Income Tax Appellate Tribunal - Pune
M/S. Ashoka Buildcon Limited, Nashik vs Commissioner Of Income-Tax - 1, Nashik on 24 September, 2018
आयकर अपीऱीय अधिकरण पण
ु े न्यायपीठ "ए" पण
ु े में
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
सुश्री सुषमा चावऱा, न्याययक सदस्य एवं श्री अयिऱ चतुवेदी, ऱेखा सदस्य के समक्ष
BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM
आयकर अपीऱ सं. / ITA No.656/PUN/2008
यििाारण वषा / Assessment Year : 2003-04
M/s. Ashoka Buildcon Ltd.,
Ashoka House, S.No.861,
Ashoka Marg, Wadala,
Nashik - 422011 .... अऩीऱाथी/Appellant
PAN: AABCA9292J
Vs.
The Commissioner of Income Tax-I,
Nashik .... प्रत्यथी / Respondent
अऩीऱाथी की ओर से / Appellant by : Shri Nikhil Pathak
प्रत्यथी की ओर से / Respondent by : Shri Rajeev Kumar
सन
ु वाई की तारीख / घोषणा की तारीख /
Date of Hearing : 07.09.2018 Date of Pronouncement: 24.09.2018
आदे श / ORDER
PER SUSHMA CHOWLA, JM:
The appeal filed by the assessee is against the order of CIT-I, Nashik, dated 24.03.2008 relating to assessment year 2003-04 passed under section 263 of the Income-tax Act, 1961 (in short 'the Act').
2. The assessee has raised various grounds of appeal but as pointed out by the learned Authorized Representative for the assessee, the issue raised in the present appeal is as raised in ground of appeal No.4, which reads as under:-
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"4 The order passed u/s 263, setting aside the whole of assessment order passed u/s 143(3) for A.Y. 2003-04, is bad & illegal."
3. Briefly, in the facts of the case, the assessee has furnished return of income declaring total income of ₹ 2,00,88,040/-. The case of assessee was picked up for scrutiny and the Assessing Officer had completed assessment under section 143(3) of the Act vide order dated 28.03.2006. The Assessing Officer had taken note of the GP rate and net profit rate and had compared the same with preceding year and had remarked that there was no shortfall. Various other issues were taken up by the Assessing Officer during the course of assessment proceedings and the assessment was completed on total assessed income of ₹ 3,27,73,040/-.
4. The Commissioner was of the view that the order passed by Assessing Officer was both erroneous and prejudicial to the interest of Revenue for various reasons mentioned in show cause notices issued under section 263 of the Act on 05.09.2006, 09.01.2008 and 11.01.2008. Show cause notices and submissions made by the assessee from time to time in response to each show cause notice are reproduced by the Commissioner in the order passed under section 263 of the Act. The Commissioner had taken up various issues and was of the view that the Assessing Officer did not examine the relevant issues in its proper perspective. Vide para 7, the Commissioner notes that the assessee failed to give proper reply on any of the specific errors pointed out in the show cause notice issued under section 263 of the Act and the Assessing Officer's failure to consider the relevant aspects including material on record, makes the order erroneous and prejudicial to the interest of Revenue. He further observed that the learned Authorized Representative for the assessee 3 ITA No.656/PUN/2008 M/s. Ashoka Buildcon Ltd.
did not seriously canvas the correctness of assessment order passed by Assessing Officer on the issues raised during 263 proceedings. He further vide para 8 was of the view that assessment on aforesaid issues was completed without conducting necessary enquiries, without obtaining reply, evidence and without ascertaining veracity of contentions and truths of the facts stated by the assessee. He further observed that the Assessing Officer should have made proper enquiries before accepting the claim of assessee. Then, he concluded vide para 9 as under:-
"9. The distortions and prejudices to the revenue, which are discussed above need to be set right. The issues discussed have wide ramifications touching all aspects of computation of income. Therefore, on careful consideration of the facts and circumstances of the case discussed above, the assessment is set aside and the matter is restored back to the file of the Assessing Officer on the aforesaid issues. In exercise of the powers conferred by the Section 263 of the IT Act, 1961, the assessment is set aside, with the direction that the assessment should be framed afresh by the A.O. after proper enquiries and after allowing reasonable opportunity of being heard to the assessee."
5. The assessee is in appeal against the order of Commissioner.
6. The learned Authorized Representative for the assessee pointed out that the first show cause notice was issued on 17.07.2007, copy of which is placed at pages 19 to 22 of Paper Book. The assessee furnished reply and the final submissions were made by the assessee on 11.03.2008. The learned Authorized Representative for the assessee referred to the notice placed at pages 19 to 22 of Paper Book i.e. issued by the Commissioner and pointed out that certain errors were committed by the Commissioner, against which the assessee filed explanation along with Annexure and enclosures. The first submission was made on 06.08.2007, then on 05.09.2007 and finally on 09.01.2008, copies of which are placed at pages 23 to 211 of Paper Book. The 4 ITA No.656/PUN/2008 M/s. Ashoka Buildcon Ltd.
learned Authorized Representative for the assessee stressed that the submissions were made which were considered and no conclusion was drawn by the Commissioner except for setting aside the issue. He then, referred to the proceedings sheet noting dated 09.01.2008, which was received from the Commissioner for additional requirements to be submitted. The third notice is dated 09.01.2008 and the fourth notice issued by the Commissioner is dated 11.01.2008, copies of which are placed at pages 212 to 216 of Paper Book. The assessee filed replies in response to proceedings sheet noting and other notices which are placed at pages 217 to 223 of Paper Book. The additional requirements vide proceedings sheet notings were issued by the Commissioner on 12.02.2008, which are placed at pages 224 and 225 of Paper Book. The assessee filed detailed submissions on different dates in response to the same, which are placed at pages 226 to 241 of Paper Book. The learned Authorized Representative for the assessee pointed out that it was not being alleged that the Commissioner cannot issue another notice under section 263 of the Act; but while issuing the said notice Commissioner should have crystallized his mind on the issue. He cannot resort to 263 proceedings to make roving enquiries. He stressed that where the Commissioner was not clear in the first, second and third notices as to what was wrong in the assessment order, then there was nothing wrong in the assessment order. With regard to observations of Commissioner on sub-contract payments, the learned Authorized Representative for the assessee referred to the order of Assessing Officer, wherein he states that the said sub-contract payments were verified. He thus, submitted that maximum it could be a case of inadequate enquiries but it cannot be said to be a case of no enquiries. Our attention was drawn to the detailed assessment order of the Assessing Officer with special emphasis to 5 ITA No.656/PUN/2008 M/s. Ashoka Buildcon Ltd.
paras 4 to 6, he pointed out that first three notices were mainly relating to sub- contract payments and on 11.01.2008, fresh notice was issued for PF payments. The learned Authorized Representative for the assessee pointed out that the said payments were allowable as the amounts were paid on 10.04.2003. The learned Authorized Representative for the assessee referred to the order of Commissioner under section 263 of the Act, wherein various issues were raised but in the end, the Commissioner failed to give specific conclusions and observes that various issues need verification and remit the issue back to the file of Assessing Officer. In this regard, he placed reliance on the ratio laid down by the Pune Bench of Tribunal in Dharrit Yogen Shah Vs. CIT in ITA Nos.1658 to 1662/PUN/2014, relating to assessment years 2005-06 to 2009-10, order dated 29.09.2017 and ATR Infra Projects Pvt. Ltd. Vs. CIT in ITA Nos.600 to 602/PUN/2015, relating to assessment years 2009-10 to 2011- 12, order dated 17.04.2017.
7. The learned Departmental Representative for the Revenue in reply, stated that no enquiries made raised by the Assessing Officer on the issues raised by the Commissioner, wherein the Commissioner has given a finding that no enquiries were made by the Assessing Officer, even the learned Authorized Representative for the assessee has failed to point out queries asked by the Assessing Officer in this regard. The learned Departmental Representative for the Revenue placed reliance on the following decisions:-
a) Ambika Agro Suppliers Vs. ITO (2005) 95 ITD 326 (Pune)
b) CIT Vs. Amitabh Bachchan in Civil Appeal Nos.5009 & 5010 of 2016, judgment dated 11.05.2016
c) Rajmandir Estates (P.) Ltd. Vs. Pr.CIT (2016) 386 ITR 162 (Calcutta) 6 ITA No.656/PUN/2008 M/s. Ashoka Buildcon Ltd.
8. The learned Authorized Representative for the assessee in rejoinder pointed out that the question arising in the present appeal is whether there was lack of enquiries or inadequate enquiries by the Assessing Officer. He stressed that the Commissioner raises queries, vide his show cause notice modifies the same and raises another set of queries but holds that enquiries need to be carried out. In respect of reliance by the learned Departmental Representative for the Revenue in the case of CIT Vs. Amitabh Bachchan (supra), the learned Authorized Representative for the assessee pointed out that these were the cases of no enquiries and hence, 263 proceedings were held to be valid. Further, he pointed out that the decision in Rajmandir Estates (P.) Ltd. Vs. Pr.CIT (supra), the facts were totally different. He again referred to the observations of the Commissioner in paras 7 to 9, wherein the issue has been generally set aside, but which issue is set aside even the learned Departmental Representative for the Revenue has not clarified. He stressed that such general set aside of assessment made by the Assessing Officer is not warranted under section 263 of the Act.
9. We have heard the rival contentions and perused the record. In the captioned appeal, the issue arising is against exercise of jurisdiction by the Commissioner under section 263 of the Act. The Commissioner is empowered to exercise the said jurisdiction where the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue and both the conditions need to be fulfilled for the Commissioner to exercise the jurisdiction.
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10. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd. Vs. CIT (2000) 109 Taxman 66 (SC) had held the proposition that if the order of Income Tax Officer was erroneous but was not prejudicial to the revenue or if it was not erroneous but was prejudicial to the revenue, then recourse cannot be made to section 263(1) of the Act. It was also held by the Hon'ble Supreme Court that where an entry in the statement of account filed by the assessee was accepted by the Assessing Officer, which was without any supporting material and without making any enquiry, then exercise of jurisdiction by the Commissioner is valid. The Hon'ble Supreme Court further held that the said provision of section 263 of the Act could not be invoked to correct each and every type of mistake or error committed by the Assessing Officer and incorrect assumption of facts and incorrect application of law would satisfy the requirement of order being erroneous and similarly, orders passed without applying the principles of natural justice or without application of mind. The Hon'ble Supreme Court further held that every loss of revenue as a consequence of order of the Assessing Officer could not be treated as prejudicial to the interest of revenue; for example, when an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it could not been treated as erroneous order prejudicial to the interest of revenue unless the view taken by the Assessing Officer was unsustainable in law.
11. The Hon'ble Bombay High Court in CIT Vs. Gabriel India Ltd. (1993) 71 Taxman 585 (Bom) while explaining the powers of revision under section 263 of the Act held that such powers were in the nature of supervisory jurisdiction and the same could be exercised only if the circumstances specified therein exists. 8 ITA No.656/PUN/2008
M/s. Ashoka Buildcon Ltd.
The Hon'ble High Court held that an order could not be termed as erroneous unless it was not in accordance with law. Where an ITO acting in accordance with law makes certain assessments, the same could not be branded as erroneous by the Commissioner simply because according to him the order should have been written more elaborately. The Hon'ble High Court held this section does not visualize the case of substitution of judgment of the Commissioner for that of the ITO to pass the order, unless the decision is held to be erroneous. The Hon'ble High Court further held that where the Assessing Officer examines the accounts, makes enquiries, accounts, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some mistakes himself, then the Commissioner, on perusal of records, may be of the opinion that the estimate made by the officer concern was on lower side and left to the Commissioner, he would have estimated the income at a figure higher than the one determined by the Assessing Officer. The Hon'ble High Court in such circumstances held that but that would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. The Hon'ble High Court held It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interest of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, namely, the order is erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interest of the Revenue, then also the 9 ITA No.656/PUN/2008 M/s. Ashoka Buildcon Ltd.
power of suo motu revision cannot be exercised. Any and every erroneous order cannot be subject-matter of revision because the second requirement also must be fulfilled.
12. The Courts have also held that where the Assessing Officer had carried out enquiries and adopted one of the courses permissible in law or had taken one of the views which was plausible but only because the Commissioner does not agree with such a view, the order passed by the Assessing Officer could not be held to be erroneous and prejudicial to the interest of Revenue, unless and until the view taken by the Assessing Officer was unsustainable in law.
13. The Hon'ble Supreme Court in CIT Vs. Max India Ltd. (2008) 166 Taxman 188 (SC) while propounding such a proposition had further held that where two views are possible, then every loss in revenue would not enable the Commissioner to exercise his powers of revision under section 263 of the Act.
14. The learned Departmental Representative for the Revenue has placed reliance on the ratio laid down by the Hon'ble Supreme Court in CIT Vs. Amitabh Bachchan (supra). In the facts of the said case, the assessment in question was set aside on the ground that requisite and due enquiries were not made by the Assessing Officer prior to finalization of the assessment. The case of the Revenue was that at the fag-end of the year, the assessee did not produce details and hence, the Assessing Officer had to complete assessment in haste and hence, he formulated certain aspects of the case. In this regard, the Commissioner issued show cause notice to the assessee on all three issues and thereafter, passed the order on issues other than issues raised. 10 ITA No.656/PUN/2008
M/s. Ashoka Buildcon Ltd.
The apex court did not accept the plea that the revisionary order having gone beyond the show cause notice was invalid, in view of the reasonable opportunity of being heard given by the Commissioner. The second argument was on the merits of issue raised vide show cause notice issued by the Commissioner. The assessee had made a claim of additional expenses in the re-revised return which was later withdrawn. The Assessing Officer had issued notice under section 69C of the Act but because of the withdrawal of claim by the assessee, the Assessing Officer thought that the matter need not be investigated any further. The view taken by the Assessing Officer was proposed by the assessee to be a possible view and where two views were possible on issue, exercise of revisionary power under section 263 of the Act was challenged by the assessee. The Hon'ble Supreme Court in CIT Vs. Amitabh Bachchan (supra) had upheld the ratio that where the view taken by the Assessing Officer was possible view, the same ought not to be interfered with by the Commissioner under section 263 of the Act merely on the ground that there was another possible view of the matter. It was further held by the apex court Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from. The Hon'ble Hon'ble Supreme Court further held that where the authority (Commissioner) felt that the matter needed further investigation i.e. in case where the assessee had made a claim which would prima facie discloses that the expenses in respect of which deduction had been claimed had been incurred and thereafter abandoning / withdrawing the same gives rise to the necessity of further enquiry in the interest of Revenue. The apex court thus, upheld the power of Commissioner in holding that the order of Assessing 11 ITA No.656/PUN/2008 M/s. Ashoka Buildcon Ltd.
Officer in simply dropping the said claim on the issue that the claim was withdrawn, was the correct course of action. The exercise of revisionary powers by the Commissioner under section 263 of the Act was thus, upheld.
15. Now, we shall refer to the facts of present case. As pointed out in the paras herein above, the Commissioner in the present case had issued notice on 17.07.2007. The learned Authorized Representative for the assessee has taken us through the said show cause notice elaborately, which is placed at pages 19 to 22 of Paper Book. He then, referred to submissions made by the assessee explaining all the issues raised in the said notice which are also placed in Paper Book and pointed out that the Commissioner after receiving submissions have not come to any conclusion as to which of the issues were not enquired into by the Assessing Officer and require further enquiries. Then, coming to the next communication of the Commissioner which is by way of note sheet entries, placed at page 212 of Paper Book; the third notice dated 09.01.2008 placed at pages 213 and 214 of Paper Book and fourth show cause notice dated 11.01.2008, which is placed at pages 215 and 216 of Paper Book, the learned Authorized Representative for the assessee pointed out that Commissioner was taking up different issues in those notices. Although various show cause notices were issued which find mention in the order passed under section 263 of the Act and the submissions of assessee have also been considered but the said communication reflects the attitude of the Commissioner i.e. in raising certain enquiries, getting the answers to them but then not concluding the issue as to what is wrong with the order of Assessing Officer; but raising fresh set of enquiries in the next show cause notice. Even while concluding proceedings initiated under section 263 of the Act, the 12 ITA No.656/PUN/2008 M/s. Ashoka Buildcon Ltd.
allegation of the Commissioner is that the assessee could not substantiate any of the contentions raised by it with the help of any cogent or positive evidence. He then goes on to say that the Assessing Officer did not examine the relevant issues in its proper perspective.
16. The requirement of the exercise of jurisdiction under section 263 of the Act is for the Commissioner to come to a finding as to what is wrong with the order of Assessing Officer and which facts / issues have not been considered by him and which should have been considered. But the series of events, in the present case, reflects that though notices one after the other were issued to the assessee but after getting the replies, another notice or other issues were raised but what was the failure on the part of Assessing Officer vis-à-vis first notice issued has not been clarified by the Commissioner. He has failed to come to a finding as to which issues need to be discussed or re-looked at by the Assessing Officer. The order of Commissioner in setting aside the assessment on the alleged aforesaid issues is not clear. Even the learned Departmental Representative for the Revenue could not explain in detail the issues which have been set aside to the Assessing Officer. Further, the perusal of assessment order itself reflects the enquiries made by the Assessing Officer during the course of original assessment proceedings. The issues which have been touched upon by the Commissioner in different show cause notices has also been verified by the Assessing Officer, may be at best, it is case of 'inadequate enquiries' but it is definitely not a case of 'no enquiries'. The Courts have held that where one of the possible views have been taken by the Assessing Officer in making the enquiries, then the Commissioner is not empowered to impose his views on the said issues.
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17. Before parting, we may also refer to the reliance placed upon by the learned Departmental Representative for the Revenue on the ratio laid down by the Hon'ble High Court of Calcutta in Rajmandir Estates (P.) Ltd. Vs. Pr.CIT (supra). In the facts of the said case, the revisionary jurisdiction invoked under section 263 of the Act was upheld by the Apex Court as it was case of lack of requisite enquiries.
18. The Pune Bench of Tribunal in ATR Infra Projects Pvt. Ltd. Vs. CIT (supra) have also held that where the Assessing Officer had made enquiries and applied his mind, then it is not a case of lack of requisite enquiry and revisionary jurisdiction invoked by the Commissioner under section 263 of the Act was struck down.
19. Now, coming to the last reliance placed upon by the learned Departmental Representative for the Revenue on Ambika Agro Supplies Vs. ITO (supra), which was also a case of no enquiry being made and hence the said proposition is of no help to the learned Departmental Representative for the Revenue.
20. Applying the ratio laid down by the Apex Court in Malabar Industrial Co. Ltd. Vs. CIT (supra) and Hon'ble Bombay High Court in CIT Vs. Gabriel India Ltd. (supra), we hold that because of failure of the Commissioner to come to a finding as to which issues in different show cause notices issued by him were not verified by the Assessing Officer and where the Commissioner issues one show cause notice on certain points, receives the reply and then issues another notice on other points and again receives the reply and then finally another 14 ITA No.656/PUN/2008 M/s. Ashoka Buildcon Ltd.
notice does not establish the exercise of proper jurisdiction by the Commissioner under section 263 of the Act. Hence, the order passed under section 263 of the Act is held to be both invalid and bad in law and the same is cancelled. The ground of appeal No.4 raised by the assessee is thus, allowed.
21. In the result, the appeal of assessee is allowed.
Order pronounced on this 24th day of September, 2018.
Sd/- Sd/-
(ANIL CHATURVEDI) (SUSHMA CHOWLA)
ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER
ऩण
ु े / Pune; ददनाांक Dated : 24th September, 2018.
GCVSR
आदे श की प्रयतलऱपप अग्रेपषत/Copy of the Order is forwarded to :
1. अऩीऱाथी / The Appellant;
2. प्रत्यथी / The Respondent;
3. ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, ऩुणे "ए" / DR 'A', ITAT, Pune;
4. गार्ड पाईऱ / Guard file.
ु ार/ BY ORDER, आदे शािस सत्यावऩत प्रतत //True Copy// वररष्ठ तनजी सधिव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩुणे / ITAT, Pune