SURESH K JAJOO, MUMBAI v. ACIT CIR 4(2), MUMBAI

ITA 2617/MUM/2009 | 2004-2005
Pronouncement Date: 21-01-2010 | Result: Allowed

Appeal Details

RSA Number 261719914 RSA 2009
Assessee PAN AAFPJ0070J
Bench Mumbai
Appeal Number ITA 2617/MUM/2009
Duration Of Justice 8 month(s) 28 day(s)
Appellant SURESH K JAJOO, MUMBAI
Respondent ACIT CIR 4(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted E
Tribunal Order Date 21-01-2010
Date Of Final Hearing 23-12-2009
Next Hearing Date 23-12-2009
Assessment Year 2004-2005
Appeal Filed On 23-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E MUMBAI BEFORE SHRI D.MANMOHAN VICE PRESIDENT & SHRI R.K.PANDA AM I.T.A. NO.2617/MUM/09 (ASSESSMENT YEAR 2004-05) SHRI SURESH K. JAJOO 7/10 BOTAWALA BUILDING 1 ST FLOOR HORNIMAN CIRCLE MUMBAI 400 001 PAN:AAFPJ 0070J VS. THE ACIT CIR. 4(2) MUMBAI. APPELLANT RESPONDENT APPELLANT BY : SHRI P.J.PARDIWALA RESPONDENT BY : SHRI HEMANT J. LAL ORDER PER R.K.PANDA AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 31/3/2009 PASSED UNDER SECTION 263 BY THE CIT-4 MUMBAI RELATING TO ASSESSMENT YEAR 2004- 05. 2. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSM ENT IN THE INSTANT CASE WAS COMPLETED U/S. 143(3) ON 19 /12/06 ON A TOTAL INCOME OF RS. 3 12 42 622/- AS AGAINST T HE RETURNED INCOME OF RS.3 11 92 622/-. IN THE SAID O RDER SHORT TERM CAPITAL LOSS OF RS. 84 71 72 226/- WAS A LLOWED TO BE CARRIED FORWARD. ON PERUSAL OF THE RECORDS THE LEARNED CIT OBSERVED THAT THE ASSESSEE IN THE SAID RETURN OF INCOME HAS DECLARED SHORT TERM CAPITAL GAIN ON ACCO UNT OF SALE OF SHARES AND UNITS OF MUTUAL FUND OF RS. 3 89 30 516/- AGAINST WHICH BROUGHT FORWARD CAPITAL LOSS OF EARLIER YEARS WAS ADJUSTED TO THE TUNE OF RS. 3. 89 CORES AND THE BALANCE OF RS. 84.71 CRORES WAS ALLOWED TO BE CARRIED FORWARD. THE LD. CIT OBSERVED THAT THE ASS ESSEE HAD FILED DETAILS AS PER ANNEXURE2 OF HIS LETTER D ATED ITA NO. 2617/M/09 SHRI SURESH K. JAJOO ================= 2 5/12/2006 WHICH CONSIST OF HIS DEMAT ACCOUNT RUNNIN G INTO MORE THAN 50 PAGES WITH EACH PAGE CONTAINING N EARLY 14 TRANSACTIONS OF PURCHASE AND SALE OF SHARES/SECU RITIES. HE OBSERVED THAT THE ASSESSEE IS ENGAGED IN SHARE T RADING AND HAS A HIGH VOLUME FREQUENCY AND CONSISTENCY OF TRANSACTION. THE ASSESSEE HAD DEALT IN NEARLY 60 S CRIPS CONSISTING OF 134 TRANSACTIONS (APPROX.) WITH PURCH ASE OF RS.31.78 CRORES (APPROX.) AND SALE OF ABOUT RS. 35. 62 CRORES RESULTING IN A GAIN OF RS.3.84 CRORES. THES E ACTIVITIES ARE INCIDENTAL TO THE MAIN BUSINESS OF T HE ASSESSEE. THE ASSESSEE HAS ALSO BORROWED FUNDS F OR THE PURPOSE OF UNDERTAKING THESE ACTIVITIES. THEREFORE THESE ACTIVITIES OF THE ASSESSEE ACCORDING TO THE LEARNED CIT AMOUNT TO BUSINESS WHEREAS THE A.O HAS WRONGLY TREA TED THE ASSESSEE AS INVESTOR AND BROUGHT TO TAX THE AMO UNT OF RS. 3 89 30 516/- AS SHORT TERM CAPITAL GAIN INSTEA D OF BUSINESS INCOME. HE THEREFORE ISSUED A NOTICE ON 3/3/09 ASKING THE ASSESSEE TO SHOW CAUSE AS TO WHY SHORT T ERM CAPITAL GAIN OF RS. 3 89 30 516/- SHOULD NOT BE TRE ATED AS BUSINESS INCOME. 3. THE ASSESSEE SUBMITTED THAT THE ORDER PASSED BY THE CIT U/S. 263 IN THE EARLIER YEAR HAS BEEN QUASHED O N IDENTICAL FACTS. IT WAS SUBMITTED THAT THE PRINCI PLE OF RES JUDICATA WOULD APPLY WHEN THE FACTS ARE IDENTICAL. AS REGARDS THE FREQUENCY AND VOLUME OF TRANSACTIONS IT WAS SUBMITTED THAT THE ACCUMULATED EARLIER INCOME HAS B EEN INVESTED IN SHARES LEADING TO INCREASED VOLUME AND FREQUENCY IN THE SHARE TRANSACTIONS. THE LOAN OF RS.57.70 CRORES REPRESENTS THE TOTAL OF CREDIT TAKEN DURING THE YEAR AND THE SAME HAS ALREADY BEEN SQUARED OFF DURING T HE COURSE OF THE PREVIOUS YEAR EXCEPT FOR THE OUTSTAND ING AMOUNT OF RS.6.5 CRORES WHICH BELONGS TO THE ASSESS EES ITA NO. 2617/M/09 SHRI SURESH K. JAJOO ================= 3 MINOR SON WHOSE INCOME IS INCLUDED IN THE INCOME O F THE ASSESSEE. THE SQUARED UP LOAN HAS MAINLY BEEN USE D FOR ADVANCING LOANS ON WHICH INTEREST HAS BEEN EARNED A ND SHOWN IN THE P&L ACCOUNT. IT WAS ARGUED THAT EVEN THOUGH A PART OF THE LOAN MAY HAVE BEEN USED FOR INVESTMENT THIS ACTION WOULD NOT BY ITSELF CONVERT INVESTMENT INTO ADVENTURE IN THE NATURE OF TRADE. 4. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE IS CONSISTENTLY BEING ASSESSED BY THE DEPARTMENT UNDER THE HEAD CAPITAL GAINS FOR SIMILAR TRANSACTIONS. THERE FORE THERE CANNOT BE ANY CHANGE IN THE STAND BY THE DEPA RTMENT WHEN THE FACTS REMAIN THE SAME. IT WAS SUBMITTED T HAT IT IS NOT REQUIRED TO BE SPECIFICALLY RECORDED A FINDI NG THAT THE ASSESSEE IS AN INVESTOR IN EARLIER YEARS ASSESSME NT ORDER. NONE OF THE CONDITIONS THAT THE ORDER OF THE A.O IS ERRONEOUS AND THAT IT IS PREJUDICIAL TO THE INTERES T OF THE REVENUE IS SATISFIED IN THIS CASE. IT WAS SUBMITTE D THAT THE ASSESSEE HAS BEEN ASSESSED UNDER THE HEAD CAPITAL G AINS IN RESPECT OF ITS INCOME FROM SALE OF SHARE/UNITS WHIC H ITSELF IS SUFFICIENT TO PROVE THAT THE DEPARTMENT HAS TREA TED THE ASSESSEE AS AN INVESTOR. THEREFORE THE DEPARTMENT GROSSLY ERRED IN STATING THAT THIS ISSUE WAS NOT UNDER CONS IDERATION AT ALL IN THE EARLIER YEARS. AS REGARDS THE INCRE ASE IN TOTAL NUMBER OF TRANSACTION AND THE BORROWINGS IT WAS SUBMITTED THAT THIS ITSELF CANNOT CONCLUDE THAT THE ASSESSEE IS A TRADER AND NOT AN INVESTOR. IT WAS S UBMITTED THAT THE MOTIVE FOR ORIGINAL PURCHASE AND SALE TRE ATMENT OF SHARES AND PROFIT AND LOSS ON THEIR SALE IN THE ACC OUNT OF THE ASSESSEE SOURCE OF FUNDS MANNER AND ACQUISIT ION OF SHARES AND INFRASTRUCTURE EMPLOYED BY THE ASSESSEE ARE TO BE CONSIDERED AS A BENCHMARK FOR DETERMINING THE NA TURE OF TRANSACTION OF THE ASSESSEE. AS REGARDS THE T REATMENT ITA NO. 2617/M/09 SHRI SURESH K. JAJOO ================= 4 OF SHARES IN THE BOOKS OF THE ASSESSEE IS CONCERNED IT WAS SUBMITTED THAT THE SAME WAS SHOWN AS INVESTMENT AND NOT AS STOCK-IN-TRADE AND THE ASSESSEE HAS NOT CLAIMED ANY EXPENSES UNDER SECTION 30-43A AND THE ASSESSEE HAS LENT MORE FUNDS THAN IT HAD BORROWED FOR WHICH THE ASSES SEE HAS EARNED INTEREST INCOME OF RS.95 55 017/-. 5. HOWEVER THE LD. CIT WAS NOT SATISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE. HE OBSERVED TH AT ALTHOUGH COPIES OF BALANCE SHEET AND OTHER DETAILS FURNISHED BY THE ASSESSEE HAVE BEEN KEPT ON RECORD NO VERIFICATION OF ANY KIND SEEMS TO HAVE BEEN MADE BY THE ASSESSING OFFICER. THE ASSESSING OFFICER HAD NOT C ONDUCTED ANY ENQUIRY TO FIND OUT THE REAL NATURE OF THE TRAN SACTION VIS--VIS MULTIPLICITY AND FREQUENCY OF THE TRANSAC TION. HAD THE ASSESSING OFFICER GIVEN A CORRECT FINDING IN TH E CURRENT YEAR THE PROFIT ARISING OUT OF SEVERAL TRANSACTION S WOULD HAVE BEEN TAXED AS BUSINESS INCOME AND THEN QUESTIO N OF ADJUSTING THE BROUGHT FORWARD LOSS UNDER THE HEAD S HORT TERM CAPITAL GAIN AGAINST THIS BUSINESS INCOME WOUL D NOT HAVE BEEN ARISEN. RELYING ON THE DECISION OF THE H ONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. BHAGWAN DAS REPORTED IN 142 (2005) TAXMAN 33 HE HELD THAT AN O RDER WHICH HAS BEEN PASSED WITHOUT APPLICATION OF MIND W ILL FALL UNDER THE EXPRESSION ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HE REJECTED THE CONTENTION O F THE ASSESSEE THAT IF THE TRANSACTION IN SHARES ARE TREA TED AS BUSINESS ACTIVITY IN THIS YEAR THEN IN THE PAST AL SO IT SHOULD BE TREATED AS BUSINESS INCOME. HE OBSERVED THAT THE ASSESSEE CANNOT DEMAND THAT HIS PAST COMPLETED ASSESSMENT SHOULD BE REOPENED TO SUIT HIS REQUIREME NTS. RELYING ON A NUMBER OF DECISIONS HE HELD THAT THE ASSESSMENT ORDER DATED 19.12.2006 IS ERRONEOUS AND SO FAR ITA NO. 2617/M/09 SHRI SURESH K. JAJOO ================= 5 AS IT WAS PREJUDICIAL TO THE INTEREST OF REVENUE ON THE GROUND THAT THE ASSESSING OFFICER HAD FAILED TO MAK E ENQUIRIES BEFORE APPRECIATING THE FACTS OF THE CASE . HE ACCORDINGLY SET ASIDE THE ORDER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO ENQUIRE AND VERIFY ALL ISSUES AND REFRAME THE ASSESSMENT ORDER AS PER LAW AFTER GIVIN G DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. AGGRIEVED WITH SUCH ORDER OF THE CIT THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRING TO T HE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER COPI ES OF WHICH ARE PLACED AT VARIOUS PAGES OF THE PAPER BOOK SUCH AS AT PAGES 1 4 8 15 AND 105 SUBMITTED THAT THE ASSESSING OFFICER HAS MADE PROPER ENQUIRY AND THE ALLEGATION OF THE CIT THAT NO PROPER ENQUIRY MADE B Y THE ASSESSING OFFICER IS FACTUALLY INCORRECT. REFERRIN G TO THE NOTICE ISSUED U/S. 263 OF THE ACT BY THE CIT HE SU BMITTED THAT THE NOTICE ITSELF SAYS THAT ENQUIRY WAS MADE B Y THE ASSESSING OFFICER. REFERRING TO THE QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER VIDE HIS NOTICE DATED 24 TH AUGUST 2006 HE SUBMITTED THAT THE ASSESSING OFFICER HAD R AISED A NUMBER OF QUERIES AND HAS CALLED FOR VARIOUS DETAIL S FROM THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAS C OMPLIED WITH THE QUERIES RAISED BY THE ASSESSING OFFICER FR OM TIME TO TIME AND THE ASSESSING OFFICER AFTER PROPER APPL ICATION OF MIND HAS PASSED THE ORDER. REFERRING TO THE DECISI ON OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GA BRIEL (I) LTD. REPORTED IN 203 ITR 108 HE SUBMITTED THA T THE HONBLE JURISDICTIONAL HIGH COURT IN THE SAID CASE HAS HELD THAT THE CIT CANNOT REVISE THE ORDER MERELY BECAUSE HE DISAGREE WITH THE CONCLUSION ARRIVED AT BY THE ASSE SSING OFFICER. ITA NO. 2617/M/09 SHRI SURESH K. JAJOO ================= 6 8. AS REGARDS THE ALLEGATION OF THE CIT THAT NO PROPER ENQUIRY WAS MADE HE REFERRED TO THE DECISION OF TH E HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUN BEAM AUTO LTD. REPORTED IN 2009-TIOL-552-HC-DEL AND SUBMITTED THAT THE HONBLE COURT IN THE SAID DECISI ON HAS HELD THAT THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER IS NOT REQUIRED TO GIVE DETAILED R EASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION ETC. ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPL ICATION OF MIND BEFORE ALLOWING THE CLAIM MADE BY THE ASSES SEE. IT WAS HELD IN THE SAID DECISION THAT THERE IS A DISTI NCTION BETWEEN LACK OF ENQUIRY AND INADEQUATE ENQUIRY. IF THERE WAS ANY ENQUIRY EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE CIT TO PASS ORDER U/S. 263 OF THE ACT MERELY BECAUSE HE HAS DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASE OF LACK OF ENQUIRY THAT SUCH A C OURSE OF ACTION WOULD BE OPEN. SINCE IN THE INSTANT CASE AD MITTEDLY THE ASSESSING OFFICER HAD MADE ENQUIRIES ELICITED REPLIES AND THEREAFTER PASSED THE ASSESSMENT ORDER THEREFO RE IT CANNOT BE SAID THAT IT IS A CASE OF LACK OF ENQUIRY . THEREFORE THE ORDER PASSED BY THE CIT U/S. 263 OF THE ACT HAS BEEN QUASHED. 9. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIG H COURT IN THE CASE OF CIT VS. PAUL BROTHERS REPORTED IN 216 ITR 548 HE SUBMITTED THAT THE HONBLE COURT IN THE SAID DECISION HAS HELD THAT WHEN THE ASSESSING OFFICER P ASSES AN ORDER ON THE BASIS OF A BINDING DECISION REVISI ONAL POWERS U/S. 263 OF THE ACT CANNOT BE EXERCISED TO U NDO THE SAID ORDER. REFERRING TO THE COPY OF THE ASSESSMEN T ORDER HE SUBMITTED THAT THE ASSESSMENT ORDER IN THIS CASE WAS PASSED ON 19 TH DECEMBER 2006. REFERRING TO THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE I.T.A. NO. ITA NO. 2617/M/09 SHRI SURESH K. JAJOO ================= 7 815/MUM/06 ORDER DATED 31 ST OCTOBER 2006 FOR THE A.Y. 2002-03 AND IN CASE OF HIS WIFE VIDE I.T.A. NO. 817 /MUM/ 06 FOR THE SAME ASSESSMENT YEAR HE SUBMITTED THAT T HE TRIBUNAL HAS QUASHED THE 263 ORDER PASSED BY THE CI T ON THE VERY SAME ISSUE. IT HAS BEEN HELD BY THE TRIBU NAL IN THE SAID ORDER THAT THE PROFIT FROM THE SALE OF SHA RES HAS BEEN CONSISTENTLY ASSESSED AS CAPITAL GAIN IN THE E ARLIER ASSESSMENT YEARS ALL RELEVANT DETAILS ARE AVAILABL E ON RECORD WHEN THE ASSESSING OFFICER MADE ASSESSMENT A ND THERE IS HARDLY ANY BASIS TO PRESUME THAT THERE WAS NON APPLICATION OF MIND ON THE PART OF THE ASSESSING OF FICER. SINCE THE ASSESSMENT ORDER PASSED FOR THE IMPUGNED ASSESSMENT YEAR WAS BASED ON THE DECISION OF THE TR IBUNAL IN A 263 PROCEEDINGS FOR THE A.Y. 2002-03 UNDER THE SAME SET OF FACTS THEREFORE IN VIEW OF THE DECISION CI TED ABOVE HE SUBMITTED THAT THE CIT CANNOT EXERCISE POWERS U/ S. 263 TO UNDO THE SAID ORDER. 10. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIG H COURT VIDE I.T.A. NO. 1040 OF 2009 ORDER DATED 16 TH NOVEMBER 2009 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE CASE OF SMT. VIMLA S. JAJOO WIFE OF THE ASS ESSEE HAS DISMISSED THE APPEAL OF THE REVENUE IN LIMINE FOR W ANT OF SUBSTANTIAL QUESTION OF LAW. HE ACCORDINGLY SUBMI TTED THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSE SSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.YS. 2002-03 AND 2003-04 IN THE CASE OF THE WIFE OF THE ASSESSEE FOR THE A.Y. 2002-03 AND THE DECISION OF T HE HONBLE HIGH COURT IN THE CASE OF THE WIFE OF THE A SSESSEE. 11. THE LEARNED DR ON THE OTHER HAND STRONGLY RELIED ON THE ORDER OF THE CIT. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. H. HOL CK LARSEN HE SUBMITTED THAT THE QUESTION WHETHER THE ITA NO. 2617/M/09 SHRI SURESH K. JAJOO ================= 8 TRANSACTIONS OF SALE AND PURCHASE OF SHARES WERE TR ADING TRANSACTIONS OR WERE IN THE NATURE OF INVESTMENT IS A MIXED QUESTION OF LAW AND FACTS. HE SUBMITTED THAT THE F ACTS OF EVERY YEAR HAVE TO BE GONE THROUGH BY THE ASSESSING OFFICER AND THE PRINCIPLES OF RES JUDICATA DO NOT APPLY TO INCOME- TAX PROCEEDINGS. HOWEVER IN THE IMPUGNED ASSESSME NT YEAR THERE IS NON APPLICATION OF MIND BY THE ASSESS ING OFFICER AND HE HAS PASSED A STEREOTYPIC ORDER. REF ERRING TO A NUMBER OF DECISIONS HE SUBMITTED THAT INCORRECT ASSUMPTION OF FACTS AND INCORRECT ASSUMPTION OF LAW WILL MAKE AN ORDER ERRONEOUS AS WELL AS PREJUDICIAL TO T HE INTEREST OF THE REVENUE. REFERRING TO THE REPLY OF THE ASSESSEE TO THE ASSESSING OFFICER VIDE PARA 3 IN HI S LETTER DATED 5 TH DECEMBER 2006 A COPY OF WHICH IS PLACED AT PAPER BOOK PAGE 15 HE SUBMITTED THAT THE ASSESSING OFFICER ACCEPTED THE CONTENTION OF THE ASSESSEE BLI NDLY WITHOUT PROPER APPLICATION OF MIND. REFERRING TO P AGE 105 OF THE PAPER BOOK WHICH CONTAINS THE SUBMISSION OF DETAILS BEFORE THE ASSESSING OFFICER WHERE THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE IS AN INVESTOR IN SHARE S AND SECURITIES AND THAT THE HONBLE ITAT HAS QUASHED TH E ORDER U/S. 263 FOR THE A.Y. 2003-03 HE SUBMITTED THAT TH E ASSESSING OFFICER NEVER EXAMINED THE FACTUAL POSITI ON OF TRANSACTIONS. THEREFORE THE VARIOUS CASE LAWS CIT ED BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. REFERRING TO THE NUMBER FREQUENCY AND THE VOLUME OF TRANSACTIONS INCLUDING THE LOAN OBTAINED ETC. HE SUBMITTED THAT THE ASSESSEE UNDER THESE CIRCUMSTANCES CANNOT BE SAID TO BE AN INVESTO R. HE SUBMITTED THAT THERE IS ABSOLUTELY NO ENQUIRY AND T HE FACTS OF EARLIER YEAR ARE DISTINGUISHABLE. HE ALSO RELIE D ON VARIOUS OTHER DECISIONS AND SUBMITTED THAT THE CIT HAS RIGHTLY ASSUMED JURISDICTION U/S. 263 OF THE ACT. ITA NO. 2617/M/09 SHRI SURESH K. JAJOO ================= 9 12. THE LEARNED COUNSEL FOR THE ASSESSEE IN HIS REJOIND ER REFERRED TO THE DECISION OF THE FULL BENCH OF THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. SHREE NIRM AL COMMERCIAL LTD. REPORTED IN 213 ITR 361 AT PAGE 368 AND SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID D ECISION HAS HELD THAT ALTHOUGH THERE IS NO DOUBT THAT THE P RINCIPLE OF RES JUDICATA DOES NOT APPLY TO INCOME-TAX PROCEEDINGS HOWEVER AT THE SAME TIME THE EFFECT OF REVISING AN EARLIER DECISION COULD LEAD TO INJUSTICE AND THE COURT MUST ALWAYS BE ANXIOUS TO AVOID THE INJUSTICE BEING DONE TO THE ASSESSEE. REFERRING TO THE SAID DECISION HE SUBMIT TED THAT ONCE THE DEPARTMENT HAS ACCEPTED ONE PROPOSITION IT WOULD NOT BE PROPER TO ALLOW THE DEPARTMENT TO COMPLETELY TURNAROUND AND TAKE A DIFFERENT VIEW SO AS TO DISAL LOW THE CLAIM OF THE ASSESSEE. AS REGARDS THE REFERENCE OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CONSOLIDATED PHOTO & FINVEST LTD. BY THE LEARNED DR THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID DECISION HAS BEEN HELD TO BE WRONG BY THE HONBLE D ELHI HIGH COURT IN 292 ITR 49 AT PAGE 69. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES PERUSED THE ORDER OF THE CIT AND TH E PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSING OFFICER W HILE FRAMING THE ASSESSMENT ORDER PASSED U/S. 143(3) OF THE ACT HAD CALLED FOR VARIOUS DETAILS AS PER HIS LETTER DA TED 24 TH AUGUST 2006. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS REPLIED TO VARIOUS QUERIES RAISED BY T HE ASSESSING OFFICER FROM TIME TO TIME. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE ASSESSEE VIDE HIS LETT ER DATED 8 TH DECEMBER 2006 ADDRESSED TO THE ASSESSING OFFICER HAD ITA NO. 2617/M/09 SHRI SURESH K. JAJOO ================= 10 SUBMITTED BEFORE THE ASSESSING OFFICER THAT HE IS A N INVESTOR IN SHARES AND SECURITIES AND HAS BEEN DOIN G INVESTMENT ACTIVITIES SINCE 1989 ONWARDS CONSISTEN TLY. IT WAS STATED IN THE SAID LETTER THAT ACTION U/S. 263 HAS BEEN MADE BY THE CIT-4 MUMBAI FOR THE A.Y. 2002-03 AND A.Y. 2003-04 AND THE ITAT HAS QUASHED THE ORDERS U/S. 26 3 OF CIT-4 MUMBAI FOR THE A.Y. 2002-03 AND THE APPEAL A GAINST THE ORDER U/S. 263 FOR THE A.Y. 2003-04 IS PENDING BEFORE THE TRIBUNAL. IT WAS FURTHER STATED IN THE SAID LE TTER THAT THE FACTS AND CIRCUMSTANCES OF THE CASE IN THE IMPU GNED ASSESSMENT YEAR ARE EXACTLY SIMILAR TO THE A.Y. 200 2-03 AND EARLIER YEARS. BASED ON THIS AND VARIOUS ARGUM ENTS ADVANCED BY THE ASSESSEE THE ASSESSING OFFICER PAS SED THE ORDER ALLOWING THE CLAIM OF THE ASSESSEE. THEREFOR E IN OUR OPINION IT CANNOT BE SAID THAT THE ASSESSING OFFIC ER HAS NOT MADE PROPER ENQUIRIES. 14. WE FIND THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUNBEAM (I) LTD. (SUPRA) RELYING ON THE DEC ISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF GABRIE L (I) LTD. HAS HELD AS UNDER: 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE COUNSEL ON THE OTHER SIDE AND HAVE GONE THROUGH THE RECORDS. THE FIRST ISSUE THAT ARISES FOR OUR CONSIDERATION IS ABOUT THE EXERCISE OF POWER BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE INCOME TAX ACT. AS NOTED ABOVE THE SUBMISSION OF LEARNED COUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER THE AO DID NOT CONSIDER THIS ASPECT SPECIFICALLY WHETHER THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PREDICATES ON THE ASSESSMENT ORDER WHICH APPARENTLY DOES NOT GIVE ANY REASONS WHILE ALLOWING THE ENTIRE EXPENDITURE AS REVENUE EXPENDITURE. HOWEVER THAT BY ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE AO HAD NOT APPLIED HIS MIND ON THE ISSUE. THERE ARE JUDGEMENTS GALORE LAYING DOWN THE ITA NO. 2617/M/09 SHRI SURESH K. JAJOO ================= 11 PRINCIPLE THAT THE AO IN THE ASSESSING ORDER IS NOT REQUIRED TO GIVE DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION ETC. THEREFORE ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. LEARNED COUNSEL FOR THE ASSESSEE IS RIGHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE DISTINCTION BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY. IF THERE WAS ANY INQUIRY EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 OF THE ACT MERELY BECAUSE HE HAS DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF LACK OF INQUIRY THAT SUCH A COURSE OF ACTION WOULD BE OPEN. IN GABRIEL INDIA LTD. (SUPRA) LAW ON THIS ASPECT WAS DISCUSSED IN THE FOLLOWING MANNER: XXX FROM A RENDING OF SUB-SECTION (1) OF SECTION IT IS CLEAR THAT THE POWER OF SUO MOTO REVISION CAN BE EXERCISED BY THE COMMISSIONER ONLY IF ON EXAMINATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IT IS NOT AN ARBITRARY OR UNDER CHARTERED POWER IT CAN BE EXERCISED ONLY ON FULFILMENT OF THE REQUIREMENTS LAID DOWN IN SUBSECTION (1). THE CONSIDERATION OF THE COMMISSIONER AS TO WHETHER AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE MUST BE BASED ON MATERIALS ON THE RECORD OF THE PROCEEDINGS CALLED FOR BY HIM. IF THERE ARE NO MATERIALS ON RECORD ON THE BASIS OF WHICH IT CAN BE SAID THAT THE COMMISSIONER ACTING IN A REASONABLE MANNER COULD PROCEEDINGS BY HIM WILL BE ILLEGAL AND WITHOUT JURISDICTION. THE COMMISSIONER CANNOT INITIATE PROCEEDINGS WITH A VIEW TO STARTING FISHING AND ROVING ENQUIRIES IN MATTERS OR ORDERS WHICH ARE ALREADY CONCLUDED. SUCH ACTION WILL BE AGAINST THE WELL-ACCEPTED POLICY OF LAW THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDINGS THAT STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A ITA NO. 2617/M/09 SHRI SURESH K. JAJOO ================= 12 PARTICULAR STAGE AND THAT LAPSE OF TIME MUST INDUCE REPOSE IN AND SET AT REST JUDICIAL AND QUASI JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SPHERES OF HUMAN ACTIVITY. (SEE PARASHURAM POTTERY WORKS CO. LTD. V. ITO [1977] 106 ITR 1 (SC) = (2002-TIOL-573-SC-IT) AT PAGE 10). FROM THE AFORESAID DEFINITIONS IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME-TAX OFFICER ACTING IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY6 BECAUSE ACCORDING TO HIM THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DOES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JUDGEMENT OF THE COMMISSIONER FOR THAT OF THE INCOME-TAX OFFICER WHO PASSED THE ORDER UNLESS THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WHERE THE INCOME-TAX OFFICER WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS MAKES ENQUIRIES APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATE HIMSELF. THE COMMISSIONER ON PERUSAL OF THE RECORDS MAY BE OF THE OPINION THAT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEFT TO THE COMMISSIONER HE WOULD HAVE ESTIMATED THE INCOME AT A FIGURE HIGHER THAN THE ONE DETERMINED BY THE INCOME-TAX OFFICER. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT HIGHER FIGURE. IT IS BECAUSE THE INCOME-TAX OFFICER HAS EXERCISED THE QUASI- JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT CONCLUSION AND SUCH A CONCLUSION CANNOT BE FORMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. ITA NO. 2617/M/09 SHRI SURESH K. JAJOO ================= 13 15. WE FIND UNDER IDENTICAL FACTS AND CIRCUMSTANCES THE TRIBUNAL HAS QUASHED THE ORDER OF THE CIT PASSED U/ S. 263 OF THE ACT FOR THE A.Y. 2002-03 AND FOR A.Y. 2003-0 4. THE ORDER OF THE TRIBUNAL FOR A.Y. 2002-03 QUASHING THE PROCEEDINGS U/S. 263 OF THE ACT BY THE CIT WAS ALSO BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER WHO PASSED THE ORDER THEREAFTER. WE FIND THE HONBLE BOMBAY H IGH COURT IN THE CASE OF PAUL BROTHERS (SUPRA) HAS HELD THAT WHEN THE ASSESSING OFFICER PASSED THE ORDER ON THE BASIS OF A BINDING DECISION REVISIONAL POWERS U/S. 263 OF T HE ACT CANNOT BE EXERCISED TO UNDO THE SAID ORDER. 16. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2002-03 AND 2003-04 AN D FURTHER CONSIDERING THE FACT THAT THE ORDER OF THE ASSESSING OFFICER IS PASSED ON THE BASIS OF THE DECISION OF T HE TRIBUNAL FOR A.Y. 2002-03 WE ARE OF THE CONSIDERED OPINION THAT UNDER THE FACTS AND CIRCUMSTANCES OF THIS CASE THE CIT WAS NOT JUSTIFIED IN ASSUMING THE JURISDICTION U/S. 263 OF THE ACT. ACCORDINGLY THE SAME IS QUASHED AND T HE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 17. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED ON 21 ST JANUARY 2010 SD/- (D. MANMOHAN) VICE PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI DATED 21 ST JANUARY 2010 ITA NO. 2617/M/09 SHRI SURESH K. JAJOO ================= 14 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY- 4. THE CIT(A)- 5. THE DR E BENCH. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI TPRAO