M/s Sardar Soap Products, RAJKOT-GUJARAT V. The Assistant Commr. Income Tax,CPC, Bangalore

ITA 111/RJT/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6707 (ITAT-RAJKOT)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 05-04-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C P BHATIA SR DR
• Keywords: Opportunity of being heard; Principle of natural justice; Right to appeal; Capital receipt; Revised return

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [ CONDUCTED THROUGH E-COURT AT AHMEDABAD ] BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.111/RJT/2016 ( / ASSESSMENT YEAR : 2012-13) M/S. SARDAR SOAP PRODUCTS NR. AMARSINHJI ROAD CIRTY STATION ROAD OPP MAHAVIR GIN WANKANER / VS. THE ACIT, CPC BANGALORE ./ ./ PAN/GIR NO. AAQFS 3596 P ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : WRITTEN SUBMISSION ! / RESPONDENT BY : SHRI C.P. BHATIA, SR.DR ' #$% ! & / DATE OF HEARING 10/02/2017 '( ! & / DATE OF PRONOUNCEMENT 16/02/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM : THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3 [CIT( A) IN SHORT] DATED 29/02/2016 FOR ASSESSMENT YEAR (AY) 2012-13. ITA NO. 111/RJT /2016 M/S. SARDAR SOAP PRODUCTS VS. ACIT (CPC) ASST.YEAR 2012-13 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN C ONFIRMING INCOME AT RS. 1,05,140/-. THE DETERMINATION NEEDS DELETION / REDU CTION TO NIL. 2. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CON FIRMING INCOME AT RS. 1,05,140/-BASED ON POSITION WHICH IS DESCRIBED WRON GLY. THE ADDITION NEEDS DELETION. 3. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CON FIRMING INCOME OF RS. 1,05,140/- ERRONEOUSLY WITHOUT APPLYING PROVISIONS OF SECTION 40(B). THE ADDITION NEEDS DELETION. 4. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CON FIRMING INCOME OF RS. 1,05,140/- BASED ON PRESUMPTION AND SURMISES AND AG AINST THE SETTLED POSITION. THE ADDITION NEEDS DELETION. 5. TAKING INTO CONSIDERATION THE LEGAL, STATUTORY, FACTUAL AND ADMINISTRATIVE ASPECTS, NO DETERMINATION OF INCOME OF RS. 1,05,140 /- OUGHT TO HAVE BEEN CONFIRMED. THE ADDITIONS NEED DELETION. 6. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CON FIRMING INCOME OF RS. 1,05,140/- WITHOUT CONSIDERING THAT THE REMUNERATIO N PAID BY THE FIRM TO THE PARTNER WAS ALREADY SHOWN BY THE PARTNER IN THE RET URN INCOME AND THEREFORE THERE WAS DOUBLE TAXATION IN MAKING ADDITION IN THE HANDS OF FIRM. THE ADDITION NEEDS DELETION. 7. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN NOT CONSIDERING THAT THE GUIDELINES ISSUED BY THE HON. SUPREME COURT PROVIDING STRICT O BSERVATION AND FOLLOWING PRINCIPALS OF NATURAL JUSTICE. THE ORDER PASSED BY THE LD. A.O. NEEDS ANNULMENT. 8. THE LD. CIT(A) HAS FURTHER ERRED IN NOT GIVING D EDUCTION TO THE AMOUNT OF REMUNERATION PAID TO THE PARTNERS OUT OF INCOME DET ERMINED AT RS. 1,05,140/-. THE SAME NEEDS DEDUCTION. 9. WITHOUT PREJUDICE, THE INTIMATION MADE I S BAD IN LAW AND DESERVES ANNULMENT. ITA NO. 111/RJT /2016 M/S. SARDAR SOAP PRODUCTS VS. ACIT (CPC) ASST.YEAR 2012-13 - 3 - 10. WITHOUT PREJUDICE, NO ADEQUATE, SUFFICIENT AND REASONABLE OPPORTUNITY HAS BEEN PROVIDED WHILE PASSING INTIMATION U/S. 143(1). THE INTIMATION NEEDS ANNULMENT. 11. WITHOUT PREJUDICE, NO ADEQUATE, SUFFICIENT AND REASONABLE OPPORTUNITY HAS BEEN PROVIDED WHILE PASSING APPEAL ORDER. THE INTIM ATION NEEDS ANNULMENT. 12. WITHOUT PREJUDICE, THE DETERMINATION IS FRAMED BEYOND STATUTORY TIME LIMIT. THE INTIMATION NEEDS ANNULMENT. 3. AS CAN BE SEEN, THE ASSESSEE HAS RAISED SEVERAL GROUNDS. HOWEVER, THE SOLITARY GRIEVANCE IS TOWARDS ACCEPTING THE INC OME OF RS.1,05,140/- IN RETURN FILED UNDER S.139 OF THE INCOME TAX ACT, 196 1 (HEREINAFTER REFERRED TO AS 'THE ACT') WHILE PROCESSING INTIMATI ON UNDER S.143(1) OF THE ACT BY THE ACIT CPC BANGALORE. 4. BRIEFLY STATED, THE ASSESSEE IS PARTNERSHIP-FIRM . FOR THE AY 2011- 12, THE ASSESSEE FILED RETURN OF INCOME AT RS.1,05, 135/-. THE RETURN AS FILED BY THE ASSESSEE WAS ACCEPTED AS SUCH WITHOUT ANY ALTERATION AND AN INTIMATION THEREOF UNDER S.143(1) WAS PROCESSED. C ONSEQUENTLY, TAX DEMAND OF RS.40,490/- WAS RAISED ON THE ASSESSEE ON THE RETURNED INCOME. IT IS THE CASE OF THE ASSESSEE THAT AFORES AID INCOME OF RS.1,05,135/- IN THE NAME OF PARTNERSHIP-FIRM WAS DIVIDED AMONG THE PARTNERS TOWARDS THEIR REMUNERATION AS CAN BE VOUC HED FROM THE ACCOUNTS OF THE ASSESSEE AS WELL AS IN THE COMPUTAT ION OF TOTAL INCOME IN RESPECT OF RETURNED INCOME. HOWEVER, IT IS CONTEND ED BY ASSESSEE THAT ITA NO. 111/RJT /2016 M/S. SARDAR SOAP PRODUCTS VS. ACIT (CPC) ASST.YEAR 2012-13 - 4 - THERE BEING NO COLUMN IN THE RETURN OF INCOME FOR I MPUGNED ALLOCATION, THE REMUNERATION TO PARTNERS COULD NOT BE CLAIMED A S DEDUCTION IN THE RETURN AND THUS TO THIS EFFECT, THE RETURN FILED BY THE ASSESSEE IS NOT CORRECT. IT IS BEING CLAIMED BY THE ASSESSEE THAT IN COMPUTATION OF INCOME THE INCOME WAS CORRECTLY DECLARED AT RS.NIL AFTER GIVING EFFECT TO THE PAYMENT TOWARDS PARTNERS. IT IS THE CASE OF THE ASSESSEE THAT THE AO WITHOUT CONSIDERING THE STATUTORY POSITION AS WE LL AS THE PAST RECORDS OF THE ASSESSEE, TREATED THE AFORESAID AMOUNT OF RS .1,05,135/- AS TOTAL INCOME OF THE ASSESSEE AS RETURNED AND DEMANDED TA X AMOUNT OF RS.40,490/- WHICH IS CONTRARY TO THE AUTHORITY OF L AW. IT IS CLAIMED THAT THE AO OUGHT TO HAVE CONSIDERED THE RECORDS OF THE ASSESSEE AND AN OPPORTUNITY OR NOTICE TO THE ASSESSEE OUGHT TO HAVE BEEN GIVEN IN THIS REGARD. THUS, IN SHORT, IT IS THE CASE OF THE ASSE SSEE THAT INSTEAD OF DETERMINING THE INCOME AT NIL, THE AO ERRED IN DETE RMINING THE INCOME AT RS.1,05,135/- WHICH IN FACT IS REMUNERATION TO T HE PARTNERS AND SHOWN BY THE PARTNERS IN THEIR RESPECTIVE ACCOUNT. 5. IN CONSEQUENCE OF THE INTIMATION UNDER S.143(1) DATED 10/05/2013 WHEREIN THE INCOME WAS ACCEPTED AT RS.1,05,140/- AS PER RETURN AND CONSEQUENT DEMAND OF TAX THEREON, THE ASSESSEE MOV ED AN APPEAL BEFORE THE CIT(A). THE CIT(A) HOWEVER, DID NOT ACCEPT THE PLEA OF THE ASSESSEE AND DECLINED TO GRANT RELIEF. THE PROCESS OF REASO NING FOR HIS CONCLUSION IS REPRODUCED HEREUNDER:- ITA NO. 111/RJT /2016 M/S. SARDAR SOAP PRODUCTS VS. ACIT (CPC) ASST.YEAR 2012-13 - 5 - 5.0 DECISION:- 5.1. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED FACTS OF THE CASE IN A.OS ORDER. THE ORDER BEING AGITATED AGAINST IS ORDER U/S.14391). THE INTIMATI ON SUGGEST THAT THE INCOME RETURNED BY THE APPELLANT U/S.139 OF RS. 105135/- WAS ACCEPTED AS SUCH (SR.NO.2 OF INTIMATION U/S.143(1). SO INTIMATION CLEARLY SHOWS THAT NO ALTERATION WAS MADE IN THE RE TURN FILED BY THE APPELLANT. NOW IT IS BEING CLAIMED THAT THERE BEIN G NO COLUMN, THE REMUNERATION TO THE PARTNERS (OF RS.1056135/- DIVID ED EQUALLY BETWEEN TWO PARTNERS) COULD NOT BE CLAIMED AND THUS TO THIS EFFECT RETURN WAS NOT CORRECT. IT IS BEING CLAIMED THAT I N COMPUTATION OF INCOME INCOME WAS SHOWN AS NIL AFTER GIVING CON SIDERATION TO THE REMUNERATION PAID TO THE PARTNERS. 5.2. IN MY OPINION, 143(1) GIVES ONLY LIMITED POWE R TO THE AO BASICALLY TO PROCESS RETURN AFTER MAKING THE FOLLOW ING ADJUSTMENTS (ONLY): 1) ANY ARITHMETICAL ERROR IN THE RETURN; OR 2) AN INCORRECT CLAIM, IF SUCH INCORRECT CLAIM IS APPA RENT FROM ANY INFORMATION IN THE RETURN IT IS APPARENT THAT NO MISTAKE HAD BEEN COMMITTED B Y THE AO IN THE PROCESSING U/S.143(1) WHICH HAD ACCEPTED THE RETURN ED INCOME AS SUCH. 5.3. MOREOVER, GRANTING DEDUCTION U/S.40(B)(V) IS SUBJECT TO THE AUTHORIZATION BY THE PARTNERSHIP DEEP . NOW FOR GIVING DEBIT OF THIS AMOUNT ON HIS OWN , AO WOULD HAVE BEEN REQUIRED TO CALL FOR THE COPY OF PARTNERSHIP DEED AND ACT DOESNT GRANT SUCH POWER TO THE AO. CONSIDERING THE ABOVE FACTS, I HOLD THAT AO HA S NOT ERRED IN PROCESSING THE RETURN AS PRESCRIBED U/S.143(1). 6.0 IN THE RESULT, THE APPEAL IS DISMISSED. ITA NO. 111/RJT /2016 M/S. SARDAR SOAP PRODUCTS VS. ACIT (CPC) ASST.YEAR 2012-13 - 6 - 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE PREFERRED APPEAL BEFORE THE ITAT. 7. NONE APPEARED FOR THE ASSESSEE IN PERSON. HOWEVE R, A WRITTEN SUBMISSION DATED NIL WAS PLACED BEFORE US FOR ITS C ONSIDERATION. THE WRITTEN SUBMISSION FILED BY THE ASSESSEE IS REPRODU CED HEREUNDER:- 1.1. AT THE OUT SET IT IS HUMBLY SUBMITTED THAT TH E ISSUE INVOLVE IN THE MATTER IS FULLY COVERED BY THE DECISIONS OF THE HON. IT AT, E-BENCH , RAJKOT IN THE CASE OF ACIT V/S. ROOPAM IMPEX 157 ITD 360 WHERE THE HON. BENCH HAS B EEN PLEASED TO HOLD AS UNDER : TAX CANNOT BE LEVIED ON ASSESSEE AT A HIGHER AMOUNT OR AT A HIGHER RATE MERELY BECAUSE ASSESSEE UNDER A MISTAKE BELIEF OR D UE TO AN ERROR, OFFERED INCOME E FOR TAXATION AT THAT AMOUNT OR THAT RATE. 1.2. MORE EVER ALSO THE MATTER IS ALSO COVERED BY THE FOLLOWING : 1. CBDT CIRCULAR NO. 14 DATED 11-4-1955 WHERE IT IS CLARIFIED THAT THE A.O. SHOULD NOT TAKE ADVANTAGE OF AN ASSESSEE'S IGNORANCE TO COLLECT MORE TAX OUT OF HIM THAN IS LEGITIMATELY DUE FROM HIM. 2. S.R. KOSHTI V/S. CIT (GUJ.) - 276 ITR 165. REGARDLESS OF WHETHER A REVISED RETURN IS FILED OR NOT AND WHETHER THE OVER ASSESSMENT IS A RESULT OF ASSESSEE'S OWN MISTAKE OR OTHERWISE, ONCE AN ASSESSEE IS IN A POSITION TO SHOW THAT HE HAS BEEN OVER ASSESSED [THAT HE IS ENTITLED TO EXEMPTION UNDER S. 10(10C)], CIT IS DUT Y-BOUND UNDER S. 264(1) TO GIVE RELIEF TO THE ASSESSEE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. 2. THE DETAILS OF THE CASE IS AS UNDER : ITA NO. 111/RJT /2016 M/S. SARDAR SOAP PRODUCTS VS. ACIT (CPC) ASST.YEAR 2012-13 - 7 - 1. THE ASSESSEE DERIVED PROFIT OF RS. 1,05,135/-. T HE SAME IS ALLOCATED AMONGST THE TWO PARTNERS AS REMUNERATION AS UNDER: 1. SHRI SURENDRA KARSHANDAS AT 50% - RS. 52,568/- 2. SHRI VIJAYKUMAR KARSHANDAS AT 50% - RS . 52.567/- TOTAL RS. 1,05,135/- 2.2 THE FACTUAL POSITION IS AS UNDER : 1. THE ASSESSEE FIRM IS DOING BUSINESS ON SMALL BAS IS AND EVERY YEAR THE AMOUNT OF PROFIT EARNED IS BEING DIVIDED AS REMUNERATION TO T HE PARTNERS. 2. IN A.Y. 2011-12 THE BOOK PROFIT OF RS. 1,17,495/ - WAS ALLOCATED AS REMUNERATION TO THE PARTNERS AND HENCE A RETURN OF INCOME SHOWING N IL INCOME WAS FILED BY THE ASSESSEE IS ACCEPTED BY THE DEPARTMENT. EVEN IN EAR LIER YEARS THE SAME POSITION IS THERE. 3. IN A.Y. 2012-13 UNDER APPEAL THE ASSESSEE EARNED AN AMOUNT OF RS. 1,05,135/- WHICH IS DIVIDED AMONG 2 PARTNERS AS REMUNERATION A S PER ACCOUNTS OF THE ASSESSEE AS WELL AS COMPUTATION OF TOTAL INCOME IN RESPECT O F RETURN INCOME. 2.3 THUS, THE PROFIT IS BEING DISTRIBUTED AMONGST P ARTNERS EVERY YEAR. THIS HAS ALSO BEEN ACCEPTED BY THE DEPARTMENT EVERY YEAR. 3. THIS YEAR IN THE RETURN OF INCOME THE AMOUNT OF RS. 1,05,135/- WAS SHOWN AND AS PER COMPUTATION OF INCOME ATTACHED HEREWITH AFTER D EDUCTION OF REMUNERATION TO THE PARTNERS, NIL INCOME WAS THERE. THE REMUNERATION TO THE PARTNERS, THERE BEING NO SPECIFIC COLUMN TO SHOW REMUNERATION TO THE PARTNER S, THE SAME WAS SHOWN IN THIS COMPUTATION OF INCOME. THUS AMOUNT OF RS. 1,05,135/ - IS IN FACT REMUNERATION TO THE PARTNERS AND NOT ASSESSABLE AS INCOME. [PAGE NO.: 7 AND 8 ] 4.1. THE LD. A.O. WITHOUT CONSIDERING THE STATUTORY POSITION AS WELL AS PAST RECORDS OF THE ASSESSEE, TREATED AN AMOUNT OF RS. 1,05,135/- W HICH IS DISTRIBUTED AMONG 2 PARTNERS AS TOTAL INCOME OF THE ASSESSEE AND DEMAND ED TAX AMOUNT OF RS. 40,490/-. THE LD. A.O. NEITHER CONSIDERED THE RECORDS OF THE ASSESSEE NOR GAVE ANY OPPORTUNITY OR NOTICE TO THE ASSESSEE AND THEREFORE VIOLATING P RINCIPALS OF NATURAL JUSTICE. THUS INSTEAD OF DETERMINING INCOME AS NIL THE LD. A.O. E RRONEOUSLY DETERMINED INCOME AT RS. 1,05,135/- WHICH IS IN FACT REMUNERATION TO THE PARTNERS AND SHOWN BY THE PARTNERS IN THEIR RESPECTIVE ACCOUNTS. 4.2 NOT ONLY THIS IN THE RETURN OF INCOME THE ASSES SEE HAS SHOWN THE TAX PAYABLE AS NIL. WHEN ASSESSEE IS SHOWN THIS IF THE LD. A.O. WA NTS TO DIFFER HE OUGHT TO HAVE GIVEN AN OPPORTUNITY TO THE ASSESSEE TO EXPLAIN THE SAME. WITHOUT DOING SO HE STATE ITA NO. 111/RJT /2016 M/S. SARDAR SOAP PRODUCTS VS. ACIT (CPC) ASST.YEAR 2012-13 - 8 - WAY DETERMINATE TAX PAYABLE AT RS. 40,490/-. THIS I S IN VIOLATION IN PRINCIPALS OF NATURAL JUSTICE AND ALSO JUDICIAL GUIDE LINES FROM THE HON. SUPREME COURT TO PROVIDE REASONABLE OPPORTUNITY TO SUBMIT THE CASE. 4.3 EVEN BEFORE THE LD. A.O. CPC THE POSITION OF P REVIOUS IS ALWAYS THERE. WHEN HE MUST HAVE FOUND THAT THE FIRM HAS GIVEN REMUNERATIO N TO THE PARTNERS AND ACCESSIBLE INCOME THERE AFTER DECLARED AS NIL. WITHOUT CONSIDE RING THIS ASPECT ALSO HE ERRED IN NOT PROVIDING ANY OPPORTUNITY STATE WAY DETERMINED INCOME AT RS. 1,05,135/- AND TAX PAYABLE AT RS. 40,490/-. WHILE DOING SO HE HAS NOT CONSIDERED THE RETURN INCOME DECLARED AS NIL AND TAX PAYABLE NIL AND ERRED IN DE TERMINING INCOME AT RS. 1,05,135/- AND TAX PAYABLE AT RS. 40,490/- WITH PROVIDING ANY OPPORTUNITY WHICH OUGHT TO HAVE BEEN. 4.4 THUS THERE IS AN ERROR IN DETERMINING INCOME AT 1,05,135/- WHICH IS IN FACT TO BE ASSESSED AS NIL INCOME AS PER ALL PREVIOUS YEARS. T HE LD. A.O. HAS NOT CONSIDERED THIS ASPECT. THE SAME THEREFORE NEEDS DELETION. 5.1 IT MAY ALSO BE MENTIONED THAT THE ABOVE AMOUNT OF REMUNERATION HAS ALSO BEEN SHOWN BY BOTH THE PARTNERS IN THEIR RETURN OF INCOM E AS UNDER 1. SHRI SURENDRA KARSHANDAS AT 50% - RS . 52,568/- 2. SHRI VIJAYKUMAR KARSHANDAS AT 50% - RS. 52.567/- TOTAL RS. 1,05,135/- 5.2 COPY OF ACKNOWLEDGEMENT OF INCOME FILED BY BO TH THE ABOVE PARTNERS ALONG WITH THEIR COMPUTATION OF INCOME SHOWING THIS REMUNERATI ON SHOWN BY THEM IS ALSO SUBMITTED HEREWITH FOR KIND PERUSAL. [PAGE NO: 10 TO 15] 5.3 THUS THERE IS ALSO DOUBLE TAXATION OF THE SA ME AMOUNT WHICH IS ALSO NOT PERMISSIBLE. 6. EVEN SUBSEQUENT TO A.Y. 2012-13, AFTER ALLOCATIO N OF REMUNERATION TO THE PARTNERS, THE INCOME OF THE ASSESSEE AS BEING ASSESSED AND AC CEPTED AT NIL INCOME. THUS ONLY IN A.Y. 2012-13, THE ABOVE ERROR IS THERE. 7. IT MAY ALSO BE MENTIONED THAT THE RETURN OF INCO ME FOR A.Y. 2012-13 DOES NOT CONTAIN ANY SPECIFIC COLUMN TO SHOW REMUNERATION TO THE PARTNERS. IN A.Y. 2015-16, THE SAME IS INSERTED WHICH IS ENCLOSED HEREWITH FOR KIND PERUSAL. 8. IT IS THEREFORE HUMBLY PRAYED THAT THE INCOME DE TERMINED AT RS. 1,05,135/- MAY KINDLY BE DIRECTED TO BE DELETED AND MAY KINDLY BE DIRECTED TO BE TAKEN AT NIL. ALTERNATIVELY, THE MATTER MAY KINDLY BE RESTORED BA CK TO THE LD. A.O. TO ALLOW ITA NO. 111/RJT /2016 M/S. SARDAR SOAP PRODUCTS VS. ACIT (CPC) ASST.YEAR 2012-13 - 9 - DEDUCTION OF REMUNERATION PAID TO THE PARTNERS FOR AFTER VERIFICATION BY GIVING AN OPPORTUNITY TO THE ASSESSEE. 3. THE ASSESSEE ALSO HUMBLY REPLY ON THE FO LLOWING : SUSHIL KUMAR DAS V. ITO 1. 2011 TAXPUB (DT) 1770 (KOL-TRIB): (2011) 011 ITR (TRIB) 0017 HELD: THE LAW IMPOSED BY THE AO TO ASSESS THE INCOME ACCO RDING TO LAW AND DETERMINED THE TAX PAYABLE THEREON. IN DOING SO, TH E AO CANNOT ASSESS THE INCOME OF THE ASSESSEE AN AMOUNT WHICH IS NOT TAXABLE AS PER LAW THOUGH SHOWN BY THE ASSESSEE IN THE RETURN. IT IS ALWAYS OPEN TO THE ASSESSEE TO TAKE A PLEA THAT THE TAXABLE INCOME THOUGH SHOWN AS INCOME IS NOT TAXABLE UNDER LAW BEF ORE THE HIGHER AUTHORITIES THEREFORE, THE INCOME OFFERED AS SUCH WAS NOT LIABL E TO TAX. IT IS A WELL SETTLED THAT THE PRINCIPLE FOR DETERMI NING THE TAXABLE INCOME OF THE ASSESSEE UNDER THE IT ACT SHOULD BE WITHIN THE PURV IEW OF THE LAW IN FORCE. IF THE TAXABLE INCOME DETERMINED BY THE AO IS NOT IN ACCOR DANCE WITH SUCH PRINCIPLE IT IS OPEN TO THE ASSESSEE TO CONTEND THE SAME BEFORE THE HIGHER AUTHORITIES TO FOLLOW THE CORRECT APPLICATION OF LAW TO DETERMINE THE ACTUAL TAXABLE INCOME OF THE ASSESSEE. THE LOWER AUTHORITIES, ARE NOT EXPECTED, TO SAY THA T MERELY BECAUSE THE ASSESSEE HAS RETURNED INCOME WHICH IS HIGHER THAN THE INCOME DET ERMINED IN ACCORDANCE WITH LEGAL PRINCIPLES SUCH RETURNED INCOME CAN BE TREATE D AS LAWFULLY ASSESSED. AN ASSESSEE IS LIABLE TO PAY TAX ONLY UPON THE TAXABLE INCOME. THE LAW IMPOSED BY THE AO TO ASSESS THE INCOME ACCORDING TO LAW AND DETERM INED THE TAX PAYABLE THEREON. IN DOING SO, THE AO CANNOT ASSESS THE INCOME OF THE AS SESSEE AN AMOUNT WHICH IS NOT TAXABLE AS PER LAW THOUGH SHOWN BY THE ASSESSEE IN THE RETURN. IT IS ALWAYS OPEN TO THE ASSESSEE TO TAKE A PLEA THAT THE TAXABLE INCOME THOUGH SHOWN AS INCOME IS NOT TAXABLE UNDER LAW BEFORE THE HIGHER AUTHORITIES. TH E CIT(A) WITHOUT GOING INTO THE MERITS OF THE CASE HELD THAT THE CIT(A) IS NOT HAVI NG ANY POWER TO REDUCE THE TAXABLE INCOME OF THE ASSESSEE AT THE APPELLATE STAGE, WHIC H IS NOT CORRECT. THE INTEREST RECEIVED AS A RESULT OF THE ORDER OF THE HONBLE HI GH COURT WAS NOT A STATUTORY INTEREST AND WAS IN THE FORM OF DAMAGE/COMPENSATION AND THE SAME WAS NOT LIABLE TO TAX. IN VIEW OF THE ABOVE, AFTER CONSIDERING THE TO TALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE INTEREST RECEIVED BY THE ASSESSEE A S PER THE ORDER OF THE HONBLE HIGH COURT WAS NOT TAXABLE AND THE SAME IS A CAPITAL REC EIPT. THE APPELLATE AUTHORITIES HAVE POWERS TO ADMIT POINTS OF LAW AND ADMIT CLAIM FOR EXEMPTION BASED ON MATERIALS ON RECORD. [PARA 9] IN VIEW OF THE ABOVE, THE AO IS DIRECTED TO TREAT THE AFORESAID RECEIPT AS CAPITAL RECEIPT WHICH WAS RECE IVED BY HIM AS PER THE ORDER OF THE HONBLE HIGH COURT. {PARA 9}. ITA NO. 111/RJT /2016 M/S. SARDAR SOAP PRODUCTS VS. ACIT (CPC) ASST.YEAR 2012-13 - 10 - 2. NATIONAL THERMAL POWER CO. LTD. V/S. CIT - 229 I TR 383 - HON. S.C. HELD : UNDER S. 254 THE TRIBUNAL MAY, AFTER GIVING BOTH THE PART IES TO THE APPEAL AN OPPORTUNITY OF BEING HEARD, PASS SUCH ORDERS THEREON AS IT THINKS FIT. THE POWER OF THE TRIBUNAL IN DEALING WITH APPEALS IS THUS EXPRESSED IN THE WIDES T POSSIBLE TERMS. THE PURPOSE OF THE ASSESSMENT PROCEEDINGS BEFORE THE TAXING AUTHOR ITIES IS TO ASSESS CORRECTLY THE TAX LIABILITY OF AN ASSESSEE IN ACCORDANCE WITH LAW. IF , FOR EXAMPLE, AS A RESULT OF A JUDICIAL DECISION GIVEN WHILE THE APPEAL IS PENDING BEFORE THE TRIBUNAL, IT IS FOUND THAT A NON-TAXABLE ITEM IS TAXED OR A PERMISSIBLE D EDUCTION IS DENIED, THERE IS NO REASON WHY THE ASSESSEE SHOULD BE PREVENTED FROM RA ISING THAT QUESTION BEFORE THE TRIBUNAL FOR THE FIRST TIME, SO LONG AS THE RELEVAN T FACTS ARE ON RECORD IN RESPECT OF THAT ITEM. THERE IS NO REASON TO RESTRICT THE POWER OF THE TRIBUNAL UNDER S. 254 ONLY TO DECIDE THE GROUNDS WHICH ARISE FROM THE ORDER OF CIT(A). BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT HAVE A RIGHT TO FILE AN APPEAL/CR OSS-OBJECTIONS BEFORE THE TRIBUNAL. TRIBUNAL SHOULD NOT BE PREVENTED FROM CON SIDERING QUESTIONS OF LAW ARISING IN ASSESSMENT PROCEEDINGS ALTHOUGH NOT RAISED EARLI ER.JUTE CORPORATION OF INDIA LTD. VS. CIT (1990) 88 CTR (SC) 66 : (1991) 187 ITR 688 (SC): TC 7R.343 APPLIED; CIT VS. ANAND PRASAD (1981) 128 ITR 388 (DEL) : TC 8R.1021, CIT VS. KARAMCHAND PREMCHAND (P) LTD. (1969) 74 ITR 254 (GUJ) : TC 8R. 547 AND CIT VS. CELLULOSE PRODUCTS OF INDIA LTD. (1985) 44 CTR (GUJ) 278 (FB) : (1985) 151 ITR 499 (GUJ)(FB) : TC 8R.965 OVERRULED. 3. RAJRANI GULATI V/S. CIT CENTRAL TILAK - 346 ITR 543 - (HON. ALL. H.C.) DECISION IN FAVOUR OF FAVOUR} ASSESSEE APPEALSTATUTORY RIGHT OF ASSESSEE U/S. 250-ASSESSE E SOLD 16,000 EQUITY SHARES FOR A CONSIDERATION OF RS. 14,91,3207- WHICH WAS PURCHASE D FOR RS.88,168SALES RESULTED IN LONG TERM CAPITAL GAIN OF RS.L2,34,006/-'AT RATE OF 20%AO ACCEPTED LONG TERM CAPITAL GAIN AND PASSED ASSESSMENT ORDERCIT HOLDIN G THAT LONG TERM CAPITAL GAIN WILL HAVE TO BE COMPUTED AT RATE OF RS.10% DIRECTED AO TO COMPUTE LONG TERM CAPITAL GAIN AT THE RATE OF 10% IN ACCORDANCE WITH THE CIRC ULAR NO. 14 (XL-35) DATED 11.04.1955 READ WITH AMENDED PROVISO TO S. 112 (1) IT AT FOLLOWING JUDGMENT IN CASE OF GOETZE (INDIA) LTD. VS. CIT, HELD ASSESSEE CANNOT RAISE GROUND BEFORE FIRST APPELLATE AUTHORITY, AS HE HAS SHOWN THE LONG TERM CAPITAL GAIN AT THE RATE OF 20% AND HAS NOT FILED ANY REVISED RETURNISSUE AS TO WH ETHER ON TRUE AND CORRECT INTERPRETATION OF PROVISIONS TO S. 250 TRIBUNAL WAS CORRECT IN HOLDING THAT ASSESSEE'S CLAIM FOR BEING ASSESSED AS PER SECOND PROVISO TO S . 112 (1) COULD NOT HAVE BEEN CONSIDERED AND ALLOWED FROM THE STAGE OF THE FIRST APPELLATE AUTHORITYHELD, RELYING ON SUPREME ( COURT'S DECISION IN CASE OF JUTE CORPORATION OF IN DIA LTD. ASSESSEE IS ENTITLED TO RAISE LEGAL ISSUE BEFORE FIRST APPELLAT E AUTHORITY, WHICH POSSESSED CO- TERMINUS POWERS SIMILAR TO AOCIT (A) HAS RIGHTLY A DJUDICATED STATUTORY RIGHT OF ASSESSEE AND DIRECTED TO ALLOW THE LONG TERM CAPITA L GAIN AT THE RATE OF 10%. ITA NO. 111/RJT /2016 M/S. SARDAR SOAP PRODUCTS VS. ACIT (CPC) ASST.YEAR 2012-13 - 11 - 4. CIT V/S. MAHALAXMI SUGAR MILLS CO. LTD. - HON. S.C. 160 ITR 920 (PARA- 10/PAGE8) IN THE SECOND PLACE, THERE IS A DUTY CAST ON THE IT O TO APPLY THE RELEVANT PROVISIONS OF THE INDIAN IT ACT FOR THE PURPOSE OF DETERMINING THE TRUE FIGURE OF THE ASSEESSEE'S TAXABLE INCOME AND THE CONSEQUENTIAL TAX LIABILITY. MERELY BECAUSE THE ASSESSEE FAILS TO CLAIM THE BENEFIT OF A SET OFF, IT CANNOT RELIEV E THE ITO OF HIS DUTY TO APPLY S. 24 IN AN APPROPRIATE CASE. ENCL: AS ABOVE . SD/- D.R. ADHIA AR 8. THE LD.DR, ON THE OTHER HAND, SUBMITTED THAT THE DEPARTMENT HAS SIMPLY ACCEPTED THE RETURN FILED BY THE ASSESSEE WI THOUT MAKING ANY ADJUSTMENTS THEREIN. THEREFORE, THERE IS NO OCCASI ON TO RAISE ANY GRIEVANCE ON THE INTIMATION. NO FAULT CAN BE FOUN D WITH THE DEPARTMENT FOR ACCEPTING THE INCOME OFFERED BY THE ASSESSEE. ALSO, THE SCOPE OF SECTION 143(1) DOES NOT PERMIT THE DEPARTMENT TO GE T INTO THE DEBATE AS PROPOSED ON BEHALF OF THE ASSESSEE. 9. WE HAVE CAREFULLY CONSIDERED THE FACTS AND CIRCU MSTANCES OF THE CASE AS NARRATED IN THE AFORESAID PARAS. THE SHOR T GRIEVANCE OF THE ASSESSEE IS THAT THE RETURN FILED BY THE ASSESSEE I TSELF OUGHT TO HAVE BEEN PROCESSED DIFFERENTLY OR AN OPPORTUNITY BEFORE RAIS ING THE DEMAND OUGHT TO HAVE BEEN GIVEN. IT IS PLEADED THAT THE DEMAND RAISED ON THE ASSESSEE IS WITHOUT GRANTING THE BENEFIT OF PAYMENT OF REMUN ERATION TO ITS PARTNERS WHICH IS ALREADY DISCLOSED IN THEIR RESPECTIVE RETU RNS. WE EX-FACIE FIND THIS LINE OF ARGUMENTS RAISED ON BEHALF OF THE ASS ESSEE AS ITA NO. 111/RJT /2016 M/S. SARDAR SOAP PRODUCTS VS. ACIT (CPC) ASST.YEAR 2012-13 - 12 - INCOMPREHENSIBLE AND FARFETCHED. AS PER THE SCHEM E OF THE ACT, A RETURN FILED UNDER THE IT ACT SHALL BE PROCESSED IN THE MA NNER TO CORRECT ARITHMETICAL ERROR ETC. AND AFTER MAKING CERTAIN PRIMA-FACIE ADJUSTMENT AS ENUMERATED IN SECTION 143(1) OF THE ACT. A BARE RE ADING OF THE SECTION 143(1) SUGGESTS THAT THE INCOME RETURNED BY THE A SSESSEE IS THE STARTING POINT AND ALL THE ADJUSTMENTS SUGGESTED TO THE RE TURNED INCOME ARE BROADLY OF DETRIMENTAL NATURE. IT IS BEYOND SCOPE OF THE AO UNDER S.143(1) TO ENGAGE IN A LONG DRAWN PROCESS AND MAK E THE ADJUSTMENT PROPOSED BY THE ASSESSEE WHILE PROCESSING THE RETUR N UNDER THE AFORESAID PROVISION. THE AO IS NOT EXPECTED TO CHASE A WILL- O THE WISP AS DEMANDED BY THE ASSESSEE. THE PURPORTED ERROR COMM ITTED BY THE ASSESSEE CANNOT BE VISUALIZED UNDER S.143(1) BY ANY STRETCH OF IMAGINATION. THUS, THE RELIEF URGED ON BEHALF OF T HE ASSESSEE IS CLEARLY BEYOND THE SCOPE AND AMBIT OF SECTION 143(1) OF THE ACT. HENCE, THE ACTION OF THE AO CANNOT BE MODIFIED AS SOUGHT. AT THIS JUNCTURE, WE NOTE THAT AS A REMEDIAL MEASURE, S.139(5) OF THE INCOME TAX ACT PROVIDES FOR REVISION OF THE RETURN FILED WITHIN STIPULATED TIME WHERE ANY PERSON HAVING FURNISHED A RETURN OF INCOME DISCOVERS ANY O MISSION OR ANY WRONG STATEMENT THEREIN. THEREFORE, SCHEME OF INCOME TA X IS NOT ENTIRELY WITHOUT REMEDY FOR THE PURPORTED MISTAKE CLAIMED TO HAVE BEEN RECTIFIED BY THE ASSESSEE IN THE PRESENT APPEAL. THE ASSES SEE HAS PROBABLY CHOSEN A WRONG PATH FOR SEEKING CORRECTION OF THE ALLEGED ERROR COMMITTED BY THE ASSESSEE ITSELF. THE AO (ACIT-CPC BANGALORE) C ANNOT BE BLAMED ITA NO. 111/RJT /2016 M/S. SARDAR SOAP PRODUCTS VS. ACIT (CPC) ASST.YEAR 2012-13 - 13 - FOR MERELY ACCEPTING AN ERRONEOUS RETURN FILED BY AN ASSESSEE. THEREFORE, WE ARE NOT IN A POSITION TO TRAVEL BEYON D THE SCOPE OF SECTION 143(1) TO ENTERTAIN THE RELIEF SOUGHT. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE COURT ON 16/02/2 017 AT AHMEDABAD. SD/- SD/- ( RAJPAL YADAV) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD ; DATED 16/02/2017 ..#, $.,#../ T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. - & ' .& / CONCERNED CIT 4. ' .& ( ) / THE CIT(A)-3, RAJKOT 5. 2$34 ,&,# , , /DR,ITAT, RAJKOT 6. 4?@ A% / GUARD FILE. / BY ORDER, 2& ,& //TRUE COPY// / ( DY./ASSTT.REGISTRAR) %&, / ITAT, RAJKOT 1. DATE OF DICTATION .. 13.2.17 (DICTATION-PAD 12 - PAGES ATTACHED AT THEHIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER .. 13.2.17 3. OTHER MEMBER... 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 17.2.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 17.2.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER