M/s Mahesh Cotton Industries, V. The ITO,

ITA 40/IND/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2420 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-12-2009
• Assessment Year: misc
• Appeal Filed On: 12-01-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: SSH AJAY TULSIYAN
• Keywords: Right to appeal; Set aside
• Section: 143(3); 80IB; 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM, AND SHRI V.K. GUPTA , AM ITA NO.39 & 40/IND/2007 A.Y. 2001-02 1. GOVERDHANDAS HAJARILAL TAYAL (PAN AASPT 7551 K ) 2. MAHESH COTTON INDUSTRIES (PAN AABFM 7865 J) C/O MAHESH AGRAWAL & CO., ADVOCATE & TAX LAW ADVISE R, 207, AMOL SAGAR DARSHAN, 9/1, NEW PALASIA, INDORE .....APPELLANTS V/S. ITO-KHARGONE ....RESPONDENT ASSESSEE BY : S/SH. AJAY TULSIYAN & MAHESH AGRAW AL DEPARTMENT BY : SMT. APARNA KARAN, SR. DR ORDER PER JOGINDER SINGH, JM BOTH THESE APPEALS BY THE DIFFERENT ASSESSEES ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF LD. CIT(A) -II, INDORE, DATED 17.10.2006, ON THE FOLLOWING COMMON GROUNDS: 1. THAT THE LD. CIT(A) ERRED IN DISMISSING THE APPEAL FILED BY THE APPELLANTS ON TECHNICAL GROUNDS ESPECIALLY WHEN THE 2 FACTS WERE PROPERLY FILED BEFORE THE LD. FIRST APPELLATE AUTHORITY AND OUGHT TO HAVE DISPOSED OF IN A REQUIRED MANNER. 2. THAT THE LD. CIT(A) ERRED IN NOT DISPOSING OF GROUND NO.2 & 3 TAKEN BY THE APPELLANTS AND SHOULD HAVE DISPOSED OF ON MERIT. 3. THAT THE LD. CIT(A) ERRED IN NOT ALLOWING DEDUCTION U/S 80IB AMOUNTING TO RS.4,09,450/- AND RS.8,76,624/- RESPECTIVELY AS ALLOWED IN THE REGULAR RESPECTIVE ASSESSMENTS, THEREFORE, THE DEDUCTION BEING LEGALLY ALLOWABLE SHOULD HAVE BEEN ALLOWED. 2. DURING THE HEARING OF THESE APPEALS, WE HAVE HEA RD SHRI AJAY TULSIYAN ALONG WITH SHRI MAHESH AGRAWAL, LD. C OUNSEL FOR THE ASSESSEE AND SMT. APARNA KARAN, LD. SR. DR. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEES IS THAT THE FA CTS IN BOTH THE APPEALS ARE IDENTICAL AND THE LD. FIRST APPELLA TE AUTHORITY DISMISSED THE APPEALS ON TECHNICAL GROUNDS WHEREAS DETAILED ASSESSMENT WAS FRAMED U/S 143(3)/263 OF THE ACT BY THE LD. ASSESSING OFFICER PURSUANT TO DIRECTION OF THE LD. CIT(A) U/S 263 VIDE ORDER DATED 29.3.2005. ON THE OTHER HAND, THE LD. SR. DR STRONGLY DEFENDED THE IMPUGNED ORDERS BY CON TENDING 3 THAT THE ASSESSING OFFICER IS FIRSTLY BOUND TO FOLL OW THE ORDERS OF THE LD. CIT AND SECONDLY THE LD. CIT(A) IS QUITE JUSTIFIED IN COMING TO A PARTICULAR CONCLUSION. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSIO N, WE ARE REPRODUCING HEREUNDER THE OBSERVATIONS CONTAINED IN ORDER DATED 29.3.2005 PASSED U/S 263 OF THE ACT: SECTION 80-IB OF THE I.T. ACT, 1961 IS RELATED TO THE DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKING ONLY. HERE IT IS SEEN THAT THAT THE ASSESSEE HAS SOURCE OF INCOME OTHER THAN INDUSTRIAL UNDERTAKING. THEREFORE, THE ADDITIONAL INCOME SURRENDERED BY THE ASSESSEE DURING THE COURSE OF SURVEY CAN NOT BE ATTRIBUTED SOLELY TO THE PROFIT DERIVED FROM INDUSTRIAL UNDERTAKING. PROFIT AND GAIN DERIVED FROM AN INDUSTRIAL UNDERTAKING IMPLIES THAT THE UNDERTAKING SHOULD BE THE DIRECT SOURCE OF PROFITS. AS HELD BY THE HON'BLE SUPREME COURT IN CIT V/S STERLING FOODS 237 ITR 570, THE MEANING OF WORD DERIVED FROM IS TO TRADE FROM A SOURCE AND FOR THE APPLICATION OF 4 THESE WORDS, A DIRECT NEXUS BETWEEN THE PROFITS AND GAINS AND THE INDUSTRIAL UNDERTAKING IS NECESSARY AND THE DEDUCTION IS NOT ALLOWABLE IF THE PARTICULAR INCOME IS MERELY ATTRIBUTABLE OR RELATABLE TO SUCH UNDERTAKING. AS THE ASSESSEE HAD SURRENDERED THE EXCESS STOCK OF COTTON ON ACCOUNT OF EXCESS STOCK OF COTTON AS UN-ACCOUNTED, THE CHARACTER OF THE MONEY INVESTED IN PURCHASE OF COTTON CAN NOT BE CONCLUSIVELY TAKEN TO BE INCOME DERIVED FROM INDUSTRIAL UNDERTAKING. IT IS ALSO TO BE MENTIONED THAT THE ASSESSEE SURRENDERED THIS INCOME ONLY AFTER THE DEPARTMENT MADE A SURVEY U/S 133A. THUS I AM OF THE VIEW THAT THE ADDITIONAL INCOME OF RS.9,50,000/- SURRENDERED BY THE ASSESSEE DURING THE COURSE OF SURVEY IS NOT ELIGIBLE TO BE CONSIDERED THE PROFIT FROM INDUSTRIAL UNDERTAKING AND THE CLAIM FOR DEDUCTION U/S 80-IB ON THIS GROUND IS AS SUCH NOT ALLOWABLE. IN VIEW OF THE ABOVE, THE ORDER U/S 143(3) PASSED BY THE AO ON 4.2.2003 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, THE ASSESSMENT ORDER PASSED BY THE AO 5 IS SET ASIDE ON THIS POINT AND THE AO IS DIRECTED TO REDO THE SAME IN ACCORDANCE WITH LAW. IDENTICAL IS THE DIRECTION IN ITA NO.40/IND/2007. T HE LD. COMMISSIONER IN HIS ORDER DATED 28.3.2005 (PAGE 44 OF THE PAPER BOOK), IDENTICALLY HELD THAT THE ORDER FRAMED U/S 143(3) PASSED BY THE ASSESSING OFFICER ON 4.2.2003 IS ERRO NEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. IT IS NOTE WORTHY THAT THE LEARNED CIT(A) IN HIS APPELLATE ORDER HAS REPRODUCED ONLY ONE PARA AND HAS NOT REPR ODUCED THE SECOND PARA OF THE LEARNED CITS ORDER U/S 263 OF T HE ACT AND ON THAT BASIS ONLY THE LEARNED CIT(A) HAS DISMISSED TH E APPEAL OF THE ASSESSEE AS NOT MAINTAINABLE. HOWEVER, WHEN THE FI NDINGS OF THE LEARNED CIT IN THE ABOVE TWO PARAS ARE PERUSED, IT IS EVIDENT THAT IN ONE PARA THE LEARNED CITS OBSERVATIONS ARE NOT TO CONSIDER THE AMOUNT SURRENDERED DURING THE COURSE OF SURVEY AS E LIGIBLE FOR DEDUCTION U/S 80IB AND IN THE CONCLUDING PARA HE HA S DIRECTED THE AO TO REDO THE ASSESSMENT IN ACCORDANCE WITH LAW. THE LEARNED COUNSEL, DURING THE COURSE OF HEARING BEFORE US, HA S VEHEMENTLY ARGUED THAT EVEN THE AO DID NOT CONSIDER THE DIRECT IONS OF THE LEARNED CIT U/S 263 IN LAST BUT ONE PARA OF HIS ORD ER AS BINDING BECAUSE HE CALLED VARIOUS EXPLANATIONS AND DETAILS FROM THE ASSESSEE AND ALSO DELIBERATED ON THE JUDICIAL DECIS IONS CITED BY 6 THE ASSESSEE WHILE REJECTING THE CLAIM OF THE ASSES SEE AND IN CASE HE WAS OF THE OTHER OPINION REGARDING DIRECTIONS OF THE LEARNED CIT, HE WOULD HAVE MERELY GIVEN EFFECT TO SUCH DIRE CTIONS WITHOUT CALLING ANY SUCH DETAILS. ON PERUSAL OF THESE DIRE CTIONS AS WELL AS THE ASSESSMENT ORDER FRAMED BY THE AO UNDER SECTION 143(3) READ WITH SECTION 263 OF THE ACT, WE FIND SUBSTANTIAL ME RIT IN THESE CONTENTIONS OF THE ASSESSEE. HENCE, WE HOLD THAT T HE ORDER OF THE CIT(A) IS NOT CORRECT IN LAW. 5. WE ARE FURTHER OF THE VIEW THAT THE SUBJECT MATT ER OF APPEAL BEFORE THE LEARNED CIT(A) WAS AN ORDER PASSED U/S 1 43(3) READ WITH SECTION 263 OF THE ACT AND HENCE MERELY BECAUS E THE GROUND NO. 1 OF THE APPEAL BEFORE HIM WAS NOT CORRECTLY WO RDED, HE SHOULD NOT HAVE HELD THAT THE ASSESSEE WAS CHALLENG ING INITIATION OF PROCEEDINGS UNDER SECTION 263 OF THE ACT WHICH C OULD NOT BE DONE. 6. THUS, TAKING INTO CONSIDERATION THESE FACTS, WE HOLD THAT THE ASSESSEES RIGHT OF APPEAL, WHICH IS A VALUABLE RIG HT FOR REDRESSAL OF ITS GRIEVANCE, SHOULD NOT BE TAKEN AWAY IN THIS MANNER AND ACCORDINGLY DIRECT THE CIT(A) TO DISPOSE OF THIS AP PEAL ON MERITS. NEEDLESS TO MENTION HERE THAT THE LD. CIT(A) IS TO EXAMINE THE NATURE AND SOURCE OF THE AMOUNT SURRENDERED BY THE ASSESSEE. THE ASSESSEE BE PROVIDED DUE OPPORTUNITY OF BEING H EARD WITH FURTHER LIBERTY TO FURNISH EVIDENCE, IF ANY, TO SUB STANTIATE THEIR 7 CLAIM, CONSEQUENTLY, BOTH THE APPEALS OF THE ASSESS EES ARE ALLOWED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 22.12.2009. SD SD (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22.12.2009 {VYAS} COPY TO: APPELLANTS/RESPONDENTS/CIT/ CIT(A)/DR 8