SHREE SHANKAR PLASTIC LTD, MUMBAI V. ITO 8(3)(1), MUMBAI

ITA 3252/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0966 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 14-03-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 07-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAKDR
• Assessee Lawyers: VIJAY MEHTAAR
• Keywords: Rectification of order

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./I.T.A./3252/MUM/2014, /ASSESSMENT YEAR: 2009-10 M/S. SHREE SHANKAR PLASTICS LIMITED 11, ORCHID TOWER, YAMUNA NAGAR, LOKHANDWALA COMPLEX ANDHERI (W),MUMBAI-400 053. PAN:AAFCS 6383 P VS. ITO-8(3)(1) AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI A.K. NAYAK-DR ASSESSEE BY: SHRI VIJAY MEHTA-AR / DATE OF HEARING: 14.03.2017 / DATE OF PRONOUNCEMENT:19.04.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DTD.20.03.2014OF CIT(A)-18,MU MBAI,THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSEESS-COMPANY,ENGAGED IN BUSINESS OF SUPPL YING PLASTIC RAW MATERIAL,FILED ITS RETURN OF INCOME AT RS. NIL.THE ASSESSING OFFICER (AO) COM PLETED THE ASSESSMENT U/S.143(3),ON 30/12/2011,DETERMINING ITS INCOME AT RS. 18.42 LAKH S. 2. THE ASSESSEE HAS RAISED THREE GROUNDS OF APPEAL. GR OUND NUMBER 2 DEALS WITH MERITS OF THE CASE,WHEREAS IN REMAINING TWO GROUNDS JURISDICTIONA L ISSUE HAS BEEN RAISED. DURING THE ASSESSMENT PROCEEDINGS THE AO OBSERVED T HAT THE ASSESSEE HAD RECEIVED COMMISSION OF RS. 25.35 LAKHS AND INTEREST OF RS. 3 .81 LAKHS FROM BASF STYRENICS PRIVATE LTD.(BASF),THAT IT HAD NOT OFFERED BOTH THE ITEMS I N ITS RETURN OF INCOME. HE DIRECTED THE ASSESSEE TO FILE AN EXPLANATION IN THAT REGARD AND HE ALSO ISSUED NOTICE U/S. 133 (6) TO BASF. AFTER CONSIDERING THE AVAILABLE MATERIAL AND THE RE PLY BASF,AO MADE AN ADDITION OF RS. 26.16 LAKHS(RS.25,35,189/-)UNDER THE HEAD COMMISSIO N INCOME AND (RS.3,81,559/-)UNDER THE HEAD UNEXPLAINED INCOME TO THE INCOME OF THE ASSESS EE. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA) AND MADE DETAILED SUBMISSI ONS ARGUING THAT IT HAD NOT RECEIVED THE 3252/M/14(09-10) SHREE SHANKAR PLASTICS 2 COMMISSION FROM BASF. HE CALLED FOR A REMAND REPORT FROM THE AO. A COPY OF THE REPORT WAS SUPPLIED TO THE ASSESSEE AND COMMENTS WERE CALL ED FOR ABOUT THE REPORT. AFTER CONSIDERING THE AVAILABLE MATERIAL,THE FAA HE LD THAT INTEREST IN COMMISSION PAYMENT MADE TO THE ASSESSEE BY BASF RELATED TO PERIOD OCTO BER, 2007 TO MARCH, 2008 I.E. RELEVANT FOR THE AY.2008-09, THAT FROM THE LETTER SENT BY BA SF TO THE AO IT WAS CLEAR THAT COMMISSION INCOME WAS TO BE ASSESSED IN THE AY.2008-09 AND NOT IN THE YEAR UNDER APPEAL, THAT BASF HAD MADE ADJUSTMENT OF INTEREST IN COMMISSION AMOUN T IN THE MONTH OF JULY/AUGUST, 2008, THAT IT PERTAIN TO THE PERIOD OCTOBER,2007-MARCH,20 08, THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THAT THE AMOUNT SH OULD BE ASSESSED IN ITS SENT FOR THE AY. 2008-09.ACCORDINGLY,HE DELETED THE ADDITIONS MADE B Y THE AO AND DIRECTED HIM TO ASSESS THE INCOME IN THE AY.2008-09 BY TAKING APPROPRIATE ACTI ON U/S.147/148 OF THE ACT. 3. DURING THE COURSE OF HEARING BEFORE US, THE AUTHORI SED REPRESENTATIVE (AR) CONTENDED THAT THE FAA HAD NO JURISDICTION TO DIRECT THE AO TO ASS ESS THE INCOME IN QUESTION IN OTHER AY., THAT HIS ORDER LACKED JURISDICTION, THAT THE ASSESS EE HAD NOT RAISED THE ISSUE OF TAXABILITY OF INCOME IN A PARTICULAR YEAR BEFORE HIM, THAT IN ITS GROUNDS OF APPEAL IT HAS OBJECTED TO THE RECTIFICATION ORDER PASSED BY THE AO. HE RELIED UPO N THE CASES OF MURLIDHAR BHAGWAN DAS (52 ITR 335),ANIL SURI (66SOT 180) THE LILASONS INDUSTR IES LTD (ITA/308/IND/2015-AY.2011- 12,DATED 30/06/2016). THE DEPARTMENTAL REPRESENTATI VE (DR) SUPPORTED THE ORDER OF THE FAA. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE ARE OF THE OPINION THAT BEFORE DECIDING THE ISSUE ON MERITS JU RISDICTIONAL ISSUE HAS TO BE DECIDED. WE FIND THAT WHILE DECIDING THE APPEAL,THE F AA HAS DI RECTED THE AO TO TAKE ACTION U/S. 147/148 OF THE ACT AND TO ASSESS THE INCOME OF THE ASSESSEE FOR THE AY. 2008-09 AND NOT FOR THE YEAR UNDER CONSIDERATION.THUS, HE HAS GIVEN A DIRECTION FOR AN AY.FOR WHICH NO APPEAL WAS PENDING BEFORE HIM.WE FIND THAT SIMILAR ISSUE WAS D EALT BY THE TRIBUNAL IN THE CASE OF LILASONS INDUSTRIES LTD.(SUPRA).AFTER NARRATING THE FACTS OF THE CASE THE TRIBUNAL OBSERVED AS UNDER: 9. AGAINST THIS ORDER OF THE LD. CIT(A), THE DEPART MENT IS NOT IN APPEAL. THE ASSESSEE IS CHALLENGING THE DIRECTION OF THE LD CIT(A) TO TAKE REMEDIAL ACTION AS PER LAW FOR THE RELEVANT A.Y. 2009-10 AND A.Y. 2010-11 IN THE CASE OF APPELL ANT COMPANY IN BOTH THE CASES. 10. DURING THE COURSE OF HEARING, THE LD. AUTHORIZE D REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE FINDINGS OF THE LD. CIT(A) GIVING DIRECTIO NS FOR YEARS NOT IN APPEAL IS UNSUSTAINABLE ON TWO COUNTS: - 1. LD. CIT(A) HAS NO JURISDICTION LEGALLY TO GIVE S UCH DIRECTIONS 2. MOREOVER, SUCH FINDINGS/ DIRECTIONS COULD NOT BE GIVEN IN THE FACTS OF THE CASE. 3252/M/14(09-10) SHREE SHANKAR PLASTICS 3 11. SO FAR AS THE FIRST COUNT I.E. LD. CIT(A) HAS N O JURISDICTION LEGALLY TO GIVE SUCH DIRECTIONS, IT WAS SUBMITTED THAT U/S. 251, THE POWERS OF LD. CIT( A) ARE WORDED. IT IS A SETTLED LAW THAT THE LD. CIT(A) HAS COTERMINUS POWERS WITH THAT OF THE L D. AO. LD. CIT(A) COULD CONDUCT ANY ENQUIRY AS HE THINKS FIT, AND DO ENHANCEMENT OF ASS ESSMENT. THE JURISDICTION OF LD. CIT(A) IS NOT LIMITED TO THE SUBJECT MATTER OF APPEAL, BUT TO THE SUBJECT MATTER OF ASSESSMENT. HE CAN DO WHAT THE LD. AO HAS FAILED TO DO. 12. FOR THIS CONTENTION, THE LD. AUTHORIZED REPRESE NTATIVE FOR THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING CASE LAWS :- (I) CIT VS KANPUR COAL S YNDICATE 53 ITR 225, 229 (SC). (II) KAPURCHAND SHRIMAL 131 ITR 451, 460 (SC). (II I) CIT VS AHMEDABAD CRUCIBLE CO. 206 ITR 574 (GUJ.) 13. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE FURTHER SUBMITTED THAT IT WOULD NOT MEAN THAT LD. CIT(A) HAS UNLIMITED POWERS. THERE AR E FETTERS ON THE POWERS OF LD. CIT(A). PROCEEDINGS BEFORE LD. CIT(A) ARE CONFINED THE YEAR WHICH IS PENDING BEFORE HIM. IF APPEAL FOR A.Y. 2011-12 ARE PENDING BEFORE LD. CIT(A) ANY OBSERVATION FOR ANY OTHER AY. WOULD BE IMPROPER IN DECIDING THE APPEAL FOR A.Y. 2011-12. F OR THIS CONTENTION, LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE RELIED ON FOLLOWING JUDGMENTS: - (A)CIT VS C.M. RAJGARHIA 121 ITR 778 (PAT.), 785. (B)C.M. RAJGARHIA 121 ITR 778 (PAT.). (C) PT. HAZARI LAL 39 ITR 265 (ALL.) (D)LAXMI NARAIN AGARWAL 47 ITR 456 (ALL.) (E ) MATHURADAS B. MOHTA 56 ITR 269 (BOM.) (F) N. KT. SIVALINGAM CHETTIAR 66 ITR 586 (S C) (G)DURGA PRASAD 57 ITR 583 (ALL.) (H)NATHALAL DHANJIBHAI 59 ITR 615 (GUJ.) (I) DAVE ( MRS. RH) 140 ITR 1035 (CAL.) (J) ITO VS MURLIDHAR BHAGWAN DAS 52 ITR 335 (SC) (K)ONKAR NATH 64 ITR 347 (ALL.) (L) CIT VS HIRDEY NARAIN YOGENDRA PRAKASH, 82 ITR 136 (ALL.). (M) CIT VS RAJGARHIA (C.M.) 121 ITR 778 (PAT.) (N) SHRI RAM NUTRIENT 14 ITJ 219 (ITAT INDORE).(O) SUN METAL FACTORY (I) (P) LTD. 124 ITD 14 (CHENNAI). XXXXX 20. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE HAVE ALSO GONE THROUGH THE CASE LAWS RELIED UPON BY THE LD. AUTHORIZED REPRESE NTATIVE FOR THE ASSESSEE. 21 WE FIND THAT THE GIST OF THE PLETHORA OF JUDGMEN TS QUOTED ABOVE IS THAT WHERE ANY AY. WAS NOT BEFORE THE LD. CIT(A), NO FINDINGS CAN BE GIVEN IN RESPECT OF SUCH CASES. WE FIND THAT IN THE CASE OF PT. HAZARI LAL, 39 ITR 265 (ALL.), IT W AS MADE CLEAR THAT THE AAC WAS ONLY COMPETENT TO RECORD THE FINDING THAT THE SUM, WHICH WAS IN QUESTION IN THE APPEAL BEFORE HIM, WAS NOT INCOME RELEVANT TO THE AY. 1947-48, WHICH W AS IN APPEAL IN THAT CASE. THE QUESTION WHETHER THIS INCOME ACCRUED OR WAS EARNED IN THE PR EVIOUS YEAR RELEVANT TO THE AY. 1946-47 (I.E. THE YEAR NOT IN APPEAL), WAS NOT BEFORE HIM F OR DECISION, NOR WAS IT A POINT ON WHICH IT WAS ESSENTIAL FOR HIM TO RECORD A FINDING BEFORE AP PROPRIATELY DECIDING APPEAL BEFORE HIM. WE ALSO OBSERVE IN THE CASE OF MATHURADAS B. MOHTA, 56 ITR 269 (BOM.), RELYING ON SUPREME COURT IN ITO VS. MURLIDHAR BHAGWAN DAS 52 ITR 335, WHEREIN IT WAS HELD THAT THE JURISDICTION OF THE AAC U/S. 31 OF THE 1922 ACT WAS STRICTLY CONFINED TO THE ASSESSMENT ORDER OF THAT PARTICULAR YEAR UNDER APPEAL. THE AAC NO DOUBT WAS COMPETENT TO HOLD WHETHER A PARTICULAR ITEM OR A PARTICULAR AMOUNT WAS INCOME O F THAT AY., BUT HE HAD NO JURISDICTION FURTHER TO DECIDE IN THAT APPEAL THE APPROPRIATE YE AR IN WHICH THE SAID INCOME WOULD FALL. WE ALSO OBSERVE THAT IN THE CASE OF NATHALAL DHANJIBHA I 59 ITR 615 (GUJ), WHEREIN IT WAS HELD THAT A FINDING, THEREFORE, COULD ONLY BE THAT WHICH WAS NECESSARY FOR THE DISPOSAL OF AN APPEAL IN RESPECT OF THE ASSESSMENT OF A PARTICULAR YEAR. HON'BLE SUPREME COURT OBSERVED THAT THE AAC MIGHT HOLD ON THE EVIDENCE THAT THE INCOME SHOW N BY THE ASSESSEE WAS NOT THE INCOME OF THE RELEVANT YEAR AND THEREBY EXCLUDE THAT INCOME F ROM THE ASSESSMENT OF THE YEAR UNDER APPEAL. WE FIND THAT IN THE CASE OF DAVE (MRS. RH) 140 ITR 1035 (CAL), WHERE ASSESSEES LAND WAS ACQUIRED BY GOVERNMENT IN MAY 1961 BUT COM PENSATION WAS RECEIVED AND ASSESSED IN AY. 1971-72 AS INCOME FROM OTHER SOURCES. LD. CI T(A) WHILE DELETING THE IMPUGNED ADDITION ON THE GROUND, INTER-ALIA, HELD THAT RELEV ANT CAPITAL GAINS HAD ALREADY BEEN TAXED IN AY. 1962-63 WHEN LAND WAS ACQUIRED, DIRECTED ITO TO BRING IT TO TAX IN CURRENT AY.. SUCH DIRECTIONS OF THE LD. CIT(A) WERE HELD TO BE UNSUST AINABLE. WE FIND THAT IN ONKAR NATH, 64 ITR 347(ALL.),HON'BLE ALLAHABAD HIGH COURT HELD THAT TH E LAW GIVES THE AAC THE POWER TO GIVE DIRECTION THAT A CERTAIN SUM WHICH WAS DELETED FROM THE ASSESSMENT OF THE FIRM SHOULD BE 3252/M/14(09-10) SHREE SHANKAR PLASTICS 4 ASSESSED IN THE HANDS OF A PARTNER AS HIS INDIVIDUA L INCOME.FOR THE AY. 1957-58, THE ITO MADE AN ADDITION WHICH INCLUDED CERTAIN SUM INTRODU CED IN THE HEAD OFFICE CASH BOOK IN NOVEMBER 1955. ON APPEAL, THE AAC DELETED THE ADDIT ION OF SAID SUM ON THE GROUND THAT THE SAID SUM WAS OUTSIDE THE FINANCIAL YEAR 1956-57, RE LEVANT TO THE AY. IN QUESTION. THE COURT FURTHER OBSERVED THAT IN THE INSTANT CASE THE AAC W AS DEALING WITH THE PROPRIETY OF THE ASSESSMENT FOR AY. 1957-58. HE FOUND THAT THE SAID SUM DID NOT RELATE TO THAT YEAR. THAT FINDING WAS SUFFICIENT TO DISPOSE OF THE ITEM. HE W OULD NOT RECORD A DEFINITE FINDING THAT THIS VERY ITEM REPRESENTED INCOME OF THE ASSESSEE FROM A N UNDISCLOSED SOURCE FOR AY. 1956-57. WE FIND THAT IN THE INSTANT CASE THE AY. INVOLVED BEFO RE THE LD. CIT(A) WAS A.Y. 2011-12. THE OBSERVATIONS MADE FOR AY.S 2010-11 AND 2009-10 WOUL D BE OUT OF THE JURISDICTION OF THE LD. CIT(A), AS BEFORE HIM NO SUCH AY. WAS PENDING. AS T HE ISSUE IS SQUARELY COVERED BY HON'BLE SUPREME COURT AND THE HON'BLE HIGH COURT JUDGMENTS, WE HOLD THAT THE DIRECTIONS OF THE LD. CIT(A) TO TAKE REMEDIAL ACTION IN THE A.Y. 2010-11 AND 2009-10 IS UNCALLED FOR AND LIABLE TO BE EXPUNGED. WE DIRECT ACCORDINGLY. CONSIDERING THE ABOVE AND THE JUDGMENT OF MURALIDHA R BHAGVANDAS(SUPRA) OF HONBLE APEX COURT,WE ARE OF THE OPINION THAT THE FAA HAD NO POW ER TO GIVE DIRECTIONS ABOUT ANOTHER AY. ESPECIALLY NO APPEAL WAS FILED BEFORE HIM FOR THAT YEAR.THEREFORE,WE HOLD THAT THE ORDER PASSED BY HIM WAS INVALID.GROUND NO.1 AND 3 ARE DEC IDED IN FAVOUR OF THE ASSESSEE AND GROUND NO.2 IS NOT BEING ADJUDICATED,AS SAME WOULD NOT SURVIVE. AS A RESULT,APPEAL FILED B Y THE ASSESSEE STANDS ALLOWED. . ORDER PRONOUNCED I N THE OPEN COURT ON 19 TH APRIL, 2017. 19 , 2017 SD/- SD/- ( / RAM LAL NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 19.04 .2017. 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.