Shri Indrajitsinh Bhalubhai Dabhi, GONDAL V. The Income Tax Officer, Ward-1(2), RAJKOT-GUJARAT

ITA 245/RJT/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2279 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C S ANJARIA
• Assessee Lawyers: DM RINDANI
• Keywords: Opportunity of being heard; Difference of opinion; Change of opinion
• Section: 143(3); 142(1); 194C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT [CONDUCTED THROUGH E-COURT AT AH MEDABAD] (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA. NO: 245/RJT/2014 (ASSESSMENT YEAR: 2009-10) SHRI INDRAJITSINH BHALUBHAI DABHI JANAK, NIVAS, STATION PLOT, GONDAL, DIST. RAJKOT V/S INCOME TAX OFFICER, WARD- 1 (2), RAJKOT (APPELLANT) (RESPONDENT) PAN: ABSPD7723Q APPELLANT BY : SHRI D.M. RINDANI, C.A. RESPONDENT BY : SHRI C. S. ANJARIA, SR. D.R. ( )/ ORDER DATE OF HEARING : 02 -03-201 6 DATE OF PRONOUNCEMENT : 04 -03-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. WITH THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF THE LD. CIT, RAJKOT-I, DATED 19.03.2014 MA DE U/S. 263 OF THE ACT. ITA NO. 245/ RJT/2014 . A.Y.2009-10 2 2. THE ASSESSEE HAS CHALLENGED THE JURISDICTION OF THE COMMISSIONER FOR INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT E RRONEOUSLY HOLDING THAT THE ORDER MADE U/S. 143(3) OF THE ACT ON 14.11 .2011 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 3. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMEN TLY SUBMITTED THAT THE ISSUES RAISED BY THE LD. COMMISSIONER HAVE ALRE ADY BEEN ADDRESSED BY THE A.O IN HIS ASSESSMENT ORDER AFTER MAKING DETAILED AND EXHAUSTIVE INQUIRIES DURING THE COURSE OF THE A SSESSMENT PROCEEDINGS. IT IS THE SAY OF THE LD. COUNSEL THAT THE DIRECTIONS GIVEN BY THE LD. CIT AMOUNTS TO CHANGE OF OPINION SINCE THE A.O HAS FRAMED ASSESSMENT AFTER MAKING ADEQUATE INQUIRIES ABOUT TH E ISSUES ON WHICH PROCEEDINGS U/S. 263 HAS BEEN INITIATED. 4. PER CONTRA, THE LD. D.R. STRONGLY SUPPORTED THE ORD ER OF THE COMMISSIONER AND STATED THAT THE ASSESSMENT ORDER M ADE U/S. 143(3) OF THE ACT IS ERRONEOUS AND ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, THE COMMISSIONER HAS RIGHTLY IN VOKED THE POWERS CONFERRED UPON HIM U/S. 263 OF THE ACT. 5. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. IN HIS SHOW CAUSE NOTICE U/S. 26 3 OF THE ACT, THE COMMISSIONER OBSERVES AS UNDER:- 2. IT IS FOUND THAT DURING THE PREVIOUS YEAR RELEVA NT TO THE ABOVE A,Y,, YOU DERIVED INCOME FROM LABOUR JOB WORK AS OBSERVED FRO M THE CONTRACT ACCOUNT, WHERE TOTAL RECEIPTS OF RS, 4,76,14,0517/- HAVE BEEN SHOWN. DURING THE RELEVANT PERIOD, YOU HAVE ALSO CLAIMED D EDUCTION FOR LABOUR CHARGES OF RS, 3,89,14,880/- 3. PERUSAL OF YOUR BALANCE SHEET AS ON 31-03-2009 S HOWS THAT THERE WERE A LIABILITY OF RS. 5,57,67,111/- FOR SUNDRY CREDITO RS. THE DETAIL OF SUNDRY ITA NO. 245/ RJT/2014 . A.Y.2009-10 3 CREDITORS SHOWS THAT SUNDRY CREDITORS OF RS, 5,53,6 0,045/- WERE PERTAINING TO LABOUR EXPENSE PAYABLE, HOWEVER, NO DETAILS OF T HE PERSONS HAVE BEEN GIVEN IN THE BALANCE SHEET, TO WHOM YOU WERE LIABLE TO MAKE PAYMENT ON ACCOUNT OF LABOUR CHARGES. ON ANALYSIS OF THE LABOU R EXPENSE CLAIMED IN CONTRACT ACCOUNT AND LABOUR EXPENSE PAYABLE AS SHOW N IN THE BALANCE SHEET, IT IS FOUND THAT LABOUR EXPENSE PAYABLE AS O N 31 ST MARCH WAS MORE THAN THE ENTIRE SUM OF LABOUR EXPENSE CLAIMED DURIN G THE RELEVANT PERIOD. 4. 5. 6.. 7.THE ASSESSING OFFICER HAS NOT VERIFIED THE GENUIN ENESS OF LABOUR CHARGES PAID TO INDIVIDUAL LABOUR BY EXAMINING SUCH LABOURE RS. THIS EXAMINATION WAS NECESSARY ON ACCOUNT OF THE CLAIM OF THE ASSESS EE THAT THE LABOURERS WERE UNPAID CREDITORS FOR A LONG PERIOD, BECAUSE LA BOURS CANNOT WAIT FOR THE PAYMENT OF THEIR WAGES FOR A LONG PERIOD OF 12 MONTHS OR SO. THIS EXAMINATION WAS ALSO NECESSARY ON ACCOUNT OF THE CL AIM OF THE ASSESSEE THAT BY MAKING PAYMENTS INDIVIDUALLY TO EACH LABOUR , THE LIABILITY TO DEDUCT TAX FROM THE COMBINED LIABILITIES OF SUCH LABOURERS STANDING IN THE NAMES OF THEIR SUPPLIERS WAS NOT THERE. THIS INACTION ON THE PART OF A.O IS ERRONEOUS AND IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 8. THE ABOVE FACTS SHOW THAT THE ASSESSMENT ORDER P ASSED BY THE ASSESSING OFFICER IN RESPECT OF A.Y. 2009-10 APPEAR S TO BE ERRONEOUS BECAUSE THE AO DID NOT APPLY HIS MIND ON THE LABOUR EXPENSE AND LABOUR EXPENSES PAYABLE AS APPEARING THE FINAL ACCOUNTS VI S-A-VIS FACTS MENTIONED IN THE TAX AUDIT REPORT AND PREJUDICIAL T O THE INTEREST OF THE REVENUE BECAUSE THE ASSESSEE WAS ALLOWED THE CLAIM OF DEDUCTION OF LABOUR EXPENSE WITHOUT MAKING NECESSARY VERIFICATIO N FOR APPLICATION OF SEC, 194C R.W.S. 40(A)(IA) OF THE ACT. THEREFORE, I INTEND TO INITIATE PROCEEDINGS U/S ; 263 OF THE ACT AND PASS A SUITABLE ORDER. BEFORE PA SSING SUCH ORDER, YOU ARE HEREBY GIVEN AN OPPORTUNITY OF BEING HEARD IN THE MATTER, PLEASE STATE AS TO WHY THE ORDER PASSED BY THE ASSESSING OFFICER ITA NO. 245/ RJT/2014 . A.Y.2009-10 4 IN YOUR CASE SHOULD NOT BE REVISED AFTER MAKING NEC ESSARY INQUIRY. IN THIS CONNECTION, YOU ARE REQUESTED TO ATTEND THIS OFFICE ON 05.12,2013 AT 4.30 PM. 6. TO THE SPECIFIC QUERIES RAISED BY THE LD. COMMISSIO NER LET US SEE THE QUERIES RAISED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS BY THE A.O VIDE NOTICE DATED 05.08.2011 WHICH IS PLACED AT PAGE 7 OF THE PAPER BOOK. THE RELEVANT QUERIES RAISED THEREIN:- Q3. PLEASE, RECONCILE YOUR INCOME DECLARED WITH THE TDS DEDUCTED/CLAIMED. ALSO, SUBMIT SECTION WISE DETAILS OF TAX DEDUCTED AND PAID BY YOU. Q5. PLEASE, SUBMIT COPY OF LEDGER ACCOUNT OF EXPENS ES EXCEEDING RS. 1 LAC FOR THE YEAR. Q6. PLEASE, SUBMIT COPY OF ACCOUNT WITH COMPLETE PO STAL ADDRESS AND PAN OF THE SUNDRY CREDITORS (ABOVE RS. 1 LAC). Q9. PLEASE, SUBMIT COPY OF TDS RETURNS AND SALES TA X RETURNS FILED FOR THE YEAR. 7. TO THE SPECIFIC QUERIES, THE REPLY OF THE ASSESSEE DATED 05.09.2011 CAN BE FOUND AT PAGE 8 OF THE PAPER BOOK IN WHICH Q3. HAS BEEN ANSWERED AS NOT APPLICABLE FOR Q5. LEDGER COPY OF ACCOUNT OF EXPENSES EXCEEDING RS . 1 LAC WERE FILED IN RESPONSE TO Q6.COPY OF ACCOUNT WITH COMPLETE POSTAL ADDRESS AND PAN OF THE SUNDRY CREDITOR WERE ENCLOSED AND FOR Q9. COPY OF TDS RETURNS AND SALES TAX RETURNS FILED FOR THE YEAR WERE ENCLOSED. 8. AFTER CONSIDERING THE DETAILED REPLY ALONG WITH DOC UMENTARY EVIDENCES, THE A.O IN HIS ASSESSMENT ORDER OBSERVES AS UNDER:- ITA NO. 245/ RJT/2014 . A.Y.2009-10 5 2. SUBSEQUENTLY, A NOTICE U/S. 142 (1) ALONG WITH Q UESTIONER LETTER WAS ISSUED ON 05-08-2011 AND SERVED, REQUESTING TO SUBM IT DETAILS & PRODUCE BOOKS OF ACCOUNTS ON 17-08-2011. IN RESPONSE TO NOT ICES ISSUED U/S. 143(2) AND 142(1) OF THE ACT, SHRI DHIREN H. LOTIA, ADVOCATE AND AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS ATTEN DED THE CASE FROM TIME TO TIME AND SUBMITTED THE DETAILS AS CALLED FO R AND PRODUCED BOOKS OF ACCOUNTS. THE DETAILS SUBMITTED WERE PLACED ON RECO RD AND BOOKS OF ACCOUNTS WERE TEST CHECKED. THE CASE WAS DISCUSSED WITH HIM. 9. A PERUSAL OF THE AFOREMENTIONED FACTUAL MA TRIX SHOWS THAT THE A.O HAS THOROUGHLY EXAMINED THE CONTENTIOUS ISSUES RAISED BY THE LD. COMMISSIONER. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GABRIAL INDIA LTD. 203 ITR 108 HAS HELD THAT THE DECISION OF THE INCOME TAX OFFICER COULD NOT BE HELD TO BE ERRONEOUS SIMPLY BE CAUSE IN HIS ORDER, HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REG ARD. 10. THE HONBLE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. 243 ITR 83 HAS LAID DOWN THE FOLLOWING RATIO:- 'A BARE READING OF SECTION. 263 OF THE INCOME-TAX A CT, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICT ION BY THE COMMISSIONER SUO MOTU UNDER II, IS THAT THE ORDER OF THE INCOME- TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS , NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ER RONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENTIF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS HUT IS PREJUDICIA L TO THE REVENUE RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT . THE PROVISION CANNOT ITA NO. 245/ RJT/2014 . A.Y.2009-10 6 BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAK E OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS' 11. THE AO HAS TAKEN A VIEW WHICH MAY BE DIFFERENT FROM THE VIEW OF THE LD. COMMISSIONER AND ASSUMING THAT THE VIEW TAKEN BY THE AO IS A LOSS TO THE REVENUE BUT THE HON'BLE SUPREME CO URT IN MALABAR INDUSTRIAL CO. LTD. (SUPRA) HAS HELD THAT ' EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE,' FOR E.G. WHEN AN INCOME TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND I T HAS RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE LD. COMMI SSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ORDER WHICH IS ER RONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE UNLESS THE V IEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTAINABLE IN LAW. 12. THE BOMBAY HIGH COURT IN CIT VS GABRIAL INDIA LTD., (1993) 203 ITR 108 HAS HELD THAT 'THE DECISION OF THE INCOME TAX OFFICER COULD NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER , HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD'. CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT OF THE JUDICIAL DECISIONS DISCUSSED HE REINABOVE, IN OUR UNDERSTANDING OF LAW, THE ASSESSMENT ORDER IS NEITH ER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE, THE REFORE, SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. COMMISSIONER U/S. 263 AND RESTORE THAT OF THE ASSESSING OFFICER PASSED U/S. 143(3) OF THE ACT. 13. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF T HE AFORE-STATED JUDICIAL DECISIONS, IN OUR CONSIDERED OPINION, THER E IS NO ERROR IN THE ITA NO. 245/ RJT/2014 . A.Y.2009-10 7 ASSESSMENT ORDER MADE U/S. 143(3) OF THE ACT WHICH CAN BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. WE, THEREFORE SET ASIDE THE ORDER OF THE LD. CIT AND RESTORE THAT OF THE A.O, APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 04 - 03 - 2016. SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, RAJKO T