NATIONAL JEWELLERS, MUMBAI V. CIT 14, MUMBAI

ITA 3633/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4072 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 22-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RUPINDER BRUR
• Assessee Lawyers: V K TULSIAN
• Keywords: Principle of natural justice; Bad and doubtful debts
• Section: 143(3); 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN , AM AND AMARJIT SINGH , JM ./ I.T.A. NO . 3633 / MUM/ 201 2 ( / ASSESSMENT YEA R : 200 7 - 08 ) M/S NATIONA L JEWELLERS LAXMI HOUSE, 1 ST FLOOR, 177/179, KALBADEVI ROAD, MUMBAI - 400002. / VS. COMMISSIONER OF INCOME TAX 14, MUMBAI ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : AACEL1487C / APPELLANT BY SHRI V K TULSIAN / RESPONDENT BY SHRI MS.RUPINDER BRUR / DATE OF HEARING : 28.12. 201 5 / DATE OF PRONOUNCEMENT: 3. 2. 2016 / O R D E R P ER B R BASKARAN, AM: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 01.03.2012 PASSED BY LD CIT - 14, MUMBAI U/S 263 OF THE ACT FOR ASSESSMENT YEAR 2007 - 08. THE ASSESSEE IS CHALLENGING THE VALIDITY OF ASSUMING JURISDICTION FOR REVISION OF THE ASSESSMENT ORDER DATED 12.11.2009 PASSED BY THE ASSESSING OFFICER. 2. THE FACTS RELATING TO THE ISSUE UNDER DISPUTE ARE DISCUSSED IN BRIEF. THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING IN GOLD ORN AMENTS. THE ASSESSMENT OF THE ITA NO. 3633 / MUM/ 201 2 2 YEAR UNDER CONSIDERATION WAS COMPLETED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT. THE LD CIT, ON EXAMINATION OF RECORD, NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF BAD DEBTS OF RS.30,79,230/ - AND THE SAME WAS ALL OWED BY THE AO WITHOUT EXAMINING THE SAME. THE LD CIT NOTICED THAT THE SAID CLAIMED BY THE ASSESSEE RELATED TO THE INSURANCE CLAIM LODGED WITH AN INSURANCE COMPANY AGAINST THE THEFT OF STOCK. THE INSURANCE COMPANY REJECTED THE SAID CLAIM ON THE REASONING THAT THE ASSESSEE COULD NOT CONCLUSIVELY PROVE THE CLAIM OF LOSS BY WAY OF THEFT. THE ASSESSEE FILED A SUIT AGAINST SUCH REJECTION BEFORE THE A COURT (AS PER ASSESSEE IT WAS CONSUMER COURT AND AS PER THE LD CIT, IT WAS HIGH COURT), BUT IT WAS ALSO REJE CTED. ACCORDINGLY THE LD CIT TOOK THE VIEW THAT THE ASSESSING OFFICER HAS FAILED TO EXAMINE THE CLAIM IN A PROPER PERSPECTIVE BY DULY CONSIDERING THE REASONS FOR REJECTION OF THE INSURANCE CLAIM. ACCORDINGLY, THE LD CIT SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE AO TO FRAME THE ASSESSMENT AFRESH. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 3. THE MAIN CONTENTION OF THE LD A.R IS THAT THE STOCK OF THE ASSESSEE WAS STOLEN ON 19 - 08 - 1999, WHILE IT WAS CARRIED BY ONE OF THE PARTNERS OF THE FIRM AND HENCE THE ASSESSEE LODGED INSURANCE CLAIM. ACCORDINGLY, THE ASSESSEE PASSED A JOURNAL ENTRY BY DEBITING THE INSURANCE COMPANY ACCOUNT WITH THE AMOUNT OF CLAIM. HOWEVER, THE INSURANCE COMPANY REJECTED THE CLAIM ON 27.02.2002 ON TECHNICAL REASONS AND HENCE THE ASSESSEE FILED A SUIT IN THE APPROPRIATE COURT AND THE ORDER OF THE COURT WAS RECEIVED ON 29 - 04 - 2006. ACCORDING TO LD A.R, THE ASSESSEE ITSELF WITHDREW ITS PETITION AND ACCORDINGLY THE COURT HAS PASSED THE ORDER DISMISSING THE PETITION OF T HE ASSESSEE. SINCE THE ASSESSEE TOOK THE VIEW THAT THE AMOUNT IS NOT RECOVERABLE, IT WROTE OFF THE AMOUNT AS BAD DEBTS IN THE ACCOUNTS RELATING TO AY 2006 - 07. THE AO EXAMINED THE SAID CLAIM ITA NO. 3633 / MUM/ 201 2 3 WHILE COMPLETING THE ASSESSMENT OF THE AY 2006 - 07 AND EXPRESSED THE VIEW THAT THE CLAIM OF THE ASSESSEE IS ALLOWABLE EITHER IN AY 2000 - 01 OR IN AY 2002 - 03 OR IN AY 2007 - 08. ACCORDINGLY HE DISALLOWED THE CLAIM MADE BY THE ASSESSEE IN AY 2006 - 07. CONSEQUENT THERETO, THE ASSESSEE FILED A REVISED COMPUTATION OF INCOME B EFORE THE AO IN AY 2007 - 08 BY CLAIMING THE DEDUCTION OF RS.30,79,230/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED A LETTER DATED 10.10.2009 BEFORE THE ASSESSING OFFICER EXPLAINING THE DETAILS OF ADDITIONAL CLAIM BY DULY ATTACHING ALL THE RELEVANT DOCUMENTS. THE AO HAS ACCORDINGLY ALLOWED THE CLAIM OF THE ASSESSEE. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE ASSESSING OFFICER HAS ALLOWED THE CLAIM AFTER DUE APPLICATION OF MIND AND HE HAS TAKEN A POSSIBLE VIEW OF THE MATTER. ACCORDING LY, HE SUBMITTED THAT THE LD CIT(A) WAS NOT JUSTIFIED IN REVISING THE IMPUGNED ASSESSMENT ORDER. 4. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSING OFFICER DID NOT DISCUSS ANYTHING ABOUT THE CLAIM MADE BY THE ASSESSEE. FURTHER, AS POINTED OUT B Y LD CIT, THE CLAIM OF THEFT WAS NOT ESTABLISHED BY THE ASSESSEE AND HENCE THE SAID INSURANCE CLAIM WAS REJECTED BOTH BY THE INSURANCE COMPANY AND ALSO BY THE COURT. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS FAILED TO PROVE THAT THE PERSON WHO CARRIED TH E JEWELLERY STOCK WAS A PARTNER IN THE FIRM. HE SUBMITTED THAT THE ASSESSING OFFICER HAS ALLOWED THE CLAIM OF THE ASSESSEE WITHOUT PROPERLY EXAMINING ALL THESE DETAILS. ACCORDINGLY HE SUBMITTED THAT THE LD CIT WAS JUSTIFIED IN PASSING THE IMPUGNED REVIS ION ORDER. 5. WE HEARD THE PARTIES AND PERUSED THE RECORD. BEFORE GOING INTO THE MERITS OF THE ISSUE, WE WOULD LIKE TO DISCUSS ABOUT THE LEGAL POSITION WITH REGARD TO THE POWER OF LEARNED CIT TO INVOKE REVISION PROCEEDINGS UNDER SECTION 263 OF THE ACT. THE SCOPE OF REVISION PROCEEDINGS INITIATED UNDER ITA NO. 3633 / MUM/ 201 2 4 SECTION 263 OF THE ACT WAS CONSIDERED BY HON'BLE BOMBAY HIGH COURT, IN THE CASE OF GRASIM INDUSTRIES LTD. V CIT (321 ITR 92) BY TAKING INTO ACCOUNT THE LAW LAID DOWN BY THE HON'BLE SUPREME COURT. THE RELEV ANT OBSERVATIONS ARE EXTRACTED BELOW: SECTION 263 OF THE INCOME - TAX ACT, 1961 EMPOWERS THE COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDINGS UNDER THE ACT AND, IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN, BY THE ASSESSING OFFICER IS E RRONEOUS 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 IS NECESSARY, ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. T HE KEY WORDS THAT ARE USED BY SECTION 263 ARE THAT THE ORDER MUST BE CONSIDERED BY THE COMMISSIONER TO BE ERRO NEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTER ESTS OF THE REVENUE. THIS PRO VISION HAS BEEN INTERPRETED BY THE SUPREME COURT IN SEVERAL JUDGME NTS 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 PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AN D IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. THE SUPREME COURT HELD THAT AN INCORRECT ASSUMPTION OF FACT OR AN INCORRECT APPLICATION OF LAW, WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. AN ORDER PASSED IN VI OLATION OF THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND, WOULD BE AN ORDER FALLING IN THAT CATEGORY. THE EXPRESSION PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE SUPREME COURT HELD, IT IS OF WIDE IMPORT AND IS NOT CONFINED TO A LOS S OF TAX. WHAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IS EXPLAINED IN THE JUDGMENT OF THE SUPREME COURT (HEADNOTE) : THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE A SSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE 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 PERMISSIBLE 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 CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLES S THE VIEW TAKEN BY THE INCOME - TAX OFFICER IS UNSUSTAINABLE IN LAW. THE PRINCIPLE WHICH HAS BEEN LAID DOWN IN MALABAR INDUSTRIAL CO. LTD. [2000] 243 ITR 83 (SC) HAS BEEN FOLLOWED AND EXPLAINED IN A ITA NO. 3633 / MUM/ 201 2 5 SUBSEQUENT JUDGMENT OF THE SUPREME COURT IN CIT V . MAX INDIA LTD. [2007] 295 ITR 282. 6. ACCORDING TO LD A.R, THE ASSESSING OFFICER HAS EXAMINED THE ISSUE DURING THE COURSE OF ASSESSMENT PROCEEDINGS RELATING TO AY 2006 - 07 AS WELL AS IN AY 2007 - 08 BY EXAMINING THE RELEVANT DOCUMENTS. WE FIND MERIT IN THE SAID SUBMISSIONS. A PERUSAL OF THE ASSESSMENT ORDER RELATING TO AY 2006 - 07 WOULD SHOW THAT THE ASSESSING OFFICER HAS EXAMINED THE CLAIM OF THE ASSESSEE IN THAT YEAR AND HAS TAKEN THE VIEW THAT THE SAME IS NOT ALLOWABLE IN THAT YEAR. HE HAS EXPRESS ED THE VIEW SPECIFICALLY THAT THE SAID CLAIM IS ALLOWABLE EITHER IN AY 2000 - 01 OR 2001 - 02 OR IN AY 2007 - 08, MEANING THEREBY, THE ASSESSING OFFICER WAS SATISFIED WITH THE CLAIM MADE BY THE ASSESSEE AND HE WAS ONLY EXPRESSING A DOUBT ABOUT THE YEAR IN WHICH THE SAME IS ALLOWABLE. WE FURTHER NOTICE THAT THE ASSESSEE HAS FILED A REVISED STATEMENT OF TOTAL INCOME BY MAKING THE ABOVE SAID CLAIM, SUBSEQUENT TO FILING OF RETURN OF INCOME U/S 139(1) OF THE ACT. WE ALSO NOTICE FROM THE ASSESSMENT ORDER RELATING TO AY 2007 - 08 THAT THE ASSESSING OFFICER HAS PROCEEDED TO COMPUTE THE TOTAL INCOME BY CONSIDERING THE TOTAL INCOME AS DISCLOSED BY THE ASSESSEE IN THE REVISED COMPUTATION OF INCOME, WHICH SHOWS THAT THE ASSESSING OFFICER HAS DULY RECOGNIZED AND ACCEPTED THE R EVISED COMPUTATION OF TOTAL INCOME. THERE IS NO DISPUTE THAT THE REVISED COMPUTATION OF INCOME WAS FILED BY THE ASSESSEE ONLY TO MAKE THE CLAIM OF BAD DEBTS OR LOSS ARISING ON THEFT OF JEWELLERY STOCK. THUS, WE NOTICE THAT THE ASSESSING OFFICER WAS VERY MUCH AWARE OF THE CLAIM PUT FORTH BY THE ASSESSEE, WHICH SHOWS THAT HE HAS DULY APPLIED HIS MIND ON THIS ISSUE. WE FURTHER NOTICE THAT THE ASSESSEE HAS AGAIN FURNISHED RELEVANT DETAILS RELATING TO THE IMPUGNED CLAIM IN THE ASSESSMENT PROCEEDINGS RELATING TO AY 2007 - 08 THROUGH A LETTER DATED 10 - 10 - 2009 FILED BEFORE THE AO. ALL THESE DISCUSSIONS WOULD SHOW THAT THE ITA NO. 3633 / MUM/ 201 2 6 ASSESSING OFFICER WAS SEIZED OF THE MATTER RELATING TO THE CLAIM AND HAS ALLOWED THE SAME BY APPLYING HIS MIND ON DUE EXAMINATION OF THE RELEVAN T DETAILS. 7. IT IS WELL SETTLED PRINCIPLE THAT THE ASSESSMENT ORDER WOULD NOT BE RENDERED ERRONEOUS MERELY BECAUSE THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEWS. WE ARE OF THE CONSIDERED VIEW THAT THE DECISION OF THE AO TO ALLOW THE CLAIM OF THE ASSESSEE IS ONE OF THE POSSIBLE VIEWS. FURTHER, THE LD CIT WOULD GET JURISDICTION TO REVISED THE ASSESSMENT ORDER ONLY IF BOTH THE CONDITIONS PRESCRIBED IN SEC. 263 OF THE ACT, VIZ., (A) THE ORDER SHOULD BE ERRONEOUS AND (B) IT SHOULD BE PREJUDICIA L TO THE INTERESTS OF THE REVENUE. IN THE INSTANT CASE, THE ASSESSMENT ORDER CANNOT BE CONSIDERED TO BE ERRONEOUS FOR THE REASONS DISCUSSED ABOVE, IN WHICH CASE, WE ARE OF THE VIEW THAT THE LD CIT SHOULD NOT HAVE EXERCISED HIS REVISIONAL JURISDICTION U/S 263 OF THE ACT. 8. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE UNABLE TO SUSTAIN THE IMPUGNED REVISION ORDER PASSED BY LD CIT. ACCORDINGLY, WE SET ASIDE THE SAME. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED ACCOR DINGLY ON 3RD FEB , 2016 . 3RD FEB , 2016 SD SD ( AMARJIT SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 3RD FEB , 201 5 . . . ./ SRL , SR. PS ITA NO. 3633 / MUM/ 201 2 7 / COPY OF THE ORDER FORWARDED TO : 1. / TH E APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORD ER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI