Dhram Pal Contractor Hot Mix Plant, MANSA V. The Principal Commissioner of Income Tax, Bathinda

ITA 219/ASR/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0748 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 08-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SH A N MISHRA
• Assessee Lawyers: P N ARORA
• Keywords: Depreciation; Assessment record; Revenue expenditure; Capital expenditure
• Section: 143(3); 142(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NOS.219 & 672(ASR)/2015 ASSESSMENT YEARS :2010-11 & 2011-12 PAN: AAEFD2575M SH. DHARAM PAL, VS. THE PRINCIPAL COMMISSIONER O F INCOME TAX. CONTRACTOR, HOT MIX BATHINDA. PLANT, VILL. DANEWALA, TEH. SARDULGARH. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. P.N.ARORA, ADVOCATE RESPONDENT BY: SH.SH. A.N. MISHRA, DR DATE OF HEARING: 24/05/2016 DATE OF PRONOUNCEMENT: 01/06/2016 ORDER PER T.S. KAPOOR, AM: THESE ARE THE TWO APPEALS FILED BY THE ASSESSEE FO R THE ASSESSMENT YEARS 2010-11 & 2011-12 AGAINST THE SEPARATE ORDERS , PASSED U/S 263 BY THE LD. PRI. CIT, BATHINDA, DATED 18.03.2015 & 0 2.11.2015 RESPECTIVELY. SIMILAR GROUNDS OF APPEALS HAVE BEEN RAISED IN BOTH THE ASSESSMENT YEARS. THE CRUX OF GRIEVANCE OF THE ASSE SSEE IS THAT THE ORDER PASSED BY THE LD. PRI. CIT UNDER SECTION 263 OF THE INCOME TAX ACT ( IN SHORT, THE ACT), 1961 IS WITHOUT JURISDICTION AS THE A.O. DURING COURSE OF ASSESSMENT PROCEEDINGS HAD EXAMINED ALL T HE ISSUES RAISED BY THE LD. PRI. COMMISSIONER. THE ISSUE INVOLVED IN BO TH THE APPEALS IS COMMON, THEREFORE, THESE WERE HEARD TOGETHER AND FO R THE SAKE OF ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 2 CONVENIENCE ARE BEING DISPOSED OFF BY THIS COMMON A ND CONSOLIDATED ORDER. 2. AT THE OUTSET, THE LD. AR INVITED OUR ATTENTION TO THE FACT THAT THE ASSESSMENT IN THESE TWO ASSESSMENT YEARS WAS COMPL ETED BY THE AO UNDER SECTION 143(3) OF THE ACT, AFTER EXAMINATION OF COMPLETE BOOKS OF ACCOUNT AND THE ASSESSEE DURING THE COURSE OF ASSES SMENT PROCEEDINGS HAD FILED REPLIES TO ALL QUERIES RAISED BY THE AO A ND BOOKS OF ACCOUNT ALONG WITH BILLS AND VOUCHERS WERE PRODUCED BEFORE THE AO AND IN SUPPORT OF HIS CONTENTION, OUR ATTENTION WAS INVITE D TO THE IST PARAGRAPH OF THE ASSESSMENT ORDER WHERE THE AO HAD MENTIONED THE FACT OF HAVING EXAMINED BOOKS OF ACCOUNT, BILLS AND VOUCHERS AND, THEREFORE, IT WAS SUBMITTED THAT THE ACTION OF THE LD. PRI. CIT WAS NOT JUSTIFIED, AS THE AO HAD PASSED THE ORDER AFTER COMPLETE SCRUTINY. INVIT ING OUR ATTENTION TO THE OBJECTIONS RAISED BY THE LD. PRI. CIT, OUR ATT ENTION WAS INVITED TO THE SHOW CAUSE NOTICE PLACED AT PB 1 TO 3 FOR ASSESSMEN T YEAR 2010-11 AND AT PB 1-2 FOR ASSESSMENT YEAR 2011-12. 3. THE LD. AR FILED BRIEF SYNOPSIS REBUTTING THERE IN, ALL THE OBJECTIONS RAISED BY THE LD. PRI. CIT. TAKING FIRST ASSESSMEN T YEAR 2010-11, THE LD. AR SUBMITTED THAT THE FIRST OBJECTION RAISED BY THE LD. PRIN. CIT IS REGARDING THE EXPENSES CLAIMED UNDER THE HEAD HIRE CHARGES OF MACHINERY. HE SUBMITTED THAT THE LD. PRI. CIT HAS RAISED OBJECTION THAT CASH EXPENSES BELOW RS.20,000/- WERE INCURRED BY TH E ASSESSEE AND THE AO HAD NOT ENQUIRED AS TO WHOM THESE PAYMENTS WERE MADE AND FURTHER ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 3 THE AO HAD NOT CROSS VERIFIED TO CONFIRM THE GENUI NENESS OF SUCH PAYMENTS. THE LD. AR IN THIS RESPECT INVITED OUR A TTENTION TO THE ORDER OF THE LD. PRI. CIT AND INVITED OUR ATTENTION TO THE F INDINGS OF THE LD. CIT AND SUBMITTED THAT THE FINDINGS OF THE LD. PRI. CIT I TSELF PROVES THAT ASSESSING OFFICER HAD EXAMINED THIS ASPECT AS LD . CIT HAS MADE FINDINGS FROM THE ASSESSMENT RECORDS ITSELF. HE SUB MITTED THAT LD. CIT HAD OBSERVED THAT THAT SOME OF VOUCHERS PERTAINING TO THESE EXPENSES WERE PLACED ON RECORD AND, THEREFORE, IT CANNOT BE SAID THAT THE AO DID NOT EXAMINE THIS ASPECT. IT WAS THEREFORE, SUBMITT ED THAT IT WAS NOT A CASE OF LACK OF ENQUIRY AS THE LD. PRI. CIT HIMSELF STATES THAT THE AO HAD NOT EXAMINED THE ISSUE FROM HIS POINT OF VIEW. IT W AS SUBMITTED THAT THE AO IN PARA 2 OF THE ASSESSMENT ORDER HAD STATED THA T THE ASSESSEE WAS A CIVIL CONTRACTOR, BOOKS OF ACCOUNT HAVE BEEN MAINTA INED AND EXAMINED, WHICH WERE TEST CHECKED ALONG WITH ALLIED BILLS AND VOUCHERS. THIS CATEGORICAL FINDING OF THE AO IN THE ASSESSMENT ORD ER PROVES THAT THE BOOKS OF ACCOUNT ALONG WITH EXPENDITURE VOUCHERS WE RE EXAMINED BY THE AO AND NO ADVERSE INFERENCE WAS DRAWN ON THE PAYME NT OF HIRE CHARGES MACHINERY USED FOR WORKS CONTRACT AND, THEREFORE, THE FINDING OF THE PRI. CIT THAT THE AO HAD NOT EXAMINED THE BOOKS OF ACCOU NT OF THE ASSESSEE IS CONTRADICTORY ITSELF. FURTHER, IT WAS SUBMITTED THAT THE FINDING OF THE PRI. CIT THAT IF THE AO HAD APPLIED MIND ON THE BARE DETAILS FILED BY THE ASSESSEE, WHICH ARE PLACED ON THE RECORDS WITH RESPECT TO HIRE CHARGES OF MACHINERY PROVES THAT THE EVIDENCE OF P AYMENT OF HIRE ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 4 CHARGES OF MACHINERY WAS FILED AND THE AO AFTER PR OPER APPLICATION OF MIND DID NOT DRAW ANY ADVERSE INFERENCE ON THIS IS SUE. IT WAS SUBMITTED THAT THE AO WHILE PASSING THE FRESH ASSES SMENT ORDER, IN VIEW OF ORDER UNDER SECTION 263 ALSO DID NOT FIND ANY FA ULT IN THE PAYMENT OF HIRE MACHINERY CHARGES AS NO SPECIFIC ADDITION HAS BEEN MADE ON THIS ACCOUNT AND THE AO ONLY APPLIED NET PROFIT RATE TO DETERMINE NET INCOME OF THE ASSESSEE. 4. IN VIEW OF THE FACTS AND CIRCUMSTANCES, IT WAS SUBMITTED THAT THE AO AFTER EXAMINATION OF THE BOOKS AND OTHER SUPPORT ING DOCUMENTS AND AFTER APPLICATION OF MIND DID NOT DRAW ANY ADVERSE INFERENCE ON THE ISSUE OF EXPENSES CLAIMED FOR HIRE CHARGES OF MACH INERY AND THE ASSESSEE CANNOT BE PENALISED, IF THE AO, HAD FAILED TO RECORD HIS FINDINGS IN THE ASSESSMENT ORDER BECAUSE IT IS HIS PREROGATI VE AS TO HOW HE WRITES AN ASSESSMENT ORDER. 5. RELIANCE IN THIS RESPECT WAS PLACED ON THE JUDGM ENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAR SHARMA (2011) 335 ITR 83 (DELHI), FOR THE PROPOSITION THAT WHERE IT WAS NOT DISCERNIBLE FROM THE ASSESSMENT ORDER AS TO WHETHER THE AO HAD APPLI ED HIS MIND OR NOT, BY NOT RECORDING CERTAIN FINDINGS, THE ASSESSEE CO ULD NOT BE PENALIZED AS IT IS THE PREROGATIVE OF THE AO TO DRAFT HIS ORDER. 6. TAKING US TO THE SECOND OBJECTION OF THE PRI. C IT, THE LD. AR SUBMITTED THAT THE ALLEGATION OF THE LD. PRI. CIT I S THAT THE AO HAD NOT EXAMINED THE EXPENSES BOOKED UNDER THE HEAD LABOUR EXPENSES AND IN ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 5 THIS RESPECT OUR ATTENTION WAS INVITED TO PARA-2 ON PAGE 2 OF THE ASSESSMENT ORDER, WHEREIN THE AO HAD SPECIFICALLY M ENTIONED ABOUT THE FACT OF EXAMINING LABOUR EXPENSES AND WHEREIN AFTER RECORDING HIS FINDINGS HE HAD MADE AN ADDITION OF RS.4,00,000/-. IT WAS SUBMITTED THAT THE ABOVE ADDITION OF RS.4,00,000/- ITSELF PRO VES THAT THE AO HAD MADE THE ADDITION AFTER MAKING ENQUIRY AND APPLICAT ION OF MIND. IT WAS FURTHER SUBMITTED THAT IN THE FRESH ASSESSMENT ORD ER, NO SUCH DISALLOWANCE HAS BEEN MADE AND RATHER THE PROFITS O F THE ASSESSEE HAS BEEN ESTIMATED BY APPLYING NET PROFIT RATE. 7. INVITING OUR ATTENTION TO THE NEXT ALLEGATION OF THE PRI. CIT REGARDING THE PURCHASE OF TWO CARS AMOUNTING TO RS. 14.55 LACS., THE LD. AR SUBMITTED THAT THE CARS WERE PURCHASED FROM PART NERS AND THIS ISSUE HAS BEEN EXAMINED BY THE AO AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO PARA 2.3 OF THE ASSESSMENT ORDER. IT WAS SUBMITTED THAT THE AO AFTER FINDING THAT THE OWNERSHIP CERTIFICATE WAS NO T IN THE NAME OF THE ASSESSEE, DISALLOWED DEPRECIATION. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ALLEGATION OF THE LD. PRI. CIT I S THAT THE AO DID NOT MAKE ANY ATTEMPT TO VERIFY AND DISALLOW OTHER EXPEN SES, SUCH AS PETROL, INSURANCE, SALARY, REPAIR & MAINTENANCE AND INTERES T RELATING TO THESE CARS. THE LD. AR IN THIS RESPECT SUBMITTED THAT THE AO HAD DULY EXAMINED THE PROFIT & LOSS ACCOUNT FILED BY THE AS SESSEE AND AFTER FINDING THAT NO EXPENSES RELATING TO CARS WERE BOOK ED BY THE ASSESSEE, HE DID NOT MAKE ANY ADDITION. IN THIS RESPECT, OUR ATT ENTION WAS INVITED TO ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 6 PROFIT & LOSS ACCOUNT (PLACED AT PB-44). THE LD. AR FURTHER INVITED OUR ATTENTION TO THE NEXT OBJECTION OF THE LD. PRI. CIT REGARDING UNSECURED LOANS AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO A COPY OF NOTICE U/S 142(1) (PLACED AT PB 80-81) AND OUR ATTENTION WAS I NVITED TO THE QUERY NO.4 RAISED BY THE AO AND FOR ITS REPLY OUR ATTENT ION WAS INVITED TO REPLY OF THE ASSESSEE PLACED AT PB 82-83. OUR SPECIFIC AT TENTION WAS INVITED TO REPLY NO.4, WHERE THE ASSESSEE HAD MENTIONED THAT DETAILS OF NEW UNSECURED LOANS ALONGWITH THE DOCUMENTARY EVIDENCES HAVE ALREADY BEEN FURNISHED. OUR ATTENTION WAS ALSO INVITED TO PB -39 , WHERE A COPY OF AUDIT REPORT UNDER SECTION 44AB WAS PLACED AND WHER EIN THE AUDITORS HAD MENTIONED THE FACT OF HAVING RECEIVED FRESH UNS ECURED LOANS FROM TWO PARTIES. THE LD. AR SUBMITTED THAT THIS AUDIT R EPORT FORMED PART OF THE MATERIAL BEFORE THE A.O. AND THEREFORE, IT CANN OT BE SAID THAT THE AO HAD NOT EXAMINED THIS ASPECT. OUR ATTENTION WAS ALS O INVITED TO PB-47 WHERE LIST OF UNSECURED LOANS WAS PLACED AND WHERE THE ASSESSEE HAD MENTIONED THE FACT THAT THE LOAN FROM THE TWO PARTI ES WERE NEW AND REST WERE OLD BALANCES. THE LD. AR ALSO TOOK US TO PAPER BOOK PAGES 57 TO 65 WHERE CONFIRMED COPIES OF ACCOUNTS OF UNSECURED LOA NS WERE PLACED. 8. FURTHER, LD. AR TOOK US TO THE OBJECTION OF THE LD. PRI. CIT THAT THE AO HAD NOT EXAMINED THE HOUSEHOLD EXPENSES OF VARIO US PARTNERS AND THEIR FAMILIES VIZ-A-VIZ DRAWINGS MADE BY THEM FRO M THE ASSESSEE FIRM AND IN THIS RESPECT THE LD. AR SUBMITTED THAT COMPL ETE BALANCE SHEET ALONG WITH CAPITAL ACCOUNTS OF THE PARTNERS WAS AV AILABLE WITH THE A.O. ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 7 OUR SPECIFIC ATTENTION WAS INVITED TO PB 81 & 81 W HERE QUERY RAISED BY THE AO WITH RESPECT TO PARTNERS CAPITAL ACCOUNT ALO NGWITH ITS REPLY WAS PLACED. THE LD. AR SUBMITTED THAT OUT OF FIVE PARTN ERS ONLY TWO PARTNERS MADE WITHDRAWALS OF RS.60,000/- AND REST OF THREE PARTNERS DID MAKE SUBSTANTIAL WITHDRAWALS AND THEREFORE, THE AO HAD NOT MADE ADDITIONS KEEPING IN VIEW THE ENTIRE FACTS. 9. REGARDING LAST OBJECTION OF THE LD. CIT, THE LD. AR SUBMITTED THAT THE OBJECTION OF THE LD. PRI. CIT THAT THE AO HAS N OT EXAMINED WHETHER TDS HAS BEEN DEDUCTED, WHILE MAKING PAYMENTS TO SU B-CONTRACTOR, NAMELY, AGGARWAL ASSOCIATES OF MANSA IS ALSO NOT CO RRECT AND IN THIS RSPECT OUR ATTENTION WAS INVITED TO PB 66 TO 79, WH ERE A COPY OF CONFIRMATION LETTERS WRITTEN BY M/S. AGGARWAL ASSOC IATES WAS PLACED AND WHEREIN M/S. AGGARWAL ASSOCIATES HAD CONFIRMED THE RECEIPT OF PAYMENT AND HAD ALSO CONFIRMED THE FACT OF ASSESSEE HAVING DEDUCTED TDS ON SUCH PAYMENTS. 10. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, I T WAS ARGUED THAT THE AO HAD PASSED THE ORDER AFTER EXAMINATION OF EA CH AND EVERY DETAILS AND, THEREFORE, THE ORDER CANNOT BE SAID TO BE ERR ONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD. AR PLACED HIS RELIANCE ON A NUMBER OF CASE LAWS MENTIONED AS BELOW: I) CIT VS. ANIL KUMAR SHARMA (2011) 335 ITR 83 (DEL.) II) NARAIN SINGLA VS. PR. CIT, 62 TAXMAN.COM. 255 (CHD. -TRIB.) ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 8 III) CIT VS. INDO GERMAL FABS, ITA NO.248 OF 2012 DATED 24.12.2014 IV) ITO VS. D.G. HOUSING PROJECTS LTD., 20 TAXMAN.COM 5 87 (DEL.) V) CIT VS. GABRIEL INDIA LTD., 71 TAXMAN 585 (BOM.) VI) CIT VS. ARVIND JEWELLERS, 259 ITR 502 (DEL.) VII) CIT VS. SUNBEAM AUTO LTD. 332 ITR 167 (DEL.) VIII) CIT VS. LEISURE WEAR EXPORTS LTD. 341 ITR 166 IX) CIT VS. DEEPAK MITTAL, 324 ITR 411 (P&H) 11. COMING TO THE APPEAL FOR THE ASSESSMENT YEAR 20 11-12, THE LD. AR SUBMITTED THAT IN THIS YEAR THE OBSERVATIONS OF THE LD. CIT ARE SIMILAR AS IN THIS YEAR ALSO, THE LD. CIT HAS ALLEGED THAT A.O . HAS NOT EXAMINED MACHINERY HIRE CHARGES, LABOUR EXPENSES AND WITHDR AWALS BY PARTNERS AND UNSECURED LOANS. THE LD. AR IN THIS RESPECT TOO K US TO ASSESSMENT ORDER AND INVITED OUR ATTENTION TO PARA 3 WHEREIN THE AO HAD MENTIONED THAT BOOKS OF ACCOUNTS WERE PRODUCED AND TEST CHECKED. 12. THE LD. AR SUBMITTED THAT HIRE CHARGES & MACHIN ERY WERE EXAMINED BY THE A.O. AS WAS EVIDENT FROM THE ORDER OF THE LD. CIT ITSELF. FURTHER OUR ATTENTION WAS INVITED TO PAPER BOOK PAG E 30 WHERE A COPY OF QUESTIONNAIRE WAS PLACED AND WHEREIN THE AO VIDE QU ESTION NO.9 HAD REQUIRED THE ASSESSEE TO FILE DETAILS OF ALL MAJOR EXPENSES ALONGWITH VOUCHERS. THE LD. AR SUBMITTED THAT ASSESSEE HAD FI LED ITS REPLY AND A COPY OF WHICH WAS PLACED AT PB 33 & 35 AND WHEREIN THE ASSESSEE HAD FILED AND PRODUCED DETAILS OF ALL MAJOR EXPENSES IN CLUDING HIRE CHARGES OF ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 9 MACHINERY AND LABOUR CHARGES. LD. AR SUBMITTED THAT WHEREAS AO DID NOT FIND ANYTHING WRONG IN THE EXPENSES OF HIRE CH ARGES AND THEREFORE, DID NOT MAKE ANY ADDITION & WHEREAS IN RESPECT OF L ABOUR EXPENSES HE MADE AN ADDITION OF RS.1,50,000/- AND THEREFORE, IT CANNOT BE SAID THAT A.O. HAD NOT APPLIED HIS MIND. 13. THE LD. AR ALSO TOOK US TO PAPER BOOK PAGE 27 W HERE COMPREHENSIVE CHART SHOWING GROSS RECEIPTS AND PERC ENTAGE OF EXPENSES INCLUDING HIRE CHARGES AND LABOUR CHARGES WAS PLACE D AND SUBMITTED THAT A.O. HAD EXAMINED THE VARIOUS RATIOS OF EXPENS ES AND FINDING THE SAME TO BE COMPARABLE WITH EARLIER YEAR DID NOT MAK E ADDITION. WE WERE ALSO TAKEN TO PB-28 WHERE A CHART SHOWING GROSS PRO FIT EARNED BY THE ASSESSEE IN THREE YEARS WAS PLACED. LD. AR SUBMITT ED THAT FINDING AN INCREASE IN G.P. RATE AND N.P. RATE OVER THE EARLI ER YEARS, THE AO WAS SATISFIED WITH THE GENUINENESS OF EXPENSES AND MORE OVER EVERY YEAR SUCH EXPENDITURE WAS BEING INCURRED. 14. AS REGARDS THE UNSECURED LOANS OF RS.53.95 LAC S, THE LD. AR SUBMITTED THAT A.O. DID MAKE ENQUIRY IN THIS RESPEC T AND OUR ATTENTION WAS INVITED TO QUERY NO.12 PLACED AT PB-31 & IN RE PLY THE ASSESSEE FILED AND SUBMITTED DETAILS AND IN THIS RESPECT OUR ATTEN TION WAS INVITED TO PB-34 WHERE A COPY OF REPLY WAS PLACED. OUR ATTENT ION WAS ALSO INVITED TO AND PAPER BOOK 39-55 WHERE COPIES OF CONFIRMED COPIES OF ACCOUNTS FROM UNSECURED LOAN HOLDERS WAS PLACED. ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 10 15. AS REGARDS THE EXAMINATION OF CAPITAL ACCOUNTS OF PARTNERS THE LD. AR SUBMITTED THAT COMPLETE BALANCE SHEET ALONGWITH CAPITAL ACCOUNTS OF PARTNERS WAS AVAILABLE WITH A.O. LD. AR ALSO TOOK U S TO PB 93 TO 94 AND INVITED OUR ATTENTION TO WITHDRAWALS MADE BY PARTNE RS AND SUBMITTED THAT ONLY TWO PARTNERS HAD MADE WITHDRAWALS OF RS. 60,000/- EACH WHEREAS REST OF THREE PARTNERS HAD MADE WITHDRAWAL S OF RS.9,14,000/- RS.5,86,000/- AND RS.2,60,000/- RESPECTIVELY AND TH EREFORE THE A.O. KEEPING IN VIEW THE ENTIRE FACTS DID NOT MAKE ANY A DDITION. 16. THE LD. DR , ON THE OTHER HAND, HEAVILY RELIED UPN THE ORDER OF THE LD. PRI. CIT AND SUBMITTED THAT THE ASSESSING OFFIC ER DID NOT EXAMINE THE VARIOUS ISSUES RAISED BY THE LD. COMMISSIONER I N A PROPER MANNER AND THEREFORE, THE LD. COMMISSIONER HAS RIGHTLY SE T ASIDE THE ORDER OF THE ASSESSING OFFICER. 17. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE LD. PRI . CIT HAS RAISED FOUR SIMILAR ISSUES IN TWO ASSESSMENT ORDERS WHICH ACCOR DING TO HIM, WERE NOT EXAMINED BY THE AO. THE ISSUES ARE AS UNDER: I) HIRE CHARGES OF MACHINERY II) LABOUR EXPENSES III) VERIFICATION OF UNSECURED LOANS IV) WITHDRAWALS OF PARTNERS. ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 11 BESIDES THIS, THE LD. PRI. CIT HAS RAISED ONE MORE ISSUE IN ASSESSMENT YEAR 2010-11 WHICH IS THAT THE AO HAD NOT EXAMINED THE EXPENSES CLAIMED BY THE ASSESSEE FOR RUNNING AND MAINTENANCE OF CARS FOR WHICH HE HAD DISALLOWED DEPRECIATION. 18. FROM THE ORDER OF LD. PRI. CIT, WE FIND THAT WITH REGARD TO HIRE CHARGES OF MACHINERY AND LABOUR CHAREGES, THE LD. P RI. CIT HAS MADE SIMILAR FINDINGS AND THERE IS DIFFERENCE OF AMOUNT ONLY. FOR THE SAKE OF COMPLETENESS, THE FINDINGS MADE BY THE LD. PRI. CIT IN HIS ORDER UNDER SECTION 263 OF THE ACT, FOR THE ASSESSMENT YEAR 20 11-12 ARE REPRODUCED AS UNDER: 2. THE RETURN OF INCOME WAS FILED BY YOU ELECTRONIC ALLY ON 29.09.2011 FOR THE ASSTT. YEAR 2011-12 DECLARING TO TAL INCOME AT RS. 21,57,390/-. THE ASSESSMENT WAS COMPLETED U/S 143(3 ) OF THE I.T. ACT. 1961 VIDE ORDER DATED 24.03.2014 BY THE ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-I, BATHINDA AT THE TOTAL INCO ME OF RS. 29,45,770. 3. PERUSAL OF THE ASSESSMENT RECORDS REVEALS THAT Y OU HAVE CLAIMED EXPENSES UNDER THE HEAD 'HIRE CHARGES OF MA C' TO THE TUNE OF RS. 1,08,16,000/- FOR HEAD OFFICE AND RS. 6,27,8 00/- FOR RATLAM BRANCH. PERUSAL OF THE DETAILS PLACED ON ASSESSMENT RECORDS REVEALS THAT ALL THE PAYMENTS ARE STATED TO BE MADE TO SOME PERSONS WITHOUT SPECIFIC ADDRESSES AND OTHER IDENTIFIABLE/VERIFIABL E PARTICULARS AND ALL SAID PAYMENTS HAVE BEEN MADE IN CASH BELOW THE CEILING OF RS. 20,000/- EACH. THE AO HAS NOT EXAMINED THE DETAILS OF THESE EXPENSES AS TO WHOM THESE PAYMENTS HAVE BEEN MADE A ND THE NATURE OF SERVICES RENDERED AND THE EXTENT OF ANY M ACHINERY SUPPLIED BY SUCH PARTIES. 3.1 FROM THE ABOVE FACTS, IT IS CLEAR THAT YOU HAVE MAINTAINED ACCOUNTS IN SUCH A MANNER SO THAT NO VERIFICATION C AN BE MADE WITH RESPECT TO THE PERSONS TO WHOM SUCH PAYMENTS HAVE A LLEGEDLY BEEN MADE. THE AO HAS MADE NO ATTEMPT DURING THE COURSE OF ASSESSMENT PROCEEDINGS TO GET THE COMPLETE DETAILS OF THE CLAIM OF SUCH EXPENSES AND TO VERIFY THE GENUINENESS OF ANY SUCH PAYMENTS. THE AO HAS EVEN NOT ENQUIRED AS TO WHAT KIND OF MAC HINERY HAD BEEN SUPPLIED BY SUCH PERSONS TO WHOM THE SAID PAYM ENTS HAVE ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 12 ALLEGEDLY BEEN MADE. IN OTHER WORDS, THE ENTIRE CLA IM OF CASH PAYMENTS TO THE TUNE OF ABOUT RS. 1.14 CRORES UNDER THIS HEAD HAS BEEN ACCEPTED BY THE AO WITHOUT MAKING ANY VERIFICA TION, ALTHOUGH SUCH PAYMENTS WERE PRIMA FACIE AND APPARENTLY WITHO UT THE SUPPORT OF PROPER EVIDENCE. 4. YOU HAVE CLAIMED EXPENSES UNDER THE HEAD 'LABOUR EXPENSES' TO THE TUNE OF RS. 7.15 CRORES IN THE CUR RENT YEAR WHICH INCLUDES LABOUR EXPENSES OF RS. 25 LAKHS FOR RATLAM BRANCH. ALL THE PAYMENTS HAVE BEEN MADE IN CASH BASED ON SELF MADE VOUCHERS. THE GP RATE OF THE ASSESSEE FOR THE CURRENT YEAR IS 7.56% AND NP RATE IS 2.44% WHICH ARE QUITE LOW. IN YOUR CASE, SI NCE THE ACCOUNTS WERE NOT RELIABLE, BEING PREPARED ON THE BASIS OF A LL SELF MADE VOUCHERS AND ALL PAYMENTS HAVE BEEN STATED TO BE MA DE IN CASH, AND HENCE, THE AO WAS DUTY BOUND TO CONSIDER THE RE JECTION OF BOOKS OF ACCOUNTS IN ACCORDANCE WITH LAW. THE AO HAS FAIL ED TO DO SO AND HE HAS MERELY MADE AN ADHOC ADDITION OF RS. 1,50,00 0/- TO THE TOTAL INCOME WITHOUT GIVING ANY BASIS FOR ESTIMATING THIS ADDITION. 19. FROM THE ABOVE FINDINGS MADE BY THE LD. PRI. CI T, WE FIND THAT FROM THE ASSESSMENT RECORDS ITSELF, THE LD. PRI. CIT CAM E TO THE CONCLUSION THAT THE ASSESSEE HAD MADE PAYMENT FOR HIRE CHARGE S AND FOR LABOUR EXPENSES AND FOR WHICH THE AO HAD NOT EXAMINED THE GENUINENESS OF EXPENSES AS THERE WAS NO ADDRESSES OF THE PAYEES ON THE VOUCHERS. MOREOVER, WE FIND THAT THE ASSESSEE DURING THE COUR SE OF ASSESSMENT PROCEEDINGS HAD ALSO FILED COMPARATIVE CHART SHOWIN G THE PERCENTAGE OF EXPENSES INCURRED IN TWO YEARS, WHICH IS PLACED AT PB-27 & 28. THE EXAMINATION OF THIS CHART REVEALS THAT HIRE CHARGES AND LABOUR EXPENSES WERE INCURRED IN TWO YEARS AND THE PERCENTAGE OF TH ESE EXPENSES TO GROSS RECEIPTS WAS ALMOST SIMILAR IN THESE TWO YEA RS. THIS CHART FURTHER STATES THAT THE ASSESSEE HAD EARNED NET PROFIT RATE OF 3.94% AS COMPARED TO 3.38% IN EARLIER YEAR. FURTHER, WE FIND THAT THE AO VIDE QUERY NO.9 ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 13 PLACED AT PB-30 HAD REQUIRED THE ASSESSEE TO FILE T HE DETAILS OF ALL MAJOR EXPENSES ALONGWITH THE VOUCHERS FOR THE SAME AND V IDE ITS REPLY PLACED AT PB-38 HAD FILED DETAILS OF THESE EXPENSES ALONGW ITH THE VOUCHERS. FURTHERMORE, WE FIND THAT THE AO AFTER GOING THROU GH THE DETAILS OF EXPENSES CLAIMED UNDER THE HEAD HIRE MACHINERY AN D LABOUR EXPENSES, ARRIVED AT THE CONCLUSION THAT HE DID NOT FIND ANYT HING WRONG IN THE HIRE PURCHASE CHARGES. THE ALLEGATION OF THE LD. PRI. C IT THAT HE HAD NOT EXAMINED THESE EXPENSES IS NOT CORRECT, AS THE THE LD. PRI. CIT HIMSELF STATES THAT ON AN EXAMINATION FROM THE ASSESSMENT R ECORD AND DETAILS FILED BY THE ASSESSEE WITH REGARD TO ITS EXPENSES, HE HAD FORMED A BELIEF THAT THE GENUINENESS OF THE EXPENSES WAS NOT VERIFI ED. FURTHERMORE, WE FIND THAT THE AO IN HIS FIRST PAGE OF THE ORDER HAS CLEARLY MADE A FINDING OF FACT THAT THE BOOKS OF ACCOUNT ALONGWITH VOUCHER S WERE PRODUCED BEFORE HIM AND HE HAD TEST CHECKED THE VOUCHERS WI TH BOOKS OF ACCOUNT. THE AO WHILE FRAMING THE ASSESSMENT ORDER, WHEN DID NOT FIND ANYTHING WRONG IN THE CLAIM OF HIRE CHARGES, DID NOT SPECIFI CALLY WRITE IN THE ASSESSMENT ORDER, WHEREAS IN RESPECT OF LABOUR EXPE NSES, HE FOUND CERTAIN DEFECTS IN THE VOUCHERS AND THEREFORE, MADE THE ADDITION ACCORDINGLY AND ALSO MENTIONED THE FACT OF SUCH ADD ITION IN THE ASSESSMENT ORDER. THE NON-MENTIONING OF EXAMINATION OF HIRE CHARGES IN ASSESSMENT YEAR CANNOT LEAD TO THE CONCLUSION THAT THE AO HAD NOT EXAMINED THIS ASPECT. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAR SHARMA, REPORTED AT 335 ITR 083 HAS HELD AS UNDER: ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 14 5. THE TRIBUNAL AFTER EXAMINING THE FACTS OF THE CA SE OBSERVED THAT ALTHOUGH IT IS NOT DISCERNIBLE FROM THE ASSESS MENT ORDER WHETHER THE AO HAD APPLIED HIS MIND OR NOT, BUT IT WAS THE PREROGATIVE OF THE AO TO DRAFT HIS ORDER, AND IF HE FAILED TO RECORD CERTAIN FINDINGS, THE ASSESSEE COULD NOT BE PENALIZ ED THEREFORE. THE TRIBUNAL FURTHER OBSERVED THAT WHAT HAS TO BE ASCER TAINED IS WHETHER THE AO HAD INVESTIGATED THE ISSUE AND APPLI ED HIS MIND TO THE WHOLE RECORD. IN THIS BEHALF IT NOTED THAT THE AO HAD ASKED THE ASSESSEE TO SUBMIT THE PURCHASE DEED IN RESPECT OF THE PURCHASE OF LAND AT VILLAGE TUGHLAKABAD AND THAT THE ASSESSEE I N RESPONSE THERETO HAD SUPPLIED REQUISITE DETAILS AND SUBMITTE D A COPY OF THE HIGH COURT'S DECISION IN RELATION TO THE AWARD OF C OMPENSATION ETC. THE TRIBUNAL, THEREFORE, CAME TO THE CONCLUSION THA T THE COMPLETE DETAILS WERE FILED BEFORE THE AO AND THAT HE APPLIE D HIS MIND TO THE RELEVANT MATERIAL AND FACTS, ALTHOUGH SUCH APPLICAT ION OF MIND IS NOT DISCERNIBLE FROM THE ASSESSMENT ORDER. THE TRIBUNAL HELD THAT THE CIT IN PROCEEDINGS UNDER S. 263 ALSO HAD ALL THESE DETAILS AND MATERIAL AVAILABLE BEFORE IT, BUT HAD NOT BEEN ABLE TO POINT OUT DEFECTS CONCLUSIVELY IN THE SAID MATERIAL, FOR ARRI VING AT A CONCLUSION THAT PARTICULAR INCOME HAD ESCAPED ASSESSMENT ON AC COUNT OF NON- APPLICATION OF MIND BY THE AO. THE TRIBUNAL, THEREF ORE, ALLOWED THE APPEAL OF THE ASSESSEE AND QUASHED THE ORDER OF THE CIT PASSED UNDER S. 263 OF THE SAID ACT. 20. THEREFORE, KEEPING IN VIEW THE ABOVE ORDER OF THE HONBLE DELHI HIGH COURT, IT CANNOT BE SAID THAT AO HAD NOT EXAMI NED A PARTICULAR ISSUE SIMPLY BECAUSE HE DOES NOT DISCUSS IT IN THE ASSESSMENT ORDER. FROM THE FACTS AS DISCUSSED IN EARLIER PART OF THE ORDER, THE A.O. DID MADE ENQUIRIES IN THESE CASES. IT IS ANOTHER MATTER THAT THE ENQUIRIES MADE BY THE A.O. WERE INADEQUATE IN THE OPINION OF THE LD. CIT BUT INADEQUATE ENQUIRIES ITSELF CAN NOT GIVE POWERS TO CIT TO INTERVENE. THERE IS A DIFFERENCE BETWEEN INADEQUATE ENQUIRY & LACK O F ENQUIRY. 21. THE HONBLE DELHI HIGH COURT, IN THE CASE OF CI T VS. SUNBEAM AUTO LTD., REPORTED IN 332 ITR 0167 HAS EXPLAINED THE DIFFERENCE BETWEEN INADEQUATE ENQUIRY AND LACK OF ENQUIRY AND HAS HEL D THAT WHERE THERE ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 15 WAS ENQUIRY IT WAS SUFFICIENT AND INADEQUATE ENQUIR Y WILL NOT GIVE OCCASION TO CIT TO PASS ORDER U/S 263. THE FINDINGS OF THE HONBLE COURT ARE SUMMARIZED BELOW: THE SUBMISSION OF THE COUNSEL FOR THE REVENUE WAS T HAT WHILE PASSING THE ASSESSMENT ORDER, THE AO DID NOT CONSID ER THE ASPECT SPECIFICALLY WHETHER THE EXPENDITURE IN QUESTION WA S REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PREDICATES ON TH E ASSESSMENT ORDER, WHICH APPARENTLY DOES NOT GIVE ANY REASONS W HILE ALLOWING THE ENTIRE EXPENDITURE AS REVENUE EXPENDITURE. HOWE VER, THAT BY ITSELF WOULD NOT BE INDICATIVE OF THE FACT THAT THE AO HAD NOT APPLIED HIS MIND ON THE ISSUE. THE AO IN THE ASSESSMENT ORD ER IS NOT REQUIRED TO GIVE DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC. THEREFORE, ONE HAS TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWI NG THE EXPENDITURE IN QUESTION AS REVENUE EXPENDITURE. THE COUNSEL FOR THE ASSESSEE IS RIGHT IN HIS SUBMISSION THAT ONE HAS TO KEEP IN MIND THE DISTINCTION BETWEEN 'LACK OF INQUIRY' AND 'INADEQUA TE INQUIRY'. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD N OT BY ITSELF GIVE OCCASION TO THE CIT TO PASS ORDERS UNDER S. 263, ME RELY BECAUSE HE HAS DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF 'LACK OF INQUIRY' THAT SUCH A COURSE OF ACTION WOULD BE OPEN . THE AO HAD CALLED FOR EXPLANATION ON THIS VERY ITEM FROM THE A SSESSEE AND THE ASSESSEE HAD FURNISHED HIS EXPLANATION VIDE LETTER DT. 26TH SEPT., 2002. THIS FACT IS EVEN TAKEN NOTE OF BY THE CIT HI MSELF IN PARA 3 OF HIS ORDER. THIS CLEARLY SHOWS THAT THE AO HAD UNDER TAKEN THE EXERCISE OF EXAMINING AS TO WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE REPLACEMENT OF DYES AND TOOLS IS TO BE TREATED AS REVENUE EXPENDITURE OR NOT. IT APPEARS THAT SINCE T HE AO WAS SATISFIED WITH THE AFORESAID EXPLANATION, HE ACCEPT ED THE SAME. THE CIT IN HIS IMPUGNED ORDER EVEN ACCEPTS THIS. THUS, EVEN THE CIT CONCEDED THE POSITION THAT THE AO MADE THE INQUIRIE S, ELICITED REPLIES AND THEREAFTER PASSED THE ASSESSMENT ORDER. THE GRI EVANCE OF THE CIT WAS THAT THE AO SHOULD HAVE MADE FURTHER INQUIR IES RATHER THAN ACCEPTING THE EXPLANATION. THEREFORE, IT CANNOT BE SAID THAT IT IS A CASE OF 'LACK OF INQUIRY'.-CIT VS. GABRIAL INDIA LT D. (1993) 114 CTR (BORN) 81 : (1993) 203 ITR 108 (BORN) RELIED ON. 22. FROM THE FACTS AND CIRCUMSTANCES OF THE CASES A S NOTED BY THE LD. CIT HIMSELF, WE FIND THAT IN RESPECT OF THESE ITEMS OF EXPENDITURE, THE AO DID MAKE ENQUIRIES THOUGH IT MAY BE INADEQUATE EN QUIRIES BUT THESE ARE ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 16 NOT THE CASE OF A LACK OF ENQUIRY. THE HONBLE HI GH COURT HAS HELD THAT IF THERE WAS AN ENQUIRY, EVEN INADEQUATE THAT WOUL D NOT BY ITSELF GIVE OCCASION TO THE CIT TO PASS ORDER UNDER SECTION 26 3, MERELY BECAUSE HE HAS A DIFFERENT OPINION IN THE MATTER. THEREFORE, I N VIEW OF THE ABOVE, WE DO NOT FIND THAT THE ACTION OF THE LD. PRI. CIT WAS CORRECT IN ASSUMING JURISDICTION UNDER SECTION 263 ON ACCOUNT OF THE AB OVE TWO OBJECTIONS. 23. AS REGARDS THE OBJECTION OF THE LD. PRI. CIT T HAT THE AO DID NOT EXAMINE THE GENUINENESS OF UNSECURED LOANS, WE FIND THAT THE AO IN THE ASSESSMENT YEAR 2010-11 HAD RAISED QUERY REGARDING UNSECURED LOANS VIDE QUERY NO. 4 AND REPLY FILED BY THE ASSESSEE IS PLACED AT PB-82 WHEREBY THE ASSESSEE SUBMITTED THE DETAILS OF NEW U NSECURED LOANS ALONGWITH DOCUMENTARY EVIDENCES. COPIES OF ACCOUNT OF NEW UNSECURED LOANS FILED DURING THE COURSE OF ASSESSMENT PROCEED INGS IS PLACED AT PB 57 TO 65, WHEREIN THE ASSESSEE HAD FILED THE CONFIR MED COPIES OF ACCOUNT OF VARIOUS UNSECURED LOANS AND FURTHER WE FIND THAT IN THE UNSECURED LOANS ACCOUNT, INTEREST HAS BEEN CREDITED AND TDS H AS BEEN DEDUCTED WHEREVER IT WAS REQUIRED. SIMILARLY, WE FIND THAT I N THE ASSESSMENT YEAR 2011-12, THE QUERY WAS RAISED BY THE AO AND THE ASS ESSEE HAD FILED REPLY TO THAT RELEVANT QUERY AND ITS REPLY IS FOUND PLACE D IN PAPER BOOK PAGE 31 & 34. FROM THE REPLY TO QUERY NO.12, WE FIND THA T THE ASSESSEE HAD DULY FILED CONFIRMATION FROM THE UNSECURED LOANS. W E FURTHER FIND THAT THE COPIES OF CONFIRMED COPIES OF ACCOUNTS OF UNS ECURED LOANS IS FOUND PLACED AT PB 39 TO 55. THE COPIES OF ACCOUNT FILED DURING THE ASSESSMENT ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 17 PROCEEDINGS INDICATE THAT THE ASSESSEE HAD CREDITED INTEREST TO THESE UNSECURED LOANS AND HAD DEDUCTED TDS WHEREVER IT WA S REQUIRED. THEREFORE, THE ALLEGATION OF THE LD. CIT WITH RESP ECT TO UNSECURED LOANS IS NOT JUSTIFIED SPECIFICALLY KEEPING IN VIEW THE FAC T THAT THE ASSESSEE HAD PROVIDED NECESSARY DETAILS DURING ASSESSMENT PROCEE DINGS AND MOST OF UNSECURED LOANS WERE OLD OUTSTANDING BALANCES. THE REFORE, ON THIS ACCOUNT ALSO THE ASSUMPTION OF JURISDICTION U/S 26 3 WAS NOT JUSTIFIED. 24. AS REGARDS LOW WITHDRAWALS OF THE PARTNERS, WE FIND THAT THE ASSESSEE DURING THE ASSESSMENT PROCEEDINGS FILED CO MPLETE SET OF BALANCE SHEET ALONGWITH COMPLETE ANNEXURES WHICH IS PLACED AT PB 29 TO 54 FOR THE ASSESSMENT YEAR 2010-11 AND PB 78 TO 100 IN RES PECT OF ASSESSMENT YEAR 2011-12. THE DETAIL OF PARTNERS CAPITAL ACCOUN T IS PLACED AT PB 45 TO 46 AND 93 TO 94 IN RESPECT OF THESE TWO YEARS. FROM THE WITHDRAWALS MADE IN THESE ACCOUNTS, WE FIND THAT THREE PARTNERS NAMELY, SH. DHARAM PAL, SH. SWARAN KUMAR AND SH. BHIM SAIN HAD WITHDRAWN CONSIDERABLE AMOUNT AS WITHDRAWALS AND THE AMOUNT WITHDRAWN RANGES FROM RS.2.30 LAKHS TO 14.58 LAKHS. ONLY IN CASE OF SH. BHARAT BHUSHAN AND SH. JIWAN KUMAR, THE WITHDRAWALS WERE TO THE EX TENT OF RS.60,000/- EACH IN TWO YEARS. THE AO KEEPING IN VIEW THE ENTIR E FACTS AND CIRCUMSTANCES HAD NOT CONSIDERED THE DRAWINGS MADE BY PARTNERS TO BE ON THE LOWER SIDE AND, THEREFORE, THE ORDER CANNOT BE ERRONEOUS ON THIS POINT ALSO, AS THE LD. CIT IS NOT PERMITTED TO REP LACE HIS OPINION WITH THE OPINION OF THE A.O. ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 18 25. AS REGARDS THE ALLEGATION OF THE LD. CIT REGARD ING NON-DISALLOWANCE OF CAR EXPENSES ON WHICH, THE AO ONLY DISALLOWED DE PRECIATION, WE FIND THAT IN THE ASSESSMENT YEAR 2010-11, THE LD. CIT RAISED THIS ISSUE, WHEREAS IN THE ASSESSMENT YEAR 2011-12, THE LD. CIT DID NOT RAISE THIS ISSUE. IN BOTH THE YEARS, THE DISALLOWANCE MADE BY THE AO RELATED TO ONLY DEPRECIATION. THE LD. AR DURING THE HEARING BEFORE US HAD ALSO INVITED OUR ATTENTION TO THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE AND HAD ARGUED THAT NO SUCH EXPENSES WERE DEBITED BY THE AS SESSEE AND THEREFORE, THE AO WAS NOT EMPOWERED TO MAKE ANY DIS ALLOWANCE IN RESPECT OF SUCH EXPENSES. IN THIS RESPECT PB-44 FOR THE ASSESSMENT YEAR 2010-11 AND PB-92 FOR THE ASSESSMENT YEAR 2011-12 I S RELEVANT. FROM THE EXAMINATION OF THESE PROFIT & LOSS ACCOUNTS F OR THESE YEARS, WE FIND THAT THE ASSESSEE HAD NOT DEBITED THE EXPENSES ON A CCOUNT OF CAR REPAIRS AND PETROL EXPENSES AND THEREFORE, THE AO HAD RIGHT LY NOT MADE ADDITION FOR THESE EXPENSES. THE FINDINGS OF THE LD. CIT IN THIS RESPECT ARE NOT CORRECT. 26. IN RESPECT OF EXAMINATION OF ISSUE OF TDS ON P AYMENTS MADE TO M/S. AGGARWAL ASSOCIATES OF MANSA, WE FIND THAT TH E AO DURING THE ASSESSMENT PROCEEDINGS DIRECTLY OBTAINED INFORMATIO N FROM M/S. AGGARWAL ASSOCIATES REGARDING PAYMENTS RECEIVED FRO M ASSESSEE AND M/S. AGGARWAL ASSOCIATES DULY FILED COPY OF ACCOUNT OF ASSESSEE ALONGWITH COPY OF AUDIT REPORT AND ALSO INTIMATED T HE WARD WHERE IT WAS ASSESSED. A COPY OF WHICH IS PLACED AT PB 66. THE C ONFIRMED COPY OF ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 19 ACCOUNT OF ASSESSEE PLACED AT PB 67 CLEARLY INDICAT ES THE AMOUNTS RECEIVED FROM ASSESSEE AND ALSO INDICATES THE TAX AT SOURCE DEDUCTED BY ASSESSEE. PAGES 71 TO 74 ARE COPIES OF BILLS RAISED BY M/S. AGGARWAL ASSOCIATES WHICH ALSO MENTIONS ABOUT TAX DEDUCTED A T SOURCE. PAGES 76 TO 79 ARE COPIES OF COUNTERFOILS FOR DEPOSIT OF TD S BY ASSESSEE ON ACCOUNT OF TAX DEDUCTED BY HIM ON CONTRACT PAYMENTS . THESE ALL DOCUMENTS WERE FILED BEFORE THE A.O., THEREFORE, ALLEGATION OF LD. CIT THAT THE ISSUE OF TDS HAS NOT BEEN EXAMINED IS NOT CORRECT. 27. FROM THE ABOVE FACTS AND CIRCUMSTANCES OF THE C ASE, WE FIND THAT THE AO HAD DULY CARRIED OUT INVESTIGATION IN RESPEC T OF THESE THREE ISSUES AND THEREFORE, LD. CITS ACTION FOR ASSUMING POWER UNDER SECTION 263 IS NOT JUSTIFIED. 28. ONCE THE ASSESSING OFFICER HAS EXAMINED A PARTI CULAR ISSUE AND HAS COMPLETED THE ASSESSMENT AFTER TAKING A PLAUSIB LE VIEW, THE LD. CIT IS NOT PERMITTED TO ASSUME POWERS U/S 263 SIMPLY BEC AUSE HE DOES NOT AGREE WITH THE VIEW TAKEN BY THE A.O. 29. THE HONBLE BOMAY HIGH COURT IN THE CASE OF CIT VS. GABRIEL INDIA LTD., REPORTED AT 71 TAXMAN 585 (BOM.), HAS HELD AS UNDER: THE POWER OF SUO MOTU REVISION UNDER SUB-SECTION ( 1) IS IN THE NATURE OF SUPERVISORY JURISDICTION AND THE SAME CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPECIFIED THEREIN EXIST. TWO CIRCUMSTANCES MUST EXIST TO ENABLE THE COMMISSIONER TO EXECISE PO WER OF REVISIONS UNDER THIS SUB-SECTION, VIZ., (I) THE ORDER IS ERRO NEOUS; AND (II) BY VIRTUE OF THE ORDER BEING ERRONEOUS PREJUDICE HAS B EEN CAUSED TO THE ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 20 INTERESTS OF THE REVENUE. IT HAS, THEREFORE, TO BE CONSIDERED FIRSTLY AS TO WHEN AN ORDER CAN BE SAID TO BE ERRONEOUS. ONE F INDS THAT THE EXPRESSIONS ERRONEOUS, ERRONEOUS ASSESSMENT AND ERRONEOUS JUDGMENT HAVE BEEN DEFINED IN BLACKS LAW DICTIONA RY. ACCORDING TO THE DEFINITION, ERRONEOUS MEANS INVOLVING ERROR; DEVIATING FROM THE LAW. ERRONEOUS ASSESSMENT REFERS TO AN ASSESSME NT THAT DEVIATES FROM THE LAW AND IS, THEREFORE, INVALID, AND IS A D EFECT THAT IS JURISDICTIONAL IN ITS NATURE, AND DOES NOT REFER TO THE JUDGMENT OF THE AO IN FIXING THE AMOUNT OF VALUATION OF THE PROPER TY. SIMILARLY, ERRONEOUS JUDGMENT MEANS ONE RENDERED ACCORDING T O COURSE AND PRACTICE OF COURT, BUT CONTRARY TO LAW, UPON MISTAK EN VIEW OF LAW, OR UPON ERRONEOUS APPLICATION OF LEGAL PRINCIPLES. 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 ITO ACTING IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSESSMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSI ONER SIMPLY BECAUSE ACCORDING TO HIM, THE ORDER SHOULD HAVE BEE N WRITTEN MORE ELABORATELY. THIS SECTION DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FOR THAT OF THE IT O, WHO PASSED THE ORDER, UNLESS THE DECISION IS HELD TO BE ERRONE OUS. CASES MAY BE VISUALIZED WHERE THE ITO WHILE MAKING THE ASSESSMEN T EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO HE 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 RECORD, MAY BE OF T HE OPINION THAT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON T HE LOWER SIDE AND LEFT TO THE COMMISSIONER HE WOULD HAVE ESTIMATE D THE INCOME AT A FIGURE HIGHER THAN THE ONE DETERMINED BY THE ITO. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT HIGHER FIGURE. IT IS BECAUSE THE ITO HAS EXERCISED THE QUASI-JUDICIAL POWER VESTED IN H IM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CON CLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE COMMIS SIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE S AID IN SUCH A CASE THAT IN THE OPINION OF THE COMMISSIONER THE ORDER I N QUESTION IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BUT TH AT BY ITSELF WILL NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE ERRONEO US BUT NOT PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THEN A LSO THE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVERY E RRONEOUS ORDER CANNOT BE THE SUBJECT-MATTER OF REVISION BECAUSE TH E SECOND REQUIREMENT ALSO MUST BE FULFILLED. 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 INTERPRETATION A LESS ER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. THEREFORE, IN ORDER TO E XERCISE POWER ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 21 UNDER SECTION 263(1) THERE MUST BE MATERIAL BEFORE THE COMMISSIONER TO CONSIDER THAT THE ORDER PASSED BY T HE ITO WAS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE AND THAT IT MUST BE AN ORDER WHICH IS NOT IN ACCORD ANCE WITH THE LAW OR WHICH HAS BEEN PASSED BY THE ITO WITHOUT MAKING ANY ENQUIRY IN UNDUE HASTE. AN ORDER CAN BE SAID TO BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE IF IT IS NOT IN ACCORDANCE WITH THE LAW IN CONSEQUENCE WHEREOF THE LAWFUL REVENUE DUE TO THE STATE HAS NOT BEEN REALIZED OR CANNOT BE REALIZED. THERE MUST BE MATERIAL AVAILABL E ON THE RECORD CALLED FOR BY THE COMMISSIONER TO SATISFY HIM PRIMA FACIE THAT THE AFORESAID TWO REQUISITES ARE PRESENT. IF NOT, HE H AS NO AUTHORITY TO INITIATE PROCEEDINGS FOR REVISION. EXERCISE OF POWE R OF SUO MOTU REVISION UNDER SUCH CIRCUMSTANCES WILL AMOUNT TO AR BITRARY EXERCISE POWER. IT IS WELL SETTLED THAT WHEN EXERCISE OF STATUTORY POWER IS DEPENDENT UPON THE EXERCISE OF CERTAIN OBJECTIVE FACTS, THE A UTHORITY BEFORE EXERCISING SUCH POWER MUST HAVE MATERIALS ON RECORD TO SATISFY IT IN THAT REGARD. IF THE ACTION OF THE AUTHORITY IS CHAL LENGED BEFORE THE COURT, IT WOULD BE OPEN TO THE COURTS TO EXAMINE WH ETHER THE RELEVANT OBJECTIVES WERE AVAILABLE WILL AMOUNT TO A RBITRARY EXERCISE OF POWER. THE ITO IN HIS CASE HAD MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITURE INCURRED BY THE ASSESSEE. THE ASSES SEE HAD GIVEN A DETAILED EXPLANATION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE WERE PART OF THE RECORD OF THE CASE. EVIDENTLY, THE CLAIM WAS ALLOWED BY THE ITO ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. THIS DECISION OF THE ITO COULD NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE D ISCUSSION IN THAT REGARD. MOREOVER, IN THE INSTANT CASE, THE COMMISSI ONER HIMSELF, EVEN AFTER INITIATING PROCEEDINGS FOR REVISION AND HEARING THE ASSESSEE, COULD NOT SAY THAT THE ALLOWANCE OF THE C LAIM OF THE ASSESSEE WAS ERRONEOUS AND THAT THE EXPENDITURE WA S NOT REVENUE EXPENDITURE BUT AN EXPENDITURE OF CAPITAL NATURE. H E SIMPLY ASKED THE ITO TO RE-EXAMINE THE MATTER. THAT WAS NOT PERM ISSIBLE. HENCE, THE PROVISIONS OF SECTION 263 WERE NOT APPLICABLE T O THE INSTANT CASE AND, THEREFORE, THE COMMISSIONER WAS NOT JUSTIFIED IN SETTING ASIDE THE ASSESSMENT ORDER. 30. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE ABOVE JUDICIAL PRECEDENTS, WE ALLOW THE APPEALS FILED BY THE ITA NOS. 219 & 672(ASR)/2015 A.YS. 2010-11 & 2011-12 22 ASSESSEE AND SET ASIDE THE ORDER OF THE LD. CIT AND RESTORE THE ORDER PASSED BY THE A.O. 31. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/06/ 2016. SD/- SD/- (A.D. JAIN) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER /SKR/ DATED: 01/06/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:DHARAM PAL CONTRACTOR HOT MIX PLANT, B ATHINDA. 2. THE PRI. CIT, BATHINDA. 3. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.