Income Tax Appellate Tribunal - Chandigarh
M/S B.D.Ispat P.Ltd, Sirsa vs Pr.Cit, Rohtak on 18 May, 2022
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, च डीगढ़
I N T H E I NC OM E T A X A P PEL L A TE T RI B U N AL
D I V I S I O N BE NC H , " A" , CH A ND I G A R H
BEFORE SHRI N.K. SAINI, VICE PRE SIDENT &
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
आयकर अपील सं./ ITA No. 155/C H D / 2 0 2 1
नधारण वष / Assessment Year : 2016-17
M/s B.D. Ispat (P) Ltd, बनाम The PCIT,
15-B, Around Additional Mandi, Rohtak
Sirsa-125055
Haryana
थायी लेखा सं./PAN NO: AADCB8461A
अपीलाथ /Appellant यथ /Respondent
आयकर अपील सं./ ITA No. 156/C H D / 2 0 2 1
नधारण वष / Assessment Year : 2016-17
Bhagwan Dass, बनाम The PCIT,
SCF 35,CC-2-2nd OPP Rohtak
Baba Bihari Netralya Janta
Bhawan Road, Sirsa-125055
Haryana
थायी लेखा सं./PAN NO: AFXPD7385K
अपीलाथ /Appellant यथ /Respondent
Hearing though video Conferencing
नधा रती क ओर से/Assessee by : Sh. Gautam Jain , Advocate.
Sh. Lalit Mohan, CA
राज व क ओर से/ Revenue by : Sh. Vivek Nangia, CIT DR
सुनवाई क तार$ख/Date of Hearing : 21.02.2022
उदघोषणा क तार$ख/Date of Pronouncement : 18. 05.2022
आदे श/Order
Per Sudhanshu Srivastava, Judicial Member:
Both these appeals preferred by the captioned assessees relate to the action taken u/s 263 of the Income Tax Act, 1961 (hereinafter called 'the Act') by challenging the assumption of jurisdiction by the Ld. ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 2 Principal Commissioner of Income Tax, Rohtak (PCIT) in holding that the assessment orders passed by the Assessing officers were erroneous so far as prejudicial to the interest of Revenue in terms of provisions of section 263 of the Act including Explanation 2 inserted by Finance Act, 2015. By the impugned orders, the Ld. PCIT has set aside the assessment orders in the original assessment proceedings. Since both the appeals involved identical issues and belonged to the same group, they were heard together and are being disposed of through this common order for the sake of convenience.
2.0 The brief facts in the case of M/s B.D. Ispat (P) Ltd( in ITA No. 155/Chd/2021) are that a survey action u/s 133A of the Act was carried out at the business premises of the assessee on 10.09.2015. During the course of survey, some excess cash, unaccounted loans and advances to various parties, unexplained investment in furniture and fixture and unexplained expenditure were found. The details of the discrepancies noticed by the survey team were as under:-
i) Excess cash found Rs. 8,00,000/-
ii) Unaccounted loans and Rs. 2,00,000/-
advances various parties
iii) Unexplained investment in Rs. 4,30,000/-
furniture and fixture
iv) Unexplained expenditure Rs. 7,70,000/-
v)
Total Rs. 40,00,000/-
ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 3 2.1 The assessee offered additional income of Rs. 40,00,000/- to tax over and above the normal business income to cover up for the above noted discrepancies.
2.2 The return of income was filed on 17.10.2016 declaring a loss of Rs. 5,61,010/-. The assessee was asked to justify the huge loss claimed by it during the post survey period of the financial year. The assessee was provided ample opportunities to justify the loss claimed by providing documentary evidences but no books of account, sales bills, purchase bills etc. were produced. The Assessing officer also issued summons u/s 133(6) of the Act to the sundry creditors requiring them to submit confirmed copies of that ledger accounts with the assessee but neither were any responses received nor were the notices received back.
Since no reply from the assessee was forthcoming, the Assessing officer took relevant data from the assessee's Income Tax Returns and Audit Reports for assessment years 2014-15, 2015-16 and 2017-18 and worked out the average gross profit at 0.643% and applying the same to the total turnover of Rs. 39,45,79,745/-, the Assessing Officer computed the gross profit at Rs. 22,48,963/-. Thereafter, from the Revenue expenditure claimed in the profit and loss account amounting to Rs.
38,54,789/-, the Assessing Officer made a disallowance of Rs. 43,000/-
claimed on account of depreciation on furniture and fixture on the written down value of Rs. 4,30,000/-, (which the assessee had surrendered at the time of survey). From the remaining expenditure of ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 4 Rs. 38,11,789/-, in the absence of any bills and vouchers, another 20% of the expenditure was further disallowed which worked out to Rs.
7,62,358/-. After including the miscellaneous income of Rs. 12,90,972/-, commission income of Rs. 2,36,884/- and interest income of Rs. 4,000/-, the net profit of the assessee was worked out at Rs. 7,31,388/-. The assessment was completed at an income of Rs. 47,31,388/- after making an addition of Rs. 40,00,000/- which had been surrendered by the assessee during the time of survey.
2.3 Subsequently, the Ld. PCIT issued a show cause notice u/s 263 of the Act proposing to invoke the revisionary jurisdiction in the assessee's case. For a ready reference the contents of the show cause notice are being reproduced herein under:-
"Return declaring loss of Rs 5,61,010/- for the AY 2016- 17 was filed by you on 17.10.2016. Subsequently your case was selected for compulsory scrutiny after serving you a notice u/s 143(2) of the Income Tax Act (hereinafter referred as Act) on 04.09.2017 by DCIT circle Sirsa and later on your case was transferred to Ito ward-3, Sirsa who vide his order dated 28.12.2018 completed the assessment in your case at an income of Rs. 47,31,388/-.
2. The assessment record for the period under consideration was called upon and examined.
a) On such examination, it has been noticed that letters were issued by the AO to the creditors and the same were neither replied to nor returned back, therefore it is crystal clear that the creditors remained unverified.
b) During the assessment proceedings the AO had noticed that the mode of transportation of goods at ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 5 the time of sale was fake even then the loss on sale of goods has been admitted by the A.O. The loss so claimed was required to be disallowed before computing the income. Further no verification of debtors amounting to Rs. 19.12 crore was done by A.O. and thus they remained un verified.
c) Perusal of the assessment order shows that the transportation receipts were fake, therefore, the purchases remained unverified for the year under consideration. The AO has not taken any action in this regard.
Failure on the part of the AO to examine the above issues by conducting any enquiries renders the assessment order erroneous in so far as it is prejudicial to the interest of revenue.
5. In view of the above, the assessment completed by the AO is, prima facie erroneous in so far as it is -prejudicial to the interest of revenue. The same is, therefore, required to be suitably amended / modified u/s 263 of the Income Tax Act, 1961. You are, therefore, required to show cause as to why an appropriate order u/s 263(1) of the Act should not be passed. In this connection, you may send your written reply supporting documentary evidences on the email-id (rohtak.cit(g)jncometax.gov.in ) or through e- proceedings by 23.03.2021. In case of no reply per above, it shall be assumed that you .do not wish to say anything in the matter and the matter would be decided as per material on record without any further notice / intimation to you."
2.4 The assessee in replied to the above said show cause notice by filing a response as well as various documentary evidences but the same was not accepted by the Ld. PCIT and the Ld. PCIT proceeded to hold that the original assessment framed in the case was erroneous so far as ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 6 prejudicial to the interest of Revenue and directed the Assessing officer to frame the afresh assessment afresh.
2.5 Against this order of the Ld. PCIT, the assessee has now approached this Tribunal and has challenged the order passed u/s 263 of the Act by raising following grounds of appeal:-
ITA No.155/Chd/2021:1. That order dated 30.3.2021 u/s 263 of the Act by lea Tied Principal Commissioner of Income Tax, Rohtak has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such:
2. That the conclusion of learned Principal Commissioner of Income Tax that "the AQ has passed the order dated 29.12.2018 in a very casual manner without due diligence and without conducting any worthwhile enquiries. Therefore, it is very clear that assessment proceedings completed u/s 143(3) of the Act are erroneous so far as prejudicial to the interest of the revenue in terms of provisions of section 263 of the Act including Explanation 2 inserted by the Finance Act, 2015 w.e.f. 01.06.2015" is based on fundamental misconception of facts and provisions of law and thus not in accordance with law and, therefore untenable.
2.1 That the finding of learned Principal Commissioner of Income Tax that order of the learned Assessing Officer is erroneous and prejudicial to the interest of revenue on the following basis is factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations;
and therefore unsustainable:
ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 7
a) That since during the assessment proceedings the AO had issued letters to creditors and they were either returned back unserved or were not replied to which led to the conclusion by the AO himself that assessee had bogus creditors and therefore addition on this account was required to be made however no such addition was made by the AO;
b) That during the assessment proceedings itself it was established that the assessee has shown fake mode of transportation of goods, therefore the loss claimed by the assessee on sale was bogus one and was required to be disallowed and the AO was required to disallow the losses on bogus sale however no such disallowance made by the AO on this account;
c) That since the assessee had shown debtors amounting to Rs. 19.12 crore however no inquiry was made to verify the same particularly when the glaring evidences of fake transport mode were available with the A.O;
d) That the AO conducted no enquiry regarding that the assessee had shown fake transportation receipt therefore the purchases remained unverified;
e) That the AO should enquire into the amount invested by the assessee in construction of building and if it is required to do so, refer the matter to valuation officer for valuation of property; and
f) That investment and sources should be inquired into by examining documentary evidences 2.2 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had made additions by rejecting the books of accounts u/s 145 of the Act and estimating the profits and further ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 8 also made disallowance of expenses and therefore computed the net profit which estimation and computation have neither been rejected nor raised, in such circumstances the order of revision is perse misconceived, misplaced and untenable, more particularly when income surrendered in the course of survey on account of excess cash, unexplained investment and unsecured loans have been separately brought to tax then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible or unsustainable view.
2.3 That the learned Principal Commissioner of Income Tax has erred in holding that it is a case of "lack of enquiry" and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s 263 of the Act.
2.4 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible view.
2.5 That the learned Pr. Commissioner of Income Tax has also failed to appreciate that, u/s 263 of the Act, an order of assessment cannot be set-aside to simply to make further enquiries and thereafter pass fresh order of assessment and as such, impugned order is contrary to law and hence, unsustainable.
ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 9 2.6 That the learned Principal Commissioner of Income Tax has failed to appreciate that surmises, conjecture and suspicion could not be a basis much less a valid basis to invoke section 263 of the Act.
2.7 That while passing the order u/s 263 of the Act the learned Principal Commission of Income Tax cannot travel beyond the show cause notice and therefore findings and observation and also the material relied upon not referred in the show cause notice but made part of the order could neither in law and nor on fact be made a basis to assume jurisdiction u/s 263 of the Act; and thus order on this ground alone deserve to be quashed as such.
2.8 That various other adverse findings recorded in the notice u/s 263 of the Act and, also in impugned order are factually incorrect, vague, legally misconceived and untenable.
3. That the learned Principal Commissioner of Income Tax ias framed the impugned order without granting sufficient opportunity to the appellant and therefore the order made is illegal, invalid and, vitiated order Prayer : It is therefore prayed that, impugned order dated 30.3.2021 under section 263 of the Act be held to be without jurisdiction and, therefore be quashed and appeal of the appellant be allowed.
3.0 In respect of the second captioned assessee, Shri Bhagwan Dass (in ITA No. 156/Chd/2021), the brief facts of the case are that this assessee was also covered in the survey operation u/s 133A of the Act which was carried out at his business preemies on 10.09.2015 and during the course of such survey, some excess cash, unaccounted loans and advances to various parties, unexplained investment in furniture and ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 10 fixture and unexplained expenditure were found. The details and discrepancies noted by the survey team were as under:-
i) excess cash found Rs. 8,00,000/-
ii) unaccounted loans and Rs. 21,50,000/-
advances
iii) unexplained investment in Rs. 1,50,000/-
furniture and fixture
iv) Unexplained expenditure Rs. 4,00,000/-
Total Rs. 35,00,000/-
3.1 Since the assessee could not explain these discrepancies, and
in order to cover up these discrepancies, the assessee offered additional income of Rs. 35,00,000/- over and above the normal business income for assessment year 2016-17.
3.2 The return of income was filed on 15.10.2016 declaring income of Rs. 3,09,320/-, however, the Assessing officer noticed that during the F.Y. 2015-16, till date of survey, the assessee had earned profit, whereas, he had incurred losses post survey. The assessee was asked to justify the reason for losses which could not be explained by the assessee. The Assessing officer also noted some discrepancies in the transportation bills submitted by the assessee and he observed that the bills produced pertained to transportation by tractor, a three wheeler and Maruti 800 car (details of which are available at pages 7 and 8 of the assessment order). The Assessing officer, therefore, proceeded to conclude that sales of the assessee were not genuine. The Assessing ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 11 officer also issued notice u/s 133(6) of the Act calling information fro m the sundry creditors asking them to provide confirmed copy of accounts, however, neither were notices received back undelivered nor was any information received from the persons to whom such notices were issued. Thereafter, in the absence of relevant information, the Assessing officer proceeded to calculate the gross profit @ 0.555% by taking gross profit percentages of assessment years 2015-16 and 2016-17 and worked out the gross profit for the year at Rs. 13,80,826/- by applying the same at turnover of Rs. 24,87,97,529/-. The Assessing officer also disallowed an amount of Rs. 15,000/- being depreciation on furniture which had been surrendered by the assessee at the time of survey. The Assessing officer also proceeded to disallow a lump sum amount of Rs.
20% out of the total expenses claimed which worked out to Rs.
1,82,935/-. Thereafter, factoring the commission income and the interest income, the net profit was computed at Rs. 8,10,173/- and the assessment was completed at Rs. 46,18,170/- after adding the income surrendered during the courses of survey amounting to Rs. 35,00,000/-
and income from house property of Rs. 3,08,000/-.
3.3 Subsequently, notice was issued u/s 263 of the Act proposing to invoke revisionary jurisdiction. The contents of the show cause notice are being reproduced herein under for ready reference:-
"Return declaring an income of Rs 3,09,320/- for the AY 2016-17 was filed by you on 15.10.2016. Subsequently your case was selected for compulsory scrutiny after serving you a notice u/s 143(2) of the ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 12 Income Tax Act (hereinafter referred as Act) on
04.09.2017 by DCIT circle Sirsa and later on your case was transferred to Ito ward-3, Sirsa who vide his order dated 28.12.2018 completed the assessment in your case at an income of Rs. 46,18,170/-.
2. The assessment record for the period under consideration was called upon and examined.
1. On such examination, it has been noticed that letters were issued by the AO to the creditors and the same were neither replied to nor returned back, therefore, it is clear that the creditors remained unverified.
2. During the assessment proceedings the AO had noticed that the mode of transportation of goods at the time of sale were fake even then the loss on sale of goods has been admitted by the A.O. The loss so claimed was required to be disallowed before computing the income. Further no verification of debtors amounting to Rs. 25.31 crore was done by A.O. and thus they remained unverified.
3. Perusal of the assessment order shows that the transportation receipts were fake, therefore, the purchases remained unverified for the year under consideration. Failure on the part of the AO to do so renders the assessment order erroneous in so far as it is prejudicial to the interest of revenue.
4. At the time of survey, it has been noticed that substantial amount have been invested out of undisclosed sources in construction of building by you. However, during the course of assessment proceedings, the Assessing Officer failed to take cognizance of the same and did not further investigate the cost of construction in a leased building.
ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 13 Failure on the part of the AO to examine the above issues by conducting any enquiries renders the assessment order erroneous in so far as it is prejudicial to the interest of revenue.
3. In view of the above, the assessment completed by the AO is, prima facie erroneous in so far as it is prejudicial to the interest of revenue. The same is, therefore, required to be suitably amended / modified u/s 263 of the Income Tax Act, 1961. You are, therefore, required to show cause as to why an appropriate order u/s 263(1) of the Act should not be passed. In this connection, you may send your written reply supporting documentary evidences on the email- id ([email protected]) or through e- proceedings by 23.03.2021. In case of no reply per above, it shall be assumed that you do not wish to say anything in the matter and the matter would be decided as per material on record without any further notice / intimation to you."
3.4 The assessee replied to the show cause notice but the reply of the assessee was found unsatisfactory by the Ld. PCIT. He proceeded to set aside the assessment by holding it as being erroneous so far as being prejudicial to the interest of Revenue and directed the Assessing officer to frame the assessment afresh.
3.5 Aggrieved by this order of the Ld. PCIT, the assessee has now approached this Tribunal challenging the impugned action u/s 263 of the Act by raising following grounds of appeal:-
ITA No.156/Chd/2021:1. That order dated 30.3.2021 u/s 263 of the Act by lea Tied Principal Commissioner of Income Tax, Rohtak ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 14 has been made without satisfying the statutory preconditions contained in the Act and is therefore without jurisdiction and thus, deserves to be quashed as such:
2. That the conclusion of learned Principal Commissioner of Income Tax that "the AQ has passed the order dated 29.12.2018 in a very casual manner without due diligence and without conducting any worthwhile enquiries. Therefore, it is very clear that assessment proceedings completed u/s 143(3) of the Act are erroneous so far as prejudicial to the interest of the revenue in terms of provisions of section 263 of the Act including Explanation 2 inserted by the Finance Act, 2015 w.e.f. 01.06.2015" is based on fundamental misconception of facts and provisions of law and thus not in accordance with law and, therefore untenable.
2.1 That the finding of learned Principal Commissioner of Income Tax that order of the learned Assessing Officer is erroneous and prejudicial to the interest of revenue on the following basis is factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations; and therefore unsustainable:
a) That since during the assessment proceedings the AO had issued letters to creditors and they were either returned back unserved or were not replied to which led to the conclusion by the AO himself that assessee had bogus creditors and therefore addition on this account was required to be made however no such addition was made by the AO;
b) That during the assessment proceedings itself it was established that the assessee has shown fake mode of transportation of goods, therefore the loss claimed by the assessee on sale was bogus one and was required to be disallowed and the AO was required to ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 15 disallow the losses on bogus sale however no such disallowance made by the AO on this account;
c) That since the assessee had shown debtors amounting to Rs. 25.31 crore however no inquiry was made to verify the same particularly when the glaring evidences of fake transport mode were available with the A.O;
d) That the AO conducted no enquiry regarding that the assessee had shown fake transportation receipt therefore the purchases remained unverified;
e) That the AO should enquire into the amount invested by the assessee in construction of building and if it is required to do so, refer the matter to valuation officer for valuation of property; and
f) That investment and sources should be inquired into by examining documentary evidences 2.2 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had made additions by rejecting the books of accounts u/s 145 of the Act and estimating the profits and further also made disallowance of expenses and therefore computed the net profit which estimation and computation have neither been rejected nor raised, in such circumstances the order of revision is perse misconceived, misplaced and untenable, more particularly when income surrendered in the course of survey on account of excess cash, unexplained investment and unsecured loans have been separately brought to tax then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 16 of revenue merely because the learned Pr.
Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible or unsustainable view.
2.3 That the learned Principal Commissioner of Income Tax has erred in holding that it is a case of "lack of enquiry" and, further failing to appreciate that alleged inadequate enquiry in the manner suggested without any independent evidence and, without any further enquiries by him cannot be a basis for assumption of jurisdiction u/s 263 of the Act.
2.4 That the learned Pr. Commissioner of Income Tax has failed to appreciate that once the learned Assessing Officer on examination of the facts on record and after making all possible enquiries had accepted claim of the appellant then such an order of assessment could not be regarded as erroneous in as much as prejudicial to the interest of revenue merely because the learned Pr. Commissioner of Income Tax had a different opinion and that too, without having established in any manner that, view adopted by the learned Assessing Officer was an impossible view.
2.5 That the learned Pr. Commissioner of Income Tax has also failed to appreciate that, u/s 263 of the Act, an order of assessment cannot be set-aside to simply to make further enquiries and thereafter pass fresh order of assessment and as such, impugned order is contrary to law and hence, unsustainable.
2.6 That the learned Principal Commissioner of Income Tax has failed to appreciate that surmises, conjecture and suspicion could not be a basis much less a valid basis to invoke section 263 of the Act.
ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 17 2.7 That while passing the order u/s 263 of the Act the learned Principal Commission of Income Tax cannot travel beyond the show cause notice and therefore findings and observation and also the material relied upon not referred in the show cause notice but made part of the order could neither in law and nor on fact be made a basis to assume jurisdiction u/s 263 of the Act; and thus order on this ground alone deserve to be quashed as such.
2.8 That various other adverse findings recorded in the notice u/s 263 of the Act and, also in impugned order are factually incorrect, vague, legally misconceived and untenable.
3. That the learned Principal Commissioner of Income Tax ias framed the impugned order without granting sufficient opportunity to the appellant and therefore the order made is illegal, invalid and, vitiated order Prayer : It is therefore prayed that, impugned order dated 30.3.2021 under section 263 of the Act be held to be without jurisdiction and, therefore be quashed and appeal of the appellant be allowed.
4.0 At the outset, the Ld. AR submitted that as per the notices received from the Registry of the Tribunal, both the appeals were time barred by 12 days. It was submitted by the Ld. AR that there was no delay in filing of these appeals in view of the judgement of the Hon'ble Apex Court in suo motu Writ Petition (Civil) No.3 of 2020, wherein, the period of limitation had been extended by taking judicial notice of the fact that the steep rise in Covid-19 virus cases was not limited to Delhi alone but had engulfed the entire nation and, therefore, keeping in mind this extraordinary situation, the limitation period had stood extended.
ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 18 4.1 Per contra, the Ld. CIT DR agreed with the contention of the Ld. AR in this regard.
4.2 Accordingly, we are of the view that there is no actual delay in filing the appeals and we admit the appeals for hearing.
5.0 The Ld. AR submitted that the facts of these two cases were identical to the facts of the six other assessees viz Sh. Rajeev Goyal, M/s Pardeep Ispat (P) Ltd, Priya Goyal, Ms Priyanka, Sh. Parshotam Goyal and Sh. Tarsem Goyal whose appeals before the ITAT were decided in favour of the assessees, wherein, orders passed u/s 263 of the Act were set aside in ITA Nos. 149/Chd/2021, 150/Chd/2021, 151/Chd/2021, 152/Chd/2021, 154/Chd/2021 and 157/Chd/2021 respectively vide common order dated 19.01.2022. It was submitted that these two assessees also belong to the same group of cases and the survey as well as the assessment orders the show cause notices issued u/s 263 and the orders passed u/s 263 of the Act were on identical facts and on identical reasoning and, therefore, orders passed by the ITAT in the above mentioned six case would apply mutatis mutandis in these cases as well.
5.1 It was further submitted that once the learned Pr. CIT has not disputed the action of the Assessing Officer vis-a-vis the rejection of books of accounts, the revenue could not rely on the rejected books of account for making the additions on account of trade creditors. It was submitted that since the income of the assessee has been estimated and ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 19 gross profit rate has been applied, no separate addition was called for either of the amounts incurred on the purchase or sundry creditors arising from those purchases by relying on the books of accounts that have been rejected u/s 145 of the Act. Reliance was placed on following judicial pronouncements:
i) 302 ITR 246 (P&H) CIT v. Aggarwal Engg. Co.
ii) 296 ITR 324 (P&H) CIT v. Santosh Jain
iii) 223 Taxman 24 (P&H) CIT v. Dulla Ram Labur Contractor
iv) ITA No. 418/Chd/2015 and 446/Chd/2015 dated 12.82015
CIT v. Hind Agro Industries
5.2 It was submitted by the Ld. AR that the books of accounts
having been rejected by the Assessing Officer and profit having been computed on the basis of estimation, as such the same books of accounts could not be relied upon for making any further addition to income in respect of purchases, sundry creditors. It was submitted that once the AO has made the additions of on account of income surrendered at the time of survey, then the alleged suppressed profits and investments have already been factored in such surrender and that the alleged unexplained creditors or investments have to be telescoped into the other resulting only in one addition.
5.3 It was also submitted that where two views are possible and the AO has taken a view with which the Ld. Pr. CIT does not agree, the said order cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the AO is ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 20 unsustainable in law. Reliance was placed on following judicial pronouncements:
i) 350 ITR 555 (Del) CIT v. DLF Ltd.
ii) 303 ITR 23 (P&H) CIT v. Munjal Casting
5.4 It was further submitted that an order u/s 263 of the Act
based on highly vague and cryptic observations does not satisfy the statutory pre-conditions contained in section 263 of the Act. Reliance was placed on the following judicial pronouncements:
i) 112 taxmann.com 321 (Del) ETT Ltd. v. CIT
ii) 120 taxmann.com 187 (Mad) CIT v. Padmavathi
iii) 275 Taxman 394 (Mad) CIT v. Vijay Kumar Kogani
iv) 117 taxmann.com 986 (Gau) Abdul Hamid v. ITO 5.5 The Ld. AR also submitted that the AO had passed the assessment order after making all possible enquiries and that it was not a case of "lack of enquiry" or "lack of investigation" wherein the Ld. Commissioner was empowered to exercise his revisional powers by calling for and examining the records of any proceedings under the Act and thereafter passing orders thereon. It was also submitted that a perusal of the impugned orders read with the show-cause notices would show that the Ld. Pr. CIT has proceeded on a fundamental factual misconception. It was submitted that the Assessing Officer had issued relevant questionnaires/notices wherein it was apparent that the issues, as raised by the Ld. Pr. CIT, have been duly considered by the AO. It ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 21 was submitted that, admittedly, and as also not disputed by Ld. Pr. CIT in the show cause notices and the orders of revision u/s 263 of the Act, that the AO had, on proper analysis of facts and material on record, come to a certain conclusion and had rejected the books of account u/s 145(3) of the Act and computed the income of the assessees by applying the Gross Profit ratio and had, thus, considered the facts of both the case in a proper perspective and had taken a plausible view while passing the assessment orders. Reliance was placed on the following judicial pronouncements:
i) 341 ITR 537 (Del) CIT v. Vikas Polymers
ii) 332 ITR 16 (Del) CIT v. Sunbeam Auto Ltd.
iii) 343 ITR 329 (Del) ITO v. D.G. Housing Projects Ltd.
5.6 It was submitted that section 263 does not permit revision of an order on the basis of suspicion, conjectures and surmises. Reliance was placed on the following judicial pronouncements:
i) 296 IR 238 (P&H) CIT v. Sohana Woolen Mills
ii) ITA No. 690/Chd/2010 A.Y. 2005-06 dated 9.3.2012 Sh.
Jaswinder Singh v. CIT
iii) ITA NO. 367/Chd/2012 AY 2007-08 dated 7.3.2013 Aarti International v. CIT 5.7 It was submitted by the Ld. AR that section 263 of the Act cannot be invoked to make a deeper enquiry. Reliance was placed on the judgment in the case of CIT v. Leisure Wear Exports Ltd. reported in 341 ITR 166. It was also submitted that for holding that the assessment order passed by the AO is not only prejudicial to the interest of revenue ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 22 but is also erroneous, the action of the Ld. Pr. CIT has to be preceded by some minimal enquiry. It was submitted that mere issuance of show cause notices and, thereafter, mechanical passing of the orders does not qualify as "minimal enquiry" u/s 263 of the Act. It was submitted that the burden is on the learned Principal Commissioner of Income Tax to establish that there is an 'error' in the order of assessment and that in absence of an 'error', invocation of section 263 of the Act was not in accordance with law. Reliance was placed on the judgment of Hon'ble Delhi High Court in the case of PCIT vs. Delhi Airport Metro Express (P) Ltd. reported in 398 ITR 8.
5.8 It was further submitted by the Ld. AR that Explanation 2 to section 263 of the Act does not authorise or give unfettered powers to the Ld. Commissioner to revise each and every order and, is not a substitute to the precondition u/s 263(1) of the Act. Reliance was placed on the following judgments:
i) 70 taxmann.com 227 (Mum) Narayan Tatu Rane v. ITO
ii) ITA No. 3391/Del/2018 Arun Kumar Garg HUF v. PCIT 5.9 It was, therefore, prayed that the impugned order made u/s 263 of the Act be quashed.
6.0 Per contra, the Ld. CIT DR vehemently supported the findings of the Ld. PCIT and he highlighted that the assessee had adopted a completely non-cooperative attitude during the course of ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 23 assessment proceedings. It was submitted that there was a complete lack of application of mind on behalf of the Assessing officer and that he had not inquired into the fake receipts pertaining to transportation and had also not undertaken any inquiry in respect of creditors or debtors even when they had not responded to the notices issue u/s 133(6) of the Act. It was pointed out by the Ld. DR that the Assessing officer had also not enquired into the aspect of investments made in the case of Shri Bhagwan Dass vis-a-vis leased property. He prayed for upholding the impugned order.
7.0 We have heard the rival submissions and have also carefully considered the record. We have also gone through the consolidated order passed by a co-ordinate Bench of ITAT Chandigarh in the case of assessees viz Sh. Rajeev Goyal, M/s Pardeep Ispat (P) Ltd, Priya Goyal, Ms Priyanka, Sh. Parshotam Goyal and Sh. Tarsem Goyal in ITA Nos. 149/Chd/2021, 150/Chd/2021, 151/Chd/2021, 152/Chd/2021, 154/Chd/2021 and 157/Chd/2021 respectively wherein the co-ordinate Bench has held the proceedings initiated u/s 263 of the Act as bad in law. We agree with the contention of the Ld. AR that the two captioned appeals are identical to the above mentioned six appeals in as much as all the assessees belong to the same group and the assessments were completed u/s 143(3) of the Act post survey proceedings u/s 133A of the Act. The assessment orders passed were also on identical lines with the Assessing Officer rejecting the books of account and estimated the profit by applying the Gross Profit ratio. The Show Cause Notices ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 24 issued by the Ld. PCIT were also identical and so were the orders passed u/s 263 of the Act. Therefore, on identical set of facts, we are inclined to follow the findings of the co-ordinate Bench of the ITAT Chandigarh in the case of Sh. Rajeev Goyal, M/s Pardeep Ispat (P) Ltd, Priya Goyal, Ms Priyanka, Sh. Parshotam Goyal and Sh. Tarsem Goyal (supra) wherein vide order dated 19.01.2022 it was held as under:-
"8.0 We have considered the rival submissions and have also perused the material on record. From the records produced before us, it is very much evident that the Assessing Officer had made detailed inquiries regarding the assessee's claim of purchases, sales, sundry debtors, sundry creditors and trading results declared by the assessee in the return of income. However, since on detailed enquiry, the AO rejected the trading results, he estimated the business profit of the assessee by applying the net profit rate declared in subsequent years. The Ld. Pr. CIT has neither disputed the rejection of books of accounts by the AO by invoking section 145 of the Act and nor has disputed the application of net profit rate declared in subsequent years. He has, however, held that based on the enquiries made, addition ought to have been made on account of creditors and disallowance of purchases claimed by the assessee. He has also directed the AO to conduct detailed inquiries regarding the purchases and sales made by the assessee by conducting third party verifications, examination of the creditors, etc. and after inquiries necessary additions to be made as per law. The order of the Ld. Pr. CIT on this count is, thus, cryptic, vague and contradictory. No effort has been made to spell out as to in what manner there was lack of enquiry by the AO in the order of assessment vis-a-vis the trading results declared by the assessee. The Assessing Officer had made adequate inquiries as is evident from the order of assessment as well as from the replies furnished (which have been placed in the Paper Book filed by the assessee before us). Thus, in view of the documentary evidences, as called for and examined by the Assessing ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 25 Officer, it is very much evident that the Assessing Officer had duly applied his mind to the issue of trading results and it was only thereafter that he had estimated income of the assessee. As far as the issue of investment in construction of house is concerned, the same is apparently misconceived, as it is not arising from assessment records. As far addition on account of fixed assets is concerned, the same stands separately added as part of the income declared during the course of survey by the assessee. Therefore, we can safely conclude that proper inquiries had been made by the Assessing Officer while accepting the claim of the assessee and, therefore, the contention of the Ld. Pr. CIT that no inquiry was made by the Assessing Officer vis-a-vis trading results or addition in fixed assets is factually incorrect. It is not the case where no inquiry has been made by the Assessing Officer. Merely because the Ld. Pr. CIT felt that further inquiry should have been made, it does not make the order of the Assessing Officer erroneous and prejudicial to the interest of the revenue.
8.1 We also note that the Ld. Pr. CIT has merely remitted the matter back to the Assessing Officer without making any inquiry himself. It is apparent that no independent inquiries have been made by the Ld. Pr. CIT although it was incumbent upon him to make such inquiry so as to reach the impugned conclusion that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue.
8.2 Moreover, on facts, rejection of trading results and application of net profit rate by the Assessing Officer is a possible view and, not an unsustainable view and, therefore, even otherwise, invocation of section 263 is not in accordance with law. In the case of CIT vs. DLF Ltd. reported in 350 ITR 555, the Hon'ble Delhi High Court, applying the mandate of the Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd. vs. CIT (reported in 243 ITR
83) and CIT vs. Max India Ltd. (reported in 295 ITR 282) has held that it is not a mere prejudicial to revenue act or a mere erroneous view that can be revised but there must be an element of un-sustainability which clothes the Commissioner with the jurisdiction u/s 263 of the Act. Also ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 26 in the case of ITO vs. D.G. Housing Project Ltd reported in 343 ITR 329, it was held by the Hon'ble Delhi High Court that in case of inadequate enquiry it is incumbent for the Commissioner to conduct enquiry and not merely remit the matter to the Assessing Officer without conducting any verification/enquiry. In the case of PCIT vs. Delhi Airport Metro Express (P) Ltd. reported in 398 ITR 8 (Del) it has been held as under:
"9. It is seen, in the order dated March 30, 2016, the Principal Commissioner of Income-tax has proceeded by setting out the contents of the show-cause notice and the contents of the reply given by the assessee. It appears that no inquiry, as such, was undertaken by the Principal Commissioner of Income-tax to come to the conclusion that the original assessment order was erroneous and prejudicial to the interests of the Revenue.
10. For the purposes of exercising jurisdiction under section 263 of the Act, the conclusion that the order of the Assessing Officer is erroneous and prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. In fact, if the Principal Commissioner of Income-tax is of the view that the Assessing Officer did not undertake any inquiry, it becomes incumbent on the Principal Commissioner of Income-tax to conduct such inquiry. All that the Principal Commissioner of Income-tax has done in the impugned order is to refer to the circular of the Central Board of Direct Taxes and conclude that "in the case of the assessee-company, the Assessing Officer was duty-bound to calculate and allow depreciation on the BOT in conformity of the Central Board of Direct Taxes Circular No. 9 of 2014 but the Assessing Officer failed to do so. Therefore, the order of the Assessing Officer is erroneous insofar as prejudicial to the interests of the Revenue".
11. In the considered view of the court, this can hardly constitute the reasons required to be given by the Principal Commissioner of Income-tax to justify the exercise of jurisdiction under section 263 of the Act. In the context of the present case if, as urged by the Revenue, the assessee has wrongly claimed depreciation on assets like land and building, it was ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 27 incumbent upon the Principal Commissioner of Income tax to undertake an inquiry as regards which of the assets were purchased and installed by the assessee out of its own funds during the assessment year in question and, which were those assets that were handedover to it by the DMRC. That basic exercise of determining to what extent the depreciation was claimed in excess has not been undertaken by the Principal Commissioner of Income-tax.
12. Mr. Asheesh Jain then volunteered that the Principal Commissioner of Income-tax had exercised the second option available to him under section 263(1) of the Act by sending the entire matter back to the Assessing Officer for a fresh assessment. That option, in the considered view of the court, can be exercised only after the Principal Commissioner of Income-tax undertakes an inquiry himself in the manner indicated hereinbefore. That is missing in the present case.
13. Therefore, the court is of the view that the Income tax Appellate Tribunal was not in error in setting aside the impugned order of the Principal Commissioner of Income-tax under section 263 of the Act. No substantial question of law arises."
8.3 In the case of M/s Arun Kumar Garg HUF v. Pr. CIT in ITA NO. 3391/Del/2018 for Assessment year 2014-15 dated 8.1.2019 it has been held by the Delhi Bench of the ITAT as under:
"5.4 In the present case, it is apparent that the Ld. Pr. CIT, unmindful of the inquiries conducted by the Assessing Officer during the course of assessment proceedings and the submissions made by the assessee in response to notice u/s 263 of the Act, has merely observed that the assessment order was passed without making proper inquiries and it is a matter of record that the Ld. Pr.CIT has himself not undertaken any inquiry to reach a conclusion that the order is erroneous and prejudicial to the interest of the revenue.
5.5 We may further add that there is a difference between lack of inquiry and inadequate inquiry and it is for the Assessing Officer to decide the extent of inquiry to be made and it is his satisfaction which is required under the law. The Hon'ble Delhi High Court ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 28 in the case of Commissioner of Income Tax vs. Sunbeam Auto Ltd reported in (2010) reported in 332 ITR 167(Delhi) has held that if there was any inquiry, even inadequate, that would by itself not give occasion to the Commissioner to pass order u/s 263 of the Act merely because the Commissioner had a different opinion in the matter. It is a settled law that the Ld. Pr.CIT cannot pass the order u/s 263 on the ground that thorough inquiry should have been made by the Assessing Officer.
5.6 Although, there has been an amendment in the provisions of section 263 of the Act by which Explanation 2 has been inserted w.e.f. 1.6.2015 but the same does not give unfettered powers to the Commissioner to assume jurisdiction under section 263 to revise every order of the Assessing Officer to re- examine the issues already examined during the course of assessment proceedings. The Mumbai ITAT Bench has dealt with Explanation 2 as inserted by Finance Act, 2015 in the case of Narayan Tatu Rane vs. ITO reported in (2016) 70 taxman.com 227 to hold that the said Explanation cannot be said to have overridden the liability as interpreted by Hon'ble Delhi High Court, according to which the Commissioner has to conduct the inquiry and verification to establish and show that the assessment order was unsustainable in law. The ITAT Mumbai Bench has further held that the intention of the legislature could not have been to enable the CIT to find fault with each and every assessment order without conducting any inquiry or verification in order to establish that the assessment order is not sustainable in law, since such an interpretation will lead to unending litigation and there would not be any point of finality in the legal proceedings. The ITAT Mumbai Bench of the Tribunal went on to hold that the opinion of the Commissioner referred to in section 263 of the Act has to be understood as legal and judicious opinion and not arbitrary opinion.
5.7 We also note that it has been held by the ITAT Mumbai Bench in the case of M/s Indus Best Hospitality & Realtors Pvt. Ltd. in ITA No. 3125/Mum/2017 vide order dated 19.01.2018 that Explanation 2 to Section 263 of the Act introduced by Finance Act, 2015 is retrospective in nature. Since the year under consideration is AY 2014-15, we are afraid ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 29 that Explanation 2 to section 263 will not come to the aid of the department in this case. Similar view has been taken by the various Coordinate Benches of the ITAT in the following cases:
(a) AV Industries v. ACIT [ITA No. 3469/Mum/2010] dated 06.11.2015
(b) Metacaps Engineering and Mahendra Constructions Co. (JV) v. CIT [ITA No. 2895/Mum/2014] dated 11.09.2017
(c) Reliance Money Infrastructure Ltd. v. PCIT [ITA No. 3259/Mum/2017] dated 06.10.2017.
(d) Shantikrupa Estate Pvt. Ltd. [ITA No. 1252/Ahd/2015] dated 09.09.2016
(e) Amira Pure Foods Pvt. Ltd. v. PCIT [ITA No. 451/Del/2017] dated 29.11.2017.
5.8 Accordingly, respectfully following the ratio of the various judgments as referred to in the preceding paragraphs, we have no hesitation in holding that the Ld. Pr.CIT had wrongly invoked the revisionary powers u/s 263 of the Act and we have no option but to quash the same. It is so ordered accordingly."
8.4 Accordingly, respectfully following the ratio of the various judgments as referred to in the preceding paragraphs, we have no hesitation in holding that the Ld. Pr. CIT has wrongly invoked the revisionary powers u/s 263 of the Act vis-a-vis the trading results declared by assessee and we have no option but to hold the same as being bad in law."
7. The above findings reproduced above squarely cover the cases of both the assessees in the present appeals and, therefore, on identical set of facts and respectfully following the orders of the co-ordinate Bench as reproduced above in the group cases, we hold the proceedings initiated u/s 263 of the Act as bad in law and quash the same.
ITA No. 155 & 156-Chd-2021 -
M/s B.D Ispat (P) Ltd. & Sh. Bhagwan Dass, Sirsa 30 8.0 In the final result, the appeals of both the assessees are allowed.
Order pronounced on 18.05.2022.
Sd/- Sd/- (N. K. SAINI) (SUDHANSHU SRIVASTAVA) Vice President Judicial Member Dated : 18.05.2022 "आर.के."
आदे शक त+ल,पअ-े,षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकरआयु.त/ CIT
4. आयकरआयु.त (अपील)/ The CIT(A)
5. ,वभागीय त न1ध, आयकरअपील$यआ1धकरण, च3डीगढ़/ DR, ITAT, CHANDIGARH
6. गाडफाईल/ Guard File आदे शानस ु ार/ By order, सहायकपंजीकार/ Assistant Registrar