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Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: DR. BRR KUMAR & MS. ASTHA CHANDRA
Assessee by: Shri Ved Jain, Advocate Shri Aman Garg, CA Department by: Shri Vivek Vardhan, Sr. DR Date of Hearing: 30.08.2023 Date of 17.11.2023 pronouncement: O R D E R PER ASTHA CHANDRA, JM
The appeal filed by the assessee is directed against the order dated 30.03.2022 of the Ld. Principal Commissioner of Income Tax (“PCIT”), Delhi-4 under section 263 of the Income Tax Act, 1961 (the “Act”) pertaining to Assessment year (“AY”) 2017-18.
The assessee has raised the following grounds:- “
1. On the facts and circumstances of the case, the order passed by the learned Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Act is bad, both in the eye of law and on facts.
2. On the facts and circumstances of the case, the order passed by the learned Pr. CIT cancelling the assessment order passed by the A.O. is untenable in the absence of order of the A.O. being erroneous as well as prejudicial to the interest of the Revenue.
On the facts and circumstances of the case, the order passed by the learned Pr. CIT cancelling the assessment order passed by the A.O. is illegal and without jurisdiction as the issues on which the revision was sought are the subject matter of appeal before the learned CIT(Appeals) 4. On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in ignoring the fact that all the issues raised by him in notice under Section 283 were before the A.O during the assessment proceedings and as such the jurisdiction on this issue under Section 263 cannot be assumed. 5. On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in rejecting the contention of the appellant that the issues raised in the show cause notice were before the AO in proceedings under Section 143(3) and were allowed after application of mind by him as such the same cannot be the matter for reassessment under Section 263 of the Act. 6. On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in ignoring the fact that the proceeding under Section 263 cannot be used for substituting option of the A.O. by that of the Pr. CIT. 7. On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in invoking revisionary power under Section 263 of the Act despite the fact that even after thorough examination, no specific findings have been given on the issue of how the order is erroneous and prejudicial to the interest of Revenue. 8. On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in setting aside the matter to the file of the A.O. without giving a finding as to the error and prejudice caused to the revenue by the assessment order. 9. That the appellant craves leave to add, amend or alter any of the grounds of appeal.”
3. Briefly stated, the assessee company is engaged in the business of petrol pump. It filed its return for AY 2017-18 on 30.10.2017 declaring income of Rs. 79,99,000/-. The case was selected for complete scrutiny through CASS. Statutory notice(s) along with questionnaire were issued / served upon the assessee. In response to notices, the assessee uploaded the submissions through online which have duly been examined by the Ld. Assessing Officer (“AO”) who completed the assessment on total income of 2 Rs. 1,09,77,800/- on 28.12.2019 under section 143(3) of the Act including therein addition of Rs. 25,21,073/- on account of undeclared profit; unexplained cash credit of Rs. 2,25,000/- under section 68; interest expense of Rs. 11,446/- under section 40(a)(ia) and disallowance of general expenses of Rs. 2,21,281/-.
The Ld. PCIT examined the case records and found that the assessee has claimed general expenses of Rs. 11,06,406/- out of which the Ld. AO disallowed 20% i.e. Rs. 2,21,281/-. According to the Ld. PCIT, the assessee has not furnished any supporting evidence in respect of general expenses. Hence, the disallowance of Rs. 11,06,406/- needs to be made. He also found that the Ld. AO has made addition of Rs. 25,21,073/- on account of undeclared profit in respect of which penalty under section 270A for under- reporting of income has been initiated. The Ld. PCIT was of the view that the aforesaid disallowance and addition fall in the definition of misreporting of income and not in the definition of under reporting of income mentioned by the Ld. AO in the assessment order. The Ld. PCIT therefore considered the assessment order as erroneous in so far as it is prejudicial to the interest of the Revenue and issued show cause notice dated 25.02.2022 as to why an order enhancing the assessment be not passed. The assessee company responded by stating that disallowance of 20% of general expenses was made by the Ld. AO after applying his mind, though no specific detail was called for and furnished by the assessee. The Ld. AO disallowed 20% of expenses after fully satisfying himself of the claim of expenditure made by the assessee company, hence, it cannot be concluded that the remaining expenditure was allowed without enquiring into the claim. As regards addition of Rs. 25,21,073/- being the difference between the sales and purchase as per information received from HPCL and as per ledger account of the assessee, it was explained that difference was mainly on account of VAT charged by HPCL in their bills whereas VAT was booked by the assessee under separate head as per accounting policy regularly followed by the assessee. It was submitted before the Ld. PCIT that both the issues were raised during assessment proceedings and the necessary clarifications / 3 documentary evidences were submitted before the Ld. AO which he did not consider properly.
The Ld. PCIT considered the submission/reply of the assessee and in exercise of powers vested in him under section 263 of the Act enhanced the assessment by a sum of Rs. 8,85,125/- being the difference between the claim of Rs. 11,06,406/- made by the assessee under the head General Expenses and disallowance of Rs. 2,21,281/- made by the Ld. AO.
Aggrieved, the assessee is in appeal before the Tribunal and all the grounds relate thereto.
The Ld. AR submitted that during the course of assessment proceedings the Ld. AO had asked the assessee to furnish details of various expenses and the assessee in response, furnished details of other expenses which included general expenses of Rs. 11,06,406/-. Thereafter, the Ld. AO after due application of mind disallowed general expenses to the tune of Rs. 2,21,281/-. Hence the order of the Ld. AO passed under section 143(3) of the Act after due application of mind cannot be deemed to be erroneous and there is no wrong application of law or an incorrect assumption of facts. Hence, revisionary powers under section 263 of the Act cannot be invoked by the Ld. PCIT as twin conditions (erroneous and prejudicial to the interest of Revenue) are not cumulatively satisfied. Conclusion arrived at by the Ld. AO in exercise of his quasi-judicial power vested in him cannot be termed as ‘erroneous’ only because the Ld. PCIT is not satisfied. Reliance was placed on a number of decisions.
The Ld. Sr. DR supported the order of the Ld. PCIT.