Shri Rakshit Shetty, Pondicherry V. ACIT, Pondicherry

ITA 1470/CHNY/2008

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8313 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-06-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 02-07-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: TAPAS KUMAR DUTTA
• Assessee Lawyers: S VENKATESAN
• Section: 143(3); 133A; 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH C : CHENNAI [BEFORE SHRI N. BARATHVAJA SANKAR, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO.1470/MDS/2008 ASSESSMENT YEAR : 2002-03 SHRI RAKSHIT SHETTY PROP. RAKSHADENT C-86/94, PIPDIC INDL. AREA METTUPALAYAM PONDICHERY 605 009 VS THE ACIT CIRCLE I PONDICHERY (APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI S.VENKATESAN RESPONDENT BY : SHRI TAPAS KUMAR DUTTA O R D E R PER HARI OM MARATHA, JM: THIS APPEAL OF THE ASSESSEE, FOR ASSESSMENT Y EAR 2002-03, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT, PUDUCHER RY, DATED 31.1.2007, PASSED U/S 263 OF THE INCOME-TAX ACT, 1961 (HEREINA FTER REFERRED TO AS 'THE ACT' FOR SHORT). 2. THE ASSESSEE RETURNED AN INCOME OF ` 8,50,000/- AFTER CLAIMING DEDUCTION U/S 80IB OF ` 86,37,178/-. THE ASSESSMENT ORDER WAS PASSED U/S 143(3) ON 16.3.2005 AT A TOTAL INCOME OF ` 8,64,740/- AFTER ITA 1470/08 :- 2 -: ALLOWING DEDUCTION U/S 80IB OF ` 86,13,443/-. THE LD. CIT CALLED FOR THE RECORDS OF THE ASSESSMENT ORDER ON THE PREMISE THAT THE ASSESSING OFFICER HAS NOT MADE PROPER ENQUIRIES AT ALL TO ASC ERTAIN WHETHER THE RELIEF U/S 80IB AS CLAIMED BY THE ASSESSEE IS ADMI SSIBLE UNDER LAW OR NOT. AS PER THE ORIGINAL AUDIT REPORT FILED U/S 4 4AB, COLUMN 28(B), IT WAS FOUND THAT IT WAS NOT A MANUFACTURING CONCERN. APART FROM THAT A SURVEY U/S 133A WAS ALSO CARRIED OUT IN THE PREMISE S OF THE ASSESSEE ON 17.2.2006 IN WHICH VARIOUS EVIDENCES WERE FOUND WHICH WERE NOT REALLY EXAMINED BY THE ASSESSING OFFICER WITH REGAR D TO ITS CLAIM MADE U/S 80IB. CONSEQUENTLY, NOTICE U/S 263 WAS ISSUED TO THE ASSESSEE ON 9.10.2006. A COPY OF THE SHOW CAUSE NOTICE IS PLAC ED AT PAGE 16 OF THE PAPER BOOK WHICH IS REPRODUCED HEREIN BELOW: THE ASSESSEE IS THE PROPRIETOR OF M/S. RAKSHA DENT , A TRADE NAME THROUGH WHICH THE ASSESSEE IS DOING BUSI NESS IN DENTAL CHAIRS. BUSINESS WAS LOCATED AT C-86 AND 94, 16 TH CROSS, PIPDIC INDUSTRIAL ESTATE, PONDICHERRY-9. IT RETURNED AN INCOME OF RS. 8,50,000/-- AFTER CLAIMING DEDUCTION U/S. 80LB OF RS. 86,37,178/-. THE ASSESSING OFFICER IN PASSING THE ASSESSMENT OR DER U/S.143(3), DATED 16.02.03 FOR ASST. YEAR 2002-03 H AS DETERMINED THE TOTAL INCOME AT RS.8,64,740/- ALLOW ING RELIEF U/S.80LB AMOUNTING TO RS.86,13,443/-. IN THIS CASE, A SURVEY U/S.133A WAS CARRIED OUT IN THE BUSINESS PREMISES OF THE ASSESSEE ON 17.02.2006. DURING THE SURVEY, THE PLANT AND MACHINERY REQUIRE D FOR MANUFACTURING OF DENTAL CHAIRS, DENTAL EQUIPMENT. W ERE PHYSICALLY NOT FOUND SUFFICIENT TO PRODUCE THE VOLUME REFLECTED IN THE ACCOUNTS FILED FOR ASST. YEAR 2002-03. THE NUMB ER OF LABOURERS ENGAGED IN THE SO-CALLED MANUFACTURING AC TIVITIES AS FOUND WERE ONLY 8 PERSONS (AS PER ROLL FOR PAYMENT OF WAGES) AS AGAINST THE MAN POWER OF 10 PERSONS FOR CLAIMING DE DUCTION ITA 1470/08 :- 3 -: U/S.80IB. THE MONTHLY AVERAGE POWER CONSUMPTION WAS ALSO FOUND TO BE NEGLIGIBLE COMPARED TO THE VOLUME OF PR ODUCTION SHOWN BY THE ASSESSEE. THUS, THE SURVEY OPERATION H AS REVEALED THAT THE ASSESSEE WAS NOT DOING COMPLETE MANUFACTURING ACTIVITIES FOR PRODUCTION OF DENTAL C HAIRS AND ETC. THEREFORE, THE CLAIM OF DEDUCTION U/S.80LB ALLOWED IN THE ASSESSMENT ORDER U/S.143(3) IS NOT IN ACCORDANCE WI TH LAW. THE ORDER IS NOT ONLY ERRONEOUS BUT PREJUDICIAL TO REVENUE, AS THE ASSESSING OFFICER HAS GRANTED RELIE F U/S.80IB WITHOUT PROPER VERIFICATION AND THE INCOME IN RESPE CT OF WHICH TAX IS TO BE REALIZED, HAS NOT BEEN SO REALIZED. THE ASSESSEE IS, THEREFORE, REQUESTED TO EXPLAIN A S TO WHY ACTION AS CONTEMPLATED UNDER SECTION 263(1) OF THE INCOME- TAX ACT SHOULD NOT BE TAKEN IN RESPECT OF THE IMPU GNED ASSESSMENT ORDER. A REPLY IN WRITING SHOULD REACH THE UNDERSIGNED ON 19.10.2006 ON WHICH A REPRESENTATION IN PERSON MAY ALSO BE MADE. 3. AFTER HEARING THE ASSESSEE, THE LD. CIT CAME TO TH E CONCLUSION THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND TO THIS IMPORTANT ISSUE, THEREFORE, HE SET ASIDE THE ASSESSMENT ORDE R AND RESTORED TO HIS FILE WITH A DIRECTION TO REDO THE SAME AFTER TA KING INTO CONSIDERATION THE SUBMISSIONS AND EVIDENCES THAT THE ASSESSEE MAY FILE IN SUPPORT OF ITS CLAIM. NOW, THE ASSESSEE IS BEFORE US AND HAS RAISED FOLLOWING GROUNDS: 1. THE ORDER PASSED BY THE LEARNED CIT U/S 263 OF THE ACT, IN SO FAR AS IT IS AGAINST THE APPELLANT, IS OPPOSED T O LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUM STANCES OF THE CASE. 2. THE LEARNED CIT FAILED TO APPRECIATE THAT THERE WAS NO ERROR MUCH LESS AN ERROR PREJUDICIAL TO THE INTEREST OF T HE REVENUE IN THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER W ARRANTING REVISION U/S.263 OF THE ACT AND CONSEQUENTLY, THE O RDER PASSED ITA 1470/08 :- 4 -: BY THE CIT IS OPPOSED TO LAW AND FACTS OF THE APPE LLANT'S CASE AND REQUIRES TO BE CANCELLED. 3. THE LEARNED CIT FAILED TO APPRECIATE THAT THE FINDING RENDERED BY THE LEARNED CIT TO THE EFFECT THAT THE A.O. HAS NOT APPLIED HIS MIND AND HAS NOT CAUSED ENQUIRIES WHILE CONCLUDING THE ASSESSMENT PROCEEDINGS U/S.143[3] IS MERELY ON SUSPICION AND SURMISE, ASSUMPTIONS AND PRESUMPTIONS AND THERE FORE, THE SAID FINDING SO RENDERED STANDS VITIATED AND CONSEQ UENTLY, THE IMPUGNED ORDER PASSED U/S 263 OF THE ACT BEING OPPO SED TO LAW IS LIABLE TO BE CANCELLED. 4. THE LEARNED CIT IS NOT JUSTIFIED IN SETTING ASID E THE ASSESSMENT PROCEEDINGS AND DIRECTING THE A.O. TO MA KE A FRESH ASSESSMENT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. HE FAILED TO APPRECIATE THAT THE DIRECTION TO MAKE A FRESH ASSESSMENT AMOUNTS TO DIRECTING MAKING FISHING AND ROVING ENQUIRIES WITHOUT ANY MATERIAL IN SUPPOR T THEREOF AND CONSEQUENTLY, THE IMPUGNED ORDER PASSED IS BAD IN L AW IS LIABLE TO BE CANCELLED. 5. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBL Y PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE A PPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES A S PART OF THE COSTS. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE C AREFULLY PERUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE W E ENTER ONTO THE FACTS OF THE CASE, WE WOULD LIKE TO SUM UP THE LAW RELATION TO REVISION U/S 263 OF THE ACT. IT IS TRITE THAT AN ORDER CAN BE REVISED ONLY AND ONLY IF TWIN CONDITIONS OF ERROR IN THE ORDER AND PREJUDICE CAUSED TO THE REVENUE CO-EXIST. 5. THE SUBJECT OF REVISION UNDER SECTION 263 HAS BEE N VASTLY EXAMINED AND ANALYSED BY VARIOUS COURTS INCLUDING T HAT OF HONBLE ITA 1470/08 :- 5 -: APEX COURT. THE REVISIONAL POWER CONFERRED ON THE CIT VIDE SECTION 263 IS OF VIDE AMPLITUDE. IT ENABLES THE CIT TO CA LL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDING UNDER THE ACT. IT EM POWERS THE CIT TO MAKE OR CAUSE TO BE MADE SUCH AN ENQUIRY AS HE DEEM S NECESSARY IN ORDER TO FIND OUT IF ANY ORDER PASSED BY ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF T HE REVENUE. THE ONLY LIMITATION ON HIS POWERS IS THAT HE MUST HAVE SOME MATERIAL(S) WHICH WOULD ENABLE HIM TO FORM A PRIMA FACIE OPINION THAT THE ORDER PASSED BY THE OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJ UDICIAL TO THE INTEREST OF THE REVENUE. ONCE HE COMES TO THE ABOVE CONCLUSION S ON THE BASIS OF THE MATERIAL THAT THE ORDER OF THE ASSESSING OFFI CER IS ERRONEOUS AND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE, T HE CIT IS EMPOWERED TO PASS AN ORDER AS THE CIRCUMSTANCES OF THE CASE M AY WARRANT. HE MAY PASS AN ORDER ENHANCING THE ASSESSMENT OR HE MA Y MODIFY THE ASSESSMENT. HE IS ALSO EMPOWERED TO CANCEL THE ASS ESSMENT AND DIRECT TO FRAME A FRESH ASSESSMENT. HE IS EMPOWERE D TO TAKE RECOURSE TO ANY OF THE THREE COURSES INDICATED IN SECTION 26 3. SO, IT IS CLEAR THAT THE CIT DOES NOT HAVE UNFETTERED AND UNCHEQURED DIS CRETION TO REVISE AN ORDER. THE CIT IS REQUIRED TO EXERCISE REVISION AL POWER WITHIN THE BOUNDS OF THE LAW AND HAS TO SATISFY THE NEED OF FA IRNESS IN ADMINISTRATIVE ACTION AND FAIR PLAY WITH DUE RESPEC T TO THE PRINCIPLE OF ITA 1470/08 :- 6 -: AUDI ALTERAM PARTEM AS ENVISAGED IN THE CONSTITUTIO N OF INDIA AS WELL IN SECTION 263. AS ORDER CAN BE TREATED AS ERRONE OUS IF IT WAS PASSED IN UTTER IGNORANCE OR IN VIOLATION OF ANY LAW; OR P ASSED WITHOUT TAKING INTO CONSIDERATION ALL THE RELEVANT FACTS OR BY TAK ING INTO CONSIDERATION IRRELEVANT FACTS. THE PREJUDICE THAT IT CONTEMPL ATED UNDER SECTION 263 IS THE PREJUDICE TO THE INCOME TAX ADMINISTRATION A S A WHOLE. THE REVISION HAS TO BE DONE FOR THE PURPOSE OF SETTING RIGHT DISTORTIONS AND PREJUDICES CAUSED TO THE REVENUE IN THE ABOVE CONTE XT. THE FUNDAMENTAL PRINCIPLES WHICH EMERGE FROM THE SEVERA L CASES REGARDING THE POWERS OF THE CIT UNDER SECTION 263 MAY BE SUMM ARIZED BELOW: (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDE R OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. BOTH THE CONDITIONS MUS T BE FULFILLED. (II) SECTION 263 CANNOT BE INVOKED TO CORRECT EAC H AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ONLY WHEN AN ORDER IS ERRONEOUS, THAT THE SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORR ECT APPLICATION OF LAW WILL SUFFICE FOR THE REQUIREME NT OR ORDER BEING ERRONEOUS. ITA 1470/08 :- 7 -: (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORD ER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND IF THE ASSESSING OF FICER HAS ADOPTED ONE OF THE COURSES PERMISSIBLE UNDER LA W OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW UNDER WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOU S ORDER, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFIC ER IS UNSUSTAINABLE UNDER THE LAW. (VI) IF WHILE MAKING THE ASSESSMENT, THE ASSE SSING OFFICER EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME, THE CIT, WHILE EXERCISING HI S POWER UNDER SECTION 263, IS NOT PERMITTED TO SUBSTI TUTE HIS ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIM ATED BY THE ASSESSING OFFICER. (VII) THE ASSESSING OFFICER EXERCISE QUASI-JUDICIA L POWER VESTED IN HIM AND IF HE EXERCISE SUCH POWER IN ACCORDANCE WITH LAW AND ARRIVES AS A CONCLUSION, SU CH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION. ITA 1470/08 :- 8 -: (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTION UNDER SECTION 263, MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. (IX) IF THE ASSESSING OFFICER HAS MADE ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND THE ASSESSEE HAS GIVEN DETAILED EXPLANATION BE A LETTER IN WRITING AND THE ASSESSIN G OFFICER ALLOWED THE CLAIM ON BEING SATISFIED WITH T HE EXPLANATION OF THE ASSESSEE, THE DECISION OF THE ASSESSING OFFICER CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. 6. APART FROM THAT, NON-APPLICATION OF MIND, AS PER T HE HON'BLE JURISDICTIONAL HIGH COURT, WHICH HAS LAID DOWN A CL EAR LAW IN THE CASE OF ASHOK LEYLAND LTD VS CIT, 260 ITR 599(MDS) AND IN THE CASE OF JAI BHARATH TANNERS VS CIT, 264 ITR 673(MDS), AN ASSESS MENT ORDER BECOMES ERRONEOUS IN SO FAR IT IS PREJUDICIAL TO TH E INTERESTS OF THE REVENUE. WE HAVE EXAMINED THE LENGTHY ARGUMENTS AN D PAPER BOOKS AND OTHER EVIDENCES FILED ON BEHALF OF THE LD.AR BU T, WE ARE NOT CONVINCED PARTICULARLY BECAUSE THIS BENCH OF THE TR IBUNAL HAS ALREADY TAKEN A VIEW ON SIMILAR FACTS IN THE VERY ASSESSMEN T ORDER THAT THE ISSUE WAS NOT PROPERLY EXAMINED BY THE ASSESSING OF FICER AND THE ENTIRE ISSUE ON THE SAME SUBJECT WAS RESTORED TO TH E FILE OF THE ITA 1470/08 :- 9 -: ASSESSING OFFICER VIDE ORDER DATED 18.9.2009. THE FACTS ARE NOT DIFFERENT IN THIS CASE ALSO. BUT MERELY ON TECHNIC ALITIES, WE CANNOT CONCLUDE THAT THERE IS NO ERROR IN THE ASSESSMENT O RDER PARTICULARLY WHEN THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND WHEN THERE IS NO DISCUSSION REGARDING FORM 3CD WHICH IS ALLEGED TO H AVE BEEN FILED BEFORE THE ASSESSING OFFICER. THE APPROACH OF THE ASSESSING OFFICER HAS BEEN CASUAL IN THIS CASE. THEREFORE, IN VIEW O F THE ABOVE LEGAL SETTLED POSITION, WE AGREE WITH THE LD. CIT AND CON FIRM HIS ORDER. CONSEQUENTLY, WE CANNOT ALLOW THIS APPEAL OF THE AS SESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.8 .2010. SD/- SD/- (N. BARATHVAJA SANKAR) VICE-PRESIDENT ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 13 TH AUGUST, 2010 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR