M/s Rajat Capital Market Private Limited, Indore V. The CIT, Indore

ITA 242/IND/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1469 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-11-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 15-05-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K K SINGH
• Section: 143(3); 195; 263; 139

Judgement Text

- 1 - IN THE INCOME TAX APPELATE TRIBUNAL, INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI V.K. GUPTA, AM ITA NO. 242/IND/09 A.Y. 2005-06 M/S RAJAT CAPITAL MARKET PRIVATE LIMITED INDORE APPELLANT (PAN AAACR-9288C VS COMMISSIONER OF INCOMETAX-I INDORE RESPONDENT APPELLANT BY SHRI ANIL KAMAL GARG, CA RESPONDENT BY SHRI K.K. SINGH, CIT DR O R D E R PER JOGINDER SINGH, JM THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER D ATED 8.3.2009 PASSED BY THE LEARNED COMMISSIONER OF INCO METAX UNDER SECTION 263 OF THE ACT ON THE GROUND THAT THE LEARNED COMMISSIONER OF INCOMETAX ERRED BOTH ON FACTS AND I N LAW IN SETTING ASIDE THE ASSESSMENT ORDER FRAMED UNDER SEC TION 143(3) OF THE ACT WITHOUT CONSIDERING THE MATERIAL FACT AND THE - 2 - ASSESSMENT ORDER SO FRAMED BY THE LEARNED ASSESSING OFFICER AND CONSEQUENTLY ERRED IN INVOKING THE PROVISIONS O F SECTION 263 WITHOUT CONSIDERING THE MATERIAL FACTS. DURING HEARING OF THE APPEAL, WE HAVE HEARD SHRI ANIL KAMAL GARG, LEA RNED COUNSEL FOR THE ASSESSEE AND SHRI K.K. SINGH, LEARN ED CIT DR. 2. THE CRUX OF ARGUMENTS ADVANCED BY SHRI GARG IS T HAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND WAS ENGAG ED IN THE BUSINESS OF LEASING AND FINANCE. AS PER THE ASSESS EE, NO BUSINESS WAS CARRIED DURING THE RELEVANT PREVIOUS Y EAR. IT WAS POINTED OUT THAT THE ASSESSEE FILED RETURN UNDER SE CTION 139 OF THE ACT ON 29.3.2006 DECLARING LOSS OF RS.22,992/- AND THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE A CT ON 28.12.2006. THE LEARNED COUNSEL FOR THE ASSESSEE I NVITED OUR ATTENTION TOWARDS THE CLAIM OF EXPENSES AND DISALLO WANCE MADE BY THE ASSESSING OFFICER. IT WAS CHALLENGED TH AT THE LEARNED COMMISSIONER OF INCOMETAX INITIATED THE PRO CEEDINGS UNDER SECTION 263 MERELY ON THE BASIS OF PROPOSAL F OR REVISION BY THE DCIT, INDORE, WHO FRAMED THE ASSESSMENT UNDE R - 3 - SECTION 143(3) OF THE ACT. THE FACTS NARRATED IN TH E IMPUGNED ORDER WERE ARGUED TO BE CONTRADICTORY TO EACH OTHER . THE ASSUMPTION OF JURISDICTION UNDER SECTION 263 BY THE LEARNED COMMISSIONER OF INCOMETAX WAS CHALLENGED AS THERE W AS NO OBJECTIVE SATISFACTION. IT WAS ARGUED THAT THE TWI N CONDITIONS I.E. THE ORDER SHOULD BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE ARE NOT SATISFIED IN THE IMPUG NED ORDER. RELIANCE WAS PLACED ON THE DECISIONS IN THE CASES O F MALABAR INDUSTRIAL CO. LTD. V. CIT; .243 ITR 83 (SC); CIT V . GABRIAL INDIA LIMITED; 203 ITR 108 AND CIT V. ASSOCIATED F OOD PRODUCTS PRIVATE LIMITED; (2006) 5 ITJ 299. 3. ON THE OTHER HAND, THE CIT DR STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT THE LEARNED DCIT- II(1), INDORE, SUO MOTO SENT A PROPOSAL FOR REVISION OF TH E ORDER BY POINTING OUT THAT SEARCH TOOK PLACE IN GROUP COMPAN IES ON 18.8.2004 AND 19.8.2004 BY FURTHER INVITING OUR ATT ENTION TO PARA 2.3 OF THE IMPUGNED ORDER. OUR ATTENTION WAS ALSO INVITED TO THE OBSERVATION OF THE LEARNED COMMISSIONER OF I NCOMETAX AS CONTAINED IN THE SHOW CAUSE NOTICE AND THE CONCL USION - 4 - DRAWN IN THE IMPUGNED ORDER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE BRIEF FACT A RE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY REGISTERED UN DER THE COMPANIES ACT, 1956 AND WAS CARRYING ON THE BUSINES S OF LEASING AND FINANCE. THE ASSESSEE DECLARED LOSS OF RS.22,992/- IN ITS RETURN FILED ON 29.3.2006 AND TH E ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE A CT ON 28.12.2006. THE CLAIM OF EXPENSES OF RS. 22,992/- WAS DISALLOWED BY THE ASSESSING OFFICER. TO CUT SHORT THE MATTER, PARA 2.3 (PAGE 3) OF THE IMPUGNED ORDER NEEDS TO BE REPRODUCED :- 2.3 THE DCIT 2(1),INDORE SUBSEQUENTLY, SUO MOTO SENT A PROPOSAL FOR REVISION OF THE ORDER U/S 263 OF THE ACT. HE POINTED OUT THAT A SEARCH HAD TAKEN PLACE IN CERTAIN GROUP COMPANIES ON 18/08/2004 AND 19/08/2004. IT IS APPARENT FROM THE RECORD OF THE PROCEEDINGS THAT THE RETURN OF INCOME RECEIVED BY HIM ON TRANSFER ON 19/12/06, HARDLY LEFT ANY TIME TO EXAMINE THE INCREASE IN SHARE CAPITAL AND SHARE PREMIUM AMOUNTS OF RS.18,75,000/- AND RS. 56,25,000/- AMOUNTING TO RS.75 LAC. IN THIS BACK GROUND, THE SHOW CAUSE NOTICE U/S 263 FOR SETTING ASIDE THE PROCEEDINGS DATED 26/12/2006 AND THE ASSESSEES REPLY AND OTHER MATERIAL FACTS NEEDS TO BE CONSIDERED. - 5 - THE ASSESSEE RECEIVED SHARE CAPITAL OF RS.62,90,500 /- PRIOR TO THE ASSESSMENT YEAR 1998-99 AND SUBSEQUENT LY THE ASSESSEE INTRODUCED SHARE CAPITAL AMOUNTING TO RS.18,75,000/- AND RS. 56,25,000/-. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT TWIN CONDITIONS CONTAINED UNDER SECTION 263 OF THE ACT I .E. THE ORDER SHOULD BE ERRONEOUS AND PREJUDICIAL TO THE IN TERESTS OF THE REVENUE ARE NOT SATISFIED IN THE IMPUGNED OR DER. IF THE AFORESAID REPRODUCED PORTION FROM THE IMPUGNED ORDER IS ANALYSED, IT IS AN UNDISPUTED FACT THAT EVEN THE LEARNED DCIT SENT A SUO MOTO PROPOSAL FOR REVISION OF ASSESSMENT UNDER SECTION 263 OF THE ACT AS THERE WA S SEARCH IN CERTAIN GROUP COMPANIES AND THERE WAS LIT TLE TIME TO EXAMINE THE CORRECT FACTS AND THE INCREASE IN SHARE CAPITAL/SHARE PREMIUM AMOUNTING TO RS.18,75,0 00/- AND RS. 56,25,000/- IN THIS BACKGROUND, THE SHOW C AUSE NOTICE UNDER SECTION 263 OF THE ACT WAS ISSUED TO T HE ASSESSEE. WE HAVE PERUSED THE SHOW CAUSE NOTICE AL SO WHEREIN THERE IS A CATEGORICAL FINDING THAT THE ASS ESSMENT - 6 - RECORD WAS EXAMINED BY THE LEARNED FIRST APPELLATE AUTHORITY AND IT WAS FOUND TO BE ERRONEOUS AND PREJ UDICIAL TO THE INTERESTS OF THE REVENUE. IN THE SHOW CAUSE NOTICE THE LEARNED COMMISSIONER OF INCOMETAX HAS MADE CERT AIN OBSERVATIONS WHICH ARE AVAILABLE AT PAGE 1 OF THE P APER BOOK FILED BY THE ASSESSEE ITSELF. IN VIEW OF THES E FACTS, WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED COMMISSIONER OF INCOMETAX WAS VERY MUCH WITHIN HIS JURISDICTION TO FRAME THE ORDER UNDER SECTION 263 O F THE ACT, THEREFORE, TO THIS EXTENT HIS ORDER DESERVES TO BE UPHELD. EVEN OTHERWISE, UNDER THE AFOREMENTIONED FA CTS, THE CASES RELIED UPON BY THE ASSESSEE RATHER SUPPOR T THE CASE OF THE REVENUE. HOWEVER, IT IS ALSO AN UNDISP UTED FACT THAT BEFORE THE LEARNED COMMISSIONER OF INCOME TAX THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF CIT V. LOVELY EX PORTS (P) LIMITED; 216 CTR 195 WHICH FINDS MENTION AT PAG E 6 OF THE IMPUGNED ORDER INCLUDING VARIOUS OTHER DECIS IONS AT PAGE 5 - 7 - . THE PRE-REQUISITE TO THE EXERCISE OF JURISDICTION BY THE LEARNED CIT UNDER SECTION 263 OF THE ACT IS THAT TH E ORDER OF THE ASSESSING OFFICER SHOULD BE ERRONEOUS INSOFA R AS IT IS PREJUDICIAL TO THE INTERESTS OF REVENUE. ADMITT EDLY, THE LEARNED CIT HAS TO BE SATISFIED ON TWIN CONDITIONS I.E. THE ORDER OF THE ASSESSING OFFICER, SOUGHT TO BE REVISE D, SHOULD BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST S OF REVENUE. HERE THE CASE OF THE REVENUE IS ON MUCH STRONGER FOOTING BECAUSE THE LEARNED DCIT HIMSELF PROPOSED FOR REVISION OF THE ORDER UNDER SECTION 26 3 BY THE LEARNED CIT. THE DECISIONS IN THE CASES OF MAL ABAR INDUSTRIAL COMPANY LIMITED V. CIT; 243 ITR 83 (SC) ; INDIAN TEXTILES V. CIT; 157 ITR 112 (MAD); BISMILLA H TRADING COMPANY V. I.O.; 248 ITR 292 (KER); THALIB AI F. JAIN V. ITO; 101 ITR 1 (KARN.); CIT V. PUSHPA DEVI; 164 ITR 639 (PAT) AND GEE VEE ENTERPRISES V. ADDITIONAL CIT; 99 ITR 375 (DEL) FURTHER SUPPORT THE CASE OF THE RE VENUE. 6. WITHOUT COMMENTING UPON THE DIRECTION OF THE LEARNED COMMISSIONER OF INCOMETAX TO THE ASSESSING - 8 - OFFICER, WE MODIFY HIS DIRECTION TO AO AND FURTHER DIRECT THE ASSESSING OFFICER THAT HE WILL EXAMINE AND INVE STIGATE THE CASE DE NOVO WITH REFERENCE TO SHARE CAPITAL AN D SHARE PREMIUM AMOUNT IN THE LIGHT OF THE DECISION I N THE CASE OF LOVELY EXPORTS (P) LIMITED (SUPRA) AND IN ACCORDANCE WITH LAW AFTER ANALYSING THE TRUE FACTS AND THE MATERIAL ON RECORD. SUBJECT TO THIS OBSERVATION, T HE STAND OF THE LEARNED CIT IS AFFIRMED AS INDICATED ABOVE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 24 TH NOVEMBER, 2009. SD/- SD/- (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER NOVEMBER 24, 2009 COPY TO APPELLANT, RESPONDENT, CIT, CIT(A), DR *D/