M/s Saibaba Road Lines, Visakhapatnam V. The DCIT, Circle-1, Rajahmundry,

ITA 158/VIZ/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72724 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 11-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Opportunity of being heard; Assessment record
• Section: 143(3); 142(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNAM BEFORE S/SHRI B. RAMAKOTAIAH (AM) & SAKTIJIT DEY (JM) I.T.A. NO.158/VIZ/2012 ASSESSMENT YEAR : 2007 - 08 SAIBABA ROAD LINES, C/O. C.SUBRAHMANYAM, CA, 102, LAKSHMI APARTMENT, FACOR LAYOUT, WALTAIR UPLANDS, VISAKHAPATNAM VS. DCIT, CIRCLE - 1, RAJAHMUNDRY PAN/GIR NO. : ABAFS 8046 D ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI C.SUBRAHMANYAM RESPONDENT BY : SHRI K.V.N. CHARYA DATE OF HEARING : 11/12/2013 DATE OF PRONOUNCEMENT : 13 /12/2013 O R D E R PER SAKTIJIT DEY, JM THE ASSESEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2007 - 08 AGAINST ORDER DATED 20.3.2012 OF LD CIT UNDER SECTION 263 OF THE I.T.ACT, 1961. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TRANSPORT BUSINESS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 8.11.2007 DECLARING TOTAL INCOME AT RS.77,630/ - . THE RETURN OF INCOME WAS INITIALLY PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, SCRUTINY ASSESSMENT PROCEEDING WAS INITIATED BY VIRTUE OF NOTICE U/S.143(2) OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEEDINGS ALSO NOTICES UNDER SECTION 142(1) AND 143(2) WERE ISSUED BY THE AO CALLING UPON THE ASSESSEE TO PRODUCE ITS BOOKS OF ACCOUNT, VOUCHERS, AND OTHER INFORMATION AS M ENTIONED IN THE SAID NOTICES. IN RESPONSE TO SAID NOTICES, AS NOTED BY THE AO IN THE ASSESSMENT ORDER, THE ASSESSEE PRODUCED ITS BOOKS OF ACCOUNTS, VOUCHERS AND BILLS AND OTHER INFORMATION CALLED FOR. THE AO AFTER VERIFYING THE BILLS FURNISHED AND EXAMIN ING THE BOOKS OF ACCOUNT AND VOUCHERS, COMPLETED THE 2 ASSESSMENT BY DETERMINING THE TOTAL INCOME AT RS.9,85,807/ - . WHILE DOING SO, THE AO, INTER ALIA, DISALLOWED AN AMOUNT OF RS.5,21,177/ - TOWARDS LORRY HIRING CHARGES AND RS.3,87,000/ - TOWARDS LEASE HIRE C HARGES UNDER SECTION 40(A)(IA) OF THE ACT. THE CIT WHILE EXAMINING THE ASSESSMENT RECORDS OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR HELD THAT THE ASSESSMENT ORDER PASSED IN CASE OF THE ASSESSEE IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ACCORDINGLY, THE CIT ISSUED A NOTICE U/S.263 DIRECTING THE ASSESSEE TO SHOW CAUSE ON THE FOLLOWING ISSUES: 1) THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.1,44,575/ - TOWARDS GUIDE EXPENSES, WHICH WAS NOT CONSIDERED BY THE AO WHILE COMPLETING THE ASSESS MENT UNDER SECTION 143(3) OF THE ACT. 2) THE AO HAS ALLOWED EXPENDITURE OF RS.14,82,980/ - TOWARDS HAMALI CHARGES WITHOUT EXAMINING AS TO WHETHER CORRESPONDING INCOME WAS OFFERED BY THE ASSESSEE OR NOT. 3) AS CAN BE SEEN FROM THE PROFIT AND LOSS ACCOUNT FOR T HE YEAR ENDED 31.3.2007 UNDER THE HEAD DIRECT INCOMES , THE ASSESSEE RECEIVED HIRE CHARGES OF RS.2,74,34,423/ - AND EXACTLY A SIMILAR AMOUNT WAS DEBITED UNDER THE HEAD DIRECT EXPENSES TOWARDS HIRE CHARGES PAID. 4) SIMILARLY, IN CASE OF HIRE CHARGES RECEIVED AND HIRE CHARGES PAID AMOUNTING TO RS.19,10,303/ - STOOD DEBITED AND CREDITED RESPECTIVELY. ACCORDING TO THE CIT, THIS EXERCI SE FACILITATED THE ASSESSEE IN N EUTRALIZING GROSS PROFIT. 5) THE NET PROFIT DECLARED BY THE ASSESSEE STOOD AT RS.5,74,104/ - AS AGAINS T THE TOTAL TURNOVER OF RS.2,93,50,726/ - . T HE ASSESSEE HAS OFFERED COMMISSION OF RS.9,08,070/ - AND IF THE COMMISSION OFFERED IS TAKEN INTO CONSIDERATION, THE NET PROFIT SHOWN BY THE ASSESSEE WOULD TURN INTO LOSSES . 3. IT WAS IN THIS BACKDROP THAT THE CIT OBSERVED THAT THE AO HAS FAILED TO EXAMINE THESE ASPECTS. IN RESPONSE TO NOTICE, THE ASSESSEE SUBMITTED ITS DETAILED REPLY OBJECTING TO EACH OF THE GROUNDS ON WHICH THE CIT SOUGHT TO REVISE THE ASSESSMENT ORDER. THE CIT HOWEVER DID NOT 3 ACCEPT THE CONTEN TION OF THE ASSESSEE AND PASSED AN ORDER U/S.263 OF THE ACT HOLDING AS UNDER : I) SO FAR AS GUIDE EXPENSES ARE CONCERNED, THE CIT WAS OF THE VIEW THAT SINCE IN THE COURSE OF THE PROCEEDINGS BEFORE HIM, THE ASSESSEE EXCEPT COPY OF THE LEDGER EXTRACT, DID N OT PRODUCE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS CLAIM, THEREFORE, THE GENUINENESS AND CORRECTNESS OF THE SAID EXPENDITURE NEEDS FRESH EXAMINATION. FURTHER SINCE PAYMENTS ARE MADE IN CASH, THEY WERE NOT VERIFIED BY THE AO DURING THE COURSE OF ASSESSM ENT PROCEEDINGS II) AS REGARDS HAMALI CHARGES ALSO, THE CIT MADE SIMILAR OBSERVATION TO THE EFFECT THAT THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS CLAIM. HE, THEREFORE DIRECTED THE AO TO VERIFY THE SAME. III) DEBITING AND CREDITING OF COMMISSION AND BROKERAGE WAS NOT EXAMINED BY THE AO AT THE TIME OF ORIGINAL ASSESSMENT. IV) THE ASPECT OF LOW N ET PROFIT SHOWN BY THE ASSESSEE IS NOT EXAMINED BY THE AO WHICH NEEDS TO BE EXAMINED AFRESH. 4. THUS, THE CIT SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE AO TO VERIFY ALL THESE ISSUES AND REFRAME THE ASSESSMENT AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5. LD A.R. BEFORE US SUBMIT TED THAT THE AO HAVING EXAMINED ALL THE ISSUES WITH PRO PER ENQUIRY, COMPLETED THE ASSESSMENT, THEREFORE, INVOKING OF POWER UNDER SECTION 263 IS NOT PROPER. LD A.R. REFERRING TO THE NOTICE ISSUED U/S.142(1) OF THE ACT AND REPLY TO THE SAID NOTICE PLACED AT PAGES 11 & 12 OF PB SUBMITTED THAT AS WOULD BE EVIDENT FROM THE SAID NOTICE BY THE AO, HE HAS NOT ONLY VERIFIED THE BOOKS OF ACCOUNT OF THE ASSESSEE BUT ALSO THE CORRESPONDING VOUCHERS AND OTHER DETAILS AND ONLY AFTER APPLYING HIS MIND TO ALL THESE MATERIALS, COMPLETED THE ASSESSMENT. LD A.R. SUBMITTED THAT THE ASSESSEE HAVING PRODUCED ALL THE BILLS, VOUCHERS AND OTHER DOCUMENTS AT THE TIME OF ASSESSMENT PROCEEDINGS, THE CIT WAS NOT JUSTIFIED IN OBSERVING THAT NO DOCUMENTARY EVIDENCE WITH REGARD TO CLAIM OF EXPENDITURE WAS PRODUCED. IT 4 WAS SUBMITTED THAT WIT HOUT GIVING AN OPPORTUNITY TO THE ASSESSEE, THE CIT CANNOT COME TO CONCLUSION UNILATERALLY WITH REGARD TO NON - SUBMISSION OF THE DOCUMENTARY EVIDENCE. SO FAR AS ISSUE OF LOW NET PROFIT AND NEUTRALIZING OF PROFIT IS CONCERNED, LD A.R. SUBMITTED THAT THE REV ISIONARY POWER UNDER SECTION 263 CANNOT BE INVOKED ON SUCH ISSUES SINCE THE ASSESSMENT ORDER PASSED CANNOT BE HELD TO BE EITHER ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE REVENUE BECAUSE THE AO HAS NOT ASSESSED THE INCOME AT A HIGHER RATE. LD A.R. S UBMITTED THE ISSUES ON WHICH CIT HAS HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE CERTAIN LY CANNOT BE SAID TO BE ISSUES ON WHICH THE CIT COULD HAVE PROCEEDED U/S.263 OF THE ACT. IN SUPPORT OF THIS CONTENTION, LD A.R. RELIED UPON THE FOLLOWING DECISIONS: I) ANTALA SANJAY KUMAR RAVJI BHAI VS CI, 135 ITD 506(RAJ) II) ROSHAN LAL VEGETABLE PRODUCTS(P)LTD VS ITO, 51 SOT 1(AGRA) III) FINE JEWELLERY (INDIA) LTD VS. ACIT, 19 ITR 846(M UM) TRIB IV) CIT VS. HINDUSTAN LEVER LTD., 343 ITR 161 (BOM) V) CIT VS. DESIGN AND AUTOMATION ENGINEERS(BOMBAY) PVT LTD., 323 ITR 632 (BOM) VI) MANI KUMAR VS CIT, 134 ITR 27 (INDORE) VII) MAITHAN INTERNATIONAL VS ACIT, 134 ITD 393(KOL) 6. ON THE OTHER HAND, LD D.R. SUBMITTED THAT THE ASSESSMENT ORDER ITSELF SHOWS THAT NO ENQUIRY HAS BEEN MADE BY THE AO BEFORE COMPLETING THE ASSESSMENT. LD D.R. SUBMITTED THAT THE NOTICE ISSUED U/S.142(1) OF THE ACT DOES NOT INDICATE THAT THE ISSUES ON WHICH THE CIT HAS DIRECTED THE AO TO REVISE THE ORDER WERE EXAMINED BY THE AO. HE, THEREFORE, SUBMITTED THAT SINCE THE AO HAS NOT EXAMINED THE ISSUES POINTED OUT BY THE CIT, THE ASSESSMENT ORDER PASSED WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND, TH EREFORE, THE EXERCISE OF POWER U/S.263 IS VALID. 7. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORDS OF THE CASE. AS ALREADY STATED EARLIER, THE CIT HAS HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF THE REVENUE ON FOUR GRO UNDS. HOWEVER, ON PERUSAL OF NOTICE ISSUED UNDER SECTION 142(1), IT CAN BE SEEN THAT THE AO CALLED FOR THE BOOKS OF ACCOUNT, BILLS, VOUCHERS, AUDIT REPORT, SECURED 5 AND UNSECURED LOAN, LIST OF SUNDRY CREDITORS, SUNDRY DEBTORS, DETAILS OF BANK ACCOUNT, TDS PARTICULARS, ADDITION TO THE FIXED ASSETS TO BILLS AND INVOICES. THE REPLY OF THE ASSESSEE TO THE AFORESAID NOTICE OF THE AO, C OPY OF WHICH IS PLACED AT PAGES 47 TO 49 OF PB SHOW THAT THE ASSESSEE NOT ONLY PRODUCED BOOKS OF ACCOUNT, BILLS, VOUCHERS BUT AL SO FURNISHED ALL DETAILS AS CALLED FOR BY THE AO. THE ASSESSMENT ORDER ALSO REVEALS THAT THE AO HAS EXAMINED THE BOOKS OF ACCOUNT, BILLS AND VOUCHERS AND OTHER DOCUMENTS FURNISHED BY THE ASSESSEE. IT IS FURTHER EVIDENT FROM THE ASSESSMENT ORDER THAT THE AO HAS MADE CERTAIN DISALLOWANCE U/S.40(A)(IA) OF THE ACT ON ACCOUNT OF LORRY HIRE CHARGES AND LEASE HIRE CHARGES. THIS FACT WOULD REVEAL THAT THE AO HAS VERIFIED THE BOOKS OF ACCOUNT AND BILLS AND VOUCHERS AND ONLY AFTER EXAMINING THEM HAS COMPLETED THE ASSESSMENT. IN THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE AO HAS NOT EXAMINED THE EXPENSES CLAIMED TOWA RDS GUIDE AND HAMALI CHARGES W HEN THE ASSESSMENT ORDER AS WELL AS T HE REPLY OF THE ASSESSEE REVEAL THAT ALL BILLS AND VOUCHERS RELATING TO THE EXP ENSES CLAIMED WERE PRODUCED AND EXAMINED BY THE AO. SIMILARLY, THE ASSESSMENT ORDER PASSED U/S.143(3) OF THE ACT CANNOT BE HELD EITHER ERRON EOUS OR PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THE GROUND THAT THE ASSESSEE HAS DISCLOSED LOW NET PROFIT. S IMILARLY THE OTHER ISSUES OF NON - EXAMINATION OF COMMISSION AND BROKERAGE APPEAR S TO BE MORE ON PRESUMPTION AND SURMISE THAN ON THE BASIS OF FACTS ON RECORD. IN SUCH A SITUAT ION, IN OUR VIEW, THE CONDITION PRECEDENT FOR ASSUMING JURISDICTION UNDER SECTION 263 IS NOT SATISFIED. IT IS WELL SETTLED PRINCIPLE OF LAW THAT FOR INVOKING THE POWER UNDER SECTION 263, TWIN CONDITIONS OF ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE HAVE TO BE SATISFIED. ON THE BASIS OF FAC TS AND MATERIAL ON RECORD AS WE LL AS ON GOING THROUGH THE ASSESSMENT ORDER, IT DOES NOT MAKE OUT A CASE FOR INVOKING THE JURISDICTION U/S.263 OF THE ACT AS APPARENTLY ON THE FACTS AND CIRCUMSTANCES OF THE CASE , ASSESSMENT CANNOT BE HELD TO ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF T HE REVENUE. IN THE CASE OF ANTALA SANJAY KUMAR RAVJI BHAI (SUPRA), IT HAS BEEN HELD THAT WHEN THE AO MADE PROPER ENQUIRIES AND EXAMINED THE ACCOUNTS, IT COULD NOT BE SAID THAT THERE WAS NON APPLICATION OF MIND, HENCE, ACTION U/S.263 WAS INVALID. THE OTH ER DECISIONS RELIED UPON BY THE ASSESSEE ALSO EXPRESS THE VIEW THAT UNLESS THE ORDER PASSED BY THE AO DISCLOSES TOTAL NON - APPLICATION OF MI ND OR LACK OF ENQUIRY , IT CANNOT BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO TH E INTERESTS OF THE RE V ENUE. WHERE THE ASSESSMENT ORDER AND FACTS AND MATERI ALS ON RECORD INDICATE OF ENQUIRY AND APPLICATION OF MIND BY THE AO BEFORE FRAMING THE ASSESSMENT UNDER SECTION 143(3) CANNOT BE HELD TO BE ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW. THEREFORE, WE ARE OF THE 6 CONSIDERED VIEW THAT IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, THE CIT WAS NOT JUSTIFIED IN ASSUMING THE POWER UNDER SECTION 263 AND, ACCORDINGLY, WE QUASH THE ORDER PASSED U/S.26 3 OF THE ACT. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/ 12/2013 . SD/ - S D/ - (B.RAMAKOTAIAH ) ( SAKTIJIT DEY ) ACCOUNTANT MEMBER JUDICIAL MEMBER VISHAKHAPATNAM DATED 13 / 12/2013 PARIDA , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT : SAIBABA ROAD LINES, C/O. C.SUBRAHMANYAM, CA, 102, LAKSHMI APARTMENT, FACOR LAYOUT, WALTAIR UPLANDS, VISAKHAPATNAM 2. THE RESPONDENT. DCIT, CIRCLE - 1, RAJAHMUNDRY 3. THE CIT(A) - CONCERNED 4. CIT RAJAHMUNDRY 5. DR, ITAT, VISHAKHAPATNAM 6. GUARD FILE. BY ORDER SR.PS, ITAT, VISHAKHAPATNAM //TRUE COPY//