Income Tax Appellate Tribunal - Chandigarh
Shri Rajinder Chauhan, Shimla vs Pr.Cit, Shimla on 21 July, 2022
आयकर अपीलीय अिधकरण,च डीगढ़
अिधकरण च डीगढ़ यायपीठ ''बी.'', च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH
BENCH 'B' CHANDIGARH
BEFORE: SMT. DIVA SINGH, JUDICIAL MEMBER &
SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No. 308/CHD/2020
Assessment Year : 2015-16
Shri Rajinder Chauhan, बनाम The Pr.CIT
Village Dhangvi, PO-Kokunala, VS Shimla.
Tehsil-Kotkhai, Shimla.
थायी लेखा सं./PAN /TAN No: AAZPC1684M
अपीलाथ /Appellant यथ /Respondent
िनधा रती क ओर से/Assessee by : Shri Sudhir Sehgal, Advocate
राज व क ओर से/ Revenue by : Shri Sarabjeet6 Singh, CIT-DR
तारीख/Date of Hearing : 29.04.2022
उदघोषणा क तारीख/Date of Pronouncement : 21.07.2022
आदेश/ORDER
PER DIVA SINGH The present appeal has been filed by the assessee wherein the correctness of the order dated 19.03.2020 of Pr.C I T, Sh i ml a pe r ta in i ng to 20 1 5 -16 a ss e s sme n t ye a r i s ch al le nge d on the fol l ow in g gr oun d s :
1. On the facts and in the circumstances of the case, the learned Principal Commissioner of Income Tax(hereafter, "the Pr. CIT") had no occasion to initiate proceedings under section 263 of the Income Tax Act, 1961 (hereafter, "the Act") as the assessment order sought to be revised is neither erroneous nor prejudicial to the interests of the revenue.
2. The impugned order of the learned Principal Commissioner of Income Tax is bad in law as there is no specific finding in the order that the order of assessment is erroneous insofar as it is prejudicial to the interests of revenue in respect of any of the issues raised.
3. The learned Pr. CIT acted without jurisdiction in passing an order in respect of the claim for shrinkage on petrol and diesel which was duly considered by the Ld. AO before passing order u/s. 143(3).
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4. For these and other grounds that may be adduced at the time of hearing, the order of the learned Pr. CIT may be quashed and the appeal allowed. The appellant craves leave to add to, or, amend/ alter/ withdraw any of the above grounds of appeal. All the grounds of appeal are without prejudice to each other."
2. Th e r e l e va n t fa c ts of th e ca s e a r e th a t the r e tur ned i nc ome of Rs. 2 , 7 4, 8 10 /- fi l e d b y th e a s se sse e wa s a c ce p te d b y the A O b y pa s si ng a n or d e r u/s 1 43 ( 3 ) of the Ac t on 2 4 .1 1 . 20 1 7 . Th e a sse sse e in th e sa i d r e tu rn h a d a l so di sc lo se d a g r ic ul tur e i nco me of Rs. 7 0 ,1 9 ,2 0 4 / -.
2. 1 Th e s a id ca se was se le cte d for scr u ti ny th r ough C A SS sp e ci f ic a ll y i n v ie w o f the f a ct tha t "l arge agr ic ul t ur e inc o me and lo w in c o me sho wn a s l arge co n tr a c tor s".
2. 2 Th i s or de r w a s s ub je cte d to the Re vi s ion a r y P ower s u/s 2 6 3 by i ss ui ng S how C a us e N oti ce to th e a sse ssee .
2. 3 Ag gr i e ve d by the or de r p a ss e d b y l d . P C I T, S h i mla , th e a sse sse e is i n a pp e a l be fore the ITA T.
3. Th e ld. AR i n vi tin g a tte nti on to t he f a cts on re cord sub mi tte d th a t t he Re vi si on a r y p ow e rs h a ve b e e n e xe r ci se d i n a me ch a ni ca l ma n n e r . Th e Sp e c if ic r e a son s re fe rre d to in t he Sh ow C a use N o tice ta k e n i nt o c ons i de r ati on for se tti ng asi d e the v a l id ly pa s se d a sse ss men t o rd e r w a s a ssa il e d on ma n y g r oun ds .
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3. 1 Th e c h a ll e n ge wa s p ose d on th e g r oun d tha t th e se i ss ue s ha d fu ll y b ee n exa mi ne d b y the A O i n th e ca se of th e a sse ssee , he n ce i t w a s a c ase of a n othe r o pin ion on sa me s e t of fa c ts.
3. 2 Re fe r r in g to the r e a son s for se le cti on of the i ssue s a s pe r C AS S, i t w a s a r gu e d t ha t the AO w a s con sc iou s of t he f a ct that the re w a s a la r ge a gr i cu lt ure in co me d i sc los e d. Th e AO h a s ta k e n in to con si d e r a ti on the G P a nd N P ra t e of th e a sse ssee fr om its Fi l li n g St a tio n i n th e n a me an d s tyl e of M/s S w a ro op S e r v ice Sta t ion , Kok u na l a , Te h si l K otk h a i , D is tt. S h iml a . Fl u ctu a tio n pos e d on a cc ount of sh r in k a ge etc . i t w a s sub mi tte d h a d bee n look e d i n to b y th e AO i n de t a il . F or th e spe ci fi c s ub mis si on , a tte n ti on w a s i n vi te d t o P a pe r B ook p a ge s 1 to 1 5 w hi ch co nta i n s the c omp uta t ion of i n come o n th e b a si s of wh i ch the re tur n w as fi le d a l on gw it h An nu a l Au d it e d Re p or t, Au d ite d B a l an ce Sh ee t a nd s up p or ti ng a nn e xu re s in cl udi n g S toc k Ta ll y e vi de n ce d fr om pa g e 1 0. I n vi ti ng a t te n ti on to p a ge 16 of th e Pa pe r B o ok, a tte n ti on w a s in vi te d to spe c ific q ue ry r a ise d b y the AO b y is sua n ce of n oti ce u/s 1 4 2 (1 ) and 1 4 3( 2 ) d ate d 1 8 . 08 . 2 017 re q ui r in g the a sse ssee to e xp l a in C omp a r a tiv e GP r ate ch a r t for the l a st th ree ye a rs a n d I nve nt ory of op e n in g a nd cl osi ng st ock giv i ng s e p a r a te d e t a il of ite ms t a k e n a t c ost p r i ce a n d ma r ke t pr i ce .
3. 3 At te n ti on w a s i n vi te d to P a p e r Book pa g e 1 7 s how i ng th a t q ue r ie s r a i se d at S r .N o. 1 2 , 20 a nd 2 2 h i ghl i gh tin g the q ue r y ITA 308 /CHD/2020 A.Y. 2015-16 Page 4 of 29 ra i se d v ide i te m N o. 5 a t pa ge 1 6 e vi de n ce d tha t the AO ha d look e d i n to a l l the fa c ts be fore the pa s si ng of the or de r . He had ra i se d a ll ne ce ssa r y q ue r ie s wi th r e ga r d to the op e ni ng a nd cl osi ng s toc k d e ta il s e tc. a nd a ll of the se s tood fur ni sh e d be f ore AO . Att e nt ion was a ls o in vi te d to n oti ce u/s 14 2 ( 1) d a ted 18 . 08 . 2 01 7 a t P a p e r B ook p a ge 19 . The a ss e ssee 's re p l y, it w a s sub mi tte d, is a v a i la bl e a t P a p e r B oo k p a ge s 2 0 -21 . The a s se sse e in i ts r e p ly h a s sh ow n i ts co mpa r a ti v e G P r a te wh ic h ha s b ee n e nq u i re d i nto a nd t he HS D a n d M S mo tor oi l op e n in g a n d cl os in g stoc k, p u r cha se a nd s a l e a n d s hor ta g e o f 98 2 3 i n HS D a n d 1 2 77 2 in MS s tood d i sc l os e d a n d co ns id er e d. I t w a s sub mi tte d th a t th i s wa s e vi de n ce d f r om r e p li e s a nd q u e r ie s r a i se d i n Q ue sti on N o. 4 & 5. Re p lie s to Q ue s ti on N o. 6 a n d 7 , i t w a s sub mi tte d , w ou ld sho w tha t the p ur ch a se w a s on l y f ro m I O C a n d s a le w a s ma d e to va r io us cl i e n ts in ro uti ne a n d i t w a s re sp on de d th at the re we re no s a le s to a n y s is te r con ce r n a s the re i s n o si ste r c on ce r n . Th e re sp on se t o q ue sti on N o. 1 2, 2 0 a nd 2 2 , i t w a s su bmi tte d , w ou ld sho w th a t the l e d ge r a cc oun t for e xpe n se s, d e b i te d to P&L Acc oun t a nd c op ie s o f b i l ls a n d vou ch e r s we re a ll p r od u ce d f or ve r i fi ca t ion be f or e the AO . B i l ls a nd vou ch e r s to s up p or t th e a gr ic ul tur e in come a lon gw i th Ja ma b a n d i a n d Fa r d to e s ta b li sh ow ne r s hi p and bi l ls and vou ch e r s of c om mis s i on a ge n ts to sup p or t t he a gri cul tu r e i nc ome , it was s ub mi tte d , we re a ll pr od u ce d be fo re t he AO .
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3. 4 At te n ti on wa s i nv it e d to a n oth e r r e p l y a p pe n de d a t pa g e 2 2- 23 w h ic h w o ul d sh ow tha t a p a r t fr om a dd r e s si ng a gr i cu ltu r e in come , the a s se sse e ha d a ls o e xp la i n e d G P f l uctua ti on a s u nd e r :
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3. 5 At te n ti on w a s a ls o i nv it e d to Pa p e r B oo k p a ge 2 4 to 2 5 wh i ch is cop y of t he Sto ck Re giste r o f the a sse ss ee w h ic h had be e n d u ly s ho wn to th e AO . Th e n a rr a t ion s th e re i n , i t w a s sub mi tte d, h a ve been du ly ve ri f ie d as is e v id e nt f r om th e si gna t ur e of the S ta te I n spe c tor. Th e s a id S tock R e gi ste r w as sho wn to the A O. A tte n ti on w a s i nv ite d to P a pe r B ook p a ge 2 6 wh i ch i s a n othe r q u e st ion n a ire da te d 1 7 . 11 . 20 1 7 i ss ue d by th e AO . I t w a s s ub mit te d t ha t si n ce th is q u e st ion n a ire w a s r el a te d to the a gr i cu ltu re p r od uc e i .e . sa l e of a p p le s a nd c lai m of de pre ci a ti on f or th e ne w t a nk e r an d q ue r ie s i n re gar d to t he sa le of ol d ta n k e r a nd some ot he r q ue r ie s i n re ga r d to comp l e ti on of hou se e tc ., th us f or th e pu r po se s of th e p re se nt pr oc ee di n gs, th is q ue s ti onn a i re , i t w a s s ub mi tte d m a y n ot b e so re leva n t. H ow e ve r, re fe rr i n g t o the q u e r ie s r a i se d , it w a s hi s su b mis si on th a t mor e tha n a d e q ua te qu e r ie s on a l l i ssue s i n cl ud i ng the p re se nt i ssue wa s ma d e b y t he AO b e f ore the pa s si ng of th e or de r . Thi s f a ct, i t wa s sub mi tte d, is e vi de n t f r om r e cor d . A tte n ti on w a s i n vi te d to the re p l ie s to t he sa i d q u e r i e s a s e vi de n ce d fr om P a p e r B ook pa ge 27 .
3. 6 I t w a s sub mi tte d t ha t a f te r ma k in g th e se de ta i le d e n q ui r ie s a nd c ons id e ri n g a l l th e s up p or ti ng d ocu me n ts, th e o rd e r w a s pa s se d b y the AO . Sp e ci fi c e mp ha s is w a s l a i d on t he fa c t that sa l e a n d p u rc has e bi l ls we re e nq u ir e d in to b y the AO a nd we re du ly r e s p onde d to w i th s up p or ti ng e vi de n ce s. Th is f a ct, i t w a s ITA 308 /CHD/2020 A.Y. 2015-16 Page 7 of 29 sub mi tte d, i s e v id e nt fr om th e a sse ss me nt or d e r itse l f w he re i n AO re cor d s, " In response to the notices, Shri Dinesh Sood, FCA, Authorized Representative (A.R.) of the assessee attended the assessment proceedings from time to time and furnished requisite details/ documents as called for.
Bills/vouchers that were produced were test checked and placed on file. The case was discussed with the A.R. of the assessee." 3.7 It was also submitted that the AO was conscious of the specific fact on account of which reasons the case had been selected under C ASS. This fact is highlighted in the assessment order itself. For the said purposes, the following extract relied upon by the ld. AR from the assessment order is reproduced hereunder :
"Return declaring income of Rs.2,74,810/- and agricultural income of Rs.70,19,204/- was filed by the assessee on 06.10.2015 and the same was processed u/s. 143(1) of the Income Tax Act, 1961 (hereinafter the Act). Later on, the case of the assessee was selected for scrutiny through CASS on the reasons "large agricultural income & low income shown by large contractors". Statutory notice u/s. 143(2) of the Act, was issued on 25.07.2016. Subsequently, fresh notices U/s. 142(1) & 143(2) of the Act along with questionnaire were issued to the assessee on 18.08.2017."
(emphasis supplied) 3.8 It was submitted that the AO after examining the entire details and being conscious of the fact that the order was selected for limited scrutiny and after addressing the GP rate etc. accepted the returned income of the assessee holding as under :
" 5 . The submissions furnished by the assessee. have been considered. Further, Books of Account that were produced by the assessee have been examined. The reasons for selection of the case for scrutiny have been verified/examined and no adverse inference is drawn.
3.9 Inviting attention to the impugned order, it was his submission that this order has been directed to be revised without ITA 308 /CHD/2020 A.Y. 2015-16 Page 8 of 29 pointing to any error or mistake of such magnitude which can be said to be also prejudicial to the interests of the Revenue solely on account of the Audit Objection of shrinkage. Th is also, it was submitted, has been enquired into by the AO and has been accepted. The ld. PCI T, it was submitted, has passed the order in haste pre-determining to set it aside without looking into the record available before him.
3.10 The fact that the Revisionary power was exercised on account of the audit objection, it was submitted, is highlighted from the reference in the following intima tion dated 29.01.2019 available at Paper Book page 28 which is given as F.No.I TO/ WARD -
2/SHIMLA /Audit/2018-19/1037 ( e mphasis supplied). This whole exercise, it was submitted, started on account of audit objection evidenced from the letter :
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3. 1 1 The said query raised by the AO, it was submitted, has been replied as is evident from page 29 of the Paper Book on 22.02.2019.
The reply relied upon is extracted hereunder :
3. 1 2 Th e sa i d r e pl y, it w a s sub mi tte d w a s s up p or te d b y le tte r of the I O C a p pe n de d a t P a pe r B oo k p a g e 3 0 a longw i th a ch a r t sho wi n g r e vi se d s hr i nk a ge a l l ow a nc e ch a r t for va r i ous a re a s othe r th a n the Nor th Ea s t. F or r e a d y re fe re nce , Pap e r B oo k pa ge 30 is e xtr a cte d he re u nde r:
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3. 1 3 Ac cor d i ng ly, i t h a s b ee n a r gue d th a t th e d e ta il s of s hr i n ka ge wa s p a r t of th e r e c or d. Th us , th e ld . P CI T, it w a s su b mit te d , i s a ga i n t ry in g t o l ook a t the ve r y s ame i n for ma ti on w hi ch h a d bee n e nq u i re d i nto b y th e A O . Th e sa m e a u d it ob je cti on, it w a s a r g ue d ha d a lr e a d y bee n e n q ui re d i n to.
3. 1 4 I n the sa i d b a ck g ro un d a tte nt ion w a s in vi te d to th e Sh ow C a use N oti ce i ss ue d to the a ss e s see w h i ch wa s r e ce i ve d on 04 . 03 . 2 02 0 i n th e l a te a f te r n oon in fo rmi n g th e a ss e ssee t ha t h is ca se wa s fi xe d f or h e a r in g i n t he mor ni ng of 0 4 .0 3 . 20 2 0 . It was hi s su bmi s si on th a t pr a c tic a l ly, it was n ot p o ss ib l e for th e a sse sse e t o e i ther p a r ti ci pa t e or f il e a r e p ly i n the he a r i n g w hi ch a lr e a d y stood c on cl ud e d . The noti ce , i t w a s r e -i te r a te d w as re ce i ve d i n the a fte r n oon of 0 4 .0 3 .2 0 2 2 i nf or min g h i m th a t it w a s ITA 308 /CHD/2020 A.Y. 2015-16 Page 11 of 29 fi xe d on th e s a i d mor ni n g. N otw i t hs ta nd i ng th e fa ct tha t th e ti me for a p p e a r i ng had a lr e a d y e l a p sed . Th e f a ct a lso r e ma i ns th a t de sp ite th is sh od dy e xe r c ise of p ow e r, the a sses see s ti ll ma d e e ff or ts in goo d fai th a nd r e p l ie d to the Sh ow C a u se N oti ce wi th in a r e a s ona b le time . The r e p ly w i th in d a ys was fi le d on 09 . 03 . 2 02 0 . C op y o f t he sa i d re p ly, it w a s s ub mi tte d , i s a v a i la b le a t p a ge s 3 7 t o 40 . I t w a s e l a bo ra t e d th a t the s pe ci fi c re p ly is a t pa g e s 3 7 to 3 9 a nd pa g e 4 0 i s th e e vi de n ce of the f a ct th a t the re p ly of the a sse s see st ood fi led on 0 9 .0 3 .2 0 20 on the I TB A Por t a l. For re a dy r e fe re nce , the sa me i s e xtr a cte d he re un de r :
3. 1 5 Acc or d in gl y, i t w a s h is s ub mi ssi on t ha t i n the fa cts o f the pr e se n t c a se , the l d. P C I T n ot e ve n c a ri n g t o co ns id e r the s a id re p ly, n ot c on side r in g t he re co rd a va i la b l e b l i ndl y r e l yi ng up on the ve r y s a me a u di t ob j e c ti on h as p a ss e d the or de r se tti ng a side a v a li d l y pa s se d or d e r w i tho ut p oi nti n g to a ny mis ta k e in the ITA 308 /CHD/2020 A.Y. 2015-16 Page 12 of 29 or de r p a sse d b y th e AO . The exe rc i se of Re vi sion a r y p ow e r , i t wa s su b mitt e d , i s not in c ons on a n ce to the tw in co nd i tio ns a s a dd r e s se s b y C ou rt s, no r is i t a n e xe r c ise a fte r due a p p li ca t ion o f min d . Th e or d e r has be e n p a sse d me ch a n ic a ll y wi th pre-
de te r mi na t ion t o se t a s ide the asse ss me nt or de r . N o e f f or ts, it wa s a r gue d , wer e ma de to go t hr ou gh re pl y of th e a s se sse e a va i la b l e o n re cor d . Th e l d . PC I T w a s fu ll y a wa re of th e fa c t th a t the ca se h a d b ee n se le c te d f or l imi te d scr u ti ny for t he spe c if i c re a son a nd i gnor i n g the fa ct t ha t th e s hr i nk a ge a lr e a d y s tood e nq u i re d i nto b y the A O p a sse d th e or de r me c han i ca l ly , bl i nd l y re ly in g u p on the ve r y s a me a u di t ob je cti on se tti ng a si d e a va l id l y pa s se d or de r w i th out poi n ti ng o ut a n y e r r or i n t he or de r pa sse d. Th e f a ct th a t d e ta i l e d a sse ss me n t or d e r ha d bee n p a sse d , i t w a s sub mi tte d, is e vi d e n ce d fr om t h e q ue r ie s r a ise d by t he A O. C ons id e ri n g the fa c ts, the AO a cce pte d the re tu rne d i nc ome hol d in g a s un d e r :
"2. Brief facts of the case are that the assessee is running a filling station in the name & style of M/s. Swaroop Service Station, Kokunala, Tehsil Kotkhai, Distt. Shimia (H.P.). During the year under assessment, the assessee has shown gross sales/turnover of Rs.8,54,93,751/-, gross profit (CP.) of 17,62,357/- and net profit of Rs. 4,21,998/- by giving N.P. ratio of 0.49% whereas in the preceding year gross sales/turnover was shown at Rs.9,11,27,513/-, gross profit (CP.) of Rs.24,36,767/- and net profit of Rs.7,41,629/- by giving N.P. ratio of 0.81%. Apart from this, the assessee has shown agricultural income of Rs.70,19,204/-.
3. During the assessment proceedings, the A.R. of the assessee was asked to furnish the proof of agriculture land owned by him and proof of agricultural produce sold sale bills etc.) from which "large agriculture income" has been shown and reasons of 'low income shown by large contractors", main reason(s) for selection of the case for scrutiny. The A.R. of the assessee furnished proof of land holding by the assessee i.e. copy of jamabandi, sale bill(s) of the agricultural produce sold and copy(s) of bank ITA 308 /CHD/2020 A.Y. 2015-16 Page 13 of 29 account which are placed on file. The bills/vouchers with regard to agricultural sale proceeds that were furnished by the assessee have been examined and no adverse inference is drawn. Therefore, agricultural income shown by the assessee is found in order and accepted.
4. Further, the A.R of the assessee was asked to explain the reasons of 'low income shown by large contractors" i.e. one of the main reasons for selection of the case for scrutiny. In this regard., the A.R. of the assessee submitted through its reply inter alia that the assessee is running a Petrol Pump and G.P. fluctuation is mainly because of the fact that the price of the Diesel and Petrol increased during the year whereas the margin on these items is on per liter basis. As such, there is a marginal fall in CP. The G.P. rate declared is comparable to the G.P. rate declared by all Oil dealers in the region and is specifically as per Trading Account.
5. The submissions furnished by the assessee have been considered. Further Books of Account that were produced by the assessee have been examined. The reasons for selection of the case for scrutiny have been verified/examined and no adverse inference is drawn."
3. 1 6 I nvi ti n g a tte ntion to th e i mp ugn e d or de r i t w a s r e - ite r a te d tha t th e Sh ow C au se N oti ce d a te d 2 8 .0 2 .2 0 2 0 w a s re ce ive d b y the a sse sse e on 0 4. 03 . 2 02 0 a n d a c cor d in gl y, a sse sse e cou l d n ot pa r ti ci p a te in t he l a te a f te rn oon i n th e p r ocee d ing s w h ic h w e re fi xe d a t 11 . 0 0 A M on the s a i d d a te . H owe ve r , th a t Sh ow C a use N oti ce , it w a s re- ite r a te d w a s rep li e d to b y the a sse sse e . P a per B ook p a ge s 3 7 to 3 9 of the P a pe r B ook we re a ga i n r e lie d up on wh i ch wo ul d sh o w t ha t the a sse ss ee a r gue d th a t a l l the se i ss ue s we re e nq u i re d i nt o b y th e AO .
3. 1 7 Acc or d in gl y, a ct ion u /s 2 63 , i t wa s s ub mit te d , w as con tr a r y to l a w a s i t is not a c a se of n on ex a min a ti on of th e is sue s by the AO a n d l a w d oe s n ot p e rmi t the l d . PC I T to su b sti t ut e h i s opi n io n on sa me se t o f fa c ts fo r the de cisi on of t he AO un le ss the tw in re q ui re me n ts a re me t . The Re vi siona r y p ow e r , i t w a s sub mi tte d, a s p e r se t tle d le ga l p r e ce de n t ca n not b e e xe r ci se d on th e gr oun d s ITA 308 /CHD/2020 A.Y. 2015-16 Page 14 of 29 of po ssi b i li ti e s a n d gu e ss w or k . I t w a s a r gue d w h e n a l l the doc ume nts w e re a va il a b le on r e c or d , the e vi de nc e s an d th e i ss ue s stood e n q ui re d i n to, th us, ta k in g a not he r vi e w wi th out p oi nt in g to th e e r r or i n t he o rd e r a nd th a t too s uc h a n e r r or w hi ch i s si mul ta ne ous ly p r e j ud i ci a l to th e in te re sts of the Re ve n ue , it w a s a rg ue d is n ot pe rmi ssi b l e i n l a w .
3. 1 8 I t w a s h is ve heme nt a r gu me n t tha t t he l d . P CI T d i d n ot e ve n ca re t o l ook i n to th e re p ly on th e I TB A Po rt a l on 09 . 0 3. 2 02 0 a nd in ha s te p ass e d the imp u gne d or de r on 19 .0 3. 2 0 20 . Th e Sh ow C a us e N oti ce is sue d b y th e ld . P CI T r e p l i e d to by the a sse sse e ha s be e n e xtr a cte d i n p a r a 2 of the imp ug ne d or d e r wh i ch r e a d s a s und e r :
2. Accordingly, a show cause notice u/s 263 of the Act was issued vide this office letter No. 6857 dated 28.02.2020 inter-alia asking the assessee to explain the following facts :-
"On perusal of case record for the A.Y. 2015-16, it is noted that you are running a filling station in the name & stale of M/s. Swaroop Service Station, Kokunala, Tehsil- Kotkhai, Shimla. During the year under consideration, you have shown gross sales/turnover of Rs.8,54,93,751/- , gross profit (G.P.) of 17,62,357/- and net profit of Rs. 4,21,998/- by giving N.P. ratio of 0.49% whereas in the preceding year gross sales/turnover was shown at Rs. 9,11,27,513/-, gross profit (G.P) of Rs. 24,36,767/- and net profit of Rs. 7,41,629/- by giving N.P. ration of 0.81%. Apart from this, you have shown agricultural income of Rs. 70,19,204/-. Thereafter, your case was selected for scrutiny through CASS for the reasons 'Large agricultural income & low income shown by large contractors" and the A.O. completed assessment u/s. 143(3) of the Act at returned income.
On examination of assessment records, it is noted that you have claimed Shrinkage Allowance of 9823 litres on the sale of 1088620 litres of High Speed Diesel (HSD) and 12772 litres on sale of 532055 litres of Motor Spirit (MS). However, the permissible limits for the Shrinkage Allowance for the given categories of fuels as per the ITA 308 /CHD/2020 A.Y. 2015-16 Page 15 of 29 Marketing Discipline guidelines 2012 issued for petrol/diesel dealers regarding stock variation of Motor Spirit and Diesel evaporation/handling loss is @ 0.75% and 0.25% on quantity sold up to an annual sale of 600KLs and beyond 600KLs the permissible limits of evaporation loss are @ 0.60% and 0.20% on petrol and diesel respectively. On calculation of the permissible shrinkage allowance in the category of HSD and MS, it is noted that you have claimed excess 7346 litres on sale of HSD and 8282 litres on sale of MS. By taking the closing valuation rate for HSD and MS at Rs. 48.62/- and Rs. 43.55/- respectively as on 31.03.2015, it appears that you have claimed excess loss on account of shrinkage/evaporation of these fuels at Rs. 3,19,918/- (7346*43.55) & Rs 4,02,670/- (8282*48.62) for HSD and MS respectively resulting thereby you have under reported your income by an amount of Rs. 7,22,588/-. This aspect has not been taken into consideration by the AO while framing the assessment under section 143(3) of the Act."
3. 1 9 I nvi ti n g a tte ntion to th e i mp ug ne d o rde r, i t w a s s ub mi tte d tha t ig nor i ng th e re p l y o f t he a sse ssee , l d . P C I T u n il a te ra l l y con cl ud e d th a t th e a sse s see is not in te re ste d i n gi vi ng a n y r e p l y a nd wi th out r ef e r r i ng to the fa c ts of th e ass e s see 's ca se pr oc ee de d to r e l y up on de ci si on s w h ic h h e l d th a t th e Re vis ion a r y pow e r s a re j us ti fi e d w he re t he orde r is e r r one ou s an d p re ju d ic ia l to the in te re sts of th e Re ve n ue . The or de r , i t w a s su bmi tt e d , i s con tr a r y t o l a w a n d f a ct s.
3. 2 0 Th e d e c is ion s r e lie d up on , it was sub mi tte d, are di st in gu is ha b l e on f a cts . Th e A pe x C ou r t i n t he c a se of R a m p y a r i Devi Sarogi Vs C IT 67 ITR 84 (S.C) it was su b mitt e d , was in cor r e c tl y re l ie d u p on in th e fa c ts o f t he p r e se nt ca s e to ho ld tha t t he a sse ss me nt or de r ha s be e n pa s se d i n ha ste w i tho ut a n y e nq u i ry a nd h en ce , it is e r r on e ous a nd p r e jud i ci a l to th e in te re sts o f the Re ve n ue . O n the con tr a r y, i t w a s s ub mi tte d th a t the p r i nc ip le l ai d d ow n by t he Ap e x C ou r t ful ly s tr ik e s the ITA 308 /CHD/2020 A.Y. 2015-16 Page 16 of 29 imp ug ne d o rd e r a s th e i mpu gn e d or d e r on fa c ts h a s b ee n p a ss ed in un du e h a ste w i th out l ook i ng i n to the re cor d s w h e re the re ply of th e a sse ssee b e f ore the ld . PC I T w a s a l l e ge dly on re cor d . Th e fa ct th a t t he AO ha d a l r e a d y re q ui r e d t he a sse s see to a d dr e ss the shr i n ka g e on a ccou nt of the a udi t ob je cti ons we re al so f a cts a va i la b l e on re cor d . The or de r p a ss e d i n u nd ue h a ste w it hou t e ve n l ook i ng a t the re cor d , in fa c t d e se r ve s to be d i smi ss e d . Th e ld . P C I T' s a cti o n to a g a in r e -lo ok i nt o t he s a m e wi th out e ve n ca r in g to address t he a sse s see 's re p ly , it was sub mi tte d, a de q ua te ly de mo ns tr a te s th a t it w a s a me c ha n i ca l e xe r ci se of pow e r . I t wa s hi s sp e c if i c pr ay e r t ha t the or de r ma y n ot b e re ma nd e d a s the a sse s see i s not se e k i ng op p or tu ni ty of b e in g he a r d a s the re ply of t he a s se s see i s a l re a d y on r e c or d. I n the ci rc ums ta nc e s , r e l yi ng up on de cisi on of th e A p ex C ou r t in th e ca se o f M / s S on a B u i ld i n g 1 1 9 ta x m an 0 4 3 0 ( 2 0 0 1 ) it w a s h i s sub mi ss ion t ha t th e s ta tu tor y li mi t u nd e r w hi ch the l d . PC I T i s t o pa s s th e or de r ma y no t b e a l l ow e d to be e xte nde d b y gi vi n g him a noth e r o pp or tun ity . Re fe r r i ng to th e time ma d e a v a i la b l e a s pe r the ld. P CI T's d a te of i ss ua n ce of the n oti ce i ts e l f, it w as sub mi tte d, i t w o u ld s how t ha t t he re w a s onl y 5 d a y s gi ve n for ma ki n g a re p ly. N o e ff or t to fa ctor i n th e c omm un ic a ti on ti me li k e l y to occ ur w a s co nsi d e re d . The f a ct th a t t h e Sh ow C a us e N oti ce w a s re ce iv e d i n the a f te rn oon of 0 4 .0 3 . 20 2 0 w h e re i n the he a r i n g w a s f ixe d a t 1 1. 0 0 A M o n th e sa i d d a te , it w a s su b mi tte d, ITA 308 /CHD/2020 A.Y. 2015-16 Page 17 of 29 wa s a ma la f i de a n d un f a ir e xe r c ise o f po we r . Ac cor d i ngl y, r e ly in g up on d e c is io n of t he H on 'b le De l h i H i gh C ou r t in the c a se of TulsiTracom P r iv a t e Ltd. Vs C IT 161 DT R 0 1 48 it was his sub mi ss ion th a t th e or de r ma y b e q u a she d . I t w a s s ub mi tte d tha t th e Ho n'b le C our t th e re i n he ld :
"Thus, there was an outer limit in the statue u/s 263 which was 31.03.2013- since no useful purpose would be served in giving the opportunity to the appellant of being heard to this stage, question answered in favor of the assessee - the assessee appeal is allowed."
3. 2 1 A tte n ti on w a s i nv it e d t o p a r a 23 of th e sa i d j u dg e me n t wh e re in C o ur t he ld a s un de r :
"This Court has also examined the question as to whether an opportunity of hearing could now be afforded to the Appellant. However, Section 263(2) of the Act is a clear bar for any order being passed pursuant to a notice under Section 263 of the Act, after expiry o f two years from the end o f the financial year in which the order sought to be revised was passed. Thus, there is an outer limited in the statue under Section 263 which, in the present case, is 31s' March, 2013. Since, no useful purpose will be served in giving an opportunity to the Appellant of being heard at this stage, this Court answers question No.1 in the negative i.e. in favor of the Assessee and against the Revenue. "
(emphasis supplied)
3. 2 2 A cco rd i ng ly , r e l yin g up on the b i nd i ng p re ce de n t as a va i la b l e i n th is d e ci si on re n de re d b y Ape x C ou r t in the c a se of Son a B u il d i ng a n d of th e D e l h i Hi gh C our t in Tu ls i Tr a co m P ri v a te Ltd . Vs C I T (s u p r a ) it w a s hi s p r a ye r tha t the or de r ma y b e q ua sh e d . I t w a s f ur th e r su bmi tte d t ha t the re i s n o i nd e pe nde n t a pp l ic a ti on of m i nd of t he l d. PC I T. A cc or di n gl y , r e l yi ng on the fol l ow in g s ub mi s si on s a n d d e ci si on s a s ci te d in th e s yn op si s fi le d , it w a s hi s pr a ye r th a t t he ord e r ma y b e q u a sh e d ;
ITA 308 /CHD/2020 A.Y. 2015-16 Page 18 of 29
15. First of all, it is submitted that in the case of the assessee, the proceedings u/sec 263 of the Act were initiated on the basis of AUDIT OBJECTION as raised by the audit wing of the department and the evidence of the same is forming part of paper book at Pgs 28 to 31.There is no independent application of mind by the Pr. CIT and proceedings were initiated merely on the basis of information received from the Audit Wing of the department which is clear from the letter dated 29.01.2019, for which the reply was filed on 22.02.2019 and the word 'Audit' is clearly mentioned in the letter of the AO.
16. It has been recently held by the Hon'ble Chandigarh Tribunal in the case of Shri Kirti Anand vs CIT in ITA No. 540/Chd/2013 order dated 14.10.2015, copy placed at pages 11 to 39 of the Judgement Set that the cases wherein CIT has merely acted upon audit objection and AO has thoroughly applied his mind in the 143(3) proceedings, the proceedings initiated u/sec 263 of the Act are bad in law. Further Reliance in this regard is also being placed upon the following Judgments which are on the similar issue:
a) CIT vs. Sohana Woolen Mills (296 ITR 238) (P&H HC)-, copy placed at pages 7 to 10 of Judgement Set and it has been held that Mere audit objection and because a different view could be taken, are not enough to say that the order of the Assessing Officer was erroneous or prejudicial to the interests of the Revenue.
b) Sh. Paramjit Singh vs. Pr CIT in ITA No. 499/Chd/2016 order dated 09.11.2016 (Chd Bench)
c) Shri Vikram Kaswan vs. CIT in ITA No. 519/Chd/2014 order dated 08.03.2016 (CHD Bench) d ) Sh. Jaswinder Singh vs. CIT-II in ITA no. 690/Chd/2010 (Chandigarh Bench) order dated 09.03.2012.
e) CIT vs. Sat Pal Agarwal 293 ITR 90 (P&H HC)
f) Shri Sartaj Singh vs. Principal CIT in 48 ITR (T) 604 (Asr Bench)
g) M/s Dashmesh Motors vs. Pr CIT in ITA No. 187/Asr/2015 order dated 23.05.2016 (Asr bench)
h) ShriJagjit Singh vs.Pr CIT in ITA No. 2777/Del/2018 (ITAT Delhi)
i) Shri Sunil ChhaganBhaybhangvs.Pr CIT in ITA No. 932/PUN/2016 (Pune Bench) Thus, on the basis of above said binding judgements of the Jurisdictional High Court and Chandigarh Bench of the ITAT and other, the proceedings as initiated by the PCIT are bad in law and deserves to be set aside.
4. O n me r its , i t w a s a r gue d t ha t t he is sue s a l re ad y s tood e nq u i re d i nt o b y th e A O on a c co u nt of th e a ud i t ob j e c ti on. Th e shr i n ka g e , it w as a r g ue d h a d spe ci fi ca l l y bee n a dd r e s se d. Th e ITA 308 /CHD/2020 A.Y. 2015-16 Page 19 of 29 shr i n ka g e , i t w as a r gu e d is a n or ma l r ou ti ne l os s i n th is n a ture of b u si ne ss a n d th e pe r ce nt a ge s of the I O C a re a t be st e sti ma te s for a d d r e s si ng the i ss ue s be twee n t he p a r tie s. Th e se pe rce n ta ge s on a n e s ti ma te b a si s ca n not f a ctor in e a ch a n d e ve r y s itu a ti on. Th e s hr i nk a ge o c cu r s not o nl y on a c cou nt of l o ss s uf fe re d on a ccou nt of e v a p or a ti on e tc . for wh i ch th e re a re e sti ma te s. Th e shr i n ka g e l oss e tc. a l so o ccu r s on a c cou nt of sp i lla ge e tc . a nd on a ccou nt o f tr a n sp or ta ti on los s e tc. W he n the AO h as a l re a d y look e d in to th i s a s pe ct a n d th is fa c t w a s in the kno w le d ge of the ld . PC I T a s th e se d ocu me nt s a n d e xp la n a ti ons w e re f or min g p a r t of th e re cor d , the ob se rv a ti ons of th e ld . P CI T i n p a r a 5 me r e l y se tt in g a s ide the or d e r w i tho ut re fe rr i ng to t he facts a n d w i thou t poi n ti ng out a t a n y e rr or in th e ac ti on of the AO i n a cc e p ti ng the a sse sse e 's ve r si on, i t w a s su b mitt e d , is no t pe r mi ss ib l e i n l a w. Acc or d in gl y, r e l yi ng up on f ol low i ng d e ci s ion s, i t w a s h is p r a ye r tha t th e or de r be q u a sh e d :
i) Ma la b a r I nd us tr i e s C o.Ltd . Vs C IT (2 0 0 0) 2 4 3 I TR 8 3 (S C ) i i) C I T V s De e p a k Mi tta l 3 24 I TR 4 11 (P & H ) i ii ) Pr . C I T V s Ke sora m I nd us tr ie s Ltd . ( 20 2 0 ) 42 3 I TR 18 0 (C a l ) i v) C I T V s A .R .B u il d e r s & D e ve l ope r s P. Ltd . ( 20 2 0 ) 4 2 5 I TR 27 2 ( Ma d )
4. 1 Ap a r t fr om th e a bo ve de ci si on s, va r i ous deci si on s of di f fe re nt Be nc he s a nd C ou rt s w e re re l ie d up on on si mi la r ITA 308 /CHD/2020 A.Y. 2015-16 Page 20 of 29 pr op os it ion of l a w . R e l yi ng on the s a me , i t w a s h is p r a ye r th a t e ve n on me r i ts, the or de r ma y be q u a sh e d .
5. Th e ld . C I T-D R r e fe r ri n g to th e q u e r ie s r a i se d b y th e AO be fore t he p a s sing of th e a sse ssme n t or de r s ubmi tte d th a t th e re we re d is cre p a n cie s a s we l l a s mi s-ma tc h i n f i gur e s w hi ch sh ou ld ha v e be e n not iced by t he A O we re va l id re a s on s for th e l d . P CI T to e xe r ci se Re vis ion a r y p ow e r s un de r the Ac t in th e p re se nt pr oc ee d i ng s. He a gr e e d t ha t th er e i s ce r ta i n pe rce nt a ge l oss on a ccou nt of sh ri n ka g e e t c. in th is l in e of b us in es s, how e ve r , i n a sse sse e 's c a se the a s se sse e ha s fa i l e d to e xp l a in i t. I t w a s h is sub mi ss ion t ha t si nc e l a c k of op p or tun i ty i s p le a d e d f or q u a sh in g the or de r , i t wa s h i s pr a ye r th a t he w ou ld ha ve no ob je cti on i f the is sue i s re ma nd e d ba ck a n d op por tun i ty ma y b e gr a nte d to the a sse sse e . Th e l d . A R s ee k i ng pe rmi ssi on to in te r j e c t re - ite r a te d tha t he h a s ma d e no suc h pr a ye r a n d he i s s tr ongly op p osi ng th e e xte nd i ng of sta t utor y t ime li n e s b y d i re cti n g r ema n d. Th e l d .
C I T-D R r e ve r ting to th e f a cts sub mi tte d i n th e f a cts of the pr e se n t ca se , t he l d . P C I T w a s f ul ly j u sti fi e d to s e t a si d e the or de r .
5. 1 Ad d r e s si ng the a r gume nts t o t h e ob je ct ion s p ose d to the Re vi s ion a r y P ower s e xe r c ise d on th e b a si s of Au d it Ob j e c tio ns , i t wa s hi s su bmi s s io n th a t the re is a s ta nd a r d SOP w h ic h is re q ui re d to be foll ow e d b y th e tax a ut hor i ti e s i n r e ga r d t o A ud i t ITA 308 /CHD/2020 A.Y. 2015-16 Page 21 of 29 Ob j e ct ion s. A tte nti on was i nv it e d to CBDT Instruction N o. 0 7 / 2 0 1 7 d a t e d 2 1 . 0 7 .2 0 1 7 . S pe cifi c a tte n ti on w a s in vi te d to p a r a
5. 3 of t he s a me , w hi ch re a d s a s un de r :
5.3 Where the Revenue Audit objection is accepted, the PCIT shall decide if the relevant order under audit requires revision u/s 263 as remedial action. If yes, he shall call for the relevant records and proceed to initiate action u/s 263. 5.4 In other cases, the PCIT shall communicate his decision not to invoke section 263 to the Assessing Officer who shall examine the facts of each case and take a suitable action as per his independent application of mind on the facts of each case.
5. 2 Re fe rr i ng to the s a me , i t w a s h is su b mis si on th a t th e re is noth i ng w r ong i n th e P C I T's a ssu mp ti on of j ur is d i c ti on. The P C I T ha s a ll th e p ow e r s to ca l l f or r e co rd s a nd p a ss a pp r op r i a te Re vi s ion a r y O r der s u/s 26 3 w h e n Au d it O bje c ti ons a r e fl a gge d . I t wa s hi s s ub mis si on t ha t i n c a se the l d . P CI T d oe s n ot ch oose to in vok e p owe r s u /s 2 63 , the n th e sa i d a u th or ity ca n r e f e r the ma tte r t o th e AO to p a ss a n or de r u /s 1 5 4 e tc . a s p e r p a ra 5 .4 of the I ns tr uct ion s.
5. 3 Ac cor d i ng ly, it wa s h is s ub mi ssi on t ha t i n l a w, the re is n o re a son w h y th e ld . P C I T c a nn ot t a k e r e co ur se to po we r s u /s 2 6 3 .
Atte nti on w a s i nv it e d to d oc umen ts a v a i la b l e on r e co rd on the ba s is o f w hi ch i t w a s a r gue d th a t the re wa s som e mi s-ma tc h in the d e ta il s a n d it w a s h is su bmi ss io n th a t i f th is a sp e c t i s e nq u i re d i n to b y the AO , the n the a sse ssee h a s al l th e r ig ht s to a rg ue wh a ts oe ver th e a s se s se e choos e s to a n d by se tti ng a si de the or de r , n o pre ju d ic e ca n be sa id to b e ca u se d to th e a s se sse e .
ITA 308 /CHD/2020 A.Y. 2015-16 Page 22 of 29
6. Th e ld. AR r e ite r a te d tha t he is str on gl y o pp os in g the De pa r tme nt 's p ra ye r fo r r e ma n d. De ci si ons c ite d i n s up p or t o f the a sse ssee 's ob je cti on s, it was s ub mi tte d , are n ot b e ing re pe a te d. Ho we ve r, the p ro po si tion of la w r e l ie d up on i n th e s a id de ci si ons of the C our ts in cl u di n g th e Ape x C ourt w as str on gl y re lie d up on .
6. 1 Th e a ss e ss ee , i t w a s su b mitt e d , is p r a yi ng for q ua sh in g th e or de r a nd a l so st r ong ly o pp os in g th e de p a r tme nta l p r a ye r th a t i t be u phe l d .
6. 2 I n vi ti ng a tte nti on to h is br ie f synop si s d a te d 15 .0 3. 2 0 22 he fu rt he r so ugh t to su p pl e me nt h is a rg ume n ts on the b a s is o f th e fol l ow in g sub mi s s ion s :
"We have to submit that we have already filed brief synopsis of the case and in continuation of that, it may be stated as under:
A. It is submitted that there was a complete lack of opportunity to the assessee because since in this case show-cause notice was received by post in the late afternoon on 04th March, 2020 and the case was fixed for hearing at 11.30AM on 4th of March, 2020 and since it was not possible to reply on the same day, we had sent the reply through Income Tax Portal on 09th March, 2020 and the order was passed by the PCIT vide order dated 19.03.2020 which was received on 27.06.2020. It is submitted that no reasonable opportunity had been afforded leading to the order in a mechanical manner and this lack of adequate time itself demonstrates that there was no intention to give effective opportunity and then, though the order was passed on 19.03.2020, then the reply could have been considered by the Ld. PCIT, for this we rely on the latest order of the Hon'ble Bench in the case of Fortune Metaliks Limited in ITA No. 82/Chd/2021 vide order dated 09.03.2022 in which, under the similar circumstances, the order u/s 263 had been quashed.
B. Though we have already relied upon number of judgments on the application of mind and on the issue of 263 on the basis of audit objection, we hereby relying on the judgment in the case of Shri Surinder Pal Singh vs. PCIT in ITA No. 57/Chd/2021 vide order dated 31.01.2022 (copy enclosed) in which under similar facts & circumstances, the order as passed by the Ld. PCIT have been quashed.
ITA 308 /CHD/2020 A.Y. 2015-16 Page 23 of 29 C. Besides the submission, already made, it may be stated that the Ld. DCIT has passed the order on the basis of the proposal sent by the Assessing Officer and this is borne out from the order of the Ld. PCIT u/s 263 at page no. 1 and then, in para no. 5 also. It is submitted that for the purposes of section 263, it is the satisfaction of the PCIT independently, which is required, before it can be held that the assessment as framed by the Ld. PCIT is erroneous and prejudicial to the interest of revenue. It has been held that, where the assessment is cancelled by the PCIT on the basis of the proposal sent by the Assessing Officer, the order passed by the PCIT cannot be sustained for this reliance is being placed on the judgment of the 'Amritsar Bench' of ITAT, in the case of 'Ambey Construction Co.' placed at judgment set 140 to 167 and the relevant discussion on this subject is at page no. 147 to 149, 156, 160 & 167, wherein, by relying upon the various other judgments of the 'Jaipur Bench' and 'Pune Bench', the order passed by the Ld. PCIT has been quashed, though on merits also, the order as passed by the Ld. PCIT have been quashed. The following other judgments are there as under on the similar issue:
i. Judgment in the case of 'Manish Chirani' vs PCIT in ITA No. 1161 /Kol/2019 copy of the judgment is placed at pages 187 to 194 ii. John Gait International vs. PCIT in ITA No. 2155/Mum/2017 copy of the judgment is placed at pages 195 to 215.
iii) 'Span Overseas Ltd. vs. CIT in ITA No. 1233/PN/2013'copy of the judgment is placed at pages 216 to 228.
iv. Judgment in the case of 'Shri Priyank Sharma' vs. CIT in ITA No. 347/JP/2013 vide order dated 28.02.2014 and the relevant finding both on the application of mind on the issue of proposal sent by the Assessing Officer, the order as passed by the Ld. PCIT has been quashed copy being filed.
v. Judgment in the case of Alfa Laval Lund AB vs. CIT in ITA No. 1287/PUN/2017 copy of the judgment is placed at pages 229 to 235. vi. Judgment in the case of Aakash Ganga Promoters & Developers vs. PCIT in ITA No. 164/CTK/2019 vide order dated 18.12.2019 copy of the judgment is placed at pages 168 to 186 and the relevant page is 181 to 186.
D. Thus, to conclude on the basis of the, application of mind by the Ld. AO and on the basis of the fact that the order u/s 263 have been passed only on the basis of proposal sent by the Assessing Officer, the order as passed by the Ld. PCIT deserves to be quashed."
7. We ha ve he a r d th e r iv a l submi ss io ns a nd p e r use d the ma te r i a l a va i la b l e on re c or d . H a v in g g one th ro ugh th e s a me , i t i s our c ons id e re d op i ni on th a t the e xe r c ise of Re vi si on a r y P ow e r s i n the f a cts of th e p re se n t ca se ca n not b e u ph e l d . The Re vi si on a ry Pow e r s i n t he fa c ts of t he p re se nt c a se ha ve b e e n e xe rc ise d ITA 308 /CHD/2020 A.Y. 2015-16 Page 24 of 29 me ch a ni ca l l y a n d i n un du e h a ste w ith ou t e ve n c a r in g to a d d r e s s the re p l y ma d e a v a i la b l e by the a ss e ssee on t he I T P or ta l . The fa ct tha t pa t e n tly on t he f a ce of t he re cor d i t is a n or d e r p a sse d in u nd u e ha s te is f ur th e r ta i nte d b y th e fa c t tha t n o e ff or t w a s ma de b y t he l d. P C I T to g iv e t he a sse ssee a n e ffe cti ve he a r i ng. Th e f i xi ng o f th e he a r i n g i n th e pe cul i a r fa c ts a nd ci r cu msta n ce s of the p re se nt ca s e w he re th e S ho w C a use N oti ce d a te d 23 . 02 . 2 02 2 is su e d t he re a fte r fi xi ng th e h e a r in g on 04 . 0 3. 2 02 0 pa t e nt ly was a r he tor i c, me a n in gl e ss e xe r ci se . A d mi tte d ly, re a son a b le ti me w a s not ma d e a va il a b le to t he a ss e ssee to p ut in an e ffe ct ive h ea r i ng . On e r ou s r e s p ons ib i li ty to p r ovi d e an e ffe c ti ve a nd f a ir h e a r i ng w a s tre a te d l i ke a me a ni ngl e s s e xe r c ise of me r e l y t ic ki n g th e b ox. I t i s un for tu na t e th a t no e f for t w as ma de to e ve n a dd r e s s the w r i tte n r e p l y o f th e a sse sse e re ce ive d on t he I T P or ta l . The e xe rc ise of R e vi si on a r y p ow e r s ca n not be a ll ow e d to be e xe r ci se d w hi msi ca l l y or a rb i tr a r i ly. The A uth or i ty is e xpe c te d to e xe r ci se the p ow e r a f te r d ul y c ons id e ri n g the re cor d , a nd e nsur e a me a n in gful a n d e f fe cti ve op p or tun i ty of be in g he a r d i s pr ov id e d to the a sse ssee a fte r i ss ui ng a Sh ow C a use N oti ce a nd on ly th e re a fte r p a s s a n or d e r af te r a ct ive a nd con sci ou s co ns id e r a ti on of the r e co rd a n d the re p l ie s of the a sse sse e w h i ch ma y b e a va i l a bl e in th e cour s e of t he he a r in g. In the f a ct s of t he p r e se n t ca se , l d . P C I T w a s co ns ci ous o f the fa c t a s t o w hy th e spe c if ic c a se w a s se le c te d f or s cr ut in y u nd e r C AS S .
ITA 308 /CHD/2020 A.Y. 2015-16 Page 25 of 29 Th e ld . P C I T a l so ha d t he be ne f it of q ue r ie s r a i se d b y th e A O a nd the re p lie s of the a s se s se e . Th e f a ct th a t th e re w a s a shr i n ka ge los s hi gh e r t ha n th e e s tima t e , w as a l so a f a ct a va i l a bl e on re c or d . I n the f a cts of th e pre se n t ca se th e 26 3 a cti on wa s tr ig ge re d by the hi ghe r pe r ce nt a ge l oss a s f l agge d b y t he Au dit O b j e cti on i s a fa ct on r e cor d . Th e fa c t th a t the is sue s we re e n q uir e d i nt o b y the AO in th e f a cts of t he p re se nt ca s e or th at on t he a ud i t obj e c ti ons , t he AO r e q u ire d the a sse sse e to offe r its e xp la n a ti on , the f a ct re ma in s th a t the hi ghe r pe r ce n ta ge or s hr i nk a g e los s i s ba s e d on e s ti ma te d pe r ce n ta ge s in r e ga r d to e va por a ti on e tc . a nd the occ a si ons fo r hi gh e r sp i ll a ge or tr a n sp or ta ti on los s w e re a ls o e sti ma te d pe r ce nta g e s we re fa cts con si de re d by the AO are a rg ume n ts w h ic h w e ha ve con si de re d. We a l so f in d t ha t the l d. PC I T di d not e ve n ca re to l ook i nto th e r e p l y of t he a s se sse e be fore the p a ss in g of t he or de r . Th e p r a ye r of the l d. CI T-D R a t thi s s ta ge tha t th e ma tte r ma y b e re ma n d e d b a ck , w e fi n d in th e pe cul i a r f a cts of th e p re se n t c a se ca n no t be a cce p te d . The fa ct tha t th e tw in con d iti on s of e r r or in t he or d e r a nd sa i d e r r or wh i ch c a n be sa id to be p re j ud i ci a l to t he i nte re s ts of the Re ve nue , we fi nd h a ve not bee n me t. Th e fa c t r e ma i n s t ha t the or de r h a s be e n pa s se d i n u nd ue ha ste w i th out c ar in g to a d d re s s e ve n the re p ly of th e a s se sse e . Acc or d in gl y, i n the se pe cu li a r fa ct s a n d ci r cu msta n ce s of th e ca se , a ll ow i ng of the p r a ye r f or re ma nd we c ons id e r w oul d be an un fa i r e xp e ct a ti on of the ITA 308 /CHD/2020 A.Y. 2015-16 Page 26 of 29 Re ve nue . Th e o ne r ou s re s po nsi bi li ty ca s t up on th e l d. PC I T for e xe r c is in g the Re v is io na r y p owe rs u /s 26 3 a r e e xpe c te d to be e xe r c ise d w it h d ue ca re a nd a tte nti on a d d re ssi n g n ot on ly to th e time li n e s b ut a ls o c on si de r in g the f a cts on re c or d . I gn or i ng the re p lie s of the a ss e s see w he re a n i mpos si b ly in a p p ro pr i a te time i s giv e n to the a s se sse e to re pl y, we fi n d ma k e s the e xe r ci se ope n to the ch a lle n ge of b e in g a r b it ra ry and i t ca nn ot be g iv e n a ju d ic ia l sa n cti on.
8. Before parting, we deem it appropriate to also address the submissions of the ld. CI T-DR who has carefully in his inimitable style has argued that merely because the exercise was triggered on account of the Audit Objection, this fact by itself may not be a reason to quash the proceedings. For the said purpose, our attention has been invited to Instruction No.7/2017 para 5.3 which has been reproduced in the earlier part of this order. On a consideration thereof and the proposition of law as cited before us, we find that objections of the ld. CI T-DR are valid. On a careful reading of the decision of the jurisdictional High Court in the case of CIT V s Sohana Woollen Mills 296 ITR 238 (P&H) we find that the proposition of law as laid down by the jurisdictional High Court is that; "Mere Audit Objection and merely because a diff erent vie w could be taken were not enough to say that the order of the AO was erroneous or prejudicial to the in terests of the Revenue." A plain reading of the said decision makes it clear that the two reasons ITA 308 /CHD/2020 A.Y. 2015-16 Page 27 of 29 being considered by the Hon'ble High Court i.e. Audit Objection and the possibility of the Revisionary Authority having a view different from the view taken by the AO were by itself not sufficient to warrant the exercise of Revisionary Powers u/s 263. The decision proceeds on the well accepted legal position of law, namely the order sought to be set aside by the ld. PCI T must necessarily meet the twin requirements of pointing out the error in the order passed and such an error which is also prejudicial to the interests of the Revenue. By merely citing an Audit Objection and setting out facts that a different view is also possible on the same set of facts has been held to be not a valid exercise of the Revisionary powers u/s 263 of the Act. Thus, we find that the Hon'ble High Court in the aforesaid decision did not lay down the proposition that in any case where there is an Audit Objection, the ld. PCI T is barred to consider exercising powers u/s 263. For the sake of completeness, we reproduce para 7 from the aforesaid decision :
"7. A reference to the provisions of s. 263 of the Act shows that jurisdiction thereunder can be exercised if the CIT finds that the order of the AO was erroneous and prejudicial to the interest of Revenue. Mere audit objection and merely because a different view could be taken, were not enough to say that the order of the AO was erroneous or prejudicial to the interest of the Revenue. The jurisdiction could be exercised if the CIT was satisfied that the basis for exercise of jurisdiction existed. No rigid rule could be laid down about the situation when the jurisdiction can be exercised. Whether satisfaction of the CIT for exercising jurisdiction was called for or not, has to be decided having regard to a given fact situation."
8.1 Thus, we are of the view that the argument canvassed on behalf of the assessee that merely be cause there is an Audit Objection, the exercise of powers u/s 263 is invalid, we hold ITA 308 /CHD/2020 A.Y. 2015-16 Page 28 of 29 cannot be accepte d. What we understand from the aforesaid decision and various other decisions cite d on this proposition is that a mechanical exercise of revisionary powers u/s 263 by the Revisionary Authority by merely citing the Audit Objection c a n n o t b e s a i d t o b e a v a l i d e x e r c i s e o f R e v i s i o n a r y P o w e r s . Th e ld. PCI T is require to give an independent finding considering the record. Th e e r r o r i n t h e o r d e r o f t h e A O , t h a t t o o s u c h a n error which is prejudicial to the inte rests of the Revenue, has to be pointed out by the Revisionary Authority in the order. Th e one rous powe r cannot be exercised mechanically and arbitrarily. Th e s a g a c i o u s a r g u m e n t s o f t h e l d . C I T- D R t o t h i s extent, we find are well founded.
8.2 Accordingly, considering the peculiar facts and circumstances of the case for the reasons given herein above, we find that the impugned order on facts deserves to be quashed. Ordered accordingly.
9. In the re sult, appeal of the assessee is allowed.
Order pronounced on 21st July,2022.
Sd/- Sd/-
(VIKRAM SINGH YADAV) (DIVA SINGH)
लेखा सद य/ Accountant Member याियक सद य/ Judicial Member
"Poonam"
ITA 308 /CHD/2020
A.Y. 2015-16
Page 29 of 29
आदेश क ितिलिप अ ेिषत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु / CIT
4. आयकर आयु (अपील)/ The CIT(A)
5. िवभागीय ितिनिध, आयकर अपीलीय आिधकरण, च डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar