Mrs. Payal Kumari, Jagadhari V. ITO, Yamunanagar

ITA 23/CHANDI/2011

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1392 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-02-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 07-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Section: 143(3); 54B; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 23/CHD/2011 ASSESSMENT YEAR: 2007-08 MRS. PAYAL KUMARI, VS. THE ITO, WARD-1, JAGADHARI YAMUNANAGAR PAN NO. ALUPK3692H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY: SHRI N.K.SAINI ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A), PANCHKULA DATED 21.10.2010 RELATING TO ASSESSMENT Y EAR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3)OF THE I.T. AC T. 2. THE ASSESSEE BY WAY OF GROUND NO.1 HAS RAISED PR ELIMINARY OBJECTION AGAINST THE SELECTION OF THE CASE UNDER S CRUTINY TO BE IN VIOLATION OF THE SCRUTINY GUIDELINES ISSUED BY THE CBDT. THE ASSESSEE HAS FURTHER RAISED VARIOUS GROUNDS OF APPEAL BUT TH E PRESENT APPEAL IS BEING DISPOSED OF ON THE BASIS OF PRELIMINARY OBJEC TION RAISED BY THE ASSESSEE VIDE GROUND NO.1. THE CASE OF THE ASSESS EE IS THAT THE RETURN OF INCOME FILED ON 31.3.2008 HAS BEEN SUBJECTED TO THE SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT IN VIOLATION OF THE CBDT GUID ELINES AND AS SUCH THE 2 PLEA OF THE ASSESSEE IS THAT THE ORDER PASSED IN TH E CASE IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 3. THE LD. AR FOR THE ASSESSEE DREW OUR ATTENTION T O PAGE 1 OF THE ASSESSMENT ORDER WHEREIN THE ASSESSING OFFICER HAS OBSERVED THAT SUBSEQUENTLY THE CASE WAS SELECTED INTO SCRUTINY AS PER BOARDS GUIDELINES FOR THE YEAR 2008-09, AS THE ASSESSEE HA S CLAIMED DEDUCTION U/S 54B / 54D EXCEEDING RS. 24 LACS . ACCORDING TO THE LD. AR FOR THE ASSESSEE, THE OBSERVATIONS OF THE ASSESSING OFFICER WERE FACTUALLY INCORRECT AS THE ASSESSEE HAS NOT CLAIMED ANY DEDUC TION U/S 54B/54D EXCEEDING RS. 25 LACS DURING THE YEAR. OUR ATTENT ION WAS FURTHER DRAWN TO THE COPY OF THE COMPUTATION OF INCOME FURNISHED AT PAGE 1 OF THE PAPER BOOK IN THIS REGARD. THE LD. AR FOR THE ASSESSEE FURTHER POINTED OUT THAT THE CIT(A) HAD ADMITTED THE ADDITIONAL GROUND OF AP PEAL RAISED BY THE ASSESSEE IN THIS REGARD VIDE PARA 3 AND 3.1. HOWE VER, THE FINDINGS OF CIT(A) IN PARA 4.2.1 AT PAGE 24 ARE INCORRECT AS TH E PROVISIONS OF SECTION 292BB ARE ONLY IN CONNECTION WITH ANY NOTICE NOT PR OPERLY SERVED. HE FURTHER STATED THAT THE SAME DOES NOT APPLY TO THE ISSUE IN HAND WHICH IS REGARDING SELECTION OF CASE. THE LD. AR FOR THE AS SESSEE FURTHER SUBMITTED THAT THE NOTICE U/S 143(2) HAS BEEN ISSUE D IN TIME BUT THE CASE OF THE ASSESSEE WAS THAT THE SELECTION OF THE PRESE NT CASE WAS IN VIOLATION OF THE GUIDELINES PRESCRIBED BY THE CBDT. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY CHANDIGARH BENCH OF TRIBUNAL IN SHRI BHANI CHAND VS. ITO IN ITA NO. 920/CHANDI/2010 RELATING TO ASSESSME NT YEAR 2006-07 ORDER DATED 14.10.2010. THE LD. DR FOR THE REVENUE WAS DIRECTED TO FILE THE GUIDELINES FOR SELECTION OF CASES FOR SCRU TINY DURING THE FINANCIAL YEAR 2008-09. THE LD. DR HAS FURNISHED THE SAME ON RECORD. IT HAS BEEN POINTED OUT BY BOTH THE REPRESENTATIVES THAT T HE SELECTION CRITERIA 3 WITH REGARD TO ITR 2, 3 ARE APPLICABLE UNDER WHICH AS PER CLAUSE (7), WHEREIN DEDUCTION CLAIMED UNDER SECTIONS 54 B / 54 D / 54E / 54 EC / 54G / 54GA EXCEEDS RS. 25 LACS, IS TO BE SELECTED FOR S CRUTINY. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE PRELIMINARY CONTENTION RAISED BY THE ASSESSEE IS AG AINST THE ASSESSMENT COMPLETED IN THE CASE BEING BAD IN LAW BECAUSE OF T HE FAILURE ON THE PART OF THE ASSESSING OFFICER IN PICKING UP THE RETURN O F INCOME FOR ASSESSMENT IN VIOLATION OF CBDT GUIDELINES. SIMILAR ISSUE RE LATING TO THE VESTING OF JURISDICTION IN ASSESSING OFFICER ON THE BASIS OF T HE SELECTION PROCEDURE FOR CASES UNDER SCRUTINY WAS ADDRESSED BY THE CHAND IGARH BENCH OF THE TRIBUNAL IN BHANI CHAND VS. ITO (SUPRA) AND AS PER PARAS 5 & 6, IT HAS BEEN HELD AS UNDER:- 5. WE HAVE CAREFULLY CONSIDERED THE CONTENTION RAISED BY THE APPELLANT THAT THE IMPUGNED ASSESSMEN T IS BAD IN LAW ON ACCOUNT OF THE FAILURE ON THE PART OF THE ASSESSING OFFICER IN PICKING UP THE RETURN OF INCOM E FOR ASSESSMENT IN VIOLATION OF THE CBDT GUIDELINES. IN THE COURSE OF THE HEARING BEFORE US, DEPARTMENT WAS DIRECTED TO PRODUCE A COPY OF THE PROCEDURE FOR SELECTION OF CASES FOR SCRUTINY FOR NON- CORPORATE ASSESSES DURING THE FINANCIAL YEAR 2007-08. IN RESPONSE, A COPY OF INSTRUCTIONS ISSUED BY THE CBDT IN THIS REGARD HAS BEEN PLACED ON RECORD B Y THE LD. DR. CLAUSE (XV) OF PARA 2 OF THE INSTRUCTIO NS PRESCRIBE FOR SELECTION FOR SCRUTINY ASSESSMENT A C ASE OF A CONTRACTOR WHOSE CONTRACTUAL RECEIPTS EXCEED RS.1 CRORE, IF TOTAL INCOME DECLARED FROM CONTRACT WORK IS LESS THAN 5% OF THE GROSS CONTRACTUAL RECEIPTS. T HE ABOVE SAID GUIDELINE HAS BEEN ADVERTED TO BY THE ASSESSING OFFICER TO JUSTIFY SELECTION OF THE CAPTI ONED CASE FOR SCRUTINY ASSESSMENT. AT THIS POINT IT MAY BE PERTINENT TO REFER TO THE JUDGMENT OF THE HONBLE A NDHRA PRADESH HIGH COURT IN THE CASE OF SMT. NAYANA P. DEDHIA (SUPRA) WHEREIN THE STATUS OF SUCH CIRCULARS OF THE CBDT HAS BEEN EXAMINED. THE HONBLE HIGH COURT RELIED UPON THE JUDGMENT OF THE HONBLE SUPREME COU RT IN THE CASE OF UCO BANK VS. CIT 237 ITR 889 (SC) TO HOLD THAT SUCH CIRCULARS WERE BINDING ON THE INCOME -TAX AUTHORITIES. ACCORDINGLY IT UPHELD THE DECISION OF THE 4 TRIBUNAL THAT AN ASSESSMENT IS BAD IN LAW IN A CASE WHERE THE RETURN OF INCOME HAS BEEN SELECTED FOR SECURITY ASSESSMENT IN VIOLATION OF THE RELEVANT CB DT GUIDELINES. TO THE SIMILAR EFFECT IS THE DECISION O F THE BILASPUR BENCH OF THE TRIBUNAL IN THE CASE OF SUNIT A FINLEASE LIMITED (SUPRA). 6. IN THIS BACKGROUND WE MAY NOW EXAMINE THE FAC TUAL POSITION IN THIS CASE. THERE IS NO DISPUTE THAT CLA USE (XV) OF PARA 2 OF THE CIRCULAR, WHICH READS AS UNDER (XV) ALL CASES OF CONTRACTORS (EXCLUDING TRANSPORTERS) WHOSE GROSS CONTRACTUAL RECEIPT EXCEED RS.1 CRORE IF TOTAL INCOME DECLARED FROM CONTRACT WORK IS LESS THAN 5% OF GROSS CONTRACTUAL RECEIPTS. HAS BEEN INVOKED BY THE ASSESSING OFFICER TO SELECT ASSESSEES RETURN OF INCOME FOR SCRUTINY ASSESSMENT . ACCORDING TO SAID GUIDELINE A RETURN OF INCOME SHAL L BE SELECTED FOR SCRUTINY ASSESSMENT IN THE CASE OF A CONTRACTOR IF TOTAL INCOME DECLARED FROM CONTRACT W ORK IS LESS THAN 5% OF THE GROSS CONTRACTUAL RECEIPTS. WE HAVE PERUSED THE AUDITED PROFIT & LOSS ACCOUNT FOR THE PERIOD UNDER CONSIDERATION, A COPY OF WHICH HAS BEE N PLACED IN THE PAPER-BOOK, WHICH CLEARLY SHOWS THAT ON GROSS CONTRACTUAL RECEIPTS OF RS.43,45,688/-, THE N ET PROFIT DECLARED IS RS.2,21,630/-, WHICH GIVES A NET PROFIT RATE OF 5.09%. SINCE THE PROFIT SO DECLARED BY THE ASSESSEE IS NOT LESS THAN 5% OF THE GROSS CONTRACTU AL RECEIPTS, THE RETURN OF INCOME FILED BY THE ASSESSE E COULD NOT HAVE BEEN SELECTED FOR SCRUTINY ASSESSMENT IN T ERMS OF THE GUIDELINE PRESCRIBED BY THE CBDT IN CLAUSE ( XV) OF PARAGRAPH 2 OF THE CIRCULAR FURNISHED BY LD. DR. TH US, THE RETURN OF INCOME HAS BEEN SELECTED FOR SCRUTINY ASSESSEE IN VIOLATION OF THE CBDT GUIDELINES AND THEREFORE THE CONSEQUENTIAL ASSESSMENT ORDER DATED 22.08.2008 IS BAD IN THE EYES OF LAW. THE OBSERVATI ON OF THE CIT(A) THAT THE NET PROFIT DECLARED IS LESS THA N 5% OF THE GROSS CONTRACTUAL RECEIPTS IS BASED ON A WRONG APPRECIATION OF THE FACTUAL POSITION. WHILE COMPUTI NG THE GROSS CONTRACTUAL RECEIPTS THE CIT(A) HAS INCLUDED THE AMOUNT OF WORK IN PROGRESS CREDITED IN THE CONTRACT/TRADING ACCOUNT, WHICH IS CLEARLY ERRONEOU S. THEREFORE, IN THE FACTUAL BACKGROUND OF THE CASE, W E CONCLUDE BY HOLDING THAT THE CONTENTION OF THE APPE LLANT THAT THE RETURN OF INCOME HAS BEEN SELECTED FOR SCR UTINY ASSESSMENT IN VIOLATION OF THE CBDT GUIDELINES, IS CORRECT. ACCORDINGLY, THE IMPUGNED ASSESSMENT IS RENDERED BAD IN THE EYES OF LAW. IN THE RESULT, THE ORDERS OF THE AUTHORITIES BELOW ARE SET-ASIDE, BEING BAD I N LAW. THE ASSESSING OFFICER IS DIRECTED TO ACCEPT THE RET URNED INCOME AS SUCH. 5 5. IN THE ABOVE SAID BACKGROUND THE FACTUAL ASPECTS OF THE PRESENT CASE ARE THAT THE ASSESSING OFFICER HAD SELECTED THE RET URN OF INCOME FILED BY THE ASSESSEE FOR SCRUTINY FOR THE ALLEGED REASONS T HAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 54B / 54D EXCEEDING RS. 25 LA CS. ACCORDING TO THE GUIDELINES ISSUED BY CBDT FOR SELECTION OF CASES F OR SCRUTINY DURING 2008-09, CLAUSE (7) UNDER ITR 2 AND 3 READS AS UNDE R:- (7). TOTAL DEDUCTION CLAIMED U/S 754 B / 54D / 54E / 54 EC / 54G / 54GA EXCEEDS RS. 25 LACS,. 6. THE SAID CIRCULAR HAD BEEN INVOKED TO SELECT THE RETURN OF I NCOME OF THE ASSESSEE FOR SCRUTINY ASSESSMENT. THE PERUSAL OF THE COMPUTATION OF INCOME FILED BY THE ASSESSEE, COPY OF WHICH IS PLAC ED AT PAGE 1 OF THE PAPER BOOK REVEALS NO SUCH DEDUCTION CLAIMED BY THE ASSESSEE. WE FIND THAT THE RETURN OF INCOME FILED BY ASSESSEE HAS BEE N SELECTED FOR SCRUTINY ASSESSMENT IN VIOLATION OF THE CBDT GUIDELINES AND AS SUCH THE CONSEQUENT ASSESSMENT ORDER DATED 30.10.2009 IS BAD IN LAW. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY TRIBUNAL IN BHA NI CHAND VS. ITO (SUPRA). THE OBSERVATION OF THE CIT(A) IN REGARD T O THE ISSUE WERE THAT THE PROVISIONS OF SECTION 292BB ARE APPLICABLE IN T HE PRESENT CASE AND AS THE ASSESSEE HAD NOT OBJECTED TO THE ASSESSMENT PRO CEEDINGS WHEN NOTICE U/S 143(2) WAS ISSUED, CANNOT NOW OBJECT TO THE SAM E IN THE APPELLATE PROCEEDINGS ON THE GROUND THAT THE CASE HAS BEEN WR ONGLY SELECTED UNDER SCRUTINY. WE FIND NO MERIT IN THE SAID OBSERVATION S OF CIT(A) AS THE PROVISIONS OF SECTION 292BB OF THE ACT ARE IN CONNE CTION WITH THE VALIDITY OF NOTICE ISSUED UNDER ANY PROVISIONS OF THE ACT. THE NOTICE REFERRED TO IN THE PRESENT PROCEEDINGS IS THE NOTICE ISSUED U/S 143(2) OF THE ACT. ADMITTEDLY, THE NOTICE U/S 143(2) HAD BEEN ISSUED I N TIME BUT THE QUESTION 6 RAISED BEFORE US IS NOT IN CONNECTION WITH ISSUE OF NOTICE U/S 143(2) OF THE ACT, BUT IS IN CONNECTION WITH SELECTION OF THE CAS E FOR SCRUTINY, WHICH IS TO BE EXERCISED BY THE ASSESSING OFFICER IN LINE WI TH THE GUIDELINES ISSUED BY THE BOARD FOR THE YEAR 2008-09. AS OBSERVED B Y US IN THE PARAS HEREINABOVE, THAT THE SELECTION OF THE CASE OF SCRU TINY WAS IN VIOLATION OF THE CBDT GUIDELINES AND ACCORDINGLY THE IMPUGNED AS SESSMENT IS BAD IN LAW. IN THE RESULT, THE ORDERS OF THE AUTHORITIES BELOW ARE SET ASIDE BEING BAD IN LAW. THE ASSESSING OFFICER IS DIRECTED TO A CCEPT THE RETURNED INCOME AS SUCH. 7. IN THE RESULT GROUND NO. 1 RAISED BY THE ASS ESSEE IS ALLOWED. 8. SINCE THE ASSESSMENT HAS BEEN SET-ASIDE BEING IN VIOLATION OF LAW, THE OTHER GROUNDS RAISED BY THE ASSESSEE RELATING TO TH E MERITS OF THE VARIOUS ADDITIONS/DISALLOWANCES ARE RENDERED ACADEMIC IN NA TURE, AND ARE THEREFORE NOT BEING ADJUDICATED. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF FEBRUARY, 2011. SD/- SD/- (N.BARATHVAJA SANKAR) (SUSHMA CHOWLA) VICE PRESIDENT JUDICIAL MEMBER DATED : 24 TH FEBRUARY, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 7