Income Tax Appellate Tribunal - Kolkata
Shri Sushil Kumar Bardia , Kolkata vs Pr.Cit-12, Kolkata on 22 November, 2019
1
ITA No. 1142/Kol/2019
Sushil Kumar Bardia, AY- 2014-15
आयकर अपील य अधीकरण, यायपीठ - "C" कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH: KOLKATA
(सम ) ी ऐ. ट . वक , यायीक सद य एवं डॉ. अजन
ु$ लाल सैनी, लेखा सद य)
[Before Shri A. T. Varkey, JM & Dr. A. L. Saini, AM]
I.T.A. No. 1142/Kol/2019
Assessment Year: 2014-15
Sushil Kumar Bardia Vs. Principal Commissioner of Income-tax-
(PAN: ADXPB9014D) 12, Kolkata
Appellant Respondent
Date of Hearing 19.09.2019
Date of Pronouncement 22.11.2019
For the Appellant Shri Anil Kochar, Advocate
For the Respondent Dr. P. K. Srihari, CIT, DR
ORDER
Per Shri A.T.Varkey, JM
This appeal preferred by the assessee is against the revision order of the Ld. Pr. CIT, Kolkata-12, Kolkata passed u/s. 263 of the Income-tax Act, 1961 (hereinafter referred to as the "Act") dated 18.03.2019 for AY 2014-15.
2. The main grievance of the assessee is against the action of the Ld. Pr. CIT-12, Kolkata in passing the impugned order u/s. 263 of the Act without satisfying the condition precedent as laid down in sec. 263 of the Act.
3. Brief facts of the case are that the assessee is an individual who has returned income of Rs.13,10,980/- for the assessment year under consideration. Later, the case of the assessee was selected for scrutiny through CASS. Thereafter, the AO noted in the assessment order that the assessee is a business man who had earned his income from trading in ball-bearing, motor parts under the name of his proprietorship concern M/s. Shree Shakti Traders. The AO notes that during the assessment proceedings the assessee had produced relevant documents for verification with reference to the return of income filed along with the P&L Account, Balance Sheet, TAR, Bank statement, copy of 26AS and other details as per his requisition which were test checked by him. Thereafter, the AO notes that 2 ITA No. 1142/Kol/2019 Sushil Kumar Bardia, AY- 2014-15 notices u/s. 133(6) of the Act were also issued to verify the transaction of the assessee. The AO also states that the case was discussed with the assessee and after hearing him he had discussed the issues relevant for determination of total income at pages 2 to 8 of his assessment order and then made an addition of Rs.32,69,898/- and thus the total income of the assessee was assessed at Rs.45,80,880/- vide assessment order dated 30.12.2016. This order was interfered by the impugned order of the Ld. Pr. CIT-12, Kolkata vide order dated 18.03.2019 by exercising his revisional power u/s. 263 of the Act.
4. The Ld. Pr. CIT has found fault with the framing of assessment. According to him, there is lack of enquiry/verification in the case of sundry creditors. In his own words the Ld. Pr. CIT-12, Kolkata states as under:
"After the assessment order was passed, the assessment record of the assessee was picked up for examination. Consequent upon examination of assessment record it was found that the Assessing Office had completed the assessment without making inquiries and verifications in respect of sundry creditors although one of the criteria for selection was "verification of sundry creditors" amounting to Rs.2,11,05,222.38 as per the balance sheet. It is apt to add here that failure to conduct inquiries and investigations renders an assessment order erroneous as well as prejudicial to the interest of revenue."{emphasis given by us]
5. Thereafter, the Ld. Pr. CIT issued show cause to the assessee and after going through the reply of the assessee, the Ld. Pr. CIT concludes as under:
"5. The assertions made by the assessee were gone through and meticulously examined. The assessee rebutted the allegations stating that:
a) The assessee had complied with notices u/s. 142(1) and 143(2) of the Act;
b) In course of proceedings books of accounts had been produced;
c) Complete list of sundry creditors involving amount of Rs.2,11,05,222/- had been recorded by the AO and had been examined by making enquiries u/s. 133(6) of the Act on test check basis as was evident from the assessment order and the records. However, it was also discernible that the Assessing Officer failed to verify the credits appearing in the books of the assessee for an amount of Rs.96,46,987/-. During the hearing also, the assessee could not produce any evidence regarding the identity and genuineness of the creditors. No explanation was given by the assessees during 263 hearing in respect of two parties who failed to respond to notices issued to them under section 133(6) by the Assessing Officer during the assessment proceedings also. The assessee mainly relied on the submissions made by it during the 263 hearing. In such a scenario, the genuineness of creditors remained unverified to the above extent. For the said reason the order is set aside with a direction to the Assessing Officer to verify the identity and genuineness inter-alia of the creditors to the extent of Rs.96,46,987/-
and pass a fresh assessment order re-computing the assessee's income taking into consideration the reasons leading to the action under section 263. The Assessing Officer is at liberty to set his own monetary ceiling for carrying out verification of the creditors. Reasonable opportunity of hearing shall be given to the assessee. Though the AO's power is 3 ITA No. 1142/Kol/2019 Sushil Kumar Bardia, AY- 2014-15 unfettered, the fact must not be lost sight of that the discretion must be exercised legally and not absolutely."[emphasis given by us]
6. Thus, the Ld. Pr. CIT was pleased to set aside the assessment order passed by the AO dated 30.12.2016 and remanded it back to the AO to carry out verification of the creditors to the tune of Rs.96,46,987/- (2 creditors) with the liberty to set his own (AO) monetary ceiling for carrying out verification of the creditors and also cautioning him that though the AO's power is unfettered, the discretion must be exercised legally and not absolutely. Aggrieved by the aforesaid action of the Ld. Pr. CIT the assessee is before us challenging the legal issue that the Ld. Pr. CIT could not have exercised his revisional powers u/s. 263 without satisfying the condition precedent that the assessment order is erroneous as well as prejudicial to the interest of the revenue.
7. We have heard rival submissions and gone through the facts and circumstances of the case. We note that the Ld. Pr. CIT has found fault with the action of the AO to have completed the assessment without making enquiries and verification in respect of sundry creditors although one of the criterion of selection (for scrutiny by CASS) was "verification of sundry creditors amounting to Rs.2,11,05,222/- as per the Balance Sheet." Thus according to Ld. Pr. CIT, failure of AO to conduct enquiries and investigations in respect of Rs 96,46,987/- rendered the assessment order erroneous as well as prejudicial to the interest of revenue. We note that the assessee has pointed out to the Ld. Pr. CIT that his assertion that AO has not conducted enquiry in respect of sundry creditors is misplaced and not borne out of records. During the revisional proceedings the assessee had asserted the following facts to assert that AO in fact had conducted investigation in respect of sundry creditors:
i) The assessee had complied with notices issued by AO u/s. 142(1) and 143(2) of the Act;
ii) In course of proceedings (assessment) books of account had been produced by the assessee;
iii) Complete list of sundry creditors involving amount of Rs.2,11,05,222/- had been recorded by the AO and had been examined by making enquiries u/s. 133(6) of the Act on test check basis and which fact is evident from the assessment order and the records;
8. In respect of the aforesaid assertions made by the assessee, the Ld. Pr. CIT does not contradict the same. However, according to Ld. Pr. CIT, the AO failed to verify the credits 4 ITA No. 1142/Kol/2019 Sushil Kumar Bardia, AY- 2014-15 appearing in the books of assessee for an amount of Rs.96,46,987/- out of Rs.2,11,05,222/- (total) and that during the hearing before him, the assessee did not produce any evidence regarding the identity and genuineness of the creditors to the tune of Rs.96,46,987/- and that the assessee could not explain during the proceedings before him in respect of two parties who failed to respond to notice issued u/s. 133(6) of the Act by the AO during the assessment proceedings.
9. After making the aforesaid findings the Ld. Pr. CIT was of the opinion that the genuineness of the creditors remained unverified to the extent of Rs.96,46,987/- and he was pleased to set aside the order of the AO with a direction to the AO to verify the identity and genuineness, inter-alia, of the creditors to the extent of Rs.96,46,987/- and to pass a fresh assessment order recomputing the income. Thus, we note that the main reason given by the Ld. Pr. CIT to interfere with the assessment order dated 30.12.2016, while issuing SCN proposing to initiate revisional jurisdiction was started with the assumption of fact that the AO without making enquiries and verification in respect of sundry creditors to the tune of Rs.2,11,05,222/- (as per the Balance Sheet) has framed the assessment order and however, while concluding the Ld. Pr. CIT found that the verification need to be restricted to only Rs.96,46,987/- after hearing the assessee during the revisional proceedings.
10. Assailing the action of the Ld. Pr. CIT, the Ld. AR drew our attention to the notice issued by the AO u/s. 142(1) of the Act dated 12.11.2015 to the assessee during the assessment proceedings wherein he clearly asked the assessee to furnish the following details:
"6. Kindly file complete party-wise details of all purchases and sales above Rs.1,00,000/- mentioning complete postal addresses and PAN of the parties involved.
7. Kindly file complete party-wise details of all sundry debtors and creditors mentioning complete postal addresses and PAN of the parties involved."
11. We note that the Ld. Pr. CIT has called for entire assessment record which fact the Ld. Pr. CIT acknowledges at page 7 of his order that "after the assessment order was passed, the assessment record of the assessee was picked up for examination." Thereafter, the Ld. Pr. CIT himself records in the impugned order the rebuttal of the assessee that -
5 ITA No. 1142/Kol/2019Sushil Kumar Bardia, AY- 2014-15
i) The assessee had complied with notices issued by AO u/s. 142(1) and 14392) of the Act;
ii) In course of proceedings (assessment) books of account had been produced by the assessee;
iii) Complete list of sundry creditors involving amount of Rs.2,11,05,222/- had been recorded by the AO and had been examined by making enquiries u/s. 133(6) of the Act on test check basis and that this fact is evident from the assessment order and the records;
12. The aforesaid assertion of the assessee has been recorded by the Ld. Pr. CIT in the impugned order. However, he has not recorded any findings to disprove the averments made by the assessee before him, which goes on to show that AO infact had discharged his role of an investigator in respect of sundry creditors. Thereafter, the Ld. Pr. CIT finds fault with the AO's action by stating that the AO failed to verify the credits appearing in the books of assessee for an amount of Rs.96,46,987/-. And that during the proceedings before him, also the assessee did not produce any evidence regarding the identity and genuineness of the creditors. And that the assessee could not explain during the proceedings before him in respect of two parties who failed to respond to notice issued u/s. 133(6) of the Act by the AO during the assessment proceedings.
13. From the aforesaid factual finding it is discerned that during assessment proceedings pursuant to the notice u/s. 142(1) of the Act issued by the AO dated 12.11.2015, the assessee had filed the complete list of sundry creditors for an amount of Rs.2,11,05,222/- and the Ld. Pr. CIT could not find fault with the assessee's assertion that the AO had examined the same by making enquiries u/s. 133(6) of the Act on test check basis, which fact is evident from the perusal of the assessment order. The only issue which the Ld. Pr. CIT finds faults finally is that the AO did not verify the creditors to the tune of Rs.96,46,987/- out of Rs.2,11,05,222/- and thereafter he opines that no endeavor was made by the assessee to produce evidence in respect of sundry creditors before him and also the assessee failed to give any explanation regarding the two parties who failed to respond to the notices issued to them u/s. 133(6) of the Act by the AO during assessment proceedings. On this reason he has set aside the assessment order of the AO and directed him to verify 6 ITA No. 1142/Kol/2019 Sushil Kumar Bardia, AY- 2014-15 the identity and genuineness of the sundry creditors to the extent of Rs.96,46,987/- and to reframe the assessment against the assessee.
14. The Ld. AR drew our attention to a similar case which came up before the Delhi Tribunal in the case of Sandeep Kr. Aggarwal Vs. ITO in ITA No. 2321/Del/2014 for AY 2009-10 wherein a similar case the Tribunal after taking note of the Hon'ble Delhi High Court's decision in Pr. CIT Vs. Delhi Airport Metro Pvt. Ltd. in ITA No. 705/2017 dated 05.09.2017 wherein the Hon'ble Delhi High Court held that where the AO has made enquiries regarding the issue for which the revision has been made by the Ld. CIT, the assessment order cannot be termed as erroneous (since enquiry has been done by AO) unless it is not in accordance with the law. It was further held that the Ld. CIT has not made any enquiry himself on that issue on which the AO has already enquired during assessment proceedings, which exercise is necessary for him to establish and show the error or mistake made by the AO. So, when the AO discharges his duty as that of the investigator on an issue and make enquiries and thereafter as an adjudicator accepts the claim of the assessee, then the Ld. CIT cannot hold the action of AO as erroneous, unless he himself enquires and records a finding that AO's satisfaction/finding is unsustainable in law and such finding of Ld. CIT must be clear, unambiguous and not debatable. We note that in the present case in hand, the AO had issued notice u/s. 142(1) dated 12.11.2015 wherein he has called for complete party-wise details of all purchases and sales above Rs. 1 lac and the complete postal address and PAN of the parties involved as well as complete party-wise details involving sundry debtors and creditors mentioning complete postal address and PAN of the parties and pursuant to which the assessee had furnished the complete details of the sundry creditors involving name, amounting to Rs.2,11,05,222/- and the AO has recorded in the assessment order that he has examined and made enquiries u/s. 133(6) of the Act on test check basis in respect of the transactions. Thus, according to us, it is not a case of no enquiry carried out by the AO during the assessment proceedings. It has to be kept in mind that the AO has dual role while framing the assessment order. He has to be an investigator as well as an adjudicator. In case, if the AO fails in any of these roles then the order of the AO would be vitiated and will be held to be erroneous. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC) has held the twin conditions 7 ITA No. 1142/Kol/2019 Sushil Kumar Bardia, AY- 2014-15 should be satisfied before the revisional jurisdiction u/s. 263 is invoked by the Ld. CIT i.e. the AO's order should be erroneous as well as prejudicial to the interest of the Revenue which condition precedents should be satisfied, before the Pr CIT usurp the revisionary jurisdiction under section 263 of the Act. Thus, we note that from the facts discussed above that this is not a case where the AO has not carried out enquiry in respect of the sundry creditors. We note that during the 263 proceedings the assessee had brought to the notice of the Ld. Pr. CIT that assessee had complied with the notice issued u/s. 142(1) and produced all the documents before the AO for verification and the AO had verified the return of income filed along with the P&L Account, Balance Sheet, TAR, bank statement etc. and thereafter after going through the entire details in respect of the sundry creditors had examined and enquired the same by issuing 133(6) notice on test check basis has framed the assessment order without any adverse view in respect of the sundry creditors. In such a scenario, the AO's action cannot be termed as a case of non enquiry. So, when the Ld. Pr. CIT himself has made a finding of fact that out of sundry creditors of Rs.2,11,05,222/- the AO has not verified the sundry creditors to the tune of Rs.96,46,987/- means AO had verified about sundry creditors to the tune of Rs.1,14,58,235/-. The scrutiny under CASS was undertaken after noticing huge sundry creditors, so AO called for the details which assessee furnished and AO has enquired on a test check basis the veracity of sundry creditor. So, if Ld. Pr. CIT was not satisfied with the enquiry conducted by the AO, then it was duty bound upon him to have enquired himself about the veracity of the sundry creditors when the entire list as well as the complete address as well as the PAN of the sundry creditors were before him. Moreover, it was brought to our notice that the ld. Pr. CIT has never confronted the assessee during the revisional proceedings to produce any proof regarding sundry creditors to the tune of Rs.96,46,987/-. At the cost of repetition we note that since the assessee had complied with the queries on the issue and filed details of sundry creditors and the AO has made enquiries in respect of the sundry creditors then in such a scenario, the ld Pr CIT in order to find that there is any fault/deficiency in the enquiry conducted by the AO while framing assessment order, then it was incumbent upon the Ld. Pr. CIT to have conducted an enquiry by himself on the issue and record his finding of fact that could show that AO order is un-sustainable in law, which he did not do. So, the AO's action/enquiry in respect of the sundry creditors cannot be held to be erroneous as well as 8 ITA No. 1142/Kol/2019 Sushil Kumar Bardia, AY- 2014-15 prejudicial to the interest of the revenue. For that we rely on the order of the Hon'ble Delhi High Court in the case of Pr. CIT Vs. Delhi Airport Metro Pvt. Ltd. (supra) and, therefore, respectfully following the ratio of the Hon'ble Delhi High Court and in view of the enquiry made by the AO the order passed by the Ld. Pr. CIT u/s. 263 of the Act cannot be sustained and quashed for want of jurisdiction.
15. In the result, the appeal of the assessee is allowed.
Order is pronounced in the open court on 22nd November, 2019
Sd/- Sd/-
(Dr. A. L. Saini) (Aby. T. Varkey)
Accountant Member Judicial Member
Dated :22nd November, 2019
Jd.(Sr.P.S.)
Copy of the order forwarded to:
1. Appellant - Shri Sushil Kumar Bardia, 20, N. S. Road, Kolkata-700 001.
2 Respondent - Pr. CIT, Kol-12 , Kolkata.
3. ITO, Ward-36(2), Kolkata.
4. DR, ITAT, Kolkata. (sent through e-mail) /True Copy, By order, Assistant Registrar