COLUMBUS OVERSEAS LLP,16, RAJA PARK, ADARSH NAGAR, JAIPUR vs. PRINCIPAL COMMISSIONER OF INCOME TAX-1, JAIPUR, NEW CENTRAL REVENUE BUILDING, BHAGWAN DAS ROAD, JAIPUR

ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by assessee aggrieved from the order of the Learned Principal Commissioner of Income Tax, Jaipur-1 [here in after “Ld. PCIT”] for assessment year 2018-19 dated 27.03.2023 as per provisions of section 263 of the Income Tax Act (hereinafter “Act”). The order of the Ld. PCIT arise from the order passed by the National e-Assessment Centre, Delhi passed u/s 143(3) read with sections 143(3A) & 143(3B) of the Act dated 12.02.2021.

2. The assessee has marched this appeal on the following grounds:-

2. In the facts and circumstances of the case and in law, Ld. PCIT has erred in exercising the revisionary powers by passing order u/s 263 of I.T. Act, 1961 dated 27.03.2023 setting aside the order passed u/s 143(3) dated 12.02.2021 without considering and ignoring the facts mentioned in our submission letter dated 16.02.2023.

3. In the facts and circumstances of the case and in law, Ld. PCIT has erred in holding that the assessment order passed u/s 143(3) dated 12.02.2021 is erroneous and prejudicial to interest of revenue. However, the details were duly verified by the Ld. AO during the assessment proceedings and the assessment order u/s 143(3) was passed with due application of mind.

4. The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing.”

Columbus Overseas LLP The parties have deducted @ 1% or 2% TDS on receipts which is contract/fees receipts but in case of HG Foods and Drinks LLP amounting to Rs.3,50,000/-, Kotak Mahindra Bank amounting to Rs. 1,78,658/-, Lokendra Singh amounting to Rs. 8,88,944/- & Pigment Communication amounting to Rs. 1,36,000/- TDS was deducted @ 10% which is covered in income from interest. Thus, the income from interest amounting to Rs. 15,53,602/- (i.e 350000 + 178658 + 888944 + 136000) was not shown by the assessee.

This has resulted under assessment of Rs. 15,53,602/- as income from interest. The ld. PCIT further noted that the assessee has disclosed receipts from contract wrongly at Rs. 10,95,79,942/- instead of Rs.15,84,30,257/- (15,99,83,859 – 15,53,602) and declared net profit thereon @ 0.65% at Rs. 7,11,130/- instead of Rs. 10,28,657/-. This resulted into under assessment of receipts at Rs.4,88,50,318/- and under assessment of income at Rs.3,17,527/-. In view of the above mentioned facts, ld. PCIT observed that the assessment order dated 12.02.2021 passed u/s 143(3) r.w.s 143(3A) & 143(3B) of the Act in the case of the assessee for A.Y 2018-19 was erroneous in so far as it was prejudicial to the interest of the revenue. Accordingly, the assessee was given an opportunity to show cause as to why the order passed u/s 143(3) r.w.s 143(3A) & 143(3B) on 12.02.2021 for A.Y 2018-19 should not be revised u/s 263 of the Act in a suitable manner. The assessee has not filed any reply to the same. Since, the assessee did not respond to the show cause noticed dated 17.03.2023 the ld. PCIT based on the material available on record held the order of the AO dated 12.02.2021 is erroneous and prejudicial to the interest of the revenue. The relevant finding of the PCIT is reproduced here in below :

“8. I have perused the order of the Assessing Officer as well as the documents placed on record. On verification of the assessment records, it is noticed that the assessee has claimed Rs. 48,281/- as interest on delayed payment on TDS. However, this is not an allowable expenditure being penal in nature. Therefore, Rs. 48,281/- is required to be disallowed and added back to the assessed income of the assessee. This has not been done by the AO during the course of assessment proceedings.

5.1 At the outset of the hearing the ld. AR of the assessee withdraw the ground no 2 raised by the assessee and he has given his consent to withdraw the same in the court file. Therefore, the ground no. 2 raised by the assessee is dismissed.

5.2 A propose to the remaining ground the ld. AR of the assessee in support of the grounds so raised, filed a detailed submission which is reproduced here in below:- “BRIEF FACTS OF THE CASE AND SUBMISSION:→ The assessee is engaged in real-estate business. For the year under consideration, the assessee filed return of income declaring total income of Rs.7,11,130/- on 18/10/2018. Copy of acknowledgement of return of income along with computation of income is available on Paper Book Page No1-3. The case was selected for complete scrutiny and notice u/s 143(2) was issued on 22/09/2019. As per the assessment order, the main issues for examination were - (1) Income from real estate business, (ii) contract receipts or fees and (iii) unsecured loans. During the course of assessment proceedings, notice u/s query letter was issued on 27/11/2020, requiring the assessee to furnish certain details/information. In compliance to the notice issued u/s 142(1), the assessee furnished the information/details requisitioned by the Learned Assessing Officer. The same were found in order after examination by the Learned Assessing Officer. Accordingly, the assessment was completed on returned income of Rs. 7,11,130/-, vide order u/s 143(3) read with Sec. 143(3A) and 143(3B) of the IT Act, 1961, vide order dated 12/2/2021. Copy of the assessment order is available on Paper Book Page No. 4-5. Subsequently, the Pr. Commissioner of Income-tax-1, Jaipur initiated revisionary proceedings u/s 263, proposing revision of the assessment order passed by the Learned Assessing Officer on 12/2/2011 on the following grounds :-

(i) That payment of Rs.48,281/- on account of interest on delayed payment of TDS, which is in the nature of penalty/fine, is required to be added back. (ii) That income from interest amounting to Rs.15,53,602/-, has been under-stated; (iii) That the contract receipts have been shown at Rs. 10,95,79,942/- instead of Rs. 15,84,30,257/- and thus, receipts have been shown less by Rs. 4,88,50,318/-, resulting in under-statement of income of Rs. 3,17,527/-. It is submitted that the Learned Pr.CIT has rushed through in passing the order u/s 263 on the basis of objections raised by Internal audit party and without considering the facts of the case, the position of law and the reply of the assessee. The order passed u/s 263 is objected to and is assailed as under, discussing the grounds of appeal. Grounds No.1 In the facts and circumstances of the case and in law, Learned. PCIT has erred in exercising the revisionary powers by passing order u/s 263 of IT Act, 1961 dated 27/03/2023 setting aside the order passed u/s 143(3) dated 12/02/2021. The action of the Learned PCIT is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the order passed u/s 263. Ground No.2 In the facts and circumstances of the case and in law, Learned PCIT has erred in exercising the revisionary powers by passing order u/s 263 of IT Act, 1961 dated 27/03/2023 setting aside the order passed u/s 143(3) dated 12/02/2021 without considering and ignoring the facts mentioned in our submission dated 16/2/2023. Ground No.3 In the facts and circumstances of the case and in law, pd PCIT has erred in holding that the assessment order passed u/s 143(3) dated 12/2/2023 is erroneous and prejudicial to the interest of revenue. However, the details were duly verified by the Learned Assessing Officer during the assessment proceedings and the assessee order u/s 143(3) was passed with due application of mind. Grounds No. 1, 2 & 3 are taken together as under :-

The Learned PCIT has wrongly held the order passed by the Learned Assessing Officer as erroneous and prejudicial to revenue without appreciating the facts that the Learned Assessing Officer before passing the assessment order had issued questionnaire along with notice u/s 142(1) and also notice u/s 143(2). It is also mentioned in the assessment order that the assessee had filed details and explanations and supporting documents and the same were examined by the learned Assessing Officer. This is as per page No. 2 of the assessment order. It is after careful examination of the details and replies furnished by the assessee that the Learned Assessing Officer passed the assessment order on 12/02/2021. The Pr CIT has held wrongly held the order of the Learned Assessing Officer as erroneous and prejudicial to the interest of revenue on the following three grounds :- (i) That payment of Rs.48,281/- on account of interest on delayed payment of TDS, which is In the nature of penalty/fine, is required to be added back. (ii) That income from interest amounting to Rs.15,53,602/-, has been under-stated; (iii) That the contract receipts have been shown at Rs. 10,95,79,942/- instead of Rs. 15,84,30,257/- and thus, receipts have been shown less by Rs. 4,88,50,318/-, resulting in under-statement of income of Rs. 3,17,527/-. Each of these grounds is discussed below :-

(a) Payment of interest of Rs.48,281/- on delayed payment of TDS. The Learned PCIT has directed the Learned Assessing Officer to disallow the payment of interest of Rs. 48,281/- claimed by the assessee on delayed payment of TDS. In the view of the Learned PCIT, the payment is of penal nature and hence the same is disallowable. It is submitted that the finding of the Learned PCIT is not in accordance with law. The claim of the assessee is legal, lawful and justified. In the following decisions of Courts and ITAT Benches, it has been held that the payment of interest on delayed payment of TDS is not of penalty nature. Therefore, the claim of the assessee is in order. The Learned

PCIT was not justified in setting aside the assessment order on this ground. Relevant decisions i. Mahalakshmi Sugar Mills Co. Vs. CIT123 ITR 429 (SC) ii. CIT Vs. Oriental Insurance Co. Ltd (2009) 183 Taxmann (Karnataka) 186 iii. Taksheel Solutions Limited Vs. ACIT - iv. M/s Trinity Infra Venture Ltd Vs. ACIT ITA N90.403/Hyd/2021 v. Ferro Alloys Corporation Ltd Vs. CIT (1992)196 ITR 406 (Bombay) vi. Resolve Salvage & Fine Ind P. Ltd Vs. DCIT ITA No. 841/Mum/2019 order dt. 18/4/2022 In the above cases, it has been held that payment of interest on TDS is of compensatory nature and is not of penal nature, therefore, the same is allowable. In these circumstances, the claim of the assessee was in order and there was no case on this issue with the Pr. CIT for setting aside the assessment order u/s 263. Copies of decisions in respect of M/s Trinity Infra Venture Ltd Vs. ACIT ITA N90.403/Hyd/2021 and Resolve Salvage & Fire Ind P. Ltd Vs. DCIT ITA No. 841/Mum/2019 order dt. 18/4/2022 are available on Paper Book Page No. 6-18. (b) Alleged under-statement of interest income amounting to Rs.15,53,602/- It is submitted that the order u/s 263 by the Pr CIT has been passed under assumptions, presumptions and conjectures. The working of alleged under- statement of interest income is totally imaginary and is not based on facts. The Learned PCIT has worked out the interest income out of the receipts of Rs.15,98,83,859/- on which TDS of Rs. 17,97,506/- was made. The Learned PCIT has sorted out such receipts on which TDS was made @ 10% and treated the same on assumption as interest income.

S. Amount (Rs.) Explanation No. 1. 3,50,000 This is rental income from HG Foods and Drinks LLP and is included in the total rental income of Rs.9,09,775/-. Copy of this account is available on Paper Book Page No.

In view of the above, there was no case with the Learned PCIT to set- aside the assessment order on the above ground. The Learned PCIT had acted on presumption in calculating the interest amount of Rs. 15,53,602/-, which in fact included rental income and receipts from club. The interest income was only of Rs. 1,36,257/- instead of Rs.15,53,602/- as mentioned in the order passed u/s 263 by the Pr CIT. Thus, the facts mentioned in the order u/s 263 are wrong and the Learned PCIT was not justified in setting aside the assessment order on the basis of wrong facts. (c) Alleged under-statement of receipts by Rs.4,88,50,318/- and under- statement of income by Rs. 3,17,527/- It is submitted that on this issue also, the Learned PCIT was not justified in setting aside the assessment order u/s 263. The action of the Learned PCIT is based on assumptions It is the case of the Learned PCIT that the assessee has claimed TDS of Rs.17,97,506/- on total receipts of Rs.15,99,83,859/-. After reducing Rs.15,53,602/-, which as per Pr. CIT, were receipts of interest and have been discussed in the foregoing paras, the balance amount remains at Rs.15,84,30,257/-, which have been treated as contract receipts, whereas such receipts as per 26AS are only of Rs.15,52,46,053/-. Therefore, the Learned PCIT erred in adopting the figures without considering the official form No. 26AS. It is submitted that these receipts are on account of sale of immovable properties of "Shivgyan Luxora". The assessee has been disclosing income on the basis of Percentage Completion Method (PCM). The total receipts of this project are Rs.63,93,54,591/-. During the year under consideration, the assessee has disclosed Rs. 10,84,53,067/- and the balance Rs.53,09,01,524/- has been disclosed in earlier years. Copy of statements having details of Rs.63,93,54,591/- is available on Paper Book Page No.24-25. Copy of statement of Rs.53,09,01,524/- disclosing receipts in earlier years is also available on Paper Book Page No.

Your Honor is requested to decide the appeal in favour of the assessee by considering the grounds and submission made above and oblige.”

Columbus Overseas LLP 6. The ld AR of the assessee in addition to the written submission so filed also vehemently argued before us that the assessment in this case has been completed by the faceless assessment unit. In the faceless unit there are various other sub units and the assessment order is passed after considering the submission of the assessee. The issue for examination also cover the issue of contract receipt for the details were called for and plausible view was taken by the NeFAC. Not only that in the faceless regime the order tested on various aspect on team-based assessment proceedings and then assessment unit has considered and framed the assessment. The board has prescribed various stage by which the order passes through various stages of the assessment unit and considering the faceless assessment scheme being framed the order passed u/s 263 of the Act is nothing but a review of the reasoned order of the assessing officer.

Observing only the defect which are not the defect in actual order is beyond the provisions of section 263 of the Act and therefore summoning the assessee again by invoking the provisions of section 263 of the Act on same issue which has been examined at length is not the purpose of provision of section 263 of the Act as regards the disallowance of interest on TDS the issue is debatable

Columbus Overseas LLP and the ld. AO has after considering the record not deem it fit to disallow and PCIT cannot direct to disallow particular claim u/s. 263 of the Act. As regards the alleged under statement of receipt for an amount of Rs. 4,88,50,318/- the ld. AR of the assessee submitted that these receipts are on account of sale of property Shivgyan luxora. The assessee has been disclosing income on the basis of percentage completion method.

Therefore, the provision of section 263 of the act has rightly been invoked by the ld. PCIT as ld. AO has not applied his mind on the various aspect as pointed out by the PCIT. The ld. AR of the assessee in this appeal so withdrawn ground no 2 that the reply has been submitted this support that the order of the PCIT deserve to be sustained.

Columbus Overseas LLP 8. We have careful consideration the factual matrix as well as argument advanced by both the parties. It is not disputed that the before the PCIT the assessee did not file any submission so as to deal the observations of the PCIT. The bench also note that the case of the assessee was specifically selected for specific issue which includes the income from real estate business and contract receipt of fees. On both the aspect of the case the ld. PCIT has observed that there is nothing on record placed by the ld. AR of the assessee that the details were placed on record and the ld. AO has examined the issue of the assessee offering the income on percentage completion method and the assessee also failed to demonstrate as to the submission for reconciling the income reflected in the TDS claim vis a vis to the income offered. Even the assessee has chosen not to reply the notice of the PCIT.

Thus, we are of the considered view that the assessee is failed to established on the both the issue for which the case was selected for scrutiny. Therefore, in the light of these facts and circumstances, we see no infirmity in the order of ld. PCIT holding that the order of the Assessing Officer is prejudicial to the interest of revenue and the same is erroneous on account of the fact that neither the assessee has filed before the ld. AO on the issue of Columbus Overseas LLP how the income of the real estate business is computed and how the contract fees is accounted. Not only that the assessee remained silent even before the ld. PCIT and has not explained the veracity of the contentions so raised. Therefore, we are of the considered view that the order passed by the Assessing Officer is erroneous and rightly held by ld. PCIT as prejudicial and erroneous in the interest of the revenue and therefore, the appeal filed by assessee is dismissed.

In the result, appeal of the assessee is dismissed.