Prasad Explosive & Chemicals, Ranchi V. Commissioner of Income Tax, Ranchi

ITA 177/RAN/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60090 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 16-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K TRIVEDI SR S C
• Assessee Lawyers: S N RAJGARHIA
• Section: 143(3); 133(6); 263

Judgement Text

ITA NO.177/RAN/2010 PRASAD EXPLOSIVE & CHEMICALS, R ANCHI 1 IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI CIRCUIT BENCH, RANCHI BEFORE: SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 177 / RANCHI / 20 10 ASSESSMENT YEAR : 200 6 - 0 7 PRASAD EXPLOSIVE & CHEMICAL S RANCHI VS. CIT, RANCHI (APPELLANT) (RESPONDENT) PAN NO. AABFP 8659F APPELLANT BY: SHRI S.N. RAJGARHIA, AR RESPONDENT BY: SHRI A.K. TRIVEDI, SR.S.C. DATE OF HEAR I NG: 1 5 .02.2012 DATE OF PRONOUNCEMENT: 15 .02.2012 ORDER PER SHRI B.R. MITTAL, JUDICIAL MEMBER:- THE ASSESSEE HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2006-07 AGAINST THE ORDER OF THE LD. CIT DATED 14.9.2010 PA SSED U/S 263 OF THE ACT DIRECTING THE ASSESSING OFFICER TO ENHANCE THE ASSE SSEES INCOME BY RS.3,31,595/- FOR MAKING FRESH ASSESSMENT. 2. THE RELEVANT FACTS GIVING RISE TO THIS APPEAL AR E THAT THE ASSESSEE IS A FIRM AND DERIVES INCOME FROM MANUFACTURING/TRADING AND COMMISSION FROM EXPLOSIVE CONCERNED. THE ASSESSEE FILED A RETURN S HOWING TOTAL INCOME OF RS.2,26,460/-. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER FOUND ON THE BASIS OF INFORMATION RECEIVED, THAT A SUM RS.4,14,504/- WAS NOT CREDITED IN PROFIT AND LOSS ACCOUNT RECEIVED ON ACC OUNT OF PROFESSIONALS/CONSULTANTS AND SIMULTANEOUSLY CREDIT OF TDS OF RS.23,258/- WAS ALSO NOT CLAIMED AGAINST PRE-PAID TAX. THE ASS ESSEE STATED THAT HE HAD NEITHER RECEIVED ANY TDS, NOR ANY DETAILS OF PAYMEN T. THE ASSESSING OFFICER ISSUED A NOTICE U/S 133(6) OF THE ACT AND IT WAS IN FORMED BY ORICA THAT THE ITA NO.177/RAN/2010 PRASAD EXPLOSIVE & CHEMICALS, R ANCHI 2 SAID PAYMENT OF RS.4,14,504/- WAS PAYMENT ON ACCOUN T OF PROFESSIONALS/CONSULTANTS AND TDS THEREON WAS DEDUC TED. IT WAS STATED THAT SAID PAYMENT WAS ADJUSTED THROUGH CREDIT NOTES WITH ASSESSEES CONSIGNMENT AND TDS CERTIFICATE WAS PROVIDED. HOWEVER, ASSESSEE STATED THAT NO TDS WAS RECEIVED ON ABOVE PROFESSIONALS/CONSULTANTS ACCOUN T AND HE WAS UNAWARE REGARDING THE FACT TILL THE DEPARTMENT APPRISED HIM . IF ANY INCOME RELATING TO PROFESSIONAL RECEIPTS IS CONSIDERED, THEN CREDIT OF TDS MUST BE CONSIDERED. IN VIEW OF ABOVE, THE ASSESSING OFFICER ESTIMATED 2 0% OF RS.4,14,504/- I.E. RS.82,900/- AS INCOME OF THE ASSESSEE ON ACCOUNT OF PROFESSIONALS AND CONSULTANTS AND GAVE CREDIT OF TDS OF RS.23,258/-. 4. HOWEVER, LD. CIT ISSUED A NOTICE U/S 263 OF THE ACT STATING THAT NO EXPENSES AGAINST ABOVE MENTIONED RECEIPT OF RS.4,14 ,504/- RECEIVED BY ASSESSEE FROM ORICA ON ACCOUNT OF PROFESSIONAL AND TECHNICAL CHARGES WAS CLAIMED BY THE ASSESSEE. EVEN NO DETAILS IN THIS R EGARD ARE SEEM TO HAVE BEEN FILED. THEREFORE, ENTIRE PROFESSIONAL AND TEC HNICAL RECEIPTS OF RS.4,14,504/- SHOULD HAVE BEEN TREATED AS ASSESSEE S INCOME FOR THE SAID PREVIOUS YEAR INSTEAD OF ONLY A SUM OF RS.82,900/- ADDED BACK BY THE ASSESSING OFFICER. THE LD. CIT STATED THAT THE ASS ESSMENT ORDER MADE U/S 143(3) OF THE ACT WAS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTEREST OF REVENUE. 5. ON BEHALF OF THE ASSESSEE IT WAS SUBMITTED BEFOR E LD. CIT THAT NEITHER ANY BILL FOR RS.4,14,504/- WAS RAISED NOR ANY PAYME NT OF RS.4.14,504/- WAS RECEIVED BY THE ASSESSEE DURING THE FINANCIAL YEAR FROM INDIAN EXPLOSIVE LIMITED NOR ASSESSEE RECEIVED ANY CREDIT NOTE FROM THE SAID COMPANY. IT WAS ALSO STATED THAT THERE WAS SOME ACCOUNTING ERROR ON THE PART OF INDIAN EXPLOSIVE LIMITED AND WRONG CREDIT OF RS.4,14,504/- WAS MADE IN ASSESSEES ACCOUNT. IT WAS ALSO CONTENDED THAT THOUGH THE ASS ESSING OFFICER ADDED 20% OF THE ALLEGED RECEIPT BUT ASSESSEE NEITHER RECEIVE D ANY PAYMENT NOR ANY CREDIT NOTE AS THE SAID AMOUNT DOES NOT BELONG TO T HE ASSESSEE. IT WAS ALSO STATED THAT INFORMATION COLLECTED BY ASSESSING OFFI CER U/S 133(6) IS FROM INDIAN EXPLOSIVE LIMITED AND NOT FROM ORICA. THE W ORD ORICA IS PRINTED ON THE LETTER HEAD OF INDIAN EXPLOSIVE LIMITED. IT WA S ALSO SUBMITTED THAT INSPITE ITA NO.177/RAN/2010 PRASAD EXPLOSIVE & CHEMICALS, R ANCHI 3 OF REPEATED REMINDERS, INDIAN EXPLOSIVE LIMITED HAD NOT SENT THE COPY OF CREDIT NOTES TO THE ASSESSEE AND ASSESSEE FILED COP Y OF THOSE LETTERS BEFORE LD. CIT DATED 20.10.2008, 8.11.2008 AND 8.12.2008 T O SUBSTANTIATE HIS SUBMISSION. THE ASSESSEE ALSO STATED THAT AN AFFID AVIT TO THIS EFFECT WAS ALSO FILED BEFORE THE ASSESSING OFFICER REITERATING THE ABOVE FACTS. HOWEVER, LD. CIT DID NOT ACCEPT THE ABOVE FACTS AND SUBMISSION O F THE ASSESSEE AND HAS HELD THAT THE ASSESSING OFFICER DID NOT SET OUT THE POINTS OF INQUIRY REGARDING EXPENDITURE INCURRED TO EARN NET PROFIT OUT OF SUPP RESSED RECEIPT OF RS.4,14,504/- AND MERELY ESTIMATED ONLY 20% OF THE SUPPRESSED RECEIPT AS INCOME FROM PROFESSIONALS WHILE MAKING ASSESSMENT U /S 143(3) OF THE ACT DATED 27.11.2008. SUCH A NON-ENQUIRY AS TO HOW MUC H EXPENDITURE I.E. TO THE EXTENT OF 80% WAS INCURRED IN RELATION TO SUCH SUPPRESSED INCOME AND NON-APPLICATION OF MIND THAT ALL EXPENDITURE RELATI NG TO BUSINESS WERE ALREADY CLAIMED BY THE ASSESSEE IN HIS PROFIT AND LOSS ACCO UNT IS PREJUDICIAL TO THE FINDINGS GIVEN BY THE ASSESSING OFFICER. LD. CIT H AS STATED THAT ASSESSING ONLY 20% OF SUPPRESSED INCOME AS INCOME OF ASSESSEE IS A DVERSE TO THE INTEREST OF THE REVENUE. THE LD. CIT STATED THAT THE ASSESS ING OFFICER DID NOT CONSIDER ALL MATERIALS RELEVANT AND HAD NOT DONE PROPER EXAM INATION. IN VIEW OF ABOVE LD. CIT HAS EXERCISED HIS JURISDICTION BY DIRECTING THE ASSESSING OFFICER TO ENHANCE ASSESSEES INCOME BY RS.3,31,595/- AND HAS DIRECTED THE ASSESSING OFFICER TO MAKE A FRESH ASSESSMENT ACCORDINGLY. HE NCE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL DISPUTING THE SAID ORDER OF THE LD. CIT. 6. LD. A.R. SUBMITTED THAT THE ASSESSEE DID NOT REC EIVE THE SAID AMOUNT OF RS.4,14,504/- FROM INDIAN EXPLOSIVE LIMITED NOR ANY INFORMATION IN RESPECT OF TDS CERTIFICATE ISSUED. HE SUBMITTED THAT THE A SSESSING OFFICER EXAMINED THE ABOVE FACT BUT DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND ON AN ADHOC BASIS TREATED 20% OF THE SAID RS.4,14,504/- A S INCOME OF THE ASSESSEE. HE SUBMITTED THAT THE ASSESSING OFFICER AT HIS OWN LEVEL MADE ENQUIRIES AND APPLIED HIS MIND TO MAKE AN ADDITION OF RS.82,900/- BY CONSIDERING THE RECEIPT OF INCOME OF RS.4,14,504/- THOUGH ASSESSEE DID NOT RECEIVE SUCH INCOME. HE SUBMITTED THAT THE LD. CIT HAS INVOKED HIS JURISDICTION U/S 263 OF THE ACT ON THE GROUND THAT THE ASSESSING OFFICER MA DE INADEQUATE ENQUIRY. THE LD. A.R. RELYING ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE ITA NO.177/RAN/2010 PRASAD EXPLOSIVE & CHEMICALS, R ANCHI 4 CASE OF CIT VS. SUN BEAM AUTO LIMITED 332 ITR 167 S UBMITTED THAT IF THERE IS AN ENQUIRY EVEN INADEQUATE THAT WOULD NOT GIVE OCCA SION TO THE CIT TO PASS ORDER U/S 263 OF THE ACT MERELY BECAUSE HE HAS A DI FFERENCE OF OPINION IN THE MATTER. HE SUBMITTED THAT THERE IS A DISTINCTION B ETWEEN LACK OF ENQUIRY AND INADEQUATE ENQUIRY. THE LD. A.R. SUBMITTED THAT IT IS NOT A CASE OF LACK OF ENQUIRY BY ASSESSING OFFICER WHILE MAKING THE ADDIT ION OF 20% OF ALLEGED RECEIPT OF RS.4,14,504/-. THE LD. A.R. FURTHER SUB MITTED THAT IF THE ASSESSING OFFICER HAS ARRIVED AT HIS FINDING AFTER CONFRONTIN G THE ASSESSEE, THE LD. CIT CANNOT EXERCISE HIS JURISDICTION U/S 263 OF THE ACT MERELY BECAUSE ACCORDING TO THE LD. CIT FURTHER ENQUIRY WAS REQUIRED TO BE M ADE BY ASSESSING OFFICER IN RESPECT OF SAID ALLEGED RECEIPT OF RS.4,14,504/- BY THE ASSESSEE AND REFERRED THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE O F CIT VS. DEVELOPMENT CREDIT BANK LIMITED 323 ITR 206. THE LD. A.R. SUBM ITTED THAT IF THE ASSESSING OFFICER HAS APPLIED HIS MIND WHILE CONSID ERING TO ADD 20% OF THE ALLEGED RECEIPT OF INCOME OF THE ASSESSEE THEN IT I S NOT A CASE OF LACK OF ENQUIRY AND AT THE MOST IT CAN BE AN ENQUIRY WHICH COULD BE SAID TO BE INADEQUATE IN THE OPINION OF THE LD. CIT BUT THAT C ANNOT GIVE JURISDICTION TO LD. CIT TO EXERCISE HIS POWERS U/S 263 OF THE ACT A ND TO SUBSTANTIATE ITS SUBMISSION, HE RELIED ON THE DECISION OF THE HONBL E DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAR SHARMA 335 ITR 83. THE LD. A.R. SUBMITTED THAT THE IMPUGNED ORDER OF LD. CIT SHOULD BE QUASHED AND THE SAME IS NOT A VALID ORDER. ON THE OTHER HAND, THE LD. D.R. RELIED ON T HE ORDER OF THE LD. CIT. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF LD. REPRESENTATIVES OF THE PARTIES AND THE ASSESSMENT ORDER OF THE ASSE SSING OFFICER DATED 27.11.2008 AS WELL AS IMPUGNED ORDER OF LD. CIT DAT ED 14.9.2010 PASSED U/S 263 OF THE ACT. 8. WE OBSERVE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER CONFRONTED THE ASSESSEE THAT ASSE SSEE RECEIVED THE PROFESSIONAL/CONSULTANT FEE OF RS.4,14,504/- FROM I NDIAN EXPLOSIVE LIMITED (WRONGLY MENTIONED ORICA) BUT THE SAME WAS NOT DISC LOSED BY THE ASSESSEE. THE ASSESSING OFFICER ALSO STATED THAT CREDIT OF TD S OF RS.23,258/- WAS ALSO NOT CLAIMED BY THE ASSESSEE AGAINST THE RECEIPT OF SAID SUM OF RS.4,14,504/-. ITA NO.177/RAN/2010 PRASAD EXPLOSIVE & CHEMICALS, R ANCHI 5 WE OBSERVE THAT THE ASSESSEE DENIED THE RECEIPT OF SAID PROFESSIONAL FEE AS WELL AS TDS CERTIFICATE. HOWEVER, THE ASSESSING OF FICER DID NOT ACCEPT THE SAID CONTENTION OF THE ASSESSEE AND IN HIS WISDOM, HE CONSIDERED 20% OF THE SAID AMOUNT OF RS.4,14,504/- AS INCOME OF THE ASSES SEE WHICH COMES TO RS.82,900/-. THE ASSESSING OFFICER GAVE CREDIT OF TDS OF RS.23,258/-. IT IS A FACT THAT THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO ESTABLISH PRIMA FACIE THAT THE ASSESSEE RECEIVED TH E SAID PROFESSIONAL FEE OF RS.4,14,504/- AND ASSESSEE WAS AWARE OF IT. NOR TH ERE IS ANY EVIDENCE ON RECORD THAT THE ASSESSEE RECEIVED TDS CERTIFICATE O F RS.23,258/- AND INTENTIONALLY DID NOT CLAIM CREDIT OF IT. WE OBSER VE THAT THE LD. CIT HAS EXERCISED HIS JURISDICTION U/S 263 OF THE ACT BY PR ESUMING THAT THE ASSESSING OFFICER HAS GIVEN 80% OF THE SAID SUM OF RS.4,14,50 4/- DEDUCTION ON ACCOUNT OF EXPENSES TO THE ASSESSEE. WE OBSERVE THAT THERE ARE NO SUCH OBSERVATION BY THE ASSESSING OFFICER NOR THERE IS ANY DETAILS O F THE EXPENSES CLAIMED BY THE ASSESSEE. WE ARE OF THE CONSIDERED VIEW THAT P OWER IS GIVEN U/S 263 OF THE ACT TO THE LD. CIT TO SUO MOTO REVISE THE ORDE R OF THE ASSESSING OFFICER IF ON PERUSAL OF RECORD, HE CONSIDERED THAT ANY ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO TH E INTEREST OF THE REVENUE. THE POWER GIVEN TO LD. CIT U/S 263 OF THE ACT IS NOT AN ARBITRARY OR UNCHATTERED POWER. IT CAN BE EXERCISED ONLY ON FULFILLMENT OF THE REQUIREMENTS LAID DOWN IN SECTION 263(1) OF THE ACT. THE CONSIDERATION OF THE COMMISSIONER AS TO WHETHER AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PR EJUDICIAL TO THE INTEREST OF THE REVENUE MUST BE BASED ON MATERIALS ON RECORD OF THE PROCEEDINGS CALLED FOR BY HIM. IF THERE ARE NO MATERIALS ON RECORD ON THE BASIS OF WHICH IT CAN BE SAID THAT COMMISSIONER ACTING IN REASONABLE MANN ER THAT COULD HAVE COME TO SUCH A CONCLUSION, THE VERY INITIATION OF PROCEE DINGS BY HIM WILL BE ILLEGAL AND WITHOUT JURISDICTION. 9. IN THE CASE BEFORE US WE OBSERVE THAT THE ASSESS ING OFFICER HAS ADDED THE SAID INCOME OF RS.82,900/- BEING 20% OF RS.4,14 ,504/- ON THE BASIS OF THE INFORMATION RECEIVED BY HIM BUT HE HAS ALSO NOT BEEN ABLE TO ESTABLISH PRIMA FACIE THAT THE ASSESSEE DID RECEIVE THIS INCO ME AND SUPPRESSED IT. WE OBSERVE THAT THE LD. CIT HAS ALSO NOT BROUGHT ANY M ATERIAL ON RECORD TO ESTABLISH THE RECEIPT OF SUCH INCOME BY THE ASSESSE E FROM INDIAN EXPLOSIVE ITA NO.177/RAN/2010 PRASAD EXPLOSIVE & CHEMICALS, R ANCHI 6 LIMITED. WE ARE OF THE CONSIDERED VIEW THAT IF THE ASSESSING OFFICER APPLIED HIS MIND AND HAS FORMED AN OPINION TO CONSIDER IT T O MAKE ADDITION OF 20% OF RS.4,14,504/- CONSIDERING THE FACTS OF THE CASE, IT IS NOT A CASE OF LACK OF ENQUIRY AND AT THE MOST IT COULD BE SAID THAT HE MA DE INADEQUATE ENQUIRY IN THE ABOVE MATTER. HONBLE DELHI HIGH COURT HAS HEL D IN THE CASE OF ANIL KUMAR SHARMA (SUPRA) THAT IF THERE IS AN INADEQUATE ENQUIRY BUT NOT A CASE OF LACK OF ENQUIRY, THE LD. CIT CANNOT EXERCISE HIS POWER U/S 263 OF THE ACT. THE SAME VIEW HAS ALSO BEEN TAKEN BY THE HONBLE DE LHI HIGH COURT IN THE CASE OF SUN BEAM AUTO LIMITED (SUPRA). THE HONBLE SUPREME COURT HAS ALSO HELD IN THE CASE OF CIT VS. ELECTRO HOUSE 82 ITR 82 4 WHICH HAS BEEN FOLLOWED BY HONBLE MP HIGH COURT IN THE CASE OF CIT VS. PRI ME SYNDICATE 141 ITR 290 THAT EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN O RDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE IN TEREST OF THE REVENUE. IF THE ASSESSING OFFICER HAS APPLIED HIS MIND AND HAS TAKE N ONE OF THE PLAUSIBLE VIEW, IT CANNOT BE SAID THAT THE ORDER OF THE ASSES SING OFFICER IS PREJUDICIAL MERELY BECAUSE IT HAS CAUSED LOSS TO THE REVENUE. CONSIDERING THE FACTS OF THE CASE THAT THE ASSESSING OFFICER HAS BROUGHT TO TAX 20% OF THE ALLEGED RECEIPT OF RS.4,14,504/- EVEN THOUGH THE ASSESSEE D ENIED ITS RECEIPT, CANNOT BE SAID THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HENCE, LD. CIT HAS NOT EXERCISED HIS JURISDICTION U/S 263 OF THE ACT VALIDLY. ACCOR DINGLY, THE ORDER OF THE LD. CIT IS QUASHED BY ALLOWING THE GROUNDS OF APPEAL TA KEN BY THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 15.02.2012 SD/ - SD/ - ( SHAMIM YAH Y A ) ( B.R. MITTAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS RANCHI, DATED 15 TH FEBRUARY, 2012 ITA NO.177/RAN/2010 PRASAD EXPLOSIVE & CHEMICALS, R ANCHI 7 COPY TO 1 PRASAD EXPLOSIVE & CHEMICALS, PRASAD MANSION, RATU ROAD, RANCHI 2 CIT, RANCHI 3 THE CIT (A) , RANCHI 4 THE DR, ITAT, RANCHI 5 GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL RANCHI/PATNA