Case Law Details
Brief of the Case
ITAT Pune held In the case of Span Overseas Ltd. vs. CIT that from the show cause notice, it is clear that the CIT has invoked the provisions of section 263 on the proposal submitted by the DCIT and deficiencies in the assessment order pointed out by the DCIT. As per the provisions of section 263, it is the CIT who has to examine the records and thereafter form an independent opinion that the order passed by the Assessing Officer is erroneous in so far as it prejudicial to the interest of revenue. In the present case, the CIT has not exercised his independent judgment for invoking revisional powers. Hence revision order is bad in law.
Facts of the Case
The assessee is engaged in the business of trading, indenting agent and export of goods. The assessee filed its return of income for the assessment year 2008-09 on 26-09-2008 declaring income of Rs.4,39,86,108/-. During the course of scrutiny assessment, the Assessing Officer made certain additions/disallowances and assessed the total income of the assessee at Rs.4,84,82,800/- vide order dated 30-12-2010. The Commissioner of Income Tax invoked his jurisdiction u/s. 263 and issued notice to the assessee on 03-05-2011.The assessee filed reply to the said notice on 21-07-2011. Thereafter, the Commissioner of Income Tax passed the impugned order setting aside the assessment order dated 30-12-2010 and directed the Assessing Officer to pass fresh assessment order.
Contention of the Assessee
The ld counsel of the assessee submitted that the CIT has erred in invoking the jurisdiction u/s. 263 without any substance and material. The AR submitted that a perusal of show-cause notice would show that the only reason for initiating proceedings u/s. 263 by the CIT is that the assessment order has been passed without making proper enquiry. The CIT has erred in holding that the assessment order was passed without proper enquiry as the issues raised by the CIT in show-cause notice were enquired into by the Assessing Officer during the course of scrutiny assessment proceedings. The Assessing Officer had given detailed questionnaire to the assessee at the time of original assessment which was duly answered and the assessee had submitted all the relevant documents in support of its contentions. The ld. AR submitted that the Patna Bench of the Tribunal in the case of Vijay Kumar Megotia Vs. Commissioner of Income Tax reported as 195 Taxman 63 (Pat.) (MAG) has held that the Commissioner of Income Tax cannot set aside the assessment merely on the ground that proper enquiry was not made by the Assessing Officer. Thus, the Commissioner of Income Tax was not correct in cancelling the assessment and directing the Assessing Officer to make fresh assessment.
The ld. AR further submitted that the CIT has erred in holding that the Assessing Officer has not applied his mind and the matter requires re-examination without giving any finding on the merits. The ld. AR submitted that the Commissioner of Income Tax has not pointed out any error in the assessment order allegedly prejudicial to the interest of Revenue. In support of his submissions, the ld. AR placed reliance on the following decisions: Commissioner of Income-tax Vs. Gabriel India Ltd., 203 ITR 108 (Bom); and Umraosingh Ostwal Vs.The Commissioner-Central, Pune, ITA No. 8857/Mum/2011 decided on 10-05-2013.
He further submitted that as per the provisions of section 263 the CIT has to form independent opinion that the order passed by the Assessing Officer is erroneous as well prejudicial to the interest of the Revenue. To substantiate his contentions the ld. AR placed reliance on the decision of Mumbai Bench of the Tribunal in the case of Vinay Pratap Thacker, Vs. Commissioner of Income Tax in ITA No. 2939/Mum/2011 decided on 27-02-2013.The ld. AR further submitted that the Commissioner of Income Tax cannot assume jurisdiction u/s. 263 only on the ground of inadequate enquiry. The provisions of section 263 cannot be invoked to make a mere fishing and roving enquiry. In support of this argument, the ld. AR draws attention to the decision of Ahmedabad Bench of the Tribunal in the case of M/s. J B Experts Vs. Commissioner of Income Tax in ITA No. 1646/Ahd/2010 decided on 16-12-2010 and the decision of Hon’ble Calcutta High Court in the case of Commissioner of Income Tax Vs. Pradeep Kumar Todi reported as 325 ITR 96 (Calcutta).
Contention of the Revenue
The ld counsel of the revenue submitted that the Assessing Officer has simply collected the information and thereafter has not applied his mind thereon. There is no discussion by the Assessing Officer in the order with regard to issues highlighted by the Commissioner of Income Tax. This clearly shows that the Assessing Officer has not applied his mind on the issues raised by the Commissioner of Income Tax in revision proceedings. The Commissioner of Income Tax is justified in invoking the provisions of section 263, as the order of Assessing Officer is erroneous as well as prejudicial to the interest of revenue. The ld. DR placed reliance on the following decisions in support of his submissions: M/s. Malabar Industries Vs. CIT, 243 ITR 83 (SC); Appollo Tyres Ltd. Vs. Dy. CIT, 360 ITR 36 (Ker); and CIT Vs. RKBK Fiscal Services (P) Ltd., 358 ITR 228 (Calcutta).
Held by ITAT
ITAT held that a perusal of the show cause notice shows that the Commissioner of Income Tax has invoked the provisions of section 263 on the proposal submitted by the Dy. Commissioner of Income Tax and deficiencies in the assessment order pointed out by the DCIT. As per the provisions of section 263 it is the Commissioner of Income Tax who has to examine the records and thereafter form an independent opinion that the order passed by the Assessing Officer is erroneous in so far as it prejudicial to the interest of revenue. In the present case we find that the Commissioner of Income Tax has not exercised his independent judgment for invoking revisional powers.
Under section 263, the CIT first has to call for the records of any proceedings under the Act and examine the same. After examining the records, if the Commissioner of Income Tax considers that the order passed by Assessing Officer is erroneous in so far as it is prejudicial to the interest of the revenue, he may issue show cause notice to the assessee. After giving an opportunity of hearing to the assessee and conducting enquiry as may be necessary, the Commissioner of Income Tax shall pass order as the case may be including enhancing or modifying the assessment or cancelling the assessment. The Commissioner of Income Tax has to pass a speaking order highlighting deficiencies in the assessment order with reasons.
Further, the CIT has not given the reasons as to how the findings of the Assessing Officer are erroneous in so far as prejudicial to the interest of revenue. The contention of the assessee is that all the relevant documents were placed on record by the assessee during the course of assessment proceedings. The Assessing Officer has passed the order after considering the same. The duty of the assessee is bring all the relevant documents before the Assessing Officer. The manner in which the order is to be passed is the prerogative of the Assessing Officer. Further for invoking revisionary powers the Commissioner of Income Tax has to exercise his own discretion and judgment. Here the CIT has invoked the provisions of section 263 at the mere suggestion of the DCIT, without exercising his own discretion and judgment.
In view of the fact that the Commissioner of Income Tax has invoked the provisions of section 263 without applying his own independent judgment and merely at the behest of proposal forwarded by the Dy. Commissioner of Income Tax is against the spirit of Act. Thus, the impugned order is liable to be set aside.
Accordingly appeal of the assessee allowed.
