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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
Per Dr. M. L. Meena, A.M.:
Both the appeals have been filed by the assessee against the impugned order dated 29.03.2021 passed by the Ld. Pr. Commissioner of Income Tax, Srinagar (Hereinafter referred to as “The PCIT”) in respect of the Assessment Years 2010-11 & 2011-12.
ITA Nos. 20&21/Asr/2021 2 Kaiser Industries Ltd. v. Pr.CIT 2. The assessee has raised the following grounds of appeal in ITA No.
20/Asr/2021:-
“The order passed by worthy Pr. CIT is erroneous in law, prejudicial, arbitrary and not in keeping with facts of the case:
That the worthy Pr. CIT is not justified on facts as well as on law in setting aside the assessment order originally passed u/s 143(3) read with Sec. 147 of the Income Tax Act, 1961 on 20.12.2017. The assessment order has been passed by the Id. A.O. after conducting necessary enquiries and after due application of mind. The order of the Ld. A.O. is neither erroneous nor prejudicial to the interests of the Revenue in terms of sec.263 of the Income Tax Act, 1961.
That the appellant craves, leaves to alter, amend and add to substitute any ground of appeal before or at the time of hearing.”
The assessee has raised the following grounds of appeal in ITA No.
21/Asr/2021:-
“The order passed by worthy Pr. CIT is erroneous in law, prejudicial, arbitrary and not in keeping with facts of the case:
That the worthy Pr. CIT is not justified on facts as well as on law in setting aside the assessment order originally passed u/s 143(3) read with Sec. 147 of the Income Tax Act, 1961 on 28.12.2018. The assessment order has been passed by the Id. A.O. after conducting necessary enquiries and after due application of mind. The order of the Ld. A.O. is neither erroneous nor prejudicial to the interests of the Revenue in terms of sec.263 of the Income Tax Act, 1961.
That the appellant craves, leaves to alter, amend and add to substitute any ground of appeal before or at the time of hearing.”
There is sole issue, on identical facts in both the appeal, wherein the appellants challenged Principal CIT’s action to invoke provisions of
ITA Nos. 20&21/Asr/2021 3 Kaiser Industries Ltd. v. Pr.CIT explanation (2) to sec.263 of the Income Tax Act, 1961 and hence, both these appeals were heard together and disposed of by this common order by taking facts from ITA No. 20/Asr/2021 in respect of Assessment Year 2010-11, as a lead case.
At the time of hearing, the counsel for the appellant assesses submitted before us that the Ld. Assessing Officer (“The A.O.” in short) passed the assessment order under sec. 147 read with sec. 143(3) of the Income Tax Act, 1961 on 20.12.2017 after carrying out necessary enquiries, verification of record and detailed information filed by assessee with due application of mind. The counsel argued that the AO had passed the assessment order by holding vide para 3 of her order that the subject matter are the bank transfers and not cash transactions for which reasons have been framed. Having obtained confirmation of the credit entries from Sudarshan overseas Ltd., I am seized of the matter that these are not bogus entries. The AO further noted that had the fact been evaluated by her predecessor even this notice u/s 148 could not have been issued as there are no cash transactions as alleged by him. The counsel had filed a brief synopsis to buttress its contention which reads as under:
Brief Synopsis
“May it please your Honours,
The appeal under consideration is against the order passed by worthy PCIT, Srinagar u/s 263 dated 29.03.2021 whereby he has set aside the order passed by Ld. A.O. u/s 143(3) read with section 147 of the I.T. Act, 1961 dated 20.12.2017 with the directions to A.O to reframe the assessment order passed and re-frame the assessment de-novo as per
ITA Nos. 20&21/Asr/2021 4 Kaiser Industries Ltd. v. Pr.CIT law after conducting necessary enquiries as per provision of explanation (2) to section 263 of the Act.
Ground of Appeal: The Worthy Pr. CIT is not justified on facts as well as on law in setting aside the assessment order passed u/s 143(3) of the Income Tax Act, 1961 on 20.12.2017. The assessment order has been passed by the ld. A.O. after conducting necessary enquiries and after application of mind. The order of the ld. A.O. is neither erroneous nor prejudicial to the interests of the Revenue in terms of sec.263 of the Income Tax Act, 1961.
It is more enumerated as under :-
3.1. On request of the assessee, the reasons for initiating proceeding u/s 147 of the Income Tax Act, 1961 were communicated to the assessee by the ld. A.O. It is placed at page 1 & 2 of the Paper Book. The very first objection in the reasons was contrary to facts that following accounts are getting credited through RTGS/Cheques/Fund transfer which is followed by debits through cash withdrawals. Even the figures of Rs.6,31,00,000/- was stated at Rs.9,29,39,848. The other figures of Rs.7,85,50,187/- in respect of Sudarshan Overseas Ltd. & Rs.7,66,85,000/- in respect of Parasnath Leasing Pvt. Ltd. are incorrect.
3.2 First questionnaire was issued by the ld. A.O. on 15.09. 2017. It is placed at page 3 of the Paper Book.
3.3 The reply filed before the Id. A.O. to abovementioned questionnaire is enclosed at page 4-5 of the Paper Book. The ledger account of Parasnath Leasing Pvt. Ltd. and bank account statement showing transfer of funds amounting to Rs.6.31 crores on different dates filed along with the above reply are placed at page 6 to 9 of the Paper Book. 3.4 Another questionnaire was issued on 18.12.2017 asking for further information regarding Rs.9.00 crores credited in the bank account.lt is placed at page 10 to 11 of the Paper Book.
3.5 Reply to the above questionnaire was furnished on 19.12.2017.It is placed at page 12-13 of the Paper Book. In the reply it was again clarified that amount in question is Rs.6.31 crores and not Rs.9.29 crores.
ITA Nos. 20&21/Asr/2021 5 Kaiser Industries Ltd. v. Pr.CIT In this reply, it was brought to the notice of the Id. A.O. that the copy of bank account stands filed by the then Id. A.O. during the course of original assessment proceedings and there are no cash transactions as alleged in the reasons for reopening of the case. Further, the reasons for transfer of funds by Sudarshan Overseas Ltd. to Parasnath Leasing Pvt. Ltd. through the assessee company were duly explained in this reply.
Copy of PAN of Sudarshan Overseas Ltd. and its ITR were also furnished along with the reply. These are placed at page 14 & 24 of the Paper Book respectively.
Further, to prove genuineness of the companies involved, the copies of Company’s master data as available at MCA site in respect of Parasnath Leasing Private Ltd. and Rayalaseema Commodities Ltd. (which was earlier Sudarshan Overseas Ltd.) were furnished to the Id. A.O. These are placed at page 15 and 16 of the Paper Book. The order passed by the Hon’ble High Court of Madras dated 11.06.2012 for winding up of Rayalaseema Commodities Ltd. (which was earlier Sudarshan Overseas Ltd.) was also furnished before the Id. A.O. It is placed at page 17 to 23 of the Paper Book.
Finally, a letter from director of M/s Sudarshan Overseas Ltd. dated 04.11.2009 was also filed before the Id. A.O. In this letter it has been stated that the company is going to pay to Parasnath Leasing Private Ltd. through bank account No.015505005785 of the assessee company maintained with ICICI Bank. This letter also clarifies that the appellant is acting only as a conduit to settle the dispute between two companies by immediately transfer funds received in its bank account from Sudarshan Overseas Ltd. to Parasnath Leasing Pvt. Ltd. It is placed at page 25 of the Paper Book.
The Id. A.O. passed the assessment order under sec. 147 read with sec. 143(3) of the Income Tax Act,1961 on 20.12.2017 after calling for details and verifying all these necessary details/information and after due application of mind. She had passed the assessment order by holding that (Relevant para is 3 of her order):-
“Sh. R.K Gupta, CA, Counsel of the assessee attended the hearings from time to time and filed bank statement showing that such matter stands scrutinized during by my predecessor. The assessment record do
ITA Nos. 20&21/Asr/2021 6 Kaiser Industries Ltd. v. Pr.CIT reveal that at 469 & 470, this bank statement is very much on our records. The subject matter are the bank transfers and not cash transactions for which reasons have been framed. Having obtained confirmation of the credit entries from Sudarshan overseas Ltd., I am seized of the matter that these are not bogus entries. Had the fact been evaluated by my predecessor even this notice u/s 148 could not have been issued as there are no cash transactions as alleged by him.”
Your Honours the Id. A.O. had verified in depth the credits of Rs. 6,31,00,000/- in the bank account and was satisfied that no income has escaped assessment then under such circumstances the worthy Principal CIT cannot annul such order under sec.263 that the Id. A.O has failed to examine this issue and the order has been passed by her in haste. The case law in this context is that of Commissioner of Income Tax Vs. Arvind Jewelers (2002) 259 ITR 0502 (Guj) placed at page 38 to 41 of the Paper Book.
Further the contention of Principal CIT to invoke provisions of explanation (2) to sec.263 of the Income Tax Act, 1961 is not applicable to the assessment year 2010-11. In this regard, kind attention is invited to case law of Brahma Center Development Pvt. Ltd. Vs. Principal CIT- 02, New Delhi (Hon’ble ITAT, Delhi in ITA no. 434 l/4342/Del/2019,dated 18.12.2019) placed at page nos.42 to 47 of the Paper Book.
It is prayed that order of the worthy Principal CIT passed u/s 263 may please be set aside.”
Per contra, the Ld. CIT(DR) supported the impugned order. However, he could not file any citation or documentary evidence in rebuttal.
We have heard both the sides, perused the material on record and case law cited. It is seen that the Id. A.O. had verified the alleged credits of Rs. 6,31,00,000/- in the bank account of the appellant during the reassessment proceeding and was satisfied that no income has escaped
ITA Nos. 20&21/Asr/2021 7 Kaiser Industries Ltd. v. Pr.CIT assessment. The Ld. PCIT, Srinagar has set aside the order passed by Ld. A.O. u/s 143(3) read with section 147 of the I.T. Act, 1961 dated 20.12.2017 with the directions to the A.O to reframe the assessment de- novo as per law after conducting necessary enquiries as per provision of explanation (2) to section 263 of the Act. However, he has not mentioned the specific reason or the error to hold the assessment order erroneous as much as prejudicial to the interest of revenue. In our view, merely alleging that enquiries were not conducted by the AO is not sufficient for invoking the provisions of section 263 of the Act. The PCIT is required to discuss that either such particular enquiries were necessary for verification of particular transaction doubted or he ought to have taken up enquires at his level to establish that assessment order is erroneous and prejudicial to interests of revenue.
The Ld. Counsel contended that prior to passing of order under section 143(3) r.w.s. 147 of the Act, two questionnaires were issued by the Assessing Officer in the course of assessment proceedings to the assessee. In compliance, these specific issues addressed by the appellant in the present proceedings were being part of the questionnaire.
It is evident from the record that the PCIT has exercised the power u/s 263 of the act, by merely alleging in the Show Cause Notice, that appellants accounts were credited through RTGS/Cheques/Fund transfer which is followed by debits through cash withdrawals. It is noted that the ld. PCIT has mentioned even the figures of Rs.6,31,00,000/- was stated at Rs.9,29,39,848 which has been examined and verified by the AO. Thus, the Ld. PCIT has summarily arrived at the conclusion, ignoring the
ITA Nos. 20&21/Asr/2021 8 Kaiser Industries Ltd. v. Pr.CIT factual evidences and plethora of jurisprudence available on the issue which casts responsibility on the Pr. CIT to point out the error and not any and every error but such an error which is prejudicial to the interests of the Revenue. The twin requirements and the sine qua non for exercising the Revisionary Power cannot be left at the mercy of whims and fancies of Revisionary Authority and the same should be brought out on record.
Thus, mere suspicions are not enough. It has been consistently held that under explanation 2(a) to section 263 before reaching to the conclusion that the order of the AO is erroneous and prejudicial to the interests of the Revenue, the Revisionary authority itself has to undertake some enquiries to establish that the assessment order is erroneous and prejudicial to the interests of the Revenue.
It is trite law that in order to attract section 263 of the Act, twin conditions are to be satisfied namely:
(i) The order of the Assessing Officer sought to be revised is erroneous, and (ii) It is prejudicial to the interest of the Revenue.
In our view, the order passed by the Assessing Officer would not fall within the ambit of Explanation 2(a) appended to section 263 of the Act, unless and until, it is not pointed out as to which inquiry or verification was not made by the Assessing Officer before passing the order. The Hon’ble, Jurisdictional Punjab and Haryana High Court in the case of “Pr. CIT Vs. Kanin (India)”, IT Appeal No. 205 and 213 of 2019 vide latest Judgement dated 21.04.2022 decided the issue in favour of assessee by
ITA Nos. 20&21/Asr/2021 9 Kaiser Industries Ltd. v. Pr.CIT observing that where order was passed by Principal Commissioner holding that assessment made by Assessing Officer was erroneous and prejudicial to interest of revenue as assessment order had been passed without making inquiries or verification, however, Principal Commissioner was not in a position to point out as to what inquiries or verification should have been made but had not been made by Assessing Officer so as to make present case fall within Explanation 2(a) to section 263, Tribunal rightly set aside order passed by Principal Commissioner.
In the case of “Malabar Industrial Co. Ltd. v. CIT”, [2000] 109 Taxman 66/243 ITR 83 (SC), the Hon’ble Apex Court has held that -
'The phrase prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law.'
In the above view, we hold that the Ld. PCIT was not justified on facts as well as on law in setting aside the assessment order passed u/s 143(3) read with Sec. 147 of the Income Tax Act, 1961. Accordingly, the
ITA Nos. 20&21/Asr/2021 10 Kaiser Industries Ltd. v. Pr.CIT impugned order passed by ld. PCIT is held to be bad in law and as such, quashed.
The issue in ITA No. 21/Asr/2021 for Assessment Year 2011-12 is exactly similar on identical facts to that of issue decided in ITA No. 20/Asr/2021 for Assessment Year 2010-11 as above and therefore, our observation and finding given in in ITA No. 20/Asr/2021 for Assessment Year 2010-11 shall apply in matatus mutandis in ITA No. 20/Asr/2021 for Assessment Year 2011-12.
In the backdrop of the aforesaid discussion the subject appeals are decided in the terms indicated as above.
Order pronounced in the open court on 16.09.2022.
Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr.PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T.