GAUTAM PREMISES P.LTD, MUMBAI V. ITO WD 2(1)(4), MUMBAI

ITA 1909/MUM/2012

• Counselvise Citation: 190919914 RSA 2012
• Duration Of Justice: 2 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 22-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 20-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Assessee Lawyers: RAHUL HAKANI; DR K SHIVARAM
• Keywords: Business expenditure
• Section: 263; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNALG BENCH, MUMB AI BEFORE SHRI D.MANMOHAN, VP AND SHRI D. KARUNAKARA R AO, AM ITA NO. 1909/MUM/2012 ASSESSMENT YEAR-2008-09 GAUTAM PREMISES PVT.LTD. NATVARLAL VEPARI & CO., CHARTERED ACCOUNTANT ORICON HOUSE, 4 TH FLOOR, 12,K, DUBASH MARG, FORT, MUMBAI-400023 / VS. THE COMMISSIONER OF INCOME-TAX-2, ROOM NO.344, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI- 400020 ./ PAN :AABCG1676L ( /ASSESSEE ) .. ( / RESPONDENT ) / ASSESSEE BY : DR. K. SHIVARAM, & SHRI RAHUL HAKANI / REVENUE BY : SMT. PARMINDER CIT-DR / DATE OF HEARING : 22/09/2014 / DATE OF PRONOUNCEMENT : 22/09/2014 / ORDER PER D. KARUNAKARA RAO, AM: THIS APPEAL BY THE ASSESSEE IS FILED AGAINST THE OR DER OF THE CIT- 2, MUMBAI DATED 20/02/2012 U/S.263 OF THE ACT. ASS ESSEE RAISED GROUND QUESTIONING THE LEGALITY TO THE JURISDICTION OF CIT V/S U/S 263 OF THE ACT. THE LD. COUNSEL MADE VARIOUS ARGUMENTS AND RESTRICTED TO THE SAID LEGAL ISSUES RELATING TO THE VALIDITY OF T HE REVISION ORDER PASSED U/S 263 OF THE ACT. 2. BRINGING OUR ATTENTION TO THE VARIOUS DOCUMENTS/ LETTERS IN THE CORRESPONDENCE BETWEEN THE ASSESSEE AND THE ASSESSI NG OFFICER DURING THE ASSESSMENT PROCEEDINGS, LD. COUNSEL MEN TIONED THAT THE CIT NOTED THAT ASSESSEES BUSINESS HAS NOT YET STAR TED AND THEREFORE, THE LOSSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF OP ERATIONAL AND OTHER EXPENSES SHOULD NOT BE ALLOWED AS BUSINESS EX PENSES. THEREFORE, SUCH BUSINESS EXPENSES SHOULD NOT BE ALL OWED TO BE SET OFF 2 ITA NO.1909/MUM/2012. AGAINST RENTAL INCOME EARNED BY THE ASSESSEE IN THE CURRENT YEAR. THE CIT IS OF THE OPINION VIDE THE REVISION ORDER PARA 9, THAT THE ASSESSING OFFICER DID NOT CONDUCT APPROPRIATE ENQUI RY AND HAS NOT APPLIED HIS MIND TO THE ISSUES MENTIONED IN THE REV ISION ORDER BEFORE THE CONCLUSION OF THE ASSESSMENT. THE SAID PARA 9 READS AS UNDER. AS THE ABOVE DISCUSSION WOULD SHOW THE ASSESSMENT ORDER IN QUESTION SUFFERS FROM LACK OF ENQUIRY AS WELL AS INAPPROPRIA TE APPLICATION OF MIND. IT HAS BEEN NOW JUDICIALLY ACCEPTED THAT LACK OF ENQUI RY LEADS TO AN ERRONEOUS ORDER. IN THE PRESENT CASE, DUE TO LACK OF ENQUIRI ES, IT HAS LED TO ASSESSEE BEING ALLOWED CERTAIN EXPENSES AGAINST THE HEAD BU SINESS INCOME AND CLEARLY STATING THEM AGAINST THE INCOME FROM HOUSE PROPERTY AND THEREFORE HAS REDUCED THE ASSESSEES TAXABLE INCOME. HENCE T HE ORDER IS PREJUDICIAL TO THE INTEREST OF REVENUE. IT IS NOT A CASE OF EITHE R INADEQUATE ENQUIRIES OR A CASE WHERE IN INTERPRETING LAW OR DRAWING AN INFERE NCE, THE A.O. HAS TAKEN A VIEW WHICH IS SOUGHT TO BE SUPER IMPOSED BY ANOTHER VIEW. IT IS A CASE OF PURE AND SIMPLE LACK OF ENQUIRY AND CONSEQUENTLY ER RONEOUS ASSESSMENT AFFECTING THE REVENUE ADVERSELY. NO EVIDENCE OF HA VING DONE ANY BUSINESS ACTIVITY DURING THE YEAR UNDER CONSIDERATION WHICH LED TO INCURRING OF LOSSES IS THERE ON RECORD FOR THE A.O. TO SET IT OFF AGAIN ST INCOME FROM OTHER HEADS. 3. BEFORE US, THE LD. COUNSEL SUBMITTED THAT THE AS SESSING OFFICER ALLOWED THE CLAIM OF THE ASSESSEE AFTER VERIFYING T HE VARIOUS PARTICULARS, DETAILS AND BRIEFS. DURING THE ASSESSM ENT PROCEEDINGS, AS PER THE LD.COUNSEL, AO ISSUED A DETAILED QUESTIO NNAIRE CONTAINING 25 ITEMS OF ENQUIRY AND ONE OF SUCH ITEM RELATES TO THE BUSINESS ACTIVITY OF THE ASSESSEE. FOR THIS PURPOSE, HE BRO UGHT OUR ATTENTION TO PAGE 3 OF THE PAPER BOOK AND READ OUT THE ITEM 6 , THAT RELATES TO THE BUSINESS ACTIVITY I.E. A DETAILED NOTE ON NATURE OF THE BUSINESS ACTIVITIES . RELYING ON THIS ITEM 6, THE LD. COUNSEL MENTIONED THAT THE ASSESSING OFFICER IS AWARE OF TH E BUSINESS ACTIVITY OF THE ASSESSEE AND ON APPLICATION OF MIND TO THE S AID BUSINESS ACTIVITY OF THE ASSESSEE, THE ASSESSING OFFICER ALL OWED THE BUSINESS EXPENSES AND CLAIM OF INTER-HEAD SET OFF OF AGAINST THE RENTAL INCOME OF THE ASSESSEE. FURTHER, HE ALSO BROUGHT OUR ATTEN TION TO THE 3 ITA NO.1909/MUM/2012. COMPUTATION OF INCOME PLACED AT PAGE 24 OF THE PAPE R BOOK WHEREIN LOSS WAS SET OFF AGAINST THE INCOME FROM HOUSE PRO PERTY BEFORE ARRIVING THE TOTAL LOSS RETURNED BY THE ASSESSEE IN RETURN OF INCOME COPY OF WHICH IS PLACED AT PAGE 28 OF THE PAPER BOO K. HE ALSO BROUGHT OUR ATTENTION TO THE VARIOUS OTHER DOCUMENT S TO SUGGEST THAT THE ASSESSING OFFICER ISSUED QUESTIONNAIRE TO ENQUI RE INTO VARIOUS ASPECTS OF THE ALLEGED CLAIM OF THE ASSESSEE. IN T HESE CIRCUMSTANCES AS PER THE LD. COUNSEL, THE CLAIM OF THE CIT THAT A O HAS NOT APPLIED HIS MIND IS NOT SUSTAINABLE. FURTHER, ASSESSEES CO UNSEL BROUGHT OUR ATTENTION TO PAGE 18 OF THE PAPER BOOK WHICH CONTAI NS THE DETAILS OF OPERATIONAL BUSINESS EXPENSES FOR VARIOUS ASSESSMEN T YEARS INCLUDING THAT OF THE ONES RELATING TO THE CURRENT ONE. HE ALSO BROUGHT OUR ATTENTION TO THE NOTES OF ACCOUNTS VARI OUS OTHER SUBMISSIONS AVAILABLE BEFORE THE AO BEFORE ASSESSME NT IS MADE. IT IS A CASE OF THE LD. COUNSEL THAT SUCH CLAIM OF THE AS SESSEE WAS ALLOWED FOR THE YEAR IN THE PAST AND THEREFORE, THE CLAIM O F THE ASSESSEE SHOULD NOT BE DISTURBED IN THE YEAR UNDER CONSIDERA TION. 4. THE LD. COUNSEL RELIED ON THE VARIOUS CASE LAWS FOR THE PROPOSITION THAT PROVISIONS OF SECTION 263 CANNOT BE INVOKED FO R THE REASONS THAT THE CIT HAS DIFFERENT VIEW TO TAKE. IN THIS REGARD, HE RELIED ON THE CASE OF VINOD KUMAR GOEL HUF IN ITA NO.1651/MUM/2011 DATED 08/01/2014 (MUM) . RELYING ON THE HONBLE SUPREME COURT JUDGMENT IN THE CASE OF MAX INDIA LTD. 295 ITR 282 (SC), LD. COUNSEL MENTIO NED THAT EVERY LOSS OF REVENUE, AS CONSEQUENCE OF AN ORDER OF THE ASSESSIN G OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE. REFERRING TO THE HONBLE SUPREME COURT JUDGMENT IN THE CASE MALABAR INDUSTRI AL CO. LTD. 243 ITR 83 (SC), THE LD. COUNSEL MENTIONED THAT WHEN THE AO HAS TAKEN ONE VIEW AFTER EXAMINING THE PAPERS FILED BY THE ASSESSEE. IN THIS CASE, WHEN THE CIT HAS DIFFERENT VIEW TO TAKE, THE ORDER CANNOT BE SAID TO BE ERRONEOUS. REFERRING TO THE JUDGMENT OF HONBLE BOMBAY HIGH CO URT IN THE CASE 4 ITA NO.1909/MUM/2012. OF GABRIAL INDIA LTD. 203 ITR 108 (MUM), LD. COUNSE L MENTIONED THAT THE DECISION TAKEN BY THE AO AFTER DUE CONSIDERATIO N OF THE FACTS AND EXPLANATION OF THE ASSESSEE, THE ORDER OF THE AO CA NNOT BE TREATED AS ERRONEOUS SIMPLY BECAUSE THE AOS ORDER IS NOT ELAB ORATE. 5. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED ON THE ORDER OF THE CIT-2. 6. ON HEARING BOTH THE PARTIES, WE FIND THAT THE AS SESSMENT WAS ORIGINALLY COMPLETED U/S. 143(3) OF THE ACT AND ALL OWED THE CLAIM OF THE ASSESSEE WITH REGARD TO THE COMMENCEMENT OF BUS INESS AS WELL AS SET OFF OF THE OPERATIONAL AND OTHER EXPENSES AGAIN ST THE RENTAL INCOME OF THE ASSESSEE. UNDISPUTEDLY, THE PAPERS P LACED IN THE PAPER BOOK SUGGEST THAT THE AO ISSUED QUESTIONNAIRE AND RECEIVED THE REPLY OF THE ASSESSEE BEFORE THE ASSESSMENT IS COMPLETED ALLOWING THE SAID CLAIM OF THE ASSESSEE. THE PAPER REFERRED TO BY THE LD. COUNSEL BEFORE US, SUPPORTS THE ARGUMENTS OF THE LD . COUNSEL. IT IS ALSO TRUE THAT A DETAILED QUESTIONNAIRE WAS ISSUED AND THE ITEM 6 RELATES TO THE BUSINESS NATURE OF THE ASSESSEE. WH EN THIS ISSUE IS EXAMINED BY THE AO, IT IS UNDERSTANDABLE THAT THE A SPECT OF COMMENCEMENT OF BUSINESS ARE OBVIOUSLY STUDIED. DET AILS OF EXPENSES CLAIMED BY ASSESSEE ARE ALSO AVAILABLE TO THE AO DURING THE ASSESSMENT PROCEEDINGS. THE ISSUES RAISED BY THE C IT(A) WERE EXAMINED BY THE AO DURING THE ASSESSMENT PROCEEDING S BEFORE THE CLAIMS OF THE ASSESSEE WAS ALLOWED AFTER DUE APPLIC ATION OF MIND. IT IS THE SETTLED PRINCIPLES ON THE SCOPE OF PROVISIONS O F SECTION 263 OF THE ACT THAT THE CIT CANNOT SUBSTITUTE HIS VIEW,WHICH M AY BE BETTER VIEW, WITH THE ONE TAKEN BY THE ASSESSING OFFICER AFTER A PPLICATION OF MIND. 7. CONSIDERING THE ABOVE SETTLED NATURE OF SCOPE OF PROVISIONS OF SECTION 263 OF THE ACT, WE ARE OF THE OPINION, ON T HE FACTS OF THE CASE, THAT IT CANNOT BE STATED THAT AO HAS NOT APPLIED HI S MIND TO THE ISSUE 5 ITA NO.1909/MUM/2012. UNDER CONSIDERATION. THEREFORE, IN OUR VIEW THE OR DER OF THE CIT-2 IS UNSUSTAINABLE IN LAW. ACCORDINGLY, THE LEGAL ISSUE RAISED BY THE ASSESSEE IS ALLOWED. OTHER ISSUE, BEING CONSEQUEN TIAL IS DISMISSED AS ACADEMIC. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND SEPTEMBER, 2014. !' # $% &! ' 22ND ()*+),-)./ 2014 0 1 SD/- SD/- D.MANMOHAN D.KARUNAKARA RAO (VICE PRESIDENT) (ACCOUNTANT MEMBER) MUMBAI , DATED: 22 /09/2014 F{X~{T? P.S. !'234 54 / COPY OF THE ORDER FORWARDED TO : (1) 2678 / THE ASSESSEE; (2) / THE REVENUE; (3) 9: ; / THE CIT(A); (4) 9 / THE CIT, MUMBAI CITY CONCERNED; (5) 4<022=6/ =6/$ > / THE DR, ITAT, MUMBAI; (6) 0?7@ / GUARD FILE. 4 2 / TRUE COPY !' / BY ORDER A / B / (DY./ASSTT. REGISTRAR) =6/$ > / ITAT, MUMBAI,