M/s B.S. Sangwan, Sonepat V. CIT, Rohtak

ITA 2680/DEL/2011

• Counselvise Citation: 268020114 RSA 2011
• Duration Of Justice: 3 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-01-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 24-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A MISHRA
• Assessee Lawyers: NAVEEN C GUPTA
• Keywords: Depreciation; Opportunity of being heard; Speculation loss; Assessment record; Right to appeal; Tax effect
• Section: 263; 143(3)

Judgement Text

I.T.A. NO.: 2680/DEL/11 ASSESSMENT Y EAR: 2007 - 08 PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI A BENCH, NEW DELHI [CORAM: PRAMOD KUMAR AM AND C. M. GARG JM ] I.T.A. NO .: 2680 /DEL/11 ASSESSMENT YEAR: 2007 - 08 B S SANGWAN .APPELLANT 4, HARRY PLAZA, ATLAS ROAD SONIPAT 131 001 [PAN: AAEFB9414C] VS. INCOME TAX OFFICER WARD 2, SONIPAT . RESPONDENT APPEARANCES BY: NAVEEN C GUPTA FOR THE APPELLANT A MISHRA , FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING: 20 TH JANUARY, 2015 DATE OF PRONOUNCING THE ORDER: 21 ST JANUARY , 2015 O R D E R PER PRAMOD KUMAR , AM : 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 18 TH MARCH 2011 PASSED BY THE COMMISSIONER OF INCOME TAX, ROHTAK, UNDER SECTION 263 R.W.S. 143(3) OF THE INCOME TAX ACT , 1961, FOR THE ASSESSMENT YEAR 2007 - 08. 2. ONE OF THE GRIEVANCES RAISED IN THIS APPEAL, AS SET OUT I N THE FIRST GROUND OF APPEAL, IS THAT THE IMPUGNED ORDER IS CONTRARY TO THE SCHEME OF THE LAW AND I.T.A. NO.: 2680/DEL/11 ASSESSMENT Y EAR: 2007 - 08 PAGE 2 OF 11 THE FACTS OF THIS CASE. AS IT IS A FUNDAMENTAL JURISDI CTIONAL ISSUE, WE WILL TAKE IT UP FIRST. 3. TO ADJUDICATE ON THIS GRIEVANCE, ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN OF. THE ASSESSEE BEFORE US IS A RAILWAY CONTRACTOR AND HAD FILED HIS RETURN OF INCOME, FOR THE ASSESSMENT YEAR BEFORE US, ON 30 TH APRI L 2007 DISCLOSING A TAXABLE INCOME OF RS 4,92,380. THIS INCOME TAX RETURN WAS SUBJECTED TO THE SCRUTINY ASSESSMENT PROCEEDINGS, AND, VIDE ORDER DATED 28 TH NOVEMBER, 2008 PASSED UNDER SECTION 143(3) OF THE ACT , THE ASSESSING OFFICER ASSESSED THE AT RS 5,82, 380. THE MATTER, HOWEVER, DID NOT REST THERE. ON 14 TH FEBRUARY 2011, LEARNED COMMISSIONER ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE WHICH, INTER ALA , POINTED OUT FOLLOWING ISSUES WITH RESPECT TO THE ASSESSMENT SO COMPLETED UNDER SECTION 143(3): I. THE ASS ESSEE IN HIS BALANCE SHEET HAS SHOWN AN AMOUNT OF RS 12,48,500 AS WORK IN PROGRESS WHEREAS, IN THE PROFIT AND LOSS ACCOUNT, THIS FIGURE HAS BEEN TAKEN AT RS 8,85,000. THEREFORE, THE DIFFERENCE OF THESE TWO FIGURES, I.E. RS 3,63,000 , WAS NOT ADDED BACK BY T HE AO. II. ON PERUSAL OF THE RECORDS, IT IS NOTICED THAT ONE OF