HUKUM JAIN, Jaipur V. CIT, Kota

ITA 425/JPR/2013

• Counselvise Citation: 42523114 RSA 2013
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K KHANDELWAL
• Keywords: Business income; Revision of order; Opportunity of being heard; Assessment record; Tax effect
• Section: 143(3); 234B; 14A; 263

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JAIPUR BENCH : JAIPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO.425/JP/2013 (A.Y. 2009-10) SHRI HUKUM JAIN, VS. CIT, C.R. BUILDING, 336, DADABARI EXT., KOTA. RAWATBHATA ROAD, KOTA (RAJASTHAN) PAN NO. ABJPJ 8941 M (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.C. PARWAL DEPARTMENT BY : SHRI A.K. KHANDELWAL - D.R. DATE OF HEARING : 28/01/2014. DATE OF PRONOUNCEMENT : 26/02/2014. O R D E R PER N.K. SAINI, A.M THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 05/03/2013 OF LD. CIT, KOTA. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, ORDER PASSED U/S 263 BY LD. CIT IS ILLEGAL AND BAD IN LAW & BE QUASHED S INCE THE LD. CIT HAS NOT CALLED FOR AND EXAMINED THE RECORD HIMSELF BEFORE I NITIATION OF PROCEEDINGS U/S 263 BUT HAS INITIATED SUCH PROCEEDINGS ON THE B ASIS OF PROPOSAL RECEIVED FROM ITO, WARD-1(2), KOTA STATING THAT THE ORDER PA SSED BY HIS PREDECESSOR AO WAS ERRONEOUS & PREJUDICIAL TO THE INTEREST OF T HE REVENUE. 2 2. THE LD. CIT HAS ERRED ON FACTS & IN LAW IN SETTI NG ASIDE THE ORIGINAL ASSESSMENT ORDER WITH THE DIRECTION TO THE AO TO FR AME IT DENOVO AFTER MAKING PROPER ENQUIRY AND VERIFICATION OF BOO KS OF ACCOUNTS AND OTHER RECORDS/DOCUMENTS. HE HAS FURTHER ERRED ON F ACTS & IN LAW IN DIRECTING AO TO MAKE ADDITION ON FOLLOWING ISSUES E VEN THE SAME WERE EXAMINED WHILE PASSING THE ORIGINAL ASSESSMENT ORDE R: (I) TO DISALLOW CLAIM OF INTEREST OF RS. 4,98,578/- PAID ON UNSECURED LOAN AND TO ICICI BANK CLAIMED AGAINST REMUNERATION & INTEREST RECEIVED FROM M/S JAIN ENTE RPRISES HOLDING THAT SAME IS NOT ALLOWABLE IN VIEW OF SECTI ON 14A R.W. RULE 8D (II) TO ASSESS RENTAL INCOME AT RS. 1,28,100/- AS A GAINST RS. 1,20,000/- DECLARED BY THE ASSESSEE. (III) TO DISALLOW THE DEDUCTION OF RS. 40,000/- CLA IMED U/S 80DDB AS ASSESSEE HAS NOT FURNISHED THE REQUIRED CERTIFIC ATE WITH THE RETURN. 3. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY A NY OF THE GROUNDS OF APPEAL. 4. NECESSARY COST BE ALLOWED TO THE ASSESSEE. 2 THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEAL RELATES TO THE ACTION OF THE LD. CIT IN QUASHING THE ORDER UNDER S ECTION 263 OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE F ILED RETURN OF INCOME ON 31/03/2010 DECLARING AN INCOME OF RS. 10, 32,950/- WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. LATER O N, CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSMENT WAS FRAMED AT AN IN COME OF RS. 10,87,950/-. THEREAFTER, THE ITO WARD-1(2), KO TA VIDE LETTER DATED 3 01/01/2013 PROPOSED ACTION UNDER SECTION 263 OF THE ACT ON THE FOLLOWING POINTS:- 1. THAT ASSESSEE HAS PAID A SUM OF RS. 498578/- AS INTEREST ON UNSECURED LOANS AND TO ICICI BANK LTD. ON LOAN TAKEN BY IT. T HIS SUM OF RS. 498578/- HAS BEEN DEDUCED FROM REMUNERATION AND INT EREST RECEIVED FROM M/S JAIN ENTERPRISES. ACCORDING TO SECTION 14 A NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE WHICH DO ES NOT FORM PART OF TOTAL INCOME UNDER THE ACT. THEREFORE, AS PER SECTION 14A READ WITH RULE 8D TH E INTEREST OF RS. 498578/- IS TO BE DISALLOWED AND ADDED TO THE INCOM E. THE ASSESSEE HAS CLAIMED INTEREST PAID OF RS. 2493 2/- AS DEDUCTION IN THE INTEREST OF RS. 49857/-. THIS INTEREST OF RS. 24932/- HAS BEEN PAID TO ICICI ON CAR LOAN TAKEN BY YOU. BUT ON PERUSAL OF THE BALANCE SHEET ON THE ASSETS SIDE CAR ON WHICH INTEREST HAS BEEN P AID DOES NOT APPEAR. 2. DURING THE YEAR THE ASSESSEE HAS RECEIVED A SUM OF RS. 120000/- AS RENT FROM SMT. SARITA MAHESHWARI. ONGOING THROUGH THE RENT DEED FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS I T IS NOTICED THAT AS PER CLAUSE(1) OF THE RENT DEED THE COMMERCIAL AREA GIVEN ON LEASE WAS ON 01/12/2006 AND AT A RENT OF RS. 10000/- AND AS P ER CLAUSE(8) OF THE DEED AFTER THE END OF EVERY YEAR RENT @ 5% WILL BE INCREASED AS PER RENT CONTROL ACT AND IT WILL BE PAID BY THE TENANT. THEREFORE, ONE YEAR OF THE TENANCY COMPLETES ON 30 TH NOV. 2007 AND ON 1 ST DEC. 2007 RENT IS INCREASED FROM RS. 10000/- TO 10 500/- I.E. RS. 11,025/- IS THE RENT TO BE PAID BY THE TENANT. THE REFORE, THE RENTAL INCOME DURING THE YEAR WORKS OUT TO :- RENT FROM 01/04/2008 TO 30/11/2008 = RS. 10500*8 = RS. 84000/- RENT FROM 01/12/2008 TO 31/03/2009 = RS. 11025*4 = 44100/- TOTAL RS. 128100/- THEREFORE, THE RENTAL INCOME COMES TO RS. 128100/- WHILE HE HAS SHOWN RS. 120000/- THEREFORE, INCOME OF RS. 8100/- IS TO BE ADDED TO THE TOTAL INCOME. 4 3. THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS. 4000 0/- UNDER SECTION 80DDB OF THE ACT. SECTION 80DDB FURTHER PROVIDES T HAT NO DEDUCTION SHALL BE ALLOWED UNLESS THE ASSESSEE FURNISHES WITH THE RETURN OF INCOME A CERTIFICATE IN SUCH FORM AS MAY BE PRESCRI BED FROM A NEUROLOGIST ON ONCOLOGISTS, A UROLOGIST, A HEMATOLO GIST AN IMMUNOLOGIST OR SUCH OTHER SPECIALIST, AS MAY BE PR ESCRIBED, WORKING IN A GOVERNMENT HOSPITAL. THERE IS NO CERTIFICATE ON THE FACE OF RECORD FOR CLAIM OF DEDUCTION UNDER SECTION 80DDB THEREFOR E THE DEDUCTION IS LIABLE TO BE DISALLOWED. THEREFORE, THERE IS UNDER COMPUTATION OF INCOME OF RS. 546678/- RESULTING IN UNDER COMPUTATI ON OF TAX OF RS. 180403/-. CHARGEABLE INTEREST U/S 234B COMES TO RS . 37885/-. TOTAL TAX EFFECT COMES TO RS. 218288/- 4. ON RECEIPT OF PROPOSAL UNDER SECTION 263 OF THE A CT FROM THE ITO, WARD-1(2), KOTA, LD. CIT ISSUED A SHOW-CAUSE NOTICE DATED 17/01/2013 UNDER SECTION 263 OF THE ACT TO THE ASSESSEE. THE ASSESSEE FILED THE WRITTEN SUBMISSION ON 18/02/2013 WHICH READS AS UND ER:- 1. INTEREST ON UNSECURED LOAN :- WE DESIRE YOUR GOODSELF KIND ATTENTION ON THE FACTS THAT THERE IS INVESTMENT AS CAPITAL OF THE ASSESSEE IS OF RS. 23461847/- . THE ASSESSEE HAS INVESTED THE CAPITAL IN THE FIRM AFTER TAKING THE UNSECURED LOAN FROM OTHERS. THE ASSESSEE HAS DI SCLOSED THE REMUNERATION AND INTEREST FROM THE FIRM AS INCOME F ROM BUSINESS AND PROFESSION AND PART OF EXPENDITURE AS INTEREST ON L OAN FROM OTHER WHICH HAS INVESTED AS CAPITAL IN THE FIRM AS PER MUTUAL U NDERSTANDING OF THE PARTNERS TO FOLLOW UP THE REQUIREMENT OF THE BANKS TO SHOW MORE CAPITAL TO TAKE DESIRE BANK GUARANTEE AND OTHER FINANCIAL FACI LITIES. IT IS MATTER OF SURPRISE TO MENTION SECTION 14A & RULE 8D WHICH IS APPLICABLE ON THE EXPENDITURE WHICH IS NOT PART OF TOTAL INCOME. THE ASSESSEE HAS DISCLOSED THE INTEREST INCOME FROM FIR M IN THE HEAD OF INCOME FROM BUSINESS. THE HEAD ITSELF ALLOW THE EXPENDITU RE GENERATED TO EARN THE BUSINESS INCOME. WE HAVE ALREADY EXPLAINED THE SAM E DURING THE PROCEEDING OF THE ASSESSMENT AS FOLLOWS:- 5 DEDUCTION FROM INTEREST INCOME: DURING THE YEAR AS SESSEE HAS PAID INTEREST RS. 498578/- ON LOAN TAKEN. THE DETAILS O F INTEREST PAID IS UNDER:- PARTICULARS AMOUNT TOTAL INTEREST PAID ON UNSECURED LOAN ASHA JAIN 103178.00 HARAK CHAND JAIN 120000.00 PRAGATI JAIN 60000.00 PARTEEK JAIN 60000.00 PRATIBHA JAIN 90148.00 SAMRIDHI JAIN 40320.00 473646.00 INTEREST PAID TO ICICI BANK 24932.00 TOTAL INTEREST PAID 498578.00 THE ASSESSEE HAS CLAIMED ABOVE EXPENSES OF INTERES T PAID OUT OF INTEREST AND REMUNERATION RECEIVED FROM JAIN ENTERPRISES. T HE INCOME FROM PARTNERS FIRM IS TREATED AS BUSINESS INCOME AND, THEREFORE, EXPENSES OF INTEREST PAID HAS BEEN CLAIMED FROM BUSINESS INCOME. 2. RENT RECEIVED RS. 120000/- :- THE ASSESSEE HAS RECEIVED THE RENT OF RS. 120000/- IN SPITE OF AGREEMENT THE TENANT HAS NOT I NCREASED AND PAID RS. 10000/- PER MONTH. THERE IS NO ANY POSSIBILITY TO CONSIDER ESTIMATED BASIS RS. 128100/-. THERE IS NO SUCH MAJOR AMOUNT TO KEE P ATTENTION ON SECTION 263 OF THE I.T. ACT, 1961. 3. RS. 40000/- U/S 80DDB : THESE ARE GENUINE EXPENDITURE THAT WIFE OF THE ASSESSEE WAS SUFFERED THE INJURY OF CANCER WHO HAS BEEN DIED AND THE AO KNOW ALL THE FACTS AND ALL THE RELEVANT INFORMAT ION AND DOCUMENTS HAVE BEEN PRESENTED, THERE IS NO SUCH REASON TO CONSIDER AS DISALLOW EXPENDITURE. ON THE BASIS OF ABOVE MENTIONED FACTS, WE ARE OF T HE OPINION THAT IT UNJUSTIFIED TO REOPEN THE CASE. WE REQUEST TO YOUR GOODSELF TO HONOR THE ASSESSMENT ORDER AS PASSED BY THE LD. ASSESSING OFF ICER. 6 5. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE, OBSERVED AS UNDER:- 5. THE EXPLANATION OFFERED BY THE ASSESSEE NOW BEF ORE ME IS NOT FOUND TO BE TENABLE ON FACTS AND LAW. EXAMINATIONS OF TH E ASSESSMENT RECORDS REVEAL THAT THE AO COMPLETED THE ASSESSMENT IN A RO UTINE MANNER. I FIND THAT IT IS NOT ONLY THE LACK OF VERIFICATION BUT AL SO MISTAKEN VIEW OF LAW WHICH HAS MADE THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. ACCORDINGLY, THE LD. CIT SET ASIDE THE ASSESSMENT O RDER DATED 09/12/2011 WITH A DIRECTION TO THE ASSESSING OFFICE R TO FRAME IT DENOVO AFTER MAKING PROPER ENQUIRY AND VERIFICATION OF BOO KS OF ACCOUNTS AND OTHER RECORDS/DOCUMENTS. NOW THE ASSESSEE IS IN AP PEAL. 6 . LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT I N THE PRESENT CASE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE A CT ON 09/12/2011. THEREAFTER, ASSESSING OFFICER MOVED A PROPOSAL UNDE R SECTION 263 OF THE ACT DATED 01/01/2013 TO THE LD. CIT FOR REVISION OF THE ASSESSMENT ORDER AND A SHOW CAUSE NOTICE DATED 17/01/2013 WAS THEN I SSUED BY THE ITO (TECH.) TO THE ASSESSEE REFERENCE WAS MADE TO 2 ND & 3 RD PARAS OF THE IMPUGNED ORDER. IT WAS FURTHER STATED THAT CONSEQU ENTLY, THE LD. CIT PASSED THE ORDER UNDER SECTION 263 OF THE ACT HOLDI NG THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT WAS 7 WITHOUT DUE AND PROPER ENQUIRY AND WAS MISTAKEN VIE W OF LAW WHICH HAD MADE THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INT EREST OF THE REVENUE. IT WAS EMPHASIZED THAT THE CONDITION PRECEDENT FOR ISSUANCE OF NOTICE UNDER SECTION 263 OF THE ACT IS THAT THE COMMISSION ER OF INCOME TAX IS TO CALL RECORD FOR EXAMINATION OF ANY PROCEEDINGS UNDE R THIS ACT BEFORE FRAMING HIS OPINION THAT THE ORDER PASSED BY THE AS SESSING OFFICER WAS ERRONEOUS SO FAR AS IT WAS PREJUDICIAL TO THE INTER EST OF THE REVENUE. HOWEVER, IN THE PRESENT CASE, AS EVIDENT FROM PARA 2 & 3 OF THE IMPUGNED ORDER, THE LD. CIT INITIATED THE PROCEEDIN GS UNDER SECTION 263 OF THE ACT BY NOT CALLING AND EXAMINING THE RECORDS AND ACTED ONLY ON THE PROPOSAL MOVED BY THE ASSESSING OFFICER TO REVISE T HE ORDER DATED 09/12/2011 PASSED UNDER SECTION 143(3) OF THE ACT, WHICH WAS AGAINST THE PLAIN LANGUAGE OF SECTION 263 OF THE ACT BECAUSE TH E SUGGESTION OF THE ASSESSING OFFICER CANNOT BE A BASIS FOR REVISION OF THE ASSESSMENT ORDER. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- 1) RAJIV ARORA VS. CIT (2011) 131 ITD 58 (JP.) (TRI B.) 2) JHEENDU RAM VS. CIT (2011) 7 ITR 463 (LUCKNOW) ( TRIB.) 3) MS. BINA INDRA KUMAR VS. ITO (2012) 137 ITD 238/ 80 DTR 180 (MUM.) (TRIB.) 4) CIT VS NEW DELHI TELEVISION LTD. (2013) 94 DTR 2 1 (DEL.) (HC) 5) CIT VS. AMIT CORPN. (2013) 213 TAXMAN 19 (GUJ.) (HC) (MAG.) 6) CIT VS. LEISURE WEAR EXPORTS LTD. (2011) 341 ITR 166 (DEL.) (HC) 8 7) PRADEEP BANDHU VS. CIT (2013) 81 DTR 289 (JD.) ( TRIB.) 8) MANISH KUMAR VS. CIT 134 ITD 27/17 ITR 324 (INDO RE) (TRIB.) 7 . IN HIS RIVAL SUBMISSIONS, LEARNED D.R. STRONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT AND FURTHER SUBMITTED THAT TH E ASSESSING OFFICER DID NOT MAKE PROPER ENQUIRIES WHILE PASSING THE ASSESSM ENT ORDER. THEREFORE, THE ASSESSMENT ORDER WAS NOT ONLY ERRONE OUS BUT ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS ABUNDANTLY CLEAR FROM PARA 2 OF THE IMP UGNED ORDER THAT THE ITO, WARD-1(2), KOTA VIDE LETTER NO. 1700 DATED 01/ 01/2013 PROPOSED ACTION UNDER SECTION 263 OF THE ACT AND IT WAS NOT THE LD. CIT, WHO HIMSELF CALLED THE RECORD AND EXAMINED THE SAME FOR ANY PROCEEDING UNDER SECTION 263 OF THE ACT. THEREFORE, IT CAN BE SAID THAT THE LD. CIT HAD NOT APPLIED HIS MIND BUT THE MATTER WAS REFERRE D BY THE ASSESSING OFFICER FOR INITIATING THE PROCEEDING UNDER SECTION 263 OF THE ACT. IN THE PRESENT CASE, ON PERUSAL OF PARA 3 OF THE IMPUGNED ORDER, IT IS NOTICED THAT THE NOTICE DATED 17/01/2013 UNDER SECTION 263 OF THE ACT WAS ISSUED ONLY ON RECEIPT OF THE PROPOSAL UNDER SECTION 263 O F THE ACT FROM THE ITO, 9 WARD-1(2), KOTA AND THE ASSESSEE EXPLAINED, VIDE WR ITTEN SUBMISSION WHICH HAS BEEN REPRODUCED IN PARA 4 OF THE IMPUGNED ORDER, EACH AND EVERY OBJECTION RAISED BY THE ITO, WARD-1(2), KOTA. IT IS WELL SETTLED THAT THE LD. CIT WHILE EXERCISING THE REVISIONARY POWERS UNDER SECTION 263 OF THE ACT MAY CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEEDINGS AND THEREAFTER IF HE CONSIDERS THAT ANY ORDER PASSED TH EREIN IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD A ND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSA RY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFIED. THEREFORE, BEFORE TAKING ANY ACTION, LD. CIT HIMSELF SHALL APPLY HIS MIND AFTER EXAMINING THE RECORD OF ANY PROCEEDINGS AND HIS SATISFACTION IS MUST. HOWEVER, IN THE PRESENT CASE, THE SATISFACTION WAS OF THE ITO ( TECH.) WHO PROPOSED ACTION UNDER SECTION 263 OF THE ACT, BUT NOT OF THE LD. CIT. THEREFORE, ISSUANCE OF NOTICE UNDER SECTION 263 OF THE ACT ON THE BASIS OF THE PROPOSAL MADE BY THE ITO WAS VOID AB INITIO . WE, THEREFORE, SET ASIDE THE SAME. FOR THE AFORESAID VIEW, WE ARE FORTIFIED BY THE FOLLOWING DECISIONS OF VARIOUS BENCHES OF THE TRIBUNALS:- 1) RAJIV ARORA VS. CIT (2011) 131 ITD 58 (JP.) 2) JHEENDU RAM VS. CIT (2011) 7 ITR 463 (LUCKNOW) 3) MS. BINA INDRA KUMAR VS. ITO (2012) 137 ITD 238/ 80 DTR 180 (MUM.) 10 4) PRADEEP BANDHU VS. CIT (2013) 81 DTR 289 (JD.) 5) MANISH KUMAR VS. CIT 134 ITD 27/17 ITR 324 (INDO RE) 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE COURT ON 26 TH FEBRUARY, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26 TH FEBRUARY, 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JAIPUR.