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Income Tax Appellate Tribunal, NAGPUR BENCH,
Before: SHRI SANDEEP GOSAIN, JM & SHRI ARUN KHODPIA, AM
IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI SANDEEP GOSAIN, JM & SHRI ARUN KHODPIA, AM ITA No. 194/NAG/2017 Assessment Year: 2009-10 M/s Shree Palsiddha Construction Vs. Pr.CIT-1, Sakharkheda, Nagpur. Taluka Sindhkhedraja, Buldhana-443202. PAN No.: ABLFS 9009 H Appellant Respondent Assessee by: Shri Mahavir Atal (CA) Revenue by : Shri Piyush Kolhe (CIT-DR) Date of Hearing: 28/04/2022 Date of Pronouncement: 28 /06 /2022 ORDER PER: SANDEEP GOSAIN, J.M. This appeal has been filed by the assessee against the order of the ld. Pr.CIT-1, Nagpur dated 08/03/2017 passed U/s 263 of the Income Tax Act, 1961 (in short, the Act) for the A.Y. 2009-10 wherein following grounds have been raised by the assessee: “1. On the facts and circumstances of the case, ld. PCIT erred in assuming jurisdiction U/s 263 and thereby setting aside order passed by Assessing Officer 2. Assessee craves leave to add and alter any other ground that may be taken at the time of hearing.” 2. The brief facts of the case are that the assessee is a civil contractor. Return of income was filed on 03/12/2009 declaring total income of
2 ITA 194/NAG/2017_ M/s Shree Palsiddha Construction Sakharkheda Vs Pr.CIT Rs.1,06,51,410/-. The return of income was processed U/s 143(1) of the Act. Case of the assessee was reopened U/s 148 of the Act on the basis of an information of the Sales Tax Department, Govt. of Maharashtra that the assessee is beneficiary of Hawala entries. Mandatory notices were issued and served upon the assessee. The AO after making discussion and examination, completed the assessment at total income of Rs. 1,12,86,880/- by making disallowance of Rs. 6,35,470/- on account of disallowance out of purchases and accepted the income returned by the assessee vide order u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short, the Act) dated 27/03/2015. By the impugned order, the ld. PCIT set aside the assessment order passed by the AO u/s 143(3) r.w.s 147 of the Act by holding that the order passed by the AO was erroneous in so far as it is prejudicial to the interests of revenue.
Against the order passed by the ld. PCIT, the assessee has preferred the present appeal before the ITAT on the grounds mentioned above.
The main grievance of the assessee relates to challenging the order of the ld. PCIT in passing the order U/s 263 of the Act. In this regard, the ld AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. PCIT and also relied on the written
3 ITA 194/NAG/2017_ M/s Shree Palsiddha Construction Sakharkheda Vs Pr.CIT submissions filed before the Bench and the same is reproduced below:
“1. The learned Assessing Officer has called for the requisite details during the assessment proceedings and it was after perusal of the documents and the proper application of the mind the learned Assessing Officer treated the purchase as a bogus purchase and brought to tax the gross profit on the said purchase to the taxation. Therefore, fact that the learned Assessing Officer has applied his mind is discernible from the assessment order.
The view that the addition in case of Hawala Purchases or bogus purchases should be restricted only to gross profit, have been widely taken by the Judiciary across India. For sake of easy reference, we have enclosed the judgment of the Hon'ble Bombay High Court in the case of PCIT Vs Mohommad Haji Adam & Co (BOM)(HC) dated addition was restricted-to the Gross profit. 11/02/2019, where the (Said judgment can be found at page 38 to 43 of the paper book).
Therefore, view of the learned Principal Commissioner of Income Tax that the entire expenditure should be disallowed is one of the possible view. However, it is settled jurisprudence that the Section 263 cannot be invoked on e basis of Change of opinion. We find support from the -Judgments of the Bombay High Court. below mentioned
CIT Vs Nirav Modi 390 ITR 292 (Bom)(HC)
Grasim Industries Vs CIT 321 ITR 92 (Bom)(HC).
We also with to draw support from the Judgment of the Hon'ble Mumbai Tribunal in the case of M/s Vaghasiya Exports Vs PCIT (2020). Enclosed on page 37 to 43 of the paper book.
4 ITA 194/NAG/2017_ M/s Shree Palsiddha Construction Sakharkheda Vs Pr.CIT In this case the learned PCIT, invoked 263 revision proceedings to set aside the assessment order passed by the Assessing Officer by making an addition of gross profit on the Hawala purchase. The learned PCIT insisted on the complete disallowance.
The Mumbai Tribunal squashed the revision order and held that it is a case of change of opinion by relying on the judgments of Grasim Industries Ltd Vs CIT (Bom)(HC) and CIT Vs Nirav Modi (Bom)(HC). The relevant operational paragraph of the said judgment is Para 7 and it can be found on Page No 34 to 36 of the paper book.
The appellant also draw support from the Judgment of the Jaipur Tribunal in the case of Ram Das Maheshwari Vs PCIT, enclosed on page 5 to 27 of the Paper book.
In this case, the appeal was filed against the penalty levied under section 271AAB. A penalty of 10% was levied by the Assessing Officer. The appellant opted for the DTDRS Scheme, 2016 and got his dues settled. The Assessment was set aside under section 263 by opining that the penalty should have been levied at 30% and the Assessing Officer erred in levying penalty at 10%.
The Hon'ble Bench highlighting provisions of section 204(3) of the scheme held that every order passed under section 204(2) of the scheme shall be conclusive as to the matter stated therein and no matter covered by such order shall be re-opened in any other proceedings under the Act or wealth tax act for time being in force. (Relevant paragraph 7 of the judgment, can be found on page 24 & 25 of the paper book).
The appellant also wishes to highlight the fact that before the First Appellate Authority, the appellant has taken two ground of App al.
5 ITA 194/NAG/2017_ M/s Shree Palsiddha Construction Sakharkheda Vs Pr.CIT First, challenging the jurisdiction under section 147 and second G.P., addition made on account of alleged Hawala Purchase. (Page 4 and 4A of the paper book)
The important fact is that the Appellant has not only challenged the addition but also the jurisdiction of the Assessing Officer. Therefore/, once an order has been settled under DTDRS Scheme, 2016, not only the G.P. Addition is settled but also the challenge of the jurisdiction by the appellant is settled.
On these count itself, the learned PCIT, who himself has settled the dispute (Form-5) should not have been invoked provisions of section 263.
We humbly request your kindness to kindly squash the revision proceedings, as it has sought to unsettle the settled issue. For this act of kindness, the appellant shall always remain obliged.” 5. On the other hand, the ld. CIT-DR has vehemently supported the order of the ld. Pr.CIT.
We have considered the rival contentions and carefully perused the material placed on record. As per facts of present case, assessment order U/s 143(3) r.w.s. 147 of the Act was passed by the A.O. However, it was noticed by the ld. Pr.CIT while passing the impugned order that in the assessment order, the A.O. recorded the findings that in respect of purchases amounting to Rs. 53,40,098/- only bills were issued and no material was dispatched to the assessee. However, the A.O. went on to
6 ITA 194/NAG/2017_ M/s Shree Palsiddha Construction Sakharkheda Vs Pr.CIT finalize the assessment order by making G.P. addition @ 11.9% of the total turnover and added an amount of Rs. 6,35,470/- to the income of the assessee. Thus, according to the ld. Pr.CIT, the assessment was finalized without carrying out any enquiries and no efforts were made to verify the purchases and hence, according to the ld. Pr.CIT, the assessment was found to be erroneous and prejudicial to the interests of the Revenue. Whereas on the contrary, the ld. AR has taken a specific ground that the additions had already been made in this case in respect of G.P. @ 11.9% and the assessee had already gone in appeal before the First Appellate Authority and the assessee had also opted for the Direct Tax Dispute Resolution Scheme, 2016 (in short, DTDRS) and have filed a petition which is pending for finalization and in this respect, it was also submitted by the assessee that there are certain judicial pronouncements which support assessee’s contention that an assessment order should not be set aside u/s 263 of the Act in respect of issues which are covered under an application of DTDRS Scheme. In this regard, the ld. AR also placed reliance in the case of Siddhartha Tubes Ltd. Vs CIT 85 ITD 316 (Ind.). It was also submitted by the ld. AR that during the pendency of the appeal before the ld. CIT(A), vide Finance Act, 2016, the government announced DTDRS, 2016. The endeavor of the government in bringing this scheme was to settle the tax disputes. In this regard, the ld. AR also placed on record
7 ITA 194/NAG/2017_ M/s Shree Palsiddha Construction Sakharkheda Vs Pr.CIT online downloaded copy of the scheme, which are placed at page No. 61 to 65 of the paper book.
We have also gone through the scheme of the Central Government which was brought vide Finance Act, 2016, known as DTDRS, 2016. In this regard, we also noticed that the assessee had opted to settle the appeal which was pending before the ld. CIT(A) in DTDRS, 2016 and the dispute between the assessee and the Revenue was finally settled on 17/05/2017 by the ld. Pr.CIT himself by issuing Form.5 and in this regard, we have also perused the scan copy of Form. 5 which is placed at page No. 1 of the paper book. As per provisions of Section 205(a) of the DTDRS, 2016 scheme wherein it has been specifically provided with regard to immunity from instituting any proceedings in respect of any office under the Income Tax Act or Wealth Tax. The relevant provisions of DTDRS, 2016 Scheme has also placed on record at page No. 63 of the paper book. Thus, considering the immunity clause in the said DTDRS, 2016 scheme, the ld. Pr.CIT was not right in invoking provisions of Section 263 of the Act. Apart from that, we have also noticed that during the assessment proceedings, the A.O. had also called for requisite details and after considering the said documents, treated the purchases as bogus purchase and brought to tax the gross profit on the said purchase to the taxation. Moreover, the Hon’ble Bombay
8 ITA 194/NAG/2017_ M/s Shree Palsiddha Construction Sakharkheda Vs Pr.CIT High Court in the case of PCIT Vs Mohommad Haji Adam & Co. vide its order dated 11/02/2019 had also restricted the additions under similar circumstances to the gross profit. The copy of the said order has also been placed on record at page No. 38 to 43 of the paper book. Thus, considering the totality of facts and circumstances of the case, we are of the view that the view of the ld. Pr.CIT that the entire expenditure should be disallowed is one of the possible view. However, it is a settled law that Section 263 of the Act cannot be invoked on the basis of “change of opinion” and in this regard, we found support from the decisions of the Hon’ble Bombay High Court in the case of CIT Vs Nirav Modi 390 ITR 292 (Bom) and Grasim Industries vs CIT 321 ITR 92 (Bom). We also draw strength from the decision of the Coordinate Bench of Mumbai Tribunal in the case of M/s Vaghasiya Exports Vs PCIT and according to the said decision of the Coordinate Bench of the Tribunal it was held that “in this case, the ld. PCIT invoked 263 revision proceedings to set aside the assessment order passed by the A.O. by making an addition of gross profit on the Hawala purchase. The ld. PCIT insisted on the complete disallowance. The Mumbai Tribunal squashed the revision order and held that it is a case of ‘change of opinion’ by relying on the judgments of Grasim Industries Ltd. Vs CIT (Bom) and CIT Vs Nirav Modi (Bom).” We also draw strength from the decision of the Coordinate Bench of Jaipur ITAT in the case of Ram Das Maheshwari Vs
9 ITA 194/NAG/2017_ M/s Shree Palsiddha Construction Sakharkheda Vs Pr.CIT PCIT in ITA No. 421/JP/2018 order dated 14/06/2018 wherein the Coordinate Bench has held that “in this case, the appeal was filed against the penalty levied U/s 271AAB. A penalty of 10% was levied by the A.O. The assessee opted for the DTDRS Scheme, 2016 and got his dues settled. The assessment was set aside U/s 263 by opining that the penalty should have been levied at 30% and the A.O. erred in levying penalty at 10%. The Coordinate Bench highlighting provisions of Section 204(3) of the scheme held that every order passed U/s 204(2) of the scheme shall be conclusive as to the matter stated therein and no matter covered by such order shall be reopened in any other proceedings under the Act or Wealth Tax Act for time being in force.” Even as per the facts of the present case, we also noticed that before the First Appellate Authority, the assessee had taken two grounds of appeal i.e. (i) challenging the jurisdiction U/s 147 of the Act and (ii) G.P. addition made on account of alleged Hawala purchase. The copy of the grounds of appeal has already been placed on record at page No. 4 and 4A of the paper book) and after going through the entire facts and circumstances of the case we also noticed that the assessee had not only challenged the addition but also challenged the jurisdiction of the A.O.. Moreover, while considering the decision of Siddhartha Tubes Ltd. Vs CIT 85 ITD 316 (Ind), we are of the view that once the order has been settled under DTDRS Scheme, 2016, not only the issue of G.P. addition is
10 ITA 194/NAG/2017_ M/s Shree Palsiddha Construction Sakharkheda Vs Pr.CIT settled but also the challenge of the jurisdiction by the assessee is settled. Thus, in view of the facts that the Pr.CIT who himself has settled the dispute by issuing Form No. 5 in favour of the assessee thus in that eventuality, the same Pr.CIT is not expected to again invoke provisions of Section 263 of the Act in the given facts and circumstances of the case. Thus, we quash the proceedings initiated U/s 263 of the Act.
In the result, this appeal of the assessee is allowed.
Order pronounced in the open Court on 28 /06 /2022
Sd/- Sd/- (ARUN KHODPIA) (SANDEEP GOSAIN) Accountant Member Judicial Member Nagpur Dated:- 28 /06 /2022 *Mishra Copy of the order forwarded to: The Appellant- M/s Shree Palsiddha Construction Sakharkheda, 1. Buldhana. The Respondent- The Pr.CIT-1, Nagpur. 2. CIT 3. The CIT(A) 4. DR, ITAT, Nagpur 5. Guard File (ITA No. 194/Nag/2017) 6. By order, Asst. Registrar