NEHAL N. GANDHI, MUMBAI V. ITO 16(2)(2), MUMBAI

ITA 2795/MUM/2010

• Counselvise Citation: 279519914 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 28-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 09-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A P SINGH
• Keywords: Business income; Salary income; Assessment record
• Section: 143(3); 142(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, F, MUMBAI BEFORE SHRI R V EASWAR, PRESIDENT AND SHRI R K PANDA, ACCOUNTANT MEMBER I T A NO: 2795/MUM/2010 (ASSESSMENT YEAR: 2005-06) MS NEHAL N GANDHI, MUMBAI APPELLANT (PAN: AEJPG2346C) VS INCOME TAX OFFICER 16(2)(2), MUMBAI RESPONDENT APPELLANT BY: MR JAYESH DADIA RESPONDENT BY: MR A P SINGH O R D E R R V EASWAR, PRESIDENT: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R OF THE COMMISSIONER OF INCOME TAX PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961, ON 19 TH MARCH 2010. 2. THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FR OM SALARY, BUSINESS INCOME AND INCOME FROM OTHER SOURCES. SHE FILED A RETURN OF INCOME DECLARING LOSS OF ` 3,54,223/-, WHICH WAS FIRST ACCEPTED UNDER SECTION 143(1) AND LATER ON REOPENED UNDER SE CTION 143(2) OF THE ACT. THE ASSESSMENT ORDER WAS PASSED UNDER SEC TION 143(3) ON 22.08.2007, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT ` 5,74,650/-, CONSISTING OF SALARY INCOME OF ` 5,67,216/-, BUSINESS INCOME OF ` NIL AND INCOME FROM OTHER SOURCES OF ` 17,667/-. 3. ON 26.11.2009 THE CIT ISSUED NOTICE UNDER SECTIO N 263 OF THE ACT ON THE GROUND THAT THE ASSESSING OFFICER HA D NOT MADE THE NECESSARY ENQUIRIES IN RESPECT OF SEVEN ITEMS WHICH WERE LISTED IN THE NOTICE AND HE CALLED UPON THE ASSESSEE TO SHOW CAUSE WHY PROCEEDINGS CANNOT BE TAKEN TO REVISE THE ASSESSMEN T ON THE GROUND THAT IT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE ASSESSEE APPEARED BEFORE THE CIT FROM TIME TO TIME ITA NO: 2795/MUM/2010 2 AND FILED WRITTEN SUBMISSIONS AND THE GIST OF THE W RITTEN SUBMISSIONS IS REFERRED TO IN THE IMPUGNED ORDER OF THE CIT. IN RESPECT OF EACH AND EVERY ISSUE OUT OF THE SEVEN IS SUES TAKEN UP BY THE CIT, THE ASSESSEE SUBMITTED THE RELEVANT DETAIL S BEFORE THE CIT. THE CIT ON A PERUSAL OF THE ASSESSEES SUBMISSIONS NOTED THAT THESE SUBMISSIONS REQUIRE RECHECKING AND VERIFICATI ON WITH THE ASSESSMENT RECORDS IN ORDER TO TAKE A FINAL VIEW IN THE MATTER. HE OPINED THAT FURTHER ENQUIRIES ARE NECESSARY WHICH C AN BE CONDUCTED ONLY BY THE ASSESSING OFFICER AND THEREFORE HE WAS NOT IN A POSITION AT THAT STAGE TO RECORD CONCLUSIVE FINDINGS ON THE VARIOUS ISSUES. HE THEREFORE SET ASIDE THE ASSESSMENT ORDER AND DIR ECTED THE ASSESSING OFFICER TO REDO THE SAME AFRESH IN RESPEC T OF THE ISSUES RAISED BY HIM AFTER THOROUGHLY CONSIDERING THE FACT S OF THE CASE AND THE DIRECTIONS. HE ALSO DIRECTED THE ASSESSING OFF ICER TO GIVE ADEQUATE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD . HE THUS RESTORED THE ASSESSMENT TO THE ASSESSING OFFICER BY ORDER DATED 19.03.2010. 4. IT IS THE AFORESAID ORDER THAT IS THE SUBJECT MA TTER OF APPEAL BEFORE US. THE CONTENTION OF THE LEARNED REPRESENT ATIVE FOR THE ASSESSEE IS THAT THE CIT HAS MERELY EXPRESSED AN OP INION DIFFERENT FROM THE OPINION EXPRESSED IN THE ASSESSMENT ORDER AND THIS DOES NOT GIVE JURISDICTION TO HIM TO REVISE THE ASSESSME NT UNDER SECTION 263 OF THE ACT, ON THE GROUND OF THE ASSESSMENT ORD ER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. IT IS CONTENDED THAT THE CIT WAS MERELY TAKING A DIFFEREN T VIEW WHERE MORE THAN ONE VIEW WAS POSSIBLE. WE ARE UNABLE TO AGREE WITH THE LEARNED REPRESENTATIVE FOR THE ASSESSEE. THE NOTIC E ISSUED UNDER ITA NO: 2795/MUM/2010 3 SECTION 263 SHOWS THAT IN RESPECT OF THE SEVEN ITEM S MENTIONED THEREIN, THE CIT WAS OF THE VIEW THAT THE ASSESSING OFFICER HAD NOT CONDUCTED ADEQUATE OR APPROPRIATE ENQUIRIES BEFORE COMPLETING THE ASSESSMENT. THE FIRST ISSUE IS THAT THOUGH THE BAL ANCE SHEET OF THE ASSESSEE REFLECTS HER 1/3 RD OWNERSHIP IN A PROPERTY IN CALCUTTA, NO RENTAL INCOME IS SHOWN THEREFROM. ACCORDING TO THE CIT THIS REQUIRED FURTHER VERIFICATION. THE SECOND ISSUE IS THAT THE BALANCE SHEET REFLECTED RENT RECEIVABLE FROM A FLAT IN BOMB AY IN THE AMOUNT OF ` 27,227/- BUT THE FLAT ITSELF WAS NOT SHOWN AS ASSET AND THIS ASPECT ALSO NEEDED VERIFICATION. THE THIRD ISSUE R ELATES TO THE TREATMENT TO BE GIVEN TO THE ADVANCE REMUNERATION R ECEIVED FROM A COMPANY BY NAME M/S LYKA BDR INTERNATIONAL LTD. AC CORDING TO THE CIT THE ASSESSEE SHOULD HAVE OFFERED THE ADVANC E REMUNERATION AS INCOME AS SHE WAS FOLLOWING THE MER CANTILE SYSTEM OF ACCOUNTING AND ALSO CLAIMED CREDIT FOR TH E TDS ON THE ADVANCE SALARY. THE SALARY ALSO PERTAINED TO OCTOB ER 2004 TO MARCH 2005, WHICH FELL WITHIN THE ASSESSMENT YEAR U NDER APPEAL. THE FOURTH ITEM IS REGARDING A BROUGHT FORWARD LOAN OF ` 25,000/- IN THE NAME OF MAHER CORPORATION, VALSAD, WHOSE NATURE AND LINK WITH A PLOT OF LAND AT DIAMOND ESTATE, ANKLESHWAR WAS NO T PROPERLY EXPLAINED. THE OTHER ITEMS MENTIONED IN THE NOTICE RELATE TO CERTAIN LOANS TAKEN FROM USHA N GANDHI AND W T NAMGYAL. AC CORDING TO THE CIT, THE ASSESSING OFFICER OUGHT TO HAVE CALLED FOR THE EXPLANATION OF THE ASSESSEE WITH REGARD TO THESE LO ANS, AS ALSO THE LOANS FROM TWO PRIVATE LIMITED COMPANIES IN WHICH 1 /3 RD OF THE SHARES WERE HELD BY THE ASSESSEE. APART FROM THE A BOVE THE CIT ALSO OPINED THAT THE ASSESSING OFFICER SHOULD HAVE VERIFIED WHETHER ITA NO: 2795/MUM/2010 4 THE ASSESSEE RECEIVED ANY INTEREST ON THE REFUND OF THE TAX OF ` 57,467/- AND IF SO, THE INTEREST SHOULD HAVE BEEN B ROUGHT TO TAX AS THE ASSESSEES INCOME. THE SEVENTH ISSUE RELATE D TO THE REDUCTION OF ` 1,84,040/- FROM THE CAPITAL ACCOUNT OF THE ASSESSEE , BEING THE DIFFERENCE BETWEEN THE SALE PRICE AND THE COST OF CERTAIN JEWELLERY SOLD IN THE FINANCIAL YEAR 2003-04 RELEVA NT TO THE ASSESSMENT YEAR 2004-05. ACCORDING TO THE CIT, THE ACTUAL DIFFERENCE SHOULD ONLY BE ` 47,558/- AS SEEN FROM THE RECORD AND THAT THE ADJUSTMENT MADE BY THE ASSESSEE APPEARED T O HIM TO BE SOME KIND OF MANIPULATION OF THE ACCOUNTS MERELY FO R THE PURPOSE OF TALLYING THE BALANCE SHEET. AFTER NOTICING THESE S EVEN ITEMS, THE CIT HAS STATED IN THE NOTICE THAT THE ASSESSING OFF ICER WHILE COMPLETING THE ASSESSMENT HAD NOT TAKEN INTO ACCOUN T ALL THE RELEVANT ISSUES FOR CONSIDERATION. 5. IT IS TRUE THAT THE ASSESSEE SUBMITTED ALL THE D ETAILS RELATING TO THE ITEMS MENTIONED IN THE NOTICE ISSUED BY THE CIT AND ATTEMPTED TO EXPLAIN THEM BEFORE HIM IN THE COURSE OF THE PRO CEEDINGS FOR REVISION. THE CIT HAS FAIRLY STATED THE NATURE OF THE ASSESSEES EXPLANATION. HE HAS HOWEVER OPINED THAT THE DETAIL S SUBMITTED BY THE ASSESSEE OUGHT TO BE VERIFIED BY THE ASSESSING OFFICER HIMSELF. IT IS A WELL SETTLED POSITION THAT MERE LACK OF ENQ UIRY INTO THE RETURN FILED BY THE ASSESSEE CAN CLOTHE THE CIT WITH JURIS DICTION TO REVISE THE ASSESSMENT UNDER SECTION 263 ON THE GROUND THAT THE ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE REVENUE. THE DECISIONS WHICH HAVE ADUMBRATED T HIS POSITION OF LAW ARE : - (1) GEE VEE ENTERPRISES VS. ADDL. CIT (1975) 99 ITR 375 (DEL) ITA NO: 2795/MUM/2010 5 (2) THALIBAI F JAIN VS. ITO (1975) 101 ITR 1 (KAR) (3) ADDL. CIT VS. MUKUR CORPORATION (1973) 111 ITR 312 (GUJ) IN THE CASE OF P R EASWARAN VS. ITO (1969) 72 ITR 2 63 (MAD), THE MADRAS HIGH COURT HAS EXPRESSED THE VIEW THAT THE A SSESSING OFFICER, AS PROSPECTOR OF THE REVENUE, IS EXPECTED TO ENTER INTO THE SUBTERRANEAN DETAILS WHEN HE IS SEIZED OF THE RETUR N FILED BY THE ASSESSEE. IN THE PRESENT CASE AS THE NOTICE ISSUE D BY THE CIT AND THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE BEFOR E THE CIT SHOW, THERE WERE CERTAIN RELEVANT ENQUIRIES WHICH OUGHT T O HAVE BEEN MADE BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT. THESE ENQUIRIES WERE NOT MADE. IN THIS SITUATION T HE PROCEEDINGS FOR REVISION TAKEN BY THE CIT ON THE GROUND THAT TH E ASSESSMENT MADE WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE CANNOT BE HELD INVALID. 6. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE DREW OUR ATTENTION TO THE NOTICE ISSUED BY THE ASSESSING OFF ICER UNDER SECTION 142(1) ON 08.02.2007 AND THE ASSESSEES REPLY DATED 09.04.2007, COPIES OF WHICH HAVE BEEN FILED IN THE PAPER BOOK A ND CONTENDED THAT THESE WOULD SHOW THAT THE ASSESSMENT HAD BEEN COMPLETED AFTER DUE ENQUIRY. WE HAVE EXAMINED THE CONTENTION . NO DOUBT THESE PAPERS SHOW THE TYPE OF ENQUIRIES CONDUCTED B Y THE ASSESSING OFFICER BUT THE NOTICE ISSUED BY THE CIT HAS BROUGHT OUT SEVEN ITEMS WHICH HAVE TO BE ENQUIRED INTO FURTHER WHICH THE ASSESSING OFFICER HAS FAILED TO DO. FOR EXAMPLE, I TEM NO.3 MENTIONED IN THE NOTICE ISSUED UNDER SECTION 263 SH OWS THAT THE CIT HAS TAKEN THE VIEW THAT NO ENQUIRY WAS MADE AS TO WHY THE ITA NO: 2795/MUM/2010 6 ASSESSEE DID NOT DECLARE THE ADVANCE SALARY OF ` 4,50,000/- RECEIVED FROM M/S LYKA BDR INTERNATIONAL LTD. THOUG H SHE HAD CLAIMED CREDIT FOR THE TDS. IN THE NOTICE ISSUED B Y THE ASSESSING OFFICER UNDER SECTION 142(1), WE DO NOT FIND ANY RE FERENCE TO THIS ASPECT OF THE MATTER. WE DO NOT ALSO FIND ANY REFE RENCE THEREIN TO THE OTHER ITEMS MENTIONED IN THE NOTICE ISSUED BY T HE CIT, SUCH AS THE RENT RECEIVABLE FROM THE BOMBAY FLAT AND THE RE NT RECEIVED FROM THE CALCUTTA PROPERTY HELD IN JOINT OWNERSHIP. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE DREW OUR ATTENTION TO THE WRITTEN SUBMISSIONS FILED BEFORE THE CIT IN RESPECT OF THES E MATTERS WHICH ACCORDING TO HIM EXPLAINED THE FACTS AND THE POSITI ON TAKEN BY THE ASSESSEE. HOWEVER WE FIND FROM THE ORDER OF THE CI T THAT EVEN WHERE THE ASSESSEE HAD SUBMITTED THE DETAILS BEFORE THE CIT IN THE COURSE OF THE PROCEEDINGS FOR REVISION, THE ASSESSE E COULD NOT SUPPORT HER CLAIM BY ADDUCING DOCUMENTARY EVIDENCE. DESPITE THIS THE CIT HAS ONLY DIRECTED THE ASSESSING OFFICER TO EXAMINE THE NECESSARY FACTS AND EVIDENCE AND PASS A FRESH ASSES SMENT ORDER AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. WE A RE SATISFIED THAT ON THE FACTS OF THE PRESENT CASE THE ASSESSING OFFI CER HAD NOT CONDUCTED CERTAIN RELEVANT AND APPROPRIATE ENQUIRIE S BEFORE COMPLETING THE ASSESSMENT EVEN THOUGH HE HAD CONDUC TED SOME ENQUIRY WITH REGARD TO CERTAIN MATTERS RELEVANT FOR THE ASSESSMENT, BY ISSUE OF NOTICE ON 08.02.2007. WE ARE NOT TO BE UNDERSTOOD AS FINDING FAULT WITH THE ASSESSING OFFICER BUT IN THE VERY NATURE OF THINGS THERE COULD BE CERTAIN ISSUES WHICH MIGHT HA VE ESCAPED THE ATTENTION OF THE ASSESSING OFFICER AND WHICH SHOULD HAVE BEEN ENQUIRED INTO BY HIM. THIS IS WHAT THE CIT HAS POI NTED OUT AND HIS ITA NO: 2795/MUM/2010 7 DECISION CANNOT THEREFORE TO BE FAULTED. MERELY BE CAUSE SOME ASPECTS OF THE RETURN WERE VERIFIED BY THE ASSESSIN G OFFICER, IT CANNOT BE SAID THAT THE POINTS MENTIONED BY THE CIT IN THE NOTICE CANNOT AGAIN BE LOOKED INTO BY THE ASSESSING OFFICE R OR THAT THE CIT CANNOT SAY THAT THE ASSESSMENT WAS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF THE REVENUE. ONCE IT IS ESTABLISHE D THAT SOME ASPECTS OF THE RETURN WERE NOT VERIFIED OR ENQUIRED INTO BY THE ASSESSING OFFICER, THAT WOULD CLOTHE THE CIT WITH J URISDICTION TO REVISE THE ASSESSMENT UNDER SECTION 263 ON THE FOOT ING THAT THERE WAS LACK OF ENQUIRY RESULTING IN THE ASSESSMENT ORD ER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. THIS IS NOT A CASE WHERE THE CIT HAS TAKEN A DIFFERENT VIEW OF THE MATTER WITH REGARD TO THE CONCLUSIONS DRAWN BY THE ASSESSING OF FICER ON THE FACTS AND EVIDENCE PRESENT BEFORE HIM, AS WAS CLAIM ED BEFORE US ON BEHALF OF THE ASSESSEE. 7. IN THE COURSE OF THE ARGUMENTS, AT OUR ENQUIRY, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE STATED THAT THE ASS ESSING OFFICER HAS GIVEN EFFECT TO THE ORDER OF THE CIT AND HAS PA SSED A FRESH ASSESSMENT ORDER, WHICH IS PENDING IN APPEAL BEFORE THE CIT(A). 8. FOR THE REASONS GIVEN ABOVE, WE UPHOLD THE ORDER OF THE CIT PASSED UNDER SECTION 263 AND DISMISS THE APPEAL FIL ED BY THE ASSESSEE WITH NO ORDER AS TO COSTS. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MAY 2011. SD/- SD/- (R K PANDA) (R V EASWAR) ACCOUNTANT MEMBER PRESIDE NT MUMBAI, DATED 18 TH MAY 2011 SALDANHA ITA NO: 2795/MUM/2010 8 COPY TO: 1. MS NEHAL N GANDHI 3C, RIDGE APARTMENT, B G KHER MARG MALABAR HILL, MUMBAI 400 006 2. ITO 16(2)(2), MUMBAI 3. CIT-16, MUMBAI 4. CIT(A)- 5. DR F BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI