Itat/92/2023 Ia No. Ga/1/2023 Karabi Dealers Private Limited v. Principal Commissioner Of Income Tax 2, Kolkata

OD-5 IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE ITAT/92/2023IA NO. GA/1/2023KARABI DEALERS PRIVATE LIMITEDVs.PRINCIPAL COMMISSIONER OF INCOME TAX 2, KOLKATA BEFORE: THE HON'BLE T. S. SIVAGNANAM ACTING CHIEF JUSTICE ANDTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYADate : 12 APRIL, 2023. Appearance:Mr. Subhas Agarwal, Adv.Mr. Brijesh Kr. Singh, Adv.…for appellantMr. Tilak Mitra, Adv.…for respondent The Court : This appeal by the assessee has been filed under Section260A of the Income Tax Act, 1961 (the Act) against the order dated November2, 2022 passed by the Income Tax Appellate Tribunal “B” Bench, Kolkata inITA No. 389/Kol/2019 for the assessment year 2015-16. The assessee has raised the following substantial questions of law forconsideration:- i)Whether, the Learned Tribunal was justified in law in notquashing the order passed under Section 263 by the PCIT-2,Kolkata when the initiation of revisionary proceedings undersection 263 was done on the basis of proposal from the A.O. ? ii)Whether, on the facts and in the circumstances of the case, theLearned Tribunal was justified in upholding the order passedunder section 263 of the PCIT-2, Kolkata when the A.O. hadpassed the assessment order after due verification/enquiry onthe issue which were under consideration by the LearnedCommissioner in revisionary proceedings? iii)Whether, on the facts and in the circumstances of the case, theorder passed by the Learned Tribunal is perverse? We have heard Mr. Subhas Agarwal, learned Counsel for theappellant/assessee duly assisted by Mr. Brijesh Kr. Singh, learned Advocateand Mr. Tilak Mitra, learned standing Counsel for the respondent/revenue. The short issue which falls for consideration is whether the PrincipalCommissioner of Income Tax –2, Kolkata (PCIT) was justified in exercising hispower under Section 263 of the Act. On perusal of the order passed underSection 263 of the Act, it is seen that the proceedings were initiated based ona proposal received by the assessing officer. The PCIT would observe that onperusal of the said proposal of the assessing officer, prima facie, it appearsthat the assessing officer has failed to take a logical action on the informationavailable with him. The statute is very clear that unless and until the twinconditions are satisfied that assessment order should be erroneous and itshould be prejudicial to the interest of revenue, the power under Section 263cannot be invoked. Turning back to the facts of the case, we find that the assessing officer has specifically recorded in the assessment order dated21.09.2017 under Section 143(3) of the Act that during the course ofassessment proceedings, the assessee was asked to explain the books ofaccounts, bills and vouchers and the authorised representative of theassessee filed the relevant documents in detail with many explanations whichwere examined by the assessing officer and verified with the books ofaccounts and the heard copies of the ITR and audited accounts andthereafter, the assessment was completed. From the notice issued underSection 142(1) of the Act dated 16.08.2017, it is seen that as many as 21particulars/documents were called upon to be produced by the assessee ofwhich the document/observations in item No. 20-21 are relevant for thepurpose of this case, they being (i) large increase in investment in unlistedequities during the year and (ii) low income in comparison to very highinvestment. It is seen that first issue on which the information was called for by theassessing officer has not been taken as a ground by the PCIT while assumingjurisdiction under Section 263 of the Act. Thus it has to be seen as towhether assessee had furnished the requisite information with regard to thesecond issue namely low income in comparison to very high investments.The assessee had placed before the assessing officer many submissions inwhich the detail explanation has been given with regard to the said issueapart from placing reliance on various decisions of the Hon’ble Supreme Court as well as the High Courts. Apart from that, a separate reply had alsobeen given on 21.09.2017 dealing with all the twenty-one issues. Thus itcannot be said that assessing officer did not conduct any enquiry in thematter with regard to the issue on which the PCIT had exercised jurisdictionunder 263 of the Act. It may be true that a proposal had been received by thePCIT from the assessing officer. However, solely based on the proposal, actioncould not have been initiated under Section 263 of the Act as the statutemandates that PCIT should enquire and be satisfied that the case warrantsexercise of its jurisdiction under Section 263 of the Act. Such satisfactionshould be manifest in the show-cause notice which is issued under Section263 of the Act. However, we find in the instant case the word used by thePCIT is “prima facie”. Thus based on prima facie view the PCIT accepted theproposal of the assessing officer and initiated action under Section 263 of theAct. The decisions of the Hon’ble Courts on the point clearly holds that thesatisfaction of the PCIT is essential. Though the Tribunal has knowledge ofthose facts as also the order sheet maintained by the assessing officer whichrecords that on 19.09.2017 the authorised representative of the assessee hadappeared and produced the books of accounts, bills vouchers etc and theywere test checked and the case was discussed with the authorisedrepresentative of the assessee. If that be so, it could not have been stated thatthere was any lack of enquiry on the part of the assessing officer. That apart,the Tribunal also admits that a paper book containing 124 pages ofdocuments were also placed. Thus it is a case where the assessing officer had raised specific query and the case was discussed with the authorisedrepresentative of the assessee and thereafter decision has been taken. Similarissue was considered by this Court in the case of PCIT 9, Kolkata Vs. ReetaLakmani; ITAT No. 129 of 2022 etc. dated 22.11.2022 and in PCIT 9 Vs.Satish Kumar Lakmani ; ITAT No. 112 of 2022 dated November 22, 2022.Though one of the decisions of this Court has been noted by the Tribunal, thereason assigned by the Tribunal for distinguishing the decision cannot becountenanced. Thus in absence of any satisfaction recorded by the PCIT thatthe order of assessment was both erroneous and prejudicial to the interest ofrevenue, the Tribunal ought to have granted relief to the assessee andfaltered the PCIT for having exercised its jurisdiction. For the above reason, the appeal filed by the assessee is allowed andthe order passed by the Tribunal as well as the PCIT is set aside and theassessment order stands restored and the substantial questions of law areanswered in favour of the appellant/assessee. (T. S. SIVAGNANAM)ACTING CHIEF JUSTICE (HIRANMAY BHATTACHARYYA, J.)