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Income Tax Appellate Tribunal, INDORE BENCH: DB: INDORE
Before: SHRI CHANDRA MOHAN GARG & SHRI BHAGIRATH MAL BIYANI
Date of Hearing : 22.02.2023 Date of Pronouncement : 09.05.2023 ORDER PER CHANDRA MOHAN GARG, J.M. The instant appeal filed by the assessee is directed against the order u/s. 263 of the Income-tax Act, 1961 (for short, ‘the Act’) dated 18.03.2021 of the Pr.CIT-1, Bhopal for A.Y. 2016-17. 2. The grounds of appeal raised by the assessee read as under:
Page 2 of 11 "1. Because, the learned principal Commissioner of Income-tax -1, Bhopal, committed manifest illegality by passing the impugned ex-parte order us 263 in brazen violation of the principles of natural justice, principles of Audi Alteram Partem and Article 14 of the Constitution of India on the very first date of hearing, that too recording incorrect fact that no adjournment application was made by the appellant while the same was duly filed on cogent grounds, thus the same is void-ab-initio and deserves to be set-aside.
Because, the agreement letter dated 27 -08-2015 entered into by the appellant was later on cancelled owing to facts discovered post entering into such agreement and the transaction was finally completed in accordance with the revised agreement, which was in consonance with the litle Deed as well as the books of accounts, therefore there is no scope to make any addition on that count to the income of the appellant merely based on surmises, conjectures and guess work. The finding recorded by the Principal Commissioner that Rs. 5,38,98,733 - was required to be added to the income is incorrect. Thus, since the assessment order is not erroneous in so far as it is prejudicial to the interests of the revenue, no Revision Order thereto us 263 ought to be passed and the order so passed deserves to be set-aside.
3. Because, the learned Principal Commissioner of Income-tax - 1, Bhopal erred by not considering that the addition to capital on account of declaration of income during survey was merely because of an accounting entry, wherein the asset in the form of residential house not in books was recorded in the books with simultaneous increase of capital, on which taxes were duly paid. The finding recorded by the Principal Commissioner that Rs. 54,96,5351- was required to be added to the income is incorrect. Thus, no addition could be made on this count to the income of the appellant and the assessment order passed by the Assessing Officer is not erroneous in so far as it is prejudicial to the interests of revenue, therefore the same deserves to be set-aside.
Page 3 of 11 4. Because, without prejudice and in addition to grounds supra, the Assessing Officer already made an addition of Rs. 37,00,0001- to the income of the appellant in the Assessment Order dated 26-12-2018, on which ground an appeal is already pending before Commissioner (Appeals), who has plenary and coterminous powers to that of Assessing Officer including power of enhancement of income. Thus, even if any further addition is required to be made, the same may be made by Commissioner (Appeals) and there was no reason to have passed Revision Order us 263 at this stage, therefore the same deserves to be set-aside.
5. Because, the learned Principal Commissioner of Income-tax - 1, Bhopal erred on the facts and in the circumstances of the cases and on law by wrongly assuming jurisdiction us 263 in the absence of twin conditions of the order passed by the Assessing Officer being erroneous as well as prejudicial to the interests of revenue, therefore the same deserves to be set-aside.
Because, the learned Principal Commissioner of Income-tax - 1, Bhopal committed legal error by ignoring the fact that the powers us 263 cannot be used for substituting the opinion of the Assessing Officer.
Because, the impugned order is arbitrary, void and illegal. Thus, the same is bad in law and facts and deserves to be set-aside on this ground alone.
8. All the grounds supra are without prejudice to and independent of each other.
9. The appellant craves leave to raise, add, alter or delete any ground and refer to the record of the case at the time of hearing.
The learned assessee representative (AR) submitted that as per recent order of ITA Indore Bench dated 07.02.2021 in A.Y. 2015-16 in the case of Sahita Construction Co. vs PCIT , ITAT Chandigarh Bench in the case of Tejpal Page 4 of 11 Bhardwaj vs PCIT, Patiala reported as 221(5) TIM 485 ITAT Chandigarh and ITAT Delhi Bench in the case of Balvinder Kumar vs PCIT reported as (2021) 125 taxmann.com 83 held that in a case of limited scrutiny the Assessing Officer could not go beyond the reason for which the matter was selected for limited scrutiny. Thus it would not be opened to PCIT to pass revisionary order u/s. 263 of the Act on other aspects which were not issue in the limited scrutiny. The learned AR submitted that in such a situation the Ld. PCIT is not validly entitled to invoke revisionary provision of section 263 of the Act alleging that the assessment order is erroneous and prejudicial to the interest of revenue and to remit the matter to the Assessing Officer for fresh/denovo assessment.
Further drawing our attention towards limited scrutiny assessment order dated 26.12.2018 for A.Y. 2016-17 para 2 the learned AR submitted that the case was picked up through cass for four reasons and the Assessing Officer dwelled the all the four issues in the assessment order and made first addition of Rs. 6,65,800/- on account of agricultural income claimed by the assessee which remained unexplained, second addition of Rs. 50,27,846/- on account of unexplained cash in hand u/s. 68 of the Act, third addition of Rs. 37,67,433/- on account of conceal profit pertaining to sales and fourth addition of Rs. 37,00,000/- on account of unexplained sundry creditors treating the same as bogus u/s. 68 of the Act. Therefore, from the assessment order it is very clear that the AO made due and sufficient enquiry on all four issues and thereafter, made additions on all the four issues by taking a view then the Ld. PCIT is not eligible to invoke revisionary provision of section 263 of the Act.
The learned AR submitted that drawing our attention towards notice issued by the Ld. PCIT u/s. 263 of the Act, the learned AR submitted that the Ld. PCIT picked up two issues for invoking Page 5 of 11 revisionary provision u/s. 263 of the Act regarding (i) cash payment of Rs. 20 lakh and (ii) increase in the capital to the extent of Rs. 54,96,535/-. The learned AR submitted that cash payment of Rs. 20 lakh towards purchase of land was not the issue under limited scrutiny and regarding second issue picked up by the Ld. PCIT he submitted that issue no. 1 for limited scrutiny was large increase in capital in the relevant financial period was adjudicated by the assessee in para 5.1 to 5.3 of assessment order and the Assessing Officer after considering the facts and submissions of the assessee and analysing the same in detail held that increase of capital due to unexplained agricultural income of Rs. 7,65,800/- was not genuine claim and thus the Assessing Officer treated the same as unexplained income/cash credit in the books of assessee and made addition to the taxable income of the assessee.
6. The learned AR summarise his contention to the two main points that the issue of payment of Rs. 20 lakh, towards purchase of land at Bawadia Kalan, Patwari halka no. 42/50, block Fanda, Thesil Hujur, District Bhopal Kasra No 157/164/1/3 area 0.660 hector (1.63 acre) from Shri Arvnid Singh Thakur, was not an issue or aspect under the limited scrutiny is the case was picked up for limited scrutiny on four issues only at mentioned in the para 2 of the assessment order. Secondly, the issue of increase in capital was also adjudicated by the Assessing Officer and he made addition of Rs. 7,65,800/- to the taxable of the assessee on this issue. Therefore when the Assessing Officer has after due and sufficient enquiries the issue of increase in capital of assessee, and thereafter, taken a view then the same cannot be replaced by the Ld. PCIT for alleging that the assessment order is erroneous prejudicial to the interest of revenue. Therefore impugned notice u/s. 263 of the Act dated 01.03.2021 and impugned revisionary order dated 18.03.2021 may kindly be quashed.
Page 6 of 11 7. Replying to the above the Ld. CIT(DR) submitted that in para 8 the Assessing Officer has adjudicated the issue of purchase of land but has not made any enquiry with regard to cash payment of Rs. 20 lakh by the assessee. Therefore the Ld. PCIT was right in alleging the assessment order as erroneous prejudicial to the interest of revenue and directing the AO to make denovo assessment after allowing due opportunity of hearing to the assessee. However, the Ld. CIT(DR) could not controvert or dislodge the factum that both the issues, picked up by the Ld. PCIT for invoking provision of sec 263 of the Act were not issues or aspects before the AO under limited scrutiny assessment proceedings.
The learned AR placing rejoinder to the above drew our attention towards impugned revisionary order and page 3 to 6 of assessee’s paper book and submitted that the Ld. PCIT issued notice u/s. 263 of the Act on 01.03.2021 fixing the date of hearing on 15.03.2021 at 3 PM. The learned AR further pointed out that the assessee requested to allow adjournment by way of application dated 15.03.2021 which was send through official e-mail id of Ld. PCIT on 15.03.2021 at 2.50.32 PM. Further drawing attention towards revisionary order dated 18.03.2021 operative para 3 submitted that the Ld. PCIT while passing order on 18.03.2021 did not acknowledge and adjudicated the adjournment application dated 15.03.2021 of assessee and wrongly noted that none attended on the of hearing and no request for adjournment was made through personal appearance/telephone. The Ld. ASSESSMENT ORDER also reiterated that in view of several orders of co-ordinate Benches of ITAT the Ld. PCIT is not valid by invoke provision of sec 263 of the Act on the issue which was not an issue or aspect before the AO in the limited scrutiny proceedings or beyond the scope of issues picked up for limited scrutiny.
The learned AR vehemently pointed out that the Ld. PCIT mentioned wrong facts in passing ex-parte order qua assessee Page 7 of 11 despite the fact that assessee filed adjournment application on 15.03.2021 but the Ld. PCIT ignored the same and passed impugned revisionary order on 18.03.2021 without allowing any second or further opportunity of hearing to the assessee. The learned AR, therefore, submitted that the revisionary order on this count only deserves to be quashed being unsustainable and passed in violation of principles of natural justice.
On careful consideration of rival submissions we are in agreement with the contention of the learned AR that the Ld. PCIT issued notice u/s. 263 of the Act on 01.03.2021 fixing the date of hearing on 15.03.2021and the assessee sought adjournment by way of filing application dated 15.03.2021 which was send to the Ld. PCIT through his official email id on 15.03.2021 at 2.50.32 PM. Therefore we declined to except contention of the Ld. PCIT that the assessee did not appear and also not filed any adjournment application. The Ld. PCIT without allowing any second opportunity or second date of hearing to the assessee proceeded to make ex-party order against the assessee. We, therefore, are of the considered view that the Ld. PCIT has passed impugned revisionary order dated 18.03.2021 u/s. 263 of the Act revising the limited scrutiny assessment order dated 26.12.2018 passed u/s. 143(3) of the Act for A.Y. 2016-17 in violation of principles of natural justice.
On careful consideration of the rival contention and perused of the material available on the record, we are of the considered view that the Ld. PCIT invoked revisionary provisions of sec 263 of the Act on two grounds/issues viz. Cash paymend of Rs. 20,00,000/- and increase in the capital of assessee. The issue of rent of Rs. 20,00,000/- was not an aspect or issue before the A.O. and this issue was out of ambit of four issue picked up by the AO for limited scrutiny. On the issue of increase in capital of assessee the AO made due and sufficient enquiry and thereafter, made addition in the hands of assessee thus, we decline to accept basis and Page 8 of 11 allegation noted in the impugned revisionary order that the AO has not made enquiry on this issue. Therefore, the Ld. PCIT was not correct in holding that the assessment order is erroneous and prejudicial to the interest of Revenue. Our conclusion also gets strong support from the orders of co-ordinate Benches of Tribunal, as relied by the Ld. AR, in the case of Sahita Construction Company vs PCIT (supra), Tej Paul Bharadwaj vs. PCIT (supra) and Balvinder Kumar vs. PCIT (supra). The relevant paras of ITAT order in the case of Sahita Construction Company (supra)are as under:- 10. In the above referred decision Tribunal has held that when the assessment is taken up for limited scrutiny, Ld. Pr. CIT/CIT cannot hold the assessment order as erroneous and prejudicial to the interest of revenue in respect of issue which was not a reason for selection of the case for limited scrutiny. Similar view also taken in the following decision: (i) The Deccan Paper Mills Co. Ltd. v. CIT [1013 & 1035/Pun/2014 - order dated 10.10.2017], ITAT Pune Benches. (ii) M/s.Aggarwal Promoters v. Pr.CIT [1708/Chd/2017 - order dated 16.04.2019] ITA Chandigarh Benches. (iii) Sanjeev Kr. Khemka v. Pr.CIT [1361/Kol/2016 - order dated 02.06.2017] ITAT Kolkata Benches. (iv) M/s. R & H Property Developer Pvt.Ltd. v. Pr.CIT [1906/Mum/2019 - order dated 30.07.2019] ITAT Mumbai Benches. (v) Mrs.Sonali Hemant Bhavsar v. Pr.CIT [742/Mum/2019 - order dated 17.05.2019] ITAT Mumbai Benches.
11. We, therefore, respectfully following the judicial precedents and the finding of Coordinate Bench Delhi in the case of Rakesh Kumar (supra) hold that Ld. Pr. CIT erred in assuming revisionary powers u/s 263 of the Act. The impugned order of Ld. Pr. CIT is quashed. Thus in our considered view assessment order dated 11.09.2017 u/s 143(3) of the Act is neither
Page 9 of 11 erroneous nor prejudicial to the interest of revenue and the same is restored. All the grounds raised by the assessee are allowed.
12. Further in the case of Tej Paul Bharadwaj vs. PCIT (supra) (supra) the relevant paras of ITAT order are as under:-
14. Admittedly, the case of the assessee was selected for limited scrutiny under CASS for the reason that there is substantial increase in the capital in the relevant year and the AO passed the assessment order and accepted the return filed by the assessee after examining the issue regarding increase in capital account as the assessee had credited his capital account with agricultural income of Rs. 2,47,500/- and the capital gain amounting to Rs. 54,56,000/-from sale of flat. The assessee has reflected that same in its capital account, copy of which is available at page 2 of the paper Book. Further in response to the letter dated 07.10.2016 issued by the AO during assessment proceedings, the assessee submitted his reply explaining the reason for increase in capital. The copy of reply is available at page 7 to 9 of the paper book filed by the assessee. However, the Ld. Pr. CIT exercising jurisdiction under section 263 of the Act, directed the AO to make fresh assessment on the issues which were not the subject matter of the limited scrutiny. Since, the issue raised by the assessee in this case has already been decided in favour of the assessee by the various Benches of the Tribunal discussed above, we find merit in the contention of the Ld. Counsel for the assessee that the Ld. Pr. CIT(A) has exceeded jurisdiction u/s 263 of the Act by directing the AO to make fresh assessment on the issues which were not the subject matter of the assessment framed on the basis of limited scrutiny. Further, no contrary decision was brought to our notice by the Ld. DR. Hence, respectfully following the decisions of the Tribunal discussed in the foregoing paras, we allow the appeal of the assessee and set aside the impugned order passed by the Ld. Pr. CIT u/s 263 of the Act.
Page 10 of 11 13. In view of foregoing, we reach to a logical conclusion that notice dated 01.03.2021 and passed by Ld. PCIT u/s. 263 of the Act dated 18.03.2021 are not sustainable being not valid and bad in law thus we quash the same. Consequently, assessment order dated 26.12.2018 for A.Y. 2016-17 is restored