KARTIK PAPER PRODUCTS, MUMBAI V. CIT 17, MUMBAI

ITA 2925/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2979 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 29-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: E SANKARAN
• Assessee Lawyers: V C SHAH
• Section: 143(3); 263

Judgement Text

, ' INCOME TAX APPELLATE TRIBUNAL,MUMBAI- A,BENCH , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & AMIT SHUKLA,JUDICIAL MEMBER /.ITA NO.2925/MUM/2014, /ASSESSMENT YEAR-2009-10 KARTIK PAPER PRODUCTS, LEVE GUJAR SNEHWARDHAK MANDAL, DR. G D AMBEDKAR MARG, KETAN APARTMENT, NAIGAON CROSS ROAD, WADALA,MUMBAI 400 031. PAN:AAIFK5057D VS CIT 17, MUMBAI ( / ASSESSEE) ( / RESPONDENT) /ASSESSEE BY : SHRI V C SHAH / REVENUE BY : SHRI E SANKARAN / DATE OF HEARING :21.1 0.2015 / DATE OF PRONOUNCEMENT :21. 10.2015 , 1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) ) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DATED 31.03.2014,OF THE CIT-1 7-MUMBAI,PASSED U/S.263 OF THE ACT,THE ASSESSEE HAD FILED THE PRESENT APPEAL. 2. ASSESSEE-FIRM,ENGAGED IN THE BUSINESS OF MANUFACTUR ING OF CRAFT PAPER FILED ITS RETURN OF INCOME ON 10.09.2009, DECLARING TOTAL INCOME OF RS. NIL,AFTER CLAIMING CARRY FORWARD OF LOSS OF RS.36.75 LACS. THE RETURN WAS PROCESSED U/S. 143 (1) OF THE ACT AND LATER ON IT WAS SELECTED FOR SCRUTINY UNDER CASS.THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT ON 16.12. 2011,U/S.143(3)OF THE ACT,ACCEPTING THE LOSS RETURN FILED BY IT. THE CIT ISSUED A RECTIFICATION NOTICE TO THE ASSESS EE ON 04.09.2012 AND SAME READ AS UNDER: THE ASSESSMENT FOR A Y. 2009-10 IN YOUR CASE WAS CO MPLETED U/S. 143(3) OF THE I.T ACT ON 16.12.2011 BY THE ASSESSING OFFICER, DCIT 17(1), MU MBAI ACCEPTING LOSS OF RS.36,75,424/- RETURNED BY YOU. ON VERIFICATION OF RECORDS IT IS NOTICED THAT ASSES SING OFFICER HAS FAILED TO CONDUCT APPROPRIATE ENQURIES ON VARIOUS ISSUES RELEVANT TO DETERMINATIO N OF ASSESSABLE INCOME FOR THE ABOVE ASSESSMENT YEAR AS UNDER: 1. THIS WAS YOUR FIRST RETURN OF INCOME AND, THEREFORE , THE ASSESSING OFFICER OUGHT TO HAVE EXAMINED TOTAL INFLOW OF FUNDS AND PURCHASE OF VARI OUS ASSETS SINCE CONCEPTION. VIDE ORDER SHEET NOTING OF 05.12.2012 THE ASSESSING OFFICER AS KED FOR THE FOOLING DETAILS: I) COPY OF BANK STATEMENT FOR THE PERIOD 01.04.2008 TO 31.03.2009 II) SOURCE OF CAPITAL INTRODUCED BY PARTNER SHRI VIVEK BABURAO PATIL III) BILLS IN RESPECT OF ADDITIONS MADE TO FIXED ASSETS ALONG WITH SOURCES OF ACQUISTIION THERE OF IV) COPY OF PARTNERSHIP DEED V) REASON FOR INCURRING LOSS VI) CONFIRMATION IN RESPECT OF SUNDRY CREDITORS EXCEEDI NG RS.5 LACS VII) PARTY WISE/ BILL WISE DETAILS IN THE FOLLOWING PROF ORMA IN RESPECT OF SUNDRY CREDITORS OF RS.1,54,26,415/- OUTSTANDING AS ON 31.03.2009 THE CASE WAS ADJOURNED TO 14.12.2011. ON 14.12.201 1 ONLY ONE HAND WRITTEN LETTER WITH REFERENCE TO INTEREST AND PRE-OPERATIVE EXPENSES WA S PLACED ON RECORD AND ASSESSMENT WAS COMPLETED ACCEPTING THE LOSS RETURNED BY YOU 2 ITA NO.2925/MUM/2014 KARTIK PAPER PRODUCTS IT IS THEREFORE APPARENT THAT THE AO COMPLETED THE ASSESSMENT WITHOUT EVEN ABOVE REQUISITE DETAILS CALLED FOR BY ASSESSING OFFICER AND FILED B Y YOU AND THE ASSESSMENT ORDER WAS THUS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE CIT FURTHER MENTIONED THAT THE ASSESSMENT ORDER PASSED BY THE AO WAS WITHOUT CONDUCTING PROPER INVESTIGATION AND WAS PASSED WITH OUT PROPER APPLICATION OF MIND,THAT IT WAS ERRONEOUS ORDER, WHICH WAS PREJUDICIAL TO THE I NTEREST OF THE REVENUE.IN ITS REPLY DATED 13. 10.2012,THE ASSESSEE MADE DETAILED EXPLANATION.AFTE R CONSIDERING THE SAME,THE CIT HELD THAT SOME OF THE DOCUMENTS/INFORMATION MENTIONED IN THE NOTICE U/S. 263 HAD BEEN EXAMINED BY THE AO,THAT THE DETAILS SUBMITTED BY THE ASSESSEE H AD BEEN TEST CHECKED,THAT IT NOT MEAN THAT ALL THE DOCUMENTS/INFORMATION HAD UNDERGONE THOROUG H SCRUTINY AS DESIRABLE FOR A NEW ASSESSEE,THAT THE PROVISIONS OF SECTION 263 COULD B E INVOKED IF IT WAS FOUND THAT THERE WAS LACK OF APPLICATION OF MIND ON CERTAIN ISSUES OR PR OPER INVESTIGATION/ENQUIRY, THAT THE AO HAD NOT MADE ENQUIRIES ABOUT UNSECURED LOANS,ADVANCES T O CUSTOMERS AND PROVISIONS FOR EXPENSES. FINALLY, THE CIT SET ASIDE THE ORDER AND DIRECTED THE AO TO PASS FRESH ORDER. 3. BEFORE US THE AUTHORISED REPRESENTATIVE(AR)STATED T HAT THE ASSESSEE HAD FURNISHED ALL THE NECESSARY DETAILS ON 14.12.2011 IN COMPLIANCE OF TH E CONTENTS OF THE ORDER SHEET DATED 05.12. 2011,THAT IT HAD PRODUCED BEFORE THE AO THE BOOKS O F ACCOUNT SUPPORTING DOCUMENTS,THAT THE DETAILS ABOUT ALL THE SEVEN ITEMS MENTIONED IN THE 263 ORDER WERE FILED BEFORE THE AO.HE REFERRED TO THE COPIES OF THE LETTER WRITTEN TO THE AO DURING THE COURSE OF ASSESSMENT PROCEED - INGS I.E.LETTER DATED 05.12.2011 AND 14.12.2011,THA T THE CIT HAD NOT MADE ANY REFERENCE TO THE ABOVE REFERRED TWO LETTERS WHILE PASSING THE RE CTIFICATION ORDER, THAT THE PAPERS FILED BEFORE THE AO RAN INTO SEVERAL HUNDRED PAGES,THAT THE FACT WAS BROUGHT TO THE NOTICE OF THE CIT,THAT HE IGNORED EVIDENCES PRODUCED BY THE ASSESSEE WHILE PASSING ORDER U/S.263 OF THE ACT.HE REFERRED TO PAGE NO.5,15-18, 25, 28 OF THE PAPER-BO OK.THE DR SUPPORTED THE ORDER OF THE CIT 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE CIT HAD INVOKED THE PROVISIONS OF SECTION 263 OF TH E ACT, AS HE WAS OF THE OPINION THAT THE ORDER PASSED BY THE AO WAS PREJUDICIAL TO THE INTER EST OF THE REVENUE AND WAS ERRONEOUS.AS PER THE CIT THE AO HAD ASKED DETAILS FROM THE ASSES SEE WITH REGARD TO SEVEN ISSUES,THAT THE AO HAD VERIFIED DETAILS FILED BY THE ASSESSEE AND H AD PASSED THE ORDER U/S. 143(3) OF THE ACT, THAT ALL THE DETAILS FURNISHED BY THE ASSESSEE WERE REFERRED TO IN THE LETTER FILED BY IT IN RESPONSE TO THE NOTICE ISSUED BY THE CIT U/S. 263 O F THE ACT,THAT THE CIT HIMSELF HAD ADMITTED THAT SOME OF THE DETAILS WERE FILED,THAT THE ASSESS EE HAD MADE AVAILABLE ALL THE SECONDARY EVIDENCES ALONG WITH THE MAIN EVIDENCES TO THE AO,T HAT THE AO HAS SPECIFICALLY MENTIONED THAT THE ASSESSEE HAD FILED ALL NECESSARY DETAILS A ND SUPPORTINGS.WE FIND THAT IN THE LETTER ADDRESSED TO THE CIT,THE ASSESSEE HAD FILED 17 ANNE XURES,INCLUDING THE LETTERS ADDRESSED TO THE AO.IN THESE CIRCUMSTANCES,WE ARE OF THE OPINION THA T THE ORDER PASSED BY THE AO WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE RE VENUE.THE CIT HAS NOT MENTIONED AS TO HOW THE THERE WAS AN INCORRECT ASSUMPTION OF FACTS OR A N INCORRECT APPLICATION OF LAW ON PART OF THE AO.WE WOULD LIKE TO REFER TO THE DECISIONS OF KRISH NA CAPBOX (P.)LTD.(372 ITR310)OF THE HONBLE ALLAHABAD HIGH COURT WHEREIN THE FACTS HAVE BEEN NARRATED AND IT HAS ALSO DISCUSSED THE PRINCIPLE GOVERNING THE RECTIFICATION.IT READS AS UNDER: THE ASSESSEES RETURN FOR THE ASSESSMENT YEAR 2008- 09 WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME-TAX ACT, 1961. NOTICE UNDER SECTION 143( 2) WAS ISSUED TO THE ASSESSEE. THE ASSESSING OFFICER MADE CERTAIN QUERIES, TO WHICH TH E ASSESSEE REPLIED AND AFTER INQUIRY, AND BEING SATISFIED WITH THE ASSESSEES ANSWERS TO THE QUERIES, ACCEPTED HIS DECLARED INCOME AND PASSED THE ASSESSMENT ORDER. THE COMMISSIONER, HOWE VER, ISSUED A NOTICE UNDER SECTION 263 ON THE GROUND THAT THE ASSESSING OFFICER HAD NOT MA DE INQUIRY ON CERTAIN ASPECTS. THE ASSESSEE SUBMITTED A REPLY STATING THAT ON ALL THES E ASPECTS, INQUIRY WAS MADE BY THE ASSESSING OFFICER BUT THE COMMISSIONER DID NOT AGRE E WITH THE REPLY AND OBSERVED THAT THE ASSESSING OFFICER HAD ACCEPTED THE VERSION OF THE A SSESSEE WITHOUT MAKING ANY INQUIRY OR 3 ITA NO.2925/MUM/2014 KARTIK PAPER PRODUCTS VERIFICATION HAD PASSED THE ASSESSMENT ORDER, WHICH WAS SUBSTANTIALLY PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ACCORDINGLY, HE SET ASIDE THE ASSESSMENT AND DIRECTED THE ASSESSING OFFICER TO PASS A FRESH ORDER OF ASSESSMENT AFTER C ONSIDERING ALL THE EVIDENCE AND AFFORDING AN OPPORTUNITY TO THE ASSESSEE. THE REVENUE TOOK THE D EFENCE BEFORE TRIBUNAL THAT NO INQUIRY WAS MADE BY THE ASSESSING OFFICER IN RESPECT TO THE QUE RIES SET OUT IN THE NOTICE ISSUED UNDER SECTION 263 , AND THEREFORE, THE ORDER OF THE COMMI SSIONER PASSED UNDER SECTION 263 WAS WHOLLY JUSTIFIED. THE TRIBUNAL FOUND THAT THE DEFEN CE ON THE PART OF THE COMMISSIONER FACTUALLY INCORRECT AND CONTRARY TO RECORD. ON THE QUESTION WHETHER OR NOT DISCUSSION OF THE QUERIES AND REPLY RECEIVED FROM THE ASSESSEE, IN TH E ASSESSMENT ORDER, WAS NECESSARY, THE TRIBUNAL HELD THAT ONCE INQUIRY WAS MADE, A MERE NO N-DISCUSSION OR NON-MENTION THEREOF IN THE ASSESSMENT ORDER COULD NOT LEAD TO THE ASSUMPTI ON THAT THE ASSESSING OFFICER DID NOT APPLY HIS MIND OR THAT HE HAD NOT MADE INQUIRY ON THE SUB JECT AND THIS WOULD NOT JUSTIFY INTERFERENCE BY THE COMMISSIONER BY ISSUING NOTICE UNDER SECTION 263 . THE TRIBUNAL ALLOWED THE ASSESSEES APPEAL. WHILE DECIDING THE MATTER THE COURT HAD REFERRED TO THE JUDGEMENT OF THE HONBLE BOMBAY HIGH COURT DELIVERED IN THE MATTERS OF FINE JEWELLE RY (INDIA) LTD.(372 ITR 303) IDEA CELLULAR LTD.(301 ITR 407). RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS,WE ARE,R EVERSING THE ORDER OF THE CIT AND DECIDING THE EFFECTIVE GROUND OF APPEAL IN FAVOUR O F THE ASSESSEE. AS A RESULT, THE APPEAL FILED BY T HE ASSESSEE STANDS ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST ,OCTOBER,2015. 21 ,2015 SD/- SD/- ( / AMIT SHUKLA) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 21.10.2015 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.