to
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believe had escaped assessment, has as a matter of fact not escaped assessment, it would then not be open to him to independently assess some other income. In the backdrop of the aforesaid judgment of the Hon‟ble jurisdictional High Court, we are of the considered view that the Pr. CIT in exercise of his revisional jurisdiction u/s 263 of the Act could not have held the order passed by the A.O u/s 143(3) r.w.s. 147, dated 28.12.2017 as erroneous, for the reason, that he had failed to make an addition which he was precluded to make as per the mandate of law. Before parting qua the aforesaid issue in hand, we may herein observe, that the Pr. CIT in exercise of his revisional jurisdiction had sought to vest the A.O with a jurisdiction to assess an amount which he as per the mandate of law was precluded to assessee. We, thus, in the backdrop of our aforesaid deliberations are unable to uphold the order passed by the Pr.CIT u/s 263 of the Act, dated 18.02.2020. 12. Although, we have observed that the Pr.CIT had clearly traversed beyond the scope of the revisional jurisdiction vested with him u/s 263 of the Act, however, for the sake of completeness we shall deal with the second contention of the Ld. A.R that the impugned order passed by the Pr. CIT u/s 263 of the Act, dated 18.02.2020 is barred by limitation. 13. Admittedly, it is a matter of fact borne from the record that the case of the assessee was reopened by the A.O u/s 147 of the Act, for the solitary reason, that he held a bonafide belief that assessee had raised a bogus claim of having received an advance of Rs. 1 crore from M/s Halwasiya Group (supra) was not genuine. As such, the assessee‟s claim of deduction of “bad debts” of Rs. 48,43,750/- was not an issue on the basis of which the case of the assessee was reopened under Sec. 147 of the Act. In the backdrop of the aforesaid fact, we find substantial force in the claim of the Ld. A.R, that now when the aforesaid issue i.e. assessee‟s claim for deduction of “bad debts” was not a subject matter of reassessment, therefore, the limitation u/s 263(2) of the Act was to be reckoned from the date of the original assessment i.e the intimation passed in the case of the assessee u/s 143(1) of the Act; and not
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from the date on which the reassessment order u/s 143(3) r.w.s. 147, dated 28.12.2017 was passed by the A.O. At this stage, we may herein observe that as the case of the assessee was reopened only qua the aforesaid issue as discussed by us hereinabove, therefore, the doctrine of merger of the original assessment/intimation would not be applicable. Our aforesaid view is fortified by the judgment of the Hon‟ble Supreme Court in the case of CIT vs. Alagendran Finance Ltd. (2007) 293 ITR 1 (SC). In its aforesaid order, it was observed by the Hon‟ble Apex Court that in respect of an issue which was not the subject matter of reassessment, the limitation under s. 263(2) would run from the date of original assessment and revisional proceedings initiated in respect of such issue beyond the period of two years from the date of original assessment/intimation would be barred by limitation. Now, in the case before us, as the income of the asseseee was initially processed u/s 143(1) of the Act, therefore, the period of limitation for passing the order u/s 263 of the Act was to be reckoned from the date of intimation that was issued by the A.O u/s 143(1) of the Act. As the order passed by the Pr. CIT u/s 263 is dated 18.02.2020 while for the return of income was filed on 24.09.2010, we, therefore, are of a strong conviction that the order u/s 263 of the Act that was required to have been passed within a period of two years from the end of the financial year in which the intimation was issued u/s 143(1) of the Act is clearly barred by limitation. Backed by our aforesaid deliberations, we are of the considered view that the order passed by the Pr.CIT u/s 263, dated 18.02.2020 having been passed beyond the time period prescribed in law cannot be sustained and is liable to be struck down on the said count also. 14. Resultantly, in the backdrop of our aforesaid observations we are unable to persuade ourselves to uphold the order passed by the Pr.CIT u/s 263 of the Act, dated 18.02.2020 and therein vacate the same and restore the order passed by the A.O u/s 143(3) r.w.s 147, dated 28.12.2017. 15. As we have quashed the order passed by the Pr. CIT u/s 263 of the Act, dated 18.02.2020 for want of jurisdiction, therefore, we refrain from adverting
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to and therein adjudicating the contentions advanced by the Ld. A.R as regards the merits of the case which are left open. 16. Resultantly, the appeal filed by the assessee is allowed in terms of our aforesaid observations. Order pronounced in the open court on 20/09/2021. Sd/- Sd/- (Shamim Yahya) (Ravish Sood) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated: 20.09.2021 Alindra, PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy//
(Sr. Private Secretary) ITAT, Mumbai