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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: MS. SUCHITRA KAMBLE & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against the order of the ld CIT (A), Meerut dated 21.03.2013 for the Assessment Year 2008-09. 2. The assessee has raised the following grounds of appeal:- “1. That the impugned order u/s 263 dated 21/03/2013 as passed by the Ld. CIT, Meerut is arbitrary, unjust and illegal on various factual and legal grounds including the following:- a) The assessment order dated 22/10/2010 passed by the Ld. AO u/s 143(3) of I.T. Act for the year under appeal was neither erroneous nor prejudicial to the interest of Revenue as held by the Id. CIT, Meerut. The onus was on the Id. CIT to prove by bringing evidence on record to show that the assessment order dated 22/10/2010 as passed by AO was erroneous and prejudicial to the interest of Revenue which had not at all been discharged. b) The assessment order dated 220/10/2010 u/s 143(3) had been passed by proper application of mind. c) The Id. CIT had either ignored or had not properly appreciated the facts stated and the case law relied upon by the assessee in response to notice u/s 263 as submitted before the Id. CIT, which also vitiates the impugned order. d) Various observations made by the Id. CIT in the impugned order u/s 263 are either incorrect or are legally untenable. The Id. CIT had no jurisdiction to partly set aside the assessment order without considering appellant's submissions with regard to each and every issue raised by him in notice u/s 263.
2. That without prejudice to Ground No. 1 above, the following observations made by the Ld. CIT and/or directions issued by her to the AO are wholly illegal and untenable:
Page 2 of 5 a) As regards point (a), the Id Counsel during 263 proceedings has given photocopy of Form 5 with Form 23 and Board resolution about raising of authorised capital. The AO is required to verify the same. b) As regards point (b),....... On the one hand, furnishing such details during 263 proceedings does not absolve the AO from making proper enquires at the time of assessment proceedings for which he was duty bound. On the other, from the copies as furnished like copies of bills without even details or the relevant 2 accounts, no examination is possible. The AO is directed to enquire into the same deeply and properly on all the relevant aspects viz. verification of the actual purchase price of fixed assets, sources of payments, valuation, admissibility of depreciation etc. etc. c) As regards point (c), the creditors are shown as high as Rs.1,59,66,490/-. The copies of two creditors have been furnished during the course of 263 proceedings which remained totally unexplained since the Assessee failed to confirm the same".
3. That various case laws relied upon by the Ld. CIT in the impugned order had either absolutely no application to the facts of Appellant's case or had been delivered on the particular facts prevailing in those cases and had therefore no application ,to Assessee's case.”
Though assessee has raised three grounds of appeal
, however their main grievance is that the ld CIT has erred in exercising jurisdiction u/s 263 of the Income Tax Act, 1961 as the order originally passed u/s 143(3) of the Act by ACIT, Circle-2, Meerut dated 22.10.2010 was neither erroneous and is not prejudicial to the interest of the revenue. The assessee company is engaged in the business of export and import of manufacturing petroleum products. It filed its return of income on 07.08.2008 declared income of Rs. 1085486/- and subsequently on that return assessment was made u/s 143(3) on 22.10.2010 accepting the return of income. Subsequently the ld CIT issued a show cause notice dated 04.03.2013 u/s 263 of the Act which was replied by the assessee on 11.03.2013. Subsequently, the ld CIT passed an order u/s 263 of the Act on 21.03.2013 setting aside the order of the AO holding it as erroneous and prejudicial to the interest of revenue on three counts. The main reason for setting aside the order of the AO was that the a. ld AO has not asked query for increasing authorised capital of the assessee from Rs. 10 lakhs to 50 lakhs. b. The second issue was that the assessee has made investment of Rs. 620000/- for purchase of the fixed assets and does not investigated properly. c. The thirds issue was with respect to the outstanding creditor of Rs. 15966490/- and debtors of Rs. 248344/- only and therefore according to the ld CIT the assessee has utilised the amount of sundry creditors for purchasing of fixed assets. This issue was not verified by the ld AO therefore the ld CIT was of the view that it should have been added to the income of the appellant u/s 68 of the act .
4. The ld AR of the appellant submitted that the ld CIT has held the order to be erroneous and prejudicial to the interest of the revenue on account of lack of proper enquiry, however, he submitted that while framing the order u/s 143(3) read with section 263 the ld AO has Page 3 of 5 accepted the contention of the assessee and has not drawn any adverse inference on increase in authorised capital, therefore on this count the assertion u/s 263 fails. With respect to the acquisition of fixed asset of Rs. 24596119/- only Rs. 620000/- has been doubted. He submitted that the assessee preferred appeal against the order of the ld AO before the first appellate authority against the order passed u/s 143(3) rws 263 of the Act and The ld First appellate authority deleted the addition of Rs. 620000/- out of investment made in the fixed assets, which has been accepted by revenue as the above addition is held to be made only on conjectures and surmises it was not sustained. Therefore on second count also the assertion u/s 263 fails. With respect to sundry creditors the addition of Rs. 15966490/- has been made u/s 68 on the direction of the ld CIT. With respect to the addition of RS. 15966490/- on account of sundry creditors balance he submitted that vide letter date 09.06.2010 the assessee submitted a list of sundry creditors along with confirmation stating the address, PAN, date of clearance of amounts. With respect to two creditors he submitted that they submitted their confirmation certificate stating their PAN and AO where they are assessed to tax. He further submitted that copies of accounts of all the sundry creditors are placed before the AO. He further referred to letter dated 20.10.2010 which demonstrates the production of original books of accounts for verification before the AO which has been examined by him on test check basis. He therefore submitted that the AO has completed the original assessment after complete verification and application of his mind. He therefore submitted that in the original assessment proceedings enquiries were carried out by the AO and therefore it cannot be said to be a case of ‘no enquiry’. He further submitted that even as the confirmation originally filed before the AO were placed the ld CIT who in turn could not find any fault in the information submitted. In the end he relied on the several case laws submitting that ld CIT cannot exercise the jurisdiction u/s 263 of the act when enquiries were made by the AO and according to ld CIT it is inadequate. He further submitted that there is no requirement for the AO to make elaborate discussion in body of assessment order about each and every enquiry made by him . He further submitted that the case laws relied upon by the ld CIT does not apply to the facts of the case before us. Therefore he vehemently submitted that the ld CIT has erred in exercising power u/s 263 of the Act.
The ld DR relied upon the order of the AO and submitted that there is no evidence of letter which are filed by the AO or not. He therefore submitted that in absence of this the ld CIT has correctly exercised her power u/s 263 of the Act.
We have carefully considered the rival contentions. Apparently original assessment was made u/s 143(3) of the act where assessee produced the books of account and vouchers and they were test checked by the AO as it was emphatically mentioned in the assessment Page 4 of 5 order that after discussion and examination of various issues and taking into consideration facts and material on record the assessment was completed.
With respect to the First issue of addition of Rs. 620000/-. In appeal before the ld CIT it has been categorically held by the ld CIT in his order dated 04.08.2015 that the addition made by the AO merely on the basis of conjectures and surmises. He held so because of the reason that the assessee has got job work done through M/s. Tahir Engineering Works for Rs. 620000/-. The assessee submitted the complete details with respect to payment made to M/s. Tahir Engineering Works for Rs. 620000/- with exhaustive details and therefore the addition was deleted. The ld DR could not confront the fact that the order of ld CIT has not been further agitated before higher forum by the revenue. Hence on this ground it cannot be said that order of the ld AO is erroneous and prejudicial to the interest of the assessee.
With respect to the addition u/s 68 of the act , though there is no reference in the assessment order of this issue raised but the assessee has submitted letter dated 28.10.2010 placed at page 128 of the Paper Book in response to notice dated 11.10.2010 submitted the list of sundry creditors along with confirmation at Page 49 to 56 of the Paper Book. At Page 133 the assessee has submitted list of 11 creditors as on 31.03.2008 amounting in total to RS. 15966490/- stating their names, address, PAN , outstanding as on date , and on which such sum is paid. In subsequent documents it submitted copies of ledger account of those parties and further the confirmation of those parties by submitting the copies of the account of the assessee from their books of accounts. In view of this it is apparent that during the course of assessment proceedings the ld AO has examined the outstanding creditors of the assessee along with confirmation as on 31.03.2008. In view this we do not agree with the order of the ld CIT who has held that the assessee has filed the confirmation but heavy onus lies on the assessee to explain of amount of credit appearing in the books of account and therefore she held that such amount to be liable to be added u/s 68 of the Act. Vide letters dated 27.08.2010, 20.10.2010 and 09.06.2010 where the copies of account of the sundry creditors amounting to Rs. 15966490/- were filed before the ld AO. The show cause notice issued by the ld CIT stated that major part of credits pertaining to Paswara Chemicals Ltd of Rs. 11377761/- and M/s. Modern Chemicals amounting to Rs. 1367088/- it was further stated that the AO has not raised these issues during the assessment proceedings and AO has not even obtain the copy of account of these creditors. It was found that before the ld AO the assessee filed the confirmation of the Modern Chemicals stating PAN, amount of outstanding as on 31.03.2008 of Rs. 1367088/-. Such confirmation is placed at Page 138 of the Paper Book dated 02.06.2010 identically with M/s. Paswara Chemicals Ltd also the assessee submitted the confirmation stating its PAN No. Therefore there is definitely an inquiry made by the ld AO with respect to outstanding creditors. Therefore it cannot be said that it is a