Narendra Goel Vs PCIT (ITAT Delhi)
Facts- Assessment u/s 143(3) was framed vide order dated 31.5.2017 determining income at Rs.17,82,584/-. Subsequently, the learned Pr.CIT on examination of record observed that the AO had not carried out requisite inquiry regarding advances from customers and also introduction of fresh capital. Accordingly, a notice u/s 263 of the Act was issued to the assessee. In response thereof, authorized representative of the assessee appeared and filed reply to the show cause notice issued by the learned Pr.CIT. However, the reply of the assessee was not found acceptable. The learned Pr.CIT observed that the assessee had simply submitted a verbal narration without furnishing any documentary evidence in support of its claim. It was further observed that assessee did not submit copy of bank statement reflecting the repayment of liabilities due to M/s Maa Kaila Foundries Private Limited in support of the confirmation of accounts.
Therefore, the learned Pr.CIT revised the assessment order and directed the AO to pass the assessment order afresh after examining the issue as observed by the learned Pr.CIT. Aggrieved against this the assessee is in appeal before this Tribunal.
Conclusion- The law is well settled that for exercising power u/s 263 twin conditions are required to be satisfied – (i) that the order should be erroneous and; and (ii) it should cause prejudice to the interests of Revenue. Moreover, it is not the case where the assessee failed to substantiate his claim, rather the explanation along with supporting evidences were placed before the assessing officer and the learned Pr.CIT. In our considered view merely on the basis of suspicion, invoking of powers u/s 263 would not be justified.
The concluded assessment should be revised where there is blatant error committed by the assessing officer, which culminated into the prejudice to the interest of Revenue. But where the Assessing Officer made necessary inquiry and satisfied itself about the explanation offered to him, revising such an order is highly unjustified and contrary to the ratio laid down by the Hon’ble Supreme Court in the case of M/s Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83. Therefore, in the present case the action of the learned Pr.CIT is unjustified and the same is hereby set aside and the assessment is restored.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal, by the assessee, is directed against the order of the learned Principal Commissioner of Income-tax (“Pr.CIT” in short), Dehradun, dated 9.3.2021, pertaining to the assessment year 2015-16. The assessee has raised following grounds of appeal:
“1. That the notice issued under Section 263 of the Income Tax Act, 1961 and the order passed by the Pr. CIT under said Section are illegal, bad in law and without jurisdiction.
2. That the Pr. CIT has failed to appreciate, that the assessment order passed under Section 143(3) by the Assessing Officer is neither erroneous nor prejudicial to the interest of Revenue and as such the order passed by the Pr. CIT order under Section 263 in set aside the assessment order and given a direction of passing, it fresh is illegal, bad in law and without jurisdiction.
3. That the notice by the Pr. CIT under Section 263 does not show that the Assessing Officer committed any error in passing the assessment order under Section 143(3). Therefore, the jurisdiction assumed by the Pr. CIT under Section 263 is illegal and without jurisdiction and is liable to be quashed.
4. That the Pr. CIT has failed to appreciate, that, the assessment order passed by the assessing officer after duly investigation, therefore, the allegation of Pr. CIT that the assessment order passed by the assessing officer is erroneous and prejudicial to the interest of revenue is highly arbitrary and against the facts of the case.
5. That the Pr. CIT has failed to appreciate that the assessee appellant has filed the confirmations of advance from customer as requisite by the assessing officer, thereafter, the assessing officer has taken a view, which is a possible view. Hence, the Pr. CIT has erred in law and on facts in setting aside the assessment to be redone afresh.
6. That the observation of the Pr. CIT are based on surmises and conjectures and on the basis of the different view taken by the Assessing Officer after framing the Assessment Order Section 143(3) and do not afford any legal justification to the findings given.
7. That the proceedings under Section 263 are initiated at the instance of Assessing Officer and the order passed by the Pr. CIT is clearly without application of mind as it refer to many irrelevant issues hence the order under section 263 is liable to be quashed.
8. That the Pr. CIT has erred in not providing proper and adequate opportunity to Appellant to place the material on record and the impugned order passed is against the principle of natural of justice.
9. That all the facts and circumstances of the case and the material available on record have not been properly considered by the Pr. CIT while passing the order under Section 263. The impugned order is illegal, arbitrary and bad in law.
10. The Appellant craves leave to add, amend, alter and or modify the grounds of appeal of the said appeal.”
2. Facts, in brief, are that in this case assessment u/s 143(3) of the Income-tax Act, 1961, hereinafter referred to as the “Act”, was framed vide order dated 31.5.2017 determining income at Rs.17,82,584/-.Subsequently, the learned Pr.CIT on examination of record observed that the Assessing Officer had not carried out requisite inquiry regarding advances from customers and also introduction of fresh capital. Accordingly a notice u/s 263 of the Act was issued to the assessee. In response thereof, authorized representative of the assessee appeared and filed reply to the show cause notice issued by the learned Pr.CIT. However, the reply of the assessee was not found acceptable. The learned Pr.CIT observed that the assessee had simply submitted a verbal narration without furnishing any documentary evidence in support of its claim. It was further observed that assessee did not submit copy of bank statement reflecting the repayment of liabilities due to M/s Maa Kaila Foundries Private Limited in support of the confirmation of accounts.
Therefore, the learned Pr.CIT revised the assessment order and directed the Assessing Officer to pass the assessment order afresh after examining the issue as observed by the learned Pr.CIT. Aggrieved against this the assessee is in appeal before this Tribunal.
3. Apropos to the grounds of appeal, learned counsel for the assessee reiterated the submissions as made in the written synopsis dated 16.3.2022. For the sake of clarity, the written synopsis of the assessee is reproduced as under:
“That, the assessee is an Individual and enjoy Income from trading of Iron, Re-rolling Material under the proprietorship firm M/s V. P. and Company and Salary from M/s Durga Ispat and M/s Kama Metal and Alloys Pvt. Ltd. and Rent and Interest from Saving Bank Account, The M/s V.P. and Company is mainly purchased Iron, Re-rolling Scrap from Indian Railway through Auction and Indian Railway collect TCS @1% on Auction Amount.
That, the case of the assessee has been picked up for the assessment scrutiny by issuing notice U/s 143(2) dated 27.07.2016 under the scheme of CASS, which was completed by the assessing officer and passed assessment order dated 31.05.2017 on Income of Rs. 17,82,584.00 against the Return Income of Rs. 13.45.220.00. The assessee has not filed any appeal against the said order.
Subsequently, the Pr. CIT, Dehradun has issued notice U/s 263 dated 21.01.2020 and initiated the proceedings U/s 263 of the Income Tax Act, 1961 proposed to set-a-side the assessment proceeding on the following grounds:
1) Advance from Customer from M/s Maa Kaila Foundries Private Limited;
2) Introduction of fresh capital of Rs. 18,00,000.00 on 02.04.2014;
3) Entries reflected in the bank account as OWN CHQ XFER DP;
In response to the alleged notice, the assessee filed a reply before the Pr. CIT, Dehradun and evidences. Thereafter, set aside the assessment order dated 31.05.2017 by passing the order dated 09.03.2021, after making following observation:
“4. The assessee had simply submitted a verbal narration of his case without furnishing any documentary evidence in support of his claim as required vide show’ cause notice dated 21.01.2020. The assessee has not submitted copy of bank statement showing the repayment of liabilities due to M/s Maa Kalia Foundries (P) Ltd in support of the confirmation of accounts. Under this circumstance, the claim of the assessee is found to be deficient and untenable. ”
Being Aggrieved from the above finding and order passed, the assessee filed this appeal before the Hon’ble Tribunal, It is respectfully submitted, as under:
ISSUE-1
1) That Pr.CIT allegedly found only one issue erroneous and prejudicial to interest of revenue, that the assessee did not file the bank account of showing the repayment of liabilities due to M/s Maa Kalia Foundaries Ltd in support of confirmation of accounts, without appreciating that the assessing officer has verified the transaction and adequate inquiry was conducted during the assessment proceedings, such as:
a. That, the assessee has shown the liability under the head of Advance from Customer from M/s Maa Kaila Foundries Private Limited having a PAN No.AACCM-4899-E at Rs.3,12,286.00 in his ITR and Audited Balance Sheet as Annexure D (Kindly Refer Page 57 of P/B).
b. That the assessing officer has raised the query in reference to the Advance to Customer at Query 9 of the notice issued U/s 142(1) dated 19.12.2016. (page No. 22 to 24, Kindly Refer Page No. 24 Point 9)
c. In response to the said query the assessee filed the details of the Advance from Customer in shape of list and confirmation, as stated below: (page No.25 to 30, Kindly Refer Page No. 25 Point 1)
i. Name and Addresses of the Parties.
ii. Pan Number of the Parties.
iii. Confirmation of the Parties. (Page No.26 & 30 of the P/B)
Thereafter, the assessing officer conducted the inquiry has issued the notice U/s 133(6) on pick and choose to the major parties, which is also duly complied by the said party, the copy of reply annexed (Page No. 28 & 29). Also, the assessee produce the complete books of accounts, which were check and verified by the assessing officer during the assessing officer.
Before the Pr.CIT the assessee contended that the said liability has been re-paid in the subsequent year, the ledger were filed through banking channels, the copy of the ledger alongwith bank account for subsequent year is being enclosed for your ready reference, .(Kindly Refer page No. 4 to 9 of the Paperbook). It is pointed out that the assessment for the next assessment year A.Y. 2016-17 was completed U/s 143(3) of the Act, in which part payment was made.
ISSUE-2
1) That, the Ld. Pr. CIT has doubted the introduction of fresh capital of Rs. 18,00,000.00 on 02.04.2014 in the show cause notice, without appreciating that the assessing officer has verified the transaction and adequate inquiry was conducted during the assessment proceedings, such as, the assessing officer raised the specific query during the hearing and the assessee duly reply the same (Kindly Refer Page 31-32 Point No.4) vide reply filed before the assessing officer. Further the assessee explained the source of the fresh capital of Rs. 18,00,000.00 has been given out of the opening balance available at Rs. 19,05,053.00 with the assessee, in his bank account with UBI a/c no.513702010001423 as on 31.03.2014, copy of the bank account is enclosed for your ready reference(Page 13 of P/B), out of which the assessee has introduce the capital of Rs. 18,00,000.00 on 02.04.2014. The source of the balance available is as under :-
