DCIT 14.1.1, MUMBAI vs. AADI INDUSTRIES LTD, MUMBAI

The A.O find that the assesse has filed the ledger account of m/s Bhumi Sales Corporation in the books of accounts of the assessee, bank statement and auditors certificate and also verified that the assessee has made sales to the party and finally the A.O has assessed the total income of Rs.1,99,89,700/- and passed the order u/sec 143(3) r.w.s 147 of the Act dated 30.12.2017.

Subsequently the Pr. CIT on perusal of the record and information found that the order passed by the AO u/sec 143(3) r.w.s 147 of the Act is erroneous and prejudicial to the interest of the revenue and has issued directions to the AO vide order u/sec 263 of the Act dated 17.03.2020. In compliance to the directions of the Pr.CIT, the AO has issued notice u/sec 142(1) of the Act and called for the information on the accommodation entries and dealt on the facts, information and submissions of the assesse at Para 5 to 8 of the order and finally rejected the books of accounts u/sec145(3) of the Act and estimated net proit@6% of the turnover, which works out to Rs.4,58,88,204/- and assessed the total income of Rs.4,75,15,450/- and passed the order u/sec 143(3) r.w.s 147 r.w.s 263 of the Act dated 29.09.2021.

Aggrieved by the order, the assessee has filed an appeal before the CIT(A). In the appellate proceedings the CIT(A) has considered the grounds of appeal, submissions of the M/s Aadi Industries Ltd, Mumbai assessee and findings of the AO and the decision of the Honble Tribunal in the assesse own case set aside the order u/sec263 of the Act. Since the revision order u/sec 263 of the Act was annulled by the Hon’ble ITAT, the CIT(A) observed that the consequential order passed in pursuance of order u/sec263 of the Act cannot survive and allowed the assesse appeal. Aggrieved by the order of the CIT(A), the revenue has filed the appeal before the Hon’ble Tribunal.

We heard the Ld.DR submissions and perused the material on record. The sole crux of the disputed issue envisaged by the Ld.DR that, the CIT(A) has erred in annulling the assessment order passed u/sec143(3) r.w.s147 r.w.s 263 of the Act based on the decision of the assessee’s own case for the same assessment year were the Hon’ble tribunal has treated the revision order passed u/sec263 of the Act as invalid. The contentions of the Ld.DR are that the Hon’ble Tribunal decision is not accepted by the revenue and the appeal u/sec260A of the M/s Aadi Industries Ltd, Mumbai act was filed before the jurisdictional Hon’ble High court. We find the CIT(A) considered the grounds of appeal

In brief, assessee has aggrieved with the revision order passed u/s.263 of the Act and in the above grounds of appeal assessee objected for initiation of 263 proceedings as well as directing the Assessing Officer to complete or reframe the assessment in a particular manner. All the above grounds are relating to revision proceedings only.

Further, he brought to our notice Para No. 2 of the order passed u/s. 263 of the Act that the proposal u/s. 263 was submitted by the DCIT 14(1)(1), Mumbai, vide letter dated 08.03.2019. In the said proposal it was stated that the case was reopened u/s. 147 of the Act on the basis of specific information received that the assessee has obtained accommodation entries/bogus bills to the tune of Rs. 72,52,414/- during the period 2009-10 relevant to A.Y. 2010-11 from Shri Chandrakant J. Dherai who was running the proprietary concern in the name of M/s. Bhumi Sales Corporation. He submitted that the revision proceedings u/s. 263 of the Act can only be initiated by the Ld. Pr.CIT suo moto and it cannot be revised on the behest of the any assessing authority under the Act. In the given case the revision proceedings were initiated on the behest and reference made by DCIT, in this regard he relied on the decision of the Vinay Pratap Thacker v. CIT in dated 27.02.2013 in which Coordinate Bench has decided the issue in favour of the assessee that 263 proceedings cannot be initiated

Further, he submitted that 263 order passed by the Ld. Pr.CIT beyond the issues raised in notice issued u/s.263 of the Act. In this regard he relied on the case of Pr.CIT v. M/s. Universal Music India Pvt. Ltd., in Income Tax Appeal No. 238 of 2018 (Bombay High Court).

On the other hand, Ld. DR objected to the submissions made by the Ld. AR objecting the reference of proposal by the Assessing Officer before the Ld. Pr.CIT. He submitted that Assessing Officer can initiate or give reference/proposal to Pr.CIT with regard to initiation of revision processing and only Ld. Pr.CIT can apply his mind and take a proper decision. Therefore, this is within the internal procedures laid down by

With regard to initiation of revision proceedings on the wrong finding that the bogus purchases were issued by the assessee in reality assessee has only sold. In this regard, Ld. DR submitted that Ld. Pr.CIT has only given a direction. Therefore, there is no prejudicial caused to the assessee since the issue is only direction were given to make a proper verification.

Considered the rival submissions and material placed on record, Ld.AR has submitted and contested three different issues relating to initiation of revision proceedings u/s. 263 of the Act. Without going into other issues raised by the Ld. AR we are inclined to focus on the issue of reference made by the Assessing Officer in order to initiate the revision proceedings u/s. 263 of the Act. This issue is squarely considered by the Coordinate Bench in the case of Vinay Pratap Thacker v CIT (supra) wherein the Coordinate Bench has held as under: - "23. We have seen from the impugned order of the CIT, dated 11.02.2011, the CIT admits, "A proposal was received on 10.06.2010 from the AO under section 263 of the Income Tax Act, 1961, pointing out some discrepancies/short comings in the assessment order". This clearly shows that in so far as the CIT was concerned, he did not apply his own mind, which the

On perusal of the SCN and the impugned order, we find that there is a departure from the reasons taken to invoke the provisions under section 263, this also finds favour with the arguments advanced by the AR and get covered by the decisions cited by him.

We also have to accept the arguments of the AR with respect of applicability of section 50C on lease hold properties, because, this is an undisputed fact that the impugned property was a leased property, even though, it is a long lease, but the title of the same shall always remain with the actual owner, in the present case, BMA. Though the issue is squarely covered by the cited decisions, but going by the submissions of the DR that it is a case of deemed ownership, itself creates a doubt that whether there has to be an application of section 50C or not. This doubt, in our considered opinion is fatal to invocation of provisions of section 263, because provision of section 263 cannot be invoked where the issue becomes debatable, because if the issue is debatable it goes out of the scope of administration provisions but would fall in the realm of judicial provisions, which is not the purpose and context of section 263, which, in our opinion is to deal only on two realms simultaneously, i.e. whether the order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue.

In the instant case, the CIT, by invoking the jurisdiction under section 263 stepped on the correctness and questioned the applicability of section 50C on leased property in the SCN, he, therefore transgressed into the judicial territory, which he cannot. LINCOME TAY DEPARTMENT

We are aware of the decision of Hon'ble Bombay High Court in the case of Gabrial India Ltd, reported in 203ITR 108, wherein, the Hon'ble Bombay High Court held, "CIT cannot revise order merely because he disagrees with the conclusion arrived at by the ITO". We are also aware of the case of CIT vs Sunbeam Auto Ltd, reported in 227 CTR 133, wherein the Hon'ble Delhi High Court drew a distinction between "Lack of M/s Aadi Industries Ltd, Mumbai inquiry" and "inadequate enquiry" and held that in the case of inadequate enquiry, provisions under section 263 cannot be invoked. In our opinion, in the instant case, this is neither the case of inadequate enquiry nor lack of enquiry at the regular assessment stage.

Taking into consideration the entire gamut of facts and judicial decisions, placed before us, we are of the considered opinion that the CIT could not have invoked the jurisdiction under section 263 without his own independent application of mind; on otherwise debatable issues and by merely disagreeing on the view taken by the AO.

In the result, we set aside the order of the CIT dated 11.02.2011, passed under section 263 and annul the initiation of revision proceedings and as a consequence, we restore the order passed by the AO, under section 143(3) dated 15.12.2008."

Respectfully following the above said decision, we are also of the opinion that Ld. Pr.CIT could not have invoked the jurisdiction u/s. 263 of the Act without his own independent application of mind, particularly when the issue is arising from the Assessment Order passed by Assessing Officer, which Assessing Officer himself cannot review by referring the issues to Pr. CIT. It means he is adopting to use the back door entry to reassess the completed assessment. Accordingly, we are also set-aside the order passed u/s. 263 of the Act and annul the initiation of revision proceedings, as a consequence, we restore the order passed u/s. 143(3) r.w.s. 147 of the Act.

In the result, appeal filed by the assessee is allowed."

We find the CIT(A) has dealt on the facts, provisions and decision of the Honble Tribunal. When the revision order u/sec 263 of the Act was set-aside being invalid and any subsequent proceedings shall become in fructuous. The Ld.DR could not controvert the findings of the CIT(A) with any new cogent material or information but relied on the Assessing officer order. Accordingly, we do not find any infirmity in the order of CIT(A) who has relied on the Hon’ble tribunal decision and passed a reasoned order and we upheld the same and dismiss the grounds of appeal of the revenue.

In the result, the appeal filed by the revenue is dismissed.