ACIT 13(3)(1), MUMBAI V. RAJHANS METALS P.LTD, MUMBAI

ITA 2611/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6001 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 10-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SARAVANAN
• Keywords: Revision of order; Revenue expenditure; Capital expenditure; Set aside
• Section: 201; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D , MUMBAI BEFORE SHRI G.S. PANNU (VP ) AND SHRI RAM LAL NEGI (JM) ITA NO. 2611 /MUM/2017 ASSESSMENT YEAR: 2009 - 10 THE DCIT - 13(3(1), ROOM NO. 229, 2 ND FLOOR, AAYAKARBHAVAN, M.K. ROAD, MUMBAI - 20 VS. M/S RAJHANS METALS PVT. LTD., 3, SHILEYINDL. ESTATE, UDYOG NAGAR, SV ROAD, GOREGAON, MUMBAI 54 PAN: AAACR5424Q (APPELLANT) (RESPONDENT) REVENUE BY : SHRI J. SARAVANAN ( D R) ASSESSEE BY : NONE DATE OF HEARING: 03 /10/2018 D ATE OF PRONOUNCEMENT: 03 / 01 /201 9 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 23.01.2017 PASSED BY THE COMMISS IONER OF INCOME TAX (APPEALS) - 21 (FOR SHORT THE CIT(A), MUMB AI, FOR THE ASSESSMENT YEAR 2009 - 10 , WHEREBY THE LD. CIT(A) HAS ALLOWED THE APPEAL FILED BY THE ASSESSEE AGAINST THE ASSESSMENT ORDER PASSED U/S 143 (3) READ WITH SECTION 263 OF THE INCOME TAX ACT, 1961 (FOR SHORT T HE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF TRADING OF SCRAP AND MANUFACTURING OF EXTR UDED BRASS RODS AND WIND POWER, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE T OTAL LOSS OF RS. 6,80,53,770/ - . THE RETURN OF 2 ITA NO. 2611/MUM/2017 ASSESSMENT YEAR: 2009 - 10 INCOME WAS PROCESSED U/S 143 ( 1) . SINCE T HE CASE WAS SELECTED FOR SCRUTINY AO ISSUED NOTICE S U/S 143 (2) AND 142 (1) TO THE ASSESSEE. I N RESPONSE THEREOF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED BEFORE THE AO AND FILED THE DETAILS CALLED FOR. THE AO ACCEPTING THE RETURNED INCOME PASSED ASSESSMENT ORDER U/S 143 (3) OF THE ACT. 3. SUBSEQUENTLY, THE CIT - 9, MUMBAI PASSED ORDER U/S 263 OF THE ACT ON THE GROUND THAT THE GROSS PROFIT SHOWN BY THE ASSESSE ON THE TURNOVER OF RS. 140.34 CRORE COMES TO 1.91%, AS AGAINST THE GROSS PROFIT SHOWN BY THE ASSESSEE AT 7.43% AND 8.58% RESPECTIVELY FOR THE ASSESSMENT YEAR S 2007 - 08 AND 2008 - 09 AND THAT THE AO HAS NOT BROUGHT ON RECORD ANY EVIDENCE TO JUSTIFY THE GROSS PROFIT SHOWN BY THE ASSESSEE DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. CONSEQUENTLY , THE LD. CIT SET ASIDE THE ASSESSMENT ORDER HOLDING THE SAME AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND SENT BACK THE MATTER BACK TO THE AO WITH THE DIRECTION TO CONSIDER THE FACTS AND ISSUES M ENTIONED IN THE ORDER AND PASS ASSESSMENT ORDER AFRESH . I N COMPLIANCE THEREOF THE AO PASSED ASSESSMENT ORDER U/S 143 (3) READ WITH SECTION 263 OF THE ACT DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 2,14,89,400/ - . 4. THE ASSESSEE CHALLENGED THE SAID ORDER BEFORE THE LD. CIT (A) . THE ASSESSEE ALSO CHALLENGED THE REVISION ORDER PASSED BY THE LD. CIT BEFORE THE ITAT. THE I TAT AFTER HEARING THE ASSESSEE QUA SH THE ORDER PASSED BY THE CI T U/S 263 OF THE ACT. SO FAR AS THE ASSESSMENT ORDER PASSED U/S 143 (3) READ WITH SECTION 263 OF THE ACT IS CONCERNED, T HE LD. CIT SET ASIDE THE SAID ORDER ON THE GROUND THAT SINCE THE ITAT HAS QUASHED THE PROCEEDINGS U/S 263 OF THE ACT. THE ORDER PASSED U /S 143 (3) READ WITH SECTION 263 DOES NOT SURVIVE. THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST THE SAID ORDER PASSED BY THE LD. CIT (A) ON THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN SETTING ASIDE THE ORDER U/S 143 (3) RWS 263 AND RESTORING THE ORIGINAL ASSESSMENT ORDER. 3 ITA NO. 2611/MUM/2017 ASSESSMENT YEAR: 2009 - 10 5. THIS CASE WAS FIXED FOR HEARING ON 03.10.2018. WHEN THE CASE WAS CAL LED OUT FOR HEARING, NONE APPEARED ON BEHALF OF THE ASSESSEE. ACCORDINGLY, WE DECIDED TO DISPOSE OF THE APPEAL ON THE BASIS OF THE MATERIAL ON RECORD AFTER HEARING THE DEPARTMENTAL REPRESENTATIVE (DR). 6. BEFORE US, T HE LD. DEPARTMENTAL REPRESENTATIVE (D R) FAIRLY ADMITTED THAT SINCE THE ITAT, MUMBAI HAS QUASHED THE ORDER PASSED BY THE LD. CIT U/S 263 OF THE ACT, THE LD. CIT (A) HAS RIGHTLY SET ASIDE THE ORDER PASSED BY THE AO U/S 143 (3) READ WITH SECTION 263 OF THE ACT. 7. WE HAVE PERUSED THE MATERIAL ON RECORD. THE COORDINATE BENCH HAS QUASHED THE ORDER PASSED BY THE CIT, VIDE ORDER DATED 16.12.2016. THE CONCLUDING PARA OF THE ORDER OF THE ITAT READS AS UNDER : 6.1 WE FIND THAT THE ONLY GROUND ON WHICH THE LD. CIT HAS PASSED THE ORDER U/S 263 SETTING ASIDE THE ASSESSMENT PASSED BY THE AO IS THAT THERE WAS A HUGE FALL IN THE GROSS PROFIT OF THE ASSESSEE IN IMPUGNED ASSESSMENT YEAR. WE FIND THAT THE ASSESSEE, IN RESPON SE TO THE QUERY RAISED BY THE A.O, HAD SUBMITTED THE REQUISITE INFORMATION/DETAIL ALONG WITH EXPLANATION VIDE ITS SUBMISSIONS DATED 8.11.2011 AND 14.11.2011. WE FIND THAT THE INSTANT CASE IS COVERED BY THE DECISION OF THE HONBLE BOBMAY HIGH COURT IN THE C ASE OF GABRIAL INDIA LTD. (SUPRA). IN THAT CASE, FOR THE A.Y. 1973 - 74, THE ASSESSEE HAD CLAIMED A SUM OF RS. 99,326/ - DESCRIBED AS PLANT RELAY OUT EXPENSES AS REVENUE EXPENDITURE AND THE AO AFTER MAKING INQUIRIES IN REGARD TO NATURE OF SAID EXPENDITURE AND CONSIDERING THE EXPLANATION FURNISHED BY THE ASSESSEE IN THAT REGARD, ALLOWED ASSESEES CLAIM. SUBSEQUENTLY , THE COMMISSIONER, EXERCISING POWERS U/S 263, CANCELLED THE ORDER OF THE AO OBSERVING THAT THE SAID ORDER DID NOT CONTAIN DISCUSSION IN REGARD T O ALLOWABILITY OF CLAIM FOR DEDUCTION WHICH INDICATED NON - APPLICATION OF MIND AND THAT CLA IM OF THE ASSE SSEE REQUIRED EXAMINATION AS TO WHETHER IN QUESTION WAS REVENUE OR CAPITAL EXPENDITURE AND DIRECTED THE AO TO MAKE A FRESH ASSESSMENT ON LINES INDICATED BY HIM. THE HONBLE HIGH COURT HELD THAT U/S 263 SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE AO IS NOT PERMISSIBLE. ALSO IT WAS HELD THAT THE AOS ORDER COULD NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION. 4 ITA NO. 2611/MUM/2017 ASSESSMENT YEAR: 2009 - 10 7. RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN GABRIAL INDIA LTD. (SUPRA), WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT U/S 263 OF THE ACT AND RESTORE THE ORDER OF THE AO. 8. SINCE, THE COORDIN ATE BENCH HAS QUASHED THE ORDER PASSED BY THE CIT U/S 263 OF THE ACT, THE LD. CIT (A) HAS RIGHTLY SET ASIDE THE ORDER PASSED BY THE AO U/S 143 (3) READ WITH SECTION 263 OF THE ACT. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A) TO INTE RFERE WITH . WE THEREFORE, UPHOLD THE ORDER PASSED BY THE LD. CIT (A) AND DISMISS THE SOLE GROUND OF APPEAL OF THE REVENUE. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEAR 2009 - 2010 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD JANUARY , 2019 . SD/ - SD/ - ( G.S. PANNU ) (RAM LAL NEGI) VICE PRESIDENT JUDICIAL MEMBER MUMBAI ; DATED: 03 / 01 / 201 9 ALINDRA, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI