M/s Dashmesh Motors Muktsar, Jalalabad(W) V. The Pr. Commissioner of Income Tax, Bathinda

ITA 187/ASR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0492 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 13-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMALENDU NATH MISRA
• Assessee Lawyers: A K PERIWAL
• Keywords: Audit objection; Principle of natural justice; Non-deduction of tax; Tax effect
• Section: 143(3); 234B; 263; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A NO. 187(ASR)/2015 ASSESSMENT YEAR: 2010-11 M/S. DASHMESH MOTORS MUKTSAR H.O C/O M/S DASHMESH AGRO INDUSTRIES, TIWANA ROAD, JALALABAD (W). PAN:AAFFD9132K VS. PRINCIPAL COMMISSIONER OF INCOME TAX, BATHINDA-151001. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SUDHIR SEHGAL, (ADV. ) & SH. A.K. PERIWAL (CA.) RESPONDENT BY: SH. AMALENDU NATH MISRA (D R.) DATE OF HEARING: 23.05.2016 DATE OF PRONO UNCEMENT: 25.07.2016 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF LEARNED CIT, BATHINDA, PASSED U/S 263 OF THE ACT, DATED 18.02.20 15, FOR ASST. YEAR: 2010-11. 2. AT THE OUTSET, THE LEARNED AR SUBMITTED THAT LEARNED CIT HAS WRONGLY ASSUMED JURISDICTION U/S 263 OF THE ACT AS ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS HAD EXAMINED ALL THE ASPECTS INCLUDING THE ASPECT RAISED BY LEARNED CIT. HE FURT HER SUBMITTED THAT THE PROCEEDINGS U/S 263 HAS BEEN STARTED ON THE BASIS O F AUDIT OBJECTION. HE FURTHER SUBMITTED THAT IN THIS CASE THE SAME ISS UE RAISED BY LEARNED CIT WAS FIRST ATTEMPTED TO BE REOPENED U/S 154 OF T HE ACT, HOWEVER, THE ITA NO.187 (ASR)/2015 ASST. YEAR : 2010-11 2 PROCEEDINGS U/S 154 WERE DROPPED. THE LEARNED AR IN THIS RESPECT INVITED OUR ATTENTION TO COPY OF THE AUDIT OBJECTI ON PLACED AT (PB PAGE 23-24) ALSO TOOK US TO COPY OF NOTICE U/S 154 AND I TS REPLY FILED BY ASSESSEE PLACED AT (PB PAGE 25 TO 27). THE LEARNED AR ALSO TOOK US TO (PB PAGE-28) WHERE A COPY OF ORDER OF ASSESSING OFFICER DROPPING PROCEEDINGS U/S 154 WAS PLACED. THE LEARNED AR SUBMITTED THAT A FTER FAILED ATTEMPT TO MAKE THE ADDITION VIDE RECTIFICATION U/S 154, TH E COMMISSIONER OF INCOME TAX ISSUED NOTICE U/S 263 OF THE ACT WHICH I S NOT PERMITTED IN LAW AS HELD BY VARIOUS JUDGMENTS OF THE TRIBUNAL AN D THE HONBLE HIGH COURTS. THE LEARNED AR IN THIS RESPECT RELIED UPON THE ORDER OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. M/S SOHAN WOLLEN MILLS 296 ITR 238 (P&H), FOR THE PROPOSITION THAT THE ASSESSM ENT CANNOT BE REOPENED U/S 263 ON THE BASIS OF AUDIT OBJECTION. THE LEARNED AR FURTHER RELIED UPON THE CASE LAW OF SH. JASWINDER S INGH DECIDED BY HONBLE CHANDIGARH BENCH IN ITA NO.690/CHD/2010 VID E ORDER DATED 9 TH MARCH, 2012. THE LEARNED AR SUBMITTED THAT FACTS OF THE PRESENT CASE ARE SIMILAR AND HONBLE BENCH IN THE CASE OF JASWINDER SINGH HAD QUASHED THE ORDER PASSED BY COMMISSIONER OF INCOME TAX U/S 263 OF THE ACT AND THEREFORE, THE ORDER PASSED U/S 263 IN THIS CASE SH OULD ALSO BE QUASHED. 3. THE LEARNED DR, ON THE OTHER HAND, HEAVILY PLACED HIS RELIANCE ON THE ORDER OF LEARNED CIT. 4. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSM ENT IN THE PRESENT ITA NO.187 (ASR)/2015 ASST. YEAR : 2010-11 3 CASE WAS COMPLETED VIDE ASSESSMENT ORDER DATED 25.0 3.2013 AS IS APPARENT FROM (PB PAGES 1 TO 2) WHERE A COPY OF ASS ESSMENT ORDER IS PLACED. THE COPY OF AUDIT OBJECTION AS RAISED BY INCOME TAX OFFICER, IS PLACED AT PB (PAGE 23 TO 24) WHEREIN THE INCOME TAX OFFICER (AUDIT) HAS RAISED THE OBJECTION AS UNDER: ASSESSMENT IN THIS CASE WAS COMPLETED UNDER SECTIO N 143(3) OF THE INCOME-TAX ACT, 1961 ON 25-03-2013 AT AN INCOME OF RS. 214450/- AGAINST THE RETURNED INCOME OF RS. 119445/-. 2. DURING THE COURSE OF AUDIT, IT HAS BEEN NOTICED THAT THE ASSESSEE HAS PAID INTEREST ON THE BORROWED CAPITAL AT RS. 52 ,61,021/- AND HAS DEBITED THIS EXPENDITURE TO THE PROFIT AND LOSS ACC OUNT. OUT OF THIS, INTEREST OF RS. 3872509/- HAS BEEN PAID ON THE CC LIMIT ACCO UNT. 2.1 IT HAS BEEN FURTHER NOTICED THAT M/S. DASHMESH AGRO INDUSTRIES IS ONE OF THE SUNDRY DEBTORS OF THE ASSESSEE WITH RS. 35,00,000/- AS ON 31- 03-2010. A PERUSAL OF THE COPY OF ACCOUNT OF M/S. D ASHMESH AGRO INDUSTRIES IN THE BOOKS OF ASSESSEE SHOWS THAT DURI NG THE YEAR, THE ASSESSEE HAD ADVANCED HUGE INTEREST FREE FUNDS, TOT ALING TO RS. 2,36,00,0Q0/- ON DIFFERENT DATES TO M/S. DASHMESH A GRO INDUSTRIES FROM HIS CC A/C. THE MONEY SO ADVANCED REMAINED WITH DAS HMESH AGRO INDUSTRIES FOR NUMBER OF DAYS RANGING BETWEEN 1 TO 126 DAYS. FROM THE COPY OF ACCOUNT PLACED ON RECORD AS WELL AS THE REP LIES FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S, BUSINESS EXPEDIENCY TO ADVANCE SUCH HUGE MONEY WITHOUT CHARG ING ANY INTEREST IS NOT ESTABLISHED. THEREFORE, THE INTEREST PAID BY TH E ASSESSEE ON THE CC LIMIT ACCOUNT TO THE TUNE OF RS. 620752/-, BY APPLY ING THE RATE OF INTEREST OF 14% ON THE AMOUNT REMAINED WITH M/S. DASHMESH AG RO INDUSTRIES, SHOULD HAVE BEEN DISALLOWED. TAX EFFECT COMES TO RS . 191813/- AND INTEREST U/S. 234B COMES TO RS. 43135/-; AGGREGATE TAX EFFECT COMES TO RS. 234948/- OR SAY RS. 234950/-. WE FIND THAT THE LEARNED COMMISSIONER IN THE SHOW CAUSE NOTICE HAS RAISED THE FOLLOWING OBJECTIONS: (I) FROM THE PERUSAL OF RECORDS REVEALS THAT YOU H AVE AVAILED OF CC LIMIT AND MADE PAYMENTS OF INTEREST THEREON. IT HAS ALSO BEEN NOTICED THAT OUT OF THE INTEREST BEARING FUNDS, AS STATED ABOVE, YOU HAVE MADE INTEREST FREE ADVANCES TOTALING TO RS.2,36,00,000/- ON DIFFERENT DATES TO M/S. DASHMESH AGRO INDUSTRIES FROM CC ACCOUNT. ACCORDING LY, PROPORTIONATE DISALLOWANCE OF INTEREST WAS REQUIRED TO BE MADE IN VIEW OF THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT DELIVERE D IN THE CASE OF ITA NO.187 (ASR)/2015 ASST. YEAR : 2010-11 4 ABHISHEK INDUSTRIES LTD. VS. CIT-I, LUDHIANA, BUT T HE AO HAS FAILED TO MAKE SUCH DISALLOWANCES. FAILURE ON THE PART OF THE THEN AO IN MAKING THE DISALLOWANCES, AS DISCUSSED ABOVE, HAS RENDERED THE ASSESSMENT ORDER DATED 25.03.2013 ERRONEOUS AND PREJUDICIAL TO THE I NTERESTS OF REVENUE. IN VIEW OF THE ABOVE, YOU ARE HEREBY GIVEN AN OPPOR TUNITY TO EXPLAIN AS TO WHY THE ABOVE REFERRED ASSESSMENT ORDER DATED 25.03.2013 MAY NOT BE CANCELLED U/S 263 OF THE INCOME TAX ACT, 1961 FO R MAKING FRESH ASSESSMENT SINCE THE SAID ORDER PASSED BY THE ASSES SING OFFICER PRIMA FACIE APPEARS TO BE ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF THE REVENUE. FROM THE ABOVE TWO DOCUMENTS I.E., AUDIT OBJECTION AND SHOW CAUSE NOTICE AS REPRODUCED IN HIS ORDER ITSELF WE FIND TH AT ISSUE RAISED IN BOTH DOCUMENTS IS SIMILAR. WE FURTHER FIND THAT ON THE S AME ISSUE NOTICE U/S 154 WAS ISSUED, A COPY OF WHICH PLACED AT (PB PAGE- 25), AND THE MISTAKE PROPOSED TO BE RECTIFIED IN THIS NOTICE IS REPRODUC ED BELOW. DURING THE YEAR UNDER CONSIDERATION, YOU HAVE ADVA NCED A SUM OF RS.2,36,00,000/- TO M/S DASHMESH AGRO INDUSTRIES ON DIFFERENT DATES FROM YOUR CC A/C. THE MONEY ADVANCED REMAINED WITH M/S DASHMESH AGRO INDUSTRIES ABOUT FOUR MONTHS AND NO CHARGED AN Y INTEREST. YOU HAVE PAID INTEREST ON CC LIMIT ACCOUNT WAS RS.6,20,752/- BY APPLYING THE RATE OF INTEREST OF 14% ON THE AMOUNT REMAINED WITH M/S DASHMESH AGRO INDUSTRIES SHOULD HAVE BEEN DISALLOWED AND REQUIRED TO BE ADDED TO YOUR TAXABLE INCOME. THE PROCEEDINGS U/S 154 WERE DROPPED ON ACCOUNT OF A REPLY TO THE NOTICE U/S 154. THE ORDER PASSED BY ASSESSING OFFIC ER IN THIS RESPECT IS PLACED AT (PB PAGE-28). THEREFORE, FROM THE ABOVE F ACTS IT IS APPARENT THAT THE REVENUE AUTHORITIES FIRST TRIED TO REOPEN THE C ASE U/S 154, WHICH ON A REPLAY FILED BY ASSESSEE WERE DROPPED AND THEREAF TER, THE LEARNED CIT TOOK UP THE SAME ISSUE BY ASSUMING JURISDICTION U/S 263 OF THE ACT. MOREOVER, WE FIND THAT THE PROCEEDINGS U/S 263 HAS BEEN INITIATED IN VIEW OF THE AUDIT OBJECTION RAISED BY INCOME TAX OF FICER (AUDIT) WHICH IS NOT PERMISSIBLE AS PER THE SETTLED POSITION OF LAW. THE HONBLE ITA NO.187 (ASR)/2015 ASST. YEAR : 2010-11 5 CHANDIGARH BENCH IN THE CASE OF JASWINDER SINGH VS. CIT, IN ITA NO. 690/CHD/2010 HAS DECIDED THE SIMILAR ISSUE AND HAS QUASHED THE ORDER PASSED BY LEARNED CIT U/S 263 BY HOLDING AS UNDER: 20. WE FIND THAT SIMILAR ISSUE OF EXERCISE OF RE VISIONARY POWERS BY THE COMMISSIONER OF INCOME TAX ON THE BAS IS OF AUDIT OBJECTIONS AROSE BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT IN CIT VS. SOHANA WOOLLEN MILLS (SUPRA) AND IT WAS HELD THAT MERE AUDIT OBJECTION A ND THE FACT THAT A DIFFERENT VIEW COULD BE TAKEN, WERE NOT ENOUGH TO SAY THAT THE ORDER OF ASSESSING OFFICER WAS ERRO NEOUS OR PREJUDICIAL TO THE INTERESTS OF REVENUE. THE HON 'BLE COURT FURTHER HELD THAT WHETHER SATISFACTION OF TH E COMMISSIONER FOR EXERCISING JURISDICTION WAS CALLED FOR OR NOT, HAS TO BE DECIDED HAVING REGARD TO THE GIVEN F ACT SITUATION'. 21. THE HON'BLE GAUHATI HIGH COURT IN B & A PLANT ATION & INDUSTRIES LTD.& ANOTHER VS. CIT & OTHERS (SUPRA) HAS LAID DOWN THE DIFFERENCE BETWEEN REVISIONARY, RECTI FICATION AND RE-ASSESSMENT PROCEEDINGS. THE FACT SITUATION B EFORE THE HON'BLE GUAHATI HIGH COURT THAT RECTIFICATION PROCEEDINGS WERE INITIATED ON THE BASIS OF AUDIT OBJECTIONS, WHICH WERE DROPPED SUBSEQUENTLY AND NOT ICE UNDER SECTION 263 OF THE ACT WAS ISSUED BY THE COMMISSIONER OF INCOME TAX ON THE BASIS OF SAME AUD IT OBJECTIONS AND THE HON'BLE COURT HELD THAT THERE WA S NO INDEPENDENT APPLICATION OF MIND BY THE COMMISSIONER OF INCOME TAX AND THE REVISION PROCEEDINGS WERE HELD T O BE NOT VALID. THE HON'BLE GAUHATI HIGH COURT OBSERVED AS UNDER: IN THE CASE AT HAND, THE ORDER, INITIATING RECTIFI CATION PROCEEDINGS UNDER SECTION 154, AS WELL AS THE ORDER REVISING TH E ASSESSMENT UNDER SECTION 263, WERE PASSED ON THE BASIS OF ONE AND THE SAME AUDIT OBJECTION. WHILE EXERCISING REVISIONAL JURISD ICTION, THE REVISIONAL AUTHORITY MUST BEAR IN MIND THAT THE PRI NCIPLES OF NATURAL JUSTICE DO NOT PERMIT THE DECISION OF A QUASI-JUDIC IAL AUTHORITY, SUCH AS A COMMISSIONER OF INCOME-TAX, TO BE INFLUENCED B Y ANY OTHER AUTHORITY. THUS, THE COMMISSIONER, IN THE PRESENT C ASE, COULD NOT HAVE INITIATED A SUO MOTU REVISIONAL PROCEEDING ON THE BASIS OF THE SAID AUDIT REPORT. HAD, ON THE BASIS OF THE AUDIT R EPORT, THE COMMISSIONER CAME TO HIS OWN FINDING THAT THE ASSES SING AUTHORITY, WHILE MAKING THE ASSESSMENT, OR THE AUTHORITY EMPOW ERED TO RECTIFY A TURNOVER, WHICH HAD ESCAPED ASSESSMENT, HAS ACTED WITHOUT JURISDICTION, REVISIONAL JURISDICTION COULD HAVE BE EN EXERCISED. EMPHASISED THE SUPREME COURT, IN THE CASE OF SIRPUR PAPER MILL LTD. ITA NO.187 (ASR)/2015 ASST. YEAR : 2010-11 6 V. CWT [1970] 77 ITR 6 , THAT WHILE EXERCISING POWER, THE COMMISSIONER MUST HAVE AN UNBIASED MIND AND DECIDE THE DISPUTE ACCORDING TO THE PROCEDURE WHICH IS CONSISTENT WITH THE PRINCIPLES OF NATURAL JUSTICE AND CANNOT PERMIT HIS MIND TO BE IN FLUENCED BY THE DICTATION OF ANOTHER AUTHORITY. THE RELEVANT OBSERV ATIONS MADE BY A THREE-JUDGE BENCH OF THE SUPREME COURT, IN THE CASE OF SIRPUR PAPER MILL LTD. 119701 77 ITR 6, READ AS FOLLOWS (PAGE 7) : 'IN EXERCISE OF THE POWER THE COMMISSIONER MUST BRI NG TO BEAR AND UNBIASED MIND, CONSIDER IMPARTIALLY THE OB JECTIONS RAISED BY THE AGGRIEVED PARTY, AND DECIDE THE DISPUTE ACCO RDING TO PROCEDURE CONSISTENT WITH THE PRINCIPLES OF NATURAL JUSTICE ; HE CANNOT PERMIT HIS JUDGMENT TO BE INFLUENCED BY MATT ERS NOT DISCLOSED TO THE ASSESSEE, NOR BY DICTATION OF ANOT HER AUTHORITY.' 22. SIMILAR VIEW HAS BEEN TAKEN BY THE CALCUTTA HIGH COURT IN JEEWAN LAI (1929) LTD. VS. ADDL.CIT & OTHE RS (SUPRA) THAT NOTICE ISSUED BY THE COMMISSIONER OF I NCOME TAX AT THE SUGGESTION OF THE AUDIT DEPARTMENT WITHO UT APPLYING HIS MIND COULD NOT BE SUSTAINED IN LAW. 23. IN THE BACK DROP OF THE ABOVE SAID SETTLED LE GAL PRECEDENTS, WE FIND THAT THE COMMISSIONER OF INCOME TAX IN THE PRESENT CASE HAD ALSO INITIATED THE PROCEEDI NGS UNDER SECTION 263 OF THE ACT ON THE BASIS OF THE AU DIT OBJECTIONS. SHOW CAUSE NOTICE WAS ISSUED IN THE PRE SENT CASE FOR NON-DEDUCTION OF TAX AT SOURCE, OUT OF CER TAIN EXPENSES INCURRED BY THE ASSESSEE AND ORDER PASSED BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT DIRECTING THE ASSESSING OFFICER TO RE-DETERMINE THE INCOME OF THE ASSESSEE BY APPLYING A RATE OTHER THA N THE RATE APPLIED BY THE ASSESSING OFFICER, BEING WITHOU T JURISDICTION, IS NOT TENABLE IN LAW. WE FIND NO MER IT IN THE PLEA OF THE LEARNED D.R. FOR THE REVENUE THAT THE S OURCE OF INFORMATION IN THE PRESENT CASE WAS AUDIT OBJECTION , BUT THERE WAS INDEPENDENT APPLICATION OF MIND BY THE COMMISSIONER OF INCOME TAX. THE PROVISIONS OF SECTI ON 263 OF THE ACT ARE CLEAR AND ABSOLUTE THAT THE POWER IS TO BE EXERCISED BY THE COMMISSIONER OF INCOME TAX FROM TH E EXAMINATION OF THE RECORDS OF THE PROCEEDINGS UNDER THE ACT. THE EXPLANATION UNDER SECTION 263 OF THE ACT D EFINES RECORDS AS ALL RECORDS RELATING TO ANY PROCEEDING S UNDER THE ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISSIONER. THE AUDIT OBJECTIONS UNDER NO CIRCUMSTANCES CAN BE CALLED AS RECORD EMPOWERING TH E COMMISSIONER OF INCOME TAX TO EXERCISE JURISDICTION UNDER SECTION 263 OF THE ACT. FURTHER IT IS APPARENT THAT THE COMMISSIONER OF INCOME TAX HAS INITIATED THE REVISI ON PROCEEDINGS ONLY ON THE BASIS OF AUDIT OBJECTION. S UCH EXERCISE OF POWER UNDER SECTION 263 OF THE ACT IS N OT ITA NO.187 (ASR)/2015 ASST. YEAR : 2010-11 7 TENABLE IN LAW. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE ASSESS EE ARE THUS ALLOWED. 24. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE FACTS AND CIRCUMSTANCES IN THE PRESENT CASE ARE SIMILAR AS THE FACTS AND CIRCUMSTANCES IN THE CASE OF SH. JASWINDER SING H, PROP.(SUPRA) THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF C O-ORDINATE BENCH, WE QUASH THE ORDER OF LEARNED COMMISSIONER U/S 263 OF THE ACT. 5. IN VIEW OF THE ABOVE, THE APPEAL FILED BY ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 .07.2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCO UNTANT MEMBER DATED:25.07.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER