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Income Tax Appellate Tribunal, BENCH “C” KOLKATA
Before: Shri Manish Borad & Shri Sonjoy Sarma
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH “C” KOLKATA Before Shri Manish Borad, Accountant Member and Shri Sonjoy Sarma, Judicial Member आयकर अपील सं.य/ Assessment Year: 2013-14 बनाम Visa Power Limited P.C.I.T-4, Kolkata-700 069 Visa House, V/s. 8/10 Alipore Road, Kolkata-700 027. PAN: AACCV-1853-D अपीलाथ" /Appellant ""यथ" /Respondent ..
अपीलाथ" क" ओर से/By None Appellant/Assessee ""यथ" क" ओर से/By Shri Tushal Dhawal Singh, CIT/Ld.DR Respondent/Department सुनवाई क" तार"ख/Date of Hearing 09-06-2022 घोषणा क" तार"ख/Date 13 -06 -2022 of Pronouncement आदेश /O R D E R PER MANISH BORAD, AM. This appeal of the assessee for the assessment year 2013-14 is directed against the order of ld. Pr. Commissioner of Income-tax, Kolkata-4, Kolkata dated 15-02-2018 framed u/s. 263 of the Income Tax Act, 1961. 2. The assessee has raised the following grounds of appeal:- 1. A.Y 2013-14 Visa Power Ltd.
1) That the notice dated 19th December, 2017 issued by the learned Pr. Commissioner of Income Tax, Kolkata 4 (,Pr. CIT') under section 263 of the Income tax Act, 1961('Act') is bad in law, void ab initio and are liable to be quashed.
2) That the order dated 15th February, 2018 passed by the learned Pr. CIT under section 263 of the Act is bad in law, void ab initio and is liable to be cancelled.
3) That on the facts and in the circumstances of the case, the learned Pr. ClT erred in setting aside the assessment order on the issue of applicability of provisions of section 14A of the Act and directing the assessing officer for reexamination of the same.
4) That on the facts and in the circumstances of the case, the learned Pr. CIT erred in setting aside the assessment order on the issue of examination of unsecured loan taken by the company and directing the assessing officer for reexamination of the same.
5) That on the facts and in the circumstances of the case, the learned Pr. CIT erred in setting aside the assessment order on the issue of examination of TDS claim made by the company and directing the assessing officer for reexamination of the same.
6) That on the facts and in the circumstances of the case, the learned Pr. CIT erred in setting aside the assessment order on the issue of examination of interest income earned by the company and directing the assessing officer for reexamination of the same.
7) That on the facts and in the circumstances of the case, the learned Pr. CIT erred in setting aside the assessment order on the issue of examination of 2. A.Y 2013-14 Visa Power Ltd.
depreciation claim on lease hold assets of the company and directing the assessing officer for reexamination of the same.
8) That on the facts and in the circumstances of the case, the learned Pr. CIT erred in setting aside the assessment order on the issue of examination of expenses on corporate social responsibility incurred by the company and directing the assessing officer for re examination of the same.
9) That the learned Pr. CIT while passing the impugned order has failed to appreciate that the aforesaid issues, on which revisionary proceedings was initiated, were duly examined and analyzed by the assessing officer, as the facts of the matter demanded, while passing the assessment order.
10) That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds taken hereinabove before or at the hearing of this appeal.
At the time of hearing none appeared on behalf of the assessee. A perusal of records shows that since 11-11-2019 since several opportunities have been provided to the assessee. The assessee did not appear on 24-02-2020, 05-11-2020, 13-10-2021,06-04-2022 and 09-06-2022. Notice was sent through RPAD (Registered Post with A.D). But the same was returned unserved. Under these circumstances, we have no option left except to proceed for adjudication of the issues raised in this appeal with the assistance of Ld. Departmental Representative. On perusal of the above mentioned grounds of appeal, we find that the assessee has challenged the validity of jurisdiction invoked by the Ld. PCIT u/s. 263 of the Act 3. A.Y 2013-14 Visa Power Ltd.
holding the order of the Ld.AO dt. 21-03-2016 passed u/s. 143(3) of the Act as erroneous and pre-judicial to the interest of the revenue.
During the course of hearing the Ld. Departmental Representative vehemently argued supporting the order of the Ld. PCIT.
We have heard the Ld. Departmental Representative and also gone through the records placed before us. We notice that the Ld. PCIT issued show cause notice u/s. 263 of the Act pointing out the following issues alleging them to have remained to be examined/enquired by the Ld. AO ( which are incorporated in para 2 of the impugned order), which reads as under:-
It is noticed that despite the fact the case was selected for scrutiny with specific verification of TDS & unsecured loans, following issue was not considered at the time of assessment.
Applicability of provisions of section 14A was not explored.
Unsecured loans, Comments of the Auditors at 3 of Annexure to independent Auditor Report also indicate squared up loans to &from closely held companies.
