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TMI Blog2010 (10) TMI 732X X X X Extracts X X X X X X X X Extracts X X X X ..... 007 passed under s.143(3) of the Act. 3. While examining the assessment records for the assessment year 2005-06, the Commissioner of Income-tax noted that disallowance of trade scheme expenditure made by the Assessing Officer for the assessment years 2003-04 and 2004-05 have been upheld by the CIT(A), but the Joint/Addl.Commissioner of Income-tax Range-16, Hyderabad, mechanically ignoring the said decision of an higher authority, i.e. CIT(A), issued direction under S.144A of the Act to the Assessing Officer on 20.12.2007 to allow the claim of the assessee on account of Trade scheme Expenses. He noted that no enquiries had been conducted by the JCIT to ascertain the genuineness of the alleged expenditure claimed by the assessee. The Commissioner of Income-tax was therefore of the view that the directions of the Joint Commissioner of Income-tax under S.144A, based on which the Dy. Commissioner of Income-tax completed the assessment, vide his order dated 31.12.2007 passed under S.143(3) of the Act, were erroneous and prejudicial to the interests of the Revenue. He accordingly invoked the jurisdiction under S.263 of the Act. Gist of submissions made on behalf of the assessee questioni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lish that there was no error in the assessment order. vii. It was precisely for the reason that the evidence was not properly appreciated by the Assessing Officer and the CIT(A), the assessee exercised a remedy which was available statutorily. For the A.Ys. 2003-04 and 2004-05 on similar issue consequent upon by the appeal filed by the assessee, the Hon'ble ITAT Hyderabad Bench-A in ITA No.478/Hyd/2007 and 1055/Hyd/2007 allowed the appeals of the assessee and deleted the additions made on the said ground in its order dated 30-09.2009. The decision of the supervisory authority should be respected as it ought to be. The Hon'ble Tribunal had appreciated the facts brought on record in respect of earlier years and directions of the JCIT under section 144A of I.T. Act. Thus, the instruction had become part of the record before the Hon'ble ITAT and therefore, the premises of notice of Commissioner of Income-tax u/s. 263 is not correct and objectionable too. viii. The word 'record' as occurring in 263 is meant to include all records relating to any proceeding under the Act available at the time of examination of the case of income-tax. It cannot be confined to any particular assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration- (1) Whether it would be a permissible conduct on the part of an A.O. to ignore, defy or disagree with the decision or instruction of his official superiors? (2) Is it open to him or her not to accept, in a subsequent assessment year, decision rendered by jurisdictional higher appellate authority such as CIT(A) in the very same case for earlier assessment years on identical issue? (3) Is it permissible conduct on the part of an Addl. CIT to record that he does not agree with the decision of his own jurisdictional CIT or CIT(A) in the very same case? The Commissioner of Income-tax, observing that if such conduct or latitude, as that of the Addl. CIT, were allowed, then CIT(A)/CIT would start disagreeing with their own jurisdictional ITAT or even still higher authorities, i.e. Hon'ble High Court, and such a scenario is fraught with dire consequences for all, concluded that there can be no two opinions that the replies/answers to all the above questions raised have to be resoundingly in the negative. 5. The Commissioner of Income-tax, with a view to know as to how and why the Addl. CIT came to the decision in his directions issued under s.144A, also addressed a letter t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the object of contriving diversion of funds from the assessee company in different guises. He also noted that the Assessing Officer has not applied his mind to various issues as directed by his official superior u/s. 144A, while allowing the assessee's claim for deduction in respect of trade scheme expenditure. The concluding remarks of the Commissioner of Income-tax in this behalf in para 4.14 of the impugned order on page 18 thereof, read as follows- "4.14. In the foregoing discussion, it has been conclusively demonstrated and established that the Assessing Officer had not carried out the direction given by his official superior u/s. 144A, i.e. the direction to verify the income-tax particulars of the alleged marketing agents in order to ascertain as to whether the amounts claimed as payments by the assessee were reflected in the hands of the marketing agents. Although he evidently did not carry out this particular direction, he did not balk act recording an untrue certificate under 'Note not to the assessee', saying that necessary verification had been done. Completing an assessment without actually carrying out the verification as per 144A direction and then proceeding to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irect the Assessing Officer to bring to tax the evident inflation in the assessee's claim of trade scheme expenditure with regard to ARK Marketing Agencies i.e. Rs. 2,17,85,853. At the same time, he should scrutinize the claim with regard to Gayatri Agencies by requisitioning the relevant income-tax returns and assess whatever inflation is noticed. He should also examine the assessee's gain/profit from its transaction with Seagram and bring to tax job work receipts/any other receipts from Seagram after making proper inquiries and bring on record proper evidence. He should call for and examine the TML Agreement with Seagram. He should also bring to tax the apparent inflation in conversion charges in annexure-23, i.e. Rs. 75,65,440 (Rs.1,89,82,944 - Rs. 1,14,17,504). 9. Aggrieved by the above order of the Commissioner of Income-tax dated 29.3.2010, passed under S.263 of the Act, assessee preferred this appeal before us. 10. Reiterating the contentions urged before the Commissioner of Income-tax, learned counsel for the assessee submitted that the order passed under S.143(3) on the very same grounds on which proceedings under S.263 of the Act were initiated were the subject matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g necessary material on record to substantiate such an allegation and confront the assessee with such material. It is evident from the material available on record that as claimed by the assessee, corresponding expenditure claimed by the assessee in the earlier as well as succeeding years, except ay 2004-05, have been allowed. As such, the contention of the learned dr that no such claim was made by the assessee in the preceding year is factually wrong and contrary to the material available on record. The observations of the lower authorities with regard to absence increase in sales commensurate with the increase in expenditure by way of commission is also not factually correct as demonstrated by the learned counsel that there was substantial increase in sale of Seagram Brand of liquor for which 87% of the expenditure in question has been incurred. Considering totality of facts and circumstances of the case, we agree with the learned counsel for the assessee that the lower authorities were not justified in disallowing the claim of the assessee. We accordingly set aside the impugned order of the CIT(A) and delete the addition of Rs. 2,83,50,920/- made by the assessing officer and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment. He submitted that it is not correct to say that the Addl. CIT has issued the directions in haste. He has taken normal time as the CIT has taken time for passing order u/s 263. Further he submitted that the direction issued u/s 144A is not at all prejudicial to the interest of the revenue. The Addl. CIT given the direction to examine the issue as below: i) The agreement with Pernord Ricord Group and to go through the terms to ascertain the extent of liability of the assessee in promoting IMFL brands owned by Pernord Ricord Group. ii) The agreements entered with marketing agents, their income tax particulars, whether the amounts paid by the assessee have been reflected in the hands of the recipients, whether the terms entered with them are within the limits of the liability of the assessee as per (i) iii) The genuinely of the expenditure which are governed by the agreements mentioned (i) & (ii) iv) The terms of understanding with APBCL as per the tender document, to verify the contention of needs to move stocks within the prescribed time schedule. 10.2 According to learned AR, the assessing officer duly carried out the above directions issued by the Addl.CIT. The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision is held to be erroneous. The assessing officer while making assessment examined the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income. The CIT, on perusal of records, may be of the opinion that the addition made by the officer concerned was on the lower side and he must have made additions on the impugned issue, had he left with that assessment and it would have resulted in assessment of income at higher figure. According the learned AR, this is not possible as per the provisions of section 263 of the IT Act and CIT is not vested with the power to reexamine the accounts and determine the income at higher figure. This is because, the ITO has exercised his quasi judicial power in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because in earlier year there was an addition on account of trade expenses. He submitted that each assessment year is independent and separate assessable unit and facts of each to be considered while making assessment. Because there was an addition in earlier year on account of trade expenses same mathematical formula cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under S.144A that went against the principles of judicial discipline, he submitted that it is not material that the order of the Tribunal dated 30.9.2009 ruled in favour of the assessee for the preceding assessment years. That order of Tribunal dated 30.9.2009 was not passed as on the date of directions issued under S.144A. The material date in that connection was 20.12.2007 being the date on which the said directions were issued to the Assessing Officer. As on that date, the order of the Assessing Officer had merged with the order of the CIT(A) which held the field. The Addl. CIT in his direction under S.144A, after deciding the issue in principle, directed the Assessing Officer to carry out certain verification. The Commissioner of Income-tax noticed that failure to adhere to the finding of the CIT(A) was perverse. Relying on the decision of the Supreme Court in the case of Union of India V/s. Kama Lakshmi Finance Corporation (Supra), besides the decisions of Supreme Court in CIT V/s. Raison Industries Ltd. (288 ITR 322) (SC)` and of the Delhi High Court in Nokia Corporation V/s. Director of Income-tax(International Taxation) and Another (292 ITR 22), he submitted that breac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S.144A of the Act, but also in applying mind to the available facts. 14. Learned Departmental Representative further submitted that if the order of the Tribunal is viewed in the light of the above background, the Tribunal in its order for the assessment years 2003-04 and 200-05 relied heavily on the absence of any material brought on record by the Department and decided the matter in favour of the assessee. Even though the Commissioner of Income-tax, as argued by the learned counsel for the assessee, should have subordinated himself to the decision of the ITAT for the immediately preceding years, on the same principles of judicial discipline which according to the Commissioner of Income-tax the Addl. CIT violated while issuing directions under S.144A of the Act, the Learned Departmental Representative submitted that since each assessment year is different and in as much as new fats have been unearthed in assessment year 2005-06, the decision handed out by the Tribunal for the assessment years 2003-04 and 2004-05 cannot bind the department in so far as assessment year 2005-06 is concerned. In this behalf, it is submitted that if an earlier decision is incorrect or inapplicable for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned order of the Commissioner of Income-tax is based on a mere change of opinion and substitution of his judgment to the one of the Assessing Officer, and therefore, it is beyond the scope of review envisaged under S.263 of the Act. It is also the case of the assessee that the Commissioner of Income-tax has traveled beyond the reasons stated in the show cause notice issued under S.263 of the Act, for invoking the revisional jurisdiction. 17. On careful consideration of the matter, we find that there is merit in the contentions of the assessee in this appeal. Since the issue relatable to the allowance of trade scheme expenses is covered in favour of the assessee by the decision of this Tribunal dated 30th September, 2009 in the appeals for the immediately preceding two assessment years, and since the action of the Assessing Officer in allowing the trade scheme expenses for the year under appeal, is in accordance with the decision of the Tribunal for the earlier years, it cannot be said that the assessment order is either erroneous or prejudicial to the interests of Revenue. There is no merit in the contention of the Revenue that this Tribunal in the order for the earlier years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been different, and at least a part of the trade scheme expenses, which represent the inflated portion, is disallowable. Even this conclusion of the Commissioner of Income-tax reveals that the Commissioner of Income-tax in the impugned order has been sitting on the order of the Tribunal rather than questioning the actions of the Assessing Officer and the Addl. CIT in relation to a particular issue, and is merely seeking to substitute his judgment against that of Tribunal. That being so, when the Assessing Officer as well as the Addl. CIT who gave directions under S.144A, have applied their mind to a particular issue, it cannot be said that the assessment order is either erroneous or prejudicial to the interests of the Revenue when it is in accordance with the earlier years order of the Tribunal on similar issue. The CIT has any right and jurisdiction to come to a conclusion entirely contrary to the one reached by Tribunal in assessee's own case in earlier years on the same facts. Otherwise, it will not only shake the confidence of the public in judicial procedure as such, but it will also totally destroy such confidence. The result of this will be conclusions based on arbitrarines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... situation. The grievance of the Revenue may be real and substantial in certain cases but such situation cannot be provided for by judicial interpretation by Courts but only by an appropriate agency. In the present case, the Order of the Tribunal in assessee own case in earlier years which is delivered on similar set facts is binding on authorities below and they cannot ignore it either in initiating a proceeding or deciding on the rights involved in such proceeding. This is breach of judicial discipline which cannot be allowed to happen. The Tribunal also in fact, has any right or jurisdiction to come to the conclusion entirely contrary to the one reached by another Bench of the same Tribunal on the same facts. It may be that the members who constituted the Tribunal and decided on the earlier occasion were different from the members who decided the case on the present occasion. But what is relevant is not the personality of the officers presiding over the Tribunal or participating in the hearing but the Tribunal as an institution. If it is to be conceded that simply because of the change in the personal of the officers who manned the Tribunal, it is open to the new officers to com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue. 18.2. The other issues dealt by the CIT in para 4.11 , 4.12, 4.13. and 4.14 which did not find place in the notice cited supra. In our opinion, it was always open to CIT to put such issues, found by him based on material on record, to the assessee. It is admitted fact that there is nothing on record which would show that the assessee was given an opportunity to these issues which form part of the order in revision dated 29.3.2010, but were not part of notice dated 2.3. 2010. Though, the learned DR agreed that there was nothing on record which would establish the contrary. It was, however, contended that the assessee would have get its opportunity to give explanation to the issue raised in the revisional order before the assessing officer and that such an opportunity would meet the requirement of the provision. In our opinion, this is not the position envisaged in law. If one were to permit correct of such a grievous error in such a manner, it would tantamount to committing errors again, which shall be avoided by all means. The assessment, unless reopened by paying faithful obeisance to statutory provision and conditionalities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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