J.Thomas & Co. Pvt. Ltd., Kolkata V. J.C.I.T.(OSD), Circle-4, Kolkata, Kolkata

ITA 570/KOL/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8070 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 12-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S C BABERIA
• Keywords: Depreciation; Audit objection; Principle of natural justice; Cost of acquisition; Unabsorbed depreciation
• Section: 143(3); 263

Judgement Text

I.T.A. NO.:570/ KOL. / 2012 ASSESSMENT YEAR : 2007-08 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA BEFORE SHRI PRAMOD KUMAR (ACCOUNTANT MEMBER), AND SHRI MAHAVIR SINGH (JUDICIAL MEMBER) I.T.A. NO.: 570/ KOL. / 2012 ASSESSMENT YEAR : 2007-08 J. THOMAS & CO. PVT. LIMITED, .APPELLANT 11, R.N. MUKHERJEE ROAD, KOLKATA-700 001 [PAN : AABCJ 2851 Q] -VS.- JOINT COMMISSIONER OF INCOME TAX (OSD),....RESPO NDENT, CIRCLE-4, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: ANUP SINHA, A.R., FOR THE APPELLANT S.C. BABERIA, CIT(DR) FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : OCTOBER 15, 2012 DATE OF PRONOUNCING THE ORDER : OCTOBER 1 9, 2012 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CHALLENGED CORRECTNESS OF LEARNED COMMISSIONERS ORDER DATED 6 TH MARCH, 2012, PASSED UNDER SECTION 263 R.W.S. 143(3) OF THE INCOM E TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2007-08 ON THE FOLLOWING GROUND S :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (HEREIN AFTER REFERRED TO AS LD. CIT) HAS ERRED IN ISSUING NOTI CE DATED J0TH FEBRUARY, 2012 UNDER THE PROVISIONS OF SECTION 263 OF THE INCOME I.T.A. NO.:570/ KOL. / 2012 ASSESSMENT YEAR : 2007-08 PAGE 2 OF 7 TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) FOR THE ASSESSMENT YEAR 2007-08, WITHOUT MENTIONING ANY REA SON FOR ISSUANCE OF THE SAME AND THEREBY VIOLATING THE PRIN CIPLES OF NATURAL JUSTICE. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT HAS ERRED IN ASSUMING JURISDICTION UNDER THE PROVISIONS OF SECTION 263 OF THE ACT BY ISSUING NOT ICE DATED 10 TH FEBRUARY, 2012 FOR THE ASSESSMENT YEAR 2007-08, BAS ED ON AUDIT OBJECTIONS RAISED BY THE REVENUE AUDIT DEPARTMENT, WITHOUT APPLICATION OF HIS MIND. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT HAS ERRED IN PASSING AN ORDER UNDE R THE PROVISIONS OF SECTION 263 OF THE ACT FOR THE ASSESS MENT YEAR 2007-08, FOR SETTING ASIDE THE ASSESSMENT ORDER PAS SED BY THE ASSESSING OFFICER (HEREIN AFTER REFERRED TO AS AO ) UNDER SECTION 143(3) OF THE ACT ON SOME OF THE GROUNDS WH ICH WERE NEVER DISCUSSED IN THE SHOW CAUSE NOTICE DATED 10 TH FEBRUARY, 2012 AND / OR DURING THE COURSE OF HEARING, THEREBY DEPRIVING THE APPELLANT OF A FAIR OPPORTUNITY TO SHOW CAUSE A GAINST THOSE GROUNDS. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT HAS ERRED IN PASSING THE ORDER UND ER THE PROVISIONS OF SECTION 263 OF THE ACT FOR THE ASSESS MENT YEAR 2007-08, FOR SETTING ASIDE THE ASSESSMENT ORDER PAS SED BY THE AO UNDER THE PROVISIONS OF SECTION 143(3) OF THE ACT W ITHOUT STATING ANY REASON AS TO WHY THE ORDER PASSED BY THE AO IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT HAS ERRED IN PASSING THE ORDER UND ER THE PROVISIONS OF SECTION 263 OF THE ACT FOR THE ASSESS MENT YEAR 2007-08, THEREBY SETTING ASIDE THE ORDER PASSED BY THE AO UNDER THE PROVISIONS OF SECTION 143(3) OF THE ACT ON THE ALLEGED GROUND THAT THE SAID ORDER WAS ERRONEOUS AS WELL AS PREJUD ICIAL TO THE INTEREST OF REVENUE WHEN THE ORDER PASSED BY THE AO WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENU E. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD. CIT HAS ERRED IN PASSING THE ORDER UND ER THE I.T.A. NO.:570/ KOL. / 2012 ASSESSMENT YEAR : 2007-08 PAGE 3 OF 7 PROVISIONS OF SECTION 263 OF THE ACT FOR THE ASSESS MENT YEAR 2007-08, THEREBY SETTING ASIDE THE ORDER PASSED BY THE AO UNDER THE PROVISIONS OF SECTION 143(3) OF THE ACT ON THE ALLEGED GROUND THAT NO VERIFICATION /ENQUIRY WAS MADE BY THE AO WH EN DUE VERIFICATION / ENQUIRY WAS MADE BY THE AO DURING TH E COURSE OF ASSESSMENT PROCEEDING AND FURTHER, WHEN A DETAILED REPLY SUBSTANTIATING THE STAND TAKEN IN THE ASSESSMENT OR DER WAS GIVEN BY THE AO IN PURSUANCE OF THE AUDIT QUERY RAI SED THE REVENUE AUDIT DEPARTMENT IMMEDIATELY AFTER THE ASSE SSMENT PROCEEDINGS. 2. THE ISSUE IN APPEAL LIES IN A NARROW COMPASS OF MATERIAL FACTS. ON 10 TH FEBRUARY, 2012, LEARNED COMMISSIONER ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE, WHICH READS AS FOLLOWS: OFFICE OF THE COMMISSIONER OF INCOME TAX, KOLKATA-II, KOLKATA AAYAKAR BHAWAN, 3 RD FLOOR, P-7, CHOWRINGHEE SQUARE, KOL-700 069 NO. CIT-II/KOL/U/S.263/C-12/2011-12/9424 DA TED: 10.02.2012 TO THE PRINCIPAL OFFICER, M/S. J. THOMAS & CO. PVT. LTD., NILHAT HOUSE, 11, R.N. MUKHERJEE ROAD, KOLKATA-700 001 SUB.: NOTICE U/S. 263 OF THE I.T. ACT 1961, IN YOUR CASE FOR AY 2007- 08- FIXATION OF HEARING- MATTER REGARDING - I HAVE CALLED FOR AND EXAMINED THE ASSESSMENT RECOR D IN YOUR CASE FOR ASSESSMENT YEAR 2007-08. IT APPEARS THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. YOU ARE REQUESTED TO APPEAR BEFORE ME EITHER PERSON ALLY OR THROUGH AN AUTHORIZED REPRESENTATIVE IN THIS REGARD ON 21.02.2 012 AT 2:00 P.M. SD/- [UJJWAL KUMAR] COMMISSIONER OF INCOME TAX, KOL-II, KOLKATA. 3. IT APPEARS THAT THE ASSESSEE ATTENDED TO THE PRO CEEDINGS ON THE SAID DATE AND DEMANDED TO KNOW THE REASONS ON THE B ASIS OF WHICH I.T.A. NO.:570/ KOL. / 2012 ASSESSMENT YEAR : 2007-08 PAGE 4 OF 7 ASSESSMENT ORDER FOR ASSESSMENT YEAR 2007-08 WAS CO NSIDERED ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. AS TO WHAT TRANSPIRED AT THE SAID HEARING, IT MAY BE USEFUL TO REFER TO THE FOLLOWING EXTRACTS FROM WRITTEN SUBMISSIONS FILED BY THE ASSE SSEE DULY ACKNOWLEDGED BY THE LEARNED COMMISSIONER AS ALSO BY THE LEARNED ASSESSING OFFICER :- WE WRITE WITH REFERENCE TO NOTICE NO. CIT-IIFKOL/U /S263/C- 12/201 1-12/9424 DATED 10TH FEBRUARY, 2012 ISSUED B Y YOUR KINDSELF UNDER SECTION 263 OF THE INCOME TAX ACT,19 61 (HEREINAFTER REFERRED TO AS THE ACT) FIXING THE D ATE OF HEARING ON 21ST FEBRUARY,2012 AND FURTHER, TO THE DISCUSSIO N WE HAD WITH YOUR KINDSELF ON THAT DATE. AS NO REASONS FOR INITIATING THE ABOVE PROCEEDINGS ON THE COMPANY WERE MENTIONED IN THE AFOREMENTIONED NOTICE DATED 10TH FEBRUARY, 2012 ISSUED BY YOUR KINDSELF, IT WAS HUMBLY REQUESTED DURING THE COURSE OF THE HEARING TO STATE THE SAME SO THAT WE CAN FILE A DETAILED WRITTEN SUBMISSION BEFO RE YOUR KINDSELF TO EXPLAIN AS TO WHY THE ORDER PASSED BY T HE ASSESSING OFFICER IS NOT ERRONEOUS AS WELL .AS NOT PREJUDICIA L TO THE INTEREST OF REVENUE. YOUR KINDSELF MENTIONED THAT T HERE ARE NO PROVISIONS IN THE ACT WHICH MAKE IT MANDATORY TO ST ATE ANY REASON FOR ISSUANCE OF THE NOTICE UNDER THE PROVISI ONS OF SECTION 263 OF THE ACT. FURTHER, YOUR KINDSELF HAS MENTIONED THAT NOTICE HAS NOT BEEN ISSUED AT YOUR INSTANCE BU T THE SAID NOTICE HAS BEEN ISSUED AT THE INSTANCE OF THE REVEN UE AUDIT DEPARTMENT WHO HAS RAISED AN AUDIT OBJECTION FOR TH E CAPTIONED ASSESSMENT YEAR. HOWEVER, YOUR KINDSELF WAS KIND EN OUGH TO SHOW US THE FILE CONTAINING THE REASONS FOR WHICH T HE REVENUE AUDIT DEPARTMENT HAS RAISED THEIR OBJECTIONS. DURING THE COURSE OF DISCUSSION, YOUR KINDSELF ASKE D THE ASSESSING OFFICER TO ATTEND THE HEARING AND HE ALSO JOINED THE HEARING. DURING THE COURSE OF THE HEARING, YOUR KIN DSELF HAS INSTRUCTED US TO FILE A COPY OF THE REPLY TO THE OF FICE OF THE ASSESSING OFFICER AS THE PROPOSAL FOR REVISION HAS BEEN RECOMMENDED FROM THE OFFICE OF THE ASSESSING OFFICE R. DURING THE COURSE OF THE DISCUSSION, THE ASSESSING OFFICER HAD STATED THAT A SUITABLE REPLY WAS GIVEN TO THE QUERY RAISED BY THE REVENUE AUDIT PARTY AND HE HAD REQUESTED THE REVENU E AUDIT I.T.A. NO.:570/ KOL. / 2012 ASSESSMENT YEAR : 2007-08 PAGE 5 OF 7 DEPARTMENT TO DROP THE QUERY RAISED BY THEM. SINCE, THE REVENUE AUDIT PARTY WAS NOT CONVINCED BY THE REPLY GIVEN, THE PROPOSAL FOR REVISION WAS SENT TO CITS OFFICE. 4. IT IS IN THIS BACKDROP THAT THE LEARNED COMMISSI ONER HAS PASSED THE IMPUGNED REVISION ORDER, WHICH IS REPRODUCED BE LOW :- FROM THE ACCOUNTS OF THE COMPANY IT WAS NOTICED THAT THE ASSESSEE SOLD TWO BUILDINGS AT A TOTAL OF RS.9,35,00,000/-. IN THE COMPUTATION OF CAPITAL GAI NS, THE ASSESSEE CLAIMED THE COST OF ACQUISITION OF THE LAN D AND BUILDING SEPARATELY. NO ENQUIRY WAS MADE INTO THIS ASPECT OF THE CASE. IT IS NOTABLE THAT, IN THE FINA L ACCOUNTS FOR AY 2005-06, COMPOSITE VALUE FOR LAND & BUILDING WAS SHOWN AS ASSET. IT IS ALSO A FACT THAT THE COST OF ACQUISITION AS CLAIMED BY THE ASSESSEE WAS ACCEPTED BY THE A.O. WITHOUT ANY VERIFICATION OF THE FARE MARKE T VALUE ON THE RELEVANT DATE. IT ALSO APPEARS THAT TH E SET OFF OF UNABSORBED DEPRECIATION OF RS.1,16,66,995/- WAS ALLOWED IMPERFECTLY. FURTHER, IN THE COMPUTATION OF TAX, NO SURCHARGE AND EDUCATION CESS WAS LEVIED. HENCE, PROCEEDINGS U/S. 263 OF THE I.T. ACT WAS INITIATED. THE A.R. OF THE ASSESSEE-COMPANY WAS HEARD IN THE MATTER. I HOLD THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AS IT IS PREJUDICIAL TO THE INTEREST OF T HE REVENUE. THE ASSESSMENT ORDER IS SET ASIDE. THE AO IS DIRECTED TO REFRAME THE ORDER AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. 5. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTUAL MATRIX OF THE CA SE AS ALSO THE APPLICABLE LEGAL POSITION. I.T.A. NO.:570/ KOL. / 2012 ASSESSMENT YEAR : 2007-08 PAGE 6 OF 7 7. WE FIND THAT THERE IS NO REASON WHATSOEVER SET O UT IN THE SHOW CAUSE NOTICE AS TO WHY THE COMMISSIONER WAS OF THE VIEW THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF THE REVENUE. UNLESS THE COMMISSIONER SPECIFICALLY SETS OUT SUCH REASONS IN THE SHOW CAUSE NOTICE, AND HEARS THE ASSESSEE ON TH E SAME, IT IS NOT OPEN TO HIM TO EXERCISE HIS REVISION POWERS UNDER S ECTION 263 OF THE ACT. UNDOUBTEDLY, IN THE IMPUGNED REVISION ORDER, L EARNED COMMISSIONER DOES MENTION ABOUT A FEW POINTS, OSTEN SIBLY BORROWED FROM REVENUE AUDIT OBJECTIONS, ON THE BASIS OF WHIC H REVISION PROCEEDINGS WERE INITIATED, BUT IT WAS NOT EVEN THE COMMISSIONERS CASE THAT HE HAD ANY OPINION OF HIS OWN, BEYOND THI S BORROWED OPINION, TO EVEN CONSIDER THE ASSESSMENT ORDER AS E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. CLEARLY , THEREFORE, THE CONDITIONS PRECEDENT, UNDER SECTION 263 WERE NOT SA TISFIED, FOR INITIATING REVISION PROCEEDINGS WERE NOT SATISFIED. WE HAVE ALSO NOTICED THAT IN THE OPERATIVE PORTION OF HIS ORDER, LEARNED COMMISSIONER HAS NOT MENTIONED ANY REASONS WHATSOEVER FOR COMING TO THE CONCLUSION AS TO WHY THE ASSESSMENT ORDER WAS CONSIDERED TO BE ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN A RA THER MAJESTIC TONE, LEARNED COMMISSIONER NOTES THAT THE A.R. OF THE ASESSEE-COMPANY WAS HEARD IN THE MATTER AND HURRIES UPTO CONCLUDE THAT I HOLD THAT THE ORDER PASSED BY THE AO IS ERRONEOUS AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE , BUT THEN HE DOES NOT REALIZE THAT WHEN HE IS EXER CISING A QUASI JUDICIAL AUTHORITY, AS HE WAS EXERCISING IN THIS CA SE, HE HAS TO SPEAK HIS MIND THROUGH HIS ORDER AND HE MUST SET OUT REASONS AS TO WHY HE HOLDS SO. UNLESS THE COMMISSIONER RECORDS REASONS FOR COM ING TO THE CONCLUSION AS TO WHY HE THINKS ORDER IS ERRONEOUS A ND PREJUDICIAL TO THE INTEREST OF THE REVENUE, HE CANNOT ASSUME JURIS DICTION UNDER SECTION I.T.A. NO.:570/ KOL. / 2012 ASSESSMENT YEAR : 2007-08 PAGE 7 OF 7 263. THE MANNER IN WHICH IMPUGNED ORDER IS PASSED L EAVES A LOT TO BE DESIRED, AND IT DOES NOT SHOW ANY APPLICATION TO MI ND. SUCH AN ACTION CANNOT MEET ANY JUDICIAL APPROVAL. IN ANY CASE, UNL ESS CATEGORICAL FINDING IS GIVEN ABOUT WHAT IS WRONG IN THE ORDER, THE MATTER CANNOT BE SET ASIDE TO FILE OF THE ASSESSING OFFICER FOR FRES H EXAMINATION. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIR ETY OF THE CASE, WE VACATE THE IMPUGNED REVISION ORDER. THE ASSESSEE GE TS THE RELIEF ACCORDINGLY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 19 TH DAY OF OCTOBER, 2012. SD/- SD/- MAHAVIR SINGH PRAMOD KUMAR (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 19 TH DAY OF OCTOBER, 2012 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.