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Income Tax Appellate Tribunal, MUMBAI BENCH “E” MUMBAI
Before: SHRI MAHAVIR SINGH & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2009-10. The appeal is directed against the order u/s 263 of the Income Tax Act 1961, (the ‘Act’) passed by the Pr. Commissioner of Income Tax-4, Mumbai [in short ‘PCIT’].
The grounds of appeal
filed by the assessee read as under:
1. The PCIT has erred in invoking Provisions at Section 263 of the Income Tax Act, 1961 by issuing the Notice in spite of the fact that Scrutiny assessment u/s. 143(3) r.w.s. 147 of the Act has been completed by the DCIT Circle - M/s S.K.M. Real Infra Ltd. 4(3)(2), Mumbai after duly examining and considering facts while framing the assessment order U/s 143 (3) r.w.s. 147 of the Act. The PCIT has erred in raising the issues and making roving enquiries in the Proceedings u/s 263 of the Act. Further Order u/s 263 is also passed without considering the submission made before the PCIT against the notice u/s 263 of the Act and without providing the reasonable opportunity of being heard. Further order passed without any conclusion merely setting aside the assessment to the file of the assessing officer which is unjustified. It is therefore submitted that the order passed U/s 263 should be cancelled.
2. Without prejudice to the Ground No. 1, the PCIT mentioned that estimation of operating profit on the basis of sales figure (5% of Rs.21,37,89,905/- i.e Rs.1,06,89,495/-) instead of the purchase figure (5% of Rs.32,45,71,664/- i.e Rs.1,62,28,583/-) resulted in short determination of total income by Rs.55,39,088/- (Rs.1,62,28,583/- minus Rs.1,06,89,495/-). The issue raised with regard to such amount was duly examined and the same cannot be considered in the Order U/s 263 of the Act. Further sufficient details were submitted before the Assessing officer to genuineness of the purchase and Assessing officer has applied his mind on the said issue while passing the assessment order u/s 143(3) r.w.s 147 of the Act. In conclusion, the PCIT has set aside the order without examining the documents and explanation filed during the 263 proceedings and mere set aside of the order to such extent is unjustified. Accordingly, the necessary direction should be given in this regard.
3. Briefly stated, the facts of the case are that the assessee filed its return of income for the assessment year (AY) 2009-10 on 27.09.2009 declaring a total income of Rs.9,74,454/-. The Assessing Officer (AO) completed the assessment u/s 143(3) on 23.12.2011 on a total income of Rs.9,84,454/-. Subsequently, the AO made an assessment u/s 143(3) r.w.s. 147 on 31.03.2015 determining the income at Rs.1,16,63,950/-.
M/s S.K.M. Real Infra Ltd. The impugned order u/s 263 passed by the PCIT is concerned with the estimation of profit made by the AO with the observation that the operating profits in this line of business ranges from 5% to 10%, but he estimated the profit at Rs.1,06,89,495/- by taking 5% of the sales figure of Rs.21,37,89,905/-. The PCIT is of the view that estimating of operating profit by the AO on the basis of sales figure instead on the basis of purchase figure resulted in short determination of total income by Rs.55,39,088/-. Therefore, the PCIT set aside the order of the AO with a direction to make a fresh assessment after making inquiries and allowing the assessee proper opportunity of being heard.
Before us, the Ld. counsel of the assessee submits that the PCIT has admitted in para 4 of his notice that the AO has examined the issues but not examined it ‘thoroughly’ and it is settled proposition of law that if an issue has been examined and considered by the AO, then the PCIT does not get jurisdiction u/s 263 of the Act. Besides the PCIT is not sure whether prejudice to revenue is caused as it has been stated that ‘prima facie’, it appears to be prejudicial to the interest of revenue. Also it is submitted by the Ld. counsel that the show cause notice u/s 263 dated 14.03.2017 has been received by the assessee on 23.03.2017 and this was the only date of hearing given by the PCIT. Neither it was found out by the PCIT as to when the notice has been served or a fresh opportunity given before the date of passing order which is stated to be 31.03.2017. It is stated that the assessee’s reply dated 24.03.2017 for adjournment has been completely ignored and the M/s S.K.M. Real Infra Ltd. 31.03.2017 has also not at all been considered. The Ld. counsel further submits that the AO has applied his mind while passing order u/s 143(3) r.w.s.
It is stated that even earlier, the whole material has been considered by the AO as well as the Joint Commissioner, who had approved issuance of notice u/s 147 of the Act. Relying on the decision in Max India Ltd. 295 ITR (SC) and Malabar Industries Co. Ltd. v. CIT 243 ITR 83 (SC), it is submitted by him that when the AO has taken one of the two views permissible in law, it cannot be held to be erroneous. On the other hand, the Ld. DR supports the order passed by the PCIT.
We have heard the rival submissions and perused the relevant materials on record. The reasons for our decision are given below. The assessee filed its return of income for the impugned assessment year on 27.09.2009 declaring total income at Rs.9,74,454/-. The assessee is engaged in trading of MS Plates. The AO completed the assessment u/s 143(3) on 23.12.2011 determining total income at Rs.9,84,454/-. Then the AO reopened the assessment by issuing notice u/s 148 on 24.03.2014. The reason for reopening the assessment was the information received from the Sales Tax Department, Government of Maharashtra that the group companies consisting of Shree Ram Urban Infrastructure Ltd., SKM Real Infra Ltd. (the assessee) and Raghuveer M/s S.K.M. Real Infra Ltd. Urban Co. Pvt. Ltd. had taken accommodation entries amounting to Rs.15.97 crores after procuring bogus bills from 12 hawala operators. In the reassessment the AO estimated profit @ 5% on value of sales of Rs.21,37,89,905/- shown in the books of account and thereby made an addition of Rs.1,06,89,495/-. In appeal filed by the assessee against the order of the AO, the Ld. CIT(A) vide order dated 14.09.2017 held as under: “5.4 The appellant has also pleaded that without prejudice, the addition @ 5% should be restricted to the purchase parties which were considered as bogus as reflected in the reasons recorded for reopening of the assessment. I find that the reasons recorded for reopening of the assessment specifies the names of the bogus parties along with the amount of purchases. Further, in the details of purchases and sales provided during the course of assessment proceedings and appellate proceedings, the names of the purchase parties and the corresponding purchase amounts match with the names and amounts appearing in the reasons recorded. In both these details, i.e. reasons recorded and details of purchases, there is one party, namely, Fervent Finance Pvt. Ltd. purchase from whom amounts to Rs.18,35,35,577/- and whose corresponding sales amounts to Rs.15,93,15,812/- which is not appearing in the list of bogus parties mentioned in the reasons recorded for opening the assessment. Ld. AO has not substantiated as to why that party should be treated as a hawala entity. Therefore, such a mechanical approach without any evidence cannot be sustained. In the circumstances, the total addition should be reduced by an amount of Rs.79,65,790/- (5% of 15,93,15,812/-) and the addition is confirmed to the extent of Rs.27,23,705/- (Total addition Rs.1,06,89,495/- less Rs.79,65,790). Accordingly, this ground of appeal is partly allowed.”