Sutlej Wine Enterprises, Bathinda V. The Principal Commissioner of Income Tax, Bathinda

ITA 220/ASR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8816 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 08-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SHARDA
• Assessee Lawyers: P N ARORA
• Keywords: Rejection of books of accounts; Difference of opinion; Change of opinion
• Section: 40A(3); 263; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, HONBLE JUDICIAL MEMBER AND SH. T.S. KAPOOR, HONBLE ACCOUNTANT MEMBER [ I.T.A NO. 220(ASR)/2015 ASSESSMENT YEAR: 2010-11 M/S SUTLEJ WINE ENTERPRISES, PHUL ROAD, RAMPURA PHUL DIST:- BATHINDA. PAN:ABFRS9069B VS. PRINCIPAL COMMISSIONER OF INCOME TAX, BATHINDA (APPELLANT) (RESPONDENT) APPELLANT BY: SH. P.N. ARORA (ADV .) RESPONDENT BY: SH. R.K. SHARDA (DR.) DATE OF HEARING: 24.02. 2016 DATE OF PRONO UNCEMENT: 10.03.2016 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF LEARNED CIT, DATED 30.03. 2015 PASSED U/S 263, FOR ASST. YEAR: 2 010-11. 2. THE GROUND OF APPEAL TAKEN BY ASSESSEE ARE REPRO DUCED BELOW. (I) THE LEARNED PRINCIPAL COMMISSIONER OF INCOME T AX, BATHINDA ERRED ON FACTS AND LAW IN SETTING ASIDE BY INVOKING THE PROVISIONS OF SECTION 263, THE ORDER OF THE AO PASSED U/S 144 ON 25.03.2013 WITHOUT PROVIDING ANY PROPER OPPORTUNITY OF HEARING . (II) THAT LD. PRINCIPAL COMMISSIONER OF INCOME TAX, BATHINDA ERRED OF FACT AND LAW IN ASSUMING THE JURISDICTION U/S 263 TO PASS AN ORDER FOR SETTING ASIDE THE ORDER U/S 144 DATED 25.03.2013 OF THE AO BECAUSE ALL THE ISSUES WHICH HAVE BEEN SET ASIDE TO THE AO HAVE BEEN EXAMINED IN DETAIL DURING THE COURSE OF ASSESS MENT PROCEEDINGS AND THE ORDER U/S 144 HAS BEEN PASSED B Y THE AO AFTER DUE APPLICATION OF MIND. ITA NO.220 (ASR)/2015 ASST. YEAR:2010-11 2 (III) THE LD. PRINCIPAL COMMISSIONER OF INCOME TAX, BATHINDA ERRED ON FACT AND LAW WHILE SETTING ASIDE THE ORDER OF TH E AO TO GIVE HIM A DIRECTION THAT INSTEAD OF REJECTING THE BOOKS OF AC COUNT AND APPLYING N.P. RATE HE SHOULD HAVE INVOKED THE PROVISIONS OF SECTION 40A(3) TO DISALLOW THE PAYMENTS MADE EXCEEDING RS.20,000/-. I N DOING SO THE PRINCIPAL COMMISSIONER HAS TRIED TO BYPASS THE BIND ING PRECEDENT OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SMT. SANTOSH JAIN IN WHICH IT HAS BEEN HELD THAT ONCE THE BOOKS OF ACCOUNT HAS BEEN REJECTED THE PROVISIONS OF SECTION 40A(3) CANN OT BE INVOKED. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE ASSE SSMENT ORDER ARE THAT THE ASSESSEE IS A WHOLE SELLER ENGAGED IN THE BUSINESS OF LIQUOR WINES. THE CASE OF THE ASSESSEE WAS SELECTED FOR SC RUTINY. HOWEVER, THE ASSESSEE DID NOT CO-OPERATE DURING THE ASSESSMENT P ROCEEDINGS, THEREFORE, THE ASSESSMENT WAS COMPLETED U/S 144 OF THE ACT AND INCOME WAS DETERMINED @ 5% OF GROSS TURN OVER OF THE ASSES SEES COMPANY. 4. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE LEARN ED CIT(A) AND LEARNED CIT(A) RESTRICTED THE ADDITION TO 0.5% OF T URN OVER INSTEAD OF 5% DETERMINED BY ASSESSING OFFICER. 5. AGAINST THE ORDER OF LEARNED CIT(A), THE REVENUE FILED APPEAL BEFORE ITAT AND HONBLE ITAT VIDE ORDER DATED 28.11.2014 D ISMISSED THE APPEAL OF THE REVENUE. THE LEANED CIT VIDE NOTICE DATED 17 .03.2015 ISSUED U/S 263 HAS NOTED DOWN THESE FACTS IN THE ORDER U/S 263 ITSELF. THE LEARNED CIT OBSERVED THAT ASSESSING OFFICER SHOWED UNDUE HA STE IN COMPLETING THE ASSESSMENT U/S 144 WHEREAS HE SHOULD HAVE MADE DISALLOWANCE U/S 40A(3) OF THE ACT AS ENTIRE PURCHASES OF ASSESSEE F IRM WERE IN CASH. AGAINST THE ORDER ISSUED U/S 263, THE ASSESSEE SUBM ITTED THAT ASSESSING ITA NO.220 (ASR)/2015 ASST. YEAR:2010-11 3 OFFICER AFTER DUE APPLICATION OF MIND HAS REJECTED THE BOOKS OF ACCOUNTS AND HAD MADE ADDITION APPLYING NET PROFIT RATE OF 5 % AND THEREFORE, ORDER PASSED BY ASSESSING OFFICER IS NEITHER ERRONE OUS AND NOR PREJUDICIAL TO THE INTEREST OF REVENUE. HOWEVER, TH E LEARNED CIT DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE AND SET ASIDE THE ORDER OF ASSESSING OFFICER AND DIRECTED ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH, KEEPING IN VIEW, THE VIOLATION OF PROVISION S OF SECTION 40A(3) OF THE ACT. 6. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 7. AT THE OUTSET, THE LEARNED AR SUBMITTED THAT ASS ESSING OFFICER HAD REJECTED THE BOOKS OF ACCOUNTS AND THEREFORE, HAD A PPLIED 5% AS NET PROFIT OF GROSS RECEIPTS AND IT WAS AN ESTABLISHED LAW THAT ONCE THE BOOKS OF ACCOUNTS ARE REJECTED AND ADDITION IS MADE ON TH E BASIS OF NET PROFIT RATIO THE VIOLATIONS U/S 40A(3) ARE NOT REQUIRED TO BE LOOKED INTO. 8. THE LEARNED AR, IN THIS RESPECT SUBMITTED THAT H ONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT (CENTRAL) VS. SMT. SANTOSH JAIN 159 TAXMAN 392 HAS HELD THAT IF THE ASSESSING OFFIC ER MADE AN ADDITION BY REJECTING BOOKS OF ACCOUNTS AND ESTIMATING THE N ET PROFIT OF ASSESSEE HE CANNOT RESORT TO THE PROVISIONS OF SECTION 40A(3 ) OF THE ACT. HE SUBMITTED THAT LEARNED CIT IN HIS ORDER SUBMITTED T HAT THE SAID JUDGMENT HAS NOT ATTAINED FINALITY WHICH IS CONTRAR Y TO THE SETTLED PRINCIPLES OF LAW AS THE JUDGMENT OF JURISDICTIONAL HIGH COURT IS BINDING ITA NO.220 (ASR)/2015 ASST. YEAR:2010-11 4 UNLESS IT IS UNSETTLED BY AUTHORITIES OF HIGHER COU RT. THE LEARNED AR FURTHER SUBMITTED THAT IT WAS NOT OPEN TO LEARNED C IT TO IMPOSE HIS OWN VIEW INSTEAD OF THE VIEW TAKEN BY ASSESSING OFFICER BY WHICH HE HAD DIRECTED THE ASSESSING OFFICER THAT HE SHOULD HAVE TAKEN INTO ACCOUNT THE VIOLATION OF PROVISIONS OF SECTION 40A(3). THE LEAR NED AR IN THIS RESPECT RELIED UPON THE CASE LAW OF CIT VS. INDO GERMAN FAB IN ITA NO.248 PASSED BY HONBLE PUNJAB & HARYANA HIGH COURT FOR T HE PROPOSITION THAT LEARNED CIT CANNOT SUBSTITUTE HIS OPINION WITH THE OPINION OF ASSESSING OFFICER. THE LEARNED AR FURTHER PLACED HIS RELIANCE ON THE ORDER OF HONNBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTIAL CO. LTD. VS. CIT 243 ITR 0083 WHERE IN THE HONBLE COURT HAS HELD THAT PROVISIONS OF SECTION 263 CANNOT BE INVOKED TO CORRECT EACH AND E VERY TYPE OF MISTAKE COMMITTED BY AO. 9. IN VIEW OF THE ABOVE, THE LEARNED AR ARGUED THAT THE ORDER PASSED BY LEARNED CIT NEEDS TO BE QUASHED. 10. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF COMMISSIONER OF INCOME TAX. 11. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THAT IT IS AN UNDISPUTED FACT THAT THE MATTER AS REGARDS FACTUAL POSITION OF THE CASE HAD ATTAINED ITS FINALITY WITH THE ORDER OF TRIBUNAL DATED 28.11.2014 BY WHIC H IT HAD DISMISSED THE APPEAL FILED BY REVENUE AND LEARNED DR HAD NOT PLACED ANY MATERIAL ITA NO.220 (ASR)/2015 ASST. YEAR:2010-11 5 SUGGESTING STAY OF ABOVE SAID TRIBUNAL ORDER. THE C OMMISSIONER OF INCOME TAX HAS ASSUMED JURISDICTION TO ISSUE NOTICE U/S 263 AFTER ORDER PASSED BY THE TRIBUNAL. BEFORE ISSUE OF NOTICE U/S 263 THE LEARNED COMMISSIONER SHOULD HAVE CONSIDERED THE ORDER PASSE D BY TRIBUNAL ALSO AS THERE IS NO POINT IN CONTINUING THE LITIGATION O N A POINT WHICH HAS BEEN DECIDED BY A HIGHER AUTHORITY. THE LEARNED CI T IN HIS NOTICE U/S 263 HAD OBSERVED THAT IF THE ASSESSING OFFICER HAD MADE DISALLOWANCE U/S 40A(3) IT WOULD HAVE BEEN BETTER FOR THE REVENU E. WE FIND THAT THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. M/S INDO GERMAN FABS IN ITA 248 OF 2012 HAS HELD THAT SECTION 263 OF THE ACT CONFERS POWER TO EXAMINE AN ASSESSMENT ORDER SO AS TO ASCERTAIN WHETHER IT IS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF REVENUE BUT DOES NOT CONFER JURISDICTION UPON THE CIT TO SUBSTI TUTE HIS OPINION FOR THE OPINION OF THE ASSESSING OFFICER. WE FURTHER FIND T HAT THE JURISDICTION OF HIGH COURT IN THE CASE OF CIT VS. DEDPAK MITTAL REPORTED IN (2010)324 ITR 411 (P&H) HAS HELD THAT CHANGE OF OPINION BY REAPPRAISING E VIDENCE IS NOT WITHIN THE PARA METERS OF REVISIONAL JURISDICTI ON OF THE COMMISSIONER OF INCOME TAX U/S 263 OF THE ACT. ABOVE ALL WE FIND THAT HONBLE SUPRE COURT IN THE CASE OF MALABAR INDUSTIAL CO. LTD. VS. CIT 243 ITR 0083 HAS HELD THAT PROVISIONS OF SECTION 263 CANNOT BE INVOK ED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO. IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACT ED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE ITA NO.220 (ASR)/2015 ASST. YEAR:2010-11 6 REQUIREMENT OF THE ORDER BEING ERRONEOUS. THE HONB LE SUPREME COURT HAS ALSO MADE CLEAR THAT THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS TO BE READ IN CONJUNCTION WITH AN ERRO NEOUS ORDER PASSED BY THE AO. EVERY LOSS OF REVENUE AS A CONSEQUENCE O F AN ORDER OF AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT WAS FURTHER STATED THAT WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE; OR W HERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE CTT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER P REJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY T HE ITO IS UNSUSTAINABLE IN LAW. 12. IN THE PRESENT CASE, WE FIND THAT AO OFFERED VA RIOUS OPPORTUNITIES TO THE ASSESSEE THE VARIOUS OPPORTUNITIES LISTED IN THE ASSESSMENT ORDER ARE DATED 6.6.2012, 11.09.2012 AND 19.03.2013, HOWE VER, THE ASSESSE DID NOT SUBMIT THE FULL DETAILS REQUIRED BY ASSESSI NG OFFICER AND FURTHER THE DOCUMENTS SUBMITTED BY ASSESSEE WERE UNCONFIRME D COPIES OF ACCOUNTS OF THE PARTIES FROM WHOM PURCHASE WERE MAD E, THEREFORE, ASSESSING OFFICER HAD NO OPTION BUT TO REJECT THE B OOKS OF ACCOUNTS OF ASSESSEE AND TO ESTIMATE THE INCOME OF ASSESSEE BY APPLYING NET PROFIT RATE. ITA NO.220 (ASR)/2015 ASST. YEAR:2010-11 7 13. IN VIEW OF THE ABOVE, WE DO NOT FIND THE ORDER OF ASSESSING OFFICER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE KEEPING IN VIEW THE JUDICIAL PRECEDENTS RELIED UPON BY THE ASSESSEE . 14. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE A SSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH MARCH, 2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT ME MBER DATED: 10.03.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.