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Income Tax Appellate Tribunal, RAIPUR BENCH,
Before: SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM
आदेश / O R D E R
Per Arun Khodpia, AM :
The captioned appeal is filed by the Assessee against the order passed by the Ld. Principle Commissioner of Income Tax, Raipur-1 (C.G.), u/s 263 of the Income Tax Act 1961, dated 27.02.2023 which in turn arises from the order by Ld. Assessing Officer u/s 143(3) r.w.s. 143(3A) & 143 (3B) dated 02.03.2021 for A.Y.2018-19. The grounds of the appeal raised by the asseseee are as under:
1 That the order of the Learned Principal Commissioner of Income Tax is arbitrary, bad in law & facts. 2 On the facts and in the circumstances of the case of the assesse, Ld. Pr. CIT was not justified in holding that the Assessment order passed u/s 143(3) was erroneous and/or prejudicial to the interest of Revenue. 3 On the facts and in the circumstances of the case of the assessee Ld. Pr. CIT was not justified in setting aside the order passed under section 143(3) by the assessing officer by invoking the provisions of section 263.
The facts of the case, submissions and the prayer of the assessee furnished by the Ld AR are extracted as under:- Synopsis of Submissions
The appellant assessee filed ROI on 14/10/2018 declaring total income at Rs.26,14,660/-.
2. The case was selected for scrutiny under CASS vide notice dated 22/09/2019 issued u/s 143(2) (Pg No.1-3 of PB)
The assessment was completed u/s 143(3) on 02/03/2021 and total income was accepted as per Return.
The ld. Pr.CIT issued notice u/s 263 on 22/02/2023 on the grounds that (a) the case was selected for complete scrutiny and (b) ld. A.O. allowed the claim of depreciation for addition to different block of assets without verification. (c) 5. In response appellant filed detailed submissions and evidences regarding addition to fixed-assets viz. copies of invoices (Page-27 of PB), mode of payment, date of payment, rate of depreciation, depreciation amount, copy of ledger accounts of fixed assets (Page-26,40,42 of PB), copy of bank statement (Page-54 of PB)and date of putting asset in use (Page-24,25 of PB), etc.
6. But ld. Pr. CIT set-aside the assessment order on the observations that it is mentioned in first para of said order that the case was selected for complete scrutiny. The appellant has furnished copies of bills and supporting evidences, his contention has been verified and apparently, prima-facie, no adverse inference is drawn. However, the A.O. may further verify the transactions for their source as well as correct claim of depreciation. The matter is set-aside for further verification.
7. Appellant submits that his case was selected under CASS for clarification identifying the limited issues.
Though the word "initially" is mentioned in para-2, the issues are specified. Hence, this is limited scrutiny.
The ld. Pr.CIT cannot enlarge the scope in revision proceedings.
Secondly, during sec. 263 proceedings appellant filed all particulars and evidences clearly establishing and satisfying query raised in notice u/s 263 of the Act.
The ld. Pr. CIT was satisfied and rendered categorical observations in para 7(ii) of impugned order.
The impugned order was passed only for another round of enquiry. It is abuse of process of law.
The twin conditions required u/s.263 i.e (i) the order of A.O. sought to be revised is erroneous and (ii) the error committed by A.O in the order is prejudicial to the interest of revenue are not satisfied.
The Pr.CIT did not specifically demonstrate how the assessment order is erroneous and prejudicial to revenues interest especially after recording his satisfaction that no adverse inference is drawn.
The Appellant relies on case laws mentioned at S1.No.13 to 17 of PB and on CIT vs. Leisure Wear Exports Ltd. [2012] 341 ITR 166 (Del.)
In this view of the matter, Appellant prays that the appeal may kindly be allowed in the interest of justice. Prayed accordingly.
4. With the above written synopsis furnished by the Ld AR, it was further submitted that on perusal of order of Ld PCIT while recording the findings at para 7(ii) at page 8 of the order u/s 263, Ld PCIT himself observed that the assessee had furnished the copies of purchase of bills and other supporting evidence. The contentions of the assessee has been verified with the submissions of the assessee and apparently, primafacie, no adverse inference is drawn, however the AO may further verify the transactions for their source as well as correct claim of depreciation etc. The matter is set aside for further verification. The AO is at liberty to take a decision after verification. However, he should pass a speaking order on the issues sub-judice. It was the submission of Ld AR that such a finding of the Ld PCIT leads to satisfaction of the Ld PCIT that there was primafacie adverse inference which could make the order of Ld AO erroneous as well as prejudicial to the interest of revenue which are the mandatory condition for sustainability of the order passed by invoking provisions of section 263 of the It Act. Under such circumstances the order of Ld PICT to set aside the matter back to the files of Ld AO is arbitrary, bad in law & facts and thus, is liable to stuck down. On the aspect of satisfaction of conditions laid down in section 263 that for invoking provision sections 263 for exercising jurisdiction by the PCIT suo motu of Ld AR relied on judgment by the Hon’ble Apex Court in the case of Malabar Industrial Company Ltd. Vs. CIT reported in (2000) 243 ITR 83 (SC), wherein Hon’ble Apex court had held that:
A bare reading of section 263(1) makes it clear that the pre-requisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1).
In response, Ld CIT DR, vehemently supported the order of Ld PCIT.
We have considered the rival submissions, perused the material available on record and judicial pronouncement pressed in support of contentions by the assessee. Admittedly, the issues which were the basis for invoking the provisions of sections 263 for revision of the assessment were show caused and responded by the assessee. Issue pertaining to Limited scrutiny was found to be misunderstood by the assessee and thus was clarified by the Ld PICT. On merits, the Ld PCIT was found to be primafacie satisfied with the submission of the assessee supported with evidence, documents and bills but was keen have it further verified. Ld PCID was of the opinion that the order of Ld AO was erroneous since certain issues which should have been looked into by the Ld AO were not examined by him during the original assessment proceedings u/s 143(3), however the two conditions which were mandatory to be established could not be satisfied by bringing on any finding or recording that could establish that the order of the Ld AO was erroneous as well as prejudicial to the interest of the revenue. Under such circumstances the order of Ld PCIT has been found to be failed on the test as laid down by Hon’ble Apex court while assuming jurisdiction u/s 263 in the case of Malabar Industrial Company
Ltd.(supra). We therefore respectfully following the binding principle of law as laid down by Hon’ble SC in the Malabar Industrial Company Ltd.(supra) are inclined to hold that the order of Ld PCIT was lacking in complying with the twin compulsory conditions as mandated u/s 263, consequently the same is bad in law and liable to be quashed and we direct to do so.
In the result appeal of the assessee is allowed in terms of our observations herein above.
Order pronounced in the court on 11/09/2023.