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Income Tax Appellate Tribunal, MUMBAI BENCHES “H”, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI ASHWANI TANEJA
Date of hearing : 18-01-2017 Date of order : 31-01-2017 O R D E R
Per ASHWANI TANEJA, AM:
This appeal has been filed by the assessee against the order of Principal Commissioner of Income-tax-7, Mumbai passed u/s 263 of the Act dated 18-03-2016 on the following grounds:-
Hon'ble Pr. CIT Central - 7 (herein after referred as CII) has erred in invoking Provisions of Section 263 of the Income Tax Act, 1961 by issuing the Notice inspite of the fact that Scrutiny assessment u/s. 143(3) r.w.s. 153C of the Income Tax Act, 1961 has been completed by the DCIT Central Circle - 1(3), Bangalore after duly examining and considering facts while framing the assessment order U/s 143 (3) r.w.s. 153C of Income Tax Act, 1961. The Hon'ble CIT has erred in raising the issues and making rowing enquiries in the Proceedings U/s 263 of the Income Tax Act, 1961, Further Order U/s 263 is also passed without any conclusion merely setting aside the assessment to the file of the learned assessing officer which is unjustified. It is therefore submitted that the order passed U/s 263 should be cancelled. 7 Without prejudice to ground No. 1, The CIT has mentioned that M/s. STI Products India Ltd. (Creditor) has not reflected in the books of account Rs.35,00,000/- of the appellant company, therefore there is under assessment of income and the learned assessing officer does not appear to looked into the said matter. 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 Income Tax Act, 1961. Further the details with regards to the difference in the books of account of appellant company and M/s. STI Products India Ltd. has been explained along-with the relevant documents that there was a mistake in the Books of M/s. STI Products India Ltd. while passing the entry in its books of accounts and thereby wrongly transferring the same in the ledger of M/s. Evisco Exim Ltd. instead of appellant company. In conclusion, CIT 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.
During the course of hearing, it was stated by the Ld. Counsel that in this case original assessment was done u/s 153C r.w.s. 143(3) vide order 28-02-2014. Subsequently, the Principal CIT issued notice u/s 263 on the ground that AO failed to examine the amount of loan from the sister concern, viz. M/s STI Products Pvt Ltd for Rs.35 lakhs. In response, the assessee furnished complete evidences to substantiate loan received of Rs.35 lakhs including bank statements, loan accounts, confirmation, etc. However, Ld. Principal CIT, without bringing on record how the order passed by the AO was erroneous, has set aside the assessment order. It was submitted that proceedings u/s 153C were initiated for examining the seized material from the office premises of M/s Convention Hotels Pvt Ltd. The satisfaction did not include any mention about impugned loan received from M/s STI Products Pvt Ltd. Thus, it was beyond the jurisdiction of the AO to examine this loan. Under these circumstances, it cannot be said that order passed by the AO was erroneous or prejudicial to the interest of Revenue. Therefore, Ld. Principal CIT could not have exercised his jurisdiction to invoke section 263. Thus, the impugned order should be quashed. In support of his arguments, the Ld. Counsel of the assessee relied upon the following judgements:- 1. Jitendra J Mehta vs CIT (ITA No.1872/Mum/2015) dt 24-06- 2015 2. Mrs. Shweta Avasekhar vs DCIT (ITA No.3186/Mum/2016) dt 01-08-2016 3. We have gone through the orders passed by the lower authorities. It is noted that original order u/s 153C dated 28-2-2014 was passed in pursuance to search in the office of M/s Convention Hotels Pvt Ltd. Perusal of the assessment order reveals that the proceedings u/s 153C were initiated upon the assessee in relation to some documents seized from the office premises of M/s Convention Hotels Pvt Ltd. Details mentioned in the assessment order shows that the seized material pertained to the transactions that took place between the assessee and said company, M/s Convention Hotels Pvt Ltd. Under these circumstances, the jurisdiction of the AO in the proceedings u/s 153C was confined to the seized material on the basis of which impugned proceedings u/s 153C were initiated. Thus, the Ld.AO had no jurisdiction to examine the loan of Rs.35 lakhs received by the assessee from M/s STI Products Pvt Ltd. The legal position is now well settled in this regard by the judgement of Hon'ble Bombay High Court in the case of All Cargo Global Logistics 374 ITR 645 (Bom) and judgments of Hon’ble Delhi High Court in the case of Gurvindersingh Bawa vs DCIT 386 ITR 483 (Del) and CIT vs Kabul Chawla 380 ITR 573 (Del).
Under these circumstances, when the AO himself did not have the jurisdiction to examine the said loan, then how the Ld. Principal CIT can take a view that non examination of loan by the AO made the assessment order as erroneous and prejudicial to the interest of Revenue. It is noted by us that the legal position has also been clarified in this regard by the co-ordinate bench of Mumbai Bench in the case of Jitendra Mehta (supra) by observing as under:- “4. We have heard both the parties and their contentions have carefully been considered. Relevant portion of the order of Ld. CIT(A) has already been reproduced in which he has dealt with the contention of the assessee that assessment order cannot be considered to be erroneous and prejudicial to the interest of Revenue as AO did not have jurisdiction to the make addition on the impugned issue as the same is not based on seized material. Such contention has been rejected only on the ground that there are conflicting views rendered by various High Courts and the contention of the assessee has not been rejected on the ground that the impugned addition is based on seized material. Also there is no material on record to suggest that issue regarding additional depreciation on Wind Mill was based on seized material. Therefore, certainly, this issue is other than the additions based on seized material. If it is so then according to the aforementioned decision of Hon'ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd.(supra), the AO would not have jurisdiction to bring such issue in the assessment completed u/s. 153A r.w.s 143(3) and non-consideration thereof in the assessment order would not make the assessment order passed under section 143(3) r.w.s. 153A as erroneous and prejudicial to the interest of Revenue.”
This view has been followed by Mumbai Bench of the Tribunal in the case of Mrs. Shweta Avarsekar vs DICT (Supra). Thus, from the facts of this case and legal discussion as made above, it is clear that the assessment order passed by the AO cannot be held to be erroneous or prejudicial to the interest of the Revenue for the reason as has been mentioned by Ld. Principal CIT. We find that the impugned order u/s 263 is contrary to law and facts and, therefore, the same is hereby quashed.
As a result, appeal filed by the assessee is allowed. Order was pronounced in the open court at the conclusion of the hearing.