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2015 (10) TMI 1515 - ITAT DELHI

2015 (10) TMI 1515 - ITAT DELHI - TMI - Revision u/s 263 - unaccounted receipt of compensation - addition on accrual basis - Held that:- The Assessee received only ₹ 2,50,00,000 towards compensation from M/s Charm India Pvt. Ltd. during the year under consideration and as the Appellant was following cash system of accounting, as is apparent from clause (11a) of tax audit report i.e. Form 3CD the Appellant rightly accounted for the actual amount of receipt of compensation on receipt basis a .....

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4 - ITAT GAUHATI ) in which the Hon'ble ITAT had endorsed the view taken in the case of Bharat Petroleum Corporation Ltd vs. Jt CIT (2004 (4) TMI 516 - ITAT MUMBAI) wherein held as under:

"The CIT by deciding the fate of the issues himself has pre-empted the assessee company in agitating the matter before the various authorities right from the assessment onwards in a systematic and consistent manner. Therefore, that part of the conclusion of the revision order is not sustainable".

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Ld. Commissioner of Income Tax, Meerut dated 18.3.2013 passed u/s. 263 of the I.T. Act pertaining to assessment year 2008-09 on the following grounds:- 1. That the impugned order as passed by the Id. CIT u/s 263 of the Income Tax Act, 1961 is arbitrary, unjust & illegal on various factual and legal grounds including the followings:- (a) The asstt. Order dated 15.11.2010 as passed by the AO. was neither erroneous nor prejudicial to the interest of revenue. (b) The Id. CIT had no jurisdiction .....

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prejudice to ground nO.1 above the various directions of Id. CIT to AO vide Para Nos.8 to 10 are also illegal, unjust and untenable in law. 3. That without prejudice to above grounds, the Id. CIT has grossly erred in law by making additions of ₹ 38,48,050/- to the income of the appellant holding that the difference between the amount as per arbitrations award and the amount declared by the appellant is the concealed income of the appellant and the finding of the Id. CIT in Para 7 page 7 & .....

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ase laws relied upon by the Id. CIT are not applicable to the appellant's case being distinguishable on facts. 4. With prejudice to above, the Id. CIT has erred in making the addition of ₹ 38,48,050/-, and in any case, if the Ld. CIT was not convinced with the submissions of the appellant, the issue ought to have been sent back to the file of the Id. AO. for reconsideration and passing the order a fresh. 5. That the impugned order of the CIT u/s 263 deserves to be cancelled l annulled. .....

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h questionnaire were issued and served upon the assessee. In response to the aforesaid notices Authorised Representative of the assessee attended the hearing from time to time and the case was discussed with him. Books of accounts, bills / vouchers etc. produced which were examined by the AO. After considering all the facts, details submitted by the assessee and after examination of books / documents and after discussion of the various issue, the assessment was completed on returned income vide .....

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nner even without asking for discrepancies and variations on record. The case was not enquired properly, at all. b) There is a photocopy of a ward by sole arbitrartor dated 1.10.2007 between the assessee as claimant and Mls Charms India Pvt. Ltd. as respondent. The assessee had claimed a sum of ₹ 4,12,00,11,500/- along with interest @ 18% per annum which is evident from the award dated 1.10.2007. The AO has not inquired at all about the taxability of the same. c) Further the arbitrator vid .....

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re amount was taxable as such in accordance with the provisions of law. d) Further, the photocopy of the details of sundry creditors for goods of Mls. Charms India Pvt. Ltd. show the assessee sundry creditor for goods for ₹ 38,48,050/- whereas the AO has accepted the version of assessee (without any inquiry) that no business activity was all carried out by the assessee. e) Mls. Charms India Pvt. Ltd. in Schedule-I has claimed under the head direct construction cost the sum of ₹ 2,88, .....

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es with some motive and has also not gone into and inquired if it had legal contractual value and/ or was binding. Out of sum received on arbitration a sum ofRs.1.92 crores has been given to Adesh Engineering Pvt. Ltd. in which all the partners of the assessee firm are the directors. The AO has not looked into this aspect as well. 4. In view of above, Ld. CIT is of the view that the order passed by the AO is erroneous and prejudicial to the interest of revenue. He also held that in the case of M .....

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sessment order after examining the issues discussed in the order u/s. 263 of the I.T. Act. 5. Against the order of the Ld. CIT dated 18.3.2013 passed u/s. 263 of the I.T. Act, the assessee appealed before the Tribunal. 6. Ld. Counsel of the assessee relied upon the original assessment order dated 15.11.2010 passed u/s. 143(3) of the I.T. Act in the case of the assessee as well as the documentary evidence filed by him in the shape of Synopsis and Paper Book. 6.1 On the contrary, Ld. DR relied upo .....

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C) and other relevant cases, we are of the considered opinion that this is not a fit case for revising the assessment order. The reasons for our above conclusion are that the twin conditions, viz., the assessment order should be erroneous in so far as it is prejudicial to the interests of revenue do not co-exist in this case. The assessee had filed return of income for the year under consideration and had disclosed the entire requisite details alongwith return of income during the year under con .....

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power under section 263 cannot be exercised in respect of a matter which falls within the power to assess escaped income under section 147 of the Act. The revisional power is a quasi-judicial one hedged with limitation and has to be exercised subject to the same and within its scope and ambit. So far as calling for the records and examining them is concerned, undoubtedly, it is an administrative act but on examination to consider or in other words, to form an opinion that particular order is er .....

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cords called for by the Commissioner. The Commissioner must give reasons for passing an order. He is bound by the decisions of the Hon ble Supreme Court and jurisdictional High Court. The Commissioner must come to a firm conclusion on the point that error in the order has resulted in prejudice to the interests of the Revenue. He has to apply his mind for coming to a firm conclusion which should be based on proper material and he must mention that material in his order. The Commissioner may under .....

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that the order is erroneous and two - that to that extent it is prejudicial to the interest of the Revenue co-exist. Or in other words, an order can be revised if it is both erroneous as well as prejudicial to the interests of the Revenue. An order, which is only erroneous but not prejudicial, cannot be revised. Likewise an order, which is only prejudicial to the interest of the Revenue but not erroneous, cannot be revised. To put it in, still simpler words, it is mandatory for the Commissioner .....

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e Act. It empowers the Commissioner to make or cause to be made such an enquiry as he deems necessary in order to find out if any order passed by Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue. The only limitation on his powers is that he must have some material(s) which would enable him to form a prima- facie opinion that the order passed by the Officer is erroneous in so far as it is prejudicial to the interest of the Revenue. Once he comes to the .....

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t the Commissioner does not have unfettered and unchequred discretion to revise an order. The Commissioner is required to exercise revisional power within the bounds of the law and has to satisfy the need of fairness in administrative action and fair- play with due respect to the principle of audi alteram partem as envisaged in the Constitution of India as well in section 263. An order can be treated as erroneous if it was passed in utter ignorance or in violation of any law; or passed without t .....

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issioner must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interests of the revenue. Both the conditions must be ful- filled. (ii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, that the section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice for the requirement of order being e .....

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ng Officer is unsustainable under law. (vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the Commissioner, while exercising his power under section 263, is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer. (vii) The Assessing Officer exercise quasi- judicial power vested in him and if he exercise such p .....

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writing and the Assessing Officer allowed the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard. 7.4 Now reverting back to the facts of the case in hand, it is found that the AO has made proper enquiries during the assessment proceedings and after examining the proofs so filed by the assessee before him, has made disallowance on bei .....

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cial to the interests of the Revenue. 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. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue-recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked t .....

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ot defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The Scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase prejudicial to the interests of the Revenue has to be read .....

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order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law. 7.6 The above ratio of Hon ble Supreme Court s decision supports our finding given in this case. The Hon ble Kolkata Bench has further clarified and defined as to what does the expressions lack of enquiry by AO means while deciding the case of Sigma Search Lights Ltd. vs. ITO, 82 ITTJ 956 (ITAT Kolkata). The Hon ble Bench has observed as under :- Revision - Erroneous and pre .....

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lowed in earlier as well as subsequent assessment years - Record showing that AO made detailed enquiry before completing the assessment - condition precedent for invoking revisional jurisdiction not present - Revisional order quashed. 7.7. We find that in the present case the Assessee is a Firm engaged in construction. Return was filed on 21/08/2008 declaring income of ₹ 2,55,46,190/- and assessment was completed on the' returned income of ₹ 2,55,46,190/- vide assessment order da .....

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#8377; 38,48,050/- has been made by the AO as directed by the Ld. CIT vide impugned order uls 263. 7.8 We note that the Ld. CIT in the impugned order uls 263 vide para 7 at pages 6-7 has observed as under: "As regards the points on the basis of which the proceedings under section 263 of the Income-tax Act, 1961 were taken, the assessee has shown an income of ₹ 2.5 crores as any other income' while there were Nil sales, gross receipts of business. As per the records, the assessee h .....

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ee has actually received only ₹ 2.5 crores out of the award amount of ₹ 2,88,48,050/- and the balance amount of ₹ 38,48,000/- not received by the assessee was foregone and settled before due date of filing return. It was contented that the adjustment was made in terms of AS-4 issued by the Institute of Chartered Accountants of India which provides for the adjustment towards the events occurring after the date of balance sheet. The assessee, however, could not furnish any eviden .....

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. Ltd. in Schedule-I has claimed under the head direct construction cost the sum of ₹ 2,88,48,050/- as other project expenses of the year ending 31.3.2008 which is rather the schedule of construction and P&L Alc and, hence, undoubtedly claimed as direct expense by Mls Charms India Pvt. Ltd. As against the same the assessee has shown the receipts of merely 2.50 crores which has been accepted by the AO without inquiring into the same. In view of above the difference of ₹ 38,48,050/ .....

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me filing letter dated 28/08/2010, copy placed at pages 25-26 of the paper book alongwith the following annexures: (i) List of Directors with their addresses, copy placed at page 27. (ii) List of shareholders with their addresses, copy placed at page 28. (iii) Memorandum of Understanding (MOU) dated 16/1/2006 between M/s Charms India Pvt. Ltd. and the Appellant, copy placed at pages 30-35. In such MOU, Mls Charms India Pvt. Ltd. approached the Appellant for development of a housing project on it .....

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ar under consideration placed at pages 49-65 from which it is evident that 'other project expenses' of ₹ 2,88,48,050/- (which included ₹ 2,50,00,000 paid as compensation to the Appellant on account of arbitration award) were debited to P&L Alc (refer to page 58) and ₹ 38,48,050/- was shown payable to the Appellant under the head 'details of sundry creditors for goods' (refer to page 64). (vii) Copy of Alc of the Appellant in the books of the Mls Charms India .....

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I that the Appellant received only ₹ 2,50,00,000/- out of ₹ 2,88,48,050/- as compensation on account of arbitration award during the year under consideration. 7.11 We also find that the AO's notice u/s 133(6) dated 04/10/2010 issued to M/s Charms India Pvt. Ltd. during the course of assessment proceedings says that :- "Vide this office letter dated 11-08-2010 you were asked to furnish the details in connection with Mls Singhal Construction Co. D-9, Shastri Nagar, Meerut. The .....

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es or parcels of land situated at Khasra No. 519M & 537, Village Kanwani, Mohiduddinpur, Tehsil Dadri, Dist. Ghaziabad measuring 7510 sq. mtrs." 7.13 In view of the above, it is evident that the assessment order was passed by the AO after making all possible enquires. In other words, assessment order dated 15/11/2010 u/s 143(3) had been passed by the AO after proper application of mind as is also evident from such assessment order itself, relevant portion of which is reproduced below: & .....

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evisional jurisdiction u/s 263 of I.T. Act cannot be exercised even where enquiry as made by the AO is considered as inadequate enquiry in the opinion of the Ld. CIT. 7.15 In view of above, the Assessee received only ₹ 2,50,00,000ltowards compensation from M/s Charm India Pvt. Ltd. during the year under consideration and as the Appellant was following cash system of accounting, as is apparent from clause (11a) of tax audit report i.e. Form 3CD copy placed at pages 4-14 {relevant page 4} of .....

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