The Commissioner of Income-tax, Chennai v. Vijay Kumar Koganti
[Citation -2020-LL-0929-41]

Citation 2020-LL-0929-41
Appellant Name The Commissioner of Income-tax, Chennai
Respondent Name Vijay Kumar Koganti
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 29/09/2020
Assessment Year 2014-15
Judgment View Judgment
Keyword Tags prejudicial to the interest of revenue • erroneous and prejudicial • application of mind • revisional order • limited scrutiny
Bot Summary: Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessment order passed under Section 143(3) dated 23.12.2014 was not erroneous and prejudicial to the interest of Revenue even though the Assessing Officer has failed to make adequate enquiry in the original assessment order passed and 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in quashing the revisional order passed by the PCIT under Section 263 of the Income Tax Act especially when the Assessing Officer had passed the order without making proper enquiries and had merely accepted the return filed by the assessee 3. The original assessee an individual died before even the order dated 03.1.2009 was passed by the Principal Commissioner of Income Tax, Chennai-1 under Section 263 of the Act. The Assessing Officer, after verification, completed the assessment by order dated 23.12.2016. Thereafter, the PCIT invoked his power under Section 263 of the Act on the ground that the assessment order was erroneous and prejudicial to the interest of the Revenue and ultimately set aside the order for fresh assessment after making due verification vide order dated 03.1.2019. The Hon'ble Supreme Court, in the decision in the case of Malabar Industrial Co. Ltd. Vs. CIT reported in 243 ITR 83, held that for exercise of jurisdiction under Section 263 of the Act, it was necessary that the order of assessment should be not merely erroneous, but also prejudicial to the interest of the Revenue. In the instant case, the assessment order is a speaking order; so also is the order passed by both the PCIT as well as the Tribunal.


TCA.No.335 of 2020 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 29.9.2020 CORAM HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN T.C.A.No.335 of 2020 Commissioner of Income Tax, Chennai ...Appellant Vs Late Shri Vijay Kumar Koganti rep.by legal heir Smt.Brundavani Koganti ...Respondent APPEAL under Section 260A of Income Tax Act, 1961 against order dated 23.10.2019 passed by Income Tax Appellate Tribunal, Chennai D Bench in I.T.A.No.1660/Chny/2019 for assessment years 2014-15. For Appellant : Mrs.R.Hemalatha, SSC Judgment was delivered by T.S.SIVAGNANAM,J This appeal, filed by Revenue under Section 260A of Income Tax Act, 1961 ( Act for brevity), is directed against 1/9 http://www.judis.nic.in TCA.No.335 of 2020 order dated 23.10.2019 passed by Income Tax Appellate Tribunal, Bench D Chennai (for short, Tribunal) in ITA.No.1660/Chny/2019 for assessment year 2014-15. 2. Revenue has filed this appeal by raising following substantial questions of law: 1. Whether, on facts and in circumstances of case, Tribunal was right in holding that assessment order passed under Section 143(3) dated 23.12.2014 was not erroneous and prejudicial to interest of Revenue even though Assessing Officer has failed to make adequate enquiry in original assessment order passed ? and 2. Whether, on facts and in circumstances of case, Tribunal was right in quashing revisional order passed by PCIT under Section 263 of Income Tax Act especially when Assessing Officer had passed order without making proper enquiries and had merely accepted return filed by assessee ? 3. We have elaborately heard Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for appellant Revenue. In view of limited nature of order we propose to pass, appeal itself is 2/9 http://www.judis.nic.in TCA.No.335 of 2020 taken up for final disposal without ordering notice to respondent. 4. original assessee individual died before even order dated 03.1.2009 was passed by Principal Commissioner of Income Tax, Chennai-1 (for brevity, PCIT) under Section 263 of Act. His wife legal heir had come on record and pursued matter by filing appeal before Tribunal, which was allowed by impugned order. 5. original assessee filed return of income for assessment year under consideration namely AY 2014-15 on 31.10.2015 declaring total income of Rs.25,83,290/-. case was selected for scrutiny by issuance of notice dated 27.7.2016 under Section 143(2) of Act, after which, assessee filed necessary information and also appeared in person through his authorized representative. Assessing Officer, after verification, completed assessment by order dated 23.12.2016. Thereafter, PCIT invoked his power under Section 263 of Act on ground that assessment order was erroneous and prejudicial to interest of Revenue and ultimately set aside order for fresh assessment after making due verification vide order dated 03.1.2019. 6. said order dated 03.1.2019 was put to challenge before Tribunal, which was set aside by order impugned in this 3/9 http://www.judis.nic.in TCA.No.335 of 2020 appeal. 7. It is submitted that Tribunal failed to take note that original assessee's financial position was distorted and he camouflaged certain transactions to bring in ostensible source for increase in capital, that shares held by original assessee in M/s.Avanti Leathers Limited, which were shown as source for increase in capital, were actually allotted in financial year 2002-03 to 2007-08 and that same were not disclosed as investment in respective assessment year. It is further submitted that Tribunal failed to take note of fact that PCIT had explicitly brought out in his order under Section 263 of Act that Assessing Officer failed to adequately verify source for increase in capital in finances of assessee and that this would be sufficient to hold that assessment order was erroneous and prejudicial to interest of Revenue. 8. In support of her contentions, learned Senior Standing Counsel appearing for appellant Revenue has placed reliance on (i) decision of Hon'ble Division Bench of Calcutta High Court in case of CIT Vs. Maithan International [reported in [2015] 56 Taxmann.com 283]; (ii) decision of Hon'ble Division 4/9 http://www.judis.nic.in TCA.No.335 of 2020 Bench of this Court in case of Ashok Leyland Ltd. Vs. CIT [reported in (2003) 181 CTR Mad 332]; and (iii) decision of another Hon'ble Division Bench of this Court in case of South India Shipping Corporation Ltd. [reported in (1998) 233 ITR 546]. 9. We have carefully considered submissions made before us and also perused materials placed on record. 10. Hon'ble Supreme Court, in decision in case of Malabar Industrial Co. Ltd. Vs. CIT [reported in (2000) 243 ITR 83], held that for exercise of jurisdiction under Section 263 of Act, it was necessary that order of assessment should be not merely erroneous, but also prejudicial to interest of Revenue. Bearing this legal principle in mind, if we test correctness of order passed by Tribunal, as rightly pointed out by Tribunal, PCIT did not point out anything specifically as to how assessment order dated 23.12.2016 was erroneous. After rendering finding on such aspect, PCIT was required to render finding that it was also prejudicial to interest of Revenue. 11. reason for selecting case for limited scrutiny through CASS was to consider two issues namely were (i) substantial increase 5/9 http://www.judis.nic.in TCA.No.335 of 2020 in capital in year; and (ii) sale consideration of property in income tax return was less than sale consideration of property reported in AIR. These issues were considered by Assessing Officer and after perusal of documents, verification of income tax returns of assessee and making enquiries with limited company where assessee held shares, Assessing Officer came to conclusion. Thus, we find that both issues, which were basis for exercise of powers under Section 263 of Act, were, in fact, issues, which were considered by Assessing Officer in limited scrutiny culminating in order of assessment under Section 143(3) of Act dated 23.12.2016. 12. When PCIT issued show cause notice dated 13.11.2018 calling upon assessee to explain with regard to increase in capital and also conversion of preference shares during relevant years, assessee gave reply dated 02.1.2019. This has been extracted by Tribunal in paragraph 3.2 of impugned order. We find explanation to be cogent and in fact, factual matrix was appreciated by Tribunal to hold that PCIT could not have invoked revisionary jurisdiction under Section 263 of Act mainly on ground that substantial increase in capital investment reflected by assessee in his balance sheet as compared to 6/9 http://www.judis.nic.in TCA.No.335 of 2020 preceding year. Tribunal further pointed out that these issues were raised by Assessing Officer in scrutiny assessment and that assessee had given proper explanation, which was taken note of by Assessing Officer while completing assessment under Section 143(3) of Act. 13. Hence, we find that entire issue is factual and no substantial question of law flows from contention raised by Revenue before us. decision of Calcutta High Court in case of Maithan International, was with regard to genuineness of loan taken by assessee from various creditors and power under Section 263 of Act was invoked on ground that Assessing Officer merely went by bank statements and and letter of confirmation. Court held that Assessing Officer was required to enquire credit worthiness of creditors. No such situation arises in case on hand. Therefore, this decision is not only distinguishable on facts, but also does not render any assistance to Revenue. 14. In decision of Hon'ble Division Bench of this Court in case of Ashok Leyland Ltd., Court had considered factual position and held that assessment order was passed without application of mind by Assessing Officer. In case on hand, no such finding has been recorded by PCIT in order dated 7/9 http://www.judis.nic.in TCA.No.335 of 2020 03.1.2019. Therefore, this decision cannot be applied to facts of present case. 15. decision of Hon'ble Division Bench of this Court in case of South India Shipping Corporation Ltd., was on slightly different issue though matter travelled to Tribunal from order passed under Section 263 of Act. However, ratio of this decision was with regard to manner, in which, Commissioner of Income Tax (Appeals) has to record his final conclusion. In instant case, assessment order is speaking order; so also is order passed by both PCIT as well as Tribunal. Thus, we find that this decision cannot be applied to facts of present case. 16. For all above reasons, we find no question of law, much less, substantial question of law arising for consideration in this appeal. Accordingly, above tax case appeal is dismissed and order passed by Tribunal stands confirmed. 29.9.2020 RS 8/9 http://www.judis.nic.in TCA.No.335 of 2020 T.S.SIVAGNANAM,J AND V.BHAVANI SUBBAROYAN,J RS To Income Tax Appellate Tribunal, Chennai D Bench TCA.No.335 of 2020 29.9.2020 9/9 http://www.judis.nic.in Commissioner of Income-tax, Chennai v. Vijay Kumar Koganti
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