Madhusudan Industries Ltd., Ahmedabad v. The CIT-II,, Ahmedabad

ITA 853/AHD/2013 | 2008-2009
Pronouncement Date: 31-10-2013 | Result: Allowed

Appeal Details

RSA Number 85320514 RSA 2013
Assessee PAN AABCM0538M
Bench Ahmedabad
Appeal Number ITA 853/AHD/2013
Duration Of Justice 7 month(s) 5 day(s)
Appellant Madhusudan Industries Ltd., Ahmedabad
Respondent The CIT-II,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 31-10-2013
Date Of Final Hearing 15-10-2013
Next Hearing Date 15-10-2013
Assessment Year 2008-2009
Appeal Filed On 25-03-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BENCH AHMEDABAD .. ! ! ! ! ' #$ BEFORE SHRI N.S. SAINI ACCOUNTANT MEMBER AND SHRI KUL BHARAT JUDICIAL MEMBER !./ I.T.A. NO.853/AHD/2013 ( & '& & '& & '& & '& / / / / ASSESSMENT YEAR : 2008-09) MADHUSUDAN INDUSTRIES LTD. MADHUSUDAN HOUSE OPP.NAVRANGPURA TELEPHONE EXCHANGE NAVRANGPURA AHMEDABAD-380 006 / VS. THE CIT AHMEDABAD-II AHMEADBAD-380 014 ( !./)* !./ PAN/GIR NO. : AABCM 0538 M ( (+ / // / APPELLANT ) .. ( -(+ / RESPONDENT ) (+ . / APPELLANT BY : SHRI S.N.SOPARKAR AR -(+ / . / RESPONDENT BY : SHRI SUBHASH BAINS CIT-DR ' 0 / $1 / / / / DATE OF HEARING : 15/10/2013 23' / $1 / DATE OF PRONOUNCEMENT : 31/10/2013 4 / O R D E R PER SHRI KUL BHARAT JUDICIAL MEMBER : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD.COMMISSIONER OF INCOME TAX-II AHMEDABAD (CIT FOR SHORT) DATED 23/01/2013 PERTAINING TO ASSESSMENT YEAR (AY) 2008- 09. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- GROUNDS OF APPEAL AGAINST ORDER DATED 23/01/2013 U /S.263 OF THE INCOME TAX ACT 1961 PASSED BY THE LD. COMMISSIONER OF INCOME TAX AHMEDABAD-II AHMEDABAD. ITA NO.853/AHD/ 2013 MADHUSUDAN INDUSTRIES LTD. VS. CIT-II ASST.YEAR 2008-09 - 2 - [1] THAT THE ORDER OF THE LD.COMMISSIONER OF INCOM E-TAX AHMEDABAD-II AHMEDABAD U/S.263 OF THE ACT IS VOID AB-INITIO AND IS AGAINST LAW FACTS AND EVIDENCE ON RECORD. [2] THAT THE LD.COMMISSIONER OF INCOME-TAX AHMEDA BAD-II AHMEDABAD HAS WRONGLY INVOKED PROVISIONS OF SECTION 263 OF THE AC T HE OUGHT TO HAVE GIVEN SPECIFIC DIRECTIONS OF MAKING ASSESSMENT RATHER THAN SETTING ASIDE THE ORDER PASSED BY THE LD.A.O. U/S.143(3) OF THE ACT AND GIVING DIRECTION TO REFRAME ASSESSMENT. [3] THAT THE LD.COMMISSIONER OF INCOME-TAX AHMEDA BAD-II AHMEDABAD WHILE SETTING ASIDE THE ASSESSMENT ORDER U/S.143(3) OF T HE ACT. DID NOT APPRECIATE THE CONTENTION OF THE APPELLANT THAT THERE WAS NO ERROR OF THE LD.A.O. CONSIDERING INTEREST INCOME AS BUSINESS INCOME WHICH WAS DETERM INED AFTER PROPER SCRUTINY CALLING AND VERIFYING COMPLETE DETAILS AND ANALYZIN G THE SAME AND HE HAS NOT BROUGHT ON RECORD WHAT WAS THE ERROR COMMITTED BY THE LD.A. O. REQUIRING ACTION U/S.263 OF THE ACT. [4] THE APPELLANT CONTENDS THAT THE VIEW TAKEN AND THE OPINION EXPRESSED BY THE LD.COMMISSIONER OF INCOME-TAX AHMEDABAD-II AHMEDA BAD THAT THE ORDER PASSED WAS ERRONEOUS AND REQUIRES RECONSIDERATION IS AGAI NST PRINCIPLE OF LAW NATURAL JUSTICE AND IS CHANGE OF OPINION WHICH DOES NOT JUS TIFYING AN ACTION U/S.263 OF THE ACT. [5] THE APPELLANT CONTENDS THAT THE ACTION OF LD. COMMISSIONER OF INCOME-TAX AHMEDABAD-II AHMEDABAD NOT BEING EMPOWERED U/S.263 OF THE ACT THE ORDER GIVING DIRECTION FOR REFRAMING ASSESSMENT REQUIRES TO BE CANCELLED. [6] IT IS ALSO NOT TRUE THAT THE APPELLANT COMPANY HAS EXHAUSTED BUSINESS LOSS AND THEREFORE DEPRECIATION CARRIED FORWARD OF EARLIER YEARS WOULD ALSO BE ENTITLED TO SET OFF AGAINST BUSINESS INCOME. THE APPELLANT CONTEND S THAT CARRIED FORWARD UNABSORBED DEPRECIATION AND BUSINESS LOSS ARE ENTIT LED TO SET OFF TO BUSINESS INCOME AND INCOME FROM OTHER SOURCES. [7] IN VIEW OF THE ABOVE AND OTHERS THAT MAY BE UR GED AT THE TIME OF HEARING THE APPELLANT PRAYS THAT (I) ACTION OF THE LD.CIT U/S.263 OF THE IT ACT DIRECTIN G TO REFRAME THE ASSESSMENT AFTER CONDUCTING NECESSARY INQUIRY BE QU ASHED AND BE CANCELLED. (II) THE APPELLANT REQUESTS THAT INTEREST INCOME BE TREA TED AS BUSINESS INCOME AND/OR THE INCOME BE SET OFF AGAINST CARRIED FORWAR D UNABSORBED DEPRECIATION AND BUSINESS LOSS. (III) ANY OTHER RELIEFS AND DEDUCTIONS AS THE FACTS AND C IRCUMSTANCES OF THE CASE REQUIRES TO BE GRANTED. [8] THE APPELLANT CRAVES LEAVE TO ADD AMEND ALTER MODIFY THE GROUNDS O9F APPEAL ON OR BEFORE THE TIME OF HEARING. 2. SINCE ALL THE GROUNDS ARE INTER-CONNECTED THEREFOR E THE SAME ARE BEING DISPOSED OF TOGETHER. ITA NO.853/AHD/ 2013 MADHUSUDAN INDUSTRIES LTD. VS. CIT-II ASST.YEAR 2008-09 - 3 - 3. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE A SSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE SCRUTINY ASSESSMENT WAS COMPLETED U/S.143(3) OF THE INCOME TAX ACT 1961. SUBSEQUENTLY THE CIT IS SUED NOTICE U/S.263 OF THE ACT ON 16/10/2012. THE CONTENTS OF THE NOTICE ARE REPRODUCED HEREINBELOW:- 2. IN THIS CASE THE ASSESSEE HAD FILED HIS RETUR N OF INCOME ON 29/08/2008 DECLARING TOTAL INCOME AT RS.NIL AFTER C LAIMING SET OFF OF BROUGHT FORWARD BUSINESS LOSS AGAINST INCOME OF RS. 32 81 018/-. THE CASE WAS SELECTED FOR SCRUTINY AND FINALIZED U/S.14 3(3) OF THE IT ACT ON 15.11.2010 AT TOTAL INCOME NIL AFTER ALLOWING SET O FF OF BROUGHT FORWARD BUSINESS LOSSES OF RS.35 96 059/-. THE ADDITION OF RS.1 37 598/- BY WAY OF MAKING DISALLOWANCE OF PROPORTIONATE EXPENSES U/ S.14A. 3. IN THIS CASE SCRUTINY OF THE ASSESSMENT RECORD S REVEALED THAT THE TOTAL INCOME INCLUDED INTEREST INCOME OF RS.97 62 6 73/-. INTEREST INCOME WAS COVERED BY THE HEAD INCOME FROM OTHER S OURCES. AS BUSINESS LOSS COULD BE SET OFF ONLY AGAINST BUSINES S INCOME NO SET OFF OF BUSINESS LOSS WAS ADMISSIBLE AGAINST INTEREST INCOM E. SIMILARLY IN VIEW OF THE PROVISIONS OF SECTION 32(2) READ WITH SECTIO N 72(2) OF THE ACT THE UNABSORBED DEPRECIATION RS.43 49 833/- BROUGHT FORW ARD FROM EARLIER YEARS ALSO COULD NOT BE TREATED AS CURRENT DEPRECIA TION AS ASSESSEE HAD UNEXHAUSTED BUSINESS LOSSES. HENCE SET OFF OF THE BUSINESS LOSS/UNABSORBED DEPRECIATION AGAINST INCOME UNDER T HE HEAD INCOME FROM OTHERS SOURCES WAS IRREGULAR. UNDERASSESSMEN T OF INCOME. 4. CONSIDERING THE FACTS AND CIRCUMSTANCES AS MENT IONED ABOVE IT APPEARS THAT THE ORDER DATED 15/11/2010 PASSED BY THE ITO WARD-4(4) AHMEDABAD IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF REVENUE. 3.1. IN RESPONSE TO THE NOTICE THE ASSESSEE FILED A WRITTEN SUBMISSION DATED 31/10/2012. THE CIT AFTER CONSIDERING THE WRITTEN SUBMISSION PASSED AN ORDER U/S.263 OF THE ACT THEREBY THE ORDER PASSED BY THE ASSESSING OFFICER U/S.143(3) OF THE ACT DATED 15/11/2010 WAS SET ASIDE AND THE A O WAS DIRECTED TO REFRAME THE ASSESSMENT AFTER CONDUCTING NECESSARY INQUIRY A ND AFTER GRANTING SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. 4. THE LD.SR.COUNSEL FOR THE ASSESSEE SHRI S.N.SO PARKAR SUBMITTED THAT THE IMPUGNED ORDER HAS BEEN PASSED ON THE BASIS THAT T HERE WAS FAILURE ON THE PART ITA NO.853/AHD/ 2013 MADHUSUDAN INDUSTRIES LTD. VS. CIT-II ASST.YEAR 2008-09 - 4 - OF THE AO TO MAKE ENQUIRIES AND ACCEPTING THE CLAIM OF THE ASSESSEE. HE SUBMITTED THAT THIS FINDING OF THE LD.CIT IS CONTRA RY TO THE RECORDS AND FACTUALLY INCORRECT. HE SUBMITTED THAT THERE WAS A SPECIFIC Q UERY BY THE AO AND SUCH QUERY WAS DULY REPLIED VIDE LETTER DATED 05/08/2010 . HE DREW OUR ATTENTION TOWARDS PAGE NO.19 OF THE PAPER-BOOK IN PARA-5 WH EREIN IT IS SPECIFICALLY SUBMITTED THAT THE DETAILS OF LOANS AND ADVANCES MA DE BY THE COMPANIES IS FURNISHED. THESE ADVANCES AND LOANS ARE FOR THE BU SINESS PURPOSE AND INCOME RECEIVED FROM LOANS AND ADVANCES IS BUSINESS INCOME OF THE COMPANY. LD.SR.COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT RENDERED IN THE CASE OF CIT VS. M/S.E XCEL INDUSTRIES LTD. IN CIVIL APPEAL NO.125 OF 2013 DATED 8 TH OCTOBER 2013 AND ALSO THE DECISION OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF IT O VS. D.G. HOUSING PROJECTS LTD. REPORTED AT (2012) 20 TAXMANN.COM 587 (DELHI). ON THE CONTRARY LD.CIT-DR SUPPORTED THE ORDERS OF THE CIT AND SUBMI TTED THAT ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. RELIANCE IS PLACED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF ADANI AGRO (P) LTD. VS. DCIT REPORTED AT 32 TAXM ANN.COM 356(GUJ.) DATED 10 TH DECEMBER-2012 AND ALSO THE DECISION OF HONBLE COO RDINATE BENCH (ITAT B BENCH AHMEDABAD) RENDERED IN THE CASE OF RATNES H METAL INDUSTRIES PVT.LTD. IN ITA NO.529&530/AHD/2012 DATED 15/03/20 13. BOTH THE PARTIES HAVE FILED WRITTEN SUBMISSIONS IN SUPPORT OF THEIR CONTENTIONS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDER OF THE LD.CIT. IN THE WRITTEN SUBMISSIONS THE BRIEF CONTENTION OF THE REVENUE IS THAT THE EXA CT QUANTIFICATION OF INCOME UNDER VARIOUS HEADS INCLUDING BUSINESS INCOME OR INCOME FROM OTHER SOURCES IS NOT ARISING OUT OF RECORD AVAILABLE WIT H HONBLE ITAT. THE CONTINUATION OF BUSINESS AND EXACT FIGURES FOR CARR Y FORWARD LOSSES/DEPRECIATION ITA NO.853/AHD/ 2013 MADHUSUDAN INDUSTRIES LTD. VS. CIT-II ASST.YEAR 2008-09 - 5 - FOR PARTICULAR YEAR ENDING CANNOT BE CONCLUSIVELY D RAWN AT THIS STAGE. AO HAS NOT MADE INQUIRY ON ASSESSING THE INTEREST INCOME A S INCOME FROM OTHER SOURCES AND INSTEAD CONCENTRATED ON INQUIRY FOR MA KING ADDITION U/S.14A OF THE ACT. IT IS ALSO SUBMITTED THAT THE PRINCIPLE O F ESTOPPEL NOT APPLICABLE. RELIANCE IS PLACED ON THE DECISION OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. BRITISH PAINTS INDIA (P) LTD. 188 ITR 44 (SC). ON THE CONTRARY THE CONTENTION OF THE LD.COUNSEL FOR THE ASSESSEE IN TH E WRITTEN SUBMISSION IS THAT THE ASSESSEE-COMPANY IS ALSO ENGAGED IN BUSINESS OF ADVANCING AND LENDING MONEY EARNING INTEREST INCOME WHICH IS PART OF BUS INESS INCOME AND IN THE PAST THE SAME WAS NEVER ASSESSED AS INCOME FROM OT HER SOURCES. IN SUPPORT OF HIS CONTENTION RELIANCE IS PLACED ON THE DECISI ON OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. M/S.EXCEL INDUSTRIE S LTD.(SUPRA). IT IS ALSO SUBMITTED IN THE WRITTEN SUBMISSION THAT THE DECISI ON OF HONBLE COORDINATE BENCH RENDERED IN THE CASE OF RATNESH METAL INDUSTR IES PVT.LTD. VS. CIT IN ITA NO.529 & 530/AHD/2012 FOR AYS 2007-08 & 2008-09 DATED 15/03/2013 IN FACT SUPPORTS THE CASE OF THE ASSESSEE AS IN TH E PRESENT CASE THERE IS A SPECIFIC ENQUIRY BY THE AO AND A SPECIFIC REPLY HAS BEEN MADE VIDE LETTER DATED 05/08/2010. RELIANCE IS ALSO PLACED ON THE DECISIO N OF HONBLE HIGH COURT OF DELHI RENDERED IN THE CASE OF ITO VS. D.G. HOUSING PROJECTS LTD.(SUPRA). 6. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO TH E RIVAL CONTENTIONS. IN THE LIGHT OF THE FACTS OF THE PRESENT CASE AND THE SUBMISSIONS MADE BY THE REPRESENTATIVES OF THE PARTIES IT IS EVIDENT THAT NOTICE U/S.263 OF THE ACT WAS ISSUED WHEREIN IT WAS POINTED OUT BY THE CIT THAT ON SCRUTINY OF THE ASSESSMENT RECORDS REVEALED THAT THE TOTAL INCOME I NCLUDED INTEREST INCOME OF RS.97 62 673/- INTERST INCOME WAS COVERED BY THE HE AD INCOME FROM OTHER SOURCES. AS BUSINESS LOSS COULD BE SET OFF ONLY A GAINST BUSINESS INCOME NO SET OFF OF BUSINESS LOSS WAS ADMISSIBLE AGAINST INT EREST INCOME. SIMILARLY IN VIEW OF THE PROVISIONS OF SECTION 32(2) READ WITH S ECTION 72(2) OF THE ACT THE ITA NO.853/AHD/ 2013 MADHUSUDAN INDUSTRIES LTD. VS. CIT-II ASST.YEAR 2008-09 - 6 - UNABSORBED DEPRECIATION RS.43 49 833/- BROUGHT FORW ARD FROM EARLIER YEARS ALSO COULD NOT BE TREATED AS CURRENT DEPRECIATION A S ASSESSEE HAD UNEXHAUSTED BUSINESS LOSSES. HENCE SET OFF OF THE BUSINESS LO SS/UNABSORBED DEPRECIATION AGAINST INCOME UNDER THE HEAD INCOME FROM OTHER SO URCES WAS IRREGULAR UNDER ASSESSMENT OF INCOME. IN REPLY TO THAT NOT ICE IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE-COMPANY WAS ESTABLISHED IN 1945 AND THE ASSESSEE- COMPANY HAS SHARE CAPITAL AND FREE RESERVES FOR OVE R SEVERAL YEARS. THE ASSESSEE-COMPANY RECEIVED SALE PROCEEDS ON SALE OF ITS VARIOUS ASSETS. THESE FINANCES WERE AVAILABLE FOR THE PURPOSE OF CARRYING ON BUSINESS. IT WAS SUBMITTED THAT U/S.56 OF THE ACT WHAT IS TAXED IS AN INCOME FROM BUSINESS OR PROFESSION CANNOT BE INCLUDED AS INCOME FROM OTHE R SOURCES. SECTION 56 CLAUSE (ID) INCLUDED THE INCOME BY WAY OF INTEREST ON SECURITIES IF THE INCOME IS NOT CHARGEABLE TO INCOME-TAX UNDER THE HEAD PRO FIT AND GAINS OF BUSINESS OR PROFESSION THE SPECIFIC INCLUSION WAS MADE FOR AL L INCOME BY WAY OF INTEREST ON SECURITIES AND WHICH IS ALSO SUBJECT TO AND NOT BEING CHARGED UNDER THE HEAD PROFITS & GAINS OF BUSINESS OR PROFESSION U/S.56( 2)(1)(ID) OF THE ACT. INTEREST INCOME OF THE COMPANY IS BUSINESS INCOME AND IS TAX ED FOR ALL THESE YEARS AS BUSINESS INCOME OF THE COMPANY. THE LOANS AND ADVA NCES ARE GIVEN FOR EARNING INTEREST INCOME AS COMPANYS BUSINESS. INT EREST INCOME OF RS.97 60 763/- IS NOT INTEREST FROM SECURITIES. IT IS INTEREST ON LOANS AND ADVANCES GIVEN TO THE COMPANIES AND OTHERS WHICH IS PART OF BUSINESS ACTIVITY OF THE COMPANY AND THEREFORE IT CANNOT BE EXCLUDE D FROM BUSINESS INCOME AND TAXED AS INTEREST FROM OTHER SOURCES. EVEN PROVISI ONS OF SECTION 56 DO NOT PROVIDE MANDATORILY TO CONSIDER IT AS INCOME FROM O THER SOURCES AND BE APPLIED TO TAX AS INCOME FROM OTHER SOURCES. ACCORDING TO SECTION 56 OF THE ACT WHATEVER INCOME IS NOT TAXED UNDER THE HEAD BUSINE SS INCOME THEN ONLY IT WOULD BE TAXED AS INCOME FROM OTHER SOURCES. THE ASSESSEE-COMPANY IS AN ON GOING CONCERN AND CONTINUOUSLY CARRYING ON BUSI NESS SINCE 1945 AND IS NOT ITA NO.853/AHD/ 2013 MADHUSUDAN INDUSTRIES LTD. VS. CIT-II ASST.YEAR 2008-09 - 7 - A NEW COMPANY. THE INTEREST INCOME HAS BEEN BUSINE SS INCOME OF THE ASSESSEE-COMPANY. THEREFORE INTEREST INCOME IS A BUSINESS INCOME AND IS LIABLE TO BE TAXED AND HAS BEEN CORRECTLY TAXED U/S .28 OF THE IT ACT AS BUSINESS INCOME. THEREFORE PRESUMPTION THAT INTEREST INCOM E IS TO BE TAXED AS INCOME FROM OTHER SOURCES IS NOTHING ELSE BUT CLEARLY A CHANGE OF OPINION WITHOUT ANY SPECIFIC PROVISIONS OF THE ACT. IT WAS ALSO SU BMITTED THAT UNABSORBED DEPRECIATION CARRIED OVER FROM THE EARLIER YEARS WO ULD CERTAINLY BE DEPRECIATION OF THE CURRENT YEAR ACCORDING TO THE BINDING PRECED ENT OF HONBLE SUPREME COURT AND HONBLE GUJARAT HIGH COURT. IN THE CASE OF CIT VS. JAIPURIA CHINA CLAY MINES (P) LTD. (1966) 59 ITR 555 HONBLE SUPRE ME COURT EXPRESSED THE VIEW THAT THE WORDS PROFITS AND GAINS CHARGEABLE F OR THAT YEAR ARE NOT CONFINED TO PROFITS AND GAINS DERIVED FROM THE BUSI NESS WHOSE INCOME IS BEING COMPUTED AND HELD THAT UNABSORBED DEPRECIATION OF P AST YEAR HAD TO BE ADDED TO DEPRECIATION OF THE CURRENT YEAR AND THE AGGREGA TE UNABSORBED AND CURRENT YEARS DEPRECIATION HAD TO BE DEDUCTED FROM THE TOTA L INCOME OF THE PREVIOUS YEAR. HONBLE GUJARAT HIGH COURT IN THE CASE OF CI T VS. FABRIQUIP PRIVATE LTD. (2003) 260 ITR 207 HELD THAT UNABSORBED DEPRECIATIO N CAN BE CARRIED FORWARD AND SET OFF AGAINST ANY OTHER INCOME OF THE ASSESSE E IN THE SUBSEQUENT ASSESSMENT YEARS. EVEN IF THE ASSESSEE HAS DISCONT INUED THE BUSINESS IN RESPECT OF WHICH THE DEPRECIATION RELATES THE UNABSORBED D EPRECIATION IS ELIGIBLE FOR SET OFF. IN VIEW OF THESE BINDING DECISIONS OBSERVATI ONS IN THE NOTICE IS NOT MAINTAINABLE IN LAW AND IS AGAINST THE JUDICIAL DEC ISIONS WHICH ALSO AMOUNTS TO CHANGE OF OPINION AND NOT VALID FOR PROPOSED ACTION U/S.263 OF THE ACT. 6.1. WE FIND THAT LD.CIT HAS NOT CONSIDERED THESE SUBMISSIONS OF THE ASSESSEE AND HAS NOT ADVERTED TO THE SAME. IT IS A SETTLED PROPOSITION OF LAW THAT PROVISIONS OF SECTION 263 OF THE ACT CAN BE INVOKED BY THE COMMISSIONER IF HE FOUND FROM THE RECORDS THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL ITA NO.853/AHD/ 2013 MADHUSUDAN INDUSTRIES LTD. VS. CIT-II ASST.YEAR 2008-09 - 8 - TO THE INTEREST OF THE REVENUE. IN THE PRESENT CAS E THE ASSESSEE HAS EXPLAINED TO THE LD.CIT THAT THE ASSESSEE-COMPANY HAS BEEN CO NTINUOUSLY TREATING THE INTEREST INCOME AS INCOME FROM BUSINESS. IT WAS ALSO SUBMITTED ON THIS ASPECT THAT THE AO HAS MADE ENQUIRY AND IN RESPONSE TO THE QUERY OF THE AO A DETAILED REPLY WAS SUBMITTED AND THE AO ON THE BASI S OF REPLY TREATED AS THE INTEREST INCOME AS BUSINESS INCOME AS HAS BEEN DONE IN EARLIER YEARS. THIS FACT IS BORNE OUT OF THE RECORDS THAT THE REPLY WAS SUBMITTED BY THE ASSESSEE- COMPANY SUBMITTING THEREIN THE DETAILS OF LOANS AND ADVANCES AND INTEREST INCOME RECEIVED FROM SUCH LOANS AND ADVANCES TREATE D AS BUSINESS INCOME OF THE COMPANY. THE CIT HAS NOT APPLIED HIS MIND ON T HE SUBMISSIONS MADE BY THE ASSESSEE-COMPANY. THE HONBLE APEX COURT IN T HE CASE OF CIT VS. M/S.EXCEL INDUSTRIES LTD. HAS FOLLOWED THE DECISION OF THE PRIVY COUNSEL REPORTED AT 1926 AC 155 (PC IN THE CASE OF HOYSTEAD VS. COMMISSIONER OF TAXATION WHEREIN IT WAS HELD AS UNDER:- 'PARTIES ARE NOT PERMITTED TO BEGIN FRESH LITIGATIO N BECAUSE OF NEW VIEWS THEY MAY ENTERTAIN OF THE LAW OF THE CASE OR NEW VERSIO NS WHICH THEY PRESENT AS TO WHAT SHOULD BE A PROPER APPREHENSION BY THE COURT O F THE LEGAL RESULT EITHER OF THE CONSTRUCTION OF THE DOCUMENTS OR THE WEIGHT OF CERTAIN CIRCUMSTANCES. IF THIS WERE PERMITTED LITIGATION WOULD HAVE NO END EXCEP T WHEN LEGAL INGENUITY IS EXHAUSTED. IT IS A PRINCIPLE OF LAW THAT THIS CANN OT BE PERMITTED AND THERE IS ABUNDANT AUTHORITY REITERATING THAT PRINCIPLE. THIR DLY THE SAME PRINCIPLE NAMELY THAT OF SETTING TO REST RIGHTS OF LITIGANTS APPLIES TO THE CASE WHERE A POINT FUNDAMENTAL TO THE DECISION TAKEN OR ASSUMED BY T HE PLAINTIFF AND TRAVERSABLE BY THE DEFENDANT HAS NOT BEEN TRAVERSED. IN THAT CASE ALSO A DEFENDANT IS BOUND BY THE JUDGEMENT ALTHOUGH IT MAY BE TRUE ENOUGH THAT SUBSEQUENT LIGHT OR INGENUITY MIGHT SUGGEST SOME TRAVERSE WHICH HAD NOT BEEN TAKE N.' 6.2. IN THE PRESENT CASE THE REVENUE HAS BEEN ACC EPTING THE CLAIM OF THE ASSESSEE THE INCOME EARNED BY WAY OF INTEREST INCO ME AS A BUSINESS INCOME. IT IS NOT STATED BY THE LD.CIT AS TO HOW THE STAND TAK EN BY THE REVENUE FOR EARLIER YEARS WAS NOT CORRECT AND THE AO TAKING A CONSISTEN T VIEW AND ORDER SO PASSED WAS ERRONEOUS. WE FIND THAT LD.CIT HAS NOT EXERCIS ED HIS JURISDICTION U/S.263 OF THE ACT IN ACCORDANCE WITH THE SETTLED PRINCIPLE OF LAW. LD.CIT HAS FAILED TO ITA NO.853/AHD/ 2013 MADHUSUDAN INDUSTRIES LTD. VS. CIT-II ASST.YEAR 2008-09 - 9 - CONSIDER THE SUBMISSIONS OF THE ASSESSEE ON BOTH TH E ASPECTS AND HAS MERELY BASED ITS ORDER ON THE BASIS THAT THE AO HAS NOT MA DE ANY ENQUIRY. HOWEVER IT IS TRANSPIRED FROM THE RECORDS THAT THE AO HAS IN FACT MADE ENQUIRY AND ISSUED QUESTIONNAIRE TO THE ASSESSEE AND IN RESPONSE TO TH E QUESTIONNAIRE THE ASSESSEE HAS SUBMITTED THAT THE INTEREST INCOME HAS BEEN TRE ATED AS BUSINESS INCOME THROUGH OUT WHICH WAS ACCEPTED BY THE AO. THE HON BLE DELHI HIGH COURT IN THE CASE OF ITO VS. D.G. HOUSING PROJECTS LTD.(SUPR A) EXAMINED THE ENTIRE LAW ON THIS ISSUE WHEREIN THE HONBLE HIGH COURT HAS H ELD A DISTINCTION MUST BE DRAWN IN THE CASES WHERE THE AO DOES NOT CONDUCT AN ENQUIRY; AS LACK OF ENQUIRY BY ITSELF RENDERS THE ORDER BEING ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND CASES WHERE THE ASSESSI NG 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 B Y 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 T HE INTEREST OF THE REVENUE. IN THE SECOND SET OF CASES CIT CANNOT DIRECT THE A SSESSING OFFICER TO CONDUCT FURTHER ENQUIRY TO VERIFY AND FIND OUT WHETHER THE ORDER PASSED IS ERRONEOUS OR NOT. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HONB LE DELHI HIGH COURT IN A RECENT DECISION RENDERED IN THE CASE OF DIRECTOR OF INCOME-TAX VS. JYOTI FOUNDATION REPORTED AT (2013) 357 ITR 388 (DELHI). THE HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (200) 243 ITR 83 (SC) HAS HELD THAT THE CIT HAS TO BE SATISFIED OF TWIN COND ITIONS NAMELY (I) THE ORDER OF THE AO SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT IF THE ORDER OF THE ITO IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE RECOURSE CANNOT BE HAD TO S. 263(1). IN THE PRESENT CASE THE REVENUE HAS FAILED TO DEMONSTRATE THAT TH ESE TWO CONDITIONS ARE ITA NO.853/AHD/ 2013 MADHUSUDAN INDUSTRIES LTD. VS. CIT-II ASST.YEAR 2008-09 - 10 - SATISFIED. THEREFORE IN OUR CONSIDERED VIEW THER E WAS NO OCCASION TO INVOKE THE PROVISIONS OF SECTION 263 OF THE ACT. THE LD.C IT IS NOT JUSTIFIED IN EXERCISING REVISONARY JURISDICTION UNDER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THE CASE LAWS RELIED UPON BY THE REV ENUE WOULD NOT APPLY ON THE FACTS OF THE PRESENT CASE. AS IN THIS CASE TH E ASSESSEE HAS BEEN CONSISTENTLY CLAIMING THE INCOME EARNED BY WAY OF INTEREST AS BU SINESS INCOME THE AO HAS MADE ENQUIRY BY WAY OF QUESTIONNAIRE AND ASSESSEE H AS GIVEN REPLY THEREOF. THE AO HAS APPLIED HIS MIND UNDER THE FACTS AND CIR CUMSTANCES THEREFORE THE ASSESSMENT ORDER IS NOT VITIATED ON THE GROUND THAT THE ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE BECAUS E NO ENQUIRY HAS BEEN DONE. THEREFORE THE IMPUGNED ORDER IS HEREBY QUASHED BEI NG UNJUSTIFIED. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN COURT ON THE DATE MENTIONED HER EINABOVE AT CAPTION PAGE SD/- SD/- ( .. ) (' #$) ( N.S. SAINI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 31/10/2013 71.. .../ T.C. NAIR SR. PS 4 / $8 98'$ 4 / $8 98'$ 4 / $8 98'$ 4 / $8 98'$/ COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. -(+ / THE RESPONDENT. 3. !! $ ': / CONCERNED CIT-II AHMEDABAD 4. ':() / THE CIT(A)-CONCERNED 5. 8 #; $ / DR ITAT AHMEDABAD 6. ;<& =0 / GUARD FILE. 4' 4' 4' 4' / BY ORDER -8$ $ //TRUE COPY// > >> >/ // / !) !) !) !) ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD