M/s A.V. Wire, Sirmour V. CIT, Shimla

ITA 415/CHANDI/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68568 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 15-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMARVEER SINGH
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI T.R.SOOD ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.415/CHD/2013 ASSESSMENT YEAR : 2007-08 M/S A.V.WIRES, VS THE COMMISSIONER OF INCOME TAX VILLAGE : RAMPUR JATTAN, RAILWAY BOARD BUILDING KALA AMB, THE MALL, TEHSIL NAHAN, SHIMLA. DISTT. SIRMOUR (HP). PAN : AALFA-8795TR (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHIT GOEL RESPONDENT BY : SHRI AMARVEER SINGH DATE OF HEARING : 29.10.2013 DATE OF PRONOUNCEMENT : 22.11.2013 O R D E R PER SUSHMA CHOWLA, JM THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX, SHIMLA DATED 30.03.2012 RELATING TO ASSESSMENT YEARS 2007-08 AGAINST THE ORDER PASSED U NDER SECTION 263 OF THE INCOME-TAX ACT, 1961 ( 'THE ACT' FOR SHORT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL : 1. THE LD CIT SHIMLA HAS ERRED IN FACTS AND LAW IN SE TTING ASIDE THE ASSESSMENT ORDER DATED 24.12.2009 U/S 263 WHEN THE ASSESSMENT ORDER IS INVALID DUE TO NON-SERVICE OF NOTICE U/S 143(2) WITHIN PRES CRIBED TIME AS PROVIDED IN PROVISO TO SECTION 143(2). 2. THE LD CIT SHIMLA HAS WRONGLY RELIED ON THE FACT TH AT THE A.O. BECOME AWARE AFTER COMPLETION OF ASSESSMENT ABOUT BALANCE SHEET, PROFIT AND LOSS ACCOUNT RELEVANT TO PREVIOUS YEAR WHICH IS DIFFEREN T FROM THE BALANCE SHEET AND PROFIT AND LOSS ACCOUNT ATTACHED WITH THE RETURN WH ILE SUCH PAPERS WITH A.O. AND ASSESSEE FILED AN EXPLANATION VIDE LETTER DATED 18, 12.2009. THE ID A.O. HAS APPLIED HIS MIND AND THEREFORE ORDER IS NOT ERRONEOUS. THIS FACT BEEN SPECIFICALLY MENTIONED BY THE LD. CIT IN ITS SHOW-CAUSE NOTICE D ATED 20/21/03/2012 SERVED 2 UPON THE ASSESSEE ON 26.03.2013, WHEREIN THE CIT HI MSELF HAS MENTIONED IN ITS SHOW-CAUSE NOTICE DATED 21/03/2012 THAT BOTH B ALANCE SHEET WERE AVAILABLE WITH THE AO AT THE ASSESSMENT AND AO HAS CHOSEN NOT TO TAKE ANY ADVERSE INFERENCE. 3. THE LD CIT SHIMLA HAS ERRED IN LAW AND FACTS IN HOL DING SUCH BALANCE SHEET, PROFIT AND LOSS ACCOUNT AS GENUINE WITHOUT ANY CORR OBORATIVE EVIDENCE OF BOOKS OF ACCOUNT WHILE NON-GENUINENESS STANDS ESTABLISHED TH AT SUCH PAPERS HAVE NOT BEEN FILED WITH BANK AND SALES TAX AUTHORITIES HAVE NOT TAKEN COGNIZANCE. 4. THE LD CIT SHIMLA HAS ERRED IN LAW AND FACTS BY TRE ATING BALANCE SHEET, PROFIT AND LOSS ACCOUNT AS GENUINE AND DIRECTED THE A.O. TO ADD THE DIFFERENCE, IF NOT RECONCILED THOUGH GENUINENESS OF SUCH PAPERS HA S NOT BEEN ESTABLISHED BY REVENUE 5. THE LD CIT SHIMLA HAS ERRED IN LAW AND FACTS IN INV OKING JURISDICTION U/S 263 WHEN THE A.O. HAS CONSIDERED THE ISSUE AND APPL IED HIS MIND. 6. THE LD CIT SHIMLA HAS NOT ESTABLISHED THAT ORDER IS PREJUDICIAL TO THE INTEREST OF REVENUE AS THE INCOME OF ASSESSEE IS EX EMPT U/S 80IC OF IT. ACT. 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINS T INVOKING OF THE JURISDICTION UNDER SECTION 263 OF THE ACT BY THE CO MMISSIONER OF INCOME TAX. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E, FOR THE YEAR UNDER CONSIDERATION HAD FURNISHED RETURN OF INCOME DECLAR ING NET LOSS OF RS. 27,73,775/- ON 24.12.2009. THE ASSESSEE FIRM WAS E NGAGED IN THE MANUFACTURE OF WIRES. THE ASSESSMENT IN THE CASE W AS COMPLETED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 24.12.20 09 AND THE RETURNED LOSS WAS ACCEPTED AS SUCH. THE COMMISSIONER OF INC OME TAX SHOW CAUSED THE ASSESSEE TO EXPLAIN THE FOLLOWING : THE ASSESSMENT FOR A.Y. 2007-08 WAS COMPLETED BY IN COME TAX OFFICER, NAHAN ON 24.12.2009 AT A LOSS OF RS. 27,73,775/-. THE ASSES SEE FIRM IS A MANUFACTURER OF WIRES. AFTER THE COMPLETION OF THE ASSESSMENT, THE ASSESSING OFFICER BECAME AWARE OF A BALANCE SHEET AND PROFIT & LOSS ACCOUNT RELEVA NT TO THE PREVIOUS YEAR ENDING ON 31.03.2007 DULY SIGNED BY ALL THE PARTNER S AND A CHARTERED ACCOUNTANT WHICH SHOWED DIFFERENT FIGURES OF SALES, PURCHASE, EXPENSES AND PROFITS AS COMPARED TO BALANCE SHEET AND PROFIT AND LOSS ACCOU NT ATTACHED WITH THE RETURN OF INCOME. THE DIFFERENCES IN THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT FILED ALONGWITH THE RETURN OF INCOME AND THE SECOND BALAN CE SHEET PURPORTEDLY GIVEN TO UNITED COMMERCIAL BANK, HIMLAND HOTEL, CIRCULAR ROAD, SHIMLA FOR A COMPROMISE PROPOSAL FOR SETTLING A DISPUTE WITH THE ASSESSEE ARE AS FOLLOWS : PARTICULARS FIGURES AS PER FIGURES IN MANUFACTURING DIFFERENCE BALANSE SHEET AND P&L ACCOUNT ATTACHED AND P&L WITH RETURN OF INCOME 3 ACCOUNT FILED WITH BANK 1. SALES 1,23,52,772/- 1,06,86,931/- 16,65,841/- 2. G.P. RATE @30.64% @1% 29.6% 3. G.P.AMOUNT 37,84,100/- 1,12,813/- 36,71,287/- 4. EXPENSES 26,82,877/- -- 26,82,877/- 5.INCOME (3- 4) -- -- 9,88,410/- 6.CLOSING STOCK 49,65,460/- 26,08,514/- 23,56,946/- 7.PARTNERS CAPITAL 60,44,123/- 24,17,124/- 36,26,999/- THE ABOVE DIFFERENCE IN TWO BALANCE SHEETS WERE NEI THER NOTICED NOR VERIFIED BY THE ASSESSING OFFICER WHILE MAKING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT ON 24.12.2009. 5. IN RESPONSE TO THE SHOW CAUSE NOTICE, REPLY WAS FILED BY THE ASSESSEE. THE EXPLANATION OF THE ASSESSEE WAS AS UN DER : 'IN THIS CONNECTION IT IS STATED THAT THE FIRM HAD NEVER SUBMITTED ANY OTHER BALANCE SHEET DATED 22:3.2001 TO ANY AUTHORIT Y INCLUDING BANK OR SECURING LOAN ETC. THIS BALANCE SHEET WAS PROVISIONAL AND MAKE , HURRIEDLY AS THE BANK WAS INSISTING FOR ITS SUBMISSION BUT BEFORE IS SUBMISSION CERTAIN MISTAKES /IRREGULARITI ES WERE NOTICED WHICH WAS SATISFIED AND A REVISED FINAL BALANCE SHE ET WAS PREPARED AND SUBMITTED TO THE BANK AS WELL AS TO TH E ITO, NAHAN WITH THE RETURN FOR THE A.Y. 2007-08.' 6. THE COMMISSIONER OF INCOME TAX, VIDE PARA 4 HELD AS UNDER : 4. I HAVE EXAMINED THE FACTS ON RECORD AND THE RE PLY FILED BY THE ASSESSEE. I HOLD THAT ORDER PASSED BY THE AS SESSING OFFICER U/S 143(3) OF THE ACT ON 24.12.2009 IS ERRONEOUS AND PR EJUDICIAL TO THE INTERESTS OF REVENUE. THE ASSESSING OFFICER HAS OBV IOUSLY FAILED TO INQUIRE AND INVESTIGATE THE DIFFERENCES IN THE TWO BALANCE SHEETS HIGHLIGHTED IN THE PRECEDING PARAGRAPHS. BY ACCEPTI NG THE FIGURES IN THE BALANCE SHEET FILED ALONGWITH THE RETURN WIT HOUT CONDUCTING ANY INQUIRY TO ASCERTAIN HOW AND WHY A SEPARATE AND DIF FERENT BALANCE SHEET AND PROFIT & LOSS ACCOUNT WAS DRAWN BY THE AS SESSEE, THE ASSESSING OFFICER HAS COMMITTED AN ERROR. THE ORDE R PASSED BY THE ASSESSING OFFICER IS ERRONEOUS WITHIN THE MEANING O F SECTION 263 OF THE ACT AND IT HAS CAUSED A PREJUDICE TO THE REVENU E. 7. THE COMMISSIONER OF INCOME TAX, THUS SET ASIDE T HE ORDER PASSED 4 BY THE ASSESSING OFFICER OBSERVING AS UNDER : 6. IN VIEW OF THE ABOVE FACTS, I SET ASIDE THE O RDER PASSED BY THE ASSESSING OFFICER ON 24.12.2009. THE ASSESSING OFFI CER IS DIRECTED TO TAKE INTO ACCOUNT THE/ SECOND BALANCE SHEET AND PROFIT & LOSS ACCOUNT PREPARED AND SIGNED BY THE ASSESSEE'S PARTNERS AND RECONCILE IT WITH THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT FILED ALONGWITH THE RETURN OF INCOME. THE ASSESSING OFFICER SHALL BRING TO TAX ANY DIFFERENCE THAT CANNOT BE RECONCILED AND HAVE A BEARING ON DETERMINATION OF TAXABLE INCO ME. IT GOES WITHOUT SAYING THAT ASSESSING OFFICER SHALL PROVIDE A REASONABLE O PPORTUNITY TO THE ASSESSEE TO LEAD EVIDENCE TO JUSTIFY ITS CLAIMS. 8. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF T HE COMMISSIONER OF INCOME TAX. 9. THE LD. AR FOR THE ASSESSEE REFERRED TO THE SHOW CAUSE NOTICE PLACED AT PAGE 25 OF THE PAPER BOOK AND IT WAS POIN TED OUT THAT IN THE SHOW CAUSE NOTICE, THERE WAS CLEARLY MENTIONED BY T HE COMMISSIONER OF INCOME TAX THAT TWO BALANCE SHEETS WERE AVAILABLE W ITH THE ASSESSING OFFICER. HOWEVER, WHILE PASSING THE ORDER UNDER SE CTION 263 OF THE ACT, THE COMMISSIONER OF INCOME TAX OBSERVED THAT THE SE COND BALANCE SHEET CAME TO LIGHT THEREAFTER. IT WAS POINTED OUT BY TH E LD. AR FOR THE ASSESSEE THAT THERE WAS CERTAIN DISPUTE BETWEEN THE PARTNERS OF THE ERSTWHILE FIRM AND UNIT WAS SOLD BY THE END OF THE THIRD YEAR OF OPERATION. ONE OF THE PARTNERS HAD COMPLAINED AGAI NST THE OTHER PARTNER AND CONSEQUENTLY, CERTAIN DISPUTES. IT WAS VEHEMEN TLY STRESSED BY THE LD. AR FOR THE ASSESSEE THAT THE BALANCE SHEET REFERRED TO BY THE COMMISSIONER OF INCOME TAX WAS NEVER FILED BEFORE A NY OF THE AUTHORITIES BUT THE SAME WAS A PROVISIONAL BALANCE SHEET AND ONCE THE ERRORS WERE DETECTED, THE SAME WERE CORRECTED. OUR ATTENTION, THEREAFTER WAS DRAWN TO THE INVESTIGATION MADE BY THE SALES TA X AUTHORITY IN RESPECT OF THE TWO BALANCE SHEETS AND THE FINDING OF THE SA LES TAX AUTHORITY IS THAT THE BALANCE SHEET OFFERED BEFORE UCO BANK, KAL A AMB MATCHED WITH THE BALANCE SHEET FILED BY THE DEALER WITH THE SALE S TAX AUTHORITIES. COPY 5 OF THE ORDER IS PLACED AT PAGES 20-23 OF THE PAPER BOOK. IT WAS FURTHER POINTED OUT BY THE LD. AR FOR THE ASSESSEE THAT DUR ING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE SAID ISSUE WAS RAISED AND EXPLANATION VIS--VIS TWO BALANCE SHEETS WAS FILED BEFORE THE ASSESSING OFFICER WHICH IS PLACED AT PAGE 24 OF THE PAPER BOO K. IN THE ALTERNATIVE, IT WAS POINTED OUT BY THE LD. AR FOR THE ASSESSEE T HAT EVEN IF ANY AMOUNT IS BROUGHT TO TAX, THE INCOME IS EXEMPT IN THE HAND S OF THE ASSESSEE UNDER SECTION 80IC OF THE ACT, IN VIEW OF THE RATIO LAID DOWN BY THE CHANDIGARH BENCH OF TRIBUNAL IN SHRI PAWAN KUMAR AG GARWAL IN ITA NO. 33/CHD/2012, ORDER DATE 23.02.2012. 10. THE LD. DR FOR THE REVENUE POINTED OUT THAT THE DEDUCTION UNDER SECTION 80IC OF THE ACT IS AVAILABLE ON BUSINESS IN COME. HOWEVER, ADDITION MADE ON ACCOUNT OF INCREASE IN CAPITAL AND /OR WOULD NOT ENTITLE THE ASSESSEE TO ANY BENEFIT OF DEDUCTION UNDER SECT ION 80IC OF THE ACT. IT IS FURTHER POINTED OUT BY THE LD. DR FOR THE REVENU E THAT ASSUMING BOTH THE BALANCE SHEETS WERE BEFORE THE ASSESSING OFFICE R BUT THERE WERE NO ENQUIRIES AND NO INDEPENDENT ENQUIRIES MADE BY THE ASSESSING OFFICER AND HENCE, THE ORDER PASSED BY THE ASSESSING OFFICE R WAS ERRONEOUS. REFERENCE WAS MADE TO THE ENQUIRIES MADE BY THE SAL ES TAX AUTHORITIES. IT WAS POINTED OUT THAT NO SUCH CONFIRMATION WAS RECEI VED FROM THE BANK BEFORE COMPLETING THE INCOME TAX PROCEEDINGS IN THE HAND OF THE ASSESSEE. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. UNDER THE PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT , COMMISSIONER OF INCOME TAX IS EMPOWERED TO EXERCISE REVISIONAL POWE RS, WHERE THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF REVENUE. THE TWIN CONDITIONS OF THE OR DER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ARE TO B E SIMULTANEOUSLY 6 SATISFIED, BEFORE EXERCISE OF THE JURISDICTION BY T HE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT. 12. IN THE FACTS OF THE PRESENT CASE, THE RETURN OF LOSS FURNISHED BY THE ASSESSEE WAS ACCEPTED BY THE ASSESSING OFFICER VIDE ORDER PASSED UNDER SECTION 143(3) OF THE ACT DATED 24.12.2009. THE CO MMISSIONER OF INCOME TAX IN THE SHOW CAUSE NOTICE ISSUED TO THE A SSESSEE HAD CONFRONTED THE ASSESSEE WITH TWO SETS OF BALANCE SH EET AND PROFIT & LOSS ACCOUNT AS ON 31.3.2007 WHICH WERE SIGNED ON 22.5.2 007. THE COMMISSIONER OF INCOME TAX FURTHER SHOW CAUSED THE ASSESSEE TO EXPLAIN THE DIFFERENCE BETWEEN THE BALANCE SHEET AS FILED W ITH THE BANK FOR OBTAINING CC LIMIT AND AS ATTACHED WITH THE RETURN OF INCOME. THE CASE OF THE ASSESSEE BEFORE US IS THAT BECAUSE OF CERTAI N DISPUTES BETWEEN THE PARTNERS OF THE ERSTWHILE FIRM, THE PROVISIONAL BAL ANCE SHEET PREPARED BY THE ASSESSEE PRIOR TO FINALIZATION OF THE BALANCE S HEET WHICH IN TURN WAS ANNEXED TO THEIR RETURN OF INCOME AND ALSO FILED WI TH THE BANK, WAS PLACED ON RECORD BY THE OTHER PARTNER. 13. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSEE WAS CONFRONTED WITH BOTH THE BALANCE SHEETS AND IT WAS EXPLAINED VIDE LETTER DATED 18.12.2009 AT PAGE 24 OF THE PAPER BOOK THAT THE FIRM HAD NEVER SUBMITTED ANY OTHER BALANCE SHEET TO THE BANK EXCEP T ONE WHICH HAD BEEN SUBMITTED ALONGWITH THE RETURN OF INCOME. SIMILARL Y, TWO SETS OF BALANCE SHEETS WERE AVAILABLE ON RECORD OF SALES TAX AUTHOR ITIES AND DURING THE COURSE OF SALES TAX ASSESSMENT PROCEEDINGS, THE ASS ESSING AUTHORITY, NAHAN-I, DISTRICT SIRMOUR ON THE PLEA OF THE DEALER I.E. THE ASSESSEE BEFORE US, WROTE A LETTER TO THE CONCERNED BANK MAN AGER OF UCO BANK, KALA AMB AND ASKED HIM TO SUPPLY COPY OF THE BALANC E SHEET AVAILABLE ON RECORD FOR THE CONCERNED YEAR. IN REPLY, THE BA NK SUBMITTED THE BALANCE SHEET WHICH WAS IDENTICAL TO THE ONE FILED BY THE DEALER. IT IS A 7 FINDING OF THE SALES TAX AUTHORITIES THAT THE OTHER BALANCE SHEET SHOWING PROFIT WAS FILED BY THE PARTNERS WITH INFLATED FIGU RES. HOWEVER, THE BALANCE SHEET PRODUCED BY THE DEALER HIMSELF I.E. T HE ASSESSEE, SUPPORTED BY THE ATTESTED/VERIFIED COPY OF THE BALANCE SHEET PROCURED/SENT BY THE BANK MANAGER CONCERNED, WAS TAKEN INTO CONSIDERATIO N AND WAS ACCEPTED FOR FRAMING THE SALES TAX ASSESSMENT. 14. IN THE TOTALITY OF THE ABOVESAID FACTS AND CIRC UMSTANCES, WHERE ADMITTEDLY THE BALANCE SHEET AS ANNEXED WITH THE RE TURN OF INCOME, WAS FILED WITH THE BANK, WHICH IN TURN WAS VERIFIED BY THE SALES TAX AUTHORITIES, WE FIND NO MERIT IN THE EXERCISE OF PO WER UNDER SECTION 263 OF THE ACT BY THE COMMISSIONER OF INCOME TAX, ESPEC IALLY IN THE FACTS OF THE PRESENT CASE WHERE BOTH THESE BALANCE SHEETS WE RE IN THE KNOWLEDGE OF ASSESSING OFFICER AND NECESSARY EXPLANATION IN T HIS REGARD WAS OBTAINED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN VIEW THEREOF, WE FIND NO MERIT IN THE REVISIONARY ORDER PASSED BY THE COMMISSIONER OF INCOME TAX UNDER SECT ION 263 OF THE ACT AND WE SET ASIDE THE SAME AND ALSO REVERSE THE FIND ING OF COMMISSIONER OF INCOME TAX IN SETTING ASIDE THE ASSESSMENT MADE BY THE ASSESSING OFFICER. THE GROUNDS OF APPEAL RAISED BY THE ASSESS EE ARE THUS, ALLOWED. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER,2013. SD/- SD/- ( T.R.SOOD) (SUSHMA CHO WLA) ACCOUNTANT MEMBER JUD ICIAL MEMBER DATED: 22 ND NOVEMBER,2013 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR ITAT,CHD.