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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
This appeal by the Assessee is directed against the revision order u/s 263 of the Act of Pr. Commissioner of Income Tax dated 29.03.2023 for A.Y. 2018-19. The assessee has raised following grounds of appeal:
“That on the Facts and in the circumstances of the case Commissioner of Income Tax has erred in setting aside the order of the AO the Ld. Principal passed U/s 143 (3) of the IT Act, for further examination and investigation of the Duty Drawback Transactions ITANo.163/Ind/2023 Mahima fibres P. Ltd. allegedly holding it erroneous in so far prejudicial to interest of revenue. The order passed by Principal Commissioner as of Income Tax-I, Indore U/s 263 of the IT Act, is bad in law and facts, requires to be quashed in full. The Appellant crave to add, amend or alter any of the ground stated above, either before or at the time of hearing of appeal."
The assessment for the year under consideration was completed by the AO u/s 143(3) r.w. section 143(3A) & 143(3B) of the Act on 04.02.2021 at the total income of Rs.13,73,82,950/- as against the return income of Rs.13,35,97,620/-. Thereafter on going through assessment record the Pr. CIT found that certain points for which the case was selected for scrutiny under CASS were not taken into consideration by the AO while passing assessment order. The Pr. CIT prima facie was of the view that order passed by the AO without making required examination/investigation is erroneous in so far as it is prejudicial to the interest of the revenue. Consequently, the proceedings u/s 263 were initiated by issuing show cause notice dated 14.03.2023. The Pr. CIT noted that the assessee has received duty drawback as per the data received from CBEC at Rs.17,56,15,262/- whereas the assessee has disclosed the duty drawback of Rs.1,10,20,685/- which was accepted by the AO without conducting further inquiry about the discrepancies in the data of duty drawback. The assessee in reply to show cause notice submitted that the AO has fully examined this issue by issuing show cause notice u/s 142(1) which has duly replied by the assessee along with relevant record and details regarding duty drawback received by the assessee during the year under ITANo.163/Ind/2023 Mahima fibres P. Ltd. consideration and the AO after considering reply and record filed by the assessee accepted the claim of the assessee as correct. The Pr. CIT was not impressed with the reply filed by the assessee and consequently passed impugned order whereby the order of the AO is set aside and remanded to the file of the AO for re-examination of the issue of duty drawback received by the assessee after making necessary verification/inquiry and investigation as well as providing opportunity of being heard to the assesse.
Before us the Ld. AR of the assessee has submitted that the AO has issued the notice u/s 142(1) and raised specific query about discrepancies of the duty drawback as shown in the SFT CBEC data and the amount declared by the assessee. Ld. AR has referred to the reply of the assessee to the show cause notice issued by the AO u/s 142(1) placed at page no.5 to 7 of the paper book and submitted that in para 5 of the said reply the assesse has explained the details of export cotton bales & cotton yarn to various countries. The assessee further stated in the reply that it had recorded all the income from duty drawback related to export for the year under consideration and copy of the ledger account was also produced before the AO. Ld. AR has submitted that since CBEC data were not available with the assessee therefore, the AO was requested to provide CBEC data to reconcile the same with the record of the assessee. He has then referred to the show cause notice dated 22.01.2021 whereby the AO asked the assessee as to why the assessment should not be completed as per draft assessment order
ITANo.163/Ind/2023 Mahima fibres P. Ltd. and consequently assessment order was passed. He has referred to para 4 & 4.1 of the assessment order and submitted that the AO has discussed about this issue while passing assessment order and specifically mentioned that the explanation of the assessee regarding discrepancies of duty drawback has been considered along with attachment which were test cheque by the AO. Therefore, the AO has examined the relevant record and then allowed the claim of the assessee regarding duty drawback received during the year under consideration. Ld. AR has submitted that the Data provided by CBEC are not correct so far as the duty drawback received by the assessee and the assessee has furnished all the relevant documents to show the export sales during the year as well as duty drawback received by the assessee. Thus, he has submitted that when the AO has conducted due inquiry and then allowed the claim of the assessee then Pr. CIT has no jurisdictional to invoke provisions of section 263 on the ground that the AO has not conducted a proper inquiry. In support of his contention he has relied upon the following decisions: 1.Maa Narmada Agrotech and Infrastructures Ltd. 34 ITJ online 101 (Trib-Indore) 2023 2. Eveready Industries India Ltd. 114 taxmann.com 610 (Kolkata-Trib.) 2020
On the other hand, ld. DR has submitted that the AO has not conducted a proper and requisite inquiry on this issue and therefore, there is complete failure on the part of the AO to ascertain the correct facts about the export sales and duty
ITANo.163/Ind/2023 Mahima fibres P. Ltd. drawback claimed by the assesse keeping in view the data taken from CBEC was substantially higher than the amount declared by the assessee in the return of income. Ld. DR has contended that as per the Data provided by the CBEC the assesse has received sum of Rs.17,56,15,262/- whereas the assessee has declared only Rs.1,10,20,685/- as duty drawback received by the assessee. The AO has accepted explanation of the assessee without verifying correctness of the data supplied by the CBEC and reconciliation with data recorded by the assessee in the books of account. The assesse was specifically asked to reconcile the differences which was not done either by the assessee or by the AO while passing assessment order. She has relied upon the order of the Pr. CIT.
We have considered rival submission as well as relevant material on record. The issue of duty drawback receipt was very much part of the subject matter of scrutiny undertaken under CASS as the AO has mentioned the issue in para 1 of the assessment order as under: “1. The case was selected for Complete Scrutiny assessment under the E-assessment Scheme, 2019 on the following issues:- - S. No. Issues i. Duty Drawback ii. Deduction from Total Income under Chapter VI-A”
5.1 The AO issued notice u/s 142(1) on 3rd December 2020 and raised various queries including query no.5 as under:
ITANo.163/Ind/2023 Mahima fibres P. Ltd. “Please reconcile your receipt with reference to CBEC data and receipt of duty drawback.”
5.2 The AO asked the assessee to reconcile your receipt with reference to CBEC data and receipt of duty drawback. In response the assessee vide letter dated 17.12.2020 has stated as under: “5.Details of Export Sales and Duty Drawback The Assessee has exported cotton bales & cotton yarn to various countries. The details of export sales are enclosed as page no. 56-58. The Assessee has recorded all the income from duty drawback relating to exports made in F.Y. 2017-18 and copy of ledger a/c is enclosed as page no. 59-60. The Assessee is not having CBEC data available, you are therefore requested to provide CBEC Data to reconcile the same with our records.”
5.3 In reply the assessee has stated that it is not having CBEC data available and requested the AO to provide CBEC data to reconcile the same with record of the assessee. Thereafter the AO collected CBSE data and issued show cause notice as stated in para 3.1 of the assessment order as under: “3.1 A scan on assessee's 'Notes forming part of the Financial Statements' reveals that it had disclosed Rs.1,10,20,685/- as 'Export Incentive' as appears at serial no. 17 B of the same. Whereas data received from CBEC reveals that the assessee company had claimed Drawback of Rs.17,56,15,262/- and the same amount was sanctioned. Since the assessee was following mercantile system of accounting, the entire amount of Rs.17,56,15,262/- was to be treated in F.Y 2017-18 instead of Rs.1,10,20,685/-.”
5.4 Therefore, the assessee was provided CBEC data for reconciliation of the discrepancies of the amount of duty drawback
ITANo.163/Ind/2023 Mahima fibres P. Ltd. receipts as declared by the assessee and as reflected in the CBEC record. The assessee in the reply dated 28.01.2021 received by the AO on 29.01.2021 has stated that the data received from CBEC are incorrect and misleading. It is clear that there was no reconciliation on the part of the assessee but it has questioned the correctness of the details of exports and duty drawback amount received by the assessee. The AO has accepted reply of the assessee in para 4.1 as under: “4.1 Regarding disallowance of Duty Drawback the explanation of the assessee has been considered. The attachments enclosed have been test- checked. On the basis of explanation offered by the assessee is accepted and no action is being taking in this regard.”
5.5 Thus, despite being a vast difference between amount of export and duty drawback receipt shown by the assessee and the details provided by the CBEC the AO has not taken any steps to verify or reconcile the differences or to ascertain correctness of the data provided by the assessee as well as CBEC but simply accepted the claim of the assessee in complete disregard to the details provided by the Government authority. It is pertinent to note that the record available with the AO exhibits two set of data one by the assessee and another by CBEC which are at vast variance of each other. Therefore, before reaching to the conclusion on this point the AO ought to have ascertained the correct facts by conducting a proper and much deeper investigation in the matter. It is serious matter when the difference of duty drawback receipts between the claim of the assesse and CBEC data is more than Rs. 17 crores and Page 7 of 10
ITANo.163/Ind/2023 Mahima fibres P. Ltd. without ascertaining the correctness of the data provided by the CBEC the issue could not have been decided conclusively. For instance had the AO accepted the CBEC data over the claim of the assessee a question would have been raised by the assessee on this point that without conducting further inquiry to ascertain correctness of the data provided by CBEC addition is not sustainable. By applying the same logic accepting the claim of the assessee disregarding the CBEC data is also not justified on the part of the AO. It is not a case of taking one of the possible view on the available facts but it is a matter of failure on the part of the AO to conduct an inquiry necessary for ascertaining the fact and then to take decision based on outcome of the inquiry of ascertaining the correct facts. When the facts are not complete and certain then conclusive decision is not possible either at the level of the AO or Pr. CIT in the revision proceedings or even at this stage of appeal. Therefore, in the facts and circumstances of the case the claim allowed by the AO without ascertaining the correct facts renders the assessment order erroneous so far as the prejudicial to the interest of the revenue. The Pr. CIT has considered this aspect in para 3 to 6 as under: “3. On perusal of the record for the relevant assessment year, it is seen that, the notice u/s 143(2) of the Income Tax Act, 1961 was issued by the AO on 22/9 / 2019 to file reply. Further, the notice under sub section (1) of Section 142 of the Income Tax Act, 1961 was issued on 3/12 / 2020 for furnishing relevant information. Then, order u/s 143(3) was passed by the AO. 4.On perusal of Assessment records, it is found that you have received significant amount of drawbacks as per export import data(received from CBEC). After examination of record it was Page 8 of 10
ITANo.163/Ind/2023 Mahima fibres P. Ltd. found that there was difference between SFT CBEC data of duty drawback claimed by you and duty drawback shown in ITR. In this regard you were asked to explain the following fact:- "A scan on your Notes forming part of the Financial Statements reveals that you have disclosed Rs. 1.10.20,685/- as Export incentive-as appears at serial no. 178 of the same. Whereas data received from CBEC revels that the assessee company had claimed Drawback of Rs. 17,56, 15.262/- was to be treated in FY 2017-18 instead of Rs. 1.10.20.685/-*
However you in reply just submitted that data given by CBEC is not correct. It has given details and invoices related to duty drawback of Rs. 1,10,20,685/- as shown in income tax return by it. However no attempt has been made by the AO to verify the claim that the given data of CBEC available as SFT details with department is incorrect. The reply was accepted by the AO without any verification. This mistake has resulted in underassessment of Rs. 16,45,94,577/- (17,56,15,262-1, 10,20,685) and revenue loss of Rs. 4,93,78,373/-
5. During the course of assessment proceedings, you have neither furnished any details nor explained the issues involved with relevant documentary evidence with regard to issues narrated above. It appears that submission and details available on records was not enough to verify the reasons for Selection of scrutiny under CASS. The Assessing Officer has not at all verified these issues and relevant facts involved therein while completing the assessment without any application of mind, without conducting proper inquiries and due verification. As such, the assessment is erroneous in the sense that it is prejudicial to the interest of revenue. You are therefore, required to show cause why provisions of section 263 be not invoked in your case for the reasons mentioned above as the order of AO dated 04/02/2021 for A.Y 2018-19 is erroneous in so far as it is prejudicial to the interest of revenue.
6. You are hereby given an opportunity of being heard to explain as to why the proposed revision should not be carried out. For this purpose, your reply should be received on or before 20/03/2023. On the scheduled date, you may either appear in Page 9 of 10
ITANo.163/Ind/2023 Mahima fibres P. Ltd. person or get yourself represented by a representative duly authorized by you as per section 288 of the Act. You may also make your written submissions in lieu of personal appearance. If such written submissions are received on or before the scheduled date, the same shall be duly considered for the purpose of the proceedings u/s 263 of the Act.”
5.6 The decision relied upon by the Ld. AR of the assessee cannot be applied in the facts of the present case when the AO has failed to ascertain correct facts relevant to the issue under consideration. In view of the facts and circumstances as discussed above we do not find any error or illegality in the impugned order of the Pr. CIT same is upheld.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 21.02.2024.