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TMI Blog2020 (7) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... order u/s 143(3) r.w.s 263 of the Act dated 31.12.2018 and that being so the order passed u/s. 263 of the Act on such erroneous stand is liable to be quashed. Therefore, based on these facts and precedents narrated above, we quash the second 263 order of ld. PCIT. - Appeal filed by the assessee is allowed. - ITA No.289/Ran/2019 - - - Dated:- 8-7-2020 - Shri S.S. Godara, JM And Dr. A.L. Saini, AM For the Assessee : Shri M.K. Chaudhury Shri Devesh Poddar, Advocate For the Respondent : Shri Inderjeet Singh, CIT (DR) ORDER PER BENCH By way of this appeal, the assessee appellant has challenged correctness of the order dated 28.03.2019 passed by the learned Principal Commissioner of Income Tax (Central), Patna, ( for short PCIT )under section 263 of the Income Tax Act, 1961( Hereinafter referred to as the Act ). Grievances raised by the assessee are as follows: i. For that the order u/s 263 passed by ld. CIT, Central Patna is illegal, unjustified, arbitrary and is liable to be quashed. ii. For that Ld. Pr. CIT, Central, Patna erred in not appreciating that the assessment order u/s 153A/143(3) dated 28.12.2016, was duly cancelled by himself vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicial to the interest of Revenue and hence ld PCIT cancelled the assessment order passed by assessing officer under section 153A/143(3) dated 28.12.2016 and directed the assessing officer to pass a fresh assessment order. The findings of the ld PCIT in the first 263 order is given below: 6. The submission of the assessee has duly considered. The objection raised by the assessee is not acceptable as it is not based on facts of the case. The assessee has raised the objection through his AR that the amount of disclosure of ₹ 11.60 crore at the time of search seizure operation was not related to the assessee only, but also his family members, companies and firms in which they were partners or directors. But the documentary evidence (L) No. 46 of statement recorded u/s 132(4) reflects a different picture. The same is reproduced here: Sl. No. For the Financial Year Head Amount (in Rupees) 1 2011-12 From inflated expenses and undisclosed other income 95,50,500/- 2. 2013-14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e incurred on 'Scientific research' 35(i) (ii) of the I.T. Act, 1961, (iii) Omission to properly verify admissibility of receipts on account of 'Advance received' to the tune of ₹ 6,66,00,000/-, (iv) Omission to properly verify the admissibility of expenditure of ₹ 4,00,00,000/- under the head 'Loss and damage' and (v) Omission to properly verify the admissibility of expenditure under the head incentive on sales , amounting to a total of ₹ 9,45,96,300/-. Accordingly, a show-cause notice u/s 263 of the I.T. Act dated 18.03.2019 was served upon the assessee through the AO, confronting him on all the above issues and also asking him to show-cause as to why the action u/s 263 should not be invoked to revise the order u/s 153A/143(3) dated 28.12.2016, wherein the AO is found to have omitted to properly examine the above issues in the case. In response to the show-cause notice, the assessee filed his written submission and some related details of the case through e-mail on 25.03.2019. After a thorough examination of the assessment records and also the perusal of reply of the assessee, the following are observed: (i) As p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from M/s. Corus Steel Pvt., appears to be justifiable, but the rest amount of advance received amounting to ₹ 6,66,00,000/- was prima facie not allowable, but the AO appears to have failed to appreciate the issue properly and allowed the same at the time of assessment without considering the relevant detail and documents. As per the submission, the assessee has contended that during the assessment proceedings, proper clarifications along with the relevant confirmation were produced before the AO who on being satisfied with the submission allowed the same. But, the available case records prima facie indicate that the AO has omitted to properly appreciate and examine the supportive details and evidences before accepting the assessee s claim on Advance received to the tune of ₹ 6,66,00,000/- at the time of assessment. Therefore, the apparent omission on the part of the AO properly examine the issue clearly renders the assessment order erroneous in so far as it is prejudicial to the interest of revenue. (iv) As per statement of accounts, the assessee is also found to have claimed expenses of ₹ 4,00,00,000/- under the head Loss and damage which was paid to M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details and evidences before allowing the expenditure on Incentive on sales amounting to ₹ 9,45,96,300/- at the time of assessment. Therefore, the apparent omission on the part of the AO to properly examine the admissibility of the said expense clearly renders the assessment order erroneous in so far as it is prejudicial to the interest of revenue on this issue. It is evident from the materials on record that during the assessment proceedings in the case, the AO omitted to examine and consider the above issues in a proper manner. An order passed without proper enquiry and correct examination in respect of any issue, which is having substantial revenue effect, is indeed an order which is erroneous in so far as it is prejudicial to the interest of revenue as contemplated in section 263 of the I.T. Act. Hence, this case, in the opinion of the undersigned calls for action u/s 263 of the I.T. Act. As per the Explanation 2 of Section 263 of the I.T. Act, an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of revenue if (a) the order is passed without making inquiries or verification which should have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld PCIT by his first 263 order dated 29.12.2017. Therefore, to cancel the assessment order which was already cancelled by ld PCIT is not permitted under the law.Both the ld Counsels therefore submitted before us that the assessment order u/s 153A/143(3) passed on 28.12.2016 was a cancelled and non-existent order in law, for which no action u/s 263 could have been taken in second 263 order. Therefore, second 263 order passed by the ld PCIT is not sustainable in law. On merits, both the ld Counsels submitted before us that the issues/points for which ld PCIT had passed second 263 order were already examined by the assessing officer in the original assessment order under section 153A/143(3), dated 18.12.2016 and in second assessment order passed by AO under section 143(3) r.w.s. 263 of the Act, in pursuance of direction of ld PCIT in the first 263 order. Therefore, the issues/points which were already examined by the assessing officer, and the assessing officer has taken a possible view, the ld PCIT should not have exercised his jurisdiction under section 263 of the Act hence,bothld Counsels prayed the Bench that second 263 order passed by the ld PCIT is bad in law and may be quash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. prejudicial to theinterest of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law . 10. Taking note of the aforesaid dictum of law laid down by the Hon ble ApexCourt, let us examine whether original assessment order passed by the assessing officer under section 153A/ 143(3) of the Act dated 28.12.2016, is erroneous as well as prejudicial to the interest of Revenue? In order to examine the validity of the proceedings under section 263 of the Act, let us first examine the do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,97,746/-. Submit the ledger of the same along with relevant documentary evidence. Also submit under your bills vouchers on this regard. From impounded documents, it is revealed that all mines development activity is to be done by M/s. Orient Resources. You are hence, directed to explain such expenses. You are also directed to prove the genuineness of such expenses incurred with relevant documentary evidences should be noted that the onus has been shifted on you to prove the genuineness of such expenses, as on earlier counts, you have submitted sufficient proof regarding the same and have given incomplete / evasive replies. You have also not justified as to why you are paying such sums (₹ 9,60,000/- during the year) to your employer of Mr. Niraj Sharma. (6) From your accounts, it is seen that you have debited and amount of ₹ 9,45,96,300/- under the head Incentive on sale . You have further clarified during subsequent replies to the I.T. dept. that such amount had been paid to M/s. Rajat Minerals and M/s. Core Minerals and only to M/s. Core Minerals during AY. To verify the same, enquiry u/s 133(6) was conducted and it was found that M/s. Core Minerals deni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etails of sundry debtors of ₹ 51,87,35,951/-. Furnish their name, PAN, address, ITR invoices against which such transactions arouse. (14) Submit details of sundry creditors of ₹ 46,15,97,033/-. Furnish their name, PAN, address, ITR, invoices against which such transaction arouse. (15)Submit details of purchases of ₹ 65,33,41,701/-. Also submit the invoices of such purchase along with name and complete address of such parties. (16) Submit ledger of compensation paid to employees ₹ 2,17,23,268/-. (17) Submit proof of service tax of ₹ 6,89,59,617/- paid during the year. (18) Submit ledger of Advertisement expense along with proof of TDS on the same. (19) Submit ledger of Other expenses of ₹ 45,13,68,375/-. (20) On perusal of the P L account, it is seen that you have debited an amount of ₹ 6,86,000/- as donation. Donation is not an expense incidental to business. You are hence directed to explain as to why it should be allowed to be debited. You are also directed to furnish copy of 80G certificate if any, in such cases. (21) Submit ledger of interest paid alongwith proof of TDS deducted on the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (35) Please furnish the detail of sundry creditors in the format given below also furnish the copies of confirmation Sl. No. Name complete address of person from whom goods were purchased PAN Amount mode Date of receive Balance as on 31.3.2012 (36) Please furnish details of fixed assets added, also furnish the documentary evidence of same. (37) Please furnish the details of immovable property sold/purchased. Sl. No. Sale/purchase deed no with date Area Sale/purchase consideration Stamp value (38) Please furnish copies of sales tax / VAT return filed along with copies of challans of agricultural tax/sales tax/VAT paid/service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t/long term capital gain. (xvii) Balance sheet, profit and loss account, bank statement etc. The assessee submitted the documents and details, as mentioned above, during the original assessment proceedings u/s 153A/143(3) of the Act in response to notice under section 142(1) of the Act. During the original assessment proceedings(before first 263 order), the Assessing Officer has examined and discussed with the assessee the above figures along with documents and details. Based on the above documents, evidences and explanation of the assessee, the original assessmentdated 28.12.2016 was framed by the assessing officer under section 153A/143(3) of the Act. 12. Thereafter, the Ld. PCIT has exercised jurisdiction u/s 263 of the Act( first 263 order) dated 29.12.2017 and declared the original assessment dated 28.12.2016 as cancelled which was framed by the assessing officer under section 153A/143(3) of the Act 13. In pursuance of the first 263 order dated 29.12.2017, the Assessing Officer has framed the consequential assessment order under section 143(3) read with section 263 of the Act dated 31.12.2018 and the assessment order so framed by the assessing officer is hereinafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving the substantial amount as incentive on sales. During the course of search and seizure operation and post search enquiry, Core Minerals in his submission dated 19.09.2014 denied to have received any incentive from M/s. Padam Kumar Jain. In view of the above facts, your claim of expenses under the head incentive on sales payment is not genuine. It is apparent that you have concealed your income by way of bogus expenses in form of incentive of sales given to aforesaid buyers in order to evade taxes. You are requested to show cause as to why expenses claimed under the head incentive on sales totaling amounting to ₹ 9,45,96,300/- should not be disallowed and added to the total income for the year under consideration. 2. On examination of details filed by you it is seen that you have claimed expenses of ₹ 2,31,97,746/- under the head mines development expenses. From impounded documents bearing identification page 19 20 of CMB- 1, it is revealed that all mines development activity is to be done by M/s. Orient Resources. Examination of accounts of different years it has been observed that in some of the years a substantial amount has been debited in the P L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis and substantiate the manner in which such undisclosed income has been derived. c. Treatment of the undisclosed income as mentioned above in the balance sheet with complete particulars of assets shown therein. d. Information as to whether the above noted undisclosed income has any nexus with any of the receipts / payments mentioned in the seized documents. You are requested to furnish the above details, explanations and documents duly identified on 14.12.2018. Notice u/s 142(1) is enclosed for your compliance, it may be noted that time and date of hearing must be strictly adhered to and no request for adjournment would be entertained. Please note that failure to comply with the terms of the above notice, penalty u/s 271(1)(b) of the Income tax Act, 1961 may be (in addition to tax, if any payable) imposed for a sum of ten thousand rupees for each such failure. We note thatwhile making the second assessment order u/s 143(3) r.w.s.263 of the Act, the following issues were examined by the assessing officer: (i).Incentive on sales totaling amounting to ₹ 9,45,96,300/- (ii).Expenses of ₹ 4,00,00,000/- under the head Loss Damage. (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has claimed the following expenses under the head Mines Development Expense for a total of ₹ 2,31,97,746.00 during the relevant previous year 2011-12: Expenses Amount in (Rs.) Overburden Removal 1,97,75,000.00 Road Maintenance 7,38,000.00 Sample Testing Fee 10,04,746.00 Supervision Charge 9,60,000.00 Free plantation D.G. Set 7,20,000.00 The ledgers of the above mentioned expenses along with relevant documentary evidence has been attached herewith for your reference. We would like to inform you that the agreement between the assessee and M/s. Orient Resources has been entered during the year 2013 and before that no transactions has been taken place between both the parties. As regard the payment of ₹ 9,60,000.00 to Mr. Niraj Sharma we would like to bring to your notice that Mr. Niraj Sharma is a mining engineer which is a very high qualification, moreover there is shortage of mining engineers in ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 4,00,00,000/-. (iv).Undisclosed income to the tune of ₹ 11,60,00,000/-. Therefore, having examined these expenses, the Assessing Officer has framed the consequential assessment order under section 143(3) read with section 263 of the Act dated 31.12.2018,(that is, second assessment order under section 143(3) r.w.s. 263 of the Act). 16. However, subsequently the Ld. PCIT has exercised again his jurisdiction under section 263 of the Act (vide his second 263 order dated 28.03.2019) to revise the original assessment order dated 28.12.2016 which was passed by the assessing officer under section 153A/143(3) of the Act. It is important to note here that ld PCIT has not exercised his jurisdiction u/s 263 of the Act to revise the assessment order framed by the assessing officer u/s 143(3)r.w.s.263 dated 31.12.2018 which was framed by assessing officer in pursuance of direction given by his first 263 order. That is, ld PCIT has exercised his jurisdiction under section 263 of the Act to revise the original assessment order u/s 153A/143(3) of the Act dated 28.12.2016, which was cancelled by him by his first 263 order dated 29.12.2017. At this juncture, ld Counsel submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) Omission to properly verify the admissibility of expenditure under the head incentive on sales , amounting to a total of ₹ 9,45,96,300/-. We note that first issue estimated additions of ₹ 11,42,917/- instead of ₹ 5,97,716/- is only typographical mistake. The correct total of the estimated addition should be at ₹ 11,42,917/-. In the assessment order due to typographical mistake the assessing officer mentioned the total at ₹ 5,97,716/- which is an apparent mistake which can be rectified by assessing officer suo-moto under section 154 of the Act or it can be rectified by the assessing officer on being an application made by assessee under section 154 of the Act. Therefore, when the remedy is available under the Act to correct the apparent mistake on the face of the record by using section 154 of the Act, there is no necessity to exercise the jurisdiction under section 263 of the Act. For remaining expenses, ld counsel submit before us that these expenses were examined by the assessing officer in the original assessment order u/s 153A/143(3) of the Act dated 28.12.2016 and in the second assessment order passed by assessing officer u/s 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses of ₹ 9,45,96,300/- has been examined by assessing officer in the original assessment u/s 153A/143(3) of the Act dated 28.12.2016, the said expenditure has also been examined by the assessing officer in the second assessment order passed by the assessing officer u/s 143(3) r.w.s. 263 of the Act which was framed by the assessing officer in pursuance of the direction given by ld PCIT, by his first 263 order. Therefore, the saidsalesincentive expenses of ₹ 9,45,96,300/- has been examined by the assessing officer twice. Again, in second 263 order, ld PCIT has directed the assessing officer to examine the said,sales incentive expenses of ₹ 9,45,96,300/- this means the assessing officer would examine third time said sales incentive expenses of ₹ 9,45,96,300/-. Since these expenses have already been scrutinized and examined by the assessing officer twice, that is, in the original assessment u/s 153A/143(3) of the Act dated 28.12.2016, and in the second assessment order passed by the assessing officer u/s 143(3) r.w.s. 263 of the Act. Now, the ld PCIT is directing again to the assessing officer by way of his second 263 order to examine these expenses ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of accounts, documents relating to various expenses, bills vouchers/invoices and the bank statements etc. and having satisfied himself about the correctness of the same and explanation of the assessee in regard to these expenses and completed the assessment and, therefore, there cannot be a reason to say that the A.O. has failed to conduct necessary enquiry before accepting the claim of the assessee. 20. We note that Ld. Pr. C.I.T. on analysis of assessment records derived satisfaction for issuing the impugned show-cause notice u/s. 263 of the Act. The expression record as used in section 263 of the Act is comprehensive enough to include the whole record of evidence on which the original assessment order is based. At the same time, if any information asked for by the assessing authority from the assessee or from others to whom he referred the matter during the course of assessment proceeding was not received but received subsequent to the completion of the assessment, in that situation the assessment order passed without receiving such report may appear to be erroneous within the meaning of sec.263 of the Act. In the case of the assessee, there is no denying the fact, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der u/s 263 of the Act. This is not permissible under law. For better appreciation, the relevant portion of the judgment in the case of Malabar Industrial Co. Ltd. vs. CIT (supra) is quoted below : The phrase prejudicial to the interests of the Revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law . 22. We note that the Ld. Pr. C.I.T. by invoking his jurisdiction u/s. 263 (Second 263 order) of the Act is giving another opportunity to the Ld. A.O., which is not permissible. Hon ble Bombay High Court in the case of RankaJewellers vs. Addl. CIT (328 ITR 148) relying on the decisions of Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out application of mind is basically a question of fact. The learned Tribunal has held that the assessment order was not passed without application of mind. The records of the assessment including the order-sheets go to show thatheard from time to time. In deciding the question the court has to bear in mind the presumption in law laid down in Section 114 clause (e) of the Evidence Act: that judicial and official acts have been regularly performed. 86. Therefore, the court has to start with the presumption that the assessment order dated March 28, 2008, was regularly passed. There is evidence to show that the Assessing Officer had required the assessee to answer 17 questions and to file documents in regard thereto. If the Assessing Officer cannot be shown to have violated any form prescribed for writing an assessment order, it would not be correct to hold that he acted illegally or without applying his mind. [Emphasis given] 23. It is a settled position in law that provisions of sec. 263 of the Act do not permit substituting one opinion by another opinion. Therefore, the order of the Ld. Pr. C.I.T. cannot be sustained on the principle of erroneous nature of the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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