Himalaya International Ltd., New Delhi V. Pr.CIT- 4, New Delhi

ITA 2524/DEL/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6939 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 11-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS MEETA SINGH
• Keywords: Earning of tax free income
• Section: 143(3); 14A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : C : NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI N.K. CHOUDHARY, JUDICIAL MEMBER ITA NO.2524/DEL/2018 ASSESSMENT YEAR : 2012-13 HIMALAYA INTERNATIONAL LTD., E-555, PALAM EXTENSION, 1 ST FLOOR, SECTOR-7, DWARKA, NEW DELHI - 110077. PAN: AAACH0158H VS. PR. CIT-4, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.K. BINDAL, CA, MS SWEETY KOTHARI, CA & MS RINKI SHARMA, CA DEPARTMENT BY : MRS. MEETA SINGH, CIT, DR DATE OF HEARING : 25.07.2018 DATE OF PRONOUNCEMENT : 26.07.2018 ORDER PER R.S. SYAL, VP: THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF TH E ORDER PASSED BY THE CIT ON 28.03.2018 IN RELATION TO THE ASSESSMENT YEA R 2012-13. ITA NO.2524/DEL/2018 2 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FURNISHED ORIGINAL RETURN DECLARING TOTAL INCOME OF RS.17,17, 610/-, WHICH WAS SUBSEQUENTLY REVISED DECLARING NIL INCOME ON THE GR OUND THAT THE AMOUNT OF INCOME OFFERED EARLIER FOR TAXATION WAS DEDUCTIBLE U/S 80IC OF THE INCOME- TAX ACT, 1961 (HEREINAFTER ALSO CALLED `THE ACT). THE A.O. DETERMINED TOTAL INCOME AT RS.23,75,422/- BY DISALLOWING DEDUCTION U/S 80IC AMOUNTING TO RS.17,17,610/- AND ALSO MAKING DISALLOWANCE U/S 14A TO THE TUNE OF RS.6,57,812/-. THE LD. CIT HELD THE ASSESSMENT ORD ER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON THE G ROUND THAT THE ASSESSING OFFICER ACCEPTED, WITHOUT ANY APPLICATION OF MIND, THE ASSESSEES CLAIM OF EXEMPT INCOME OF RS.15,12,47,000/-, BEING, AGRICU LTURAL INCOME WHICH WAS ACTUALLY GENERATED FROM GROWING MUSHROOM. AFTER THO ROUGHLY DISCUSSING THE POINT, THE LD. CIT SET ASIDE THE ASSESSMENT ORDER A ND DIRECTED THE ASSESSING OFFICER TO VERIFY THE ASSESSEES CLAIM OF PRODUCTIO N OF MUSHROOM RESULTING INTO AGRICULTURAL INCOME AND ALSO TO: VERIFY THE Q UANTUM OF ACTUAL PROFIT EARNED. THE ASSESSEE IS AGGRIEVED AGAINST THIS ORD ER. 3. WE HAVE HEARD BOTH THE SIDES PERUSED THE RELEVAN T MATERIAL ON RECORD. IT IS OVERT THAT THE LD. CIT HELD THE ASSESSMENT ORDER TO BE ERRONEOUS AND ITA NO.2524/DEL/2018 3 PREJUDICIAL TO THE INTEREST OF THE REVENUE ON TWO C OUNTS, VIZ., FIRST, THAT THE PRODUCTION OF MUSHROOM DOES NOT LEAD TO AGRICULTURA L INCOME; AND, SECOND, THAT THE A.O. DID NOT VERIFY THE QUANTUM OF ACTUAL PROFIT EARNED FROM SUCH ACTIVITY. IT CAN BE SEEN FROM THE ASSESSMENT ORDER DATED 17.09.2015 PASSED U/S 143(3) OF THE ACT THAT THERE IS NO DISCUSSION W HATSOEVER ON ANY OF THESE TWO ASPECTS AS DISCUSSED BY THE LD. CIT IN THE IMPU GNED ORDER. 4. IN SO FAR AS THE FIRST ASPECT IS CONCERNED, THE HYDERABAD SPECIAL BENCH OF THE TRIBUNAL RECENTLY IN DCIT VS. INVENTTA INDUSTRIES PVT. LTD. HAS HELD VIDE ITS ORDER DATED 09.07.2018 THAT THE INCOME FROM PRODUCTION AND SALE OF MUSHROOM CAN BE TERMED AS AGRICULTURAL INCOME UND ER THE ACT. IT FURTHER LAID DOWN THAT ANYTHING WHICH IS PRODUCED BY PERFOR MING BASIC OPERATIONS ON THE SOIL IS AN 'AGRICULTURAL PRODUCT' AND THE INCOM E THEREFROM IS 'AGRICULTURAL INCOME' AND THE NATURE OF THE PRODUCT IS IRRELEVANT . IN HOLDING SO, THE SPECIAL BENCH NOTICED THAT THERE WERE TWO TYPES OF VIEWS PR EVALENT ON THAT POINT. THE VERY FACT THAT THE SPECIAL BENCH HAD TO BE CONS TITUTED DUE TO DIVERGENCE OF OPINION ON THE POINT, MAKES IT EXPLICITLY CLEAR THAT THE ISSUE AT THE TIME OF PASSING OF THE ORDER BY THE LD. CIT, WAS DEBATABLE. THE HONBLE SUPREME COURT IN CIT VS. MAX INDIA LTD. (2007) 295 ITR 282 (SC) HAS HELD THAT ITA NO.2524/DEL/2018 4 WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW, WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF THE REVENUE, UNLESS THE VIEW TAK EN BY THE ITO IS UNSUSTAINABLE IN LAW. IT GOES WITHOUT SAYING THAT D EBATABLE ISSUES ARE OUTSIDE THE KEN OF SECTION 263. AN ASSESSMENT ORDER MUST BE NECESSARILY, INTER ALIA, ERRONEOUS SO AS TO BE ELIGIBLE FOR REVISION U/S 263 . IF A POINT IS DEBATABLE AND THE TWO VIEWS ARE PREVALENT ON A PARTICULAR POINT A ND THE ASSESSING OFFICER ADOPTS ONE VIEW, WHEREAS THE CIT CONSIDERS THE OTHE R VIEW TO BE MORE PLAUSIBLE, IT CANNOT BE SAID THAT THE ASSESSMENT OR DER IS ERRONEOUS SO AS TO CLOTHE THE CIT WITH THE POWER TO REVISE THE ASSESSM ENT ORDER. SINCE THERE WAS A CLEAVAGE OF JUDICIAL OPINION ON THE POINT AS TO WHETHER OR NOT INCOME FROM GROWING OF MUSHOROOM IS AGRICULTURAL, WHICH IS SUE HAS NOW BEEN SETTLED IN FAVOUR OF THE ASSESSEE BY VIRTUE OF THE HYDERABA D SPECIAL BENCH OF THE TRIBUNAL, WE HOLD, IN PRINCIPLE, THAT THE LD. CIT W AS NOT JUSTIFIED IN NOT APPROVING THE STAND OF THE ASSESSING OFFICER THAT I NCOME FROM GROWING OF MUSHROOM WAS AGRICULTURAL INCOME. IMPUGNED ORDER IS SET ASIDE PRO TANTO. 5. AS REGARDS THE SECOND ASPECT, BEING, THE VERIFIC ATION OF QUANTUM OF INCOME FROM GROWING OF MUSHROOM, IT IS FOUND THAT T HE ASSESSMENT ORDER IS ITA NO.2524/DEL/2018 5 TOTALLY SILENT ON THE SAME. THE LD. CIT HAS DISCUSS ED CERTAIN ASPECTS REGARDING QUANTIFICATION OF INCOME FROM MUSHROOM WHICH ARE GE RMANE TO THE COMPUTATION, BUT WERE NOT CONSIDERED BY THE ASSESSI NG OFFICER. SUCH ASPECTS HAVE BEEN ENUMERATED IN PARA 3 OF THE IMPUGNED ORDE R. THEREAFTER, THE LD. CIT RECORDED IN PARA 6.2 OF THE IMPUGNED ORDER THAT THOUGH THE ASSESSING OFFICER CALLED FOR INFORMATION REGARDING OTHER POIN TS, : `BUT AT NO POINT OF TIME DETAILS PERTAINING TO CLAIMED AGRICULTURAL INC OME AND ITS RELATED EXPENSES WERE CALLED FOR BY THE ASSESSING OFFICER. IN THE NEXT PARA, HE NOTED THAT : `THE AO HAD EVEN FAILED TO ASK FOR DETAILS OF THE LAND CLAIMED TO HAVE BEEN UTILIZED FOR GROWING MUSHOROOMS, WHICH WERE GIVEN D URING PROCEEDINGS U/S 263 ONLY, VIDE LETTER DATED 28.02.2018. THIS SHOWS THAT THE AO DID NOT EXAMINE THE QUANTIFICATION OF THE EXTENT OF INCOME CLAIMED AS EXEMPT. NO MATERIAL HAS BEEN PLACED BEFORE US TO DEMONSTRATE T HAT SUCH FINDINGS RECORDED BY THE REVISIONARY AUTHORITY ARE NOT CORRE CT. 6. CLAUSE (A) OF EXPLANATION 2 TO SECTION 263 ST ATES THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEMED TO BE ERRONEO US IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IF, IN T HE OPINION OF THE PRINCIPAL CIT OR COMMISSIONER: THE ORDER IS PASSED WITHOUT M AKING INQUIRIES OR ITA NO.2524/DEL/2018 6 VERIFICATION WHICH SHOULD HAVE BEEN MADE. CLAUSE ( B) FURTHER PROVIDES THAT AN ORDER IS DEEMED TO BE COVERED WITHIN THE PURVIEW OF SECTION 263 IF :`THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQUIRI NG INTO THE CLAIM. EXPLANATION 2 HAS BEEN INSERTED BY THE FINANCE ACT, 2015 W.E.F. 01.06.2015 AND THE SAME IS APPLICABLE TO THE FACTS OF THE INST ANT CASE. WE ARE CONFRONTED WITH A SITUATION IN WHICH THERE IS NO SHRED OF EVID ENCE THAT THE AO INQUIRED INTO THE ASPECTS OF THE QUANTIFICATION OF INCOME FR OM GROWING OF MUSHROOM. IT IS A TRITE LAW THAT WHEN AN ASSESSMENT ORDER IS PASSED IN A HURRIED MANNER WITHOUT MAKING PROPER INQUIRIES, SUCH AN ORDER IS L IABLE TO BE SET ASIDE. THE HON'BLE SUPREME COURT IN RAM PYARI DEVI SAROGI VS. CIT (1968) 67 ITR 84 (SC) HAS HELD THAT WHERE AN ASSESSMENT IS DONE IN UNDUE HURRY, THE ORDER CAN BE REVISED U/S 263. SIMILAR VIEW HAS BEEN REITERAT ED IN SEVERAL JUDGMENTS OF THE HON'BLE SUPREME COURT AND SEVERAL HON'BLE HIGH COURTS INCLUDING THE HON'BLE BOMBAY HIGH COURT IN CIT VS. HINDUSTAN LEVEL LTD. (2012) 343 ITR 161 (BOM). 7. THE LD. AR RAISED ANOTHER ISSUE BY SUBMITTING TH AT THE NOTICE U/S 263 OF THE ACT DID NOT REFER TO ANY QUANTIFICATION ASPECT AND THE SAME WAS ONLY ON THE POINT THAT INCOME FROM GROWING OF MUSHROOM WAS NOT AN AGRICULTURAL ITA NO.2524/DEL/2018 7 INCOME. IT WAS, THEREFORE, URGED THAT IN GIVING DI RECTION TO THE AO FOR VERIFYING THE QUANTUM OF INCOME FROM MUSHROOM, THE LD. CIT TRANSGRESSED THE BOUNDARIES SET OUT IN THE NOTICE AND HIS ACTION SHOULD BE QUASHED. 8. WE ARE NOT CONVINCED WITH THE ARGUMENT ADVANCED BY THE LD. AR. IN THE NOTICE DATED 29.01.2018, THE LD. CIT DISCUSSED ABOUT THE AO NOT MAKING ANY INQUIRY AS TO THE CORRECTNESS OF THE AGRICULTUR AL INCOME IN VIEW OF THE FACT THAT THE SAME WAS GENERATED FROM GROWING MUSHROOM. HOWEVER, IT IS GRAPHICALLY CLEAR THAT THE QUANTIFICATION OF INCOME FROM GROWING OF MUSHROOM IS NOT A NEW ISSUE, BUT SIMPLY ANOTHER ASP ECT OF THE SAME ISSUE. FURTHER, WE DO NOT FIND ANY REASON TO RESTRICT THE JURISDICTION OF THE CIT ONLY TO THE EXTENT OF ISSUES TAKEN UP IN THE NOTICE. THE RAISON D`ETRE OF OUR SUCH CONCLUSION IS THE LANGUAGE USED IN SECTION 263(1) O F THE ACT, WHICH USES THE EXPRESSION AFTER GIVING THE ASSESSEE AN OPPORTUNIT Y OF BEING HEARD WHICH IS DIFFERENT FROM AFTER THE SERVICE OF NOTICE. IF AN OPPORTUNITY HAS BEEN GIVEN DURING THE COURSE OF REVISIONARY PROCEEDINGS, NO CH ALLENGE CAN BE LAID TO THE POWER OF THE CIT IN CONSIDERING THE ASSESSMENT ORDE R AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON A COU NT WHICH IS NOT THE SUBJECT MATTER OF NOTICE U/S 263. THE HON'BLE SUPREME COUR T IN CIT VS. ELECTRO ITA NO.2524/DEL/2018 8 HOUSE (1971) 82 ITR 824 (SC) HAS HELD THAT IT IS NOT NECESSARY FOR THE CIT TO ISSUE NOTICE BEFORE ASSUMING JURISDICTION. RECENTL Y, THE HON'BLE SUPREME COURT IN CIT VS. AMITABH BACHCHAN (2016) 384 ITR 200 (SC) HAS REITERATED THE SAME VIEW BY HOLDING THAT : ` IT MAY BE THAT IN A GIVEN CASE AND IN MOST CASES IT IS SO DONE A NOTICE PROPOSING THE REVISION AL EXERCISE IS GIVEN TO THE ASSESSEE INDICATING THEREIN BROADLY OR EVEN SPECIFI CALLY THE GROUNDS ON WHICH THE EXERCISE IS FELT NECESSARY. BUT THERE IS NOTHING IN THE SECTION (SECTION 263) TO RAISE THE SAID NOTICE TO THE STATUS OF A MA NDATORY SHOW CAUSE NOTICE AFFECTING THE INITIATION OF THE EXERCISE IN THE ABS ENCE THEREOF OR TO REQUIRE THE C.I.T. TO CONFINE HIMSELF TO THE TERMS OF THE NOTIC E AND FORECLOSING CONSIDERATION OF ANY OTHER ISSUE OR QUESTION OF FAC T . THIS IS NOT THE PURPORT OF SECTION 263. OF COURSE, THERE CAN BE NO DISPUTE THA T WHILE THE C.I.T. IS FREE TO EXERCISE HIS JURISDICTION ON CONSIDERATION OF ALL R ELEVANT FACTS, A FULL OPPORTUNITY TO CONTROVERT THE SAME AND TO EXPLAIN T HE CIRCUMSTANCES SURROUNDING SUCH FACTS, AS MAY BE CONSIDERED RELEVA NT BY THE ASSESSEE, MUST BE AFFORDED TO HIM BY THE C.I.T. PRIOR TO THE FINAL IZATION OF THE DECISION. ADVERTING TO THE FACTS OF THE INSTANT CASE, AS IS A LSO PALPABLE FROM THE IMPUGNED ORDER, THAT IT IS NOT THE CASE OF THE ASSE SSEE THAT THE LD. CIT DID NOT ITA NO.2524/DEL/2018 9 GIVE OPPORTUNITY OF HEARING IN THIS REGARD. THUS, N O FAULT CAN BE FOUND WITH THE LD. CIT IN DIRECTING THE AO TO VERIFY THE QUANT UM OF THE INCOME FROM THE GROWING OF MUSHROOM. WE, THEREFORE, APPROVE THE VIE W OF THE LD. CIT IN SO FAR AS THE SECOND ASPECT IS CONCERNED, NAMELY, THE ASSESSING OFFICER FAILED TO MAKE PROPER VERIFICATION OF THE QUANTUM OF INCOME A RISING FROM GROWING OF MUSHROOM, ETC., CLAIMED BY THE ASSESSEE AS EXEMPT A GRICULTURAL INCOME. THE IMPUGNED ORDER IS UPHELD TO THIS EXTENT. 9. TO SUM UP, WE HOLD THAT THE LD. CIT WAS NOT JUSTIFIED IN INVOKING SECTION 263 IN HOLDING THAT INCOME FROM GROWING OF MUSHROOM IS AN AGRICULTURAL INCOME. HOWEVER, NO FAULT CAN BE FOUND WITH THE ORD ER OF THE LD. CIT IN DIRECTING THE ASSESSING OFFICER TO VERIFY THE QUANT UM OF INCOME FROM GROWING OF MUSHROOM. 10. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 2 6 TH JULY, 2018. {{ SD/- SD/- [N.K. CHOUDHARY] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 26 TH JULY, 2018. ITA NO.2524/DEL/2018 10 DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.