M/s. Kavery Wines, Namakkal V. ITO, Namakkal

ITA 330/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5006 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 30-05-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 19-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN
• Assessee Lawyers: T S LAKSHMIVENKATARAMAN
• Keywords: Opportunity of being heard; Non compliance; Revenue expenditure
• Section: 133A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B ENCH C C HENNAI BEFORE SHRI HARI OM MARATHA, J.M. AND SHRI N.S. SAINI , AM .. I.T.A. NO S . 330 TO 333 /MDS/2 0 1 0 ASSESSMENT YEAR S 1999 - 2000 TO 2002 - 03 M/S KAVERY WINES 94 - D, VELUR MAIN ROAD PETTAPALAYAM POST , PARAMATHI VELUR TK., NAMAKKAL DISTRICT (PAN NO. K 5599 [166] ) VS. THE I.T .O WARD 1(2) NAMAKKAL (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI T.S. LAKSHMI VENKATARAMAN DEPARTMENT BY : SHRI K.E.B. RENGARAJAN O R D E R PER N.S. SAINI, A.M - : TH ESE ARE FOUR APPEAL S FILED BY THE ASSESSEE DIRECTED AGAINST THE COMMON ORDER PASSED U/S 263 OF THE INCOME - TAX ACT, 1961 [IN SHORT, THE ACT] BY THE LD. CIT , SALEM DATED 4 . 12 .20 0 6 FOR ASSESSMENT YEARS 1999 - 2000 TO 2002 - 03 RESPECTIVELY. SINCE THE ISSUE INVOLVED IN ALL THESE PAGE 2 OF 10 I.T.A. NO. 330 TO 333/MDS/2010 AP PEALS IS SAME, WE ARE DISPOSING THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF BREVITY AND CONVENIENCE. 2. IN ALL THESE APPEALS, THE ASSESSEE HAS TAKEN SIX GROUNDS OF APPEAL. HOWEVER, T HE SOLE ISSUE INVOLVED IN ALL THESE APPEALS FOR ALL ASSESSMENT YEARS UNDER CONSIDERATION IS THAT THE COMMISSIONER OF INCOME - TAX WAS WRONG IN ENTERTAINING JURISDICTION U/S 263 OF THE ACT . 3. IN THE INSTANT CASE, THE CIT VIDE HIS ORDER DATED 4.12.2006 PASSED ORDER U/S 263 OF THE ACT REVISED ASSESSMENT M ADE IN THE CASE OF ASSESSEE FOR ASSESSMENT YEARS 1999 - 2000 TO2002 - 03. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM CONSISTS OF NINE PARTNERS WHO WERE CARRYING ON LIQUOR BUSINESS ON A LICENCE OBTAINED BY ONE OF THE PARTNERS, NAMELY, SHRI S. NAC HIMUTHU. A SURVEY U/S 133A WAS CONDUCTED ON 10.1.2003 IN THE BUSINESS CUM RESIDENTIAL PREMISES OF SHRI S.M. SAKTHIVEL WHO WAS ALSO A PARTNER IN THE ASSESSEE FIRM. DURING THE COURSE OF SAID SURVEY, INCRIMINATING DOCUMENTS MARKED BUNCH B WERE FOUND AND SH RI S.M. SAKTHIVEL, IN THE STATEMENT RECORDED ON 10.1.2003 AND 30.1.2003 STATED THAT THE IMPOUNDED DOCUMENTS REFLECTED CORRECT PROFIT OF M/S KAVERI WINES, THAT IS, FOR TH E PERIOD 1.6.1998 TO 31.5.2000 RS. 17,43,902/ - AND PAGE 3 OF 10 I.T.A. NO. 330 TO 333/MDS/2010 FOR THE PERIOD 1.6.2000 TO 31.7.2001 RS. 5,80,946/. ON THE BASIS O F THE ABOVE, ASSESSMENT OF THE ASSESSEE WAS REOPENED FOR THE ASSESSMENT YEARS 1999 - 2000 TO 2002 - 03. REASSESSMENT WAS COMPLETED ON 19.9.2003. IN THE REASSESSMENT ORDER SO PASSED BY THE ASSESSING OFFICER, THE ASSESSING OFFICE R ADOPTED THE INCOME OF THE ASSESSEE FOR THE PERIOD 1.6.1998 TO 31.7.2001 AT RS. 4 LAKHS ON THE BASIS OF STATEMENT OF SHRI S. NACHIMUTHU . THE RELEVANT OBSERVATION OF THE ASSESSING OFFICER IS AS UNDER: AFTER EXAMINING ALL THE MATERIAL AVAILABLE ON RECORDS, IT IS CONCLUDED THAT SHRI S. NACHIMUTHU WAS IN FULL POSSESSION AND CONTROL OF THE AFFAIRS AND ACCOUNTS OF THE FIRM. HE ONLY FILED RETURN OF INCOME FOR HT ABOVE CONCERN BEFORE THE SURVEY TOOK PLACE. IT IS ALSO NOTICED THAT THE NAME OF THE SAID CONCERN HAS NOT BEEN MENTIONED IN THE LOOSE SHEETS IMPOUNDED. IN VIEW OF THE ABOVE FACTS, STATEMENT GIVEN BY SHRI S. NACHIMUTH U IS ACCEPTED AND ASSESSMENT FOR THE Y EA RS IS COMPLETED. 4. THEREAFTER, THE LD. CIT CONSIDERING THE ABOVE O RDER DATED 19.9.2003 PASSED BY THE ASSESSING OFFICER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ISSUED SHOW CAUSE NOTICE DATED 21.9.2006. THE HEARING WAS FIXED ON 9.11.2006. ON THAT DATE, THE ASSESSEE SOUGHT ADJOURNMENT. THE LD. CIT ADJ OURNED THE HEARING AND RE FIXED ON PAGE 4 OF 10 I.T.A. NO. 330 TO 333/MDS/2010 20.11.2006 AND ON THAT DATE, THERE BEING NO COMPLIANCE BY THE ASSESSEE, PASSED AN EX PARTE ORDER U/S 263 OF THE ACT AND HELD AS UNDER: A. THE ASSESSEE SHOULD BE ASSESSED IN THE STATUS OF AOP B. THE PROFITS OF THE BUSINESS SHOULD BE ADOPTED AT RS. 17,43,902/ - FOR THE PERIOD FROM 1.6.1998 TO 31.5.2000 AND RS. 5,80,964/ - FOR THE PERIOD 1.6.2000 TO 31.7.2001. THE PROFIT FOR EACH ASSESSMENT YEAR SHOULD BE ADOPTED AND PROPORTIONATE BASIS [IN PROPORTIO N TO THE NUMBER OF DAYS IN THAT YEAR]. C. THE SUM OF RS. 11,27,725/ - PAID TO VILLAGE PUBLIC FOR DEVELOPMENT SHOULD BE TAXED IN RESPECTIVE ASSESSMENT YEARS RELATING TO THE DATES OF PAYMENT IF THE SOURCES OF THE SAME REMAINED UNEXPLAINED. D. THE MAMOOL EXP ENSES AND DONATION BE DISALLOWED. THE DETAILS OF GENERAL EXPENSES SHOULD BE CALLED FOR AN EXAMINED. 5. BEFORE US, THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE DIRECTION OF THE LD. CIT TO ASSESS INCOME OF THE ASSESSEE IN THE STAT US OF AN AOP WAS CORRECT. HOWEVER, THE ORDER OF THE PAGE 5 OF 10 I.T.A. NO. 330 TO 333/MDS/2010 LD. CIT IN RESPECT OF OTHER ISSUES WERE NOT JUSTIFIED OR TENABLE. HE ARGUED THAT THE ASSESSING OFFICER HAS EXAMINED THE STATEMENT OF BOTH THE PERSONS, NAMELY SHRI S.M. SAKTHIVEL AND SHRI S. NACHIMUTHU AND ARRIVED AT THE CONCLUSION THAT THE STATEMENT OF SHRI S. N ACHIMUTHU IS CORRECT. HE ACCORDINGLY ASSESSED THE INCOME OF RS. 4 LAKHS IN THE ASSESSMENT YEARS BY APPORTIONING THE SAME. THEREAFTER, HE CONTENDED THAT AS THE ASSESSING OFFICER HAD ADOPTED A POSSIBLE VIEW AFTER EXAMINING THE MATERIAL, THE LD. CIT WAS NOT JUSTIFIED IN EXERCISING JURISDICTION U/S 263 OF THE ACT IN RESPECT OF THAT ISSUE. HE ALSO PLACED RELIANCE ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS ABOVE CONTENTION: 1. CIT VS. HONDA SIEL POWER PRODUCTS 333 ITR 547 [DELHI] 2. CIT VS. MAX INDIA LTD [2008] 166 TAXMAN 188 [SC] 3. CIT VS. SUNBEAM AUTO LTD. [2011] 332 ITR 167 [DELHI] 6. ON THE OTHER HAND, THE LD. D.R. SUPPORTED THE ORDER OF THE LD. CIT FOR THE REASONS MENTIONED IN THE ORDER OF THE LD. CIT. 7. WE FIND THAT IN RESP ECT OF ISSUE OF ASSESSMENT OF THE ASSESSEE IN THE STATUS OF AOP, THE LD. A.R. OF THE ASSESSEE HAS FAIRLY CONCEDED THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND THE DIRECTION OF THE LD. CIT WAS CORR ECT. WE, THEREFORE, UPHOLD THE ORDER OF THE LD. CIT ON THIS ISSUE. PAGE 6 OF 10 I.T.A. NO. 330 TO 333/MDS/2010 8. IN RESPECT OF REMAINING ISSUES , WE FIND THAT ALL THE REMAINING ISSUES ARISE OUT OF THE DOCUMENTS IMPOUNDED DURING THE COURSE OF SURVEY AND STATEMENTS OF SHRI S.M. SAKTHIVEL AND SHRI S. NACHIMUTHU . THE CRUX OF THE MATTER IS THAT, AS PER THE LD. CIT, ASSESSMENT SHOULD HAVE BEEN MADE ON THE BASIS OF IMPOUNDED DOCUMENTS AND STATEMENT OF SHRI S.M. SAKTHIVEL AND NON - MAKING OF ASSESSMENT ON THAT BASIS, RENDERS ASSESSMENT ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF THE REVENUE. WE FIND THAT AS PER THE ASSESSING OFFICER, STATEMENT OF SHRI S. NACHIMUTHU WAS CORRECT BECAUSE HE WAS IN THE CONTROL OF THE BUSINESS OF THE ASSESSEE, HE FILED RETURN OF INCOME BEFORE SURVEY AND THE IMPOUNDED DOCUMENTS DO NOT BEAR NAME OF THE ASSESSEE AND, THEREFORE, HE COMPLETED THE ASSESSMENT ON THE BASIS OF STATEMENT OF SHRI S. NACHIMUTHU. 9. WE FIND THAT COPY OF DOCUMENTS IMPOUNDED, COPY OF STATEMENT OF SHRI S.M. SAKTHIVEL AND COPY OF STATEMENT OF SHRI S. NACHIMUTHU HAVE NOT BEEN PRODUCED BY EITHER OF THE PARTIES. W HAT WERE THE CONTENTS OF THE IMPOUNDED DOCUMENTS , STATEMENT OF SHRI S.M. SAKTHIVEL AND STATEMENT OF SHRI S. NACHIMUTHU HAVE NOT BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER OR THE LD. CIT. ACCORDING TO US, SIMPLY BECAUSE ONE OF THE PAGE 7 OF 10 I.T.A. NO. 330 TO 333/MDS/2010 PARTNER S HAS FILED RETURN AND THE SAID PARTNER WAS MANAGING AND CONTROLLING THE AFFAIRS OF THE FIRM, F ROM THIS IT CANNOT BE CONCLUDED THAT THE OTHER PARTNERS COULD NOT POSSES DOCUMENTS RELEVANT TO THE AFFAIRS OF THE FIRM OR T HE OTHER PARTNERS HAD NO KNOWLEDGE ABOUT THE FINANCIAL RESULTS OF THE FIRM OR STATEMENT MADE BY OTHER PARTNERS IN RESPECT OF AFFAIRS OF THE FIRM WAS NOT RELIABLE . NOTHING HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER THAT UNDER WHAT CIRCUMSTANCES SH RI S.M. SAKTHIVEL CAME INTO THE POSSESSION OF THE IMPOUNDED DOCUMENTS AND THE DOCUMENTS RELATED TO WHOM , HOW AND WHEN THE SAID DOCUMENTS WERE PREPARED AND UNDER WHAT CIRCUMSTANCES SHRI S.M. SAKTHIVEL GAVE STATEMENT WHICH WAS RECORDED ON 10.1.2003 AND 30.1. 2003. FURTHER, FROM THE MATERIAL S AVAILABLE BEFORE US, IT IS NOT CLEAR AS TO HOW AND ON WHAT BASIS SHRI S. NACHIMUTHU STATED THAT INCOME OF THE ASSESSEE DURING THE PERIOD 1.6.1998 TO 31.7.2001 WAS RS. 4 LAKHS AND HOW THE ASSESSING OFFICER VERIFIED THE SAM E. FURTHER, WE FIND THAT IN THE DECISION OF THE DELHI HIGH COURT IN THE CASE OF HONDA SIEL POWER PRODUCTS [SUPRA] AND OF THE HON'BLE SUPREME COURT IN THE CASE OF MAX INDIA LTD [SUPRA] IT HAS BEEN HELD THAT WHEN A VIEW ADOPTED BY THE ASSESSING OFFICER WAS POSITIVE VIEW ON THE DATE O N WHICH LD. CIT PASSED ORDER U/S 263 OF THE ACT , HIS ACTION U/S 263 IS NOT SUSTAINABLE. PAGE 8 OF 10 I.T.A. NO. 330 TO 333/MDS/2010 10. FURTHER IN THE CASE OF SUNBEAM AUTO LIMITED [SUPRA], THE HON'BLE DELHI HIGH COURT HAS H ELD AS UNDER: THE OPINION OF THE ASSESSING OFFICER IN TREATING THE EXPENDITURE AS REVENUE EXPENDITURE WAS PLAUSIBLE AND THUS THERE WAS NO MATERIAL BEFORE THE LD. CIT(A) TO VARY THAT OPINION AND ASK FOR FRESH INQUIRY. 11. IN OUR CONSIDERED VIEW, THE ABOVE DECISIONS DO NOT HELP THE CASE OF THE ASSESSEE. IN THE INSTANT CASE, THE ISSUE IS THAT, ACCORDING TO THE LD. CIT , ASSESSING OFFICER SHOULD NOT HAVE IGNORED THE IMPOUNDED DOCUMENTS AND STATEMENT OF SHRI S.M. SAKTHIVEL ONLY IN VIEW OF STATEMENT OF SHRI S. NACHIMUTHU. WE ARE OF THE CONSIDERED OPINION THAT IN VIEW OF NO MATERIAL HAVING BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER TO SHOW THAT THE IMPOUNDED DOCUMENTS RELATE TO SOME PERSONS OTHER THAN THE ASSESSEE, STATEMENT OF SHRI S.M. SAKTHIVEL W A S MADE UNDER SOME MISTAKE OF FACT OR LAW, THE SAME COULD NOT BE IGNORED ONLY ON THE BASIS OF SUBSEQUENT STATEMENT OF ANOTHER PARTNER WHO WAS CLAIMED TO BE THE PERSON WHO CONTROLLED OR MANAGED THE AFFAIRS OF THE FIRM. IN OUR CONSI DERED VIEW, THE IMPOUNDED DOCUMENTS AND STATEMENT OF SHRI S.M. PAGE 9 OF 10 I.T.A. NO. 330 TO 333/MDS/2010 SAKTHIVEL WAS IGNORED WITHOUT MAKING DUE AND PROPER VERIFICATION. HOWEVER, WE ALSO FIND THAT THE LD. CIT HAS ALSO DIRECTED TO MAKE ADDITION ON THE BASIS OF IMPOUNDED DOCUMENTS AND STATEMENT OF SHRI S.M. SAKTHIVEL WITHOUT MAKING ANY DUE ENQUIRY AND WITHOUT CONSIDERING THE STATEMENT OF SHRI S. NACHIMUTHU. IT IS OBSERVED FROM THE RECORDS THAT SHRI S.M. SAKTHIVEL WAS NOT EXAMINED AFTER THE STATEMENT OF SHRI S. NACHIMUTHU BY ANY AUTHORITY TO BRING O UT TRUE FACTS OF THE CASE. IT IS OBSERVED THAT THE LD. CIT PASSED THE ORDER ON THE FIRST DATE OF NON COMPLIANCE BY THE ASSESSEE WITHOUT ALLOWING ANY FURTHER OPPORTUNITY TO THE ASSESSEE AND WITHOUT MAKING ANY FURTHER ENQUIRE IN THE MATTER. IN TH E SE CIRCUM STANCES, IN OUR CONSIDERED OPINION, IT SHALL BE IN THE INTEREST OF JUSTICE TO RESTORE THE REMAINING ISSUES BACK TO THE FILE OF THE LD. CIT FOR ADJUDICATION AFRESH AFTER PROPER VERIFICATION AND AFTER ALLOWING SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASS ESSEE IN THE LIGHT OF OBSERVATIONS MADE HEREINABOVE. WE ORDER ACCORDINGLY. 12 . IN THE RESULT, ALL THE SE APPEAL S FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE COURT ON 31 ST MAY 2011. PAGE 10 OF 10 I.T.A. NO. 330 TO 333/MDS/2010 SD/ - SD/ - ((HARI OM MARATHA ) (N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 31 ST MAY, 201 1 . VL COPY TO: ASSESSEE / AO / CIT (A) / CIT / D.R. / GUARD FILE