M/s Fashion Arts, Ludhiana V. CIT-I, Ludhiana

ITA 558/CHANDI/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60847 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-05-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 14-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: RAJIV KAUSHAL
• Keywords: Principle of natural justice
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI H.L. KARWA, V.P. AND SHRI T.R. SOOD, AM ITA NO. 558/CHD/2010 ASSESSMENT YEAR: 2005-06 FASHION ARTS V C.I.T. -I DYEING COMPLEX LUDHIANA BAHADUR KE ROAD LUDHIANA PAN: AAAFF 2431 N (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI RAJIV KAUSHAL RESPONDENT BY: SHRI N.K. SAINI DATE OF HEARING: 10.05.2012 DATE OF PRONOUNCEMENT: 17.5.2012 ORDER PER T.R. SOOD, A.M IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE ORD ER PASSED U/S 263 BY CIT-I, LUDHIANA. 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT ON E XAMINATION OF RECORD, THE LD. CIT FOUND THAT THE ASSESSEE HAD NOT FILED CERTI FIED COPY OF PARTNERSHIP DEED DULY CERTIFIED BY ALL THE PARTNERS FOR CLAIMING OF INTEREST AND REMUNERATION TO THE PARTNERS. THEREFORE, DEDUCTION OF INTEREST PAID T O THE PARTNERS AND SALARIES TO THE PARTNERS OF RS. 2,29,899/- WAS NOT ALLOWABLE. HE FURTHER NOTED THAT THE ASSESSEE HAS PAID DUES OF ESI AND EPF LATE. THEREF ORE, THE SAME WERE ALSO NOT ALLOWABLE. A SHOW CAUSE NOTICE WAS ISSUED ACCO RDINGLY. ON BEHALF OF THE ASSESSEE, THE DISALLOWANCE OF ESI AND EPF WAS ACCE PTED. FURTHER IN RESPECT OF OTHER ISSUES IT WAS STATED THAT CERTIFIED COPY O F THE PARTNERSHIP DEED WHICH WAS SIGNED BY ONLY ONE PARTNER WAS DULY FILED WITH THE ASSESSING OFFICER. 3. THE LD. CIT DID NOT AGREE WITH THE SUBMISSIONS A ND HELD THAT IN THE ABSENCE OF CERTIFIED PARTNERSHIP DEED INTEREST AND REMUNERATION TO THE PARTNERS COULD NOT BE ALLOWED AND ACCORDINGLY DIRECTED ASSES SING OFFICER TO NOT ALLOW SUCH PAYMENTS. 2 4. BOTH THE PARTIES WERE HEARD IN DETAIL. AFTER HE ARING BOTH THE PARTIES WE FIND THAT THE LD. CIT HAS NOWHERE STATED THAT THE A SSESSMENT ORDER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE HON'BLE SUPREME COURT HAS CLEARLY LAID DOWN IN CASE OF MALA BAR INDUSTRIAL CO. LTD V. CIT, 243 ITR 83 AND IT HAD OBSERVED AS UNDER: A BARE READING OF SECTION 263 OF THE INCOME-TAX AC T, 1961 MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCISE OF JURISDICT ION BY THE COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE ITO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE OR DER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS , AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF O NE OF THEM IS ABSENT IF THE ORDER OF THE ITO IS ERRONEOUS BUT IS NOT P REJUDICIAL TO THE REVENUE OR IT IS NOT ERRONEOUS BUT IS PREJUDICIAL T O THE REVENUE RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT . THE PROVISIONS CANNOT BE INV9OKED TO CORRECT EACH AND EVERY TYPE O F MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. AN INCORRECT A SSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUI REMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATIO N OF MIND. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IS NO T AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. UNDERSTOOD IN ITS O RDINARY MEANING IT IS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. TH E SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WITH THE PROV ISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO A N ERRONEOUS ORDER OF THE ITO, THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE. THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE REVENUE HAS T O BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASSESSING OFF ICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSI NG OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE R EVENUE, FOR EXAMPLE, WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO 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 ITO IS UNSUSTA INABLE IN LAW. 5. THUS ONLY THOSE ORDERS CAN BE SUBJECTED TO REVIS ION WHICH ARE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVEN UE. THE ASSESSMENT ORDER MAY BE ERRONEOUS BUT MAY STILL NOT BE PREJUDICIAL TO TH E INTEREST OF THE REVENUE. THE PRESENT ASSESSMENT ORDER HAS BEEN FRAMED WITHOUT MAKING ENQUIRIES REGARDING PARTNERSHIP DEED AND ESI PAYMENT ETC. WHICH WERE MADE LATE. THEREFORE, THE ORDER PASSED WITHOUT M AKING ENQUIRY IS DEFINITELY ERRONEOUS BECAUSE IT IS SETTLED POSITION O F LAW THAT AN ASSESSMENT ORDER FRAMED WITHOUT MAKING ENQUIRIES IS ERRONEOUS. HOWEVER, AT 3 THE SAME TIME THIS ORDER CAN NOT BE CALLED PREJUDIC IAL. IN THIS CASE AS FAR AS THE ISSUE REGARDING LATE PAYMENT OF ESI AND EPF DUES AR E CONCERNED A CONTROVERSY WAS WHETHER LATE PAYMENT CAN ALSO BE AL LOWED OR NOT. THE MATTER WAS ULTIMATELY SETTLED BY HON'BLE SUPREME COURT IN CASE OF CIT V. ALOM EXTRUSIONS LTD. 319 ITR 306 (S.C). IT WAS HELD THA T EVEN IF THE PAYMENTS ARE MADE LATE BUT PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME THEN SUCH PAYMENTS ARE ALLOWABLE U/S 43B. FOLLOWING THIS DEC ISION THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF CIT V. NUCHEM LTD., ITA NO. 323 OF 2009 THAT EVEN THE LATE PAYMENTS ON ACCOUNT OF PF AND ES I DUES WHICH ARE PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME A RE ALLOWABLE. THUS NO PREJUDICE CAN BE SAID TO HAVE BEEN CAUSED TO THE RE VENUE ON THIS ACCOUNT. AS FAR AS THE OTHER ISSUE REGARDING CERTIFIED COPY IS CONCERNED, THE CIT HAS CLEARLY NOTED IN PARA 3.2 THAT A COPY OF THE PARTNERSHIP DE ED WAS FILED WHICH WAS CERTIFIED BY ONLY ONE PARTNER BUT NOT BY ALL THE PA RTNERS. EVEN IF THE DEED WAS NOT CERTIFIED BY ALL THE PARTNERS, AN OPPORTUNITY C OULD HAVE BEEN ALLOWED BY THE ASSESSING OFFICER TO RECTIFY THIS MISTAKE AND DEDUC TION OF REMUNERATION TO THE PARTNERS COULD HAVE BEEN ALLOWED. MERELY BECAUSE A N OPPORTUNITY WAS NOT GIVEN WOULD NOT LEAD TO THE CONCLUSION THAT THE DED UCTION IS NOT ALLOWABLE. THEREFORE, THE DEFECT IS ONLY TECHNICAL AND THE ORD ER CANNOT BE CALLED PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN THESE CIRCUMSTA NCES WE ARE OF THE OPINION THAT THE LD. CIT COULD NOT HAVE EXERCISED REVISIONAL JUR ISDICTION IN THE PRESENT CASE. ACCORDINGLY WE QUASH HIS ORDER. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED ON 17.5 .2012 SD/- SD/- (H.L. KARWA) (T.R. SOOD) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 17.5 .2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/ THE DR 4