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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL,
Before: ARUN KHODPIA & ARUN KHODPIA & ARUN KHODPIA
IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE BEFORE S/SHRI GEORGE MATHAN, JUDICIAL JUDICIAL MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.252/CTK/2020 Assessment Year : 2016-17
M/s. Bishandayal Jewellers , M/s. Bishandayal Jewellers , Vs. Pr. CIT(Central), Hyderabad Pr. CIT(Central), Hyderabad Nayasarak, Cuttack Nayasarak, Cuttack PAN/GIR No. PAN/GIR No.AAHFB 3298 C (Appellant (Appellant) .. ( Respondent Respondent) Assessee by : Shri S.K.Sarangi, CA S.K.Sarangi, CA Revenue by : Shri M.K.Gautam, CIT : Shri M.K.Gautam, CIT DR Date of Hearing : 23 /9 9/2022 Date of Pronouncement : 23/9 9/2022 O R D E R Per Bench This is an appeal filed by the assessee against the order of the ld This is an appeal filed by the assessee against the order of the ld This is an appeal filed by the assessee against the order of the ld Pr. CIT, Hyderabad CIT, Hyderabad dated 24.3.2020 in No. ITBA/COM/F/17/2019 ITBA/COM/F/17/2019- 20/1026882934(1) passed u/s.263 of the 20/1026882934(1) passed u/s.263 of the I.T.Act, 1961 I.T.Act, 1961 for the assessment year 2016-17. 17.
Shri S.K.Sarangi, Shri S.K.Sarangi, CA appeared for the assessee and Shri CA appeared for the assessee and Shri M.K.Gautam, ld CIT DR appeared for the revenue. M.K.Gautam, ld CIT DR appeared for the revenue.
The appeal is time barred by 196 days. The assessee has filed The appeal is time barred by 196 days. The assessee has filed The appeal is time barred by 196 days. The assessee has filed condonation petition dated 4.12.202 condonation petition dated 4.12.2020 alongwith affidavit stating the reason 0 alongwith affidavit stating the reason for delay in filing the appeal or delay in filing the appeal that the order u/s.263 of the Act of the Pr. CIT that the order u/s.263 of the Act of the Pr. CIT
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was served on the assessee in E-filing portal on 24.3.2020 and there is no service of the above order by post/physical delivery. It is stated that due to lockdown imposed by the Central Government/State Government for COVID-19 pandemic situation, there was complete closure of office/cum/business premises of the assessee during the period March and April, 2020. Therefore, the delay in filing was unintentional. Ld A.R. at the time of hearing reiterated the submissions stated in the petition and requested for condoning the delay. Ld CIT DR did not oppose the request of ld A.R of the assessee. In view of above, we condone the delay of 196 days in filing the appeal and admit for hearing.
It was submitted by ld AR that the assessee is a jeweller, who is engaged in the business of manufacturing and trading in jewellery, precious and semi-precious stones. It was the submission that there was a search and seizure operation at the premises of the assessee on 9.12.2015. As a consequence to the search, the assessment came to be completed u/s.143(3) on 29.12.2017, where the income of the assessee is determined at Rs.4,04,73,980/- as against the returned loss of Rs.25,37,276/-. It was the submission that the additions had been made under the head “undisclosed investment in silver stock”, “undisclosed investment in stock”, “undisclosed sale” and “disallowance u/s.69A” of the Act. It was the submission that the assessment was subject matter of appeal before the ld CIT(A)-1, Bhubaneswar and the ld CIT(A) had given relief to the assessee
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to the extent of Rs.4,06,82,567/-. Thus, as against the loss of Rs.25,37,276/-, after giving effect to the order of the ld CIT(A), the loss was determined at Rs.2,08,586/-. It was the submission that the Revenue has filed appeal before the ITAT against the said order of the ld CIT(A). It was the submission that the Pr. CIT, Hyderabad issued a show cause notice on 27.2.2020 u/s.263 of the Act for revising the assessment order passed u/s.143(3). The assessee had replied to the Pr. CIT vide letter dated 16.3.2020 submitting that the AO in the course of assessment has considered all the issues. The Pr. CIT, Hyderabad on the ground that there was a difference between the admitted income and the income estimated by the Investigation Wing and income disclosed in the return of income, observed that the difference should have been sorted out by conducting joint meeting between the Investigation Wing and the AO as per the procedure laid down in the CBDT Instruction No.F.286/161/2006-IT(Inv.II) dated 22.12.2006. The Pr. CIT has extracted part of the instruction in his order. It was the submission that by relying upon the clause (c) of the Explanation 2 to Section 263 as has been extracted by the Pr. CIT in his order treated the assessment order passed u/s.143(3) as erroneous and prejudicial to the interest of the Revenue and consequently, he set aside the impugned assessment order with a direction to redo the assessment taking into consideration of the observation in regard to closing stock and to follow the CBDT Instruction while reframing the assessment order. It was the
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submission by ld AR that the AO in pages 2 to 37 of the assessment order has extracted the appraisal report of the investigation wing. Pages 42 to 44 are the show cause notice issued on the assessee, pages 44 to 45 are the reply of the assessee to the show cause notice and page 46 is the addition. It was the submission that thus, clearly, the AO has followed the appraisal report issued by the Investigation Wing. It was the further submission that the AO has made addition in respect of undisclosed investment in stock. It was the submission that the issue of undisclosed investment in the stock was the subject matter of appeal before the ld CIT(A) and the ld CIT(A) has adjudicated on the issue in depth and has deleted the same. It was the further submission that another reason for the deletion of the addition made by the AO following the appraisal report was that the assessment order pages 2 to 37 was nothing but a copy of the appraisal report. It was the submission that the issues having been considered by the AO and the AO having complied with the additions, as proposed in the appraisal report, the revision u/s.263 is liable to be set aside.
In reply, ld CIT DR submitted that as the Assessing officer has not given complete weightage to the appraisal report, the Pr. CIT was right in invoking clause (c) of explanation -2 to section 263 to hold that the assessment order passed u/s.143(3) was erroneous and prejudicial to the interest of the revenue. It was the submission that the additions as
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proposed in the appraisal report has not been done by the AO. It was the submission that the order of the Pr. CIT is liable to be upheld.
We have considered the rival submissions. At the outset, a perusal of the assessment order passed u/s.143(3) of the Act clearly shows that the Assessing Officer himself has mentioned in para 4 page 2 that the appraisal report is extracted. Upto page 37 of the assessment order, admittedly it is an extract of the appraisal report. Further, the Revenue has not been able to show as to which portion of the appraisal report, the Assessing officer has not complied with. Mere allegation that the AO has not followed the appraisal report would not hold water.
Coming to the clause (c) of the Explanation 2 to Section 263, the order or direction or instruction, which is referred therein, are those issued by the CBDT u/s.119. A perusal of the said instruction shows that this is practically a search and seizure manual notification. It is an internal communication being guidelines for the notice of the Commissioner of Income tax, Range Head and the AO handling the assessment of search and seizure cases. This notification is not one which has been issued u/s.119 of the Income tax Act, 1961. For the purpose of brevity, the first page of the Notification as also the last page of the Notification is being extracted alongwith this order, as under:
Page-1
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“APPNEDIX - V 155
ANNEXURE – 92
Date of Issue: 22.12.2006 Subject: Search and Seizure Assessments F. No. 286/161/2006-IT (Inv. II) Search and Seizure Assessments : The Board has examined the existing mechanism followed in assessments relating to search and seizure cases and has decided to frame general guidelines which would enable Assessing Officers to enhance the quality of such assessments and bring uniformity in the work relating thereto. The guideline, which is elaborated in the following paragraphs, is aimed at laying down prescribed time bound action at various stages in the assessment proceedings. 1. First Stage: From receipt of Appraisal Report to filing of Return. 1.1 It is necessary in search assessments that the Assessing Officer is acquainted with the appraisal report and the seized material before he takes up the assessments of the case. 1.2 The appraisal report is expected to be received within 60 days of the search. Any delay in receipt of the appraisal report must be brought to the notice of the concerned CIT(Central) by the Assessing Officer who may pursue the case with the DIT(Inv.) concerned. The DDIT(lnv.)/ ADIT(lnv.) should hand over the seized material to the Assessing Officer (before whom the cases get centralised) within a week of sending the Appraisal Report. 1.3 On receipt of the appraisal report and seized material, the Assessing Officer and Range Head should jointly scrutinize the appraisal report and seized material and prepare an Examination Note to decide: i. Cases where notices u/s 153A of the Income- tax Act, 1961 (the Act) are required to be issued. ii. Cases where notices u/s 153C of the Act are required to be issued. iii. Cases where notices u/s 148 of the Act are required to be issued. iv. Cases where seized material pertains to persons other than those whose cases have been centralised. 1.4 If necessary, confirmation may be obtained from the investigation wing for matching the names of entities as appearing in the warrant of authorisation as against the names appearing in the Panchnama prepared at the time of conclusion of search.
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1.5 An action note, based on a comprehensive and methodical examination of seized material, in addition to the comments available in the appraisal report, must be prepared within 90 days of receipt of the seized material… Last page: APPNEDIX - V is apprehended that the assessee will go in appeal or to the Settlement Commission. This exercise also helps in identification of the seized material which can be released to the assessee. 4.3 On completion of assessment proceedings, immediate action should be taken for retention of books, as per law, where considered necessary. Books of accounts not used in assessment and having no investigation ramification can be considered for release with the approval of the CIT. While sending recommendations for release of books/documents the following must be ensured: i. Audit (Internal & Revenue) of the cases are completed. ii. No action u/s 263/145/154 is pending. iii. No set aside assessment is pending. . iv. No external agency like CBI/ED/DRI etc. has requisitioned the seized material. If there is a likelihood of such requisition in future, it must be indicated whether a reference has been made to them. v. Prosecution has not been launched nor is it proposed. 4.4 Often seized assets are released against a bank guarantee furnished by the assessee. The bank guarantee has limited validity and needs to be renewed from time to time. A register should be maintained for the purpose, indicating the validity of the bank guarantee, to ensure proper renewal. 4.5 Cash deposited in the PD Account should be applied and adjusted in accordance with Board’s Instruction No. 11/2006 dated 1.12.2006. 4.6 A register has been prescribed in the Manual of Office Procedure, Volume-II, (Technical) issued by the Directorate of Income Tax (O&MS) in 2003 at page 40 indicating the report and registers that are required to be sent to or maintained by the Range Heads. This register is to be maintained in all Central charges. In view of the changes in the Act, a revised format is given as ‘Annexure-1’. 5. The DGsIT(lnv.)/CCsIT(Central) should hold seminars at the beginning of the calendar year for orienting the Assessing Officers with the guidelines and also to discuss various issues relating to search and seizure assessments. 6. These guidelines may be brought to the notice of all Commissioners of Income Tax, Range Heads and Assessing Officers handling assessments of search and seizure cases.
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Normally, when the Board issues any specific direction u/s.119, it is mentioned that such a direction of circular/order or notification is issued u/s.119. Thus, on this ground itself, the order passed u/s.263 is liable to annulled and we do so.
Another issue which comes up to our notice is that the assessment order passed u/s.143(3) for the impugned assessment year has been subject matter of appeal before the ld CIT(A). In the order of the ld CIT(A), the issue of the stock valuation has already been considered. The ld CIT(A) has also taken cognizance of the fact that pages 2 to 37 of the assessment order is nothing but extract of the appraisal report. This being so, in view of the provisions of Explanation -1 (c) of Section 263 (1), as the order passed by the AO had been the subject matter of appeal filed after the 1st day of June, 1988, the powers of the Pr. CIT u/s.263(1) could extend only to such matters as had not been considered and decided in the appellate order. Both the issues proposed by the pr. CIT was subject matter and has been under the consideration of the ld CIT(A) and the Pr. CIT has also recognized that the ld CIT(A) has adjudicated the appeal and he has also passed his order on 14.10.2019 much before the show cause notice has been issued by the Pr. CIT. Thus, on this ground also, the order passed u/s.263 is unsustainable and same stands quashed.
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In the result, appeal of the assessee stands allowed.
Order dictated and pronounced in the open court on 23/9/2022.
Sd/- sd/- (Arun Khodpia) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 23/9/2022 B.K.Parida, SPS (OS) Copy of the Order forwarded to : 1. The Appellant : M/s. Bishandayal Jewellers , Nayasarak, Cuttack 2. The respondent: Pr. CIT(Central), Hyderabad 3. The CIT(A)-, Cuttack 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// By order
Sr.Pvt.secretary ITAT, Cuttack
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