Gujarat Engineering Co, Baroda V. The CIT-I, Baroda

ITA 1475/AHD/2011

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9044 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 02-03-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 25-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIBHA BHALLA
• Keywords: Assessment record
• Section: 143(3); 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA NO. 1475/AHD/2011 / A.Y. 2006-07 GUJARAT ENGINEERING CO., SURVEY NO. 111, JAROD SAMLAYA ROAD, VILLAGE-VASALA, TAL. SAVLI, VADODARA PAN : AABFG 6098 D VS COMMISSIONER OF INCOME-TAX-I, VADODARA ./ ITA NO. 1366/AHD/2014 / A.Y. 2006-07 GUJARAT ENGINEERING CO., TAL. SAVLI, VADODARA PAN : AABFG 6098 D VS INCOME-TAX OFFICER, WARD-2(2), VADODARA / (APPELLANT) / (RESPONDENT) BY ASSESSEE : SHRI BHAVIN MARFATIA, AR BY REVENUE : MS. VIBHA BHALLA, CIT-DR / DATE OF HEARING : 02/03/2017 / DATE OF PRONOUNCEMENT: 06/03/2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE ABOVE CAPTIONED APPEALS ARE CONCERNING THE CASE OF THE ASSESSEE FOR AY 2006-07 AND ARE AGAINST THE ORDER OF THE COM MISSIONER OF INCOME- TAX (IN SHORT CIT) PASSED U/S 263 OF THE INCOME-T AX ACT, 1961 (IN SHORT THE ACT) AND CONSEQUENTIAL ASSESSMENT ORDER PASSE D PURSUANT THERETO RESPECTIVELY. ITA NO.1475/AHD/2011 AY 2006-07 2. WE SHALL THEREFORE FIRST ADDRESS THE ISSUES ARIS ING OUT OF THE ORDER OF THE CIT PASSED U/S 263 ASSAILED BY THE ASSESSEE. ITA NO. 1475/AHD/2011 & 1366/AHD/ 2014 GUJARAT ENGINEERING CO. VS. CIT A.Y. 2006-07 - 2 - 3. THE ASSESSEE FILED RETURN OF INCOME FOR AY 2006- 07 DECLARING TOTAL INCOME OF RS.8,77,710/-. ASSESSMENT U/S 143(3) WAS COMPLETED ON A TOTAL INCOME OF RS.9,38,990/-. SUBSEQUENTLY, ON EXAMINAT ION OF THE ASSESSMENT RECORDS, IT WAS OBSERVED BY THE COMMISSIONER THAT T HE TDS (TAX DEDUCTED AT SOURCE) CERTIFICATES (FORM 16A) FILED BY THE ASS ESSEE SHOWED LABOUR CHARGES RECEIPT AMOUNTING TO RS.1,10,82,073/-. HOW EVER, IN THE PROFIT & LOSS ACCOUNT, THE LABOUR CHARGES RECEIVED WERE DECL ARED AT RS.94,78,552/-. IN VIEW OF THIS MISMATCH, IT WAS OBSERVED BY THE CI T THAT LABOUR CHARGES HAVE NOT BEEN CORRECTLY DECLARED AND THE RECEIPT AR ISING FROM LABOUR CHARGES IS SHORT DECLARED BY RS.16,03,521/-. THE C IT THUS CONCLUDED THAT THE INCOME OF THE ASSESSEE HAS BEEN UNDER ASSESSED TO THE EXTENT OF RS.16,03,521/- WHILE FRAMING ASSESSMENT U/S 143(3) OF THE ACT. HE ACCORDINGLY DIRECTED THE ASSESSING OFFICER UNDER SE CTION 263 TO MODIFY THE ASSESSMENT TO INCLUDE THE INCOME UNDER ASSESSED AS NOTED ABOVE. 4. THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE CI T PASSED U/S 263 DATED 30.03.2011 AND IS IN APPEAL BEFORE THE TRIBUN AL. 5. THE LD. AR FOR THE ASSESSEE SHRI BHAVIN MARFATIA , AT THE OUTSET, SUBMITTED THAT THE ASSESSMENT ORDER PASSED U/S 143( 3) BY THE ASSESSING OFFICER, WHICH IS SOUGHT TO BE IMPUGNED BY THE CIT U/S 263, IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. CONSEQUENTLY, THE EXERCISE OF JURISDICTION U/S 263 IS VOID AB INITIO AND NOT SUSTAINABLE IN LAW. THE LD. AR, ON FACTS, ADVERTED OUR ATTENTION TO THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AND SUBMITTED W ITH REFERENCE TO THE JOB WORK ACCOUNT AS APPEARING IN ITS BOOKS FOR FY 2004-05 RELEVANT TO AY 2005-06 THAT THE ASSESSEE RAISED CERTAIN BILLS IN T HE MONTH OF FEBRUARY AND MARCH 2005 ON M/S. SETCO AUTOMOTIVE LTD. FOR RENDER ING SERVICES AND ITA NO. 1475/AHD/2011 & 1366/AHD/ 2014 GUJARAT ENGINEERING CO. VS. CIT A.Y. 2006-07 - 3 - ACCORDINGLY ACCOUNTED IT FOR IN FINANCIAL YEAR RELE VANT TO AY 2005-06. HOWEVER, THE RECIPIENT OF SERVICES NAMELY M/S. SETC O AUTOMOTIVE LTD. RECORDED THE AFORESAID EXPENSES IN THE SUBSEQUENT Y EAR I.E. FY 2005-06 RELEVANT TO AY 2006-07. THE TDS WAS ACCORDINGLY DE DUCTED IN THE SUBSEQUENT YEAR BY THE DEDUCTOR. THE DIFFERENCE IN THE ACCOUNTING TREATMENT BETWEEN BY THE ASSESSEE (PAYEE) QUA THE P AYER HAS RESULTED IN THE AFORESAID DIFFERENCE OF RS.16,03,521/-. WHILE THE ASSESSEE HAS ACCOUNTED FOR THE AFORESAID INCOME IN THE AY 2005-0 6, THE PAYER NAMELY M/S. SETCO AUTOMOTIVE LTD. HAS RECORDED THE EXPENDI TURE IN THE SUBSEQUENT YEAR. THEREFORE, IN ESSENCE, THERE IS N O UNDER ASSESSMENT BUT THE DIFFERENCE IS OWING TO RECORDING OF INCOME IN T HE DIFFERENT FINANCIAL YEAR THAN WHAT IS CONTROVERTED BY THE CIT. THE TDS CREDIT HAS BEEN, ALBEIT, CLAIMED IN THE SUBSEQUENT YEAR WHICH OUGHT TO HAVE BEEN GRANTED IN THE AY 2005-06 IN TERMS OF SECTION 199 OF THE AC T. THE LD. AR POINTED OUT THAT ALL THESE FACTS PERTAINING TO AFORESAID DI FFERENCE IN THE JOB WORK CHARGES WERE BROUGHT TO THE NOTICE OF THE AO AS WEL L AS BEFORE THE COMMISSIONER IN 263 PROCEEDINGS BY WAY OF RECONCILI ATION STATEMENT AND OTHER RECORDS. IN THESE CIRCUMSTANCES, WHEN THE IN COME HAS BEEN DULY RECORDED AND ALREADY OFFERED IN TAXATION IN THE YEA R IN WHICH THE ASSESSEE HAS RAISED THE BILLS, CANNOT BE SAID TO SUFFER FROM ANY ERROR PER SE . THUS, THE ACTION OF THE CIT IN USURPING THE JURISDICTION U/S 263 PRIMA-FACIE IS WITHOUT AUTHORITY OF LAW AND THUS REQUIRES TO BE RE VERSED. 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDER OF THE CIT PASSED U/S 263 OF THE ACT. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE SHORT QUESTIO N THAT ARISES FOR CONSIDERATION IN THE PRESENT CASE IS WHETHER THE AS SUMPTION OF JURISDICTION ITA NO. 1475/AHD/2011 & 1366/AHD/ 2014 GUJARAT ENGINEERING CO. VS. CIT A.Y. 2006-07 - 4 - U/S 263 OF THE ACT BY THE CIT IS JUSTIFIED IN THE F ACTS OF THE CASE OR NOT. THE COMMISSIONER, IN THE PRESENT CASE, HAS PURPORTED TO ACT IN EXERCISE OF POWER U/S 263 ON THE GROUND THAT THE ORDER OF THE A SSESSING OFFICER PASSED U/S 143(3) OF THE ACT SUFFERS FROM ERROR WHI CH IS HOSTILE TO THE INTERESTS OF THE REVENUE. SECTION 263 OF THE INCO ME-TAX ACT, 1961 CONFERS THE POWER UPON THE COMMISSIONER TO CALL FOR AND EXA MINE THE RECORDS OF A PROCEEDING UNDER THE ACT AND REVISE ANY ORDER IF HE CONSIDERS THE SAME TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF TH E REVENUE. THUS, RECOURSE UNDER SECTION 263 OF THE ACT CANNOT BE TAK EN UNLESS THE TWIN CONDITIONS OF ORDER BEING (I) ERRONEOUS AS WELL AS (II) PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS SATISFIED. BOTH THE CO NDITIONS ARE CUMULATIVE AND TO BE SATISFIED SIMULTANEOUSLY. IN THE BACKGRO UND OF THE AFORESAID MANDATE OF LAW, WE SHALL NOW TEST THE ACTION OF T HE COMMISSIONER U/S 263 OF THE ACT. WE NOTE THE FACTS MARSHALED ON BEH ALF OF THE ASSESSEE THAT THE INCOME TOWARDS DIFFERENTIAL AMOUNT OF RS.16,03, 521/- NOTICED BY THE COMMISSIONER HAS BEEN ALREADY OFFERED FOR TAXATION IN THE YEAR PRIOR TO THE IMPUGNED AY 2006-07. THE TDS HAS BEEN CLAIMED IN THE CURRENT ASSESSMENT YEAR AS PER CERTIFICATE ISSUED BY THE DE DUCTOR AS PER ITS BOOKS OF ACCOUNTS. THIS HAS GIVEN RISE TO THE MISMATCH IN THE FIGURES OF JOB-WORK. HOWEVER, THE IMPUGNED INCOME HAS NOT ESCAPED ASSESS MENT AT ALL. ON THE CONTRARY, THE INCOME HAS BEEN OFFERED PRIOR TO THE YEAR IN WHICH IT IS SOUGHT TO BE TAXED BY THE COMMISSIONER. THESE FACT S COULD NOT BE REBUTTED ON BEHALF OF THE REVENUE AT ANY STAGE OF T HE PROCEEDINGS BEFORE US. CLEARLY, THE RETURN OF INCOME FILED BY THE ASS ESSEE IN NOT OFFERING THE JOB WORK CHARGES IN THE ASSESSMENT YEAR 2006-07 WHE N THE INCOME HAS ALREADY BEEN OFFERED IN THE EARLIER ASSESSMENT YEAR CANNOT BE SAID TO BE ERRONEOUS BY ANY STRETCH OF IMAGINATION. CONSEQUEN TLY, THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT CANNOT BE SAID T O BE SUFFERING FROM ANY ITA NO. 1475/AHD/2011 & 1366/AHD/ 2014 GUJARAT ENGINEERING CO. VS. CIT A.Y. 2006-07 - 5 - ERROR ON THIS SCORE. THUS, ONE OF THE TWO CONDIT IONS, AS NOTED ABOVE, IS CLEARLY NOT SATISFIED. THE ORDER U/S 263 IS, THEREF ORE, LIABLE TO BE STRUCK DOWN ON THIS SCORE ALONE. NOTWITHSTANDING, WE FURT HER FAIL TO COMPREHEND AS TO HOW THE ORDER PASSED U/S 143(3) IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE WHEN THE INCOME WHICH IS A LLEGED TO HAVE ESCAPED THE ASSESSMENT HAS ALREADY BEEN REPORTED IN THE PRIOR YEAR. THEREFORE, WHEN SEEN HOLISTICALLY, THE ACTION OF TH E ASSESSEE IS PRIMA FACIE TAX NEUTRAL. IN THE ABSENCE OF ANY DEMONSTRABLE LOS S OF REVENUE, INTERFERENCE IN EXERCISE OF POWER UNDER SECTION 263 CANNOT BE JUSTIFIED. AS NOTED ABOVE, NO PREJUDICE PER SE AS CONTEMPLATED UNDER SECTION 263 IS CAUSED TO THE REVENUE. THEREFORE, IT CAN BE SEEN T HAT EVEN THE OTHER CONDITION OF PREJUDICIAL TO THE INTERESTS OF THE R EVENUE IS ALSO NOT SATISFIED. THEREFORE, NONE OF THE VICES HAVE BEEN SHOWN TO BE EXISTING TO ENABLE THE COMMISSIONER TO TAKE RECOURSE TO SECTION 263 OF THE ACT. IN THESE CIRCUMSTANCES, WE HAVE NO HESITATION TO HOLD THAT THE ACTION OF THE COMMISSIONER IN ASSUMING THE JURISDICTION IS WRONGF UL AND CONTRARY TO SECTION 263 OF THE ACT AND IS THUS LIABLE TO BE QUA SHED. WE DO SO ACCORDINGLY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 1475/AHD/2011 IS ALLOWED. ITA NO.1366/AHD/2014 AY 2006-07 9. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY THE CONSEQUENTIAL ORDER PASSED U/S 143(3) PURSUANT TO THE DIRECTIONS OF THE CIT UNDER SECTION 263 OF THE ACT. 10. AS NOTED EARLIER, IN TERMS OF ORDER IN ITA NO.1 475/AHD/2011, THE ORDER OF CIT PASSED UNDER SECTION 263 DATED 30.03.2 011 STANDS QUASHED. ITA NO. 1475/AHD/2011 & 1366/AHD/ 2014 GUJARAT ENGINEERING CO. VS. CIT A.Y. 2006-07 - 6 - AS A SEQUEL THERETO, THE ASSESSMENT ORDER PASSED U/ S 143(3) R.W.S. 263 DATED 20.10.2011 DOES NOT SURVIVE AND IS RENDERED I NFRUCTUOUS. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.1366/AHD/2014 IS ALLOWED. 12. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON 6 TH MARCH, 2017 AT AHMEDABAD SD/- SD/- (S.S. GODARA) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED 06/03/2017 *BT ! '! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ' $ / CONCERNED CIT 4. $ ( ) / THE CIT(A) 5. ' **' , ' , / DR, ITAT, AHMEDABAD 6. / / GUARD FILE. / BY ORDER, TRUE COPY / (DY./ASSTT.REGISTRAR) ' (, / ITAT, AHMEDABAD