Ruchi Bakers (P) Ltd, Kolkata V. C.I.T - II,kolkata, Kolkata

ITA 1013/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4527 (ITAT-KOLKATA)
• Duration Of Justice: 13 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 04-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 30-04-2003
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Keywords: Revision of order; Question of law; Revenue expenditure; Capital expenditure
• Section: 143(3); 133A; 147; 263

Judgement Text

1 ITA NO. 1013/KOL/2013 RUCHI BAKERS (P) LTD., AY 2008-09 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI M. BALAGANESH, AM & SHRI S. S. VISWAN ETHRA RAVI, JM] I.T.A NO.1013/KOL/2013 ASSESSMENT YEAR: 2008-09 RUCHI BAKERS (P) LTD., (PAN: AABCR2931D) VS. COMMI SSIONER OF INCOME-TAX-11, KOLKATA. ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 04.07.2016 DATE OF PRONOUNCEMENT: .07.2016 FOR THE APPELLANT: SHRI SUBHAS AGARWAL, ADVOCA TE FOR THE RESPONDENT: SHRI NIRAJ KUMAR, CIT, DR ORDER PER SHRI M. BALAGANESH, AM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF REVISION ORDER OF CIT, KOL-II, KOLKATA VIDE M. CIT-II/KOL/U/S. 263/2012-13/10114-17 DATED 25.03 .2013. ASSESSMENT WAS FRAMED BY ITO, WD-4(1), KOLKATA U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR AY 2008-09 VIDE HIS ORDER DATED 15.0 9.2010. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CIT IS JUSTIFIED IN INVOKING REVISIONARY JURISDICTION U/S 263 OF THE AC T IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSES SEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE ACTIVITIES OF MANUFACTURING AND TRADING IN BISCUITS HAVING ITS FACTORY AT A RURAL AREA OF WEST BENGAL AT G.T.ROAD, KULTORA DISTRICT, BURDW AN. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED ON 25.1.2008 BY THE LD AO IN THE FACTORY PREMISES OF THE ASSESSEE. ON THE DATE OF SURVEY, THE SURVEY TEAM RECORDED THE FOLLOWING S TOCKS OF RAW MATERIALS AND FINISHED GOODS:- 2 ITA NO. 1013/KOL/2013 RUCHI BAKERS (P) LTD., AY 2008-09 SL. NO. PARTICULARS UNIT QTY. 1. RAW MATERIALS MAIDA (165 BAGS OF 60 KG & 3 BAGS OF 20-25 KGS.) SUGAR VEGETABLE OIL CHEMICALS & FLAVORS (80KG.), MILKMAID (80 KG.) (APP ROX.) K.G. K.G. K.G. K.G. 8310 3152 476 160 2 FACTORY STORES (APPROX. RS.5000/ - ) 3 WORK IN PROGRESS TIT BIT (150 GM.) & OTHERS (APPROX.) MIXTURES ABOUT (200 KG.) (APPROX.) REJECTED BISCUITS (30 KG) (APPROX.) CARTOONS 180 4 FINISHED GOODS (AS PER ANNEXURE-1) CARTOONS 3101 THE AFORESAID STOCKS WERE VALUED BY THE SURVEY TEAM AT RS. 7,32,417/-. THERE WAS NO DISCREPANCY ON THE SAID VALUATION AS WAS ADMITTED B Y THE ASSESSEE EXCEPT STATING THAT THE SURVEY TEAM DID NOT INCLUDE THE STOCK OF DIESEL OF RS. 1,60,634/- AND STOCK OF PACKING MATERIALS TO THE TUNE OF RS. 3,38,863/-. THE LD A O OBSERVED THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, BOOKS OF ACCOUNTS ALONG WIT H REQUISITE DETAILS AND SUPPORTING DOCUMENTS INCLUDING THE BOOKS INVENTORISED ON THE D ATE OF SURVEY WERE PRODUCED AND THE SAME WERE EXAMINED ON TEST CHECK BASIS. HE OBSERV ED THAT AS THE BOOKS OF ACCOUNTS AS ON THE DATE OF SURVEY WERE NOT UPDATED, THE SURVEY TEA M COULD NOT DETERMINE THE INCOME CONCEALMENT ETC. LATER IN THE COURSE OF SCRUTINY P ROCEEDINGS, THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE UPDATED WITH THE HELP OF BILLS / VOUC HERS PRODUCED AND THE FIGURES OF PURCHASES, SALES, MANUFACTURING EXPENSES AS ON THE DATE OF SURVEY WERE DETERMINED WHICH WERE DULY VOUCHED AND ACCEPTED BY THE ASSESSEE. B ASED ON THIS, THE LD AO PREPARED A RECASTED TRADING ACCOUNT OF THE ASSESSEE ON THE DAT E OF SURVEY (I.E UPTO 25.1.2008) BY HAVING THE FIGURES OF VOUCHED FIGURES OF OPENING ST OCK, PURCHASES OF VARIOUS ITEMS , MANUFACTURING EXPENSES AND SALES FIGURES INTACT. HE APPLIED THE GROSS PROFIT DISCLOSED BY THE ASSESSEE IN THE EARLIER YEAR AT 11.57% ON THE S ALES AND ARRIVED AT THE GROSS PROFIT. BASED ON THIS WORKINGS, HE ARRIVED AT THE CLOSING STOCK F IGURE OF RS. 15,08,380/- AS A BALANCING FIGURE. THE LD AO CONCLUDED THAT THE DIFFERENCE O F RS. 7,75,963/- (15,08,380 7,32,417) BETWEEN THE CLOSING STOCK OF RS. 15,08,380/- AS ARR IVED BY HIM AS A BALANCING FIGURE AND THAT ARRIVED AT THE TIME OF SURVEY AMOUNTING TO RS. 7,32,417/- COULD NOT BE RECONCILED BY 3 ITA NO. 1013/KOL/2013 RUCHI BAKERS (P) LTD., AY 2008-09 THE ASSESSEE. HE CONCLUDED THAT THE DIFFERENCE REP RESENTS SALES MADE OUTSIDE THE BOOKS. HE APPLIED GROSS PROFIT RATE OF 11.57% ON THE SAID DIFFERENCE OF RS. 7,75,963/- AND MADE AN ADDITION OF RS. 89,779/- . THE ASSESSEE ACCEPTED F OR THIS ADDITION IN THE ASSESSMENT AND DID NOT PREFER ANY APPEAL AGAINST THE ASSESSMENT ORDER AND THE TAXES DUE THEREON WERE RECOVERED OUT OF REFUNDS DUE TO THE ASSESSEE. 4. LATER, THIS ASSESSMENT WAS SOUGHT TO BE REVISED U/S 263 OF THE ACT BY THE LD CIT BY TREATING THE ORDER PASSED BY THE LD AO AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE IN AS MUCH AS THE LD AO OUGHT TO HAVE MADE ADDITION OF RS. 7,75,963/- TOWARDS UNDISCLOSED SALES INSTEAD OF JUST ADDING THE GROSS PROFIT THEREON. THE LD CIT OBSERVED AS BELOW:- THE ONLY QUESTION WHICH IS TO BE CONSIDERED IS WH ETHER THE ENTIRE SUM OF RS.7,75,963/- BEING UNRECONCILED CLOSING STOCK AS ABOVE CONSTITUT ES PROFIT OR THERE SHOULD BE A METHOD OF ADOPTION OF THE NET INCOME, AS HAS BEEN DONE BY THE ASSESSING OFFICER BY APPLYING THE G.P. RATE OF 11.57%. IN THIS CASE IT IS CLEAR THAT THE U NRECONCILED SALES IS OUT OF BOOKS. THE ASSESSING OFFICER IS DIRECTED TO VERIFY WHETHER OR NOT THE RELATABLE PURCHASE HAVE BEEN DEBITED IN THE BOOKS OF ACCOUNTS. IF IT IS, THEN TH E ENTIRE SALES PROCEEDS OF RS.7,75,963/- AND NOT MERELY THE PROFIT EARNED HAS TO BE ADDED. HE IS ALSO DIRECTED TO VERIFY WHAT THE CORRECT RATE OF GP IS, AND IF RELATABLE PURCHASE ARE REFLEC TED IN THE BOOKS, APPLY THE CORRECT PROFIT PERCENTAGE. 5. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LD. CIT PASSED U/S. 263 IS BA D IN LAW AND ON FACTS AND IS LIABLE TO BE QUASHED. 2. THAT THE CIT'S ORDER U/S. 263 IS VOID AB INITIO IN THE ABSENCE OF PROPER NOTICE INASMUCH AS IT DOES NOT SPECIFY ANY REASONS FOR THE EXERCISE OF REVISIONARY JURISDICTION U/S. 263. 3. FOR THAT THE LD. CIT ERRED IN EXERCISING THE POW ER OF REVISION FOR THE PURPOSE OF DIRECTING THE A.O. TO HOLD ANOTHER INVESTIGATION WHEN THE ORD ER OF THE A.O. WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 4. THAT THE LD. CIT ERRED IN PREFERRING TO TAKE A D IFFERENT VIEW AS A BASIS FOR AN ACTION U/S.263 WHEN THE A.O. HAD TAKEN A PARTICULAR VIEW A FTER CONSIDERING THE MATERIAL ON RECORD AND AFTER DUE INVESTIGATION. 6. THE LD AR ARGUED THAT AT THE OUTSET, THE SHOW C AUSE NOTICE ISSUED BY THE LD CIT DID NOT STATE HOW THE ORDER PASSED BY THE LD AO IS ERRO NEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE ARGUED THAT THE LD AO HAD PREPARE D A TRADING ACCOUNT UPTO THE DATE OF SURVEY I.E UPTO 25.1.2008 AND ARRIVED THE CLOSING S TOCK FIGURE AS A BALANCING FIGURE AT RS. 4 ITA NO. 1013/KOL/2013 RUCHI BAKERS (P) LTD., AY 2008-09 15,08,380/- AFTER APPLYING GROSS PROFIT @ 11.57% O N THE TURNOVER. HE STATED THAT THE LD AO HAD ASSUMED THAT THE ASSESSEE IS CONDUCTING ITS BUSINESS IN A CONTROLLED ENVIRONMENT WHERE THE PURCHASE AND SELLING PRICES ARE FIXED AND WOULD REMAIN SO FOR A LONGER PERIOD OF TIME. THIS ASSUMPTION IS FACTUALLY INCORRECT IN AS MUCH AS THE PRICES OF RAW MATERIAL (I.E MAIDA) REQUIRED FOR MANUFACTURING BISCUITS (I.E FIN ISHED GOODS) FLUCTUATE ALMOST ON A DAILY BASIS , WHEREAS THE SELLING PRICE OF BISCUITS WOULD REMAIN CONSTANT FOR A CONSIDERABLE PERIOD OF TIME. THIS MARKET SITUATION HAS TO BE STUDIED A ND MAINTAINED BY THE ASSESSEE TO STAY IN THE BUSINESS CONTINUOUSLY. HENCE IN THIS SCENARIO , APPLYING THE GROSS PROFIT RATE OF 11.57% BY THE LD AO ON A PARTICULAR DATE I.E UPTO THE DATE OF SURVEY WOULD NOT DETERMINE THE REAL PROFIT OF THE ASSESSEE. HE FURTHER ARGUED THAT THE INCOME TAX ASSESSMENT HAS TO BE MADE AFTER TAKING INTO ACCOUNT THE TRANSACTIONS FOR THE WHOLE YEAR AND NOT CONFINED ONLY UPTO THE DATE OF SURVEY. IN THE INSTANT CASE, THE LD AO ARR IVED THE CLOSING STOCK FIGURE OF RS. 15,08,380/- AS BALANCING FIGURE AS ON THE DATE OF S URVEY. BUT HE HAD IGNORED THE FACT THAT THE SAME WOULD BECOME AUTOMATICALLY THE OPENING STO CK AS ON 26.1.2008 AND THE PROFIT POSITION OF THE YEAR HAS TO BE DETERMINED AFTER TAK ING INTO ACCOUNT THE TRANSACTIONS FROM 26.1.2008 TO 31.3.2008. HE FURTHER ARGUED THAT ABS OLUTELY NO QUANTITY DIFFERENCES WERE NOTICED BY THE SURVEY TEAM AT THE TIME OF SURVEY OR BY THE LD AO WHILE COMPLETING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAD DULY SUBMI TTED ALL THE RECORDS INCLUDING THE SUBSIDIARY RECORDS DULY UPDATED AT THE TIME OF ASSE SSMENT PROCEEDINGS WHICH WERE DULY RECORDED AND ADMITTED BY THE LD AO IN HIS ASSESSMEN T ORDER. THE SAME WERE ALSO EXAMINED BY THE LD AO ON TEST CHECK BASIS AS ADMITTED IN HIS ORDER. NO ADVERSE INFERENCE WERE DRAWN ON THE SAME. THE BOOKS OF ACCOUNTS SO PRODUC ED WERE NOT REJECTED BY THE LD AO. WHILE THIS IS SO, THERE WAS NO NEED TO MAKE AN ESTI MATE OF GROSS PROFIT ON THE ALLEGED UNDISCLOSED SALES OF RS. 7,75,963/- AND MAKING AN A DDITION TOWARDS GROSS PROFIT OF RS. 89,779/-. IT IS TRUE THAT THE ASSESSEE DID NOT CON TEST THE ADDITION BY WAY OF PREFERRING AN APPEAL BEFORE THE LD CITA. THAT DECISION WAS TAKEN IN VIEW OF THE SMALLNESS OF THE ADDITION MADE AND SINCE THERE WAS NO TAX OUTFLOW TO THE ASSESSEE PURSUANT TO THE SAID ADDITION AS THE TAXES WERE COLLECTED OUT OF REFUNDS DUE TO ASSESSEE. THIS DOES NOT IN ANY 5 ITA NO. 1013/KOL/2013 RUCHI BAKERS (P) LTD., AY 2008-09 WAY COULD BE CONSTRUED AS ACQUIESCENCE ON THE PART OF THE ASSESSEE. MOREOVER, THE LD CIT FAILED TO UNDERSTAND THAT THE ISSUE OF ALLEGED DIFF ERENCE IN CLOSING STOCK HAS BEEN THOROUGHLY EXAMINED BY THE LD AO IN THE SCRUTINY ASSESSMENT PR OCEEDINGS PURSUANT TO THE SURVEY CONDUCTED ON 25.1.2008 AND PURSUANT TO THE REPORT O F SURVEY TEAM IN THIS REGARD. HENCE THIS CANNOT BE THE CASE FALLING UNDER THE CATEGORY OF LACK OF ENQUIRY BY THE LD AO WARRANTING REVISIONARY JURISDICTION U/S 263 OF THE ACT. HE PLACED RELIANCE ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS SUNB EAM AUTO LTD REPORTED IN (2009) 332 ITR 167 (DEL) . 7. IN RESPONSE TO THIS, THE LD DR SUPPORTED THE L D CITS ORDER U/S 263 OF THE ACT BY STATING THAT THE LD CIT HAD MERELY DIRECTED THE LD AO TO MAKE ENQUIRY TO VERIFY THE RELATABLE PURCHASES ATTRIBUTABLE TO THE UNDISCLOSED SALES OF RS. 7,75,963/- HAVE BEEN DEBITED IN THE BOOKS BY THE ASSESSEE SO AS TO DECIDE WHETHER THE E NTIRE UNDISCLOSED SALES IS TO BE ADDED OR ONLY THE PROFIT DERIVED THEREFROM IS TO BE ADDED. THE ASSESSEE CANNOT HAVE ANY GRIEVANCE ON THIS ASPECT AS IT IS A MERE GUIDANCE TO MAKE AN ENQUIRY IN A PARTICULAR MANNER. HE FURTHER ARGUED THAT THE LD CIT CANNOT BE EXPECTED T O MAKE THESE KIND OF ENQUIRY AT HIS LEVEL. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD INCLUDING THE PAPER BOOK FILED BY THE ASSESSEE COMP RISING OF INCOME TAX RETURNS AND FINAL ACCOUNTS FOR THE YEAR ENDED 31.3.2008 (PAGES 1 TO 1 5 OF PAPER BOOK) ; TAX AUDIT REPORT (PAGES 16 TO 29 OF PAPER BOOK) ; SHOW CAUSE NOTICE ISSUED BY THE LD CIT (PAGE 30 OF THE PAPER BOOK) ; SUBMISSIONS MADE BEFORE THE LD CIT (P AGES 31 TO 40 OF PAPER BOOK) AND DETAILS OF CLOSING STOCK OF EACH PRODUCTS WITH COMP LETE QUANTITATIVE DETAILS MONTH WISE MOVEMENTS WITH VALUES THEREON (PAGES 41 TO 56 OF PA PER BOOK). THE CONDITION PRECEDENT FOR INVOKING REVISIONARY JURISDICTION U/S 263 OF TH E ACT IS THAT THE LD CIT SHOULD PROVE THAT THE ORDER PASSED BY THE LD AO IS ERRONEOUS AND PREJ UDICIAL TO THE INTEREST OF THE REVENUE. IN THE INSTANT CASE, NO DISCREPANCIES WERE NOTICED ON THE QUANTITATIVE PARTICULARS FILED BY THE ASSESSEE EITHER BY THE LD AO OR BY THE LD CIT. WE FIND THAT THE LD CIT HAD DIRECTED THE LD AO TO VERIFY WHETHER THE PURCHASES RELATABLE TO THE UNRECONCILED SALES HAVE BEEN RECORDED 6 ITA NO. 1013/KOL/2013 RUCHI BAKERS (P) LTD., AY 2008-09 OR HAVE NOT BEEN RECORDED IN THE BOOKS ALREADY BY THE ASSESSEE. THIS ONLY TANTAMOUNT TO LD CIT TRYING TO DIRECT THE LD AO TO MAKE FISHING A ND ROVING ENQUIRY IN THIS ASPECT TO JUSTIFY HIS SUSPICION. WE FIND THAT THE LD CIT IS NOT SUR E ABOUT THE ASPECT AS TO WHETHER THE ORDER OF THE LD AO IS ERRONEOUS OR NOT. HENCE IT COULD B E SAFELY CONCLUDED THAT THE LD CIT HAD NOT GIVEN ANY CATEGORICAL FINDING IN HIS ORDER THAT THE ORDER OF THE LD AO IS ERRONEOUS. HENCE THE BASIC ASSUMPTION OF REVISIONARY JURISDICT ION U/S 263 OF THE ACT FAILS. WE PLACE HEAVY RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS GABRIEL INDIA LTD REPORTED IN (1993) 203 ITR 108 (B OM) WHEREIN IT WAS HELD THAT :- 7. WE HAVE HEARD LEARNED COUNSEL FOR THE PARTIES AN D CAREFULLY PERUSED THE ORDERS OF THE INCOME- TAX OFFICER, THE COMMISSIONER AND THE TRIBUNAL. ON PE RUSAL OF THE ADMITTED FACTS, IT APPEARS THAT THE INCOME-TAX OFFICER IN THE INSTANT CASE HAD EXAMIN ED THE ALLOWABILITY OF THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF THE ABOVE AMOUNT OF RS. 99 ,326. WHILE DOING SO, HE ASKED FOR AN EXPLANATION FROM THE ASSESSEE IN REGARD TO THE NATU RE THEREOF. THE ASSESSEE FURNISHED A DETAILED EXPLANATION, VIDE HIS LETTER DATED SEPTEMBER 19, 197 5. IT WAS ON A CONSIDERATION OF THE SAID EXPLANATION AND ON BEING SATISFIED THAT IT WAS A RE VENUE EXPENDITURE THAT THE INCOME-TAX OFFICER ALLOWED THE CLAIM FOR DEDUCTION. IT IS, HOWEVER, COR RECT THAT IN HIS ORDER, HE DID NOT MAKE ANY DISCUSSION IN REGARD TO THE QUERY MADE BY HIM AND TH E EXPLANATION SUBMITTED BY THE ASSESSEE THERETO. 8. ACCORDING TO THE COMMISSIONER OF INCOME-TAX, THE O RDER OF THE INCOME-TAX OFFICER DID NOT DISCLOSE ANY APPLICATION OF MIND. HE ISSUED THE NOTI CE AS HE FELT THAT THE EXPENDITURE IN QUESTION MIGHT BE A CAPITAL EXPENDITURE. BUT DESPITE EXAMINING THE MATTER AT LENGTH AND HEARING THE ASSESSEE, HE COULD NOT COME TO ANY CONCLUSION THAT T HE EXPENDITURE WAS NOT REVENUE EXPENDITURE BUT EXPENDITURE OF CAPITAL NATURE. HE REFERRED THE MATTER BACK TO THE INCOME-TAX OFFICER TO EXAMINE THE SAME AND TO DECIDE AFRESH. THE TRIBUNAL D ID NOT APPROVE SUCH ACTION OF THE COMMISSIONER. THEREFORE, THE QUESTION THAT ARISES FO R CONSIDERATION IS WHETHER THE COMMISSIONER WITHOUT ARRIVING AT A FINDING THAT THE ORDER IN QUE STION WAS ERRONEOUS CAN SET ASIDE THE ASSESSMENT IN EXERCISE OF POWER UNDER SECTION 263 OF THE ACT. IT MAY BE EXPEDIENT AT THIS STAGE TO SET OUT SECTION 263 OF THE ACT. SECTION 263 , SO FAR AS RELEVANT, RUNS AS FOLLOWS : '263. REVISION OF ORDERS PREJUDICIAL TO REVENUE. - (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEI NG HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH OR DER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING T HE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. (2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) - (A) TO REVISE AN ORDER OF REASSESSMENT MADE UNDER SECTION 147 , OR (B) AFTER THE EXPIRY OF TWO YEARS FROM THE DATE OF T HE ORDER SOUGHT TO BE REVISED. . . . 7 ITA NO. 1013/KOL/2013 RUCHI BAKERS (P) LTD., AY 2008-09 9. FROM A READING OF SUB-SECTION (1) OF SECTION 263 , IT IS CLEAR THAT THE POWER OF SUO MOTU REVISION CAN BE EXERCISED BY THE COMMISSIONER ONLY IF, ON EXAMI NATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT, HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE INCOME-TAX OFFICER IS 'ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE'. IT IS NOT AN ARBITRARY OR UNCHARTERED POWER. IT CAN BE EXERCISED ONLY ON FULFILMENT OF THE REQUIREMENTS LAID DOWN IN SUB-SECTION (1). THE CONSIDERATION OF THE COMMISSIONER AS TO WHETHER AN OR DER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, MUST BE BASED ON MA TERIALS ON THE RECORD OF THE PROCEEDINGS CALLED FOR BY HIM. IF THERE ARE NO MATERIALS ON RECORD ON TH E BASIS OF WHICH IT CAN BE SAID THAT THE COMMISSIONER ACTING IN A REASONABLE MANNER COULD HAV E COME TO SUCH A CONCLUSION, THE VERY INITIATION OF PROCEEDINGS BY HIM WILL BE ILLEGAL AND WITHOUT JURISDICTION. THE COMMISSIONER CANNOT INITIATE PROCEEDINGS WITH A VIEW TO STARTING FISHIN G AND ROVING ENQUIRIES IN MATTERS OR ORDERS WHICH ARE ALREADY CONCLUDED. SUCH ACTION WILL BE AG AINST THE WELL-ACCEPTED POLICY OF LAW THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDINGS , THAT STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE AND THAT LAPSE OF TIME MUST INDUCE REPOSE IN AND SET AT REST JUDICIAL AND QUASI-JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SPH ERES OF HUMAN ACTIVITY. ( SEE PARASHURAM POTTERY WORKS CO. LTD. V. ITO ). 10. AS OBSERVED IN SIRPUR PAPER MILLS LTD. V. ITO BY RAGHUVEER J. (AS HIS LORDSHIP THEN WAS), THE DEPARTMENT CANNOT BE PERMITTED TO BEGIN FRESH LITIGA TION BECAUSE OF NEW VIEWS THEY ENTERTAIN ON FACTS OR NEW VERSIONS WHICH THEY PRESENT AS TO WHAT SHOULD BE THE INFERENCE OR PROPER INFERENCE EITHER OF THE FACTS DISCLOSED OR THE WEIGHT OF THE CIRCUMSTANCES. IF THIS IS PERMITTED, LITIGATION WOULD HAVE NO END, 'EXCEPT WHEN LEGAL INGENUITY IS EXHAUS TED'. TO DO SO, IS '. . . TO DIVIDE ONE ARGUMENT INTO TWO AND TO MULTIPLY THE LITIGATION'. 11. THE POWER OF SUO MOTU REVISION UNDER SUBSECTION (1) IS IN THE NATURE OF SUPERVISORY JURISDICTION AND THE SAME CAN BE EXERCISED ONLY IF THE CIRCUMSTAN CES SPECIFIED THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE POW ER OF REVISION UNDER THIS SUB-SECTION, VIZ., (I) THE ORDER IS ERRONEOUS; (II) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE HAS BEEN CAUSED TO THE INTERESTS OF THE REVENUE. IT HAS, THEREFORE, TO BE CONSIDERED FIRSTLY AS TO WHEN AN ORDER CAN BE SAID TO BE ERRONEOUS. WE FIND THAT THE EXPRESSIONS 'ERRO NEOUS', 'ERRONEOUS ASSESSMENT' AND 'ERRONEOUS JUDGMENT' HAVE BEEN DEFINED IN BLACK'S LAW DICTIONAR Y. ACCORDING TO THE DEFINITION, 'ERRONEOUS' MEANS 'INVOLVING ERROR; DEVIATING FROM THE LAW'. 'ERR ONEOUS ASSESSMENT' REFERS TO AN ASSESSMENT THAT DEVIATES FROM THE LAW AND IS, THEREFORE, INVALI D, AND IS A DEFECT THAT IS JURISDICTIONAL IN ITS NATURE, AND DOES NOT REFER TO THE JUDGMENT OF THE A SSESSING OFFICER IN FIXING THE AMOUNT OF VALUATION OF THE PROPERTY. SIMILARLY, 'ERRONEOUS JUD GMENT' MEANS 'ONE RENDERED ACCORDING TO COURSE AND PRACTICE OF COURT, BUT CONTRARY TO LAW, UPON MISTAKEN VIEW OF LAW; OR UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES'. 12. FROM THE AFORESAID DEFINITIONS IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME-TAX OFFI CER ACTING IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERR ONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEE N WRITTEN MORE ELABORATELY THIS SECTION DOES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE INCOME-TAX OFFICER, WHO PASSED THE ORDER UNLESS THE DECISION I S HELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WHERE THE INCOME-TAX OFFICER WHILE MAKING AN ASSESSMEN T EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMST ANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME E STIMATE HIMSELF. THE COMMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEFT TO THE COMMISSIONER HE WOU LD HAVE ESTIMATED THE INCOME AT A FIGURE HIGHER THAN THE ONE DETERMINED BY THE INCOME-TAX OFFI CER. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE T HE INCOME HIMSELF AT A HIGHER FIGURE. IT IS BECAUSE THE INCOME-TAX OFFICER HAS EXERCISED THE QUA SI-JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT CONCLUSION AND SUCH A CONCL USION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SUCH A CASE THAT IN THE OPINION OF THE COMMISSIONER THE ORDER IN QUESTION IS PREJUDICIAL TO THE INTERESTS OF THE 8 ITA NO. 1013/KOL/2013 RUCHI BAKERS (P) LTD., AY 2008-09 REVENUE. BUT THAT BY ITSELF WILL NOT BE ENOUGH TO V EST THE COMMISSIONER WITH THE POWER OF SUO MOTU REVISION BECAUSE THE FIRST REQUIREMENT, VIZ., THAT THE ORDER IS ERRONEOUS, IS ABSENT. SIMILARLY, IF AN ORDER IS ERRONEOUS BUT NOT PREJUDICIAL TO THE INTER ESTS OF THE REVENUE, THEN ALSO THE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVERY ERR ONEOUS ORDER CANNOT BE THE SUBJECT-MATTER OF REVISION BECAUSE THE SECOND REQUIREMENT ALSO MUST BE FULFILLED. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFUL LY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCOR RECT OR INCOMPLETE INTERPRETATION A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. 13. AS OBSERVED IN DAWJEE DADABHOY AND CO. V. S. P. JAIN [1957] 31 ITR 872 (CAL), AT PAGE 881, 'THE WORDS 'PREJUDICIAL TO THE INTERESTS OF THE REV ENUE' HAVE NOT BEEN DEFINED, BUT IT MUST MEAN THAT THE ORDERS OF ASSESSMENT CHALLENGED ARE SUCH AS ARE NOT IN ACCORDANCE WITH LAW, IN CONSEQUENCE WHEREOF THE LAWFUL REVENUE DUE TO THE STATE HAS NOT BEEN REALISED OR CANNOT BE REALISED. IT CAN MEAN NOTHING ELSE'. THE AFORESAID OBSERVATIONS WERE ALSO APPLIED BY THE GUJARAT HIGH COURT IN ADDL. CIT V. MUKUR CORPORATION [1978] 111 ITR 312. WE ARE OF THE OPINION THAT THE AFORESAID INTERPRETATION GIVEN BY THE CALCUTTA HIGH COURT TO THE EXPRESSION 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' IS THE CORRECT INTERPRETATION. 14. WE, THEREFORE, HOLD THAT IN ORDER TO EXERCISE P OWER UNDER SUB-SECTION (1) OF SECTION 263 OF THE ACT THERE MUST BE MATERIAL BEFORE THE COMMISSIONER TO CONSIDER THAT THE ORDER PASSED BY THE INCOME-TAX OFFICER WAS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WE HAVE ALREADY HELD WHAT IS ERRONEOUS. IT MUST BE AN O RDER WHICH IS NOT IN ACCORDANCE WITH THE LAW OR WHICH HAS BEEN PASSED BY THE INCOME-TAX OFFICER W ITHOUT MAKING ANY ENQUIRY IN UNDUE HASTE. WE HAVE ALSO HELD AS TO WHAT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. AN ORDER CAN BE SAID TO BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IF I T IS NOT IN ACCORDANCE WITH THE LAW IN CONSEQUENCE WHEREOF THE LAWFUL REVENUE DUE TO THE STATE HAS NOT BEEN REALISED OR CANNOT BE REALISED. THERE MUST BE MATERIAL AVAILABLE ON THE RECORD CALLED FOR BY T HE COMMISSIONER TO SATISFY HIM PRIMA FACIE THAT THE AFORESAID TWO REQUISITES ARE PRESENT. IF NOT, H E HAS NO AUTHORITY TO INITIATE PROCEEDINGS FOR REVISION. EXERCISE OF POWER OF SUO MOTU REVISION UND ER SUCH CIRCUMSTANCES WILL AMOUNT TO ARBITRARY EXERCISE OF POWER. IT IS WELL-SETTLED THA T WHEN EXERCISE OF STATUTORY POWER IS DEPENDENT UPON THE EXISTENCE OF CERTAIN OBJECTIVE FACTS, THE AUTHORITY BEFORE EXERCISING SUCH POWER MUST HAVE MATERIALS ON RECORD TO SATISFY IT IN THAT REGARD. IF THE ACTION OF THE AUTHORITY IS CHALLENGED BEFORE THE COURT IT WOULD BE OPEN TO THE COURTS TO EXAMINE WHETHER THE RELEVANT OBJECTIVE FACTORS WERE AVAILABLE FROM THE RECORDS CALLED FOR AND EXAMINED BY SUCH AUTHORITY. OUR AFORESAID CONCLUSION GETS FULL SUPPORT FROM A DECISION OF SABYASACHI MUKH ARJI J. (AS HIS LORDSHIP THEN WAS) IN RUSSELL PROPERTIES PVT. LTD. V. A. CHOWDHURY, ADDL . CIT . IN OUR OPINION, ANY OTHER VIEW IN THE MATTER WILL AMOUNT TO GIVING UNBRIDLED AND ARBITRARY POWER TO TH E REVISING AUTHORITY TO INITIATE PROCEEDINGS FOR REVISION IN EVERY CASE AND START RE-EXAMINATION AND FRESH ENQUIRIES IN MATTERS WHICH HAVE ALREADY BEEN CONCLUDED UNDER THE LAW. AS ALREADY ST ATED IT IS A QUASI JUDICIAL POWER HEDGED IN WITH LIMITATION AND HAS TO BE EXERCISED SUBJECT TO T HE SAME AND WITHIN ITS SCOPE AND AMBIT. SO FAR AS CALLING FOR THE RECORDS AND EXAMINING THE SAME IS CONCERNED, UNDOUBTEDLY, IT IS AN ADMINISTRATIVE ACT, BUT ON EXAMINATION 'TO CONSIDER' OR IN OTHER WORDS, TO FORM AN OPINION THAT THE PARTICULAR ORDER IS ERRONEOUS IN SO TAR AS IT IS PR EJUDICIAL TO THE INTERESTS OF THE REVENUE, IS A QUA SI- JUDICIAL ACT BECAUSE ON THIS CONSIDERATION OR OPINI ON THE WHOLE MACHINERY OF RE-EXAMINATION AND RECONSIDERATION OF AN ORDER OF ASSESSMENT, WHICH HAS ALREADY BEEN CONCLUDED AND CONTROVERSY WHICH HAS BEEN SET AT REST, IS SET AGAIN IN MOTION. IT IS AN IMPORTANT DECISION AND THE SAME CANNOT BE BASED ON THE WHIMS OR CAPRICE OF THE REVISING AUT HORITY. THERE MUST BE MATERIALS AVAILABLE FROM THE RECORDS CALLED FOR BY THE COMMISSIONER. 15. WE MAY NOW EXAMINE THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE POWERS OF THE COMMISSIONER SET OUT ABOVE. THE INCOME-TAX OFFICER IN THIS CASE HAD MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSES SEE. THE ASSESSEE HAD GIVEN DETAILED EXPLANATION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE AR E PART OF THE RECORD OF THE CASE. EVIDENTLY, THE CLAIM WAS ALLOWED BY THE INCOME-TAX OFFICER ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. SUCH DECISION OF THE INCOME-TAX OFFICER CA NNOT BE HELD TO BE 'ERRONEOUS' SIMPLY BECAUSE 9 ITA NO. 1013/KOL/2013 RUCHI BAKERS (P) LTD., AY 2008-09 IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSIO N IN THAT REGARD. MOREOVER, IN THE INSTANT CASE, THE COMMISSIONER HIMSELF, EVEN AFTER INITIATING PROCEE DINGS FOR REVISION AND HEARING THE ASSESSEE, COULD NOT SAY THAT THE ALLOWANCE OF THE CLAIM OF THE ASSESSEE WAS ERRONEOUS AND THAT THE EXPENDITURE WAS NOT REVENUE EXPENDITURE BUT AN EXPE NDITURE OF CAPITAL NATURE. HE SIMPLY ASKED THE INCOME-TAX OFFICER TO RE-EXAMINE THE MATTER. THAT , IN OUR OPINION, IS NOT PERMISSIBLE. FURTHER INQUIRY AND/OR FRESH DETERMINATION CAN BE DIRECTED BY THE COMMISSIONER ONLY AFTER COMING TO THE CONCLUSION THAT THE EARLIER FINDING OF THE INCOME-TA X OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. WITHOUT DOING SO, HE DOES NOT GET THE POWER TO SET ASIDE THE ASSESSMENT. IN THE INSTANT CASE, THE COMMISSIONER DID SO AND IT I S FOR THAT REASON THAT THE TRIBUNAL DID NOT APPROVE HIS ACTION AND SET ASIDE HIS ORDER. WE DO N OT FIND ANY INFIRMITY IN THE ABOVE CONCLUSION OF THE TRIBUNAL. 16. IN THE LIGHT OF THE FOREGOING DISCUSSION, WE AN SWER THE QUESTION REFERRED TO US IN THE AFFIRMATIVE, THAT IS, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 8.1. WE FIND THAT THE LD AO HAD TREATED A SUM OF R S. 7,75,963/- AS UNRECORDED SALES WHILE COMPLETING THE ASSESSMENT. WE FIND THAT HE HAD NO T FOUND ANY DISCREPANCIES IN THE BOOKS OF ACCOUNTS PRODUCED BEFORE HIM. IT IS NOT IN DISP UTE THAT THE SURVEY TEAM ALSO DID NOT FIND ANY DISCREPANCIES IN THE BOOKS OF ACCOUNTS IN THE F ORM OF UNDISCLOSED SALES OR UNDISCLOSED PURCHASES OR ANY OTHER INCRIMINATING MATERIALS IN T HE FORM OF UNDISCLOSED INCOME OR ASSETS ETC. THE ASSESSEE HAD DISCLOSED GROSS PROFIT OF 18 .94% AS COULD BE EVIDENT FROM THE TAX AUDIT REPORT FOR THE YEAR UNDER APPEAL. WE FIND THAT THE DIFFERENCE OF RS. 7,75,963/- IN THE CLOSING STOCK VALUATION MADE BY THE LD AO BY ADOPTI NG A BALANCING FIGURE WAS ONLY A HYPOTHETICAL FIGURE WHICH HAD LEAD TO A CONCLUSION THAT THE SAME REPRESENTS ALLEGED UNRECONCILED SALES MADE BY THE ASSESSEE. THE PURCH ASES, SALES AND MANUFACTURING EXPENSES DISCLOSED BY THE ASSESSEE ARE NOT DISTURBED BY THE REVENUE. HENCE IT COULD BE SAFELY CONCLUDED THAT THE ALLEGED UNRECONCILED SALES COULD HAVE EMANATED ONLY OUT OF ALLEGED UNDISCLOSED PURCHASES. IN SUCH AN EVENT, THE ONLY RECOURSE TO TAX THE INCOME IS BY APPLYING THE GROSS PROFIT PERCENTAGE THEREON, WHICH IS WHAT HAS BEEN ULTIMATELY DONE BY THE LD AO IN THE ASSESSMENT BY MAKING AN ADDITION OF RS. 89,779/ - . HENCE THE ORDER PASSED BY THE LD AO CANNOT BE CONSIDERED AS ERRONEOUS IN NATURE AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN FACT THE ORDER IN THE GIVEN SET OF FAC TS AND CIRCUMSTANCES COULD ONLY BE VIEWED AS PREJUDICIAL TO THE INTERESTS OF THE ASSESSEE AND NOT FOR THE REVENUE. 8.2. IN ANY CASE, WE ARE IN COMPLETE AGREEMENT WIT H THE ARGUMENTS ADVANCED BY THE LD AR THAT THE PROFIT FOR THE WHOLE YEAR HAS TO BE DETERM INED BY THE LD AO AND BY THE LD CIT. WE 10 ITA NO. 1013/KOL/2013 RUCHI BAKERS (P) LTD., AY 2008-09 FIND THAT THE LD AO HAD ONLY ARRIVED AT AN ARITHMET ICAL FIGURE OF CLOSING STOCK AS ON 25.1.2008 AS A BALANCING FIGURE AT RS. 15,08,380/-. IT IS PERTINENT TO NOTE THAT THE SAID FIGURE WOULD AUTOMATICALLY BECOME THE OPENING STOCK AS ON 26.1.2008 THEREBY MAKING IT REVENUE NEUTRAL. ULTIMATELY NO DISCREPANCIES WERE NOTICED BY THE LD AO AND BY THE LD CIT IN THE FINAL AUDITED ACCOUNTS OF THE ASSESSEE AND THE BOOK S OF ACCOUNTS PRODUCED BY THE ASSESSEE FROM WHERE THE PROFITS OF THE ASSESSEE COULD BE REA SONABLY DEDUCED THEREFROM. THE BOOKS OF ACCOUNTS AND THE AUDITED FIGURES OF THE ASSESSEE WERE NOT REJECTED BY THE LD AO OR BY THE LD CIT. UNDER THESE CIRCUMSTANCES, THE ORDER PASS ED BY THE LD AO CANNOT BE CONSTRUED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 8.3. IT IS WELL SETTLED THAT THE CONDITION PRECEDE NT FOR INVOKING REVISIONARY JURISDICTION IS THAT THE TWIN CONDITIONS, I.E (I) ORDER SHOULD BE E RRONEOUS AND (II) IT SHOULD BE PREJUDICIAL TO THE INTEREST OF REVENUE, SHOULD BE CUMULATIVELY SAT ISFIED. IF, EITHER ONE OF THEM IS ABSENT, THEN REVISIONARY JURISDICTION U/S 263 OF THE ACT FA ILS. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF MALABAR INDUSTRIE S CO LTD VS CIT REPORTED IN 243 ITR 83 (SC) . 8.4. WE ALSO FIND THAT THE ASPECT OF THIS CLOSING STOCK VALUATION HAS BEEN THE SUBJECT MATTER OF VERIFICATION BOTH BY THE SURVEY TEAM AND BY THE LD AO IN THE ASSESSMENT PROCEEDINGS AND HENCE THE SAME CANNOT BE CONSTRUED AS LACK OF ENQUI RY. WE HOLD THAT THIS ISSUE HAVING BEEN EXTENSIVELY VERIFIED WOULD NOT FALL UNDER THE AMBIT OF LACK OF ENQUIRY BY THE LD AO AND HENCE THE SAME CANNOT BE REVISED U/S 263 OF THE ACT . WE WOULD LIKE TO PLACE RELIANCE ON THE FOLLOWING DECISIONS IN THIS REGARD:- (I) HONBLE ALLAHABAD HIGH COURT IN THE CASE OF PRINCIP AL CIT VS M/S ASHOK HANDLOOM FACTORY PVT LTD IN ITA NO. 19 OF 2016 DATED 28.1.20 16 HAD HELD AS UNDER:- IT IS SETTLED LAW THAT THE CIT CAN EXERCISE HIS JU RISDICTION UNDER SECTION 263 OF THE INCOME TAX ACT ONLY IN CASES WHERE NO ENQUIRY IS MA DE BY THE ASSESSING OFFICER. IN THE INSTANT CASE, IT IS ADMITTED BY THE INCOME TAX DEPARTMENT THAT THE ASSESSING 11 ITA NO. 1013/KOL/2013 RUCHI BAKERS (P) LTD., AY 2008-09 OFFICER HAS MADE SOME ENQUIRIES THOUGH ACCORDING TO THEM IT WAS NOT A PROPER ENQUIRY. IN OUR VIEW OF THE FACT THAT SOME ENQUIRY WAS MADE IS SUFFICIENT TO DEBAR THE AUTHORITIES FROM EXERCISING THE POWERS UNDER SECTIO N 263 OF THE INCOME TAX ACT. THE TRIBUNAL WAS ACCORDINGLY JUSTIFIED IN SETTING A SIDE THE ORDER PASSED UNDER SECTION 263 OF THE ACT. WE DO NOT FIND ANY SUBSTAN TIAL QUESTION OF LAW ARISING FOR CONSIDERATION. THE APPEAL IS ACCORDINGLY, DISMISSED. (II) HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS SUNB EAM AUTO LTD REPORTED IN (2009) 332 ITR 167 (DEL) , WHEREIN IT WAS CONCLUDED THAT THE LD AO HAVING MA DE ENQUIRIES, ELICITED REPLIES AND THEREAFTER ALLOWED THE EXPENDITURE ON T OOLS AND DYES AS REVENUE EXPENDITURE, IT CANNOT BE SAID THAT IT IS A CASE OF LACK OF ENQUIR Y AND , THEREFORE, THE ASSESSMENT ORDER PASSED BY THE AO ALLOWING DEDUCTION OF SAID EXPENDI TURE COULD NOT BE REVISED UNDER S.263 MORE SO, AS THE VIEW TAKEN BY THE AO WAS ONE OF THE POSSIBLE VIEWS AND THE CIT HIMSELF WAS NOT CLEAR AS TO WHETHER THE SAID EXPENDITURE IS TO BE TREATED AS CAPITAL OR REVENUE EXPENDITURE. 9. IN VIEW OF THE AFORESAID FINDINGS AND IN THE F ACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE VARIOUS JUDICIAL PRECEDE NTS RELIED UPON HEREINABOVE, WE HOLD THAT THE ORDER PASSED BY THE LD AO IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND HENCE, WE HAVE NO HESITATION IN QUASHI NG THE ORDER PASSED U/S 263 OF THE ACT. ACCORDINGLY THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 08.07.201 6 SD/- SD/- (S. S. VISWANETHRA RAVI) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTAN T MEMBER DATED : 8TH JULY, 2016 JD.(SR.P.S.) 12 ITA NO. 1013/KOL/2013 RUCHI BAKERS (P) LTD., AY 2008-09 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT RUCHI BAKERS (P) LTD., 23B, N. S. ROAD, 2 ND FLOOR, KOLKATA-700 001. 2 RESPONDENT CIT-II, KOLKATA. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .