Leo Global Commodities Pvt.Ltd., Hyd, Hyderabad V. DCIT, Circle-16(1), Hyd, Hyderabad

ITA 1196/HYD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2439 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 12-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GITENDAR MANN
• Assessee Lawyers: T S AJAI
• Keywords: Business income; Opportunity of being heard; Principle of natural justice; Right to appeal
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO. 1196/HYD/2016 ASSESSMENT YEAR: 2008-09 LEO GLOBAL COMMODITIES P. LTD., HYDERABAD. PAN AAACL 6967A VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE 16(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI T.S. AJAI REVENUE BY : SMT. GITENDAR MANN DATE OF HEARING 12/02/2018 DATE OF PRONOUNCEMENT 28/02/2018 O R D E R PER S. RIFAUR RAHMAN, A.M.: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 20/06/2016 PASSED BY CIT(A) 4, HYDERABAD RELATING TO AY 2008-09 . 2. BRIEFLY THE FACTS OF THE CASE ARE, THE ASSESSEE COMPANY, ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND CO MMODITIES, FILED ITS RETURN OF INCOME FOR THE AY 2008-09 ON 25/09/20 08 ADMITTING TOTAL INCOME OF RS. 2,15,58,694/-, WHICH WAS PROCESSED U/ S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTI NY AND ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 2 6/11/2012 ACCEPTING THE RETURN OF INCOME. 2.1 SUBSEQUENTLY, PROCEEDINGS U/S 263 WERE INITIATE D BY THE CIT-IV, HYDERABAD AND ORDER U/S 263 OF THE ACT WAS PASSED O N 26/03/2013 DIRECTING THE AO TO TREAT THE CAPITAL GAINS DECLARE D BY THE ASSESSEE OF 2 ITA NO. 1196 /HYD/2016 LEO GLOBAL COMMODITIES P. LTD. RS. 20,72,646/- AS BUSINESS INCOME AND RECOMPUTE TH E TOTAL INCOME ACCORDINGLY. 2.2 ON RECEIPT OF THE ABOVE ORDER, THE AO ISSUED TH E NOTICES U/S 143(2) RWS 263 OF THE ACT DATED 31/03/2013 TO THE A SSESSEE POSTING THE CASE FOR HEARING ON 23/05/2013. SINCE THERE WAS NO RESPONSE, ANOTHER LETTER DATED 08/08/2013 WAS ISSUED POSTING THE CASE FOR HEARING ON 20/08/2013. IN RESPONSE, THE ASSESSEE FU RNISHED A LETTER DATED 30/08/2013, THE CONTENTS OF WHICH WAS PRODUCE D BY THE AO AT PAGES 2 & 3 OF THE ORDER. SINCE, THE ASSESSEE COUL D NOT FURNISH ANY NEW EVIDENCE OR FACTS IN SUPPORT OF THE CLAIM DURIN G THE PROCEEDINGS U/S 143(3) RWS 263, THE AO ASSESSED THE AMOUNT OF R S. 20,72,646/- AS BUSINESS INCOME INSTEAD OF SHORT TERM CAPITAL GA INS. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE CIT(A). 4. THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING THAT AS THE CIT AND CIT(A) ARE THE EQUAL AUTHORITIE S, AN APPEAL AGAINST THE ASSESSMENT COMPLETED AS PER THE DIRECTI ONS OF THE CIT U/S 263 OF THE ACT, COULD NOT BE DECIDED BY THE CIT(A). 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT (APPEALS) HAS ERRED IN LAW AND I N THE FACTS AND CIRCUMSTANCES OF THE CASE IN DISMISSING THE APP EAL OF THE ASSESSEE AGAINST THE ASSESSMENT MADE U/S 143(3) R.W .S 263, ON THE GROUND THAT AN APPEAL AGAINST THE ASSESSMENT COMPLETED AS PER THE DIRECTIONS OF THE COMMISSIONER OF INCOME TAX U/S 263 OF THE ACT COULD NOT BE DECIDED BY THE COMMISSI ONER OF INCOME TAX (APPEALS). 2. THE LEARNED CIT (APPEALS) OUGHT TO HAVE NOTED TH AT AS PER SECTION 246A OF THE ACT ANY ORDER PASSED U/S 143(3) IS APPEALABLE BEFORE THE CIT (APPEALS) AND HENCE THE D ISMISSAL OF THE APPEAL IS NOT IN ACCORDANCE WITH LAW. 3 ITA NO. 1196 /HYD/2016 LEO GLOBAL COMMODITIES P. LTD. 3. THE LEARNED CIT (APPEALS) OUGHT TO HAVE ALSO NOT ED THAT DURING THE ASSESSMENT PROCEEDINGS UNDER APPEAL NOTI CES U/S 143(2) HAVE BEEN ISSUED, THE ASSESSING OFFICER HAS EXAMINED THE ISSUE AND ASSESSMENT ORDER MADE U/S 143(3) R.W. S. 263 AND HENCE THE SAME IS APPEALABLE BEFORE THE CIT (APPEAL S). 4. THE LEARNED CIT (APPEALS) HAVING HELD THAT IN TH E ASSESSMENT ORDER THERE IS NO APPLICATION OF MIND BY THE AO, OUGHT TO HAVE QUASHED SUCH AN ASSESSMENT ORDER SINC E NO ORDER U/S 143(3) CAN BE MADE WITHOUT APPLICATION OF MIND BY THE AO. 5. THE LEARNED CIT (APPEALS) OUGHT TO HAVE ALSO DEL ETED THE ADDITION FOLLOWING THE CBDT CIRCULAR NO 6/2016 DATE D 29 TH FEBRUARY, 2016 LAYING DOWN THE PRINCIPLE THAT THE T REATMENT OF INCOME ON SALE OF SHARES AS BETWEEN CAPITAL GAINS A ND BUSINESS INCOME AS MADE BY THE ASSESSE SHALL BE ACC EPTED BY THE ASSESSING OFFICER. 6. BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED T HAT THE ACTION OF THE CIT(A) IN DISMISSING THE APPEAL OF THE ASSES SEE IS NOT PROPER BECAUSE AS PER SECTION 246A OF THE ACT ANY ORDER PA SSED U/S 143(3) IS APPEALABLE BEFORE THE CIT(A). FURTHER, HE SUBM ITTED THAT AO HAS ISSUED NOTICE U/S 143 AND GAVE AN OPPORTUNITY TO AS SESSEE BEFORE CONCLUDING THE ASSESSMENT. IT SHOWS THAT AO HAS PAS SED 143(3) ASSESSMENT INDEPENDENTLY, EVEN THOUGH AS PER DIRECT ION FROM CIT. IT IS APPEALABLE ORDER U/S 246A. FOR THIS PROPOSITION, HE RELIED ON THE FOLLOWING DECISIONS: 1. SAKAR PATAL VIBHAG JUNGLE KAMDARD MANDLI LTD. VS . ITO, [1991] 39 TTJ 54 (AHD.) 2. CROMPTON GREAVES LTD. VS. CIT, [2017] 82 TAXMANN .COM 246 (MUM-TRIB) 6.1 HE ALSO RELIED ON THE CBDT CIRCULAR NO. 6/2016, DATED 29/02/2016 TO SUBMIT THAT THE CIT(A) OUGHT TO HAVE DELETED THE ADDITION BY FOLLOWING THE ABOVE CIRCULAR, WHICH IS BINDING ON THE REVENUE AUTHORITIES. 7. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS O F REVENUE AUTHORITIES. 4 ITA NO. 1196 /HYD/2016 LEO GLOBAL COMMODITIES P. LTD. 8. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. NO DOUBT, WHILE FOLLOWING THE DIRECTIONS GI VEN BY THE CIT U/S 263, THE AO OBSERVED THAT THE ASSESSEE COULD NOT FU RNISH ANY NEW EVIDENCE OR FACTS IN SUPPORT OF THE CLAIM DURING TH E PROCEEDINGS U/S 143(3) RWS 263 AND TREATED THE SHORT TERM CAPITAL G AINS AS BUSINESS INCOME AS DIRECTED BY THE CIT. WHEREAS, THE ASSESSE ES CONTENTION IS THAT THE ASSESSEE HAS SUBMITTED EXPLANATION BEFORE AO THAT THESE STOCKS WERE HELD AS INVESTMENT NOT AS STOCK IN TRAD E TO TREAT THE SAME AS BUSINESS INCOME. HE THEREFORE SUBMITTED THAT THE AO FAILED TO APPLY HIS MIND TO THE EXPLANATIONS OFFERED DURING T HE ASSESSMENT PROCEEDINGS AND HAS MECHANICALLY FOLLOWED THE ORDER OF THE CIT WHICH CONSTITUTES VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. 8.1 AS FAR AS THE ACTION OF THE CIT(A) IN DISMISSIN G THE APPEAL ON THE GROUND THAT IT IS NOT MAINTAINABLE, IT IS OBSER VED THAT THOUGH THE AO FOLLOWED THE DIRECTIONS OF THE CIT, HE HAS ISSUE D NOTICES U/S 143(2) RWS 263, INDEPENDENTLY, TO THE ASSESSEE TO S UBSTANTIATE ITS CLAIM. THEREFORE, THE CIT(A) IS WRONG IN DISMISSING THE APPEAL OF THE ASSESSEE WITHOUT GOING INTO THE MERITS OF THE CASE. IN THIS CONNECTION, WE REFER TO THE DECISION OF THE ITAT, AHMEDABAD IN THE CASE OF SAKAR PATAL VIBHAG JUNGLE KAMDARD SAHAKARI MANDLI LTD (SU PRA), ON WHICH RELIANCE PLACED BY THE ASSESSEE, WHEREIN THE COORDI NATE BENCH OBSERVED AS UNDER: 8. SECTION 263 OF THE ACT CONFERS QUASI-JUDICIAL P OWERS ON A COMMISSIONER TO REVISE THE ORDER PASSED BY THE ITO IN ANY PROCEEDINGS UNDER THE ACT. THE ESSENTIAL REQUIREMEN T FOR PASSING AN ORDER UNDER SECTION 263 IS THAT THE COMM ISSIONER MUST FEEL SATISFIED THAT THE ORDER AS PASSED BY THE ITO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF REVENUE. SUCH SATISFACTION ON THE PART OF THE COMMI SSIONER, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING H EARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH ENQUIRY AS HE DEEMS NECESSARY, MAY PASS SUCH ORDERS AS THE CIRCUMSTANCE S OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIF YING THE ASSESSMENT OR CANCELLING THE ASSESSMENT AND DIRECTI NG FRESH ASSESSMENT. IT MAY BE NOTED THAT SECTION 263 AUTHOR IZES THE COMMISSIONER TO PASS AN ORDER OF ENHANCEMENT OR MOD IFICATION OF THE ASSESSMENT. IF THE COMMISSIONER' CHOSE TO PA SS AN ORDER 5 ITA NO. 1196 /HYD/2016 LEO GLOBAL COMMODITIES P. LTD. OF ENHANCEMENT OR MODIFICATION OF THE ASSESSMENT HE NEED NOT CANCEL THE ASSESSMENT AND DIRECT FRESH ASSESSMENT. NO FRESH ASSESSMENT UNDER SECTION 143 (3) WOULD BE INVOLVED IN THOSE CASES. HOWEVER, IF THE COMMISSIONER CHOSE TO CANCEL THE 'ASSESSMENT, THEN IT WOULD BE OBLIGATORY ON HIS PAR T TO HAVE DIRECTED A FRESH ASSESSMENT. ONCE THE COMMISSIONER HAS OPTED FOR CANCELLING THE ASSESSMENT AND DIRECTING FRESH A SSESSMENT, THE ITO MAY PROCEED TO MAKE FRESH ASSESSMENT IN THE GIVEN CASE UNDER SECTION 143(3) OF THE ACT ONLY AND AN OR DER PASSED UNDER SECTION 143(3) IS UNDISPUTEDLY AN APPEALABLE ORDER UNDER SECTION 246(C) OF THE ACT. ONCE AN ORDER UNDER SECT ION 143(3) IS CHALLENGED IN APPEAL BEFORE THE APPELLATE AUTHORITY , THE RIGHT OF THE ASSESSEE-APPELLANT TO CHALLENGE THE ORDER UNDER SECTION 143(3) ON MERITS CANNOT BE TAKEN AWAY BY THE APPELL ATE AUTHORITY ON THE GROUND THAT SUCH AN ORDER HAD BEEN PASSED IN PURSUANCE OF AN ORDER PASSED AND/OR IN CONFORMITY W ITH THE DIRECTIONS GIVEN BY A REVISIONAL AUTHORITY UNDER SE CTION 263. THE EXPRESSION OF OPINION BY THE COMMISSIONER ON ANY PA RT WHICH HAD APPEALED TO HIM TO CONSIDER THE ORDER OF ASSESS MENT AS MADE BY THE ITO AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE AND WHICH HAD PROMOTED HIM TO SET ASIDE THE ASSESSMENT AND TO DIRECT THE ITO TO MAKE FRESH ASSE SSMENT, SHOULD NOT BE INTERPRETED AS TAKING AWAY THE RIGHT OF THE ASSESSEE OF CHALLENGING THAT POINT BEFORE THE APPEL LATE AUTHORITY OR DIVESTING THE APPELLATE AUTHORITY OF H IS POWER OF DECIDING SUCH POINTS ON HIS OWN MERITS. IN THAT SEN SE OF THE MATTER, IN THE ''RESENT CASE THE ASSESSEE HAD EVERY RIGHT TO REQUIRE THE COMMISSIONER (APPEALS) TO DECIDE THE PO INT INVOLVED IN HIS APPEAL ON ITS OWN MERITS AND THE COMMISSIONE R (APPEALS) WOULD BE, IN OUR OPINION, FULLY COMPETENT AND JUSTI FIED IN MAINTAINING THE APPEAL AND DECIDING SUCH POINTS ON ITS OWN MERITS. WE ARE THEREFORE, OF THE CLEAR OPINION THAT THE COMMISSIONER (APPEALS) WAS NOT RIGHT IN LAW IN NOT MAINTAINING THE APPEAL OF THE ASSESSEE AND DECIDING THE SAME ME RITS. THE ORDER UNDER APPEAL PASSED UNDER SECTION 250 OF THE ACT IS, THEREFORE, REQUIRED TO BE SET ASIDE. 8.2 IN THE CASE OF CROMPTON GREAVES LTD. (SUPRA), T HE ITAT, MUMBAI BENCH HAS HELD AS UNDER: ON PERUSAL OF SECTION 246A OF THE ACT, WE HAVE OBS ERVED THAT APPEAL AGAINST THE ORDERS PASSED U/S 143(3) READ WI TH SECTION 263 OF THE ACT SHALL LIE WITH THE CIT(A) U/S 246A(1 )(A) OF THE ACT BEING AN ORDER PASSED BY LEARNED ASSESSING OFFICER U/S 143(3) OF THE ACT. APPEAL UNDER THE ACT IS A STATUTORY RIGHT WHICH EMA NATES ONLY FROM THE STATUTE. THE ASSESSEE DOES NOT HAVE A VEST ED RIGHT TO APPEAL UNLESS PROVIDED FOR IN THE STATUTE. REFERENC E IS DRAWN TO 6 ITA NO. 1196 /HYD/2016 LEO GLOBAL COMMODITIES P. LTD. THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F C/TV. ASHOKA ENGG. CO. [1992] 194 ITR 645/63 TAXMAN 510 ( SC) WHEREBY THE HON'BLE SUPREME COURT HELD THAT: '7. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES . THE QUESTION AT ISSUE IS REGARDING A RIGHT OF APPEAL. I T IS TRUE THAT THERE IS NO INHERENT RIGHT OF APPEAL TO ANY AS SESSEE AND THAT IT HAS TO BE SPELT FROM THE WORDS OF THE S TATUTE, IF ANY, PROVIDING FOR AN APPEAL. BUT IT IS AN EQUALLY WELL- SETTLED PROPOSITION OFLAW THAT, IF THERE IS A PROVI SION CONFERRING A RIGHT OF APPEAL, IT SHOULD BE READ IN A REASONABLE, PRACTICAL AND LIBERAL MANNER.' HENCE, IN OUR CONSIDERED VIEW, THIS INSTANT APPEAL BEARING ITA NO. 2836/MUM/20 14 CANNOT BE ADJUDICATED BY THE TRI BUNAL AS THE FIRST APPEAL AGAINST THE ORDERS DATED 24.02.201 4 PASSED BY THE AO U/S 143(3) OF THE ACT READ WITH SECTION 263 OF THE ACT SHALL LIE AND FALL WITHIN THE JURISDICTION OF THE C IT(A) U/S 246A(1)(A) OF THE ACT. WE HAVE OBSERVED THAT THE FI RST APPEAL IS FILED DIRECTLY BY THE ASSESSEE COMPANY IN ITA NO. 2836/MUM/2014 BEFORE THE TRIBUNAL, WHICH THE TRIBUN AL IS NOT COMPETENT TO ADJUDICATE AS PER PROVISIONS OF SECTIO N 253(1) OF THE ACT BECAUSE THE FIRST APPEAL LIE'S BEFORE THE C IT (A) U/S 246A(1)(A) OF THE ACT AND HENCE THE APPEAL FILED BY THE ASSESSEE COMPANY IS HEREBY DISMISSED. HOWEVER, THE ASSESSEE COMPANY IS AT LIBERTY TO FILE AN APPEAL BEFORE THE CIT(A) U/S 246A(1)(A) OF THE ACT FOR ADJUDICATION ON MERITS. T HE CIT(A) SHALL CONSIDER THE RELEVANT FACT THAT IN THE INTERV ENING PERIOD THE ASSESSEE COMPANY WAS PURSUING THE APPEAL WITH THE T RIBUNAL ALBEIT AT WRONG FORUM WITH THE TRIBUNAL INSTEAD OF FILING THE FIRST APPEAL WITH THE CIT(A) AS PROVIDED U/S 246A(I)(A) O F THE ACT, WHICH RELEVANT FACT SHALL BE CONSIDERED LIBERALLY B Y THE CIT(A) WHILE ADJUDICATING THE CONDONATION APPLICATION, IF FILED BY THE ASSESSEE COMPANY, WHILE ADJUDICATING THE APPEAL ON MERITS. WE ORDER ACCORDINGLY. 8.3 IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE T HE ORDER OF THE CIT(A) AND REMIT THE MATTER BACK TO HIS FILE WITH A DIRECTION TO DECIDE THE APPEAL ON MERITS IN ACCORDANCE WITH LAW AFTER P ROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE IN THE MATTER. 7 ITA NO. 1196 /HYD/2016 LEO GLOBAL COMMODITIES P. LTD. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 28 TH FEBRUARY, 2018. SD/- SD/- (P. MADHAVI DEVI) (S. RIFAUR RAHM AN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 28 TH FEBRUARY, 2018 KV COPY TO:- 1) LEO GLOBAL COMMODITIES PVT. LTD., 203, DIAMOND H OUSE, BEHIND TOPAZ BUILDING PUNJAGUTTA, HYDERABAD 500 082 2) DCIT, CIRCLE 16(1), HYDERABAD 3) CIT(A) 4, HYD. 4) PR. CIT 4, HYD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 6) GUARD FILE