Revision u/s 263 not justified in case of best judgment assessment u/s 144 for non co-operation by assessee
INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR
I.T.A No. 220(Asr)/2015 Assessment Year: 2010-11
M/s Sutlej Wine Enterprises (Appellant) vs. PrCIT (Respondent)
Date of Order: 10/03/2016
PER T. S. KAPOOR (AM):
This is an appeal filed by assessee against the order of learned CIT, dated 30.03. 2015 passed u/s 263, for Asst. Year: 2010-11.
2. The ground of appeal taken by assessee are reproduced below.
“(i) The learned Principal Commissioner of Income Tax, Bathinda erred on facts and law in setting aside by invoking the provisions of section 263, the order of the AO passed u/s 144 on 25.03.2013 without providing any proper opportunity of hearing.
(ii) That Ld. Principal Commissioner of Income tax, Bathinda erred of fact and law in assuming the jurisdiction u/s 263 to pass an order for setting aside the order u/s 144 dated 25.03.2013 of the AO because all the issues which have been set aside to the AO have been examined in detail during the course of assessment proceedings and the order u/s 144 has been passed by the AO after due application of mind.
(iii) The Ld. Principal Commissioner of Income Tax, Bathinda erred on fact and law while setting aside the order of the AO to give him a direction that instead of rejecting the books of account and applying N.P. rate he should have invoked the provisions of section 40A(3) to disallow the payments made exceeding Rs.20,000/-. In doing so the Principal Commissioner has tried to bypass the binding precedent of Punjab & Haryana High Court in the case of CIT vs. Smt. Santosh Jain in which it has been held that once the books of account has been rejected the provisions of section 40A(3) cannot be invoked.”
3. The brief facts of the case as noted in the assessment order are that the assessee is a whole seller engaged in the business of liquor wines. The case of the assessee was selected for scrutiny. However, the assessee did not co-operate during the assessment proceedings, therefore, the assessment was completed u/s 144 of the Act and income was determined @ 5% of gross turn over of the assessee’s company.
4. Aggrieved the assessee filed appeal before learned CIT(A) and learned CIT(A) restricted the addition to 0.5% of turn over instead of 5% determined by Assessing Officer.
5. Against the order of learned CIT(A), the Revenue filed appeal before ITAT and Hon’ble ITAT vide order dated 28.11.2014 dismissed the appeal of the Revenue. The leaned CIT vide notice dated 17.03.2015 issued u/s 263 has noted down these facts in the order u/s 263 itself. The learned CIT observed that Assessing Officer showed undue haste in completing the assessment u/s 144 whereas he should have made disallowance u/s 40A(3) of the Act as entire purchases of assessee firm were in cash. Against the order issued u/s 263, the assessee submitted that Assessing Officer after due application of mind has rejected the books of accounts and had made addition applying net profit rate of 5% and therefore, order passed by Assessing Officer is neither erroneous and nor prejudicial to the interest of Revenue. However, the learned CIT did not agree with the submissions of the assessee and set aside the order of Assessing Officer and directed Assessing Officer to decide the issue afresh, keeping in view, the violation of provisions of section 40A(3) of the Act.
6. Aggrieved the assessee is in appeal before us.
7. At the outset, the learned AR submitted that Assessing Officer had rejected the books of accounts and therefore, had applied 5% as net profit of gross receipts and it was an established law that once the books of accounts are rejected and addition is made on the basis of net profit ratio the violations u/s 40A(3) are not required to be looked into.
8. The learned AR, in this respect submitted that Hon’ble Punjab & Haryana High Court in the case of CIT (Central) vs. Smt. Santosh Jain 159 Taxman 392 has held that if the Assessing Officer made an addition by rejecting books of accounts and estimating the net profit of assessee he cannot resort to the provisions of section 40A(3) of the Act. He submitted that learned CIT in his order submitted that the said judgment has not attained finality which is contrary to the settled principles of law as the judgment of jurisdictional High Court is binding unless it is unsettled by authorities of Higher Court. The learned AR further submitted that it was not open to learned CIT to impose his own view instead of the view taken by Assessing Officer by which he had directed the Assessing Officer that he should have taken into account the violation of provisions of section 40A(3). The learned AR in this respect relied upon the case law of CIT vs. Indo German Fab in ITA No.248 passed by Hon’ble Punjab & Haryana High Court for the proposition that learned CIT cannot substitute his opinion with the opinion of Assessing Officer. The learned AR further placed his reliance on the order of Hon’nble Supreme Court in the case of Malabar Industial Co. Ltd. vs. CIT 243 ITR 0083 where in the Hon’ble Court has held that provisions of section 263 cannot be invoked to correct each and every type of mistake committed by AO.
9. In view of the above, the learned AR argued that the order passed by learned CIT needs to be quashed.
10. The learned DR, on the other hand, relied upon the order of Commissioner of Income Tax.
11. We have heard the rival parties and have gone through the material placed on record. We find that that it is an undisputed fact that the matter as regards factual position of the case had attained its finality with the order of Tribunal dated 28.11.2014 by which it had dismissed the appeal filed by Revenue and learned DR had not placed any material suggesting stay of above said Tribunal order. The Commissioner of Income Tax has assumed jurisdiction to issue notice u/s 263 after order passed by the Tribunal. Before issue of notice u/s 263 the learned Commissioner should have considered the order passed by Tribunal also as there is no point in continuing the litigation on a point which has been decided by a higher authority. The learned CIT in his notice u/s 263 had observed that if the Assessing Officer had made disallowance u/s 40A(3) it would have been better for the Revenue. We find that the Hon’ble Punjab & Haryana High Court in the case of CIT vs. M/s Indo German Fabs in ITA 248 of 2012 has held that section 263 of the Act confers power to examine an assessment order so as to ascertain whether it is erroneous and prejudicial to the interest of Revenue but does not confer jurisdiction upon the CIT to substitute his opinion for the opinion of the Assessing Officer. We further find that the jurisdiction of High Court in the case of CIT Vs. Dedpak Mittal reported in (2010)324 ITR 411 (P&H) has held that change of opinion by reappraising evidence is not within the para meters of revisional jurisdiction of the Commissioner of Income tax u/s 263 of the Act. Above all we find that Hon’ble Supre Court in the case of Malabar Industial Co. Ltd. vs. CIT 243 ITR 0083 has held that provisions of section 263 cannot be invoked to correct each and every type of mistake or error committed by the AO. 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. The Hon’ble Supreme Court has also made clear that the phrase ‘prejudicial to the interests of the Revenue’ has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interest of the Revenue. It was further stated that 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 CTT 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.
12. In the present case, we find that AO offered various opportunities to the assessee the various opportunities listed in the assessment order are dated 6.6.2012, 11.09.2012 and 19.03.2013, however, the assesse did not submit the full details required by Assessing Officer and further the documents submitted by assessee were unconfirmed copies of accounts of the parties from whom purchase were made, therefore, Assessing Officer had no option but to reject the books of accounts of assessee and to estimate the income of assessee by applying net profit rate.
13. In view of the above, we do not find the order of Assessing Officer to be erroneous and prejudicial to the interest of Revenue keeping in view the judicial precedents relied upon by the assessee.
14. In view of the above, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 10th March, 2016.
(A.D. JAIN) JUDICIAL MEMBER (T. S. KAPOOR) ACCOUNTANT MEMBER
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