Babita Garg, Bhubaneswar V. ACIT, Bhubaneswar

ITA 187/CTK/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 4264 (ITAT-CUTTACK)
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 10-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K GAUTAM
• Assessee Lawyers: D K SETH
• Keywords: Cost of acquisition; Reassessment proceedings
• Section: 263

Judgement Text

( WORD TO PDF CONVERTER - UNREGISTERED ) HTTP://WWW.WORD-TO-PDF-CONVERTER.NET IN THE INCOME-TAX APPELLATE TRIBUNAL, CUTTACK BENCH; CUTTACK (BEFORE S/SHRI D.K.TYAGI, JM & K.K. GUPTA AM.) I.T.A.NO.187 /CTK/2010 ASSESSMENT YEAR: 2006-07 BABITA GARG, V. THE ACIT, CIRCLE 1(2), OLD STATION BAZAR, AAYAKAR BHAVAN, RAJASWA VIHAR, BHUBANESWAR-06 BHUBANESWAR-07. PA NO.AAUPG 2153 J (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI D.K.SETH RESPONDENT BY: SHRI A.K.GAUTAM ORDER PER D.K.TYAGI, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER U/S.263 OF THE I.T.ACT, 1961 DATED 12.3.2010 OF THE COMMISSIONER OF INCOME TAX, BHUBANESWAR FOR THE ASSESSMENT YEAR 2006-07. 2. FACTS IN BRIEF ARE THAT THE INCOME OF THE ASSESSEE CONSISTED OF INCOME FROM HER PROPRIETOR BUSINESS OF WEIGHBRIDGE AND THAT FROM OTHER SOURCES. A SEARCH & SEIZURE OPERATION WAS CARRIED OUT AT THE BUSINESS PREMISES AS WELL AS RESIDENTIAL PREMISES OF GARG GROUP OF CASES AND THE PREMISES OF THE ASSESSEE WERE COVERED. THE ASSESSMENT WAS COMPLETED U/S.143(3)/147 ON 31.12.2008 COMPUTING THE TOTAL INCOME OF THE ASSESSEE AT RS.3,23,720/-. THE REASSESSMENT PROCEEDINGS SHOWED THAT THE ASSESSEE NOT HAVING ANY SOURCE DURING THE YEAR FROM WHICH STATED INCOME HAD ACCRUED AND INVESTMENT MADE THEREFROM. THEREFORE, THE AO INFERRED THAT THE INCOME AND INVESTMENT OF THE ASSESSEE, IN FACT, REPRESENTED UNDISCLOSED INCOME OF SHRI RAJESH GARG, HER SPOUSE. HENCE, THE A ASSESSED THE INCOME AS WELL AS INVESTMENT OF THE ASSESSEE IN HER HANDS ON A PROTECTIVE BASIS AND MADE A SUBSTANTIVE ADDITION OF THE SAME AMOUNT IN THE HANDS OF HER HUSBAND. THE COMMISSIONER FOUND THAT DURING THE SEARCH OPERATION, GOLD JEWELLERY VALUED AT RS. 4,39,939/- AND SILVER ARTICLES AT ( WORD TO PDF CONVERTER - UNREGISTERED ) HTTP://WWW.WORD-TO-PDF-CONVERTER.NET RS.30,996/- WERE FOUND FROM THE RESIDENCE OF THE ASSESSEE, WHICH WERE NOT REFLECTED IN THE ASSESSMENT ORDER. THEREFORE, HE WAS OF THE VIEW THAT THE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, HE ISSUED NOTICE U/S.263 TO THE ASSESSEE REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ASSESSMENT ORDER PASSED U/S.143(3)/14 SHOULD NOT BE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND, ACCORDINGLY BE MADE SUBJECT MATTER OF REVISION UNDER SECTION 263 OF THE ACT. IN REPLY TO NOTICE U/S.263, THE ASSESSEE STATED THAT THE AO HAD DULY ENQUIRED IN RESPECT OF THE JEWELLERY AND IT WAS STATED THAT THE SAID JEWELLERY WAS ACQUIRED BY THE ASSESSEE DURING THE COURSE OF HER MARRIAGE. ON THE STRENGTH OF THE ASSESSEES SUBMISSIONS, THE COMMISSIONER WAS OF THE VIEW THAT IT IS A FACT ON RECORD THAT THE AO HAD MADE SOME PRELIMINARY ENQUIRY REGARDING THE SOURCE OF ACQUISITION OF GOLD JEWELLERY AND SILVER ORNAMENTS. THE AO HAD ACCEPTED THE CONTENTION OF THE ASSESSEE AS SUCH, WITHOUT FURTHER VERIFYING THE GENUINENESS OF THE CLAIM OF THE ASSESSEE AND WITHOUT TAKING INTO CONSIDERATION THE LOGICAL END. THEREFORE, HE WENT AHEAD WITH PROPOSED REVISION ORDER AND SET ASIDE THE ORDER U/S.143(3)/147 OF THE AO AND RESTORED IT BACK TO THE FILE OF THE AO WITH THE DIRECTION TO MAKE NECESSARY ENQUIRIES IN RESPECT OF THE INVESTMENTS MADE BY SMT GARG IN GOLD JEWELLERY AND SILVER ORNAMENTS. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. AT THE TIME OF HEARING, LD COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE CIT WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263. IN THE INSTANT CASE, THE AO HAS PASSED THE ORDER AFTER MAKING NECESSARY ENQUIRIES AS IS EVIDENT FROM THE QUESTIONNAIRE ISSUED BY THE AO DURING THE ASSESSMENT PROCEEDINGS. HE, THEREFORE, PRAYED THAT THE ORDER PASSED BY THE CIT U/S.263 MAY KINDLY BE QUASHED. ON THE OTHER HAND, LD D.R. SUPPORTED THE ORDER OF THE COMMISSIONER. 4. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE RECORD OF THE CASE. WE FIND THAT THE C.I.T. HAS INVOKED HIS POWERS U/S. 263 MAINLY ON THE GROUND THAT THE A.O. DID NOT MAKE THE REQUISITE ENQUIRY. AT THE TIME OF HEARING BEFORE US, IN THE ARGUMENTS, THE REVENUE HAS CONTENDED THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE ON THE GROUND THAT THE A.O. FAILED TO MAKE THE ENQUIRY WHICH WAS WARRANTED ON THE FACTS OF THE CASE. ( WORD TO PDF CONVERTER - UNREGISTERED ) HTTP://WWW.WORD-TO-PDF-CONVERTER.NET 4.1 IN THE CASE OF GEE VEE ENTERPRISES VS. ADDL. CIT [99 ITR 375], THE HONBLE DELHI HIGH COURT HELD AS UNDER :- IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER INQUIRIES BEFORE CANCELING THE ASSESSMENT ORDER OF THE INCOME-TAX OFFICER. THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE INCOME-TAX OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE STATEMENTS MADE BY THE ASSESSEE IN HIS RETURN. THE REASON IS OBVIOUS. THE POSITION AND FUNCTION OF THE INCOME-TAX OFFICER IS VERY DIFFERENT FROM THAT OF A CIVIL COURT. THE STATEMENTS MADE IN A PLEADING PROVED BY THE MINIMUM AMOUNT OF EVIDENCE MAY BE ADOPTED BY A CIVIL COURT IN THE ABSENCE OF ANY REBUTTAL. THE CIVIL COURT IS NEUTRAL. IT SIMPLY GIVES DECISION ON THE BASIS OF THE PLEADING AND EVIDENCE WHICH COMES BEFORE IT. THE INCOME-TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIRY. IT IS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHICH THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. IT IS BECAUSE IT IS INCUMBENT ON THE INCOME-TAX OFFICER TO FURTHER INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES WOULD MAKE SUCH AN INQUIRY PRUDENT THAT THE WORD ERRONEOUS IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. SIMILAR VIEW WAS REITERATED BY THEIR LORDSHIPS OF HONBLE DELHI HIGH COURT IN THE CASE OF DUGGAL & CO. VS. CIT [220 ITR 456]. 4.2. IN THE CASE OF TARAJAN TEA CO. PVT. LTD. VS. CIT [205 ITR 45], THE HONBLE GAUHATI HIGH COURT HELD AS UNDER :- THAT IT WAS NOT QUITE CERTAIN WHETHER THE TRESS SOLD IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR WERE TREES STANDING AT THE TIME OF ACQUISITION OR TREES WHICH GREW ON ROOTS AND TRUNK EXISTING ON THE DATE OF ACQUISITION OR ON ROOTS AND TRUNKS OF TREES EXISTING AT THE TIME OF ACQUISITION AND CUT SUBSEQUENTLY. THIS WAS A MATTER WHICH HAD TO BE INVESTIGATED BY THE INCOME-TAX OFFICER AFTER CALLING UPON THE ASSESSEE TO FURNISH RELEVANT DATA. THE INSPECTING ASSISTANT COMMISSIONER HAD NO SUCH DATA BEFORE HIM IN ORDER TO ENABLE HIM TO CONCLUDE THAT THERE WAS NO COST OF ACQUISITION. IT WAS ALSO TO BE CONSIDERED WHETHER THE SPONTANEOUS GROWTH REQUIRED ANY CARE OR ATTENTION BY WAY OF PROTECTION FROM ANIMALS AND THE LIKE AND, IF SO, WHETHER THE ASSESSEE DID NOT INCUR ANY COST IN THAT REGARD. ANY DECISION EITHER WAY WITHOUT CONSIDERING THESE ASPECTS WOULD CERTAINLY BE ERRONEOUS AND ANY DECISION IN FAVOUR OF THE ASSESSEE WITHOUT CONSIDERING THESE ASPECTS WOULD BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX AND THE ORDER PASSED BY THE TRIBUNAL SUSTAINING THE SAME AS A WHOLE WERE VALID. ( WORD TO PDF CONVERTER - UNREGISTERED ) HTTP://WWW.WORD-TO-PDF-CONVERTER.NET 4.3. IN THE CASE OF ADDL. CIT VS. MUKUR CORPORATION [111 ITR 312], HONBLE GUJARAT HIGH COURT HELD AS UNDER :- THAT THE WORDS PREJUDICIAL TO THE INTERESTS OF THE REVENUE IN SECTION 263 HAVE NOT BEEN DEFINED BUT THEY MUST MEAN THAT THE ORDERS OF ASSESSMENT CHALLENGED ARE SUCH AS ARE NOT IN ACCORDANCE WITH LAW, IN CONSEQUENCE WHEREOF THE LAWFUL REVENUE DUE TO THE STATE HAS NOT BEEN REALIZED OR CANNOT BE REALIZED. IN THE PRESENT CASE, IT WAS OBVIOUS THAT THE INCOME-TAX OFFICER HAD COMMITTED AN ERROR IN NOT MAKING ENQUIRY INTO THE DETAILS AS REGARDS BOTH THE DEDUCTIONS AND ALSO THAT WANT OF SUCH ENQUIRY HAD RESULTED IN PREJUDICE TO THE INTERESTS OF THE REVENUE. TO THIS EXTENT, THE INITIATION OF ACTION UNDER SECTION 263 BY THE COMMISSIONER WAS QUITE PROPER. 4.4. IN THE CASE OF CIT VS. SOUTH INDIA SHIPPING CORPN. LTD. [233 ITR 546], HONBLE MADRAS HIGH COURT HELD AS UNDER :- EVEN ASSUMING THAT THE INCOME-TAX OFFICER HAD CALLED FOR THE PARTICULARS, WHICH WERE ALSO FURNISHED BY THE ASSESSEE, IF THE INCOME-TAX OFFICER WITHOUT PROBING INTO THE MATTER FURTHER HAD ALLOWED THE CLAIM OF THE ASSESSEE FOR WEIGHTED DEDUCTION AND IF THE COMMISSIONER ON THE BASIS OF MATERIALS FORMED AN OPINION THAT THE GRANT OF ALLOWANCE MADE BY THE OFFICER WAS ERRONEOUS AND NOT WARRANTED BY LAW, THE JURISDICTION OF THE COMMISSIONER UNDER SECTION 263 OF THE ACT WAS NOT OUSTED. THE COMMISSIONER MAY NOT HAVE RECORDED HIS FINAL CONCLUSION, BUT THE QUESTION FOR EXERCISING THE POWER OF REVISION BY THE COMMISSIONER IS WHETHER THE ORDER OF THE ASSESSING OFFICER CAN BE REGARDED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT MAY BE ERRONEOUS IN LAW OR IN FACT. IT MAY BE ERRONEOUS IN THE SENSE THAT THE INCOME-TAX OFFICER HAD PASSED THE ORDER WITHOUT PROPERLY CONDUCTING THE INQUIRY IN COMPLETION OF THE ASSESSMENT AND THE ORDER MAY ALSO BE ERRONEOUS WHEN THE EXPENDITURE ALLOWED WAS AGAINST THE PROVISIONS OF LAW. 4.5. WE FURTHER FIND THAT THE SPECIAL BENCH OF I.T.A.T., CHENNAI HAS ALSO DECIDED THE IDENTICAL ISSUE IN THE CASE OF RAJALAKSHMI MILLS LTD. VS. ITO [121 ITD 343 (CHENNAI-SB)], WHEREIN THE I.T.A.T. HELD AS UNDER :- IT IS NOT NECESSARY FOR THE COMMISSIONER TO MAKE FURTHER ENQUIRIES BEFORE CANCELING THE ASSESSMENT ORDER OF THE ASSESSING OFFICER. THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE STATEMENTS MADE BY THE ASSESSEE IN HIS RETURN. THE REASON IS OBVIOUS. UNLIKE THE CIVIL COURT WHICH IS NEUTRAL TO GIVE A DECISION ON THE BASIS OF EVIDENCE PRODUCED BEFORE IT, AN ASSESSING OFFICER IS NOT ONLY AN ADJUDICATOR BUT IS ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE AN INQUIRY. THE MEANING TO BE GIVEN TO THE WORD ERRONEOUS IN SECTION 263 EMERGES OUT OF THIS CONTEXT. THE WORD ERRONEOUS IN THAT SECTION INCLUDES CASES WHERE THERE HAS BEEN FAILURE TO MAKE THE NECESSARY INQUIRIES. IT IS ( WORD TO PDF CONVERTER - UNREGISTERED ) HTTP://WWW.WORD-TO-PDF-CONVERTER.NET INCUMBENT ON THE ASSESSING OFFICER TO INVESTIGATE THE FACTS STATED IN THE RETURN WHEN CIRCUMSTANCES MAKE SUCH AN INQUIRY PRUDENT AND THE WORD ERRONEOUS IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN ENQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. IN THE INSTANT CASE, THE ASSESSING OFFICER FAILED TO MAKE ANY ENQUIRY IN REGARD TO THE ALLOWABILITY OF THE PROVISION FOR GRATUITY. AS SUCH, THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THEREFORE, THE CONDITIONS PRECEDENT FOR ASSUMING JURISDICTION UNDER SECTION 263 DID EXIST IN THE FACTS OF THE INSTANT CASE. 4.6 THE APEX COURT IN THE CASE OF SMT. TARA DEVI AGGARWAL VS. CIT, 88 ITR 323 (SC) HAS HELD THAT THE CIT MAY CONSIDER AN ORDER OF THE AO TO BE ERRONEOUS NOT ONLY IT CONTAINS SOME APPARENT ERROR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT BUT ALSO BECAUSE IT IS A STEREO TYPED ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS STATED IN HIS RETURN AND FAILS TO MAKE ENQUIRIES WHICH ARE CALLED FOR IN THE CIRCUMSTANCES OF THE CASE. THE AO IS NOT ONLY AN ADJUDICATOR BUT IS ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIRY. THE MEANING TO BE GIVEN TO THE WORD ERRONEOUS IN SECTION 263 EMERGES OUT OF THIS CONTEXT. 4.7 NO CONTRARY DECISION IS BROUGHT TO OUR KNOWLEDGE. IN VIEW OF THE ABOVE, WE UPHOLD THE ORDER OF LD CIT. 5. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 23 RD JULY, 2010 SD/- SD/- (K.K.GUPTA) (D.K.TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : JULY, 2010 PARIDA COPY TO : 1. ASSESSEES- 2. ASSESSING OFFICER 3. CIT, 4. D.R., ITAT, CUTTACK. TRUE COPY BY ORDER ( WORD TO PDF CONVERTER - UNREGISTERED ) HTTP://WWW.WORD-TO-PDF-CONVERTER.NET SR. PVT. SECRETARY