Income Tax Appellate Tribunal - Cochin
Hi Build Coatings P. Ltd, Cochin vs The Acit, Cochin on 19 June, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL
COCHIN BENCH, COCHIN
BEFORE S/SHRI CHANDRA POOJARI, AM & GEORGE GEORGE K., JM
I.T.A. No.216/Coch/2017
Assessment Year : 2012-13
M/s. Hi Build Coatings Pvt. Ltd., Vs. The Assistant Commissioner of
South Kalamassery, Income-tax, Corporate Circle-1(2),
Kochi-683 104. Kochi.
[PAN: AAACH 7058N]
(Assessee-Appellant) (Revenue-Respondent)
Assessee by Shri K. Gopi, CA
Revenue by Shri A. Dhanaraj, Sr. DR
Date of hearing 18/06/2018
Date of pronouncement 19/06/2018
ORDER
Per CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed u/s. 263 of the Income Tax Act by the Commissioner of Income Tax, Kochi dated15/03/2017 and pertains to the assessment year 2012-13.
2. The assessee raised the following grounds:
1) The Learned Principal Commissioner of Income Tax (Pr. CIT) grossly erred in setting aside u/s.263 of the IT Act, the scrutiny assessment order issued by the Learned Assessing Officer (AO) on 27.03.2015 vide proceedings u/s.143(3) of the IT Act and directing the AO to pass a detailed speaking order in accordance with law, after affording due I.T.A. No. 216/C/2017 opportunity to the assessee. The scrutiny assessment had been completed after due verification of all facts and law and hence there is no error which is prejudicial to the interest of revenue which requires revision u/s.263 of the IT Act.
2) The Learned Pr. CIT erred in stating that there is error in computation of interest u/s.234 C or u/s.234 B of the IT Act in the assessment order, in so far as prejudicial to interest of revenue. The error if any in computation of interest u/s.234 B & C can be rectified u/s.154 of the IT Act.
3) The Pr. CIT erred in stating that there is a difference in sales consideration of land as per Cash Flow Statement vis-à-vis the amount reckoned in statement of computation of income, which was not verified by the AO and hence there is an error in so far as prejudicial to interest of revenue. On facts before the Assessing Officer and the Pr. CIT, there is no error.
4) The Pr. CIT erred in stating that the Learned AO allowed depreciation @60% on computer peripherals representing Networking & voice cabling, fibre connectivity and UPS without passing a speaking order and hence there is error prejudicial to interest of revenue. The Pr. CIT ought to have noted that it is now well settled that computer accessories like UPS, servers, other related parts being part and parcel of computers system are eligible for depreciation as in the case of computers and hence there is no error in so far prejudicial to the interest of revenue.
5) The Pr. CIT grossly erred in holding that the Ld AO had not verified the claim of write off of bad debts in Profit and Loss account under the nomenclature 'Provision for Bad & doubtful debts & advances', with reference to the factual position in details. The Learned Pr. CIT ought to have noted that the said claim was made by the appellant relying on the decision H'ble Income Tax Appellate Tribunal in appellant's own case in respect of AY 2010-11 (ITA ITA No.310/Coch/2014) and hence there is no error in so far as prejudicial interest of revenue.
6. The Pr. CIT grossly erred in stating that the Learned AO omitted to examine claim of deduction made u/s.40 A (7) of the IT Act. The Pr. CIT ought to have noted that the said claim is in order and there is no error in so far as prejudicial to the interest of revenue.
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I.T.A. No. 216/C/2017
7) The Learned Pr. CIT erred in stating the AO had not examined claim of deduction of expenses made under the nomenclature "applicable net loss on foreign currency transaction' under the head exchange fluctuation loss. The Pr. CIT omitted to that the claim made is in order and there is no error prejudicial to interest of revenue in this regard.
8) For these and other grounds that may be further adduced at the time of hearing, the order of the learned AO requires to be modified suitably.
3. The CIT after perusing the assessment order, observed that the order was erroneous in so far as it was prejudicial to the interests of the Revenue for the reasons mentioned below:
a) Mistake in interest calculation u/s. 234B and 234C.
b) Sale consideration of land as per cash flow statement is Rs.30,64,069(75,41,941-44,81,872) instead of Rs.29,30,505/- taken in the computation statement.
c) Excess depreciation allowed @ 60% on net working cable, fibre connectivity expenses and UPS.
d) Omission to consider the disallowance of provisions of bad and doubtful debts of Rs.3,18,430/-.
e) Omission to examine the claim of deduction u/s. 40A(7) for Rs.7,63,105/-.
f) Omission to examine the claim of foreign exchange fluctuation loss of Rs.10,28,441/-.3
I.T.A. No. 216/C/2017 Accordingly, he set aside the assessment order passed u/s. 143(3) of the Act dated 27/03/2015 for the assessment year 2012-13 for de nova examination by the Assessing Officer and pass a detailed speaking order.
4. Against this, the assessee is in appeal before us. The Ld. AR submitted that the Assessing Officer after duly examining the issues raised by the CIT, has considered the same in the original assessment order passed u/s. 143(3) of the Act and he has taken one view and in that view, the CIT cannot find fault with. He further submitted that in the giving effect order to the 263 order, the Assessing Officer has not at all made an addition on the issues raised by the CIT (b to f). There was only levy of interest u/s.234B of the Act which could have been rectified u/s. 154 of the I.T. Act.
5. The Ld. DR relied on the order of the CIT.
6. We have heard the rival submissions and perused the record. Section 263 of the Income-tax Act seeks to remove the prejudice caused to the revenue by the erroneous order passed by the Assessing Officer. It empowers the Commissioner to initiate suo moto proceedings either where the Assessing Officer takes a wrong decision without considering the materials available on record or he takes a decision without making an enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner is well within his powers to regard an 4 I.T.A. No. 216/C/2017 order as erroneous on the ground that the Assessing Officer should have made further inquiries before accepting the claims made by the assessee. The Assessing Officer cannot remain passive in the face of a claim, which is apparently in order but calls for further enquiry. In other words, he must carry out investigation where the facts of the case so require and also decide the matter judiciously on the basis of materials collected by him as also those produced by the assessee before him. The Assessing Officer was statutorily required to make the assessment under Section 143(3) after scrutiny and not in a summary manner as contemplated by Sub-section (1) of Section 143. The Assessing Officer is therefore, required to act fairly while accepting or rejecting the claim of the assessee in cases of scrutiny assessments. The Assessing Officer should protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. The Assessing Officer is not expected to put blinkers on his eyes and mechanically accept what the assessee claims before him. It is his duty to ascertain the truth of the facts stated and the genuineness of the claims made in the return. The order passed by the Assessing Officer becomes erroneous when an enquiry has not been made or genuineness of the claim has not been examined. The Commissioner may consider an order of the Assessing Officer to be erroneous not only when it contains some apparent error of reasoning or of law or of fact on the face of it but also when the Assessing Officer fails to make enquiries or examine the genuineness of the claims of the assessee. In taking the aforesaid 5 I.T.A. No. 216/C/2017 view, we are supported by the decisions of the Hon'ble Supreme Court in Rampyari Devi Saraogi v. CIT (67 ITR 84) (SC), Smt. Tara Devi Aggarwal v. CIT (88 ITR 323) (SC), and Malabar Industrial Co. Ltd's case ( 243 ITR 83) (SC). 6.1 In view of the foregoing, it can safely be said that an order passed by the Assessing Officer becomes erroneous and prejudicial to the interests of the Revenue under Section 263 in the following cases:
(i) The order sought to be revised contains error of reasoning or of law or of fact on the face of it.
(ii) The order sought to be revised proceeds on incorrect assumption of facts or incorrect application of law. In the same category fall orders passed without applying the principles of natural justice or without application of mind.
(iii) The order passed by the Assessing Officer is a stereotype order which simply accepts what the assessee has stated in his return or where he fails to make the requisite enquiries or examine the genuineness of the claim which is called for in the circumstances of the case.
6.2 In the present case, the CIT was of the opinion that there is no proper enquiry by the Assessing Officer and he accepted the claims of the assessee without making any enquiry with regard to the claims of the assessee. He has not gathered any information and evidence to suggest that the claims of the assessee were right. The Assessing Officer is required to cause enquiries with regard to the claims of the assessee. As such, the CIT is justified in remitting the issue to the file of the Assessing Officer for de novo consideration by 6 I.T.A. No. 216/C/2017 invoking the provisions of sec. 263 of the Act. At this stage we refrain from going into the merit of the issues raised by the assessee as CIT has only directed the Assessing Officer to consider the same fresh. Accordingly, the grounds of appeal of the assessee are dismissed.
7. In the result, the appeal filed by the assessee is dismissed.
Order pronounced in the open Court on this 19th June, 2018.
sd/- sd/-
(GEORGE GEORGE K.) (CHANDRA POOJARI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Place: Kochi
Dated: 19th June, 2018
GJ
Copy to:
1. M/s. Hi Build Coatings Pvt. Ltd., South Kalamassery, Kochi-683 104.
2. The Assistant Commissioner of Income Tax, Corporate Circle-1(2), Kochi.
3. The Pr. Commissioner of Income-tax, Kochi
4. D.R., I.T.A.T., Cochin Bench, Cochin.
5. Guard File.
By Order (ASSISTANT REGISTRAR) I.T.A.T., Cochin 7