PAWANKUMAR SARAF, MUMBAI V. ITO WD 24(1)-2, MUMBAI

ITA 7374/MUM/2010

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9167 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 11-03-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 28-10-2010
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Bad and doubtful debts; Deemed dividend; Condonation of delay
• Section: 143(3); 263; 63; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI VK;DJ VIHYH; VF/KDJ.K] ** LH ** U;K;IHB EQACBZ BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER JH FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ] YS[KK LNL; DS LE{K ITA NO. 7374/MUM/2010 ASSESSMENT YEAR: - 2005 - 06 SHRI PAWANKUMAR SARAF, 8/9, DEV SMRUTI BUILDING, H.F.S. ROAD, JOGESHWARI - EAST, MUMBAI 400060. VS.` INCOME TAX OFFICER WARD - 24(1) - 2, MUMBAI PRATYAKSHA KAR BHAVAN, BANDRA KURLA COMP LEX, MUMBAI 400 051. PAN: - AALPS7212H APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE REVISION ORDER DATED 25.09.2009 PASSED U/S 263 OF THE INCOME TAX ACT BY THE COMMISSIONER OF INCOME TAX FOR A.Y. 2005 - 06. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS: - BEING AGGRIEVED BY THE ORDER DATED 25.09.2009 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX - 24, MUMBAI. [' CIT '] U/S 263 OF THE INCOME - TAX ACT, 1961 ('ACT'), YOUR APPELLANT PREFERS THIS APPEAL, AMONG OTHERS, ON THE FOLLOWING GROUNDS OF APPEAL, EACH OF WHICH IS WITHOUT PREJUDICE TO, AND INDEPENDENT OF, THE OTHER: ASSESSEE BY SHRI SHRIRAM BAJAJ REVENUE BY SHRI H.P. HAOKIP DATE OF HEARING 11 .03.2015 DATE OF PRONOUNCEMENT 20 .03.2015 ITA NO. 7374/MUM/2010 ASSESSMENT YEAR: - 2005 - 06 2 | P A G E 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT ERRED IN PASSING THE IMPUGNED ORDER, HOLDING THAT ASSESSMENT ORDER PASSED U/S 143(3) DATED 04/10/2007 BY INCO ME - TAX OFFICER, WARD, 24(1)(2), MUMBAI, TO BE ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTEREST OF THE REVENUE. YOUR APPELLANT SUBMITS THAT THE SAID ASSESSMENT ORDER WAS NEITHER ERRONEOUS NOR WAS IT PREJUDICIAL TO THE INTEREST OF THE REVENUE AND PRAY S THAT SAID ORDER BE CANCELLED/SQUASHED . 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT ERRED IN PASSING THE IMPUGNED ORDER WITHOUT AFFORDING PROPER OPPORTUNITY OF BEING HEARD TO YOUR APPELLANT. YOUR APPELLANT, THEREFORE, PRAYS THAT SAID ORDER BE CANCELLED/SQUASHED: 2. THERE IS A DELAY OF 328 DAYS IN FILING THE APPEAL BY THE ASSESSEE. THE ASSESSEE FILED THE APPLICATION FOR CONDONATION OF DELAY SUPPORTED BY THE AFFIDAVIT . 2. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS EXPLAINED THE CAUSE OF DELAY IN THE AFFIDAVIT IN PARA 2 TO 8 AS UNDER: - 2. THAT, FOR THE ASSESSMENT YEAR 2005 - 06, THE LEARNED COMMISSIONER OF INCOME TAX HAS PASSED THE ORDER U/ S 2 63 SETTING ASIDE ORIGINAL ASSESSMENT ORDER DATED 04.10.2007 PASSED U/S 143(3) OF THE ACT. THE AO WAS DIRECTED TO DO PROPER ENQUIRY IN THE ISSUE OF WRITING OFF THE FIXED DEPOSITS OF RS. 6,46,294/ - AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . 3. IN FACT, AFTER RECEIPT OF THE NOTICE FROM LEARNED C. I. T. U/ S 263, I HAVE SUBMITTED A REPLY VIDE LETTER DATED 11.09.2009 AND REQUESTED THE LEARNED CIT TO AFFORD MORE TIME TO GIVE DETAILED REPLY IN VIEW OF ONGOING TAX AUDIT U/S 44AB FOR AY 2009 - 10 AND NAVRATRI AND DIPAVALI FESTIVAL DAYS AT THE RELEVANT TIME. 4. THE LEARNED C .I.T. HAS PASSED ORDER U/ S 263 DATED 25.09.2009 DIRECTING THE AO TO MAKE PROPER ENQUIRY AND PASS FRESH ORDER AFTER AFFORDING PROPER OPPORTUNITY TO THE ASSESSEE. THE OPPORTUNIT Y OF HEARING BEFORE THE AO WAS CONSIDERED AS AN ADDITIONAL TIME AS REQUESTED BY ME FROM THE LEARNED CIT ITA NO. 7374/MUM/2010 ASSESSMENT YEAR: - 2005 - 06 3 | P A G E 5. I WAS UNAWARE OF THE FINER ASPECT OF THE LAW AND WAS IGNORANT ABOUT THE PROVISIONS FOR FILING AN APPEAL AGAINST THE REVISI ON ORDER PASSED BY THE LEA RNED C .I.T. AFTER RECEIPT OF THE ORDER U/ S 263, I WAS AWAITING NOTICE OF HEARING FOR FRESH ASSESSMENT FROM THE ASSESSING OFFICER. THE LEARNED ASSESSING OFFICER HAS PASSED THE ORDER U/S 141(3) DATED 02.08.2010 GIVING EFFECT TO THE REVISION ORDER. 6. I HA VE APPROACHED THE CA SHRIRARN BAJA]. OF M/S S. M. BAJA] & CO., CHARTERED ACCOUNTANTS, FOR THE PURPOSE OF FURNISHING AN APPEAL AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER U/ S 143(3) IN PURSUANCE TO ORDER U/ S 263 OF THE ACT, IN THE SECOND WEEK OF OCT OBER, 2010. 7. MY COUNSEL HAS BROUGHT TO MY NOTICE THAT, AN ORDER PASSED BY THE C I. T. U/ S 263 IS APPELLABLE AND APPEAL SHOULD HAVE BEEN PREFERRED BEFORE HON'BLE ITAT, AGAINST THE SAID ORDER; IN ADDITION TO AN APPEAL BEFORE LEARNED CI.T. (A) AGAINST TH E ORDER PASSED U/ S 143(3) R.W.S. 263 DATED 02.08.2010 . 8. HAVING BROUGHT TO MY NOTICE THE AFORESAID LEGAL POSITION, I HAVE IMMEDIATELY INSTRUCTED MY COUNSEL TO PREPARE AN APPEAL PETITION, AGAINST THE ORDER PASSED U/ S 263, BEFORE HON'BLE IT AT WHICH WAS INDEED SUBMITTED ON 28.10.2010. IN THE PROCESS THE SUBMI SSION OF THE APPEAL PETITION IS DELAYED BY 328 DAYS. I, THEREFORE, RESPECTFULLY SUBMIT THAT MY PRAYER FOR CONDONATION OF DELAY OF 328 DAYS BE ALLOWED WITH A REQUET TO ADMIT THE CAPTIONED APPEAL FOR ADJUDICATION ON ITS MERITS. 3. THE LD. AUTHORIZED REPRESENTATIVE HAS RELIED UPON THE ORDER OF PUNE BENCHCES OF THIS TRIBUNAL IN THE CASE OF KEWALKUMAR JAIN VS. ACIT 37 TAXMANN.COM 248 AND SUBMITTED THAT ON IDENTICAL FACTS, THE PUNE BENCHES OF THIS TRIBUNAL HAS CONDONED THE DELAY. 4. ON THE OTHER HAND, THE LD. DR HAS VEHEMENTLY OPPOSED THE CONDONATION OF DELAY AND SUBMITTED THAT THERE IS AN INORDINATE DELAY IN FILING THE APPEAL BY THE ASSESSEE AND THE REASONS EXPLAINED BY THE ASSESSEE ARE NOT SUFFICIENT. 5. HAVING CONSIDERED THE RIVA L SUBMISSIONS AS WELL AS THE DECISION RELIED UPON BY THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE, WE NOTE THAT IN ITA NO. 7374/MUM/2010 ASSESSMENT YEAR: - 2005 - 06 4 | P A G E CASE OF KEWALKUMAR JAIN VS. ACIT (SUPRA), THE PUNE BENCHES OF THIS TRIBUNAL HAS DEALT WITH AN IDENTICAL ISSUE OF CONDONATION OF DELAY D UE TO THE REASON THAT THE ASSESSEE WAS UNDER THE IMPRESSION THAT THERE WAS NO NEED OF FILING THE APPEAL AGAINST THE REVISION ORDER PASSED U/S 263 WHEN THE ASSESSMENT WAS SET ASIDE AND ASSESSING OFFICER WAS DIRECTED TO REDO THE ASSESSMENT AFTER GIVING THE PROPER OPPORTUNITY TO THE ASSESSEE IN PARA 8 TO 10 OF THE SAID ORDER, THE TRIBUNAL HAS DISCUSSED THE FACTS AND REASONS EXPLAINED BY THE ASSESSEE FOR CONDONATION OF DELAY AS UNDER: - 8. PRIMARILY, THE COMMISSIONER SET ASIDE THE ASSESSMENT WITH A DIRECTION TO THE ASSESSING OFFICER TO ARRIVE AT THE CORRECT AVAILABLE 'ACCUMULATED PROFITS' FOR THE PURPOSES OF CONSIDERING THE AMOUNT OF 'DEEMED DIVIDEND' ASSESSABLE IN THE HANDS OF THE ASSESSEE UNDER SECTION 2(22)(E) OF THE ACT . A PERUSAL OF THE ORDER OF THE COM MISSIONER WOULD REVEAL THAT THE EFFECT OF THE ORDER WAS AGAINST THE ASSESSEE; BUT THE ASSESSEE MISCONSTRUED IT BY ASSUMING THAT SINCE THE MATTER WAS REMITTED BACK TO THE ASSESSING OFFICER, HE COULD AGITATE THE CONSEQUENTIAL ORDER TO BE PASSED BY THE ASSESS ING OFFICER IN THE APPEAL/PROCEEDINGS BEFORE THE CIT(A) ONLY. IN VIEW OF THE NATURE OF THE ORDER PASSED BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT, ASSESSEE ENTERTAINED A BELIEF THAT AS THE ORIGINAL ASSESSMENT HAD BEEN SET ASIDE, THERE WAS NO NECESSI TY OF CHALLENGING THE ORDER OF THE COMMISSIONER IN APPEAL BEFORE THE TRIBUNAL. IT WAS IN FACT AFTER THE DECISION OF HIS APPEAL BY THE CIT(A) AGAINST THE ORDER OF FRESH ASSESSMENT THAT THE ASSESSEE REALIZED THAT IT OUGHT TO HAVE CHALLENGED THE ORDER OF THE COMMISSIONER PASSED UNDER SECTION 263 OF THE ACT IN APPEAL BEFORE THE TRIBUNAL. IN OUR CONSIDERED OPINION, MISCONSTRUCTION OF THE ORDER OF THE COMMISSIONER BY THE ASSESSEE AND NOT FILING AN APPEAL AGAINST IT WITHIN TIME IS WRONG BUT THE SAME CANNOT BE CONS IDERED TO BE MALA FIDE OR WITH ANY ULTERIOR PURPOSE. BECAUSE, THE ASSESSEE WAS AGGRIEVED WITH THE MANNER IN WHICH THE AMOUNTS HAVE BEEN DETERMINED TO BE ASSESSABLE UNDER SECTION 2(22)(E) OF THE ACT BY THE COMMISSIONER, AND OPPOSED THE SAME DURING THE CONSE QUENTIAL ASSESSMENT PROCEEDINGS. THEREFORE, IT IS NOT A CASE WHERE ASSESSEE INTENDED TO GIVE UP THE CHALLENGE TO THE ENHANCED AMOUNT SOUGHT TO BE ASSESSED BY THE COMMISSIONER UNDER SECTION 2(22)(E) OF THE ACT. 9. WE MAY REFER TO THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF TAJ SATS AIR CATERING LTD. (SUPRA) WHEREIN THE ASSESSEE HAD FILED AN APPEAL BEFORE THE HON'BLE HIGH COURT BELATEDLY BY 1,195 DAYS. ALTHOUGH, DELAY WAS SUBSTANTIAL, THE HON'BLE HIGH COURT CONDONED THE DELAY BY OBSERVING THA T THE ISSUE RAISED IN APPEAL WAS BEING CONTESTED BY THE ASSESSEE IN THE OTHER YEARS AND THEREFORE IT WAS CLEAR THAT THE ASSESSEE NEVER INTENDED TO GIVE UP THE CHALLENGE ITA NO. 7374/MUM/2010 ASSESSMENT YEAR: - 2005 - 06 5 | P A G E IN RESPECT OF IMPUGNED ISSUES MERELY ON ACCOUNT OF MISCONSTRUCTION OF AN ORDER OF THE T RIBUNAL WHEREBY THE ISSUES WERE SET ASIDE TO THE ASSESSING OFFICER. 10. CONSIDERED IN THE LIGHT OF THE ABOVE REASONING AND THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT IN THE ABSENCE OF ANY MALA FIDE OR ULTERIOR PURPOSE, THE ASSESSEE CAN BE SAID TO HAVE 'SUFFICIENT CAUSE' FOR NOT PRESENTING ITS APPEAL BEFORE THE TRIBUNAL IN TIME AGAINST THE ORDER OF THE COMMISSIONER PASSED UNDER SECTION 263 OF THE ACT. WE, THEREFORE, CONDONE THE DELAY IN FILING OF APPEAL BEFORE THE TRIBUNAL. THE AFORESAID DECISION WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING AND ACCORDINGLY THE RIVAL PARTIES PROCEEDED TO ADDRESS THE CONTROVERSY ON ITS MERITS. 6. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTEREST OF JUSTICE, WE CONDONE T HE DELAY IN FILING THE APPEAL BY THE ASSESSEE. 7. ON MERITS, W E HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 4.10.2007, WHEREBY, THE ASSESSING OFFICER ASSESSED THE TOTAL ICOME OF ASSESSEE AT RS. 6,06,860/ - AS AGAINST THE RETURNED INCOME OF RS. 5,31,880/ - . SUBSEQUENTLY, THE COMMISSIONER FOUND FROM THE RECORD THAT THE AS SESSEE CLAIMED BAD DEBTS OF RS. 6,46,294/ - ON ACCOUNT OF FIXED DEPOSIT WITH VISNAGAR NAGRIK SAHAKARI BANK LTD WHICH BECAME INSOLVENT. THE CIT WAS OF THE VIEW THAT THE FIXED DEPOSIT WAS A CAPITAL LOSS IN THE HANDS OF THE ASSESSEE AND WAS NOT ALLOWA BLE AS BAD DEBTS U/S 36(1)(VII). A CCORDINGLY, THE COMMISSIONER FOUND THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. A SHOW - CAUSE NOTICE DATED 17.08.2010 U/S 263 WAS ISSUED TO THE ASSESSEE ASKING HIM TO SHOW CAUSE AS TO WHY THE ASSESSMENT ORDER DATED 4.10.2007 SHOULD NOT BE TREATED AS ERRONEOUS SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. SINCE THERE WAS A CHANGE IN THE ADDRESS OF THE ASSESSEE, ACCORDINGLY, THE COMMISSIONER ISSUED A FRESH NOTICE DATED 8 - 09 - 2009. IN RE SPONSE THE ASSESSEE VIDE ITS LETTER DATED 11.09.2009 FILED ITS REPLY. AFTER CONSIDERING THE ITA NO. 7374/MUM/2010 ASSESSMENT YEAR: - 2005 - 06 6 | P A G E SUBMISSIONS/REPLY OF THE ASSESSEE, THE COMMISSIONER HAS SET ASIDE THE ASSESSMENT ORDER ON THE ISSUE OF CLAIM OF BAD DEBTS U/S 36(1)(VII) ALLOWED BY THE ASSESSING OF FICER AND DIRECTED THE ASSESSING OFFICER TO CONDUCT A PROPER ENQUIRY AND PASS A FRESH ORDER AFTER GIVING A SUFFICIENT OPPORTUNITY TO THE ASSESSEE. 8. WE FIND THAT THE LOSS OF FIXED DEPOSIT WITH THE BANK DUE TO INSOLVENCY OF THE BANK CANNOT BE CONSIDERED AS BAD DEBTS AS PER PROVISIONS OF SECTION 36(1)(VII) AND THE CLAIM IS NOT ALLOWABLE CLAIM BEING BAD DEBTS FOR WANT OF THE CONDITIONS PRESCRIBED U/S 36(2) OF THE INCOME TAX ACT. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAS VEHEMENTLY CONTENDED THA T THE ASSESSING OFFICER HAS DISCUSSED THIS ISSUE WHILE PASSING THE SCRUTINY ASSESSMENT U/S 143(3), THEREFORE, THE COMMISSIONER IS NOT PERMITTED TO INVOKE THE PROVISIONS OF SECTION 263 MERELY BECAUSE HE DOES NOT AGREE WITH THE VIEW TAKEN BY THE ASSESSING OF FICER. IT IS PERTINENT TO NOTE THAT THE PRINCIPLE OF NOT ALLOWING THE COMMISSIONER TO INVOKE THE PROVISIONS OF 263 WHEN THE ASSESSING OFFICER HAS TAKEN A VIEW IS APPLICABLE ONLY WHEN THE VIEW TAKEN BY THE ASSESSING OFFICER IS ONE OF THE POSSIBLE VIEWS. IN THE CASE IN HAND, THE ASSESSING OFFICER HAS ALLOWED THE CLAIM OF BAD DEBS U/S 36(1)(VII) IN RESPECT OF THE FIXED DEPOSIT WITH THE BANK WHICH IS IMPERMISSIBLE CLAIM BECAUSE THE DEPOSIT WITH THE BANK DOES NOT FULFILL THE CONDITION AS PRESCRIBED U/S 36(2). THEREFORE, THE CLAIM OF BAD DEBTS IS AN IMPERMISSIBLE CLAIM AND EVEN IF THE ASSESSING OFFICER HA ALLOWED THE SAID CLAIM THE VIEW TAKEN BY THE ASSESSING OFFICER IS NOT A POSSIBLE VIEW. ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORD ER OF COMMISSIONER. SINCE THE COMMISSIONER HAS ALREADY SET ASIDE THE ISSUE WITH THE DIRECTION TO ASSESSING OFFICER TO CONDUCT A PROPER ENQUIRY AND PASS A FRESH ASSESSMENT ORDER AND, THEREFORE, THE ASSESSEE IS AT LIBERTY TO ITA NO. 7374/MUM/2010 ASSESSMENT YEAR: - 2005 - 06 7 | P A G E MAKE AN ALTERNATIVE CLAIM OF BU SINESS LOSS U/S 28 OR 37 OF THE INCOME TAX ACT. 8. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS DISCUSSION, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE. 3 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED . ORDER PRONOUCNED IN THE OPEN COURT ON THIS 20 TH DAY OF MARCH 2015 VKNS'K DH ?KKS'K.KK [KQYS U;K;KY; ES FNUKAD 20 EKPZ 2015 DKS DH XBZA SD/ - SD/ - ( RAJENDRA ) (VIJAY PAL RAO) ( ACCOUNTANT MEMBER / YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; ) MUMBAI DATED 20 . 03.2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI