Loading judgment…

Daffodills Pharmaceuticals Ltd… vs PCIT | ITAT Delhi 2023 | BharatTax

DAFFODILLS PHARMACEUTICALS LTD,MEERUT vs. PCIT, GHAZIABAD

ITA 1148/DEL/2022Status: DisposedITAT Delhi19 September 2023AY 2012-13Bench: SHRI N. K. BILLAIYA (Accountant Member), SHRI YOGESH KUMAR U.S. (Judicial Member)23 pages

No AI summary yet for this case.

Cases cited in this judgment

Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.

CIT v. Gabriel India Ltd.
203 ITR 108 · 1993 · HC
990 citing
CIT v. Sun Engineering Works (P) Ltd.
198 ITR 297 · 1992 · SC
814 citing
CIT v. Jet Airways (I) Ltd.
331 ITR 236 · 2011 · HC
694 citing

Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI

For Appellant: Mr. K. Sampath and Sh. V. Rajakumar, Advs

For Respondent: Mr T. James Singson, CIT-DR

Hearing: 08/08/2023Pronounced: 19/09/2023

Appellant by Mr. K. Sampath and Sh. V. Rajakumar, Advs. Respondent by Mr T. James Singson, CIT-DR Date of Hearing 08/08/2023 Date of Pronouncement 19/09/2023 ORDER

PER YOGESH KUMAR U.S., JM:

1.

This appeal by assessee is directed against order of Principal CIT passed u/s 263 of the Income Tax Act, 1961 (“the Act” for short) for the assessment year 2012-13 dated 29.3.2022. The assessee has raised following grounds of appeal:

Daffodills Pharmaceuticals Ltd. vs. PCIT

“1. That having regard to facts & circumstances of the case, Ld. Pr.CIT has erred in law and on facts in assuming jurisdiction u/s 263 of Income Tax Act, 1961 and has erred in holding the reassessment order dated 29-12-2019 as erroneous as well as prejudicial to the interest of revenue and that too by recording incorrect facts and findings and in violation of principles of natural justice.

2. That having regard to facts & circumstances of the case, Ld. Pr.CIT has erred in law and on facts in setting aside the reassessment order dated 29-12-2019 and directing the assessing officer to make the assessment afresh after taking into account the alleged facts mentioned in para 4.1 to 4.7 after due verification and inquiry in this case and after taking input from the CBI wing relating to this case and pass an appropriate order as per the provisions of Income Tax Act and that to by recording incorrect facts and findings and without observing the principles o natural justice and more particularly when all the necessary details/information/evidences were examined at the time of re- proceedings.

3. That having regard to facts & circumstances of the case, Ld. Pr.CIT has erred in law and on facts in observing as under:- • That the assessee company is involved in HRHM Scam. • That there is a difference of Rs.12,98,24,582/- between the turnover and credits in bank account. • That the issue of section 40A(2)(b) has not been examined. • That the depreciation of Rs.2,29,125 is not allowable.

Daffodills Pharmaceuticals Ltd. vs. PCIT a lesser tax than was just has been imposed. Thus under s. 263 the revisionary power can be exercised only if the order of the AO is erroneous and prejudicial to the interests of Revenue. In the absence of any one of the said conditions the revisionary power cannot be exercised by the ld. PCIT. The Supreme Court in the case of Malabar Industrial Co. Ltd. vs. ld. PCIT (supra) has observed as follows : "A bare reading of s. 263 of the IT Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the CIT suomotu under it, is that the order of the ITO is erroneous insofar as it is prejudicial to the interest of the Revenue. The CIT has to be satisfied of twin conditions, namely, (i) the order of the AO sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent—if the order of the ITO is erroneous but is not prejudicial to the Revenue or if it not erroneous but is prejudicial to the Revenue—recourse cannot be had to s. 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the AO, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the Revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning, it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task js entrusted to the Revenue. If due to an erroneous order of the ITO, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of the AO, cannot be treated as prejudicial to the interests of the Revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law."

“The effect of s. 147 as it now stands after the amendment of 2009 can be summarized as follows : (i) The AO must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year; (ii) Upon the formation of that belief and before he proceeds to make an assessment, reassessment or re-computation, the ld. AO has to serve on the assessee a notice under sub-s. (1) of s. 148; (iii) The ld. AO may assess or reassess such income, which he has reason to believe, has escaped assessment and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section; and (iv) Though the notice under s. 148(2) does not include a particular issue with respect to which income has escaped assessment, he may nonetheless, assess or reassess the income in respect of any issue which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. Upon the formation of a reason to believe under s. 147 and following the issuance of a notice under s. 148, the AO has the power to assess or reassess the income, which he has reason to believe had escaped assessment and also any other income chargeable to tax. The words "and also" cannot be ignored. The interpretation which the Court places on the provision should not result in diluting the effect of these words or rendering any part of the language used by Parliament otiose. Parliament having used the words "assess or reassess such income and also any other income chargeable to tax which has escaped assessment", the words "and also" cannot be read as being in the alternative. On the contrary, the correct interpretation would be to regard those words as being conjunctive and cumulative. It is of some significance that Parliament has not used the word "or". The legislature did not rest content by merely using the word "and". The words "and", as well as "also" have been used together and in conjunction. The words 'such income' refer to the income chargeable to tax which has escaped assessment and in respect of which the AO has formed a reason to believe that it has escaped assessment. Hence, the language which has been used by Parliament is indicative of the position that the assessment or reassessment must be in respect of the income in respect of which he has formed a reason to believe that it has escaped assessment and also in respect of any other income which comes to his notice subsequently during the course of the proceedings as having escaped assessment. If the income, the escapement of which was the basis of the formation of the reason to believe is not assessed or reassessed, it would not be open to the AO to independently assess only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment. If upon the issuance of a notice under s. 148(2), the AO accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issue independently. Parliament when it enacted the provisions of s. 147 w.e.f. 1st April, 1989 clearly stipulated that the AO has to assess or reassess the income which he had reason to believe had escaped assessment and also any other income chargeable to tax which came to his notice Page 16 of 23 Daffodills Pharmaceuticals Ltd. vs. PCIT during the proceedings. In the absence of the assessment or reassessment of the former, he cannot independently assess the Parliament, when it enacted the Exp/n. 3 to s. 147 by the Finance (No. 2) Act, 2009 clearly had before it both the lines of precedent on the subject. The precedent dealt with two separate questions. When it effected the amendment by bringing in Expln. 3 to s. 147, Parliament stepped in to correct what it regarded as an interpretational error in the view which was taken by certain Courts that the AO has to restrict the assessment or reassessment proceedings only to the issues in respect of which reasons were recorded for reopening the assessment. The corrective exercise embarked upon by Parliament in the form of Expln. 3 consequently provides that the AO may assess or reassess the income in respect of any issue which comes to his notice subsequently in the course of the proceedings though the reasons for such issue were not included in the notice under s. 148(2). Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under s. 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the AO could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Exp/n. 3 by the Finance Act (No. 2) of 2009. However, Expln. 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of s.