9911796707
TMI Blog2025 (5) TMI 1717X X X X Extracts X X X X X X X X Extracts X X X X ..... ing toll plaza and collecting toll. An agreement had been entered into between the assessee and the National Highways Authority of India (NHAI) on 18.04.2002 for conversion of Delhi Gurgaon Section of National Highway-08 into an access controlled 8/6 lane highway. 3. The case of assessee was selected for scrutiny by the Revenue for the AY 2014-15 and a notice under Section 143 (2) of the Act was issued to the assessee on 23.09.2015 by the learned Assessing Officer i.e, Assistant Commissioner of Income Tax, Central Circle-14, New Delhi [hereafter 'the AO']. In response, the assessee submitted a representation seeking adjournment. Thereafter, notices under Section 141 (2) of the Act were issued to the assessee on 20.10.2015, 10.05.2016 and 04.07.2016. 4. However, since the assessee neither attended the hearings nor submitted any document in response to the aforesaid notices, and also did not file its return of income, a notice dated 10.08.2016 under Section 274 read with 271 of the Act was issued to the assessee to show cause as to why an order imposing a penalty on the assessee be not passed under Section 271 of the Act. Since the assessee failed to attend the proceedings before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and maintenance expenses. The AO further noted that it was apparent that the expenditure claimed by the assessee was not only for business purposes, and further that the assessee had not substantiated the expenses on the basis of proper documents. Resultantly, the AO disallowed 20% of the expenses under each of the six heads, and made a total addition of Rs. 2,40,83,797/-. Accordingly, the assessment was framed by the AO, computing a total loss of Rs. 2,35,36,058/- against the loss of Rs. 4,76,19,855/- returned by the assessee. The relevant portion of the assessment order is set out below: "... 2) During the course of Assessment Proceedings, it is observed from Profit & Loss Account and on perusal of details submitted, that during the year revenue from operation has declined compared to last year from Rs. 192.2 cr to Rs. 149.1 cr. From the perusal of P&L A/C of the assessee there is an increase of some expenses as compare to last year under the heads of project running expense, Electricity and Fuel Expense. Administration and office expense, printing and stationery expense, postage and stamp, vehicle running and maintenance expense. The expenditure so claimed by the assessee does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d cash into its books of accounts by misrepresenting it as sundry creditors. The DCIT opined that the other sundry creditors shown by the assessee may also be bogus. Given the cash-intensive nature of the assessee's toll collection business, it was suspected that unaccounted cash was being disguised as sundry creditors. Thus, it was opined that the order passed by the AO was erroneous, due to the assessee's tactic of submitting documents just three days before the time-barring date, preventing proper verification, and prejudicial to the interests of Revenue. The DCIT also observed that similar discrepancies were observed in previous year i.e. AY 2013-14, where sundry creditors listed in the balance sheet of the assessee did not match from the balance sheet of EGIS Infra. In view of the same, the DCIT sent a proposal dated 19.04.2018 for action under Section 263 of the Act to the Principal Commissioner of Income Tax, Central-2, New Delhi [hereafter 'the PCIT'], for setting aside the order passed by the AO for AY 2014-15. The Order of PCIT 9. The PCIT, on 28.01.2019, issued a notice to the assessee to show cause as to why action under Section 263 of the Act be not taken against it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee submitted the list of creditors on 29.12.2016 to which the AO did not have sufficient time for requisite enquiry/ investigation of these transactions and whatever was claimed by the assessee, was allowed without verifying the genuineness of transactions. The assessee filed a list of creditors only during the revisional proceedings u/s 263. However confirmation of parties or copies of the Ledger account of the sundry creditors was not provided by the assessee. Therefore, the genuineness and creditworthiness of sundry creditors could not be verified even during the proceedings u/s 263 of the income tax act. 5. I, thus, hold that the assessment order passed in the case of assessee by the Assessing Officer, Central - 14, New Delhi on 31/12/2016 u/s 143 (3) is erroneous and prejudicial to the interest of revenue. Hence, the AO is directed to examine the genuineness of transactions of amount to Rs. 514,453,415/- on account of sundry creditors and also conduct proper enquiries and investigation to the above issue in this case. 6. Thus, the said assessment is set aside and the assessment proceedings are restored back to the file of the assessing officer on the aforesaid issues. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order and no evidence in this regard was shown by the PCIT in its own order passed under Section 263 of the Act. The learned ITAT, rather observed that the AO did not make any additions on account of any bogus creditor found during the course of assessment but he rather disallowed the 20% of the total expenditure under Section 37 of the Act, based on statistical analysis, and thus, the assessment order was neither erroneous nor prejudicial to the interests of the Revenue. It was also observed that the AO could have used its powers to conduct further inquiries during the assessment, but he instead opted for proportionate disallowance of expenditure. The learned ITAT further expressed that invoking Section 263 of the Act and directing verification of the transactions amounted to extending time for completion of assessment, which would contravene statutory timelines under Section 153 of the Act. The learned ITAT, thus, quashed the order of the PCIT and allowed the assessee's appeal. The relevant portion of the impugned order reads as under: "...We have carefully considered the rival contentions and perused the order of the learned assessing officer which was held to be erroneous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of booking of those expenditure are added to the total income of the assessee. Therefore, the assessing officer took the first recourse available of disallowing the proportionate expenditure, which is according to us the one of the two options available with the assessing officer. By disallowing the expenditure to the extent of 20%, in fact he has held that the sundry creditors to the extent of that 20% i.e. 24,083,797/- are not related to the business and are* unsubstantiated. The order of Ld CIT thus, did not show how the order passed by the Id AO is erroneous. 10. Further, the learned CIT held that the order is erroneous and prejudicial to the interest of the revenue for the reason that the assessee submitted the list of creditors on 29/12/2016 due to which the AO did not have sufficient time for requisite enquiry. According to us, if the assessee is found lacking in provision of the details to the assessing officer, the learned assessing officer could have used vast powers bestowed upon him by the act to make the best judgment assessment. But the assessing officer took a view to disallow 20% of the expenditure. Thus merely non availability of time to the assessing office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrect. There is no provision in the act that unpaid expenditure is also to be tested on the parameter of creditworthiness. Therefore even in the assessment order the ld AO did not commit any error of law. 12. While deciding this appeal we have considered and applied the ratio laid down by various judicial precedents cited before us. 13. In view of this, the order passed by the learned and CIT u/s 263 of the act is not sustainable. In the result order of the learned CIT passed u/s 263 of the act for the impugned assessment year is quashed. 14. Resultantly, Appeal of the assessee is allowed..." 15. Aggrieved by the order of the learned ITAT, the Revenue has preferred the present appeal. QUESTIONS OF LAW 16. On 21.03.2024, the following questions of law were framed by this Court: "A. Whether the ITAT has erred in law to hold that the assessment order passed by the AO was not erroneous and that the exercise of power under Section 263 of the Act by the CIT was not justified even through the AO passed the assessment order without making inquiries or verification which should have been made in the facts and circumstances of the present ease? B. Whether the ITAT has erred in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... miliar with the nuances of tax laws, would find it convincing upon due consideration. It is contended that failure to do so amounts to a case of lack of inquiry, rather than merely an inadequate inquiry. 20. In support of its contentions, the learned counsel placed reliance on the following decisions: (i) Commissioner of Income Tax, Mumbai v. Amitabh Bachchan: (2016) 11 SCC 748; and (ii) Pr. Commissioner of Income Tax-II v. Shri Braham Dev Gupta: (2018) SCC OnLine Del 9946. Submissions on Behalf of the Assessee 21. The learned counsel appearing for the assessee contended that the show-cause notice issued by the PCIT was premised on incorrect facts since the notice erroneously claimed that out of the total sundry creditors amounting to Rs. 51,44,53,415/-, a specific entry of Rs. 4,65,86,911/- had been verified and found to be bogus. However, this allegation neither finds any mention in the assessment order nor is it supported by any evidence. It was argued that the AO did not make any addition or observation to suggest that this creditor was bogus. Further, during the assessment proceedings, the assessee had provided comprehensive details regarding the expenses incurred by it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including,- (i) an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section. *** Explanation 2. - For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer or the Transfer Pricing Officer, as the case may be, shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, - (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d erroneous if it is based on incorrect assumption of facts or an incorrect application of law, and also if it is passed without applying the principles of natural justice or without application of mind. In this case, a resolution passed by the board of the appellant-company was not placed before the assessing officer and it was held that there was no material to support the claim of the appellant therein, and the assessing officer had accepted the entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry. 31. The Coordinate Bench of this Court, in Gee Vee Enterprise v. Additional Commissioner of Income Tax: (1975) 99 ITR 375, held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the officer should have made further inquiries before accepting the statements made by the assessee in the return. The relevant portion of the decision is reproduced hereunder: "These two decisions show that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed below: "10. We are unable to appreciate this reasoning given by the Tribunal simply because that the Assessing Officer himself did not say any such thing in his order. There is no doubt that the proceedings before the Assessing Officer are quasi-judicial proceedings and a decision taken by the Assessing Officer in this regard must be supported by reasons. Otherwise every order such as the one passed by the Assessing Officer, could result in a theoretical possibility that it may be revised by the CIT under section 263 of the Act. Such a situation is clearly impermissible. 11. It is also necessary for the parties to know the reasons that have weighed with the Adjudicating Authority in coming to a conclusion. The order passed by the Assessing Officer should be a self-contained order giving the relevant facts and reasons for coming to the conclusion based on those facts and law. 12. We find that the order passed by the Assessing Officer is cryptic to say the least, and it cannot be sustained. The Tribunal cannot substitute its own reasoning to justify the order passed by the Assessing Officer when the Assessing Officer himself did not give any reason in the order passed by him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d notices were duly issued under Sections 143 (2) and 142 (1) of the Act, first such notice having been issued on 23.09.2015. However, despite repeated opportunities, the assessee failed to attend the proceedings or submit the requisite documents. Even when the AO issued a penalty notice under Section 271 of the Act, the assessee remained non-compliant, and provided no valid cause for its failure to cooperate with the assessment proceedings. The pattern of non-compliance persisted throughout the proceedings, with the assessee submitting its return of income only on 29.12.2016, merely three days before the assessment proceedings would have become time barred. Even at this belated stage, the assessee's submissions were incomplete and inadequate. Notably, the list of sundry creditors amounting to Rs. 51,44,53,415/- was furnished by the assessee on 29.12.2016 i.e. three days prior to the expiry of limitation period, and this list only contained the names of the sundry creditors and the corresponding amount qua them. The list, however, did not contain the crucial details such as PAN number, or addresses of the creditors, or supporting documents to substantiate the transactions. Moreover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted inquiries regarding the genuineness of the transactions. The relevant portion of the decision is reproduced as under: "14. In this Court's opinion, such findings and reasoning are clearly indefensible; they amount to putting a gloss over the AO's glaring omissions. Repeated decisions have emphasized that the AO should - at least as regards what appears from the record, and what are issues inquired into, during scrutiny assessment, indicate the briefest of reasons, accepting or rejecting any argument. In this case, the mere fact that out of 80 debtors, particulars of 22 were furnished and that PAN particulars of most of them were not provided (for AY, cannot lead to the conclusion that the doubting of genuineness of those transactions was unwarranted, under Section 263). 15. For AY 2012-13, the CIT, pertinently observed - with regard to expenditure claimed towards purchases, as follows: "It was informed to the assessee that a number of parties have not responded to the notices. The assessee has admitted that only 37 parties out of 114 have responded to the notices. Other parties out of 114 have not even responded to the notices. Therefore the genuineness of these d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43. In the present case, the AO had passed an order without verification or enquiries; the DCIT had on verification of one of the entries had found the first entry out of the 70 entries of sundry creditors to be bogus and had therefore, sent the recommendation to PCIT. Therefore, the AO's order would naturally not have referred to any bogus entry as the AO had not bothered to find out or verify as to whether the entries were bogus or not. That is precisely the premise on which the DCIT had opined that the assessment order was erroneous and had proposed action under Section 263 of the Act. In such circumstances, for the learned ITAT to hold that the AO's order did not find mention of bogus entry, was clearly without application of mind, since that was exactly the ground that he had not verified the entries which laid the edifice of passing of order under Section 263 of the Act. Had the AO conducted enquiries or verified the sundry creditors, there may not have been an occasion to exercise jurisdiction under Section 263 of the Act. 44. Therefore, the observations of the learned ITAT in paragraph 8 of the impugned order, that the AO could not find one entry of Rs. 4,65,86,911/- as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 31.12.2016 i.e. when the assessment order was passed by the AO. 49. We note that the learned ITAT in the impugned order expressed that mere scarcity of time with the AO to make adequate inquiries cannot be rectified by invoking powers under Section 263 of the Act and then granting further time to the AO to make enquiries and decide the issue afresh. It was further held that such a course would amount to extension of time limit provided under Section 153 of the Act to complete the assessment. The learned ITAT also observed that mandate of law was to rectify an order if it is found to be erroneous and prejudicial to the interest of Revenue, but the PCIT had adopted an alternative route, devised by the Revenue, to give further time to the AO to complete the assessment proceedings by making further enquiries. 50. We are unable to agree with the aforesaid observations of the learned ITAT. 51. Firstly, in the present case, it was the assessee who had delayed the proceedings before the AO and had submitted the list of sundry creditors on 29.12.2016, though the notice in this case was first issued under Section 143 (2) of the Act on 23.09.2015, knowing fully well that the period o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh assessment after conducting proper inquiries. In fact, when Explanation 2(a) of Section 263 of the Act itself clarifies that an assessment order passed without conducting enquiries would be erroneous, there is no reason as to why the direction of PCIT to AO, to pass afresh order after conducting proper enquiries, would be without jurisdiction and outside the scope of Section 263 of the Act. 54. In our opinion, a statute is to be construed and interpreted in a manner which would further its intent, and not defeat the same. The only conclusion which can be driven from the language and intent of the provision of Section 263 of the Act is that the PCIT, in cases such as the present one, by virtue of exercising its powers under the said provision, is empowered to direct the AO to frame the assessment afresh after conducting enquiries into such transactions, in interest of the Revenue. 55. As far as the question of extending time limit for completion of assessment stipulated under Section 153 of the Act is concerned, we note that Section 153 (6) inter alia provides as follows: "153. Time limit for completion of assessment, reassessment and recomputation. * * * (6) Nothing cont ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
