Care Universal Business Solutions P.Ltd, Pune V. DCIT, Pune

ITA 1281/PUN/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79907 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 07-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1281/PN/2013 (ASSESSMENT YEAR 2008-09) CARE UNIVERSAL BUSINESS SOLUTIONS PVT. LTD., SAMEER BUILDING, ARCHANA SOCIETY, GANESH MALA, SINHAGAD ROAD, PUNE 411051 PAN NO.AAACI7503D .. APPELLANT VS. DCIT, CIRCLE-1(1), PUNE .. RESPONDENT ASSESSEE BY : SHRI M.R. BHAGWAT REVENUE BY : SHRI A.K. MODI DATE OF HEARING : 22-05-2014 DATE OF PRONOUNCEMENT : 27-05-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 28-03-2013 PASSED U/S.263 BY THE CIT-I, PUNE RELATI NG TO ASSESSMENT YEAR 2008-09. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE, A PRIVATE LTD. COMPANY, FILED ITS RETURN OF INCOME ON 30-09-2008 D ECLARING TOTAL LOSS OF RS.86,19,861/-. THE ASSESSING OFFICER PASSED THE O RDER U/S.143(3) ON 30-09-2010 DETERMINING THE TOTAL LOSS AT RS.78,21,1 70/-. SUBSEQUENTLY THE LD.CIT CALLED FOR THE RECORDS AND NOTICED THAT THE ASSESSEE HAD NOT SUO-MOTO DISALLOWED PROFITS OF RS.57,31,982/- U/S.4 1 OF THE I.T. ACT, THE DETAILS OF WHICH ARE AS UNDER : 2 2.1 HE NOTED THAT EVEN THOUGH THE STATUTORY AUDITOR S AT CLAUSE 20 OF THE STATUTORY AUDIT REPORT IN FORM 3CD HAD CATEGORICALL Y MENTIONED THAT PROFITS TO THE ABOVE EXTENT WERE CHARGEABLE TO TAX UNDER THE SAID SECTION THE ASSESSING OFFICER IN THE ASSESSMENT MADE U/S.14 3(3) HAS FAILED TO BRING THE SAID PROFITS TO TAX. THE LD.CIT OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOT A SINGLE QUERY WAS RA ISED BY THE ASSESSING OFFICER ON THE BASIS OF THE SAID REMARKS. HE, THEREFORE, WAS OF THE OPINION THAT THE ASSESSMENT ORDER DATED 30-09-2 010 PASSED BY THE ASSESSING OFFICER U/S.143(3) WAS ERRONEOUS IN SO FA R AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE ACCORDINGLY ISSUED A SHOW CAUSE NOTICE U/S.263 OF THE I.T. ACT TO THE ASSESSEE CALLING UPO N IT TO SHOW CAUSE AS TO WHY THE ASSESSMENT ORDER DATED 30-11-2010 SHOULD NO T BE REVISED UNDER THE SAID SECTION. 2.2 FROM THE DETAILS FURNISHED BY THE ASSESSEE, THE LD.CIT NOTED THAT OUT OF THE TOTAL AMOUNT OF RS.57,31,982.65, THE ASS ESSEE ITSELF HAS OFFERED THE FIRST 3 ITEMS TOTALLING TO RS.25,19,679.43 IN T HE COMPUTATION STATEMENT OF INCOME. HOWEVER, THE ASSESSEE HAS NOT OFFERED THE AMOUNT OF RS.32,12,303.22 U/S.41 OF THE I.T. ACT. IT WAS EXPLAINED BEFORE THE LD.CIT THAT WHILE THE STATUTORY AUDITOR HAS CONSIDE RED THE AMOUNT OF RS.32,12,303.22 AS OVER-STATEMENT OF THE ASSESSEES LIABILITY TO M/S. SINGTEL CO. (SINGAPORE TELECOMMUNICATION LTD.) ON T HE BASIS OF THE PARTICULARS AMOUNT SALARY 1,119,250.04 CREDITORS 775,638.39 LEAVE ENCASHMENT 624,791.00 IPCL CHARGES-SIGTEL CO.LO & IPCL A/C. 3,212,303.33 TOTAL 5,731,982.65 3 CONFIRMATION GIVEN BY THE ABOVE CREDITOR OF LIABILI TY TO THE EXTENT OF RS.4,82,810/- ONLY, THE ASSESSEE HAD STILL SHOWN TH E ENTIRE LIABILITY AS PAYABLE TO M/S. SINGTEL BECAUSE IN THE MEANWHILE PA YMENTS HAD BEEN MADE TO THIS CONCERN BY MR. KIRAN KULKARNI, DIRECTO R BY USING HIS OWN CREDIT CARD. THE LD.CIT NOTED THAT IN THE ASSESSEE S STATEMENT OF ACCOUNTS, MR. KIRAN KULKARNI DOES NOT FIGURE AS A C REDITOR AT ALL WHICH OUGHT TO HAVE BEEN THE CASE IF HE HAD PARTLY DISCHA RGED THE ASSESSEES LIABILITY TO M/S. SINGTEL. IT WAS EXPLAINED THAT E VEN THOUGH MR. KIRAN KULKARNI HAS AUTHORISED M/S. SINGTEL TO CHARGE HIS CREDIT CARD FOR RECOVERY OF THE PAYMENT DUE FROM THE COMPANY, THE E XPRESS UNDERSTANDING WITH M/S. SINGTEL WAS THAT AS SOON A S THE COMPANY MAKES THE PAYMENT TO M/S. SINGTEL, THIS AMOUNT WILL BE CR EDITED BACK TO HIS CREDIT CARD. HOWEVER, THE SUBSEQUENT REQUESTS MAD E BY MR. KIRAN KULKARNI TO M/S. SINGTEL TO REVERSE THE CHARGES MAD E TO HIS PERSONAL CREDIT CARD WAS NOT HONOURED. INSTEAD, M/S. SINGTE L INSTRUCTED K.R. UNIVERSAL, I.E. THE ASSESSEE, TO PAY THE CHARGES DI RECTLY TO MR. KIRAN KULKARNI. DURING THE FOLLOW UP PHASE THE LIABILIT Y IN COMPANYS BOOKS REMAINED UNDER M/S. SINGTEL AS THERE WAS SOME HOPE THAT M/S. SINGTEL WILL REVERSE THE CREDIT CARD PAYMENTS. COPIES OF A FEW E-MAIL COMMUNICATIONS BETWEEN THE ASSESSEE AND M/S. SINGTE L AUTHORITIES WERE SUBMITTED TO SUBSTANTIATE THE ABOVE CONTENTION OF T HE ASSESSEE. IT WAS SUBMITTED THAT THERE WAS NO INTENSION OF ANY MIS-RE PRESENTATION OF THE FACTS AND THE LIABILITY WAS BEING SHOWN ONLY IN THE NAME OF M/S. SINGTEL BECAUSE OF THE PECULIAR CIRCUMSTANCES OF THE CASE. 4 2.3 IT WAS ALSO SUBMITTED THAT A MERE ERROR IN ACCO UNTING SHOULD NOT RESULT INTO ADDITION TO THE INCOME U/S.41. IT WAS FURTHER SUBMITTED THAT SECTION 41 SHOULD NOT BE INVOKED FOR THE A.Y. 2008- 09 AS THE ASSESSEE COMPANY HAD NOT OBTAINED ANY BENEFIT AS ON 31-03-20 08. VARIOUS DECISIONS WERE ALSO CITED BEFORE LD.CIT(A). 3. HOWEVER, THE LD.CIT WAS NOT CONVINCED WITH THE E XPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT THE SUBMISSIO N OF THE ASSESSEE THAT MR. KIRAN KULKARNI HAS MADE THE PAYMENTS FROM HIS C REDIT CARD TO M/S. SINGTEL CANNOT BE BELIEVED SINCE MR. KIRAN KULKARNI HAS NOT BEEN SHOWN AS A CREDITOR IN THE ACCOUNTS OF THE ASSESSEE. THE REASONS FOR NOT SHOWING AS A CREDITOR TO THE EXTENT OF RS.32,29,953 .71 ARE BEST KNOWN TO THE ASSESSEE. REJECTING THE VARIOUS EXPLANATIONS G IVEN BY THE ASSESSEE AND DISTINGUISHING THE VARIOUS DECISIONS CITED BEFO RE HIM HE HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS PATENTLY E RRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE, TH EREFORE, DIRECTED THE ASSESSING OFFICER TO RECOMPUTE THE ASSESSEES ASSES SABLE INCOME FOR THE A.Y. 2008-09 BY BRINGING TO TAX U/S.41(1), THE LIAB ILITY TO M/S. SINGTEL WHICH HAD SEIZED TO EXIST. HOWEVER, HE NOTED THAT AT ANNEXURE-5 TO THE AUDIT REPORT, THE SAID LIABILITY IS SHOWN AT RS.32, 12,303.22 WHEREAS IN THE AUDITORS REPORT TO THE SHAREHOLDERS THE SAME HAS B EEN SHOWN AT RS.32,39,953/.71. HE, THEREFORE, DIRECTED THE ASSE SSING OFFICER TO ASCERTAIN THE CORRECT AMOUNT AND BRING THE SAME TO TAX BY DEEMING IT AS INCOME U/S.41(1) OF THE I.T. ACT. 3.1 AGGRIEVED WITH SUCH ORDER OF THE CIT THE ASSES SEE IS IN APPEAL BEFORE US. 5 4. THE LD. COUNSEL FOR THE ASSESSEE ADMITTED THAT T HE ASSESSING OFFICER HAS NOT MADE ANY QUERIES DURING THE ASSESSM ENT PROCEEDINGS REGARDING THE CESSATION OF LIABILITY TO M/S. SINGTE L ALTHOUGH THE SAME WAS SPECIFICALLY POINTED OUT BY THE AUDITORS IN THE TAX AUDIT REPORT AS WELL AS IN THE REPORT TO THE SHAREHOLDERS. HE, HOWEVER, SU BMITTED THAT SINCE FULL DETAILS WERE GIVEN BEFORE THE CIT HE SHOULD HAVE EX AMINED THE SAME AND DROPPED THE 263 PROCEEDINGS. REFERRING TO THE DECI SION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. VIKAS POLYMERS RE PORTED IN 341 ITR 537 THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTEN TION OF THE BENCH TO THE FOLLOWING OBSERVATIONS OF THE HONBLE HIGH COUR T : WE ARE THUS OF THE OPINION THAT THE PROVISIONS OF SECT ION 263 OF THE ACT, WHEN READ AS A COMPOSITE WHOLE MAKE IT INCUMBENT UPON THE COMMISSIONER BEFORE EXERCISING REVISIONAL POWERS TO (I) CALL FOR AND EXAMINE THE RECORD, AND (II) GIVE THE ASSESSEE AN OPPOR TUNITY OF BEING HEARD AND THEREAFTER TO MAKE OR CAUSE TO BE MADE SUCH ENQUIRY AS HE DEEMS NECESSARY. IT IS ONLY ON FULFILMENT OF THESE TWIN CONDITIONS THAT THE COMMISSIONER MAY PASS AN ORDER EXERCISING HIS POWER O R REVISION. MINUTELY EXAMINED, THE PROVISIONS OF THE SECTION ENVI SAGE THAT THE COMMISSIONER MAY CALL FOR THE RECORDS AND IF PRIMA FAC IE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRON EOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE MAY AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH ENQUIRY AS HE DEEMED NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY. THE TWIN REQUIR EMENTS OF THE SECTION IS MANIFESTLY FOR A PURPOSE. MERELY BECAUSE THE COMMISSIONER CONSIDERS ON EXAMINATION OF THE RECORD THAT THE ORDER HAVE BEEN ERRONEOUSLY PASSED SO AS TO PREJUDICE THE INTERESTS OF THE REVENUE WILL NOT SUFFICE. THE ASSESSEE MUST BE CALLED HIS EXPLANATI ON SOUGHT FOR AND EXAMINED BY THE COMMISSIONER, AND THEREAFTER IF THE C OMMISSIONER STILL FEELS THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE, THE COMMISSIONER MAY PASS REVISIONAL ORDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HE ACCORDINGLY SUBMITTED THAT SINCE ASSESSEE HAS EX PLAINED IN DETAILS REGARDING NON CHARGING OF RS.32,12,303 U/S.41 OF TH E I.T. ACT, THE CIT SHOULD HAVE DROPPED THE PROCEEDINGS U/S.263 OF THE I.T. ACT. 6 5. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT. HE SUBMITTED THAT THERE IS NO APPLICATION OF MIND BY THE ASSESSING OFFICER ON THIS VITAL ISSU E WHICH HAS BEEN POINTED OUT BY THE STATUTORY AUDITORS AS WELL AS TA X AUDITORS IN AUDIT REPORT. NOT A SINGLE QUERY WAS RAISED BY THE ASSES SING OFFICER ON THIS ISSUE NOR THE ASSESSEE HAS FILED ANY DETAILS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, THE ORDER OF TH E ASSESSING OFFICER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THE LD.CIT WAS JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 OF THE I.T. ACT. HE ALSO RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL COMPANY LTD. VS. CIT REP ORTED IN 243 ITR 83 FOR THE ABOVE PROPOSITION. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DIS PUTE TO THE FACT THAT THE ASSESSING OFFICER IN THE INSTANT CASE HAS NOT AT AL L DISCUSSED ABOUT THE TAXABILITY OF THE AMOUNT OF RS.32,12,303.22 U/S.41( 1) OF THE I.T. ACT ON ACCOUNT OF CESSATION OF LIABILITY TO M/S. SINGTEL C OMPANY. NOT A SINGLE QUERY ON THIS ISSUE HAS BEEN RAISED BY THE ASSESSIN G OFFICER DESPITE A SPECIFIC NOTE BY THE AUDITORS ON THIS ISSUE NOR THE ASSESSEE HAS GIVEN ANY DETAILS OR SUBMISSIONS DURING THE COURSE OF ASSESSM ENT PROCEEDINGS. THEREFORE, THIS IS A CASE OF NO ENQUIRY ON A VITAL ISSUE AND THEREFORE THE PROVISIONS OF SECTION 263 ARE CLEARLY ATTRACTED. H OWEVER, WE FIND THE LD.CIT INSTEAD OF SETTING ASIDE THE ORDER TO THE FI LE OF THE ASSESSING OFFICER FOR DENOVO ASSESSMENT ON THIS ISSUE HAS GIV EN THE DIRECTION TO THE 7 ASSESSING OFFICER TO BRING THE SAID AMOUNT TO TAX U /S.41(1) OF THE I.T. ACT. WE, THEREFORE, MODIFY THE ORDER OF THE CIT ON THIS ISSUE AND RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO MAKE THE ASSESSMENT DENOVO ON THE ISSUE OF TAXABILITY OF RS. 32,12,303.22 U/S.41(1) OF THE I.T. ACT. WE HOLD AND DIRECT ACCO RDINGLY. THE APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR ST ATISTICAL PURPOSES 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 27-05-2014. SD/- SD/- (R.S. PADVEKAR) (R.K. PAND A) JUDICIAL MEMBER ACCOUN TANT MEMBER PUNE DATED: 27 TH MAY, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT-I, PUNE 4. THE D.R, B PUNE BENCH 5. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE