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Income Tax Appellate Tribunal, “PATNA” BENCH, PATNA
Before: SHRI SONJOY SARMA, HON’BLE & SHRI GIRISH AGRAWAL, HON’BLE
IN THE INCOME TAX APPELLATE TRIBUNAL “PATNA” BENCH, PATNA [THROUGH VIRTUAL COURT] BEFORE SHRI SONJOY SARMA, HON’BLE JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, HON’BLE ACCOUNTANT MEMBER ITA No.184/Pat/2018 Assessment Year: 2013-14 M/s. Aditya Futuristic Trading CIT-1, Patna Pvt. Ltd. C/o. Nirmal & Associates, Chartered Accountants, Nepali Vs. Kothi, Opp. Gasoline Petrol Pump. Boring Road, Patna – 800001. [PAN: AAECA 9085 E] (Appellant) (Respondent) Present for: Assessee by : Shri Nishant Maitin, CA Revenue by : Smt. Rinku Singh, CIT/DR Date of Hearing : 13.12.2022 Date of Pronouncement : 22.12.2022 O R D E R PER SONJOY SARMA, JM: This is an appeal preferred by the assessee against the order of ld. PCIT-1, Patna dated 23.03.2018 u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The assessee has taken the following grounds of appeal: “i. For that the grounds hereto are without prejudice to each other. ii. For that the order passed by ld. Commissioner of Income-tax-1, Patna is bad both in law and on facts. iii. For that the order passed by ld. Commissioner of Income-tax-1, Patna is based on presumption, surmise and conjectures. iv. For that the ld. Commissioner of Income-tax-1, Patna passed the order ignoring the fact that all the points which were raised in the notice had duly been examined by the ld. AO.
2 ITA No.184/PAT/2018 M/s. Aditya Futuristic Trading Pvt. Ltd. A.Y. 2013-14 v. For that the order passed by ld. Commissioner of Income-tax-1, Patna is wholly perverse in as much as the same are contrary to and at variance with the material available on record. vi. For that in any view of the matter the order passed by ld. Commissioner of Income-tax-1, Patna to the extent as aforesaid is bad and therefore fit to be set aside. vii. For that other various grounds which may be urged at the time of hearing.”
From the perusal of the grounds raised by the assessee, we find that the solitary grievance of the assessee is that the ld. PCIT erred in invoking the revisionary jurisdiction without satisfying the condition precedent laid down u/s 263 of the I.T. Act without validly held that the ld. Assessing Officer (in short ‘AO’) order is erroneous as well as prejudicial to the interest of the revenue.
Brief facts of the case are that the assessee-company is engaged in running and operating of Amway Distribution Channel and it has filed its return of income for the assessment year 2013- 14 on 28.09.2013 declaring total income of Rs. 2,32,360/-. The return of the assessee was processed u/s 143(1) of the Act. The case of the assessee was selected manually for scrutiny. Notices u/s 143(2) and 142(1) were issued to the assessee time to time by the ld. AO. In response to such notice, the ld. AR appeared and submitted various written submissions as well as bills and vouchers in compliance to such notice issued by the AO and the ld. AO, framed an assessment order on 21.03.2016 u/s 143(3) of the Act by which the total income of Rs. 2,32,360/- in the hands of the assessee. Subsequently, the ld. PCIT on perusal of the aforesaid assessment order and records of the assessee, he observed that while framing the assessment order, an amount of
3 ITA No.184/PAT/2018 M/s. Aditya Futuristic Trading Pvt. Ltd. A.Y. 2013-14 Rs. 23,47,428/- relating to loss of sale of assets was deducted from gross revenue receipt of Rs. 45,71,790/- and the ld. AO did not call for any explanation from assessee on this issue as he found from the assessment record. Therefore, the ld. PCIT viewed that the issue has not been examined properly during the course of assessment proceedings and the assessment order passed by the ld. AO without proper application of mind and by not doing so, the ld. AO has dealt with the matter superficially without making proper enquiry. Therefore, the order passed by the ld. AO considered erroneous and prejudicial to the interest of revenue. Accordingly, ld. PCIT in exercise of his power u/s 263 of the I.T. Act proposed to make an order u/s 263 of the Act. Before passing such order, the ld. PCIT issued notice upon the assessee and in response to such notice, the ld. AR of the assessee appeared and submitted his submission and considering the submission of the assessee, the ld. PCIT viewed that no details of break-up of service charges and reimbursement of charges along with amortization of assessments for executing the such service was filed by the assessee before the ld. AO and on perusal of the assessment record also, the ld. PCIT found that the Assessing Officer has not obtained detailed of cost of assets at Rs. 23,47,428/- and after examining all the issues, the ld. PCIT observed as under: “In view of the above discussion, I am satisfied that in this case Assessing Officer has failed to examine the details of loss of assets as evident from depreciation chart and to determine the issue of deductibility of the same against the Gross Revenue Receipt (GRP). The failure of the Assessing Officer to conduct necessary enquiry and investigation to determine the nature of loss on capital assets
4 ITA No.184/PAT/2018 M/s. Aditya Futuristic Trading Pvt. Ltd. A.Y. 2013-14 as well as the amount being deductible against Gross Receipt has made the order of Assessing Officer erroneous and to that extent prejudicial to the interest of the revenue. The issue of allowability of deduction of Rs. 23,47,428/- in respect of loss of business assets is set aside and restored to the file of AO. The Assessing Officer is directed to conduct necessary investigation after calling the details in regard to assets, their ownership and sale of write off, if any, and determine the allowability of deduction of this amount against the Gross Revenue Receipt.”
Aggrieved by the above order passed by the ld. PCIT, the assessee is in appeal before this Tribunal, the ld. Counsel for the assessee reiterated the submission which was made before the ld. PCIT during the revisionary proceeding to substantiate his claim and he has filed a paper book dated 16.07.2022 containing almost 60 pages to prove the fact that the ld. AO has examined the alleged issues while framing the assessment order.
Per contra, the ld. vehemently argued in support of the order passed by the ld. PCIT.
We have heard the rival contention and perused the record placed before us. The assumption of jurisdiction u/s 263 of the Act by the ld. PCIT has been challenged before us by the assessee. Before we advert to the facts and law involved in this issue before us, let us revisit the law governing the issue before us. The assessee has challenged first place the very jurisdiction by the ld. PCIT to invoke his revisionary power enjoyed u/s 263 of the Act. The revisional jurisdiction is exercising in the case before the ld.
5 ITA No.184/PAT/2018 M/s. Aditya Futuristic Trading Pvt. Ltd. A.Y. 2013-14 PCIT rightfully exercise his revisionary power and we have to examine as to whether the order passed by the ld. Assessing Officer found fault by the ld. PCIT is erroneous as well as prejudicial to the interest of revenue. For this purpose, let us take the help of the judicial precedence laid down by the Hon’ble Apex Court in the case of Malabar Industries Ltd. vs CIT (2000) 243 ITR 83 (SC) wherein their lordship held that twin conditions need to be satisfied before exercising revisionary jurisdiction u/s 263 of the Act by the ld. PCIT. The twin conditions are that the ld. AO’s must be erroneous in so far as prejudicial to the interest of the revenue. In the following circumstances of the order of the ld. AO can be held to be erroneous order i.e. (i) if the ld. AO’s order was based on incorrect assumption of fact or (ii) incorrect application of law, or ld. AO’s order is in violation of principles of natural justice or (iv) if the order is passed by the ld. AO without application of mind (v) if the ld. AO has not investigated issue before him (because AO has to discharged dual roll of an investigator as well as that of adjudicator) then in the aforesaid any event the order passed by the ld. AO can be termed as erroneous order. Coming to the second limb which is required to be examined as to whether the action of AO can be termed as prejudicial to the interest of revenue when this aspect is examined one has to understand what is prejudicial to the interest of revenue. The Hon’ble Supreme Court in the case of Malabar Industries Ltd. (supra) held that this phrase i.e. “prejudicial to the interest of revenue” as to read in conjunction with erroneous order passed by the ld. AO. Their lordship held it has to be remembered that every loss of revenue as a
6 ITA No.184/PAT/2018 M/s. Aditya Futuristic Trading Pvt. Ltd. A.Y. 2013-14 consequence of an order of ld. AO cannot be treated as prejudicial to the interest of revenue when the ld. AO adopted one of the courses permissible in law and has resulted in loss to the revenue or where two views are possible and the ld. AO has taken one view with which the ld. PCIT does not agree, it cannot be treated as erroneous and is prejudicial to the interest of revenue unless the view taken by the ld. AO is unsustainable in law. Keeping in view, the aforesaid judicial position of law in mind, we noticed that the ld. PCIT has alleged that Assessing Officer has failed to examine the details of loss of assets as evident from depreciation chart and to determine the issue of deductibility of the same against the gross revenue receipt. We further find that the ld. AO while completing the assessment order u/s 143(3) of the Act did not examine the issue of deductibility of loss of assets from the depreciation chart and nowhere discuss the issue in the assessment order and same is read as under: “The assessee Co. is engaged in running/operating of Amway Distribution Channel, it has filed e-return of income for the A.Y. 2013-14 on 28.09.2013 declaring total income at Rs. 2,32,360/-. The return was processed u/s 143(1) of I.T. Act. The case was selected Manually for scrutiny. 2. In this case, notice u/s 143(2) has been issued by the erstwhile AO on 30.09.2014. The present AO after taking over the charge has issued notice u/s 142(1) on 29.05.2015. In response, Shri Nishant Maitin, FCA & AR of the assessee appeared from time to time and filed written submissions, bills & vouchers confirmation of loans etc., produced at the time of hearing have been examined on test check basis. Assessed u/s 143(3) of the I.T. Act 1961 at a total income of Rs. 2,32,360/-. Give credit to prepaid taxes/TDS after verification. Charge interest u/s 234A, 234B and 234C of I.T. Act, if any, issue D.N. & challan accordingly.”
7 ITA No.184/PAT/2018 M/s. Aditya Futuristic Trading Pvt. Ltd. A.Y. 2013-14
Under this given facts and circumstances of the case, where the issue raised in show cause notice has not been examined properly by the ld. AO during the course of assessment proceeding. Therefore, we viewed that the revisionary order passed by the ld. PCIT u/s 263 of the Act is not perverse. In the present circumstances of the case and from perusal of the various documents and examining the orders of the authorities below, we find that since the ld. AO has not endeavour to applied his mind on the issue and examine the facts properly therefore we agree with the findings of the ld. PCIT by which setting aside the assessment order. Thus, the ld. PCIT has rightly observed/held that the order of AO u/s 143(3) of the Act is erroneous and prejudicial of the interest of the revenue. We, therefore, find no infirmity in the impugned order passed u/s 263 of the Act by setting aside the assessment order dated 21.03.2016 and directing the ld. AO to frame the assessment afresh after considering observation/findings of the ld. PCIT. Thus, all the grounds of appeal raised by the assessee are dismissed.
In the result, the appeal of the assessee is dismissed. Order pronounced in the open court on 22.12.2022. Sd/- Sd/- (GIRISH AGRAWAL) (SONJOY SARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Kolkata, Dated: 22.12.2022. Biswajit, Sr. P.S.
8 ITA No.184/PAT/2018 M/s. Aditya Futuristic Trading Pvt. Ltd. A.Y. 2013-14
Copy to: 1. The Appellant: M/s. Aditya Futuristic Trading Pvt. Ltd. 2. The Respondent: CIT-1, Patna. 3. The CIT, Concerned, Patna 4. The CIT (A) Concerned, Patna 5. The DR Concerned Bench
//True Copy// [ By Order
Assistant Registrar ITAT, Kolkata Benches, Kolkata