Sri.Sabjan Said Muhammed, Alappuzha V. The CIT, Kottayam

ITA 237/COCH/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7228 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 16-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 26-05-2014
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR
• Assessee Lawyers: A KRISHNAN
• Keywords: Unexplained cash credit; Unexplained investment; Business income; Charitable institution; Principle of natural justice
• Section: 143(3); 69; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NOS.237&238 /COCH/2014 ASSESSMENT YEARS : 2009-10 & 2010-11 SHRI SABJAN SAIDMUHAMMED, S.H. TRADERS, VAZHICHERRY, ALAPPUZHA-688 001. [PAN: APGPS 2980A] VS. THE INCOME TAX OFFICER, WARD-4, ALAPPUZHA (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI A. KRISHNAN, ADV. REVENUE BY SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 16/09/2014 DATE OF PRONOUNCEMENT 24/09/2014 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE TWO APPEALS FILED BY THE ASSESSEE ARE DIRECT ED AGAINST THE DIFFERENT ORDERS PASSED U/S. 263 OF THE I.T. ACT BY THE COMMISSIONER OF INCOME TAX, KOTTAYAM FOR THE ASSESSMENT YEARS 2009- 10 AND 2010-11. 2. SINCE THE FACTS IN BOTH THE APPEALS ARE IDENTICA L, WE CONSIDER THE FACTS AS NARRATED BY THE CIT(A) FOR THE ASSESSM ENT YEAR 2009-10. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-1 0 WAS I.T.A. NO.237&238/COCH/2014 2 ELECTRONICALLY FILED BY THE ASSESSEE ON 27-11-2009, DECLARING TOTAL INCOME AT RS.2,09,230/-. SUBSEQUENTLY, THE CASE WA S SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S. 143( 3) BY THE ASSESSING OFFICER ON 22-12-2011 ASSESSING THE TOTAL INCOME AT RS.12,66,590/- WHICH RESULTED IN A DEMAND OF RS.4,2 9,780/. ON AN EXAMINATION OF THE RECORDS OF THE ASSESSEE FOR THE ABOVE ASSESSMENT YEAR, IT WAS SEEN THAT THE ASSESSEE WAS MAINTAINING A SAVING BANK ACCOUNT WITH HDFC BANK, ALAPPUZHA. DURING THE PERIO D RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, THERE WAS A CR EDIT IN SB ACCOUNT TO THE TUNE OF RS.28,67,871/- WHICH WAS NOT RECORDE D IN THE BOOK OF ACCOUNTS OF THE ASSESSEE AND THERE WERE WITHDRAWALS THROUGH ATM ALSO. BESIDES, THERE WAS ALSO A CLOSING BALANCE OF RS. 1,694/- IN THE SB ACCOUNT, WHICH WAS NOT SHOWN IN THE BALANCE SHEE T AS ON 31-03- 2009. IN ADDITION, AN AMOUNT OF RS.38,59,713/- WAS SHOWN AS SUNDRY CREDITORS WHICH WAS RECORDED IN THE LIABILITY SIDE OF THE BALANCE SHEET AS ON 31-03-2009. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD REQUESTED THE ASSESSEE TO PRO VE THE GENUINENESS OF CASH CREDIT IN SB ACCOUNT AS WELL AS CONFIRMATIO NS FROM CREDITORS, HOWEVER, THE ASSESSEE FAILED TO DO SO. 3. SINCE THE ASSESSEE FAILED TO PROVE THE GENUINENE SS OF CASH CREDITS OF RS.28,67,871/- IN SB ACCOUNT AS WELL AS SUNDRY CREDITORS OF I.T.A. NO.237&238/COCH/2014 3 RS.38,59,713/-, A PROPOSAL FOR REVISION U/S. 263 OF THE I.T. ACT WAS COMMUNICATED TO THE ASSESSEE VIDE LETTER DATED 05-0 3-2014. SUBSEQUENTLY, THE LD. AR FILED OBJECTIONS TO THE PR OPOSAL FOR REVISION U/S. 263 STATING THAT THE ASSESSEES PART TIME ACCO UNTANT HAD OMITTED TO ACCOUNT THE SB ACCOUNT MAINTAINED WITH HDFC BANK IN THE BOOKS OF ACCOUNTS. ACCORDING TO THE ASSESSEE THE DEPOSITS I N SB ACCOUNT WERE RECEIPTS FROM VARIOUS CUSTOMERS AND IT CANNOT BE RE GARDED AS UNEXPLAINED CASH CREDITS. ACCORDING TO THE ASSESSEE THE DEALINGS IN COIR PRODUCTS WHICH ARE HAND MADE AND WOVEN IN HOUS EHOLDS IS COMMON IN ALLEPPEY AND THE PRODUCTION OF THE PARTIC ULAR DAY IS COLLECTED BY ONE PERSON AND THIS IS TAKEN TO THE MA RKET BY ONE OF THEIR REPRESENTATIVES. SINCE THE COIR PRODUCTS ARE EXEMP TED FROM VAT, THE MANUFACTURERS DO NOT ISSUE ANY BILLS AND THE DAY PU RCHASE IS CREDITED AGAINST THE NAME OF ONE OF THE REPRESENTATIVE. IN THE ABOVE CIRCUMSTANCES, THE ASSESSEE SUBMITTED THAT IT WAS D IFFICULT TO PRODUCE ANY PURCHASE BILL OR PROVE THE IDENTITY OF THE CRED ITOR AND AS THE REMITTANCE FROM THE CUSTOMERS WERE OMITTED TO BE AC COUNTED THE CREDITORS BALANCE ALSO GOT PILED UP. 4. THE CIT OBSERVED THAT IN THE AUDIT REPORT U/S. 4 4AB DATED 27/11/2009, THE AUDITOR HAD CERTIFIED THAT THE BALA NCE SHEET AND PROFIT AND LOSS ACCOUNT WERE IN AGREEMENT WITH THE BOOKS O F ACCOUNT I.T.A. NO.237&238/COCH/2014 4 MAINTAINED AT THE HEAD OFFICE. THE CIT FURTHER OBSE RVED THAT THE BALANCE DUE TO SUNDRY CREDITORS AND BALANCE DUE TO SUNDRY DEBTORS WERE SUBJECT TO CONFIRMATION. HOWEVER, THE ASSESSE E FAILED TO ACCOUNT THE CASH CREDIT IN SB ACCOUNT IN THE BOOKS OF ACCOU NT OF THE ASSESSEE. IN THESE CIRCUMSTANCES, THE CIT OBSERVED THAT BALAN CE SHEET AND PROFIT AND LOSS ACCOUNT CANNOT BE IN AGREEMENT WITH THE BO OKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. SIMILARLY, SUNDRY DEBT ORS AND SUNDRY CREDITORS WERE SUBJECT TO CONFIRMATION, HENCE, THE ASSESSEE HAS TO PROVE THE GENUINENESS OF SUNDRY CREDITORS AT THE TI ME OF ASSESSMENT. ACCORDING TO THE CIT, THE ASSESSING OFFICER HAS ERR ED IN COMPLETING THE ASSESSMENT ON THE FOLLOWING GROUNDS: 1) THE ASSESSING OFFICER HAS FAILED TO MAKE ADDITI ON OF UNPROVED CREDITORS AS THE ASSESSEE HAS FAILED TO DISCHARGE HIS DUTY OF PROVING THE GENUINENESS OF THE CREDITORS. 2) THE CASH DEPOSITS IN SB ACCOUNTS WITH HDFC BAN K WAS NOT DISCLOSED IN THE BOOKS OF ACCOUNT AND THE CLOSING BALANCE WAS NOT REFLECTED IN THE BALANCE SHEET. THUS THE ASSES SING OFFICER HAS FAILED TO DISALLOW THE CASH CREDIT AS UNEXPLAI NED AT THE TIME OF ASSESSMENT. ACCORDINGLY, THE CIT FOUND THAT THE ORDER OF THE AS SESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE AND DIRECTED THE ASSESSING OFFICER TO MODIFY THE ASSESSMENT FOR A.Y. 2009-10 BY DISALLOWING THE UNEXPLAINED CASH CREDIT AND UNPROVE D SUNDRY CREDITORS I.T.A. NO.237&238/COCH/2014 5 AFTER DEDUCTING THE AMOUNT WHICH WAS ALREADY BROUGH T TO TAX. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LD. AR SUBMITTED THAT THE IMPUGNED ORDER WAS PASSED WITHOUT APPLICATION OF MIND AND IN A HASTY MANNER. THE CIT DID NOT MAKE ANY ENQUIRY AND THERE WERE NO MATERIAL SUBSTAN TIATION FOR THE IMPUGNED ORDER. THE CIT HAS NOT ENTERED INTO ANY F INDING OR DID NOT HAVE ANY MATERIALS TO UPHOLD THAT THE ASSESSEE HAS SOME OTHER SOURCE OF INCOME OTHER THAN BUSINESS INCOME SO AS TO COMPL ETELY DISALLOW THE AMOUNT OF RS. 38,59,713/-THE LD. AR RELIED ON THE F OLLOWING CASE LAW: A) MALABAR INDUSTRIAL CO. LTD. VS. CIT (243 ITR 83 (SC). B) CIT VS. SAKTHI CHARITIES (244 ITR 226) (MADRAS) . (C) CIT VS. ASSOCIATED FOOD PRODUCTS P. LTD. (280 ITR 377) (M.P.), (D) PAUL MATHEWS & SONS VS. CIT (263 ITR 101) (KER .) (E) CIT VS. ARVIND JEWELLERS (259 ITR 502) (GUJ.) (F) CIT VS. TRUSTEES, ANUPAM CHARITABLE TRUST (162 ITR 129) (RAJ.). 6. THE LD. DR RELIED ON THE ORDER OF THE CIT PASSED U/S. 263 OF THE I.T. ACT. I.T.A. NO.237&238/COCH/2014 6 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US AND ALSO GONE THROUG H ALL THE JUDGMENTS CITED BY THE PARTIES BEFORE US. FIRST WE TAKE UP TH E LEGAL ISSUE WITH REFERENCE TO THE JURISDICTION OF INVOKING THE PROVI SIONS OF SECTION 263 OF THE ACT BY THE LEARNED CIT. THE SCHEME OF THE IT AC T IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF TH E ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO ERRONEOUS ORDER OF THE ASSESSING OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTEREST OF THE REV ENUE. AS HELD IN THE CASE OF MALABAR INDUSTRIES CO. LTD., VS. CIT ( 243 ITR 83) (SC), THE COMMISSIONER CAN EXERCISE REVISION JURISDICTIONAL U /S 263 IF HE IS SATISFIED THAT THE ORDER OF THE ASSESSING OFFICER S OUGHT TO BE REVISED IS (I)ERRONEOUS; AND ALSO (II) PREJUDICIAL TO THE INTE RESTS OF THE REVENUE. THE WORD ERRONEOUS HAS NOT BEEN DEFINED IN THE IN COME TAX ACT. IT HAS BEEN HOWEVER DEFINED AT PAGE 562 IN BLACKS LAW DICTIONARY (SEVENTH EDITION) THUS; ERRONEOUS, ADJ. INVOLVING ERROR, DEVIATING FROM TH E LAW. THE WORD ERROR HAS BEEN DEFINED AT THE SAME PAGE IN THE SAME DICTIONARY THUS: ERROR NO. 1 : A PSYCHOLOGICAL STATE THAT DOES NOT CONFORM TO OBJECTIVE REALITY; A BRIEF THAT WHAT IS FALSE IS TR UE OR THAT WHAT IS TRUE IS FALSE. AT PAGE 649/650 IN P. RAMANATHA AIYERS LAW LEXICON REPRINT 2002, THE WORD ERROR HAS BEEN DEFINED TO MEAN- ERROR: A MISTAKEN JUDGEMENT OR DEVIATION FROM THE T RUTH IN MATTERS OF FACT, AND FROM THE LAW IN MATTERS OF JUD GEMENT ERROR I.T.A. NO.237&238/COCH/2014 7 IS A FAULT IN JUDGEMENT, OR IN THE PROCESS OR PROCE EDING TO JUDGEMENT OR IN THE EXECUTION UPON THE SAME, IN A COURT OF RECORD; WHICH IN THE CIVIL LAW IS CAL LED A NULLITYIE (TERMES DE LA LEY). SOMETHING INCORRECTLY DONE THROUGH IGNORANCE OR INA DVERTENCE S.99 CPC AND S.215 CR.PC. ERROR, FAULT, ERROR RESPECTS THE ACT; FAULT RESPECT THE AGENT, AN ERROR MAY LAY IN THE JUDGEMENT, OR IN THE CONDUCT, BUT A FAULT LIES IN THE WILL OR INTENTION. 8. AT PAGE 650 OF THE AFORESAID LAW LEXICON, THE SCOPE OF ERROR, MISTAKE, BLUNDER, AND HALLUCINATION HAS BEEN EXPLAINED THUS: AN ERROR IS ANY DEVIATION FROM THE STANDARD OR COU RSE OF RIGHT, TRUTH, JUSTICE OR ACCURACY, WHICH IS NOT INTENTIONAL. A MI STAKE IS AN ERROR COMMITTED UNDER A MISAPPREHENSION OF MISCONCEPTION OF THE NATURE OF A CASE. AN ERROR MAY BE FROM THE ABSENCE OF KNOW LEDGE, A MISTAKE IS FROM INSUFFICIENT OR FALSE OBSERVATION. BLUNDER IS A PRACTICAL ERROR OF A PECULIARLY GROSS OR AWKWARD KIND, COMMIT TED THROUGH GLARING IGNORANCE, HEEDLESSNESS, OR AWKWARDNESS. AN ERROR MAY BE OVERLOOKED OR ATONED FOR, A MISTAKE MAY BE RECTIFIE D, BUT THE SHAME OR RIDICULE WHICH IS OCCASIONED BY A BLUNDER, WHO C AN COUNTERACT. STRICTLY SPEAKING, HALLUCINATION IS AN ILLUSION OF THE PERCEPTION, A PHANTASM OF THE IMAGINATION. THE ONE COMES OF DISOR DERED VISION, THE OTHER OF DISCARDED IMAGINATION. IT IS EXTENDED IN MEDICAL SCIENCE TO MATTERS OF SENSATION, WHETHER THERE IS NO CORRES PONDING CAUSE TO PRODUCE IT. IN ITS ORDINARY USE IT DENOTES AN UNACC OUNTABLE ERROR IN JUDGEMENT OR FACT, ESPECIALLY IN ONE REMARKABLE OTH ERWISE FOR ACCURATE INFORMATION AND RIGHT DECISION. IT IS EXCE PTIONAL ERROR OR MISTAKE IN THOSE OTHERWISE NOT LIKELY TO BE DECEIVE D. 9. IN ORDER TO ASCERTAIN WHETHER AN ORDER SOUGH T TO BE REVISED UNDER SECTION 263 IS ERRONEOUS, IT SHOULD BE SEEN W HETHER IT SUFFERS FROM ANY OF THE AFORESAID FORMS OF ERROR. IN OUR VI EW, AN ORDER SOUGHT TO BE REVISED UNDER SECTION 263 WOULD BE ERR ONEOUS AND FALL I.T.A. NO.237&238/COCH/2014 8 IN THE AFORESAID CATEGORY OF 'ERRORS' IF IT IS, INT ER ALIA, BASED ON AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLI CATION OF LAW OR NON-APPLICATION OF MIND TO SOMETHING WHICH WAS OBVI OUS AND REQUIRED APPLICATION OF MIND OR BASED ON NO OR INSU FFICIENT MATERIALS SO AS TO AFFECT THE MERITS OF THE CASE AND THEREBY CAUSE PREJUDICE TO THE INTEREST OF THE REVENUE. 10. SECTION 263 OF THE INCOME-TAX ACT SEEKS TO REMO VE THE PREJUDICE CAUSED TO THE REVENUE BY THE ERRONEOUS OR DER PASSED BY THE ASSESSING OFFICER. IT EMPOWERS THE COMMISSIONE R TO INITIATE SUO MOTO PROCEEDINGS EITHER WHERE THE ASSESSING OFF ICER TAKES A WRONG DECISION WITHOUT CONSIDERING THE MATERIALS AV AILABLE ON RECORD OR HE TAKES A DECISION WITHOUT MAKING AN ENQ UIRY INTO THE MATTERS, WHERE SUCH INQUIRY WAS PRIMA FACIE WARRANT ED. THE COMMISSIONER WILL BE WELL WITHIN HIS POWERS TO REGA RD AN ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES O F THE CASE, THE ASSESSING OFFICER SHOULD HAVE MADE FURTHER INQUIRIE S BEFORE ACCEPTING THE CLAIM MADE BY THE ASSESSEE IN HIS RET URN. THE REASON IS OBVIOUS. UNLIKE THE CIVIL COURT WHICH IS NEUTRAL IN GIVING A DECISION ON THE BASIS OF EVIDENCE PRODUCED BEFORE I T, THE ROLE OF AN ASSESSING OFFICER UNDER THE INCOME-TAX ACT IS NOT O NLY THAT OF AN ADJUDICATOR BUT ALSO OF AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN I.T.A. NO.237&238/COCH/2014 9 THE FACE OF A RETURN, WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER ENQUIRY. HE MUST DISCHARGE BOTH THE ROLES E FFECTIVELY. IN OTHER WORDS, HE MUST CARRY OUT INVESTIGATION WHERE THE FACTS OF THE CASE SO REQUIRE AND ALSO DECIDE THE MATTER JUDICIOU SLY ON THE BASIS OF MATERIALS COLLECTED BY HIM AS ALSO THOSE PRODUCE D BY THE ASSESSEE BEFORE HIM. THE SCHEME OF ASSESSMENT HAS U NDERGONE RADICAL CHANGES IN RECENT YEARS. IT DESERVES TO BE NOTED THAT THE PRESENT ASSESSMENT WAS MADE U/S. 143(3) OF THE INCO ME-TAX ACT. IN OTHER WORDS, THE ASSESSING OFFICER WAS STATUTORI LY REQUIRED TO MAKE THE ASSESSMENT UNDER SECTION 143(3) AFTER SCRU TINY AND NOT IN A SUMMARY MANNER AS CONTEMPLATED BY SUB-SECTION (1) OF SECTION 143. BULK OF THE RETURNS FILED BY THE ASSES SEES ACROSS THE COUNTRY IS ACCEPTED BY THE DEPARTMENT UNDER SECTION 143(1) WITHOUT ANY SCRUTINY. ONLY A FEW CASES ARE PICKED U P FOR SCRUTINY. THE ASSESSING OFFICER IS THEREFORE, REQUIRED TO ACT FAIRLY WHILE ACCEPTING OR REJECTING THE CLAIM OF THE ASSESSEE IN CASES OF SCRUTINY ASSESSMENTS. HE SHOULD BE FAIR NOT ONLY TO THE ASSE SSEE BUT ALSO TO THE PUBLIC EXCHEQUER. THE ASSESSING OFFICER HAS GOT TO PROTECT, ON ONE HAND, THE INTEREST OF THE ASSESSEE IN THE SENSE THAT HE IS NOT SUBJECTED TO ANY AMOUNT OF TAX IN EXCESS OF THAT IS LEGITIMATELY DUE FROM HIM, AND ON THE OTHER HAND, HE HAS A DUTY TO P ROTECT THE INTERESTS OF THE REVENUE AND TO SEE THAT NO ONE DOD GED THE I.T.A. NO.237&238/COCH/2014 10 REVENUE AND ESCAPED WITHOUT PAYING THE LEGITIMATE T AX. THE ASSESSING OFFICER IS NOT EXPECTED TO PUT BLINKERS O N HIS EYES AND MECHANICALLY ACCEPT WHAT THE ASSESSEE CLAIMS BEFORE HIM. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED AND THE GENUINENESS OF THE CLAIMS MADE IN THE RETURN WHEN THE CIRCUMSTA NCES OF THE CASE ARE SUCH AS TO PROVOKE INQUIRY. ARBITRARINESS IN EITHER ACCEPTING OR REJECTING THE CLAIM HAS NO PLACE. THE ORDER PASSED BY THE ASSESSING OFFICER BECOMES ERRONEOUS BECAUSE AN ENQUIRY HAS NOT BEEN MADE OR GENUINENESS OF THE CLAIM HAS NOT B EEN EXAMINED WHERE THE INQUIRIES OUGHT TO HAVE BEEN MADE AND THE GENUINENESS OF THE CLAIM OUGHT TO HAVE BEEN EXAMINED AND NOT BE CAUSE THERE IS ANYTHING WRONG WITH HIS ORDER IF ALL THE FACTS STAT ED OR CLAIM MADE THEREIN ARE ASSUMED TO BE CORRECT. THE COMMISSIONER MAY CONSIDER AN ORDER OF THE ASSESSING OFFICER TO BE ERRONEOUS N OT ONLY WHEN IT CONTAINS SOME APPARENT ERROR OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT BUT ALSO WHEN IT IS A STEREO-TYPED O RDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS STATED IN HIS RETURN AND FAILS TO MAKE ENQUIRIES OR EXAMINE THE GENUINENESS OF THE CL AIM WHICH ARE CALLED FOR IN THE CIRCUMSTANCES OF THE CASE. IN TAK ING THE AFORESAID VIEW, WE ARE SUPPORTED BY THE DECISIONS OF THE HON' BLE SUPREME COURT IN RAMPYARI DEVI SARAOGI V. CIT (67 ITR 84) ( SC), SMT. TARA I.T.A. NO.237&238/COCH/2014 11 DEVI AGGARWAL V. CIT ITR 323) (SC), AND MALABAR IND USTRIAL CO. LTD'S CASE ( 243 ITR 83) (SC). 11. IN MALABAR INDUSTRIAL CO. LTD. CASE THE HON'B LE COURT HAS HELD AS UNDER: THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED B Y THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN I NCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BE ING ERRONEOUS. IN THE SAME CATEGORY FALL THE ORDERS PASSED WITHOUT APPLYI NG THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND. IN OUR HUMBLE VIEW, ARBITRARINESS IN DECISION-MAKING WOULD ALWAYS NEED CORRECTION REGARDLESS OF WHETHER IT CAUSES PREJUDICE TO AN ASS ESSEE OR TO THE STATE EXCHEQUER. THE LEGISLATURE HAS TAKEN AMPLE CAR E TO PROVIDE FOR THE MECHANISM TO HAVE SUCH PREJUDICE REMOVED. WHILE AN ASSESSEE CAN HAVE IT CORRECTED THROUGH REVISIONAL JURISDICTI ON OF THE COMMISSIONER UNDER SECTION 264 OR THROUGH APPEALS A ND OTHER MEANS OF JUDICIAL REVIEW, THE PREJUDICE CAUSED TO THE STA TE EXCHEQUER CAN ALSO BE CORRECTED BY INVOKING REVISIONAL JURISDICTI ON OF THE COMMISSIONER UNDER SECTION 263. ARBITRARINESS IN DE CISION-MAKING CAUSING PREJUDICE TO EITHER PARTY CANNOT THEREFORE BE ALLOWED TO STAND AND STARE AT THE LEGAL SYSTEM. IT IS DIFFICULT TO C OUNTENANCE SUCH ARBITRARINESS IN THE ACTIONS OF THE ASSESSING OFFIC ER. IT IS THE DUTY OF THE ASSESSING OFFICER TO ADEQUATELY PROTECT THE INT EREST OF BOTH THE PARTIES, NAMELY, THE ASSESSEE AS WELL AS THE STATE. IF HE FAILS TO DISCHARGE HIS DUTIES FAIRLY, HIS ARBITRARY ACTIONS CULMINATING IN ERRONEOUS ORDERS CAN ALWAYS BE CORRECTED EITHER AT THE INSTANCE OF THE ASSESSEE, IF THE ASSESSEE IS PREJUDICED OR AT THE I NSTANCE OF THE COMMISSIONER, IF THE REVENUE IS PREJUDICED. WHILE M AKING AN ASSESSMENT, THE ITO HAS A VARIED ROLE TO PLAY. HE I S THE INVESTIGATOR, PROSECUTOR AS WELL AS ADJUDICATOR. AS AN ADJUDICATO R HE IS AN ARBITRATOR BETWEEN THE REVENUE AND THE TAXPAYER AND HE HAS TO BE FAIR TO BOTH. HIS DUTY TO ACT FAIRLY REQUIRES THAT WHEN HE ENQUIR ES INTO A SUBSTANTIAL MATTER LIKE THE PRESENT ONE, HE MUST RECORD A FINDI NG ON THE RELEVANT ISSUE GIVING, HOWSOEVER BRIEFLY, HIS REASONS THEREF OR. IN S.N. MUKHERJEE V. UNION OF INDIA AIR 1990 SC 1984, IT HA S BEEN OBSERVED BY THE HON'BLE SUPREME COURT AS FOLLOWS: I.T.A. NO.237&238/COCH/2014 12 REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHOR ITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI-JUDICIAL FUNCTIONS, WO ULD NO DOUBT FACILITATE THE EXERCISE OF ITS JURISDICTION BY THE APPELLATE OR SU PERVISORY AUTHORITY. BUT THE OTHER CONSIDERATIONS, REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH THIS COURT IN HOLDING THAT AN ADMINISTRATIVE AUTHORITY M UST RECORD REASONS FOR ITS DECISION ARE OF NO LESS SIGNIFICANCE. THESE CON SIDERATIONS SHOW THAT THE RECORDING OF REASONS BY AN ADMINISTRATIVE AUTHORITY SERVES A SALUTARY PURPOSE, NAMELY, IT EXCLUDES CHANCES OR ARBITRARINE SS AND ENSURES A DEGREE OF FAIRNESS IN THE PROCESS OF DECISION-MAKIN G. THE SAID PURPOSE WOULD APPLY EQUALLY TO ALL DECISIONS AND ITS APPLIC ATION CANNOT BE CONFINED TO DECISIONS WHICH ARE SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IN OUR OPINION, THEREFORE, THE REQUIREMENT THAT REASON S BE RECORDED SHOULD GOVERN THE DECISIONS OF AN ADMINISTRATIVE AUTHORITY EXERCISING QUASI- JUDICIAL FUNCTIONS IRRESPECTIVE OF THE FACT MAY, HO WEVER, BE ADDED THAT IT IS NOT REQUIRED THAT THE REASONS SHOULD BE AS ELABORAT E AS IN THE DECISION OF A COURT OF LAW. THE EXTENT AND NATURE OF THE REASON S WOULD DEPEND ON PARTICULAR FACTS AND CIRCUMSTANCES. WHAT IS NECESSA RY IS THAT THE REASONS ARE CLEAR AND EXPLICIT SO AS TO INDICATE THAT THE A UTHORITY HAS GIVEN DUE CONSIDERATION TO THE POINTS IN CONTROVERSY. THE NEE D FOR RECORDING OF REASONS IS GREATER IN A CASE WHERE THE ORDER IS PAS SED AT THE ORIGINAL STAGE. THE APPELLATE OR REVISIONAL AUTHORITY, IF IT AFFIRMS SUCH AN ORDER, NEED NOT GIVE SEPARATE REASONS IF THE APPELLATE OR REVISIONAL AUTHORITY AGREES WITH THE REASONS CONTAINED IN THE ORDER UNDE R CHALLENGE. 12. SIMILAR VIEW WAS EARLIER TAKEN BY THE HON'BLE SUPREME COURT IN SIEMENS ENGG. & MFG. CO. LTD. V. UNION OF INDIA AIR 1976 SC 1785. IT IS SETTLED LAW THAT WHILE MAKING ASSESSMENT ON ASSESSE E, THE ITO ACTS IN A QUASI-JUDICIAL CAPACITY. AN ASSESSMENT ORDER IS AME NABLE TO APPEAL BY THE ASSESSEE AND TO REVISION BY THE COMMISSIONER UNDER SECTIONS 263 AND 264. THEREFORE, A REASONED ORDER ON A SUBSTANTIAL I SSUE IS LEGALLY NECESSARY. THE JUDGMENTS ON WHICH RELIANCE WAS PLAC ED BY THE LEARNED COUNSEL FOR THE ASSESSEE ALSO POINTS TO THE SAME DI RECTION. THEY HAVE HELD THAT ORDERS, WHICH ARE SUBVERSIVE OF THE ADMIN ISTRATION OF REVENUE, MUST BE REGARDED AS ERRONEOUS AND PREJUDICIAL TO TH E INTERESTS OF THE I.T.A. NO.237&238/COCH/2014 13 REVENUE. IF THE ASSESSING OFFICERS ARE ALLOWED TO M AKE ASSESSMENTS IN AN ARBITRARY MANNER, AS HAS BEEN DONE IN THE CASE BEFO RE US, THE ADMINISTRATION OF REVENUE IS BOUND TO SUFFER. IF WI THOUT DISCUSSING THE NATURE OF THE TRANSACTION AND MATERIALS ON RECORD, THE ASSESSING OFFICER HAD MADE CERTAIN ADDITION TO THE INCOME OF THE ASSE SSEE, THE SAME WOULD HAVE BEEN CONSIDERED ERRONEOUS BY ANY APPELLATE AUT HORITY AS BEING VIOLATIVE OF THE PRINCIPLES OF NATURAL JUSTICE WHIC H REQUIRE THAT THE AUTHORITY MUST INDICATE THE REASONS FOR AN ADVERSE ORDER. WE FIND NO REASON WHY THE SAME VIEW SHOULD NOT BE TAKEN WHEN A N ORDER IS AGAINST THE INTERESTS OF THE REVENUE. AS A MATTER OF FACT S UCH ORDERS ARE PREJUDICIAL TO THE INTERESTS OF BOTH THE PARTIES, B ECAUSE EVEN THE ASSESSEE IS DEPRIVED OF THE BENEFIT OF A POSITIVE FINDING IN HIS FAVOUR, THOUGH HE MAY HAVE SUFFICIENTLY ESTABLISHED HIS CASE. 13. IN VIEW OF THE FOREGOING, IT CAN SAFELY BE SAID THAT AN ORDER PASSED BY THE ASSESSING OFFICER BECOMES ERRONEOUS AND PREJUDI CIAL TO THE INTERESTS OF THE REVENUE UNDER SECTION 263 IN THE FOLLOWING CASE S: (I) THE ORDER SOUGHT TO BE REVISED CONTAINS ERRO R OF REASONING OR OF LAW OR OF FACT ON THE FACE OF IT. (II) THE ORDER SOUGHT TO BE REVISED PROCEEDS ON INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW. IN THE SA ME CATEGORY FALL ORDERS I.T.A. NO.237&238/COCH/2014 14 PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL J USTICE OR WITHOUT APPLICATION OF MIND. (III) THE ORDER PASSED BY THE ASSESSING OFFICER IS A STEREOTYPE ORDER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS STATED I N HIS RETURN OR WHERE HE FAILS TO MAKE THE REQUISITE ENQUIRIES OR EXAMINE THE GENUINENESS OF THE CLAIM WHICH IS CALLED FOR IN THE CIRCUMSTANCES OF T HE CASE. 14. WE SHALL NOW TURN TO THE FACTS OF THE CASE TO SEE WHETHER THE CASE BEFORE US IS COVERED BY THE AFORESAID PRINCIPLES. A PERUSAL OF THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER DO ES NOT SHOW ANY APPLICATION OF MIND ON HIS PART. HE SIMPLY ACCEPTED THE INCOME DECLARED BY THE ASSESSEE. THIS IS A CASE WHERE THE ASSESSING OF FICER MECHANICALLY ACCEPTED WHAT THE ASSESSEE WANTED HIM TO ACCEPT WIT HOUT ANY APPLICATION OF MIND OR ENQUIRY. THE EVIDENCE AVAILABLE ON RECO RD IS NOT ENOUGH TO HOLD THAT THE RETURN OF THE ASSESSEE WAS OBJECTIVELY EXA MINED OR CONSIDERED BY THE ASSESSING OFFICER. IT IS BECAUSE OF SUCH NON CO NSIDERATION OF THE ISSUES ON THE PART OF THE ASSESSING OFFICER THAT THE RETUR N FILED BY THE ASSESSEE STOOD AUTOMATICALLY ACCEPTED WITHOUT ANY PROPER SCR UTINY. THE ASSESSMENT ORDER PLACED BEFORE US IS CLEARLY ERRONEOUS AS IT W AS PASSED WITHOUT PROPER EXAMINATION OR ENQUIRY OR VERIFICATION OR OBJECTIVE CONSIDERATION OF THE CLAIM MADE BY THE ASSESSEE. THE ASSESSING OFFICER HAS COM PLETELY OMITTED TO I.T.A. NO.237&238/COCH/2014 15 EXAMINE THE ISSUES IN QUESTION FROM CONSIDERATION A ND MADE THE ASSESSMENT IN AN ARBITRARY MANNER. HIS ORDER IS A C OMPLETELY NON-SPEAKING ORDER. IN OUR VIEW, IT WAS A FIT CASE FOR THE LEARN ED COMMISSIONER TO EXERCISE HIS REVISIONAL JURISDICTION UNDER SECTION 263 WHICH HE RIGHTLY EXERCISED BY CANCELLING THE ASSESSMENT ORDER AND DI RECTING THE ASSESSING OFFICER TO PASS A FRESH ORDER CONSIDERING THE ISSUE S RAISED BY THE CIT. IN OUR VIEW, THE ASSESSEE SHOULD HAVE NO GRIEVANCE IN THE ACTION OF LEARNED COMMISSIONER IN EXERCISING THE JURISDICTION U/S. 26 3 OF THE IT ACT. 15. IT WAS HOWEVER CONTENDED BY THE LEARNED COUN SEL THAT THE ASSESSING OFFICER HAD TAKEN A POSSIBLE VIEW IN ACCEPTING THE RETURN OF THE ASSESSEE WITH REFERENCE TO EXPENDITURE AND HENCE, THE COMMIS SIONER WAS NOT JUSTIFIED IN ASSUMING THE REVISIONAL JURISDICTION U NDER SECTION 263. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE AFORESAID SUBMISSIONS. AS ALREADY STATED EARLIER, AN ORDER BECOMES ERRONEOUS BECAUSE INQUIRIES, WHICH OUGHT TO HAVE BEEN MADE ON THE FACTS OF THE CASE, WERE NO T MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF A LL THE FACTS STATED OR THE CLAIMS MADE IN THE RETURN ARE ASSUMED TO BE CORRECT . THUS, IT IS MERE FAILURE ON THE PART OF THE ASSESSING OFFICER TO MAKE THE NE CESSARY INQUIRIES OR TO EXAMINE THE CLAIM MADE BY THE ASSESSEE IN ACCORDANC E WITH LAW, WHICH RENDERS THE RESULTANT ORDER ERRONEOUS AND PREJUDICI AL TO THE INTEREST OF THE REVENUE. NOTHING MORE IS REQUIRED TO BE ESTABLISHED IN SUCH A CASE. ONE WOULD NOT KNOW AS TO WHAT WOULD HAVE HAPPENED IF TH E ASSESSING OFFICER I.T.A. NO.237&238/COCH/2014 16 HAD MADE THE REQUISITE INQUIRIES OR EXAMINED THE CL AIM OF THE ASSESSEE IN ACCORDANCE WITH LAW. HE COULD HAVE ACCEPTED THE ASS ESSEE'S CLAIM. EQUALLY, HE COULD HAVE ALSO REJECTED THE ASSESSEE'S CLAIM DE PENDING UPON THE RESULTS OF HIS ENQUIRY OR EXAMINATION INTO THE CLAIM OF THE ASSESSEE. THUS, THE FORMATION OF ANY VIEW BY THE ASSESSING OFFICER WOUL D NECESSARILY DEPEND UPON THE RESULTS OF HIS INQUIRY AND CONSCIOUS, AND NOT PASSIVE, EXAMINATION INTO THE CLAIM OF THE ASSESSEE. IF THE ASSESSING OF FICER PASSES AN ORDER MECHANICALLY WITHOUT MAKING THE REQUISITE INQUIRIES OR EXAMINING THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW, SUCH AN ORD ER WILL CLEARLY BE ERRONEOUS IN LAW AS IT WOULD NOT BE BASED ON OBJECT IVE CONSIDERATION OF THE RELEVANT MATERIALS. IT IS THEREFORE, THE MERE FAILU RE ON THE PART OF THE ASSESSING OFFICER IN NOT MAKING THE INQUIRIES OR NO T EXAMINING THE CLAIM OF THE ASSESSEE IN ACCORDANCE WITH LAW THAT PER SE REN DERS THE RESULTANT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. NOTHING ELSE IS REQUIRED TO BE ESTABLISHED IN SUCH A CASE TO SHOW T HAT THE ORDER SOUGHT TO BE REVISED IS ERRONEOUS AND PREJUDICIAL TO THE INTE RESTS OF THE REVENUE. 16. IN THIS CASE, ADMITTEDLY, THE ASSESSING OFF ICER FAILED TO EXAMINE PROPERLY THE ISSUE RELATING TO CASH CREDIT AND BALA NCE DUE TO SUNDRY CREDITORS AND DEBTORS IN SB ACCOUNT., THE TOTAL SUN DRY CREDITORS AS PER BOOKS OF ACCOUNT IS RS.38,59,713/- AND SUNDRY DEBTO RS IS RS.36,59,840.42. THE CREDITS IN THE ASSESSEES SB ACCOUNT WITH HDFC BANK ARE NOT REFLECTED I.T.A. NO.237&238/COCH/2014 17 IN THE BOOKS OF ACCOUNT. IT WAS STATED THAT ALL THE CREDITS IN THE SB ACCOUNT ARE MAINLY THE SALE PROCEEDS FROM THE UPCOUNTRY BUY ERS. THE TOTAL RECEIPTS THROUGH THE HDFC BANK SB ACCOUNT IS RS.28,67,871/- THE ASSESSEE HAS NOT PROVIDED CONFIRMATION FROM THE CREDITORS. HENCE, THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE CREDITORS. IN THE ABSE NCE OF CONFIRMATION FROM SUNDRY CREDITORS, THE ASSESSING OFFICER HELD THAT T HE AMOUNT OF SUNDRY CREDITORS OVER AND ABOVE THE AMOUNTS RECEIVED THROU GH THE BANK ACCOUNT AS NOT GENUINE AND HENCE THE SAME WAS DISALLOWED AN D ADDED BACK AS UNEXPLAINED CREDITS AND THE DEPOSITS IN THE SAVING BANK ACCOUNT AS UNEXPLAINED INVESTMENT AS IT RELATES TO THE SALE PR OCEEDS FROM UPCOUNTRY BUYERS U/S. 69 OF THE I.T. ACT. THE ASSESSING OFFIC ER OPTED TO NETTING OF ALL THESE ACCOUNTS AND ADDED ONLY AN AMOUNT OF RS.9,91, 842/- WHICH IS INCORRECT. BEFORE THE CIT(A) ALSO, THE ASSESSEE EX PRESSED HIS INABILITY TO PROVE THE GENUINENESS OF THE CREDITS AND STATED THA T IT WAS DIFFICULT TO PRODUCE ANY PURCHASE BILL TO PROVE THE IDENTITY OF THE CREDITOR AND THE REMITTANCE FROM THE CUSTOMERS WERE OMITTED TO BE AC COUNTED THE CREDITORS BALANCE ALSO GOT PILED UP. HENCE THE CIT(A) HAD NO OTHER OPTION BUT TO DIRECT THE ASSESSING OFFICER TO MODIFY THE ASSESSME NT BY DISALLOWING THE UNEXPLAINED ASH CREDIT AND UNPROVED SUNDRY CREDITOR S AFTER DEDUCTING THE AMOUNT WHICH WAS ALREADY BROUGHT TO TAX. THE ACCOUN TS OF THE ASSESSEE ARE NOT RELIABLE AS IT DOES NOT REFLECT THE TRUE PICTUR E OF THE BUSINESS OF THE ASSESSEE. BEING SO, IN OUR OPINION, THE INVOCATION OF REVISIONS PROCEEDINGS I.T.A. NO.237&238/COCH/2014 18 U/S. 263 OF THE ACT AND THEREAFTER THE DIRECTION TO MAKE FURTHER ADDITION AND MODIFY THE ASSESSMENT ORDER, AS DISCUSSED IN EARLIE R PARA, IS JUSTIFIED. 17. AS ALREADY DISCUSSED, THE ASSESSMENT ORDER IS E RRONEOUS BECAUSE THERE IS WRONG ASSUMPTION OF FACTS BY THE ASSESSING OFFICER WHICH RENDERS THE RESULTANT ORDER ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF THE REVENUE. THE FORMATION OF VIEW BY THE ASSESSING OFFICER IS I NCORRECT WHICH WARRANTED THE EXERCISE OF JURISDICTION BY THE CIT U/S. 263 OF THE I.T. ACT. AS SUCH WE ARE UNABLE TO ACCEPT THE SUBMISSION OF THE LD. AR A ND ACCORDINGLY, WE ARE INCLINED TO UPHOLD THE ORDER OF THE CIT ON THIS ISS UE IN ITS ENTIRETY AND DISMISS THE GROUND TAKEN BY THE ASSESSEE. 18. SINCE THE FACTS AND CIRCUMSTANCES FOR THE ASSES SMENT YEAR 2010-11 ARE SIMILAR, FOLLOWING THE ABOVE FINDINGS FOR THE A SSESSMENT YEAR 2009-10, WE ARE INCLINED TO DISMISS THIS GROUND IN BOTH THE APPEALS. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE DISMISSED. PRONOUNCED ACCORDINGLY ON 24-09-2014 SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACC OUNTANT MEMBER PLACE: KOCHI DATED: 24TH SEPTEMBER 2014 I.T.A. NO.237&238/COCH/2014 19 GJ COPY TO: 1. SHRI SABJAN SAIDMUHAMMED, S.H. TRADERS, VAZHICHE RRY, ALAPPUZHA-688 001. 2. THE INCOME TAX OFFICER, WARD-4, ALAPPUZHA. 3. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM. 4. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 5. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHI N