M/s Sri Vasavi Compounding, Yanam V. The CIT, Rajahmundry, Rajahmundry

ITA 197/VIZ/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1042 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 24-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M BHUPAL REDDY
• Keywords: Initiation of penalty proceedings; Assessment record
• Section: 143(3); 80IB; 263

Judgement Text

197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.197/VIZAG/2012 ( / ASSESSMENT YEAR: 2007-08) M/S. SRI VASAVI COMPOUNDING, YANAM VS. ITO, WARD - 2, KAKINADA [PAN: AATFS 9578A ] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NO.596/VIZAG/2014 ( / ASSESSMENT YEAR: 2007-08) ITO, WARD - 2, KAKINADA VS. M/S. SRI VASAVI COMPOUNDING, YANAM [PAN: AATFS 9578A ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI M.BHUPAL REDDY, DR / DATE OF HEARING : 17.06.2016 &14.07.2016 / DATE OF PRONOUNCEMENT : 29.07.2016 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 2 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE CROSS APPEALS FILED BY THE ASSESSEE AND REVE NUE ARE DIRECTED AGAINST SEPARATE ORDERS OF CIT, RAJAHMUNDR Y U/S 263 OF THE ACT, DATED 22.3.2012 AND CIT(A), VISAKHAPATNAM U/S 250 OF THE ACT, DATED 27.8.2014 FOR THE ASSESSMENT YEAR 2007-08. S INCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED-OFF BY WAY OF THIS COMMON ORDER FOR THE SA KE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PARTNERSHIP FIRM, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTU RE AND SALE OF PLASTIC MASTER BATCHES, PLASTIC COMPOUNDING HDPE, PP SACKS, ETC. THE ASSESSEE HAS FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 26.10.2007 THROUGH E-FILING DECLARING NIL TOTAL INC OME AFTER CLAIMING DEDUCTION U/S 80IB OF THE INCOME TAX ACT, 1961 (HER EINAFTER CALLED AS 'THE ACT'). THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE HAS BEEN SELECTED FOR SCRUTI NY AND ACCORDINGLY, NOTICE U/S 143(2) & 143(1) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHORIZED REPRESENTATIVE OF THE ASSES SEE APPEARED FROM TIME TO TIME AND PRODUCED BOOKS OF ACCOUNTS AND OTH ER DETAILS CALLED 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 3 FOR. THE ASSESSING OFFICER, AFTER CONSIDERING THE D ETAILED SUBMISSIONS FURNISHED BY THE ASSESSEE COMPLETED THE ASSESSMENT AND ACCEPTED INCOME DECLARED. 3. THE CIT, RAJAHMUNDRY ISSUED A SHOW-CAUSE NOTICE DATED 13.10.2011 AND ASKED TO EXPLAIN WHY THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT DATED 20.11.2009 SHALL NOT BE REV ISED UNDER THE PROVISIONS OF SECTION 263 OF THE ACT. THE CIT, PRO POSED TO REVISE THE ASSESSMENT ORDER FOR THE REASONS THAT ON EXAMINATIO N OF ASSESSMENT RECORDS, CERTAIN OMISSIONS AND COMMISSIONS WERE NOT ICED, WHICH RENDERED THE ASSESSMENT ORDER ERRONEOUS IN SO FAR A S IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IN TERMS OF SECTION 263 OF THE ACT. THE CIT, IN THE SAID SHOW CAUSE NOTICE, OBSERVED THAT THE A. O. HAS ALLOWED THE DEDUCTION U/S 80IB OF THE ACT, WITHOUT CALLING FOR THE BASIC DETAILS SUCH AS MANDATORY REQUIREMENT OF SUBMISSION OF AUDIT REP ORT IN FORM NO.10CCB UNDER PROVISIONS OF SECTION 80IA(7) OF THE ACT. THE CIT, FURTHER, OBSERVED THAT THE A.O. HAS ALLOWED THE BEN EFIT OF DEDUCTION U/S 80IB OF THE ACT TOWARDS JOB WORK CHARGES, WHICH IS OTHERWISE NOT ALLOWABLE UNDER THE PROVISIONS OF THE ACT. SIMILAR LY, THE CIT OBSERVED THAT THE A.O. COMPLETED ASSESSMENT WITHOUT EXAMININ G APPLICABILITY OF THE PROVISIONS OF SECTION 44AB OF THE ACT, EVEN THO UGH GROSS RECEIPTS 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 4 FROM THE BUSINESS EXCEEDS THRESHOLD LIMIT FOR GETTI NG ACCOUNTS AUDITED FROM A CHARTERED ACCOUNTANT AND FURNISHED HIS REPOR T. IT WAS FURTHER OBSERVED THAT THE A.O. HAS FAILED TO RECONCILE THE GROSS RECEIPTS AND TAX DEDUCTED AT SOURCE AND ALSO FAILED TO EXAMINE CORRE CTNESS OF PAYMENT OF FRINGE BENEFIT TAX AND APPLICABILITY OF DISALLOWANC E OF EXPENDITURE UNDER THE PROVISIONS OF SECTION 40A(IA) OF THE ACT, FOR N ON-DEDUCTION OF TAX AT SOURCE ON VARIOUS EXPENDITURES DEBITED TO P&L ACCOU NT. THE A.O. WITHOUT EXAMINING THE ABOVE ISSUES, SIMPLY ACCEPTED THE INCOME DECLARED BY THE ASSESSEE, THEREFORE, THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT, IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. WITH THESE OBSERVATIONS, IS SUED A SHOW CAUSE NOTICE AND ASKED TO EXPLAIN WHY THE ASSESSMENT SHAL L NOT BE SET ASIDE UNDER THE PROVISIONS OF SECTION 263 OF THE ACT. 4. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE S UBMITTED THAT THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF T HE ACT DATED 20.11.2009 IS NOT ERRONEOUS IN SO FAR AS IT IS PREJ UDICIAL TO THE INTEREST OF THE REVENUE, AS THE A.O. HAS EXAMINED ALL THE ISSUE S POINTED OUT IN THE SHOW CAUSE NOTICE AT THE TIME OF COMPLETION OF ASSE SSMENT. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS FURNISHED BO OKS OF ACCOUNTS AND OTHER RELEVANT INFORMATION AT THE TIME OF ASSESSMEN T, IN RESPONSE TO A SHOW CAUSE NOTICE ISSUED BY THE A.O. ON TWO OCCASIO NS I.E. ON 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 5 16.11.2009 AND AGAIN ON 19.11.2009, FURNISHING ALL THE INFORMATION NECESSARY FOR THE PURPOSE OF COMPLETION OF ASSESSME NT. THE A.O., AT THE TIME OF ASSESSMENT HAS CALLED FOR COMPLETE DETA ILS WITH REGARD TO THE ELIGIBILITY OF DEDUCTION CLAIMED U/S 80IB OF THE AC T. THOUGH, IT HAS NOT FILED AUDIT REPORT IN FORM NO.10CCB ALONG WITH RETU RN OF INCOME, THE SAME HAS BEEN FURNISHED AT THE TIME OF ASSESSMENT W HICH WAS CONSIDERED BY THE A.O. BEFORE ALLOWING DEDUCTION U/ S 80IB OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT EVEN OTHERWISE THE REQUIREMENT OF FURNISHING AUDIT REPORT IN FORM NO.10CCB CAN BE FIL ED AT ANY TIME BEFORE COMPLETION OF ASSESSMENT. IT IS NOT NECESSARILY TO FILE AUDIT REPORT ALONG WITH RETURN OF INCOME IN VIEW OF THE FACT THAT THE FILING OF PHYSICAL COPY OF AUDIT REPORTS HAS BEEN DONE AWAY, WHEN E-FILING OF INCOME TAX RETURNS HAS BEEN INTRODUCED. AS REGARDS JOB WORK CH ARGES IS CONCERNED, THE ASSESSEE SUBMITTED THAT IT IS INTO THE BUSINESS OF MANUFACTURING OF GOODS AND ARTICLES ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. IT WAS FURTHER SUBMITTED THAT THE FIRM HAS TAKEN UP JOB WO RK OF PROCESSING OF GOODS FOR OTHERS IN ADDITION TO ITS OWN MANUFACTURI NG IN VIEW OF SPARE CAPACITY AVAILABLE. IT WAS FURTHER SUBMITTED THAT SECTION 80IB OF THE ACT, DOES NOT PLACE ANY RESTRICTION ON JOB WORK RECEIPTS BY STATING THAT THE DEDUCTION WAS CLAIMED U/S 80IB OF THE ACT SIMILAR T O THAT OF THE DEDUCTION U/S 80I & 80IA OF THE ACT. THE ASSESSEE FURTHER SUBMITTED 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 6 THAT IT HAS CLAIMED DEDUCTION U/S 80IB OF THE ACT F OR ITS ACTIVITY IN THE PAST WHICH WAS ACCEPTED BY THE DEPARTMENT IN THE AS SESSMENT PROCEEDINGS. HAVING BEEN ACCEPTED DEDUCTION CLAIMED FOR THE EARLIER YEARS, THERE IS NO REASON FOR REJECTION OF DEDUCTIO N FOR THE CURRENT YEAR UNDER SIMILAR FACTS, TO SUPPORT HIS ARGUMENTS, RELI ED UPON CERTAIN JUDICIAL PRECEDENTS. SIMILARLY, THE ASSESSEE FURTHER SUBMITT ED THAT AS REGARDS THE OTHER ISSUES POINTED OUT BY THE CIT, WITH REGARD TO THE RECONCILIATION OF GROSS RECEIPTS AND TAX DEDUCTED AT SOURCE, CORRECTN ESS OF FRINGE BENEFITS TAX, INITIATION OF PENALTY PROCEEDINGS U/S 271B OF THE ACT AND APPLICABILITY OF THE PROVISIONS OF SECTION 40(A)(IA ) OF THE ACT, THE A.O. HAS EXAMINED ALL THE ISSUES AT THE TIME OF ASSESSME NT BY CALLING FOR THE DETAILS. THEREFORE, THE ASSESSMENT ORDER PASSED BY THE A.O. IS NOT ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 5. THE CIT, AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE HELD THAT THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 14 3(3) OF THE ACT DATED 20.11.2009 IS ERRONEOUS IN SO FAR AS IT IS PR EJUDICIAL TO THE INTEREST OF THE REVENUE, AS THE A.O. HAS FAILED TO VERIFY TH E BASIC DETAILS IN RESPECT OF ALLOWABILITY OF DEDUCTION U/S 80IB OF TH E ACT. THE CIT, FURTHER, OBSERVED THAT IT IS A MANDATORY REQUIREMEN T TO FILE THE AUDIT REPORT IN FORM NO.10CCB FOR ALLOWING DEDUCTION U/S 80IB OF THE ACT, HOWEVER, THE A.O. HAS FAILED TO OBTAIN THE AUDIT RE PORT AND ALSO FAILED TO 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 7 VERIFY THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF JOB WORK RECEIPTS. THE CIT, FURTHER, HELD THAT THE ACTIVITY UNDERTAKEN BY THE ASSESSEE IS NOT A MANUFACTURING ACTIVITY WHICH IS ELIGIBLE FOR CLAI MING DEDUCTION U/S 80IB OF THE ACT. THOUGH, THE DEPARTMENT HAS ALLOWED DED UCTION IN THE EARLIER YEARS, IT IS A WELL SETTLED PROPOSITION OF LAW THAT THE PRINCIPLES OF RES JUDICATA ARE NOT APPLICABLE TO THE INCOME TAX PROCE EDINGS AND THE INCOME TAX AUTHORITY COMPLETING THE ASSESSMENT IS N OT BOUND TO TAKE OR FOR THAT MATTER FOLLOW SIMILAR STAND TAKEN BY HIM I N RESPECT OF EARLIER YEAR OF AN ISSUE IN ASSESSEES OWN CASE. THE DECIS ION ON ISSUES VARIES FROM YEAR TO YEAR BASED ON MANY PARAMETERS COUPLED WITH THE INTERPRETATION COMPLEXITY. IT IS FURTHER HELD THAT WHEN THE CLAIM FOR THE EARLIER YEAR IS FOUND TO HAVE BEEN ERRONEOUSLY ALLO WED BY THE ASSESSING OFFICER UPON MAKING AN INCORRECT CLAIM MADE BY THE ASSESSEE, THE ASSESSING OFFICER IS AT LIBERTY TO RE-OPEN THE CASE FOR THAT PARTICULAR YEAR TO BRING THE INCOME ESCAPED TO TAX. AS REGARDS OTH ER ISSUES, THE CIT OBSERVED THAT THE ASSESSMENT ORDER PASSED BY THE A. O. IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE ON ACCOUNT OF LACK OF ENQUIRY ON THE PART OF THE ASSESSING OFFICER. T HE A.O. NOT ONLY EXAMINED THE ISSUES POINTED OUT IN THE SHOW CAUSE N OTICE, BUT FAILED TO APPLY HIS MIND BEFORE COMPLETING THE ASSESSMENT. F ROM THIS, IT IS VERY CLEAR THAT IT IS A CASE OF LACK OF ENQUIRY ON THE P ART OF THE A.O. AND 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 8 HENCE, FIT CASE FOR ASSUMPTION OF REVISIONARY JURIS DICTION U/S 263 OF THE ACT. WITH THESE OBSERVATIONS, SET ASIDE THE ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT DATED 20.11.2009 AND DIRECT THE A .O. TO TAKE UP THE ISSUE AS REFERRED TO HEREINABOVE AND COMPLETE THE A SSESSMENT WITHIN THE STIPULATED TIME FRAME AFTER AFFORDING REASONABL E OPPORTUNITY OF HEARING THE ASSESSEE. AGGRIEVED BY THE CIT ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. A.R. FOR THE ASSESSEE, SUBMITTED THAT TH E ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT DATE D 20.11.2009 IS NOT ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE, AS THE A.O. HAS EXAMINED THE ISSUES POINTED OUT BY THE CIT, IN THE SHOW CAUSE NOTICE. THE A.R. FURTHER SUBMITTED THAT THE CIT WAS NOT CORRECT IN DIRECTING THE A.O. TO DENY THE BENEFIT OF DEDUCTION U/S 80IB OF THE ACT, FOR THE REASON THAT THE ASSESSEE HAS NOT SUBMITTED THE AUDIT REPORT IN FORM NO.10CCB ALONG WITH RETURN OF INCOME. BUT, TH E FACT IS THAT THE ASSESSEE HAS SUBMITTED AUDIT REPORT AT THE TIME OF ASSESSMENT WHICH WAS PART OF ASSESSMENT RECORD, THEREFORE, THE CIT, WAS NOT CORRECT IN ASSUMPTION OF JURISDICTION TO REVISE THE ASSESSMENT ORDER. THE A.R. FURTHER SUBMITTED THAT AS REGARDS THE ELIGIBILITY O F DEDUCTION U/S 80IB OF THE ACT TOWARDS JOB WORK CHARGES, IT IS A SETTLED P OSITION OF LAW THAT JOB WORK CHARGE IS ELIGIBLE FOR DEDUCTION U/S 80IB OF T HE ACT. THERE IS NO 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 9 BAR IN THE PROVISIONS OF SECTION 80IB OF THE ACT TO CLAIM DEDUCTIONS FOR JOB WORK CHARGES. THE ASSESSEE IS INTO THE BUSINESS OF MANUFACTURING OF GOODS AND ARTICLES, WHICH IS ELIGIBLE ACTIVITY FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IB OF THE ACT. IN ADDITION TO MANU FACTURING ACTIVITY, IT HAS TAKEN UP THE WORK OF PROCESSING OF GOODS FOR OT HERS IN VIEW OF SPARE CAPACITY AVAILABLE, THEREFORE, THE CIT WAS NOT CORR ECT IN ASSUMING JURISDICTION BY STATING THAT JOB WORK CHARGES ARE N OT ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. AS REGARDS OTHER IS SUES POINTED OUT BY THE CIT, THE A.R. SUBMITTED THAT ALL THE ISSUES POI NTED OUT BY THE CIT IN THE SHOW-CAUSE NOTICE HAS BEEN EXAMINED BY THE A.O. BY ISSUING A SPECIFIC QUESTIONNAIRE ON TWO OCCASIONS DATED 19.11 .2009 AND 27.11.2009. THE ASSESSEE HAS FURNISHED COMPLETE DE TAILS WITH REGARD TO THE APPLICABILITY OF THE PROVISIONS OF SECTION 40(A )(IA) OF THE ACT, RECONCILIATION OF GROSS TURNOVER TO TDS AND FRINGE BENEFIT TAX PAID BY THE ASSESSEE. THE A.O. HAVING EXAMINED THE ISSUES SATI SFIED HIMSELF AND ACCEPTED THE INCOME DECLARED BY THE ASSESSEE, THERE FORE, THE CIT IS NOT CORRECT IN COMING TO THE CONCLUSION THAT THERE IS A LACK OF ENQUIRY ON THE PART OF A.O. IN EXAMINING THE ISSUES AS POINTED OUT IN THE SHOW-CAUSE NOTICE. ON THE OTHER HAND, THE LD. D.R. STRONGLY SU PPORTED THE ORDER OF CIT. 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 10 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE CIT ASSUMED JURISDICTION TO REVISE THE ASSESSMENT ORDER FOR THE REASON THAT THE A.O. HAS NOT CONDUCTED PROPER ENQUIRY BEFORE CO MPLETION OF ASSESSMENT, THEREBY THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT DATED 20.11.2009 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE CIT , REVISED THE ASSESSMENT ORDER FOR THE REASON THAT THE A.O. HAS A LLOWED THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT WITHOUT CALLING FOR B ASIC DETAILS. IT WAS FURTHER OBSERVED THAT FURNISHING OF AUDIT REPORT IN FORM NO.10CCB IS A MANDATORY REQUIREMENT UNDER THE PROVISIONS OF SECTI ON 80IB(7) OF THE ACT. BUT, THE A.O. WITHOUT OBTAINING THE AUDIT REPO RT WHICH IS A MANDATORY REQUIREMENT FOR ALLOWING DEDUCTION, COMPL ETED ASSESSMENT AND ALLOWED DEDUCTION WHICH IS OTHERWISE NOT ALLOWA BLE TO THE ASSESSEE. THE CIT, FURTHER, OBSERVED THAT THE A.O. HAS ERRONE OUSLY ALLOWED DEDUCTIONS U/S 80IB TOWARDS JOB WORK CHARGES, WITHO UT APPRECIATING THE FACTS THAT THE ACTIVITY UNDERTAKEN BY THE ASSESSEE AMOUNTS TO MANUFACTURING OF GOODS OR NOT. THOUGH, ASSESSEE INV OLVED IN THE MANUFACTURING ACTIVITY, IT HAS DONE JOB WORK CHARGE S AND CLAIMED DEDUCTION TOWARDS JOB WORK CHARGES ON THE PREMISES OF MANUFACTURING ACTIVITY. THE CIT HAS POINTED OUT OTHER ISSUES, I. E. RECONCILIATION OF TDS 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 11 TO GROSS RECEIPTS, FBT PAYMENT AND APPLICABILITY OF PROVISIONS OF SECTION 40(A)(IA) OF THE ACT, WHICH LEADS TO REVISION OF AS SESSMENT ORDER PASSED BY THE A.O. IT IS THE CONTENTION OF THE ASSESSEE T HAT THE ISSUES RAISED BY THE CIT HAVE BEEN EXAMINED BY THE A.O. AT THE TIME OF COMPLETION OF ASSESSMENT. THE ASSESSEE FURTHER CONTENDED THAT TH E A.O. HAS CALLED FOR ALL THE DETAILS BEFORE ALLOWING DEDUCTIONS U/S 80IB OF THE ACT. THOUGH ACT MANDATES FILING OF AUDIT REPORT IN FORM NO.10CC B, IT IS NOT NECESSARY THAT AUDIT REPORT SHOULD BE FILED ALONG WITH RETURN OF INCOME, IT CAN BE FILED ANY TIME BEFORE COMPLETION OF ASSESSMENT. THE ASSESSEE FURTHER SUBMITTED THAT AFTER E-FILING OF INCOME RETURNS MAD E IT MANDATORY, THE FILING OF PHYSICAL COPY OF AUDIT REPORT HAS BEEN DO NE AWAY WITH, THEREFORE, THE CIT IS NOT CORRECT IN STATING THAT T HE ASSESSEE HAS NOT FILED THE AUDIT REPORT ALONG WITH RETURN OF INCOME. 8. WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE, FO R THE REASON THAT THE A.O. HAS EXAMINED THE ISSUE OF DEDUCTION U/S 80 IB OF THE ACT AT THE TIME OF COMPLETION OF ASSESSMENT. THE A.O. HAS CALL ED FOR NECESSARY DETAILS BY A SPECIFIC QUESTIONNAIRE DATED 19.11.200 9 AND 27.11.2009. THE ASSESSEE HAS FILED COMPLETE DETAILS ALONG WITH COPY OF AUDIT REPORT AND ALSO EXPLAINED HOW JOB WORK CHARGES IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. THE A.O. AFTER CONSIDERING THE EXP LANATIONS FURNISHED BY THE ASSESSEE AND ALSO TAKEN INTO NOTE OF JUDICIAL J UDGMENTS RELIED UPON 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 12 BY THE ASSESSEE ALLOWED THE CLAIM OF DEDUCTION U/S 80IB OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT THE CIT WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT THE A.O. HAS NOT CONDUCTED PROP ER ENQUIRY OF THE ISSUES BEFORE COMPLETION OF ASSESSMENT. WE FURTHER OBSERVED THAT AS REGARDS THE ELIGIBILITY OF DEDUCTION U/S 80IB OF TH E ACT TOWARDS JOB WORK CHARGES, THE ASSESSEE CONTENDED THAT IT IS INTO THE BUSINESS OF MANUFACTURING OF GOODS WHICH IS ELIGIBLE FOR CLAIMI NG DEDUCTIONS U/S 80IB OF THE ACT. IN ADDITION TO ITS OWN MANUFACTURI NG, IT HAS TAKEN UP JOB WORK FOR OTHERS IN VIEW OF THE SPARE CAPACITY A VAILABLE. WE FIND THAT THE A.O. HAS NOT DOUBTED THE ACTIVITY OF THE ASSESS EE. BUT, HE IS OF THE OPINION THAT ONLY GOODS MANUFACTURED BY THE ASSESSE E ON ITS OWN IS ELIGIBLE FOR DEDUCTION, BUT NOT JOB WORK DONE FOR O THERS. WE DO NOT AGREE WITH THE STAND TAKEN BY THE A.O., FOR THE REA SON THAT ONCE THE ASSESSEE IS INVOLVED IN THE BUSINESS OF MANUFACTURE OF GOODS OR ARTICLES WHICH IS ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IB O F THE ACT, JOB WORK DONE IN THE SPARE CAPACITY AVAILABLE ALSO ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. WE FURTHER OBSERVED THAT THE SAID SECTIO N DOES NOT PLACE ANY RESTRICTION ON JOB WORK RECEIPTS. ONCE, ASSESSEE PR OVES THAT IT IS INVOLVED IN THE ELIGIBLE BUSINESS I.E. MANUFACTURING OF GOOD S OR ARTICLE WHICH IS ELIGIBLE FOR CLAIMING DEDUCTION, IT IS IMMATERIAL W HETHER IT MANUFACTURES ON ITS OWN OR MANUFACTURES FOR OTHERS. SO LONG AS I T IS IN THE BUSINESS OF 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 13 MANUFACTURING OF GOODS OR ARTICLES, IT IS ELIGIBLE FOR DEDUCTION U/S 80IB OF THE ACT. 9. COMING TO THE OTHERS ISSUES POINTED OUT BY THE C IT IN THE ASSESSMENT ORDER. THE CIT, OBSERVED THAT THE A.O. H AS FAILED TO EXAMINE ISSUES WITH REGARD TO RECONCILIATION OF GRO SS TURNOVER AND TAX DEDUCTED AT SOURCE, CORRECTNESS OF FRINGE BENEFIT T AX ESTIMATED BY THE ASSESSEE, INITIATION OF PENALTY PROCEEDINGS U/S 271 B OF THE ACT AND APPLICABILITY OF TAX DEDUCTION AT SOURCE IN RESPECT OF VARIOUS EXPENSES DEBITED TO P&L ACCOUNT AND ALSO APPLICABILITY OF DI SALLOWANCE U/S 40(A)(IA) OF THE ACT. THE CIT WAS OF THE OPINION T HAT THE A.O. HAS FAILED TO EXAMINE THE ABOVE ISSUES BEFORE COMPLETION OF AS SESSMENT. IT IS THE CONTENTION OF THE ASSESSEE THAT ALL THE ISSUES POIN TED OUT BY THE CIT HAS BEEN EXAMINED BY THE A.O. AT THE TIME OF COMPLETION OF ASSESSMENT. WE FIND FORCE IN THE ARGUMENT OF THE ASSESSEE FOR TH E REASON THAT THE A.O. HAS CALLED FOR NECESSARY DETAILS WITH REGARD T O THE ISSUES POINTED OUT BY THE CIT AT THE TIME OF COMPLETION OF ASSESSM ENT BY WAY OF SPECIFIC QUESTIONNAIRE DATED 19.11.2009 AND 27.11.2 009. THE ASSESSEE HAS FILED A PAPER BOOK CONTAINING THE SHOW CAUSE NO TICE ISSUED BY THE A.O. AND REPLIES FILED BY THE ASSESSEE. ON PERUSA L OF THE DETAILS FILED BY THE ASSESSEE, WE FIND THAT THE A.O. HAS ISSUED A SP ECIFIC QUESTIONNAIRE WITH REGARD TO THE ISSUES POINTED BY THE CIT WHICH WAS ADDRESSED BY 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 14 THE ASSESSEE TO THE A.O. AT THE TIME OF COMPLETION OF ASSESSMENT. THE A.O. AFTER SATISFIED WITH THE DETAILS FURNISHED BY THE ASSESSEE CHOSEN TO ACCEPT THE INCOME DECLARED BY THE ASSESSEE. THEREFO RE, THE CIT WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT THE A.O. H AS NOT CONDUCTED PROPER ENQUIRY OF THE ISSUES BEFORE COMPLETION OF A SSESSMENT. 10. THE CIT, ASSUMED JURISDICTION TO REVISE THE ASS ESSMENT ORDER ON THE SOLE GROUND THAT THERE IS A LACK OF ENQUIRY ON THE PART OF THE A.O. IN EXAMINING THE ISSUES REFERRED TO IN THE SHOW CAUSE NOTICE. THE CIT QUESTIONS THE ISSUES RIGHT FROM THE DEDUCTION U/S 8 0IB OF THE ACT TO THE APPLICABILITY OF THE PROVISIONS OF SECTION 40(A)(IA ) OF THE ACT FOR NON- DEDUCTION OF TDS ON EXPENDITURE DEBITED TO THE P&L ACCOUNT. THE ASSESSEE FILED A PAPER BOOK WHICH CONTAINS THE DETA ILS FURNISHED TO THE A.O. AT THE TIME OF ASSESSMENT. ON PERUSAL OF THE PAPER BOOK FILED BY THE ASSESSEE, WE FIND THAT THE A.O. HAS ISSUED A DE TAILED QUESTIONNAIRE IN RESPECT OF DEDUCTION CLAIMED U/S 80IB OF THE ACT AND ALSO OTHER ISSUES POINTED OUT BY THE CIT IN THE SHOW CAUSE NOTICE. T HE A.O. AFTER SATISFIED WITH THE EXPLANATIONS FURNISHED BY THE AS SESSEE ACCEPTED INCOME RETURNED. THEREFORE, WE ARE OF THE VIEW THAT ONCE THE ISSUES WHICH ARE SUBJECT MATTER OF REVISION U/S 263 OF THE ACT HAVE BEEN EXAMINED BY THE A.O. AT THE TIME OF ASSESSMENT, THE CIT HAS NO JURISDICTION TO ENTERTAIN FRESH ENQUIRY ON THE SAME ISSUES, BECAUSE HE 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 15 HAS A DIFFERENT OPINION ON THE ISSUES. IN OUR CONS IDERED VIEW, THE ISSUES OF DEDUCTION U/S 80IB OF THE ACT AND OTHER ISSUES P OINTED OUT BY THE CIT HAVE BEEN EXAMINED BY THE A.O. AT THE TIME OF ASSES SMENT. THEREFORE, THE CIT WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT A.O. HAS NOT EXAMINED THE ISSUES. 11. THE CIT HAS POWER OF REVISING THE ASSESSMENT OR DER U/S 263 OF THE ACT, BUT, TO INVOKE THE PROVISIONS OF SECTION 263 O F THE ACT, THE TWIN CONDITIONS MUST BE SATISFIED I.E. THE ORDER OF THE A.O. IS ERRONEOUS AND FURTHER IT MUST BE PREJUDICIAL TO THE INTEREST OF T HE REVENUE. UNLESS BOTH THE CONDITIONS ARE SATISFIED, THE CIT CANNOT ASSUME JURISDICTION U/S 263 OF THE ACT. IT IS NOT NECESSARY THAT EVERY ORDER W HICH IS ERRONEOUS MUST BE PREJUDICIAL TO THE INTEREST OF THE REVENUE OR VI CE VERSA. UNLESS, THE ASSESSMENT ORDER IS ERRONEOUS, NO ACTION CAN BE TAK EN BY THE CIT U/S 263 OF THE ACT, THIS IS BECAUSE THE TWIN CONDITIONS , I.E THE ORDER IS ERRONEOUS AND THE SAME IS PREJUDICIAL TO THE INTERE ST OF THE REVENUE ARE CO-EXIST. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE FACTS AVAILABLE ON RECORD, WE FIND THAT THE A.O. HAS CONDUCTED DETA ILED ENQUIRY AND ALSO EXAMINED THE ISSUE OF DEDUCTION CLAIMED U/S 80IB OF THE ACT AND OTHER ISSUES POINTED OUT BY THE A.O. THE ASSESSEE EXPLAI NED THAT THOUGH FILING OF AUDIT REPORT IN FORM NO.10CCB IS MANDATORY IN NA TURE, IT IS NOT NECESSARY TO FILE THE SAME ALONG WITH RETURN OF INC OME IN VIEW OF THE 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 16 CHANGES IN FILING OF INCOME TAX RETURN FROM PAPER R ETURN TO E-FILING OF INCOME TAX RETURNS. IN THE NEW SYSTEM OF E-FILING OF INCOME TAX RETURNS, FILING OF PHYSICAL COPY OF ANY REPORTS OR STATEMENT S IS DONE AWAY WITH. SIMILARLY, AS REGARDS THE ELIGIBILITY OF JOB WORK C HARGES FOR CLAIMING DEDUCTION U/S 80IB OF THE ACT, WHICH WAS EXAMINED B Y THE A.O. AND ALLOWED DEDUCTION AFTER SATISFIED WITH THE ACTIVITY OF THE ASSESSEE. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSMENT O RDER PASSED BY THE A.O. U/S 143(3) OF THE ACT DATED 20.11.2009 IT IS N OT ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE . 12. NOW IT IS PERTINENT TO DISCUSS THE CASE LAWS RE LIED UPON BY THE ASSESSEE. THE ASSESSEE RELIED UPON THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF SAI CONTRACTORS VS. I TO IN ITA NO.109/VIZAG/2012. THE COORDINATE BENCH OF THIS TRI BUNAL, AFTER CONSIDERING THE RATIO LAID DOWN BY THE HONBLE DELH I HIGH COURT IN THE CASE OF CIT VS. SUNBEAM AUTO LIMITED (2011) 332 ITR 167 HELD THAT ONCE THE A.O. EXAMINED THE ISSUES, THE CIT CANNOT A SSUME JURISDICTION ON THE SAME ISSUES WHICH IS ALREADY EXAMINED BY THE A.O. BY STATING THAT THE A.O. HAS CONDUCTED INADEQUATE ENQUIRY OR T HERE IS A LACK OF ENQUIRY. THE RELEVANT PORTION OF THE ORDER IS REPR ODUCED AS UNDER: 10. TO INVOKE THE PROVISIONS OF SECTION 263 OF THE ACT, THE TWIN CONDITIONS MUST BE SATISFIED I.E. THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND FURTHER IT MUST BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 17 UNLESS BOTH CONDITIONS ARE SATISFIED, THE CIT CANNO T ASSUME JURISDICTION TO PASS ORDER U/S 263 OF THE ACT. IT IS NOT NECESSARY THAT EVERY ORDER WHICH IS PREJUDICIAL TO THE INTEREST OF REVENUE IS ALSO E RRONEOUS. UNLESS THE A.OS ORDER IS NOT ERRONEOUS, NO ACTION CAN BE TAKEN BY T HE CIT U/S 263 OF THE ACT, THIS IS BECAUSE THE TWIN CONDITIONS I.E. (1) T HE ORDER IS ERRONEOUS AND (2) THE SAME IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE ARE NOT CO- EXISTS. IN THE PRESENT CASE, THE A.O. HAS CONDUCTE D ENQUIRY BEFORE ALLOWING DEDUCTION TOWARDS WAGES AND CENTERING EXPE NSES AND ALSO EXAMINED THE POINTS ON WHICH THE CIT WANTS FURTHER VERIFICATION. THE ASSESSING OFFICER AFTER CAREFULLY EXAMINED THE BOOK S OF ACCOUNTS AND RELEVANT VOUCHERS FURNISHED BY THE ASSESSEE PASSED THE ASSESSMENT ORDER AS INDICATED IN HIS ORDER, WHICH IS CLEARLY EVIDENT FROM THE ASSESSMENT ORDER. THE CONTENTION OF THE CIT WAS THAT THE A.O. HAS NOT CONDUCTED PROPER ENQUIRY AND ALSO NOT APPLIED HIS MIND BEFORE ALLOWING THE DEDUCTION. BUT, WE DO NOT AGREE WITH THE CIT FOR T HE REASON THAT THERE IS A DISTINCTION BETWEEN LACK OF ENQUIRY AND INADEQUAT E ENQUIRY. IF THERE IS AN INADEQUATE ENQUIRY THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE CIT TO ASSUME JURISDICTION U/S 263 OF THE ACT, MERELY BECA USE HE HAS A DIFFERENT OPINION IN THE MATTER. THE CIT CAN DO THIS ONLY, W HEN THERE IS A LACK OF ENQUIRY BY THE ASSESSING OFFICER. IN THE PRESENT CA SE, THE ASSESSMENT ORDER IS DETAILED ONE AND ALSO, THE A.O. HAS PASSED A REMARKS IN THE ASSESSMENT ORDER ON TWO ISSUES, ON WHICH THE CIT AS SUMED JURISDICTION, I.E. DISALLOWANCE OF ROUND SOME EXPENDITURE OF RS. 1,00,000/- UNDER THE HEAD WAGES AND CENTERING CHARGES AND ALSO PARTNERS CAPITAL ACCOUNTS, WHERE THE ADDITION WAS RS. 66,825/-.THE A.O. HAD CA LLED FOR EXPLANATION AND THE ASSESSEE HAS FURNISHED ITS EXPLANATION. BU T, THE CIT WAS OF THE OPINION THAT THE ASSESSING OFFICER COULD HAVE DO WE LL TO EXPLORE THE POSSIBILITY OF REJECTING THE BOOKS OF ACCOUNTS AND ESTIMATE THE PROFIT. ACCORDING TO CIT, THE ASSESSING OFFICER HAS CONDUCT ED ENQUIRY BUT, IN ADEQUATE, THEREFORE HE WANTED FURTHER ENQUIRY ON TH E ISSUE ON WHICH HE ASSUMED JURISDICTION. THIS FACT HAD NOT BEEN DISPUT ED BY THE REVENUE. THE COMMISSIONER CANNOT INITIATE REVISION PROCEEDINGS, WITH A VIEW TO CONDUCT FISHING AND REVOLVING ENQUIRY IN THE MATTERS WHICH ARE ALREADY EXAMINED BY THE A.O. THE DEPARTMENT CANNOT DO FRESH ASSESSME NT IN THE GUISE OF REVISION ON THE MATTERS WHICH ARE EXAMINED AND CONC LUDED BY THE A.O. THE A.O. BEING A QUASI JUDICIAL AUTHORITY, SHALL HA VE THE AUTHORITY TO EXERCISE RIGHT JUDGEMENT AND DISCRETION ON THE BASI S OF INFORMATION AVAILABLE BEFORE HIM. IN THE PRESENT CASE ON HAND, THE ASSESSING OFFICER AFTER CONSIDERING VOUCHERS, MADE AN ROUND SOME ADDI TION OF RS.1,00,000/- WHICH IS ONE OF THE POSSIBLE VIEW AVAILABLE FOR HIM , WHICH THE CIT SHALL NOT TERM IT AS LACK OF ENQUIRY OR NON APPLICATION OF MI ND. THUS, IT CANNOT BE SAID THAT IT IS A CASE OF LACK OF ENQUIRY OR NON AP PLICATION OF MIND. 13. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO APPLYING THE RATIO OF THE COORDINATE BENCH, WE ARE OF THE VIEW THAT THE 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 18 ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF T HE ACT DATED 20.11.2011 IS NOT ERRONEOUS IN SO FAR AS IT IS PREJ UDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, WE QUASH THE ORDER PASSED BY THE CIT U/S 263 OF THE ACT AND RESTORE THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT DATED 20.11.2011. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA 596/VIZAG/2014: 15. THIS APPEAL FILED BY THE REVENUE, CHALLENGING T HE ORDER OF CIT(A), VISAKHAPATNAM AGAINST THE CONSEQUENTIAL ORDER PASSE D BY THE A.O. U/S 143(3) R.W.S. 263 OF THE ACT. THE ASSESSING OFFICER HAS PASSED CONSEQUENTIAL ORDER U/S 143(3) R.W.S. 263 OF THE AC T ON THE DIRECTIONS OF THE CIT AND DENIED THE DEDUCTIONS U/S 80IB OF THE A CT. ON FIRST APPEAL, THE CIT(A) ALLOWED THE APPEAL FILED BY THE ASSESSEE AND SET ASIDE THE ORDER PASSED BY THE A.O. U/S 143(3) R.W.S. 263 OF T HE ACT. AGAINST CIT(A) ORDER, THE REVENUE IS IN APPEAL BEFORE US. B EFORE US, THE REVENUE HAS CHALLENGED THE ORDER PASSED BY THE CIT(A) DELET ING THE ADDITIONS MADE BY THE A.O. TOWARDS DISALLOWANCE OF DEDUCTIONS CLAIMED U/S 80IB OF THE ACT. THE A.O. DISALLOWED DEDUCTION CLAIMED U/S 80IB OF THE ACT, ON THE DIRECTIONS OF THE CIT U/S 263 OF THE ACT. T HE TRIBUNAL IN THE PRECEDING PARAGRAPH 13, SET ASIDE THE ORDER PASSED BY THE CIT U/S 263 197/VIZAG/2012 & ITA NO.596/VIZAG/2014 SRI VASAVI COMPOUNDING, YANAM 19 OF THE ACT AND RESTORE THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT. SINCE, THE ORDER PASSED BY THE C IT U/S 263 OF THE ACT, IS SET ASIDE, THE CONSEQUENTIAL ORDER PASSED BY THE A.O. U/S 143(3) R.W.S. 263 OF THE ACT IS INFRUCTUOUS. THEREFORE, FO R THE REASONS RECORDED IN THE PRECEDING PARAGRAPHS, WE DISMISS THE APPEAL FILED BY THE REVENUE AS NOT MAINTAINABLE. 16. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA NO.596/VIZAG/2014 IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 29 TH JUL16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED :29.07.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT M/S. SRI VASAVI COMPOUNDING, 4-2 85, RADHA NAGAR, YANAM, PONDICHERRY STATE. 2. / THE RESPONDENT THE CIT, RAJAHMUNDRY 3. + ( ) / THE CIT (A), RAJAHMUNDRY 4. # . , . , # / DR, ITAT, VISAKHAPATNAM 5 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM