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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
The present appeal has been filed by the assessee challenging the impugned order dated 19/01/2022, passed under section 263 of the Income Tax Act, 1961 ("the Act") by the learned Principal Commissioner of Income Tax, Napgur–1, Nagpur, [―learned PCIT‖], for the assessment year 2017–18.
Following grounds have been raised by the assessee in this appeal:–
―1. That on the facts and circumstances of the case, the revision order passed by the Ld. Pr. CIT u/s 263 of the Income Tax Act, 1961 is bad in law and therefore deserves to be set aside. 2. That on the facts and circumstances of the case, the Ld. Pr. CIT erred in holding that the assessment order passed u/s 143(3) of the Income Tax Act,
Spark Mall and Parking Pvt. Ltd. ITA no.33/Nag./2022 1961 dated 27.11.2019 is erroneous and prejudicial to the interest of the revenue when all the necessary enquiries were duly made by the assessing officer and duly explained by the assessee.
3. That on facts and circumstances of the case, the Order u/s 263 of the Act dated 19/01/2022 setting aside the original Assessment Order dated 27.11.2019 and directing fresh assessment to examine issue on which the then Ld. AO has already applied it mind during the original assessment proceedings makes the present revision a mere change opinion, not being permissible under the Income Tax Act, 1961.‖
Facts in Brief:– For the year under consideration, the assessee filed its return of income on 31/10/2017, declaring loss of ` (–) 31,16,32,554. The case was selected for complete scrutiny through CASS. Notice under section 143(2) and 142(1) of the Act were duly served on the assessee through ITBA. During the assessment proceedings, in response to the notice issued by the Assessing Officer, the assessee furnished submissions through e–filing portal. The Assessing Officer, on verification of the details submitted by the assessee, accepted the returned income of the assessee. Accordingly, the Assessing Officer assessed the total income which is reproduced below:–
Returned Loss ` (–) 31,16,32,654 Assessed Loss ` 31,16,32,554
Subsequently, the learned PCIT, by exercising power under section 263 of the Act, issued show cause notice and after receiving the reply, he passed the impugned order holding that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue and accordingly directed the Assessing Officer to re–frame the assessment in accordance with law. On being aggrieved by the order so passed by the learned PCIT, the assessee is in appeal before the Tribunal.
Spark Mall and Parking Pvt. Ltd. ITA no.33/Nag./2022
5. Before us, the learned Counsel for the assessee submitted that the Assessing Officer has examined all the details and hence, the learned PCIT was not justified in directing the Assessing Officer to re–frame the assessment order by exercising power under section 263 of the Act. He accordingly prayed that the order passed by the learned PCIT under section 263 of the Act be quashed.
6. The learned Departmental Representative submitted that the Assessing Officer has not examined the details filed by the assessee particularly the forfeited amount of ` 43,99,20,000, from M/s. A.N. Enterprises Infrastructure Services Pvt. Ltd. and hence the order passed by the Assessing Officer is erroneous which is prejudicial to the interest of Revenue.
We have heard the rival arguments, perused the material available on record and gone through the orders of the authorities below. Admittedly, the Assessing Officer, for the year under consideration, has passed assessment order under section 143(3) of the Act without examining the issue relating to forfeiture of ` 43,99,20,000 from M/s.A.N. Enterprises Infrastructure Services Pvt. Ltd. However, the Assessing Officer failed to examine the issue relating to forfeiture of ` 43,99,20,000, from M/s. A.N. Enterprises Infrastructure Services Pvt. Ltd. In this regard, it is pertinent to refer to the provisions of Explanation 2 to section 263, wherein it says that–
Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 3[or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,— Page | 3
Spark Mall and Parking Pvt. Ltd. ITA no.33/Nag./2022
(a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.
The Assessing Officer has not conducted any enquiry or verification which ought to have been done by him. In view of the above, we hold that the order passed by the Assessing Officer is erroneous inasmuch as it is prejudicial to the interest of Revenue and thus we find no infirmity in the order passed by the learned PCIT hence decline to interfere and uphold the same. The operative part of the order passed by the learned PCIT is reproduced below for better appreciation of facts:– ―4. I have carefully considered the submission of the assessee and perused the assessment record, analysed the factual and legal matrix of the case. The admitted fact is that in the order passed by the AO u/s. 143(3) of the I.T. Act, 1961 for the year AY 2017-18, the AO has not examined the above issue of forfeiture of subscription.. amount of Rs.43,99,20,000/- from M/s. A.N. Enterprises Infrastructure Service Pvt Ltd. The assessee has submitted that it has filed the audited financial statements before the AO which contained the detail of the said transaction and as such it is to be inferred that the AO verified the same. This argument of the assessee is not acceptable. Merely filing the audited financial statement does not mean nor imply that the AO verified each and every transaction mentioned therein especially transaction of this magnitude. The AO further, apart from not evaluating the taxability of the forfeited amount failed to verify the credibility of the transaction including but not limited to verifying the source, genuineness and credit worthiness which the AO was supposed to. Thus, the AO should have called for relevant details to satisfy himself about the taxability or otherwise of the forfeited amount of subscription of Rs.43,99,20,000/- which as mentioned earlier is substantial amount.
In this case it is apparent that the assessment order has been passed without making inquiries or verification which should have been made by the AO. Accordingly, it is erroneous and prejudicial to the interest of revenue in view of Explaination 2 to Section 263 of the I.T. Act. The above Explanation 2
Spark Mall and Parking Pvt. Ltd. ITA no.33/Nag./2022 to Section 263 of the Income Tax Act find favour in the various court decisions, which are enumerated below:- 5.1 The Hon'ble Apex Court in The Malabar Industrial Co. Ltd. Vs. CIT (243 ITR 83) had on the scope of proceedings u/s 263 observed as under: "There can be no doubt that 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 interests 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 not confined to loss of tax" 5.2 The Hon'ble ITAT Bench in the case of Apollo Tyres Ltd vs Assistant Commissioner of Income Tax, as reported in the 65 ITD 263 (Delhi) has held as under: It is a well-settled law that where the Assessing Officer fails to make proper inquiries and investigation, such failure on the part of the Assessing Officer will result in prejudice to interests of the revenue and initiation of action under section 263 by the Commissioner under such circumstances will be perfectly valid and justified. 5.3 Rajmandir Estates Private Limited V. Principal Commissioner of Income Tax'- 2016 (5) TMI 801-CALCUTTA HIGH COURT- The High Court held that lack of enquiry, where enquiry is necessary, can be treated as prejudicial to the interest of the Revenue so as to justify revisional jurisdiction. It was for non inquiry, the validity of action under Section 263 was held justified in a case of non verification of share capital contribution when there was evidence to suggest that the transaction could not be genuine. 5.4 The Hon'ble ITAT Ahmedabad Bench in the case of M/s. Sonalank Investment & Trading Pvt. Ltd. Vs. CIT, (ITA No. 1343/AM/2011) had relied on following observations: "An assessment order can be erroneous either in law or in fact. An assessment order can be an erroneous one when prima facie a claim is allowed which according to the learned CIT was against the provisions of law. An assessment order can be held as prejudicial to the interest of the revenue if in the opinion of the learned CIT the inquiry was not adequate or no inquiry at all has been made. In a landmark decision in the case of G.V. Enterprises, 99 ITR 375, the Hon'ble Delhi High Court has held that "inadequacy of inquiry is a good reason for invoking the proceedings under section 263 of the Act." If the reasoning is lacking in an assessment order, then also the learned CIT can invoke the revisionary powers."
In view of the above and the factual and legal matrix, I am satisfied that the order passed u/s.143(3) of the IT Act, 1961 for the A.Y. 2017-18 on 27.11.2019 is erroneous in so far as it is prejudicial to the interest of revenue and therefore the same deserves to be revised u/s.263 of the IT Act, 1961. Page | 5
Spark Mall and Parking Pvt. Ltd. ITA no.33/Nag./2022
The AO, in this case has failed to examine the taxability of the amount of Rs.43,99,20,000/- including the source and genuineness of the sum so forfeited. Therefore, in exercise of power vested in me u/s. 263 of the I.T. Act, 1961, I hereby set aside the order dated 27.11.2019 of the I.T.O. Ward-1(4), Nagpur, passed u/s. 143(3) of the IT Act, 1961 for the A.Y. 2017-18 with a directions to pass a fresh Assessment Order and after giving opportunity of being heard to the assessee and conducting necessary inquiries.
In view of the above, we find no reason to interfere with the order passed by the learned PCIT. Accordingly, all the grounds raised by the assessee are dismissed.
In the result, appeal filed by the assessee is dismissed. Order pronounced in the open Court on 11/07/2024