ADDL CIT CIR 15(1), MUMBAI V. WAMAN HARI PETHE SONS, MUMBAI

ITA 2277/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7297 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2005-2006
• Appeal Filed On: 09-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHAMMED USMAN
• Assessee Lawyers: UMA MAHADEVKA R
• Section: 143(3); 68; 54; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G: MUMBAI BEFORE SHRI J. SUDHAKAR REDDY (AM) AND SHRI R.S. PADVEKAR (JM) ITA NO. 2277/MUM/2009 (ASSTT. YEAR : 2005-06) D.C.I.T., CIR. 15(1), APPELLANT MATRU MANDIR, MUMBAI- 400 007 V/S. M/S. WAMAN HARI PETHE SONS RESPONDENT 110, VIKAS PARADISE, BAKTI MRG, MULUND (W), MUMBAI 400 082 PAN : - APPELLANT BY :MR. MOHAMMED USMAN RESPONDENT BY :MS. UMA MAHADEVKA R : O R D E R : PER R.S. PADVEKAR, J.M THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE I MPUGNED ORDER OF THE LD CIT(A)- XV, MUMBAI DATED 29.1.2009 FOR THE A.Y . 2005-06. 2. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUN DS : 1. THE LD CIT(A)-XV, MUMBAI ERRED IN LAW AND ON FA CTS IN DELETING THE ADDITION OF RS. 61,27,898/- UNDER THE HEAD UNE XPLAINED ADVANCES RECEIVED FROM CUSTOMERS ON TECHNICAL GROUND THAT S UCH MISTAKE CANNOT BE RECTIFIED U/S. 154 OF THE I.T. ACT IGNORING THE FACT THAT THE ASSESSEE, BEING A JEWELER, RECEIVED BOTH ADVANCES FROM CUSTO MERS AND GOLD DEPOSITS FROM THE CUSTOMERS AND BOTH ARE TWO SIDES OF SAME COIN BEING RECEIVED BY THE ASSESSEE FOR MANUFACTURING OF GOLD ORNAMENTS FOR CUSTOMERS WHICH REMAINED UNCLAIMED EVEN AFTER MANUF ACTURED GOLD ITA NO. 2277/MUM/2009 2 ORNAMENTS WERE HANDED OVER TO THE ALLEGED CUSTOMERS , AND THEREFORE, SIMILAR TREATMENT WAS LEGALLY REQUIRED TO BE MADE I N RESPECT OF ADVANCE FROM CUSTOMER LIKE GOLD DEPOSIT FROM CUS TOMERS AND FAILURE TO DO SO AMOUNTS TO A MISTAKE APPARENT FROM RECORD TO BE RECTIFIABLE U/S. 154 OF THE I.T. ACT. 2. THE LD CIT(A)-XV, MUMBAI ERRED IN LAW AND ON FAC TS IN DELETING THE ADDITION OF RS. 61,27,898/- MADE U/S. 154 OF I. T. ACT IGNORING THE FACT THAT THE QUANTUM APPEAL IS PENDING FOR A.Y. 2 005-06 INVOLVING INALIENABLE SIMILAR ISSUE WHERE THE LEARNED CIT(A) COULD HAVE TAKEN BOTH THE APPEAL SIMULTANEOUSLY FOR A.Y. 2005-06 AND IN CASE, HE CONFIRMS THE CONTENTION OF THE AO, THE ACTION OF AO U/S. 154 WOULD BE JUSTIFIABLE IN THE EYE OF LAW AS LEGAL AND LOGICAL COROLLARY. 3. THE FACTS WHICH REVEAL FROM THE RECORD ARE AS UN DER. IN THIS CASE, THE ASSESSMENT OF THE ASSESSEE WAS FRAMED U/S. 143(3) V IDE ORDER DT. 26.12.2007 IN WHICH VARIOUS ADDITIONS WERE MADE. ONE OF THE M AIN ADDITION WAS IN RESPECT OF THE GOLD DEPOSITS RECEIVED FROM CUSTOM ERS. THE A.O. REACHED TO THE CONCLUSION IN THE ORIGINAL ASSESSMENT ORDER THA T THE ASSESSEE HAS FAILED TO ESTABLISH THE IDENTITY OF CUSTOMERS WHO HAD GIVEN GOLD DEPOSITS TO THE ASSESSEE AS THE ASSESSEE HAS NOT PROVIDED THEIR ADD RESSES DESPITE SEVERAL OPPORTUNITIES GIVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE A.O SUBSEQUENTLY INITIATED THE PROCEEDINGS U/S. 154 OF THE ACT BY GIVING THE REASON THAT THE ASSESSEE HAD NOT GIVEN ADDRESSES OF THE CU STOMERS WHO HAD GIVEN GOLD DEPOSITS OF 10307 GRAMS. THE A.O ASKED THE ASSESSEE TO PRODUCE THE ORDER BOOK OF THE CUSTOMER IN RESPECT OF 10307 GRAM S OF GOLD. IT APPEARS THAT THE ASSESSEE FILED THE DETAILS GIVING NAMES AND ADD RESSES OF THE PARTIES/CUSTOMERS WHO HAS DEPOSITED GOLD. THE ASSE SSEE RESISTED THE ACTION OF THE A.O FOR RECTIFYING THE ORDER U/S. 154 AS PRO POSED BY HIM. THE A.O WAS OF THE OPINION THAT AS THE ASSESSEE FAILED TO EST ABLISH THE GENUINENESS OF THE DEPOSITS OF THE GOLD AS NO ADDRESSES WERE PROVIDED, HENCE THE ASSESSEE FAILED TO ESTABLISH THE IDENTITY OF THE CUSTOMERS WHO KEPT THE GOLD WITH THE ASSESSEE AND THE ENTIRE GOLD DEPOSITS WERE LIABLE FOR ADDITI ON IN THE INCOME OF THE ASSESSEE. THE, A.O., THEREFORE PROCEEDED TO DETERM INE THE FAITH OF 10307 GRAMS OF GOLD JEWELLERY WHICH WERE CLAIMED AS DEPOS ITS WITH THE ASSESSEE. ITA NO. 2277/MUM/2009 3 THE A.O HAS DEALT WITH THE ISSUE IN THE ORDER PASS ED U/S. 154 IN DETAIL. ON PAGE NO. 4 OF THE ORDER, THE A.O HAS GIVEN THE DETA ILS OF THE GOLD DEPOSITS FOR THE PERIOD APRIL 2004 TO MARCH 2005 IN DIFFERENT CA RRATAGE LIKE 18 CT., 22 CT., 23 CT., ETC., AFTER GIVING THE ELABORATE DETAILED REASONS IN THE ORDER PASSED U/S. 154, THE A.O. RECTIFIED THE ASSESSMENT ORDER P ASSED U/S. 143(3) DT. 26.12.2007 BY MAKING THE ADDITION U/S. 68 OF THE AC T OF RS. 61,27,898/- AND THEREBY RE-COMPUTED THE TOTAL INCOME AT RS. 2,68,51 ,780/-. THE ASSESSEE CHALLENGED THE ORDER PASSED U/S. 154 OF THE ACT BEF ORE THE LD CIT(A). IT WAS CONTENDED THAT THE APPEAL AGAINST THE REGULAR ASSES SMENT ORDER WAS ALREADY PENDING BEFORE THE CIT(A) AND THEREAFTER FACTS HAD BEEN MENTIONED IN THE NOTICE U/S. 154 HAS ALREADY BEEN CONSIDERED BY THE A.O WHILE PASSING THE REGULAR ASSESSMENT ORDER AND HENCE, THERE WAS NO AP PARENT MISTAKE IN THE ORDER PASSED BY THE A.O. THE ASSESSEE ALSO CONTEND ED THAT THE ISSUE WHICH IS MADE THE SUBJECT MATTER OF THE RECTIFICATION U/S. 1 54 WAS HIGHLY DEBATABLE ONE WHICH REQUIRES THE DETAILED INVESTIGATION AND T HE SAID ISSUE CANNOT BE DETERMINED IN THE PROCEEDINGS U/S. 154 OF THE ACT. THE LD CIT(A) ALLOWED THE APPEAL FILED BY THE ASSESSEE AND QUASHED THE ORDER PASSED BY THE A.O U/S. 154 OF THE I.T. ACT DT. 28.1.2008. THE OPERATIVE P ART OF THE REASONS AND FINDINGS OF THE LD CIT(A) IS PARA NO. 3.3. WHICH RE ADS AS UNDER : 3.3 I HAVE CONSIDERED THE ISSUE UNDER APPEAL AND F OUND THAT AO HAS NOT RECTIFIED THE MISTAKE APPARENT FROM THE RECORD BUT HAS RECTIFIED HIS OMISSION OF MAKING ASSESSMENT OF SOME POINT WHICH W AS ANALOGICAL TO THE OTHER POINT, HENCE, THERE WAS OMISSION OF THE J UDGEMENT OR A DECISION ON FACTS WHICH WERE UNDER PROCESS OF ASSES SMENT. THIS CANNOT BE PRESUMED TO BE APPARENT MISTAKE FROM RECORD. WH ILE RECTIFYING THE MISTAKE AO HAS MENTIONED THAT MISTAKE RELATES TO TW O VERY CLEAR & SIMPLE ISSUES (I) ONE THAT ADDRESSES OF CUSTOMERS FROM WHOM ADVANCES ARE RECEIVED IS NOT PROVIDED BY THE APPELL ANT DESPITE BEING ASKED SPECIFICALLY HENCE THEIR IDENTITY & GENUINENE SS IS NOT ESTABLISHED & (II) SECONDLY, THE ADVANCES FROM CUSTOMERS RECEIV ED FOR MANUFACTURE OF GOLD ORNAMENTS SUCH AS ORNAMENTS ARE DELIVERED W ITHIN A PERIOD OF MINIMUM OF ONE MONTH AND THEREAFTER ADVANCES SHOULD BECOME PART OF SALES. THE FINDING OF THE AO THAT MISTAKE OF NON-A DDITION OF SUCH AMOUNT IN ASSESSMENT ORDER WAS OBVIOUS, CLEAR AND P ATENT MISTAKE, FOR ITA NO. 2277/MUM/2009 4 WHICH NEITHER ANY LONG RUN PROCESS OF REASONING IS REQUIRED NOR ANY SUCH LONG DRAWN REASONING IS GIVEN. THEREFORE, AO HAS MADE THIS ADDITION WHICH IS NOT AT ALL THE APPARENT MISTAKE FROM THE RECORD. THE PROVISION OF LAW U/S. 154 IS VERY CLEAR THAT MISTAK E APPARENT FROM RECORD SHOULD BE GLARING ONE, FREE FROM DEBATE AND ALTERNATE ARGUMENT WHEREAS THE ISSUE UNDER REFERENCE IS NOT FREE FROM DEBATE OR NOT FREE FROM ALTERNATIVE ARGUMENTS. IT TRANSPIRES FROM REC TIFICATORY ORDER THAT THERE IS A RECTIFICATION OF ERROR OF JUDGEMENT, HE NCE IT CANNOT BE RECTIFIED U/S. 154 VIDE INDIAN IRON & STEEL CO. LTD . V. STO (1973) 32 STC 95 (ALL) & CIT V/S. RAMESH ELECTRIC & TRADING C O. (1993) 203 ITR 497, 502 (BOM). FURTHER MORE, THERE IS NO PROPRIET ARY ON THE PART OF THE LD. AO TO INITIATE PENALTY PROCEEDING U/S. 271( 1)(C) OF THE I.T. ACT FOR RECTIFICATION OF SUCH SO CALLED MISTAKE WHEREAS THERE IS A CASE OF MISTAKE OF JUDGEMENT OR A DECISION AND NOT THE MIST AKE APPARENT FROM RECORDS. IN THE CASE OF CIT V. SUMAN TEA & PLYWOOD INDUSTRIES P. LTD.,(1997) 226 ITR 35 HONBLE CALCUTTA HIGH COURT HAS GIVEN A PROPOSITION THAT MISTAKE SHOULD BE CLERICAL, GRAMMATICAL, ARITHMETICAL OR ALIKE NATURE WHICH COULD BE DETECTE D WITHOUT REARGUMENT OR REAPPRAISAL OF FACTS. BUT, IN THIS CASE NO SUCH MISTAKE IS THERE, HENCE THE RECTIFACTORY ORDER OF T HE AO IS NOT AS PER THE LAW OF PROVISION U/S. 154 OF THE I.T. ACT. IT IS A LSO RELEVANT TO MENTION THAT QUANTUM APPEAL IS PENDING IN WHICH REMAND REPO RT HAS BEEN SOUGHT HENCE, AO CAN BRING TO THE NOTICE THE FULL F ACTS & EVIDENCES ON RECORD TO COVER UP THIS ISSUE IN QUANTUM OF APPEAL WHICH IS STILL IN THE PROCESS OF HEARING. THEREFORE, THE ORDER PASSED U/ S. 154 OF THE I.T. ACT DTD. 28.01.2008 IS HEREBY QUASHED AND AO IS DIRECTE D TO DELETE THE ADDITION MADE U/S. 68 IN RECTIFICATORY ORDER AND RE DUCE THE ASSESSMENT AS POINTS CANNOT BE SUBJECTED FOR ADDITION IS RECTI FICATORY ORDER U/S. 154 OF THE I.T. ACT. NOW THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PART IES. WE HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE FA CTS ARE NOT DISPUTED IN THIS CASE THAT THE ASSESSMENT OF THE ASSESSEE HAS BEEN C OMPLETED BY THE A.O U/S. ITA NO. 2277/MUM/2009 5 143(3) OF THE ACT VIDE ORDER DT. 26.12.2007. THE A .O SUBSEQUENTLY INITIATED THE PROCEEDINGS U/S. 154 OF THE I.T. ACT FOR RECTI FYING THE ASSESSMENT ORDER ON THE REASON THAT IN RESPECT OF THE GOLD DEPOSITS CLA IMED BY THE ASSESSEE WHICH WERE RECEIVED FROM THE CUSTOMERS, THE A.O HAD NOT V ERIFIED THE ADDRESSES OF THE CUSTOMERS. THOUGH THE ASSESSEE RESISTED THE AC TION OF THE A.O FOR MAKING THE INQUIRY IN RESPECT OF THE GOLD DEPOSITS WHICH W ERE WITH THE ASSESSEE BY INITIATING THE PROCEEDINGS U/S. 154, BUT THE A.O RE JECTED THE OBJECTION OF THE ASSESSEE AND ENHANCED THE ASSESSMENT BY MAKING THE ADDITION U/S. 68. ON THE PERUSAL OF THE ORDER PASSED U/S. 154, IT IS SEE N THAT THE A.O HAS ELABORATELY DEALT WITH ISSUE HOW THE GOLD DEPOSITS BY THE CUSTOMERS WERE MADE WITH THE ASSESSEE, MORE PARTICULARLY, IN RESPE CT OF THANE AND DOMBIVLI BRANCHES WERE NOT GENUINE AS THE IDENTITY OF THE DE POSITORS WERE NOT DISCLOSED. THE LD COUNSEL ARGUED THAT THE A.O HAS DONE THE ENTIRE EXERCISES OF THE INVESTIGATION AND THEREBY GIVING THE FINDING IN THE PROCEEDINGS U/S. 154 OF THE ACT WHICH IS NOT PERMISSIBLE. THE LD COUNSE L ALSO REFERRED TO THE ORDER PASSED BY THE A.O U/S. 154 AND SUBMITTED THAT THE E NTIRE ISSUE OF THE ADDITION U/S. 68 IS HIGHLY DEBATABLE ISSUE AND THE A.O CANNO T TAKE THE SHELTER OF SECTION 154 FOR THE PROVISION OF SECTION 68 AFTER C OMPLETION OF THE ASSESSMENT U/S. 143(3). THE LD COUNSEL ALSO RELIED ON THE FOL LOWING PRECEDENTS : I) ITO V/S. VOLKHART BROTHERS, 82 ITR 50 (SC) II) TATA IRON AND STEEL CO. LTD. V/S. N.C. UPADYA, 96 I TR 1, (BOM) III) WALCHANDNAGAR INDUSTRIES LTD. V/S. V.S. GAITON DE, 44 ITR 260 (BOM). 5. WE HAVE ALSO HEARD THE LD. D.R. ON THE PERUSAL O F THE ORDER PASSED U/S. 154, THERE IS NO DOUBT, AS RIGHTLY SUBMITTED BY THE LD COUNSEL THAT THE ISSUE OF THE ADDITION U/S. 68 CANNOT BE SUBJECT MATTER OF PROCEEDINGS U/S. 154 OF THE ACT. THE A.O HAS IN DETAIL TRIED TO JUSTIFY THE AD DITION TO BE MADE U/S. 68 AND ACCORDINGLY, HAS PASSED THE DETAILED ORDER GIVING T HE ELABORATE REASONS. NOW THE LAW IS WELL SETTLED IN RESPECT OF THE LIMITATIO N OF THE A.O TO RECTIFY ANY ORDER U/S. 154. IN THE CASE OF VOLKHART BROTHERS (S UPRA), THE HONBLE SUPREME COURT IN CLEAR TERMS HAS HELD THAT THE POWER OF A.O IS LIMITED TO RECTIFY THE MISTAKES WHICH ARE APPARENT ON THE FACE OF THE RECO RD. THE A.O HAS NO POWER TO GO INTO THE DEBATABLE ISSUE AND DETERMINE THE TA XABILITY U/S. 68 OR ITA NO. 2277/MUM/2009 6 OTHERWISE. IN OUR OPINION, THE LD CIT(A) HAS RIGHTL Y CANCELLED THE ORDER PASSED BY THE A.O U/S. 154 AND WE FIND NO REASONS TO INTER FERE WITH THE SAME. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25TH DAY OF MARCH, 2010. SD/- SD/- (J. SUDHAKAR REDDY) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 25TH DAY OF MARCH, 2010. :US COPY TO: 1. APPELLANT 2. RESPONDENT , 3.THE CIT(A)- XV, MUMBAI 4.THE CIT, CITY-15, MUMBAI 5.THE DR, G BENCH, MUMBAI 6.GUARD FILE BY ORDER TRUE COPY ASSTT..REGISTRAR, ITAT, MUMBAI. ITA NO. 2277/MUM/2009 7 US DATE INITIALS 1. DRAFT DICTATED ON 18/3/10 --------------- S R.P.S. 2. DRAFT PLACED BEFORE AUTHORITY 19/3/10 --------- ----- SR.P.S. 3. DRAFT PROPOSED & PLACED ----------- ---------- --- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED ----------- ----------- -- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO ----------- ------------ - SR.P.S. THE SR. P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON --------- ----------- -- SR.P.S. 7. FILE SENT TO THE BENCH CLERK --------- --------- ---- SR.P.S. 8. DATE ON WHICH FILE GOES TO THE ------- --------- ---- 9. DATE OF DISPATCH OF ORDER --------- --------- ----