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TMI Blog2024 (9) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... d, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case . The issue of sub-contract expenses admittedly was duly deliberated upon by the AO in Section 147 proceedings after the questionnaire dated 18.03.2023 - CIT wrong in saying that AO has not done proper enquiry. As discussed it is clearly discernible that AO has done properly each and every inquiry pertaining to sub-contract etc. The issue of refund was consequential to reassessment order dated 23.03.2023 and there is no specific order by the AO, hence, CIT cannot invoke jurisdiction u/s. 263 of the Act; Hence, we hold that the order passed by AO u/s. 147 dated 23.03.2023 is not erroneous in so far as it is prejudicial to the interest of the revenue. Since assessee has not challenged order u/s. 154 of the Act dated 8th August, 2023, hence not entitled to agitate in this proceedings. Tribunal order in the cases of Trinity Charitable Trust [ 2014 (9) TMI 924 - ITAT COCHIN ] and Cargo Service Centre India (P) Ltd. [ 2021 (12) TMI 398 - ITAT MUMBAI ] are dehors the facts of the present case hence not applicable. Case law cited b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial on record and submissions made by the Appellant. 2.3. The Ld. CIT erred in passing the Impugned Order, on the allegation that the Ld. AO had not examined/made inadequate inquiries with respect to provision for subcontracting expenses during the assessment proceedings, without appreciating that the Ld. AO had duly conducted enquiries and verification on subcontracting expenses and had also issued a notice under section 133(6) of the Act on Keller Ground Engineering India Private Limited ( Keller India ). 2.4. The Id. CIT erred in passing the Impugned Order, on the allegation that the Ld. AO had not examined the refund claim of the Appellant along with interest, without appreciating that the Ld. AO had duly conducted enquiries and verification on interest claimed along with refund during the proceedings under section 154 of the Act. 3- Disallowance of provision for subcontracting expenses 3.1 The Ld. CIT has, in the facts and circumstances of the case and in law, erred by disregarding the fact that the Appellant had created a provision for warranty based on unbilled revenue recorded by Keller India in percentage of completion method and therefore, the provision created shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... last date to furnish belated return for the impugned AY was March 31, 2019). Given the same, the Appellant had filed an application dated January 18, 2021, before the Hon'ble Board under section 119 of the Act for condonation of delay. During the pendency of disposal of the condonation application by the Hon'ble Board, the Appellant was served a notice under section 148 of the Act on March 31, 2022. In response to the notice Appellant filed a return of income on April 28, 2022. Thereafter, the Ld. AO proceeded with the reassessment proceedings. On conclusion of re-assessment proceedings, a reassessment order was passed by the Ld. AO under section 143(3) read with section 147 on March 23, 2023, accepting the returned income under section 148 of the Act. Further, the refund as returned in the return filed under section 148 of the Act ( 148 return ), along with applicable interest was determined as due in the said assessment order. Thereafter, the Ld. AO has proposed to rectify the above order vide notice dated July 26, 2023. The rectification was proposed on the ground that the Appellant was not eligible to interest under section 244A of the Act. The Appellant had responded t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion proceedings under section 154 of the Act 12 26-Jul-23 Notice for rectification proceedings under section 154 read with section 147 of the Act Claim of refund was examined 13 02-Aug-23 Response to notice for rectification under section 154 14 08-Aug-23 Rectification order under section 154 of the Act AO vide order under section 154 denied interest under section 244A of the Act IV. Revisionary proceedings under section 263 of the Act 15 18-Aug-23 SCN under section 263 of the Act SCN was issued on two issues provision for sub-contracting expense and refund claim 16 31-Aug-23 Response to SCN under section 263 of the Act 17 21-Sep-23 Order under section 263 of the Act holding Asst order u/s. 147 dated 23.03.2023 as erroneous in so far as it is prejudicial to the interest of Revenue 5. The ld. Authorised Representative referred the order of assessment passed u/s. 147 of the Act dated 23.03.2023 and relevant portion is reproduced as under:- 3. A notice u/s 143 (2) of the IT Act, 1961 dated 30.09.2022 was issued and duly served on the assessee. A notice u/s. 142(1) of the IT Act, 1961 dated 30.09.2022 calling for certain details was issued to the assessee. The assessee replied on 19.10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on April 28, 2022, in response to notice under section 148 of the Act 133 5 Submission dated June 20, 2022, filed with the Ld. AO in response to the notice under section 142(1) of the Act dated June 09, 2022 206 5.1. Notice under section 142(1) of the Act dated June 09, 2022, issued by the Id. AO 208 6 Submission dated October 07, 2022, in response to notice under section 143(2) read with 147 of the Act 210 6.1. Notice under section 143(2) read with 147 of the dated October 03, 2022 issued by Ld. AO 213 7 Submission dated October 18, 2022, filed with the Ld. AO in response to the notice dated October 07, 2022 217 7.1. Notice under section 142(1) of the Act dated October 07, 2022, issued by the Ld. AO 221 7.2. Statement of computation of income of the Appellant for AY 2018-19 225 7.3. Financial statements of the Appellant for FY 2017-18 230 8 Submission dated March 21, 2023, filed with the AO in response to the show cause notice ( SCN ) dated March 18, 2023 issued by the Ld. AO 233 8.1 SCN dated March 18, 2023, issued by the Id. AO 238 8.2 Letter of award issued by Rail Vikas Nigam Ltd. ( RVNL ) to the Appellant 239 Letter of award issued by the Appellant to Keller Ground Engineerin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Max India Ltd. HC-P H 268 ITR 128 5 3 Malabar Industries Co. Ltd. Supreme Court 243 ITR 83 7 4 Virtusa Consulting Services (P.) Ltd. HC-Madras 442 ITR 385 12 5 Sunbeam Auto Ltd. HC-Delhi 332 ITR 167 22 6 Spectra Shares Scrips (P.) Ltd. HC-Andhra Pradesh 354 ITR 35 33 7 Saravana Developers HC-Karnataka 387 ITR 239 57 8 Chemsworth (P.) Ltd. HC-Karnataka 119 taxmann.com 358 65 9 Hari Iron Trading Co HC-Punjab Haryana 263 ITR 437 69 10 Shriram Properties Limited ITAT-Chennai 2023 (4) TMI 375 76 11 Cavinkare (P.) Ltd. ITAT-Chennai 149 taxmann.com 296 97 12 Rajkumar Impex Pvt. Ltd. ITAT-Chennai 2023 (6) TMI 812 108 13 FCA Engineering India Pvt. Ltd. ITAT-Chennai ITA No. 684/CHNY/2023 117 B. Refund cannot be denied merely on account of non-furnishing of the return Sl.No Name of the case Forum Citation Page No. 14 Tata Chemicals Ltd. Supreme Court 363 ITR 658 126 15 R. Seshammal HC-Madras 237 ITR 185 136 16 Vali Brothers HC- Allahad 282 ITR 149 138 17 A. Balakrishnan HC-Karnataka 290 ITR 227 141 18 Daljit Singh Pyare Lal Co. HC-P H 269 ITR 19 146 19 Karnataka State Cooperative Apex Bank Ltd. HC-Karnataka 130 taxmann.com 114 149 20 C. Kishan Rao Co. ITAT Hyderabad 3 ITD 474 155 The ld.Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e may be,] is erroneous in so far as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, [including, (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under Section 92- CA; or (iii) an order cancelling the order under Section 92-CA and directing a fresh order under the said section.] *** [Explanation 2. For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or Commissioner, (a) the order is passed without making inquiries or verification which 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 accordanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect a non-application of mind by the AO. It was further held that merely inadequacy of enquiry would not confer the power of revision under Section 263 of the Act on the Commissioner. The relevant paragraph of the said decision reads as under:- We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income-tax Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a conclusion that there was no enquiry with respect to transactions carried out by the assessee. 25. Further, the decision of the Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd., enunciates the meaning and intent of the phrase prejudicial to the interests of the Revenue , in the following words:- 8.The phrase prejudicial to the interests of the Revenue is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The High Court of Calcutta in Dawjee Dadabhoy Co.v.S.P. Jain[(1957) 31 ITR 872(Cal)], the High Court of Karnataka in CITv.T. Narayana Pai[(1975) 98 ITR 422(Kant)], the High Court of Bombay in CITv.Gabriel India Ltd.[(1993) 203 ITR 108(Bom)] and the High Court of Gujarat in CITv.Minalben S. Parikh[(1995) 215 ITR 81(Guj)] treated loss of tax as prejudicial to the interests of the Revenue. 9. Mr. Abraham relied on the judgment of the Division Bench of the High Court of Madras in Venkatakrishna Rice Co.v.CIT[(1987) 163 ITR 129(Mad)] interpreting prejudicial to the interests of the Revenue . The High Court held: In this context, (it must) be regarded as involving a conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Section 263of the Income Tax Act, it is observed and held that in order to exercise the jurisdiction under Section 263(1)of the Income tax Act, the Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. It is further observed that if one of them is absent, recourse cannot be had to Section 263(1) of the Act. *** . 27. Considering the aforesaid judicial pronouncements, it can be safely concluded that inadequacy of enquiry by the AO with respect to certain claims would not in itself be a reason to invoke the powers enshrined in Section 263 of the Act. The Revenue in the instant case has not been able to make out a sufficient case that the CIT has exercised the power in accordance with law. Rather, in our considered opinion, the facts of the case do not indicate that the twin conditions contained in Section 263 of the Act are fulfilled in its letter and spirit. 28. Notably, the ITAT, while making a categorical finding that the CIT had failed to point out any definite or specific error in the assessment order, has satisfactorily explained bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame is misplaced, particularly in light of the insertion of Explanation 2 to Section 263 of the Act, brought in place by the Finance Act, 2015. The said amendment markedly specifies various conditions to exercise the authority vested in the Commissioner under Section 263 of the Act, leaving no ambiguity in the interpretation of the said provision. 31. In view of the aforesaid, the appeal preferred by the Revenue is dismissed alongwith the pending application(s), if any . 9. Hence in the light of above judgment and cases cited at bar, we are of the considered view that the impugned order is liable to be set aside for the following reasons:- (i) The ld. CIT took into consideration the same set of material which was duly addressed by the AO in reassessment proceedings; (ii) The ld. CIT cannot sit in appeal on the reassessment order 23.03.2023 reversing findings of the AO and impose his own view of decision making process on same material; (iii) There is legal presumption as per Section 114(f) of the Evidence Act that AO passed the reassessment order properly to the best of his ability. Section 114(f) of the evidence Act says: The Court may presume the existence of any fact which it th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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