G.M.P.Properties Pvt.Ltd., CHENNAI V. ACIT, CHENNAI

ITA 1181/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64696 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 29-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR S MOHARANA
• Assessee Lawyers: N QUADIR HOSEYN
• Keywords: Capital expenditure
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH CHENNAI BEFORE DR. O. K. NARAYANAN, VICE PRESIDENT AND SHRI V. DURGA RAO, JUDICIAL MEMBER ------- ITA NO. 1181/MDS/2012 ASSESSMENT YEAR : 2007-08 M/S. G.M.P. PROPERTIES PVT. LTD., NO.9, PANDIAN STREET, VELACHERY, CHENNAI-600 042. V. THE ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-II(2), CHENNAI. (PAN : AABCG1724B) (APPELLANT) (RESPONDENT) APPELLANT BY : SRI N. QUADIR HOSEYN, ADVOCATE RESPONDENT BY : DR. S. MOHARANA, CIT-DR DATE OF HEARING : 12-12-2012 DATE OF PRONOUNCEMENT : 21-12-201 2 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 26-03-2012 PASSED BY THE COMMISSIONER OF INCO ME TAX UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 FOR T HE ASSESSMENT YEAR 2007-08. ITA NO.1181/MDS /2012 : 2 : 2. ORIGINALLY THE ASSESSMENT WAS COMPLETED UNDER SE CTION 143(1) OF THE INCOME TAX ACT, 1961 ('THE ACT' FOR S HORT). SUBSEQUENTLY THE ASSESSING OFFICER PASSED A SCRUTIN Y ASSESSMENT UNDER SECTION 143(3) OF THE ACT. IN ITS RETURN OF INCOME THE ASSESSEE HAD DISCLOSED RENTAL INCOME OF ` 29,29,105/- AND INTEREST OF ` 30,46,663/-. IN THE COMPUTATION OF INCOME THE ASSESSEE HAD OFFERED THE RENTAL INCOM E UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND HAD SHOWN A NET INCOME OF (-) ` 1,00,580/- UNDER THE HEAD INCOME FROM OTHER SOURCES AFTER CLAIMING AN AMOUNT OF ` 31,47,243/- AS EXPENSES WHICH INCLUDED INTEREST ON CORPORATE LOAN AND INTEREST ON FDR. ACCORDING TO THE LEARNED CIT, TH E EXPENSES CLAIMED OF ` 31,47,243/- DEDUCTED IN COMPUTING INCOME FROM OTHER SOURCES COULD NOT BE REGARDED AS EXPENDITURE (NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE) LAID OUT OR E XPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME AS STIPULATED IN CLAUSE (III) OF SECTIO N 57 OF THE ACT. THE LEARNED CIT WAS OF THE OPINION THAT THE A SSESSING OFFICER OMITTED TO EXAMINE THE DEDUCTIBILITY OF THE CLAIM OF EXPENSES U/S 57(III) OF THE ACT WHICH HAD RESULTED IN ALLOWANCE OF THE CLAIM WRONGLY WHILE COMPUTING INCOME UNDER T HE HEAD ITA NO.1181/MDS /2012 : 3 : OTHER SOURCES. SINCE THE ASSESSMENT WAS FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE, A NOTICE U/S 263 OF THE ACT WAS ISSUED TO THE ASSESSEE TO SH OW CAUSE AS TO WHY THE ASSESSMENT SHOULD NOT BE SET ASIDE. IN RESPONSE TO THE NOTICE THE ASSESSEE SUBMITTED ITS R EPLY STATING THAT THE VERY SAME ISSUE OF DISALLOWANCE OF EXPENDI TURE U/S 57(III) HAS BEEN CONTESTED IN APPEAL AND IS PENDING BEFORE THE CIT(APPEALS)-III. THE ASSESSING OFFICER HAD DISALL OWED AN AMOUNT OF ` 4,03,341/- AS BEING EXPENDITURE NOT INCIDENTAL TO EARNING INCOME FROM OTHER SOURCES, I.E. INTEREST INCOME. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER AF TER EXAMINING THE DETAILS HAS ALLOWED THE EXPENDITURE C LAIMED BY THE ASSESSEE. THE LEARNED CIT AFTER CONSIDERING THE REPLY GIVEN BY THE ASSESSEE HELD THAT THE ASSESSING OFFIC ER FAILED TO EXAMINE THE RELEVANT FACTS TO ARRIVE AT THE RIGHT C ONCLUSION AND THEREFORE RENDERED THE ASSESSMENT ERRONEOUS AND PRE JUDICIAL TO THE INTERESTS OF THE REVENUE. THE LEARNED CIT F URTHER OBSERVED THAT IN THE PRESENT CASE THE ASSESSING OFF ICER DID NOT EXAMINE THE FACTS AVAILABLE ON RECORD BEFORE ALLOWI NG THE CLAIM OF DEDUCTION U/S 57(III) OF THE ACT. HE ALSO OBSER VED THAT THE ASSESSING OFFICER SHOULD HAVE ALLOWED THE CLAIM WIT H REFERENCE ITA NO.1181/MDS /2012 : 4 : TO THE RELEVANT FACTS AND MATERIAL AVAILABLE BEFORE HIM. ACCORDINGLY, THE LEARNED CIT SET ASIDE THE ORDER PA SSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT, DIRECTED T HE ASSESSING OFFICER TO EXAMINE ALL THE RELEVANT FACTS AND MATER IAL AND TO PASS A FRESH ORDER IN ACCORDANCE WITH LAW. 3. AGAINST THE ORDER OF THE LEARNED CIT, THE ASSESS EE HAS CARRIED THE MATTER BEFORE THE TRIBUNAL. THE LEARN ED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFIC ER AFTER EXAMINING THE FACTS AND MATERIAL HAS PASSED THE ORD ER AND THEREFORE NO NOTICE U/S 263 OF THE ACT CAN BE ISSUE D. IT WAS FURTHER SUBMITTED THAT THE ORDER PASSED BY THE LEAR NED CIT SHOULD BE SET ASIDE AND THE ORDER PASSED BY THE ASS ESSING OFFICER MAY BE RESTORED. 4. ON THE OTHER HAND, THE LEARNED DR SUPPORTED THE ORDER PASSED BY THE LEARNED CIT. 5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORD S AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ONLY ISSUE FOR CONSIDERATION IS WHETHER THE ASSESSING OF FICER HAS EXAMINED THE FACTS AND MATERIAL BEFORE ALLOWING THE EXPENDITURE CLAIMED BY THE ASSESSEE. WE HAVE CAREF ULLY GONE THROUGH THE ASSESSMENT ORDER PASSED BY THE ASSESSIN G OFFICER. ITA NO.1181/MDS /2012 : 5 : WE FIND THAT THE ASSESSING OFFICER DID NOT DISCUSS ANYTHING ABOUT THE EXPENDITURE CLAIMED BY THE ASSESSEE. WIT HOUT EXAMINING, HE SIMPLY ALLOWED THE CLAIM OF THE ASSES SEE. WE ARE THEREFORE OF THE OPINION THAT THE ASSESSING OFF ICER HAS NOT INVESTIGATED/ENQUIRED ANYTHING BUT SIMPLY ACCEPTED THE CLAIM OF THE ASSESSEE. IN THIS CONTEXT THE HONBLE DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRISES V. ADDL. CIT (99 ITR 375) (DEL) HAS OBSERVED AS UNDER (VIDE HEAD NOTE OF THE DECISION) : THE INCOME-TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDE R BUT CALLS FOR FURTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETU RN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. IT IS BECAUSE IT IS INCUMBENT ON THE INCOME-TAX OFFICER TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT THAT THE WORD ERRONEOUS IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUM ED TO BE CORRECT. ITA NO.1181/MDS /2012 : 6 : 6. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS N OT INVESTIGATED OR ENQUIRED WHICH HE IS SUPPOSED TO DO AS PER LAW. WE, THEREFORE, HOLD THAT THE LEARNED CIT HAS RIGHTLY INVOKED SECTION 263 OF THE ACT AND SET ASIDE THE OR DER PASSED BY THE ASSESSING OFFICER AND DIRECTED HIM TO MAKE A FRESH ASSESSMENT. THE AFORESAID DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF GEE VEE ENTERPRIESES V. ADDL. CIT IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CAS E. WE THEREFORE CONFIRM THE ORDER PASSED BY THE LEARNED C IT UNDER SECTION 263 OF THE ACT. IN THE CIRCUMSTANCES, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 7. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 21 ST OF DECEMBER, 2012, AT CHENNAI. SD/- SD/- (DR. O. K. NARAYANAN) (V.DURGA RAO) VICE PRESIDENT JUDICIAL MEMBER CHENNAI, DATED THE 21 ST DECEMBER, 2012. H. COPY TO: ASSESSEE/AO/CIT(A)/CIT/D.R./GUARD FILE