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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 S/ S/SHRI CHANDRA MOHAN GARG, JUDICIAL JUDICIAL MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER ITA No.251/CTK/2015 Assessment Year : 2010-2011 2011 M/s. Swapna Motors Pvt Ltd., M/s. Swapna Motors Pvt Ltd., Vs. Asst. Commissioner of Income Asst. Commissioner of Income Friends Colony, Cuttack Friends Colony, Cuttack tax, tax, Circle Circle-2(1), Arunodoya Nagar, Cuttack Nagar, Cuttack PAN/GIR No. No.AAFCS 1450 A (Appellant (Appellant) .. ( Respondent Respondent) Assessee by : None Revenue by : Shri M.K.Goutam, CIT (DR) Date of Hearing : 30 /3/ 20 / 2022 Date of Pronouncement : 05 / /4/2022 O R D E R Per C.M.Garg g, JM
This is an appeal filed by the assessee a This is an appeal filed by the assessee against the order of the CIT, gainst the order of the CIT, Cuttack u/s.263 of the Act, for the assessment year 2010 Cuttack u/s.263 of the Act, for the assessment year 2010 Cuttack u/s.263 of the Act, for the assessment year 2010-2011.
The grievance of the assessee is that the ld CIT is not justified in The grievance of the assessee is that the ld CIT is not justified in The grievance of the assessee is that the ld CIT is not justified in treating the assessment order as erroneous and prejudicial to the interest of treating the assessment order as erroneous and prejudicial to the interest of treating the assessment order as erroneous and prejudicial to the interest of the revenue and setting aside the order for fresh the revenue and setting aside the order for fresh consideration consideration.
Facts of the case are that the assessee i Facts of the case are that the assessee is a private limited company s a private limited company deriving income from dealership of TATA motors and Fiat India Ltd., trading deriving income from dealership of TATA motors and Fiat India Ltd., trading deriving income from dealership of TATA motors and Fiat India Ltd., trading of motor car, utility vehicle, sales and service. The Assessing Officer of motor car, utility vehicle, sales and service. The Assessing Officer of motor car, utility vehicle, sales and service. The Assessing Officer
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completed the assessment u/s 143(3) of the Act on 1/3/2013 determining the total income at Rs.1,08,70,360/-.
Thereafter, the Pr. CIT, Cuttack called the assessment records by virtue of his power under section 263(1) of the Act. On perusal of records, he noticed that the assessee company had disclosed returned income of Rs.8,78,800/- for the assessment year 2010-2011 after making adjustment of carry forward business loss & unabsorbed depreciation as per return of the assessment year 2009-10 amounting to Rs.34,94,402/-. From the assessment record for A.Y. 2009-10, it is revealed that such adjustment of business loss, unabsorbed depreciation loss had already been taken into account but again same loss which had already been adjusted in the A.Y. 2009-10 has been adjusted in A.Y. 2010-11 in arriving the total income at Rs.8,78,800/-. He also noticed that tax audit report in form No.3CD filed in the return of income for A.Y. 2010-11 states that brought forward loss or depreciation at Nil accordingly, the assessee company is not to be allowed to claim any brought forward loss in the return of income for A.Y. 2010-11. The AO has wrongly adjusted Rs.34,94,402/- as carry forward business loss and unabsorbed depreciation loss while passing the assessment order for A.Y. 10-11.
The CIT also noticed that in the balance sheet and cash flow statement for the year ending 31.3.2010, the assessee had received a sum of Rs.7,30,00,000/- from issue of share capital including share premium and P a g e 2 | 7
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share application money during the previous year 2009-10, the details of which are reflected in the order of the CIT at page-2. The AO had not examined the source, mode of transaction of the above funds received during the previous year, creditworthiness and genuineness of the investors in assessment proceedings.
In the audited trading and loss account, filed by the assessee for the year ended 31.3.2010, the assessee has debited purchase of Rs.99,61,42,131/- whereas the copy of VAT return submitted during the assessment proceedings indicates the purchase figure at Rs.98,90,20,270/- but the AO has not examined the difference in purchase of Rs.71,21,861/-.
In view of above, the CIT found that while framing the assessment u/s.143(3) of the Act, the AO has not examined the aforesaid issues causing the assessment order erroneous and prejudicial to the interest of the revenue. Accordingly, show cause notice u/s.263 of the Act was issued on 17.2.2014 by the CIT requiring the assessee to furnish clarification by 26.2.2014. In response to notice, the assessee filed written submissions with regard to the above issues pointed out by ld CIT. After considering the submissions of the assessee, the CIT was of the view that the Assessing Officer has not made any enquiry on the above issues and passed the order without application of mind and set aside the assessment order and directed the AO for fresh adjudication after giving proper opportunity to the assessee. P a g e 3 | 7
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We have heard the rival submission and perused the record of the case. We find that the ld CIT relied on various judgments holding that when the AO did not make proper enquiry and accepted the return income of the assessee, the revision order u/s.263 is justified. On perusal of assessment order u/s.143(3) of the Act, we observe that there is no discussion in this regard to the points raised by the ld CIT in the impugned order. We observe that the ld CIT in the impugned order has categorically held that the AO has not made any enquiry, inter alia, directed the AO to make fresh assessment observing as under:
“ …In fact In this case there is total non application of mind. When assessee had claimed to have furnished certain details the AO should have verified whether the claimed by the A/R is correct. The bank accounts given by the assessee do not relate to the previous year under consideration. They relate to previous year 01.04.2010 to 31.03.2011 which is relevant to A.Y. 2011-12. Therefore, the assessment order suffers from non application of mind which makes the assessment order erroneous and since involving Rs. 7.3 crore of credit introduction there is loss of revenue as well and as a result it is prejudicial to the interests of revenue. As to the share application and share premium money introduced by assessee in its books, AO is duty bound to investigate/enquire into the identity of the shareholder, the creditworthiness and genuineness of transaction. If AO is satisfied as to these, then he should state the same in the assessment order by recording his satisfaction. It is clear from, the assessment order that the AO has not recorded his satisfaction as to the explanation furnished by the assessee as to the introduction of share capital/share premium. As regards carry forward loss or unabsorbed depreciation, the contention of the A/R is not acceptable. The AO cannot wait indefinitely for the appeal proceedings before the CIT(A), ITAT and Hon'ble High Court. After receiving an appellate order, the AO has to give effect to it by rectifying the order passed by him.
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As regards difference in purchases even after considering the explanation of the assessee, there is still some difference which is not properly explained, causing loss of revenue. If due to an erroneous order of the AO, the revenue is losing tax lawfully payable by a person it will be certainly be prejudicial to the interest of revenue. In this case both the conditions 'erroneous' and 'prejudicial to the interest of revenue' are fulfilled. In view of the above, it is clear that this is a case where no investigation was made by the AO. Reference is made to the rulings given by the Hon'ble Supreme Court in the case of Ramapyari Devi Sarogi Vrs. CIT (1968) 67 ITR 84 (SC) and Smt. Tara Devi Aggarwal Vrs. CIT reported in 88 ITR 323 (SC) (1973) in which the Hon'ble Apex Court has held that lack of enquiry or verification at the relevant time by the Assessing Officer would constitute prejudice to the interest of revenue and would involve error of facts and law. It was held by the jurisdictional High Court in the case of Umashankar Rice Mills Vs. CIT reported in 187 ITR 638(Ori)that, where the Commissioner felt that proper enquiry was not made by the AO during assessment proceedings, he was justified in invoking provisions of Section 263 in respect of the order passed by the AO. Similarly, in the case of Gee Vee Enterprises Vs. Addl. CIT report in 99 ITR 375(Del), the Hon'ble Court has held that the Commissioner can regard the order of the AO as erroneous on the ground that, in the circumstances of the case, the AO should have made further enquiries before accepting the statement filed by the assessee. Further in the case of Jagadish Kumar Gulati Vs. CIT reported in 269 ITR 71 (All), it was held that where the Commissioner found that necessary enquiries were not made by the AO before finalizing the assessment, assumption of jurisdiction u/s.263 by him to cancel the order of the AO was justified. Again in the case of CIT vs Puspa Devi reported in 164 ITR 639(Pat), it was held that where there was failure on the part of the AO to make proper enquiry, the commissioner was justified in cancelling the order of the AO. Similarly in the case of Tahlibai F Jain Vs. ITO reported in 101 ITR 1 (Kar) and Swarup Vegetable Products Industries Limited reported in 187 ITR 412 (All), the Hon'ble Courts held that the Commissioner was justified in cancelling assessment order where the claim made by the assessee in the statement fled before the AO was accepted without making proper enquiry. Further, in the case Malabar Industrial Co. Ltd Vs. CIT reported in 198 ITR 611 (Ker) it was held that where the AO did not make proper enquiry
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and accepted the entry in the statements of account filed by the assessee, revision of the AO's order u/s263 was justified. In the instant case, on the issues pointed out in show cause notice proper enquiries and verifications were not made by the AO. Because of such failure on the part of the AO, the order passed by him is considered to be erroneous as well as prejudicial to the interests of revenue. As held by various courts in the cases mentioned above, the Principal Commissioner can regard an order as erroneous on the ground that in the circumstances of the case, the AO should have made further enquires before accepting the statements given by the assessee in his return. In view of the above, the assessment order framed u/s. 143(3) of the I.T.Act, 1961 on 29.03.2013 for being erroneous in so far as the same is prejudicial to the interest of revenue is hereby set aside to the Assessing Officer for fresh adjudication of facts and proper application of law in fresh assessment proceedings after giving proper opportunity to the assessee. The Assessing Officer has to call for audited books of account relating to the financial year 2009-10 and examine the issue of share capital and share premium amounts introduced in the books of account of the assessee the correctness of the purchases recorded in the P & L Account and also the issue of carry forward of business loss and unabsorbed depreciation. On the basis of such examination of facts, fresh findings have to be recorded for the AY: 2010-11.”
When the above findings of the ld CIT was confronted to ld A.R. of the assessee that whether the AO has conducted any enquiry on the above aspects, no satisfactory reply was forthcoming. From the above, we observe that the Assessing Officer has not made any enquiry and examination of the matter. We also observe that the CIT has directed the AO to make proper enquiry and pass fresh assessment order after giving due opportunity of hearing to the assessee. Hence, we do not find any infirmity in the order of the ld CIT, which is hereby confirmed.
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In the result, appeal of the assessee is dismissed
Order pronounced on 5 /4/2022.
Sd/- sd/- (Arun Khodpia) (Chandra Mohan Garg) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 5 /04/2022 B.K.Parida, SPS (OS) Copy of the Order forwarded to : 1. The Appellant : M/s. Swapna Motors Pvt Ltd., Friends Colony, Cuttack 2. The Respondent. Asst. Commissioner of Income tax, Circle-2(1), Arunodoya Nagar, Cuttack 3. The CIT(A)- Cuttack 4. Pr.CIT-, Cuttack 5. DR, ITAT, Cuttack 6. Guard file. //True Copy// By order
Sr.Pvt.secretary ITAT, Cuttack
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