M/s.Parthas, Trivandrum V. ACIT, Trivandrum

ITA 142/COCH/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1039 (ITAT-COCHIN)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 21-05-2012
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA; M ANIL KUMAR
• Assessee Lawyers: R KRISHNAN
• Keywords: Revision of order; Principle of natural justice
• Section: 143(3); 153A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NOS. 141 & 142/COCH/2012 ASSESSMENT YEAR : 2002-03 & 2008-09 M/S. PARTHAS, POWER HOUSE ROAD, TRIVANDRUM-695 036 [PAN: VS. THE COMMISSIONER OF INCOME TAX (CENTRAL), KOCHI. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI R. KRISHNAN, CA REVENUE BY SMT. S. VIJAYAPRABHA, JR. DR & SHRI M. ANIL KUMAR, CIT(DR DATE OF HEARING 03/12/2012 DATE OF PRONOUNCEMENT 11/01/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST THE SEPARATE ORDERS PASSED U/S. 263 OF THE ACT BY THE LD. CIT (CENTRAL) , KOCHI FOR THE ASSESSMENT YEARS 2002-03 & 2008-09. THE ASSESSEE IS CHALLENGING THE VALIDITY OF THE REVISION ORDERS PASSED BY THE LD. CIT. 2. WE SHALL FIRST TAKE UP THE APPEAL PERTAINING TO THE ASSESSMENT YEAR 2002-03. THE ORIGINAL ASSESSMENT OF THAT YEAR WAS COMPLETED ON 31-12-2009 BY THE ASSESSING OFFICER U/S. 143(3) READ WITH SEC. 153A OF THE ACT. THE LD. CIT, ON EXAMINATION OF THE RECORDS, NOTICED THAT THE ASSESSEE HAD PAID A SUM O F RS.4,01,624/- AS BUILDING TAX FOR EXTENSION OF THE BUILDING AND CLAIMED THE SAME AS R EVENUE EXPENDITURE. THE LD. CIT WAS OF THE VIEW THAT THE SAID BUILDING TAX IS A CAP ITAL EXPENDITURE AND THE SAME SHOULD NOT HAVE BEEN ALLOWED BY THE ASSESSING OFFICER. HE ALSO NOTICED THAT THIS ISSUE WAS NOT I.T.A. NOS.141 & 142/COCH/2012 2 EXAMINED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ACCORDINGLY THE LD. CIT, AFTER HEARING THE ASSESSEE , SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO RE-DO THE SAME AF TER EXAMINING THE SAID ISSUE PROPERLY. AGGRIEVED BY THE SAID ORDER, THE ASSESSE E IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE PARTIES. AFTER CAREFUL P ERUSAL OF THE ASSESSMENT ORDER, WE NOTICE THAT THE AO DID NOT DISCUSS ANYTHING ABOUT T HE CLAIM OF BUILDING TAX IN THE ASSESSMENT ORDER. THE ASSESSEE ALSO COULD NOT FURN ISH ANY MATERIAL TO SHOW THAT THE IMPUGNED ISSUE WAS EXAMINED BY THE AO. IT IS NOW W ELL-SETTLED THAT THE LACK OF ENQUIRY ON THE PART OF THE ASSESSING OFFICER WOULD RENDER T HE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN T HE INSTANT CASE, APPARENTLY, THE ASSESSING OFFICER DID NOT EXAMINE THE QUESTION OF A LLOWABILITY OF BUILDING TAX DURING THE COURSE OF ASSESSMENT PROCEEDING. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE REVISION ORDER FOR THE ASSESSMENT YEAR 2002-03. ACCORDINGLY , WE UPHOLD THE ORDER OF THE LD. CIT. 4. WE SHALL NOW TAKE UP THE APPEAL PERTAINING TO TH E ASSESSMENT YEAR 2008-09. THE ASSESSMENT FOR THIS YEAR WAS COMPLETED BY THE ASSES SING OFFICER U/S. 143(3) OF THE ACT ON 31-12-2009. CONSEQUENT TO THE SEARCH OPERATIONS , THE ASSESSEE HAD OFFERED A SUM OF RS.1,21,00,000/- IN THE INSTANT YEAR TO COVER UP ANY POSSIBLE OMISSIONS OR COMMISSIONS. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE ASSESSING OFFICER IDENTIFIED VARIOUS DISALLOWANCES AND ADDITIONS THAT ARE REQUIRED TO BE MADE AND THE AGGREGATE OF SUCH DISALLOWANCES WORKED OUT TO RS. 3 9,30,732/-. BEFORE THE AO, THE ASSESSEE LODGED A PLEA THAT THE ADDITIONAL INCOME O F RS.1,21,00,000/- WAS OFFERED TO COVER UP THE POSSIBLE OMISSION AND COMMISSIONS AND HENCE THE AGGREGATE AMOUNT OF DISALLOWANCES IDENTIFIED BY THE AO SHOULD BE TELESC OPED WITH THE SAID OFFER. THE ASSESSING OFFICER ACCEPTED THE SAID PLEA MADE BY TH E ASSESSEE AND HENCE HE DID NOT MAKE ADDITION OF RS.39,30,732/-. 5. THE LD. CIT NOTICED THAT VARIOUS DISALLOWANC ES AND ADDITIONS IDENTIFIED BY THE AO COULD BE CLASSIFIED INTO FOUR CATEGORIES AS GIVEN B ELOW:- I.T.A. NOS.141 & 142/COCH/2012 3 A) ARTIFICIAL DISALLOWANCE U/S. 40(A)(IA) FOR DEBI T ENTRIES PRIOR TO SEARCH VIZ. 11/10/2007. B) ARTIFICIAL DISALLOWANCE U/S. 40(A)(IA) FOR DEBIT ENTRIES AFTER SEARCH VIZ. 11/10/2007. C) NORMAL DISALLOWANCE FOR DEBIT ENTRIES RECORDED PRIOR TO SEARCH VIZ. 11/10/2007. D) NORMAL DISALLOWANCE FOR DEBIT ENTRIES RECORDED AFTER SEARCH VIZ. 11/10/2007. THE LD. CIT TOOK THE VIEW THAT THE ASSESSING OFFICE R DID NOT EXAMINE WHETHER THE VARIOUS DISALLOWANCES OR ADDITIONS IDENTIFIED BY TH E ASSESSING OFFICER COULD FALL UNDER THE CATEGORY OF OMISSIONS OR COMMISSIONS. THE SAI D DISALLOWANCES CONSISTED OF ARTIFICIAL DISALLOWANCES U/S 40(A)(IA), WHICH ARE N OT REPRESENTED BY ANY UNACCOUNTED ASSET/EXPENDITURE AND SOME OF THE DISALLOWANCES/ADD ITIONS PERTAIN TO THE POST SEARCH PERIOD. UNDER THESE CIRCUMSTANCES, THE LD. CIT FEL T THAT THE ASSESSING OFFICER FAILED TO CARRY OUT PROPER EXAMINATION AS TO WHETHER THESE DI SALLOWANCES WOULD FALL IN THE CATEGORY OF OMISSIONS OR COMMISSIONS. ACCORDINGL Y, HE SET ASIDE THE ASSESSMENT ORDER AND DIRECTED TO RE-DO THE SAME AFTER EXAMININ G THE ISSUE PROPERLY. 6. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD OFFERED THE ADDITIONAL INCOME OF RS.1.21 CRORES ON AN ADHOC BAS IS TO COVER UP ALL TYPES OF OMISSION OR COMMISSION, WHICH SHALL ALSO INCLUDE TECHNICAL D ISALLOWANCES AND ARTIFICIAL DISALLOWANCES AS POINTED OUT BY THE LD CIT. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSING OFFICER IDENTIFIED THE DI SALLOWANCES/ADDITIONS ONLY TO THE TUNE OF RS.39,30,732/- AND THE SAME WAS LESS THAN THE A MOUNT OF RS. 1.21 CRORES THAT WAS OFFERED BY THE ASSESSEE ON ADHOC BASIS. HENCE, THE ASSESSEE MADE A PLEA TO THE ASSESSING OFFICER TO TELESCOPE THE SAID DISALLOWANC ES AGAINST THE ADDITIONAL INCOME OFFERED BY THE ASSESSEE AND THE ASSESSING OFFICER, AFTER APPLICATION OF HIS MIND, ACCEPTED THE PLEA OF THE ASSESSEE. THE VIEW ENTERT AINED BY THE ASSESSING OFFICER IS ONE OF THE POSSIBLE VIEWS AND HENCE THE LD. CIT WAS NOT CORRECT IN LAW IN INITIATING THE REVISION PROCEEDINGS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. I.T.A. NOS.141 & 142/COCH/2012 4 7. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT THE ALLOWANCES/ADDITIONS IDENTIFIED BY THE ASSESSING OFFICER INCLUDED ARTIFICIAL DISALL OWANCES WHICH COULD NOT HAVE BEEN VISUALISED BY THE ASSESSEE WHILE MAKING THE VOLUNTA RY OFFER. HENCE, THE LD. CIT WAS RIGHT IN LAW IN PASSING THE IMPUGNED REVISION ORDER . 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. THERE IS NO DISPUTE WITH REGARD TO THE THAT THE ASSESSEE HAS OFFERED ADDITIONAL INCOME OF RS. 1.21 CRORES ON AN ADHOC BASIS, CONSEQUENT TO THE SE ARCH OPERATIONS, TO COVER UP ANY OMISSION OR COMMISSION. IN THE ASSESSMENT PROCEEDIN GS, THE ASSESSING OFFICER IDENTIFIED VARIOUS DISALLOWANCES/ADDITIONS TO THE TUNE OF RS. 39,30,732/-. THE LD. COUNSEL THEN APPEARING FOR THE ASSESSEE MADE A REQUEST TO THE AS SESSING OFFICER TO TELESCOPE THE ABOVE SAID ADDITIONS AGAINST THE VOLUNTARY OFFER OF RS. 1.21 CRORES AND IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE SAID REQUEST WAS ACC EPTED BY THE ASSESSING OFFICER. THE OBSERVATIONS MADE BY THE ASSESSING OFFICER IN THIS REGARD ARE EXTRACTED BELOW FOR THE SAKE OF CONVENIENCE: THE DISALLOWANCES/ADDITIONS PROPOSED ABOVE TOTAL UP TO RS. 39,30,732/-. THOUGH THE AUTHORIZED REPRESENTATIVE, IN PRINCIPLE , AGREED TO THE ADDITIONS PROPOSED FOR THIS YEAR AS IS THE CASE WITH OTHER E ARLIER YEARS, HE REQUESTED THAT SINCE THE ASSESSEE HAS ALREADY ADMITTED RS. 1,21,0 0,000/- IN HIS RETURN TO COVER ANY POSSIBLE OMISSIONS OR COMMISSIONS AS DEPOSED B Y SHRI ARJUNAN ON 31-10- 2007 BEFORE THE ADIT(INV.), TVM., NO SEPARATE ADDI TION MAY BE MADE ON THESE AREAS AND THEY BE ADJUSTED AGAINST THE ADDITIONAL INCOME ALREADY OFFERED. THIS REQUEST IS ACCEPTED. HENCE NO ADDITION AS DISCUSS ED ABOVE ARE SEPARATELY MADE EXCEPT THE INCOME FROM HOUSE PROPERTY WHICH FALLS UNDER A DIFFERENT HEAD OF INCOME THAN THE ONE ADMITTED BY THE ASSESSEE. THE OBSERVATIONS EXTRACTED ABOVE SHOW THAT THE ASSE SSING OFFICER HAS ACCEPTED THE PLEA OF THE ASSESSEE AFTER APPLICATION OF HIS MIND ON THE IMPUGNED ISSUE. IT IS NOT THE CASE OF THE LD CIT THAT THE ADDITIONAL INCOME OF RS .1.21 CRORES OFFERED BY THE ASSESSEE WAS WITH REFERENCE TO ANY PARTICULAR INCOME/ASSET/E XPENSE. HENCE, IT IS POSSIBLE TO VIEW THAT THE GENERAL OFFER OF RS.1.21 CRORES SHALL INCL UDE ALL TYPES OF ADDITIONS. THE PRINCIPLE OF TELESCOPING IS ALSO GENERALLY APPLIED WHILE COMPUTING THE TOTAL INCOME, DEPENDING UPON THE FACTS AND CIRCUMSTANCES OF THE C ASE. I.T.A. NOS.141 & 142/COCH/2012 5 9. THE SCOPE OF REVISION PROCEEDINGS INITIATED U NDER SECTION 263 OF THE ACT WAS CONSIDERED BY HON'BLE BOMBAY HIGH COURT, IN THE CAS E OF GRASIM INDUSTRIES LTD. V CIT (321 ITR 92) BY TAKING INTO ACCOUNT THE LAW LAID DO WN BY THE HON'BLE SUPREME COURT. THE RELEVANT OBSERVATIONS ARE EXTRACTED BELOW: SECTION 263 OF THE INCOME-TAX ACT, 1961 EMPOWERS TH E COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDINGS UNDER THE ACT AND, IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN, BY THE ASS ESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, TO PASS AN ORDER UPON HEARING THE ASSESSEE AND AFTER A N ENQUIRY AS IS NECESSARY, ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THE KE Y WORDS THAT ARE USED BY SECTION 263 ARE THAT THE ORDER MUST BE CONSIDERE D BY THE COMMISSIONER TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THIS PROVISION HAS BEEN INTERPRETED BY THE SUPREME COURT IN SEVERAL JUDGMENTS TO WHICH IT IS NOW NECESSARY TO TURN. IN MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83, THE SUPREME COURT HELD THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ON LY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. THE SUPREME COURT HELD THAT AN INCORRECT ASSUMPTION OF FACT OR AN INCORRECT APP LICATION OF LAW, WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. AN OR DER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APP LICATION OF MIND, WOULD BE AN ORDER FALLING IN THAT CATEGORY. THE EXPRESSION PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE SUPREME COURT HELD, IT IS OF W IDE IMPORT AND IS NOT CONFINED TO A LOSS OF TAX. WHAT IS PREJUDICIAL TO T HE INTEREST OF THE REVENUE IS EXPLAINED IN THE JUDGMENT OF THE SUPREME COURT (HEA D NOTE) : THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE A SSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CA NNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. THE PRINCIPLE WHICH HAS BEEN LAID DOWN IN MALABAR I NDUSTRIAL CO. LTD. [2000] 243 ITR 83 (SC) HAS BEEN FOLLOWED AND EXPLAI NED IN A SUBSEQUENT JUDGMENT OF THE SUPREME COURT IN CIT V. MAX INDIA L TD. [2007] 295 ITR 282. I.T.A. NOS.141 & 142/COCH/2012 6 10. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE OPINION THAT THE VIEW TAKEN BY THE ASSESSING OFFICER CAN BE CONSIDERED AS ONE OF T HE POSSIBLE VIEWS AND HENCE THE IMPUGNED ASSESSMENT ORDER CANNOT BE CONSIDERED AS E RRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. UNDER THESE CIRCUMSTANCE S, WE SET ASIDE THE ORDER PASSED BY LD CIT FOR THE ASSESSMENT YEAR 2008-09. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2002-03 IS DISMISSED AND THE APPEAL FOR THE ASSESSMENT YEAR 20 08-09 IS ALLOWED. PRONOUNCED ACCORDINGLY ON 11-01-20 13. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 11TH JANUARY, 2013 GJ COPY TO: 1. M/S. PARTHAS, POWER HOUSE ROAD, TRIVANDRUM-695 0 36 2. THE COMMISSIONER OF INCOME-TAX, CENTRAL, KOCHI. 3. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 4.. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN