The DCIT, Circle-4(1)(2), Ahmedabad V. M/s. The Grand Bhagwati Banquests and Hotels Ltd., Ahmedabad

ITA 2528/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8217 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 06-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Assessee Lawyers: S N DIVATIA
• Keywords: Revision of order
• Section: 143(3); 14A; 63

Judgement Text

, LH LHLH LH IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD LKOZJH OLHE VGEN] YS[KK LNL; ,OA EGKOHJ IZLKN] U;KF ;D LNL; DS LKOZJH OLHE VGEN] YS[KK LNL; ,OA EGKOHJ IZLKN] U;KF ;D LNL; DS LKOZJH OLHE VGEN] YS[KK LNL; ,OA EGKOHJ IZLKN] U;KF ;D LNL; DS LKOZJH OLHE VGEN] YS[KK LNL; ,OA EGKOHJ IZLKN] U;KF ;D LNL; DS LE{KA LE{KA LE{KA LE{KA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.2528/AHD/2016 ( / ASSESSMENT YEAR : 2009-10) DCIT, CIRCLE 4(1)(2), AHMEDABAD. / VS. M/S. THE GRAND BHAGWATI BANQUETS AND HOTELS LTD., 301, P CIRCLE, HONEST CROSS ROAD, S.C. HIGHWAY, AHMEDABAD. ./ ./ PAN/GIR NO. : AABCB 6825 A ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI T. SANKAR SR. D.R. / RESPONDENT BY : SHRI S. N. DIVATIA, A.R. / DATE OF HEARING 11/05/2018 !'# / DATE OF PRONOUNCEMENT 24/05/2018 $% / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE APPELLATE ORDER OF THE COMMISSIONER OF INCOME TAX(A PPEALS)-1, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)-1/DCIT, CI R-1(1)(2)/57/2015-16 DATED 28/07/2016 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) R.W.S. 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') DATED 11/03/2015 RELEVANT TO ASSESSMENT YEAR (AY) 2 009-10. ITA NO.2528/AHD/2016 DCIT VS. M/S. THE GRAND BHAGWATI BANQUETS AND HOTE LS LTD. ASST.YEAR 2009-10 - 2 - 2. THE GROUND RAISED BY THE REVENUE PER ITS APPEAL IS AS UNDER:- WHETHER THE LD. CIT(A) IS RIGHT IN LAW AND ON FACT S IN HIS JUDGMENT TO HELD THE ASSESSMENT ORDER INFRUCTUOUS. 3. AT THE OUTSET IT WAS BROUGHT TO OUR NOTICE BY TH E LD. AR THAT THE ASSESSMENT U/S 143(3) WAS FRAMED BY THE AO VIDE ORD ER DATED 29.12.2011. SUBSEQUENTLY THE ASSESSMENT ORDER WAS REVISED U/S 2 63 OF THE ACT BY THE LD. CIT VIDE HIS ORDER DATED 4.3.2014. ACCORDINGLY THE AO PASSED GIVING EFFECT ORDER U/S 143(3)/263 DATED 11-3-2015 OF THE ACT IN PURSUANCE TO THE DIRECTIONS ISSUED BY THE LD. CIT U/S 263 OF THE ACT . 4. HOWEVER THE ASSESSEE AGAINST THE REVISION ORDER PASSED U/S 263 OF THE ACT PREFERRED AN APPEAL BEFORE HON'BLE TRIBUNAL IN ITA NO. 1279/AHD/2014 WHEREIN IT WAS HELD THAT THERE WAS NO ERROR IN THE ORDER PASSED BY AO DATED 29.12.2011. ACCORDINGLY, THE ORDER PASSED BY LD. CI T U/S 263 OF THE ACT WAS HELD UNSUSTAINABLE BY THE TRIBUNAL VIDE ORDER DATED 19.02.2016. IN THIS REGARD, LD. AR BEFORE US SUBMITTED THAT THE ORDER P ASSED IN CONSEQUENCE TO THE DIRECTION ISSUED U/S 263 OF THE ACT BY THE AO H AS NO LEG TO STAND. THEREFORE, SUCH ORDER BECOMES INFRUCTUOUS/ NON-EST IN THE EYES OF LAW. THUS, IT WAS PLEADED BY LD. AR THAT THE APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) BECOMES INFRUCTUOUS IN CONSEQUENCE TO THE ORDER PASSED UNDER SECTION 143(3)/263 OF THE ACT DATED 11-3-2015. ON THE OTHER HAND, LD. DR VEHEMENTLY RELIED ON THE ORDER OF ASSESSING OFFICER. ITA NO.2528/AHD/2016 DCIT VS. M/S. THE GRAND BHAGWATI BANQUETS AND HOTE LS LTD. ASST.YEAR 2009-10 - 3 - 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THERE IS NO AMBIGUITY THAT THE ORDER PASSED BY LD. CIT U/S 263 OF THE ACT IN THE C ASE OF ASSESSEE PERTAINING TO ASSESSMENT YEAR 2009-10 WAS QUASHED IN ITA NO. 1279/AHD/2014 VIDE ORDER DATED 19.02.2016. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW:- 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS . THE FIRST THING WHICH HAS TO BE CONSIDERED IS WHETHER THE LD. COMMI SSIONER HAS RIGHTLY ASSUMED THE POWER U/S. 263 OF THE ACT. THE HONBLE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. 243 ITR 83 HAS LAID DOW N 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 JUR ISDICTION BY THE COMMISSIONER SUO MOTU UNDER II, IS THAT THE ORDER O F 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 TW IN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUG HT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERE STS OF THE REVENUE. IF ONE OF THEM IS ABSENTIF THE ORDER OF THE INCOME-TA X OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS HUT IS PREJUDICIAL TO THE REVENUE RECOUR SE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COM MITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRO NEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUI REMENT OF THE ORDER BEING ERRONEOUS' 8. NOW, LET US SEE IN THE LIGHT OF THE ABOVE RATIO WHE THER THE ASSESSMENT HAS BEEN MADE ON AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW. THE FIRST OBSERVATION OF THE LD . CIT RELATES TO THE CLAIM OF 1/5 TH OF IPO EXPENSES U/S. 35D OF THE ACT. THE LD. CIT I S OF THE FIRM BELIEF THAT SINCE THE ASSESSEE IS NOT AN INDUS TRIAL UNDERTAKING SUCH CAPITAL EXPENSES CANNOT BE CLAIMED U/S. 35D AFTER C OMMENCEMENT OF BUSINESS AS PER PROVISIONS APPLICABLE FOR A.Y. 2009 -10. WE FIND THAT THE GUJARAT POLLUTION CONTROL BOARD HAS GIVEN CONSENT A ND AUTHORIZATION ITA NO.2528/AHD/2016 DCIT VS. M/S. THE GRAND BHAGWATI BANQUETS AND HOTE LS LTD. ASST.YEAR 2009-10 - 4 - TREATING THE ASSESSEE AN INDUSTRIAL UNDERTAKING. FU RTHER WE FIND THAT THIS VIEW IS ALSO SUPPORTED BY THE DECISION OF THE HONB LE KERALA HIGH COURT IN THE CASE OF P.ALIKUNJU, M.A. NAZEER CASHEW INDUS TRIES 166 ITR 804. IT WOULD BE PERTINENT TO MENTION HERE, THE OBSERVATION S OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SHIP SCRAP TRADERS 251 ITR 806 WHEREIN THE HONBLE HIGH COURT HAS OBSERVED AS UNDE R:- THE CONCEPT OF INDUSTRIAL UNDERTAKING NEED NOT NEC ESSARILY BE CONFINED TO MANUFACTURE AND PRODUCTION OF ARTICLES AND EVEN IN THE ABSENCE OF EITHER OF THEM THERE COULD BE AN INDUSTR IAL UNDERTAKING. 9. IN OUR UNDERSTANDING OF THE LAW, THIS IS THE REASO N FOR WHICH THE HONBLE KERALA HIGH COURT (SUPRA) HAS HELD THE BUSINESS OF LODGE TO BE AN INDUSTRIAL UNDERTAKING. THE FINDING OF THE COMMISSI ONER THAT THE A.O HAS NOT ENQUIRED INTO THIS IS INCORRECT. WE FIND THAT T HE A.O HAS THOROUGHLY EXAMINED THIS ISSUE AT LENGTH WHICH IS EVIDENT FROM THE OBSERVATIONS/FINDINGS GIVEN AT PARA 3 OF THE ASSESS MENT ORDER. 10. SINCE THE CLAIM OF THE ASSESSEE IS BACKED BY JUDICI AL PRONOUNCEMENT IN FAVOUR OF THE ASSESSEE. IT CANNOT BE SAID THAT THER E WAS A WRONG ASSUMPTION OF LAW. 11. THE SECOND OBSERVATION OF THE COMMISSIONER IS THAT NO DISALLOWANCE HAS BEEN MADE BY THE A.O U/S. 14A OF THE ACT. THE COMMI SSIONER FURTHER OBSERVED THAT THE A.O HAS PROCEEDED ON A WRONG ASSU MPTION OF FACTS THAT THE INVESTMENTS MADE BY THE ASSESSEE ARE OUT OF NON INTEREST BEARING FUNDS WHEREAS THE CORRECT FACTS ARE THAT THE INVEST MENTS HAVE BEEN MADE OUT OF INTEREST BEARING FUNDS. 12. THIS OBSERVATION OF THE COMMISSIONER IS ALSO AGAINS T THE TRUE FACTS OF THE CASE, THE FOLLOWING OBSERVATIONS/FINDINGS OF THE A. O WOULD EXPLAIN THE POSITION. THE SUBMISSION OF THE ASSESSEE HAS BEEN CONSIDERED. REGARDING INVESTMENTS, THE ASSESSEE HAS PUT ON RECO RDS FROM ITS ACCOUNTS EVIDENCE TO DEMONSTRATE THAT THE SOURCE OF INVESTME NT IS OUT OF INTEREST FREE FUNDS. FURTHER REGARDING ADMINISTRATIVE EXPENS ES, THE ASSESSEE HAS OFFERED 0.5% OF THE AVERAGE INVESTMENTS AS DISALLOW ANCE U/S. 14A AMOUNTING TO RS. 8,80,758/-. CONSIDERING THE DETAIL S, THE DISALLOWANCE OFFERED BY THE ASSESSEE DURING THE ASSESSMENT PROCE EDINGS IS ACCEPTED AND A DISALLOWANCE OF RS. 8,80, 758/- IS MADE U/S. 14A . FROM THE ABOVE, IT CAN BE SEEN THAT THAT THE A.O. HAS THOROU GHLY EXAMINED THE ITA NO.2528/AHD/2016 DCIT VS. M/S. THE GRAND BHAGWATI BANQUETS AND HOTE LS LTD. ASST.YEAR 2009-10 - 5 - SOURCE OF INVESTMENT AND AFTER EXAMINATION/VERIFICA TION , THE A.O WAS CONVINCED THAT THE INVESTMENT IS OUT OF INTEREST FR EE FUNDS. 13. IN THE LIGHT OF THE ABOVE, IT CANNOT BE SAID THAT T HERE IS ANY WRONG ASSUMPTION OF FACT. 14. HAVING SAID ALL THAT, IN OUR CONSIDERED OPINION NEI THER THERE IS ANY WRONG ASSUMPTION OF LAW NOR THERE ISANY WRONG ASSUM PTION OF FACTS TO MAKE THE ASSESSMENT ORDER ERRONEOUS AND PRE-JUDICIA L TO THE INTEREST OF THE REVENUE. 15. THE AO HAS TAKEN A VIEW WHICH MAY BE DIFFERENT FROM THE VIEW OF THE LD. COMMISSIONER AND ASSUMING THAT THE VIEW TAKEN BY TH E AO IS A LOSS TO THE REVENUE BUT THE HON'BLE SUPREME COURT IN MALABA R 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 ADOPT ED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN L OSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME TAX OFFICER H AS TAKEN ONE VIEW WITH WHICH THE LD. COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ORDER WHICH IS ERRONEOUS OR PREJUDICIAL TO THE I NTEREST OF REVENUE UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTAINABLE IN LAW. 16. THE BOMBAY HIGH COURT IN CIT VS GABRIAL INDIA LTD., (1993) 203 ITR 108 HAS HELD THAT 'THE DECISION OF THE INCOME TAX O FFICER COULD NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER, H E DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD'. CONSIDERING T HE FACTS IN TOTALITY IN THE LIGHT OF THE JUDICIAL DECISIONS DISCUSSED HEREI NABOVE, 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. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. FROM THE ABOVE PROPOSITION, THERE REMAINS NO DOUBT THAT THE ORDER PASSED BY LD. CIT U/S 263 OF THE ACT WAS HELD AS UNSUSTAINABL E. THEREFORE, THE ORDER PASSED IN CONSEQUENT TO THE DIRECTION ISSUED U/S 26 3 OF THE ACT BECOMES ITA NO.2528/AHD/2016 DCIT VS. M/S. THE GRAND BHAGWATI BANQUETS AND HOTE LS LTD. ASST.YEAR 2009-10 - 6 - INFRUCTUOUS. HENCE, WE FIND NO REASON TO INTERFERE IN THE ORDER PASSED BY THE LD. CIT(A) ON THE GROUND THAT THE CONSEQUENTIAL ORD ER PASSED U/S 143(3)/263 OF THE ACT IS NOT MAINTAINABLE AND THUS THE APPEAL FILED BECOMES INFRUCTUOUS. HENCE THE ADDITIONS MADE BY THE AO IN HIS GIVING EF FECT ORDER ARE NOT SUSTAINABLE. THUS WE DISMISS THE APPEAL FILED BY TH E REVENUE. 6. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . THIS ORDER PRONOUNCED IN OPEN COURT ON 24/05/2018 SD/- SD/- EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; YKS[KK LNL; U;KF;D LNL; YKS [KK LNL; U;KF;D LNL; YKS [KK LNL; U;KF;D LNL; YKS [KK LNL; (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 24/05/2018 PRITI YADAV, SR.PS !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. )() / THE CIT(A)-1, AHMEDABAD. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD