DCIT, Gurgaon V. Sh. Chanchal Singh Dhek, Gurgaon

ITA 5945/DEL/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7796 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 03-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Keywords: Depreciation; Rectification of order; Opportunity of being heard; Audit objection; Reassessment proceedings; TDS; Set aside
• Section: 263; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER AND. MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.5945/DEL/2014 ASSESSMENT YEAR: 2005-06 DCIT CIRCLE -1 (1) GURGAON VS. SH. CHANCHAL SINGH DHEK PROP. M/S. GREAT ROADWAYS ANAJ MANDI CHOWK, GURGAON PAN NO. AAOPD6087G (APPELLANT) (RESPONDENT) APPELLANT BY MS. ASHIMA NEB, SR. DR. RESPONDENT BY SH. PRATAP GUPTA, CA DATE OF HEARING: 28/08/2019 DATE OF PRONOUNCEMENT: 14/10/2019 ORDER PER R.K PANDA, AM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DATED 29.08.2014 OF CIT(A), FARIDABAD RELATIN G TO A.Y. 2005-06. 2. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN RAISED BY THE REVENUE IN THE GROUNDS OF APPEAL, THESE ALL RELATE TO THE ORDER OF THE CIT(A) IN QUASHING THE ORDER PASSED BY THE AO U /S. 154 OF THE IT ACT. PAGE | 2 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND DERIVES INCOME FROM LORRY HIRE AND T RANSPORTATION. HE FILED HIS RETURN OF INCOME ON 30.10.2005 DECLARI NG TOTAL INCOME OF RS.9,78,805/-. THE AO COMPLETED THE ASSE SSMENT U/S. 143 (3) ON 18.12.2007 WHEREIN HE MADE ADDITION OF R S.91,920/- BEING DISALLOWANCE OF 1/8 TH OF THE EXPENSES OUT OF TELEPHONE VEHICLE REPAIR AND MAINTENANCE AND DEPRECIATION ON MOTOR CAR AND RS.354/- ON ACCOUNT OF DISALLOWANCE U/S. 44B. S UBSEQUENTLY THE AO FOUND THAT ASSESSEE HAS DEBITED LORRY HIRE C HARGES TO THE EXTENT OF RS.1,66,43,122/-ON WHICH NO TDS WAS DEDUC TED BY THE ASSESSEE. HE, THEREFORE, ISSUED A NOTICE U/S. 154 OF THE IT ACT. SINCE THERE WAS NO COMPLIANCE FROM THE SIDE OF THE ASSESSEE, THE AO FOLLOWING THE PROVISIONS OF SECTION 40 (A) (IA) MADE ADDITION OF RS.1,66,43,120/- TO THE TOTAL INCOME OF THE ASSESSE E AND DETERMINED THE TOTAL INCOME AT RS.1,77,14,200/-. 4. IN APPEAL THE LD. CIT(A) QUASHED THE ORDER PASSE D U/S. 154 OF THE IT ACT, 1961. WHILE DOING SO, HE OBSERVED T HAT THE RECTIFICATION ORDER WAS PASSED BY THE AO ON THE BAS IS OF AN AUDIT OBJECTION RAISED BY THE AUDIT PARTY ON 08.09.2008. SUBSEQUENT TO THIS THE AO ISSUED THE NOTICE U/S. 154 ON 26.12.200 8. THEN FOR A PERIOD OF MORE THAN 2 YEARS THERE IS NO CORRESPONDE NCE OR ACTION ON THIS FRONT BETWEEN 2008 ON 2010. SUBSEQUENTLY, O N 15.02.2010 THE AO ISSUED A NOTICE U/S. 154 FIXING T HE CASE ON 19.03.2010 AND PASSED THE ORDER ON 29.03.2010. HE OBSERVED FROM THE RECORDS THAT THE NOTICE ISSUED BY THE AO U /S. 154 ON 15.03.2010 WAS RECEIVED BACK BY THE DEPARTMENT UNSE RVED ON THE ASSESSEE ON 25.03.2010. HE, THEREFORE, INFERRED TH AT ON THE DATE PAGE | 3 ON WHICH THE AO PASSED THE ORDER U/S. 154 I.E. 29.0 3.2010, THE UNSERVED NOTICE HAD ALREADY BEEN RECEIVED BACK IN T HE OFFICE OF THE AO ON 25.03.2010 THUS, THE ORDER PASSED BY THE AO WAS WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE OF B EING HEARD. HE, THEREFORE, HELD THAT THE ORDER PASSED BY THE AO IS BAD IN LAW AS IT CLEARLY VIOLATES THE PROVISIONS OF SECTION 15 4 (3). RELYING ON VARIOUS DECISIONS WHERE IN IT HAS BEEN HELD THAT WH ERE ANY ORDER U/S. 154 IS PASSED WITHOUT GIVING NOTICE AND OPPORT UNITY TO THE ASSESSEE AND THE INCOME OF THE ASSESSEE IS ENHANCED OR REFUND IS REDUCED THE ORDER IS BAD. HE FURTHER HELD THAT THE RECTIFIABLE MISTAKE IS A MISTAKE WHICH IS OBVIOUS AND NOT SOMET HING WHICH HAS TO BE ESTABLISHED BY A LONG DRAWN PROCESS OF RE ASONING OR WHERE TWO OPINIONS ARE POSSIBLE. DECISION ON DEBAT ABLE POINT OF LAW CANNOT BE TREATED AS MISTAKE APPARENT FROM THE RECORD. HE ACCORDINGLY HELD THAT THE RECTIFICATION CARRIED OUT BY THE AO IS BAD IN LAW AS IT WAS PASSED WITHOUT GIVING A PROPER OPPORTUNITY TO THE ASSESSEE OF BEING HEARD AND ALSO BECAUSE OF THE FACT THAT RECTIFICATION CARRIED OUT FALLS OUT OF THIS SCOPE O F SECTION 154 AS IT IS A DEBATABLE ISSUE AND DEPENDENT ON ELABORATE ARG UMENTS AND HAS TO BE ESTABLISHED BY A LONG DRAWN PROCESS OF RE ASONING. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE REV ENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE LD. DR STRONGLY CHALLENGED THE ORDER OF THE CIT(A). HE SUBMITTED THAT IT WAS APPARENT FROM RECORD THAT NO TDS WAS DEDUCTED ON LORRY HIRE CHARGES PAID AND HENCE THE N ON DEDUCTION OF THIS AMOUNT WAS A MISTAKE APPARENT FROM RECORD A ND WAS COVERED U/S. 154 OF THE IT ACT. HE SUBMITTED THAT THE CBDT PAGE | 4 CIRCULAR NO.715 DATED 08.08.1995 HAS CLARIFIED THAT IF THE GOODS ARE TRANSPORTED CONTINUOUSLY IN PURSUANCE OF A CONT RACT FOR A SPECIFIC PERIOD OR QUANTITY, EACH GR WILL NOT BE SE PARATE CONTRACT AND ALL GRS RELATING TO THAT PERIOD OR QUANTITY WI LL BE AGGREGATED FOR THE PURPOSE OF TDS. IT IS NOT A DEBATABLE ISSUE . FURTHER THERE IS NO DISCUSSION ON THIS ISSUE IN THE ORDER PASSED U/S. 143 (3). HE FURTHER SUBMITTED THAT THE ORDER PASSED BY THE C IT(A) IS FACTUALLY INCORRECT AND SHOULD BE SET ASIDE. 6.1 THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER H AND STRONGLY SUPPORTED THE ORDER OF THE CIT(A). REFERRI NG TO PROVISION OF SECTION 194C(3), HE SUBMITTED THAT THE PROVISION WILL BE APPLICABLE WHERE THE AMOUNT PAID TO EACH PARTY EXCE EDS RS.50,000/-. HE SUBMITTED THAT THERE IS NO APPAREN T MISTAKE COMING OUT OF THE ASSESSMENT ORDER AND THE AO COULD NOT HAVE ASSUMED JURISDICTION U/S. 154 OF THE IT ACT. HE SU BMITTED THAT IT REQUIRES A LONG DRAWN PROCESS TO COME TO THE CONCLU SION THAT THE PROVISIONS OF SECTION 40 (A) (IA) ARE APPLICABLE. HE SUBMITTED THAT THE PROVISION OF SECTION 263 COULD HAVE BEEN INVOKE D WHICH HAS NOT BEEN DONE IN THE INSTANT CASE. THEREFORE, THE ORDER OF THE CIT(A) BE UPHELD AND THE GROUNDS RAISED BY THE REVE NUE SHOULD BE DISMISSED. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BEL OW. WE FIND THE AO IN THE INSTANT CASE PASSED THE ASSESSMENT OR DER ON 18.12.2007 U/S. 143 (3) DETERMINING THE TOTAL INCOM E OF THE ASSESSEE AT RS.10,71,080/- AS AGAINST THE RETURNED INCOME OF RS.9,78,805/- WHEREIN HE DISALLOWED CERTAIN EXPENSE S ON PAGE | 5 ESTIMATE BASIS AND MADE ADDITION U/S. 43 B. THERE IS ABSOLUTELY NO DISCUSSION ON THE ISSUE OF DISALLOWANCE U/S. 40 (A) (IA) FOR NON- DEDUCTION OF TAX FROM LORRY HIRE CHARGES. WE FIND T HE AO PASSED THE ORDER U/S. 154 ON 29.03.2010 WHEREIN HE MADE AD DITION OF RS.1,66,43,122/- U/S. 40 (A) (IA) OF THE IT ACT. WE FIND THE LD. CIT(A) QUASHED THE RECTIFICATION ORDER PASSED U/S. 154 ON THE GROUND THAT ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY OF BEING HEARD WHILE ENHANCING THE INCOME U/S. 154 OF THE IT ACT AND FURTHER THE ISSUE IS NOT A MISTAKE APPARENT FROM RE CORD AND IS DEBATABLE ISSUE AND DEPENDENT ON ELABORATE ARGUMENT S AND HAS TO BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASON ING. 7.1 WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF TH E CIT(A) QUASHING THE REASSESSMENT PROCEEDINGS. ADMITTEDLY T HERE IS NO DISCUSSION ON THE ISSUE OF DISALLOWANCE U/S. 40 (A) (IA) ON ACCOUNT OF NON DEDUCTION OF TAX FROM LORRY HIRE CHARGES. T HEREFORE, ONLY COURSE OF ACTION AVAILABLE WAS ORDER U/S. 263 AND T HE AO COULD NOT HAVE ASSUMED JURISDICTION U/S. 154 OF THE IT AC T. WE FIND THE LD.CIT(A) WHILE QUASHING THE RECTIFICATION ORDER PA SSED BY THE AO HAS FOLLOWED THE DECISION OF HONBLE KOLKATA HIGH C OURT IN THE CASE OF OIL INDIA REPORTED IN 183 ITR 412 WHEREIN T HE ISSUE OF RECTIFICATION U/S. 154 VIS-A-VIS THE DISALLOWANCE U /S. 40 (A) (V) HAS BEEN DEALT WITH IN DETAIL. THE RELEVANT OBSERVATIO N OF THE HONBLE HIGH COURT READS AS UNDER :- 'THE SHORT QUESTION WHICH FALLS FOR DETERMINATION I S WHETHER THE ORDER OF REMAND WHICH WAS MADE BY THE TRIBUNAL IN A PROCEEDING ARISING OUT OF THE ORDER PASSED UNDER SECTION 154 I S VALID OR NOT. IT IS NOW WELL-SETTLED THAT IF THE MISTAKE HAS TO BE A SCERTAINED ON INVESTIGATION INTO FACTS, IT WILL NOT BE A MISTAKE APPARENT FROM THE PAGE | 6 RECORDS. THE INCOME- TAX OFFICER CANNOT, IN SUCH A CASE, INVOKE SECTION 154 OF THE ACT. THE NATURE OF THE MISTAKE A S CONSIDERED BY THE INCOME-TAX OFFICER IN HIS ORDER IS AS FOLLOWS: 'ON THE ABOVE EXPLANATION AND FACTS ON RECORD GIVEN BY THE COMPANY AT THE TIME OF ASSESSMENT, IT IS CLEAR THAT THE COMPANY WAS NOT ENTITLED TO ANY DEDUCTION OF THE EXPENSES A ND ALLOWANCES INCURRED AND CLAIMED ON ACCOUNT OF THE BUNGALOWS, E TC., PROVIDED FREE FOR USE TO THE EMPLOYEES. THE PROVISIONS OF SE CTION 40(A)(V) ARE VERY CLEAR IN THIS REGARD. THEN, IN COMPUTING THE E XPENDITURE, WHAT IS TO BE INCLUDED IS NOT THE VALUE OF THE PERQUISIT E, BENEFIT OR AMENITY AS IS ASSESSABLE IN THE EMPLOYEES' HANDS, B UT THE COST INCURRED IN PROVIDING SUCH BENEFIT, AMENITY OR PERQ UISITE. THE FACT REMAINS THAT THE EXPENSES AND ALLOWANCES INCURRED A ND CLAIMED BY THE COMPANY RELATE TO THE QUARTERS, ETC., WHICH ARE MEANT FOR THE USE OF THE EMPLOYEES. IT IS IMMATERIAL SO FAR A S THE POSITION IN LAW IS CONCERNED EVEN IF THE EMPLOYEES GO ON LEAVE FOR A MONTH. EVEN ACCORDING TO THE COMPANY'S OWN ADMISSION, SUCH QUARTERS DURING THE LEAVE PERIOD OF ONE EMPLOYEE IS GIVEN TO ANOTHER MEMBER OF THE STAFF. ON THE FACTS WHICH ARE ON RECO RD, IT IS CLEAR THAT, BY MISTAKE, THE DEDUCTION CLAIMED BY THE COMP ANY WAS ALLOWED. THE OBJECTION OF THE COMPANY IS, THEREFORE , NOT ACCEPTABLE AND THE ASSESSMENT IS RECTIFIED UNDER SECTION 154. IF THERE IS NO DISPUTE THAT THE DEDUCTION CLAIMED B Y THE ASSESSEE IS NOT, ALLOWABLE IN LAW, IN THAT EVENT, THERE WILL BE A MISTAKE APPARENT FROM THE RECORD AND THE INCOME-TAX OFFICER WOULD BE JUSTIFIED IN RECTIFYING THE MISTAKE. ONCE IT IS EST ABLISHED THAT THERE IS A MISTAKE APPARENT FROM THE RECORDS, THE INCOME- TAX OFFICER ASSUMES JURISDICTION AND IN RECTIFYING SUCH MISTAKE IF THE QUANTUM OF DEDUCTION HAS TO BE DETERMINED ON ASCERT AINING CERTAIN FACTS, THE INCOME-TAX OFFICER WILL NOT BE P RECLUDED FROM PAGE | 7 DOING SO UNDER SECTION 154. IN SUCH A CASE, IT CANN OT BE SAID THAT THE DETERMINATION OF MISTAKE DEPENDS ON THE INVESTI GATION OF FACTS. BUT WHEN THE MISTAKE ITSELF HAS TO BE DETERM INED ON INVESTIGATION OF FACTS, INCOME TAX OFFICER WILL HA VE NOT JURISDICTION TO PROCEED UNDER SECTION 154. THE TRIBUNAL SHOULD HAVE DECIDED WHETHER THE INCOM E-TAX OFFICER WAS JUSTIFIED IN INVOKING SECTION 154 FOR DISALLOWING DEDUCTION UNDER SECTION 40(A)(V). THE TRIBUNAL, IN STEAD OF DOING THAT, HAS HELD THAT IT WAS NECESSARY TO RESTO RE THE APPEALS TO THE APPELLATE ASSISTANT COMMISSIONER FOR FRESH D ISPOSAL AFTER EXAMINING AS TO WHETHER THE DETAILS FILED BY THE AS SESSEE ARE CORRECT AND WHETHER THE EXPENSES DISALLOWED BY THE INCOME-TAX OFFICER UNDER SECTION 40(A)(V) ARE JUSTIFIED. THIS DIRECTION MAY BE CONSTRUED TO MEAN THAT THE TRIBUNAL FOUND THAT THER E WAS A MISTAKE APPARENT FROM THE RECORDS. BUT THE TRIBUNAL DID NOT DECIDE ALTHOUGH SUCH AN ISSUE WAS RAISED WHETHER TH E PROCEEDING UNDER SECTION 154 WAS VALIDLY INITIATED. THE TRIBUN AL HAS, HOWEVER, GONE INTO THE MERITS. THE TRIBUNAL SHOULD HAVE FIRST CONSIDERED WHETHER THE INCOME-TAX OFFICER RIGHTLY I NVOKED SECTION 154 AND WHETHER THERE WAS ANY MISTAKE APPARENT FROM THE RECORDS. ONLY THEREAFTER, THE DETERMINATION OF QUAN TUM OF DISALLOWANCE COULD HAVE BEEN LEFT TO THE INCOME-TAX OFFICER AND THE APPELLATE ASSISTANT COMMISSIONER. FOR THE REASO NS AFORESAID, WE ARE OF THE VIEW THAT THE TRIBUNAL'S ORDER IN REM ANDING THE CASE TO THE APPELLATE ASSISTANT COMMISSIONER FOR FRESH D ISPOSAL IN THE APPEAL ARISING OUT OF A PROCEEDING UNDER SECTION 15 4 WITHOUT FIRST DECIDING WHETHER THERE WAS A MISTAKE APPARENT FROM THE RECORDS WAS NOT IN ACCORDANCE WITH LAW.' PAGE | 8 8. RESPECTFULLY FOLLOWING THE DECISION CITED (SUPRA ) WE ARE OF THE CONSIDERED OPINION THAT THE CIT(A) WAS FULLY JU STIFIED IN QUASHING THE RECTIFICATION PROCEEDINGS ON THE GROUN D THAT THE ISSUE IS NOT A MISTAKE APPARENT FROM RECORD AND IS A DEBATABLE ISSUE AND DEPENDENT ON ELABORATE ARGUMENTS AND HAS TO BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENU E IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.10.2019. SD/- SD/- (SUCHITRA KAMBLE) (R.K PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER *NEHA* DATE:-14.10.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 09.10.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 10.10.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS 14.10.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 14.10.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 14.10.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 14.10.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 14.1 0.2019 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER