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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri Rajpal Yadav, Vice- & Shri Rajesh Kumar]
ORDER Per Shri Rajesh Kumar, AM:
This is an appeal preferred by the assessee against the order of the Principle Commissioner of Income Tax-4, Kolkata [hereinafter referred to as ‘PCIT’] passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as the Act) dated 26.02.2020 for the assessment year 2015-16.
Though the Registry has pointed out that the appeal is time barred, however, in view of the decision of the Hon’ble Supreme Court in the case of Miscellaneous Application No. 665 of 2021 in SMW(C ) No. 3 of 2020, the period of filing appeal during the COVID-19 pandemic is to be excluded for the purpose of counting the limitation period. In view of this, the appeal is treated as filed within the limitation period.
The only issue raised in the various grounds of appeal by the assessee is against the exercise of revisionary jurisdiction u/s 263 of the Act by ld PCIT setting aside the assessment order framed u/s 143(3) of the Act dated 09.05.2017.
The facts in brief are that the assessment u/s 143(3) of the Act was framed vide order dated 09.05.2017 by making various additions assessing the loss at Rs.
Sri Krishna Agri Projects Pvt. Ltd. 20,68,218/-. The Ld. PCIT, upon examination of the assessment order, came to the conclusion that the AO has failed to examine the documents(profit and loss account) SKAPL-1 which showed the business loss of Rs. 26,82,183/- as on 31.03.2015 and another profit and loss account which showed profit of Rs. 46,82,054/-. Accordingly a show cause notice were issued u/s 263 of the Act as to why the assessment order framed should not be revised. The ld PCIT ultimately revised the assessment vide order passed u/s 263 of the Act dated 25.02.2020 directing the AO to frame the assessment afresh after making enquiry into the seized documents which showed the amount of loss and profit on the same date.
The facts in brief are that the survey u/s 133A of the Act was conducted on the assessee on 06.01.2015 and certain documents were seized marked as SKAPL-1 to SKAPL-11 and external hard disk marked as SK/HD/1 were impounded. The impounded documents comprised of two profit and loss accounts one showed profit of Rs. 46,82,054/- and the second one showed loss of Rs. 26,82,183/- for AY 2014-15. During the course of survey, statement of Shri Saurav Rungta one of the directors of the assessee company was recorded who expressed his ignorance about these two profit and loss accounts. The assessee filed return of income on 30.09.2009 declaring a loss of Rs. 22,08,271/- based upon the audited books of accounts. The Ld. A.R. submitted before the Bench that the issue proposed to raised by the Ld. PCIT which accordingly to him was allegedly not examined during the course of assessment proceedings is completely wrong and against the facts on record. The Ld. A.R. referred to the assessment order framed by the AO and submitted that the AO has specifically called upon the assessee to explain the discrepancies as contained in the documents marked as SKAPL-1 and SKAPL-2 which were found during the course of survey on 06.01.2015. The ld AR submitted that during the course of scrutiny proceedings the assessee replied the query raised by the AO. The Ld. A.R. argued that having accepted the reply of the assessee and various arguments as furnished before the AO by the assessee during the course of assessment proceedings, the AO accepted the contentions of the assessee. The Ld. A.R. contended that since the issue
Sri Krishna Agri Projects Pvt. Ltd. proposed in the revisionary order by Ld. PCIT has been examined by the AO in detail by calling upon the assessee to furnish the explanation on these two profit and loss accounts and therefore the revisionary jurisdiction exercised u/s 263 of the Act on the issue and the consequent revisionary order passed by the Ld. PCIT may kindly be quashed. The Ld. A.R. submitted that the assessee has got the books of account audited and filed its return of income on the basis of audited books of account. The AO having satisfied on the correctness of the books of account accepted the same. Therefore exercise of jurisdiction u/s 263 of the Act revising the assessment which was framed in accordance with law by taking a plausible and possible view is wrong and has to be quashed. The Ld. A.R. in defense of his arguments relied on the decisions of jurisdiction High Court in the case of PCIT Vs Kesoram Industries Ltd. (2020) 423 ITR 180(Cal) and also a number of other decisions namely Malabar Industrial Co vs. CIT 198 ITR 611(SC) ,CIT vs. Maxx India Ltd. 295 ITR 282 (SC) and CIT vs. Gabriel India Ltd. (1993) 203 ITR 108(Bom).
The ld. D.R on the other hand submitted before the bench that during the course of survey, the survey team impounded certain paper which comprised of two profit and loss account of the same date disclosing one net profit of Rs. 46,82,054/- whereas the other showed net loss of Rs. 26,82,183/-. The Ld. D.R. relied heavily on the order of Ld. PCIT while admitting that issue has been examined by the AO but wrong view has been taken after considering the submissions of the assessee which is nothing but wrong appreciation of facts by the AO and thus justifies the jurisdiction u/s 263 of the Act to revise the assessment. The ld DR therefore prayed that the appeal of the assessee may kindly be dismissed.
We have heard rival contentions and perused the facts on record carefully including the revisionary order passed u/s 263 of the Act and various decisions cited before us. We note that during the assessment proceedings, notice 142(1) of the Act along with questionnaire was issued calling for various details and explanation from the assessee on documents marked as SKAPL-1 and SKAPL-2 which were found during the course of survey on 06.01.2015. Both these documents were profit and loss
Sri Krishna Agri Projects Pvt. Ltd. accounts of the same date relating to the same period but showing different amount of net result. One showing profit of Rs. 46,82,054/- whereas the second one showed loss of Rs. 26,82,183/- for AY 2014-15 which were replied by the assessee by giving detailed explanation/evidences. Thereafter the Ld. PCIT invoked the jurisdiction u/s 263 of the Act on the ground that the AO has not examined/enquired seized documents during the assessment proceedings and accordingly came to the conclusion that the assessment so framed in was erroneous in so far as prejudicial to the interest of the revenue and revised assessment by directing the AO to pass fresh assessment order after examining these documents and assess the income by making proper enquiries/verification in respect of the issues as stated in revisionary order by affording reasonable opportunity of hearing to the assessee. We have perused the notices issued by the AO u/s 142(1) and replies/written submissions filed before the AO in response thereto and observe that issues as proposed by the ld PCIT in the orders passed u/s 263 of the Act were examined and enquired and only then the assessment was framed. The notice issued u/s 142(1) of the Act, questionnaire and reply with evidences are part of the assessment records and were also filed before the tribunal in the paper books as discussed above. We note that the assessee has produced the audited books of accounts before the AO and duly explained as to how the issues raised by the ld PCIT were not warranted in view of the explanation given by the assessee. In our considered view, since the AO has examined all the issues raised by the PCIT in the revisionary order during assessment proceedings and only thereafter framed the assessments u/s 143(3) of the Act, the jurisdiction u/s 263 of the Act is not maintainable as the AO has taken a possible view or taken one of the two possible views to which the PCIT does not agree or is of the opinion that the AO has taken one view whereas according to PCIT the second view should have been taken by the AO. It is settled law that in order to invoke the jurisdiction u/s 263 of the Act by the PCIT, the twin conditions i.e. the order has to be erroneous and prejudicial to the interest of the revenue, have to be satisfied. In case one of the condition is satisfied out of the two, even then the PCIT cannot invoke the jurisdiction u/s 263 of the Act to revise the assessment. Similarly the powers of revision u/s 263 of the Act cannot be exercised
Sri Krishna Agri Projects Pvt. Ltd. arbitrarily in order to make roving enquiries and initiate fresh enquiries . In our considered view , the jurisdiction u/s 263 can be exercised to revise the assessment where no enquiry at all has been conducted by the AO which is a case of lack of enquiry but not in a case where the AO has conducted an enquiry which in the opinion of PCIT is inadequate /insufficient without showing as to how the order framed by the AO after appreciating the evidences filed by the assessee is contrary to facts or not in accordance with law. The case of the assessee finds supports on all these propositions from several decisions by the Apex Courts and other juridical forums as cited before us during the course of hearing and are being discussed hereunder:
• In the case of Malabar Industrial Co. (supra) the Hon’ble Apex Court has held that the prerequisite to exercise of jurisdiction u/s 263 of the Act by Commissioner is that the order of the AO is erroneous insofar as prejudicial to the interest of the revenue. The Hon’ble Court has held that the Ld. PCIT has to satisfy the twin conditions namely i) the order of the AO sought to be revised is erroneous and ii) it is prejudicial to the interests of the revenue and if one of them is absent, i.e. if the order of the AO is erroneous but is not prejudicial to the revenue or vice versa,recourse cannot be had to Section 263 of the Act. In the present case before us also the PCIT has failed to point out as to how the order passed by the AO is erroneous in so far as prejudicial to the interest of revenue. The Ld. PCIT simply discussed various issues which according to him have not been verified/examined by the AO during the assessment proceedings and has not pointed out as to how the assessments are erroneous in so far as prejudicial to the interest of the revenue and therefore the jurisdiction exercised under Section 263 cannot be sustained. • In the case of CIT vs. Max India Ltd. (supra) the Hon’ble Supreme Court has held that where two views are possible and the AO has taken one of the plausible views, the assessment so framed by the Sri Krishna Agri Projects Pvt. Ltd. AO cannot be termed as erroneous insofar as prejudicial to the interest of the revenue. The Hon’ble Apex Court has considered the earlier decision passed by the Co-ordinate Bench in the case of Malabar Industrials Co. (supra). In the case of the assessee since the AO has taken one of the two possible view on all the issues after examining them during assessment proceedings to which the PCIT does not agree and therefore the revisionary proceedings cannot be justified and sustained. • In the case of CIT vs. Gabriel India Ltd. (supra) the Hon’ble Bombay High Court has held that in order to invoke the jurisdiction u/s 263(1) of the Act there must be material before the Commissioner to consider that the order passed by the ITO was erroneous insofar as prejudicial to the interest of the revenue. The Hon’ble court has held that an erroneous order must be an order which is not in accordance with the law or which has been passed by the AO in undue haste without making any enquiry. The Hon’ble Court has further held that the order is said to be prejudicial to the interest of revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized. The Hon’ble Court held that such a decision of Income Tax Officer cannot be held to be erroneous simply because he has not made elaborate discussion in that regard in the assessment order.
Considering the facts of the case in the light of the various judicial precedents laid down by the Apex Court and various other judicial forms on the various propositions as discussed hereinabove , we hold that the revisionary jurisdiction has not been validly exercised by the ld PCIT. Accordingly we quash the revisionary proceedings initiated u/s 263 of the Act and the consequent order passed u/s 263 of the Act. The appeal of the assessee is allowed.
Sri Krishna Agri Projects Pvt. Ltd. 11. In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 9th May, 2022