M/s V. Dhana Reddy & Co., Visakhapatnam V. The DCIT-1, Circle-1(1) Visakhapatnam, Visakhapatnam

ITA 354/VIZ/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67363 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 01-05-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 12-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Revision of order; Principle of natural justice; Source of fund
• Section: 194C; 148; 263

Judgement Text

ITA NOS.353&354/VIZ/2011 V.D. REDDY & CO., VISAKHA PATNAM IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.353&354/VIZAG/2011 ASSESSMENT YEAR : 2006-07 & 2007-08 V.D. REDDY & CO. VISAKHAPATNAM DCIT-1, CIRCLE-1(1) VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO.AACFC 4288P APPELLANT BY: SHRI G.V.N. HARI, ADVOCATE RESPONDENT BY: SHRI K.V.N. CHARYA, CIT(DR) DATE OF HEARING : 01.05.2013 DATE OF PRONOUNCEMENT : 03.05.2013 ORDER PER SHRI B.R. BASKARAN, ACCOUNTANT MEMBER:- BOTH THE APPEALS HAVE BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDERS PASSED BY LD. CIT U/S 263 OF THE INCOME-TAX ACT AND THEY RELATE TO THE ASSESSMENT YEARS 2006-07 AND 2007-08. THE ASSE SSEE IS CHALLENGING THE VALIDITY OF INITIATION OF REVISION PROCEEDINGS U/S 263 OF THE ACT BY LD. CIT. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF STEVEDORING, CLEARING & FORWARDING, SHORE HANDLING AND STEAMER AGENCY ETC. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE FIRM DID NOT FILE ITS RET URN OF INCOME, THOUGH THE PARTNERS OF THE FIRM WERE DECLARING THE SHARE INCOM E FROM THE FIRM IN THEIR RESPECTIVE RETURNS OF INCOME. HENCE, THE ASSESSING OFFICER ISSUED NOTICES U/S 148 OF THE ACT FOR BOTH THE YEARS UNDER CONSIDERATI ON. IN RESPONSE THERETO, THE ASSESSEE FILED THE RETURNS OF INCOME DECLARING INCOME ON ESTIMATED BASIS I.E. @ 7.5% OF THE GROSS RECEIPTS. THE ASSESSING O FFICER AFTER CARRYING OUT NECESSARY ENQUIRIES, COMPLETED THE ASSESSMENT BY ES TIMATING INCOME AT 10% OF THE GROSS RECEIPTS. ITA NOS.353&354/VIZ/2011 V.D. REDDY & CO., VISAKHA PATNAM 2 3. ON EXAMINATION OF THE RECORDS, THE LD. CIT N OTICED THAT GROSS RECEIPTS OF THE ASSESSEE INCLUDED GODOWN RENTAL INCOME. THE LD. CIT FURTHER NOTICED THAT THE ASSESSEE HAS CLAIMED TDS CREDIT IN RESPECT OF CONTRACT RECEIPTS ON WHICH TAX WAS DEDUCTED AT SOURCE U/S 194C OF THE AC T AND ALSO IN RESPECT OF RENT RECEIPTS ON WHICH TAX WAS DEDUCTED AT SOURCE U /S 194I OF THE ACT. THE LD. CIT TOOK THE VIEW THAT THE ASSESSING OFFICER HA S ERRED IN ESTIMATING THE INCOME AT 10% IN RESPECT OF GODOWN RENTAL RECEIPTS ALSO, AS HE WAS OF THE VIEW THAT THE NET INCOME FROM GODOWN RENT RECEIPTS COULD BE ASCERTAINED AFTER CONSIDERING THE EXPENSES RELATING TO THE SAME . ACCORDINGLY, THE LD. CIT TOOK THE VIEW THAT THE IMPUGNED ASSESSMENTS ARE ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, SINCE THE METHODOLO GY ADOPTED BY THE ASSESSING OFFICER RESULTED IN UNDER ESTIMATION OF T OTAL INCOME. ACCORDINGLY, THE LD. CIT INITIATED REVISION PROCEEDINGS U/S 263 OF THE ACT AND AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE, SET A SIDE THE ASSESSMENT ORDERS WITH THE DIRECTION TO RE-DO THE ASSESSMENTS OF THE ASSESSMENT YEARS UNDER CONSIDERATION DE-NOVO BY DETERMINING THE INCOME FRO M GODOWN RECEIPTS SEPARATELY IN ADDITION TO THE INCOME FROM CONTRACT RECEIPTS. AGGRIEVED BY THE ORDERS PASSED BY LD. CIT, THE ASSESSEE HAS FILED TH ESE APPEALS BEFORE US. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HEREIN HAS BEEN FILING RETURN OF INCOME FOR THE PAST 4 DEC ADES. THE ASSESSMENTS OF EARLIER YEARS WERE COMPLETED IN THE CENTRAL CIRCLE OF THE INCOME-TAX DEPARTMENT. SUBSEQUENTLY, ONE OF THE MAIN PARTNERS SHRI K. GANGI REDDY EXPIRED ON 11.12.2004 AND THEREAFTER DIFFERENCES CR OPPED UP AMONGST THE PARTNERS, WHICH WENT TO THE LEVEL OF COURT LITIGATI ON ALSO. ON ACCOUNT OF THESE REASONS, THE ASSESSEE COULD NOT MAINTAIN PROPER BOO KS OF ACCOUNTS AND COULD NOT FILE RETURNS OF INCOME ALSO. HENCE, THE ASSESS ING OFFICER ISSUED NOTICES U/S 148 OF THE ACT FOR THREE ASSESSMENT YEARS, VIZ. , ASSESSMENT YEARS 2005- 06 TO 2007-07. IN RESPONSE THERETO, THE ASSESSEE F IRM FILED RETURNS OF INCOME DECLARING AN INCOME ON ESTIMATED BASIS @ 7.5% OF TH E GROSS RECEIPTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE DETAILED ENQUIRIES WITH REGARD TO THE ESTIMATE MADE BY THE A SSESSEE. AT ONE STAGE, THE ASSESSING OFFICER PROPOSED TO ENHANCE THE ESTIM ATE TO 12.5% OF THE GROSS ITA NOS.353&354/VIZ/2011 V.D. REDDY & CO., VISAKHA PATNAM 3 RECEIPTS ON THE PRESUMPTION THAT THE ASSESSEE HAS D ECLARED INCOME AT 12.5% FOR THE ASSESSMENT YEAR 2004-05. HOWEVER, BEFORE T HE ASSESSING OFFICER, THE ASSESSEE DEMONSTRATED THAT THE INCOME DECLARED BY I T IN ASSESSMENT YEAR 2004-05 ACTUALLY WORKED OUT TO AROUND 10% ONLY. DU RING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ALSO TOOK NOTE OF THE FACT THAT THE RENTAL RECEIPTS FROM GODOWN WAS SHOWN IN THE EA RLIER YEARS. HOWEVER, AFTER CONSIDERING THE VARIOUS EXPLANATIONS OF THE A SSESSEE AND AFTER APPLICATION OF HIS MIND, THE ASSESSING OFFICER DETE RMINED THE TOTAL INCOME AT 10% OF THE GROSS RECEIPTS. HE FURTHER SUBMITTED TH AT THE GODOWN RENTALS ARE ALSO PART OF STEVEDORING AND CLEARING AND FORWARDIN G ACTIVITIES. HE FURTHER SUBMITTED THAT THE VIEW ENTERTAINED BY LEARNED CIT( A) THAT THE EXPENSES RELATING TO RENTAL INCOME FROM GODOWNS IS ASCERTAIN ABLE IS ALSO WRONG, SINCE THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNT. FU RTHER THE ASSESSING OFFICER HAS ESTIMATED THE INCOME ONLY BECAUSE THE ASSESSEE DID NOT MAINTAIN BOOKS OF ACCOUNT. BY PLACING RELIANCE ON THE FOLLOWING DE CISIONS, THE LEARNED COUNSEL SUBMITTED THAT THERE IS NO ERROR IN THE ASS ESSMENT ORDERS PASSED BY THE ASSESSING OFFICER AND HENCE THEY ARE OUTSIDE TH E SCOPE OF REVISION PROCEEDINGS. JEEWANRAM CHOUDHARY VS. CIT (2013)(84 DTR (JD)(TRI B) 317 MOOKAMBICA CONSTRUCTIONS (ITA NO.25/VIZAG/2009 DT. 13.11.2009) HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER IDENTICAL FASHION FOR THE ASSESSMENT YEAR 200 5-06 ALSO AT THE VERY SAME POINT OF TIME AND THE LEARNED CIT HAS THOUGHT FIT NOT TO REVISE THE SAME, THOUGH THE TIME LIMIT FOR REVISION WAS VERY M UCH AVAILABLE. 5. THE LEARNED D.R SUBMITTED THAT THE ASSESSEE WAS HAVING TWO DIFFERENT SOURCES OF INCOME AND THE ASSESSING OFFICER HAS FAI LED TO EXAMINE THIS ASPECT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HE FU RTHER SUBMITTED THAT THE LACK OF ENQUIRY ON THE PART OF THE ASSESSING OFFICE R WOULD MAKE THE ASSESSMENT ORDER ERRONEOUS ONLY AND HENCE IT IS SUS CEPTIBLE FOR REVISION UNDER SECTION 263 OF THE ACT. IN THIS REGARD, THE LEARNED D.R PLACED RELIANCE ON THE DECISION RENDERED BY THE HON'BLE GAUHATI HIG H COURT IN THE CASES ITA NOS.353&354/VIZ/2011 V.D. REDDY & CO., VISAKHA PATNAM 4 REPORTED IN 3451 ITR 434, 342 ITR 74 AND ALSO ON TH E DECISION RENDERED BY THE HON'BLE MADRAS HIGH COURT IN THE CASE REPORTED IN 346 ITR 452. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PE RUSED THE RECORD. BEFORE PROCEEDING FURTHER, WE FEEL IT PERTINENT TO DISCUSS ON THE LEGAL POSITION RELATING TO THE REVISION PROCEEDINGS CARRIED OUT UN DER SECTION 263 OF THE ACT. THE HON'BLE BOMBAY HIGH COURT, IN THE CASE OF GRASI M INDUSTRIES LTD. V CIT (321 ITR 92) HAS DISCUSSED ABOUT THE SCOPE OF PROVI SIONS OF SECTION 263 AS UNDER: SECTION 263 OF THE INCOME-TAX ACT, 1961 EMPOWERS TH E COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD O F ANY PROCEEDINGS UNDER THE ACT AND, IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN, BY THE ASSESSING OFFICER IS ERRONEO US IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, TO PASS AN ORDER UPON HEARING THE ASSESSEE AND AFTER AN ENQUIRY AS I S NECESSARY, ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THE KE Y WORDS THAT ARE USED BY SECTION 263 ARE THAT THE ORDER MUST BE CONSIDERED BY THE COMMISSIONER TO BE ERRONEOUS IN SO FAR AS IT I S PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THIS PROVISION HAS B EEN INTERPRETED BY THE SUPREME COURT IN SEVERAL JUDGMENTS TO WHICH IT IS NOW NECESSARY TO TURN. IN MALABAR INDUSTRIAL CO. LTD. V . CIT [2000] 243 ITR 83, THE SUPREME COURT HELD THAT THE PROVISI ON CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE O R ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ON LY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACT ED. THE SUPREME COURT HELD THAT AN INCORRECT ASSUMPTION OF FACT OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQ UIREMENT OF THE ORDER BEING ERRONEOUS. AN ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATIO N OF MIND, WOULD BE AN ORDER FALLING IN THAT CATEGORY. THE EXPRESSIO N PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE SUPREME COURT HE LD, IT IS OF WIDE IMPORT AND IS NOT CONFINED TO A LOSS OF TAX. W HAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IS EXPLAINED IN THE JUDGMENT OF THE SUPREME COURT (HEAD NOTE) : THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CON SEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN INCOME- TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBL E IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE , IT ITA NOS.353&354/VIZ/2011 V.D. REDDY & CO., VISAKHA PATNAM 5 CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. THE PRINCIPLE WHICH HAS BEEN LAID DOWN IN MALABAR I NDUSTRIAL CO. LTD. [2000] 243 ITR 83 (SC) HAS BEEN FOLLOWED AND EXPLAINED IN A SUBSEQUENT JUDGMENT OF THE SUPREME COURT IN CIT V. MAX INDIA LTD. [2007] 295 ITR 282. 7. THERE MAY NOT BE ANY DISPUTE THAT THE REVISIO N PROCEEDING SHALL NOT LIE ON THE ISSUES ON WHICH THE ASSESSING OFFICER HAS TA KEN A PLAUSIBLE VIEW AFTER EXAMINING AND APPLYING HIS MIND ON IT. IN THE INST ANT CASE, WE NOTICE THAT THE ASSESSEE HEREIN FILED ITS RETURN OF INCOME ON ESTIM ATED BASIS ON THE PLEA THAT IT DID NOT MAINTAIN BOOKS OF ACCOUNT. THIS FACT WA S BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER BY WAY OF NOTE ATTACHED TO TH E RETURN OF INCOME. FURTHER, THE ASSESSEE HAS ALSO BROUGHT THIS FACT DU RING THE COURSE OF ASSESSMENT PROCEEDINGS ALSO TO THE NOTICE OF THE AS SESSING OFFICER. ON BEING CONVINCED WITH THE DIFFICULTIES OF THE ASSESSEE, TH E ASSESSING OFFICER HAS ALSO PROPOSED TO ENHANCE THE ESTIMATE MADE BY THE ASSESS EE. THE ASSESSING OFFICER HAS ALSO NOTICED THE FACT THAT THE ASSESSEE HAS DECLARED THE RENTAL INCOME FROM GODOWNS SEPARATELY IN THE EARLIER YEARS . THUS, WE NOTICE THAT THE ASSESSING OFFICER HAS CONSIDERED ALL ASPECTS WH ILE COMPLETING THE ASSESSMENT. UNDER THESE CIRCUMSTANCES, IN OUR VIEW , THE ASSESSING OFFICER HAS PROPERLY APPLIED HIS MIND AND THE VIEW TAKEN BY HIM IS ONE OF THE POSSIBLE VIEWS. 8. THE LEARNED A.R HAS ALSO POINTED OUT THAT TH E VIEW EXPRESSED BY LEARNED CIT THAT THE EXPENSES RELATING TO RENTAL RE CEIPTS CAN BE ASCERTAINED IS NOT CORRECT IN VIEW OF THE FACT THAT THERE WERE NO BOOKS OF ACCOUNT. THE LEARNED CIT HAS NOT BROUGHT ON RECORD AS TO HOW THE EXPENSES CAN BE DETERMINED IN THE ABSENCE OF BOOKS OF ACCOUNT. IT WAS ALSO POINTED OUT THAT THE LEARNED CIT HAS NOT THOUGHT IT TO REVISE THE AS SESSMENT ORDER OF THE ASSESSMENT YEAR 2005-06, WHICH WAS PASSED IN AN IDE NTICAL MANNER. 9. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIE WS WHILE COMPLETING THE ITA NOS.353&354/VIZ/2011 V.D. REDDY & CO., VISAKHA PATNAM 6 ASSESSMENT OF THE YEARS UNDER CONSIDERATION. ACCOR DINGLY, WE SET ASIDE THE REVISION ORDERS PASSED BY LEARNED CIT FOR BOTH THE YEARS UNDER CONSIDERATION. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSE SSEE ARE ALLOWED. PRONOUNCED ACCORDINGLY ON 03.05.2013 SD/- SD/- (D. MANMOHAN) (B.R. BASKARAN) VICE PRESIDENT ACCOUNTANT MEMBER VISAKHAPATNAM, DATED 3 RD MAY, 2013 VG/SPS COPY TO 1 V. DHANA REDDY & CO., D.NO.23-23-2, BEACH ROAD, T HOMPSON STREET, VISAKHAPATNAM 2 DCIT-1, CIRCLE-1(1), VISAKHAPATNAM 3 THE CIT, VISAKHAPATNAM 4 THE CIT(A), VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM