Shri Rajmal Kanwar, JAIPUR V. CIT-1, JODHPUR

ITA 142/JODH/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5439 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 17-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEENA CIT DHK
• Keywords: Revision of order; Charitable institution; Opportunity of being heard; Assessment record
• Section: 40A(3); 143(3); 133A; 133(6); 131; 263; 63

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA-@ ITA NO. 142/JU/15 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 SHRI RAJMAL KANWAR C/O B.D. GARGIEYA & CO., 537-538 5 TH FLOOR , MAHIMA TRINITY, NR. JYOTI RAO PHULE COLLEGE, NEW SANGNER ROAD, JAIPUR CUKE VS. THE COMMISSIONER OF INCOME TAX-I, JODHPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAVPK 9052 F VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MAHENDRA GARGIEYA (C.A.) JKTLO DH VKSJ LS@ REVENUE BY S HRI M.S. MEENA (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 10/02/2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 26/02/2016 VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT-I, JODHPUR DATED 27.03.2015 U/S 263 OF THE INCOME TAX ACT, 1 961 WHEREIN THE ASSESSEE HAS TAKEN FOLLOWING THREE GROUNDS OF APPEAL: (1) THE LD. PR. CIT-I, JODHPUR ERRED IN LAW AS WELL AS ON THE FACT OF THE CASE IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT H OLDING THE ASSESSMENT ORDER DATED 18.01.2013 TO BE ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE WHICH IS CONTRARY TO THE PROVISIONS OF LAW AND FACTS ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 2 THEREFORE, THE IMPUGNED ORDER U/S 263 OF THE ACT DA TED 27.03.2015 KINDLY BE QUASHED. (2) THE LD. PR. CIT-I, JODHPUR ERRED IN LAW AS WELL AS ON THE FACT OF THE CASE IN ASSUMING JURISDICTION U/S 263 OF THE ACT BY WRONGL Y AND INCORRECTLY HOLDING THAT THE SUBJECTED ASSESSMENT ORDER PASSED ON DATED 18.01.2013. WAS WITHOUT MAKING PROPER ENQUIRIES. S UCH FINDING AND THE ASSUMPTION OF JURISDICTION, BOTH ARE CONTRARY TO TH E PROVISIONS OF LAW AND FACTS ON RECORD. HENCE, THE PROCEEDINGS INITIATED U/S 263 OF THE ACT AND THE IMPUGNED ORDER DATED 27.03.2015 KINDLY BE QUASH ED. (3) THE LD. PR. CIT-I, JODHPUR ERRED IN LAW AS WELL AS ON THE FACT OF THE CASE IN SETTING ASIDE THE ASSESSMENT ORDER DATED 18.01.201 3, WITH REFERENCE TO ALL THE FOLLOWING ISSUES, MERELY ON SUSPICION, SU RMISE & CONJECTURES, AND IN WRONGLY ALLEGING LACK OF PROPER ENQUIRY AND NON -APPLICATION OF MIND BY THE AO WHICH IS NOTHING BUT A PRETENCE. THE SU BJECTED ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE NOR IT HAS BEEN SHOWN SO: (I) ALLEGED EXCESS CONSUMPTION OF COLOR AND CHEMICALS (II) OUTSTANDING LIABILITIES IN THE ACCOUNTS OF SUNDRY C REDITORS (III) VALUATION OF STOCK AND SALES MADE (IV) EXCESSIVE CLAIM MADE ON ACCOUNT OF PAYMENT OF INTER EST, WATER AND ELECTRICITY EXPENSES (V) REGARDING NON-COMPLIANCE OF TDS PROVISIONS BY THE A SSSSEE AS ALSO BY THE THIRD PARTIES. THE IMPUGNED ORDER THEREFORE, LACKS VALID JURISDICT ION U/S 263 OF THE ACT AND HENCE, THE IMPUGNED ORDER KINDLY BE QUASHED. 2. BEFORE CONSIDERING THE GROUNDS OF APPEAL, IT IS NOT ED THAT HONBLE PRESIDENT VIDE HIS ORDER DATED 15/9/2015 UNDER RULE 4 OF INCO ME TAX APPELLATE TRIBUNAL RULES, 1963 HAS DIRECTED THE SUBJECT APPEAL WHICH F ALLS IN THE ORIGINAL JURISDICTION OF ITAT, JODHPUR BENCH, JODHPUR TO BE HEARD AND DET ERMINED BY ITAT, JAIPUR BENCH, JAIPUR. ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 3 3. THE BRIEF FACTS FOR THE ISSUE UNDER CONSIDERATION: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF JOB WORK OF DYING OF CLOTH. DURING THE YEAR UNDER CONSIDERATION, A SURVEY U/S 133A WAS CONDUCTED AT THE BUSINESS PREMI SES OF THE ASSESSEE ON 28.09.2010 WHEREIN THE ASSESSEE SURRENDERED AN AMOU NT OF RS 65,04,000. SUBSEQUENTLY, HE FILED THE RETURN OF INCOME ON 30.0 9.2011 DECLARING AN INCOME OF RS. 68,47,450/- WHICH INCLUDES THE SURRENDERED AMOU NT OF RS 65,04,000. THE RETURN WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S 143(3) DETERMINING TOTAL INCOME AT RS 69,78,704 AFTER MAKI NG AN ADDITION OF RS. 55,214/- ON ACCOUNT OF INTEREST ON I.T. REFUND AND LUMP SUM ADDITION OF RS. 76,000/- FOR PROBABLE LEAKAGE IN TRADING ACCOUNT AND PERSONAL EL EMENT OF USE. 3.1 THEREAFTER, THE LD. PR. CIT-I, JODHPUR ISSUED A SHOW CAUSE NOTICE U/S 263 DATED 24.12.2013 WHEREIN THE FOLLOWING ISSUES WERE BROUGHT TO THE NOTICE OF THE ASSESSEE: (I) THAT THERE WAS AN INCREASE IN CONSUMPTION OF COLOR AND CHEMICALS FROM 44.80% TO 50.21% DURING THE YEAR UNDER CONSIDERATIO N AND NO EXPLANATION OR ENQUIRY HAS BEEN MADE BY THE AO AS TO WHY PURCHA SE AND USE OF COLOUR AND CHEMICALS HAVE GONE UP BY 5.41% AS COMPARED TO LAST YEAR. (II) THAT SUBSTANTIAL AMOUNT HAS BEEN DISCLOSED IN ACCOU NT OF FIVE SUNDRY CREDITORS AND AO HAS NOT ENQUIRED AS TO WHY SUBSTAN TIAL AMOUNT IN NAMES OF THESE PARTIES ARE OUTSTANDING. (III) DURING THE COURSE OF SURVEY, EXCESS STOCK OF GRAY C LOTH OF RS 51,59,935 WAS FOUND AND OFFERED TO TAX. THAT THE AO HAS NOT EXAM INED THE VALUE TAKEN FOR THE PURPOSES OF VALUATION OF GRAY CLOTH IN THE STOCK INVENTORY AS ON 31 ST MARCH 2011 AND SELLING PRICE OF GRAY CLOTH PROCESSE D WHICH HAS BEEN SOLD FOR RS. 29,36,554/- (IV) THAT THE ASSESSEE HAS CLAIMED MORE EXPENSES UNDER V ARIOUS HEADS (INTEREST, WATER EXPENSES, WAGES AND SALARY AND ELE CTRICITY) IN COMPARISON TO LAST YEAR. NO ENQUIRY OR EXAMINATION HAS BEEN CA RRIED OUT BY AO. (V) THAT ON JOB WORK RECEIPTS DECLARED BY THE ASSESSEE OF RS 84,02,186, NO TDS WAS MADE BY THE DEDUCTOR. THE AO SHOULD HAVE INTIM ATED THE CONCERNED AO OF THE DEDUCTORS WHO WOULD HAVE DISALLOWED THE C LAIM OF JOB WORK CHARGES AS PER SECTION 40(A)(IA) OF THE ACT . ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 4 (VI) THE ASSESSEE HAS GOT DONE JOB WORK FROM OUTSIDE PAR TIES ON SUBCONTRACT BASIS AND PAID JOB CHARGES OF RS. 41 LACS. NO DETA ILS HAVE BEEN OBTAINED BY THE AO AS TO WHETHER ANY TDS ON JOB WORK CHARGES WA S DONE OR NOT FOR THE PURPOSES OF WORKING OUT THE DISALLOWANCES UNDER SEC TION 40(A)(IA) OF THE ACT. 3.2 THE PR. CIT-I, JODHPUR, VIDE HIS ORDER U/S 2 63 DATED 27.03.2015 AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE STATED THAT THE SUBMISSIONS OF THE AUTHORIZED REPRESENTATIVE FOR DROPPING OF PROCEEDIN GS INITIATED U/S 263 ARE NOT FOUND TENABLE FOR THE FOLLOWING REASONS: (1) THE ASSESSING OFFICER HAS NOT EXAMINED AS FOR T HE PURPOSE OF EARNING OF JOB CHARGES OF RS. 836.99 LACS THE USE OF COLOR AND CHE MICALS HAS GONE UPTO THE EXTENT OF RS.50.12% OF JOB RECEIPTS AS THAT OF 44.8 0% IN THE IMMEDIATE LAST FINANCIAL YEAR. THE EXCESS CLAIM OF USE OF COLOR A ND CHEMICALS IN TERMS OF MONEY WORKS OUT TO RS. 45,28,115/-. THE ASSESSING OFFICER OUGHT TO HAVE EXAMINED CONSIDERING THE NATURE OF BUSINESS OF J OB AND THE USE OF COLOR AND CHEMICAL BY OTHER SIMILAR CASES IN PALI. NORMALLY THE USE OF COLOR AND CHEMICALS IN PROCESS OF GRAY CLOTH IS TO EXTENT OF 25% TO 30% OF JOB RECEIPTS ONLY, WHEREAS IN CASE OF ASSESSEE, IT WORKS OUT TO 50.12%. IT IS FURTHER NOTICED THAT IN THE ACCOUNTS OF VARIOUS PARTIES FROM WHOM T HE ASSESSEE CLAIMED TO HAVE PURCHASED COLOR AND CHEMICALS SUBSTANTIAL AMOU NT HAS BEEN SHOWN OUTSTANDING SUNDRY CREDITORS. THEREFORE, CONSIDERING THE INCREASE IN USES OF CO LOR & CHEMICALS AND SUNDRY CREDITORS AMOUNT SHOWN FROM PURCHASES THE COLOR & C HEMICALS PARTIES, THE ASSESSING OFFICER OUGHT TO HAVE EXAMINED GENUINENES S OF THE TRANSACTION BY CALLING OF INFORMATION U/S 133(6) OR EXAMINING BOOK S OF ACCOUNT U/S 131 OF THE INCOME TAX, 1961. (2) ON PERUSAL OF PAYMENT OF PROCESS CHARGES O F RS. 41,42,107/-AND PARTICULARLY COPY OF LEDGER ACCOUNT OF M/S DEEP SHI KA TEXTILES, BALWANT PROCESS PALI AND M/S HITESH BLEACHING WORKS, PALI, IT IS FOUND THAT THE ASSESSEE HAD PAID PAYMENT BY CASH SHOWING PAYMENT ON NUMBER OF DAYS AT RS. 19,000/- SO TO AVOID CONTRAVENTION OF PROVISION OF SECTION 40A(3). THE ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 5 ASSESSING OFFICER OUGHT TO HAVE EXAMINED GENUINENES S OF WORK CARRIED OUT BY THESE PARTIES. (3) THE DETAILS /DOCUMENTS FILED ALONGWITH LETTER DATED 19.05.2014 BY THE ASSESSEE HAD NOT BEEN EXAMINED BY THE ASSESSING OFFICER AS NO PROOF HAS BEEN FILED BEFORE THE UNDERSIGNED TO SUGGEST THAT T HESE INFORMATION /DOCUMENTS WERE PRODUCED BEFORE THE ASSESSING OFFIC ER. (4) DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOT EXAMINED AS TO WHY THE TDS HAS NOT BEEN DE DUCTED BY PAYEE ON PAYMENT OF JOB CHARGES TO THE EXTENT OF RS. 84,02,1 86/-. THE ASSESSING OFFICER OUGHT TO HAVE INTIMATED TO THE ASSESSING OFFICER OF PAYEE FOR APPLICABILITY OF THE SECTION 40A(IA) IN REGARDS TO NON-DEDUCTION OF TDS ON PAYMENT OF JOB WORK CHARGES TO THE ASSESSEE. SIMILARLY ON PAYMENT OF JOB WORK CHARGES OF RS. 41,42,107/-, THE ASSESSING OFFICER OUGHT TO HAVE E XAMINED WHETHER TDS ARE MADE OR NOT AND WHETHER THE PROVISIONS OF SECTION 4 0A(IA) IS APPLICABLE IN THE ASSESSEES CASE. (5) IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES O F THE CASE, I HOLD THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICE R ON 18.01.2013 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE ON THE ABOVE POINTS AND THE POINTS DISCUSSED IN THE SHOW C AUSE NOTICE U/S 263 DATED 24.12.2013. HE ACCORDINGLY SET ASIDE ASSESSMENT ORDER FOR THE A .Y. 2011-12 FOR DETAIL EXAMINATION OF USE OF COLOUR AND CHEMICALS ALONG WI TH OTHER ASPECTS AS DISCUSSED ABOVE AND TO DECIDE ON MERIT AFRESH AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 3.2 IN RESPONSE, THE LD. AR SUBMITTED BEFORE THE B ENCH THAT THERE WAS DUE AND PROPER APPLICATION OF MIND BY AO. IT WAS S UBMITTED THAT THE SUBJECTED ASSESSMENT WAS COMPLETED U/S 143(3) AFTER MAKING VA RIOUS ENQUIRIES AND DUE INVESTIGATION. THE LD. AR SHRI M.C. MEHTA APPEARED BEFORE THE AO ON VARIOUS OCCASIONS AND VARIOUS DETAILS AS DESIRED BY THE AO, WERE FILED THROUGH LETTERS DATED 15.01.2013, 11.11.2013 AND 08.01.013, THE AO RAISED DETAILED QUERIES (VIZ. ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 6 THROUGH LETTER/SCN DATED 2.01.2013 ARISING FROM TH E DISCUSSION THROUGH QUERY LETTER/S AND ALSO AS NOTED IN THE ORDER SHEETS ENT RIES. THE LD. AR SUBMITTED VARIOUS REPLIES ON DIFFERENT DATES, AS SUBMITTED HE REIN BELOW ISSUE WISE. THE LD. AR ATTENDED TIME TO TIME, PRODUCED BOOKS OF ACCOUNT, COPIES OF ACCOUNT SUNDRY DEBTORS & CREDITORS, WAGES REGISTERS, PURCH ASE, JOB CHARGES BILLS AND EXPENSES VOUCHERS AND FILED VARIOUS OTHER DETAILS A S REQUIRED AND ALSO THOSE EVEN THOUGH NOT REQUIRED, AND WERE DULY EXAMINED. THE L D. AO FRAMED THE ASSESSMENT IN ACCORDANCE WITH THE AVAILABLE JUDICIAL GUIDELINE . THE ACCOUNTS WERE AUDITED AND NO ADVERSE REMARK ON THE TRUTHINESS AND FAIRNES S OF THE ACCOUNTS SO MAINTAINED AND EXAMINED BY THE AO IS REPORTED EVEN BY THE LD. CIT. THESE FACTS ARE EVIDENT FROM THE FOLLOWING EXTRACT FROM THE SUBJECTED ASSESSMENT ORDER DATED 18.01.2013 THE CASE WAS SELECTED FOR S CRUTINY THROUGH CASS/COMPUTER SELECTION SCRUTINY SYSTEM) AND ACCORD INGLY NOTICE U/S 143(2) WAS ISSUED ON 21,09,2012 TO THE ASSESSEE FIXING THE CAS E FOR HEARING ON 28.09.2012, LATER ON QUESTIONNAIRE WAS ISSUED ON 12.01.2013 IN COMPLIANCE TO SAID LETTER SHRI M.C. MEHTA WITH SHRI RAJMAL KANWAR THE ASSESSEE ATT ENDED ON 08.01.2013 & HE WAS ASKED TO SUBMIT/FILED THE REQUIRE DETAILS AS PE R ORDER SHEET DATED 08.01.2013 AND THE DATE OF NEXT HEARING WAS GIVEN 11.01.2013. ON THIS DATE SHRI M.C. MEHTA A/R & SHRI RAJMAL KANWAR ATTENDED AND PRODUCED BOOK S OF ACCOUNT AND REPLY TO THE ORDER SHEET DATED 08.01.20123 WHICH WAS PLACED ON RECORD & AGAIN SOME EXPLANATION WERE CALLED AND NEXT DATE OF HEARING WA S FIXED ON 15.01.2013. ON THE DATE OF HEARING SHRI M.C. MEHTA, ITP ATTENDED & PRODUCED CASH BOOK WHERE FROM DEPOSITS IN BANK ACCOUNT CONFIRMED & WRITTEN S UBMISSION PLACED ON RECORD. THERE APART, IN THE LATER PART OF THE ORDER ALSO QU ERIES WERE RAISED/EXPLANATION WERE SOUGHT. THUS, THE AO HAD EVIDENTLY MADE REASO NABLY DETAILED ENQUIRIES, COLLECTED RELEVANT INFORMATION UNDER THE BACKGROUND OF LOCAL KNOWLEDGE OF THE TRADE AND INDUSTRY, THE NATURE AND PREVALENT PRACTI CES THEREIN. PRESENCE OF THE LD. AR AND THE FACT OF DISCUSSION WITH HIM ARE ALS O EVIDENT FROM THE BODY OF SUBJECTED ASSESSMENT ORDER ITSELF. ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 7 HENCE, IT IS NOT A CASE OF LACK OF INQUIRY THOUGH FROM THE ASSESSMENT ORDER IT MAY APPEAR A CASE OF INADEQUATE INQUIRY. HOWEVER , THERE IS A DISTINCTION BETWEEN THE TWO. THE AR HAS PLACED RELIANCE ON FOLL OWING DECISIONS: CIT VS. GANPAT RAM BISHNOI (2005)198 CTR 546 (RAJ. ) CIT VS. RAJASTHAN FINANCIAL CORPORATION (1996) 134 CTR 145 (RAJ.) CIT VS. VIKAS POLYMERS (20100 47 DTR 348, 236 CTR 476 (DEL) CIT VS. HINDUSTAN MARKETING & ADVERTISING CO. LTD. (2010) 46 DTR 109(DEL.) CIT .VS. TRUSTEES ANUPAM CHARITABLE TRUST (198)167 ITR 129 (RAJ.) CIT VS. SUNBEAM AUTO LTD. (2009)227 CTR 133 (DEL.) LD AR FURTHER SUBMITTED THAT THE CIT RELIED UPON CE RTAIN DECISIONS IN THE IMPUGNED ORDER HOWEVER, NONE OF THE CASES APPLY ON THE FACTS OF THIS CASE AND ARE COMPLETELY DISTINGUISHABLE. IN K.A. RAMASWAMY C HETTIAR VS. CIT( (MAD.) AGAIN THERE WAS NO ENQUIRY AT ALL MADE WHEREAS IN THIS CA SE RATHER AN IN-DEPTH ENQUIRY, WAS MADE BY THE AO. SIMILAR IS THE SITUATION WITH OTHER DECISIONS CITED VIZ. COLORCRAFT V. ITO, CIT VS, DEEPAK KUMAR GUPTA AND A UTO PRODUCTS MTRS LTD VS. ITO. LD AR FURTHER SUBMITTED THAT IMPUGNED ORDER WAS NOT PREJUDICIAL TO THE REVENUE. THE FACTS OF THE PRESENT CASE CLEARLY REVEAL THAT N O PREJUDICE AT ALL WAS CAUSED TO THE REVENUE FOR THE FOLLOWING REASONS: (I) THE LD. CIT NEVER APPRECIATED THAT THE ASSESSEE HAD ALREADY MADE A SURRENDER OF A HUGE AMOUNT OF RS.65,04,000/- ON ACC OUNT OF COLOR AND CHEMICALS, GREY STOCK AND CASH. IT IS NOT THE CAS E OF THE LD. CIT ALSO THAT THE ASSESSEE DID NOT HONOR THE SURRENDER SO MADE BY DECLARING THE SAME IN THE RETURN OF INCOME. IT IS NOT HIS CASE THAT FIND ING OF THE SURVEY TEAM OR THE SURVEY RECORD SHOWS THAT SOME MORE ADDITION OVE R AND ABOVE WHAT WAS SURRENDERED WAS CALLED FOR/WARRANTED. (II) NO SEPARATE ADDITION/DISALLOWANCE IF ACCOUNTS REJEC TED: IN THIS CASE, THE ACCOUNTS WERE IMPLIEDLY REJECTED U/S 145, WHEN ADDI TIONAL INCOME WAS OFFERED DURING THE SURVEY. IT IS SUBMITTED THAT TH E LAW IS WELL SETTLED THROUGH VARIOUS CASE LAWS AND IN PARTICULAR OF THIS HONBLE BENCH EVEN ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 8 (AVAILABLE ON THE DATE OF MAKING THE ASSESSMENT) TH AT ONCE ACCOUNTS ARE REJECTED, THE REVENUE (THE CIT) COULD NOT FALL BACK /CONSIDER THE SAME ACCOUNTS. SIMILAR SITUATIONS HAVE ARISEN WHEN EVEN AFTER REJECTION OF ACCOUNTS ADDITIONS/DISALLOWANCES U/S 40A(3) OR UNDE R OTHER PROVISIONS WERE MADE. HOWEVER, THE COURTS IN SEVERAL DECISIO NS HAVE HELD THAT THE MOMENT ACCOUNTS ARE REJECTED, REVENUE CANNOT RELY O N SAME ACCOUNTS FOR FURTHER ADDITION. HENCE NO SEPARATE DISALLOWANCE C OULD BE MADE/ALLEGED AFTER APPLICATION OF ADHOC NP RATE OR BY FEELING SA TISFIED THE GP RATE AT 6.80% BY THE AO AND NOT OBJECTED BY THE CIT. (III) ADMITTEDLY, THE ASSESSEE DECLARED BETTER TRADING RE SULTS THIS YEAR IN AS MUCH AS THE GP DECLARED THIS YEAR WAS AT 6.80% A S AGAINST 4.98% LAST YEAR. THE ISSUE OF ALLEGED EXCESS CONSUMPTION OF C OLOR AND CHEMICALS W.R.T. TURNOVER OF 5.41% WHICH CORRECTLY SHOULD BE 1.92% O NLY IS COVERED BY THE INCREASE OF 1.82% IN THE GP RATE THIS YEAR. PERTIN ENTLY, THE VERY SURRENDERED INCOME ALSO INCLUDED THE SURRENDER MADE ON ACCOUNT OF THE EXCESSIVE CONSUMPTION OF COLOR AND CHEMICALS AND CA SH. THE AO CLEARLY DISCUSSED THE REASONABLENESS OF THE GP RATE IN PARA 2 & 5 OF THE SUBJECTED ASSESSMENT. (IV) COVERED ISSUE : ALL THE ISSUES RAISED BY THE CIT, HAVE A DIRECT BEARING OVER THE GP AND NP, WHICH ASPECT ALREADY CONSIDERED BY THE AO. WHEN, THE ACCOUNTS ARE IMPLIEDLY REJECTED AND THE TRADING RESULTS ARE FOUND BETTER CONSIDERING THE SURRENDERED INCOME ON THESE VERY IS SUES. THEREFORE, IMPUGNED ACTION U/S 263 IS NOTHING BUT SUBSTITUTION OF OPINION BY THE CIT WHICH IS NOT PERMISSIBLE. A DIRECT DECISION ON SIM ILAR FACTS IN THE CONTEXT OF SEC. 263 TAKING SIMILAR VIEW IS IN CASE OF CIT VS. JAIN CONSTRUCTION CO. (2013) 257 CTR 336/84 DTR 369. (V) THE LD.CIT ALSO DISCUSSED THE ISSUE OF THE OUTSTAND ING BALANCES OF THE CREDITORS. NOTABLY THESE ARE THE SAME CREDITORS FR OM WHOM THE PURCHASES OF COLOR AND CHEMICALS HAVE BEEN MADE AND THEREFORE , BOTH THE ALLEGATION ARE PART OF THE ONE SINGLE ISSUE AND CANNOT BE SEEN SEPARATELY. THE LD. CIT ALSO THEREFORE RIGHTLY DID NOT ALLEGED OF MAKING AN Y SEPARATE ADDITION OR INVOKING SECTION 41(1) OF THE ACT. ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 9 THUS, ONE OF THE MANDATORY CONDITION U/S 263 WHEN N OT SATISFIED IMPUGNED ORDER HAS TO BE QUASHED. THE LD AR FURTHER SUBMITTED THAT ON MERITS, ISSUE- WISE SUBMISSIONS ARE AS UNDER: (I) EXCESS COLOR & CHEMICALS USED BY 5.41% - FIRSTLY, THE LD. CIT HAS OBJECTED THAT THE INCREASE IN CONSUMPTION BY 5.41% THIS YEAR AS COMPARED TO THE LAST YEAR WAS NOT EXAMINED BY THE AO. THE ACTUAL CONSU MPTION STOOD THIS YEAR AT 49.63% AS COMPARED TO 44.07% LAST YEAR. THUS TH E ACTUAL DIFFERENCE IN THE CONSUMPTION OF THE TWO YEARS, STOOD AT 4.92% O NLY AND NOT 5.41% AS WRONGLY ASSUMED BY THE CIT. THIS IS CLEARLY FOR TH E REASON THAT THE LD. CIT CONSIDERED THE RATIO OF PURCHASES TO TURN OVER AS A GAINST THE RATIO OF ACTUAL CONSUMPTION OF THE TURNOVER WHICH IS THE CORRECT LE GAL AND FACTUAL POSITION. THE LD. CIT HIMSELF THUS, ERRED IN PROCEEDING ON WR ONG FACTS AND FIGURE ON DRAWING ADVERSE INFERENCE THERE FROM. FURTHER, HE D ID NOT PROVIDE ANY BASIS/EVIDENCE OF 25-30% OF JOB RECEIPTS TOWARDS US E OF COLOUR AND CHEMICALS THOUGH ALLEGED. FURTHER EVEN AGAIN OUT OF 49.63% OF THE COLORS AND CHEMICALS CONSUMED THIS YEAR, THERE WAS AN INCREASE OF CONSUMPTION BY 3% THIS YEAR BY THE ASSESSEE BECAUSE OF THE REDUCTION IN THE JOB OUTSOU RCING THIS YEAR AS AFORESAID. THIS YEAR THE ASSESSEE OUTSOURCED THE JO B WORK ONLY AT 4.95% AS AGAINST 11.03% LAST YEAR AND THIS WAY THE ASSESSEE DID SUCH WORK AT ITS OWN PLACE UPTO 6.08% (11.03% (-) 4.95%) AND BECAUSE OF WHICH FACT, THERE WAS AN INCREASE OF 3% IN THE CONSUMPTION OF COLOR AND C HEMICALS. THIS WAY OUT OF 5.91% OR (4.92% CORRECTLY SPEAKING), THE EXCESS CONSUMPTION TO THE EXTENT OF 3% STAND EXPLAINED, LEAVING A BALANCE OF 2.41% (1.92% ONLY CORRECTLY SPEAKING) ANOTHER VERY IMPORTANT ASPECT TO BE CONSIDERED IS THAT WHEN THIS ASPECT WAS EXAMINED BY THE SURVEY TEAM, BASED ON THE WORKI NG , THE CONSUMPTION OF THE SAME COLOR AND CHEMICALS WAS ARRIVED AT 72% AND THIS FACT HAVING ALREADY BEEN AVAILABLE IN THE SURVEY FOLDER AS ALSO ACCORDINGLY BEFORE THE PRESENT AO, THERE WAS NO REASON TO HAVE DOUBTED THE PERCENTAGE OF CONSUMPTION BY THE ASSESSEE AT 50.21% (W.R.T. PURCH ASES) OR THE 46.55% ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 10 DECLARED. THUS, FOR AN ASSESSING OFFICER IT WAS A GOOD MATERIAL WHICH HE DULY CONSIDERED BECAUSE THE RECORD AVAILABLE BEFORE HIM AT THE TIME OF MAKING SUBJECTED ASSESSMENT ORDER ON 18.01.2013 ALS O COMPRISED OF THE SURVEY FOLDER BEING RELATING TO THE SUBJECT ASSESSM ENT YEAR ITSELF. IN THE LIGHT OF THESE FACTS IF THE AO HAS NOT MADE ANY FUR THER ENQUIRY ON THE ASPECT OF CONSUMPTION OF COLOR AND CHEMICALS THERE WAS NOTHING WRONG BECAUSE THESE FACTS NEVER CALLED FOR/WARRANTED ANY ENQUIRY AT ALL TO BE MADE BY HIM. SECOND IMPORTANT ASPECT TO BE NOTED THIS YEAR IS T HAT THE TOTAL SALE ( JOB DONE BY THE ASSESSEE) STOOD AT RS. 7.95 CRORES OUT OF WHICH 11.03% WAS GOT DONE FROM THE MARKET AND WAS OUT SOURCED WHEREAS TH IS YEAR THE ASSESSEE DONE THE JOB/SALE AT RS.8.37% CRORES OUT OF WHICH 4 .95% WAS GOT DONE FROM THE MARKET/OUTSOURCED. IT IS FOR THIS REASON THERE HAS BEEN INCREASE IN THE CONSUMPTION OF THE COLOR & CHEMICALS AS NOTED ABOVE . FURTHER THE ROTATIONAL SYSTEM INTRODUCED BY THE COL LECTORS & WATER POLLUTION CONTROL (CEPT), DEPARTMENT OF THE STATE G OVERNMENT AND KISSAN SANGHRASH SAMITI, PALI WHO MUTUALLY DECIDED TO STO P/NOT BE MAKE PRODUCTION/TO CLOSE DOWN THE UNITS AT LEAST TWICE A WEEK THEREFORE, ON SATURDAYS AND SUNDAYS THE UNITS OF THE RESPECTIVE Z ONE WHEREIN THE ASSESSEE FALL WAS TO KEEP OFF ON FRIDAY & SATURDAYS UNITS CLOSED FOR PRODUCTION AND THIS RESULTED INTO EXCESS CONSUMPTIO N IN AS MUCH AS THE RESIDUAL COLOR & CHEMICALS WHICH WERE LYING IN THE VESSELS, AFTER THE WORKING OF FIRST FIVE DAYS, WAS NOT THEREAFTER FIT FOR FURTHER CONSUMPTION/WAS NOT FIT TO BE RE-USED FOR DYING AND ACCORDINGLY HAD TO BE THROWN OUT. THIS WAS NOT THE SITUATION IN THE PREC EDING YEAR HENCE, ALSO THERE WAS AN INCREASE. THERE APART, THERE HAS ALSO BEEN INCREASE IN BUYIN G COST BEING PURCHASE RATES OF THE COLOR & CHEMICALS WHICH IS ALSO EVIDEN T FROM THE PRICE LIST OF THE COLOR & CHEMICALS PURCHASED THIS YEAR VIS-A-VIS OF LAST YEAR AND COMPARATIVE VERIFICATION WAS ALSO DONE BY THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS ITSELF, WHEN THE COMPLETE BO OKS OF ACCOUNT AND ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 11 OTHER RECORDS, INCLUDING SUCH INVOICES OF CURRENT Y EAR AND COPIES OF A/C OF PERSONS FROM WHOM PURCHASES WERE MADE AND THROUGH L ETTER DATED 11.01.2013 WERE PLACED BEFORE HIM. IN ANY CASE, THE FACT IS NOT DENIED THAT GP WAS MU CH BETTER THAN THE PRECEDING YEAR AND THIS COST BEING A PART OF DIRECT COST, DIRECTLY AFFECT THE COST OF PRODUCTION AND ULTIMATELY THE ASSESSEES GP . THE AO WAS THEREFORE, SATISFIED ON THIS ASPECT AND NO ENQUIRY AT ALL WAS REQUIRED. ANOTHER ASPECT IS THAT THE PARTICULAR AO, HAVING BE EN REMAINED IN PALI FOR ALMOST MORE THAN TWO YEARS, IT HAS TO BE ADMITTED T HAT HE MUST BE HAVING THE COMPLETE INS & OUTS AND KNOWLEDGE OF THE TECHNI CALITIES OF THE PARTICULAR TRADE WITH WHICH THE ASSESSEE IS CONCER NED IN AS MUCH AS THERE ARE MORE THAN 1300 PROCESSING & TRADING UNITS WORKI NG IN PALI ITSELF. ALL THE REASONS WHICH THE ASSESSEE HAS JUST NARRATED ABOVE, WAS A COMMON PHENOMENA AND WHICH HAPPENED NOT ONLY WITH THE ASSE SSEE BUT ALSO EQUALLY APPLICABLE WITH ANY OTHER CASE/WAS AN ACCEP TED TRADE PRACTICE. HAVING KEPT THESE FACTS & FIGURES IN MIND, EVEN IF THE AO HAS NOT ELABORATELY DISCUSSED IN THE ASSESSMENT ORDER, THAT DID NOT MEAN THAT THE AO DID NOT APPLY HIS MIND WELL ON THE ISSUES IN HAN D. THE AO APPLIED FULL MIND WHEN HE EXAMINED A/C & INV OICES OF COLOR SUPPLIERS & KEEP RECORD OF PRODUCTION, PURCHASE, CO NSUMPTION, ETC. REF. LETTER 11.01.2013 TO AO AND THE FINDING OF THE CIT AT PAGE 4,9 TO 11 OF HIS ORDER WHERE HE REFERS TO RECORDS. (II) INCREASE IN THE AMOUNT OF THE SUNDRY CREDITORS NAMELY M/S MANIBHADRA DYE CHEMS. M/S NAGESHWAR TRADING CO., M/S MANIBHADR A COLOR AND CHEMICALS PALI. A PART OF THE PURCHASES WERE MADE FROM THESE PARTIES LOCALLY. FURTHER AS PER THE PREVAILING TRADE PRACTI CE, THE GOODS PURCHASED HAS TO BE DELIVERED FOR AND BUYER (THE ASSESSEE HER E) IS NOT REQUIRED TO TAKE DELIVERY ON ITS OWN AND HENCE ITS DOES NOT REQ UIRE ANY TRANSPORTATION FACILITY. OTHERWISE, PALI IS A SMALL PLACE AND IN CASE OF EMERGENT SITUATION WHEN SOME COLOR CHEMICALS OF SMALL QUANTITY RANGIN G BETWEEN 50-100 KG. IS REQUIRED, THE SAME IS DELIVERED THROUGH THE MANU FACTURERS LOADING ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 12 VEHICLES SCOOTER ETC. UNDER THESE FACTS, THERE WER E NO REQUIREMENTS OF MENTIONING SEPARATE TRUCK /LAURI/OTHER TRANSPORTING VEHICLE NUMBERS ON THE INVOICES AND THIS IS MERE SUSPICION ONLY. THE AO A S STATED ABOVE HAVING REMAINED AT PALI WHO WAS VERY MUCH CONVERGENT OF TH ESE FACTS. AS REGARDS THE SIGNATURE OF THE SAME PERSON THE THR EE PARTIES I.E. M/S MANIBHADRADYE CHEMS. M/S NAGESHWAR TRADING CORPORAT ION AND M/S MANIBHADRA COLORS CHEMICALS ARE PART OF ONE GROUP/F AMILY ONLY, WHO HAS DEPUTED THEIR COMMON PERSONS AND THEREFORE, SIGNATU RE MAY APPEAR COMMON PERSON/S HOWEVER, THERE IS NOTHING ABNORMAL SO FAR AS ASSESSEE IS CONCERNED . IN PALI THERE IS A PREVAILING PRACTICE THAT WITH A VIEW TO REDUCE THE COST, ONE COMMON PERSON IS ENGAGED BY THE DIFF ERENT ENTITIES WHETHER OF THE SAME GROUP OR EVEN OF OUTSIDE OR STRANGER GR OUPS, WHO IS HANDED OVER COMMON TYPES OF WORK SAY FOR AN EXAMPLE DELIV ERY MAN OR THE ACCOUNTANT WHO IS A MULTIPURPOSE PERSON AND TAKE CA RES OF THE TASKS SIGNED BY VARIOUS ENTITIES. ALL THESE PARTIES, WHICH THE LD. CIT REFERRED IN HIS ORDER, ARE THOSE PARTIES WITH WHICH THIS ASSESSEE HAS BEEN CONTINUOUSLY DEAL ING WITH LAST MORE THAN TEN YEARS & EVEN IN THE LATER YEARS AND ALL THE NO TED OUTSTANDING, HAVE BEEN CLEARED IN THE SUBSEQUENT YEARS. NOTABLY THE ASSESSMENT OF THESE SUPPLIER PARTIES HAVE ALSO BEEN SELECTED FOR SCRUTI NY AND WERE COMPLETED U/S 143(3). IN THE PAST AND LATER YEARS BOTH, WHER EIN, THE SALES MADE TO THE ASSESSEE HAVE NEVER BEEN DOUBTED AND THE BALANCES S HOWN BY THE RESPECTIVE PARTIES HAVE ALSO BEEN ACCEPTED. FURTHER THIS IS NOT THE PHENOMENA WITH THE ASSESSEE ONLY BUT IT IS A GENERAL PRACTICE AND THIS MUCH OF THE OUTSTANDING QUITE USU ALLY REMAINS WITH OTHER TRADERS AS WELL, YEAR AFTER YEARS. THERE APART, ALS O THERE IS GENERAL PRACTICE OF NOT DEMANDING ANY OUTSTANDING PAYMENT BEFORE THE EXPIRY OF THREE MONTHS PERIOD. A CHART AT PB 240 SHALL MAKE IT CLE AR THAT THE ASSESSEE AS ALSO THOSE SUPPLIER PARTIES, WERE IN THE HABIT OF M AINTAINING OUTSTANDING BALANCE TO THE EXTENT RANGING BETWEEN RS. 2.50 LACS TO 16.07 LACS AND THERE WAS NOTHING ABNORMAL IN THIS YEAR. ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 13 SOME OF THE PARTIES MAINLY NAGESHWAR GROUP WERE RAT HER SO CONFIDENT AND THAT THEY USED TO PURPORTEDLY KEEP HEAVY BALANCES OUTSTANDING WITH THE ASSESSEE SO THAT IN THE EMERGENT SITUATION OF URGEN T NEED THE FUNDS, COULD HAVE OBTAINED FROM THE ASSESSEE. SUCH TYPES OF OBJECTIONS OF THE LD. CIT IN FACTS, A RE MERE SUSPICION AND WERE NOTHING TO DO WITH THE GENUINENESS OF THE TRANSACTI ON BETWEEN THE PARTIES. THE AO REQUIRED THE ASSESSEE TO FILE CONFIRMED COPI ES OF THE ACCOUNTS OF ALL THE TRADE DEBTORS/CREDITORS ETC. WHICH WERE DULY FI LED BY THE ASSESSEE VIDE LETTER DATED 11.01.2013 INTERESTINGLY, THESE FACT S ARE ALSO EVIDENT FROM THE VERY FINDING RECORDED BY THE LD. CIT HIMSELF. THE FACTS, FIGURES AND CLOSING BALANCES, PAYMENT MADE ETE. COPIES OF THE DETAILED LEDGER ACCOUNT OF THOSE PARTIES WHICH CERTAINLY HAS BEEN FILED BEFORE THE AO AND WERE AVAILABLE IN THE ASSESSMENT RECORD AT THE TIME OF I NSPECTION BY THE LD. CIT. IF NO ENQUIRIES MADE HOW THE CIT REFERRED TO THE BI LLS, INVOICES, ENTRIES OF LEDGER ETC. (III) CASH PAYMENT IN RELATION TO SEC. 40A(3): WITH REGARD TO CASH PAYMENT IN RELATION TO SEC. 40A(3), IT APPEARS A M ERE SUSPICION IN AS MUCH AS THE ASSESSEE ADMITTEDLY MADE PAYMENTS BELOW RS. 20,000/- TO THE SMALL PERSONS ENGAGED IN THE WORK OF WASHING ETC. WHO DOE S NOT REQUIRE MUCH INVESTMENT AND THEY ARE FINANCIALLY WEAK AND THEREF ORE, THEY ALWAYS INSIST FOR CASH PAYMENT. THEY EVEN DO NOT HAVE THEIR BANK A/C AND THEREFORE, CASH PAYMENT HAS TO BE MADE BUT AT THE SAME TIME TH E ASSESSEE MADE TDS THEREFORE, THE PURCHASES WERE FOUND GENUINE. EVEN THE LD. CIT HAS NOT DOUBTED THE GENUINENESS AND MOREOVER, ADMITTEDLY TH E EXPENDITURE ON THIS ASPECT HAS COME DOWN FROM RS. 87 LACS TO RS.41 LACS THIS YEAR. THE AO HAS FULLY VERIFIED THE CASHBOOK PRODUCED BEFORE HIM ALONGWITH THE TAX AUDIT REPORT IN WHICH THE TAX AUDITOR HAS NOT REPOR TED ANY CONTRAVENTION OF SEC. 40A(3), THEREFORE, THERE WAS NOTHING MORE R EQUIRED TO EXAMINE BY THE AO. YET WHEN ASKED THE ASSESSEE REPLIED VIDE LE TTER DATED 11.01.2013 AND CASH BOOK WAS PRODUCED VIDE LETTER DATED 15.01. 2013. ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 14 (IV) NO TDS BY THE THIRD PARTIES: THE ALLEGATION REVEALE D BY THE LD. CIT IN PARA (V) AT PAGE 12 OF THE IMPUGNED ORDER, SOUNDS V ERY STRANGE AND ABNORMAL IN AS MUCH AS HE HAS FOUND THE SUBJECTED A SSESSMENT ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE SIMPLY BECAUSE THE AO HAS NOT EXAMINED AS TO WHY THE THIRD PARTIES MAK ING THE PAYMENT TO THE ASSESSEE OF INTEREST OR OF JOB CHARGES ETE, HA VE NOT MADE TDS AND ALSO THE PRESENT AO HAS NOT INTIMATED TO THE CONCERNED A O OF THE SUCH PERSONS MAKING PAYMENT TO MAKE DISALLOWANCE U/S 40()(IA). AT THE OUTSET, THE ASSUMPTION OF JURISDICTION U/S 2 63 BASED ON SUCH AN ALLEGATION IS ABSOLUTELY MISCONCEPTION OF LAW IN AS MUCH AS THE PREJUDICE TO THE REVENUE AND ANY ERROR IN THE SUBJECTED ASSES SMENT ORDER HAS ALWAYS TO BE SEEN AND EXAMINED BY THE CIT ONLY W.R.T. THE ASSESSMENT PROCEEDINGS OF THE ASSESSEE ONLY AND NOT W.R.T. THE AFFAIRS OF THE THIRD PARTIES. BECAUSE OF SUCH A FAILURE, THE CIT ALSO DID NOT ALL EGE THAT THE INCOME ASSESSED BY THE PRESENT OFFICER STOOD UNDER ASSESSE D OR REMAINED UNTAXED IN ANY MANNER WHATSOEVER. THEREFORE, THIS PART OF THE ORDER HAS TO BE QUASHED ON THIS LEGAL AND FACTUAL GROUND. STILL TH EREAFTER, THE ASSESSEE TO CLEAR THE DOUBTS IN THE MIND OF THE LD. CIT, DURIN G THE COURSE OF THE REVISION PROCEEDINGS, FILED COPIES OF THE LEDGER ACCOUNT OF ALL SUCH PERSONS WHO MADE PAYMENTS WITH REASONING MENTIONED AT THE END O F EACH CONFIRMATION AS TO WHY THEY DID NOT MAKE TDS. THESE FACTS WERE WELL EXPLAINED BEFORE THE LD. CIT(A) FEW SPECIMEN COPIES ARE ENCLOSED SHO WING THE REASONS OF NON DEDUCTION . ALTHOUGH AGAIN TO REPEAT, THIS HAS NOT NOTHING TO DO WITH THE PRESENT ASSESSMENT OF THE ASSESSEE. FURTHER, IN RESPECT OF TDS BY THE ASSESSEE WHEN ASK ED THE ASSESSEE SUBMITTED VIDE LETTER DATED 11.01.2013. (V) IN THE SHOW CAUSE NOTICE ALTHOUGH THE LD. CIT RAISE D ON MORE ISSUE ALLEGING THAT THE AO HAS NOT EXAMINED THE VALUE TAKEN FOR TH E VALUATION OF THE GREY CLOTH FOR THE SELLING PRICES OF THE GOODS SOLD HOWE VER, HE HAS NOT AT ALL TAKEN THE SAME IN THE FINAL ORDER. THEREFORE, TO THE EXT ENT THE ASSESSMENT ORDER CANNOT BE HELD TO BE ERRONEOUS & PREJUDICIAL. ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 15 (VI) DOUBTFUL FILING OF LETTER DATED 19.05.2014 BY THE A SSESSEE TO THE AO: WITH REGARD TO THE ALLEGATION LD. CIT AT PAGE-11 PARA II I OF THE IMPUGNED ORDER READ AS UNDER: THE DETAILS/DOCUMENT FILED LONG WITH LETTER DATED 19.05.2014 BY THE ASSESSEE HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER AS N O PROOF HAS BEEN FILED BEFORE THE UNDERSIGNED TO SUGGEST THAT THESE INFORM ATION /DOCUMENTS WERE PRODUCED BEFORE THE ASSESSING OFFICER. STRANGELY, HOWEVER, THE LD. A/R OF THE ASSESSEE HAD AT NO POINT OF TIME FILED ANY SUCH LETTER DATED 19.05.2014 BEFORE THE ASSESSI NG OFFICER AND MORE PARTICULARLY WHEN THE SUBJECTED ASSESSMENT ITSELF S TOOD COMPLETED ON 18.01.2013, HENCE, THERE WAS NO OCCASION TO FILE S UCH A LETTER AFTER THE CLOSE OF THE PROCEEDINGS. THIS SHOWS A CLEAR CUT PRE-CON CEIVED NOTION AND SUSPICION PREVAILING IN THE MIND OF THE LD. CIT WHILE DECIDIN G THE PROCEEDINGS U/S 263. 4.THE LD CIT DR VEHEMENTLY ARGUED THE MATTER AND SU BMITTED THAT CIT HAS RIGHTLY INVOKED HIS JURISDICTION UNDER SECTION 263 OF THE ACT AS THE AO HAS FAILED TO MAKE THE REQUISITE ENQUIRES AS DETAILED I N THE ORDER PASSED BY THE CIT. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE MATERIAL ON RECORD. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AS GONE THROUGH TWO PROCEEDINGS UNDER THE INCOME TAX ACT BEFORE ISSUANC E OF THE IMPUGNED ORDER UNDER SECTION 263 OF THE ACT. FIRSTLY, A SURVEY HA S BEEN CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE WHEREIN THE BOOKS OF ACCOUNTS AND OTHER DOCUMENTS MAINTAINED BY THE ASSESSEE WERE EXAMINED BY THE SURVEY TEAM DEPUTED BY THE REVENUE, STATEMENTS WERE RECORDED AN D THE ASSESSEE SURRENDERED AN AMOUNT OF RS 65,04,000 WHICH WAS SUB SEQUENTLY OFFERED TO TAX IN THE RETURN OF INCOME. SECONDLY, THE RETURN OF I NCOME FILED BY THE ASSESSEE HAS BEEN SUBJECTED TO THE SCRUTINY ASSESSMENT UNDER SECTION 143(3) OF THE ACT. THE AO IN HIS ORDER PASSED UNDER SECTION 143(3) OF THE ACT HAS STATED THAT SURVEY HAS BEEN CONDUCTED WHERE THE ASSESSEE HAS SU RRENDERED THE AMOUNT OF RS 65,04,000 WHICH HAS BEEN OFFERED TO TAX IN TH E RETURN OF INCOME. THE AO IS THUS CEASED OF THE SURVEY PROCEEDINGS AND REL ATED RECORDS AND HAVING ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 16 CONSIDERED THE SAME, HAS COMPLETED THE PROCEEDINGS UNDER SECTION 143(3) OF THE ACT. FURTHER, THE AO HAS ISSUED NOTICE UNDER S ECTION 143(2) ON 21.09.2012, DETAILED QUESTIONNAIRE WAS ISSUED ON 2.01.2013, AND SUBSEQUENTLY THROUGH THE ORDER SHEET ENTRIES, VARIOUS QUERIES/CLARIFICATIONS /DOCUMENTS WERE SOUGHT AND ASSESSEES SUBMISSIONS WERE EXAMINED. FURTHER, THE ASSESSEE HAS PRODUCED BOOKS OF ACCOUNTS, CASH BOOK ETC. GIVEN THESE UNDI SPUTED FACTS AS APPARENT FROM THE ASSESSMENT ORDER, IT CLEARLY EMERGES THAT THE ASSESSEE HAS UNDERGONE THROUGH TWO DETAIL PROCEEDINGS SURVEY P ROCEEDINGS UNDER SECTION 133A AND THEREAFTER ASSESSMENT PROCEEDINGS UNDER SE CTION 143(3) OF THE ACT WHERE ITS BOOKS OF ACCOUNTS WERE EXAMINED NOT JUST ONCE BUT TWICE BY THE REVENUE AUTHORITIES AND ACCEPTED AFTER CONSIDERING THE SURRENDERED AMOUNT EXCEPT FOR CERTAIN ADDITIONS AS MADE UNDER SECTION 143(3) OF THE ACT. KEEPING THIS IN MIND, WE THEREFORE NEED TO EXAMINE WHETHER THE ORDER PASSED BY THE AO CAN BE HELD TO BE ERRONEOUS AS WELL AS PREJUDICI AL TO THE INTEREST OF REVENUE WHICH ARE THE ESSENTIAL INGREDIENTS FOR INV OKING THE JURISDICTION BY LD CIT UNDER SECTION 263 OF THE ACT. IN THE CONTEXT OF SURVEY PROCEEDINGS, IT IS NOTED T HAT BOTH AO AS WELL AS LD CIT HAVE ACKNOWLEDGED THE FACT THAT SURVEY HAS BEEN CON DUCTED, ASSESSEE HAS SURRENDERED CERTAIN AMOUNT AND THE SAID SURRENDERED AMOUNT HAS BEEN DULY OFFERED TO TAX IN THE RETURN OF INCOME. IT IS THUS NOT THE CASE OF THE LD. CIT THAT THE ASSESSEE DID NOT HONOR THE SURRENDER SO MADE BY NOT DECLARING THE SAME IN HIS RETURN OF INCOME. IT IS ALSO NOT THE CASE OF LD CIT THAT THE AO HAS FAILED TO CONSIDER THE FINDINGS AND REPORT OF THE SURVEY TEAM WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. HERE, IT WOULD BE RELEVANT TO NOTE AS TO WHICH ALL ACCOUNT THE ASSESSEE HAS SURRENDERED THE AMOUNT OF RS 65,04,000. IT CONSIST S OF EXCESS STOCK OF COLOUR AND CHEMICALS OF RS 844,135, GRAY CLOTH OF RS 57,59 ,935 AND EXCESS CASH OF RS 4,99,930. IT WOULD BE EQUALLY INTERESTING TO NOTE THAT IN THE SHOW CAUSE NOTICE, LD CIT TALKS ABOUT AO NOT EXAMINING CONSUMP TION OF COLOUR AND CHEMICALS AND STOCK OF GRAY CLOTH. WE ARE UNABLE T O UNDERSTAND THE DUAL APPROACH TAKEN BY LD CIT. TO OUR MIND, LD CIT HAS T O BE CONSISTENT IN HIS APPROACH. HAVING NOT CHALLENGED THE SURRENDER RATH ER ACCEPTING THE SAME ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 17 AFTER DUE VERIFICATION, THE AO HAS COMPLETED THE AS SESSMENT. HOWEVER, AS PER LD CIT, AO SHOULD HAVE EXAMINED THE MATTER FURTHER BY COMPARING THE INCREASE IN CONSUMPTION OF COLOUR AND CHEMICALS VIS--VIS TH E LAST YEAR AND THE STOCK OF GRAY CLOTH. TO OUR MIND, HE HAS COMPLETELY IGNORED THE SURRENDER MADE DURING THE COURSE OF SURVEY PROCEEDINGS AND INDEPENDENT OF THAT, WAS OF THE BELIEF THAT AO SHOULD HAVE EXAMINED THE MATTER FURTHER. WH ERE THE SURRENDERED AMOUNT HAS BEEN ACCEPTED BY THE REVENUE, WHERE IS T HE QUESTION OF PREJUDICE BEING CAUSED BY THE REVENUE. IN OUR VIEW, THE SAME CANNOT FORM THE BASIS AND FOUNDATION FOR EXERCISE OF JURISDICTION UNDER SECTI ON 263 OF THE ACT. FURTHER, LD AR RAISED THE CONTENTION THAT ALL THE I SSUES RAISED BY THE CIT HAVE A DIRECT BEARING OVER THE GP AND NP WHICH HAVE ALREAD Y CONSIDERED BY THE AO. ADMITTEDLY, THE ASSESSEE DECLARED BETTER TRADING RE SULTS THIS YEAR IN AS MUCH AS THE GP DECLARED THIS YEAR WAS AT 6.80% AS AGAINST 4 .98% LAST YEAR. THE ISSUE OF ALLEGED EXCESS CONSUMPTION OF COLOR AND CHEMICALS W .R.T. TURNOVER OF 5.41% WHICH CORRECTLY SHOULD BE 1.92% ONLY IS COVERED BY THE INCREASE OF 1.82% IN THE GP RATE THIS YEAR. PERTINENTLY, THE VERY SURRE NDERED INCOME ALSO INCLUDED THE SURRENDER MADE ON ACCOUNT OF THE EXCESSIVE CONS UMPTION OF COLOR AND CHEMICALS AND CASH. THE AO CLEARLY DISCUSSED THE R EASONABLENESS OF THE GP RATE IN PARA 2 & 5 OF THE SUBJECT ASSESSMENT ORDER. IN THE INSTANT CASE, IT IS NOTED THAT THE AO SEEMS SATISFIED WITH THE ASSESSEE S DECLARED PROFIT BY GIVING HIS FINDING IN THE BODY OF THE ASSESSMENT ORDER WHE RE HE STATES THAT THE TRADING AND MANUFACTURING ACCOUNT OF THE ASSESSEE S HOWS HIGHER GP AND THEREFORE, NO INTERFERENCE MADE ON THIS ISSUE. AS PER LD CIT, THE AO SHOULD HAVE EXAMINED THE INCREASE IN CONSUMPTION OF COLOUR AND CHEMICALS VIS--VIS LAST YEAR. THE CONSUMPTION OF COLOUR AND CHEMICALS WHICH FORMS PART OF THE TRADING RESULT AND SUCH TRADING RESULTS HAVING BEEN COMPARED VIS--VIS LAST YEAR AND FOUND SATISFACTORY BY THE AO, THIS EFFECTIVELY MEANS THAT THE AO HAS MADE THE NECESSARY ENQUIRES AND AFTER EXAMINATION FELT S ATISFIED WITH THE INCREASE IN CONSUMPTION OF COLOUR AND CHEMICALS AMONG OTHER ITE MS. THE ISSUE THEREFORE IS WHERE THE AO HAS APPLIED A MACRO APPROACH AND FE LT SATISFIED WITH THE ASSESSEES RESULTS BUT AS PER LD CIT, THE AO SHOULD HAVE APPLIED A MICRO APPROACH WHICH WOULD HAVE RESULTED IN THE SAME OR E VEN A DIFFERENT ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 18 INFERENCE/CONSEQUENCES, IN OUR VIEW, THE SAME CANNO T FORM THE BASIS FOR EXERCISE OF JURISDICTION UNDER SECTION 263 OF THE A CT IN THE INSTANT CASE. AS PER THE CASE LAWS CITED ABOVE BY THE LD AR INCLUDING TH AT OF RAJASTHAN HIGH COURT IN CASE OF GANPAT RAM BISHNOI 198 CTR 546, THE SAME AT BEST MAY BE TERMED AS A CASE OF INADEQUATE ENQUIRY BUT CLEARLY NOT A C ASE OF LACK OF ENQUIRY. IT IS ONLY IN CASE OF LACK OF ENQUIRY, NOT APPLICATION OF MIND BY THE AO AND WHERE THE ORDER PASSED BY THE AO NOT IN ACCORDANCE WITH L AW, THE FOUNDATION LIES FOR INVOKING JURISDICTION UNDER SECTION 263 OF THE ACT AND NOT OTHERWISE. NOW LET US EXAMINE THE SPECIFIC ISSUES RAISED BY TH E LD CIT IN HIS ORDER UNDER SECTION 263 OF THE ACT. FIRSTLY, THE LD. CIT HAS OBJECTED THAT THE INCREASE IN CONSUMPTION BY 5.41% THIS YEAR AS COMPARED TO THE LAST YEAR WAS NOT EXAMINED BY THE AO. AS PER LD AR, THE LD. CIT CONSIDERED THE RATIO OF PURCHASES TO TU RNOVER AS AGAINST THE RATIO OF ACTUAL CONSUMPTION OF THE TURNOVER. DURING THIS YEA R, THE ACTUAL CONSUMPTION STOOD AT 49.63% AS COMPARED TO 44.07% LAST YEAR, RE SULTING IN INCREASE OF 4.92% ONLY AND NOT 5.41%. FURTHER, IT WAS SUBMITTED THAT THERE WAS AN INCREASE OF CONSUMPTION BY 3% THIS YEAR BECAUSE THE ASSESSEE OUTSOURCED LESS JOB WORK TO THIRD PARTIES AT 4.95% AS AGAINST 11.03 % LAST YEAR AND THIS WAY THE ASSESSEE DID SUCH WORK AT ITS OWN PLACE UPTO 6.08% (11.03% (-) 4.95%). THIS WAY OUT OF 4.92%, THE EXCESS CONSUMPTION TO THE EXT ENT OF 3% STAND EXPLAINED, LEAVING A BALANCE OF 1.92% ONLY. IT WAS ALSO SUBMITTED THAT THE SURVEY TEAM HAD ALREADY EXAMINED THE MATTER RELATIN G TO THE CONSUMPTION OF THE COLOUR AND CHEMICALS AND GIVEN THAT, THERE WAS NO REASON FOR THE AO TO HAVE DOUBTED THE PERCENTAGE OF CONSUMPTION BY THE A SSESSEE. IT WAS FURTHER SUBMITTED THAT DUE TO THE ROTATIONAL SYSTEM INTRODU CED BY THE COLLECTORS & WATER POLLUTION CONTROL (CEPT) DEPARTMENT OF THE ST ATE GOVERNMENT AND KISSAN SANGHRASH SAMITI, PALI, IT WAS MUTUALLY DECI DED TO KEEP THE UNITS CLOSED AT LEAST TWICE A WEEK AND THIS RESULTED INTO EXCESS CONSUMPTION IN AS MUCH AS THE RESIDUAL COLOR & CHEMICALS WHICH WERE LYING IN THE VESSELS, AFTER THE WORKING OF FIRST FIVE DAYS, WAS NOT THEREAFTER FIT FOR FURTHER CONSUMPTION/WAS NOT FIT TO BE RE-USED FOR DYING AND ACCORDINGLY HAD TO BE THROWN OUT. THIS WAS NOT THE SITUATION IN THE PRECEDING YEAR HENCE, ALSO THERE WAS AN INCREASE IN ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 19 CONSUMPTION DURING THE YEAR. THAT APART, THERE HAS ALSO BEEN AN INCREASE IN BUYING COST BEING PURCHASE RATES OF THE COLOR & CHE MICALS WHICH IS ALSO EVIDENT FROM THE PRICE LIST OF THE COLOR & CHEMICALS PURCHA SED THIS YEAR VIS-A-VIS OF LAST YEAR. IT WAS FINALLY SUBMITTED THAT THE AO HAVING BEEN STATIONED AT PALI FOR MORE THAN TWO YEARS IS EXPECTED TO HAVE COMPLETE KN OWLEDGE OF THE TECHNICALITIES OF THE PARTICULAR TRADE WITH WHICH T HE ASSESSEE IS CONCERNED IN AS MUCH AS THERE ARE MORE THAN 1300 PROCESSING & TRADI NG UNITS WORKING IN PALI ITSELF. GIVEN SUCH KNOWLEDGE OF TRADE AND PRACTICE , WHERE AO HAS PASSED AN ORDER EVEN THOUGH NOT AN ELABORATE ORDER, IT CANNOT BE SAID THAT THE AO DID NOT APPLY HIS MIND ON THE ISSUES AT HAND. AS WE HAV E DISCUSSED EARLIER, THE ISSUE OF CONSUMPTION OF COLOUR AND CHEMICALS HAS BE EN EXAMINED BY THE SURVEY TEAM AND BASED ON THAT, THE ASSESSEE HAS SUR RENDERED CERTAIN AMOUNT AND REPORTED IN HIS RETURN OF INCOME WHICH HAS BEEN ACCEPTED BY THE AO. FURTHER, THE AO HAS CARRIED OUT THE EXAMINATION OF ASSESSEES BOOKS OF ACCOUNTS WHICH INCLUDES THE MANUFACTURING AND TRADI NG ACCOUNT AND BASED ON BETTER GP RESULTS WHICH INCLUDES THE CONSUMPTION OF COLOUR AND CHEMICALS SHOWN BY THE ASSESSEE, THE SAME HAVE BEEN ACCEPTED. IN FACT, THE AO IN HIS ORDER HAS STATED CLEARLY THAT HE HAS EXAMINED THE M ANUFACTURING AND TRADING ACCOUNT AND FELT SATISFIED. ACCORDINGLY, ON THIS A CCOUNT, IT CANNOT BE SAID THAT AO HAS NOT THE EXAMINED THE MATTER OR THERE IS NO A PPLICATION OF MIND WHICH WARRANT AN INTERVENTION BY LD CIT UNDER SECTION 263 OF THE ACT. SECONDLY, REGARDING AMOUNT STANDING IN THE ACCOUNT OF THE SUNDRY CREDITORS NAMELY M/S MANIBHADRA DYE CHEMS, M/S NAGESHWAR TRADING CO. , M/S MANIBHADRA COLOR AND CHEMICALS PALI IS CONCERNED, T HE LD AR SUBMITTED THAT THE AO REQUIRED THE ASSESSEE TO FILE COPIES OF THE ACCOUNTS OF ALL THE TRADE DEBTORS/CREDITORS ETC. WHICH WERE DULY FILED BY THE ASSESSEE VIDE LETTER DATED 11.01.2013 INTERESTINGLY, THESE FACTS ARE ALSO EV IDENT FROM THE FINDING RECORDED BY THE LD. CIT HIMSELF WHERE HE REFERS TO THE FACTS, FIGURES AND CLOSING BALANCES, PAYMENT MADE ETC. TO THESE PARTIES. IT W AS FURTHER SUBMITTED THAT THESE ARE THE SAME CREDITORS FROM WHOM THE PURCHASE S OF COLOR AND CHEMICALS HAVE BEEN MADE AND THEREFORE, BOTH THE ALLEGATION A RE PART OF THE ONE SINGLE ISSUE AND CANNOT BE SEEN SEPARATELY. THE LD. CIT A LSO THEREFORE RIGHTLY DID NOT ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 20 ALLEGED MAKING ANY SEPARATE ADDITION OR INVOKING SE CTION 41(1) OF THE ACT. WE AGREE WITH THE CONTENTION OF THE LD AR THAT WHERE T HE BALANCES OF SUNDRY CREDITORS HAVING BEEN EXAMINED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE FACT THAT THESE CREDITORS RELATES TO CONSUMPTIO N OF COLOUR AND CHEMICALS AND CIT NOT INVOKING SECTION 41(1) OF THE ACT, THE ISSUE HAS TO BE SEEN IN THE CONTEXT OF CONSUMPTION OF COLOUR AND CHEMICALS WHIC H WE HAVE ALREADY DISCUSSED ABOVE. ACCORDINGLY, ON THIS ACCOUNT, IT CANNOT BE SAID THAT AOS ORDER UNDER SECTION 143(3) CALL FOR INTERVENTION OF LD CIT UNDER SECTION 263 OF THE ACT. THIRDLY, LD CIT HAS STATED THAT THE EXCESS STOCK OF GRAY CLOTH OF RS 51,59,935 WHICH WAS FOUND DURING THE COURSE OF SURVEY, THE AO HAS NOT EXAMINED THE VALUE TAKEN FOR THE PURPOSES OF VALUATION OF GRAY C LOTH IN THE STOCK INVENTORY AS ON 31 ST MARCH 2011 AND SELLING PRICE OF GRAY CLOTH PROCESS ED WHICH HAS BEEN SOLD FOR RS. 29,36,554/-. FROM THE PERUSAL OF THE COMPUTATION OF INCOME (PB 143), IT IS NOTED THAT IN ADDITION TO PROFIT AS PER PROFIT AND LOSS ACCOUNT, THE ASSESSEE HAS OFFERED AN AMOUNT OF RS 65,04,000 WHIC H IS THE AMOUNT SURRENDERED DURING THE COURSE OF SURVEY. THE SAID AMOUNT INCLUDES AN AMOUNT OF RS 51,59,935 TOWARDS STOCK OF GRAY CLOTH. GIVEN THIS UNDISPUTED FACTS WHERE THE ASSESSEE HAS OFFERED THE WHOLE OF THE PURCHASE STOCK TO TAX AND WHICH HAS BEEN ACCEPTED BY THE AO, WE ARE UNABLE TO UNDERSTAN D THE PREJUDICE WHICH HAS BEEN CAUSED TO THE REVENUE IN THIS REGARD. IN ANY CASE, THE PURCHASE AND RESULTANT SALE OF GRAY STOCK AND PROFIT ARISING THE REFROM HAS BEEN FACTORED IN THE GROSS PROFIT WHICH HAS BEEN EXAMINED BY THE AO. ACCORDINGLY, ON THIS ACCOUNT, IT CANNOT BE SAID THAT AOS ORDER UNDER SE CTION 143(3) CALL FOR INTERVENTION OF LD CIT UNDER SECTION 263 OF THE ACT . NEXT ISSUE IS REGARDING CASH PAYMENT AND RELATED DI SALLOWANCES UNDER SEC. 40A(3), IT WAS SUBMITTED BY LD AR THAT ADMITTEDLY, THE ASSESSEE MADE PAYMENTS BELOW RS. 20,000/- TO THE SMALL PERSONS EN GAGED IN THE WORK OF WASHING ETC. WHICH DOESNOT REQUIRE MUCH INVESTMENT AND THEY ARE FINANCIALLY WEAK AND THEREFORE, THEY ALWAYS INSIST FOR CASH PAY MENT. THEY EVEN DO NOT HAVE THEIR BANK A/C AND THEREFORE, CASH PAYMENT HAS TO BE MADE. IT WAS FURTHER SUBMITTED THAT THE AO HAS VERIFIED THE CASH BOOK PRODUCED BEFORE HIM ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 21 ALONGWITH THE TAX AUDIT REPORT IN WHICH THE TAX AUD ITOR HAS NOT REPORTED ANY CONTRAVENTION OF SEC. 40A(3). ON PURSUAL OF THE AS SESSMENT ORDER, IT IS NOTED THAT THE CASH BOOK WAS PRODUCED DURING THE COURSE O F HEARING ON 15.01.2013 AND IT IS ALSO STATED THAT THE AO HAS DONE THE VERI FICATION OF THE CASH DEPOSITS. IT THEREFORE CANNOT BE SAID THAT THE AO HAS NOT VER IFIED THE CASH BOOK AND IT IS LIKELY THAT ON EXAMINATION OF SUCH CASH BOOK, HE HA S FOUND THE SAME TO BE IN ORDER INCLUDING COMPLIANCE WITH SECTION 40A(3). AC CORDINGLY, ON THIS ACCOUNT, IT CANNOT BE SAID THAT AOS ORDER UNDER SECTION 143 (3) CALL FOR INTERVENTION OF LD CIT UNDER SECTION 263 OF THE ACT. NEXT IS THE ISSUE RAISED BY LD CIT THAT THE AO HAS NOT EXAMINED AS TO WHY THE THIRD PARTIES MAKING THE PAYMENT TO THE ASSESSEE HA VE NOT MADE TDS AND ALSO THE PRESENT AO HAS NOT INTIMATED TO THE CONCERNED A O OF THE SUCH PERSONS MAKING PAYMENT TO MAKE DISALLOWANCE U/S 40()(IA). IN OUR VIEW, THE SAME CANNOT FORM THE BASIS FOR ASSUMING JURISDICTION UND ER SECTION 263 IN THE CASE OF THE ASSESSEE. NEXT IS THE ISSUE RELATING TO PAYMENT OF JOB WORK C HARGES OF RS. 41,42,107/- WHERE THE LD CIT BELIEVES THAT THE ASSESSING OFFICE R OUGHT TO HAVE EXAMINED WHETHER TDS ARE MADE OR NOT AND WHETHER THE PROVISI ONS OF SECTION 40A(IA) IS APPLICABLE IN THE ASSESSEES CASE. IN THIS REGARD, IT IS NOTED THAT THE ASSESSEE VIDE ITS LETTER DATED 11.01.2013 (PB 45-48 & 141) H AS SUBMITTED COPY OF TDS RETURNS AS WELL AS COPY OF ACCOUNT OF JOB WORK/PROC ESS CHARGES WHERE IT IS SHOWN THAT THE ASSESSEE HAS DONE TDS ON SUCH PAYMEN TS. IN OUR VIEW, THE SAME CANNOT FORM THE BASIS FOR ASSUMING JURISDICTIO N UNDER SECTION 263 IN THE CASE OF THE ASSESSEE. IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE C ASE, WE ARE OF THE VIEW THAT THE ORDER PASSED BY AO UNDER SECTION 143(3) CANNOT BE HELD TO BE AN ERRONEOUS ORDER WHICH IS PREJUDICIAL TO THE INTERES T OF REVENUE. THE AO HAS MADE SUFFICIENT ENQUIRIES, CONSIDERED THE SURVEY RE CORDS AND THE SURRENDER MADE BY THE ASSESSEE AND AFTER CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE AND DUE APPLICATION OF MIND COMPLETED THE ASSESSMEN T PROCEEDINGS UNDER ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 22 SECTION 143(3) OF THE ACT. HENCE, THE IMPUGNED ORD ER ISSUED BY LD CIT UNDER SECTION 263 LACKS THE INHERENT JURISDICTION AND THU S CANNOT BE SUSTAINED. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 /0 2/2016. SD/- SD/- ( R.P. TOLANI) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 26 / 02 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI RAJMAL KANWAR,PALI C/O B.D. GARGIEYA & CO., CA, JAIPUR 2. THE RESPONDENT- THE CIT-I, JODHPUR 3. THE CIT(A) 4. THE CI-I, JODHPUR. 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO 142 /JP/15) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR ITA NO. 142/JP/15 SHRI RAJMAL KANWAR, PALI VS. CIT-I, JODHPUR 23 SL. NO. DATE INITIAL 1 DATE OF DICTATION 2 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER OTHER MEMBER 3 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S 4 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 5 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. 6 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 8 THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 9. DATE OF DISPATCH OF THE ORDER