M/s Venus Texspine Ltd., Ludhiana V. Pr. CIT, Central, Ludhiana

ITA 793/CHANDI/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6538 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 09-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUBHASH AGGARWAL
• Section: 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, B CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 793/CHD/2017 ASSESSMENT YEAR: 2012-13 M/S VENUS TEXSPIN LTD., VS. THE PRINCIPAL CIT, CEN TRAL, LUDHIANA LUDHIANA PAN NO. AACCV6244Q (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUBHASH AGGARWAL RESPONDENT BY : SH. ALOK KUMAR DATE OF HEARING : 16.11.2017 DATE OF PRONOUNCEMENT : 12.12.2017 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 17.3.2017 OF THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) [HEREINAFTER REFERRED TO AS PCIT], LUDHIA NA PASSED U/S 263 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). THE A SSESSEE HAS NOT ONLY CHALLENGED THE IMPUGNED ORDER PASSED U/S 263 OF THE ACT BUT ALSO VERY ASSUMPTION OF REVISION JURISDICTION BY THE LD.PCIT U/S 263 OF THE ACT. 2 2. THE LD. COUNSEL HAS INVITED OUR ATTENTION TO THE SHOW CAUSE NOTICE ISSUED DATED 16.11.2016 VIDE WHICH THE ASSESSEE WAS ASKED TO EXPLAIN REGARDING VARIOUS ISSUES AND POINTING OUT THAT THE SAID ISSUES HAVE NOT BEEN EXAMINED BY THE ASSESSING OFFICER. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FILED REPLY, COPY OF WHICH IS PLACED AT PA GES 5 TO 7 OF THE PAPER BOOK, WHEREIN, IT WAS EXPLAINED THAT EACH OF THE IS SUE RAISED BY THE PCIT WAS DULY EXAMINED BY THE ASSESSING OFFICER, QUERIES WERE RAISED WHICH WERE EXPLAINED TO THE ASSESSING OFFICER AND THAT TH E ASSESSING OFFICER HAD APPLIED HIS MIND ON EACH OF THE ISSUE. THE ASSESSIN G OFFICER AFTER CONSIDERING THE EACH OF THE ISSUE, HAD PASSED THE A SSESSMENT ORDER IN QUESTION AND THAT THERE WAS NO JUSTIFICATION ON THE PART OF THE PCIT TO RE- EXAMINE THE ISSUE UNDER THE GARB OF REVISION JURISD ICTION U/S 263 OF THE ACT. THE LD. COUNSEL HAS INVITED OUR ATTENTION TO THE COPIES OF THE ORDER SHEET ENTRIES PERTAINING TO THE ASSESSMENT PROCEEDI NGS/RECORDS AND FURTHER TO THE COPIES OF VARIOUS NOTICES/QUERIES ISSUED BY THE ASSESSING OFFICER ON THE ISSUES RAISED BY LD. PCIT, COPY OF THE REPLIES THERETO FIELD BY THE ASSESSEE AND ALSO OFFICE NOTE OF THE ASSESSING OFFI CER AT THE END OF THE ASSESSMENT ORDER WHEREIN THE ASSESSING OFFICER HAS SEPARATELY MENTIONED REGARDING EACH OF THE ISSUE THAT THE ENQUIRIES HAVE BEEN CONDUCTED AND THE EXPLANATION OF THE ASSESSEE THERETO WAS EXAMINED AN D VERIFIED. THE LD. COUNSEL THEREAFTER HAS INVITED OUR ATTENTION TO THE RELEVANT PART OF THE IMPUGNED ORDER IN PARA 2 OF THE IMPUGNED ORDER. THE LD. PCIT HAS MENTIONED, THEREIN, THAT A SHOW CAUSE NOTICE DATED 16.11.2016 WAS ISSUED TO THE ASSESSEE AND OPPORTUNITIES WERE GIVEN FROM T IME TO TIME. HOWEVER, THEREAFTER FORM PARA 3 ONWARDS OF THE ORDER, THE LD . PCIT PROCEEDED TO 3 DISCUSS EACH OF THE ISSUE AND HELD THAT THE ORDER O F THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF RE VENUE. HE, ACCORDINGLY SET ASIDE THE SAME AND ORDERED DE-NOVO ASSESSMENT. THE LD. COUNSEL, THEREFORE, HAS CONTENDED THAT THE EXERCISE OF JURIS DICTION BY THE PCIT U/S 263 OF THE ACT WAS WRONG AND ILLEGAL AS THE PRIMARY CONDITION OF EXAMINING THE REPLY AND EXPLANATION OF THE ASSESSEE IN RESPONSE TO THE SHOW CAUSE NOTICE CONCLUDING THAT THE ORDER OF THE ASSESSING OFFICER WAS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REV ENUE HAS NOT BEEN COMPLIED WITH. THE LD. A.R HAS FURTHER STRESSED THA T THERE IS A DIFFERENCE BETWEEN LACK OF ENQUIRIES AND INADEQUATE ENQUIRIES. THAT WHERE THE ASSESSING OFFICER HAS APPLIED HIS MIND AND THE VIEW TAKEN BY HIM IS ONE OF THE POSSIBLE VIEWS, THEN THE ORDER CANNOT BE SAID T O BE ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE, EVEN, IF TH E COMMISSIONER HAS A DIFFERENT VIEW FROM THAT OF THE ASSESSING OFFICER; WHERE THE AO HAS MADE ENQUIRIES IN RESPECT OF THE CLAIM OF THE ASSESSEE, ORDER CANNOT BE SAID TO BE ERRONEOUS EVEN IF THE DETAILS OF ENQUIRIES MADE DO NOT FIND MENTION IN THE ASSESSMENT ORDER. HE IN THIS RESPECT HAS RELIED UP ON THE FOLLOWING CASE LAWS: (I) CIT VS. SUNBEAM AUTO LTD. 227 CTR 133 (DELHI HC) (II) CIT VS. VIKAS POLYMERS (2010) 194 TAXMAN 57 (DELHI HC) (III) CIT VS. GUPTA SPINNING MILLS LTD. ITA NO.410 OF 2003 DATED 13.09.2013 (IV) CIT VS. AMIT CORPORATION (2013) 213 TAXMAN 19 (MAG) (GUJARAT- HC) (V) CIT VS. FINE JEWELLERY (I) LTD. (2015) 372 ITR 303 (MUMBAI- HC) (VI) CIT VS. GABRIEL INDIA (1993) 203 ITR 108 (BOMB AY-HC) (VII) MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 1 09 TAXMAN 66 (SC) 4 (VIII) CIT VS. GOETZ (I) LTD. 2014 361 ITR 505 (DEL HI HC) 3. ON THE OTHER HAND, LD. DR HAS RELIED ON THE FIND INGS OF THE LD. PCIT. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. WE FIN D THAT THOUGH THE LD. PCIT HAS GIVEN NOTICE RUNNING INTO FOUR PAGES T O THE ASSESSEE, ASKING TO EXPLAIN ABOUT EACH OF THE ASPECT / ISSUE RELATED OF THE RETURNED INCOME, HOWEVER, HAD FAILED TO CONSIDER THE REPLY OF THE AS SESSEE TO THE SAID SHOW CAUSE NOTICE. THE ASSESSEE HAD GIVEN A DETAILED REP LY IN RESPECT OF EACH OF THE ISSUE WITH DETAILS OF THE EVIDENCES FURNISHED B EFORE THE ASSESSING OFFICER AND FURTHER SUBMITTED THAT THE ASSESSING OF FICER HAD APPLIED HIS MIND TO EACH OF THE ISSUE AND THAT EACH OF THE POI NT WAS DULY EXAMINED AND VERIFIED BY THE ASSESSING OFFICER. THE PCIT INS TEAD OF GOING THROUGH THE ABOVE CONTENTION OF THE ASSESSEE, WHICH WAS THE FOREMOST REQUIREMENT BEFORE FURTHER GOING DEEP INTO THE MERITS OF EACH O F THE ISSUE, PROCEEDED TO INDEPENDENTLY EXAMINE EACH ISSUE AND TOTALLY IGNORE D THE CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFICER HAD APPLIED HIS MIND TO EACH OF THE ISSUE AND THAT THE VIEW FORMED BY THE ASSESSING OFF ICER WAS ONE OF THE POSSIBLE VIEWS AND THAT THERE WAS NO ERROR IN THE O RDER OF THE ASSESSING OFFICER. THE ABOVE CONTENTION OD THE ASSESSEE IS CO RROBORATED WITH THE RELEVANT EVIDENCES SUCH AS THE COPIES OF THE ORDE R SHEET ENTRIES PERTAINING TO THE ASSESSMENT PROCEEDINGS/RECORDS, COPIES OF VA RIOUS NOTICES/QUERIES ISSUED BY THE ASSESSING OFFICER, COPIES OF THE REPL IES THERETO FIELD BY THE ASSESSEE. THE ASSESSING OFFICER HAS ALSO PUT A NOTE AT THE END OF THE ASSESSMENT ORDER MENTIONING SEPARATELY ABOUT EACH O F THE ISSUE THAT THE ENQUIRIES HAVE BEEN CONDUCTED AND THE EXPLANATION O F THE ASSESSEE THERETO WAS EXAMINED AND VERIFIED. 5 5. THOUGH, A DEEMING FICTION HAS BEEN CREATED I N SECTION 263 OF THE ACT BY THE AMENDMENT MADE BY FINANCE ACT, 2015 W.E.F. 0 1.06.15 WHEREIN IT HAS BEEN MENTIONED THAT WHERE THE COMMISSIONER IS O F THE OPINION THAT THE ASSESSING OFFICER HAD PASSED THE ORDER WITHOUT MAK ING ENQUIRIES OR VERIFICATIONS WHICH SHOULD HAVE BEEN MADE OR A RELI EF HAS BEEN ALLOWED WITHOUT ENQUIRING INTO THE CLAIM OR THAT THE SAME I S NOT IN ACCORDANCE WITH ANY ORDER OR DIRECTION OR INSTRUCTION ISSUED BY CBD T, THAT SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS ITS PREJUDICIAL TO THE INTEREST OF REVENUE. THE SAID DEEMING PROVISIONS, IN OUR VIEW, ARE NOT APPLI CABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. 6. EVEN OTHERWISE, THE LD. PCIT HAS SIMPLY MENTIONE D THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE ISSUE IN QUE STION TOTALLY IGNORING THE SUBMISSIONS OF THE ASSESSEE THAT THE ISSUE HAVE BEEN DULY EXAMINED BY THE ASSESSING OFFICER. IN OUR VIEW, WHEN THE ASSESS EE SHOWS FROM THE RECORD THAT THE NECESSARY ENQUIRIES WERE MADE BY TH E ASSESSING OFFICER AND THE ASSESSING OFFICER HAD APPLIED HIS MIND AND THE VIEW ADOPTED BY HIM WAS ONE OF THE POSSIBLE VIEWS, THEN IT CANNOT BE SA ID THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS. MERELY BECAUSE, TH E ASSESSMENT ORDER IN QUESTION IS NOT A DETAILED ORDER AND THE ASSESSING OFFICER HAS NOT MENTIONED ITEM WISE FINDINGS REGARDING THE CLAIMS O F THE ASSESSEE, THAT ITSELF, DOES NOT MEAN THAT THE ASSESSING OFFICER H AD NOT MADE ENQUIRIES IN THIS RESPECT. AS PER THE RELEVANT PROVISIONS AS TH EY STOOD DURING THE RELEVANT PERIOD, WHATEVER REQUIRED BY THE ASSESSING OFFICER WAS TO LOOK INTO THE CLAIM OF THE ASSESSEE. ADMITTEDLY, THE AS SESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE NECESSARY DETAILS FROM TIME TO TIME WHICH WERE DULY FURNISHED BY THE ASSESSEE AND AFTER CONSIDERING THE SAME THE ASSESSING 6 OFFICER PASSED THE ASSESSMENT ORDER. THE HON'BLE SU PREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO LTD VS. CIT (2000) 24 3 ITR 83 (SC) HAS HELD THAT WHEN AN ITO ADOPTED ONE OF THE COURSES PE RMISSIBLE 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 INTEREST OF THE REVENUE UNLESS THE VIEW TAKEN BY THE ITO IS UNSUSTA INABLE IN LAW. THE HONBLE DELHI HIGH COURT IN THE CASE OF SUNBEAM AU TO LTD. (SUPRA) HAS HELD THAT THERE IS A DISTINCTION BETWEEN LACK OF EN QUIRY AND INADEQUATE ENQUIRY. IF THERE IS AN ENQUIRY EVEN INADEQUATE TH AT WOULD NOT BY ITSELF GIVE OCCASION TO THE CIT TO PASS ORDER UNDER SECTIO N 263 MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. THE ASSESSI NG OFFICER IS NOT REQUIRED TO GIVE DETAILED REASONING IN RESPECT OF EACH AND E VERY ITEM OF DEDUCTION IN THE ASSESSMENT ORDER. WHERE THE ASSESSING OFFICER HAD CALLED FOR AN EXPLANATION REGARDING THE CLAIM MADE BY THE ASSESSE E AND THE ASSESSEE HAD FURNISHED ITS EXPLANATION, THEN IT CANNOT BE SAID T O BE A CASE OF LACK OF ENQUIRY. 7. IN THE CASE OF VIKAS POLYMERS (SUPRA) THE HON BLE DELHI HIGH COURT HAS HELD THAT FOR EXERCISING POWERS UNDER SEC TION 263, IT IS PRE- REQUISITE THAT COMMISSIONER MUST GIVE REASONS TO JU STIFY EXERCISE OF REVISION POWERS UNDER SECTION 263 TO REOPEN A CONCL UDED ASSESSMENT. THE EXERCISE OF THE POWER BEING QUASI-JUDICIAL IN NATUR E, THE REASONS MUST BE SUCH AS TO SHOW THAT THE ENHANCEMENT OR MODIFICATIO N OF THE ASSESSMENT OR CANCELLATION OF THE ASSESSMENT OR DIRECTIONS ISSUED FOR A FRESH ASSESSMENT WAS CALLED FOR AND MUST IRRESISTIBLY LEAD TO THE CO NCLUSION THAT THE ORDER OF THE AO WAS NOT ONLY ERRONEOUS BUT WAS ALSO PREJUDIC IAL TO THE INTEREST OF 7 THE REVENUE. THE HONBLE HIGH COURT HAS OBSERVED T HAT THE PROVISIONS OF SECTION 263 WHEN READ AS A COMPOSITE WHOLE MAKE IT INCUMBENT UPON THE COMMISSIONER BEFORE EXERCISING REVISIONAL POWERS TO (I) CALL FOR AND EXAMINE THE RECORD AND (II) GIVE THE ASSESSEE AN OP PORTUNITY OF BEING HEARD AND THEREAFTER, TO MAKE OR CAUSE TO MAKE SUCH AN EN QUIRY AS HE DEEMS NECESSARY. IT IS ONLY ON FULFILLMENT OF THESE TWIN CONDITIONS THAT THE COMMISSIONER MAY PASS AN ORDER EXERCISING POWERS OF REVISION, THE ASSESSEE MUST BE CALLED FOR, HIS EXPLANATION SOUGHT FOR AND EXAMINATION BY THE COMMISSIONER AND THEREAFTER IF THE COMMISSIONER STILL FEELS THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE THEN HE MAY PASS THE REVISIONAL ORDERS. 8. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GA BRIEL INDIA LTD. (SUPRA) HAS HELD THAT THE COMMISSIONER CANNOT INITI ATE PROCEEDINGS WITH A VIEW TO STARTING FISHING AND ROWING ENQUIRIES IN MA TTERS OR ORDERS WHICH ARE ALREADY CONCLUDED. THERE MUST BE MATERIAL ON R ECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED IF THE CLAIM WAS ALLOWED BY THE INCOME TAX OFFICER (ITO). ON BEING SATISFIE D WITH THE EXPLANATION OF THE ASSESSEE, SUCH DECISION OF THE ITO CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELAB ORATE DISCUSSION IN THAT RECORD. ALMOST SIMILAR PROPOSITION HAS BEEN LAID DO WN IN THE CASE OF GUPTA SPINNING MILLS LTD. (SUPRA) AND AMIT CORPO RATION (SUPRA) THAT COMMISSIONER HAS TO GIVE A DEFINITE FINDING THAT TH E ORDER OF THE AO IS ERRONEOUS AND THAT INADEQUATE ENQUIRIES BY ITSELF W ILL NOT MAKE THE ORDER AS ERRONEOUS. WE FURTHER FIND THAT THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. GOETZ (I) LTD. (SUPRA) HAS ELABORATELY DISCUSSED THE VARIOUS CASE LAWS REGARDING THE POWERS OF THE COMMISSIONER UNDER SECTION 263 8 INCLUDING CIT VS. NAGESH KNITWARS PVT. LTD. (2012 ) 345 ITR 135 (DELHI HC) AND OF THE HONBLE BOMBAY HIGH COURT IN THE C ASE OF GABRIEL INDIA LTD. (SUPRA) AND ALSO OF THE HONBLE DELHI HIGH CO URT IN THE CASE OF SUNBEAM AUTO LTD. (SUPRA) AND HAS REACHED TO THE CONCLUSION THAT THE COMMISSIONER SHOULD BE ABLE DEMONSTRATE THAT THE V IEW TAKEN BY THE AO WAS NOT POSSIBLE BEING LEGALLY UNSUSTAINABLE AND IN CORRECT AND THIS FINDING MUST BE RECORDED. THE COMMISSIONER CANNOT REMAND T HE MATTER TO THE AO TO DECIDE WHETHER THE FINDINGS RECORDED ARE ERRONEO US. IN CASES WHERE THERE IS INADEQUATE ENQUIRY BUT NOT LACK OF ENQUIRY , THE COMMISSIONER MUST GIVE AND RECORD A FINDING THAT THE ORDER/ENQUIRY MA DE IS ERRONEOUS. THIS CAN HAPPEN IF AN ENQUIRY AND VERIFICATION IS CONDUC TED BY THE COMMISSIONER AND HE IS ABLE TO ESTABLISH AND SHOW T HE ERROR OR MISTAKE MADE BY THE AO MAKING THE ORDER UNSUSTAINABLE IN LA W. THE MATTER CANNOT BE REMITTED FOR A FRESH DECISION TO THE AO TO CONDU CT FURTHER ENQUIRIES WITHOUT A FINDING THAT THE ORDER IS ERRONEOUS AND T HE COMMISSIONER FURTHER MUST ALSO SATISFY THE SECOND LIMB OF THE PROVISION THAT THE ORDER IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE HO NBLE SUPREME COURT IN THE CASE OF CIT VS. G.M. MITTAL STAINLESS STEEL (P ) LTD. (2003) 263 ITR 255 HAS OBSERVED THAT THE SATISFACTION BY THE COMMI SSIONER MUST BE ONE OBJECTIVELY JUSTIFIABLE AND BASED ON MATERIAL EITHE R LEGAL OR FACTUAL WHEN AVAILABLE, IT CANNOT BE MERE IPSE DIXIT OF THE COMMISSIONER. 9. IN VIEW OF THE ABOVE DISCUSSION OF THE VARIOUS C ASE LAWS, WE FIND THAT THE HONBLE SUPREME COURT AND VARIOUS OTHER HIGH CO URTS INCLUDING OUR JURISDICTIONAL HIGH COURT HAVE BEEN ALMOST UNANIMO US IN HOLDING THAT BEFORE ENHANCING OR ANNULLING OR MODIFYING OR CANCE LLING THE ASSESSMENT WHILE EXERCISING HIS POWERS UNDER SECTION 263 OF TH E ACT, THE 9 COMMISSIONER MUST RECORD A FINDING OF FACT OR OF LA W THAT THE ORDER OF THE AO IS ERRONEOUS AND IS ALSO PREJUDICIAL TO THE INTE REST OF REVENUE AS DISCUSSED ABOVE. IN THE CASE IN HAND, AS DISCUSSED ABOVE, THIS PREREQUISITE CONDITION HAS NOT BEEN SATISFIED AS THE COMMISSIONE R AFTER CALLING FOR THE EXPLANATION FROM THE ASSESSEE HAS FAILED TO MAKE NE CESSARY EXERCISE IN EXAMINING OR CAUSE TO EXAMINE THE EXPLANATION/DETAI LS SUBMITTED BY THE ASSESSEE FOR THE JUSTIFICATION OF ITS CLAIM AND EVE N WITHOUT ANY FURTHER ENQUIRY, DIRECTED THE AO TOP MAKE ADDITIONS OF THE ENTIRE DEPOSITS INTO THE INCOME OF THE ASSESSEE. HENCE, IN THE LIGHT OF THE VARIOUS CASE LAWS AS ANALYZED ABOVE, THE ORDER OF THE COMMISSIONER EXERC ISING JURISDICTION UNDER SECTION 263 OF THE ACT CANNOT BE HELD TO BE S USTAINABLE IN LAW AND THE SAME IS ACCORDINGLY SET ASIDE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HE REBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.12.2017. SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12 TH DEC., 2017 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR