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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS. SUCHITRA KAMBLE & SHRI B.M. BIYANI
आदेश/O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by revision-order dated 19.03.2021 passed by learned Pr. Commissioner of Income-Tax-1, Bhopal [“Ld. PCIT”] u/s 263 of Income-tax Act, 1961 [“the Act”], which in turn arises out of assessment-order dated 16.06.2017 passed by learned ACIT-2(1), Bhopal [“Ld. AO”] u/s 143(3) for Assessment-Year [“AY”] 2015-16, 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.
M.P. Warehousing & Logistic Corporation Assessment year 2015-16 3. The registry has informed that the present appeal is filed after a delay of 6 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.
4. Briefly stated the facts are such that the case of assessee of relevant AY 2015-16 was subjected to scrutiny proceedings and the Ld. AO passed assessment-order u/s 143(3) whereby the total income was assessed at Rs. 16,33,93,930/-. Subsequently, 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 the show-cause notice dated 01.03.2021, is such that the Ld. AO has not made these disallowances while passing assessment-order which were required to be made, namely (i) prior period expenses amounting to Rs 68,42,720/-; (ii) Belated payment of provident funds amounting to Rs 3,92,64,279/- u/s 36(1)(va); (iii) Provision for payment of gratuity of Rs. 5,11,77,913/-; (iv) Payments of Rs. 5,76,70,528/- inadmissible u/s 43B; and (v) Provision for bad and doubtful debts of Rs 3,64,88,955/-.
5. 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 filed a written submission dated 18.03.2021.
However, none of those submissions impressed the Ld. PCIT. The Ld. PCIT further observed that since the section 263 has been amended and M.P. Warehousing & Logistic Corporation Assessment year 2015-16 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 Ld. PCIT concluded that there was a complete lack of enquiry on the part of AO; therefore the assessment-order is erroneous in so far as it is prejudicial to the interest of revenue. Accordingly, he passed revision-order u/s 263 whereby the assessment-order was set aside and AO was directed to re-do assessment.
Aggrieved by such revision-order, the assessee has filed this appeal.
By means of various grounds raised in 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?
Ld. AR straightaway carried us to a Paper-Book dated 20.03.2023 (running over 81 pages) and a Written-Submission dated 14.03.2023 (running over 6 pages + annexures consisting of 13 pages enclosed thereto) filed by him. Referring to various documents placed therein, Ld. AR submitted that the revisionary-action undertaken by Ld. CIT(A) is totally illegal and against the mandate of section 263 which is very much clear from following facts/evidences:
M.P. Warehousing & Logistic Corporation Assessment year 2015-16 (i) Firstly, Ld. AR carried us to Page No. 1 of the annexure to Written- Submission dated 14.03.2023 which is actually a draft-letter dated 01.03.2021 put up by lower-authorities before Ld. PCIT. This draft- letter is scanned below:
M.P. Warehousing & Logistic Corporation Assessment year 2015-16
Ld. AR submits that a bare reading of this draft-letter reveals that it is the lower-authorities who have usurped the power of PCIT and recommended a revision; the Ld. PCIT has himself not called for/ examined the record of assessment-proceeding as required by section 263. Ld. AR submits that the revision-action has triggered with the lower-authorities sending a proposal to Ld. PCIT and then the later passing the order u/s 263 on the basis of such a proposal; therefore it is a clear-cut case of jurisdiction-deficit resulting into vitiating the impugned order. Ld. AR submitted that the present case is squarely covered by decision of Hon’ble ITAT, Pune Bench in the case of Alfa Laval Lund AB Vs. CIT(IT/TP) Pune, order dated 02.11.2021 wherein, on identical facts, the revision was held to be illegal and quashed.
(ii) Secondly, Ld. AR submits that out of five items of disallowances alleged by Ld. PCIT in the show-cause notice, as many as four items have been falsely mentioned. Ld. AR submits that the assessee has debited “prior period expenses” of Rs. 68,42,720/- to Profit & Loss Appropriation A/c and not to Profit & Loss A/c (Page No. 16 to 17 of the Paper-Book); thus no deduction was in fact claimed by assessee, hence no disallowance is required. Then, Ld. AR carried us to Page No. 43 & 44 of the Paper-Book, where a copy of Form No. 3CD (Tax Audit Report) submitted by assessee is placed on record. Referring to item no. 20(b) therein, Ld. AR demonstrated that the “due dates” and “actual dates of payments” mentioned by auditors clearly reveal that the entire contribution of Rs. 3,92,64,279/- on account of employee’s contribution to Provident Fund had been paid before the due dates prescribed under the Provident Fund Act and there was no delay in payment as alleged by Ld. PCIT; thus no disallowance was required u/s 36(1)(va). Then, the Ld. AR carried us to Page No. 13 of the Paper-
M.P. Warehousing & Logistic Corporation Assessment year 2015-16 Book where a copy of the Computation of Taxable Income is placed which clearly reveal that the assessee had voluntarily disallowed a sum of Rs. 5,11,77,913/- in respect of gratuity provision. Then, Ld. AR submitted that there is no detail as to how the Ld. PCIT has made a conclusion that a sum of Rs. 5,76,70,528/- was inadmissible u/s 43B. Thus, Ld. AR submits, it is quite apparent without saying anything that the Ld. PCIT has not examined the record of assessment, much less consideration thereof, and accorded approval in a mechanical manner without application of mind.
Finally, Ld. AR argued that the revision-proceeding conducted in such a manner is not in accordance with the law of section 263 and deserves to be quashed.
Per contra, Ld. DR placed heavily reliance upon the action of Ld. PCIT.
We have considered rival submissions of both sides and perused the case records in the light of provision of section 263 and the judicial decision placed before us. After a careful consideration, we find that in the present case, the revision-action had been taken by Ld. PCIT on the basis of a proposal mooted by lower-authorities and not on the basis of his own examination and consideration of the record. Therefore, the present case is directly governed by decision of ITAT, Pune Bench (supra) in which revision action in such a manner was held to be illegal and quashed. The relevant paragraphs of the decision are reproduced below:
“3. We have heard both the sides through Virtual Court and gone through the relevant material on record. It can be seen from para 4 of the ld. CIT‟s order that: "A proposal for revision u/s 263 of the IT Act, 1961 was received from DCIT(IT)-1, Pune through the Jt.CIT(IT), Pune vide letter No. Pn/Jt.CIT(IT)/ 263/2016-17/61 dated 23.05.2016". It is thus manifest that the edifice of the revision in the extant case has been laid on the bedrock of receipt of the proposal from the AO. At this stage, it would be worthwhile to have a glance at sub-section (1) of section 263 of the Act, which runs as under:- "The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order
M.P. Warehousing & Logistic Corporation Assessment year 2015-16 passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he, may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment."
Sub-section (1) of section 263 of the Act is an enabling provision which confers jurisdiction on the CIT to revise an assessment order which he considers erroneous and prejudicial to the interests of revenue. The process of revision u/s 263 of the Act initiates only when the CIT calls for and examines the record of any proceeding under this Act and considers that any order passed by the AO is erroneous and prejudicial to the interests of the revenue. The twin conditions of - (i) the CIT calling for and examining the record; succeeded by (ii) his considering the assessment order as erroneous etc. - are sine qua non for the exercise of power under this section. The use of the word `and' between the expression `call for and examine the record ....‟ and the expression `if he considers that any order ... is erroneous ...‟ abundantly demonstrates that both these conditions must be cumulatively fulfilled by the CIT and in the same order, that is, the first followed by the second. In other words, the kicking in point for invoking jurisdiction u/s 263 is calling for and examining the record of any proceedings under the Act by the CIT leading him to consider the assessment order erroneous etc. A communication from the AO is not `the record of any proceedings under this Act'. To put it simply, the consideration that the assessment order is erroneous and prejudicial to the interests of the revenue should flow from and be the consequence of his examination of the record of proceedings. If such a consideration is not preceded by the examination of record of the proceedings under the Act, the condition for revision does not get magnetized.
It is trite that a power which vests exclusively in one authority, can’t be invoked or cause to be invoked by another, either directly or indirectly. Section 263 of the Act confers power on the CIT to revise an assessment order, subject to certain conditions. Instantly, we are confronted with a situation in which the revision was initiated on the basis of the AO sending a proposal to the CIT and not on the CIT suo motu calling for and examining the record of the assessment proceedings and thereafter considering the assessment order erroneous and prejudicial to the interests of the revenue. The AO recommending a revision to the CIT has no statutory sanction and is a course of action unknown to the law. If AO, after passing an assessment order, finds something amiss in it to the detriment of the Revenue, he has ample power to either reassess the earlier assessment in terms of section 147 or carry out rectification u/s 154 of the Act. He can‟t usurp the power of the CIT and recommend a revision. No overlapping of powers of the authorities under the Act can be permitted. As the revision proceedings in this case have triggered with the AO sending a proposal to the ld. CIT and then the latter passing the order u/s 263 of the Act on the basis of such a proposal, we hold that it became a case of jurisdiction deficit resulting into vitiating the impugned order. Without going into the merits of the case, we quash the impugned order on this legal issue itself.
M.P. Warehousing & Logistic Corporation Assessment year 2015-16
6. In the result, the appeal is allowed.” 14. We also find a strong weightage in the submission of Ld. AR that out of five items of disallowance mentioned by PCIT, at least four items were such which did not require any disallowance and still Ld. PCIT has alleged in his show-cause notice. Thus, it is quite manifest that the Ld. PCIT has given approval as a mere formality, merely on the basis of proposal of lower- authorities and without examination/consideration of records.
Clearly therefore, the revision-action undertaken in the present case is not in accordance with the requirement/mandate of section 263. Therefore, we are inclined to quash such revision-order and restore the original assessment-order. Ordered accordingly.
Resultantly, this appeal of assessee is allowed.
Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 31 /03/2023 Order pronounced in the open court on ….../……/2023