Appeal of Anil Kapoor Film Co. Pvt. Ltd dismissed by ITAT

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Appeal of Anil Kapoor Film Co. Pvt. Ltd dismissed by ITAT

Appeal of Anil Kapoor Film Co. Pvt. Ltd dismissed by ITAT

Facts & views:

The assessee is in the business of producing feature films/TV serials, declared nil income/loss from the business in its return filed on 26/11/2014. Notice under section 143(2) dated 01/09/2015 and subsequently, notice under section 142(1) of the Act, alongwith questionnaire, were issued/served upon the assessee. The assessee attended the proceedings from time to time and filed part details. The assessment was framed under section 143(3) of the Act on 29/12/2016. The ld. Pr. Commissioner observed that the assessee claimed to have obtained loan from one “Anubhav Vinimay” amounting to Rs.2 crores and the confirmation of the loan transactions were furnished on 27/12/2016 and the assessment order was passed on 29/12/2016 itself.

It was observed by the Ld. Pr. CIT that the creditworthiness/genuineness of the transactions of the lender was never verified/examine by the ld. Assessing Officer and even in the loan confirmation documents, the address of the lender is not mentioned and further the assessee company neither filed the return of income of M/s Anubhav Vinimay Pvt. Ltd. nor the bank statement. It was further observed that the Ld. Assessing Officer raised any query with respect to the genuineness of the loan, therefore, the assessment was held to be erroneous and prejudicial to the interest of the Revenue, accordingly, a show cause notice was issued and on consideration of submissions of the assessee, it was observed as under :-

  1. The order is passed without making inquiries or verification which should have been made;
  2. The order is passed allowing any relief without inquiring into the claim;

iii. The order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or iv. The order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.”

In view of the above, the Ld. Pr. CIT observed that the Ld. Assessing Officer should have made enquiries/verification, to satisfy himself with respect to the creditworthiness of the lender and genuineness of the transactions before framing the assessment, thus, the ld. Assessing Officer was directed to pass fresh assessment order after providing due opportunity of being heard to the assessee. Even in the direction by the Ld. Pr. Commissioner to the Assessing Officer is not going to cause any prejudice to the assessee because the direction has been issued to the Ld.

Assessing Officer to examine the genuineness of the loan and after providing due opportunity of being heard to the assessee, the assessment be reframed.

The assessee is at liberty to substantiate its claim, thus, we don’t find any infirmity in the impugned order, resultantly, the appeal of the assessee is without any merit, consequently, dismissed.

Finally, the appeal of the assessee is dismissed.

The key observation by the ITAT were as under:

  1. Admittedly, an incorrect assumption of fact or an incorrect application of law would satisfy the requirement of order being erroneous u/s. 263 of the Act. The phrase “prejudicial to the interest of the Revenue” u/s. 263, has to be read in conjunction with the expression “erroneous” order by the Assessing Officer. Every loss of Revenue as a consequence of assessment order cannot be termed as prejudicial to the interest of Revenue, meaning thereby, “prejudice” must be prejudice to the Revenue administration.
  1. The object of the provision is to raise revenue for the state and section 263 is enabling provision conferring jurisdiction upon the Commissioner to revise the order. The provision is intended to plug the leakage of the revenue by the erroneous and prejudicial order.
  1. The different shades of power conferred on different authorities under the Act has to be exercised within the areas specifically delineated by the Act and the exercise of power under one provision cannot trench upon the powers available under another provision of the Act. In this regard, it must be specifically noticed that against an order of assessment, so far as the Revenue is concerned, the power conferred under the Act is to reopen the concluded assessment under Section 147 and/or to revise the assessment order under Section 263 of the Act. The scope of the power/jurisdiction under the different provisions of the Act would naturally be different. The power and jurisdiction of the Revenue to deal with a concluded assessment, therefore, must be understood in the context of the provisions of the relevant Sections noticed above. While doing so it must also be borne in mind that the legislature had not vested in the Revenue any specific power to question an order of assessment by means of an appeal.
  2. In the case on hand, the CIT has assumed jurisdiction by issuing show cause notice u/s 263 but while passing the final order he relied on various other grounds for coming to the final conclusion. This itself makes the revision order bad in law and also violative of principles of natural justice and thus not maintainable. If, during the course of revision proceedings the CIT was of the opinion that the order of the AO was erroneous on some other grounds also or on any additional grounds not mentioned in the show cause notice, he ought to have given another show cause notice to the assessee on those grounds and given him a reasonable opportunity of hearing before coming to the conclusion and passing the final revision order. In the case on hand, the CIT has not done so. Thus, the order u/s 263 is violative of principles of natural justice as far as the reasons, which formed the basis for the revision but were not part of the show cause notice issued u/s 263 are concerned. The order of the CIT passed u/s 263 is therefore liable to be quashed insofar as those grounds are concerned.

The copy of the judgment is produced hereunder:

INCOME TAX APPELATE TRIBUNAL, MUMBAI

Anil Kapoor Film Co. P.Ltd, Mumbai vs Pr.Cit-16, Mumbai on 31 December, 2018

   आयकर अपील य अ धकरण, मुंबई  यायपीठ, ‘ए’,मुंबई।

  IN THE INCOME TAX APPELLATE TRIBUNAL

  MUMBAI BENCHES “A”, MUMBAI

               ी जो ग दर संह, उपा य  एवं

          ी एन. के.  धान, लेखा सद य, के सम

     Before Shri Joginder Singh, Vice President, and

         Shri N.K. Pradhan, Accountant Member

                ITA NO.5015/Mum/2018

                 Assessment Year: 2014-15

M/s Anil Kapoor Film                    Pr.CIT-16

Co. Pvt. Ltd                   बनाम/    Room No.442

Flat No.101, Shernaz                    Aaykar Bhavan, M.K.Road

Society, Juhu Tara Road        Vs.      Mumbai-400 020

Mumbai-400 049

   (#नधा$%रती

          /Assessee)                         (राज व /Revenue)

P.A. No.AAECA8464H

  #नधा$%रती क  ओर से / Assessee by Shri Ratan Samal & Ms.

                                   Ruchi M. Rathod-AR

   राज व क  ओर से / Revenue by Shri Rajeshwar Yadav-DR

  ु वाई क* तार+ख / Date of Hearing :

 सन                                              05/11/2018

 घोषणा क* तार+ख/Date of Pronouncement            31/12/2018

                      आदे श / O R D E R

Per Joginder Singh (Vice President)

       The assessee is aggrieved by the impugned order dated

08/08/2018 of the Ld. Pr. Commissioner of Income Tax,

Mumbai, invoking revisional jurisdiction under section 263 of

the Income Tax Act, 1961 (hereinafter the Act).

2. During hearing, the ld. counsel for the assessee,

 Shri Ratan Samal along with Ms. Ruchi M. Rathod, claimed

that necessary evidences/details were filed before the Ld.

Assessing Officer and the genuineness of the transactions

was proved. The Ld. counsel invited our attention to various

pages of the paper book and relied upon the decision in CIT

 

vs Kwality Steel Suppliers Complex 395 ITR 1(Supreme

Court), CIT vs Dwarkadhish Investment Pvt. Ltd. & Ors.

(2011) 330 ITR 298(Del.) and CIT vs Vikas Polymers ITR

3/1991, order dated 16/08/2010.

2.1.       On the other hand, Shri Rajeshwar Yadav, ld. CIT-

DR, strongly defended the impugned order by explaining that

first of all a certificate has been filed by the assessee in the indexed paper book by explaining that so far as page-10 of

the paper book is concerned, the loan confirmation and bank

statement/balance-sheet of loan transactions were only filed

before the Assessing Officer and the balance sheet copies of

Assessment Year 2014-15 of the lender M/s Anubhav Vimaya

Pvt. Ld., copy of balance sheet of 2015-16 reflecting 50% of

the receipt of loan from the assessee, bank statement of the

lender i.e. M/s Anubhav Vimaya Pvt. Ld. showing receipt of

Rs.1 crore were not filed before the Ld. Assessing Officer.

This claim of the Ld. CIT-DR was not confronted by the Ld.

counsel for the assessee. It was also explained by the ld. CIT- DR that no proper application was made before the ld.

Assessing Officer and the documents filed before the Ld.

Commissioner of Income Tax (Appeal), for the first time is an

additional evidence and the ld. Assessing Officer could not

examine the authenticity of the same. From the page-12 of

the paper book, it was explained that these documents were

filed only before two days from passing the assessment order

and there is no application of mind by the Ld. Assessing

Officer. Our attention was further invited to page-78 of the

paper book by arguing that certain entries needs verification

as the source of Rs.2 crore was not established by the

assessee. It was pleaded that the assessment order was

pssed on 29/12/2016, whereas confirmation was filed on

27/12/2016, thus, how the Assessing Officer can verify the

genuineness of the transactions and even the details are

without address. It was pointed out that there is no finding of the Ld. Assessing Officer with respect to examination of

source. The crux of the argument is that standard operating

procedure was not even followed by the ld. Assessing Officer,

therefore,    it   is   covered   under   sub-section    (a)(b)(e)of explanation 263 of the Act. It was pleaded that the cases relied upon by the assessee are not applicable to the facts of the present appeal and even the Assessing Officer did not raise any query with respect to the claimed loan as there is no whisper of the same in the assessment order. At this stage, a query was raised by the Bench whether there is

discussion in the assessment order with respect to taking

loan, the ld. counsel for the assessee fairly agreed that “YES”, there is no whisper.

2.2.         We have considered the rival submissions and

perused the material available on record. Before adverting

further, it is our bounded duty to examine section 263 of the

Act, which is reproduced hereunder for ready reference and

analysis:-

     “263. (1) The Principal Commissioner or Commissioner may

     call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.

Explanation 1.]–For the removal of doubts, it is hereby

declared that, for the purposes of this sub-section,–

(a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include–

  1. i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner undersection 144A;

 (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director

     General or Director General or Principal Commissioner or

     Commissioner authorised by the Board in this behalf

     under section 120;

(b) “record” shall include and shall be deemed always to have

     included all records relating to any proceeding under this Act available at the time of examination by the Principal

     Commissioner or Commissioner;

(c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have      extended to such matters as had not been considered and     decided in such appeal.

 [Explanation 2.–For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner,–

  (a) the order is passed without making inquiries or verification which should have been made;

  (b) the order is passed allowing any relief without inquiring into the claim;

  (c) the order has not been made in accordance with any order,direction or instruction issued by the Board under section 119;

     or

  (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the

jurisdictional High Court or Supreme Court in the case of the

assessee or any other person.]

(2) No order shall be made under sub-section (1) after the

     expiry of two years from the end of the financial year in whichthe order sought to be revised was passed.

(3) Notwithstanding anything contained in sub-section (2), an

order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of,or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, National Tax Tribunal, the High Court or the Supreme Court.

Explanation.–In computing the period of limitation for the

purposes of sub-section (2), the time taken in giving an

opportunity to the assessee to be reheard under the proviso

to section 129 and any period during which any proceeding

under this section is stayed by an order or injunction of any

court shall be excluded.”

2.3. If the aforesaid section is analyzed, it speaks about

the powers of the Ld. Pr. Commissioner or the Commissioner

to consider whether the assessment order is erroneous in so

far as prejudicial to the interest of Revenue and after giving

opportunity of being heard and he make such enquiry as he

deems necessary and pass such order thereon as the

circumstances of the case so justify including, enhance and

modifying the assessment or canceling the assessment and

directing a fresh assessment. It has been further explained

with the insertion of Explanation-2 inserted by the Finance

Act, 2015 w.e.f. 01/06/2015.

Undisputedly, the Ld. Commissioner served upon the assessee a show cause notice dated 28/06/2018 as to why the assessment framed under section 143(3) of the Act should not be revised or modified.

The assessee vide letter dated 03/08/2018 filed written

submissions. Before the Ld. Pr. Commissioner, the assessee

submitted that the Ld. Assessing Officer duly examined the

issue involved, raised appropriate queries, called for relevant details and on examination of such details allowed relief to the assessee. Identical plea was raised before this Tribunal.

2.4.      Now, we shall deal with the cases and the ratio laid

down therein and also some other cases which are available

on the issue in hand, so that we can reach to a justifiable

conclusion. Before this Tribunal, the assessee has relied

upon the decision of Kwality Steel Suppliers Complex

((Supra)), the issue is with respect to dissolution of the firm owing to death of the partner, therefore, it is on different facts. Even in the case of Dwarkadhish Investment Pvt. Ltd. ((Supra)), the facts are with respect to cash credit under section 68 of the Act, wherein, it was held that the initial burden is upon the assessee to prove identity of creditors. In the case of CIT vs Vikas Polymers ((supra)), on going through the assessment record of the assessee, it was found by the Ld. Commissioner that the Ld. Income Tax Officer did not enquire into the genuineness of the capital investment of the two partners. The reply of the assessee was that Smt. Ratni Devi is an existing assessee and her assessment was

completed after due verification of the investment. Identical is the situation for other persons. In that situation, the Hon’ble High Court reached to a particular conclusion, whereas, in the case of the present assessee, the genuineness and source of loan was not examined by the ld. Assessing Officer and even there is no whisper in the assessment order with respect to issue in hand, therefore, the cases relied upon by the assessee may not help the assessee. It is a clear case that the assessment order was framed in a slip shot manner and without application of mind, therefore, the assessment order is erroneous as well as prejudicial to the interest of Revenue.

2.5       In another decision in Narayn Tatu Rane vs

Income Tax Officer (2016) 70 taxman.com 227 (Mum. Trib.).

In this case, since, the commissioner had not brought any

material on record to substantiate the inference and merely

passed the revisional order only to carry out fishing and

roving enquiries with objective of substituting his view with

that of the Assessing Officer, in that situation the

revisional order was held to be not justified, whereas, it is not so in thepresent appeal.

2.6.      In the case of M/a Amira Enterprises Ltd. vs Pr.

 

CIT (ITA No.3206/Del./2017), the business of the assessee

was trading of rice. It was found by the Tribunal that the Pr.

CIT himself did not take any enquiry to reach to a conclusion

that the assessment order is erroneous and prejudicial to the

interest of Revenue. In that situation, a particular view was

taken, therefore, this decision may not help the assessee.

2.7.         Likewise, in the case of M/s Indus Best Hospitality vs Pr. CIT (ITA No.3125/Mum/2017), the bench relied upon the decision from Hon’ble jurisdictional High Court in the case of CIT vs Nirav Modi 390 ITR 292. The issue was whether the Ld. Assessing Officer examined the gift received by the assessee and accepted the same as genuine. No

enquiry was caused by the ld. CIT to find out whether the

Assessing Officer was satisfied with respect to correctness of

the claim of the assessee whether erroneous. In that

situation, the bank took a decision.

2.8.  So far as, the case of Metacaps Engineering and

Mahendra  Construction  COMPANY(J.V.)    (2017)86 taxman.com 128 (Mum. ITAT) is concerned, therein the assessee was awarded as civil construction contract of a project. As the assessee had insufficient capital and infrastructure,    it   sub-contracted      the    project       to      sub-contractor    ‘Urja”    on   back    to   back    basis.     The       entire responsibility and completion of contract was taken over by the sub-contractor. Revisional jurisdiction was invoked mainly on the ground of excessive expenses on labour

payment, etc. In that situation, a particular view was taken.

2.9.      There are certain decisions, which favour of the

case of the Revenue and one such decision is Arvee

International vs Addl. CIT (2006) 8 SOT 452 (Mum. Trib.),

wherein, the assessment was framed without application of

mind. It was held that mere allegation that Assessing Officer

has taken a view in the matter will not put the matter beyond

the purview of section 263 unless the view so taken by the

Assessing Officer is a judicial view based on proper enquiry

and legal aspect.

2.10.     In the case of Horizon Investment Company Ltd. vs

CIT (ITA No.1593/Mum/2013), wherein, it was clear that

there was a lack/absence of enquiry by the Assessing Officer,

therefore, the jurisdiction in relation to deduction of the

said expenditure was held to be validly assumed.

2.11.     In the case of CIT vs I.C.I. India Pvt. Ltd. 139 ITR

105 (Cal.), it was held as under:-

“An expenditure may not be an allowable deduction under section 10(2)(v ) of 1922 Act on the ground that the repairs are not current repairs and yet, it may be allowed under section 10(2)(xv) of 1922 Act provided its conditions are fulfilled.

In the instant case, merely because some columns and beams were repaired by the company it did not necessarily follow that the expenditure incurred on it was in the nature of a capital expenditure.

That apart, it was not the finding of the Tribunal in the instant case that any structural alteration was made. By a mere patch work, the building would have lasted only for 5 to 10 years and the money that would have been spent in it would have been a complete waste.

Therefore, plastering of certain portions of the concrete works with cement and some columns and beams by the process of guniting became absolutely essential. No doubt, that process had extended the life of the “building” by many more years, but not exceeding its original life. Further, the repairs had not improved in original condition. It was an admitted fact that the building needed an extensive repair. The company had, no doubt, made extensive repairs by incurring a huge expenditure. But the magnitude of repair went with the

magnitude of wear and tear, and not with the question as to

whether the expenditure incurred in it was a capital or a revenue expenditure. The quantum of expenditure by itself was also not a determining factor.Where a building needs repair, it is not for the taxing authorities but for its owner to decide how and in which manner, process or appliances it is to be carried out including the extent of its repair and the expenditure to be incurred on it. Even where structural

repairs are carried out, the expenditure incurred on it is not

necessarily a capital expenditure, for every repair, if properly done,must, as a matter of course, improve the condition of the building.

The object and the purpose of every repair is to improve the bad condition of the building, to prevent its further deterioration as far as possible and to keep it wind and water-tight. So long the repair does not bring into existence an additional advantage or benefit of an enduring nature or change the nature, character or the identity of the building itself, the expenditure must be regarded as a revenue

expenditure. On the other hand, if it does, it will be in the nature of a capital expenditure. Guniting is nothing but a modern process of plastering by a machine. The company had used this modern p

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