Appellant: Delhi Gurgaon Super Connectivity Ltd., New Delhi
Respondent: Pr.CIT- 2, New Delhi
Assessment Year: 2014-15
Result: Appeal Allowed
Case Filed On: 2019-05-23
Order Type: Final Tribunal Order
Date of Order: 2020-10-13
Pronounced On: 2020-10-13
The case revolves around M/s Delhi Gurgaon Super Connectivity Ltd. (the assessee/the appellant) filing an appeal against the order passed by The Commissioner Of Income Tax, Central – II, New Delhi dated 29th of March 2019 under Section 263 of The Income Tax Act [The Act] in respect of the assessment order passed under Section 143 (3) of the Act dated 31st December 2016 for the assessment year 2014-15. The Assistant Commissioner Of Income Tax, Central Circle – 14, New Delhi (The Learned AO) deemed the order to be erroneous and prejudicial to the interest of the revenue. Consequently, the learned CIT set aside the assessment order and restored the assessment proceedings back to the file of the learned assessing officer, directing him to examine the genuineness of the transaction amounting to ₹514,453,415 on account of sundry creditors and conduct proper enquiries and investigation regarding the issue. The assessee was aggrieved by this decision and raised multiple grounds of appeal.
The assessee is a company engaged in maintaining toll plazas and collecting toll. The assessee signed an agreement with the National Highway Authority of India on 18th April 2002 for converting the Delhi Gurgaon Section of National Highway – 8 into an access-controlled 8/6 lane highway from kilometer 14.32 to km 42. The assessee filed its return of income on 29th December 2016 declaring income of Rs. Nil. The case was selected for scrutiny by issuing various notices under Sections 143 (2) and 142 (1) of the Act. Initially, the assessee did not submit the requisite details, but subsequently, the details were submitted. Upon examination of the profit and loss account, the AO noted a decline in revenue from operations compared to the previous year, along with an increase in various expenses. Consequently, 20% of the expenses were disallowed, resulting in an addition of ₹24,083,797. The assessment was made at a total loss of ₹23,536,058 against the returned income of a loss of ₹476,19,855.
The Commissioner Of Income Tax examined the assessment order and observed that it was completed without proper examination and verification of relevant issues, and that the provisions of the Act were not properly applied. The AO allowed the sundry creditors without proper examination and verification, leading to the issuance of a show cause notice under Section 263 of the Act on 28th January 2019.
“On perusal of the assessment record, it is found that as per the balance sheet, the assessee has shown an amount of ₹514,453,415 as sundry creditors. Out of a total of 70 entities in the list of sundry creditors, only one entry of ₹4,65,86,911 was verified and found bogus, therefore verification of sundry creditors was required because the assessee’s business income was from toll collection, which is a cash-generating business and generally there is no reason/scope for increased accumulation of sundry creditors. In any case, the total amount of sundry creditors was not verified by the AO, not even on a simple check basis.”
The assessee submitted that it was assessed under Section 143 (3) of the Act. During the assessment proceedings, all the information called for was furnished and duly verified by the AO. The details of sundry creditors were furnished and verified, and the AO found them satisfactory as no further enquiry was raised. Therefore, the order passed by the AO was neither erroneous nor prejudicial to the interest of revenue, and hence the order under Section 263 of the Act should not be passed.
The CIT rejected the assessee’s explanation and passed an order under Section 263 of The Income Tax Act, holding that the assessment order passed by the AO was erroneous and prejudicial to the interest of revenue. The AO was directed to examine the genuineness of transactions amounting to ₹514,453,415 on account of sundry creditors and conduct proper enquiries and investigation.
The learned authorised representative of the assessee contested the CIT’s order, arguing that the show cause notice was based on incorrect facts. There was no addition made by the AO regarding any bogus credit during the assessment proceedings. The expenses were verified, and ad hoc disallowances were made by the AO. The complete list of sundry creditors was submitted to the AO, who found them satisfactory. The revisionary proceedings were initiated based on an audit objection and not on any enquiry establishing the amount claimed to be bogus.
The learned CIT DR supported the CIT’s order, stating that the assessee submitted the details of creditors on 29th December 2016, which did not give the AO sufficient time for requisite enquiry. Therefore, the AO’s order was erroneous and prejudicial to the interest of revenue, and the CIT’s order assuming jurisdiction under Section 263 was justified.
The Tribunal carefully considered the rival contentions and perused the assessment order. It noted that the CIT invoked jurisdiction under Section 263 based on the incorrect fact that one entry of ₹4,65,86,911 was found bogus. There was no evidence supporting this claim. The AO disallowed 20% of the expenses, implying that the sundry creditors to that extent were unsubstantiated. The CIT’s order did not show how the AO’s order was erroneous.
Furthermore, the Tribunal observed that the AO could have used his powers to make a best judgment assessment if the assessee failed to provide details. However, the AO chose to disallow 20% of the expenditure. Merely the non-availability of time to the AO for proper enquiry cannot be rectified by invoking Section 263. The CIT’s order aimed to extend the time limit for completing the assessment, which is not permissible under the law.
In the order passed by the CIT, there was no finding that the creditors were unsubstantiated. The creditors emerged from the expenditure incurred by the assessee, which was allowed by the AO to the extent of 80%. Therefore, there was no need to examine the genuineness and creditworthiness of the creditors separately. The Tribunal found that the CIT’s order was not sustainable in law.
The Tribunal quashed the CIT’s order passed under Section 263 of the Act for the assessment year 2014-15, allowing the appeal of the assessee.
Order pronounced in the open court on 13/10/2020.
-Sd/-
(H.S.SIDHU)
JUDICIAL MEMBER
-Sd/-
(PRASHANT MAHARISHI)
ACCOUNTANT MEMBER
Dated: 13/10/2020
A K Keot
Copy forwarded to:
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR ITAT, New Delhi
Date of dictation: 09.10.2020
Date on which the typed draft is placed before the dictating member: 12.10.2020
Date on which the typed draft is placed before the other member: 13.10.2020
Date on which the approved draft comes to the Sr. PS/ PS: 13.10.2020
Date on which the fair order is placed before the dictating member for pronouncement: 13.10.2020
Date on which the fair order comes back to the Sr. PS/ PS: 13.10.2020
Date on which the final order is uploaded on the website of ITAT: 13.10.2020
Date on which the file goes to the Bench Clerk: 13.10.2020
Date on which the file goes to the Head Clerk
The date on which the file goes to the Assistant Registrar for signature on the order
Date of dispatch of the order: 13.10.2020
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