The DCIT, Central Circle, Rajahmundry v. Sri K S V Raja (Ind), Narsapur

PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM B EFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI B.R.BASKARAN ACCOUNTANT MEMBER SL. NO. CASE NO. ASST. YEAR P.A.N.NO. APPELLANTS RESPONDENTS 1 M.A NO.7/VI Z/2010 (ITA 427/VIZ/2008) 2000 - 01 AKUPK 9237 H DCIT CENTRAL CIRCLE RAJAHMUNDRY KSV RAJA (IND) NARSARPUR 2 M.A NO.8/VIZ/2010 (ITA 428/VIZ/2008) 2001 - 02 AKUPK 9237 H DCIT CENTRAL CIRCLE RAJAHMUNDRY KSV RAJA (IND) NARSARPUR 3 M.A NO.9/VIZ/2010 (ITA 429/VIZ/2010) 2002 - 03 AKUPK 9237 H DCIT CENTRAL CIRCLE RAJAHMUNDRY KSV RAJA (IND) NARSARPUR 4 M.A.NO.10/VIZ/2010 (ITA 430/VIZ/2008) 2003 - 04 AKUPK 9237 H DCIT CENTRAL CIRCLE RAJAHMUNDRY KSV RAJA (IND) NARSARPUR 5 M.A.NO.11/VIZ/2010 (ITA.431/VIZ/2008) 2 004 - 05 AKUPK 9237 H DCIT CENTRAL CIRCLE RAJAHMUNDRY KSV RAJA (IND) NARSARPUR 6 M.A.NO.12/VIZ/2010 (ITA 432/VIZ/2008) 2005 - 06 AKUPK 9237 H DCIT CENTRAL CIRCLE RAJAHMUNDRY KSV RAJA (IND) NARSARPUR 7 M.A.NO.13/VIZ/2010 (ITA 433/VIZ/2008) 2006 - 07 AKUPK 9 237 H DCIT CENTRAL CIRCLE RAJAHMUNDRY KSV RAJA (IND) NARSARPUR 8 MA NO.14/VIZ/2010 (ITA 434/VIZ/2008) 2000 - 01 AGXPK 5879 Q DCIT CENTRAL CIRCLE RAJAHMUNDRY KV RAMA KRISHNA RAO NARSARPUR 9 MA NO.15/VIZ/2010 (ITA 435/VIZ/2008) 2001 - 02 AGXPK 5879 Q DCIT CENTRAL CIRCLE RAJAHMUNDRY KV RAMA KRISHNA RAO NARSARPUR 10 MA NO.16/VIZ/2010 (ITA 436/VIZ/208) 2002 - 03 AGXPK 5879 Q DCIT CENTRAL CIRCLE RAJAHMUNDRY KV RAMA KRISHNA RAO NARSARPUR 11 MA NO.17/VIZ/2010 (ITA 437/VIZ/2008) 2003 - 04 AGXPK 5879 Q DCIT C ENTRAL CIRCLE RAJAHMUNDRY KV RAMA KRISHNA RAO NARSARPUR 12 MA N O.18/VIZ/2010 (ITA 438/VIZ/2008) 2004 - 05 AGXPK 5879 Q DCIT CENTRAL CIRCLE RAJAHMUNDRY KV RAMA KRISHNA RAO NARSARPUR 13 MA NO.19/VIZ/2010 (ITA 439/VIZ/2010) 2005 - 06 AGXPK 5879 Q DCIT CE NTRAL CIRCLE RAJAHMUNDRY KV RAMA KRISHNA RAO NARSARPUR 14 MA NO.20/VIZ/2010 (ITA 440/VIZ/2008) 2006 - 07 AGXPK 5879 Q DCIT CENTRAL CIRCLE RAJAHMUNDRY KV RAMA KRISHNA RAO NARSARPUR 15 MA NO.21/VIZ/2010 (ITA 454/VIZ/2008) 2000 - 01 ACWPK 3299 H DCIT CENT RAL CIRCLE RAJAHMUNDRY KV RAM KUM AR (IND) NARSARPUR 16 MA NO.22/VIZ/2010 (ITA 455/VIZ/2008) 2001 - 02 ACWPK 3299 H DCIT CENTRAL CIRCLE RAJAHMUNDRY KV RAM KUM AR (IND) NARSARPUR 17 MA NO.23/VIZ/2010 (ITA 456/VIZ/2008) 2002 - 03 ACWPK 3299 H DCIT CENTRAL CI RCLE RAJAHMUNDRY KV RAM KUM AR (IND) NARSARPUR 18 MA NO.24/VIZ/2010 (ITA 457/VIZ/2010) 2003 - 04 ACWPK 3299 H DCIT CENTRAL CIRCLE RAJAHMUNDRY KV RAM KUM AR (IND) NARSARPUR 19 MA NO.25/VIZ/2010 (ITA 458/VIZ/2008) 2004 - 05 ACWPK 3299 H DCIT CENTRAL CIRCLE RAJAHMUNDRY KV RAM KUM AR (IND) NARSARPUR PAGE 2 OF 6 20 MA NO.26/VIZ/2010 (ITA 459/VIZ/2008) 2005 - 06 ACWPK 3299 H DCIT CENTRAL CIRCLE RAJAHMUNDRY KV RAM KUM AR (IND) NARSARPUR 21 MA NO.27/VIZ/2010 (ITA 460/VIZ/2008) 2006 - 07 ACWPK 3299 H DCIT CENTRAL CIRCLE RAJAHMUNDRY KV RAM KUM AR (IND) NARSARPUR 22 MA NO.28/VIZ/2010 (ITA 421/VIZ/2008) 2000 - 01 AEWPK 3070 L DCIT CENTRAL CIRCLE RAJAHMUNDRY KV SRINIVASA RAO (IND) NARSARPUR 23 MA NO.29/VIZ/2010 (ITA 422/VIZ/2008) 2001 - 02 AEWPK 3070 L DCIT CENTRAL CIRCLE RAJAHMUNDRY KV SRINIVASA RAO (IND) NARSARPUR 24 MA NO.30/VIZ/2010 (ITA 423/VIZ/2008) 2002 - 03 AEWPK 3070 L DCIT CENTRAL CIRCLE RAJAHMUNDRY KV SRINIVASA RAO (IND) NARSARPUR 25 MA NO.31/VIZ/2010 (ITA 424/VIZ/2008) 2003 - 04 AEWPK 3070 L DCIT CENTRAL CIRCLE RAJAHMUNDRY KV SRINIVASA RAO (IND) NARSARPUR 26 MA NO.32/VIZ/2010 (ITA 425/VIZ/2008) 2004 - 05 AEWPK 3070 L DCIT CENTRAL CIRCLE RAJAHMUNDRY KV SRINIVASA RAO (IND) NARSARPUR 27 MA NO.33/VIZ/2010 (ITA 426/VIZ/2008) 2005 - 06 AEWPK 3070 L DCIT CENTRAL CIRCLE RAJAHMUNDRY KV SRINIVASA RAO (IND) NARSARPUR APPELLANTS BY: SHRI SUBRATA SARKAR CIT (DR) & SHRI B.SASMAL RESPONDENTS BY: SHRI G.V.N. HARI CA ORDER PER BENCH: THESE MISCELLANEOUS APPLICATIONS ARE PREFER RED AGAINST THE CONSOLIDATED ORDER OF THE TRIBUNAL DATED 31-8-2009 WITH THE SUBM ISSION THAT THE TRIBUNAL HAS WRONGLY APPROVED THE MODE OF COMPUTATION OF INCOME AT NET WORTH BASIS ADOPTED BY THE ASSESSEE HAVING RELIED UPON THE CIRCULAR F. NO.2/48/68/IT(IMV) DATED 26.2.1969 WITHOUT TAKING INTO ACCOUNT THAT THE ASSE SSED INCOME WOULD BE LESSER THAN THE RETURNED INCOME WHICH IS AGAINST THE PRIN CIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SALI PRODUCTS AND OTHERS (2003) 216 ITR 367 (SC) AND IT RESULTED INTO AN ERROR APPARENT FRO M THE ORDER OF THE TRIBUNAL. THUS THE RECTIFICATION OF THE ORDER OF THE TRIBUNAL IS CALLED FOR. 2 DURING THE COURSE OF HEARING THE LD COUNSEL FOR THE DEPARTMENT HAS INVITED OUR ATTENTION TO THE FACT THAT THE TRIBUNAL HAS WRONGLY CONSIDERED THAT THERE WAS A CIRCULAR F.NO.2/48/68/IT(IMV) DATED 26.2 .1969 WHEREAS THERE WAS NO PAGE 3 OF 6 CIRCULAR ISSUED BY THE CBDT IT WAS AN INTERNAL GUI DANCE NOTE/INSTRUCTION ISSUED BY THE CBDT. AS SUCH THE TRIBUNAL HAS WRONGLY HELD THA T THE CIRCULAR IS BINDING UPON THE SUBORDINATE AUTHORITIES AND THE AO SHOULD HAVE ACCEPTED THE NET WORTH METHOD ADOPTED BY THE ASSESSEE FOR COMPUTING ITS TO TAL INCOME. THE LD DR ALSO PLACED RELIANCE UPON THE JUDGMENT OF THE APEX COURT IN THE CASE OF THE CIT VS. SALI PRODUCTS AND OTHERS (SUPRA) IN SUPPORT OF HIS CONTENTION THAT THE ASSESSED INCOME CANNOT BE LESSER THAN THE RETURNED INCOME OF THE ASSESSEE. THE LD COUNSEL FOR THE ASSESSEE ON THE OTHER HAND H AS SUBMITTED THAT THE TRIBUNAL HAS CATEGORICALLY ADJUDICATED THE ISSUE WI TH REGARD TO THE MODE OF COMPUTATION OF THE INCOME. IN ITS PARA 18 TO 23 OF THE ORDER THE TRIBUNAL HAS EXAMINED DIFFERENT MODE OF COMPUTATION OF INCOME IN THE ABSENCE OF PROPER BOOKS OF ACCOUNTS AND HAS GIVEN A CATEGORICAL FINDI NG THAT THE MODE OF ACCOUNTING SHOULD BE LEFT AT THE CHOICE OF THE ASSE SSEE AND WHEN THE ASSESSEE HAD ADOPTED THE MODE OF COMPUTING ITS PROFIT FOR TH E YEAR ON THE BASIS OF NET WORTH BASIS THE SAME SHOULD NOT BE REJECTED WITHOUT POINTING OUT ANY SPECIFIC DEFECTS THEREIN. THE LD COUNSEL FOR THE ASSESSEE HO WEVER CONTENDED THAT THE SO CALLED INSTRUCTIONS OR GUIDANCE NOTE F.NO.2/48/68/I T(IMV) DATED 26.2.1969 IS ADMITTEDLY ISSUED BY THE CBDT. IT MAKES NO DIFFERENC E WHETHER IT IS CIRCULAR OR INSTRUCTIONS OR GUIDANCE NOTES ISSUED BY THE CBDT. THE SUBORDINATE AUTHORITIES ARE REQUIRED TO FOLLOW THE SAME. WITH REGARD TO THE JUDGMENT OF THE APEX COURT IN THE CASE OF CIT VS. SALI PRODUCTS AND OTHERS (SUPRA ) IT WAS CONTENDED THAT DURING THE COURSE OF HEARING OF THE APPEAL THE JUDGMENT WA S NOT REFERRED BY THE REVENUE AUTHORITIES. MOREOVER THE JUDGMENT IS NOT AT ALL AP PLICABLE IN THE INSTANT CASE IN AS MUCH AS THE ORIGINAL RETURNS WERE NOT FILED IN THE NAME OF THE ASSESSEE. IT WAS RATHER FILED IN THE NAME OF THE PARTNERSHIP FIRMS F ORMED BY THE ASSESSEE. THE LD COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT THE TRIBUNAL HAS ADJUDICATED THE ISSUE ON MERIT AND ALSO IN THE LIGHT OF THE FACTS A VAILABLE ON RECORD. THEREFORE THE ORDER OF THE TRIBUNAL CANNOT BE REVIEWED UNDER THE GARB OF RECTIFICATION U/S 254 (2) OF THE ACT. PAGE 4 OF 6 3. WE HAVE HEARD THE RIVAL SUBMISSION AND CAREFULLY PERUSED THE ORDERS OF THE TRIBUNAL VIS--VIS MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE. THE SOLE CONTROVERSY BEFORE THE TRIBUNAL WAS WITH REGARD TO MODE OF COMPUTATION OF PROFIT IN THE HANDS OF THE ASSESSEE. THE ASSESSEE WAS ENGA GED IN THE BUSINESS OF EXECUTING THE CIVIL CONTRACT WORKS FOR GOVT. OF AND HRA PRADESH AND HE GOT CONTRACT WORKS IN THE INDIVIDUAL NAMES BUT EXECUTED THE WORK THROUGH PARTNERSHIP FIRMS FLOATED BY HIM. HE HAS FILED THE ORIGINAL RETURNS O F INCOME IN THE NAME OF DIFFERENT PARTNERSHIP FIRM. BUT DURING THE SEARCH OPERATIONS HE COULD NOT PROVE THE GENUINENESS OF THE FIRM AND ADMITTED THE ENTIRE INC OME IN THE HANDS OF THE INDIVIDUAL/HUF STATUS. THOUGH HE AGREED DURING THE COURSE OF SEARCH THAT THE TOTAL INCOME MAY BE TAKEN AT 4% GROSS RECEIPT BUT F ILED THE RETURN OF INCOME AFTER COMPUTING ITS TOTAL INCOME ON NET WORTH/WEALTH BASI S WHICH WAS REJECTED BY THE AO. THE AO ESTIMATED IT AT 8% OF THE GROSS CONTRACT RECEIPT WHICH WAS LATER ON REDUCED TO 5% BY THE CIT (A). BEFORE THE TRIBUNAL T HE MODE OF CALCULATIONS OF THE PROFIT WAS THE SOLE CONTROVERSY AND THE TRIBUNAL HA S EXAMINED THE METHOD OF COMPUTATION ADOPTED BY THE REVENUE AUTHORITIES AND ALSO OF THE ASSESSEE AND THE TRIBUNAL HAS CONCLUDED THAT IT IS THE CHOICE OF THE ASSESSEE TO ADOPT A PARTICULAR METHOD OF COMPUTING ITS PROFIT OF THE YEAR AND THE ASSESSEE HAD ADOPTED THE MODE OF COMPUTING THE PROFIT OF THE YEAR ON THE BAS IS OF NET WORTH BASIS AND FURNISHED THE DETAILS AND ITS MODE OF COMPUTATION B EFORE THE AO. THE TRIBUNAL FURTHER OBSERVED THAT THE AO HAS NOT POINTED OUT AN Y DEFECT IN THE MODE OF CALCULATION OF THE PROFIT ON THE BASIS OF NET WORTH BASIS. THE TRIBUNAL HAS ALSO EXAMINED THE REASONS FOR THE REJECTION OF NET WORTH METHOD BUT IT WAS NOT CONVINCED WITH THE REASONS EXPRESSED BY THE AO. THE TRIBUNAL ACCORDINGLY APPROVED THE NET WORTH BASIS THE MODE OF COMPUTATI ON OF PROFIT OF THE YEAR ADOPTED BY THE ASSESSEE. 4. FROM A CAREFUL PERUSAL OF THE ORDER OF THE TRIBU NAL IT IS NOT DISCERNIBLE THAT THE REVENUE HAS EVER REFERRED THE JUDGMENT OF THE APEX COURT IN THE CASE OF PAGE 5 OF 6 CIT VS. SALI PRODUCTS AND OTHERS (SUPRA). WE HOWEVE R CAREFULLY EXAMINED THE JUDGMENT AND WE FIND THAT THE JUDGMENT CANNOT BE AP PLIED TO THE PRESENT FACTS OF THE CASE. IN THAT JUDGMENT THE ORIGINAL RETURN WAS FILED BY THE ASSESSEE ITSELF AND THE INCOME ASSESSED WAS LOWER THAN THAT. IN THAT SI TUATION THEIR LORDSHIPS OF THE APEX COURT HAVE HELD THAT THE ASSESSED INCOME CANNO T BE LESSER THAN THE RETURNED INCOME. BUT IN THE INSTANT CASE THE ORIGIN AL RETURNS WERE FILED BY DIFFERENT ASSESSEES WHICH WERE NOT ACCEPTED BY THE REVENUE. THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR THE FIRST TIME IN RE SPONSE TO NOTICE U/S 153 A OF THE ACT IN WHICH HE HAS ADOPTED THE MODE OF COMPUTATION OF THE INCOME ON NET WORTH BASIS. IN THIS SITUATION WE ARE OF THE VIEW THAT TH E RATIO LAID DOWN BY THE APEX COURT IN THE CASE OF CIT VS. SALI PRODUCTS CANNOT B E APPLIED. SO FAR AS THE REFERENCE OF GUIDANCE NOTE/INSTRUCTIONS NO. F.NO.2/ 48/68/IT(IMV) DATED 26.2.1969 AS CIRCULAR IN THE ORDER BY THE TRIBUNAL IS CONCERNED WE ARE OF THE VIEW WHATEVER INSTRUCTIONS OR GUIDANCE OR CIRCULAR ISSUE D BY THE CBDT IT HAS A BINDING EFFECT OVER THE OFFICERS OF THE REVENUE. IT WOULD N OT MAKE MUCH DIFFERENCE IF THE TRIBUNAL REFERRED THESE GUIDANCE/INSTRUCTIONS IN PL ACE OF THE CIRCULAR. THE REFERENCE WAS MADE ONLY TO SAY THAT THE NET WORTH/W EALTH BASIS IS RECOGNIZED MODE OF COMPUTATION OF INCOME OF THE YEAR IN THE AB SENCE OF PROPER BOOKS OF ACCOUNTS. 5. FROM A CAREFUL PERUSAL OF THE ORDER OF THE TRIBU NAL WE ARE OF THE VIEW THAT THE TRIBUNAL HAS GIVEN A FINDING OF THE FACT IN THE LIGHT OF THE VARIOUS JUDGMENTS REFERRED TO BY THE PARTIES AND IT CANNOT BE REVIEWE D UNDER THE GARB OF RECTIFICATION U/S 254(2) OF THE ACT. THE SCOPE OF SEC. 254(2) HA VE BEEN RECENTLY EXAMINED BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S EA RNEST EXPORT LTD. (ITA NO.26/2010 DATED 25/2/2010) IN WHICH THEIR LORDSHI PS HAVE HELD THAT THE POWER U/S 254(2) IS CONFINED TO RECTIFICATION OF A MISTAK E APPARENT ON RECORD. THE TRIBUNAL MUST CONFINE ITSELF WITHIN THOSE PARAMETER S. SEC. 254(2) IS NOT CART BLANCHE FOR THE TRIBUNAL TO CHANGE ITS VIEW BY SUBS TITUTING A VIEW WHICH IT BELIEVES SHOULD HAVE BEEN TAKEN IN THE FIRST INSTAN CE. SEC. 254(2) IS NOT MANDATE PAGE 6 OF 6 TO UNSETTLE DECISION TAKEN AFTER DUE REFLECTION. TH E PRINCIPLE EMPOWERS THE TRIBUNAL TO CORRECT MISTAKE ERROR AND OMISSION APP ARENT ON THE FACE. THE SECTION IS NOT AN AVENUE TO REVIEW A PROCEEDING BY RECOURSE TO DISINGENUOUS ARGUMENT NOR DOES IT CONTEMPLATE A FRESH LOOK AT THE DECISIO N RECORDED OR MERIT HOWEVER APPEALING ALTERNATIVE VIEW MAY SEEM. UNLESS RESTRAI NT IS OBSERVED JUDICIAL DISCIPLINE WOULD BE THE CAUSALITY. THAT IS NOT WHAT PARLIAMENT ENVISAGED. SINCE THE TRIBUNAL HAS TAKEN INTO ACCOUNT ALL NECESSARY FACTS AND ARGUMENTS BEFORE GIVING FINDING OF FACT ITS VIEW CANNOT BE REVIEWED UNDER THE GARB OF RECTIFICATION AS NO ERROR APPARENT FROM THE RECORD IS NOTICED. ACCORDIN GLY THE MISCELLANEOUS APPLICATIONS OF THE REVENUE ARE DISMISSED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 23-4-2010. SD/- SD/- (B R BASKARAN) (S.K. YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PVV/SPS VISAKHAPATNAM DATE 23-4-2010. COPY TO 1. THE DCIT CENTRAL CIRCLE RAJAHMUNDRY 2. SHRI KSV RAJA (IND) D.NO.6-12-18 MAIN ROAD N ARSARPUR 3. SHRI KV RAMA KRISHNA RAO ) D.NO.6-12-18 MAIN ROAD NARSARPUR 4. SHRI KV RAM KUMAR (IND) D.NO.6-12-18 MAIN ROAD NARSARPUR 5. SHRI KV SRINIVASA RAO (IND) D.NO.6-12-18 MAIN R OAD NARSARPUR 6. COMMISSIONER OF INCOME TAX (APPEALS) RAJAHMUNDRY 7. COMMISSIONER OF INCOME TAX RAJAHMUNDRY 8. THE DEPARTMENTAL REPRESENTATIVE I.T.A.T. VISAKH APATNAM 9. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM