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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH
Before: Shri Waseem Ahmed & Shri T.R. Senthil Kumar
Appellant by : Shri Sunil Talati, A.R. Respondent by : Shri A.P. Singh, CIT/DR Date of hearing : 20-07-2022 Date of pronouncement : 07-10-2022 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Assessee against the Revision order dated 31.03.2021 passed by the Principal Commissioner of Income Tax, Ahmedabad-3, under section 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2016-17.
The brief facts of the case is that the assessee is a Private Limited Company engaged in the business of manufacturing low Page No 2 Pierlite India Pvt. Ltd. vs. PCIT voltage switchgear and professional lighting solutions. For the Assessment Year 2016-17, the assessee filed its Return of Income on 21.11.2016 declaring Nil total income under the normal provision and paid tax of Rs. 1,29,32,700/- under Minimum Alternative Tax u/s. 115JB of the Act. Regular assessment u/s. 143(3) was completed on 27.12.2018 assessing the Nil total income.
2.1. On scrutiny of the assessment records by the Ld. PCIT, it was noticed that the assessee company sold two plots namely Plot Nos. 60 and 61 at Mouje Rakhial at Maninagar admeasuring 21276 sq. mtr. being factory building/shed for a sale consideration of Rs. 37.98 Crores on 11.06.2015 whereas the assessee purchased the above land for a consideration of Rs. 5,09,04,313/- from different conveyance deed on 19.05.1999. While completing the assessment proceedings, the assessee claimed indexed cost of acquisition of the property as Rs. 5,09,04,313/- but the Assessing Officer failed to verify the evidence of payment of the cost of acquisition of Rs. 1,55,86,793/- by the assessee. Similarly the assessee computed the capital gains on 37.50 Crores whereas the sale consideration as per the registered sale deed was Rs. 37.98 Crores. Thus the assessee has taken less consideration of Rs. 48,00,000/- while computing the capital gains. Thus the assessment order passed is an erroneous and prejudicial to the interest of revenue. Therefore the Ld. PCIT issued a show cause notice dated 15.03.2021 to file the following details/documentary evidences:
Page No 3 Pierlite India Pvt. Ltd. vs. PCIT i) Copies of purchase deeds of the sold property i.e. Plot No.60 and 61, TP 10 situated at Mouje Rakhial of Maninagar admeasuring 21276 sq. mtr. together with superstructure being factory building/shed admeasuring 9432.95 sq. mtr. ii) Details of payments made to the vendors of the above purchase of the property along with documentary evidences thereof. In case of non-furnishing or furnishing of .incomplete details, please show cause as to why the cost of acquisition claimed by you should not be disallowed. iii) Explanation as to why the sale consideration for both the sold assets should not be taken at documented price of Rs.37,98,00,000/- instead of Rs.37,50,00,000/- taken by you for capital gain tax liability purpose and balance Rs.48,00,000/- should not be added to your total income for the year under consideration.
2.2. The case was posted for hearing on 22.03.2021 as the Revision proceedings is getting time barred on 31.03.2021. The assessee vide its detailed reply dated 24.03.2021 submitted that there is no error or mistake whatsoever in the assessment order passed by the A.O. Therefore the invocation of proceedings u/s. 263 itself is invalid in law and relied upon various case laws. The assessee further replied that all the sale transactions were submitted to the Assessing Officer vide letter dated 11.10.2018 and the computation of income vide letter dated 18.10.2018 were submitted to the Assessing Officer and the Assessing Officer has correctly assessed the same after due verification of evidences filed before him. Therefore the assessment order is not an erroneous and prejudicial to the interest of Revenue. The assessee further submitted that during the assessment year 2016-17, the assessee company has paid tax under the Minimum Alternative Tax (MAT) provision of Rs. 1,29,32,700/- and not under the normal provisions, where the tax effect is Nil. Thus the assessment order is not at all prejudicial to the interest of Revenue, as there is no loss of revenue. Therefore the invocation of revision proceedings u/s. 263 is completely illegal Page No 4 Pierlite India Pvt. Ltd. vs. PCIT and unjustifiable and produced the computation of income as follows: Particulars As per AO order As proposed by your good self Tax under Normal Provisions: Gross Taxable Income 171,796,544 171,796,544 Addition proposed by your 0 4,800,000 good self Less: B/f Business Loss* (171,796,544) (171,796,544) Taxable Income 0 0 Tax liability under the Normal 0 0 provisions (A) Tax under MAT provisions: Book Profit 69,906,485 69,906,485 Tax liability under the MAT 1,29,32,700 12,932,700 provisions (B) Total Tax liability (higher of A 12,932,700 12,932,700 or B) *Loss c/f to future years 93,198,518 88,398,518 2.3. Thus the assessee requested to drop the Revision proceedings proposed u/s. 263 of the Act. The Ld. PCIT considered the above reply and held that the Assessing Officer has not applied his mind and allowed the capital gain offered by the assessee with a lessor consideration of Rs. 48,00,000/- and without ascertaining the correct cost of acquisition and cost of indexation adopted for the assessment year 1997-98 whereas the original purchase of the properties were actually registered in the subsequent assessment year. Thus the assessment order passed by the A.O. is an erroneous order and prejudicial to the interest of revenue and accordingly the assessment order is set aside with a direction to the A.O. to make requisite inquires and proper verification with regard to the issue mentioned above and redo the assessment de-novo after due consideration of the facts and law in this regard.
Page No 5 Pierlite India Pvt. Ltd. vs. PCIT
Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal:
1. The learned Pr. C.I.T. has erred in passing Order u/s. 263 without jurisdiction and appropriate powers available under the Act. It is submitted that the order passed u/s. 263 is bad in law as AO has neither committed any error nor it is prejudicial to the interest of revenue. It be held now.
2. The learned Pr. C.IT, has erred in holding that the assessee company has offered lessor sale consideration by Rs 48,00,000/- in the return of income and in Assessment Order, and, held that order passed is erroneous and prejudicial to the interest of revenue. It is submitted that the Assessee has offered full sale consideration received on sale of property, which has been fully verified by the AO and there in no error whatsoever. It is further submitted that the complete details regarding full sale consideration of Rs. 37.98 Cr. were filed during the course of assessment proceeding and only after due verification of such details, the AO had correctly accepted the same. It is therefore submitted that the view so taken of holding the assessment order passed by A.O. as erroneous and prejudicial to the interest of Revenue is incorrect and illegal and accordingly the direction to set aside the original assessment order and passing the fresh assessment order be cancelled. It be so held now.
3. The learned Pr. C.I.T. has erred in holding that the Ld AO has passed the Asst. Order u/s 143(3) of the Act without ascertaining the correct cost of acquisition claimed by the assessee. It is submitted that the assessee company has correctly claimed the cost of acquisition at Rs.1,55,86,797/- in ROI filed and the complete details regarding the same have been filed during the course of Original assessment proceeding. The Id AO had, after due verification of such details and evidences filed, and after application of mind, had allowed the above cost of acquisition claimed. It is therefore submitted that there is no under assessment of income and the incorrect view taken by Ld. Pr. C.I.T. is without any basis or justification. Thus the direction to set aside the original assessment order and passing the fresh assessment order be cancelled and the order passed by Ld. Pr. C.I.T. be set aside and quashed.
4. Without prejudice to the above, the Learned Pr. CIT has erred in passing the order u/s. 263 of the Act both on facts and in law, without appreciating detailed submission and the fact that order is not at all prejudicial to the interest of revenue. It is submitted that even though the amount of addition/disallowance made to the total income of the assessee as drawn by Ld. Pr. CIT in order passed u/s 263, the final tax liability does not get change and remains payable under the MAT only. On the facts and circumstances of the case, the directions given to set aside the original assessment and passing the fresh assessment order be cancelled and the order passed by Ld. Pr. C.I.T. u/s 263 giving such incorrect directions be set aside and quashed. It be so held now.
5. The order passed by the learned Pr. C.I.T is bad in law and contrary to the provisions of law and facts. It is submitted that the same be held so now.
Page No 6 Pierlite India Pvt. Ltd. vs. PCIT
Ld. Counsel Mr. Sunil Talati appearing for the assessee reiterated the submissions made before the Lower Authorities and filed a Paper Book containing the Return of Income, Copies of notices issued u/s. 142(1), calling in various details by the Assessing Officer, Assessment order passed u/s.143(3), Show cause notice issued by Ld. PCIT and Copies of the Written Submissions filed by the assessee before Ld. PCIT with the replies filed by the assessee before the Assessing Officer. The Ld. Counsel drawn our attention to Page No. 286 of the Paper Book wherein the assessee’s e-mail reply dated 27.07.2020 wherein the assessee has given the break-up of sale consideration amounting to Rs. 37.98 Crores. Similarly at Page No. 288 of the Paper Book wherein a detailed reply dated 12.12.2018 field by the assessee on indexation of the cost of acquisition of the property at Rs. 1,55,86,797/-. The assessee also clarified that though the year of acquisition is mentioned as 1997-98 in the computation of income, however while considering the Cost Inflation Index, the assessee has correctly taken the Cost Inflation Index as Rs. 331 pertaining to the Financial Year 1997-98. Thus the Ld. Counsel pleaded that the assessing Officer while framing the assessment order u/s. 143(3) has dealt elaborately the submissions made by the assessee and verified the same and then passed the assessment order, which is neither erroneous nor prejudicial to the interest of revenue. Once the Revision order is given effect to, even in that case there is no difference in the total tax liability. Thus there is no prejudicial caused to the interest of revenue and the entire exercise is liable to be quashed, since all details have been submitted before the Page No 7 Pierlite India Pvt. Ltd. vs. PCIT Assessing Officer and then only the A.O. passed the assessment order. Thus the Ld. A.R. pleaded to quash the Revision order.
Per contra Ld. CIT/DR Shri A.P. Singh appearing for the Revenue supported the order of the Ld. PCIT and requested to uphold the same.
Heard the rival contentions and perused the materials available on record including the Paper Book filed by the assessee. It is seen on record that the show cause notice dated 15.03.2021 was issued to revise the assessment order dated 27-12-2018 passed by the Assessing Officer which was erroneous on two grounds namely the cost of acquisition of the property was not computed properly and the Assessing Officer failed to the full consider of Rs. 48,00,000/- while computing the capital gain, which is the registered document price. The assessee case was fixed for hearing on 23.03.2021 as it is getting time barred by 31.03.2021 for revision proceedings. The assessee vide its detailed reply dated 24.03.2021 submitted that the assessment order is neither erroneous nor prejudicial to the interest of revenue. Therefore requested to drop the revision proceedings and also brought to the attention of the Ld. PCIT that the assessee vide its letter dated 11.10.2018 and 18.10.2018 submitted all the details required by the Assessing Officer and thereafter the assessment order was passed. There is no prejudicial to the interest of Revenue as for the present assessment year, as the assessee paid tax under the MAT provisions u/s. 115JB only and no tax payable under the normal provisions of the Income Tax Page No 8 Pierlite India Pvt. Ltd. vs. PCIT Act because of carry forward losses. In our considered view, the present Revision proceedings itself is unjustifiable.
6.1. It is appropriate to quote the Jurisdictional High Court judgment in the case of Commissioner of Income Tax Vs. Kamal Galani reported in [2018] 95 taxmann.com 261 (Guj.) wherein the Hon’ble High Court held as follows: 20. In this context, we may recall, the Assessing Officer had examined two issues. With respect to introduction of the capital, the assessee had pointed out that he was an NRI for over two years and he had made foreign remittances over a period of time. With respect to the unsecured loan of Rs. 3.87 crores received from his brother also, the assessee had provided' necessary details which were called upon by the Assessing Officer. We have reproduced some of the responses of the assessee only to highlight the nature of inquiries carried out by the Assessing Officer and the detailed answers given by the assessee. With respect to his brother, the assessee pointed out that he was running a successful business of trading, was engaged in various commercial and non-commercial activities. He was man of standing and means. In fact, the Commissioner has gone on record to suggest that he neither disputes the identity nor the creditworthiness of the brother of assessee to loan such amount.
The Assessing Officer having carried out such detailed inquiries, it was not open for the Commissioner to thereafter reopen the issues on mere apprehension and surmises. His two fundamental objections were that the Assessing Officer did not verify whether the remittances were from the own income or sources of the assessee and his brother or were merely by way of hawala transactions. In the process, he was also critical of the Assessing Officer not insisting on collecting the details of the accounts from which the foreign remittances were made to the Indian account of the said two persons. Without any material without any basis, the CIT could not have remanded the proceedings to the Assessing Officer to carry out further inquiries in order to ascertain whether the remittances were genuine or were in the nature of hawala transactions. In the entire order of the Commissioner, we do not find any basis for him to carry such apprehension. His principle thrust was to the effect that assessee did not produce the precise bank details of the foreign remittances even before him. There is nothing on the record to suggest that he called upon the assessee to do so and the assessee failed or refused to do so.
6.2. Further it is not the case that the assessee declared the details during the assessment proceedings. The assessee has given the break-up of the entire sale consideration amounting to Rs. 37.98 Page No 9 Pierlite India Pvt. Ltd. vs. PCIT Crores by its e-mail reply dated 27.07.2020. Similarly the Cost of Indexation of the property and the working thereon was also given by the assessee and the Cost Inflation Index of Rs. 331 is pertaining to the Financial Year 1997-98. After considering the above details, the Assessing Officer passed the assessment order which is neither erroneous nor prejudicial to the interest of Revenue. Therefore the Revision proceedings initiated by the Ld. PCIT u/s. 263 is hereby quashed. Thus the grounds raised by the assessee are hereby allowed.
In the result, the appeal filed by the Assessee is hereby allowed.