Income Tax Appellate Tribunal - Chennai
Sahayamatha Salterns Pvt. Limited, ... vs Dcit Circle 1, Tuticorin on 11 December, 2019
आयकर अपील य अ धकरण, 'बी' यायपीठ, चे नई
IN THE INCOME TAX APPELLATE TRIBUNAL
' B' BENCH : CHENNAI
ी एन.आर.एस. गणेशन, या यक सद य एवं
ी इंटूर रामा राव, लेखा सद य के सम
[BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND
SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER]
आयकर अपील सं./I.T.A. No.1498/CHNY/2019
नधारण वष /Assessment year : 2014-2015.
M/s. Sahayamatha Salterns Vs. The Deputy Commissioner of
Pvt. Ltd, Income Tax,
13-A-1, Meenakshipuram Circle I,
West, Tuticorin.
Tuticorin 628 002.
Tamil Nadu
[PAN AACCS 0545D]
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ# क$ ओर से/ Appellant by : Shri. G. Baskar, Advocate
&'यथ# क$ ओर से /Respondent by : Shri. A. Sundararajan, Addl. CIT.
सन
ु वाई क$ तार ख/Date of Hearing : 04-12-2019
घोषणा क$ तार ख /Date of Pronouncement : 11-12-2019
आदे श / O R D E R
PER INTURI RAMA RAO, ACCOUNTANT MEMBER
This is an appeal filed by the assessee directed against the order of the ld. Principal Commissioner of Income Tax-1, Madurai :- 2 -: ITA No.1498/2019 ('PCIT' for short) dated 27.03.2019 for the Assessment Year (AY) 2014-2015 passed u/s.263 of the Income Tax Act, 1961 (in short the ''Act'')
2. The Assessee raised the following grounds of appeal:
''1.1 The impugned order of the CIT u/s.263 is erroneous, opposed to law and facts and is liable to be cancelled. 1.2 The CIT erred in passing the order without application of mind and without adverting to the submissions made before him.
1.3 The CIT erred in invoking the provisions of Section 263 insofar as the assessment order is neither prejudicial to the interests of the Revenue nor erroneous.
2.1 The CIT failed to properly appreciate the detailed submissions that there could be no prejudice to the interest of revenue if the AC had not travelled beyond the scope of the limited scrutiny for which the return was selected. 2.2 The CIT erred in summarily brushing aside the fact that the assessment was pending for limited scrutiny by holding that it was a mere procedural matter.
2.3 The CIT erred in holding that the AC ought to have acted upon a new issue, which can be initiated only under completely different proceedings u/s 153C in the pending assessment proceedings.
2.4 In any event, the CIT failed to note that proceedings u/s 153C r.w.s. 153A were actually initiated on 28.11.2016 and on being objected to by the Asssessee, the AC withdrew the same before the assessment was completed.
2.5 The CIT erred in referring to section 153C which is not at all applicable to this year.
2.6 The CIT erred in holding that the Assessing Officer did not conduct necessary enquiries and verifications, which is contrary to the records.:- 3 -: ITA No.1498/2019
3. The CIT erred in relying on cases that are totally distinguishable on facts and has failed to appreciate the submissions of the Appellant in the proper perspective.
4. Any other ground that may be raised at the time of hearing''.
3. The brief facts of the case are as under:
The appellant M/s. Sahayamatha Salterns Pvt. Ltd, is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business of salt production and trading. The return of income for the AY 2014-15 was filed on 30.09.2014 disclosing total income of Rs.63,15,640/-. Against the said return of income, the assessment was completed by the Deputy Commissioner of Income Tax, Circle I, Tuticorin (hereinafter called "AO") vide order dated 30.12.2016 passed u/s. 143(3) of the Act, at total income of Rs.
869,88,850/-.
4. While the matter stood thus, the ld. PCIT, Madurai-1 on suo- motu examination of assessment records for the assessment year 2014-2015 found that the Assessing Officer had failed to consider the information passed on to him by the Assistant Commissioner of Income Tax, Central Circle-1, Madurai vide letter :- 4 -: ITA No.1498/2019 dated 03.10.2016 whereby the Assessing Officer was informed that the assessee had purchased land measuring 383.42 acres at Periakulam Village in Ramanathapuram Dist and against the total consideration of G10,92,74,700/-, assessee had disclosed purchase consideration of G3,18,76,896/-. This information stated to have been found consequent to the search and seizure operations in the case of M/s. DSF group to whom the said property was sold by the assessee and the said group had admitted receipt of on-money consideration before the Settlement Commission. Despite this specific information before the Assessing Officer, he had failed to consider the sources for on-money payment in the hands of appellant.
5. Therefore, ld. PCIT formed an opinion that the assessment order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue, accordingly issued show cause notice u/s.263 of the Act on 02.01.2019 calling upon the assessee to show cause why an order setting aside the assessment should not be passed.
6. In response to the show cause notice, the assessee filed detailed written submission on 14.01.2019 contending that assessment :- 5 -: ITA No.1498/2019 was taken up for limited scrutiny for the purpose of verifying the following items.
a) ''Large other expenses claimed in the Profit and Loss account.
b) Mismatch between income/receipt credited to profit and loss account considered under other heads of income and income from heads of income other than business of profession''.
The assessment was completed by the Assessing Officer after due verification of those items and therefore the assessment order cannot be said to be erroneous and prejudicial to the interests of the Revenue.
However, the ld. PCIT opined that Assessing Officer ought to have considered the information received from the Deputy Commissioner of Income tax, Central Circle-1, Madurai on 18.09.2015 during the course of pendency of scrutiny assessment proceedings. Non consideration of this information rendered the assessment order erroneous and prejudicial to the interests of the Revenue, accordingly set aside the assessment with direction to the Assessing Officer to redo the assessment after considering the information received from the Deputy Commissioner of Income tax as well as after giving an opportunity of hearing to the assessee. Accordingly, he set aside the assessment order vide order dated 27.03.2019.
:- 6 -: ITA No.1498/20197. Being aggrieved by the order of the ld. PCIT, the assessee is in appeal before us. It is contented that assessment was completed based on limited scrutiny and the Assessing Officer cannot go beyond the issue for which the case was selected for scrutiny assessment. In this connection, he relied on the CBDT Instruction Nos.20/2015, dated 29th December, 2015 and 6/2017, dated 21st July, 2017. He also placed reliance on the series of following judicial decisions.
''01 ITO vs. Pericles Foods, 17 SOT 602 (Mumbai Tribunal) 02 Gift land handicraft vs. CIT, 108 TTJ 0312 (Delhi Tribunal) 03 Nayek Paper Converters s. ACIT, 93 ITD 144 (Kol Tribunal) 04 Ajit Gupta vs. ITO, (2007) 108 TTJ 301 05 CIT vs. Narayana P. Dedhia, 270 ITR 572 (AP) 06 DCIT vs. Sunita Finlease Ltd, 330 ITR 491 (Chat) 07 Kwalpro Exports vs. ACIT, 109 TTJ 0869 08 CIT vs. Amal Generators Ltd, 84 DTR 0045 09 CIT vs. Howrah Flour Mills Ltd, 236 ITR 156 10 CIT vs. PVP Ventures, 211 Taxman 554 11 Jai Commercial Co. Ltd. vs. JCIT, 66 TTJ 731 12 Andhra Valley Power Supply vs. DICT, 53 TTJ 0647''.
and decision of Co-ordinate Bench of this Tribunal in the case of Smt. Padmavathi vs. ITO in ITA No.1306/CHNY/2019, dated 02.12.2019 for assessment year 2014-2015.
8. Per contra, ld. Sr. Departmental Representative placing reliance on the orders of lower authorities submitted that Circulars :- 7 -: ITA No.1498/2019 gave liberty to the Assessing Officer to consider any other items which would come to his notice during the course of assessment proceedings. Thus, he submitted that the ld. PCIT was right in exercising the powers of revision.
9. We heard the rival submissions and perused the material on record. The only issue in the present appeal relates to the validity of power of revision exercised by the ld. PCIT u/s.263 of the Act.
Admittedly, the assessment was completed by the Assessing Officer under limited scrutiny assessment in order to verify the following two items.
a) ''Large other expenses claimed in the Profit and Loss account.
b) Mismatch between income/receipt credited to profit and loss account considered under other heads of income and income from heads of income other than business of profession'' the Assessing Officer completed the assessment after due verification of these items. From the perusal of Sub Clause (d) of Clause 3 of the said CBDT Instruction No.20/2015, dated 29th December, 2015, the Assessing Officer is empowered to take up any other issue for assessment with the approval of the ld. PCIT/CIT concerned, which has come to the notice of the Assessing Officer that there is potential escapement of income exceeding G5 lakhs for non :- 8 -: ITA No.1498/2019 metro and G 10 lakhs in the case of metro. In the present case, admittedly, the Assessing Officer was in receipt of information from the Deputy Commissioner of Income tax, Central Circle-1, Madurai vide letter dated 18.09.2015 stating that assessee had paid on money consideration at the time of purchase of land located in Periakulam Village in Ramanathapuram Dist to M/s. DSF group.
Undisputedly, this information forms part of record has material bearing in the assessment of the tax liability of the assessee.
Therefore, considering exception clause carved in Sub Clause (d) of Clause 3 of the said CBDT Instruction, the Assessing Officer should have sought permission from the ld. PCIT to enquire into this issue of assessability of payment of on-money consideration at the time of purchase of land. There is no gain saying that non enquiry of an issue renders an assessment order erroneous and prejudicial to the interests of the Revenue, if the procedure followed by the Assessing Officer to bring in lesser revenue than some other procedure, the order passed by the Assessing Officer would obviously be erroneous and prejudicial to the interests of the Revenue, it would give jurisdiction to the ld. PICT u/s.263 of the Act, as held by the Patna High Court in the case of CIT vs. Pushpa Devi, (1987) 164 ITR 639.
The relevant para is extracted below.
:- 9 -: ITA No.1498/2019''17. If the rigors of an enquiry and investigation had been relaxed by the scheme of the Board, 'the order of the Tribunal would have been perfectly justified. Let us, therefore, pursue the Scheme. I have quoted earlier the salient aspects of the Scheme. In paragraph 4 it has been specifically stated that 'returns of income filed in the names of minors and ladies should not, however, be accepted without proper enquiries.' What is the content of this sentence. In my view, it clearly means that minors and ladies were not covered by the Scheme. It applied to others and not minors and ladies. They not having formed part of the Scheme, there was no relaxation for them. No spot assessment was to be done in the case of return filed by minors and ladies. They must have been excepted precisely on the ground that unscrupulous assessee might endeavour to lessen the tax burden upon themselves by filing returns in the names of their wives and minor children. I must confess, I have some difficulty in appreciating that if the Scheme did not apply to minors; and ladies, how the rigors of enquiry and investigation was reduced in their case. It is well established that circulars of the Board issued in exercise of powers under section 119 have a binding effect and the revenue are bound to act upon them. It is not necessary to labour on that question, but the most question is whether the Scheme encompassed ladies and minors. I am clearly of the view that it did not. If it did not include them, any discussion on the binding character of the orders of the Board have no relevance. The Vice President Mr. Mathur took note of the fact that the scheme of the Board made a distinction between the adult male assessees and assessees who are ladies and minors. He rightly observed that the distinction was done because the Government found some unscrupulous assessees having huge income may be trying to reduce the rate of the tax applicable to them by showing the income in the names of ladies and minors to whom lower rate of tax was applicable. He rightly observed that in the case of ladies and minors the proper enquiries required to be made was only to confirm whether ladies and minors were benamidars of some other assessees whose income was taxable at higher rate of tax. Was that done? Certainly not. Having missed the central point, the Tribunal fell into a grievous error in holding that the assessment had to be completed within the period of grace. Not to complete it within that period would be denying to a lady or minor assessee to the benefit of the scheme. I regret, the majority conclusion of the Tribunal is fallacious. The law in regard to assessment was not modified so far as ladies and minors were concerned. In the course of mass communication whenever a return was filed by a lady or a minor, it could have been accepted, but could not have been disposed of in terms of the scheme. It should have been treated as an original assessment proceeding- with all the rigors in regard to initial capital investment. No correction or amelioration of the procedure in their case was envisaged. These assessments had to be completed in terms of section 143(3) and where it was prejudicial to the revenue the Commissioner would be fully justified in setting aside such :- 10 -: ITA No.1498/2019 assessments. In fact, in the course of mass communication if a return was filed on behalf of a lady or a minor, the ITO would have been fully justified in not accepting them at the spot and calling upon them to file the return in the department as if the scheme did not exist. There is slight distinction on facts between the case of Smt. Rambha Devi (supra) and the case of the present assessee. In the former case the return had been filed on 22-12-1972, the Inspector conducted inquiry on 27-12-1972. Thereafter, assessment was made. Thus, there was at least a gap of five days between filing of the return and the assessment. What difference the gap of five days would have, would be a matter to be considered when the reference in the case of Smt. Rambha Devi ( supra) is taken up by this Court. But in the instant case, the return was filed on 14-12-1972, and the Inspector's enquiry was completed on the same day and the assessment was made on the very same day for all the assessment years except 1973-74 at the spot. Mr. P.D. Mathur distinguished the case of Thalibai F. Jain v. ITO [1975] 101 ITR 1 (Kar.) on the footing that the ITO had made the assessment without enquiry and evidence and in undue haste. The situation in the instant case, is exactly similar. The filing of return, the equiry and assessments were all done on the same day. I am, therefore, firmly of the view that the enquiry, if at all there was any, was conducted in undue haste. If any enquiry worth the name was conducted, the attention of the Inspector and the ITO was not directed towards ascertainment of the core question, namely, when and from where did funds come and whether the case of the assessee in regard thereto was gullible. The enquiry not having directed towards that question, it was no equiry. The scheme did not liberalise matters for the assessee, who was a lady, wife of a trader. The assessment, thus, on the basis of such enquiry was clearly erroneous.
18. That brings us to the question of jurisdiction of the Commissioner under section 263 to cancel assessment and direct a fresh assessment. If the assessment is erroneous, it must toe presumed to be prejudicial to the interest of the revenue. The finding of the Commissioner in this case was that the order of the assessment was prejudicial to the interest of the revenue, as the assessee may have been a mere benamidar of her husband. It is true that the Commissioner did not record a concluded finding that she was a benamidar. But if he had done so, he would have laid himself open to the charge that the dice had been loaded against the assessee, the Commissioner, therefore, rightly only ordered further investigation into the claim of the assessee upon this finding if the funds had been provided by the assessee's husband, the income would be taxable in his hands over which a higher rate of tax may have been applicable. In that situation, the order of assessment of the wife, would be per se prejudicial to the revenue. It does no need much argument to convince that if the procedure adopted by an ITO brings in lesser revenue than some other procedure, the order would obviously be :- 11 -: ITA No.1498/2019 prejudicial to the revenue. If that is so, the order of assessment is prejudicial to the revenue. It cannot be doubted that the Commissioner would then have the jurisdiction to act in terms of section 263 and order cancellation of the previous assessment and direct fresh assessment. Reliance placed by the learned senior standing counsel in this regard in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 is well placed. The Supreme Court in that case observed that:
" . . . Even where an income has not been earned and is not assessable, merely because the assessee wants it to be assessed in his or her hands in order to assist someone else who would have been assessed to a larger amount, an assessment so made can certainly be erroneous and prejudicial to the interest of the revenue. . . . " (p. 328) The case of the Supreme Court in Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 also supports the revenue. The majority view of the Tribunal distinguishes those cases on some misconception''. Therefore in our considered opinion, the Assessing Officer not following procedure prescribed in Sub Clause (d) of Clause of 3 of said CBDT instruction would render the assessment order erroneous and prejudicial to the interests of the Revenue, thereby confirming the jurisdiction on ld. PCIT u/s.263 of the Act. As regards to the decision of Co-ordinate Bench of the Tribunal in the case of Smt. Padmavathi (supra) to which one of us i.e. the Accountant Member is the author of the order. In the said decision the Tribunal had rendered decision overlooking exceptional clause carved out in Sub Clause (d) of Clause 3 of CBDT Instruction No.20/2015, dated 29.12.2015. Thus, the decision is per incuriam. It is needless to say that an order which is per incuriam has no precedential value. In the circumstances, we are :- 12 -: ITA No.1498/2019 of the considered opinion that ld. PCIT was justified in exercising the jurisdiction vested with him u/s.263 of the Act.
10. In the result, the appeal filed by the assessee stands dismissed.
Order pronounced on 11th day of December, 2019, at Chennai.
Sd/- Sd/-
(एन.आर.एस. गणेशन) (इंटूर रामा राव)
(N.R.S. GANESAN) (INTURI RAMA RAO)
या यक सद य/JUDICIAL MEMBER लेखा सद य/ACCOUNTANT MEMBER
चे नई/Chennai
.दनांक/Dated: 11th December, 2019.
KV
आदे श क$ & त0ल1प अ2े1षत/Copy to:
1. अपीलाथ#/Appellant 3. आयकर आयु3त (अपील)/CIT(A) 5. 1वभागीय & त न7ध/DR
2. &'यथ#/Respondent 4. आयकर आयु3त/CIT 6. गाड फाईल/GF