C/TAXAP/203/2020 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 203 of 2020 PRINCIPAL COMMISSIONER OF INCOME TAX-3 Versus N K PROTEINS LTD Appearance: MRS MAUNA M BHATT(174) for Appellant(s) No. 1 for Opponent(s) No. 1 CORAM:HONOURABLE CHIEF JUSTICE MR. VIKRAM NATH and HONOURABLE MR. JUSTICE J.B.PARDIWALA Date : 16/09/2020 ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1 This Tax Appeal under Section 260A of Income Tax Act, 1961 (for short, Act, 1961 ) is at instance of Revenue and is directed against order passed by Income Tax Appellate Tribunal, Ahmedabad, Bench C Ahmedabad dated 12th December 2019 in ITA No.699/Ahd/2015 for A.Y. 2010-11. 2 Revenue has proposed following substantial questions of law for consideration of this Court: [A] Whether on facts and in circumstances of case, Tribunal was justified in law in quashing order u/s 263 of Income tax Act, 1961, passed by Principal Commissioner of Income Tax? [B] Whether Tribunal was justified in facts and in law in ignoring finding of Principal Commissioner of Income Tax that necessary enquiries had not been conducted by Assessing Officer while framing assessment in undue haste resulting in non application of mind on part of Assessing Officer? Page 1 of 7 Downloaded on : Tue Oct 06 10:53:19 IST 2020 C/TAXAP/203/2020 ORDER [C] Whether on facts of case and in law Tribunal is right to hold that Assessing Officer conducted necessary and sufficient enquiries while should have been made warranted on facts of case in respect of each of issues raised in impugned order u/s 263 dated 25/02/2015 as recorded in 263 order in general and in para-3 (items 1 to 7) in particular and also whether proper submissions in respect of these were made by assessee to Assessing Officer before assessment was completed? 3 We have heard Ms. Mauna Bhatt, learned Senior Standing Counsel appearing for Revenue. 4 It appears from materials on record that assessee company filed its return of income on 29 th September 2010 declaring total income at Rs.15,31,24,189/-. assessment order was passed under Section 143(3) of Act dated 26 th March 2013 determining taxable income of assessee at Rs.15,47,54,611/-. 5 CIT-3, Ahmedabad took up order of assessment dated 26th March 2013 referred to above in suo motu revision in exercise of his power under Section 263 of Act, 1961 and vide order dated 26th March 2013 quashed and set aside assessment order. CIT-3 came to conclusion that assessment order under Section 143(3) of Act, 1961 referred to above is erroneous and prejudicial to interest of Revenue. 6 Later, pursuant to directions of CIT-3, Ahmedabad vide order dated 15th March 2016, accounts of assessee s company were audited under Section 142(2A) of Act. special audit submitted his report dated 16 th September 2016. order under Sections 143(3) read with 263 and 142(2A) respectively of Act, 1961 was passed on 11 th November 2016 Page 2 of 7 Downloaded on : Tue Oct 06 10:53:19 IST 2020 C/TAXAP/203/2020 ORDER making various additions on basis of report of special audit as well as order passed under Section 263 of Act. issue related to payment to related parties covered under Section 40A(2)(b) of Act including job work charges, purchases of services, etc. 7 assessee, being dissatisfied with order passed by CIT-3, Ahmedabad under Section 263 of Act, preferred appeal before Appellate Tribunal. Appellate Tribunal vide its order dated 12th December 2019 partly allowed appeal. 8 Revenue, being dissatisfied with impugned order passed by Tribunal has come up with present appeal. Appellate Tribunal, while partly allowing appeal filed by assessee, held as under: 9 We have heard rival contentions of both parties and perused materials available on record. In instant case, Ld. Pr.CIT has held that order of AO as erroneous insofar prejudicial to interest of Revenue on account of non- verification of items as discussed above. 9.1 However, we note that AO during assessment proceedings has required assessee to furnish details of fixed assets in notice issued under section 142(1) of Act dated 22-10-2012. relevant extract of notice is reproduced as under: 11. Regarding additions to fixed assets, furnish copies of major bills of additions to Fixed Assets. Give details in following proforma: Fixed Asset Date of Date of Installation Whether If loan Deprecia Whether Asset Block purchase putting to expenses, any loan taken, tion Additional use freight taken for date of claimed Depreciati expenses, purchase sanction on u/s. insurance of this of loan 32(iia) expenses asset and date claimed incurred if of first Page 3 of 7 Downloaded on : Tue Oct 06 10:53:19 IST 2020 C/TAXAP/203/2020 ORDER any payment of interest If any extra charges like insurance, carriage, interest etc. have been incurred for purchase of these assets, please provide bills. assessee is response to such notice filed reply vide letter dated 5th November 2012. relevant extract of letter is reproduced as under: 9. details of addition to fixed assets i.e. description of asset, date put to use and value of asset is already given in Annexure-3A to audit report under form 3CD. 9.2 We also find that assessee in response to above notice has also filed details of assets for each block of assets which are placed on pages 141 to 149 of paper book. Thus after perusal of details of fixed assets which were available before AO during assessment proceedings, we find that AO after due application of mind framed assessment under section 143(3) of Act. 9.3 Similarly, we note regarding proceeds from deposits and cash credit i.e. unsecured loans, that AO during assessment proceedings has required assessee to furnish details in notice issued under section 142(1) of Act dated 22-10-2012. relevant extract of notice is reproduced as under: 8. Details of secured loans taken from banks alongwith Name and address of Branch and Type of loan and amount of loan taken. Also state security hypothecated / mortgaged. 9. Please provide details of unsecured loans in following proforma: Name of Address PAN Opening Closing Whether Rate of Unsecured balance balance squared up Interest paid creditor during year 10. In respect of any new unsecured loans taken and Page 4 of 7 Downloaded on : Tue Oct 06 10:53:19 IST 2020 C/TAXAP/203/2020 ORDER concerning any squared up loans, give confirmations of persons and also provide ITRs showing returned income of lenders. 19. Details of deposits along with name & address of person and amount. assessee is response to such notice filed reply vide letter dated 5th November, 2012. relevant extract of letter is reproduced as under: 7. details of secured loans along with details of security furnished relevant to AY 2010-11 is enclosed. 8. details of unsecured loans in required format relevant to AY 2010-11 is enclosed. 9.4 We also find that assessee in response to above notice has filed details of unsecured loan which are placed on pages 137 to 140 of paper book as well as confirmations which are placed on 178 to 199 of paper book. 9.5 Similarly, we note, regarding transactions covered under section 40A(2)(b) of Act assessee in response to queries raised in course of hearing has submitted vide letter dated 06/03/2013 that transactions were carried out with related parties at prevailing market rate. In course of hearing certain queries are raised. They are explained as under: 1. As regards Section 40A(2)(b) assessee has made purchases from NKIL, N.K. Roadways P. Ltd. and Tirupati Proteins P. Ltd. They are all at prevailing market rate. This may be verified from purchase invoices from said parties and thir parties produced for your verification. Therefore question of applicability of Section 40A(2)(b) does not arise. 9.6 We also note that assessee has filed complete copies of ledgers of transactions carried out with parties which are placed on page 295 to 671 of paper book. 9.7 Similarly, we note, regarding current liabilities that AO during assessment proceedings has required assessee to furnish details in notice issued under section 142(1) of Page 5 of 7 Downloaded on : Tue Oct 06 10:53:19 IST 2020 C/TAXAP/203/2020 ORDER Act dated 22-10-2012. relevant extract of notice is reproduced as under: 15. Give details of outstanding provisions in following proforma: Provision made for Amount If payment made subsequently, date of discharge of liability 16. Provide complete list of all your sundry creditors for AY 2010-11 in following proforma: Name Nature of Outstanding Outstanding Outstanding Outstanding creditors balance as on balance as on balance as on balance as on (Goods, other 31-03-2010 31-03-2009, if 31-03-2008 today (if no etc.) any (put _ if (put _ if outstanding there was no o/ there was no o/ balance, then s. Balance) s balance) state date of writing off liability or date of payment for clearing dues). assessee is response to such notice filed reply vide letter 5th November 2012. relevant extract of letter is reproduced as under: 7. details of secured loans in required format relevant to AY 2010-11 is enclosed. 8. details of unsecured loans in required format relevant to AY 2010-11 is enclosed. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 13. details of provision made relevant to AY 2010-11 is enclosed. 14. list of creditors outstanding as on 31/03/2009 and 31/03/2010 are enclosed. 9.8 We also note that assessee has filed complete details of parties and accounts of provisions which are placed on pages 150 to 167 of paper book. Page 6 of 7 Downloaded on : Tue Oct 06 10:53:19 IST 2020 C/TAXAP/203/2020 ORDER 9.9 In view of above, we hold that assessment order was framed under section 143(3) of Act after due verification by AO. Accordingly, we are of view that order of AO cannot be held as erroneous insofar prejudicial to interest of Revenue on account of non-verification on facts as stated above. 9 We also take notice of fact that Tribunal, in support of its reasonings and conclusions, has placed reliance on various decisions of Supreme Court and High Courts. 10 finding of fact recorded by Appellate Tribunal, after due consideration of relevant aspects of matter, is that assessment order was framed under Section 143(3) of Act after due verification by A.O. Therefore, order of Assessing Officer could not be said to be erroneous and prejudicial to interest of Revenue. Tribunal has also recorded finding that assessee had furnished complete details of parties and accounts. 11 In overall view of matter, we are convinced with reasonings assigned by Appellate Tribunal while allowing appeal of assessee. We are of view that none of three questions proposed by Revenue could be termed as substantial questions of law. 12 In view of aforesaid, this appeal fails and is hereby dismissed. (VIKRAM NATH, CJ) (J. B. PARDIWALA, J) NAIR SMITA V. / CHANDRESH Page 7 of 7 Downloaded on : Tue Oct 06 10:53:19 IST 2020 Principal Commissioner of Income-tax-3 v. N K Proteins Ltd