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TMI Blog2018 (9) TMI 1541X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year 2008-09 on 26/09/2008, declaring a total income of Rs. 16,81,42,890/-. 3. On 05/11/2009, there was a search and seizure operations under section 132(1) of the Act, in NKG group of companies and the assessee's case was taken up for scrutiny under section 153-A of the Act. Assessee filed the return of income on 14/09/2010 declaring the income at Rs. 21,26,39,300/-. Learned Assessing officer, however, assessed the income of the assessee at Rs. 22,87,10,229/- and the assessee accepted the same by not filing any appeal. Subsequently, there was another search and seizure operations under section 132(1) of the Act on 23/08/2012 in NKG group of companies and again the case of the assessee was taken up for scrutiny under section 153-A of the Act. Assessee filed the return of income on 1/7/2014 declaring an income of Rs. 22,87,10,229/-. 4. Learned Assessing Officer, during the assessment proceedings, called for the detailed information and considering the same, passed the assessment order dated 31/03/2016 wherein he had taken the gross profit margin on sales turnover at the rate of 9%. Inasmuch as the assessee's margin was below 9% in respect of the assessment years 2008-09 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted the assessment order without preferring any appeal and, therefore, the assessee is precluded from taking such a plea for the first time before the Tribunal. Basing on the assessment order, the Ld. DR submitted that the assessee filed application before the Income Tax Settlement Commission for the assessment years 2007-08 to 2013-14 on 18/02/2015 offering additional income. The application was admitted by the settlement commission vide its order under section 245-D(1) of the Act dated 26/02/2015. By order dated 09/04/2015, the Settlement Commission declared the application invalid as the assessee failed to make full and true disclosure. Basing on this factual matrix, Ld. DR submitted that the limitation period got extended till 31/03/2016 in view of the provisions of the 2nd proviso to Explanation to section 153 of the Act. 9. We have gone through the record carefully in the light of the submissions made on either side. In view of the rival contentions on the aspect of limitation, as stated above, the contention between the parties is that in case of search, whether the provisions of section 153 or section 153-B of the Act, that is applicable. 10. For proper appreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be excluded: Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in clause (a) or clause (b) of this sub-section available to the Assessing Officer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly: 11. A reading of section 153 makes it clear that, no order of assessment shall be made under section 143 or section 144 at the time after the expiry of two years from the end of the assessment year in which the income was first assessable, and many provisos are provided to the section; whereas section 153- B starts with the expression that "notwithstanding anything contained in section 153", and states that the Assessing Officer shall make an order of assessment or reassessment in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in class (b) of subsection (1) of section 153-A etc. 12. Admittedly the assessment involved in this matter is under section 153A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rescribed under section 153-B of the Act. 15. Basing on this, the Ld. AR submits that the assessment order in this case is barred by limitation and is non-est in the eye of law. Taking forward this argument and placing reliance on the decision of the Hon'ble Apex Court reported in Kiran Singh & Ors. V. Chaman Paswan & Ors. [1955] 1 SCR 117, Ld. AR submitted that the learned Principal Commissioner of Income Tax cannot assume jurisdiction under section 263 of the Act to revise the assessment order, which is non-est in the eye of law, being barred by limitation. 16. In Kiran Singh & Ors. V. Chaman Paswan & Ors. [1955] 1 SCR 117 Hon'ble Apex Court held that " It is a fundamental principle well-established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... While exercising powers u/s 263 Id. Commissioner cannot revise an assessment order which is non est in the eye of law because it would prejudice the right of assessee which has accrued in favour of assessee on account of its income being determined. If Id. Commissioner revises such an assessment order, then it would imply extending/ granting fresh limitation for passing fresh assessment order. It is settled law that by the action of the authorities the limitation cannot be extended. Because the provisions of limitation are provided in the same 20. In view of above discussion ground no.3 is allowed and revision order passed u/s 263 is quashed. " 19. We are, therefore, convinced with this argument of the Ld. AR and hold that the assessment order is barred by limitation, the assessee can challenge the validity of the same during this appellate proceedings relating to the examination of the validity of the order passed under section 263 of the Act. Respectfully following the decision of the Hon'ble Apex Court in the case of Kiran Singh (supra); the decisions of the Tribunal in West life Development Ltd (supra) followed by the Delhi Tribunal in Chennai Industries (ITA 1398- 99/Del/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (d) of explanation two of the section 263 (1) of the Act which says that for the purposes of this section it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous insofar as it is prejudicial to the interests of the revenue, if, in the opinion of the Prl. Commission or Commissioner, "the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdiction of High Court or Supreme Court in the case of the assessee or any other person". 24. According to the learned principal Commissioner of income tax the Hon'ble Apex Court in SLP (C) CC No. 769 of 2017, by order dated 16/01/2017 approved the decision of the Hon'ble Gujarat High Court in the case of NK industries vs. DCIT where it was held that, where the entire purchases shown on the basis of fictitious invoices have been debated in the trading account, since the transaction was found to be bogus, "the Tribunal having once come to a categorical finding that the amount of Rs. 2,92,93,288/- represented alleged purchases from bogus suppliers it was not incumbent on it to restrict the disallowance to only Rs. 73,23,322/-". 25. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercising its appellate jurisdiction and not while exercising the discretionary jurisdiction disposing of petition for special leave to appeal. The doctrine of merger can therefore be applied to the former and not to the latter. iv) An order refusing special leave to appeal may be a non- speaking order or a speaking one. In either case it does not attract the doctrine of merger. An order refusing special leave to appeal does not stand substituted in place of the order under challenge. All that it means is that the Court was not inclined to exercise its discretion so as to allow the appeal being filed. v) If the order refusing leave to appeal is a speaking order, i.e. gives reasons for refusing the grant of leave, then the order has two implications. Firstly, the statement of law contained in the order is a declaration of law by the Supreme Court within the meaning of Article 141 of the Constitution. Secondly, other than the declaration of law, whatever is stated in the order are the findings recorded by the Supreme Court which would bind the parties thereto and also the court, tribunal or authority in any proceedings subsequent thereto by way of judicial discipline, the Supre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al to the interest of revenue, taking the case covered by clause (d) of Explanation 2 to section 263 (1) of the Act. On this score, we are unable to endorse the view of the learned Principal Commissioner of Income Tax. 29. Now we shall refer to the propriety of the exercise of jurisdiction under section 263 of the Act by the learned Principal Commissioner of Income Tax. It is the contention of the Ld. AR that it is not a case of lack of enquiry or inadequate inquiry conducted by the Learned Assessing Officer before passing the assessment order. According to him Learned Prl. Commissioner of Income Tax also does not dispute the correctness of the enquiry conducted by the Learned Assessing Officer or the conclusions reached by him pursuant to such enquiry. 30. With reference to the plausibility of the view taken by the Ld. Assessing Officer, it is the further submission of the Ld. AR that the total sales accepted in this matter ought to be to the tune of Rs. 107,25,03,637/- whereas if we accept the analogy of the Learned Principal Commissioner of income tax, the income of the assessee would be Rs. 100,52,55,984/- and the profit margin would be at approximately 93.7% which is quite i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e whole amount, was an error that could be corrected under section 263 and the Learned Principal Commissioner of Income Tax has power to consider all aspects which were subject matter of Assessing Officer's order, if, in his opinion, they were erroneous, despite assessee's appeal on that or some other aspect. The other decisions relied upon by Ld. DR are not applicable to the facts of the case inasmuch as in all such cases the record speaks that there was a finding as to the Learned Assessing Officer failing to carry out adequate enquiry. 33. Ld. DR further placed reliance on the decision reported in CIT vs. La Medica (2001) 250 ITR 575 for the principle that once it was accepted that supplies were not made by the said supplier to whom payments are alleged to have been made, question of purchases having been made from some other source could not weighed with the Tribunal as a factor in assessee's favour. Further, reliance is placed on the decision reported in Sanjay Oilcake Industries vs. CIT (2009) 316 ITR 274 (Gujarat) wherein it was held that when certain additions were made on account of inflated purchase price and alleged sellers were not traceable and the documents had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructure sector projects, the profit rate is something approximately 94%. We are conscious of the fact that in civil contracts of construction and execution of infrastructure sector projects the profit rate cannot be 94%, inasmuch as law acknowledges the fact, under section 44-AD as it stood prior to the amendment by Finance Act, 2009 that in the case of an assessee engaged in the business of civil construction, a sum equal to 8% of the gross receipt shall be deemed to be the profits and gains of such business chargeable to tax. In such a situation, we find strength in the argument of Ld. AR that being conscious of this fact of the profitability of the business of work of civil construction and execution of infrastructure sector projects, Learned Assessing Officer proceeded to estimate the gross profit of the assessee in respect of the alleged bogus purchases at 9%, as such it is not a case of lack of enquiry or inadequate enquiry, so as to enable the Learned principal Commissioner of income tax to exercise direction under section 263 of the Act. 37. In the circumstances, we find strength in the argument of the Ld. AR that Ld. Pr. CIT is not justified in setting aside the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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