Nav-Yug Sewing Machine Co. Ltd, New Delhi V. ACIT, New Delhi

ITA 1068/DEL/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5506 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-03-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 23-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H B GILL
• Assessee Lawyers: SURJIT SINGH; SSH PRAKASH NARAIN
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE G.E. VEERABHADRAPPA, HON'BLE VICE-PRESIDENT SHRI RAJPAL YADAV: HONBLE JUDICIAL MEMBER . I.T.A. NO. 1068/DEL/2009 ASSESSMENT YEAR: 2005-06 NAVYUG SEWING MACHINE CO. LTD. VS. ASSISTANT CIT, N-10, KALKAJI, CO.CIR. 13(1), NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: S/SH. PRAKASH NARAIN, ADV. & SU RJIT SINGH, CA RESPONDENT BY: SHRI H.B. GILL, CIT(DR) ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED COMMISSIONER OF INCOME-TAX DATED 08.08.2008 PASSED UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961. THE ASSESSEE HAS PLEADED THAT LEARNED COMMISSIONER HAS ERRED IN TAKING COGNIZANCE UNDER S EC. 263 OF THE ACT AND THEREBY HOLDING THE ASSESSMENT ORDER AS ERRONEOUS A ND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2. THE BRIEF FACTS EMERGING OUT FROM THE RECORD ARE THAT ASSESSEE HAS FILED ITS RETURN OF INCOME ON 31 ST OCTOBER, 2005 DECLARING AN INCOME OF 2 RS.61,18,780. THE ASSESSEE WAS ENGAGED IN THE BUSIN ESS OF WHOLESALE TRADING OF IMPORTED INDUSTRIAL SEWING MACHINE AND T HEIR RELATED PARTS, MAINLY PURCHASED FROM TAIWAN AND CHINE. ASSESSING O FFICER HAD ISSUED NOTICE UNDER SECTION 143(2) OF THE ACT AND AFTER HE ARING THE ASSESSEE FRAMED AN ASSESSMENT UNDER SEC. 143(3) ON 19.12.2007 WHERE BY HE DETERMINED THE TOTAL TAXABLE INCOME OF THE ASSESSEE AT RS.65,01,89 0. 3. LEARNED COMMISSIONER ON EXAMINATION OF THE ASSES SMENT RECORD FORMED AN OPINION THAT ASSESSMENT ORDER IS ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE ISSUED A SHOW-CAUSE NOT ICE TO THE ASSESSEE INVITING ITS EXPLANATION AS TO WHY ACTION UNDER SEC . 263 OF THE ACT MAY NOT BE TAKEN AND ASSESSMENT ORDER BE NOT HELD AS ERRONE OUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. LEARNED COMMISSIONER HA S ASSIGNED MAINLY THREE REASONS FOR TAKING ACTION UNDER SEC. 263 OF THE ACT . IN THE FIRST REASON, HE HAS OBSERVED THAT ON AN ANALYSIS OF DETAILS OF SALES AN D PURCHASE, IT REVEALED THAT ASSESSEE HAD RECORDED DIFFERENT RATES OF PURCHASES OF MACHINERY. LEARNED COMMISSIONER HAS SPECIFIED THE DATES, BILL NUMBER, DESCRIPTION OF GOODS AND THE PURCHASE PRICE PER ITEM PAID BY THE ASSESSEE. I N THE SECOND REASON, HE POINTED OUT THAT THE ASSESSING OFFICER VIDE ORDER S HEET ENTRY DATED 7 TH SEPTEMBER 2007 HAS CALLED FOR CERTAIN DETAILS AND S UPPORTING EVIDENCES FROM 3 THE ASSESSEE. THE ASSESSEE FAILED TO PRODUCE THOSE DETAILS AND INSPITE OF THAT ASSESSING OFFICER HAS ACCEPTED THE CONTENTIONS OF T HE ASSESSEE. IN THE THIRD REASON, HE OBSERVED THAT ASSESSEE HAD SHOWN AN INCR EASE TO THE TUNE OF RS. 2 CRORES APPROXIMATELY IN THE BUILDING CONSTRUCTION D URING THE YEAR. THE ASSESSING OFFICER HAS NOT EXAMINED THIS ISSUE WITH REGARD TO TDS ETC. 4. IN RESPONSE TO QUERY OF LEARNED CIT(APPEALS), AS SESSEE HAS CONTENDED THAT AS FAR AS DIFFERENCE IN PURCHASE PRI CES OF MACHINERY ARE CONCERNED, THERE IS NOMINAL DIFFERENCE. THIS DIFFER ENCE HAS OCCURRED ON ACCOUNT OF VARIOUS REASONS I.E. EXCHANGE SALES FLUC TUATION, TRANSPORT CHARGES, VARIATION IN COST ETC. WITH REGARD TO OTHER ISSUES, THE ASSESSEE POINTED OUT THAT ASSESSING OFFICER HAS DULY ISSUED SHOW-CAUSE N OTICE. ASSESSEE SUPPLIED THE INFORMATION AND AFTER VERIFYING THOSE INFORMATI ON, ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER. IT WAS POINTED OUT THA T ASSESSMENT ORDER IS A WELL REASONED ORDER. 5. LEARNED COMMISSIONER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. HE HELD THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ACCORDINGLY SET ASIDE T HE SAME. HE DIRECTED THE ASSESSING OFFICER REFRAME THE ASSESSMENT. 4 6. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE IMPUG NING THE ORDER OF LEARNED CIT(APPEALS), CONTENDED THAT IN THE FRESH A SSESSMENT PROCEEDINGS, ASSESSING OFFICER HAS ACCEPTED ALL THE ISSUES DOUBT ED BY THE LEARNED COMMISSIONER EXCEPT THE ONE ISSUE WHICH IS IN RESPE CT OF CONSTRUCTION OF THE BUILDING. ASSESSING OFFICER HAS DISALLOWED THE SUM OF RS.22,06,618 OUT OF THE EXPENSES INCURRED FOR THE BUILDING. WITH REGARD TO THIS ISSUE, HE POINTED OUT THAT THAT ASSESSING OFFICER IN THE ORIGINAL ROU ND OF LITIGATION, VIDE ORDER SHEET ENTRY DATED 7.9.2007 HAS ASKED FOR THE DETAIL S IN RESPECT OF CONSTRUCTION OF BUILDING. THESE DETAILS WERE SUBMITTED BY THE AS SESSEE BEFORE THE ASSESSING OFFICER. HE EXAMINED THOSE DETAILS AND TH EREAFTER ACCEPTED THEM. LEARNED COMMISSIONER FAILED TO POINT OUT HOW THE OR DER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF THE REVENUE. LEARNED DR ON THE OTHER HAND POINTED OUT THAT ASSESSMENT OR DER PASSED IN CONSEQUENCE TO THE ORDER OF THE LEARNED COMMISSIONE R PASSED UNDER SEC. 263 IS A DEVELOPMENT SUBSEQUENT TO THE 263 ORDER. T HE FACTS EMERGING OUT IN THIS ASSESSMENT ORDER WERE NOT AVAILABLE WHEN LEARN ED COMMISSIONER PASSED THE ORDER UNDER SEC. 263, THEREFORE, ASSESSE E CANNOT DRAW ANY BENEFIT FROM THE STAND OF THE ASSESSING OFFICER IN THE FRES H ASSESSMENT ORDER IN ORDER TO SAY THAT ORDER OF LEARNED COMMISSIONER IS NOT SUSTAINABLE. HE 5 FURTHER CONTENDED THAT ASSESSING OFFICER IN THE ORI GINAL ROUND OF LITIGATION DID NOT EXAMINE THE DETAILS AND, THEREFORE, HIS ORD ER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE BECAUSE NO INVESTIGATION OF FACTS WERE MADE BY HIM. 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. THE ITAT IN THE CASE OF MRS. KH ATIZA S. OOMERBHOY VS. ITO,MUMBAI, 101 TTJ 1095, ANALYZED IN DETAIL VARI OUS AUTHORITATIVE PRONOUNCEMENTS INCLUDING THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF MALABAR INDUSTRIES 243 ITR 83 AS WELL AS H ONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF GABRIEL INDIA LTD. 20 3 OTR 188 AND HAS PROPOUNDED THE FOLLOWING BROADER PRINCIPLE TO JUDG E THE ACTION OF CIT TAKEN UNDER SECTION 263. THE FUNDAMENTAL PRINCIPLE WHICH EMERGE FROM THE A BOVE CASES MAY BE SUMMARIZED BELOW (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDE R OF THE A.O IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. BO TH THE CONDITIONS MUST BE FULFILLED. (II) SEC. 263 CANNOT BE INVOKED TO CORRECT EACH AN D EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE A,O AND IT WAS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCOR RECT APPLICATION OF LAW WILL SUFFICE THE REQUIREMENT OF ORDER BEING ERRONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION O F MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORDER. 6 (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PRE JUDICIAL TO THE INTERESTS OF THE REVENUE AND IF THE A.O HAS ADOPTED ONE OF TH E COURSES PERMISSIBLE UNDER LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE A.O HAS TAKEN ONE VIEW WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT B E TREATED AS AN ERRONEOUS ORDER, UNLESS THE VIEW TAKEN BY THE A.O I S UNSUSTAINABLE UNDER LAW. (VI) IF WHILE MAKING THE ASSESSMENT, THE A.O EXAMI NES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINE THE INCOME, THE CIT, WHILE EXERC ISING HIS POWER UNDER S. 263 IS NOT PERMITTED TO SUBSTITUTE HIS ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIMATED BY THE A.O. (VII) THE A.O EXERCISES QUASI-JUDICIAL POWER VEST ED IN HIS AND IF HE EXERCISES SUCH POWER IN ACCORDANCE WITH LAW AND ARR IVES AT A CONCLUSION, SUCH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SI MPLY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION. (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTION UNDER S. 263 MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. (IX) IF THE A.O HAS MADE ENQUIRIES DURING THE COU RSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND THE ASSESSEE HAS GIVEN DETAILED EXPLANATION BY A LETTER IN WRITING AND THE A.O ALLO WS THE CLAIM ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE DECISION OF THE A.O CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HI S ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. 8. IN THE LIGHT OF THE ABOVE PROPOSITION, LET US EX AMINE THE FACTS OF THE PRESENT CASE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED ON RECORD COPIES OF THE ORDER SHEET ENTRY OF THE ASSESSMENT P ROCEEDINGS AT PAGE NOS. 1 AND 2 OF THE PAPER BOOK. FROM PERUSAL OF THESE ENTR IES, IT REVEALED THAT ASSESSING OFFICER HAS CALLED FOR THE RELEVANT MATER IAL FROM THE ASSESSEE. ON 7 TH OF SEPTEMBER, 2007, THE ORDER SHEET ENTRY SHOWS TH AT THE ASSESSING 7 OFFICER HAS EXAMINED THE G.P. OF FIVE ITEMS PRODUCT WISE. THE G.P. FOR TWO PRODUCTS WAS SHOWN BY THE ASSESSEE AT 15% AND FOR T HREE CASES IT WAS 12%. HE EXAMINED THE OTHER DETAILS SUBMITTED BY THE ASSE SSEE. THEREAFTER, HE CALLED FOR BOOKS OF CONSTRUCTION OF BUILDING. THE A SSESSEE HAS SUBMITTED THESE DETAILS TO THE ASSESSING OFFICER WHICH WERE A LSO SUPPOSED TO HAVE BEEN EXAMINED BY THE ASSESSING OFFICER. THE ORIGINAL ASS ESSMENT ORDER IS NOT A NON-SPEAKING ORDER RATHER IS RUNNING INTO EIGHT PAG ES AND EXHIBITING THE DISCUSSION ON MANY ISSUES. AS AGAINST THIS, LEARNED COMMISSIONER IN THE ORDER PASSED UNDER SEC. 263 HAS NOT DISCUSSED ANY P OINT. HE HAS JUST NARRATED DETAILS DEMONSTRATING THE REASONS FOR TAKING ACTION UNDER SEC. 263 BUT HE HAS NOWHERE CONSIDERED THE EXPLANATION OF ASSESSEE POIN TING OUT THAT NO ACTION UNDER SEC. 263 IS INEVITABLE. THE FIRST REASON ASSI GNED BY THE LEARNED COMMISSIONER IS IN RESPECT OF VARIATION OF PURCHASE PRICE OF CERTAIN ITEMS. WE HAVE GONE THROUGH THE DETAILS NARRATED BY THE LE ARNED COMMISSIONER ON PAGE NO.2 AND FOUND THAT VARIATION IS VERY NOMINAL E.G. ON IST OF APRIL 2004 VIDE BILL NO.4116, ONE OF THE ITEMS WAS PURCHASED F OR RS.25461. THIS ITEM IS HEAD AND MOTOR. A SIMILAR ITEM WAS PURCHASED ON 2 ND APRIL, 2004 VIDE BILL NO.4124 FOR A CONSIDERATION OF RS.24,000. ACCORDING TO THE LEARNED COMMISSIONER, THERE IS A VARIATION IN THE PURCHASE PRICE. THE ASSESSEE HAS 8 PRODUCED THE SPECIFIC DETAILS FROM WHOM THESE ITEMS WERE PURCHASED, WHAT IS THE PURCHASE PRICE. IT ALSO PRODUCED THE DETAILS OF SALES OF THESE ITEMS. ALL THESE THINGS WERE PRODUCED BEFORE THE ASSESSING OFF ICER AND AFTER VERIFICATION OF THESE THINGS HE ACCEPTED THE PURCHA SES SHOWN BY THE ASSESSEE. IN THE ORDER UNDER SEC. 263, LEARNED COMMISSIONER N OWHERE POINTED OUT THAT WHY THIS STAND OF ASSESSEE CANNOT BE ACCEPTED. IT I S TRUE THAT ORDER PASSED UNDER SEC. 143(3) READ WITH SEC. 263 IN CONSEQUENCE TO THE DIRECTIONS GIVEN BY THE LEARNED COMMISSIONER IS A SUBSEQUENT DEVELOP MENT AND THE FACTS EMERGING OUT IN THIS ORDER ARE NOT RELEVANT FOR JUD GING THE ORDER OF THE LEARNED COMMISSIONER BECAUSE WHEN THE LEARNED COMMI SSIONER TOOK COGNIZANCE UNDER SEC. 263 HE WAS EXAMINING THE FACT S AVAILABLE BEFORE AND HE HAS JUST FORMED HIS PRIMA FACIE OPINION THAT CER TAIN ASPECTS HAD NOT BEEN EXAMINED BY THE ASSESSING OFFICER. WE ARE TAKING IN TO CONSIDERATION THE ORDER OF THE ASSESSING OFFICER DATED 30.12.2009 FOR A LIMITED PURPOSE I.E. INSPITE OF A DETAILED INQUIRY, NO FAULT WAS FOUND B Y THE ASSESSING OFFICER IN THE SECOND ROUND. IT ONLY INDICATES THAT HAD THE LE ARNED COMMISSIONER EXAMINED THE ISSUE ANALYTICALLY, HE PROBABLY WOULD HAVE NOT TREATED THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF THE REVENUE. THE NON-TAKING OF ANY ACTION AGAINST THE ASSESSEE B Y THE ASSESSING OFFICER 9 IN THE FRESH ASSESSMENT ORDER IS ONLY AN INDICATOR AND CORROBORATIVE PIECE OF MATERIAL FOR TESTING THE ORDER OF THE LEARNED COMMI SSIONER. TO OUR MIND, LEARNED COMMISSIONER HAS NOT MADE AN ANALYTICAL ANA LYSIS BEFORE SETTING ASIDE THE ISSUE TO THE ASSESSING OFFICER. ASSESSING OFFICER IN THE ORIGINAL ROUND OF LITIGATION HAS TAKEN POSSIBLE VIEW ON ALL THESE ISSUES WHICH IS NOT CONTRARY TO LAW, THEREFORE, LEARNED COMMISSIONER IS NOT JUSTIFIED TO HOLD SUCH AN ORDER AS ERRONEOUS AND PREJUDICIAL TO THE I NTEREST OF THE REVENUE WITHOUT DEMONSTRATING AS SUCH IN THE IMPUGNED ORDER . 9. IN VIEW OF THE ABOVE DISCUSSION, WE ALLOW THE AP PEAL OF THE ASSESSEE AND QUASH THE ORDER PASSED BY THE LEARNED COMMISSIO NER. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 19.03.2010 ( G.E. VEERABHADRAPPA ) ( RAJPAL YAD AV ) VICE-PRESIDENT JUDICIAL MEMBER DATED: 19/03/2010 MOHAN LAL COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR:ITAT ASSISTANT REGISTRAR;