Span Overseas Ltd, Pune V. CIT-III, Pune

ITA 1223/PUN/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 2221 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 30-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K RASTOGI
• Keywords: Opportunity of being heard; Audit objection; Earning of tax free income; Reason to believe
• Section: 14A; 37(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E , ' #$ , % & BEFORE SHRI VIKAS AWASTHY, JM AND SHRI PRADIP KUMAR KEDIA, AM ' / ITA NO. 1223/PN/2013 ( ) *) / ASSESSMENT YEAR : 2008-09 SPAN OVERSEAS LTD., OFFICE NO. 5, AMAR AVINASH CORPORATE CITY, BUND GARDEN ROAD, PUNE 411001 PAN : AABCS4214N ....... / APPELLANT +( / V/S. COMMISSIONER OF INCOME TAX-III, PUNE / RESPONDENT ASSESSEE BY : SHRI KETAN VED REVENUE BY : SHRI S.K. RASTOGI / DATE OF HEARING : 29-09-2015 / DATE OF PRONOUNCEMENT : 21-12-2015 , / ORDER PER VIKAS AWASTHY, JM : THE PRESENT APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX-III, PUNE DATED 26-03-2013 P ASSED U/S. 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE AC T) FOR THE ASSESSMENT YEAR 2008-09. IN APPEAL, THE ASSESSEE HAS ASSAILED THE IMPUGNED ORDER ON ACCOUNT OF INVOKING JURISDICTION U/S. 26 3 BY COMMISSIONER OF INCOME TAX, AS WELL ON MERITS. 2 ITA NO. 1223/PN/2013, A.Y. 2008-09 2. THE BRIEF FACTS OF THE CASE ARE : THE ASSESSEE IS A CO MPANY AND IS ENGAGED IN THE BUSINESS OF TRADING, INDENTING AGENT AND E XPORT OF GOODS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AS SESSMENT YEAR 2008-09 ON 26-09-2008 DECLARING INCOME OF RS.4,39,86,108/-. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE ASSESSING OFFICER MADE CERTAIN ADDITIONS/DISALLOWANCES AND ASSESSED THE TOTAL INCOME OF TH E ASSESSEE AT RS.4,84,82,800/- VIDE ORDER DATED 30-12-2010. THE COM MISSIONER OF INCOME TAX INVOKED HIS JURISDICTION U/S. 263 AND ISSUED NOTICE TO THE ASSESSEE ON 03-05-2011 FOR THE IMPUGNED ASSESSMEN T YEAR. THE ASSESSEE FILED REPLY TO THE SAID NOTICE ON 21-07-2011. T HEREAFTER, THE COMMISSIONER OF INCOME TAX PASSED THE IMPUGNED ORDER SE TTING ASIDE THE ASSESSMENT ORDER DATED 30-12-2010 AND DIRECTED T HE ASSESSING OFFICER TO PASS FRESH ASSESSMENT ORDER. AGGRIEVED BY THE ORDER OF COMMISSIONER OF INCOME TAX PAS SED U/S. 263, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI SHRI KETAN VED APPEARING ON BEHALF OF THE ASSESSE E SUBMITTED THAT THE COMMISSIONER OF INCOME TAX HAS ERRED IN INVOKING THE JURISDICTION U/S. 263 WITHOUT ANY SUBSTANCE AND MAT ERIAL. THE LD. AR SUBMITTED THAT A PERUSAL OF SHOW-CAUSE NOTICE WHICH IS AT PAGES 83 TO 85 OF THE PAPER BOOK WOULD SHOW THAT THE ONLY REAS ON FOR INITIATING PROCEEDINGS U/S. 263 BY THE COMMISSIONER OF INCOME TAX IS THAT THE ASSESSMENT ORDER HAS BEEN PASSED WITHOUT MAKING PROPE R ENQUIRY. THE COMMISSIONER OF INCOME TAX HAS ERRED IN HOLDING THAT THE ASSESSMENT ORDER WAS PASSED WITHOUT PROPER ENQUIRY AS THE ISSUES RAISED BY THE COMMISSIONER OF INCOME TAX IN SHOW-CAUSE N OTICE WERE ENQUIRED INTO BY THE ASSESSING OFFICER DURING THE COURSE O F SCRUTINY ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAD GIVEN DETAILED 3 ITA NO. 1223/PN/2013, A.Y. 2008-09 QUESTIONNAIRE TO THE ASSESSEE AT THE TIME OF ORIGINAL ASSE SSMENT WHICH WAS DULY ANSWERED AND THE ASSESSEE HAD SUBMITTED ALL THE RELEVANT DOCUMENTS IN SUPPORT OF ITS CONTENTIONS. THE LD. AR REFER RED TO THE CERTIFIED COPY OF QUESTIONNAIRE DATED 28-07-2010 WHICH IS P LACED AT PAGES 129 TO 134 OF THE PAPER BOOK. THE LD. AR ALSO REFE RRED TO THE OFFICIAL NOTINGS RECORDED BY THE ASSESSING OFFICER (PAGES 135 TO 137 OF PAPER BOOK) AND AT THE TIME OF ASSESSMENT AND SUBMITTED THAT A PERUSAL OF THE NOTING SHEETS WOULD SHOW THAT THE ASSESS ING OFFICER HAD RAISED QUERIES IN RESPECT OF ALL THE ISSUES WHICH HAVE BEEN MENTIONED BY THE COMMISSIONER OF INCOME TAX IN REVISION PROCEEDINGS U/S. 263 OF THE ACT. THE LD. AR SUBMITTED THAT THE PATNA BENCH OF T HE TRIBUNAL IN THE CASE OF VIJAY KUMAR MEGOTIA VS. COMMISSIONER OF INCO ME TAX REPORTED AS 195 TAXMAN 63 (PAT.) (MAG) HAS HELD THAT THE COMMISSIONER OF INCOME TAX CANNOT SET ASIDE THE ASSESSM ENT MERELY ON THE GROUND THAT PROPER ENQUIRY WAS NOT MADE BY TH E ASSESSING OFFICER. THUS, THE COMMISSIONER OF INCOME TAX WAS NOT CORR ECT IN CANCELLING THE ASSESSMENT AND DIRECTING THE ASSESSING OFFICE R TO MAKE FRESH ASSESSMENT. 3.1 THE LD. AR FURTHER SUBMITTED THAT THE COMMISSIONER OF I NCOME TAX HAS ERRED IN HOLDING THAT THE ASSESSING OFFICER HAS N OT APPLIED HIS MIND AND THE MATTER REQUIRES RE-EXAMINATION WITHOUT GIVING ANY FIND ING ON THE MERITS. THE LD. AR SUBMITTED THAT THE COMMISSIONER OF INCOME TAX HAS NOT POINTED OUT ANY ERROR IN THE ASSESSMENT O RDER ALLEGEDLY PREJUDICIAL TO THE INTEREST OF REVENUE. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS: I. COMMISSIONER OF INCOME-TAX VS. GABRIEL INDIA LTD., 203 ITR 108 (BOM); AND 4 ITA NO. 1223/PN/2013, A.Y. 2008-09 II. UMRAOSINGH OSTWAL VS. THE COMMISSIONER-CENTRAL, PUNE, ITA NO. 8857/MUM/2011 DECIDED ON 10-05-2013. 3.2 THE LD. AR CONTENDED THAT THE COMMISSIONER OF INCOME TAX HAS TO INDEPENDENTLY APPLY HIS MIND FOR INVOKING JURISDICTION U/ S. 263 OF THE ACT. THE LD. AR SUBMITTED THAT A PERUSAL OF SHOW-CAU SE NOTICE WOULD SHOW THAT THE NOTICE HAS BEEN ISSUED ON THE PROP OSAL MADE BY THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-6, PUNE. THE COMMISSIONER OF INCOME TAX HAS STATED IN THE SHOW-CAUSE NOTICE THAT, THE DY. COMMISSIONER OF INCOME TAX HAS POINTED OUT THE FOLLOWING DEFICIENCIES IN THE ASSESSMENT ORDER. THEREAFTER, THE COM MISSIONER OF INCOME TAX HAS MERELY REPRODUCED THE ALLEGED SHORTCOM ING POINTED OUT BY DY. COMMISSIONER OF INCOME TAX. AS PER THE PROVISIONS OF SECTION 263 THE COMMISSIONER OF INCOME TAX HAS TO FORM INDEPENDE NT OPINION THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONE OUS AS WELL PREJUDICIAL TO THE INTEREST OF THE REVENUE. TO SUBSTANTIA TE HIS CONTENTIONS THE LD. AR PLACED RELIANCE ON THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF VINAY PRATAP THACKER, VS. CO MMISSIONER OF INCOME TAX IN ITA NO. 2939/MUM/2011 DECIDED ON 27-02 -2013. THE LD. AR FURTHER SUBMITTED THAT THE COMMISSIONER OF INCO ME TAX CANNOT ASSUME JURISDICTION U/S. 263 OF THE ACT ONLY ON THE GROUND OF INADEQUATE ENQUIRY. THE PROVISIONS OF SECTION 263 CANNOT BE INVOK ED TO MAKE A MERE FISHING AND ROVING ENQUIRY. IN SUPPORT OF TH IS ARGUMENT, THE LD. AR DRAWS ATTENTION TO THE DECISION OF AHMEDABAD B ENCH OF THE TRIBUNAL IN THE CASE OF M/S. J B EXPERTS VS. COMMISSIONER O F INCOME TAX IN ITA NO. 1646/AHD/2010 DECIDED ON 16-12-2010 AND THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF COMM ISSIONER OF INCOME TAX VS. PRADEEP KUMAR TODI REPORTED AS 325 ITR 96 (CALCUTTA). 5 ITA NO. 1223/PN/2013, A.Y. 2008-09 THE LD. AR SUBMITTED THAT ON MERITS THE ASSESSEE HAD FILED A DETAILED REPLY ON THE ISSUES ON WHICH THE COMMISSIONER OF INCOME TAX HAS INITIATED REVISION PROCEEDINGS U/S. 263. THE COMMISSIONER OF INCOME TAX HAS POINTED OUT THAT WHILE COMPUTING DISALLOWANCE U/S. 14A OF THE ACT, THE ASSESSING OFFICER HAS MADE ERROR WHILE TAKING THE AVERAGE VALUE OF INVESTMENT FOR THE PURPOSE OF MAKING DISALLOWANCE U/S. 14A R.W. RULE 8D(III). THE ASSESSING OFFICER WHILE COMPUTING THE DISALLOWANCE STRICTLY FOLLOWED THE PROVISIONS U/S. 8D(III) WHICH PR OVIDES THAT ONLY INVESTMENTS, THE INCOME FROM WHICH DOES NOT FOR M PART OF THE TOTAL INCOME HAS TO BE CONSIDERED. THE COMMISSIONER OF IN COME TAX HAS FURTHER ERRED IN COMING TO THE CONCLUSION THAT THE C OMMISSION PAID RS.88,21,760/- WAS EXCESSIVE AND THE ASSESSEE COMPANY H AD HARDLY ANY BUSINESS ACTIVITY DURING THE YEAR. THE COMMISSIONER O F INCOME TAX HAS ERRED IN NOT CONSIDERED THE FACT THAT THE ASSE SSEE HAD RECEIVED COMMISSION TO THE TUNE OF RS.5,47,10,562/- DURING THE ASSE SSMENT YEAR 2008-09 AND HAS PAID COMMISSION OF RS.88,21,770/- WHICH IS ONLY 16.12% OF THE COMMISSION EARNED. THE OBSERVATION OF THE COMMISSIONER OF INCOME TAX THAT THE ASSESSEE COMPANY H AS HARDLY ANY BUSINESS IS UNFOUNDED. THE ASSESSING OFFICER DURING TH E SCRUTINY ASSESSMENT PROCEEDINGS RAISED QUERY WITH REGARD TO THE PAYMENT OF COMMISSION WHICH WAS ANSWERED TO BY THE ASSESSEE. ACCO RDINGLY, NO ADDITION/DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER ON T HIS GROUND. THE COMMISSIONER OF INCOME TAX HAS FURTHER RAISE D DOUBT OVER THE AMOUNT OF INCENTIVE RS.42,00,500/- PAID. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THIS ISSUE WAS ALSO RAISED BY A SSESSING OFFICER AND THE ASSESSEE HAD GIVEN EMPLOYEE WISE DETAILS OF THE COMMISSION PAID. THE LD. AR SUBMITTED THAT THE DETAILS OF TH E INCENTIVE PAID ARE GIVEN AT PAGE 104 OF THE PAPER BOOK. THE LD. AR SUBMITTED 6 ITA NO. 1223/PN/2013, A.Y. 2008-09 THAT THE COMMISSIONER OF INCOME TAX HAS ALSO RAISED QUES TION OVER DEDUCTIBILITY OF COMPENSATION PAID TO THE FAMILY OF DECEASED EMPLOYEE. THIS ISSUE WAS ALSO EXAMINED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER W AS SATISFIED WITH THE EXPLANATION FURNISHED BY THE ASSESSEE FOR PAYMEN T OF COMPENSATION RS.27,50,000/- AND ACCORDINGLY ALLOWED THE SA ME. THE LD. AR FURTHER SUBMITTED THAT COMMISSIONER OF INCOME TAX H AS ALSO RAISED DOUBT OVER GENUINENESS AND ADMISSIBILITY OF TRAVELLING EXPENSES RS.33,91,004/- AND RENT PAID RS.17,50,680/-. BOTH THESE ISS UES WERE DISCUSSED BY THE ASSESSING OFFICER AT THE TIME OF ASSESSM ENT PROCEEDINGS. THE ASSESSEE HAD GIVEN THE DETAILS OF ALL TH ESE EXPENDITURE INCLUDING THE TRAVELING EXPENSES AND THE RENT PAID. THEREFORE, THE OBSERVATIONS OF THE COMMISSIONER OF INCOME TAX THAT THE AFORESAID EXPENDITURE HAVE BEEN ALLOWED WITHOUT PROPER EN QUIRY OR WITHOUT ANY BASIS IS WRONG. THE LD. AR PRAYED FOR SETTING ASIDE THE IMPUGNED ORDER. 4. ON THE OTHER HAND SHRI S.K. RASTOGI REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE IMPUGNED ORDER. THE LD. DR SU BMITTED THAT THE ASSESSING OFFICER HAS SIMPLY COLLECTED THE INFORMATION AN D THEREAFTER HAS NOT APPLIED HIS MIND THEREON. THERE IS NO DISCUSSION BY THE ASSESSING OFFICER IN THE ORDER WITH REGARD TO ISSUES H IGHLIGHTED BY THE COMMISSIONER OF INCOME TAX. THIS CLEARLY SHOWS THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND ON THE ISSUES RAIS ED BY THE COMMISSIONER OF INCOME TAX IN REVISION PROCEEDINGS. THE COMMISSIONER OF INCOME TAX IS JUSTIFIED IN INVOKING THE PROVIS IONS OF SECTION 263 OF THE ACT, AS THE ORDER OF ASSESSING OFFICER IS ERRONEOUS AS 7 ITA NO. 1223/PN/2013, A.Y. 2008-09 WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. THE LD. DR PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS SUBMISSIONS: I. M/S. MALABAR INDUSTRIES VS. CIT, 243 ITR 83 (SC); II. APPOLLO TYRES LTD. VS. DY. CIT, 360 ITR 36 (KER); AND III. CIT VS. RKBK FISCAL SERVICES (P) LTD., 358 ITR 228 (CALCUTTA) 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BE LOW AS WELL AS THE DOCUMENTS PLACED ON RECORD. THE COMMISSIONER OF INC OME TAX INITIATED REVISIONAL PROCEEDINGS U/S. 263 BY ISSUING SHOW CAU SE NOTICE DATED 03-05-2011. THE SHOW CAUSE NOTICE ISSUED BY TH E COMMISSIONER OF INCOME TAX READS AS UNDER: TO THE PRINCIPAL OFFICER, SPAN OVERSEAS PVT. LTD., OFFICE NO.5, 3 RD FLOOR, AMAR AVINASH CORPORATE CITY, 11, BUND GARDEN ROAD, PUNE 411 001. SIR, SUB: SHOW-CAUSE NOTICE U/S.263 OF THE I.T. ACT, 196 1 ASST. YEAR 2008-09 REG. THE DY. COMMISSIONER OF INCOME-TAX. CIRCLE 6, PUNE, HAS SUBMITTED A PROPOSAL U/S.263 OF THE INCOME-TAX ACT, 1961, SEEKI NG CANCELLATION OF ASSESSMENT ORDER DATED 30.12.2010 FOR A.Y. 2008-09 MADE U/S.143(3), AS THIS ORDER SUFFERS FROM CERTAIN DEFICIENCIES BEC AUSE OF WHICH IT IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF REVENUE. THE DY. COMMISSIONER OF INCOME TAX HAS POINTED OUT THE FOLLO WING DEFICIENCIES IN THE ASSESSMENT ORDER:- I. YOUR COMPANY HAS RECEIVED SUBSTANTIAL INCOME WHICH IS EXEMPT FROM INCOME-TAX. AN AMOUNT OF RS.15,29,167/- WAS VO LUNTARILY DISALLOWED U/S.14A OF THE INCOME-TAX ACT, 1961 OUT OF EXPENSES BEING RELATED TO EARNING OF EXEMPT INCOME. THE ADDL . 8 ITA NO. 1223/PN/2013, A.Y. 2008-09 COMMISSIONER OF INCOME-TAX, RANGE 6, PUNE, WHO MADE THE ASSESSMENT, COMPUTED DISALLOWANCE OF RS.56,76,732/- U/S.14A READ WITH RULE 8D OF THE INCOME TAX RULES, 1962. IT IS OBSERVED THAT FOR THE PURPOSE OF WORKING OF DISALLOWANCE, AV ERAGE VALUE OF INVESTMENT WAS TAKEN AT RS.6,72,66,798/-, 0.50% OF WHICH WAS CONSIDERED FOR DISALLOWANCE. THE BALANCE-SHEET, HOW EVER, SHOWS THE VALUES OF INVESTMENT AS ON 1.04.2007 AND 31.03. 2008 RESPECTIVELY AT RS.26,02,44,413/- AND AT RS.34,67,2 6,761/-. AVERAGE OF THESE TWO AMOUNTS WORKS OUT TO RS.30,34, 85,587/-, 0.50% OF WHICH WOULD BE RS.15,17,428/-. HOWEVER, I N THE COMPUTATION THE AO HAS TAKEN THIS AMOUNT AT RS.3,36 ,334/-. THIS HAS RESULTED INTO SHORT DISALLOWANCE OF RS.11,81,09 4. II. YOUR COMPANY CLAIMED RS.88,21,760/- ON ACCOUNT OF C OMMISSION. NO ENQUIRY WAS CARRIED OUT IN THIS REGARD BEFORE AC CEPTING THE CLAIM. YOUR COMPANY HAD HARDLY ANY BUSINESS ACTIVIT Y DURING THE YEAR AND INCOME EARNED WAS MOSTLY FROM OTHER SOURCE S. IT IS ALSO OBSERVED FROM THE BALANCE-SHEET THAT A SUM OF RS.1, 91,57,738/- IS SHOWN AS OUTSTANDING ON ACCOUNT OF COMMISSION. I N VIEW OF THE FACT THAT YOUR COMPANY HAD LITTLE BUSINESS ACTIVITY , THE GENUINENESS OF COMMISSION EXPENSE NEEDED VERIFICATI ON MORE SO IN VIEW OF THE FACT THAT PROVISIONS MADE IN THE PAS S HAVE MOSTLY REMAINED UNPAID. III. YOUR COMPANY CLAIMED AN AMOUNT OF RS.42,00,500/- AS INCENTIVE. RECORD; SHOW THAT NO VERIFICATION OF THIS CLAIM WAS CARRIED OUT TO EXAMINE ITS GENUINENESS AND ALSO ITS ADMISSIBILITY. SINCE YOUR COMPANY HAD LITTLE BUSINESS ACTIVITY DURING THE YEA R, NATURE OF THE INCENTIVE EXPENSE AND GENUINENESS THEREOF WAS REQUI RED TO BE INQUIRED INTO WHICH WAS NOT DONE. IV. YOUR COMPANY CLAIMED TO HAVE PAID RS.27,50,000/- AS COMPENSATION TO DECEASED EMPLOYEE. RECORDS DO NOT S HOW THAT THE ASSESSING OFFICER MADE ENQUIRIES ABOUT ADMISSIB ILITY OF THIS AMOUNT. RECORDS ALSO DO NOT SHOW THAT YOUR COMPANY WAS UNDER ANY OBLIGATION TO MAKE THIS PAYMENT. THIS CLAIM WAS PRIMA-FACIE NOT IN THE NATURE OF EXPENSE DEDUCTIBLE U/S. 37(1) OF THE INCOME- TAX ACT, 1961 AND HENCE WAS NOT ALLOWABLE. V. YOUR COMPANY HAS CLAIMED RS.33,91,004/- AS TRAVELIN G EXPENSES. SINCE NOT MUCH BUSINESS ACTIVITY WAS CARRIED OUT BY YOUR 9 ITA NO. 1223/PN/2013, A.Y. 2008-09 COMPANY DURING THE YEAR AND THE RECEIPT CREDITED IN THE ACCOUNTS WAS IN THE NATURE OF OTHER INCOME, THE ASSESSING OF FICER WAS REQUIRED TO EXAMINE THE GENUINENESS AND ADMISSIBILI TY OF THIS EXPENSE WHICH WAS NOT DONE. VI. YOUR COMPANY HAD PAID AMOUNTS OF RS.17,50,680/- AND FURTHER RS.1,68,540/- TO RELATED PARTIES. EXPENDITURE OF TH IS NATURE HAD SUBSTANTIALLY INCREASED DURING THE CURRENT YEAR IN COMPARISON WITH THE PRECEDING YEAR. THE ASSESSING OFFICER IS F OUND TO HAVE NOT MADE ANY VERIFICATION WITH REGARD TO REASONABLE NESS AND ADMISSIBILITY IN THE LIGHT OF PROVISIONS OF SECTION 40A(2)(B) OF THE INCOME-TAX ACT, 1961. 2. IT IS THUS OBSERVED THAT THE ASSESSING OFFICER H AS ERRONEOUSLY COMPUTED DISALLOWANCE U/S.14A READ WITH RULE 8D WHI CH IS LOWER BY RS.11,81,094/-. SHE HAS ALSO NOT MADE ANY ENQUIRY WITH REGARD TO EXPENSES ON COMMISSION, INCENTIVE, COMPENSATION TO THE DECEASED EMPLOYEE, TRAVELING AND RENT THOUGH SUCH ENQUIRY WA S WARRANTED ON THE BASIS OF THE FACTS ON RECORD. SHE HAS ACCEPTED THE CLAIMS OF YOUR COMPANY WITHOUT APPLICATION OF MIND. THE ASSESSMENT ORDER IS, THEREFORE, ERRONEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTERE ST OF REVENUE AND THE PROVISIONS OF SECTION 263 OF THE INCOME-TAX ACT, 19 61 ARE ATTRACTED. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, YOU ARE HERE BY REQUESTED TO EXPLAIN AS TO WHY NOT THE PROVISIONS OF SECTION 263 OF THE INCOME-TAX ACT, 1961 BE INVOLVED AND THE ASSESSMENT ORDER DATED 30- 12-2010 BE CANCELLED. 3. YOU ARE HEREBY GIVEN AN OPPORTUNITY OF BEING HEA RD IN PERSON OR THROUGH AN AUTHORIZED REPRESENTATIVE ON 18.05.2011 AT 11 A.M. IN MY OFFICE AT THE ADDRESS GIVEN IN THIS NOTICE. IN CASE YOU PREFER TO FURNISH A WRITTEN EXPLANATION IN THIS REGARD, PLEASE ENSURE T HAT THE SAME REACHES THIS OFFICE ON OR BEFORE THAT DATE. YOURS FAITHFULLY, SD/- ( . ' #) (DR. PRAYAG JHA) COMMISSIONER O INCOME TAX-ILL, PUNE 10 ITA NO. 1223/PN/2013, A.Y. 2008-09 A PERUSAL OF THE SHOW CAUSE NOTICE SHOWS THAT THE COMM ISSIONER OF INCOME TAX HAS INVOKED THE PROVISIONS OF SECTION 263 ON THE PROPOSAL SUBMITTED BY THE DY. COMMISSIONER OF INCOME TAX AND DEFICIENCIES IN THE ASSESSMENT ORDER POINTED OUT BY THE D Y. COMMISSIONER OF INCOME TAX. 6. AS PER THE PROVISIONS OF SECTION 263 IT IS THE COMMISSION ER OF INCOME TAX WHO HAS TO EXAMINE THE RECORDS AND THEREA FTER FORM AN INDEPENDENT OPINION THAT THE ORDER PASSED BY THE ASSES SING OFFICER IS ERRONEOUS IN SO FAR AS IT PREJUDICIAL TO THE INTEREST OF RE VENUE. IN THE PRESENT CASE WE FIND THAT THE COMMISSIONER OF INCOME TAX HAS NOT EXERCISED HIS INDEPENDENT JUDGMENT FOR INVOKING REVISIONAL POWERS . FOR ASSUMING THE REVISIONAL JURISDICTION, THE COMMISSIONER OF INCOME TAX FIRST HAS TO CALL FOR THE RECORDS OF ANY PROCE EDINGS UNDER THE ACT AND EXAMINE THE SAME. AFTER EXAMINING THE RECOR DS, IF THE COMMISSIONER OF INCOME TAX CONSIDERS THAT THE ORDER PAS SED BY ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIA L TO THE INTEREST OF THE REVENUE, HE MAY ISSUE SHOW CAUSE NOTICE TO THE ASSESSEE. AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE AND CONDUCTING ENQUIRY AS MAY BE NECESSARY, THE COMMISSIONE R OF INCOME TAX SHALL PASS ORDER AS THE CASE MAY BE INCLUDING ENHAN CING OR MODIFYING THE ASSESSMENT OR CANCELLING THE ASSESSMENT. THE COMMISSIONER OF INCOME TAX HAS TO PASS A SPEAKING ORDER HIGHLIGHTING DEFICIENCIES IN THE ASSESSMENT ORDER WITH REASONS. 7. A PERUSAL OF THE IMPUGNED ORDER SHOWS, THAT THE COMMISSIONER OF INCOME TAX IN THE INSTANT CASE HAS MERELY REPRODUCED THE DEFICIENCIES POINTED OUT BY THE DY. COMMISSIONER OF INCOME TAX IN THE ASSESSMENT 11 ITA NO. 1223/PN/2013, A.Y. 2008-09 ORDER. THE COMMISSIONER OF INCOME TAX HAS NOT GIVEN THE REASONS AS TO HOW THE FINDINGS OF THE ASSESSING OFFICER ARE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. THE CONTENTION OF THE ASSESSEE IS THAT ALL THE RELEVANT DOCUMENTS WERE PLACED ON RECORD B Y THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSES SING OFFICER HAS PASSED THE ORDER AFTER CONSIDERING THE SAME. THE D UTY OF THE ASSESSEE IS BRING ALL THE RELEVANT DOCUMENTS BEFORE THE A SSESSING OFFICER. THE MANNER IN WHICH THE ORDER IS TO BE PASSED IS THE PREROGATIVE OF THE ASSESSING OFFICER. 8. THE ORDER OF THE ASSESSING OFFICER MAY BE BRIEF AND CRYP TIC BUT THAT BY ITSELF IS NOT SUFFICIENT REASON TO HOLD THAT THE ASS ESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IT IS FOR THE COMMISSIONER TO POINT OUT AS TO WHAT ERROR WAS COMMITTE D BY THE ASSESSING OFFICER IN TAKING A PARTICULAR VIEW. IN THE CASE IN HAND, THE COMMISSIONER OF INCOME TAX HAS FAILED TO POINT OUT ERROR IN THE ASSESSMENT ORDER. FOR INVOKING REVISIONARY POWERS THE C OMMISSIONER OF INCOME TAX HAS TO EXERCISE HIS OWN DISCRETION AND JUD GMENT. HERE THE COMMISSIONER OF INCOME TAX HAS INVOKED THE PROVISIONS OF SECTION 263 AT THE MERE SUGGESTION OF THE DY. COMMISSIONER OF INC OME TAX, WITHOUT EXERCISING HIS OWN DISCRETION AND JUDGMENT. 9. THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF VINAY P RATAP THACKER VS. COMMISSIONER OF INCOME TAX (SUPRA) HAS SET AS IDE THE ORDER OF COMMISSIONER OF INCOME TAX PASSED U/S. 263 ON T HE GROUND THAT THE COMMISSIONER OF INCOME TAX HAD NOT USED HIS OW N DISCRETION AND JUDGMENT IN ASSUMING THE REVISIONAL JURISDICTION. THE R ELEVANT EXTRACT OF THE ORDER OF THE TRIBUNAL IS REPRODUCED HERE-IN-UNDE R: 12 ITA NO. 1223/PN/2013, A.Y. 2008-09 22. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PART IES AND HAVE ALSO PERUSED THE MATERIAL PLACED BEFORE US, INCLUDING TH E CASE LAWS CITED BY EITHER SIDE. ON GOING THROUGH THE SUBMISSIONS OF TH E ASSESSEE, SCN AND AUDIT OBJECTION, WE FIND THAT THE ISSUE HAD BEEN DE ALT WITH BY THE AO IN REGULAR ASSESSMENT PROCEEDINGS AND THEREAFTER AN AU DIT OBJECTION WAS RAISED, WHICH WAS USED BY THE AO TO CONVINCE THE CI T TO INVOKE HIS JURISDICTION UNDER SECTION 263. WHEN WE READ THE SE CTION, WHICH READS, AS, (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVI NG THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUS ING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THER EON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORD ER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSM ENT AND DIRECTING A FRESH ASSESSMENT. THIS CLEARLY SHOWS, THAT THE CIT MUST HIMSELF COME TO A CONCLUSION, AFTER APPLYING HIS OWN MIND, BECAUSE, THE WORDS USED IN T HE SECTION ARE,.. AND IF HE CONSIDERS .., HERE, APPLICATION OF HIS OWN MIND BECOMES IMPORTANT. IT IS IMPORTANT TO EXAMINE THE SIMILARITY OF THE EXPRESSION USED UNDER SECTION 147(1) AND 263(1). UNDER SECTION 147( 1), THE EXPRESSION USED IS HAS REASON TO BELIEVE AND UNDER SECTION 2 63(1), THE EXPRESSION USED IS IF HE CONSIDERS. THOUGH THE EXPRESSIONS U SED ARE NOT VERBATIM PARI MATERIA, BUT THE MEANING WHICH IS TO BE DRAWN IN BOTH THE EXPRESSIONS ARE PARI MATERIA, I.E., AN INDEPENDENT, UNPOLLUTED AND UNADOPTED APPLICATION OF MIND BY THE OFFICER, INVOK ING THE PROVISION. 23. WE HAVE SEEN FROM THE IMPUGNED ORDER OF THE CIT , DATED 11.02.2011, THE CIT ADMITS, A PROPOSAL WAS RECEIVED ON 10.06.2 010 FROM THE AO UNDER SECTION 263 OF THE INCOME TAX ACT, 1961, POIN TING OUT SOME DISCREPANCIES/SHORT COMINGS IN THE ASSESSMENT ORDER . THIS CLEARLY SHOWS THAT IN SO FAR AS THE CIT WAS CONCERNED, HE D ID NOT APPLY HIS OWN MIND, WHICH THE HONBLE SUPREME COURT OF INDIA HAS SAID IN ICICI BANK (SUPRA) THAT THERE SHOULD BE AN INDEPENDENT APPLICA TION OF MIND. 10. IN VIEW OF THE FACT THAT THE COMMISSIONER OF INCOME TA X HAS INVOKED THE PROVISIONS OF SECTION 263 WITHOUT APPLYING HIS OWN INDEPENDENT JUDGMENT AND MERELY AT THE BEHEST OF PROP OSAL FORWARDED 13 ITA NO. 1223/PN/2013, A.Y. 2008-09 BY THE DY. COMMISSIONER OF INCOME TAX IS AGAINST THE SPIR IT OF ACT. THUS, THE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE. 11. IN THE RESULT, THE IMPUGNED ORDER IS SET ASIDE AND T HE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 21 ST DAY OF DECEMBER, 2015. SD/- SD/- (PRADIP KUMAR KEDIA) (VIKAS AWASTHY) % &' / ACCOUNTANT MEMBER ( ) &' / JUDICIAL MEMBER % / PUNE; *&+ / DATED : 21 ST DECEMBER, 2015 RK ,-'./0*. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. , , - () / THE CIT-III, PUNE 4. /0' ))12 , , 12 , 3 456 , % / DR, ITAT, A BENCH, PUNE. 5. '7 89 / GUARD FILE. // / ) // TRUE COPY// ,&%: / BY ORDER, ); 16 / PRIVATE SECRETARY, , 12 , % / ITAT, PUNE