M/s. Shiv Construction Co., Baroda V. The ACIT., Circle-5, Baroda

ITA 183/AHD/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6050 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-06-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 18-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M K PATEL
• Keywords: Capital receipt
• Section: 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER ITA NO.183/AHD/2013 A.Y.2008-09 M/S. SHIV CONSTRUCTION CO. 3, SONALI SOCIETY, WATER TANK ROAD, KARELIBAUG, BARODA. PAN: AAKFS 6031P VS ACIT, CIRCLE-5, BARODA. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SUBHASH BAINS, CIT- D.R., ASSESSEE(S) BY : SHRI M.K. PATEL, A.R. / DATE OF HEARING : 18/06/2014 / DATE OF PRONOUNCEMENT: 27/06/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M THE ORDER OF LEARNED CIT-III, BARODA PASSED U/S.263 DATED 14.03. 2008. THE APPELLANT HAS RAISED THE FOLLOWING GROUNDS: 1. THE LEARNED CIT ERRED IN PASSED THE ORDER U/S.2 63 OF THE ACT. 2. IT IS PRAYED THAT THE ORDER PASSED U/S.263 IS A B INITIO VOID AND THEREFORE BE QUASHED. 3. THE LEARNED CIT ERRED IN SETTING ASIDE THE ASSES SMENT ON TWO ISSUES RELATING TO CLAIM OF DEDUCTION U/S.40(A)(IA) IN REL ATION TO THE PRECEDING YEAR AND IN RELATION TO RELINQUISHMENT OF LIABILITY CLAI MED BY THE FIRM. 4. THE LEARNED CIT ERRED IN NOT AFFORDING PROPER OP PORTUNITY TO THE APPELLANT FIRM WHILE PASSING THE ORDER U/S.263. 2. AT THE OUTSET, LEARNED AR, MR. M.K. PATEL HAS EX PRESSED NOT TO PRESS GROUND NO.4; HENCE, THE SAME IS NOT ADJUDICAT ED AND THE PLEA RAISED THEREIN IS HEREBY REJECTED. ITA NO.183/AHD/2013 SHIV CONSTRUCTION CO. BARODA VS. ACIT, BARODA. A.Y. 2008-09. - 2 - 3. LEARNED COMMISSIONER HAS NOTED WHILE PASSING THE ORDER U/S.263 OF IT ACT THAT AN ASSESSMENT WAS COMPLETED U/S.143( 3) DATED 22.10.2010 AND THE TOTAL INCOME WAS ASSESSED AT RS.18,12,040/- AGAINST THE DECLARED INCOME OF RS.4,97,450/-. ACCORDING TO HIM, ON EXAMI NATION OF RECORD, IT WAS FOUND THAT THE ASSESSEE HAD CLAIMED IN A.Y. 200 8-09, THE EXPENDITURE WHICH WERE DISALLOWED DURING A.Y. 2006- 07 AND 2007-08 OF RS.8,47,202/- AND RS.37,11,026/- BY INVOKING THE PR OVISIONS OF SECTION 40 OF IT ACT. IT WAS ALSO NOTED BY LEARNED CIT THAT THE ASSESSEE HAD DEPOSITED TDS OF RS.50,000/- EACH ON 05.03.2008 AND 28.03.2008 WHICH PERTAINED TO A.Y.2006-07. AN ANOTHER AMOUNT OF TDS OF RS.34,180/- WAS ALSO DEPOSITED ON 31.01.2008 WHICH PERTAINED TO A.Y .2007-08. ACCORDING TO LEARNED COMMISSIONER, THERE WAS SHORT DEDUCTION OF TDS. HE HAS PLACED ON RECORD THAT THE RATE ON WHICH THE TAX AT SOURCE WAS REQUIRED TO BE DEDUCTED FROM THE CONTRACTORS WAS 2. 04%. HENCE, ACCORDING TO HIM, FOR A.Y.2006-07 AND 2007-08 THE A SSESSEE SHOULD HAVE DEDUCTED THE TAX AT RS.1,76,403/- AND RS.75,705/-, RESPECTIVELY, INSTEAD OF RS.1,00,000/- AND RS.34,180/-. HE HAS FURTHER NO TED THAT PROPER INQUIRY WAS NOT CARRIED OUT AT THE STAGE OF ASSESSM ENT BY THE AO. ACCORDING TO HIM, THE AO HAD FAULTED IN ALLOWING TH E EXPENSES AS CLAIMED BY THE ASSESSEE WITHOUT ASCERTAINING WHETHE R FULL TDS IN RESPECT OF EXPENDITURE HAD INDEED BEEN DEPOSITED DURING THE YEAR UNDER CONSIDERATION. HE HAS HELD THAT THE AO HAD COMMITTE D AN ERROR BY ALLOWING THE EXPENDITURE OF RS.86,47,202/- FOR A.Y. 2006-07 AND RS.37,11,026/- FOR A.Y. 2007-08. THIS WAS THE FIRST REASON FOR INVOCATION OF THE PROVISIONS OF SECTION 263 OF IT ACT. ITA NO.183/AHD/2013 SHIV CONSTRUCTION CO. BARODA VS. ACIT, BARODA. A.Y. 2008-09. - 3 - 3.1 LEARNED COMMISSIONER HAS ALSO FOUND AN ANOTHER REASON TO INVOKE THE PROVISIONS OF SECTION 263 THAT ON EXAMINATION O F RECORD FOR A.Y.2008-09 THE ASSESSEE HAD DEDUCTED AN AMOUNT OF RS.17,22,000/- TOWARDS RELINQUISHMENT OF LIABILITY OF THE PRINCIPL E CREDIT TO THE P&L A/C. HE HAS NOTED THAT THE SAID AMOUNT WAS A LOAN WAIVED BY BARODA PEOPLES CO-OPERATIVE BANK LTD. DURING THE ASSESSMENT, THE A SSESSEES CONTENTION WAS THAT THE PRINCIPLE AMOUNT WAS WAIVED; HENCE, IT WAS TREATED AS CAPITAL RECEIPTS NOT LIABLE TO TAX. THE LOAN WAS NEVER CLAIMED AS DEDUCTION WHILE COMPUTING THE INCOME; HENCE, THE PR OVISIONS OF SECTION 41(1) WERE NOT APPLICABLE. HOWEVER, LEARNED CIT HAS REFERRED A DECISION OF LOGITRONICS (P) LTD. (2011) 9 TAXMANN.COM 302 (DELH I) FOR THE LEGAL PROPOSITION THAT THE PRINCIPLE AMOUNT OF LOAN WAIVE D WOULD RESULT INTO INCOME. LEARNED COMMISSIONER HAS POINTED OUT THAT A T THE TIME OF ASSESSMENT THE PURPOSE FOR WHICH THE LOAN IN QUESTI ON WAS TAKEN WAS NEITHER DIVULGED BY THE ASSESSEE NOR ASCERTAINED BY THE AO. THE LOAN AMOUNT OF RS.17,22,867/- WAS NOT INCLUDED IN THE TO TAL INCOME BY THE AO WITHOUT ASCERTAINING THE PURPOSE FOR WHICH THE LOAN IN QUESTION WAS TAKEN; HENCE, THE AO HAD FAULTED IN NOT BRINGING FU LL FACTS ON RECORD. ACCORDING TO HIM, THE ASSESSMENT ORDER IN QUESTION WAS ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENU E. 3.2 THE LEARNED COMMISSIONER HAS SET ASIDE THE ASSE SSMENT ORDER AND DIRECTED TO PASS A FRESH ASSESSMENT ON THE SAID ISS UES AFTER NECESSARY INQUIRIES AND FRAME FRESH ASSESSMENT ACCORDINGLY. T HE ASSESSEE HAS CHALLENGED THIS ORDER. ITA NO.183/AHD/2013 SHIV CONSTRUCTION CO. BARODA VS. ACIT, BARODA. A.Y. 2008-09. - 4 - 4. FROM THE SIDE OF THE APPELLANT, LEARNED AR, MR. M.K. PATEL APPEARED. IN RESPECT OF THE FIRST ISSUE OF SHORT DE DUCTION OF TDS, A RELIANCE WAS PLACED ON A DECISION OF ITAT D BENCH AHMEDABAD IN THE CASE OF PARAYAS ENGINEERING LTD. (ITA NO.2825/AHD/2 010 & 2826/AHD/2010) A.YS.2007-08 (CROSS APPEALS) ORDER D ATED 29.04.2014, WHEREIN A FEW DECISION OF THE TRIBUNAL WERE REFERRE D AND THEREUPON IT WAS HELD THAT ALTHOUGH THERE COULD BE A SHORT DEDUC TION OF TDS BUT ON THAT GROUND DISALLOWANCE OF EXPENDITURE IS NOT PERM ISSIBLE U/S.40(A)(IA). 4.1 IN RESPECT OF SECOND ISSUE, LEARNED AR HAS PLAC ED RELIANCE ON CHETAN CHEMICALS, 267 ITR 770 (GUJARAT) FOR THE LEGAL PROPOSITION THAT IF A PRINCIPLE AMOUNT OF LOAN IS WAIVED THEN T HE SAME IS TO BE TREATED AS CAPITAL RECEIPT. 4.2 ON THE ISSUE OF THE JURISDICTION U/S.263 OF IT ACT. LEARNED AR PLEADED THAT A REQUISITE INQUIRY IN RESPECT OF BOTH THE ISSUES WAS MADE BY THE AO AND THE ORDER WAS PASSED U/S.143(3) OF IT AC T, THEREFORE, IF AN INQUIRY IS MADE AND THE THEREUPON A DECISION WAS TA KEN BY THE AO NOT TO TAX THE AMOUNT THEN NO ACTION IS REQUIRED BY THE LE ARNED COMMISSIONER TO INVOKE THE PROVISIONS OF SECTION 263 OF IT ACT. FOR THIS LEGAL PROPOSITION, HE HAS PLACED RELIANCE ON THE FOLLOWING DECISIONS: 1. MAX INDIA LTD , 295 ITR 282 (SC). 2. MALABAR INDUSTRIES, 243 ITR 82 (SC) 3. NIRMA CHEMICALS, 309 ITR 67 (GUJ) 4. ARVIND JEWELS, 259 ITR 502 (GUJ) 5. AMIT CORPORATION, 21 TAXMANN.COM 64 (GUJ.) 6. GABRIEL INDIA LTD., 203 ITR 108 (BOM.) 7. D.G. HOUSING, 343 ITR 329 (DEL.) 5. FROM THE SIDE OF THE REVENUE, LEARNED CIT-DR, MR . SUBHASH BAINS APPEARED AND VEHEMENTLY SUPPORTED THE ORDER P ASSED U/S.263 BY ITA NO.183/AHD/2013 SHIV CONSTRUCTION CO. BARODA VS. ACIT, BARODA. A.Y. 2008-09. - 5 - LEARNED COMMISSIONER. HE HAS PLEADED THAT ON PERUSA L OF THE IMPUGNED ASSESSMENT ORDER, IT IS EVIDENT THAT THE INQUIRY IN RESPECT OF THE PROVISIONS OF SECTION 40(A)(IA) WERE IN RESPECT OF THE DISALLO WANCES WHICH WERE EARLIER MADE AND BECAUSE THE TAX WAS PAID DURING TH E YEAR UNDER CONSIDERATION, THEREFORE, CLAIMED IN THE STATEMENT OF INCOME FOR THE YEAR UNDER CONSIDERATION. IT WAS A VITAL ISSUE WHICH REQ UIRED AN ELABORATE DISCUSSION IN THE ASSESSMENT ORDER ITSELF BUT THE A SSESSMENT ORDER IS SILENT ON THIS ISSUE. IN RESPECT OF THE SECOND REASON FOR INVOCATION OF THE PROVISIONS OF SECTION 263 OF IT ACT, LEARNED DR HAS PLEADED THAT THE LOAN AMOUNT WHICH WAS WAIVED HAD BECOME THE MONEY OF THE ASSESSEE; HENCE, IT WAS TO BE TAXED AS INCOME. BUT THE AO HAD FAILED TO DO SO; HENCE, LEARNED COMMISSIONER HAS RIGHTLY SET ASIDE THE ASSE SSMENT ORDER. IN SUPPORT OF THE ACTION OF THE LEARNED COMMISSIONER, LEARNED DR HAS PLACED RELIANCE ON THE FOLLOWING ORDERS: 1. CIT VS. INFOSYS TECHNOLOGIES LTD., 17 TAXMANN.C OM 203 (KAR.) 2. CIT VS. JAWAHAR BHATTACHARJEE, 24 TAXMANN.COM 2 15 (GAUHATI) 3. CIT VS. ASHOK LOGANI, 11 TAXMANN.COM 208(DELHI) 4. SHRI JITENDRA K. DESAI VS. CIT, ITA NO.1210/AHD /2010 ITAT, AHD. 5. ASMAN INVESTMENT LTD. VS. DCIT, ITA NO.1262/AHD /2011 ITAT, AHD. 6. CIT VS. USHA INTERNATIONAL LTD., 348 ITR 485 (D ELHI) 7. BHARAT OVERSEAS BANK LTD. VS. CIT, 152 TTJ 546 (CHENNAI) 8. MALABAR INDUSTRIES LTD. VS. CIT, 243 ITR 23 (SC ) 6. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. THE RE IS NO DISPUTE ABOUT THIS SETTLED LEGAL POSITION THAT THE LEARNED COMMISSIONER HAS WIDE POWERS U/S.263 OF IT ACT. IN A SITUATION, WHEN IT I S EVIDENT THAT AN ASSESSMENT ORDER IS ERRONEOUS INSOFAR AS IT IS PREJ UDICIAL TO THE INTEREST OF THE REVENUE THEN THE COMMISSIONER HAS BEEN GRANTED REVISIONAL POWER U/S.263 EITHER TO CORRECT THE ORDER OR TO PASS REQU ISITE DIRECTION TO THE AO. THIS IS THE FIRST STEP TOWARDS JUDGING THE CORRECTN ESS OF THE INVOCATION OF SECTION 263 OF IT ACT. FROM THE SIDE OF THE REVENUE , LEARNED DR HAS ITA NO.183/AHD/2013 SHIV CONSTRUCTION CO. BARODA VS. ACIT, BARODA. A.Y. 2008-09. - 6 - ARGUED ON THIS POINT VEHEMENTLY THAT THE AO HAD ALL OWED BOTH THE CLAIMS WITHOUT ANY DISCUSSION IN THE ASSESSMENT ORDER AND THAT IT WAS NOT CLEAR WHETHER PROPER INQUIRIES HAVE ACTUALLY BEEN MADE BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN RESPECT OF BOTH THE ISSUES AS RAISED BY LEARNED COMMISSIONER. AS FAR AS THIS APPEAL IS C ONCERNED, UPTO THIS EXTENT WE ARE NOT INCLINED TO DISTURB THE JURISDICT ION OF LEARNED COMMISSIONER INVOKED U/S.263 ON THE FACTS AND CIRCU MSTANCES AS DISCUSSED SUPRA. BUT SIDE BY SIDE WE HAVE TO SEE WH ETHER THE LEARNED COMMISSIONER HAS TAKEN A CORRECT DECISION AND THAT THE DIRECTION OF TAXING THE IMPUGNED TWO AMOUNTS WAS AS PER LAW OR N OT. UNDER SECTION 263, THE PHRASE USED IS IF HE CONSIDERS POSTULATE S THAT LEARNED COMMISSIONER IS REQUIRED TO SCRUTINY ALL RELEVANT F ACTS AS ALSO THE APPLICABLE PROVISION OF LAW IN THE LIGHT OF THE PRE CEDENTS BEFORE HOLDING THAT THE IMPUGNED AMOUNTS IN QUESTION COULD BE SUBJ ECT TO TAX. IF THE NECESSARY DISCUSSION WAS NOT MADE BY THE LEARNED CO MMISSIONER OR HE HAS NOT BEEN APPRAISED OF THE LAW APPLICABLE THEN I N THAT SITUATION THE DIRECTIONS GIVEN BY HIM TO THE AO SHOULD BE SUBJECT TO CORRECTION. 6.1 WE HAVE PERUSED THE ORDER OF LEARNED COMMISSION ER AND THEREUPON NOTED THAT THE DIRECTIONS GIVEN WERE DEVO ID OF CERTAIN BASIC FACTS AND THERE WAS ABSENCE OF THE LEGAL DISCUSSION IN THE LIGHT OF THE FEW CASE LAWS AS NOTED BY US HEREINABOVE. IN OUR HUMBLE OPINION, A COMMISSIONER IS EXPECTED TO INVESTIGATE ALL THE ASP ECTS OF AN ISSUE. BEFORE INVOKING THE REVISIONAL POWERS, LEARNED COMM ISSIONER HAS TO EXAMINE THE APPLICABILITY OF THE PROVISIONS OF IT A CT IN THE LIGHT OF THE DECISIONS TAKEN BY HONBLE COURTS. IN THE PRESENT C ASE, IT COULD BE POSSIBLE THAT DUE TO LACK OF OPPORTUNITY THAT POSIT ION OF LAW WAS NOT ITA NO.183/AHD/2013 SHIV CONSTRUCTION CO. BARODA VS. ACIT, BARODA. A.Y. 2008-09. - 7 - DISCUSSED; HENCE, CONSIDERING THAT POSITION AS WELL WE HAVE NOTED THAT FEW HONBLE HIGH COURTS HAVE APPROVED THE ACTION OF THE ITAT REMANDING THE MATTER BACK TO LEARNED COMMISSIONER D IRECTING TO PASS A FRESH ORDER AFTER FURTHER INVESTIGATION. TO BUTTRES S THIS VIEW, WE PLACE RELIANCE ON MARTIN BURN LTD., 114 ITR 939 (CALCUTTA) . THAT ORDER OF THE HONBLE CALCUTTA HIGH COURT HAD GONE UPTO HONBLE S UPREME COURT, CITED AS MARTIN BURN LTD, 199 ITR 606 (SC) , WHEREIN IT WAS HELD THAT HONBLE HIGH COURT HAS RIGHTLY APPROVED THE ORDER O F THE TRIBUNAL WHEREIN INSTEAD OF DISPOSING OF THE APPEAL, THE MAT TER WAS REMANDED TO THE COMMISSIONER FOR PASSING A FRESH ORDER. WE, THE REFORE, REMIT THIS ISSUE FOR DENOVO CONSIDERATION BY LEARNED COMMISSIO NER IN THE LIGHT OF THE CASE LAWS CITED. LIKEWISE, WE HEREBY DIRECT THE ASSESSEE TO FULLY CO- OPERATE IN THE PROCEEDINGS BEFORE LEARNED COMMISSIO NER BY FILING REQUISITE INFORMATION WITHOUT SEEKING FRIVOLOUS ADJ OURNMENTS. THE ASSESSEE SHOULD PLACE ON RECORD WITHOUT FAIL THE EV IDENCES DULY SUPPORTED BY CASE LAWS AT AN EARLY DATE SO THAT THE LD. COMMI SSIONER ON DUE ANALYSIS CAN DIRECT THE AO AS PER LAW. THE MATTER I S RESTORED BACK FOR FRESH ADJUDICATION; HENCE, THE GROUNDS RAISED BY TH E ASSESSEE CAN BE TREATED AS ALLOWED THAT TOO FOR STATISTICAL PURPOSE ONLY. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE ONLY. SD/- SD/- (ANIL CHATURVEDI) (MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 27/06/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT ITA NO.183/AHD/2013 SHIV CONSTRUCTION CO. BARODA VS. ACIT, BARODA. A.Y. 2008-09. - 8 - 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD