VG RAJAMANI AGENCIES PVT. LTD.,COIMBATORE vs. PCIT-1, COIMBATORE

By way of this appeal, the assessee assails the invocation of revisionary jurisdiction u/s 263 as exercised by Ld. Pr. Commissioner of Income Tax-1, Coimbatore (Pr. CIT) vide impugned order dated 21-06- 2023 in the matter of an assessment framed by Ld. Assessing Officer, National Faceless Assessment Centre, Delhi u/s.147 r.w.s 144 r.w.s 144B of the Act on 30-03-2022. The grounds raised by the assessee read as under: - 1.The Order passed by the Learned Principal Commissioner in exercise of powers under Section 263 is bad and illegal.

The Ld. AR advanced arguments and submitted that the assessment proceedings, in totality, was already subject matter of adjudication before first appellate authority at the time of revision and therefore, doctrine of merger would apply. Reliance has been placed on the recent decision of this Tribunal in Prabhu Kanimozhi vs. Pr. CIT (ITA No.350/Chny/2022 dated 21.04.2023) wherein Tribunal, on similar facts, held that the assessee’s case was covered under Clause (c) of Sec 263(1) which puts a bar on initiation of revision u/s 263 when an appeal is pending before Ld. CIT(A). The Ld. AR submitted that considering the same, the revision would be bad-in-law. The Ld. CIT-DR, on the other hand, controverted the arguments of Ld. AR and submitted that the issue, for which the return of income was scrutinized, was not examined by Ld. AO and therefore, the revision was justified. The Ld. CIT-DR sought distinction in the facts of cited decision of Tribunal. Having heard rival submissions and after perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 From the records, it emerges that the assessee filed return of income on 31.10.2017 declaring income of Rs.1.05 Lacs. The return was subjected to scrutiny since it transpired that the assessee deposited cash in various bank accounts during the period of demonetization 3 between 09.11.2016 to 30.12.2016. The cash in hand as on 08.11.2016 was Rs.40.06 Lacs but the assessee deposited cash of Rs.128 Lacs, Accordingly, the case was reopened and notice u/s 148 was issued on 31.03.2021. Since the assessee did not file return of income in response to notice u/s 148, the assessment was completed on best judgment basis u/s 144. The assessee also failed to furnish supporting documents as well as requisite details as called for by Ld. AO. Only partial submissions were made wherein certain discrepancies were found. It also transpired that the assessee was engaged in wholesale and retail trading of Nestle Products and Ujala products. The assessee submitted that the deposits were out of sale proceeds. 3.2 The Ld. AO issued notice u/s 133(6) to the banks and obtained bank account statement which revealed that the assessee deposited cash of Rs.110.89 Lacs in Kotak Mahindra Bank Ltd. and another Rs.11.34 Lacs in City Union Bank during the aforesaid period. The assessee made sales of Rs.1682.70 Lacs and submitted monthly purchase and monthly sales summary. The actual data of opening stock, purchases, sales and closing stock differed with the figures declared by the assessee in the return of income. The same has been tabulated in para 5.3 of the assessment order. Accordingly, the books of accounts were held to be not correct and held to be incomplete. 3.3 After considering the reconciliation statement as well as partial details submitted by the assessee, Ld. AO finally held that an amount of Rs.240.85 Lacs was undisclosed income of the assessee in stock which was not declared in the Income Tax return. Accordingly, the same was added to the income of the assessee and assessment was completed.

The second pertinent fact is that the assessee has assailed the reassessment proceedings before first appellate authority which was pending for adjudication at the time of revision of the order. In such a case, the ratio of decision of Hon’ble Madras High Court in the case of Smt. Renuka Philip vs. ITO (409 ITR 567) would apply wherein it was held as under: - 22. The above explanation makes it clear that when the appeal is pending before the Commissioner, the exercise of jurisdiction under Section 263 of the Act is barred. The Commissioner in the order dated 14.03.2012 states that the appeal pertains to the claim made by the assessee under Section 54 of the Act and it has got nothing to do with the order passed by the Assessing Officer under Section 54F of the Act. The said finding rendered by the Commissioner is wholly unsustainable, since the assessee went on appeal against the re-assessment order dated 31.12.2009 stating that his claim for deduction under Section 54 of the Act should be accepted.

Therefore, in the process of considering as to what relief the assessee is entitled to, the Assessing Officer held that the assessee is entitled to claim deduction under Section 54F of the Act and assigned certain reasons for that. Therefore, the larger issue was pending before the Commissioner of Appeals, and in such circumstances, the Commissioner could not exercise power under Section 263 of the Act on account of the statutory bar. Therefore, on this ground also, the assumption of jurisdiction under Section 263 of the Act was wholly erroneous.

As noticed above, the Assessing Officer while completing the re-assessment proceedings has assigned certain reasons for coming to a conclusion that the assessee is entitled for deduction under Section 54F and not under Section 54 of the Act. This reason assigned by the Assessing Officer has been found by us to show due application of mind. As observed, we cannot expect an Assessing Officer to write a judgment. In such circumstances, the view taken by the Commissioner in his order under Section 263 of the Act has to be termed as a change of opinion, or in other words, the Assessing Officer adopted one of the two views possible and in such circumstances, it cannot be stated that the order is prejudicial to the interest of the Revenue as well as erroneous. For the purpose of exercise of jurisdiction under Section 263 of the Act, the twin tests are to be satisfied and even assuming, the re- assessment order is to be held as erroneous, it cannot be stated to be prejudicial to the interest of Revenue as every erroneous order cannot be subject matter of Revision under Section 263 of the Act. Further more, if the order passed by the Commissioner under Section 263 of the Act as confirmed by the Tribunal is allowed to stand, then the very purpose of the remand order against the original re- assessment proceedings would become a fait accompli.

In the result, the appeal filed by the assessee is allowed and the order passed by the Commissioner dated 14.03.2012, under Section 263 of the Act as confirmed by the Tribunal by order dated 13.07.2012 are set aside, and it is left open to the assessee to pursue her claim before the Assessing Officer. Accordingly, the Substantial Questions of Law are answered in favour of the assessee. Since, the matter has been pending for a quite long number of years and there has been repeated orders of assessment, we direct the Assessing Officer to give effect to the re-assessment order dated 31.12.2009, wherein the Assessing Officer had granted the benefit of Section 54F of the Act to the assessee. No costs.

Therefore, considering the facts of the case and respectfully following the binding judicial precedent as aforesaid, we would hold that the impugned revision u/s 263 was bad-in-law and the same is therefore, liable to the quashed. We order so.

The appeal stand allowed in terms of our above order. Order pronounced on 9th January,2024 (V. DURGA RAO) (MANOJ KUMAR AGGARWAL) "ाियक सद /JUDICIAL MEMBER लेखासद / ACCOUNTANT MEMBER चे7ई Chennai; िदनांक Dated : 09-01-2024 DS 8 आदेशकीTितिलिपअ%ेिषत/Copy of the Order forwarded to : 1. अपीलाथ"/Appellant 2. !"थ"/Respondent 3. आयकरआयु@/CIT 4. िवभागीय!ितिनिध/DR 5. गाडEफाईल/GF