M/s JVL Agro Industries LTD., Varanasi V. CIT, Varanasi

ITA 463/ALLD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63343 (ITAT-ALLAHABAD)
• Duration Of Justice: 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 19-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH
• Assessee Lawyers: SHISHIR BAJPAI F
• Keywords: Opportunity of being heard; Period of limitation; Source of fund; Question of law; Cost of acquisition; Revised return
• Section: 143(3); 142(1); 14A; 115JB; 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH, ALLAHABAD BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.463/A/2012 ASSESSMENT YEAR: 2008-09 M/S JVL AGRO INDUSTRIES LTD., VS. COMMISSIONER OF INCOME TAX, JHUNJHUNWALA BHAWAN, VARANASI. NATI IMLI, VARANASI. (PAN : AAACJ 5704 B). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHISHIR BAJPAI, F.C.A. RESPONDENT BY : SHRI JAGDISH, CIT - D.R. DATE OF HEARING : 30.10.2012 DATE OF PRONOUNCEMENT : 09.11.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 21.09.2012 PASSED BY THE LD. CIT, VARANASI FOR THE ASSESSMENT YEAR 2008-09. 2. THE ASSESSEE HAS RAISED AS MANY AS 17 GROUNDS OF APPEAL CHALLENGING ORDER OF LD. CIT PASSED UNDER SECTION 263 OF THE INCOME T AX ACT, 1961 (THE ACT HEREINAFTER). ITA NO.463/A/2012 A.Y. 2008-09 2 3. THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECT ION 143(3) OF THE ACT ON 28.07.2010 AT RS.12,72,23,072/-. SUBSEQUENTLY, THE ASSESSING OFFICER SUBMITTED A PROPOSAL FOR CONSIDERING THE ASSESSMENT UNDER SECTI ON 263 OF THE ACT AS THE ASSESSMENT ORDER WAS PREJUDICIAL TO THE INTEREST OF REVENUE. THE CIT ISSUED NOTICE UNDER SECTION 263 ON 31.01.2012. THE CIT NOTED THA T THE ASSESSING OFFICER DID NOT EXAMINE THE VARIOUS ISSUES WHILE MAKING ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THE VARIOUS ISSUES DISCUSSED BY THE CIT IN HI S ORDER UNDER SECTION 263 OF THE ACT ARE AS UNDER :- DISALLOWANCE OF EXPENDITURE UNDER SECTION 14A :- 4. THE CIT NOTED THAT THE ASSESSEE DEBITED RS.5.84 CORES AS FINANCIAL EXPENSES TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE HAS C LAIMED RS.1,81,82,370/- AS INCOME EXEMPTED FROM INCOME TAX. THE CIT WAS OF TH E VIEW THAT THE ASSESSING OFFICER DID NOT NOTICE THE PROVISION OF SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES. THE ASSESSING OFFICER SHOULD HAVE WORKED OUT THE DISALLOWANCE IN ACCORDANCE WITH THE SAID PROVISIONS OF THE ACT. SHARE CAPITAL:- ITA NO.463/A/2012 A.Y. 2008-09 3 5. THE CIT NOTED THAT DURING THE YEAR THE ASSESSEE HAS ISSUED RS.60 LACS PREFERENTIAL CONVERTIBLE WARRANTS FOR RS.48 CRORES @ RS.10/- EACH ON PREMIUM OF RS.70/- PER DEBENTURE. APPLICATION MONEY @ RS.8/- EACH AMOUNTING TO RS.4.80 CRORES WAS RECEIVED DURING THE FINANCIAL YEAR. THE CIT FOUND THAT THE ASSESSING OFFICER ACCEPTED THE CLAIM OF GENUINENESS OF SOURCE OF RS.4.80 CRORES ON FACE VALUE, WITHOUT EXAMINING IT. THE ASSESSING OFFICER DID NOT EXAMINE THE RELEVANT BANK ACCOUNT. THE ASSESSING OFFICER DID NOT EXAMIN E THE SHARE HOLDS. THE ISSUE REQUIRED EXAMINATION IN VIEW OF PREVAILING PRACTICE IN THE MARKET OF TRANSFERRING OWN UNACCOUNTED FUNDS IN THE FORM OF SHARE CAPITAL. THE CIT NOTED THAT THE ASSESSING OFFICER DID NOT SEE VARIOUS ASPECTS WHICH HAVE BEEN NOTED BY THE CIT IN HIS ORDER AT PAGE NO.4. ALLOWABILITY OF CAPITAL GAIN RS.3,30,12,480/- :- 6. THE CIT NOTED THAT THE ASSESSEE COMPANY HAS CLAI MED SHORT TERM CAPITAL GAIN OF RS.3,30,12,480/- ON SALE OF SHARES. THE CI T NOTED THAT THE ASSESSING OFFICER DID NOT LOOK INTO THE ISSUE SUCH AS COST OF ACQUISITION OF SHARES, HOLDING PERIOD, GENUINENESS ETC. THE CIT FOUND THAT THE AS SESSING OFFICER ACCEPTED THE CLAIM OF THE ASSESSEE WITHOUT MAKING ANY ENQUIRY. ITA NO.463/A/2012 A.Y. 2008-09 4 ALLOWABILITY OF DEDUCTION OF R.5,68,89,928/- U/S. 8 0IB/- :- 7. THE CIT NOTED THAT THE ASSESSEE COMPANY HAS CLAI MED DEDUCTION UNDER SECTION 80IB OF THE ACT OF RS.5,68,89,928/- IN REVI SED RETURN. THE CIT NOTED THAT REPORT IN FORM 10CCB FOR PLASTIC CONTAINERS UNIT NO .VI, FATTY DISTILLATION UNIT NO.VIII, GASIFICATION UNIT NO.IX AND RED PALMOLEIN AND ENTER ESTRIFIED UNIT NO.IX WERE FURNISHED ON 02.12.2009, WHILE FOR AUTOM ATIC TIN MANUFACTURING UNIT X AS ON 29.09.2008 MUCH AFTER THE DUE DATE OF FILIN G OF RETURN OF INCOME AND THEREBY IS IN VIOLATION OF THE MANDATORY ACTION POI NTS RECORDED IN THE APPENDIX OF FORM NO 10CCB. THE CIT NOTED THAT THE AUDIT REPORT S OBTAINED MUCH AFTER DUE DATE OF FILING OF RETURNS HENCE THE CLAIM OF DEDUCT ION UNDER SECTION 80IB IS NOT ALLOWABLE. THE ASSESSING OFFICER DID NOT LOOK INTO THE MATTER. SECTION 80IB(10) READ WITH SECTION 80IB(13) :- 8. THE CIT NOTED THAT THE ASSESSEE IS SHOWING PROFI TS ONLY IN TAX EXEMPTED UNITS BY SUPPRESSING THE TAXABLE INCOME OF NON EXEM PT UNITS ONLY WITH INTENTION TO EVADE TAX LIABILITY. THE ALLOWABILITY OF DEDUCTION UNDER SEATON 80IB WITH REFERENCE TO SECTION 80IB(10) FOR EACH UNITS REMAIN ED TO BE EXAMINED THOROUGHLY BY THE ASSESSING OFFICER. ITA NO.463/A/2012 A.Y. 2008-09 5 9. AS PER SECTION 80IB(2)(IV) THE MINIMUM REQUIREMENT OF EMPLOYEES OR WORKERS IN SUCH MANUFACTURING UNIT CARRIED ON WITH AID OF POWER IS 10 OR MORE WORKERS AND 20 OR MORE WORKERS IN MANUFACTURING UND ERTAKING WHERE MANUFACTURING PROCESS CARRIED OUT WITH AID OF POWER . THE CIT FOUND THAT THE ASSESSEE DID NOT SATISFY THE CONDITIONS IN SOME OF THE UNITS. THE ISSUE HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER DURING THE ASSESS MENT PROCEEDINGS. THE CIT ALSO NOTED THAT THE ASSESSEE HAS INCLUDED THE TRADI NG QUANTITY ALSO IN MANUFACTURING QUANTITY. THE ASSESSING OFFICER DID NOT LOOK INTO THIS ASPECT AT ALL AND ALLOWED 80IB DEDUCTION WITHOUT ASCERTAINING TRADING RECEIPT FROM GROSS TOTAL RECEIPTS. BROKERAGE AND COMMISSION 10. THE CIT NOTED THAT TOTAL BROKERAGE AND COMMISSI ON ON SALE AMOUNTING TO RS.3.18 CRORES WHICH INCLUDES 0.48 CRORE AS REBATE AND DISCOUNT ON SALE NOT LIABLE FOR TDS. THE CIT NOTED THAT THE ASSESSING OFFICER DID NOT VERIFY THE GENUINENESS OF THE COMMISSION PAYMENT. ADVANCE FROM CUSTOMER :- ITA NO.463/A/2012 A.Y. 2008-09 6 11. THE CIT NOTED THAT THE ADVANCE FROM CUSTOMER IN CREASED FROM RWS.6.22 CRORES TO RS.20.07 CRORES FROM PRECEDING YEARS. TH E ASSESSING OFFICER DID NOT XAMINE THIS ISSUE ALSO. SUNDRY CREDITORS :- 12. SUNDRY CREDITORS HAS INCREASED TO RS.307 CRORES FROM RS.143 CRORES OF PRECEDING YEARS. THE ISSUE REQUIRES TO BE EXAMINED BY THE ASSESSING OFFICER. COMPLIANCE OF PROVISIONS OF CHAPTER-XVII B REGARDIN G TDS :- 13. THE CIT NOTED THAT THE PAYMENT OF COMMISSION ON IMPORT OF MACHINERY OF RS.14,11,682/- APPEAR AS TECHNICAL FEES PAID FOR IN STALLATION OF MACHINE WHICH IS SUBJECT TDS UNDER SECTION 195 OF THE ACT. THE ASSE SSING OFFICER DID NOT EXAMINE THE ISSUE FROM THIS POINT OF VIEW. SECURITY DEPOSIT OF RS.1.63 CRORES:- 14. THE CIT NOTED THAT THE CREDITWORTHINESS OF DEPO SITORS AND GENUINENESS OF THE TRANSACTIONS WERE NOT EXAMINED BY THE ASSESSING OFF ICER. THE CIT ALSO NOTED THAT ITA NO.463/A/2012 A.Y. 2008-09 7 THE ASSESSEE DID NOT PAY ADVANCE TAX AND INSTEAD OF ADVANCE TAX HE HAS PAID SELF ASSESSMENT TAX OF RS.99,65,640/- AND INTEREST RS.9, 98,690/-. THE NON-PAYMENT OF ADVANCE TAX AND HUG TAX LIABILITY OF SELF ASSESSMEN T TAX ALSO DID NOT PROMPT THE ASSESSING OFFICER TO LOOK IN TO THE VARIOUS DEVICES OF THE TAX AVOIDANCE PRACTICE BY THE ASSESSEE. THE CIT PLACED RELIANCE ON VARIOUS J UDGEMENTS INCLUDING THE JUDGEMENT OF HON'BLE M.P. HIGH COURT IN THE CASE OF CIT VS. DEEPAK KUMAR GARGH, 212 CTR 152 (M.P.) AND HON'BLE ALLAHABAD HIG H COURT IN THE CASE OF JAGDISH KUMAR GULATI VS. CIT, 191 CTR 25 (ALL) AND FOUND THAT PROPOSAL OF ASSESSING OFFICER ADDRESSED TO CIT UNDER SECTION 26 3 IS BASED ON MATERIAL FACTS ON RECORD AND IS ON MERIT OF THE CASE. THE RELEVANT F INDING OF THE CIT IS REPRODUCED AS BELOW :- (PAGE NOS.10 & 11) IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF TH E CASE, I FOUND THAT PROPOSAL OF ASSESSING OFFICER ADDRESSED TO CIT UNDER SECTION 263 IS BASED ON MARTIAL FACTS ON RECORDS AN D IS ON MERITS OF THE CASE. THE ASSESSMENT ORDER PASSED BY THE ASSES SING OFFICER IS PREJUDICIAL TO THE INTEREST OF REVENUE AND THE INCO ME HAS BEEN UNDER ASSESSED. SOME OF THE ISSUES DISCUSSED ABOVE HAVE NOT BEEN TOUCHED AT ALL BY THE ASSESSING OFFICER. NEITHER COMPLETE DETAIL WAS CALLED FOR NOR ATTEMPT WAS MADE TO ANALYZE THE FACTS ON RECORD FOR THE PURPOSE OF WORKING OUT THE STATUTORY QUALIFYING AMOUNT UNDE R SECTION 14A R.W. RULE 80IB. ON SOME ISSUES PARTIAL INCOMPLETE INFOR MATION WAS SUBMITTED BY ASSESSEE, BUT SAME WAS ALSO NOT SEEN A T ALL BY ASSESSING OFFICER. THE ASSESSING OFFICER HAS DEFINITELY FAIL ED IN DISCHARGING HIS DUTY AND COMPLETED THE ASSESSMENT IN HURRIED MANNER . 15. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS FURNISHED COMPLETE DETAILS BEFORE THE ASSESSING OFF ICER. THE ASSESSING OFFICER ITA NO.463/A/2012 A.Y. 2008-09 8 BEFORE MAKING ASSESSMENT HAS EXAMINED THOSE DETAILS . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE DETAILS REGARDING DISALLOWANCE OF EXPENSES UNDER SECTION 14A READ WITH RULE 8-D, THE ASSESSEE HAS FU RNISHED THE DETAILS BEFORE THE ASSESSING OFFICER THROUGH A LETTER OF WHICH COPY HA S BEEN PLACED AT PAGE NO.316 OF PAPER BOOK. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE DETAILS READING SHARE CAPITAL HAS BEEN FURNISHED BEFORE THE ASSESSING OFFICER VIDE LETTER DATED 12.03.2010 OF WHICH COPY HAS BEEN PLACED AT P AGE NO.247 OF ASSESSEES PAPER BOOK. THE SAID LETTER WAS GIVEN TO THE ASSES SING OFFICER IN REPLY TO QUERY MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN THE SAID LETTER IT WAS STATED THAT THE ASSESSEE RECEIVED RS.4,80,00,000/- AND IN RESPECT OF SHARE OF WARRANT, THE DETAILS OF THE SAME WAS ENCLOSED TO THAT LETTER. A COPY OF PRINCIPAL APPROVAL IN BOMBAY STOCK EXCHANGE, THE AMOUNT RECEIVED FROM FII S WAS APPROVED BY RESERVE BANK OF INDIA AND THE RELEVANT COPY OF THE SAME WAS ALSO FURNISHED BEFORE THE ASSESSING OFFICER. A COPY OF BANK ACCOUNT SHOW ING THE AFORESAID RECEIPT OF PREFERENTIAL SHARE WARRANT WAS ALSO FURNISHED TO TH E A.O. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE APPLICATION RECEI VED BY THE FFI IN RESPECT OF SHARE WARRANT AND BANK ADVICE REGARDING PROCEEDS OF PAYMENT WERE FURNISHED TO THE ASSESSING OFFICER VIDE LETTER DATED 22.03.2010 OF WHICH COPY HAS BEEN LACED AT PAGE NO.248 OF THE ASSESSEES PAPER BOOK. A COPY O F INCOME TAX RETURN ALONG WITH BALANCE SHEET OF INDIAN APPLICANT TO WHOM SHAR E WARRANT HAS BEEN ALLOTTED ON ITA NO.463/A/2012 A.Y. 2008-09 9 PREFERENTIAL BASIS WAS ALSO FURNISHED THROUGH THE L ETTER. THE ASSESSEE FURTHER SUBMITTED THE DETAILS VIDE LETTERS DATED 20.04.2010 . THE RELEVANT SUBMISSIONS MADE IN THE SAID LETTER ARE REPRODUCED AS BELOW :- ( PAGE NOS.249 & 250 OF ASSESSEES PAPER BOOK) WE HAVE FILED THE DETAIL OF INVESTMENT MADE FOR PR EFERENTIAL SHARE WARRANT WHEREIN INVESTMENT MADE FROM THREE IN DIAN COMPANIES IS BEING GIVEN AND THE PROFIT AND LOSS ACCOUNT, BAL ANCE SHEET AND ACKNOWLEDGMENT OF THE INVESTORS COMPANY HAD ALREAD Y BEEN SUBMITTED. THE SOURCE OF FUND FOR MAKING INVESTMEN T IN PREFERENTIAL SHARE WARRANT IS GIVEN HEREUNDER ALONG WITH THE SUP PORTING. 1. THE M/S NILAMBER TREXIM AND CREDIT PRIVATE LIMIT ED HAS DEPOSITED OFF HOLDING IN SHARES OF M/S UTTAR PRADES H CORBONS AND CHEMICALS LIMITED FOR RS.1,00,00,000/- TO M/S PAHAR IA MARKETS AND INVESTMENTS PRIVET LIMITED, THE COPY OF BANK ACCOUN T, AUDITED PROFIT AND LOSS ACCOUNT BALANCE SHEET AND ACKNOWLEDGMENT O F RETURN OF M/S PAHARIA MARKETS AND INVESTMENTS PRIVATE LIMITED IS ENCLOSED. THE COMPANY HAD MADE INVESTMENT OF RS.76,00,000/- OUT O F THE SAME. 2. THE M/S JASRAPURIA SILK MILL PRIVATE LIMITED HAS MADE INVESTMENT OF RS.40,00,000/- WHICH THE COMPANY HAS ACQUIRED AS A SHARE CAPITAL FROM FOLLOWING FOUR COMPANIES : (A) M/S TWENTY FIRST CENTURY (INDIA) LTD. (B) M/S OASIS CINE COMMUNICATION LIMITED (C) M/S SHYAMA INFOSYS LIMITED THE COPY OF AUDITED BALANCE SHEET, PROFIT AND LOSS ACCOUNT, INCOME TAX ACKNOWLEDGMENT AND BANK STATEMENT OF THE AFORESAID FOUR COMPANIES IS ENCLOSED. 3. THE M/S JHUNJHUNWALA GASES PRIVATE LIMITED HAD M ADE INVESTMENT OF RS.1,24,00,000/-WHICH IS SOURCED OF R S.24,00,000/- FROM M/S NILAMBER TREXIM AND CREDIT PRIVATE LIMITED AND RS.1,00,00,000/- FROM DISPOSAL OF SHARES OF M/S UTTAR PRADESH CORBON S AND CHEMICALS LIMITED TO M/S JASRAPURIA SILK MILLS PRIVATE LIMITE D. THE DETAIL OF ITA NO.463/A/2012 A.Y. 2008-09 10 AVAILABILITY OF FUND IN HANDS OF M/S. NILAMBER TREX IM AND CREDIT PRIVATE LIMITED AND M/S JASRAPURIA SILK MILLS PRIVA TE LIMITED HAS ALREADY BEEN GIVEN HERE IN ABOVE. THUS THE AVAILABILITY OF FUND IN HANDS OF INDIAN IN VESTOR HAD BEEN FULLY EXPLAINED AND HOPE THAT IT WILL SERE THE PURPOSE OF YOUR GOODSELF. 16. AS REGARDS THE ALLOWABILITY OF SHORT TERM CAPI TAL GAIN, THE LEARNED AUTHORISED REPRESENTATIVE REFERRED TO PAGES NOS.350 TO 388 OF THE ASSESSEES PAPER BOOK AND SUBMITTED THAT THE ASSESSEE VIDE HIS LETTE R DATED 27.05.2010 FURNISHED THE DETAILS OF CALCULATION OF LONG TERM CAPITAL GAIN SC RIPT WISE. COPIES OF BILLS SHOWING STT BEING PAID WAS FURNISHED TO THE ASSESSI NG OFFICER. COMPLETE DETAILS OF SHORT TERM CAPITAL GAIN SHOWING NAME OF SCRIPTS, NUMBER OF SHARES, PURCHASE COST, SALE QUANTITY, SALE VALUE AND SHORT TERM CAPI TAL GAIN SCRIPT WISE HAS BEEN FURNISHED TO THE ASSESSING OFFICER OF WHICH COPY HA S BEEN PLACED AT PAGE NO.351 OF THE ASSESSEES PAPER BOOK. LEARNED AUTHORISED REPR ESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER HAS MADE DISCUSSION IN THIS REGAR D IN PARAGRAPH NO.4 OF HIS ORDER. 17. IN RESPECT OF DATE OF AUDIT REPORT, THE AUDITOR VIDE HIS LETTER DATED 15.06.2012 CLARIFIED THAT THERE IS TYPING MISTAKE. THE DATE O F AUDIT REPORT FOR ALL THOSE UNITS WERE DATED 29.09.2008 AND NOT 22.12.2009. LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS CLARIFIED THIS POSI TION BEFORE THE CIT VIDE LETTER ITA NO.463/A/2012 A.Y. 2008-09 11 DATED 18.06.2012. LEARNED AUTHORISED REPRESENTATIV E REFERRED A JUDICIAL PRONOUNCEMENT IN THE CASE OF CIT VS. GUJARAT OIL AN D ALLIED INDUSTRIES, 201 ITR 325 (GUJ) WHEREIN IT HAS BEEN HELD THAT IN VIEW OF THE REASONING OF THE ALLAHABAD HIGH COURT AND PATNA HIGH COURT WHICH IS SQUARELY A PPLY TO THE FACTS OF THAT CASE. THE PROVISION ABOUT FURNISHING OF THE AUDITORS REP ORT ALONG WITH THE RETURN HAS TO BE TREATED AS A PROCEDURAL PROVISION, DIRECTORY IN NATURE, AND ITS SUBSTANTIAL COMPLIANCE SHOULD SUFFICE, MEANING THEREBY THAT SUC H REPORT SHOULD BE MADE AVAILABLE BY THE ASSESSEE TO THE ASSESSING OFFICER LATEST WHEN TO QUESTION OF FRAMING OF ASSESSMENT IS TAKEN UP BY THE INCOME TAX OFFICER AND WHEN HE APPLIES HIS MIND TO THE CLAIM OF THE ASSESSEE AND IF BY THA T TIME THE ASSESSEE HAS PUT HIS HOUSE IN ORDER AND HAS FURBISHED THE REPORT OF THE AUDITOR OF SUPPORTING THE RETURN, HE CAN BE SAID TO HAVE SATISFIED THE REQUIREMENT OF THAT SECTION. 18. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT REVISED RETURN WAS FURNISHED DUE TO THE CIT(A)S ORDER FOR A.Y. 2007-0 8. 19. AS REGARDS THE NUMBER OF PERSONS AND DEDUCTION UNDER SECTION 80IB OF THE ACT, LEARNED AUTHORISED REPRESENTATIVE SUBMITTED TH AT THE DETAILS WERE ALREADY ON FILE BEFORE THE ASSESSING OFFICER. THE ASSESSING O FFICER BEFORE ALLOWING THE DEDUCTION UNDER SECTION 80IB, EXAMINED THE SAME. I N RESPECT OF BROKERAGE AND ITA NO.463/A/2012 A.Y. 2008-09 12 COMMISSION, THE LEARNED AUTHORISED REPRESENTATIVE S UBMITTED THAT THE COMPUTATION FURNISHED BY THE ASSESSEE ITSELF CONTAIN DISALLOWAN CE IN RESPECT OF SECTION 40(A)(IA) OF THE ACT. THE ASSESSING OFFICER SPECIFICALLY ASK ED FOR THE TDS DETAILS VIDE ORDER SHEET DATED 28.04.2010 AND THE SAME HAS BEEN REPLIE D BY THE ASSESSEE VIDE LETTER DATED 13.05.2010. LEARNED AUTHORISED REPRESENTATIV E SUBMITTED THAT THE ASSESSEE HAS FURNISHED COMPLETE DETAILS INCLUDING THE AMOUNT OF BILL WHERE TDS WAS NOT REQUIRED TO BE DEDUCTED. THE ASSESSING OFFICER HAS EXAMINED ALL THESE ASPECTS BEFORE MAKING THE ASSESSMENT UNDER SECTION 143(3) O F THE ACT. 20. THE LEARNED AUTHORISED REPRESENTATIVE REFERRED PAGE NOS.38 TO 78 OF THE ASSESSEES PAPER BOOK WHERE COMPLETE DETAILS OF COM MISSION PAYMENT AND TDS MADE HAS BEEN FURNISHED TO THE ASSESSING OFFICER AS WELL AS BEFORE THE CIT. IN RESPECT OF ADVANCE FROM CUSTOMERS, LEARNED AUTHORIS ED REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER ASKED THE DETAILS OF SUN DRY CREDITORS VIDE ORDER SHEET DATED 05.02.2010, 15.04.2010 & 23.04.2010. THE ASS ESSEE FURNISHED RELEVANT DETAILS BEFORE THE ASSESSING OFFICER INCLUDING COPY OF ACCOUNTS, POSTAL ADDRESS, CONFIRMATION ETC. VIDE LETTER DATED 24.02.2010, 28. 04.2010 AND 07.05.2010. ADVANCE FROM CUSTOMER HAS ALSO BEEN EXAMINED BY THE ASSESSING OFFICER AS COMPLETE BOOKS OF ACCOUNT AND AUDITED BALANCE SHEET WERE PRODUCED BEFORE THE A.O. AS REGARDS COMPLIANCE OF PROVISION OF CHAPTER XVII-B REGARDING TDS, ITA NO.463/A/2012 A.Y. 2008-09 13 LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT TH ERE WAS NO COMMISSION ON IMPORT OF MACHINE RS.14,11,662/-, ON IMPORT OF VANA SPATI TDS HAS BEEN DEDUCTED. LEARNED AUTHORISED REPRESENTATIVE REFERRED PAGE NO. 66 OF ASSESSEES PAPER BOOK AND POINTED OUT SL. NOS. 280 TO 282, 284 TO 287, 29 1. IT WAS ALSO SUBMISSION OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ASSE SSING OFFICER MADE ASSESSMENT AFTER EXAMINING EACH AND EVERY ASPECT WHICH IS REQU IRED TO BE EXAMINED FOR MAKING THE ASSESSMENT UNDER SECTION 143(3). LEARN ED AUTHORISED REPRESENTATIVE IN SUPPORT OF HIS CONTENTION REFERRED PARAGRAPH NO. 2 OF ASSESSING OFFICERS ORDER. 21. THE LEARNED AUTHORIZED REPRESENTATIVE WHILE SUM MARIZING THE ARGUMENT SUBMITTED THAT WHEN THE ASSESSING OFFICER HAS APPLI ED HIS MIND ON THE DETAILS FILED BY THE ASSESSEE, ORDER OF THE ASSESSING OFFICER CAN NOT BE SAID TO BE ERRONEOUS. LEARNED AUTHORIZED REPRESENTATIVE IN SUPPORT OF HIS CONTENTION RELIED UPON THE FOLLOWING DECISIONS:- I) CIT VS. ANIL KUMAR SHARMA, 335 ITR 83 (DELHI) II) RANKA JEWELLERS VS. ADDL. CIT, 328 ITR 148 (BOM BAY) III) CIT VS. J.P. GOEL (HUF) 247 ITR 553 (KOLKATA) 22. LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THA T ADOPTING ONE POSSIBLE VIEW BY THE ASSESSING OFFICER, THE ORDER OF THE ASS ESSING OFFICER CANNOT BE SAID TO BE ERRONEOUS. LEARNED AUTHORIZED REPRESENTATIVE IN SUPPORT OF HIS CONTENTION RELIED UPON THE FOLLOWING JUDGEMENTS:- ITA NO.463/A/2012 A.Y. 2008-09 14 I) CIT VS. HONDA SEIL POWER PRODUCT LIMITED, 333 IT R 547 (DELHI) II) CIT VS. MAX INDIA LIMITED, 295 ITR 282 (S.C.) III) BONGAIGAON REFINERY PETROCHEMICALS LTD. VS. UO I 287 ITR 120 (GUA) IV) CIT VS. DLF PVT. LTD. 329 ITR 289 (DELHI) V) CIT VS. VINAJI INVESTMENT, 290 ITR 505 (DELHI) VI) CIT VS. MUNJAL COSTING, 303 ITR 023 (PUNJAB) VII) CIT VS. PANKAJ DHIRAJLAL AND DHRUVE, 305 ITR 3 32 (PUNJAB) 23. IT IS ALSO SUBMISSION OF THE LEARNED AUTHORIZED REPRESENTATIVE THAT ON DOCTORING OF PARITY ASSESSING OFFICERS ORDER CANNO T BE ERRONEOUS. HE RELIED UPON THE FOLLOWING JUDGEMENT:- I) CIT VS. GOKULDAS EXPORT, 333 ITR 214 (KARNATAKA) 24. LEARNED AUTHORIZED REPRESENTATIVE ALSO SUBMITTE D THAT FILING OF DETAILS OF CAPITAL GAIN AND DUE TO INADEQUATE ENQUIRING CANNOT BE TREATED AS FAILURE OF ENQUIRIES TO MAKE ORDER AS ERRONEOUS. LEARNED AUTH ORIZED REPRESENTATIVE IN SUPPORT OF HIS CONTENTION RELIED UPON THE FOLLOWING JUDGMENT:- I) CIT VS. DEVELOPMENT CREDIT BANK LIMITED, 323 IT R 206 (BOMBAY). 25. LEARNED AUTHORIZED REPRESENTATIVE FURTHER SUBMI TTED THAT WHEN THE ASSESSEE HAS PRODUCED THE RELEVANT MATERIAL AND OFFERED EXPL ANATION FOR QUERIES AND THE ASSESSING OFFICER HAS REACHED A PARTICULAR CONCLUSI ON, ORDER OF THE ASSESSING OFFICER CANNOT BE AID TO BE ERRONEOUS. THE LEARNED AUTHORIZED REPRESENTATIVE RELIED UPON THE FOLLOWING JUDGMENT:- I) CIT VS. ARVIND JEWELLERS, 259 ITR 502 (GUJARAT) ITA NO.463/A/2012 A.Y. 2008-09 15 26. WITH REFERENCE TO THE JUDGEMENT OF HON'BLE DELH I HIGH COURT IN THE CASE OF CIT VS. DLF LIMITED, ITA NO.263/2010 & 384/2010, JU DGEMENT DATED 17.09.2012, LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT SE CTION 263 CANNOT BE INVOKED ON PRESUMPTION THAT SECTION 14A WAS NOT CONSIDERED BY ASSESSING OFFICER. WHEN REPLY FOR THE SAME WAS ON RECORD, SECTION 263 CANNO T BE INITIATED FOR SECTION 14A OF THE ACT. 27. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDER OF CIT AND SUBMITTED THAT CIT IS NOT MAKING F RESH ASSESSMENT. THE CIT RESTORED THE MATTER TO THE FILE OF THE ASSESSING OF FICER FOR EXAMINATION. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CIT HAS POWER UNDER SECTION 263 TO DIRECT THE ASSESSING OFFICER TO EXAM INE THE ISSUE WHERE HE FINDS THAT ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF REVENUE. THE LEARNED DEPARTMENTAL REPRESENTATIVE I N SUPPORT OF HIS CONTENTION RELIED UPON THE JUDGMENT OF HON'BLE SUPREME COURT I N THE CASE OF CIT VS. SHREE MANJUNATHESWARE PACKING PRODUCTS AND CAMPHOR WORKS, 231 ITR 53 (S.C.). THE LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITT ED THAT WITHOUT APPLICATION OF MIND AND NO PROPER ENQUIRY BY ASSESSING OFFICER AMO UNT TO ERRONEOUS ORDER OF ASSESSING OFFICER AND CIT CAN EXERCISE HIS POWER UN DER SECTION 263 OF THE ACT. THE LEARNED DEPARTMENTAL REPRESENTATIVE, IN SUPPORT OF HIS CONTENTION HAS RELIED ITA NO.463/A/2012 A.Y. 2008-09 16 UPON THE JUDGEMENT OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. SHRI BHAGWAN DAS, 272 ITR 367 (ALL), SWARUP VEGETABLE PR ODUCTS INDUSTRIES LIMITED (NO.1) VS. CIT, 187 ITR 412 (ALL.) AND HON'BLE GUWA HATI HIGH COURT IN THE CASE OF CIT VS. PARASMAL JAIN, 70 DTR (GAU) 214. 28. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND RECORDS PERUSED. THE ISSUE UNDER CONSIDERATION IS PERTAINI NG TO SECTION 263 OF THE ACT WHICH READS AS UNDER :- 263. (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE [ASSESSING] OFFICER IS ERRONE OUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY , AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MA KING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SU CH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSE SSMENT AND DIRECTING A FRESH ASSESSMENT. [EXPLANATION.FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT, FOR THE PURPOSES OF THIS SUB-SECTION, (A) AN ORDER PASSED [ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988] BY THE ASSESSING OFFICER SHALL INCLUDE (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMMISSIONER [OR DEPUTY COMMISSIONER] OR THE INCOME-TAX OFFICER ON T HE BASIS OF THE DIRECTIONS ISSUED BY THE [JOINT] COMMISSIONER UNDER SECTION 144A ; (II) AN ORDER MADE BY THE [JOINT] COMMISSIONER IN EXERCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ITA NO.463/A/2012 A.Y. 2008-09 17 ISSUED BY THE BOARD OR BY THE CHIEF COMMISSIONER OR DIRECTOR GENERAL OR COMMISSIONER AUTHORIZED BY THE BOARD IN THIS BEHALF UNDER SECTION 120 ; (B) 'RECORD' [SHALL INCLUDE AND SHALL BE DEEMED AL WAYS TO HAVE INCLUDED] ALL RECORDS RELATING TO ANY PROCEEDING UN DER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISS IONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTIO N AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF AN Y APPEAL [FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988], THE POWERS OF THE COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEND [A ND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED] TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL.] [(2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) A FTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHI CH THE ORDER SOUGHT TO BE REVISED WAS PASSED.] (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TI ME IN THE CASE OF AN ORDER WHICH HAS BEEN PASSED IN CONSEQUENCE OF, OR T O GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN ORDER OF T HE APPELLATE TRIBUNAL, [NATIONAL TAX TRIBUNAL,] THE HIGH COURT O R THE SUPREME COURT. EXPLANATION.IN COMPUTING THE PERIOD OF LIMITATION FOR THE PURPOSES OF SUB-SECTION (2), THE TIME TAKEN IN GIVING AN OPP ORTUNITY TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PERIOD DURING WHICH ANY PROCEEDING UNDER THIS SECTI ON IS STAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED. 29. FROM A PLAIN READING OF SUB-SECTION (1) OF SECT ION 263, IT IS CLEAR THAT THE POWER OF SUO MOTU REVISION CAN BE EXERCISED BY THE COMMISSIONER ONLY IF, ON EXAMINATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT, HE CONSIDERS THAT AN ORDER PASSED THEREIN BY THE INCOME TAX OFFICE IS E RRONEOUS IN SO FAR AS IT IS ITA NO.463/A/2012 A.Y. 2008-09 18 PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT I S NOT AN ARBITRARY OR UNCHARTERED POWER. IT CAN BE EXERCISED ONLY ON FULFILLMENT OF THE REQUIREMENTS LAID DOWN IN SUB-SECTION (1). THE CONSIDERATION OF THE COMMISSI ONER AS TO WHETHER AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, MUST BE BASED ON MATERIALS ON THE RECORD OF THE PROCEEDINGS CALLE D FOR BY HIM. IF THERE ARE NO MATERIALS ON RECORD ON THE BASIS OF WHICH IT CAN BE SAID THAT THE COMMISSIONER ACTING IN A REASONABLE MANNER COULD HAVE COME TO SU CH A CONCLUSION, THE VERY INITIATION OF PROCEEDINGS BY HIM WILL BE ILLEGAL AN D WITHOUT JURISDICTION. THE POWER OF SUO MOTU REVISION UNDER SUB-SECTION (1) IS IN THE NATURE OF SUPERVISORY JURISDICTION AND THE SAME CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPECIFIED THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIT TO ENAB LE THE COMMISSIONER TO EXERCISE POWER OF REVISION UNDER THIS SUB-SECTION, VIZ. (1) THE ORDER IS ERRONEOUS; (2) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE HAS B EEN CAUSED TO THE INTERESTS OF THE REVENUE. IT HAS, THEREFORE, TO BE CONSIDERED FIRST LY AS TO WHEN AN ORDER CAN BE SAID TO BE ERRONEOUS. WE FIND THAT THE EXPRESSION ERRO NEOUS, ERRONEOUS ASSESSMENT AND ERRONEOUS JUDGEMENT HAVE BEEN DEFINED IN BLAC KS LAW DICTIONARY. ACCORDING TO THE DEFINITION, ERRONEOUS MEANS INV OLVING ERROR; DEVIATING FROM THE LAW. ERRONEOUS ASSESSMENT REFERS TO AN ASSE SSMENT THAT DEVIATES FROM THE LAW AND IS, THEREFORE, INVALID, AND IS DEFECT THAT IS JURISDICTIONAL IN ITS NATURE, SIMILARLY, ERRONEOUS JUDGEMENT MEANS ONE RENDERE D ACCORDING TO COURSE AND ITA NO.463/A/2012 A.Y. 2008-09 19 PRACTICE OF COURT, BUT CONTRARY TO LAW, UPON MISTAK EN VIEW OF LAW, OR UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES. 30. BEFORE COMING TO THE FACTS OF THE CASE, WE WOUL D LIKE TO EXAMINE THE JUDGEMENTS RELIED UPON BY THE REVENUE. IN THE CASE OF JAGDISH KUMAR GULATI VS. CIT, 191 CTR 25 (ALLD), IT HAS BEEN FOUND THAT NO P ROPER ENQUIRIES WERE MADE BY THE ASSESSING OFFICER. THIS FACT WAS ADMITTED BY T HE ASSESSING OFFICER HIMSELF. IN THE CASE OF CIT VS. DEEPAK KUMAR GARGH, 212 CTR 152 (M.P.) WHEREIN IT HAS BEEN HELD THAT THE ASSESSING OFFICER PASSED THE ASSESSME NT ORDER WITHOUT PROPER ENQUIRY. IN THE CASE OF MALABAR INDUSTRIAL CO. LTD . VS. CIT, 243 ITR 83 (SC) WHEREIN BROAD GUIDELINES OF SCOPE OF SECTION 263 HA S BEEN PROVIDED. IN THE CASE OF CIT VS. PARASMAL JAIN, 70 DTR (GAU) 214 WHEREIN IT HAS BEEN HELD THAT ON LACK OF PROPER ENQUIRY REVISION BY CIT IS PERMISSIBLE. ORD ER OF THE ASSESSING OFFICER WAS PASSED ON WRONG PRESUMPTION OF FACTS, INCORRECT APP LICATION OF LAW OR NON- APPLICATION OF MIND. 31. THE RATIO LAID DOWN IN THE ABOVE JUDGMENTS, AFT ER CONSIDERING THE FACTS OF RELEVANT CASES, IT IS FOUND THAT WHICH ARE NOT SIMI LAR TO THE FACTS OF THE CASE UNDER CONSIDERATION. HOWEVER, AS PER DETAILED DISCUSSION BELOW, THE JUDGEMENT RELIED UPON BY THE REVENUE ARE DISTINGUISHABLE ON FACT. T HE JUDGEMENT OF MALABAR ITA NO.463/A/2012 A.Y. 2008-09 20 INDUSTRIAL CO. LTD. VS. CIT (SUPRA) HAS LAID DOWN B ROAD GUIDELINES IN RESPECT OF SECTION 263. THEREFORE, THE SAID JUDGMENT HAS BEEN CONSIDERED WHILE DECIDING THE CASE UNDER CONSIDERATION. 32. THE APEX COURT IN THE CASE OF MALABAR INDUSTRIA L CO. LTD. VS. CIT, 243 ITR 83 (SC) EXPLAINED THE SCOPE AND CONTENT OF REVISION AL POWER OF COMMISSIONER UNDER SECTION 263 AS FOLLOWS:- A BARE READING OF THIS PROVISION MAKES IT CLEAR TH AT THE PREREQUISITE TO EXERCISE OF JURISDICTION BY THE COM MISSIONER SUO MOTO UNDER IT, IS THAT THE ORDER OF THE INCOME TAX OFFIC ER IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE INTERESTS OF TH E REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS , NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTEREST OF THE REVEN UE. IF ONE OF THEM IS ABSENT IF THE ORDER OF THE INCOME TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOU S BUT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO SECTION 263 (1) OF THE ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER , IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACT ED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE S AME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NA TURAL JUSTICE OR WITHOUT APPLICATION OF MIND. THE PHRASE PREJUDICI AL TO THE INTEREST OF THE REVENUE IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD IN IT ORDINARY MEANING IT IS OF WIDE IMP ORT AND IS NOT CONFERRED TO LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AN D THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS O RDER OF THE INCOME TAX OFFICER, THE REVENUE IS LOSING TAX LAWFULLY PAY ABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF T HE REVENUE. 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. ITA NO.463/A/2012 A.Y. 2008-09 21 EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF ASSESSING OFFICER CANNOT BE TREADED AS PREJUDICIAL TO THE INT ERESTS 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 R EVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME TAX OFFICER HAS T AKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANN OT BE TREADED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTA INABLE IN LAW. 33. IN CIT VS. MAX INDIA LIMITED, 295 ITR 282 (SC), AFTER NOTICING THE JUDGMENT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (SUPRA), THE HON'BLE SUPREME COURT APPLIED THE LAW DECLARED BY IT AND AL SO CLARIFIED AS UNDER :- THE PHRASE PREJUDICIAL TO THE INTEREST OF THE REV ENUE IN SECTION 263 OF THE INCOME TAX ACT, 1961 HAS TO BE R EAD IN CONJUNCTION WITH THE EXPRESSION ERRONEOUS ORDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR EXAMPLE, WHEN THE ASSESSING OFFICER A DOPTS ONE OF TWO COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN L OSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE ASSESSING OFFI CER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE RE VENUE, UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABL E IN LAW 34. FROM THE JUDGEMENT OF HON'BLE ALLAHABAD HIGH CO URT IN THE CASE OF CIT VS. GOYAL PRIVATE FAMILY SPECIFIC TRUST, 171 ITR 698 (A LL), THE RELEVANT HEAD NOTE IS REPRODUCED AS BELOW:- THE ASSESSEE, A PRIVATE TRUST, FILED ITS RETURN AN D THE INCOME TAX OFFICER ASSESSED THE BENEFICIARIES OF THE TRUST AND HELD THAT THE TRUST WAS NOT ASSESSABLE. THE COMMISSIONER, ACTING UNDER SECTION 263 OF THE INCOME TAX ACT, 1961, SET ASIDE THE ORDE R OF ASSESSMENT. THE TRIBUNAL FOUND THAT THE NECESSARY BOOKS OF ACCO UNT HAD BEEN ITA NO.463/A/2012 A.Y. 2008-09 22 PRODUCED, THE INCOME TAX OFFICER HAD EXAMINED THEM AND ALSO DISCUSSED THE CASE WITH THE REPRESENTATIVE OF THE A SSESSEE BEFORE PASSING THE ORDER OF ASSESSMENT. ON THE OTHER HAND , THERE WAS NO FINDING BY THE COMMISSIONER OF INCOME TAX THAT THE INCOME TAX OFFICER HAD REACHED AN ERRONEOUS CONCLUSION. THE T RIBUNAL SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME TAX. ON AN APPLICATION TO DIRECT REFERENCE: HELD, DISMISSING THE APPLICATION, THAT IN THE ABSEN CE OF A FINDING BY THE COMMISSIONER OF INCOME TAX THAT THE ASSESSMENT ORDERS WERE ERRONEOUS, THE CANCELLATION OF ASSESSME NTS WAS NOT JUSTIFIED. THE TRIBUNAL WAS JUSTIFIED IN SETTING A SIDE THE ORDER OF THE COMMISSIONER AND NO QUESTION OF LAW AROSE FROM HIS ORDER. 35. HON'BLE RAJASTHAN HIGH COURT IN THE CASE CIT VS . GIRDHARI LAL, 258 ITR 331 HELD AS UNDER : HELD, THAT WHEN THE ASSESSING OFFICER AFTER GOING THROUGH THE MATERIAL ON RECORD AND AFTER CONSIDERING THE EXPLAN ATION OF THE ASSESSEE, MADE SOME ADDITIONS AND REJECTED THE BOOK S OF ACCOUNT, IT COULD NOT BE SAID THAT HE HAD NOT APPLIED HIS MIND. IT IS NOT ALWAYS NECESSARY THAT EVERY ASSESSEE IN THE LINE OF THE BU SINESS SHOULD HAVE THE SAME RATE OF PROFIT. THE TRIBUNAL WAS CORRECT IN CANCELLING THE ORDERS UNDER SECTION 263 OF THE INCOME TAX ACT FOR THE ASSESSMENT YEARS 1977-78, 1979-80 TO 1981-82. 36. IN THE LIGHT OF ABOVE DISCUSSION, IF WE CONSIDE R THE FACTS OF THE CASE UNDER CONSIDERATION, WE FIND THAT THE ASSESSEE FURNISHED COMPLETE DETAILS BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER BEFORE MA KING ASSESSMENT UNDER SECTION 143(3) OF THE ACT EXAMINED THOSE DETAILS WHICH IS E VIDENT FROM PARAGRAPH NO.2 OF THE ASSESSMENT ORDER, THE SAME IS REPRODUCED AS BEL OW:- ITA NO.463/A/2012 A.Y. 2008-09 23 2. IN COMPLIANCE TO THE SEVERAL STATUTORY NOTICES UNDER SECTION 142(1) OF THE IT ACT SHRI SHISHIR BAJPAI, FCA ATTEN DED ON ASSESSEES BEHALF FORM TIME TO TIME, SUBMITTED COPY OF AUDIT R EPORTS, REPLIES AS AND WHEN REQUIRED AND OTHER VARIOUS DETAILS/DOCUMEN TS IN SUPPORT OF INCOME DISCLOSED AND INFORMATION GIVEN IN THE FINAL ACCOUNTS. BOOKS OF ACCOUNTS, SEPARATELY BOTH FOR UNIT WISE AND CONS OLIDATED WERE PRODUCED AND EXAMINED ON TEST CHECK BASIS. THE CAS E WAS DISCUSSED WITH HIM. 37. THE LEARNED AUTHORIZED REPRESENTATIVE DEMONSTRA TED BY REFERRING VARIOUS PAGES OF THE PAPER BOOK THAT WHATEVER THE ISSUE RAI SED BY CIT IN HIS SHOW CAUSE NOTICE UNDER SECTION 263, THE ASSESSEE HAS FURNISHE D SUFFICIENT DETAILS IN SUPPORT OF THE FACT THE ASSESSING OFFICER HAS EXAMINED THOSE I SSUES. THE DETAILS WERE FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFI CER. EVEN OTHERWISE ALSO, THE DETAILS WERE FURNISHED BY THE ASSESSEE BEFORE THE C IT AND THE CIT DID NOT FIND THAT HOW THE DETAILS FURNISHED BY THE ASSESSEE WAS INCOR RECT OR LEADS TO ERRONEOUS ORDER OF THE ASSESSING OFFICER. ON CONSIDERATION OF SCHE ME OF ACT REGARDING ASSESSMENT PROCEEDINGS, WE NOTICE THAT THE POWER FOR MAKING AS SESSMENT IS GIVEN TO THE ASSESSING OFFICER AND DUTY IS GIVEN TO THE ASSESSEE TO FURNISH ALL THE RELEVANT DETAILS LIKE BOOKS OF ACCOUNT AND OTHERS IN SUPPORT OF THE INCOME DECLARED IN HIS RETURN OF INCOME. WHEN THE ASSESSEE HAS FURNISHED COMPLETE DETAILS INCLUDING BOOKS OF ACCOUNT FROM TIME TO TIME DURING THE COURS E OF ASSESSMENT PROCEEDINGS, AND THE ASSESSING OFFICER HAS APPLIED HIS MIND BEFO RE FINALIZING ASSESSMENT. UNDER THAT CIRCUMSTANCES, THE ASSESSEE CANNOT COMMA ND TO THE ASSESSING OFFICER ITA NO.463/A/2012 A.Y. 2008-09 24 TO WRITE AN ORDER IN A PARTICULAR WAY. SIMILARLY, THE CIT HAS ALSO NO POWER TO DIRECT THE ASSESSING OFFICER TO EXAMINE THE PARTICULAR ISS UE IN ACCORDANCE WITH THE VIEW OF THE CIT BECAUSE THE ASSESSING OFFICER HAS QUASI- JUDICIAL POWER. 38. IN THE LIGHT OF THE JUDGEMENT OF HON'BLE ALLAHA BAD HIGH COURT IN THE CASE OF CIT VS. GOYAL PRIVATE FAMILY SPECIFIC TRUST, 171 IT R 698 (ALL), THE IMPUGNED ORDER OF CIT UNDER SECTION 263 IS NOT SUSTAINABLE. 39. IN THE CASE UNDER CONSIDERATION, THE ASSESSEE H AS PRODUCED BOOKS OF ACCOUNT BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICE R EXAMINED THEM AND ALSO DISCUSSED THE CASE OF THE REPRESENTATIVE OF THE ASS ESSEE BEFORE PASSING THE ORDER OF ASSESSMENT. FURTHER, THE ASSESSEE FURNISHED ALL TH E RELEVANT DETAILS BEFORE THE CIT AND THERE IS NO FINDING OF THE CIT THAT THE ORDER O F THE ASSESSING OFFICER IS ERRONEOUS. 40. IT IS NOT NECESSARY FOR THE ASSESSING OFFICER W HEN HE IS SATISFIED ON THE DETAILS FINISHED BY THE ASSESSEE THAT THE ASSESSEE HAS MADE THE COMPLIANCE OF THE PROVISIONS. HE NEEDS NOT TO MAKE ALL THESE ISSUES AND ITEMS IN ASSESSMENT ORDER. 41. APART FROM THE ABOVE, WE HAVE NOTICED THAT IN T HE INSTANT CASE, THE PROCEEDINGS UNDER SECTION 263 OF THE ACT HAS BEEN P ROPOSED BY THE ASSESSING ITA NO.463/A/2012 A.Y. 2008-09 25 OFFICER AND THE SAME HAS BEEN ACCEPTED BY THE CIT A S IS EVIDENT FROM THE RELEVANT FINDING OF CIT (PARAGRAPH NO.11, PAGE NOS.10) 11. ASSUMPTION OF JURISDICTION UNDER SECTION 263 OF INC OME TAX ACT. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF TH E CASE, I FOUND THAT PROPOSAL OF ASSESSING OFFICER ADDRESSED TO CIT UNDER SECTION 263 IS BASED ON MATERIAL FACTS ON RECORDS AND IS ON MER ITS OF THE CASE. 42. THE HON'BLE CALCUTTA HIGH COURT IN THE CASE OF JEEWANLAL (1929) LIMITED VS. ADDL. CIT, 108 ITR 407 (CAL) WHEREIN IT HAS BEEN HE LD THAT THE ADDL. CIT ISSUED THE NOTICE UNDER SECTION 263 AT THE INSTANCE OF THE AUDIT DEPARTMENT WITHOUT EXERCISING HIS OWN DISCRETION AND JUDGEMENT. THE N OTICE COULD NOT, THEREFORE, BE SUSTAINED. THE RELEVANT FINDING OF HON'BLE CALCUTT A HIGH COURT IS REPRODUCED FROM PAGE NO.412 AS UNDER :- THE SECOND GROUND OF ATTACK WAS, AS I MENTIONED B EFORE, THAT THIS ORDER WAS PASSED AT THE SUGGESTION OF THE AUDI T DEPARTMENT OF THE REVENUE AND NOT BY THE ADDITIONAL COMMISSIONER IN E XERCISE OF HIS QUASI-JUDICIAL DISCRETION. I HAVE NOTICED THE TERM S OF SECTION 263 OF THE ACT WHICH EMPOWERS THE COMMISSIONER TO CALL FOR EXAMINATION OF THE RECORD AND THEREAFTER TO MAKE AN ORDER. IN THI S CASE THE COMMISSIONER PURPORTED TO EXERCISE THE POWER AT THE SUGGESTION OF THE AUDIT DEPARTMENT. THIS POSITION WOULD BE CLEAR IF ONE REFERS TO THE AVERMENT MADE IN PARAGRAPH 4(D) OF THE AFFIDAVIT-IN -OPPOSITION, BY ONE MADAN MOHAN LAL, FILED ON BEHALF OF THE RESPOND ENTS. FROM THE FACTS IT IS APPARENT THAT THE ADDITIONAL COMMISSION ER DID NOT EXERCISE HIS DISCRETION AND JUDGEMENT. IN THE AFORESAID VIE W OF THE MATTER, ON THE BASIS OF THE PRINCIPLES ENUNCIATED BY THE SUPRE ME COURT IN THE CASE OF SIRPUR PAPER MILLS LIMITED VS. COMMISSIONER OF WEALTH-TAX [1970] 77 ITR 6 (SC), THIS NOTICE CANNOT ALSO BE SU STAINED. THE NOTICE, THEREFORE, ISSUED ON THE 24 TH OF MARCH, 1972, IS HEREBY QUASHED ITA NO.463/A/2012 A.Y. 2008-09 26 AND SET ASIDE. THE RESPONDENT- COMMISSIONER IS RES TRAINED FROM GIVING EFFECT TO THE SAME. IF ANY ORDER HAS BEEN P ASSED BY THE COMMISSIONER, THE SAME IS ALSO SET ASIDE AND QUASHE D. THE RULE IS MADE ABSOLUTE TO THE EXTENT INDICATED ABOVE. THERE WILL BE NO ORDER AS TO COSTS. 43. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT ASSUMED JURISDICTION UNDER SECTION 263 ON THE BASIS OF PROPOSAL OF THE A SSESSING OFFICER. IN THE LIGHT OF ABOVE JUDGMENT OF HON'BLE CALCUTTA HIGH COURT IN TH E CASE OF JEEWANLAL (1929) LIMITED VS. ADDL. CIT (SUPRA), THE IMPUGNED ORDER O F CIT UNDER SECTION 263 IS NOT SUSTAINABLE. 44. ONE OF THE IMPORTANT ASPECTS TO BE PUT ON RECOR D IS THAT THE ASSESSING OFFICER COMPUTED THE TOTAL INCOME UNDER SECTION 115JB OF TH E ACT. FOR THE PURPOSE OF READY REFERENCE, THE COMPUTATION OF TOTAL INCOME CO MPUTED BY THE ASSESSING OFFICER IS REPRODUCED AS BELOW:- (PAGE NO.5 OF PAPE R BOOK) PROFIT & GAINS FROM BUSINESS RS.15,11,00,520/- ADD: AS DISCUSSED IN PARA- 5, ABOVE RS.1,00,000/- A-INCOME FROM BUSINESS RS.15,12,00,520/- B-INCOME FROM SHORT TERM CAPITAL GAINS RS.3,30,12,480/- GROSS TOTAL INCOME RS.18,42,13,000/- LESS:- DEDUCTION UNDER CHAPTER-VIA RS.5,68,89,928/- RS.12,73,23,072/- TOTAL INCOME RS.12,73,23,072/- DEEMED TOTAL INCOME U/S. RS.29,67,05,563/- ITA NO.463/A/2012 A.Y. 2008-09 27 115JB, AS APPLICABLE TO THE COMPANY CASES TAX ON 29,67,05,563/- @ 10% RS.2,96,70,556/- 45. FROM THE ABOVE COMPUTATION OF TOTAL INCOME, WE NOTICED THAT THE ASSESSING OFFICER HAS CALCULATED THE TAX ON DEEMED TOTAL INCO ME UNDER SECTION 115JB OF THE ACT, THE CIT FAILED TO POINT OUT BY ANY SPECIFIC F INDING THAT HOW THE ORDER OF THE ASSESSING OFFICER IS PREJUDICIAL TO THE INTERESTS O F THE REVENUE. FURTHER, THE CIT HAS NOT GIVEN SPECIFIC FINDING ABOUT THE ERRONEOUS ORDER OF THE ASSESSING OFFICER. THE FINDING OF CIT IS ON THE BASIS OF GENERAL ASSUM PTIONS AND PRESUMPTIONS, FOR EXAMPLE, IN THE CASE OF ADVANCE FROM CUSTOMERS, SUN DRY CREDITORS AND SUNDRY DEPOSIT ETC. THE CIT HAS JUST POINTED OUT OPENING AND CLOSING BALANCE OF THE ACCOUNTS AND HE WAS OF THE VIEW THAT THESE WERE REQ UIRED EXAMINATION. THE FINDING OF THE CIT IN THIS REGARD AMOUNTS TO ROWING AND FIS HING ENQUIRY WHICH IS NOT COVERED UNDER THE SCOPE OF SECTION 263 OF THE ACT. IN THIS REGARD, WE MAY REFER TO A JUDGEMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUNBEAM AUTO LIMITED, 332 ITR 167 (DELHI). 46. SINCE THERE IS NO FINDING OF THE CIT THAT THE O RDER OF ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE R EVENUE, WE, THEREFORE, FIND THAT ITA NO.463/A/2012 A.Y. 2008-09 28 THE CONDITIONS LAID DOWN UNDER SECTION 263 OF THE A CT, ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, DOES NOT SATISFY. 47. IN THE LIGHT OF THE FACT, WE ARE OF THE CONSIDE RED VIEW THAT THE ORDER OF THE CIT PASSED UNDER SECTION 263 OF THE ACT IS NOT IN A CCORDANCE WITH LAW. THEREFORE, THE SAME IS QUASHED. 48. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, ALLAHABAD BENCH, ALLAHABAD 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE T RIBUNAL, ALLAHABAD TRUE COPY