THE PARTNERS SHRI MANOJ GUPTA HAS PURCHASED A CAR IN HIS NAME WHEREAS DEPRECIATION AMOUNTING TO RS 99,000 RELATING TO THIS CAR HAS BEEN CLAIMED AS EXPENSES OF THE FIRM. AS THE ASSESSEE FIRM IS N OT THE OWNER OF THE VEHICLE, DEPRECIATION CLAIMED AT RS 99,000 WAS NOT ADMISSIBLE, BUT WAS ALLOWED BY THE AO. III. AS PER THE P&L ACCOUNT, THE ASSESSEE HAS INCURRED THE FOLLOWING EXPENSES, WHICH ARE LIABLE TO DEDUCTION OF TAX AT SOURCE, BUT NO TAX HAS BEEN D EDUCTED: A) HIRE CHARGES FOR VEHICLES/ MACHINES RS 15,78,500 I.T.A. NO.: 2680/DEL/11 ASSESSMENT Y EAR: 2007 - 08 PAGE 3 OF 11 B) PROFESSIONAL CHARGES RS 36,000 C) LEGAL FEES RS 36,850 D) LOADING OF MATERIAL RS 62,82,650 TOTAL RS 79,37,250 THEREFORE, THESE EXPENSES ARE NOT ADMISSIBLE AS PROVIDED IN SECTION 40(A)(IA) OF THE INCOME TAX ACT, BUT THE AO HAS ALLOWED THE SAME. IV. THE ASSESSEE FIRM, AS PER BALANCE SHEET, HAS SHOWN FDR AND SECURITIES RECEIVABLE WORTH RS 32,65,650 UNDER THE HEAD CURRENT ASSETS . THE AMOUNT OF FDR AND SECURITY IS TO BE BIFURCA TED AS TO INTEREST ON FDR AND SECURITY AMOUNT FOR CLOSING BALANCE/ WORK IN PROGRESS MAY BE VERIFIED BUT THE SAME WAS NOT DONE BY THE AO. V. AN AMOUNT OF RS 2,65,650 HAS BEEN RECORDED AS UNSECURED LOAN FROM SHRI N K SINGHAL IN THE BALANCE SHEET. NECESSARY VE RIFICATION REGARDING IDENTITY , CREDITWORTHINESS OF SHRI N K SINGHAL AND GENUINENESS OF TRANSACTION WAS NOT MADE BY THE AO. 4. HAVING SO SET OUT THE INFIRMITIES IN THE ASSESSMENT ORDER DATED 28 TH NOVEMBER, 2008, LEARNED COMMISSIONER PROCEEDED TO ISSUE TH E SHOW CAUSE NOTICE TO THE ASSESSEE REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ABOVE ASSESSMENT ORDER NOT BE CANCELLED/ MODIFIED. ON THIS ASPECT, HE STATED AS FOLLOWS: 4. KEEPING IN VIEW THE ABOVE, THE ORDER PASSED UNDER SECTION 143(3) OF THE IN COME TAX ACT, 1961, IS CONSIDERED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HAD THE SAID ADDITIONS/ DISALLOWANCES BEEN MADE, THERE WOULD HAVE BEEN SUBSTANTIAL TAX EFFECT AND THUS THE CAUSE OF REVENUE HAS SUFFERED. FURTH ER, THE ORDER OF THE AO IS IN CLEAR VIOLATION OF THE LEGAL I.T.A. NO.: 2680/DEL/11 ASSESSMENT Y EAR: 2007 - 08 PAGE 4 OF 11 PROVISIONS AS ENUMERATED IN THE INCOME TAX ACT, 1961. THUS, THE VERY SANCTITY OF THE ACT HAS BEEN ERO DED AND MAY SERVE AS A VERY BAD PRECEDENT. THE SAME, THEREFORE, NEEDS TO BE CANCELLED/ MODIFIED. 5. WITH THESE OBSERVATIONS, LEARNED COMMISSIONER REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY AN APPROPRIATE ORDER UNDER SECTION 263 OF THE INCOME TAX ACT, 1961, BE NOT PASSED . THE HEARING ON THIS SHOW CAUSE NOTICE WAS FIXED FOR 24 TH FEBRUARY 2011 WHICH, AFTER A COUPLE OF ADJOURNMENTS, FINALLY TOOK PLACE ON 11 TH MARCH 2011. LEARNED COUNSEL FOR THE ASSESSEE ELABORATE ARGUMENTS ON MERITS ON EACH OF THE POINT SET OUT IN LEARNED COMMISSIONER S SHOW CAUSE NOTICE. SO FAR POINT NO. 1, WITH RESPECT TO WORK IN PROGRESS, WAS CONCERNED, LEARNED COMMISSIONER REJECTED THE EXPLANATION OF THE ASSESSEE IN THE ABSENCE OF THE CORROBORATIVE EVIDENCE . ON POINT NO. 2, LEARNED COMMISSIONER DROPPED THE PROCEEDINGS. ON POINT NO. 3, I.E. WITH RESPECT TO DISALLOWANCE ON AC COUNT OF NOT DEDUCTING TDS, LEARNED COMMISSIONER HELD THAT THESE EXPENSES ARE NOT VERIFIABLE AND THAT IN THE ABSENCE OF COMPLETE DETAILS, IT IS HELD THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE BUT FAILED TO DO SO , AND, THEREFORE, THESE EXPENSE S ARE DISALLOWABLE UNDER SECTION 40(A)(IA). ON POINT NO. 4, LEARNED COMMISSIONER HELD THAT IN THE ABSENCE OF BIFURCATION OF DETAILS OF FDR AND SECURITY, THE INTEREST INCOME COULD NOT BE BROUGHT TO TAX BUT PROCEEDED TO HOLD THAT AN AMOUNT OF RS 2,60,150, WH ICH WAS DEDUCTED BY THE RAILWAY AUTHORITIES, WAS A PENAL PAYMENT IN NATURE AND, AS SUCH, DID NOT CONSTITUTE AN ADMISSIBLE EXPENDITURE. FINALLY, IN RESPECT OF POINT NO. 5, LEARNED COMMISSIONER HELD THAT SINCE ONUS IN RESPECT OF IDENTITY AND CREDITWORTHINES S OF SHRI N K SINGHAL IS NOT DISCHARGED AND SINCE GENUINENESS IS NOT PROVED, THE ASSESSMENT ORDER IS CONSIDERED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE TO THE EXTENT OF THE AMOUNT OF ADDITION OF RS 2,65,000 . YET, WHE N IT CAME TO OPERATIVE PART OF THE IMPUGNED ORDER, LEARNED COMMISSIONER HAD A DIFFERENT TONE ALTOGETHER AND HE SIMPLY RESTORED THE ASSESSMENT ORDER TO THE FILE OF THE ASSESSING OFFICER FOR FRESH I.T.A. NO.: 2680/DEL/11 ASSESSMENT Y EAR: 2007 - 08 PAGE 5 OF 11 ADJUDICATION AFTER MAKING PROPER ENQUIRIES AS WAS EVIDENT FROM THE FOLLOWING CONCLUDING PARAGRAPH: IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE AO HAS PASSED THE ORDER WITHOUT PROPER CONSIDERATION OF FACTS AND WITHOUT FOLLOWING THE LAW LAID DOWN BY THE LEGISLATURE AND WITHOUT MAKING REQUISITE AND PROPER ENQUIRIES. AS SUCH THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND IS SET ASIDE TO BE FRAMED AFRESH AFTER MAKING PROPER ENQUIRIES. THE AO IS DIRECTED TO MAKE FRESH ASSESSMENT IN ACCORDANCE WITH THE LAW. 6. WHAT THUS START ED WITH A DISAPPROVAL OF THE STAND TAKEN BY THE ASSESSING OFFICER ON MERITS, RESULTED IN THE ASSESSMENT ORDER BEING RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ASSESSMENT IN ACCORDANCE WITH THE LAW AND AFTER MAKING PROPER INQUIRIES . BE THAT AS IT MAY, THE ASSESSEE IS AGGRIEVED WITH THE STAND SO TAKEN BY THE COMMISSIONER IN THE IMPUGNED ORDER, AND IS IN APPEAL BEFORE US. 7. THE FUNDAMENTAL QUESTION THAT REALLY ARISES FOR OUR CONSIDERATION IS WHETHER SUCH A CHANGE OF HEART IS PERMISSIBLE UN DER THE SCHEME OF LAW, AND WHETHER A REVISION PROCEEDINGS, WHICH STARTED WITH A SHOW CAUSE NOTICE CONDEMNING THE ACTION OF THE ASSESSING OFFICER ON MERITS, CAN LAWFULLY CULMINATE IN THE DIRECTION THAT THE SUBJECT MATTER OF REVISION PROCEEDINGS BE DECIDED A FRESH IN ACCORDANCE WITH LAW AND AFTER MAKING PROPER INQUIRIES. 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. I.T.A. NO.: 2680/DEL/11 ASSESSMENT Y EAR: 2007 - 08 PAGE 6 OF 11 9. A CO - ORDINATE BENCH OF THIS T RIBUNAL, IN THE CASE OF SYNERGY ENTREPRENEUR SOLUTIONS PVT LTD VS DCIT [(2011) 13 ITR TRIBUNAL 377 (MUM) ], HAD AN OCCASION TO DEAL WITH A SOMEWHAT SIMILAR SITUATION. THAT CASE A CASE IN WHICH IN THE SHOW CAUSE NOTICE, LEARNED COMMISSIONER HELD THAT THE LOS S BROUGHT FORWARD COULD NOT BE SET OFF AGAINST PROFITS OF THE CURRENT YEAR, BUT WHEN THE COMMISSIONER WAS TO PASS THE FINAL REVISION ORDER, HE SIMPLY HELD THAT THE MATTER IS REQUIRED TO BE EXAMINED AFRESH IN ACCORDANCE WITH THE LAW. AS TO WHETHER SUCH A SH IFT IN THE STAND WAS PERMISSIBLE, THE COORDINATE BENCH, SPEAKING THROUGH ONE OF US AND FOLLOWING THE ESTEEMED VIEWS OF DELHI F BENCH OF THIS TRIBUNAL IN THE CASE OF MAXPAK INVESTMENTS LTD VS ACIT [(2207) 13 SOT 67 (DEL)] ARTICULATED THROUGH LEGENDARY HON B LE VICE PRESIDENT EASWAR (AS HE THEN WAS; LATER HON BLE JUSTICE EASWAR), HELD AS FOLLOWS: . A PLAIN READING OF THE IMPUGNED REVISION ORDER CLEARLY SHOWS THAT THE CONCLUSIONS DRAWN IN THE REVISION PROCEEDINGS ARE DIFFERENT FROM THE REASONS FOR REVISION PROCEEDINGS SET OUT IN THE SHOW - CAUSE NOTICE EXTRACTS FROM WHICH ARE SET OUT IN THE REVISION ORDER ITSELF. IT IS IMPORTANT TO NOTE THE SHIFTING STAND OF THE CIT SO FAR AS REASONS FOR SUBJECTING THE ASSESSMENT ORDER TO REVISION PROCEEDINGS. AT P. 1, IN FIFT H SENTENCE OF THE IMPUGNED REVISION ORDER, LEARNED CIT NOTES THAT THAT 'ON PERUSAL OF ASSESSMENT RECORD, IT WAS NOTICED THAT ASSESSMENT ORDER WAS ERRONEOUS IN AS MUCH AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE DETAILS OF PURCHASE AND SALE OF SHARE TRANSACTIONS IN FUTURES WERE NOT VERIFIED AS TO WHETHER THE PROFIT OR LOSS FROM THE FUTURES TRADING AMOUNTS TO SPECULATION GAIN OR LOSS'. THE EXTRACTS FROM SHOW - CAUSE NOTICE, WHICH HAVE BEEN REPRODUCED IN THE IMPUGNED REVISION ORDER AT PP. 1 AND 2 , DO NOT, HOWEVER, EVEN REMOTELY SUPPORT THAT STAND. THE STAND TAKEN IN THE SHOW - CAUSE NOTICE IS THAT, ON MERITS, SET OFF IS NOT PERMISSIBLE IN AS MUCH AS SHOW - CAUSE NOTICE STATES THAT 'AS PER THE PROVISIONS OF S. 73 OF THE IT ACT, ANY LOSS COMPUTED IN RES PECT OF SPECULATION BUSINESS CARRIED ON BY THE ASSESSEE SHALL NOT BE SET OFF EXCEPT AGAINST PROFITS AND GAINS OF ANOTHER SPECULATION BUSINESS', AND, 'THEREFORE YOU (THE ASSESSEE) ARE NOT ALLOWED TO ADJUST THE SPECULATION LOSS'. THE SHOW - CAUSE NOTICE, THERE FORE, CLEARLY REFERS TO DECLINING WHAT THE CIT PERCEIVES AS A SET OFF OF SPECULATION LOSS AGAINST BUSINESS PROFITS. THAT IS A CATEGORICAL DISENTITLEMENT OF SET OFF. IN THE FINAL CONCLUSIONS IN THE IMPUGNED REVISION ORDER, HOWEVER, THE CIT ONCE AGAIN DEVIAT ES FROM THE STAND SO TAKEN AND CONCLUDES AS FOLLOWS : I.T.A. NO.: 2680/DEL/11 ASSESSMENT Y EAR: 2007 - 08 PAGE 7 OF 11 'IN VIEW OF THE FOREGOING, THE ASSESSMENT ORDER DT. 27TH DEC., 2007 PASSED BY THE AO IS CONSIDERED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. SINCE THE AO HAS NOT TAKEN THE NECESS ARY DETAILS TO VERIFY WHETHER THE PROFITS AND LOSS FROM FUTURES TRADING AMOUNTS TO SPECULATION PROFITS OR LOSS, THE ASSESSMENT ORDER IS SET ASIDE WITH A DIRECTION TO OBTAIN COMPLETE DETAILS AND CONDUCT NECESSARY ENQUIRIES AND EXAMINE THE SAME FOR THE ASSES SMENT YEAR UNDER CONSIDERATION. THE AO SHALL PROVIDE ADEQUATE OPPORTUNITY TO THE ASSESSEE BEFORE PASSING THE ASSESSMENT ORDER.' 5. IT IS THUS CLEAR THAT THERE HAS BEEN SHIFT IN THE STAND OF THE CIT ON WHETHER IT WAS A FIT CASE FOR REVISION ON THE GROUND T HAT THE ASSESSEE WAS NOT ELIGIBLE FOR SET OFF OF LOSSES ON SPECULATIVE TRANSACTIONS OR WHETHER IT WAS A CASE FOR REVISION ON THE GROUND THAT THE AO DID NOT MAKE NECESSARY VERIFICATIONS ABOUT THE TRANSACTIONS. THE REASON GIVEN IN THE SHOW - CAUSE NOTICE IS FO RMER, WHILE THE REASON FOR WHICH REVISION POWERS ARE FINALLY EXERCISED IN THE IMPUGNED ORDER ARE LATTER. AS TO WHETHER SUCH AN EXERCISE OF REVISIONAL POWERS, ON THE GROUNDS OTHER THAN THE GROUNDS OF REVISION AS SET OUT IN THE SHOW - CAUSE NOTICE, COULD BE HE LD TO BE SUSTAINABLE IN LAW, WE FIND GUIDANCE FROM THE DECISIONS OF A CO - ORDINATE BENCH IN THE CASE OF MAXPAK INVESTMENT LTD. VS. ASSTT. CIT (2006) 104 TTJ (DEL) 881 : (2007) 13 SOT 67 (DEL) WHICH, INTER ALIA, OBSERVES AS FOLLOWS : ' .IN CIT VS. G.K. K ABRA (1995) 125 CTR (AP) 55 : (1995) 211 ITR 336 (AP) THE ANDHRA PRADESH HIGH COURT WAS DEALING WITH AN APPLICATION SEEKING REFERENCE UNDER S. 256(2), INTER ALIA OF THE FOLLOWING QUESTION : WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS CORRECT IN HOLDING THAT THE CIT LACKS INITIAL JURISDICTION, PARTICULARLY WHEN THE CONCLUSION MADE BY THE CIT IN THE ORDER UNDER S. 263 WAS ON THE BASIS OF THE INFORMATION FURNISHED IN RESPONSE TO THE INITIAL NOTICE ? WHILE DECLINING TO RE FER THE ABOVE QUESTION, THE HIGH COURT HELD AS UNDER (PP. 339 - 340) : THE NECESSARY IMPLICATION IN THE EXPRESSION AFTER GIVING OPPORTUNITY OF BEING HEARD RELATES TO THE POINT ON WHICH THE CIT CONSIDERS THE ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE I NTERESTS OF THE REVENUE. IN OTHER WORDS, IT IS NECESSARY FOR THE COMMISSIONER TO POINT OUT THE EXACT ERROR IN THE ORDER WHICH HE PROPOSES TO REVISE SO THAT THE ASSESSEE WOULD HAVE AN I.T.A. NO.: 2680/DEL/11 ASSESSMENT Y EAR: 2007 - 08 PAGE 8 OF 11 ADEQUATE OPPORTUNITY OF MEETING THE ERROR BEFORE THE FINAL ORDER IS MADE. (EMPHASIS, ITALICSED IN PRINT, SUPPLIED) IN THE CASE BEFORE THE HIGH COURT, THE SHOW - CAUSE NOTICE REFERRED TO TWO ISSUES TO WHICH THE ASSESSEE HAD GIVEN SATISFACTORY REPLIES. NO ACTION WAS TAKEN UNDER S. 26 3 IN RESPECT OF THESE TWO ISSUES. HOWEVER, IN THE SAID ORDER THE CIT MENTIONED THE HIRE CHARGES AS THE GROUND FOR REVISING THE ASSESSMENT. THIS POINT HAD NOT BEEN MENTIONED AS A GROUND IN THE SHOW - CAUSE NOTICE. THE HIGH COURT HELD THAT IN AS MUCH AS THE C IT HAD NOT CHOSEN TO SHOW THESE TWO POINTS AS THE ERRORS IN MAKING THE FINAL ORDER AND THE FINAL ORDER UNDER S. 263 REFERS ONLY TO THE INFERENCE OF HIRE CHARGES BEING EXIGIBLE TO TAX WHICH WAS NOT MENTIONED AT ALL IN THE SHOW - CAUSE, OBVIOUSLY THE ASSESSEE HAD NO OPPORTUNITY TO MEET THAT POINT .' (EMPHASIS, ITALICSED IN PRINT, SUPPLIED) 10. THE RATIO OF THE DECISION, CLEAR FROM THE ABOVE OBSERVATION, IS THAT IF A GROUND OF REVISION IS NOT MENTIONED IN THE SHOW - CA USE NOTICE ISSUED UNDER S. 263, THAT GROUND CANNOT BE MADE THE BASIS OF THE ORDER PASSED UNDER THE SECTION, FOR THE SIMPLE REASON THAT THE ASSESSEE WOULD HAVE HAD NO OPPORTUNITY TO MEET THE POINT. . 11. THE OTHER JUDGMENT WHICH SUPPORTS THE CASE OF THE ASSESSEE IS THAT OF THE PUNJAB & HARYANA HIGH COURT IN CIT VS. JAGADHRI ELECTRIC SUPPLY & INDUSTRIAL CO. (1983) 140 ITR 490 (P&H). THE NATURE OF THE JURISDICTION OF THE CIT UNDER S. 263 AND THE POWERS OF THE TRIBUNAL WHILE DEALING WITH AN APPEAL AGAINS T THE ORDER PASSED UNDER THAT SECTION WERE EXPLAINED IN THAT DECISION. THE CIT HAD FOUND THE ORDER OF THE AO ALLOWING CONTINUATION OF REGISTRATION TO THE ASSESSEE - FIRM TO BE ERRONEOUS ON THE GROUND THAT THE ACTUAL DISTRIBUTION OF THE PROFITS WAS DIFFERENT FROM THE RATIO MENTIONED IN THE DEED OF PARTNERSHIP. THE TRIBUNAL SET ASIDE THE ORDER OF THE CIT BUT WHILE DOING SO OBSERVED THAT THERE WAS A CHANGE IN THE NUMBER OF PARTNERS FROM 10 TO 11 WHICH FACT HAD NOT BEEN TAKEN INTO ACCOUNT BY THE AO WHEN HE GRANTE D REGISTRATION FOR THE FIRM FOR THE ASST. YR. 1966 - 67 AND THUS THE GRANT OF REGISTRATION WAS ERRONEOUS. ON THE BASIS OF THIS OBSERVATION IT WAS ARGUED BEFORE THE HIGH COURT ON BEHALF OF THE REVENUE THAT THE TRIBUNAL OUGHT TO HAVE SUSTAINED THE ORDER OF THE CIT ON THAT GROUND. REPELLING THE CONTENTION, IT WAS HELD BY THE HIGH COURT AS UND ER (PP. 502 - 3) : I.T.A. NO.: 2680/DEL/11 ASSESSMENT Y EAR: 2007 - 08 PAGE 9 OF 11 THE JURISDICTION VESTED IN THE CIT UNDER S. 263(1) OF THE ACT IS OF A SPECIAL NATURE OR, IN OTHER WORDS, THE CIT HAS THE EXCLUSIVE JURISDICTION UNDER THE ACT TO REVISE THE ORDER OF THE ITO IF HE CONSIDERS THAT ANY ORDER PASSED BY HIM WAS ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BEFORE DOING SO, HE IS ALSO REQUIRED TO GIVE AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IF AFT ER HEARING THE ASSESSEE IN PURSUANCE OF THE NOTICE ISSUED BY HIM UNDER S. 263(1) OF THE ACT, HE IS NOT SATISFIED, HE MAY PASS THE NECESSARY ORDERS. OF COURSE, THE ORDER THUS PASSED WILL CONTAIN THE GROUNDS FOR HOLDING THE ORDER OF THE ITO TO BE ERRONEOUS, AS CONTEMPLATED UNDER S. 263(1) OF THE ACT. . . . THE TRIBUNAL CANNOT UPHOLD THE ORDER OF THE CIT ON ANY OTHER GROUND WHICH, IN ITS OPINION, WAS AVAILABLE TO THE CIT AS WELL. IF THE TRIBUNAL IS ALLOWED TO FIND OUT THE GROUND AVAILABLE TO THE CIT TO PASS AN ORDER UNDER S. 263(1) OF THE ACT, THEN IT WILL AMOUNT TO A SHARING OF THE EXCLUSIVE JURISDICTION VESTED IN THE CIT, WHICH IS NOT WARRANTED UNDER THE ACT. IT IS ALL THE MORE SO, BECAUSE THE REVENUE HAS NOT BEEN GIVEN ANY RIGHT OF APPEAL UNDER THE ACT AGAIN ST AN ORDER OF THE CIT UNDER S. 263(1) OF THE ACT. . . . UNDER S. 263 OF THE ACT IT IS ONLY THE CIT WHO HAS BEEN AUTHORIZED TO PROCEED IN THE MATTER AND, THEREFORE, IT IS HIS SATISFACTION ACCORDING TO WHICH HE MAY PASS NECESSARY ORDERS THEREUNDER IN ACCORD ANCE WITH LAW. IF THE GROUNDS WHICH WERE AVAILABLE TO HIM AT THE TIME OF THE PASSING OF THE ORDER DO NOT FIND A MENTION IN HIS ORDER APPEALED AGAINST, THEN IT WILL BE DEEMED THAT HE REJECTED THOSE GROUNDS FOR THE PURPOSE OF ANY ACTION UNDER S. 263(1) OF TH E ACT. IN THIS SITUATION, THE TRIBUNAL, WHILE HEARING AN APPEAL FILED BY THE ASSESSEE, CANNOT SUBSTITUTE THE GROUNDS WHICH THE CIT HIMSELF DID NOT THINK PROPER TO FORM THE BASIS OF HIS ORDER. WE RESPECTFULLY UNDERSTAND THIS JUDGMENT AS HOLDING, BY NECE SSARY IMPLICATION, THAT IF THE CIT HAS NOT MENTIONED THE GROUND ON WHICH ACTION IS PROPOSED TO BE TAKEN UNDER S. 263 IN THE SHOW - CAUSE NOTICE, IT IS DEEMED THAT HE WAS NOT SATISFIED THAT IT WAS A FIT GROUND FOR TAKING ACTION UNDER THE SECTION, WITH THE RES ULT THAT THE FINAL ORDER, IF BASED ON THE GROUND WHICH HE HAD EARLIER CONSIDERED NOT FIT FOR TAKING ACTION UNDER THE SECTION, WILL HAVE TO BE SET ASIDE AS NOT BASED ON ANY GROUND WHICH MAY JUSTIFY HIS BELIEF THAT THE ORDER PASSED BY THE AO WAS ERRONEOUS IN SOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. .' I.T.A. NO.: 2680/DEL/11 ASSESSMENT Y EAR: 2007 - 08 PAGE 10 OF 11 10. WE ARE IN CONSIDERED AGREEMENT WITH THE VIEWS SO EXPRESSED BY THE COORDINATE BENCHES AND WE ADOPT THESE VIEWS. WHEN WE EXAMINE THE FACTS OF THIS CASE IN THE LIGHT OF THE LEGAL PO SITION SO SET OUT, WE FIND THAT I N THE IMPUGNED REVISION PROCEEDINGS, LEARNED COMMISSIONER STARTED BY POINTING OUT, WHAT HE SAW AS, GLARING ILLEGALITIES IN THE ASSESSMENT ORDER, WHICH WAS SUBJECTED TO REVISION PROCEEDINGS, BUT WHAT HE CONCLUDED WAS THAT TH E SAID ASSESSMENT ORDER WAS PASSED WITHOUT MAKING PROPER REQUISITE AND DESIRED INQUIRES . WHAT THE ASSESSEE WAS REQUIRED TO DEMONST R ATE THE INCORRECTNESS OF THE LEARNED COMMISSIONER S STAND TO THE EFFECT THAT, BECAUSE OF THE FIVE ADDITIONS/ DISALLOWANCES , AS SET OUT IN PARAGRAPH 3, NOT HAVING BEEN MADE, THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE ASSESSEE. LEARNED COMMISSIONER PROCEEDED TO OBSERVE THAT HAD THE SAID ADDITIONS/ DISALLOWANCES BEEN MADE, THERE WOULD HAVE BEEN SUBSTANTIAL TA X EFFECT AND THUS THE CAUSE OF REVENUE HAS SUFFERED. FURTHER, THE ORDER OF THE AO IS IN CLEAR VIOLATION OF THE LEGAL PROVISIONS AS ENUMERATED IN THE INCOME TAX ACT, 1961. THUS, THE VERY SANCTITY OF THE ACT HAS BEEN ERODED AND MAY SERVE AS A VERY BAD PRECED ENT . YET, FINALLY HE REVISED THE ORDER FOR WANT OF PROPER REQUISITE AND DESIRED INQUIRES AND THUS SHIFTED THE GOALPOST. THAT S NOT PERMISSIBLE UNDER THE SCHEME OF THE LAW , AS A REVISION ORDER CAN ONLY BE PASSED ON THE GROUND ON WHICH THE ASSESSEE HAS B EEN GIVEN REASONABLE OPPORTUNITY OF BEING HEARD , AND AS IT IS NOT OPEN TO COMMISSIONER TO SET OUT ONE REASON FOR REVISING THE ORDER BUT ACTUALLY REVISE THE ORDER ON SOME OTHER GROUND. IN OUR HUMBLE UNDERSTANDING, LACK OF PROPER INQUIRIES, WHICH AN ASSESSIN G OFFICER OUGHT TO HAVE CONDUCTED ON THE FACTS OF THE SAID CASE, IS ALTOGETHER A DIFFERENT REASON FROM INADMISSIBILITY OF A CLAIM OF DEDUCTION OR AN INCOME WHICH OUGHT TO HAVE BEEN BROUGHT TO TAX . IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARING IN MIND E NTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE IMPUGNED REVISION ORDER IS CONTRARY TO THE SCHEME OF LAW, AND SHOULD BE QUASHED FOR THIS REASON ALONE. AS WE HAVE QUASHED THE IMPUGNED REVISION ORDER, ON THIS TECHNICAL GROUND, WE SEE NO REASONS T O ADDRESS OURSELVES TO THE MERITS OF THE CASE AS I.T.A. NO.: 2680/DEL/11 ASSESSMENT Y EAR: 2007 - 08 PAGE 11 OF 11 RAISED IN THE OTHER GROUND OF APPEAL. ALL THOSE ISSUES ARE ACADEMIC IN THE PRESENT CONTEXT. 11. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERMS, AND FOR THE REASONS, SET OUT ABOVE. PRONOUNCED IN THE OPEN COURT TODAY ON 21 ST DAY OF JANUARY, 2015 SD/ - SD/ - C M GARG PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) NEW DELHI , THE 21 ST DAY OF JANUARY, 2015. COPIES TO : (1) THE APPELLANT ( 2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI