Case Law Details
Ametek Builtech India Versus Pvt Ltd Vs PCIT (ITAT Delhi)
Introduction: The recent case of Ametek Builtech India Versus Pvt Ltd Vs PCIT (ITAT Delhi) sheds light on the significance of thorough assessments by Assessing Officers (AO). The Income Tax Appellate Tribunal (ITAT) Delhi upheld the Principal Commissioner of Income Tax’s (PCIT) revision order under Section 263 of the Income Tax Act, emphasizing the need for a comprehensive inquiry by the AO. The appeal, dated 17.10.2023, for the assessment year 2015-16, revolves around the acceptance of the Income Tax Return (ITR) without adequate scrutiny.
Detailed Analysis:
Background: The appeal, filed against the order of PCIT-1, New Delhi, dated 16.03.2020, pertains to A.Y. 2015-16. The appellant, Ametek Builtech India Pvt Ltd, raised several grounds challenging the PCIT’s order.
Grounds of Appeal: The appellant argued that the PCIT erred in not recognizing that the company was in its initial stages of business during the concerned assessment year. The loans and advances, sourced through group companies’ bank accounts, were deemed genuine. However, PCIT invoked Section 263, directing a fresh assessment.
PCIT’s Perspective: PCIT, in the revision order, highlighted the inadequacy of the Assessing Officer’s (AO) examination of the unsecured loans, advances, and the company’s increased total long-term borrowing. The AO’s acceptance of the returned income without sufficient verification led PCIT to deem the order erroneous and prejudicial to revenue.
Lack of Enquiry by AO:
PCIT pointed out several flaws in the AO’s approach:
- Lack of verification of creditworthiness of sister concerns.
- Failure to objectively verify information in financial statements.
- Inadequate examination of large transactions within a single day.
- Absence of complete ledger accounts for loan transactions.
PCIT’s Intervention: In invoking Section 263, PCIT stressed that the AO’s failure to conduct thorough investigations rendered the assessment order erroneous. The PCIT directed the AO to reassess for AY 2015-16, ensuring proper verification and providing the assessee an opportunity to be heard.
ITAT’s Verdict: The ITAT upheld the PCIT’s order, stating that the AO accepted the returned income without adequate examination. The tribunal emphasized the importance of a detailed and proper inquiry, citing the Supreme Court’s precedent in the case of Shri Amitabh Bachhan.
Conclusion: The Ametek Builtech India case serves as a reminder of the AO’s responsibility to conduct thorough assessments. The ITAT’s affirmation of the PCIT’s order reinforces the principle that accepting ITR without adequate enquiry can lead to revision under Section 263. Taxpayers and practitioners should take note of this decision, emphasizing the need for meticulous scrutiny and verification in assessment proceedings to ensure the integrity of the tax assessment process.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal has been filed against the order of ld. PCIT-1, New Delhi dated 16.03.2020 for A.Y. 2015-16.
2. When the appeal was called for hearing neither the assessee nor any authorized representative appeared nor any adjournment application has been filed despite several notices. However, or perusal of the appeal records and impugned order, we find that the appeal can be disposed of ex-parte qua assessee after hearing the arguments of ld. Senior DR. Therefore we proceed to adjudicate the appeal ex-parte qua assessee.
3. The assessee has raised following grounds of appeal:-
1. That the order of the Ld. Principal Commissioner of Income-tax-1, Delhi, New Delhi is bad in law and on facts and needs to be cancelled.
2. That without prejudice to the above, the Ld. Principal Commissioner of Income-tax-1, Delhi, New Delhi, erred in not appreciating the fact that the Appellant Company had hardly started the business and the loans and advances were from group companies through their bank accounts and duly accepted as genuine.
3. Appropriate direction may be issued not to proceed for the assessment on the directions in the order u/s 263 of the Act.
4. From the grounds and statement of facts we note that the assessee while challenging the revisionary order passed u/s. 263 of the I.T Act 1961 (for short the ‘Act’) of PCIT, New Delhi submitted that the ld. PCIT has erred in not appreciating the fact that during AY 2015-16 the assessee company had hardly started the business and the loans and advances from the group companies routed through banking channels was rightly accepted by the Assessing Officer as explained and genuine. From the written submissions dated 25.03.2019 submitted before the ld. PCIT, as has been reproduced in para 6 of impugned order, we note that the assessee contended the Assessing Officer has made an independent inquiry u/s. 133(6) of the Act which was duly complied by the respective lender/creditors company and the Assessing Officer also verified and examined the books of accounts of assessee and thereafter accepted the same. Therefore it was contended before ld. PCIT that after being satisfied from the explanation, documentary evidence and other details filed by the assessee and also considering the reply of lender/creditors company the Assessing Officer rightly found that the unsecured loans and advances are genuine transaction. After submitting said contentions the assessee before the ld. PCIT finally submitted that the assessment order cannot alleged as erroneous and prejudicial to the interest of Revenue. However, not being agreed with the stand of assessee the ld. PCIT invoke the provision of section 263 of the Act and directed the Assessing Officer to make a fresh denovo assessment order in terms of the directions given in the said revisionary order u/s. 263 of the Act.
5. Supporting the order of the ld. PCIT the ld. CIT(DR) submitted that the ld. Revisionary Authority rightly held that the assessment order dated 30.11.2017 has been passed without making required enquiries and verification, which should have been made, while accepting unsecured loans and advances shown by the assessee in its financial accounts and balance sheet. The ld. PCIT also submitted that the assessment order clearly reveals that the Assessing Officer has accepted assessee’s explanation without making any inquiry of verification of fact therefore it was rightly alleged that the assessee order is erroneous and prejudicial to the interest of Revenue. The ld. CIT(DR) submitted that accordingly, as per mandate of explanation 2 to section 263 of the Act the ld. PCIT rightly held that the assessment order passed without proper verification and enquiries is not only erroneous but prejudicial to the interest of Revenue hence the assessment order dated 30.11.2017 was rightly set aside directing the Assessing Officer to reframe denovo assessment order for AY 2015-16 after proper verification of facts and allowing due opportunity of hearing to the assessee.
6. On careful consideration of above contentions of the assessee placed before ld. PCIT and in the grounds & statements of facts and submissions of ld. CIT(DR) we are of the consider view that during the year consideration the assessee company was engaged in the business of construction, development, sale and operation of all types townships, housing project, commercial premises and other related activities and the case was selected for scrutiny u/s. 143(3) of the Act. The Assessing Officer passed a cryptic order accepting the returned income as nil as per declaration of assessee. Subsequently, the ld. PCIT, on examination of assessment order in question as well as the assessment records containing the Financial statement of the assessee company, it has been noticed that total Long term borrowing had increased from Rs. 30,11,43,544/-as on 31.03.2014 to Rs. 72,20,76,372/- as on 31.03.2015 corresponding to increase of Rs. 42,09,32,828/-. Further, Long term loans & advances had also been found to be increased from Rs. 29,89,85,372/- as on 31.03.2014 to Rs. 42,09,50,178/- as on 31.03.2015 i.e. increased by Rs. 12,19,54,806/-. It has also been found that the assessee-company had taken loans and advance from M/s Supertech Township Project Ltd. and M/s Supertech Realtors Pvt. Ltd., claimed to be their sister concerns and assessed to tax separately. In the course of the assessment proceedings of the case, the AO of the case been found to have issued notices u/s 133(6) of the Income-tax Act, 1961 and the so-called had been found to have filed their replies in response to notice u/s 133(6) of the Income-tax Act, 1961.
7. On further examination of the same, the ld. PCIT also noted following factual position emerged from the financial statements and balance sheet of assessee:-
(i) M/s Supertech Realtors Pot. Ltd. has filed its return of income declaring loss of Rs. 4,73,30,485/-, therefore, its creditworthiness remained doubtful.
(ii) From the Balance sheet of M/s Supertech Realtors Pot. Ltd., it could not objectively verified that the assessee company has availed loan of Rs. 58,06,71,151/- as Long term loans & Advances because as per Note No. 11 of Balance sheet of M/s Supertech Realtors Pvt. Ltd. the same is only at Rs. 2,33,71,220/-.
(iii) On verification of the Corporation Bank A/c No. CBCA/01/200055 of M/s Supertech Realtors Pvt. Ltd. on 27.08.2014, it is noticed that Rs. 103 crores were credited and debited on the same day with the assessee company. The AO has failed to acknowledge the gravity of such huge transaction happening in a single day and has not called for further details in this regard. Thus, the AO has failed to analyze the Bank statemen t submitted in response to notice u/s 133(6).
(iv) On examining Ledger account of unsecured loan of M/s Supertech Realtors Pvt. Ltd. in the books of assessee company, it is noticed that details have been submitted for the period from 01.03.2015 to 31.03.2015 i.e. only for one month instead of full year. In absence of full Ledger account, the AO could not verify the sources/ creditworthiness and genuineness of this loan transaction of assessee company with M/s Supertech Realtors Pvt. Ltd.
(v) On verifying Balance sheet of M/s Supertech Township Project, it could not he objectively verified that the assessee company has availed loan of Rs. 14,14,05,221/-as Long term Loans & Advances, which as per Note No. 11 of Balance sheet of M/s Supertech Realtors Pot. Ltd. is only at Rs. 2,33,71,220/-.
8. The ld. PCIT also noted that In the course of the assessment proceedings of the case, the AO chose to make perfunctory enquiries on the issues of the case for which it has been selected for the Limited Scrutiny and no enquiries whatsoever had been found to have been made in respect of the identity, creditworthiness and genuineness of the loans and advances as required u/s 68 of the Act. The AO should have made further investigations so as to establish that the identity of the party, its creditworthiness and genuineness of the Loan transactions should have been established. However, the AO without making such further investigations passed the assessment order u/s 143(3) of the Income-tax Act, 1961 on 30.11.2017 therein assessing the total income at Rs. NIL.
9. In view of above, factual position which was clearly discernable and noted by the ld. PCIT when we evaluate the action of the Assessing Officer along with assessment order then we clearly find that the Assessing Officer has passed a very brief and cryptic order. However, in the body of the order he has mentioned that specific query were raised regarding two issues viz. (i) large increase of unsecured loan during the year and low income in compression to high amounts of loan, advances and investment in shares and noted that in response to notices AR of assessee attending proceedings and after taking on record necessary details, explanation and evidences returned income at Nil was accepted.
10. We are unable to see any endeavour exercise by the Assessing Officer regarding verification, examination and adjudication of both the issues were picked up for scrutiny assessment proceedings even from the statement of facts we are unable to see details of any notice either u/s. 142(1) or any other provisions of the Act except notices dated 19.09.2017 u/s. 133(6) of the Act to sister concerns (2) of assessee. Even despite service of notice the assessee is not representing and perusing his case before this Tribunal. Therefore we are inclined to hold that the Assessing Officer accepted returned income of assessee without any verification and examination of both the issues therefore it is a clear case of inadequate and insufficient enquiry. Thus, the ld. PCIT was quite justified and correct in alleging the assessment order as erroneous and prejudicial to the interest of revenue by following the preposition rendered by Hon’ble Supreme Court in the case of Shri Amitabh Bachhan 384 ITR 200 (SC). We are unable to see any valid reason to interfere with the revisionary action and order of the ld. PCIT passed u/s. 263 of the Act and hence, we uphold the same. Accordingly, grounds of assessee being devoid of merits are dismissed.
11. In the result, the appeal of assessee is dismissed.
Order pronounced in the open court on 17.10.2023
