Commissioner Of Income Tax -I Jabalpur vs M/S Khalsa Wine Traders,Chhindwara

Vivek Rusia, J

This appeal under section 260-A of the Income Tax Act has been filed by the appellant (Commissioner of Income Tax-I, Jabalpur) against the order dated 11.12.2002 passed by the Income Tax Appellate Tribunal, Jabalpur (for short "ITAT") in ITA No.102/JAB/2002 [M/s.Khalsa Wine Traders Vs. JCIT (Asstt.)] in respect of assessment year 1997-98.

Facts of the case, in short, are as follows:-

The respondent/assessee was engaged in the business of country liquor and Indian made foreign liquor. The respondent/assessee submitted its ITR return declaring its income of Rs.18,09,270/- on 11.2.1998. The firm was called upon to furnish the Tax Audit Report alongwith Trading, Profit & Loss Account and Balance Sheet. The return of income was processed under section 143(1)(a) of the Income Tax Act on 24.2.1998, followed by issuance of notice under sections 143(2) & 142(1) of the Income Tax Act. In response to the notice, the Tax Consultant/Advocate appeared with the documentary evidence. The Assessing Officer passed the final Assessment Order on 16.3.2000.

The Commissioner of Income Tax-I, Jabalpur, found the assessment order prejudicial to the interest of the revenue, hence invoked the provision of section 263 of the Income Tax Act by issuing notice to the respondent/assessee to afford an opportunity of hearing. Thereafter, vide order dated 27.3.2002, the Commissioner of Income Tax cancelled the assessment order and remanded the matter with direction to pass a fresh assessment order. The Commissioner of Income Tax was of the opinion that the Assessing Officer did not enter the exercise of examining the genuineness of cash credit within the meaning of section 68 of the Income Tax Act, which casts an obligation to record satisfaction as regards the genuineness of credit entries in the books of account. The Commissioner of Income Tax also noticed an unsecured loan transactions which have wrongly been accepted without any investigation by the Investigating Officer.

Being aggrieved by the order passed by the Commissioner of Income Tax, the respondent/assessee approached the ITAT, Jabalpur. Vide order dated 11.12.2002, the learned Tribunal has set aside the order passed by the Commissioner of Income Tax. Hence, this appeal is before this Court.

Vide order dated 23.6.2003, this appeal has been admitted on the following substantial question of law:-

"Whether in the facts and circumstances of the case, the Tribunal was justified in setting aside the order of CIT (Appeals) passed under section 263 of the Income Tax Act, 1961, more so, when there was ample material to arrive at the conclusion which has been arrived at by the competent authority under the statute?"

Learned counsel for the appellant submitted that the learned ITAT has restricted the scope for interference with the order of the Commissioner of Income Tax, without properly appreciating and discussing the considerations made by the record of the CIT. Section 263 of the Income Tax Act gives wide power to the Commissioner of Income Tax to set aside, enhance, modify or cancel the order of assessment and direct the making fresh assessment. On 03.3.2020, Shri Purohit, learned senior counsel appearing for the respondent, raised an objection that the tax effect is approximately Rs.33 lacs; therefore, the amount involved in this appeal is below the tax limit, and hence, the appeal is liable to be dismissed.

Learned counsel for the appellant, after seeking instruction from the department submitted that the tax effect is not liable to be considered because this is a case under section 263 of the Income Tax Act, which is exempted under the notification dated 15.3.2024.

Appreciation & Conclusions

The Assessing Officer passed the assessment order in favour of the assessee. Learned counsel appearing for the assessee submitted that it is a case under section 263 of the Income Tax Act; therefore, paragraph 3.1(f) of the aforesaid notification will apply in this case. Admittedly, the Assessing Officer had assessed the income of Rs.18,48,023/-, and the CIT vide order dated 27.3.2002 did not assess the income and only remanded the matter back. Therefore, the tax effect is uncertain in this appeal. Shri Purohit, learned senior, has also not provided any source of information for declaring tax effect below Rs.33 lacs. Hence, in view of paragraph 3.1 of the aforesaid notification dated 15.3.2024, the appeal is not liable to be dismissed.

The Assessing Officer has passed the assessment order on 16.3.2000. Thereafter, the Commissioner of Income Tax has set aside the assessment order vide order dated 27.3.2002 and remanded the matter back. Thereafter, an appeal was preferred, which remained pending and was finally decided, in which the order of remand passed by the CIT has been quashed. Thereafter, the instant appeal was filed in the year 2003. Since then, it has been pending before this Court i.e., for a period of more than 28 years, since the date of passing of the assessment order. If this appeal is allowed, then the entire proceeding under section 143A of the Income Tax Act would be initiated afresh in respect of the assessment year 1997-98. Income Tax laws have undergone a profound change. There is no finding recorded by the CIT. The satisfaction recorded by the Assessing Officer was liable to be taken as prejudiced to the revenue, even if the same is erroneous.

As per language of sub-section (1) of Section 263 of the Income Tax Act, even if an order is erroneous, the same is not liable to be interfered with in revisional jurisdiction only to the extent it is prejudicial to the interest of revenue. Merely, there is a difference of opinion between the Assessing Officer and the Commissioner; the entire assessment order is not liable to be set aside, modified or remanded only by observing that it is detrimental to the interest of revenue. Therefore, CIT was required to record reasons as to the extent to which the order is prejudicial to the interest of the revenue. There is no observation about income disclosed in the assessment order by the Assessing Officer in the assessment year 1997-98. The net profit as per the P&L Account is Rs. 18,03,936/- in the assessment year 1997-98. The Commissioner has doubts about the source of funds invested by the 19 partners in the Firm. Without indicating the exact source of income, the Assessing Officer called upon the account books of partners and examined the same. Now, in section 68 of the Income Tax Act it has been introduced by way of proviso that explanation offered by the assessee shall be deemed to be not satisfactory unless the person in whose name such credit is recorded in the books of such assessee also offers and explanation about the nature and source of such sum so credited; and such explanation in the opinion of the Assessing Officer is satisfactory.

Even otherwise, it is not a case of cash credit, but it is a case where the partners, by investing their money, constituted a Firm. Out of 19 (nineteen), 05 partners had invested cash credit in their account and were credited to the tune of Rs. 1,08,18,100/- in their capital account, and in the course of assessment proceedings, the Assessing Officer did exercise and examine the genuineness of the cash credit. The account of the books of Sardar Charanjeet Singh was examined. He is also in the business of the liquor trade. Therefore, looking at the nature of business from where the amount was transferred from one firm to another firm engaged in the same business, the satisfaction of the Assessing Officer was not liable to be interfered with by the ITAT in the garb of section 263. We do not find that any question of law is liable to be answered in favour of the revenue .

In the result, the appeal is dismissed.