COMMISSIONER OF INCOME TAX V. M/S UNIQUE AUTOFELTS (P) LTD.

ITA/445/2008

AI Insights

The case revolves around an appeal by the Commissioner of Income-Tax, Karnal against the order of the Income Tax Appellate Tribunal, which had quashed the order under Section 263 of the Income Tax Act, 1961. The dispute centered on whether the Assessing Officer had adequately examined the increase in share capital and unsecured loans during the assessment year 2001-02. The Tribunal found that the Assessing Officer had made specific inquiries and was satisfied with the explanations provided by the assessee, M/s Unique Autofelts (P) Ltd., thus not justifying the Commissioner's intervention under Section 263.

• Counselvise Citation: [2009] 140 COUNSELVISE.COM (IT) 719654 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 17-08-2009
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: SUKANT GUPTA
• Keywords: Assessment; Erroneous order; Income Tax; Prejudicial to revenue; Share Application Money; Unsecured loan
• Section: 143(3); 154; 263; 260A

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A.No. 445 of 2008 Date of decision: 17.8.2009 Commissioner of Income-Tax, Karnal ......Appellant Vs. M/s Unique Autofelts (P) Ltd. 250-251, Sector 29, HUDA, Paniapt. ...Respondent CORAM:- HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MRS.JUSTICE DAYA CHAUDHARY PRESENT: Mr.Sukant Gupta, Standing Counsel for the Revenue. **** ADARSH KUMAR GOEL, J. (Oral) 1. This appeal has been preferred by the Revenue under Section 260A of the Income Tax Act, 1961 (for short,”the Act”) against the order of the Income Tax Appellate Tribunal, Delhi Bench 'C' Delhi passed in ITA No. 43/Del/2006 dated 31.7.2007 for the assessment year 2001-02, proposing to raise the following substantial question of law: “ Whether on the facts and in the circumstances of the case, the Hon'ble ITAT was right in law in quashing the impugned order under Section 263 of the Income Tax Act, 1961 passed by the Commissioner of Income Tax, Karnal?” 2. The assessee is dealing in manufacturing of fabrics for export. Assessment was made under Section 143(3) of the Act and thereafter order I.T.A.No. 445 of 2008 [2] of ratification under Section 154 of the Act was passed. The CIT(A) in exercise of its power under Section 263 of the Act, cancelled the order of assessment and directed making of assessment de novo. On appeal, the Tribunal held that CIT(A) was not justified in invoking its jurisdiction under Section 263 of the Act, as the Assessing Officer had duly applied his mind, made inquiries and examined the accounts. The observations of the Tribunal are as under: “The next issue on which power under Section 263 was invoked by the learned Commissioner relates to the share application money. The Commissioner has found that the share capital has been increased during the assessment order on account of share application money from various parties. He has, therefore, held the order to be erroneous and prejudicial to the revenue by observing that the assessee has failed to produce the share holders along with their bank statements in original. Here again it may be pointed out that he has been influenced by the fact that before him the assessee failed to produce share holders along with their bank statements. So far as the examination of the issue I.T.A.No. 445 of 2008 [3] at the assessment stage is concerned, we find that the AO made specific query from the assessee in relation to this issue. The query is as under: “9. Share capital has increased from Rs.19,78,000/- to Rs.33,28,000/-. Please furnish copies of a/cs of persons, who have invested in shares and furnish complete description of such persons. Also prove the evidence of source of investment made by such persons.” In reply to this query the assessee had filed reply giving full details of the Share application money. This reply has been made through letter dated 24.2.2003 and is available at page 77 of the paper-book. The assessee also filed the details of share application money as on 31.3.2001 which are available at page 79 of the paper-book. It was pointed out by the learned counsel for the assessee that at Serial No. 21 in place of Kansnite Capital Services, it should have been Kinetic Capital Services and that this mistake was typographical one. The assessee has filed confirmation from Kinetic I.T.A.No. 445 of 2008 [4] Capital Services Ltd. Regarding share application money of Rs.5 lacks before the AO. With the confirmation the assessee also filed copy of acknowledgment for filing of the return by Kinetic Capital Services Ltd. Similarly, the assessee filed copy of letter confirmation from other Share applicants along with the copy of Acknowledge for filing return and copies of bank statements etc. After going through this material, the AO was satisfied and therefore, he did not consider it proper to make any disallowance on account of Share application money. Therefore, it cannot be said that the AO did not apply his mind. The findings of the learned CIT on this issue is also not based on the examination of record. So far as the third issue relating to unsecured loan from Shri Pramod Khurana is concerned, on this issue the assessee has filed copies of account of Shri Pramod Kumar Khurana as mentioned in the reply dated 24.2.2003 available at pages 77-78 of the paper-book. Copy of acknowledgment I.T.A.No. 445 of 2008 [5] of Income- tax Return of Shri Pramod Khurana is available at pages 80-90 of the paper-book which shows that the proper query has been made by the AO in original assessment order and proper reply was given by the assessee. Thus the AO has made the assessment only after examining the material produced before him. Order of the learned CIT holding that the order of the AO is erroneous in so far as it is prejudicial to the interest of the revenue because the AO has not applied his mind, is not justified.” 3. We have heard learned counsel for the appellant. 4. Learned counsel for the appellant submitted that the Commissioner rightly held that share capital had increased during the assessment order and the assessee failed to produce the share holders but the Assessing Officer failed to draw adverse inference. The Assessing Officer also failed to draw adverse inference with regard to un-secured loan from Pramod Khurana. In the circumstances, power exercised under Section 263 was fully justified. 5. From the finding of the Tribunal, it is clear that the assessee had given proper explanation by filing the necessary confirmations. In view of such a finding, the Tribunal rightly held that power under Section 263 of I.T.A.No. 445 of 2008 [6] the Act could be exercised where view taken by an Assessing Officer was erroneous. While exercising such power, the Commissioner was bound to take into account all relevant facts. If order invoking the said power proceeds on an erroneous assumption, the same could be set aside by the Tribunal. Finding of the Tribunal is not shown to be perverse. No substantial question of law arises. 6. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE (DAYA CHAUDHARY) August 17, 2009 JUDGE raghav Note: Whether this case is to be referred to the Reporter? ........Yes/No "