Shri Mohmed Sarif M.Rangwal, Ahmedabad V. The CIT.,A'bad-VI, Ahmedabad

ITA 1941/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0383 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 07-10-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 12-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Assessee Lawyers: MUKESH M PATEL
• Keywords: Capital asset; Opportunity of being heard; Revenue expenditure; Capital expenditure; Set aside
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING: 7.10.09 DRAFTED ON: 7.10.2009 ITA NO.1941/AHD/2009 ASSESSMENT YEAR : 2004-2005 SHRI MOHMED SARIF M. RANGWALA PROP. M/S.AKIK DYE CHEM, ARFAT COMPOUND, B/H. SHRIRAM TEXTILE, NR.CHHIPA SOCIETY, DANILIMDA, AHMEDABAD. VS. COMMISSIONER OF INCOME TAX, AHMEDABAD-VI, AHMEDABAD. PAN/GIR NO. : AAKPR 0103R (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI MUKESH M. PATEL RESPONDENT BY: SHRI SHELLEY JINDAL SR. D.R. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF THE LD.CIT-VI, AHMEDABAD, DATED 02.03.2009. 2. THE APPEAL FILED BY THE ASSESSEE IS BARRED BY LIMITATION OF 34 DAYS. THE ASSESSEE HAS FILED AFFIDAVIT DATED 11.08.2009 WHERE IN IT HAS BEEN STATED THAT, THE ORDER PASSED BY CIT-VI, AHMEDABAD UNDER SECTION 26 3 FOR ASSESSMENT YEAR 2004- 05 WAS RECEIVED BY ASSESSEE ON 10.03.2009. MEANWHIL E, THE CONSTRUCTION WORK WAS BEING CARRIED OUT IN THE FACTORY FOR TWO AND A HALF MONTHS, HENCE AND ALL THE BOOKS AND PAPERS ALONG WITH THE ORDER UNDER SECTION 263 WAS BY MISTAKE OF THE STAFF OF THE FACTORY PUT ON THE SELVES. THE ASSESSEE TRIED T O TRACE THE ORDER FROM ALL CORNERS OF THE FACTORY BUT IT WAS NOT TRACED OUT. AFTER THE COMPLETION OF THE CONSTRUCTION ALL THE BOOKS OF ACCOUNTS AND OTHER PAPERS WERE TAKEN F ROM SELVES AND THE ORDER WAS FOUND WITH THESE PAPERS AND THE APPEAL WAS FILED ON 12.06.2009. IT WAS PRAYED THAT SINCE THE DELAY WAS UNINTENTIONAL AND WAS DUE TO BO NAFIDE MISTAKE, THE SAME MAY ITA NO.1941/AHD/ 2009 SHRI MOHMED SARIF M.RANGWALA ASST.YEAR -2004-2005 - 2 - BE CONDONED AND APPEAL BE ADMITTED FOR HEARING. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAD NO OBJECTION TO CONDONATION OF T HE DELAY IN FILING OF THE APPEAL BY THE ASSESSEE AND ADMITTING THE SAME FOR HEARING. WE THEREFORE, ARE OF THE VIEW THAT THE DELAY IN FILING THE APPEAL WAS ON ACCOUNT OF PLAUSIBLE REASONS AND CONDONE THE DELAY AND ADMIT THE APPEAL FOR HEARING. 3. IN THIS APPEAL, THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1) THE ORDER PASSED BY COMMISSIONER OF INCOME TAX HOLDING THE LEARNED ASSESSING OFFICER PASSED BY A.O.TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE WITHIN THE PROVISIONS OF SECTION 263 OF THE ACT, IS NOT JUSTIFIED AND REQUIRES TO BE QUASHED. 2) THE LEANED C.I.T. IS NOT JUSTIFIED IN DIRECTING THE A.O. TO REFRAME THE ASSESSMENT HOLDING THAT THE SAME WAS PASSED BY A.O. WITHOUT CARRYING OUT NECESSARY ENQUIRY ON THE ISSUE OF CLAIM OF BUILDING REPAIRS. 3) THE HON'BLE C.I.T. HAS DISREGARDED THE FACTS ON RECORD THAT THE SAID ORDER IS PASSED UNDER SECTION 143(3) OF THE ACT AFTER PROPER AND DETAILED SCRUTINY OF DETAILS/RECORDS AND CONTENTIONS OF THE ASSESSEE BEF ORE THE CIT IN ITS SUBMISSION DATED 19.02.2009. 4) THE ORDER PASSED BY CIT IS PRAYED TO THE QUASHE D. 5) YOUR APPELLANT RESERVES THE RIGHT TO ADD, ALTER OR AMEND ANY OF THE GROUNDS OF APPEAL. 4. SINCE, THE FACTS AND ISSUE INVOLVED IN THE ABOVE GROUNDS OF APPEAL ARE COMMON, THEY ARE BEING DISPOSED OF TOGETHER AS UNDE R. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE C.I.T. ISSUED SHOW CAUSE NOTICE UNDER SECTION 263 OF THE ACT ON 4.02.2009, WHEREIN IT WAS STATED THAT THE ASSESSEE HAS CLAIMED BUILDING REPAIRING EXPENSES OF RS.7,49,990/ - AND THAT THE WRITTEN DOWN VALUE OF THE BUILDING IS RS.11,68,654/- AND THAT TH E REPAIRING EXPENSES WORKS OUT TO 64% OF THE WRITTEN DOWN VALUE OF THE BUILDING. IT A PPEARS THAT THE LEARNED ASSESSING OFFICER HAS ALLOWED THE CLAIM WITHOUT ANY VERIFICATION AND WITHOUT CALLING FOR THE DETAILS OF EXPENDITURE. CONSIDERING THE SUB STANTIAL EXPENDITURE ON REPAIRS CLAIMED THE LEARNED ASSESSING OFFICER WAS EXPECTED TO CARRY OUT NECESSARY INQUIRIES FOR VERIFYING WHETHER THE EXPENDITURE WAS IN THE NATURE OF CAPITAL ITA NO.1941/AHD/ 2009 SHRI MOHMED SARIF M.RANGWALA ASST.YEAR -2004-2005 - 3 - EXPENDITURE. HOWEVER, IT APPEARS NO SUCH INQUIRY WA S MADE BY THE LEARNED ASSESSING OFFICER BEFORE ACCEPTING THE EXPENDITURE AS THE REVENUE EXPENDITURE. 6. IN REPLY TO THE SHOW CAUSE NOTICE THE ASSESSEE F ILED DETAILS OF REPAIRING WORK CARRIED OUT TOGETHER WITH THE COPIES OF BILLS ETC. AND SUBMITTED THAT REPAIRS TO THE BUILDING CARRIED OUT AND EXPENSES INCURRED ARE GENU INE AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THEREFORE, IT WAS SUBMITTED T HAT THE DEDUCTION FOR THE EXPENDITURE WAS RIGHTLY ALLOWED BY THE LEARNED ASSE SSING OFFICER AND THE PROPOSED ACTION UNDER SECTION 263 OF THE ACT SHOULD BE DROPP ED. 7. THE C.I.T. AFTER CONSIDERING THE SUBMISSIONS OBS ERVED THAT THE LEARNED ASSESSING OFFICER ALLOWED THE CLAIM FOR EXPENDITURE ON REPAIRS TO BUILDING WITHOUT ANY VERIFICATION AND WITHOUT CALLING FOR THE BASIC DETAILS. THE DETAILS OF REPAIR EXPENSES AS WELL AS COPIES OF THE BILLS ETC. SUBMIT TED NOW WITH THE REPLY DATED 19.02.2005 WERE NOT FILED BEFORE THE LEARNED ASSESS ING OFFICER. THUS, THE EXPENDITURE ON REPAIRS WAS ALLOWED BY THE LEARNED A SSESSING OFFICER WITHOUT MAKING NECESSARY INQUIRIES AND VERIFICATIONS. HENCE , THE CIT HELD THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF REVENUE WITHIN THE MEANING OF THE PROVISIONS OF SECTION 263 OF THE ACT. ACCORDINGLY, HE SET ASIDE THE ORDER OF THE LEARNED ASSESSING OFFICER AND REST ORED THE CLAIM OF REPAIR EXPENSES BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR FURTHER VERIFICATION WITH A DIRECTION TO CARRY OUT NECESSARY INQUIRIES A FTER ALLOWING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THEN DECIDE THE SAM E AFRESH. 8. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE AT THE TIME OF THE HEARING ARGUED THAT IT WILL BE SEEN FROM PAGE 7 TO 9 OF THE PAPER BOOK, CONTAINING COPY OF LETTER DATED 7.07.2006 ISSUED BY THE ACIT, CIRCLE -12, AHMEDABAD, WHEREIN INQUIRY ABOUT THE DETAILS OF BUILDING REPAIRS EXPEN SES OF RS.7,49,990/- WAS MADE IN PARA.15(C). FROM PAGE 10 TO 17 OF THE PAPER BOOK , WHEREIN REPLY DATED ITA NO.1941/AHD/ 2009 SHRI MOHMED SARIF M.RANGWALA ASST.YEAR -2004-2005 - 4 - 20.07.2006 OF THE ASSESSEE TO THE INQUIRY OF THE LE ARNED ASSESSING OFFICER IS FILED IT CAN BE SEEN THAT THE ASSESSEE FILED DETAILED COPY O F ACCOUNTS OF THE BUILDING REPAIRS EXPENSES OF RS.7,49,990/-. AFTER CONSIDERING THE SA ID DETAILS, THE LEARNED ASSESSING OFFICER ALLOWED THE CLAIM OF REPAIRING EXPENSES TO BUILDING OF THE ASSESSEE AS REVENUE EXPENDITURE. THEREFORE, THE CIT WAS NOT JUS TIFIED IN STATING IN HIS ORDER PASSED UNDER SECTION 263 OF THE ACT THAT THE LEARNE D ASSESSING OFFICER HAS ALLOWED THE CLAIM FOR DEDUCTION OF THE BUILDING REPAIRING E XPENSES WITHOUT ANY VERIFICATION AND WITHOUT EVEN CALLING FOR THE BASIC DETAILS AND THAT THE DETAILS OF REPAIRS EXPENSE AS WELL AS COPIES OF BILLS ETC. NOW FILED BY THE AS SESSEE BEFORE HIM ALONG WITH THE REPLY DATED 19.02.2009 WERE NOT FILED BEFORE THE LE ARNED ASSESSING OFFICER. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESS EE FURTHER SUBMITTED THAT IF THE LEARNED ASSESSING OFFICER IN THE ASSESSMENT ORD ER PASSED, DOES NOT STATE ABOUT THE DETAILED INQUIRY CARRIED OUT BY HIM BEFORE ALLO WING THE CLAIM OF EXPENDITURE TO THE ASSESSEE, THE ASSESSEE DOES NOT HAVE ANY CONTRO L OVER AS TO HOW THE ORDER SHOULD BE DRAFTED BY THE LEARNED ASSESSING OFFICER. HE SUBMITTED THAT ALL THE DETAILS FOR THE REPAIRING EXPENDITURE WERE FILED BY THE ASSESSEE AND WERE DULY CONSIDERED BY THE LEARNED ASSESSING OFFICER BEFORE ALLOWING DEDUCTION FOR THE SAME, AND THEREFORE, THE C.I.T. IS NOT JUSTIFI ED IN RESTORING THE MATTER BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR VERIFICAT ION AFRESH THE DETAILS OF REPAIRING EXPENDITURE. HE FURTHER ARGUED THAT WHERE TWO VIEWS ARE POSSIBLE AND LEARNED ASSESSING OFFICER ADOPT ONE OF THE POSSIBLE VIEWS T HAN THE CIT CANNOT SAY THAT THE VIEW TAKEN BY THE LEARNED ASSESSING OFFICER WAS WRO NG AND THEREFORE, THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER WAS ERRONEO US AND PREJUDICIAL IN THE INTEREST OF THE REVENUE. HE THEREFORE, PRAYED THAT THE ORDER OF THE CIT PASSED UNDER SECTION 263 SHOULD BE QUASHED. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND FULLY SUPPORTED THE ORDER OF THE CIT. ITA NO.1941/AHD/ 2009 SHRI MOHMED SARIF M.RANGWALA ASST.YEAR -2004-2005 - 5 - 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE ASSESSEE CLAIMED REPAIRING EXPENSES ON FACTORY BUILDING OF R S.7,49,990/- IN THE RETURN OF INCOME FILED. THE LEARNED ASSESSING OFFICER CALLED FOR THE DETAILS OF EXPENSES AND THE ASSESSEE IN RESPONSE TO THE SAME FILED DETAILED COPY OF ACCOUNTS OF BUILDING REPAIRING EXPENSE OF RS.7,49,990/-. THE LEARNED ASS ESSING OFFICER THEREAFTER, PASSED UNDER SECTION 143(3) ON 28.12.2006 ALLOWING THE CLAIM FOR EXPENDITURE ON REPAIRS TO FACTORY BUILDING. THEREAFTER, THE CIT IS SUED NOTICE UNDER SECTION 263 OF THE ACT ON 4.02.2009 TO THE ASSESSEE TO SHOW CAUSE WHY ACTION UNDER SECTION 263 OF THE ACT SHOULD NOT BE TAKEN AS EXPENDITURE OF RS .7,49,990/- WAS ALLOWED BY THE LEARNED ASSESSING OFFICER WITHOUT NECESSARY INQUIRI ES AS TO WHETHER THE EXPENDITURE WAS CAPITAL IN NATURE. THE ASSESSEE SUB MITTED THAT THE LEARNED ASSESSING OFFICER CALLED FOR THE REQUIRED DETAILS A S PER THE LETTER DATED 7.07.2006 DURING THE COURSE OF SCRUTINY ASSESSMENTS WHICH WER E FILED BY THE ASSESSEE ALONG WITH REPLY DATED 20.07.2006 AND BEING SATISFIED WIT H THE REPLY OF THE ASSESSEE, THE LEARNED ASSESSING OFFICER HAS ALLOWED DEDUCTION FOR THE EXPENDITURE CLAIMED BY THE ASSESSEE. THE CIT WAS NOT SATISFIED WITH THE S AID EXPLANATION AND OBSERVING THAT THE DETAILS OF EXPENDITURE AND BILLS ETC. FILE D BEFORE HIM WERE NOT FILED BEFORE THE LEARNED ASSESSING OFFICER AND THEREFORE, THE EX PENDITURE CLAIMED WAS ALLOWED BY THE LEARNED ASSESSING OFFICER WITHOUT VERIFICATI ON, SET ASIDE THE ORDER OF THE LEARNED ASSESSING OFFICER AND DIRECTED THE LEARNED ASSESSING OFFICER TO VERIFY THE EXPENDITURE BY MAKING NECESSARY INQUIRIES AND KEEPI NG IN VIEW THAT AS COMPARED TO THE WRITTEN DOWN VALUE OF THE BUILDING OF RS.11,68, 645/-, THE REPAIRING EXPENDITURE OF RS.7,49,990/- WAS 64% WHICH WAS SUBSTANTIAL EXPE NDITURE AND MAY BE CAPITAL EXPENDITURE. IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED ASSESSING OFFIC ER DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, REQUIRED THE ASSESSEE TO FI LE THE DETAILS OF REPAIRING EXPENDITURE AND THE ASSESSEE FILED COPY OF ACCOUNT OF BUILDING REPAIRING EXPENSES AND ALSO PRODUCED BILLS ETC. FOR VERIFICATION BEFOR E THE LEARNED ASSESSING OFFICER. ITA NO.1941/AHD/ 2009 SHRI MOHMED SARIF M.RANGWALA ASST.YEAR -2004-2005 - 6 - THE ASSESSEE HAS PLACED THE COPY OF ACCOUNT OF BUIL DING REPAIRING EXPENSES IN THE PAPER BOOK FILED BEFORE US AT PAGES 10 TO 17 OF THE PAPER BOOK AND HAS APPENDED A CERTIFICATE TO THE EFFECT THAT THE SAME WERE FILED BEFORE THE LEARNED ASSESSING OFFICER. THE LEARNED DEPARTMENTAL REPRESENTATIVE CO ULD NOT CONTROVERT THE ABOVE CERTIFICATE APPENDED TO THE PAPER BOOK BY FILING AN Y COGENT OR RELEVANT MATERIAL ON RECORD TO SHOW THAT THE DETAILS OF REPAIRING EXPENS ES WERE NOT FILED BEFORE THE LEARNED ASSESSING OFFICER. FURTHER, THE LEARNED AS SESSING OFFICER HAS ALLOWED THE CLAIM FOR DEDUCTION OF BUILDING REPAIRING EXPENSES TO THE ASSESSEE TREATING THE SAME AS REVENUE EXPENDITURE. THE LEARNED DEPARTMENT AL REPRESENTATIVE COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE EXPEN DITURE IN QUESTION WAS NOT INCURRED BY THE ASSESSEE ON REPAIRS TO BUILDING BUT WAS INCURRED FOR ACQUIRING ANY NEW CAPITAL ASSET. IN ABSENCE OF ANY SUCH MATERIAL BROUGHT ON RECORD IN OUR CONSIDERED OPINION, THE CIT WAS NOT JUSTIFIED IN SE TTING ASIDE THE ORDER OF THE LEARNED ASSESSING OFFICER ALLOWING THE CLAIM OF EXP ENDITURE TO THE ASSESSEE AND RESTORING THE MATTER TO THE LEARNED ASSESSING OFFIC ER WITH THE DIRECTION TO MAKE INQUIRY AFRESH IN THE MATTER. FURTHER, WHERE THE LE ARNED ASSESSING OFFICER HAD MADE INQUIRES AS REGARDS TO THE NATURE OF THE EXPEN DITURE INCURRED BY THE ASSESSEE AND ASSESSEE HAD GIVEN DETAILED EXPLANATION IN THAT REGARD, BY A LETTER IN WRITING, ALL THESE WERE PART OF THE RECORD OF THE CASE. EVIDENTL Y, THE CLAIM WAS ALLOWED BY THE LEARNED ASSESSING OFFICER ON BEING SATISFIED WITH T HE EXPLANATION OF THE ASSESSEE. THE DECISION OF THE LEARNED ASSESSING OFFICER COULD NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER, HE DID NOT MAKE AN ELA BORATE DISCUSSION IN THAT REGARD. FURTHER, THE CIT HIMSELF EVEN AFTER INITIATING PROC EEDINGS FOR REVISION AND HEARING THE ASSESSEE, COULD NOT SAY THAT THE ALLOWANCE OF T HE CLAIM OF THE ASSESSEE WAS ERRONEOUS AND THAT THE EXPENDITURE WAS NOT THE REVE NUE EXPENDITURE BUT AN EXPENDITURE OF CAPITAL NATURE. HE SIMPLY ASKED THE LEARNED ASSESSING OFFICER TO REEXAMINE THE MATTER THAT WAS NOT PERMISSIBLE. FUR THER, INQUIRY AND/OR FRESH DETERMINATION CAN BE DIRECTED BY THE CIT ONLY AFTER COMING TO THE CONCLUSION THAT THE EARLIER FINDING OF THE LEARNED ASSESSING OFFICE R WAS ERRONEOUS AND PREJUDICIAL OF ITA NO.1941/AHD/ 2009 SHRI MOHMED SARIF M.RANGWALA ASST.YEAR -2004-2005 - 7 - THE INTEREST OF THE REVENUE. WITHOUT DOING SO, HE D OES NOT GET THE POWER TO SET ASIDE THE ASSESSMENT. IN THE INSTANT CASE, THE CIT DID SO AND IT IS FOR THAT REASON, WE SET ASIDE THE ORDER OF THE CIT AND RESTORE BACK THE ORDER OF THE LEARNED ASSESSING OFFICER. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT AT THE CLOSE OF THE H EARING IN THE PRESENCE OF PARTIES ON 7/10/2009. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 7/10/2009 PARAS# COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-VI, AHMEDABAD. 5. THE DR, AHMEDABAD BENCH6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD