Shri Parvej Alam, Jalaun V. Commissioner of Income Tax-II, Kanpur

ITA 207/LKW/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4655 (ITAT-LUCKNOW)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-03-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 10-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: DR A K SINGH
• Keywords: Opportunity of being heard; Principle of natural justice; Difference of opinion; Change of opinion
• Section: 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.207/LKW/2015 ASSESSMENT YEAR:2012-13 C.I.T.-II, KANPUR. VS SHRI PARVEZ ALAM, 211 UDAL SARAI, KALPI, DISTT. JALAUN. PAN:AIPPA2420F (RESPONDENT) (APPELLANT) SHRI SWARAN SINGH, F.C.A. APPELLANT BY DR. A. K. SINGH, CIT, D.R. RESPONDENT BY 02/03/2016 DATE OF HEARING 17/03/2016 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE OR DER PASSED BY LEARNED CIT-II, KANPUR DATED 27/02/2015 U/S 263 FOR ASSESSM ENT YEAR 2012-13. 1. THAT THE LD. CIT-II, KANPUR HAS ERRED IN LAW AN D ON FACTS IN CANCELLING THE ASSESSMENT DONE U/S 153C OF THE INCOME TAX ACT,1961, VIDE ORDER DATED 04.03.2015, I N UNDUE EXERCISE OF THE POWERS CONFERRED UPON HIM U/S 263 OF THE INCOME TAX ACT, 1961, VIDE IMPUGNED ORDE R DATED 27.02.2015. 2. THAT THE IMPUGNED ORDER UNDER APPEAL HAS BEEN PA SSED ON DIFFERENT REASON(S) AND PREMISES THAN THE REASON (S) MENTIONED IN THE SHOW CAUSE NOTICE U/S 263 OF THE INCOME TAX ACT,1961 DATED 12.01.2015, THEREFORE, TH E SAID ORDER IS UNSUSTAINABLE IN LAW AND ON FACTS AND LIABLE TO BE ANNULLED/QUASHED. 3. THAT THE LD. CIT-II, KANPUR HAS ALSO ERRED IN LA W AND ON FACTS IN CANCELLING THE IMPUGNED ASSESSMENT ORDER D ATED 04.03.2015 MERELY ON CONJECTURES, PRESUMPTIONS & 2 SURMISES AND ALSO WITHOUT FINDING OUT ANY ERROR OR HOW THE SAME IS PREJUDICIAL TO THE INTEREST OF THE REVE NUE. 4. THAT THE LD. CIT-II, KANPUR FAILED TO CONSIDER F ULL FACTS, RELEVANT PROVISIONS OF THE INCOME TAX ACT, 1961 AND MANUAL OF OFFICE PROCEDURE, AS APPLICABLE, AS WERE EXPLAINED IN THE WRITTEN SUBMISSIONS OF THE APPELLA NT, DATED 09.02.2015, FILED IN THE COURSE OF HEARING, THEREFORE, THE IMPUGNED ORDER UNDER APPEAL IS INSUPPORTABLE IN LAW AND ON FACTS AND IS ALSO CONTR ARY TO THE PRINCIPLES OF NATURAL JUSTICE AND EQUITY AND IS LIABLE TO BE QUASHED. 5. THAT THE LD. CIT-II, KANPUR HAS ALSO FAILED TO C ONSIDER AND APPRECIATE THAT THE LD. AO HAD INITIATED THE PROCEEDINGS U/S 153C OF THE INCOME TAX ACT, 1961 ON THE INSTRUCTIONS OF HIGHER AUTHORITY AND WITHOUT RE CORDING MANDATORY SATISFACTION AS CONTEMPLATED UNDER SECTIO N 153C OF THE INCOME TAX ACT, 1961, THEREFORE, THE WH OLE ASSESSMENT ITSELF WAS ILLEGAL, UNSUSTAINABLE AND CO ULD NOT HAVE BEEN REVISED U/S 263 OF THE INCOME TAX ACT, 19 61. 6. THAT THE LD. CIT-II, KANPUR HAS ALSO FAILED TO A PPRECIATE THE FACT THAT THE APPROVAL GRANTED BY THE LD. JCIT, RANGE-6, KANPUR U/S 153D OF THE INCOME TAX ACT, 196 1 WAS MECHANICAL AND WITHOUT AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE APPELLANT, HENCE ALSO THE SUBJEC T ASSESSMENT WAS VOID-AB-INITIO AND COULD NOT HAVE BE EN REVISED U/S 263 OF THE INCOME TAX ACT, 1961. 7. THAT THE LD. CIT-II, KANPUR HAS FAILED TO CONSID ER THAT ESTIMATE OF NET PROFIT BY THE LD. AO, VIDE HIS ORDE R DATED 04.03.2014, WAS HIGHER THAN THE NET PROFIT OF COMPA RABLE CASE, HENCE THE REASON MENTIONED IN THE NOTICE ISSU ED U/S 263 OF THE INCOME TAX ACT, 1961 DATED 12.01.201 5 CONSTITUTES MERELY A CHANGE OF OPINION AND NEITHER CONSTITUTES A ERROR NOR A ERROR PREJUDICIAL TO THE INTEREST OF REVENUE, HENCE THE REVISION MADE IS BAD IN LAW, UNSUSTAINABLE AND LIABLE TO BE ANNULLED. 8. THAT THE NOTICE UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 WAS ISSUED BY THE LD. CIT-II, KANPUR MERELY ON SUSPICION AND WITHOUT HAVING COGENT MATERIAL OR REA SON WITH HIM FOR INITIATING PROCEEDINGS U/S 263 OF THE INCOME 3 TAX ACT, 1961, HENCE THE IMPUGNED ORDER UNDER APPEA L IS ILLEGAL AND UNSUSTAINABLE. 9. THAT THE LD. CIT-II, KANPUR HAS FAILED TO APPREC IATE THAT WHILE MAKING THE ASSESSMENT, THERE WAS NEITHER INCO RRECT ASSUMPTION OF FACTS NOR INCORRECT APPLICATION OF LA W BY THE AO, HENCE THE ORDER IS NEITHER ERRONEOUS IN THE EYE OF LAW, NOR IS PREJUDICIAL TO THE INTEREST OF THE R EVENUE. 10. THAT THE LD. CIT-II, KANPUR PREJUDGED THE CASE AND THE PROCEEDINGS INITIATED U/S 263 OF THE INCOME TAX ACT , 1961 WERE MERELY A EMPTY FORMALITY INSUPPORTABLE IN LAW AND ON FACTS, THEREFORE, THE CANCELLATION OF ASSESS MENT IS ILLEGAL AND LIABLE TO BE QUASHED. 11. THAT ANY OTHER RELIEF OR RELIEFS AS MAY BE DEEM ED FIT IN THE CASE & CIRCUMSTANCES OF THE CASE BE GRANTED. 2. IT WAS SUBMITTED BY LEARNED A. R. OF THE ASSESSE E THAT THE SHOW CAUSE NOTICE ISSUED BY LEARNED CIT U/S 263 IS AVAIL ABLE ON PAGE NO. 32 OF THE PAPER BOOK. HE PLACED RELIANCE ON A TRIBUNAL O RDER RENDERED IN THE CASE OF GOPAL NARAYAN SINGH VS. DCIT AS REPORTED IN [201 5] 53 TAXMANN.COM 51 (PATNA). HE SUBMITTED A COPY OF THIS TRIBUNAL ORDE R. HE SUBMITTED THAT AS PER THIS TRIBUNAL ORDER, THE ISSUE IS COVERED IN FA VOUR OF THE ASSESSEE. 3. AS AGAINST THIS, LEARNED D. R. OF THE REVENUE SU PPORTED THE ORDER OF LEARNED CIT PASSED BY HIM U/S 263 OF THE ACT. IN P ARTICULAR, HE DRAWN OUR ATTENTION TO PARA 12 OF THE ORDER OF LEARNED CIT AN D POINTED OUT THAT A CATEGORICAL FINDING HAS BEEN GIVEN BY LEARNED CIT T HAT THE ASSESSING OFFICER DID NOT EXAMINE FOUR PERSONS STATED TO BE ASSESSEE S AGENTS FROM WHOM CASH WAS SEIZED. HE ALSO POINTED OUT THAT THE ASSE SSING OFFICER ALSO DID NOT INQUIRE AS TO WHETHER THESE FOUR PERSONS WERE T HE ONLY AGENTS EMPLOYED BY THE ASSESSEE OR WHETHER THERE WERE OTHER AGENTS AND IF LATTER WAS THE CASE, WHAT WAS THE VOLUME OF DEALING WITH THEM. H E HAS ALSO NOTED THAT THE ASSESSING OFFICER HAS NOT TRIED TO FIND OUT WHE THER THE AMOUNT OF RS.21 LACS SEIZED REPRESENTED A SINGLE TRANSACTION OR A S INGLE SET OF TRANSACTIONS 4 AND IF THIS WAS THE CASE, HOW MANY TRANSACTIONS THR OUGH THESE AGENTS OR OTHER AGENTS TOOK PLACE DURING THE YEAR. HE SUBMIT TED THAT AS PER THIS PARA OF THE ORDER OF LEARNED CIT, THIS IS A CLEAR CASE O F NO INQUIRY BY THE ASSESSING OFFICER AND THEREFORE, THE ORDER PASSED B Y LEARNED CIT IS CORRECT AND THE SAME SHOULD BE CONFIRMED. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT THE OBJECTION OF LEARNED CIT IS NOT THIS THAT WHY THE ASSESSING O FFICER APPLIED THE NET PROFIT RATE OF 1% OF TURNOVER AS AGAINST THE NET PR OFIT RATE OF 0.25% SHOWN BY THE ASSESSEE IN THE PROFIT & LOSS ACCOUNT INSTEA D OF APPLYING A HIGHER RATE. THE OBJECTION OF LEARNED CIT IS THIS THAT IT IS NOWHERE EXPLAINED BY THE ASSESSING OFFICER AS TO WHY THE PROFIT SHOULD BE ES TIMATED AT 1% AND ON WHAT BASIS. NOW AT THIS JUNCTURE, WE FEEL IT PROPE R THAT PARA 12 OF THE ORDER OF LEARNED CIT BE REPRODUCED HEREIN BELOW FOR READY REFERENCE. THE SAME IS AS UNDER: 12. THE FACT REMAINS THAT THE ASSESSING OFFICER D ID NOT EXAMINE THE FOUR PERSONS STATED TO BE ASSESSEE'S AG ENTS FROM WHOM CASH WAS SEIZED. THE AO ALSO DID NOT INQUIRE A S TO WHETHER THESE FOUR WERE THE ONLY AGENTS EMPLOYED BY THE ASSESSEE OR WHETHER THERE WERE OTHER AGENTS AND IF LATTER WAS THE CASE WHAT WAS THE VOLUME OF DEALINGS WITH THEM. AGAIN THE AO HAS NOT TRIED TO FIND OUT WHETHER THE AMOUNT OF RS 21 LACS SEIZED REPRESENTED A SINGLE TRANSACTION OR A SINGLE SET OF TRANSACTIONS AND IF THIS WAS THE CASE HOW MANY TRAN SACTIONS THROUGH THESE AGENTS OR OTHER AGENTS TOOK PLACE DUR ING THE YEAR. THAT THE ASSESSEE COULD NOT PRODUCE ANY RELIA BLE EVIDENCE AND THAT THE ENTIRE BUSINESS WAS STATED TO BE IN CA SH WERE ASPECTS THAT NECESSITATED FURTHER ENQUIRY. THIS THE AO FAILED TO MAKE. THE ASSESSEE HAD STATED THAT PAYMENTS MADE AN D EXPENSES INCURRED WERE IN CASH, BILLS AND VOUCHERS ON PLAIN PAPER AND NOT AT ALL OPEN TO INDEPENDENT VERIFICATI ON. THE ASSESSING OFFICER HAS NOTED THIS BUT HE HAS CONFINE D HIMSELF TO INFERENCES FROM THE STATEMENTS OF THESE FOUR PERSON S MADE WHEN CASH WAS SEIZED FROM THEM. IN THE CIRCUMSTANCE S OF THIS CASE THE AO WAS REQUIRED TO MAKE DETAILED INQUIRIES ABOUT THE ASSESSEE'S BUSINESS, PERSONS TO WHOM CASH PAYMENTS WERE MADE, WHETHER THESE WERE VERIFIABLE AND GENUINE OR MERELY 5 SELF-SERVING EXPLANATIONS OF THE ASSESSEE. IT WAS H IGHLY IMPROBABLE THAT ASSESSEE'S BUSINESS WAS CONFINED TO THESE FOUR AGENTS OR THIS TRANSACTION. THAT IN A SINGLE TRANS ACTION THE AMOUNT IN CASH WAS MORE THAN RS. 20 LACS WOULD HAVE NECESSITATED DETAILED INQUIRIES. SUCH INQUIRIES WER E ESSENTIAL TO FIND OUT WHAT WAS THE ASSESSEE'S CORRECT INCOME THA T WAS LIABLE TO BE TAXED UNDER THE ACT. THIS WAS EVEN MORE NECES SARY ONCE THE BOOKS OF ACCOUNT WERE FOUND UNRELIABLE AND REJE CTED. THUS, THE ASSESSING OFFICER HAS FAILED TO COMPLETE THE ASSESSMENT IN A MANNER THAT WOULD ENABLE INCOME EXI GIBLE TO TAX TO BE CORRECTLY WORKED OUT. THE ASSESSMENT ORD ER DATED 04/03/2014 IS, THEREFORE, ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 4.1 FROM THE ABOVE PARA FROM THE ORDER OF LEARNED C IT, IT IS SEEN THAT THE BASIC OBJECTION OF LEARNED CIT IS THAT NO INQUIRY W AS MADE BY THE ASSESSING OFFICER IN SPITE OF THIS FACT THAT CASH WAS SEIZED FROM FOUR PERSONS STATED TO BE ASSESSEES AGENTS. EVEN THESE PERSONS WERE NOT EXAMINED BY THE A.O. IT IS ALSO OBSERVED THAT THE ASSESSING OFFICER DID NOT INQUIRE AS TO WHETHER THESE FOUR PERSONS WERE THE ONLY AGENTS EMPLOYED BY THE ASSESSEE OR WHETHER THERE WERE OTHER AGENTS ALSO. IN THE LIGHT OF THESE FACTS, NOW WE EXAMINE THE APPLICABILITY OF THE TRIBUNAL ORDER CIT ED BY LEARNED A. R. OF THE ASSESSEE HAVING BEEN RENDERED IN THE CASE OF GOPAL NARAYAN SINGH (SUPRA). IN THAT CASE, IT IS NOTED BY THE TRIBUNAL IN PARA 5 THAT IN THAT CASE, THE ASSESSING OFFICER CALLED FOR THE INFORMATION AND TH IS WAS RESPONDED BY THE ASSESSEE BY EXPRESSING INABILITY TO PROVIDE THE SAI D EVIDENCE OF EXPENSES AND THIS FACT IS NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER ALSO. UNDER THESE FACTS, THE ASSESSING OFFICER ESTIMATED THE INCOME OF THE ASSESSEE BY APPLYING CERTAIN PERCENTAGE OF PROFIT O N GROSS RECEIPT. IN THAT CASE ALSO, IT IS NOTED BY THE TRIBUNAL THAT ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF MIND BY THE ASS ESSING OFFICER WHILE MAKING THE ASSESSMENT AND ONLY IN THE CASE OF LACK OF INQUIRY, SECTION 263 CAN BE INVOKED AND NOT FOR INADEQUATE INQUIRY. IN THE PRESENT CASE, WE HAVE SEEN THAT THERE IS COMPLETE LACK OF INQUIRY BY THE ASSESSING OFFICER BECAUSE EVEN THOSE FOUR PERSONS WHO ARE STATED TO B E AGENTS OF THE 6 ASSESSEE AND FROM WHOM CASH WAS SEIZED, WERE NOT EX AMINED BY THE ASSESSING OFFICER AS PER THE FINDING GIVEN BY LEARN ED CIT IN PARA 12 OF HIS ORDER AND THIS FINDING OF LEARNED CIT COULD NOT BE CONTROVERTED BY LEARNED A. R. OF THE ASSESSEE. CONSIDERING THESE FACTS THA T THERE WAS LACK OF INQUIRY, WE ARE OF THE CONSIDERED OPINION THAT THIS TRIBUNAL ORDER CITED BY DOES NOT RENDER ANY HELP TO THE ASSESSEE IN THE PRE SENT CASE. SINCE THERE IS LACK OF INQUIRY BY THE ASSESSING OFFICER, IN OUR CO NSIDERED OPINION, THE PROVISIONS OF SECTION 263 WERE RIGHTLY INVOKED BY L EARNED CIT AND THEREFORE, WE FIND NO INFIRMITY IN HIS ORDER. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GAROD IA ) JUDICIAL MEMBER ACCOUNTANT MEMB ER DATED:17/03/2016 *SINGH COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR