Krishi Rasayan Export (P) Ltd. v. Principal Commissioner of Income-tax-4, Kolkata
[Citation -2016-LL-0923-62]

Citation 2016-LL-0923-62
Appellant Name Krishi Rasayan Export (P) Ltd.
Respondent Name Principal Commissioner of Income-tax-4, Kolkata
Court ITAT-Kolkata
Relevant Act Income-tax
Date of Order 23/09/2016
Assessment Year 2012-13
Judgment View Judgment
Keyword Tags opportunity of being heard • international transaction • fresh assessment • associated enterprise • lawful jurisdiction
Bot Summary: 19.11.2015, ignoring the facts that original assessment order passed by Addl Commissioner of Income Tax- Range-12 has merged with the appeal order dt. 11.08.2014 passed in appeal case No 211/CIT(A)/-XII/R-12/14-15 by Commissioner of Income Tax-XII, as such, the order passed u/s. Commissioner of Income-Tax had directed the AO to pass a fresh order as per the I.T. Act, after giving proper opportunity of being heard to the assessee company, observing the following: 5. The order passed u/s 143(3) of the I. T. Act, 1961 dated 31.03.2014 is Set Aside de novo with a direction to carryout proper examination on each and every issue relating to the case. 3 ITA No.1504 /Kol/2015 KrishiRasayan Export Ltd. Thus, in the present case the Commissioner after taking into consideration the assessment order and material on record came to the conclusion that the order of the Assessing Officer is erroneous, as much as it is prejudicial to the interest of revenue. DR as his submissions are supported by the basic fact that the matter which has not been taken up by the assessee before the Commissioner of Income Tax, on that matter,the Commissioner of Income-Tax has jurisdiction to pass the order under section 263 of the Income-Tax Act. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct.


ITA No.1504 /Kol/2015 Krishi Rasayan Export (P) Ltd. IN INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH , KOLKATA (Before Shri S.S.Viswanethra Ravi, J.M. & Dr.A.L.Saini, A.M.) ITA No. 1504/Kol/2015 : Asstt. Year : 2012-13 Krishi Rasayan Export (P) Ltd., Vs Principal Commissioner of 29, LalaLajpat RaiSarani, Income-Tax-4, Kolkata-700020 Aaykar Bhawan, PAN: AACCK 4124G P-7, Chowringhee Square, Kolkata 700 069 (APPELLANT) (RESPONDENT) Appellant by: Shri Sanjeev Kadel, FCA Respondent by:Shri Rajat Subhra Biswas, CIT Date of Hearing : 05.09.2016 Date of Pronouncement :- 23/09/16 ORDER Per Dr. A.L.Saini, A.M.: captioned appeal filed by assessee pertaining to assessment year 2012-13, is directed against order passed by Ld. Principal Commissioner of Income-Tax, Kolkata-4, Kolkata, under section 263 of Income Tax Act, 1961 dated 19/11/2015, which in turn arises out of order passed by Assessing Officer under section 143(3) of Income Tax Act, 1961 (in short, Act ), dated 31/03/2014. 2. facts of case are stated in brief. assessee company filed its return of income on 26 t h September, 2012 for assessment year under consideration declaring total income at Rs.30,27,62,094/-. return was processed under section 143(1)on 24.05.2013. Later 1 ITA No.1504 /Kol/2015 KrishiRasayan Export (P) Ltd. on, case was selected for scrutiny and AO has completed scrutiny assessment under section 143(3) on 31.03.2014. 3. assessee has taken following grounds of appeal: 1. That notice issued by Ld. Principal Commissioner of Income Tax- 4, dt. 24.02.2015 issued u/s. 263 is bad, illegal & void ab-initio. 2. That order passed by Principal Commissioner of Income Tax-4 u/s. 263 dt. 19.11.2015, ignoring facts that original assessment order passed by Addl Commissioner of Income Tax- Range-12 has merged with appeal order dt. 11.08.2014 passed in appeal case No 211/CIT(A)/-XII/R-12/14-15 by Commissioner of Income Tax (Appeal )-XII, as such, order passed u/s. 263 is beyond jurisdiction of Ld. Commissioner of Income Tax -4, and amount to invalid order. 3. That notice issued by Ld. Principal Commissioner of Income Tax-4 u/s. 263 was limited to "failure on part of A.O for examination of international Transaction", whereas ld. Principal Commissioner has set aside and directed A.O.to make fresh assessment de-novo. action of Ld. Commissioner is arbitrary and illegal. 4. By this appeal, assessee has challenged validity of proceedings under section 263 of Income-Tax Act, 1961. Commissioner of Income-Tax observed that assessee company is engaged in business of manufacturing and trading of insecticides, pesticides and Agro Chemicals during financial year 2011-12, assessee has made international transaction of Rs.36,45,16,187/- with its associated enterprise. same was not considered for verification during assessment proceedings. assessment order under section 143(3) of I.T. Act, 1961 was passed without determining arm s length price of international transaction. 2 ITA No.1504 /Kol/2015 KrishiRasayan Export (P) Ltd. 4.1 In view of above facts, Commissioner of Income-Tax noticed that order of AO is erroneous in so far as prejudicial to interest of revenue. Accordingly, show cause notice under section 263 of I.T.Act was issued to assessee company on 24.02.2015. ld. Commissioner of Income-Tax had directed AO to pass fresh order as per I.T. Act, after giving proper opportunity of being heard to assessee company, observing following: 5. After going through facts of case, materials available on records and submission dated 03.03.2015 of assessee company, it is seen that assessing officer has not examined Arm s Length Price on International transaction of Rs.36,45,16,187/- made by assessee company during F.Y. 2011-12 and thereby did not determined arm's length price. Therefore, order dated 31.03.2014 passed u/s 143(3) of I T Act, 1961 is erroneous in so far as prejudicial to interest of revenue. order passed u/s 143(3) of I. T. Act, 1961 dated 31.03.2014 is Set Aside de novo with direction to carryout proper examination on each and every issue relating to case. assessment is being set aside as no proper examination for relevant assessment year was made as held in case of Jagadish Kumar Gulati vs Commissioner of Income Tax (High Court of Allababad) (2004)191 CTR (ALL)25 relevant part of judgement is reproduced below applicable to this case. "The office note indicated that proper enquiries were not made by Assessing Officer as he himself admitted. There is no statutory bar in making office note. There is also no statutory bar in relying upon office note under section 263. By said office note, Assessing Officer had expressed his opinion that he was not able to make proper enquiries. When Assessing Officer himself made that admission, it was not for assessee to dispute it. Moreover, report of inspectors indicated that assessee had not given correct details about valuation and income of properties in question. [para 15]. 3 ITA No.1504 /Kol/2015 KrishiRasayan Export (P) Ltd. Thus, in present case Commissioner after taking into consideration assessment order and material on record came to conclusion that order of Assessing Officer is erroneous, as much as it is prejudicial to interest of revenue. Hence there was valid assumption of jurisdiction under section 263 of Act by Commissioner and Tribunal has not committed any error of law in confirming order of CIT in setting aside assessment order under section 263 and directing Assessing officer to make fresh assessment [para 20]. Before parting with case, we would like to mention that it is often found that assessments are being done in improper manner without proper consideration and explanation given is that it was done in hurry as limitation was expiring. This is often pretext for not doing proper assessment, and it raises apprehensions that Assessing Officer is hand in glove with assessee. It is practice of department not to scrutinize every case in detail; but when case is picked up for scrutiny, surely duty of Assessing Officer is to do through investigation but he did not do it in this case, which is indeed lamentable. We are, therefore, of opinion that C.B.D.T should issue appropriate circulars to income-tax authorities that at least in scrutiny cases there should bethorough enquiries by Assessing Officer and in such cases his functioning should be monitored by superior officer. Plea that he did not have time and that he was making hurried assumption as assessment was becoming time-barred should not be accepted in such cases [para 21] 5. ld. AR for assessee has submitted before us that Commissioner of Income-Tax, in case under consideration should not have directed AO to make fresh assessment because complete details of property transaction including details of international transaction were submitted during course of assessment proceedings. ld. AR has also submitted that it is duty of AO to consider same. ld. AR has relied on following judgments: i) In case of E I H Limited-vs- CIT in ITA No.529/Kol/2013 dated 19.02.2016 of ITAT, C bench, Kolkata wherein decision of Hon ble Delhi High Court in case of CIT vs Honda Siel power Products 4 ITA No.1504 /Kol/2015 KrishiRasayan Export (P) Ltd. Ltd. (2010) 333 ITR 547(Del) was relied on wherein it was held that mere absence of discussion of provisions of section 80IB(13) read with section 80IA(9) of Act would not mean that AO has not applied his mind to said provisions and there is no material to indicate that AO has not applied his mind to provisions of section 80IB(13) read with section 80IA(9) of Act. presumption that assessment orders u/s 143(3) had been passed upon application of mind has not been rebutted by revenue. We hold that impugned issue is squarely covered by decision of Hon'ble Supreme Court (supra) and Hon'ble Rajasthan High Court (supra) among others and circulars issued by CBDT in this regard and hence it can be safely concluded that order has been passed by Learned AO by taking one of possible views and hence order cannot be termed as erroneous warranting initiation of revision proceedings u/s 263 of Act. We also find that issue is accepted by revenue in assessee's own case for Asst Year 2011-12 pursuant to directions of Hon 'ble DRP. In these circumstances, we hold that order passed by Learned AO cannot be considered as erroneous. Hence grounds raised by assessee on issue of allowability of lease rentals are allowed. ii) In case of M/s. Maithan international vs- ACIT in ITA No.559/Kol/2009 dated 24th June, 2011 of ITAT, Kolkata C bench, Kolkata 6. ld. DR for Revenue has primarily reiterated stand taken by AO and ld. CIT(A). He submitted that in this case there is no two opinions as ld. AR for assessee has submitted, it is matter where assessee has submitted papers relating to international transaction but AO did not consider 5 ITA No.1504 /Kol/2015 KrishiRasayan Export (P) Ltd. them at all. In case of international transaction it is duty of AO to examine whether there is adjustment relating to arm`s length price or not. As per CIT there is adjustment of arm`s length price of international transaction and Assessing Officer has failed to do so, therefore there is loss to revenue. Therefore, it is order passed by AO, which is prejudicial to interest of Revenue and hence, Commissioner of Income-Tax has rightly invoked provisions of section 263 of Income-Tax Act, 1961. 7. Having heard rival submissions, we noticed merit in submissions of ld. DR as his submissions are supported by basic fact that matter which has not been taken up by assessee before Commissioner of Income Tax (Appeals), on that matter,the Commissioner of Income-Tax has jurisdiction to pass order under section 263 of Income-Tax Act. We noticed that assessee has not taken up this issue before ld. CIT(A) at all. Therefore, this issue has not been merged with order of Commissioner of Income-Tax. Thus, issue which is being argued, never taken up before CIT(A). assessee also relied on judgment of GEE VEE ENTERPRISES vs. ADDITIONAL COMMISSIONER OF INCOME TAX & ORS-99 ITR 0375 (Del. HC) , wherein following principle have been laid down which are applicable to case under consideration: Page 386-The position and function of Income Tax Officer is very different from that of civil Court. statements made in pleading proved by minimum amount of evidence may be accepted by civil Court in absence of any rebuttal. civil Court is neutral. It simply gives decision on basis of pleading and evidence which comes before it. ITO is not only adjudicator but also investigator. He cannot remain passive in face of return which is apparently in order but calls for further inquiry. It is his duty to ascertain truth of facts stated in return when circumstances of case are such as to provoke inquiry. meaning to be given to word "erroneous'' in s. 263 emerges out of this context. It is because it is incumbent on ITO to further investigate facts stated in return when circumstances would make such inquiry prudent that word "erroneous'' in s. 263 includes failure to make such inquiry. order becomes erroneous because such inquiry has not been made and not because there is anything wrong with order if all facts stated therein are assumed to be correct. 6 ITA No.1504 /Kol/2015 KrishiRasayan Export (P) Ltd. company and partnership in this case were formed in same year with many members common in both. fact that company purchased land but handed over construction work to partnership even though object of company was to make such construction should naturally provoke query as to why this was done. partnership was required to be in existence as genuine firm in previous year before it could be registered under s. 185 of Act. Such registration gives substantial advantage to it for purpose of taxation. In very first assessment of company and firm, advantage of registration was given to firm. question would naturally arise whether firm was formed merely for purpose of getting tax advantage. Assessee argued that there is nothing wrong if legitimate advantage is sought by these means. But it was precisely for that reason that ITO had to be satisfied that firm had existed in previous year genuinely. It cannot be said that CIT could not be reasonably of opinion that order of ITO was erroneous because previous inquiries were not made by ITO. Nor can it be said that it was necessary for CIT himself to make such inquiry before cancelling order of assessment. In view of decisions of Supreme Court in Rampyari Devi and Tara Devi Aggarwal, challenge of petitioners to jurisdiction of Commissioner exercised under section 263 fails and writ petitions do not qualify for admission on ground of impugned orders being without jurisdiction Hence, it is issue not examined by AO and which is never touched upon by ld. Commissioner of Income Tax(Appeals) and therefore, Commissioner of Income Tax under section 263 has rightly invoked his jurisdiction. Therefore, based on above set of factual position and case law cited above, we dismiss appeal filed by assessee. 8. In result, appeal filed by assessee is dismissed. Order Pronounced in Open Court on 23.09.2016 Sd/- Sd/- (S.S.Viswanethra Ravi) (Dr. A.L.Saini) JudicialMember Accountant Member Dated: 23/09/2016 Talukdar (Sr.PS) 7 ITA No.1504 /Kol/2015 KrishiRasayan Export (P) Ltd. Copy of order forwarded to: 1. Revenue 2 Assessee 3. CIT-I, 4. CIT(A)-I, 5. DR, Kolkata Benches, Kolkata True Copy, By order, Asst. Registrar, ITAT, Kolkata Benches 8 Krishi Rasayan Export (P) Ltd. v. Principal Commissioner of Income-tax-4, Kolkata
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