TaxTMI 
TaxTMI 
1997 (5) TMI 96
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....itten representation dated 22-2-1994 objecting to the proposed revision under section 263. It was submitted on behalf of the assessee that all the details of the secret commission, etc., had already been furnished to the Assessing Officer and that only after careful consideration of these details and due verification, the assessment had been completed. The details show that the assessee paid a total of Rs.9.80 lakhs to 28 persons and the remaining Rs.2.13 lakhs is shown as paid to 'sundry parties'. It was argued that the identity of all the 28 persons to whom secret commission had been paid had, according to the assessee, been established before the Assessing Officer. He, therefore, submitted that the assessment already completed cannot be considered as erroneous and prejudicial to the interests of the Revenue warranting intervention by the Commissioner under section 263. In this connection, following case laws have been relied upon by the assessee's counsel: 1. CIT v. Coimbatore Salem Transport (P.) Ltd [1966] 61 ITR 480 (Mad.), 2. Ganga Properties v. ITO [1979] 118 ITR 447 (Cal.), 3. Venkatakrishna Rice Co. v. CIT [1987] 163 ITR 129/30 Taxman 528 (Mad.), 4. CIT v. Gan....
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....g, the Assessing Officer has called for written explanation for the expenditure of secret commission incurred wholly and exclusively for the purpose of carrying on the business under section 37(1). A detailed reply dated 6-3-1992 was filed on 7-3-1992. At the time of hearing on 2-3-1992, a detailed explanation was given for the purpose of incurring the expenditure orally and subsequent to this a detailed written explanation was given as desired by the Assessing Officer. The purpose for which the payment was incurred has been fully established. The learned counsel for the assessee drew our attention to the assessment order passed under section 143(3) placed at pages 24 to 26 of the paper book. Our specific attention was drawn to page 24 of the paper bookwhere the Assessing Officer has stated that "Books of account produced examined. Details called for have been filed. After discussion with assessee's representative, assessee's income is determined as under". He further contented that the very fact that the Assessing Officer has disallowed a sum of Rs.41,510 from out of Rs.3,24,199 claimed by the assessee as general expenses and Rs.50,000 out of Rs.6,51,810 claimed by the assessee as....
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....rder passed by him contains any error. It is seen that the Assessing Officer has examined all the details filed before him by the assessee while passing the assessment order. On a perusal of the assessment order, it is seen that the assessment which was originally completed under section 143(1) was subject-matter of scrutiny and the Assessing Officer has served a notice to the assessee under section 143(2) on 14-2-1992. In reply to the said notice, the assessee filed all the details before the Assessing Officer and it is clear from the assessment order that all the books of account and details of payment of secret commission have been furnished by the assessee before the Assessing Officer and the Assessing Officer after examining all such details and books of account, has allowed deduction to the assessee. The fact that the Assessing Officer has fully applied his mind is borne out from the fact that he has disallowed a sum of Rs.45,510 from out of Rs.3,24,199 claimed by the assessee under general expenses and Rs.50,000 from out of Rs.6,51,810 claimed by the assessee as shop expenses. The Commissioner has made an observation in her order that the assessment was made by the Assessing....
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.... Court in the case of CIT v. Ashoka Traders by dismissing a Special Leave Petition filed by the Department to appeal against the order dated 15-10-1987 of the Madras High Court in TCP Nos. 703-704/1985 rejecting a reference application. 8. Respectfully following the ratio laid down by the Madras High Court, we hold that in the instant case, the order of assessment of the ITO was in accordance with law and it could not be held to be erroneous and, consequently, it could not be prejudicial to the interests of the revenue and, hence, the action of the Commissioner was not justified. 9. In the result, the appeal is allowed. Per Accountant Member -- I have carefully perused the order proposed by my learned brother, the Judicial Member, and I am unable to agree with the conclusion reached by him. The facts of the case in brief are, the assessee, a firm of nine partners, had at the relevant point of time successfully bid for as many as nine wine shops (that is to say, retail outlets for selling IMFL). For the assessment year 1991-92, it filed its return of income on 27-1-1992 disclosing a total income of Rs.1,80,600. An assessment under section 143(1) of the Act was made on 10-2-....
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....He, therefore, took the assessee on notice of his intention to pass suitable orders under section 263 of the Act. 3. The assessee responded by contending that no revisionary action was called for in this case. In this regard, the following points were made before the Commissioner: (a) The details of the secret commission paid had been filed before the Assessing Officer. (b) The parties to whom secret commission came to be paid were also identified. (c) The parties were produced before the Assessing Officer and sworn statements were recorded from them. (d) The parties concerned have filed return of income disclosing the secret commission received by them from the assessee. The assessee had also referred to and relied upon certain reported cases in support of the proposition that no revisionary action was called for in this case. 4. None of the aforesaid contentions found favour with the Commissioner, because, on an examination of the records, she found: -- that the records did not contain any evidence to show that the persons who received secret commission were produced before the Assessing Officer for examination; -- that no sworn statements were recorded....
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.... should not be forgotten that it was on the facts of the case before them that the Madras High Court deprecated a pettifogging approach while invoking the provisions of section 263. 9. As I see it, on the facts and the circumstances of the case, which is now before us, the very rationale of and the philosophy behind the said section as elucidated by the Madras High Court squarely support the order in revision passed by the Commissioner. 10. What are the facts here? The return of income was filed on 27-1-1992 and the assessment was made within a short time thereafter, namely, 30-3-1992. Certain routine additions were made in the process. Further, there was effective hearing only on two days, namely, 2-3-1992 and 25-3-1992. Between the said dates the assessee had, on 6-3-1992, filed certain details at the instance of the Assessing Officer. The Assessing Officer merely took the details on record and proceeded to complete the assessment on 30-3-1992. 11. The assessee had claimed revenue deduction in a large sum of Rs.11,93,100. As rightly pointed out by the Commissioner, no investigation at all was made into the genuineness of the payments in question. The assessee's counsel c....
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....HE INCOME-TAX ACT, 1961 We, the Members of the Madras Bench 'C' of the Tribunal have differed in respect of Appeal in ITA No. 857/Mad./94 (Asst. year 1991-92) in the case of Vettri Wines, Tirupur v. ITO. 2. The Question on which we have differed is referred to the Hon'ble President, ITAT under section 255(4) of the Income-tax Act, 1961. The question on which there is a difference between the Members of the Bench is as under: "Whether, on the facts and in the circumstances of the case, the Commissioner of Income-tax, Coimbatore has jurisdiction to invoke the provisions of section 263 of the Income-tax Act, 1961 in the assessee's case?" ORDER Per G.E. Veerabhadrappa (A.M.) -- This appeal came before me as a Third Member to express my opinion on the following question:-- "Whether, on the facts and in the circumstances of the case, the Commissioner of Income-tax, Coimbatore has. jurisdiction to invoke the provisions of section 263 of the Income-tax Act, 1961 in the assessee's case?" 2. This appeal was by the assessee against the order dated 16-3-1994 of the Commissioner of Income-tax, Coimbatore passed under section 263 of the Income-tax Act, 1961. The assessee is ....
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....nt has been framed according to law, the same does not contain any error and is not prejudicial to the interests of the revenue. Reliance was placed on the decision of the Madras High Court in the case of Venkatakrishna Rice Co. in this connection. 4. On the other hand, the learned Accountant Member observed that the assessee filed its return of income on 27-1-1992 disclosing a total income of Rs.1,80,600 and the assessment was made under section 143(3) of the Act on 30-3-1992. Certain routine additions were made in the process or assessment. Further, there was effective hearing only on 2-3-1992 and 25-3-1992. Between the said dates, the assessee had furnished on 6-3-1992 certain details at the instance of the Assessing Officer. According to the learned Accountant Member, the Assessing Officer mere too the details on record and proceeded to complete the assessment on 30-3-1992. According to him, no investigation at all was made with regard to the genuineness of the payment in question. The assessee has given only the names of the 28 parties without giving their addresses. The other plea that was taken by the assessee that the said 28 persons had advanced monies to the assessee t....
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....he particulars required by the Assessing Officer were filed on 7-3-1992. The letter filed before the Assessing Officer is at page 12 of the Paper Book. Again, the case was posted for hearing on 25-3-1992. The assessee appeared on all these dates to satisfy the Assessing Officer with regard to the details filed by the assessee in connection with the assessment of income and final orders were passed on 30-3-1992. According to the learned counsel for the assessee, the Assessing Officer made all the enquiries that were required for assessment. After considering the assessee's explanation, he accepted the assessee's stand with regard to the payment of the secret commission but chose to make an addition and some disallowance out of miscellaneous expenses, out of shop expenses and out of travelling expenses. The learned counsel further pointed out that the Commissioner erred in concluding that the order of the Assessing Officer is erroneous and also prejudicial to the interests of the revenue. According to him, no material is provided to reach such a conclusion. Moreover, there was no enquiry made by the Commissioner. According to him, the learned Commissioner was not justified in setting....
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....tem of attempt to create evidence with regard to the secret commission payment. There is no evidence to support the theory that 28 persons wanted to form a partnership. According to him, the assessee got the auction of 9 wine shops and, therefore, if the 28 persons could not become partners, these wine shops could have been divided among them with one or more persons taking a particular shop. The payment of commission is not justified, merely because the 28 persons could not be made partners in the firm. According to him, a letter written by the assessee on 22-10-1991 addressed to the Chartered Accountant at Coimbatore should not be accepted as it does not bear any acknowledgement. According to him, all these related to an attempt to create evidence which is very strange, unusual and improbable. The learned departmental representative further pointed out that after the Assessing Officer called for details of secret commission, the returns have been filed in the cases of the 28 persons. This again is an attempt to create evidence of payment of the secret commission. It was pointed out that it is unusual that the addresses of the 28 persons are the same as that of the assessee. He po....
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....de and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct. 9. It has been held by the Delhi High Court in the case of Gee Vee Enterprises, that it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the ITO. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case, the ITO should have made further inquiries before accepting the statements made by the assessee in his return. 10. It has also been held by the Kerala High Court in Malabar Industrial Co. Ltd v. CIT [1992] 198 ITR 611 that the words "prejudicial to the interest of the revenue" are of wide import and they should not be limited to a case where the order passed by the ITO can be considered to be one prejudicial to the revenue administration as such. It has been held that where the ITO did not make proper enquiries called for in the circumstances of the case and the assessment order did not show that the ITO considered all the aspects of the case including the agreement and the damages and compensation realised for the loss of agricultural income, revision of such....
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....d the ITO to re-examine the matter but the Bombay High Court held that it was not permissible under section 263. 15. in the light of these principles, I have gone through the assessment records submitted by the revenue. It is not correct to say that the Assessing Officer made the assessment in a hurry. Although the date of assessment and date of filing the return apparently makes one to feel that the assessment has been done in a hurry but it is not factually correct. The Income-tax Inspector on 4-12-1991 makes an enquiry into the business activity of M/s. Vettri Wines which was running 9 wine shops by the same name. The Inspector makes a memo that a partnership firm was running from 1-6-1990 and all the time-limit for filing the returns of their income have expired and, therefore, the notice under section 142(1) came to be issued. The case was posted on 26-2-1992 and on 2-3-1992 and also adjourned to 11-3-1992. From the records it is clear that in pursuance of such proceedings the firm filed on 9-3-1992 the details of the secret commission paid to the parties and relied upon the decision of the Madras High Court in Coimbatore Salem Transport (P.) Ltd.'s case and the Supreme Cou....
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.... posting the case for 28-2-1992. On 14-2-1992, the necessary replies were made in respect of the notice issued under section 271D, read with section 269SS, of the Act. In fact, the assessment order clearly mentions that the penalty proceedings initiated under section 269SS, read with section 271D stands good. AU these clearly show that the Assessing Officer made some enquiries in relation to the issue of receipt of deposit from 30 parties and the Assessing Officer was given the information that for participation for allotment of wine shop by the Government of Tamil Nadu a ring was formed among the said parties and all were joined together and orally agreed either to share the shop or to form a partnership concern and become partners. After taking the shop in open auction, it appears that the assessee approached the tax consultant about the formation of partnership firm and that it was advised that such formation of partnership could not be possible due to the restriction of the member& The assessee settled the dispute among the parties by way of payment of secret commission. The so-called secret commission is clearly payment for the deposits received from the above parties. The Ass....