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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: Shri J.Sudhakar Reddy & Shri S.S.Godara
आयकर अपील�य अधीकरण, �यायपीठ – “�व” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH “B” KOLKATA Before Shri J.Sudhakar Reddy, Accountant Member and Shri S.S.Godara, Judicial Member ITA No.812/Kol/2019 Assessment Years: 2014-15
M/s Chengmari Tea Co. Ltd., ACIT, Circle-4(1), बनाम / S.B. Towres, 37, P-7, Chowringhee V/s. Shakespeare Sarani, Square, Kolata-700 069 Kolkata-700 017 [PAN No.AABCC 0672 Q] .. अपीलाथ� /Appellant ��यथ� /Respondent
Shri Sunil Surana, FCA अपीलाथ� क� ओर से/By Appellant Shri Radhey Shyam, CIT-DR & ��यथ� क� ओर से/By Respondent Smt. Ranu Biswas, Addl. CIT-DR 18.09.2019 सुनवाई क� तार�ख/Date of Hearing 31.01.2020 31-01-2020 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R PER S.S.Godara, Judicial Member:- This assessee’s appeal for assessment year 2014-15 arises against the Principal Commissioner of Income Tax (Appeals)-2, Kolkata’s order dated 29.03.2019 passed in M.No.Pr.cit-2Hqrs-2/Kol/u/s.263/Chengmari Tea/2018-19/12488-91, involving proceedings 263 of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file(s) perused.
We advert to the basic relevant facts. This assessee grows and manufacture tea. It also deals in shares. The assessee had filed its return on 30.11.2014 stating loss of
ITA No.812/Kol/2019 Assessment Year 2014-15 M/s Chengmari Tea Co. Pvt. Ltd. Vs ACIT,Cir-4(1), Kol. Page 2 ₹57,29,768/-. The Assessing Officer completed the regular assessment in question dated 18.10.2016 making various disallowance(s) / addition(s) thereby assessing the assessee’s carried forward losses of ₹49,68,628/- followed by sec. 115JB computation of ₹1,51,79,827/-.
Case file suggests that the PCIT thereafter proposed to invoke his sec. 263 revision jurisdiction by treating the above regular assessment as erroneous causing prejudice to the interest of Revenue. He issued his show cause notice dated 12.12.2018 pin-pointing the following two issues:- “3. In this regard the following discrepancies have been observed: As per schedule 15 of the Balance sheet an amount of Rs.78,73,866/- was deposited with national bank for agricultural and rural development on or before 26.08.2014. A deduction u/s 33AB amounting to Rs.1,57,47,599/- as claimed by you in your computation of income was allowed. An amount of Rs.78,73,733/- [Rs.1,57,47,599/-(-) Rs.78,73,866/-] was not deposited with the NABARD in conformity with the provision as laid down in section -33AB of the I.T. Act, 1961, i.e. before the expiry of six months from the end of previous year ending or before the due date of furnishing the return of his income whichever is earlier. Therefore, Rs.78,73,733/- was required to be added back to your total income in the assessment order passed us.143(3) on 18.10.2016. An agriculture income of Rs.1,53,14,554/- was determined as per the assessment order dated 18.10.2016,but as per information received from Agriculture Income Tax, West Bengal, you had offered an agriculture income of rs.1,41,72,839/- and also paid the agriculture tax of Rs.11,41,715/-[Rs.1,53,554/-(-) Rs.44,00,000/-. Therefore, Agriculture Income of Rs.1,41,72,839/-] was determined in excess as per the assessment order dated 18.10.2016.”
The assessee appears to have filed its reply strongly contesting the PCIT’s above twin reasons. We notice that although the PCIT has dropped both the above stated issues, he has held that the Assessing Officer had not verified the utilization of the amount of ₹165,36,500/- deposited under Tea Development Accounts Scheme, 2007 as to whether the same satisfied the relevant stipulation therein or not as under:- “6. The submission of the AR as well as the comments of the Addl. CIT, Range-4. Kolkata have been considered. The same are found to be in order as far as the claim of the assessee for deposit u/s 33AB of the ‘Act' and the quantum of agriculture income are concerned. However, it is seen, the AO did not verify the utilization of the amount of Rs.1,65,36,500/- withdrawn from the Tea Development Account Scheme, 2007 i.e., as to whether it was in accordance with and for the purposes specified in sec. 33AB or not. Failure to conduct such inquiry/verification has rendered the assessment order erroneous and prejudicial to the interest of revenue within the meaning of sec. 263 of the' Act'. It is trite that the AO is duty bound to scrutinize/examine every information which comes to his knowledge. It is .imperative on the part of the Assessing Officer to examine each and every document and conduct necessary inquiry/scrutiny in order to assess correct income of the assessee. In this case, the assessment order was passed without considering the corroborative material, available at the disposal of
ITA No.812/Kol/2019 Assessment Year 2014-15 M/s Chengmari Tea Co. Pvt. Ltd. Vs ACIT,Cir-4(1), Kol. Page 3 the AO and accordingly, the AO failed to carry out necessary inquiry on the utilization of the amount withdrawn from the Tea Development Account Scheme as per the provision of sec.33AB of the 'Act' and assess the correct income of the assessee. 6.1 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. It is well settled that incorrect assumption of facts or application of law satisfies the requirement of law i.e. order being erroneous and prejudicial to the interest of revenue. The order passed by the AO. without application of mind or order showing apparent error of reasoning or the order where the A.O. simply accepts whatever the assessee Slated 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 / or 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, Central-l 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 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 " 6.2 The Hon'ble Supreme Court, further, in the case of Rampyari Devi Saraogi vs CIT(1968) 67 ITR 87(SC) and Smt. Tara Devi Aggarwal vs CIT(l973)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. 6.3 The Hon'ble Delhi High Court in the case of Gee Vee Enterprise vs Addl. 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 a/so 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 off acts 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 our 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. ,. 6.4 In addition, reliance is also placed on the following decisions whereby it was held that the failure on the part of the Assessing Officer to make an enquiry on a relevant issue/point would render the assessment erroneous and prejudicial to the interest of the revenue: (1966) 220 ITR 456 (Delhi) Duggal and Co. (1966) 220 ITR 167 (MP) Mahavar Traders (1995) 213 ITR 843 (Raj) Emery Stone Mfg. Co. (1992) 198 ITR 611 (Ker) Malabar Industrial Co. Ltd. v. CIT: 243 ITR 83
ITA No.812/Kol/2019 Assessment Year 2014-15 M/s Chengmari Tea Co. Pvt. Ltd. Vs ACIT,Cir-4(1), Kol. Page 4 CIT vs. Max India Limited: 268 ITR 128 (P&H) [affirmed in 295 ITR 282 (Sell CIT v Kwality Steel Suppliers Complex: 395 ITR 1 (SC) CIT vs. Amitabh Bachchan: 384 ITR 200 (SC) CIT v. Hindustan Lever Ltd: 343 ITR 161 (Born.) CIT v. Vikas Polymers: 341 ITR 537 (Del.) CIT v. Sunbeam Auto Ltd.: 332 ITR 167 (Del) CIT vs. Development Credit Bank Ltd: 323 ITR 206 (Born.) Vimgi Investment (P) Limited: 290 ITR 505 (Del) Hari Iron Trading Co. vs. CIT: 263 ITR 437 (P&H) CIT vs. Gabriel India Limited: 203 ITR 108 (Born). 6.5 It may be further noticed that in order to provide clarity on the issue of “erroneous in so far as it is prejudicial to the interest of the revenue", a new Explanation has been inserted to clarify that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if in the opinion of the Principal Commissioner or Commissioner "(a) The order is passed without making inquiries or verification which, should have been made; (b) The order is passed allowing any relief without inquiring into the claim; (c) The order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) The order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person. This amendment takes effect from 1-6-2015.” 6.6 The spirit of this ratio is squarely applicable in a recent judgment, wherein the order u/s 263 passed by the PCIT was upheld in the case of M/s Vama Sundari Investment (Delhi) (P) Ltd vs. Pr. C.I.T.-9, New Delhi (ITA No: 2252/Del/2018) by the Hon'ble ITAT, Delhi F Bench, New Delhi. While doing so, the Honble IT AT had placed reliance on the following orders: (i) Hon'ble Supreme Court in the case of Deniel Merchants Pvt. Ltd. vs. ITO (Appeal No. 2396/20171 dated 29.11.2017. In this group of cases, Hon'ble Supreme Court has dismissed SLPs in cases where AO did not make any proper inquiry while making the assessment and accepting the explanation of the assessee(s) insofar as receipt of share application money is concerned. On that basis the Commissioner of Income Tax had, after setting aside the order of the Assessing Officer, simply directed the Assessing Officer to carry thorough and detailed inquiry. (ii) Malabar Industrial Co. Ltd. Vs CIT 109 Taxman 66 1 SC 171 [2000] 243 ITR 83 (SC)/20001 159 CTR 1 (SC) wherein the Hon'ble Supreme Court held that where Assessing Officer had accepted entry in statement of account filed by assessee, in absence of aI1) supporting material without making any enquiry, exercise of jurisdiction by Commissioner under section 263(1) was justified. (iii) Raimandir Estates (P) Ltd Vs PCIT [2017] 77 taxmann.com 285 (SC)/(2017) 245 Taxman 127 (SC) wherein the Hon'ble Supreme Court has dismissed SLP against High Court's ruling that where assessee with a small amount of authorised share capital, raised huge sum on account of premium, exercise of revisionary powers by Commissioner opining that this could be a case of money laundering was justified. 6.7 Thus in the instant case, it can be summarized that the aforesaid twin conditions of rendering an assessment erroneous in so far as it is prejudicial to the interests of the revenue, are met since during the assessment proceedings, the assessing officer did not conduct
ITA No.812/Kol/2019 Assessment Year 2014-15 M/s Chengmari Tea Co. Pvt. Ltd. Vs ACIT,Cir-4(1), Kol. Page 5 extensive / necessary enquiries regarding the withdrawal of the amount from Tea Development Account Scheme as per the provision of sec. 33AB of the 'Act'. 6.8 In view of the facts and the legal position stated above, I am of the considered 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 pre-judicial to the interest of the revenue within the meaning and scope of Section 263 of the Income Tax Act, 1961. 6.9 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). 7. Having regard to the facts and circumstances of the case and in the light of the aforesaid decisions of Hon'ble Supreme Court and Hon'ble High Court and in accordance with the amendment made to Section 263 of the' Act' with effect from 01.06.2015. I hold that the impugned assessment order dated 18.10.2016 passed by the A.O. is erroneous in so far as it is prejudicial to the interests of revenue. Therefore, after giving the assessee an 'opportunity of being heard, that the impugned assessment order dated 18.10.2016 is quashed with the directions given in this order separately. 8. Accordingly, in view of the facts and circumstances of the case as stated above, and also respectfully following the judgments cited above, I am of the considered view that the issue of utilisation of withdrawn of the amount from the Tea Development Account Scheme needs to be verified in accordance with the provision of sec. 33AB of the . Act' in the instant case so that a judicious conclusion could be made by the revenue after giving due opportunity of being heard to the assessee. Therefore, it is deemed fit and appropriate in the interest of justice to restore the file back to the A.O for de novo assessment with a direction to him to consider the issue as mentioned above. Accordingly, I direct the AO to re-assess the income of the assessee for the relevant AY -2014-15 on the limited issue as discussed supra.”
Learned counsel’s first and foremost arguments before us is that PCIT’s has erred in law and on facts in exercising his revision jurisdiction qua the impugned sole surviving issue of factual verification, regarding utilization of the amount of ₹165,36,580/- withdrawn from the Tea Development Accounts Scheme, 2007 as to whether it was in accordance with and for the specified purposes u/s 33AB or not (supra), is not sustainable since he had nowhere afforded any opportunity of hearing to the assessee as per certified copy(ies) of the corresponding order-sheets from 12.12.2018 to 29.03.2019 forming part of the paper book pages 51-51. Learned counsel’s next argument is that the assessee’s scrutiny assessment was an instance of limited scrutiny selection under CASS for assessment year 2014-15 (as per pages 24- 26 of the paper book) wherein the only issues to be examined were large other
ITA No.812/Kol/2019 Assessment Year 2014-15 M/s Chengmari Tea Co. Pvt. Ltd. Vs ACIT,Cir-4(1), Kol. Page 6 expenditure claim of profit and loss account, large any other deduction claim in schedule-B E creating the loss without any income in profit and loss account, depreciation claim at higher rates / higher depreciation, mis-match in sales turnover returned in audited report and ITR and mis-match in amounts paid to relevant parties u/s 40A(2)(b) reported in audited report and ITR and therefore, the PCIT’s main reason for assuming sec. 263 revision jurisdiction holding the Assessing Officer to have not carried out any factual verification / enquiry as sec. 33AB claim goes against the record of the case. The assessee’s third argument sought to invite our attention to the paper book pages No. 34 to 48 comprising of NABARD is ledgers confirming the deposits in the Tea Development Accounts, its auditor’s certificate in Form No.3AC dated 29.11.2014 showing utilization of funds withdrawn from NABARD to be in compliance u/s 33AB of the Act, copy of Tea Development Scheme, 2007 indicating provision of withdrawal and utilization of the amount deposited as well as copy of statement showing details of machinery purchased; respectively. Its case therefore is that once the corresponding withdrawals satisfied the relevant purposes envisaged in the Tea Development Accounts Scheme,2007, there is neither any error nor prejudicial caused to the interest of the Revenue as canvassed in the PCIT’s revision directions under challenge. Learned counsel has also taken pains to refer to various judicial precedents which shall be taken note of in succeeding paragraphs.
Learned CIT-DR has vehemently supported the PCIT’s impugned revision directions under challenge holding the Assessing Officer to have failed in carrying out the necessary enquiry / factual verification regarding the assessee’s withdrawal of funds amounting to ₹165,36,500/- as to whether the same was for the specified purposes u/s 33A or not. Mr. Radhey Shyam strongly argued that the non-examination of the above stated clinching issue by the Assessing Officer during the course of assessment renders the same as erroneous causing prejudice interest of the Revenue. Coming to the assessee’s foregoing third argument (supra), he stated that the same is not liable to be accepted since the PCIT has rightly exercised his revision jurisdiction in the given facts and circumstances of the case.
ITA No.812/Kol/2019 Assessment Year 2014-15 M/s Chengmari Tea Co. Pvt. Ltd. Vs ACIT,Cir-4(1), Kol. Page 7 7. We have given our thoughtful consideration to foregoing rival pleadings. Coming to the assessee’s three folded arguments, we find no merit in its first plea that the PCIT’s nowhere granted it opportunity of hearing as the sole surviving issue of utilization of the amount involving figure in question of ₹165,36,500/- under the Tea Development Accounts Scheme, 2007. It is come on record that PCIT’s sec. 263 show cause had raised the issue of sec. 33AB deduction only from beginning till the end. It was very well within his jurisdiction therefore to examine all aspects of the same during the course of revision proceedings. We observe in these facts and circumstances that the assessee’s technical plea that the PCIT had not specified the above stated sole surviving issue in revision proceedings carries no substance since it itself was very well aware of the entire comprehensive issue touching upon sec. 33AB deduction claim. We therefore decline the assessee’s first plea.
Next comes the assessee’s second substantive argument that since the Assessing Officer had framed his regular assessment involving limited scrutiny on the above stated issues not including sec. 33AB deduction to the purpose of the impugned withdrawals. We find that the same is duly covered in its favor as per this tribunal’s co-ordinate bench’s decision in ITA No.1361/Kol/2016 in Sanjeev K.Khemka vs. Pr. Commissioner of Income-Tax-15, Kolkata decided on 02.06.2017 as under:- “4. We have heard the rival contentions of the parties and perused the materials on record. The primary issue in the case on hand revolves whether it is a case selected under CASS for limited scrutiny or regular scrutiny. It can be seen from the grounds of appeal that the assessee wants to contend that the very initiation of proceedings u/s 143(3) of the Act on the basis of regular scrutiny under the Act was bad in law. The proceedings under section 143(3) of the Act should have been limited to the extent of the information gathered through AIR. Accordingly the proceedings u/s 263 of the Act cannot be expanded beyond the issue raised in AIR. Thus the order u/s 143(3) of the Act beyond the points of AIR is invalid in law and so the same is with the order passed u/s 263 of the Act. It is the further contention of the assessee that in the items which are not subject matter of AIR cannot subject matter of scrutiny. Such matters include salary of the assessee, loans & interest on loans, payment of LIC, Commission & brokerage income etc. It is the case of the assessee that in the assessment order passed u/s 143(3) of the Act, the AO has travelled beyond the points of the AIR on the basis of which the case of scrutiny was selected under CASS module. It is the plea of the assessee that when no addition/disallowance can be made beyond the points mentioned in AIR in the assessment proceedings then same is the case with proceedings initiated u/s 263 of the Act. 9. This tribunal’s yet another decision in ITA No.1011/Kol/2017 in Sri Hartaj Sewa Singh vs. DCIT,(IT),Circle1(1), Kolkata decided on 27.04.2018 also decides the
ITA No.812/Kol/2019 Assessment Year 2014-15 M/s Chengmari Tea Co. Pvt. Ltd. Vs ACIT,Cir-4(1), Kol. Page 8 instant issue in assessee’s favour on identical reasoning. We conclude in these facts and circumstances that the PCIT has erred in law and on facts in holding the impugned assessment as erroneous causing prejudice to the interest of Revenue on the ground which nowhere formed subject-matter of the CASS scrutiny as it is evident from the case records. We reiterate the learned co-ordinate bench’s detained reasoning hereinabove that the sec. 263 revision proceedings ought not to have been set into motion for expanding the jurisdiction of the Assessing Officer to examine the issues beyond the scope of limited scrutiny. We therefore reverse the PCIT’s action assuming sec. 263 revision jurisdiction in these facts and circumstances.
Coming to the assessee’s third argument on merits. We find that the relevant clause in Tea Development Accounts, Scheme, 2007 (pages 1 to 45 of the paper book) contain clause No.9 regarding withdrawal or utilization of the amounts deposited thereunder. The assessee’s statement of necessary particulars in part-ii alongwithi Form No.3AC {Auditor report sec. 33AB(2)} indicates that it had withdrawn ₹44,58,300/-, ₹96,54,000/- as on 26.04.2013, 24.05.2013 and 05.05.2013 for green tea factory material alongwith plant and equipment of former two and irrigation; respectively. These crucial facts as well as the corresponding purpose in the Tea Development Accounts Scheme, 2007 have gone unrebutted from the Revenue side during the course of hearing. We conclude in this factual backdrop of that even if we agree with the PCIT’s stand that the Assessing Officer had not carried out necessary enquiries about the purpose of the assessee’ withdrawals amounting of ₹165,36,500/- from the Tea Development Accounts Scheme, 2007, no prejudice has been caused to interest of the Revenue since the amounts pertain to the specified purpose under the scheme only. We make it clear that hon'ble apex court’s landmark judgment in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax (2000) 243 ITR 83 (SC) has settled the law long back that twin conditions of an assessment being erroneous as well as causing prejudice to the interest of the Revenue have to be simultaneously satisfied before the Commissioner of Income tax or Principal Commissioner of Income Tax; as the case may be, seeks to invoke sec. 263 Revenue proceedings. We therefore hold that the PCIT’s revision directions under challenge
ITA No.812/Kol/2019 Assessment Year 2014-15 M/s Chengmari Tea Co. Pvt. Ltd. Vs ACIT,Cir-4(1), Kol. Page 9 are not sustainable in law. The impugned regular assessment dated 18.10.2016 is restored as a necessary corollary. Ordered accordingly. This assessee’s appeal is allowed. 11. Order pronounced in the court on Friday, 31st January, 2020 Sd/- Sd/- (लेखा सद'य) (�या)यक सद'य) (J.Sudhakar Reddy) (S.S.Godara) Accountant Member Judicial Member *Dkp-Sr.PS *दनांकः- 31/01/2020 कोलकाता / Kolkata आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-M/s Chengmari Tea Co. Ltd., S.B. Towers, 37, Shakespeare Sarani, Kolkat-17 2. ��यथ�/Respondent-ACIT, Circle-4(1), P-7, Chowringhee Sq. Kolkata-700069 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 6. गाड2 फाइल / Guard file. By order/आदेश से, /True Copy/ सहायक पंजीकार आयकर अपील�य अ-धकरण, कोलकाता ।