M/s. Tetagarh Steels Ltd. (Since merged with Titagarh Wagons Ltd.), Kolkata V. DCIT, Circle - 1, Kolkata, Kolkata

ITA 1713/KOL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4563 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 29-08-2014
• Court: TRIBUNAL
• Department Lawyers: G MALLIKARJUNA
• Assessee Lawyers: S JHAJHARIA
• Keywords: Period of limitation; Question of law; Bad and doubtful debts; Time period of passing order; Condonation of delay
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI N. V. VASUDEVAN, JM & SHRI M. BALAGAN ESH, AM] I.T.A NO.1713/KOL/2014 ASSESSMENT YEAR: 2009-10 TITAGARH STEELS LTD. (SINCE MERGED VS. DEPUTY COM MISSIONER OF INCOME-TAX, WITH TITAGARH WAGONS LTD.) CIRCLE-1, KOLKATA. (PAN: AABCT1568J) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 06.06.2016 DATE OF PRONOUNCEMENT: 08.07.2016 FOR THE APPELLANT: SHRI S. JHAJHARIA, AR FOR THE RESPONDENT: SHRI G. MALLIKARJUNA, CIT, D R ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF REVISION ORDER OF CIT-1, KOLKATA VIDE M. NO. CIT,KOL-1/263/2013-14/10885-87 DATED 31.03.201 4. ASSESSMENT WAS FRAMED BY JCIT(OSD), CIT-1, KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2009-10 VIDE HIS O RDER DATED 23.12.2011. 2. AT THE OUTSET, WE FIND THAT THERE WAS A DELAY IN FILING THE APPEAL BY THE ASSESSEE BEFORE US BY 88 DAYS FOR WHICH AN AFFIDAVIT FROM TH E CHIEF FINANCIAL OFFICER (CFO ) MR ANIL KUMAR AGARWAL AND AFFIDAVIT OF MR NAND KISHORE MITTAL HAVE BEEN FILED BY THE ASSESSEE ADDUCING THE REASONS FOR THE DELAY. THE AF FIDAVIT OF THE CHIEF FINANCIAL OFFICER OF THE COMPANY STATED THAT THE ASSESSEE ONLHY AFTER RECEIPT OF NOTICE U/S 143(2) OF THE ACT FOR THE ASST YEAR 2009-10 FROM THE AO DATED 22. 7.2014 AND ONLY AFTER ATTENDING THE HEARING ON 1.8.2014 BEFORE THE LD AO, CAME TO KNOW THAT THERE WAS AN ORDER U/S 263 PASSED BY THE LD CIT. IMMEDIATELY ON LEARNING THE SAME, HE HAD CONTACTED MR NAND KISHORE MITTAL , AN EMPLOYEE WHO HAD BEEN LOOKING A FTER THE INCOME TAX MATTERS IN THE ASSESSEE COMPANY, WHO STATED THAT THE ORDER U/S 263 WAS RECEIVED BY HIM , WHO IN TURN AT THE TIME OF HIS RESIGNATION WITH EFFECT FROM 12. 4.2014, HAD HANDED OVER THE SAME TO MR DEBNATH MUKHOPADHYAY, SR.GENERAL MANAGER (FINANC E & ACCOUNTS) OF THE ASSESSEE FOR TAKING APPROPRIATE ACTION. THE AFFIDAVIT OF CF O FURTHER STATED THAT MR DEBNATH MUKHOPADHYAY HAD ALSO THEREAFTER RESIGNED FROM THE SERVICES OF THE ASSESSEE WITH EFFECT FROM 5.5.2014 WITHOUT PROPERLY HANDING OVER THE NEC ESSARY PAPERS TO HIS SUCCESSOR. DUE 2 ITA NO.1713/K/2014 TITAGARH STEELS LTD.. AY 2009-10 TO THIS MISCONDUCT, DISCIPLINARY ACTION ALSO HAS BE EN INITIATED BY THE ASSESSEE AGAINST MR DEBNATH MUKHOPADHYAY VIDE LETTERS DATED 17.5.2014 A ND 13.6.2014. WHEN FURTHER ENQUIRED ABOUT THE ORDER OF THE LD CIT U/S 263 , HI S PAPERS AND DOCUMENTS WERE CHECKED AND NOT FINDING THE SAME, THE ASSESSEE HAD TO BROKE OPEN HIS DRAWER ON 20.8.2014 IN THE PRESENCE OF ONE MR RAMNATH GUPTA (WITNESS) AND THE ORDER U/S 263 WAS FOUND THEREON. THEREAFTER NECESSARY ACTION WAS TAKEN FOR PREFERRIN G THIS APPEAL BEFORE THE TRIBUNAL AT THE EARLIEST POSSIBLE TIME. THE LEARNED AR ALSO DRE W OUR ATTENTION TO THE AFFIDAVIT FILED BY MR NAND KISHORE MITTAL WHICH IS ALSO PART OF TH E RECORDS, WHEREIN THE CONCERNED EMPLOYEE HAD ADMITTED THAT THE ORDER OF LD CIT U/S 263 WAS RECEIVED BY THE COMPANYS OFFICE ON 3.4.2014 AND HE IN TURN HAD HANDED OVER T O MR DEBNATH MUKHOPADHYAY PURSUANT TO HIS RESIGNATION WITH EFFECT FROM 12.4.2 014 WITH A CLEAR INSTRUCTION TO HAND OVER THE SAME TO THE AUTHORIZED REPRESENTATIVES FO R FURTHER ACTION. THEREAFTER HE DID NOT BOTHER TO FOLLOW UP THE MATTER WITH MR DEBNATH MUKH OPADHYAY AS HE HAD ALREADY RESIGNED FROM THE ASSESSEE COMPANY. BASED ON THE SE REASONS , THE LEARNED AR PLEADED THAT THE DELAY HAD OCCURRED ONLY DUE TO REASONS BEY OND THE CONTROL OF THE ASSESSEE AS NARRATED HEREINABOVE. IN RESPONSE TO THIS, THE LEARNED DR STRONGLY OBJECT ED TO THE CONDONATION ON THE GROUND THAT THE ASSESSEE HAD NOT ADDUCED SUFFICIENT CAUSE BY WAY OF ILLNESS OR GENUINELY OBSTRUCTED BY REASONS BEYOND THE CONTROL OF THE ASS ESSEE FOR THE DELAY IN FILING THE APPEAL. ACCORDINGLY, HE ARGUED THAT THE APPEAL O F THE ASSESSEE SHOULD BE DISMISSED AS UNADMITTED. IN RESPONSE TO THIS, THE LEARNED AR PL ACED RELIANCE ON THE DECISION OF THE MUMBAI TRIBUNAL IN THE CASE OF PRASHANT PROJECTS LT D VS DCIT REPORTED IN (2013) 145 ITD 202 (MUM TRIB) DATED 4.9.2013 FOR THE EXPRESSION SUFFICIENT CAUSE. 2.1. WE FIND THAT THE SUBSTANTIAL JUSTICE SHOULD PREVAIL OVER TECHNICAL CONSIDERATIONS. IT IS TRUE THAT EVERY DAYS DELAY MUST BE EXPLAINED BY THE ASSESSEE AND IT DOES NOT MEAN THAT A PEDANTIC APPROACH SHOULD BE TAKEN. THE DOCT RINE MUST BE APPLIED IN A RATIONAL COMMON SENSE AND PRAGMATIC MANNER. IN THE CASE OF VEDABHAI ALIAS VAIJAYANTABAI BABURAO PATIL VS SHANTARAM BABURAO PATIL & OTHERS R EPORTED IN 253 ITR 798 (SC) , THE HONBLE SUPREME COURT IN THE MATTER OF CONDONATION OF DELAY HELD THAT THE SUBSTANTIAL JUSTICE SHOULD BE GIVEN PRIME IMPORTANCE. SIMILAR VIEWS WERE GIVEN BY THE APEX COURT 3 ITA NO.1713/K/2014 TITAGARH STEELS LTD.. AY 2009-10 IN THE CASE OF N.BALAKRISHNAN VS M.KRISHNAMURTHY REPORTED IN (1998 ) 7 SCC 123 (SC) AND SHANKARRAO VS CHANDRASENKUNWAR REPORTED IN (198 7) SUPPL. SCC 338 (SC) . WE FIND THAT THE MUMBAI TRIBUNAL SUPRA HAD HELD THAT- I). IF SUFFICIENT CAUSE FOR EXCUSING DELAY IS SHOWN , DISCRETION IS AVAILABLE TO THE FAAS TO CONDONE THE DELAY AND ADMIT THE APPEAL. II). THE EXPRESSION 'SUFFICIENT CAUSE' IS NOT DEFIN ED, BUT IT MEANS A CAUSE WHICH IS BEYOND THE CONTROL OF AN ASSESSEE. FOR INVOKING THE AID OF THE SECTION ANY CAUSE WHICH PREVENTS A PERSON APPROACHING THE FAA WITHIN TIME IS CONSIDERED SUFFICIENT CAUSE. IN DOING SO, IT IS THE TEST OF REASONABLE MA N IN NORMAL CIRCUMSTANCES WHICH HAS TO BE APPLIED. THE TEST WHETHER OR NOT A CAUSE IS SUFFICIENT IS TO SEE WHETHER IT COULD HAVE BEEN AVOIDED BY THE PARTY BY THE EXERCIS E OF DUE CARE AND ATTENTION. IN OTHER WORDS, WHETHER IT IS BONA FIDE CAUSE, INASMUC H AS NOTHING SHALL BE DEEMED TO BE DONE BONA FIDE OR IN GOOD FAITH WHICH IS NOT DON E WITH DUE CARE AND ATTENTION. WHAT MAY BE SUFFICIENT CAUSE IN ONE CASE MAY BE OTH ERWISE IN ANOTHER. WHAT IS OF ESSENCE IS WHETHER IT WAS AN ACT OF PRUDENT OR REAS ONABLE MAN.[ASHUTOSH BHADRA V. JATINDRA MOHAN SEAL (AIR 1954 CAL.238) AND HISARIA PLASTIC PRODUCTS V. CST AIR 1980 (ALL.) 185].SUBSEQUENT DECISION OF A COURT CAN NOT CONSTITUTE SUFFICIENT CAUSE. III). IN EVERY CASE OF DELAY, THERE IS SOME LAPSE ON THE PART OF THE ASSESSEE. IF THERE ARE NO MALA FIDES AND IT IS NOT PUT FORTH AS PART OF A DILATORY STRATEGY, THE FAA SHOULD CONSIDER THE APPLICATION 6 ITA NO. 7167/MUM/ 2011 (AY- 2005-06) PRASHANT PROJECTS LTD. OF THE ASSESSEE. BUT WHEN THERE IS RE ASONABLE GROUND TO THINK THAT THE DELAY WAS OCCASIONED OTHERWISE THAN A BONA FIDE CON DUCT, THEN THE FAA SHOULD LEAN AGAINST ACCEPTANCE OF THE EXPLANATION. IV) SECTION 249(3)OF THE ACT IS DISCRETIONARY IN NA TURE AND THE ASSESSEE CANNOT SEEK CONDONATION OF DELAY UNDER THIS PROVISION AS A MATTER OF RIGHT, BUT HAS TO SATISFY THE FAA BY EXPLAINING THE SUFFICIENT CAUSE FOR THE DELAY. V). JUST BECAUSE THERE IS MERIT IN THE APPEAL FILED BY THE ASSESSEE, ANY AMOUNT OF DELAY, HOWEVER, NEGLIGENTLY CAUSED, CANNOT BE CO NDONED. VI). REQUIREMENT OF SUFFICIENT CAUSE FOR DELAY CANN OT BE IGNORED AND IT BECOMES VERY IMPORTANT AND SIGNIFICANT WHEN THE DELAY IS IN ORDINATE AND ABNORMAL. VII). IN THE MATTER OF J.B. ADVANI & CO. (P.) LTD.( 72 ITR 395) HONBLE SUPREME COURT HAD HELD THAT EXPLANATION OF DELAY FOR THE EN TIRE PERIOD IS NECESSARY. IN OTHER WORDS WHAT IS EXPECTED OF THE APPELLANT IN SUCH MAT TERS IS TO SHOW THAT DELAY WAS OCCASIONED DUE TO SOME SUFFICIENT CAUSE. THE CAUSE PLEADED SHOULD NOT ONLY BE A PROBABLE ONE BUT IT SHOULD BE REAL AND SUFFICIENTLY REASONABLE. IT WOULD NOT BE ANY SORT OF ASSERTION THAT WOULD AMOUNT TO SUFFICIENT C AUSE AND WOULD JUSTIFY THE CONDONATION OF DELAY. THE CAUSE PLEADED MUST FIT IN THE FACTS AND CIRCUMSTANCES OF THE GIVEN CASE AND THE EXPLANATION OFFERED REGARDIN G THE DELAY OCCASIONED BY SUCH CAUSE SHOULD APPEAL TO REASONS SO AS TO GET JUDICIA L APPROVAL. IN SHORT IN MATTERS OF DELAY IT IS NEITHER PRACTICABLE NOR DESIRABLE TO EX PLAIN MINUTE-TO-MINUTE/HOUR-TO- HOUR DELAY, BUT DELAY HAS TO BE EXPLAINED. 4 ITA NO.1713/K/2014 TITAGARH STEELS LTD.. AY 2009-10 VIII). WHEN AN APPLICATION FOR CONDONATION OF DELAY IS MADE; TO CONSIDER WHETHER A SUFFICIENT CAUSE HAS BEEN MADE OUT BY THE ASSESSE E; THE ORDER OF THE FAA SHOULD DISCLOSE THAT HE HAD APPLIED HIS MIND TO THE QUESTI ON RAISED BEFORE IT. DUE EXERCISE OF JUDICIAL DISCRETION IS A PRE-CONDITION FOR ALLOW ING/ REFUSING AN APPLICATION FILED FOR CONDONING DELAY. IX). THE APPLICATION FOR CONDONATION OF DELAY SHOUL D CONTAIN SUBSTANTIALLY ALL THE RELEVANT MATERIAL AND AS FAR AS POSSIBLE IT SHO ULD BE SUPPORTED BY AFFIDAVIT, SHOWING THAT THERE IS SUFFICIENT CAUSE FOR CONDONAT ION. X). IF THE DELAY IS NOT VITIATED BY ANY ERROR OF LA W IT SHOULD BE CONDONED. XI). ANY EVENT, CAUSE OR CIRCUMSTANCE ARISING AFTER THE EXPIRY OF THE LIMITATION PERIOD CANNOT CONSTITUTE A SUFFICIENT CAUSE. XII). IT IS SAID THAT NON-FILING OF APPEAL BEFORE T HE FAA, BEFORE THE END OF LIMITATION PERIOD, CREATES A VESTED RIGHT IN FAVOUR OF THE REVENUE. AS A RESULT OF NOT FILING OF AN APPEAL BY AN ASSESSEE, DEPARTMENT, GET S A LEGITIMATE AND UNDISPUTED RIGHT OVER THE TAX-REVENUE ACCRUING TO IT IN PURSUA NCE OF THE ORDER OF THE AO. THIS RIGHT CANNOT BE DISTURBED IN A LIGHT-HEARTED MANNER . XIII). IN THE CASES OF BELATED APPEALS MATTERS HAVE TO BE ESSENTIALLY ANALYSED IN THE FACTS OF EACH CASE-NO GENERAL FORMULA CAN BE OR SHOULD BE APPLIED, SO AS TO ENSURE THAT AN OTHERWISE GENUINE CAUSE OF JUSTICE I S NOT DEFEATED BY ADHERENCE TO TECHNICAL PRECEDENCE. KEEPING IN VIEW THE PRINCIPLES LAID DOWN IN THE AFO RESAID JUDGMENTS AND IN VIEW OF THE REASONING ADDUCED IN THE AFFIDAVIT BY THE ASSESSEE, WE FIND THAT THE DELAY IN FILING THE APPEAL BY THE ASSESSEE BY 88 DAYS DESERVES TO BE CO NDONED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. HENCE, THE APPEAL OF THE ASSESSEE IS ADMITTED HEREIN AND TAKEN UP FOR ADJUDICATION. 3. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LEARNED CIT IS JUSTIFIED IN INVOKING REVISIONARY JURISDICTION U/S 263 OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSES SMENT FOR THE ASST YEAR 2009-10 WAS COMPLETED U/S 143(3) OF THE ACT ON 23.12.2011 WHERE IN THE CLAIM OF DEDUCTION TOWARDS ADVANCES WRITTEN OFF WAS ALLOWED BY THE LEARNED AO AFTER RAISING A SPECIFIC QUERY IN THAT REGARD. THE LEARNED CIT ON EXAMINATION OF THE PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.3.2009 OBSERVED THAT AN AMOUNT OF RS. 1,97,37,755/- WAS WRITTEN OFF FROM THE ACCOUNTS AS EXTRAORDINARY ITEMS. THE EXTRAOR DINARY ITEMS REPRESENT ADVANCES GIVEN 5 ITA NO.1713/K/2014 TITAGARH STEELS LTD.. AY 2009-10 TO TITAGARH PAPERS LTD. AND BHATPARA PAPER LTD. TH E COMPANIES CAME INTO EXISTENCE AFTER DEMERGER OF TITAGARH OF TITAGARH INDUSTRIES I NTO 3 UNITS NAMELY TITAGARH STEELS LTD. TITAGARH PAPERS LTD AND BHATPARA PAPERS LTD AS PER THE ORDERS OF CALCUTTA HIGH COURT DT. 01.02.2006. THE ADVANCES WERE GIVEN FROM TIME TO TIME TO SAFEG UARD THEIR PROPERTIES. SINCE THE MILLS HAD NO OPERATION DURING THE LAST 4-5 YEAR S THE ADVANCES HAD BECOME IRRECOVERABLE AND HENCE WRITTEN OFF. THE BREAK UP OF ABOVE ADVANCE IS GIVEN BELOW: TITAGARH PAPERS LTD. RS. 66,44,083/- BHATPARA PAPERS LTD. RS.1,30,93,672/- RS.1,97,37,755/- 5. THE LEARNED CIT ISSUED A SHOW CAUSE NOTICE ASS UMING JURISDICTION U/S 263 OF THE ACT BY STATING THAT THE ASSESSEE HAD NOT OFFERED AN Y INCOME IN TERMS OF SECTION 36(2) OF THE ACT OUT OF THESE ADVANCES AND ACCORDINGLY NOT E NTITLED FOR DEDUCTION U/S 36(1)(VII) OF THE ACT ON THE WRITE OFF OF THE SAME. ACCORDINGLY , HE OBSERVED THAT THE LEARNED AO HAD NOT CONSIDERED THIS ISSUE IN THE PROPER MANNER AND HELD THAT THE ORDER PASSED BY THE LEARNED AO IS ERRONEOUS IN SO FAR AS IT IS PREJUDIC IAL TO THE INTERESTS OF THE REVENUE AND PASSED AN ORDER U/S 263 OF THE ACT BY SETTING ASIDE THIS ISSUE TO THE FILE OF THE LEARNED AO FOR RE-EXAMINATION. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCU MSTANCES, THE ORDER U/S. 263 IS WHOLLY BAD, ILLEGAL, UNJUSTIFIED AND UNCALLED FOR AND IN VIEW O F THE FACTS AND IN THE CIRCUMSTANCES SUCH ORDER IS LIABLE TO BE QUASHED 1 CANCELLED AND IN VI EW OF THE FACTS AND IN THE CIRCUMSTANCES IT MAY KINDLY BE HELD ACCORDINGLY. 2. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUMS TANCES, THE ORDER OF THE AO BEING NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENU E, PROVISIONS OF SECTION 263 DID NOT VALIDLY LIE IN THIS CASE AND IN VIEW OF THE FACTS A ND IN THE CIRCUMSTANCES IT MAY KINDLY BE HELD ACCORDINGLY AND THE ORDER MADE U/S. 263 MAY KI NDLY BE QUASHED/CANCELLED. 3. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUMS TANCES, THE ORDER U/S. 263 HAVING BEEN MADE WITHOUT PROPER APPLICATION OF MIND AND WITHOUT PROPERLY TAKING INTO CONSIDERATION ALL THE DETAILS AND PARTICULARS SUBMITTED BY YOUR P ETITIONER, SUCH ORDER OF THE AO U/S. 263 IS WHOLLY BAD, ILLEGAL, UNJUSTIFIED AND UNCALLED FOR A ND IN VIEW OF THE FACTS AND IN THE CIRCUMSTANCES IT MAY KINDLY BE QUASHED/CANCELLED AN D IN ANY CASE WITHOUT PREJUDICE AND EVEN OTHERWISE, THE LD. CIT IS WHOLLY UNJUSTIFIED I N SETTING ASIDE THE ORDER AND DIRECTING THE AO TO FRAME ASSESSMENT DE-NOVO. 4. FOR THAT IN VIEW OF THE FACTS AND IN THE CIRCUMS TANCES, THE AO HAVING RAISED A SPECIFIC QUERY REGARDING WRITE OFF OF LOANS AND ADVANCES OF RS. 1,97,37,755/- BY LETTER NO.ITO/WD- 3(4)/KOL/ASST. PROCEEDINGS/2011-12/ 610 DT. 17.10.2 011 DT. 23.1.2014 AND ALL THE DETAILS 6 ITA NO.1713/K/2014 TITAGARH STEELS LTD.. AY 2009-10 AND PARTICULARS IN THIS REGARD HAVING BEEN SUBMITTE D BEFORE THE AO BY LETTER DT. 19.10.2011 AND THE AO HAVING ACCEPTED THE WRITE OFF OF LOANS A ND ADVANCES AFTER PROPER APPLICATION OF MIND AND AFTER DULY TAKING INTO CONSIDERATION THE D ETAILS SUBMITTED BY YOUR PETITIONER COMPANY, ORDER U/S. 263 MADE ON THIS ISSUE IS WHOLL Y BAD, ILLEGAL, UNJUSTIFIED AND UNCALLED FOR AND IN VIEW OF THE FACTS AND IN THE CIRCUMSTANC ES PROVISIONS OF SEC. 263 DID NOT VALIDLY LIE IN RESPECT OF SUCH WRITE OFF OF LOANS AND ADVAN CES OF RS.1,97,37,755/- AND IN VIEW OF THE FACTS AND IN THE CIRCUMSTANCES IT MAY KINDLY BE HEL D ACCORDINGLY AND THE ORDER U/S. 263 MAY KINDLY BE QUASHED/CANCELLED. 5. FOR THAT WITHOUT PREJUDICE AND EVEN OTHERWISE SU CH LOANS AND ADVANCES HAVING BEEN MADE IN COURSE OF BUSINESS AND FOR THE PURPOSES OF BUSINESS AND BEING UNREALIZABLE HAVING BEEN ACTUALLY WRITTEN OFF AND THE AO IN ACCEPTING T HE WRITE OFF OF SUCH LOANS AND ADVANCES FOR RS. 1,97,37,755/- HAVING TAKEN A POSSIBLE LEGAL VIEW AND HENCE IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PROVISIONS OF SEC. 263 A RE NOT VALIDLY APPLICABLE IN RESPECT OF WRITE OFF OF SUCH LOANS AND ADVANCES OF RS. 1,97,37 ,755/- AND IN VIEW OF THE FACTS AND IN THE CIRCUMSTANCES PROVISIONS OF SEC. 263 DID NOT VALIDL Y LIE IN THIS CASE AND IN VIEW OF THE FACTS AND IN THE CIRCUMSTANCES IT MAY KINDLY BE HELD ACCO RDINGLY AND THE ORDER U/S 263 MAY KINDLY BE QUASHED/CANCELLED AND IN ANY CASE, THE SA ME MAY KINDLY BE HELD AS ALLOWABLE. 6. FOR THAT YOUR PETITIONER CRAVES THE RIGHT TO RAI SE ADDITIONAL GROUND OR GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING AND OR TO ALTER/AM END/RECTIFY THE PRESENT ANY GROUND OR GROUNDS OF APPEAL. 6. THE LEARNED AR ARGUED THAT THIS ISSUE WAS ALREAD Y EXAMINED IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND THE LEARNED AO HAD RAISE D A SPECIFIC QUERY IN THIS REGARD AND AFTER EXAMINATION OF THE REPLY FILED BY THE ASS ESSEE IN RESPECT OF ADVANCES WRITTEN OFF HAD ALLOWED THE CLAIM OF DEDUCTION IN THE ORIGI NAL ASSESSMENT PROCEEDINGS. HENCE IT CANNOT BE CONSTRUED AS LACK OF ENQUIRY BY THE LEARN ED AO. HE STATED THAT THE ADVANCES WERE GIVEN BY THE ASSESSEE TO TWO ENTITIES AFTER TH E DEMERGER DURING THE COURSE OF ITS BUSINESS IN ORDER TO PROTECT THE PROPERTIES AND THE BUSINESS INTERESTS. HE STATED THAT THE ASSESSEE HAD MADE CERTAIN ADVANCES TO ITS GROUP COM PANIES TO PROTECT THEIR PROPERTIES DURING THE COURSE OF ITS BUSINESS AND IN FURTHERANC E OF ITS BUSINESS INTERESTS THEREON AND SINCE THE GROUP COMPANIES HAD NOT CARRIED ON ANY BU SINESS WHATSOEVER AND HAD PRACTICALLY CLOSED THEIR OPERATIONS IN THE LAST 4-5 YEARS, THERE WAS NO OTHER OPTION LEFT TO THE ASSESSEE BUT TO WRITE OFF THE ADVANCES GIVEN TO THEM AS IRRECOVERABLE. MOREOVER, THERE CANNOT BE ANY BETTER PERSON THAN THE ASSESSEE TO COME TO A CONSCIOUS CONCLUSION THAT THE ADVANCES GIVEN TO GROUP CONCERNS HAD BECOM E IRRECOVERABLE AS IT HAS GOT A FIRSTHAND INFORMATION ABOUT THE FUTURE PROSPECTS OF REVIVAL OF THE BUSINESSES THAT WERE CLOSED BY THE GROUP CONCERNS. HE ARGUED THAT SIN CE THE SAID ADVANCES WERE MADE DURING THE COURSE OF ITS BUSINESS TO PROTECT ITS BU SINESS INTERESTS, THE LOSS ARISING THEREFROM WOULD HAVE TO BE TREATED LOSS INCIDENTAL TO THE BUSINESS. HE FURTHER ARGUED THAT THE LEARNED CIT HAD NOT BROUGHT ANY MATERIAL O N RECORD AS TO HOW THE ORDER PASSED 7 ITA NO.1713/K/2014 TITAGARH STEELS LTD.. AY 2009-10 BY THE LEARNED AO IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE WITHIN THE MEANING OF SECTION 263 OF THE ACT. 7. IN RESPONSE TO THIS, THE LEARNED DR ARGUED THA T THE SHOW CAUSE NOTICE ISSUED BY THE LEARNED CIT CLEARLY STATES THAT THE ORDER PASSE D BY THE LEARNED AO IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND THE SAME NEED NOT BE STATED AGAIN IN THE FINAL ORDER PASSED BY THE LEARNED CIT U/S 263 OF TH E ACT. NO DOCUMENTARY EVIDENCES WERE FILED BY THE ASSESSEE IN SUPPORT OF THE CLAIM OF DEDUCTION BY THE ASSESSEE. THE ASSESSEE HAS BEEN GIVEN SUFFICIENT OPPORTUNITY TO R EPRESENT ITS CASE BY THE LEARNED CIT. HE ARGUED THAT SINCE THE ADVANCES WERE GIVEN BY THE ASSESSEE TO TWO ENTITIES TO PROTECT ITS PROPERTIES, ANY LOSS ARISING THEREFROM WOULD ON LY BE CAPITAL LOSS AND HENCE THE SAME CANNOT BE ALLOWED. HE PLACED RELIANCE ON THE DECISI ON OF THE MUMBAI TRIBUNAL IN THE CASE OF JCIT VS RALLIS INDIA LTD REPORTED IN 3 ITR( T) 1 AND THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS EPSILON ADVISERS PVT LTD IN ITA NO. 23 OF 2006 DATED 13.6.2012 . 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASSESS EE COMPRISING OF COPY OF AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31.3.2009 ( PAGES 1 TO 36 OF PB) ; COPY OF NOTICE DATED 17.10.2011 ISSUED BY THE LEARNED AO MAKING A SPECIFIC QUERY WITH REGARD TO ADVANCES WRITTEN OFF DURING ORIGINAL SCRUTINY ASSES SMENT PROCEEDINGS (PAGES 38-39 OF PB) ; COPY OF REPLY FILED BY ASSESSEE VIDE LETTER D ATED 19.10.2011 (PAGES 40 -41 OF PB) ; COPY OF ORIGINAL ASSESSMENT ORDER U/S 143(3) DT 23. 12.2011 (PAGES 42-43 OF PB) ; COPY OF SHOW CAUSE NOTICE ISSUED U/S 263 DATED 23.1.2014 (PG 44 OF PB) AND COPY OF REPLY TO SHOW CAUSE NOTICE BY ASSESSEE (PAGES 45-46 OF PB). WE FIND THAT THE LEARNED AO HAD ISSUED A SPECIFIC QUESTIONNAIRE DURING ORIGINAL SCR UTINY ASSESSMENT PROCEEDINGS VIDE NOTICE DATED 17.10.2011 AS BELOW:- - THAT AN ITEM TERMED AS EXTRA ORDINARY ITEMS OF RS. 1,97,37,755/- CLAIMED AS AN DEBIT ITEM OF THE P/L A/C WITH NO EXPLANATION MADE THEREI N IT IS ONLY STATED AS PER SCHEDULE 19, POINT NO. 16 WHEREAS, IN THE CORRESPONDING SCHEDULE IT IS ONLY STATED AS OLD LOANS AND ADVANCES. PLEASE ENSURE TO FURNISH ALL SUPPORTING DOCUMENTS AND EVIDENCES TO ENABLE THIS OFFICE TO ALLOW SUCH CLAIM. THE ASSESSEE HAD REPLIED TO THIS VIDE LETTER DATED 19.10.2011 BY STATING AS UNDER:- 8 ITA NO.1713/K/2014 TITAGARH STEELS LTD.. AY 2009-10 5. RS. 1,97,37,755 OLD LOANS AND ADVANCES AFTER DEMERGER OF TITAGARH INDUSTRIES LIMITED INTO 3 UNITS NAMELY TITAGARH STEELS LTD, TITAGARH PAPERS LTD AND BHATPARA PAPERS LTD AS PER CALCUTTA HIGH COURT ORDER DT 1.2.2006, WE, TSL HAD PAID ADVANCES TO TITAGARH PAP ERS LTD AND BHATPARA PAPERS LTD FROM TIME TO TIME TO SAFEGUARD THEIR PROPERTIES. T OTAL AMOUNT PAID AS UNDER:- TITAGARH PAPERS LIMITED RS. 66,44,083 BHATPARA PAPERS LIMITED RS. 1,30,93,672 TOTAL RS. 1,97,37,755 BOTH THE MILLS HAD NO OPERATIONS WHATSOEVER DURING LAST 4-5 YEARS. IN VIEW OF THIS ADVANCE PAID TO THEM WERE NOT RECOVERABLE AND HENCE WRITTEN OFF. 8.1. WE FIND THAT THE LEARNED AO ON EXAMINING THIS REPLY HAD COME TO A CONCLUSION THAT THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE TO WARDS ADVANCES WRITTEN OFF IS IN ORDER AND ACCORDINGLY ALLOWED THE DEDUCTION. THOUG H THERE IS NO DISCUSSION IN THE ORDER OF ASSESSMENT , THE FACT THAT THE LEARNED AO RAISED A QUERY AND DID NOT MAKE ANY ADDITION, ONLY MEANS THAT THE EXPLANATION GIVEN BY THE ASSESSEE HAS BEEN ACCEPTED BY THE LEARNED AO. HENCE IT COULD BE SAFELY CONCLUDED THA T THE LEARNED AO HAD DULY EXAMINED THIS ISSUE AND APPRECIATED THE REPLIES SUB MITTED BY THE ASSESSEE AFTER DUE EXAMINATION OF THE SAME. WE PLACE RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS GABRIEL INDIA REPO RTED IN (1993) 203 ITR 108 (BOM) WHEREIN IT WAS HELD THAT THE COMMISSIONER CANNOT IN ITIATE PROCEEDINGS U/S 263 OF THE ACT WITH A VIEW TO STARTING FISHING AND ROVING ENQU IRIES IN MATTERS OR ORDERS WHICH ARE ALREADY CONCLUDED. THERE MUST BE MATERIAL ON RECOR D TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED IF THE CLAIM WAS ALLOWED BY THE ITO. ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, SUC H DECISION OF THE ITO CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID N OT MAKE AN ELABORATE DISCUSSION IN THAT RECORD. FROM THE ABOVE, IT COULD SAFELY BE CONCLUDED THAT T HE LEARNED AO HAD DULY APPRECIATED THIS STAND OF THE ASSESSEE DURING THE C OURSE OF ORIGINAL ASSESSMENT PROCEEDINGS AND HAD ALLOWED THE DEDUCTION TO ASSESS EE BY TAKING ONE OF THE POSSIBLE VIEWS IN THE MATTER. WHEN ONE POSSIBLE VIEW HAS BE EN TAKEN, THE SAME CANNOT BE SUBSTITUTED BY ANOTHER VIEW OF THE LEARNED CIT. W E ALSO PLACE RELIANCE ON THE DECISION 9 ITA NO.1713/K/2014 TITAGARH STEELS LTD.. AY 2009-10 OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ITO VS D.G. HOUSING PROJECTS LTD REPORTED IN (2012) 343 ITR 329 (DEL) A FINDING THAT THE ORDER IS ERRONEOUS IS A CONDITI ON OR REQUIREMENT WHICH MUST BE SATISFIED FOR EXERC ISE OF JURISDICTION UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961.THE MATTER CANNOT BE REMITTED FOR A FRES H DECISION TO THE ASSESSING OFFICER TO CONDUCT FURTHE R ENQUIRIES WITHOUT A FINDING THAT THE ORDER IS ERRONEOUS. IN SUCH MATTERS, TO REMAND THE MATTER TO THE ASSESSING OFFICER WOULD IMPLY THE COMMISSIONER HAS NOT EXAMINED AND DECIDED WHETHER O R NOT THE ORDER IS ERRONEOUS BUT HAS DIRECTED THE ASSESSING OFFICER TO DECIDE THE QUESTION. THE ORDER OF THE ASSESSING OFFICER MAY OR MAY NOT BE WRONG. THE COMMISSIONER CANNOT DIRECT RECONSIDERATION ONLY WHEN THE ORDER IS ERRONEOUS. AN ORDER OF REMIT CANNOT BE PASSED BY THE COMMISSIONER TO ASK THE ASS ESSING OFFICER TO DECIDE WHETHER THE ORDER WAS ERRONEOUS. THIS IS NOT PERMISSIBLE. THE COMMISSIONE R MUST AFTER RECORDING REASONS HOLD THAT THE ORDER IS ERRONEOUS. A DISTINCTION MUST BE DRAWN IN THE CASES WHERE THE ASSESSING OFFICER DOES NOT CONDUCT AN ENQUIRY ; AS LACK OF ENQUIRY BY ITSELF RENDERS THE ORDER ERRONEO US AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND CASES WHERE THE ASSESSING OFFICER CONDUCTS AN ENQUI RY BUT THE FINDING RECORDED IS ERRONEOUS AND WHICH IS ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE . IN THE LATTER CASES, THE COMMISSIONER HAS TO EXAM INE THE ORDER OR THE DECISION TAKEN BY THE ASSESSING OF FICER ON THE MERITS AND THEN FORM AN OPINION ON THE MERITS THAT THE ORDER PASSED BY THE ASSESSING OFFIC ER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN THE SECOND SET OF CASES, THE COMMISSION ER CANNOT DIRECT THE ASSESSING OFFICER TO CONDUCT FURTHER ENQUIRY TO VERIFY AND FIND OUT WHETHER THE ORDER PASSED IS ERRONEOUS OR NOT. 8.1.1. WE ALSO FIND THAT THE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUST RIAL CO. LTD VS CIT REPORTED IN (2000) 243 ITR 83 (SC) HAD HELD AS UNDER:- HELD, DISMISSING THE APPEAL, (I) THAT IN THE INSTAN T CASE, THE COMMISSIONER NOTED THAT THE INCOME-TAX OFFICER PASSED THE ORDER OF NIL ASSESS MENT WITHOUT APPLICATION OF MIND. INDEED, THE HIGH COURT RECORDED THE FINDING THAT TH E INCOME-TAX OFFICER FAILED TO APPLY HIS MIND TO THE CASE IN ALL PERSPECTIVE AND THE ORD ER PASSED BY HIM WAS ERRONEOUS. THE RESOLUTION PASSED BY THE BOARD OF THE APPELLANT-COM PANY WAS NOT PLACED BEFORE THE ASSESSING OFFICER. THUS, THERE WAS NO MATERIAL TO S UPPORT THE CLAIM OF THE APPELLANT THAT THE SAID AMOUNT REPRESENTED COMPENSATION FOR LOSS O F AGRICULTURAL INCOME. HE ACCEPTED THE ENTRY IN THE STATEMENT OF THE ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY INQUIRY. ON THESE FACTS, THE CONCLUSION THAT THE ORDER OF THE INCOME-TAX OFFICER WAS ERRONEOUS W AS IRRESISTIBLE. THE HIGH COURT HAD RIGHTLY HELD THAT THE EXERCISE OF JURISDICTION BY T HE COMMISIONER UNDER SECTION 263(1) WAS JUSTIFIED. (II) THAT IT WAS NOT SHOWN AT ANY STAGE OF THE PROC EEDINGS THAT THE AMOUNT IN QUESTION WAS FIXED OR QUANTIFIED AS LOSS OF AGRICULTURAL INCOME AND ADMITTEDLY IT WAS NOT SO FOUND BY THE TRIBUNAL. IT WAS EVIDENT FROM THE ORDER OF THE HIGH COURT THAT THE FINDINGS RECORDED BY THE TRIBUNAL THAT THE APPELLANT STOPPED AGRICULT URAL OPERATION IN NOVEMBER, 1982, AND THAT THE RECEIPT UNDER CONSIDERATION DID NOT RELATE TO ANY AGRICULTURAL OPERATION CARRIED ON BY THE APPELLANT, WERE NOT QUESTIONED BEFORE IT. THOUGH THE HIGH COURT WAS NOT RIGHT IN HOLDING THAT THE SAID AMOUNT WAS PAID FOR BREACH OF CONTRACT, AS IT WAS PAID IN MODIFICATION/RELAXATION OF THE TERMS OF THE CONTRAC T, THE HIGH COURT WAS JUSTIFIED IN CONCLUDING THAT THE SAID AMOUNT WAS A TAXABLE RECEI PT UNDER THE HEAD INCOME FROM OTHER SOURCES. 10 ITA NO.1713/K/2014 TITAGARH STEELS LTD.. AY 2009-10 8.1.2. WE ALSO FIND THAT THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF PRINCIP AL CIT VS M/S ASHOK HANDLOOM FACTORY PVT LTD IN ITA NO. 19 OF 2016 DATED 28.1.2016 HAD HELD AS UNDER:- IT IS SETTLED LAW THAT THE CIT CAN EXERCISE HIS JU RISDICTION UNDER SECTION 263 OF THE INCOME TAX ACT ONLY IN CASES WHERE NO ENQUIRY IS MA DE BY THE ASSESSING OFFICER. IN THE INSTANT CASE, IT IS ADMITTED BY THE INCOME TAX DEPA RTMENT THAT THE ASSESSING OFFICER HAS MADE SOME ENQUIRIES THOUGH ACCORDING TO THEM IT WAS NOT A PROPER ENQUIRY. IN OUR VIEW OF THE FACT THAT SOME ENQUIRY WAS MADE IS SUFFICIENT TO DEBAR THE AUTHORITIES FROM EXERCISING THE POWERS UNDER SECTION 263 OF THE INCOME TAX ACT. THE TRIBUNAL WAS ACCORDINGLY JUSTIFIED IN SETTING ASIDE THE ORDER PA SSED UNDER SECTION 263 OF THE ACT. WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW ARISING FOR CONSIDERATION. THE APPEAL IS ACCORDINGLY, DISMISSED. 8.2. WE ALSO FIND THAT THE LEARNED CIT HAD INITIAT ED THE REVISIONARY PROCEEDINGS ON THE PRETEXT THAT THE CLAIM OF DEDUCTION MADE BY THE ASS ESSEE IS NOT ALLOWABLE U/S 36(1)(VII) OF THE ACT AS NO INCOME WAS OFFERED BY THE ASSESSEE IN TERMS OF SECTION 36(2) OF THE ACT. BUT FROM THE RECORDS, WE FIND THAT THE ASSESSEE HAD NOT MADE ANY CLAIM TOWARDS BAD DEBTS WARRANTING INVOCATION OF SECTION 36(1)(VII) R EAD WITH SECTION 36(2) OF THE ACT. HENCE THE INITIATION OF SECTION 263 PROCEEDINGS BY THE LEARNED CIT ON THE WRONG ASSUMPTION OF FACTS IS TO BE DECLARED AS BAD IN LAW . 8.3. WITH REGARD TO THE ARGUMENT ADVANCED BY THE L EARNED DR THAT THE LOSS ARISING ON ACCOUNT OF ADVANCES WRITTEN OFF SHOULD BE CONSTRUED AS CAPITAL LOSS FOR WHICH CERTAIN CASE LAWS WERE RELIED UPON BY HIM, IN VIEW OF OUR A FORESAID FINDINGS AND JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE, WE DONT DEEM I T FIT AND APPROPRIATE TO GET INTO THE ASPECT OF WHETHER THE LOSS ARISING ON ACCOUNT OF WR ITE OFF IS A CAPITAL LOSS OR NOT. 8.4. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES, WE HOLD THAT THE REVISIONARY JURISDICTION INVOKED BY THE LEARNED CIT U/S 263 IS TO BE QUASHED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 08.07.201 6 SD/- SD/- (N. V. VASUDEVAN) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER 11 ITA NO.1713/K/2014 TITAGARH STEELS LTD.. AY 2009-10 DATED : 8 TH JULY, 2016 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT M/S. TITAGARH STEELS LTD. (SINCE MERGE D WITH TITAGARH WAGONS LTD.), C/O, SALARPURIA JAJODIA & CO., 7, C. R. AVENUE, KOLKATA- 700072. 2 RESPONDENT DCIT, CIRCLE-1, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .