Perfect Engineers, Ahmedabad V. The CIT,A'bad-I, Ahmedabad

ITA 1604/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1805 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 17-03-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 13-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Principle of natural justice; Earning of tax free income; Assessment record
• Section: 143(3); 263

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M PERFECT ENGINEERS, PLOT. NO.H-20, GIDC ESTATE, NR. WATER TANK, ODHAV, AHMEDABAD. VS. THE CIT-I, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI M.K. PATEL, AR RESPONDENT BY:- SHRI MUDIT NAGPAL, SR.D.R. O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS:- (1) THAT ON FACTS AND IN LAW, THE LD. CIT HAS GRIEVOUSL Y ERRED IN ASSUMING JURISDICTION U/S 263 OF THE ACT WITHOUT PO INTING AS TO HOW THE ORDER PASSED BY LD. AO IS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF REVENUE. (2) THAT ON FACTS AND IN LAW, IT OUGHT TO HAVE BEEN HEL D THAT THE LD. AO HAS PASSED THE ORDER AFTER EXAMINING ALL THE ISS UES, CONSIDERING THE DETAILS AND ADOPTING A PERMISSIBLE VIEW IN LAW. 2. THE ASSESSEE IS BEFORE US AGAINST THE ORDER OF L D. CIT PASSED U/S263 DATED 9.3.2010. THE LD. CIT EXAMINED THE ASSESSMENT RECORD FOR ASST. YEAR 2006-07 AND FOUND THAT - (1) CLOSING STOCK OF C.I. CASTINGS WAS UNDER VALUED AND IT WAS NOT EXAMINED BY THE A.O. ITA NO.1604/AHD/2010 ASST. YEAR 2006-07 ITA NO.1604/AHD/2010 ASST. YEAR 2006-07 2 (2) THE ASSESSEE HAD CLAIMED INTEREST EXPENDITURE OF RS .14,62,137/- OF UNSECURED LOANS WHICH WERE INVESTED IN MUTUAL FU NDS WHICH RESULTED IN EXEMPT INCOME AND HENCE INTEREST WAS TO BE DISALLOWED UNDER SECTION 14-A. (3) COMMISSION EXPENSES WERE ALLOWED WITHOUT CALLING FO R THE DETAILS AND NECESSARY VERIFICATION. (4) TAX WAS NOT DEDUCTED ON THESE EXPENSES AND HENCE AP PLICABILITY OF SECTION 40A(IA) WAS NOT EXAMINED. (5) THE ASSESSEE HAD SOLD PLOTS IN GIDC. THE AO DID NOT OBTAIN THE DETAILS FOR EXAMINING THE SHORT-TERM CAPITAL GAINS. ACCORDING TO THE LD. CIT, THE AO HAD FRAMED THE ASS ESSMENT ON 5.12.2007 U/S 143(3) WITHOUT EXAMINING THE ABOVE IS SUES. HE ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AND OBTAINED THE REPLY FROM HIM WHICH FORMS PART OF THE ORDER OF LD. CIT. CONSIDERING THE REPLY OF THE ASSESSEE LD. CIT CAME TO THE CONCLUSION THAT THE AO HAD NOT MADE ENQ UIRIES IN THESE FIVE ITEMS. THEREFORE, HE CONSIDERED AOS ORDER AS ERRON EOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE LD. CIT REFERRED TO THE FOLLOWING 5 JUDGMENTS IN SUPPORT OF HIS FINDING :- (1) TARAJAN TEA CO. P. LTD. VS. CIT 205 ITR 45 (GAU) (2) CIT VS. SESHASAYEE PAPER & BOARDS LTD. 242 ITR 490 (MAD) (3) CIT VS. SOUTH INDIA SHIPPING CORPORATION LTD. 233 I TR 546 (MAD) (4) CIT VS. EMERY STONE MFG. CO. 213 ITR 843 (RAJ) (5) MANNULAL MATADEEN VS. CIT 277 ITR 346 (ALL) HE ACCORDINGLY RESTORE THE ASSESSMENT TO THE FILE O F AO FOR EXAMINING THESE FIVE ISSUES AFTER AFFORDING NECESSARY OPPORTU NITIES OF BEING HEARD TO THE ASSESSEE. 3. WE HAVE HEARD THE LD. AR & THE LD. DR. IN OUR CO NSIDERED VIEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF L D. CIT. IT COULD NOT BE POINTED OUT TO US AS TO WHAT ENQUIRIES AO HAS DONE ON THESE ISSUES AND ITA NO.1604/AHD/2010 ASST. YEAR 2006-07 3 WHAT MATERIAL ASSESSEE HAS PLACED BEFORE THE AO. IT IS THUS QUITE APPARENT THE AO HAD PASSED THE ORDER PERFUNCTORILY WITHOUT D ISCHARGING HIS DUTIES AND, THEREFORE, LD. CIT WAS JUSTIFIED IN HOLDING HI S ORDER AS ERRONEOUS. HON. SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. V S. CIT (2000) 243 ITR 83 (SC) HAS HELD THAT WHERE THE AO FAILED TO AP PLY HIS MIND TO THE CASE IN ALL PERSPECTIVE THE ORDER PASSED BY HIM WOU LD BE ERRONEOUS. THERE IS NO MATERIAL ON RECORD IN THE PRESENT CASE TO SUG GEST THAT AO HAD IN FACT APPLIED HIS MIND TO ABOVE ISSUES RAISED BY LD. CIT. IN CIT VS. DEEPAK KUMAR GARG (2008) 299 ITR 435 (M.P.) IT WAS HELD TH AT WHERE THE AO CARRIES OUT ONLY A SEMBLANCE OF ENQUIRIES THAT IN A VERY SLIP SHOD MANNER OR AO ACCEPTS THE VERSION OF THE ASSESSEE WITHOUT P ROPER ENQUIRIES THEN CIT WOULD BE JUSTIFIED IN DIRECTING THE AO TO OBSER VE THE RULE OF NATURAL JUSTICE AND CARRY OUT NECESSARY ENQUIRIES AS IT WIL L SAFEGUARD THE INTEREST OF ASSESSEE ALSO. HON. DELHI HIGH COURT IN DUGAL AN D CO. VS. CIT (1996) 200 ITR 456 (DEL) HELD THAT AO IS NOT ONLY AN ADJUD ICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF THE RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR ENQUIRIES. IT IS INCUMBENT ON THE AO TO INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIR CUMSTANCES WOULD REQUIRE ENQUIRIES. THE WORD ERRONEOUS USED IN SEC TION 263 INCLUDES THE FAILURE TO MAKE SUCH ENQUIRY. THE ORDER BECOMES ERR ONEOUS BECAUSE SUCH AN ENQUIRY HAS NOT BEEN MADE NOT BECAUSE THERE WAS ANYTHING WRONG IN THE ORDER EVEN THOUGH ALL THE FACTS ARE STATED THER EIN. 4. IN VIEW OF ABOVE, WE UPHOLD THE ORDER OF LD. CIT AND DISMISS THE APPEAL FILED BY THE ASSESSEE. ITA NO.1604/AHD/2010 ASST. YEAR 2006-07 4 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 25/3/11. SD/- SD/- (BHAVNESH SAINI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 25/3/11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD 1.DATE OF DICTATION 17/3/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 24/3/ 2011 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..