C.M. Buildcon Pvt. Ltd. vs Pr.CIT-2, Delhi – Appeal Against Revision Order (Assessment Year 2009-10) – ITA No. 6202/DEL/2019

Case Summary: C.M. Buildcon Pvt. Ltd. vs Pr.CIT-2, Delhi

Case Number: ITA 6202/DEL/2019

Appellant: C.M. Buildcon Pvt. Ltd., Delhi

Respondent: Pr.CIT-2, Delhi

Assessment Year: 2009-10

Date of Filing: 22nd July 2019

Order Type: Final Tribunal Order

Date of Order: 14th June 2023

Date of Pronouncement: 14th June 2023

Background of the Case

The case involves M/s C.M. Buildcon Pvt. Ltd., a closely held company engaged in the real estate business, and the Principal Commissioner of Income Tax (Pr. CIT)-2, Delhi. The dispute arose from the revision order issued by the Pr. CIT under section 263 of the Income Tax Act, 1961, for the assessment year 2009-10. The appellant contested this order, arguing that the Assessing Officer (AO) had already examined the relevant issues during the reassessment proceedings, and there was no basis for the Pr. CIT to invoke section 263.

Initially, the appellant filed its income tax return on 16th September 2009. The case was later reopened under section 147 of the Act based on documents seized during a survey on M/s Cardio Technovention. The documents suggested that C.M. Buildcon Pvt. Ltd. allegedly paid cash of Rs. 5,73,183 to M/s Cardio Technovention for the reversal of an entry as commission received through proper banking channels. The reassessment concluded with the returned income, but the Pr. CIT issued a notice under section 263, arguing that the AO had not thoroughly examined the issue.

Grounds of Appeal

The appellant raised several grounds of appeal against the revision order:

1. The Pr. CIT erred in holding that the AO did not apply his mind to the impounded material during the survey of a third party, despite the AO addressing the issue throughout the assessment proceedings.
2. The Pr. CIT issued the direction under section 263 without making any inquiry or showing cause, making the order unsustainable.
3. Even if it is assumed that the cash was paid for obtaining cheques for the reversal of commission, there is no loss to revenue as the amount was already accounted for in the appellant’s books and credited to the profit and loss account.
4. The appellant reserved the right to add, alter, modify, or delete any of the grounds of appeal.

Tribunal Proceedings

The case was heard by the Income Tax Appellate Tribunal (ITAT) Delhi Bench ‘B’ on 23rd May 2023, with the order pronounced on 14th June 2023. The tribunal comprised Shri Anil Chaturvedi, Accountant Member, and Shri Anubhav Sharma, Judicial Member. The appellant was represented by Dr. Rakesh Gupta, Sh. Deepesh Garg, and Sh. Shrey Jain, Advocates, while the Revenue was represented by Sh. Javed Akhtar, CIT-DR.

Appellant’s Arguments

The appellant’s counsel argued that the issue of the alleged cash payment to M/s Cardio Technovention was thoroughly examined during the reassessment proceedings. The AO issued a notice under section 148 based on the allegation and conducted a detailed inquiry. The appellant provided a ledger account, invoices, and an affidavit from M/s Cardio Technovention’s partner, denying any cash payment. The AO, satisfied with the explanations and evidence, completed the reassessment at the returned income.

The appellant’s counsel further argued that the Pr. CIT’s reliance on the seized documents was misplaced, as the documents were not confronted with the appellant, and the affidavit provided by M/s Cardio Technovention should have been considered valid evidence. The counsel cited several judicial precedents to support their position that the AO had conducted a proper inquiry and the Pr. CIT’s invocation of section 263 was unwarranted.

Revenue’s Arguments

The Revenue’s representative, on the other hand, supported the Pr. CIT’s order, arguing that the AO had not conducted a thorough examination of the issue. The Pr. CIT had correctly invoked section 263 to ensure that the assessment order was not erroneous or prejudicial to the interests of the Revenue.

Tribunal’s Decision

After hearing both parties and perusing the records, the ITAT found merit in the appellant’s arguments. The tribunal noted that the AO had indeed examined the issue during the reassessment proceedings and had obtained an affidavit from M/s Cardio Technovention, denying any cash payment. The tribunal held that the Pr. CIT had erred in invoking section 263 without adequately rebutting the evidence provided by the appellant.

The tribunal emphasized that an affidavit, although not considered ‘evidence’ under the Indian Evidence Act, 1872, holds value in quasi-judicial proceedings if accepted by the authority. The ITAT concluded that the Pr. CIT had wrongly set aside the reassessment order based on an incomplete understanding of the facts and evidence.

Consequently, the tribunal quashed the Pr. CIT’s revision order under section 263, thereby allowing the appeal in favor of C.M. Buildcon Pvt. Ltd.

Conclusion

The ITAT’s ruling in the case of C.M. Buildcon Pvt. Ltd. vs Pr.CIT-2, Delhi serves as an important precedent in matters involving the invocation of section 263 of the Income Tax Act. The tribunal’s decision highlights the importance of thorough examination and due process in reassessment proceedings, as well as the weight that should be given to affidavits and other evidence provided by the assessee. This case reaffirms the principle that revisionary powers under section 263 should be exercised with caution and only when there is clear evidence of error or prejudice to the Revenue.

Order Pronounced: The appeal of the assessee, C.M. Buildcon Pvt. Ltd., is allowed, and the revision order under section 263 is quashed.

C.M. Buildcon Pvt. Ltd. vs Pr.CIT-2, Delhi – Appeal Against Revision Order (Assessment Year 2009-10) – ITA No. 6202/DEL/2019