Commissioner Of Income-Tax, Karnal v. M/S Unique Autofelts (P) Ltd. 250-251, Sector 29, Huda, Paniapt

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A.No. 445 of 2008Date of decision: 17.8.2009 Commissioner of Income-Tax, Karnal Vs. M/s Unique Autofelts (P) Ltd. 250-251, Sector 29, HUDA, Paniapt. ......Appellant ...Respondent CORAM:-HON'BLE MR.JUSTICE ADARSH KUMAR GOELHON'BLE MRS.JUSTICE DAYA CHAUDHARY PRESENT:Mr.Sukant Gupta, Standing Counsel for the Revenue.**** ADARSH KUMAR GOEL, J. (Oral) 1.This appeal has been preferred by the Revenue under Section260A of the Income Tax Act, 1961 (for short,”the Act”) against the order ofthe Income Tax Appellate Tribunal, Delhi Bench 'C' Delhi passed in ITANo. 43/Del/2006 dated 31.7.2007 for the assessment year 2001-02,proposing to raise the following substantial question of law: “ Whether on the facts and in thecircumstances of the case, the Hon'ble ITATwas right in law in quashing the impugnedorder under Section 263 of the Income TaxAct, 1961 passed by the Commissioner ofIncome Tax, Karnal?” 2.The assessee is dealing in manufacturing of fabrics for export.Assessment was made under Section 143(3) of the Act and thereafter order of ratification under Section 154 of the Act was passed. The CIT(A) inexercise of its power under Section 263 of the Act, cancelled the order ofassessment and directed making of assessment de novo. On appeal, theTribunal held that CIT(A) was not justified in invoking its jurisdictionunder Section 263 of the Act, as the Assessing Officer had duly applied hismind, made inquiries and examined the accounts. The observations of theTribunal are as under: “The next issue on which power underSection 263 was invoked by the learnedCommissioner relates to the shareapplication money. The Commissioner hasfound that the share capital has beenincreased during the assessment order onaccount of share application money fromvarious parties. He has, therefore, held theorder to be erroneous and prejudicial to therevenue by observing that the assessee hasfailed to produce the share holders alongwith their bank statements in original. Hereagain it may be pointed out that he has beeninfluenced by the fact that before him theassessee failed to produce share holdersalong with their bank statements. So far as the examination of the issue at the assessment stage is concerned, wefind that the AO made specific query fromthe assessee in relation to this issue. Thequery is as under: “9. Share capital has increased fromRs.19,78,000/- to Rs.33,28,000/-. Pleasefurnish copies of a/cs of persons, who haveinvested in shares and furnish completedescription of such persons. Also prove theevidence of source of investment made bysuch persons.” In reply to this query the assessee had filedreply giving full details of the Shareapplication money. This reply has beenmade through letter dated 24.2.2003 and isavailable at page 77 of the paper-book. Theassessee also filed the details of shareapplication money as on 31.3.2001 whichare available at page 79 of the paper-book.It was pointed out by the learned counsel forthe assessee that at Serial No. 21 in place ofKansnite Capital Services, it should havebeen Kinetic Capital Services and that thismistake was typographical one. Theassessee has filed confirmation from Kinetic In reply to this query the assessee had filedreply giving full details of the Shareapplication money. This reply has beenmade through letter dated 24.2.2003 and isavailable at page 77 of the paper-book. Theassessee also filed the details of shareapplication money as on 31.3.2001 whichare available at page 79 of the paper-book.It was pointed out by the learned counsel forthe assessee that at Serial No. 21 in place ofKansnite Capital Services, it should havebeen Kinetic Capital Services and that thismistake was typographical one. Theassessee has filed confirmation from Kinetic Capital Services Ltd. Regarding shareapplication money of Rs.5 lacks before theAO. With the confirmation the assesseealso filed copy of acknowledgment forfiling of the return by Kinetic CapitalServices Ltd. Similarly, the assessee filedcopy of letter confirmation from otherShare applicants along with the copy ofAcknowledge for filing return and copies ofbank statements etc. After going throughthis material, the AO was satisfied andtherefore, he did not consider it proper tomake any disallowance on account of Shareapplication money. Therefore, it cannot besaid that the AO did not apply his mind.The findings of the learned CIT on thisissue is also not based on the examination ofrecord. So far as the third issue relating tounsecured loan from Shri Pramod Khuranais concerned, on this issue the assessee hasfiled copies of account of Shri PramodKumar Khurana as mentioned in the replydated 24.2.2003 available at pages 77-78 ofthe paper-book. Copy of acknowledgment of Income- tax Return of Shri PramodKhurana is available at pages 80-90 of thepaper-book which shows that the properquery has been made by the AO in originalassessment order and proper reply wasgiven by the assessee. Thus the AO hasmade the assessment only after examiningthe material produced before him. Order ofthe learned CIT holding that the order of theAO is erroneous in so far as it is prejudicialto the interest of the revenue because theAO has not applied his mind, is notjustified.” 3.We have heard learned counsel for the appellant. 4.Learned counsel for the appellant submitted that theCommissioner rightly held that share capital had increased during theassessment order and the assessee failed to produce the share holders butthe Assessing Officer failed to draw adverse inference. The AssessingOfficer also failed to draw adverse inference with regard to un-securedloan from Pramod Khurana. In the circumstances, power exercised underSection 263 was fully justified. 5.From the finding of the Tribunal, it is clear that the assesseehad given proper explanation by filing the necessary confirmations. In viewof such a finding, the Tribunal rightly held that power under Section 263 of I.T.A.No. 445 of 2008 the Act could be exercised where view taken by an Assessing Officer waserroneous. While exercising such power, the Commissioner was bound totake into account all relevant facts. If order invoking the said powerproceeds on an erroneous assumption, the same could be set aside by theTribunal. Finding of the Tribunal is not shown to be perverse. Nosubstantial question of law arises. 6.The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE August 17, 2009 raghav (DAYA CHAUDHARY) JUDGE Note: Whether this case is to be referred to the Reporter? ........Yes/No