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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS. SUCHITRA R KAMBLE & SHRI B.M. BIYANI
आदेश/O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by revision-order dated 03.03.2022 passed by learned Pr. Commissioner of Income-Tax,Indore-1 [“Ld. PCIT”] u/s 263 of Income-tax Act, 1961 [“the Act”], which in turn arises out of assessment-order dated 26.12.2019 passed by learned ITO-2(1), Ujjain [“Ld. AO”] u/s 143(3) of the act for Assessment-Year [“AY”] 2017-18, the assessee has filed this appeal on the grounds raised in Appeal-Memo.
Heard the learned Representatives of both sides at length and case- records perused.
Dr. Deshmukh Mother & Child Care Assessment year 2017-18 3. The registry has informed that this appeal has been filed after a delay of 2 days and therefore time-barred. Ld. AR prayed that the delay has occurred due to Covid-19 Pandemic. Ld. AR further placed reliance on the order of Hon’ble Supreme Court in Suo Motu Writ Petition (C) No. 3 of 2020 read with Misc. Applications, by which suo motu extension of the limitation-period for filing of appeals w.e.f. 15.03.2020 under all laws has been granted and hence there is no delay in fact. We confronted Ld. DR who agreed to the submission of Ld. AR. In view of this, the appeal is proceeded with for hearing, there being no delay in fact.
Brief facts leading to present appeal are such that the assessee filed return of income on 23.11.2017 at a total income of Rs. 9,01,433/- which was subjected to scrutiny assessment through notices u/s 143(2)/142(1). Finally, the AO completed assessment u/s 143(3) vide order dated 26.12.2019. Subsequently,the Ld. PCIT examined the record of assessment- proceeding and viewed that the assessment-order passed by Ld. AO is erroneous in so far it is prejudicial to the interest of revenue, which attracts revisionary-jurisdiction u/s 263. The reason of framing such a view, as mentioned by Ld. PCIT in show-cause notice dated 10.01.2022 and also re- produced in Para No. 3.1 to 3.7 of the impugned revision-order, are as under:
Dr. Deshmukh Mother & Child Care Assessment year 2017-18
Dr. Deshmukh Mother & Child Care Assessment year 2017-18 /
Dr. Deshmukh Mother & Child Care Assessment year 2017-18 However, the veracity of such payments has not been verified by the AO.”
By the aforesaid show-cause notice, the assessee was asked to explain as to why the assessment-order may not be revised. In response thereto, the assessee made a detailed submission to Ld. PCIT, which is re-produced in Para No. 3 of the revision-order.
However, none of those submissions impressed the Ld. PCIT. The Ld. PCIT further observed that since the section 263 has been amended and Explanation 2, as reproduced below, had been introduced therein, the assessment-order is deemed to be erroneous-cum-prejudicial to the interest of revenue if the same had been passed without inquiries or verification which should have been made:
Explanation 2 – “For the purpose of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interest of revenue, if in the opinion of the Principal Commissioner or Commissioner - (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) …. (d) …
Finally, the PCIT concluded that the Ld. AO has not carried out the inquiry/verification which he should have done and hence the assessment- order is erroneous in so far as it is prejudicial to the interest of revenue. Accordingly, the Ld. PCIT passed revision-order u/s 263 whereby the assessment-order was set aside to the file of Ld. AO with a direction to re- frame assessment after examining impugned issues.
Aggrieved by such revision-order, the assessee has filed this appeal.
By means of various grounds raised in the Appeal Memo which are not being reproduced for the sake of brevity, the appellant-assessee requires us to adjudicate whether or not the revision-order passed by Ld. PCIT u/s 263 is valid in the eyes of law?
Dr. Deshmukh Mother & Child Care Assessment year 2017-18 10. Ld. Representatives of both sides made a lengthy discussion on various issues one by one. We sum up the arguments and contentions of both sides as also our analysis issue-wise as under:
(i) Regarding issue raised in Para No. 3.1 of show-cause notice:
Ld. PCIT observed that the Opening WDV of fixed assets of current year was greater than the Closing WDV of immediately preceding year but the AO did not verify the difference.
In this regard, Ld. AR submitted that during assessment-proceeding, the AO specifically raised a query to assessee vide Point No. 9 of the notice dated 09.07.2019 u/s 142(1) (Paper-Book Page 50) to explain the reason of difference between the opening W.D.V. of fixed assets of current year and closing W.D.V. of fixed assets of preceding year. The assessee filed reply in Point No. 9 of letter dated 17.07.2019 (Paper- Book Page No. 56). Ld. ARalso drew our attention to Tax Audit Report of current AY 2017-18 alongwith Annexure-A appended thereto by the auditors (Paper Book Page No. 139 and 140) and Tax Audit Report of immediately preceding AY 2016-17 (Paper Book Page No. 116) and demonstrated that the total opening WDV of fixed assets of current year is Rs. 3,97,28,403/- and closing WDV of fixed assets of preceding year was Rs. 3,97,28,383/-; thus the two figures tally except a negligible difference of some rupees. But there were internal changes in the figures of certain blocks/items of fixed assets due to re- classification according to applicable depreciation rates. Thus, Ld. AR submitted that on one hand the AO has enquired into the issue and on other hand, the figures tally and there is no difference.
Per contra, Ld. DR submitted that the assessment-order is totally silent on this issue and does not talk of any information having been filed by assessee to AO.
Dr. Deshmukh Mother & Child Care Assessment year 2017-18 On a careful consideration, we find that during assessment- proceeding, the AO has made enquire from assessee on this issue in response to which the assessee has also filed reply. Further, the figures broadly tally with a negligible difference. Therefore, prima facie it appears that this issue does not hold any valid basis for revision.
(ii) Regarding issue raised in Para No. 3.2 of show-cause notice:
Ld. PCIT observed that the assessee has made cash deposits of Rs. 19,40,000; Rs. 1,00,000/- and Rs. 7,80,000/- in three bank accounts during demonetisation period and the assessee explained the same out of receipts from patients but the AO has not enquired the claim of assessee. Further, the assessee has not filled the columns prescribed in Return of Income for giving details of cash-deposits in bank accounts during demonstration-period but the AO has not enquired reason of not filling the said information by assessee.
In this regard, Ld. AR submitted that the assessee was carrying on hospital and during demonetisation-periodthere was no bar or limit on receiving cash from patients towards medical treatment and depositing the same in bank a/c due to a specific exemption given by Govt. to hospitals. Further, the AO has raised a specific query in Point No. 3 of the notice dated 09.07.2019 u/s 142(1) qua the source of cash- deposits made by assesseein bank accounts during demonetisation- period from 09.11.2016 to 31.12.2016 alongwith documentary evidences (Paper Book Page No. 50) and the assesseealso filed reply in Point No. 3 of letter dated 17.07.2019 (Paper Book Page No. 56) followed by Point No. 2, 3 and 8 of letter dated 17.07.2019, also produced books of account vide Point No. 9 of the same letter and also filed complete summaries of monthwise cash-receipts and cash- expenses as annexure to the same letter (Paper-Book Page 59 to 62). Thus, there is full enquiry made by AO and reply given by assessee.
Dr. Deshmukh Mother & Child Care Assessment year 2017-18 Per contra, Ld. DR insisted that the AO did not examine the cash- receipts from patients. He further submitted that the AO has not examined as to why the assessee had not given details of such demonetisation-deposits in the Return of Income.
On a careful consideration, we find that the assessee was carrying on hospital and it was permitted by Govt. to accept receipts from patients in cash as argued by Ld. AR which could not be contradicted by Ld. DR. We further observe that during assessment-proceeding the AO has raised specific queries qua the deposits made by assessee and in response the assessee filed replies as also produced complete books of account wherein the entries of deposits were duly incorporated. These details/documents on record clearly show that the AO has made enquiries qua deposits. Regarding non-reporting of information in the Return of Income, although we do not get any explanation from assessee’s side as to why it was so, yet we observe that the receipts as recorded in the books have been deposited in bank accounts and it is not the case of revenue that any deposit was not recorded in assessee’s books of account. Therefore, in absence of explanation from assessee’s side even if we assume that there was some error in the Return of Income by non-furnishing of required information, the same does not cause any prejudice to the interest of revenue for the reason thatthere is nothing outside books of account and hence there is no revenue leakage. Therefore, this issue does not hold a valid basis for conducting revision.
(iii) Regarding issue raised in Para No. 3.3 of show-cause notice:
Ld. PCIT observed that the assessee has not deducted tax at source out of payments of Rs. 1,56,566/- and Rs. 1,24,110/- made to M/s Srijan Imagicraft Pvt. Ltd. and M/s Hoswin Incinerator Pvt. Ltd. respectively and still the AO has not made any disallowance.
Dr. Deshmukh Mother & Child Care Assessment year 2017-18 In this regard, Ld. Representatives of both sides agree that the AO has already made disallowance in respect of impugned items in the assessment-order itself and realising that the PCIT has also dropped this issue at the time of passing revision-order. Therefore, this issue does not hold a valid basis for conducting revision.
(iv) Regarding issue raised in Para No. 3.4 of show-cause notice:
Ld. PCIT has observed several aspects, viz. (a) the AO has not brought on record various schedules of Balance-Sheet and except a few expenses, no details of various expenses debited to P&L A/c are available on record; (b) the AO has not verified whether the books prescribed in Section 44AA read with Rule 6F have been maintained or not?; (c) various crucial issues such as capital contribution by partners, sundry creditors and provisions of Rs. 62,87,322/-, unsecured loans of Rs. 19,90,000/-, addition to fixed assets of Rs. 61,09,191/-, etc. have not been verified by AO. Further, no details/documents in respect of addition to fixed assets, sundry creditors and provisions, confirmation of unsecured loans are available on record and the ledger accounts of creditors claimed to have been submitted on 24/12/2019 are also not available on record.
In this regard, Ld. AR submitted that the PCIT has made a very vague and general query and ragged up this point for the sake of undertaking revision only. He further submitted that the accounts of assessee were duly audited u/s 44AB of the act and the Tax Audit Report was held on record at the time of assessment which contained all those details (Paper Book Page No. 128 to 144). Further, the AO has acknowledged in Para No. 2 of assessment-order that the books of account were duly produced by assessee and perused by AO. Further, the AO has applied his mind and made disallowances out of “Repairs & Maintenance Expenses”, “Advertisement Expenses” and “Hoswin Expenses” claimed
Dr. Deshmukh Mother & Child Care Assessment year 2017-18 by assessee in P&L A/c. These facts clearly show that the AO has made a proper scrutiny.
Per contra, Ld. DR supported revision-order and strongly contended that the AO has not examined the various points raised by PCIT.
On a careful consideration, we find that the AO has made disallowances of certain expenses in assessment-order after perusal of books of account. That shows that the AO has examined the claim of various expenses made by assessee in P&L A/c and hence the PCIT is not justified in invoking revision qua this aspect.
Regarding maintenance of prescribed books of account as per Rule 6F, on perusal of Column No. 11(a)/(b)/(c) of Tax Audit Report (Paper Book Page No. 129), we find that the auditors have categorically mentioned “Cash-book, Ledger, Journal” against (i) books required to be maintained u/s 44AA; (ii) books actually maintained by assessee and (iii) books examined by auditors. This shows that the assessee has maintained books of account as required under law, hence the PCIT is not justified in invoking revision qua this aspect.
However, in so far as Capital contribution by partners, Sundry creditors and provisions of Rs. 62,87,322/-, Unsecured loans of Rs. 19,90,000/-, Addition to fixed assets of Rs. 61,09,191/- are concerned, we do not find any explanation from assessee’s side to demonstrate that the AO has actually examined those crucial aspects during scrutiny assessment. Therefore, we agree that the PCIT has rightly invoked revisionary jurisdiction qua these items.
(v) Regarding issue raised in Para No. 3.5 of show-cause notice:
Ld. PCIT has observed that the AO has not verified whether or not the assessee charged any interest on deposits/investments of Rs. 10,89,095/- shown in Balance-Sheet and if not, whether any Dr. Deshmukh Mother & Child Care Assessment year 2017-18 proportionate disallowance out of interest expenses was called for or not? It is also not verified whether any interest has been paid on unsecured loans and whether liability for TDS was attracted or not?
In this regard, Ld. AR could not controvert this issue raised by PCIT. On the other hand, Ld. DR submitted that the PCIT has rightly found that the AO has not examined this issue. Faced with this situation, we agree that the PCIT has rightly invoked revisionary jurisdiction qua this issue.
(vi) Regarding issue raised in Para No. 3.6 of show-cause notice:
Ld. PCIT observed that the assessee had debited Rs. 38,477/- and Rs. 50,407/- under the heads “ESI” and “PF” respectively in P&L A/c. On perusal of Col. 20(b) of audit report in Form No. 3CD, the details of employees’ contributions to ESI & PF are kept blank; thus it is not ascertainable as to whether any contribution from employees on account of ESI & PF were received during the year; whether the same had been deposited to the respective accounts before due dates and whether any addition u/s 2(24)(x) r.w.s. 36(1)(va) was called for or not?
In this regard, Ld. AR could not controvert this issue raised by PCIT. On the other hand, Ld. DR submitted that the PCIT has rightly found that the AO has not examined this issue. Faced with this situation, we agree that the PCIT has rightly invoked revisionary jurisdiction qua this issue.
(vii) Regarding issue mentioned in Para No. 3.7 of revision-order:
Ld. PCIT observed that the assessee had made various payments to the persons specified in section 40A(2)(b) as reported by auditors in Column No. 23 of audit-report but the AO has not verified the veracity and reasonableness of such payments.
Dr. Deshmukh Mother & Child Care Assessment year 2017-18 In this regard, Ld. AR carried us to Page No. 133 of the Paper-Book and drawing our attention to the impugned Column No. 23 of audit- report submitted that all payments have been made to partners of assessee-firm and there is only one payment of Rs. 3,00,000/- made to partner’s father by way of salary. Ld. AR submitted that assessee’s father was aged 80 years and the salary payment was reasonable.
Ld. DR submitted that the AO ought to have made enquiry at least qua the salary paid to partner’s father but it was not done at all.
On a careful consideration, we find no enquiry having been made by AO on this issue. Therefore, we agree that the PCIT has rightly invoked revisionary jurisdiction qua this issue.
In view of above, we are of the view that the Ld. PCIT was justified to invoke revisionary action qua certain issues but not all issuesas discussed in foregoing paragraph. Being so, we are persuaded to modify and thus partly uphold the revision-order passed by PCIT to the extent it relates to the issues for which the revision was validly done as narrated above. The assessee succeeds partly in this appeal.
Resultantly, this appeal of assessee is allowed partly.
Order pronounced in the open court on 15/06/2023.