Income Tax Appellate Tribunal - Chandigarh
M/S Worldwide Immigration Consultancy ... vs Pr. Cit-1, Chandigarh on 13 November, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, "बी ", 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 VI SI O N B E N C H , 'B ' , C H AND I G AR H
ी संजय गग , या यक सद य एवं ीमती अ नपण ू ा ग'ु ता, लेखा सद य
B E F OR E S HR I S A N J A Y GA R G, J U D I C I A L M E MB E R A N D
M s . A N N A P U R N A G U P T A , A C CO U N T A N T M E MB E R
आयकर अपील सं./ ITA No. 7 7 2 / C H D / 2 0 1 7
नधा रण वष / Assessment Year : 2012-13
M/s Worldwide Immigration बनाम The Pr. CIT-1,
Consultancy Pvt Ltd., Chandigarh
SCO 2415-16,
Sector 22-C,
Chandigarh
थायी लेखा सं./PAN No: AAACW1564A
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by : Shri Tej Mohan Singh, Advocate
राज व क ओर से/ Revenue by : Shri. G.S. Phani Kishore, CIT DR
सन
ु वाई क तार%ख/Date of Hearing : 31.10.2019
उदघोषणा क तार%ख/Date of Pronouncement : 13.11.2019
आदे श/Order
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 28.08.2014 of the Pr. Commissioner of Income Tax, Chandigarh [hereinafter referred to as 'PCIT'] agitating the action of the PCIT in passing the impugned order u/s 263 of the I.T. Act exercising his revision jurisdiction.
2. The brief facts relating to the issue are that the Ld. PCIT noticed that the assessee had debited Rs. 10 lacs as 'Keyman Insurance Policy' ITA No. 772/Chd/2017- M/s Worldwide Immigration Consultancy Services Pvt Ltd,. Chandigarh 2 and that the said claim of expenditure was allowed without verification. On being asked to explain in this respect, the assessee explained in this respect that the assessee company took a unit linked keyman insurance policy from Max Life Insurance. As per the insurance premium receipt it has been stated by Max Life Insurance that policy has been endorsed as an employer / employee policy and accordingly premium paid is allowed as business expenditure in the hands of employer. It is immaterial weather the policy is a term policy or a unit linked policy. For the purposes of section 10(10D) of the Act, 'keyman Insurance policy' means a life insurance policy taken by a person on the life o f another person who is or was the employee of the first mentioned person or is or was connected in any manner whatsoever with the business of the first mentioned person.
However, the Ld. PCIT observed that the Insurance Regulatory Development Authority (IRDA) has no role to play in the interpretation of statutory provisions of Income Tax Act. He observed that the Assessing Officer has not examined the issue of allowance of expenditure incurred on keyman Insurance policy. He, accordingly set aside the order of the Assessing Officer and remanded the matter to the file of the Assessing Officer to pass the order afresh order in accordance with law.
3. Aggrieved by the said order of the Ld. PCIT, the assessee has ITA No. 772/Chd/2017- M/s Worldwide Immigration Consultancy Services Pvt Ltd,. Chandigarh 3 come in appeal before us. The Ld. Counsel for the assessee has submitted that the Ld. PCIT has failed to point out any error in the assessment order which makes it prejudicial to the interest of Revenue.
4. The Ld. CIT DR, on the other hand, has filed the following written submissions vide letter dated 29.10.2019:-
"Sub:- ITA No.772/Chd/2017-M/s World Wide Immigration Consultants-Regarding-
The case is listed for hearing on 29.11.207 In the case the Learned Assessing Officer disallowed an amount of Rs.10 Lakhs debited towards Keyman Insurance mechanically and without application of mind and the Learned CIT i has passed a speaking order.
2. Case laws in support of the fact that the Ld CIT has validly initiated the proceedings u/s 263 of the Act (copies enclosed for reference):
a. Assam Tea House [2012] 25 taxmann.com 93 (P&H)- Relevant part of the order is extracted below:
".....The Commissioner could have proceeded under section 263 of The Act if the Assessing Officer had made assessment without application of mind. The Commissioner held that as per the order sheet no record was produced while in the order a contrary statement was made. The order of the Assessing Officer did not show the verification of closing stock, purchases and transportation and other items mentioned above. These reasons were valid reasons for exercise of power under section 263 of the Act. The Tribunal held that the Assessing Officer was not required to discuss these aspects in its order and that the Assessee had explanation to the points made by the Commissioner. This approach of the Tribunal cannot be sustained. "[Para 10].
".....In Malabar's case [2000] 243ITR 83 (SC), it was observed (page
87), it was observed (page 87 and 88):ITA No. 772/Chd/2017-
M/s Worldwide Immigration Consultancy Services Pvt Ltd,. Chandigarh 4 "The phrase 'prejudicial to the interests of the Revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax.
In the instant case, the Commissioner noted that the Income-tax Officer passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the Income-tax Officer failed to apply his mind to the case in all perspective and the order passed by him was erroneous. It appears that the resolution passed by the board of the appellant-company was not placed before the Assessing Officer. Thus, there was no material to support the claim of the appellant that the said amount represented compensation for loss of agricultural income. He accepted the entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry, in these facts the conclusion that the order of the Income-tax Officer was erroneous is irresistible. We are, therefore, of the opinion that the High Court ban rightly held that the exercise of the jurisdiction by the Commissioner under section 263(1) was justified."[ Para 12] b. Bassera Realtors P Ltd vs CIT - 55 taxmann.com 327 (ITAT, Chandigarh) - Relevant part of the order is extracted below:
".....it is trite law that if proper enquiry has not been made then the assessment order passed by him has to be considered erroneous and prejudicial to the interest of Revenue. We have already referred to the decision of Hon'ble Delhi High Court in the case of Gee Vee Enterprises (supra). In this case, it is clearly held that if proper enquiries are not made then the assessment order would be erroneous......" [Para 52] " In view of the above discussion, it becomes totally clear that Assessing Officer has not made proper enquiries and therefore, assessment order is erroneous and prejudicial to the interest of Revenue which has been correctly revised by the Ld. Commissioner by passing an order u/s 263. Accordingly we ITA No. 772/Chd/2017- M/s Worldwide Immigration Consultancy Services Pvt Ltd,. Chandigarh 5 uphold the same. In the result, the appeal is dismissed." [Para 53] c. CIT vs Rippen Ahuja - 49 taxmann.com 261 (P & H) - Relevant part of the order is extracted below:
"........It is gathered from the language used in the provisions ibid that the Commissioner is empowered to exercise jurisdiction where he is satisfied that the order of the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The object of the aforesaid provision is to correct an order passed by the Assessing Officer which is erroneous and prejudicial to the interests of the Revenue as the Department has no remedy of appeal against the assessment order. Whether a revisional order fulfills the requirements of section 263 of the Act, depends upon facts of each case. "[Para 12] d. Gee Vee Enterprises 99 ITR 375 (Delhi) - Relevant part of the order is extracted below:
"... The reason is obvious. The position and function of the Income-tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income- Tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of the return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income-Tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is ITA No. 772/Chd/2017- M/s Worldwide Immigration Consultancy Services Pvt Ltd,. Chandigarh 6 anything wrong with the order if all the facts sated therein are assumed to be correct."
e. Vodafone South Ltd. [2015] 61 taxmann.com 108 (Chandigarh-Trib.) As there is no right to appeal available to the revenue from the order of assessment passed by Assessing Officer and thus revisionary powers have been given to the Commissioner and such power were held to be of wide amplitude by the Supreme Court in the case of CIT v. Shree Manjunatheshware Packing Products & Comphor Works [1998] 231ITR 53/96 Taxmann 1. Therefore, normally when Assessing Officer has not made any enquiry on a particular issue, then such order has to be construed as erroneous and prejudicial to the interest of revenue. f. Subhlakshmi Vanijya (P.) Ltd s (Kolkata-Trib.) Where Assessing Officer had mechanically accepted returned income without scrutinizing or reffering to any material examined by him, revision under section 263 would be justified.
3. In view of the above it is respectfully submitted that the Pr.CIT's assumption of jurisdiction u/s 263 is correct and as per law. It is further submitted that the appeal filed by the assessee may please be considered for dismissal.
4. The above submission may please be taken on record. Yours faithfully, Sd/-
(G.S. Phani Kishore) Commissioner of Income Tax (DR-1, ITAT, Chandigarh"
5. We have heard the rival contentions of both the Ld. Representatives of the parties and have gone through the record. To arrive at the correct conclusion of the case, we deem it necessary to ITA No. 772/Chd/2017- M/s Worldwide Immigration Consultancy Services Pvt Ltd,. Chandigarh 7 reproduce the relevant provisions of section 263 of the Act.
"Section 263(1) in The Income- Tax Act:
(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the 2 Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he, may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. ........."
6. The sum and substance of the above reproduced section 263(1) can be summarized in the following points:
1) The Commissioner may call for and examine the record of any proceeding under the Act;
2) If he considers that the order passed by the AO is
(i) erroneous; and
(ii) is prejudicial to the interest of Revenue;
3) He has to give an opportunity of hearing in this respect to the assessee; and
4) He has to make or cause to make such enquiry as he deems necessary;
5) He may pass such order thereon as the circumstances of the
case justify including,
(i) an order enhancing or,
(ii) modifying the assessment or
(iii) cancelling the assessment and directing a fresh
assessment.
7. In our view, as per the provisions of section 263 as enumerated above, after getting the explanation from the assessee, the Ld. CIT was ITA No. 772/Chd/2017- M/s Worldwide Immigration Consultancy Services Pvt Ltd,. Chandigarh 8 supposed to examine the contention of the assessee. Before passing an order of modifying, enhancing or cancelling the assessment, he was supposed either to himself make or cause to make such an enquiry as he deems necessary. The words "as he deems necessary", in our view, do not mean that the Ld. CIT is left with a choice either to make or not to make an enquiry. As per the relevant provisions of section 263, it was incumbent upon the Ld. CIT to make or cause to make an enquiry. So far as the words "as he deems necessary" are concerned, the said words suggest that the enquiries which are necessary to form a view as to whether the order of the AO is erroneous and prejudicial to the interest of Revenue or not? The Ld. CIT had asked the assessee about the genuineness/validity of various claims to which the assessee had given a detailed reply. Once a point wise reply was given by the assessee, then a duty was cast upon the Ld. CIT to examine the reply of the assessee and form a prima-facie opinion as to whether the order of the AO was erroneous so far as it was prejudicial to the interest of Revenue.
8. A perusal of the impugned order of the Ld. PCIT reveals that on being asked to explain about the deduction of expenditure claimed on keyman insurance, the assessee duly explained that the assessee obtained the insurance policy for its employees and that the same was business expenditure of the assessee. The Ld. PCIT without considering the submissions of the assessee and even without giving any prima-facie finding that expenditure incurred by the assessee on the keyman ITA No. 772/Chd/2017- M/s Worldwide Immigration Consultancy Services Pvt Ltd,. Chandigarh 9 insurance policy of its employees was not admissible expenditure has set aside the order of the Assessing Officer merely on the ground that the Assessing Officer had not discussed about the said allowance.
In our view, the action of the Ld. PCIT without considering the explanation given by the assessee and without pointing out as to what other enquires were required to be made by the Assessing Officer in the facts and circumstances of the case, has set aside the order of the Assessing Officer and remanded the matter back to the file of the Assessing Officer for passing of the assessment order afresh. The above action of the Ld. PCIT cannot be held to be justified. The Ld. PCIT has failed to pin-point as to how the assessment order was erroneous and prejudicial to the interest of Revenue without pointing out as to why the claim of the assessee of the aforesaid expenditure was not allowable and as to what further investigations were required to be carried out. Merely because the Assessing Officer has not discussed in detail is no ground to hold that the order of the Assessing Officer is erroneous and prejudicial to the interest of Revenue especially when the claim of expenditure by the assessee apparently is an allowable expenditure.
9. It is pertinent to mention here that a deeming fiction has been created in section 263 of the Act by the amendment made by Finance Act, 2015 w.e.f. 01.06.15 wherein it has been mentioned that where the Commissioner is of the opinion that the AO had passed the order ITA No. 772/Chd/2017- M/s Worldwide Immigration Consultancy Services Pvt Ltd,. Chandigarh 10 without making enquiries or a claim has been allowed without enquiring into the claim or that the same is not in accordance with any order or direction or instruction issued by CBDT, that shall be deemed to be erroneous in so far as its prejudicial to the interest of Revenue. The said deeming provisions, in our view, are not applicable for the assessment year under consideration. Even the Coordinate Mumbai Bench of the Tribunal in the case of "Narayan Tatu Rane vs Income Tax Officer" (2016) 70 taxman.com 227 (Mum) has observed as under:-
"Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. This provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Commissioner cannot be taken as final one, without scrutinizing the nature of enquiry or verification carried out by the AO vis-à-vis its reasonableness in the facts and circumstances of the case. Hence, what is relevant for clause (a) of Explanation 2 to sec. 263 is whether the AO has passed the order after carrying our enquiries or verification, which a reasonable and prudent officer would have carried out or not. It does not authorise or give unfettered powers to the Commissioner to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made. It is the responsibility of the Ld Commissioner to show that the enquiries or verification conducted by the AO was not in accordance with the enquires or verification that would have been carried out by a prudent officer."ITA No. 772/Chd/2017-
M/s Worldwide Immigration Consultancy Services Pvt Ltd,. Chandigarh 11
10. We have also gone through the written submissions of the Ld. CIT DR. However, it mainly consist of the certain case laws, however, in our humble view, the case laws cited by the Ld. DR are not applicable to the facts and circumstances of the present case.
In view of the above discussion, the impugned order of the PCIT is not sustainable and the same is hereby quashed.
The appeal of the assessee stands allowed.
Order pronounced in the Open Court on 13.11.2019.
Sd/- Sd/-
(अ नपण
ू ा ग'ु ता / ANNAPURNA GUPTA) (संजय गग / SANJAY GARG)
लेखा सद य/ Accountant Member या यक सद य/ Judicial Member
Dated : 13.11.2019
"आर.के."
आदे श क त,ल-प अ.े-षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु/त/ CIT
4. आयकर आयु/त (अपील)/ The CIT(A)
5. -वभागीय त न2ध, आयकर अपील%य आ2धकरण, च4डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायक पंजीकार/ Assistant Registrar ITA No. 772/Chd/2017- M/s Worldwide Immigration Consultancy Services Pvt Ltd,. Chandigarh 12