Sh. Gurcharan Singh, Bathinda V. The Principal Commissioner of Income Tax, Bathinda

ITA 135/ASR/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8775 (ITAT-AMRITSAR)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 28-11-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 09-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VEDPAL SINGH
• Assessee Lawyers: K. R JAIN
• Keywords: Revision of order; Revenue expenditure; FORM 26AS
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 92; 48; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNA AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.SANJAY GARG, JUDICIAL MEMBER I.T.A. NO.135(ASR)/2016 ASSESSMENT YEAR: 2011-12 SH. GURCHARAN SINGH S/O KAKA SINGH C/O PAWAN KUMAR CONTRACTOR, MAUR MANDI, DIST.BATHINDA PAN:BUZPS6702H VS. PR. CIT, BATHINDA. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. K. R JAIN, ADV. RESPONDENT BY: SH. VEDPAL SINGH, DR DATE OF HEARING: 28/11/2016 DATE OF PRONOUNCEMENT: 07/02/2017 ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF LD. PR. CIT, BATHINDA, DT.27.11.2015 FOR ASST. YEAR: 2011-12. 2. AT THE OUTSET, LD. AR SUBMITTED THAT THE LD. PR. CIT HAD PASSED ORDER U/S 263 AS IN HIS OPINION, THE ASSESSING OFFI CER HAD NOT VERIFIED CERTAIN POINTS WHICH HE SHOULD HAVE VERIFIED AND IN THIS RESPECT, HE INVITED OUR ATTENTION TO THE ORDER U/S 263 WHERE TH E LD. PR. CIT HAD REPRODUCED THE THREE REASONS FOR WHICH HE HAD PASSE D ORDER U/S 263. REGARDING THE FIRST ISSUE OF VERIFICATION OF SOURCE OF CASH DEPOSITS IN THE ITA NO.135/ASR/2016 ASST. YEAR: 2011-12 2 SAVING BANK ACCOUNT MAINTAINED WITH AXIS BANK, THE LD. AR SUBMITTED THAT ASSESSEE HAD DEPOSITED THE SAID AMOUNT OUT OF SALES MADE BY HIM AND ASSESSING OFFICER HAD DULY VERIFIED THE SAME AN D IN THIS RESPECT HE INVITED OUR ATTENTION TO THE QUESTIONNAIRE ISSUED B Y ASSESSING OFFICER PLACED AT (PB-9 TO 12). OUR SPECIFIC ATTENTION WAS INVITED TO PARA-4 & PARA 13 OF THE QUESTIONNAIRE WHERE THE ASSESSING OF FICER HAD REQUIRED THE ASSESSEE TO FURNISH MONTH WISE DETAILS OF PURCH ASES AND SALES AND HAD ALSO REQUIRED THE ASSESSEE TO PRODUCE BANK PASS BOOK OF ALL BANKS. THE LD. AR SUBMITTED THAT THIS QUERY WAS REPLIED TO VIDE LETTER DATED 05.08.2013 WHEREIN THE MONTH WISE DETAIL OF SALES A ND PURCHASE WERE SUBMITTED VIDE PARA NO.4 AND COPY OF BANK ACCOUNTS AND COPY OF BANK STATEMENT WERE SUBMITTED VIDE REPLY AT POINT NO.13. THE LD. AR ALSO TOOK US TO (PB-17) WHERE VIDE PARA-3, THE ASSESSEE HAD S TATED THAT HE WAS MAINTAINING SAVING ACCOUNT WITH AXIS BANK AND WHEREIN HE HAD MENTIONED THAT THE CASH HAD BEEN DEPOSITED IN AXIS BANK OUT OF SALE PROCEEDS OF LIQUOR AND OUT OF CONSIGNMENT SALES MA DE ON BEHALF OF M/S. CHANDIGARH DISTILLERS AND BOTTLERS LTD. THE LD. AR FURTHER TOOK US TO PARA 6 OF THE LETTER PLACED AT PB -7 WHERE THE ASSE SSEE HAD FURNISHED LEDGER, CASH BOOK, FOR KIND PERUSAL AND VERIFICATIO N. THEREFORE, IT WAS SUBMITTED THAT THE FINDING OF LD. PR. CIT THAT ASSE SSING OFFICER HAD NOT MADE ANY VERIFICATION FOR CASH DEPOSIT IN AXIS BANK IS TOTALLY WRONG. ITA NO.135/ASR/2016 ASST. YEAR: 2011-12 3 2.1 INVITING OUR ATTENTION TO SECOND ISSUE REGARDIN G LICENSE FEE PAID TO PUNJAB GOVT. EXCISE DEPARTMENT, THE LD. AR INVITED OUR ATTENTION TO (PB- 11&12) WHERE VIDE SERIAL NO.15 OF QUESTIONNAIRE, TH E ASSESSING OFFICER HAD REQUIRED ASSESSEE TO FURNISH COPY OF ORDER PASS ED BY MARKET COMMITTEE/ EXCISE DEPARTMENT ETC. THE LD. AR SUBMIT TED THAT REPLY TO THIS QUERY RAISED BY ASSESSING OFFICER WAS FURNISHE D AS PER LETTER DATED 05.08.2013 VIDE PARA-15 WHEREBY THE ASSESSEE HAD FU RNISHED COPY OF ACCOUNT OF EXCISE FEES AND ADDITIONAL EXCISE FEES A LONG WITH PROOF OF PAYMENT OF THE SAME. THE LD. AR ALSO TOOK US TO COP Y OF ORDER SHEET OF ASSESSING OFFICER PLACED AT (PB -107) WHERE VIDE OR DER SHEET ENTRY DATED 19.12.2013, THE ASSESSING OFFICER HAD REQUIRED THE ASSESSEE TO FURNISH EVIDENCE FOR DEPOSIT OF EXCISE DUTY TO THE TUNE OF RS.18 LAC. THE LD. AR SUBMITTED THAT VIDE LETTER PLACED AT (PB-17) VIDE PARA -5 THE ASSESSEE HAD ENCLOSED PROOF OF PAYMENT OF LICENSE FEE ALONG WITH COPY OF FINAL ACCOUNTS FOR THE YEAR ENDING 31.03.2010. THE LD. AR SUBMITTE D THAT ASSESSEE HAD DEPOSITED RS.18 LAC AS ADVANCE EXCISE DUTY. THE LD. AR SUBMITTED THAT THE SAID AMOUNT WAS PAID DURING F.Y. ENDING 31.03.2 010 AS ADVANCE FOR F.Y. 2010-11 AND THEREFORE, ASSESSEE HAD RIGHTLY CL AIMED THE SAME AS EXPENSES IN THE YEAR UNDER CONSIDERATION AS PER MER CANTILE SYSTEM OF ACCOUNTING. IT WAS SUBMITTED THAT IN THE EARLIER YE AR ALSO THE ASSESSEE HAD FOLLOWED THE SAME SYSTEM OF ACCOUNTING. THEREFO RE, IT WAS SUBMITTED THAT FINDING OF LD. PR. CIT THAT THE EXPENDITURE DI D NOT BELONG TO THE PRESENT YEAR IS NOT CORRECT. ITA NO.135/ASR/2016 ASST. YEAR: 2011-12 4 2.2 AS REGARDS THE THIRD GROUND REGARDING NON DIS CLOSURE OF COMMISSION INCOME, THE LD. AR INVITED OUR ATTENTION TO COPY OF ORDER SHEET PLACED AT (PB-105 TO 108) AND OUR SPECIFIC AT TENTION WAS INVITED TO ORDER SHEET ENTRY DATED 15.10.2013 WHEREIN THE ASSE SSING OFFICER HAD REQUIRED THE ASSESSEE TO EXPLAIN NATURE AND DETAILS OF COMMISSION CREDITED AT RS.7,15,628/-. THE LD. AR SUBMITTED THA T THE ASSESSEE WAS AN AUTHORIZED AGENT OF CHANDIGARH DISTILLERS AND BOTTL ERS LTD. FROM WHOM THE ASSESSEE HAD RECEIVED COMMISSION WHICH WAS CRED ITED TO PROFIT AND LOSS ACCOUNT. THE LD. AR SUBMITTED THAT THE QUERY O F THE ASSESSING OFFICER WAS REPLIED VIDE REPLY DATED 21.10.2013 PLA CED AT (PB-15) WHERE THE ASSESSEE HAD INFORMED THE ASSESSING OFFICER VID E PARA -2 THAT HE HAD RECEIVED THE COMMISSION FROM CHANDIGARH DISTILLERS AND BOTTLERS LTD. AND COPY OF AGREEMENT WITH CHANDIGARH DISTILLERS AN D BOTTLERS LTD WAS FILED AND COPY OF COMMISSION ACCOUNT WAS ALSO FILED . THE LD. AR IN THIS RESPECT TOOK US TO (PB-22) WHERE A COPY OF COMMISSI ON ACCOUNT SUBMITTED TO ASSESSING OFFICER WAS PLACED. THE LD. AR FURTHER TOOK US TO COPY OF FORM 26AS WHEREIN THE DEPARTMENT ITSELF HAD REFLECTED THE SAID AMOUNT AS HAVING BEING RECEIVED BY ASSESSEE FROM CH ANDIGARH DISTILLERS AND BOTTLERS LTD. 3. THE LD. DR, ON THE OTHER HAND PLACED HIS RELIANC E ON THE ORDER OF LD. PR. COMMISSIONER OF INCOME TAX. ITA NO.135/ASR/2016 ASST. YEAR: 2011-12 5 4. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT REGARDING C ASH DEPOSITS IN THE AXIS BANK, THE ASSESSEE VIDE REPLY PLACED AT (PB-17 ) IN PARA-3 HAD SUBMITTED THAT AS UNDER: THAT THE SAVING ACCOUNT IS MAINTAINED WITH AXIS BA NK WAS BEING UTILIZED FOR BUSINESS TRANSACTIONS. THE CASH HAS BEEN DEPOSI TED IN AXIS BANK, BATHINDA OUT OF SALE PROCEEDS OF LIQUOR AND CONSIGN MENT SALES MADE ON BEHALF OF M/S CHANDIGARH DISTILLERS AND BOTTLERS LT D. (CONSIGNOR). WE FURTHER FIND THAT ASSESSEE HAD ALSO FURNISHED A COPY OF CASH BOOK AND COPY OF LEDGER ACCOUNT OF AXIS BANK WHICH IS PL ACED AT (PB 34 TO 38). THE ASSESSEE HAD ALSO FURNISHED A COPY OF SAVI NGS BANK ACCOUNT OF ASSESSEE FOR THE ABOVE SAID PERIOD WHICH IS PLACED AT (PB 48 TO 50). THE ASSESSEE HAD ALSO FURNISHED COMPLETE BOOKS OF ACCOU NT ALONG WITH CASH BOOK WHICH IS APPARENT FROM PARA-6 OF THE LETTER WH ICH READS AS UNDER: THAT THE BOOKS OF ACCOUNTS I.E. LEDGER, CASH BOOK, EXCISE INSPECTION NOTEBOOK ETC ARE HEREBY PRODUCED FOR YOUR KIND PERU SAL AND RETURN. IN VIEW OF THIS FACTS AND CIRCUMSTANCES THE FINDING S OF LD. PR. CIT, THE ASSESSING OFFICER HAD NOT VERIFIED THE CASH DEPOSIT S IN AXIS BANK IS NOT CORRECT. 4.1 AS REGARDS THE SECOND ISSUE REGARDING LICENSE F EES PAID TO PUNJAB GOVT. WE FIND THAT DURING THE F.Y. 2009-10 RELEVANT FOR ASST. YEAR: 2010- 11, THE ASSESSEE HAD DEPOSITED THE LICENSE FEES AS ADVANCE WHICH IS PRACTICE WITH EXCISE DEPARTMENT WHEREBY THEY TAKE A DVANCE LICENSE FEE FOR THE ENSUING YEAR. THIS FACT IS VERIFIABLE FROM THE COPY OF BALANCE SHEET OF ASSESSEE FOR F.Y. 2009-10 PLACED AT (PB 61 TO 67 ) WHERE AT PAGE 67 THE ITA NO.135/ASR/2016 ASST. YEAR: 2011-12 6 ASSESSEE HAD REFLECTED AN AMOUNT OF RS.15,30,000/- AS ADVANCE LICENSE FEE. THIS FEE RELATED TO YEAR UNDER CONSIDERATION A ND THE ASSESSEE HAD RIGHTLY CLAIMED THE SAME IN THE PRESENT YEAR AS PER MERCANTILE SYSTEM OF ACCOUNTING. THE ASSESSING OFFICER HAD EXAMINED THIS ISSUE VIDE QUERY AT SERIAL NO.15 PLACED AT (PB-12). THE ASSESSEE VIDE R EPLY DATED 05.08.2013 PLACED AT (PB-14) HAD FURNISHED A COPY OF ACCOUNT O F EXCISE FEES AND ADDITIONAL EXCISE FEES ALONG WITH PROOF OF PAYMENT OF THE SAME AND THEREFORE, IT IS WRONG ON THE PART OF LD. PR. CIT T O HOLD THAT THE EXPENSES RELATED TO PRECEDING YEAR. THE ASSESSING OFFICER HA D EXAMINED THIS ISSUE AND HAD RIGHTLY ALLOWED THE CLAIM. 4.2 COMING TO THE LAST ISSUE OF COMMISSION RECEIVED FROM CHANDIGARH DISTILLERS AND BOTTLERS LTD, WE FIND THAT THE OBJEC TION OF LD. PR. CIT IS THAT ASSESSEE HAD NOT DISCLOSED AN AMOUNT OF RS.3,11,343 /- RECEIVED FROM CHANDIGARH DISTILLERS & BOTTLERS LTD. AS THE AMOUNT WAS NOT INCLUDED IN THE DECLARED INCOME OF COMMISSION AT RS.7,15,682/-. IN THIS RESPECT, WE FIND THAT ASSESSEE HAD FURNISHED COPY OF AGREEMENT ENTERED WITH CHANDIGARH DISTILLERS AND BOTTLERS LTD. AND HAD ALS O FURNISHED THE COPY OF COMMISSION ACCOUNT AS IS MENTIONED IN HIS LETTER DATED 21.10.2013 PLACED AT (PB-15). WE FURTHER FIND THAT COPY OF COM MISSION ACCOUNT AS PLACED BEFORE ASSESSING OFFICER IS PLACED AT (PB-22 ) WHEREIN THE ASSESSEE HAD DECLARED AN AMOUNT OF RS.7,15,628/- AS COMMISSI ON INCOME FROM CHANDIGARH DISTILLERS AND BOTTLERS LTD. THIS FACT I S FURTHER STRENGTHENED FROM COPY OF FORM 26AS PLACED AT (PB 25 TO 28) WHER EIN IT HAS BEEN ITA NO.135/ASR/2016 ASST. YEAR: 2011-12 7 MENTIONED THAT ASSESSEE HAD RECEIVED AN AMOUNT OF R S.7,15,628/- AS COMMISSION FROM CHANDIGARH DISTILLERS AND BOTTLERS LTD. THIS FACT IS FURTHER STRENGTHENED FROM COPY OF FORMS NO.16A PLAC ED AT (PB 29 TO 33). WE FIND THAT THE LD. PR. CIT HAD MENTIONED THAT ASS ESSEE HAD RECEIVED CERTAIN PAYMENTS IN AXIS BANK AS COMMISSION FROM CH ANDIGARH DISTILLERS AND BOTTLERS LTD. WHILE HOLDING SUCH FINDING HE HAS OVERLOOKED THE FACT THAT BOOKING OF AN INCOME ON ACCRUAL BASIS AND RECE IPT THEREOF IN THE BANK ACCOUNT ARE TOO DIFFERENT ENTRIES. THE ASSESSE E HAD BOOKED THE INCOME IN THE P&L ACCOUNT WHICH FIGURE IS CORRECT A S IT IS SUPPORTED BY COPY OF FORM NO.16A AND COPY OF FORM 26AS. THIS COM MISSION WAS RECEIVED IN INSTALLMENTS IN THE AXIS BANK AND WHICH INCLUDED THE AMOUNTS POINTED OUT BY PR. COMMISSIONER. IN VIEW OF THE ABOVE FINDINGS, THIS ISSUE ALSO DID NOT REQUIRE THE INTERVENTION OF LD. PR. CIT. IN VIEW OF THE ABOVE, WE HOLD THAT THE ORDER PASSED BY LD. PR. CIT IS NOT SUSTAINABLE AS ASSESSING OFFICER HAD ENQUIRED INTO ALL THE ENQ UIRIES WHICH THE LD. PR. CIT HAD LISTED. THERE IS DIFFERENCE BETWEEN LACK OF ENQUIRY AND INADEQUATE ENQUIRY. VARIOUS COURTS HAS HELD THAT WH ERE AN ENQUIRY HAS BEEN MADE AND HAS BEEN EXAMINED EVEN INADEQUATE, TH E PROVISIONS OF SECTION 263 CAN NOT BE APPLIED. THE PRESENT CASE IS NOT OF LACK OF ENQUIRY AS ASSESSING OFFICER HAD MADE SUFFICIENT ENQUIRIES. THE HONBLE DELHI HIGH COURT IN THE CASE CIT VS. SUNBEAM AUTO LTD. RE PORTED IN 332 ITR 0167 HAS EXPLAINED THAT THE DIFFERENCE BETWEEN INAD EQUATE ENQUIRY AND LACK OF ENQUIRY AND HAS HELD THAT WHERE THERE IS EN QUIRY EVEN IF ITA NO.135/ASR/2016 ASST. YEAR: 2011-12 8 INADEQUATE IT WAS SUFFICIENT AND INADEQUATE ENQUIRY WILL NOT GIVE OCCASION TO CIT TO PASS ORDER U/S 263. THE FINDING S OF THE HONBLE COURT ARE SUMMARIZED BELOW. THE SUBMISSION OF THE COUNSEL FOR THE REVENUE WAS TH AT WHILE PASSING THE ASSESSMENT ORDER, THE AO DID NOT CONSIDER THE ASPEC T SPECIFICALLY WHETHER THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL EXPE NDITURE. THIS ARGUMENT PREDICATES ON THE ASSESSMENT ORDER, WHICH APPARENTL Y DOES NOT GIVE ANY REASONS WHILE ALLOWING THE ENTIRE EXPENDITURE AS REVENUE EX PENDITURE. HOWEVER, THAT BY ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE AO HAD NOT APPLIED HIS MIND ON THE ISSUE. THE AO IN THE ASSESSMENT ORDER IS NOT REQ UIRED TO GIVE DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC . THEREFORE, ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF M IND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. THE COUNSEL FOR THE ASSESSEE IS RIGHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIN D THE DISTINCTION BETWEEN 'LACK OF INQUIRY' AND 'INADEQUATE INQUIRY'. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE CIT T O PASS ORDERS UNDER S. 263, MERELY BECAUSE HE HAS DIFFERENT OPINION IN THE MATT ER. IT IS ONLY IN CASES OF 'LACK OF INQUIRY' THAT SUCH A COURSE OF ACTION WOULD BE OPEN . THE AO HAD CALLED FOR EXPLANATION ON THIS VERY ITEM FROM THE ASSESSEE AND THE ASSESSEE HAD FURNISHED HIS EXPLANATION VIDE LETTER DT.26TH SEPT., 2002. TH IS FACT IS EVEN TAKEN NOTE OF BY THE CIT HIMSELF IN PARA 3 OF HIS ORDER. THIS CLEARL Y SHOWS THAT THE AO HAD UNDERTAKEN THE EXERCISE OF EXAMINING AS TO WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE REPLACEMENT OF DYES AND TOOLS I S TO BE TREATED AS REVENUE EXPENDITURE OR NOT. IT APPEARS THAT SINCE THE AO WAS SATISFIED WITH THE AFORESAID EXPLANATION, HE ACCEPTED THE SAME. THE CIT IN HIS I MPUGNED ORDER EVEN ACCEPTS THIS. THUS, EVEN THE CIT CONCEDED THE POSITION THAT THE AO MADE THE INQUIRIES, ELICITED REPLIES AND THEREAFTER PASSED THE ASSESSME NT ORDER. THE GRIEVANCE OF THE CIT WAS THAT THE AO SHOULD HAVE MADE FURTHER INQUIRI ES RATHER THAN ACCEPTING THE EXPLANATION, THEREFORE, IT CANNOT BE SAID THAT IT I S A CASE OF 'LACK OF INQUIRY -CIT VS. GABRIAL INDIA LTD. (1993) 114 CTR (BOM) 81 : (1993) 203 ITR108 (BOM) R ELIED ON. IN VIEW OF THE ABOVE, THE ORDER PASSED BY LD. PR. C IT U/S 263 IS CANCELLED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 5. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE AS SESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/02/2017 . SD/- SD/- (SANJAY GARG) (T.S. KAPOOR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 07/02/2017 /PK/PS ITA NO.135/ASR/2016 ASST. YEAR: 2011-12 9 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: 2. THE 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER