TMI Blog2023 (1) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that there was no agreement. The AO has further stated that the consultancy fees paid was different in respect of different clients and it ranged from 24.23% to 71.09% of the fees received by the assessees herein and hence there is no scientific basis for computing the fees payable to Shri Deepak Kochhar. Accordingly, the AO has expressed the view that the payments made to Shri Deepak Kochhar were not explained. However, the AO did not specifically say that the consultancy fee payments are bogus. Hence, it appears that the AO did not make disallowance. With regard to the transfer of funds from Deepak Kochhar to M/s Aarem Management and from Aarem Management to the assessee, the AO has taken the view that Shri Deepak Kochhar has used the accounts of the assessees herein to get the unaccounted funds converted, i.e., there is circular movement of undisclosed fund through Pioneer group of companies. The AO has further held that the funds transferred to Shri Deepak Kochhar are also proved to be not genuine. All these observations of the AO are related to his comments upon transfer of funds. Since there was circular movement of funds, he chose to estimate commission income. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals are stated in brief. The assessing officer reopened the assessments of AY 2012-13 and 2013-14 in the case of M/s Pioneer Investcorp Ltd and the assessment of AY 2012-13 in the case of M/s Pioneer Insurance Reinsurance Brokers P Ltd. The common reason for reopening of the assessment is stated in brief. The revenue carried out survey operations u/s 133A of the Act in the hands of both the assessees on 03-05-2018. During the course of survey operations, it was found that the above said companies have paid consultancy/retainership fees to a person named Shri Deepak Kochhar. A statement was taken during the course of survey on oath u/s 131 of the Act from Shri Gaurang Gandhi, the managing director of both these companies. The DDIT (inv.) appears to have taken the view that the payments made to Shri Deepak Kochhar as consultancy fees were only accommodation entries. Based on the report from DDIT (Inv.), the AO reopened the assessments of all the three years under consideration in the hands of both the assessees. 3. During the course of assessment proceedings, the AO raised various queries with regard to the payments made to Shri Deepak Kochhar. He also noticed that both thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessees. 6. Before Ld PCIT, these assessees contended that the AO had called for all the information relating to the payments made to Shri Deepak Kochhar and the assessee has also furnished them. It was submitted that the Ld PCIT is placing reliance on the report of DDIT (Inv), which in turn, has placed reliance on the Statement given by Shri Gaurang Gandhi, the Managing director of these two companies. Hence the statement given by Shri Gaurang Gandhi formed the basis for reopening of assessment by the AO as well as the initiation of revision proceedings by Ld PCIT. It was submitted that the copies of the said statement were not furnished to the assessees. 7. It was contended that the, merely on the basis of some view expressed by DDIT (Inv), it cannot be said that the payments made to Shri Deepak Kochhar were merely accommodation entries and it cannot be considered that this fact has been conclusive established. It was submitted that these assessees as well as Shri Deepak Kochhar have all along maintained the stand that the payments were given/received on account of services rendered. It was further submitted that the Ld PCIT has also not arrived at any conclusion that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... note that the Ld PCIT also discussed that the AO has not examined applicability of sec.68 of the Act on the loans received by the assessees, even though the said issue was not mentioned in the notice issued by him. Accordingly, the Ld PCIT set aside the assessment orders of all the three years in the hands of both the assessees herein and directed the AO to pass fresh assessment orders on the issues discussed in the revision orders passed by him, after giving due opportunity to the assessee. Both the assessees are aggrieved by the orders passed by Ld PCIT. 10. Before us, the Ld A.R reiterated the contentions made before Ld PCIT. He submitted that the basic material relied upon by the AO for reopening the assessments and by Ld PCIT for initiation of revision proceedings is the statement given by Shri Gaurang Gandhi. He submitted that the statement of Shri Gandhi has not been given to the assessee either by AO or by Ld CIT(A). Accordingly, he contended that there was clear violation of principles of natural justice. He submitted that the AO has extracted certain questions and answers from the statements given by Shri Gaurang Gandhi and Shri Deepak Kochhar. A perusal of the same w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard rival contentions and perused the record. The scope of revision proceedings initiated under section 263 of the Act was examined by Hon'ble Bombay High Court, in the case of Grasim Industries Ltd. V CIT (321 ITR 92) by taking into account the law laid down by the Hon'ble Supreme Court. The relevant observations are extracted below: Section 263 of the Income-tax Act, 1961 empowers the Commissioner to call for and examine the record of any proceedings under the Act and, if he considers that any order passed therein, by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, to pass an order upon hearing the assessee and after an enquiry as is necessary, enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment. The key words that are used by section 263 are that the order must be considered by the Commissioner to be erroneous in so far as it is prejudicial to the interests of the Revenue . This provision has been interpreted by the Supreme Court in several judgments to which it is now necessary to turn. In Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, the Supreme Court held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to start fishing and roving enquiries in matters or orders which are already concluded. 14. We shall now refer to the notice issued by Ld PCIT. Identical notices have been issued in all the three years in the hands of both the assessees. Hence we extract below the notice dated 13-08-2021 issued in the hands of M/s Pioneer Investcorp Limited for AY 2012-13:- 3. During the course of assessment after considering the submissions made by you, the A.O. arrived at the conclusion that the commission paid to Shri Deepak Kocchhar during the year under consideration is not genuine and accordingly, added 3% of receipts of Rs. 4,25,00,000/- i.e., Rs.12,75,000/- and 3% of payments of Rs.4,25,00,000/- i.e. Rs.12,75,000/- totalling to Rs.25,50,000/-. However, it is noted that no justification has been given by the A.O. in the assessment order as to why merely 3% of receipts of commission Rs.4,25,00,000/- i.e. Rs. 12,75,000/- and 3% of payment of Rs.4,25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide order dated 29.12.2019 making an ad hoc addition of Rs.25,50,000/- holding that Pioneer had concealed commission income at 3% of receipts from and payment made to Mr. Deepak Kochar i.e., in aggregate @ 6% of Rs.4,25,00,000/- i.e, INR 25,50,000/-. Against this order the assessee filed appeal before the CIT(A) on 28.01.2020. Post filing of appeal the assessee opted for VsV Scheme and the same was accepted by the Department. Therefore, it has been argued that the issue under consideration is settled under VSV and has attained finality. The assessee has referred to the decision of the Hon'ble Supreme Court in the case of Killick Ninon Ltd. V Deputy Commissioner of Income Tax (2002)125 taxman 1055(SC). 5.1.2 In this regard, it is observed that the decision referred by the assessee is in respect of KVSS and the decision of the Apex Court was in respect of peculiar facts of the case. The decision was in respect of reopening of the issue by the AO In the instant case, the proceedings u/s.263 has been initiated by the Pr. CIT, who is a supervisory authority, who has been given duty in the Income-tax Act to correct the errors in assessment made by the AO, which are prejudicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vation made by the PCIT which appears to be true at first sight or prima facie true. Assessee s contention, in this regard, is nothing but a rhetoric. The order u/s.263 is a decision taken by the PCIT on the basis of explanation given by the assessee in reply to the notice u/s.263. Therefore, the observation of assessee and challenging the notice for use or word appears to be true is a misplaced semantic. It is nothing but lack of understanding the meaning of the phrase. 5.4 In its reply filed on 10.03.2022, the assessee, inter-alia, has also stated that it has withdrawn appeal filed before CIT(A) and therefore the subject matter has attended finality. In this regard, it is observed that there is no bar for revisionary proceedings in respect of matters which have not considered and decided in appeal. Since the appeal has been withdrawn, the issue is not considered and decided. Moreover, as already discussed, the issue in this revisionary proceeding is not exactly the same as in the appeal filed before the CIT(A). Therefore, the contention of the assessee on this issue is not tenable. 5.5 The assessee has referred to various judicial decisions in its reply, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order becomes erroneous in so far it is prejudicial to the interest of revenue. 6. In view of the aforesaid facts the assessment order dated 29.12.2019 is held to be erroneous in so far it is prejudicial to the interest of revenue. The assessment order is therefore, set aside and the AO is directed to pass a fresh assessment order on the issues discussed in this order after giving due opportunity to the assessee. The AO is also directed not to make any addition on the issue of commission of RS.25,50,000/-, which has become final in view of the VsV declaration filed by the assessee. 16. A perusal of the impugned revision orders passed by Ld PCIT would show that the Ld PCIT has not discussed anything about the genuineness or otherwise of the consultancy fees paid to Shri Deepak Kochhar. In most of the paragraphs, the Ld PCIT has addressed the contention of the assessee that the settlement of disputed addition of commission income under VSV Act, 2020 will not bar him to initiate revision proceedings in respect of consultancy fees paid to Shri Deepak Kochhar. In paragraph 5.1.4, the Ld PCIT has expressed the view that the AO has failed to examine the applicability of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pak Kochhar was only accommodation entries, as presumed by Ld PCIT. 19. Now we shall examine whether impugned revision orders can be sustained? We noticed earlier that the AO has initiated reassessment proceedings and the Ld PCIT has initiated revision proceedings only on the basis of report given by DDIT (Inv.). Hence, on the basis of report given by DDIT (Inv.) only, the Ld PCIT has entertained the view that the AO has failed to make disallowance of consultancy fees paid to Shri Deepak Kochhar. Whether Ld PCIT can simply rely upon the report of DDIT (Inv.) and hold the assessment order to be erroneous is the question that requires examination. In this regard, we may gainfully refer to the decisions rendered by Hon ble Bombay High Court in the case of Gabriel India Ltd (supra), wherein, inter alia, held as under:- From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an income tax officer acting in accordance with the law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner of Income tax and he is able to establish and show the error or mistake made by the Assessing officer, making the order unstainable in law. In some cases possibly though rarely, the Commissioner of Income tax can also show and establish that the facts on record or inferences drawn from facts on record per se justified and mandated further enquiry or investigation but the Assessing officer had erroneously not undertaken the same. However, the said finding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the Assessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter/ssie to the Assessing Officer would imply and mean the Commissioner of Income tax has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question . Similar view has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on this issue. On the contrary, the Ld PCIT did not make any enquiry or verification in order to show that the finding reached by the AO is erroneous. While the AO has taken the view not to disallow the consultancy fees paid, the Ld PCIT has taken the view that the AO should have disallowed it. Thus, the AO has taken a possible view of the matter on the basis of his examination and merely because, the Ld PCIT has got different view, he cannot initiate revision proceedings. 23. With regard to the observation of the Ld PCIT on the issue of examination of loans u/s 68 of the Act, we have noticed that the Ld PCIT did not mention this issue in the notice issued by him for initiation of revision proceedings. The Ld A.R submitted that the assessees have made submissions on the issue of consultancy fee paid and submitted that no query was asked about sec.68 of the Act. At the time of hearing, it was not shown to us that the Ld PCIT has given opportunity to the assessee on the issue of examination of loans u/s 68 of the Act. Accordingly, we are of the view that the Ld PCIT could not have discussed this new issue in the impugned revision orders. 24. In view of the foregoing discussio ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
