TMI Blog2016 (8) TMI 1565X X X X Extracts X X X X X X X X Extracts X X X X ..... sceptible to review contemplated under S. 263 of the Act. Lack of enquiry on unconnected issues in a reassessment proceeding - We notice that the Commissioner has merely entertained strong suspicion on the bona-fide of trading results owing to huge losses and observed that in the absence of income reported on account of credit towards write back of certain amounts under section 41(1), the assessee has declared trading losses on a substantial turnover which ought not to have been accepted without embarking upon a detailed enquiry. The show-cause action of the Commissioner under section 263 seeking to upset the reassessment order is thus clearly actuated in the realm of such suspicion. As noted earlier, indulging in roving enquiry u/s 147 on unconnected issues is a case of overreaching of powers which is not permissible in law. AO in his quasi judicial capacity has accepted the trading results. A mere different perception of Commissioner founded upon suspicion on the issue is not sufficient to legitimize jurisdiction under section 263. It would be farfetched to presume that the purported substantial turnover per se would necessarily give rise to presumption of profits thereon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8-2016 - Shri Vikas Awasthy, JM And Shri Pradip Kumar Kedia, AM For the Appellant : Shri M. K. Kulkarni. For the Respondent : Shri Dilip Sharma. ORDER PER PRADIP KUMAR KEDIA, AM : Both the captioned appeals filed by the assessee are directed against separate orders of the Commissioner of Income Tax-V, Pune (in short the Commissioner ), both dated 28.03.2014 whereby the two different assessment orders passed by the Assessing Officer i.e. in relation to assessment year 200809 passed under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short the Act ) and order passed under section 143(3) of the Act in relation to assessment year 2009-10, both dated 16.12.2011 respectively were held to be erroneous in so far as it was prejudicial to the interests of the Revenue within the meaning of section 263 of the Act. 2. Both the appeal were clubbed and heard together as these appeals relate to the same assessee and involve similar issues. The factual differences however have been dealt with separately for each assessment year. A consolidated order has been passed for the sake of brevity. ITA No. 813/PN/2014 (A.Y. 2008-09) : 3. The assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 014 requiring the assessee to show-cause as to why the assessment so framed under section 143(3) r.w.s. 147 should not be set-aside or modified. It was alleged by the Commissioner that examination of records revealed that assessment order so passed is erroneous in so far as it is prejudicial to the interests of the Revenue for the reasons that the Assessing Officer has failed to conduct proper enquiries/verifications/examinations in respect of trading results declared in exclusion to extraordinary income declared by way of write back of certain credits. Secondly, the Commissioner observed that certain figures of income of ₹ 2,40,21,887/- as an amount written back does not tally with corresponding breakup of ₹ 2,36,44,153/- submitted in the course of assessment proceedings of AY 2007-08. The Commissioner alleged that the Assessing Officer has failed to verify this discrepancy as well as the authenticity of the disclosure. 6. In response, the assessee submitted before CIT that the impugned reassessment order sought to be set-aside has been carried in appeal before the CIT(A) and the CIT(A) passed appellate order on 27.07.2012 with certain reliefs granted to the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has preferred an appeal before the Tribunal. 9. The Ld. Counsel for the assessee, Shri M. K. Kulkarni reiterated the aforementioned facts and submitted at the outset that impugned assessment order which has been sought to be set-aside was subjected to appeal before the CIT(A) and thereafter before the ITAT. He adverted to the order of the Tribunal in the case of ACIT vs. Bhiva S. Rane in ITA Nos.2058 2059/PN/2012, order dated 27.09.2013 in this regard. He submitted with reference to the appellate orders that the question on write back of an amount referred under section 41(1) stands concluded. He thereafter submitted that it is not in dispute that the assessee furnished the trading results together with the account of write back of creditors, etc. in the course of hearing. All the relevant details were submitted as called for by Assessing Officer. He finally submitted that there was no error per se in terms of section 263 in the order passed under section 143(3) r.w.s. 147 of the Act and therefore power exercised by the Commissioner under section 263 is vitiated in law. Consequently, the order framed under section 263 of the Act dated 28.03.2014 requires to be set-aside. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 147/148 was taken as follow up action on the basis of assessment carried out for the assessment year 2007-08 on the issue of income arising from write back of unpaid credits under section 41(1) of the Act as appearing in the books. 12.1 A pertinent question of law that arises in the subject matter of appeal is the scope of revisionary powers of the CIT under S. 263 to a re-assessment order passed in pursuance of section 147 / 148 of the Act. 12.2 As the assessment sought to be revised was made under section 143(3) r.w.s. 147 of the Act, it is ostensible that the Assessing Officer was required to frame re-assessment of the income chargeable to tax which is found to have escaped assessment in the light of reasons recorded under S. 148(2) before issuance of notice. Indeed, the jurisdiction of the Assessing Officer under S. 147 also extends to other income which may come to his notice subsequently in the course of re-assessment proceedings. However, precise question that emerges is whether the Assessing officer in exercise of powers conferred under S. 147 is under statutory duty to peddle roving enquiries to explore the possibility of escapement on every other item that may p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner to expand the scope of section 147 of the Act. S. 263 read in the context of reassessment proceedings cannot be exercised unless there is a cause available on objective facts to demonstrate that detailed probe or enquiries were warranted to encompass escapement of other possible income in a given set of facts. Consequently, the alleged inaction of the AO on the issue of correctness of trading results in reassessment proceedings is not fatal or erroneous for the purposes of section 263 of the Act. Hence, the reassessment order passed within the four corner of its authority cannot be dubbed as erroneous per se and is thus is not susceptible to review contemplated under S. 263 of the Act. 12.5 We now proceed to examine the issue of lack of enquiry on unconnected issues in a reassessment proceeding from a different perspective. It is well settled that exercise of statutory powers under S. 263 is dependent upon the existence of certain objective facts. In our view, proposed action as suggested by the CIT runs contrary to the well accepted policy of law that there must be a point of finality on all legal proceedings. Needless to say, the discretion given to the Commissioner is req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y declaring higher income compared to what was provided in the course of assessment in the earlier year. The condition precedent for exercise of powers under S. 263 is thus sorely missing. Hence, we fail to visualize any rationale in this Ground set out by the Commissioner for invoking revisionary powers. Notwithstanding aforesaid, the section 41(1) is attracted only to the extent of remission granted by the creditor i.e. assessee. A higher remission by a unilateral act to the prejudice of the Assessee can not be ordinarily forced. Therefore, this ground for invoking section 263 is also not sustainable in law. In the context, We also simultaneously observe that amount written back under S. 41(1) was assessed and some additions thereon were also made by the Assessing officer. The assessment was subjected to appellate proceedings before the CIT(A) and ITAT and thus stood concluded. Therefore, the doctrine of merger would apply in so far as this aspect of the matter is concerned and hence this issue on correctness of quantum of credits written back under S. 41(1) could not have been re-visited by the Commissioner in view of section 263(1)(c) of the Act. Thus, in view of section 263(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of T.R.F. Ltd. vs. CIT, (2010) 323 ITR 397 (SC) has held that the assessee need not prove the debts to be irrecoverable under section 36(1)(vii) of the Act. It is sufficient if the debts incidental to business are written off for the purpose of making claims. In the light of the aforesaid decision of the Hon ble Supreme Court in the case of T.R.F. Ltd. vs. CIT (supra), it was not unreasonable for the Assessing Officer to accept the debts written off. Further, the Commissioner has not brought on record any good reason to hold to the contrary. In this view of the matter, we do not see any error committed by the Assessing Officer in admitting amounts write off towards bad debts and grant deduction of the same with similar amounts written back. In the light of aforesaid discussion, the action of the Commissioner under section 263 is outside the bounds of law and thus cannot be sustained. In consequence, the order passed under S. 263 for the assessment year 2009-10 dated 28.03.2014 requires to be set aside and quashed. We do so accordingly. 19. In the result, the appeal of the assessee in ITA No.814/PN/2014 relating to assessment year 2009-10 is also allowed. 20. Resul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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