Sri Asapu Babu Rao, Kakinada v. The ITO, Ward-1, Kakinada

ITA 516/VIZ/2010 | 2007-2008
Pronouncement Date: 05-01-2011 | Result: Allowed

Appeal Details

RSA Number 51625314 RSA 2010
Assessee PAN ABEPA8465E
Bench Visakhapatnam
Appeal Number ITA 516/VIZ/2010
Duration Of Justice 1 month(s) 3 day(s)
Appellant Sri Asapu Babu Rao, Kakinada
Respondent The ITO, Ward-1, Kakinada
Appeal Type Income Tax Appeal
Pronouncement Date 05-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted SMC
Tribunal Order Date 05-01-2011
Assessment Year 2007-2008
Appeal Filed On 02-12-2010
Judgment Text
ITA NO.516 OF 2010 ASAPU BAU RAO KAKINADA U-S 263 1 43(3) 147 10(10 PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO.516/VIZAG/2010 ASSESSMENT YEAR: 2007-08 ASAPU BABU RAO KAKINADA VS. ITO WARD-1 KAKINADA (APPELLANT) PAN NO: ABEPA 8465 E (RESPONDENT) APPELLANT BY: SHRI C.V.S. MURTHY CA RESPONDENT BY: S/SHRI TH.LUCAS PETER D.R & D.S. SUNDER SINGH SR.DR ORDER PER SHRI B. R. BASKARAN ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25.08.2010 PASSED BY LEARNED CIT RAJAHMUNDRY UNDER SECTION 263 OF THE ACT AND IT RELATES TO THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS ASSAILING THE DIRECTION GIVE N BY LEARNED CIT TO THE ASSESSING OFFICER TO REVOKE THE EXEMPTION GRANTED T O THE ASSESSEE UNDER SECTION 10(10C) OF THE ACT ON THE EX-GRATIA AMOUNT RECEIVED BY HIM. 3. THE LEARNED A.R SUBMITTED THAN AN IDENTICAL ISSUE WAS CONSIDERED BY THIS BENCH IN THE CASE OF VALLURI DAS KAKINADA AN D OTHERS IN ITA NO.465/VIZAG/2010 AND OTHERS AND THIS BENCH VIDE I TS ORDER DATED 07-12- 2010 HAD SET ASIDE THE ORDER PASSED BY THE LEARNED CIT IN THEIR RESPECTIVE HANDS. THE LEARNED A.R ALSO PLACED BEFORE US A COP Y OF THE ORDER OF THE TRIBUNAL RELIED UPON BY HIM. 4. WE HAVE GONE THROUGH THE SAID ORDER. FOR TH E SAKE OF CONVENIENCE WE EXTRACT BELOW THE FACTS OF THE CASE AND ALSO THE DECISION RENDERED THEREIN. ITA NO.516 OF 2010 ASAPU BAU RAO KAKINADA U-S 263 1 43(3) 147 10(10 PAGE 2 OF 6 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN B RIEF. ALL THESE ASSESSEES HAVE RETIRED FROM THE STATE BANK OF INDIA UNDER EXIT OPTION SCHEME (EOS) FRAMED BY THE SAID BANK. THESE ASSESSEES CLAIMED EXEMPTION UNDER SECTION 10(10C) OF THE ACT ON THE EX-GRATIA AMOUNT RECEIVED BY THEM UNDER THE SAID SCHEME. THEI R RESPECTIVE RETURN OF INCOME WAS INITIALLY ACCEPTED UNDER SECTI ON 143(1) OF THE ACT. THEREAFTER THE ASSESSING OFFICER REOPENED THE ASSESSMENT OF ALL THESE ASSESSEES BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT ON THE REASON THAT THESE ASSESSEES HAVE WRONGLY CLAIMED EX EMPTION UNDER SECTION 10(10C) OF THE ACT ON THE EX-GRATIA AMOUNT RECEIVED BY THEM. IN THE REASSESSMENT PROCEEDINGS THESE ASSESSE ES SUPPORTED THEIR CLAIM OF EXEMPTION ON THE BASIS OF 3 RD MEMBER DECISION OF ITAT LUCKNOW BENCH IN THE CASE OF ANANT KUMAR AGRAWAL VS . ITO (2008) (302 ITR AT 49). THE ASSESSING OFFICER AFTER COMPA RING THE CASE OF THESE ASSESSEES WITH THE ABOVE SAID DECISION ACCE PTED THEIR CLAIM THAT THEY ARE ENTITLED FOR EXEMPTION UNDER SECTION 10(10C) OF THE ACT ON THE EX-GRATIA AMOUNT RECEIVED BY THEM. ACCORDIN GLY HE COMPLETED THE ASSESSMENT UNDER SECTION 143(3) R.W.S . 147 OF THE ACT ON 25-9-2008 BY ALLOWING THE ABOVE SAID EXEMPTION. THEREAFTER THE LEARNED CIT VIDE HIS ORDER DATED 19-7-2010 PASSED UNDER SECTION 263 OF THE ACT DIRECTED THE ASSESSING OFFICER TO R EVOKE THE EXEMPTION SO GRANTED TO THEM FOR THE REASON THAT TH E EXIT OPTION SCHEME OFFERED BY THE STATE BANK OF INDIA DID NOT CO NFIRM FULLY WITH THE GUIDELINES PRESCRIBED UNDER RULE 2BA OF THE INCO ME-TAX RULES. AGGRIEVED BY THIS ORDER ALL THESE ASSESSEES HAVE F ILED APPEALS BEFORE US. 4. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSING OFFICER HAS PASSED THE IMPUGNED ASSESSMEN T ORDER UNDER SECTION 147 OF THE ACT AFTER FULLY VERIFYING THE CL AIM OF THE ASSESSEE AND HENCE THE SAME CANNOT BE TERMED AS AN ERRONEOUS ORDER. IN THIS REGARD THE LEARNED AUTHORISED REPRESENTATIVE RELIED UPON THE DECISION OF ITAT AGRA BENCH IN THE CASE OF RADHEY S HYAM AGARWAL (HUF) VS. CIT (2010) 35 (III) ITCL. 392 (AGRA-TRIB) WHEREIN IT HAS BEEN HELD AS UNDER: WHEN ASSESSING OFFICER HAD REOPENED THE VERY SAME ISSUE WHICH WAS UNDER REVISION AND HAD EXAMINED ALL THE D ETAILS AND AFTER VERIFYING AND BEING SATISFIED HAS TAKEN A PLAUSIBLE VIEW HIS ORDER CANNOT BE TREATED AS ERRONEOUS SIMP LY BECAUSE IN HIS ORDER HE HAD NOT MADE ELABORATE DIS CUSSION WITH REFERENCE TO HIS SATISFACTION. HE FURTHER SUBMITTED THAT THE LEARNED CIT HAS INITI ATED THE PROCEEDINGS UNDER SECTION 263 OF THE ACT ON THE BAS IS OF A LETTER DATED 6-10-2009 ISSUED BY THE CBDT TO ALL CHIEF COM MISSIONERS OF INCOME TAX; WHEREIN IT WAS STATED THAT THE EXIT OPTI ON SCHEME OF THE STATE BANK OF INDIA ITSELF CLEARLY LAY OUT THAT THEY ARE NOT ELIGIBLE FOR ITA NO.516 OF 2010 ASAPU BAU RAO KAKINADA U-S 263 1 43(3) 147 10(10 PAGE 3 OF 6 DEDUCTION UNDER SECTION 10(10C) OF THE ACT. HOWEVER THE SAID LETTER HAS BEEN ISSUED BY CBDT SUBSEQUENT TO THE DATE OF C OMPLETION OF THE REOPENED ASSESSMENT AND HENCE ON THE BASIS OF T HE SAID LETTER THE IMPUGNED ASSESSMENT ORDERS CANNOT BE TERMED AS ERRONEOUS. THE LEARNED AUTHORISED REPRESENTATIVE ALSO SUBMITTE D THAT THE RBI ALSO FORMULATED A SIMILAR SCHEME AND THE CENTRAL BO ARD OF DIRECT TAXES VIDE ITS LETTER F.NO.225/74/2005-ITA-II DATE D 20-10-2005 INITIALLY DIRECTED THE INCOME TAX DEPARTMENT NOT TO GRANT EXEMPTION UNDER SECTION 10(10C) OF THE ACT. APPARENTLY THE C BDT PLACED RELIANCE ON THE LETTER RECEIVED FROM THE RBI ON THE MATTER OF EXEMPTION. WHEN THE QUESTION OF EXEMPTION WAS CHAL LENGED THE HON'BLE BOMBAY HIGH COURT ALLOWED THE EXEMPTION UND ER SECTION 10(10C) OF THE ACT ON THE SAID SCHEME OF RBI IN THE CASE OF CIT VS. KOODATHIL KALLYATAN AMBUJAKSHAN (2008) 219 CTR (BOM ) 80. ON THE BASIS OF THE SAID DECISION THE CBDT AGAIN ISSUED A CIRCULAR DATED 8- 5-2009 STATING THAT THE EX-GRATIA RECEIVED UNDER TH E SAID SCHEME OF RBI IS ELIGIBLE FOR EXEMPTION SECTION 10(10C) OF THE ACT. THE HON'BLE SUPREME COURT HAS ALSO CONFIRMED THE ORDER OF THE B OMBAY HIGH COURT REFERRED (SUPRA) IN THE CASE OF CHANDRA RANGA NATHAN & ORS VS. CIT (2010) (235 CTR (SC) 365). 4.1 THE LEARNED AUTHORISED REPRESENTATIVE FURTH ER SUBMITTED THAT THE STATE BANK OF INDIA HAS MODIFIED THE EXIT OPTI ON SCHEME VIDE ITS CIRCULAR DATED 5 TH SEPTEMBER 2006 AND ON SUCH MODIFICATION THE SECOND AND THIRD CONDITIONS SPECIFIED IN RULE 2BA WHICH WERE STATED BY LEARNED CIT AS NOT COMPLIED WITH ALSO BECOMES FULFILLED. THE LEARNED A.R POINTED OUT THAT THE LEARNED CIT HAS FA ILED TO CONSIDER THE CIRCULAR DATED 5-9-2006 OF THE STATE BANK OF IN DIA REFERRED (SUPRA). THE LEARNED AUTHORISED REPRESENTATIVE BY PLACING RELIANCE ON THE DECISION OF ITAT AHMEDABAD IN THE CASE OF PA NDYA VINODCHANDRA BHOGILAL VS. INCOME TAX OFFICER (2010) 133 TTJ (AHD) 253 SUBMITTED THAT THE ASSESSEE CANNOT BE PENALIZE D ON THE ASSUMPTION THAT THE SCHEME FRAMED BY THE EMPLOYER I S NOT IN ACCORDANCE WITH THE RULE 2BA. ACCORDINGLY THE LEARN ED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ORDER PASSED BY T HE ASSESSING OFFICER CANNOT BE TERMED AS ERRONEOUS AND HENCE THE REVISION ACTION TAKEN UNDER SECTION 263 IS NOT IN ACCORDANCE WITH T HE LAW. 5. ON THE CONTRARY THE LEARNED DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT THE EXIT OPTION SCHEME THAT WAS FRAM ED BY THE STATE BANK OF INDIA HAS ITSELF STATED THAT THE EXEMPTION UNDER SECTION 10(10C) WILL NOT BE AVAILABLE ON THE EX-GRATIA PAYM ENT RECEIVED UNDER THAT SCHEME. FURTHER THE SAID SCHEME WAS NOT IN ACCORDANCE WITH THE RULE 2BA SINCE IT WAS APPLICABLE ONLY TO A CERTAIN CLASS OF OFFICERS AND NOT TO ALL EMPLOYEES. HE FURTHER SUBMI TTED THAT THE MERE EXAMINATION OF THE ISSUE BY THE ASSESSING OFFICER C ANNOT TAKE AWAY THE SAID ASSESSMENT ORDER OUTSIDE THE PURVIEW OF SE CTION 263 IF SUCH EXAMINATION HAD NOT BEEN DONE BY APPLYING CORRECT L AW. ACCORDINGLY HE SUBMITTED THAT THE ASSESSING OFFICER IN THE PRES ENT CASES HAS NOT ITA NO.516 OF 2010 ASAPU BAU RAO KAKINADA U-S 263 1 43(3) 147 10(10 PAGE 4 OF 6 PROPERLY APPLIED THE PROVISIONS OF 10(10C) R.W. RUL E 2BA AND HENCE THE REVISION ORDER PASSED BY THE LEARNED CIT SHOULD BE SUSTAINED. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND ALSO PERUSED THE RECORD. BEFORE PROCEEDING WE FEEL IT PERTINENT TO DISCUSS ON THE LEGAL POSITION ON THE ISSUE OF SECTION 263 OF THE A CT. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GRASIM INDUSTRIES LTD. V CIT (321 ITR 92) HAS DEALT WITH THE SCOPE OF PROVISIONS OF S ECTION 263 AS UNDER: SECTION 263 OF THE INCOME-TAX ACT 1961 EMPOWERS T HE COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD O F ANY PROCEEDINGS UNDER THE ACT AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS E RRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE TO PASS AN ORDER UPON HEARING THE ASSESSEE AND AFTE R AN ENQUIRY AS IS NECESSARY ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELING THE ASSESSMENT AND DIRECTIN G A FRESH ASSESSMENT. THE KEY WORDS THAT ARE USED BY SE CTION 263 ARE THAT THE ORDER MUST BE CONSIDERED BY THE COMMISSIONER TO BE ERRONEOUS IN SO FAR AS IT IS PR EJUDICIAL TO THE INTERESTS OF THE REVENUE. THIS PROVISION HA S BEEN INTERPRETED BY THE SUPREME COURT IN SEVERAL JUDGMEN TS TO WHICH IT IS NOW NECESSARY TO TURN. IN MALABAR INDUS TRIAL CO. LTD. V. CIT [2000] 243 ITR 83 THE SUPREME COURT HELD THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE A SSESSING OFFICER AND IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. THE SUPREME COURT HELD THAT AN INCORRECT ASSUMPTION OF FACT OR AN INCORRECT APPLIC ATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEI NG ERRONEOUS. AN ORDER PASSED IN VIOLATION OF THE PRIN CIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATION OF MIND WOU LD BE AN ORDER FALLING IN THAT CATEGORY. THE EXPRESSION PRE JUDICIAL TO THE INTERESTS OF THE REVENUE THE SUPREME COURT HE LD IT IS OF WIDE IMPORT AND IS NOT CONFINED TO A LOSS OF TAX . WHAT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IS EXPLA INED IN THE JUDGMENT OF THE SUPREME COURT (HEAD NOTE) : THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS O RDER PASSED BY THE ASSESSING OFFICER. EVERY LOSS OF RE VENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE FOR EXAMPLE WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULT ED IN LOSS OF REVENUE OR WHERE TWO VIEWS ARE POSSIB LE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WIT H WHICH THE COMMISSIONER DOES NOT AGREE IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE ITA NO.516 OF 2010 ASAPU BAU RAO KAKINADA U-S 263 1 43(3) 147 10(10 PAGE 5 OF 6 INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. THE PRINCIPLE WHICH HAS BEEN LAID DOWN IN MALABAR INDUSTRIAL CO. LTD. [2000] 243 ITR 83 (SC) HAS BEE N FOLLOWED AND EXPLAINED IN A SUBSEQUENT JUDGMENT O F THE SUPREME COURT IN CIT V. MAX INDIA LTD. [2007] 295 IT R 282. 7. COMING TO THE FACTS OF THE CASE WE FIRST NOTI CE THAT THE LEARNED CIT HAS RELIED ON THE DIRECTIVES OF CBDT ISSUED IN THE LETTER DATED 06- 10-2009 WHICH IS APPARENTLY ISSUED AFTER THE COMPL ETION OF THE IMPUGNED ASSESSMENT ORDERS. SECONDLY THE LEARNED CIT HAS OPINED THAT THE EXIT OPTION SCHEME DOES NOT FULLY COMPLY W ITH THE RULE 2BA OF THE INCOME TAX RULES AND ACCORDINGLY HELD THAT THE EX-GRATIA PAYMENT RECEIVED UNDER THE SAID SCHEME WILL NOT BE ENTITLED TO EXEMPTION UNDER SECTION 10(10C) OF THE ACT. HOWEVER THE CAS E OF THE LEARNED A.R IS THAT THE LEARNED CIT HAS FAILED TO CONSIDER THE SUBSEQUENT CIRCULAR ISSUED BY THE STATE BANK OF INDIA WHEREIN THE LACUNAE POINTED OUT BY THE LEARNED CIT HAS BEEN FULFILLED. 8. APART FROM THE ABOVE WHAT IS REQUIRED TO BE S EEN IN A PROCEEDING UNDER SECTION 263 IS WHETHER THE VIEW OF THE ASSESS ING OFFICER IS A PLAUSIBLE VIEW AND IS SUSTAINABLE IN LAW. AT THE T IME WHEN THE ASSESSMENT ORDER WAS PASSED THE LETTER DATED 06 TH OCTOBER 2009 OF CBDT WAS NOT ISSUED AND HENCE THE ASSESSING OFFICER COULD NOT HAVE REFERRED TO IT. AS POINTED OUT EARLIER THE ASSESS ING OFFICER HAS COMPARED THE FACTS OF THE INSTANT CASES WITH THE DE CISION OF ITAT LUCKNOW IN THE CASE OF ANANT KUMAR AGARWAL (SUPRA) AND FINALLY CAME TO THE CONCLUSION THAT THESE ASSESSEES ARE ENT ITLED FOR EXEMPTION UNDER SECTION 10(10C) OF THE ACT. HENCE IN OUR VIEW THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEWS AND IN THESE CIRCUMSTANCES THE IMPUGNED ASSESSMENT ORDERS CANNOT BE TERMED AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THE BASIS OF A SUBSEQUENT LETTER. OUR ATTENTION WAS DRAWN TO THE LETTER ISSU ED BY THE CBDT. WE NOTICE THAT THE CBDT HAS ISSUED THE SAID LETTER BY PLACING RELIANCE ON THE RECITALS OF THE SAID SCHEME. HOWEVER THE ASSE SSING OFFICER IN THE INSTANT CASES HAVE COMPARED THE FACTS WITH THE FAC TS OF THE CASE OF ANANT KUMAR AGARWAL (SUPRA) AND ON BEING SATISFIE D WITH THE PARITY OF FACTS ALLOWED THE CLAIM OF THE ASSESSEES. IN TH ESE CIRCUMSTANCES WE DO NOT FIND ANY JUSTIFICATION IN INITIATING PROC EEDINGS UNDER SECTION 263 OF THE ACT IN THE HANDS OF THESE ASSESSEES. AC CORDINGLY WE SET ASIDE THE ORDERS OF THE LEARNED CIT PASSED UNDER SE CTION 263 OF THE ACT IN THE HANDS OF THESE ASSESSEES. 5. BOTH THE PARTIES AGREED THAT THE FACTS OF TH E INSTANT CASE ARE IDENTICAL TO THE FACTS PREVAILING IN THE CASE OF VALLURI DAS KAKINADA AND OTHERS. ITA NO.516 OF 2010 ASAPU BAU RAO KAKINADA U-S 263 1 43(3) 147 10(10 PAGE 6 OF 6 HENCE CONSISTENT WITH THE VIEW TAKEN THEREIN WE S ET ASIDE THE ORDER OF LEARNED CIT PASSED UNDER SECTION 263 OF THE ACT. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. PRONOUNCED IN THE OPEN COURT ON 5 TH JANUARY 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM DATE:05-01-2011 COPY TO 1 SHRI ASAPU BABU RAO D.NO. 70-7-57 KRISHNA NAGAR KAKINADA 2 THE ITO WARD-1 KAKINADA 3 THE CIT RAJAHMUNDRY 4 THE DR ITAT VISAKHAPATNAM. 5 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM