M/s Vinayaka Agencies, Hyderabad V. ITO,Ward-1, Kothagudem

ITA 1080/HYD/2014

• Counselvise Citation: 108022514 RSA 2014
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-06-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 30-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S NARASAMMA
• Assessee Lawyers: M CHANDRAMOULESWARA RAO
• Keywords: Depreciation; Opportunity of being heard
• Section: 263; 63; 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC) : HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER ITA.NO.1080/HYD/2014 ASSESSMENT YEAR 2009-2010 M/S. VINAYAKA AGENCIES, YELLANDU, KHAMMAM DISTRICT. PAN AABFV0887H VS. THE INCOME TAX OFFICER WARD-1 KOTHAGUDEM (APPELLANT) (RESPONDENT) FOR ASSESSEE : MR. M. CHANDRAMOULESWARA RAO FOR REVENUE : SMT. S. NARASAMMA DATE OF HEARING : 14.08.2015 DATE OF PRONOUNCEMENT : 04 .0 9 .2015 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT, VIJAYAWADA DATED 28.03.2014 PASSED UNDER SECTION 263 OF THE I.T. ACT , 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL WHO IS ENGAGED IN THE BUSINESS OF DEALIN G IN NIRMA PRODUCTS UNDER THE NAME AND STYLE OF HIS PROPRIETARY CONCERN M/S. VINAYAKA AGENCIES. THE RET URN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILE D BY HIM ON 27.09.2009 DECLARING TOTAL INCOME OF RS.41,1 70. IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3) VI DE ORDER DATED 28.04.2011, THE TOTAL INCOME OF THE ASS ESSEE WAS DETERMINED BY THE A.O. AT RS.1,67,846 AFTER MAK ING 2 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. ADDITION OF RS.1,26,136 ON ACCOUNT OF DISALLOWANCE OF EXPENSES CLAIMED BY THE ASSESSEE TO THE EXTENT OF 2 0%. THE RECORD OF THE SAID ASSESSMENT CAME TO BE EXAMIN ED BY THE LD. CIT AND ON SUCH EXAMINATION, HE WAS OF T HE OPINION THAT THE ASSESSMENT ORDER PASSED BY THE A.O . WITHOUT MAKING ENQUIRIES ON VARIOUS ISSUES WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE. HE THEREFORE, ISSUED A NOTICE UNDER SECTIO N 263 POINTING OUT SUCH ISSUES AND REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ASSESSMENT ORDER PASSED BY THE A.O. UNDER SECTION 143(3) SHOULD NOT BE REVISED BY EXERCISING THE POWERS CONFERRED UNDER SECTION 263. IN RESPONSE TO THE SAID NOTICE, A DETAILED REPLY WAS F ILED BY THE ASSESSEE OFFERING HIS EXPLANATION IN SUPPORT OF EACH AND EVERY ISSUE RAISED BY THE LD. CIT IN THE NOTICE ISSUED UNDER SECTION 263. THE SAID EXPLANATION OF THE ASSE SSEE, HOWEVER, WAS NOT FOUND ACCEPTABLE BY THE LD. CIT. ACCORDING TO HIM, VARIOUS ISSUES INVOLVED IN THE CA SE OF THE ASSESSEE AS POINTED OUT BY HIM IN THE NOTICE IS SUED UNDER SECTION 263 HAD NOT BEEN LOOKED INTO OR ENQUI RED BY THE A.O. WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) AND SUCH NON-CONSIDERATION OF THESE ISSUES MADE THE ASSESSMENT ORDER PASSED BY THE A.O. UNDER SECTION 143(3) ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. ACCORDINGLY, HE PASSED AN ORDER UNDER SECTION 263 SETTING ASIDE THE ORDER PASSED BY THE A.O. UNDER SECTION 143(3) WITH A DIRECTION TO THE A .O. TO RE-DO THE ASSESSMENT DENOVO ON THE ISSUES POINTED O UT BY 3 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. HIM IN ACCORDANCE WITH LAW, AFTER AFFORDING A REASO NABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AGGRIEV ED BY THE SAME, THE ASSESSEE HAS PREFERRED THIS APPEAL BE FORE THE TRIBUNAL. 3. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, TOOK US THROUGH THE IMPUGNED ORDER PASSED B Y THE LD. CIT UNDER SECTION 263 TO POINT OUT THAT A DETAI LED REPLY WAS FILED BY THE ASSESSEE OFFERING HIS EXPLAN ATION IN RESPECT OF EACH AND EVERY ISSUE RAISED BY THE LD. C IT IN THE NOTICE ISSUED UNDER SECTION 263. HE ALSO PREPAR ED AND FURNISHED A TABULAR STATEMENT GIVING THE DETAILS OF EXPLANATION OFFERED BY THE ASSESSEE IN RESPECT OF E ACH AND EVERY ISSUE RAISED BY THE LD. CIT IN THE NOTICE ISS UED UNDER SECTION 263 AS UNDER : ISSUES RAISED BY THE LD. CIT IN HIS SECTION 263 PROCEEDINGS. SUBMISSIONS AND EXPLANATIONS FURNISHED BY THE ASSESSEE. ISSUE NO.1 : AS PER THE BALANCE SHEET AS ON AS ON 31.03.2008, THE FIXED ASSETS ARE SHOWN AT RS.15,75,680/- AND DEPRECIATION ON THE PLANT & MACHINERY AT RS.49,252/- AND THE WDV WAS SHOWN AT RS.6,07,447/-. IN THE BALANCE SHEET AS ON 31.03.2009, THE OPENING WDV WAS SHOWN AT RS.6,07,447/-, FIXED ASSETS AT RS.12,75,680/- AS AGAINST THE CLOSING WDV OF ASSESSEES REPLY : THE ASSESSEE HAS FILED A FIXED ASSETS SCHEDULE AND DEPRECIATION STATEMENT AND ALSO THE TAX AUDIT REPORT ALONG WITH THE IT RETURN. FURTHER, THE ASSESSEE ALSO FURNISHED THE SAME DOCUMENTS BEFORE THE CIT AND CLARIFIED THAT, THE DETAILS OF FIXED ASSETS, OPENING AND CLOSING BALANCES, ADDITIONS TO AND DELETIONS THERE FROM ARE ALSO PART OF THE RECORDS AND SUBMITTED THAT, THERE IS 4 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. RS.2,61,330/- AND A SUM OF RS.3,00,000/- WAS DEDUCTED AS DELETIONS MADE TO THE FIXED ASSETS AND CLAIMED DEPRECIATION FOR RS.3,07,447/- AT RS.46,117/-. THE AO DID NOT CALL FOR THE RELEVANT DETAILS AND EXAMINED AND ACCEPTED THEM WITHOUT VERIFICATION'. NO ERROR IN THE ASSESSMENT ORDER NOR IN THE ACCOUNTS. IT WAS FURTHER I SUBMITTED THAT, THERE IS NO ERROR IN THE IT COMPUTATION OR IN THE IT RETURN. THE OPENING AND CLOSING BALANCES OF FIXED ASSETS FOR THE EARLIER YEARS IS AVAILABLE ON RECORDS. THE LD. CIT COULD NOT POINT OUT THE ERROR IN THE AMOUNT OF DEPRECIATION CLAIMED BY THE ASSESSEE. THE LD. CIT, WITHOUT POINTING OUT THE DETAILS OF THE ERROR AND THE PREJUDICE CAUSED TO THE REVENUE, HAS ERRONEOUSLY ORDERED REVISION OF ASSESSMENT ORDER ON THIS ISSUE. KINDLY REFER TO PAGE NOS.01 TO 02 OF THE PAPER BOOK. ISSUE NO.2: '6.1 AS PER P & L A/C, THE GROSS PROFIT FOR THE A.Y. 2008-09 IS AT RS.37,08,700/- ON A TURNOVER OF RS.3,16,47,667/- WHICH WORKS OUT TO 11.72%. WHEREAS THE GROSS PROFIT FOR THE A.Y. 2009-10 IS AT RS.36,54,504/- ON A TURNOVER OF RS.3,38,03,515/- (I.E., @ 10.80%). THE A.O. WITHOUT CALLING FOR THE REASONS FOR THE DECREASE IN THE GROSS PROFIT BY WAY OF DEBIT NOTES WORTH RS.3,31,974/- AND CREDIT ASSESSEE'S REPLY: THE ASSESSEE (APPELLANT) EXPLAINED TO THE LD. CIT THAT, THIS ISSUE HAS BEEN ENQUIRED INTO AND EXAMINED BY THE A.O. DURING THE ASSESSMENT PROCEEDINGS. THE ALLEGATION MADE BY THE LD. CIT THAT THE ISSUE OF 'DEBIT NOTES' FROM M/S. NIRMA LIMITED HAS NOT BEEN EXAMINED AND VERIFIED BY THE AO AND WITHOUT DUE EXAMINATION, ACCEPTED THE TRADE RESULTS, IS DEVOID OF ANY MERITS AND CONTRARY TO THE FACTS AVAILABLE ON RECORD. 5 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. NOTES OF RS.1,30,619/- AND DUE EXAMINATION, ACCEPTED THE TRADE RESULTS.' THE ASSESSEE FURNISHED BEFORE THE LD. CIT, THE COPIES OF THE DEBIT NOTES AND CREDIT NOTES AND ALSO COPY OF THE SUBMISSIONS MADE, BEFORE THE ASSESSING OFFICER, REGARDING THE MARGINAL FALL IN THE PROFITS AND ISSUE OF DEBIT NOTES BY M/S. NIRMA AS ONE OF THE REASONS FOR THE FALL IN THE PROFIT. THE ASSESSEE, FIRM IS A DISTRIBUTOR FOR THE 'NIRMA PRODUCTS', THE COPY OF THE SUBMISSIONS MADE IN THIS REGARD BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS IS PLACE, AT PAGE NO.105 1- 106 OF THE PAPER BOOK. THE LETTER SUBMITTED TO AO ALSO CONTAINED THE DETAILED REASONS FOR THE SLIGHT FALL IN THE PROFITS. ISSUES EXAMINED THOROUGHLY BY THE A.O. CANNOT BE SUBJECTED REVISION U/S.263. LOW PROFIT CANNOT BE THE REASON FOR ORDERING REVISION U/S.263. ISSUE NO.3: IN THE BALANCE SHEET AS ON 31/03/2008, THE UNSECURED LOAN CREDITORS WAS SHOWN AT RS.30,60,468/-, WHEREAS THE SAME HAS COME DOWN TO RS.8,66,093/- IN THE BALANCE SHEET FOR THE YEAR ENDING 31/03/2009. THE AO DID NOT CALL FOR AND EXAMINED THE RELEVANT ASSESSEE'S REPLY: THE ASSESSEE SUBMITTED BOTH BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS AND ALSO TO THE LD, CIT, DURING HIS SEC.263 PROCEEDINGS, THAT THE UNSECURED LOAN CREDITS TO THE EXTENT OF THE AMOUNT OUTSTANDING IN THE NAME OF 6 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. PAYMENT DETAILS AND THE SCOPE OF APPLICATION OF PROVISIONS OF SEC.269T TO SUCH PAYMENTS, IF ANY.' M/S. SYAM SUDAR RICE DEPOT, WHICH IS A PARTNERSHIP FIRM AND WHICH PARTNERS ARE ALSO PARTNERS IN THE PRESENT ASSESSEE FIRM, HAS BEEN TRANSFERRED BY WAY OF BOOK ENTRIES TO THE INDIVIDUAL CAPITAL ACCOUNTS OF THE PARTNERS ON THE DISSOLUTION OF THE PARTNERSHIP FIRM. FURTHER, IT WAS ALSO EXPLAINED TO BOTH THE AUTHORITIES THAT THE AMOUNTS OF UNSECURED LOAN HAS BEEN SET OFF AGAINST THE DEBIT BALANCES (LOAN AND ADVANCES) AVAILABLE IN THE PARTNERS INDIVIDUAL ACCOUNTS. IT WAS EXPLAIN TO THE AUTHORITIES THAT, THE REDUCTION IN THE AMOUNT OF UNSECURED LOANS IS DUE TO THE SET OFF OF THE SAME AGAINST THE LOANS AND ADVANCES AND SHOWN TO THEM THAT, THERE IS REDUCTION IN THE AMOUNTS OF UNSECURED LOANS AS WELL AS IN THE 'LOANS AND ADVANCES' ON BOTH THE SIDE OF THE BALANCE OF THE ASSESSEE FIRM. IT WAS ALSO SUBMITTED THAT, SINCE THE UNSECURED LOANS WAS TRANSFERRED BY WAY OF BOOK ENTRIES AND REPAYMENTS WERE NOT PAID IN CASH, THE QUESTION OF INVOKING OF SEC.269T DOES NOT ARISE. DOCUMENTARY EVIDENCES WERE FURNISHED TO THE AO AND ALSO TO THE CIT FOR THEIR PERUSAL AND RECORDS. THE LD. 7 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. CIT WITHOUT PAYING ANY ATTENTION TO THE SUBMISSIONS MADE, EXPLANATIONS OFFERED AND THE MATERIAL PRODUCED, HAS BRUSHED ASIDE AND THE SAME AND WITHOUT ASSIGNING ANY REASON ARE OFFERING ANY MATERIAL TO SUPPORT HIS POINT OF VIEW AND TREATED THE ASSESSMENT ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE RELEVANT DOCUMENTARY EVIDENCE IS FURNISHED AT PAGE NOS. 19-21 IN THE PAPER BOOK. ISSUE NO.4 : IN THE BALANCE SHEET AS ON 31.03.2009, SUNDRY CREDITOR IN THE NAME OF M/S. NIRMA LTD., AHMEDABAD AT RS.33,27,419/- WAS NOT RECONCILED WITH THE ASSESSEES ACCOUNT COPY IN THE BOOKS OF THE SAID CREDITOR. ASSESSEE'S REPLY: THE ASSESSEE HAS EXPLAINED TO THE LD. CIT THAT, THERE IS NO REQUIREMENT FOR PREPARING RECONCILIATION STATEMENT IN THE CASE OF M/S. NIRMA LIMITED, HAS THE ACCOUNT OF NIRMA IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE FIRM AND THE LEDGER ACCOUNT OF THE ASSESSEE FIRM IN THE BOOKS OF M/S. NIRMA LIMITED ARE SHOWING THE SAME FIGURE AND THERE IS NO DIFFERENCE BETWEEN THE TWO SETS OF ACCOUNTS. LEDGER EXTRACTS ARE FURNISHED TO THE LD. CIT WHO HAS BRUSHED ASIDE THE SAME WITHOUT ASSIGNING ANY REASONS AND TREATED THE ASSESSMENT ORDER AS ERRONEOUS ON THIS ISSUE. THE RELEVANT LEDGER EXTRACTS ARE PLACED IN THE PAPER BOOK FOR 8 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. YOUR HONOURS READY REFERENCE AT PAGE NO.05-18. THE ACCOUNT BALANCE IS RS.33,27,419.22/- DEBIT IN M/S. NIRMA LTD BOOKS OF ACCOUNTS AND THE SAME AMOUNT IS CREDIT IN THE LEDGER ACCOUNT OF M/S. NIRMA IN THE BOOKS OF THE ASSESSEE FIRM. ISSUE NO.5 : IN THE BALANCE SHEET AS ON 31.03.2008, THE SECURED LOANS WERE AT RS.14,75,676/- WHEREAS AS PER THE BALANCE AS ON 31.03.2009, THE SAME WERE AT RS.16,14,455/-. FURTHER, ON VERIFICATION OF THE DETAILS, A SUM OF RS.2,12,845/- WAS REPAID TO KOTAK MAHINDRA BANK LTD., VIJAYAWADA. THE A.O. DID NOT CALL AND OBTAINED THE RELEVANT DETAILS AND DID NOT EXAMINE THE SAME. ASSESSEES REPLY : THE ASSESSEE HAS EXPLAINED TO THE LD. CIT THAT, THE ISSUE OF SECURED LOANS HAS BEEN EXAMINED BY THE A.O. AND HAS CALLED FOR THE ACCOUNT COPIES OF THE BANKS AND VERIFIED THE SAME (PLEASE REFER TO PAGE NO.105-106 OF THE PAPER BOOK). THE ASSESSEE SUBMITTED THE FOLLOWING REPLY TO THE LD. CIT DURING 263 PROCEEDINGS. THE SECURED LOAN DUE TO KOTAK MAHINDRA BANK REPAID TO THE TUNE OF RS.2,12,845/- (RS.2,86,500 EMI-INTEREST RS.73,665) THROUGH ACCOUNT PAYEE CHEQUES DRAWN ON STATE BANK OF HYDERABAD. STATE BANK OF HYDERABAD ACCOUNT COPY AND KOTAK MAHINDRA LOAN ACCOUNT COPY HAVE BEEN DULY SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AO HAS VERIFIED THE SAME WITH THE 9 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. RELEVANT INFORMATION. NO DEFICIENCY IN THIS MATTER. HENCE, THE ORDER CANNOT BE CONSIDERED AS ERRONEOUS ON THIS POINT. THE LD. COMMISSIONER OF INCOME TAX SIMPLY BRUSHED ASIDE THE ABOVE FACTS AND EXPLANATION OFFERED BY THE ASSESSEE AND STATED THAT, THE ABOVE REPLY DID NOT COVERED THE DEFICIENCIES POINTED OUT IN THIS RESPECT. EXCEPT STATING THIS, HE HAS NOT BROUGHT OUT ANY DEFICIENCY/ERRORS WITH RESPECT TO THIS ISSUE EITHER IN THE SHOW CAUSE NOTICE OR IN THE SEC.263 ORDER. THE HON'BLE TRIBUNAL MAY KINDLY SEE THAT THE LD. COMMISSIONER OF INCOME TAX HAS NOT POINTED OUT ANY ERROR IN THE ASSESSMENT ORDER ON THIS ISSUE NOR COULD HE BRING OUT THE PREJUDICE CAUSED TO THE REVENUE DUE TO SUCH ERROR. ISSUE NO.6 : THE ASSESSEE HAS WITHDRAWN A SUM OF RS.17,10,000/- IN CASH ON VARIOUS DATES FROM ITS ACCOUNT WITH STATE BANK OF HYDERABAD. THE A.O. DID NOT CALLED FOR AND EXAMINED THE DETAILS AS TO ITS PURPOSE, THE APPLICABILITY OF PROVISIONS OF SECTION 14A TO SUCH ASSESSEES REPLY THE PROVISIONS OF SEC.14A ARE APPLICABLE WHEN THE EXPENDITURE INCURRED DOES NOT RELATE TO THE INCOME EARNED. WHEN THERE IS NO NEXUS BETWEEN INCOME EARNED AND EXPENDITURE INCURRED, THE PROVISIONS OF SEC.14A ARE APPLICABLE. SIMPLE WITHDRAWAL OF CASH 10 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. WITHDRAWALS. FURTHER, THE AO HAS ALSO NOT OBTAINED THE DETAILS AND EXAMINED THE RELEVANT DETAILS FOR CASH WITHDRAWAL OF RS.4,50,000/- BY WAY OF CASH OR YOURSELF ON VARIOUS DATES FROM THE ASSESSEE'S CURRENT ACCOUNT WITH AXIS BANK LTD., KHAMMAM. THROUGH SELF-CHEQUES OR OTHERWISE DOES NOT MEAN THAT THE PROVISIONS OF SEC.14A ARE APPLICABLE. THE AMOUNTS WITHDRAWN FROM BANK HAVE BEEN DULY CREDITED/RECORDED IN THE BOOKS OF ACCOUNTS. THE TOTAL BANK ENTRIES HAVE BEEN VERIFIED WITH BOOKS OF ACCOUNTS DURING THE ASSESSMENT PROCEEDINGS. THERE IS NO DEFICIENCY IN THIS ASPECT AND HENCE THE ORDER CANNOT BE CONSIDERED AS ERRONEOUS. THE FACTS STATED BY THE ASSESSEE HAVE NOT BEEN CONTROVERTER BY THE LD. COMMISSIONER OF INCOME TAX AND ORDERED REVISION OF THE ASSESSMENT ORDER ON SHEER SUSPICION AND SURMISE. HE COULD NOT PIN POINT THE ERROR EXCEPT STATING THAT, THE AO DID NOT CALL FOR AND EXAMINED THE REASONS FOR THE CASH WITHDRAWALS. HE COULD NOT EVEN STATE IN HIS REVISION ORDER THE EVENTS OF MISAPPROPRIATION OF CASH OR ERRONEOUS CLAIMS OF EXPENSES IN THE ACCOUNTS. ISSUE NO.7 : THE AO DID NOT CALL FOR AND EXAMINED THE DETAILS OF RENT PAID OF RS.L,20,000/- FOR SHOP & GODOWN AS TO WHETHER OR NOT SUCH ASSESSEES REPLY : THE ASSESSEE SUBMITTED BEFORE THE LD. CIT THAT, THE RENT OF RS.1,20,000/- IS THE AGGREGATE OF THE AMOUNT OF RENTS PAID TO MORE THAN 1 11 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. PAYMENT ATTRACTS THE PROVISIONS OF SEC.40(A)(IA) OF THE ACT. PERSON AND THEREFORE, PAYMENT OF RENT TO ANY INDIVIDUAL WAS LESS THAN RS.1,20,000/-. SINCE THE RENTAL AMOUNT IS LESS THAN RS.1,20,000/- PAID TO EACH INDIVIDUAL, THE PROVISIONS OF SEC.194I FOR TDS ARE NOT APPLICABLE. FURTHER, IT WAS ALSO SUBMITTED BEFORE THE LD. CIT THAT THE A.O. HAS EXAMINED THIS ISSUE AND FOUND THAT, THE PROVISIONS OF SEC.194-I ARE NOT APPLICABLE. THERE IS NO ERROR IN THE ASSESSMENT ORDER ON THIS ISSUE. THE LD. CIT COULD NOT CONTROVERT THIS FACT. HOWEVER, HE PASSED THE REVISION ORDER ON THIS ISSUE WITHOUT ANY MERIT IN HIS ARGUMENTS. HE HAS NOT EXAMINED THE FACTS AVAILABLE ON RECORD AND SIMPLY ISSUED ORDER U/S. 263 IN GROSS VIOLATION OF HIS AUTHORITY. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DETAILED REPLY FILED BY THE ASSESSEE TO TH E NOTICE ISSUED BY THE LD. CIT UNDER SECTION 263 OFFERING HI S EXPLANATION IN RESPECT OF EACH AND EVERY ISSUE WAS SUFFICIENT TO SHOW THAT PROPER AND SUFFICIENT ENQUI RY AND VERIFICATION WAS CONDUCTED BY THE A.O. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS AND AFTER HAVING SATISFIE D HIMSELF ON EXAMINATION OF THE BOOKS OF ACCOUNTS AND OTHER RECORD, THE ASSESSMENT WAS COMPLETED BY THE A .O. UNDER SECTION 143(3). HE SUBMITTED THAT THIS POSITI ON WAS 12 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. CLEARLY BROUGHT TO THE NOTICE OF THE LD. CIT BY THE ASSESSEE IN THE REPLY FILED TO THE NOTICE ISSUED UN DER SECTION 263 AND EVEN WHATEVER OBJECTIONS RAISED BY THE LD. CIT WERE ALSO MET BY CLARIFYING EACH AND EVERY POINT RAISED BY HIM. HE CONTENDED THAT THE LD. CIT HOWEVE R COMPLETELY IGNORED THE EXPLANATION OFFERED BY THE A SSESSEE AND REVISED THE ASSESSMENT MADE BY THE A.O. UNDER SECTION 143(3) BY EXERCISING THE POWERS CONFERRED U PON HIM UNDER SECTION 263 WITHOUT EVEN CONTROVERTING TH E FACTS AND FIGURES FURNISHED BY THE ASSESSEE IN HIS REPLY. HE CONTENDED THAT THE LD. CIT IN HIS IMPUGNED ORDER PASSED UNDER SECTION 263 HAS NOT POINTED OUT AS TO HOW THE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT ACCEPTABLE AND SIMPLY SET ASIDE THE ORDER PASSED BY THE A.O. UNDER SECTION 143(3) BY OBSERVING THAT THE SAM E WAS MADE WITHOUT ENQUIRING INTO CERTAIN ISSUES. HE CONT ENDED THAT THE SO-CALLED ERRORS POINTED OUT BY THE LD. CI T ARE NOTHING BUT ONLY THE WILD ALLEGATIONS AND THE SAME ARE PASSED ON SURMISES AND CONJECTURES. IN SUPPORT OF T HIS CONCLUSION, HE RELIED ON THE DECISION OF HONBLE DE LHI HIGH COURT IN THE CASE OF CIT VS. HINDUSTAN MARKETING AN D ADVERTISING CO. LTD., 341 ITR 180 WHEREIN IT WAS HE LD THAT THE INCOME TAX OFFICER HAVING MADE REASONABLY A DET AILED ENQUIRY, COLLECTED RELEVANT MATERIAL AND DISCUSSED VARIOUS FACTS OF THE CASE WITH THE ASSESSEES REPRESENTATIV E BEFORE MAKING THE ASSESSMENT, THERE WAS NO VALID BASIS FOR THE COMMISSIONER TO EXERCISE JURISDICTION UNDER SECTION 263 AND TO DIRECT THE A.O. TO MAKE FRESH ASSESSMENT BY GOING 13 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. DEEPER INTO THE MATTER. HE ALSO RELIED ON THE DECIS ION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SUN BEAM AUTO LTD., 332 ITR 167 (HC) (DEL.) AND THE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF JANARDH AN PRASAD ASHOK KUMAR VS. CIT 193 ITR 186 (HC) (ALL.) WHEREIN IT WAS HELD THAT THE ORDER PASSED BY THE LD . CIT UNDER SECTION 263 WITHOUT CONSIDERING THE RELEVANT MATERIAL AVAILABLE ON RECORD OR THOSE FURNISHED BY THE ASSESSEE COULD NOT BE SUSTAINED. 5. THE LEARNED D.R. ON THE OTHER HAND, STRONGLY RELIED ON THE IMPUGNED ORDER OF THE LD. CIT PASSED UNDER SECTION 263 IN SUPPORT OF REVENUES CASE THAT THE ASSESSMENT ORDER PASSED BY THE A.O. UNDER SECTION 2 63 BEING ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE AS POINTED OUT BY THE LD. CIT, THE SAME HAS BEEN RIGHTLY SET ASIDE/REVISED BY EXERCISING THE POWERS CONFERRED UNDER SECTION 263. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED FROM THE NOTICE ISSUED BY THE LD. CIT UNDE R SECTION 263 AND THE DETAILED REPLY FILED BY THE ASS ESSEE TO THE SAID NOTICE THAT MOST OF THE ISSUES RAISED BY T HE LD. CIT WERE NOT ONLY ENQUIRED BY THE A.O. BUT THE CLAI M OF THE ASSESSEE WAS ACCEPTED BY HIM BY APPLYING HIS MI ND TO THE RELEVANT FACTS OF THE CASE AS WELL AS THE MATER IAL PLACED ON RECORD. IN MY OPINION, THE ASSESSMENT ORD ER PASSED BY THE A.O. THEREFORE CANNOT BE HELD TO BE 14 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE ON THESE ISSUES AS ALLEGED BY THE LD. CIT IN HIS IM PUGNED ORDER PASSED UNDER SECTION 263. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SPECTRA SH ARES & SCRIPS P. LTD., VS. CIT 354 ITR 35, WHILE EXAMINING THE CITS POWER UNDER SECTION 263 OF THE ACT, HAS ANALY SED VARIOUS DECISIONS OF THE HONBLE SUPREME COURT AS W ELL AS DIFFERENT HIGH COURTS AND CULLED OUT THE PRINCIPLES FOR EXERCISING THE JURISDICTION UNDER SECTION 263 OF TH E ACT AS UNDER : (A) THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT - IF THE ORDER OF THE INCOME TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IT IS PREJUDICIAL TO THE REVENUE _ RECOURSE CANNOT BE HAD TO SECTION 263 (1) OF THE ACT. (B) EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR EXAMPLE, WHEN AN INCOME TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE: OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME TAX OFFICER IS UNSUSTAINABLE IN LAW. (C) TO INVOKE SUO MOTU REVISIONAL POWERS TO REOPEN A CONCLUDED ASSESSMENT UNDER SEC.263, THE COMMISSIONER MUST GIVE REASONS; THAT A BARE 15 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. REITERATION BY HIM THAT THE ORDER OF THE INCOME TAX OFFICER IS ERRONEOUS INSOFAR AS IT IS PREJUDICI AL TO THE INTERESTS OF THE REVENUE, WILL NOT SUFFICE; THAT THE REASONS MUST BE SUCH AS TO SHOW THAT THE ENHANCEMENT OR MODIFICATION OF THE ASSESSMENT OR CANCELLATION OF THE ASSESSMENT OR DIRECTIONS ISSUED FOR A FRESH ASSESSMENT WERE CALLED FOR, AND MUST IRRESISTIBLY LEAD TO THE CONCLUSION THAT THE ORDER OF THE INCOME TAX OFFICER WAS NOT ONLY ERRONEOUS BUT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THUS, WHILE THE INCOME TAX OFFICER IS NOT CALLED UPON TO WRITE AN ELABORATE JUDGMENT GIVING DETAILED REASONS IN RESPECT OF EACH AND EVERY DISALLOWANCE, DEDUCTION, ETC., IT IS INCUMBENT UPON THE COMMISSIONER NOT TO EXERCISE HIS SUO MOTU REVISIONAL POWERS UNLESS SUPPORTED BY ADEQUATE REASONS FOR DOING SO; THAT IF A QUERY IS RAISED DURING THE COURSE OF THE SCRUTINY BY THE ASSESSING OFFICER, WHICH WAS ANSWERED TO THE SATISFACTION OF THE ASSESSING OFFICER, BUT NEITHER THE QUERY NOR THE ANSWER WERE REFLECTED IN THE ASSESSMENT ORDER, THIS WOULD NOT BY ITSELF LEAD TO THE CONCLUSION THAT THE ORDER OF THE ASSESSING OFFICER CALLED FOR INTERFERENCE AND REVISION. (D) THE COMMISSIONER CANNOT INITIATE PROCEEDINGS WITH A VIEW TO START FISHING AND ROVING INQUIRIES I N MATTERS OR ORDERS WHICH ARE ALREADY CONCLUDED; THAT THE DEPARTMENT CANNOT BE PERMITTED TO BEGIN FRESH LITIGATION 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 CIRCUMSTANCE; THAT IF THIS IS PERMITTED, LITIGATION WOULD HAVE NO END EXCEPT WHEN LEGAL INGENUITY IS EXHAUSTED (E) WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION HAS TO BE SEEN; THAT IF THERE WAS AN INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION 16 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. TO THE COMMISSIONER TO PASS ORDERS UNDER SEC.263 MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER; THAT IT IS ONLY IN CASES OF LACK OF INQUIRY THAT SUCH A COURSE OF ACTION WOULD BE OPEN; THAT AN ASSESSMENT ORDER MADE BY THE INCOME TAX OFFICER CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY; THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT THE TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION, A LESSER TAX THAN WHAT WAS JUST, HAS BEEN IMPOSED. (F) THE POWER OF THE COMMISSIONER UNDER SEC.263 (1) IS NOT LIMITED ONLY TO THE MATERIAL WHICH WAS AVAILABLE BEFORE THE ASSESSING OFFICER AND, IN ORDER TO PROTECT THE INTERESTS OF THE REVENUE, THE COMMISSIONER IS ENTITLED TO EXAMINE ANY OTHER RECORDS WHICH ARE AVAILABLE AT THE TIME OF EXAMINATION BY HIM AND TO TAKE INTO CONSIDERATION EVEN THOSE EVENTS WHICH AROSE SUBSEQUENT TO THE ORDER OF ASSESSMENT. 6.1. IF THE AFORESAID PRINCIPLES ARE APPLIED TO TH E FACTS OF THE PRESENT CASE, I FIND THAT THE A.O. IN THE PRESENT CASE HAS NOT ONLY CONDUCTED ENQUIRY ON THE VARIOUS ISSUES POINTED OUT BY THE LD. CIT IN HIS IM PUGNED ORDER BUT HAS ALSO APPLIED HIS MIND TO THE INFORMAT ION AND EVIDENCE FURNISHED BY THE ASSESSEE. IN THESE CIRCUMSTANCES, I AM OF THE VIEW THAT THE ASSESSMENT ORDER PASSED BY HIM CANNOT BE HELD TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE ONLY BE CAUSE THE LD. CIT IS OF THE OPINION THAT SOME MORE ENQUIR Y SHOULD HAVE BEEN MADE BY THE A.O. THE POWER UNDER 17 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. SECTION 263 CANNOT BE EXTENDED TO HOLD AN ORDER PAS SED BY THE A.O. AS ERRONEOUS AND PREJUDICIAL TO THE INT ERESTS OF THE REVENUE DUE TO INADEQUACY OF ENQUIRY. AFTER HAVING PERUSED THE IMPUGNED ORDER OF THE LD. CIT IN THE LI GHT OF THE FACTS AND MATERIAL ON RECORD AND DETAILED SUBMI SSIONS MADE BY THE ASSESSEE, I FIND THAT THE DIRECTIONS OF THE LD. CIT ON VARIOUS ISSUES ARE IN THE NATURE OF STARTING ROVING AND FISHING ENQUIRY WHICH IS NOT PERMISSIBLE UNDER SECTION 263 AS HELD INTER ALIA BY THE HONBLE BOMBA Y HIGH COURT IN THE CASE OF CIT VS. GABRIEL INDIA LTD., 20 3 ITR 108. IN MY VIEW, THE LD. CIT HAS NO MATERIAL BEFORE HIM TO CONSIDER THE ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE ON THE ISSUES POINTED OUT BY HIM. A PERUSAL OF THE DISCUSSION MAD E BY HIM IN THIS REGARD SHOWS THAT HIS ACTIONS ARE MORE LIKE AN A.O. IN SESSION OF ASSESSMENT PROCEEDINGS RATHER TH AN REVISIONAL AUTHORITY EXERCISING POWER UNDER SECTION 263. IT IS SETTLED LAW THAT THE POWERS UNDER SECTION 263 AR E REQUIRED TO BE EXERCISED BY THE LD. CIT SPARINGLY A ND IN GENUINE CASES WHEN DUE TO ERROR COMMITTED BY THE A. O. THERE IS LOSS TO THE REVENUE. IF THERE IS NO EVIDEN CE WHICH COULD PRIMA FACIE DEMONSTRATE THAT ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE LD. CIT CANNOT REVISE THE SAME ON TRIVIAL OR NON-EXISTENT ISSUES MERELY ON TH E BASIS OF DOUBT AND SUSPICION. IT APPEARS FROM THE RECORD OF THE PRESENT CASE THAT THE ENQUIRIES ON THE RELEVANT ISS UES WERE MADE BY THE A.O. DURING THE COURSE OF ASSESSME NT 18 ITA.NO.1080/HYD/2014 M/S. VINAYAKA AGENCIES, YELLANDU KHAMMAM DISTRICT. PROCEEDINGS THOUGH THE SAME MIGHT NOT HAVE BEEN REFERRED TO IN THE ASSESSMENT ORDER. 7. FOR THE REASONS STATED ABOVE, I AM OF THE VIEW THAT THERE WERE NO ERRORS IN THE ORDER OF THE A.O. PASSED UNDER SECTION 143(3) AS ALLEGED BY THE LD. CIT CALL ING FOR ANY REVISION UNDER SECTION 263. IN THAT VIEW OF THE MATTER, I SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CI T UNDER SECTION 263 AND RESTORE THAT OF THE A.O. PASS ED UNDER SECTION 143(3). 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 04.09.2015. SD/- (P.M.JAGTAP) ACCOUNTANT MEMBER DATED 04 TH SEPTEMBER, 2015. VBP/- COPY TO 1. M/S. VINAYAKA AGENCIES, YELLANDU, KHAMMAM DISTRICT. C/O. M. CHANDRAMOULESWARA RAO, CHARTERED ACCOUNTNAT, C-3, SKYLARK APARTMENTS, BASHEERBAGH, HYDERABAD 29. 2. THE INCOME TAX OFFICER, WARD - 1, KOTHAGUDEM. 3. COMMISSIONER OF INCOME TAX, 1 ST FLOOR, SVR PLAZA, D.NO.40-6-15, REVENUE COLONY, SIDDHARTHA PUBLIC SCHOOL ROAD, MOGHALRAJPURAM, VIJAYAWADA520 010. 4. ADDL. CIT, KHAMMAM RANGE, KHAMMAM. 5. D.R. ITAT HYDERA BAD B (SMC) BENCH, HYDERABAD. 6. GUARD FILE