Ita/90/2015 Of M/S Wintac Ltd v. Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE J8TH DAY OF JULY 20271 PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR.JUSTICE HEMANT CHANDANGOUDAR.ILT.A. NO.90 OF 2015 BEITWEEN M/S. WINTAC LTD.,.NO.54/1, BOODHIHAL VILLAGENELAMANGALA, BANGALORE-562123PREVIOUSLY HAVING ITS REGISTEREDOFFICE AT NO.163, RESERVOIR STREET|BASAVANNGUDI, BANGALORE-560031PAN: AAACR8613HREPRESENTED BY ITS.MANAGING DIRECTOR|SHRI. S. JAYAPRAKASH MADY~AGED ABOUT 53 YEARS|S/O LATE S. SADANANDAMADY.,.., APPELLAN | (BY SRI. BALRAM R. RAO, ADV.) AND COMMISSIONER OF INCOME TAXBANGALORE -IIICENTRAL REVENUE BUILDINGSQUEENS ROAD, BANGALORE-560001..., RESPONDENT| (BY SRI. K.V. ARAVIND, ADV.,) THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T..ACT, 1961 ARISING OUT OF ORDER DATED 31.10.2014PASSED IN ITA NO.604/BANG/2013, FOR THE ASSESSMENTYEAR 2008-09, PRAYING TO:I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW|STATED ABOVE. I]. ALLOW THE APPEAL AND SET ASIDE THE ORDER|PASSED BY THE ITAT, DATED 31.10.2014 BEARING IN ITA.NO.604/BANG/2013 FOR THE ASSESSMENT YEAR 2008-09. THIS I.T.A. COMING ON FOR HEARING, THIS DAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax Act,1961 (hereinafter referred to as ‘the Act’ for short) has beenfiled by the assessee against the order dated 31.10.2014passed by the Income Tax Appellate Tribunal. Tne subjectmatter of the appeal pertains to the Assessment Year 2008-09. The appeal was admitted by a Bench of this Court on thefollowing substantial question of law: “Whether.Of)thefactsand|Inthecircumstances of the case, and in law, theTribunal was Justified in confirming the orderpassed by the Commissioner of Income Tax under|Section 263 of the Income Tax Act,, 1961cancelling the order of assessment under Section115 WE(3) dated 18.11.2010 and directing the assessing officer to make an order de novo onlyfor the reason that there [is no discussion in theorder or In the record of the assessmentproceedings? 2. Facts leading to filing of this appeal briefly stated aretnat the assessee is a company wnich is engaged in thebusiness of manufacture of pharmaceutical products. Theassessee had filed return of income in respect of fringe|benefits for the Assessment Year 2008-09 on 19.09.2008 andhad declared the total value of fringe benefits as enumeratedunder Section 115WE of the Act as NIL. The order ofassessment under Section 115WE of the Act was passed bythe Assessing Officer on 18.11.2010 by which the AssessingAutnority accepted the return filed by the assessee and|treated the total value of fringe benefits as NIL. TheCommissioner of Income Tax (Appeals) invoked the powersunder Section 263 of the Act and issued a notice dated11.03.2013 to the assessee. The Commissioner of Income|Tax (Appeals), by an order dated 30.03.2013,inter alianeld~tnat the order passed by the Assessing Authority is erroneousand is prejudicial to the interest of the revenue as the Assessing Authority has not considered the items namelyveniciemaintenanceof|Rs.24,83,836/-,.travelingand.conveyance amount for a sum of Rs.22,37,001/- and poojaexpenses to an extent of Rs.1,35,/711/-. It was neld that theaforesaid amounts attracted fringe benefit tax under Section11I5WE of tne Act. Accordingly, the aforesaid amounts werebrought to tax. Being aggrieved, the assessee filed anappeal before the Income Tax Appellate Tribunal. TheTribunal, Dy an order dated 31.10.2014, dismissed theappeal preferred by the assessee. In the aforesaid factualbackground, this appeal Nas been filed. Assessing Authority has not considered the items namelyveniciemaintenanceof|Rs.24,83,836/-,.travelingand.conveyance amount for a sum of Rs.22,37,001/- and poojaexpenses to an extent of Rs.1,35,/711/-. It was neld that theaforesaid amounts attracted fringe benefit tax under Section11I5WE of tne Act. Accordingly, the aforesaid amounts werebrought to tax. Being aggrieved, the assessee filed anappeal before the Income Tax Appellate Tribunal. TheTribunal, Dy an order dated 31.10.2014, dismissed theappeal preferred by the assessee. In the aforesaid factualbackground, this appeal Nas been filed. 3. Learned counsel for the assessee, at the outset,while inviting the attention of this Court to paragraph 6.4 ofthe order passed by the Tribunal, submitted that the claim ofthe assessee under Section LL5WE of the Act in respect of fringe benefits has not been considered on merits by theTribunal while deciding tne appeal and the impugned ordertherefore be set aside and the matter be remitted to theTribunal for decision afresh on merits with regard to theclaim of the assessee in respect of fringe benefits. On the| other hand, learned counsel for the revenue has supportedtne order passed by the Tribunal. 4 We nave considered the SUDMISSIONS made on potn |sides and have perused the record. From perusal of theorder passed by the Tribunal, it is evident that the Tribunalhas not considered the claim of the assessee with regard tofringe benefits under Section 115WE of the Act on merits.For the facility of reference, paragrapn 6.4 of tne orderpassed by tne Tribunal is reproduced below: "6.4 From a perusal of the order dt:18.11.2010 |passed unaer section 115W(2) of the Act, we do.not find any material to establisn that the.Assessing Officer has investigated the issue offringe benefits witn respect to the tnree items ofexpenaiture i.e., venicie maintenance, travel and|conveyance and pooja expenses and how he nasapplied nis mind to tnis issue. In tne course of.hearings before us, the learned Authorized|Representative of the assessee was required to furnish copy of the show cause notice, if any,|issued by the Assessing Officer in respect of thefringe benefits of the above three items of|expenditure and the reply of the assessee| tnereto, Dut no sucn details were availabie. We|also find from the reply dt.19.3.2013 filed by the.assessee before the learned CIT in revisionary|proceedings, tnat the assessee nas nownere.aqemonstrateda that tne Assessing Officer Naissued a show cause notice or letter calling for|tnese details and that it nas filed a reply. While.it is the prerogative of the Assessing Officer to.pass tne order of assessment in the manner hedeems fit, but if discussion is not discernable|there from on a particular issue, then in order toascertain whether the Assessing Officer has.applied his mind or not, the nignher appellateforum can go through the show cause notice, ifany, issued by him and the reply given thereto.by the assessee. This would indicate that|thougn tne order of assessment is silent, the.issue in question must nave been discussed in)tne course of assessment proceedings. We find.that no sucn meterlial is available on record. The|Hon'ble Apex Court in tne case of Malabar.Industries Co. V CIT (243 ITR 83) Nas observed|that the accepting of accounting entries as it Is without any enguiry being carried out by tne|Assessing Officer would make the assessment|order erroneous and prejudicial to tne interests|of revenue. In the facts and circumstances Of| the case as discussed above, we are of theconsidered view that the learned CIT had rightly|considered all these aspects before taking actionUnder section 263 of the Act and therefore|finding no merit in this appeal of the assesseedismiss the same.” 5. It is evident from the aforesaid extract of tneimpugned order that the Tridunal Nas not dealt with tne claimof the assessee on merits. The impugned order is thereforequasned and the matter is remitted to the Tribunal fordecision afresh with regard to the claim of the assessee withreference to fringe benefits, on merits. the case as discussed above, we are of theconsidered view that the learned CIT had rightly|considered all these aspects before taking actionUnder section 263 of the Act and therefore|finding no merit in this appeal of the assesseedismiss the same.” 5. It is evident from the aforesaid extract of tneimpugned order that the Tridunal Nas not dealt with tne claimof the assessee on merits. The impugned order is thereforequasned and the matter is remitted to the Tribunal fordecision afresh with regard to the claim of the assessee withreference to fringe benefits, on merits. In the result, the appeal is disposed of. Sd/-JUDGE Sd/-JUDGE