CHANDRANI COMPLIMENTS & EXPORT (P) LTD.,KOLKATA vs. D.C.I.T.,CIRCLE-10(1), KOLKATA

2. The assessee in this appeal has contested the very validity of the revision order passed by the ld. PCIT.

At the outset, the ld. counsel for the assessee has stated the chronological events by stating that the return for the assessment year under consideration i.e. A.Y 2012-13 was filed by the assessee on 01.10.2012 showing an income of Rs.67,5,030/-. Thereafter, the scrutiny assessment was completed on 19.12.2014 by the ld. DCIT, Circle-10(1), Kolkata u/s 143(3) of the Act, wherein, the income of the Assessment Year : 2012-13 Chandrani Compliments & Export (P) Ltd assessee was assessed at Rs.5,05,50,540/-. Thereafter, the ld. CIT-4 exercised his revision jurisdiction u/s 263 of the Act and passed revision order dated 13.06.2016 observing that the assessment order dated 19.12.2014 was erroneous and prejudicial to the interest of Revenue for want of proper enquiries on the part of the Assessing Officer while framing the assessment on various issues viz. share application money including the identity and creditworthiness of the share subscribers, charging of interest u/s 201(1A), rental income from the vehicles and depreciation thereupon.

Pursuant to the aforesaid order of the ld. CIT-4, Kolkata, an assessment was carried out u/s 143(3) r.w.s. 263 of the Act by DCIT, Circle-10(1), Kolkata. However, in the said assessment, the Assessing Officer after enquiries assessed the income of the assessee at Rs.71,41,040/- vide assessment order dated 17.01.2017.

Thereafter, a proposal was made by DCIT, Circle-10, Kolkata vide letter dated 08.02.2019, whereby, it was pointed that in this case, in the earlier assessment order, certain additions were made in respect of share premium, disallowance of depreciation, brokerage and commission, provision for gratuity, disallowance of expenses u/s 36(1)(va) of the Act. However, in pursuance of revision order u/s 263 of the Act, the total income was revised to the tune of Rs.71,41,040/- which was less than the earlier assessed income. Since, the assessed income, in pursuance to the revision order passed, was less than the income assessed earlier, therefore, the said assessment order dated 17.01.2017 was erroneous and prejudicial to the interest of Revenue.

After receiving the proposal from the from the concerned DCIT, the then ld. PCIT-4, Kolkata again exercised revision jurisdiction u/s 263 of the Act and held that the second assessment order dated Assessment Year : 2012-13 Chandrani Compliments & Export (P) Ltd 17.01.2017 passed u/s 143(3) r.w.s. 263 of the Act was erroneous and prejudicial to the interest of the Revenue as the Assessing Officer has failed to make proper and independent enquiries on various issued and again set aside the assessment order for de novo assessment. The ld. PCIT, inter alia, observed that “any order passed subsequent to order u/s 263 must be in favour of revenue. Either earlier assessed income should be enhanced or should be same as earlier order but with enhanced enquiries so that addition should be strengthen to pass the test of appellate proceedings. But here the assessment order passed u/s 143(3) r.w.s. 263 was erroneous as addition made u/s 68 on account of unexplained share capital/premium was not added back”. Being aggrieved by the said order of the ld. PCIT, the assessee has come in appeal before us.

We have heard the rival contentions and gone through the record. At the outset, the ld. counsel for the assessee has submitted that the assessment order dated 17.01.2017, pursuant to the directions given by the ld. CIT-4, Kolkata for de novo assessment, was in fact passed by the concerned Assessing Officer after taking approval from the concerned PCIT-4, Kolkata. He in this respect has referred to the letter dated 08.12.2016, the contents of the same, for the sake of ready reference, are reproduced as under:

In this case earlier assessment order was cancelled de novo /s 263 directing a fresh assessment, as assessment made earlier was completed without making inquiries and also without carrying out verification, which should have been made, ignoring the order and direction of PCCIT, West Bengal & Sikkim and also ignoring the instruction of the CBDT. The letter dated 28.10.2016 of Ld. CCIT-4, Kolkata is to be followed on issue based or partially set aside cases, particularly in revenue audit objection cases. However, after carrying out verification and inquiries if no addition is called for on merits, in such cases approval of PCIT may be obtained.

The A.O has reported that the inquiry/verification in light of direction u/s 263 has properly been made and assessment order has been finalised accordingly. The A.O is directed to pass the assessment order accordingly, in the light of outcome of reported submitted. The above remarks of PCIT-4, Kolkata is being forwarded for necessary action at your end. Yours faithfully, Sd/- Uday Shankar Dutta ACIT, (Hqrs)-4, Kolkata 7.2 Thereafter, vide letter dated 08.02.2019, the ld. DCIT, Circle- 10(1), Kolkata moved a proposal to the ld. PCIT stating therein that since the assessed income in the subsequent assessment order dated 17.01.2017 passed u/s 143(3) r.w.s. 263 of the Act was less than the assessed income in the earlier assessment order u/s 143(3) dated 19.12.2014, therefore, the order was erroneous and prejudicial to the Assessment Year : 2012-13 Chandrani Compliments & Export (P) Ltd interest of the revenue. The ld. PCIT-4, therefore reopened the assessment on the aforesaid proposal of the Assessing Officer, however, stating in the order that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue for want of proper enquiries and further observing that any order passed subsequent to the order u/s 263 must be in favour of revenue and that the earlier assessed income should be enhanced or should be the same as in earlier order but should not be less than the earlier assessed income. 7.3 In this case, the earlier assessment order was set aside for de novo assessment which means that all the issues were open before the Assessing Officer. The assessee, under the circumstances, was entitled to furnish explanations and evidences on each of the issue that was open before the Assessing Officer and in relation to which the details were called upon by the Assessing Officer. There was neither any statutory power nor otherwise any other law requiring the Assessing Officer to only enhance or assess the same income which was earlier assessed. Such a proposition would be against the spirit of the law. When an assessment has been set aside or de novo assessment, all the issues in the assessment are open before the Assessing Officer, assessee as well also gets the right to plead, explain and furnish evidence on each of the issues. The outcome of the fresh assessment order is neither dependent nor can be based on the earlier assessment order which has been held to be erroneous and prejudicial to the interest of the revenue. If in the outcome of the fresh assessment order, the resultant assessed income is less than the earlier assessed income, the said order, by any fiction of law, cannot be termed as erroneous. 7.4 In the case in hand, the Assessing Officer, noting that in the fresh assessment proceedings, the assessed income of the assessee would be Assessment Year : 2012-13 Chandrani Compliments & Export (P) Ltd less than the earlier assessment income, sought necessary directions from the ld. PCIT-4, Kolkata in this respect and the ld. PCIT-4, Kolkata after considering this aspect has categorically directed the Assessing Officer that if after making necessary enquiries/verifications, even if the assessed income was coming out to be less than the earlier assessed income, he should pass the order accordingly. The Assessing Officer, after getting the aforesaid directions, passed the impugned order. Thereafter, sending of the proposal by the successor-Assessing Officer on the ground that the income assessed vide subsequent assessment order 17.01.2017 was less than the income assessed vide earlier assessment order dated 19.12.2014, in itself, was a wrong and illegal proposal and the subsequent action of the ld. PCIT, in exercise of revision jurisdiction on the said proposal, cannot be held to be justified. Moreover, the assessee has already been subjected to two assessment proceedings, wherein, the assessee had already furnished necessary details and evidences and under the circumstances, the assessee cannot be burdened with further assessment proceedings on the same issue, by way of reopening of the assessment only on the ground that the certain more enquiries are required to be made by the Assessing Officer. Such an action cannot be held to be justified as under such circumstances, there will be no finality of the assessment and every time, the assessment order passed by Assessing Officer could be subjected to revision order by the ld. PCIT alleging that more enquiries are needed. The assessment cannot be kept open in perpetuity. There must be some finality to the proceedings. For exercising of revision jurisdiction for the second time or thereafter, there must be mention of specific and strong grounds warranting such revision of assessment order. The revision jurisdiction for want of mere enquiries cannot be exercised at the whims and wishes of the PCIT.

In the result, the appeal of the assessee stands allowed.