Industrial Promotion and Investment Corporation of Orissa Ltd, Bhubaneswar V. CIT, Bhubaneswar

ITA 353/CTK/2012

• Counselvise Citation: 35322114 RSA 2012
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 24-09-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 01-06-2012
• Court: TRIBUNAL
• Department Lawyers: MATI PRAMITA TRIPATHY
• Assessee Lawyers: A K SABAT B K MOHAPATRA ARS
• Keywords: Opportunity of being heard; Assessment record
• Section: 143(3); 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK ( ) BEFORE . . , , HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER. /AND . . . , S HRI K.S.S.PRASAD RAO, JUDICIAL MEMBER / I.T.A.NO. 353/CTK/2012 / ASSESSMENT YEAR 2007 - 08 INDUSTRIAL PROMOTION & INVESTMENT CORPORATION OF ODISHA LTD., IPICOL HOUSE, JANPATH, SAHEED NAGAR,BHUBANESWAR. PAN: AAACI 4815 J - - - VERSUS - COMMISSIONER OF INCOME - TAX, BHUBANESWAR. ( /APPELLANT ) ( / RESPONDENT ) / FOR THE APPELLANT : / SHRI A.K.SABAT/.B.K.MOHAPATRA, ARS / FOR THE RESPONDENT: / SHRI MATI PRAMITA TRIPATHY, CIT - DR / DATE OF HEARING: 24 . 09 . 2012 / DATE OF PRONOUNCEMENT: 28.09.2012 / ORDER . . , , SHRI K.K.GUPTA, ACCOUNTANT MEMBER. THIS APPEAL FOR THE ASSESSMENT YEAR 2007 - 08 IS ON THE LEARNED CI T ASSUMING JURISDICTION U/S.263 IS AGITATED BY THE ASSESSEE RAISING THE FOLLOWING GROUNDS. 1. THAT THE NOTICE DATED 5/6TH JULY 2011 U/S.263 OF THE INCOME TAX ACT, 1961 (ACT) OF THE LEARNED COMMISSIONER OF INCOME TAX, BHUBANESWAR (CIT) IS VOID AB INIT IO, INVALID, HAD IN LAW AND LEGALLY UNTENABLE. 2. THAT ASSUMING OF JURISDICTION BY THE LEARNED CIT BY INVOKING THE POWERS U/S.263 OF THE ACT AND THE ORDER DATED 28.03.2012 PASSED BY THE LEARNED CIT IS GROSSLY ERRONEOUS, BAD ON FACTS AS WELL AS IN LAW AND LEGALLY NOT TENABLE. 3. THAT THE ORDER DATED 28.03.2012 OF THE LEARNED CIT U/S.263 OF THE ACT IN DIRECTING THE LEARNED ASSESSING OFFICER (AO) TO PASS ASSESSMENT ORDER DE NOVO, IS CONTRARY TO FACTS, I.T.A.NO. 353 /CTK/2012 2 WITHOUT/IN EXCESS OF JURISDICTION, OH IN/I/O VOID, IN VALID, ERRONEOUS, BAD IN LAW AND THE SAME DESERVES TO BE QUASHED/SET ASIDE. 4. THAT THE LEARNED CIT HAS MIS - APPRECIATED/MISCONSTRUED THE FACTS ON THE ISSUE OF DEDUCTION OF RS.2,37,80,5 13/ - DEBITED UNDER AMOUNT UNREALIZABLE, IRRECOVERABLE, WRITTEN OFF A ND LOSS ON INVESTMENT IN P/L ACCOUNT CLAIMED AND LAWFULLY RIGHTLY ALLOWED BY THE LEARNED AO IN PASSING THE ORDER DATED 29.10.2009 U/S.L43(3) OF THE ACT AND THE ORDER DATED 28,03.2012 OF THE LEARNED CIT U/S. 263 OF THE ACT IS UNJUSTIFIED, CONTRARY TO FACTS , ERRONEOUS AND BAD IN LAW. 5. THAT THE DETAILS AND PARTICULARS RELATING TO DEDUCTION OF SUM OF 2,37,80,513 DEBITED UNDER AMOUNT UNREALIZABLE, IRRECOVERABLE, WRITTEN OFF AND LOSS ON INVESTMENT IN P/L ACCOUNT HAVING BEEN ASKED FOR SPECIFICALLY BY THE LEARNED AO AND THE SAME HAVING BEEN FILED BEFORE HIM ON 13.10.2009 AND THE ORDER DATED 29.10.2009 U/S .L43(3) OF THE ACT HAVING BEEN PASSED CONSIDERING THE SAME, THE LEARNED CIT HAS GROSSLY ERRED IN HOLDING THAT THE EARNED AO HAS NOT EXAMINED THE SAME AND THE ORDER DATED 28.03.20 12 IS CONTRARY TO FACTS, ERRONEOUS, BAD IN LAW AND LEGALLY NOT TENABLE. 2. THE LEARNED COUNSEL FOR THE ASSESSEE INITIATING HIS ARGUMENTS SUBMI TTED THAT THE ASSESSEE IS A 100% GOVERNMENT OF ODISHA UNDERTAKING FUNCTIONING AS THE NAME SUGGESTS PROMOTION OF INDUSTRIES IN THE STATE OF ODISHA BY ENCOURAGING INVESTMENT AND HAS BEEN IN THE BUSINESS OF GRANTING FINANCIAL AIDS TO THE NEEDY. THE BRIEF ASSESSMENT MADE FOR THE IMPUGNED ASSESSMENT YEAR WHEN THE REQUISITIONS BY THE ASSESSING OFFICER U/S.143( 2) AND 142(1) WERE COMPLIED WITH INCLUDING THE DETAILS OF THE AMOUNTS WRITTEN OFF BEING THE AMOUNTS NOT RECOVERABLE IN THE FORM OF TERM LOAN , EQUITY PARTICIPATION ETC., TOTALING 2.37 CORES AS GIVEN ON PAGE 131 OF THE PAPER BOOK WHICH DETAILS WERE ALSO SUBMITTED TO THE ASSE SSING OFFICER. THE DETAILS READ AS UNDER : I.T.A.NO. 353 /CTK/2012 3 A S MENTIONED EARLIER THESE DETAILS WERE PART AND PARCEL OF THE ASSESSMENT RECORD, THEREFORE, COULD NOT BE CONSIDERE D FOR DISCOVERING AN ERROR PREJUDICIAL TO THE INTEREST OF REVENUE NOT CONSIDERED BY THE ASSESSING OFFICER IN HIS BRIEF ORDER INSOFAR AS THERE ARE PLETHORA OF JUDGMENTS BEING CITED WHICH INDICATE THAT THE LEARNED CIT ASSUMING JURISDICTION U/S.263 HAS TO SAT ISFY HIMSELF THAT BOTH THE LIMBS OF SECTION 263 OF AN ERROR HAVING BEEN COMMITTED WHICH MAY HAVE RESULTED IN PREJUDICE TO THE REVENUE HAS TO BE ESTABLISHED. HE SUBMITTED THEREFORE THAT ONCE A REQUISITION U/S.142(1) HAD BEEN MADE, IT WAS NOBODYS CASE THAT THE ASSESSING OFFICER HAD NOT VERIFIED THE CLAIM OF THE AMOUNTS WRIT TEN OFF AS WERE CLAIMED, GIVEN IN PAPER BOOK PAGE 41 BEING THE ANNUAL REPORT FOR THE FY 2006 - 07 WHEN THE AMOUNTS WERE UNREALIZABLE OR IRRECOVERABLE WERE WRITTEN OFF RESULTING IN ADJUSTMENT OF PROFIT OF 2.15 CRORES FOR THE IMPUGNED ASSESSMENT YEAR RESULTING IN LOSS . IN I.T.A.NO. 353 /CTK/2012 4 SUPPORT OF HIS CONTENTION, HE FILED A COMPILATION OF CASE LAWS ALONG WITH THE FINANCIAL STATEMENTS FOR THE IMPUGNED ASSESSMENT Y EAR AS WELL AS THE MEMORANDUM AND ARTICLES OF ASSOCIATION WHEN THE ASSESSMENT ORDER HAS VERIFIED THE SAME IN ALLOWING THE CLAIM OF THE ASSESSEE AGAINST WHICH NO INFIRMITY HAS BEEN FOUND BY THE LEARNED CIT TO ASSUME JURISDICTION U/S.263 INSOFAR AS HE ISSUED THE SHOW CAUSE NOTICE BY EXAMINING THE ALLOWA BILITY OF THE EXPENDITURE. THE PURPORTED ENQUIRY SOUGHT TO BE MADE BY HIM WAS REPLIED TO AT THE TIME OF HEARING. HE HAS SUBMITTED A COPY OF THE SUBMISSIONS AS WERE MADE BEF ORE THE LEARNED CIT WHICH READ AS FOLLOWS. WITH RESPECT TO ABOVE, WE WOULD LIKE TO PLACE THE FOLLOWING FOR YOUR HONOURS KIND CONSIDERATION: (1) IPICOL IS 100% OWNED STATE GOVERNMENT UNDERTAKING FORMED 38 YEARS BACK FOR THE MAIN PURPOSE OF INDUSTRIAL PROMOTION IN THE STATE. (2) THE MAIN BUSINESS OF IPICOL WHILE PROMOTING INDUSTRIES IS TH AT OF PROVIDING LOANS, ADVANCES TO AND INVESTMENTS IN THE ESTABLISHMENT OF INDUSTRIES AS PER OBJECTS SET OUT IN THE MEMORANDUM & ARTICLES OF ASSOCIATION (COPY ENCLOSED 1). (3) WHILE CARRYING OUT SUCH BUSINESS OVER THE YEARS IPICOL, UNDER THE GUIDELINES I SSUED BY IDBI PROVIDES IN THE BOOKS FOR DOUBTFUL LOANS AND ADVANCES AND INVESTMENTS AND WHENEVER SUCH DOUBTFUL LOANS / ADVANCES / INVESTMENTS BECOME IRRECOVERABLE WRITES OFF THE SAME BY DEBIT TO PROFIT & LOSS A/C WITH REVERSAL OF PROVISIONS CREATED EARLIER . (COPY OF ANNUAL REPORT ENCLOSED 2) (4) THE ABOVE HAS BEEN THE CONSISTENT ACCOUNTING PRACTICE FOLLOWED BY THE CORPORATION OVER THE YEARS AS CONCURRED BY IDEI, STATUTORY AUDITORS APPOINTED BY COMPTROLLER & AUDITOR GENERAL OF INDIA OFFICE, AG OFFICE WHILE CARRYING OUT SUPPLEMENTARY AUDIT AFTER COMPLETION OF STATUTORY AUDIT. (5) THE ORDER OF ASSESSMENT U/S 143(3) FOR ASS. YEAR 2007 - 08 HAS BEEN GIVEN AFTER DETAILED SCRUTINY INCLUDING REVIEW OF WRITE OFFS FOR WHICH SEPARATE DETAILS AS CALLED FOR BY THE LEARNED ACIT WERE SUBMITTED VIDE OUR LETTER NO.ACCTS/IT RETURN / F.Y. 2006 - 07 DATED 13.10.2009 (COPY ENCLOSED - 3)_ IN VIEW OF ABOVE, WE BEG TO STATE BEFORE YOUR HONOUR THAT THE ORDER PASSED BY THE LEANED ACIT HAD BEEN RIGHTLY DONE BASED ON CONSISTENT ACCOUNTING PRACTICE FOLLOWED BY IPICOL IN WRITING OFF IRRECOVERABLE LOANS, ADVANCES, INVESTMENTS DURING THE COURSE OF ITS MAIN BUSINESS OPERATIONS I.T.A.NO. 353 /CTK/2012 5 BEING PROMOTION OF INDUSTRIES THROUGH ADVANCING OF LOANS & ADVANCES TO AND INVESTING IN THE ESTABLISHMENT OF INDUSTRIES AND THUS BEING REVENUE LOSS ALLOWABLE UNDER THE PROVISIONS OF INCOME TAX ACT, 1961. HENCE WE BEG TO STATE THAT THE PROCEEDINGS U/S 263 FOR REVISING THE ORDER OF ACIT BY TREATING THE WRITE OFFS OF 2,37,80,513 AS CAPITAL LOSS INSTEAD OF REVE NUE LOSS MAY PLEASE BE DROPPED. HE PRAYED THAT THE ORDER U/S.263 PASSED BY THE LEARNED CIT MAY BE QUASHED. 3. THE LEARNED CIT - DR OPPOSED THE CONTENTIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE FOR THE SIMPLE RE ASON THAT A CLAIM HAS BEEN MADE N REDUCING THE PROFIT ON THE BASIS OF THE CLAIM MADE BY ANOTHER CONCERN AND NOT BECAUSE THE ASSESSING OFFICER HAD ALLOWED THE CLAIM AS PART AND PARCEL OF THE EXPENDITURE CLAIMED BY THE ASSESSEE N ITS REGULAR CONDUCT OF BUSIN ESS. AN ERROR WAS FOUND BY THE LEARNED CIT INSOFAR AS THE DETAILS AS FURNISHED BY THE LEARNED COUNSEL FOR THE ASSESSEE ON PAGE 131 OF THE PB AS MENTIONED ABOVE CLEARLY INDICATE THAT THE AMOUNTS HAVE BEEN WRITTEN OFF AS REVENUE WHEN THE ASSETS HAVE BEEN SEI ZED AND SOLD WHETHER BY THE ASSESSEE OR BY THE LOAN DEBTORS OF THE ASSESSEE WERE OF CAPITAL NATURE . FURTHERMORE SHE POINTED OUT THAT THE NOTES TO THE ACCOUNTS CLEARLY INDICATE THAT THE SALE VALUES OF THE SEIZED ASSETS OF THE DEFAULTING UNITS ARE APPORTIONE D BY THE ASSESSEE AND THE OSFC ON THE BASIS OF TOTAL OVER DUES. THEREFORE, BOTH BEING SATE GOVERNMENT UNDERTAKINGS PARTICIPATED JOINTLY CANNOT BE HELD AS A CLAIM FROM THE PROFITS FROM THE ASSESSEE - COMPANY ALONE. THE AMOUNTS RECEIVABLE FROM OSFC THEREFORE B ECOMES INCOME TO THE ASSESSEE WHICH WAS SOUGHT TO BE DIRECTED BY THE LEARNED CIT ASSUMING JURISDICTION U/S.263 TO THE ASSESSING OFFICER TO VERIFY WHETHER COULD BE ALLOWED AS EXPENDITURE IN THE ASSESSMENT YEAR WAS RIGHTLY SUBJECTED TO REVISION U/S.263. THE CASE LAWS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE AS OF NOW DO NOT INDICATE THE FACTS INSOFAR AS THE EXPLANATION SUBMITTED BY THE ASSESSEE DURING THE COURSE I.T.A.NO. 353 /CTK/2012 6 OF REVISION PROCEEDINGS REQUIRED EXPLANATION BY THE LEARNED COUNSEL FOR THE ASSESSEE ON IDENT IFYING THE CLAIM ALONE AS REVENUE LOSS WAS NEVER EXPLAINED. THE LEARNED COUNSEL FOR THE ASSESSEE W ITHOUT INSISTING TO CITED CASE LAWS WHICH MAY HAVE ON DIFFERENT FACTUAL MATRIX OUGHT TO ALLOW THE ASSESSING OFFICER TO VERIFY THE FACTS AS NOTED BY THE LEARNE D CIT(A) U/S.263 . THE LEARNED CIT WAS WITHIN HIS JURISDICTION TO DIRECT THE ASSESSING OFFICER TO EXAMINE THE ISSUE DE NOVO AS PER THE PROVISIONS OF THE I.T.ACT WHICH SHOULD BE UPHELD AS BOTH THE LIMBS OF AN ERROR FOUND WHICH WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE HAS NOT BEEN DEMOLISHED AS HELD IN THE CASE LAWS RELIED . 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. ON CONSIDERATION OF THE FACTS AND CIRCUMSTANCES O F THE CASE, WE ARE INCLINED TO UPHOLD THE ORDER OF THE LEARNED CIT U/S.263 INSOFAR AS HE HAS DIRECTED THE ASSESSING OFFICER TO EXAMINE THE ISSUE OF ALLOWABILITY OF THE IMPUGNED EXPENDITURE AS PER THE PROVISIONS OF LAW AND NOT PASS THE WHOLE OF THE ASSESSME NT ORDER DE NOVO WHICH MAY BE THE SOLE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US. THE ASSESSING OFFICER WAS REQUIRED TO VERIFY THE CLAIM OF AMOUNTS WRITTEN OFF AMOUNTING TO 2,37,87,513 BEING AMOUNTS UNREALIZABLE, IRRECOVERABLE, WRITTEN OFF, LOSS OF INVESTMENT INSOFAR AS THEY HAVE NOT BEEN CLAIMED U/S.36(1)(VI) AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE AND WERE NEITHER THE EARLIER PROVISIONS WRITTEN OFF, THE ASSESSEE BEING A NON - BANKING FINANCIAL INSTITUTION, THEREFORE WAS RIGHTLY CONSIDERED BY THE LEARNED CIT FOR ASSUMING JURISDICTION U/S.263. THE DETAILS FURNISHED TO THE ASSESSING OFFICER REQUIRE D VERIFICATION WHICH HAD NOT BEEN DONE BY THE ASSESSING OFFICER AS PER OUR PERUSAL OF THE SAID ORDER. THE CLAIM OF THE ASSESSEE IS CONTRADICTORY TO THE EXTENT THAT THE CLAIMS HAVE BEEN MADE I.T.A.NO. 353 /CTK/2012 7 WITHOUT INDICATING AS TO THE EXTENT OF REVENUE LOSS SHARED BETWEEN THE TWO GOVERNMENT UNDERTAKINGS INSOFAR AS ONE OF THE GOVERNMENT UNDERTAKINGS STILL OWES AMOUNTS TO ANOTHER ON CAPITAL ACCOUNT . IT IS N OT PARTICIPATION OF REVENUE LOS S ES WHICH HAVE BEEN CLAIMED IN THE PROFIT & LOSS ACCOUNT. WE DO FIND THAT THE ERROR WAS PREJUDICIAL TO THE INTEREST OF REVENUE AS POINTED OUT BY THE LEARNED CIT WHEN HE HAS DIRECTED THE ASSESSING OFFICER TO EXAMINE T HE ISSUE AFRESH AFTER AFFORDING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THAT THIS ISSUE HAS BEEN DEALT WITH BY THE ASSESSING OFFICER AT LENGTH IN ANY OF THE EARLIER ORDERS AS WELL, TO HOLD IT AS A VIEW SUSTAINABLE IN LAW . THE EXAMINATION THEREFORE HAS TO BE MADE DE NOVO. WE MAY CLARIFY THAT ONLY THIS ISSUE REQUIRES EXAMINATION AFRESH. IN THIS VIEW OF THE MATTER, THE CASE LAWS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE OF NO A VAIL TO THE ASSESSEE, WHICH ARE NOT APPLICABLE TO THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT ASSUMING JURISDICTION U/S.263 AND DISMISS THE APPEAL OF THE ASSESSEE. 5. IN THE RESULT, THE APPE AL OF THE ASSESSEE IS DISMISSED. SD/ - SD/ - ( . . . ) , (K.S.S.PRASAD RAO), JUDICIAL MEMBER ( . . ) , , (K.K.GUPTA), ACCOUNTANT MEMBER. ( ) DATE: 28.09.2012 ( ), (H.K.PADHEE), SENIOR.PRIVATE SECRETARY. I.T.A.NO. 353 /CTK/2012 8 - COPY OF THE ORDER FORWARDED TO: 1 . / THE APPELLANT : INDUSTRIAL PROMOTION & INVESTMENT CORPORATION OF ODISHA LTD., IPICOL HOUSE, JANPATH, SAHEED NAGAR,BHUBANESWAR. 2 / THE RESPOND ENT: COMMISSIONER OF INCOME - TAX, BHUBANESWAR. 3 . / THE CIT, 4 . ( )/ THE CIT(A), 5 . / DR, CUTTACK BENCH 6 . GUARD FILE . / TRUE COPY, / BY ORDER, APPENDIX XVII SEAL TO BE AFFIXED ON THE ORDER SHEET BY THE SR. P.S./P.S. AFTER DICTATION IS GIVEN 1. DATE OF DICTATION 24.09.201 2 . 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 25.09.2012 OTHER MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS P LACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.... 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S . 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER ................ 9. DATE OF DESPATCH OF THE ORDER ..