ITAT JODHPUR BENCH
Commissioner of Income-tax
IT APPEAL NO. 235 (JODH.) OF 2012
[ASSESSMENT YEAR 2009-10]
DECEMBER 13, 2012
Hari Om Maratha, Judicial Member – This appeal of the assessee for Assessment year 2009-10 is directed against the order of the ld. CIT, Ajmer dated 28/03/2012 passed u/s 263 of the Income Tax Act, 1961 (‘the Act for short”).
2. Briefly stated, the facts of the case are that the assessee-firm filed its return of income (ROI) on 29.09.2009 declaring total income at Rs. ‘NIL’. The books of accounts of the firm are duly audited u/s 44AB and the report in form No 3 CA and 3CB dated 26/09/2009 were filed alongwith the ROI. The assessee-firm derives its income from sale of Petrol and Diesel and also from transport business. The A.O has completed his order u/s 143(3) on 7.1.2011.
3. Subsequently, ld. Commissioner called for the records of this assessment order and found that this order is erroneous and prejudicial to the interest of the revenue in respect of the following issues :-
(i) transportation receipts
(ii) scrap value of the closing stock of tyres and tubes.
(iii) Expenses under the head “Maruti Penalty Expenses”
After issuing show-cause notice u/s 263 and after hearing the objection of the assessee, the ld. CIT has found the order as such and has, thus, set it aside, to that extent, with a direction to frame it afresh on these issues.
4. Being aggrieved, the assessee-firm has preferred this appeal by raising following grounds:-
1. That the order under sec 263 of Income Tax Act 1961 as passed by the learned CIT is patently invalid, contrary to provision of law and also contrary to the facts and the material, evidence existing on records.
2. That the learned CIT has erred in holding that the original assessment order as passed u/s 143(3) on 7 January 2011 was erroneous and prejudicial to the interest of the Revenue.
3. That the order under sec. 263 as passed by the learned CIT is not justified both on facts and in law.
4. That the order under sec. 263 as passed by the learned CIT is beyond the ambit of scope of sec. 263.
5. That the learned CIT has not considered the facts of the case and also the assessee’s reply while giving directions in respect of the alleged undisclosed transport receipts, stock of old tyres and tubes, income from sale of old tyres and tubes and Maruti penalty expenses. The conclusions as arrived at by him in these respects are erroneous and not justified both on facts and in law.
5. We have heard rival submissions and have carefully gone through the relevant record available before us. It is trite that an order can be revised only and only if the twin-conditions of ‘error in the order’ and ‘prejudice caused to the Revenue’ do co-exist. The subject of ‘revision under section 263’ has been vastly examined and analyzed by various Courts including that of Hon’ble Apex Court. The revisional power conferred on the CIT vide section 263 is of vide amplitude. It enables the CIT to call for and examine the records of any proceeding under the Act. It empowers the CIT to make or cause to be made such an enquiry as he deems necessary in order to find out if any order passed by Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The only limitation on his powers is that he must have some material(s) which would enable him to form a prima facie opinion that the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue. Once he comes to the above conclusion on the basis of the ‘material’ that the order of the Assessing Officer is erroneous and also prejudicial to the interests of the Revenue, the CIT is empowered to pass an order as the circumstances of the case may warrant. He may pass an order enhancing the assessment or he may modify the assessment. He is also empowered to cancel the assessment and direct to frame a fresh assessment. He is empowered to take recourse to any of the three courses indicated in section 263. So, it is clear that the CIT does not have unfettered and unchequred discretion to revise an order. The CIT is required to exercise revisional power within the bounds of the law and has to satisfy the need of fairness in administrative action and fair play with due respect to the principle of audialterampartem as envisaged in the Constitution of India as well as in section 263. An order can be treated as ‘erroneous’ if it was passed in utter ignorance or in violation of any law; or passed without taking into consideration all the relevant facts or by taking into consideration irrelevant facts. The ‘prejudice’ that is contemplated under section 263 is the prejudice to the Income Tax administration as a whole. The revision has to be done for the purpose of setting right distortions and prejudices caused to the Revenue in the above context. The fundamental principles which emerge from the several cases regarding the powers of the CIT under section 263 may be summarized below:
(i) The CIT must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interests of the revenue. Both the conditions must be fulfilled.
(ii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, that the section will be attracted.
(iii) An incorrect assumption of facts or an incorrect application of law will suffice for the requirement or order being erroneous.
(iv) If the order is passed without application of mind, such order will fall under the category of erroneous order.
(v) Every loss of revenue cannot be treated as prejudicial to the interest of the revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view under with which the CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under the law.
(vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the CIT, while exercising his power under section 263, is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer.
(vii) The Assessing Officer exercise quasi-judicial power vested in him and if he exercise such power in accordance with law and arrives as a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not feel satisfied with the conclusion.
(viii) The CIT, before exercising his jurisdiction under section 263, must have material on record to arrive at a satisfaction.
If the Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation be a letter in writing and the Assessing Officer allowed the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard.
6. We have found that the ld. CIT issued a show cause notice dated 06.03.2012 on the above issues to the assessee-firm. A detailed reply dated 20.03.2012 given by the assessee reads as under:-
“1. Difference in Transportation Receipts as per TDS detail and as per Profit & Loss Account:
It is submitted that the department has given observation that details of Transportation Receipt available on record was Rs. 7,53,08,733/- and Transportation Receipt as per Profit & Loss Account was Rs. 7,24,21,780/-. The difference of Rs. 28,86,953/-.
We humbly submit that this difference is arise due to accounting treatment adopted by M/s Tata Motors Ltd. and M/s TML distribution Ltd. Assessee issued Transportation bill in the month of April 2009 & May 2009 but in TDS certificate of M/s Tata Motors Ltd. and M/s TML distribution Ltd. it was taken in the period from 01/03/2009 to 31/03/2009 while in TDS certificate date of payment/amount credited was shown April 2009 & may 2009 month which was falling in next financial year 2009-10.
As such Assessee issued Transportation bill in the month of April 2008 & May 2008 but in TDS certificate of M/s Tata Motors Ltd. and M/s TML distribution Ltd. it was taken in the period from 01/03/2008 to 31/03/2008 while in TDS certificate date of payment/amount credited was shown April 2008 & may 2008 month which was falling in financial year under assessment i.e. 2008-09.
As such assessee issued Transportation bill in the F.Y. 2007-08 but some parties’ payment received in F.Y. 2008-09. They deduct TDS when they paid the amount.
Copy of above mentioned TDS certificates attached with this letter for your kind consideration. Thus, we have declared transportation receipts properly and correctly.
Many time assessee subcontract the transportation work to other parties. Amount paid to other parties directly less from Transportation receipts.
In view of above submission, explanation, it is humbly submitted that we have declared transportation receipts properly and correctly and the difference arise due to accounting treatment.
2. Tyre and Tube Expenses, Closing Stock of old Tyre and Tubes & Income from sale of old Tyre and Tubes:
It is submitted that the department has given observation that the assessee firm has claimed total expenses of Rs. 51,75,5601/- under the head of Tyre and Tube Expenses in Profit & Loss Account but there is no closing stock of old tyre has been shown and not shown any income by sale of old tyre and tubes.
We humbly submit that the assessee firm has claimed total expenses of Rs. 51,75,560/- under the head of Tyre and Tube Expenses in Profit & Loss Account. This expenses mainly divided in three part:
Tyre& Tube (New Tyre purchases expenses)
Tyre&Tube (Tyre Retreading Expenses)
Tyre and Retreading (Old Tyre purchases and Retreading Expenses)
Tyre& Tube (New Tyre Purchases Expenses) This type of expenses was purchase of new Tyre& Tube for running heavy vehicle by the assessee. New Tyre& Tubes purchased as per requirement so there was no closing stock. This is purchased and consumed item.
Tyre& Tube (Tyre Retreading Expenses) – This type of expenses was tyre retreading expenses. When a tyre depreciated or damaged then it retreaded. Tyre retreading means, Tyre Retreading is a technology, where the old tyres are made serviceable by removing worn out and damaged treads (rubber belts) and replacing it with new treads. Similar to the new tyres, the treated tyres can be very well used on all vehicles, irrespective of light or heavy vehicles. Vihen retreaded tyre damaged or fully depreciated, it has negligible scrap value.
Tyre& Retreading (Old Tyre Purchases & Retreading Expenses) – This type of expenses was old tyre purchases & retreading expenses. Assessee purchased old tyre ‘and retreaded them, for the old tyres was made serviceable similar to the new tyres.
In view of above submission, explanation, it is humbly submitted that assessee purchased tyre& tubes and consumed them so there was no closing stock of tyre& tubes. When a tyre depreciated or damaged then it retreaded. When retreaded tyre damaged or fully depreciated, it has negligible scrap value. So there was negligible scrap income which was shown in other income in Profit & Loss Account.
3. Maruti Penalty Expenses :
It is submitted that the department has given observation that the assessee firm has claimed expenses of Rs. 1,01,5661/- under the head of Maruti Penalty Expenses in Profit & Loss Account, since the expenses are of the nature of penalty, the same are required to be fully disallowed.
We humbly submit that the assessee-firm has claimed expenses of Rs. 1,01, 566/-under the head of Maruti Penalty Expenses in Profit & Loss Account. Nature of this expenses describe as follows:
When assessee ‘s transportation vehicle (trailer) not reached on time at Maruti ‘s vehicle pickup unit for loading of maruti passenger cars for deliver at maruti dealers, then maruti charged a penalty for late loading.
When assessee ‘s transportation vehicle (trailer) not deliver on time maruti passenger cars at maruti dealers at their showroom or business place, then maruti charged a penalty for late delivery.
Sometimes loaded goods damaged during the course of transportation then maruti charged a charges/penalty for damage which was included in this expenses.
Penalty charged by Maruti Co. does not constitutes any violation of the statutory duty or obligation. So Maruti Penalty Expenses is normal business expenses.
In view of above submission, explanation, it is humbly submitted that this expenses is normal business expenses and not a nature of penalty.
We once again humbly submit that in the given facts & circumstances of the case, provisions of the section 263 are not attracted. From various cited case laws, judicious assessment order u/s 143(3), explanation and submission on each & every issue/point raised by your honour and all the material on the records, invoking the provisions of section 263 will be prejudicial to the natural justice, unjustified, bad in law and will be invalid. We pray for dropping the same.”
7. Per contra, ld. CIT (D.R.) has supported the order of ld. CIT (Admn.) in its letter as well in its spirit.
8.After considering rival submissions in the light of the legal position on the subject of revision, we have found that the A.O. has examined each and every of the above issues, as per law. The order of ld. CIT is directory in the nature which is based on his own view as against the taken by the A.O. We don’t find any lack of inquiry or even a case of inadequate inquiry. Under section 263, the commissioner cannot substitute his own view. He has not given any valid reason as to how the assessment order is erroneous. He has simply stated that the assessment order dated 7.1.2011 is erroneous and prejudicial to the interest of the revenue to that extent. The intention of this section is somewhat different. In case the A.O. has not made enquiries and taken an erroneous decision regarding an item of income, only then the order can be said to be erroneous on that point. In case the A.O. takes a possible view qua a claim made and the ld. CIT takes another possible view, the order cannot be said to be erroneous.
9. Accordingly, we rather, think the order of the ld. CIT is not correct. He has transgressed his revisionary powers as if he is sitting in appeal. His powers are delineated by the courts in the manner we have discussed above. Therefore, set aside the order of ld. CIT passed u/s 263 of the Act. The order of A.O. is restored.
10. In the result, the appeal of the assessee-firm is allowed.