Srinivasa Hair Industries, Eluru V. Assistant Commissioner of Income Tax., Eluru

ITA 194/VIZ/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8590 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 17-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SONOWAL
• Keywords: Sale consideration of property below Jantri Value; Depreciation; Period of limitation; Cost of acquisition; Difference of opinion
• Section: 143(3); 50C; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . . , BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , ACCOUNTANT MEMBER . / I . T .A.NO. 194 /VIZ/ 201 8 ( / ASSESSMENT YEAR: 20 1 3 - 20 1 4 ) M/S SRINIVASA HAIR INDUSTRIES P.B.NO.8 EASTERN STREET ELURU [PAN : A ALFS8434M ] ASST. COMMISSIONER OF INCOME TAX CIRCLE - 1 ELURU ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI G.V.N.HARI , AR / RESPONDENT BY : S HRI D.K.SONOWAL , CIT DR / DATE OF HEARING : 11 . 1 2 . 2018 / DATE OF PRONOUNCEMENT : 03 . 01 .201 9 / O R D E R PER D.S. SUNDER SINGH, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE PRINCIPAL COMMISSIONER OF INCOME TAX (PR.CIT ), RAJAHMUNDRY VIDE F.NO.9/263/PR.CIT/RJY/2017 - 18 DATED 28 . 03 .201 8 FOR THE A SSESSMENT Y EAR (A.Y.) 20 13 - 14 . 2 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU 2. IN THIS CASE, THE ASSESSEE FILED THE RETURN OF INCOME DECLARING TOTAL INCOME OF RS.3,54,65,050/ - ON 26.09.2013 AND THE ASSESSMENT WAS COMPLETED U/S 143(3) BY AN ORDER DATED 21.04.2015 ( WRONGLY TYPED AS 21.04.2014) ON TOTAL INCOME OF RS.3,61,81,321/ - . SUBSEQUENTLY, THE PR.CIT, RAJAHMUNDRY HAS TAKEN UP THE CASE FOR REVISION U/S 263 AND NOTICED THAT (I) THE ASSESSEE HAS TRANSFERRED AN AMOUNT OF RS.6,5 2,39,273/ - FROM THE TRADE CREDITORS TO THE CAPITAL ACCOUNTS OF THE PARTNERS OF THE FIRM WHICH WAS EXPLAINED BEFORE THE AO VIDE LETTER DATED 16.04.2015 THAT THE AMOUNTS WERE TRANSFERRED FOR THE PURPOSE OF BANK LOANS AND NO CESSATION OF LIABILITY. THE PR.CIT WAS OF THE VIEW THAT THE CONTENTION OF THE ASSESSEE WAS NOT SUBSTANTIATED WITH PROPER EVIDENCE , HENCE , THE LD.PR.CIT VIEW ED THAT THE CREDITORS WERE TRANSFERRED TO THE CAPITAL ACCOUNTS OF THE PARTNERS AND THE LIABILITY OF FIRM TO THE EXTENT CEASE D TO EXIS T AND THE PROVISIONS OF SECTION 41(1) ARE APPLICABLE. THE AO DID NOT VERIFY THE APPLICATION OF 41(1), HENCE OBSERVED THAT THE ASSESSMENT ORDER PASSED BY THE AO U/S 143(3) R.W.S. 147 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. (II ) FROM THE CONFIRMATION LETTERS OBTAINED FROM THE COMMON CREDITORS FOR THE CURRENT YEAR AND THE SUBSEQUENT ASSESSMENT YEARS, THE LD.PR.CIT NOTICED THAT ALL OF THEM ARE FROM KOLKATA AND THERE WAS MISMATCH 3 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU OF SIGNATURES OF THE SAME PERSONS AND THE GENUINENESS OF THE CREDITORS WAS NOT INVESTIGATED BY THE AO. ( III ) THE PR.CIT FURTHER OBSERVED THAT THE ASSESSEE HAD INCURRED INTEREST EXPENDITURE OF RS.10.58 CRORES ON BORROWED CAPITAL AND AS PER THE BALANCE SHEET, EXCEPT SUNDRY CREDITORS, RESERVES AND SURPLUSES OTHER FUNDS ARE INTEREST BEARING FUNDS. DURING THE YEAR, THE BUILDING AT VIJAYARAI VILLAGE WAS STATED TO HAVE BEEN COMPLETED AT TOTAL COST OF RS.3.36 CRORES ON WHICH DEPRECIATION WAS ALSO CLAIMED. THE PR.CIT OBSERVED THAT THE ASSESSEE CLAIMED THE INTEREST DURING THE CONSTRUCTION PERIOD OF THE BUILDING FOR WHICH IT IS NOT ELIGIBLE FOR DEDUCTION AS PER THE PROVISIONS OF SECTION 36(1)(III) AND THE SAID INTEREST NEEDS TO BE DISALLOWED. SIMILARLY, UNDER THE HEAD SUNDRY DEBTORS THE ASSESSEE HAD SHOWN AN AMOUNT O F RS.3.23 CRORES TOWARDS JOINT CONSTRUCTION ACCOUNT OF PARTNERS AT KOPPAL, KARNATAKA ON WHICH DEPRECIATION WAS NOT CLAIMED, WHICH INDICATES THAT THE ASSET HAS NOT BEEN PUT TO USE, HENCE, VIEWED THAT INTEREST PERTAINING TO THE FUNDS BORROWED AND INVESTED DU RING THE PRE - CONSTRUCTION PERIOD NEEDS TO BE DISALLOWED AS PER THE PROVISIONS OF SECTION 36(1)(III) OF THE ACT. ( IV ) LD.PR. CIT ALSO FOUND THAT THE ASSESSEE HAS SHOWN M/S MADHULATHA ENTERTAINMENT AS DEBTOR FOR AN AMOU N T OF RS.2.68 CRORES AND 4 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU AN AMOUNT OF RS.10.63 LAKHS WAS COLLECTED AS INTEREST RECEIPT AND OBSERVED THAT THE INTEREST COLLECTED BY THE ASSESSEE WAS VERY LESS COMPARED TO BANK LENDING RATE. THEREFORE, THE INTEREST ATTRIBUT ABLE TO THE ADVANCES GIVEN TO MADHULATHA ENTERTAINMENT REQU IRED TO BE DISALLOWED. (V ) THE ASSESSEE OWNS RESIDENTIAL APARTMENTS VALUED AT RS.90.65 LAKHS IN M/S VAIBHAV FORT, ELURU AND CLAIMED DEPRECIATION OF 4.65 LAKHS ON THE SAME. THE AO DID NOT VERIFY WHETHER THE COST OF APARTMENT INCLUDES THE LAND VALUE OR NO T AND DEPRECIATION REQUIRED TO BE RESTRICTED TO THE COST OF THE BUILDING EXCLUDING THE LAND VALUE. ( VI ) THE LD.PR.CIT ALSO OBSERVED THAT THE VALUE OF CLOSING STOCK WAS SHOWN AT RS.553/ - PER KG., W HEREAS THE ACTUAL PURCHASE RATE OF MATERIAL WA S RS.4,314/ - PER KG. THE ASSESSEE ALSO HAD CLAIMED PROCESS LOSS OF 2.45 LAKH KGS. THE CORRECTNESS OF BOTH THE VALUE OF CLOSING STOCK AND PROCESS LOSS WAS NOT VERIFIED BY THE AO. 3. IN VIEW OF THE ABOVE, THE PR.CIT WAS OF THE VIEW THAT THE ASSESSMENT ORDER PASSE D U/S 143(3) DATED 21.04.2015 WA S PRIMA FACIE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE, HENCE, ISSUED NOTICE U/S 263 DIRECTING THE ASSESSEE TO EXPLAIN AS TO WHY THE ASSESSMENT SHOULD NOT BE REVISED. IN RESPONSE TO THE NOTICE ISSUED, THE AS SESSEE FILED DETAILED 5 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU EXPLANATION ISSUE WISE AND OBJECTED FOR REVISION. IN RESPECT OF TRADE CREDITORS, THE ASSESSEE EXPLAINED THAT THERE WAS NO CESSATION OR REMISSION OF LIABILITY AND THE TRADE CREDITORS WERE TRANSFERRED TO THE PARTNERS CAPITAL ACCOUNT ONL Y WITH AN INTENTION TO INCREASE THE CAPITAL BASE FOR OBTAINING THE BETTER BANK CREDIT FACILITIES AND IN THE SUBSEQUENT YEAR THE BALANCES WERE RETRANSFERRED TO THE RESPECTIVE CREDITORS ACCOUNT THUS SUBMITTED THAT THERE WAS NO BENEFIT OBTAINED BY THE ASSESSE E . 4. IN RESPECT OF PROPOSED DISALLOWANCE U/S 36(1)(III) FOR CONSTRUCTION OF BUILDING AT VIJAYARAI VILLAGE AND KOPPAL, THE ASSESSEE EXPLAINED AND FURNISHED THE DETAILS STATING THAT NO INTEREST BEARING FUNDS WERE DIVERTED AND OWN FUNDS WERE UTILIZED FOR CONSTRUCTION, THUS, THERE IS NO CASE FOR DISALLOWANCE OF INTEREST. 5. IN RESPECT OF DEBIT BALANCE IN THE CASE OF MADHULATHA ENTERTAINMENT, THE ASSESSEE EXPLAINED THAT THERE ARE SUFFICIENT INTEREST FREE FUNDS AVAILABLE TO THE ASSESSEE, HEN C E THE QUES TION OF CHARGING INTEREST DOES NOT ARISE. THE ASSESSEE FURTHER A EXPLAINED THAT AGAINST THE BANK LENDING RATE OF 7.75%, THE ASSESSEE HAS COLLECTED THE INTEREST AT 6% P.A., HENCE, THERE IS NO CASE FOR DISALLOWANCE OF INTEREST FOR DIVERSION OF FUNDS. 6 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU 6 . WITH REGARD TO DEPRECIATION ON RESIDENTIAL APARTMENT AT VAIBHAV FORT, ELURU, THE ASSESSEE EXPLAINED THAT NO SEPARATE COST WAS ALLO CAT ED TO THE LAND AND THE SUPER STRUCTURE OF THE APARTMENT AND IT WAS COMPOSITE COST CONSISTING OF THE UNDIVIDED SHARE OF LA ND AND BUILDING . SINCE THE LAND VALUE WAS NOT SEPARATELY SHOWN, THE DEPRECIATION WAS CLAIMED ON COMPOSITE COST OF THE APARTMENT . IT WAS ALSO STATED THAT DURING THE ASSESSMENT PROCEEDINGS, THE ORIGINAL DOCUMENTS WERE PRODUCED BEFORE THE AO WHICH WAS VERIFIED AND ALLOWED THE DEPRECIATION , HENCE, THERE IS NO CASE OF EXCESS CLAIM OF DEPRECIATION. 7. IN RESPECT OF CLOSING STOCK, THE ASSESSEE EXPLAINED THAT THE IT COLLECTS VARIETIES OF HUMAN HAIR AND SEGREGATES THE SAME INTO DIFFERENT GRADES AND THE AVERAGE PRICE OF CLOSING STOCK DEPENDS ON THE GRADE WHICH IS RANGING FROM RS.14 TO RS.4,854/ - PER KG .THE ASSESSEE FURTHER SUBMITTED THAT IT HAS VALUED THE CLOSING STOCK CORRECTLY GRADE WISE AND DECLARED THE SAME IN THE FINANCIAL STATEMENTS. IT WAS ALSO STATED THAT THE COMPLETE DETAILS WERE PLACED BEFORE THE AO AT THE TIME OF ASSESSMENT WHICH WAS VERIFIED BY THE AO AND ACCEPTED THE TRADING RESULTS, THUS, THERE IS NO CASE FOR REVISION U/S 263. 7 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU 8. THE LD.PR.CIT CONSIDERED THE EXPLANATION OFFERED BY THE ASSESSEE AND NOT BEING CONVINCED WITH THE EXPLANATION HELD THAT THE ASSESSMENT MADE U/S 143(3) WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND ACCORDINGLY SET ASIDE THE ASSESSMENT AND DIRECTED THE AO TO MAKE THE ADDITION OF RS.6,52,39 ,273/ - RELATING TO TRADE CREDITORS WHICH WAS TRANSFERRED TO PARTNERS CAPITAL ACCOUNT U/S 41(1) OF THE ACT AND IN RESPECT OF OTHER ISSUES DIRECTED THE AO TO EXAMINE AND VERIFY THE ISSUES AND REDO THE ASSESSMENT AFRESH AS PER LAW. 9. AGGRIEVED BY THE ORDER OF THE LD.PR.CIT, THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. APPEARING FOR THE ASSESSEE, THE LD.AR SUBMITTED THAT IN THIS CASE, THE ASSESSMENT WAS COMPLETED U/S 143(3)ORIGINALLY AND DURING ASSESSMENT PROCEEDINGS, THE AO HAS CALLED FOR ALL THE DETAIL S RELATING TO THE ISSUES RAISED BY THE PR,CIT AND EXAMINED THE SAME AND COMPLETED THE ASSESSMENT THUS TAKEN A CONSCIOUS DECISION NOT TO MAKE THE ADDITION AND ACCEPTED THE CONTENTIONS OF THE ASSESSEE. THE LD.AR REFERRING TO PAPER BOOK PAGE NO.98 SUBMITTED THAT IN THE SHOW CAUSE LETTER ISSUED BY THE PR.CIT DATED 22.01.2018, OBSERVED THAT THE AO HAS CALLED FOR THE DETAILS OF TRANSFER OF TRADE CREDITORS TO THE PARTNERS CAPITAL ACCOUNT AND THE ASSESSEE EXPLAINED THE SAME TO THE AO VIDE LETTER 16.04.2015, WHERE IN THE IT WAS 8 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU EXPLAINED THAT THE TRADE CREDITORS WERE TRANSFER RED TO PARTNERS CAPITAL ACCOUNT AND THE LIABILITY OF TRADE CREDITORS W AS TAKEN OVER BY PARTNERS AND THUS THERE IS NO CASE FOR REMISSION OR CESSATION OF LIABILITY AND NO CASE FOR APPLICATION OF SECTION 41(1) OF THE ACT. THE LD.AR ARGUED THAT FROM VERY READING OF THE SHOW CAUSE NOTICE ISSUED BY PR.CIT IT IS ESTABLISHED THAT THE ISSUE WAS VERIFIED BY THE AO. THE LD.AR REFERRING TO PAGE NO.28 OF THE PAPER BOOK, SUBMITTED THAT THE AO HAS CALLED FOR THE FULL DETAILS OF PURCHASES, OPENING STOCK AND OTHER EXPENSES. REFERRING TO PAGE NO.28 THE AR STATED THAT IN QUESTION NO.2, THE AO HAS CALLED FOR THE DETAILS OF INTRODUCTION OF CAPITAL AND ITS SOURCES WHICH THE ASSESSEE EXPLAINED TO THE AO FURNISHING THE COPIES OF THE PARTNERS CAPITAL ACCOUNT IN PAGE NO.33 AND 41 OF PAPER BOOK AND EXPLAINED THE TRANSFER OF TRADE CREDITORS BALANCE OF RS.3,15,08,585/ - RELATING TO MD.MAHASIN ALI KHAN TO ONE OF THE PARTNERS MR. KANIGOLLA KUMAR CAPITAL ACCOUNT. SIMILARLY I N PAGE NO.34, A SUM OF RS.3,37,30,688/ - RELATING TO THE TRADE CREDITOR HABIBULLA MALLICK, BHAGWANPUR, MAYBULLA MALLICK, BHAGWANPUR AND TAKKA KHAN, BHAGWANPUR W ERE TRANSFERRED REPRESENTING THE SUM OF RS.1,32,19,285/ - , RS.90,38,030/ - AND RS.1,14,73,373/ - RES PECTIVELY TO THE CAPITAL ACCOUNT OF KANIGOLLA SRINIVASA GUPTA. SUBSEQUENTLY ON 1 ST APRIL, THE ENTIRE AMOUNT WAS TRANSFERRED BACK TO THE RESPECTIVE TRADE CREDITORS ACCOUNT AND THE PAYMENT 9 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU WAS MADE BY CHEQUE. RELEVANT ACCOUNT COPIES OF THE TRADE CREDITORS A CCOUNTS WERE ENCLOSED IN PAGE NO.47 TO 53 OF PAPER BOOK AND ARGUED THAT ENTIRE THE INFORMATION WAS FURNISHED BEFORE THE AO AT THE TIME OF ASSESSMENT WHICH WAS VERIFIED AND COMPLETED THE ASSESSMENT WITHOUT MAKING ANY ADDITION. IT IS INCORRECT TO SAY THAT THE AO DID NOT VERIFY THE ISSUE AT THE TIME OF ASSESSMENT. SINCE THE AO HAS VERIFIED THE ISSUE AND TAKEN A CONSCIOUS DECISION NOT TO MAKE ANY ADDITION, THE LD.AR ARGUED THAT THERE IS NO ERROR IN THE ASSESSMENT ORDER WHICH CAUSED PREJUDICE TO THE ASSESSMEN T, THUS REQUESTED TO QUASH THE REVISION ORDER PASSED U/S 263. 10. IN RESPECT OF DISALLOWANCE OF INTEREST U/S 36(1)(III) RELATING TO THE CONSTRUCTION OF BUILDING AT VIJAYARAI VILLAGE AND KOPPAL, KARNATAKA THE LD.AR REFERRING TO BALANCE SHEET FILED BY THE ASSESSEE, SUBMITTED THAT THE ASSESSEE IS HAVING INTEREST FREE FUNDS OF RS.45,81,65,230 CONSISTING OF RESERVES AND SURPLUSES AND TRADE CREDITORS. THE INVESTMENT FOR CONSTRUCTION OF BUILDING WAS MADE OUT OF INTEREST FREE FUNDS AVAILABLE TO THE ASSESSEE, THEREFORE, THE QUESTION OF DISALLOWANCE DOES NOT ARISE. SIMILARLY IN THE CASE OF KOPPAL VILLAGE ALSO NO INTEREST BEARING FUNDS WERE USED FOR THE PURPOSE OF CONSTRUCTION. THE ASSESSEE SUBMITTED THE VARIOUS CREDIT BALANCES AVAILABLE AND UTILIZATION OF FUNDS AND DEMONSTRATE D THAT NO 10 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU INTEREST BEARING FUNDS WERE UTILIZED FOR TH E PURPOSE OF CONSTRUCTION OF BUILDINGS AT KOPPAL AND VIJARAI VILLAGE. REFERRING TO PAPER BOOK PAGE NO.28, THE ASSESSEE SUBMITTED THAT THE AO CALLED FOR THE DETAILS OF ADDITIONS TO FIXED ASSETS AND DETAILS OF UNSECURED LOANS AND THE INTEREST PAID THERE ON, OTHER BANK LOANS AND INTEREST PAID WERE CALLED FOR AND WAS PLACED BEFORE THE AO VIDE QUESTIONNAIRE DATED 26.02.2015, THE AO HAS EXAMINED ALL THE EVIDENCES FURNISHED AND ALLOWED THE INTEREST DEBITED TO P&L A/C CLAIMED AS EXPENDITURE AND NO ADDITIONS WAS MA DE. THE AO VERIFIED THE BOOKS OF ACCOUNTS, BILLS, VOUCHERS DURING THE SCRUTINY PROCEEDINGS AND SATISFIED THAT THAT THERE IS NO DISALLOWANCE REQUIRED TO BE MADE FOR CONSTRUCTION OF BUILDING . THE LD.AR ARGUED THAT SINCE , THE AO HAS ALREADY VERIFIED THE ISS UES RELATING TO UNSECURED LOANS AND INTEREST THERE ON, THERE IS NO ERROR IN THE ASSESSMENT ORDER PASSED BY THE AO AND THERE IS NO CASE FOR INVOKING THE JURISDICTION U/S 263 OF THE ACT. 11. TRADE CREDITORS : IN RESPECT OF OTHER COMMON CREDITORS, THE LD.AR INVITED OUR ATTENTION TO THE QUESTIONNAIRE ISSUED BY THE AO CALLING FOR THE CONFIRMATION FROM THE CREDITORS WHICH WAS PLACED BEFORE THE AO VIDE REPLY DATED 09.04.2015. DETAILS AND CONFIRMATIONS WERE PROVIDED BY THE ASSESSEE AND EXAMINED BY THE AO AND ACCE PTED THE GENUINE NE SS OF TRADE 11 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU CREDITORS. THUS, THERE IS NO CASE FOR SUSPECTING THE GENUINE NE SS AND REVISIN G THE ORDER U/S 263 OF THE ACT. IN RESPECT OF INTEREST CHARGED TO MADHULATHA ENTERPRISES, THE ASSESSEE EXPLAINED THAT THE INTEREST FREE FUNDS ARE AVAILABLE TO THE ASSESSEE FROM WHICH THE ASSESSEE HAS MADE THE ADVANCES. THE LD. A.R FURTHER SUBMITTED THAT THE ASSESSEE IS AT LIBERTY TO ADVANCE THE LOANS WITHOUT CHARGING ANY INTEREST FROM THE INTEREST FREE FUNDS. HOWEVER, AGAINST THE INTEREST CHARGED BY THE BANK AT 7.75%, THE ASSESSEE HAS CHARGED INTEREST AT 6% ON THE DATE, WHICH IS REASONABLE. DURING THE ASSESSMENT PROCEEDINGS, THE BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE AO AND THE AO HAD CALLED FOR THE DETAILS OF INTEREST PAYMENTS AND TDS THEREO N ON UNSECURED LOANS AND THEN ALLOWED THE INTEREST DEBITED TO P&L A/C , HENCE , ARGUED THAT THE ISSUE WAS VERIFIED BY THE AO IN DETAIL AND THERE IS NO CASE FOR REVISION U/S 263. 12. IN RESPECT OF DEPRECIATION OF APARTMENT, THE ASSESSEE SUBMITTED THAT DUR ING THE ASSESSMENT PROCEEDINGS, THE AO HAS CALLED FOR THE ADDITIONS TO ASSETS AND THE ASSESSEE HAD SUBMITTED THE ORIGINAL PURCHASE DEED WHICH WAS EXAMINED BY THE AO . I N THE ORIGINAL PURCHASE DEED, THERE IS NO SEPARATE ALLOCATION COST FOR LAND AND THE SUPER STRUCTURE THUS THERE IS NO CASE FOR DISALLOWING THE DEPRECIATION ON BUILDING. THE AO AFTER VERIFICATION OF THE 12 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU SALE DEED ALLOWED THE DEPRECIATION, THEREFORE, THERE IS NO ERROR IN THE ASSESSMENT MADE BY THE AO, AND ARGUED THAT THERE IS NO CASE FOR REVISIO N U/S 263 OF THE ACT. 13. IN RESPECT OF CLOSING STOCK, THE ASSESSEE INVITED OUR ATTENTION TO QUESTIONNAIRE ISSUED BY THE AO IN PAGE NO.28 OF THE PAPER BOOK IN QUESTION NO.3 WH E REIN THE DETAILS WERE CALLED FOR WITH REGARD TO VALUATION OF CLOSING STOCK AN D LOSS OF STOCK DUE TO OBSOLETE / DAMAGED VIDE QUESTIONNAIRE DATED 26.02.2015. THE ASSESSEE SUBMITTED COMPLETE DETAILS OF THE VALUATION OF CLOSING STOCK AS PER PAGE NO.53 OF THE PAPER BOOK. IT WAS STATED BY THE AR THAT THE VALUATION OF CLOSING STOCK WAS FURNISHED BEFORE THE AO WITH OPENING STOCK PURCHASES, LOSSES AND THE CLOSING STOCK DURING THE ASSESSMENT PROCEEDINGS . IN PAGE NO.54, THE ASSESSEE HAS FURNISHED VARIOUS GRADES OF CLOSING STOCK IN QUANTITY AND AVERAGE PRICE AND STATED THAT IT WAS SUBMITTED BEFORE THE AO AND ARGU ED THAT SINCE TH E AO HAS CALLED FOR THE DETAILS, EXAMINED THE ISSUE AND NO ADDITION WAS MADE, IT SHOWS THE SATISFACTION OF THE AO REGARDING THE CORRECTNESS OF VALUATION OF CLOSING STOCK AND ACCORDINGLY ARGUED THAT THERE IS NO ERROR IN THE ASSESSMENT ORDE R AND REQUESTED TO QUASH THE REVISION ORDER PASSED BY THE PR.CIT U/S 263 OF THE ACT. 13 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU 14. ON THE OTHER HAND, THE LD.DR VEHEMENTLY SUPPORTED THE ORDERS OF THE PR.CIT AND ARGUED THAT IN THE CASE OF TRADE CREDITORS SINCE THE ASSESSEE HAS TRANSFERRED THE OUTSTANDING TRADE CREDITORS TO THE PARTNERS CAPITAL ACCOUNTS THE ADDITION REQUIRED TO BE MADE U /S 41(1) OF THE A CT AND REQUESTED TO UPHOLD THE ORDER OF THE LD.PR.CIT. 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD. THE FIRST ISSUE IN THIS CASE IS RELATED TO THE TRADE CREDITORS AMOUNTING TO RS.6,52,39,273/ - TRANSFERRED TO CAPITAL ACCOUNTS OF THE PARTNERS OF THE FIRM. IT IS ESTABLISHED BY THE LD.AR THAT THE AO HAS CALLED FOR THE DETAILS DURING THE ASSESSMENT PROCEEDINGS AND THE ASSESSEE HAD EXPLAINED THE REASONS FOR TRANSFER TO THE PARTNERS CAPITAL ACCOUNT VIDE LETTER DA TED 16.04.2015. THE CONTENTION OF THE ASSESSEE IS , AS AT THE END OF THE YEAR TO INCREASE THE CAPITAL BASE FOR BETTER BANK LOAN FACILITIES, THE AMOUNTS WERE TRANSFERRED TO CAPITAL ACCOUNTS OF THE PARTNERS. VERIFICATION OF THE BALANCE SHEET SHOWS THAT THE C APITAL ACCOUNT BALANCES OF THE PARTNERS ARE SHOWING BALANCE I.E. 13.17 CRORES INCLUDING THE TRANSFER OF TRADE CREDITORS AMOUNTING TO RS.6.52 CRORES. IF TRADE CREDITORS ARE EXCLUDED THE PARTNERS CAPITAL ACCOUNT SHOW S ONLY 6.25 CRORES AS AGAINST THE LIABILI TIES OF RS.51 .00 CRORES WHICH SHOWS POOR STATE OF FINANCIAL S FOR BANK LOAN FACILITIES. 14 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU THEREFORE, THE ASSESSEE HAS RESORTED FOR WINDOW ADDRESSING TO INFLATE THE CAPITAL BASE TO GET BETTER FACILITIES FROM THE BANKS. THE EXPLANATION OFFERED BY THE ASSESSEE APPEARS TO BE REASONABLE AND IS A NORMAL PRACTICE IN THE TRADING COMMUNITY THOUGH IT IS UNETHICAL. THE ASSESSEE HAS RETRANSFERRED THE CREDITORS BALANCES IN THE SUBSEQUENT YEARS TO THE RE SPECTIVE TRADE CREDITOR WHICH IS EVIDENT FROM THE TRADERS ACCOUNT CO PIES FURNISHED IN PAGE NO.47 TO 51 OF THE PAPER BOOK. IN THE CASE OF MD.MAHASIN ALI KHAN, BHAGWANPUR, THE ASSESSEE HAS RETRANSFERRED THE SUM OF RS.3,15,08,585/ - TO THE TRADERS ACCOUNT AND SUBSEQUENTLY MADE PURCHASES AND AS WELL AS PAYMENTS THROUGH BANK CHEQUE AND THERE WAS NO CASH PAYMENT. SIMILARLY IN THE CASE OF HABIBULLA MALLICK, BHAGWANPUR, THE AMOUNT WAS TRANSFERRED TO ONE OF THE PARTNERS CAPITAL ACCOUNT OF SRI KANIGOLLA SRINIVASA GUPTA AND THE SAID SUM OF RS.1,32,19,285/ - WAS TRANSFERRED BACK T O THE TRADE CREDITORS ACCOUNT ON APRIL 13. THE CREDIT IN THE CASE OF MD.MAHASIN ALI KHAN BHANWANPUR WAS TRANSFERRED BACK TO THE CREDITORS ACCOUNT ON 10.04.2013 A SUM OF RS.90,38,030/ - . SIMILARLY CREDIT IN THE NAME OF TIKKA KHAN, BHAGWANPUR WAS ALSO TRANSF ERRED BACK TO THE CREDITORS ACCOUNT ON 10.04.2013. AFTER RETRANSFER OF THE CREDITS TO THE TRADE CREDITORS ACCOUNT S , THE ASSESSEE HAS MADE PURCHASES AND PAID THE ENTIRE SUMS THROUGH CHEQUE INCLUDING THE RETRANSFERRED AMOUNTS. THE AO EXAMINED THE PURCHASES AND 15 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU SALES AND ACCEPTED THE PURCHASES AND SALES. FROM THE SCRUTINY OF THE PARTNERS CAPITAL ACCOUNTS, TRADE CREDITORS ACCOUNT, WE UNDERSTAND THAT THE ASSESSEE HAS UNILATERALLY TRANSFERRED THE SUMS TO THE PARTNERS CAPITAL ACCOUNTS AND THERE WAS NO CESSATION OR REMISSION OF THE LIABILITY. THE SAME FACT IS ESTABLISHED AS PER THE ACCOUNT COPIES PLACED IN THE PAPER BOOK IN PAGE NO.47 TO 49 OF THE PAPER BOOK. IT IS SETTLED LAW THAT TO TAX THE TRADE CREDITORS BALANCES U/S 41(1) , THE CESSATION OR REMISSION OF THE L IABILITY HAS TO BE ALLOWED BY THE TRADE CREDITOR BUT NOT BY THE BENEFICIARY ASSESSEE AND THE ENTRIES MADE IN THE BOOKS OF ACCOUNTS ARE IMMATERIAL. THERE MUST BE CONSENT FORM THE CREDITOR TO WAIVE THE LIABILITY. THIS VIEW IS UPHELD BY THE HONBLE APEX COU RT IN THE CASE OF COMMISSIONER OF INCOME TAX VS SUGAULI SUGAR WORKS (P.) LTD 102 TAXMAN 713 , HONBLE APEX COURT HELD THAT JUST BECAUSE AN ASSESSEE MADE AN ENTRY IN HIS BOOKS OF ACCOUNT UNILATERALLY, HE CANNOT GET RID OF HIS LIABILITY. THE QUESTION WHETHER THE LIABILITY IS ACTUALLY BARRED BY LIMITATION, IS NOT A MATTER WHICH COULD BE DECIDED BY CONSIDERING THE ASSESSEE'S CASE ALONE BUT IT IS A MATTER WHICH HAS TO BE DECIDED ONLY IF THE CREDITOR IS BEFORE THE CONCERNED AUTHORITY. IN THE ABSENCE OF THE CREDITOR, IT IS NOT POSSIBLE FOR THE AUTHORITY TO COME TO A CONCLUSION THAT THE DEBT WAS BARRED AND HAD BECOME UNENFORCEABLE. THERE MAY BE CIRCUMSTANCES WHICH MAY ENABLE THE CREDITOR TO COME WITH A PROCEEDING FOR ENFORCEMENT OF THE DEBT EVEN AFTER EXPIRY OF THE NORMAL PERIOD OF LIMITATION AS PROVIDED IN THE LIMITATION ACT. THE PRINCIPLE THAT EXPIRY OF PERIOD OF LIMITATION PRESCRIBED UNDER THE LIMI T ATION ACT CANNOT EXTINGUISH THE DEBT BUT IT WILL ONLY PREVENT THE CREDITOR FROM ENFORCING THE DEBT IS WELL - SET TLED. MERE ENTRY IN THE BOOKS OF ACCOUNT OF THE DEBTOR MADE UNILATERALLY WITHOUT ANY ACT ON THE PART OF THE CREDITOR WOULD NOT ENABLE THE DEBTOR TO SAY THAT THE LIABILITY HAD COME TO AN END. APART FROM THAT THAT WOULD NOT BY ITSELF CONFER ANY BENEF IT ON THE DEBTOR AS CONTEMPLATED BY THE SECTION. THEREFORE, THE HIGH COURT WAS RIGHT IN HOLDING THAT THE ASSESSEE'S UNILATERAL ENTRY IN THE 16 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU ACCOUNTS TRANSFERRING THE AMOUNT TO THE CAPITAL RESERVE ACCOUNT WOULD NOT BRING THE MATTER WITHIN THE SCOPE OF SECTI ON 41. 15.1. SIMILARLY IN THE CASE OF SATPAL & SONS (HUF) V. ACIT CIRCLE - 38(1), NEW DELHI * 85 TAXMAN.COM 283 , THE COORDINATE BENCH OF ITAT DELHI HAS ALSO TAKEN SIMILAR VIEW. IN THE INSTANT CASE, THE ASSESSEE HAS TRANSFERRED THE TRADE CREDIT BALANCES TO THE CAPITAL ACCOUNTS WITHOUT ANY CONFIRMATION FROM THE TRADE CREDITOR FOR CESSATION OR REMISSION OF LIABILITY, HENCE, IT IS INCORRECT TO HOLD THAT THE SAID SUM REQUIRED TO BE BROUGHT TO TAX U/S 41(1) OF THE ACT. AS PER THE MATERIAL PLACED BEFORE US BY THE ASSESSEE AND DISCUSSED IN THE PRECEDING PARAGRAPHS CLEARLY ESTABLISH THAT THE AO HAS MADE REASONABLE AND SUFFICIENT ENQUIRIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THUS, THERE IS NO ERROR IN THE ORDER PASSE D BY THE AO AND THE LD.PR.CIT HAS INCORRECTLY INVOKED THE JURISDICTION U/S 263 OF THE ACT. THEREFORE, WE CANCEL THE ORDER OF THE PR.CIT U/S 263 ON THIS ISSUE AND ALLOW THE APPEAL OF THE ASSESSEE. 16. THE SECOND ISSUE FOR CONSIDERATION IS MISMATCH OF SIGNATURES OF THE TRADE CREDITORS IN THE CONFIRMATION LETTERS FOR THE IMPUGNED A.Y. AS WELL AS IN THE SUBSEQUENT A.Y. THE AO HAS CALLED FOR THE DETAILS OF SUNDRY CREDITORS OUTSTANDING AS AT THE END OF THE YEAR AS PER THE QUESTIONNAIRE ISSUED ON 26.02.2015 ( AS PER QUESTION NO.8 ) PAGE NO.28 OF THE PAPER BOOK. THE 17 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU ASSESSEE FURNISHED THE DETAILS OF THE CREDITORS AND THE CONFIRMATIONS VIDE LETTER DATED 09.04.2015 WHICH SHOWS THAT THE AO HAS CAUSED NECESSARY ENQ UIRIES BEFORE COMPLETING THE ASSESSMENT. THE ASSESSEE FURNISHED COPIES OF THE CONFIRMATION OF ACCOUNTS IN PAGE NO.55 OF THE PAPER BOOK. THE ASSESSEE HAS ALSO ENCLOSED THE ACCOUNT COPIES OF THE TRADE CREDITORS IN THE PAPER BOOK. ALL THE TRADE CREDITORS AR E RELATED TO THE PURCHASE OF HUMAN HAIR AND THE PAYMENT WAS MADE THROUGH CHEQUE. THE AO HAS ACCEPTED THE PURCHASES AND TAXED THE SALES. AFTER VERIFICATION OF THE CONFIRMATIONS, THE AO ACCEPTED THE GENUINENESS OF THE OUTSTANDING CREDITORS. HAVING VERIFIE D THE PURCHASES, SALES, PAYMENTS AND DID NOT FIND ANY INCONSISTENCY OR BOGUS NATURE OF THE TRANSACTION, THERE IS NO CASE FOR SUSPECTING THE GENUINENESS OF THE OUTSTANDING CREDIT MERELY BECAUSE THE PARTIES ARE FROM CALCUTTA AND THERE WAS SLIGHT CHANGE IN THE SIGNATURE. THE PR.CIT HAS NOT ESTABLISHED THE BOGUS NATURE OF TRANSACTION WITH TANGIBLE EVIDENCE. MERELY ON THE SUSPICION IT IS UNJUSTIFIED TO HOLD THAT THE CREDIT IS NOT BONAFIDE. SINCE THE ISSUE WAS VERIFIED BY THE AO AT THE TIME OF ASSESSMENT , THE PURCHASES AND SALES WERE ACCEPTED AND THE PAYMENTS WERE MADE THROUGH BANK CHEQUES , WHICH THE AO HAS VERIFIED ALL THE FACTS DURING THE COURSE OF ASSESSMENT, WE FIND NO ERROR IN THE ASSESSMENT ORDER WHICH CAUSED PREJUDICE TO THE DEPARTMENT. THEREFORE, WE HOLD THAT THERE IS NO CASE FOR JURISDICTION U/S 18 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU 236 ON THIS ISSUE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE PR.CIT AND ALLOW THE APPEAL OF THE ASSESSEE. 17. THE NEXT ISSUE IS DISALLOWANCE OF INTEREST ON BORROWED CAPITAL FOR CONSTRUCTION OF BUILDING AT VIJAYARAI VILLAGE AND KOPPAL KARNATAKA. IN THE CASE OF BUILDING AT VIJARAI VILLAGE, THE LD.PR.CIT HELD THAT THE INTEREST NEEDS TO BE DISALLOWED SINCE THE ASSESSEE HAS USED THE BORROWED FUNDS DURING THE CONSTRUCTION PERIOD. IN THE CASE OF KOPPAL ALSO, TH E PR.CIT VIEWED THAT THE INTEREST NEEDS TO BE DISALLOWED U/S 36(1)(III) OF THE ACT SINCE THE ASSESSEE HAS NOT CLAIMED THE DEPRECIATION. IN THE INSTANT CASE, THE ASSESSMENT WAS COMPLETED U/S 143(3) AND THE AO HAS CALLED FOR THE DETAILS OF UNSECURED LOANS AN D VERIFIED THE BALANCE SHEET, PROFIT & LOSS ACCOUNT, THE DETAILS OF BANK LOANS AND INTEREST PAYMENTS ETC. AND ALLOWED THE INTEREST DEBITED TO PROFIT & LOSS ACCOUNT AFTER THOROUGH SCRUTINY OF THE DETAILS AND THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE ASSES SEE HAS EXPLAINED VARIOUS CREDIT LIMITS GRA N TED BY THE BANK, ITS APPLICATION AND THE INTEREST CHARGED ON VARIOUS CREDIT LIMITS. AS PER THE DETAILS SUBMITTED BY THE ASSESSEE, THE ENTIRE INTEREST IS RELATED TO THE VARIOUS CREDIT LIMITS GRANTED TO THE ASSE SSEE FOR THE PURPOSE OF THE BUSINESS. APART FROM THE ABOVE, THE ASSESSEE IS HAVING INTEREST FREE FUNDS TO THE EXTENT OF RS.45,81,65,230/ - CONSISTING OF PARTNERS 19 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU CAPITAL ACCOUNT, RESERVES AND SURPLUSES AND TRADE CREDITORS. THE INVESTMENT FOR CONSTRUCTION OF THE FACTORY BUILDING AT VIJAYARAI VILLAGE AND KOPPAL WAS ONLY RS.6,60,42,440/ - WHICH IS LESS THAN NON - INTEREST BEARING FUNDS WHICH WERE AT THE DISPOSAL OF THE ASSES S EE. THOUGH IT IS A COMMON ACCOUNT, THE ASSESSEE IS AT LIBERTY TO USE THE NON - INTEREST BEA RING FUNDS FOR CONSTRUCTION. THERE IS NO DISPUTE THAT THE FACTORY BUILDING AT VIJAYARAI VILLAGE AND KOPPAL KARNATAKA ARE BUSINESS ASSETS AND THE ASSESSEE IS FREE TO SPEND FROM THE BUSINESS FUNDS. THE REVENUE HAS NOT ESTABLISHED THE FACT THAT THE ASSESSEE HAS USED THE INTEREST BEARING FUNDS FOR CONSTRUCTION OF THE BUILDINGS. FOR DISALLOWANCE OF THE INTEREST, THERE MUST BE NEXUS FOR INVESTMENT OF INTEREST BEARING FUNDS FOR NON - BUSINESS PURPOSES. SINCE IN THE INSTANT CASE THE ASSESSEE HAS USED NON - INTEREST BEARING FUNDS, THERE IS NO CASE FOR DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT. APART FROM THE ABOVE DURING THE ASSESSMENT PROCEEDINGS, THE AO HAS CALLED FOR THE INTEREST PAYMENTS IN THE QUESTIONNAIRE DATED 26.02.2015 AND AFTER RECEIPT OF REPLY A ND AFTER VERIFICATION OF THE BOOKS OF ACCOUNTS, THE AO HAS ALLOWED THE INTEREST DEBITED TO THE PROFIT & LOSS ACCOUNT. THEREFORE, WE FIND NO ERROR IN THE ASSESSMENT ORDER PASSED BY THE AO AND THE LD.PR.CIT HAS INVOKED JURISDICTION INCORRECTLY. THEREFORE, WE SET ASIDE THE ORDER PASSED BY THE LD.PR.CIT ON THIS ISSUE AND ALLOW THE APPEAL OF THE ASSESSEE. 20 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU 18. IN THE CASE OF OUTSTANDING LOAN IN THE CASE OF M/S MADHULATHA ENTERPRISES ALSO, THE ASSESSEE SUBMITTED THAT INTEREST FREE FUNDS AVAILABLE TO THE ASSESSE E WERE USED FOR ADVANCING THE SUM TO THE DEBTOR AND CHARGED THE INTEREST AT 6% AGAINST THE BANK RATE INTEREST AT 7.7%. THERE IS NO DOUBT THAT THE ASSESSEE IS HAVING INTEREST FREE FUNDS IN THE FORM OF PARTNERS CAPITAL ACCOUNTS, TRADE CREDITORS, RESERVES AN D SURPLUSES AND THE ASSESSEE HAS UTILIZED THE NON - INTEREST BEARING FUNDS EFFICIENTLY AND CHARGED THE INTEREST REASONABLY AND THE ISSUE WAS VERIFIED BY THE AO. THEREFORE, WE FIND NO ERROR IN THE ASSESSMENT ORDER WHICH CAUSED PREJUDICE TO THE INTEREST OF TH E REVENUE. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD.PR.CIT AND ALLOW THE APPEAL OF THE ASSESSEE. 19. THE NEXT ISSUE IS RELATED TO THE DEPRECIATION OF LAND ON RESIDENTIAL APARTMENT VALUED AT 90.65 LAKHS IN M/S VAIBHAV FORT, ELURU. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CALLED FOR THE DETAILS OF THE ADDITIONS TO FIXED ASSETS ALONG WITH THE ORIGINAL BILLS AND ALSO CALLED FOR THE DETAILS OF THE DEPRECIATION WHICH WAS FURNISHED BY THE ASSESSEE. AS PER THE ORIGINAL SALE BILL, THERE IS NO ALLO CATION OF COST TO THE LAND AND SUPER STRUCTURE SEPARATELY. THE ASSESSEE GOT UNDIVIDED SHARE OF LAND IN APARTMENT COMPLEX. THE SALE CONSIDERATION CONSISTS OF LAND COST AS WELL AS 21 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU THE COST OF CONSTRUCTION. NORMALLY IN APARTMENTS, THE SALE OF APARTMENT IS FIXED ON THE BASIS OF PLINTH AREA. IN THIS CASE ALSO, THE SAME PROCEDURE IS FOLLOWED, THEREFORE, AFTER VERIFICATION OF THE SALE DEED, THE AO ALLOWED THE DEPRECIATION O N THE APARTMENT ON COMPOSITE COST WITHOUT SEPARATELY ALLOCATING THE COST OF LAND AND COS T OF BUILDING. SINCE THE AO EXAMINED THE ISSUE AND ALLOWED THE DEPRECIATION THOUGH IT IS PREJUDICIAL TO THE EXTENT OF THE DEPRECIATION ON LAND, HAVING VERIFIED THE ISSU E AT THE TIME OF ASSESSMENT, THERE IS NO ERROR IN THE ASSESSMENT ORDER MADE BY THE AO, THUS, THE CASE IS BEYOND JURISDICTION U/S 263 OF THE ACT. 20. THE NEXT ISSUE FOR REVISION U/S 263 IS VALUATION OF THE CLOSING STOCK. WITH REGARD TO THE VALUATION OF THE CLOSING STOCK, THE AO HAS CALLED FOR THE DETAILS OF THE CLOSING STOCK VIDE QUESTIONNAI RE DATED 26.02.2015 AND THE ASSESSEE SUBMITTED THE DETAILS OF THE CLOSING STOCK AND ITS VALUATION ITEM WISE. DURING THE ASSESSMENT PROCEEDINGS, AS WELL AS BEFORE THE PR.CIT, THE ASSESSEE SUBMITTED THAT THE VALUE OF THE CLOSING STOCK DEPENDS ON THE QUALITY AND GRADE OF THE HUMAN HAIR. THE ASSESSEE COLLECTS THE HUMAN HAIR DOMESTICALLY AS WELL AS FROM THE TEMPLES AND GRADES THE SAME ACCORDING TO THE QUALITY. THE ASSESSEE SUBMITTED BEFORE THE AO, THE CLOSING STOCK AND ITS VALUATION, GRADE WISE. THE PRICE OF THE HUMAN HAIR RANGES FROM RS.14 TO RS.4640/ - PER KG. THE PRICE OF EACH GRADE IS DIFFERENT DEPENDING ON THE 22 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU QUALITY. THE ASSESSEE HAS VALUED THE CLOSING STOCK AT RS.4,854/ - PER KG AND THE WASTE WAS VALUED AT RS.14 PER KG AND THE AVERAGE PRICE CAME TO RS.55 3/ - PER KG. EXCEPT MAKING OBSERVATION THAT THE AO HAS NOT VERIFIED THE CLOSING STOCK, THE PR.CIT DID NOT MAKE OUT A CASE THAT THERE IS AN ERROR IN THE ASSESSMENT ORDER WHICH CAUSED PREJUDICE TO THE DEPARTMENT. SINCE THE ISSUE HAS BEEN EXAMINED BY THE AO A ND SATISFIED REGARDING THE VALUATION CLOSING STOCK AT THE TIME OF ASSESSMENT WE FIND NO ERROR IN THE ASSESSMENT ORDER WHICH CALLS FOR REVISION U/S 263 OF THE ACT. 21. FROM TH E ABOVE DISCUSSION, WE OBSERVE THAT ALL THE ISSUES RAISED BY THE PR.CIT FOR REVISION U/S 263 WERE EXAMINED BY THE AO AT THE TIME OF MAKING ASSESSMENT IN DETAIL AND SATISFIED REGARDING THE CORRECTNESS AS DISCUSSED EARLIER IN THIS ORDER. EITHER THE AO HAS CALLED FOR SPECIFIC DETAILS AND EXAMINED THE ISSUE AND ACCEPTED THE EXPENDITURE DEBITED TO P&L ACCOUNT AFTER DUE VERIFICATION OF THE BILLS, VOUCHERS ETC. THERE IS NO EVIDENCE TO SHOW THAT THE AO HAS NOT CONDUCTED THE ENQUIRY AT THE TIME OF ASSESSMENT ON ANY OF THE ISSUES . LACK OF ENQU IRY IS A CASE FOR REVISION U/S 263, BUT NOT THE INADEQUATE ENQUIRY. IN THE INSTANT CASE, THOUGH O N CERTAIN ISSUES, THERE IS INADEQUATE ENQUIRY, THERE IS NO LACK OF ENQUIRY ON ANY OF THE ISSUES TAKEN UP FOR REVISION. THIS TRIBUNAL IN THE CASE OF BONDALAP ATI 23 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU PRASAD BABU VIDE I.T.A. NO.400/VIZ/2017 DATED 17.08.2018 AND G VENKATA RAMANA VIDE I.T.A NO.32/2017 DATED 10.08.2018 , HELD THAT 5.2. IT IS FOUND FROM THE ASSESSMENT ORDER THAT THE ASSESSEE HAD FILED THE DETAILS AND MADE THE SUBMISSIONS IN RESPECT OF COMPUTATION OF CAPITAL GAINS AND THE ASSESSMENT WAS COMPLETED AFTER EXAMINATION OF THE DETAILS FURNISHED BY THE ASSESSEE. THE ISSUE WITH REGARD TO THE COMPUTATION OF CAPITAL GAINS, COST OF ACQUISITION OF THE PROPERTY, COST OF CONSTRUCTION, SALE CONSIDERATI ON AND APPLICABILITY OF 50C WERE DULY VERIFIED BY THE AO BEFORE COMPLETION OF THE ASSESSMENT. SINCE THE ISSUE HAS ALREADY BEEN VERIFIED BY THE AO, THE LD.PR.CIT IS NOT PERMITTED TO REVISIT THE SAME ISSUE AND SUBSTITUTE HIS OPINION IN THE NAME OF REVISION. REVIEW OF THE SAME ISSUE WHICH WAS ALREADY CONSIDERED AND EXAMINED BY THE AO WOULD AMOUNT TO DIFFERENCE OF OPINION NOT A CASE FOR REVISION U/S 263. FURTHER, HAVING EXAMINED THE ISSUE BY THE AO AND TAKEN A CONSCIOUS DECISION, ACCEPTING THE COST OF CONSTR UCTION, AFTER DUE VERIFICATION, NOT APPLYING THE RATES AS OBSERVED BY THE LD.PR.CIT WOULD AMOUNT TO INADEQUATE ENQUIRY, BUT NOT LACK OF ENQUIRY AND AGAIN ON INADEQUATE ENQUIRY, THE LD.PR.CIT IS NOT ALLOWED TO INVOKE THE JURISDICTION U/S 263. HONBLE HIGH COURT OF KARNATAKA IN COMMISSIONER OF INCOME - TAX, BANGALORE. V. KURLON LTD, [2014] 52 TAXMANN.COM 92 (KARNATAKA) HELD THAT WHERE ASSESSING AUTHORITY HAD ALREADY CONSIDERED ALL DETAILS MENTIONED IN COMPUTATION STATEMENT WHICH WAS TAKEN FROM BOOKS OF ACCOUNT MAINTAINED BY ASSESSEE, REVISION WAS NOT JUSTIFIED. SIMILAR VIEW HAS BEEN EXPRESSED BY THIS TRIBUNAL IN G.V.R ASSOCIATES VS ITO REPORTED IN (2017) 49 CCH 0223, VISAK HAPAT NAM. 22. SINCE, IN THE INSTANT CASE, THERE IS NO LACK OF ENQUIRY AND THE AO MADE THE ENQUIRIES AND COMPLETED THE ASSESSMENT, SUBSTITUTION OF THE COMM ISSIONERS VIEW AND THE SUSPICION OF THE PR.CIT CANNOT BE A CASE FOR REVISION U/S 263 OF THE ACT. THE REVISION U/S 263 CANNOT BE TAKEN UP FOR DIFFERENCE OF OPINION. THEREFORE, WE HOLD THAT THERE IS NO ERROR IN THE ORDER PASSED BY THE AO WHICH REQUIRES RE VISION U/S 263. ACCORDINGLY, THE ORDER PASSED BY THE PR.CIT U/S 263 IS QUASHED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 24 I.T.A. NO .194 /VIZ/201 8 M/S SRINIVASA HAIR INDUSTRIES, ELURU 23. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON 3 RD JANUARY 2019 . S D/ - S D/ - ( . ) ( . . ) (V. DURGA RAO) ( D.S. SUNDER SINGH ) /JUDICIAL MEMBER /ACCOUNTANT MEMBER /VISAKHAPATNAM /DATED : 03 . 01 .201 9 L.RAMA, SPS / COPY OF THE ORDER FORWARDED TO: - 1. / THE ASSESSEE M/S SRINIVASA HAIR INDUSTRIES, P.B.NO.8 , EASTERN STREET, ELURU 2 . / THE REVENUE ASST.COMMISSIONER OF INCOME TAX, CIRCLE - 1, ELURU 3 . THE PR. COMMISSIONER OF INCOME TAX, RAJAHMUNDRY 4 . , , / DR, ITAT, VISAKHAPATNAM 5 . / GUARD FILE / BY ORDER // TRUE COPY // SR. PRIVATE SECRETARY ITAT, VISAKHAPATNAM