Shri Vijendra Omprakash Agrawal, V. ITO, Jalgaon

ITA 2284/PUN/2012

• Counselvise Citation: 228424514 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 20-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VERMA
• Keywords: Revenue expenditure; Capital expenditure
• Section: 40A(3); 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.2284/PN/2012 (A.Y.2008-09) SHRI VIJENDRA OMPRAKASH AGRAWAL PROP. VIJENDRA COTTON CORPORATION BHAGAWAN MAHAVIR MARG, BHADGAON ROAD, PACHORA 424201 PAN: AGAPA4942K APPELLANT VS. ITO, WARD 2(3), JALGAON RESPONDENT APPELLANT BY : SMT. DEEPA KHARE RESPONDENT BY : SMT.M.S. V ERMA, CIT DATE OF HEARING : 03.04.2014 DATE OF ORDER : 10.04.2014 ORDER PER R.K. PANDA, A.M: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 27.08.2012 PASSED U/S. 263 BY THE CIT-II, NAS HIK RELATING TO A.Y. 2008-09. 2. THE ASSESSEE HAS RAISED VARIOUS GROUNDS CHALLENG ING THE ORDER OF THE CIT IN SETTING ASIDE THE ASSESSMENT ORDER PA SSED U/S.143(3) BY INVOKING THE PROVISIONS OF SECTION 263. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF TRADING COTTON GINNI NG, BALES AND SEEDS. HE FILED HIS RETURN OF INCOME ON 30.09.2008 DECLARING TOTAL 2 INCOME OF 3,55,910/-. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S.143(3) ON 13.12.2010 DETERMINING THE TOTAL INCOME AT 5,11,360/-. IN THE SAID ORDER, THE ASSESSING OFFI CER HAS MADE ADDITION OF 1,25,445/- U/S.40A(3) BY TREATING 5% OF THE PURCHA SES AS IN CONTRAVENTION TO THE PROVISIONS OF SECTION 40 A(3). SIMILARLY, THE ASSESSING OFFICER HAD DISALLOWED AN AMOUNT OF 30,000/- ON ESTIMATE BASIS OUT OF VARIOUS EXPENSES ON ACCOUNT O F SELF MADE VOUCHERS WHICH ARE NOT FULLY VERIFIABLE. 4. SUBSEQUENTLY, THE LD. CIT CALLED FOR THE RECORDS AND OBSERVED THAT WHILE FINALIZING THE ASSESSMENT U/S.143(3), TH E ASSESSING OFFICER HAS STATED IN THE ASSESSMENT ORDER THAT BAHARGAON (OUTDOOR) PURCHASES OF 1,25,44,485/- WERE NOT FULLY FROM THE FARMERS. HOWEVER, THE ASSESSING OFFICER CONSIDERED ONLY 5% O F THE PURCHASES ON ESTIMATE BASIS IN CONTRAVENTION OF SECTION 40A(3 ) AND DISALLOWED 20% OF THE SAME. ACCORDING TO HIM, AS PER PROVISIO NS OF SECTION 40A(3), ADDITION CANNOT BE MADE ON ESTIMATE BASIS. THE ASSESSING OFFICER SHOULD HAVE SPECIFICALLY VERIFIED EACH AND EVERY PURCHASE SO AS TO ARRIVE AT THE TOTAL CASH PURCHASES DURING THE ASSESSMENT YEAR UNDER CONSIDERATION AND SHOULD HAVE WORKED OUT THE ADDITION ON THE AMOUNT OF CASH PURCHASES WHICH ARE IN CONTRAVENTION OF SECTION 40A(3). SIMILARLY, THE ASSESSING OFFICER HAS NOT T AKEN CARE OF THE DISALLOWANCE U/S.14A R.W.R. 8D. HE, THEREFORE, WAS OF THE OPINION THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS E RRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. HE, T HEREFORE, ISSUED A NOTICE U/S.263 ASKING THE ASSESSEE TO EXPLAIN AS TO WHY THE ORDER PASSED BY ASSESSING OFFICER U/S.143(3) SHOULD NOT B E SET ASIDE / MODIFIED. 4.1 ON THE BASIS OF EXPLANATION FILED BY THE ASSESS EE, THE LD.CIT AGREED WITH THE ASSESSEE THAT THE PROVISIONS OF SEC TION 14A R.W.R. 8D ARE NOT APPLICABLE. HOWEVER, SO FAR AS THE FIRST I SSUE I.E. DISALLOWANCE U/S.40A(3) IS CONCERNED, HE HAS HELD T HAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE TO SHOW THAT THE ENT IRE PURCHASES 3 WERE FROM FARMERS. FURTHER, THE PURCHASE RATE WAS HIGHEST IN THE MONTH OF MARCH AND THEREFORE, THERE IS A POSSIBILIT Y OF THE PURCHASES BEING INFLATED BY THE ASSESSEE. THE ASSESSEE HAS N OT EVEN PROVIDED THE IDENTITY OF THE PERSONS / FARMERS TO WHOM THE C ASH PAYMENTS WERE MADE. THEREFORE, THE PARTIAL DISALLOWANCE MAD E BY THE ASSESSING OFFICER WAS NOT JUSTIFIED. THE ASSESSING OFFICER WAS DUTY BOUND TO CARRY OUT EFFECTIVE INVESTIGATION, WHICH W AS NOT DONE. HE, THEREFORE, HELD THAT THE ORDER PASSED BY ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE. HE, ACCORDINGLY, SET ASIDE THE ORDER OF ASSESSING OFFIC ER AND DIRECTED THE ASSESSING OFFICER TO RE-EXAMINE THE ISSUE AFTER MAK ING PROPER ENQUIRY AND AFTER PROVIDING DUE OPPORTUNITY OF BEIN G HEARD TO THE ASSESSEE. AGGRIEVED WITH SUCH ORDER OF THE CIT, TH E ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR ASSESSEE REFERRING TO TH E VERY FIRST PARAGRAPH OF THE ORDER OF CIT PASSED U/S.263, DREW THE ATTENTION OF THE BENCH TO THE SAME AND SUBMITTED THAT THE CIT HA S PASSED ORDER U/S.263 ON THE BASIS OF A PROPOSAL RECEIVED FROM TH E ASSESSING OFFICER THAT THE SAID ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. REFERRING TO THE SUBM ISSIONS MADE BEFORE THE ASSESSING OFFICER FROM TIME TO TIME, (TH E DETAILS OF WHICH ARE AT PAGE 22 TO 28 OF PAPER BOOK) SHE SUBMITTED T HAT THE ASSESSEE HAS FURNISHED FULL DETAILS BEFORE THE ASSESSING OFF ICER. REFERRING TO THE SUBMISSIONS FURNISHED BEFORE THE ASSESSING OFFI CER ON 16.11.2010, (THE DETAILS OF WHICH ARE AT PAGE 24 TO 28) THE LEARNED COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO PARA 8 OF THE SUBMISSION, WHERE THE DETAILS OF PARTIES FROM W HOM PURCHASES ABOVE 1 LAKH HAVE BEEN MADE WERE FURNISHED. SHE SUBMITT ED THAT BASED ON THE VARIOUS DETAILS, THE ASSESSING OFFICER APPLIED HIS MIND AND PASSED THE ORDER U/S.143(3). THEREFORE, THE CI T WAS NOT JUSTIFIED IN INVOKING THE POWERS U/S.263. REFERRIN G TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUN BEAM AUTO LTD. REPORTED IN 332 ITR 167, SHE SUBMITTED THAT THE HON BLE DELHI HIGH 4 COURT IN THE SAID DECISION, HAS HELD THAT IF THERE WAS ANY ENQUIRY, EVEN INADEQUATE ENQUIRY, THAT WOULD NOT BY ITSELF G IVE OCCASION TO THE CIT TO PASS ORDERS U/S.263 OF I.T. ACT. MERELY BEC AUSE, HE HAS DIFFERENT OPINION IN THE MATTER, IT IS ONLY IN THE CASE OF LACK OF ENQUIRY THAT SUCH COURSE OF ACTION WOULD BE OPEN. REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR SHARMA REPORTED IN 335 ITR 83, SHE SUBMITTED THAT T HE HONBLE DELHI HIGH COURT IN THE SAID DECISION HAS HELD THAT THERE IS A DISTINCTION BETWEEN LACK OF ENQUIRY AND INADEQUATE ENQUIRY. IF, THERE WAS ANY ENQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDER U/S.263 OF ACT MERELY BECAUSE, HE HAS DIFFERENT OPINION IN THE MATTER. S HE ALSO RELIED ON THE FOLLOWING DECISIONS; I) BINA INDRAKUMAR VS. ITO, 137 ITD 238 (MUMBAI) II) RAJIV ARORA VS. CIT, 131 ITD 58 (JP) 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND HEAVILY RELIED ON THE ORDER OF THE LD.CIT. SHE SUB MITTED THAT THE DISALLOWANCE U/S.40A(3) HAS TO BE MADE ON THE BASIS OF ACTUAL CASH PAYMENTS MADE DURING THE WHOLE YEAR AND IT COULD NO T BE ON THE BASIS OF ESTIMATED DISALLOWANCE. SINCE THE ASSESSI NG OFFICER HAS NOT MADE PROPER ENQUIRY BY VERIFYING ALL THE CASH PAYME NTS, THEREFORE, THE LD. CIT WAS JUSTIFIED IN INVOKING THE PROVISION S OF SECTION 263. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO RELIED ON THE DECISIONS REPORTED IN 36 SOT 11 AND 95 ITD 326. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BOTH BY THE SIDES, PERUSED THE ORDERS OF THE AO AND LD.CIT AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONS IDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE, THE ASSESSING OFFICER HAS VERIFIED THE COMPUTERIZED BOOKS OF ACCO UNT I.E. CASH BOOK, JOURNAL, LEDGER, PURCHASE AND SALES REGISTER ALONG WITH BILLS AND INVOICES ON TEST CHECK BASIS. AFTER CONSIDERING TH E BAHARGAON 5 (OUTDOOR) PURCHASES AT 1,25,44,485/- WHICH ARE NOT FULLY FROM FARMERS, HE ESTIMATED 5% OF THE PURCHASES AS IN CON TRAVENTION OF THE PROVISIONS OF SECTION 40A(3) R.W.R. 6DD(I) AND DISA LLOWED AN AMOUNT OF 1,25,445/- U/S. 40A(3) OF THE ACT. IT IS THE CASE OF REVENUE THAT THE ASSESSING OFFICER SHOULD HAVE VERIFIED EACH AND EVERY PURCHASES FROM NON-FARMERS AND SHOULD HAVE DISALLOWED THE AMO UNT U/S.40A(3). SINCE HE HAS NOT DONE THE SAME, THEREF ORE THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PR EJUDICIAL TO THE INTERESTS OF REVENUE. IT IS THE CASE OF THE ASSESS EE THAT FULL DETAILS WERE PRODUCED BEFORE THE ASSESSING OFFICER AND AFTE R DUE APPLICATION OF MIND, THE ASSESSING OFFICER HAS DISALLOWED AN AM OUNT OF 1,25,445/- BY ESTIMATING 5% OF THE PURCHASES AS IN CONTRAVENTION OF PROVISIONS OF SECTION 40A(3). SINCE THE ASSESSING OFFICER HAS APPLIED HIS MIND AND TAKEN A VIEW, THEREFORE, IT IS A CASE OF INADEQUATE ENQUIRY BUT NOT A CASE OF LACK OF ENQUIRY AND THERE FORE, THE PROVISIONS OF SECTION 263 ARE NOT APPLICABLE TO THE PRESENT CASE. 8. WE FIND MERIT IN THE ABOVE SUBMISSION OF LEARNED COUNSEL FOR THE ASSESSEE. WE FIND THE HONBLE DELHI HIGH COURT IN THE CASE OF SUNBEAM AUTO LTD. (SUPRA) HAS OBSERVED AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE CO UNSEL ON THE OTHER SIDE AND HAVE GONE THROUGH THE RECORDS. THE F IRST ISSUE THAT ARISES FOR OUR CONSIDERATION IS ABOUT THE EXERCISE OF POWER BY THE COMMISSIONER OF INCOME-TAX UNDER SECTION 263 OF THE INCOME-TAX ACT. AS NOTED ABOVE, THE SUBMISSION OF LEARNED COUN SEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER , THE ASSESSING OFFICER DID NOT CONSIDER THIS ASPECT SPEC IFICALLY WHETHER THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PREDICATES ON THE ASSESS MENT ORDER, WHICH APPARENTLY DOES NOT GIVE ANY REASONS WHILE AL LOWING THE ENTIRE EXPENDITURE AS REVENUE EXPENDITURE. HOWEVER, THAT BY ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND ON THE ISSUE. THER E ARE JUDGMENTS GALORE LAYING DOWN THE PRINCIPLE THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS NOT REQUIRED TO GIVE DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTI ON, ETC. THEREFORE, ONE HAS TO SEE FROM THE RECORD AS TO WHE THER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDI TURE IN QUESTION AS REVENUE EXPENDITURE. LEARNED COUNSEL FO R THE 6 ASSESSEE IS RIGHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE DISTINCTION BETWEEN LACK OF INQUIRY AND INAD EQUATE INQUIRY . IF THERE WAS ANY INQUIRY, EVEN INADEQUAT E THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 OF THE ACT, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF LACK OF INQUIRY THAT SUCH A COURSE OF ACTION WOULD BE OPEN. 9. WE FIND FOLLOWING THE ABOVE DECISIONS, THE HONB LE DELHI HIGH COURT IN CASE OF ANIL KUMAR SHARMA (SUPRA) HAS OBSE RVED AS UNDER: THE TRIBUNAL AFTER EXAMINING THE FACTS OF THE CASE OBSERVED THAT ALTHOUGH IT IS NOT DISCERNIBLE FROM THE ASSESSMENT ORDER WHETHER THE ASSESSING OFFICER HAD APPLIED HIS MIND OR NOT, IT WAS THE PREROGATIVE OF THE ASSESSING OFFICER TO DRAFT HIS ORDER, AND IF HE FAILED TO RECORD CERTAIN FINDINGS, THE ASSESSEE COU LD NOT BE PENALIZED THEREFOR. THE TRIBUNAL FURTHER OBSERVED T HAT WHAT HAS TO BE ASCERTAINED IS WHETHER THE ASSESSING OFFICER HAD INVESTIGATED THE ISSUE AND APPLIED HIS MIND TO THE WHOLE RECORD. IN THIS BEHALF IT NOTED THAT THE ASSESSING OFFICER HAD ASKED THE ASSESSEE TO SUBMIT THE PURCHASE DEED IN RESPECT OF THE PURCHASE OF LAND AT VILLAGE TUGHLAKABAD AND THAT THE ASSESSE E IN RESPONSE THERETO HAD SUPPLIED REQUISITE DETAILS AND SUBMITTED A COPY OF THE HIGH COURT'S DECISION IN RELATION TO TH E AWARD OF COMPENSATION ETC. THE TRIBUNAL, THEREFORE, CAME TO THE CONCLUSION THAT THE COMPLETE DETAILS WERE FILED BEFORE THE ASS ESSING OFFICER AND THAT HE APPLIED HIS MIND TO THE RELEVANT MATERI AL AND FACTS, ALTHOUGH SUCH APPLICATION OF MIND IS NOT DISCERNIBL E FROM THE ASSESSMENT ORDER. THE TRIBUNAL HELD THAT THE COMMI SSIONER IN PROCEEDINGS UNDER SECTION 263 ALSO HAD ALL THESE D ETAILS AND MATERIAL AVAILABLE BEFORE IT, BUT HAD NOT BEEN ABLE TO POINT OUT DEFECTS CONCLUSIVELY IN THE SAID MATERIAL, FOR ARRI VING AT A CONCLUSION THAT PARTICULAR INCOME HAD ESCAPED ASSE SSMENT ON ACCOUNT OF NON-APPLICATION OF MIND BY THE ASSESSIN G OFFICER. THE TRIBUNAL, THEREFORE, ALLOWED THE APPEAL OF THE ASSE SSEE AND QUASHED THE ORDER OF THE COMMISSIONER PASSED UNDER SECTION 263 OF THE SAID ACT. 10. SINCE, IN THE INSTANT CASE, THE ASSESSING OFFIC ER HAS EXAMINED THE BOOKS OF ACCOUNT AND AFTER OBSERVING THAT THE P URCHASES FROM BAHARGAON I.E. OUTDOOR AT 1,25,44,485/- ARE NOT ENTIRELY FROM FARMERS, FOR WHICH, HE ESTIMATED 5% OF SUCH PURCHAS ES AS IN CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3), THEREFORE, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND WHILE MAKING SUCH DISALLOWANCE. NOW THE COMMISSIONER WAN TS TO 7 SUBSTITUTE HIS OWN VIEWS AGAINST THE VIEWS OF ASSES SING OFFICER. SINCE IT MAY BE A CASE OF INADEQUATE ENQUIRY BUT CE RTAINLY NOT A CASE OF LACK OF ENQUIRY, THEREFORE, IN VIEW OF THE DECIS IONS CITED (SUPRA), WE HOLD THAT THE CIT WAS NOT JUSTIFIED IN INVOKING THE POWERS UNDER SECTION 263 OF THE I.T. ACT. THE VARIOUS DECISIONS RELIED ON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ARE DISTINGUISH ABLE AND ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. SINCE THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT CITE ANY CONT RARY DECISION AGAINST THE DECISION OF HONBLE DELHI HIGH COURT RE LIED ON BY THE LEARNED COUNSEL FOR ASSESSEE, THEREFORE, RESPECTFUL LY FOLLOWING THE DECISIONS OF HONBLE DELHI HIGH COURT CITED (SUPRA) , WE HOLD THAT LEARNED CIT WAS NOT JUSTIFIED IN INVOKING THE PROVI SIONS OF SECTION 263 OF ACT IN THE INSTANT CASE. WE, ACCORDINGLY, S ET ASIDE HIS ORDER AND ALLOW THE GROUNDS RAISED BY ASSESSEE. 11. IN THE RESULT, THE APPEAL FILED BY ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THE DAY OF 10 TH APRIL, 2014. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 10 TH APRIL, 2014 GCVSR COPY TO:- 1. ASSESSEE 2. DEPARTMENT 3. THE CIT-II, NASHIK 4. THE DR, A BENCH, I.T.A.T., PUNE. 5. GUARD FILE //TRUE COPY// BY ORDER SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE