Shri Prem Chand Plantation Pvt. Ltd, Noida V. ACIT, New Delhi

ITA 992/DEL/2009

• Counselvise Citation: 99220114 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-08-2011
• Assessment Year: 1993-1994
• Appeal Filed On: 18-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SYAMA S BANSIA
• Assessee Lawyers: N CH HILLAR; SANJAY AGARWAL ITP
• Keywords: Revenue expenditure; Capital expenditure
• Section: 263; 144; 10; 143(3)

Judgement Text

BEFORE THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH B, NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.992/DEL/2009 (ASSESSMENT YEAR : 1993-94) SHRI PREM CHAND PLANTATION PVT. LTD., VS. COMMISSIO NER OF INCOME-TAX, C/O DR. D.K. GARG, MEERUT. C 68, TARANG APARTMENTS, I.P. EXTENSION, NEW DELHI 110 092. (PAN NO.ACUPG623Q) (APELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY AGARWAL, ITP & SHRI N. CH HILLAR DEPARTMENT BY : SMT. SYAMA S. BANSIA, CIT DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF THE ORDER OF THE CIT, MEERUT DATED 20.03.1996 FOR THE ASSESSMENT YEAR 199 3-94. 2. ON THE ISSUE OF PRELIMINARY OBJECTION ABOUT THE TECHNICAL OBJECTION OF THE DEPARTMENT THAT THE APPEAL IS NOT MAINTAINAB LE AS IT IS BARRED BY LIMITATION WAS HEARD ON 8.10.2010 AND ITAT HAS HELD THAT THE ASSESSEES APPEAL IS MAINTAINABLE AND THE SAME IS ADMITTED FOR HEARING. 3. IN THE APPEAL, THE ISSUE INVOLVED IS AGAINST THE ORDER PASSED U/S 263 BY THE CIT, MEERUT ON 20.3.1996. THE GROUNDS TAKEN IN ASSESSEES APPEAL READ AS UNDER :- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT MEERUT HAS ERRED IN LAW AND ON FA CTS IN ITA NO.992/DEL/2009 2 ASSUMING JURISDICTION IN PASSING THE ORDER U/S 263, MORE SO WHEN THE ASSESSMENT ORDER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT MEERUT HAS ERRED IN LAW AND ON FA CTS IN PASSING THE IMPUGNED ORDER U/S 263 BEING BEYOND JURISDICTION BARRED BY LIMITATION, ILLEGAL AND VOID AB INITIO. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT MEERUT HAS ERRED IN LAW AND ON FA CTS IN PASSING THE IMPUGNED ORDER U/S 263 BEING BAD IN LAW FOR THIS REASON ALSO THAT NO SHOW CAUSE NOTICE WAS SERV ED UPON THE ASSESSEE AND NO OPPORTUNITY OF HEARING AS PER L AW HAS BEEN GRANTED TO THE ASSESSEE. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT MEERUT HAS ERRED IN LAW AND ON FA CTS IN PASSING THE IMPUGNED ORDER U/S 263 IS BAD IN LAW FO R THIS REASON ALSO THAT ORIGINAL ASSESSMENT ORDER WAS ILLE GAL AND VOID AB INITIO. 5. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER A CTION OF LD. CIT, MEERUT HAS ERRED IN LAW AND ON FACTS IN PASSING THE IMPUGNED ORDER BEING CONTRARY TO LAW AND FACTS, VOID AB INITIO, BEYOND JURISDICTION AND THE SAME IS NOT SUSTAINABLE ON VARIOUS LEGAL AND FACTUAL GROUNDS. 4. WHILE PLEADING ON BEHALF OF ASSESSEE, THE LD. AR HAS SUBMITTED THAT THE ORDER PASSED U/S 263 WAS BAD IN LAW AS NO SHOW-CAUSE NOTICE WAS SERVED ON THE ASSESSEE AND NO OPPORTUNITY OF HEARIN G AS PER LAW WAS GIVEN. HE ALSO PLEADED THAT THE CIT, MEERUT WAS NO T JUSTIFIED IN HOLING THAT ORIGINAL ORDER PASSED U/S 143(3) WAS ILLEGAL A ND VOID AB INITIO. HE ALSO SUBMITTED THAT CIT, MEERUT HAS ERRED IN LAW AN D FACT BY SETTING ASIDE THE ORDER OF THE AO WHILE THE CIT WAS NOT HAVING AN Y JUSTIFICATION TO DO SO. THE LD. AR SUBMITTED THAT THE ASSESSMENT FOR T HE AY 1993-94 WAS ITA NO.992/DEL/2009 3 COMPLETED AT NIL INCOME BY THE ITO, NOIDA ON 30.03. 1994. THE ASSESSEE HAS DECLARED AGRICULTURAL INCOME OF RS.7,44,702/- I N THE RETURN OF INCOME. NOTICES U/S 143(2) WERE ISSUED TO ASSESSEE. NOTICE S WERE ISSUED TO THE ASSESSEE TO FILE DETAILS. A DETAILED QUESTIONNAIRE DATED 13.09.1994 WAS ALSO ISSUED BY ITO AFTER CLOSE SCRUTINY OF ASSESSEE S INCOME-TAX RETURN, COPY AVAILABLE AT PAGE 7 OF PAPER BOOK. THE AO MAD E THE SCRUTINY. HE ALSO SUBMITTED THAT THE AO HAS CATEGORICALLY STA TED IN THE ORDER THAT A NOTICE U/S 143(2) WAS ISSUED TO THE ASSESSEE AND IN COMPLIANCE TO THAT, THE AR OF THE ASSESSEE ATTENDED TIME TO TIME AND FILED NECESSARY DETAILS. THE AO HAS ALSO CATEGORICALLY STATED THAT THE ASSESSEE COMPANY IS ENJOYING INCOME FROM AGRICULTURAL OPERATIONS AND HAS DECLARE D SUCH INCOME OF RS.7,44,702/-. HE ALSO PLEADED THAT THE AO HAS ALS O MENTIONED IN THE ORDER THAT THE NECESSARY DETAILS WERE FILED REGARDI NG THE AGRICULTURAL INCOME AND AFTER SCRUTINIZING OF THESE DOCUMENTS, T HE AO HAS HELD THAT THE AGRICULTURAL INCOME IS EXEMPT U/S 10 OF THE INC OME-TAX ACT. THE ASSESSMENT WAS COMPLETED AT NIL INCOME. THE RELEVA NT BALANCE SHEET, PROFIT & LOSS ACCOUNT ALONG WITH THE DETAILS WERE S UBMITTED BEFORE THE AO. THESE DETAILS ARE AVAILABLE AT PAGE 13 TO 18 O F THE PAPER BOOK. THE ORDER SHEET RECORDED BY THE AO DURING THE ASSESSMEN T PROCEEDINGS IS ALSO PLACED AT PAGE 19 OF THE PAPER BOOK. THE RECORDING S OF AO ON THE ORDER SHEET ITSELF SHOWS THAT THE AO HAD ASKED THE DETAIL S, SCRUTINIZED THE SAME AND TOOK A PLAUSIBLE VIEW. THUS, AO HAD FINALIZED THE ASSESSMENT AFTER ITA NO.992/DEL/2009 4 APPLYING HIS MIND AND SCRUTINIZING DETAILS. HE PL EADED THAT THE CIT HAS WRONGLY COME TO THE CONCLUSION THAT ASSESSEE HAS NO T PRODUCED THE BOOKS OF ACCOUNTS BEFORE THE AO, THEREFORE, AO PASSED ORD ER U/S 144 OF INCOME-TAX ACT. IN THE ORDER SHEET, AO HIMSELF HAS STATED THAT SHRI VIPIN SAHNI HAS ATTENDED FROM TIME TO TIME AND FILED NECE SSARY DETAILS. THESE DETAILS WERE FROM THE BOOKS OF ACCOUNT OF ASSESSEE. THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT WERE FILED WITH THE RETUR N OF INCOME. THESE DETAILS SATISFIED THE AO IN RESPECT OF THE VERACITY OF THE ACCOUNTS, HENCE HE ACCEPTED THE BOOK RESULTS. FURTHER, THE OTHER A LLEGATION OF CIT THAT THE ASSESSEE HAS NOT PRODUCED THE BANK ACCOUNT IS ALSO NOT TENABLE. THE BALANCE SHEET FILED ALONG WITH RETURN OF INCOME CLE ARLY SHOWS THAT ASSESSEE WAS NOT MAINTAINING ANY BANK ACCOUNT DURIN G THE RELEVANT PERIOD. AO WAS SATISFIED TO THIS FACT AND HE DID N OT MAKE ANY ADVERSE INFERENCE ON THIS COUNT. THE CITS OTHER ALLEGATIO N THAT DOCUMENTARY EVIDENCE REGARDING THE GENUINENESS OF INCOME WAS NO T FILED IS ALSO NOT TENABLE. THE AO HAS CATEGORICALLY ASKED THE DETAIL S IN RESPECT OF VARIOUS EXPENSES LIKE CONVEYANCE & TRAVELING, MANDI SAMITTE E TAX, SEEDS, LEASE RENT, PUMP SET RENT, LABOUR CHARGES, FREIGHT AND BR OKERAGE IN THE QUESTIONNAIRE ISSUED TO THE ASSESSEE. AFTER SATISF YING HIMSELF, THE AO REPORTED IN THE ORDER THAT ASSESSEE COMPANY ENJOYS INCOME FROM AGRICULTURAL OPERATIONS AND HAS SHOWN SUCH INCOME O F RS.7,44,702/-. THE LAST ALLEGATION OF CIT THAT AO HAS NOT EXAMINED REG ARDING THE FACT THAT ITA NO.992/DEL/2009 5 ASSESSEE WAS IN ACTUAL POSSESSION OF LAND IS ALSO N OT TENABLE. IT WAS CLEAR FROM THE DETAILS THAT LAND WAS TAKEN ON LEASE TO DO AGRICULTURE. THE LEASE RENT WAS DEBITED IN PROFIT & LOSS ACCOUNT. AO INQU IRED ON THIS ISSUE DURING ASSESSMENT PROCEEDINGS ITSELF AND ACCEPTED A SSESSEES CLAIM. HE FURTHER PLEADED THAT IN VIEW OF THE DECISION OF HON 'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUNBEAM AUTO LIMITED, 189 TA XMAN 436 (DELHI), THE AO IS NOT REQUIRED TO GIVE DETAILS REASONS IN T HE ASSESSMENT ORDER IN RESPECT OF EACH AND EVERY ITEM. IT IS A FACT THAT AO HAS APPLIED HIS MIND BEFORE ACCEPTING THE RETURN OF INCOME AND FOUND THE EXPLANATION PROVIDED BY THE ASSESSEE AS GENUINE IN RESPECT OF THE VARIOU S EXPENSES CLAIMED AND INCOME DECLARED IN THE RETURN OF INCOME. THE CITS CONTENTION THAT IT WAS NECESSARY FOR AO TO EXAMINE THE ASPECT OF THE A GRICULTURAL INCOME AS THE SAME IS EXEMPTED FROM INCOME-TAX, IS ALSO NOT A PROPER GROUND ON WHICH THE PROCEEDINGS CAN BE INITIATED U/S 263 OF T HE INCOME-TAX ACT. AO HAD CATEGORICALLY STATED IN HIS ORDER IN THIS RE GARD. THE CITS CONTENTION THAT AO HAS NOT EXAMINED WHETHER THE ASS ESSEE WAS HAVING ACTUAL POSSESSION OF THE LAND IS ALSO NOT A GENUINE GROUND FOR INVOKING PROVISIONS OF SECTION 263 OF INCOME-TAX ACT. IT WA S CLEAR FROM THE DETAILS THAT THE ASSESSEE HAS TAKEN THE LAND ON LEASE AND L EASE RENT HAS BEEN DEBITED IN THE PROFIT & LOSS ACCOUNT. THE AO HAS R AISED THE QUERY IN THE QUESTIONNAIRE ISSUED TO ASSESSEE IN THIS REGARD. E XPENSES FOR AGRICULTURE OPERATIONS WERE ALSO DEBITED IN PROFIT & LOSS ACCOU NT. AO HAS INQUIRED ITA NO.992/DEL/2009 6 ABOUT ALL THESE EXPENSES. AS HELD IN THE CASE OF CIT VS. SUNBEAM AUTO LTD., CITED SUPRA, THE AO IS NOT REQUIRED TO GIVE D ETAILED REASONS IN THE ASSESSMENT ORDER IN RESPECT OF EACH AND EVERY ITEM. THE AO HAS ASKED THE DETAILS IN RESPECT OF SUNDRY DEBTORS OF RS.6,79 ,600/- (QUESTION NO.4 OF QUESTIONNAIRE ISSUED). AO HAS ALSO INQUIRED IN RES PECT OF REVENUES SURPLUSES, SALES, ADVANCE AND EXPENSES DEBITED . IN VIEW OF THESE, HE SUBMITTED THAT NEITHER THE ORDER OF AO IS ERRONEOUS NOR IT WAS PREJUDICIAL TO THE INTEREST OF REVENUE. HE ALSO SUBMITTED THAT THE CIT CANNOT INVOKE THE JURISDICTION U/S 263 OF INCOME-TAX ACT WHERE TH E AO HAS TAKEN A PLAUSIBLE VIEW. CIT HAS NO JURISDICTION TO INVOKE SECTION 263 OF INCOME- TAX ACT WHEN THERE WERE EVEN INADEQUATE ENQUIRIES M ADE BY AO. THE HON'BLE HIGH COURT IN THE CASE OF CIT VS. SUNBEAM A UTO LTD., CITED SUPRA, HAS CLEARLY MADE A DISTINCTION BETWEEN A LA CK OF ENQUIRY AND INADEQUATE ENQUIRY. THE HON'BLE COURT HAS HELD T HAT IF THERE WAS ANY ENQUIRY, EVEN INADEQUATE, THAT WOULD NOT, BY ITSELF , GIVE OCCASION TO COMMISSIONER PASS ORDER U/S 263 OF THE INCOME-TAX A CT MERELY BECAUSE HE HAS DIFFERENT OPINION IN THE MATTER. LEARNED A R PLEADED TO SET ASIDE THE ORDER OF CIT. 5. ON THE OTHER HAND, LEARNED DR PLEADED THAT ORDER PASSED BY AO WAS WITHOUT APPLICATION OF MIND, HENCE IT WILL FALL UNDER THE EXPRESSION ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. IN ASSESSEES CASE, THE ORDER HAD BEEN PASSED WITHOUT APPLICATION OF MI ND. THEREFORE, THE ITA NO.992/DEL/2009 7 CIT WAS JUSTIFIED TO SETTING ASIDE THE ORDER OF AO WHICH WAS PASSED AFTER ADEQUATE/DUE ENQUIRIES. SHE ALSO RELIED ON THE FOL LOWING CASE LAWS :- (I) MALABAR INDUSTRIAL CO. LTD. VS. CIT, 243 ITR 8 3 (SC); AND (II) CIT VS. SHRI BHAGWAN DAS, 272 ITR 367 (ALL.). SHE SUBMITTED THAT THE CIT CAN INVOKE THE JURISDICT ION U/S 263 WHEN THE ORDER OF AO IS ERRONEOUS AND PREJUDICIAL TO THE INT EREST OF REVENUE. SHE SUBMITTED THAT INCORRECT ASSUMPTION OF THE FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF ORDER BEING ERRONEOUS. SHE ALSO RELIED ON THE FACT THAT IN ASSESSEES OWN CASE IN THE AY 1994-95, THE AGRICULTURAL INCOME HAS BEEN TAXED AS INCOME FR OM UNDISCLOSED SOURCES. SHE PLEADED TO DISMISS ASSESSEES APPEAL. 6. WE HAVE HEARD BOTH THE SIDES IN DETAIL. THE ORD ER FOR THE AY 1993- 94 WAS PASSED ON 30.03.1994. THE ORDER FOR AY 1994 -95 WAS PASSED ON 22.03.1999. THE COMMISSIONER PASSED THE ORDER U/S 263 ON 20.03.1996. THE ORDER FOR AY 1994-95 PASSED ON 22.03.1999, THER EFORE, FACTS RECORDED IN THAT ORDER WERE NOT AVAILABLE TO THE CI T WHILE PASSING ORDER U/S 263 OF INCOME-TAX ACT. THE REVENUES RELIANCE ON THE FINDING RECORDED IN THAT ORDER IS NOT TENABLE. THE AO HAS MADE INQUIRY BY ASKING THE DETAILS THROUGH THE QUESTIONNAIRE DATED 13.09.1 994. THE DETAILS AND QUESTIONS ASKED IN THE QUESTIONNAIRE SHOW THAT AO H AD APPLIED HIS MIND WHILE MAKING SCRUTINY OF THE CASE. THE COPY OF QU ESTIONNAIRE IS PLACED AT PAGE 7 OF THE PAPER BOOK SHOW THAT AO HAS RAISED THE QUESTIONS AND ITA NO.992/DEL/2009 8 ASKED DETAILS REGARDING THE SHAREHOLDING, REGARDING RESERVE AND SURPLUS, REGARDING ADVANCES MADE FOR THE PURCHASE OF LAND, R EGARDING SUNDRY DEBTORS, REGARDING SALES IN EXCESS OF RS.10,000/-. THE DETAILS REGARDING CONVEYANCE AND TRAVELING, MANDI SAMITTEE TAX, SEEDS , BEEJ, LEASE RENT, PUMP SET RENT, LABOUR CHARGES, FREIGHT AND BROKERAG E WERE ALSO CALLED. THE FACT THAT THE ASSESSEE WAS NOT MAINTAINING A BA NK ACCOUNT WAS EVIDENT FROM THE BALANCE SHEET FILED BEFORE THE AO. THESE FACTS SHOW THAT AO HAD APPLIED HIS MIND AND HAD MADE INQUIRIES. TH US, IT IS NOT A CASE WHERE NO ENQUIRIES WERE MADE. AO MADE INQUIRIES WH ICH MAY NOT BE ADEQUATE OR SAY NOT SUFFICIENT TO THE SATISFACTION OF CIT. AO MAY NOT HAVE MADE INQUIRY AS PER CITS POINT OF VIEW BUT HE HAD CERTAINLY MADE SOME INQUIRIES. THE HON'BLE DELHI HIGH COURT IN TH E CASE OF CIT VS. SUNBEAM AUTO LTD., CITED SUPRA, HAD HELD AS UNDER : - (EXTRACT FROM HELD PORTION) THE SUBMISSION OF THE REVENUE WAS THAT WHILE PASSIN G THE ASSESSMENT ORDER, THE ASSESSING OFFICER DID NOT CON SIDER THE ASPECT SPECIFICALLY WHETHER THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL EXPENDITURE. THAT ARGUMENT PREDICATED ON THE ASSESSMENT ORDER, WHICH APPARENTL Y DID NOT GIVE ANY REASON WHILE ALLOWING THE ENTIRE EXPEN DITURE AS REVENUE EXPENDITURE. HOWEVER, THAT, BY ITSELF, W OULD NOT BE INDICATIVE OF THE FACT THAT THE ASSESSING OFFICE R HAD NOT APPLIED HIS MIND TO THE ISSUE. THERE ARE JUDGMENTS GALORE LAYING DOWN THE PRINCIPLE THAT THE ASSESSING OFFICE R IN THE ASSESSMENT ORDER IS NOT REQUIRED TO GIVE DETAILED R EASONS IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC. THEREFORE, ONE HAS TO SEE FROM THE RECORD AS TO WHE THER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. ONE HAS TO ITA NO.992/DEL/2009 9 KEEP IN MIND THE DISTINCTION BETWEEN 'LACK OF INQUI RY' AND 'INADEQUATE INQUIRY: IF THERE WAS ANY INQUIRY, EVEN INADEQUATE, THAT WOULD NOT, BY ITSELF, GIVE OCCASIO N TO THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 MEREL Y BECAUSE HE HAS DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF 'LACK OF INQUIRY' THAT SUCH A COURSE OF AC TION WOULD BE OPEN. IN THE CASE UNDER CONSIDERATION, AO MADE CERTAIN IN QUIRIES. THE AO WAS NOT REQUIRED TO GIVE DETAILS REASONS IN THE ASSESSM ENT ORDER IN RESPECT OF EACH AND EVERY ITEM. THERE WAS DEFINITELY APPLICA TION OF MIND BY THE AO AND HE HAD MADE CERTAIN ENQUIRIES ALTHOUGH THESE MAY NOT BE INADEQUATE TO THE SATISFACTION OF CIT , IN VIEW OF THESE FACTS, CIT HAS NO JURISDICTION TO INVOKE SECTION 263 OF INCOME-TAX AC T. IN OUR CONSIDERED VIEW, THE CIT WAS NOT JUSTIFIED IN INVOKING THE PRO VISIONS OF SECTION 263 OF THE INCOME-TAX ACT MERELY BECAUSE HE WAS NOT SAT ISFIED WITH THE MANNER OF INQUIRIES MADE BY AO AND HAVING A DIFFERE NT VIEW IN THE MATTER. THE CIT HAS POWER TO LOOK INTO THE ORDER OF THE AO ONLY WHEN THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTER EST OF REVENUE. BUT SUCH IS NOT A CASE HERE. THEREFORE, WE SET ASIDE THE OR DER OF CIT. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THE 12 TH DAY OF AUGUST, 2011. SD/- SD/- (C.L. SETHI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : THE 12 TH DAY OF AUGUST, 2011/TS ITA NO.992/DEL/2009 10 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT, MEERUT. 5.CIT(ITAT), NEW DELHI. AR/ITAT