AI Structured Summary
Not yet generated for this judgment
Judgment
PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
The assessee has filed appeal against the order of the ld. Pr. Commissioner of Income Tax (Appeals) (PCIT), Delhi-7 [“Ld. PCIT”, for short] dated 30.03.2025 for the Assessment Year 2011-12.
Brief facts of the case are, assessee filed its return of income on 16.03.2012 and the case was taken up for scrutiny under section 148 of the Income-tax Act, 1961 (for short ‘the Act’) on 27.03.2018, based on the information received from Investigation Wing. Subsequently, the assessment was completed u/s 143 r.w.s 147 of the Act on 29.12.2018. While reviewing the assessment order, ld. PCIT observed that the AO verified information submitted by the assessee and the assessee was specifically asked to submit reconciliation statement for commission disclosed by the assessee in its return of income and as per 26AS. Accordingly, assessee has submitted the same which is reproduced at page 2 of the assessment order, as per which the difference of commission which was not accounted for in the books of account by the assessee and also assessee has taken TDS credit of Rs.1,94,433/-. The AO proceeded to complete the assessment merely making the addition of TDS credit taken by the assessee instead of commission income which was not declared in the books of account. Accordingly, he issued a notice to the assessee and also after considering the submissions of the assessee treated the assessment order passed u/s 143(3) r.w.s. 147 as erroneous as well as prejudicial to the interest of Revenue by invoking the provisions of section 263 Explanation 2 of the Act and also relied on several decisions.
Aggrieved with the above order, the assessee is in appeal before us raising following grounds of appeal :-
“Ground No.1
That having regards to the facts and circumstances of the case, the Ld. PCIT has erred in set-aside for re-adjudication by the AO afresh and estimating under assessed income amounting to Rs. Rs. 19,94,298/- by the assessing officer.
Ground No.2
That having regards to the facts and circumstances of the case, the Ld. PCIT has erred in law by passing his order without making adequate inquiries regarding the facts of the case.
Ground No.3
That having regards to the facts and circumstances of the case, the Ld. PCIT has erred in law in giving his decision without examining the relevant material on record and also in passing his order without rejecting those documents based on which, the assessing officer had given his order.
Ground No.4
That having regards to the facts and circumstances of the case, the Ld. PCIT has erred in law in bringing a second opinion by modifying the order passed by the assessing officer in contravention to the provisions of section 263 of Income Tax Act
Ground No.5
That the Ld. PCIT has not afforded proper opportunity to the appellant to explain the matter and the whole order is arbitrary and against the principle of natural justice.
Ground No.6
That in any view of the matter and in any case the order under appeal is bad in law and against the circumstances of the case.”
At the time of hearing, ld. AR of the assessee brought to our notice findings of the ld. PCIT in 263 order and further submitted as under :-
That having regards to the facts and circumstances of the case, the Ld. PCIT has erred in law by passing his order without making adequate inquiries regarding the facts of the case.
PCIT Observation
In view of the above facts and the judicial precedents cited above along with the already recorded interpretation that there were no enquiries conducted on the issues under consideration here, a reference is invited to Explanation 2 of Section 263 (1), reproduced here under:
Explanation 2—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer 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 Commissioner or Commissioner,—
1.1. the order is passed without making inquiries or verification which should have been made;
2.2. the order is passed allowing any relief without inquiring into the claim;
3.3. the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119, or
4.4. the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.
In these facts and circumstances, by exercise of powers conferred under section 263, the Order u/s 143(3) r.w.s. 144B of the I. T. Act, 1961, passed by the Assessing Officer dated 29.12.2018 is hereby set aside being erroneous and prejudicial to the interest of the revenue to the extent of escaped income not assessed in earlier assessment. I direct the Assessing Officer to pass a fresh order, as per provisions of the Income tax Act, 1961, enhancing the assessment after making proper enquiry and verification.
Appellant Submissions
The assessing officer’s finding:
The extracts of Para No. 3 of assessment order dated 29.12.2018 is reproduced below:-
3.It is seen from reconciliation statement submitted by the assessee, which is reproduced below. *BPTP Commission As per 28 AS6243968 Less Service Tax583075 Net Commission As per 28AS5680921 Commission credited in Books 300000 977241 600000 1000000 500000 2893523666593 Commission not credited in Books1994328 There is a difference of Rs.19,94,328/- of commission which has not been accounted for in the Books of accounts. Even if, it is presumed that the assessee has not received the amount of commission of Rs.19,94,328/-. The assessee has taken the benefit of TDS of Rs.1, 94,433/-, which is definitely the income of the assessee and is accordingly added back to the income of the assessee. 3. After discussion Income is computed as under Income as per original Return of IncomeRs.7,15,830/- Addition on account of interest u/s 244A of the I, T, Act.Rs.8,835/- Addition as per para.3Rs.1,99,433/- Rs.9,24,098/- Assessed at total income on Rs.9,24,098/- Charge interest as per rules. Give credit for prepaid taxes. Issue demand notice, challan and copy of order. Penalty proceedings u/s 271(1)(C) of the Act, to be initiated separately.
From the above it is very clear that then Ld. officer had deeply examined the books of accounts and other relevant records like Bank statement. And find it out neither the appellant has accounted for the commission nor received the bank account. Only the appellant has taken the benefit of TDS that was added back to the income of the appellant.
On the basis of above finding, ld. assessing officer has framed the assessment order accordingly.
Ld. PCIT before holding order of Assessing Officer as erroneous and prejudicial to interest of revenue should have to conduct necessary enquiries or verification in order to show that findings given by Assessing Officer are unsustainable in law.
Since Assessing Officer after applying his mind and making due enquiries had taken a plausible view and passed assessment order, Ld. PCIT could not invoke revision jurisdiction under section 263 merely because view taken by Assessing Officer was not found acceptable to him.
It is therefore, to say that addition of Income without conducting necessary enquiries or verification is as per section 263 with regard is incorrect and liable to be quashed.
Appellant relies on following case Laws:
INCOME TAX : Where Principal Commissioner invoked revision jurisdiction under section 263 in case of assessee on basis of an information received from Dy. Director (Investigation) regarding huge amount of unaccounted funds received in bank account of assessee, since a reassessment proceeding was already invoked and completed on basis of same information, impugned revision was unjustified
(i)Pr. CIT vs. Usha Polychem India (P.) Ltd. – (2023) 149 taxmann.com 240 (Calcutta);
(ii)Vinod Bhandari vs. Pr. CIT (1), Indore (2020) 116 taxmann.com 264 (Indore – Trib.)
INCOME TAX: Where Pro Commissioner invoked revision jurisdiction on ground that there was difference in amount of opening/closing balance of liabilities shown as compared to total liabilities which ought to Have been disallowed under section 41(1) and, thus, order passed by Assessing Officer was erroneous and prejudicial to interest of revenue, since Assessing Officer after applying his mind and making due enquiries had taken a plausible view and passed assessment order, Pr. Commissioner could not invoke revision jurisdiction under section 263 merely because view taken by Assessing Officer was not found acceptable to him.
(i)Pr. CIT vs. S.N. Tradelink (P.) Ltd. (2022) 145 taxmann.com 73 (Gujarat)
3.It is seen from reconciliation statement submitted by the assessee, which is reproduced below.
BPTP
Commission As per 26 AS 6243966 Less Service Tax 583075 Net Commission As per 26AS 5680921 Commission credited in Books 300000 977241 600000 1000000 500000 289352 3666593 Commission not credited in Books 1994328
There is a difference of Rs.19,94,328/- of commission which has not been accounted for in the Books of accounts. Even if, it is presumed that the assessee has not received the amount of commission of Rs.19,94,328/-, The assessee has taken the benefit of TDS of Rs.1, 94,433/-, which is definitely the income of the assessee and is accordingly added back to the income of the assessee.
3.After discussion income is computed as under
Income as per original Return of Income Rs.7,15,830/- Addition on account of interest u/s 244A of the I. T. Act. Rs.8,835/- Addition as per para 3 Rs.1,99,433/- Rs.9,24,098/- Assessed at total income on Rs.9,24,098/- Charge interest as per rules. Give credit for prepaid taxes. Issue demand notice, challan and copy of order. Penalty proceedings u/s 271(1)(C) of the Act, to be initiated separately.
Ld. PCIT Version
Order under Section 263 of the Income Tax Act, 1961
1.The brief facts of the case are that the assessee company filed its return of income declaring income of Rs. 7,15,830/- on 16.03.2012. Subsequently, the case was assessed u/s 143(3) r.w.s. 147 of the I. T. Act, 1961, at an income of Rs.9,24,098/- by the Assessing Officer 29.12.2018. Subsequently, on perusal of the assessment records, it was noticed that during the year under consideration, the assessee company received an amount of Rs. 62,43,966/- (including Service tax of Rs. 5,83,075/-) from M/s BPTP Ltd. on account of brokerage and TDS was deducted thereon. However, in P&L Account, the assessee company only accounted amount of Rs. 36,66,593/- (excluding Service Tax) for taxation purposes. Further, in computation of income, the assessee company benefit of TDS of Rs. 1,99,432/- but corresponding income of Rs. 19,94,298/- [62,43,966 - (36,66,593+5,83,075)= 19,94,298/-] has not been offered for taxation. Consequently, proceedings u/s 263
(i)CIT, Kota vs. Deepak Real Estate Developers (I)(P.) :td/ (2014) 52 taxmann.com 75 (Rajasthan)
Ground No.4
That having regards to the facts and circumstances of the case, the Ld. PCIT has erred in law in bringing a second opinion by modifying the order passed by the assessing officer in contravention to the provisions of section 263 of Income Tax Act.
Ld. PCIT version
Axis Bank Ltd. vs. ACIT (2023) 149 taxmann.com 395 (Gujarat); (ii) ABB India Ltd. vs. JCIT (2023) 150 taxmann.com 522 (Karnataka); (iii) Administrator of Estate of Lt. Edulji Framroze Dinshaw vs. CIT, (IT)-2, Mumbai (2019) 103 taxmann.com 452 (Mumbai-Trib.); INCOME TAX : Where during assessment proceedings assessee had tendered details of individuals to whom assessee had paid guarantee commission and also produced copy of agreement of guarantee commission executed with said entities and Assessing Officer passed assessment order without making any addition under head guarantee commission expenses, reopening of assessment on ground that assessee had paid guarantee commission to six entities which had escaped assessment was not justified INCOME TAX : Where assessment was sought to be reopened in case of assessee on ground that assessee had made payment of excess interest over 12 per cent on unsecured loans from certain parties, however, assessee had submitted audited balance sheet with its reply showing bifurcation of interest expenses during course of assessment proceedings and Assessing Officer made no additions on account of reason of higher rate of interest expense, reassessment being mere change of opinion of Assessing Officer on same set of facts was not justified . INCOME TAX: Where issue of section 14A disallowance was very much there before Assessing Officer during assessment proceedings and Assessing Officer made no addition on account of disallowance under section 14A, reopening of assessment on ground that disallowance under section 14A had escaped assessment was not justified INCOME TAX: Where assessee during course of assessment proceedings had produced statement showing project wise reconciliation between Form 26AS and books of account and also submitted copy of ledger accounts of work-in-progress and sales account and Assessing Officer made no addition on account of income difference between Form 26AS Statement and books of account, reopening of assessment on ground that there was income difference between Form 26AS Statement and books of account of assessee was not justified. (i) P.C. Snehal Engineers (P.) Ltd. vs. ACIT (2023) 147 taxmann.com 54 (Gujarat)”
On the other hand, ld. DR of the Revenue relied on the findings of the ld. PCIT.
Considered the rival submissions and material placed on record. We observed that the case of the assessee was reopened based on the information received from Investigation Wing that assessee has received commission income of Rs.54.93 lakhs from BPTP and TDS was accordingly deducted thereon. However, assessee had accounted for an income of Rs.35.31 lakhs and declared lesser receipts of Rs.19.61 lakhs. We observed that AO has duly verified the above aspects at para 3 of his order and assessee has accepted that assessee has not declared the commission income to the extent of Rs.19.94 lakhs and claimed only the TDS benefit. After observing the same, the AO proceeded to treat the TDS benefit claimed by the assessee as income of the assessee. In the 263 proceedings, ld. PCIT has highlighted the exact same issue that the AO should have brought to tax the undisclosed commission income instead of restricting the undisclosed income to the extent of TDS benefit. After considering the submissions of both the sides, we are of the considered view that the AO has made apparent mistake on record and it is not the case that AO has not verified but AO has passed the order without verification of the reasons for which assessment was reopened that is based on the information that assessee has not disclosed total commission income received from BPTP and not appreciated the fact properly. We observed that assessee is a company and as per the provisions of the Companies Act, assessee has to maintain books of account on the basis of mercantile system. Accordingly, they should have recorded the commission fully and it is not relevant in mercantile system of accounting that commission should have been received. It is not the case of the assessee that assessee is following books of account on receipt basis. Therefore, the AO has made a mistake which is apparent on record, hence, in our considered view, proceedings initiated by the ld. PCIT is justified. Therefore, we are inclined to dismiss the appeal filed by the assessee.
In the result, the appeal filed by the assessee is dismissed