Income Tax Appellate Tribunal - Hyderabad
M/S Vinayaka Agencies,, Hyderabad vs Assessee on 4 September, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCHES "B" (SMC) : HYDERABAD
BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER
ITA.No.1080/Hyd/2014
Assessment Year 2009-2010
M/s. Vinayaka Agencies, vs. The Income Tax Officer
Yellandu, Khammam Ward-1
District. Kothagudem
PAN AABFV0887H
(Appellant) (Respondent)
For Assessee : Mr. M. Chandramouleswara Rao
For Revenue : Smt. S. Narasamma
Date of Hearing : 14.08.2015
Date of Pronouncement : 04.09.2015
ORDER
This appeal filed by the assessee is directed against the Order of Ld. CIT, Vijayawada dated 28.03.2014 passed under section 263 of the I.T. Act, 1961.
2. The assessee in the present case is an individual who is engaged in the business of dealing in Nirma Products under the name and style of his proprietary concern M/s. Vinayaka Agencies. The return of income for the year under consideration was filed by him on 27.09.2009 declaring total income of Rs.41,170. In the assessment completed under section 143(3) vide order dated 28.04.2011, the total income of the assessee was determined by the A.O. at Rs.1,67,846 after making 2 ITA.No.1080/Hyd/2014 M/s. Vinayaka Agencies, Yellandu Khammam District.
addition of Rs.1,26,136 on account of disallowance of expenses claimed by the assessee to the extent of 20%. The record of the said assessment came to be examined by the Ld. CIT and on such examination, he was of the opinion that the assessment order passed by the A.O. without making enquiries on various issues was erroneous as well as prejudicial to the interests of the Revenue. He therefore, issued a notice under section 263 pointing out such issues and requiring the assessee to show cause as to why the assessment order passed by the A.O. under section 143(3) should not be revised by exercising the powers conferred under section 263. In response to the said notice, a detailed reply was filed by the assessee offering his explanation in support of each and every issue raised by the Ld. CIT in the notice issued under section 263. The said explanation of the assessee, however, was not found acceptable by the Ld. CIT. According to him, various issues involved in the case of the assessee as pointed out by him in the notice issued under section 263 had not been looked into or enquired by the A.O. while completing the assessment under section 143(3) and such non-consideration of these issues made the assessment order passed by the A.O. under section 143(3) erroneous as well as prejudicial to the interests of the Revenue. Accordingly, he passed an order under section 263 setting aside the order passed by the A.O. under section 143(3) with a direction to the A.O. to re-do the assessment denovo on the issues pointed out by 3 ITA.No.1080/Hyd/2014 M/s. Vinayaka Agencies, Yellandu Khammam District.
him in accordance with law, after affording a reasonable opportunity of being heard to the assessee. Aggrieved by the same, the assessee has preferred this appeal before the Tribunal.
3. The Ld. Counsel for the assessee, at the outset, took us through the impugned order passed by the Ld. CIT under section 263 to point out that a detailed reply was filed by the assessee offering his explanation in respect of each and every issue raised by the Ld. CIT in the notice issued under section 263. He also prepared and furnished a tabular statement giving the details of explanation offered by the assessee in respect of each and every issue raised by the Ld. CIT in the notice issued under section 263 as under :
Issues raised by the Ld. CIT Submissions and in his Section 263 explanations furnished by proceedings. the Assessee.
Issue No.1 : ASSESSEE'S REPLY : "As per the balance sheet as The Assessee has filed a on as on 31.03.2008, the fixed assets schedule and fixed assets are shown at depreciation statement and Rs.15,75,680/- and also the tax audit report depreciation on the Plant & along with the IT Return. Machinery at Rs.49,252/- Further, the Assessee also and the WDV was shown at furnished the same Rs.6,07,447/-. In the documents before the CIT Balance Sheet as on and clarified that, the details 31.03.2009, the opening of fixed assets, opening and WDV was shown at closing balances, additions Rs.6,07,447/-, fixed assets to and deletions there from at Rs.12,75,680/- as are also part of the records against the closing WDV of and submitted that, there is 4 ITA.No.1080/Hyd/2014
M/s. Vinayaka Agencies, Yellandu Khammam District.
Rs.2,61,330/- and a sum of no error in the assessment Rs.3,00,000/- was deducted order nor in the accounts. It as deletions made to the was further I submitted that, fixed assets and claimed there is no error in the IT depreciation for computation or in the IT Rs.3,07,447/- at return. The opening and Rs.46,117/-. The AO did not closing balances of Fixed call for the relevant details assets for the earlier years and examined and accepted is available on records. The them without verification". Ld. CIT could not point out the error in the amount of depreciation claimed by the assessee.
The Ld. CIT, without pointing
out the details of the error
and the prejudice caused to
the Revenue, has
erroneously ordered
Revision of assessment
order on this issue. Kindly
refer to Page Nos.01 to 02 of
the Paper Book.
ISSUE NO.2: ASSESSEE'S REPLY:
"6.1 As per P & L a/c, the The Assessee (Appellant)
gross profit for the A.Y. explained to the Ld. CIT
2008-09 is at that, this issue has been
Rs.37,08,700/- on a enquired into and examined
turnover of Rs.3,16,47,667/- by the A.O. during the
which works out to 11.72%. assessment proceedings.
whereas the gross profit for The allegation made by the
the A.Y. 2009-10 is at Ld. CIT that the issue of
Rs.36,54,504/- on a "Debit Notes" from M/s.
turnover of Rs.3,38,03,515/- Nirma Limited has not been
(i.e., @ 10.80%). The A.O. examined and verified by
without calling for the the AO and without due
reasons for the decrease in examination, accepted the
the gross profit by way of trade results, is devoid of
debit notes worth any merits and contrary to
Rs.3,31,974/- and credit the facts available on record.
5
ITA.No.1080/Hyd/2014
M/s. Vinayaka Agencies, Yellandu Khammam District.
notes of Rs.1,30,619/- and The Assessee furnished due examination, accepted before the Ld. CIT, the copies the trade results." of the debit notes and credit notes and also copy of the submissions made, before the Assessing Officer, regarding the marginal fall in the profits and issue of debit notes by M/s. Nirma as one of the reasons for the fall in the profit. The Assessee, firm is a distributor for the "Nirma Products", The copy of the submissions made in this regard before the AO during the assessment proceedings is place, at Page No.105 - 1- 106 of the paper book.
The letter submitted to AO also contained the detailed reasons for the slight fall in the profits. Issues examined thoroughly by the A.O. cannot be subjected revision u/s.263. Low profit cannot be the reason for ordering revision u/s.263.
ISSUE NO.3: ASSESSEE'S REPLY: In the Balance Sheet as on The Assessee submitted 31/03/2008, the unsecured both before the Assessing loan creditors was shown at Officer during the Rs.30,60,468/-, whereas Assessment proceedings the same has come down to and also to the Ld, CIT, Rs.8,66,093/- in the during his Sec.263 Balance Sheet for the year proceedings, that the ending 31/03/2009. The AO unsecured loan credits to the did not call for and extent of the amount examined the relevant outstanding in the name of 6 ITA.No.1080/Hyd/2014
M/s. Vinayaka Agencies, Yellandu Khammam District.
payment details and the M/s. Syam Sudar Rice scope of application of Depot, which is a provisions of Sec.269T to partnership firm and which such payments, if any." partners are also partners in the present Assessee firm, has been transferred by way of book entries to the individual capital accounts of the partners on the dissolution of the partnership firm. Further, it was also explained to both the authorities that the amounts of unsecured loan has been set off against the debit balances (loan and advances) available in the partners individual accounts. It was explain to the authorities that, the reduction in the amount of unsecured loans is due to the set off of the same against the loans and advances and shown to them that, there is reduction in the amounts of unsecured loans as well as in the "loans and advances" on both the side of the balance of the Assessee firm. It was also submitted that, since the unsecured loans was transferred by way of book entries and repayments were not paid in cash, the question of invoking of Sec.269T does not arise.
Documentary evidences were furnished to the AO and also to the CIT for their perusal and records. The Ld. 7 ITA.No.1080/Hyd/2014 M/s. Vinayaka Agencies, Yellandu Khammam District.
CIT without paying any attention to the submissions made, explanations offered and the material produced, has brushed aside and the same and without assigning any reason are offering any material to support his point of view and treated the assessment order as erroneous and prejudicial to the interest of the Revenue.
The relevant documentary evidence is furnished at Page Nos. 19-21 in the paper book.
ISSUE NO.4 : ASSESSEE'S REPLY:
"In the balance sheet as on The Assessee has explained 31.03.2009, sundry creditor to the Ld. CIT that, there is in the name of M/s. Nirma no requirement for preparing Ltd., Ahmedabad at reconciliation statement in Rs.33,27,419/- was not the case of M/s. Nirma reconciled with the Limited, has the account of assessee's account copy in Nirma in the books of the books of the said accounts of the Assessee creditor." firm and the ledger account of the assessee firm in the books of M/s. Nirma Limited are showing the same figure and there is no difference between the two sets of accounts. Ledger extracts are furnished to the Ld. CIT who has brushed aside the same without assigning any reasons and treated the assessment order as erroneous on this issue. The relevant ledger extracts are placed in the Paper Book for 8 ITA.No.1080/Hyd/2014 M/s. Vinayaka Agencies, Yellandu Khammam District.
your honours ready reference at Page No.05-18.
The account balance is Rs.33,27,419.22/- debit in M/s. Nirma Ltd books of accounts and the same amount is credit in the ledger account of M/s.
Nirma in the books of the Assessee firm.
ISSUE No.5 : ASSESSEE'S REPLY :
"In the Balance Sheet as on The assessee has explained 31.03.2008, the secured to the Ld. CIT that, the issue loans were at of secured loans has been Rs.14,75,676/- whereas as examined by the A.O. and per the balance as on has called for the account 31.03.2009, the same were copies of the banks and at Rs.16,14,455/-. Further, verified the same (Please on verification of the details, refer to Page No.105-106 of a sum of Rs.2,12,845/- was the Paper Book). repaid to Kotak Mahindra Bank Ltd., Vijayawada. The The Assessee submitted the A.O. did not call and following reply to the Ld. CIT obtained the relevant details during 263 proceedings. and did not examine the same." "The Secured loan due to Kotak Mahindra Bank repaid to the tune of Rs.2,12,845/- (Rs.2,86,500 EMI-Interest Rs.73,665) through account payee cheques drawn on State Bank of Hyderabad. State Bank of Hyderabad account copy and Kotak Mahindra Loan account copy have been duly submitted during the course of assessment proceedings. the AO has verified the same with the 9 ITA.No.1080/Hyd/2014 M/s. Vinayaka Agencies, Yellandu Khammam District.
relevant information. No deficiency in this matter.
Hence, the order cannot be considered as erroneous on this point."
The Ld. Commissioner of Income Tax simply brushed aside the above facts and explanation offered by the Assessee and stated that, the above reply did not covered the deficiencies pointed out in this respect.
Except stating this, he has not brought out any deficiency/errors with respect to this issue either in the show cause notice or in the Sec.263 order. The Hon'ble Tribunal may kindly see that the Ld. Commissioner of Income Tax has not pointed out any error in the assessment order on this issue nor could he bring out the prejudice caused to the Revenue due to such error.
ISSUE NO.6 : ASSESSEE'S REPLY The assessee has The provisions of Sec.14A withdrawn a sum of are applicable when the Rs.17,10,000/- in cash on expenditure incurred does various dates from its not relate to the income account with State Bank of earned. When there is no Hyderabad. The A.O. did not nexus between income called for and examined the earned and expenditure details as to its purpose, the incurred, the provisions of applicability of provisions of Sec.14A are applicable. Section 14A to such Simple withdrawal of cash 10 ITA.No.1080/Hyd/2014 M/s. Vinayaka Agencies, Yellandu Khammam District.
withdrawals. Further, the through self-cheques or AO has also not obtained the otherwise does not mean details and examined the that the provisions of relevant details for cash Sec.14A are applicable. The withdrawal of Rs.4,50,000/- amounts withdrawn from by way of cash or Yourself bank have been duly on various dates from the credited/recorded in the Assessee's current account books of accounts. The total with Axis Bank Ltd., bank entries have been Khammam. verified with books of accounts during the assessment proceedings.
There is no deficiency in this aspect and hence the order cannot be considered as erroneous.
The facts stated by the Assessee have not been controverter by the Ld. Commissioner of Income Tax and ordered revision of the Assessment order on sheer suspicion and surmise. He could not pin point the error except stating that, the AO did not call for and examined the reasons for the cash withdrawals. He could not even state in his Revision Order the events of misappropriation of cash or erroneous claims of expenses in the accounts.
ISSUE NO.7 : ASSESSEE'S REPLY : The AO did not call for and The assessee submitted
examined the details of rent before the Ld. CIT that, the paid of Rs.l,20,000/- for rent of Rs.1,20,000/- is the shop & Godown as to aggregate of the amount of whether or not such rents paid to more than 1 11 ITA.No.1080/Hyd/2014 M/s. Vinayaka Agencies, Yellandu Khammam District.
payment attracts the person and therefore, provisions of Sec.40(a)(ia) of payment of rent to any the Act. individual was less than Rs.1,20,000/-. Since the rental amount is less than Rs.1,20,000/- paid to each individual, the provisions of Sec.194I for TDS are not applicable. Further, it was also submitted before the Ld. CIT that the A.O. has examined this issue and found that, the provisions of sec.194-I are not applicable.
There is no error in the assessment order on this issue. The Ld. CIT could not controvert this fact.
However, he passed the Revision Order on this issue without any merit in his arguments. He has not examined the facts available on record and simply issued order u/s. 263 in gross violation of his authority.
4. The Ld. Counsel for the assessee submitted that the detailed reply filed by the assessee to the notice issued by the Ld. CIT under section 263 offering his explanation in respect of each and every issue was sufficient to show that proper and sufficient enquiry and verification was conducted by the A.O. during the course of assessment proceedings and after having satisfied himself on examination of the books of accounts and other record, the assessment was completed by the A.O. under section 143(3). He submitted that this position was 12 ITA.No.1080/Hyd/2014 M/s. Vinayaka Agencies, Yellandu Khammam District.
clearly brought to the notice of the Ld. CIT by the assessee in the reply filed to the notice issued under section 263 and even whatever objections raised by the Ld. CIT were also met by clarifying each and every point raised by him. He contended that the Ld. CIT however completely ignored the explanation offered by the assessee and revised the assessment made by the A.O. under section 143(3) by exercising the powers conferred upon him under section 263 without even controverting the facts and figures furnished by the assessee in his reply. He contended that the Ld. CIT in his impugned order passed under section 263 has not pointed out as to how the explanation offered by the assessee was not acceptable and simply set aside the order passed by the A.O. under section 143(3) by observing that the same was made without enquiring into certain issues. He contended that the so-called errors pointed out by the Ld. CIT are nothing but only the wild allegations and the same are passed on surmises and conjectures. In support of this conclusion, he relied on the decision of Hon'ble Delhi High Court in the case of CIT vs. Hindustan Marketing and Advertising Co. Ltd., 341 ITR 180 wherein it was held that the Income Tax Officer having made reasonably a detailed enquiry, collected relevant material and discussed various facts of the case with the assessee's representative before making the assessment, there was no valid basis for the Commissioner to exercise jurisdiction under section 263 and to direct the A.O. to make fresh assessment by going 13 ITA.No.1080/Hyd/2014 M/s. Vinayaka Agencies, Yellandu Khammam District.
deeper into the matter. He also relied on the decision of Hon'ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd., 332 ITR 167 (HC) (Del.) and the decision of Hon'ble Allahabad High Court in the case of Janardhan Prasad Ashok Kumar vs. CIT 193 ITR 186 (HC) (All.) wherein it was held that the order passed by the Ld. CIT under section 263 without considering the relevant material available on record or those furnished by the assessee could not be sustained.
5. The learned D.R. on the other hand, strongly relied on the impugned order of the Ld. CIT passed under section 263 in support of Revenue's case that the assessment order passed by the A.O. under section 263 being erroneous and prejudicial to the interests of the Revenue as pointed out by the Ld. CIT, the same has been rightly set aside/revised by exercising the powers conferred under section 263.
6. I have considered the rival submissions and also perused the relevant material on record. It is observed from the notice issued by the Ld. CIT under section 263 and the detailed reply filed by the assessee to the said notice that most of the issues raised by the Ld. CIT were not only enquired by the A.O. but the claim of the assessee was accepted by him by applying his mind to the relevant facts of the case as well as the material placed on record. In my opinion, the assessment order passed by the A.O. therefore cannot be held to be 14 ITA.No.1080/Hyd/2014 M/s. Vinayaka Agencies, Yellandu Khammam District.
erroneous and prejudicial to the interests of the Revenue on these issues as alleged by the Ld. CIT in his impugned order passed under section 263. The Hon'ble jurisdictional High Court in the case of Spectra Shares & Scrips P. Ltd., vs. CIT 354 ITR 35, while examining the CIT's power under section 263 of the Act, has analysed various decisions of the Hon'ble Supreme Court as well as different High Courts and culled out the principles for exercising the jurisdiction under section 263 of the Act as under :
(a) "The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent - if the order of the Income Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue _ recourse cannot be had to Section 263 (1) of the Act.
(b) Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income Tax Officer is unsustainable in law.
(c) To invoke suo motu revisional powers to reopen a concluded assessment under Sec.263, the Commissioner must give reasons; that a bare 15 ITA.No.1080/Hyd/2014 M/s. Vinayaka Agencies, Yellandu Khammam District.
reiteration by him that the order of the Income Tax Officer is erroneous insofar as it is prejudicial to the interests of the Revenue, will not suffice; that the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suo motu revisional powers unless supported by adequate reasons for doing so; that if a query is raised during the course of the scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision.
(d) The Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded; that the department cannot be permitted to begin fresh litigation because of new views they entertain on facts or new versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of the circumstance; that if this is permitted, litigation would have no end except when legal ingenuity is exhausted
(e) Whether there was application of mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even inadequate that would not by itself give occasion 16 ITA.No.1080/Hyd/2014 M/s. Vinayaka Agencies, Yellandu Khammam District.
to the Commissioner to pass orders under Sec.263 merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such a course of action would be open; that an assessment order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately; there must be some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed.
(f) The power of the Commissioner under Sec.263 (1) is not limited only to the material which was available before the Assessing Officer and, in order to protect the interests of the Revenue, the Commissioner is entitled to examine any other records which are available at the time of examination by him and to take into consideration even those events which arose subsequent to the order of assessment."
6.1. If the aforesaid principles are applied to the facts of the present case, I find that the A.O. in the present case has not only conducted enquiry on the various issues pointed out by the Ld. CIT in his impugned order but has also applied his mind to the information and evidence furnished by the assessee. In these circumstances, I am of the view that the assessment order passed by him cannot be held to be erroneous and prejudicial to the interests of the Revenue only because the Ld. CIT is of the opinion that some more enquiry should have been made by the A.O. The power under 17 ITA.No.1080/Hyd/2014 M/s. Vinayaka Agencies, Yellandu Khammam District.
section 263 cannot be extended to hold an order passed by the A.O. as erroneous and prejudicial to the interests of the Revenue due to inadequacy of enquiry. After having perused the impugned order of the Ld. CIT in the light of the facts and material on record and detailed submissions made by the assessee, I find that the directions of the Ld. CIT on various issues are in the nature of starting roving and fishing enquiry which is not permissible under section 263 as held inter alia by the Hon'ble Bombay High Court in the case of CIT vs. Gabriel India Ltd., 203 ITR
108. In my view, the Ld. CIT has no material before him to consider the assessment order to be erroneous and prejudicial to the interests of the Revenue on the issues pointed out by him. A perusal of the discussion made by him in this regard shows that his actions are more like an A.O. in session of assessment proceedings rather than revisional authority exercising power under section 263. It is settled law that the powers under section 263 are required to be exercised by the Ld. CIT sparingly and in genuine cases when due to error committed by the A.O. there is loss to the revenue. If there is no evidence which could prima facie demonstrate that assessment order passed by the A.O. is erroneous and prejudicial to the interests of the Revenue, the Ld. CIT cannot revise the same on trivial or non-existent issues merely on the basis of doubt and suspicion. It appears from the record of the present case that the enquiries on the relevant issues were made by the A.O. during the course of assessment 18 ITA.No.1080/Hyd/2014 M/s. Vinayaka Agencies, Yellandu Khammam District.
proceedings though the same might not have been referred to in the assessment order.
7. For the reasons stated above, I am of the view that there were no errors in the order of the A.O. passed under section 143(3) as alleged by the Ld. CIT calling for any revision under section 263. In that view of the matter, I set aside the impugned order passed by the Ld. CIT under section 263 and restore that of the A.O. passed under section 143(3).
8. In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 04.09.2015.
Sd/-
(P.M.JAGTAP) ACCOUNTANT MEMBER Dated 04th September, 2015.
VBP/-
Copy to
1. M/s. Vinayaka Agencies, Yellandu, Khammam District. C/o. M. Chandramouleswara Rao, Chartered Accountnat, C-3, Skylark Apartments, Basheerbagh, Hyderabad - 29.
2. The Income Tax Officer, Ward-1, Kothagudem.
3. Commissioner of Income Tax, 1st Floor, SVR Plaza, D.No.40-6-15, Revenue Colony, Siddhartha Public School Road, Moghalrajpuram, Vijayawada-520 010.
4. Addl. CIT, Khammam Range, Khammam.
5. D.R. ITAT Hyderabad "B" (SMC) Bench, Hyderabad.
6. Guard File