ANJALI SUDHIR MORE, MUMBAI V. ITO 18(3)(1), MUMBAI

ITA 2458/MUM/2010

• Counselvise Citation: 245819914 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 30-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGARWAL
• Keywords: Wrong claim
• Section: 143(3); 263; 2

Judgement Text

1 ITA 2458/ /M/2010 SMT. ANJALI SU DHIR MORE. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A BEFORE SHRI R.V. EASWAR, HONBLE PRESIDENT AND SHRI R.K. PANDA, A.M. ITA NO. 2458/MUM/2010 ASSESSMENT YEAR 2005-06 SMT. ANJALI SUDHIR MORE. 101, KUTCHI MEMON TRUST, BUILDING NO. 272, NARSEE NATHA, ST. MASJID BUNDER, MUMBAI 400 009. PAN AAEPM 3350 M VS. ITO 18(3)(1), MUMBAI. APPELLANT RESPONDENT APPELLANT BY SHRI K. GOPAL RESPONDENT BY SHRI RAJEEV AGARWAL ORDER PER R.K. PANDA A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DTD. 27.01.2010 PASSED U/S 263 BY THE CIT- 18, MUMBAI RELATING TO A .Y. 2005-06. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF TRANSPORTATION AND FILED HER RETURN OF INCOME ON 31.10.2005 DECLARING TOTAL INCOME OF ` 4,34,901/-. THE INCOME OF THE ASSESSEE CONSISTS OF PROFITS FROM PROPRIETARY CONCERN M/S DECCAN QUEEN T RANSPORT CO., SALARY FROM DECCAN EXPRESS TRANSPORT CO. PVT. LTD. AND INC OME FROM OTHER SOURCES. THE A.O. AFTER ISSUING NOTICE U/S 143(2) & 142 (1) AND AFTER CONSIDERING VARIOUS SUBMISSIONS FILED BY THE ASSESSEE FROM TIME TO TIME , COMPLETED THE ASSESSMENT DETERMINING THE TOTAL INCOME AT ` 5,02,360/-. SUBSEQUENTLY, THE LD. CIT EXAMINED THE RECORDS AND NOTED THAT THE ORDER PASSE D BY THE A.O. U/S 143(3) 2 ITA 2458/ /M/2010 SMT. ANJALI SU DHIR MORE. IS ERRONEOUS IN SO FAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON ACCOUNT OF FOLLOWING REASONS:- (I) WRONG CLAIM OF CREDIT FOR TDS AMOUNTING TO ` 7839/- PERTAINING TO THE SISTER CONCERN. (II) NO DOCUMENTARY EVIDENCE FILED IN RESPECT OF UN EXPLAINED EXPENDITURE OF ` 62,83,666/- BEING THE DIFFERENCE IN THE AMOUNT OF A LLEGED TRANSPORT BUSINESS DONE WITH M/S DECCAN EXPRESS TRANSPORT CO. PVT. LTD. AT ` 83,42,193/- AND PAYMENT MADE TO THEM AT ` 20,58,527/- BESIDES APPLICATION OF SECTION 40A(2)(B) OF THE UI.T. ACT, 1961. (III) NO EVIDENCE IS FILED FOR ` 20,58,527/- ON ACCOUNT OF RENT DEBITED IN THE P&L ACCOUNT. (IV) WRONG CLAIM OF COMMISSION @ ` 9580/- P.M. FOR 12 MONTHS STARTING FROM APRIL, 2004 TO MARCH, 2005 TO M/S VINAYAK B REDKAR & SON, WHILE THE BUSINESS OF TRANSPORT WAS STARTED FROM 01.09.2004. (V) NO EVIDENCE ON HAMALI CHARGES OF ` 9,55,776/- CARTAGE EXPENSES OF ` 8,19,318/- AND SALARY EXPENSES OF ` 9,07,336/- FOR THEIR GENUINENESS AND TO PROVE THE NEXUS OF THESE EXPENSES WITH YOUR BUSINESS ACTIVITIES. 2.1 REJECTING THE VARIOUS EXPLANATIONS GIVE BY THE ASSE SSEE AND HOLDING THAT THE A.O. HAS PASSED THE ORDER WITHOUT APPLICATION O F MIND TO THE VERY IMPORTANT ASPECT OF SUCCESSION OF A PART OF A FAMIL Y BUSINESS BY THE ASSESSEE DURING THE YEAR AND THE TAX IMPLICATION THEREOF AND SINCE THE A.O. HAS NOT CARRIED OUT NECESSARY INVESTIGATIONS IN THE BOOKS O F THE COMPANY TO VERIFY WHETHER THE SAME EXPENSES WERE BEING CLAIMED THERE ALSO AND THE REASONABLENESS OF THE PAYMENTS WITH RESPECT TO ASSE SSEES BUSINESS NEEDS, HE HELD THAT THE ASSESSMENT IS BOTH ERRONEOUS AND PREJ UDICIAL TO THE INTERESTS OF THE REVENUE. HE, ACCORDINGLY, SET ASIDE THE ASSESS MENT AND DIRECTED THE A.O. TO MAKE THE ASSESSMENT DE NOVO AFTER DUE VERIFICATI ON OF ALL THE ISSUES AND AFTER CARRYING OUT NECESSARY INVESTIGATION. 2.3 AGGRIEVED BY SUCH ORDER OF THE LD. CIT, THE ASS ESSEE IS IN APPEAL BEFORE US. 3 ITA 2458/ /M/2010 SMT. ANJALI SU DHIR MORE. 3. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PA GE 12 OF THE PAPER BOOK DREW THE ATTENTION OF THE BENCH TO THE NOTES TO ACC OUNTS AND SUBMITTED THAT IN CLAUSE 6, IT IS CLEARLY MENTIONED THAT THIS IS THE FIRST YEAR OF OPERATION. REFERRING TO PAPER BOOK PAGE NO. 23 TO 26, HE DREW THE ATTENTION OF THE BENCH TO THE NOTICE ISSUED U/S 142 OF THE ACT AND THE NOT ICE ISSUED U/S 143(2) ALONG WITH THE QUESTIONNAIRE. DRAWING THE ATTENTION OF T HE BENCH TO PAPER BOOK PAGE NO. 29 TO 32, HE SUBMITTED THAT THE ASSESSEE VIDE L ETTER DT. 9.1.2007 ADDRESSED TO THE A.O. HAD FILED VARIOUS DETAILS IN WHICH IT W AS MENTIONED IN CLAUSE 8 THAT THE BUSINESS HAS BEEN STARTED ON 01.09.2004. REF ERRING TO PAPER BOOK PAGE 33 TO 35, HE DREW THE ATTENTION OF THE BENCH TO THE LETTER DT. 29.1.2007 ADDRESSED TO THE A.O. GIVING THE DETAILS OF LOAN CO NFIRMATION, DETAILS OF COMMISSION, OFFICE EXPENSES, PRINTING AND STATIONER Y AND HAMALI PAID. REFERRING TO PAPER BOOK PAGE NO. 36 & 37, HE DREW T HE ATTENTION OF THE BENCH TO THE LETTER DTD. 7.3.2007 ADDRESSED TO THE A.O. G IVING VARIOUS OTHER DETAILS AS PER THE QUESTIONNAIRE ISSUED BY THE A.O. REFERRIN G TO PAPER BOOK PAGE NO. 65, HE SUBMITTED THAT THE ASSESSEE VIDE LETTER DTD. 17. 10.2007 ADDRESSED TO THE A.O. VIDE CLAUSE NO. 4 HAS FURNISHED DEBIT NOTES RE LATING TO TRANSPORT BUSINESS ON MONTHLY BASIS FROM OCTOBER 2004 TO MARCH 2005 AC CORDING TO WHICH TOTAL OF THE DEBIT NOTES WORKS OUT TO ` 83,42,193/-. REFERRING TO PAPER BOOK PAGE NO. 67 TO 96, HE DREW THE ATTENTION OF THE BENCH TO THE STATEMENT OF FREIGHT RECEIVED FROM OCTOBER, 2004 TO MARCH 2005. REFERRING TO PAGE NO. 2 OF COPY OF ASSESSMENT ORDER, HE SUBMITTED THAT THE A.O. HAS CL EARLY MENTIONED THAT THE ASSESSEE WAS ASKED TO PRODUCE BOOKS OF ACCOUNT ALON G WITH BILLS AND VOUCHERS FOR TEST CHECKING PURPOSE. AFTER THE TEST CHECKING , THE A.O. HAS MADE CERTAIN ADDITION. REFERRING TO PAGE 106 TO 107 OF THE PAPE R BOOK, HE SUBMITTED THAT THE ASSESSEE HAS FILED DETAILED REPLY IN RESPONSE T O NOTICE U/S 263 BEFORE THE LD. CIT. REFERRING TO PAGE 108 TO 111 OF THE PAPER BOO K, HE SUBMITTED THAT THE A.O. HAS GIVEN DETAILED REPLY IN RESPONSE TO THE NO TICE ISSUED BY THE LD. CIT TO GIVE HIS COMMENTS. HE, THEREFORE, SUBMITTED THAT TH E ASSESSEE HAS DULY RECONCILED THE TRANSPORTATION CHARGES AND HAS ALSO FURNISHED ALL THE DETAILS. 4 ITA 2458/ /M/2010 SMT. ANJALI SU DHIR MORE. THE A.O., AFTER DUE APPLICATION OF HIS MIND, HAS PA SSED THE ORDER, THEREFORE, THE LD. CIT WAS NOT CORRECT TO SAY THAT THE A.O. HAS NO T APPLIED HIS MIND. 3.1 REFERRING TO THE REPLY SENT BY THE A.O. TO CIT, HE SUBMITTED THAT THE A.O. HAS CATEGORICALLY STATED THAT THE ASSESSMENT ORDER CANNOT BE TREATED EITHER AS ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE RE VENUE. THE A.O. HAS MENTIONED THAT IN THE PRESENT CASE, ONLY AFTER EXAM INING THE BOOKS OF ACCOUNT AND VERIFYING ALL THE DETAILS FURNISHED BY THE ASSE SSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND APPLYING HIS MIND THAT T HE A.O. HAS REACHED HIS CONCLUSION. HE SUBMITTED THAT FOR ASSUMING JURISDI CTION U/S 263, THE TWIN CONDITIONS I.E. (I) THE ORDER MUST BE ERRONEOUS AND (II) IT MUST BE PREJUDICIAL TO THE INTERESTS OF REVENUE MUST BE SATISFIED. IF ONE IS ABSENT, THE CIT CANNOT ASSUME THE JURISDICTION U/S 263 OF THE ACT. WHEN TH ERE IS DUE APPLICATION OF MIND BY THE A.O., SIMPLY BECAUSE THE CIT DOES NOT A GREE WITH THE A.O. WILL NOT MAKE THE ORDER ERRONEOUS. HE SUBMITTED THAT THE A. O. IN HIS REPLY TO CIT HAS GIVEN POINT-WISE COMMENTS ON THE ALLEGATIONS MADE B Y THE LD. CIT FOR ASSUMING THE JURISDICTION U/S 263 OF THE ACT. THE A.O. HAS G IVEN THE REPLY WHICH IS A SORT OF A REMAND REPORT AND WHERE THE A.O. HAS JUSTIFIED THE ORDER STATING THAT THE SAME WAS PASSED AFTER DUE APPLICATION OF MIND. THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIED ON VARIOUS DECISIONS INCLUDING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. MAX INDIA LTD. 295 ITR 282 AND SUBMITTED THAT THE ORDER OF THE CIT PASSED U/S 263 SHOULD BE SET ASIDE. 4. THE LD. D.R., ON THE OTHER HAND, WHILE SUPPORTIN G THE ORDER OF THE LD. CIT SUBMITTED THAT THIS IS NOT A SIMPLE CASE AS PROJECT ED BY THE LD. COUNSEL FOR THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAS TAKEN OVER THE BUSINESS OF A RUNNING COMPANY AND THE AGREEMENT ETC. WERE NEVER F URNISHED BEFORE THE A.O., THEREFORE, THE LD. CIT WAS JUSTIFIED IN PASSING THE ORDER U/S 263. 5. THE LD. COUNSEL FOR THE ASSESSEE, IN HIS REJOIND ER, SUBMITTED THAT THE RETURN OF THE COMPANY FOR THE LAST TWO YEARS AND RE CONCILIATION STATEMENT OF ALL 5 ITA 2458/ /M/2010 SMT. ANJALI SU DHIR MORE. BANKS WERE FILED BEFORE THE A.O. FOR HIS VERIFICATI ON. REFERRING TO PAGE 36 OF THE PAPER BOOK, HE DREW THE ATTENTION OF THE BENCH TO C LAUSE 3 WHERE COPY OF INCOME-TAX ACKNOWLEDGEMENT OF SISTER CONCERN M/S DE CCAN EXPRESS TRANSPORT CO. PVT. LTD. FOR A.Y. 2005-06 WAS FILED. REFERRIN G TO PAGE 57 OF THE PAPER BOOK, HE DREW THE ATTENTION OF THE BENCH TO THE MOU FOR W AREHOUSING PREMISES BETWEEN DECCAN EXPRESS TRANSPORT CO. PRIVATE LIMITE D AND DECCAN QUEEN TRANSPORT COMPANY, AND SUBMITTED THAT IT WAS EXPLAI NED BEFORE THE A.O. THAT THE ASSESSEE HAS TAKEN OVER THE BUSINESS. SINCE THE A.O. AFTER DUE APPLICATION OF HIS MIND HAS PASSED THE ORDER, THEREFORE, THE SA ME CANNOT BE HELD AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE A.O. AND THE CIT AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US CASE LAWS CITED BEFORE US. IN VIEW OF THE DECISION OF THE HONBLE SUPREME COUR T IN THE CASE OF CIT VS. MAX INDIA LTD. 295 ITR 282, TO INVOKE THE JURISDICTION U/S 263 BY THE CIT, THE TWIN CONDITIONS NAMELY (I) THE ORDER MUST BE ERRONEOUS A ND (II) IT MUST BE PREJUDICIAL TO THE INTERESTS OF REVENUE MUST BE SATISFIED. IF O NE IS ABSENT, THE CIT CANNOT ASSUME THE JURISDICTION U/S 263 OF THE ACT. IN THE INSTANT CASE, WE FIND THE A.O. VIDE HIS QUESTIONNAIRE ATTACHED TO THE NOTICE U/S 143(2) HAS CALLED FOR VARIOUS DETAILS. WE FIND THE ASSESSEE IN HER SUBMI SSION BEFORE THE A.O. VIDE LETTER DATED 9.1.07, 29.1.07, 7.3.07 AND 20.03.07 H AS FURNISHED THE VARIOUS DETAILS CALLED FOR BY THE A.O. THE COPY OF THE WAR EHOUSING AGREEMENT DTD. IST SEPTEMBER, 99, AGREEMENT FOR CONTRACT OF WAREHOUSIN G DTD. IST AUGUST, 2004 AND MOU FOR WAREHOUSING PREMISES BETWEEN DECCAN EXP RESS TRANSPORT CO. PVT. LTD. AND DECCAN QUEEN TRANSPORT COMPANY WERE A LSO FILED BEFORE THE A.O. ALL THE ABOVE DOCUMENTS FILED BEFORE THE A.O. CLEAR LY INDICATE THAT BEFORE PASSING THE ASSESSMENT ORDER, THE A.O. HAS DULY APP LIED HIS MIND. EVEN IN THE REPORT SUBMITTED TO THE LD. CIT IN PURSUANCE TO HIS LETTER NO. CIT-18/REVISION U/S 263/08-09 DATED 26.03.2009, THE A.O. HAS STRONG LY ARGUED THAT FREIGHT CHARGES OF ` 83,42,193/- ARE DULY REFLECTED IN THE BOOKS OF THE ASSESSEE AS WELL 6 ITA 2458/ /M/2010 SMT. ANJALI SU DHIR MORE. AS ITS SISTER CONCERN. THE PAYMENT OF ` 5,28,234/- TOWARDS RENT PAID IS IN ORDER. THE EXPENSES IN RESPECT OF HAMALI OF ` 9,50,776/-, CARTAGE OF ` 19,318/- , SALARY OF ` 9,07,336/- AND THE COMMISSION PAID WERE VERIFIED F ROM THE BOOKS OF ACCOUNT, BILLS AND VOUCHERS WHICH WERE CALLED FO R DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON VERIFICATION, THE SAM E WERE FOUND TO BE CORRECT AND NO DISCREPANCY WAS OBSERVED. SO FAR AS THE ISS UE RELATING TO CREDIT FOR TDS ` 7839/- IS CONCERNED, THE A.O. HAS REPORTED THAT TH ERE IS SOME MISTAKE IN THE TDS CERTIFICATE WHICH IS NOT CORRECTABLE AND FOR WH ICH RECTIFICATION PROCEEDINGS HAVE BEEN INITIATED. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE A.O., AFTER DUE APPLICATION OF HIS MIND HAS PASSED THE ORDER WHICH CANNOT BE CALLED AS ERRONEOUS. MERELY BECAUS E THE COMMISSIONER WANTS THE ASSESSMENT TO BE DONE IN A PARTICULAR MANNER OR MERELY BECAUSE SOME MORE REVENUE COULD HAVE BEEN GENERATED IF THE A.O. WOULD HAVE COMPLETED THE ASSESSMENT IN A PARTICULAR MANNER CANNOT MAKE THE O RDER ERRONEOUS ALTHOUGH THE SAME MAY BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE ALSO DO NOT FIND ANY MERIT IN THE SUBMISSION OF THE LD. D.R. REGARDI NG THE TAX IMPLICATION BECAUSE OF ACQUISITION OF THE BUSINESS OF A RUNNING COMPANY BY THE ASSESSEE. WE FIND FORCE IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IF TAX IMPLICATION ON ACQUISITION IS CHALLENGED THEN PROCE EDINGS COULD HAVE BEEN INITIATED IN THE HANDS OF THE COMPANY AND NOT IN TH E HANDS OF THE ASSESSEE. FROM THE PAPER BOOK FILED BEFORE US, WE FIND THE AC KNOWLEDGEMENT OF INCOME- TAX RETURN OF THE COMPANY FOR THE A.Y. 2005-06 WAS FILED BEFORE THE A.O. THE ASSESSEE HAS EXPLAINED BEFORE THE A.O. THAT SHE HAS TAKEN OVER THE BUSINESS OF THE PVT. LTD COMPANY. FROM THE VARIOUS DETAILS FURN ISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND FRO M THE COPY OF THE REPORT SUBMITTED BY THE A.O. TO THE LD. CIT IN RESPONSE TO THE LETTER FOR INITIATING PROCEEDINGS U/S 263 WE ARE SATISFIED THAT THE ASSES SEE HAS FURNISHED ALL THE REQUISITE DETAILS NECESSARY FOR THE ASSESSMENT. WE FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT DRAFTING O F THE ORDER BY THE A.O. IS HIS PREROGATIVE AND THE ASSESSEE HAS NO CONTROL OVER TH E A.O. AS TO HOW THE A.O. 7 ITA 2458/ /M/2010 SMT. ANJALI SU DHIR MORE. HAS TO PASS THE ORDER. SINCE THE ASSESSEE HAS FURN ISHED ALL THE DETAILS REQUIRED FOR COMPLETION OF THE ASSESSMENT, THEREFORE, THE SA ME, IN OUR OPINION, CANNOT BE HELD AS ERRONEOUS ALTHOUGH THE SAME MAY PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. SINCE ONE OF THE CONDITIONS OUT OF THE TW IN CONDITIONS IS ABSENT, THE CIT, IN OUR OPINION, CANNOT ASSUME THE JURISDICTIO N U/S 263 OF THE ACT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MAX INDIA LTD. (SUPRA). THE LD. CIT, IN OUR OPINION, IS THEREFORE NOT JUSTIFIED IN ASSUMING JURISDICTION U/S 263. ACCORDINGLY, THE ORDER PASSE D U/S 263 IS QUASHED. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLO WED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 31.5.2011. SD/- SD/- (R.V. EASWAR) (R.K. PANDA) PRESIDENT ACCOU NTANT MEMBER MUMBAI, DATED 31 ST MAY, 2011. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT - 18, MUMBAI 4. THE ADDL. CIT- RANGE 18(3), MUMBAI 5. THE DR BENCH, A 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 8 ITA 2458/ /M/2010 SMT. ANJALI SU DHIR MORE. DATE INITIALS 1 DRAFT DICTATED ON 20.5.2011, 24.5.11 SR. PS 2 DRAFT PLACED BEFORE THE AUTHOR 25.5.11 SR. PS 3 DRAFT PLACED BEFORE THE SECOND MEMBER 4 APPROVED DRAFT COMES TO THE SR. PS SR. PS 5 KEPT FOR PRONOUNCEMENT ON SR. PS 6 FILE SENT TO THE BENCH CLERK SR. PS 7 DATE ON WHICH FILE GOES TO THE HEAD CLERK 8 DATE ON WHICH FILE GOES TO THE AR 9 DATE OF DISPATCH OF ORDER