ITA NO. 2726/Del/2013
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "G", NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI O.P. KANT, ACCOUNTANT MEMBER
I.T.A. No. 2726/DEL/2013
A.Y. : 2008-09
M/S SINGHAL CONSTRUCTION COMMISSIONER OF INCOME
COMPANY, VS. TAX,
A-211, SAKET, AAYAKAR BHAWAN, BHAINSALI
MEERUT CITY, GROUND,
MEERUT MEERUT
(PAN: ABIFS7468P)
(APPELLANT) (RESPONDENT)
Assessee by : Sh. Sandeep Sapra, Adv.
Department by : Sh. Sujit Kumar, Sr. DR
Date of Hearing : 18-8-2015
Date of Order : 01-10-2015
ORDER
PER H.S. SIDHU : JM
This appeal by the Assesse is directed against the Order of the
Ld. Commissioner of Income Tax, Meerut dated 18.3.2013 passed
u/s. 263 of the I.T. Act pertaining to assessment year
2008-09 on the following grounds:-
1. That the impugned order as passed by the Id. CIT u/s 263 of
the Income Tax Act, 1961 is arbitrary, unjust & illegal on various
factual and legal grounds including the followings:-
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(a) The asstt. Order dated 15.11.2010 as passed by the AO. was
neither erroneous nor prejudicial to the interest of revenue.
(b) The Id. CIT had no jurisdiction to invoke section 263 of the I.T.
Act, 1961.
(c) The Id. AO. has passed the order dt. 15.11.2010 u/s 143(3) after
proper application of mind.
(d) Various Observations and directions made by the Id. CIT in his
section 263 order are either incorrect or are untenable in law and
various case laws relied upon by the Id. CIT are not applicable to the
appellant's case, being distinguishable on facts and the facts on
records have not been considered in the right perspective thereof.
2. That, without prejudice to ground nO.1 above the various
directions of Id. CIT to AO vide Para Nos.8 to 10 are also illegal,
unjust and untenable in law.
3. That without prejudice to above grounds, the Id. CIT has
grossly erred in law by making additions of Rs. 38,48,050/- to the
income of the appellant holding that the difference between the
amount as per arbitrations award and the amount declared by the
appellant is the concealed income of the appellant and the finding of
the Id. CIT in Para 7 page 7 "that the appellant has shown in its
books of account the sum of RS.34,48,050/- as receivable from M/s
Charms India (P) Ltd." is factually incorrect and the action of Id. CIT
is perverse and has caused gross & great injustice to the appellant
and that the proper opportunity of being heard on the issues has not
been allowed and the order under appeal cannot be termed as a
speaking order and is based on incomplete and inadequate
appreciation of facts of the case and the various case laws relied
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upon by the Id. CIT are not applicable to the appellant's case being
distinguishable on facts.
4. With prejudice to above, the Id. CIT has erred in making the
addition of RS.38,48,050/-, and in any case, if the Ld. CIT was not
convinced with the submissions of the appellant, the issue ought to
have been sent back to the file of the Id. AO. for reconsideration and
passing the order a fresh.
5. That the impugned order of the CIT u/s 263 deserves to be
cancelled l annulled.
6. The appellant craves leave to add, delete and l or modify any
grounds of appeal.
2. The facts relating to the issue in dispute are that the
assessee company filed its return declaring net income at Rs.
2,55,46,190/- on 21.8.2008 which was processed u/s. 143(1) on the
returned income. The case has been selected to be completed
under scrutiny through Selective scrutiny and accordingly, notice
u/s. 143(2) dated 22.9.2009 was issued. Thereafter various notices
u/s. 143(2) and 142(1) alongwith questionnaire were issued and
served upon the assessee. In response to the aforesaid notices
Authorised Representative of the assessee attended the hearing
from time to time and the case was discussed with him. Books of
accounts, bills / vouchers etc. produced which were examined by the
AO. After considering all the facts, details submitted by the
assessee and after examination of books / documents and after
discussion of the various issue, the assessment was completed on
returned income vide order 15.11.2010 passed u/s. 143(3) of the I.T.
Act, 1961.
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3. Ld. CIT, Meerut examined the record and found that the
assessment was completed without proper enquiry on the following
counts:-
a) The case was selected for scrutiny since the assessee had
shown Rs.2.50 crores as `any other income' while NIL sales,
gross receipts of business were shown. This aspect needed to
be investigated. The assesseement records show that the
assessment has been completed on returned income in a
casual manner even without asking for discrepancies and
variations on record. The case was not enquired properly, at
all.
b) There is a photocopy of a ward by sole arbitrartor dated
1.10.2007 between the assessee as claimant and Mls Charms
India Pvt. Ltd. as respondent. The assessee had claimed a sum
of Rs.4,12,00,11,500/- along with interest @ 18% per annum
which is evident from the award dated 1.10.2007. The AO has
not inquired at all about the taxability of the same.
c) Further the arbitrator vide award dated 1.10.2007 has
awarded a sum of Rs. 2,88,48,050/- in favor of the claimant
out of which the assessee has merely shown the sum of Rs.
2.50 crores as the income from the same leaving sum of
Rs.2,88,48,050 - Rs.2,50,00,000 = Rs.38,48,050/-. The AO has
totally failed to enquire and tax the remaining sum of
Rs.38,48,050/- and there is nothing on record as to how the
sum awarded has not been returned by the assessee which did
not have any justification and entire amount was taxable as
such in accordance with the provisions of law.
d) Further, the photocopy of the details of sundry creditors
for goods of Mls. Charms India Pvt. Ltd. show the assessee
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sundry creditor for goods for Rs.38,48,050/- whereas the AO
has accepted the version of assessee (without any inquiry) that
no business activity was all carried out by the assessee.
e) Mls. Charms India Pvt. Ltd. in Schedule-I has claimed
under the head direct construction cost the sum of
Rs.2,88,48,050/- as other project expenses of the year ending
31.3.2008 which is rather the schedule of construction and P&L
Alc and, hence, undoubtedIy claimed as direct expense by Mls.
Charms India Pvt. Ltd. As against the same the assesse has
shown the receipts of merely 2.50 crores which has been
accepted by the AO without inquiring into the same.
f) The AO has also not inquired if the agreement between
the two concerns and the MOU was a collusive one or the
arrangement entered into by the parties with some motive and
has also not gone into and inquired if it had legal contractual
value and/ or was binding.
Out of sum received on arbitration a sum ofRs.1.92 crores
has been given to Adesh Engineering Pvt. Ltd. in which all the
partners of the assessee firm are the directors. The AO has not
looked into this aspect as well.
4. In view of above, Ld. CIT is of the view that the order passed by
the AO is erroneous and prejudicial to the interest of revenue. He
also held that in the case of M/s. Malabar Industries, the Hon'ble
Apex court has held that incorrect assumption of facts or incorrect
application of law, will satisfy the requirement of the order being
erroneous; order passed by the AO is without applying the principles
of natural justice or without application of mind. The Ld. CIT has
passed the impugned order u/s. 263 dated 18.3.2013 directing the
AO to make addition of Rs. 38,48.050/- and partly set aside the
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assessment order with the direction to frame a fresh assessment
order after examining the issues discussed in the order u/s. 263 of
the I.T. Act.
5. Against the order of the Ld. CIT dated 18.3.2013 passed u/s.
263 of the I.T. Act, the assessee appealed before the Tribunal.
6. Ld. Counsel of the assessee relied upon the original
assessment order dated 15.11.2010 passed u/s. 143(3) of the I.T.
Act in the case of the assessee as well as the documentary evidence
filed by him in the shape of Synopsis and Paper Book.
6.1 On the contrary, Ld. DR relied upon the order passed by the
Ld. CIT dated 18.3.2013 passed under Section 263 of the I.T. Act.
7. Having carefully examined the entire evidences available on
the record in the light of the oral submissions of the parties, with
reference to the provisions of law and after giving anxious thought,
in the light of the plain words used in section 263 of the Act. We
draw support from the decision of the Hon'ble Supreme Court
rendered in the case of Malabar Industries Co. Ltd. vs. CIT (2000)
243 ITR 83 (SC) and other relevant cases, we are of the considered
opinion that this is not a fit case for revising the assessment order.
The reasons for our above conclusion are that the twin conditions,
viz., the assessment order should be erroneous in so far as it is
prejudicial to the interests of revenue do not co-exist in this case.
The assessee had filed return of income for the year under
consideration and had disclosed the entire requisite details
alongwith return of income during the year under consideration.
During the assessment proceedings, the ld. AO examined all the
relevant evidences produced before him, either alongwith the return
or during the assessment proceedings, and has accepted the gift as
genuine. The AO called for the entire details on the issue in dispute.
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7.1 We find that the revisional power conferred on the
Commissioner under this section is of wide amplitude. It enables the
Commissioner to call for and examine the record of any proceeding
under the Act. The revisional power under section 263 cannot be
exercised in respect of a matter which falls within the power to
assess escaped income under section 147 of the Act. The revisional
power is a quasi-judicial one hedged with limitation and has to be
exercised subject to the same and within its scope and ambit. So far
as calling for the records and examining them is concerned,
undoubtedly, it is an administrative act but on examination "to
consider" or in other words, to form an opinion that particular order
is erroneous is so far as it is prejudicial to the interests of the
Revenue, is a quasi-judicial act because on this consideration or
opinion the whole machinery of re-examination and reconsideration
of an order of assessment, which has already been concluded and
controversy which has been set at rest, is again set in motion. It is
an important decision and the same cannot be based upon the
whims and the fancies or the caprice of the revising authority.
There must be material(s) available from the records called for by
the Commissioner. The Commissioner must give reasons for passing
an order. He is bound by the decisions of the Hon'ble Supreme
Court and jurisdictional High Court. The Commissioner must come
to a firm conclusion on the point that error in the order has resulted
in prejudice to the interests of the Revenue. He has to apply his
mind for coming to a firm conclusion which should be based on
proper material and he must mention that material in his order. The
Commissioner may under this section pass such an order as the
circumstances of the case justify, including an order enhancing or
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modifying the assessment or canceling the assessment and
directing a fresh assessment, or any other order to the detriment of
the assessee. But a mistake or omission in the assessment order
would not justify the setting aside of the whole order.
7.2 From the plain reading of the above provision it is manifestly
clear that an order can be revised if and only if the twin conditions,
viz., one that the order is erroneous and two that to that extent it
is prejudicial to the interest of the Revenue co-exist. Or in other
words, an order can be revised if it is both erroneous as well as
prejudicial to the interests of the Revenue. An order, which is only
erroneous but not prejudicial, cannot be revised. Likewise an order,
which is only prejudicial to the interest of the Revenue but not
erroneous, cannot be revised. To put it in, still simpler words, it is
mandatory for the Commissioner to revise an order that both the
above conditions must "co-exist". An order which is not "erroneous"
cannot be revised even if it is prejudicial to the interest of the
Revenue, and the vice-versa.
7.3 The subject of "revision U/s 263" has been vastly examined
and analysed by various Courts including that of Hon'ble Apex Court.
The revisional power conferred on the Commissioner vide S. 263 is
of vide amplitude. It enables the Commissioner to call for and
examine the records of any proceeding under the Act. It empowers
the Commissioner to make or cause to be made such an enquiry as
he deems necessary in order to find out if any order passed by
Assessing Officer is erroneous in so far as it is prejudicial to the
interest of the Revenue. The only limitation on his powers is that he
must have some material(s) which would enable him to form a
prima- facie opinion that the order passed by the Officer is
erroneous in so far as it is prejudicial to the interest of the Revenue.
Once he comes to the above conclusions on the basis of the
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`material' that the order of the A.O. is erroneous and also prejudicial
to the interests if the Revenue, the Commissioner is empowered to
pass an order as the circumstances of the case may warrant. He
may pass an order enhancing the assessment or he may modify the
assessment. He is also empowered to cancel the assessment and
direct to frame a fresh assessment. He is empowered to take
recourse to any of the three courses indicated in S. 263. So, it is
clear that the Commissioner does not have unfettered and
unchequred discretion to revise an order. The Commissioner is
required to exercise revisional power within the bounds of the law
and has to satisfy the need of fairness in administrative action and
fair- play with due respect to the principle of audi alteram partem as
envisaged in the Constitution of India as well in section 263. An
order can be treated as "erroneous" if it was passed in utter
ignorance or in violation of any law; or passed without taking into
consideration all the relevant facts or by taking into consideration
irrelevant facts. The "prejudice" that is contemplated under S. 263 is
the prejudice to the Income Tax administration as a whole. The
revision has to be done for the purpose of setting right distortions
and prejudices caused to the Revenue in the above context. The
fundamental principles which emerge from the several cases
regarding the powers of the Commissioner under section 263 may
be summarized below:-
(i) The Commissioner must record satisfaction that the order
of the Assessing Officer is erroneous and prejudicial to
the interests of the revenue. Both the conditions must be
ful- filled.
(ii) Section 263 cannot be invoked to correct each and every
type of mistake or error committed by the Assessing
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Officer and it is only when an order is erroneous, that the
section will be attracted.
(iii) An incorrect assumption of facts or an incorrect
application of law will suffice for the requirement of order
being erroneous.
(iv) If the order 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 interest of the revenue and if the Assessing Officer
has adopted one of the courses permissible under law or
where two views are possible and the Assessing Officer
has taken one view with which the Commissioner does
not agree, it cannot be treated as an erroneous order,
unless the view taken by the Assessing Officer is
unsustainable under law.
(vi) If while making the assessment, the Assessing Officer
examines the accounts, makes enquiries, applies his
mind to the facts and circumstances of the case and
determines the income, the Commissioner, while
exercising his power under section 263, is not permitted
to substitute his estimate of income in place of the
income estimated by the Assessing Officer.
(vii) The Assessing Officer exercise quasi- judicial power
vested in him and if he exercise such power in
accordance with law and arrives at a conclusion, such
conclusion cannot be termed to be erroneous simply
because the Commissioner does not feel satisfied with
the conclusion.
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(viii) the Commissioner , before exercising his jurisdiction
under section 263, must have material on record to arrive
at a satisfaction.
(ix) If the Assessing Officer 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 Assessing Officer allowed the
claim on being satisfied with the explanation of the
assessee, the decision of the Assessing Officer cannot be
held to be erroneous simply because in his order he does
not make an elaborate discussion in that regard.
7.4 Now reverting back to the facts of the case in hand, it is found
that the AO has made proper enquiries during the assessment
proceedings and after examining the proofs so filed by the assessee
before him, has made disallowance on being satisfied with the
explanation of the assessee.
7.5 The finding of the Hon'ble Supreme Court given in the
celebrated decision of Malabar Industries Co. Ltd. (supra) are
relevant for ready reference and so these are being extracted herein
below :
"A bare reading of section 263 of the income-tax
Act, 1961, makes it clear that the prerequisite for
the exercise of jurisdiction by the Commissioner suo
motu under it, is that the order of the Income-tax
Officer is erroneous in so far as it is prejudicial to
the interests of the Revenue. The Commissioner has
to be satisfied of twin conditions, namely, (i) the
order of the Assessing Officer sought to be revised
is erroneous; and (ii) it is prejudicial to the interests
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of the Revenue. If one of them is absent if the
order of the Income-tax Officer is erroneous but is
not prejudicial to the Revenue or if it is not
erroneous but is prejudicial to the Revenue-recourse
cannot be had to section 263(1) of the Act. The
provision cannot be invoked to correct each and
every type of mistake or error committed by the
Assessing Officer, it is only when an order is
erroneous that the section will be attracted. An
incorrect assumption of facts or an incorrect
application 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 interest of the Revenue"
is not an expression of art and is not defined in the
Act. Understood in its ordinary meaning it is of wide
import and is not confined to loss of tax. The
Scheme of the Act is to levy and collect tax in
accordance with the provisions of the Act and this
task is entrusted to the Revenue. If due to an
erroneous order of the Income-tax Officer, the
Revenue is losing tax lawfully payable by a person,
it will certainly be prejudicial to the interests of the
Revenue. 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 Income-tax Officer adopted one
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of the courses permissible in law and it has resulted
in loss of revenue, or where two views are possible
and the Income-tax Officer 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 Income-tax Officer is unsustainable in law."
7.6 The above ratio of Hon'ble Supreme Court's decision supports
our finding given in this case. The Hon'ble Kolkata Bench has further
clarified and defined as to what does the expressions "lack of
enquiry by AO" means while deciding the case of Sigma Search
Lights Ltd. vs. ITO, 82 ITTJ 956 (ITAT Kolkata). The Hon'ble Bench
has observed as under :-
"Revision Erroneous and prejudicial order Lack of
enquiry by AO An order may be brief or cryptic but
if has been passed after conducting proper
enquiries into the facts stated in the return, such an
order cannot be held erroneous and prejudicial to
the interest of the Revenue for that reason alone
CIT setting aside assessment under s. 263 and
ordering do novo assessment on grounds of low GP
rate and higher expenses towards commission No
finding by CIT that expenses were bogus and similar
expenses to same parties allowed in earlier as well
as subsequent assessment years Record showing
that AO made detailed enquiry before completing
the assessment condition precedent for invoking
revisional jurisdiction not present Revisional order
quashed."
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7.7. We find that in the present case the Assessee is a Firm
engaged in construction. Return was filed on 21/08/2008 declaring
income of RS.2,55,46,190/- and assessment was completed on the'
returned income of RS.2,55,46,190/- vide assessment order dated
15/11/2010 passed u/s. 143(3) of I. T. Act. Subsequently, show
cause notice uls 263 dated 12/02/2013 was issued by the Ld. CIT.
Vide impugned order uls 263 dated 18/03/2013, the Ld. CIT directed
the AO to make addition of Rs, 38,48,050/- and partly set aside the
assessment order with the direction to frame a fresh assessment
order after examining the issues discussed in the order u/s 263. In
pursuance to order uls 263, AO passed assessment order dated
28/02/2014 uls 263/143(3), addition of RS.38,48,050/- has been
made by the AO as directed by the Ld. CIT vide impugned order uls
263.
7.8 We note that the Ld. CIT in the impugned order uls 263 vide
para 7 at pages 6-7 has observed as under:
"As regards the points on the basis of which the proceedings
under section 263 of the Income-tax Act, 1961 were taken, the
assessee has shown an income of RS.2.5 crores as `any other
income' while there were Nil sales, gross receipts of business.
As per the records, the assessee had claimed a sum of Rs.
12, 11,5001- along with interest at 18% per annum from Mls
Charms India Pvt. Ltd. Vide an Award by sole arbitrator dated
1.10.2007, the assessee was awarded a sum of
Rs.2,88,48,050/-. Vide notice under section 263 of the Income-
tax Act, 1961 the assessee was asked as to why the entire sum
of Rs.4,12, 11,500/- along with interest at 18% be not taken as
income of the assessee on the basis of assessee's claim. It was
argued by the Id. Counsel that the assessee has actually
received only Rs. 2.5 crores out of the award amount of
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Rs. 2,88,48,050/- and the balance amount of Rs. 38,48,000/-
not received by the assessee was foregone and settled before
due date of filing return. It was contented that the adjustment
was made in terms of AS-4 issued by the Institute of Chartered
Accountants of India which provides for the adjustment
towards the events occurring after the date of balance sheet.
The assessee, however, could not furnish any evidence or
material if its claim from Charms India Pvt. Ltd. to the tune of
Rs. 4.12 crores seized to exist or if no legal claim for the same
remained for which no explanation was offered. On the other
hand, the assessee has shown in its books the sum of
Rs.38,48,050/- as receivable from Mls Charms India Pvt Ltd.
Further, the details of sundry creditors for goods of Mls Charms
India Pvt. Ltd. shows the assessee as sundry credit for good
for Rs. 38,48,050/-. Moreover, Mls Charms India Pvt. Ltd. in
Schedule-I has claimed under the head direct construction cost
the sum of Rs.2,88,48,050/- as other project expenses of the
year ending 31.3.2008 which is rather the schedule of
construction and P&L Alc and, hence, undoubtedly claimed as
direct expense by Mls Charms India Pvt. Ltd. As against the
same the assessee has shown the receipts of merely 2.50
crores which has been accepted by the AO without inquiring
into the same. In view of above the difference of
RS.38,48,050/- between the Award and receipts shown by the
assessee is added to its income."
7.9 We also find from the observations of the Ld. CIT in the
impugned order that receipts of merely RS.2.50 crores from Mls
Charms India Pvt. Ltd. has been accepted by the AO without
inquiring into the same is factually incorrect as explained below:
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a) During the course of assessment proceedings, AO issued
notice u/s 133(6) of I.T. Act dated 11/08/2010 to Mls Charms India
Pvt. Ltd. who in response to the same filing letter dated 28/08/2010,
copy placed at pages 25-26 of the paper book alongwith the
following annexures:
(i) List of Directors with their addresses, copy placed at page 27.
(ii)List of shareholders with their addresses, copy placed at page 28.
(iii) Memorandum of Understanding (MOU) dated 16/1/2006 between
M/s Charms India Pvt. Ltd. and the Appellant, copy placed at pages
30-35. In such MOU, Mls Charms India Pvt. Ltd. approached the
Appellant for development of a housing project on its land situated
in Village Kanawani Mohidinpur, Tehsil Dadri, District, Gautam Budh
Nagar.
iv) Arbitration award of Shri B.B.L Hajelay (Retd. District Judge)
dated 01/10/2007, copy placed at pages 36-43 in which Mls Charms
India Pvt. Ltd. was directed to pay compensation/award of
Rs.2,88,48,0501- to the Appellant for breach of MOU.
(v) Copy of ITR and computation of income of Mls Charms India Pvt.
Ltd.
(vi) Copy of audited balance sheet, P&L Alc of Mls Charms India Pvt.
Ltd. for the year under consideration placed at pages 49-65 from
which it is evident that 'other project expenses' of Rs.2,88,48,050/-
(which included Rs.2,50,00,000 paid as compensation to the
Appellant on account of arbitration award) were debited to P&L Alc
(refer to page 58) and Rs.38,48,050/- was shown payable to the
Appellant under the head 'details of sundry creditors for goods'
(refer to page 64).
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(vii) Copy of Alc of the Appellant in the books of the Mls Charms
India Pvt. Ltd. for the subsequent assessment year 2009-10 placed
at page 29 from which it is evident that compensation of
Rs.38,48,0501- payable to the Appellant in the assessment year
2008-09 was reversed in the subsequent assessment year 2009-10.
7.10 We also observed from the copy of Alc of the Appellant in the
books of Mls Charms India Pvt. Ltd. for the year under consideration
as filed by such party before the AO in response to notice u/s 133(6)
dated 11/08/2010, copy attached as Annexure-I that the Appellant
received only RS.2,50,00,000/- out of Rs2,88,48,050/- as
compensation on account of arbitration award during the year under
consideration
7.11 We also find that the AO's notice u/s 133(6) dated 04/10/2010
issued to M/s Charms India Pvt. Ltd. during the course of assessment
proceedings says that :-
"Vide this office letter dated 11-08-2010 you were asked to
furnish the details in connection with Mls Singhal Construction
Co. D-9, Shastri Nagar, Meerut. The requisite details were
furnished by you vide your office letter dated 28/08/2010
except one information which is mentioned at S. No. 8 of this
office letter dated 11/08/2010 i.e. details of ownership property
mentioned in MOU dated 16/01/2006".
7.12 The details of ownership of property is duly mentioned in the
first page of MOU at Sr.No.1 in which it is mentioned that " the
owners (i.e. M/s Charm India Pvt. Ltd.) seized and possessed of or
otherwise well and sufficiently entitled to the pieces or parcels of
land situated at Khasra No. 519M & 537, Village Kanwani,
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Mohiduddinpur, Tehsil Dadri, Dist. Ghaziabad measuring 7510 sq.
mtrs."
7.13 In view of the above, it is evident that the assessment order
was passed by the AO after making all possible enquires. In other
words, assessment order dated 15/11/2010 u/s 143(3) had been
passed by the AO after proper application of mind as is also evident
from such assessment order itself, relevant portion of which is
reproduced below:
"In response to the aforesaid notices, Sh. R.M. Agarwal,
CA., counsel of the assessee attended the hearing from
time to time and the case was discussed with him. Books
of accounts bills/vouchers etc. produced which were
examined on test check basis.
Considering all the facts, detailed submitted by the
assessee and after examination of account
books/documents and after discussion of the various
issues, the assessment is completed on returned
income."
7.14 In our considered opinion, the revisional jurisdiction u/s 263 of
I.T. Act cannot be exercised even where enquiry as made by the AO
is considered as inadequate enquiry in the opinion of the Ld. CIT.
7.15 In view of above, the Assessee received only RS.2,50,00,000l-
towards compensation from M/s Charm India Pvt. Ltd. during the
year under consideration and as the Appellant was following cash
system of accounting, as is apparent from clause (11a) of tax audit
report i.e. Form 3CD copy placed at pages 4-14 {relevant page 4} of
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the paper book, the Appellant rightly accounted for the actual
amount of receipt of compensation on receipt basis and therefore,
there was no justification on the part of the Id. CIT to make addition
of RS.38,48,050/- to the income of the Assessee on accrual basis.
7.16 Keeping in view of the above, the impugned order u/s 263 is
also illegal as the Ld. CIT has not conducted any independent
enquiry/verification before making addition of Rs.38,48,050/- on
account of compensation. In this regard, we draw our support from
the ITAT Gauhati Bench judgment in the case of ACIT vs. Manas Salt
Iodisation Industries (P) Ltd. reported in 116 DTR(Gau)(Trib) 348, in
which the Hon'ble ITAT had endorsed the view taken in the case of
Bharat Petroleum Corporation Ltd vs. Jt CIT (Mumbai ITAT) 3 SOT 44
in which at internal page 352, it was held as under:
"The CIT by deciding the fate of the issues himself has
pre-empted the assessee company in agitating the
matter before the various authorities right from the
assessment onwards in a systematic and consistent
manner. Therefore, that part of the conclusion of the
revision order is not sustainable".
8. In view of the foregoing observations and the precedents, we
are of the considered opinion that the assessment framed by the
Assessing Officer was not erroneous and prejudicial to the interests
of revenue so as to attract the proceedings u/s. 263 of the I.T. Act,
19
ITA NO. 2726/Del/2013
1961. Accordingly, we cancel the revisional order passed u/s. 263
and restore the assessment order in question.
9. In the result, the Appeal filed by the assessee stands allowed.
Order pronounced in the Open Court on 01/10/2015.
Sd/- Sd/-
[O.P. KANT] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 01/10/2015
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar,
ITAT, Delhi Benches
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