Income Tax Appellate Tribunal - Delhi
R.S. Components & Controls (India) ... vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'F' : NEW DELHI)
BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER
and
SHRI B.C. MEENA, ACCOUNTANT MEMBER
ITA No.972/Del./2010
(ASSESSMENT YEAR : 2005-06)
M/s. R.S. Components & Controls (India) Ltd., vs. Addl. CIT,
222, Okhla Industrial Estate, Range 15,
New Delhi - 110 020. New Delhi.
(PAN : AAACR0194D)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri Anil Bhalla, CA
REVENUE by : Shri Pradeep Kumar, CIT DR
ORDER
PER B.C. MEENA, ACCOUNTANT MEMBER :
This appeal filed by the assessee emanates from the order of CIT, Delhi
- V dated 21.01.2010 for the assessment year 2005-06. The assessee has taken the following grounds of appeal :-
"1. The learned CIT-Delhi, has erred both on facts and in law in passing an order u/s 263 without jurisdiction and therefore the order u/s 263 is bad in law.
2. The learned CIT-Delhi, was under mistaken belief that the order passed u/s 143(3) was erroneous and prejudicial to the revenue in as much as the issues raised were duly considered by the learned Assessing Officer while framing the assessment u/s 143(3) of the Act.2 ITA No.972/Del./2010
3. The learned CIT-Delhi, has erred in law in trying to substantiate the opinion of the AO with his opinion which act is bad in law.
4. The appellant craves leave to add, alter or amend the ground of appeal at a later stage."
2. In this case, the return was filed on 30.10.2005 declaring income at nil. The case was selected for scrutiny and notices were issued u/s 143(2) on 25.10.2006. The company is engaged in the business of mail order supply of industrial components, spare parts in the nature of cables and connectors, control and automation components, electronic and electrical consumables, semi conductors, tests and measurement instruments, maintenance safety and security equipment and components, mechanical products and tools and technical books, etc. etc. The assessment u/s 143(3) was completed on 17.11.2008 at an income of Rs.1,01,29,688/-.
3. While pleading on behalf of the assessee, the learned AR submitted that the assessment was completed u/s 143(3) of the Income-tax Act, 1961. In the show cause notice issued by the CIT u/s 263 of the Income-tax Act (placed at pages 26 & 27 of the paper book, the CIT has raised three issues. Firstly, the assessee has claimed deduction for Rs.71,09,456/- on account of commission paid @ 5% to M/s. Control & Switchgear. As per CIT, the Assessing Officer has not examined this claim as to how M/s. Control & Switchgear helped in the sales. It is related concern. The reasonableness of the commission paid 3 ITA No.972/Del./2010 was also required to be examined. The Assessing Officer has not examined these aspects of the deduction claimed by the assessee. For this, Ld. AR submitted that during the assessment proceedings, this query was raised and during the proceedings, assessee has submitted on this issue as under :-
"(b) Regarding your query of commission paid, we submit that the same has been paid to M/s. Controls & Switchgear Co. Ltd.
(details enclosed at page 1) in view of the expertise and the requisite infrastructure of country wide marketing network with M/s. Controls & Switchgear Company Limited it was decided by the Board of Directors of the assessee company to pay commission @ 5% on sales effected through M/s. Controls & Switchgear Company Limited."
The Assessing Officer satisfied with the explanation of assessee and accepted the same. Further, Ld. AR submitted that in the just preceding year, such claim was allowed. The order of the Assessing Officer passed u/s 143(3) for the Assessment Year 2003-04 (placed at pages 4 & 5 of the paper book). Ld. AR submitted that the Assessing Officer has taken a plausible view and there was no lack of proper enquiry. Wherever two views are possible the Assessing Officer can adopt one plausible view. In that situation, CIT cannot have jurisdiction u/s 263 of Income-tax Act. For this proposition, Ld. AR relied on the decision of CIT vs. Sunbeam Auto Limited reported in 227 CTR (Del) 133 wherein the Hon'ble Delhi High Court held that when there was an enquiry and even if it was inadequate that would not by itself give occasions to CIT to make order u/s 263, merely because the CIT has different opinion in the matter. CIT can invoke the provisions of section 263 only in the case of 4 ITA No.972/Del./2010 lack of enquiry. The decision of Hon'ble Madras High Court in the case of CIT vs. Mepco Industries Ltd. - 294 ITR 121 (Mad) for the proposition that wherever two views are plausible and Assessing Officer has adopted one plausible view then the CIT cannot invoke the jurisdiction u/s 263 of the Income-tax Act. Ld. AR further relied on the decision of Hon'ble Mumbai High Court in the case of CIT vs. Gabrial India Ltd. - 203 ITR 108 (Mum.) for the proposition that CIT cannot revise merely because he disagrees with the view of Assessing Officer. Queries made and explained but not mentioned in the order of Assessing Officer then also the order of Assessing Officer cannot be said to be erroneous. Further Ld. AR relied on the decision of Hon'ble Rajasthan High Court in the case of CIT vs. Mangilal Didwania - 286 ITR 126 (Raj.) for the proposition that once query made and explained and nothing is mentioned in the order by the Assessing Officer, it cannot make an order to be erroneous. Learned AR also relied on the decision of Hon'ble Delhi High Court in the case of CIT vs. of CIT vs. Hindustan Coca Cola Beverages Pvt. Ltd. - 2011-TIOL-33-HC-DEL-IT (ITA Nos.1391/ 2010, 1394/2010 & 1396/2010) for the proposition that when full details have been given in the notes to the accounts, balance sheet and tax audit report with regard to claim of depreciation on goodwill, then the proceedings u/s 263 cannot be sustained. Ld. AR further relied on the decision of ITAT, Bench 'C', Chennai in the case of Sical Logistics Ltd. Vs. ACIT reported in 127 ITD 5 ITA No.972/Del./2010 187 (Chennai)(TM) where it has been held that entire annual accounts were before the Assessing Officer and the annual accounts can be the basis to make enquiries into various aspects wherever the Assessing Officer feels necessary to do so. The Assessing Officer has also not made summary assessments and had enquired into various details. The Assessing Officer did not feel it necessary to call for details in respect of matters the Commissioner of Income Tax deemed necessary to call. The Third Member noted that it is a matter of perception which varies from person to person and it is who is the Assessing Officer the adjudicator as well as investigator and therefore it is his perception which counts and not that of Commissioner of Income Tax. Ld. AR further relied on the case of the Institute of Chartered Accountants of India vs. DIT (Exemptions) - 2011-TIOL-69-ITAT-DEL where the proceedings u/s 263 were held to be invalid. Learned AR also relied on the decision of Hon'ble Delhi High Court in the cases of CIT vs. Vikas Polymers
- 2010-TIOL-595-High Court-DEL-IT, CIT vs. Vikram Aditya & Associates (P) Ltd. - 287 ITR 268 (Del.) and Hon'ble Gujarat High Court in the case CIT vs. Arvind Jewellers - 259 ITR 502 (Guj.). Ld. AR further relied on the decision of Hon'ble Supreme Court in the case of CIT vs. Max India Limited
- 295 ITR 282 (SC) for the proposition that to assume jurisdiction, both the conditions have to be in existence, for example, the order has to be erroneous as well as prejudicial to the interest of the revenue. Existence of one will not 6 ITA No.972/Del./2010 entitle the CIT to assume jurisdiction. He further relied on the decision of Hon'ble Supreme court in the case of Malabar Industrial Co. Ltd. vs. CIT reported in 243 ITR 83 (SC). Further reliance was also placed on the decision of ITAT, Jodhpur Bench in the case of Metallizing Equipment vs. JCIT - (2005) 96 TTJ (Jd.) 827, ITAT, Pune Bench in the case of Bagaria Vegetable Products Ltd. vs. JCIT reported in 106 ITD 105 (Pun)(TM), ITAT, Delhi Bench in the case of Bharti Aquanet Ltd. - ITA No.1950/Del/2008 and Hon'ble Delhi High Court in the case of ITO vs. DG Housing Projects Ltd. - ITA No.179/2011. The second issue in the show cause notice was regarding the depreciation on the vehicles. Ld. AR pleaded that the CIT has himself accepted in the order that there was no error in the order on this account. Further, the third issue in the show cause notice was regarding the applicability of TDS provisions and examination thereof. Ld. AR submitted that the assessee has submitted all the relevant details and the same were available in the return of income with the Assessing Officer. The details of TDS, section wise and date-wise, were also annexed as Annexure 'H' to the balance sheet (page 12). Even sections under which TDS were deducted have been clearly mentioned. The relevant challans were also enclosed. Assessing Officer had satisfied himself about the relevant provisions of Act under which TDS was detected. The relevant challans filed clearly show the date on which 7 ITA No.972/Del./2010 TDS was deposited. Even dates were also mentioned in Annexure 'H'. Therefore, on this count also, the order of the CIT is not justified.
4. On the other hand, the learned DR relied on the order of the CIT.
5. We have heard both the sides on the issue. We find that Assessing Officer inquired into the issue of payment of commission and the assessee submitted the explanation in this regard. Assessee also submitted details of commission paid along with the order of preceding year in which such commission was allowed. These facts show that Assessing Officer has made the relevant enquiry and has accepted the submissions of assessee in this regard. The second allegation made by the CIT in the show cause notice has been dropped by CIT himself also shows that there was no lack of enquiry on that issue. Regarding enquiry in respect of TDS, we note that the details of TDS, section-wise and date-wise, were filed before the Assessing Officer along with the relevant challans, copy of which are placed at pages 10 to 25 of the paper book shows that there was no lack of enquiry on this count also. Considering totality of the facts and circumstances, we find that there were enquiries by Assessing Officer on the issues raised by the CIT in the show cause notice prior to passing the order u/s 143(3) of the Income-tax Act. Assessing Officer has taken one of the plausible views, therefore, the CIT cannot invoke the jurisdiction u/s 263 to replace the view taken by the Assessing Officer. The Hon'ble jurisdictional High Court in the latest case of 8 ITA No.972/Del./2010 ITO vs. DG Housing Projects Ltd. - ITA No.179 / 2011 dated 1st March, 2012 has held as under :-
"17. This distinction must be kept in mind by the CIT while exercising jurisdiction under Section 263 of the Act and in the absence of the finding that the order is erroneous and prejudicial to the interest of Revenue, exercise of jurisdiction under the said section is not sustainable. In most cases of alleged "inadequate investigation", it will be difficult to hold that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. We may notice that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT [see CIT vs. Shree Manjunathesware Packing Products, 231 ITR 53 (SC)]. Nothing bars/prohibits the CIT from collecting and relying upon new/additional material/evidence to show and state that the order of the Assessing Officer is erroneous.
18. It is in this context that the Supreme Court in Malabar Industrial Co. Ltd. vs. Commissioner of Income Tax, (2000) 243 ITR 83 (SC), had observed that the phrase 'prejudicial to the interest of Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of Revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of Revenue. Thus, when the Assessing Officer had adopted one of the courses permissible and available to him, and this has resulted in loss to 9 ITA No.972/Del./2010 Revenue; or two views were possible and the Assessing Officer has taken one view with which the CIT may not agree; the said orders cannot be treated as an erroneous order prejudicial to the interest of Revenue unless the view taken by the Assessing Officer is unsustainable in law. In such matters, the CIT must give a finding that the view taken by the Assessing Officer is unsustainable in law and, therefore, the order is erroneous. He must also show that prejudice is caused to the interest of the Revenue.
19. In the present case, the findings recorded by the Tribunal are correct as the CIT has not gone into and has not given any reason for observing that the order passed by the Assessing Officer was erroneous. The finding recorded by the CIT is that "order passed by the Assessing Officer may be erroneous". The CIT had doubts about the valuation and sale consideration received but the CIT should have examined the said aspect himself and given a finding that the order passed by the Assessing Officer was erroneous. He came to the conclusion and finding that the Assessing Officer had examined the said aspect and accepted the respondent's computation figures but he had reservations. The CIT in the order has recorded that the consideration receivable was examined by the Assessing Officer but was not properly examined and therefore the assessment order is "erroneous". The said finding will be correct, if the CIT had examined and verified the said transaction himself and given a finding on merits. As held above, a distinction must be drawn in the cases where the Assessing Officer does not conduct an enquiry; as lack of enquiry by itself renders the order being erroneous and prejudicial to the interest of the Revenue and cases where the Assessing Officer conducts enquiry but finding recorded is erroneous and which is also prejudicial to the interest of the Revenue. In latter cases, the CIT has to examine the order of the Assessing Officer on merits or the decision taken by the Assessing Officer on merits and then hold and form an opinion on merits that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. In the second set of cases, CIT cannot direct the Assessing Officer to conduct further enquiry to verify and find out whether the order passed is erroneous or not.10 ITA No.972/Del./2010
Keeping these facts in view and various decisions relied upon by the learned AR and in view of the latest decision of Hon'ble jurisdictional High Court, we hold that the CIT was not justified in invoking the provisions of section 263.
The order passed by the Assessing Officer was neither erroneous nor prejudicial to the interest of revenue. The Assessing Officer has adopted one of the courses available to him. The Assessing Officer has taken one view with which CIT may not agree, however, the order cannot be treated as erroneous order which is prejudicial to the interest of revenue. The view taken by the Assessing Officer was not a view which is not unsustainable in the law. Keeping these facts in view, we allow the assessee's appeal and set aside the order of the CIT.
6. In the result, the appeal of the assessee is allowed.
Order pronounced in open court on this 23rd day of March, 2012.
Sd/- sd/-
(U.B.S. BEDI) (B.C. MEENA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated the 23rd day of March, 2012
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT-V, New Delhi.
5.CIT(ITAT), New Delhi AR, ITAT
NEW DELHI.