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 :-
- The order is passed without making inquiries or verification which should have been made;
- 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:
- 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.
- 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.
- 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.
- 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
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
/Assessee) (राज व /Revenue)
#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 :
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
“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–
- 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;
(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