Sh. Rakesh Pandey, Ludhiana V. CIT-I, Ludhiana

ITA 511/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60872 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 28-05-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 10-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Audit objection
• Section: 32; 147; 148; 263; 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 511 & 512/CHD/2011 A.Y.: 2005-06 & 2006-07 SHRI RAKESH PANDEY, V CIT-1, C/O M/S BHARAT JYOTEE MECHANICALS, LUDHIANA. B-18, FOCAL POINT, LUDHIANA. PAN: ACSPP-3600M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NAVNEET SEHTAL RESPONDENT : SMT. JAISHREE SHARMA DATE OF HEARING : 28.05.2012 DATE OF PRONOUNCEMENT : 05.06.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEALS FILED BY THE SAME ASSESSEE, ARE DIRECTED AGAINST THE ORDER, DATED 30.3.2011 PASSED BY THE LD. CIT U/S 263 OF THE INCOME-TAX ACT,1961 (IN SHORT 'T HE ACT'). 2. THE ASSESSEE HAS RAISED AS MANY AS 8 GROUNDS OF APPEAL, FOR THE ASSESSMENT YEAR 2005-06. IN SUBSTANCE, ALL THE GROUNDS OF APPEAL, CUMULATIVELY CHALLENGE THE ORDER DATED 30.03.2011, PASSED BY THE CIT U/S 263 OF THE ACT. IN THESE GROUNDS OF APPEAL, THE ASSESSEE HAS CHALLENGED THE ISSUANCE OF NOTICE, DATED 15.3.2011, FOR THE PURPOSE OF INVOKIN G PROVISIONS OF SECTION 263 OF THE ACT. THE ASSESSEE HAS FILED BRIEF SYNOPSIS, WHICH IS RELEVANT FOR THE PRESENT APPEAL AND THE 2 APPEAL IN ITA NO. 512/CHD/2011 FOR ASSESSMENT YEAR 2006-07, AGAINST THE ORDER OF CIT DATED 30.3.2011. 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, THE LD. 'AR' CONTENDED THAT THE ORDER, PASSED BY THE CIT U/ S 263 OF THE ACT IS BAD IN LAW AS THE AO HAS CONSIDERED AND ADJUDICATED ALL THE ISSUES, RAISED IN THE IMPUGNED ORDER U/S 26 3 OF THE ACT, WHILE FRAMING THE ASSESSMENT. 4. LD. 'AR' CONTENDED THAT THE ISSUES, WHICH HAVE B EEN CONSIDERED AND ADJUDICATED BY THE AO, WHILE PASSING ASSESSMENT U/S 147 READ WITH SECTION 143 OF THE ACT , CANNOT BE THE SUBJECT MATTER OF REVISIONARY POWERS OF THE CIT, U/S 263 OF THE ACT. IN THIS CASE, THE AO, HAS TAKEN LEGALL Y PERMISSIBLE VIEW. THE WRITTEN SUBMISSIONS, FOR BOTH THE ASSESS MENT YEARS, ARE REPRODUCED HEREUNDER : 1. THE APPELLATE IS - MINISTER OF STATE IN GOVERNMENT OF PUNJAB - PARTNER IN A FIRM FOR THE LAST 20 YEARS . 2. AUDIT OBJECTION - ASSESSMENT COMPLETED U/S 148 TWO LSSUES OF AUDIT & REOPENING 1. INCOME TAX ON SALARY PAID BY PUNJAB GOVERNMENT, SHO ULD BE ADDED BEING, MONETARY BENEFIT. 2. DEPRECIATION ON CAR, USED FOR BUSINESS NOT TO BE AL LOWED AGAINST INCOME FROM PARTNERSHIP - SALARY AS PARTNER - INTEREST ON PARTNER'S CAPITAL - SHARE OF PROFITS THE HON'BLE COMMISSIONER HAS PASSED AN ORDER U/S 26 3 FOR ASSESSMENT YEAR 2005-06 AND 2006-07. ASSESSMENT YEAR 2005-06 1ST ISSUE THE ASSESSING OFFICER HAD ADDED THE INCOME TAX PAID BY THE PUNJAB GOVERNMENT ON THE SALARY DUE TO THE APPELLATE (AS MINISTER) BEING A P ERQUISITE IN THE NATURE OF 3 MONETARY BENEFIT, WHILE MAKING ASSESSMENT U/S 143(3 ) READ SECTION 148. THE CIT ON ACCOUNT OF CERTAIN CALCULATION PROPOSED TO ENHANCE IT. IIND ISSUE THE APPELLANT, BEING A PARTNER IN A PARTNERSHIP FIR M FOR THE LAST 20 YEARS, IS HAVING INCOME FROM THE PARTNERSHIP, ASSESSABLE U/S 28, AS BUSINESS INCOME COMPUTED AFTER ALLOWING DEDUCTION OF EXPENSES U/S 30 TO 43D. THE I NCOME FROM PARTNERSHIP IS : - SALARY AS PARTNER - INTEREST ON PARTNER'S CAPITAL - SHARE OF PROFITS THE ASSESSING OFFICER, AFTER DETAILED ENQUIRIES, EX AMINATION OF RECORD & DISCUSSIONS ALLOWED DEPRECIATION ON CAR AGAINST INCOME FROM PAR TNERSHIP FIRM TO THE APPELLANT VIDE GIVING DETAILED REASONING IN HIS ASSESSMENT ORDER. THE CIT HAS IN HIS ORDER U/S 263 PROPOSED THE SAME TO BE AN ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ASS ESSMENT YEAR 2006-07 ONLY ONE ISSUE ALLOWANCE OF DEPRECIATION ON CAR AGAINST INCOME FROM PARTNERS HIP FIRM. JUDGEMENTS 1. ERRONEOUS & PREJUDICIAL TO REVENUE CIT VS MAX INDIA LTD (2004) 268 ITR 128 THE HON'ABLE PUNJAB & HARYANA COURT HAS 'HELD, DISMISSING THE APPEAL, THAT THE VIEW EXPRESS ED BY THE ASSESSING OFFICER WAS IN CONFORMITY WITH THE VIEW SUBSEQUENTLY EXPRES SED BY THE VARIOUS BENCHES OF THE TRIBUNAL. THE VIEW EXPRESSED BY THE ASSESSIN G OFFICER WAS A POSSIBLE VIEW AND SINCE THE ASSESSING OFFICER HAD TAKEN A POSSIBL E VIEW, THE COMMISSIONER HAD NO JURISDICTION TO INTERFERE BY EXERCISING HIS POWERS UNDER SECTION 263'. AFFIRMED BY THE APEX COURT IN CIT VS MAX INDIA LTD (2007) 295 ITR 282 THE HON'ABLE PUNJAB & HARYANA HIGH COURT HAS HELD IN CI T VS MUNJAL CASTINGS (2008) 303 ITR 23 - 'THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE RE VENUE' HAS TO BE IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFF ICER. EVERY LOSS OF REVENUE AS CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EX AMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN L AW AND IT HAS RESULTED IN LOSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE , IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTAINABLE IN LAW'. 4 5. LD. 'DR', ON THE OTHER HAND, PLACED RELIANCE, ON TH E ORDER OF THE CIT. 6. THE AO, VIDE ASSESSMENT ORDER, DATED 31.07.2008, PA SSED U/S 143(3) OF THE ACT, ALLOWED THE CLAIM OF DEPRECI ATION, ON CAR, AGAINST SALARY AND INTEREST FROM THE FIRM, AFT ER APPRECIATION OF THE SUBMISSIONS AND LEGAL POSITION, EXPLAINED BY THE ASSESSEE, IN THE SUBMISSION, AS REPRODUCED I N THE SAID ASSESSMENT ORDER. HOWEVER, THE AO, DISALLOWED 1/6 TH OF THE CAR DEPRECIATION I.E. RS.34,612/- TO COVER UP THE PERSO NAL NATURE OF EXPENSES, UNDER THIS HEAD. THE RELEVANT PART OF THE ASSESSMENT ORDER IS REPRODUCED HEREUNDER : THE CONTENTION OF THE COUNSEL ON THIS GROUND IS ACCEP TABLE BECAUSE AS PER SECTION 28(V) OF THE INCOME TAX ACT, 1 961 ANY INTEREST AND SALARY DUE TO OR RECEIVED BY A PARTNER OF A FIRM FROM SUCH FIRM IS CONSIDERED AS PROFITS AND GAINS OF BUSINES S AND PROFESSION. ONCE AN INCOME IS TREATED AS BUSINESS IN COME DEPRECIATION U/S 32 IS ALLOWABLE ON THE SAME. HENCE, THE ASSESSEE IS JUSTIFIED IN CLAIMING CAR DEPRECIATION AS DONE IN THE RETURN OF INCOME. BUT THE ASSESSEE HAS NOT DISALLOWED ANY EXPEN SE FOR THE PERSONAL USE OF CAR WHICH SHOULD NORMALLY BE THE CASE. HENCE, L/6 TH OF THE CAR DEPRECIATION I.E. RS.34,612/- CLAIMED IS DIS ALLOWED TO COVER UP THE PERSONAL NATURE OF EXPENSES UNDER THIS HEAD. 7. IT IS MENTIONED, THAT THE CASE OF THE ASSESSEE W AS RE- OPENED U/S 147, READ WITH SECTION 148, AFTER RECORD ING REASONS. THE DEPRECIATION ON CAR AS DISCUSSED ABOV E, WAS ALLOWED BY THE AO, WHILE PASSING THE SAID ASSESSMEN T ORDER. THUS, IT IS A CASE, WHERE THE AO HAS APPLIED HIS MI ND, TO THE FACTS OF THE CASE AND PASSED THE ASSESSMENT ORDER, AFTER 5 MAKING DUE ENQUIRY, AND AS PER THE LEGALLY PERMISSI BLE VIEW, IN THE MATTER. HOWEVER, LD. CIT, IN THE ORDER U/S 263 , DATED 30.03.2011, HELD THAT AO, MADE AN ERROR, IN ALLOWIN G THE PART DEPRECIATION, OF RS.1,73,098/- AND ERRED EQUALLY IN NOT ALLOWING A PART DEPRECIATION OF RS.34,612/-. IN FAC T, HE SHOULD HAVE DISALLOWED THE FULL CLAIM, BEING NOT ADMISSIBL E. THE RELEVANT FINDINGS OF THE CIT, ON THE ISSUE IN QUEST ION, ARE REPRODUCED HEREUNDER : DEPRECIATION RELATABLE TO NON-TAXABLE INCOME SHOULD HAVE BEEN DISALLOWED AND ADDED BACK TO THE BUSINESS INCO ME OF THE ASSESSEE IN VIEW OF THE PROVISIONS OF SECTION 14A READ WITH SECTION 10(2A). [FOR THE SAKE OF RECORD, IT IS MENTIONED TH AT THE ASSESSEE HAD ALSO NOT REVEALED ANY INCOME FROM THE REGD. FIRM TO THE STATE GOVERNMENT]. IN THIS VIEW OF THE MATTER, THE AO MADE ERROR IN ALLOWING A PART OF DEPRECIATION OF RS.1,73,098/- AN D ERRED EQUALLY IN NOT ALLOWING A PART OF DEPRECIATION OF RS.34,612/-. IN FACT HE SHOULD HAVE DISALLOWED THE FULL CLAIM BEING NOT ADMIS SIBLE 8. HAVING REGARD TO THE FACT-SITUATION OF THE PRESE NT CASE, AND THE CONSCIOUS VIEW TAKEN BY THE AO, AFTER APPRE CIATION OF THE SUBMISSION FILED BY THE ASSESSEE, IN THE MATTER , THE CIT IS NOT COMPETENT U/S 263, TO SUBSTITUTE HIS VIEW IN PL ACE OF CONSCIOUS AND, LEGALLY PERMISSIBLE VIEW, TAKEN BY T HE AO. THIS VIEW IS SUPPORTED BY SEVERAL DECISIONS OF THE HIGH COURTS AND HON'BLE SUPREME COURT. HOWEVER, THE ISSUE IS SQUAR ELY COVERED BY THE DECISION OF THE HON'BLE SUPREME COUR T, IN THE CASE OF MALABAR INDUSTRIAL CO.LTD.V CIT, 243 ITR 83 (S.C). 9. THE AO MADE AN ADDITION OF RS.17,533/-, TREATING THE SAME AS MONETARY PERQUISITE, BEING INTEREST FREE LO AN AS THE TAX ON THE SAME AS NOT EXEMPT U/S 10(10CC) OF THE A CT. THE 6 ADDITION WAS MADE BY THE AO, ON PERUSAL OF FORM NO. 16A AND ON THE BASIS OF EXPLANATION, FILED BY THE ASSESSEE. LD. CIT HELD THAT AN AMOUNT OF RS.18,339/- (RS.1,85,805/- - RS.1 ,67,466/- HAS NOT BEEN INCLUDED IN THE INCOME OF THE ASSESSEE , AS IS EVIDENT FROM THE FOLLOWING OBSERVATIONS OF THE CIT, IN HIS ORDER: I HAVE GONE THROUGH THE WRITTEN SUBMISSIONS. THE ASSESSEE VIDE LETTER DATED 28.03.2011 IN PARA 6 STATED THAT THE T AX PAID ON SALARY, IS A NON-MONETARY PERQUISITE WHICH CANNOT B E ADDED TO THE INCOME. HE HAS RELIED ON THE DECISION OF THE HON'BL E ITAT DELHI BENCH 'E' IN TRANSOCEAN DISCOVERER VS. ACIT, CIRCLE -I, DEHRADUN (2011) 44SOT 248 WHICH FOLLOWED ORDER OF HON'BLE ITAT (SIB ), DELHI IN THE CASE OF RBF RIG CORPN. LIC (RBPRC) VS. ASSISTANT COMMISS IONER OF INCOME TAX, (DELHI) (2007) 109 ITD 141. THE FACTS OF THE P RESENT CASE ARE DISTINGUISHABLE FROM THE FACTS OF THE CASES CITED B Y THE ASSESSCE'S COUNSEL. IN THE CITED CASES THE RETURNS OF THE EMPL OYEES WERE FILED BY THE EMPLOYER COMPANY IN THE REPRESENTATIVE C APACITY, TAX PAID BY THE EMPLOYER ON THE SALARY PAID WAS ADD ED AS A PERQUISITE AND THE TAX WAS CALCULATED ON THE RESULT ANT FIGURE AND PAID BY THE EMPLOYER. HOWEVER, IN THE PRESENT CAS E THE ASSESSEE HAS NOT DISCLOSED HIS BUSINESS INCOME AND INCOME FR OM OTHER SOURCES TO HIS EMPLOYER NOR HAS HE DISCLOSED ANY DE DUCTION CLAIMED BY HIM TO HIS EMPLOYER TO ENABLE HIM TO COR RECTLY CALCULATE HIS TAXABLE INCOME. THIS FACT IS CLEAR FROM PERUSAL OF FORM NO. 16 DATED NIL SIGNED BY ASSESSEE HIMSELF IN HIS CAPACITY OF DDO WHICH SHOWS TAX PAID AMOUNTING TO RS.2,76,900/- VIDE BOOK ADJUSTMENT VIDE,PUNJAB'S LE TTER NO. D.C.-L /203/IT/2005-06/299-300 DATED 28.07.2005. IN FORM NO. 16 TOTAL INCOME CALCULATED BY EMPLOYER IS RS.9,09,2 99/- ON WHICH TOTAL TAX HAS BEEN WORKED OUT A T RS.2,76,900/- AND PAID BY EMPLOYER. IN THE RETURN OF INCOME DATED FILED ON 16.12.2005, THE ASSESSEE HAS CLAIMED TAX REFUND O F RS. 1,13,408/- ON THE DECLARED TOTAL INCOME OF RS. 7,38 ,669/-. THE REFUND WAS ISSUED VIDE R.V.NO. 039952 DATED 02.11.2 006 AMOUNTING TO RS.1,19,131/-. FROM THE SEQUENCE OF E VENTS IT IS CLEAR THAT THE ASSESSOR HAS CLAIMED TAX REFUND FR OM THE TAX PAID BY THE EMPLOYER. HENCE, THE ASSESSEE HAS TRE ATED (AND ALSO RECEIVED BACK SUM OF RS1,13,408/- REFUND) TAX PAID BY EMPLOYER AS A MONETARY BENEFIT. THUS, THE ASSESSE E'S CONTENTION THAT TAX PAID BY EMPLOYER IS NOT A MONE TARY BENEFIT IS FLAWED CONTENTION IN HIS CASE. HIS RELIANCE ON THE ABOVE TWO DECISIONS IS ALSO MISPLACED AS THE SET OF FAC TS IS ENTIRELY DIFFERENT IN THE CASE OF ASSESSEE. IN THE ASSESSMENT ORDER DATED 31.07.2008 THE ASSESSING OFFICER HAS ADDED TO TOTAL INCOME OF ASSESSEE RS.1,67,466/- AS TAX ON MONETAR Y BENEFIT WHEREAS THE TOTAL PAID BY GOVT. OF PUNJAB, WHICH IS TO BE CONSIDERED AS INCOME OF THE ASSESSEE IS RS.1.85.805/-.- THE BALANCE AMOUNT I.E. RS.18.339/- (RS.1,85,805 -1,67, 466) HAS NOT BEEN INCLUDED IN THE INCOME OF THE ASSESSEE. 7 10. THE ISSUE HAS BEEN CONSIDERED BY THE AO, IN TER MS OF THE PROVISIONS OF SECTION 10(10CC) AND ACCORDINGLY, TOO K THE VIEW, ON THE BASIS OF PERUSAL OF FORM NO. 16A AND THE SUB MISSION FILED BY THE ASSESSEE, AND AN AMOUNT OF RS.17,533/- WAS TREATED AS MONETARY PERQUISITE AND TAX ON THE SAME, AS NOT EXEMPT U/S 10(10CC) OF THE ACT. CONSEQUENTLY, THE AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE. 11. WE HAVE CAREFULLY PERUSED THE FINDINGS OF BOTH AO, AS WELL AS THAT OF THE CIT AND THE RELEVANT RECORDS. IT IS EVIDENT THAT THE AO, HAS TAKEN A LEGALLY PERMISSIBLE VIEW, IN TH E MATTER, IN TERMS OF THE PROVISIONS OF SECTION 10(10CC) OF THE ACT. THE CIT HAS COMPUTED THE INCOME OF RS.18,339/- IN RESPECT O F INTEREST PAID BY THE EMPLOYER, AS IS EVIDENT FROM FINDINGS O F THE LD. CIT, REPRODUCED ABOVE. THE ISSUE, IN QUESTION HAS BEEN D EALT WITH AND CONSIDERED BY THE AO, AFTER APPLICATION OF MIND AND MAKING REQUISITE ENQUIRIES. THEREFORE, CIT IS NOT COMPETENT U/S 263 OF THE ACT TO SUBSTITUTE HIS OPINION, IN PL ACE OF THE VIEW TAKEN BY THE AO. IN VIEW OF THE ABOVE DISCUSS IONS, THE ISSUE FALLS BEYOND THE PURVIEW OF THE PROVISIONS OF SECTION 263 OF THE ACT. 12. HAVING REGARD TO THE ABOVE LEGAL AND FACTUAL DI SCUSSIONS, THE IMPUGNED ORDER OF THE CIT, FALLS BEYOND THE STA TUTORY PALE OF SECTION 263 OF THE ACT. THIS VIEW IS FURTHER SU PPORTED BY THE DECISION OF THE APEX COURT AND JURISDICTIONAL H IGH COURT, CITED BY THE LD. 'AR', IN HIS WRITTEN SUBMISSIONS, REPRODUCED ABOVE. IN VIEW OF THIS, THE IMPUGNED ORDER U/S 263 OF THE ACT 8 CANNOT BE SUSTAINED. THUS, THE ASSESSEE SUCCEEDS I N HIS APPEAL, FOR THE ASSESSMENT YEAR 2005-06. ITA NO. 512/CHD/2011 A.Y. 2006-07 13. THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 20 06-07 DATED 31.7.2008, DEALS WITH IDENTICAL ISSUES, AS WE RE OBTAINING IN THE ASSESSMENT YEAR 2005-06. SIMILARLY, CIT, IN THE ORDER DATED 30.3.2011, FOR THE ASSESSMENT YEAR 2006-07 PA SSED U/S 263 OF THE ACT, HAS DEALT WITH IDENTICAL ISSUES, AS OBTAINING IN THE ASSESSMENT YEAR 2005-06. THE GROUNDS OF APPEAL, RAISED BY THE ASSESSEE, AGAINST THE IMPUGNED ORDER U/S 263, A RE ALSO IDENTICAL VIS--VIS GROUNDS OF APPEAL, RAISED IN TH E ASSESSMENT YEAR 2005-06. IN VIEW OF THIS, AS THE ISSUES INVOL VED ARE IDENTICAL IN THE ASSESSMENT YEAR 2006-07, THE FINDI NGS RECORDED BY US FOR THE ASSESSMENT YEAR 2005-06 ARE MUTATIS MUTANDIS APPLICABLE TO THE APPEAL FILED BY THE ASSE SSEE FOR THE ASSESSMENT YEAR 2006-07 ALSO. ACCORDINGLY, THE APP EAL OF THE ASSESSEE, FOR ASSESSMENT YEAR 2006-07, IS ALLOWED. 14. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE I.E. FOR ASSESSMENT YEAR 2005-06 AND 2006-07 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH JUNE, 2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 5 TH JUNE,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT ,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH