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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI JAMLAPPA D. BATTULL
आयकर अपीलीय �ायािधकरण, रायपुर �ायपीठ, रायपुर म�। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR (Through Virtual Court) BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI JAMLAPPA D. BATTULL, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No. 28/RPR/2021 िनधा�रण वष� / Assessment Year : 2015-2016
M J Steels Private Limited Plot No. 68, Phase II, Siltara Industrial Area Siltara, Raipur (CG) .......अपीलाथ� / Appellant PAN : AAECM0257C
बनाम / V/s. Pr. Commissioner of Income Tax-1, Raipur. (C.G.) ……��थ� / Respondent Appearances Assessee by : Shri Ramesh Kumar Singhania Revenue by : Shri P. K. Mishra सुनवाई की तारीख / Date of conclusive Hearing : 10/02/2022 घोषणा की तारीख / Date of Pronouncement : 11/03/2022 आदेश / ORDER PER JAMLAPPA D. BATTULL, AM; Against the revisionary order of Principal of Commissioner of Income Tax, Raipur [for short “PCIT”] passed u/s 263 of the Income-tax Act, 1961 [for short “the Act”] vide order dt 20/03/2021, the appellant assessee filed this appeal before Income Tax Appellate Tribunal [for short “the Tribunal”] u/s 253.
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ITA No. 28/RPR/2021 AY – 2015-2016 2. The short issue under this appeals is that, the appellant company challenged the validity of revisionary action directing the AO for fresh adjudication against an apparent error in applying the provisions of section 68 r.w.s. 115BBE of the Act.
The appellant raised a solitary legal ground in the present appeals, however before proceeding to adjudication, it is essential to reproduce effective ground/grounds challenged by the appellant assessee, as under; “1.That in the facts and circumstances of the case, the Ld. Pr. CIT, Raipur-1 failed to appreciate that the assessment order was neither erroneous nor prejudicial to the interest of revenue and as such he had no jurisdiction to interfere with the said assessment order. He further erred in holding that the assessment order was passed by Ld. AO without inquiry. Therefore, the revisionary proceeding initiated under section 263 of the Income Tax Act, 1961 is bad in law & facts, consequently revision order so passed may kindly be quashed. (Empasis Supplied)
The facts as accentuated from the records of the case pithily are; 4.1 The appellant assessee is a closely held company incorporated under the provisions of Companies Act, 1956 [for short “COA”] and engaged in the business of Manufacturing and trading of Ingot Products. For the assessment year [for short “AY”] 2015-2016 filed its e-return [for short “ROI / ITR”] on 30/09/2015 declaring NIL income with a carried forward of unabsorbed depreciation of ₹50,49,804/-. The case of the appellant company was selected for scrutiny under CASS and the assessment u/s 143(3) was completed with an addition of ₹1,08,00,000/- u/s 68 of the Act, as unexplained cash credit.
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ITA No. 28/RPR/2021 AY – 2015-2016 4.2 Concurring with the findings of the assessing officer, Ld PCIT invoked the revisionary powers vested in him by virtue of section 263(1) and betokening an apparent error, directed the Ld AO to reframe the assessment on the basis of concluded findings by bringing to tax the amount of sale consideration ₹4,98,11,600/- by an application of provisions of section 68 r.w.s. 115BBE of the Act.
4.3 Pending such direction before the Ld. AO, the appellant company opposed the revisionary action of Ld PCIT before this Tribunal for justice on a solitary legal ground alleging that, order of the Ld AO is neither erroneous nor prejudicial to the interest of the revenue.
After hearing to the rival contention of both the parties; perused material placed on record and duly considered the facts of the case in the light of settled legal position and the case law relied upon by the appellant assessee as well the respondent revenue.
It is evidently discernible form the records are that; 6.1 The primary issue in the present controversy is, as to whether or not the order passed by the assessing officer u/s 143(3) can be said to be erroneous and prejudicial to the interest of the revenue within the preview of section 263 of the Act.
6.2 It makes it necessary to make a note that, during the course of regular scrutiny assessment proceedings, a statutory notice u/s 143(2) was issued & served on 11/04/2016 and in compliance thereof the authorised representative [for short “AR”] Shri RK Singhania, CA & Shri Vijay Mohan Sharma, Adv appeared and made submissions. On the detailed scrutiny of records Ld AO made comparative observations including decrease in the profitability ration of the assessee company
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ITA No. 28/RPR/2021 AY – 2015-2016 over past three years, further acceptance of new unsecured loans and a sale of property which remained untaxed.
6.3 In order to verify the threefold attributes of fresh unsecured loan such as identification, creditworthiness and genuineness thereof, Ld AO queried & directed assessee company to prove on record the same in the following cases;
Amount of Loan Outstanding Loan Sr Name of the Lender Received During amount as on the Year (Rs) 31-03-2015 (Rs) 1 Diamond Financial Services Pvt Ltd 10,00,000 10,00,000 2 Veenapani Vinimay Pvt Ltd 83,00,000 83,00,000 3 Sun Bright Agencies Pvt Ltd 15,00,000 15,00,000
In reply thereof, the Ld AR / assessee filed copies of acknowledgement of return, photocopies of account confirmation, audit report and bank statements of aforesaid lenders. However, on a verification of bank statement of aforesaid lenders placed on record revealed that, there were extensive cash deposit found made into the bank accounts immediately preceding the date of loan transfer to appellant assessee. Consequently, to verify the genuineness of such loan transaction, the Ld. AO through a registered post issued notices u/s 133(6) of the Act to aforesaid lending companies, which were invariably returned unserved by the postal authorities with a remark either “Not Known” or “Left”.
6.4 On failing the first test of verification as aforestated, the Ld AO sought clarification from the assessee and in reply to which the assessee reiterated its submission with the details of directors, copies of confirmation letters, details of turnover, copies of PAN (wherever possible) and after considering the same Ld AO
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ITA No. 28/RPR/2021 AY – 2015-2016 summoned the lenders u/s 131 calling upon the following directors to examine them on oath;
Sr Name of the Lender Directors summoned for verification 1 Diamond Financial Services Pvt Ltd Shri Kuldeep Jain 2 Veenapani Vinimay Pvt Ltd Shri Mukesh Kumar Agrawal 3 Sun Bright Agencies Pvt Ltd Shri Jagdish Prasad Gehi
Neither of these summoned director attended for establishing on records the genuineness of loan transactions, except Mr Vikram Singh for Veenapani Vinimay Pvt Ltd attended as director who could not confirm the fact whether any such loan was given by his company to the appellant assessee under consideration.
6.5 In the event of failure to establish the identity, creditworthiness and genuineness of loan transaction, Ld AO following principle of natural justice, issued a subsequent show cause notice dt 18/12/2017 to showcase as to why; a. Such amount of unsecured loan credited in the books of account should not be treated as unexplained cash credit u/s 68 of the Act and
b. An amount of ₹4,98,11,600/- claimed to have received from Jenco Developers Pvt Ltd against the sale of shop, in the absence of registered sale agreement should not be treated as accommodation entry & brought to tax as income u/s 68 r.w.s. 115BBE of the Act.
6.6 When no response in a reasonable time forthcoming from the assessee company, the Ld AO before concluding the assessment proceedings, in order to concretise his findings, issued a commission u/s 131(1)(d) of the Act to the Deputy Director of Income Tax (Investigation), Unit-1(1) of Kolkata [for short “DDIT(Inv)”], whose
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ITA No. 28/RPR/2021 AY – 2015-2016 report is placed on record as an integral part of assessment order with the conclusive findings which reads as under;
Credit Sr Name of the Lender / Concern Identity Genuineness Worthiness 1 Veenapani Vinimay Pvt Ltd Not Found - - 2 Jenco Developers Pvt Ltd Established Established Not Established
6.7 Much before the formation of opinion and conclusion of assessment proceedings u/s 143(3), following the principle of ‘audi alteram partem’, a statement recorded during the course of assessment proceedings and a copy of report of DDIT(Inv) were made available to the assessee company for cross examination & rebuttal.
6.8 Seizing the findings as regards to failure on the part of appellant company to establish genuineness of loan transactions and failure to substantiate its claim of receipt as sale consideration from the sale of immovable property, the Ld AO relying on catena of judicial pronouncement in the light of deprecative evidences brought on record, culminated the assessment proceedings with a solitary addition of ₹1,08,00,000/- u/s 68 holding the unsecured loan as unexplained cash credit and let slip memory from taxing the receipt on the basis of concluded findings.
6.9 Whereas none of the parties are in appeals against the aforesaid concluded 143(3) assessment. Concurring with the findings of the assessing officer, Ld PCIT invoked the revisionary powers vested in him by virtue of section 263(1) and by an order directed the Ld AO for a limited purpose for correcting the apparent grievous mistake of not taxing the receipt of ₹4,98,11,600/- in-spite holding it as an accommodation entry, which found to shown as arising out of sale of property by the assessee.
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ITA No. 28/RPR/2021 AY – 2015-2016 7. During this appellate hearing, the Ld AR in his submission solely relied upon catena of judicial pronouncement in support of solitary legal ground raised in this appeals, whereas the Ld departmental representative [for short “DR”] supported the 263 revisionary order for an apparent mistake of not bringing to tax the amount arisen on duly concluded findings and prayed for confirming the order under dispute.
At this juncture, without going into the merits of the case, we first deal with the solitary legal ground raised by the appellant company and to hit the ball on the head, it will be apt to reproduce the provision of section 263(1) in verbatim as it stood and applicable to the AY under consideration; 8.1 “263. Revision of orders prejudicial to revenue – (1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous insofar as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.”
(2) No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. (Empasis Supplied)
8.2 A plain reading of this provision makes it clear that, the precondition to exercise revisionary jurisdiction by the PCIT/CIT suo moto under it, is that the order of AO is erroneous insofar as it is prejudicial to the interests of the revenue is concern. Consequently, the provision mandates the satisfaction of existence of twofold
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ITA No. 28/RPR/2021 AY – 2015-2016 conditions before invocation and these explicitly are; (i) the order of the assessing officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If any one of two is absent or unsatisfied, that is where the order of the assessing officer is erroneous but is not prejudicial to the revenue or where order is not erroneous but is prejudicial to the revenue, then the recourse to Section 263(1) of the Act fails.
8.3 Albeit the foresaid twin satisfaction drawn from the assessment records may trigger the revisionary jurisdiction, yet such shall not automatically empower the revisionary tax authorities to conclude the revision proceedings without obeying additional dual riders such as; (i) making or causing to be made such inquiry as necessary and (ii) according an opportunity of being heard to the assessee following the principle of natural justice.
8.4 In the light of aforesaid provisions of law, it is of paramount importance to note that, an incorrect assumption of facts or an incorrect application of law or passing an order without application of mind or without applying the principle of natural justice, shall discretely be sufficient to hold the order being erroneous. Albeit the term prejudicial to the interests of the revenue is not at all defined in the Act, but is needs to be understood in its ordinary meaning and it is of wide import and is not confined to mere loss to an ex-chequer.
8.5 Having said so, where the revisionary proceedings are concluded entirely in concurrence of assessment proceedings and thereby betokening the mistake apparent on the face of the assessment order, where concluded finding of assessment remained
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ITA No. 28/RPR/2021 AY – 2015-2016 untaxed, shall clearly validate the revisory action and jurisdiction u/s 263 for the protection loss of revenue to the ex-chequer.
8.6 In the light of ration laid down by Hon’ble Supreme Court of India on the subject matter, we have the audacity to summarise the inferential but harmonious analysis of revisionary provision laid in section 263 of the Act, into a five steps “Queen Principle”, falling the case into shall embark the tax authorities from assuming revisionary jurisdiction u/s 263, and these steps are; a. There must be an explicit query from the adjudicating tax authority as regards to any claim made including information supplied in the return of income filed or to be filed, and b. There must be direct, clear and an unreserved submission from the assessee in reply to aforesaid query, and c. The submission must be followed by detailed inquiry (and not enquiry) by the tax authorities into assessee’s eligibility of claim, basis of claim and compliance of pre as well post conditions as may be attached to the claim under scrutiny, and d. There should be even-handed application of mind by the adjudicating authority in reaching out the allowability or dis-allowability of claim under consideration, e. And finally, the adjudication must ensure the correct application of law as regards to aforesaid upholding the principle of natural justice.
In the instant appeal, considering the facts of the case extenso, we find that, pursuant to queries raised by the Ld AO, the submissions were made by the appellant company and a consequential due inquiry into the subjected transaction laid to tangible deprecative evidential findings in disapproving the claim of the appellant company with respect to receipt from sale of property as genuine transaction. However the Ld AO
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ITA No. 28/RPR/2021 AY – 2015-2016 merely left the elephant in the room unattended and framed the assessment losing the sight and ignoring to bring such receipt to tax, this is nothing but a grievous error vis-à-vis incorrect computation on the part of Ld AO, which undoubtedly and authoritatively triggered the provisions of section 263(1) of the Act, and such a case does finds a place within the ration laid by the Hon’ble lordship in a celebrated case of “Malabar Industrial Co Ltd. Vs CIT” reported in 243 ITR 83, the para 9 of which read as; “There must be some grievous error in the Order passed by the Income-tax Officer, which might set a bad trend or pattern for similar assessments, which on a broad reckoning, the Commissioner might think to be prejudicial to the interests of Revenue Administration. In our view this interpretation is too narrow to merit acceptance. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue” (Empasis supplied)
We find that, the Ld PCIT during the revisionary proceedings made a categorical findings that, the Ld AO in the light of conclusion reached upon the necessary inquiry conducted and placing the deprecative evidential material on records lost the sight while passing the impugned order of assessment without bringing the amount of receipt from sale of property to tax as unexplained cash credit u/s 68 of the Act, hence in our considered opinion the conclusion drawn by the Ld PCIT is irresistible. We are, therefore applying the ration drawn by Hon’ble Apex Court in Malabar Industries Co (Supra) are of the strong view that, the action of Ld PCIT is perfectly sustainable in law, to the effect holding the order of assessment as erroneous & prejudicial to the interest of revenue, ergo we find no infirmity with the direction of 263 revisionary order, thus the solitary legal ground of the appellant is dismissed.
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ITA No. 28/RPR/2021 AY – 2015-2016 11. Before parting, we shall make a mention that, in the instant case, the assessment order sought to be revised was passed on 26/12/2017, whereas a SCN u/s 263 was issued on 09/03/2020, however the revisionary order was passed on 20/03/2021. Albeit the period of two years from the end of relevant financial year in which the order sought to be revised was ended on 31/03/2020, however in the light of direction of Hon’ble Apex Court vide MA 21 & 29 of 2022, MA 665 of 2021 and Suo-motu WP 3 of 2020, the foresaid 263 order falls within the permitted relaxation period of limitation i.e. between 15/03/2020 to 28/02/2022, consequently the aforesaid revisionary order fraternised within the provisions of 263(2) of the Act.
Resultantly, the appeal of the appellant assessee is dismissed, with no order as to cost. Order pronounced on this Friday, 11th day of March, 2022.
Sd/- Sd/- RAVISH SOOD JAMLAPPA D. BATTULL JUDICIAL MEMBER ACCOUNTANT MEMBER रायपुर / RAIPUR ; िदनांक / Dated : 11th March, 2022 आदेश की �ितिलिप अ�ेिषत / Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant. 2. ��थ� / The Respondent. 3. The CIT (Appeals), Raipur (C.G) 4. The Pr. CIT, Raipur (C.G) 5. िवभागीय �ितिनिध,आयकर अपीलीय �ायािधकरण, रायपुर ब�च, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6. गाड�फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // िनजीसिचव / Private Secretary आयकर अपीलीय �ायािधकरण, रायपुर ब�च, रायपुर / DR, ITAT, Raipur
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