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Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI L.P. SAHU
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “G”, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER
I.T.A. Nos. 3132 to 3136/DEL/2014 A.Yrs. : 2005-06 to 2009-10 M/S SURYA MERCHANTS LTD., DY. COMMISSIONER OF 1010, FAIZ RAD, VS. INCOME TAX, KAROL BAGH, CGO COMPLEX-I, HAPUR NEW DELHI – 110 005 CHUNGI, GHAZIABAD (PAN: AAFCS9517A) (APPELLANT) (RESPONDENT)
Assessee by : Sh. Surinder Mahajan, CA & Sh. Samir Mahajan, CA Department by : Smt. Sunita Kejriwal, CIT(DR)
Date of Hearing : 05-07-2016 Date of Order : 08-07-2016
ORDER PER H.S. SIDHU : JM
These five Appeals filed by the Assessee are directed
against the separate Orders passed by the Ld. Commissioner of
Income Tax (Central), Kanpur u/s 263 of the Income Tax Act,
1961 (hereinafter referred as the Act) relevant for the
assessment years 2005-06 to 2009-10. Since the issues
involved in these appeals are common and identical, therefore,
these appeals were heard together and are being disposed of
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by this common order for the sake of convenience, by dealing with ITA No. 3132/Del/2014 (AY 2005-06).
Since the grounds of appeal in all the 5 appeals are the same, hence, for the sake of brevity, we are reproducing the grounds of appeal only in respect of ITA No. 3132/Del/2014 (AY 2005-06) which read as under:-
“1.1 That on the facts and in the circumstances of the case, Commissioner of Income Tax (Central) Kanpur (CIT for short) has erred in assuming jurisdiction uls 263 of the Income Tax Act, 1961 (hereinafter called the Act for short) since he has singularly failed to point out that the assessment order dated 22.07.2011 passed by Assistant Commissioner of Income Tax, Central Circle (Meerut) (AO for short) was erroneous in so far as it was prejudicial to the interest of the Revenue as contemplated u/s 263 of the Act.
1.2 That on the facts and in the circumstance of the case, no mistake had been committed by the A0 while determining the total on money for Assessment Years 2004-05 to 2009-10 at Rs. 32,71,38,984/- and determining the undisclosed allowable expenses at Rs. 25,41,18,747/- & allocating the balance to various assessment years, is clear from the fact that such allocation of Rs. 33,45,300/- for assessment year 2004-05 has not been questioned by CIT since he has not invoked the provisions of Section 263 of the Act 2
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for assessment year 2004-05.
That on the facts and in the circumstances of the case, CIT erred in assuming jurisdiction u/s 263 of the Act since the assessment order dated 22.07.2011 had already been the subject matter of an appeal before CIT(A) Meerut.
That on the facts and ill the circumstances of the case, the impugned order passed by CIT on 28.03.2014 is void and illegal as it flouts the Principles of Natural Justice statutorily embedded in Section 263 of the Act since CIT was not in Kanpur on 25.03.2014 when the appellant presented himself in his office in compliance to CIT's show cause notice dated 14.03.2014 served on the appellant at 5 PM on Friday, the 21st March, 2014.
That the appellant craves liberty to add, alter, vary or amend any ground of appeal.
ITA No. 3132/Del/2014 - A.Y. 2005-06
The brief facts of the case are that search and seizure operations were carried out at the assessee’s premises during which it was found that the assessee was receiving ‘on money’ in cash on sale of property in addition to the sale proceeds recorded in the regular books of accounts. The assessee filed
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its return u/s. 153A after taking into account the income from ‘on money’ and after claiming deduction of expenses against such income. The assesee further claimed deduction u/s. 80IB against the additional income from ‘on money’ shown in the return. The total income was assessed by the AO at Rs. 1,75,86,210/- while making disallowance u/s. 40A(3) amounting to Rs. 62,04,510/- and denying deduction u/s. 80IB on additional ‘on money’ income amouting to Rs. 18,43,552/- vide his order dated 22.7.2011 passed u/s. 153A/143(3) of the I.T. Act, 1961. Against the aforesaid assessment order dated 22.7.2011, assessee appealed before the Ld. CIT(A) who vide his impugned order allowed the claim of deduction u/s. 80IB made by the assessee, but upheld the disallowance made u/s. 40A(3) by the AO. Aggrieved with the Ld. CIT(A)’s order, both Assessee and Revenue went in appeal before the ITAT, Delhi wherein the ITAT has confirmed the action of the Ld. CIT(A) with regard to allowance of deduction u/s. 80IB and restored back to the AO on the issue of disallowance u/s. 40A(3).
Subsequently the assessee received a show cause notice u/s. 263 of the Act dated 14.3.2014. In response to the aforesaid show cause notice, assessee filed its reply dated 25.3.2014. The Ld. CIT after perusing the reply filed by the assessee has passed an order dated 28.3.2014 u/s. 263 of the I.T. Act, 1961. 4
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Against the aforesaid order of the Ld. CIT passed u/s. 263 of the Act dated 28.3.2014, assessee is in appeal before the Tribunal.
Ld. Authorised Representative of the assessee has stated 6. that as per the facts on record, AO while completing the assessment has taken into account and examined the seized documents and the amount of "on-money" received by the assessee. It was further stated that the expenses incurred in relation to "on-money" were also quantified by AO on the basis of the seized documents from which disallowances were made. He draw our attention towards the following points which are very important and needs to be considered.
a. In this case Notice u/s 142(1) alongwith detailed questionnaire was issued by A.O. requiring the assessee to explain seized documents. Response to this was filed by the assessee on 20.10.2010 and onwards.
b. With regard to the special audit, show cause notice was issued to assessee, reply to the said notice was made by the assessee vide submission dated 27.12.2010. For issues raised in the audit report dated 25.05.2011 of Special Auditor, fresh notices U/S 143(2) and 142(1) were issued, in compliance to which required details were produced.
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6.1 It was the further contention of the Ld. AR that Ld. CIT did not bring on record any material or evidence to point out any mistake in finding of act of the AO regarding 'on money' transactions. He stated that Ld. CIT merely ten random examples cited in the assessment order and concluded that the undisclosed sale was 0.54 times the disclosed sale and so required extrapolation. No reason has been given by the Ld. CIT for his ipse dixit that deduction allowed against this income has not been correctly computed as per provisions of the Act. It was further stated that the submissions made by the assessee with workings of 'on money' receipts not considered by the Ld. CIT. Ld. A.R. of the assessee also submitted that the jurisdictional pre-conditions for invoking revision jurisdiction u/s 263 are absent and thus the impugned order is liable to be cancelled and relied upon the following case laws:-
a. CIT vs. Kanda Rice Mills 178 ITR 446 (P & H)
b. CIT vs. Unique Auto Belts (P) Ltd. 30 DTR 231 (P&H)
6.2 It was further stated that suppression of sales unearthed during search and seizure operations can be calculated only to the extent of the seized material and relied upon the following case laws:-
a. Fort Projects (P) Ltd. Vs. DCIT (2012) 145 TTJ 0340
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(Kolkata Tribunal)
b. J.B Education Society vs. ACIT (2014) 98 DTR 347 (Hyderabad Tribunal)
6.3 Ld. AR of the assessee further stated that every erroneous order cannot be the subject matter of revision unless it is prejudicial to the interest of revenue as well. In this regard, he placed reliance upon the following decisions:-
a. Malabar Industrial Co. Ltd. (243 ITR 83(SC»
b. CIT vs. Green World Corp. (314 ITR 81 (SC»
c. CIT vs. DLF (350 ITR 555 (Del»
6.4 It was the further contention that if an AO acting in accordance with law makes a certain assessments, the same cannot be branded as erroneous by CIT simply because according to him the order should have been written more elaborately in view of the following case laws:-
a. CIT vs. Arvind Jewellers (2003) 259 ITR 502 (Guj)
b. CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del)
c. CIT vs. Vinod Kumar Gupta (2007) 165 TAXMAN 225 (P&H)
d. CIT vs. Design & Automation Engineers (Bombay) (P) Ltd.
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(2010) 323 ITR 632
e. CIT vs. Munjal Castings (2008) 303 ITR 23 (P&H)
f. CIT vs. Max India Ltd. (2007) 295 ITR 282 (SC)
g. Ranka Jewellers vs. Add CIT (2010) 328 ITR 148
h. CIT vs. Mahendra umar Bansal (2008) 297 ITR 99 (All)
6.5 It was further stated by the Ld. AR that stand of the Ld. CIT for AY 2004-05 and next five years is contradictory and is against principles of consistency and for this contention he placed reliance on the following case laws:-
a Radha Soami Satsang vs. CIT (1992) 193 ITR 321 (SC)
b. Berger Paints India Ltd. vs. CIT (2004) 266 ITR 99 (SC)
c. UOI & ORS. vs. Kaumudini Narayan Dalal & Anr. (2001) 249 ITR 219 (SC)
d. CIT vs. Shivsagar Estate (2002) 257 ITR 59 (SC) : (2002) 124 TAXMAN 606 (SC)
6.6 The Ld. AR of the assessee stated that the disallowance uls 40A(3) and denial of deduction uls 80-IB being matters considered and decided in appeal, cannot be subjected to revision jurisdiction in terms of clause (c) of the Explanation to
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section 263(1). For disallowance uls 40A(3), the Ld. CIT(A), vide his letter dated 27.11.2012 directed the Ld. A.O to send a remand report after verifying the aforesaid expenditure from the seized documents. Vide remand report dated 24.01.2013, the Ld. A.O. had reported that "the payments made under rule 6 DD has been verified from the seized material and date of payments have been found correct". Since denial of deduction uls 80IB with regard to 'on money' profits was a subject matter of appeal, therefore, fulfillment of all conditions including validation of computation of the profits from 'on money' transactions for deduction uls 80IB was a subject matter of appeal before Ld. CIT(A). In order to support his contention, he placed reliance on the case law in the case of CIT vs. Nirma Chemical Works (P) Ltd (2009) 309 ITR 67 (Guj High Court). He further stated that on the basis of doctrine of merger, order passed by the Ld. AO merged with order of Ld. CIT(A) which is not amenable u/s 263 and placed the reliance on the following cases:-
a. Punjab State Civil Supplies Corporation Ltd. vs. CIT (1993) 200 ITR 536 (P&H)(FB)
b. CIT vs. Shri Arbuda Mills Ltd. (1998) 231 ITR50 (SC) : (1998) 98 T AXMAN 457
c. CIT vs. Jaykumar B. PatH (1999) 156 CTR (SC) 476 : (1999) 236 ITR 469 (SC)
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d. CIT vs. Shalimar Housing and Finance Ltd. (2009) 320 ITR 157 (MP HC)
6.7 Lastly, Ld. AR of the assessee stated that Show cause notice u/s 263 of the Act dated 14.03.2014 was received by the Assessee only at 5 PM on Friday, 21st March 2014. Date of hearing was fixed on 25.03.2014 in Kanpur. However, the Ld. CIT was not available in Kanpur on 25.03.2014. Any order passed without affording an opportunity to the assessee to represent its case is void ab initio and to support his version, he placed reliance on the following case laws.
a. Swadeshi Cotton Mills Company Ltd. vs. Union ofIndia 51 ITC 210, 255 (SC);
b. Gandhi vs. Union ofIndia AIR 1978 SC 597;
c. Smt. Kanti Khare vs. Kali Prasad Asthan AIR 1983 All 45;
d. Monga Metals (P) Ltd. vs. ACIT (2000) 67 TTJ (ALL) 247
On the other hand, Ld. CIT(DR) controverted the various submissions and arguments advanced by the Ld. AR of the Assessee. She has strongly relied upon the impugned Order passed u/s. 263 by the Ld. CIT and has invited our attention to the various findings recorded by the learned CIT in his impugned order. The learned CIT(DR) has stated that AO while completing the assessment has not taken into account the seized documents and has not correctly taken into account undisclosed
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income. She further stated that from the documents which was
established that the assessee has been receiving 'on money' on
the sale of flats and this 'on money' was to be computed on the
basis of the documents seized during the course of search. She has stated that the deduction allowed against this income has not
been correctly computed as per the provisions of the Income tax
Act 1961. Thus an error has been committed in computation of
income which is caused prejudice to the interest of the Revenue
as income has been determined at a lower figure. In support of
her arguments, she also draw our attention to para no. 3 page no. 2 of the impugned order and relied upon the order of the
ITAT, Hyderabad Bench ‘A’ in the case of Leo Meridian
Infrastructure Projects & Hotels Ltd. vs. DCIT passed in ITA No.
