Premium Polycot Pvt.Ltd., Ahmedabad V. The CIT.A'bad-III, Ahmedabad

ITA 1072/AHD/2011

• Counselvise Citation: 107220514 RSA 2011
• Duration Of Justice: 1 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-07-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 11-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B K S PANDYA
• Assessee Lawyers: SUNIL H TALATI
• Keywords: Business income
• Section: 143(3); 142(1); 6; 263; 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD B BENCH BEFORE: SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JU DICIAL MEMBER PREMIUM POLYCOT PVT. LTD AHMEDABAD (APPELLANT) PAN NO. AABCP1453A VS. COMMISSIONER OF INCOME TAX AHMEDABAD-III, AHMEDABAD (RESPONDENT) REVENUE BY : SHRI B.K.S PANDYA, SR. D.R. ASSESSEE BY : SRI SUNIL H. TALATI, A.R DATE OF HEARING : 05-07-2012 DATE OF PRONOUNCEMENT : 21-09-2012 / ORDER PER : KUL BHARAT, JUDICIAL MEMBER:- THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX AHMEDABAD-III DATED 17-0 3-2011 PASSED UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 (HERE INAFTER REFERRED TO AS THE ACT). THE ASSESSEE HAS RAISED THE FOLLOWING GR OUNDS OF APPEAL:- 1, THE LEARNED C.I.T. HAS ERRED IN PASSING ORDER U/S. 263 WITHOUT JURISDICTION AND APPROPRIATE POWERS AVAILABLE UNDER THE ACT. IT IS SUBMITTED THAT THE ORDER PASSED U/S. 263 IS BAD IN LAW, VOID AB INITIO AND THE SAME BE DELETED. I.T.A. NO 1072/AHD/2011 A.Y.:-2006-07 ITA NO. 1072/AHD/2011 A.Y. 2006-07 PAGE NO. PREMIUM POLYCOT PVT. LT. VS. CIT 2 2. WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THAT THE ORDER PASSED U/S. 263 OF THE IT. ACT IS NOT CORRECT ON FACTS AND IN LAW INASMUCH AS THE ORIGINAL ORDER PASSED U/S. 143(3} , THE SAID ORDER WAS NEITHER PREJUDICED TO THE INTEREST OF REVENUE NOR IT WAS ERRONEOUS. IT IS SUBMITTED THAT THE FINDING GIVEN BY THE LEARNED C.I.T. IS NOT CORRECT ON THE F ACTS AND FAR FROM TRUTH. IT BE SO HELD NOW. 3. WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTED THAT THE LEARNED C.I.T, HAS PASSED THE ORDER U/S. 263 SETTING ASIDE THE ORIGINAL ORDER PASSED AND DIRECTING THE ASSESSING OFFICER TO EXAMI NE THE ISSUE WITH REGARD TO THE FACT THAT THE FUNDS WERE ADVANCED TO A RELATED CONCERN AND THE TRANSACTION WAS HIT BY SECTIONS 2(22)(E) AND 40 A(2)(B) OF THE INCOME TAX ACT. IT IS SUBMITTED THAT SECTION 2(22)(E) APP LIES TO THE RECIPIENT COMPANY AND NOT TO THE LENDING COMPANY. THE ASSESSE E COMPANY HAS ADVANCED AND HAS LENT THE MONEY AND HAS NOT RECEIVE D THE MONEY. HENCE THERE IS NO QUESTION OF SECTION 2{22)(E) OF THE I, T. ACT. SIMILARLY, SO FAR AS SECTION 40A(2)(B) IS CONCERNED ALSO IT APPLIES WHER E ASSESSEE HAS INCURRED ANY EXPENDITURE OF WHICH PAYMENT HAS BEEN MADE TO A RELATED CONCERN. IN THIS CASE THE ASSESSEE HAS ADVANCED THE PAYMENT AND HAS RECEIVED THE INCOME AND THERE IS NO QUESTION OF APP LYING OR INVOKING SECTION 40(A(2)(B). THUS THE ENTIRE BASIS OF THE DI RECTION OF SETTING ASIDE THE ORDER IS ABSOLUTELY ON INCORRECT FACTS BASELESS AND ARE WITHOUT APPLICATION OF MIND. IT IS SUBMITTED THAT THE DIREC TIONS GIVEN BY THE LEARNED C.IT, TO THE ASSESSING OFFICER IS INCORRECT, ILLEGA L AND THE SAME BE CANCELLED AND THE ORDER PASSED U/S. 263 BE CANCELLE D. 4. THE LEARNED C.I.T, HAS GROSSLY ERRED IN MENTIONI NG THAT THE ASSESSEE'S CASE IS COVERED BY THE EXPLANATION TO SE CTION 73. IN FACT THIS IS INCORRECT AND ERRONEOUS FINDING. THE ASSESSEE IS NOT AT ALL COVERED BY THE EXPLANATION TO SECTION 73 FOR WHICH A DETAILED REPLY WITH EVIDENCES WAS FILED, WHICH HAS BEEN TOTALLY IGNORED AND BRUSHED A SIDE. IT IS SUBMITTED THAT THE DIRECTION GIVEN ON SUCH INCORRECT BASIS AN D FINDING NEEDS TO BE QUASHED AND SET ASIDE. ITA NO. 1072/AHD/2011 A.Y. 2006-07 PAGE NO. PREMIUM POLYCOT PVT. LT. VS. CIT 3 5. THE LEARNED C.I.T. HAS FURTHER GROSSLY ERRED IN INCORRECTLY MENTIONING THAT ASSESSEE HAS BEEN HIT BY PROVISIONS OF CIRCULAR NO.4 OF 2007 INASMUCH AS INCOME OF VERY FEW TRANSACTIONS OF PURCHASE AND SALE OF SHARES SHOULD BE TAXED AS BUSINESS INCOME AND NO T AS SHORT TERM CAPITAL GAINS. IT IS SUBMITTED THAT ON THE FACTS A ND CIRCUMSTANCES OF THE CASE THE ASSESSEE IS NOT AT ALL COVERED BY THE CBDT CIRCULAR, THIS ISSUE WAS EXAMINED IN LENGTH BY THE ASSESSING OFFICER AND INCOME IS CORRECTLY TAXED AS SHORT TERM CAPITAL GAIN. THE LEARNED C.IT .'S DIRECTION TO TREAT THE INCOME AS BUSINESS INCOME IS ERRONEOUS, ILLEGAL AND UNJUSTIFIED BOTH ON FACTS AND ON LAW AND THEREFORE, THE ORDER OF THE LEARNED C.I.T. DESERVES TO BE QUASHED AND SET ASIDE. 6. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT. HAS GROSSLY ERRED IN INITIATING PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE SUBMITTED THAT THE LEARNED C.I.T. HAS NOT COME TO A CONCLUSION AND HAS GIVEN INCORRECT DIRECTIONS, WHICH ARE NOT AT ALL BINDING AND APPLIC ABLE BASED ON THE FACTS OF THE STATEMENT OF TOTAL INCOME. IN ABSENCE OF ANY FI NDING BY THE ASSESSING AUTHORITIES, THE LEARNED C,IT HAS NO JURISDICTION T O INITIATE PENALTY PROCEEDINGS U/S. 271(1){C). IN VIEW OF THIS, DIRECT ION OF INITIATING PENALTY PROCEEDINGS MAY ALSO BE SET ASIDE. 7. THE ORDER PASSED BY THE LEARNED C.I.T. IS BAD IN LAW AND CONTRARY TO THE PROVISIONS OF LAW AND FACTS. IT IS SUBMITTED TH AT THE SAME BE HEFD SO NOW. 2. THE FACTS ARE THAT IN THIS CASE, THE ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFER TO AS T HE ACT) WAS FRAMED THEREBY THE CLAIM OF THE ASSESSEE OF SHORT TERM CAP ITAL GAIN WAS ACCEPTED BY THE A.O. SUBSEQUENTLY, THE COMMISSIONER OF INCOME TAX ON VERIFICATION OF RECORDS OBSERVED 2(A) THE ASSESSEE HAD ENGAGED IN THE BUSINESS OF TR ADING IN SHARES DURING THE YEAR AND HAD ENTERED INTO VARI OUS SHARE TRANSACTIONS, PURCHASING SHARES AND SELLING THEM-OFTEN WITHIN A V ERY SHORT PERIOD. ITA NO. 1072/AHD/2011 A.Y. 2006-07 PAGE NO. PREMIUM POLYCOT PVT. LT. VS. CIT 4 ADDITIONALLY, THE ASSESSEE HAD MISDECLARED PURCHASE OF SUCH SHARES AS INVESTMENTS. THE ASSESSEE HAD CLAIMED ALL KINDS OF EXPENSES RELATED TO SHARE TRADING THOUGH IT HAD OFFERED SUCH INCOME AS CAPIT AL GAINS. THE ASSESSING OFFICER FAILED TO CONSIDER CIRCULAR NO. 4 DATED 15-06-2007 AND TAX SUCH PROFITS AS BUSINESS INCOME INSTEAD OF S HORT TERM CAPITAL GAIN (B) IN SCHEDULE F TO THE BALANCE SHEET THE ASSES SEE HAD SHOWN ADVANCE TO PRAKASH CALANDER PVT. LTD. AS AN ADVANCE FOR PURCHA SE OF GOODS, WHILE IN THE AUDIT REPORT IS WAS CLASSIFIED AS AN INTEREST-F REE ADVANCE TO A RELATED COMPANY. FURTHER THE ASSESSEE HAD CLAIMED INTEREST PAYMENT OF RS. 2,09,9601/- TO REEMA BUSINESS SERVICES PVT. LTD. BU T NOT CHARGED INTEREST ON THE ADVANCE/LOAN AMOUNTING TO RS. 85,90,000/- OUTST ANDING IN THE NAME OF THE PRAKASH CALANDER PVT. LTD. IN VIEW OF ABOVE, T HE INTEREST PAYMENT WAS REQUIRED TO BE DISALLOWED AND ADDED TO THE TOTAL IN COME. HOWEVER, THE ASSESSING OFFICER FAILED TO DO SO . 3. THEREFORE, THE ASSESSMENT ORDER PASSED BY THE DC IT, CIRCLE-5, AHMEDABAD APPEARED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVNUE AND A NOTICE U/S. 263 WAS ISSUED TO THE ASSE SSEE ON 21-2-2011 ACCORDINGLY, A NOTICE U/S 263 OF THE ACT WAS ISSUED TO THE ASSESSEE IN RESPONSE THERETO, ASSESSEE MADE SUBMISSIONS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, LD. CIT SET ASIDE THE ASSESSMENT ORDER AND THE AO WAS DIRECTED TO EXAMINE THE ISSUE IN THE LIGHT O F THE GUIDELINES GIVEN IMPUGNED ORDER AND WORK OUT THE DISALLOWANCE. THE ASSESSEE FEELING AGGRIEVED BY THE ORDER OF LD. CIT HAS FILED THE PRE SENT APPEAL. ITA NO. 1072/AHD/2011 A.Y. 2006-07 PAGE NO. PREMIUM POLYCOT PVT. LT. VS. CIT 5 3. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ORDER UNDER SECTION 263 IS PASSED ON THE BASIS THAT THE ASSESSING OFFIC ER DID NOT VERIFY WHETHER SALE OF SHARE IS IN THE NATURE OF CAPITAL GAIN OR B USINESS INCOME, AND SECOND LY THAT THE ASSESSING OFFICER DID NOT DISALLOW THE INTEREST EXPENDITURE THAT THE ASSESSEE HAD ADVANCED RS. 85,90,000/- TO M/S PRAKA SH CALENDER PVT LTD, WITHOUT CHARGING INTEREST. HE SUBMITTED THAT SO FA R FIRST POINT IS CONCERNED, HE DREW OUR ATTENTION TO THE NOTICE ISSUED BY THE A SSESSING OFFICER AND ENCLOSED AT BOOK PAGE NO. 1 AND 2 AND REPLY FILED B Y THE ASSESSEE ON PAGE 3 AND 4 OF THE PAPER BOOK WHEREIN THE COMPLETE DETAIL S OF INVESTMENT AND SALES OF SHARES WERE FILED. IT IS SUBMITTED BY THE LD CO UNSEL THAT THE ASSESSING OFFICER HAD VERIFIED RETURN OF INCOME AND DETAILS O F SHORT TERM CAPITAL GAIN, THE DETAILS WERE DULY FILED BY THE ASSESSEE ALONG W ITH RETURN OF INCOME AND AFTER DETAILED VERIFICATION, THE ASSESSING OFFICER TAXED THE SAME AS SHORT TERM CAPITAL GAIN, HE DREW OUR ATTENTION TO PAGE 19 AND 24 OF THE PAPER BOOK IN SUPPORT OF THIS CONTENTION. HE SUBMITTED THAT THE ASSESSING OFFICER WAS SATISFIED THAT THE ASSESSEE HAD HELD THE SHARES AS INVESTMENT AND SALES OF SHARES AS SHORT TERM CAPITAL GAIN AND THE ASSESSEE WAS NOT INVOLVED IN BUYING OR SELLING OR TRADING IN SHARES. THEREFORE, THERE WAS NO ERROR ON THE PART OF THE ASSESSING OFFICER IN TAXING THE SAME ACCORDINGL Y AND THEREFORE, THE ORDER IS NOT PREJUDICIAL TO THE INTEREST OF REVENUE. 3.1 WITH REGARD TO SECOND POINT, THE LD. A.R. DREW OUR ATTENTION ON PAGE 12 AND 13 OF THE PAPER BOOK WHERE COMPLETE DETAILS WERE FILED AND ON PAGE 14 WHEREIN PROOFS WERE FILED BEFORE THE ASSESSING O FFICER SHOWING THAT INTEREST FREE ADVANCES WERE GIVEN FOR SHORT PERIOD FROM ITS OWN FUNDS. THUS, THIS ASPECT WAS ALSO FULLY VERIFIED BY THE AS SESSING OFFICER AS HE HAS CLEARLY ASKED THE SAME IN HIS NOTICE. HE SUBMITTED THAT IN PURSUANCE OF ORDER ITA NO. 1072/AHD/2011 A.Y. 2006-07 PAGE NO. PREMIUM POLYCOT PVT. LT. VS. CIT 6 UNDER SECTION 263, THE ASSESSING OFFICER HAS PASSED ORDER UNDER SECTION 143(3) READ WITH SECTION 263 WITHOUT CONSIDERING AN D APPRECIATING THE DETAILS AND JUST FOLLOWED THE DIRECTION OF THE LD. CIT BY TAXING THE SHORT TERM CAPITAL GAIN AT RS. 56,56,620/- AS BUSINESS IN COME. SIMILARLY, WITHOUT DISCUSSING ANYTHING ABOUT EVIDENCES FILED WITH REGA RD TO INTEREST FREE FUNDS AVAILABLE WITH THE COMPANY, THE ASSESSING OFFICER D ISALLOWED INTEREST OF RS. 2,09,961/- WHICH WERE FOR THE PURPOSE OF BUSINES S BY WAY OF BROKERAGE AND OTHER INCOME OF RS. 6.5 LAKH AND IN ANY EVENT L ESSER THAN LAST YEAR WHEN THERE WAS NO SUCH CAPITAL GAIN. HE SUBMITTED THAT T HE ASSESSING OFFICER HAS FOLLOWED MECHANICALLY THE DIRECTION OF THE COMMISSI ONER OF INCOME TAX WITHOUT EXAMINING THE ISSUES, IN RIGHT PERSPECTIVE. HE SUBMITTED THAT THE ASSESSING OFFICER HAD VERIFIED AND APPLIED HIS MIND IN ORIGINAL ASSESSMENT SAME CANNOT BE TERMED TO BE ERRONEOUS. HE SUBMITTE D THAT THE CASE COULD BE INSUFFICIENCY OF INQUIRY BUT NOT LACK OF INQUIRY. HE SUBMITTED THAT FOR WANT OF INSUFFICIENCY OF INQUIRY THE PROVISION OF SECTIO N 263 CANNOT BE INVOKED, IN SUPPORT OF THIS CONTENTION HE RELIED ON THE DECISIO N OF THE HONBLE ITAT JAIPUR BENCH IN THE CASE OF KAMAL KUMAR GUPTA VS. C IT PASSED IN ITA NO. 39/JP/2001. HE SUBMITTED THAT THE ASSESSING OFFICE R MADE A BRIEF ORDER AND IN THE ABSENCE OF DISCREPANCIES IN ORDER CANNOT BE CONSTRUED THAT THE ASSESSING OFFICER FAILED TO APPLY HIS MIND ON THE I SSUES. HE RELIED UPON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF COMMISSIONER OF INCOME TAX VS. GABRIEL INDIA 203 ITR 108(BOMBAY). HE SUBMITTED THAT THE ASSESSING OFFICER RAISED MANY QUERIES IN RESPECT OF THE ISSUES IN DISPUTE AND APPLIED HIS MIND TO THE REPLY MADE BY THE ASSESSEE TO HIS SATISFACTION THAN IT DOES NOT REACH TO A CONCLUSION THAT ORDER OF THE AS SESSING OFFICER NEEDS TO BE INTERFERED BY WAY OF REVISION UNDER SECTION 263. IN SUPPORT OF THIS CONTENTION HE RELIED UPON THE DECISION OF DELHI HIG H COURT RENDERED IN THE ITA NO. 1072/AHD/2011 A.Y. 2006-07 PAGE NO. PREMIUM POLYCOT PVT. LT. VS. CIT 7 CASE OF COMMISSIONER OF INCOME TAX VS. VIKAS POLYME RS (2010) 236 CTR (DEL) 476. HE SUBMITTED THAT THE ASSESSING OFFICER MADE DETAILED INQUIRY AS IS EVIDENT FROM THE NOTICE ISSUED UNDER SECTION 142 WHEREIN PARA 7, HE ASKED TO FILE DETAILS OF LOAN AND ADVANCES AND IN THE SAME NOTICE HE INQUIRED ABOUT DETAILS OF G.P. THE ASSESSEE DULY MADE REPLY TO THIS QUERY. 3.2 FURTHER IT IS SUBMITTED THAT IT WAS DULY EXPLA INED TO THE ASSESSING OFFICER WITH REGARD TO INTEREST FREE ADVANCE TO M/S PRAKASH CALENDER THE ADVANCES ARE GIVEN OUT OF INTEREST FREE FUNDS AND AS PER DECISION OF THE BOARD LOOKING AT BIGGER BUSINESS OPPORTUNITY AVAILA BLE FROM THEM. THE SOURCE OF MONEY FROM WHICH ADVANCES WERE GIVEN WAS ALSO EXPLAINED TO THE ASSESSING OFFICER AND INTEREST PAID ON FUNDS BORRO WED FROM REEMA BUSINESS HAD NO NEXUS WITH THE ADVANCED TO PRAKASH CALENDER, THE TERM OF LENDING WERE ALSO VERY SHORT DURATION. IT IS EVIDE NT FROM ALL THE FACTS NARRATED THAT THE ASSESSING OFFICER APPLIED HIS MIN D AND DULY ENQUIRED THE MATTER. HE SUBMITTED THAT THE PROVISION OF SECTION 73 IS NOT ATTRACTED TO THE CASE OF THE ASSESSEE. HE SUBMITTED THAT ON PERUSAL OF EVIDENCE IT CAN BE SEEN THAT ALL THE INCOME OF THE ASSESSEE IS SUCH THAT WH ICH IS ASSESSABLE FROM INCOME FROM OTHER SOURCE OR CAPITAL GAIN. THE ASSE SSEE HAD LOAN AND ADVANCES TOTALLING TO RS. 97.07 LACS AGAINST OWN FU NDS OF RS. 94.35 LACS. INVESTMENT IN SHARES AND MUTUAL FUNDS ARE SHOWN AS INVESTMENT AT COST IN BALANCE SHEET AS WELL AS NOTES TO ACCOUNTS. INVEST MENT IN SHARES AND MUTUAL FUNDS WAS ACCORDED BY THE RESOLUTION PASSED BY BOAR D. THIS UNDOUBTEDLY PROVES THAT THE BUSINESS OF THE ASSESSEE IS GRANTIN G OF LOANS AND ADVANCES AND INVESTMENT IN SHARES AND MUTUAL FUND. HE IN SUP PORT OF THIS CONTENTION RELIED UPON THE DECISION OF HONBLE CO-ORDINATE BEN CH IN THE CASE OF AYOJAN INVESTMENT PVT LTD VS. ASSISTANT COMMISSIONER OF IN COME TAX (2009) 22 ITA NO. 1072/AHD/2011 A.Y. 2006-07 PAGE NO. PREMIUM POLYCOT PVT. LT. VS. CIT 8 TTR 88, DECISION OF THE HONBLE ITAT MUMBAI SPECIAL BENCH IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX VS. CONCORD CO MMERCIAL PVT LTD (2005) 94 TTJ (MUMBAI) SB 913. HE RELIED UPON THE DECISION OF THE HONBLE SPECIAL BENCH IN THE CASE OF DEPUTY COMMISS IONER OF INCOME TAX VS.VENKATESWAR INVESTMENT AND FINANCE PVT LTD (2005 ) 92 TTJ (CAL) SB 1129 4. HE SUBMITTED THAT FOR RESORTING TO THE PROVISION OF SECTION 263 CAN BE HAD WHEN AN ORDER OF ASSESSING OFFICER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE REVENUE. EVEN IN ANY OF THE TWO CONDITIONS IS ABSENT THE PROCEEDINGS UNDER SECTION 263 BECAME ILLEGAL AND VOID, IN SUPP ORT OF THIS CONTENTION, HE RELIED ON THE DECISION OF THE MALABAR INDUSTRIAL CO MPANY PVT LIMIT VS. COMMISSIONER OF INCOME TAX 243 ITR 83 (S.C.). ON T HE CONTRARY, CIT(D.R) STRONGLY SUPPORTED THE ORDER OF THE LD. C IT. HE SUBMITTED THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. HE SUBMITTED THAT THE ASSESSI NG OFFICER FAILED TO EXAMINE THE ISSUE IN THE LIGHT OF THE CIRCULAR NO. 4 DATED 15-06-2007 AS WELL AS TO EXAMINE WHETHER THE INTEREST FREE ADVANCES WE RE GIVEN TO A RELATED CONCERN AND ALSO WHETHER BORROWED FUNDS WERE UTILIZ ED FOR ADVANCING THE LOAN. 5. WE HAVE HEARD RIVAL SUBMISSIONS PERUSED THE MATE RIAL AVAILABLE ON RECORD AND THE JUDGMENTS CITED. WE FIND THAT THE L D. CIT INVOKED THE PROVISION OF SECTION 263 ON THE BASIS THAT THE ASSE SSEE HAD ENGAGED IN BUSINESS, TRADE IN SHARES DURING THE YEAR AND HAD E NTERED IN VARIOUS SHARES TRANSACTIONS PURCHASING SHARES AND SELLING THEM OFT EN WITHIN A SHORT PERIOD. THE ASSESSEE HAD CLAIMED ALL KINDS OF EXPENSES RELA TED TO SHARES TRADING ITA NO. 1072/AHD/2011 A.Y. 2006-07 PAGE NO. PREMIUM POLYCOT PVT. LT. VS. CIT 9 THOUGH IT HAD OFFERED SUCH INCOME AS CAPITAL GAINS. THE ASSESSING OFFICER FAILED TO CONSIDER CIRCULAR NO. 4 DATED 15-06-2007 AND THE ASSESSING OFFICER FAILED TO TAKE NOTE OF THAT FACT THAT IN SCHEDULE F TO THE BALANCE SHEET THE ASSESSEE HAD SHOWN ADVANCE TO PRAKASH CALENDER PVT LTD AS ADVANCE FOR PURCHASE OF GOODS WHILE IN THE AUDIT REPORT IT WAS CLASSIFIED AS AN INTEREST FREE ADVANCE TO A RELATED COMPANY. 5.1 FURTHER, THE ASSESSEE HAD CLAIMED INTEREST PAY MENT AT RS. 2,09,961/- TO REEMA BUSINESS SERVICES PVT LTD BUT NOT CHARGED INTEREST ON THE ADVANCE LOAN AMOUNTING TO RS. 85,90,000/- OUTSTAND ING IN THE NAME OF PRAKASH CALENDER PVT LTD. THE CONTENTION OF THE L EARNED COUNSEL FOR THE ASSESSEE IS THAT IN THE NOTICE ISSUED UNDER SECTION 142(1) DATED 01-05-2008, THE AO HAD MADE INQUIRIES WITH REGARD TO ISSUES WHI CH HAVE BEEN MADE BASIS FOR INVOKING THE PROVISION OF SECTION 263 OF THE ACT. IT IS NOT DISPUTED BY THE REVENUE THAT THE QUERY WAS RAISED VIDE NOTIC E UNDER SECTION 142(1) DATED 01-05-2008 AND IN RESPONSE TO THE NOTICE THE ASSESSEE HAD FILED REPLY TO ALL THE QUERIES. THE REPLY OF THE ASSESSEE WAS CONSIDERED BY THE ASSESSING OFFICER HOWEVER NO DETAILED DISCUSSION IS MADE. WE FIND FORCE INTO THE CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE THA T IT CAN BE AT THE UTMOST A CASE OF THE INSUFFICIENCY OF INQUIRY NOT LACK OF IN QUIRY. THE CONTENTION OF THE REVENUE THAT THE ASSESSING OFFICER HAS NOT DISC USSED ALL THE ISSUES IN DETAIL IS CONTRARY TO RECORDS AS IS EVIDENT FROM TH E NOTICE DATED 01-05-2008 ISSUED U/S 142(I) OF THE ACT, THE AO HAD IN FACT CA LLED UPON THE ASSESSEE TO EXPLAIN AND FURNISH THE DETAILS. ON THE CONTRARY, THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT NOT MAKING OF DETA ILED ORDER WOULD NOT RENDER SAME AS ERRONEOUS AND PREJUDICIAL TO THE INT EREST OF REVENUE. THE RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME TAX VS. GABRIEL INDIA LTD ITA NO. 1072/AHD/2011 A.Y. 2006-07 PAGE NO. PREMIUM POLYCOT PVT. LT. VS. CIT 10 (SUPRA), WHEREIN IT HAS BEEN HELD IN NEGATIVE THE Q UESTION WHETHER A OS ORDER COULD BE HELD TO BE ERRONEOUS SIMPLY BECAUSE HE DID NOT MAKE ANY ELABORATE DISCUSSION. AFTER HAVING CONSIDERED THE ALL ASPECTS OF THE MATTER WE ARE OF THE CONSIDERED VIEW THAT THE PROCEEDINGS UNDER SECTION 263 AS INITIATED BY THE COMMISSIONER OF INCOME TAX CANNOT BE UPHELD IN VIEW OF THE RATIO LAID IN THE JUDICIAL PRONOUNCEMENTS AS RE LIED BY THE LEARNED COUNSEL FOR THE ASSESSEE. IN THIS VIEW OF THE MATTER THIS GROUND OF THE ASSESSEES APPEAL IS ALLOWED. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K. GARODIA) (KUL BHARAT) ACCOUNTANT MEMBER JUDIC IAL MEMBER AHMEDABAD : DATED 21 / 09 /2012 A.K. / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '# *