TMI Blog2021 (8) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... 3-8-2021 - Shri Pawan Singh, JM And Dr. A. L. Saini, AM For the Assessee : Shri Kamlesh Bhatt - CA For the Respondent : Shri S. T. Bidare CIT. DR ORDER PER DR. A. L. SAINI, ACCOUNTANT MEMBER: These captioned two appeals filed by the assessee, pertaining to Assessment Years 2010-11 and 2013-14, are directed against the separate orders passed by the Learned Principal Commissioner of Income Tax -2, Surat [in short the PCIT ], dated 26.03.2018 and 23.03.2018 respectively, under section 263 of the Income Tax Act 1961, [hereinafter referred to as the Act ] 2. In these two appeals, assessee has challenged the correctness of the order passed by the Learned PCIT under section 263 of the Act. Since, the issues involved in all these two appeals are common and identical; and these two appeals relate to same assessee, therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No. 310/SRT/2018 for AY 2013-14, have been taken into consideration for deciding the above appeals en masse. The grievances raised by the assessee in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of this, from the findings during survey that in F.Y. 2012-13 ₹ 1,82,18,581/- was paid by assessee in cash in excess of ₹ 20,000/- which was neither disputed nor the Statements retracted, later, only ₹ 20,70,763/- was allowable expenditure u/s 40A(3) of the Act read with rule 6DD of the Rules. Further, declaration of ₹ 15,00,000/- made for F.Y; 2012-13 is regarding irregularities in books of accounts and hence, it has no bearing on disallowance of cash payment in excess of ₹ 20,000/-. Hence, payment of ₹ 1,61,47,818/- (₹ 1,82,18,581 - ₹ 20,70,763/-) should be disallowed. 6. Therefore, learned PCIT had issued a show cause notice to the assessee on 29-01.2018, to explain the above transactions. In response to the said show cause notice, assessee has submitted written submission before the learned PCIT, which is reproduced below: 1. --------With reference to the captioned notice, your good self has asked us as to why payment of ₹ 13,41,006/- made to Rameshbhai - Labour contractor should not be disallowed u/s 40(a)(ia). In this regard, we have to state that we have made payment to Rameshbhai - Labour Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion made by the assessee noted that in several time the assessee had made the payment in cash in excess of ₹ 20,000/- in a single day which requires detailed verification by the assessing officer. Therefore, order passed by the Assessing officer for AY 2013-14 under section 143(3) of the Act, on 22.03.2016 is erroneous and prejudicial to the interest of the Revenue. Therefore, learned PCIT set-aside the order of the AO with the direction to frame a fresh assessment. 8. Aggrieved by the order of the learned PCIT, the assessee is in appeal before us. 9. Shri Kamlesh Bhatt, Learned Counsel for the assessee submitted before the Bench that various issues raised by learned PCIT in his order under section 263 of the Act, have been examined by the Assessing Officer, therefore, those issues which were examined by the assessing officer should not be subject to revision proceedings under section 263 of the Act. About the payment to Shri Rameshbhai of ₹ 13,41,006/-, learned Counsel submitted that this issue has been examined by the AO vide para 3 and 4 of the assessment order. Further, regarding the issue of payment in cash in excess of ₹ 20,000/-, the assessing off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 40A(3) of the Act. Therefore, order passed by the assessing officer is erroneous and prejudicial to the interest of revenue, hence ld DR prayed the Bench that order of ld PCIT, under section 263 of the Act may be upheld. 12. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld PCIT and other materials brought on record. In ITA No.309/SRT/2018, for assessment year 2010-11, only one issue was raised by the ld PCIT in his order under section 263 of the Act, which is that out of total cash payment in excess of ₹ 20,000/-, of ₹ 93,56,628/- which was found during survey, the then assessing officer allowed payment of ₹ 49,45,811/- under rule 6DD of the Income Tax Rules, as it was paid against purchase of milk. It was however noticed by ld PCIT, from cash book that in the following cases, payments of ₹ 36,38,376/- were made to eight traders, ( cash payment in excess of ₹ 20,000/- in violation of the provisions of section 40A(3), as detailed below : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id payment to each of them is covered, vide the exception provided in sub clause (ii) of clause (e) of rule 6DD of the Income Tax Rules. We note that during the course of assessment proceedings, the Assessing Officer has rightly allowed the impugned payment as expenditure as it was covered by the exception provided in sub clause (ii) of clause (e) of rule 6DD of the Income Tax Rules, 1962. Thus, so far, this issue is concerned, the order passed by the assessing officer is neither erroneous nor prejudicial to the interest of revenue. 13. Learned Counsel also submitted before us that about the issue of cash payment in excess of ₹ 20,000/-, assessee has submitted each and every documents during the re-assessment proceedings under section 143(3) r.w.s. 147 of the Act, which is evident from para 3 and 4 of the assessment order, which is reproduced below: 3.During the year, the assessee firm was engaged in the business of manufacturing of dairy products. In this case a survey action U/s 133A of the Act was carried out on 22/01/2013 at the business premises of the assessee. During the course of survey proceedings, statement on oath u/s 131 of the I.T.Act, of Shri Vimal K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d agreed upon the proposed disallowances as communicated in the show cause notice. Accordingly, the total payments made to various parties of ₹ 41,45,883/- in contravention to Section 40A(3) of the I.T.Act is disallowed and added to the total income. 14. It is abundantly clear from para No.3 and 4 of assessment order that regarding excess payment of ₹ 20000/-, each and every document were there before the assessing officer and assessing officer examined them and has taken a possible view, therefore, assessment order passed by the assessing officer under section 143(3) r.w.s.147 of the Act, dated 18.03.2016, is neither erroneous nor prejudicial to the interest of revenue. 15. In ITA No.310/SRT/2018, for assessment year 2013-14, ld PCIT has raised the same issue of payment in cash in excess of ₹ 20,000/-: In the matter of payment of ₹ 1,61,47,818/- made to various persons in cash in excess of ₹ 20,000/-, the ld PCIT, noted that in several time, the assessee had made the payment in cash in excess of ₹ 20,000/- in a single day which, requires detailed verification by the assessing officer. Therefore, order passed by the Assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly the disallowance under section 40(a)(ia) of the Act was made and the assessee company accepted the disallowance. The learned PCIT noted that assessing officer did not make any disallowance on payment made to Rameshbhai of ₹ 13,41,006/-, therefore, the order passed by the AO was without proper verification, hence, order of the AO was erroneous and prejudicial to the interest of the Revenue. We note that about the payment of ₹ 13,41,006/- made to Rameshbhai - Labour contractor. The assessee had made payment to Rameshbhai - Labour Contractor and the said issue was originally considered in assessment proceedings and accordingly the disallowance U/s 40 (a)(ia) of the Act was made by the assessing officer and the assessee accepted the disallowance. This issue has also been examined by the AO vide para 3 and 4 of the assessment order. In view of this order passed by the assessing officer is neither erroneous nor prejudicial to the interest of revenue. 17. We note that ld PCIT should have reason to believe that the order passed by the Assessing Officer is prejudicial to the interest of revenue but also erroneous in law, for that we rely of the judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missed with the observations made above. 18. On the similar facts, our view is fortified by the judgment of Hon`ble Gujarat High Court in the case of Arvind Jewellers, 124 Taxman 615 (Guj-HC), wherein the Court has held as follows: 4. Heard Mrs. Mona Bhatt, the learned counsel appearing for the applicant-revenue and Mr. R.K. Patel, the learned advocate appearing for the respondent-assessee. The revenue's case was, as canvassed by Mrs. Bhatt, that since the material which was available with the ITO was not considered while finalizing the assessment, the order passed on that basis is erroneous and prejudicial to the interest of the revenue. According to the revenue, before passing the order, full enquiry and investigation ought to have been made by the ITO and since this was not done, it has caused loss to the revenue and in this view of the matter, the order so passed was erroneous and prejudicial to the interest of the revenue and the Commissioner was justified while taking action under section 263. In support of her contention, she had relied on the decision of the Supreme Court in the case of CIT v. Manjunathesware Packing Products Camphor Works [1998] 231 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the Income-tax Officer is unsustainable in law. (p. 83) 6. From the above observations made by the Supreme Court, it is clear that the provisions of section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous, that section will be attracted and incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. The Supreme Court has also made it clear that the phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer and that every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue. It was further emphatically stated that when an ITO adopts one of the courses permissible in law and it has resulted in loss of revenue, or where ..... X X X X Extracts X X X X X X X X Extracts X X X X
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