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TMI Blog2016 (12) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... ned assessment order. Alternatively, as held by the Pr. CIT, even if the assessee’s argument that when its claim of write off at Rs one crore as an expenditure is not allowed as a deduction in ay 2006-07 on the ground that it was capital in nature, subsequently , when such amounts are recovered by it & was offered as an income in the ays 2007-08 and 2008-09 , then such receipts should also be treated as capital in nature & they should be reduced from the income of the respective year is considered in its favour, even then, the assessee has recovered ₹ 60 lakhs only in ay 2007-08 and offered it as an income in that ay. However, it claimed a deduction of Rs. One crore which was accepted by the AO in the impugned assessment order. Thus, an excess deduction of ₹ 40 lakhs was allowed to the assessee in ay 2007- 08, which is an error and it clearly falls within the scope of section 263 of the Act. - Decided against assessee. Under invoicing - Held that:- The FOB rate per weighing metric tonne amounted to Rs,1,955/- (under invoicing to the extent of 53%). The extent of under invoicing was calculated on the basis of information provided by the Customs Department of Marmag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n logistics, mining, trading of iron ore and retailing of petroleum products. Its assessment u/s. 153A rws 143(3) for ay 2007-08 was completed on 31.03.2013 accepting the returned income . On a review of records, the Pr. Commissioner of Income Tax, (Central), (PCIT(C)), Bengaluru, noticed that the assessee had entered into an MoU with Ripple Investments Ltd on 04.08.2005 to purchase upto 25 lakh shares of Valuemart Info Technologies Ltd @ ₹ 4 per share through Ripple Investments Ltd for ₹ 1 crore. In continuation to that MoU, on 12.6.2006, it entered into an M0U wherein Ripple Investments Ltd was to buy back the 25 lakh shares @ ₹ 8 per share. During a y 2006-07, it has written off the investment to the extent of ₹ 1 crore and claimed it as a revenue expenditure. In the assessment made for ay 2006-07 u/s.143(3) dated 31.12.2008, the Assessing Off icer has disallowed that ₹ 1 crore stating that it is a capital expenditure and hence it was not allowed as an expenditure to be charged to the P L account under section 37(1). This order attained finality as the assessee has not contested it at all. 03. Consequent to a search and seizure action, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation, there is no application of mind, on these counts also, the assessment order passed by the A O is erroneous and prejudicial to the interests of Revenue and placed reliance on the following decisions :- 1. CIT Vs Jawahar Bhattacharjee, 341 ITR 434(Gau)(F.B.) and 2. Assam Tea House 344 ITR 507 (P H). 06. Thus, the PCIT( C) held that the assumption of jurisdiction u/s.263 is fully justified both on merits and facts . In view of that, he set aside the assessment order on this specific issue to the file of the AO to re-examine the claim of the assessee and decide in accordance with law after giving a reasonable and sufficient opportunity to the assessee. Aggrieved, the assessee filed this appeal with following grounds of appeal : 1. The Order of the learned Principal Commissioner of Income Tax is opposed to law, facts and circumstances of the case. 2. The Order is passed in haste, without providing sufficient and reasonable opportunity of being heard. 3. The Order is passed against the principle of natural justice and thus liable to be quashed. 4. The Ld. Principal CIT erred in issuing the order u/s. 263 of the Income Tax Act, 1961. 5. The Ld. Respondent e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Pr.CIT is liable to be quashed. He also placed reliance on the decisions, viz Malabar Industrial Co Ltd vs CIT 243 ITR 0083 SC , CIT vs Anil Kumar Sharma 335ITR 083 Delhi, CIT vs Sunbeam Auto Ltd 227 CTR 133 Delhi , CIT vs Vikas Polymers 194 Taxman 57 Delhi, Kelvinator of India 320 ITR 561 SC etc. 08. Per contra, the DR submitted that in the assessment made u/s 153A r.w.s. 143(3) for ay 2007-08, the assessee can not make any fresh claim as was done by it . In this regard, the DR relied on the the Hon'ble ITAT , Pune B Bench decision in the case of Shri Shankar Junjhunwala v ACIT , Central Circle, Aurangabad in ITA 225/PN/2004-05 dt 31.07.2012 wherein following the special bench decision of the the Hon'ble ITAT, Mumbai in ITA Nos 5018 to 5022 5059 /M/10 dt 06.07.12 in Al Cargo Global Logistics v DCIT , Cent Circle 44, Mumbai it held that the assessment made u/s 153A is to be made only on the basis of incriminating material , and the return filed by the assessee u/s 139 attained finality. In other words, the DR submitted that a new claim of deduction or allowance could not be entertained in the reassessment proceedings and hence the order of the Pr.CIT is in acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B Shah, former Judge of Supreme Court. This Commission has, inter al ia, investigated into the issue of under invoicing of export price of iron in the State of Goa. From its report, the Pr. CIT noticed that the assessee shipped the consignment of iron lumps to China at a price which is below the average sale of FOB price of the same grade of iron ore on the same day. At page No.187 of Volume 2 of that report, it has been stated that this company had shipped a consignment of iron lumps to China on 21.04.2007 weighing 50,650 metric tonnes and FOB value of ₹ 9,90,33,413/-. The FOB rate per weighing metric tonne amounted to Rs,1,955/- (under invoicing to the extent of 53%). The extent of under invoicing was calculated on the basis of information provided by the Customs Department of Marmagao and Panjim ports for the year 2008-09. The report by the Shah Commission Report is on the basis of average sale FOB price for the same grade of iron on the same day since it is based on the average freight on board (FOB). On a review of records, the Pr CIT not iced that the A O has not verified the pricing adopted by the assessee while making exports so as to examine whether there is any und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d against the principle of natural justice and thus liable to be quashed. 4. The Ld. Principal CIT erred in issuing the order u/s. 263 of the Income Tax Act, 1961. 5. The Ld. Respondent erred in holding that the assessment carried out was erroneous and prejudicial to the interest of the Revenue. 6. The Ld. Pricipal CIT has erred in passing the order u/s. 263 on the basis of the report of the Shah Commission. 7. The Ld. Principal CIT has erred in ignoring the fact that the name mentioned in Page 187 of the Shah Commission report is M/s. ICC Industries Limited and not M/s. ILC Industries Ltd (the assessee). 8. The Ld. Respondent erred in not considering the submissions and explanations provided by the Appellant before passing the order u/s. 263. 9. The Ld. Respondent erred in calculating teh under invoicing using the data for the financial year 2008-09 as opposed to relevant financial year 2007-08. 10. The Ld. Respondent erred in placing reliance on case laws which are factually different to the present case. 11. The AR submitted that during the proceedings under sec. 153A r.w.s. 143(3), the AO has directed the assessee to furnish shipment wise details of sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, etc. preferably by Enforcement Directorate and the Income Tax Department. What emanates from the above is that the findings of Shah Commission are tentative and require further investigation. In other words, the Shah Commission has not conclusively held that the Appellant or any of the other parties have indeed resorted to under invoicing. In the absence of any conclusive finding, the Pr. CIT has relied on the report of the Shah Commission to conclude that the Appellant has under invoiced its sales that has caused prejudice to the interests of the Revenue. The Pr. CIT ought to have made an independent enquiry to satisfy himself that the Appellant had resorted to under invoicing that has caused prejudice to the interest of the Revenue. Merely relying on the report of Shah Commission, which in itself is inconclusive to record satisfaction will not satisfy the requirements laid down in sec. 263. The AR distinguished the judgement of Hon'ble Income Tax Appellate Tribunal, Panaji in the case of Sadiq Seikh in ITA Nos. 170 172/PNJ/2014 and ITA Nos. 171 173/PNJ/2014 viz in that case of Sadiq Seikh, the assessee had failed to submit any reply to the query raised by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the State of Goa. The Shah commission published its report in the month of October 2013 only, ie after the completion of the impugned assessment. It dealt with the issue of under invoicing, evasion of taxes, duties and others. At page No.187 of Volume 2 of that report, it has been stated that the assessee company had shipped a consignment of iron lumps to China on 21.04.2007 weighing 50,650 metric tonnes and FOB value of ₹ 9,90,33,413/-. The FOB rate per weighing metric tonne amounted to Rs,1,955/- (under invoicing to the extent of 53%). The extent of under invoicing was calculated on the basis of information provided by the Customs Department of Marmagao and Panjim ports for the year 2008-09. The Shah Commission report is on the basis of average sale FOB price for the same grade of iron on the same day since it is based on the average freight on board (FOB). On a review of records, the Pr CIT found that the AO has not verified the pricing adopted by the assessee while making exports so as to examine whether there is any under invoicing resorted by them. The A O did not make any enquiries/verification and reconciliation of sales. Since the A O has not considered the issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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