SHRI ALPESH T. PARIKH, Ahmedabad V. THE ITO- WARD-9(1), Ahmedabad

ITA 1158/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9278 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-08-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 15-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C
• Assessee Lawyers: J M SHAH
• Keywords: Principle of natural justice; Difference of opinion; Assessment record; Change of opinion
• Section: 143(3); 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL,A-BENCH,AHMEDA BAD. BEFORE :SHRI H L KARWA, JUDICIAL MEMBER, AND SHRI D.C.AGRAWAL, ACCOUNTANT MEMBER. ITA NO.1158/AHD/2009 (ASSESSMENT YEAR 2004-2005) SHRI ALPESH TRILOKBHAI PARIKH, PROP. OF M/S. PARIKH DEVELOPERS, 71, KAMDHENU COMPLEX, NR. POLYTECHNIC, AHMEDABAD. VERSUS ITO, WARD 9(1), AHMEDABAD. (APPELLANT) (RESPONDENT) PAN: AAMPP2497C FOR THE APPELLANT: SHRI J.M. SHAH, AR FOR THE RESPONDENT SHRI M.C. PANDIT, DR ORDER PER SHRI D.C. AGRAWAL: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) IN CANCELING THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER AND DIRECTING HIM TO CARRY OUT I NQUIRIES ON CERTAIN ISSUES. 2. THE FACTS OF THE CASE ARE THAT: FOR ASSESSMENT YEAR 2004-05, ASSESSING OFFICER PAS SED AN ORDER UNDER SECTION 143(3) ON 29-11-2006 ASSESSING THE AS SESSEE ON AN INCOME OF RS. 3,04,448/- AND AGRICULTURAL INCOME OF RS. 2, 79,286/- AGAINST RETURNED INCOME OF RS. NIL AND AGRICULTURAL INCOME OF RS. 4,02,510/-. IN THE SHOW CAUSE NOTICE ISSUED BY THE LD. CIT, IT WAS POINTED OUT TO THE ASSESSEE AS UNDER: 2 ITA NO. 1158/AHD/2009 (ASSESSMENT YEAR 2004-2005) 3. IT IS SEEN FROM THE ASSESSMENT RECORDS THAT THE ASSESSEE HAS SHOWN EXCESS YIELD OF VARIOUS CROPS COMPARISON WITH THE YIELD PUBLISHED BY THE DIRECTORATE OF AGRICULTURE, GUJARA T STATE TO THE TUNE OF RS.3,57,080/-. THE EXCESS YIELD SHOWN IS A S PER BELOW MENTIONED CHART. NAME OF THE CROP YIELD (KG. PER BIGHA DISCLOSED BY THE ASSESSEE) YIELD AS PER GOVT. PUBLICATI ON TOTAL AREA CULTIVATED (PER BIGHA) EXCESS PRODUCTIO N SHOWN(KG. ) AMOUNT (RS.) CASTER OIL 899.. 220 9 6113 91,705 PADDY 1722.7 386 17 22724 1,70,430 GUWAR 546.7 124 2 8455 14,795 THEL 275.8 85 6 1145 80,150 4.THE YIELD SHOWN BY THE ASSESSEE APPEARS TO BE UNU SUALLY HIGH IN EACH OF THE PRODUCTS AS COMPARED TO THE GOVT. ACCEP TED STANDARDS. IT APPEARS THAT THE ASSESSEE HAS INFLATED HIS AGRIC ULTURAL INCOME BY SHOWING HIGHER YIELD AND THEREBY AVOIDED PAYMENT OF TAX ON TAXABLE INCOME BY CLAIMING THE SAME AS EXEMPT INCOM E. THE ASSESSING OFFICER DOES NOT APPEAR TO HAVE SOUGHT AN Y EXPLANATION FOR THE UNUSUALLY HIGH YIELD SHOWN BY THE ASSESSEE. 5.IT IS ALSO NOTICED THAT IN THE P & L ACCOUNT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 1,82,215/- ON ACCOUNT OF F OREIGN TRAVELLING EXPENSES AS IS APPARENT FROM COL. 17(B) OF FORM NO. 3 CD. IT APPEARS THAT THE ASSESSING OFFICER AS NOT I NVESTIGATED THE ISSUE PROPERLY AND HAS NOT PLACED ON RECORD ANY SUB STANTIAL PROOF REGARDING THE EXPENDITURE CLAIMED AS BUSINESS EXPEN SES. IT APPEARS THAT THIS IS NOT ALLOWABLE EXPENSE BEING IN CURRED FOR NON BUSINESS PURPOSE. 6.IT IS ALSO NOTICED THAT DURING THE YEAR UNDER CON SIDERATION ASSESSEE HAS ADDED RS. 21,51,103/- AS FRESH CAPITAL . ON GOING THROUGH THE CASE RECORD IT IS OBSERVED THAT ASSESSE E HAS NOT GIVEN ANY SOURCE OF THIS AMOUNT. THE SAME IS REQUIRED TO BE INVESTIGATED. 7.FURTHER, IT IS NOTICED THAT THE ASSESSEE HAS CLAI MED INTEREST EXPENSES OF RS.2,10,508/- IN THE P & L ACCOUNT OF L OANS, SAME TIME THE ASSESSEE HAS GIVEN LOANS AND ADVANCES TO VARIOU S PERSONS OF RS. 17.55 LACS. THE ASSESSEE HAS NOT CHARGED ANY I NTEREST ON THIS AMOUNT. IT APPEARS THAT THE ASSESSEE ADVANCED INTE REST FREE 3 ITA NO. 1158/AHD/2009 (ASSESSMENT YEAR 2004-2005) AMOUNT WHEREAS HE HAS PAID THE INTEREST OF RS.2,10, 508/-. THE INTEREST EXPENSES SO CLAIMED ARE REQUIRED TO BE DIS ALLOWED BEING EXPENSES INCURRED FOR NON BUSINESS PURPOSES. IN RESPONSE TO THIS, ASSESSEE FURNISHED A REPLY ON 17-02-2009 STATING THEREIN AS UNDER: REGARDING AGRICULTURAL INCOME----- THE ASSESSING OF FICER HAS MADE THE ADDITION IN RESPECT OF AGRICULTURE INCOME AND MATTER IS PENDING BEFORE ITAT. THE MATERIAL ON WHICH CIT HAS RELIED HAS NOT BEEN PROVIDED TO THE ASSESSEE. WHAT IS ACTUALLY PRODUCE D AND SOLD HAS BEEN DECLARED IN THE RETURN. REGARDING FOREIGN TRAVEL EXPENSES---- IT WAS SUBM ITTED THAT EXPANSES WERE INCURRED FOR DEVELOPMENT OF BUSINESS AND THE ASSESSING OFFICER HAS DISALLOWED 50% EXPENSES FOR BUSINESS PU RPOSES. THE ASSESSEE HAS RECEIVED BUSINESS IN SUBSEQUENT YEARS FROM THE FOREIGN PARTIES. REGARDING ADDITION IN PARTNERS CAPITAL ACCOUN T----- IT WAS SUBMITTED THAT DETAILS WERE FURNISHED BEFORE THE ASSESSING OF FICER. REGARDING THE CLAIM OF INTEREST EXPENSES----- -- IT WAS SUBMITTED THAT ALL THE DETAILS ARE FILED WITH THE ASSESSING OFFICE R AND ASSESSING OFFICER HAS ACCEPTED THE CLAIM AFTER VERIFICATION. 3. THE LD. CIT HOWEVER DID NOT AGREE AND HELD THE O RDER OF ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF REVENUE ON THE ABOVE POINTS AND DIRECTED THE ASSESSING OFFICER TO CARRY OUT INQUIRIES. 4. AGAINST THIS LEARNED A.R. SUBMITTED THAT IT IS A CASE OF CHANGE OF OPINION. ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3). HE REFERRED TO VARIOUS DECISIONS IN SUPPORT OF HIS ARGUMENT THA T ORDER OF THE ASSESSING OFFICER IS NOT ERRONEOUS. MUMBAI ITAT CROWN FROZEN FOODS IT REVIEW IT MA RCH 05/17 4 ITA NO. 1158/AHD/2009 (ASSESSMENT YEAR 2004-2005) FOLLOWED MALABAR INDUSTRIAL CO. LTD. 243 ITR 83 (S. C.) CHANDIGARH ITAT VINODKUMAR GUPTA V/S I.T.O. P & H H.C. C.I.T. V/S R K METAL WORKS 112 ITR 445 DELHI ITAT SMT. GULJEET WALIA V/S I.T.O. 32 TTJ 5 38 DELHI ITAT S.N. AGRAWAL V/S. I.T.O. 13 TTJ 444. 5. AGAINST THIS LD. D.R. SUBMITTED THAT ASSESSING O FFICER HAS ACTUALLY NOT CARRIED OUT ANY INQUIRIES ON THE ABOVE ISSUES. THEREFORE, ORDER OF THE ASSESSING OFFICER IS ERRONEOUS. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND CARE FULLY PERUSING THE MATERIAL ON RECORD, WE ARE OF THE VIEW THAT ASSESSI NG OFFICER HAS NOT CARRIED OUT INQUIRIES ON THE ISSUE RAISED BY THE CO MMISSIONER EXCEPT ON ISSUE OF FOREIGN TRAVEL EXPENSES OUT OF WHICH HE HA S DISALLOWED 50% OF THE EXPENSES CLAIMED. ON ALL OTHER ISSUES THERE AP PEARS TO BE NO APPLICATION OF MIND BY THE ASSESSING OFFICER. 7. REGARDING AGRICULTURAL INCOME WE NOTICE THAT THE ASSESSEE HAD MADE A CLAIM OF RS. 4,02,510/-. THE ASSESSING OFFI CER HAD NOTICED THAT ASSESSEE HAS NOT SHOWN ANY EXPENDITURE, THEREFORE, HE DISALLOWED 30% THEREOF AS AGRICULTURAL EXPENSES AND TREATED IT AS NON AGRICULTURAL INCOME. THIS MATTER IS IN DISPUTE BEFORE THE TRIBUNAL. HOW EVER, ASSESSING OFFICER DID NOT CONSIDER THE ISSUE WHETHER PRODUCTI ON SHOWN BY THE ASSESSEE FROM AGRICULTURAL LAND WAS EXCESSIVE FOR T HE PURPOSE OF CLAIMING EXEMPTED INCOME. ONCE THIS ISSUE HAS NOT BEEN TOUC HED BY THE ASSESSING OFFICER, COMMISSIONER HAS JURISDICTION TO DIRECT TH E ASSESSING OFFICER TO MAKE INQUIRY. 8. IN RESPECT OF ADDITION IN CAPITAL ACCOUNT, IT SE EMS THAT ASSESSING OFFICER HAS ACCEPTED THE CLAIM WITHOUT ANY VERIFICA TION AND INQUIRIES. THE ADDITION IN CAPITAL AMOUNT CONSISTED OF A LOAN OF R S. 5.57 LACS AND SALE OF 5 ITA NO. 1158/AHD/2009 (ASSESSMENT YEAR 2004-2005) AGRICULTURAL LAND AMOUNTING TO RS. 13,75,000/-. TH E RECORDS DID NOT REVEAL THAT ASSESSING OFFICER HAD CARRIED OUT ANY I NQUIRY ON THE GENUINENESS OF THIS CLAIM. IN RESPECT OF CLAIM OF INTEREST THERE IS NO MATERIAL SHOWN TO HAVE BEEN SUBMITTED BY THE ASSESS EE TO THE ASSESSING OFFICER THAT INTEREST FREE FUNDS WERE DIVERTED AS I NTEREST FREE ADVANCES. THE CIT WAS THEREFORE JUSTIFIED IN DIRECTING THE AS SESSING OFFICER TO CARRY OUT NECESSARY INQUIRES. 9 . LD. A.R. HAS REFERRED TO CERTAIN AUTHORITIES. BUT COMPLETE CITATION OR THE DECISIONS WERE NOT MADE AVAILABLE, THEREFORE WE ARE UNABLE TO DISCUSS SOME OF THEM HERE. IN MALABAR INDUSTRIAL CO.(SUPRA) THE FACTS WERE THAT THAT COMPANY RECEIVED COMPENSATION/DAMAGES FOR NOT RECEIVING INSTALLMENTS FOR SALE OF RUBBER PLANTATION FROM TH E PURCHASER IN TIME AND TREATED THE SAME AS AGRICULTURE INCOME WHICH CLAIM WAS ACCEPTED BY A.O. WITHOUT VERIFICATION. ON THESE FACTS THE CONC LUSION THAT THE ORDER OF THE INCOME-TAX OFFICER WAS ERRONEOUS WAS IRRESISTIB LE. HONBLE SUPREME COURT HELD THAT: A BARE READING OF SECTION 263 OF THE INCOME-TAX AC T, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICTION BY TH E COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEO US IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUG HT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVE NUE. IF ONE OF THEM IS ABSENT-IF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT P REJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE-REC OURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER , IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN IN CORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUI REMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APP LYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' IS NOT AN EXPRESSION OF ART AND IS NOT DEF INED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEANING IT IS OF WIDE IMPORT AND IS NOT CO NFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WI TH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRO NEOUS ORDER OF THE INCOME-TAX OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE PH RASE 'PREJUDICIAL TO THE INTERESTS OF 6 ITA NO. 1158/AHD/2009 (ASSESSMENT YEAR 2004-2005) THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. 9. THE HON'BLE ALLAHABAD HIGH COURT IN MANULAL MATA DI VS. CIT (2005) 277 ITR 376 (ALLAHABAD), JAGDISH KUMAR GULAT I VS. CIT (2004) 269 ITR 71 (ALLAHABAD), AND HONBLE MADRAS HIGH COU RT IN RAMASWAMI CHAITYAR VS. CIT 1996 220 ITR 657 (MADRAS) HAVE HEL D THAT WHERE THE ASSESSING OFFICER HAS NOT CARRIED OUT INQUIRES ON A NY ISSUE THE COMMISSIONER IS JUSTIFIED IN CANCELING THE ORDER AN D DIRECTING THE ASSESSING OFFICER TO MAKE INQUIRIES AND PASS ORDER AFRESH ON THOSE POINTS. 10. THEREFORE, IN OUR CONSIDERED VIEW, COMMISSIONER WAS JUSTIFYING IN CANCELING THE ORDER OF THE ASSESSING OFFICER AND DI RECTING HIM TO CARRY OUT NECESSARY INQUIRIES BEFORE ACCEPTING THE CLAIM. THE ORDER OF THE LD. CIT IN DIRECTING THE ASSESSING OFFICER TO CARRY OUT INQUIRES ON THE ISSUE OF EXCESSIVE PRODUCTION OF AGRICULTURAL PRODUCE, IN RESPECT OF ADDITIONS IN CAPITAL ACCOUNT, AND IN RESPECT OF CLAIM OF INTERES T EXPENSES IS JUSTIFIED. HIS ORDER IN RESPECT OF FOREIGN TRAVEL EXPENSES IS NOT UPHELD. 11. AS A RESULT, THE APPEAL OF THE ASSESSEE IS PART LY ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON DATED 28 TH AUGUST, 2009. SD/- SD/- (H.L. KARWA) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTA NT MEMBER AHMEDABAD; DATED: 28/08/2009 ANKIT* COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED 7 ITA NO. 1158/AHD/2009 (ASSESSMENT YEAR 2004-2005) 4. THE CIT, 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, ASSTT. REGISTRAR/ DEPUTY REGISTRAR ITAT, AHMEDABAD BENCHES, AHMEDABAD.