Bhavani Castings Ltd., Kakinada V. THE CIT , Rajahmundry

ITA 242/VIZ/2014

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9946 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 16-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T S N MURTHYDR
• Assessee Lawyers: V RAVI SARMA
• Keywords: Opportunity of being heard; Question of law; Assessment record; Revenue expenditure; Capital expenditure
• Section: 143(3); 263

Judgement Text

ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 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.242/VIZAG/2014 ( / ASSESSMENT YEAR: 2009-10) BHAVANI CASTINGS LTD., KAKINADA VS. CIT, RAJAHMUNDRY [PAN: AADCS1331C ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI V. RAVI SARMA, AR / RESPONDENT BY : SHRI T.S.N. MURTHY,DR / DATE OF HEARING : 20.06.2016 / DATE OF PRONOUNCEMENT : 12.08.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST ORDER OF THE CIT, RAJAHMUNDRY U/S 263 OF THE INCOME TAX ACT, 196 1 (HEREINAFTER CALLED AS 'THE ACT') FOR THE ASSESSMENT YEAR 2009-1 0. ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF A UTOMOBILE SPARE PARTS, FILED RETURN OF INCOME FOR THE ASSESSMENT YE AR 2009-10 ON 29.9.2009 DECLARING TOTAL INCOME OF ` 73,61,980/-. THE ASSESSMENT FOR THE YEAR HAS BEEN COMPLETED U/S 143(3) OF THE ACT, ON 29.11.2011 AND DETERMINED TOTAL INCOME OF ` 83,54,560/-. 3. THE CIT, RAJAHMUNDRY ISSUED A SHOW CAUSE NOTICE DATED 21.11.2013 AND ASKED TO EXPLAIN WHY THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT, DATED 29.11.2011 SHALL NOT BE REVISED UNDER THE PROVISIONS OF SECTION 263 OF T HE ACT. THE CIT, PROPOSED TO REVISE THE ASSESSMENT ORDER FOR THE REA SON THAT ON EXAMINATION OF ASSESSMENT RECORDS, CERTAIN OMISSION S AND COMMISSIONS WERE NOTICED WHICH RENDERED THE ASSESSMENT ORDER ER RONEOUS, IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE IN TERMS OF SECTION 263 OF THE ACT. THE CIT, IN SAID SHOW CAUSE NOTICE, OB SERVED THAT THE A.O. HAS NOT VERIFIED THE ISSUES MENTIONED IN THE SHOW C AUSE NOTICE AT THE TIME OF COMPLETION OF ASSESSMENT. THE CIT, FURTHER , OBSERVED THAT THE A.O. HAS COMPLETED ASSESSMENT WITHOUT EXAMINING ISS UES, SUCH AS EXCISE DUTY PAYMENTS, EXPENDITURE INCURRED UNDER TH E HEAD BUILDING MAINTENANCE, INTEREST AND FINANCE CHARGES, PRE-PAI D EXPENSES AND ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 3 OTHERS, DETAILS OF SALES COMMISSION, ADVANCES AGAIN ST PURCHASE OF MATERIAL, BANK RECONCILIATION STATEMENT, PAYMENTS M ADE TO SPECIFIED PERSONS U/S 40A(2)(B) OF THE ACT, RE-PAYMENT OF LOA N CREDITORS, REMARKS MADE IN ANNEXURE TO FORM 3CD, SQUARED UP LOANS, PUR CHASE OF RAW MATERIALS AND DIFFERENCE IN ANALYSIS OF RAW MATERIA LS CONSUMED. THE A.O. WITHOUT EXAMINING ABOVE ISSUES, SIMPLY COMPLET ED ASSESSMENT BY MAKING CERTAIN ADHOC DISALLOWANCES, WHICH RENDERED THE ASSESSMENT ORDER ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO T HE INTEREST OF THE REVENUE. WITH THESE OBSERVATIONS, ISSUED A SHOW CAU SE NOTICE AND ASKED TO EXPLAIN WHY THE ASSESSMENT ORDER PASSED U/ S 143(3) OF THE ACT, DATED 29.11.2011 SHALL NOT BE REVISED UNDER TH E PROVISIONS OF SECTION 263 OF THE ACT. 4. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE S UBMITTED THAT THE ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT, DAT ED 29.11.2011 IS NOT ERRONEOUS, IN SO FAR AS IT IS PREJUDICIAL TO THE IN TEREST OF THE REVENUE, AS THE A.O. HAS EXAMINED ALL THE ISSUES POINTED OUT IN THE SHOW CAUSE NOTICE AT THE TIME OF COMPLETION OF ASSESSMENT. TH E ASSESSEE FURTHER SUBMITTED THAT IT HAS FURNISHED BOOKS OF ACCOUNTS A ND OTHER RELEVANT INFORMATION AT THE TIME OF ASSESSMENT, IN RESPONSE TO A SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER ON VARIOUS O CCASIONS. THE A.O. ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 4 HAS ISSUED VARIOUS SHOW CAUSE NOTICES ON 5 OCCASION S AND SPECIFICALLY ASKED DETAILS ABOUT THE EXCISE RETURNS FILED BY THE ASSESSEE, LEDGER ACCOUNT COPIES OF BUILDING MAINTENANCE AND INTEREST AND FINANCE CHARGES, PRE-PAID EXPENSES AND OTHERS. THE ASSESSE E FURTHER SUBMITTED THAT THE A.O. HAS SOUGHT EVERY DETAILS IN RESPECT O F ADVANCES PAID AGAINST PURCHASE OF RAW MATERIALS, BANK RECONCILIAT ION STATEMENTS, PAYMENT MADE TO SPECIFIED PERSONS U/S 40A(2)(B) OF THE ACT, DETAILS OF SALES COMMISSION, REPAYMENT OF LOANS, PURCHASE OF R AW MATERIALS AND ANALYSIS OF CONSUMPTION OF RAW MATERIALS AND ALSO O BSERVATIONS MADE BY THE TAX AUDITORS IN ANNEXURE IN FORM NO.3CD TO TAX AUDIT REPORTS. THE ASSESSEE HAS FILED ITS REPLY DATED 2.9.2011, 24.10. 2011, 25.10.2011, 14.11.2011 & 24.11.2011 ALONG WITH DETAILS SOUGHT B Y THE A.O. THE ASSESSEE HAS FURNISHED DETAILS OF BANK RECONCILIATI ON STATEMENT AND ALSO EXPLAINED DIFFERENCE BETWEEN BANK BALANCE SHOWN IN THE BOOKS OF ACCOUNTS TO THE BALANCES APPEARED IN THE BANK ACCOU NTS AS ON THE DATE. THE ASSESSEE ALSO FURNISHED DETAILS OF RAW MATERIAL S PURCHASED, ANALYSIS OF CONSUMPTION OF RAW MATERIALS AND EXCISE DUTY PAY MENT DETAILS ALONG WITH EXCISE RETURNS FILED TO THE EXCISE DEPARTMENT AND EXPLAINED THE ISSUE POINTED OUT BY THE A.O. IT WAS FURTHER SUBMIT TED THAT THE ASSESSEE HAS FILED LEDGER ACCOUNT COPIES OF BUILDING MAINTEN ANCE AND ALSO OTHER EXPENSES ALONG WITH ADVANCES PAID AGAINST PURCHASE OF RAW MATERIALS, ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 5 PAYMENTS MADE TO SPECIFIED PERSONS AND REPAYMENT OF LOANS AND FURNISHED NECESSARY EVIDENCES BEFORE THE A.O. THE A .O. AFTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE A CCEPTED EXPLANATIONS OF THE ASSESSEE AND COMPLETED THE ASSESSMENT, THERE FORE, THE ASSESSMENT ORDER PASSED BY THE A.O. IS NOT ERRONEOU S IN SO FAR AS IT IS 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 29.11.2011 IS ERRONEOUS IN SO FAR AS IT IS PR EJUDICIAL TO THE INTEREST OF THE REVENUE, AS THE ASSESSING OFFICER HAS FAILED TO EXAMINE THE ISSUES POINTED OUT IN THE SHOW CAUSE NOTICE WITH REFERENCE TO BOOKS OF ACCOUNTS AND RELEVANT DETAILS. THE CIT, FURTHER, O BSERVED THAT THE A.O. HAS COMPLETED ASSESSMENT BY MAKING FEW ADHOC DISALL OWANCE OF EXPENDITURE WITHOUT EXAMINING THE SPECIFIC POINTS R EFERRED TO IN THE SHOW CAUSE NOTICE WITH REGARD TO PAYMENT OF EXCISE DUTY, BUILDING MAINTENANCE, INTEREST AND FINANCE CHARGES, PRE-PAID EXPENSES, SALES COMMISSION, PAYMENT MADE TO SPECIFIED PERSONS U/S 4 0A(2)(B) OF THE ACT AND ALSO FAILED TO EXAMINE THE ADVANCES PAID AG AINST PURCHASE OF RAW MATERIALS. THE CIT, FURTHER, OBSERVED THAT ON P ERUSAL OF THE DOCUMENTS, IT IS NOTICED THAT THERE IS A DIFFERENCE BETWEEN BALANCES ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 6 SHOWN UNDER EACH BANK ACCOUNT IN THE BOOKS OF ACCOU NTS TO THE BANK STATEMENTS FURNISHED BY THE ASSESSEE, HOWEVER, THE A.O. HAS NOT EXAMINED THE DIFFERENCES WITH BANK RECONCILIATION S TATEMENT. THE CIT, FURTHER, OBSERVED THAT THE ASSESSEE HAS PAID VARIOU S PAYMENTS TO SPECIFIED PERSONS, HOWEVER, THE A.O. FAILED TO EXAM INE REASONABLENESS OF PAYMENTS WITH REFERENCE TO THE PROVISIONS OF SEC TION 40A(2)(B) OF THE ACT, INSPITE OF THE OBSERVATIONS OF THE TAX AUDITOR S IN ANNEXURE TO FORM NO.3CD. THE CIT, FURTHER, OBSERVED THAT THE ASSESSE E HAS CLAIMED SALES COMMISSION OF ` 1,14,48,688/-, HOWEVER, THE INFORMATION WITH REGAR D TO SALES COMMISSION IS AVAILABLE TO THE EXTENT OF RS. 30,10,874/-. THE A.O. HAS FAILED TO GATHER THE REQUIRED INFORMATION WITH REGARD TO PAYMENT OF SALES COMMISSION WITH NECESSARY EVIDENCES. IT WAS F URTHER OBSERVED THAT AS POINTED OUT BY THE TAX AUDITORS IN THE TAX AUDIT REPORT ANNEXURE TO FORM NO.3CD, THERE WERE SOME DIFFERENCES AS PER BOO KS OF ACCOUNTS OF THE ASSESSEE AND AS PER THE CONFIRMATION FURNISHED BY SOME OF THE CREDITORS HOWEVER, THE A.O. HAS FAILED TO EXAMINE T HE AMOUNT SHOWN IN THE BOOKS OF ACCOUNTS WITH REFERENCE TO CONFIRMATIO N LETTER FURNISHED BY THE ASSESSEE. THE CIT, FURTHER, OBSERVED THAT THE A.O. NOT ONLY EXAMINED THE ISSUES POINTED OUT IN THE SHOW CAUSE N OTICE, BUT FAILED TO APPLY HIS MIND BEFORE COMPLETION OF ASSESSMENT. THE REFORE, THE ASSESSMENT ORDER PASSED BY THE A.O., IS ERRONEOUS I N SO FAR AS IT IS ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 7 PREJUDICIAL TO THE INTEREST OF THE REVENUE. WITH TH ESE OBSERVATIONS, SET ASIDE THE ORDER PASSED BY THE A.O. U/S 143(3) OF TH E ACT DATED 29.11.2011 AND DIRECTED THE A.O. TO PASS CONSEQUENT IAL ORDER IN THE LINES DISCUSSED HEREIN ABOVE WITHIN THE TIME ALLOWE D AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AGGRIE VED WITH 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/S143(3) OF THE ACT, DATE D 29.11.2011 IS NOT ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE, AS THE A.O. HAS EXAMINED ALL 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 CONDUCT FURTHER ENQUIRIES WITH REGARD TO THE ISSUES WHICH WERE ALREADY EXAMINED BY THE A.O. AT T HE TIME OF COMPLETION OF ASSESSMENT. THE A.R. FURTHER SUBMITT ED THAT THE A.O. HAS EXAMINED ALL THE ISSUES POINTED OUT BY THE CIT, AT THE TIME OF ASSESSMENT BY WAY OF SPECIFIC QUESTIONNAIRE ON VARI OUS OCCASIONS. THE ASSESSEE HAS SUBMITTED ALL THE DETAILS BEFORE THE A .O., ON VARIOUS OCCASIONS WHICH WAS CONSIDERED BY THE A.O. BEFORE C OMPLETION OF ASSESSMENT. THEREFORE, THE CIT WAS NOT CORRECT IN C OMING TO THE CONCLUSION THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOUS IN ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 8 SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LD. A.R. FURTHER SUBMITTED THAT THE CIT CANNOT TAKE UP REVIS ION ON THE ISSUES WHICH WERE ALREADY EXAMINED BY THE A.O., BY HOLDING THAT THE ISSUES WERE NOT EXAMINED BY THE A.O. ACCORDING TO THE SATI SFACTION OF CIT. THE ASSESSEE HAS SUBMITTED ALL THE INFORMATION BEFORE T HE A.O. AND THE A.O. HAS VERIFIED ALL THE ISSUES AND APPLIED HIS MIND BE FORE COMPLETION OF ASSESSMENT, THEREFORE, THE CIT CANNOT COME TO THE C ONCLUSION THAT THERE IS A LACK OF ENQUIRY ON THE PART OF THE A.O. IN EXA MINING THE ISSUES POINTED OUT BY THE CIT. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS SUBMITTED ALL THE ISSUES BEFORE THE CIT AND EXP LAINED WITH NECESSARY EVIDENCES AS TO HOW THE ASSESSMENT ORDER PASSED BY THE A.O. IS NOT ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE. THE CIT, EVEN AFTER CONSIDERING THE DETAILS FILED BY TH E ASSESSEE WHICH WAS ALREADY IN THE ASSESSMENT RECORDS, SIMPLY DISOWNED THE EVIDENCES FILED BY THE ASSESSEE AND REVISED THE ASSESSMENT ORDER BY HOLDING THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS LACK OF ENQU IRY AND ALSO THE A.O. HAS NOT APPLIED HIS MIND BEFORE COMPLETION OF ASSES SMENT. THE LD. D.R. ON THE OTHER HAND STRONGLY SUPPORTED THE ORDER OF T HE CIT(A). 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 ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 9 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 29.11.2011 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 C OMPLETED THE ASSESSMENT WITHOUT EXAMINING THE VARIOUS ISSUES WHI CH CAUSED PREJUDICE TO THE INTEREST OF THE REVENUE. THE CIT, FURTHER, WAS OF THE OPINION THAT THE A.O. HAS COMPLETED THE ASSESSMENT BY MAKING FEW ADHOC DISALLOWANCES WITHOUT EXAMINING THE CORE ISSU ES, SUCH AS BANK RECONCILIATION STATEMENT, EXCISE DUTY PAYMENT DETAI LS WITH REFERENCE TO EXCISE RETURNS FILED BY THE ASSESSEE BEFORE THE AUT HORITIES, VARIOUS EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT, A DVANCES PAID AGAINST PURCHASE OF RAW MATERIALS, ANALYSIS OF CONSUMPTION OF RAW MATERIALS AND OTHER ISSUES POINTED OUT BY THE TAX AUDITORS IN THE IR REPORT IN ANNEXURE TO FORM NO.3CD. THE CIT, FURTHER, WAS OF THE OPINI ON THAT THE ASSESSEE HAS MADE PAYMENTS TO SPECIFIED PERSONS U/S 40A(2) O F THE ACT, HOWEVER, THE A.O. FAILED TO EXAMINE THE REASONABLEN ESS OF THE PAYMENT MADE TO SPECIFIED PERSONS WITH REFERENCE TO PROVISI ONS OF SECTION 40A(2)(B) OF THE ACT. THE A.O. NOT ONLY FAILED TO EXAMINE THE ISSUES, BUT ALSO FAILED TO APPLY HIS MIND ON VARIOUS ISSUES , WHICH RENDERED THE ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 10 ASSESSMENT ORDER ERRONEOUS IN SO FAR AS IT IS PREJU DICIAL TO THE INTEREST OF THE REVENUE. 8. IT IS THE CONTENTION OF THE ASSESSEE THAT THE A. O. HAS EXAMINED THE ISSUES POINTED OUT BY THE CIT IN THE SHOW CAUSE NOT ICE. THE ASSESSEE FURTHER CONTENDED THAT ALL THE ISSUES POINTED OUT B Y THE CIT HAVE BEEN EXAMINED BY THE A.O. AT THE TIME OF ASSESSMENT BY W AY OF SPECIFIC QUESTIONNAIRE ON VARIOUS OCCASIONS. THE ASSESSEE HA S FILED ALL DETAILS BEFORE THE A.O., ON VARIOUS DATES, I.E. ON 2.9.2011 , 24.10.2011, 25.10.2011, 14.11.2011 & 24.11.2011 AND THE A.O., A FTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE CHOSEN TO ACC EPT THE EXPLANATIONS OF THE ASSESSEE WITH REGARD TO VARIOUS ISSUES WHICH CANNOT BE TERMED ERRONEOUS OR LACK OF ENQUIRY BY THE CIT. THE ASSESS EE FURTHER CONTENDED THAT IT HAS FURNISHED EXCISE RETURNS BEFORE THE A.O . AND ALSO EXPLAINED THE ANALYSIS OF CONSUMPTION OF RAW MATERIALS WITH N ECESSARY QUANTITATIVE DETAILS. IT IS FURTHER SUBMITTED THAT IT HAS FURNI SHED BANK RECONCILIATION STATEMENT AND ALSO EXPLAINED THE DIFFERENCE BETWEEN BALANCES SHOWN IN THE BOOKS OF ACCOUNTS TO THE BALANCE APPEARED IN TH E BANK STATEMENT. IT IS FURTHER SUBMITTED THAT THE OTHER ISSUES POINT ED OUT BY THE CIT I.E. CORRECTNESS OF BUILDING MAINTENANCE EXPENDITURE, IN TEREST AND FINANCE CHARGES, PRE-PAID EXPENSES, SALES COMMISSION, RE-PA YMENT OF LOANS, ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 11 ADVANCE AGAINST PURCHASE OF RAW MATERIALS AND PAYME NTS MADE TO SPECIFIED PERSONS U/S 40A(2)(B) OF THE ACT HAVE BEE N SUBSTANTIATED WITH NECESSARY EVIDENCES BEFORE THE A.O. THE A.O. AFTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE HAS ACCEPTED THE EXPLANATIONS AND COMPLETED THE ASSESSMENT. WE FIND FORCE IN THE ARGUM ENTS OF THE ASSESSEE FOR THE REASON THAT THE A.O. HAS EXAMINED THE ISSUES POINTED OUT BY THE CIT, IN THE SHOW CAUSE NOTICE AT THE TIM E OF COMPLETION OF ASSESSMENT BY WAY OF SPECIFIC QUESTIONNAIRE. WE FUR THER OBSERVED THAT THE A.O. HAS ISSUED VARIOUS QUESTIONNAIRES ON 5 OCC ASIONS WHICH WAS DULY ANSWERED BY THE ASSESSEE BY FILING NECESSARY D ETAILS. ON VERIFICATION OF THE DETAILS FILED BY THE ASSESSEE, WE FIND THAT THE ASSESSEE HAS FURNISHED DETAILS OF BANK RECONCILIATION STATEM ENT, PURCHASE OF RAW MATERIALS, RECONCILIATION OF CONSUMPTION OF RAW MAT ERIALS, EXCISE DUTY PAYMENTS AND OTHER ISSUES POINTED OUT BY THE CIT. 9. THE CIT, ASSUMED JURISDICTIONS TO REVISE THE ASS ESSMENT ORDER ON THE GROUND THAT THERE IS LACK OF ENQUIRY ON THE PAR T OF THE A.O. IN EXAMINING THE ISSUES REFERRED TO IN THE SHOW CAUSE NOTICE. THE CIT QUESTIONS THE ISSUES RIGHT FROM VERIFICATION OF BAN K RECONCILIATION STATEMENT TO EXAMINATION OF ADVANCES AGAINST PURCHA SE OF RAW MATERIALS. THE ASSESSEE HAS FILED A PAPER BOOK WHIC H CONTAINS THE ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 12 DETAILS FURNISHED TO THE A.O. AT THE TIME OF ASSESS MENT. ON PERUSAL OF THE PAPER BOOK FILED BY THE ASSESSEE, WE FIND THAT THE ASSESSEE HAS LISTED OUT THE ISSUES POINTED OUT BY THE CIT IN THE SHOW CAUSE NOTICE IN A TABULAR FORM. ON FURTHER VERIFICATION OF THE DETA ILS FILED BY THE ASSESSEE, WE NOTICED THAT THE ASSESSEE HAS SUBMITTE D ALL THE DETAILS WITH REGARD TO EACH AND EVERY ISSUES RAISED BY THE CIT I N THE SHOW CAUSE NOTICE AND EXPLAINED BEFORE THE A.O. THE A.O. AFTE R SATISFIED WITH THE EXPLANATIONS FURNISHED BY THE ASSESSEE COMPLETED TH E ASSESSMENT BY MAKING CERTAIN ADHOC DISALLOWANCES. THEREFORE, WE ARE OF THE VIEW THAT ONCE THE ISSUES WHICH WERE SUBJECT MATTER OF REVISI ON 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 T HE SAME ISSUES, BECAUSE HE HAD A DIFFERENT OPINION ON THE ISSUES. IN OUR CONSIDERED VIEW THE ISSUES POINTED OUT BY THE CIT, HAVE BEEN T HOROUGHLY EXAMINED BY THE A.O., THEREFORE, THE CIT WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT THE A.O. HAS NOT EXAMINED THE ISSUE S BEFORE COMPLETION OF ASSESSMENT. 10. THE CIT HAS POWER TO REVISE THE ASSESSMENT ORDE R U/S 263 OF THE ACT, BUT TO INVOKE THE PROVISIONS OF SECTION 263 OF THE ACT, THE TWIN CONDITIONS MUST BE SATISFIED, I.E.