The Cochin Bench of Income Tax Appellate Tribunal has held that appeal against scrutiny assessment pending adjudication and quashes revision proceedings initiated by Principle Commissioner of Income Tax.
The appellant, M/s. Armajaro Trading India (P), is engaged in the business of trading in cashew. The appellant filed a return for the assessment year 2016-17 declaring a total loss of Rs.36,97,730. The assessment was selected for scrutiny for verification of a lower amount disallowed u/s 40(a)(ia) of the I.T.Act and a large increase in share application money pending for more than one year and assessed a total income of Rs.11,94,830.
The PCIT issued show-cause notice u/s 263, on a belief that the Assessing Officer has not made an inquiry with regard to the receipts of money, whether it is actually for share application or for services rendered by the assessee-company to its parent company in the UK. Aggrieved by the order assessee filed appeal before ITAT.
The appellant submitted that the equity shares were actually allotted to the payers and the details of the same were also furnished. The assessment order was not erroneous or prejudicial to the interest of the revenue, since the issue raised by the PCIT in the show cause notice u/s 263 of the I.T.Act was considered in the scrutiny assessment
The Tribunal observed that one of the reasons for limited scrutiny was for the purpose of examining whether the share application money received by the assessee was genuine and was from disclosed sources. The details and documents furnished were verified during the course of scrutiny proceedings. The Assessing Officer had treated the foreign exchange loss as unexplained cash credit and brought the same to the tax net. The assessee had preferred an appeal for treating the foreign exchange loss as unexplained cash credit and the appeal filed before the first appellate authority was pending adjudication. Therefore, from the above factual position, it is not correct on the part of the PCIT to come to a conclusion that the A.O. has not examined the issue in question.
The Coram of Mr. George George K, JM and Mr. Laxmi Prasad Sahu, AM has held that “the same cannot be brought to tax during the relevant assessment year, since the amounts were received in assessment years 2014-2015 and 2015-2016 (Rs.1,50,68,858 received in the assessment year 2014-2015 and Rs.95,78,702 received in the assessment year 2015-2016). For the aforesaid reasons, we quash the order passed by the PCIT u/s 263 of the I.T.Act. It is ordered accordingly”.
Mr. Mohit Ashok Parmar, CA, and Mr. Shantham Bose appeared on behalf of the appellant and respondent respectively.
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