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TMI Blog2022 (8) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... re restricted and because of such practical situation, it was always not possible to follow the time of limitation regarding filing of appeal before various forums. This fact was also observed and taken cognizance by the Hon'ble Supreme Court of India, in Civil Original Jurisdiction, Suo Moto Writ Petition (Civil) No. 3 of 2020 dated 8th March, 2021 excluding the limitation period from 15.03.2020 to 14.03.2021. The assessee has also filed separately condonation petition. The ld. D/R agreed for the condonation of delay of 92 days. After hearing the parties and taking guidance from the decision of the Hon'ble Supreme Court (supra), we condone the delay of the assessee and proceed to hear the case on merits. 3. The assessee is in appeal before this Tribunal raising the following grounds: "1. That the order passed by Ld. Principal Commissioner of Income Tax, Kolkata-2 under section 263 of the Income Tax Act, 1961 setting aside the assessment order dated 30th November, 2018 passed by the Income Tax Officer, Ward - 4(4), Kolkata under section 143(3) read with section 147 of the Income Tax Act, 1961 is without jurisdiction, against law and facts of the case and therefore illegal and is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was received from Investigation (Wing) Kolkata that a search and seizure operation u/s 132 and survey operation u/s 133A of the Income-tax Act, 1961 was conducted at the various premises of group concerns of Super Sonic and Jhunjhunwala Group with two entry operator namely Bhartia Group and Newatia Group at Kolkata, Hyderabad, Jamshedpur and Indore on 03.01.2018. During the search operation statement of Sri Subhash Kumar Bhartia was recorded u/s 132(4) of the Income Tax Act. He has stated in his statement that M/s Chaturang Commercials Pvt. Ltd., Liberal Spinners Pvt. Ltd., Oven Commercial Pvt. Ltd., Chanda Cast Iron Industries Pvt. Ltd., Pushkar Trading and Holdings Pvt. Ltd. are shell companies controlled and managed by him and these companies were formed for providing accommodation entry to the various beneficiaries in the form of bogus share capital & share premium and unsecured loan etc. Further bank accounts of above five companies were scrutinized. It was seen that M/s unsecured loan etc. Further bank accounts of above five companies were scrutinized. It was seen that M/s. Karan Polymers Pvt. Ltd. has taken accommodation entry of Rs. 60,00,000/- from M/s. Pushker Trading a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 by the ITO, Ward- 4(4), Kolkata on 30.11.2018 for A.Y. 2011- 12 is prima facie, erroneous in so far as it is prejudicial to the interests of the revenue for the following reasons: "In the instant case, an information was received from the Investigation wing Kolkata that M/s Karan Polymers Pvt. Ltd., the Assessee Company had taken accommodation entry of Rs. 60,00,000/- from M/s Pushker Trading and Holdings Pvt. Ltd. Thereafter letter was received from the office of the Pr. Commissioner of Income Tax-2, Kolkata on 26.04.2018 regarding "Action taken report in cases of beneficiaries of S.K Hawala Scam in respect of information provided by Pr. DIT(Inv.), Delhi". As no action was taken earlier the same was included in the note sheet by the then jurisdictional ACIT Circle - 4(1), Kolkata for investigation during the course of assessment proceeding already re-opened on the basis of information received from the ADIT (Inv), Unit - 6, Kolkata on 29.03.2018. The information was that the Assessee Company was involved in S.K. Jain Haw ala Scam and is one of the beneficiaries who had got credited fund of Rs. 10,00,000/- in its bank account during the financial year 2010-11. The above informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation wing, no scrutiny was made by the AO in this regard. Therefore, the assessment completed appears to be erroneous in so far as prejudicial to the interests of revenue as no scrutiny." 4.4. In response to the notice issued u/s 263 of the Act, the assessee filed a detailed reply. In the reply, the assessee submitted that the notice issued u/s 263 of the Act is not as per law and therefore it was requested to drop the proceedings initiated u/s 263 of the Act. Copy of the reply is enclosed at page 8-19 of the paper book. 4.5. However, the learned PCIT did not appreciate the submissions filed by the assessee and passed the order u/s 263 of the Act dated 26-03-2021 wherein the assessment order passed u/s 143(3)/147 dated 30-11-2018 for the subject assessment year was set aside to the file of the Assessing Officer with a direction to pass a fresh assessment order holding that the said order is erroneous and prejudicial to the interest of the revenue on the following grounds: 1. The Assessing Officer failed to make proper enquiries in respect of the information received from the Directorate of Investigation, Kolkata on accommodation entry of Rs.60,00,000/- taken by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 0136 and that of the Hon'ble Bombay High Court in the case of PCIT vs. Lark Chemicals (P) Ltd. [2018] 99 taxmann.com 311 (Bom.). Based on the ratio laid down in these judgments, ld. Counsel for the assessee stated that since the very cause for re-opening the case of the assessee on the basis of reasons recorded failed it was not open for the ld. AO to independently assess any other income and if he intends to do so, a fresh notice u/s 148 of the Act has to be given. Therefore, since the assessment order u/s 147 of the Act dated 30.11.2018 cease to survive, time limit of initiating the proceedings u/s 263 of the Act raising new issues which were not the subject matter of the re-assessment proceedings as contemplated under sub-Section (2) of Section 263 of the Act, which is two years, would begin to run from the date of the original assessment order and not from the date of re-assessment order. Reliance was placed on the judgment of the Hon'ble High Court of Madras in the case of Indira Industries vs. PCIT [2018] 95 taxmann.com 103 (Madras). Third contention which is on merits of the case is that for all the three issues raised in the show cause notice detailed enquiry has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rroneous and prejudicial to the interest of the Revenue on the following three grounds: "1. The Assessing Officer failed to make proper enquiries in respect of the information received from the Directorate of Investigation, Kolkata on accommodation entry of Rs.60,00,000/- taken by the assessee from M/s Pushkar Trading and Holding Pvt. Ltd. 2. The Assessing Officer has failed to appreciate that the assessee was involved in S.K.Jain Hawala Scam. The A.O. has failed to make proper enquiries which should have been carried out in the instant case in respect of information in cases of beneficiaries of S.K. Jain Hawala Scam. 3. The Assessing Officer did not make any enquiry in respect of the share application money of Rs.2,85,67,000/- received during the FY 2010-11." 9. With the assistance of ld. representative, we have gone through the record. Section 263 has a direct bearing on the controversy, therefore, it is pertinent to take note of this section. It reads as under:- "263(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 9.1. On a bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessing Officer on culmination of any proceedings or during the pendency of those proceedings. On an analysis of the record and of the order passed by the Assessing Officer, he formed an opinion that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. By this stage the learned Commissioner was not required the assistance of the assessee. Thereafter the third stage would come. The learned Commissioner would issue a show cause notice pointing out the reasons for the formation of his belief that action u/s 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al v. CIT [1973] 88 ITR 323 (SC)".[Emphasis Supplied] 9.3. Hon'ble Apex Court in the case of CIT vs. Max India Limited as reported in 295 ITR 0282 has held that: " 2. At this stage we may clarify that under para 10 of the judgment in the case of Malabar Industrial Co. Ltd. (supra) this Court has taken the view that the phrase "prejudicial to the interest of the Revenue" under s. 263 has to be read in conjunction with the expression "erroneous" order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, when the ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO 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 ITO is unsustainable in law." 9.4. Hon'ble Madhya Pradesh High court in the case of CIT vs. Associated Food Products (P) Ltd as reported in 280 ITR 0377 has held that: 10. In view of the aforesaid pronouncement of law and taking into consideration the language emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possible views, no action to exercise powers of revision can arise, nor can revisional power be exercised for directing a fuller enquiry to find out if the view taken is erroneous. This power of revision can be exercised only where no enquiry, as required under the law, is done. It is not open to enquire in case of inadequate inquiry. Our view is fortified by the judgment of Hon'ble High Court of Bombay in the case of CIT vs. Nirav Modi, [2016] 71 taxmann.com 272 (Bombay). 9.6. This view is further supported by the decision of the Hon'ble Gujarat High Court in the case of Shri Prakash Bhagchand Khatri in Tax Appeal No. 177 with Tax Appeal No.178 of 2016, wherein the Hon'ble Gujarat High Court was seized with the following substantial question of law:- "Whether the Tribunal is right in law and on facts in upholding the order passed by the CIT under section 263 of the Act on merits and still storing the issue of allowability of deduction under section 54 of the Act to the file of Assessing Officer even though the working of allowability of deduction under section 54F is available in the order under section 263 which is not disputed by the assessee before ITAT." 9.7. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apart from above stated broader principles, one more principle needs to be added in view of the judgment of Hon'ble Delhi High Court in the case of ITO vs. D.G. Housing Projects Ltd. [2012] 343 ITR 329 (Delhi) that the ld. CIT has to examine and verify the issue himself and give a finding on merits and form an opinion on merits that the order passed by the AO is erroneous and prejudicial to the interest of the Revenue. Relevant extract is reproduced below: "In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. This fact was, further, stated in another reply filed on 22.10.2018 place on record at page 37 to 38 of the paper book when the ld. AO sought some more information about the alleged transaction. These series of facts prove beyond doubt that the ld. AO has conducted a detailed enquiry about the issue of alleged transaction of the assessee with M/s. Pushkar Trading and Holding Pvt. Ltd. and after examining the documents filed by the assessee, ld. AO was satisfied that the assessee has not entered into any bogus/accommodation entry/transaction with this party and there is no element of undisclosed income and further, the transaction was not of Rs.60,00,000/- but it was transaction of Rs.30,00,000/- as the loan received on 13.10.2010 and the same amount repaid on 25.11.2010. We are of the considered view that the order of the AO dated 30.11.2018 cannot be termed as erroneous and prejudicial to the interest of the Revenue on the basis of this issue of the alleged transaction with M/s. Pushkar Trading and Holding Pvt. Ltd. 11. As regards the second issue raised in the show cause notice relating to the alleged transaction of Rs.10,00,000/- in S.K. Hawala Scam, we find that in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a challenge by the assessee". Since ld. AO had not made any addition for the reasons recorded, no addition could be made on any other issue without issuing a fresh show cause notice u/s 148 of the Act. Under these circumstances, invoking the provisions of Section 263 of the Act was bad in law. 12.2. Even otherwise, the second contention of the assessee also has merit that in view of the ratio laid down by the Hon'ble Madras High Court in the case of Indira Industries (supra), if a notice u/s 263 of the Act raises new issue which are not the subject matter of re-assessment proceedings, then two year period contemplated under sub-Section (2) of Section 263 of the Act would begin to run from the date of original assessment and not from the date of re-assessment. In the instant case the original assessment was completed on 31.03.2014 and if this date is taken as the basis for computing the limitation period for invoking provisions of Section 263 of the Act, the impugned proceedings would be time barred. 12.3. Even on merits, from perusal of the audited financial statement placed at page 49 to 66 of the paper book, schedule of share capital in schedule-A at page 56 that as on 31.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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