Mrs. Manju Agarwal, New Delhi V. ITO, New Delhi

ITA 3016/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3795 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 16-06-2010
• Assessment Year: 2002-2003
• Appeal Filed On: 29-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SAHOTA SENIOR
• Assessee Lawyers: VISHAL AGARWAL CS
• Keywords: Business income; Principle of natural justice; Corroborative evidences; Onus to prove; Reason to believe
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E, NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.3016/DEL/2009 (ASSESSMENT YEAR : 2002-03) MRS. MANJU AGARWAL, VS. ITO, WARD 33 (4), PROP. M/S. ARPIT SALES CORPORATION, NEW DELHI. 14B/23, IST FLOOR, DEV NAGAR, NEW DELHI 110 005. (PAN : ADRPA7112P) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VISHAL AGARWAL, CS REVENUE BY : SHRI G.S. SAHOTA, SENIOR DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE IS FILED AGAINST THE OR DER OF THE CIT (APPEALS)-XXVI, NEW DELHI DATED 30.4.2009 FOR THE A SSESSMENT YEAR 2002- 03. THE FOLLOWING GROUNDS OF APPEAL ARE TAKEN BY THE ASSESSEE : 1. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD AO HAS ISSUED NOTICE U/S. 148 IN A MECH ANICAL MANNER AND NOT IN TERMS OF LAW. HENCE THE ILLEGAL ASSESSMENT ORDER PASSED ON THIS BASIS MAY BE VACATED AND ALLEG ED DEMAND MAY BE DELETED. 2. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD AO HAS ERRED INVOKING SECTION 147 SIMPL Y ON THE BASIS OF INFORMATION AND WITHOUT HAVING ANY REASON TO BELIEVE AND APPLICATION OF HIS MIND THAT THE INCOME HAS ESC APED ASSESSMENT. HENCE THE ORDER PASSED ON THE BASIS OF SUCH A DEFECTIVE NOTICE IS FRUCTUOUS AND WITHOUT JURISDICT ION AND LIABLE TO BE QUASHED AND DEMAND MAY BE VACATED. ITA NO.46/DEL/2010 2 3. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. AO HAS ERRED IN INVOKING SECTION 147 W ITHOUT HAVING ANY BASIS OF ESCAPEMENT OF INCOME AS THE BAS IC DOCUMENT I.E. INCOME TAX RETURN FOR A.Y.2002-03 WAS NOT AVAILABLE AND TRACEABLE WITH THE ITO, WARD 33(4) AT THE TIME OF ISSUE OF NOTICE U/S. 148. HENCE REASON TO BELIEVE IS BASED ON GUESSWORK ONLY. HENCE THE ORDER MAY BE QUASHED AND DEMAND MAY BE DELETED. 4. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. AO HAS ILLEGALLY INVOKED SECTION 147/1 48 ON THE BASIS OF GENERAL STATEMENT OF THIRD PARTY OVERLOOKI NG THE DIRECTION OF COURTS THAT A MERE GENERAL CONFESSIONA L STATEMENT BY THIRD PARTY THAT ALL TRANSACTIONS ARE BOGUS CAN NOT BE THE BASIS FOR HOLDING THAT THE INCOME HAS ESCAPED ASSESSMENT. HENCE, THE DEMAND MAY BE DELETED. 5. THAT UNDER THE FACTS AND CIRCUMSTANCE OF THE CAS E AND IN LAW, THE LD. AO HAS ERRED IN LAW AS THE STATUTORY R EQUIREMENT OF SECTION 151(2) REGARDING SATISFACTION BY LD. JOINT COMMISSIONER OF INCOME TAX IS ABSENT IN THE FILE HE NCE THE ACTION FOR REASSESSMENT IS TOTALLY ILLEGAL AND UNSU STAINABLE BOTH ON FACTS AND IN LAW. 6. THE IMPUGNED ORDER HAD BEEN PASSED BY OBTAINING BEHIND THE BACK OF THE APPELLANT SOME ALLEGED STATE MENTS / INFORMATION FOR WHICH NO OPPORTUNITY PROVIDED TO RE BUT THE SAME AND THERE WAS NOT EVEN A SHOW CAUSE NOTICE SPE CIFICALLY PROPOSING TO MAKE ANY ADDITION NOT ANY EFFECTIVE OP PORTUNITY OF HEARING AND HENCE, THE IMPUGNED ORDER PASSED IN VIO LATION OF NATURAL JUSTICE IS LIABLE TO BE QUASHED. 7. THE RESPONDENT HAS NOT DISCHARGED ITS ONUS OF P ROOF IN ANY MANNER AND HAS CHOSEN TO MAKE ILLEGAL ADDITION PERVERSELY AND ALL THE ADDITIONS SHOULD THEREFORE BE SET ASIDE AND QUASHED. 8. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. AO HAS NOT REPLIED TO THE OBJECTION RA ISED BY THE ASSESSEE DURING THE COURSE OF PROCEEDING NOR HE PRO DUCED THE DIR. OF INV. FOR CROSS EXAMINATION AS REQUIRED BY T HE ASSESSEE. ITA NO.46/DEL/2010 3 HENCE THE CASE HAS BEEN ASSESSED ARBITRARILY AND NO T JUDICIALLY. HENCE THE ORDER MAY BE VACATED AND DEMAND MAY BE DE LETED. 9. THE ILLEGAL ADDITION MADE BY THE RESPONDENT IN R ESPECT OF COMMISSION RECEIVED IN CASH RS.93,738/- FOR ACCOMMO DATION ENTRY GIVEN CANNOT BE SUSTAINED BOTH ON FACTS AND I N LAW AND MUST BE VACATED. 10. THE RESPONDENT IS ALSO WRONG IN RAISING ILLEGA L DEMANDS OF TAX, INTEREST AND PENALTIES MECHANICALLY AND PER VERSELY AND ALL THE DEMANDS AS WELL AS PENALTY NOTICE BE QUASHE D. 2. AT THE OUTSET OF HEARING, LEARNED AR FOR THE ASS ESSEE SUBMITTED THAT HE WANTED TO PLEAD ON GROUND NO.9 FIRST. WHIL E PLEADING THIS GROUND, HE SUBMITTED THAT THE CIT (A) HAS NOT DECID ED THE ISSUES ON MERITS. THE CIT (A) HAS WRITTEN IN HIS ORDER THAT GROUND RELATING TO ADDITION OF RS.93,738/- @ 2% OF RS.46,86,900/- HAS NOT BEEN PRESSED, HENCE NO DECISION IS BEING GIVEN. HE SUBMITTED THA T THIS IS FACTUALLY INCORRECT. WHILE MAKING THE SUBMISSIONS BEFORE THE CIT (A) THE ASSESSEE HAS SUBMITTED WRITTEN SUBMISSIONS ON THIS ISSUE WHICH IS EVIDENT FROM PAGE 42 TO 44 OF THE PAPER BOOK. ASSE SSEE HAD NEVER CONSENTED FOR NOT TO PRESS THE GROUND. THEREFORE, HE SUBMITTED THAT THE APPEAL MAY BE RESTORED BACK TO THE FILE OF CIT (A) TO BE DECIDED ON MERITS. 3. LEARNED DR WAS ALSO NOT HAVING CONTRARY VIEW IN THIS REGARD. 4. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE A SSESSEE HAS SUBMITTED BEFORE THE CIT (A) REGARDING ADDITION OF RS.93,738/ - AS UNDER : THE ILLEGAL ADDITIONS MADE BY THE RESPONDENT IN RE SPECT OF COMMISSION PAID IN CASH RS.93,738/- FOR ACCOMMODATI ON ENTRY RECEIVED CANNOT BE SUSTAINED BOTH ON FACTS AND IN L AW AND MUST BE VACATED. ITA NO.46/DEL/2010 4 THE ADDITION MADE TOTALLY BASED ON ASSUMPTIONS ONLY NO SUPPORTING EVIDENCE WAS PLACED ON RECORD BY LD. AO TO JUSTIFY THE ILLEGAL ADDITION MADE BY HIM. THE APPELLANT DIS CHARGE HIS ONUS TO EXPLAIN ALL THE TRANSACTIONS BUT LD. AO HAS NOT DISCHARGES HIS ONUS TO PROVE CONTRARY IN ANY MANNER . HENCE ADDITIONS MADE ARE ILLEGAL AND HENCE LIABLE TO BE V ACATED. IN THE END, THE APPELLANT PRAYS FOR RELIEF IN VIEW OF THE FACT THAT THE APEX COURT, IN THE CASE OF UNION OF INDIA & ORS . V KAMLAKASHI FINANCE CORPN. LTD (1992) SUPPL (1) SCC 648 WHICH WAS LATER FOLLOWED BY TWO MEMBER BENCH OF THE PUNE ITAT IN THE CASE OF EAGLE FLASK INDUSTRIES LTD VS. DCIT, 65 (1999) TTJ (PUNE) 422/(2000) ITD 245 (PUNE), HELD T HAT IT MAY BE CONSIDERED AS SETTLED LAW THAT THE DECISION OF T HE HIGHER AUTHORITIES IS BINDING ON THE LOWER AUTHORITIES IN THE JUDICIAL HIERARCHY. ACCORDINGLY, IT WOULD STAND TO REASON TH AT THE CIT (A) AND THE AO WOULD BE BOUND BY THE DECISION OF TH E TRIBUNAL AT THE TIME OF PASSING THE IMPUGNED ORDERS; AS THEY WERE WORKING WITHIN THE JURISDICTION OF THE TRIBUNAL. AN Y OTHER ACTION ON THE PART OF THE AUTHORITIES BELOW IS FLAG RANT DISREGARD TO THE PRINCIPAL OF JUDICIAL DISCIPLINE AS STIPULAT ED BY ARTICLE 141 OF THE CONSTITUTION OF INDIA. THE MADHYA PRADESH HIGH COURT IN THE CASE OF SIMRAN FARMS LTD VS. CIT, INDORE HELD THAT IT MUST BE SINCERE EN DEAVOR OF ALL THE AUTHORITIES, TRIBUNALS AND COURTS WHILE DECIDIN G THE CASES TO ENSURE SUBJECT TO ANY LEGAL LIMITATION IF THERE IS, THAT THEIR CONCLUSIONS IS IN CONFORMITY WITH THE LAW LAID DOWN BY THE SUPREME COURT. THIS IS WHAT THE ARTICLE 141 OF THE CONSTITUTION PROVIDES FOR AND NON-OBSERVATION OF LAW LAID DOWN B Y THE APEX COURT VITIATES THE ORDER. IT IS APPARENT ON ITS FAC E. THE HON'BLE DELHI HIGH COURT IN THE IN THE CASE OF DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) AND ANOTHER. (2 007) 292 ITR 22. 'WE ARE OF THE VIEW THAT IF THE TRIBUNAL CAN FOLLOW ITS EARLIER ORDER PASSED BY THE SPECIAL BENCH, IN KEEPING WITH THE HIGH STANDARDS OF JUDICIAL DISCIPLINE, THEN THERE IS ABS OLUTELY NO REASON WHY A SUBORDINATE AUTHORITY SUCH AS THE COMM ISSIONER ITA NO.46/DEL/2010 5 OF INCOME TAX (APPEALS) SHOULD FEEL HESITANT TO FOL LOW THE ORDER OF THE SPECIAL BENCH AND GIVE RELIEF TO THE PETITIO NER.' THE SUPREME COURT HELD IN UNION OF INDIA V. KZMLAK SHI FINANCE CORPORATION LTD. [1991] 55 ELT 433 AS FOLLO WS: 'THE PRINCIPLES OF JUDICIAL DISCIPLINE REQUIRE THAT THE ORDERS OF THE HIGHER APPELLATE AUTHORITIES SHOULD BE FOLLOWED UNRESERVEDLY BY THE SUBORDINATE AUTHORITIES.' IT WAS FURTHER OBS ERVED BY THE SUPREME COURT THAT IF THE ORDER OF AN APPELLATE AUT HORITY IS THE SUBJECT-MATTER OF FURTHER APPEAL, THAT CANNOT FURNI SH ANY GROUND FOR NOT FOLLOWING IT, UNLESS ITS OPERATION HAS BEEN SUSPENDED BY A COMPETENT COURT. THE SUPREME COURT WENT ON TO SAY THAT IF THIS HEALTHY RULE IS NOT FOLLOWED, THE RESULT WILL NOT ONLY BE UNDUE HARASSMENT TO ASSESSEES BUT CHAOS IN THE ADMI NISTRATION OF TAX LAWS.' IT WAS FURTHER OBSERVED IN BHOPAL SUGAR INDUSTRIES LTD. V. ITO [1960] 40 ITR 618 (SC) : 'THE JUDICIAL COMMISSIONER WAS NOT SITTING IN APPEA L OVER THE TRIBUNAL AND WE DO NOT THINK THAT, IN THE CIRCUMSTA NCES OF THIS CASE, IT WAS OPEN TO HIM TO SAY THAT THE ORDER OF T HE TRIBUNAL WAS WRONG AND, THEREFORE, THERE WAS NO INJUSTICE IN DISREGARDING THAT ORDER. AS WE HAVE SAID EARLIER, SUCH A VIEW IS DESTRUCTIVE OF ONE OF THE BASIC PRINCIPLES OF ADMINISTRATION OF JU STICE.' SIMILARLY, IN TRIVENI CHEMICALS LTD. V. UOI [2007] 2 SCC 503, THE SUPREME COURT REITERATED THE PRINCIPLE THAT ADJ UDICATING AUTHORITIES ARE BOUND BY THE DOCTRINE OF JUDICIAL D ISCIPLINE. A FURTHER SUBMISSION WAS ALSO MADE WHICH READS ALSO AS UNDER : REGARDING ADDITION OF RS. 93,738/-: THE ILLEGAL ADDITIONS MADE BY THE RESPONDENT IN RESPECT OF ALLEGED UNACCOUNTED COMMISSION EARNED IN CASH RS.93,738/- FOR AMOUNT DE POSITED IN THE BANK CANNOT BE SUSTAINED BOTH ON FACTS AND IN L AW AND MUST BE VACATED. THE ASSESSEE RECEIVED VARIOUS BUSINESS RECEIPTS DUR ING THE YEAR UNDER CONSIDERATION AND THE SAME WERE DULY ACCOUNTE D FOR IN ITA NO.46/DEL/2010 6 THE BOOKS OF ACCOUNTS AND FULLY DISCLOSED IN THE BA LANCE SHEET AND PROFIT LOSS ACCOUNT FOR THAT YEAR AND TRADING P ROFIT WAS DULY CONSIDERED AND TAXED AS PER LAW AT THE TIME OF FILI NG OF INCOME TAX RETURN BY THE ASSESSEE. BUT THE RESPONDENT WANT TO TAX THE ALLEGED INCOME CALCULATED ON NO BASIS BUT TOTALLY O N THE BASIS OF ASSUMPTIONS AND SURMISES WHICH HAVE NO LEG TO SUPPO RT THE BASIS OF CALCULATING THE ALLEGED COMMISSION. ON THE OTHER HAND THE ASSESSEE FULLY EXPLAINED THE TRANSACTIONS HELD DURING THE YEAR UNDER CONSIDERATION TO LD. AO (REF.: PB 15-19) ON THE CONTRARY LD. AO CHOOSE TO MAKE THE ADDITION TOTALLY BASED ON ASSUMPTIONS ONLY NO SUPPORTING EVIDENCE WAS PLACED ON RECORD BY LD. AO TO JUSTIFY THE ILLEGAL ADDITION MADE BY H IM. THE APPELLANT DISCHARGE HIS ONUS TO EXPLAIN ALL THE TRA NSACTIONS BUT LD. AO HAS NOT DISCHARGES HIS ONUS TO PROVE CONTRAR Y IN ANY MANNER. HENCE ADDITIONS MADE ARE ILLEGAL AND AGAINS T THE NATURAL JUSTICE AND HENCE LIABLE TO BE VACATED. THERE IS NO EVIDENCE ON RECORD NOR IT WAS BROUGHT T O OUR NOTICE BY THE LEARNED DR THAT THIS ISSUE WAS NOT PRESSED BEFORE T HE CIT (A). THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF CIT (A) WITH A DIRECTION TO DECIDE ON MERITS AFTER HEARING THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THE 16 TH DAY OF JUNE 2009. SD/- SD/- (C.L. SETHI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : THE 16 TH DAY OF JUNE, 2009/TS COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. CIT 4. CIT(A)-VIII, NEW DELHI. 5. DR, ITAT. ASSTT.REGISTRAR ITAT, NEW DELHI.