Sri Raman Vallison, CHENNAI V. ADIT, CHENNAI

ITA 805/CHNY/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6484 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 25-05-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Revision of order; Business expenditure
• Section: 143(3); 50C; 80HHC; 263

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI A BENCH, CHENNAI. BEFORE SHRI.U.B.S.BEDI J.M. &SHRI.N.S. SAINI A.M. I.T.A.NO.805/MDS/2010 ASSESSMENT YEAR: 2005-06 SHRI RAMAN VALLISON, NON-RESIDENT REPRESENTED BY, 85/129, LLOYDS ROAD, ROYAPETTAI, CHENNAI 600 014. [PAN: AADPV 6194M] VS. THE ASSISTANT DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION, CHENNAI (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI K. MEENAKSHISUNDARAM REVENUE BY : SHRISHAJI P. JACOB ORDER PER U.B.S. BEDI, J.M . THISAPPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION) , CHENNAI DATED 22.03.2010 RELEVANT TO THE ASSESSMENT YEAR 2005-06, WHEREBY TH E ASSESSEE HAS CHALLENGED THE ORDER RAISING VARIOUS GROUNDS AND TA KING MAIN PLEA THAT SECTION 50C HAS NO APPLICATION TO THE FACTS OF THE CASE, WH EN A NON-RESIDENT BELIEVES A RESIDENT AND WHERE A NON-RESIDENT DOES NOT MAKE A B ENEFIT IN ANY MANNER OTHER THAN WHAT HAD BEEN STATED IN THE DOCUMENT OF SALE A S HE HAS GIVEN POWER OF ATTORNEY TO THE RESIDENT FOR COMPLETING THE TRANSAC TION. 2. THE LD. COUNSEL FOR THE ASSESSEE, WHILE REITERA TING THE PLEAS AS RAISED IN THE MEMORANDUM OF APPEAL HAS PLEADED THAT THE ASSES SEE, WHO IS A NON- RESIDENT INDIAN HAS EXECUTED POWER OF ATTORNEY IN F AVOUR OF THE RESIDENT FOR SALE OF PROPERTY OWNED BY THE ASSESSEE AND HE HAS ONLY G IVEN HIM DOCUMENTED I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NO. .. .80 8080 805 55 5/MDS/1 /MDS/1 /MDS/1 /MDS/10 00 0 2 PRICE AND OTHERWISE, THE PROVISIONS OF SECTION 50C OF INCOME TAX ACT ARE NOT APPLICABLE TO THE NON-RESIDENT INDIAN, WHOSE ASSESS MENT HAS BEEN FRAMED BY REGARDING THE RESIDENT AS AGENT BEING REPRESENTATIV E ASSESSEE, WHICH IS SUBJECTIVE CLAUSE, ARE CATEGORIZED AS PER CHAPTER X IV C RELATABLE AND ALL THE DETAILS WERE FILED BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT. SO, THE ACTION OF THE LD. DIT IN INVOKING THE PROVISION S OF SECTION 263 TO SET ASIDE THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) IS NEITHER JUST NOR PROPER AND WHILE REFERRING TO THE HONBLE BOMBAY HI GH COURTS DECISION STATED TO BE REPORTED IN AIR 1928 BOM 225. THE ASSESSEES AR WAS ASKED TO SHOW AS TO HOW THE SAID DECISION COULD BE APPLICABLE TO THI S CASE AND ALSO TO FILE COPY OF THE SAID DECISION. NEITHER THE LD. COUNSEL FOR THE ASSESSEE COULD FILE THE COPY OF THE SAID DECISION NOR HE COULD ESTABLISH AS TO HOW THIS DECISION COULD ADVANCE THE CASE OF THE ASSESSEE AND OTHERWISE, HE ADMITTED THAT THIS DECISION IS RELATABLE TO POWER OF ATTORNEY AND HE COULD NOT SHO W IN CLEAR TERMS AS TO HOW THE RATIO OF THIS DECISION COULD BE APPLIED TO THIS CASE. HE JUST REPEATED THAT SINCE ASSESSMENT IN THE CASE OF REPRESENTATIVE ASSE SSEE IS FRAMED AS SPECIAL CASE SO, NORMAL PROVISION OF SECTION 50C WILL NOT A PPLY IN THIS CASE. AT THIS STAGE, HE WAS AGAIN ASKED TO SHOW WHETHER THE CASE OF REPRESENTATIVE ASSESSEE CAN BE DIFFERENTIATED UNDER ANY PROVISION OF INCOME TAX ACT, HE WAS UNABLE TO REPLY THE QUERY. BUT, INSISTED THAT OTHER DETAILS WERE FURNISHED BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT EVE N IF HE HAS NOT MENTIONED ABOUT THE SAME, THE LD. DIT COULD NOT PASS THE IMPU GNED ORDER WHICH SHOULD BE QUASHED. I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NO. .. .80 8080 805 55 5/MDS/1 /MDS/1 /MDS/1 /MDS/10 00 0 3 3. THE LD. DR, WHILE REFERRING TO THE ASSESSMENT O RDER, HAS STATED THAT IN THIS CASE GUIDELINE VALUE AS PER STAMP DUTY PROVISI ONS AND STATED CONSIDERATION WAS DIFFERENT IN AMOUNT, SO THE ASSESSING OFFICER C OULD NOT PROCEED WITH THE MATTER WITHOUT APPLYING THE PROVISIONS OF SECTION 5 0C AND NONE OF THE PROVISIONS OF INCOME TAX ACT OR RULE INDICATE THAT THERE COULD BE ANY DIFFERENTIAL TREATMENT IN THE CASE OF THE REPRESENT ATIVE ASSESSEE, NORMAL ASSESSEE OR BEING A SPECIAL CASE, BECAUSE AS PER DE FINITION OF ASSESSEE AS CONTAINED IN SECTION 2(7),IT COVERS EVERY PERSON, W HO IS DEEMED TO BE AN ASSESSEE UNDER ANY PROVISIONS OF ACT. SO, THE PLEA OF THE REPRESENTATIVE ASSESSEE THAT SECTION 50C WOULD NOT APPLY IN THE C ASE OF THE REPRESENTATIVE ASSESSEE IS NOT SUSTAINABLE AND IS TO BE REJECTED, OTHERWISE, THE ASSESSING OFFICER HAS NOT APPLIED THE PROVISIONS OF SECTION 5 0C WHILE MAKING THE ASSESSMENT AND NO ENQUIRY HAS AT ALL BEEN CONDUCTED BY THE ASSESSING OFFICER BEFORE FINALIZATION OF THE ASSESSMENT, THEREFORE, T HE LD. DIT WAS FULLY JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 263 TO SET ASIDE THE ASSESSMENT AND RESTORING IT TO THE ASSESSING OFFICER FOR DOING NEE DFUL IN VIEW OF THE DIRECTION ISSUED, WHICH IS LEGALLY CORRECT SHOULD BE UPHELD. RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF MALABAR INDUSTRIES CO. LTD. VS. CIT 243 ITR 83 (SC), WHICH IS BEING FOLLOWED IN SUBSEQUENT DECISIONS BY VARIOUS HIGH COURTS INCLUDING JURISDICTIONAL HIGH COURT. 4. WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MA TERIAL ON RECORD AS WELL AS RELEVANT PROVISIONS OF LAW. WE HAVE ALSO CAREFUL LY GONE THROUGH THE ORDER OF I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NO. .. .80 8080 805 55 5/MDS/1 /MDS/1 /MDS/1 /MDS/10 00 0 4 THE LD. DIT PASSED UNDER SECTION 263. IT IS SEEN TH AT THE ASSESSING OFFICER HAS PASSED THE FOLLOWING ASSESSMENT ORDER UNDER SECTION 143(3) ON 14.12.2007: ASSESSMENT ORDER THE ASSESSEE FILED HIS RETURN OF INCOME ON 31-03-0 6 DECLARING TOTAL INCOME OF RS.7,91,214/-. THE RETURN OF INCOME WAS PROCESSED U/S 143(1) ON 07-08-07. SUBSEQUENTLY THE CASE WAS SELEC TED FOR SCRUTINY. THE NOTICE U/S 143(2) WAS SERVED ON 28-03-07. SHRI N. NARASIMHAN, AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED THE DETAILS CALLED FOR. BASED ON THE SCRUTINY OF THE RETURN OF INCOME AND THE MATERIALS GATHERED DURING THE COURSE OF HEARING, THE RETURNED INCOME IS ACCEPTED AND THE ASSESSMENT IS FINALIZED AS UNDER: RETURNED INCOME 7,91,214 ASSESSED INCOME 7,91,214 INCOME CLAIMED TO BE EXEMPT AS PER RETURN 7,49,580 TOTAL TAXABLE INCOME 41,634 TAX PAYABLE NIL 5. FROM THE ABOVE, IT BECOMES CLEAR THAT THERE IS NO MENTION ABOUT CONSIDERING OR APPLYING THE PROVISIONS OF SECTION 5 0C OF THE INCOME TAX ACT AND NO OTHER MATERIAL HAS BEEN ADDUCED TO SHOW THAT ANY ENQUIRY WITH REGARD TO THIS ISSUE HAS BEEN CONDUCTED BY THE ASSESSING OFFICER N OR ANY MATERIAL FOUND TO HAVE BEEN PLACED BEFORE THE ASSESSING OFFICER BY TH E ASSESSEE DURING THE ASSESSMENT PROCEEDINGS IN THIS REGARD AND THE ASSES SMENT ORDER IS ALSO SILENT ON THIS ASPECTTHE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES CO. LTD. VS. CIT 243 ITR 83, AS HEAVILY RELIED UPON BY THE LD. DR, HAS AFFIRMED THE DECISION OF HONBLE KERALA HIGH COURT REPORTED IN 1 98 ITR 611, (WHILE DISAPPROVING CERTAIN DECISIONS HONBLE MADRAS HIGH COURTS DECISION IN THE CASE OF VENKATAKRISHNA RICE CO. V. CIT 163 ITR 129 AND DISCUSSING AND REFERRING TO THE OTHER DECISIONS TITLED AS CIT V. G ABRIEL INDIA LTD. 203 ITR 108 I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NO. .. .80 8080 805 55 5/MDS/1 /MDS/1 /MDS/1 /MDS/10 00 0 5 (BOM), CIT V. MINALBEN S. PARIKH (SMT.) 215 ITR 81 (GUJ), CIT V. NARAYANAPAI (T.) 98 ITR 422 (KAR), CIT V. RAJA BENOY KUMAR SAHA S ROY 32 ITR 466 (SC), DAWJEEDADABHOY AND CO. V. S.P. JAIN 31 ITR 872 (CAL ), RAMPYARI DEVI SARAOJI V. CIT 67 ITR 84 (SC), TARA DEVI AGGARWAL (SMT.) V. CIT 88 ITR 323 (SC), C.A. NO. 3646 OF 1993) AND HAS OPINED AS UNDER: . HE ACCEPTED THE ENTRY IN THE STATEMENT OF ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPORTING MATERIAL AND WITHOUT MAKING ANY INQUIRY. ON THESE F ACTS THE CONCLUSION THAT THE ORDER OF THE INCOME-TAX OFFICER WAS ERRONEOUS WAS IRRESISTIBLE. THE HIGH COURT HAD RIGHTLY HELD T HAT THE EXERCISE OF JURISDICTION BY THE COMMISSIONER UNDER SECTION 2 63(2) WAS JUSTIFIED. 6. FURTHER, USEFUL REFERENCE CAN BE MADE TO THE DE CISION (A) IN THE CASE OF MOFFUSSIL WAREHOUSE AND TRADING CO. LTD. V. CIT 238 ITR 867 (MAD), THE HEAD- NOTES AND HELD PORTIONS ARE AS UNDER: BUSINESS EXPENDITURE DISALLOWANCE EXCESSIVE PA YMENT FOR GOODS SERVICES OR FACILITIES SCOPE OF SECTION 40A(2) INCOME-TAX ACT, 1961, S. 40A(2). REVISION CONDITION PRECEDENT ORDER WHICH IS ER RONEOUS AND PREJUDICIAL TO REVENUE ITO ALLOWING PAYMENTS TO HOLDING COMPANY FOR UTILIZATION OF SERVICES OF ITS EMPLOYEE S WITHOUT CONSIDERING APPLICABILITY OF SECTION 40A(2) ORDER OF REVISION WAS VALID INCOME-TAX ACT, 1961, SS. 40A, 263. HELD, THAT, IN THE INSTANT CASE, THE AMOUNTS PAID B Y THE ASSESSEE COMPANY TO THE HOLDING COMPANY BY WAY OF REIMBURSEMENT IN RELATION TO THE UTILIZATION OF THE SERVICES OF THE EMPLOYEES OF THE HOLDING COMPANY RAN TO THE TUBE OF RS.1,48,587 AND RS.1,44,471 FOR THE ASSESSMENT YEARS IN QUESTIO N RESPECTIVELY. THE EXCESSIVE NATURE OF THE CLAIM OR ITS UNREASONAB LENESS OR OTHERWISE HAD NOT BEEN TAKEN INTO ACCOUNT BY THE IN COME-TAX OFFICER. THE COMMISSIONER OF INCOME-TAX SET ASIDE T HE ASSESSMENTS WITH A DIRECTION TO THE INCOME-TAX OFFICER TO CONSI DER THE APPLICABILITY OF THE PROVISIONS OF SECTION 40A(2)(B ) OF THE INCOME- TAX ACT AND REDO THE ASSESSMENTS ACCORDING TO LAW. HIS ORDER WAS VALID. I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NO. .. .80 8080 805 55 5/MDS/1 /MDS/1 /MDS/1 /MDS/10 00 0 6 (B) THE HEAD-NOTES AND HELD PORTION IN THE CASE OF JAI BHARATH TANNERS V. CIT 264 ITR 673 (MAD) ARE AS UNDER: REVISION ASSESSMENT SUMMARY ASSESSMENT ACCEPTI NG RETURN AND CLAIMS IN RESPECT OF PREMIUM ON SALE OF IMPORT ENTITLEMENTS AND CASH COMPENSATORY SUPPORT UNDER SECTIONS 80HH A ND 80HHC NO ENQUIRY REGARDING CLAIMS ORDER ERRONEOUS AND PREJUDICIAL TO REVENUE REVISION OF ORDER VALID INCOME-TAX AC T, 1961, SS. 80HH, 80HHC, 143(1)(A), 263. . THE DEDUCTION CONTEMPLATED UNDER SECTIONS 8 0HH AND 80HHC OF THE ACT INVOLVE A DETAILED ENQUIRY AS TO THE FACTUAL ASPECTS OF THE MATTER AND THE SATISFACTION OF THE A SSESSING OFFICER THAT VARIOUS CONDITIONS PRESCRIBED IN SECTIONS 80HH AND 80HHC OF THE ACT FOR CLAIMING DEDUCTION ARE SATISFIED. IT IS AXIOMATIC THAT BEFORE GRANTING DEDUCTION, THE ASSESSEE MUST ESTABL ISH THAT THE ASSESSEE IS ENTITLED TO THE STATUTORY DEDUCTION UND ER SECTIONS 80HH AND 80HHC OF THE ACT BY PRODUCING NECESSARY MATERIA LS IN SUPPORT OF ITS CLAIM AND THE ASSESSING OFFICER SHOULD ALSO BE SATISFIED THAT THE CONDITIONS PRESCRIBED IN BOTH THE SECTIONS ARE COMPLIED WITH, BY THE ASSESSEE. THE ORDER OF THE ASSESSING OFFICER GR ANTING DEDUCTION WITHOUT AN ENQUIRY IS PLAINLY ERRONEOUS AND PREJUDI CIAL TO THE INTERESTS OF THE REVENUE. REVISION OF SUCH AN ORDER IS VALID. (C) IN THE CASE OF CIT VS. KOHINOOR TOBACCO PRODUCT S P. LTD. REPORTED IN 234 ITR 557, THE HONBLE MADHYA PRADESH HIGH COURT HAS HELD AS UNDER: . THIS FAILURE ON THE PART OF THE ASSESSING OFFICER TO MAKE NECESSARY ENQUIRY RENDERED THE ASSE SSMENT ERRONEOUS AND ALSO PREJUDICIAL TO THE INTERESTS OF THE REVENUE (D) YET IN ANOTHER CASE, THE HONBLE MADHYA PRADES H HIGH COURT IN CIT VS. MAHAVAR TRADERS 220 ITR 167 HAS HELD AS UNDER: HELD THAT THE INCOME-TAX OFFICER SHOULD HAVE EXAMI NED THE MATTER IN THE LIGHT OF THE CONDITIONS MENTIONED IN BOTH THE SECTIONS BEFORE GRANTING RELIEF. THE COMMISSIONER O F INCOME-TAX HAD NOT GIVEN ANY FINDING BUT ONLY REMANDED THE CAS E TO THE INCOME-TAX OFFICER FOR MAKING ASSESSMENT AFRESH. TH E TRIBUNAL INSTEAD OF APPROACHING THE MATTER IN THE PROPER PRO SPECTIVE, HAD I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NO. .. .80 8080 805 55 5/MDS/1 /MDS/1 /MDS/1 /MDS/10 00 0 7 ON THEIR OWN STARTED MAKING ENQUIRIES AND FOUND THA T THE ORDER PASSED BY THE INCOME-TAX OFFICER WAS CORRECT. THIS WAS ERRONEOUS. THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX WAS VALID. (E) FURTHER, THE HONBLE DELHI HIGH COURT IN THE CA SE OF DUGGAL AND CO. AND CIT, 220 ITR 456, HAS HELD AS UNDER: THE INCOME-TAX OFFICER IS NOT ONLY AN ADJUDICATOR BUT ALSO AN INVESTIGATOR. HE CANNOT REMAIN PASSIVE IN THE FA CE OF A RETURN WHICH IS APPARENTLY IN ORDER BUT CALLS FOR FURTHER INQUIRY. IT IS INCUMBENT ON THE INCOME-TAX OFFICER TO FURTHER INVE STIGATE THE FACTS STATED IN THE RETURN, WHEN CIRCUMSTANCES WOUL D MAKE SUCH AN INQUIRY PRODUCT AND THE WORD ERRONEOUS IN SECT ION 263 OF THE INCOME-TAX ACT, 1961, INCLUDES THE FAILURE TO MAKE SUCH AN ENQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH A N INQUIRY HAS NOT BEEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATE THEREIN ARE ASSUME D TO BE CORRECT. (F) AND THE HONBLE ALLAHABAD HIGH COURT IN THE CA SE OF SWARUP VEGETABLE PRODUCTS INDUSTRIES LTD. VS. CIT 187 ITR 412 HAS OB SERVED AS UNDER: IT IS BEYOND DISPUTE THAT, UNDER SECTION 263 OF TH E INCOME- TAX ACT, 1961, THE COMMISSIONER HAS POWER TO SET AS IDE THE ASSESSMENT ORDER AND SEND THE MATTER FOR FRESH ASSE SSMENT IF HE IS SATISFIED THAT FURTHER ENQUIRY IS NECESSARY AND THAT THE ORDER OF INCOME-TAX OFFICER IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. (G) SIMILARLY, THE HONBLE MADRAS HIGH COURT IN THE CASE OF EXPRESS NEWSPAPERS PVT. LTD. VS. CIT 255 ITR 137 HAS HELD A S UNDER: THE COMMISSIONER HAS THE DISCRETION TO SET ASIDE THE ASSESSMENT IN WHOLE OR IN PART. THE EXERCISE OF THA T DISCRETION IS NOT TO BE ORDINARILY INTERFERED WITH UNLESS THE FAC TS SHOW THAT THE EXERCISE OF THE DISCRETION ITSELF IS REQUIRED TO BE CHARACTERIZED AS ARBITRARY. 7 IT HAS NOT BEEN ESTABLISHED THAT PROPER ENQUIRY H AS BEEN CONDUCTED BY THE ASSESSING OFFICER BEFORE FINALIZING THE ASSESSM ENT ORDER IN RELATION TO THE SAID ISSUE AND THE LD. DIT, CONSIDERING THIS VITAL ASPECT, WHILE INVOKING THE I.T.A. NO I.T.A. NO I.T.A. NO I.T.A. NO. .. .80 8080 805 55 5/MDS/1 /MDS/1 /MDS/1 /MDS/10 00 0 8 PROVISIONS OF SECTION 263, HAS CONCLUDED TO SET ASI DE THE ORDER OF THE ASSESSING OFFICER FOR REDOING THE SAME BY CONDUCTING PROPER E NQUIRY AFTER GIVING DUE NOTICE TO THE ASSESSEE. SINCE NON-CONDUCTING OF PRO PER ENQUIRY RENDERS THE ORDER ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTER EST OF THE REVENUE, THEREFORE, IN OUR CONSIDERED VIEW, THE ACTION OF THE LD. DIT I S LIABLE TO BE SUSTAINED. ACCORDINGLY, IN VIEW OF THE FACTS, CIRCUMSTANCES AN D THE DISCUSSIONS HELD IN THE LIGHT OF THE ABOVE PRECEDENTS,IT IS HELD THAT INVOK ING OF PROVISIONS OF SECTION 263 BY THE LD. DIT IN SETTING ASIDE THE MATTER TO THE A SSESSING OFFICER TO RECOMPUTE THE INCOME OF THE ASSESSEE KEEPING IN VIEW THE PROV ISIONS OF SECTION 50C TO MAKE A FRESH ASSESSMENT ON THIS ISSUE IS PROPER AND JUSTIFIED AND CALLS FOR NO INTERFERENCE AT THIS STAGE, THEREFORE, HIS ORDER IN THIS REGARD IS UPHELD AND APPEAL OF THE ASSESSEE IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON 30.06.2011. SD/- SD/- (N.S. SAINI) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER CHENNAI, DATED, THE 30.06.2011 VM/- TO:THE ASSESSEE//A.O./CIT(A)/CIT/D.R.