M/s Amalgamated Transport & Company, Kolkata V. DCIT, Cir-4(3), Kolkata, Kolkata

ITA 88/KOL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1189 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 18-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Income from undisclosed sources; Search and seizure; Document seized; Documents seized
• Section: 153A; 263

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 88 / KOL / 2017 ASSESSMENT YEAR :2011-12 M/S AMALGAMATED TRANSPORT & CO. 30/31, KALAKAR STREET, BURRA BAZAR, KOLKATA-007 [ PAN NO.AAPFA 6596 C ] V/S . PR. CIT, CENTRAL-2, 110, SHANTI PALY, NR. RUBY HOSPITAL, EM BYE PASS, AAYAKAR POORVA, KOLKAT-107 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI S.M. SURANA, ADVOCATE /BY RESPONDENT MD. USMAN, CIT-DR /DATE OF HEARING 13-09-2017 /DATE OF PRONOUNCEMENT 31-10-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL HAS BEEN FILED BY THE ASSESSEE RELATING TO ASSESSMENT YEAR 2011- 12. THE APPEAL IS AGAINST THE ORDER U/S 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) PRINCIPAL CO MMISSIONER OF INCOME TAX, CENTRAL-2, KOLKATA DATED 14.10.2016. ASSESSMENT WAS FRAMED BY DCIT, CENTRAL CIRCLE-4(3), KOLKATA U/S 153A/143(3) OF THE ACT VIDE HIS ORDER DATED 31.03.2015. GROUNDS RAISED BY ASSESSEE PER ITS APPE AL AS UNDER:- 1 FOR THAT THE ORDER OF THE LD. PR. CIT IS ARBITRAR Y, ILLEGAL, EXCESSIVE, AND BAD IN LAW. 2. FOR THAT THE LD. PR. CIT ERRED IN SETTING ASIDE THE ORDER WHEN THE ASSESSING OFFICER APPLIED HIS MIND AND CORRECTLY AS SESSED THE TOTAL INCOME IN ACCORDANCE WITH THE DOCUMENTS AND EVIDENCES SEIZED IN THE COURSE OF SEARCH AND THEREFORE THE ORDER WAS NEITHER ERRONEOUS NOR P REJUDICIAL TO THE INTEREST OF REVENUE. ITA NO.88/KOL/2017 A.Y. 2011-12 M/SAMALGAMATED TRANSPSORT & CO. VS. PR.CIT, CEN- 2, KOL. PA GE 2 3. FOR THAT THE LD. PR. CIT ERRED IN CONSIDERING TH E ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE FOR THE REAS ONS THAT THE AO SHOULD HAVE ASSESSED THE INCOME ON ESTIMATE ON THE BASIS OF THE INCOME FOUND NOR THE SEIZED PAPERS FOR ONE QUARTER WHICH WAS NOT RECORDE D IN THE BOOKS OF ACCOUNTS WHEN LAW DO NOT PERMIT SUCH AN ESTIMATE, N O INCRIMINATING PAPERS WERE FOUND NOR THE AO WAS ENTITLED TO ESTIMATE SUCH INCOME. 4. FOR THAT THE LD AO COMPLETED THE ASSESSMENT ALTE R DUE APPLICATION OF MIND AND IN ACCORDANCE WITH THE JUDICIALLY ACCEPTED PRIN CIPLES AND THE LD PR. CIT EVEN IF THOUGHT OTHERWISE OR WAS HAVING A DIFFERENT VIEW, THE ASSESSMENT CANNOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF REVENUE. 5. FOR THAT HE LD PR. CIT ERRED IN SETTING ASIDE TH E ENTIRE ASSESSMENT WHEN IN THE SHOW CAUSE NOTICE AS WELL IN THE ORDER U/ S. 26 3 HE CONSIDERED THE ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE ONLY WITH REGARD TO THE COMMISSION INCOME WHICH ACCORDING TO HIM SHOULD HAV E BEEN ESTIMATED FOR ALL THE 4 QUARTERS IN PLACE OF ONE QUARTER FOR WHIC H THE INCRIMINATING DOCUMENTS WERE FOUND. 6. FOR THAT ORDER OF THE LD. PR CIT IS NOT IN ACCOR DANCE WITH LAW SINCE HE DIRECTED THE AO TO MAKE ENQUIRY TO DETERMINE THE IN COME FOR THE WHOLE YEAR AND AT THE SAME TIME HIMSELF HAS GIVEN THE FINDING THAT THE INCOME FOR THE WHOLE YEAR SHOULD BE ESTIMATED AND FOR THE REMAININ G 3 QUARTERS ADDITION OF RS. 25,09,188/ - SHOULD BE MADE. 7. FOR THAT THE ORDER OF THE CIT IS NOT IN ACCORDAN CE WITH LAW, THE SAME MAY BE SET ASIDE AND THE ASSESSEE BE GIVEN RELIEF PRAYE D FOR. SHRI S.M. SURANA, LD. ADVOCATE APPEARED ON BEHALF O F ASSESSEE AND MD. USMAN, LD. DEPARTMENTAL REPRESENTATIVE REPRESENTED ON BEHALF OF REVENUE. 2. GROUNDS NO.1 TO 6 ARE INTER-RELATED AND THEREFOR E BEING TAKEN UP TOGETHER. THE ISSUE RAISED IN THIS APPEAL IS THAT L D. CIT U/S 263 OF THE ACT ERRED IN HOLDING THE ORDER OF ASSESSING OFFICER AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. 3. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS A PART NERSHIP FIRM AND ENGAGED IN THE ACTIVITY OF MONEY TRANSFER AND COURIER BUSIN ESS. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED AT THE BUSINESS PREMISES OF ASSESSEE ON 14.01.2013. AS A RESULT OF SEARCH, VARIOUS DOCUMENT S WERE SEIZED AND IMPOUNDED FROM THE PREMISES OF ASSESSEE. ON THE BAS IS OF SEIZED MATERIALS, IT WAS FOUND THAT ASSESSEE HAS EARNED COMMISSION INCOM E FOR 8,36,396/- ITA NO.88/KOL/2017 A.Y. 2011-12 M/SAMALGAMATED TRANSPSORT & CO. VS. PR.CIT, CEN- 2, KOL. PA GE 3 DURING THE PERIOD BEGINNING FROM 01.04.2010 TO 30.0 6.2010. THE AO ON THE BASIS OF SEIZED DOCUMENTS, ACCORDINGLY, DETERMINED UNDISCLOSED COMMISSION INCOME OF ASSESSEE FOR RS. 8,36,396/- IN HIS ORDER WHICH WAS FRAMED U/S 153A/143(3) OF THE ACT. 4. SUBSEQUENTLY, LD. CIT U/S. 263 OF THE ACT OBSERV ED THAT THE UNDISCLOSED INCOME OF THE ASSESSEE HAS BEEN UNEARTHED FOR THE F IRST QUARTER OF THE FINANCIAL YEAR 2010-11 ON THE BASIS OF SEIZED MATER IAL WHICH NEEDS TO BE EXTRAPOLATED FOR THE REMAINING THREE QUARTERS I.E. RS. 25,09,188 (836396 X 3). ACCORDINGLY, THE LD. CIT U/S 263 OF THE ACT WAS OF THE VIEW THAT THERE IS AN ERROR IN THE ASSESSMENT ORDER WHICH IS CAUSING PREJ UDICE TO THE INTEREST OF REVENUE AS THE INCOME FOR THREE QUARTERS OF THE FY 2010-11 HAS ESCAPED ASSESSMENT. ACCORDINGLY, HE CALLED UPON THE ASSESSE E BY ISSUING NOTICE U/S 263 OF THE ACT. 5. IN COMPLIANCE THERETO, THE ASSESSEE SUBMITTED T HAT THE ASSESSMENT WAS FRAMED U/S 153A/143(3) OF THE ACT ON THE BASIS OF S EIZED MATERIALS FOR THE 1 ST QUARTER OF THE FY 2010-11. THE REVENUE DURING SEARC H PROCEEDINGS COULD NOT FIND ANY DOCUMENTARY EVIDENCE SUGGESTING THAT ASSES SEE HAS EARNED COMMISSION INCOME IN REMAINING THREE QUARTERS BEGIN NING FROM 01.07.2010 AND ENDING ON 31.03.2011. THE ASSESSEE FURTHER SUBM ITTED THAT THE INCOME U/S. 153A OF THE ACT CAN BE DETERMINED ONLY ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. THE ASS ESSEE IN SUPPORT OF ITS CLAIM RELIED ON THE ORDER OF HONBLE ITAT HYDERABAD BENCHES IN THE CASE OF ACIT VS. B. SRINIVASA RAO REPORTED IN 159 TTJ 483 W HEREIN IT WAS HELD AS UNDER : FURTHER, UNLESS THERE IS EVIDENCE OR MATERIAL INDIC ATING ANY SUPPRESSION OF COLLECTION OF FEES TOWARDS MANAGEMENT QUOTA SEATS FOR A.Y. 200 3-2004 HAVING BEEN FOUND DURING SEARCH, AND NO ADMISSION FROM ASSESSEE, AO W AS NOT JUSTIFIED IN ESTIMATING SAME ON MATERIALS SEIZED RELATING TO SUBSEQUENT ASS ESSMENT YEARS INDICATING SUPPRESSION OF COLLECTION OF FEES FOR MANAGEMENT SE ATS, IN ASSUMING SUPPRESSED/UNACCOUNTED RECEIPTS OF FEES FOR YEAR UN DER CONSIDERATION. CALCULATION OF UNACCOUNTED INCOME FROM COLLECTION OF FEES FROM MAN AGEMENT SEATS SHOULD BE BASED ON MATERIALS RELEVANT TO A.Y. UNDER CONSIDERA TION AND IT SHOULD BE ON SCIENTIFIC BASIS AND CANNOT BE MERELY ON ASSUMPTIONS. ORDER OF CIT(A) UPHELD. EXTRAPOLATION OF ITA NO.88/KOL/2017 A.Y. 2011-12 M/SAMALGAMATED TRANSPSORT & CO. VS. PR.CIT, CEN- 2, KOL. PA GE 4 INCOME CANNOT BE MADE FOR A.Y. IN QUESTION ON BASIS OF SEIZED MATERIAL RELATING TO SOME OTHER ASSESSMENT YEARS. THE LD. CIT, HOWEVER PASSED ORDER U/S.263 OF THE AC T DIRECTING THE AO TO ENQUIRE ABOUT THE ADDITION TO BE MADE FOR THE PREVI OUS YEAR OVER AND ABOVE THE PERIOD FOR WHICH SEIZED DOCUMENT INDICATED UNDI SCLOSED TRANSACTIONS. AGGRIEVED BY THE ORDER OF THE LD. CIT, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; IN CLUDING THE JUDICIAL PRONOUNCEMENTS CITED AND PLACED RELIANCE UPON. IN T HE INSTANT CASE, THE AO DETERMINED THE INCOME UNDER SECTION 153A/143(3) OF THE ACT ON THE BASIS OF INCRIMINATING MATERIAL. IT IS UNDISPUTED FACT THAT THE INCRIMINATING MATERIAL WAS FOUND DURING SEARCH & SEIZURE OPERATION FOR THE 1 ST QUARTER OF THE FINANCIAL YEAR UNDER CONSIDERATION. HOWEVER THE LD. CIT U/S 263 OF THE ACT IS DESIROUS OF EXTRAPOLATING THE INCOME OF ASSESSEE FOR THE REMAIN ING THREE QUARTERS I.E. 25,09,188 (836396 X 3) ON THE BASIS OF SEARCH DOCUM ENTS PERTAINING TO THE 1 ST QUARTER OF THE FINANCIAL YEAR. AS SUCH THERE WAS N O INCRIMINATING DOCUMENT FOUND DURING SEARCH FOR THE REMAINING THREE OF THE FINANCIAL YEAR UNDER CONSIDERATION. THEREFORE, THE INCOME WAS DETERMINED BY THE AO U/S. 153A/143(3) ONLY ON THE BASIS OF INCRIMINATING MATE RIALS. 7. IT IS A WELL SETTLED LAW THAT THE ADDITION DURIN G THE SEARCH PROCEEDINGS CAN BE MADE ONLY ON THE BASIS OF INCRIMINATING MATE RIALS FOUND DURING THE COURSE OF SEARCH. AS THERE WAS FOUND NO INCRIMINATI NG MATERIALS PERTAINING TO THE PERIOD BEGINNING FROM 01.07.2010 TO 31.03.2011 I.E. REMAINING THREE QUARTERS OF THE FY 2010-11, THEREFORE NO ADDITION C AN BE MADE IN THE HANDS OF ASSESSEE. IN HOLDING SO, WE FIND SUPPORT AND GUIDAN CE FROM THE ORDER B. SRINIVASA RAO (SUPRA) . 8. BESIDES THE ABOVE, WE FIND THAT A BARE READING OF SEC. 263 OF THE ACT MAKES IT CLEAR THAT THE PREREQUISITE FOR THE EXERCI SE OF JURISDICTION BY THE ITA NO.88/KOL/2017 A.Y. 2011-12 M/SAMALGAMATED TRANSPSORT & CO. VS. PR.CIT, CEN- 2, KOL. PA GE 5 COMMISSIONER SUO MOTU UNDER IT, IS THAT THE ORDER OF THE INCOME-TAX OFFI CER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE. THE COMMISSIONER HAS TO BE SATISFIED WITH TWIN CONDITIO NS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRON EOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT E.G. IF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDIC IAL TO THE INTEREST OF THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIA L TO THE INTERESTS OF THE REVENUE - RECOURSE CANNOT BE TAKEN TO SEC. 263(1) O F THE I.T. ACT. THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVE RY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER, IT IS ONLY WHEN THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE REVENUE, THE PROVISIONS OF SECTI ON WILL BE ATTRACTED. THE PHRASE ' PREJUDICIAL TO THE INTERESTS OF THE REVENUE ' IS NOT AN EXPRESSION OF ART AND IS NOT DEFINED IN THE ACT. IT IS OF WIDE IMPORT AND IS NOT CONFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT T AX IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF DUE TO AN ERRONEOUS ORDER OF THE INCOME-TAX OFFICER, THE REVE NUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICI AL TO THE INTERESTS OF THE REVENUE. THE PHRASE ' PREJUDICIAL TO THE INTERESTS OF THE REVENUE ' HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE AO. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE AO CANN OT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 9. IN HOLDING SO, WE FIND SUPPORT AND GUIDANCE FRO M THE ORDER MALABAR INDUSTRIAL CO. LIMITED VS. CIT 243 ITR 83 WHEREIN IT WAS HELD AS UNDER: WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED A S AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAK EN BY THE ITO IS UNSUSTAINABLE IN LAW. 10. IN VIEW OF THE ABOVE, WE FIND THAT THE AO HAS CONSCIOUSLY ADDED THE UNDISCLOSED INCOME BASED ON THE INCRIMINATING MATER IAL. NOW THE VIEW TAKEN BY THE AO CANNOT BE SUBSTITUTED BY THE CIT UNDER SE CTION 263 OF THE ACT. IT IS BECAUSE THE AO HAS TAKEN A POSSIBLE VIEW AS ESTABLI SHED BY VARIOUS COURTS AS ITA NO.88/KOL/2017 A.Y. 2011-12 M/SAMALGAMATED TRANSPSORT & CO. VS. PR.CIT, CEN- 2, KOL. PA GE 6 DISCUSSED ABOVE. THUS, WE HOLD THAT THE IMPUGNED OR DER PASSED U/S 153A/143(3) BY THE AO CANNOT BE REVISED U/S 263 OF THE ACT. HENCE, THIS GROUND OF ASSESSEE IS ALLOWED. 11. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 31/ 10/2017 SD/- SD/- ($ &) ( &) (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) *DKP, SR.P.S KOLKATA, (- 31 / 10 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S AMALGAMATED TRANSPORT &CO.30/31,KALA KAR ST, BURRA BAZR, KOL-07 2. /RESPONDENT-PR. CIT, CENTERAL-2, 110, SHANTI PALY, NR. RUBY HOSPITAL, EM BYE PASS, AAYAKAR P OORVA, KOLKTA-107 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 $$3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 3,