ACHILES KNITWEAR PVT. LTD., MUMBAI V. C.I.T.-10(1), MUMBAI

ITA 2242/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2271 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 12-05-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 04-04-2012
• Court: TRIBUNAL
• Department Lawyers: B PRUSETH
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Difference of opinion; Change of opinion
• Section: 143(3); 6; 263

Judgement Text

, , A , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI , , , BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.2242/MUM/2012 ASSESSMENT YEAR: 2007-08 ACHILES KNITWEAR PVT. LTD., 292, VIDYA NAGARI MRG., KALINA, SANTACRUZ (E) MUMBAI -400 055 / VS. CIT 10 AAYAKAR BHAVAN, M.K. RD. MUMBAI- (REVENUE ) (RESPONDENT ) P.A. NO . AACCA6725H ASSESSEE BY SHRI JITENDRA SINGH & MISS NEHA PARANJPE (AR) REVENUE BY SHRI B. PRUSETH (DR) / DATE OF HEARING: 12/07/2016 / DATE OF ORDER: 27/07/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST SEPARATE ORDERS OF LD. ORDER OF LD. COMMISSIONER OF INCOME TAX-10, MUMBAI, {(IN SHORT CIT(A)}, PASSED AGAINS T ACHILES KNITWEAR PVT. L. 2 ASSESSMENT ORDER U/S 263 OF THE ACT, FOR THE A.Y.20 07-08 ON THE FOLLOWING GROUNDS: 1.ON THE FACTS OF THE CASE AND IN LAW, THE LEARNED CIT HAS ERRED IN INVOKING SECTION 263 TO THE CASE OF TH E APPELLANT ONLY ON GUESSWORK AND SURMISES, WITHOUT POINTING OUT ANY ERROR IN THE ORDER OF THE ASSESSIN G OFFICER BY DISREGARDING DETAILED SUBMISSIONS MADE T O HIM FROM TIME TO TIME. 2. ON THE FACTS OF THE CASE AND IN LAW, THE SHOW CA USE NOTICE & OR ORDER U/S 263 ALLEGING ERRORS AND PREJU DICE, ITSELF IS ERRONEOUS ON MANY COUNTS AS FOLLOWS. 3.ON THE FACTS OF THE CASE AND IN LAW, THE LEARNED CIT HAS ERRED IN MAKING A CHANGE OF OPINION ABOUT THE F ACTS ALREADY SUBMITTED BEFORE THE ASSESSING OFFICER. 4.ON THE FACTS OF THE CASE AND IN LAW, THE LEARNED CIT HAS ERRED IN DISALLOWING RS.4,39,573/- WHICH HAS BEEN DEBITED TO PROFIT & LOSS A/C ON ACCOUNT OF ALLEGED PRIOR PERIOD EXPENSE ITEM. 5.ON THE FACTS OF THE CASE AND IN LAW, THE LEARNED CIT HAS ERRED IN HOLDING THAT THE SUM OF RS 4,39,573/- REPRESENTS PRIOR PERIOD ITEMS ALTHOUGH DISCOUNTS AN D REBATES WERE RECORDED IN THE BOOKS AS PER ACCRUAL S YSTEM OF ACCOUNTING IN AY 2007-08. 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y SHRI JITENDRA SINGH & MISS NEHA PARANJPE, AUTHORISE D REPRESENTATIVE (AR) ON BEHALF OF THE ASSESSEE AND B Y SHRI B. PRUSETH, DEPARTMENTAL REPRESENTATIVE (DR) ON BEHALF OF THE REVENUE. 3. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. IT I S NOTED THAT LD. CIT HAS PASSED THE ORDER ONLY ON THE GROUN D THAT IT WAS NOTED BY HIM FROM THE PERUSAL OF THE ACCOUNTS T HAT THERE WAS A CLAIM OF PRIOR PERIOD EXPENSES OF RS.4,39,573 /- IN THE PROFIT AND LOSS ACCOUNT WHICH WAS NOT ADDED BACK BY THE ASSESSEE IN THE COMPUTATION OF INCOME NOR BY THE AO IN THE ACHILES KNITWEAR PVT. L. 3 ASSESSMENT ORDER. WITH THE ASSISTANCE OF LD. COUNSE L, IT IS NOTED BY US THAT ASSESSEE IS IN THE BUSINESS OF JOB WORK AND TRADING OF KNITTED HOSIERY FABRICS AND THE IMPUGNED EXPENSES ACTUALLY PERTAIN TO THE YEAR UNDER CONSIDERATION. L D. COUNSEL OF THE ASSESSEE HAD DRAWN OUR ATTENTION IN THIS REG ARD UPON DETAILED REPLY SUBMITTED TO LD. CIT IN RESPONSE TO THE SHOW CAUSE NOTICE RECEIVED U/S 263. THE RELEVANT PORTION OF THE SAID REPLY IS REPRODUCED BELOW: VIDE SHOW CAUSE NOTICE DATED 14/11/2011 RECEIVED BY YOUR ASSESSEE ON 18/11/2011, THE LEARNED COMMISSIONER OF INCOME TAX HAS WRONGLY PROPOSED TO ADD RS. 4,39,573/- WHICH HAS BEEN DEBITED TO PROFIT & LOSS A/C ON ACCOUNT OF ALLEGED PRIOR PERIOD EXPENSE ITEM WHICH WAS ADDED NEITHER IN THE COMPUTATION OF INCOME NOR IN THE ASST ORDER BY THE ASSESSING OFFICER AT THE TIME OF SCRUTINY ASSESSMENT. DURING EARLIER YEARS CERTAIN LABOUR CHARGES WERE RECEIVED FROM CERTAIN PARTIES MENTIONED AS PER THE ANNEXURE F ATTACHED TO FORM NO.3CD. THEREFORE THE ORIGINAL LABOUR CHARGES WERE ACCOUNTED FOR IN THE RESPECTIVE YEARS IN WHICH LABO UR CHAR G ES WERE EARNED. BUT THE DISCOUNTS AND REBATES WERE RECORDED IN THE BOOKS AS PER ACCRUAL SYSTEM O ACCOUNTING IN AY 2007-08. THE ASSESSEE ALSO SUBMITTED ALL THE NECESSARY DETAILS WITH THE AO, DURING THE COURSE OF ASSESSMENT. THE A.O. DID NOT RAISE ANY FURTHER QUERY THEREAFTER IN THIS CONNECTI ON AND PASSED THE ASSESSMENT ORDER U/S 143(3) AFTER DUE VERIFICATION OF ALL THE DETAILS FILED AS PER HI S REQUIREMENT. MOREOVER, IT IS ALSO POINTED OUT THAT THE TAX AUDITOR HAD WRONGLY CLASSIFIED THESE EXPENSES AS PRIOR PERIOD EXPENSES AT COLUMN 22(B) OF FORM NO . 3CD. MOREOVER, ANNEXURE F ATTACHED TO THE FORM NO. 3CD GAVE PARTY WISE DETAILS OF DISCOUNTS & REBATES WHICH ACCRUED DURING THE YEAR IN RESPECT OF LABOUR CHARGES EARNED BY THE ASSESSEE IN THE PRIOR YEARS. IT IS ALSO SUBMITTED THAT LABOUR CHARGES WERE ACCOUNTED FOR IN THE RESPECTIVE YEARS ON THE BASIS ACHILES KNITWEAR PVT. L. 4 OF MERCANTILE SYSTEM OF ACCOUNTING. HOWEVER, THE SETTLEMENT OF THOSE LABOUR CHARGES TOOK PLACE IN TH E AY 2007-08. ON SETTLEMENT OF THE BILLS OF LABOUR CHARGES THERE ARE BOUND TO BE DISCOUNTS, REBATES, RATE DIFFERENCE KASAR ETC. THEREFORE THOSE DISCOUNT S ETC. HAVE TO BE ACCOUNTED FOR AS & WHEN IT ACCRUES. 3.1. IT IS FURTHER NOTED BY US THAT LD. CIT WHILE PASSI NG THE ORDER U/S 263 HAS NOT EVEN TAKEN ANY PAIN TO DISCUS S THE REPLY SUBMITTED BY THE ASSESSEE. THE LD. CIT, BEFOR E PASSING THE ORDER U/S 263, MADE NO ANALYSIS AND DID NOT DI SCUSS ANY FACTS TO EXAMINE ALLOWABILITY OR OTHERWISE OF THE I MPUGNED EXPENSES. THE ORDER PASSED BY THE CIT IS NON- SPEAK ING, CRYPTIC AND CASUAL, AS WOULD BE EVIDENT FROM THE FI NDINGS AND OBSERVATIONS GIVEN BY CIT IN THE IMPUGNED REVISION ORDER WHICH ARE REPRODUCED AS UNDER: 4.2 THE ARGUMENT OF THE ASSESSEE THAT THE CONDITIO NS LAID DOWN IN THE PROVISIONS OF SEC.263 ARE NOT SATI SFIED CANNOT BE ACCEPTED. THE HON'BLE SUPREME COURT IN TH E CASE OF M/S.MALABAR INDUSTRIAL CO. LTD . 243 ITR 83 (SC) HAS LAID DOWN THE CONDITIONS PRECEDENT BY WHICH THE CIT CAN INVOKE THE PROVISIONS OF SEC. 263 . THE HON'BLE SUPREME COURT HAS HELD THAT 'IF THE ORDER O F THE A. 0. IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL T O THE INTEREST OF THE REVENUE.' IT IS FURTHER HELD THAT ' AN INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOU S.' FURTHER, IT IS HELD THAT 'THE PHRASE PREJUDICIAL TO THE INTEREST OF REVENUE' IS NOT AN EXPRESSION OF ART AN D IS NOT DEFINED IN THE ACT. UNDERSTOOD IN ITS ORDINARY MEAN ING IT IS OF WIDE IMPORT AND IS NOT CONFINED TO THE LOSS O F TAX. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE /TO, THE REVENUE IS LOSING TAX LAWFULL Y PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICI AL TO THE INTEREST OF THE REVENUE. MOREOVER THE HON'BLE K ERALA HIGH COURT IN THE CASE OF ENGLISH INDIAN CLAYS LTD. 331 ACHILES KNITWEAR PVT. L. 5 ITR 219 (KER.) HAS HELD THAT A LACK OF PROPER ENQUI RY BY THE ASSESSING OFFICER WILL RENDER THE ORDER ERRONEO US AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THE INSTANT CASE THE AUDITOR OF THE ASSESSEE HAD QUALIF IED IN THE NOTES TO ACCOUNTS (SCHEDULE M) SR.NO.LI (7) THA T THE ASSESSEE HAD DEBITED AN AMOUNT OF RS.4,39,5731- ON ACCOUNT OF PRIOR PERIOD ITEMS. SINCE THE ASSESSEE I S FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. IN VIEW OF THE ABOVE, THE ASSESSMENT ORDER PASSED U /S. 143(3) DATED 21.12.2009 IS ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF REVENUE, AND THE SAME IS SET ASIDE TO THE FILE -TT1SESSING OFFICER TO FRAME THE ASSESSMENT, D E NOVO. 3.2. PERUSAL OF THE ABOVE ORDER REVEALS THAT CIT REPRO DUCED OBSERVATIONS OF HONBLE SUPREME COURT AND HONBLE K ERALA HIGH COURT AND THEREAFTER WITHOUT DISCUSSING THE FA CTS OF THIS CASE AND WITHOUT GIVING ANY PROPER REASONING, HE AB RUPTLY REACHED ON THE CONCLUSION THAT ASSESSMENT ORDER PAS SED U/S 143(3) DATED 21.12.2009 IS ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF REVENUE AND THEREFORE SAME WAS SET ASID E TO THE FILE OF THE AO FOR DE NOVO ASSESSMENT. NO ANALYSIS OR REASONING HAS BEEN GIVEN BY LD. CIT. NOTHING HAS BEEN MENTION ED THAT HOW PRIOR PERIOD ITEMS WERE NOT ALLOWABLE. ON THE O THER HAND, ASSESSEE HAD EXPLAINED THAT IMPUGNED EXPENSES PERTA IN TO THE YEAR UNDER CONSIDERATION. THE CIT DID NOT MEET OR C ONTROVERT THE EXPLANATION AND JUSTIFICATION GIVEN BY THE ASSE SSEE. ACTUALLY, WE FIND THE ORDER PASSED U/S 263 ITSELF, TO BE ERRONEOUS AS PER LAW AND FACTS. THE IMPUGNED REVISI ON ORDER HAS BEEN PASSED IN HIGHLY UNFAIR AND UNJUSTIFIED MA NNER. THE IMPUGNED EXPENSES WERE NOT DISALLOWABLE PER SE AS THESE PERTAIN TO THE YEAR UNDER CONSIDERATION, WE FIND TH AT THE ORDER ACHILES KNITWEAR PVT. L. 6 PASSED U/S 263 IS CONTRARY TO LAW AND THEREFORE, SA ME IS HEREBY QUASHED. 4. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH JULY, 2016. SD/- (AMIT SHUKLA ) SD/- (ASHWANI TANEJA) ! / JUDICIAL MEMBER ' ! / ACCOUNTANT MEMBER MUMBAI; # DATED : 27/07/2016 CTX? P.S/. .. #$%&'(')% / COPY OF THE ORDER FORWARDED TO : 1. % &' / THE APPELLANT 2. ()&' / THE RESPONDENT. 3. * * ( % ) / THE CIT, MUMBAI. 4. * * / CIT(A)- , MUMBAI 5. -. / (01 , * % 012 , / DR, ITAT, MUMBAI 6. / 34 5 / GUARD FILE. / BY ORDER, ) -% ( //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI