TMI Blog2022 (6) TMI 1422X X X X Extracts X X X X X X X X Extracts X X X X ..... has demonstrated that it has disclosed the income and it is part the computation of income then, the ld. Pr. CIT changed the scope of enquiry and held that it is not discernable as to how the Assessing Officer has accepted this return. He should not have allowed the expenditure relatable to earning of this income. It suggests that he has initiated the action without properly analyzing the record and the computation of income filed by the assessee. In other words, a show-cause notice to the assessee would have been in different terms. CIT wanted to verify the inclusion of the income. The assessee has demonstrated that it has offered tax on net basis and income has to be offered on net basis only. Nothing remains to be explored on the ground that as to how the gross income was not offered. It is not the case of the revenue that the assessee has claimed excessive expenditure or the expenditure were not to be granted to the assessee. Therefore, to our mind the impugned order is not sustainable because the ld Pr. CIT failed to make a complete analysis of the record. Nothing is available on the record which authorizes the ld. Pr. CIT to take action u/s 263 of the Act Commission pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er going through the details submitted by the assessee, the Assessing Officer passed a scrutiny assessment order on 31/05/2017 u/s 143(3) of the Act. 4. Before adjudicating the specific issue discussed in the impugned order, we would like to make a mention that earlier a notice u/s 263 of the Act was issued on 11/06/2019 by the ld. Pr. CIT-1, Patna. According to the assessee, this notice was later on dropped after the reply of the assessee. We will discuss the relevancy of this aspect in later part of this order. On perusal of the assessment order, the ld. CIT found that the assessment order is erroneous as well as prejudicial to the interest of the revenue. Therefore, he issued the show-cause notice u/s 263 of the Act. Copy of the show-cause notice has been placed on record by the assessee on page no. 1 of the paper book which reads as under:- P.T.O. 5. In response to this show-cause notice, the assessee appeared before the ld. Pr. CIT and filed written submissions which has been partly reproduced in the impugned order. The specific reply of the assessee vide letter dt. 28/01/2021 has been reproduced on pages 3 to 17 of the impugned order. 6. We have heard the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court. Explanation.- In computing the period of limitation for the purposes of subsection (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. 7. A bare perusal of the sub section-1 would reveal that powers of revision granted by section 263 to the learned Commissioner have four compartments. In the first place, the learned Commissioner may call for and examine the records of any proceedings under this Act. For calling of the record and examination, the learned Commissioner was not required to show any reason. It is a part of his administrative control to call for the records and examine them. The second feature would come when he will judge an order passed by an Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are possible and the AO has taken one view with which the CIT does not agree. If cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under law. (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determine the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in his and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not fee stratified with the conclusion. (viii) The CIT, before exercising his jurisdiction under s. 263 must have material on record to arrive at a satisfaction. (ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oach of ld. Assessing Officer while passing assessment order. The observation of the Hon ble court on pages 386 of journal read as under:- it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income-tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income-tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and function of the Income-tax Officer is very diffident from that of a civil court. The statement made in a pleading proved by the minimum amount of evidence may be adopted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only on adjudicator but also an investigator. He cannot remain passive in the face of the return which is apparently in order but called for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, under the provisions of the specified Act; or 11. The ld. Counsel for the assessee further submitted that completion of any proceeding or passing of any order, pre-supposes initiation of proceedings and/or pendency of any proceedings by issuing of a notice on or before 20/03/2020, is absent in the present case. He pointed out that the proceedings on the first reason is based on the letter of CIT D/R, (ITAT, Mumbai Bench) dt. 14/10/2020 and, therefore, the order has to be construed as passed beyond the period of limitation u/s 263 of the Act. 12. We have duly considered the first fold contention raised by the ld. Counsel for the assessee. However, we do not find any merit in this contentions because the ld. Counsel for the assessee failed to explain the meaning of the expression issuance of any notice used in sub-Clause (a) of Clause 3(1). A reading of this sub-Clause makes it clear that it not only extends the time limit for completion of the proceedings or passing of an order but it also contemplates about issuance of any notice. In other words, it enhances the limitation for taking any action which is going to be time barred on 20th day of March, 2020. The action in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R D expenditure incurred by the assessee is only Rs. 6061.72 lac. However the entire claim has been allowed. The overlooking of these facts has made the assessment in this case erroneous in so far as it is prejudicial to the interests of the revenue. 2. On the facts and in the circumstances of the case as discussed above, it is observed that the Assessing Officer (AO) passed the order u/s 143(3) of the Income Tax Act, 1961 dated 31.05.2017 without proper application of law and without making the required investigation/enquiry which he was legally bound to make before completing the assessment under section 143 (3) of the Act making the order passed by him erroneous and prejudicial to the interests of revenue. 3. Therefore, the undersigned proposes to revise the said order by invoking the provisions of Section 263 of the Income Tax Act, 1961. 4. Before passing such order, an opportunity of being heard is granted to you on 03.07.2019 at 11.30 A.M. On that date you may appear either in person or through an authorized representative in the office of the undersigned and show cause, in writing as to why action u/s 263 of the Income Tax Act should not be taken in your case. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee has been examined with reference to the material on record. The CIT(DR), ITAT-7, Bench-A, Mumbai Vide letter dated 14.10.2020, addressed to ITO, Ward-23(1) (2), Mumbai and a copy endorsed to PCIT-1, Patna communicated that the AOP namely Avenue Venture Real Estate Fund (for short AVREF ) has filed its return of income for the A.Y 2015-16 on 29.08.2015 declaring total income at Nil. Assessment u/s 143(3) of the IT Act, 1961 was made assessing total income of AVREF at Rs. 201786430/- by ITO, Ward-23(1)(2), Mumbai on 28.12.2017. The AOP claimed a refund of Rs. 63856139/- for the year under consideration and stated before the AO that during the F.Y 2014-15 AVREF has earned taxable income of Rs. 201786432/-, which has been offered to tax by the beneficiary M/s Alkem Laboratories Ltd. (for short ALKEM ) of this income. On perusal of record of M/s Alkem for the A.Y 2015-16, it was observed that the assessment u/s 143(3) of the IT Act, 1961 was completed on 31.05.2017 determining total income of Rs. 381,18,39,146/- under 115JB (MAT) as returned by the assessee. It was found that the Assessing Officer has completed the assessment without making any enquiry and verificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,61,80,000/- 5,61,80,000/- Trusteeship Fee 2,24,720/- 2,24,720/- Auditors Remuneration 5,07,845/- 5,07,845/- Legal Professional Fee 5,61,800/- 5,61,800/- Total of Expense [B] :: 5,74,74,365/- 5,74,74,365/- Difference [A-B] 28,37,40,612/- 14,43,12,067/- Assessee has been asked to substantiate with accounts, details etc. showing that the payments made by it to AVREF was disallowed or added back to its income. The assessee vide letter dated 26.03.2021 submitted the working of the same and expressed that in the absence of specific head in the ITR it has been shown under the head other income and sub head interest income . Further it has been clarified that the assessee has shown interest income of Rs. 1332214996/- under the Schedule of P L Account in the ITR. The same is verifiable. The assessee failed to clarify why the net of receipt of Rs. 1332214996/- was offered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclosed income. When the assessee has demonstrated that it has disclosed the income and it is part the computation of income then, the ld. Pr. CIT changed the scope of enquiry and held that it is not discernable as to how the Assessing Officer has accepted this return. He should not have allowed the expenditure relatable to earning of this income. It suggests that he has initiated the action without properly analyzing the record and the computation of income filed by the assessee. In other words, a show-cause notice to the assessee would have been in different terms. 20. In the letter of the CIT D/R, it is discernible that a trust, namely, AVREF was setup under the provisions of the Indian Trust Act, 1882. The trust was required to manage the real estate portfolio for the assessee and the assessee is the sole beneficiary. The assessment order in the case of the Trust was passed on 28th December, 2017 i.e., much after the assessment of the assessee. The income was offered in the hands of the assessee in the capacity of the beneficiary. The letter makes a reference about two CBDT Circulars which authorize the Income Tax Officer to exercise his option to tax, in the hands of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aced on page 93 94 of the impugned order. It read as under:- 22. This letter is dt. 11/04/2016. Notice u/s 143(2) of the Act was issued on 07/04/2016. The Assessing Officer was conducting the enquiry. In other words, scrutiny assessment was being carried out when the Assessing Officer received this letter. It was brought to the notice of the Assessing Officer according to the ld. Counsel for the assessee and the assessee filed reply on this issue. The reply was brought to the notice of the ld. Pr. CIT and relevant part of the reply is available at page 46 to 48 of the paper book. We deem it proper to take cognizance of this reply which reads as under:- 8. Transaction with Reynolds Petro Chems Ltd. That as required the petitioner is enclosing here with the details of transaction with the aforesaid party along with bills raised during the year under consideration. The petitioner has paid commission to the aforesaid party amounting to Rs. 1.61 crore. Similar query was raised in the immediately preceding year i.e. A.Y. 2014-15 wherein, the department has served the petitioner with copy of Deputy Director (Inv.), Unit-3 (3), Mumbai dated 11.04.2016 along with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to import their product. These agents provide all the infrastructure to local companies and negotiate the price. Since they are introduced by me I get my referral commission. The other director Sanjay Parasmal Jain in answer to question no.16 has categorically admitted that he is acting as director in the company for namesake only and is not fully aware of business activity or basic functions of all the companies and is signing the document as per instruction of Sri Somani. With regard to the business activity of Reynolds Petro Chems Ltd., he has clearly stated in answer to question no. 18 that he is not exactly aware of the activities carried out by RPCL and has also stated that Sri Kabra and Sri Somani can tell about the activities. Further, he has categorically stated that he left RPCL in the month of July, 2014 and is doing part time accounts work with different client/parties. The Deputy Director (Inv.) in para-3 of the report has placed heavy reliance on the statement of Mr Somani (question no.17 at page 4). The copy of the statement supplied to the petitioner contains first page upto question no.3, there is no second page and the third page starts from question no.11. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed by the petitioner. 23. Apart from the above reply, the assessee has filed copies of the invoices issued by Reynolds Petro Chems Ltd., details of TDS etc. After going through these replies, the Assessing Officer has accepted the stand of the assessee. On the strength of these details, it was submitted by the ld. Counsel for the assessee that even though there is no discussion made by the Assessing Officer in the assessment order but, it does not mean that enquiry was not conducted. He submitted that passing of an assessment order is the prerogative of the Assessing Officer and the assessee has no control over the language or the manner in which the assessment order is to be drafted. But on account of nondiscussion of an issue, the assessee should not suffer a second round of proceedings. It has to be examined whether the details were filed by the assessee before the Assessing Officer and the Assessing Officer has applied his mind on all these details and after being satisfied with the contention, he had taken a plausible view accepting the stand of the assessee, without making any finding. For buttressing this contention, he relied on the judgment of the Hon ble Patna H ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
