Appeal details
Counselvise Citation
[2009] 114 COUNSELVISE.COM (IT) 8087 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 5 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-06-2009
Appeal Filed By
Department
Order Result
Partly Allowed
Bench Allotted
D
Next Hearing Date
30-06-2009
Assessment Year
2003-2004
Appeal Filed On
15-01-2008
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `D: NEW DELHI BEFORE SHRI R.P. TOLANI, JM AND SHRI A.K. GORAD IA, AM I.T.A. NOS.142 & 143/DEL OF 2008 ASSESSMENT YEARS: 2002-03 AND 2003-04 ACIT, KARNAL CIRCLE, THE KARNAL COMMUNICATION NETW ORK KARNAL. VS (P) LTD., C/O YOGESH TOWER, KARNAL. APPELLANT RESPONDENT APPELLANT BY: SHRI S. REHMAN RESPONDENT BY: NONE ORDER PER R.P. TOLANI, JM: THESE ARE TWO REVENUE APPEALS. NONE APPEARED FOR THE ASSESSEE DESPITE SEVERAL OPPORTUNITIES, IN VIEW THEREOF, REV ENUES APPEALS ARE HEARD EX PARTE QUA THE ASSESSEE. FOLLOWING GROUNDS ARE RAISE D: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN QUASHING THE PROCEEDINGS U/S 147/148 OF THE INCOME-TAX ACT, 1961 BY MISAPPLYING THE RATIO OF THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT, IN THE CASE OF VIPIN KHANNA, 255 ITR 220. (THIS GROUND IS FOLLOWED BY RELIANCE ON CASE LAWS, WHICH IS NOT REPRODUCED) 2. THAT THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.4,00,000/- MADE BY THE AO ON ACCOUNT OF PERSONAL EXPENSES. 3. THAT THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.17,795/- MADE BY THE AO. 2 4. THAT THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.24,845/- MADE BY THE AO OUT OF MD REMUNERATION. 5. THAT THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.98,890/- MADE BY THE AO ON ACCOUNT OF SALARIES. 6. THAT THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.1,00,000/- MADE BY THE AO OUT OF DIRECTORS REMUNERATION. 7. THAT THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.35,398/- MADE BY THE AO OUT OF TELEPHONE EXPENSES. 8. THAT THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.9000/- MADE BY THE AO OUT OF VEHICLE MAINTENANCE. 9. THAT THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.15,000/- MADE BY THE AO UNDER THE HEAD DIWALI EXPENSES. 10. THAT THE LD. CIT(A) HAS ERRED IN LAW IN DELETIN G THE ADDITION OF RS.1,00,000/- MADE BY THE AO ON ACCOUNT OF BAD DEBT. 11. THAT THE LD. CIT(A) HAS ERRED IN LAW IN DELETIN G THE DISALLOWANCE OF DEPRECIATION MADE BY THE AO. 2. LEARNED DR CONTENDS THAT ASSESSEE HAD NOT FILED VOLUNTARY RETURN. THEREAFTER AO WAS IN RECEIPT OF INFORMATION FROM TH E CASE OF DIRECTOR OF THE ASSESSEE SHRI YOGESH GUPTA AND ISSUED NOTICE U/S 14 8 BY RECORDING FOLLOWING REASONS: CERTAIN ENQUIRIES WERE MADE IN THE CASE OF SH. YOGESH GUPTA, DIRECTOR IN KARNAL COMMUNICATION NETWORK PVT. LTD. KARNAL AND IT WAS FOUND THAT HE COMPANY HAS RECEIVED INCOME FROM ADVERTISEMENT OF RS.1,63,580/- BUT NO RETURN OF INCOME HAS BEEN 3 FILED BY THE COMPANY. I HAVE, THEREFORE, REASON TO BELIEVE THAT ON ACCOUNT OF OMISSION AND FAILURE ON THE PART OF THE ASSESSEE COMPANY AN INCOME OF RS.1,63,580/- HAS ESCAPED ASSESSMENT IN TERMS OF SECTION 147 OF THE I.T. ACT,1961. 3. ASSESSEE FILED RETURN DECLARING LOSS ON 20.8.200 4. THEREAFTER, NOTICES U/S 142(1) AND 143(2) WERE ISSUED. AO ASKED QUERIE S AND ASKED TO PRODUCE BOOKS OF ACCOUNTS, VOUCHERS ETC. AND ATTENDANCE OF THE SAID DIRECTOR BUT THE SAME WAS NOT COMPLIED BY THE ASSESSEE, THEREFORE, A BOVE ADDITIONS WERE MADE. AGGRIEVED ASSESSEE PREFERRED FIRST APPEAL WH ERE CIT(A) HELD THE NOTICE U/S 148 TO BE INVALID AND FURTHER DELETED TH E ADDITIONS ON MERITS ALSO WHICH ARE AGITATED BY REVENUE. NOTICE U/S 148 WAS QUASHED BY FOLLOWING OBSERVATIONS: 7. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE ASSESSEE. IN EARLIER TWO ASSESSMENT YEARS IN SIMILAR CIRCUMSTANCES, THE ASSESSMENTS HAVE BEEN QUASHED BY CIT(A) IN AY 2000-01 AND 2001-02 AND AS INFORMED BY THE ASSESSEE, NO FURTHER APPEAL HAS BEEN FILED BY THE DEPARTMENT IN THOSE CASES AGAINST THE ORDER OF CIT(A). IN THE YEAR UNDER CONSIDERATION ALSO, THE REASONS RECORDED U/S 148 ARE MERELY ON THE ISSUE OF ADVERTISEMENT RECEIPT AMOUNTING TO RS.1,64,580/-. THE AO HAS NOT MENTIONED AS TO HOW AND FROM WHERE HAS THIS INFORMATION BEEN RECEIVED AND HOW HAS THE INCOME ESCAPED FROM ASSESSMENT. FROM THE RECORDS, IT SEEMS THAT NO INFORMATION IN REGARD TO ESCAPEMENT WAS RECEIVED OR AVAILABLE WITH THE AO AT THE TIME OF ISSUE OF NOTICE U/S 148. THE REASONS RECORDED ARE COMPLETELY CAUSAL AND THERE CANNOT BE ANY REASON TO BELIEVE ON SUCH A SIMPLE 4 FACT THAT ADVERTISEMENTS HAVE BEEN RECEIVED, HENCE, INCOME HAS BEEN CONCEALED,. ON THE CONTRARY ASSESSEE HAS PROPERLY SHOWN THE ADVERTISEMENT RECEIPT AND AO HAS ALSO NOT MADE ANY DETAILED INQUIRY EXCEPT ASKING DETAIL OF THE ADVERTISEMENT I N THE QUESTIONNAIRE AND NO ADDITIONS ON THIS ISSUE HAVE BEEN MADE. ON THE CONTRARY, AO HAS ISSUED A DETAILED QUESTIONNAIRE ASKING FOR DETAIL OF VARIOUS OTHER EXPENSES AND OTHER ITEMS OF BALANCE SHEET, WHEREAS NO OTHER INFORMATION OF CONCEALMENT ON ANY OTHER ISSUE WAS AVAILABLE WITH THE ASSESSEE TIL L THE COMPLETION OF ASSESSMENT, THEREFORE, AO HAS TRIED TO MAKE FISHING AND ROVING INQUIRIES AFTER RECORDING REASONS ON A FLIMSY GROUND AND LATER ON RESORTED TO MAKE AD HOC DISALLOWANCES. AS POINTED OUT BY THE ASSESSEE, THE BOOKS OF ACCOUNTS WERE NEITHER REQUIRED TO BE PRODUCED IN THE QUESTIONNAIRE NOR IN THE ORDER SHEET, THEREFORE, ASSESSEE DID NOT PRODUCE BOOKS OF ACCOUNTS, WHEREAS COMPLETE DETAILS, AS REQUIRED BY THE AO WERE FILED WHICH HAVE NOT BEEN DISPUTED BY THE AO IN HIS COMMENTS. AO DOES NOT SEEM TO HAVE FORMED HIS BELIEF IN GOOD FAITH BEFORE STARTING THE REASSESSMENT, THE PROCEEDINGS U/S 148 CANNOT BE RESORTED FOR MAKING FISHING AND ROVING INQUIRIES AND THE ASSESSEE HAS RIGHTLY RELIED ON THIS ISSUE O N THE DECISION OF HONBLE P&H HIGH COURT IN THE CASE OF VIPIN KHANNA, 255 ITR 220, THEREFORE, KEEPING IN VIEW THE ABOVE FACTS AND DISCUSSION, THE PROCEEDINGS INITIATED U/S 148 ARE QUASHED AND ACCORDING, ASSESSMENT MADE, IS ALSO QUASHED AND THE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. 4. LEARNED DR VEHEMENTLY ARGUES THAT CIT(A) HAS HEL D THAT IN SIMILAR CIRCUMSTANCES IN EARLIER TWO YEARS THE ASSESSMENTS HAD BEEN QUASHED. HOWEVER, NO PARITY OF FACTS IS GIVEN. CIT(A) HAS Q UESTIONED THE SOURCE OF INFORMATION OF AO. FURTHER CIT(A) HAS ERRED IN APP RECIATING THE FACT THAT NO 5 BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE AO AND T HE ADVERTISEMENT EXPENSES ON WHICH NOTICE U/S 148 WAS ISSUED WAS SHO WN TO BE ACCOUNTED BEFORE CIT(A), THEREFORE, THE REASONS RECORDED ARE INSUFFICIENT AND ON SURMISES. IT WAS PLEADED THAT THE CORRECT POSITION IS OTHER WAY ROUND INASMUCH AS THE ASSESSEE COMPANY DID NOT FILE RETUR N OF INCOME, IN THE CASE OF A DIRECTOR AO CAME TO KNOW ABOUT HUGE ADVERTISEM ENT EXPENSES AND ON THAT BASIS SATISFIED HIMSELF THAT INCOME HAS ESCAPE D. IT WAS FURTHER CONTENDED THAT AO IS NOT OBLIGED TO DISCLOSE TO THE ASSESSEE THE SOURCE OF HIS INFORMATION AND IN ANY CASE, FOR WANT OF ASSESSEES VOLUNTARY RETURN, IT WAS INCUMBENT UPON HIM TO FORM A VIEW, SINCE TIME LIMIT OTHERWISE HAD EXPIRED, AO WAS LEFT WITH NO CHOICE BUT TO TAKE RECOURSE TO LINE OF ACTION ADOPTED BY HIM. CIT(A) HAS OVERLOOKED THE FACT THAT ASSESSEE HAD NOT FILED RETURNS OF INCOME AND ON THE BASIS OF INFORMATION EMANATING FR OM DIRECTOR, AO FORMED A BELIEF, WHICH IS VINDICATED FROM THE FACT THAT UL TIMATELY THE EXPENDITURE WAS FOUND TO BE BELONGING TO THE ASSESSEE, WHICH WA S NOT SHOWN TO AO AT THE TIME OF RE-ASSESSMENT. 5. CIT(A)S ORDER WAS ASSAILED ON COUNT OF MERITS T HAT NO BOOKS OF ACCOUNTS WERE FILED BEFORE AO. IN THE CIRCUMSTANCE S, CIT(A) BEFORE ENTERTAINING BOOKS OF ACCOUNTS AND STATEMENTS OF AS SESSEE SHOULD HAVE HELD THE SAME TO BE AN ADDITIONAL EVIDENCE AND SHOULD HA VE EITHER REJECTED THE 6 SAME OR CALLED ASSESSEE TO FILE AN APPLICATION FOR ADDITIONAL EVIDENCE SHOWING SUFFICIENT REASONS FOR NON PRODUCTION OF SA ME BEFORE THE AO. THIS IS A MANDATORY REQUIREMENT PRESCRIBED BY RULES AND WITHOUT CARRYING OUT THIS EXERCISE, CIT(A) WAS NOT JUSTIFIED IN AWARDING THE RELIEF TO THE ASSESSEE BASED ON HIS ACCOUNT BOOKS. IT WAS ARGUED THAT WIT HOUT GIVING FACTUAL ASPECTS AND ITS SIMILARITY WITH PRECEDING YEARS, CI T(A) SHOULD NOT HAVE SUMMARILY HELD AN INFERENCE. BESIDES CIT(A) WAS NOT RIGHT IN HOLDING THAT AOS REASONS WERE VAGUE AND WITHOUT ANY MATERIAL AN D, THEREFORE, QUASHING NOTICE U/S 148. ON MERITS ALSO, CIT(A) WAS NOT JUS TIFIED IN DELETING THESE ADDITIONS. 6. WE HAVE HEARD THE LEARNED DR, PERUSED THE MATERI AL AVAILABLE ON RECORD. AS THE FACTS EMERGE, ASSESSEE COMPANY HAD N OT FILED ANY VOLUNTARY RETURN OF INCOME. AO CAME INTO THE KNOWLEDGE OF HU GE EXPENSES WHICH EMANATED FROM THE CASE OF THE DIRECTOR. CIT(A) HAS HELD THAT AOS REASONS ARE VAGUE AND DOES NOT INDICATE THE SOURCE OF THIS INFORMATION. IN OUR VIEW, CIT(A) HAS LOST SIGHT OF THE FACT THAT THE AO HAS H IMSELF MENTIONED THAT THE SOURCE OF INFORMATION IS FROM THE CASE OF MR. YOGES H KUMAR, DIRECTOR. IT HAS BEEN MENTIONED THAT NO RETURN OF INCOME HAS BEE N FILED AND VERIFICATION OF EXPENSES BECOMES IMPERATIVE. IN OUR VIEW, THE A O WAS RIGHT IN ASSUMING JURISDICTION U/S 148. CIT(A), IN OUR OPINION, WAS NOT CORRECT IN HOLDING THE 7 AO TO BE IN FAULT MORE SO WHEN THE ALLEGATIONS MADE ARE NOT CORROBORATED AS THE ANSWER LIES IN THE REASONS ITSELF. APROPOS HOL DING THAT AOS INFERENCE THAT EXPENDITURE PRE-SUPPOSES INCOME IS ALSO NOT CO RRECT BECAUSE THE AO WOULD LIKE TO VERIFY HUGE EXPENSES ARE PROPERLY DEB ITED OR NOT AND THE SAME MAY BE INGREDIENT OF ESCAPEMENT OF INCOME. NOTICE U/S 148 DOES NOT PUT A BURDEN ON AO TO BE FOOLPROOF ABOUT ESCAPEMENT. WHA T IS REQUIRED IS A PRIMA FACIE SATISFACTION BASED ON SOME INFORMATION. THE SAME IS FOUND TO BE PRESENT IN THIS CASE. IN OUR VIEW, ASSUMPTION OF J URISDICTION BY AO CANNOT BE FOUND FAULT WITH WITHOUT SHOWING A SIMILARITY BE TWEEN CIT(A)S ORDER FOR ASSTT. YEARS 2001-02 AND 2002-03. IN VIEW THEREOF, WE UPHOLD THE REOPENING OF ASSESSMENT. 7. COMING TO THE MERITS OF THE CASE, WE FIND SUBSTA NCE IN THE PROPOSITION OF LEARNED DR. ASSESSEE DID NOT PRODUCE ANYTHING I N THE ASSESSMENT PROCEEDINGS, THE ENTIRE RECORD AND ACCOUNT BOOKS WE RE PRODUCED BEFORE CIT(A). THERE IS NO REFERENCE TO ANY ADDITIONAL EV IDENCE, THE REASONS OFFERED BY ASSESSEE FOR NON PRODUCTION AND CIT(A) H AS GIVEN THE RELIEF WITHOUT ADMITTING ADDITIONAL EVIDENCE BY RECORDING THE SUFFICIENCY OF REASONS ON THE PART OF ASSESSEE. AT LEAST THERE IS NO MENTION IN THE ORDER OF CIT(A) IN THIS BEHALF. IN OUR VIEW, CIT(A)S ORDER CANNOT BE CALLED A REASONED AND BALANCED ORDER. IN VIEW THEREOF, WE S ET ASIDE THE MERITS BACK 8 TO THE FILE OF CIT(A) TO PROCEED WITH IT IN ACCORDA NCE WITH LAW I.E. PROPER ADMISSION OF ADDITIONAL EVIDENCE, RECORDING REASONS WHY ASSESSEE WAS PREVENTED IN PRODUCING THE SAME BEFORE AO AND THERE AFTER, DECIDING THE MERITS. 8. IN VIEW THEREOF, REVENUES APPEAL IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE, 2009. (A.K. GORADIA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30 TH JUNE, 2009 VIJAY COPY TO: 1. APPELLANT 2. RESPONDENT. 3. CIT 4. CIT(A), KARNAL. 5. DR ASSISTANT REGISTRAR
