Income Tax Appellate Tribunal - Chandigarh
R.P. Foundary (P) Ltd., Mandi ... vs Assessee on 15 March, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER
AND MS. RANO JAIN, ACCOUNTANT MEMBER
ITA No.422 /Chd/2015
( Assessment Year : 2010-11)
M/s R.P. Foundary (P) Ltd., Vs. The Principal C.I.T.(Central)
Mandi Gobindgarh. Ludhiana.
PAN: AACCR8095F
(Appellant) (Respondent)
Appellant by : Shri Sudhir Sehgal
Respondent by : Shri Sushil Kumar, CIT DR
Date of hearing : 12.01.2016
Date of Pronouncement : 15.03.2016
O R D E R
PER RANO JAIN, A.M. :
This appeal filed by the assessee is directed against the order of learned Commissioner of Income Tax (Central), Ludhiana dated 16.03.2015, passed under section 263 of the Income Tax Act, 1961 (in short 'the Act').
2. Briefly, the facts of the case are that the assessee filed return declaring income of Rs.59,55,040/- as on 9.8.2012. The assessment was completed under section 153A as on 25.3.2013 making 2 assessment at an income of Rs.1,35,89,928/-. The Commissioner of Income Tax issued a show cause notice under section 263 of the Act, dated 8.1.2015, which reads as under :
"A search u/s 132 of the I.T. Act, 1961 was conducted on 30.06.2010 in Narain and Company Group of cases. The assessee company M/s R.P. Foundary (P) Ltd., Mandi Gobindgarh belongs to Narain and Company Group of cases. The return of income for A.Y. 2010-11 declaring income of Rs.59,55,040/- was filed on 09.08.2012. Assessment was completed determining total income of Rs.1,35,89,928/- vide order dated 25.03.2013 passed u/s 153A r.w.s. 143(3) of the I.T. Act.
2. After going through the assessment records and the relevant seized material, it is noticed that assessment order is erroneous in as much as it is prejudicial to the interest of revenue for the reasons given below :-
In the course of search, inter-alia; a note-book (Ledger) marked as A-2 was found and seized from the residential premises of Sh. Narain Singla. Aforesaid ledger recorded details of unaccounted purchases and sale etc. As per facts discussed from page 2 to 8 of the assessment order for A.Y. 2010-11, there are unrecorded purchases of Rs.8,12,01,500/- and unrecorded sales of Rs.7,65,43,329/-. On the basis of above working of unrecorded purchases and sale, A.O. has computed peak investment of Rs,i,25,54,782/~ apart from profit on the unaccounted sales. Since assessee had already declared an amount of Rs.50 lac, A.O, made further addition of Rs.75.54 lacs (Rs.1,25,54,782 - Rs.50,00,000/-).
3. However, on perusal of the aforesaid ledger, it is found that following transactions as per Annexures given in the below-mentioned table though recorded in the ledger 3 do not find place in the details of purchase and sale recorded on page 3 to 8 of the assessment order. It therefore follows that all the transactions recorded in the aforesaid ledger have not been taken into account for computing the peak investment and profit on the sales and consequentially additions made :-
Sr. Particulars Amount Annexure
No.
1. Details of date- Rs.65,91,496/- Ann. 1
wise unaccounted
sales.
2. Details of date-wise Rs.2,51,99,926/- Ann. II (Page 3)
unaccounted sales Total tax :
(tax details) Rs.2,76,814/-
3. Details of date-wise Rs.21,83,083/- Ann. Ill
unaccounted
purchase
4. Thekdar (Debit Rs.28,19,608/- Ann. IV
Amount not entered
in assessment
order).
5. Details of purchase Rs.14,00,480/- Ann. V
Birdi - Delux (not
entered in
assessment order)
6. Details of entries of Rs.66,081/- Ann. VI
Lime stone (Debit
amount not entered in
assessment order)
4. It is also relevant to state here that while allowing set off of profits on unaccounted sales recorded in this ledger from the peak investment of Rs.1,25,54,7827-, A.O. has considered the profit element even on the sales made after the date on which the peak investment has been considered by the A.O. which in my considered opinion is not proper. In other words, profit element on the sales made after 11.01.2010; the date on which the peak investment of Rs.1,25,54,782/- has been adopted by the A.O. for making addition (A.O. has allowed set off of profit element on whole 4 of the sales including the sales made after the date of peak investment) would not be available with the assessee for making the peak investment.
5. In the light of the aforesaid facts, it is considered that the order passed u/s 153A r.w.s. 143(3) of the Act dated 25.03.2013 by the DCIT, Central Circle-Ill, Ludhiana is prima facie erroneous in so far as it is prejudicial to the interest of revenue. You are, therefore, requested to show cause as to why the aforesaid order dated 25.03.2013 passed u/s 153A r.w.s. 143(3) of the Act for the A.Y.2010-11 should not be revised/modified/enhanced or set aside with the directions to make the assessment denovo.
6. For this purpose, you are hereby given an opportunity of being heard either in person or through an authorized representative in my office situated at Kitchlu Nagar, 2nd Floor, Near B.V.M. School, Ludhiana on 20.01.2015 at 1.30 P.M. On that date, you may submit your objections with evidence, if any, to the proposed action in writing. In case of your failure to attend on the aforesaid date or to submit written reply by that date, it will be presumed that you have no objection to the proposed action and matter shall be decided on merits."
3. In reply to the said notice, the assessee submitted that all the entries recorded in the impounded diary marked as Annexure-A-I have been duly considered by the Assessing Officer during the assessment proceedings. It was an admitted fact that part of the entries not recorded in the books of account representing purchases and sales outside the books of account were taken into account and thereafter calculating peak at Rs.1,25,54,782/- and after deducting a sum of Rs.50 lacs 5 being the amount surrendered, the addition of Rs.75,54,782/- was made by the Assessing Officer. The learned CIT (Appeals) had deleted the addition to the extent of Rs.69,24,127/- and balance addition of Rs.6,30,655/- was upheld. The assessee as well as the department are in appeal before the I.T.A.T. against the said order of the learned CIT (Appeals), which is still pending. Apart from this, certain clerical mistakes with regard to wrong noting down of figure were admitted by the assessee.
4. After considering these submissions of the assessee, the learned Commissioner of Income Tax held that the contention of the assessee that these entries have been recorded in the books of account, have been checked by the Assessing Officer is not evident. Further, he held that there are admittedly certain arithmetical errors in noting down of figures and also working out of peak. Further, the learned Commissioner of Income Tax held that on the basis of a table reproduced in his order at page 5, that these amounts are not recorded in the books of the assessee and the assessee's contention that these are covered in the surrender made by it cannot be accepted. With regard to assessee's submission that Assessing Officer's order having merged with the order of the CIT (Appeals), the jurisdiction under section 263 of the Act is not proper, the learned Commissioner of Income Tax brushed aside the same and held that the issue is 6 not of addition to be made on account of transaction already noted in the assessment order, the issue is non recording or wrong recording of certain transactions. Further, he also observed that the Assessing Officer's considering profit element even on the sales made after the date on which the peak investment has been adopted is also not correct. Relying on a number of judgments of various High Courts and Benches of the I.T.A.T., the learned Commissioner of Income Tax held the order of the Assessing Officer to be erroneous and prejudicial to the interest of the Revenue and setting aside the same, gave direction to the Assessing Officer to make fresh assessment de-novo after properly examining the facts and relevant legal provision and conducting proper enquiry and after affording opportunity of being heard to the assessee.
5. Aggrieved by this order of the learned Commissioner of Income Tax , the assessee has come in appeal before us, raising following grounds of appeal :
"1. That the Worthy Principal Commissioner of Income Tax (Central) has erred in invoking the proceedings u/s 263 and passing the order u/s 263 of the Income Tax Act, 1961 thereby setting aside the order of the Assessing officer with the direction to make fresh assessment.
2. That the Worthy Principal CIT(Central) has also erred in not considering the fact that the assessment was 7 completed u/s 153A r.w.s. 143(3), after thorough investigation and application of mind and, as such, the assessment framed was neither erroneous and nor prejudicial to the interest of revenue.
3. Notwithstanding the above said ground of appeal, the Pr.
CIT (C) , has erred in not considering the following facts that the assessment was neither erroneous nor prejudicial to the interest of revenue: -
i). The entries as confronted by the Pr. C!T( C) by way of Annexure -1 are duly recorded in the books of accounts, which were verified by the Assessing Officer and the evidence of the same was given to, the Principal CIT(C) and which, it did not require any further verification. Further, the typographical error of one figure as shown at item No. 23 of the seized document did not effect the income as already assessed by the Assessing Officer.
ii). Similarly, the entries as confronted by the Worthy Pr.CIT (C) as per Annexure-2 have been duly recorded in the books of accounts, which were verified by the Assessing Officer and evidence of the same was also furnished to the Worthy Pr.CiT (C), except item No. 35 of the seized document, which have a typographical error, but did not effect the income as already assessed by the Assessing Officer.
iii). Similarly, as regards certain entries in the seized document communicated as per Annexure-lll were partly recorded in the books of accounts, which were verified by the Assessing Officer and for which, the evidence was also furnished to the Worthy Pr.CiT (C) and for the others, it 8 was a typographical error and which did not effect the amount of addition as made by the Assessing Officer.
iv). As regards the entries as confronted by the Worthy Pr.CIT(C) by way of item No. iv, v, & vii though, they had not been recorded in the books of account, but are duly covered in the offer of Rs.50 lacs as made ,while filling the return of income and which aspect has been examined by the Assessing Officer.
v). That the f inding of the Worthy Pr.CIT (C) that certain figures, which had been taken incorrectly while working out the addition would make the assessment erroneous and prejudicial to the interest of revenue is not correct finding, since even if, the assessment is erroneous but not prejudicial to the interest of revenue would not given the power to the Worthy Pr.CIT (C) to assume the jurisdiction u/s 263.
4. That the finding of the Worthy Pr.CIT (C) that entries which are covered in the disclosure of Rs. 50 lacs would make the assessment as already framed as incorrect, is not a correct observation, since the mere fact that the assessment as already framed is incorrect, but not prejudicial to the interest of revenue would not authorize the Worthy Pr.CIT (C) to set aside the case to the Assessing Officer.
5. That the Worthy Pr.CIT (C) has failed to consider the fact that the issue of diary was a subject matter of appeal before the Worthy CIT (A)-l, who had already adjudicated and decided the matter and both the assessee and department are in appeal before the Hon'ble Income Tax Appellate Tribunal, 9 Chandigarh and, therefore, the order of the Assessing Officer having already merged with the order of CIT (A)-l, Ludhiana and, as such, the order as passed by the Worthy Pr.CIT (C) is not a valid order either.
6. That the detailed submissions filed during the course of hearing has not been considered properly.
7. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off."
6. The learned counsel for the assessee reiterated the submissions made before the lower authorities. In addition, it was submitted that the learned Commissioner of Income Tax has invoked his revisionary powers on the basis of the same documents, which were there before the Assessing Officer. On the same documents, only change in mode and manner of making addition by the Assessing Officer, is not proper on the part of the learned Commissioner of Income Tax to assume jurisdiction under section 263 of the Act. As regards unaccounted entries, our attention was invited to the office note written by the Assessing Officer at the end of his order, whereby he has clearly stated that all unaccounted entries have been considered by him. Further, it was argued that as regards the prejudice caused to the Revenue, no finding has been recorded by the learned Commissioner of Income Tax. In view of the order of the Assessing Officer, getting merged 10 with the order of the CIT (Appeals), the learned Commissioner of Income Tax does not have power to revise the order under section 263 of the Act.
7. The learned D.R. relied on the order of the learned Commissioner of Income Tax. His emphasis was mainly on the issue that admittedly there were certain figures recorded incorrectly, the learned Commissioner of Income Tax has jurisdiction to rectify the same.
8. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. On perusal of the Paper Book filed by the assessee, that of the Assessing Officer's order as well as the submission of learned counsel for the assessee, there is no doubt to the fact that the same issue which the learned Commissioner of Income Tax is raking up in proceedings under section 263 of the Act, which was there before the Assessing Officer during the assessment proceedings. There is a diary containing certain transactions which as per the Assessing Officer were not recorded in the books of accounts, while the contention of the assessee is that these are recorded in the books of account. The Assessing Officer analyzed all the transactions after hearing the assessee, applied his mind on the same and arrived at a certain conclusion, while making additions. In fact, this 11 was the sole issue before the Assessing Officer during the assessment proceedings. Therefore, certainly it is not a case of no inquiry. The Assessing Officer has made specific queries, duly replied by the assessee, totally applying his mind, he took a judicious decision. The decision taken by him is certainly based on the material and explanation on record brought by him as well as the assessee. We cannot see in these circumstances that he has not applied his mind. There is nothing very specific provided under the law to be done in such circumstances. The Assessing Officer has been given powers to take a judicious decision after considering the material and evidences, which he has duly done. Now, the learned Commissioner of Income Tax, in the garb of assuming jurisdiction under section 263 of the Act, cannot impose his own decision as that of the Assessing Officer. At many places in his order, he himself observed that he is not in agreement with the decision taken by the Assessing Officer, this cannot be a right occasion to assume jurisdiction under section 263 of the Act. As we have already stated that the conclusion drawn by the Assessing Officer is not one which is in contravention of some law. The Assessing Officer has drawn conclusion to the best of his ability, the learned Commissioner of Income Tax, now cannot impose his own view under section 263 of the Act. The learned Commissioner of Income Tax has held 12 somewhere in his order that the contention of the assessee that all these entries are actually recorded in the books of account is not acceptable. We do not understand how the learned Commissioner of Income Tax assuming jurisdiction under section 263 of the Act, can decide an issue, which has been already decided by the learned CIT (Appeals) and the matter is pending before the I.T.A.T. Further, his observation that there is no evidence that the Assessing Officer has examined the same or not is also not correct, since all along the contention of the assessee has been that these entries are recorded in the books of account and the Assessing Officer as well as the CIT (Appeals) have actually worked on these lines only. Some of the observations made by the learned Commissioner of Income Tax with regard to wrong noting and not noting of certain entries may be correct, as we see that even the assessee has admitted to that. However, these mistakes do not given the learned Commissioner of Income Tax jurisdiction under section 263 of the Act, there are other mechanisms provided under the Act to correct these anomalies. Further, in this context, we also observe that if all these corrections are done, whether the tax imposable on the assessee will increase or decrease, this fact also remains under the clouds. In such circumstances, how can the learned Commissioner of Income Tax infer that these mistakes lead to the order 13 being prejudicial to the interest of the Revenue, it may result into being prejudicial to the interest of assessee also. Therefore, we see that the learned Commissioner of Income Tax 's act of assuming jurisdiction under section 263 of the Act is not as per law.
9. The other aspect raised by the assessee is that the order of the Assessing Officer having merged with the order of the CIT (Appeals), the learned Commissioner of Income Tax does not have jurisdiction to revise the same under section 263 of the Act. There is no dispute to the fact that the proceedings under section 263 of the Act have been initiated after the order of the CIT (Appeals), where partial relief was given to the assessee and at present both the assessee as well as Department are in appeal before the I.T.A.T. It is a trite law by now that the issues which are adjudicated by the CIT (Appeals), the order of the Assessing Officer on such issues gets merged in the order of the CIT (Appeals). Both the CIT (Appeals) as well as the learned Commissioner of Income Tax being the officers of the same rank, the learned Commissioner of Income Tax cannot assume jurisdiction under section 263 of the Act, on such orders. Otherwise also, the learned Commissioner of Income Tax under section 263 of the Act has the powers to revise Assessing Officer's order only and not that of CIT (Appeals). In the present case, the contention of the learned Commissioner of Income Tax , that the issue is not of addition to be made on account of 14 transactions already noted in the Assessing Officer's order, but of non-recording or wrong recording of certain transactions. However, we find that this is not the proper occasion to assume jurisdiction under section 263 of the Act. The issue of recording, non-recording, under recording of entries etc. are all inter-related and the Assessing Officer as well as CIT (Appeals) have already applied their mind to the same, how can the wrong recording or under recording can be considered an issue independent of non-recording, we do not understand. Otherwise also, as we have held elsewhere in this order, there are other mechanisms under the Act to correct these kind of anomalies, if any.
10. Before parting, we would also like to observe that the learned Commissioner of Income Tax has at the end of his order given direction to the Assessing Officer to make assessment de-novo after making further enquiry. This, in our view, is not proper. If the learned Commissioner of Income Tax is satisfied that the order is erroneous, he has to give a categorical finding in this regard after conducting enquiries and investigation, he thinks fit. The act of the learned Commissioner of Income Tax to give such direction to the Assessing Officer, goes to prove that the learned Commissioner of Income Tax himself is not sure whether the order is erroneous or not, as the enquiries conducted at the level of the Assessing Officer may not lead to such error. From this point also, 15 the learned Commissioner of Income Tax has not acted as per law.
11. In view of the above, we set aside the order of the learned Commissioner of Income Tax and allow the appeal of the assessee.
10. In the result appeal of the assessee is allowed.
Order pronounced in the open court on this 15th day of March, 2016.
Sd/- Sd/- (BHAVENESH SIANI) (RANO JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 15 t h March, 2016 *Rati*
Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.
Assistant Registrar, ITAT, Chandigarh 16