Friends Engineers, V. CIT, Ghaziabad.,

ITA 1960/DEL/2006

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8276 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 22-06-2009
• Assessment Year: 2001-2002
• Appeal Filed On: 30-05-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M L MEENA
• Assessee Lawyers: A K MITTAL
• Keywords: Gift; Opportunity of being heard; Tax effect; Set aside
• Section: 263; 143(3); 207

Judgement Text

I.T.A. NO1960/DEL/06 1/6 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H NEW DELHI) BEFORE SHRI A.D. JAIN, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.1960 /DEL/06 ASSESSMENT YEAR : 2001-02 M/S FRIENDS ENGINEERS, CIT, D-16, KAVI NAGAR INDL. AREA, GHAZIABAD. GHAZIABAD. V. (APPELLANT) (RESPONDENT) PAN /GIR/NO.AAAFF3119M APPELLANT BY : SHRI A.K. MITTAL, C.A. RESPONDENT BY : SHRI ML MEENA, SR. DR. ORDER PER A.K. GARODIA, AM: THIS IS AN ASSESSEE'S APPEAL DIRECTED AGAINST THE O RDER UNDER SECTION 263 PASSED BY LD CIT, GHAZIABAD DATED 28.3.2006. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER :- 1. THE ORDER OF LD CIT IS BAD IN LAW AND ON FACTS. 2. THE LD CIT HAS ERRED IN LAW AND ON FACTS IN PAS SING THE ORDER U.S 263 OF THE ACT. 3. THE LD CIT HAS ERRED BOTH IN LAW AND ON FACTS I N CANCELING THE ASSESSMENT ORDER PASSED BY LD ASSESSING OFFICER UND ER SECTION 143(3) OF THE ACT. . I.T.A. NO.196006/DEL/ 2/6 4. THE LD CIT HAS ERRED BOTH ON FACTS AND ON LAW I N PASSING THE ORDER UNDER SECTION 263 DESPITE THE FACT THAT DETAILED E XAMINATION OF THE ISSUE WAS UNDER TAKEN BY LD ASSESSING OFFICER DURIN G THE PROCEEDINGS U/.S 143(2). 5. THE LD CIT HAS ERRED BOTH ON FACTS AND IN LAW I N ALLEGING THAT THE LD ASSESSING OFFICERS ASSESSMENT ORDER IS ERRONEOUS A ND PREJUDICIAL TO THE INTEREST OF REVENUE. 6. THE LD CIT HAS ERRED IN LAW AND ON FACTS IN FAI LING TO APPRECIATE THAT INTEREST FREE LOAN WAS GIVEN OUT OF NON INTEREST BE ARING FUNDS AVAILABLE WITH THE APPELLANT. 3. BRIEFLY STATED, THE FACTS ARE THAT IN THIS CASE, RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 31.10.2001 SHOWING NET INCOME OF RS .7170/- AND THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF T HE ACT ON 17.2.2004 ON A TOTAL INCOME OF RS.22,170/-. SUBSEQUENTLY, NOTICE UNDER SECTION 263 OF THE IT ACT AS ISSUED BY LD CIT, GHAZIABAD ON 28.2.2006. IN THE SAID NOTICE, IT HAS BEEN STATED BY THE LD CIT THAT THE ASSESSEE FIRM H AS ADVANCED A SUM OF RS.4 LAKHS AS INTEREST FREE LOAN TO SMT. SANGEETA GUPTA W/O SHRI PARVEEN KUMAR, PARTNER. IT WAS ALSO NOTED THAT THE LOAN WAS ADVANC ED DURING THE PRECEDING YEAR. THE PARTNER OF THE ASSESSEE FIRM HAS CHARGED INTERE ST OF RS.93,262/- AT THE RATE OF 18% PER ANNUM ON OPENING BALANCE OF RS.5,18,147/ -. IT IS ALSO NOTED BY LD CIT IN THE SAID NOTICE THAT INSTEAD OF WITHDRAWING HIS OWN MONEY AND ADVANCING THE SAME TO HIS WIFE, THE PARTNER HAS ADVANCED FIRM S FUNDS AND CHARGED INTEREST FOR HIMSELF FROM THE FIRM. THE LD AR OF THE ASSESSE E HAS APPEARED BEFORE LD CIT AND AFTER CONSIDERING HIS SUBMISSION, LD CIT H AS SET ASIDE THE ASSESSMENT ORDER AND RESTORED THE MATTER BACK TO THE FILE OF T HE ASSESSING OFFICER FOR PASSING A FRESH ASSESSMENT ORDER AFTER CONSIDERING ALL THE MATERIAL ON RECORD AND AFTER GIVING THE ASSESSEE REASONABLE OPPORTUNITY TO BE HE ARD. AGAINST THIS ORDER OF LD CIT UNDER SECTION 263, THE ASSESSEE IS IN APPEAL B EFORE US. . I.T.A. NO.196006/DEL/ 3/6 4. IT IS SUBMITTED BY LD AR OF THE ASSESSEE THAT TH IS ISSUE WAS VERY MUCH EXAMINED BY THE ASSESSING OFFICER IN THE ORIGINAL A SSESSMENT PROCEEDINGS AND IN THIS REGARD, OUR ATTENTION WAS DRAWN TO PAGE N.1 & 2 OF THE PAPER BOOK WHICH CONTAIN THE WRITTEN SUBMISSIONS DATED 10.2.2004 FIL ED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER WHEREIN THE ASSESSEE HAS EXPLAINE D REGARDING ADVANCING OF INTEREST FREE LOAN OF RS.4 LAKHS IN THE PRECEDING Y EAR TO THE WIFE OF THE PARTNER OF THE ASSESSEE FIRM. IT WAS THE SUBMISSION OF THE LD AR OF THE ASSESSEE THAT SINCE THE ISSUE WAS EXAMINED BY THE ASSESSING OFFICER, TH E ASSESSMENT ORDER CANNOT BE SAID TO BE ERRONEOUS AND IN SUPPORT OF THIS CONT ENTION, RELIANCE WAS PLACED ON THE FOLLOWING JUDGMENTS:- A) UNIQUE AUTOFELTS PVT. LTD. V. ITO 207 TIOL-330- ITAT(DEL.). B) RED ROSE ENTERPRISES V. CIT, IN I.T.A. NO. 117/ M/2004. 5. AS AGAINST THIS, IT IS SUBMITTED BY LD DR OF THE REVENUE THAT SUBMISSIONS MIGHT HAVE BEEN MADE BY THE ASSESSEE BEFORE THE ASS ESSING OFFICER BUT HE HAS NOT EXAMINED THIS ISSUE AT ALL AS CAN BE SEEN FROM THE ASSESSMENT ORDER AND HENCE THE ASSESSMENT ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE BECAUSE PROPER ENQUIRIES WERE NOT CARRIED O UT BY THE ASSESSING OFFICER. HE SUPPORTED THE ORDER OF LD CIT. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE A UTHORITIES BELOW. WE FIND THAT IN THE ASSESSMENT ORDER DATED 17.2.2004, THERE IS NO DISCUSSION AT ALL REGARDING THIS ASPECT OF THE MATTER. THE ASSESSING OFFICER HAS MENTIONED REGARDING HIS ENQUIRY ABOUT THE GP PERCENTAGE IN TH E PRESENT YEAR AS COMPARED TO EARLIER YEARS. THERE IS NO MENTION REGARDING ANY ENQUIRY MADE BY THE ASSESSING OFFICER WITH REGARD TO INTEREST FREE LOAN GIVEN BY THE ASSESSEE FIRM TO SMT. SANGEETA GUPTA, W/O SHRI PARVEEN KUMAR, PARTNE R. IN THE SAID SUBMISSION OF THE ASSESSEE DATED 10.2.2004, IT WAS THE CLAIM O F THE ASSESSEE THAT THE ASSESSEE HAD GIVEN THE INTEREST FREE ADVANCE OUT OF INTEREST FREE FUNDS BUT THIS . I.T.A. NO.196006/DEL/ 4/6 ASPECT REQUIRES EXAMINATION AS TO WHETHER THIS CONT ENTION IS CORRECT OR NOT. AS PER THIS LETTER DATED 10.2.2004, NO EVIDENCE HAS BE EN FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER IN SUPPORT OF THIS CON TENTION THAT THE ASSESSEE HAS GIVEN INTEREST FREE ADVANCE TO SMT. SANGEETA GUPTA OUT OF INTEREST FREE FUNDS. BEFORE US ALSO, NO SUCH EVIDENCE IS PRODUCED. BEFOR E LD CIT ALSO, SIMILAR CONTENTION WAS RAISED THAT INTEREST ADVANCES WERE G IVEN OUT OF INTEREST FEE FUNDS OF THE ASSESSEE FIRM BUT BEFORE HIM ALSO, NO EVIDEN CE HAS BEEN PRODUCED BY THE ASSESSEE. LD CIT HAS DIRECTED THE ASSESSING OFFICER TO DECIDE THIS ISSUE AFRESH AFTER CONSIDERING ALL THE MATERIAL AVAILABLE ON REC ORD AND AFTER GIVING THE ASSESSEE REASONABLE OPPORTUNITY TO BE HEARD. UNDER THESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT PROPER ENQUIRIES WERE NOT C ARRIED OUT BY THE ASSESSING OFFICER TO FIND OUT AS TO WHETHER SUCH INTEREST FRE E LOAN WAS ADVANCED BY THE ASSESSEE FIRM OUT OF INTEREST FREE FUNDS OR OUT OF INTEREST BEARING BORROWED FUNDS. IN VIEW OF THIS FACT THAT PROPER ENQUIRIES WERE NOT CARRIED OUT BY THE ASSESSING OFFICER, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AS WELL AS PREJU DICIAL TO THE INTEREST OF REVENUE AND HENCE WE FEEL THAT NO INTERFERENCE IS C ALLED FOR IN THE ORDER OF LD CIT PASSED BY HIM UNDER SECTION 263. WE, THEREFORE , CONFIRM THE SAME. 7. REGARDING JUDGMENTS CITED BY LD AR OF THE ASSESS EE, WE FIND THAT THESE JUDGMENTS DO NOT HELP THE ASSESSEE IN THE PRESENT C ASE BECAUSE THE FACTS ARE DIFFERENT. IN THE CASE OF UNIQUE AUTOFELTS PVT. LTD . (SUPRA), IT IS NOTED BY THE TRIBUNAL IN PARA NO.15 OF THIS JUDGMENT THAT PROPER ENQUIRY HAS BEEN MADE BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT OR DER AND PROPER REPLY WAS GIVEN BY THE ASSESSEE AND THE ASSESSING OFFICER HAS MADE THE ASSESSMENT ONLY AFTER EXAMINING THE MATERIAL PRODUCED BEFORE HIM. I N THE PRESENT CASE, NOTHING HAS BEEN BROUGHT ON RECORD BEFORE US TO SHOW AS TO WHAT WAS THE EXACT QUERY MADE BY THE ASSESSING OFFICER IN REPLY OF WHICH THE ASSESSEE HAS FURNISHED INFORMATION CONTAINED IN A LETTER DATED 10.2.2004 A ND WE FIND THAT IN THE SAID REPLY DATED 10.2.2004, IT IS THE SUBMISSION OF THE ASSESSEE THAT THE ASSESSEE HAS GIVEN INTEREST FREE ADVANCE OUT OF INTEREST FREE FU NDS BUT NO EVIDENCE IN THIS . I.T.A. NO.196006/DEL/ 5/6 REGARD HAS BEEN FURNISHED BY THE ASSESSEE BEFORE TH E ASSESSING OFFICER OR BEFORE CIT OR BEFORE US. HENCE, THIS JUDGMENT IS NOT APPLICABLE IN THE PRESENT CASE. 8. REGARDING SECOND JUDGMENT RENDERED IN THE CASE O F RED ROSE ENTERPRISES (SUPRA) ALSO, WE FIND THAT THE FACTS AR E DIFFERENT. IN THAT CASE, THE CASE WAS SELECTED FOR SCRUTINY TO EXAMINE THE SOURC E OF INVESTMENT IN PURCHASE OF COMPUTERS AND ALSO TO EXAMINE THE PAYMENT OF COM MISSION AND BROKERAGE AND GIFT/PRESENTATION. IT WAS THE ALLEGATION OF THE REVENUE THAT THE ASSESSMENT WAS COMPLETED WITHOUT EXAMINATION OF THE SAME BUT I T IS NOTED BY THE TRIBUNAL THAT THE ASSESSING OFFICER HAS ACCEPTED THE CLAIM R EGARDING PAYMENT OF COMMISSION AND BROKERAGE AND ALSO ITEMS OF GIFTS/PR ESENTATION AFTER DUE EXAMINATION AND THERE WAS NO ERROR COMMITTED BY THE ASSESSING OFFICER. IT WAS ALSO NOTED BY THE TRIBUNAL IN THAT CASE THAT THE FA CT, THAT THERE WAS NO MENTION IN THE ASSESSMENT ORDER ABOUT DETAILS FILED WITH REGAR D TO THE SAME DID NOT MAKE THE ASSESSMENT ORDER ERRONEOUS. IN THE PRESENT CAS E ALSO , WE ARE NOT GOING ON THIS BASIS ALONE THAT THERE IS NO MENTION IN THE A SSESSMENT ORDER REGARDING DETAILS FILED BY THE ASSESSEE BUT IN THE PRESENT CA SE, WE FIND THAT EVEN THIS SUBMISSION OF THE ASSESSEE THAT INTEREST FREE LOAN WAS ADVANCED OUT OF INTEREST FREE FUNDS IS A SUBMISSION OF THE ASSESSEE FOR WHIC H NO EVIDENCE HAS BEEN FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFI CER OR BEFORE LD CIT OR BEFORE US. WE FEEL THAT ONCE IT WAS SPECIFICALLY P OINTED OUT TO THE ASSESSING OFFICER BY THE ASSESSEE THAT INTEREST FREE LOANS WE RE GIVEN BY THE ASSESSEE TO THE WIFE OF A PARTNER, THE ASSESSING OFFICER SHOULD HAVE CARRIED OUT PROPER ENQUIRY AS TO WHETHER SUCH INTEREST FREE ADVANCE WA S GIVEN OUT OF INTEREST FREE FUNDS OR OUT OF INTEREST BEARING FUNDS. SINCE NOTH ING HAS BEEN BROUGHT ON RECORD TO SHOW THAT ANY SUCH ENQUIRY WAS MADE BY THE ASSES SING OFFICER, WE FEEL THAT THIS TRIBUNAL ORDER IS ALSO NOT APPLICABLE IN THE P RESENT CASE. ONE MORE CONTENTION WAS RAISED BY LD AR OF THE ASSESSEE ON T HE BASIS OF THIS JUDGMENT RENDERED IN THE CASE OF RED ROSE ENTERPRISES (SUPRA ) THAT AS PER THIS JUDGMENT, PROVISION OF SECTION 263 SHOULD NOT BE RESORTED TO FOR SUCH TECHNICAL REASONS AND . I.T.A. NO.196006/DEL/ 6/6 THAT TOO WHERE TAX EFFECT WAS NOMINAL. IT WAS THE S UBMISSION THAT IN THE PRESENT CASE ALSO, THE TAX EFFECT IS NOMINAL AND IT IS ABOU T RS.20,000/- AND ODD. REGARDING THIS CONTENTION OF THE LD AR OF THE ASSES SEE, WE FEEL THAT THE OBSERVATION OF THE TRIBUNAL IN THE CASE OF RED ROSE ENTERPRISES (SUPRA) IS BASED ON THE FACTS OF THAT CASE. IN THE PRESENT CASE, THE REASON FOR INVOKING PROVISIONS OF SECTION 263 ARE NOT TECHNICAL REASONS BUT OBJECT ION OF THE REVENUE IS THAT INTEREST FREE LOANS WERE GIVEN TO THE PARTNERS WIF E OUT OF INTEREST BEARING FUNDS AND THE CLAIM OF THE ASSESSEE IS THAT SUCH INTEREST FREE ADVANCES WERE GIVEN OUT OF INTEREST FREE FUNDS, WE ALSO FIND THAT THE MATTE R WAS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER BY LD CIT FOR A FRESH DECISI ON AFTER EXAMINING THE MATERIAL AVAILABLE ON RECORD AND AFTER PROVIDING ADEQUATE OP PORTUNITY OF BEING HEARD TO THE ASSESSEE AND HENCE IT CANNOT BE SAID THAT THE R EASONS FOR INVOKING SECTION 263 WERE TECHNICAL REASONS AND HENCE THIS ARGUMENT IS ALSO WITHOUT ANY SUBSTANCE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE OF HEARING I.E. 22.6.2009. SD/- SD/- (A.D. JAIN) (A.K. GARODIA) JUDICIAL,MEMBER ACCOUNTANT MEMBER DT. 22..6.2009. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).