Sri.K.D.Gopalakrishnan, Kayamkulam V. ITO, Alappuzha

ITA 255/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69023 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 07-10-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 06-05-2013
• Court: TRIBUNAL
• Department Lawyers: M ANIL KUMAR; K K JOHN
• Keywords: Principle of natural justice; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 255 /COCH/2013 ASSESSMENT YEAR : 2008-09 K.D.GOPALAKRISHNAN, ELEMEC WEDDING CASTLE, KAYAMKULAM. [PAN: AKQPG 9226J] VS. THE INCOME TAX OFFICER, WARD-1, ALAPPUZHA. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI R. SREENIVASAN, FCA REVENUE BY SHRI K.K. JOHN, SR. DR & SHRI M. ANIL KUMAR, CIT(DR) DATE OF HEARING 07/10/2013 DATE OF PRONOUNCEMENT 11/10/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE REVISION ORDER PASSED BY THE LD. CIT, KOTTAYAM U/S. 263 OF THE ACT FOR THE ASSES SMENT YEAR 2008-09. 2. THE ASSESSEE IS CONTENDING BEFORE US THAT THE AS SESSMENT ORDER PASSED BY THE ASSESSING OFFICER IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND HENCE, THE IMPUGNED REVISION ORDER IS NOT VALID IN THE EYES OF LAW. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS CARRYING ON TEXTILE BUSINESS. THE ASSESSMENT FOR THE ASSESSMEN T YEAR 2008-09 IN THE HANDS OF THE ASSESSEE WAS COMPLETED U/S. 143(3) OF THE ACT ON 31 -12-2010. THE LD. CIT, ON EXAMINATION OF RECORD, NOTICED THAT THE ASSESSEE HA S CHANGED THE METHOD OF CLAIMING ADVERTISEMENT EXPENSES IN THE IMMEDIATELY PRECEDING YEAR. TO ELABORATE FURTHER, THE ASSESSEE WAS CLAIMING THE ENTIRE AMOUNT OF ADVERTIS EMENT EXPENSES INCURRED IN A YEAR I.T.A. NO. 255/COCH/2013 2 AS EXPENDITURE IN THAT YEAR ITSELF THE PREVIOUS YEA R. IN ASSESSMENT YEAR 2006-07, THE ASSESSEE HAD CLAIMED THE ENTIRE AMOUNT OF ADVERTISE MENT EXPENSES IN THAT YEAR ITSELF. HOWEVER, IN THE SUCCEEDING ASSESSMENT YEAR, I.E., I N ASSESSMENT YEAR 2007-08, THE ASSESSEE CHANGED THE METHOD AND CLAIMED THE SAME AS DEFERRED REVENUE EXPENDITURE SPREAD OVER A PERIOD OF FIVE YEARS. IN ASST. YEAR 2007-08, THE ASSESSEE HAD INCURRED A SUM OF RS.1,03,13,025/- TOWARDS ADVERTISEMENT EXPEN SES AND CLAIMED 1/5 TH OF THE SAME IN THAT YEAR. ACCORDINGLY IN ASSESSMENT YEAR 2008-09, I.E., THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED ANOTHER 1/5 TH OF EXPENSES. 4. THE LD. CIT NOTICED THAT THE ASSESSEE HAD DECLA RED LOSS IN THE RETURN OF INCOME FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2007- 08. HOWEVER, THE SAID RETURN WAS FILED BELATEDLY, I.E., BEYOND THE DUE DATE, THUS DI SENTITLING THE ASSESSEE TO CLAIM SET OFF OF CARRY FORWARD LOSS IN THE SUCCEEDING YEARS. THE LD CIT NOTICED THAT THE LOSS WOULD HAVE GONE UP, HAD THE ASSESSEE CLAIMED THE ENTIRE A MOUNT OF ADVERTISEMENT EXPENSES AS DEDUCTION IN THE ASSESSMENT YEAR 2007-08 ITSELF. HENCE, THE LD. CIT TOOK THE VIEW THAT THE ASSESSEE HAS TAKEN THE DECISION TO CHANGE THE METHOD OF ACCOUNTING THE ADVERTISEMENT EXPENSES ONLY TO REDUCE THE QUANTUM O F LOSS FOR ASST. YEAR 2007-08. ACCORDINGLY, THE LD. CIT TOOK THE VIEW THAT THE CLA IM OF 1/5 TH OF ADVERTISEMENT EXPENSES MADE DURING ASST. YEAR 2008-09 WAS WITH THE INTENTI ON TO INDIRECTLY CLAIM SET OFF OF LOSS RELATING TO ASSESSMENT YEAR 2007-08, WHICH HAD THE EFFECT OF REDUCING THE INCOME OF ASST. YEAR 2008-09 AND SUBSEQUENT YEARS. 5. THE LD. CIT NOTICED THAT THE ASSESSING OFFICER D ID NOT EXAMINE THIS ISSUE AND ACCORDINGLY HELD THAT THE ASSESSMENT ORDER IS ERRON EOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ACCORDINGLY, HE INITIATED REVISION PROCEEDINGS U/S. 263 OF THE ACT. AFTER HEARING THE ASSESSEE, THE LD. CIT SET ASIDE THE IMP UGNED ASSESSMENT ORDER AND DIRECTED THE ASSESSING OFFICER TO RE-DO THE ASSESSM ENT CONSIDERING THE FACTS DISCUSSED IN THE ORDER. AGGRIEVED, THE ASSESSEE HAS FILED TH IS APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS. ADMIT TEDLY, THE ASSESSING OFFICER DID NOT DISCUSS ANYTHING IN THE ASSESSMENT ORDER ABOUT THE CLAIM OF ADVERTISEMENT EXPENSES I.T.A. NO. 255/COCH/2013 3 MADE IN THIS YEAR. BEFORE US THE LD A.R CLAIMED TH AT THE AO DID EXAMINE THIS ISSUE DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BUT HE DID NOT FILE ANY MATERIAL TO SUPPORT HIS CLAIM. AT THIS JUNCTURE, WE FEEL IT P ERTINENT TO REFER TO THE DECISION RENDERED BY THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF GRASIM INDUSTRIES LTD. V CIT (321 ITR 92), WHEREIN THE COURT HAS DISCUSSED ABOUT THE SCOPE OF PROVISIONS OF SECTION 263 AS UNDER: SECTION 263 OF THE INCOME-TAX ACT, 1961 EMPOWERS TH E COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDINGS UNDER THE ACT AND, IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN, BY THE ASS ESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, TO PASS AN ORDER UPON HEARING THE ASSESSEE AND AFTER A N ENQUIRY AS IS NECESSARY, ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THE KE Y WORDS THAT ARE USED BY SECTION 263 ARE THAT THE ORDER MUST BE CONSIDERE D BY THE COMMISSIONER TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THIS PROVISION HAS BEEN INTERPRETED BY THE SUPREME COURT IN SEVERAL JUDGMENTS TO WHICH IT IS NOW NECESSARY TO TURN. IN MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83, THE SUPREME COURT HELD THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ON LY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. THE SUPREME COURT HELD THAT AN INCORRECT ASSUMPTION OF FACT OR AN INCORRECT APP LICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. AN ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE OR W ITHOUT APPLICATION OF MIND, WOULD BE AN ORDER FALLING IN THAT CATEGORY . THE EXPRESSION PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE SUPREME COURT HELD, IT IS OF WIDE IMPORT AND IS NOT CONFINED TO A LOSS OF TAX. W HAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IS EXPLAINED IN THE JUDGMEN T OF THE SUPREME COURT (HEAD NOTE) : THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE A SSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE O F THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF T HE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE I N LAW. THE PRINCIPLE WHICH HAS BEEN LAID DOWN IN MALABAR I NDUSTRIAL CO. LTD. [2000] 243 ITR 83 (SC) HAS BEEN FOLLOWED AND EXPLAI NED IN A SUBSEQUENT I.T.A. NO. 255/COCH/2013 4 JUDGMENT OF THE SUPREME COURT IN CIT V. MAX INDIA L TD. [2007] 295 ITR 282. THERE MAY NOT BE ANY DISPUTE THAT THE REVISION PROC EEDING SHALL NOT LIE ON THE ISSUES ON WHICH THE ASSESSING OFFICER HAS TAKEN A PLAUSIBLE V IEW AFTER EXAMINING AND APPLYING HIS MIND ON IT. IF THE AO DID NOT MAKE ANY ENQUIRY ON ANY OF THE PERTINENT ISSUE, IT WILL RESULT IN LACK OF APPLICATION OF MIND. 7. THE HONBLE DELHI HIGH COURT, IN THE CASE OF TOYOTO MOTOR CORPORATION (306 ITR 49), HAS HELD THAT THE PROCEEDINGS BEFORE THE AO AR E QUASI JUDICIAL PROCEEDINGS AND A DECISION TAKEN BY THE AO IN THIS REGARD MUST BE SUP PORTED BY REASONS. IN THE CASE BEFORE THE DELHI HIGH COURT, THE ASSESSING OFFICER PASSED A CRYPTIC ORDER DROPPING THE PENALTY PROCEEDINGS WITHOUT GIVING ANY REASON AND H ENCE THE SAID ORDER WAS REVISED BY THE LD CIT U/S 263 OF THE ACT. THE ASSESSEE CHALLE NGED THE REVISION ORDER BEFORE THE TRIBUNAL AND COULD SUCCEED. THE DEPARTMENT CARRIED THE MATTER IN APPEAL BEFORE THE HONBLE DELHI HIGH COURT, WHICH UPHELD THE REVISION ORDER PASSED BY LD CIT U/S 263 OF THE ACT FOR THE REASONS STATED ABOVE. THE SAID ORD ER OF THE DELHI HIGH COURT HAS BEEN APPROVED BY THE HONBLE SUPREME COURT IN THE CASE O F TOYOTO MOTOR CORPORATION (306 ITR 52) WITH THE OBSERVATION THAT THE ASSESSING OFF ICER SHOULD PASS A REASONED ORDER. THESE DECISIONS CLEARLY BRING OUT THAT THE ASSESSME NT ORDER SHOULD BE PASSED WITH OR SHOULD CONTAIN PROPER REASONS ON VARIOUS ISSUES. 8. IN THE INSTANT CASE, THE ASSESSING OFFICER HA S FAILED TO EXAMINE THE ISSUE RELATING TO ADVERTISEMENT EXPENSES AND HENCE, IN OUR VIEW ALSO, THE ASSESSMENT ORDER IS RENDERED ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. 9. IN VIEW OF THE FOREGOING DISCUSSIONS, IN OUR VIEW, THE LD CIT WAS JUSTIFIED IN PASSING THE IMPUGNED REVISION ORDER BY INVOKING THE PROVISIONS OF SEC. 263 OF THE ACT. I.T.A. NO. 255/COCH/2013 5 10. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 11-10-20 13. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 11TH OCTOBER, 2013 GJ COPY TO: 1. K.D.GOPALAKRISHNAN, ELEMEC WEDDING CASTLE, KAYAMK ULAM. 2. THE INCOME TAX OFFICER, WARD-1, ALAPPUZHA. 3 THE COMMISSIONER OF INCOME-TAX, KOTTAYAM.-. 4. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 5. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN