Rajasthan Arts & Crafts House, JODHPUR V. CIT-I, JODHPUR

ITA 235/JODH/2014

• Counselvise Citation: 23523314 RSA 2014
• Duration Of Justice: 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-05-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 11-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DEEPAK SEHGAL
• Assessee Lawyers: DINESH BOOB
• Keywords: Opportunity of being heard; Principle of natural justice; Assessment record
• Section: 143(3); 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 235/JU/2014 ASSESSMENT YEAR: 2009-10 RAJASTHAN ARTS & CRAFTS HOUSE VS. THE C.I.T I NEAR CIRCUIT HOUSE JODHPUR UMAID BHAWAN PALACE ROAD JODHPUR, RAJASTHAN PAN NO. AAIFR 0039C (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DINESH BOOB DEPARTMENT BY : DR. DEEPAK SEHGAL, CIT-DR DATE OF HEARING : 06.05.2014 DATE OF PRONOUNCEMENT : 13.05.2014 ORDER PER HARI OM MARATHA, J.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE FOR A.Y 2009-10 AGAINST THE ORDER OF THE CIT-I, JODHPUR, DA TED 31.03.2014 PASSED U/S 263 OF THE INCOME-TAX ACT, 19 61 ['THE ACT', FOR SHORT]. 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE-FIRM FILED ITS RETURN OF INCOME [ROI] FOR A.Y. 2009-10 O N 29.9.2009 DECLARING TOTAL INCOME OF RS. 12,64,380/- AFTER CLA IMING EXEMPTION U/S 10BA OF THE ACT OF RS. 1,58,00,224/- AS AGAINST WHICH ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 2 8.12.2011 DETERMINING THE TOTAL INCOME AT RS. 65,73,000/- BY MAKING TRADING ADDITION OF RS. 5 LAKHS AND RESTRICTING THE EXEMPTI ON U/S 10BA OF THE ACT TO THE TUNE OF RS. 1,09,86,112/- AS AGAINST CLAIMED AT RS. 1,58,00,224/-. SUBSEQUENTLY, THE LD. CIT(A) CALLED FOR ASSESSMENT RECORDS AND NOTICED THAT THE ASSESSEE HAD GIVEN INT EREST FREE ADVANCES TO M/S TRADITIONAL HANDICRAFTS CENTRE AMOU NTING TO RS. 1.47 CRORES. SIMILARLY, THE ADVANCESOF RS. 82.50 L AKHS WAS GIVEN TO SMT. GULAB GUPTA. FROM THESE ADVANCES, NO INTEREST HAS BEEN CHARGED BY THE ASSESSEE WHEREAS IN THE PROFIT AND L OSS ACCOUNT, THE ASSESSEE HAS DEBITED INTEREST AMOUNTING TO RS. 20,3 0,490/-. NO ENQUIRY BY THE A.O. WAS MADE AS PER THE LD. CIT TO ASCERTAIN AS TO WHY NO INTEREST HAS BEEN CHARGED FROM ADVANCES GIVE N. HE HAS OBSERVED THAT THE ADVANCES WERE GIVEN OUT OF INTERE ST BEARING FUND OR BORROWED FUND ON WHICH INTEREST HAS BEEN CLAIMED IN THE PROFIT AND LOSS ACCOUNT. THE LD. CIT(A) HAS INVOKED PROVI SIONS OF SECTION 3 36(1)(III) OF THE ACT. AS PER SECTION 36(1)(III) I F THE FUNDS BORROWED BY THE ASSESSEE HAS NOT BEEN UTILIZED FOR THE PURPO SE OF BUSINESS THEN NO INTEREST IS ALLOWABLE. THUS, AS PER THE LD . CIT(A), NO SUCH ENQUIRY HAS BEEN MADE BY THE A.O. THEREFORE, HE HA S TREATED IT AS NON APPLICATION OF MIND. IT WAS ALSO NOTICED THAT THE ASSESSEE HAD CLAIMED MANUFACTURING EXPENSES OF RS. 1,26,44,854/- AND JOB CHARGES OF RS. 92,73,312/- IN THE PROFIT AND LOSS A CCOUNT. BUT THE A.O. HAS NOT EXAMINED THESE CLAIMS MADE BY THE ASSE SSEE. AS PER THE LD. CIT, THE A.O. HAS NOT EVEN MADE ENQUIRIES R ELATING TO ELIGIBILITY OF CLAIM OF DEDUCTION U/S 10BA OF THE A CT DURING A.Y. 2009-10 EXCEPT TAKING A REPORT FROM THE INSPECTOR W HO COULD NOT EXAMINE ACTUAL OPERATION CARRIED OUT IN F.Y. 2008-0 9 RELEVANT TO A.Y. 2009-10 BY MAKING VISIT IN THE F.Y. 2011-12. THE ASSESSEE IS REQUIRED TO FULFILL THE CONDITIONS OF ALLOWABILITY OF DEDUCTION LAID DOWN IN SECTION 10BA OF THE ACT. AS PER THE LD. CI T, THE A.O. HAS NOT EVEN CONSIDERED WHETHER THE CONDITIONS OF SECTI ON 10BA OF THE ACT HAVE BEEN FULFILLED BY THE ASSESSEE OR NOT. IN VIEW OF THE AFOREMENTIONED REASONS, THE LD. CIT ISSUED NOTICE U /S 263 OF THE ACT ON 17.12.2013. ON BEHALF OF THE ASSESSEE, ALL THE ABOVE POINTS WERE REFUTED AND IT WAS STATED THAT THE A.O. HAD MADE FU LL ENQUIRY TO HIS 4 SATISFACTION ON THE IMPUGNED POINTS AND HAS PASSED ORDER AFTER APPLICATION OF HIS FULL CAUTIOUS MIND. HE ARGUED T HAT THE A.O. HAS VERILY EXAMINED THE ISSUE OF ADVANCES GIVEN TO M/S TRADITIONAL HANDICRAFTS CENTRE AND MRS. GULAB GUPTA REGARDING T HE CLAIM MADE U/S 10BA OF THE ACT. ALSO THE LD. CIT HAS MADE SIM ILAR OBSERVATIONS AND FINALLY HE HAS FOUND THAT IN ALL THE ABOVE THRE E ISSUES, THE A.O. HAS NOT MADE ENQUIRES AND HAS ALSO NOT APPLIED CORR ECT PROVISIONS OF THE ACT, PARTICULARLY SECTION 36(1)(III) OF THE ACT , SECTION 29 R.W.S 37 OF THE ACT AND 10BA OF THE ACT. THEREFORE, THE ASS ESSMENT ORDER PASSED BY THE A.O. ON 28.12.2011 IS TO BE CONSIDERE D AS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF T HE REVENUE. THEREFORE, HE HAS SET ASIDE THE ASSESSMENT ORDER AN D HAS RESTORED IT TO THE FILE OF THE A.O. TO PASS FRESH ORDER AFTER G IVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AGGRIEVED, THE ASSESS EE HAS COME IN APPEAL AND HAS RAISED THE FOLLOWING GROUNDS: (1) THAT ON THE FACT AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT-1, JODHPUR SHRI K.R. MEENA HAS SERIOUSL Y ERRED IN CONSIDERING THAT THE ASSESSMENT ORDER DATE D 28.12.2011 PASSED U/S 143(3) OF IT. ACT 1961 BY LEA RNED ACIT CIRCLE-1, JODHPUR FOR ASST. YEAR 2009-2010 IS 5 ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF REVENUE, AND THEREFORE UNJUSTIFIED IN SET ASIDE AND RESTORE TO THE FILE OF THE ASSESSING OFFICER TO PAS S A FRESH ORDER IN THE CASE OF APPLICANT ASSESSEE U/S 2 63 OF THE IT. ACT 1961. (2) THAT LEARNED CIT-1, JODHPUR IS UNJUSTIFIED IN HOLDING THAT ASSESSING OFFICER HAS NOT MADE ANY ENQ UIRY ABOUT ON THE THREE POINTS MENTIONED IN THE SHOW CAU SE NOTICE, WHERE AS THE LEARNED A.O. HAS PASSED THE ASSESSMENT ORDER AFTER APPLYING HIS FULL MIND AND A LL THE RELEVANT FACTS INCLUDING THE POINTS MENTIONED B Y THE LEARNED CIT-1, JODHPUR DURING THE COURSE OF ASSESSM ENT AND PASSED THE ASSESSMENT ORDER CONSCIOUSLY. EVEN T HIS ASSESSMENT ORDER WAS CHALLENGED BEFORE CIT(A), JODH PUR AND BEFORE HON'BLE TRIBUNAL BECAUSE THE LEARNED A.O . AFTER HIS DETAILED INQUIRY MADE CERTAIN TRADING ADD ITION AND DISALLOWED THE CLAIMED U/S 10BA ON DDB AND VKGUY, HENCE THERE WAS NO JURISDICTION OF LEARNED'' CFT- 1, JODHPUR TO REVIEW SAID ASSESSMENT ORDER OF ASSES SEE. HENCE ORDER PASSED BY THE LEARNED CIT-1, JODHPUR U/ S 263 IS ILLEGAL AS WELL AS AGAINST THE FACTS AND AGA INST THE NATURAL JUSTICE. 6 (3) THAT EVEN AFTER ISSUING THE SHOW CAUSE NOTICE B Y THE LEARNED CIT-1, JODHPUR, THE ASSESSEE HAS GIVEN THE REPLY TOGETHER WITH THE DOCUMENTARY EVIDENCES ON TH E ALL THE THREE POINTS MENTIONED IN THE SAID ORDER U/ S 263 BUT THE LEARNED CIT-1, JODHPUR HAS NOT APPRECIATED TIME TO TIME REPLIES AND DETAILS GIVEN BY THE ASSES SEE. EVEN THE MANY RELEVANT FACTS MENTIONED IN THE REPLY IGNORED BECAUSE HE WAS BENT UPON TO REOPEN THE CASE U/S 263 AND TO SET ASIDE THE SAME, WHICH IS ABSOLUT ELY UNJUSTIFIED. (4) THAT THE ORDER PASSED BY THE LEARNED CIT-1, JODHPUR IS BAD IN LAW AS WELL AS BAD IN FACTS ALSO, HENCE HE WAS UNJUSTIFIED IN APPLYING SECTION 263 AND TO R EOPEN THE CASE BY SET ASIDE THE CASE. 3. WE HAVE HEARD BOTH SIDES IN DETAIL. IT HAS BEEN ARGUED THAT NOT ONLY THE A.O. HAS MADE FULL AND COMPLETE ENQUIR IES REGARDING ITEMS MENTIONED IN THE SHOW CAUSE NOTICE BUT ALSO H E HAS MADE PROPER ENQUIRY BY APPLYING HIS MIND. WE HAVE ALSO PERUSED CAREFULLY THE ENTIRE EVIDENCES AVAILABLE ON RECORD. IT IS TRITE THAT AN ORDER CAN BE REVISED ONLY AND ONLY IF TWIN CONDI TIONS OF ERROR IN THE ORDER AND PREJUDICE CAUSED TO THE REVENUE CO -EXIST. THE SUBJECT OF REVISION UNDER SECTION 263 HAS BEEN VA STLY EXAMINED 7 AND ANALYZED BY VARIOUS COURTS INCLUDING THAT OF HO NBLE APEX COURT. THE REVISIONAL POWER CONFERRED ON THE CIT V IDE SECTION 263 IS OF VIDE AMPLITUDE. IT ENABLES THE CIT TO CALL F OR AND EXAMINE THE RECORDS OF ANY PROCEEDING UNDER THE ACT. IT EMPOWE RS THE CIT TO MAKE OR CAUSE TO BE MADE SUCH AN ENQUIRY AS HE DEEM S NECESSARY IN ORDER TO FIND OUT IF ANY ORDER PASSED BY ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE. THE ONLY LIMITATION ON HIS POWERS IS THAT HE MUST HAVE SOME MATERIAL(S) WHICH WOULD ENABLE HIM TO FORM A P RIMA FACIE OPINION THAT THE ORDER PASSED BY THE ASSESSING OFFI CER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF T HE REVENUE. ONCE HE COMES TO THE ABOVE CONCLUSION ON THE BASIS OF THE MATERIAL THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE CIT IS EMPOWER ED TO PASS AN ORDER AS THE CIRCUMSTANCES OF THE CASE MAY WARRANT. HE MAY PASS AN ORDER ENHANCING THE ASSESSMENT OR HE MAY MODIFY THE ASSESSMENT. HE IS ALSO EMPOWERED TO CANCEL THE ASS ESSMENT AND DIRECT TO FRAME A FRESH ASSESSMENT. HE IS EMPOWERE D TO TAKE RECOURSE TO ANY OF THE THREE COURSES INDICATED IN S ECTION 263. SO, IT IS CLEAR THAT THE CIT DOES NOT HAVE UNFETTERED AND UNCHEQURED 8 DISCRETION TO REVISE AN ORDER. THE CIT IS REQUIRED TO EXERCISE REVISIONAL POWER WITHIN THE BOUNDS OF THE LAW AND H AS TO SATISFY THE NEED OF FAIRNESS IN ADMINISTRATIVE ACTION AND FAIR PLAY WITH DUE RESPECT TO THE PRINCIPLE OF AUDI ALTERAM PARTEM AS ENVISAGED IN THE CONSTITUTION OF INDIA AS WELL AS IN SECTION 263. AN ORDER CAN BE TREATED AS ERRONEOUS IF IT WAS PASSED IN UTTER IG NORANCE OR IN VIOLATION OF ANY LAW; OR PASSED WITHOUT TAKING INTO CONSIDERATION ALL THE RELEVANT FACTS OR BY TAKING INTO CONSIDERATION IRRELEVANT FACTS. THE PREJUDICE THAT IS CONTEMPLATED UNDER SECTION 263 IS THE PREJUDICE TO THE INCOME TAX ADMINISTRATION AS A WHO LE. THE REVISION HAS TO BE DONE FOR THE PURPOSE OF SETTING RIGHT DISTORTIONS AND PREJUDICES CAUSED TO THE REVENUE IN THE ABOVE C ONTEXT. THE FUNDAMENTAL PRINCIPLES WHICH EMERGE FROM THE SEVERA L CASES REGARDING THE POWERS OF THE CIT UNDER SECTION 263 M AY BE SUMMARIZED BELOW: (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BOTH THE CONDITIONS MUST BE FULFILLED. 9 (II) SECTION 263 CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ONLY WHEN AN ORDER IS ERRONEOUS, THAT THE SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SUFFICE FOR THE REQUIREMENT OR ORDER BEING ERRONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORDER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND IF THE ASSESSING OFFICER HAS ADOPTED ONE OF THE COURSES PERMISSIBLE UNDER LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW UNDER WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE UNDER THE LAW. 10 (VI) IF WHILE MAKING THE ASSESSMENT, THE ASSESSING OFFICER EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME, THE CIT, WHILE EXERCISING HIS POWER UNDER SECTION 263, IS NOT PERMITTED TO SUBSTITUTE HIS ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIMATED BY THE ASSESSING OFFICER. (VII) THE ASSESSING OFFICER EXERCISE QUASI- JUDICIAL POWER VESTED IN HIM AND IF HE EXERCISE SUCH POWER IN ACCORDANCE WITH LAW AND ARRIVES AS A CONCLUSION, SUCH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION. (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTIO N UNDER SECTION 263, MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. (IX) IF THE ASSESSING OFFICER HAS MADE ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND THE ASSESSEE HAS GIVEN DETAILED EXPLANATION BE 11 A LETTER IN WRITING AND THE ASSESSING OFFICER ALLOWED THE CLAIM ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE DECISION OF THE ASSESSING OFFICER CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. REVERTING TO THE FACTS OF THIS CASE, IN VIEW OF THE ABOVE LEGAL POSITION, WE ARE OF THE CONSIDERED OPINION THAT THE RE IS NO ERROR IN THE ORDER WHICH CAN BE SAID TO BE PREJUDICIAL TO TH E INTEREST OF THE REVENUE. ACCORDINGLY, WE SET ASIDE THE ORDER APPEA LED AGAINST AND RESTORE THAT OF THE A.O. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 13 TH MAY, 2014. SD/- SD/- (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13 TH MAY, 2014 VL/- 12 COPY TO: THE APPELLANT THE RESPONDENT THE CIT BY ORDER THE CIT(A) THE DR ASSISTANT REGISTRAR ITAT, JODHPUR