DCIT, Jaipur V. RAJ KUMAR BABUTTA, Jaipur

ITA 101/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4821 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 03-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S KOTHARI
• Assessee Lawyers: ANIL MATHUR DHK
• Keywords: Rejection of books of accounts; Business income; Principle of natural justice; Opportunity of cross examination; Difference of opinion; Onus to prove; Change of opinion
• Section: 143(3); 263

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH HKKXPAN] YS[KK LNL; ,OA JH DQY HKKJR ] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NOS. 101, 199 & 200/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2010-11, 2011-12 & 2012-13 DY. COMMISSIONER OF INCOME TAX, CIRCLE-2, JAIPUR. CUKE VS. RAJ KUMAR BABUTTA, PROP.- M/S VAISHNO ASSOCIATES, 169, 1 ST FLOOR, GANPATI PLAZA, M.I. ROAD, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ACNPB 1052 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 154/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 RAJ KUMAR BABUTTA, PROP.- M/S VAISHNO ASSOCIATES, 169, 1 ST FLOOR, GANPATI PLAZA, M.I. ROAD, JAIPUR. CUKE VS. PRINCIPAL COMMISSIONER OF INCOME TAX-I, N.C.R. BUILDING, STATUTE CIRCLE, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ACNPB 1052 E VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI D.S. KOTHARI. FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI ANIL MATHUR. LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19/12/2016 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 29/12/2016 ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 2 VKNS'K@ ORDER PER: KUL BHARAT, J.M. THIS IS THE BATCH OF FOUR APPEALS, THREE BY THE REV ENUE AND ONE BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS OF THE LD. CIT(A)-I, JAIPUR DATED 27/11/2015 & 02/12/2015 AND PR.CIT-I, JAIPUR DATED 18/12/2015 PERTAINING TO THE A.Y. 2010-11, 2011-12 AND 2012-13 . 2. SINCE, COMMON ISSUES ARE INVOLVED IN ALL THE APP EALS, THEREFORE, ALL THE APPEALS ARE BEING HEARD TOGETHER AND FOR THE SA KE OF CONVENIENCE AND BREVITY, COMMON ORDER IS BEING PASSED. 3. FIRSTLY WE TAKE REVENUES APPEAL FOR A.Y. 2010-11 I.E. ITA NO. 101/JP/2016. IN THIS APPEAL, THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN REDUCING THE NP RATE OF 5.56% AS DECLARED BY THE ASSESSEE AS AGAINST NP RATE OF 8% APPLIED BY THE A.O. DESPITE UPHOLDING THE REJECTION OF BOOKS OF ACCOUNTS. 2. WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE A.O. OF RS. 60,19,118/- UNDER THE HEAD INCOME FROM OTHER SOURCES. ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 3 4. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE CA SE OF THE ASSESSEE WAS PICKED FOR SCRUTINY ASSESSMENT AND THE ASSESSMEN T U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE AC T) WAS FRAMED VIDE ORDER DATED 12/3/2013. WHILE FRAMING THE ASSESSMENT , THE ASSESSING OFFICER NOTICED THAT DURING THE YEAR UNDER APPEAL, THE ASSESSEE HAD SHOWN GP RATE OF 10.71% AND NP RATE OF 5.5.6% WITH GR OSS RECEIPTS OF RS. 22,41,45,266/- IN COMPARISON TO GP RATE OF 10.3 2% AND NP RATE OF 5.07% WITH GROSS RECEIPTS OF RS. 24,05,97,598/- SHOW N IN THE PRECEDING YEAR I.E. A.Y. 2009-10. THE ASSESSING OFFICER REJECT ED THE BOOKS OF ACCOUNT AND ESTIMATED THE NP RATE @ 8% AND THUS COMP UTED THE NET PROFIT RATE AT RS. 1,79,31,621/-. THE ASSESSING OFF ICER ALSO MADE ADDITION UNDER THE HEAD INCOME FROM OTHER SOURCES AT RS. 6 0,19,118/-. 5. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A), WHO AFTER C ONSIDERING THE SUBMISSIONS, PARTLY ALLOWED THE APPEAL AND HELD THAT BY FOLLOWING THE DECISION OF THE HONBLE ITAT THAT THE ASSESSING OFFI CER WAS NOT JUSTIFIED IN APPLYING THE NP RATE @ 8% TO THE TOTAL TURNOVER OF T HE YEAR UNDER APPEAL. 6. NOW THE REVENUE IS IN APPEAL BEFORE US. THE FIRST GROUND OF APPEAL RELATES TO APPLYING THE NP RATE @ 5.56% AGAINST 8% A PPLIED BY THE ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 4 ASSESSING OFFICER. THE LD DR HAS ARGUED THAT THE LD . CIT(A) WAS NOT JUSTIFIED IN DISTURBING THE NP RATE ADOPTED BY THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSING OFFICER HAS CONSIDERED ALL MATERIAL ON RECORD AND ON THE BASIS OF THE SPECIFIC DEFECTS, BOOKS WERE RIGHTLY REJECTED. 7. ON THE CONTRARY, THE LD AR OF THE ASSESSEE HAS R EITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN BRIEF AND PRAYED TO UPHOLD THE ORDER OF THE LD. CIT(A). 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND MERIT IN THE SUBMISSI ON OF THE LD. AR OF THE ASSESSEE THAT THE IDENTICAL ISSUE HAS ALREADY CAME BEFORE THE COORDINATE BENCH IN ASSESSEES OWN CASE IN ITA NO. 346 & 950/JP /2012 FOR THE A.Y. 2008-09 AND 2009-10 AND THE COORDINATE BENCH VIDE O RDER DATED 13/02/2015, AFTER CONSIDERING THE FACTS AVAILABLE O N RECORD HAS HELD THAT THE REJECTION OF BOOKS OF ACCOUNTS IN THOSE YEARS W AS NOT JUSTIFIED. IT IS CONTENDED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE FACTS ARE IDENTICAL AS WERE IN THE A.Y. 2008-09 AND 2009-10. THE COORDINA TE BENCH IN ITA NO. 346 & 950/JP/2012 FOR THE A.Y. 2008-09 AND 2009 -10 HAS HELD AS UNDER:- ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 5 5.2 THE ASSESSING OFFICER DESIRED TO VERIFY THE AMO UNTS PAID TO SUB-CONTRACTORS. THE EMPLOYMENT OF SUB-CONTRACTOR S IS NOT DISPUTED LIKEWISE THE PAYMENT TO THEM THROUGH ACCOUNT PAYEE CHEQUES, DEDUCTION OF TDS WHEREVER APPLICABLE HAS NOT BEEN DISPUTED. THE ASSESSING OFFI CER WANTED THEIR PERSONAL ATTENDANCE; SOME ATTENDED SUO MOTU, SOME WERE PRODUCED BY THE ASSESSEE, WHO CONFIRMED THE WORK. SOME WERE EXAMINED BEHIND THE BACK OF THE ASSESSEE. SOME OF THEM ADMITTED DOING WO RK BUT EXPRESSED INABILITY TO REMEMBER THE RELEVANT DE TAILS AFTER A PERIOD OF 2 YEARS. LIKEWISE SOME DENIED HAV ING DONE ANY WORK FOR THE REASONS BEST KNOWN TO THEM, IN THAT CASE AO SHOULD HAVE VERIFIED THEIR BANK PASS B OOKS TO TEST THE VERACITY OF THEIR DEPOSITIONS. THE ASSE SSEE WAS NOT GIVEN AN OPPORTUNITY TO CROSS EXAMINE THEM AND THE STATEMENTS HAVE BEEN HELD TO BE TRUE AND A TOOL TO REJECT THE BOOKS OF ASSESSEE U/S 145(3). IN OUR CONSIDERED VIEW THE ADVERSE INFERENCE DRAWN IN THIS BEHALF IS NOT TE NABLE. SIMILARLY IN CONTRACTORS CASES THERE ARE NUMEROUS OCCASION OF DRAWING SELF MADE VOUCHERS AS THEY ARE M ANY A TIMES INCURRED AT FAR AWAY SITES. THEREFORE, SELF M ADE VOUCHERS CANNOT BE HELD TO BE BOGUS ON FACE VALUE A ND A FEW OF THEM DONT HAVE THE PROPENSITY TO RENDER THE BOOKS OF ACCOUNTS AS LIABLE FOR REJECTION U/S 145(3 ). 5.3 THE LEARNED CIT(A) IN THIS CASE HAS HELD THAT THE ASSESSEE DOES NOT HAVE A VESTED RIGHT TO CROSS EXAM INE ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 6 THE SUBCONTRACTORS WHO DEPOSED AGAINST HIM; WITH RESPECT WE DONT AGREE TO THIS FINDING. LD. ASSESSIN G OFFICER CAN CALL A WITNESS, RECORD HIS STATEMENT AND DRAW SUITABLE INFERENCE THEREFROM, HOWEVER IT IS INCUMBEN T FOR HIM TO TEST THE VERACITY OF DEPOSITION FROM THE MAT ERIAL AVAILABLE WITH THE DEPARTMENT LIKE PAN NO., BANK ACC OUNT OF THE DEPONENT. IN OUR CONSIDERED VIEW THAT THE LEA RNED CIT(A)S OBSERVATION IS NOT TENABLE IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE. IT IS NOT DISPUTED T HAT THE ASSESSEE HAS PRODUCED ANY RECORD IN SUPPORT OF THE CLAIM OF EXPENDITURE, THE ACCOUNT PAYEE CHEUQES, THE BANK ACCOUNTS, THE ASSESSEES ACCOUNTS AND THE TDS DEDUCT ION CERTIFICATES DEMONSTRATE THAT THE ASSESSEE PRODUCED THE PRIMARY EVIDENCE. IN THIS SITUATION, THE ASSESSING OFFICER WAS OBLIGED TO GIVE THE ASSESSEE AN OPPORTUNITY OF C ROSS EXAMINING THEM BESIDE EFFECTIVELY REBUTTING THE EVI DENCE FURNISHED BY ASSESSEE. IN ANY CASE, THE ASSESSING O FFICER SHOULD HAVE CONFRONTED THE ISSUE OF TDS CERTIFICATES ISSUED BY ASSESSEE AND BANK ACCOUNTS OF SUCH DEPONE NT SUB-CONTRACTORS, NO SUCH EXERCISE HAS BEEN DONE TO ESTABLISH THEIR VERACITY. THESE SUB-CONTRACTORS STAT EMENTS HAVE BEEN ACCEPTED ON FACE VALUE NEITHER BY GIVING OPPORTUNITY FOR CROSS EXAMINATION NOR CONFRONTING I T WITH THE EXISTING RECORD; THUS THEIR VERACITY REMAINS UNCORROBORATED. UNDER THESE CIRCUMSTANCES, WE ARE UNABLE TO UPHOLD THE FINDINGS OF THE LEARNED ASSESS ING ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 7 OFFICER AND CIT(A) ON THIS ISSUE AS THEY ARE UNSUBSTANTIATED AND AGAINST THE FUNDAMENTAL PRINCIP LES OF LAW OF NATURAL JUSTICE. UNDISPUTEDLY THE SUB-CONT RACTING OF THE WORK IS ESSENTIAL IN THIS BUSINESS; THE AMOUN TS HAVE BEEN PAID BY BANK ACCOUNT; THE BILLS BEAR PAN NUMBERS AND TDS IS DEDUCTED. THE ASSESSEE HAS DISCHARGED ITS BURDEN TO PROVE THE INCURRING OF EXPENDITURE IN THIS BEHALF. THE ASSESSING OFFICER SH OULD HAVE REBUTTED THE SAME IN EFFECTIVE TERMS, WHICH IS NOT DONE, BESIDES, IF THE ASSESSING OFFICER WANTED TO R ELY ON SOME MATERIAL, WHICH IS CONTRARY TO THE RECORD SUBMI TTED BY THE ASSESSEE, THE SAME SHOULD HAVE BEEN INTIMATE D TO HIM AND EXPLANATION SHOULD HAVE BEEN CALLED. OR IT SHOULD HAVE BEEN CORROBORATED FROM OTHER MATERIAL WH ICH IS STARKLY MISSING. THE ASSESSEE BEFORE LEARNED CIT(A ) ALSO HAS GIVEN PROPER EXPLANATION FOR EACH AND EVE RY SUB-CONTRACTORS. THEREFORE, WE ARE OF THE VIEW THAT AS FAR AS THE EXPENDITURE INCURRED ON SUB-CONTRACTORS IS CONCERNED, THE ASSESSEE HAS DISCHARGED ITS PRIMARY ONUS TO CORROBORATE THE SAME. THUS BOOKS HAVE BEEN REJECT ED WITHOUT REBUTTING THE ASSESSEE EXPLANATION AND WITHOU T GIVING OPPORTUNITY OF CROSS EXAMINATION OF THE DEVI ANT SUB-CONTRACTORS, WHOSE STATEMENTS WERE RECORDED BEHI ND THE BACK OF THE ASSESSEE. THUS, NO ADVERSE INFERENC E CAN BE DRAWN IN THIS RESPECT ON UNSUBSTANTIATED DEPOSITI ONS. ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 8 5.4 APROPOS THE ALLEGATION THAT SOME OF THE EXPENDI TURE VOUCHERS ARE SELF MADE AND IN CASH, IN OUR CONSIDER ED VIEW, THE ASSESSEE CONTRACTOR OPERATES AT VARIOUS SI TES MOST OF THEM BEING IN RURAL AREA, IT WILL BE TOO MUC H TO EXPECT THAT FOR EACH AND EVERY RURAL WORKER, VENDOR, ELECTRICIAN WILL GET PRINTED BILLS AND GIVE IMPRESSIVE/PRESENTABLE INVOICES. IT GOES WITHOUT SAY ING THAT THERE ARE SEVERAL OCCASIONS WHEN THE CONTRACTO RS WORKING ON MULTIPLE SITES HAVE TO INCUR THE EXPENDIT URE IN CASH ON THE REPORT OF THE SITE SUPERVISOR; THEY MAK E A SELF MADE VOUCHER WHICH ARE CONSIDERED AS AN EVIDENC E OF EXPENDITURE. THIS DIFFICULTY CANNOT BE HELD AS A LEVERAGE BY THE AO TO REJECT THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WITHOUT APPRECIATING THE SURROUNDING CIRCUMSTANCES. AT THE MOST, THE ASSESSI NG OFFICER MAY HAVE DISALLOWED PART OF THE AMOUNT, WHICH DEPENDS ON VARIOUS FACTORS INCLUDING IDENTIFICATION OF THE ITEMS TO BE DISALLOWED. 5.5 IN OUR CONSIDERED OPINION, IN THE FACTS AND CIR CUMSTANCES OF FACTS; THE ADVERSE INFERENCE DRAWN IN RESPECT OF THE STOCK REGISTER, PAYMENTS TO SUB-CONTRACTORS AND EXPENDITURE INCURRED ON SELF MADE VOUCHERS DO NOT H AVE THE PROPENSITY OF RECOURSING TO THE HARSH ACTION OF REJECTING THE BOOKS OF ACCOUNTS U/S 145(3) IN THESE CIRCUMSTANCES. AND MORE SO WHEN ALL THE RESULTS ARE MUCH BETTER THAN EARLIER YEARS. THEREFORE, WE HOLD TH AT ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 9 THE ASSESSEES BOOKS HAVE BEEN WRONGLY REJECTED U/S 145(3) OF THE ACT, THE SAME DESERVES TO BE UPHOLD. THIS GROUND OF ASSESSEE IS ALLOWED. 5.6 BEFORE PARTING WE MAY LIKE TO MENTION THAT EVEN IF WORST IS ASSUMED AGAINST THE ASSESSEE IN RESPECT OF REJEC TION OF BOOKS OF ACCOUNTS; IN THE EVENTUALITY OF REJECTION, THE ASSESSING OFFICER CANNOT ADOPT THE HARSH PRESUMPTIV E RATE OF TAXATION GLOSSING OVER THE ACCEPTED PREVIOU S HISTORY OF THE ASSESSEE. THE OP, G.P. AND N.P. IN TH ESE YEARS ARE BETTER THAN EARLIER YEARS. IN THIS HYPOTH ETICAL EVENTUALITY OF REJECTION OF BOOKS ALSO, THEREFORE, NO QUESTION OF SUCH ADDITION ARISE. ON MERITS ALSO, WE HAVE HELD THAT THE ASSESSEE HAS DISCHARGED ITS PRIMARY O NUS TO DEMONSTRATE THAT THE STOCK REGISTER, SUB-CONTRACTOR S PAYMENTS AND SELF MADE VOUCHERS ARE PROPERLY MADE. THERE IS NO EFFECTIVE REBUTTABLE FROM THE SIDE OF ASSESSING OFFICER OR LEARNED CIT(A) TO COUNTER IT. U NDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THERE IS NO SCOPE OF ANY ADDITION ON MERITS. THEREFORE, ALL THE ADDITIONS, WHICH ARE SUSTAINED, ARE DELETED. WE ALSO FIND THAT THE LD. CIT(A) HAS HELD THAT IF TH E BOOKS OF ACCOUNT OF THE APPELLANT ARE REJECTED, STILL NO ADDITION CAN B E MADE ON ACCOUNT OF NP RATE AS THE OP, GP AND NP RATES ARE BETTER THAN EAR LIER YEARS. HE RELIED ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS. ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 10 GOTAN LIME KHANIJ UDYOG 256 ITR 243 (RAJ) WHEREIN TH E HON'BLE HIGH COURT HAS HELD THAT EVEN IF THE BOOKS ARE REJECTED THERE IS NO NECESSITY OF MAKING TRADING ADDITION IF THE DECLARED GP RATE IS OTHERWISE JUSTIFIED. THE FACTS IN THE PRESENT CASE ARE IDENTICAL TO THE FACT S PERTAINING TO THE A.Y. 2008-09 AND 2009-10. THERE IS NO CHANGE INTO THE FA CTS AND CIRCUMSTANCES OF THE CASE, THEREFORE, BY TAKING A C ONSISTENT VIEW, WE DO NOT SEE ANY REASON TO INTERVENE INTO THE ORDER OF T HE LD. CIT(A), ACCORDINGLY, THE ORDER OF THE LD. CIT(A) IS HEREBY U PHELD. BOTH THE GROUNDS OF REVENUES APPEAL ARE DISMISSED. 9. NOW WE TAKE REVENUES APPEAL FOR A.Y. 2011-12 AND 2012-13 I.E. ITA NO. 199 & 200/JP/2016. IN BOTH THE CASES OF THE REVENUE, THERE ARE NO MAT ERIAL CHANGE INTO THE FACTS AND CIRCUMSTANCES OF THE CASE. BOTH THE P ARTIES HAVE ADOPTED SAME ARGUMENT AS WERE MADE IN ITA NO. 101/JP/2016, T HEREFORE, BY TAKING A CONSISTENT VIEW, WE DO NOT SEE ANY REASON TO INTERVENE INTO THE ORDER OF THE LD. CIT(A), ACCORDINGLY, THE ORDER OF T HE LD. CIT(A) IS HEREBY UPHELD. BOTH THE GROUNDS OF REVENUES APPEAL ARE DI SMISSED. 10. NOW WE TAKE ASSESSEES APPEAL I.E. ITA NO. 154/JP /2016. IN THIS APPEAL, THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL:- ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 11 1. THAT THE LEARNED PRINCIPAL COMMISSIONER OF INCO ME TAX-I, JAIPUR HAS ERRED IN LAW IN REVISION THE ORDER OF ASS ESSMENT PASSED BY ACIT,CIRCLE-2, JAIPUR ON 30.01.2014 FOR ASSESSMENT YEAR 2011-12 UNDER SECTION 263 OF THE IN COME TAX ACT ON THE FOLLOWING GROUNDS: - A. THAT THE ORDER OF ASSESSMENT DATED 30.01.2014 HAS TO BE PROVED TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO REVENUE BEFORE REVISIONARY POWERS UNDER SECTION 263 CAN BE EXERCISED. IN THE PRESENT CASE, THE ASSESSIN G OFFICER HAD ASKED FOR DETAILS OF ITEMS CONSTITUTING THE PROFIT & LOSS ACCOUNT AND HAD EXAMINED ALL RECEIPTS BEFORE MAKING AN ADDITION ON ACCOUNT OF GROSS PROFI T RATE. SINCE THE IMPUGNED ITEMS OF THE PROFIT & LOSS ACCOUNT HAD ALREADY BEEN EXAMINED AND A DECISION THEREON TAKEN BY THE ASSESSING OFFICER, THE RE- EXAMINATION OF THE SAME ITEMS AMOUNTS TO CHANGE OF OPINION, AND SUPERIMPOSITION OF THE VIEWS OF THE COMMISSIONER OF INCOME-TAX OVER THOSE OF THE ASSESSING OFFICER. AN ASSESSMENT CANNOT BE REVISED UNDER SECTION 263 OF THE ACT ON THE BASIS OF SUBSTITUTION OF THE OPINION OF THE AO WITH THE OPINI ON OF THE COMMISSIONER OF INCOME TAX. B. THAT THE AMOUNT OF PENALTY IS ACTUALLY NOT A PENA L ITEM BUT MORE IN THE NATURE OF SHORT PAYMENT DUE TO DEFICIENCIES IN THE WORK EXECUTED BY THE ASSESSEE OR NON-ADHERENCE TO TIME-LIMITS OR SPECIFICATIONS, WHIC H IS RETURNED WHEN THE APPEAL OF THE ASSESSEE IS UPHELD O N RE-VERIFICATION. THEREFORE, THEY ARE AN INTEGRAL PAR T OF THE BUSINESS OF THE ASSESSEE AND TO BE TAXED AS BUSINESS INCOME. INCOME FROM OTHER SOURCES IS A RESIDUAL HEAD, AND RECEIPTS ARE TAXED UNDER THIS HE AD ONLY IF THEY CANNOT BE TAXED UNDER ANY HEAD, INCLUD ING INCOME FROM BUSINESS. THIS MATTER HAD BEEN ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 12 EXAMINED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AND HE WAS OF THE VIEW THAT THESE ARE BUSINESS RECEIPTS. HENCE, THE ORDER OF ASSESSMENT WAS NEITHER ERRONEOUS, NOR PREJUDICIAL TO REVENUE. C. THAT THE ITEMS NOTED BY THE COMMISSIONER OF INCOM E- TAX ARE ITEMS THAT OCCUR EVERY