M/s. R.Kasi Vishwanathan & Bros, Palakkad V. ACIT, Palakkad

ITA 475/COCH/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69030 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 22-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 08-06-2011
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: B RAMANNA KUMAR
• Keywords: Search and seizure; Opportunity of being heard; Non-deduction of tax; Corroborative evidences; Revised return
• Section: 133A; 234B; 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 475 COCH/2011 ASSESSMENT YEAR : 2006-07 M/S. R. KASI VISHWANATHAN & BROS., C/O K.RAMAKRISHNAN/SHRI G. NATARAJAN, CAS, 71, SANYASI GRAMAM STREET, THIRUNELVELI JUNCTION-627 001. [PAN: AACFR 8902Q] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, PALAKKAD RANGE, PALAKKAD. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI B. RAMANNA KUMAR, ADV. REVENUE BY SMT. S. VIJAYAPRABHA, JR. DR DATE OF HEARING 22/07/2013 DATE OF PRONOUNCEMENT 11/10/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 15-03-2011 PASSED BY THE LD. CIT(A)-V, KOCHI AND IT RELATES TO THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE IS ASSAILING THE DECISION OF THE LD . CIT(A) IN RESPECT OF THE FOLLOWING ISSUES: (A) NON CONSIDERATION OF REVISED RETURN OF INCOME FILED BY THE ASSESSEE. (B) CONFIRMATION OF DISALLOWANCE MADE U/S. 40(A)(I A) OF THE ACT IN RESPECT OF THE ADVERTISEMENT EXPENSES. (C) NON CONSIDERATION OF CLAIM FOR DEDUCTION OF L OSS ON CLEARANCE SALE. I.T.A. NO. 475/COCH/2011 2 3. THOUGH THE ASSESSEE HAS RAISED TWO MORE GROUNDS RELATING TO JURISDICTION OF THE ASSESSING OFFICER AND LEVY OF INTEREST U/S 234B OF THE ACT, THE LD. COUNSEL DID NOT ARGUE ON THOSE GROUNDS. HENCE, THEY ARE NOT CONSIDERED F OR ADJUDICATION. 4. THE FACTS RELATING TO THE CASE ARE STATED IN BRI EF. THE ASSESSEE IS ENGAGED IN THE RETAIL BUSINESS IN TEXTILES. IT FILED ITS RETURN O F INCOME FOR THE YEAR UNDER CONSIDERATION ON 31-10-2006 DECLARING A TOTAL INCOME OF RS. 6,37, 550/-. THE DEPARTMENT CARRIED OUT SEARCH AND SEIZURE OPERATIONS U/S. 133A OF THE ACT IN THE BUSINESS PREMISES OF THE ASSESSEE ON 24-12-2006. CONSEQUENT TO THE SURVEY OP ERATIONS, THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 31-03-2007 DECLARING A TOTAL INCOME OF RS. 11,06,350/-. IN THE REVISED RETURN, THE ASSESSEE DISALLOWED ADVERTI SEMENT CHARGES OF RS.1,09,67,754/- U/S 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX A T SOURCE AND ALSO MADE A FRESH CLAIM FOR DEDUCTION OF LOSS ON CLEARANCE SALE TO THE TU NE OF RS.1,04,98,946/-. THE NET EFFECT OF THE ABOVE SAID TWO ADJUSTMENTS HAS RESULTED IN I NCREASE IN THE INCOME DECLARED IN THE REVISED RETURN OF INCOME. 5. DURING THE COURSE OF PROCEEDINGS, THE ASSESS ING OFFICER DID NOT CONSIDER THE REVISED RETURN OF INCOME. ACCORDING TO THE AO, THE ASSESSEE CAME TO KNOW OF HIS FAILURE TO DEDUCT TAX AT SOURCE ON THE ADVERTISEMEN T CHARGES AND RESULTANT DISALLOWANCE REQUIRED TO BE MADE U/S 40(A)(IA) OF THE ACT DUE TO SURVEY OPERATIONS CARRIED BY THE DEPARTMENT. HENCE, THE ASSESSEE HAS FILED THE REVI SED RETURN BY MAKING THE STATUTORY DISALLOWANCE U/S 40(A)(IA) OF THE ACT AND FURTHER, IN ORDER TO REDUCE THE TAX LIABILITY ARISING OUT OF THE SAID DISALLOWANCE, THE ASSESSEE HAS CLAIMED DEDUCTION OF LOSS ON CLEARANCE SALE. HENCE, THE AO HELD THAT THE FILI NG OF REVISED RETURN ITSELF IS AN AFTERTHOUGHT. HENCE, THE AO DID NOT CONSIDER THE R EVISED RETURN. HOWEVER, HE DISALLOWED THE ADVERTISEMENT EXPENSES U/S 40(A)(IA) BY TREATING THE REVISED RETURN AS EXPLANATION GIVEN BY THE ASSESSEE FOR THE DISALLOWA NCE TO BE MADE U/S 40(A)(IA) OF THE ACT. 6. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALS O HELD THAT THE ASSESSEE HAS FILED THE REVISED RETURN ONLY TO REDUCE THE TAX LIABILITY AND HENCE IT IS CLEARLY AN AFTERTHOUGHT. I.T.A. NO. 475/COCH/2011 3 ACCORDINGLY, THE LD CIT(A) HELD THAT THE AO WAS JUS TIFIED IN IGNORING THE REVISED RETURN. IN THIS REGARD THE LD. CIT(A) PLACED RELIANCE ON TH E FOLLOWING DECISIONS: (A) CIT VS. RADHEY SHAYM (1980) (123 ITR 125) (ALL .) (B) CIT VS. GREY CAST FOUNDRY WORKS (2006) (99 ITD 515)(AHD.) THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE U/S . 40(A)(IA) OF THE ACT ON THE REASONING THAT THE ASSESSEE HIMSELF HAS DISALLOWED THE SAME IN THE REVISED RETURN OF INCOME. THE LD CIT(A) ALSO CONSIDERED THE GROUND R AISED ON REJECTION OF THE CLAIM FOR DEDUCTION OF LOSS ON CLEARANCE SALE MADE IN THE R EVISED RETURN OF INCOME AND REJECTED THE SAME ON THE REASONING THAT THE ASSESSEE DID NOT FURNISH ANY SUPPORTING EVIDENCE. THUS, THE LD CIT(A), AFTER HOLDING THAT THE AO WAS JUSTIFIED IN REJECTING THE REVISED RETURN, HAS PROCEEDED TO DECIDE THE ISSUES URGED O N THE BASIS OF THE REVISED RETURN OF INCOME. FURTHER, HE HAS PLACED RELIANCE ON THE REV ISED RETURN ITSELF TO DECIDE THE ISSUE RELATING TO THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 7. THE LD. COUNSEL SUBMITTED THAT THE REVISED RETUR N WAS FILED WITHIN THE TIME PRESCRIBED U/S 139(5) OF THE ACT. HENCE, THE TAX A UTHORITIES ARE NOT JUSTIFIED IN REJECTING THE REVISED RETURN. HE FURTHER SUBMITTED THAT THE ASSESSEE-CONCERN HAS INCURRED HEAVY LOSS ON THE CLEARANCE SALE, SINCE IT SOLD GOODS AT HEAVY DISCOUNTED RATES. THESE FACTS HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER AND HE HAS DISCUSSED ABOUT IT THROUGHOUT THE ASSESSMENT ORDER IN MORE THAN ONE PLACE. DESPI TE THIS FACTUAL SITUATION, THE AO HAS CHOSEN TO REJECT THE REVISE RETURN OF INCOME FILED BY THE ASSESSEE ON THE REASONING THAT IT IS AN AFTERTHOUGHT. THE LD. COUNSEL SUBMITTED T HAT THE ASSESSEE HAS BORROWED FUNDS FROM BANKS AND HENCE, IT WAS CONSTRAINED TO FILE BA LANCE SHEET BEFORE THE BANK AUTHORITIES SHOWING GOOD RESULTS. HENCE, IN ORDER TO MAKE THE BALANCE SHEET SATISFY THE LENDING NORMS OF THE BANK, THE ASSESSEE HAS TO MEND WITH THE SALES, STOCK AND PROFIT FIGURES. THIS IS EVIDENCED BY THE FACT THAT DURING THE COURSE OF SURVEY, THE VALUE OF STOCK FOUND BY THE SURVEY TEAM WAS ONLY 2.69 CRORES AS AGAINST THE BOOK STOCK OF RS.7.50 CRORES. ACCORDINGLY, THE LD. AR SUBMITTED THAT THE ASSESSEE HAS CORRECTED THE ABOVE SAID MISTAKES BY FILING THE REVISED RETURN OF INCOME WITHIN THE DUE DATE PRESCRIBED U/S. 139(5) OF THE ACT. ACCORDINGLY, HE SUBMITTED THAT THE TAX AUTHORITIES ARE I.T.A. NO. 475/COCH/2011 4 NOT JUSTIFIED IN HOLDING THAT THE REVISED RETURN OF INCOME FILED BY THE ASSESSEE IS AN AFTERTHOUGHT AND REJECTING THE SAME. THE LD. COUNS EL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE HAS INCURRED ADVERTISEM ENT EXPENSE ON HIS OWN AND IT WAS NOT PAID TO OTHERS AND HENCE, THERE WAS NO REQUIREM ENT FOR DEDUCTION OF TAX ON SUCH PAYMENTS. HENCE THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT SHALL ALSO NOT APPLY TO THE SAME. THE LD. COUNSEL ALSO SUBMITTED THAT THE TAX AUTHORITIES ARE ALSO NOT JUSTIFIED IN REJECTING THE CLAIM OF LOSS ON CLEARANCE SALE, A FTER ASCERTAINING THE REAL FINANCIAL POSITION AND STATE OF AFFAIRS OF BUSINESS OF THE AS SESSEE. 8. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE A SSESSEE HIMSELF HAS DISALLOWED ADVERTISEMENT EXPENSES U/S. 40(A)(IA) OF THE ACT IN THE REVISED RETURN OF INCOME, SINCE IT DID NOT DEDUCT TAX AT SOURCE ON THE SAID PAYMENT S. ACCORDINGLY, THE LD. DR SUBMITTED THAT THE ASSESSEE IS NOT ENTITLED TO RAIS E A NEW CLAIM IN RESPECT OF THIS DISALLOWANCE. THE LD. DR SUBMITTED THAT THE ASSESS EE HAS FILED THE REVISED RETURN OF INCOME AFTER THE DATE OF SURVEY. ONLY DURING THE C OURSE OF SURVEY, THE ASSESSEE CAME TO KNOW OF THE REQUIREMENT OF MAKING DISALLOWANCE U /S. 40(A)(IA) OF THE ACT AND HENCE, HE CHOSE TO CLAIM LOSS ON CLEARANCE SALE ALSO IN THE REVISED RETURN, IN ORDER TO OFF-SET TAX LIABILITY ARISING OUT OF THE DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT. HENCE, FILING OF REVISED RETURN OF INCOME IS CLEARLY AN AFTERTHOU GHT AND HENCE THE TAX AUTHORITIES ARE JUSTIFIED IN REJECTING THE REVISED RETURN OF INCOME . THE LD D.R FURTHER SUBMITTED THAT THE ASSESSEE COULD NOT FURNISH ANY EVIDENCE TO SUBS TANTIATE THE CLAIM OF LOSS ON CLEARANCE SALE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. THE FIRST QUESTION THAT NEEDS TO BE CONSIDERED IS WHETHER THE TAX AUTHORITIES ARE JUSTIFIED IN DECLINING TO CONSIDER THE REVISED RETURN OF INCOME. WE NOTICE THAT THE AO DID NOT CONSIDER THE SAME ON THE REASONING THAT THE FILING OF REVISED RETURN OF INCOME IS AN AFTERTHOUGHT. THE LD CIT(A) ALSO AGREED WITH THE S AID VIEW EXPRESSED BY THE AO AND IN THIS REGARD HE PLACED RELIANCE ON THE TWO DECISIONS REFERRED SUPRA. WE HAVE CAREFULLY GONE THROUGH THE ABOVE SAID TWO DECISIONS AND FIND THAT THEY HAVE BEEN RENDERED IN I.T.A. NO. 475/COCH/2011 5 THE CONTEXT OF PENALTY LEVIED U/S 271(1)(C) OF THE ACT. HENCE, IN OUR VIEW, THESE TWO DECISIONS DO NOT SUPPORT THE VIEW OF THE LD CIT(A). 10. WE NOTICE THAT THE ASSESSEE HAS FILED ORIG INAL RETURN OF INCOME ON 31.10.2006, I.E. WITHIN THE DUE DATE PRESCRIBED U/S 139(1) OF T HE ACT FOR THAT YEAR. THEREAFTER, THE ASSESSEE HAS FILED REVISED RETURN U/S 139(5) OF THE ACT ON 31.3.2007. THERE IS NO DISPUTE WITH REGARD TO THESE FACTUAL ASPECTS. SECT ION 139(5) OF THE ACT READS AS UNDER:- IF A PERSON, HAVING FURNISHED A RETURN UNDER SUB-S ECTION (1), OR IN PURSUANCE OF NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142, DISCOVERS ANY OMISSION OR ANY WRONG STATEMENT THEREIN, HE MAY FURNISH A REVISED R ETURN AT ANY TIME BEFORE THE EXPIRY OF ONE YEAR FROM THE END OF THE RELEVANT ASS ESSMENT YEAR OR BEFORE THE COMPLETION OF THE ASSESSMENT, WHICHEVER IS EARLIER. THE ASSESSMENT IN THE HANDS OF THE ASSESSEE IS COMP LETED ON 29.12.2008 AND ONE YEAR PERIOD FROM THE END OF THE ASSESSMENT YEAR UNDER CO NSIDERATION EXPIRES ON 31.3.2008. SINCE THE ASSESSEE HAS FILED REVISED RETURN OF INCO ME ON 31.3.2007, IT IS WELL WITHIN THE TIME LIMIT PRESCRIBED U/S 139(5) OF THE ACT. 11. IT IS SEEN THAT THE PROVISIONS OF SEC. 139( 5) GIVES A RIGHT TO AN ASSESSEE TO FILE A REVISED RETURN OF INCOME IF HE DISCOVERS ANY OMISSI ON OR ANY WRONG STATEMENT THEREIN. IN THE INSTANT CASE, THE ASSESSEE HAS FILED THE REV ISED RETURN ON FINDING THAT THE DISALLOWANCE REQUIRED TO BE MADE U/S 40(A)(IA) OF T HE ACT WAS NOT MADE IN THE ORIGINAL RETURN OF INCOME AND FURTHER THE CLAIM OF LOSS ON CLEARANCE SALE WAS NOT MADE THEREIN. 12 WE NOTICE THAT IT IS NOT THE CASE OF THE ASSES SING OFFICER THAT TWO ADJUSTMENTS MADE BY THE ASSESSEE IN THE REVISED RETURN DO NOT F ALL IN THE CATEGORY OF OMISSION OR ANY WRONG STATEMENT AS STATED IN SEC. 139(5) OF TH E ACT. WE NOTICE THAT THE POWER TO TREAT A RETURN OF INCOME AS INVALID IS GIVEN TO T HE ASSESSING OFFICER U/S 139(9) OF THE ACT. WE NOTICE THAT THE AO HAS NOT FOLLOWED THE PR OCEDURES LAID DOWN IN SEC. 139(9) OF THE ACT FOR THE PURPOSE OF REJECTING THE REVISED RE TURN OF INCOME. THUS, IT IS SEEN THAT THE ASSESSING OFFICER HAS NOT DRAWN SUPPORT FROM AN Y OF THE STATUTORY PROVISIONS FOR THE DECISION TAKEN BY HIM TO REJECT THE REVISED RETURN OF INCOME. THE ONLY REASON GIVEN BY I.T.A. NO. 475/COCH/2011 6 THE AO IS THAT IT IS AN AFTERTHOUGHT ON THE PART OF THE ASSESSEE. WE HAVE ALREADY NOTICED THAT THE PROVISIONS OF SEC. 139(5) OF THE A CT GIVES A RIGHT TO THE ASSESSEE TO FILE A REVISED RETURN, IF HE SATISFIES THE CONDITION PRE SCRIBED IN THAT SECTION. HENCE, IN OUR VIEW, THE AO WAS NOT ENTITLED TO REJECT THE REVISED RETURN OF INCOME, WHICH IS FILED IN ACCORDANCE WITH THE PROVISIONS OF SEC. 139(5) OF TH E ACT, EXCEPT IN THE MANNER AND IN THE METHOD PRESCRIBED BY THE ACT. 13. IN THE INSTANT CASE, WE HAVE NOTICED THAT T HE ASSESSEE HAS FILED THE REVISED RETURN OF INCOME BY DULY COMPLYING WITH THE CONDITI ONS PRESCRIBED U/S 139(5) OF THE ACT. WE HAVE ALSO NOTICED THAT THE AO HAS NOT FOLL OWED THE PROCEDURES PRESCRIBED UNDER THE ACT FOR TREATING A RETURN AS INVALID, N OR DID HE SHOW THAT THE ADJUSTMENTS MADE BY THE ASSESSEE IN THE RETURN OF INCOME DO NOT FALL IN THE CATEGORY OF OMISSION OR WRONG STATEMENT. HENCE, IN OUR VIEW, THE AO AND L D CIT(A) WAS NOT RIGHT IN LAW IN REJECTING THE REVISED RETURN OF INCOME FILED BY THE ASSESSEE. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS MATTER AND HOLD THAT THE AO SHOULD HAVE COMPLETED THE ASSESSMENT ON THE BASIS OF REVISED RETURN OF INCOME FILED BY THE ASSESSEE. 13. WE HAVE ALREADY NOTICED THAT THE LD CIT(A), AFTER HAVING HELD THAT THE REVISED RETURN REQUIRES TO BE REJECTED, HAS ALSO CONSIDERED THE ISSUES ON MERITS, VIZ., THE ISSUE RELATING TO DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT AND ALSO THE ISSUE RELATING TO THE CLAIM OF LOSS ON CLEARANCE SALE. IT IS PERTINENT TO NOTE THAT THE AO DID NOT CONSIDER THE CLAIM FOR DEDUCTION OF LOSS ON CLEARANCE SALE IN THE ASSESSMENT ORDER. 14. SINCE THE AO HAS NOT CONSIDERED THE REVISED RETURN OF INCOME AND FURTHER, SINCE IT GOES TO THE ROOT OF MATTER, WE ARE OF THE VIEW T HAT THE ENTIRE ISSUES URGED BEFORE US NEEDS FRESH EXAMINATION AT THE END OF THE AO. ACCO RDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON ALL ISSUES AND DIRECT THE ASSESSING OF FICER TO DO THE ASSESSMENT DE-NOVA ON THE BASIS OF REVISED RETURN OF INCOME FILED BY THE ASSESSEE, AFTER AFFORDING NECESSARY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. SINCE WE HAVE QUASHED THE ORDER OF LD CIT(A) ON THE PRELIMINARY ISSUE AND SINCE WE HAVE D IRECTED THE AO TO DO THE I.T.A. NO. 475/COCH/2011 7 ASSESSMENT DE-NOVA, WE DO NOT FIND IT NECESSARY TO ADJUDICATE THE GROUNDS URGED ON MERITS. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGL Y ON 11-10-2013. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 11TH OCTOBER, 2013 GJ COPY TO: 1. M/S. R. KASI VISHWANATHAN & BROS., C/O K.RAMAKRI SHNAN/SHRI G. NATARAJAN, CAS, 71, SANYASI GRAMAM STREET, THIRUNELVELI JUNCTION-62 7 001. 2. THE /ASSISTANT COMMISSIONER OF INCOME-TAX, PALAK KAD RANGE, PALAKKAD. 3 THE COMMISSIONER OF INCOME-TAX(APPEALS)-V,KOCHI. 4.THE COMMISSIONER OF INCOME-TAX, TRICHUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN