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Income Tax Appellate Tribunal, DELHI BENCH ‘F’: NEW DELHI
1 ITA No. 1886/Del/2022 Rits Jewelers Pvt. Ltd. Vs. Pr. CIT IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE, DR. B.R.R.KUMAR, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER
ITA No.1886/Del/2022 (ASSESSMENT YEAR 2015-16)
Rits Jewellers Pvt. Ltd., Pr. CIT, C/o IPSO Legal H-35, Faridabad 1st Floor, Jangpura Vs. Extension, New Delhi-110 014 PAN-AAFCR 8802D (Appellant) (Respondent)
Appellant by Mr. Rajiv Saxena, and Mr. Dishant Sethi, Advocates Respondent by Mr. T. Kipgen, CIT-DR Date of Hearing 08/06/2023 Date of Pronouncement 27/07/2023
ORDER PER YOGESH KUMAR U.S., JM:
This appeal has been filed by Assessee against the order passed by the Learned Principal Commissioner of Income Tax, Faridabad [“Ld. Pr. CIT”, for short], dated 28/08/2019 for Assessment Year 2015-16.
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The grounds raised by assessee in this Appeal which are as under:
“1. That the Ld. Pr. Commissioner of Income Tax erred in law and on facts in assuming jurisdiction u/s 263 of the Act IT Act, 1961 by setting aside the assessment made u/s 263 without appreciating: a. that the assessment order was passed after verification and due enquiry as required under the Act during the course of the assessment b. that assumption of jurisdiction cannot be made merely on surmises, conjectures and misconceived premise.
c. that neither there was any adverse material in respect of credits received by the assessee, found by the AO nor by the Pr. CIT u/s 263 before initiating the proceeding as no enquiry was made by Pr. CIT in arriving at conclusion which is contrary in view of the jurisdictional and other High Courts and the Apex Court. d. that once the sums have been received through banking channels and complete evidences was provided during the course of the assessment, suspicion raised purely on assumptions is wholly unsustainable in law.
That without having any material on record the assessment order passed u/s 143(3) of the Act accepting the returned income filed by assessee being neither erroneous nor prejudicial to the interest of revenue and as such the order passed u/s 263 of the Act directing to make a fresh assessment is without any basis, bad in law and liable to be quashed.
The above grounds are without prejudice and independent of each other.
Appellant craves leave to amend, add or modify any of the above grounds of appeal during the course of hearing.”
There is a delay of 1025 days in filing the present appeal. The
assessee filed an application for condoning the delay on the ground of ‘Covid
Situations’ and took shelter under the order of the Hon'ble Supreme Court in
Re:Cognizance for extension of limitation made in writ petition (C) No. 3 of
2020. Further submitted that, due to post covid pandemic situations, the
3 ITA No. 1886/Del/2022 Rits Jewelers Pvt. Ltd. Vs. Pr. CIT
earlier counsel was suffering from serious illness and on account of highly
diabetic conditions, the assessee was not able to file the Appeal on time, thus,
prayed or condoning the delay in filing the appeal. Considering the reasons
assigned in the application for condonation of delay, the delay in filing the
present appeal is condoned.
Brief facts of the case are that, the assessment was completed u/s 143(3)
of the Act on 12/04/2017 at returned income of Rs. 2,07,909/-. The case was
selected for ‘limited scrutiny’ through the CASS to verify large share premium
received during the year. Notice u/s 143(2) of the Act was issued and the
assessment order came to be passed on 12/04/2017 u/s 143(3) of the Act by
assessing the income of the assessee at Rs. 2,07,909/- at the returned income.
An order u/s 263 of the Act came to be passed against the assessee on
28/08/2019 by the Principal Commissioner of Income Tax, Faridabad (‘PCIT’
for short) declaring that the assessment order passed u/s 143(3) of the Act
dated 12/04/2017 is erroneous and also prejudicial to the interest of the
Revenue, thus, cancelled the assessment order. Further, directed the A.O. to
make proper enquiry to verify the issue relating to the investor before
completing the assessment. Aggrieved by the impugned order dated
28/08/2019 passed by the PCIT, the assessee in Appeal on the grounds
mentioned above.
4 ITA No. 1886/Del/2022 Rits Jewelers Pvt. Ltd. Vs. Pr. CIT
The Ld. Counsel for the assessee vehemently submitted that PCIT was of
the erroneous opinion that AO had completed the scrutiny assessment without
making any requisite verification w.r.t. issues raised in connection with share
premium and share capital of Rs.49,00,000/- receive from M/s Texcity
Construction Kovai Pvt. Ltd., but during the course of assessment after issuing
notice u/s 143(2) of the Act on 8th July 2016, a Notice u/s 142(1) was issued
and detailed questionnaire seeking information specifically on share premium,
was served on the assessee. A detailed reply submitted by the Assessee during
the course of assessment proceedings along with documents relating to
investor such as bank account statement, Form PAS 3 along with the list of
allottees, share certificate in favour of M/s Texcity Construction Kovai Pvt. Ltd,
ITR and computation of income of investor, Ledger confirmation of account of
investor company, Balance sheet and P&L account of investor company,
Valuation report. Further submitted that the assessment order for AY 2014-15
dated 19-04-2016 which was also revised by the same Pr.CIT on 29-03-2019,
after giving show cause notice u/s 263 on 19-02-2019. The said order was
challenged before the Tribunal who have quashed the order of PCIT vide order
dated 02-09-2022 in ITA no. 6226/Del/2019 for AY 2014-15 in Assessee’s own
case, wherein also on similar ground of investment in shares by various
companies including M/s Texcity Constructions Kovai Pvt. Ltd. was treated to
be not examined. Therefore submitted that, the present Appeal is deserves to
be allowed.
5 ITA No. 1886/Del/2022 Rits Jewelers Pvt. Ltd. Vs. Pr. CIT
Per contra, the Ld. Departmental Representative relied on the orders of
the Ld. PCIT-7 and submitted that the assessee will not be prejudiced and if
the A.O verifies the details as per the directions of the PCIT and prayed for
dismissal of the Appeal. We have heard both the parties and verified the
material available on record. It is seen from the record that the Ld. A.O. during
the assessment proceedings issued notice u/s 142(1) of the Act requiring to
furnish the relevant information and details. In response, the assessee through
its AR filed hard copies of return computation of total income, financial
statements including balance sheet and profit and loss account along with its
annexure, bank statement and various other necessary details as well as other
relevant documentary evidence relatable to the income of the assessee.
Further, in reply to the notice dated 03/01/2017 issued by the A.O., the
assessee submitted the following documents which are reproduced in the
paper book which includes the details of investor company i.e Texcity
Construction Kovai Pvt.
• Bank account statement along with the Bank 16-17 Book of assessee company. • Form PAS-3 along with List of allotees. 18-23 • Share Certificate issued by assessee company in 24 favour of M/s Texcity Construction Kovai Pvt. Ltd. (investor co.) 25-26 • ITR and computation of income of investor co. 27-35 • Ledger confirmation of accounts of investor co. 36-52 • Balance Sheet and P/L of investor co. 53-54 • Valuation report. 55-56 • Form 26AS 57-59 • Assessment order for AY 2014-15 dated 19.04.2016.
6 ITA No. 1886/Del/2022 Rits Jewelers Pvt. Ltd. Vs. Pr. CIT
After verifying the above documents, the total income of Rs. 2,07,909/-
as returned by the assessee is accepted by the A.O. The Ld. CIT(A) while
exercising power conferred u/s 263 of the Act was of the opinion that the
Assessing Officer has not made any enquiry with regard to genuineness and
creditworthiness of the investor Companies i.e. Share Capital of Rs.
49,00,000/- from Texcity Construction Kovai Pvt. Ltd.
When all the explanations and documents from the assessee has been
scrutinized and examined by the Assessing Officer, in such scenario the order
of the assessment cannot be held to be erroneous and prejudicial to the
interest of the Revenue. In this regard, reliance can be placed on the decision
of the Hon’ble Bombay High Court in the case of CIT vs. Gabriel India Ltd., 203
ITR 108 (Bombay) which was followed by the Hon’ble Delhi High Court in the
case of CIT vs. Sunbeam Auto Ltd., 332 ITR 167 (Delhi) and in the case of CIT
vs. Anil Kumar Sharma, 335 ITR 83 (Delhi). The relevant paragraphs of the
decision of the Hon’ble Delhi High Court in the case of Sunbeam Auto Ltd.
(supra) are extracted hereunder :-
“We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order which apparently does not give any reasons while allowing the entire
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expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the 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 Act, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry", that such a course of action would be open. In Gabriel India Ltd.'s case (supra), law on this aspect was discussed in the following manner : " . . . From a reading of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he 6 ITA No.170/PUN/2021 considers that any order passed therein by the Income-tax Officer is 'erroneous insofar as it is prejudicial to the interests of the revenue'. It is not an arbitrary or unchartered power. It can be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous insofar as it is prejudicial to the interests of the revenue must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. [See : Parashuram Pottery Works Co. Ltd. v. ITO[1977] 106 ITR 1 (SC) at page 10]. ......”
