Shri Shantilal Amrutlal Mehta, Ahmedabad V. The CIT-III, Ahmedabad

ITA 507/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1580 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-04-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 28-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R I PATEL
• Keywords: Business income
• Section: 143(3); 263; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 507/AHD/2012 (ASSESSMENT YEAR: 2007-08) SHRI SHANTILAL AMRUTLAL MEHTA, 37-G, HARI PARK SOCIETY, BEHIND PAVAN PARK SOCIETY, MIRAMBICA ROAD, NARANPURA, AHMEDABAD-380013 V/S THE CIT-III, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AIGPM3480Q APPELLANT BY : SHRI TUSHAR P. HEMANI, AR RESPONDENT BY : SHRI R.I. PATEL, CIT/ D.R. ( )/ ORDER DATE OF HEARING : 28 -04-201 6 DATE OF PRONOUNCEMENT : 04-05-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. WITH THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE C ORRECTNESS OF THE ORDER OF THE LD. CIT, AHMEDABAD-III, DATED 20.01.20 12 MADE U/S. 263 OF THE ACT. ITA NO 507/A HD/2012 . A.Y. 2007-08 2 2. THE ASSESSEE HAS CHALLENGED THE VERY JURISDICTION O F THE COMMISSIONER IN INVOKING THE POWERS CONFERRED UPON HIM BY THE PR OVISIONS OF SECTION 263 OF THE ACT. 3. THE LD. COUNSEL VEHEMENTLY STATED THAT THE ISSUES T AKEN BY THE COMMISSIONER HAVE BEEN EXAMINED BY THE A.O DURING T HE COURSE OF THE ASSESSMENT PROCEEDINGS ITSELF. THEREFORE, THE C OMMISSIONER COULD NOT HAVE INVOKED REVISIONARY JURISDICTION. IT IS TH E SAY OF THE LD. COUNSEL THAT THE ASSESSMENT ORDER IS NEITHER ERRONE OUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. PER CONTRA, LD. D.R . STRONGLY SUPPORTED THE ORDER OF THE COMMISSIONER MADE U/S. 263 OF THE ACT. 4. THE SHOW CAUSE NOTICE U/S. 263 OF THE ACT ISSUED AN D SERVED UPON BY THE COMMISSIONER READ AS UNDER:- OFFICE OF THE COMMISSIONER OF INCOME TAX AHMEDABAD-III ROOM NO. 411, 4 TH FLOOR C-WING, PRATHYAKSH KAR BHAVAN AMBAWADI, AHMEDABAD NO. HQ-TECH-III263/SAM/2011-12 DATE: 06-09-2011 BY RPAD/SPEED POST TO, SHRI SHATILAL AMRUTLAL MEHTA PAN: AIGPM3480Q 37-G, HARI PARK SOCIETY, B/H. PAVAN PARK SOCIETY, MIRAMBICA ROAD, NARANPURA, AHMEDABAD SUB: SHOW CAUSE NOTICE U/S. 263 OF THE INCOME TAX A CT, 1961 FOR THE YEAR A.Y. 2007- 08-REG. 1. ON EXAMINING THE RECORD OF ASSESSMENT PROCEEDINGS I N YOUR CASE FOR THE A.Y.2007-08, IT IS OBSERVED THAT THE ASSESSMENT ORDER DATED 29/1 2/2009, PASSED BY THE INCOME TAX ITA NO 507/A HD/2012 . A.Y. 2007-08 3 OFFICER, WARD-7(4), AHMEDABAD, U/S.!43(3) OF THE IN COME TAX ACT, 1961, DETERMINING THE TOTAL INCOME AT RS.9,23,770/-, IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, FOR THE FOLLOWING REASONS:- 2. DURING THE F.Y.2006-07, THERE WERE CASH DEPOSITS TO THE TUNE OF RS.33,08,342/- IN YOUR BANK ACCOUNTS. YOU CLAIMED THAT THE SOURCE OF SUCH CASH DEPOSITS WAS THE SALES PROCEEDS OF SCRAP, AND OFFERED THE SUM OF RS.1,65,4 17/- AS INCOME FROM THE SALE OF SCRAP, I.E. 5% OF THE CASH DEPOSITED IN THE BANK AC COUNTS. THE ASSESSING OFFICER FAILED TO THOROUGHLY EXAMINE THE NATURE OF ENTRIES IN THE BANK ACCOUNTS TO ASCERTAIN AS TO WHETHER DEPOSITS ACTUALLY REPRESENTED THE SALE PROC EEDS OF ANY REGULAR BUSINESS ACTIVITY OF SALE AND PURCHASE OF SCRAP, AND ACCEPTE D YOUR CLAIM WITHOUT ANY INVESTIGATION. THE ASSESSING OFFICER ALSO FAILED TO EXAMINE IN DETAIL THE UNEXPLAINED CASH DEPOSITS OF RS. 33,08,342/- IN TERMS OF THE PROVISI ONS OF SEC.68 OF THE I.T. ACT, 1961. THIS HAS MADE THE ASSESSMENT ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF THE REVENUE. 3. FROM THE DISCUSSION ABOVE, IT MAY BE SEEN THAT THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961 ON 29/12/2009 FO R THE A.Y.2007-08 IS CLEARLY ERRONEOUS, AND HENCE, PREJUDICIAL TO THE INTERESTS OF REVENUE. YOU ARE THEREFORE REQUESTED TO SHOW CAUSE AS TO WHY ACTION U/S.263 OF THE INCOME TAX ACT, 1961 SHOULD NOT BE INITIATED FOR MODIFYING OR EVEN CANCELLING T HE SAID ASSESSMENT ORDER. 4. IN CASE YOU HAVE ANY OBJECTION TO THE ACTION PROPOS ED, YOU ARE REQUESTED TO APPEAR BEFORE ME EITHER PERSONALLY OR THROUGH YOUR AUTHORI ZED REPRESENTATIVE ON 21 ST SEPTEMBER. 2011 AT 11.30 A.M. AT MY OFFICE SITUATED AT THE ABOVE ADDRESS, ALONG W ITH A WRITTEN REPLY TO THIS NOTICE. (SIDDHARTHA MUKHERJEE) COMMISSIONER OF INCOME TAX AHMEDABAD-III, AHMEDABAD 5. A PERUSAL OF THE NOTICE ISSUED BY THE COMMISSIONER U/S. 233 OF THE ACT SHOWS THAT THE COMMISSIONER WAS OF THE FIRM BELIEF THAT THE ASSESSING OFFICER FAILED TO THOROUGHLY EXAMINE THE NATURE OF ENTRIES IN THE BANK ITA NO 507/A HD/2012 . A.Y. 2007-08 4 ACCOUNTS TO ASCERTAIN AS TO WHETHER DEPOSITS ACTUAL LY REPRESENTED THE SALE PROCEEDS OF ANY REGULAR BUSINESS ACTIVITY. 6. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THE FOLLOWI NG OBSERVATIONS OF THE ASSESSING OFFICER MADE WHILE COMPLETING THE ASS ESSMENT U/S. 143(3) OF THE ACT. 5. DURING THE COURSE OF SCRUTINY PROCEEDINGS THE AS SESSEE HAS SHOWN HIS ANOTHER SIDE BUSINESS INCOME OF METAL SCRAP WHICH WAS NOT DISCLO SED IN HIS RETURN OF INCOME. ON ASKING FOR THE DETAILS, HE HAS SUBMITTED THAT IF IS A SMALL RETAIL BUSINESS OF SALE-PURCHASE OF METAL SCRAPS, WHICH WERE REMAINS TO BE INCLUDED IN THE RETURN OF INCOME. HE HAS DISCLOSED THE PROFIT OF RS. 1,65,417/- OUT OF THIS SIDE BUSINESS. THE SAME IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE CONSIDERING IT AS UNDI SCLOSED INCOME. PENALTY PROCEEDINGS U/S. 271(1)(C) ARE INITIATED FOR CONCEALMENT OF INC OME. 7. THE AFOREMENTIONED OBSERVATION CLEARLY SHOWS THAT T HE A.O HAS GONE INTO THE BUSINESS OF THE ASSESSEE IN PURCHASE AND S ALE OF METAL SCRAP AND HE HAS ALSO MADE ADDITION OF RS. 1,65,417/- AS UNDISCLOSED INCOME FROM THE SAID BUSINESS. 8. ON THE AFOREMENTIONED FACTS, THE FIRST THING WHICH HAS TO BE CONSIDERED IS WHETHER THE LD. COMMISSIONER HAS RIGHTLY ASSUMED THE POWER U/S. 263 OF THE ACT. THE HONBLE SUPREME COURT IN MALABA R INDUSTRIAL CO. LTD. 243 ITR 83 HAS LAID DOWN THE FOLLOWING RATIO:- 'A BARE READING OF SECTION. 263 OF THE INCOME-TAX A CT, 1961, MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICTION BY TH E COMMISSIONER SUO MOTU UNDER II, IS THAT THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEO US IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO B E SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUG HT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENTIF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDIC IAL TO THE REVENUE OR IF IT IS NOT ITA NO 507/A HD/2012 . A.Y. 2007-08 5 ERRONEOUS HUT IS PREJUDICIAL TO THE REVENUE RECOUR SE 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 ONL Y WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS' 9. NOW, LET US SEE IN THE LIGHT OF THE ABOVE RATIO, WHETHER THE ASSESSMENT HAS BEEN MADE ON AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW. 10. THE MAIN THRUST OF THE OBJECTION OF THE COMMISSIONE R RELATES TO THE CASH DEPOSITS IN THE BANK ACCOUNTS. ACCORDING T O THE COMMISSIONER, THE A.O HAS NOT EXAMINED THESE DEPOSI TS QUA THE NATURE OF BUSINESS ALLEGED TO HAVE BEEN CARRIED OUT BY THE ASSESSEE. IF THE OBSERVATIONS OF THE COMMISSIONER ARE CONSIDE RED IN THE LIGHT OF THE ASSESSMENT ORDER, WE FIND THAT THE COMMISSIONER WAS NOT IN POSSESSION OF ANY MATERIAL EVIDENCE TO DISBELIEVE T HE CLAIM OF BUSINESS IN THE METAL SCRAP BY THE ASSESSEE. ON THE CONTRARY , THE A.O HAS EXAMINED AND ACCEPTED THE BUSINESS TRANSACTIONS RES ULTING INTO THE CASH DEPOSITS IN THE BANK ACCOUNT. THE A.O HAS ACCE PTED THE CASH DEPOSITS BEING OUT OF THE SALE PROCEEDS OF THE META L SCRAP. 11. THE AO HAS TAKEN A VIEW WHICH MAY BE DIFFERENT FROM THE VIEW OF THE LD. COMMISSIONER AND ASSUMING THAT THE VIEW TAKEN BY THE AO IS A LOSS TO THE REVENUE BUT THE HON'BLE SUPREME CO URT IN MALABAR INDUSTRIAL CO. LTD. (SUPRA) HAS HELD THAT ' EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE,' FOR E.G. WHEN AN INCOME TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND I T HAS RESULTED IN ITA NO 507/A HD/2012 . A.Y. 2007-08 6 LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE LD. COMMI SSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ORDER WHICH IS ER RONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE UNLESS THE V IEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTAINABLE IN LAW. 12. THE BOMBAY HIGH COURT IN CIT VS GABRIAL INDIA LTD., (1993) 203 ITR 108 HAS HELD THAT 'THE DECISION OF THE INCOME TAX OFFICER COULD NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER , HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD'. CONSIDERING THE FACTS IN TOTALITY IN THE LIGHT OF THE JUDICIAL DECISIONS DISCUSSED HE REINABOVE, IN OUR UNDERSTANDING OF LAW, THE ASSESSMENT ORDER IS NEITH ER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. WE, THE REFORE, SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. COMMISSIONER U/S. 263 AND RESTORE THAT OF THE ASSESSING OFFICER PASSED U/S. 143(3) OF THE ACT. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 04 - 05 - 20 16. SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE.