M/s. S.B.M. & Co. (P) Ltd., New Delhi V. ITO, New Delhi

ITA 804/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77810 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 08-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 07-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHALINI VERMA
• Assessee Lawyers: ANSHUL GUPTACA
• Section: 143(3); 54; 37; 144; 154

Judgement Text

ITA NO. 804/DEL/2013 ASSTT.YEAR: 2008-09 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.804/DEL/2013 ASSESSMENT YEAR : 2008-09 S.B.M. & CO.(P) LTD., VS INCOME TAX OFFICER, C/O RAJ KUMAR & ASSOCIATES, W ARD 7 (1), CA, 4435/7, ANSARI ROAD, NEW DELHI. DARYA GANJ, NEW DELHI-110002 (PAN: AAHCS5565N) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ANSHUL GUPTA,CA RESPONDENT BY : SMT. SHALINI VERMA SR. DR O R D E R PER CHANDRAMOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE ORDER OF THE CIT(A)-X, NEW DELHI DATED 24.12.2012 IN APPEAL NO. 24/10-11 FOR AY 2008-09. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THI S APPEAL:- 1. THAT THERE IS NO SERVICE OF NOTICE U/S 154, HE NCE, ORDER PASSED ENHANCING THE ASSESSMENT WITHOUT PROVIDING ANY OPPORTUNITY OF HEARING AS MANDATORY U /S 154(3) IS UNSUSTAINABLE IN LAW. 2. THAT UNDER THE FACTS AND CIRCUMSTANCES, RS.60,4 02/- BEING REIMBURSEMENT OF ELECTRICITY EXPENSES TO DIRE CTORS AS REPORTED IN TAX AUDIT REPORT IS NOT OF THE NATUR E WHICH ITA NO. 804/DEL/2013 ASSTT.YEAR: 2008-09 2 CAN BE DISALLOWED U/S 37 BY INVOKING PROVISIONS OF SEC. 154. MORE SO THIS ISSUE IS OUTSIDE THE SCOPE OF SE C. 154 AS HIGHLY DEBATABLE. 3. BRIEFLY STATED THE FACTS GIVING RISE TO THIS APP EAL ARE THAT THE CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICE U/S 143( 2) OF THE INCOME TAX ACT, 1961 WAS SERVED ON THE ASSESSEE. AFTER CONSIDERING SUBMISSIONS AND EXPLANATION OF THE ASSESSEE, THE AO MADE DISALLOWAN CE ON THE ADDITIONS PERTAINING TO SHORT AND EXCESS CLAIMED IN THE P&L A CCOUNT, MISCELLANEOUS EXPENSES WITHOUT SUPPORTING DOCUMENTARY EVIDENCE AN D DISALLOWANCE U/S 35D OF THE ACT BEING EXPENSES WRITTEN OFF AND THE A O ASSESSED THE TAXABLE INCOME OF THE ASSESSEE AT RS.5,62,110/- AS AGAINST RETURNED INCOME OF RS.5,41,690/- BY PASSING ASSESSMENT ORDER DATED 17. 12.2009. 4. SUBSEQUENTLY, THE AO PICKED UP THE MATTER AGAIN U/S 154 OF THE ACT AND ISSUED A NOTICE TO THE ASSESSEE ON 26.6.2010 FI XING THE DATE OF HEARING FOR 05.07.2010. AS PER THE AO ON THE DATE OF HEARI NG I.E. 05.07.2010, NONE APPEARED NOR ANY WRITTEN SUBMISSION WAS RECEIVED ON BEHALF OF THE ASSESSEE. THE AO PASSED AN ORDER U/S 144 OF THE ACT BY MAKING AN IMPUGNED ADDITION OF RS.60,402 WITH FOLLOWING OBSERVATIONS AND FINDIN GS:- ASSESSMENT IN THIS CASE WAS COMPLETED U/S 143(3) ON 17.12.2009 AT AN INCOME OF RS.5,62,110/-. HOWEV ER, A PERUSAL OF FORM NO.3CD FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT, REVEALED THAT THE AUDITORS HA D REPORTED AGAINST COLUMN NO. 17(B) IN FORM NO. 3CD T HAT ITA NO. 804/DEL/2013 ASSTT.YEAR: 2008-09 3 THE PERSONAL EXPENDITURE AMOUNTED TO RS.60,402/-. THIS EXPENDITURE IS NOT ALLOWABLE U/S 37 OF THE I.T.ACT, WHICH WAS OMITTED TO HAVE BEEN ADDED TO THE INCOME AT THE TIME OF ASSESSMENT. SINCE THIS WAS A MISTAKE APPARENT F ROM RECORD, A SHOW CAUSE NOTICE U/S 154 DATED 25.6.2010 WAS ISSUED TO THE ASSESSEE ASKING IT TO EXPLAIN AS TO W HY A SUM OF RS.60,402/- REPORTED BY THE AUDITOR AS PERSONAL EXPENDITURE BE NOT ADDED TO THE TOTAL INCOME. THE HEARING WAS FIXED FOR 5 TH JULY, 2010 BUT ON THIS DATE NONE APPEARED NOR ANY WRITTEN SUBMISSION WAS RECEIVED. IT IS PRE SUMED THAT THE ASSESSEE HAS NOTHING TO SAY IN THIS REGARD AS MISTAKE IS VERY MUCH APPARENT. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(A) WHICH WAS ALSO DISMISSED WITH FOLLOWING CONCLUSION:- 4. AFTER GOING THOUGH THE FACTS OF THE CASE, OBSE RVATIONS OF THE AO AND SUBMISSIONS OF THE AR OF THE APPELLAN T, IT IS OBSERVED THAT THERE IS NO DISPUTE REGARDING THE COM MENTS OF THE AUDITORS WHERE IN THE AMOUNT OF RS.60,402/- HAS BEEN SHOWN AS PERSONAL IN NATURE. THE AR OF THE APPELLANT HAS NOT BROUGHT ANY EVIDENCE OR DETAILS O N RECORD TO ESTABLISH THAT TWO VIEWS WERE POSSIBLE REGARDING THE NATURE OF THESE EXPENSES, SINCE THE A UDITORS HAVE CLEARLY GIVEN THEIR COMMENTS WHICH HAVE NOT BE EN DISPUTED BY THE APPELLANT EVEN BEFORE THE AUDITORS. ACCORDINGLY, I DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE ASSESSING OFFICER. AS A RESULT, THIS APPEAL IS DISMISSED. 6. NOW, THE ASSESSEE IS BEFORE THIS TRIBUNAL IN THE SECOND APPEAL WITH THE GROUNDS AS REPRODUCED HEREINABOVE. ITA NO. 804/DEL/2013 ASSTT.YEAR: 2008-09 4 GROUND NO.1 7. HOWEVER, AT THE OUTSET, LD. AR SUBMITTED THAT HE DO ES NOT WANT TO PRESS GROUND NO.1, THEREFORE GROUND NO. 1 OF THE AS SESSEE IS DISMISSED AS NOT PRESSED. GROUND NO.2 8. APROPOS GROUND NO.2, LD. AR SUBMITTED THAT THE A O COMPLETED ASSESSMENT U/S 143(3) OF THE ACT ON 17.2.2009 BY MA KING THREE DISALLOWANCES AND ASSESSED THE INCOME OF THE ASSESS EE AT RS.5,62,110 AS AGAINST THE RETURNED INCOME OF RS. 5,41,690/-. TH E AR AGAIN PICKED UP THE CASE AND OBSERVED THAT KEEPING IN VIEW THE AUDITOR S REPORT IN FORM NO. 3 CD, THE AMOUNT OF RS. 60,402 WAS THE PERSONAL EXPEN DITURE WHICH WAS NOT ALLOWABLE U/S 37 OF THE ACT AND THE AO WAS NOT EMPO WERED TO DO SO. THE AR FURTHER CONTENDED THAT RECTIFICATION U/S 154 OF THE ACT CAN ONLY BE MADE WHEN GLARING MISTAKE OF FACT OR LAW HAS BEEN COMMIT TED BY THE OFFICER PASSING THE IMPUGNED ORDER AND IT BECOMES APPARENT FROM THE RECORD. THE AR FURTHER CONTENDED THAT THE RECTIFICATION IS NOT POSSIBLE IF THE QUESTION IS DEBATABLE ON THE POINT WHICH WAS NOT EXAMINED ON FA CT OR IN LAW WHICH CAN NOT BE TERMED AS A MISTAKE APPARENT FROM RECORD. L D. COUNSEL FURTHER SUBMITTED THAT PRIOR TO PASSING ORDER U/S 154 OF TH E ACT, A NOTICE TO THE ITA NO. 804/DEL/2013 ASSTT.YEAR: 2008-09 5 ASSESSEE IS MANDATORY, SPECIALLY WHEN THE ASSESSMEN T IS ENHANCED OR REFUND IS REDUCED. 9. THE AR POINTED OUT THAT DURING THE ASSESSMENT PR OCEEDINGS U/S 143(3) OF THE ACT, LD. AO HAS AN OPPORTUNITY TO VERIFY AND EXAMINE THE CLAIM OF THE ASSESSEE IN THE LIGHT OF RELEVANT MATERIAL AND 3 CD REPORT WHICH WAS ALSO AVAILED BY HIM AND THE AO ALSO MADE ADDITIONS ON TH REE COUNTS. THEREFORE, IT SHOULD BE PRESUMED THAT AFTER EXAMINING AND VERI FYING OTHER CLAIMS OF THE ASSESSEE, THE AO HAS ACCEPTED ALL CLAIMS OF THE ASS ESSEE EXCEPT ON WHICH ADDITIONS HAVE BEEN MADE. 10. REPLYING TO THE ABOVE, LD. DR SUBMITTED THAT TH ERE IS NO DISPUTE REGARDING THE COMMENTS OF THE AUDITORS IN 3CD REPOR T WHEREIN IT WAS MENTIONED THAT THE EXPENDITURE OF AMOUNT OF RS.60,4 02 HAS BEEN SHOWN AS PERSONAL IN NATURE AND THE ASSESSEE HAS NOT BROUGHT ANY EVIDENCE OR DETAILS ON RECORD TO ESTABLISH THAT TWO VIEWS WERE POSSIBLE REGARDING THE NATURE OF EXPENSES, THEREFORE, THE AO WAS EMPOWERED TO RECTIF Y THE ORDER ACCORDINGLY U/S 154 OF THE ACT. THE DR FURTHER CONTENDED THAT SINCE THE AUDITORS HAVE CLEARLY GIVEN THEIR COMMENTS WHICH HAVE NOT BEEN DI SPUTED BY THE ASSESSEE EVEN BEFORE THE AUDITORS, THEREFORE, THE AO WAS JUS TIFIED IN PASSING IMPUGNED ORDER U/S 154 OF THE ACT. ITA NO. 804/DEL/2013 ASSTT.YEAR: 2008-09 6 11. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS A ND PERUSAL OF RELEVANT RECORD, AT THE OUTSET, WE NOTE THAT THE ORIGINAL AS SESSMENT OF THE ASSESSEE COMPANY WAS COMPLETED U/S 143(3) OF THE ACT WHEREIN THE AO MADE CERTAIN ADDITIONS ON THREE COUNTS. IN THIS SITUATION, AN I NFERENCE MAY BE DRAWN THAT THE AO HAS EXAMINED AND VERIFIED ALL THE CLAIMS OF THE ASSESSEE IN THE LIGHT OF MATERIAL PLACED BEFORE HIM AND EXCEPT THREE, ALL CLAIMS HAVE BEEN ACCEPTED. 12. COMING TO THE POWERS OF THE AO GIVEN U/S 154 OF THE ACT, WE OBSERVE THAT THE HONBLE SUPREME COURT IN THE CASE OF CIT VS HERO CY CLES PVT. LTD. (1997) 1994 TAXMAN 271 HAS HELD THAT RECTIFICATION U/S 154 OF THE ACT CAN ONLY BE MADE WHEN GLARING MISTAKE OF THE FACT A ND LAW HAS BEEN COMMITTED IN THE IMPUGNED ORDER AND IT IS APPARENT FROM RECORD. THE HONBLE APEX COURT FURTHER HELD THAT THE RECTIFICAT ION IS NOT PERMISSIBLE IF THE QUESTION IS DEBATABLE AND THE POINT WHICH WAS E XAMINED ON FACT OR IN LAW CANNOT BE DEALT WITH AS MISTAKE APPARENT FROM RECOR D. IN THE PRESENT CASE, THE AO COMPLETED ASSESSMENT U/S 143(3) OF THE ACT W ITHOUT OBJECTING TO THE CLAIM OF THE ASSESSEE COMPANY PERTAINING TO THE ELE CTRICITY EXPENSES FOR RESIDENCE OF THE DIRECTORS OF THE COMPANY. SUBSEQU ENTLY, THE AO PICKED UP THE CASE AND ON THE BASIS OF 3CD REPORT, THE AO MAD E A DISALLOWANCE AND ADDITION BY PASSING ORDER U/S 154 OF THE ACT. THE CLAIM OF THE ASSESSEE ITA NO. 804/DEL/2013 ASSTT.YEAR: 2008-09 7 COMPANY IS DEBATABLE AS THE SAME MAY BE ALLOWED OR MAY NOT BE ALLOWED IN VIEW OF CORRESPONDING RESERVATION OF THE COMPANY PE RTAINING TO THE ALLOWANCES AND BENEFITS SANCTIONED AND PROVIDED FOR THE DIRECTORS. IN VIEW OF OBSERVATION OF THE AUDITORS IN 3CD REPORT, IT CA NNOT BE SAID THAT THERE WAS A MISTAKE APPARENT FROM RECORD. 13. IN THE CASE OF MAHARANA MILLS (P.) LTD. VS INCOME-TAX OFFICER [1959] 36 ITR 350 (SC), THE HONBLE SUPREME COURT HELD THAT THE OBJECT OF PROVIDING THE ISSUE OF NOTICE IN SECTION 154 OF THE ACT IS THAT NO ORDER SHOULD BE PASSED TO THE DETRIMENT OF ASSESSEE WITHOUT AFFO RDING DUE OPPORTUNITY OF HEARING TO HIM AND THIS PROVISION IS APPLICABLE WHE RE THE ASSESSMENT IS ENHANCED BY MAKING CERTAIN DISALLOWANCES OR ADDITIO NS. IN VIEW OF ABOVE, WE COME TO A CONCLUSION THAT THE AO COMPLETED ASSES SMENT U/S 143(3) OF THE ACT AND SUBSEQUENTLY PICKED UP THE CASE AGAIN U/S 1 54 OF THE ACT ON DEBATABLE ISSUE ON THE BASIS OF 3CD REPORT OF THE A UDITOR WHICH WAS ALSO BEFORE HIM AT THE TIME OF ORIGINAL ASSESSMENT. WE FURTHER OBSERVE THAT THE AO PASSED ORDER U/S 154 OF THE ACT ON THE BACK OF T HE ASSESSEE WITHOUT AFFORDING DUE OPPORTUNITY OF HEARING AND THE AO ENH ANCED THE ASSESSMENT BY MAKING ADDITIONS IN REGARD TO CLAIM OF EXPENDITU RE PERTAINING TO ELECTRICITY BILLS OF THE RESIDENCE OF THE DIRECTORS OF THE COMPANY, WHICH CANNOT BE SAID TO BE A MISTAKE APPARENT FROM RECORD AND ORDER U/S 154 OF THE ITA NO. 804/DEL/2013 ASSTT.YEAR: 2008-09 8 ACT IS NOT SUSTAINABLE ON DEBATABLE ISSUE WHICH WAS ALSO UNDER EXAMINATION AND VERIFICATION BY THE AO DURING ORIGINAL ASSESSME NT PROCEEDINGS. ACCORDINGLY, WE CONCLUDE THAT THE ORDER PASSED BY T HE AO U/S 154 OF THE ACT IS OUTSIDE THE AMBIT OF SECTION 154 OF THE ACT WHIC H IS NOT SUSTAINABLE AND WE SET ASIDE THE SAME. THUS, GROUND NO. 2 OF THE A SSESSEE IS ALLOWED. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED ON GROUND NO.2. ORDER PRONOUNCED IN THE OPEN COURT ON 25TH JULY 2014. SD/- SD/- (S.V. MEHROTRA) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 25TH JULY 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR.