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M/s SURYA MERCHANTS LTD. Versus DY. COMMISSIONER OF INCOME TAX, GHAZIABAD

2016 (7) TMI 564 - ITAT DELHI

Revision u/s 263 - mistake in finding of act of the AO regarding 'on money' transactions - Held that:- CIT did not bring on record any material or evidence to point out any mistake in finding of act of the AO regarding 'on money' transactions. No reason has been given by the Ld. CIT for the deduction allowed against the income which has not been correctly computed as per provisions of the Act. - For the following reasons also the order passed by the learned CIT u/s. 263 totally fails to mee .....

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nt year and, therefore, the view taken by the Assessing Officer gets supported from the principles of consistency of approach when the facts and circumstances are similar. - (iii) Thus, when the Assessing Officer has taken a plausible view after thorough application of mind and after making detailed enquiry, the learned CIT cannot substitute his view by assuming jurisdiction u/s.263 of the I.T. Act. - Revision order u/s 263 quashed - Decided in favour of assessee - I.T.A. Nos. 3132 to 3136/D .....

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-06 to 2009-10. Since the issues involved in these appeals are common and identical, therefore, these appeals were heard together and are being disposed of by this common order for the sake of convenience, by dealing with ITA No. 3132/Del/2014 (AY 2005-06). 2. Since the grounds of appeal in all the 5 appeals are the same, hence, for the sake of brevity, we are reproducing the grounds of appeal only in respect of ITA No. 3132/Del/2014 (AY 2005-06) which read as under:- 1.1 That on the facts and i .....

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n the facts and in the circumstance of the case, no mistake had been committed by the A0 while determining the total on money for Assessment Years 2004-05 to 2009-10 at ₹ 32,71,38,984/- and determining the undisclosed allowable expenses at ₹ 25,41,18,747/- & allocating the balance to various assessment years, is clear from the fact that such allocation of ₹ 33,45,300/- for assessment year 2004-05 has not been questioned by CIT since he has not invoked the provisions of Sect .....

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ce CIT was not in Kanpur on 25.03.2014 when the appellant presented himself in his office in compliance to CIT's show cause notice dated 14.03.2014 served on the appellant at 5 PM on Friday, the 21st March, 2014. 5. That the appellant craves liberty to add, alter, vary or amend any ground of appeal. ITA No. 3132/Del/2014 - A.Y. 2005-06 3. The brief facts of the case are that search and seizure operations were carried out at the assessee s premises during which it was found that the assessee .....

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nting to ₹ 62,04,510/- and denying deduction u/s. 80IB on additional on money income amouting to ₹ 18,43,552/- vide his order dated 22.7.2011 passed u/s. 153A/143(3) of the I.T. Act, 1961. Against the aforesaid assessment order dated 22.7.2011, assessee appealed before the Ld. CIT(A) who vide his impugned order allowed the claim of deduction u/s. 80IB made by the assessee, but upheld the disallowance made u/s. 40A(3) by the AO. Aggrieved with the Ld. CIT(A) s order, both Assessee and .....

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2014 u/s. 263 of the I.T. Act, 1961. 5. Against the aforesaid order of the Ld. CIT passed u/s. 263 of the Act dated 28.3.2014, assessee is in appeal before the Tribunal. 6. Ld. Authorised Representative of the assessee has stated that as per the facts on record, AO while completing the assessment has taken into account and examined the seized documents and the amount of "on-money" received by the assessee. It was further stated that the expenses incurred in relation to "on-money&q .....

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y to the said notice was made by the assessee vide submission dated 27.12.2010. For issues raised in the audit report dated 25.05.2011 of Special Auditor, fresh notices U/S 143(2) and 142(1) were issued, in compliance to which required details were produced. 6.1 It was the further contention of the Ld. AR that Ld. CIT did not bring on record any material or evidence to point out any mistake in finding of act of the AO regarding 'on money' transactions. He stated that Ld. CIT merely ten r .....

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he jurisdictional pre-conditions for invoking revision jurisdiction u/s 263 are absent and thus the impugned order is liable to be cancelled and relied upon the following case laws:- a. CIT vs. Kanda Rice Mills 178 ITR 446 (P & H) b. CIT vs. Unique Auto Belts (P) Ltd. 30 DTR 231 (P&H) 6.2 It was further stated that suppression of sales unearthed during search and seizure operations can be calculated only to the extent of the seized material and relied upon the following case laws:- a. Fo .....

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350 ITR 555 (Del» 6.4 It was the further contention that if an AO acting in accordance with law makes a certain assessments, the same cannot be branded as erroneous by CIT simply because according to him the order should have been written more elaborately in view of the following case laws:- a. CIT vs. Arvind Jewellers (2003) 259 ITR 502 (Guj) b. CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del) c. CIT vs. Vinod Kumar Gupta (2007) 165 TAXMAN 225 (P&H) d. CIT vs. Design & Automatio .....

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oami Satsang vs. CIT (1992) 193 ITR 321 (SC) b. Berger Paints India Ltd. vs. CIT (2004) 266 ITR 99 (SC) c. UOI & ORS. vs. Kaumudini Narayan Dalal & Anr. (2001) 249 ITR 219 (SC) d. CIT vs. Shivsagar Estate (2002) 257 ITR 59 (SC) : (2002) 124 TAXMAN 606 (SC) 6.6 The Ld. AR of the assessee stated that the disallowance uls 40A(3) and denial of deduction uls 80-IB being matters considered and decided in appeal, cannot be subjected to revision jurisdiction in terms of clause (c) of the Explana .....

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a subject matter of appeal, therefore, fulfillment of all conditions including validation of computation of the profits from 'on money' transactions for deduction uls 80IB was a subject matter of appeal before Ld. CIT(A). In order to support his contention, he placed reliance on the case law in the case of CIT vs. Nirma Chemical Works (P) Ltd (2009) 309 ITR 67 (Guj High Court). He further stated that on the basis of doctrine of merger, order passed by the Ld. AO merged with order of Ld. .....

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.2014 was received by the Assessee only at 5 PM on Friday, 21st March 2014. Date of hearing was fixed on 25.03.2014 in Kanpur. However, the Ld. CIT was not available in Kanpur on 25.03.2014. Any order passed without affording an opportunity to the assessee to represent its case is void ab initio and to support his version, he placed reliance on the following case laws. a. Swadeshi Cotton Mills Company Ltd. vs. Union ofIndia 51 ITC 210, 255 (SC); b. Gandhi vs. Union ofIndia AIR 1978 SC 597; c. Sm .....

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taken into account the seized documents and has not correctly taken into account undisclosed income. She further stated that from the documents which was established that the assessee has been receiving 'on money' on the sale of flats and this 'on money' was to be computed on the basis of the documents seized during the course of search. She has stated that the deduction allowed against this income has not been correctly computed as per the provisions of the Income tax Act 1961. .....

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e stated that the order passed by the AO is erroneous as well as prejudicial to the interest of the Revenue. Accordingly, she requested that the impugned order passed u/s. 263 of the Act passed by the Ld. CIT may be upheld and appeal of the assessee may be dismissed. 8. We have carefully considered the rival submissions and perused the relevant records available with us, especially the impugned order passed by the Ld. CIT u/s. 263 of the Act alongwith the legal position on the relevant issues wh .....

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ined. The assessment order dated 22.07.2011 is considered as erroneous and prejudicial to the interests of the revenue. The brief facts of the case are at a search was conducted on 06.02.2009 at the premises of the assessee. The return in response to notice u/s 153A was filed on 07.04.2010 declaring total income at ₹ 94,91,330/- after claiming deduction u/s 80IB(10). The accounts were also audited u/s 142(2A) and report was submitted on 26.05.2011 by the auditor. During search operation in .....

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tted on 26.05.2011. The assessing officer has assessed income from sale of flats/shops at ₹ 94,91,330/- as per computation of income, in the concluding para of the order, whereas as per para 8 of the order, it is held that net addition on account of incriminating documents comes to ₹ 7314792/-. Para 8 of the order is as under: "During the search several documents were found and seized from which it was evident that the assessee was receiving "on money" one sale of flat .....

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art of the assessment order. In this way repetition has been sought to be taken care of. From the seized documents in the case of the assessee and the chart submitted by the assessee itself total undisclosed income from A. Y. 2003-04 to 2009-10 comes to ₹ 82,71,38,984/- and out of this amount ₹ 5,68,80,271/- pertains to the year under consideration. This has been accepted by the assessee. However, the assessee has claimed deductions which includes expenses ₹ 3,49,52,143/- again .....

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agreements was ₹ 4.09 crores, whereas in the revised agreement forms sale consideration was shown at ₹ 2.64 crores. The difference was recorded as on money", The ratio of total sale to disclose sale worked out to 1.54 i.e. undisclosed sale was 0.54 time the disclosed sale. Thus an extrapolation was required to arrive at actual sales. For the year, disclosed sale was of ₹ 21,18,24,636/- as per audit report and as per chart filed during assessment proceedings further sales .....

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. There is also no discussion in the assessment order about the findings of the audit report u/s. 142(2A) of the I.T.Act. thus, the issue has not been properly examined by the AO and therefore the assessment order u/s. 153A/143(3) dated 22.8.2011 is erroneous and prejudicial to the interests of the revenue. In this respect you are hereby allowed an opportunity of being heard and therefore, required to attend my office at 7/81-B, Tilak Nagar, Kanpur on 25.03.2014 at 11.30 AM either in person or b .....

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record obtains from the website of postal department as an evidence of the receipt of the said notice is enclosed as Annexure-A directing us to appear before you on 25.03.2014 at 11.30 AM at Kanpur. In these circumstances, it is obvious that adequate opportunity of being heard has not been provided to us. 2. Nonetheless as directed by you, we are making the following submissions in response to your above show cause notice uls 263 of the Income Tax Act, 1961 (hereinafter called the Act for short .....

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sessment proceedings as per AO's directions. No discrepancy has not been pointed out by you in the findings arrived by the AO in para 8 of the assessment order. It is submitted that since there is no mistake in the observations of the AO in para 8 of the assessment order. It cannot be inferred that the order passed by the AO is erroneous & prejudicial to the Revenue as mandated by Section 263 of the Act. 3.2 A perusal of the above captioned notice would further show that you have inferre .....

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#8377; 2.64 Crores. It is submitted that the aforementioned assumption made by you is obviously based on para 7 of the assessment order. A careful perusal of the para 7 of the assessment order would show that the learned AO has observed that "from these documents it is apparent that part of the sale consideration of these shops/flats/commercial spaces has been received in cash as on money. For example, few of such are as under". The data regarding the 10 examples given by the AO on pag .....

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e above figure of ₹ 5,68,80,271/- is based on exact figures found by the AO based on all the seized documents including 0-6,D-7, D-I0 & D-l1. Thus, the very exercise of making an interpolation based on 10 examples can have no validity when the entire on- money has been taken into consideration by the AO after going through all the seized documents. That the total on-money for all the years put together amounts to ₹ 32,71,38,984/- out of which on-money of ₹ 5,68,80,271/- per .....

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it report uls 142(2A) of the Act clearly shows that the special auditor only examined the original books of accounts and not the seized books as would be clear from Annexure-C. Therefore, the audit report uls 142(2A) of the Act is not at all relevant as far the determination of total amount of on- money is concerned. 5. It is submitted that the learned AO has framed the AO after a detailed analysis of the seized documents and has arrived at the total quantum of on- money on the basis of all the .....

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terest of the Revenue. 6. Before parting with this matter, it is also humbly pointed out that the assessment order including the quantum of total income as a result of the onmoney found on the basis of all seized documents was the subject matter of an appeal filed by the assessee before CIT(A)-Meerut which was disposed off by him on 28.03.2013. Accordingly, the assessment order cannot be validly revised U/S 263 of the Act in view of sub clause (c) of Explanation below Section 263 of the Act. 11. .....

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e" as given in section 263(1).Explanation (c) are as under:- Section 263(1) read with Explanation (c) ;-where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 15t day of June, 1988] the powers of the Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal.] The assessee himself has .....

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into account the seized documents and has not correctly taken into account undisclosed income. From the documents which was established that the assessee has been receiving 'on money' on the sale of flats and this 'on money' was to be computed on the basis of the documents seized during the course of search. It is further seen that the deduction allowed against this income has not been correctly computed as per the provisions of the Income tax Act 1961. Thus an error has been com .....

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erut as per the provisions of section 153D of the Act, the approval so granted is also erroneous and prejudicial to the interest of the Revenue. The same is hereby set aside to be granted afresh as per provisions of the I.T. Act, 1961. 12. After perusing the above, at the threshold, we find that that there is no dispute with regard to the following position:- a. In this case Notice u/s 142(1) alongwith detailed questionnaire was issued by A.O. requiring the assessee to explain seized documents a .....

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point out any mistake in finding of act of the AO regarding 'on money' transactions. No reason has been given by the Ld. CIT for the deduction allowed against the income which has not been correctly computed as per provisions of the Act. The submissions made by the assessee with workings of 'on money' receipts not considered by the Ld. CIT. d. It is a settled law that every erroneous order cannot be the subject matter of revision unless it is prejudicial to the interest of reven .....

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onditions, 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 to correct each and every type of mistake or error committed by the Assessing Officer .....

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s 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 Incometax 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 in conjunction with an erroneous order passed by the Assessing Officer. Every loss of .....

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-tax Officer is unsustainable in law. e) That view the Ld. CIT for AY 2004-05 and next five years is contradictory and is against principles of consistency and is against the law laid down by the Hon ble Supreme Court of India in the case of Radha Soami Satsang vs. CIT (1992) 193 ITR 321 (SC) wherein it has been observed as under (Heads Notes only):- Charitable Trust - Exemption under section 11 - Constitution and bye laws of assessee, a religious institution, indicated that its property was int .....

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rial change, a different view than that taken in earlier years, could not be taken. f) That the disallowance uls 40A(3) and denial of deduction uls 80-IB being matters considered and decided in appeal, cannot be subjected to revision jurisdiction in terms of clause (c) of the Explanation to section 263(1). For disallowance uls 40A(3), the Ld. CIT(A), vide his letter dated 27.11.2012 directed the Ld. A.O to send a remand report after verifying the aforesaid expenditure from the seized documents. .....

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e Ld. CIT(A). Hence, the action of the Ld. CIT is against the law laid down by the Hon ble Gujarat High in the case of CIT vs. Nirma Chemical Works (P) Ltd (2009) 309 ITR 67 wherein the following has been observed vide para no. 7 as under:- 7. On behalf of the assessee it was contended that once the issue of deduction under Section 80I of the Act had been considered by the Assessing Officer and the matter carried in Appeal before the Commissioner (Appeals) the assessment order would merge with t .....

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v. Shashi Theatre Pvt. Ltd. (supra) was directly on the point as the matter involved identical fact situation except for the fact that it was a case of investment allowance under Section 32A of the Act whereas the present matter relates to deduction under Section 80I of the Act. That in the aforesaid case the Assessing Officer had allowed investment allowance in relation to some of the items while disallowing investment allowance in relation to certain other items which was carried in appeal. Th .....

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nt allowance. That in revenue's reference it was held by the High Court that for the purpose of considering the grant of investment allowance qua the items rejected by the Assessing Officer, the Commissioner (Appeals) was required to go into the question of validity of grant of investment allowance in relation to the items on which investment allowance had already been granted by the Assessing Officer. That the total claim for investment allowance as per return of income was before the Appel .....

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er the said provision could not be divorced and treated independent of the quantum. It was further submitted that in the next decision the question was in relation to deduction under Section 80I of the Act and the Court had followed the principle laid down in case of CIT v. Shashi Theatre Pvt. Ltd. (Supra). g) That the Show cause notice u/s 263 of the Act dated 14.03.2014 was received by the Assessee only at 5 PM on Friday, 21st March 2014. Date of hearing was fixed on 25.03.2014 in Kanpur. Howe .....

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d documents and reply thereof was filed by the assessee which was duly considered by the AO. The AO also considered the Special Audit Report and completed the assessment as per the documentary evidence as well as law. Therefore, the arguments advanced by the Ld. DR as well as the case law cited by her is not useful to the Revenue in interfering in the assessment order. 13. We are of the considered opinion that for the following reasons also the order passed by the learned CIT u/s. 263 totally fa .....

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