Income Tax Appellate Tribunal - Chandigarh
M/S Motia Constructions Ltd., Mohali vs Pr. Cit (Central), Ludhiana on 28 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE MS. DIVA SINGH, JUDICIAL MEMBER
AND Dr.B.R.R.KUMAR, ACCOUNTANT MEMBER
ITA No. 813/CHD/2016
Assessment Year : 2008-09
M/s Motia Constructions Ltd., Vs. The Pr.CIT (Central),
Royal Estate, Ludhiana.
Chandigarh Ambala Highway,
Zirakpur, Distt. SAS Nagar,
Mohali (Punjab)PIN-140603.
PAN No. AADCM6576B
&
ITA 519/CHD/2013
Assessment Year : 2007-08
M/s Motia Constructions Ltd., Vs. The CIT,
Royal Estate, Central,
Chandigarh Delhi Highway, Ludhiana.
Near Lights, Zirakpur.
PAN No. AADCM6576B
(Appellant) (Respondent)
Appellant by : Shri Sudhir Sehgal,Advocate
Respondent by : Shri Ravi Sarangal, CIT-DR
Date of hearing : 03.07.2017
Date of Pronouncement : 28.09.2017
ORDER
PER DIVA SINGH,JM These are two appeals filed by the assessee assailing the correctness of the separate orders dated 28.03.2013 and 28.03.2016 passed u/s 263 of Income Tax Act dated for 2007-08 and 2008-09 assessment years.
2. It was the common stand of the parties before the Bench that facts, submissions and arguments in the two appeals are more or less identical. Consequently the arguments advanced in 2008-09 assessment year would apply to the appeal for 2007-08 assessment year also. Accordingly, these appeals are being decided by a common order.
3. The ld. AR inviting attention to the appeals submitted that he would first address ITA 813/CHD/2016 in 2008-09 assessment year as the arguments advanced herein would address the entire issues in both the appeals, Synopsis of submissions in the respective appeals running into ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 2 of 35 11 pages in 2008-09 assessment year and 3 pages in 2007-08 assessment year were relied upon.
4. Accordingly, the grounds raised in ITA 813/2016 are being reproduced hereunder :
1. That the Worthy Pr. Commissioner of Income Tax (Central) has erred in setting aside the earlier order of the Assessing Officer passed u/s 143(3)/153A and directing the Assessing Officer to enhance the income already completed u/s 143(3)/153A by an amount of Rs.20.76 crores as per Para 20 of the order of CIT(A).
2. That the Worthy CIT, has failed to appreciate the fact that the assessment had been framed by the Assessing Officer after earlier order of the Assessing Officer has been set aside U/s_l£3, for which, the Assessing Officer has made the denovo assessment and which was after due application of mind and, thus, enhancement of income already assessed is not proper.
3. That the Worthy CIT has failed to appreciate the fact that the assessment having been made after due application of mind and after the Assessing Officer had made the necessary enquiry and enhancement of income by the Pr. CIT is against the facts and circumstances of the case.
4. Notwithstanding the above said grounds of appeal, it is submitted that the enhancement of income by the CIT is against the facts and circumstances of the fact.
4.1 Addressing the grounds, the ld. AR submitted that a search was conducted on the Motia group of cases on 25.02.2009 and the assessee M/s Motia Construction Ltd. was one of the persons covered u/s 132 of the Act. The assessee, it was submitted, is engaged in the business of Real Estate. In response to notice u/s 153A, return of income dated 16.10.2009 was filed for the year under consideration wherein an income of Rs. 4,93,420/- was declared. The income of the assessee, it was submitted, was assessed at Rs. 2,98,14,313/- vide order u/s 143(3)/153A dated 22.10.2010. The addition of Rs. 2,45,10,000/- it was submitted, had been made on the basis of the seized paper 62 of A-4 which was the basis of two 263 order by the Tax Department over the years. The latest 263 order in point of time is under challenge in the present proceedings.
4.2 It was submitted, that noting of this fact is necessary as the claim of the assessee is that the AO considering the seized page 62 of A-4 in the scrutiny assessment had made an addition of Rs. 2,45,10,000/- after a reasoned and speaking order and since there is no new fact, the present 263 proceedings under challenge were not maintainable.
4.3 Referring to the scrutiny assessment order, it was submitted, that the AO had analyzed each and every entry of the said chart and only then the addition had been made. Accordingly relying upon the assessment ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 3 of 35 order dated 22.10.2010, it was his submission that it is a case of full application of mind by the AO, copy of the original assessment order passed by the AO ( copy of the same is placed at pages 1 to 30 of the Paper Book).
4.4 The said scrutiny assessment order, it was submitted was challenged by the assessee before the CIT(A) and after considering the same seized paper, the CIT(A) dismissed the appeal of the assessee vide order dated 20.03.2012. Thus, it was submitted, that the assessment order having been merged with the order of the CIT(A) could not have been revised by the Pr. CIT as per settled legal position. (Copy of this order is at pages 31 to 66 of the Paper Book).
4.5 Considering the very same seized document, it was submitted, the CIT, subjected this very assessment order to his Revisionary powers u/s
263. The said power though did not vest with him and the exercise of power was contrary to law and had been challenged in appeal before the ITAT, however, the challenge was withdrawn as by the time it had come up for hearing before the ITAT, the AO carrying out the directions of CIT, Central, Ludhiana had already re-considered the entries mentioned at Sr.Nos. 7, 8, 10, 11 and 21 by his assessment order dated 30.03.2014 u/s 143(3) read with Section 263 and again took a conscious view that they did not relate to the assessee. Thus, only the original addition which had been made in the scrutiny assessment was repeated. Thus, in view of this fact, in order to avoid repetitive appeals, the assessee had withdrawn the challenge to the 263 proceedings.
4.6 Thus it was submitted, that in 2008-09 assessment year admittedly on facts the AO in the second round also passed the order dated 30.03.2014 u/s 143(3) read with Section 263 after due application of mind and after considering the entries including the entries at Sr.No. 7, 8, 10, 11 and 21 of the seized Page No. 62.
4.7. In the said background, it was submitted, that the exercise of the power vested in the CIT u/s 263 yet again considering the very same seized document is an abuse of power as the Pr. CIT has this time directed that additions were required to be made on account of entries at Sr.No. 7, 8 and 21. Thereby in effect admitting that CIT, Central in the first round had wrongly included the Projects mentioned at Sl.No. 10 and 11. It was his submission that there is a vested right of the assessee which if it has ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 4 of 35 to be disturbed, has to be disturbed by following the due procedures of law and not on arbitrary whims of different officers of the department. The Pr. CIT in this round not only on account of all the other reasons addressed earlier even otherwise exceeds his jurisdiction by stepping in the shoes of the AO by directing him to make additions.
4.8 Inviting attention to the copy of the show cause notice dated 16.02.2016 (placed at pages 83 to 85 of the Paper Book) issued by the Pr.
CIT (C) Ludhiana for initiating the proceedings u/s 263, it was submitted, that it would show that reference is being made to the very same entries of the seized paper No. 62 i.e. Sr.No. 7, 8, 10, 11 & 21.
4.9 It was submitted that if copy of the said show cause notice is compared to the earlier show cause notice issued during the earlier notice u/s 263, it would show that they are more or less identical.
4.10 Relying upon the chart in the Synopsis filed, which addresses the sequence of events, the facts and submissions were reiterated. Relying on the same, it was submitted that the case of the assessee consistently has been that the AO in the original assessment order dated 22.10.2010 u/s 143(3)/153A has considered the very same seized document; after requiring the assessee to explain all the entries of the said document after considering the record and the arguments with due application of mind concluded that for projects at Sr.No. 7, 8, 10, 11 and 21, addition was not required to be made in the hands of the assessee and proceeded to make addition of Rs. 2.45 crores odd which as was challenged in appeal before the CIT(A). The order having been merged with the order of the CIT(A) dated 20.03.2012 was not open to the CIT, Central for exercising his Revisionary Power qua the assessment order dated 22.10.2010. However, since the appeal challenging the order was withdrawn as the AO vide his consequent order dated 30.03.2014 u/s 143(3) read with Section 263 after considering the speaking direction, again came to the conclusion that additions for these specific concerns were not warranted Accordingly , in the said background, the action of the Pr. CIT to again revisit the same assessee on the basis of the same seized document, it was submitted, was bad in law as the assessment in the case of the assessee has been finalized u/s 143(3) read with Section 153A and thereafter a detailed and thorough investigation had been done by the AO pursuant to the first 263 order. The said document i.e. the seized paper 62 of Annexure A-4 has ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 5 of 35 been discussed in detail by the AO in the original order from page 7 to 30 of his order. The show cause notice issued in regard to the issue in the original round has been discussed by the AO and addressed by the assessee and is placed at page 7, 11 and pages 11 to 24 of the said order. The conclusion of the AO partly agreeing with assessee has been set out therein after the 30 paged original assessment order.
4.11 Referring to the original assessment order, it was submitted, that only after considering these facts and the submissions of the assessee, the AO not fully accepting the same, proceeded to make addition of Rs. 2.45 Crores after due application of mind excluding the entries 7, 8, 10, 11 and
21. The addition was challenged before the CIT(A). It was his submission that the assessee, apart from relying upon the submissions before the AO in the original proceedings would also like to bring out the fact that the said document was looked at and considered even by the CIT(A) in appeal. Attention was invited to the reply dated 09.12.2010 which is part of the assessment order and discussed at pages 11 and 12 of the order and had also been discussed by the CIT(A) in his order dated 20.03.2012 ( copy at pages 31 to 66 of the Paper Book) as would be evident from page 62 of the Paper Book. Thus, it was argued, the issue has been much examined and considered. It has also been considered by the CIT Central in the first round of the order u/s 263 dated 28.03.2013. (copy placed at pages 67 to 80 of the Paper Book). This fact is evident from the relevant discussion at page 69 of the Paper Book. The assessee, it was submitted, has given the following reply which has been extracted by the CIT(A) and at internal page 3 of his order :
"As regards page no -62 of Annexure-A-4 seized during the course of search, we have already stated that this page is an estimation made by directors before search in the normal course of business. This estimation was made to know Total estimated cost, estimated sale and estimated profits of the projects relating to Motia Constructions Ltd. As well as other projects relating to one of the director having interest in other concerns in addition to Motia Constructions Ltd. As mentioned at Page No. 62 at serial No. 7,8,10,11 and 21.".
4.12 It was further submitted that the assessee had also given reply dated 27.10.2010 during the original assessment proceedings with regard to these very entries which had been referred to by the Pr. CIT(C) in the original 263 order dated 28.03.2013 and has been discussed at page 69 to 73 of the Paper Book. It was his submission that the said reply has even been reproduced by the AO in his order passed in consequence to the first 263 direction of CIT, Central in order dated 30.03.2014 u/s 143(3) r.w.
ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 6 of 35 Section 263. Thus, in view of this factual background, it was his submission that the AO has duly applied his mind and only after complete satisfaction, he has come to the conscious decision yet again not to make any addition on account of Sr.No. 7, 8, 10, 11 and 21. This fact, it was submitted, is further proved from the fact that the entire page has been reproduced by the AO at page 8 & 9 of the Paper Book and the AO himself at page 10 and 11 of the Paper Book has calculated the difference in the costs and at that time has consciously taken a call accepting the fact that addition for entries at page 7, 8, 10, 11 and 21 were not to be made in the hands of the assessee. The AO, it was submitted, has done so only on account of the fact that the said entries did not relate to the assessee. Thus, only after consideration of the entries in the seized paper, the AO has come to the following conclusion at page 25 of his order :
"Barring projects stated in row 7,8,10,11 and 21, all the projects belong to M/s Motia Constructions Limited. Also the Projects mentioned in 7,8,10,11 and 21 relate to the erstwhile director of M/s Motia Constructions Limited Sh. Pawan Bansal and the fund used column reflect the investment of the assessee company M/s Motia Constructions Limited in the projects of the sister concerns then." (The said finding of the assessee was even referred by the CIT(A) at page 28 of his order (pg 58 of the PB)"
4.13 It was his submission that there is nothing on record to show that out of the total 22 entries, it can be said that the AO selectively applied his mind only to 17 entries. When a document is before the AO then necessarily it is the entire document which has been considered. The document has been considered by the CIT(A) also in his order dated 28.03.2012 evident from page 35 of his order, although the finding starts from page 63 of the order.
4.14 In order to demonstrate that there was a detailed discussion during the first consequential order passed u/s 143(3) read with 263 dated 30.03.2014 the ld. AR submitted that infact, it too is a second detailed assessment order on the same issue. The entire chart of all the Projects/Concerns mentioned in the seized document page No. 62 of Annexure A-4 has been reproduced at page 2 of the order. Referring to point No. 4, it was submitted, it would show that the assessee was asked to furnish the explanation with regard to all the entries/details on the said document and specifically entries at Sr.No. 7, 8, 10, 11 and 21. It was submitted that the issue was again considered and addressed specifically for these projects/concerns. Attention was invited to the finding of the AO, thereafter in para 8 of the order that entries at Sr.No. 7, 8, 10, 11 and 21 relate to Marble Home Apartments, Marble Home Constructions Pvt. Ltd., ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 7 of 35 Motia Township Pvt. Ltd., Prabhat 40's, Motia Developers Pvt. Ltd. (Baddi Land & Motia Heights) and Motia Projects Pvt. Ltd.(Schools) respectively. Attention was also invited to the reply filed before the AO during the said proceedings, copy of which is placed at PB-II page 135-136. Referring to the same, it was reiterated that it was concluded that for certain entries relating to independent assessees, no addition could be made in the hands of the assessee. The view on considering the record has consistently been taken in the original assessment proceedings as well as the proceedings pursuant to the first 263 order.
4.15 Referring to the record, it was submitted, that the AO in the assessment order u/s 143(3) r.w.s. 263 has himself given the entire history in the case of the assessee and thus, to conclude that he has missed looking at the entries pertaining to these Projects is a fact based on suspicions as it is not coming out from the record. The AO, it was submitted, has reproduced the replies of the assessee relating to the entries at Sr. No. 7, 8, 10, 11 and 21 and agreed that on facts that Projects/Concerns relate to different assessees and has taken note of the fact in point 8 of his order. In point No. 9, the AO has held that the said five entries have duly been covered for the purposes of assessment in the case of those respective assessees. Thus, it was his submission that the AO was careful to consider the aspect from all sides and held that the assessment orders infact have duly been passed in the case of entries at Sr.No. 10 and 11 namely M/s Motia Township Pvt. Ltd. and Motia Developers Pvt. Ltd. Accordingly, it was his submission that the view taken has been consciously taken after applying his mind to the seized page 62 and not casually arrived at. The order of the AO even in the set aside consequential order dated 30.03.2014 that additions for those projects was not required is again being subjected to the Revisionary Powers. Thus, it was his submission that in the facts of the present case, two different AOs and the CIT(A) have already applied their mind to the facts of the case and specifically page 62 of A-4. Thus, how many times is the department going to insist that the specific paper be considered.
4.16 In order to assume jurisdiction, it was submitted, twin conditions are required to be fulfilled; (i) that the order is erroneous, and (ii) alongwith being erroneous, it also prejudicial to the interest of the Revenue. In the facts where two AOs have formed a view after due and relevant enquiry, the exercise of power u/s 263 yet again on the very same ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 8 of 35 issue was assailed on the grounds of being arbitrary. The assessee, it was submitted, before the Pr.CIT, Central, Ludhiana for the second time had filed a detailed reply dated 29.02.2016 available at page 137 to 139 of the Paper Book. The findings of the Pr. CIT were assailed on the following grounds as per Chart placed at para 19 pages 7 to 9 of the synopsis filed :
The AO has not made any addition for the a) It is submitted that the AO has duly applied his mind on projects mentioned at S.No 7,8 and 21 the project; S.No 7,8 and 21 and only after due satisfaction though the assessee Company had some (twice) no addition made by the AO. business interest/share of profit in the b) That the Assessee did not have any share of profit/interest in entities mentioned in the documents at concern namely Marble Home Apartment, Marble Home 7,8 and 21. Construction Pvt. Ltd. and Motia Projects Pvt Ltd. except that for few months certain amount was advanced to those concerns. Thus, the finding of the Pr CIT is misconceived.
c) The Pr. CIT has used his powers u/sec 263 of the Act to direct the AO make the addition in the case of the Assessee on account of three entries at S.NO 7,8 and 21.
d) The Pr. CIT has stepped into the shoes of the AO by directing the AO the end of the order to include the profit of Rs. 20.76 cr and pass the assessment order. The Pr. CIT could have himself made the enhancement.
The Pr. CIT in point c(i) at page 9 of the a) The Assessee cannot obtain a copy of the Assessment order of order has held that the Assessee had not a third person. However, the Pr. CIT could have enquired into the filed any documentary evidence in the matter since the assessee had intimated the jurisdiction of those form of assessment order in the case of parties that the same are with CIT-III. Marvel Home construction. b) Even otherwise, the Pr. CIT is has directed the AO to make the addition in those cases i.e 7,8 and 21, wherein he was not sure as to whether the assessment has been framed in those cases or not.
c) For the projects at S.No 10 and 11, the Assessing Officer has himself stated that the assessment has been framed by him, those cases were ignored in the case of the Assessee.
d) The finding of the Pr CIT that in other cases if no addition had been made, then the addition would be made in the case of the Assessee is ill-founded.
e) The department has not made the addition in the case of the Assessee on account of 2 entities i.e Motia Township Pvt Ltd and Motia Developers Pvt Ltd as separate assessments had been made in their cases. We have been able to get the order of another entity i.e Marble Home Construction Pvt Ltd. (S.No 8) wherein addition has been made by the AO, so on the same principle no addition is called for in the case of the Assessee. f) So, it is very much clear that the Pr. CIT has exceeded his jurisdiction and has made the addition wrongly The Pr. CIT in point no c(ii) at page-9 a) The CIT has not stated as to how the reply as given by the with regard to Marble Home Assessee is vague. It is very much clear from the order Apartment has held that the Assessee itself that addition for only those cases have been made has given a vague, ambiguous reply in the case of the Assessee for which the without touching the merits. department was not clear that the assessment has been framed in the respective cases or not.
b) Even otherwise, the fact that the said entry does not ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 9 of 35 relate to the Assessee has been examined by two Assessing Officers at different point of time.
c) The AO as well as the Pr. CIT had not made any enquiry with regard to the assessments of the respective assessee's. (with regard to 3 persons i.e at S.No 7,8 and 21)
c) The CIT is not the assessing authority and by doing so, he has exceeded his jurisdiction which is against the law.
The Pr. CIT in point no c(iii) at page a) The Pr. CIT has not stated as to how the reply as given by 9-10 with regard to M/s Motia the Assessee is vague. It is very much clear from the order Township has held that the Assessee itself that addition for only those cases have been made in has given a vague, ambiguous reply the case of the Assessee for which the department was not clear that the assessment has been framed in the without touching the merits.
respective cases or not.
b) Even otherwise, the fact that the said entry does not relate to the Assessee has been examined by two Assessing Officers at different point of time.
c)The Pr. CIT is not the assessing authority and by doing so, ,he has exceeded his jurisdiction which is against the law.
The Pr. CIT on point d at page-10 has a) The Pr. CIT has duly agreed that the addition of Rs.
held that the AO has made the 2.45cr had been made earlier by the AO on account of same addition of Rs. 2.45 cr on account of page. undisclosed profits with regard to So, it is quite obvious that the AO has duly applied his
different projects as per Page-62. So, mind on the said seized page on each and every single entry. the addition for projects at S.no 7,8 b ) Further, the Pr. CIT himself ignored the projects at and 21 was also required to be made S.No 10 and 11 after it came to his knowledge that the assessment has been separately made in their case. If the Pr. CIT has ignored projects at S.No 10 and 11, on the same strength, the other projects not relating to the Assessee should have been ignored and as such the finding of the Pr. CIT is contradictory.
4.17 The reasoning taken by the Pr. CIT, it was submitted, appears to be that in cases wherein it was not clear to him also, whether the addition has been made in the respective years in those assessee cases or not, is not clear. The direction has been that in case addition is not made in the hands of the other party, then the profit should be assessed in the hands of the assessee. It was submitted, that despite copiously looking into the issue, the Pr. CIT has not crossed the threshold of pointing out the error and has proceeded to give directions based on ifs and buts. Nowhere has the Pr. CIT demonstrated that the order was passed without due application of mind. Nothing new has been noticed by him warranting the exercise of his Revisionary Power yet again. Accordingly, it was his submission that in terms of the various decisions and orders relied upon specifically Shri Satya Prakash Gupta V ITO, Delhi in ITA No. 2730/Del/2013 order dated 07.03.2014, M/s Ved Parkash Contractors Vs CIT in ITA 573/CHD/2015,M/s Kumar Enterprises vs DCIT in ITA No. ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 10 of 35 525/Chd/2014, Venus Woolen Mills as reported in 36 ITR (Trib) 388, Hari Trading Co. V CIT 263 ITR 437, and order dated 28.08.2017 of Chandigarh Bench in ITA No. 1252/CHD/2016 assessment year 2007-08 and 7 other appeals in ACIT Vs Nikkamal Jewellers, Ludhiana, the impugned order be quashed.
4.18 Referring specifically to order dated 03.11.2015 of the Chandigarh Bench in the case of M/s Ved Parkash Contractors Vs CIT in ITA 573/CHD/2015,it was his submission that the order of the Pr. CIT Central may be quashed as he has exceeded his jurisdiction. Following extract of the said decision was heavily relied upon :
"17. From the above, it is abundantly clear that CIT has exceeded its jurisdiction in virtually reassessing the case. It is true that the revisional authority itself has wide power to examine the case whether the decision has been erroneous and prejudicial to the interest of Revenue and in exercise of these power modifications are permissible, and furthermore that if the Commissioner comes to this conclusion that the assessment is required to be redone, that such direction can still be issued to the Assessing officer . However, it is trite law that it is not permissible for the CIT being a revisional authority to step into the shoes of the Assessing officer and to redo the assessment and pass fresh assessment order."
4.19 In the facts of the present case, it was submitted, that on the basis of very same document, addition of Rs. 2.45 Crores odd stood made in the hands of the assessee. In the circumstances, the direction that certain entries in the document have not been fully considered as a basis for invoking the Revisionary power was not maintainable under law.
4.20 Apart from placing reliance upon the order dated 13.04.2016 of Chandigarh Bench in M/s Kumar Enterprises vs DCIT in ITA No. 525/Chd/2014 (Pg-54-67 of Judgment set) and Venus Woolen Mills as reported in 36 ITR (Trib) 388 (Pg-68-70 of Judgment set), specific attention was invited to decision of the jurisdictional High Court in the case of Hari Trading Co. V CIT 263 ITR 437 for the following proposition :
"AO having made full inquiries before accepting the claim of the assessee qua the amount surrendered at the time of survey on account of discrepancy in stock and accordingly passed the order without making the addition, the order of CIT under s. 263 could not be sustained on the ground that the assessment was made without proper enquiry, moreso when the assessee's case was being monitored by the CIT from time to time and the assessment order has been passed after a draft order had been forwarded to the then CIT for his approval. "
4.20.1 In the facts of the said case also, it was submitted, a surrender in the course of the survey had been made which had been thoroughly ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 11 of 35 investigated in the course of the assessment proceedings by the AO. Thereafter, 263 proceedings initiated by the Commissioner were held to be bad in law. The facts were stated to be identical.
4.21 Reliance was also placed upon order dated 29.02.2012 of the ITAT in the case of M/s Gupta Spinning Mills vs CIT in ITA No. 3398/Del/2010 (copy placed at page 71-87 of Judgment set) for the following proposition :
"The Id. CIT totally ignored the aforesaid reply dated 16.10.2008 filed by the assessee before the AO. Mere change of opinion or view would not enable the CIT to exercise jurisdiction u/s 263 of the Act more so, when the AO had considered the details and the explanation offered by the assessee. Change of opinion by reappraising the evidence is not within the parameters of revisional jurisdiction of the Commissioner under section 263 of the Act. In view thereof, we set aside the impugned order u/s 263 of the Act and quash the same".
4.22 Attention was also invited to order dated 24.02.2017 in the case of Small Wonder Industries Vs CIT in ITA 2464/Mum/2013 (copy placed at pages 88-99 of the judgement set) for the following proposition :
"There is a distinction between "lack of enquiry" and "inadequate enquiry". If the AO has called for the necessary details and the assessee has furnished the same, the fact that the AO is silent in the assessment order does not mean that he has not applied his mind so as to justify exercise of revisional powers by the CIT u/s 263"
4.23 Reliance was also placed upon order dated 28.08.2017 of Chandigarh Bench in ITA No. 1252/CHD/2016 assessment year 2007-08 and 7 other appeals in ACIT Vs Nikkamal Jewellers, Ludhiana for the proposition that the case having been considered and examined u/s 143(3) and where no new fact came up for consideration. The proceedings of re-assessment deserve to be quashed.
4.24 It was also his submission that the action is bad in law in view of the fact that the assessment order on the issue had already merged with the order of the CIT(A) which is the specific argument in the appeal for 2007-08 assessment year. Explanation-I(c) to Section 263 of the Act, it was submitted, makes this legal position very clear as only the mater, which was not the subject matter of the original appeal, can only be invoked by applying the provisions of Section 263. The relevant provision is extracted hereunder:
"where any order referred to in this sub-section and passed by the Assessing Officer had been subject matter of any appeal, the powers of the Principal Commissioner under this sub section shall extend to such matters as had not been considered and decided in such Appeal."
(emphasis provided) 4.25 It was his submission that in the face of the overwhelming discussions on the said document in the respective years and the various ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 12 of 35 authorities of the tax department, no case has been made out by the Pr. CIT or the CIT, Central that the said document or the specific Project/Concerns had not been considered. For quashing the proceedings in the respective years, reliance was placed upon the following decisions;
a) K. Sera Productions vs CIT in ITA No. 3024/Mum/2012 order dated 14.09.2012; b) ITAT Mumbai Bench in the case of Sonal Garments v. Jt. CIT [2005] 95 ITD 363 (Pg-100- 103 of Judgment set); c) ITAT Mumbai Bench in the case of Marico Industries Ltd. v. Asstt. CIT [2009] 27 SOT 73 (URO), (Pg-104-106 of Judgment set); d) Hon'ble Gujarat High Court in the case of CIT v. Nirma Chemicals Works (P.) Ltd. [2009] 309 ITR 67 (Pg-107- 110 of Judgment set); e) Hon'ble Bombay High Court in the case of CIT v. Saraf Bandhu (P.) Ltd. [1995] 216 ITR 833. (Pg-lll-112yof Judgment set); f) Mahipat Raichand Sharebroking vs DCIT in ITA No. 323/Ahd/2010 order dated 06.08.2010.
4.26 Addressing the factual position for 2007-08 assessment year, the ld. AR submitted that the assessee, pursuant to the notice u/s 153A declared an income of Rs. 1,88,25,010/- and the assessment was concluded at an income of Rs. 3,08,08,741/- by an order u/s 143(3)/153A dated 22.12.2010. Specific addition of Rs. 81,50,000/- was made by the AO after making due enquiries on the basis of the very same seized page No.62 of Annexure-A-4, the correctness of the said order was challenged in appeal before the CIT(A) who also dismissed appeal of the assessee. Accordingly, in the facts of the present case also, the issues, it was submitted, have been enquired into, replied to, considered and orders after due application of mind were passed by the AO and the CIT(A). In the facts of the present case also, it was submitted that only after the passing of the order of the CIT(A) dated 20.03.2013, the CIT, Central, Ludhiana initiated proceedings on the basis of show cause notice dated 21.03.2013 and passed the order under challenge on 28.03.2013 directing that in the order dated 22.12.2010 , the AO has passed an order erroneous and prejudicial to the interests of the Revenue. The arguments advanced in the appeal for 2008-09 Assessment Year, it was submitted, remain the same as applicable to the case namely that herein the order which was sought to be revised stood merged by the order of the CIT(A) dated 20.03.2012 and thus firstly there is no error pointed out by CIT, Central in the original assessment order u/s 143(3)/153A dated 22.12.2010 let alone such an error which is prejudicial to the interests of the Revenue.
ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 13 of 35 Further, the AO's order dated 22.12.2010 stood merged with the order dated 20.03.2012, accordingly it could not have been revised by Pr. CIT as it was barred by Statute. Thus, in the facts of the present case, the power which the Pr.CIT Central exercises, does not vest with the said authority as there is nothing on record to even arouse a suspicion that the issue had not been considered by the CIT(A) as admittedly it had been considered. Moreover, even then it was submitted, it has been exercised arbitrarily on the basis of suspicions as nothing in the show cause notice or in the impugned order brings out the error. It is only based on the arbitrary opinion of the Pr. CIT, Central/CIT Central and is secondly based on no facts.
4.27 Inviting attention to the original assessment proceedings wherein the assessee had replied vide letter dated 09.12.2010 which is a part of order itself explaining the specific document and the calculations therein as having been estimated cost, estimated sale and estimated profits of the projects relating to the Motia Constructions which included the projects relating to an erstwhile Director who had interests in other Motia Constructions Ltd. and which found mention in Sr.No. 7, 8, 10, 11 and 21 at page No. 62. This fact, it was submitted, has been referred to by the CIT Central in his order also dated 28.03.2013. The AO had already considered the very same arguments, facts and evidence segregated the investments of the then Director Shri Pawan Bansal in the original proceedings. For ready reference, the relevant extract of the synopsis highlighting the record filed at page 2 and 3 para 4, 5 and 6 is reproduced hereunder :
4. The Assessee during the original assessment proceedings had filed a reply dated 09.12.2010 (part of order at Page-10 of the order) wherein the Assessee has duly stated as follows:
"As regards page no -62 of Annexure-A-4 seized during the course of search, we have already stated that this page is an estimation made by directors before search in the normal course of business. This estimation was made to know Total estimated cost, estimated sale and estimated profits of the projects relating to Motia Constructions Ltd. As well as other projects relating to one of the director having interest in other concerns in addition to Motia Constructions Ltd. As mentioned at Page No. 62 at serial No. 7,8,10,11 and 21." The Worthy CIT(A) in his order dated 20.03.2012 as passed against the original assessment order has referred to the said n-ply- (Relevant Pg-10 of the PB)._Even the CIT in the 263 order dated 28.03.2013 has referred to the same. (Pg-4 of order).
5. Further the Assessee has even a given a detailed reply dated 27.10.2010 with regard to these entries. The said reply is reproduced by the CIT in the 263 order dated 28.03.2013 (Relevant Page-4-7 of the order).
ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 14 of 35
6. The Assessing Officer has duly considered the replies of the Assessee and has given his findings at Page-23-24 of the order wherein the relevant portion is as under point a(ix):
"Barring Projects stated in row 7,8,10,11 and 21 of pg 62, all the projects belong to M/s Motia Constructions Limited. Also the projects mentioned in 7,8, 10,11 & 21 relate to the erstwhile director of M/s Motia Constructions Limited Sh. Pawan Bansal and the fund used column reflect the investment of the assessee company M/s Motia Constructions Limited in the projects of its sister concerns then."
4.28 Accordingly, on the basis of these facts, submissions and material on record, it was submitted, that the AO had duly applied his mind on the very same document and the fact that the documents were considered has been noted by the CIT, Central as well as the Pr. CIT Central, the order of the AO accordingly on this issue stood merged with the order of the higher authority i.e. the CIT(A) are admitted facts and mere arguments to the contrary without evidence have no value. The respective orders under challenge in the respective years, it was submitted, are bad in law. All the other arguments remaining that there was no basis to show that the AO applied his mind only to 17 entries out of 22 entries and that the said matter of consideration i.e. the issue on the cases of the same seized document already stood considered, decided and merged with the order of the CIT(A) remain the same. Accordingly, the appeals of the assessee deserve to be allowed.
5. The ld. CIT-DR inviting attention to the impugned orders submitted that the impugned orders deserves to be upheld. The difference that in 2008-09 assessment year the said seized document had already been a subject matter for consideration u/s 263 proceedings was a fact on record and it is the second 263 proceedings under challenge and that in 2007-08 assessment year, it is the first 263 proceedings was not disputed.
5.1 Carrying us through the order for 2008-09 assessment year passed by the Pr. CIT, Central, attention was invited to the show cause notice issued by the Commissioner which has been reproduced in the order itself for the sake of completeness of the record. Referring to the same, copy of which is also available at pages 67 to 80 of the Paper Book, it was submitted, that the Pr. CIT (Central) Ludhiana considering the record held that the assessment order dated 22.12.2010 passed u/s 143(3)/153A of the Income Tax Act erroneous as well as prejudicial to the interest of the Revenue. In the assessment order passed consequential to the earlier 263 directions, it was submitted, no doubt was on record. It was ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 15 of 35 submitted, where despite the clear directions of CIT Central u/s 263, the AO still refused to look into what was directed to be seen and maintains the same addition, as in the original proceedings, in such a situation, the only power available to the tax authorities to set right and address the position is the power u/s 263 which has been exercised again. The arguments of the assessee that the AO has made proper enquiries, it was submitted, cannot be accepted. If the AO does not verify the position whether the additions have been made in the hands of the corresponding assessees or fails to make full and proper enquiries, then in such a situation, the Department is very much within its rights to issue a statutory direction u/s 263. It was his submission that in the facts of the present case, the AO has not applied his mind and the Pr. CIT accordingly, had no alternative but to direct that the additions in the hands of those assessees have escaped and since these were investments of the assessee, they should be added in the hands of the assessee.
5.2 Inviting attention to page 9 of the impugned order, it was submitted that the CIT(A) has pointedly directed the AO to examine the addition in the case of M/s Marble Home Apartments and Marble Home Construction Ltd. and Motia Projects, as it appeared that the documentary evidence in support of assessee's claim was not produced. For ready reference, the specific para relied upon is reproduced hereunder:
(c)(i) The assessee in Ms reply dated 21st March, 2016 has stated that in the case of Marvel Home Construction Pvt. Ltd., the addition have been made by the Assessing Officer on the basis of this piece of paper and the concerned Assessing Officer is Income Tax Officer, Ward-7(l), Ludhiana had framed the assessment by adding the amount in the hands of M/s Marvel Home Construction Pvt. Ltd. and, therefore, no action is called for in the case of assessee. However, no documentary evidence by way of assessment order etc., in this regard has been produced during the present 263 proceedings.
5.3 In the facts of such cases, where the AO holding another AO responsible for the addition resulting in no addition anywhere in the circumstances there is nothing wrong in his finding that the addition be made in the hands of the assessee. On account of this casual approach of the AO, the Revenue suffers on account of non application of mind by the AO. It was his pained submission that in fact there is rampant in- subordination in the Department as is evident from record where despite a direction, the AO has relied upon the assessee's submissions.
5.4 Inviting attention to page 2 of the impugned order, it was submitted, that the Pr. CIT has taken note of the fact that in the order passed ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 16 of 35 consequent to Section 143(3)/263 order dated 30.03.2014, it was noticed that reference was sent to the concerned AO in the case of M/s Motia Projects Pvt. Ltd. (Schools) Panchkula. It was submitted, that there was nothing on record to show whether any document had been taken in the matter or not. It was submitted, that the documents pertaining to the issues relied upon by the assessee were either incomplete or wrong. Referring to the reference made by the AO in the said 143(3)/263 proceedings in the case of M/s Motia Home Apartments and M/s Motia Homes Constructions Pvt. Ltd. sent to the concerned AO at Ludhiana that as per information, they were liable for assessment, however, the documents relied upon and considered were not verified and the information relied upon by the assessee was either incomplete or wrong. It was his submission that only name sake enquiries had been carried out, the investigation by the AO have been incomplete. The decision of Delhi Bench of the Tribunal in the case of S.P.Gupta relied upon by the assessee, it was submitted, is not applicable. Infact all the decisions are fact specific, it was submitted, and have no applicability as the facts of the present case are self speaking. Accordingly, it was his submission that the arguments and submissions of the assessee may be rejected as it is a fit case for proceedings u/s 263 of the Act.
6. The ld. AR in reply submitted that the parameters of Section 263 as per settled legal positions relied upon by him in the various case laws necessitate that the assessment orders sought to be visited by the Pr. CIT Central or CIT, Central by invoking the Revisionary Power vested in the said authority u/s 263 necessitate that in the assessment order, there is such an error which is also prejudicial to the interests of the Revenue. The powers cannot be exercised arbitrarily or on whims to make good some lapse in some other unconnected case or some other unconnected assessment order. Referring to the order under challenge for 2008-09 assessment year, it was submitted, that there are consistently contradictory findings of Pr. CIT in the exercise of the power and as per record, it has been done purely on the basis of suspicions and whims. There is nothing on record to show that income has escaped assessment or there is an error in the orders which is prejudicial to the interests of the Revenue. It was his submission that he has ignored the fact that the AO in the order passed u/s 143(3)/153A which is the order sought to be revised, yet again has made an addition of Rs. 2.45 Crore odd considering the very ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 17 of 35 same seized document ( page 62) of annexure A-4 which addition is again repeated pursuant to the first 263 order in 2008-09 assessment year specifically considering the entries mentioned at Sr. Nos. 7, 8, 10, 11 and
21. The argument that they have not been considered by the AO in his order is a mere allegation which is not demonstrated by any fact or evidence.
6.1 It was also his submission that the argument remains unaddressed that the said order had already been subjected on the very same reasoning by the Chief Commissioner of Income Tax u/s 263 which fact is noted by the Pr. Chief Commissioner and he also notes that the AO has passed an order in pursuance thereto i.e. order dated 30.03.2014, however, the Pr. Chief Commissioner still proceeds to arbitrarily note that the information considered by the AO is "either incomplete or wrong". It was his submission that the Pr. Chief Commissioner needs to form a view based on fact and evidence whether the information, evidence is incomplete or it is wrong. It cannot be both. Thus, the view taken by the Commissioner in para 5 that the assessment order dated 30.03.2014 was erroneous and prejudicial to the interests of the Revenue in regard to the entries at Sr. Nos. 7, 8 and 21 and not 7, 8, 10, 11 and 21 as earlier held and thus in effect accepts that the arbitrary exercise of 263 proceedings in the first round to which the assessee was subjected to demonstrates the continuing arbitrary action of the Revenue. It was submitted, that there has to be an end sometime. Without prejudice to the arguments raised earlier namely statutory bar to the order having been merged with the CIT(A)'s order specifically in 2007-08 assessment year, it was submitted, that if for a moment, it is to be considered that a particular document was open to different interpretations, then an interpretation given by the AO in the first round repeated in the second round cannot be the basis for another 263 proceedings as how many times can the Department justify the issuing of notice for 263 on the basis of same matter, the same seized document. It was questioned that can this power be invoked so carelessly and casually right till the time that the additions proposed by the superiors are adhered to by the AO. without being required to meet the twin requirements i.e. the order sought to be revised, should be shown to be erroneous as well as prejudicial to the interests of the Revenue.
6.2 It was his submission that there should be limit to how many times the very same document can be considered by the different tax authorities ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 18 of 35 to suit their personal whims. It was argued that how can the assessee be made answerable for the lapse if any of some AO anywhere in the case of some other assessee. If something has not been taxed somewhere by some AO, how and why should the assessee be made to repeatedly suffer. According to the Department, it is required to be taxed in some case, then what stops them from taxing it where it is to be taxed. To pick on the assessee again and again on the basis of very same document, it was submitted, is an arbitrary whimsical exercise of power and should not be allowed to be carried on. It was his submission that this manner of functioning should be put a stop to. Admittedly the AO has considered the documents and taken a view not to tax the assessee giving a reasoning which is available on record. Thus, it was his earnest prayer that the assessee cannot be harassed perpetually.
7. We have heard the rival submissions and perused the material available on record. Before we proceed to address the arguments of the respective parties, it is necessary to address the factual background to the extent the facts are admitted namely that a certain document described as page 62 of Annexure A-4 was found from the residence of Shri Krishan Goyal in his capacity of Director, Motia Constructions during the course of search conducted upon the Motia Group on 25.02.2009. The assessee in response to notice u/s 153A declared an income of Rs. 4,93,420/- in 2008-09 assessment year. The assessment was concluded vide order dated 22.12.2010 u/s 143(3)/153A at an income of Rs. 2,98,14,313/-. Copy of the said order is available at pages 1 to 30 of the Paper Book.
7.1 The said order was challenged in appeal before the CIT(A) by the assessee in appeal instituted on 19.01.2011 before the CIT(A)-I Ludhiana who vide his order dated 20.03.2012 proceeded to confirm the said addition.
7.2 A perusal of the assessment order as well as the order of the CIT(A) dated 20.03.2012, it is seen takes note of the fact that the said document was considered and enquired into by the said authorities as would be evident from para 12 of the CIT(A)'s order dated 20.03.2012. The said para 12 of the said order is reproduced hereunder :
12. The ground of appeal at Sr. No. 9 pertain to the claim of the appellant that the AO has wrongly made an addition of Rs. 2,45,10,000/- on account of unexplained profits with regard to sale of lands. The AO in this regard has observed in para 7 of her order that during the course of search at the residence of the ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 19 of 35 Director of the assessee company Sh. Krishan Goyal one computerized sheet of paper was seized as pg No. 62 of Annexure A-4, which contained details of the projects of the assessee company. The AO confronted this document and on the basis of assessee's reply and analysis of the seized document confronted the following proposed addition :-
"Vide questionnaire dated 01/09/10 you were required to explain the contents of page 62 of Annexure-A-4 seized from the residence of the Director Sh. Krishan Goyal during the course of search action on 25/02/2009. The contents of the document are reproduced as under:-
S.No. Name of company Total Funds Sale Total Amount Duration
cost used profit/market of share of of funds
consideration profit for used
funds used
1 Adv. Agst.land & 7.85 6.90 21.90 14.05 12.35 22.09.05
land at Bhankarpur to
31.12.07
2 Motia Highway 1.02 0.51 3.40 2.38 1.19 06.02.06
Kharar to
16.11.07
3 Motia Homes at 2.10 2.10 5.60 3.50 3.50 14.10.05
Sirakpur ( 30 flats to
31.12.05
4 Mahesh Nagar 3.60 3.60 13.60 10.00 10.00 25.02.06
Project Barnala, to
Samana Colony 31.12.07
5 Motia Royal 1.38 1.38 3.38 2.00 2.00 06.06.05
Estate, Nabha to
31.12.07
6 Land at Derabassi 2.10 1.11 4.20 2.10 1.11 20.12.05
(Mehendru Land) to
31.12.07
7 Marble Home 6.48 6.48 12.96 6.48 6.48 27.02.06
Apartment to
31.12.07
8 Marble Home 1.95 0.70 3.30 1.35 0.48 16.11.05
Construction Pvt. TO
Ltd. 13.11.07
9 Land at Phabat 1.05 0.90 1.60 0.55 0.47 08.11.05
(1.75 acres) to
31.03.06
10 Motia Township 22.00 8.61 48.00 26.00 10.18 01.04.07
Pvt. Ltd. Pabhat to
40's 55% 31.12.07
11 Motia Developers 13.00 1.95 18.00 5.00 0.75 24.01.06
P.Ltd. (Baddi Land to
& Motia Heights) 31.12.07
12 Land at Kharar 5.61 3.27 13.77 8.16 4.76 14.11.05
Tikka (11 acres to
51% share) 31.03.06
13 Land at 0.78 0.78 1.58 0.80 0.80 26.08.05
Gholumajra to
31.03.06
14 Land at Khararr 0.80 0.52 1.60 0.80 0.52 09.09.05
(13 kanal 4 marlas) to
ITA 813/CHD/2016 &
ITA 519/CHD/2013
Page 20 of 35
31.03.06
15 Green Vally flats 0.08 0.08 0.28 0.20 0.20 13.08.05
Dhakoli to
26.11.05
16 Comm. Plot SCO 0.84 0.34 10.00 9.16 3.71 11.01.06
393, Sector 8 to
Panchkula 31.12.07
17 Motia Diamond at 1.28 0.60 3.00 1.72 0.81 16.10.05
Kharar (Quila to
Complex) 31.12.07
18 Adv. Against land 0.15 0.15 0.55 0.40 0.40 22.01.07
at Singhpura to
(Sinha) 27.12.07
19 Land at Madopur 0.80 0.80 2.80 2.00 2.00 01.06.05
to
31.12.07
20 Land Derabassi 1.51 1.51 7.00 5.49 5.49 05.05.06
(Samgoli land) to
31.12.07
21 Motia Projects 6.72 6.72 20.52 13.80 13.80 20.04.06
Pvt.Ltd.(Schools) to
31.12.07
22 Adv. Against land 7.65 2.94 11.12 11.12 1.33 02.09.05
at Kharar (Sigma to
City Land 15's 26.03.07
51% share)
Total 88.75 51.95 208.16 119.41 82.33
7.3 The fact that the said document was seen and considered by the AO is evident from internal pages 7 to 28 of the order and specific discussion at internal page 25 sub-para (ix). The relevant extract is reproduced hereunder :
"From the above show cause and reply of the assessee it goes beyond doubt that pg No. 62 of Annexure-A-4 of prernise-A-3 is a document based on the actual facts with regard to (hose transactions which have materialized before the date of preparation of this document and the sanctity of this document is established on account of following facts:-
(i) ...........
(ii) ---------
(iii) ...........
(iv) ..........
(v) ..........
(vi) ..........
(vii) ..........
(viii) .........
(ix) Barring projects stated in row-7, 8, 10, 11 & 21 of pg 62, all the projects
belong to M/s Motia Constructions Limited. Also the projects mentioned in 7, 8, 10, 11 a 21 relate to the erstwhile director of M/s Motla Constructions Limited Sh. Pawan Bansal and the fund used column reflect the investment ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 21 of 35 of ihe assesses company M/s Motia Constructions Limited in the projects of Its sister concerns then.
Thus in the light of the above facts, the veracity of page 62 of Annexure A-4 of premise A-3 is established beyond doubt., 7.4 A further reading of internal pages 10 to 31 and again 31 to 35 of the CIT(A)'s order dated 20.03.2012 show that the discussion entirely takes place on the said page 62 A-4 i.e. the seized document. The following relevant extract from page 35 of this order also highlights the same as under :
...........
The document seized during the course of search and relied upon by the AO is clearly meant to have an over view of various financial aspects of different project under taken by the assessee company and its promoters so as to settle some issues amongst themselves and that is why even projects not belonging to M/s Motia Construction Limited find mention therein.
................... (emphasis supplied)
..................
As such the additions made by the AO on account of page No. 62 of annexure A-4 seized from the residence of Sh. Krishan Goyal are confirmed."
(emphasis supplied) 7.5 It is seen that though the order of the AO stood merged with the order of CIT(A)-I Ludhiana, it was subjected to the Revisionary Powers of the CIT, Central, Ludhiana by order dated 28.03.2013 u/s 263 where the show cause notice issued to the assessee was after the passing of the appellate order. Copy of the 263 order is placed at page 67 to 80. Admittedly the assessee had filed an appeal against this order of the CIT, Central, Ludhiana. However, the said appeal was withdrawn as is evidenced by Paper Book page 81-82. In the face of these admitted facts, the question of validity of the 263 order in the first round never came up for consideration. Consequential order passed in pursuance to the 263 order dated 28.03.2013 is a valid assessment in these peculiar facts.
7.6 It is the assessment order dated 30.03.2014 passed u/s 143(3) r.w.s. 263 which was again sought to be revised by Pr. CIT, Central. Copy of the show cause notice issued by the Pr. CIT dated 16.02.2016 in the order under challenge is available at pages 83 to 85 which has been extracted in the order itself also. A perusal of page 83, internal page 1 of the show cause notice shows that in para 2, the facts are referred to. It is further noticed in aforesaid para and in para 4 that the order u/s 143/263 dated ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 22 of 35 30.03.2014 had concluded that all the five entries at Sr. No. 7, 8, 10, 11 and 21 had been covered in the case of the respective assessees. The Pr. CIT has concluded that this conclusion has been without proper verification supported by the reasoning given in sub-para (a) (b) and (c) of para 4 of the Show Cause Notice. On the basis of this reasoning, the order is considered to be erroneous and prejudicial to the interests of the revenue on the following three counts. For ready reference, the relevant extract of the Show Cause Notice issued in the present proceedings by the Pr. CIT is extracted hereunder :
03. On perusal of the assessment records, it was observed by CIT(C).
Ludhiana that the addition of Rs. 2,45,10,000/- made on account of undisclosed profits was earned by the assessee company with regard to the projects/companies mentioned at Sr. No. 1 to 6, 9, 12 to 20 and 22 but no addition was made in respect of projects at Sr. No, 7, 8, 10, If & 21, Though the assessee company had some business interest/share in the entities mentioned in the document at Sr.No.7, 8, 10, 11 & 21. The order u/s !43(3)/153A dated 22.12.2010 was, therefore, considered as erroneous and prejudicial to the interest of the revenue and assessment order was set aside for limited purpose for making proper additions after properly examining the issues and conducting proper inquiry after according an opportunity to the assessee in respect of projects at Sr. No. 7. 8, 10. 11 & 21 of page 62 of Annexure A 4 seized from the residence of Sh. Krishan Goyal.
04. In pursuance of the directions of the CIT, again an order u/s 143(3)/ 263 of the I. T, Act, was passed on 30th March. 2014, as per which it was held that all the five entries/projects at Sr. No. 7, 8, 10, 1! & 21 namely Marble Home apartments, Marble Home Construction, (P) Ltd., Motia Township (P) Ltd, Pabhat 40's, Motia Developers (P) Ltd. Pabhat 40's(Baddi Land & Motia Heights) and Motia Projects (P) Ltd., (Schools) have duly been covered for the assessment in cases of respective assessees without proper verification of facts viz.,
a) Though, a reference in the ease of M/s Motia Projects Pvt. Ltd. (Schools). Panchkula (Sr. No. 21)have been sent to the assessing officer concerned hut there is nothing on record to suggest as to whether any action had been taken in the matter or not. As per the facts on record, it is evident that the requisite documents pertaining to the assessee concerned such as a copy of the return of income supported with computation, of income, audit report etc., neither obtained nor verified, before making such reference to the concerned assessing officer. Thus, the information supplied by the assessee in the course of assessment proceedings is either incomplete or wrong.
b) A reference in the eases of M/s Marble Home Apartments and M/s Marble Home Constructions Pvt. Ltd. sent to the concerned Assessing Officer at However, the worthy CIT-III, Ludhiana, under whose territorial jurisdiction the remaining two cases namely M/s Marble Home Apartments and M/s Marble Home Constructions Pvt. Ltd. were reportedly liable for assessment has informed as per its letter No. ClT- III/Ldh/JB/CIT(A)/73/14-l 5/2055 dated 21.11.2014 that in the case of M/s Marble Home Apartments, wherein the total profit is worked out Rs, 6,48 Crores, no action could be taken as the same is not assessed in its charge and the whereabouts of this concern are not available. The requisite documents pertaining to the assesses concerned such as a copy of the return of income supported with computation of income, audit copy of .return of income supported with computation of income, audit report etc., neither obtained nor verified, before making such reference to the concerned assessing officer. Thus, the information supplied by the assessee in the course of assessment proceedings is either incomplete or wrong.
c) In the case of M/s Marble Home Constructions (P) Ltd., it is reported by the worthy CIT-III, Ludhiana that the assessment, in this case, has been made u/s 143(3) by the ITO, Ward VT(4), Ludhiana, vide order dated 24.03.2014, wherein it was held that a ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 23 of 35 sum of Rs. 48 Lacs is the share of M/s Motia Constructions Ltd, and the same is liable for taxation in the hands of the assessee under reference.
06. In absence of conducing proper inquiries and verification, the assessment order passed on 30th March. 2014 u/s 143{3)/263 is therefore erroneous and prejudicial to the interest of the revenue because:
that the Lit Assessing Officer has omitted to assess in the hands of the assessee company, under reference, the income of Rs. 48 lacs, being the share of profit out of investment of Rs. 70 lacs with M/s Marble Home Construction (?) Ltd., Ludhlana (Sr. No.
06),
(ii) that the Ld. Assessing Officer has omitted to cognizance of the profit of Rs, 6.48 crores. as appearing against Sr. No. 7 of the seized documents, simply by accepting the claim of the assessee company to the effect that it belongs to M/s marable Home Apartments, even without making proper verification and obtaining the requisite documents, such as, a copy of the return of income supported with computation of income, audit report etc. pertaining to the assessee concerned.
(iii.) that the Ld, Assessing Officer has omitted to take cognizance of the entries appearing at Sr. No. 21 of the seized documents, simply by accepting the claim of the assessee company to the effect that it belongs to M/s Motia Projects Pvt. Ltd. (Schools), Panchkula and even without making proper verification and obtaining the requisite documents, such as, a copy of the return of income supported with computation of income, audit report etc., pertaining to the assessee concerned,
07. In view of the facts stated above, the assessment made u/s 143(3) of the LT. Act by the A.O. is erroneous in so far it is prejudicial to the interest of revenue and it is proposed to be revised u/s 263 of the LT. Act, 1961. You are, therefore, given an opportunity to file your objections against the proposed action u/s 263 of the IT. Act either personally or through an. authorized representative on 22.02.2016 at 1 1.00 AM in my office at above mentioned address.
7.7 It may not be out of place to refer to the original assessment order passed u/s 143(3)/153A dated 22.12.2010 so as to consider the correctness of the ld. AR's arguments that the very same seized document had by this time been considered by to different AOs. It is seen from the original assessment order that the AO has required the assessee to explain the contents of the documents described as page 62 of Annexure A-4 . The relevant extract of the said para is reproduced hereunder :
"7. Issue regarding Page 62 of Annexure A4 of premise A3 During the course of search at the residence of the Director of the assessee company Shri Krishan Goyal one computerized sheet of paper was seized as page No. 62 of Annexure-A4, which contained details of the projects of the assessee company. During the course of assessment proceedings in the ce of the assessee for the A.Y. 2006-07, the issue of page No. 62 of Annexure A4 seized from the residence of director Shri Krishan Goyal has been taken up in detail. The extracts of the deliberation and findings on the issue are reproduced below (on page 7-28).
T h e a s s e s s e e was required to furnish explanation with regard to the contents of the said document vide questionnaire dated 01.09.10. The assessee in response sought adjournments on 15-09-10,06-10-10 and 21-10-10. On 27-10-10 and on 22-11-10, the assessee filed replies explaining the contents of the said document. Based on these replies and contents of the document pg 62 of ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 24 of 35 Annexure A-4 seized from the residence of Director Shri. Krishan Goyal (Premise A-
3) a detail show cause notice was issued and served on the assessee on 29.11.10. The relevant part of the show cause is reproduced as under :
"Vide questionnaire dated 01.09.2010 you were required to explain the contents of page 62 of Annexure-A-4 seized from the residence of the Director Shri Krishan Goyal during the course of search action on 25.02.2009. The contents of the document are reproduced as under :
S.No. Name of company Total Funds Sale Total Amount Duration
cost used profit/market of share of of funds
consideration profit for used
funds used
1 Adv. Agst.land & 7.85 6.90 21.90 14.05 12.35 22.09.05
land at Bhankarpur to
31.12.07
2 Motia Highway 1.02 0.51 3.40 2.38 1.19 06.02.06
Kharar to
16.11.07
3 Motia Homes at 2.10 2.10 5.60 3.50 3.50 14.10.05
Sirakpur ( 30 flats to
31.12.05
4 Mahesh Nagar 3.60 3.60 13.60 10.00 10.00 25.02.06
Project Barnala, to
Samana Colony 31.12.07
5 Motia Royal 1.38 1.38 3.38 2.00 2.00 06.06.05
Estate, Nabha to
31.12.07
6 Land at Derabassi 2.10 1.11 4.20 2.10 1.11 20.12.05
(Mehendru Land) to
31.12.07
7 Marble Home 6.48 6.48 12.96 6.48 6.48 27.02.06
Apartment to
31.12.07
8 Marble Home 1.95 0.70 3.30 1.35 0.48 16.11.05
Construction Pvt. TO
Ltd. 13.11.07
9 Land at Phabat 1.05 0.90 1.60 0.55 0.47 08.11.05
(1.75 acres) to
31.03.06
10 Motia Township 22.00 8.61 48.00 26.00 10.18 01.04.07
Pvt. Ltd. Pabhat to
40's 55% 31.12.07
11 Motia Developers 13.00 1.95 18.00 5.00 0.75 24.01.06
P.Ltd. (Baddi Land to
& Motia Heights) 31.12.07
12 Land at Kharar 5.61 3.27 13.77 8.16 4.76 14.11.05
Tikka (11 acres to
51% share) 31.03.06
13 Land at 0.78 0.78 1.58 0.80 0.80 26.08.05
Gholumajra to
31.03.06
14 Land at Khararr 0.80 0.52 1.60 0.80 0.52 09.09.05
(13 kanal 4 marlas) to
31.03.06
15 Green Vally flats 0.08 0.08 0.28 0.20 0.20 13.08.05
Dhakoli to
26.11.05
ITA 813/CHD/2016 &
ITA 519/CHD/2013
Page 25 of 35
16 Comm. Plot SCO 0.84 0.34 10.00 9.16 3.71 11.01.06
393, Sector 8 to
Panchkula 31.12.07
17 Motia Diamond at 1.28 0.60 3.00 1.72 0.81 16.10.05
Kharar (Quila to
Complex) 31.12.07
18 Adv. Against land 0.15 0.15 0.55 0.40 0.40 22.01.07
at Singhpura to
(Sinha) 27.12.07
19 Land at Madopur 0.80 0.80 2.80 2.00 2.00 01.06.05
to
31.12.07
20 Land Derabassi 1.51 1.51 7.00 5.49 5.49 05.05.06
(Samgoli land) to
31.12.07
21 Motia Projects 6.72 6.72 20.52 13.80 13.80 20.04.06
Pvt.Ltd.(Schools) to
31.12.07
22 Adv. Against land 7.65 2.94 11.12 11.12 1.33 02.09.05
at Kharar (Sigma to
City Land 15's 26.03.07
51% share)
Total 88.75 51.95 208.16 119.41 82.33
Vide reply dated 27.10.2010 you have stated that the entries appearing in this sheet of paper is estimation made by Directors before search in the normal course of business. It was made to know total estimated cost, estimated sale & estimated profits of the projects relating to M/s Motia Construction Ltd. as well as other projects relating to one of the Director having interest in other concerns in addition to M/s Motia Construction Ltd. as mentioned at page No. 62 at serial No. 7, 8, 10, 11 & 21. (emphasis supplied) 7.7.1 It is seen that the AO did not completely agree with the entire submissions and further required the assessee to justify the claim. A perusal of interim pages 11-12 of the assessment order shows that from the reply of the assessee dated 09.12.2010, following has been extracted by the AO :
"As regards page no. 62 of Annexure A-4 seized during the course of search, we have already 'stated that tins page is an estimation made by directors before search in the normal course of business. This estimation was made to know Total estimated cost, estimated sale and estimated pi (juts ol the pi ejects relating to Motia Constructions Ltd. as well as other projects relating to one of she dnector having interest in other concerns in add-on to Motia Constructions Ltd. as mentioned ot Page No: 62 at serial no: 7, 8, 10, 11 & 21.
As regards your show cause regarding why the difference in column 3 & column 4 i.e. Total cost Funds used in respect of projects of the company appearing at Sr. no. 1, 2, 3, 4, 5, 6, 9, 12 to 20 & 22 be considered as undisclosed investment of the company in its project, we have to state as under-
...............
..............."
7.7.2 It is seen that thereafter proceeding to consider the other explanations, the AO at internal pages 24-25 considers the reply of the assessee and forms the following view thereon :
ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 26 of 35 The reply of the assessee and the contents of the document have been considered and dealt with as under :
From the above show cause and reply of the assessee it goes beyond doubt that pg No. 62 of Annexure-A-4 of premise-A-3 is a document based on the actual facts with regard to those transactions which have materialized before the date of preparation of this document and the sanctity of this document is established on account of following facts:-.
(i) As per the reply of the assessee the document was prepared by the directors of the company.
ii) The document was prepared somewhere in first week of January, 2008 as per the reply of the assessee. which is verifiable from the column duration of funds used in pg 62.
iii) Funds used column of pg 62 has been reconciled in toto with the regular books of the assessee by the assessee itself,
(iv) Ratio of Col.4: Col.3 i.e Funds used: Total Cost is exactly same with ratio of Col.7: Col.6 i.e. Amount of share of profit for funds used: Total profit.
v) Col. 5 (-) Col.3 = Col.6 i.e Sale (-) Total Cost = Total Profit.
vi) The projects which have been sold off before 31/12/2007, in those cases the duration of funds used exactly tallies,
vii) The narration 40's 55% appearing in row 10 is 22 which tallies with the figure mentioned In the column; of Total Cost.
viii) Similarly, the narration 11 acre's 51% share appearing in row 12 (Land at Kharar Tikka). Total Cost is 5.61 out of which the company's share is 51% which comes to 3.27 in the funds used column.
ix) Barring projects stated In row-7, 8,10,11 & 21 of pg 62, all the projects belong to M/s Motia Constructions Limited. Also the projects mentioned in 7, 8, 10, 11 & 21 relate to the erstwhile director of M/s Motia Constructions Limited Sh. Pawan Bansal and the fund used column reflect the investment of She assessee company M/s Motia Constructions Limited in the projects of its sister concerns then. Thus, in light of the above facts, the veracity of pg 62 of Annexure A4 of premise A-3 is established beyond doubt."
( emphasis supplied) 7.7.3 After considering the argument vis-à-vis the Projects/Concerns mentioned on serial numbers 1 to 22, the addition of Rs. 2.45 lacs odd was made excluding the Projects/Concerns mentioned at Sr.No. 7, 8, 10, 11 and 21.
7.8 The issue was examined by the CIT(A) also. The CIT(A) as noticed earlier vide his order dated 20.03.2012 in para 12 proceeded to consider the specific ground raised assailing the addition made on the basis of seized document page 62 Annexure A-4. It is seen that the reason and rationale for the exclusion of the Projects mentioned at Sr.No. 7, 8, 10, 11 and 21 stated to be relating to the erstwhile Director of M/s Motia Constructions Ltd., Shri Pawan Bansal and having been reflected in the projects of the seized concerns is taken note of at internal page 28 ( Paper Book page 58) in para 14. The submissions on behalf of the assessee reiterating this aspect at internal page 32 is found addressed by the CIT(A), on the basis of which the CIT(A) in para 15 proceeds to consider ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 27 of 35 the arguments and for the purpose of present proceedings, the following extract brings out this aspect :
...........
The document seized during the course of search and relied upon by the AO is clearly meant to have an over view of various financial aspects of different project under taken by the assessee company and its promoters so as to settle some issues amongst themselves and that is why even projects not belonging to M/s Motia Construction Limited find mention therein.
................... (emphasis supplied) As such the additions made by the AO on account of page No. 62 of annexure A-4 seized from the residence of Sh. Krishan Goyal are confirmed."
(emphasis supplied) 7.9 It is further seen from the order u/s 263 dated 28.03.2013 wherein show cause notice was issued to the assessee on 21.03.2013, cognizance of this fact has been taken by the ld. Commissioner of Income Tax ,Central Ludhiana. Although the extract of the submissions advanced during the assessment proceedings and the 263 proceedings has been made wherein the name of Shri Pawan Bansal as a Director in the different concerns alongwith Partners/Associates Shri Rajender Mohan Singla or Smt. Pinki Bansal and Shri Kewal Bansal etc. find a mention, however the show cause notice is issued to the assessee on the following specific reasoning :
No further enquiry with respect to the assessee's share in (lie concerns mentioned at Sr. No. 7, 8,10,11 & 21 above has been made resulting in no addition on account of assessee's share in Unexplained Investment and Undisclosed Profits arising from (he above mentioned projects, 7.10 The reply of the assessee is considered and variously extracted in paras 3 to 5 and relying upon the observations made by the AO in paras 6 to 9 and referring to facts which have been owned up by the assessee in paras 10 to 19, the CIT Central concludes that assessment has been made without making proper additions; conducting proper enquiries and also with non application of mind. Paras 16 and 19 are reproduced hereunder :
"16. However, aforesaid arguments of the Ld. AR are not acceptable in view of the detailed facts discussed above in this order. Admittedly, assessee company has made huge investments in these concerns at SI. No, 7, 8, 10, 11 & 21 and it is unusal and beyond comprehension mat no profits are earned by the assessee company from its investments in above concern/projects unless of course supported by evidence which is not forthcoming in this case from the assessee. Not only assessee has not filed any evidence of not having earned any income in its aforesaid investments but fact of earning profits is quite evident from the transactions recorded on page 62 supra which cannot be brushed aside merely on the basis of uncorroborated submissions of the assessee specially when A.O. has rightly held that these are not mere estimates."
ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 28 of 35 "19 In view of the above discussion, the assessment order is held to be erroneous and prejudicial to the interest of revenue, as assessment order has been made appropriate additions and conducting proper inquiries and also with non-application of mind. In view of above discussion, assessment made by the A.O. for A.Y. 2008-09 vide order dated 22 12.2010 passed u/s 143(3)/153A of the I.T. Act is set aside for the limited purpose of making proper additions after properly examining the issues and conducting proper enquiry and after affording an opportunity of being heard to the assessee in respect of project No. 7, 8, 9, 10, 1 1 & 21 of page No. 62 and the other projects in respect of which no addition has been made on account of undisclosed profits.
7.11 It is a fact that appeal was filed assailing the correctness of the said order, however, it was withdrawn before the ITAT. Ld. AR has argued that since the consequent assessment order had been passed wherein the earlier additions stood confirmed, in order to avoid multiplicity, the appeal was withdrawn. It is a fact that the assessment order pursuant to the said order was passed by the AO on 30.03.2014. A perusal of this order shows that the AO took note of this specific seized document as is referred by him in para 2 before extracting the aforesaid chart. For ready reference, the relevant extract is reproduced hereunder:
"2.From the perusal of the assessment records, it has been noticed that certain transactions regarding purchase and sale of properties at various places by different companies including the assessee company were found depicted in a document seized at page no. 62 of Annexure A-4 from the residence of Sh. Krishan Goyal,Director of Motia Constructions Ltd. during the course of search conducted on 25.02.2009. It was a chart on appearing on the said document which is as under:
.....................
.....................
7.12 In paras 3 and 4 of the said order, cognizance is taken of the fact that the said document was considered by the AO in the original proceedings and considering the documents and the finding of the AO, the AO in the second round re-confirmed that it was a document based on actual facts. Referring to transactions before the date of the preparation of the document and considering the same, the projects/companies mentioned at Sr.No. 1 to 6, 9, 12 to 20 and 22 led to the addition of Rs.
2,45,10,000/- odd and considering the fact that the specific entries at Sr.No. 7, 8, 10, 11 and 21 were left to be considered, in view of which no addition had been made and the re-opening u/s 263 was directed by the Commissioner of Income Tax, Central Circle, Ludhiana vide order dated 25.02.2013, facts are narrated in regard thereto in detail. For ready reference, a portion of the same is extracted hereunder :
"5. It was noticed that entries at Serial No.7,8,10,11 and 21 were left to be considered in the of M/s Motia Constructions Pvt. Ltd, A perusal of the reply dated 27,10.2010 further reveals that the assessee company had some business ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 29 of 35 interest/share in the entitles mentioned at serial No. 7,8,10,11&21. Relevant part of the reply is reproduced hereunder;
........................
........................
6. And no further enquiry with respect to the assessee's share in the concerns mentioned at Sr, No, 7, -8,10,11 & 21 above has been made resulting in no addition on account of assessee's share in Unexplained Investment and Undisclosed Profits arising from the above mentioned projects.
As such the assessment was re-opened u/s 263 vide order- dated
25.O3.2013 of the Ld. Commissioner of Income Tax, Central Circle, Ludhiana,"
7.13 Accordingly, notices were issued to the assessee and considering the explanation, the view affirmed in the original assessment order was re-affirmed in paras 7 of the same. The conclusion was drawn keeping in view the specific 263 direction which was quoted by the AO as under :
"8. On the basis of the above discussion, I am of the firm opinion that the document page No. 62 Annexure A-4 impounded from the residence of Shri Krishan Kumar Goyal are quite correct authentic and reliable in the case of the assessee company also. During the course of assessment proceedings u/s 263 all the above mentioned entries related to projects mentioned from Sr. No, 1 to 6, 9,12 to 20 and 22 on seized documents page No. 62 Annexure A-4 impounded from the residence of Sh.Krishan Kumar Goyal have been reexamined and it is found that they have duty been considered during the assessment proceedings u/s 153A/143(2) earlier. The entries at Sr. No, 7,8,10,11 and 21 relate to Marble Home Apartments/Marble Home Constructions Pvt. Ltd., Motia Township Pvt Ltd, Pabhat 40's, Motia Developers Pvt Ltd. (Baddi Land & Motia Heights) and Motia Projects Pvt. Ltd-(Schools) respectively.
9. The above mentioned all the five entries at Serial No. 7,8,10,11 and 21 have duly been covered for the assessment in the cases of respective assessees namely Marble Home Apartments, Marble Home Constructions Pvt. Ltd., Motia Township Pvt Ltd, Pabhat 40*s, Motia Developers Pvt Ltd, (Baddi Land & Motia Heights) and Motia Projects Pvt. Ltd,(Schools) respectively as per initiated proceedings u/s 263 of the Ld. CIT. The issues related to entries lying at Serial No. 10 & 11, in the name of M/s Motia Township Pvt Ltd, Pabhat 40's, Motia Developers Pvt Ltd, (Baddi Land & Motia Heights) of the mentioned seized document page No, 62 Annexure A-4 impounded from the residence of Sh.Krishan Kumar Goyal are already been assessed in the cases of respective assessees namely M/s Motia Township Pvt Ltd. Pabhat 40's, Motia Developers Pvt Ltd, (Baddi Land & Motia Heights) for the respective periods and the assessees relating to entries at Serial No. 5,6 and 21(7&8 are stated as a typographical mistake by ld. AR as 5&6) of the page No, 62 Annexure A-4 impounded from the residence of Shri Krishan Kumar Goyal are under assessment at their respective jurisdictional A.Os. As such all the issues related to assessee company M/s Motia Constructions Pvt. Ltd. rising from documents page No.62 Annexure A-4 impounded from the residence of Shri Krishan Kumar Goyal are duly considered and the income of the assessee company M/s Motia Constructions Pvt. Ltd. for A.Y. 2008- 09 is assessed at Rs. 2,98,18,313/- as assessed earlier vide order dated 22.12.2010 u/s 143(3)/153A(1)(b) of the Income Tax Act,1961.
As such the income of the assessee company is assessed at Rs. 2,98,18,313/-."
(emphasis supplied) 7.14 It is seen that the ld. Pr. Chief Commissioner has taken note of these entire facts in his order under challenge i.e. dated 28.03.2016 holding that the arguments of the assessee have not been substantiated ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 30 of 35 by documentary evidence and the addition of Rs. 2,45,10,000/- has been made on the basis of projects/concerns mentioned at Sr.No. 1 to 6, 9, 12 to 20 and 22 and concludes that whereas "the AO should have mad3e the addition in respect of projects mentioned at Sr.No. 7, 8 and 21". The AO was held to have passed the order dated 30.03.2014 without conducting proper enquiries and verifications and without requiring the assessee to prove the facts qua these three projects.
7.15 We have given our utmost consideration to the peculiar facts. However, on a consideration thereof in the light of the decisions cited before us and the arguments advanced, we find that the impugned order in the facts of the present case, are not in accordance with law. The exercise of the supervisory powers in the peculiar facts of the present cases cannot be upheld. While coming to the said conclusion, the decisions relied upon by the parties and also distinguished by the parties, have been taken into consideration. However, they are not being specifically referred to as each decision proceeds on facts peculiar to its own. Addressing the concerns expressed by the ld. CIT-DR justifying the second 263 order in 2008-09 which is a subject matter for consideration in the present proceedings, we note that the direction is given, yet again in the context of the very same seized document justifying the need and necessity to resort to this power on account of peculiar facts and circumstances where it is stated there is rampant insubordination in the department. Addressing the said issue first and giving due consideration to this serious malaise, we deem it appropriate to observe that the power u/s 263 was never intended by the legislature to address the problems of insubordination. The legal position is well settled so as to leave no scope for debate that the Pr. CIT or CIT is to exercise the Revisionary Powers vested in the said authority to call for and examine the record of any proceeding of the AO and only if he considers that the order passed is erroneous in so far as it is prejudicial to the interests of the Revenue, he may pass the order as the circumstances justify. The existence and necessity of the twin conditions of order being erroneous and prejudicial to the interests of the Revenue is a sine qua non. It was never the legislative intent to control rampant insubordination by resorting to 263. For addressing rampant insubordination, if there is a will, there are adequate remedies available to the tax administration. If the subordinate officers do not perform as per law then there is no ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 31 of 35 justification for harassing the tax paying citizens of India. The solution lies in checking the errant officer and not harass the tax paying citizen. In the facts of the present case, the specific document page 62 A-4 is available to the AO in the original proceedings. Enquiries and explanation in regard to the projects and concerns mentioned therein are enquired into. We have seen that a conscious view has been taken to hold that certain projects did not belong to the assessee. If the said view is incorrect on facts, the Revenue may have had a case justifying the setting aside of the respective assessment orders in the two years. However, as we have noted that it is not the case of the Pr. CIT Central, Ludhiana or CIT, Central Ludhiana in 2008-09 and 2007-08 assessment years. We cannot agree to the use of the said provision on the grounds that income has not been taxed in some other unconnected case. The record shows that the consistent explanation of the assessee that it is a mere estimate for internal purposes is considered and rejected. The explanation that the specific projects identified as Sr. 7, 8, 10, 11 & 21 belong to the erstwhile Director Shri Pawan Bansal and did not concern the assessee is accepted. The said explanation is a consistent claim on record. The said claim, admittedly and evidently was considered by the AO in the original proceedings as noted by us and the AO after due application of mind confined his addition to the projects and concerns mentioned at Sr.No. 1 to 6, 9, 12 to 20 and 22. The addition as per record was challenged in appeal before the CIT(A) who too considering the said seized document as has also been noticed by us, proceeded to sustain the addition. This fact needs to be noted in the context of the powers vested by the Statute on the Commissioner (Appeals). Section 251(1) of the Income Tax Act, 1961 empowers the CIT(A) while disposing the appeals to confirm, reduce, enhance or annul the assessment. Thus, where on facts the document seized has been considered by the CIT(A) who did not propose to exercise his power of enhancement and considered the view canvassed by the assessee that these projects were not relatable to the assessee as they pertained to the erstwhile Director, is a fact which comes out from the record. The contra presumption which may be proposed that the CIT(A) while passing the order has also proceeded carelessly and did not consider the document as a whole would require the drawing of presumptions and assumptions in the absence of any such fact on record. Since, there is nothing available on record to support such presumption, ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 32 of 35 the natural normal presumption that the document having been considered by the CIT(A) as a whole by way of relevant discussion thereon wherein we have noticed that the arguments recorded of the assessee have also been brought out by the said Authority to our minds amply evidences the fact that a conscious view has been formed while passing the order.
7.16. While so holding, we are not commenting upon the correctness of the said order as it is not an issue in the present proceedings. Suffice it to say that a speaking order has been passed. In the circumstances in 2008-09, the directions to set aside the order in respect of concerns at Sr.No. 7, 9 and 21 in 2008-09 assessment year and Sr.No. 7, 8, 10, 11 and 21 in 2007-08 assessment year is whimsical and arbitrary. The exclusion of two Projects in the second round in 2008-09 assessment year further demonstrated the casual approach and attitude to the use of this power.
7.17 We also note that there is nothing in the order to show that the consistent claim of the assessee made before the tax authorities was casually or incorrectly considered by different tax authorities at different points of time. The record shows that the; a) original assessment order was passed by Ms. Ekta Jain, Dy. Commissioner of Income Tax, Central Circle, Patiala; b) the order of the CIT(A) which also considered the very same document and the very same claim to agree with the conclusion that the Projects did not pertain to the assessee, is seen to have passed by Shri Harinder Veer Singh Gill, CIT(A)-I Ludhiana; c) the first 263 order dated 28.03.2013 has been passed by Shri D.V.Goyal, CIT Central, Ludhiana; d) acting on his directions, the AO in the third round, Shri R.R.N. Shukla, Assistant Commissioner of Income Tax, Central Circle, Patiala has also formed the very same view. Thus to concur with the arguments of the ld. CIT-DR that the exercise of power by the Pr. Chief Commissioner Income Tax and the CIT, Central in the respective year in the present proceedings is an exercise of power which is necessitated, warranted and justified would be a mockery of justice.
7.18 There is nothing on record to show that the suspicions or beliefs harboured by the tax authorities in the exercise of 263 powers was based on actual facts and errors, let alone those errors which were prejudicial to the interests of the Revenue. The record shows that in the first round, ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 33 of 35 263 power has been exercised directing that additions be made considering the projects mentioned at Sr.No. 7, 8, 10, 11 and 21 and in the order under challenge, it is thereafter deemed appropriate to direct the addition on account of projects /concerns mentioned at Sr.No. 7, 8 and 21, thereby excluding the projects at Sl.No.s 10 and 11 demonstrating that inclusion for Projects mentioned at Sr.No. 10 and 11 was an incorrect decision by an authority no less than CIT, Central, Ludhiana in the first round, which view is repeated in 2007-08 A.Ys.
7.19 In the facts of the present case, we are of the view that the exercise of power is not justified, not only on account of the fact that the subject matter of consideration stood merged with the order of the CIT(A), but more importantly on the ground that there is nothing on record to show that the conclusions drawn by the different AOs on the basis of same seized document, same arguments consistently was without due application of mind. The said finding of the different AOs has not been shown or held to be erroneous let alone prejudicial to the interests of the Revenue. If income has not been subjected to tax in projects unconnected to assessee, then we fail to see why the assessee should suffer.
7.20 In 2007-08 assessment year, the distinguishing fact being that the Commissioner Income Tax did not invoke 263 proceedings twice, however the fact remains that the very same document has been considered by the AO to make an addition of Rs. 81,50,000/- in the first round and the said order also came up in appeal before the CIT(A) who dismissed the assessee's claim again wherein despite having the powers u/s 251(1)(a) to confirm, reduce, enhance or annul the assessment, chose to confirm the addition and there is nothing on record to show that the said authority, on considering the very same document accepting the assessee's plea that these projects were relatable to its erstwhile Director, was a view taken casually and carelessly. If the facts warranted an enhancement, the CIT(A) was vested with the said power. The decision not to choose to do so is a matter of record. Thus, the assessment order stood merged with the order of the CIT(A) as the same seized document stood considered by the CIT(A) in appeal in 2007-08 assessment year, thus, it could not have been the basis for issuance of show cause notice u/s 263 dated 21.03.2013. Accordingly, the order dated 28.03.2013 under challenge in 2007-08 assessment year was again outside the scope of the Revisionary Powers of CIT Central by virtue of Explanatio-1(c) of Section 263 of the Income Tax ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 34 of 35 Act as the assessment order sought to be revised stood merged with the order of the CIT(A).
7.21. The power to revise the assessment order u/s 263 is so vested with the CIT or Pr. CIT in his capacity as a supervisory jurisdiction and can be exercised only if the circumstances specified therein exist. The error envisaged by Section 263 is not one which is expected to depend on possibilities or guess work. It should actually spell out and be demonstrated as an error either on fact or law and the error should be such which can be categorized to be prejudicial to the interests of the Revenue.
7.22 It may not be out of place to refer to a speaking judgement of the Apex Court in the case of Parshuram Pottery Works Co. Ltd. Vs ITO, Circle 1, Ward-A, Rajkot (1077) 106 ITR 1 (S.C) which though on the issue of re-assessment in the context of the Indian Income Tax, 1922. However, the principle of law expounded therein can be well exported and applied to cases where the tax authorities contemplate disturbing the tax paying citizens on account of remissness of the tax authorities. Addressing the challenge posed by the assessee to the jurisdictional issue, the Hon'ble Apex Court was pleased to reverse the decision of the Hon'ble Gujrat High Court holding that "if the AO makes a mistake in relying upon his own record for determining the issue, responsibility for that mistake cannot be ascribed to an omission or failure on the part of the assessee." In fact, their Lordships of the Apex Court considering the contra claim of the parties before the Bench made the following observation :
"It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realising that price should familiarise themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is 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."
(emphasis supplied) 7.23 Perusal of the above shows that the Hon'ble Court has been very clear on two basic principles (i) that those entrusted with the task of assessing are expected to be well versed with the law on the subject and have gone on to hold that any remissness i.e. carelessness on their part can only be at the cost of national exchequer and must necessarily result in loss to the Revenue. The Hon'ble Court simultaneously makes it clear ITA 813/CHD/2016 & ITA 519/CHD/2013 Page 35 of 35 that there must be a finality in all legal proceedings. While making these observations, their Lordships have considered that although what facts are material and necessary for assessment, would differ from case to case, however there was duty on the part of the assessee which was required to be considered in the context of the re-opening of assessment which the Statute casts upon the assessee to disclose fully and truly all material facts necessary for his assessment. However, thereafter it was the duty of the AO to address the facts for the purpose of computing or determining the proper tax due from an assessee. It has been held that any remissness on the part of the AO cannot be the basis for taking recourse to re- opening an assessment. The said dictum when applied to the facts of the present case, amply addresses the argument that the 263 cannot be justifiably resorted to for rampant insubordination in the tax department.
8. Accordingly, in view of the detailed reasons given herein above, wherein the arguments of the respective parties have been considered from all angles and the decisions relied upon and distinguished have also been fully considered, we are of the view that in the peculiar facts and circumstances of the case, the impugned orders dated 28.03.2016 in ITA 813/CHD/2016 assessment year of Pr. CIT, Central deserves to be pertaining to 2007-08 assessment year of CIT Central deserves to be quashed. Ordered accordingly.
Order pronounced in the Open Court on 28th Sept., 2017.
Sd/- Sd/-
( Dr.B.R.R.KUMAR) (DIVA SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
'Poonam'
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CI T(A)
5. The DR
Asstt. Registrar
ITAT,Chandigarh.