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2012 (11) TMI 1199 - ITAT HYDERABAD

2012 (11) TMI 1199 - ITAT HYDERABAD - TMI - ITA No. 499/Hyd/2011, ITA No. 692/Hyd/2011 and ITA No. 1420/Hyd/2011 - Dated:- 16-11-2012 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER. Appellant by: Sri K.C. Devdas Respondent by: Sri A. Sudhakar Reddy and Smt. Vidisha Kalra. ORDER PER CHANDRA POOJARI, AM: All the above appeals relate to the same assessee involving mainly the common issue relating to allowability of trade scheme expenditure. ITA No. 499/Hyd/2 .....

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se appeals is identical in nature, all these appeals are clubbed and heard together and are being disposed of by this common order for the sake of convenience. 2. First, we will take up ITA No. 692/Hyd/2011 for A.Y. 2006-07. In this appeal, the assessee mainly challenged assumption of jurisdiction by the CIT u/s. 263 of the Act and also challenged direction of the CIT with regard to disallowance of Trade Scheme Expenditure of ₹ 3,35,17,143 paid to M/s. Gayatri Marketing Agencies and M/s. A .....

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ivities or services rendered by these parties to the assessee. According to the CIT the assessee claimed similar expenditure for A.Ys. 2003-04 and 2004-05 and the disallowance was confirmed by the CIT(A). Similarly for A.Y. 2005-06, the assessee claimed the expenditure on the same head of income. The assessment order for the A.Y. 2005-06 was subjected to revision by CIT u/s. 263 of the Act. As such listing various reasons for disallowance, the CIT directed the Assessing Officer that this claim o .....

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er in allowing the claim as the claim of the assessee in earlier years though disallowed by the Revenue authorities, the same was allowed for the A.Ys. 2003-04 and 2004-05 by the Tribunal in ITA No. 478/Hyd/2007 and 1055/Hyd/2007 vide order dated 30th September, 2009. Similarly, the order of 263 passed by the CIT for the A.Y. 2005-06 was annulled by the Tribunal vide order dated 29th October, 2010 in ITA No. 611/Hyd/2010 for A.Y. 2005-06. Being so, the Assessing Officer after considering the ent .....

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vouchers in the course of the assessment. Thus, he submitted that the CIT is not justified to state that the Assessing Officer has neither examined nor applied his mind to the above mentioned expenditure. Further, he submitted that the same issue was decided in favour of the assessee for A.Ys. 2003-04, 2004-05 and 2005-06 by a higher judicial forum, i.e., the Tribunal, and it is not proper on the part of the CIT to direct the Assessing Officer to disallow this expenditure by considering irreleva .....

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perused the material on record. Admittedly, the issue relating to Trade Scheme Expenditure came before this Tribunal in assessee s own case for A.Ys. 2003-04, 2004-05 in ITA Nos. 478/Hyd/2007 and 1055/Hyd/2007. The Tribunal vide order dated 30th September, 2009 held as follows: "11. We have considered the rival submissions and perused the material available on record. There is no dispute either with regard to the identity of the marketing agents, who in fact are income-tax assessees and the .....

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we are of the view that the matter has to be looked from businessman's point of view and in the absence of any material brought on record, it is not fair and proper to allege diversion of funds by the assessee or question the engagement of marketing agents by the assessee on grounds of commercial expediency. The decision of jurisdictional High Court in the case of Transport Corporation of India (supra) relied upon by the learned Departmental Representative is totally distinguishable, inasmu .....

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competent authority under s. 144A. It is no doubt true that having claimed a particular deduction, it is for the assessee to substantiate its claim. However, when the Revenue is making a serious allegation like diversion of funds by the assessee, the burden shifts to the Revenue, and it is for the Revenue to bring 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 .....

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mission 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  .....

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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 .....

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has not accepted the decision of the Tribunal for the earlier years and preferred appeals against the same before higher forum, does not mitigate in any way the binding force of the Tribunal decision on the lower authorities. Therefore, neither the fact that the Tribunal has relied upon the directions given under S. 144A of the Act for the assessment year 2005-06, nor the fact that the Revenue has not accepted the decision of the Tribunal for the earlier years, render the assessment order passed .....

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under consideration, in the face of disallowance of trade scheme expenses for the earlier years and during pendenecy of appeals against such disallowance before the Tribunal, has also criticized the actions of the lower authorities, viz. Additional Commissioner who gave directions under S. 144A of the Act, and the Assessing Officer who passed the impugned assessment order, even attributing motives to their actions. While it is evident from the impugned assessment order that the trade expenses ha .....

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th regard to allowability of totality of expenses claimed would have 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 subs .....

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bunal 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 arbitrariness and whims and fancies of the individual officers and not reached objectively on the basis of the facts placed before authorities. However, one thing is to be kept in mind, and that is, a decision rendered by this Tribunal is a bi .....

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equent assessment years. It may happen that the Commissioner may consider that such a decision of the Tribunal is not in accordance with the law and may also find that such a decision is the subject matter of further appeal or revision as the case may be. He may expect that the High Court may decide in favour of the Revenue, but that may take a number of years. He may be of the view that by the time the decision of the High Court arrives, a number of years may elapse by which time the exercise o .....

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of passing order u/s 263. Being so, the order of the assessing authority cannot be said to be erroneous as his order is in conformity with the order of the Tribunal. It is required to be noted that the decisions reached by the Tribunal is binding upon the CIT and judicial discipline demands that he should follow the decision of the Tribunal or High Court, as the case may be. It is not open for him to ignore the same on the ground that the Tribunal order on the question is subject matter of appea .....

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ding 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 fr .....

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on the same set of facts, 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 arbitrariness and whims and fancies of the individuals presiding over the courts or the tribunals and not reached objectively on the basis of the facts placed before the authorities. In view of this, CIT cannot take up the issue relating to trade expenses for revision u/s 263. 18.1 Further, w .....

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s obliged to afford an opportunity to the assessee before passing an order, to the prejudice of the assessee. The Commissioner sought to accord such an opportunity to the assessee by putting him to notice as regards aspects with the assessing officer failed to scrutinize. In the present case, CIT issued a notice dated 2.3.2010 to consider the following issue as seen from the Para 3 of the said notice: 3. It is seen that the assessing officer had neither examined nor applied his mind to the follo .....

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y the JCIT to ascertain the genuineness of the alleged expenditure incurred by the assessee. Hence, the directions of the JCIT tax issued u/s 144A to allow the expenditure claimed towards trade scheme expenses appear to be both erroneous and prejudicial to the interest of revenue. 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 materi .....

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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 provided therein, attain finality on their conclusion. The provisions of 2 .....

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nt of the enquiry, the commissioner is required to conduct to come to a conclusion that an order for either an enhancement or modification of the assessment or, as in the present case, an order for cancellation of the assessment is called for, with a direction to the assessing officer to make a fresh assessment. This defect cannot be cured by first carrying the revision and then granting the opportunity to the assessee to respond to the issues raised before the assessing officer during the cours .....

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ncorporated in the provisions of Act in respect of such power vested with the CIT. In our opinion, the issues dealt by CIT other than issue mentioned in the notice cannot be formed part of the order passed u/s 263. 19. In the light of the above discussion and considering totality of facts and circumstances of the case, we hold that the impugned order of the Commissioner of Income-tax passed under S. 263 of the Act is not sustainable in law, as the impugned order of assessment passed under S. 143 .....

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payment of Trade Scheme Expenditure to the same party is subject matter of appeal before this Tribunal. Being so, on the same issue the CIT is not expected to take a different view. It is needless to say that an order delivered by the Tribunal is binding on the Assessing Officer as well as the CIT/CIT(A). He is bound to follow the order of the Tribunal in its true letter and spirit. The Assessing Officer/CIT being an inferior officer vis-a-vis the Tribunal, was bound by the judgement of the Tri .....

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Ltd. vs. CIT (257 ITR 235). Thus, the learned CIT should not have committed any judicial impropriety in refusing to follow the order of the Tribunal. Even if he had any remote reservation about correctness of the decision of the Tribunal, he should have followed that order. He could and should have left it to the Department to take the matter in further appeal to the Hon ble High Court for taking an appropriate decision thereon. Be that as it may be, and having expressed our opinion that the de .....

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to the same party, the decision of the Tribunal is binding on the sub-ordinate forum including this Bench. The claim of the assessee cannot be disturbed for this assessment year under consideration. Further, we make it clear that neither the CIT/CIT(A) nor the Tribunal cannot scrutinise the earlier order of the Tribunal, sentence by sentence merely to find out whether all the facts have been set out in detail by the Tribunal or whether some incidental fact which appears on the record has not be .....

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en into account the cumulative effect of the circumstances or has considered the totality of the facts of the case, as if it is a magic formula: if the judgement of the Tribunal shows that it has, in fact, done so, there is no reason to interfere with the decision of the Tribunal. The CIT is not justified in finding a hole in the order of the Tribunal so as to disallow the claim of the assessee towards Trade Scheme Expenditure. In our opinion, the comments of the CIT regarding the interpretation .....

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ression of the CIT that the claim of the assessee is spurious deduction is against the findings of the Tribunal in the earlier assessment years. The reasons given by the CIT to disregard the binding nature of the Tribunal order which was pressed into service before him by the assessee would be in violation of the laws. Utmost regard should be paid by the adjudicating authority and appellate authorities to the requirement of maintaining judicial discipline and the necessity for giving effect to t .....

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y the CIT u/s. 263 of the Act. As we have annulled the order of the CIT passed u/s. 263 of the Act, the interlocutory order becomes infructuous and dismissed accordingly. 9. Now coming to the appeal of the assessee for A.Y. 2007-08 in ITA No. 1420/Hyd/2011. The first issue is with regard to disallowance of expenditure at ₹ 48,01,268 incurred towards Trade Scheme Expenditure paid to M/s. Gayatri Marketing Agencies. Since the same issue came before this Tribunal for consideration in A.Ys. 20 .....

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