Ram Rang, Meerut V. CIT, Meerut

ITA 3276/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8048 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 17-02-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 23-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BALWAN CHAUHAN
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3); 263

Judgement Text

1 ITA NO. 3276/DEL/2013 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SMT SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A .NO.- 3276/DEL/2013 (ASSESSMENT YEA R-2008-09) RAM RANG 120, RAM NAGAR MEERUT (APPELLANT) VS COMMISSIONER OF INCOME T A X AAYAKAR BHAWAN, BHAINSALI GROUND, MEERUT. (RESPONDENT) APPELLANT BY SH. M.P. RASTOGI, ADV RESPONDENT BY SH. BALWAN CHAUHAN, CIT(DR) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 12/3/2013 PASSED BY CIT -MEERUT. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS:- 1. THAT THE ASSESSEE ORDER DATED 25 TH OCTOBER 2010 PASSED U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) IS NEITHER ERRONEOUS NOR PR EJUDICIAL TO THE INTEREST OF REVENUE AND CONSEQUENTLY THE ASSUMPTION OF JURISDICTION U/S 263 OF THE ACT BY TH E CIT IS ARBITRARY, UNJUST AND INVALID. DATE OF HEARING 17.02.2016 DATE OF PRONOUNCEMENT 27.04.2016 2 ITA NO. 3276/DEL/2013 2. THAT THE ASSESSEE ORDER DATED 25 TH OCTOBER 2010 PASSED BY THE ASSESSING OFFICER AFTER MAKING PROPER ENQUI RY WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F THE REVENUE AND CONSEQUENTLY THE ASSUMPTION OF JURISDIC TION BY CIT (APPEALS) U/S 263 OF THE ACT IS ARBITRARY, U NJUST, ILLEGAL AND BASED ON SURMISES AND CONJECTURES NOT PERMISSIBLE UNDER THE LAW. 3. THAT WITHOUT PREJUDICE TO GROUNDS NO. 1 AND 2 AB OVE, THE COMMISSIONER OF INCOME TAX HAS ERRED ON FACTS AND U NDER THE LAW IN OBSERVING THAT THE TRANSPORTATION CHARGE S OF RS.1,04,80,182/- ARE INCORRECT, UNSUPPORTED, TOTALL Y UNMATCHED, UNVERIFIABLE AND WRONG AND CONSEQUENTLY THE ADDITION OF RS.1,04,80,182/- TO THE INCOME OF THE A SSESSEE ON ACCOUNT OF INCORRECT CLAIM OF BOGUS EXPENSES IS ARBITRARY, UNJUST AND WITHOUT ANY BASIS. 4. THAT THE LD. CIT(APPEALS) HAS ERRED ON FACTS IN OBSERVING THAT THE PAYMENT SLIPS IN RESPECT OF TRANSPORTATION CHARGES PAID DO NOT EVEN GIVE PARTIES NAME OR OTHER DETAILS AND CONSEQUENTLY THE DISALLOWANCE OF TRANSPORTATION CHA RGES OF RS.1,04,80,182/- IS ARBITRARY, UNJUST AND BASED ON SURMISES AND CONJECTURES NOT PERMISSIBLE UNDER THE LAW. 5. THAT THE COMMISSIONER OF INCOME TAX HAS ERRED ON FACTS AND UNDER THE LAW IN HOLDING THAT THE ASSESSING OFF ICER HAD MADE NO ENQUIRY ABOUT THE FUEL AND OIL AND TRUC K REPAIR EXPENSES AND THEN DIRECTING THE ASSESSING OF FICER TO LOOK INTO THE SAME AND ARRIVE AT A PROPER CONCLU SION. 6. THAT THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENC E AND WITHOUT PREJUDICE TO ONE ANOTHER. 3. THE ASSESSEE IS A PROPRIETOR OF M/S BOMBAY BANAR AS TRANSPORT COMPANY, MEERUT AND ENGAGED IN THE BUSINE SS OF TRANSPORTING GOODS THROUGH TRUCKS. DURING THE COURS E OF ASSESSMENT PROCEEDINGS, THE A.O MADE AN ADDITION OF RS.90,000/- 3 ITA NO. 3276/DEL/2013 IN RESPECT OF TRUCK REPAIR AND MAINTENANCE AND ALSO ADDITION OF RS.23,063/- IN RESPECT OF CAR AND TELEPHONE EXPENSE S. THE CIT U/S 263 ISSUED NOTICE DATED 15/2/2013 ON THE FOLLOW ING POINTS AS THE CIT HELD THAT THE A.O HAS PASSED THE ASSESSMENT ORDER WITHOUT PROPER ENQUIRY. A). THE CASE WAS SELECTED UNDER SCRUTINY TO INVESTI GATE OTHER EXPENSES OF RS.1,21,39,868/-. THE A.O HAS OBTAINED ONLY THE HEADWISE AMOUNT DETAILS INCLUDED IN SAID AMOUNT. T HE BIGGEST HEAD IS TRANSPORTATION CHARGES RS. 1,09,76, 832/- FOR WHICH NO DETAILS ARE OBTAINED. SIMILARLY IN P & L A/C HUGE EXPENSES HAVE BEEN CLAIMED UNDER THE HEAD FUEL & O IL FOR RS.1,17,50,577/- AND TRUCK REPAIR EXPENSES FOR RS.16,08,015/- FOR WHICH ALSO NO DETAILS ARE OBTAIN ED & NO ENQUIRY MADE. 4. THE CIT THEREAFTER PASSED AN ORDER U/S 263 DATED 12/3/2013 HOLDING THAT THE ASSESSEE WAS CONFRONTED AS TO HOW IN THE ABSENCE OF ANY VOUCHERS OR BILLS OR EVEN THE IDENTITY OF TH E PARTY TO WHOM ALLEGED PAYMENTS WERE MADE, THE EXPENSES WERE ADMIS SIBLE FOR WHICH THERE WAS NO EXPLANATION WHATSOEVER. THE CIT FURTHER HELD THAT AS PER THE FACTS OF THE CASE THE ASSESSEE HIMS ELF MADE PAYMENTS SLIPS WHICH DO NOT EVEN GIVE PARTIES NAME OR ANY OTHER DETAILS STATING THAT NO SUCH DETAILS ARE KEPT OR MA INTAIN VIDE THESE SLIPS THE ASSESSEE HAD SHOWN CASH PAYMENT EACH OF W HICH IS AROUND OR JUST MARGINALLY LESS THAN RS.20,000/-. T HE ASSESSEE ALSO COULD NOT OFFER ANY EXPLANATION AS TO HOW SUCH CHAR GES ON HIRING 4 ITA NO. 3276/DEL/2013 SMALL TEMPO ETC, FOR LOCAL TRIPS INSIDE TOWN PER TR IP COULD BE SO HIGH EVEN THE PARTIES NAME OR ANY OTHER DETAILS ON EVEN THE NAME OF THE CITY TOWN WERE NOT APPEARING ON THE SAID SLIPS WHIC H WERE MERELY OF SELF-SERVING NATURE. THUS, THE CIT HELD THAT THE E NTIRE AMOUNT OF RS.1,04,80,182/- REMAIN TOTAL UNVERIFIABLE AND, THE REFORE, THE A.O WAS WRONG AND UNJUST TO ALLOW THE SAME WHICH REMAIN ED TOTALLY UNEXPLAINED. THUS, ASSESSEES CLAIM REGARDING TRAN SPORTATION CHARGES WAS HELD AS INCORRECT BY THE CIT. AS RELAT ES TO EXPENSES IN RESPECT OF FUEL, OIL AND TRUCK REPAIR EXPENSES, THE CIT HELD THAT NO DETAILS WERE OBTAIN AND NO ENQUIRY WAS MADE DURING THE COURSE OF ASSESSMENT AND DIRECTED THE ASSESSING OFFICER TO LO OK INTO THE SAME AFTER AFFORDING REASONABLE OPPORTUNITIES TO THE ASS ESSEE AND ARRIVE AT A PROPER CONCLUSION. 5. THE LD. AR SUBMITTED THAT DURING THIS ASSESSMENT YEAR AS WELL AS IN EARLIER AND SUBSEQUENT ASSESSMENT YEARS SECTI ON 143(3) ASSESSMENT WAS MADE AND THERE WAS NO DISALLOWANCE I N SUBSEQUENT AS WELL AS EARLIER ASSESSMENT YEARS IN R ESPECT OF TRUCK REPAIR AND MAINTENANCE AS WELL AS FUEL, OIL EXPENSE S AND TRANSPORTATION CHARGES. THE LD. AR HAS DRAWN ATTEN TION TO PAGE 54 OF THE PAPER BOOK STATING THEREIN THAT THE ASSESSEE HAS THROUGHOUT HIS RETURN CLAIM THESE EXPENSES AND IT HAS BEEN ALL OWED BY THE ASSESSING OFFICER IN THE PAST AS WELL AS IN SUBSEQU ENT YEARS. THE LD. AR ALSO DRAWN ATTENTION TO PAGES 27, 30 AND 31 OF THE PAPER BOOK WHEREIN THE DETAILS OF OTHER EXPENSES WERE GIV EN AS WELL AS THE COMPARATIVE RETURN OF EARLIER YEARS HAVE BEEN GIVEN TO THE ASSESSING OFFICER DURING THE RELEVANT ASSESSMENT PROCEEDINGS. THE LD. AR 5 ITA NO. 3276/DEL/2013 SUBMITTED THAT CIT HAS PASSED ORDER U/S 263 ONLY ON THE SOLE GROUND THAT THERE WAS NO PROPER ENQUIRY BY THE ASSE SSING OFFICER. THIS ALLEGATION DOES NOT SUSTAIN IN LIGHT OF APEX C OURT JUDGMENT IN THE CASE OF MALABAR INDUSTRIES CO. LTD VS. CIT 243 ITR 83 (S.C) AS ERRONEOUS AND PRE-JUDICIAL ASSESSMENT HAS TO BE TAK EN INTO ACCOUNT. THE LD. AR SUBMITTED THAT THE ERRONEOUS A ND PRE-JUDICIAL ASSESSMENT ORDER FIRST HAS TO BE PROVED AND IT SHOU LD BE IN VIOLATION OF LAW SET UP IN SECTION 263 THEN ONLY THE CIT CAN REOPEN THE CASE OR GIVE HIS FINAL FINDING ON CONTRARY TO THE ASSESS MENT ORDER. THE LD. AR SUBMITTED THAT THE AUDITED BOOKS OF ACCOUNTS AND PROPER VOUCHERS WERE SUBMITTED BEFORE THE ASSESSING OFFICE R AND THE ASSESSING OFFICER AFTER VERIFYING THE SAME HAS PASS ED PROPER ORDER NOT EXPENSES DURING THE YEAR IN RESPECT OF TRANSPOR TATION WAS LESSER THAN EARLIER YEAR. THE CIT SHOULD HAVE CONSIDERED THAT IN THE PAST AND IN THE SUBSEQUENT, THE ASSESSEE WAS DEALING IN THE SAME BUSINESS AND ON THE VERY SAME EXPENSES AND CHARGES, THE ASSESSEE HAS CLAIM TAX BENEFIT. IN THE SUBSEQUENT ASSESSMEN T YEAR 2009-10 THERE WAS NO SUCH DISALLOWANCE IN RESPECT OF FUEL, OIL AND MAINTENANCE EXPENSES. THUS, THE ORDER U/S 263 IS N OT JUST AND PROPER. THE LD. AR RELIED UPON CIT VS. SUNBEAM AUT O LTD. 332 ITR 167 THE JURISDICTIONAL HIGH COURT JUDGMENT. THE LD . AR SUBMITTED THAT THE JUDGMENTS WHICH WERE CITED BY THE CIT IN H IS ORDER ARE NOT APPLICABLE IN ASSESSEES CASE. 6. THE LD. DR SUBMITTED THAT U/S 263 CIT CAN EXAMIN E AND ASK FOR RECORDS AND IF IT WAS FOUND BY THE CIT THAT THE RE WAS NO SUFFICIENT ENQUIRY WAS MADE BY THE ASSESSING OFFICE R OR THE ORDER IS 6 ITA NO. 3276/DEL/2013 ERRONEOUS AND PRE-JUDICIAL TO THE INTEREST OF REVEN UE. THE CIT HAS FULL POWERS TO REFUSE THE SAID ORDER OF ASSESSMENT. THE LD. DR FURTHER SUBMITTED THAT THE A.O HAS NOT DONE ANY VER IFICATION OF EXPENSES THERE WAS NO INVESTIGATION BY ASSESSING OF FICER THAT IS ON THE CIT HAS DIRECTED THE ASSESSING OFFICER TO COND UCT ENQUIRY. HE SUBMITTED THAT IF A.O FOLLOWS TO CONDUCTING ENQUIRY OR INVESTIGATION THE CIT HAS POWERS U/S 263 OF THE INCOME TAX ACT AN D IN THE PRESENT CASE THE CIT HAS RIGHTLY TAKEN COGNIZANCE O F SECTION 263 FOR THE INTEREST OF REVENUE. 7. WE HAVE PERUSED ALL THE RECORDS AND HEARD BOTH T HE PARTIES THE CONTENTION OF LD. AR HAS BEEN THAT ALL THE MATE RIAL RECORD AND AUDITED BOOKS OF ACCOUNTS FOR THE RELEVANT ASSESSME NT YEAR WERE BEFORE THE ASSESSING OFFICER AND FROM THE PAPER BOO K FURNISHED BY THE ASSESSEE IT CAN BE SEEN THAT ALL THE DOCUMENTS WERE PRODUCED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF A SSESSMENT PROCEEDINGS. THE CIT U/S 263 HAS SIMPLY ISSUED NOT ICE THAT THERE WAS NO PROPER ENQUIRY BUT FROM RECORDS IT CAN BE SE EN THAT PROPER ENQUIRY WAS MADE BY THE ASSESSING OFFICER AND THER E WAS RELEVANT DOCUMENTS AVAILABLE BEFORE THE ASSESSING OFFICER T O COME TO THE CONCLUSION AND PASS ASSESSMENT ORDER. THE EARLIER YEAR ASSESSMENT ORDERS AND SUBSEQUENT ASSESSMENT ORDERS HAVE ALSO BEEN TAKEN INTO COGNIZANCE DURING THE ARGUMENT. IN THE PRESENT CASE THE EXPENSES CLAIMED BEFORE THE ASSESSING OFFI CER WERE SIMILAR FOR ALL THE PRECEDING AND SUBSEQUENT YEARS & NO DIS CREPANCY WAS POINTED OUT. THE LD. CIT ONLY REQUIRED THE A.O TO MAKE FURTHER ENQUIRY WHICH IS NOT THE SPIRIT OF SECTION 263 OF T HE ACT. ON A 7 ITA NO. 3276/DEL/2013 SIMILAR ISSUE THE HONBLE DELHI HIGH COURT IN THE C ASE OF CIT VS. SUNBEAM AUTO LTD. REPORTED AT 332 ITR 167HELD AS UN DER:- 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF TH E COUNSEL ON THE OTHER SIDE AND HAVE GONE THROUGH THE RECORDS. THE FIRST I SSUE THAT ARISES FOR OUR CONSIDERATION IS ABOUT THE EXERCISE OF POWER BY THE CIT UNDER S. 263 OF THE IT ACT. AS NOTED ABOVE, THE SUBMISSION OF LEARNED C OUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER, THE AO DID NOT CONSIDER THIS ASPECT SPECIFICALLY WHETHER THE EXPENDITURE IN QUES TION WAS REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PREDICATES ON TH E ASSESSMENT ORDER, WHICH APPARENTLY DOES NOT GIVE ANY REASONS WHILE AL LOWING THE ENTIRE EXPENDITURE AS REVENUE EXPENDITURE. HOWEVER, THAT B Y ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE AO HAD NOT APPLIED HIS MIND ON THE ISSUE. THERE ARE JUDGMENTS GALORE LAYING DOWN THE PRINCIPL E THAT THE AO IN THE ASSESSING ORDER IS NOT REQUIRED TO GIVE DETAILED RE ASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC. THEREFORE, ONE HA S TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. LEA RNED COUNSEL FOR THE ASSESSEE IS RIGHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE DISTINCTION BETWEEN 'LACK OF INQUIRY' AND 'INADEQUA TE INQUIRY'. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSE LF GIVE OCCASION TO THE CIT TO PASS ORDERS UNDER S. 263 OF THE ACT, MERELY BECAUSE HE HAS DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF 'LACK OF INQUIRY' THAT SUCH A COURSE OF ACTION WOULD BE OPEN. IN GABRIAL INDIA LT D. (SUPRA), LAW ON THIS ASPECT WAS DISCUSSED IN THE FOLLOWING MANNER : '... .....FROM A READING OF SUB-S. (1) OF SECTION, IT IS CLEAR THAT THE POWER O F SUO MOTU REVISION CAN BE EXERCISED BY THE CIT ONLY IF, ON EXAMINATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT, HE CONSIDERS THAT ANY O RDER PASSED THEREIN BY THE ITO IS 'ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE'. IT IS NOT AN ARBITRARY OR UNCHARTERED POW ER. IT CAN BE EXERCISED ONLY ON FULFILMENT OF THE REQUIREMENTS LAID DOWN IN SUB-S. (1). THE 8 ITA NO. 3276/DEL/2013 CONSIDERATION OF THE CIT AS TO WHETHER AN ORDER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, MUST B E BASED ON MATERIALS ON THE RECORD OF THE PROCEEDINGS CALLED FOR BY HIM. IF THERE ARE NO MATERIALS ON RECORD ON THE BASIS OF WHICH IT CAN BE SAID THAT TH E CIT ACTING IN A REASONABLE MANNER COULD HAVE COME TO SUCH A CONCLUS ION, THE VERY INITIATION OF PROCEEDINGS BY HIM WILL BE ILLEGAL AN D WITHOUT JURISDICTION. THE CIT CANNOT INITIATE PROCEEDINGS WITH A VIEW TO STAR TING FISHING AND ROVING ENQUIRIES IN MATTERS OR ORDERS WHICH ARE ALREADY CO NCLUDED. SUCH ACTION WILL BE AGAINST THE WELL ACCEPTED POLICY OF LAW THA T THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDINGS, THAT STALE ISSUE S SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE AND THAT LAPSE OF TIME MU ST INDUCES REPOSE IN AND SET AT REST JUDICIAL AND QUASI-JUDICIAL CONTROV ERSIES AS IT MUST IN OTHER SPHERES OF HUMAN ACTIVITY. THE RATIO LAID DOWN IN THE AFORESAID CASE IS SQUARE LY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. WE THEREFORE SET ASIDE THE IMPUGNED ORDER AND ASSESSMENT ORDER IS RESTORED. 8. IN RESULT, THE APPEAL IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 27TH OF APRIL, 2016. SD/- SD/- ( N. K. SAINI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27/04/2016 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 9 ITA NO. 3276/DEL/2013 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 17/02/2016 PS 2. DRAFT PLACED BEFORE AUTHOR 18/02/2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 2 7 . 0 4 .2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 2 7 . 0 4 .2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 10 ITA NO. 3276/DEL/2013