Sri Hari Om Bansal, Madurai V. ITO, Madurai

ITA 334/CHNY/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51742 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 24-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR I VIJAYAKUMAR
• Assessee Lawyers: R MEENAKSHISUNDARAM
• Keywords: Unexplained cash credit; Revision of order
• Section: 143(3); 133A; 68; 69; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI [BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER] I.T.A.NO.334/MDS/2011 ASSESSMENT YEAR : 2005-06 SHRI HARI OM BANSAL PROP. VISHNU GRANITES 22, AMC ROAD K.K.NAGAR MADURAI 625 020 VS THE INCOME-TAX OFFICER WARD I(1) MADURAI [PAN ABCPH0755N] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.MEENAKSHISUNDARAM RESPONDENT BY : DR.I.VIJAYAKUMAR, CIT/DR DATE OF HEARING : 03-08-2011 DATE OF PRONOUNCEMENT : 24-08-2011 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE, FOR ASSESSME NT YEAR 2005-06, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT, DATED 30 .3.2010, PASSED U/S 263 OF THE ACT. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE, AN INDIVIDUAL, IS RUNNING A BUSINESS IN THE NAME AND S TYLE OF M/S VISHNU GRANITES DEALING IN POLISHED GRANITES. A SURVEY U /S 133A OF THE ACT ITA 334/2011 :- 2 -: WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSES SEE ON 11.3.2005. CONSEQUENT UPON THE SURVEY, THE ASSESSEE FILED HIS RETURN OF INCOME FOR ASSESSMENT YEAR 2005-06 ON 27.1.2006 ADMITTING TOTAL INCOME OF ` 88,776/-. THE ASSESSING OFFICER COMPLETED THE ASSE SSMENT U/S 143(3) ON 28.12.2007 AT A TOTAL INCOME OF ` 8,45,670/-. SUBSEQUENTLY, THE LD. CIT CALLED FOR THE RECORDS OF THIS CASE AND FOUND T HAT THE ASSESSEE HAD RECEIVED CASH DEPOSITS AND ALSO MADE PAYMENTS IN CA SH TO VARIOUS PARTIES TOTALING TO ` 9,30,000/-. THE ASSESSING OFFICER HAD ISSUED NOTICE CALLING FOR THE DETAILS OF THESE AMOUNTS AND THE ASSESSEE HAD COMPLIED WITH BY FILING THE CONFIRMATORY LETTERS FR OM DIFFERENT CREDITORS. ON THE BASIS OF THE DECISIONS OF VARIOUS HIGH COURT S AND ALSO OF HON'BLE SUPREME COURT, THE LD. CIT WAS OF THE VIEW THAT FOR PROVING THE CASH CREDITS, THE ASSESSEE IS REQUIRED TO PROVE (I) THE IDENTITY OF THE CREDITORS, (II) THEIR CREDITWORTHINESS AND (III ) THE GENUINENESS OF THE TRANSACTIONS. IN THE OPINION THE LD. CIT, THE ASSE SSING OFFICER HAS NOT EXAMINED THESE CREDITS FROM THESE ANGLES. THEREFOR E, AFTER GIVING SHOW CAUSE NOTICE U/S 263, HE HAS REJECTED THE EXPL ANATION FILED ON BEHALF OF THE ASSESSEE AND HAS SET ASIDE THE ASSES SMENT ORDER BY HOLDING IT AS ERRONEOUS AND PREJUDICIAL TO THE INTE RESTS OF THE REVENUE. HE HAS DIRECTED THE ASSESSING OFFICER TO REDO THE A SSESSMENT BY TREATING ` 9,30,000/- AS UNEXPLAINED CASH CREDIT U/S 68 OF TH E ACT. HE HAS FURTHER ENLARGED THE AMBIT OF SECTION 263 BY OB SERVING THAT THE ITA 334/2011 :- 3 -: ASSESSING OFFICER IS AT LIBERTY TO CONSIDER ANY OTH ER RELEVANT POINTS DURING THE COURSE OF FRESH ASSESSMENT AS DIRECTED ABOVE. HE HAS ALSO DIRECTED TO COLLECT TAX ALONGWITH INTEREST AND PENA LTY AFTER EXPEDITIOUSLY COMPLETING THE ASSESSMENT ORDER. AGA INST THIS FINDING, THE ASSESSEE IS IN APPEAL HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX-I, MADURAI DATED 30.03.2010 PASSED U/S 263 OF THE ACT INSOFAR AS IT RELATES TO TREATING THE SUM OF ` 9,30,000 AS UNEXPLAINED CASH CREDIT UNDER SECTION 69 OF THE ACT IS AGAINST THE PROVISIO NS OF LAW AND CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE . 2. THE COMMISSIONER OF INCOME-TAX ERRED IN MAKING AN ADDITION OF ` 9,30,000/- AS UNEXPLAINED CASH CREDIT INASMUCH AS THE ASSESSEE HAS DULY SUBMITTED ALL REQUIRED EXPLANATIO NS WITH THE ASSESSING OFFICER WHO HAS COMPLETED THE ASSESSMENT AFTER VERIFYING THE FACTS. 3. THE COMMISSIONER OF INCOME-TAX OUGHT TO HAVE CO NSIDERED THE FACT THAT THE PARTIES FROM WHOM CASH CREDITS HA VE BEEN TAKEN HAVE FILED THEIR RETURN OF INCOME AND ARE DUL Y ASSESSED TO INCOME TAX AND INASMUCH AS THEIR IDENTITY, CREDITWO RTHINESS AND GENUINENESS OF THE TRANSACTIONS HAVE BEEN PROVED, THE COMMISSIONER OF INCOME-TAX SHOULD NOT HAVE REOPENED THE PROCEEDINGS BY HIS ORDER UNDER SECTION 263 OF THE A CT. F OR THESE REASONS AND FOR ANY OTHER R E ASONS THAT MAY BE ADDUCED AT THE T I ME O F HEA RI NG , I T I S PRAYED THAT THE HON ' BLE TRIBUN A L MAY BE P L EASED TO SET AS I DE T H E ORDE R OF THE COMMISSIONER OF INCOME TAX-I , MADURA I 30-03-20 1 0 IN SOF AR AS I T R E L ATES TO T R EATING THE SUM OF ` 9 , 30 , 000/- AS UNEXPLAINED CASH C R EDI T UN DE R SECTION 68 OF THE ACT AS AGAINS T THE PROVI SI ON S OF LAW AND CONTRARY TO THE FACT S AND C I R C UM STA N CES OF THE CASE , AND RENDER JUSTICE . 3. WE HAVE HEARD BOTH SIDES IN DETAIL. WE HAVE ALSO PERUSED CAREFULLY THE ENTIRE EVIDENCE 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. ITA 334/2011 :- 4 -: 4. THE SUBJECT OF REVISION UNDER SECTION 263 HAS BEE N VASTLY EXAMINED AND ANALYSED BY VARIOUS COURTS INCLUDING T HAT OF HONBLE APEX COURT. THE REVISIONAL POWER CONFERRED ON THE CIT VIDE SECTION 263 IS OF VIDE AMPLITUDE. IT ENABLES THE CIT TO CA LL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDING UNDER THE ACT. IT EM POWERS THE CIT TO MAKE OR CAUSE TO BE MADE SUCH AN ENQUIRY AS HE DEEM S NECESSARY IN ORDER TO FIND OUT IF ANY ORDER PASSED BY ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF T HE REVENUE. THE ONLY LIMITATION ON HIS POWERS IS THAT HE MUST HAVE SOME MATERIAL(S) WHICH WOULD ENABLE HIM TO FORM A PRIMA FACIE OPINION THAT THE ORDER PASSED BY THE OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJ UDICIAL TO THE INTEREST OF THE REVENUE. ONCE HE COMES TO THE ABOVE CONCLUSION S ON THE BASIS OF THE MATERIAL THAT THE ORDER OF THE ASSESSING OFFI CER IS ERRONEOUS AND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE, T HE CIT IS EMPOWERED TO PASS AN ORDER AS THE CIRCUMSTANCES OF THE CASE M AY WARRANT. HE MAY PASS AN ORDER ENHANCING THE ASSESSMENT OR HE MA Y MODIFY THE ASSESSMENT. HE IS ALSO EMPOWERED TO CANCEL THE ASS ESSMENT AND DIRECT TO FRAME A FRESH ASSESSMENT. HE IS EMPOWERE D TO TAKE RECOURSE TO ANY OF THE THREE COURSES INDICATED IN SECTION 26 3. SO, IT IS CLEAR THAT THE CIT DOES NOT HAVE UNFETTERED AND UNCHEQURED DIS CRETION TO REVISE AN ORDER. THE CIT IS REQUIRED TO EXERCISE REVISION AL POWER WITHIN THE BOUNDS OF THE LAW AND HAS TO SATISFY THE NEED OF FA IRNESS IN ITA 334/2011 :- 5 -: ADMINISTRATIVE ACTION AND FAIR PLAY WITH DUE RESPEC T TO THE PRINCIPLE OF AUDI ALTERAM PARTEM AS ENVISAGED IN THE CONSTITUTIO N OF INDIA AS WELL IN SECTION 263. AS ORDER CAN BE TREATED AS ERRONE OUS IF IT WAS PASSED IN UTTER IGNORANCE OR IN VIOLATION OF ANY LAW; OR P ASSED WITHOUT TAKING INTO CONSIDERATION ALL THE RELEVANT FACTS OR BY TAK ING INTO CONSIDERATION IRRELEVANT FACTS. THE PREJUDICE THAT IT CONTEMPL ATED UNDER SECTION 263 IS THE PREJUDICE TO THE INCOME TAX ADMINISTRATION A S A WHOLE. THE REVISION HAS TO BE DONE FOR THE PURPOSE OF SETTING RIGHT DISTORTIONS AND PREJUDICES CAUSED TO THE REVENUE IN THE ABOVE CONTE XT. THE 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 ORDE R OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTERESTS OF THE REVENUE. BOTH THE CONDITIONS MUS T 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 INCORR ECT APPLICATION OF LAW WILL SUFFICE FOR THE REQUIREME NT OR ORDER BEING ERRONEOUS. ITA 334/2011 :- 6 -: (IV) IF THE ORDER IS PASSED WITHOUT APPLICATION OF MIND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORD ER. (V) EVERY LOSS OF REVENUE CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND IF THE ASSESSING OF FICER HAS ADOPTED ONE OF THE COURSES PERMISSIBLE UNDER LA W 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 ERRONEOU S ORDER, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFIC ER 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 HI S POWER UNDER SECTION 263, IS NOT PERMITTED TO SUBSTI TUTE HIS ESTIMATE OF INCOME IN PLACE OF THE INCOME ESTIM ATED BY THE ASSESSING OFFICER. (VII) THE ASSESSING OFFICER EXERCISE QUASI-JUDICIA L POWER VESTED IN HIM AND IF HE EXERCISE SUCH POWER IN ACCORDANCE WITH LAW AND ARRIVES AS A CONCLUSION, SU CH CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION. ITA 334/2011 :- 7 -: (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 ENQU IRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS ON THE RELEVANT ISSUES AND THE ASSESSEE HAS GIVEN DETAILED EXPLANAT ION BE A LETTER IN WRITING AND THE ASSESSING OFFICER AL LOWED THE CLAIM ON BEING SATISFIED WITH THE EXPLANATION O F THE ASSESSEE, THE DECISION OF THE ASSESSING OFFICER CAN NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DOES NOT MAKE AN ELABORATE DISCUSSION IN THAT REGAR D. 5. REVERTING BACK TO THE FACTS OF THE CASE, WE HAV E FOUND CLEARLY FROM THE RECORD THAT THE ASSESSING OFFICER HAS VERI LY EXAMINED THIS ISSUE AND HAS TAKEN THE VIEW THAT THE CASH CREDITS STAND EXPLAINED. THIS IS NOT A CASE WHERE THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND TO A PARTICULAR ITEM OF INCOME. THE POWERS OF LD. CIT AS ANALYZED HEREIN ABOVE ARE ALSO RESTRICTED INASMUCH AS THAT HE CAN REVISE THOSE ITEMS OF INCOME IN A PARTICULAR ORDER ONLY AND ONLY WHEN THE TWIN CONDITIONS, THAT THE ORDER SHOULD NOT ONLY BE ERRO NEOUS BUT IT SHOULD ALSO BE PREJUDICIAL TO THE INTERESTS OF THE REVENU E, CO-EXIST. HOW THE ORDER BECOMES ERRONEOUS WE HAVE EXPLAINED IT WITH F EW ILLUSTRATIONS WITH THE HELP OF THE DECISIONS AND PRINCIPLES LAID DOWN THEREIN. IN OUR CONSIDERED OPINION, WHEN THE ASSESSING OFFICER HAS APPLIED HIS MIND TO THE ISSUE OF CASH CREDIT AND HAS COME TO A CONSCIOU S DECISION, SECTION ITA 334/2011 :- 8 -: 263 DOES NOT VEST THE CIT WITH THE POWERS OF AN A PPELLATE AUTHORITY. THE POWERS OF REVISION ARE DIFFERENT FROM RE-ASSES SMENT POWERS WHERE ANY ESCAPEMENT OF INCOME CAN BE BROUGHT TO TA X. IT IS THE SATISFACTION OF THE ASSESSING OFFICER WHICH MATTERS IN RE-ASSESSMENT PROCEEDINGS AND NOT THAT OF THE LD. CIT ALTHOUGH TH E HIGHER AUTHORITIES IN HIERARCHY OF ADMINISTRATION MAY BE TREATED AS C O-TERMINUS WITH THAT THE ASSESSING OFFICER; BUT THE SATISFACTION HAS ALW AYS TO BE THAT OF THE ASSESSING OFFICER AND THAT ACTUALLY WHICH MATTERS. THE ASSESSING OFFICER HAS TAKEN A VIEW ON PARTICULAR SET OF FACT S AND THE LD. CIT HAS ALSO MENTIONED THIS FACT IN SO MANY WORDS IN THE SE COND PARA OF HIS ORDER THAT THE ASSESSING OFFICER HAS CALLED FOR THE EXPLANATION IN THIS REGARD AND THE ASSESSEE HAS FILED CONFIRMATORY LETT ERS FROM THE CREDITORS ALONGWITH THEIR PAN NUMBERS. WHEN THE CR EDITORS HAVE FURNISHED THEIR CONFIRMATION REGARDING THE TRANSACT IONS AND THEIR SOURCE OF INCOME AND ALSO FURNISHED THE FACTS OF TH EIR BEING ASSESSED WITH THE DEPARTMENT, THEN IN OUR OPINION, ALL THE T HREE REQUIREMENTS AS LAID DOWN BY THE PRECEDENTS FOR PROVING CASH CREDIT S STAND FULFILLED TO THE SATISFACTION OF THE ASSESSING OFFICER. BUT THE APPELLATE AUTHORITY CAN FURTHER LOOK INTO THIS ASPECT BUT NOT THE CIT A S HAS BEEN DONE IN THIS CASE. AND THE PRIMARY ONUS OF THE ASSESSEE GE TS DISCHARGED. ON SIMILAR SET OF FACTS IF HE ASSESSING OFFICER HAS TA KEN A DECISION, BUT WHICH ACCORDING TO THE LD. CIT, IS NOT AND SHOULD N OT BE THAT DECISION, ITA 334/2011 :- 9 -: SECTION 263 DOES NOT EMPOWER HIM TO LOOK ON THE ISS UE FROM THAT ASPECT. THE LD. CIT CANNOT REPLACE HIS OWN OPINION AND SUBSTITUTE WITH THAT OF THE ASSESSING OFFICER. HE CAN REVISE THE A SSESSMENT ORDER ONLY AND ONLY WHEN THE TWIN CONDITIONS I.E ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, ARE FULFILLED. IN THIS C ASE, THE ASSESSMENT ORDER IS NOT AT ALL ERRONEOUS, HENCE, IT CANNOT BE REVISED. CONSEQUENTLY, WE SET ASIDE THE ORDER OF THE LD. CIT AND RESTORE THE ASSESSMENT ORDER. 6. IN THE RESULT, THE APPEAL STANDS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 24.08.2011. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER ( HARI OM MARATHA ) JUDICIAL MEMBER DATED: 24 TH AUGUST, 2011 RD COPY TO: APPELLANT /RESPONDENT/CIT(A)/CIT/DR