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Income Tax Appellate Tribunal, “A”, BENCH KOLKATA
Before: SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM
आदेश / O R D E R Per A.L. Saini, AM:
The captioned appeal filed by the Assessee, pertaining to assessment year 2013-14, is directed against the order passed by the Pr. Commissioner of Income Tax, Kolkata-1, under section 263 of the Income Tax Act, 1961 (in short the ‘Act’) dated 12/03/2018.
The grounds of appeal raised by the assessee are as follows: 1) That, the Ld. Principal CIT, Kolkata-1 on the facts and circumstances of the case and in law erred in assuming jurisdiction u/s. 263 of the Act in order to impose his own views on the A.O. when the A.O. after having taken note of the details submitted in the course of the assessment proceeding had taken a possible view and completed the assessment as per return.
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 2a) That, the Ld. Pr. CIT on wrong premise found alleged difference in the opening balance of trade payables of Rs.304,18,61,529 as per Balance Sheet and Rs.627,25,25,375 as per details submitted before the A.O. having not been considered by the A.O. resulting in under assessment of income in spite of the fact that the opening balance remained the same as the details submitted during assessment proceeding was before adjustment of debit and credit balances of two parties and the same stood explained before the A.O.
(b) That, the Ld. Pr. CIT further erred in not considering that the figures of the previous year were regrouped by transferring the debit balance of Gouri Iron & Steel P. Ltd. from sundry creditors to sundry debtors account and credit balance of B.N. Chatterjee& Bros, from sundry creditors to advance from customers account, having no impact on the profit & loss items and the A.O. after considering such re-grouping permissible under Accounting Principles has passed the assessment order.
3) That, the Ld. Pr. CIT further erred in having alleged that the A.O. without necessary enquiry accepted the sales of Rs.263,98,73,500/- made to M/s. Gouri Iron & Steel P. Ltd. without incurring any transportation charges in spite of the fact that the A.O. after being satisfied that the impugned delivery of goods was made ex-godown not requiring any expenditure on transportation, has accepted the sales.
4) That, therefore, the impugned order passed by the A.O. u/s.143(3) of the Act originally being neither erroneous nor prejudicial to the interest of the revenue, the Ld. Pr. CIT wrongly invoked jurisdiction by making allegations which are not supported by any evidence or by law and that being so, his order should be quashed and your assessee be given such relief(s) as prayed for.
5) That, the assessee craves leave to amend, alter, modify, substitute, add to, abridge and/ or rescind any or all of the above grounds.
Brief facts qua the issue are that the assessee is a resident company, filed its return of income for the A.Y. 2013-14. The return of income was assessed u/s 143(3) of the Act on 28.03.2016 at a total income of Rs. NIL. Subsequently, the ld. PCIT exercised his jurisdiction u/s 263 of the Act. The ld. PCIT examined the assessment records and observed as under:
i) It is observed from the record that assessee company was showing a sum of Rs.3,04,18,61,529/- as a opening balance and Rs.7,04,22,46,085/- as closing balance of ‘Trade payables’ under the head of current liabilities. However, from the details of Trade Payables submitted in course of assessment proceedings it is seen that closing balance of Trade payables of Rs.7,04,22,46,085/- was arrived at after taking opening balance of Trade Page | 2
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 payables as on 01.04.2012 at Rs.627,25,25,375/-. But in the Balance sheet the opening balance of Trade Payables as on 01.04.2012 was shown at Rs.3,04,18,61,529/-. This therefore has resulted in excess unexplained, depiction of ‘Trade Payables’ of Rs. 323,06,63,846/-(Rs.6,27,25,25,375/- - Rs.304,18,61,529/-) in the Balance Sheet which was required to be treated as unexplained income and the said amount resulted in under assessment of income by an identical amount with consequent undercharge of tax. ii) The assessee company during the year made sales amounting to Rs.886,40,48,745/- out of which sales amounting to Rs.263,98,73,500/-was made to one party named Gouri Iron and Steels(P) Ltd. It was found that it also did not debit any transportation charges although having a huge business turnover. On querying it replied that all purchases and sales were ex-godown and hence all transport charges for purchases and sales were incurred by the suppliers & customers which amply demonstrate the fact that the entire purchase and sale transaction were without any delivery and either no physical sale & purchase took place or mere accommodation entry were made in the books of the assessee. Hence, the sales amounting Rs. 263,98,73,500/- to the party named Gouri Iron and Steels (P) Ltd. was required to have been scrutinized properly at the time of assessment proceedings which was not done
Based on the reasons mentioned above, Ld. Principal Commissioner of Income Tax (PCIT) was satisfied that it was a case of erroneous assessment insofar as it was prejudicial to the interests of the revenue and, therefore, Ld. PCIT issued show cause notice u/s 263 of the Act. The assessee was requested to show cause as to why the provisions of Section 263 of the Act should not be invoked in his case and the assessment completed by the Assessing Officer should not be revised / modified or set aside.
In response to the notice, the assessee submitted the written submission before ld PCIT, which is reproduced below:
M/s Y.R. Traders (P) Ltd. M/s Y.R. Traders (P) Ltd. Year: Assessment Year:2013-14
M/s Y.R. Traders (P) Ltd. M/s Y.R. Traders (P) Ltd. Year: Assessment Year:2013-14
However, the ld. PCIT rejected the contention of the assessee and held that the . However, the ld. PCIT rejected the contention of the assessee and held that the . However, the ld. PCIT rejected the contention of the assessee and held that the order passed by the Assessing Officer is erroneous as well as prejudicial to the order passed by the Assessing Officer is erroneous as well as prejudicial to the order passed by the Assessing Officer is erroneous as well as prejudicial to the Page | 5
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 interest of the revenue and therefore he directed the Assessing Officer to re-frame the assessment.
Aggrieved by the order of the ld. PCIT the assessee is in appeal before us.
The ld. Counsel Shri S.K. Tulsiyan begins by pointing out that the assessee filed its return of income for A.Y. 2013-14 on 30.09.2013 declaring total income of Rs. Nil and carried forward loss of Rs. 16,60,95,652/-. During the course of scrutiny assessment proceeding, notices u/s 143(2) and 142(1) of the Act were issued on different dates and duly complied with all details, information, evidences as per requisitions. The ld. A.O. having taken note of the details submitted in course of the assessment proceeding and after hearing the A/R of the assessee on several dates, completed the assessment as per return of income with his following observation / finding vide assessment order u/s 143(3) of the Act dated 28.03.2016:
“The assessee company engaged in the business of Trading of Iron & Steels. This was also the nature of business in the immediately preceding previous year. In the course of these proceedings, details pertaining to the business along with Audited Accounts, Tax Audit Report, copy of VAT return, Detail of Expenses etc. were filed. Inspector Report as per verification made by preceding Assessing Officer placed in record also perused and the information generated by the ITS module of ITD system were examined. In the course of the hearings the A.R’s submission was heard and the case discussed with him and in view of the above and considering all the aspects of the case, the income / loss of the assessee company, M/s Y.R. Traders Pvt. Ltd. for the A.Y .2013-14 is assessed as per return.” The Ld. Counsel submitted that Assessing Officer has issued notices u/s 142(1) and 142(1) of the Act on different dates; and in response to these notices assessee has submitted documents, evidences and explanations. Assessee submitted balance sheet, profit and loss account, Tax Audit Report and details of expenses. Assessing Officer examined the opening and closing balances of “Trade payables”. The Assessing Officer also examined the details of transportation expenses. The AO did the detailed scrutiny of all balance sheet items and profit and loss account items, then after framed the assessment u/s 143(3) of the Act; therefore Assessing Officer’s order is neither erroneous nor prejudicial to the interest of the revenue. Page | 6
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 9.The Ld DR for the revenue, on the other hand submitted before the Bench that Ld PCIT has wide power under section 263 of the Act to revise the assessment order. Under the scheme of the Act, the Department does not have power to file appeal against the order of assessing officer, therefore to protect the revenue the ld PCIT has exercised his jurisdiction u/s 263 of the Act. The ld. D.R. pointed out that there is a difference in the opening balance of ‘Trade Payables’, apart from this assessee has not debited transportation expenses in connection of sales amounting to Rs.263,98,73,500/-which was made to one party named Gouri Iron and Steels(P) Ltd, hence, order passed by the AO is erroneous and prejudicial to the interest of Revenue and therefore ld PCIT has rightly exercised his jurisdiction u/s 263 of the Act.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld PCIT and other materials available on record. We note that ld PCIT exercised his jurisdiction u/s 263 of the Act for the two reasons viz:
(i).Opening Balance of ‘Trade payables’ shown by the assessee in the Balance Sheet was to the tune of Rs.304,18,61,529/-, whereas opening balance shown in written submissions and reconciliation filed by the assessee was to the tune of Rs. 627,25,25,375/-, therefore, ld PCIT treated unexplained ‘Trade Payable’ to the tune of Rs. 323,06,63,846/- ( being difference between Rs. 627,25,25,375- Rs.304,18,61,529). Therefore, ld PCIT held that assessing officer failed to examine the unexplained ‘Trade payables’.
(ii)Total sales amounting to Rs.886,40,48,745/- out of which sales amounting to Rs.263,98,73,500/-was made to one party named Gouri Iron and Steels (P) Ltd. It was found that it did not debit any transportation charges although having a huge business turnover. Therefore, ld PCIT held that assessing officer failed to examine the transportation charges.
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 11. We note that during the scrutiny assessment u/s 143(3) of the Act, ld Assessing officer has examined the ‘Trade payables’ mentioned in the balance sheet and also examined the entire expenses including transportation expenses and thereafter he concluded in his assessment order as follows:
The assessee company engaged in the business of Trading of Iron & Steels. This was also the nature of business in the immediately preceding previous year. In the course of these proceedings, details pertaining to the business along with Audited Accounts, Tax Audit Report, copy of VAT return, Detail of Expenses etc. were filed. Inspector Report as per verification made by preceding Assessing Officer placed in record also perused and the information generated by the ITS module of ITD system were examined. In the course of the hearings the A.R’s submission was heard and the case discussed with him and in view of the above and considering all the aspects of the case, the income / loss of the assessee company, M/s Y.R. Traders Pvt. Ltd. for the A.Y .2013-14 is assessed as per return.
12.We note that during the scrutiny assessment u/s 143(3) of the Act, the assessee has filed various replies (written and oral) in response to notices issued by AO under sections 142(1) and 142(2) of the Act, and one of these replies is reproduced below:
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 We note that Sec.263 of the Act speaks of revision of orders prejudicial to revenue. As per the said section and various judicial precedents including those of Hon’ble Apex Court in the cases of Malabal Industrial Co. Ltd. vs. CIT (243 ITR 83) and CIT vs. Max India Ltd. (295 ITR 282), in order to invoke provisions of sec.263 of the Act, twin conditions need to be satisfied exhaustively, viz. first, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the Revenue. Such occasions arise when the A.O. while passing assessment order u/s. 143(3) did not have called for such information/ documents from the assessee to frame the assessment and did not consider the same before completing the assessment. Once the A.O. conducts enquiry as deem fit to complete the assessment u/s. 143(3) and takes a possible view on such enquiry and consideration of facts and explanation of the assessee, in that case, jurisdiction to invoke provisions of sec.263 does not lie. As stated above, during the course of the scrutiny assessment proceeding, the assessee furnished full details of trading activities, party-wise break-up of debit and credit
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 entries/balances of sundry debtors and creditors, soft copy of audited books of account, notes of the financial statements as at 31.03.2013, bank details, quarterly VAT returns etc., which were as well filed before the Ld. Pr. C.I.T. during 263 proceeding. Even the Ld. A.O. deputed Inspector, who also verified the purchase and sale records, bank statements and other related details at the business premises of the assessee. The A.O. also raised queries to establish genuineness of sales/purchases during the year. Considering all these things and hearing the A.R. of the assessee on various dates, the impugned assessment order was passed accepting the income returned by the assessee.
We note that during the scrutiny assessment the AO issued notice u/s 142(1) of the Act, vide Notice No. Circle(2)/Kol/Scr/AY 2013-14/15-16/785 dated 01.03.2016 (P/B pages-4 & 5) which will give a clear picture about enquiries made by the A.O. during the scrutiny assessment proceeding and replies made and documents filed by the assessee. The said notice u/s 142(1) is reproduced below for ready reference:
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 We note that the A/R of the assessee vide letter dated 08.03.2016 had explained the points/queries made in the notice u/s 142(1), which is mentioned para 12 of this order, (P/B pages-6 to 30) and at the cost of repeatation the same is reproduced below again for ready reference as follows:
“This is with reference to your Notice No. :Circlel(2)/Kol/Scr/AY 2013-14/15-16/785 dated 01.03.2016.Please note that the undersigned had filed all details required as per the notices dated 19.08.2015 &vide letters dated 28.08.2015 & 16.10.2015. Further with regards to your notice dated received on 16.02.2016 a letter dated 18.02.2016 was filed in your office. As such there is no non-compliance of any notices.” It is now humbly submitted as below: Assessment u/s 143(3) for the above assessee was done for A.Y. 2011-12.Your observation that “it is observed from your accounts that no goods were received and dispatch from your godown” is totally incorrect and a mere presumption on your behalf merely because no freight was incurred. It is reiterated that all sales/purchases were ex- godown as per mutual understanding and as such no freight were incurred by the Assessee (please refer earlier letter dated 16.10.15.1 further wish to rely on the following: a. Your predecessor in his assessment for AY 2012-13 found no such material after having checked and also issued notices to debtors / creditors. b. The soft copy of books of accounts were produced before the DCIT, Circle 3(1) who was previously having jurisdiction of the case (please refer to letter dated 07.12.2015 by the Director filed in his office on 09.12.2015). Purchase/sales bills files were carried to the department where the A.O. the occasion to verify the same. All bank statements were also produced along with Stock ledger. c. The quarterly VAT returns have also been filed vide letter dated 19.10.2015 and party-wise details of sales/purchase for the year had also been furnished vide letter dated 16.10.2015. It is not understood how all these records can be ignored Page | 11
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 and rejected by you. It is pertinent to note that no case is pending before the Sales Tax Authorities in this regard. d. An Inspector from your department had visited the office of the assessee and himself once again verified the purchase and sales records as well as the bank statements. From the above it is clear that you have formed a biased opinion without going into the merits of the case. Details of the following expenses are being enclosed:\ Other borrowing costs - it represents the bank charges in respect of banking transactions throughout the year. Accounting charges - TDS had been deducted thereon u/s 194J (please refer letter dated 16.10.2015). Godown rent being less than Rs. 180,000/- no TDS has been deducted u/s. 1941. No electricity charges were separately required to be paid for the godown space. Rates and taxes - i.e. Trade License and professional tax payments. Legal and professional charges - no TDS was required to be deducted since the payments were below the limit prescribed u/s 194J. Printing & Stationery, Audit fees and Preliminary Expenses all are also enclosed. Details of Debtors and Creditors have already filed vide letter dated 16.10.2015. Details of inventory giving item-wise enclosed. Details of Directors of the company has already been filed vide letter dated 28.08.2015. Summary of Output & Input VAT for the full year is enclosed. The closing debit balance represents the unutilized Input VAT.”
On the above facts, therefore, the allegation of the Ld. Pr. C.I.T. in his show cause notice u/s. 263 dated 19.02.2018 that “AO has passed the impugned assessment order without making enquiries or verification which should have been made in this case” does not come within the purview of twin conditions contained in sec.263 of the Act.
The Ld. Pr. C.I.T. by setting aside the assessment order has allowed the Ld. A.O. to reopen the concluded issue, which was adjudicated upon after detailed enquiry. This course of action on the part of Ld. Pr. C.I.T. is not permissible u/s. 263 of the Act. It is a settled position in law that the proceedings u/s. 263 cannot be initiated Page | 12
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 by the Ld. Pr. C.I.T. merely in his supervisory capacity. Before invoking the powers u/s 263 of the Act, it is necessary for him to demonstrate that the A.O. had committed a patent error which resulted in prejudice to the revenue. On the contrary, where the Ld. A.O. has conducted enquiries and after due consideration of the facts and circumstances of the case backed by relevant details/documents he comes to a conclusion, then it is not open to the Ld. Pr. C.I.T. to invoke revisionary jurisdiction. The power envisaged u/s. 263 of the Act in setting aside an assessment is large and wide, but that cannot be exercised to allow the A.O. to make up the deficiency of his case. We note that Coordinate Bench of I.T.A.T., Kolkata in the case of Plastic Concern vs. ACIT [61 TTJ 87 (Cal) has held that mere possibility of gathering more material to prove the claim of the assessee wrong would not make the concluded assessment erroneous so long as the ld. A.O. had acted judiciously and conducted enquiries in the course of assessment proceedings.
We note that there is no mention or finding in the order of ld. PCIT alleging no enquiry, rather according to him “sales made to Gouri Iron & Steels (P) Ltd was required to have been scrutinized properly at the time of assessment proceedings”. That is, required verification was not made by the Ld. A.O. At the same time he has omitted to consider that it was for his deep and conclusive enquiry that an Inspector was also deputed for the spot investigation into the sales, purchases, stocks etc. of the assessee. Even during the assessment proceeding, as noted in the letter of the assessee dated 08.03.2016 cited above, the Ld. A.O. primarily raised objection and thus made enquiries about dispatch of goods on sale, which was satisfactorily explained with evidences. Therefore, it cannot be said that no enquiry was made by the A.O. on the issues raised in the impugned 263 show cause notice.
We note that ld Pr. C.I.T. has alleged that as per record the assessee had taken the closing balance of trade payables of Rs.704,22,46,085/- after accounting the opening balance of trade payable as on 01.04.2012 at Rs.627,25,25,375/-, whereas in the Balance Sheet as on 01.04.2012 the opening balance was shown at Page | 13
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 Rs.304,18,61,529/- which, according to the Ld. Pr. C.I.T. has resulted in excess unexplained depiction of ‘Trade Payables’ of Rs.323,06,63,846/- in the Balance Sheet. The assessee during the assessment proceeding and also in response to 263 notice had filed the following statements to explain and establish that such an assumption was without properly going through the details and entries found recorded in the statements filed vis-a-vis books of account. It was further explained that the figures of the previous year were re-grouped by permissible adjustment as per generally accepted accounting principles. This was done by transferring the debit balance of Rs.323,92,71,012/- of M/s. Gouri Iron & Steels (P) Ltd. from sundry creditors to sundry debtors account and credit balance of Rs.86,07,167/- of M/s .B.N. Chatterjee& Bros, from sundry creditors to advance from customers account, which had the effect of reducing the credit balance of trade payables as on 31.03.2012 from Rs.627,25,25,375/- to Rs.304,18,61,530/-.A brief analysis of the statements pertaining to books of account filed before the A.O. during assessment proceeding and Ld. Pr. C.I.T. in response to 263 notice is given below, (P/B pages-8 to 13) : a) Annexure-A :Details of Sundry Creditors for FY 2011-12 (01.4.2011 to 31.03.2012) I. Closing balance of Trade payables as per books Rs.627,25,25,375 II. Add:Adjustment of credit balance in respect of B.N.Chatterjee. Rs. 86,07.167 & Bros Rs.628,11,32,542 III. Less:Adjustment of debit balance in respect of M/s.Gouri Iron & Steels (P) Ltd. Rs.323.92.71.012 Closing Balance as on 31.03.2012 after said adjustment and shown Rs.304,18,61,530 as Opening Balance in the Balance Sheet as at 31.03.2013. b) Annexure-B : Details of Sundry Debtors for FY 2012-13 (01.4.2012 to 31.03.2013) The adjustment shown in Annexure-A above in respect of M/s.Gouri Iron & Steels (P) Ltd. is also reflected in Annexure-B (Details of Sundry Debtors), wherein opening debit balance of Rs.323,92,71,012/- is shown against the said party and closing balance as per books (including other sundry debtors) was for Rs.615,18,36,950/-. This is tallied with the figure shown against ‘Trade
M/s Y.R. Traders (P) Ltd. M/s Y.R. Traders (P) Ltd. Year: Assessment Year:2013-14 Receivables’ under Current Assets in the Balance Sheet as at 31.03.2013 and as Receivables’ under Current Assets in the Balance Sheet as at 31.03.2013 and as Receivables’ under Current Assets in the Balance Sheet as at 31.03.2013 and as per Note-10, the description was as under 10, the description was as under (P/B page-26): c) Annexures-C &D :Details of Advance To & From parties and Details of Advance To & From parties and Details of Advance To & From parties and Details of Sundry Creditors for FY 2012 Sundry Creditors for FY 2012-13 (01.4.2012 to 31.03.2013) The statement in Annexure The statement in Annexure-C (P/B page 10), inter alia, shows transfer of credit C (P/B page 10), inter alia, shows transfer of credit balance of Rs. 86,07,167/ balance of Rs. 86,07,167/- of B.N.Chatterjee& Bros, to Advance from Customers of B.N.Chatterjee& Bros, to Advance from Customers Account. The closing balance Account. The closing balance as per books vide the said statement was Rs. as per books vide the said statement was Rs. 35,49,64,090/-. Further as per Annexure . Further as per Annexure-D (P/B page 11) showing details of D (P/B page 11) showing details of sundry creditors for A.Y. 2013 sundry creditors for A.Y. 2013-14 (01.04.2012 to 31.03.2013), closing balance as 14 (01.04.2012 to 31.03.2013), closing balance as per books was Rs.739,72,10,177/ per books was Rs.739,72,10,177/-. After adjustment of closing balance of losing balance of Rs.35,49,64,090/- in respect of Advance To/From parties vide Annexure in respect of Advance To/From parties vide Annexure in respect of Advance To/From parties vide Annexure-C from the closing balance of sundry creditors vide Annexure the closing balance of sundry creditors vide