There 'were two sets of total TDS deducted as per assessee's submission dated 27.07.2016 being of Rs. 1,20, 05,0741 and Rs. 1.20,79,395/ ,. as against of Rs. 1,20,07;074/ as per computation as well return. Evidently, there would be substantial difference in corresponding receipts, which was not examined at the time of assessment.
A.Y 2013-14 Visa Power Ltd.
In the A. Y 201415 preproduction interest income was apportioned into two halves, one part of Rs. 8,83,28,063/ was capitalized, while the balance of Rs. 3,21,11,251/ was charged to P&L accounts. No explanation for the segregation was given and AO did not seek any justification.
So far as preoperative 'interest income is concerned it surely has to be guided by section 14 of the Act. There can be no other option. As per the said section income is classified in the jive heads (i) Salaries, (U) Income from House Property, (iii) Profits & gains of business or profession. (iv) Capital gains and (v) Income from other sources.
If an assessee has to incur an expenditure in order to make the earning of an income possible, then such expenditure would be clubbed with the entire accounts drawn in that respect. So far as preoperative situation is concern as there is no business income, all expenses are supposed to be capitalized. In this regard it is pertinent to point out that in its submission dated 16.02.2016. the assessee at the third para of second page mentioned that the interest incomes were indirectly related to this business. Therefore, the entire interest income was charging to income tax, which was not.
So, far as expenses claimed are concerned, (he assessee itself in penultimate para of page 2 of its submission dated 16.02.2016 had offered capitalization of expenses. However the issue was not examined to at all.
Depreciation was claimed on lease held assets also.
Expenses under "Corporate Social Responsibility" 'were capitalized (Note 10) by the assessee. As per Act expenses under this head is to be disallowed. Capitalization means at latter date depreciation will be claimed on such expense.
During the course of revisionary proceeding the assessee made general statements without furnishing necessary details so as to show 5. A.Y 2013-14 Visa Power Ltd.
that issues raised in the show cause notice has been examined by the Ld. AO. Thereafter, the Ld. PCIT after considering the submissions of the assessee held that the assessment order dt. 21- 03-2016 is erroneous and prejudicial to the interest of the revenue observing as under:-
“4. The assessee in his submission stated that the Insolvency and Bankruptcy proceedings has been initiated against the company and the matter has been referred to Insolvency Professional by National Company Law Tribunal. Hence, as per the provisions of Insolvency Proceedings, no other proceedings can be initiated against the company until the Insolvency Proceedings are completed. The submission of the assessee in this regard is not tenable as it appears that the same is applicable for pending suit only not for any income tax proceedings.
As regard issue relating to 14A of the Income Tax Act, 1961, the plea of the assessee appears to be general and not substantiated by relevant evidence, it is also relevant to point out that the CBDT vide Circular No. 5/2014 has clarified that disallowance of expenditure under Rule 8D read with section 14A of the Act can be made even where taxpayer in a particular year has not earned any exempt income, in terms of which the assessment order passed by the A.O on this issue is primafacie erroneous so far as prejudicial to the interest of revenue. As regard mismatch in TDS, it is observed that the order has been passed without reconciling the said mismatch making the order erroneous so far as prejudicial to the interest of revenue. Similarly on the issue of interest income, it appears that the issue has not been carried to the logical end by examining the issue adequately making the order erroneous so far as prejudicial to the interest of revenue. Moreover, the A.O has accepted the claim of depreciation on lease hold assets without examining the veracity of the plea of the assessee that is no such assets in the book. On this ground also there is a case 6. A.Y 2013-14 Visa Power Ltd.
of lack of enquiring which makes the order erroneous so far as prejudicial to the interest of revenue. Lastly, as regards CSR expense it is apparent that the claim has been allowed by A.O without examining the nature and genuineness making the assessment order erroneous so far as prejudicial to the interest of revenue. Thus, the order passed u/s 143(3) of the Income Tax Act, 1961 on 21032016 suffers from lack of enquiry/inadequate verification causing the order passed u/s 143(3) of the Income Tax Act, 1961 erroneous so far as prejudicial to the interest of revenue.
The power of revision by the CIT u/s 263 of the Act is very wide and it is in the nature of supervisory jurisdiction. The power u/s 263 can be exercised even in cases where the issue is debatable and such power is not comparable with the power of rectification of mistake u/s 154 of the Income Tax Act. It is well settled that incorrect assumption of facts or application of law satisfies the requirement of law i.e. order being erroneous & prejudicial to the interest of revenue. The order passed by the A.O. without application of mind or order showing apparent error of reasoning or the order where the A.O. simply accepts where the assessee stated in his return of income and fails to make the enquiries which are called for in the facts and circumstances of the case will also call for intervention U/S 263 of the Act by the CIT/Pr. CIT. It is a trite law that the disclosure of facts by the assessee in the return of income and for in the course of assessment proceedings cannot give immunity from revisional jurisdiction of the CIT/Pr. CIT u/s 263. In this context, it may be mentioned here that in the case of Commissioner of Income tax, CentralI Kolkata Vs Maithan International, it was held by Calcutta High Court [2015] 56 taxmann.com 283(Calcutta) that "it is not the law that the Assessing Officer occupying the position of an investigator and adjudicator can discharge his function by perfunctory or inadequate investigation. Such a course is bound to result in erroneous and prejudicial order. Where the relevant enquiry was not undertaken, as in the case, the order 7. A.Y 2013-14 Visa Power Ltd.
is erroneous and prejudicial too and therefore revisable. Investigation should always be faithful and fruitful. Unless all fruitful areas or enquiry are pursued the enquiry cannot be said to have been faithfully conducted. "
The Hon'ble Supreme Court, further, in the case of Rampyari Devi SaraogiVs CIT(l968) 67 ITR 87(SC) and Srnt. Tara Devi Aggarwal VsCIT(1973)8B ITR323(SC) has held that in absence of proper enquiries, the assessment order would become erroneous and prejudicial to the interest of the revenue.
The Hon'ble Delhi High Court in the case of Gee Vee EnterpriseVsAddl. CIT(1975) 99 ITR 375 has also held as under:
"The reason is obvious. The position and function of the income tax officer is very different from that of a Civil Court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a Civil Court in the absence of rebuttal. The Civil Court is neutral. It simply gives decision on the basis of pleading and evidence which comes before it. The income tax officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of return which is apparently in order but calls for further enquiry. It is his duty to ascertain the truth of facts stated in the return when the circumstances of .case are such as to provoke an enquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the income tax officer to further such an enquiry prudent that the word "erroneous" in section 263 includes the failure to make such an enquiry.
The order becomes erroneous because such an enquiry has not been and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. 8. A.Y 2013-14 Visa Power Ltd.
In view of the facts and the legal position stated above) I am of the view that the order passed on an incorrect assumption of facts or incorrect application of law and without making requisite inquiries will satisfy the requirement of the order being erroneous and prejudicial to the interest of the revenue within the meaning and scope of Section 263 of the Income Tax Act, 1961. The afore stated decisions postulate that when the officer is expected to make an inquiry of a particular item of income and if he does not make an inquiry as expected, that would be a ground for the Commissioner to interfere with the order passed by the Officer since such an order passed by the Officer is erroneous and prejudicial to the interests of the Revenue (K.A. Ramaswamy Chettiar V. CIT, (1996) 220 ITR 657).
I have carefully considered the submission made on behalf of the assessee and perused the material available on record and found that the issues pointed out in the show cause needs verification as merely accepting submission without calling for relevant material/evidences during the course of assessment proceedings the A.O. failed to examine the above referred issue. After having considered the position of law and facts and circumstances of the instant case, I am of the considered opinion that the assessment order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of revenue in accordance with the Explanation 2(c ) below section 263 (1) of the Act. Accordingly, the issue is set aside to the table of A.O on specific point mentioned in para 2 above. The A.O is directed to provide reasonable opportunity to the assessee company to produce documents & evidences which it may choose to rely upon for substantiating its own claim. Thereafter a fresh assessment order may be passed in accordance with the relevant provisions of law.”
A.Y 2013-14 Visa Power Ltd.
A perusal of above finding of the Ld. PCIT and also considering the judicial precedence referred therein, we find that neither any details were filed during the course of revisionary proceedings before the Ld. PCIT nor any details were filed before this Tribunal. There is no discussion on the alleged issues referred to show cause notice in the assessment order. All these facts indicate that the issues raised by the Ld. PCIT in the show cause notice giving rise to revisionary proceedings has not been examined by the Ld. AO and the same needs to be examined as per direction given by the Ld.PCIT in the impugned order. We, therefore, find no reason to interfere in the finding of the Ld. PCIT given in the impugned order passed u/s. 263 of the Act. Accordingly, all the grounds raised by the assessee are dismissed and revisionary proceedings u/s. 263 of the Act are held to be valid and hold that the Ld. PCIT has rightly invoked the jurisdiction and carried out the revisionary proceedings u/s. 263 of the Act.
In the result, the appeal of the assessee is dismissed as per terms indicated hereinabove.
The order pronounced in the open Court on 13 .06.2022 (SONJOY SARMA) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated :13 -06-2022 **PP/SPS
A.Y 2013-14 Visa Power Ltd.
आदेश क" ""त"ल"प अ"े"षत / Copy of Order Forwarded to:- 1.अपीलाथ"/Appellant/Assessee: Visa Power Limited, Visa House, 8/10 Alipore Road, Kolkata-700 027. . 2. ""यथ"/Respondent/Department: The PCIT-4, Kolkata/ACIT, Cir-11(2), Aaykar Bhawan, P-7 Chowringhee Sq., Kolkata- 700 069. 3. संबं"धत आयकर आयु"त / Concerned CIT 4. आयकर आयु"त- अपील / CIT (A) 5. "वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण कोलकाता / DR, ITAT, Kolkata गाड" फाइल 6. / Guard file. By order/आदेश से, //