1254(Hyd.) of 2011 & 1872 (Hyd.) of 2012 dated 28.3.2013.
Accordingly, she stated that the order passed by the AO is
erroneous as well as prejudicial to the interest of the Revenue. Accordingly, she requested that the impugned order passed u/s.
263 of the Act passed by the Ld. CIT may be upheld and appeal of
the assessee may be dismissed. 8. We have carefully considered the rival submissions and perused the relevant records available with us, especially the impugned order passed by the Ld. CIT u/s. 263 of the Act alongwith the legal position on the relevant issues which emanates from the various decisions cited before us.
ITA NOS. 3132-3136/Del/2014
In this case assessee has received a show cause notice u/s. 263 of the Act dated 14.3.2014. The contents of the show cause notice is reproduced as under:-
Sub.: Show cause u/s 263 of the Income Tax Act, 1961 for revision of assessment order uls 153A/143(3) dated 22.07.2011 for A.Y. 2005-06 passed by ACIT, Central Circle, Meerut - regarding.
The record of assessments proceedings for A.Y. 2005-06 before the assessing officer has been examined. The assessment order dated 22.07.2011 is considered as erroneous and prejudicial to the interests of the revenue. The brief facts of the case are at a search was conducted on 06.02.2009 at the premises of the assessee. The return in response to notice u/s 153A was filed on 07.04.2010 declaring total income at Rs. 94,91,330/- after claiming deduction u/s 80IB(10). The accounts were also audited u/s 142(2A) and report was submitted on 26.05.2011 by the auditor.
During search operation incriminating documents marked as Annexure D-6, D-7, D-10 and D-11 were found at the corporate office of M/s Surya Merchants Ltd and were seized. These documents contained entries/information pointing out that "on money" on sale of flats was received in addition to the sale proceeds recorded in regular books of account The income from "on money"( was not disclosed in the regular books of account Subsequently, special audit u/s 142(2A) was also ordered and audit report was
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submitted on 26.05.2011. The assessing officer has assessed income from sale of flats/shops at Rs. 94,91,330/- as per computation of income, in the concluding para of the order, whereas as per para 8 of the order, it is held that net addition on account of incriminating documents comes to Rs. 7314792/-. Para 8 of the order is as under:
"During the search several documents were found and seized from which it was evident that the assessee was receiving "on money" one sale of flats/shops. During assessment proceedings, notice u/s 142(1) dated 08.10.2010 was served on assessee to explain the "on money". The assessee furnished Its reply on 27.10.2010 and on subsequent dates. It furnished a chart as Annexure-I in which on money was admitted and details of year-wise on money received on different flats/shops has been given. This chart takes care of the on money and the other undisclosed income which have been shown in many documents repeatedly. This chart is also part of the assessment order. In this way repetition has been sought to be taken care of. From the seized documents in the case of the assessee and the chart submitted by the assessee itself total undisclosed income from A. Y. 2003-04 to 2009-10 comes to Rs. 82,71,38,984/- and out of this amount Rs. 5,68,80,271/-
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pertains to the year under consideration. This has been accepted by the assessee. However, the assessee has claimed deductions which includes expenses Rs.3,49,52,143/- against this income has deposited in bank refund to the party, expenses incurred by the director on consumable etc as per the computation filed by the assessee on the return and during the assessment proceedings according to which net addition on account of incriminating documents comes to Rs. 73,14,792/-.”
On the examination of documents no. D-6, D7, D-10 and D-11, it was found that there were two sets of agreements out of which one set was cancelled. Total sale consideration in respect cancelled agreements was Rs. 4.09 crores, whereas in the revised agreement forms sale consideration was shown at Rs. 2.64 crores. The difference was recorded as “on money", The ratio of total sale to disclose sale worked out to 1.54 i.e. undisclosed sale was 0.54 time the disclosed sale. Thus an extrapolation was required to arrive at actual sales. For the year, disclosed sale was of Rs. 21,18,24,636/- as per audit report and as per chart filed during assessment proceedings further sales were disclosed at Rs. 2,63,17,928/-. The extra sales multiplied by 0.54 comes to Rs. 12,85,96,985/- being 0.54 times of (Rs.21,18,24,636/- plus Rs.2,63,17,928/-). The AO has considered undisclosed at Rs. 2,63,17,928/-. The
ITA NOS. 3132-3136/Del/2014
extra sales multiplied by 0.54 comes to Rs. 12,85,96,985/- being 0.54 times of (Rs. 21,18,24,636/- plus Rs. 2,63,17,928). The AO has considered undisclosed sales at Rs. 5,68,80,271/- only in the order as against the amount of Rs. 12,85,96,985/-. There is also no discussion in the assessment order about the findings of the audit report u/s. 142(2A) of the I.T.Act. thus, the issue has not been properly examined by the AO and therefore the assessment order u/s. 153A/143(3) dated 22.8.2011 is erroneous and prejudicial to the interests of the revenue.
In this respect you are hereby allowed an opportunity of being heard and therefore, required to attend my office at 7/81-B, Tilak Nagar, Kanpur on 25.03.2014 at 11.30 AM either in person or by a representative duly authorized in writing in this behalf and show cause as to why assessment order for the year under consideration should not be revised as per provisions of section 263 of the Income Tax At, 1961.”
In response to the aforesaid show cause notice, assessee filed its reply dated 25.3.2014 and the contents thereof are reproduced hereunder:-
It is submitted that the above captioned notice was received by the assessee on Friday, the 21st of March, 2014 at 5 PM. A copy of track record obtains from the website of postal department as an evidence of the receipt of the said notice is enclosed
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as Annexure-A directing us to appear before you on 25.03.2014 at 11.30 AM at Kanpur. In these circumstances, it is obvious that adequate opportunity of being heard has not been provided to us.
Nonetheless as directed by you, we are making the following submissions in response to your above show cause notice uls 263 of the Income Tax Act, 1961 (hereinafter called the Act for short):-
3.1 At the very outset, it is submitted with the greatest respects that your above captioned notice is based on a mis-appreciation of facts obtaining in the case of the assessee. A perusal of the captioned notice would show that you have referred to para 8 of the Assessment Order which has been formulated by the learned AO after elaborately going through all the seized documents and further by applying his mind to the information submitted by the assessee during the course of the detailed assessment proceedings as per AO's directions. No discrepancy has not been pointed out by you in the findings arrived by the AO in para 8 of the assessment order. It is submitted that since there is no mistake in the observations of the AO in para 8 of the assessment order. It cannot be inferred that the order passed by the AO is erroneous & prejudicial to the Revenue as mandated by Section 263 of the Act.
3.2 A perusal of the above captioned notice would further show that you have inferred on an exam of documents no. D-6, D-7, D-10 & D-11 that the A 0
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has held that undisclosed sales amounted to Rs. 5,68,80,278/- (i.e. not disclosed in the original books of accounts but disclosed in the seized documents) as against the on-money sales of Rs. 12,85,96,985/- estimated by you by extrapolation on the assumption that the total sale consideration in respect of cancelled agreement was Rs. 4.09 Crores whereas in the Revised Agreement Forms sale consideration was shown at Rs. 2.64 Crores. It is submitted that the aforementioned assumption made by you is obviously based on para 7 of the assessment order. A careful perusal of the para 7 of the assessment order would show that the learned AO has observed that "from these documents it is apparent that part of the sale consideration of these shops/flats/commercial spaces has been received in cash as on money. For example, few of such are as under". The data regarding the 10 examples given by the AO on page 4 of the assessment order would show that the original agreement amount in these 10 illustrated examples aggregated to Rs. 4.09 Crores whereas it aggregated to Rs. 2.64 Crores in the revised agreement forms. However, in para 8 of the assessment order, the AO has found from the seized documents and from the chart submitted by the assessee that the total on- money came to Rs. 32,71,36,984/- out of which amount of Rs. 5,68,80,271/- pertains to A.Y. 2005-06. It is submitted that the above figure of Rs. 5,68,80,271/- is based on exact figures found by the AO based on all the seized documents including 0-6,D-7, D-I0 & D-l1. Thus, the very exercise of making an 17
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interpolation based on 10 examples can have no validity when the entire on- money has been taken into consideration by the AO after going through all the seized documents. That the total on-money for all the years put together amounts to Rs. 32,71,38,984/- out of which on-money of Rs. 5,68,80,271/- pertains to A.Y. 2005-06 will be clear from the statements placed at Annexure-B.
In the above captioned notice, you have also mentioned that "there is also no discussion in the assessment order about the findings of the audit report U/S 142(2A) of the Act. Thus, the issue has not been properly examined by the AO and, therefore, the assessment order u/s 153A/143(3) dated 22.07.2011 is erroneous & prejudicial to the interests of the revenue". It is submitted that a perusal of the audit report uls 142(2A) of the Act clearly shows that the special auditor only examined the original books of accounts and not the seized books as would be clear from Annexure-C. Therefore, the audit report uls 142(2A) of the Act is not at all relevant as far the determination of total amount of on- money is concerned.
It is submitted that the learned AO has framed the AO after a detailed analysis of the seized documents and has arrived at the total quantum of on- money on the basis of all the seized documents including D-6, D -7, D -10 & D -1). You have not pointed out any discrepancy in the figures mentioned by the AO in para 8 of the assessment order. In fact, these figures -were under the 18
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consideration of Hon'ble CIT(A)-Meerut who has not found any discrepancy in these figures as would be clear from para 3.2 of his order dated 28.03.2013. In these circumstances, it is humbly submitted that the assessment order passed by the AO is neither erroneous nor prejudicial to the interest of the Revenue.
Before parting with this matter, it is also humbly pointed out that the assessment order including the quantum of total income as a result of the on- money found on the basis of all seized documents was the subject matter of an appeal filed by the assessee before CIT(A)-Meerut which was disposed off by him on 28.03.2013. Accordingly, the assessment order cannot be validly revised U/S 263 of the Act in view of sub clause (c) of Explanation below Section 263 of the Act.”
The Ld. CIT after perusing the reply filed by the assessee has passed an order dated 28.3.2014 u/s. 263 of the I.T. Act, 1961 by observing as under:- “The contention of the assessee on this issue is not correct. The issue involved in the order of the CIT(A) is regarding allowance deduction u/s 80IB of the Income Tax Act in respect of disallowance made u/s 40A(3) and is not the issue as mentioned in notice u/s 263 dated 14-03-2014. The provisions for "Revision of orders prejudicial to revenue" as given in section 263(1).Explanation (c) are as under:-
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Section 263(1) read with Explanation (c) ;-where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 15t day of June, 1988] the powers of the Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.]
The assessee himself has stated in para no. 4 (Page No.2 ) of his reply that “it is submitted that a perusal of the audit report u/s 142(2A) of the Act clearly shows that the special auditor only examined the original books of accounts and not the seized books as would be clear from Annexure-C. Therefore the Audit Report u/s 142(2A) of the Act is not all relevant as far the determination of total amount of on-money is concerned. (7) From the above, it is obvious that the AO while completing the assessment has not taken into account the seized documents and has not correctly taken into account undisclosed income. From the documents which was established that the assessee has been receiving 'on money' on the sale of flats and this 'on money' was to be computed on the basis of the documents seized 20
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during the course of search. It is further seen that the deduction allowed against this income has not been correctly computed as per the provisions of the Income tax Act 1961. Thus an error has been committed in computation of income which is caused prejudice to the interest of the Revenue as income has been determined at a lower figure. Therefore, the order passed by the AO is erroneous as well as prejudicial to the interest of the Revenue. Accordingly, the order passed by the AO. u/s 153A/143(3) of the IT Act is hereby set aside to be framed afresh after taking into account all the aspects of the case. (8) Since order has also been passed with the approval of the Addl. CIT, Central Range, Meerut as per the provisions of section 153D of the Act, the approval so granted is also erroneous and prejudicial to the interest of the Revenue. The same is hereby set aside to be granted afresh as per provisions of the I.T. Act, 1961.”
After perusing the above, at the threshold, we find that that there is no dispute with regard to the following position:-
a. In this case Notice u/s 142(1) alongwith detailed questionnaire was issued by A.O. requiring the assessee to explain seized documents and reply thereof was filed by the assessee on 20.10.2010 and onwards.
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b. With regard to the Special Audit, show cause notice was issued to assessee, reply to the said notice was made by the assessee vide submission dated 27.12.2010. For issues raised in the Audit Report dated 25.05.2011 of Special Auditor, fresh notices U/S 143(2) and 142(1) were issued, in compliance to which required details were produced by the assessee to the AO.
c. Ld. CIT did not bring on record any material or evidence to point out any mistake in finding of act of the AO regarding 'on money' transactions. No reason has been given by the Ld. CIT for the deduction allowed against the income which has not been correctly computed as per provisions of the Act. The submissions made by the assessee with workings of 'on money' receipts not considered by the Ld. CIT.
d. It is a settled law that every erroneous order cannot be the subject matter of revision unless it is prejudicial to the interest of revenue as well, in view of the decision of the Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd. reported in 243 ITR 83 (SC), wherein it was held as under:-
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“A bare reading of section 263 of the income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent – if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase “prejudicial to the interest of the Revenue” is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is 23
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not confined to loss of tax. The Scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income- tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. 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.”
e) That view the Ld. CIT for AY 2004-05 and next
five years is contradictory and is against principles
of consistency and is against the law laid down by
the Hon’ble Supreme Court of India in the case of
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Radha Soami Satsang vs. CIT (1992) 193 ITR 321 (SC) wherein it has been observed as under (Heads Notes only):-
“Charitable Trust – Exemption under section 11 – Constitution and bye laws of assessee, a religious institution, indicated that its property was intended for the common purpose of furthering the objects of the State Satguru and the Central Council had the authority to manage the property – Properties vested in the trust and also recorded in the name of Sabha (Central Council) – Satguru never claimed any title over, or beneficial interest in the properties and they were always utilized for the purpose of the religious community – Income derived by assessee was, therefore, entitled to exemption under ss. 11 and 12 – In the absence of any material change, a different view than that taken in earlier years, could not be taken.”
f) That the disallowance uls 40A(3) and denial of deduction uls 80-IB being matters considered and decided in appeal, cannot be subjected to revision jurisdiction in terms of clause (c) of the Explanation to section 263(1). For disallowance uls 40A(3), the Ld. CIT(A), vide his letter dated 27.11.2012 directed the Ld. A.O to send a remand report after verifying the aforesaid expenditure from the seized documents. Vide remand report dated 24.01.2013, the Ld. A.O. had reported that "the payments made under rule 6 DD has been verified from the seized
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material and date of payments have been found correct". Since denial of deduction uls 80IB with regard to 'on money' profits was a subject matter of appeal, therefore, fulfillment of all conditions including validation of computation of the profits from 'on money' transactions for deduction uls 80IB was a subject matter of appeal before Ld. CIT(A). Hence, the action of the Ld. CIT is against the law laid down by the Hon’ble Gujarat High in the case of CIT vs. Nirma Chemical Works (P) Ltd (2009) 309 ITR 67 wherein the following has been observed vide para no. 7 as under:-
“7. On behalf of the assessee it was contended that once the issue of deduction under Section 80I of the Act had been considered by the Assessing Officer and the matter carried in Appeal before the Commissioner (Appeals) the assessment order would merge with the order of the Appellate Authority and in terms of Provisions of Section 263 Explanation (c) of the Act the CIT did not have jurisdiction to undertake revision of the assessment order relating to the said subject matter. In support of the submissions reliance was placed on the two decisions of this Court in the case of CIT v. Shashi Theatre Pvt. Ltd. 26
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and in the case of CIT v. Mehsana District Co-operative Milk Producers Union Ltd .. It was further submitted that the decision in the case of CIT v. Shashi Theatre Pvt. Ltd. (supra) was directly on the point as the matter involved identical fact situation except for the fact that it was a case of investment allowance under Section 32A of the Act whereas the present matter relates to deduction under Section 80I of the Act. That in the aforesaid case the Assessing Officer had allowed investment allowance in relation to some of the items while disallowing investment allowance in relation to certain other items which was carried in appeal. That Commissioner (Appeals) had granted investment allowance qua the items carried in appeal. The CIT took up the matter in revision under Section 263 of the Act by only referring to those items which were not carried in appeal and on which investment allowance had been granted by the Assessing Officer. However, the principal ground forming basis of revision was that cinema theatre owned by the Assessing Officer could not be termed to be a 'small scale industry' to be eligible for investment allowance. That in revenue's reference it was held by the High Court that for the purpose of considering the grant of investment allowance qua the items 27
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rejected by the Assessing Officer, the Commissioner (Appeals) was required to go into the question of validity of grant of investment allowance in relation to the items on which investment allowance had already been granted by the Assessing Officer. That the total claim for investment allowance as per return of income was before the Appellate Authority. It was therefore urged that in case of the assessee the issue was regarding relief under Section 80I of the Act and without entering into the examination of eligibility the Assessing Officer could not have granted partial deduction by allowing the claim under Section 80I of the Act by reducing the quantum thereof, and once the Commissioner (Appeals) was seized of the disallowed part of the computation as regards relief under Section 80I of the Act, issue regarding eligibility under the said provision could not be divorced and treated independent of the quantum. It was further submitted that in the next decision the question was in relation to deduction under Section 80I of the Act and the Court had followed the principle laid down in case of CIT v. Shashi Theatre Pvt. Ltd. (Supra).”
g) That the Show cause notice u/s 263 of the Act dated
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14.03.2014 was received by the Assessee only at 5 PM on Friday, 21st March 2014. Date of hearing was fixed on 25.03.2014 in Kanpur. However, the Ld. CIT was not available in Kanpur on 25.03.2014. It is a settled law that any order passed without affording an opportunity to the assessee to represent its case is void ab initio.
h) That the arguments advanced by the Ld. DR in the preceding paragraphs is not tenable in the eyes of law, keeping in view of the facts and circumstances of the present case, because in the case notice u/s. 142(1) alongwith detailed questionnaire was issued by the AO requiring the assessee to explain seized documents and reply thereof was filed by the assessee which was duly considered by the AO. The AO also considered the Special Audit Report and completed the assessment as per the documentary evidence as well as law. Therefore, the arguments advanced by the Ld. DR as well as the case law cited by her is not useful to the Revenue in interfering in the assessment order. 13. We are of the considered opinion that for the following reasons also the order passed by the learned CIT u/s. 263
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totally fails to meet the jurisdictional requirements of section 263 of the I.T. Act, 1961.
(i) The issue communicated to the assessee in the show cause notice was thoroughly examined at the time of original assessment and, therefore, there was complete application of mind on the part of the Assessing Officer on this issue.
(ii) Further, the Assessing Officer at the time of original assessment has adopted a view which is consistent with the view adopted by the Department itself in the preceding assessment year and, therefore, the view taken by the Assessing Officer gets supported from the principles of consistency of approach when the facts and circumstances are similar.
(iii) Thus, when the Assessing Officer has taken a plausible view after thorough application of mind and after making detailed enquiry, the learned CIT cannot substitute his view by assuming jurisdiction u/s.263 of the I.T. Act.
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In the background of the aforesaid discussions and respectfully following the precedents, as referred above, we hold that the impugned order passed by the learned CIT u/s.263 of the I.T. Act is without jurisdiction and not sustainable in law. Accordingly, the said order is hereby quashed and as a result, the Assessee’s Appeal No. 3132/Del/2014 (AY 2005-06) stands allowed.
Since the order passed by the learned CIT which is under appeal has been quashed by us, going into the merits of the issues is only of academic interest, hence, the same are not being adjudicated upon.
ITA Nos. 3133 to 3136/Del/2014 - A.Yrs. 2006-07 2009-10.
Since the facts and circumstances pertaining to the A.Y. 2005-06, the grounds of appeal raised by the assessee and the arguments and submissions made before us on behalf of the assessee as well as on behalf of the Department are identical and same. Therefore, following the consistent view taken in ITA No. 3132/Del/2014 (AY 2005-06) as aforesaid, we hold that the respective Orders passed u/s.263 by the learned CIT in ITA No. 3133 to 3136/Del/2014 (AYrs. 2006-07 to 2009-
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10) also suffers from fatal jurisdictional defects and is,
therefore not sustainable in the eyes of law, hence, the same
are also quashed accordingly. Accordingly, the Assessee’s
Appeal Nos. 3133 to 3136/Del/2014 (Ayrs. 2006-07 to 2009-
10) also stand allowed.
In the result, all the five Appeals filed by the Assessee stand
allowed.
Order pronounced in the Open Court on 08/07/2016.
SD/- SD/-
(L.P. SAHU) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 08/07/2016 *SR BHATNAGAR* Copy forwarded to: - 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY By Order,
ASSISTANT REGISTRAR