Annexure-D, the figure stood tallied D, the figure stood tallied with the ‘Trade Payables’ shown in the Balance Sheet as at 31.03.2013 under with the ‘Trade Payables’ shown in the Balance Sheet as at 31.03.2013 under with the ‘Trade Payables’ shown in the Balance Sheet as at 31.03.2013 under “Current Liabilities’ as under: rrent Liabilities’ as under: Balance as per books (Annexure Balance as per books (Annexure-D) Rs.739,72,10,177 Rs.739,72,10,177 Less : Closing Balance of Advance To/From : Closing Balance of Advance To/From Rs. 35.49.64,090 Rs. 35.49.64,090 Parties for FY 2012-13 (Annexure 13 (Annexure-C) Rs.704,22,46,087 Rs.704,22,46,087 Less : Rounded off 2 Balance as Per Balance Shee Balance as Per Balance Sheet (31.03.2013) Rs.704,22,46,085 Rs.704,22,46,085 The assessee also filed statement showing party The assessee also filed statement showing party-wise details of purchases made as wise details of purchases made as per Purchase Register during F.Y. 2012 per Purchase Register during F.Y. 2012-13 relevant to A.Y. 2013 13 relevant to A.Y. 2013-14 (P/B page 12) and as per books the same was to the tune of Rs. 12) and as per books the same was to the tune of Rs. 970,58,67,313 / 970,58,67,313 /- and stood duly tallied with the figure of purchase of stock duly tallied with the figure of purchase of stock-in-trade shown in the statement of trade shown in the statement of Profit and Loss Account in Balance Sheet. Further, as per statement showing Account in Balance Sheet. Further, as per statement showing Account in Balance Sheet. Further, as per statement showing party-wise details of sales made as per Sale Register during F.Y. 20 wise details of sales made as per Sale Register during F.Y. 20 wise details of sales made as per Sale Register during F.Y. 2012-13 (P/B page 13), filed before the Ld. A.O. and also before the Ld. Pr. C.I.T., balance as page 13), filed before the Ld. A.O. and also before the Ld. Pr. C.I.T., balance as page 13), filed before the Ld. A.O. and also before the Ld. Pr. C.I.T., balance as per books was to the tune of Rs.886,40,48,662/ per books was to the tune of Rs.886,40,48,662/- and the same is tallied with and the same is tallied with Page | 15
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 Revenue from Operation shown in the statement of Profit and Loss Account in Balance Sheet (P/B page 22).
Now coming to the issue of sales made to Gouri Iron & Steels (P) Ltd. amounting to Rs.263,98,73,500/-. We note that the Ld. Pr. C.I.T. in his show- cause notice u/s 263 of the Act mentioned stating that “on sales made to Gouri Iron & Steels (P) Ltd. amounting to Rs.263,98,73,500/-, no debit entry in respect of transportation charges for the said sale has been passed”. The explanation offered by assessee was that all purchases and sales were ex-godown and hence all transport charges were incurred by the suppliers. The ld Pr. C.I.T. rejected the contention of the assessee and presumed that there was either no physical sale & purchase took place or mere accommodation entries were made in the books of the assessee. We note that vide notice dated 01.03.2016 (supra), the Ld. A.O. had made an observation that “it is observed from your accounts that no goods were received and dispatch from your godown”. Vide reply dated 08.03.2016, the A/R of the assessee filed all the relevant details, accounts and statements already referred to above and explained the entire matter. After deep enquiry and considering the explanation of the assessee vis-a-vis the details/documents submitted, the Ld. A.O. accepted the purchases and sales as shown in the books of account. That being so, the inference of the Ld. Pr. C.I.T. in support of his invoking jurisdiction u/s. 263 of the Act that the “AO has passed the impugned assessment order without making enquiries or verification which should have been made in this case” is totally unfounded, baseless and beyond the facts of the case, as explained above and was based on the expectation of a fishing and roving enquiry, wrongly treated on par with lack of enquiry, which is different from inadequate enquiry, so that even on this ground, revision was not justified, as held by the Coordinate Bench of Kolkata Tribunal in the case of Vinod Agarwal vs. Pr. CIT (2018) 61 ITR (Trib) 598 (Kol) following CIT vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom).
We note that in the notice u/s 263 of the Act, the Ld. Pr. C.I.T. took only an objectionable allegation on his suspicion that as no transportation charges were Page | 16
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 charged for purchase/sale of goods, the transactions were mere accommodation entries in the books of the assessee. The Ld. Pr. C.I.T. has utterly failed to bring on record any proved fact or remotely any evidence to even show that the assessee was engaged in such dubious activities of providing or getting accommodation entries. Entire audited books of accounts and various clarificatory statements/annexures in support of the books of account were filed before him and Ld PCIT could not establish such an uncalled allegation of accommodation entry. Once this is not proved, it cannot be held purely on suspicion that the purchase and sale transactions and amounts paid and received were bogus. That being so, it cannot be held that the assessment order accepting the genuineness of the trading results of the assessee is prejudicial to the interest of revenue. Therefore, order passed by the AO after detailed scrutiny is neither erroneous nor prejudicial to the interest of Revenue.
We note that Ld. A.O. having examined the details filed in Annexures/statements and audited books of account in course of assessment proceeding, verified the same also through the Inspector of the department and having satisfied himself about the correctness of the same and explanation of the assessee in regard to the opening balance of trade payables, completed the assessment and, therefore, there cannot be a reason to say that the A.O. has failed to conduct necessary enquiry before accepting the claim of the assessee vis-a-vis trading results. We note that Ld. Pr. C.I.T. on analysis of assessment records derived satisfaction for issuing the impugned show-cause notice u/s. 263 of the Act. The expression ‘record ’ as used in section 263 of the Act is comprehensive enough to include the whole record of evidence on which the original assessment order is based. At the same time, if any information asked for by the assessing authority from the assessee or from others to whom he referred the matter during the course of assessment proceeding was not received but received subsequent to the completion of the assessment, in that situation the assessment order passed without receiving such report may appear to be erroneous within the meaning of sec.263 of the Act. In the case of the assessee, there is no denying the fact, as detailed above and Page | 17
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 acknowledged in the assessment order u/s. 143(3) dated 28.03.2016, that in response to notices u/s. 143(2)/142(1) and further requisitions made during the course of assessment proceeding, the A/R of the assessee appeared from time to time and produced/ submitted necessary details/documents as per requisitions in relation to the issues raised by the Ld. Pr. C.I.T., which were examined by Assessing Officer. Therefore, it is the appraisal of the same records which are already with the Ld. A.O. and the Ld. Pr. C.I.T. took a different view than adopted by the A.O. on the same set of facts, which is not permissible u/s. 263 of the Act. In the above circumstances, the view taken by the A.O. was one of the possible views and the assessment order passed by him could not be held to be erroneous and prejudicial to the interests of revenue. For that we rely on the decision of Hon’ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd. [(2010) 189 Taxman 436 (Del)] .Further, it was settled by Hon`ble Supreme Court in the case of Malabar Industrial Co. Ltd. vs. CIT [(2000) 243 ITR 83 (SC)] wherein it was held that if the A.O. adopts one of the possible courses available in the scheme of the I.T. Act which results in any loss of revenue or when two views are possible and the A.O. adopts one of them with which the C.I.T. does not agree, then it would not be an order prejudicial to the interest of revenue for invoking the jurisdiction u/s. 263 of the Act. In other words, the Ld. Pr. C.I.T. on the same set of facts and evidences on record was of the opinion that the A.O. should have rejected the regrouping of debit and credit entries as explained above and he should have taken the stand which the Ld. Pr. C.I.T. hinted in the impugned order u/s 263 of the Act. This is not permissible under law. For better appreciation, the relevant portion of the judgment in the case of Malabar Industrial Co. Ltd. vs. CIT (supra) is quoted below : “The phrase “prejudicial to the interests of the Revenue” has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law”.
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 17. We note that the Ld. Pr. C.I.T. by invoking his jurisdiction u/s. 263 of the Act is giving another opportunity to the Ld. A.O., which is not permissible. Hon’ble Bombay High Court in the case of Ranka Jewellers vs. Addl. CIT (328 ITR 148) relying on the decisions of Hon’ble Supreme Court in the cases of Malabar Industrial Co. Ltd. vs. CIT (supra) and CIT vs. Max India Ltd. [(2007) 295 ITR 282 (SC)], has held that once the issue was considered by the A.O., the remedy of the revenue could not lie in invoking of the jurisdiction u/s. 263 of the Act. Therefore, the order of the Ld. C.I.T. was definitely outside the purview of section 263 of the Act. As noted above, the exercise aimed at ascertaining the correct income of the assessee has been fulfilled by the Ld. A.O. by exercising his quasi- judicial functions vis-a-vis passing the assessment order u/s.143(3) of the Act. Therefore, certainly it is not a case wherein adequate enquiries at the assessment stage were not carried out or assessment was made in haste. However, what is an opinion formed as a result of these enquiries and verification of the materials is something which is in exclusive domain of the Assessing Officer, and even if Ld. Pr. Commissioner does not agree with the results of such enquiries, the resultant order cannot be subjected to revision proceedings. For that we rely on the decision of the Coordinate Bench of I.T.A.T., Kolkata in the case of Smt. Juthika Kar vs. ITO [I.T.A. No.1128/Kol/ 2009, dated 16.5.2012 ], wherein it has been held as under (relevant portion) :- “8……However, what is opinion formed as a result of these enquiries is something which is inexclusive domain of the Assessing Officer, and even if Commissioner has such results of enquiries, the resultant order cannot be subjected to revision proceedings. The conclusions arrived at as a result of enquiries cannot be tinkered with in the revision proceedings. The conclusions being drawn up as a result of enquiry is a highly subjective exercise and as to what is appropriate conclusion is something on which perceptions vary from person to persons. These variations in the perceptions of the Assessing Officer vis- a-vis that of the Commissioner, cannot render an order erroneous and prejudicial to the interest of the revenue.” The aforesaid position gets further strength from the decision of Hon’ble jurisdictional High Court in the case of CIT vs. J.L. Morrison (India) Ltd. (2014) 366 ITR 593 (Cal), the relevant finding of which is applicable to the facts of the present assessee is quoted below : “85. Whether the assessment order dated March 28, 2008, was passed without application of mind is basically a question of fact. The learned Tribunal has held that the assessment order was not passed without application of mind. The records of the Page | 19 M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 assessment including the order-sheets go to show that heard from time to time. In deciding the question the court has to bear in mind the presumption in law laid down in Section 114 clause (e) of the Evidence Act: “that judicial and official acts have been regularly performed.
Therefore, the court has to start with the presumption that the assessment order dated March 28, 2008, was regularly passed. There is evidence to show that the Assessing Officer had required the assessee to answer 17 questions and to file documents in regard thereto. If the Assessing Officer cannot be shown to have violated any form prescribed for writing an assessment order, it would not be correct to hold that he acted illegally or without applying his mind. ” [Emphasis given]”
It is a settled position in law that provisions of sec. 263 of the Act do not permit substituting one opinion by another opinion. Therefore, the order of the Ld. Pr. C.I.T. cannot be sustained on the principle of ‘erroneous’ nature of the order of the A.O., as it is not erroneous. Further, in the instant case, to reiterate, there was no allegation by the Ld. revenue authorities that the evidences produced were fictitious or invented, thus accepted the authenticity of the same. Such an order cannot be called erroneous and prejudicial to interests of revenue only because the A.O. made the assessment without discussing such details therein, as held by the Coordinate Bench of ITAT Kolkata in the case of Chroma Business Ltd. vs. DCIT (2004) 82 TTJ 540 (Cal).Further support in this connection is taken from the decision of Hon’ble Delhi High Court in the case of CIT vs. Vikas Polymers (2012) 341 ITR 537 (Del). Relevant part of the observation in this regard reads as under : " This is for the reason that if a query is raised during the course of scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer was reflected in the assessment order, that would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision." [Emphasis supplied] Further, according to the decision of Coordinate Bench of I.T.A.T., Hyderabad in the case of Manisha Agri Biotech P. Ltd. vs. CIT (2014) 36 ITR (Trib.) 42 -, wherein it was held as follows: “The respondent had no different or new material to take a different view from the one taken by the Assessing Officer and the reasons given by him to reopen the assessment and sustain the revision are totally unacceptable. The respondent is not vested with any power under section 263 to initiate proceedings for revision in every case and start re- examination and fresh enquiries in matters which have already been concluded under the law. ”
M/s Y.R. Traders (P) Ltd. Assessment Year:2013-14 Based on the above discussion on assessee`s facts as well as on various precedents applicable to assessee’s facts, we are of the view that revisionary jurisdiction exercised by the Ld. Pr. C.I.T. u/s. 263 of the Act was not in tune with the facts and evidences on record duly explained to the Ld. A.O. and verified by him and that being so the order passed u/s. 263 of the Act on such erroneous stand is liable to be quashed. Therefore, we quash the order of the ld. PCIT u/s 263 of the Act.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 22.01.2020