It is relevant to observe that the similar observations have been made
for the Assessment Year 2014-15 in assesse’s own case by the PCIT while
passing order u/s 263 of the Act regarding various companies including
8 ITA No. 1886/Del/2022 Rits Jewelers Pvt. Ltd. Vs. Pr. CIT
business Texcity Construction Kovai Pvt. Ltd. and the said issue has been
dealt and decided by the Co-ordinate Bench of the Tribunal in ITA No.
6226/Del/2016 (A.Y 2015-16) in following manners:-
It is seen from the Record that the Ld. A.O., during the Assessment proceedings not only called for the record from the Assessee to submit, issued the questioners to the Assessee, but also issued Notice under Section 133(6) of the Act to the firms from whom the Assessee had the transactions calling upon them to produce the Balance sheet, Ledger and the ITR for the purpose of verifying the creditworthiness of the creditors. The said details were made available to the AO by the Creditors and also the Assessee respectively, which are produced by the Assessee before us by way of Paper Books, which are as under:-
: : :
Texcity Constructions Pvt. Ltd. 22.02.2005 i. Form 1 Certificate of 299-308 Incorporation along with memorandum and articles of association AoA ii. Auditors report and balance 309-318 sheet and profit and loss account for F.Y 2012-13-14 relevant to A.Y 2104-15 18.09.2015 iii. Acknowledgement of return of 389 income along with computation of income 01.04.2014 iv. Confirmation of accounts 320 15.05.2013 v.Bank statement of IDBI bank 321-323 04.03.2015 vi. Intiamtion u/s 143(1) of the 324-328 Income Tax, 1961
9 ITA No. 1886/Del/2022 Rits Jewelers Pvt. Ltd. Vs. Pr. CIT . . . . . .
Thus, from the above it is evident that the Ld. A.O. not only made detail enquiry with the Assessee but also by issuing the Notice under Section 133(6)of the Act to the Creditors and after obtaining the details and convincing himself, found that the Creditors are genuine and passed the Assessment Order in-favour of the Assessee.
Further, there was no material brought by the Pr. CIT to observe that “no verification was made during the course of the assessment by the A.O.” On the other hand, it is seen from the record that, the Ld. A.O. has made detailed enquiry, considered all evidence and arrive to a conclusion to accepted the income declared by the Assessee. Thus, in our opinion, the Pr. CIT has only expressed the different view which is not permissible under Section 263 of the Act. Revisionary power u/s 263 of the Act is conferred by the Act on the Commissioner when an order is passed by the Authority is erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue, but which are passed after inquiry/investigation on the question/issue are not per se are normally treated as erroneous and prejudicial to the interest of the Revenue. Because, the Revisionary Authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken, the same cannot be initiated without following the proper provisions u/s 263 of the Act.
10 ITA No. 1886/Del/2022 Rits Jewelers Pvt. Ltd. Vs. Pr. CIT
In the present case the Assessing Officer has made all the inquiries and after verifying the documents/ material on record passed a reasoned Assessment Order. Therefore, the Commissioner does not have any locus standi to make further inquiry. The decision of the Hon'ble Supreme Court in case of CIT vs. Max India Ltd 295 ITR 282, Malabar Industrial Co. Ltd. vs. CIT 243 ITR 83 are aptly applicable in the present case as the Hon'ble Apex Court wherein it is held that Section 263 has to be read in conjunction with the expression "erroneous" order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the 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. The case laws relied by the Revenue in respect of Section 263 also reiterates the said ratio as well. Some of the decisions relied by the Revenue are not at all applicable in the present case as distinguishing facts involved in those cases. Therefore, order u/s 263 of the Act in present appeal is not justified. Accordingly, we allow the Grounds of Appeal of the assessee and the order u/s 263 is passed by the Principal Commissioner of Income Tax is set aside.”
11 ITA No. 1886/Del/2022 Rits Jewelers Pvt. Ltd. Vs. Pr. CIT
Considering the fact that the issue regarding the share premium and share capital from Texcity Construction Kovai Pvt. Ltd. has been already examined in the Assessment Year 2014-15 wherein the order revising the assessment order u/s 263 of the Act was quashed by the Tribunal, apart from the same, since the assessee has furnished all the relevant documents pertaining to investment before the A.O., during the assessment proceedings, the impugned order made by the PCIT u/s 263 of the Act liable to be set aside, accordingly we allow the grounds of Appeal of the assessee and the impugned order made u/s 263 of the Act by the PCIT is set aside and the Appeal of the assessee stands allowed. Order pronounced in open Court on 27th July, 2023
Sd/- Sd/- (DR. B.R.R.KUMAR) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 27/07/2023 Pk/R.N Sr.ps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT
ASSISTANT REGISTRAR ITAT, NEW DELHI
12 ITA No. 1886/Del/2022 Rits Jewelers Pvt. Ltd. Vs. Pr. CIT