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Income Tax Appellate Tribunal, ‘ A’ BENCH : CHENNAI
Before: SHRI GEORGE MATHAN & SHRI S.JAYARAMAN
आदेश / O R D E R
PER GEORGE MATHAN, JUDICIAL MEMBER
I.T.A.Nos.1325 & 1326/Chny/2017 are appeals filed by the assessee against the separate order of the Principal Commissioner of Income-tax, Salem, passed u/s.263 of the Income Tax Act, 1961 (in short “the Act”) in No.9544(09)/2016-17/PCIT/SLM dated 13.02.2017 and in No.9544(10)/2016-17/PCIT/SLM dated 13.02.2017 for the assessment years 2012-13 & 2013-14 respectively. I.T.A.Nos.3348 & 3349/Chny/2018 are appeals filed by the assessee against the separate order of the Commissioner of Income-tax(Appeals), Salem, in Appeal No.145/2017-18 and in Appeal No.146/2017-18 dated 20.09.2018 for the assessment years 2012-13 & 2013-14 respectively, being the orders in appeal against the consequential order passed by the Assessing Officer to the order passed u/s.263 of the Act, which is subject matter of the appeal I.T.A.Nos.1325 & 1326/Chny/2017. Cross Objection Nos.20 & 21/Chny/2019 arising Appeal Nos.3348 & 3349/Chny/2018 are filed by the assessee against the order of ld.CIT(A), Salem for the assessment years 2012-13 & 2013-14.
ITA Nos.1325 & 1326/chny/17 :- 3 -: & 3349/chny/18 C.O. Nos.20 &21/chny/19 Mr.G.Baskar represented on behalf of the Assessee and 2.
Mr.S.Bharath represented on behalf of the Revenue.
3. Since the assessee pertaining to Assessment Year is common in all these appeals as well as Cross Objections, we heard these appeals and Cross objections together and dispose of the same by this common order.
It was submitted by ld.AR the original assessments u/s.143(3) of the Act for assessment year 2012-13 came to be completed on 16.12.2014, and for the assessment year 2013-14 on 27.03.2015. It was submitted that assessee is in the business of doing lorry transport. It was a submission that ld.PCIT had invoked his power u/s.263 of the Act and issued a show cause notice on 13.02.2017 for both the assessment years wherein the issue raised was as follows:--
“O/o.PCIT,3,Gandhi Road, Salem 636 007 C.No.9544(10)/2016-17/PCIT/SLM Dated.13/08.02.2017 The assessment in this case was completed by the ITO, Ward-1,Namakkal u/s.143(3) of the Income Tax Act,1961 for the assessment year 2013-14 on 27.03.2015 by making an addition of Rs.48,000/- to the total income of assessee.
ITA Nos.1325 & 1326/chny/17 :- 4 -: & 3349/chny/18 C.O. Nos.20 &21/chny/19 (2) On going through the records, I found that the assessment completed by the ITO, Ward-1, Namakkal is erroneous and it is prejudicial to the interest of revenue for the following reasons:-
(2.1.) The assessee firm has made the hire charges payments amounting to Rs.7,35,92,131/- as debited in P&L A/c, by way of Bearer cheques and not by way of account payee cheque as mentioned in the provisions of section 40A(3). Therefore, the above said amount is required to be disallowed u/s.40A(3).
Therefore, I am of the view that the assessment order is both erroneous and prejudicial to the interest of revenue. I therefore, propose to pass appropriate order thereon u/s.263 as the circumstances of the case justify. You are hereby given an opportunity to represent your case and state your objections, if any to the proposed action.
4. The case is posted for hearing on 20.02.2017 at 4.00 PM. You are requested to appear before me either in person or through Authorized representative on the said date.
Sd/-/PCIT, Salem.
It was submitted by ld.AR that the issue raised in the show cause notice in respect of hire charges payments debited in the Profit and Loss A/c, paid by way of Bearer Cheques and not by way of Account Payee cheques. In reply to the said show cause notice, the assessee had given a detailed reply dated 06.03.2017 wherein the assessee had explained the reasons for issuing the Bearer Cheques and the practicality of the payment as also various case laws cited on the issue.
It was a submission that after considering the reply of the assessee, the ld.PCIT passed an order u/s.263 of the Act on 30.03.2017 for the assessment year 2012-13 and on 27.03.2017 for the assessment year
ITA Nos.1325 & 1326/chny/17 :- 5 -: & 3349/chny/18 C.O. Nos.20 &21/chny/19 2013-14 wherein for the assessment year 2012-13 in para 2.3 of his order, the PCIT after considering the reply, dropped his show cause notice on the issues raised for the assessment year 2013-14 and similarly the PCIT in para No.2.3 withdrew the revision proposed. It was a further submission that however in the second paragraph of 2.3, the ld. PCIT gave a direction as follows:-
“However, it is noticed that the total hire charges paid amounted to Rs.7,57,47,771/- and involved single payments exceeding Rs.1 lakh in so many occasion which requires through verification. Moreover, if sec.40A(3) is not applicable, then disallowance of expenditure wherever PAN is not available has to be made u/s.40a(ia) of the I.T.Act as the provisions of section 194C(6) would not be satisfied if PAN was not obtained while making the payment. The Assessing Officer may have to verify the genuineness of the payments as claimed by the assessee and allow the same if found genuine and if allowed there the applicability of sec.40a(ia) of the I.T Act is also to be verified. It was submitted that the direction given was to verify the payments exceeding Rs.1/- lakhs and where the provisions of section 40A(3) is not applicable and where the PAN is also not available, then provisions of section 40(a)(ia) of the Act was to be invoked in view of the provisions of section 194C(6) of the Act. Consequently, the Assessing Officer had been directed to verify the genuineness of the payments as claimed by the assessee and allow the same, if found genuine, and if it was allowed, then the applicability of Section 40(a)(ia) of the Act was to be verified. It was submitted by ld.AR that this issue was not an issue as mentioned in the show cause notice. It was also a submission
ITA Nos.1325 & 1326/chny/17 :- 6 -: & 3349/chny/18 C.O. Nos.20 &21/chny/19 that a perusal of the provisions of section 263(1) of the Act, specifically provides for an opportunity of being heard to the assessee. It was a submission that the assessee has not been served with show cause notice and the assessee having not been heard by the ld.PCIT u/s.263 of the Act in respect of the issue, as regards direction for verification the order passed u/s.263 of the Act directing the Assessing Officer to do verification was unsustainable.
In reply, the ld.DR vehemently supported the order of PCIT.
It was submitted that the issue of verification of genuineness of applicability of provisions of section 40(a)(ia) of the Act, was inbuilt to the show cause notice in para 2.1 , which has been extracted earlier. It was a submission that the assessee in his reply had specifically mentioned applicability of the provisions of section 6DD of the Act as being illustrative and not exhaustive. It was a further submission that assessee in his reply to show cause notice had talked about applicability of Rule 6DD(k). It was submitted that the assessee had been heard in respect of the issue, which has been directed for verification by the PCIT. It was a prayer the order of PCIT was liable to be upheld.
We have heard the rival contentions and perused the material available on record. A perusal of the show cause notice as ITA Nos.1325 & 1326/chny/17 :- 7 -: & 3349/chny/18 C.O. Nos.20 &21/chny/19 extracted clearly shows that the issue of verification as to whether the payment is made after deduction of TDS or not and as to whether the provisions of section 40(a)(ia) of the Act would apply in respect of the payments made, is not a part of the show cause notice. It is true that the assessee has discussed the provisions of rule 6DD and the applicability of Rule 6DD(k) of the Act, in his reply to the show cause notice, the provisions of rule 6DD(k) is in respect of reasons for making the payment in a manner other than as prescribed under the Act, and is not in any way connected to the applicability of Sec.40(a)(ia) of the Act or the deduction of TDS u/s.194C(6) of the Act. A perusal of Section 263(1) of the Act clearly shows that the words used are “after giving the assessee an opportunity of being heard”. In the present case, the directions given by the ld.PCIT to the Assessing Officer is not an issue, that has been put to the assessee or one which has been done after giving the assessee an opportunity of being heard. This being so, his direction is unsustainable and consequently, the order passed u/s.263 of the Act becomes unsustainable and consequently quashed.
In the result, the appeals of the Assessee in & 1326/chny/2017 stand allowed.
ITA Nos.1325 & 1326/chny/17 :- 8 -: & 3349/chny/18 C.O. Nos.20 &21/chny/19 8. As we have quashed the order passed u/s.263 of the Act by the ld.PCIT in & 1326/chny/2017 for assessment years 2012-13 & 2013-14, the Revenue’s appeal in ITA Nos.3348 & 3349/chny/2017 for assessment years 2012-13 & 2013-14 become infructuous, so also the Cross objections filed by the assessee in C.O.
Nos.20 & 21/chny/2019 for assessment years 2012-13 & 2013-14 are dismissed as infructuous.
In the result, the appeals filed by the assessee in & 1326/Chny/2017 are allowed, and the appeals of the Revenue in ITA Nos.3348 & 3349/Chny/2018 and Cross objections of the Assessee in C.O Nos.20 & 21/Chny/2018 for assessment years 2012-13 & 2013-14 respectively stand dismissed.
Order pronounced in the open Court after conclusion of hearing on 05th September, 2019, at Chennai.