YEAR, AND THE COMMISSIONER DID NOT UNDERTAKE ANY EXERCISE TO FIND OUT WHETHER EXCLUDING THESE ITEMS WOULD ULTIMATELY LEAD TO ANY ADDITION ON ACCOUNT OF GROSS PROFIT RAT E OF THIS YEAR WHEN COMPARED WITH THE GROSS PROFIT RATE OF EARLIER YEAR, ALSO CALCULATED BY EXCLUDING THESE IT EMS, OVER AND ABOVE THE ADDITION ALREADY MADE BY THE ASSESSING OFFICER. THEREFORE, THERE IS NOTHING IN T HE ORDER U/S 263 TO SUGGEST THAT THERE HAS BEEN ANY LO SS OF REVENUE. SO THE CIT HAS NOT PROVED THAT THE ASSESSMENT ORDER WAS PREJUDICIAL TO THE INTEREST OF REVENUE. D. THAT DEBATABLE ISSUES CANNOT BE MADE SUBJECT MATT ER OF AN ORDER OF REVISION UNDER SECTION 263. WHAT IS THE HEAD UNDER WHICH THESE ITEMS ARE TO BE TAXED IS A DEBATABLE ISSUE, AND SO COULD NOT HAVE BEEN MADE TH E BASIS OF AN ORDER U/S 263. E. THAT THESE ITEMS WERE EXAMINED BY THE ASSESSING OFFICER, AND TAKEN INTO CONSIDERATION WHILE MAKING A N ADDITION ON ACCOUNT OF GROSS PROFIT RATE AS IS CLEA R FROM THE EXTRACT OF THE ASSESSMENT ORDER REPRODUCED IN P ARA 7 OF THE STATEMENT OF FACTS. THIS ISSUE HAS BEEN THE SUBJECT MATTER OF AN ORDER PASSED BY COMMISSIONER O F INCOME TAX (APPEALS)-I, JAIPUR. BY THE THEORY OF MERGER, THE ORDER OF THE ASSESSING OFFICER HAS GOT MERGED WITH THE ORDER OF THE COMMISSIONER OF INCOME ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 13 TAX (APPEALS), AFTER THE PASSING OF THE APPELLATE OR DER. HENCE, THIS ORDER CANNOT BE REVISED BY AN AUTHORITY OF EQUAL LEVEL, THAT IS, BY ANOTHER COMMISSIONER OF INCOME-TAX. HENCE THE ORDER U/S 263 IS ILLEGAL AND UNTENABLE IN THE EYE OF LAW. 2. THAT THE LEARNED PRINCIPAL COMMISSIONER HAS ERRED IN LAW IN MAKING ORDER FOR REVISION WITHOUT TAKING INTO CONSID ERATION THAT: - (I) ORDER OF ASSESSING OFFICER WAS NEITHER ERRONEOUS NOR DETRIMENTAL TO INTEREST OF REVENUE LOOKING TO FACT THAT WHEN WHOLE OF THE TURNOVER IS ASSESSED AT A NET PROF IT @ 8% WHY A PARTICULAR PORTION THEREOF CAN BE ASSESSED AT 100%. (2) THE INCOME TAX APPELLATE TRIBUNAL AND THE COMMISSIONER OF INCOME TAX HAVE CONTINUOUSLY ALLOWING ASSESSEES APPEAL AND ACCEPTING RETURNED INCOME, WHY A PARTICULAR INCOME IS CHOSEN FOR REVISION. 11. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSMENT U/S 143(3) OF THE ACT WAS FRAMED VIDE ORDER DATED 30/01/2014 TH EREBY THE ASSESSING OFFICER COMPUTED THE TOTAL INCOME AT RS. 2,45,25,51 0/-. SUBSEQUENTLY, THE LD. PR.CIT REVISED THE ORDER U/S 263 OF THE ACT ON T HE GROUND THAT THE ASSESSEE HAD SHOWN RECEIPT AT RS. 23,77,18,346/-, A CCORDINGLY, A NET PROFIT @ 8% WAS DETERMINED AT RS. 1,90,17,468/- BY TH E ASSESSING OFFICER. IT WAS NOTICED THAT THERE WERE CERTAIN RECEI PTS SUCH AS PENALTY REFUNDED BY JVVNL OF RS. 32,77,664/- AND INSURANCE CHARGES OF RS. ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 14 43,780/- WHICH WERE INCLUDED IN THE GROSS RECEIPTS SH OWN AT RS. 23,77,18,346/-. THESE RECEIPTS WERE ACTUALLY NOT PART OF GROSS CONTRACTUAL RECEIPTS. THESE WERE PART OF OTHER INCOME AND SHOULD HAVE BEEN CONSIDERED SEPARATELY. THEREFORE, THE LD. CIT(A) CONC LUDED THAT THE ASSESSING OFFICER COMPLETED THE ASSESSMENT WITHOUT M AKING PROPER ENQUIRIES AND VERIFICATION IN RESPECT OF NATURE AND TAXABILITY OF THE RECEIPTS ON ACCOUNT OF PENALTY AND INSURANCE CHARGE S. HE, THEREFORE, HELD THAT THE ASSESSMENT ORDER DATED 30/1/2014 WAS ERRONE OUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE AND SAME WAS SET ASIDE. THE ASSESSING OFFICER WAS DIRECTED TO MAKE FRESH ASSESS MENT PROCEEDINGS AFTER IN-DEPTH EXAMINATION OF THE ISSUES MENTIONED IN PARA 2 OF THE IMPUGNED ORDER. 12. NOW THE ASSESSEE IS IN APPEAL BEFORE US. THE LD A R OF THE ASSESSEE HAS REITERATED THE SUBMISSIONS AS MADE IN THE WRITTE N BRIEF. HE FURTHER SUBMITTED THAT LD. PR.CIT WAS NOT JUSTIFIED IN INVOKI NG THE PROVISIONS OF SECTION 263 OF THE ACT. IT WAS CONTENDED BY THE LD A R THAT THE ASSESSING OFFICER HAD DULY EXAMINED THE ISSUES RAISED BY THE LD. PR.CIT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. ALL DOCUMENTARY E VIDENCES, EXPLANATIONS AND INFORMATION WERE PROVIDED TO THE AS SESSING OFFICER IN ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 15 RESPECT OF TURNOVER AND THE SAME WERE DULY CONSIDERE D BY HIM. THE ASSESSEE HAD DEPICTED THE HEAD TURNOVER AS PER SC HEDULE 12 OF THE AUDITED FINANCIAL STATEMENTS. THE ASSESSING OFFICER AFTER EXAMINING THE FACTS OF THE CASE AND DUE APPLICATION OF MIND, TREA TED THAT THE REFUND OF RS. 41,96,035/- FROM TURNOVER TO INCOME FROM OTHER SOURCES. HE SUBMITTED THAT THE ASSESSING OFFICER WHILE FINALIZI NG THE ASSESSMENT ORDER HAD DULY EXAMINED ALL ITEMS AND FINALIZED THE ASSES SMENT ACCORDINGLY. THE DIRECTIONS OF THE LD. PCIT OF CONSIDERING AMOUNTS UNDER THE HEAD PENALTY CLEARED BY JVVNL AND INSURANCE CHARGES AS N OT PART OF TURNOVER BUT TO BE CONSIDERED SEPARATELY IS NOTHING BUT CHAN GE OF OPINION. HE SUBMITTED THAT THE LAW IS WELL SETTLED THAT THE ASSES SING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEWS, THEREFORE, IT CANNOT BE H ELD THE ORDER BEING PREJUDICIAL TO THE INTEREST OF REVENUE BY INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT. FURTHER IT IS SUBMITTED THAT THE IS SUE INVOLVED WAS DETERMINATION OF INCOME ONLY AND THE SAME HAS BEEN DULY CONSIDERED BY THE LD. CIT(A) IN HIS ORDER DATED 02/12/2015 AND THE REFORE THIS ORDER HAD MERGED WITH THE ASSESSMENT ORDER. IT IS CONTENDED TH AT THE ASSESSMENT ORDER WAS ALSO ASSAILED BY THE ASSESSEE BEFORE THE L D. CIT(A), WHO HAD DECIDED THE ISSUE VIDE ORDER DATED 02/12/2015. THERE FORE, HE SUBMITTED THAT THE IMPUGNED ORDER IS OTHERWISE ALSO ILLEGAL AN D UNJUSTIFIED. THE LD ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 16 AR HAS PLACED RELIANCE ON THE DECISION OF THE HONB LE CALCUTTA HIGH COURT IN THE CASE OF STRAW PRODUCTS LTD. VS ACIT 252 ITR 4 44 (CAL.) WHEREIN THE HON'BLE HIGH COURT HAS HELD THAT THE ORIGINAL ORDER OF ASSESSMENT HAS BEEN MERGED WITH THE APPEAL PROCEEDED BEFORE THE COM MISSIONER (APPEAL)/APPELLATE COMMISSIONER AND IF SUCH ORDER I S MERGED WITH THE ORDER OF THE APPELLATE AUTHORITY, THE SHOW CAUSE NOT ICE ISSUED BY THE COMMISSIONER, U/S 263 CANNOT EXIST SUPERSEDING THE AUTHORITY OF THE APPELLATE COMMISSIONER. HE SUBMITTED THAT IN THE PR ESENT CASE, ADMITTEDLY, THE APPEAL WAS PENDING BEFORE THE LD. CI T(A) WHEN THE NOTICE U/S 263 WAS ISSUED AND IT IS ALSO APPARENT FROM THE RECORD THAT THE REVISION ORDER IS PASSED SUBSEQUENT TO THE ORDER PA SSED BY THE LD. CIT(A) AS THE IMPUGNED ORDER IS DATED 18/12/2015 WHEREAS TH E LD. CIT(A) HAD PASSED THE ORDER ON 02/12/2015. RELIANCE IS ALSO PL ACED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CI T VS. SHASHI THEATRE PVT. LTD. 248 ITR 126 (GUJ). 13. ON THE CONTRARY, THE LD DR HAS VEHEMENTLY SUPPO RTED THE ORDER OF THE LD. PR.CIT AND SUBMITTED THAT THERE IS NO INFIRM ITY IN HIS ORDER. HE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT APPLIE D HIS MIND, THE ITEM WHICH WAS NO RELATED TO THE CONTRACTUAL RECEIPTS WERE TAKEN AS BUSINESS ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 17 RECEIPTS, THEREFORE, EX FACIE THE ORDER IS ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF REVENUE. 14. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE REVENUE HAS NOT DISPUTED T HE FACT THAT THE BOOKS OF ACCOUNTS WERE REJECTED AND AFTER REJECTION OF BOOKS OF ACCOUNT, THE ASSESSMENT WAS FRAMED BY THE ASSESSING OFFICER, THEREFORE, IT CANNOT BE INFERRED THAT THERE WAS NO APPLICATION OF MIND BY THE ASSESSING OFFICER. IT IS ALSO NOT DISPUTED THAT WHEN THE SHOW CAUSE FOR REVISING THE ASSESSMENT ORDER WAS ISSUED, THE ASSESSEE HAD FILED APPEAL BEFORE THE LD. CIT(A). IT IS SETTLED POSITION OF LAW THAT THE COMMISSIONER (APPEALS) HAS CO- TERMINUS POWER WITH THE ASSESSING OFFICER. IT IS NOT THE REVENUES CASE THAT THE ENTIRE RECORD WAS NOT AVAILABLE BEFORE THE LD. CIT(A). THE LD. CIT(A) IS EMPOWERED TO ENHANCE THE ASSESSMENT. IN THE PRESENT CASE, THE ISSUE OF RECEIPTS IS DULY EXAMINED BY THE LD. C IT(A) DURING THE APPELLATE PROCEEDINGS, THEREFORE, IN OUR CONSIDERED VIEW, THE QUESTION OF ASSESSING OFFICERS FAILURE OF CONDUCTING ENQUIRY C ANNOT BE MADE THE BASIS FOR REVISING THE ASSESSMENT ORDER. WE ARE FORTIFIED BY THIS VIEW BY THE ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 18 JUDGMENTS OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF STRAW PRODUCTS LTD. VS ACIT (SUPRA), HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SHASHI THEATRE PVT. LTD. (SUPRA) AND THE DECI SION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF COMMISSIONER OF WE ALTH TAX VS. SAMPATHMAL CHORDIA, EXECUTOR TO THE ESTATE OF LATE NENI KAVUR BAI (2003) 127 TAXMAN 525 (MAD.). IN THE LIGHT OF THE RA TIO LAID DOWN BY THE HONBLE HIGH COURTS, THE IMPUGNED ORDER CANNOT BE S USTAINED, THEREFORE, WE HEREBY QUASH THE ORDER OF THE LD. PR.CIT AND RESTO RE THE ORIGINAL ASSESSMENT. ACCORDINGLY, THIS ISSUE IS DECIDED IN F AVOUR OF THE ASSESSEE. 15. IN THE RESULT, ALL THE THREE APPEALS OF THE RE VENUE ARE DISMISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH DECEMBER, 2016. SD/- SD/- HKKXPAN DQY HKKJR (BHAGCHAND) (KUL BHARAT) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 29 TH DECEMBER, 2016 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE D.C.I.T., CIRCLE-2, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- SHRI RAJ KUMAR BABUTTA, JAIPUR & PRINCIPAL COMMISSIONER OF INCOME TAX-I, JAIPUR. ITA 101, 199, 200 & 154/JP/2016_ DCIT VS RAJ KUMAR BABUTTA 19 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 101, 199, 200 AND 154/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR