ZME Global India LLP, New Delhi V. Pr.CIT-12, New Delhi

ITA 1890/DEL/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6443 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2015-2016
• Appeal Filed On: 20-11-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Gift; Revision of order; Opportunity of being heard; TDS; Set aside
• Section: 37; 263; 143(3); 142(1); 13; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SH. KUL BHARAT, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 1890/DEL/2020 : ASSTT. YEAR : 2015-16 ZME GLOBAL INDIA LLP, 505, PEARLS COMPLEX, MANGALAM PALACE, SECTOR-3, ROHINI, NEW DELHI-110085 VS PR. CIT-12, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AA AFZ9582G ASSESSEE BY : SH. PRAMOD KR. JAIN, CA REVENUE BY : MS. DEEP SHIKHA SHARMA, SR. DR DATE OF HEAR ING: 26 . 0 8 .20 2 1 DATE OF PRONOUNCEMENT: 07 .0 9 .20 2 1 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. PCIT-12, NEW DELHI DATED 04.03.202 0. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF EXPOR TING & TRADING OF ALUMINUM FOIL AND SERVICE PROVING TO ITS FOREIGN CLIENTS IN CHINA FOR EXPORTING THEIR BULK DRUG TO C USTOMER IN INDIA AND FILED RETURN OF INCOME ON 27.08.2015 DECL ARING TOTAL INCOME OF RS.17,09,730/-. THE CASE HAS BEEN ASSESSE D U/S 143(3) VIDE ORDER DATED 19.12.2017 MAKING DISALLOWA NCE OF 40% OF THE DIWALI EXPENSES AND INTEREST ON LATE DEP OSIT OF SERVICE TAX. ITA NO.1890/DEL/2020 ZME GLOBAL INDIA LLP 2 3. THE CASE HAS BEEN REVIEWED IN ACCORDANCE WITH TH E PROVISIONS OF SECTION 263. 4. THE LD. PCIT MADE THE FOLLOWING OBSERVATIONS: 1. THE ASSESSES HAS ALSO CLAIMED PAYMENT OF CHINA TAX OF RS. 5,74,183 /-. THE AO HAS NOT MADE ANY ENQUIRY ABOUT THE NATURE OF CHINA TAX WHETHER THE SAME IS LIKE TDS OR SERVICE TAX ETC. WITHOUT SPECIFYING THE NATURE OF C HINA TAX, AO HAS ALLOWED SAME. 2. THE ASSESSEE HAS ALSO CLAIMED DIWALI EXPENSES OF RS. 5,29,500/-. ON PERUSAL OF THE SAME, IT HAS BEEN FOUND THAT THE ASSESSEE HAS PURCHASED 150 WALL CLOCK @ 1000 PER WATCH FROM M/S GLOBAL IMPEX, AND EXECUTIVE DAIRY 20 0 PCS @ 320 PER FROM M/S GLOBAL IMPEX. THE AO HAS NOT ENQUIRED ABOUT UTILIZATION OF THESE ITEMS WHETHER T HESE WERE PURCHASED FOR BUSINESS PURPOSE. 3. THE ASSESSEE HAS CLAIMED EXHIBITION EXPENSES OF RS.3,41,250/- . THESE EXPENSES RELATES TO PURCHASE OF 1500 PCS OF CALENDAR @ 150 PER PCS FROM M/S GLOBAL IMPEX AND 1000 PCS OF NOTEPAD @ 100 PER PCS FROM M/S GLOBAL I MPEX. THE AO HAS NOT ENQUIRED ABOUT UTILIZATION OF HUGE Q UANTITY OF THESE ITEMS FOR BUSINESS PURPOSE. AO HAS ALSO NO T VERIFIED THE GENUINE OF PURCHASE. 4. THE ASSESSEE HAS INCURRED THE BUSINESS PROMOTION EXPENSES OF RS.1,02,980/- BUT AO HAS NOT ENQUIRED ABOUT NATURE OF THESE EXPENSES WITH BILLS AND VOUCHERS. ITA NO.1890/DEL/2020 ZME GLOBAL INDIA LLP 3 5. THE ASSESSEE HAS PAID COMMISSION TO 6 PERSONS. THE AO HAS NOT MADE ANY ENQUIRY ABOUT JUSTIFICATION AND GENUINENESS FROM THE PARTIES ON BEHALF OF WHICH THE COMMISSION WAS PAID. SOME OF THE PARTIES ON BEHALF OF WHOM THE COMMISSION WAS PAID, IS WELL KNOWN COMPANY IN THE BUSINESS OF PHARMACEUTICALS LIKE M/S MOREPAN LABORATORIES PVT. LTD., M/S IND. SWIFT LABORATORIES LTD., M/S HETRO DRUGS LD., M/S C. J. SHAH AND COMPANY. 6. THE ASSESSEE CLAIMED PAYMENT OF RS.29,00,037/- ON ACCOUNT OF SALARY FOR WHICH THE AO HAS NOT MADE ANY ENQUIRY TO ESTABLISH THE LINKAGE OF SALARY EXPENSE WITH THE BUSINESS. 5. THE LD. PCIT ISSUED NOTICE TO THE ASSESSEE ON 07 .02.2020 CONFRONTING THE ABOVE ISSUES TO THE ASSESSEE. THE A SSESSEE REPLIED VIDE LETTER DATED 18.02.2020. WITH REGARD TO THE 154 WALL CLOCKS AND 200 EXECUTIVE DIARIES CLAIMED BY TH E ASSESSEE UNDER DIWALI EXPENSES, THE LD. PCIT HELD THAT THE A SSESSEE IS HAVING LESS THAN 15 CUSTOMERS AND 13 VENDORS AND HE NCE THE 150 ITEMS OF WALL CLOCKS COULD NOT HAVE BEEN DISTRI BUTED . 6. BEFORE THE LD. PCIT, THE ASSESSEE ARGUED MAINLY ON THE BASIS OF THE LEGAL PRINCIPLES. 7. THE LD. PCIT HELD THAT THE AO HAS NOT APPLIED HI S MIND AND NOT CONDUCTED PROPER ENQUIRIES AND VERIFICATION. TH E LD. PCIT PASSED ORDER U/S 263 ON 04.03.2020 ANNULLING THE AS SESSMENT WITH DIRECTION TO THE AO THAT THE ASSESSMENT BE MAD E DE NOVO AFTER CONDUCTING APPROPRIATE ENQUIRIES. ITA NO.1890/DEL/2020 ZME GLOBAL INDIA LLP 4 8. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. 9. FROM THE RECORDS, WE FIND, A. WITH REGARD TO CHINA TAX - THE ASSESSEE HAS REPLIED VIDE LETTER DATED 18.08.2017. CHINA TAX IS PAID BY THE C HINESE MANUFACTURERS WHICH IS DEDUCTED FROM THE COMMISSIO N PAID TO THE ASSESSEE. THE GROSS COMMISSION IS CREDI TED AND THE CHINESE TAX PAID BY THE MANUFACTURER IS DEBITED . B. WITH REGARD TO COMMISSION - IT WAS EXPLAINED BEFORE THE AO THAT THE COMMISSION HAS BEEN PAID TO VARIOUS PERSON S NAMELY, SH. RAJESH JAIN, SH. RAJAT SINGHAL, SH. VIJ AYANAT JAIN, MS. ROOPA MALHOTRA FOR OBTAINING ORDERS FROM DIFFERENT COMPANIES AND FOR DIFFERENT PRODUCTS. THE INVOICES ISSUED BY THE AGENTS HAVE BEEN SUBMITTED A ND TDS HAS BEEN DULY DEDUCTED. VIDE LETTER DATED 20.11 .2017, COPIES OF THE AGREEMENTS, CONTRACTS FOR RECEIPT OF COMMISSION FROM CHINESE COMPANIES WERE SUBMITTED BEFORE THE AO. THE DETAILS OF THE COMMISSION HAVE B EEN DULY EXPLAINED IN DETAIL VIDE REPLY DATED 28.11.201 7 SUBMITTED BEFORE THE AO. FOR THE SAKE OF READY REFE RENCE, THE REPLY GIVEN BY THE ASSESSEE TO THE AO IS REPROD UCED AS UNDER: SUB.: ASSESSMENT PROCEEDINGS U/S 143/2) AND 142(1) OF THE INCOME TAX ACT, 1961. RESPECTED SIR, WITH REFERENCE TO YOUR NOTICE FOR THE ABOVE CAPTION ED SUBJECT AND IN FURTHERANCE TO OUR EARLIER SUBMISSIO N, WE ITA NO.1890/DEL/2020 ZME GLOBAL INDIA LLP 5 HEREBY SUBMIT THE FOLLOWING INFORMATION AND DOCUMEN TS AS UNDER: 1. THE ASSESSEE IS A LIMITED LIABILITY PARTNERSHIP INCORPORATED UNDER LLP ACT 2008. IT IS A SEPARATE LEGAL ENTITY AND IS A BODY CORPORATE. 2. IT IS A PART OF SHAH TC GROUP. DURING THE YEAR ASSESSEE LLP STARTED THE BUSINESS ON COMMISSION BAS IS AS IT WAS NOT ACHIEVING ADEQUATE PROFITS IN ITS TRA DING ACTIVITIES IN PREVIOUS YEARS. 3. NOTE ON COMMISSION INCOME: 3.1 THE ASSESSEE LLP IS ENGAGED INTO PROVIDING SERV ICES FOR PROCUREMENT OF API AND INTERMEDIATES PRODUCTS F OR THE MANUFACTURE OF PHARMA MEDICINE IN INDIA FROM CHINA MANUFACTURERS. 3.2. THE ASSESSEE LLP HAS ITS OWN CLIENTS OVER THE YEARS AND ALSO USED VARIOUS SERVICES OF AGENTS FROM TIME TO TIME WHO INTRODUCE THE INDIAN PHARMA MANUFACTURERS CUSTO MERS TO ASSESSEE LLP. 3.3. ON THE REQUEST OF AGENTS AS WELL AS OUR SALE TEAM, REQUEST OF PROCUREMENT OF PRODUCTS COME TO THE NOTI CE OF THE ASSESSE LLP TEAM. THE SAME TEAM NEGOTIATES WITH THOSE CUSTOMERS AS WELL AS CHINA MANUFACTURERS REGA RDING THE PRODUCT, QUANTITY, QUALITY AND PRICE. UPON THE NEGOTIATION, A SALES CONFIRMATION IS OBTAINED BY SA LES TEAM FROM INDIAN CUSTOMERS. COPY OF A SALES CONFIRM ATION LETTER IS ENCLOSED AS PER ANNEXURE 1. ITA NO.1890/DEL/2020 ZME GLOBAL INDIA LLP 6 3.4 THEREAFTER THE ASSESSEE LLP ENTERS INTO THE SAL ES CONTRACT WITH CHINESE COMPANY, WHEREIN TERMS ARLY S TATES THAT A COMMISSION WOULD BE PAID ON THE FULL CONTRAC T AMOUNT TO ASSESSEE LLP AS PER SED ANNEXURE 2 HIGHLI GHTING IN YELLOW. AS PER THIS ANNEXURE, THE COMMISSION TO BE RECEIVED BY SSE LLP WAS 3%. 3.5. THE ASSESSEE LLPS EMPLOYEES COORDINATE WITH I NDIAN MANUFACTURERS CUSTOMERS TO OPEN LC ON THE CHINESE SUPPLIERS. THE INDIAN CUSTOMERS SENT THE LCS COPIE S TO ASSESSEE LLP FOR CHECKING THE TERNS & CONDITIONS AS PER SALES AGREEMENT. ON THE ASSESSEES LLP APPROVAL THE LC IS OPENED ON THE CHINESE MANUFACTURERS DIRECTLY BY IND IAN CUSTOMERS. A COPY OF LC RELATED DOCUMENTS IS ENCLOS ED AS PER ANNEXURE 3. 3.6. THE CHINESE MANUFACTURER THEN ISSUE THE COMMER CIAL INVOICE TO INDIAN CUSTOMERS ALONG WITH BATCH RELEAS E CERTIFICATE AND CERTIFICATE OF ANALYSIS OF PRODUCTS . THE SAME ALSO CONTAIN LABEL MARKING ALONG WITH PACKING LIST. OUR SALES TEAM FOLLOWS WITH CHINESE MANUFACTURERS F OR THE PREPARATION DISPATCH OF SAID MATERIAL. COPIES OF RE LATED DOCUMENTS ENCLOSED ARE ENCLOSED AS PER ANNEXURE 4. 3.7 THE CHINESE SUPPLIER BOOKS THE SHIPMENT OF PROD UCT IN FAVOR OF INDIAN MANUFACTURERS CUSTOMERS SENDS THE O RIGINAL BILL OF LADING ALONG WITH SHIPMENT DOCUMENTS TO IND IAN CUSTOMERS BANK AND SENDS THE COPY OF SAME TO ASSESS EE LLP. THE COPY RELATED DOCUMENTS ARE ENCLOSED AS PER ANNEXURE 5. ITA NO.1890/DEL/2020 ZME GLOBAL INDIA LLP 7 3.8 UPON THE ARRIVAL OF GOODS IN INDIA, INDIAN CUST OMERS GET THE SAME CLEARED FROM CUSTOM AUTHORITIES, EMPLO YEES OF ASSESSEE LLP COORDINATES WITH CLEARING HOUSE AGE NT FOR CLEARANCE OF ANY DOUBTS AS PRODUCTS ARE RELATED TO PHARMA INDUSTRY. 3.9 ASSESSEE LLP THEN ISSUED COMMISSION NOTE ON CHI NESE MANUFACTURERS THAT OUR COMMISSION WOULD BE DUE WITH IN 90 DAYS. COPY OF COMMISSION NOTE IS ENCLOSED AS PER ANNEXURE 6. 3.10 ON THE COMPLETION OF 90 DAYS THE INVOICE IS RA ISED ON THE CHINESE MANUFACTURERS COMPANIES FOR COMMISSION DUE. COPY OF INVOICE IS ENCLOSED AS PER ANNEXURE 7. 3.11 THEREAFTER THE EMPLOYEES OF ASSESSEE LLP FOLLO W UP FOR THE PAYMENT OF DUES. THE PAYMENT IS RECEIVED DI RECTLY IN BANK THROUGH BANKING CHANNELS I.E. SWIFT TRANSFE R. FEW COPIES OF FOREIGN INWARD REMITTANCE CERTIFICATE (FI RC) IS ENCLOSED AS PER ANNEXURE 8. 4. NOTE ON EXPENSES INCURRED TO EARN COMMISSION INCOME 4.1 THE ASSESSEE LLP USES ITS MANPOWER AND ALSO SER VICES OF VARIOUS OUTSIDERS TO EARN THE COMMISSION INCOME. 4.2. MAJOR EXPENSES INCURRED BY THE ASSESSE LLP IN CLUDE SALARY, COMMISSION, EXHIBITION EXPENSES, DIWALI EXP ENSES AND CHINA TAX. ITA NO.1890/DEL/2020 ZME GLOBAL INDIA LLP 8 4.3. SALARY IS PAID TO EMPLOYEES OF THE ASSESSE LL P DETAILS OF WHICH ALONG WITH LEDGER ACCOUNTS AND APPOINTMENT LETTERS HAS ALREADY BEEN SUBMITTED VIDE OUR SUBMISSION DATED 15TH SEPTEMBER 2017. 4.4. DETAILS OF COMMISSION PAID ALONG WITH CONFIRM ATIONS HAVE ALREADY BEEN SUBMITTED VIDE OUR SUBMISSION DAT ED 18TH AUGUST 2017. TDS DEDUCTED FROM THEIR PAYMENTS REFLECTED THROUGH TDS CERTIFICATES HAVE ALSO BEEN SUBMITTED VIDE OUR SUBMISSION DATED 20 TH NOVEMBER 2017. 4.5. DETAIL OF EXHIBITION EXPENSES AND DIWALI EXPE NSES HAS ALSO BEEN SUBMITTED VIDE OUR SUBMISSION DATED 3 8TH AUGUST 2017. THESE ARE BEING INCURRED TO MAINTAIN G OOD BUSINESS RELATIONSHIPS WITH EXISTING CUSTOMERS AND HAVE NEW CUSTOMERS. 4.6. CHINA TAX IS PAID BY CHINESE MANUFACTURERS WH ICH IS DEDUCTED FROM THE COMMISSION PAID TO THE ASSESSE LL P, THE DETAIL OF WHICH HAS BEEN HAS ALREADY BEEN SUBMITTED VIDE OUR SUBMISSION DATED 18 TH AUGUST 2017. 4.7. IT IS PERTINENT TO NOTE THAT THOUGH THE ASSESS E LLP EARNED COMMISSION OF RS. 96 LAKHS APPROX, ONLY, YET IT EFFECT SALES OF RS. 44.22 CRORES. THE COMMISSION EA RNED IS JUST AKIN TO GROSS MARGIN HERE. A DETAIL OF VOUCHER NO. WISE SALES, RELATED BUYER, SALES EFFECTED AND COMMI SSION EARNED IS ENCLOSED AS ANNEXURE 9. ITA NO.1890/DEL/2020 ZME GLOBAL INDIA LLP 9 4.8 THE PROCESS OF CONTINUOUSLY FINDING BUYERS AND SELLERS, LIAISON WORK, FOLLOW-UPS, DOCUMENTATION, ETC. REQUI RES ADEQUATE MANPOWER. 4.9. FOR FINDING BUYERS, LIAISON WORK, FOLLOW-UPS, DOCUMENTATION, MAINTAINING BUSINESS RELATIONSHIP, E TC. EXPENSES ON SALARY, EXHIBITION, DIWALI HAS TO BE IN CURRED, WHICH ARE ALL RELATED TO BUSINESS ONLY AND ALLOWABL E U/S 37 OF THE INCOME TAX ACT, 1961. 4.10. COMMISSION IS PAID TO AGENTS WHO PROVIDE REQU ISITE CLIENTS, BASED ON WHICH FURTHER WORKING IS DONE BY THE EMPLOYEES OF THE ASSESSE LLP TO GENERATE INCOME. HA D THESE AGENTS NOT PROCURED THE CLIENTS, THE ASSESSE LLP WOULD NOT HAVE EARNED THAT INCOME AT ALL. IT IS PER TINENT TO NOTE THAT COMMISSION IS NO PAID, ON TOTAL COMMISSIO N INCOME EARNED BY THE ASSESSE LLP BUT ONLY ON THE PO RTION OF SALES AND RELATED COMMISSION EFFECTED BY THESE A GENTS. 4.11. DETAILS OF THE FOUR AGENTS, WHICH YOUR GOOD-S ELF SPECIFICALLY ASKED FOR ARE AS UNDER: 4.11.1 RAJAN JAIN IS A GRADUATE HAVING 10 YEARS OF EXPERIENCE HAVING PAN AS AANPJ3470G AND IS ASSOCIAT ED WITH SHAH TC GROUP SINCE FY 2009-10. CUSTOMERS FOR RELEVANT PRODUCTS PROVIDED BY HIM WERE MOREPAN LABORATORIES LTD. AND SARCA LABORATORIES LTD. HE IS NOT A PARTY U/S 40A2(B) OF THE ASSESSE LLP. RELATED DOCUM ENTS OF COMMISSION TO HIM HAS ALREADY BEEN SUBMITTED TO YOUR OFFICE AS PER PARA 4.4 ABOVE. ITA NO.1890/DEL/2020 ZME GLOBAL INDIA LLP 10 4.11.2 RAJAT SINGHAL IS A GRADUATE HAVING 10 YEARS OF EXPERIENCE HAVING PAN AS BCTPS6986B AND IS ASSOCIAT ED WITH SHAH TC GROUP SINCE FY 2014-15. CUSTOMER FOR RELEVANT PRODUCTS PROVIDED BY HIM WAS MSN LABORATOR IES LTD. HE IS NOT A PARTY U/S 40A2(B) OF THE ASSESSE L LP. RELATED DOCUMENTS OF COMMISSION TO HIM HAS ALREADY BEEN SUBMITTED TO YOUR OFFICE AS PER PARA 4.4 ABOVE. 4.11.3. VIJAYANT JAIN IS A GRADUATE HAVING 10 YEARS OF EXPERIENCE HAVING PAN AS AANPJ3471H AND IS ASSOCIAT ED WITH SHAH TC GROUP SINCE FY 2009-10. CUSTOMERS FOR RELEVANT PRODUCTS PROVIDED BY HIM WERE HETERO LABS LTD., C J SHAH & CO. AND KANTILAL MANILAL & CO. PVT. LTD. HE IS NOT A PARTY U/S 40A2(B) OF THE ASSESSE LLP. RELATED DOCUMENTS OF COMMISSION TO HIM HAS ALREADY BEEN SUBMITTED TO YOUR OFFICE AS PER PARA 4.4 ABOVE. 4.11.4. ROOPA MALHOTRA IS A GRADUATE HAVING 7 YEARS OF EXPERIENCE HAVING PAN AS AHEPM4088P AND IS ASSOCIAT ED WITH SHAH TC GROUP SINCE FY 2010-11, CUSTOMERS FOR RELEVANT PRODUCTS PROVIDED BY HER WERE IND SWIFT LABORATORIES LTD., MSN ORGANICS PVT. LTD., SAGAR RU BBER PRODUCTS PVT. LTD. SHE IS NOT A PARTY U/S 40A2(B) O F THE ASSESSE LLP. RELATED DOCUMENTS OF COMMISSION TO HER HAS ALREADY BEEN SUBMITTED TO YOUR OFFICE AS PER PARA 4 .4 ABOVE. 4.12. FROM THE ABOVE DISCUSSIONS, IT IS AMPLY CLEAR THAT ALL EXPENSES WERE INCURRED ONLY FOR THE BUSINESS PURPOS ES AND ARE ALLOWABLE UNDER RELEVANT PROVISIONS INCLUDING S ECTION 37 OF THE INCOME TAX ACT, 1961. ITA NO.1890/DEL/2020 ZME GLOBAL INDIA LLP 11 C. WITH REGARD TO SALARIES - THE SAME HAS BEEN REQUISITIONED VIDE ORDER SHEET NOTING DATED 07.09.2017. THE ASSES SEE FILED COMPLETE DETAILS ALONG WITH THE APPOINTMENT L ETTERS OF THE EMPLOYEES VIDE REPLY DATED 15.09.2017. D. WITH REGARD TO DIWALI, EXHIBITION & BUSINESS PROMOT ION EXPENSES - THE REPLIES HAVE BEEN GIVEN VIDE LETTER DATED 18.08.2017 AT POINT NO. 1 AND 28.11.2017 AT POINT N O. 4.5. THE OBSERVATION OF THE LD. PCIT THAT THE ASSESSEE H AS GOT ONLY 15 CUSTOMERS AND 13 VENDORS AND HENCE AND THE REQUIREMENTS OF THE GIFTS CANNOT BE MORE THAN THE CUSTOMERS AND VENDORS IS AN ANTITHESIS FOR DEVELOPM ENT OF ANY BUSINESS. THE ASSESSEE DISTRIBUTES DIARIES, CAL ENDARS AND TOTAL GIFTS DURING THE EXHIBITION PARTICIPATED SO AS TO ATTRACT WIDER CUSTOMER BASE IS ALSO NOT OUT OF CONT EST TO MENTION THAT THE ASSESSING OFFICER HAS ALREADY DISA LLOWED 40% OF THE DIWALI EXPENSES IN THE ORDER U/S 143(3). 10. THUS, WE FIND THAT THE AO HAS DULY EXAMINED THE ISSUES RAISED BY THE LD. PCIT. FURTHER, WE FIND THAT THE C ONCLUSION PARA 13 OF THE LD. PCIT IN THE ORDER PASSED U/S 263, 13. THUS, THE ASSESSMENT ORDER PASSED U/S 143(3) DATED 19.12.2017 FOR A.Y 2015-16 IS BOTH ERRONEOUS & PREJ UDICIAL TO THE INTEREST OF REVENUE. IT IS ABSOLUTELY CLEAR THAT DURING THE ASSESSMENT PROCEEDINGS FOR AY 2015-16, AO HAS N OT MADE PROPER ENQUIRY AND VERIFICATION OF THE ISSUE M ENTIONED ABOVE. THERE WAS NO APPLICATION OF MIND ON ISSUES I N HAND AS NARRATED ABOVE. THIS HAS RENDERED ASSESSMENT ORDER ERRONEOUS. IF DUE TO AN ERRONEOUS ORDER OF THE AO THE REVENUE IS LOSING TAX LAWFULLY PAYABLE BY A PERSON, IT WOULD BE CERTAINLY PREJUDICIAL TO THE INTEREST OF REVENUE . IN CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (2000) 243 ITR 87 (SC) ITA NO.1890/DEL/2020 ZME GLOBAL INDIA LLP 12 HONBLE APEX COURT HELD THAT THERE WAS NO MATERIAL TO SUPPORT THE CLAIM OF APPELLANT & YET AO ACCEPTED TH E ENTRY IN THE STATEMENT OF ACCOUNT IN ABSENCE OF ANY SUPPORTI NG MATERIAL AND WITHOUT MAKING ANY INQUIRY. IT IS INCU MBENT ON THE OFFICER TO INVESTIGATE THE FACTS STATED IN THE RETURN. THE ORDER BECOMES ERRONEOUS IF SUCH AS ENQUIRY HAS NOT BEEN MADE AS HELD IN CASE OF DUGGAL & CO. VS. CIT (1998) 220 ITR 458 (DEL.). 13.1 WHERE THE ASSESSING OFFICER KEEPS A LETTER ON RECORD AND DOES NOT CARRY OUT NECESSARY INVESTIGATIONS WHI CH ARE PER SE REQUIRED TO VERIFY THE CORRECTNESS OF THE AV ERMENTS, THERE BEING AN ERROR IN THE SENSE THAT HE HAS FAILE D TO CARRY OUT THE REQUISITE ENQUIRY WHICH CAN BE RECTIFIED IN A REVISION. THUS THE COMMISSIONER WAS TO PASS A FRESH ORDER UND ER SECTION 283 AFTER HEARING THE ASSESSES [CIT VS. DLF POWER LTD., (2012) 345 ITR 448(DEL.)]. 13.2 THE HONBLE DELHI HIGH COURT IN THE CASE OF C IT VS. SHRI BRAHAM DEV GUPTA IN ITA NO. 907/2017 AND 1162/2017 HAS CLEARLY DECIDED THAT PR. COMMISSIONER OF INCOME TAX CAN INVOKE THE PROVISION OF SECTION 263 OF INCOME TAX A CT WHERE AO HAS NOT MADE ADEQUATE ENQUIRY AND VERIFICATION. IN THIS MATTER, SLP OF THE ASSESSEE HAS ALSO BEEN DISMISSED BY HONBLE APEX COURT. 13.3 FURTHER, SECTION 263 OF THE ACT AND AMENDMENT MADE IN EXPLANATION 2 TO SECTION 263 STATES THAT THE PRINCIPAL COMMISSIONER OR] COMMISSIONER MAY C ALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY TH E ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS P REJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MA KING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSA RY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, ITA NO.1890/DEL/2020 ZME GLOBAL INDIA LLP 13 INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSES SMENT, OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASS ESSMENT. EXPLANATION 1.-......... EXPLANATION 2.- FOR THE PURPOSES OF THIS SECTION, I T IS HEREBY DECLARED THAT AN ORDER PASSED BY THE ASSESSING OFFI CER SHALL BE DEEMED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUD ICIAL TO THE INTERESTS OF THE REVENUE, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER,- 1. THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION, WHICH SHOULD HAVE BEEN MADE; 2. THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQUIRING INTO THE CLAIM; 3. THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH A NY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; OR 4. THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WITH ANY DECISION WHICH IS PREJUDICIAL TO THE ASSESSEE, REND ERED BY THE JURISDICTIONAL HIGH COURT OR SUPREME COURT IN THE C ASE OF THE ASSESSEE OR ANY OTHER PERSON. CAN BE HELD TO BE MISPLACED IN THE FACE OF THE FACT S NARRATED ABOVE AND AGAINST THE PROVISIONS OF SECTION 263 AS NEITHER WHAT IS PREJUDICIAL TO THE INTEREST OF REVENUE NOR ERROR IN THE ASSESSMENT HAS BEEN BROUGHT TO THE FORE BY THE LD. PCIT. EVEN THE OBSERVATION OF THE LD. PCIT THAT THERE WAS NO M ATERIAL TO SUPPORT THE CLAIM OF THE APPELLANT AND AT AO ACCEPT ED WITHOUT VERIFICATION IS FOUND TO BE CONTRARY TO THE MATERIA L AVAILABLE ON RECORD. THE AO IS NOT EXPECTED TO EXAMINE MINUTELY THE UTILIZATION OF 150 WALL CLOCKS, 200 DIARIES AND THE CALENDARS TO WHOM THEY HAVE BEEN GIVEN AND WHETHER IT IS FOR BUS INESS ITA NO.1890/DEL/2020 ZME GLOBAL INDIA LLP 14 PURPOSE OR NOT, IF SO, WHAT IS THE BENEFITS DERIVED THEREOF. THE LD. PCIT HAS ALSO NOT BROUGHT ANYTHING ON RECORD WI TH REGARD TO THE PREJUDICE OR ERROR IN THE ASSESSMENT WHICH LED OR INDICATE TO LOSS OF REVENUE BY THE WAY OF BRINGING ANY COGENT M ATERIAL ON RECORD. NO MATERIAL WHATSOEVER HAS BEEN BROUGHT ON RECORD BY THE COMMISSIONER WHICH SHOWS THAT THERE WAS ANY DIS CREPANCY FOR FALSITY IN SUBMISSIONS FURNISHED BY THE ASSESSE E, THE ORDER OF THE ASSESSING OFFICER CANNOT BE SET ASIDE FOR MA KING DEEP ENQUIRY IN A HEURISTIC WAY ONLY ON THE PRESUMPTION AND ASSUMPTION THAT SOMETHING NEW MAY COME OUT. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/09/2021. SD/- SD/- (KUL BHARAT) (DR. B. R. R. KUMAR) JUDICIAL MEMBER AC COUNTANT MEMBER DATED: 07/09/2021 *SUBODH KUMAR, SR. PS* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR