Dr.(Mrs.) Vijay Kumar Rathi, Kanpur V. The Asstt. Commissiner of Income Tax-V, Kanpur

ITA 275/LKW/2012

• Counselvise Citation: 27523714 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-05-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 14-05-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALOK MITRA
• Keywords: Depreciation; Assessment record
• Section: 143(3); 14A; 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A : LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER I.T.A. NO. 275 /LKW/ 2012 ASSESSMENT YEAR: 2007 - 2008 DR. (MRS.) VIJAY KANTA RATHI, VS. A.C.I.T. - V, 84/185 - D, KARWALO NAGAR, KANPUR. KANPUR. PAN:ABQPR3334P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAKESH GARG, ADVOCATE RESPONDENT BY : SHRI ALOK MITRA, D.R. DATE OF HEARING : 28 /0 5 /201 3 DATE OF PRONOUNCEMENT :07/08/2013 ORDE R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF CIT PASSED U/S 263 OF THE I.T. ACT, 1961 (HEREINAFTER CALLED AS AN ACT), INTER ALIA, ON VARIOUS GROUNDS WHICH ARE AS UNDER: 1. BECAUSE CIT - II, KANPUR HAS ERRED ON FACTS AND IN LAW IN CANCELLING THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT BY ASSUMING JURISDICTION U/S 263 OF THE ACT, WHICH ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE, AS SUCH, THE ORDER PASSED BY THE CIT - II , KANPUR IS MISCONCEIVED, BAD IN LAW AND BE QUASHED. 2 2. BECAUSE THE ASSESSMENT FRAMED BY THE AO U/S 143(3) OF THE ACT WAS UNDER THE MONITORING OF THE ADDL. CIT AS WELL AS THE CIT - II, THE CIT - II HAS ERRED ON FACTS AND IN LAW IN CANCELLING THE SAME. 3. BEC AUSE, THE ORDER PASSED BY THE CIT - II, KANPUR U/S 263 IS DEVOID OF REASONS/ INQUIRY 'AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY', WHICH IS SINE - QUA - NON, TO ARRIVE AT THE FINDING OF 'ERRONEOUS OR PRE JUDICIAL' OF AN ASSESSMENT ORDER, THE ENTIRE EXERCISE UNDERTAKEN BY THE CIT - II IS WITHOUT JURISDICTION, THE ORDER PASSED BE QUASHED. 4. BECAUSE THE CIT - II HAS FAILED TO APPRECIATE THAT THE ASSESSMENT ORDER PASSED FOR THE YEAR UNDER CONSIDERATION IS ALREADY SUBJECT MATTER OF APPEAL BEFORE THE CIT(A) WHEREIN THE ISSUE OF CLAIM U/S. 80IB AND OTHER ISSUES ARE BEING AGITATED, THE ORDER PASSED U/S 263 BY CIT - II IS WITHOUT JURISDICTION AND BE QUASHED. 5. BECAUSE THE CIT - II, KANPUR HAS FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF CASE AND HAS ARBITRARILY HELD THAT THE ASSESSEE IS NOT ENTITLED FOR THE DEDUCTION U/S 80IB OF THE ACT, 1961, WHICH THE AO HIMSELF HAS DENIED IN THE ORDER PASSED U/S. 143(3). 6. BECAUSE CIT - II, KANPUR HAS ERRED ON FACTS AND IN LAW IN ARBITRARILY HOLDING TH AT THE PROVISIONS U/S 14A ARE APPLICABLE TO THE FACTS OF THE CASE. 7. BECAUSE THE CIT - II, KANPUR HAS FAILED TO APPRECIATE AND HAS ARBITRARILY HELD THAT THE ASSESSEE IS NOT ENTITLED FOR DEPRECIATION ON FIXED ASSETS OWNED AND POSSESSED UNDER THE HEAD OFFICE SET. 2. THE FACTS, IN BRIEF, BORNE OUT FROM THE ORDERS OF THE LOWER AUTHORITIES, ARE THAT THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 29/12/2009 AND ON ITS SCRUTINY THE CIT HAS NOTICED THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE ISSUE OF DEPRECIATION ON THE 3 ASSETS OF THE HEAD OFFICE, CLAIM OF DEDUCTION U/S 80IB ON THE PROFIT DERIVED FROM INCOME OF 4D COLOUR DOPPLER MACHINE AND THE APPLICATION OF PROVISIONS OF SECTION 14A OF THE ACT TO THE RECEIPT OF DIVIDEND INCOME , T HEREFORE, THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE CIT ACCORDINGLY CANCELLED THE ASSESSMENT ORDER ON THE AFORESAID ISSUE S AND DIRECTED THE ASSESSING OFFICER TO MAKE A FRESH ASSESSMENT AFTER EXAMINING THE ABOVE MENT IONED ISSUES. 3. AGAINST THE REVISIONAL ORDER, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSIONS THAT THE ASSESSING OFFICER HAS PASSED A REASONED AND DETAILED ORDER AFTER EXAMINING ALL THE ISSUES IN DETAIL. WITH REGARD TO CLAI M OF DEDUCTION U/S 80IB OF THE ACT, SHRI RAKESH GARG, LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THE ASSESSING OFFICER HAS EXAMINED THIS ISSUE AND HAVING NOT CONVINCED WITH THE CONTENTIONS OF THE ASSESSEE, HE DISALLOWED THE DEDUCTION CLAIMED U/S 8 0IB OF THE ACT AGAINST WHICH THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE CIT(A) AND THE MATTER IS SUB JUDICE BEFORE HIM. THEREFORE, IN THIS REGARD, IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND. SO FAR AS THE ISSUE OF DEPRECIA TION ON HEAD OFFICE ASSETS IS CONCERNED, IT WAS EXPLAINED TO THE CIT IN RESPONSE TO SHOW CAUSE NOTICE THAT THE ASSESSEE WAS EARLIER EMPLOYED IN KANPUR AND WAS PRACTICING AT KANPUR. LATER ON HE SHIFTED TO GORAKHPUR IN THE YEAR 1980 WITH BAG AND BAGGAGE BUT CONTINUED TO FILE HER RETURN AT KANPUR WITH THE ASSESSING OFFICER WITH WHOM SHE WAS BEING ASSESSED TO TAX AT KANPUR. A LOCAL ADDRESS WAS GIVEN FOR NECESSARY COMPLIANCE WITH THE STATUTORY NOTICES AS MAY BE ISSUED FROM TIME TO TIME. THE ASSESSEE WAS NOT HAVING ANY ESTABLISHMENT AT KANPUR. THE ADDRESS MENTIONED AS HEAD OFFICE WAS ONLY FOR THE PURPOSE OF ASSESSMENT. THE ASSESSEE WAS MAINTAINING DIFFERENT SET OF BOOKS , NAMELY , ONE SET FOR 4 INVESTMENTS MADE BY HER IN FINANCIAL ASSETS AND THE OTHERS IN RESPEC T OF THE DIFFERENT DIAGNOSTIC UNITS IN WHICH SHE WAS CARRYING HER DIAGNOSTIC BUSINESS. THE ACCOUNTS OF ALL THE SETS ARE CONSOLIDATED AND PUT UNDER A COMMON HEAD CALLED HEAD OFFICE SET. THEREFORE, THE HEAD OFFICE SET IS NOTHING BUT A CONSOLIDATED SET OF A CCOUNTS CONTAINING THE INCOME & EXPENDITURE OF BOTH INVESTMENTS SET AND DIAGNOSTIC SETS. 4. WITH REGARD TO THE EXPENDITURE ATTRIBUTABLE TO INCOME U/S 14A OF THE ACT, IT WAS CONTENDED THAT NO PART OF THE EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE IN EARNING THE TAX FREE INCOME. THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN NOT INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT FOR M AKING THE DISALLOWANCE. 5. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT SINCE ALL THE DOCUMENTS WERE PROPERLY EXAMINED BY THE ASSESSING OFFICER, THEREFORE IT IS NOT JUSTIFIED TO STATE THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICE R IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 6. THE CIT, D.R., ON THE OTHER HAND, HAS CONTENDED THAT SO FAR AS THE DEPRECIATION ON ASSETS OF HEAD OFFICE IS CONCERNED, THE ASSESSEE HIMSELF HAS CLAIMED THE FIXED ASSETS UNDER THE HEAD HEAD OF FICE AT ` 8,52,542.2 2 ON WHICH THE DEPRECIATION WAS CLAIMED. IN THIS REGARD NEITHER ANY QUERY WAS RAISED NOR ANY EXPLANATION WAS FURNISHED BEFORE THE ASSESSING OFFICER. ONCE THE ASSESSEE HIMSELF HAS SHOWN THE FIXED ASSETS UNDER THE HEAD HEAD OFFICE AND DEPRECIATION WAS CLAIMED THEREON , THE ASSESSING OFFICER WAS REQUIRED TO EXAMINE THIS ISSUE BUT WITHOUT EXAMINING THIS ISSUE THE ASSESSING OFFICER HAS ALLOWED THE DEPRECIATION AS CLAIMED BY THE ASSESSEE. SIMILAR IS THE POSITION WITH REGARD TO THE INVE STMENT IN SHARES. THE 5 ASSESSEE HAS SHOWN A SUM OF ` 26,51,931.52 UNDER THE HEAD SHARE ACCOUNT AND DIVIDEND INCOME WAS SHOWN AT ` 4,79,889/ - . THEREFORE, THE ASSESSING OFFICER WAS REQUIRED TO EXAMINE THE NATURE OF FUNDS WHICH WERE INVESTED IN SHARES BY INVO KING THE PROVISIONS OF SECTION 14A OF THE ACT BUT NEITHER ANY QUERY WAS RAISED IN THIS REGARD NOR ANY EXPLANATION WAS FURNISHED ON BEHALF OF THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND TO THIS ISSUE ALSO WHICH MAKES THE ASSESSM ENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 7. HAVING GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES AND THE REPLY SUBMITTED BY THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE, PROCEEDINGS OF THE ASSESSMENT RECORD, BALANCE SH EET AND INCOME & EXPENDITURE ACCOUNT, WE FIND THAT THE CLAIM OF DEDUCTION U/S 80IB WAS DULY EXAMINED BY THE ASSESSING OFFICER BY RAISING QUERIES THROUGH QUESTIONNAIRE. IN RESPONSE TO THE QUESTIONNAIRE, THE REPLY WAS FILED AND IT WAS DULY EXAMINED BY THE A SSESSING OFFICER. BEING NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE, THE ASSESSING OFFICER HAS DISALLOWED THE DEDUCTION U/S80IB OF THE ACT AGAINST WHICH AN APPEAL WAS FILED BEFORE THE CIT(A) . THEREFORE, THE ORDER OF THE ASSESSING OFFICER IN THIS R EGARD CANNOT BE CALLED TO BE PREJUDICIAL TO THE INTEREST OF REVENUE. T HE ASSESSING OFFICER HAS DULY APPLIED HIS MIND, THEREFORE, HIS ORDER CANNOT BE CALLED TO BE ERRONEOUS. WE, THEREFORE, FIND NO MERIT IN THE ORDER OF CIT IN THIS REGARD AS THE ISSUE WAS DULY EXAMINED BY THE ASSESSING OFFICER AND NOW THE MATTER IS SUB JU D ICE BEFORE THE CIT(A). THEREFORE, THE CIT HAS NO JURISDICTION TO COMMENT THEREON. 7.1 SO FAR AS THE ISSUE OF DEPRECIATION AT HEAD OFFICE ASSETS IS CONCERNED, WE FIND THAT THE ASSESSEE H IMSELF HAS CLAIMED THE HEAD OFFICE 6 ASSETS AT ` 8,52,542.22 IN THE BALANCE SHEET AS ON 31/03/2007. THE DEPRECIATION ON FIXED ASSETS WAS ALSO CLAIMED UNDER INCOME & EXPENDITURE ACCOUNT. T HE ASSESSEE HAS SUBMITTED BEFORE THE CIT THAT HE HAS SHIFTED TO GORAKHPUR AND THE HEAD OFFICE WAS FOR THE NAME SAKE ONLY AS HE WAS NOT HAVING ANY ESTABLISHMENT AT KANPUR AND THE ADDRESS OF HEAD OFFICE WAS GIVEN ONLY FOR THE PURPOSE OF ASSESSMENT. IF THAT BE THE CASE THEN THERE WOULD BE NO ASSETS IN THE SO CALLED HEAD OFFICE BUT THE ASSESSEE HIMSELF HAS SHOWN THE VALUE OF FIXED ASSETS AT ` 8,52,542.22 IN THE BALANCE SHEET AS ON 31/03/2007. IN THIS REGARD NEITHER ANY QUERY WAS RAISED NOR ANY REPLY WAS FILED BEFORE THE ASSESSING OFFICER. THE ASSESSEE HAS TAKEN THIS STAND FIRST TIME BEFORE THE CIT DURING THE REVISIONAL PROCEEDINGS. THEREFORE, WE ARE OF THE VIEW THAT THIS ISSUE WAS NEVER EXAMINED BY THE ASSESSING OFFICER AND HE HAS ALLOWED THE DEPRECIATION CLAIMED BY THE ASSESSEE WITHOUT VERIFYING THE NATURE AND USE OF ASS ETS. WE, THEREFORE, ARE OF THE VIEW THAT ON THIS ISSUE THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. WE, ACCORDINGLY, CONFIRM THE ORDER OF CIT IN THIS REGARD. 7.2 SIMILAR IS THE POSITION WITH REGARD TO THE A PPLICATION OF PROVISIONS OF SECTION 14A OF THE ACT TO EXEMPTED INCOME/DIVIDEND INCOME RECEIVED BY THE ASSESSEE. IN THE BALANCE SHEET THE ASSESSEE HAS SHOWN THE INVESTMENT IN SHARES AT ` 26,51,931.62 FOR WHICH THE DIVIDEND INCOME WAS SHOWN AT ` 4,79,889.72 I N THE INCOME AND EXPENDITURE ACCOUNT BUT NO QUERY WAS RAISED BY THE ASSESSING OFFICER TO ASCERTAIN THE NATURE OF FUNDS INVESTED IN THE SHARES. IF BORROWED FUNDS ARE INVESTED IN ACQUIRING THE SHARES, THE CORRESPONDING INTEREST IS TO BE DISALLOWED. MOREOVE R, IT HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER THAT HOW MUCH GENERAL EXPENDITURE HAS BEEN INCURRED TO EARN THIS TAX FREE INCOME. ON CAREFUL 7 PERUSAL OF THE ASSESSMENT ORDER , PROCEEDINGS AND THE QUESTIONNAIRE , WE FIND THAT NEITHER ANY QUERY WAS RAISED NOR ANY EXPLANATION WAS FURNISHED IN THIS REGARD BY THE ASSESSEE. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND TO THE ISSUE OF APPLICATION OF PROVISIONS OF SECTION 14A OF THE ACT. THE SETTLED POSITION OF THE LAW IS T HAT NON APPLICATION OF MIND BY THE ASSESSING OFFICER MAKES THE ASSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. WE, THEREFORE, ARE OF THE VIEW THAT THE ORDER OF THE ASSESSING OFFICER IN THIS REGARD IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, THEREFORE, THE CIT IS JUSTIFIED IN INVOKING THE REVISIONAL JURISDICTION. ACCORDINGLY, ON THIS ISSUE , WE CONFIRM HIS ORDER. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 07/08/2013 ) SD/. SD/. ( PRAMOD KUMAR) ( SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 07/08/2013 *SINGH COPY FORWARDED TO THE: 1. APPELLANT. 2. RESPONDENT. 3. CIT (A) 4. CIT 5. DR. ASSISTANT REGISTRAR