Shree Balkrishna Commercial Ltd v. Pr CIT

Case snapshot

Sections / provisions: 263

Questions before the Court / Tribunal

• 263
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

O R D E R PER SUCHITRA KAMBLE,JM This appeal is filed by the assessee against the order dated 15.03.2017 passed by the Pr. CIT-1, Kolkata u/s 26 3 of the Income Tax Act for Assessment Year 2012-13. 2. The grounds of appeal are as under :- Assessee by: Shri Subhash Singhal, CA Department by : Shri Sujeet Kumar, CIT, DR Date of Hearing 09/11/2021 Date of pronouncement 25/11/2021

1.“Audit party had raised objection on two po ints in assessment order and the AO responded defending his decision. Using the exact language, the show cause notice under sec 263 by Pr. CIT only on those two points in view of 296 ITR 238(P&H), 119 ITR 996 (SC) and 1 08 ITR 407 (Cal) is not justified. Use of section 263 in place of sec 147 or 154 is not correct. CIT has not answe red this objection in order under appeal.

2. Rule of consistency be followed, if the facts a re same. In earlier years in scrutiny assessments, the decla red version was accepted for both the points. For no ch ange in facts and law, it may not be disturbed.

3. The AO in his assessment order u/s 143(3) full details of shares purchase/sale/stock in value and quality with contract notes/ broker bills were file d and examined by the AO and he accepted the claim after the consideration of facts. The two views are possible to treat it as a business loss or capital loss and AO has adopted the earlier one. The CIT in his order u/s 2 63 has erred in deciding/ directing the AO to adopt th e later view. Frequency of transactions is no criteri a to decide this issue. The main objects in MOA of 1986 cover this as business of the assessee company.

5. For action u/s 263, there is a necessary pre-co ndition of loss of revenue. Action by Pr. CIT is not justif ied as there is no loss of revenue in this case. The asst, ultimately was made applying provisions of sec 115 JB on fixed percentage of book profits. Even after directions u/s 263, the net income is going to be computed u/s 115 JB at same figure. Thus action u/s 263 is not justified and be cancelled. The case laws relied upon by learned Pr CIT are either not relevant on facts or general in nature which varies from case to case, the comme nt of non¬enquiry by AO is not factually correct, as enough evidence was collected by AO at assessment stage an d he had applied his mind on both the points.”

Appellant / petitioner / assessee submissions

The assessee also submitted entire income d etails along with TDS for AC Charges/DG set and further submitte d that these amounts are properly reflected in books of ac counts. The assessee also submitted earlier reply in wherein th e agreements along with the other details were submitted before the Assessing Officer. Thus, the Assessing Officer has not only raised the objections/queries related to these incomes but has also taken cognizance of the evidences produced by the assesse e. The Pr. CIT has also taken note that assessee has revealed composite rent from its clients for letting out houses and al so for some allied services. But the Pr. CIT has not commented on the nature of the business and the offer of the assessee of th e rental income as the business income and totally ignored the asse ssee’s submission before the Assessing officer at the time of assessment proceedings u/s 143(3).

Revenue / respondent submissions

The judgment does not separately label the respondent’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Court / Tribunal analysis and reasoning

3. The assessee company is engaged in the busine ss of renting, air processing, trading in securities and construct ion and development. The return of income for assessment ye ar 2012-13 was filed on 27.9.2012 declaring total income of Rs . 78,58,058/-. The assessment u/s 143(3) was completed on 25.3.201 5 at total income of Rs. 1,79,28,170/- under normal provisions of Income Tax Act 1961. The Principal Commissioner of Income Tax observed that income from other source in respect o f profit and loss account under the caption “profit and loss acc ount” in share trading of the assessee company was not properly ve rified by the Assessing Officer. Therefore, the Principal Commiss ioner of Income Tax issued show cause notice u/s 263 on 18.2 .2017. The assessee replied the same show cause notice on 18.2 .2017. The Principal Commissioner of Income Tax vide order dat ed 15.3.2017 directed the Assessing Officer to pass fr esh

6. The Ld. DR submitted that the assessee failed to demonstrate in respect of audit objection that the same was rel evant or not as the copies produced are not proper copies and there was no record as such available that the audit objection w as dropped at any point of time. Therefore, Ld. DR prayed that Ground No. 1 be dismissed. As regards the issue of invocation of Se ction 263, the Ld. DR submitted that the share trading loss has no t been specifically enquired and no investigation on part of the Assessing Officer was conducted during the assessme nt proceedings u/s 143(3). The questionnaire which was pointed out by the Ld. AR, are general in nature and hence the Ld. DR submitted that the Principal Commissioner of Income Tax has rightly invoked the provisions of Section 263 of the Act.

7. We have heard both the parties and perused a ll the relevant material available on record. As regards Ground No . 1, there is no co-relation between audit objection and the show cause notice issued u/s 263 by Principal CIT. In fact, there is no record which shows that the said audit objection was dropp ed later on. The notice issued u/s 263 has clearly mentioned the two issues upon which the Assessing Officer has been directed to pass fresh assessment. Hence Ground No. 1 is dismissed. As reg ards to merit of invocation of Section 263 by the Principal CIT, the Pr. CIT observed that the profit and loss account revea l that “profit

2015 w.e.f. 1/6/2015. The said explanation regardi ng order passed without making enquiry or verification, orde r passed allowing any relief without enquiring into the clai m has been applicable from AY 2016-17 and will not be applicab le in the present Assessment Year i.e. 2012-13. As regards merit of invocation of Section 263, the assessee at the time of assessment proceedings u/s 143(3) has given the details relati ng to share trading loss as questionnaire No. 20 and 47 were in respect of asking details of transaction in shares as well as investment in shares as on 31.3.2011. Therefore, the assessee ha s given the details accordingly. In fact the assessee demonst rated that the assessee is dealing in share trading and the said i ncome was offered as business income.

Operative decision and relief

5. Ld. AR submitted that soon after the assessm ent was made by the ACIT, the Departmental Audit Party raised tw o objections. These objections pertained to share trading loss an d receipt of DG set/AC charges etc. collected by the assessee. T he notice u/s 263 also covers these two issues only. This gives a conclusion that the audit objection has lead to issuance of no tice u/s 263. Thus the Ld. AR relied upon the decision of Hon’ble Punjab & Haryana High Court in case of CIT vs. Sohana Wollen Mills reported in 296 ITR 238 as well as the Hon’ble Supr eme Court in case of Indian & Eastern Newspaper Society vs. CIT 119 ITR 996 (SC). Thus the Ld. AR submitted that as per Ground No. 1, the notice u/s 263 has clearly been set out in the audi t objection which was later on dropped by the department. Thus the order u/s 263 be quashed and set aside. As regards share application/share trading loss, the Ld. AR submitte d that at the time of proceedings u/s 143(3), the Assessing Offic er has made inquiry relating to the capital loss as per the boo ks of accounts and raised specific query at point No. 20 of the qu estionnaire issued by the Assessing Officer. The Ld. AR further submitted that the trading in shares was regularly done by th e assessee and the same was never doubted in the past by the R evenue. As regards receipt of DG set/AC charges, the same was also clearly

Thus, the Pr. CIT set aside the assessment order in light of the decision of the Hon’ble Supreme Court in case of CIT Vs. Sh. Manjun atheshwar Packing Products and Camphor Works 231 ITR 53 where the Assessing Officer has not made any enquiry on a par ticular issue, such order is construed as erroneous and pre judicial to the interest of the Revenue. Firstly, we must look into the explanation 2 to Section 263 which was inserted by Finance Act

present case. The Pr. CIT while passing the order under Section 263 of the Act has not shown any new material or ha s not come to the conclusion that there is escapement of incom e during the assessment proceedings. The order passed by the Pr . CIT in capacity of Section 263 is merely a second opinion and does not fall in the category of prejudicial to the interest of Revenue. In the present case the Assessing Officer has taken cognizance of all the material provided by the Assessee during the Assess ment Proceedings and after verifying the same has passed just and proper order. Thus, the Pr. CIT’s observation that no inquiry/insufficient enquiry made by Assessing Offi cer, is incorrect and does not sustain. Thus, merely havin g a different opinion upon the treatment of any receipt cannot be the reason of invocation of section 263. Thus the appeal of th e assessee is allowed.

8. In the result, the appeal of the assessee is allowed. Order pronounced in the open court in presence of b oth the parties on 25 th November, 2021.

Ratio and legal principle

The narrow proposition associated with Shree Balkrishna Commercial Ltd v. Pr CIT concerns 263 The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in ITA No. 1168/KOL/2017.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Quashed / set aside” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: 263 Its practical value lies in the way the Itat Delhi connected the governing provisions—263—to the procedural posture and evidence before it.

The authority level is Court / Tribunal. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of 263 and the decision date 2021-11-25; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

Does this case match your facts?

Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is Shree Balkrishna Commercial Ltd v. Pr CIT, the proceeding is ITA No. 1168/KOL/2017, and the decision is dated 2021-11-25. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as SHRI O. P. KANT, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER. A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with 263. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Quashed / set aside. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is Review / appeal / SLP status: check pending. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• 263 — apply the exact version considered in the judgment.

Case network

• Haris Marine Products v. Export Credit Guarantee Corporation (ECGC) Limited — Supreme Court of India · Quashed / set aside
• Mohit Bansal v. The Institute of Chartered Accountants of India — Delhi High Court · Quashed / set aside
• The Sirpur Paper Mills Limited & Another v. Union of India & Two others — Telangana High Court · Quashed / set aside
• Income Tax Officer v. V.Mohan — Supreme Court of India · Quashed / set aside

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