Income Tax Appellate Tribunal - Mumbai
Bala Akhai Patel, Mumbai vs Pr. Cit - 23, Mumbai on 2 January, 2019
1 ITA Nos.4140-41/Mum/2017 Bala Akhai Patel Assessment Years :2010-11 & 2011-12 आयकर अपीलीय अिधकरण "बी" ायपीठ मुंबई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI माननीय ी सी. एन. साद, ाियक सद एवं माननीय ी मनोज कुमार अ वाल ,ले खा सद के सम ।
BEFORE HON'BLE SHRI C.N. PRASAD, JM AND HON'BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ I.T.A. No.4140/Mum/2017 (िनधा रण वष / Assessment Year: 2010-11) & आयकरअपील सं./ I.T.A. No.4141/Mum/2017 (िनधा रण वष / Assessment Year: 2011-12) Bala Akhai Patel Pr. Commissioner of Basement NCL Building बनाम/ Income Tax-23 Bandra Kurla Complex Vs. 1 s t Floor, Matru Mandir Marg Bandra (E), Mumbai-400 051 Tardeo Road, Mumbai-07 थायीले खासं ./जीआइआरसं ./PAN/GIR No. AAGPP-7622-P (अ पीलाथ#/Appellant) : ( $थ# / Respondent) Assessee by : Devendra Jain- Ld. AR Revenue by : Ms. Sunita Billa - Ld.CIT-DR सुनवाई की तारीख/ : 13/12/2018 Date of Hearing घोषणा की तारीख / : 02/01/2019 Date of Pronouncement आदे श / O R D E R Per Manoj Kumar Aggarwal (Accountant Member)
1. By way of these appeals for Assessment Years [AY] 2010-11 & 2011-12, the assessee has contested the jurisdiction of appropriate authority u/s 263. Since facts are identical, both the appeals are dealt 2 ITA Nos.4140-41/Mum/2017 Bala Akhai Patel Assessment Years :2010-11 & 2011-12 with by way of this common order for the sake of convenience & brevity. The appeal ITA No. 4140/Mum/2017 for AY 2010-11 contest the order of Ld. Principal Commissioner of Income Tax - 23, Mumbai [Pr. CIT] dated 29/03/2017 in invoking revisional jurisdiction u/s 263. The grounds raised before us reads as under: -
1. On the facts and circumstances and in law, the Ld. Pr. CIT has erred in assuming jurisdiction u/s 263 of the Act, on the concluded issue of original assessment, not subject matter of re-opened assessment. She / He ought to have considered in full the appellant's detailed submission in her order u/s
263.
2. On the facts and circumstances and in law, the Ld. Pr. CIT has erred in issuing the requisite show cause notice u/s 263 (1) on 07-03-2017 for jurisdiction u/s 263 without determining the conclusion of pending proceedings u/s 154 of the Act. She / He ought to have mentioned in show cause notice on conclusion of pending proceedings u/s 154 - the dropping of which was never brought to the knowledge of appellant till service of impugned order u/s 263.
3. On the facts and circumstances and in law, the Ld. Pr. CIT has erred in not allowing the appellant's claim that assessment order passed u/s 143 (3) rws 147 of the Act is bad in law. She / He ought to have considered and adjudicated the proposition of Hon. SC submitted and discussed. She / He ought to have further considered and adjudicated the two limbs of Proviso to sec. 147 in show cause notice u/s 263 (1).
4. On the facts and circumstances and in law, the Ld. Pr. CIT has erred in remitting the matter to the file of AO for re-determination of issue, concluded by him in para 7 of impugned order."
2.1 Facts as emanating from the record are that the assessee being resident individual filed his return of income for impugned AY on 20/09/2010 at Rs.4.54 Lacs which was processed u/s 143(1). Subsequently, the assessee was subjected to reassessment proceedings u/s 143(3) read with Section 147 vide order dated 20/03/2015 wherein the income of the assessee was determined at Rs.5.10 Lacs after addition of alleged bogus purchases for Rs.0.55 Lacs. The assessee was engaged in the business of trading of stationery items, printing and consumable items under proprietorship concern 3 ITA Nos.4140-41/Mum/2017 Bala Akhai Patel Assessment Years :2010-11 & 2011-12 namely M/s Roman Stationers & Printers. The perusal of quantum assessment order reveal that the reassessment proceedings were apparently triggered upon receipt of certain information from Sales Tax Department, Maharashtra regarding assessee being indulging in procuring accommodation / fictitious bills from many entities / parties. Resultantly, the assessee was saddled with estimated addition of Rs.0.55 Lacs against alleged bogus purchases. 2.2 Subsequently, this order was subjected to revisional jurisdiction u/s 263 by Ld. Pr.CIT on the premise that the assessee received an amount of Rs.2.16 Lacs on account of rent from plant & machinery and claimed expenses against the same to the extent of 50% and offered the balance 50% i.e. Rs.1.08 Lacs under the head income from other sources. However, the expenses of 50% as claimed by the assessee, in the opinion of Ld. Pr.CIT, were not allowable to him in terms of Section 57(iv) read with Section 56(2)(viii) [wrongly referred to as 56(2)(vii)] and therefore, the quantum order was erroneous as well as prejudicial to the interest of the revenue. Against show-cause notice dated 07/03/2017, the assessee filed written submissions on 27/03/2017 agitating the action of Ld. Pr. CIT. The attention was drawn to the fact the rectification notice issued u/s 154 by Ld. AO against the quantum assessment order had not been terminated / closed. The attention was also drawn to the fact that the issue pertained to original assessment completed u/s 143(1) before 31/03/2015 and the same was not subject matter of reassessment proceedings and therefore, the proposed action u/s 263 was time barred in law. Another plea raised was the fact the no appeal was preferred by the assessee against the quantum assessment order 4 ITA Nos.4140-41/Mum/2017 Bala Akhai Patel Assessment Years :2010-11 & 2011-12 and therefore, the validity of notice issued u/s 148 could be challenged by the assessee u/s 263 since the order was subject matter of revision. However, not convinced, rejecting all the submissions, Ld. Pr. CIT opined that the aforesaid deduction of 50% was wrongly availed by the assessee which made the order erroneous as well as prejudicial to the interest of the revenue and hence, required revision u/s 263. It was also noted that rectification u/s 154 was already dropped by Ld.AO on 23/02/2017. Therefore, the quantum order was set aside with the direction to Ld. AO to recompute the income of the assessee after due consideration. Aggrieved, the assessee is in further appeal before us.
3. The Ld. Authorized Representative [AR], Shri Devendra Jain has contested the validity of revisional jurisdiction on legal grounds whereas Ld. CIT-DR, Ms. Sunita Billa submitted that the proposed action u/s 263 was the only recourse available to the revenue under the circumstances. 4.1 We have carefully heard the rival submissions and perused relevant material on record including judicial pronouncements cited before us. Upon due consideration, it is undisputed fact that the original return of income filed by the assessee was processed u/s 143(1) during May, 2011 and the assessee was assessed by way of scrutiny assessment for the first-time u/s 143(3) read with section 148 on 20/03/2015. It is also undisputed fact that the only subject matter of the reassessment proceedings was alleged bogus purchases made by the assessee which is evident from the reasons records for initiating the reassessment proceedings as well as quantum assessment order. As a logical deduction, no other issue including the issue as noted by Ld. Pr.CIT was ever a subject matter of the reassessment proceedings and 5 ITA Nos.4140-41/Mum/2017 Bala Akhai Patel Assessment Years :2010-11 & 2011-12 those issues had already attained finality by way of acceptance of returned income u/s 143(1). In terms of Section 263(2), no order could be made by authority u/s 263 after the expiry of two years from the end of financial year in which the order sought to be revised was passed. As per revenue's submissions, the period is to be reckoned from the reassessment order dated 20/03/2015 wherein the Ld. AR has contended that the same has to be reckoned from the date of intimation sent u/s 143(1).
4.2 The Ld. CIT-DR has urged that that the scope of intimation u/s 143(1) was very limited and the same was restricted only to rectify arithmetical error or disallow patently incorrect claims made by the assessee and therefore, the aforesaid order could not be termed as erroneous or prejudicial to the interest of the revenue. Our attention has also been drawn to Explanation 3 to Section 147 as inserted by Finance Act, 2009 w.e.f. 01/04/1989 to submit with the change in law, Ld. AO had wide power to assessee not only those income for which reassessment proceedings were initiated but also those income which came to his notice subsequently and therefore, the non-consideration of certain vital issues as noted by Ld. Pr.CIT made the concerned order erroneous and prejudicial to the interest of the revenue which justify revisional jurisdiction u/s 263. It has also been submitted that case laws being relied upon by the assessee pertains to the period prior to insertion of aforesaid explanation and therefore, distinguishable on the facts. Moreover, in some of the case, the original assessment was completed u/s 143(3).
6ITA Nos.4140-41/Mum/2017 Bala Akhai Patel Assessment Years :2010-11 & 2011-12 4.3 Per Contra, Ld. AR has submitted that the facts of the case were squarely covered by many judicial pronouncements including the decision of Hon'ble Bombay High Court rendered in CIT Vs Lark Chemicals Limited [55 Taxmann.com 446]. It was also urged that rectification proceedings u/s 154 were already pending on the date of issue of show-cause notice u/s 263 and therefore, assumption of jurisdiction u/s 263 was invalid. Our attention also drawn to the fact that rectification u/s 154 as stated to be dropped by Ld. AO in the impugned order was never intimated to the assessee. The Ld. AR also urged that reassessment proceeding u/s 147 were bad in law & were liable to be quashed in terms of certain binding judicial pronouncements. A point was also urged that the order could not be held to be erroneous on the ground that certain issues ought to have come to the knowledge of Ld. AO.
4.4 After thoughtful consideration, we find that the only reason for which reassessment proceedings u/s 147 were initiated, was the fact of alleged bogus purchases and nothing else. In our opinion, Explanation-3 to Section 147 did not give unbridled power to revenue authorities to usurp the already concluding matter which could be disturbed only by way of express statutory powers granted to revenue authorities u/s 147 or 263. As per settled legal position, one of the vital conditions to invoke the reassessment proceedings was the fact that there was tangible material in the hands of Ld. AO which suggested possible escapement of income in the hands of the assessee. This condition, was a sine qua non to invoke reassessment proceedings and therefore, explanation-3 could not, in any manner, widen the scope of reassessment proceedings by 7 ITA Nos.4140-41/Mum/2017 Bala Akhai Patel Assessment Years :2010-11 & 2011-12 granting wide powers to revenue authorities to assess or reassess any income without the fulfilment of this primary condition. It is disputed fact that the subject matter of revisional proceedings was never the issue under reassessment proceedings and therefore, the point as urged by Ld. CIT-DR, in this regard could not be accepted. 4.5 Having said so, we find that the fact of the present case get squarely covered by the decision of Hon'ble Bombay High Court rendered in CIT Vs Lark Chemicals Limited [55 Taxmann.com 446] wherein Hon'ble court, under similar circumstances, has made the following pertinent observations: -
12. We have considered the rival submissions. It is not disputed that save and except the issue of non-genuine purchases all other issues dealt with by the Commissioner of Income-tax in the order dated March 30, 2009, were not a subject matter of the assessment order passed on June 28, 2006, under section 143(3)/147 of the Act. All the other issues on which the Commissioner of Income-tax is seeking to exercise the jurisdiction under section 263 of the Act were concluded by virtue of an intimation under section 143(1) of the Act which admittedly was done beyond a period of two years prior to the notice dated March 17, 2009, issued under section 263 of the Act. Section 263(2) of the Act provides that no order would be made in exercise of the jurisdiction under section 263(1) of the Act after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. It is an admitted position that the Commissioner of Income-tax has not exercised the revisional jurisdiction in respect of the order/intimation passed section 143(1) of the Act within two years of it being passed. Therefore, exercise of jurisdiction on those issues under section 263 of the Act is time barred as held by this court in CIT v. Anderson Marine & Sons (P.) Ltd. [2004] 266 ITR 694/139 Taxman 16. Moreover, in view of the decision of the apex court in the matter of Alagendran Finance Ltd.'s case (supra) as well as our court in the matter of Ashoka Buildcon Ltd.'s case (supra) the jurisdiction under section 263 of the Act cannot be exercised on issues which were not subject matter of consideration while passing the order of reassessment under section 143(3)/147 of the Act but a part of an assessment done earlier under the Act.
Respectfully following the same, we hold that time limit to reckon the period of limitation u/s 263(2) shall start running from the date of 8 ITA Nos.4140-41/Mum/2017 Bala Akhai Patel Assessment Years :2010-11 & 2011-12 intimation u/s 143(1). Counting in the above manner, the revisional jurisdiction u/s 263 is time barred and therefore, bad in law. We order so. 4.6 So far as the argument of Ld. AR that the reassessment proceedings were not valid, is concerned, we find no force in the same in view of the fact proceedings u/s 147 and u/s 263 were separate and distinct proceedings. The proceedings u/s 147 had already attained finality by way of acceptance by the assessee and therefore, the assessee was debarred from contesting the validity of the same in altogether new set of proceedings. We find no force in the same.
ITA No. 4141/Mum/2017 : AY 2011-125. Similar are the facts and circumstances in AY 2011-12 wherein the revisional jurisdiction u/s 263 has been invoked against the assessee vide order dated 07/03/2017. The assessee was reassessed u/s 143(3) read with Section 147 on 20/03/2015 wherein the assessee was saddled with certain addition on account of alleged bogus purchases. The intimation u/s 143(1) was issued to the assessee during November, 2011. The facts and circumstances being pari-materia the same, we hold that invocation of revisional jurisdiction u/s 263 was bad in law. Conclusion
6. Both the appeals stand allowed in terms of our above order.
9ITA Nos.4140-41/Mum/2017 Bala Akhai Patel Assessment Years :2010-11 & 2011-12 Order pronounced in the open court on 02nd January, 2019.
Sd/- Sd/-
(C.N. Prasad) (Manoj Kumar Aggarwal)
ाियक सद / Judicial Member लेखा सद / Accountant Member मुंबई Mumbai; िदनां क Dated : 02/01/2019 Sr.PS, Jaisy Varghese आदे शकी ितिलिपअ!ेिषत/Copy of the Order forwarded to :
1. अपीलाथ#/ The Appellant
2. $थ#/ The Respondent
3. आयकरआयु+(अपील) / The CIT(A)
4. आयकरआयु+/ CIT- concerned
5. िवभागीय ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai
6. गाड0 फाईल / Guard File आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, मुंबई / ITAT, Mumbai.