Balar Fabrics Private Limited, PALI V. CIT-I, JODHPUR

ITA 524/JODH/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5259 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-03-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 20-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MADHUK
• Keywords: Revision of order; Depreciation; Principle of natural justice; Additional depreciation
• Section: 143(3); 263; 11

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE: SHRI N. S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A.NO.524/JODH/2014 ASSESSMENT YEAR: 2010-11 BALAR FABRICS LTD., C/O. C. P. LADDHA C-7 CO., CHARTERED ACCOUNTANT, 204, VEER DURGADAS NAGAR, NEAR ALLAHABAD BANK, PALI. PAN :AAACB6597J VS. THE COMMISSIONER OF INCOME TAX -1, JODHPUR, RAJASTHAN APPELLANT RESPONDENT APPELLANT BY SHRI MAHESH GEHLOT, ADVOCATE RESPONDENT BY SHRI S. K. MADHUK, CIT DR DATE OF HEARING: 10.03.2016 DATE OF PRONOUNCEMENT: 10.03.16 O R D E R PER: GEORGE MATHAN, J.M. : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE LEARNED CIT-I, JODHPUR PASSED IN APPEAL NO.CIT-I/JU/U/S263/ 2014-15/973 DATED 14 TH AUGUST, 2014 FOR ASSESSMENT YEAR 2010-11. 2. THE ASSESSEE HAS SOUGHT ADJOURNMENT WITHOUT GIVI NG ANY SPECIFIC REASON. CONSEQUENTLY, THE ADJOURNMENT APPLICATION I S REJECTED. 3. MR. MAHESH GEHLOT, ADVOCATE REPRESENTED ON BEHAL F OF THE ASSESSEE AND MR. S. K. MADHUK, LEARNED CIT DR REPRESENTED ON BEHALF OF THE REVENUE. 2 ITA NO.524/JODH/2014 4. IT WAS SUBMITTED BY THE LEANED AR THAT FOR THE R ELEVANT ASSESSMENT YEAR THE ORIGINAL RETURN HAD BEEN FILED BY THE ASSE SSEE ON 14-10-2010. THE ASSESSMENT U/S 143(3) OF THE IT ACT WAS COMPLETED O N 31-01-2013. SUBSEQUENTLY, NOTICE U/S 263 OF THE ACT WAS ISSUED ON THE ASSESSEE ON 28- 03-2014 ON THE GROUND THAT THE ASSESSING OFFICER HA D NOT EXAMINED/ENQUIRED THE DETAILS OF QUANTITY, RATE AND DATE THE ASSESSEE HAD GIVEN FOR PROCESS TO MAHALAXMI COTTON MILL AND WHEN IT WAS RETURNED BAC K IN THE FORM OF PRINTED/ DYED CLOTH. THE SECOND ISSUE WAS THE CLAIM OF ADDIT IONAL DEPRECIATION THAT ON PURCHASE OF OLD AND USED PLANT AND MACHINERY. IN RE SPONSE, TO THE SHOW CAUSE NOTICE THE ASSESSEE HAD FILED HIS REPLY ON TH REE OCCASIONS BEING 16- 04-2014, 26-6-2014 AND 06-08-2014. THE LEARNED CIT HAS HELD IN PAGE 3 OF HIS ORDER IN PARA 8 SINCE ALL THESE ENQUIRIES HAVE NOT BEEN CARRIED OUT BY THE A O IN THE COURSE OF ASSESSMENT PROCEEDINGS AND, TH EREFORE, AT THIS STAGE, SUBMISSIONS MADE BY THE ASSESSEE IN THE COURSE OF T HE PROCEEDINGS U/S 263 OF THE ACT WITHOUT VERIFICATION BY THE A O CANNOT B E ACCEPTED. FURTHER, THE LEARNED CIT REFERRED TO VARIOUS CASE LAWS AND HAD S ET ASIDE THE ASSESSMENT ORDER PASSED U/S 143 (3) OF THE ACT ON 31-01-2013 O N THE SAID TWO ISSUES AND RESTORED BACK TO THE FILE OF THE A O FOR EXAMINATIO N/ENQUIRY ON THE LINES MENTIONED IN THE ORDER. IT WAS A SUBMISSION THAT AL L ENQUIRIES HAD BEEN DONE AND NO FURTHER ENQUIRY WAS LEFT TO BE DONE AND THE LEARNED CIT HAS NOT POINTED OUT ANY SPECIFIC ERROR WHICH CALLS FOR INVO KING THE POWERS U/S 263 OF 3 ITA NO.524/JODH/2014 THE ACT. IN REPLY, THE LEARNED D R SUBMITTED THAT T HE ASSESSEE WAS NOT ENTITLED TO ADDITIONAL DEPRECIATION AS THE MACHINER Y WAS OLD AND THE DETAILS OF THE MANUFACTURE OF THE DYED AND PRINTED CLOTH MATER IALS THROUGH M/S. MAHALAXMI COTTON MILLS HAD NOT BEEN PROPERLY EXAMIN ED BY THE A O. IT WAS SUBMITTED THAT THE ORDER OF THE LEARNED CIT PASSED U/S 263 OF THE ACT WAS LIABLE TO BE UPHELD. AT THIS STAGE, A SPECIFIC QUER Y WAS PUT TO THE LEARNED D. R. AS TO WHAT WAS THE ENQUIRY WHICH HAS BEEN MADE O R CAUSED TO BE MADE BY THE LEARNED CIT ON THE ISSUES RAISED IN THE SHOW -CAUSE NOTICE BEFORE HE PASSED THE ORDER U/S 263 OF THE ACT. TO THIS, THE L EARNED D.R. SUBMITTED THAT THE ISSUANCE OF THE SHOW-CAUSE NOTICE TO THE ASSESS EE AND CONSIDERATION OF THE DETAILS SUBMITTED BY THE ASSESSEE IN THE REPLY WAS THE ENQUIRY DONE. HE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT. 5. WE HAVE CONSIDERED THE SUBMISSIONS. FOR PROPER U NDERSTANDING OF THE ISSUES RAISED IT WOULD BE NECESSARY TO EXTRACT THE PROVISIONS OF SECTION 263 (1) WHICH IS AS UNDER:- SECTION 263 (1) THE PRINCIPAL COMMISSIONER OR THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEED ING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIA L TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPO RTUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER ENHANCING OR MODI FYING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIREC TING A FRESH ASSESSMENT. 4 ITA NO.524/JODH/2014 THE PROVISIONS OF SECTION 263(1) OF THE ACT PROVIDE THE FOLLOWING ACTIONS:- (1) CALL FOR AND EXAMINE THE RECORDS OF ANY PROCEED INGS UNDER THIS ACT. (2) IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN B Y THE AO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE IT REQUIRES A SPECIFIC FINDING BY HIM AS TO WHAT IS THE ERROR IN THE ORDER PASSED BY THE AO WHICH HE DEEMS TO BE ERRONEO US IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE . (3) AFTER THIS, HE MAY GIVE OPPORTUNITY TO THE AS SESSEE OF BEING HEARD. HERE, IT MUST BE APPRECIATED THAT THERE WAS NO NECE SSITY THAT HE MUST GIVE OPPORTUNITY TO THE ASSESSEE OF BEING HEAR D THOUGH IT IS UNDER THE PRINCIPLE OF NATURAL JUSTICE THAT AN OPPO RTUNITY IS ADVISED TO BE GIVEN TO THE ASSESSEE, IN THE EVENT THAT ACTI ON IS GOING TO BE TAKEN WHICH COULD BE PREJUDICIAL OR DETRIMENTAL TO THE ASSESSEE. (4) AFTER HE GIVES OPPORTUNITY TO THE ASSESSEE FOR HEARING, HE IS REQUIRED COMPULSORILY TO MAKE OR CAUSES TO MAKE SUC H ENQUIRY AS HE DEEMS NECESSARY. THE TERM DEEMS NECESSARY IS O PEN ENDED. THERE COULD BE CASES WHERE THE COMMISSIONER CAN TAK E A STAND THAT THERE WAS NO NECESSITY TO MAKE FURTHER ENQUIRY . IF THAT IS THE CASE IT SHOULD BE SPECIFICALLY RECORDED THAT THE FA CTS EMANATING FROM THE RECORDS REQUIRES NO FURTHER ENQUIRY TO BE MADE OR CAUSED TO BE MADE. (5) IT IS ONLY AFTER ALL THE ABOVE THAT THE LEARNED CIT CAN PROCEED TO PASS THE ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSES SMENT OR CANCELLING AN ASSESSMENT ORDER DIRECTING A FRESH AS SESSMENT. THE PROVISION OF SECTION 263 IS SUBSTANTIALLY A PRO VISION OF LAST RESORT USED BY THE REVENUE AUTHORITY. IT IS A PROVISION WHICH HAS THE POWER UNSETTLED THE 5 ITA NO.524/JODH/2014 SETTLED ASSESSMENT. SUCH POWER COULD NOT HAVE AN UN INHIBITED LIBERTY. IT IS FOR THIS REASON THAT THE LEGISLATURE IN ITS WISDOM HAS REQUIRED THE MAKING OR CAUSING TO BE MADE SUCH ENQUIRY AS HE DEEMS NECESS ARY. THE ENQUIRY/ INQUIRY COULD BE MADE EVEN BEFORE THE 263 PROCEEDIN GS ARE INITIATED AND THAT WOULD BECOME PART OF THE RECORD. BUT ENQUIRY/INQUIR Y IS THE FOUNDATION AND IT MUST BE AVAILABLE TO SHOW HOW THE ORDER OF THE AO I S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. FURTHER, WHEN ISSUES HAVE BEEN EXAMINED BY THE AO THEN THE LEARNED CIT CANNOT USE HIS POWERS U/S 263 OF THE ACT TO REE XAMINE THE MATTER. THIS VIEW IS SUPPORTED BY THE DECISION OF THE HON'BLE BO MBAY HIGH COURT IN THE CASE OF GABRIEL INDIA LTD. 203 ITR 108 (BOM). 6. IN THE PRESENT CASE, THOUGH THE SHOW-CAUSE NOTIC E WAS ISSUED TO THE ASSESSEE AND THOUGH THE ASSESSEE HAD FILED MULTIPLE REPLIES, NOTHING IN THE ORDER SHOWS NOR HAS THE REVENUE BEEN ABLE TO POINT OUT THE FURTHER ENQUIRY, THE LEARNED CIT HAS MADE OR HAS CAUSED TO BE MADE B EFORE HE PASSES THE ORDER U/S 263 OF THE ACT. IN FACT, THE EARLIER EXTR ACTED WORDS OF THE LEARNED CIT WHICH READS AS FOLLOWS:- SINCE ALL THESE ENQUIRIES HAVE NOT BEEN CARRIED OU T BY THE A O IN THE COURSE OF ASSESSMENT PROCEEDINGS AND, THEREFORE, A T THIS STAGE, SUBMISSIONS MADE BY THE ASSESSEE IN THE COURSE OF PROCEEDINGS U/S 263 WITHOUT VERIFICATION BY THE A O CANNOT BE ACCE PTED, 6 ITA NO.524/JODH/2014 SPECIFICALLY SHOWS THE ABSENCE OF MAKING OR CAUSI NG TO BE MADE SUCH ENQUIRIES AS HE DEEMED NECESSARY, BEFORE THE LEARN ED CIT PASS THIS ORDER U/S 263 OF THE ACT. 7. WE ARE LIVE TO THE PROVISIONS OF EXPLANATION (2) TO SECTION 263 OF THE ACT WHICH HAS BEEN INTRODUCED W. E. F. 1 ST JUNE, 2015 WHEREIN IT HAS BEEN EXPLAINED THAT THE ORDER PASSED BY THE AO SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF T HE REVENUE IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER/COMMISSIONER THE ORDER IS PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE. HOWEVER, IT SHOULD BE UNDERSTOOD THAT THE WORD USED IN THE SAID EXPLANATION IS OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER AND S UCH OPINION SHOULD BE IN WRITING OR AT LEAST DISCERNIBLE FROM THE ORDER O F THE LEARNED CIT. BUT, EVEN THIS EXPLANATION WOULD BE CONTROLLED BY THE PRIMARY SECTION OF 263(1) WHICH DEMANDS THE MAKING OR CAUSING TO BE MADE SUCH ENQU IRY AS HE DEEMS NECESSARY, BEFORE HE PASSES THE ORDER U/S 263. IN THE PRESENT CASE AS THE SAID ENQUIRY HAS NOT BEEN MADE BY THE COMMISSIONER NOT HAS IT BEEN CAUSED TO BE MADE BY THE LEARNED CIT EITHER BEFORE THE INT IMATION OR AFTER THE INTIMATION BUT MORE SPECIFICALLY ITS ABSENCE HAS BE EN RECORDED BY THE LEARNED COMMISSIONER BEFORE PASSING HIS ORDER U/S 263 OF TH E ACT, WE ARE OF THE VIEW THAT THE ORDER PASSED U/S 263 OF THE ACT BY THE LEA RNED CIT IS UNSUSTAINABLE AND CONSEQUENTLY STAND QUASHED. 7 ITA NO.524/JODH/2014 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10.03.2016. SD/- SD/- (N. S. SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER JODHPUR, DATED: 10 TH MARCH, 2016 LAKSHMIKANTA LAKSHMIKANTA LAKSHMIKANTA LAKSHMIKANTA DEKA/ DEKA/ DEKA/ DEKA/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. CIT CONCERNED 4. CIT (A) CONCERNED 5. DR, ITAT, JODHPUR 6. GUARD FILE BY ORDER, SR. PRIVATE SECRETARY DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 10 .03.16 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 11.03.16 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 11 .03.16 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 11.03. 16 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 11 .03.16 SR.PS 6. DATE OF PRONOUNCEMENT NA SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER