The DCIT, Circle-3(1), Baroda V. Construction Manegement Group, Baroda

MA 191/AHD/2016

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5752 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2006-2007
• Appeal Filed On: 21-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Audit objection; Tax effect

Judgement Text

M.A. NO.191 /AHD/ 201 6 ASSESSMENT YEAR : 20 06 - 07 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR , AM AND S.S. GODARA , JM] M.A. NO.191/AHD/2016 (IN ITA NO. 2 219 / AHD / 2 0 1 4 ASSESSMENT YEAR: 2 006 - 07 DY. COMMISSIONER OF INCOME TAX , .... ...... .......... APPELLANT CIRCLE - 8, AHMEDABAD. VS. CONSTRUCTION MANAGEMENT GROUP, .......... . RESPONDENT C/O. VINODABEN V. PATEL, A/401/402, TOWER A SILV E R ARCADE COMPLEX AKOTA, VADODARA 390 020. [PAN: AABFC 0341 D ] APPEARANCES BY: TUSH AR P. HEMANI FOR THE APPELLANT MUDIT NAGPAL FOR THE RESPONDENT D ATE OF CONCLUDING THE HEARING : 18.08 . 2017 DATE OF PRONOUNCING THE ORDER : 15 . 0 9 .2017 O R D E R PER PRAMOD KUMAR, AM: 1. THIS IS A RECTIFICATION PETITION FILED BY T HE ASSESSING OFFICER AND IT SEEKS RECALL OF ORDER DATED 15.12.2015 PASSED BY THIS TRIBUNAL ON THE GROUND THAT WHILE THE DEPARTMENTAL APPEAL WAS DISMISSED ON THE GROUND OF TAX EFFECT BEING LESS THAN RS.10 LAKHS, IT DID NOT TAKE INTO ACCOUNT THE FACT THAT IN THIS CASE REVENUE AUDIT OBJECTION WAS ACCEPTED BY THE DEPARTMENT. 2. THE APPLICANT POINTS OUT THAT THE DEPARTMENTAL APPEAL WAS DISMISSED VIDE ORDER DATED 15.12.2015 ON THE GROUND THAT TAX EFFECT INVOLVED IN THE PRESENT APPEAL IS LESS M.A. NO.191 /AHD/ 201 6 ASSESSMENT YEAR : 20 06 - 07 PAGE 2 OF 6 THAN RS.10 LAKHS IN THE LIGHT OF CIRCULAR NO.21/2015 DATED 10.12.2015. IT IS, HOWEVER, ALSO POINTED OUT THAT IN PARA 8 OF THE SAID CIRCULAR IT IS INTER ALIA STATED THAT ADVERSE JUDGEMENTS RELATING TO THE FOLLOWING ISSUES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT TH E TAX EFFECT ENTAILED IS LESS THAN THE MONETARY LIMITS SPECIFIED AND THE EXCEPTIONS ARE AS FOLLOWS : - (A) WHERE THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF AN ACT OR RULE ARE UNDER CHALLENGE, OR (B) WHERE BOARD S ORDER, NOTIFICATION, INSTRUCTION O R CIRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA VIRES, OR (C) WHERE REVENUE AUDIT OBJECTION IN THE CASE HAS BEEN ACCEPTED BY THE DEPARTMENT, OR (D) WHERE THE ADDITION RELATES TO UNDISCLOSED FOREIGN ASSETS/ BANK ACCOUNTS. 3. OUR ATTENTION WAS EVEN INVI TED TO THE FACT THAT IN THIS CASE THE REVENUE AUDIT PARTY VIDE OBJECTION NO.ITRA - XII/HM NO.4 DATED 08.06.2009 FOR A.Y. 200 6 - 07 HAD RAISED OBJECTION AGAINST THE INCORRECT EXPENSES/PROVISION OF RS.13,81,126/ - . THE FACTS OF THE CASE ARE THAT AS PER LEDGER AC COUNT, THE CONTRACT INCOME OF THE ASSESSEE W A S RS.3,01,82,522/ - AND AS PER PROFIT & LOS S ACCOUNT IT WAS RS.2,84,82,522/ - . IN THE LEDGER ACCOUNT, THE CONTR A CT INCOME W A S REDUCED BY RS.17,00,000/ - TOWARD S PROVISION FOR EXPENSES. IN THE B ALANCE S HEET, THE P ROVISION W A S ONLY R S.3,18,874/ - . ALSO, PROVISIONS FOR INCOME TAX, INTEREST AND S A LARY TO PARTNERS ARE ALSO DEBITED TO PROFIT & LOSS ACCOUNT. THUS, THE ASSESSEE HAS CLAIMED INCORRECT EXPENSES/PROVISION OF RS.13,81,126/ - (17,00,000 3,18,874) , WHICH RESUL TED INTO UNDER - ASSESSMENT OF INCOME OF RS.13,81,126/ - . THIS OBJECTION WAS ACCEPTED BY THE DEPARTMENT. THE APPLICANT CONTENDS THAT IN VIEW OF THE FACT THAT THE DEPARTMENTAL OBJECTION OF THE REVENUE AUDIT PARTY WAS ACCEPTED IT IS A FIT CASE IN WHICH APPEAL COULD NOT BE DISMISSED ON THE GROUND M.A. NO.191 /AHD/ 201 6 ASSESSMENT YEAR : 20 06 - 07 PAGE 3 OF 6 THAT TAX EFFECT INVOLVED IS LESS THAN RS.10 LAKHS. HE HAS THUS URGED TO RECALL THE ORDER DATED 15.12.2015 AND HEAR THE MATTER ON MERITS. 4. LEARNED COUNSEL FOR THE ASSESSEE DOES NOT DISPUTE THE FACT THAT THE REVENU E AUDIT OBJECTION WAS RAISED IN THE PRESENT CASE AND THE SAME WAS ACCEPTED BY THE DEPARTMENT. HE, HOWEVER, CONTENDED THAT MERE FACT THAT REVENUE AUDIT OBJECTION HAS BEEN ACCEPTED BY THE DEPARTMENT CANNOT BE REASON ENOUGH FOR PURSUING THE MATTER ON MERITS BEFORE THE TRIBUNAL. HE SUBMITS THAT VIDE SUBSEQUENT CIRCULAR DATED 23.01.2017 CBDT HAS CLARIFIED THE ABOVE POSITION BY STATING AS FOLLOWS : - INSTRUCTIONS WERE ISSUED VIDE CBDT CIRCULAR NO.21/2015 DATED 10.12.2015, TO THE EFFECT THAT APPEALS/SLPS SHOULD NOT BE FILED IN CASES WHERE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS SPECIFIED UNDER PARA 3 OF THE SAID CIRCULAR, IT WAS ALSO CLARIFIED THEREIN THAT AN APPEAL SHOULD NOT BE FILED MERELY BECAUSE THE TAX EFFECT IN A CASE EXCEEDS THE MONETARY LIMITS PRE SCRIBED IN THE SAID CIRCULAR. 2. IN PARA 8 OF THE AFORESAID CIRCULAR NO.21/2015, IT HAS BEEN UNAMBIGUOUSLY AND EXPRESSLY PROVIDED THAT ADVERSE JUDGEMENTS RELATING TO THE FOLLOWING ISSUES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT E NTAILED IS LESS THAN THE MONETARY LIMITS SPECIFIED IN CIRCULAR OR EVEN IF THERE IS NO TAX EFFECT: A. WHERE THE CONSTITUTIONAL VALIDITY OF THE PROVISIONS OF AN ACT OR RULE ARE UNDER CHALLENGE, OR B. WHERE BOARD'S ORDER, NOTIFICATION, INSTRUCTION O R CIRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA VIRES, OR C. WHERE REVENUE AUDIT OBJECTION IN THE CASE HAS BEEN ACCEPTED BY THE DEPARTMENT D. WHERE THE ADDITION RELATES TO UNDISCLOSED FOREIGN ASSETS/BANK ACCOUNTS. THE DIRECTION TO 'CONTEST ON MERI TS' NEGATES THE MECHANICAL FILING OF APPEALS IN THESE CASES. 3. HOWEVER, IT HAS BEEN NOTICED THAT PARA 8 (C) OF CIRCULAR NO.21/2015, REGARDING CASES WHERE ADDITION MADE ON ACCOUNT OF REVENUE AUDIT OBJECTION IS DELETED, IS BEING ERRONEOUSLY INTERPRETED AN D APPEALS ARE M.A. NO.191 /AHD/ 201 6 ASSESSMENT YEAR : 20 06 - 07 PAGE 4 OF 6 BEING MECHANICALLY FILED BY THE DEPARTMENT WITHOUT PROPER EXAMINATION OF THE CASE ON MERITS. THIS IS CONTRARY TO THE INSTRUCTIONS CONTAINED IN CIRCULAR NO.21/2015 AND CIRCULAR NO.8/2016. IT IS, THEREFORE, CLARIFIED THAT THE IMPORT AND INTE NT OF PARA 8 OF THE CIRCULAR NO.21/20L5 IS THAT EVEN ON ISSUES MENTIONED IN THE SAID PARA, APPEALS AGAINST THE ADVERSE JUDGEMENT SHOULD ONLY BE FILED ON MERITS. 4. ACCORDINGLY, HENCEFORTH, APPEALS SHOULD NOT BE FILED BY THE DEPARTMENT IN VIOLATION OF INSTRU CTIONS MENTIONED ABOVE. FURTHER, APPEALS THAT MAY HAVE BEEN FILED IN VIOLATION OF THESE INSTRUCTIONS MAY BE WITHDRAWN. 5. THE ABOVE MAY BE BROUGHT TO THE NOTICE OF ALL CONCERNED. 5. LEARNED COUNSEL, ON THE BASIS OF ABOVE CIRCULAR, CONTENDS THAT EV EN IN THE SITUATION IN WHICH REVENUE AUDIT OBJECTION HAS BEEN ACCEPTED BY THE INCOME TAX AUTHORITIES, THE DECISION TO PURSUE OR NOT TO PURSUE WILL HAVE TO BE TAKEN ON MERIT IN EACH CASE. IN OTHER WORDS, ACCORDING TO THE LEANED COUNSEL, EVEN WHEN THE REVEN UE AUDIT OBJECTION HAS BEEN ACCEPTED BY THE DEPARTMENT IT IS ONLY AFTER THE SATISFACTION OF THE COMMISSIONER THAT THE INCOME TAX DEPARTMENT HAS THE STRONG CASE THAT APPEAL CAN BE PURSUED FOR ADJUDICATION ON MERITS. HE SUBMITS THAT NO SUCH SITUATION IS IND ICATED IN THE PRESENT CASE. LEARNED COUNSEL FURTHER INVITES OUR ATTENTION TO CERTAIN JUDICIAL PRECEDENTS, WHICH FOR THE REASONS WE WILL SET OUT IN A SHORT WHILE, WE NEED NOT REFER AT THIS STAGE, WHICH ARE IN FAVOUR OF THE ASSESSEE ON MERITS. IT IS SUBMIT TED THAT WHEN THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE ON MERITS BY BINDING JUDICIAL PRECEDENTS THERE CANNOT BE ANY GOOD REASON TO PURSUE THE MATTER IN APPEAL FOR ADJUDICATION ON MERITS. IN THESE CIRCUMSTANCES, ACCORDING TO LEARNED COUNSEL, RECALL O F THIS ORDER WILL LEAD TO MULTIPLICITY OF PROCEEDINGS. HE THUS URGED US NOT TO RECALL THE ORDER AS THERE IS NOTHING TO SHOW OR EVEN TO SUGGEST THAT APPLICANT IS OF THE VIEW THAT HE HAS A CASE ON MERITS. 6. IN THE BRIEF REJOINDER, LEARNED DEPARTMENTAL REP RESENTATIVE SUBMITS THAT IT IS NOT FOR THE ASSESSEE TO DECIDE AS TO WHETHER THE INCOME TAX DEPARTMENT SHOULD PURSUE THIS M.A. NO.191 /AHD/ 201 6 ASSESSMENT YEAR : 20 06 - 07 PAGE 5 OF 6 APPEAL ON MERITS OR NOT, AND THAT CALL HAS TO BE TAKEN BY THE AUTHORITIES CONCERNED ONLY. HE NEVERTHELESS FAIRLY ACCEPTS THAT THERE IS NOTHING MORE THAN THE FACT THAT THE REVENUE AUDIT OBJECTION HAS BEEN ACCEPTED IN THE PRESENT CASE AND AS SUCH THERE IS NO SATISFACTION OF THE INCOME TAX AUTHORITIES TO THE EFFECT THAT IT IS A CASE WHICH DESERVES TO BE PROCESSED EVEN WHEN THE TAX EFFECT IS LESS THAN RS.10 LAKHS. HE, HOWEVER, CONTENDS THAT NO SUCH CALL IS NECESSARY AT PRESENT BECAUSE RIGHT NOW HE IS ONLY SEEKING RECALL OF THE TRIBUNAL S ORDER DISMISSING THE APPEAL SUMMARILY. THE DECISION AS TO WHETHER THE APPEAL IS TO BE PURSUED CAN ONLY B E TAKEN AFTER THE SAID DISMISSAL ORDER IS RECALLED. HE THUS URGES US TO RECALL TRIBUNAL S ORDER DATED 15.12.2015 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LE GAL POSITION. 8. WE SEE MERITS IN THE PLEA OF THE LEARNED COUNSEL FOR THE ASSESSEE. IN ORDER THAT AN APPEAL CAN BE PURSUED ON MERITS BY THE INCOME TAX AUTHORITIES IN A CASE WHERE TAX EFFECT IS LESS THAN RS.10 LAKHS IT IS NOT SUFFICIENT THAT THE REVENUE AUDIT OBJECTION HAS BEEN ACCEPTED BY THE DEPARTMENT. IN SUCH A CASE, EVEN AFTER ACCEPTANCE OF THE REVENUE AUDIT OBJECTION, THE MATTER HAS TO BE EXAMINED ON MERITS BY THE AUTHORITIES CONCERNED TO TAKE A CONSCIOUS CALL AS TO WHETHER OR NOT SUCH AN APPEAL IS ACTUALLY WORTH PURSUING. IN OTHER WORDS, SIMPLY BECAUSE REVENUE AUDIT OBJECTION HAS BEEN ACCEPTED BY THE REVENUE AUTHORITIES DOES MAKE DEPARTMENTAL APPEAL INVOLVING TAX EFFECT LESS THAN RS.10 LAKHS WHICH ARE REQUIRED TO BE PURSUED ON MERITS. IN SUCH A S ITUATION, A CONSCIOUS CALL FOR PURSUING THE APPEAL ON MERITS IS REQUIRED TO BE TAKEN ON MERITS OF EACH CASE. THAT DECISION IS NOT ON RECORD AND, THEREFORE, GIVEN PRESENT FACTS AS BEFORE US IT IS NOT REALLY NECESSARY TO RECALL THE ORDER DATED 15.12.2015. WHILE IT IS NOT FOR US TO JUDGE, AS TO WHETHER THE INCOME TAX AUTHORITIES ARE JUSTIFIED IN DECIDING WHETHER A PARTICULAR APPEAL IS TO BE PURSUED OR NOT, THERE HAS TO BE A CONSCIOUS DECISION BY THE M.A. NO.191 /AHD/ 201 6 ASSESSMENT YEAR : 20 06 - 07 PAGE 6 OF 6 INCOME TAX AUTHORITIES TO PURSUE AN APPEAL IN CASE TAX EFFE CT IS LESS THAN RS.10 LAKHS EVEN WHEN THE REVENUE AUDIT OBJECTION IS ACCEPTED BY THE INCOME TAX DEPARTMENT. IN THIS VIEW OF THE MATTER, WE SEE NO MERITS IN THE RECTIFICATION PETITION FILED BY THE DEPARTMENT BEFORE US. WE MUST, HOWEVER, MAKE IT CLEAR THAT IN A CASE IN WHICH INCOME TAX AUTHORITIES CONCERNED ARE OF THE CONSCIOUS VIEW THAT APPEAL IS TO BE PURSED ON MERIT, IT WILL BE OPEN TO THE APPLICANT TO MOVE A FRESH RECTIFICATION APPLICATION CONVEYING THE SAID DECISION OF THE INCOME TAX AUTHORITIES AND TH E TRIBUNAL WILL THEN TAKE A CALL, AS MAY BE CONSIDERED APPROPRIATE, ON RECALL OF THE IMPUGNED ORDER. WITH THESE OBSERVATIONS, THE PRESENT RECTIFICATION APPLICATION IS REJECTED. 9 . IN THE RESULT, MISCELLANEOUS APPLICATION FILED BY THE DEPARTMENT IS DISMI SSED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 15 TH DAY OF SEPTEMBER , 2017. SD/ - SD/ - S.S. GODARA PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 15 TH DAY OF SEPTEMB ER , 2017 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER UE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, A HMEDABAD