M/s B.Devchand & Sons Shipping Ltd., Jamnagar V. The Assistant Commr. of Income Tax, Jamnagar

ITA 183/RJT/2006

• Counselvise Citation: 18324914 RSA 2006
• Duration Of Justice: 4 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 30-03-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 03-05-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L MEENA
• Assessee Lawyers: PM MAHARSHI
• Keywords: Opportunity of being heard; Period of limitation; Capital receipt
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.183/RJT/2006 (ASSESSMENT YEAR 2001-02) M/S B DEVCHAND & SONS VS THE ACIT, CIR.3 SHIPPING LTD, JAMNAGAR KANCHANJANGHA APARTMENT OPP CRICKET GROUND, JAMNAGAR PAN : AAACB8736F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PM MAHARSHI RESPONDENT BY : SHRI SL MEENA O R D E R PER AL GEHLOT, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 28- 03-2006 PASSED BY THE COMMISSIONER OF INCOME-TAX, J AMNAGAR UNDER SECTION 263 OF THE ACT FOR THE ASSESSMENT YEAR 2001-02. TH E ASSESSEE AGITATES THAT THE ORDER OF THE COMMISSIONER PASSED U/S 263 IS BAD IN LAW. 2. THE BRIEF FACTS OF THE CASE ARE THAT ORIGINAL AS SESSMENT U/S 143(3) WAS MADE ON 31-03-2004. ON EXAMINATION OF RECORD, THE COMMISSIONER OF INCOME- TAX, JAMNAGAR NOTICED THAT THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE INASMUCH AS THAT THE ASSESSING OFFIC ER HAD WRONGLY TAXED THE REMISSION OF INTEREST U/S 41(1) AMOUNTING TO RS.63, 42,552 AS AGAINST THE CORRECT AMOUNT OF RS.1,29,41,092 AS SUM OF RS.2,11,08,262 C REDITED IN THE PROFIT & LOSS ACCOUNT REPRESENTING THE REMISSION OF LIABILITY OF LOAN DUE TO GIIC AMOUNTING TO RS.4,91,08,262 (PRINCIPAL AMOUNT OF RS.3,61,67,180 AND INTEREST PORTION OF RS.1,29,41,092) ON SETTLEMENT FOR A SUM OF RS.2,80, 00,000. THE COMMISSIONER NOTICED THAT THE ENTIRE INTEREST PORTION OF RS.1,29 ,41,092 WAS TO BE TAXED U/S 41(1) OF THE ACT INSTEAD OF RS.63,42,552 TAXED BY T HE ASSESSING OFFICER ON PRORATA ITA NO.183/RJT/2006 2 BASIS. AFTER CONSIDERING THE SUBMISSIONS OF THE AS SESSEE, THE COMMISSIONER DIRECTED THE ASSESSING OFFICER TO FRAME ASSESSMENT AFRESH BY OBSERVING AS UNDER: 4. I HAVE CONSIDERED THE ABOVE SUBMISSIONS, BUT TH E SAME IS NOT FOUND SATISFACTORY. THE AMOUNT WAIVED HAS BEEN ASCERTAINED BY REDUCING FROM THE TOTAL OUTSTANDING DUES OF RS.4 ,91,08,262/-, THE SUM OF RS.2,80,00,000/- ARRIVED AS PAYABLE UNDER TH E OTS SCHEME. HOWEVER, THERE IS NOTHING ON RECORDS SHOWI NG THE WORKING OF THE FINAL AMOUNT ARRIVED AS PAYABLE AT R S.2,80,00,000/- UNDER THE OTS SCHEME. THERE IS ALSO NOTHING ON REC ORDS TO SHOW THAT THE FINAL AMOUNT SO ARRIVED AS PAYABLE AT RS.2 ,80,00,000/- UNDER THE OTS SCHEME WAS IN FACT CONSISTING THE SAM E RESIDUARY PORTION OF THE INTEREST, WHICH HAS NOT BEEN WAIVED BY THE BANK AND WHICH IS STATED TO BE 57% OF THE TOTAL OUTSTANDING INTEREST. GENERALLY, THE BANK PREPARES SANCTION NOTE-CUM-CONT ROL REPORT FOR ACCEPTING THE PARTICULAR AMOUNT TOWARDS FULL AND FINAL PAYMENT OF THE DUES. IN THIS SANCTION NOTE-CUM-CON TROL REPORT, THE DETAILS SUCH AS PRESENT POSITION OF THE LOAN ACCOUNT, PRESENT OUTSTANDING; AMOUNT OF UNREALIZED INTEREST RECORDED IN MIRROR A/C, DATE UP TO WHICH THE INTEREST IS CALCUL ATED; AMOUNT OF NPA INTEREST ACCOUNT, CUT OF DATE AND AMOUNT OF REC OVERIES IN THE ACCOUNT AFTER THE CUT OF DATE, COMPUTATION OF AMOUN T TO BE WRITTEN OFF / FOREGONE, COMPUTATION OF COMPROMISE AMOUNT ET C. ARE BEING SHOWN. FROM THESE DETAILS, EXACT AMOUNTS WRITTEN O FF / FORGONE TOWARDS PRINCIPAL DUES AND INTEREST DUES CAN BE ASC ERTAINED. BUT WITHOUT BRINGING ON RECORDS, SUFFICIENT MATERIAL WI TH THIS REGARD, THE ASSESSING OFFICER HAS CHARGED THE PROFIT U/S 41(1) ON PRO-RATA BASIS. AFTER DUE CONSIDERATION OF THE MATERIAL ON RECORD AND FACTS OF THE CASE, THE ASSESSMENT ORDER FOR AY 2001-02 PA SSED BY THE ASSESSING OFFICER ON 31-3-2004 IS HELD TO BE ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND IS S ET ASIDE TO BE FRAMED AFRESH AFTER GRANTING PROPER OPPORTUNITY TO THE ASSESSEE. 3. THE LD.AR DREW OUR ATTENTION TO THE ORIGINAL ASS ESSMENT ORDER PASSED BY THE ASSESSING OFFICER. THE LD.AR SUBMITTED THAT IN THE ORIGINAL ASSESSMENT, THE ASSESSING OFFICER HAS EXAMINED THE ISSUE IN DETAIL. THE LD.AR SUBMITTED THAT THE ASSESSING OFFICER HAS ALSO MADE ENQUIRY FROM GIIC A ND AFTER CONSIDERING THE RECORD OF GIIC AND ASSESSEES SUBMISSION, THE ASSES SING OFFICER DID NOT ACCEPT THE ASSESSEES BIFURCATION REGARDING WAIVER PART OF THE INTEREST TO BE TAXED U/S 41(1) OF THE ACT. THE ASSESSING OFFICER TREATED AN AMOUNT OF RS. 7,77,883 AS INCOME U/S 41(1) OF THE ACT (RS. 1,55,51,883 RS. 1,47,74,000) OVER AND ABOVE ITA NO.183/RJT/2006 3 THE SUM OF RS.55,61,669 CONSIDERED BY THE ASSESSEE AND SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. THE LD.AR FURTHE R SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER WAS NEITHER ERRONEOUS NOR PRE JUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, THE ORDER OF COMMISSIONER PASS ED U/S 263 IS BAD IN LAW. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDE R OF THE COMMISSIONER OF INCOME-TAX, JAMANAGAR. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE RECORD. THE ISSUE UNDER CONSIDERATION IS PERTAINING TO SECTION 263 OF THE I.T. ACT. THE SAID SECTION READS AS UNDER: 263.(1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOU S IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MA KING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSA RY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSES SMENT, OR CANCELING THE ASSESSMENT AND DIRECTING A FRESH ASSE SSMENT. EXPLANATION.-FOR THE REMOVAL OF DOUBTS, IT IS HEREB Y DECLARED THAT, FOR THE PURPOSES OF THIS SUB-SECTION,- (A) AN ORDER PASSED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE, 1988 BY THE ASSESSING OFFICER SHALL INCLUDE (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMMISSIONER OR DEPUTY COMMISSIONER OR THE INCOME-TAX OFFICER ON THE BASIS OF THE DIRECTIONS ISSUED BY THE JOINT COMMISSIONER UNDER SECTION 144A; (II) AN ORDER MADE BY THE JOINT COMMISSIONER IN EXE RCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTION S OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO H IM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMMISSIONER OR DIRECTOR GENERAL OR COMMISSIONER AUTHORIZED BY THE BOARD IN THIS BEHALF UNDER SECTION 120 ; ITA NO.183/RJT/2006 4 (B) RECORD SHALL INCLUDE AND SHALL BE DEEMED ALWA YS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UND ER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISS IONER; WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION A ND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF AN Y APPEAL FILED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE 1988, THE POWERS OF THE COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEND AN D SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS H AD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. (2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) AF TER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL Y EAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TIME IN THE CASE OF AN ORDER WHICH HAS BEEN PASSED IN CONSEQUENCE OF OR TO GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN ORDER OF THE APPELLATE TRIBUNAL, NATIONAL TAX TRIBUNAL, THE HIGH COURT OR THE SUPREME COURT. EXPLANATION.- IN COMPUTING THE PERIOD OF LIMITATION FOR THE PURPOSES OF SUB-SECTION (2), THE TIME TAKEN IN GIVING AN OPP ORTUNITY TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PERIOD DURING WHICH ANY PROCEEDING UNDER THIS SECTI ON IS STAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUD ED. FROM A READING OF SUB-SECTION (1) OR SECTION 263, I T IS CLEAR THAT THE POWER OF SUO MOTU REVISION CAN BE EXERCISED BY THE COMMISSION ON LY IF, ON EXAMINATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT, HE CONSI DERS THAT ANY ORDER PASSED THEREIN BY HE INCOME-TAX OFFICER IS ERRONEOUS IN S O FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT IS NOT AN ARBITRARY OR UNCHARTERED POWER. IT CAN BE EXERCISED ONLY ON FULFILLMENT OF THE REQUIREMENTS L AID DOWN IN SUB-SECTION (1). THE CONSIDERATION OF THE COMMISSIONER AS TO WHETHER AN ORDER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF TH E REVENUE, MUST BE BASED ON MATERIALS ON THE RECORD OF THE PROCEEDINGS CALLED F OR BY HIM. IF THERE ARE NO MATERIALS ON RECORD ON THE BASIS OF WHICH IT CAN BE SAID THAT THE COMMISSIONER ACTING IN A REASONABLE MANNER COULD HAVE COME TO SU CH A CONCLUSION, THE VERY INITIATION OF PROCEEDINGS BY HIM WILL BE ILLEGAL AN D WITHOUT JURISDICTION. THE POWER ITA NO.183/RJT/2006 5 OF SUO MOTU REVISION UNDER SUB-SECTION (1) IS IN TH E NATURE OF SUPERVISORY JURISDICTION AND THE SAME CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPECIFIED THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIST TO EN ABLE THE COMMISSIONER TO EXERCISE POWER OF REVISION UNDER THIS SUB SECTION, VIZ. (1) THE ORDER IS ERRONEOUS; (2) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDIC E HAS BEEN CAUSED TO THE INTEREST OF THE REVENUE. IT HAS, THEREFORE, TO BE CONSIDERED FIRSTLY AS TO WHEN AN ORDER CAN BE SAID TO BE ERRONEOUS. WE FIND THAT TH E EXPRESSIONS ERRONEOUS, ERRONEOUS ASSESSMENT REFERS TO AN ASSESSMENT THAT DEVIATES FROM THE LAW AND IS, THEREFORE, INVALID, AND IS DEFECT THAT IS JURIS DICTIONAL IN ITS NATURE, SIMILARLY, ERRONEOUS JUDGMENT MEANS ONE RENDERED ACCORDING TO COURSE AND PRACTICE OF COURT, BUT CONTRARY TO LAW, UPON MISTAKEN VIEW OF L AW, OR UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES. 5. AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME-TAX OFFICER ACTING IN ACCOR DANCE WITH LAW MAKES AN ASSESSM3ENT, THE SAME CANNOT BE BRANDED AS ERRONEOU S BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE AO SHOULD HAV E MADE THOROUGH ENQUIRY AND ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY . THIS SECTION DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME-TAX OFFICER, WHO PASSED THE ORDER, UNLES S THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALIZED WHERE THE INCOM E-TAX OFFICER WHILE MAKING AN ASSESSMENT EXAMINES THE AMOUNTS, MAKES ENQUIRIES , APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME CHANGES. THE COMMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE DIFFERENT OPI NION THAN THE OPINION OF THE INCOME-TAX OFFICER. THAT WOULD NOT VEST THE COMMIS SIONER WITH POWER TO RE- EXAMINE THE ACCOUNTS AND EXPRESS DIFFERENT OPINION. IT IS BECAUSE THE INCOME- TAX OFFICER HAS EXERCISED THE QUASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CON CLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES N OT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF THE ITA NO.183/RJT/2006 6 COMMISSIONER THE ORDER IN QUESTION IS PREJUDICIAL T O THE INTERESTS OF THE REVENUE. BUT THAT BY ITSELF WILL NOT BE ENOUGH TO VEST THE C OMMISSIONER WITH THE POWER OF SUO MOTU REVISION BECAUSE THE FIRST REQUIREMENT, VI Z., THAT THE ORDER IS ERRONEOUS, IS ABSENT. 6. IN THE LIGHT OF ABOVE DISCUSSION WE CONSIDER THE FACTS OF THE CASE UNDER CONSIDERATION. WE FIND THAT IN THE ORIGINAL ASSESS MENT THE ASSESSING OFFICER HAS DISCUSSED THE ISSUE IN DETAIL. THE ASSESSING OFFIC ER NOTED THE FACTS IN HIS ORDER THAT THE OTHER INCOME SHOWN IN THE LAST YEAR WERE T O THE TUNE OF RS.38,12,171 UNDER VARIOUS SUB HEADS WHICH INCLUDED MISCELLANEOU S INCOME OF RS. 28,17,348 CREDITED BY THE ASSESSEE FOLLOWING THE DECLARATION MADE DURING THE COURSE OF SURVEY WHICH WAS CARRIED OUT ON 09-02-2000. IT HAS ALSO BEEN NOTED BY THE ASSESSING OFFICER THAT RS.2,11,08,262 WAS CREDITED AS OTHER INCOME WHICH REPRESENTED THE TERM LOAN AS WELL AS INTEREST THERE ON WRITTEN BACK. THE ASSESSING OFFICER HAS ALSO OBSERVED THAT A NOTE BEL OW SCHEDULE 16 OF THE ACCOUNT RELATED TO THIS ISSUE AND HAS REPRODUCED TH E SAME IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER SPECIFICALLY ASKED TH E ASSESSEE TO EXPLAIN THE TREATMENT GIVEN IN THE COMPUTATION OF TOTAL INCOME VICE VERSA ITS TAXABILITY OF THE AMOUNT OF IMPUGNED TRANSACTION VIDE LETTER DATED 16 -01-2004. THE ASSESSING OFFICER HAS ALSO REPRODUCED THE SUBMISSIONS OF THE ASSESSEE IN HIS ORDER WHICH READS AS UNDER: 01. AS PER THE TERMS OF ONE TIME SETTLEMENT SCHEME WITH GIIC, THE ASSESSEE COMPANY OFFERED TO SETTLE THE DUES OF RS.1,91,08,262/- WHICH WAS CONSISTING OF RS.3,61,67 ,180/- PRINCIPAL AMOUNT AND RS.1,29,41,092/- BEING INTEREST PAYABLE ON LOAN. THE COMPANY REQUESTED THE GIIC TO SETTLE THIS LOAN AMOU NT FOR RS.2,80,00,000/- IN LUMP SUM. DUE TO THIS, AN AMOU NT OF RS.2,11,08,262/- (I.E. RS.49108262 (-) 2,80,00,000) WAS TRANSFERRED TO PROFIT & LOSS ACCOUNT. AS AT 31/3/2001 IN THE BA LANCE SHEET THE AMOUNT OF SECURED LOAN FROM GIIC IS SHOWN AS 2,80,0 0,000/-, BEING AMOUNT TO BE SETTLED, GIIC IN ITS SETTLEMENT HAS NO T GIVEN ANY BIFURCATION OF INTEREST AS WELL AS CAPITAL REPAYMEN T CONSISTING IN THE ABOVE AMOUNT. THE LETTER ACCEPTING THE OTS PROPOSA L BY GIIC DATED 27/28 JUNE 2001 UNDER REFER NO.GIIC/SEC/17072 M:11/212 IS ITA NO.183/RJT/2006 7 ATTACHED HEREWITH AS ANNEXURE I. TERMS AND CONDITI ONS OF THIS OTS AGREEMENT ARE CONTAINED IN THIS LETTER. THE ABOVE AMOUNT OF RS.2,11,08,262/- CONSIST OF CAPITAL LOAN AMOUNT OUT STANDING AS WELL AS REVERSAL INTEREST AMOUNT CHARGED, TO THE PROFIT & LOSS ACCOUNT IN EARLIER YEARS. THEREFORE, THE AMOUNT OF RS.2,80,00 ,000/- IS BIFURCATED BETWEEN THE AMOUNT CHARGEABLE TO TAX U/S 41(1) AS WELL AS CAPITAL RECEIPT. 7. THE ASSESSING OFFICER HAS ALSO EXAMINED SECTION 41(1) OF THE ACT AND CHARGEABILITY OF THE AMOUNT U/S 28(IV) OF THE ACT. IN THE LIGHT OF THESE SECTIONS, THE ASSESSING OFFICER HAS ALSO CONSIDERED THE DECIS ION OF THE RAJKOT BENCH OF THE TRIBUNAL IN THE CASE OF SHREE DIGVIJAY TILES & POTT ERIES LTD, A COPY OF WHICH WAS FURNISHED BEFORE THE ASSESSING OFFICER BY THE ASSES SEE WITH REGARD TO THE TAXABILITY OF THE AMOUNT U/S 41(1) OF THE ACT. WIT H A VIEW TO VERIFY THE CONTENTIONS OF THE ASSESSEE, THE ASSESSING OFFICER ISSUED A LET TER DATED 26 TH MARCH, 2004 TO GIIC REQUESTING THEM TO CLARIFY THE MATTER AND THE FOLLOWING INFORMATION WAS GATHERED BY THE ASSESSING OFFICER FROM GIIC: RS. IN LAKHS TOTAL OUTSTANDING AS ON 31.3.2001 473.37 PRINCIPAL OUTSTANDING 361.67 DOCUMENTED INTEREST RATE 20% AMT.RECEIVED FROM THE CO. TILL DATE 183.84 OTS AMOUNT SANCTIONED 280.00 TOTAL RECOVERY INCLUDING PROPOSED OTS AMOUNT 463.84 SACRIFICE OF THE CORPORATION CONSIDERING TOTAL OUTSTANDING 193.37 SACRIFICE CONSIDERING PRINCIPAL OUTSTANDING 161.67 INTEREST RATE OF RETURN 6.20% INT. RECOVERED ON DEFAULTED OTS AMOUNT 21.00 FOR DEFAULTED PERIOD ULTIMATELY, THE ASSESSING OFFICER DID NOT ACCEPT TH E ASSESSEES CLAIM AND CALCULATED TAXABILITY U/S 41(1) OF THE ACT ON THE B ASIS OF INFORMATION COLLECTED ITA NO.183/RJT/2006 8 DURING THE ASSESSMENT PROCEEDINGS. THE RELEVANT FI NDINGS OF THE ASSESSING OFFICER ARE REPRODUCED BELOW: FROM THE ABOVE ISSUE THE FOLLOWING FACTS EMERGE A ND TREATMENT GIVEN BY GIIC, IT MAY BE SEEN THAT OUT OF TOTAL OUTSTANDING AS AT 31/3/2001 OF RS.473.37 LAKHS RS.361.67 LAKHS WERE OUTSTANDING TOWARDS LOAN PRINCIPAL AMOUNT AND THERE FORE NATURALLY THE BALANCE AMOUNT IS TOWARDS INTEREST PORTION, WHI CH COMES TO RS.111.70 LAKHS. THE AMOUNT PAYABLE UNDER OTS IS RS.280 LAKHS AGAINST THE TOTAL OUTSTANDING OF RS.473.37 LAKHS, A S PER GIIC. THE BALANCE AMOUNT OF RS.193.37 AS AT 31/3/2001 IS TO B E WRITTEN OFF BY GIIC ON COMPLETION OF OTS. THEREFORE, THE PERCENTA GE OF OTS TO OUTSTANDING DUES IS 59.15% AND THE RATIO OF OUTSTAN DING AMOUNT TO BE WRITE OFF IS 40.85%. ON THE BASIS OF THE ABOVE WORKING AND ANALYSIS THE AMOUNT OF APPORTIONMENT BETWEEN THE IN TEREST AND THE CAPITAL IS AS UNDER: (IN LAKHS) SR. PARTICULARS BALANCE PAYABLE WRITTEN OFF NO IN OTS AS PER GIIC -------- ------------------ -------------- ------- -- --------------- 1 TOTAL OUTSTANDING 473.37 280.00 193.37 1. LOAN AMOUNT 361.67 213.92 147.75 2. INTEREST PORTION 111.70 66.08 45.62 AS DISCUSSED ABOVE, IT IS CLEAR THAT LENDER HAS EX ERCISED ITS OPTION AND HAS WRITTEN OFF THE AMOUNT OF RS.147.75 LAKHS ONLY. AGAINST THIS AMOUNT ASSESSEE HAS CLAIMED RS.1,55,51 ,883/-. THEREFORE THE AMOUNT OF RS.1,55,51,883/- (-) 1,47,7 4,000/- = RS.7,77,883/- IS TREATED AS INCOME U/S 41(1), OVER & ABOVE THE SUM OF RS./5564669 CONSIDERED BY THE ASSESSEE, & THE SA ME IS ADDED TO THE INCOME OF THE ASSESSEE. 8. FROM THE ABOVE DISCUSSION, WE FIND THAT THE ASSE SSING OFFICER HAS APPLIED HIS MIND AND REACHED A PARTICULAR CONCLUSION REGARD ING THE TAXABILITY OF INCOME U/S 41(1) OF THE ACT OF THE IMPUGNED TRANSACTION. THE ASSESSING OFFICER HAS EXERCISED HIS QUASI JUDICIAL POWER AND ARRIVED AT A PARTICULAR CONCLUSION AND THEREFORE SUCH A CONCLUSION CANNOT BE TERMED AS ERR ONEOUS SIMPLY BECAUSE IN THE OPINION OF THE COMMISSIONER THE ASSESSING OFFIC ER OUGHT TO HAVE ARRIVED AT A DIFFERENT CONCLUSION. IN THE CASE UNDER CONSIDERAT ION, THE ORDER OF THE ASSESSING OFFICER, IN OUR OPINION, IS NOT ERRONEOUS. THEREFO RE, WE ARE OF THE CONSIDERED VIEW ITA NO.183/RJT/2006 9 THAT THE COMMISSIONER OF INCOME-TAX IS NOT CORRECT IN EXERCISING HIS JURISDICTION U/S 263 OF THE ACT IN THE INSTANT CASE. 9. IN VIEW OF THE ABOVE DISCUSSION WE HOLD THAT THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) DATED 31-03-2004 IS NE ITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE SO AS TO MAKE ROOM FOR THE ADMINISTRATIVE COMMISSIONER TO INVOKE HIS JURISDICT ION U/S 263 OF THE I.T. ACT. SINCE BOTH THE ESSENTIAL CONDITIONS THAT MANDATORIL Y REQUIRE FOR INVOKING PROVISIONS OF SECTION 263 ARE MISSING IN THE CASE O N HAND, WE HAVE TO NECESSARILY FIND THAT THE ORDER DATED 28-02-2006 PA SSED U/S 263 OF THE ACT BY THE COMMISSIONER OF INCOME-TAX, JAMANAGAR SETTING ASIDE THE ASSESSMENT U/S 143(3) DATED 31-03-2004 IS VOID AB INITIO. WE ACCO RDINGLY QUASH THE IMPUGNED ORDER U/S 263 OF THE ACT. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29-04-2011. SD/- SD/- (N.R.S. GANESAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DT : 29 TH APRIL, 2011 PK/- COPY TO: 1. M/S. B. DEVCHAND & SONS, JAMNAGAR 2. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -3, JAMNAGAR 3. THE CIT, JAMNAGAR 4. THE DR,.I.T.A.T., RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT