Ram Manohar Bhati, JODHPUR V. CIT-II, JODHPUR

ITA 320/JODH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78190 (ITAT-JODHPUR)
• Duration Of Justice: 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 08-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K KHANDELWAL; N A JOSHI
• Assessee Lawyers: SHAILENDRA BARDIA
• Keywords: Prejudicial to interest
• Section: 44AD; 263

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO.320/JODH/2014 (A.Y. 2009-10) RAM MANOHAR BHATI, VS. CIT-II C/O SHAILENDRA BARDIA, C.AS. JODHPUR. 53, NEHRU PARK, JODHPUR. PAN NO. ACKPB 8075 E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SHAILENDRA BARDIA. DEPARTMENT BY : SHRI A.K. KHANDELWAL & SHRI N.A. JOSHI - D.R. DATE OF HEARING : 22/05/2014. DATE OF PRONOUNCEMENT : 11/06/2014. O R D E R PER HARI OM MARATHA, J.M THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER DATED 14/02/2014 OF LD. CIT-II, UDAIPUR FOR A.Y. 2009-10 U/S 263 OF THE INCOME-TAX ACT, 1961 ['THE ACT', FOR SHORT]. 2 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT THE ORDER UNDER SEC. 263 OF THE I.T. ACT, 1961 AS PASSED BY THE LD. CIT IS NOT JUSTIFIED BOTH ON FACTS AND IN LAW. 2. THAT THE LD. CIT HAS NOT GIVEN ANY BASIS OR REAS ONING WHICH JUSTIFIED THE PASSING OF THE ORDER UNDER SEC. 263 3. THAT THE ORDER OF THE LD. CIT IS BASED ON MERE S USPICION AND DOUBTS AND THERE IS NO SUCH MATERIAL ON THE BASIS OF WHICH IT COULD BE SAID THAT THE ORDER OF THE LEARNED ITO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. THAT THE LEARNED CIT HAS NOT GIVEN ADEQUATE OPPO RTUNITY TO THE ASSESSEE TO EXPLAIN HIS SIDE. 5. THAT THE ORDER OF THE LEARNED ITO IS NOT ERRONE OUS OR PREJUDICIAL TO INTEREST OF THE REVENUE. THE LEARNED ITO HAD PASS ED THE ORDER AFTER ONLY APPRECIATING AND DULY CONSIDERING THE COMPLETE FACTS AND MAKING ADEQUATE INQUIRY. THEREFORE, THERE IS NO JU STIFICATION OF INITIATION OF THE PROCEEDINGS U/S 263 BY THE LEARNE D CIT. 6. THAT THE VALUATION OF STOCK HAS BEEN DONE ACCORD ING TO THE METHOD CONSISTENTLY FOLLOWED AND THERE IS NO DISCREPANCY. THE ADDITIONS IN THE CAPITAL WERE ALSO DULY EXPLAINED DURING THE ASS ESSMENT PROCEEDINGS. THEREFORE, THERE IS NO JUSTIFICATION OF THE ORDER UNDER SEC. 263. 3 7. THAT THE APPELLANT BE ALLOWED TO ADD, ALTER, AME ND, MODIFY OR WITHDRAW ANY OF THE GROUND(S) OF APPEAL BEFORE OR A T THE TIME OF HEARING OF THIS APPEAL. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME [ROI] FOR A.Y. 2009-10 AT RS. 3,95,120/- ON 29.9.2009 BUT REGULAR ASSESSMENT WAS MADE U/S 143(3 ) OF THE ACT ON 5.2.2011 AT A TOTAL INCOME OF RS. 4,26,120/- AFTER MAKING ADDITION OF RS. 31,000/-. SUBSEQUENTLY, THE LD. CIT CALLED FOR RECORDS OF THIS ASSESSMENT ORDER UNDER THE PROVISIONS OF SECTION 26 3 OF THE ACT AND HAS NOTICED THAT THE PURCHASES OF SOYA BEAN OIL WERE MA DE AT HIGHER RATE RESULTING INTO LOWER VALUATION OF THE CLOSING STOCK OF REFINED SOYA BEAN OIL. HE ALSO NOTICED THAT DURING THE YEAR, THE ASS ESSEE HAD INTRODUCED FRESH CAPITAL OF RS. 24,39,450/- IN THE CAPITAL ACC OUNT OF M/S BHOPAT RAM & CO. BUT THE A.O. HAS FAILED TO EXAMINE THE S OURCE OF THIS CAPITAL INTRODUCTION. ACCORDINGLY, THE LD. CIT FOU ND THE ASSESSMENT ORDER AS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL T O THE INTEREST OF THE REVENUE. CONSEQUENTLY, NOTICE U/S 263 OF THE ACT W AS ISSUED TO THE ASSESSEE CALLING HIM TO EXPLAIN AS WHY THE ASSESSME NT ORDER MAY NOT BE MODIFIED, SET ASIDE, CANCELLED OR ENHANCED. THIS NOTICE WAS RESPONDED FROM THE SIDE OF THE ASSESSEE STATING THA T THE VALUATION OF CLOSING STOCK ' BEEN MADE ACCORDING TO THE SETTLED PRINCIPLE THAT IT SHOULD BE VALUED EITHER AT THE COST PRICE OR THE MA RKET PRICE 4 WHICHEVER IS LOWER AND BY FOLLOWING THE FIFI [FIRST IN FIRST OUT] METHOD WHICH THE ASSESSEE HAS BEEN FOLLOWING CONSISTENTLY. IT WAS STATED THAT HIS BOOKS OF ACCOUNT ARE DULY AUDITED U/S 44AD OF T HE ACT AND NO ADVERSE REMARK HAS BEEN GIVEN BY THE TAX AUDITORS. HOWEVER, THE LD. CIT HAS SET ASIDE THE ENTIRE ASSESSMENT ORDER BY GI VING DIRECTION TO THE A.O. TO EXAMINE THE ISSUES AFRESH AND PASS WELL REA SONED ASSESSMENT ORDER. AGAINST THIS FINDING, THE ASSESSEE HAS COME IN APPEAL BEFORE THE APPELLATE TRIBUNAL BY RAISING THE ABOVE EXTRACTED G ROUNDS. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAR EFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. BEFORE US, SHRI SHA ILENDRA BARDIA ARGUED THAT THE A.O. DID EXAMINE EACH AND EVERY ASP ECT ON WHICH THE LD. CIT HAS SET ASIDE THE ORDER OF THE A.O. AND AFT ER APPLYING HIS MIND, THE ORDER WAS PASSED. THE LD. A.R. ARGUED THAT U/S 263 OF THE ACT, THE LD. CIT CANNOT ASSUME THE ROLE OF THE APPELLATE AUT HORITY AND ONLY IF THIS ORDER IS FOUND TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, THE LD. CIT CAN MODIFY/SET ASIDE/CANCEL OR ENHANCE THE SAME. HE ARGUED THAT THE ASSESSMENT OR DER IN QUESTION IS NOT AT ALL ERRONEOUS. HE STATED THAT THE POINTS RA ISED IN THE NOTICE ISSUE DU/S 263 WERE APTLY REPLIED BUT THE LD. CIT H AS NOT CONSIDERED 5 THEM AT ALL AND HAS PASSED ONE LINE ORDER WITHOUT G IVING REASONS FOR REVISING THE ASSESSMENT ORDER. 4. PER CONTRA, THE LD. D.R. SHRI A K. KHANDELWAL HA S RELIED ON THE ORDER OF THE LD. CIT AND HAS DEFENDED THE ORDER OF LD. CIT WHICH IS APPEALED AGAINST. 5. WE HAVE HEARD BOTH SIDES IN DETAIL. WE HAVE ALS O PERUSED CAREFULLY THE ENTIRE EVIDENCES AVAILABLE ON RECORD. IT IS TRITE THAT AN ORDER CAN BE REVISED ONLY AND ONLY IF TWIN CONDITIO NS OF ERROR IN THE ORDER AND PREJUDICE CAUSED TO THE REVENUE CO-EXI ST. THE SUBJECT OF REVISION UNDER SECTION 263 HAS BEEN VASTLY EXAMIN ED AND ANALYZED BY VARIOUS COURTS INCLUDING THAT OF HONBLE APEX COURT . THE REVISIONAL POWER CONFERRED ON THE CIT VIDE SECTION 263 IS OF V IDE AMPLITUDE. IT ENABLES THE CIT TO CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDING UNDER THE ACT. IT EMPOWERS THE CIT TO MAKE OR CAUS E TO BE MADE SUCH AN ENQUIRY AS HE DEEMS NECESSARY IN ORDER TO FIND O UT IF ANY ORDER PASSED BY ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE ONLY LIMITATION ON HIS POWERS IS THAT HE MUST HAVE SOME MATERIAL(S) WHICH WOULD ENABLE HI M TO FORM A PRIMA FACIE OPINION THAT THE ORDER PASSED BY THE AS SESSING OFFICER IS 6 ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE. ONCE HE COMES TO THE ABOVE CONCLUSION ON THE BASIS OF THE MATERIAL THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOU S AND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE CIT IS EMPOWER ED TO PASS AN ORDER AS THE CIRCUMSTANCES OF THE CASE MAY WARRANT. HE M AY PASS AN ORDER ENHANCING THE ASSESSMENT OR HE MAY MODIFY THE ASSES SMENT. HE IS ALSO EMPOWERED TO CANCEL THE ASSESSMENT AND DIRECT TO FR AME A FRESH ASSESSMENT. HE IS EMPOWERED TO TAKE RECOURSE TO AN Y OF THE THREE COURSES INDICATED IN SECTION 263. SO, IT IS CLEAR THAT THE CIT DOES NOT HAVE UNFETTERED AND UNCHEQUERED DISCRETION TO REVIS E AN ORDER. THE CIT IS REQUIRED TO EXERCISE REVISIONAL POWER WITHIN THE BOUNDS OF THE LAW AND HAS TO SATISFY THE NEED OF FAIRNESS IN ADMI NISTRATIVE ACTION AND FAIR PLAY WITH DUE RESPECT TO THE PRINCIPLE OF AUDI ALTERAM PARTEM AS ENVISAGED IN THE CONSTITUTION OF INDIA AS WELL AS IN SECTION 263. AN ORDER CAN BE TREATED AS ERRONEOUS IF IT WAS PASSE D IN UTTER IGNORANCE OR IN VIOLATION OF ANY LAW; OR PASSED WITHOUT TAKIN G INTO CONSIDERATION ALL THE RELEVANT FACTS OR BY TAKING INTO CONSIDERAT ION IRRELEVANT FACTS. THE PREJUDICE THAT IS CONTEMPLATED UNDER SECTION 263 IS THE PREJUDICE TO THE INCOME TAX ADMINISTRATION AS A WHO LE. THE REVISION HAS TO BE DONE FOR THE PURPOSE OF SETTING RIGHT DIS TORTIONS AND PREJUDICES CAUSED TO THE REVENUE IN THE ABOVE CONTE XT. THE 7 FUNDAMENTAL PRINCIPLES WHICH EMERGE FROM THE SEVERA L CASES REGARDING THE POWERS OF THE CIT UNDER SECTION 263 MAY BE SUMM ARIZED BELOW: (I) THE CIT MUST RECORD SATISFACTION THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BOTH THE CONDITIONS MUST BE FULFILLED. (II) SECTION 263 CANNOT BE INVOKED TO CORRECT EAC H AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ONLY WHEN AN ORDER IS ERRONEOUS, THAT THE SECTION WILL BE ATTRACTED. (III) AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SUFFICE FOR THE REQUIREMENT OR ORDER BEING ERRONEOUS. (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORDER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND IF THE ASSESSING OFFICER HAS ADOPTED ONE OF THE COURSES PERMISSIBLE UNDER LAW OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW UNDER WITH WHICH THE CIT DOES NOT AGREE, IT CANNOT BE TREATED AS AN 8 ERRONEOUS ORDER, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE UNDER THE LAW. (VI) IF WHILE MAKING THE ASSESSMENT, THE ASSE SSING OFFICER EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME, THE CIT, WHILE EXERCISING HIS POWER UNDER SECTION 263, IS NOT PERMITTED TO SUBSTITUTE HIS ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIMATED BY THE ASSESSING OFFICER. (VII) THE ASSESSING OFFICER EXERCISE QUASI-JUDICIA L POWER VESTED IN HIM AND IF HE EXERCISES SUCH POWER IN ACCORDANCE WITH LAW AND ARRIVES AS A CONCLUSION, SUCH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION. (VIII) THE CIT, BEFORE EXERCISING HIS JURISDICTION UNDER SECTION 263, MUST HAVE MATERIAL ON RECORD TO ARRIVE AT A SATISFACTION. (IX) IF THE ASSESSING OFFICER HAS MADE ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND THE ASSESSEE HAS GIVEN DETAILED EXPLANATION BE A LETTER IN WRITING AND THE ASSESSING OFFICER ALLOWED THE CLAIM ON BEING SATISFIED WITH THE EXPLANATION 9 OF THE ASSESSEE, THE DECISION OF THE ASSESSING OFFICER CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD . 6. REVERTING TO THE FACTS OF THIS CASE, WE HAVE FOUND THAT THE A.O. HAS DULY EXAMINED BOTH THE ISSUES RAISED BY TH E LD. CIT AND HAS TAKEN AN APT DECISION AS PER LAW. THE ASSESSEE HAS BEEN CONSISTENTLY FOLLOWING THE FIFO METHOD FOR VALUING HIS STOCK AND NO ANOMALY HAS BEEN NOTICED OR HAS BEEN MENTIONED BY T HE LD. CIT IN HIS ORDER. THE REVISION IS BASED MORE ON CONJECTUR ES AND SURMISES AND GENERAL OBSERVATIONS OF THE LD. CIT AND NOT ON FACTS. HE HAS NOT AT ALL GIVEN REASONS FOR REVISING HIS ORDER. I N THE LIGHT OF THE ABOVE MENTIONED LEGAL POSITION ON THIS SUBJECT, WE HAVE FOUND THAT THE TWIN CONDITIONS OF SECTION 263 DO NOT EXIST IN THIS CASE. THE ASSESSMENT ORDER IS NOT AT ALL ERRONEOUS BECAUSE IT HAS BEEN PASSED AFTER DUE APPLICATION OF MIND BY THE A.O. THE LD. CIT CANNOT REPLACE HIS OWN VIEW U/S 263 FOR REVISING THE ASSES SMENT ORDER. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT DATED 14.2.2014 AND RESTORE THAT OF THE A.O. 10 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE COURT ON 11 TH JUNE, 2014). SD/- SD/- (N.K.SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 11 TH JUNE, 2014. VL/ COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.