M/s Universal Product (P) Ltd., Meerut V. CIT, Meerut

ITA 2056/DEL/2013

• Counselvise Citation: 205620114 RSA 2013
• Duration Of Justice: 2 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 11-09-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 09-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MODI
• Assessee Lawyers: K SAMPATH ADVT SH V K GOEL
• Keywords: Revision of order; Non-deduction of tax; Revenue expenditure; Capital expenditure
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H, NEW DELHI BEFORE SH. G.C.GUPTA, V.P. AND SH. PRASHANT MAHAR ISHI, AM ITA NO. 2056/DEL/2013: ASSTT. YEAR: 2008-09 UNIVERSAL PRODUCT (P) LTD., DHOLKI MOHALLA, SADAR MEERUT VS CIT MEERUT (APPELLANT) (RESPONDENT) PAN NO. AAACU2882P ASSESSEE BY SH. K. SAMPATH , ADVT., SH. V.K. GOEL, ADV. REVENUE BY SH. O.P.MODI, CIT, DR DATE OF HEARING : 11.09.2015 DATE OF PRONOUNCEMENT : 08.10.2015 ORDER PER PRASHANT MAHARISHI, AM: 01. THIS APPEAL, BY THE ASSESSEE, IS DIRECTED AGAINST T HE ORDER DATED 25/03/2013 U/S 263 OF THE INCOME-TAX ACT, 1961, PASSED BY THE COMMISSIONER O F INCOME TAX ,MEERUT FOR A.Y. 2008-09. 02. BRIEF FACTS OF THE CASE IS THAT ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF REPAIRS OF TRANSFORMERS AND ALSO SALE OF SPARE PARTS. ASSESSEE FILED ITS E- RETURN OF INCOME ON 30-9- 2008 DECLARING INCOME OF RS 4970/- FOR AY 2008-09. AO COMPLETED THE ASSESSMENT U/S 143(3) AFTER EXAMINING THE DETAILS, EXPLANATIONS AN D THE BOOKS OF ACCOUNT AT RETURNED INCOME. SUBSEQUENTLY, LD. CIT EXAMINED THE RECORDS AND ISSUED NOTICE U/S 263 DATED 4/3/2013 ALLEGING THAT ORDER PASSED BY AO IS ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF REVENUE BECAUSE I. NET PROFIT SHOWN BY THE ASSESSEE IS ONLY 0.18% OF T HE TURNOVER AND IN ABSENCE OF STOCK REGISTER THE BOOKS ARE LIABLE FOR REJECTIO N. II. SUNDRY CREDITORS OF RS. 1423436/- HAVE NOT BEEN INQ UIRED PROPERLY BY AO III. UNSECURED LOAN OF RS. 10565133/- HAVE NOT BEEN INQU IRED PROPERLY BY AO ITA NO. 2056/DEL/2013 UNIVERSAL PRODUCTS P. LTD. 2 IV. TOTAL INTEREST WAS DISALLOWABLE AS NO TDS HAS BEEN MADE BY ASSESSEE, AO HAS NOT INQUIRED IN THESE ASPECT. V. BASED ON THE TDS, GROSS RECEIPTS SHOWNBY ASSESSEE I S LOWER THAN WHAT IT SHOULD HAVE BEEN. 03. ON 11/3/2013 ASSESSEE SUBMITTED ITS REPLY IN RESPON SE TO ABOVE NOTICE STATING THAT ALL THE DETAILS WITH RESPECT TO ABOVE ISSUES WERE SUBMITTED BEFORE AO AND SAME WERE EXAMINED PROPERLY AND AFTER THAT ASSESSMENT ORDER IS PASSED. IT WAS FURTHER SUBMITTED THAT ORDER IS NEITHER ERRONEOUS AND NOR PREJUDICIAL TO THE INTERE ST OF REVENUE. 04. HOWEVER LD. CIT WAS OF THE VIEW THAT ORDER PASSED B Y AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON SOME ISSUES DIRECTIO NS WERE GIVEN AND ON SOME ISSUES ADDITIONS WERE MADE AS UNDER :- I. REJECTING THE BOOKS OF ACCOUNTS IN ABSENCE OF STOC K REGISTER TO TAKE ON SALES OF RS 12466181 NET PROFIT RATE OF 8 % I.E . RS 997294/- AND ON JOB WORK RECEIPT OF RS 2026651/- NET PROFIT RATE @ 2 0 % I.E. RS 350335/-. THEREFORE MAKING ADDITION ON THIS ACCOUNT OF RS 132 0978/- II. SUNDRY CREDITORS OF RS. 1423436/- HAVE NOT BEEN INQ UIRED PROPERLY BY AO III. UNSECURED LOAN OF RS. 10565133/- HAVE NOT BEEN INQU IRED PROPERLY BY AO IV. TO VERIFY WHETHER TDS IS MADE ON INTEREST PAYMENTS OF RS 469432/-. V. BASED ON THE TDS DEDUCTED THE GROSS RECEIPTS SHOWN BY THE ASSESSEE IS LOWER THAN WHAT IT SHOULD HAVE BEEN, ADDITION OF RS 391600/- WAS MADE. 05. AGAINST THE ABOVE ORDER U/S 263, WHERE PARTLY ADDIT IONS HAVE BEEN MADE AND ON SOME ISSUES DIRECTIONS ARE GIVEN FOR FURTHER VERIFICATIO N, ASSESSEE IS IN APPEAL RAISING SEVERAL GROUNDS OF APPEAL ORIGINALLY BUT SUBSEQUENTLY RAISE D AN ADDITIONAL GROUND THAT THE ORDER PASSED BY CIT U/S 263 OF THE ACT IS ARBITRARY, ERRO NEOUS AND ILLEGAL AND MUST BE QUASHED. LD.DR DID NOT EXPRESS ANY SERIOUS RESERVATION AGAIN ST ADMISSION OF THIS GROUND OF APPEAL. AS THIS GROUND APPEAL IS MAINLY REITERATION OF MANY GROUNDS OF APPEAL RAISED IN ORIGINAL APPEAL MEMO, IN THE INTEREST OF JUSTICE SAME IS ADM ITTED. FURTHER ADDITIONAL GROUND RAISED COVERS THE MAIN ISSUE, ONLY THAT GROUND IS ADJUDICA TED. 06. NOW WE PROCEED TO EXAMINE EACH OF THE ISSUES RAISED IN ORDER U/S 263 AND CONTENTION OF RIVAL PARTIES. I. LOWER GROSS AND NET PROFIT SHOWN BY ASSESSEE ITA NO. 2056/DEL/2013 UNIVERSAL PRODUCTS P. LTD. 3 ON THIS LD. AR SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3), AO ISSUED NOTICE DATED 10TH MAY, 2010 WHERE IN AO RAISED QUERY VIDE PARA NO. 8 FOR GROSS PROFIT AND NET PROFIT RATE FOR LAS T 3 YEARS AND REASONS FOR DECREASE THEREIN. IN RESPONSE TO THAT ASSESSEE SUBMITTED A C OMPARATIVE CHART OF THE GROSS PROFIT FOR LAST THREE YEARS. ACCORDING TO THAT CHAR T THE ASSESSEE HAS DISCLOSED FROM AY 2005-06 TO AY 2008-09 GROSS PROFIT EARNED, NET P ROFIT THEREON AND THE PERCENTAGE THEREOF. THE NP PERCENTAGE WERE IN THE R ANGE OF 0.30% TO 0.18% FOR ALL THESE YEARS. ALONG WITH THE CHART ASSESSEE SUBMITTE D THE ASSESSMENT ORDERS FOR ALL THE YEARS WHICH ARE MADE U/S 143(3) OF THE ACT. ACC ORDING TO THE CHART, THE GROSS PROFIT RATIO HAS INCREASED TO 12.09% COMPARED TO 11.51% IN PRECEDING PREVIOUS YEAR. DURING THE ASSESSMENT PROCEEDINGS THE BOOKS O F ACCOUNTS, BILLS AND VOUCHERS WERE PRODUCED BEFORE THE ASSESSING OFFICER. IN SUBS EQUENT COMMUNICATION EXPLANATION FOR DECREASE IN NET PROFIT WAS ALSO EXP LAINED WITH QUANTITY DETAILS OF NUMBER OF TRANSFORMERS REPAIRED. LD. AR FURTHER SUB MITTED THAT THE LETTER DATED 19.07.2010 SUBMITTED BEFORE THE ASSESSING OFFICER H AS MADE ABSOLUTELY CLEAR WITH RESPECT TO ALL THE DETAILS REGARDING REPAIR CHARGES EARNED BY THE ASSESSEE, GROSS PROFIT AND NET PROFIT. THE REASON FOR FALLING THE NET PROFIT IS BECAUSE OF PAYMENT OF INTEREST WAS ALSO EXPLAINED THEREFORE, THE FINDING OF THE CIT THAT AO HAS NOT VERIFIED OR INQUIRED INTO ALL THE ABOUT DETAILS IS DEVOID OF ANY MERIT. THEREFORE, THE CONTENTION OF THE AR WAS THAT AO HAS MADE INQUIRY O N THIS ISSUE AND AFTER THAT ACCEPTED THE BOOK RESULTS. II. SUNDRY CREDITORS OF RS. 14,23,436/- LD. CIT HAS STATED THAT AO HAS NOT VERIFIED THE SUN DRY CREDITORS OF RS. 1423436/- PROPERLY. REGARDING THIS AR OF APPELLANT SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE PARA NO. 5 OF THE NOTIC E DATED 10TH MAY, 2010, AO HAS ASKED FOR THE CONFIRMATION OF SUNDRY CREDITORS ALON G WITH THEIR PAN ETC. IN RESPECT OF TO THIS VIDE LETTER DATED 20TH MAY, 2010, ASSESS EE HAS SUBMITTED COMPLETE DETAILS OF SUNDRY CREDITORS AND SUBMITTING THEIR LEDGER ACC OUNTS FOR THE NINE CREDITORS. ASSESSEE SUBMITTED COPY OF THE ACCOUNT OF THOSE CRE DITORS FROM THE BOOKS OF THE ASSESSEE AS WELL AS CONFIRMATION OF MAJOR CREDITORS STATING THEIR NAMES, ADDRESS AND ITA NO. 2056/DEL/2013 UNIVERSAL PRODUCTS P. LTD. 4 PERMANENT ACCOUNT NO. THESE DETAILS WERE ACCEPTED B Y AO. THEREFORE THE CONTENTION OF LD. CIT THAT THESE CREDITORS REMAIN UNCONFIRMED IS INCORRECT. III. ON UNSECURED LOAN OF 105,65,133/- AR OF THE APPELLANT SUBMITTED THAT CONFIRMATIONS OF ACCOUNT WERE SUBMITTED ALONG WITH DETAILED CHART OF UNSECURED LOAN. ALL CONFIRMA TIONS WERE SHOWING THE NAME, ADDRESS AND PERMANENT ACCOUNT NO. ALONG WITH COPY O F INCOME TAX RETURN AS WELL AS BALANCE SHEET OF THE LENDERS FOR NEW LOANS. THIS SUBMISSION WAS MADE IN RESPONSE TO PARA NO. 7 OF NOTICE DATED 10TH MAY, 20 10 OF AO WHICH WAS COMPLIED WITH BY LETTER DATED 20TH MAY, 2010 VIDE PARA NO. 7. AS PER CHART IT WAS ALSO MENTIONED THAT MOST OF THE LOANS ARE OLD LOANS AND CARRIED OVER FROM EARLIER YEARS. HENCE, CONTENTION OF LD. CIT THAT THESE CREDITORS R EMAIN UNCONFIRMED IS INCORRECT. FURTHER WHEN THE TRANSACTIONS ARE SUPPORTED BY THE BALANCE SHEET OF THE LENDER, THEIR IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE T RANSACTIONS IS ESTABLISHED. IV. NON-DEDUCTION OF TAX AT SOURCES ON INTEREST LD. AR SUBMITTED THAT IN PARA NO. 9 OF LETTER DATED 10TH MAY, 2010 THE DETAILS OF TDS WERE ASKED FOR AND SAME WERE SUBMITTED BY LETTE R DATED 20TH MAY, 2010. ASSESSEE SUBMITTED FORM NO. 27A ALONG WITH THE PROV ISIONAL RECEIPTS ISSUED FOR FILING OF TDS RETURN ALONG WITH THE COPY OF THE CHA LLAN OF TAX DEDUCTION AT SOURCE OF RS. 48,249/- ON INTEREST PAYMENT MADE ON 28TH MAY, 2008. THEREFORE, THE ISSUE OF DEDUCTION TAX AT SOURCE ON INTEREST PAYMENT IS EXAM INED BY AO. V. ESTIMATION OF TURNOVER BASED ON TDS DEDUCTED OF ASS ESSEEE IN THIS REGARD AR OF THE APPELLANT SUBMITTED THAT A OHAS WRITTEN A LETTER TO ALMOST ALL THE PARTIES WHO HAS DEDUCTED TAXES AT SOURCE ON PAYMENTS MADE TO THE APPELLANT AND NO DISCREPANCY WAS NOTICED. THEREFORE, THERE CA NNOT BE ANY REASON FOR SAYING THAT AO HAS NOT INQUIRED INTO THE TAX DEDUCTION AT SOURCE VIS A VIS GROSS RECEIPTS EARNED BY THE ASSESSEE. 07. FURTHER LD. AR SUBMITTED THAT ORDER PASSED BY THE A SSESSING OFFICER MIGHT NOT HAVE DISCUSSED ALL THESE THINGS IN THE BODY OF THE ORDER BUT HE HAS CALLED FOR EXHAUSTIVE DETAILS AND BASED ON THAT ASSESSMENT IS FRAMED. FURTHER HE SUBMITTED THAT IT IS NOT A CASE OF LACK OF INQUIRY BUT THERE IS AN INQUIRY MADE BY AO AND DETA ILS WERE EXAMINED BY HIM. HENCE, THAT ITA NO. 2056/DEL/2013 UNIVERSAL PRODUCTS P. LTD. 5 ASSESSMENT CANNOT BE TERMED AS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE SEVERAL DECISION OF COORDINATE BENCH WERE CITED WHE REIN THE ABOVE VIEW HAS BEEN CONSIDERED. 08. IN RESPONSE TO THIS LD. DR SUBMITTED THAT DETAILS W ERE NOT THOROUGHLY EXAMINED BY ASSESSING OFFICER BUT HE HAS JUST TAKEN THE DETAILS ON RECORD AND DID NOT CONDUCT ANY VERIFICATION OF THOSE DETAILS. HE FURTHER SUBMITTED THAT ORDER ALSO DOES NOT SHOW FACT OF INQUIRY CONDUCTED. HE SUBMITTED THAT EVEN A SINGLE ERROR FOUND IN THE ORDER OF ASSESSING OFFICER CIT CAN REVISE THAT ORDER. FOR VARIOUS CONT ENTIONS RAISED, HE RELIED ON DECISION OF HONBLE DELHI HIGH COURT IN CASE OF GEE VEE ENTERPR ISES VS. ADDITIONAL CIT 99 ITR 375 (DELHI). 09. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3), PERUSED THE DETAILS S UBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ORDER PASSED BY LD. CIT U/S 263 OF THE ACT. IT IS AN ADMITTED POSITION OF LAW THAT CIT HAS BEEN CONFERRED WITH WIDE REVISIONA RY POWERS U/S 263 OF THE ACT FOR CALLING FOR AND EXAMINATION OF SUCH RECORDS IN ORDE R TO FIND OUT THAT WHETHER THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF REVENUE. HOWEVER, LD. CIT BEFORE STATING SO MUST HAVE SOME MATERIAL TO HOLD A PRIMA FACIE OPINION ABOUT THE ERROR IN THE ORDER AND THEREBY MAKING THA T ORDER PREJUDICIAL TO THE INTEREST OF REVENUE. HOWEVER, IF AO HAS MADE INQUIRIES DURING T HE COURSE OF ASSESSMENT PROCEEDINGS ON THE ISSUES COVERED U/S 263 NOTICE AND ASSESSEE H AS SUBMITTED EXPLANATION ON THOSE ISSUES AND FURTHER AO BEING SATISFIED BY EXPLANATION SUBM ITTED THEN IN OUR VIEW IT CANNOT BE SAID THAT THE ORDER PASSED BY AO IS ERRONEOUS. IT IS NOT MATERIAL THAT IN CASE OF INQUIRES MADE WHETHER AO MAKES DETAIL DISCUSSION ON THOSE ISSUES. IN THE CASE BEFORE US THERE WERE SPECIFIC ISSUES COVERED IN NOTICE AND IN RESPONSE T O THAT ASSESSEE HAS MADE DETAILED SUBMISSION PRODUCING ALL THE RELEVANT DETAILS CALLE D FOR. LD. CIT SIMPLY STATED THAT AO HAD NOT MADE PROPER INQUIRY BUT FROM THE ORDER OF LD. C IT IT IS NOT MENTIONED THAT WHAT INQUIRY OTHER THAN ALREADY MADE BY AO IS REQUIRED TO BE MAD E. FACTS RELATING TO EACH OF THE ABOVE ISSUES AND OUR FINDINGS THEREON IS DISCUSSED HEREUN DER :- (A) NET PROFIT WORKING OF THE ASSESSEE AO HAS RAISED A QUERY DURING THE COURSE OF ASSESSME NT PROCEEDINGS ABOUT THE GROSS PROFIT WORKING AS WELL AS THE NET P ROFIT WORKING OF THE ITA NO. 2056/DEL/2013 UNIVERSAL PRODUCTS P. LTD. 6 ASSESSEE WITH RESPECT TO EARLY ARREARS AND REASONS IF THERE IS A DECREES IN THAT. IN RESPONSE TO THAT AO GAVE DETAILED CHART FOR ASSESSMENT YEAR 2005-06 TILL ASSESSMENT YEAR 2008-09. FURTHER ALL THE ORDERS CONCERNING THOSE YEARS WERE ALSO SUBMITTED WHEREIN ON IDENTICAL FACTS THE BOOKS RESULTS OF THE ASSESSEE WAS ACCEPTE D EITHER DURING THE ASSESSMENT PROCEEDINGS OR IN APPELLANT PROCEEDINGS. FOR ASSESSMENT ORDERS FOR THOSE YEARS ARE PASSED U/S 143(3) OF THE ACT. THE PAST HISTORY OF THE ASSESSEE ALSO SHOWS THAT IN NONE OF THE YEARS BOOKS OF ACCOUNTS WERE REJECTED IN ABSENCE OF STOCK REGISTER . IN AY 2007-08, THE GROSS PROFIT RATIO OF ASSESSEE WAS 11.51 % AND IN THE CURRENT YEAR IT IS 12.09% RESPECTIVELY THEREFORE THERE IS INCREA SE IN THE GROSS PROFIT RATE FURTHER THE LETTER DATED 19.07.2010 OF THE ASS ESSEE ALSO SHOWED NUMBER OF TRANSFORMERS REPAIRED BY THE ASSESSEE. TH E LETTER ALSO CLEARLY EXPLAINS THE FALL IN THE NET PROFIT RATIO I S BECAUSE OF PAYMENT OF HIGHER INTEREST. THE LD. CIT HAS PRESUMED NET PR OFIT RATIO OF 8% ON SALES AS WELL AS 20% ON JOB WORKING WITHOUT GIVI NG ANY COMPARABLE CASES OR ANY OTHER REASON. THEREFORE WE DO NOT FIND ANY REASON TO CONFIRM AO HAS NOT MADE REQUISITE INQUIRY ON THIS ASPECT, HENCE, CONSIDERING THE TOTALITY OF THE FACTS, WE A RE OF THE VIEW THAT LD. CIT WAS NOT JUSTIFIED IN MAKING ADDITION OF RS. 13,20,978/- ON ACCOUNT OF GROSS PROFIT. WE DO NOT FIND ANY ERROR I N THE ORDER OF ASSESSING OFFICER ON THIS COUNT. (B) REGARDING VERIFICATION OF SUNDRY CREDITORS ON UNSEC URED LOAN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AO HAS ASKED FOR THE CONFIRMATION OF SUNDRY CREDITORS OF RS. 14,23,436/- . THIS ISSUED WAS INQUIRED BY AO VIDE LETTER DATED 28TH MAY, 2010. TH E CREDITORS WERE DULY CONFIRMED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS FURTHER WHEN THE BILLS AND VOUCHERS OF SUCH PURCHASES ARE PRODUCED BEFORE AO, WE ARE OF THE VIEW THAT SUC H BILLS ARE CONTEMPORANEOUS CONFIRMATION GIVEN BY THE SUNDRY CR EDITORS. WHEN COPIES OF ACCOUNTS OF SUCH CREDITORS FROM THEIR BOO KS STATING ITA NO. 2056/DEL/2013 UNIVERSAL PRODUCTS P. LTD. 7 PERMANENT ACCOUNT NUMBERS AND ADDRESS IS PROVIDED AND IN ABSENCE OF ANY SUSPICION, AO IS JUSTIFIED IN ACCEPTING THE SAME. ASSESSEE HAS PRODUCED ALL SUCH SUBMISSION IN PAPER BOOKS AND SAM E WERE ALSO NOT CONTROVERTED BY LD. DR. HENCE, WE ARE OF THE OPINIO N THAT ORDER OF ASSESSING OFFICER IS NOT ERRONEOUS AND FURTHER LD. CIT HAS ALSO ERRED IN STATING THAT THEY REMAIN UNCONFIRMED. REGARDING THE LOANS TAKEN BY THE ASSESSEE DURING TH E YEAR AS WELL AS OUTSTANDING FROM EARLIER YEARS AMOUNTING TO RS. 1,0 5,65,133/-, ASSESSEE HAS SUBMITTED CHART WHEREIN DETAILS OF EIG HT LENDERS WERE TABULATED STATING THEIR NAME, ADDRESS, PERMANENT A CCOUNT NUMBER; THE RATE OF INTEREST, PERIOD SINCE WHEN THIS LOANS ARE OUTSTANDING ETC. DURING THE YEAR MOST OF THE LOAN ACCOUNTS ARE CARRI ED OVER FROM EARLIER YEARS EXCEPT IN CASE OF SHRI RAKESH MOHAN G UPTA AND SMT. UMANG GUPTA. FOR THESE NEW LOANS ASSESSEE HAS SUBM ITTED CONFIRMATION OF THE PARTIES STATING THEIR NAME, ADD RESS & PERMANENT ACCOUNT NUMBER AS WELL AS THE COPY OF ITR ALONG WIT H BALANCE SHEET. THE AO ON SPECIFIC INQUIRY RECEIVED THESE DETAILS A ND ACCEPTED THAT CREDITWORTHINESS IN VIEW OF COPIES OF THE BALANCE S HEET SUBMITTED BY THEM. IN VIEW OF THIS THE FINDING OF LD. CIT THAT T HEY REMAIN TOTALLY UNCONFIRMED IS TOTALLY UNFOUNDED. LOOKING TO THE TO TALITY OF THE FACTS, WE ARE OF THE VIEW THAT THE ORDER OF THE ASSESSING OFFICER IS NOT ERRONEOUS ON THIS COUNT. (C) TDS MADE ON THE INTEREST REGARDING TAX DEDUCTION AT SOURCE SPECIFIC INQUIRY WAS MADE AND ASSESSEE HAS SUBMITTED THE TDS RETURNS FILED BY THE ASSESSEE ALONG WITH THE COPIES OF THE CHALLANS. THEREFORE, THESE D ETAILS HAVE ALREADY BEEN VERIFIED ON PAYMENT OF INTEREST OF RS. 4,69,43 2/-. THE CIT DOES NOT SPEAK ABOUT WHAT FURTHER INQUIRY IS TO BE MADE AND WHAT INQUIRY AO HAS FAILED TO MAKE. IN ABSENCE OF ANY SUCH DIREC TION IT CANNOT BE SAID THAT AO HAS MADE EVEN IN PROPER INQUIRIES ON T HIS COUNT, ITA NO. 2056/DEL/2013 UNIVERSAL PRODUCTS P. LTD. 8 THEREFORE, THE ORDER OF THE AO CANNOT BE FOUND TO B E ERRONEOUS ON THIS COUNT. (D) GROSS RECEIPT BASED ON TDS CERTIFICATES IN THIS CASE THE ASSESSING OFFICER HAS MADE DETAILE D INQUIRY ABOUT THE FULL AMOUNT OF TDS DEDUCTED OF APPELLANT FROM VARIO US PARTIES WHO HAVE DEDUCTED TAXES AT SOURCE OF THE APPELLANT. THE IR CONFIRMATIONS WERE OBTAINED AND BASED ON THEIR CONFIRMATION AO HA S FOUND THERE IS NO SUPPRESSED OF GROSS RECEIPT OR ACCESS CLAIM OF T DS AMOUNT. THE LD. CIT HAS MADE AN ADDITION OF RS. 3,91,600/- TO T HE INCOME OF THE ASSESSEE BY APPLYING THE RATE OF TDS ON THE AMOUNT OF TDS AND THEN ESTIMATED THE TURNOVER OF ASSESSEE AND COMPARED IT WITH THE BOOK TURNOVER AND DIFFERENCE IS ADDED TO THE INCOME OF A SSESSEE.. WE CANNOT APPROVE OF SUCH A THUMB RULE APPROACH ADOPTE D BY LD. CIT. THE DETAIL SUBMITTED DURING THE COURSE OF ASSESSMEN T PROCEEDINGS SHOWS VARIOUS TDS CERTIFICATES ISSUED BY VARIOUS GO VERNMENT AGENCIES. FURTHER WHEN THIRD PARTY CONFIRMATIONS A RE OBTAINED BY AO FOR TDS AND ON VERIFICATION OF THEM AO DID NTO F IND ANY INFIRMITY IN THIS CERTIFICATES, WE ARE OF THE VIEW THAT CIT IS NOT JUSTIFIED TO ESTIMATE TURNOVER BASED ON APPLYING TH E TDS RATES AND THEREBY MAKING AN ADDITION OF RS. 3,91,600/-. IN OU R VIEW THIS CANNOT BE APPROVED OF IN VIEW OF DETAILS AVAILABLE IN ASSE SSMENT PROCEEDINGS. IN VIEW OF THIS ORDER OF LD. CIT HOLDI NG THAT ORDER OF AO IS ERRONEOUS IS NOT CORRECT. 10. WE ARE FURTHER OF THE VIEW THAT ALL THE ISSUES INVO LVED IN ORDER OF LD. CIT, AO HAS MADE SOME INQUIRY AND LD. CIT IS OF THE VIEW THAT PROPER INQUIRY HAS NOT BEEN MADE BY AO, THEREFORE THIS CASE IS NOT THE CASE OF LACK OF INQU IRY. LD. CIT HAS ALSO NOT MENTIONED THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE WHAT FURTHE R INQUIRIES AO SHOULD HAVE MADE. IN THE CASE OF CIT V. SUNBEAM AUTO LTD. [2011] 332 ITR 167 (DELHI), THE DELHI HIGH COURT WAS CONSIDERING THIS ASPECT, WHEN THERE IS NO PROPER OR FULL VERIFICATION, AND IT WAS HELD AS UNDER (PAGE 179) : ITA NO. 2056/DEL/2013 UNIVERSAL PRODUCTS P. LTD. 9 'WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE CO UNSEL ON THE OTHER SIDE AND HAVE GONE THROUGH THE RECORDS. THE FIRST ISSUE THAT ARIS ES FOR OUR CONSIDERATION IS ABOUT THE EXERCISE OF POWER BY THE COMMISSIONER OF INCOME-TAX UNDER SECTION 263 OF THE INCOME- TAX ACT. AS NOTED ABOVE, THE SUBMISSION OF LEARNED COUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER, THE ASSESSING O FFICER DID NOT CONSIDER THIS ASPECT SPECIFICALLY WHETHER THE EXPENDITURE IN QUESTION WA S REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PREDICATES ON THE ASSESSMENT ORDER, W HICH APPARENTLY DOES NOT GIVE ANY REASONS WHILE ALLOWING THE ENTIRE EXPENDITURE AS RE VENUE EXPENDITURE. HOWEVER, THAT BY ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND ON THE ISSUE. THERE ARE JUDGMENTS GALORE L AYING DOWN THE PRINCIPLE THAT THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS NOT RE QUIRED TO GIVE DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC. T HEREFORE, ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. LEARNED COUNSEL FO R THE ASSESSEE IS RIGHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE DISTINC TION BETWEEN 'LACK OF INQUIRY' AND 'INADEQUATE INQUIRY'. IF THERE WAS ANY INQUIRY, EVE N INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UN DER SECTION 263 OF THE ACT, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. I T IS ONLY IN CASES OF 'LACK OF INQUIRY' THAT SUCH A COURSE OF ACTION WOULD BE OPEN . IN GABRIEL INDIA LTD. [1993] 203 ITR 108 (BOM), LAW ON THIS ASPECT WAS DISCUSSED IN THE FOLL OWING MANNER (PAGE 113): ' . . . FROM A READING OF SUB-SECTION (1) OF SECTIO N 263, IT IS CLEAR THAT THE POWER OF SUO MOTU REVISION CAN BE EXERCISE D BY THE COMMISSIONER ONLY IF, ON EXAMINATION OF THE RECORDS OF ANY PROCEEDINGS UNDER THIS ACT, HE CONSIDERS THAT ANY O RDER PASSED THEREIN BY THE INCOME-TAX OFFICER IS 'ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE'. IT IS NOT AN ARBITRARY OR UNCHARTERED POWER, IT CAN BE EXERCISED ONLY ON FULF ILMENT OF THE REQUIREMENTS LAID DOWN IN SUB-SECTION (1). THE CONS IDERATION OF THE COMMISSIONER AS TO WHETHER AN ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, MUST B E BASED ON MATERIALS ON THE RECORD OF THE PROCEEDINGS CALLED F OR BY HIM. IF THERE ARE NO MATERIALS ON RECORD ON THE BASIS OF WH ICH IT CAN BE SAID THAT THE COMMISSIONER ACTING IN A REASONABLE M ANNER COULD HAVE COME TO SUCH A CONCLUSION, THE VERY INITIATION OF PROCEEDINGS BY HIM WILL BE ILLEGAL AND WITHOUT JURISDICTION. TH E COMMISSIONER CANNOT INITIATE PROCEEDINGS WITH A VIEW TO STARTING FISHING AND ROVING ENQUIRIES IN MATTERS OR ORDERS WHICH ARE ALR EADY CONCLUDED. SUCH ACTION WILL BE AGAINST THE WELL-ACCEPTED POLIC Y OF LAW THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROC EEDINGS, THAT STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULA R STAGE AND THAT LAPSE OF TIME MUST INDUCE REPOSE IN AND SET AT REST JUDICIAL AND QUASI-JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SP HERES OF HUMAN ACTIVITY (SEE PARASHURAM POTTERY WORKS CO. LTD. V. ITO [1977] 106 ITR 1 (SC) AT PAGE 10) . . . ITA NO. 2056/DEL/2013 UNIVERSAL PRODUCTS P. LTD. 10 FROM THE AFORESAID DEFINITIONS IT IS CLEAR THAT AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME-TAX OFFICER ACTING IN ACCORDANCE WITH LAW MA KES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY. THIS SECTION DO ES NOT VISUALISE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMI SSIONER FOR THAT OF THE INCOME-TAX OFFICER, WHO PASSED THE ORDER UNL ESS THE DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALISED WH ERE THE INCOME-TAX OFFICER WHILE MAKING AN ASSESSMENT EXAMI NES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATE H IMSELF. THE COMMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEFT TO THE COMMISSIONER HE WOULD HAVE EST IMATED THE INCOME AT A FIGURE HIGHER THAN THE ONE DETERMINED B Y THE INCOME- TAX OFFICER. THAT WOULD NOT VEST THE COMMISSIONER W ITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HI MSELF AT A HIGHER FIGURE. IT IS BECAUSE THE INCOME-TAX OFFICER HAS EXERCISED THE QUASI-JUDICIAL POWER VESTED IN HIM IN ACCORDANC E WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNO T BE FORMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES N OT FEEL SATISFIED WITH THE CONCLUSION . . . THERE MUST BE S OME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFU LLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATIO N A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED . . . WE MAY NOW EXAMINE THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE POWERS OF THE COMMISSIONER SET OUT ABOVE. THE INCOME-TAX OFFICER IN THIS CASE HAD MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITUR E INCURRED BY THE ASSESSEE. THE ASSESSEE HAD GIVEN DETAILED EXPLANATION IN THAT REG ARD BY A LETTER IN WRITING. ALL THESE ARE PART OF THE RECORD OF THE CASE. EVIDENTLY , THE CLAIM WAS ALLOWED BY THE INCOME-TAX OFFICER ON BEING SATISFIED WITH THE EXPL ANATION OF THE ASSESSEE. SUCH DECISION OF THE INCOME-TAX OFFICER CANNOT BE HELD T O BE 'ERRONEOUS' SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE D ISCUSSION IN THAT REGARD.'' NOW EXAMINING THE FACTS OF THE PRESENT CASE BEFORE US, ASSESSEE HAS FURNISHED REQUIRED DETAILS CALLED FOR ALONG WITH EXPLANATIONS IN WRITI NG AS WELL AS ALL CONFIRMATIONS OF THE SUNDRY CREDITORS AS WELL AS LENDERS STATING THEIR N AME, ADDRESS AND PAN AND ALSO CONTRA ACCOUNTS ALONG WITH THE BALANCE SHEET AND INCOME TA X RETURNS OF LENDERS. IN CASE OF TDS CREDIT GIVEN TO ASSESSEE AO HAS MADE INQUIRIES FROM THIRD PARTIES. FURTHER LD. CIT IS ITA NO. 2056/DEL/2013 UNIVERSAL PRODUCTS P. LTD. 11 UNDER BELIEF THAT SUNDRY CREDITORS AND LENDERS REMA INS UNCONFIRMED WHICH FACT IS NOT BORNE OUT FROM SUBMISSION MADE BY ASSESSEE AND NOT CONTROVERTED BY REVENUE. THEREFORE ORDER PASSED AFTER SUCH VERIFICATION CANNOT BE TERM ED AS ERRONEOUS. 11. REGARDING NON-MENTIONING OF THE INQUIRY IN ORDER HO N. DELHI HIGH COURT IN CIT V. VIKAS POLYMERS 341 ITR 537 HAS HELD THAT : ' THIS IS FOR THE REASON THAT IF A QUERY IS RAISED DU RING THE COURSE OF SCRUTINY BY THE ASSESSING OFFICER, WHICH WAS ANSWERED TO THE SATISF ACTION OF THE ASSESSING OFFICER, BUT NEITHER THE QUERY NOR THE ANSWER WAS REFLECTED IN THE ASSESSMENT ORDER, THAT WOULD NOT BY ITSELF LEAD TO THE CONCLUSION THAT THE ORDER OF THE ASSESSING OFFICER CALLED FOR INTERFERENCE AND REVISION.' 12. HON BOMBAY HIGH COURT IN INCOME TAX APPEAL NO. 296 OF 2013 (CIT V. FINE JEWELLERY (INDIA) LTD. [2015] 372 ITR 303 (BOM)) DECIDED ON F EBRUARY 3, 2015, FOLLOWING ITS EARLIER DECISION IN IDEA CELLULAR LTD. V. DEPUTY CIT [2008] 301 ITR 407 (BOM) HAS TAKEN A SIMILAR VIEW THAT : '. . . IF A QUERY IS RAISED DURING THE ASSESSMENT PROCEE DINGS AND RESPONDED TO BY THE ASSESSEE, THE MERE FACT THAT IT IS NOT DEALT WI TH IN THE ASSESSMENT ORDER WOULD NOT LEAD TO A CONCLUSION THAT NO MIND HAD BEEN APPL IED TO IT.' 13. ACCORDINGLY WE ARE OF THE VIEW THAT ASSESSMENT ORDE R DATED 12/11/2010 PASSED BY AO U/S 143(3) IN CASE OF THE ASSESSEE IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE O RDER DATED 25/03/2013 PASSED BY THE LD. CIT U/S 263 OF THE ACT IS SET ASI DE AND THE ASSESSMENT ORDER FRAMED BY THE AO IS RESTORED. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. (ORDER PRONOUNCED IN THE COURT ON 08/10/2 015) SD/- SD/- (G.C.GUPTA) (PRASHANT MAHARISHI) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 08 /10/2015 *B. RUKHAIYAR* COPY FORWARDED TO: 1.APPELLANT A ITA NO. 2056/DEL/2013 UNIVERSAL PRODUCTS P. LTD. 12 2.RESPONDENT 3.CIT 4.CIT(APPEALS) 5.DR: ITAT ASSISTANT REGISTRAR DATE INITIAL 1. DRAFT DICTATED ON 15/09/2015 2. DRAFT PLACED BEFORE AUTHOR 15/09/2015 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.