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TMI Blog2025 (1) TMI 1480X X X X Extracts X X X X X X X X Extracts X X X X ..... Seethalakshmi, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : Shri Mahendra Gargieya, (Adv.) And Shri Hemang Gargieya (Adv.) For the Revenue : Mrs. Alka Gautam, (CIT-DR) ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by the assessee aggrieved from the order of the Learned Principal Commissioner of Income Tax, Udaipur dated 29.02.2024 [for short "PCIT"] for the assessment year 2017- 18. Ld. PCIT passed that order while exercising the power vested upon her u/s. 263 of Income Tax Act, 1961 [for short Act] while examining the assessment records of the assessee which was passed by the National Faceless Assessment Centre on 15.04.2021. 2. The assessee has marched this appeal on the following grounds:- "1. The Ld. PCIT, Udaipur seriously erred in law as well as on the facts of the case in invoking the provisions of S.263 of the Act and therefore, the impugned order dated 29.02.2024 u/s 263 kindly be quashed. 2. The Id. PCIT, Udaipur seriously erred in law as well as on the facts of the case in assuming jurisdiction u/s 263 by wrongly and incorrectly holding that the subjected assessment order passed u/s 147 dated 15.04.2021 is prejudicial to the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se Existed: With regard to the delay, it is humbly submitted that there did exist a reasonable cause and the delay so caused was completely unintended and bonafide in as much as Shri Sushil Mittal, employed in the office of the Company and permanent employee of the appellant company namely, M/s SHIV VEGPRO PRIVATE LIMITED, Kota, was assigned the task to collect the appeal prepared from the counsel at Jaipur, to get it signed and to ensure filing of the same in time. Shri Sushil Mittal was fully conversant with the affairs of the above assessee in the office of M/s SHIV VEGPRO PRIVATE LIMITED, Kota. Shri Sushil Mittal collected the documents prepared from the counsel at Jaipur, which were received only a week before the last date of filing of the appeal. In the meanwhile, because of the marriage of his daughter in the month of April, he proceeded on leave. Therefore, he could neither hand over his responsibilities to his colleague nor could inform Shri Sandeep Kumar Saboo, Director of the company about the documents, including the appeal papers. 2.2 Although subsequently, Shri Sushil Mittal resumed his duties in the office sometime in the first week of May, 2024, yet however, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slature has conferred the power to condone delay by enacting section 5 of the Limitation Act 1963 in order to enable the Courts to do substantial justice to parties by disposing of matters on 'merits. The expression 'sufficient cause employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner which sub serves the ends of justice that being the life-purpose of the existence of the institution of Courts. It is common knowledge that this Court has been making a justifiably liberal approach in matters instituted in this Court, But the message does not appear to have percolated down to all the other Courts in the hierarchy." The said judgment is a leading case on the subject and has a binding force on all the officers subordinate thereto. Prayer It is, therefore, humbly prayed that: a. This application may kindly be allowed by condoning the delay, taking a sympathetic view, in the interest of justice. b. Any other order, which this Hon'ble ITAT deems fit and proper, be also passed in favour of applicant assessee." The assessee also supported the contention so raised in the application with an affidavit so exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases, Sales and Valuation of Stock etc., which could establish the claim of the assessee that its sale is genuine. Although the assessee has submitted the sale invoices amounting to Rs. 6,93,32,499/- made to the party named M/s Kangana Agro Product, no supporting evidence of goods actually transported has been submitted. On perusal of the sales invoices submitted by the assessee, it is seen that the details of the transporters, GR/LR no, date and time of entry, date and time of dispatch are left blank. Hence, it appears that these invoices/documents are self-generated and do not prove the actual movement of the goods allegedly sold to the party M/s Kangna Agro Products for Rs. 6,93,32,499/-. 4.4 Shri Sanjay, Proprietor of M/s Kangna Agro Products (PAN: EFKPS5346C) in his statement recorded on 11/11/2019 u/s 131(1) of the Act mentioned that he was only a helper/cleaner in the Office of Shri Om Prakash and Shri Om Prakash established a proprietorship concern called M/s Kangna Agro Products in the name of Shri Sanjay. He further stated in his statement that he never did any business from this proprietorship concern, and he did not have any knowledge about the business activities of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of law, the assessment order passed u/s 147 r.w.s. 144B of the Act was found to be erroneous in so far as it was prejudicial to the interest of revenue. Therefore, she proposed that the impugned order be suitably be modified / enhanced / cancelled by invoking the provisions of section 263 of the Act. Before doing so she a notice u/s. 263 of the Act was duly issued on 14.02.2023 to the assessee for giving opportunity of being heard as well as requiring the assessee to furnish its submission on the issues, as categorically mentioned by her. In compliance to that notice assessee filed written submission on 16.06.2023. Ld. PCIT considered the reply of the assessee and she deal with the each issue so as to observed a detailed holding holds that the order of the assessing officer is therefore, liable for revision under clause (a) & (b) of the Explanation of (2) of section of 263 of the Act. The relevant finding of the ld. PCIT is reiterated herein below:- "8. Considering the above facts, it is held that the order passed by the Assessing Officer (FAU) u/s 147 r.w.s. 144B of the IT Act dated 15.04.2021 is suffering from specific defects, hence, order so passed by the AO is errone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e passing the order and for that specific notice was issued by the ld. AO applied mind and after due process of law that order was passed making addition thereupon. Thus, he relied upon the assessment order and submitted that there is no flaw in the assessment order and the impugned order u/s 263 of the Act passed by the ld. PCIT needs to be quashed for which he submitted the following written submission to counter the order of the ld. PCIT; BRIEF FACTS: The appellant is a private limited company engaged in manufacturing of vegetable oil, DOC, High Pro-DOC etc. The appellant filed its ROI u/s 139 of the Act on dated 06.11.2017 declaring total income at Rs. 9,56,12,530/-. The same was processed on date 16.10.2018 u/s 143(1) of the Act. Thereafter, the case was reopened u/s 147 by issuing notice u/s 148 dated 17.03.2020, in response to which the appellant filed ROI declaring the same total income. The reassessment was completed after making additions of Rs. 6,93,32,499/- making additions u/s 68 of the Act on account of unexplained credits in the grab of bogus sales and thus, the total income was finally assessed at Rs. 16,49,44,849/- (PB 62-69) vide the order u/s 143/147 at 15.04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following: - (a) While completing the Scrutiny Assessment u/s 147 r.w.s.144B of the Act, the AO/NaFAC made an addition of Rs. 6,93,32,499 u/s 68 of the Act and assessed at Total Income at Rs. 16,49,44,849/-. (c) Therefore, the addition on account of Bogus Sales as Unexplained Cash Credit u/s 68 (Rs.6,93,32,499/-), made vide the Assessment Order Dated 15.04.2021, SHALL NOT BE DISTURBED, and would be free from fresh assessment proceedings. (c) The tax shall have to be charged as per Section 115BBE of the Act for the addition already made u/s 68 of the Act, supra. 10. Thereafter, based on outcome of such enquiries and verification, necessary additions, wherever required, may be made to the total income of the assessee as per law by modifying the assessment order u/s 147/144B of the Act dated 15.04.2021. However, the AO is directed to ensure that reasonable opportunities of being heard are provided to the assessee before passing such order." Hence this appeal Submissions: The impugned order passed u/s 263 is completely beyond the scope of S. 263 of the Act on various grounds, as discussed herein below. 1. Legal Position on Sec.263 - Judicial Guideline: Before proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer has 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." Ratio of these cases fully apply on the facts of the present case in principle. 2.Beyond the scope of enquiry contemplated u/s 263 on facts and in law: The law is well settled that the reopening of reassessment as contemplated u/s 147 of the Act is for a specific purpose of assessing the escaped income and therefore, the AO, in the reassessment proceedings can assess only those item of income which have escaped assessment and find place in the reasons to believe but the income not being a part of the reasons recorded cannot be considered in the reassessment proceedings and also therefore, cannot be subject matter of revisionary proceedings u/s 263 of the Act. The facts are not disputed that in this case, the Assessment Order passed u/s 147 dt. 15.04.2021 has been subjected to revision u/s 263 by the Ld. CIT. A Notice u/s 148 was issued on 17.03.2020 for A.Y. 2017-18 under consideration, and reasons to believe are recorded as communicated to the appellant by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concern and was not doing any genuine business activities during the relevant year. The AO thus, having recorded specific reasons, could not have enquired into and examined any issue other than those already recorded in the reasons to believe, as above. A specific amount was categorically mentioned of the escaped income being Rs. 6,93,32,499/- based on certain items beyond which, the AO was not supposed to have gone in as much as the entire assessment was not thrown open before him. Hence, consequently AO was supposed to complete the assessment u/s 147/148 of the Act as per reason to believe only. Also when no other escaped income came to his notice during re-assessment proceedings. The issues raised now by the Ld. CIT in the captioned SCN u/s 263 being failure of the AO in making various disallowances/additions were not part of the reasons to believe. In other words, the captioned SCN does not touch/not even whisper anything stated in the reasons to believe based on which only, the proceedings u/s 147 was initiated hence, such issues are beyond the scope of 263 and therefore, the proceedings may kindly be dropped. 3. Supporting Case Laws: 3.1 In case of CIT vs. Alagendran Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be exercised with reference to issues which did not form subject of reopening of assessment or order of reassessment, period of limitation provided for in section 263(2) would commence from date of order of assessment and not from date on which order of reassessment has been passed - Held, yes Section 147 of the Income-tax Act, 1961 - Income escaping assessment - General - Whether where assessment is sought to be reopened only on one or more specific grounds and reassessment is confined to one or more of those grounds, original order of assessment would continue to hold field, save and except for those grounds on which a reassessment has been made under section 143(3) read with section 147 - Held, yes Fact: For the relevant assessment year, the assessee's original order of assessment under section 143(3) dated 27-12-2006 was sought to be reopened on 6-3-2007 solely on the basis that the benefit of section 72A had been wrongly allowed to the assessee. In the order of reassessment, that was passed on 27-12-2007, the claim made by the assessee with reference to the provisions of section 72A was disallowed. On 30-4-2009, the Commissioner issued the impugned notice under section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f PF and ESI on the due date specified in the related Act, but all the contributions were duly deposited before the due date (as evident from the table given hereunder) of filing of return u/s 139(1). Hence, the same are fully allowable. The original due date for filing of ROI was 31.09.2017 which was extended to 31.10.2017. Payment of Employees State Insurance (ESI) S.No. Month of Deduction Amount Paid Due Date of Payment The actual date of payment 1. August, 2016 Rs. 38,263/- 21-Sep-16 26-Sep-16 2. October, 2016 Rs. 38,263/- 21-Nov-16 22-Nov-16 3. November, 2016 Rs. 37,272/- 21-Dec-18 30-Jan-17 4. December, 2016 Rs. 45,810/- 21-Jan-19 31-Jan-17 5. January, 2017 Rs. 52,449/- 21-Feb-19 06-Mar-17 6. February, 2017 Rs. 51,546/- 21-Mar-19 24-Mar-17 Payment of Employees Provident Fund (PF) S.No. Month of Deduction Amount Paid Due Date of Payment The actual date of payment 1. April, 2016 Rs. 2,74,365/- 15-May-16 16-May-16 2. August, 2016 Rs. 26,028/- 15-Sep-18 16-Sep-16 3. September,2016 Rs. 2,98,842/- 15-Oct-18 19-Oct-16 4. October, 2016 Rs. 2,98,842/- 15-Nov-18 21-Nov-16 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be made u-s 43B or section 36(1)(va). No substantial question of law arises out of the impugned orders of the ITAT. Commissioner of Income Tax vs. M-s State Bank of Bikaner & Jaipur (D.B. Income Tax Appeal No.177-2011); Commissioner of Income Tax vs. Jaipur Vidyut Vitaran Nigam Ltd. (D.B. Income Tax Appeal No.189-2011), followed." 4.2.4 The Hon'ble ITAT, Jaipur Bench has also followed the same view in the case of ACIT v-s M-s Anil Special Steel Industries Ltd., Jaipur (2014) 52 TW 189 (JP) Para 4 & 7 of its order. Similarly, in M/s K.S. Automobiles Pvt. Ltd. vs ITO in ITA No. 1184 (JP), Zuberi Engineering Company vs. DCIT (2019) 197 TTJ (Jp) 659 and Hon'ble Apex court in the case of CIT vs. Alom Extrusions Ltd. (2009) 227 CTR 417 (SC) also held so. 5. The above decisions were binding upon the AO even if the department might have filed SLP in absence of any stay granted over the operation of the said judgments. Thus, the AO was bound to have followed the law of the land. Hence he took a possible view and committed no error. 6. Alternatively, it is well settled law that if decisions of non-Jurisdictional High Courts are in conflict with each other than decision favorable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions for imposition of penalty and compensating the government by the levy of interest. Therefore, in addition thereto, making disallowance under Income Tax Act and creating demand cannot be the legislative intent. The above provisions of 36(1)(va) nowhere prohibits the allowability u/s 37(1), which is a residuary category. Even in the case of Checkmate (Supra) there is no prohibition if the assessee is allowed u/s 37(1) of the Act. This contention is duly supported by the case of Trupti Enterprises (P) Ltd. Vs. DCIT (2022) 36 NYPTTJ 1280 (Cuttack)." 4.1.2 The Ld. CIT dealt with this issue at page 22 onwards, as under: - "(A) Disallowance on account of Late Payment of PF/ESI Contributions (Rs.24,14,531) (i) The assessee failed to make the payments of certain amounts collected from the employees as provident fund/ESI contribution within the prescribe time. The statutory auditors have reported in from 3CD that following amounts of PF/ESI contributions of employees were not paid/deposited by the assessee within the prescribed time of relevant statues of PF/ESI. X X X (ii) This amount of Rs. 24,14,531/- was legally disallowable in terms of section 36(1)(va) r.w.s 2(24)(x) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At that time, there was no dispute that the issue whether the power subsidy should be treated as capital receipt had been concluded against the revenue. The satisfaction of the Commissioner, therefore, was based on no material, either legal or factual, which would have given him the jurisdiction to take action under section 263. [Para 5]" (II) Also relied CIT, LTU, Bangalore vs. Canara Bank [2021] 123 taxmann.com 207 (Karnataka). Since the AO acted in accordance with the law as interpreted by the jurisdictional HC, ITAT which prevailed on the date of the passing assessment order and continued even when Sec.263 order was passed hence, no fault can be found in his action and in particular, proceeding u/s 263 cannot be invoked in such a case. (III) Further, it was held in the case of PCIT vs. SPPL Property Management (P.) Ltd. [2023] 151 taxmann.com 103 (Calcutta) that where Assessing Officer had followed decision of jurisdictional High Court which held field in relevant assessment year relating to PF contribution received from employees but not deposited to concerned account within due date and completed assessment on said basis, assessment could not be held to be prejudicial t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough claimed but was not paid. Reference to note 23 to financial statements (PB 17-28) is also relevant. Since the assessee has been making payments in this manner that the bank itself making the deduction of interest from the CC account, it was not a case of any amount remaining outstanding as on 31.03.2017. Hence, it is not a case of making payment after the end of the previous year and before the due date of filing ITR u/s 139(1). Moreover, clause 26(i)(B)(a) (PB 37) speaks of the payment of the statutory dues only and apparently does not include outstanding interest payment to the bank relating to clause (e) of section 43B of the Act." 4.2.2 The Ld. CIT dealt with this issue at page 24 onwards, as under: - "C) Disallowance u/s 43B(e) of the Act (Rs.63,97,664/-) (i) As per Note 23 to Balance-sheet, the assessee has incurred an expenditure of Rs. 63,97,664/- as interest payable to scheduled banks on bank loans. As per clause (e) of section 43B of the Act, any sum payable by the assessee as interest on any loan or advance from Scheduled Bank, if not paid before the due date of filing of ITR u/s 139(1) of the Act, was disallowable. (ii) Further, In clause 26(i)(B)(a) of aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ): 4.3.1"12. In Para 4(e) of the SCN it is alleged that as per clause 34(c) of form 3CD (PB 40-41), the auditors have reported payment of interest of Rs. 21,732/- on account of the delayed payment of TDS. It is alleged that the same is not allowable expenditure u/s 36(1)(iii) or u/s 37 of the Act which otherwise should have been disallowed. It is submitted that firstly, such an interest is not of penal nature and it is merely of compensatory nature. There is no allegation nor any finding with evidence that such interest was of penal nature. Even a reference to the relevant provision of Sec.201 of the Act doesn't speak of any such interest of penal nature. Such contention is also supported by various case laws." 4.3.2 The Ld. CIT dealt with this issue at page 25 onwards, as under: - "(D) Disallowance u/s 36(1)(iii) or u/s 37 of the Act (Rs.21,732/-) (i) As per clause 34 (c) of form 3CD, the auditors have reported that the assessee have incurred an interest amount of Rs. 21,732/- for delayed payment of TDS. This interest was not an allowable expenditure u/s 36(1)(iii) or u/s 37 of the Act. Hence, the same should have been disallowed but during the assessment proceedings FAO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is nothing on record to show anything contrary thereto. Some of the other creditors are old and are coming from preceding years as their opening balances are available in their ledger accounts. In most of the cases closing balances are there which means the account was carried forward in next AY 2018-19. Nothing wrong was found hence the assessment was rightly completed." 4.4.2 The Ld. CIT dealt with this issue at page 26 onwards as under: - "(F) Inadequate Examination/Verification of 'New Loan During the Year (Rs.6.35 Crore): - (a) The clause 31(a) of Tax Audit report contains the details of loan or deposit amount exceeding the limit specified in sec. 269SS taken or accepted during the previous year. (b) The a/c confirmations of respective parties have been filed during the revisional proceedings u/s 263 of the Act. Further, the PAN of M/s Advani Pvt. Ltd., having the maximum outstanding/closing balance of Rs. 1.05 Crores has been furnished (PAN-AACCA1895Q). (c) Perusal of respective confirmation-ledger reveals that the receipt of amount and also the repayment, were made through banking channels. Interests were also paid through Cheque and TDS, applicable was also ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not permitted u/s 263. 4.5 E) Tax charged u/s 115 BBE of the Act 4.5.1 Where the show cause dated 03.10.2023 (PB 143-144), the Ld. CIT also raised the issue of application u/s 115 BBE as under-: "However, in connection with the queries raised vide Notice dated 14.02.2023 vis-à-vis your reply filed on 16.06.2023, on further examination of assessment records, it was found that the FAO/AO, while finalizing the assessment proceeding u/s 147 of the Act, in your case for the impugned A.Y on 15.04.2021, made an addition of Rs. 6,93,32,499/- u/s 68 r.w.s 115BBE of the Act. This addition of Rs. 6,93,32,499/- was made by the FAO by way of treating the sales made to M/s Kangna Agro Products as non-genuine and bogus and hence, held that the same was only an accommodation entry. In para 7 of the assessment order, the FAO has held that since the assessee has not given any vital information to prove that the impugned sales of Rs. 6,93,32,499/- made to the party M/s Kangna Agro Product were genuine, hence, added the same by treating this sales as bogus u/s 68 of the I.T. Act, 1961. However, in computation sheet of assessed income and tax payable, issued by the FAO, with the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) [and clause (b)] of subsection (1).]" 5.2 A combined reading of S. 14 with S. 56 of the Act makes is evidently clear that for the assessment of an income it must have to be classified under four heads of income as enumerated u/s 14 and if it doesn't fall under any specific head of income as per item A to E of S. 14, such income has to be assessed under the residuary head of income i.e. item F of S. 14. Therefore, income added u/s 68 or 69 etc. has to be given a specific head in terms of S. 14. 5.3 The Hon'ble Supreme Court in case of Karanpura Development Co Ltd vs. CIT [1962] 44 ITR 362 (SC) held that these heads are in a sense exclusive to one another and income which falls within one head cannot be brought to tax under another head. Further, the Hon'ble Supreme Court in case of Nalinikant Ambalal Mody v CIT [1966] 61 ITR 428, has held that whether an income falls under one head or another is to be decided according to the common notions of practical man because the Act does not provide any guidance in the matter. Of course, lot of judicial precedents are available to a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business activity of the assessee of manufacturing and extracting of vegetable oil, doc, etc. The net profit arising from this transaction was also undisputedly included in the audited P&L account and the ROI. Thus, this subjected amount, pertained to the declared business activity/ source only. Therefore, such amount could not be considered as income from other sources and was to be classified. Even the Ld. CIT in the impugned order did not direct the AO that such income should be assessed under the income from other sources. There is no other known or unknown source of income, neither stated by the assessee nor so found by the department. 5.7 In these circumstances, the only inescapable conclusion is that the subjected income was nothing but business income from the disclosed business activity of the assessee. Therefore, "merely to levy more tax, is an illegal and unjustified attempt to invoke 115BBE" which is not clearly applicable on the facts of the present case. 5.8 Interestingly, in the impugned order at Page 7, the AO himself has made the additions u/s 68 r.w.s 115 BBE of the Act. Therefore, the allegation and finding of the Ld. CIT is factually incorrect that the FAO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoked. 6.1 The Hon'ble Ahmedabad Tribunal in case of Chokshi Hiralal Maganlal vs DCIT (ITA No. 3281/Ahd/2009 AY 2004-05 dated 5 August 2011) held that for invoking deeming provisions under sections 69, 69A, 69B & 69C there should be clearly identifiable investment or asset or expenditure (i.e. in our understanding not connected with business so as to make convenient to invoke aforesaid sections). In case source of investment or asset or expenditure is clearly identifiable and has no independent existence of its own where a case arises to claim that it cannot be separated from business then first 'what is to be taxed is the undisclosed business receipt. Only on failure of such exercise, it would be regarded as taxable under section 69 on the premises that such excess investment or asset or expenditure is unexplained and unidentified, satisfying the mandate of the law. 6.2 The Hon'ble Rajasthan High Court in case of CIT vs Bajargan Traders [ITA No. 258/2017 dated 12/09/2017] has held that when the assessee is dealing in sale of food grains, rice and oil seeds and the excess stock which is found during survey is stock of rice then, it can be said that investment in procurement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecisions of Hon'ble Rajasthan High Court and ITAT Jaipur, is well settled. The AO acted in accordance with the judicial guideline and the ratio laid in the cases of: a. CIT vs Bajargan Traders [2024] 466 ITR 397 b. Chokshi Hiralal Maganlal vs DCIT (ITA No. 3281/Ahd/2009 dated 05.08.2011/ (2011) 45 SOT 349). c. Shri Lovish Singhal vs ITO (ITA No 142 to 146/Jodh/2018 for AY 2014- 15 dated 25 May 2018). and applying the same on the facts of the case in hand, decided that the provisions of S.115BBE were not applicable and hence did not therefore apply high rate of tax. 9. (F) Clause (a) of Explanation 2 of S. 263 wrongly invoked: 9.1 The ld. CIT stated that "7. As per the amended provision i.e., clause (a) of Explanation 2 of Section 263, 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 in the opinion of Principal Commissioner or Commissioner, the order is passed without making inquiries or verification which should have been made; Further, as per clause (b) to Explanation 2 of Section 263 says about "if the order is passed allowing any relief without inquiring into the claim". It reads ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of mind. Therefore, the Explanation 2 to section 263 of the Act do not, in our view, thwart the assessment process in the facts and the context of the case. Consequently, we find that the foundation for exercise of revisional jurisdiction is sorely missing in the present case. 18 In the light of above facts and legal position, we are of the considered view that the AO had made detailed enquiries and after applying his mind and accepted the genuineness of loans received from GTPL and PAFPL, which is also plausible view. Therefore, we find that twin conditions were not satisfied for invoking the jurisdiction under section 263 of the Act. The case laws relied by the ld. CIT(D.R.) are distinguishable on facts and in law hence, by the ld. Counsel as well and we concur the same hence not applicable to present facts of the case. Therefore, in absence of the same, the ld. CIT ought to have not exercised his jurisdiction under section 263 of the Act. Therefore, we cancel the impugned order under section 263 of the Act, allowing all grounds of appeal of the Assessee." 9.3.2 In Narayan Tatu Rane v. ITO, (2013) 7 NYPTTJ 1493 (Mum), it was held that newly inserted. Explanation 2(a) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. 9.4.4 In Elder IT Solutions (P.) Ltd. vs CIT [2015] 59 taxmann.com 232 (Mumbai - Trib.), it was held that: "18. In the case in hand, there is no dispute that the AO called for financial details of these companies and also examine the parties in order to satisfy himself about the genuineness of the transaction. Therefore, on the basis of the record av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 't be denied that the matter relating to the examination of the (1) Late payment of PF/ESI contributions u/s 43B, (2) New Loans during the year, (3) Disallowance of unpaid sale tax u/s 43B of the Act, (4) Disallowance of unpaid interest payable to banks u/s 43B (e) of the Act, (5) Disallowance u/s 36(1)(iii) or u/s 37 of the Act and (6) Disallowance u/s 35AC (2) of the Act (hereinafter referred as the "new issues / aspects"), have the subject matter of the re-assessment order dated 15.04.2021(PB 62-69) passed u/s 143(3)/148 of the Act [which is presently being sought to be revised by the ld. CIT u/s 263] in as much as the AO before making that assessment order, proceeded to form his reason to believe as to escapement on the basis of the specific information w.r.t the appellant company. 10.3 In fact and in law, this particular issue stood concluded long back, when the first assessment order / Intimation Order was passed u/s 143(1) on dated 16.10.2018 when the assessment was completed by making additions/disallowances of Rs. 15,21,810/- on account of property rent, unexplained cash credit (Rs. 1,00,000/- by Sh. Maha Chand Jain) and disallowance of legal & professional, office, cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3)/147 of the Act. All the other issues on which the Commissioner of Income-tax is seeking to exercise the jurisdiction under section 263 of the Act were concluded by virtue of an intimation under section 143(1) of the Act which admittedly was done beyond a period of two years prior to the notice dated March 17, 2009, issued under section 263 of the Act. Section 263(2) of the Act provides that no order would be made in exercise of the jurisdiction under section 263(1) of the Act after the expiry of two years from the end of the financial year in which the order sought to be revised was passed. It is an admitted position that the Commissioner of Income tax has not exercised the revisional jurisdiction in respect of the order/intimation passed section 143(1) of the Act within two years of it being passed. Therefore, exercise of jurisdiction on those issues under section 263 of the Act is time barred as held by this court in CIT v. Anderson Marine & Sons (P.) Ltd. [2004] 266 ITR 694/139 Taxman 16. Moreover, in view of the decision of the apex court in the matter of Alagendran Finance Ltd.'s case (supra) as well as our court in the matter of Ashoka Buildcon Ltd.'s case (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of L.G. Electronics India (P.) Ltd. Vs PCIT (2016) 388 ITR 135/ 290 CTR 283 (Allahabad) (PB 23 to 29)(DC ), the original assessment was passed at total income of Rs. 5,83,91,17,790/- on dated 21.10.2011 wherein an addition on account of sales tax subsidy of Rs. 61,00,79,579/- was made. Thereafter, the case was reopened and reassessment was completed vide order dated 26.03.2015 by making a further disallowance of Rs. 1,38,95,995/- u/s 40(a)(ia) of the Act (and the total reassessed income of Rs. 5,97,80,77,790/-). However, this was followed by a notice u/s 263 with reference to the reassessment order passed u/s 143(3) r.w. 147 of the Act dated 26.03.2015 on the ground that a further amount of sales tax subsidy of Rs. 20,58,34,234/- accrued due to scheme of Maharashtra Government was not taxed as revenue receipt (this subsidy was in addition to the sales tax incentive received by the assessee of Rs. 61,00,79,579/- from UP Government). In this factual context, the contention of the assessee (in Para 14) was that in the original assessment, the sales tax subsidy accrued to assessee from Maharashtra Government was treated as capital receipt and no addition was made therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the other contentions and arguments), assuming, the AO had passed an assessment order u/s 143(3), prior to the subjected reassessment order, even then this revision u/s 263 would have been barred by limitation since as per Section 153(1) [prevailing at that time], the said order was to be passed within 21 months from the from the end of the assessment year in which the income was first assessable. The time chart is as follows: S.No. Particulars (A.Y. 2017-18) Date A. Last date of relevant A.Y. 31.03.2018 B. Limitation u/s 153(1) - 21 months 31.12.2019 C. (+) Limitation as per Section 263(2) 2 years D. Last date of passing Revision Order u/s 263 31.12.2021 Hence, the impugned SCN u/s 263 and the resultant order kindly be declared as barred by limitation. 6.1 In support of the grounds so raised the ld. AR appearing on behalf of the assessee has also placed reliance on the written submission on 05.11.2024 which is extracted herein below:- "1. That in the aforesaid matter, the ld. PCIT, Udaipur passed the Order u/s 263 on dated 29.02.2024 (hereinafter referred as "impugned order"), Accordingly, the appeal was to be filed on/before dt. 28.04.2024 however, the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the same to the counsel at Jaipur without any further delay. 2.4Thus, the delay in filing of the instant appeal was not at all deliberate or intentional but arose due to circumstances beyond the assessee's control, primarily stemming from the unintended and bonafide mistake committed by the Employee working at the Assessee-Company. The Assessee has acted diligently and in good faith throughout this process, taking all necessary steps to rectify the situation and ensure compliance. 2.5 That the applicant was a layman & not very conversant with the complex tax laws and due to the circumstances stated above, the delay so caused was beyond their control but was bonafide and unintended. The assessee was not going to gain any benefit because of the delayed finding and their conduct was not contumacious. 3. In support, affidavits of Shri Sandeep Kumar Saboo and Shri Sushil Mittal are enclosed herewith and marked as Annexure-1 and Annexure- 2. 4. Supporting Case Laws: It is submitted that the Hon'ble Supreme Court in the case of Collector, Land & Acquisition v. Mst. Katiji & Others (1987) 167 ITR 471 (SC) has advocated for a very liberal approach while considering a case for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R of the assessee also filed an another paper book on 11.11.2024 on the decision referred in support of the contention so raised in the written submission and the index of the judicial decision relied upon are as under:- S.No. PARTICULARS Pg. No. 1. CIT vs. Alagendran Finance Ltd, (2007) 211 CTR (SC) 69 1-7 2. CIT v. Bharti Airtel Ltd. [2013] 37 taxmann.com 218/218 Taxman 112(Mag.) (Delhi) 8-9 3. Ashok Buildcon Ltd. Vs. ACIT (2010) 325 ITR 574(Bom.) 10-15 4. Chhabra Syncotex (P) Ltd.vs AO (2019) TTJ (Jp) 77 16-37 5. PCIT vs. SPPL Property Management (P.) Ltd. 151 taxmann.com 103 (Calcutta) 37A-40 6. CIT vs Bajargan Traders 86 taxmann.com 295 (Rajasthan) 41-43 7. CIT vs. Larc Chemical Limited [214] 368 ITR 655(Mum) 44-47 8. CIT vs Anderson Marine & Sons (P.) Ltd.266 [ITR 694] 139 Taxman 16 (Bombay) 48-52 9. CIT vs. Rajkumar DeepchandPhade[249 ITR 520] 116 Taxman 783 (Bombay) 53-55 10. L.G. Electronics India (P.) Ltd. Vs PCIT (2016) 388 ITR 135/290 CTR 283 56-64 11. CIT vs. ICICI Bank Ltd. (2012) 343 ITR 74/252 CTR 85 65-68 12. Indira Industries Vs. Pr. CIT 305 CTR 314(Mad) 69-74 7. The ld. AR of the assessee in addition to what has been stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee and on that aspect of the matter he relied upon the written submission so filed. 10. We have heard both the parties and perused the materials available on record. Vide ground no. 1 & 2 the assessee challenges the order of the ld. PCIT on the technical ground stating that the PCIT has erred in law as well as on facts in invoking the provision of section 263 of the based on the set of the facts of the case of the assessee and therefore, he prayed that the same being illegal and bad in law required to be quashed. The brief facts related to the issue are that in this case the assessee filed the original return of income on 06.09.2017 the said return was processed and an intimation u/s. 143(1) was issued on 16.10.2018. Thereafter, notice u/s. 148 was issued on 17.03.2020 and that re-opened assessment order was passed on 15.04.2021. The issues on which PCIT is seeking to exercise the jurisdiction u/s. 263 of the Act were concluded by virtue of an intimation dated 16.10.2018 issued u/s. 143(1) of the Act which admittedly was done beyond a period of two years prior to the notice dated 14.02.2023 issued u/s. 263 of the Act. The bench noted that the issue raised by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned from the date of original assessment order and not from the date of reassessment order. 5. The aforesaid legal position is not disputed by learned counsel for the respondents. 6. In view of the above, the notice impugned cannot be sustained in law and, therefore, the same is set aside being without jurisdiction and barred by limitation. 7. The petition is accordingly allowed. The issue decided by our High Court has also been confirmed by the apex court vide order dated 03.01.2025 wherein the SLP filed by the revenue was dismissed. Thus, the issue goes in favour of the assessee and the revenue did not brought any contrary decision we respectfully following the ration decided held that the order of the PCIT was barred by limitation as prescribed under the Act and thereby we considered the ground no. 1 and 2 raised by the assessee. Ground no. 3 to 6 are on the merits of the disputes, since we have considered the appeal of the assessee on technical grounds the grounds on merits becomes educative in nature. Ground no. 7 being general does not require our finding. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 28/01/2025. X X X X Extracts X X X X X X X X Extracts X X X X
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