(1) THE ORDER OF THE A.O. IS ERRONEOUS ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 13 (2) FURTHER IT MUST BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. UNLESS BOTH THE CONDITIONS ARE SATISFIED, THE CIT CANNOT A SSUME JURISDICTION U/S 263 OF THE ACT. IT IS NOT NECESSARY THAT EVERY ORD ER WHICH IS ERRONEOUS MUST BE PREJUDICIAL TO THE INTEREST OF THE REVENUE OR VICE-VERSA. IN SOME CASES, THE ORDER PASSED BY THE A.O. MAY BE ERRONEOU S, BUT IT MAY NOT BE PREJUDICIAL TO THE INTEREST OF REVENUE OR VICE-V ERSA. UNLESS THE ORDER PASSED BY THE A.O.IS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE REVENUE, THE CIT CANNOT ASSUME JURISDICTION TO REVI SE THE ASSESSMENT ORDER, THIS IS BECAUSE THE TWIN CONDITIONS I.E. THE ORDER IS ERRONEOUS AND THE SAME IS PREJUDICIAL TO THE INTEREST OF THE REVE NUE ARE CO-EXIST. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE FACTS AVAIL ABLE ON RECORD, WE FIND THAT THE A.O. HAS CONDUCTED DETAILED ENQUIRY A ND ALSO EXAMINED ALL THE ISSUES POINTED OUT BY THE CIT IN THIS SHOW CAUS E NOTICE. THE ASSESSEE HAS EXPLAINED EACH AND EVERY ISSUE POINTED OUT BY THE CIT WITH NECESSARY EVIDENCES. THE CIT, CANNOT ASSUME JU RISDICTION TO REVISE ASSESSMENT ORDER, ONCE, ASSESSEE EXPLAINED THAT IT HAD FILED ALL THE DETAILS BEFORE THE A.O. ON THE ISSUES ON WHICH CIT WANTS FURTHER VERIFICATION. IT IS THE GENERAL PRESUMPTION OF LAW THAT, THE A.O. HAS CONSIDERED ALL THE DETAILS BEFORE COMPLETION OF ASS ESSMENT AND THE CIT CANNOT PRESUME THAT THE ENQUIRIES CONDUCTED BY THE A.O. IS INSUFFICIENT AND ALSO THE A.O. HAS NOT APPLIED HIS MIND, UNLESS CIT PROVES THAT THE ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 14 ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOUS. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSMENT ORDER PASSED BY THE A. O. U/S 143(3) OF THE ACT DATED 29.11.2011 IS NOT ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 11. NOW, IT IS PERTINENT TO DISCUSS THE CASE LAW RE LIED UPON BY THE ASSESSEE. THE ASSESSEE RELIED UPON THE DECISION OF COORDINATE BENCH OF VISAKHAPATNAM TRIBUNAL, IN THE CASE OF NU TECH ENGI NEERS VS. CIT IN ITA NO.570/VIZAG/2013 DATED 10.6.2016. THE COORDIN ATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES HELD THAT ONC E THE A.O. EXAMINED THE ISSUES ON WHICH THE CIT WANTS FURTHER VERIFICAT ION, THE CIT CANNOT ASSUME JURISDICTION ON THE SAME ISSUES WHICH WAS AL READY EXAMINED BY THE A.O. AT THE TIME OF ASSESSMENT BY STATING THAT THE A.O. HAS CONDUCTED INADEQUATE ENQUIRY OR THERE IS A LACK OF ENQUIRY. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUND ER: CIT(A) ASSUMED JURISDICTION TO REVISE THE ASSESSME NT 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 HIS SHOW CAUSE NOTICE. TH E QUESTION OF LOW NET PROFIT DECLARED BY THE ASSESSEE AND ALSO TDS ON REN T AND HIRE CHARGES HAVE BEEN CONSIDERED BY THE A.O. AT THE TIME OF COM PLETION OF ASSESSMENT. THE ASSESSES FILED A PAPER BOOK WHICH C ONTAINS THE DETAILS FURNISHED BEFORE THE A.O. AT THE TIME OF ASSESSMENT . ON PERUSAL OF THE PAPER BOOK FILED BY THE ASSESSEE, ITAT FIND THAT TH E A.O. HAS ISSUED A DETAILED QUESTIONNAIRE IN RESPECT OF NET PROFIT AND ALSO TDS IN RESPECT OF RENT AND HIRE CHARGES. THE A.O. AFTER SATISFIED WIT H THE EXPLANATIONS FURNISHED BY THE ASSESSEE HAS ACCEPTED THE INCOME R ETURNED. THEREFORE, ITAT 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 ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 15 OF ASSESSMENT, THE CIT HAS NO JURISDICTION TO ENTER TAIN FRESH ENQUIRY ON THE SAME ISSUES, BECAUSE HE HAS A DIFFERENT OPINION ON THE ISSUES. IN ITAT CONSIDERED OPINION, THE ISSUE OF NET PROFIT AND TDS ON RENT AND HIRE CHARGES HAS BEEN EXAMINED BY THE A.O. AT THE TIME O F ASSESSMENT, THEREFORE, THE CIT WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT THE A.O. HAS NOT EXAMINED THE ISSUES. 12. THE ASSESSEE RELIED UPON THE DECISION OF HONBL E HIGH COURT OF DELHI, IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. (20 11) 332 ITR 167. THE HONBLE HIGH COURT OF DELHI, UNDER SIMILAR CIRC UMSTANCES HELD THAT ONCE THE A.O. HAS EXAMINED A PARTICULAR ISSUE WHICH IS THE SUBJECT MATTER OF REVISION U/S 263 OF THE ACT, THE CIT CANN OT ASSUME JURISDICTION U/S 263 OF THE ACT BY HOLDING THAT THE ORDER PASSED BY THE A.O. IS LACK OF ENQUIRY AND ALSO THE A.O. HAS NOT APPLIED HIS MIND BEFORE COMPLETION OF ASSESSMENT. THE RELEVANT PORTION OF THE ORDER IS R EPRODUCED HEREUNDER: THE SUBMISSION OF THE COUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER, THE AD DID NOT CONSIDER THE A SPECT SPECIFICALLY WHETHER THE EXPENDITURE IN QUESTION WAS REVENUE OR CAPITAL EXPENDITURE. THIS ARGUMENT PREDICATES ON THE ASSESSMENT ORDER, W HICH APPARENTLY DOES NOT GIVE ANY REASONS WHILE ALLOWING THE ENTIRE EXPE NDITURE AS REVENUE EXPENDITURE. HOWEVER, THAT BY ITSELF WOULD NOT BE I NDICATIVE OF THE FACT THAT THE AD HAD NOT APPLIED HIS MIND ON THE ISSUE. THE AD IN THE ASSESSING ORDER IS NOT REQUIRED TO GIVE DETAILED RE ASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION, ETC. THEREFORE, ONE HA S TO SEE FROM THE RECORD AS TO WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING 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 NOT BY ITSE LF GIVE OCCASION TO THE CIT TO PASS ORDERS UNDER S. 263, MERELY BECAUSE HE HAS DIFFERENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF 'LACK OF INQUI RY' THAT SUCH A COURSE OF ACTION WOULD BE OPEN. THE AD HAD CALLED FOR EXPLANA TION ON THIS VERY ITEM FROM THE ASSESSEE AND THE ASSESSEE HAD FURNISHED HI S EXPLANATION VIDE LETTER DT. 26TH SEPT., 2002. THIS FACT IS EVEN TAKE N NOTE OF BY THE CIT HIMSELF IN PARA 3 OF HIS ORDER. THIS CLEARLY SHOWS THAT THE AD HAD UNDERTAKEN THE EXERCISE OF EXAMINING AS TO WHETHER THE EXPENDITURE ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 16 INCURRED BY THE ASSESSEE IN THE REPLACEMENT OF DYES AND TOOLS IS TO BE TREATED AS REVENUE EXPENDITURE OR NOT. IT APPEARS T HAT SINCE THE AD WAS SATISFIED WITH THE AFORESAID EXPLANATION, HE ACCEPT ED THE SAME. THE CIT IN HIS IMPUGNED ORDER EVEN ACCEPTS THIS. THUS, EVEN TH E CIT CONCEDED THE POSITION THAT THE AD MADE THE INQUIRIES, ELICITED R EPLIES AND THEREAFTER PASSED THE ASSESSMENT ORDER. THE GRIEVANCE OF THE C IT WAS THAT THE AD SHOULD HAVE MADE FURTHER INQUIRIES RATHER THAN ACCE PTING THE EXPLANATION. THEREFORE, IT CANNOT BE SAID THAT IT IS A CASE OF L ACK OF INQUIRY'.GT VS. GABRIAL INDIA LTD. (1993) 114 (BOM) 81 (1993) 203 I TR 108 (BOM) RELIED ON. EVEN THE CIT IN HIS ORDER, PASSED UNDER S. 263, IS NOT CLEAR AS TO WHETHER THE EXPENDITURE CAN BE TREATED AS CAPITAL EXPENDITU RE OR IT IS REVENUE IN NATURE. NO DOUBT, IN CERTAIN CASES, IT MAY NOT BE P OSSIBLE TO COME TO A DEFINITE FINDING AND THEREFORE, IT IS NOT NECESSARY THAT IN ALL CASES THE CIT IS BOUND TO EXPRESS FINAL VIEW. BUT, THE LEAST THAT WAS EXPECTED WAS TO RECORD A FINDING THAT ORDER SOUGHT TO BE REVISED WA S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. NO BASI S FOR THIS IS DISCLOSED. IN SUM AND SUBSTANCE, ACCOUNTING PRACTICE OF THE ASSES SEE IS QUESTIONED. HOWEVER, THAT BASIS OF THE ORDER VANISHES IN THIN A IR WHEN THIS VERY ACCOUNTING PRACTICE, FOLLOWED FOR NUMBER OF YEARS, HAD THE APPROVAL OF THE IT AUTHORITIES. INTERESTINGLY, EVEN FOR FUTURE ASSES SMENT YEARS, THE SAME VERY ACCOUNTING PRACTICE IS ACCEPTED. THE ASSESSEE IS A MANUFACTURER OF CAR PARTS. IN THE MANUFACTURING PROCESS, DYES ARE F ITTED IN MACHINES BY WHICH THE CAR PARTS ARE MANUFACTURED. THESE DYES AR E THUS THE COMPONENTS OF THE MACHINES. THESE DYES NEED CONSTAN T REPLACEMENT, AS THEIR LIFE IS NOT MORE THAN A YEAR. THE ASSESSEE HA D ALSO EXPLAINED THAT SINCE THESE PARTS ARE MANUFACTURED FOR THE AUTOMOBI LE INDUSTRY, WHICH HAVE TO WORK ON COMPLETE ACCURACY AT HIGH SPEED FOR A LONGER PERIOD, REPLACEMENT OF THESE PARTS AT SHORT INTERVALS BECOM ES IMPERATIVE TO RETAIN ACCURACY. BECAUSE OF THESE REASONS, THESE TOOLS AND DYES HAVE A VERY SHORT SPAN OF LIFE AND IT COULD PRODUCE MAXIMUM ONE LAKH PERMISSIBLE SHORTS. THEREAFTER, THEY HAVE TO BE REPLACED. WITH THE REPLACEMENT OF SUCH TOOLS AND DYES, WHICH ARE THE COMPONENTS OF A MACHINE, NO NEW ASSET COMES INTO EXISTENCE, NOR IS THERE BENEFIT OF ENDURING NATURE. IT DOES NOT EVEN ENHANCE THE LIFE OF EXISTING MACHINE OF WHICH THESE TOOLS AND DYES ARE ONLY PARTS. NO PRODUCTION CAPACITY OF THE EXISTING MACHINES IS INCREASED EITHER. IT IS CLEAR THAT VIEW TAKEN BY THE AO WAS ONE OF THE POSSIBLE VIEWS AND THEREFORE, THE ASSESSMENT ORDER PASSED BY THE AO COULD NOT BE HELD TO BE PREJUDICIAL TO THE REVENUE. THUS, FROM WHATEVER ANGLE THE MATTER IS TO BE LOOKED INTO, THE CONCLUSI ON WOULD BE THAT THE ORDER OF THE TRIBUNAL DOES NOT CALL FOR ANY INTERFE RENCE AS THE QUESTION OF LAW HAS RIGHTLY BEEN DECIDED.SUNBEAM AUTO LTD. VS. CIT (2006) 100 TTJ (DEL) 209 AFFIRMED; CIT VS. SARAVANA SPINNING MILLS (P) LTD. (2007) 211 CR (SC) 281 (2007) 293 ITR 201 (SC) DISTINGUISHED. ITA NO.242/VIZAG/2014 BHAVANI CASTINGS LTD., KAKINADA 17 13. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO APPLYING THE RATIOS OF THE COORDINATE BENCH, WE ARE OF THE VIEW THAT THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF T HE ACT, DATED 29.11.2011 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 29.11.2011. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 12 TH AUG16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 12.08.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT BHAVANI CASTINGS LTD., D.NO.2-14 4 & 145, SANTHI NAGAR, PITAPURAM ROAD, KAKINADA. 2. / THE RESPONDENT THE CIT, RAJAHMUNDRY 3. + ( ) / THE PRINCIPAL CIT-2, VISAKHAPATNAM 4. + ( ) / THE CIT (A), RAJAHMUNDRY 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM