DCIT, New Delhi V. M/s Cargo Motors Pvt. ltd., New Delhi

ITA 2067/DEL/2011

• Counselvise Citation: 206720114 RSA 2011
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-11-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 26-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DEEPAK SEHGAL
• Keywords: Reopening of assessment; Capital asset; Audit objection; Tangible material; Reason to believe
• Section: 37(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B : NEW DELHI BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND SHRI B.R. JAIN, ACCOUNTANT MEMBER ITA NO.2067/DEL/2011 ASSESSMENT YEAR : 2005-06 DCIT, CIRCLE 3(1), NEW DELHI. VS. CARGO MOTORS PVT. LTD., 1/9-B, JINDAL HOUSE, ASAF ALI ROAD, NEW DELHI. PAN : AAACC2744C CO NO.172/DEL/2011 (ITA NO.2067/DEL/2011) ASSESSMENT YEAR : 2005-06 CARGO MOTORS PVT. LTD., 1/9-B, JINDAL HOUSE, ASAF ALI ROAD, NEW DELHI. PAN : AAACC2744C VS. DCIT, CIRCLE 3(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK KHANDELWAL, CA REVENUE BY : SHRI DEEPAK SEHGAL, SR.DR ORDER PER B.R. JAIN, ACCOUNTANT MEMBER THIS APPEAL BY REVENUE AND THE CROSS OBJECTION BY T HE ASSESSEE ARISE FROM THE ORDER DATED 22.02.2011 PASSED BY LD. CI T (A)-IV, NEW DELHI, RAISE THE FOLLOWING GROUNDS:- 1. THE LD. CIT (A) HAS ERRED ON THE FACTS AND IN LA W IN ANNULLING THE ORDER U/S 143 (3)/147 OF THE IT ACT WHIL E HOLDING INVALID THE REOPENING U/S 147, IGNORING THAT ALSO AS P ER DECISION ITA NO.2067/DEL/2011 CO NO.172/DEL/2011 2 OF HONBLE SUPREME COURT IN CIT (A) VS. P.V.S. BEADI ES PRIVATE LIMITED 237 ITR 13, THE FACTUAL INFORMATION PROVIDED BY THE INTERNAL AUDITOR IS TO BE TREATED AS INFORMATION FOR THE PURPOSE OF REOPENING OF ASSESSMENT. RELIANCE IS ALSO PLACED ON THE FOLLOWING DECISIONS: I) BAWA ABHAI SINGH VS. DCIT 253 ITR 83 (DEL) II) PHOOLCHAND BAJRANG LAL VS. CIT (1993) 203 ITR 456 ( SC) III) RAM PRASAD VS. ITO (1995) 82 TAXMAN 199 (ALL) IV) CONSOLIDATED PHOTO & FINVEST LIMITED VS. ACIT (2006) 2 81 ITR 394 (DEL) V) KLM ROYAL DUTCH AIRLINES VS. ADIT (2007) 292 ITR 49 (DEL) VI) ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD. (2007) 161 TAXMAN 316 (SC) VII) PRAFUL CHUNILAL PATEL VS. MAKWANA ACIT (1999) 263 IT R 832 1.1. GROUNDS OF CROSS OBJECTION READ AS UNDER :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LOSS INCURRED ON SALE OF VEHICLE AMOUNTING TO RS.6538841/- IN THE NORMAL COURSE OF THE BUSINESS IS AN ALLOWABLE DEDUCTI ON AND THE LOSS IS NOT BEING CAPITAL IN NATURE. 2. THAT SIMILAR CLAIM HAS BEEN ALLOWED IN THE PAST AND SUBSEQUENT YEARS BY TREATING THE SAME AS BUSINESS LOSS AND NOT BEING CAPITAL IN NATURE. THAT CONSISTENCY IS REQUIR ED TO BE FOLLOWED IN THE MATTER OF ASSESSMENT. 1.2. IN THE CROSS OBJECTIONS, THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND AS FOLLOWS:- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE REO PENING OF THE ASSESSMENT IS BAD IN LAW. 2. THE ASSESSEE IS A DEALER OF TELCO AND IS ENGAGED IN B UYING AND SELLING OF VEHICLES. A RETURN OF INCOME AT ` 4,09,20,360/- WAS FILED. THE RETURNED INCOME WAS PROCESSED U/S 143(1) OF THE ACT ON 21.02.2005. THEREAFTER, AFTER RECORDING THE REASONS, THE ASSESSING OF FICER ISSUED NOTICE U/S 148 OF THE ACT ON 20.12.2007. THE ASSESSEE F ILED OBJECTIONS FOR TAKING ACTION U/S 148 THROUGH THE LETTER DATED 0 4.11.2008. THE LD. ASSESSING AUTHORITY, HOWEVER, DID NOT ACCEPT THE CONTEN TION OF THE ITA NO.2067/DEL/2011 CO NO.172/DEL/2011 3 ASSESSEE AND COMPLETED THE ASSESSMENT AT AN INCOME OF ` 4,74,59,201/- AFTER DISALLOWING THE LOSS CLAIMED ON RE POSSESSED ASSETS IN TERMS OF DETAILED DISCUSSIONS CONTAINED IN THE ASSESSMENT ORDER. 3. THE LD. CIT (A) CONSIDERED THE ACTION TO BE VITIA TED AS THE ACTION WAS TAKEN ON THE BASIS OF OBJECTION ON A LEGAL ISSUE RAI SED BY THE AUDIT PARTY; THE ASSESSING OFFICER HAD REOPENED THE ASSESSMENT ON THE WRITTEN INSTRUCTIONS OF THE TERRITORIAL COMMISSIONER O F INCOME-TAX; AND THE COMMUNICATION BY THE AUDIT CANNOT BE TAKEN AS AN INFORMATION U/S 147 OF THE ACT; AND, THUS, THE ASSESSING OFFICER DID NOT HAVE ANY REASON TO BELIEVE TO REOPEN THE ASSESSMENT. HE, HOWEVE R, DID NOT RENDER DECISION ON THE MERITS OF THE ADDITION SO MADE BY THE ASSESSING AUTHORITY AS THE NOTICE WAS TREATED AS VOID AND ASSESSMEN T STOOD ALLOWED. 4. THE LD. DR, ASSAILING THE IMPUGNED ORDER CONTENDS T HAT THE LD. CIT (A) HAS ERRED IN TREATING THE INTIMATION/INTERNA L CORRESPONDENCE RESTING BETWEEN THE ASSESSING OFFICER AND THE CIT AS A DI RECTION. THE INITIAL LETTER WRITTEN BY THE ASSESSING AUTHORITY DATED 17.12.2007 (COPY AT ASSESSEES PAPER BOOK PAGE 18), SHALL REVEAL THAT THE ASSESSING OFFICER HIMSELF HAS SUGGESTED TWO RECOURSES FOR TAKING AC TION IN A CASE LIKE THIS. THE REASON ALSO DO NOT SUGGEST THAT THE ACTI ON HAS BEEN TAKEN ON ANY DIRECTIONS AS STATED BY THE LD. CIT (A). SECONDLY, IN THE YEAR UNDER CONSIDERATION NO OPINION HAS BEEN FORMED B Y THE ASSESSING OFFICER AS THE RETURN FILED BY THE RESPONDENT STOOD A CCEPTED IN A SUMMARY MANNER. IT WAS, THEREFORE, WITHIN THE COMPET ENCE OF THE ASSESSING OFFICER TO TAKE ACTION ONCE HE HAD BONA FIDEL Y FORMED A PRIMA FACIE OPINION THAT INCOME OF THE ASSESSEE HAS ESCAP ED ASSESSMENT. ITA NO.2067/DEL/2011 CO NO.172/DEL/2011 4 5. THE LD. CIT (A) ALSO HAS MISDIRECTED HIMSELF IN HOL DING THAT THE OBSERVATION OF THE AUDIT PARTY DID NOT CONSTITUTE INF ORMATION FOR TAKING ACTION U/S 147 OF THE ACT. IN FACT, AFTER THE AMEND MENT OF SECTION 147 THERE IS NO SUCH REQUIREMENT THAT THERE SHOULD BE SOME INFORMATION IN POSSESSION OF ASSESSING AUTHORITY FORMING OPINION. THE ON LY REQUIREMENT IS THAT THERE SHOULD BE TANGIBLE MATERIAL TO FORM PRIMA FACIE BELIEF WHICH, IN THE PRESENT CASE, THE ASSESSING OF FICER HAD ON RECORD ITSELF AND ALSO STOOD REVEALED FROM THE REASONS R ECORDED. THE DECISION TAKEN BY LD. CIT (A), THEREFORE, NEEDS TO BE SET ASIDE BY ALLOWING GROUND IN APPEAL RAISED BY THE REVENUE. 6. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE, SUPPORTING THE CONCLUSION REACHED BY THE LD. CIT (A), STATES THAT KEEPING IN VIEW THE NATURE OF BUSINESS AND THE FACT THAT IN THE EARLIE R ASSESSMENTS IT IS DISCERNIBLE THAT LOSS ON SALE OF REPOSSESSED VEHICLES IS A COMMERCIAL/BUSINESS LOSS OF THE ASSESSEE. THE ISSUE ALSO STO OD EXAMINED IN THE ASSESSMENT FOR ASSESSMENT YEAR 2001-02 WHE RE SIMILAR AUDIT OBJECTIONS WERE ALSO CONSIDERED IN THE LI GHT OF THE JUDGEMENT RENDERED BY HONBLE ALLAHABAD HIGH COURT IN THE CASE OF MOTOR GENERAL SALES PVT. LTD. VS. CIT, 226 ITR 137 (A LL). THE ASSESSING OFFICER HIMSELF HAS DISPUTED THE AUDIT OBJECTION AND, THEREFORE, THE SAME CANNOT BE USED TO FORM REASON TO BELIEVE THAT INC OME HAS ESCAPED ASSESSMENT. RELIANCE HAS BEEN PLACED ON THE JUDG EMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CADILA HEA LTHCARE LTD. VS. ACIT (2012) 64 DTR 344. RELIANCE HAS ALSO BEEN PLAC ED ON THE JUDGEMENT OF THE HONBLE DELHI HIGH COURT IN THE CA SE OF CIT VS. SPLS SIDDHARTHA LTD., ORDER DATED 14.09.2011 IN ITA NO. 836/2011 WHERE IT WAS HELD THAT SATISFACTION OF ONE AUTHORITY CANNOT BE SUBSTITUTED BY THE SATISFACTION OF THE OTHER AUTHORITY. IN THE PRESENT C ASE IN APPEAL, THE ASSESSING OFFICER PROCEEDED TO TAKE ACTION ON THE BASIS OF INSTRUCTIONS ITA NO.2067/DEL/2011 CO NO.172/DEL/2011 5 FROM THE HIGHER AUTHORITY, I.E., HIS TERRITORIAL COM MISSIONER OF INCOME- TAX. RELIANCE HAS ALSO BEEN PLACED ON: I) MARUTI CIVIL WORKS V. ITO (2011) 51 DTR 257 (PUNE TR IBUNAL) II) H.V. TRANSMISSIONS LTD. VS. THE ITO (ITAT MUMBAI), ITA NO.2230/MUM/2010, ORDER DATED 7 TH OCTOBER, 2011. III) CIT-III VS. SFIL STOCK BROKING LTD., 2010-TIOL-328-H C-DEL-IT IV) DCIT VS. DURATEX EXPORT (ITAT, MUMBAI, ITA NOS.3088&3089/MUM/2010, ORDER DATED 15 TH JUNE, 2011.) V) ITO VS. M/S DUTTA CONSTRUCTION (ITAT, AHMEDABAD, ITA N O. 2013/AHD/2008, ORDER DATED 2.01.2011. VI) DCIT VS. CITICORP MARUTI FINANCE LTD. (ITAT, DELHI, ITA NO.5515/DEL/2010, ORDER DATED 14.09.2012) VII) HOTEL OASIS (SURAT) PVT. LTD. VS. DCIT (JUDGEMENT OF T HE HONBLE GUJARAT HIGH COURT IN SPL. CIVIL APPLN. NO. 10657 OF 2009, DATED 05.05.2011) VIII) CADILA HEALTHCARE LTD. VS. ACIT (2012) 64 DTR 344 (G UJ) 7. WE HAVE HEARD THE PARTIES WITH REFERENCE TO THE M ATERIAL ON RECORD AND CASE LAWS BROUGHT TO OUR NOTICE. THE ASSESSI NG OFFICER RECORDED THE FOLLOWING REASONS BEFORE INITIATING ACTI ON U/S 147 OF THE ACT AND ISSUED NOTICE THEREAFTER ON 20.12.2007:- REASONS FOR INITIATING PROCEEDINGS U/S 147 IN THE CA SE OF M/S CARGO MOTORS PVT. LTD. FOR ASSESSMENT YEAR 2005-06. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPAN Y FILED ITS RETURN OF INCOME ON 31.10.2005 DECLARING IN COME OF RS.40920360/-. THE SAME WAS PROCESSED U/S 143 (1) OF THE IT ACT ON 21.3.2005 BY ACCEPTING THE RETURNED INCOME. THE AUDIT PARTY RAISED THE FOLLOWING AUDIT OBJECTION DURING THE C OURSE OF AUDIT:- SECTION 37(1) OF THE INCOME TAX ACT, 1961, PROVIDES TH AT ANY EXPENDITURE, NOT BEING EXPENDITURE OF CAPITAL NATUR E, LAID OUT WHOLLY OR EXCLUSIVELY FOR THE PURPOSE OF BUSINES S IS ITA NO.2067/DEL/2011 CO NO.172/DEL/2011 6 ALLOWABLE AS DEDUCTION IN COMPUTATION OF THE INCOME CH ARGEABLE UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFE SSION. THE EXPENDITURE WHICH IS NOT RELATED TO THE BUSINESS IS NOT ALLOWABLE AS DEDUCTION. THE ASSESSMENT OF M/S CARGO MOTORS PVT. LTD. FOR THE ASSESSMENT YEAR 2005-06 WAS COMPLETED AFTER SUMMARY MANNER IN 2006 DETERMINING AN INCOME OF RS.40920360 /-. AUDIT SCRUTINY REVEALED THAT THE ASSESSEE HAD DEBITED RS.653 8841 TO THE PROFIT AND LOSS ACCOUNT (IN SCHEDULE 17) ON ACCOUN T OF LOSS ON SALE OF REPOSSESSED ASSETS. THIS LOSS BEING CAP ITAL IN NATURE, SHOULD HAVE BEEN DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE. THE OMISSION RESULTED IN UNDERASSESSMENT OF INCOME OF RS.6538841/- INVOLVING SHORT LEVY OF TAX OF RS.2392725.00 ONGOING THROUGH THE AUDIT OBJECTION, IT IS FOUND THAT THERE IS SUBSTANCE IN THE ISSUE RAISED BY THE AUDIT. THE LOS S ON SALE OF REPOSSESSED ASSETS IS NOT ALLOWABLE AS TRADING LOSS I N THIS CASE AS HELD BY THE HONBLE ALLAHABAD HIGH COURT IN THE CAS E OF MOTOR AND GENERAL SALES (PVT.) LTD. VS. CIT (226 ITR 137). THE FACTS OF THE CASE ARE ALSO SIMILAR AND IN BOTH THE CASES THE VEH ICLES ARE NOT REGISTERED IN THE NAME OF RESPECTIVE ASSESSEE. T HIS WAS THE BASIS ON WHICH THE COURT GAVE THE RULING IN FAVOUR OF THE REVENUE. THUS THE INFORMATION PROVIDED BY THE AUDIT H AS MATERIAL SUBSTANCE WITHIN THE MEANING OF SECTION 147 AN D THE SAME IS INVOKABLE. FURTHER, IN CASE OF RANCHI CLUB V. CIT IN 214 ITR 64 3, 1995 (PAT), THE HONOURABLE COURT HAS HELD THAT IN CASES WHERE ONLY SUMMARY ASSESSMENT HAS BEEN MADE AND INTIMATION SENT TO THE ASSESSEE U/S 143 (1), REOPENING U/S 147 IS VALID WI TH ISSUE OF NOTICE U/S 148. HERE IT IS ALSO PERTINENT TO STATE THAT IN ITS RULING BY THE HONBLE APEX COURT IN CASE OF ACIT VS. RAJESH JHAVER I STOCK BROKERS PVT. LTD. ( 291 ITR 500, 2007, SC) THE REOPENI NG ON THE BASIS OF THE REVENUE AUDIT PARTY OBJECTION WAS HELD TO BE VALID. FURTHER, IT HAS BEEN HELD IN NAGRATH CHEMICALS WORKS V S. CIT 265 ITR 401 (2004, ALL), THAT IF THE AUDIT POINTS O UT CERTAIN FACTS WHICH WERE NOT IN THE KNOWLEDGE OF THE INCOME-TAX OFFICER WHEN HE MADE THE ORIGINAL ASSESSMENT, IT WOULD CONSTITU TE INFORMATION UNDER SECTION 147 (B) OF THE INCOME TAX AC T, 1961. SIMILAR VIEWS HAVE BEEN HELD IN FOLLOWING CASE LAWS ZORASTER AND CO. VS. CIT [1978] 163 ITR 858 (RAJ); L ABELLA CONSTRUCTION CO. VS. CIT [1994] 207 ITR 657 (GUJ); R. MADHAVAN NAIR V. CIT [1976] 105 ITR 813 (KER.); CLARIDGES HO TEL P. LTD. VS. ITO [1980] 123 ITR 844 (DELHI). FURTHER IN BAWA ABHAI SINGH VS. DCIT (2001) 168 CTR (DELHI) 521/253 ITR 83,ARIJIT PASAYAT, CJ IT WAS HELD THAT THE ONLY ITA NO.2067/DEL/2011 CO NO.172/DEL/2011 7 CONDITION FOR ACTION IS THAT A.O SHOULD HAVE REASON TO B ELIEVE THAT INCOME AHS ESCAPED ASST. WHICH BELIEF CAN BE REAC HED IN ANY MANNER AND IS NOT QUALIFIED BY A PRECONDITION OF FAITH AND TRUE DISCLOSURE OF MATERIAL FACT BY THE ASSESSEE AS CON TEMPLATED IN THE PRE-AMENDED SECTION 147 (A). A.O. CAN UNDER THE AMENDED PROVISION LEGITIMATELY REO PEN THE ASST. IN RESPECT OF AN INCOME WHICH HAS ESCAPED A SSTT. VIEWED IN THAT ANGLE POWER TO REOPEN ASSTT. IS MUCH WID ER UNDER THE AMENDED PROVISION AND CAN BE EXERCISED EVEN AFTE R ASSESSEE HAS DISCLOSED FULLY AND TRULY ALL THE MATERI AL FACTS, SO SIMILAR VIEW WERE THE CONCLUSION OF THIS COURT (DELHI) IN 142 CTE (DELHI) 271, 225 ITR 496. IN VIEW OF ABOVE FACTS OF THE CASE AND THE PROVISIONS OF THE ACT IN THIS REGARD AND THE CASE LAW CITED ABOVE, I HAVE REASONS TO BELIEVE THAT THE INCOME TO THE TUNE OF RS.65388 41/- HAS ESCAPED ASSESSMENT. THEREFORE, NOTICE U/S 148 IS HEREBY ISSUED FOR REOPENING U/S 147 OF THE IT ACT. SD/- (DR. PRASHANT KHAMBRA) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 3 (1), NEW DELHI. 8. THE CORRESPONDENCE RESTING BETWEEN THE ASSESSING OFFI CER AND HIS TERRITORIAL COMMISSIONER AS WELL AS REPLIES TO AUDIT OBJECTIONS HAVE ALSO BEEN PERUSED. FIRSTLY, THE REASONS RECORDED DO NO T REVEAL THAT THE ACTION HAS BEEN TAKEN ON THE DIRECTION OF HIS SUPERIO R AUTHORITY. THE JUDGEMENT RENDERED BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SPLS SIDDHARTHA LTD. (SUPRA), THEREFORE, CANNOT BE APPLIED TO PECULIAR FACTS OF THIS CASE. WE, THEREFORE, DO NOT A GREE WITH THE LD. CIT (A) THAT THE ASSESSMENT HAS BEEN REOPENED ON THE INSTRU CTIONS OF LD. CIT. 9. AS REGARDS THE ASSESSEES BELIEF THAT THE ASSESSING OFFICE R HAS DISPUTED THE OBJECTIONS AND, AS SUCH, HE CANNOT USE THE AUDIT REPORT FOR INITIATING ACTION U/S 147 OF THE ACT, WE FIND TH AT THE ISSUE HAS TO BE EXAMINED IN THE LIGHT OF THE JUDGEMENT OF THE APEX COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS PVT. LTD. (SUPRA). ACCOR DING TO THE ITA NO.2067/DEL/2011 CO NO.172/DEL/2011 8 AFORESAID JUDGEMENT, RELEVANT CONSIDERATION FOR ASSUM PTION OF JURISDICTION IS THAT THE ASSESSING OFFICER MUST FORM A PRI MA FACIE BELIEF BASED ON MATERIAL ON RECORD THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. THIS PRIMA FACIE OPINION MUST BE BASED ON MAT ERIAL ON RECORD AND SHOULD NOT BE MERE PRETENCE OR REASON TO S USPECT. THE MATERIAL ON RECORD REVEALS THAT IN THE CASE OF THE AP PELLANT HIMSELF PROCEEDINGS FOR RE-ASSESSMENT HAD ALSO BEEN INITIATED FO R ASSESSMENT YEAR 2001-02 IN RESPECT OF IDENTICAL CLAIM OF LOSS ON SALE OF REPOSSESSED ASSETS. THE PROCEEDINGS FOR RE-ASSESSMENT FOR ASSESSMENT YEAR 2001-02 THOUGH HAD COMMENCED ON 7 TH FEBRUARY, 2008, WHICH IS SUBSEQUENT TO THE IMPUGNED NOTICE, BUT THE SAME WERE ALSO BASED ON AN AUDIT OBJECTION AS IS THE CASE OF THE A PPELLANT IN THE YEAR UNDER CONSIDERATION. IN RESPECT OF REPLIES FURNI SHED BY THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2001-02 IN RESPONSE TO AUDIT OBJECTIONS, IT WAS STATED THAT THE LOSS ON SALE OF REPOSSE SSED ASSETS IS A REVENUE LOSS. THIS IS EVIDENT FROM THE LETTER DATED 22.11.2006 WRITTEN BY LD. DCIT, CIRCLE 3 (1), COPY OF WHICH IS LAID AT PAGES 56-57 OF THE ASSESSEES PAPER BOOK. IT HAS BEEN STATED THEREIN AS U NDER:- AFTER CONSIDERING THE ABOVE SUBMISSIONS MADE BY THE A SSESSEE, SUCH LOSS WHICH IS NORMAL IN THE NATURE OF BUSINESS C ARRIED ON BY THE ASSESSEE WAS ALLOWED AS DEDUCTION. SUCH LOSS INC URRED IS BEING ALLOWED YEAR AFTER YEAR WHENEVER THE SAME WAS I NCURRED. THIS BEING THE NORMAL BUSINESS LOSS INCURRED FOR CAR RYING ON THE BUSINESS CANNOT BE TREATED AS CAPITAL LOSS. NO CAPITAL ASSET WAS ACQUIRED. THEREFORE, THERE WAS NO OMISSION ON THE PA RT OF THE A.O. ON THE ABOVE SAID ISSUE. CONSIDERING THE COMMER CIAL LOSS DUE TO CHANGE IN THE MARKET SCENARIO EXPLAINED BY THE A SSESSEE IN DETAILED AND FACTS OF THE CASE, OBSERVATION MADE BY THE REVENUE AUDIT PARTY IS NOT ACCEPTED. 10. FURTHER, IN THE LETTER DATED 6/8.1.2007 BY ACIT , CIRCLE 3 (1), IT WAS REITERATED THAT LOSS ON SALE OF REPOSSESSED ASSETS IS A NORMAL BUSINESS LOSS AND NOT A CAPITAL LOSS. IT WAS STATED THEREIN AS UNDER:- ITA NO.2067/DEL/2011 CO NO.172/DEL/2011 9 AS SEEN FROM ABOVE, THE LOSS ON ACCOUNT OF SALE OF R EPOSSESSED VEHICLES IS A NORMAL BUSINESS LOSS IN THE NATURE OF B USINESS CARRIED ON BY THE ASSESSEE. HENCE, THIS WAS ALLOWED AS A REVENU E LOSS AND CANNOT BE TREATED AS CAPITAL LOSS. HENCE, THERE WAS NO OMISSION ON PART OF THE A.O. DURING THE ASSTT. PROCEEDINGS FOR ALLOWING THIS DEDUCTION. STILL YOUR KIND DIRECTIONS ARE SOLICITED ON THE ABOVE MENTION ISSUE RAISED BY THE REVENUE AUDITS FOR THE POSSIBLE REMEDIAL ACTION. 11. IT MAYBE PERTINENT TO STATE HERE THAT THE AFORESA ID LETTER DATED 08.11.2007 WAS WRITTEN BY THE SAME ASSESSING OFFICER WHO HAS RECORDED THE REASONS FOR THE YEAR UNDER CONSIDERATION AND ISSUED THE IMPUGNED NOTICE U/S 148 OF THE ACT. LIKEWISE, THE AF ORESAID FACTS WERE REITERATED IN ANOTHER LETTER DATED 28.11.2007 WHICH WAS ALSO BEFORE INITIATING THE ACTION U/S 148 OF THE ACT IN THE IMPU GNED YEAR. THUS, THE FACT WHICH EMERGES FROM THE AFORESAID LETTERS IS THAT T HE ASSESSING OFFICER HIMSELF HAS ENTERTAINED A BELIEF THAT THE LOSS ON SALE OF REPOSSESSED ASSETS IN THE CASE OF THE ASSESSEE IS A BUSINESS LOSS AND NOT A CAPITAL LOSS. MOREOVER, IT IS PERTINENT TO STAT E HERE THAT DESPITE ABOVE REPLIES, ACTION U/S 148 WAS INITIATED FOR ASSESSMENT YEAR 2001- 02 AND AN ORDER DATED 16.12.2008 WAS MADE. THE AFOR ESAID ORDER WAS ANNULLED BY THE LD. CIT (A) AND THE APPELLATE TRIBU NAL CONFIRMED THE ACTION VIDE ITS ORDER DATED 13.11.2009. SINCE, IN T HE BUSINESS OF THE ASSESSEE LOSS HAS BEEN TREATED AS A BUSINESS LOSS, THEREFORE, I T DOES NOT STAND TO ANY REASON THAT IT COULD BE A CAPITAL LO SS IN THE IMPUGNED YEAR PARTICULARLY WHEN NO CHANGE IN BUSINESS ACTIVITY IS SHOWN TO HAVE UNDERGONE IN THE YEAR UNDER CONSIDERATION. 12. UNDER THE PECULIAR FACTS AND CONSIDERING THE HIST ORY OF THE ASSESSEE ITSELF AS WELL AS THE REPLIES AND REASONING TAKEN BY THE ASSESSING OFFICER HIMSELF WHILE DEALING WITH THE AUDIT O BJECTIONS, IT CANNOT BE SAID THAT THERE WAS ANY TANGIBLE MATERIAL I N THE POSSESSION OF THE ASSESSING OFFICER FOR FORMING OPINION THAT THE E XPENDITURE/LOSS ITA NO.2067/DEL/2011 CO NO.172/DEL/2011 10 UNDER CONSIDERATION COULD BE CAPITAL LOSS AND NOT BUSIN ESS LOSS REQUIRING HIM TO INITIATE ACTION U/S 147 OF THE ACT. 13. THAT APART, SINCE THE ASSESSING OFFICER HIMSELF HAS DI SPUTED THE OBJECTION IN ASSESSMENT YEAR 2001-02, WHICH IS IDENTICAL TO THE AUDIT OBJECTION FOR THE YEAR UNDER CONSIDERATION, THE SAME CANNOT CONSTITUTE REASON TO BELIEVE AS HAS BEEN HELD BY HONBLE GUJARAT HIGH COURT IN THE CASE OF CADILA HEALTHCARE LTD. VS. ACIT (SUPRA). WE, THEREFORE, CONCUR WITH THE CONCLUSION OF THE LD. CIT (A) AND FI ND NO REASON TO INTERFERE THEREIN FOR OUR OWN REASONS STATED HEREINBEF ORE AND REJECT THE GROUNDS RAISED IN APPEAL BY THE REVENUE. 14. HAVING CONFIRMED THE CONCLUSION REACHED BY THE L D. CIT (A), WHEREBY THE NOTICE OF ASSESSMENT STOOD QUASHED, WE DO NOT CONSIDER IT NECESSARY TO DECIDE THE MERITS OF THE GROUNDS RAISED IN ASSESSEES CROSS OBJECTIONS AS NECESSARY CONSEQUENCE SHALL FOLLOW IN THE LIGHT OF JUDGEMENT RENDERED BY THE HONBLE CALCUTTA HIGH COU RT IN THE CASE RAWATMAL HARAKCHAND VS. CIT 129 ITR 346 (CAL) 15. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISMISSE D AND THE CROSS OBJECTIONS BY THE ASSESSEE BECOMES INFRUCTUOUS. THE SA ME STAND DISPOSED OF ACCORDINGLY. THE ORDER PRONOUNCED IN THE OPEN COURT ON 02.11.20 12. SD/- SD/- [B.R. MITTAL] [B.R. JAIN] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 02.11.2012. DK ITA NO.2067/DEL/2011 CO NO.172/DEL/2011 11 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES