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TMI Blog2024 (5) TMI 487X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Pawan Kumar Agarwal, Chartered Accountant, for filing of appeal against the impugned order of the ld. Pr. CIT. However, the said appeal could not be filed by said Shri Pawan Kumar Agarwal in time due to sudden sickness and injury and the assessee was even not informed that the appeal could not be filed. When the assessee came to know that the said appeal was not filed in time by Shir Pawan Kumar Agarwal, he immediately approached the present counsel, Shri A. K. Tibrewal, FCA, who immediately filed the appeal before this Tribunal. It has, therefore, been pleaded that the delay in filing of the appeal is not intentional rather due to sudden sickness and injury of Shri Pawan Kumar Agarwal, CA. The said application is corroborated with the affidavit of Shri Pawan Kumar Agarwal, CA, wherein, he has affirmed that Shri Deep Kishan Saraf, Director of the assessee company had approached him in second week of January 2023 and that the appeal form 36 and grounds of appeal were also prepared and duly got signed from the said Shri Deep Kishan Saraf and that he had further directed his office staff, Shri Mrinal Kar Chowdhury to deposit the appeal fees and file the appeal before this Tribunal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limitation Act, 1963. Whenever interpretation and construction of this expression has fallen for consideration before Hon'ble High Court as well as before the Hon'ble Supreme Court, then, Hon'ble Court were unanimous in their conclusion that this expression is to be used liberally. We may make reference to the following observations of the Hon'ble Supreme court from the decision in the case of Collector Land Acquisition vs. Mst. Katiji & Others, 1987 AIR 1353: "1. Ordinarily a litigant does not stand to benefit by lodging an appeal late. 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties. 3. Every day's delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense pragmatic manner. 4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC 749]. It must be remembered that in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the court should lean against acceptance of the explanation. While condoning delay the Could should not forget the opposite party altogether. It must be borne in mind that he is a looser and he too would have incurred quiet a large litigation expenses. It would be a salutary guideline that when courts condone the delay due to laches on the part of the applicant the court shall compensate the opposite party for his loss". 4.2. We do not deem it necessary to re-cite or recapitulate the proposition laid down in other decisions. It is suffice to say that the Hon'ble Courts are unanimous in their approach to propound that whenever the reasons assigned by an applicant for explaining the condonation of delay, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 passed in ITA No. 171/Kol/2021 set aside the order of the Pr. CIT dated 23.03.2021, and restored the matter to the file of the ld. Pr. CIT for de novo consideration directing that the ld. Pr. CIT will consider the objections raised by the assessee on law as well as on facts and thereafter, to decide whether to proceed with the action u/s 263 of the Act in accordance with law. The ld. Pr. CIT thereafter again issued show-cause notice to the assessee on 29.11.2022, the relevant part of which is reproduced as under: "On perusal of assessment record, it is revealed that the assessee has entered into transaction with 01 concern namely M/s. Swiss Progressive Products Pvt. Ltd. and received an amount of Rs. 80 lakhs from the aforesaid concern during the FY 2011-12. As per Investigation Report carried out by the Investigation Director, 02 concerns namely M/s Swiss Progressive Product Pvt. Ltd. and M/s Shree Jawala Consultants Pvt. Ltd were not doing any real business and was only acting as intermediaries from providing accommodation entries to beneficiaries through layering of funds. Therefore, the sum of Rs. 80 lakhs received by the assessee company from M/s Swiss Progressive Product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re that the Assessing Officer received some information from Investigation Wing, Kolkata that the assessee company was beneficiary of accommodation entry received from Swiss Progressive Production (P) Ltd. (hereinafter referred to as "Swiss"). In response to the Notice u/s. 148 the assessee company filed fresh of income declaring the same income of Rs. 48,26,890 as was assessed earlier on 19th January 2015. 2.1 In course of re-assessment proceedings, the Assessing Officer issued Notice u/s. 142(1) of the Act directing the Assessee Company to submit various details which inter alia included the details of share application money received from "Swiss" and other two share subscribers as well. The Assessee Company was asked to satisfy the source of the share application money received from all the three share subscribers including "Swiss" within the meaning of section 68 of the Income Tax Act, 1961. The Assessee Company vide its letter dated 12th November, 2018 furnished all details and documents and evidences to explain the source of the share application money received by it from "Swiss". A copy of the Notice issued u/s. 142(1) of the Act and the copy of reply by Assessee with all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Financial Year 2011-12 relevant to the assessment year 2012-13 was wholly explained by the assessee company in course of the assessment proceedings in its assessment u/s 143(3) of the Act as well as in course of re-assessment proceedings u/s 147/148 of the Act. It is pertinent to submit that the reassessment proceedings were initiated pursuant to report of the Investigation Wing alleging issue of shares by the assessee company through accommodation entries. 3. The Assessing Company submits that, in such circumstances, the assessment order passed by the Assessing Officer on 18th March, 2019 cannot be held to be erroneous and prejudicial to interest of revenue within the meaning of section 263 of the Act. The said assessment order passed by the Assessing Officer cannot be held to be unsustainable in law. There are number of judgments where the Courts have held that, the share capital subscribed by the assessee company cannot be added in the hands of the assessee company, in similar facts and circumstances of this case. The assessee company relies on the following judgments which inter alia include the judgments of Hon'ble Supreme Court and Jurisdictional Calcutta High Court. a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counted income through intermediary companies by taking accommodation entries and had concealed/ suppressed their income/ receipts. The assessee company has received an amount of Rs. 80,00,000/- from M/s. Swiss Progressive products Pvt Ltd and the same was received owing to subscription of shares at high premium. However, as per report received from the Investigation Directorate, the aforesaid concern M/s. Swiss Progressive products Pvt Ltd does not have the financial creditworthiness to forward such huge sum to the assessee company and the assessee only routed its unaccounted income through the aforesaid concern in the form of share capital. Since it is the unaccounted income of the assessee itself which has been routed through M/s. Swiss Progressive Products Pvt Ltd, the amount should have been added u/s. 68 of the Income Tax Act. In view of the above the assessment order passed u/s. 147/ 143(3) is erroneous insofar as it is prejudicial to the interest of revenue. 5. Now, explanation (2) to section 263(1) reads as under: "Explanation 2- for the purpose of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sition and function of the Income-tax Officer is very different from that of civil court. The statements made in the 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 come before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls 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 provoke an inquiry. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an enquiry. The order becomes erroneous because such an inquiry has not be made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct." 6. The Hon'ble ITAT, Kolkata was pleased to restore the case back to the file of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of amount of Rs. 45 lakh from M/s Swiss Progressive Products Pvt. Ltd". The ld. Counsel in this respect has submitted that the reopening of the assessment was made only on the reason that the Assessing Officer had received information from the investigation wing that the assessee was beneficiary of a transaction amounting Rs. 40 lakh from M/s Swiss Progressive Products Pvt. Ltd. That the Assessing Officer in the reopened assessment proceedings thoroughly examined this issue. The assessee during the assessment proceedings submitted all the necessary documents to prove the genuineness of the transaction which are also reflected in the submissions made by the assessee before the ld. Pr. CIT as reproduced above. The ld. Counsel has also relied upon the paper-book to submit that the assessee company filed reply dated 12.11.2018 with annexures before the Assessing Officer in response to the notice issued by him u/s 142(1) of the Act in the course of reassessment proceedings. That the said M/s Swiss Progressive Products Pvt. Ltd. also responded to the notice issue u/s 133(6) of the Act and duly filed confirmation and evidences before the Assessing Officer copies of which have been placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling the assessment and directing a fresh assessment. ........." 9.2. The sum and substance of the above reproduced section 263(1) can be summarized in the following points: 1) The Commissioner may call for and examine the record of any proceeding under the Act; 2) If he considers that the order passed by the AO is (i) erroneous; and (ii) is prejudicial to the interest of Revenue; 3) He has to give an opportunity of hearing in this respect to the assessee; and 4) He has to make or cause to make such enquiry as he deems necessary; 5) He may pass such order thereon as the circumstances of the case justify including, (i) an order enhancing or, (ii) modifying the assessment or (iii) cancelling the assessment and directing a fresh assessment." 8. As per the provisions of section 263, as enumerated above, after getting the explanation from the assessee, the Ld. Pr. CIT was supposed to examine the contention of the assessee. Before passing an order of modifying, enhancing or cancelling the assessment, he was supposed either to himself make or cause to make such an enquiry as he deems necessary. The words "as he deems necessary", in our view, do not mean that the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and as to why the ld. Pr. CIT was not satisfied about such details/replies furnished by the assessee. Simply because the ld. Pr. CIT felt that the Assessing Officer should have made further enquiries on the same issue or that the case was to be examined from some another angle, the same, in our view, cannot be a valid ground to set aside the assessment order. If such an action is allowed by the ld. Pr. CIT in his revision jurisdiction then, there would be no end to litigation and there would not be any finality to the assessment. The Explanation 2 to Section 263(1) of the Act does not give unbridled powers to the ld. Pr. CIT to simply set aside the assessment order by saying that the Assessing Officer was required to make further enquiries without pointing out as to what was lacking in the enquiries made by the Assessing Officer and why the ld. Pr. CIT was not satisfied with the reply and evidence furnished by the assessee. 9. Further, the Coordinate Kolkata Bench of the Tribunal in the case of 'M/s Rani Sati Agro Tech Pvt. Ltd. vs. ITO' in ITA No.85/Kol/2022 order dated 19.06.2023 while analysing the provisions of section 263 of the Act has considered various case laws, the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. 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, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO 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 ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reflect any kind of satisfaction. As is manifest the said authority has been governed by a singular factor that the order of the AO is wrong. That may be so but that is not enough. What was the sequitur or consequence of such order qua prejudicial to the interest of the Revenue should have been focused upon. That having not been done, in our considered opinion, exercise of jurisdiction under s. 263 of the Act is totally erroneous and cannot withstand scrutiny. Hence, the Tribunal has correctly unsettled and dislodged the order of the CIT. [Emphasis supplied]" 12. In the light of the provisions of section 263 of the Act and a settled position of law, powers u/s 263 of the Act can be exercised by the Pr. Commissioner/Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and also prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may choose not to exercise his power of revision. This is for the reason that if a query is raised during the course of scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. In the instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not." 10. Further, the Coordinate Mumbai Bench of the Tribunal in the case of 'Narayan Tatu Rane v. ITO' reported in [2016] 70 taxmann.com 227 (Mum. - Trib.) has held that Explanation 2(a) to section 263 of the Act does not authorise or give unfettered power and to revise each and every order on the ground that the Assessing Officer should have made more enquiries and verifications. The relevant part of the order of the Tribunal is reproduced as under: "20. Further clause (a) of Explanation states that an order shall be deemed to be erroneous, if it has been passed without making enquiries or verification, which should have been made. In our considered view, this provision shall apply, if the order has been passed without making enquiries or verification which a reasonable and prudent officer shall have carried out in such cases, which means that the opinion formed by Ld Pr. CIT cannot be taken as final one, without scruti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment was reopened based on the information received from the DDIT (Investigation) Unit 2(2), Kolkata dated 6-3-2019. Thereafter, notice under section 148 of the Act was issued on 29-3-2019 and in response to such notice the assessee filed its return of income declaring a total income of Rs. 23,440/-. Subsequently, notices were issued under sections 143(2), 142(1) of the Act and the assessee filed his response along with documents. The Assessing Officer on considering the documents and the return furnished by the assessee accepted the stand taken by the assessee and completed the assessment. It is seen that PCIT has exercised jurisdiction under section 263 of the Act on the very same information furnished by the DDIT (Investigation) Unit 2 (2) dated 6- 3-2019. On perusal of the order passed by the PCIT dated 15-3-2021 in which the show cause notice issued under section 263 of the Act has been extracted, the PCIT has not recorded any finding that he has reason to believe that income that is assessable to tax has escaped assessment. 5. In the absence of such finding, we are of the view that the Tribunal was right in coming to the conclusion that the PCIT erred in exercising its jur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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