SHRI AMRIT PARKASH SEHGAL (HUF),JALANDHAR vs. INCOME TAX OFFICER WARD-2(1), JALANDHAR

Per Dr. M. L. Meena, A.M.:

The appeal has been filed by the assessee against the order dated 25.03.2019 passed by the Ld. Pr. Commissioner of Income Tax-1, Jalandhar in respect of the Assessment Year 2014-15.

2 ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO “1. That on the facts and circumstances of the case, Learned Pr. Commissioner of Income Tax, Jalandhar-1 (‘Ld. CIT’) has grossly erred in law in assuming jurisdiction u/s 263 of the income Tax Act, 1961 (‘the Act’). The order passed u/s 263 of the Act directing the Assessing Officer to pass fresh order after necessary enquiries/investigations income is illegal and bad in law.

3 ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO 6. That on the facts & circumstances of the case, Learned Commissioner of Income Tax, Jalandhar-1 (‘Ld. CIT’) has grossly erred in setting aside the assessment framed with the directions to pass fresh order after making necessary enquiries/investigations. Non issuance of specific directions for assessment to be framed clearly proves that it is a case of only change of opinion and the assessment framed is neither erroneous nor prejudicial to the interest of the revenue.

impugned order passed u/s 263 of the Act vide order dated 19.03.2019 as

the appeal was required to be filed on or before 27.05.2019 but it has been

filed on 09.01.2020.

on account of the death of Sh. Ravi D. Sharma Chartered Accountants,

Jalandhar who was looking after the tax matters relating to filling of the

Income Tax return and appeals. In support, an affidavit of the appellant

assessee is filed before us which is placed on record. The appellant

assessee has stated in the affidavit that the original assessment

proceedings were attended by Sh. Ravi D. Sharma, Chartered Accountant

and the assessee was under the impression that appeal is to be filed on

receipt of the consequential assessment order in compliance to the order of

the PCIT u/s 263 of the Act. Accordingly, the AO passed the assessment

4 ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO order on 27.12.2019, in compliance to the direction of the PCIT u/s 263 of

the Act, The appellant assessee has contacted M/s Surinder Mahajan &

Associates the present counsel, on 06.01.2020 who has filed the appeal

before the Tribunal with the application of condonation of delay with the

support of an affidavit and prayer to condone the delay due to good and

sufficient reasons of the death of the regular counsel of the appellant, Sh.

Ravi D. Sharma with a request to condone the delay and allow the matter

to be adjudicated on merits.

4.1 The ld. DR has objected to the condonation application filed by the

assessee. He argued that the appellant assessee is a business concern

which is looked after by group of employees and battery of lawyers having

knowledge of tax matters however, the DR failed to submit in rebuttal that

what prejudice would be caused to the department by condoning the delay

on account of mistaken belief, in view of the death of the assessee’s

regular Chartered Accountant, Sh. Ravi D. Sharma.

Sahabuddin Quadiri v. DCIT in ITA No. 1617/KOL/2016 condoned the

delay of 409 days in filing appeal against order u/s 263 of the Act by

observation as under:

5 ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO “We are of the considered opinion that assessee was under a bona fide belief that the impugned order of Id CIT under section 263 of the Act was not appealable before this Tribunal since he was not advised by his Tax Consultant about this legal right. Later on, when a Senior Lawyer advised assessee to file an appeal, the assessee immediately took steps to file the appeal. Therefore, the delay caused. We note that delay was because of the wrong advice of the Tax Professional for which assessees cannot be penalized.”

delay of 227 days in filing this appeal due to mistaken unbelief, and we,

therefore, hereby condoned the delay and admit the appeal to be heard on

merits.

(APB pg. no. 4-7) and that the assessment was framed u/s 143(3) of the

Act by making an addition of Rs.4,26,748/- (APB pg. no. 66-67).

Subsequently, proceedings u/s 154 of the Act were initiated based on audit

objection by issuing a notice dated 08.06.2018 (APB pg. no. 68-71) which

were filed. Afterwards, a notice u/s 263 of the Act dated 28.02.2019 was

issued to the assessee (APB pg. no. 116-117).

cause notice observed that expenditure of Rs. 93,96,787/- claimed by the

assessee on account of current repair and maintenance of machinery, most

expenses are in respect of moving parts which are subject to daily wear

6 ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO and tear, however, the copy of ledger account filed by the assessee shows

that substantial amounts have been reflected in the account which do not

seem to be in the nature of repair and maintenance of machinery; that

expenditure of Rs.12,88,783/- on account of current repairs and

maintenance of building, however, the copy of the ledger account filed by

the assessee shows that substantial amounts have been reflected in the

account which do not seem to be in the nature of repair and maintenance

of building and that appellant claimed of deduction of interest on deposits to

the extent of Rs. 20,33,441/- in the computation of income which is

explained by the assessee as related to the old deposits raised and

invested in the business and these were borrowed by Amrit Parkash

Sehgal HUF during financial year 2006-07 and invested in the proprietary

business through capital account. Thus, the Ld. PCIT held that the

Assessing Officer has failed to make any enquiry and make verifications of

the claim of the assessee in respect of the aforesaid current repairs and

maintenance of machinery, current repairs and maintenance of building

and deduction of the interest out of the business income of the assessee.

Accordingly, the PCIT concluded that the AO passed an assessment order

u/s 143(3) of the Act without making required enquiries and verification that

rendered the assessment order to be erroneous and prejudicial to the

7 ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO interest of the Revenue and accordingly, he set aside the case to the file of

the AO for fresh assessment.

framed after due verification of the claim made in the profit and loss

account by the appellant assessee by way of queries raised in respect of

expenses claimed on account of current repairs and maintenance of

machinery, current repairs and maintenance of building and the interest

(APB pg. no. 8 to 65) by way of issuing a notice u/s 142(1) of the Act. The

counsel has argued that based on audit objection, vide audit memo

CHD/IT/001/2017-18 dated 24.01.2018 proceedings u/s 154 of the Act

were initiated, by way of notice dated 08.06.2018 on the issue of machinery

repairs and maintenance of building, repairs and maintenance and interest

paid which were being duly considered by the AO, while framing the

assessment u/s 143(3) (APB pg. 68 to 71) and that in the proceeding’s u/s

154 of the act which were filed (APB, Pg. 72-115). The ld. AR also argued

that the assessee has filed detailed replies to notice of the 142(1) of the Act

along with annexure A, B & C.

proceedings u/s 263 of the Act on the same issues of machinery repairs

and maintenance, building repairs and maintenance and interest paid

8 ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO which was already verified during the assessment proceedings u/s 144 of

the Act and the proceedings u/s 154 of the Act as above. The ld. PCIT has

merely stated that the appellant assessee failed to produce copy of the

ledger account to establish and substantiate that the expense amounts

have been reflected in the accounts which do not seem to be in the nature

of current repairs and maintenance, however, the Ld. PCIT has not

established the contrary on the record with the support of corroborative

evidences in order to hold the assessment order to be erroneous and

prejudicial to the interest of the Revenue. The ld. AR further argued that

proceedings u/s 263 cannot be invoked on the basis of the audit objection.

For this purpose, the Ld. AR placed reliance on the judgment of the Hon’ble

jurisdictional Punjab & Haryana High Court in the case of CIT v. Sohana

Woollen Mills (2009) 296 ITR 0238 (APB pg. 56-59) para 7, and other

judgement as per CLPB-II.

not file any case law in rebuttal.

record. Admittedly, the Ld. PCIT passed order u/s 263 of the Act, holding

the assessment order erroneous and prejudicious to the interest of revenue

by observing that the AO failed to verify the appellants claims related

9 ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO current repairs and maintenance of machinery, current repairs and

maintenance of building and deduction of the interest out of the business

income of the assessee. The PCIT further observed that the copy of ledger

account filed by the assessee shows that substantial amounts have been

reflected in the account which do not seem to be in the nature of repair and

maintenance. The Ld. Counsel argued that the AO, even in the assessment

order passed u/s 143(3) r.w.s. 263 of the Act on 26.12.2019, has allowed

30% of machinery repair and maintenance expenses as revenue expenses

and balance 70% were treated as capital expenses. The counsel made a

reference to the provisions of section 263 of the Act and contended that

jurisdiction therein cannot be exercised if the CIT finds that order of the AO

was erroneous and prejudicial to the interest of the Revenue, because

merely a audit objection or a different view could be taken; are not enough

to show that the order of the AO was erroneous or prejudicial to the interest

of the Revenue.

head current repairs and maintenance of machinery, current repairs and

maintenance of building and interest claimed on creditors was accounted

for in the ledger, produced for verification during the course of scrutiny

assessment proceedings u/s 143(3) and 154 before the AO and duly

10 ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO stands verified to his satisfaction. The ld. PCIT has merely stated that the

AO has failed to make necessary enquiry and investigation, however he

has not specified the particular head of the account or the expense with the

support of the corroborative evidences being brought on record to hold that

how the assessment order was to be erroneous and prejudicial to the

interest of the revenue. In our view, such vague observation made by the

ld. PCIT, merely doubting the assessment proceedings cannot hold the

assessment order erroneous and prejudicial to the interest of the Revenue

and that to base on the audit objection in particular.

v. Sohana Woollen Mills (2009) 296 ITR 0238 (APB pg. 56-59) vide para 7,

observed as under:

“7. A reference to the provisions of s. 263 of the Act shows that jurisdiction there under can be exercised if the CIT finds that the order of the AO was erroneous and prejudicial to the interest of Revenue. Mere audit objection and merely because a different view could be taken; were not enough to say that the order of the AO was erroneous or prejudicial to the interest of the Revenue. The jurisdiction could be exercised if the CIT was satisfied that the basis for exercise of jurisdiction existed. No rigid rule could be laid down about the situation when the jurisdiction can be exercised. Whether satisfaction of the CIT for exercising jurisdiction was called for or not, has to be decided having regard to a given fact situation.”

the act and the replies filed, it is abundantly clear that the Assessing

11 ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO Authority has made enquiry about the expenses claimed by the appellant

assessee in respect of current repairs and maintenance of machinery,

current repairs and maintenance of building and interest claimed during the

course of assessment proceedings as well as 154 proceedings. The AO

was satisfied from the reply of the assessee and after consideration of the

reply, the AO has filed the proceedings u/s 154. The observation of the

PCIT that no enquiries or verification were made, is factually incorrect as

the sufficient enquiries were seen to be made as above. In the case of Dev

Raj Hi Tech Machines Ltd. v. DCIT (2015) 174 TTJ 0009 (Asr), the

coordinated bench vide para 7, on lack of enquiry and inadequate enquiry

has held as under:

“7. We have heard the rival parties and have gone through the material placed on record. The only question to be answered by us in the present appeal is as to whether the surrender made by assessee can be considered as business income or can be taxed as deemed income under section 69A of the Act. In this respect, let us examine the surrender letter which is placed at paper book page 46. From the above surrender letter it is apparent that assessee had made a surrender as additional income over and above the normal profits of the concern and since the income has been declared as business income, the same has to be assessed under the head business income and not as deemed income under the provisions of section 69A. The Assessing Officer had taken a plausible view while accepting the contention of the assessee. As regards the enquiries during the assessment proceedings, we find that Assessing Officer vide letter dated 15.07.2011 placed at paper book page 35 raised this issue vide para-11. The assessee filed a detailed reply under the heading justification of taxable income wherein it explained as to why the taxable income had decreased as compared to surrendered income. As per paper book page-39, the main reason for decrease in taxable profits was due to increase in depreciation and increase in bank interest. The Assessing Officer after considering this explanation had

12 ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO passed the assessment order, however, he did not mention the fact of considering this explanation in the assessment order. The only none mentioning of certain enquiries and explanations thereof, in the assessment order in itself does not give a right to Commissioner to pass order under section 263. The Hon'ble Bombay High Court in the case of CIT vs. Gabriel India Ltd. (supra) has held that where the Assessing Officer had made enquiries in regard to nature of expenditure incurred by assessee and assessee had given detailed explanation in that regard and Assessing Officer had accepted the explanation of the assessee, the decision of Assessing Officer could not be held to be erroneous simply because in his order he did not make an elaborate discussion in this regard. In the present case, the Assessing Officer raised an enquiry and assessee filed detailed reply and thereafter, Assessing Officer accepted the explanation and did not make any addition on that account. The order of Assessing Officer cannot be said to be erroneous as he has taken a plausible view, keeping in view the facts and circumstances of the case. The Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar Sharma 335 ITR 83 has held as under:

"There is a distinction between "lack of inquiry" and 'inadequate inquiry" If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Income-tax Act, 1961, merely because he has a different opinion in the matter:

“Held, dismissing the appeal, that the present case would not be one of "lack of inquiry" even if the inquiry was termed inadequate. The Tribunal found that complete details were filed before the Assessing Officer and that he applied his mind to the relevant material and facts, although such application of mind was not discernible from the assessment order. The Tribunal held that the Commissioner in proceedings under section 263 also had all these details and material available before him, but had not been able to point out defects conclusively in the material, for arriving at a conclusion that particular income had escaped assessment on account of non-application of mind by the Assessing Officer. The Tribunal was right and the order of revision was not valid."

to section 263 of the Act on imaginary foundation which is not sufficient to

hold that the Assessing Officer did not make sufficient enquiry. Without

13 ITA No. 12/Asr/2020 Amrit Parkash Sehgal (HUF) v. ITO prejudice to above, in the matter where there can be two plausible views on

the issue, then the one taken by the AO held to be justified. Accordingly,

we hold that the order passed by the PCIT was not in accordance with the

law and as such, it is quashed.

Order pronounced in the open court on 24.08.2022.

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. True Copy By Order