Allahabad H.C : Assessing Officer is to enquire only those issues that are raised in revision order passed by Commissioner

High Court Of Allahabad

Smt. Shobha Govil vs. ACIT

Assessment Year : 2006-07

Section : 263

Prakash Krishna And Manoj Kumar Gupta, JJ.

Writ Tax No. 364 Of 2010

May 16, 2013

ORDER

Prakash Krishna, J. – The petitioner is engaged in two distinct line of businesses, namely,

(1) Mentha business, and

(2) Cattle Feed and Green Vegetable business.

The petitioner is maintaining separate profit and loss accounts and drawing separate balance sheets for them. The dispute relates to the assessment year 2006-07. The assessment proceedings were initiated under the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The assessment order was passed on 17th November, 2008 by Income Tax Officer, CHN Ward, Chandausi. On 16th September, 2009, the Commissioner of Income Tax issued a notice under Section 263 of the Act treating the assessment order as erroneous and prejudicial to the revenue. The petitioner filed a reply to the show cause notice and supported the assessment order. The said reply was not found favour with the respondent no. 1 who revised the assessment order under Section 263 of the Act. The said order is dated 21st January, 2010 which has attained finality. The matter was restored back to the Assessing Officer after setting aside the assessment order. The Assessing Officer after remand, served a questionnaire on the petitioner making inquiries with regard to the income and expenditure of the petitioner in respect of Mentha business as well as Cattle Feed and Green Vegetable business. The petitioner resisted the questionnaire on the ground that the remand order passed by the Commissioner of Income Tax is confined to the question of determination of Cattle Feed business. Income from mentha business has become final as it has not been interfered with under Section 263 of the Act.

2. Present writ petition has been filed challenging the legality and validity of the order dated 4th March, 2010 and 02.03.2010 rejecting the contention of the petitioner that the scope of order passed under Section 263 of the Act is confined to the determination of income of cattle feed and green vegetable business only.

3. A counter affidavit has been filed on behalf of the respondents questioning the maintainability of the present writ petition as also raising pleas on the merits of the case.

4. Heard Sri Subham Agrawal, learned counsel for the petitioner and Sri Dhananjay Awasthi, learned counsel for the respondents.

5. Learned counsel for the petitioner submits that indisputably the petitioner is carrying two businesses, namely, Mentha business as well as Cattle Feed and Green Vegetable business. Turnover of mentha business has been audited and the audited account book relating to mentha business and the auditor’s report is on the record. No objection was raised nor any defect could be pointed out with regard to maintenance of accounts relating to Mentha business either by the Assessing Authority or, by the Commissioner of Income Tax while exercising the power under Section 263 of the Act. The income and expenditure with regard to Mentha business has attained finality as the same has not been adversely commented upon in the revision by the Commissioner. However, certain objections were raised with regard to the assessment of income from Cattle Feed and Green Vegetable business and after setting aside the assessment order, the matter has been restored back to the Assessing Officer. Therefore, the Assessing Officer could make queries and serve questionnaire with regard to the business affairs of Cattle Feed and Green Vegetable and no query can be raised with regard to Mentha business. Reliance has been placed on the following decisions:

(1) CIT v. D.N. Dosani [2006] 280 ITR 275/153 Taxman 13 (Guj.);

(2) Ram Dayal Harbilas v. CST [1979] 44 STC 84 (All.);

(3) CIT v. Hindustan Coconut Oil Mill [2002] 255 ITR 428/[2003] 127 Taxman 96 (Cal).

6. Sri Dhananjay Awasthi, learned counsel for the respondents, on the other hand, submits that the ambit and scope of fresh assessment proceedings as a consequent of the remand order passed by the Commissioner, is not confined to the question of determination of income from Cattle Feed and Green Vegetable business alone. In other words, the entire assessment order has been set aside and fresh assessment has to take place in respect of the entire income and expenditure of the petitioner.

7. Considered the respective submissions of the learned counsel for the parties and perused the record.

8. It is not in dispute that the petitioner is maintaining two sets of account books one for mentha business and another for cattle feed and green vegetable business. The account books relating to mentha business is audited one and no mistake or defect was pointed out therein by the Assessing Authority. In the show cause notice issued to the petitioner under Section 263 of the Act, it does not raise any objection with regard to the account books relating to mentha business. The order of the C.I.T. Is bereft of any discussion with regard to mentha business. The objection raised by the C.I.T. Is with regard to the business relating to cattle feed and green vegetable business. The assessment order has been criticized with regard to determination of income relating to cattle feed and green vegetable business only. Contention of the learned counsel for the petitioner is that the scope of inquiry after remand is confined to the question relating to determination of income from cattle feed and green vegetable business and the earlier assessment order has attained finality so far it relates to mentha business. Reliance has been placed on D.N. Dosani case (supra) as also on Hindustan Coconut Oil Mill case (supra). These decisions support the contention of the learned counsel for the petitioner. The Assessing Officer opined that the entire assessment order has been set aside and the scope of inquiry is not restricted to the cattle feed and green vegetable business. This approach appears to be incorrect. To answer the issue, the revisional order is to be read as a whole along with the show cause notice which commenced the proceedings. The show cause notice is confined to the cattle feed and green vegetable business. Sri Dhananjay Awasthi, learned counsel for the department failed to demonstrate that the Commissioner raised any objection with regard to income of mentha business. He referred para-10 of the Commissioner’s order. The said paragraph is reproduced below:

“Considering the submission of the assessee and taking into account the findings as discussed in this order, I cancel the order dated 17/11/2008 of the ITO Chandausi and direct him to pass a fresh assessment order after carrying out thorough enquiry of purchase and sale transactions and expenses claimed by the assessee as discussed in this order and pass the assessment order by applying the provisions of the Income-tax Act correctly.”

9. The above quoted para should not be read in isolation and it should be read with the other part of the order. The entire discussion in the order under Section 263 is confined to the question of determination of income and expenditure of cattle feed and green vegetable business. This is clear even from para-5 of the order of C.I.T., reproduced below:

“The main issue involved in this case while starting the revisionary proceeding u/s 263 was enquiring into the cattle feed and green vegetable business of the assessee to find out the nature of this business, to find out the genuineness of the loss claimed by the assessee from this business and also to find out as to why account of this business was not audited after determining the nature of the business. During the course of hearing, authorized representative of the assessee was asked to produce sale and purchase bills/voucher of this business and also vouchers for travelling & conveyance freight outward expenses claimed by the assessee.”

The discussion, para after para, is with regard to cattle feed and green vegetable business, viz. its sales, sale bills, absense of addresses of the purchasers of Bhusa, truck expenses and freight outward expenses, salary of the staff, all related to the cattle feed and green vegetable business. It shows that the subject matter of proceedings under Section 263, was confined to cattle feed and green vegetable business and the remaining part of the earlier assessment order was not the subject matter of the revision. We therefore, find force in the submission of the petitioner’s counsel.

10. The Income Tax Officer in para 3(i) of the impugned order has made reference to paras-2.2, 2.3 & 2.5 in particular and other paragraphs of the order passed by C.I.T. to support his view that the remand order passed by the C.I.T. was an open remand order. Meaning thereby, the assessment order was set aside in its entirety. We do not find any such thing in the order of the C.I.T. suggesting that the entire assessment order is being set aside. As discussed herein above, subject matter of revisional order was the income drawn from the cattle feed and green vegetable business and not other income. The Income Tax Officer was not justified in coming to the conclusion that he is also required to pass fresh assessment order for mentha business. To this extent, the impugned order cannot be allowed to stand and is hereby, set aside. However, by way of clarification, it may be added that it shall be open to the Assessing Officer to raise all such queries which according to him, are relevant to determine the income of the assessee with regard to the cattle feed and green vegetable business .

11. Viewed as above, by way of clarification it may be added that the petitioner cannot refuse to give the reply to the queries raised by the Assessing Authority. However, the Assessing Officer shall bear in mind the dictum of law as indicated above.

12. We find merits in the present writ petition. The writ petition is allowed, as indicated above by quashing the impugned order dated 02.03.2010.

[Citation : 354 ITR 668]

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