PSL LTD., MUMBAI V. M/s. CIT-7, MUMBAI

ITA 1965/MUM/2008

• Counselvise Citation: 196519914 RSA 2008
• Duration Of Justice: 3 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-11-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 18-03-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Revision of order; Depreciation; Additional depreciation; Assessment record
• Section: 263; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI J. SUDHAKAR REDDY, JUDICIAL MEMBER ITA NO. 1965/MUM./2008 (ASSESSMENT YEAR : 2005-06 ) M/S. PSL LIMITED PSL TOWERS, 615 MAKWANA ROAD, MAROL ANDHERI (E), MUMBAI 400 059 PAN AAACP2734K .. APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CIRCLE-7(1), MUMBAI .... RESPONDENT ASSESSEE BY : MR. M. SUBRAMANIAN REVENUE BY : MR. A.C. TEJPAL DATE OF HEARING 30.11.2011 DATE OF ORDER 23.12.2011 O R D E R PER J. SUDHAKAR REDDY, A.M. THIS APPEAL PREFERRED BY THE ASSESSEE, IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 28 TH FEBRUARY 2008, PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) BY THE COMMISSIONER OF INCOME TAX-VII, MUMBAI, FOR ASSESSMENT 2005-06. 2. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE IS A LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF STEE L PIPES, IRON AND WIRE MESH AND ANTI-CORROSIVE TREATMENT TO PIPELINES, ETC . IT FILED ITS RETURN OF PSL LIMITED ITA NO. 1965/MUM./2008 2 INCOME ON 28 TH OCTOBER 2005, DECLARING A TOTAL INCOME OF ` 17,89,12,116. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) O F THE ACT ON 24 TH MAY 2007, WHEREIN THE ASSESSING OFFICER MADE DISALLOWAN CE UNDER SECTIONS 14A, 37(4) OF THE ACT AS WELL AS CLAIM FOR ERECTION AND FABRICATION CHARGES. THE TOTAL TAXABLE INCOME WAS DETERMINED AT ` 18,37,99,773. THE COMMISSIONER ISSUED SHOW CAUSE NOTICE DATED 28 TH SEPTEMBER 2007 UNDER SECTION 263, PROPOSING REVISION OF THE ORDER PASSED UNDER SECTIO N 143(3) BY THE ASSESSING OFFICER DATED 24 TH MAY 2007, ON THE GROUND THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THE ASSESSEE SUBMITTED ITS REPLY. THE COMMISSIONER, VIDE ITS ORDER DATED 2 8 TH FEBRUARY 2008, REJECTED ALL THE CONTENTIONS OF THE ASSESSEE AND SE T ASIDE THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) AND DIRECTED THE ASSESSING OFFICER TO PASS ASSESSMENT ORDER AFRESH AFTER TAKING INTO CONSIDERA TION THE ASSESSEES SUBMISSIONS AND AFTER MAKING NECESSARY ENQUIRIES. A GGRIEVED, THE ASSESSEE FILED THIS APPEAL ON THE FOLLOWING GROUNDS. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE ID. CIT ERRED IN PASSING ORDER U/S 263, SETTING ASIDE T HE ORDER PASSED BY THE ASSESSING OFFICER AND DIRECTING HIM TO PASS A F RESH ORDER. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT ERRED IN INVOKING THE PROVISIONS OF SECTION 263 ON THE GROUND THAT THE ASSESSMENT ORDER WAS DEFICIENT IN CERTAIN RESPE CTS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID. CIT ERRED IN PASSING ORDER U/S 263 ON THE GROUND THAT THE ASSESS ING OFFICER FAILED TO MAKE DETAILED ENQUIRIES INTO THE DEDUCTIONS CLAI MED BY THE ASSESSEE IN RESPECT OF ENCASHMENT OF BANK GUARANTEE, TRADING EXPENSES AND DEPRECIATION WITHOUT SHOWING THAT THE ORDER PASSED BY ASSESSING OFFICER U/S 143(3) OF THE I.T. ACT AFTER DETAILED E NQUIRIES WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E . 3. BEFORE US, THE LEARNED COUNSEL, MR. M. SUBRAMANIAN, REPRESENTING ASSESSEE, SUBMITTED THAT THE SHOW CAUSE NOTICE RERF ERS TO DEFICIENCIES IN THE ASSESSMENT ORDER AND NOT TO ANY ERRORS WHICH ARE PR EJUDICIAL TO THE INTERESTS OF REVENUE. HE SUBMITTED THAT THE COMMISSIONER DIRE CTED RE-VERIFICATION AND THAT SUCH DIRECTIONS ARE NOT VALID. HE CONTENDS THA T ALL THE ISSUES MENTIONED IN THE SHOW CAUSE NOTICE ARE ISSUES THAT ARISE FROM THE DETAILS SUBMITTED BY THE ASSESSEE THROUGH THE ASSESSING OFFICER DURING T HE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. HE REFERS TO LETTER DATED 1 0 TH MAY 2007 AND 16 TH PSL LIMITED ITA NO. 1965/MUM./2008 3 MAY 2007, WHICH ARE PLACED AT PAGES-95 TO 103 OF TH E ASSESSEES PAPER BOOK TO EMPHASIZE THE POINT THAT THE ASSESSING OFFICER H AD, IN FACT, SPECIFICALLY RAISED QUESTIONS ON THE ALLOWABILITY OF CERTAIN EXP ENDITURE AND THAT THE ASSESSEE HAS REPLIED TO THE SAME. 4. LEARNED COUNSEL, ON THE ISSUES THAT ARISE FROM THE ORDER PASSED UNDER SECTION 263, SUBMITTED AS FOLLOWS:- I) ON FORFEITURE OF BANK GUARANTEE BY GWSSB THAT THE R ELEVANT DETAILS WERE SUBMITTED DURING THE ASSESSMENT PROCEEDINGS AN D THAT AN UNDERTAKING THAT INCOME, IF ANY, ON THIS ISSUE WHIC H COULD ARISE IN FUTURE WILL BE OFFERED TO TAX UNDER SECTION 41(1) W AS ALSO GIVEN TO THE ASSESSING OFFICER, A COPY OF WHICH IS PLACED AT PAG E-202 OF THE ASSESSEES PAPER BOOK. II) THAT THE PERFORMANCE GUARANTEE BEING LIQUIDATED DAM AGES FOR WHICH ARBITRATION WAS PENDING WAS WRONGLY HELD AS NOT QUA NTIFIABLE BY THE COMMISSIONER. HE SUBMITTED THAT THE ASSESSING OFFIC ER HAS TAKEN A POSSIBLE VIEW AND THE COMMISSIONER WRONGLY EXERCISE D REVISIONAL JURISDICTIONAL. III) ON TRADING EXPENDITURE, PROFESSIONAL CHARGES, REPAI RS AND MAINTENANCE AND GENERAL EXPENDITURES, LEARNED COUNSEL SUBMITTED THAT THE COMMISSIONER HAS WRONGLY ORDERED FOR SECOND ROUND O F VERIFICATION UNDER THE GUISE OF EXERCISING REVISIONAL JURISDICTI ON UNDER SECTION 263. IV) ON DIMINUTION ON VALUE OF INVESTMENT, HE SUBMITTED THAT DETAILS OF GENERAL EXPENSES WERE FURNISHED AND THE COMMISSIONE R HAS WRONGLY SET ASIDE THIS ISSUE FOR FRESH VERIFICATION BY THE ASSESSING OFFICER. V) ON THE ISSUE OF GUEST HOUSE EXPENSES AND ENTERTAINM ENT EXPENSES, HE SUBMITTED THAT THOUGH RELEVANT DETAILS WERE SUBMITT ED TO THE ASSESSING OFFICER, THE ISSUE IS SET ASIDE ONCE AGAI N FOR VERIFICATION WHICH IS BAD-IN-LAW. PSL LIMITED ITA NO. 1965/MUM./2008 4 5. SIMILARLY, HE SUBMITS THAT IN CASE OF PAYMENT OF CO MMISSION UNDER SECTION 48(2)(B) OF THE ACT, PERCENTAGE CONSUMPTION OF MATERIAL OF FINISHED GOODS, ADDITIONAL DEPRECIATION, FRESH VERIFICATION WAS ORDERED BY THE COMMISSIONER DESPITE THE ASSESSING OFFICER EXAMININ G THE SAME IN THE ORIGINAL ASSESSMENT PROCEEDINGS. HE FILED A PAPER B OOK RUNNING INTO 244 PAGES TO DEMONSTRATE HIS CONTENTIONS THAT ALL THE I NFORMATION WAS IN FACT FURNISHED BEFORE THE ASSESSING OFFICER DURING THE C OURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. HE RELIED ON THE FOLLOWING CASE LAWS:- JEWEL OF INDIA V/S ACIT, [2010] 325 I TR 0092 (BOM); CIT V/S GABRIEL INDIA LTD., [1993] 203 ITR 0108 (BO M); MALABAR INDUSTRIAL CO. LTD. V/S CIT, [2000] 243 ITR 0083 (SC); CIT V/S MAX INDIA LTD., [2007] 295 ITR 0282 (SC); CIT V/S GANPAT RAM BISHNOI, [2008] 296 ITR 0292 (RAJ.); CIT V/S VIKAS POLYMERS, (2010) 194 TAXMAN 57 (DEL.) ; AND WESTERN COALFIELDS LTD. V/S ACIT, (2009) 124 TTJ 65 9. 6. ON THE ALLOWABILITY OF LOSS OF THE BANK GUARANTEE, WHICH WAS FORFEITED, HE RELIED ON THE FOLLOWING CASE LAWS:- CIT V/S SUGAR DEALERS, 100 ITR 0424; AND 35 ITR 903, NARANDAS MATHURADAS & CO. 7. LEARNED DEPARTMENTAL REPRESENTATIVE, MR. A.C. TEJPA L, ON BEHALF OF THE REVENUE, OPPOSED THE CONTENTIONS OF THE ASSESSEE AN D SUBMITTED THAT A PLAIN READING OF THE ASSESSMENT ORDER DEMONSTRATE T HAT THE ASSESSING OFFICER HAS PASSED THE ORDER WITHOUT MAKING ADEQUATE ENQUIR Y. HE SUBMITTED THAT A COPY OF THE CONTRACT WITH GWSSB AS WELL AS THE BID DOCUMENTS CONTAINING THE ENTIRE TERMS AND CONDITIONS OF CONTRACT PLACED IN THE PAPER BOOK ARE NOT AVAILABLE IN THE ORIGINAL ASSESSMENT RECORD. HE SUB MITTED THAT THE COMMIS- SIONER, IN HIS ORDER PASSED UNDER SECTION 263, VIDE PARA-2, HAS CORRECTLY RECORDED THE ABOVE FACT. HE POINTED OUT THAT IN SCH EDULE-I TO THE BALANCE SHEET OF THE ASSESSEE COMPANY, THE ASSESSEE HAS SHO WN THIS AMOUNT AS DOUBTFUL ADVANCE. IN SCHEDULE-II - SIGNIFICANT ACCO UNTING POLICY, THE AUDITOR OF THE COMPANY HAS CERTIFIED THAT THE ABOVE ISSUE A S A CONTINGENT LIABILITY. THE LEARNED DEPARTMENTAL REPRESENTATIVE POINTED OUT THAT THE ASSESSING PSL LIMITED ITA NO. 1965/MUM./2008 5 OFFICER HAS SIMPLY COLLECTED CERTAIN DATA FROM THE ASSESSEE AND WITHOUT APPLICATION OF MIND PASSED A CRYPTIC ORDER. HE POIN TED OUT THAT THE ASSESSEE HAS CLAIMED AS AN EXPENDITURE, DIMINUSHING IN THE V ALUE OF INVESTMENT AND THE ASSESSING OFFICER WITHOUT INQUIRY ALLOWED THIS AMOUNT OF ` 10,00,000. ACCORDING TO HIM, THIS SOLE ISSUE JUSTIFIES EXERCIS E OF REVISION UNDER SECTION 263. HE RELIED ON THE DECISION OF CHENNAI BENCH OF THE TRIBUNAL IN RAJALAKSHMI MILLS LTD. V/S ITO, (2009) 313 ITR (AT) 182 (CHENNAI), FOR THE PROPOSITION THAT THE JURISDICTION UNDER SECTION 263 , CAN BE EXERCISED FOR LACK OF ENQUIRY WHICH IS PRIMA-FACIE WARRANTED. HE RELIE D ON THE FOLLOWING CASE LAWS FOR THE PROPOSITION THAT AN ASSESSMENT WITHOUT ENQUIRY CAN BE CONSIDERED AS THAT WHICH IS ERRONEOUS AND PREJUDICI AL TO THE INTERESTS OF REVENUE. CIT V/S PUSHPA DEVI (SMT.), [1988] 173 ITR 0445 (PA T.) ACIT V/S MUKUR CORPORATION, [1978] 111 ITR 0312 (GUJ); SWARUP VEGETABLE PRODUCTS INDUSTRIES LTD. V/S CIT ( ALL.) LEARNED DEPARTMENTAL REPRESENTATIVE, ACCORDINGLY, P RAYED THAT THE ORDER PASSED BY THE COMMISSIONER UNDER SECTION 263, BE UPHELD. 8. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND ON A PERUSAL OF THE P APERS ON RECORD, AS WELL AS THE CASE LAWS CITED BEFORE US, WE HOLD AS FOLLOW S:- 9. THE COMMISSIONER HAS EXERCISED HIS REVISIONAL POWER UNDER SECTION 263, ON A NUMBER OF ISSUES. IF THE ORDER PASSED UND ER SECTION 263, CAN BE SUSTAINED ON ONE ISSUE, THEN, WE NEED NOT ADJUDICAT E THE OTHER ISSUES RAISED AS LONG AS THERE ARE NO SPECIFIC DIRECTIONS OR CONC LUSIONS DRAWN BY THE COMMISSIONER. IN THE CASE ON HAND, WE FIND THAT THE ASSESSEE HAS DEBITED ` 10,00,000 UNDER THE HEAD DIMINUTION IN THE VALUE OF INVESTMENT . THE ASSESSING OFFICER HAS NOT ASKED ANY QUESTION ON THI S ASPECT. THE UNDISPUTED FACT IS THAT THE AMOUNT IN QUESTION WAS INVESTMENT IN SHARES AND HAS BEEN REFLECTED AS SUCH IN THE BALANCE SHEET. THERE IS NO TRANSFER OF THESE SHARES. THE ASSESSEE SIMPLY WROTE-OFF THIS VALUE ON THE GRO UND THAT THERE IS A DIMINUTION IN THE VALUE OF SHARES. ALLOWING SUCH A CLAIM OF THE ASSESSEE WITHOUT AN ENQUIRY, IN OUR OPINION, IS AN ERRONEOUS WHICH CAUSES PREJUDICE TO PSL LIMITED ITA NO. 1965/MUM./2008 6 THE INTERESTS OF REVENUE. THE ORDER PASSED UNDER SE CTION 263, IS TO BE UPHELD ON THIS SOLE COUNT. 10. IN VIEW OF THE ABOVE FINDINGS, ADJUDICATING OTHER C ONTENTIONS OF THE ASSESSEE ON THE VALIDITY OF AN ORDER PASSED UNDER S ECTION 263, BECOMES ACADEMIC AS LONG AS THERE IS NO SPECIFIC OBSERVATIO NS BY THE COMMISSIONER (APPEALS) ON CERTAIN ISSUES WHICH WOULD DIRECTLY OR INDIRECTLY RESTRICT OR BIND THE ASSESSING OFFICER. IN THE CASE ON HAND, ON THE ISSUE OF ALLOWABILITY OF LOSS ACCRUING ON FORFEITURE OF BANK GUARANTEE DUE TO NON -PERFORMANCE OF A CONTRACT THOUGH THE COMMISSIONER HAS SET ASIDE THE ISSUE FOR DENOVO ASSESSMENT, HE HAD EXPRESSED A VIEW THAT THE CLAIM IS NOT ALLOWABLE IN THIS PARTICULAR ASSESSMENT YEAR. THOUGH THE ASSESSING OF FICER HAS TAKEN UNDERTAKING FROM THE ASSESSEE THAT THE AMOUNT WOULD BE OFFERED FOR TAX UNDER SECTION 41(1), AS AND WHEN THE ACCESSION ARIS ES, THE FACT REMAINS THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE TERMS OF CONTRACT, BID DOCUMENTS, ETC. BE IT, AS IT MAY, WE VACATE THE FIN DINGS OF THE COMMISSIONER ON THIS ISSUE OF ALLOWABILITY OF THIS CLAIM OF DEDU CTION CONSEQUENT TO FORFEITURE OF BANK GUARANTEE DUE TO NON-PERFORMANCE OF THE CON TRACT. THE ASSESSING OFFICER SHALL ADJUDICATE THIS ISSUE AFRESH WITHOUT BEING INFLUENCED BY THE OBSERVATIONS AND FINDINGS OF THE COMMISSIONER IN HI S ORDER DATED 28 TH FEBRUARY 2008, PASSED UNDER SECTION 263. 11. COMING TO THE OTHER ISSUES, AS WE HAVE UPHELD THE R EVISIONARY ORDER, WE DO NOT ADJUDICATE THE SAME. SUFFICE TO SAY THAT THE ASSESSING OFFICER SHALL INDEPENDENTLY ADJUDICATE THESE ISSUES WITHOUT BEING INFLUENCED OR BEING BOUND BY ANY OF THE OBSERVATIONS / COMMENTS MADE BY THE COMMISSIONER IN HIS ORDER 28 TH FEBRUARY 2008, PASSED UNDER SECTION 263. 12. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.12.2011 SD/- D. MANMOHAN VICE PRESIDENT SD/- J. SUDHAKAR REDDY ACCOUNTANT MEMBER MUMBAI, DATED: 30.12.2011 PSL LIMITED ITA NO. 1965/MUM./2008 7 COPY TO : (1) THE ASSESSEE; (2) THE RESPONDENT; (3) THE CIT(A), MUMBAI, CONCERNED; (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE `DR, C BENCH, ITAT, MUMBAI. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY ASSISTANT REGISTRAR SR. PRIVATE SECRETARY ITAT, MUMBAI BENCHES, MUMBAI DATE INITIAL 1. DRAFT DICTATED ON 21.12.2011 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 21.12.11 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 21.12.2011 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 21.12.2011 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 21.12.2011 SR.PS 6. DATE OF PRONOUNCEMENT 30.12.2011 SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER