AMBIT MULTITRADE P. LTD, MUMBAI V. ITO 4(1)(3), MUMBAI

ITA 1527/MUM/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2853 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 13-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: E SANKARAN
• Assessee Lawyers: R MURLIDHAR
• Section: 142(1); 133(6); 263

Judgement Text

, ' INCOME TAX APPELLATE TRIBUNAL,MUMBAI- A,BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & AMIT SHUKLA,JUDICIAL MEMBER /.ITA NO.1527/MUM/2015, /ASSESSMENT YEAR-2010-11 AMBIT MULTITRADE P. LTD., 401-A,PEARL ARCADE,OPP. P K JEWELLERS, DAUD BAUG LANE, OFF J P ROAD, ANDHERI (W),MUMBAI-58 PAN: AAICA1031C VS ITO 4(1)(3) MUMBAI ( / ASSESSEE) ( / RESPONDENT) /ASSESSEE BY : SHRI R MURLIDHAR / REVENUE BY : SHRI E SANKARAN / DATE OF HEARING :21.10.2015 / DATE OF PRONOUNCEMENT :28.10.2015 , 1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) ) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 27.02.2015,OF THE PRINC IPAL CIT-4,MUMBAI,PASSED U/S.263 OF THE ACT,THE ASSESSEE HAS FILED THE PRESENT APPEAL. 2. ASSESSEE COMPANY,ENGAGED IN THE BUSINESS OF SHARE T RADING,FILED ITS RETURN OF INCOME ON 19.09.2010.INITIALLY, THE RETURN OF INCOME WAS PROC ESSED U/S. 143(1)OF THE ACT.SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND WAS ASSESSME NT WAS COMPLETED U/S.143(3) OF THE ACT ON 03.01.2013BY THE ASSESSING OFFICER(AO),DETERMINING THE INCOME OF THE ASSESSEE AT RS. NIL. 3. WHILE GOING THROUGH THE CASE RECORDS AND THE ORDER PASSED BY THE AO,THE PCIT OBSERVED THAT THE AO HAD PASSED A ROUTINE ORDER WITHOUT APPL ICATION OF MIND, THAT ORDER WAS COMPLETED IN A MECHANICAL FASHION,THAT THE ASSESSEE HAD ALLOT TED 20,000 SHARES OF FACE VALUE FOR RS.10/- PER SHARE AT A HUGE PREMIUM OF RS.490/-PER SHARE,TH AT PURCHASE OF RS.1 CRORE HAD BEEN SHOWN AS CLOSING STOCK,THAT THERE WAS NOTHING ON RECORD T O REFLECT THE REASON FOR SUCH HUGE PREMIUM, GENUINENESS ABOUT THE SOURCE OF MONEY, MODE OF TRAN SACTION FOR SHARE APPLICATION MONEY. THE PCIT,VIDE NOTICE DTD.16.04.2014,ISSUED U/S.263 OF THE ACT,ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE INCOME SHOULD NOT BE RE-COMPUTED FOR THE YEAR UNDER CONSIDERATION.THE ASSESSEE,VIDE ITS LETTER,DATED 12.05.2014,MADE SUBM ISSIONS BEFORE THE PCIT. AFTER CONSIDERING THE SAME SHE HELD THAT THE AO HAD NEITHER CONDUCTED ANY ENQUIRY NOR HAD CARRIED OUT ANY INVESTIGATION WITH RESPECT TO GENUI NENESS OR CREDIT WORTHINESS OF THE PERSONS FROM WHOM THE TRADING STOCK WAS PURCHASED,THAT THE COMPUTATION OF CAPITAL GAIN WAS NOT ENQUIRED BY THE AO, THAT THIS WAS THE FIRST YEAR OF INCORPORATION OF THE ASSESSEE COMPANY,THAT THE AO HAD NOT AT ANY POINT APPLIED HIS MIND TO THE REASON FOR SUCH HIGH VALUATION OF A RS.10/- SHARE AT THE PREMIUM OF RS.490/-,THAT THE A O HAD NOT ISSUED NOTICES U/S. 133(6) OF THE ACT TO THE KOLKATA COMPANIES, THAT THE AO HAD FAILE D TO CARRYOUT RELEVANT AND MEANINGFUL ENQUIRIES IN RESPECT OF COMPUTATION OF CAPITAL GAIN AND INDEXATION BENEFIT OF MARKET RATE,THAT JUST ACCEPTANCE OF RECEIPT OF PAPER CONFIRMATION,WI THOUT ANY INDEPENDENT ENQUIRY AMOUNTED TO NON-APPLICATION OF MIND.FINALLY,SHE HELD THAT TH E AO HAD FAILED TO ENQUIRE THE RECEIPT OF HUGE SHARE PREMIUM AND CLOSING STOCK.ACCORDINGLY,TH E ORDER PASSED BY THE AO WAS SET ASIDE AND THE MATTER WAS RESTORED BACK TO HIS FILE TO APP LY HIS MIND AND TO INVESTIGATE THE ISSUE. 2 ITA/ 1527/MUM/2015-AMBIT 4 .BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)STATED THAT THE ASSESSEE HAD FILED NECESSARY DETAILS BEFORE THE AO,THAT WHILE PASSING THE RECTIF ICATION ORDER THE PCIT DID NOT CONSIDER THE LETTER OF THE ASSESSEE DATED 01.11.2012,THAT THE RE TURN WAS SELECTED FOR SCRUTINY THROUGH APPROVAL OF CCIT,THAT AO HAD ISSUED NOTICES U/S. 14 3(2) AND 142(1) OF THE ACT, THAT VIDE ITS LETTERS DATED 01.11.2012 AND 26.11.2012 THE ASSESSE E HAD FILED DETAILS OF AUDITED ACCOUNTS FOR THE YEAR,PARTY WISE DETAILS OF THE PURCHASES DEBITE D TO THE P & L ACCOUNT AS WELL AS THE DETAILS OF SHARE CAPITAL AND SECURITY PREMIUM RECEIVED DURI NG THE YEAR,THAT THE ISSUE OF SHARES AT PREMIUM AND PURCHASE OF TRADING STOCK WAS DELIBERAT ED UPON BY THE AO,THAT THE AO HAD COMPLETED THE ASSESSMENT AFTER DISCUSSION AND VERIF ICATION,THAT IT COULD NOT BE CONSTRUED THAT THE ASSESSMENT MADE BY THE AO WAS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF THE REVENUE, THAT THE AO HAD TAKEN A VIEW WHICH WAS POSSIBLE AS PER THE PROVISIONS OF THE ACT,THAT PROVISIONS OF SECTION 263 WERE WRONGLY INVOKED.THE AR PRODUCED BEFORE US,A COPY OF THE ASSESSMENT ORDER THAT CONTAINED THE OFFICE NOTE OF THE AO,ORDER DATED 03.01.2013.IT WAS STATED THAT ASSESSEE HAD INSPECTED THE FILE AND HAD OBTAINED THE XEROX COPY OF THE SAID ORDER. THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE PCIT. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT ORIGINALLY THE RETURN WAS PROCESSED U/S.143(1) OF T HE ACT,THAT AFTER THE APPROVAL OF THE CCIT NOTICES U/S.142(1) AND 143(2)WERE ISSUED TO THE ASS ESSEE, THAT THE ASSESSEE WAS SPECIFICALLY ASKED ABOUT THE SHARE PREMIUM CHARGED,THAT ASSESSEE HAD FILED EVIDENCES IN ITS SUPPORT,THAT IT ALSO PRODUCED NECESSARY DETAILS ABOUT THE CLOSING S TOCK.WE WOULD LIKE TO REPRODUCE A PART OF THE OFFICE NOTE OF THE-THEN-AO AND THE SAME READS A S UNDER:- THE CASE WAS SELECTED FOR SCRUTINY UNDER CCITS AP PROVAL, THE REASON BEING THAT THIS WAS THE FIRST RETURN OF THE COMPANY AND THE COMPANY HAD REC EIVED RS.98,00,000/- AS PREMIUM ON SHARES ISSUED AND THE ASSESSEE HAD SHOWN PURCHASES OF RS.1 CRORE AND THE ENTIRE PURCHASE OF RS.1 CRORE HAVE BEEN SHOWN AS CLOSING STOCK. ALL THESE FACTS NEED VERIFICATION. THE DETAILS FURNISHED HAVE BEEN VERIFIED AND THE ASSESSMENT COMPLETED ACC ORDINGLY WE FURTHER FIND THAT THE PCIT HAS NOT TAKEN INTO CO NSIDERATION TWO LETTERS WRITTEN BY THE ASSESSEE TO THE AO.THE ASSESSEE HAD FURNISHED ALL T HE REQUIRED DETAILS ABOUT SHARE PREMIUM AND THE CLOSING STOCK BEFORE THE AO.IN THESE CIRCUM STANCES,WE ARE OF THE OPINION THAT THE AO HAD APPLIED HIS MIND WHILE PASSING THE ORDER U/S.14 3(3) OF THE ACT.THE ORDER PASSED BY HIM DOES NOT FALL IN THE CATEGORY OF AN ORDER WHICH COU LD BE PREJUDICIAL TO THE INTEREST OF THE REVENUE OR ERRONEOUS.HERE,WE WOULD LIKE TO REFER TO THE CASE OF GABRIEL INDIA LTD.(203ITR 108),DELIVERED BY THE HONBLE BOMBAY HIGH COURT.THE HONBLE COURT HAS HELD AS UNDER: THE POWER OF SUO MOTU REVISION UNDER SUB-SECTION (1 ) OF SECTION 263 OF THE INCOME-TAX ACT, 1961, IS IN THE NATURE OF SUPERVISORY JURISDICTION AND CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPECIFIED THEREIN EXIST. TWO CIRCUMST ANCES MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE THE POWER OF REVISION UNDE R THIS SUB-SECTION, VIZ., (I) THE ORDER SHOULD BE ERRONEOUS; AND (II) BY VIRTUE OF THE ORDE R BEING ERRONEOUS PREJUDICE MUST HAVE BEEN CAUSED TO THE INTERESTS OF THE REVENUE. AN ORDER CA NNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME-TAX OFFICE R ACTING IN ACCORDANCE WITH LAW MAKES CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS E RRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BE EN WRITTEN MORE ELABORATELY. THIS SECTION DOES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JU DGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME-TAX OFFICER, WHO PASSED THE ORDER, UNLESS TH E DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WHERE THE INCOME-TAX OFFICER WHIL E MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOU NTS OR BY MAKING SOME ESTIMATES HIMSELF. THE COMMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEF T TO THE COMMISSIONER HE WOULD HAVE ESTIMATED THE INCOME AT A HIGHER FIGURE THAN THE ON E DETERMINED BY THE INCOME-TAX OFFICER. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE 3 ITA/ 1527/MUM/2015-AMBIT THE INCOME HIMSELF AT A HIGHER FIGURE. THIS IS BECA USE THE INCOME-TAX OFFICER HAS EXERCISED THE QUASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANC E WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONE OUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF THE COMMISSIONER THE ORDER IN QUESTION IS PREJUDICI AL TO THE INTERESTS OF THE REVENUE. BUT THAT BY ITSELF WOULD NOT BE ENOUGH TO VEST THE COMMISSIO NER WITH THE POWER OF SUO MOTU REVISION BECAUSE THE FIRST REQUIREMENT, NAMELY, THAT THE ORD ER IS ERRONEOUS, IS ABSENT. SIMILARLY IF AN ORDER IS ERRONEOUS BUT NOT PREJUDICIAL TO THE INTER ESTS OF THE REVENUE, THEN THE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVERY ER RONEOUS ORDER CANNOT BE THE SUBJECT- MATTER OF REVISION BECAUSE THE SECOND REQUIREMENT M UST BE FULFILLED. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHI CH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE, ON AN INCORRECT OR INCOMPLETE INTERPRETATION, A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. WHEN EXERCISE OF STATUTORY POWER IS DEPENDENT UPON THE EXISTENCE OF CERTAIN OB JECTIVE FACTS, THE AUTHORITY BEFORE EXERCISING SUCH POWER MUST HAVE MATERIALS ON RECORD TO SATISFY IT IN THAT REGARD. IF THE ACTION OF THE AUTHORITY IS CHALLENGED BEFORE THE COURT IT WOULD BE OPEN TO THE COURTS TO EXAMINE WHETHER THE RELEVANT OBJECTIVE FACTORS WERE AVAILAB LE FROM THE RECORDS CALLED FOR AND EXAMINED BY SUCH AUTHORITY. RESPECFULLY,FOLLOWING THE PRINCIPLES ENUMERATED IN THE ABOVE MENTIONED JUDGMENT AND CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE,WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT, THE APPEAL FI LED BY THE ASSESSEE STANDS ALLOWED. . ORDER PRONOUNCED IN THE OPE N COURT ON 28TH OCTOBER,2015. 28 TH ,2015 SD/- SD /- ( /AMIT SHUKLA) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 28.10.2015 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.