Prabhat Kumar Agrawal, Sultanpur V. CIT, Faizabad

ITA 93/ALLD/2011

• Counselvise Citation: 9320714 RSA 2011
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 29-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH
• Assessee Lawyers: ANAND GODBOLE
• Keywords: Opportunity of being heard; Period of limitation; Competent authority
• Section: 143(3); 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD BENCH, ALLAHABAD BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.93/A/2011 ASSESSMENT YEAR: 2006-07 SHRI PRABHAT KUMAR AGARWAL, VS. COMMISSIONER OF IN COME TAX, RUDRA NAGAR, FAIZABAD. SULTANPUR. (PAN: AARPA 1496 P) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANAND GODBOLE, ADVOCATE RESPONDENT BY : SHRI JAGDISH, CIT D.R. DATE OF HEARING : 30.10.2012 DATE OF PRONOUNCEMENT : 02.11.2012 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 10.02.2011 PASSED BY THE LD. CIT, FAIZABAD FOR THE ASSESSMENT YEAR 2006-07. 2. THE EFFECTIVE GROUND RAISED IS IN RESPECT OF CHA LLENGING THE ORDER OF CIT PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 196 1 (THE ACT HEREINAFTER). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E TRADES IN TEXTILE. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF TH E ACT ON 06.10.2008 AT TOTAL ITA NO.93/A/2011 A.Y. 2006-07 2 INCOME OF RS.2,98,100/- AGAINST THE TOTAL INCOME O F RS.2,70,253/- DECLARED IN THE RETURN OF INCOME. A NOTICE UNDER SECTION 263 DATED 07.12.2010 WAS ISSUED BY INCOME TAX OFFICER (TECH.) ON BEHALF OF CIT. COPY OF THE SAID NOTICE IS PLACED AT PAGE NO.36 OF THE PAPER BOOK. FOR THE PURPOSE OF R EADY REFERENCE, THE SAME IS REPRODUCED AS BELOW :- SUB: REVISION UNDER SECTION 263 OF THE INCOME TAX ACT 1961, A.Y. 2006-07 REG. ON EXAMINATION OF THE RECORD IN YOUR CASE FOR A.Y. 2006-07, IT APPEARS THAT THE ASSESSMENT ORDER DATED 06.10.2008 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE AS ENVISAGED IN S.263 OF IT ACT ON GROUNDS MENTIONED BELOW. PROCEEDINGS UNDER SECTION 263 OF THE IT ACT, 1961 ARE ACCORDINGLY PROPOSED FO R A.Y. 2006-07 ON GROUNDS MENTIONED BELOW. IN THIS CONNECTION YOU AR E DIRECTED TO ATTEND THE O/O THE COMMISSIONER OF INCOME-TAX, FAIZ ABAD ON 23.12.2010 AT 11:30 AM PERSONALLY OR THROUGH AUTHORIZED REPRESENTATIVE. GROUNDS FOR REVISION UNDER SECTION 263 : ASSESSEE HAS INTRODUCED SUBSTANTIAL UNSECURED LOAN FROM VARIOUS PERSONS. HE HAS TAKEN LOAN OF RS.1,50,000/ - FROM A PERSON, WHO HAS SHOWN RECEIPT OF SALARY FROM THE ASSESSEE W HEREAS IN THE BOOKS OF THE ASSESSEE NO SUCH PAYMENT OF SALARY TO THIS PERSON IS SHOWN. THUS, THE VERY SOURCE OF INCOME SHOWN BY TH E CREDITOR WAS BOGUS AND UNSECURED LOAN AND INTEREST THEREON NEEDE D TO BE ADDED BACK TO INCOME OF THE ASSESSEE. AS THE ASSESSING O FFICER HAS NOT EXAMINED THESE ISSUES IN HIS ORDER UNDER SECTION 14 3(3) DATED 06.10.2008, HIS ORDER DATED 06.10.2008 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE WITHIN THE M EANING OF S.263 OF IT ACT. 4. THE CIT NOTED THAT THE ASSESSEE HAS CHANGED HIS STATEMENT, CONTRADICTED HIMSELF THAT NOTICE HAS BEEN EVER ISSUED. DURING E XAMINATION THE ASSESSING ITA NO.93/A/2011 A.Y. 2006-07 3 OFFICER HAS ADMITTED FILING AND VERIFYING OF RETURN WHICH AS PER THE STATEMENT IS WRONG ON MATERIAL POINT. IN NOTICE UNDER SECTION 2 63 IT WAS POINTED OUT THAT THE ASSESSEE HAS INTRODUCED SUBSTANTIAL UNSECURED LOANS FROM VARIOUS PERSONS. THE ASSESSEE HAS TAKEN LOAN OF RS.1,50,000/- FROM A PER SON, WHO HAS SHOWN RECEIPT OF SALARY FROM THE ASSESSEE WHEREAS IN THE BOOKS OF TH E ASSESSEE NO SUCH PAYMENT OF SALARY TO THIS PERSONS IS SHOWN. TO EXAMINE THIS L OAN, THE CIT INVOKED SECTION 263 OF THE ACT. THE CIT NOTED THAT THE ASSESSING OFFIC ER HAS NOT APPRECIATED THE ISSUE IN THE PROPER LEGAL CONTEXT. HIS ORDER UNDER SECTI ON 143(3) DATED 06.10.2008 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF REVENUE. 5. THE ISSUE UNDER CONSIDERATION IS PERTAINING TO S ECTION 263 OF THE ACT WHICH READS AS UNDER :- 263. (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE [ASSESSING] OFFICER IS ERRONE OUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY , AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MA KING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SU CH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSE SSMENT AND DIRECTING A FRESH ASSESSMENT. [ EXPLANATION .FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB-SECTION, ( A ) AN ORDER PASSED [ON OR BEFORE OR AFTER THE 1ST DA Y OF JUNE, 1988] BY THE ASSESSING OFFICER SHALL INCLUDE ITA NO.93/A/2011 A.Y. 2006-07 4 ( I ) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COM MISSIONER [OR DEPUTY COMMISSIONER] OR THE INCOME-TAX OFFICER ON T HE BASIS OF THE DIRECTIONS ISSUED BY THE [JOINT] COMMISSIONER UNDER SECTION 144A; ( II ) AN ORDER MADE BY THE [JOINT] COMMISSIONER IN EXE RCISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFICER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSUED BY THE BOARD OR BY THE CHIEF COMMISSIONER OR DIRECT OR GENERAL OR COMMISSIONER AUTHORIZED BY THE BOARD IN THIS BEHALF UNDER SECTION 120; ( B ) 'RECORD' [SHALL INCLUDE AND SHALL BE DEEMED ALWAY S TO HAVE INCLUDED] ALL RECORDS RELATING TO ANY PROCEEDING UN DER THIS ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISS IONER; ( C ) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION A ND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF AN Y APPEAL [FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988], THE POWERS OF THE COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEND [A ND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED] TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL.] [(2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) A FTER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHI CH THE ORDER SOUGHT TO BE REVISED WAS PASSED.] (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TI ME IN THE CASE OF AN ORDER WHICH HAS BEEN PASSED IN CONSEQUENCE OF, OR T O GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN ORDER OF T HE APPELLATE TRIBUNAL, [NATIONAL TAX TRIBUNAL,] THE HIGH COURT O R THE SUPREME COURT. EXPLANATION .IN COMPUTING THE PERIOD OF LIMITATION FOR THE PUR POSES OF SUB-SECTION (2), THE TIME TAKEN IN GIVING AN OPP ORTUNITY TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PERIOD DURING WHICH ANY PROCEEDING UNDER THIS SECTION IS S TAYED BY AN ORDER OR INJUNCTION OF ANY COURT SHALL BE EXCLUDED. 6. FROM A PLAIN READING OF SUB-SECTION (1) OF SECTI ON 263, IT IS CLEAR THAT THE POWER OF SUO MOTU REVISION CAN BE EXERCISED BY THE COMMISSIONER ONLY IF, ON ITA NO.93/A/2011 A.Y. 2006-07 5 EXAMINATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT, HE CONSIDERS THAT AN ORDER PASSED THEREIN BY THE INCOME TAX OFFICE IS E RRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT I S NOT AN ARBITRARY OR UNCHARTERED POWER. IT CAN BE EXERCISED ONLY ON FULFILLMENT OF THE REQUIREMENTS LAID DOWN IN SUB-SECTION (1). THE CONSIDERATION OF THE COMMISSI ONER AS TO WHETHER AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, MUST BE BASED ON MATERIALS ON THE RECORD OF THE PROCEEDINGS CALLE D FOR BY HIM. IF THERE ARE NO MATERIALS ON RECORD ON THE BASIS OF WHICH IT CAN BE SAID THAT THE COMMISSIONER ACTING IN A REASONABLE MANNER COULD HAVE COME TO SU CH A CONCLUSION, THE VERY INITIATION OF PROCEEDINGS BY HIM WILL BE ILLEGAL AN D WITHOUT JURISDICTION. THE POWER OF SUO MOTU REVISION UNDER SUB-SECTION (1) IS IN THE NATURE OF SUPERVISORY JURISDICTION AND THE SAME CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPECIFIED THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIT TO ENAB LE THE COMMISSIONER TO EXERCISE POWER OF REVISION UNDER THIS SUB-SECTION, VIZ. (1) THE ORDER IS ERRONEOUS; (2) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE HAS B EEN CAUSED TO THE INTERESTS OF THE REVENUE. IT HAS, THEREFORE, TO BE CONSIDERED FIRST LY AS TO WHEN AN ORDER CAN BE SAID TO BE ERRONEOUS. WE FIND THAT THE EXPRESSION ERRO NEOUS, ERRONEOUS ASSESSMENT AND ERRONEOUS JUDGEMENT HAVE BEEN DEFINED IN BLAC KS LAW DICTIONARY. ACCORDING TO THE DEFINITION, ERRONEOUS MEANS INV OLVING ERROR; DEVIATING FROM THE LAW. ERRONEOUS ASSESSMENT REFERS TO AN ASSE SSMENT THAT DEVIATES FROM THE LAW AND IS, THEREFORE, INVALID, AND IS DEFECT THAT IS JURISDICTIONAL IN ITS NATURE, ITA NO.93/A/2011 A.Y. 2006-07 6 SIMILARLY, ERRONEOUS JUDGEMENT MEANS ONE RENDERE D ACCORDING TO COURSE AND PRACTICE OF COURT, BUT CONTRARY TO LAW, UPON MISTAK EN VIEW OF LAW, OR UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES. 7. THE POWER OF REVISION CONFERRED ON THE CIT IS NO T ADMINISTRATIVE BUT A QUASI JUDICIAL WHERE CIT DOES NOT MAKE INDEPENDENT JUDGEM ENT BUT SEEK INSTRUCTIONS FROM THE BOARD, THE SAME WOULD BE IMPROPER. THE AP EX COURT IN THE CASE OF SIRPUR PAPER MILLS VS. CWT, 77 ITR 6 (SC) HELD THAT NOTICE ISSUED BY CIT AT THE INSTIGATION OF THE AUDIT WING WITHOUT EXERCISING HI S OWN DISCRETION, THE IMPUGNED JUDGMENT CANNOT BE SUSTAINED. FOR EXERCISING POWER UNDER SECTION 263 OF THE ACT, THE CIT MUST APPLY HIS MIND TO THE MATERIAL PLACED BEFORE HIM AND SATISFY HIMSELF THAT IT IS A CASE WHERE HE HAS TO EXERCISE HIS REVI SIONAL POWER. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. RA JESH KUMAR PANDEY (2012) 25 TAXMAN 242 (ALL.) CONFIRMED THE FINDING OF THE TRIB UNAL WHERE THE TRIBUNAL HELD THAT POWER UNDER SECTION 263 OF THE ACT CAN BE EXER CISED BY THE COMMISSIONER BY ISSUING NOTICE HIMSELF. THE RELEVANT ABSTRACT OF T HE JUDGMENT IS REPRODUCED AS UNDER :- 6. ON PERUSAL OF THE AFORESAID PROVISIONS, IT WILL BE ABUNDANTLY CLEAR THAT THE PROVISIONS OF SECTION 299-BB DEALS W ITH THE PROCEDURE FOR SERVICE OF NOTICE AND IN CASE, THERE IS A DEFEC TIVE SERVICE OF NOTICE, IT PROVIDES THAT IF THE ASSESSEE HAS COOPERATED, IT WILL NOT BE OPEN FOR HIM TO RAISE THE PLEA, WHEREAS IN THE INSTANT CASE, IT IS NOT THE CASE OF THE SERVICE OF NOTICE, BUT THE INITIAL ISSUANCE OF NOTICE, WHICH HAS NOT BEEN SIGNED BY THE COMPETENT AUTHORITY AS A FINDING HAS BEEN RECORDED BY THE TRIBUNAL THAT THE NOTICE HAS BEEN I SSUED UNDER THE ITA NO.93/A/2011 A.Y. 2006-07 7 SIGNATURE OF INCOME TAX (TECHNICAL), WHEREAS IN VIE W OF THE PROVISIONS OF POWERS UNDER SECTION 263(1), IT IS ONLY THE COMM ISSIONER OF INCOME-TAX TO ISSUE NOTICE. IT IS ALSO RELEVANT TO ADD THAT PLEAS CAN BE RAISED ONLY OUT OF THE JUDGEMENT PASSED BY THE TRIB UNAL OR OTHER AUTHORITIES, BUT THE PLEA, WHICH WAS NOT RAISED AT ANY STAGE, CANNOT BE RAISED FOR THE FIRST TIME BEFORE THIS COURT. NO OT HER ARGUMENTS HAVE BEEN ADVANCED IN RESPECT OF OTHER QUESTIONS FRAMED IN THE MEMO OF APPEAL. 7. IN VIEW OF ABOVE DISCUSSIONS, THE INCOME TAX APP EAL FAILS AND IS HEREBY DISMISSED. 8. IN THE CASE UNDER CONSIDERATION, AS NOTED ABOVE, FROM THE ABSTRACT OF NOTICE WE FIND THAT THE NOTICE WAS ISSUED BY INCOME TAX OF FICER (TECHNICAL) AND NOT BY CIT. THEREFORE, IN THE LIGHT OF THE RATIO LAID DOW N BY THE HON'BLE JURISDICTIONAL HIGH COURT, ORDER OF PASSED BY THE CIT UNDER SECTIO N 263 OF THE ACT CANNOT BE SUSTAINED. IN THE LIGHT OF THE FACT, ORDER OF CIT IS QUASHED. 9. SINCE THE ORDER OF CIT IS QUASHED ON LEGAL ISSUE AS DISCUSSED ABOVE, THEREFORE, WE ARE NOT EXPRESSING ANY OPINION ON THE MERIT OF THE ISSUE. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER ITA NO.93/A/2011 A.Y. 2006-07 8 PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, ALLAHABAD BENCH, ALLAHABAD 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE T RIBUNAL, ALLAHABAD TRUE COPY