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TMI Blog2018 (4) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... This is an appeal filed by the assessee emanates from the order of the ld. Pr. CIT(A), Alwar dated 15/03/2016 for the A.Y. 2011-12 passed U/s 263 of the Income Tax Act, 1961 (in short the Act). 2. The assessee is engaged in doing business of royalty collection in terms of the contract awarded by the Mining Department, Govt. of Rajasthan for collection of royalty in Bayana Tehsil and Roopwas Tehsil. The assessee filed its return of income on 31/3/2013 declaring total income of ₹ 2,99,820/-. The case was selected for scrutiny. The Assessing Officer has passed assessment order U/s 143(3) of the Act by making various additions and estimated total income of ₹ 4,55,560/- and added the same to the total declared income of the assessee. The ld. Pr. CIT(A) has passed order U/s 263 of the Act and set aside the issue to the Assessing Officer to be decided afresh. 3. Now the assessee is in appeal before the ITAT by taking following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, Ld. Commissioner of Income Tax (CIT) erred in passing order u/s 263 of the Income Tax Act, 1961 (the Act), when the assessment for the impugned assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 194C of the Act, ignoring the fact that all the necessary details in this regard were already submitted during the course of Assessment proceedings and were examined by Ld. AO. Thus, the said direction of CIT may please be held as bad in law. 8. On the facts and in the circumstances of the case and in law, Ld, CIT erred in directing the AO to inquire into the identity, genuineness and creditworthiness of Unsecured loans ignoring the fact that necessary details in this regard were already been submitted before AO during assessment proceedings and examined by Ld. AO. Thus appellant prays the direction of CIT is bad in law. 9. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal. 4. All the grounds of appeal is interlinked and the main issue involved in the appeal is passing order U/s 263 of the Act by the Pr.CIT, Alwar. 5. While pleading on behalf of the assessee, the ld AR has submitted as under: Brief facts of the case are that this is the first year of business of the appellant assessee who is formed as partnership firm during the year under appeal having sol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... afresh in light of the directions given by him in the impugned revision order. Aggrieved by the aforesaid revision order of Ld. CIT (Admn.), the assessee has preferred the present appeal before this Hon ble Tribunal. In support of and elaboration to the grounds of appeal already taken, ground-wise submission is made as under: Grounds of Appeal Nos. 1 to 8: Under all these grounds of appeal, the assessee has challenged the action of Ld. CIT(Admn.) in passing the impugned revision order u/s 263 of the Act arbitrarily and without in any manner establishing as to how the Assessment Order passed by Ld. AO was erroneous and prejudicial to the interest of revenue. As stated above, the year under appeal is the first year of business of the assessee who has commenced its operation w.e.f. 30.09.2010 after awarding the Royalty Collection Contract from Mining Department, state of Rajasthan. As per the partnership deed dt. 1/4/2010,the the assessee firm constituted of total 17 partners who all had contributed towards the capital of the firm totaling to ₹ 2,74,05,000/-. During the course of assessment proceedings, complete books of accounts of the assessee including bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly scrutinized / examined by him. However, by completely ignoring the above factual position, the Ld. CIT(Admn.) without any basis alleged that the Ld. AO had not made proper inquiry during the course of assessment proceedings, and therefore, he arbitrarily held the order of Ld. AO as erroneous and prejudicial to the interest of revenue vide the impugned revision order passed u/s 263 of the Income Tax Act, 1961. In this regard, it is submitted that the main issue pointed out by the Ld. CIT in the impugned revision order pertains to the capital contributions of the partners in the assessee firm. The Ld. CIT has framed an opinion that the source of capital contributions in the hands of assessee firm has not been explained properly by the assessee during the course of assessment proceedings, nor was enquired into by the Ld. Assessing Officer. In this connection, it is submitted that complete evidences pertaining to the source of share capital were filed during the course of assessment proceedings. Not only this, even the source in the hands of contributors of this capital i.e. partners, was also explained by submitting the copies of their income tax returns alongwith balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als v. CIT [2013] 32 taxmann.com 68 Allahabad) Section 68 of the Income-tax Act, 1961 - Cash credits - (In case of firm/partner) - Assessment year 1991-92 - Assessee was a partnership firm constituted vide partnership deed dated 5-7-1990 - A minor, 'S', was admitted to benefits of partnership firm on 7-7-1990 who contributed towards his capital account in shape of two demand drafts - In assessment proceedings, Assessing Officer required assessee firm to explain source of contribution made by 'S' - Explanation offered was not found satisfactory and Assessing Officer added amount contributed in hands of assessee - Tribunal confirmed said addition - On appeal, it was noted that it was first year of operation of assessee-firm and, thus, assessee could not have its separate income at time of formation - Further, identity of depositor, i.e., 'S', was not in dispute and, thus, if for one reason or other, revenue authorities were not satisfied with financial capability of 'S', amount in question could have been added at hands of 'S' but not in hands of firm - Whether in view of above, impugned addition made in case of assessee-firm was to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that, the salary was distributed among the partners as per clause 10 of the partnership deed (APB- 29) . The total salary credited in the capital accounts was ₹ 14,70,000/- ( APB 46-49) and accordingly, the admissible amount ₹ 674,723/- was claimed as deduction in the computation sheet. Though, there may be some mistake in bifurcation of salary at the time of preparing the computation sheet, wherein the total salary as claimed for the deduction was same i.e. ₹ 14,70,000/- but the same was shown as distributed between 7 (seven) partners only, instead of 10 partners, as per clause 10 of partnership deed however, the same did not affect the total Income of the firm, if the salary is calculated as prescribed in the deed of partnership and is claimed in Profit Loss Account (APB-46) and distributed between the partners (APB 47-49). Merely due to mistake in computation of income where inadvertently the total salary of ₹ 14,70,000/- was shown as distributed amongst 7 (seven) partners instead of 10 (ten) partners, it does not make order passed as prejudicial to the interest of revenue since the amount allowable towards partners remuneration as per pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the issue of deposits made by partners in the bank account of assessee , it is submitted that, the amount deposited by the partners in the Bank accounts, had already been shown in the concerning capital accounts as well as in the Balance Sheet etc. submitted at the time of assessment. The assessee has also explained the source of deposits at the time of assessment before the assessing authority as mentioned in the preceding paras in detail. 6. On the issue of payment of vehicle rent to various truck owners, it is submitted that, the assessee expended a sum of ₹ 46,44,301/- on vehicles rent, the assessee submitted the copy of above account before the assessing authority, the assessee also produced the vouchers of each and every entry of payment in the above said heads (APB-106) . No payment exceeding ₹ 50,000/- was made to any party, thus the assessee was not liable to make any TDS, the Assessing Officer was satisfied with the above submissions and thus made no disallowance. 7. With regard to unsecured loan taken by assessee , it is submitted that all the parties are assessed to Income Tax since long and the amounts were received through account pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.] A perusal of above clarifies that order passed by assessing officer shall be deemed to be erroneous and prejudicial to the interest of the revenue if AO has passed such order without making inquiries or verification which should have been made; It is worthwhile to note here that the phrase which should have been made here in no way means that enquiries should have been made in manner as desired by CIT, rather it means that before holding an order to be erroneous, CIT should have conducted necessary enquiries or verification which brings on record certain material in order to show that the finding given by the assessing officer is erroneous. In this regard reliance is placed on the following decisions: (1) Shri Narayan Tatu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of Ld. CIT u/s 263 of the Act. In holding so, we find support and guidance from the judgment of Hon'ble jurisdictional High Court in the case of CIT vs. M/s. J.L. Morrison (India) Ltd. (ITA No 168 of 2011) in GA No 1541 of 2012 dated 15.05.2014, wherein it was held as under:- By sections 3 and 4, the Indian Income-tax Act, 1922, imposes a general liability to tax upon all income. But the Act does not provide that whatever is received by a person must be regarded as income liable to tax. In all cases in which a receipt is sought to be taxed as income, the burden lies upon the department to prove that it is within the taxing provision. We also rely on the judgment of the Hon ble Supreme Court in the case of CIT Vs. Max India Limited reported in 295 ITR 282 wherein it was held as under : When the CIT passed the impugned order under s. 263, two views were inherently possible on the word profits occurring in the proviso to s. 80HHC(3) and therefore, subsequent amendment of s. 80HHC made in the year 2005, though retrospective, did not render the order of the AO erroneous and prejudicial to the interest of the Revenue, and CIT could not exercise powers un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record in the shape of the submissions and departmental record, the Ld. AO has passed a reasoned order. Thus, the order of Ld. AO cannot at all be held as erroneous and thus the action of Ld. CIT(Admn.) in passing the impugned order concluding that the said order is erroneous and prejudicial to the revenue is bad in law. It is further submitted that, the Hon ble Bombay High Court in the case of CIT Vs. Gabrial India Ltd ., reported in 203 ITR 108 , has held that, CIT cannot revise order merely because he disagrees with the conclusion arrived at by the ITO . Further, in the case of CIT Vs. Sunbeam Auto Ltd. , reported in 227 CTR 133 , the Hon ble Delhi High Court drew a distinction between Lack of inquiry and inadequate enquiry and held that, in the case of inadequate enquiry, provisions under section 263 cannot be invoked. It may however, be noted that the instance case is neither the case of inadequate enquiry nor lack of enquiry during assessment proceedings as it can be seen that due, necessary and most pertinent enquiries to all the issues emerging from the return filed by the assessee were conducted by the Ld. AO. Therefore, in view of such legal position, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law. Thus, it is submitted without admitting that the defect (if any) does not in anyway lead to supply the foundation for revising an otherwise valid order which can neither be said erroneous nor prejudicial to invoke section 263 of the Income Tax Act, 1961, which section cannot be permitted to be brought into play unless both the conditions i.e. the order has to be prejudicial as well as erroneous both, meaning thereby that the twin conditions are to be cumulatively satisfied before proceeding to revise an assessment order. In light of the facts / circumstances of the case, submissions made above, and the case laws relied upon, it is very humbly prayed that the impugned revision order of Ld. CIT(Admn.) may please be quashed and held bad in law, thereby restoring the assessment order of Ld. AO. Further, reliance is placed on the following case laws: 1. CIT Vs. M/s Chambal Fertilizers Chemicals Ltd. (Raj HC) (2014) 51 TW (III) 157 Therefore, it is clear the CIT does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the following conditions are satisfied (i) the order of the Assessing Officer should be erroneous, and (ii) it should be prejudicial to the interests of the Revenue. These conditions are conjunctive. An order of assessment passed by the Assessing Officer should not be interfered with only because another view is possible. 4. M/s Emgee Cables Communication Ltd. Vs. CIT (2014) 51 TW (IV) 197 Section 263 power of revision by commissioner AO completed assessment at NIL assessee involved in manufacture / trading of cable/copper/wire declared income from interest commission as business income accepted by AO CIT invoked sec 263 and setaside the order of AO directing him to consider the said income as income from other sources and not from business whether CIT justified in invoking sec 263? Held : No CIT only wanted AO to make re-verification cannot be said that that order of AO was without making proper enquiry AO having taken one of the possible view cannot be said that assessment order was erroneous and prejudicial to the interest of revenue. It is thus submitted that for the sake of clarification and at the cost of repetition it is submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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