M/s. Superfine Agro Industries, Abohar V. The Income-tax Officer, Bathinda

ITA 203/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8814 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 10-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 02-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S KANWAL
• Keywords: Business income; Revision of order; Depreciation; Loose papers; Audit objection; Deemed to accrue or arise in india; Retraction
• Section: 143(3); 133A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D.JAIN, HONBLE JUDICIAL MEMBER AND SH. T.S. KAPOOR, HONBLE ACCOUNTANT MEMBER [ I.T.A NO. 203(ASR)/2014 ASSESSMENT YEAR: 2009-10 M/S SUPERFINE AGRO INDUSTRIES, BURJ MUHAR ROAD, ABOHAR. PAN:ABKFS1193D VS. INCOME TAX OFFICER, WARD-II(3), ABOHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SUDHIR SEHGAL RESPONDENT BY: SH. S.S.KANWAL (DR. ) DATE OF HEARING: 10.02. 2016 DATE OF PRONO UNCEMENT: 10.03.2016 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF LEARNED CIT, DATED 04.02. 2014 PASSED U/S 263, FOR ASST. YEAR: 2 009-10. 2. THE ASSESSEE HAS RAISED VARIOUS GROUNDS OF A PPEAL, HOWEVER, THE CRUX OF GROUNDS OF APPEAL IS ACTION OF LEARNED CIT BY WHICH HE HAS PASSED ORDER U/S 263. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE ASSE SSMENT ORDER ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF GAW AR GUM MANUFACTURING. BOOKS OF ACCOUNT OF THE ASSESSEE HAV E BEEN AUDITED U/S 44AB OF THE I.T. ACT,1961. THE CASE OF THE ASSESSEE WAS SELECTED FOR ITA NO.203 (ASR)/2014 ASST. YEAR:2009-10 2 SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, THE ASSESSING OFFICER REQUIRED ASSESSEE TO FILE REPLY TO DETAILED QUESTIONER FOR WHICH WRITTEN EXPLANATIONS WERE FILED AND THEREFORE, THE ASSESSMENT WAS COMPLETED U/S 143(3) AFTER MAKING AN ADDITION OF RS .1 LAC. THE LEARNED CIT OBSERVED THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E AS ASSESSING OFFICER HAD NOT EXAMINED AND INVESTIGATED THE ASSESSEE IN A PROPER MANNER BECAUSE OF THE FOLLOWING FACTS. (I) A SURVEY WAS CONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE ON 25.02.2009 AND ASSESSEE HAD SURRENDERED AN AMOUNT OF RS.30,00,000/- WHICH HAS BEEN WIPED OUT BY ASSES SEE BY DEBITING VARIOUS EXPENSES AGAINST THE ADDITIONAL IN COME AND THE ASSESSING OFFICER HAD NOT EXAMINED ALLOWABILITY OF SUCH EXPENSES. HE FURTHER OBSERVED THAT SURRENDER INCOME WAS TO BE TAXED SEPARATELY WHICH ASSESSING OFFICER HAD FAILED TO DO . HE OBSERVED THAT THE SURRENDERED INCOME WAS TO BE TAXED U/S 69A OF THE ACT IN VIEW OF THE JUDGMENT PASSED BY PUNJAB & HARYANA HIG H COURT IN THE CASE OF KIM PHARMA (P) LTD. VS.CIT, PANCHKULA. (II) THE LEARNED CIT OBSERVED THAT ASSESSEE HAD SOL D GWAR KORMA AT AVERAGE RATE OF RS.950/- PER QTL. WHEREAS IT HAS VALUED CLOSING STOCK AT RS.1150/- PER QUINTAL AND THEREFORE, THE A SSESSEE HAD SUPPRESSED SALES WHICH THE ASSESSING OFFICER HAD NO T EXAMINED. ITA NO.203 (ASR)/2014 ASST. YEAR:2009-10 3 (III) HE FURTHER OBSERVED THAT INTEREST PAID TO M/S SATIZA TRADING COMPANY AND M/S B.M. AGRO INDUSTRIES PVT. LTD. WORK ED OUT TO BE AT 16.76% AND 15.34% RESPECTIVELY WHICH WAS EXCESSI VE AND WHICH ASPECT HAS NOT BEEN EXAMINED BY ASSESSING OFFICER. THE LEARNED CIT OBSERVED THAT SUCH EXCESSIVE INTERE ST HAS BEEN DEBITED TO REDUCE THE INCIDENCE OF TAX ON SURRENDERED INCO ME AND ASSESSING OFFICER HAD FAILED TO MAKE ANY ENQUIRIES ON THIS IS SUE, THEREFORE, ON THE ABOVE THREE POINTS HE ISSUED SHOW CAUSE NOTICE U/S 263 ON 21.1.2014. THE ASSESSEE FURNISHED REPLY TO THE QUERIES RAISED BY LEARNED CIT, HOWEVER THE LEARNED CIT WAS NOT SATISFIED WITH THE REPLY AND HE SET ASIDE THE ORDER OF ASSESSING OFFICER AND DIRECTED HIM TO PASS A FRESH ASSESSMENT ORDER. 4. AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 5. AT THE OUTSET, THE LEARNED AR SUBMITTED THAT ALL THE THREE POINTS RAISED BY LEARNED CIT WERE EXAMINED BY ASSESSING OF FICER DURING ASSESSMENT PROCEEDINGS AND IN THIS RESPECT HE REFER RED TO PAPER BOOK PAGE 25 TO 28 AND OUR SPECIFIC ATTENTION WAS INVITE D TO PAGE 25, 26 AND 27. THE LEARNED AR THEN TOOK US TO PAPER BOOK PAGE 63 AND 64 WHERE AGAIN REPLY DATED 9.12.2011 TO THE QUERIES OF ASSES SING OFFICER WAS PLACED. IN VIEW OF THE ABOVE THE LEARNED AR ARGUED THAT ASSESSING OFFICER HAD PASSED ORDER AFTER DUE APPLICATION OF MIND AND HAS FINALIZED THE ASSESSMENT BASED UPON FACTS OF THE CASE. HE SUBMITT ED THAT THE ONLY ITA NO.203 (ASR)/2014 ASST. YEAR:2009-10 4 SOURCE OF INCOME OF ASSESSEE IS MANUFACTURING OF GU M AND ALLIED PRODUCTS AND THEREFORE, INCOME SURRENDERED DURING S URVEY OPERATIONS CANNOT BE TAXED OTHER THAN BUSINESS INCOME. HE SUBM ITTED THAT FACTS OF THE CASE OF M/S KIM PHARMA (P) LTD. VS. CIT, PANCHK ULA AND M/S MOHAMMAED HAZI HASSAN ARE TOTALLY DIFFERENT, THEREF ORE, OBSERVATION OF LEARNED CIT ARE TOTALLY WRONG. CONTINUING HIS ARGU MENTS THE LEARNED AR SUBMITTED THAT IN FACT CASE OF THE ASSESSEE WAS COV ERED BY THE JUDGMENT OF GAURISH STEEL V/S ACIT 43 ITR (TRIB) 414 DECIDED BY CHANDIGRH BENCH, WHEREIN THE JUDGEMENT OF KIM PHARMA (P) LTD HAS BEE N CONSIDERED. HE SUBMITTED THAT CASE OF M/S PARVEEN CHAPPAL CENTRE A BOHAR, DECIDED BY HONBLE AMRITSAR BENCH UNDER SIMILAR FACTS AND CIRC UMSTANCES WAS ALSO IN FAVOUR OF ASSESSEE AND THEREFORE ORDER OF ASSESS ING OFFICER IS NOT ERRONEOUS. 6. AS REGARDS SUPPRESSION OF SALES AS OBSERVED BY L EARNED CIT, THE LEARNED AR SUBMITTED THAT ACCOUNTS OF THE ASSESSEE ARE AUDITED U/S 44AB OF THE ACT. HE SUBMITTED THAT SALES OF THE ASS ESSEE HAS BEEN BOOKED ON THE BASIS OF PREVAILING MARKET PRICES AND CLOSING STOCK WAS VALUED AT MARKET PRICES AS ON THE CLOSE OF YEAR AND EVIDENCE OF VALUATION OF CLOSING STOCK WAS DULY FILED WITH ASSESSING OFFI CER AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PAPER BOOK PAGE 71, WH ERE A COPY OF BILL DATED 28.03.2009 WAS PLACED. THEREFORE, IT WAS ARGU ED THAT OBSERVATION OF LEARNED CIT THAT THERE IS SUPPRESSION IN THE VAL UE OF SALE IS MISCONCEIVED. ITA NO.203 (ASR)/2014 ASST. YEAR:2009-10 5 7. AS REGARDS PAYMENT OF INTEREST TO TWO PARTIES LE ARNED AR SUBMITTED THAT LEARNED CIT HAS WRONGLY CALCULATED INTEREST @ 16.76% AND 15.34% AND IN FACT RATE OF INTEREST HAS 15% WHICH IS QUITE REASONABLE KEEPING IN VIEW THE FACT THAT LOANS WERE RAISED WITHOUT ANY SE CURITY AND THE DETAILS OF PARTY WISE PAYMENT OF INTEREST WAS SUBMITTED TO ASSESSING OFFICER AND HE HAS TAKEN A PLAUSIBLE VIEW IN ACCEPTING THAT INT EREST PAYMENTS WERE NOT EXCESSIVE. 8. IN VIEW OF THE ABOVE, HE ARGUED THAT THERE WAS D UE APPLICATION OF MIND BY THE ASSESSING OFFICER AND EVERY THING STAND S EXAMINED AND HENCE ORDER U/S 263 IS NOT JUSTIFIED. RELIANCE IN T HIS RESPECT WAS PLACED ON THE FOLLOWING CASE LAWS. (I) VENUS WOOLEN MILLS AS REPORTED IN 36 ITR (TRI B)388 (II) KHUSHI RAM & SONS AS REPORTED IN 40 ITR (TRIB ) 92 (III) HARI TRADING CO. VS. CIT (P&H HC) AS REPORTE D IN 263 ITR 437. (IV) AMRIK SINGH VS. ACIT (CHANDIGARH BENCH) AS RE PORTED IN 36 DTR 111. (V) SH. NARAIN SINGLA VS. CIT (CENTRAL) IN ITA NO. 427/CHD/2015 ORDER DATED 31.08.2015. (VI) PAWAN KUMAR VS. CIT IN ITA NO.435/CHD/2012 VID E ORDER DATED 19.08.2015. 9. WITHOUT PREJUDICE THE LEARNED AR SUBMITTED THAT INTERNAL AUDIT TEAM OF INCOME TAX DEPARTMENT HAD RAISED THE OBJECT ION REGARDING WIPING OUT OF ENTIRE SURRENDERED AMOUNT OF RS.30,00 ,000/- VIDE AUDIT NOTE DATED 16.05.2013, COPY WAS PLACED IN PAPER BOO K PAGE 65 AND 66. THE LEANED AR SUBMITTED THAT THE ASSESSING OFFICER VIDE ITS REPLY DATED 16.05.2013 TO THE OBJECTION OF AUDIT TEAM HAD REPLI ED AND HAD REQUESTED TO FILE THE OBJECTION. THE LEARNED AR FURTHER TOOK US TO PAPER PAGE 69 TO ITA NO.203 (ASR)/2014 ASST. YEAR:2009-10 6 70 WHERE A COPY OF LETTER WRITTEN BY COMMISSIONER O F INCOME TAX, BATHINDA WAS PLACED WHERE IN THE COMMISSIONER OF IN COME TAX, BATHINDA HAS DIRECTED AS TO WHY AUDIT OBJECTION HAS BEEN IGNORED. THE LEARNED AR SUBMITTED THAT THE SEQUENCE OF EVENTS SU GGESTS THAT NOTICE U/S 263 WAS ISSUED ON THE BASIS OF AUDIT OBJECTION WHICH IS NOT AS PER LAW AND RELIANCE IN THIS RESPECT WAS PLACED ON THE FOLLOWING CASE LAWS. (I) SH. JASWINDER SINGH VS. CIT (ITA NO.690/CHD/201 0) (II) M/S REFEX INDUSTRIES LTD. VS. DCIT (ITA NO.972 /MDS/2014 (III) CIT VS. SOHANA WOLLEN MILLS (2008) 296 ITR 23 8 (P&H) (IV) J.THOMAS & CO. PVT. LTD. VS. JCIT (OSD) ITA NO.570/KOL/2012 (V) VINAY PARTAP THACKER VS. CIT (ITA NO. 2939/MUM/ 2011. (VI) CIT VS. GABRIEL INDIA LTD. (1993) 203 ITR 108 (BOM). WITHOUT PREJUDICE IT WAS SUBMITTED THAT LEARNED CIT HAS ONLY SET ASIDE THE ORDER WHICH WAS PASSED AFTER DUE APPLICATION OF MIND AND THEREFORE, LEARNED CIT WAS NOT OF CONFIRMED VIEW ABOUT HIS ACT ION AND THEREFORE, THE ORDER U/S 263 WAS BAD IN LAW. RELIANCE IN THIS RESP ECT WAS PLACED ON THE CASE LAW OF CIT VS. M/S KANDA RICE MILLS 178 ITR 446 (P&H). 10. THE LEARNED DR, ON THE OTHER HAND, INVITED OUR ATTENTION TO THE PROVISIONS OF SECTION 263 AND SUBMITTED THAT LEARN ED COMMISSIONER HAS ALL POWERS TO INITIATE ACTION U/S 263 IF THE ORDER OF ASSESSING OFFICER WAS PREJUDICIAL TO THE INTEREST OF REVENUE AND WAS ERRO NEOUS. THE LEARNED DR INVITED OUR ATTENTION TO ASSESSMENT ORDER IN THIS R ESPECT AND SUBMITTED THAT THERE IS NO WHISPER OF EXAMINATION OF THE POIN TS RAISED BY LEARNED COMMISSIONER OF INCOME TAX AND THEREFORE, LEARNED C IT WAS JUSTIFIED IN HOLDING THAT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF ITA NO.203 (ASR)/2014 ASST. YEAR:2009-10 7 REVENUE. COMMENTING UPON THE MERITS OF THE CASE THE LEARNED DR SUBMITTED THAT THE SURVEY WAS CONDUCTED IN THE LAST MONTH OF FINANCIAL YEAR AND HOW THE ASSESSEE HAD INFLATED ITS EXPENSES WAS NOT EXAMINED BY ASSESSING OFFICER. 11. AS REGARDS THE ARGUMENTS OF LEARNED AR THAT SEC TION 263 WAS INITIATED ON THE BASIS OF AUDIT OBJECTION, THE LEAR NED DR SUBMITTED THAT THE CAG IS A PART OF GOVERNMENT OF INDIA AND THE OB JECTION RAISED BY IT CANNOT BE IGNORED. HE FURTHER SUBMITTED THAT THE LE ARNED CIT WAS NOT GUIDED BY AUDIT OBJECTION ONLY AND THERE WERE OTHER ISSUES ALSO SUCH AS SUPPRESSION IN VALUE OF SALE OF GWAR KORAM AND EXCE SSIVE PAYMENT OF INTEREST. 12. THE LEARNED DR SUBMITTED THAT DURING SURVEY PRO CEEDINGS THE ASSESSEE HAD EVEN HANDED OVER THE CHEQUES ALSO FOR PAYMENT OF TAX, THEREFORE, THE ASSESSEE HAD MANIPULATED ITS ACCOUNT S TO WIPE OUT THE SURRENDERED INCOME WHICH ASPECT HAS NOT BEEN EXAMIN ED BY ASSESSING OFFICER AND THEREFORE, THE ACTION OF THE LEARNED CI T WAS AS PER THE PROVISIONS OF LAW. 13. THE LEARNED AR IN HIS REJOINDER SUBMITTED THAT ALL THE REASONS FOR INCURRING OF LOSS DURING THIS YEAR WAS EXPLAINED TO ASSESSING OFFICER, THEREFORE, IT CAN NOT BE SAID THAT ASSESSING OFFICE R HAS NOT EXAMINED THE EXPENSES BOOKED BY ASSESSEE. AS REGARDS GWAR KORAM THE LEARNED AR SUBMITTED THAT ALL SALES OF THE ASSESSEE WERE VOUCH ED AND THESE WERE ITA NO.203 (ASR)/2014 ASST. YEAR:2009-10 8 BOOKED AT MARKET PRICES AND MONTHWISE FIGURES OF SA LES WERE ALSO FILED DURING ASSESSMENT PROCEEDINGS. REGARDING HANDING OV ER OF CHEUQES THE LEARNED AR SUBMITTED THAT PROFIT/LOSS OF AN ASSESSE E CAN BE DETERMINED ANY AFTER CLOSE OF THE YEAR AND THEREFORE, HANDING OVER OF CHEQUES DOES NOT AMOUNT TO ADMISSION OF TAX LIABILITY AS THE CHE QUES WERE NOT ENCHASED. 14. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT A DETAILED QUESTIONNAIRE WAS ISSUED BY ASSESSING OFFICER WHICH IS PLACED AT PAPE R BOOK PAGE 21 TO 24. THE ASSESSING OFFICER BESIDES OTHER ISSUES HAD RAIS ED THE FOLLOWING QUERIES FROM THE ASSESSEE. QUESTION NO. 5:- RATE OF INTEREST CHARGED ON ADVAN CES/LOANS WHICH HAVE BEEN GIVEN AND IF RATE OF INTEREST CHARGED IS LOWER VIS- A- VIS INTEREST PAID ON LOANS RAISED, PLEASE EXPLAIN WHY THE DIFFERENCE BE NOT DISALLOWED AND ADDED TO YOUR INCOME. PLEASE GIVE THE WORKING OF SU CH DIFFERENCE INDICATING THE RATE OF INTEREST CHARGED AND PAID. QUESTION NO.7:- INVENTORY OF OPENING AND CLOSING ST OCK WITH METHOD OF VALUATION. QUESTION NO.10:- MONTH-WISE SALE /PURCHASE WITH QUA NTITY AND AMOUNT. IN REPLY TO THESE QUERIES THE ASSESSEE FILED ITS RE PLY VIDE LETTER DATED 1.08.2011 PLACED AT PAPER BOOK PAGE 25 TO 28, IN WH ICH BESIDES OTHER REPLIES ON OTHER QUERIES THE REPLY TO RELEVANT QUER IES WERE FURNISHED AS UNDER: ITA NO.203 (ASR)/2014 ASST. YEAR:2009-10 9 (I) THE DETAILS OF INTEREST ARE ENCLOSED MENTIONIN G THEREIN THE RATE OF INTEREST. INTEREST BEARING FUNDS HAVE NOT BEEN DIVE RTED FOR NON BUSINESS PURPOSES. THE INTEREST BEARING FUNDS HAVE NOT BEEN DIVERTED IN LOW INTEREST BEARING INVESTMENTS. (II) THE DETAILS OF OPENING AND CLOSING INVENTORY A RE ENCLOSED. THE CLOSING INVENTORY HAS BEEN VALUED AT MARKET PRICE. THE EVIDENCE REGARDING MARKET RATES PREVAILING AS ON 31 ST MARCH, 2009 ARE ENCLOSED. (III) THE PURCHASES AND SALES ARE COMPLETELY VOUCHE D. THE SUPPORTING VOUCHERS, IN RESPECT OF EXPENSES, ARE PRODUCED IN R ESPECT OF EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT. THE IT EMS MANUFACTURED BY THE CONCERN ARE ALL SOLD ON BASIS OF MARKET RATE S PREVAILING IN THE AREA. THE SALE AND PURCHASE RATE VARY FROM MINUTE T O MINUTE BY MARKET FORCES THEREFORE G.P RATE OF ONE YEAR CAN NO T ACT AS BAROMETER FOR ASCERTAINING THE PROFITABILITY OF ANO THER YEAR. THE CURRENT UNDER ASSESSMENT IS FIRST YEAR OF ITS BUSIN ESS OPERATIONS. HOWEVER ITEM WISE TRADING ACCOUNTS OF EACH COMMODIT Y STATING THEREIN THE QUANTITIES/WEIGHT ARE ENCLOSED. (IV) THE DETAILS OF EXPENSES EXCEEDING RS.50000/- D EBITED TO PROFIT & LOSS ACCOUNT ARE ENCLOSED. THE COMPARATIVE CHART OF EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT CAN NOT BE PREPA RED AS CURRENT YEAR IS FIRST YEAR OF ITS BUSINESS OPERATION. 15. THE ASSESSEE VIDE LETTER DATED 9.12.2011 FURTH ER CLARIFIED REGARDING SURRENDERED INCOME AND EXPENSES INCURRED BY IT. FOR THE SAKE OF CONVENIENCE THE REPLY OF ASSESSEE AS PLACED IN P APER BOOK PAGE 63 AND 64 IS ANNEXED HEREWITH AS PART OF THE ORDER. ITA NO.203 (ASR)/2014 ASST. YEAR:2009-10 10 TO 09-12-2011 THE INCOME TAX OFFICER, WARD -11 (3) ABOHAR DEAR SIR, SUB. :-ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YE AR 2009-10 IN CASE OF SUPERFINE AGRO INDUSTRIES,BURJ MUHAR ROAD, ABOHAR. IN CONNECTION WITH THE ONGOING ASSESSMENT PROCEEDIN GS IN THE ABOVE SAID CASE IT IS SUBMITTED THAT SURVEY U/SL33A WAS CONDUCTED ON THE BUSINESS P REMISES OF THE ASSESSEE ON 25-02-2009. NO BOOKS OF ACCOUNTS WERE IMPOUNDED. THE SURRENDERED AMOUNT WAS DECLARED/REFLECTED IN THE BOOKS OF ACCOUNTS. THERE IS NO RETRACTION OF DISCLOSURE, IF ANY, MADE DURING SURVEY. THE CURRENT ASSESSMENT YEAR IN QUEST ION IS THE FIRST YEAR OF BUSINESS OPERATIONS OF THE ASS ESSEE. THE SUBSTANTIAL AMOUNT OF BUILDING OR PLANT & MACHINERY WERE INSTALLED PRIOR TO SURVEY OPERATIONS AND INSIGNIFICANT AMOUNT OF INVESTMENT WAS MADE TO ASSETS AFTER SURVEY OPERATIONS AND THERE IS NO I NSTANCE OF CLAIMING HIGHER DEDUCTION OF DEPRECIATIO N. IN FACT THE ASSESSEE WAS UNDER HEAVY LOSSES AT THE TIME OF SURVEY DUE TO INADEQUACY OF FUNDS & HIGHER INTEREST CHARGES . THE ASSESSEE WAS PRESSURIZED TO SURRENDER THE AMOUN T OF LOSS OTHERWISE THERE WERE NO DIFFERENCE IN STOCKS OR BOO KS. IT WAS SPECIFICALLY STATED IN THE OFFER LETTER THAT ALL DISCREPANCIES AS ON THE DATE STANDS COVERED IN THE SURVEY. IN THE LIGHT OF ABOVE FACTS THE INCOME DECLARED BY THE ASSESSEE MAY KINDLY BE ACCEPTED. REGARDING LOW PROFITABILITY IT IS SUBMITTED THAT AS SESSMENT YEAR IN QUESTION WAS FIRST YEAR OF ITS BUS INESS OPERATION. THE CONCERN HAD GARNERED GROSS PROFIT OF RS 4064533.01 BUT THE SAME VANISHED UNDER HEAVY LOAD OF FOLLOWING EXPENDITURE. BROKERAGE 130498.00 DEPRECIATION 953946.00 DISCOUNT 788932.47 ELECTRICITY EXPENSES 775900.00 INSURANCE 86918.00 INTEREST 2500201.00 TOTAL 6086895.47 THE ABOVE EXPENSES IN ANY CASE WERE REQUIRED TO BE INCURRED FOR EFFECTIVELY RUNNING THE FACTORY .THE OWN CAPITAL OF THE PARTNERS WAS NEGLIGIBLE HENCE IN TEREST COST IN THE FIRST YEAR OF ITS BUSINESS ACTIV ITY STOOD AT RS 25, 00,201.00.THE SURRENDERED AMOUNT WA S COMPLETELY WIPED OUT BY REMAINING VARIABLE EXPENSES LIKE RATES & TAXES, MACHINERY REPAIRS, LEG AL FEE, GODOWN RENT, PRINTING & STATIONARY ETC. THE EXPENSES OF THE CONCERN ARE GENUINE AND COMPLETELY VOUCHED. NONE OF THE EXPENSES IS OF PERSONAL IN NATURE OR HAS BEEN INCURRED FOR NON-BUSINESS PURPOS ES. KEEPING IN VIEW THE TOTALITY OF THE FACTS THE TRADING RESULTS OF THE CONCERN MAY KINDLY BE ACCEPT ED. SUBMITTED FOR FAVOURABLE AND SYMPATHETIC CONSIDERAT ION. THANKING YOU YOURS FAITHFULLY, FOR SUPERFINE AGRO INDUSTRIES, SD/- (O.P.DODA) PARTNER ITA NO.203 (ASR)/2014 ASST. YEAR:2009-10 11 16. FROM THE QUERIES RAISED BY ASSESSING OFFICER A ND FROM THE REPLY FILED BY ASSESSEE, WE FIND THAT ASSESSING OFFICER H AS EXAMINED ALL THE THREE ISSUES RAISED BY COMMISSIONER OF INCOME. THE ASSESSEE HAS CLARIFIED THAT ITS PURCHASES AND SALES ARE COMPLETE LY VOUCHED AND HAS PRODUCED COMPLETE VOUCHERS IN RESPECT OF EXPENSES A ND EVEN ITEM WISE TRADING ACCOUNT ALONG WITH QUANTITY WAS ALSO SUBMIT TED. THE EVIDENCE REGARDING MARKET RATES PREVAILING AS ON 31 ST MARCH, 2009 WERE ALSO SUBMITTED IN THE FORM OF BILL NO.267 DATED 28 TH MARCH, 2009 WHICH WAS FOR GWAR KORMA WHICH WAS SOLD AT THE RATE OF RS.115 0/- PER QNTL. THE COPY OF BILL IS PLACED AT PAPER BOOK PAGE 71. 17. IN VIEW OF THE ABOVE OBSERVATION OF LEARNED CIT , THAT THERE WAS SUPPRESSION IN SALES OF GWAR KORMA IS NOT CORRECT A S THE VALUATION OF STOCK WAS DONE AT PRICES PREVAILING AS ON 28 TH MARCH, 2009 AND SALES OF THE ASSESSEE WERE COMPLETELY VOUCHED. 18. NOW COMING TO ANOTHER OBJECTION REGARDING ALLEG ATION OF LEARNED CIT THAT ASSESSEE WIPED OUT SURRENDERED INCOME, WE FIND THAT ASSESSEE HAD PRODUCED VOUCHERS FOR EXPENSES AND HAD ALSO SUB MITTED BREAK UP OF VARIOUS EXPENSES AND ASSESSING OFFICER WAS NOT ABLE TO POINT OUT ANY DISCREPANCY IN THE SAME. IN THE LETTER FILED BY ASS ESSEE ON 9.12.2011, THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS UNDER HEAV Y LOSSES AT THE TIME OF SURVEY DUE TO INADEQUACY OF FUNDS AND HIGHER INT EREST CHARGES, ITA NO.203 (ASR)/2014 ASST. YEAR:2009-10 12 THEREFORE, IT CANNOT BE SAID THAT ASSESSING OFFICER HAD NOT EXAMINED THE EXPENSES INCURRED BY ASSESSEE. 19. AS REGARDS THE OBJECTION OF LEARNED CIT THAT AS SESSEE SHOULD HAVE DECLARED THE SURRENDERED INCOME AS SEPARATE INCOME U/S 69A, WE FIND THAT THE ASSESSEE VIDE SURRENDER LETTER PLACED AT P APER BOOK PAGE 20 HAD SURRENDERED ADDITIONAL INCOME OF RS.30 LACS OVER AN D ABOVE THE NORMAL INCOME AS MENTIONED IN THE SURRENDER LETTER. THE ON LY INCOME OF ASSESSEE IS INCOME FROM OPERATIONS OF THIS BUSINESS ONLY AND THEREFORE, ASSESSEE HAD RIGHTLY CREDITED THE AMOUNT OF SURRENDER TO ITS PROFIT AND LOSS ACCOUNT AS ADDITIONAL INCOME WHICH FACT IS VERIFIAB LE FROM PAPER BOOK PAGE 16, WHERE A COPY OF PROFIT & LOSS ACCOUNT IS P LACED. THE ASSESSING OFFICER WHILE DEALING WITH SURRENDERED INCOME HAS T AKEN A PLAUSIBLE VIEW AS DECIDED BY VARIOUS JUDGMENTS. THE AMRITSAR BENCH IN THE CASE OF M/S PARVEEN CHAPPAL CENTRE VS. ACIT , IN ITA NO.626(ASR)/2011 DECIDED ON 28.06.2013 HAS HELD THE SURRENDER INCOME OF RS.50 L ACS TO BE A BUSINESS INCOME. THE ASSESSING OFFICER IN THIS CASE HAD MADE AN ADDITION OF RS. 50 LACS WHICH WAS SURRENDERED DURING THE COURSE OF SURVEY U/S 133A RELYING UPON THE CASE LAW OF FAKIR MOHAMAD HAJI HAS AN VS. CIT, 247 ITR 290 (GUJRAT HIGH COURT), HOWEVER THE TRIBUNAL HELD THE SAME TO BE ASSESSED AS BUSINESS INCOME. WE FURTHER FIND THAT T HE HONBLE CHANDHGARH TRIBUNAL IN THE CASE OF GAURISH STEEL (P VT.) LTD. VIDE ORDER DATED SEP.17, 2015 AFTER RELYING UPON THE CASE OF K IM PHARMA (P) LTD. VS. CIT, PANCKULA AND FAKIR MOHAMAD HAJI HASAN VS. CIT (SUPRA) HAS HELD ITA NO.203 (ASR)/2014 ASST. YEAR:2009-10 13 THAT OTHER THAN CASH THE OTHER INCOME SURRENDERED C AN BE BROUGHT TO BE TAXED UNDER THE HEAD BUSINESS INCOME WHILE THE CASH CAN BE ASSESSED AS DEEMED INCOME U/S 69A OF THE ACT. FROM THE CONTENT S OF SURRENDER LETTER PLACED AT PAPER BOOK PAGE 20 WE FIND THAT AS SESSEE HAD SURRENDERED ADDITIONAL INCOME OF RS.30 LACS COVERIN G ALL DISCREPANCIES IN CASH, STOCK, LOOSE PAPERS, VALUATION OF BUILDING AN D OTHER DISCREPANCIES, HOWEVER THE EXTENT OF DIFFERENCE IN CASH BOOK AND P HYSICAL CASH HAS NOT BEEN MENTIONED. THE ASSESSING OFFICER ON THE BASIS OF SURRENDERED LETTER HAS ACCEPTED THE CLAIM OF INCOME TO BE ASSESSED AS BUSINESS INCOME WHICH IS A PLAUSIBLE VIEW. 20. AS REGARDS EXAMINATION OF EXPENSES, WE FIND THA T ASSESSEE HAD FILED COMPLETE DETAILS OF EXPENSES AND HAD ALSO PRO DUCED VOUCHERS OF EXPENSES, THE ASSESSING OFFICER APPLYING HIS MIND H AD MADE ADDITION OF RS.1 LAC ONLY. THEREFORE, OBSERVATION OF LEARNED CI T THAT ASSESSING OFFICER DID NOT EXAMINE THE EXPENSE IS NOT CORRECT. SIMILAR LY THE ASSESSEE HAD FILED COMPLETE DETAILS OF INTEREST WHICH WERE PAID TO THE LENDERS AND WHICH WAS FOUND TO BE AT MARKET PRICE BY ASSESSING OFFICER, THEREFORE, THE OBSERVATION OF LEARNED CIT THAT INTEREST EXPENS ES WERE EXCESSIVE IS NOT CORRECT. 21. IN VIEW OF THE ABOVE, WE ARE IN AGREEMENT WITH THE ARGUMENTS OF LEARNED AR THAT ASSESSING OFFICER HAD EXAMINED FROM EACH AND EVERY ANGLE AND THEREFORE, THE ORDER WAS NOT ERRONEOUS. T HE HONBLE PUNJAB & ITA NO.203 (ASR)/2014 ASST. YEAR:2009-10 14 HARYANA HIGH COURT IN THE CASE OF HARI TRADING COMP ANY VS. CIT AS REPORTED IN 263 ITR 437 HAS HELD AS UNDER: AO HAVING MADE FULL INQUIRIES BEFORE ACCEPTING TH E CLAIM OF THE ASSESSE QUA THE AMOUNT SURRENDERED AT THE TIME OF SURVEY ON ACCOUNT OF DISCREPANCY IN STOCK AND ACCORDINGLY PASSED THE ORD ER WITHOUT MAKING THE ADDITION, THE ORDER OF CIT UNDER S.263 COULD NOT BE SUSTAINED ON THE GROUND THAT THE ASSESSMENT WAS MADE WITHOUT PROPER ENQUIRY, MORESO WHEN THE ASSESSEES CASE WAS BEING MONITORED BY THE CIT FOR TIME TO TIME AND THE ASSESSMENT ORDER HAS BEEN PASSED AFTER A DR AFT ORDER HAD BEEN FORWARDED TO THE THEN CIT FOR HIS APPROVAL. WE FURTHER FIND THAT HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 (SC) HELD AS UNDER: A BARE READING OF PROVISIONS OF S.263 MAKES IT CLE AR THAT THE PREREQUISITE TO EXERCISE OF JURISDICTION BY THE CIT SUO MOTU UND ER IT, IS THAT THE ORDER OF THE ITO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL T O THE INTEREST OF THE REVENUE. THE CIT HAS TO BE SATISFIED OF TWIN CONDIT IONS NAMELY, (I) THE ORDER OF THE AO SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABS ENT-IF THE ORDER OF THE ITO IS ERRONEOUS BUT IS NON PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IS PREJUDICIAL TO THE REVENUE-RECOURSE CANNOT B E HAD TO S. 263(1). THERE CAN BE NO DOUBT THAT THE PROVISION CANNOT BE INVOKE D TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE AO; IT IS ONLY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACT ED. AN INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLICATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SA ME CATEGORY FALL ORDERS PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL J USTICE OR WITHOUT APPLICATION OF KIND. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' IS NOT AN EXPRESSION OF ART AND IS NOT CONFINED TO LOSS OF TAX. THE SCHEME OF THE ACT IS TO LEVY AND COLLECT TAX IN ACCORDANCE WI TH THE PROVISIONS OF THE ACT AND THIS TASK IS ENTRUSTED TO THE REVENUE. IF D UE TO AN ERRONEOUS ORDER OF THE ITO, THE REVENUE IS LOSING TAX LAWFULLY PAYA BLE BY A PERSON, IT WILL CERTAINLY BE PREJUDICIAL TO THE INTEREST OF THE REV ENUE. THE PHRASE 'PREJUDICIAL TO THE INTERESTS OF THE REVENUE' HAS T O READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE AO. EVERY LOSS OF REVENUE AS CONSEQUENCE OF AN ORDER OF AO CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE , EXAMPLE, WHEN AN ITO ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN L OSS OF REVENUE; OR WHERE TWO VIEWS ARE POSSIBLE AND THE ITO HAS TAKEN ONE VI EW WITH WHICH THE CTT DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRO NEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAK EN BY THE ITO IS UNSUSTAINABLE IN LAW. ITA NO.203 (ASR)/2014 ASST. YEAR:2009-10 15 IN THE PRESENT CASE THE ASSESSING OFFICER HAS EXAMI NED ALL THE POINTS RAISED BY COMMISSIONER OF INCOME TAX. THE ACTION OF LEARNED CIT CANNOT BE TERMED AS JUSTIFIED SO LONG AS ASSESSING OFFICER HAS EXAMINED FROM EACH AND EVERY ANGLE AND HAS TAKEN A PLAUSIBLE VIEW . IN VIEW OF THE FACTS AND CIRCUMSTANCES AND THE LEGAL PRECEDENTS RELIED U PON BY LEARNED AR THE APPEAL OF THE ASSESSEE IS ALLOWED. AS WE HAVE A LREADY DECIDED THE ISSUE IN FAVOUR OF ASSESSEE, THE OTHER ALTERNATIVE ARGUMENTS RAISED BY LEARNED AR HAS NOT BEEN ADJUDICATED. 22. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH MARCH, 2016. SD/- SD/- (A.D. JAIN) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT ME MBER DATED:10.03.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.