M/s. Mahawar Iron Stores (P) Ltd., New Delhi V. DCIT, Faridabad

ITA 2639/DEL/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8355 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2010-2011
• Appeal Filed On: 05-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUNIL CHANDER SHARMA
• Keywords: Business expenditure; Opportunity of being heard; Principle of natural justice; Fair market value; Assessment record
• Section: 143(3); 142(1); 68; 263

Judgement Text

ITA NO. 2639/DEL/2015 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AN D SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. N O. 2639 /DEL/201 5 A.Y. : 20 10 - 11 M/S MAHAWAR IRON STORES (P) LTD., A-11, NIZAMUDIN (WEST) NEW DELHI (PAN: AACCM5576G) VS. DCIT, CENTRAL CIRCLE - 1, FARIDABAD (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. ASHWANI KUMAR, CA DEPARTMENT BY : SH. SUNIL CHANDER SHARMA, CIT(DR) DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : 28 2828 28- -- -0 00 03 33 3- -- -201 201 201 2016 66 6 DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : 1 11 11 11 1- -- -0 00 04 44 4- -- -201 201 201 2016 66 6 ORDER ORDER ORDER ORDER PER PER PER PER H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU : : : : J JJ JM MM M THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (CENTRAL), GURGAON DATE D 108.3.2015 PASSED U/S. 263 OF THE I.T. ACT PERTAINING TO ASSESSMENT YEAR 2010-11 ON THE FOLLOWING GROUNDS:- 1. THAT THE ORDER DATED 18-03-2015 PASSED U/S 263 OF THE INCOME-TAX ACT, 1961 PASSED BY THE LD COMMISSIONER OF INCOME-T AX, (CENTRAL), GURGAON IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO SET ASIDE THE ORDER DATED 31-12-2012 P ASSED U/S 143(3) OF THE INCOME-TAX ACT, 1961 BY THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-I, FARIDABAD ON THE GROUND THAT THE SAME IS ALLEGEDLY ERRONEOUS ITA NO. 2639/DEL/2015 2 AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE IN AS MUCH AS THE TWIN CONDITIONS AS LAID OUT IN SECTION 263 OF THE INCOME -TAX ACT, 1961 WERE NOT FULFILLED. 2. THAT THE ORDER DATED 18-03-2015 PASSED U/S 263 O F THE INCOME-TAX ACT, 1961 PASSED BY THE LD COMMISSIONER OF INCOME-T AX, (CENTRAL), GURGAON IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO SET ASIDE THE ORDER DATED 31-12-2012 P ASSED U/S 143(3) OF THE INCOME-TAX ACT, 1961 BY THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-I, FARIDABAD AND DIRECT THE ASSESSING OFFICE R TO:- A) EXAMINE THE ADMISSIBILITY OF THE AMOUNT OF RS. 50,85,988/- ON ACCOUNT OF BROKERAGE EXPENSES CLAIMED IN THE PROFIT & LOSS ACCOUNT; B) RECONCILE THE FIGURES OF SALE AND PURCHASE FOR F RESH CONSIDERATION DE NOVO COVERING ALL FACTUAL ASPECTS AS THERE IS DIFFE RENCE IN SALES AND PURCHASE AS PER THE PURCHASE/SALES REGISTER VIS-A-V IS THE VAT RETURNS AND THE PURCHASES AND SALES DISCLOSED IN THE PROFIT AND LOSS ACCOUNT C) RECONCILE BANK ACCOUNT WITH THE BANK BALANCES IN VARIOUS ACCOUNTS OF THE APPELLANT COMPANY FOR FRESH CONSIDERATION AS RE CONCILIATION OF BANK BALANCE FIGURE AS ON 31.03.2010 AS PER THE BANK STA TEMENT VIS-A-VIS THE BOOKS OF ACCOUNT APPEARED TO DISCLOSE HUGE DIFFEREN CES IN RESPECT OF ASSESSEE'S BANK ACCOUNT IN HDFC AND STATE BANK OF P ATIALA F) VERIFY THE DATES, CHEQUE NUMBER AND AMOUNT FROM THE BANK ACCOUNT OF THE LENDER AND TALLY IT WITH THE ENTRIES IN THE BOO KS OF ACCOUNT AS WELL AS BANK ACCOUNT OF THE APPELLANT COMPANY BESIDES EXAMI NING THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S INCLUDING TAX IMPLICATION IN RESPECT OF TRANSACTIONS WITH INTERES TED PARTIES IN RESPECT OF ITA NO. 2639/DEL/2015 3 LOAN AMOUNTING TO RS. 9 CRORE RAISED BY THE APPELLA NT COMPANY FROM VARIOUS PARTIES. G) EXAMINE AFRESH WHETHER THE TRANSACTION WITH RELA TED PARTIES ARE HIT BY THE PROVISIONS CONTAINED IN SECTION 40A(2)(B) OF TH E INCOME-TAX ACT, 1961 AND TO TAKE APPROPRIATE DECISION AS PER THE PROVISI ONS OF THE AFORESAID SECTION. H) TO HOLD THAT PROPER INQUIRIES WERE NOT MADE BY THE LD. ASSESSING OFFICER AT THE TIME OF FRAMING THE ORIGINAL ASSESSM ENT. 2. THE BRIEFLY STATED FACTS ARE THAT THE ASSESSEE COMPANY FILED ITS E-RETURN ON 29.9.2010 DECLARING TOTAL INCOME OF RS.17,50,420/-. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND STATUTORY NOTICE U/S. 143 (2) WAS ISSUED ON 27.8.2011, WHICH WAS DULY SERVED UPON THE ASSESSEE. IN RESPON SE TO THE SAME, LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FURNISHED REQUIRED DETAILS AND INFORMAT ION. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF IRON AND STEEL. THE DETAILS AND DOCUMENTS WITH REGARD TO THE INCOME SHOWN AND EXPENSES CLAIMED HAV E BEEN PLACED ON RECORD. BOOKS OF ACCOUNTS AND VOUCHERS HAVE ALSO BEEN PROD UCED BY THE ASSESSEE AND EXAMINED ON TEST CHECK BASIS BY AO. THE AO ACCEPTED THE INCOME DECLARED BY THE ASSESSEE AND COMPLETED ON TOTAL INCOME OF RS. 2 2,59,020/- VIDE ORDER DATED 31.12.2012 PASSED U/S. 143(3) OF THE I.T. ACT , 1961. 3. LD. CIT WHILE EXAMINING THE ASSESSMENT ORDER, FO UND THAT ASSESSING OFFICER HAS NOT EXAMINED THE FOLLOWING ISSUES OR IF EXAMINED, THE CONCLUSION WHICH NATURALLY FLOWS FROM THE FACTS AND CIRCUMSTAN CES OF THE CASE AS WELL AS ITA NO. 2639/DEL/2015 4 AVAILABLE MATERIAL ON RECORDS, HAS NOT BEEN DRAWN AND ACCORDINGLY ISSUED THE NOTICE U/S. 263 OF THE I.T. ACT TO THE ASSESSEE ON 07.3.2014. (A) BROKERAGE EXPENSES (B) PERCEIVED DIFFERENCES BETWEEN THE PURCHASE AND SALES (C) DIFFERENCE IN THE BANK BALANCE FIGURES SHOWN I N THE BALANCE SHEET AND THOSE REFLECTED IN THE BANK STATEMENTS (D)(I) WITH REGARD TO THE LOANS OF RS. 54 LACS RAI SED FROM DYNA POWER AND RS.2.46 CRORES FROM M/S NATIONAL HOUSING DEVELOPMEN T FINANCE CORPORATION (II) UNSECURED LOANS SQUARED UP DURING THE YEAR. (E) APPLICABILITY OF THE PROVISIONS OF SECTION 40A( 2)(B) OF THE ACT IN RESPECT OF PURCHASES MADE FROM MIS STAR WIRE (I) LTD, A RELATE D ENTERPRISE, AND PAYMENT OF SALARY OF RS. 40,000/- PER MONTH TO SHRI SURENDRA K UMAR GUPTA. 4. IN COMPLIANCE OF THE NOTICE DATED 07.3.2014 ASSE SSEE FILED ITS REPLY DATED 14.11.2014 AND STATED THAT NO EXERCISE OF THE REVISIONARY POWERS U/S. 263 OF THE ACT IS CALLED FOR SINCE ALL THE RELEVANT DET AILS WITH RESPECT TO THE ISSUES LAID OUT IN THE IMPUGNED NOTICE WERE DULY FILED BEFORE T HE AO AND CORRESPONDING CONCLUSION DRAWN BY HIM BASED ON THE RELEVANT FACT S AND IT CANNOT BE SAID THAT THE ORDER PASSED BY THE AO IS ERRONEOUS SO AS TO BE PREJUDICIAL TO THE INTEREST OF JUSTICE. IN ITS REPLY IT WAS FURTHER STATED THAT TH E ISSUES IN QUESTION WERE DULY EXAMINED AND A CONCLUSION DRAWN BY THE AO ON THE BA SIS OF AN ANALYSIS OF ALL THE RELEVANT FACTS AND EXAMINATION OF THE EVIDENCE FILED AND AS SUCH THE ORDER PASSED BY HIM U/S. 143(3) OF THE ACT CANNOT BE CONS IDERED TO BE ERRONEOUS WHEREBY ONE OF THE MANDATORY TENETS FOR THE PROVISI ONS OF SECTION 263 TO COME INTO PLAY ARE NOT SATISFIED. ITA NO. 2639/DEL/2015 5 5. AFTER EXAMINATION OF THE REPLY OF THE ASSESSEE AND DOCUMENTARY EVIDENCES, LD. CIT PASSED THE IMPUGNED ORDER U/S. 263 OF THE I.T. ACT DATED 18.03.2015 BY OBSERVING THAT THE ASSESSMENT ORDER PASSED BY T HE AO IS HELD TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE, THEREFORE, LD. CIT HAS SET ASIDE THE ASSESSMENT TO THE FILE OF THE AO TO E XAMINE DE NOVO AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 6. AGAINST THE ORDER OF THE LD. CIT DATED 18.3. 2015 PASSED U/S. 263 OF THE I.T. ACT, THE ASSESSEE APPEALED BEFORE THE TRIBUNAL . 7. LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORIG INAL ASSESSMENT ORDER DATED 31.12.2012 PASSED U/S. 143(3) OF THE I.T. ACT IN THE CASE OF THE ASSESSEE AS WELL AS THE DOCUMENTARY EVIDENCES FILED BY HIM IN T HE SHAPE OF PAPER BOOK CONTAINING PAGES 1 TO 267 HAVING THE COPY OF THE NO TICE U/S. 263; COPY OF WRITTEN SUBMISSION DATED 14.11.2014 FILED BEFORE TH E CIT, (CENTRAL) GURGAON; COMPLETE DETAILS OF THE PARTIES TO WHOM BROKERAGE H AS BEEN PAID BY THE ASSESSEE COMPANY ALONGWITH CONFIRMATIONS FROM SOME PARTIES; STATEMENT RECONCILING THE DIFFERENCES OF PURCHASES AND SALES AS PER BOOKS AND VAT RETURN; STATEMENT RECONCILING DIFFERENCE BETWEEN BANK BALAN CE FIGURES SHOWING IN THE BALANCE SHEET AND THE BANK STATEMENT; COPY OF CONFI RMATIONS, BANK STATEMENTS AND INCOME TAX RETURNS WITH RESPECT TO UNSECURED LO ANS RAISED FROM VARIOUS PARTIES INCLUDING SQUARED UP ACCOUNTS; DOCUMENTARY EVIDENCE SHOWING THE RATE AT WHICH PURCHASES MADE FROM STAR WIRE (I) LTD. AND FROM OTHER PARTIES; COPY OF COMPUTATION OF INCOME AND ACKNOWLEDGEMENT OF INCOME TAX RETURN FOR AY 2010-11; COPY OF NOTICE U/S. 143(2) AND 142(1) OF T HE I.T. ACT; COPY OF REPLY DATED 22.9.2012 IN RESPONSE TO NOTICES; COPY OF RE PLY DATED 23.10.2012 FILED BEFORE THE DCIT, FARIDABD DURING THE COURSE OF ASSE SSMENT PROCEEDINGS U/S. 143(3) OF THE I.T. ACT, 1961. ITA NO. 2639/DEL/2015 6 7.1 LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE H AS REITERATED THE SIMILAR CONTENTIONS BEFORE US WHICH HE MADE BEFORE THE LD. CIT. HE SUBMITTED THAT AO HAS COMPLETED THE ASSESSMENT AFTER EXAMINING ALL TH E EVIDENCES FILED BY THE ASSESSEE MAKING DETAILED ENQUIRY THEREOF, DESPITE T HAT LD. CIT HAS WRONGLY APPLIED SECTION 263. IN THE WRITTEN SUBMISSION THE ASSESSEE HAS STATED THAT NO EXERCISE OF THE REVISIONARY POWERS U/S 263 OF THE A CT IS CALLED FOR SINCE ALL THE RELEVANT DETAILS WITH RESPECT TO THE ISSUES LAID OU T IN THE IMPUGNED NOTICE WERE FULLY FILED BEFORE THE AO AND CORRESPONDING CONCLUS ION DRAWN BY HIM BASED ON THE RELEVANT FACTS AND IT CANNOT BE SAID THAT THE O RDER PASSED BY THE AO IS ERRONEOUS SO AS TO BE PREJUDICIAL TO THE INTEREST O F REVENUE. HOWEVER, SEPARATE CONTENTIONS WITH RESPECT TO EACH OF THE ISSUES WERE MADE AS UNDER:- (A) WITH REGARD TO BROKERAGE EXPENSES, IT WAS SUBMI TTED THAT THE ASSESSEE COMPANY IS BASICALLY ENGAGED IN TRADING OF STEEL WH EREIN PAYMENT OF BROKERAGE IS NOT ONLY REQUIRED BUT ALSO ESSENTIAL NOT ONLY TO GENERATE SALES BY IDENTIFYING CUSTOMERS AND THEIR REQUIREMENTS BUT ALSO SOMETIMES TO FACILITATE IN THE COLLECTION OF DUES AND GUARANTEE THE RECOVERY OF THE OUTSTANDI NG. BROKERAGE IS AN INTEGRAL PART OF THE ASSESSEE COMPANY'S BUSINESS ACTIVITIES AND HAS BEEN ALLOWED AS AN EXPENDITURE IN THE ASSESSMENT IN EARLIER YEARS. (B) WITH REGARD TO THE PERCEIVED DIFFERENCES BETWEE N THE PURCHASE AND SALES REGISTERS AND COPY OF VAT RETURN ARE AVAILABLE ON R ECORD, IT WAS SUBMITTED THAT RECONCILIATION STATEMENT RECONCILING THE SAME HAVE BEEN PREPARED WHEREBY VARIATIONS IN THESE FIGURES STAND AUTOMATICALLY VER IFIED. (C) WITH REGARD TO THE ALLEGED VAST DIFFERENCE IN THE BANK BALANCE FIGURES SHOWN IN THE BALANCE SHEET AND THOSE REFLECTED IN THE BAN K STATEMENTS, THE BANK RECONCILIATION STATEMENT DULY RECONCILING THE SAME . ITA NO. 2639/DEL/2015 7 (D)(I) WITH REGARD TO THE LOANS OF RS. 54 LACS RAI SED FROM DYNA POWER AND RS.2.46 CRORES FROM M/S NATIONAL HOUSING DEVELOPMEN T FINANCE CORPORATION, THE REQUISITE DOCUMENTARY EVIDENCE WITH REGARD TO C ONFIRMATIONS, BANK STATEMENTS AND INCOME TAX RETURNS ALONG WITH EXTRAC T OF THE RELEVANT BANK STATEMENTS IN WHICH THE CHEQUES RECEIVED FROM THE S AID PARTIES HAVE BEEN DEPOSITED WERE FILED. . IT MAY BE CLARIFIED IN THIS REGARD THAT ALL THE TRANSACTIONS IN THE SAID ACCOUNTS HAVE BEEN TAKEN PLACE BY MEANS OF ACCOUNT PAYEE CHEQUE THROUGH NORMAL BANKING CHANNELS WHICH SHOWS THE CRE DITWORTHINESS AND IDENTITY OF THE PARTIES AND GENUINENESS OF THE TRANSACTIONS AS CAST BY SECTION 68 OF THE ACT. (II) SIMILAR DETAILS WERE FILED WITH RESPECT TO UN SECURED LOANS SQUARED UP DURING THE YEAR WHEREBY AGAINST WOULD BE CLEAR THAT THE ON US CAST BY SECTION 68 STANDS DULY DISCHARGED IN THIS REGARD ALSO. (E) WITH REGARD TO THE QUESTION OF APPLICABILITY OF THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT IN RESPECT OF PURCHASES MADE F ROM MIS STAR WIRE (I) LTD, A RELATED ENTERPRISE, AND PAYMENT OF SALARY OF RS. 40 ,000/- PER MONTH TO SHRI SURENDRA KUMAR GUPTA, IT WAS SUBMITTED AS UNDER:- UNDER SUB-SECTION (2) OF SECTION 40A, EXPENDITURE INCURRED IN A BUSINESS FOR WHICH PAYMENT HAS BEEN OR IS TO BE MADE TO THE TAXPAYER'S RELATIVES OR ASSOCIATE CONCERNS IS LIABLE TO BE DISALLOWED IN CO MPUTING THE PROFITS OF THE BUSINESS OR PROFESSION TO THE EXTENT THE EXPEND ITURE IS CONSIDERED TO BE EXCESSIVE OR UNREASONABLE. THE REASONABLENESS OF AN Y EXPENDITURE IS TO BE JUDGED HAVING REGARD TO THE FAIR MARKET VALUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE OR THE LEG ITIMATE NEEDS OF THE BUSINESS OR PROFESSIONAL OR THE BENEFIT DERIVED BY OR ACCRUING TO THE TAXPAYER FROM THE EXPENDITURE. SUCH PORTION OF THE EXPENDITURE WHICH IN ITA NO. 2639/DEL/2015 8 THE OPINION OF THE ASSESSING OFFICER IS EXCESSIVE O R REASONABLE ACCORDING TO THESE CRITERIA IS TO BE IS ALLOWED IN COMPUTING THE PROFITS OF THE BUSINESS OR PROFESSION. IN VIEW OF THE ABOVE, LD. AR SUBMITTED THAT NO E XERCISE OF THE REVISIONARY POWERS U/S. 263 OF THE ACT IS CALLED FOR IN THE FAC TS AND CIRCUMSTANCES OF THE CASE, HENCE, THE ORDER OF THE LD. CIT MAY BE QUASHE D AND THE ORDER OF THE AO MAY BE RESTORED. 8. ON THE CONTRARY, LD. DR RELIED UPON THE ORDE R PASSED BY THE LD. CIT DATED 18.3.2015 BECAUSE THE ASSESSMENT ORDER PASSE D BY THE AO WAS HELD TO BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE BY THE LD. CIT. THE MAIN CONTENTION OF THE LD. DR WAS THAT THE AO HAS N OT MADE PROPER ENQUIRIES ON THE ISSUES IN DISPUTE, HENCE, THE LD. CIT HAS RIGHT LY SET ASIDE THE ISSUES IN DISPUTE TO THE FILE OF THE AO TO EXAMINE THE SAME DENOVO, AFTER GIVING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD AND ALSO OBSE RVED THAT AO IS FREE TO ARRIVE AT ANY CONCLUSION IN THE LIGHT OF THE EVIDEN CE ADDUCED BY THE ASSESSEE AND AS PER THE PROVISIONS OF INCOME TAX ACT WITHOUT BEING GUIDED BY ANY OBSERVATIONS MADE IN THE IMPUGNED ORDER. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND CONSID ERED THE PAPER BOOK ALONGWITH CASE LAWS CITED BY THE ASSESSEE AND ORDE RS OF THE AUTHORITIES BELOW. WE FIND THAT THE AO HAS NOT EVEN MADE ANY ATTEMPT T O MAKE ANY ENQUIRY BEFORE ACCEPTING THE CLAIM OF THE ASSESSEE AND ACCE PTED THE CLAIM IN A HURRY MANNER WITHOUT APPLYING MIND. FROM THE RECORDS, I T REVEALS THAT THE AO HAS NOT EVEN APPROPRIATELY APPRECIATED THE EVIDENCE ON RECO RD EITHER FAILED TO EXAMINE OR IF EXAMINED, DID NOT ARRIVE AT THE CORRECT LOGIC AL CONCLUSION ON SOME ISSUES. THEREFORE, THE ASSESSMENT FRAMED BY THE AO PRIMA FA CIE APPEARED PREJUDICIAL TO ITA NO. 2639/DEL/2015 9 THE INTERESTS OF REVENUE AND THUS, A NOTICE U/S. 263 OF I.T. ACT, 1961 HAS RIGHTLY BEEN ISSUED ON 7.3.2014 ON THE FOLLOWING ISSUES/ REASONS :- A) APROPOS ISSUE RELATING TO BROKERAGE EXPENSES OF RS. 50,85,988/- IS CONCERNED, WE FIND FROM THE ASSESSMENT RECORD THAT ON THIS ISSUE THE CASE WAS SELECTED FOR SCRUTINY TO VERIFY THE ADMISSIBLE OF T HE SAID EXPENSES, BUT NO ENQUIRY APPEARED TO HAVE BEEN MADE AS TO THE PURPOSE AND BASIC OF PAYMENT OF BROKERAGE, ITS CONNECTION WITH THE BUSINESS AND WHE THER THE PAYMENT COMMENSURATE TO THE BENEFIT DERIVED BY THE COMPANY. HOWEVER, A COMPLETE LIST OF THE AGENTS ALONGWITH ADDRESSES WAS AVAILABLE ON RECORDS, BUT NO ATTEMPT APPARENTLY WAS MADE TO VERIFY EVEN ONE OF THESE PE RSONS. THEREFORE, IN OUR CONSIDERED OPINION, LD. CIT HAS RIGHTLY SET ASIDE THE ISSUE OF ALLOWABILITY OF BROKERAGE EXPENSES TO THE FILE OF THE AO FOR MAKI NG ENQUIRIES AND ARRIVE AT CONCLUSION ABOUT ADMISSIBILITY OF BUSINESS EXPENSES OF BROKERAGE IN ACCORDANCE WITH PROVISION OF I.T. ACT, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ORDER OF THE LD. CIT ON THIS I SSUE. B) APROPOS ISSUE RELATING DIFFERENCE IN SALES AND P URCHASES AS PER THE PURCHASE/SALES REGISTER VIS-A-VIS THE VAT RETURNS A ND THE PURCHASES AND SALES DISCLOSED IN THE PROFIT AND LOSS ACCOUNT IS CONCERN ED, WE FIND THAT VAT RETURN AND PURCHASE AND SALES REGISTERS IN ORDER TO RECONCILE THE FIGURE OF SALES AND PURCHASES AS DISCLOSED IN THE P&L A/C ARE YET TO BE RECONCILED. IT WAS SEEN THAT THE RECONCILIATION STATEMENT SHOWS ADDITION OF CRED IT NOTE TO PURCHASES IN ORDER TO RECONCILE THE FIGURE OF TOTAL PURCHASES. SIMILARLY, SALES HAVE BEEN RECONCILED BY ADDING A FIGURE UNDER THE NOMENCLATURE SALE HIGH S EAS (NOT PART OF VAT RETURN) AND NO REASON WHATSOEVER FOR SUCH ADDITION HAS BEEN GIVEN NOR ANY EVIDENCE WAS PRODUCED. THEREFORE, IN OUR CONSIDERE D OPINION, LD. CIT HAS RIGHTLY SET ASIDE THE ISSUE IN DISPUTE TO THE FILE OF THE AO FOR FRESH CONSIDERATION ITA NO. 2639/DEL/2015 10 DENOVO, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ORDER OF THE LD. CIT ON THIS ISSUE. C) APROPOS ISSUE RELATING TO RECONCILIATION OF BANK BALANCE AS ON 31.3.2010 AS PER THE BANK STATEMENT THE BOOK OF ACCOUNT AS TH ERE APPEARED TO BE A HUGE DIFFERENCE IN RESPECT OF ASSESSES BANK ACCOUNT IN HDFC BANK AND STATE BANK OF PATIALA IS CONCERNED, WE FIND THAT IN A BANK RECONC ILIATION STATEMENT VARIOUS CHEQUES ISSUED BY THE ASSESSEE BUT NOT PRESENTED IN BANK AS WELL AS CHEQUES RECEIVED BUT NOT ENCASHED BY THE ASSESSEE, THESE E NTRIES REQUIRES VERIFICATION FROM THE BANK ACCOUNT OF THE ASSESSEE IN VARIOUS BA NKS, HOWEVER, AO HAS NOT MADE ANY ATTEMPT TO VERIFY/EXAMINE THE SAME. THE REFORE, IN OUR CONSIDERED OPINION, LD. CIT HAS RIGHTLY SET ASIDE THE ISSUE IN DISPUTE TO THE FILE OF THE AO FOR FRESH CONSIDERATION, WHICH DOES NOT NEED ANY INTERF ERENCE ON OUR PART, HENCE, WE UPHOLD THE ORDER OF THE LD. CIT ON THIS ISSUE. D) APROPOS ISSUE RELATING TO VARIOUS LOANS AMOUNTIN G TO RS. 9 CRORES IS CONCERNED, WE FIND THAT THE SAME WAS ALSO NOT ENQU IRED INTO AND VERIFIED BY THE AO DURING THE ASSESSMENT PROCEEDINGS. ON THIS ISSU E, THE ASSESSEE HAS FURNISHED COPIES OF BANK ACCOUNT OF THE LENDERS AS WELL AS THEIR ASSESSMENT DETAILS, BUT THE SAME WAS NOT VERIFIED ENTRY WISE F ROM THE BOOKS OF ACCOUNT AS WELL AS BANK ACCOUNT OF THE ASSESSEE. THEREFORE, I N OUR CONSIDERED OPINION, LD. CIT HAS RIGHTLY SET ASIDE THE ISSUE IN DISPUTE TO THE FILE OF THE AO WITH THE DIRECTION TO VERIFY THE DATES, CHEQUE NUMBER AND A MOUNT FROM THE BANK ACCOUNT OF THE LENDER AND TALLY IT WITH THE ENTRIES IN THE BOOKS OF ACCOUNT AS WELL AS BANK ACCOUNT OF THE ASSESSEE, BESIDES EXAMINING THE IDEN TITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS INCLUDING TAX IMPLI CATION THEREOF, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ORDER OF THE LD. CIT ON THIS ISSUE. ITA NO. 2639/DEL/2015 11 E) APROPOS THE LAST ISSUE RELATING TO PURCHASES FRO M M/S STAR WIRE INDIA LTD. IS CONCERNED, WE FIND THAT THE SAME HAS ALSO NOT BE EN EXAMINED FROM THE ANGLE OF PROVISION OF SECTION 40A(2)(B) OF THE I.T. ACT, 1961. ON THIS ISSUE ASSESSEE HAS SUBMITTED THAT TRANSACTION WITH ASSOCIATE CONCERN W AS MADE AT THE PREVAILING RATES. HOWEVER, IT WAS NOTICED FROM THE DOCUMENTS F URNISHED BY THE ASSESSEE AS AGAINST PURCHASE @ OF RS. 33,000/- PER MT FROM M/S STAR WIRE INDIA LTD., ON 3.6.2009 IN RESPECT OF GOODS DESCRIBED AS ROUND, ANOTHER SELLER M/S NARAYAN & COMPANY HAS SOLD THE SAME TO ANOTHER PERS ON @RS.32,330/- PER MT ON THE SAME DATE. THIS REVEALS THAT PURCHASES FR OM RELATED PARTIES HAVE BEEN SHOWN BY THE ASSESSEE AT INFLATED PRICE. THEREFORE, IN OUR CONSIDERED OPINION, LD. CIT HAS RIGHTLY SET ASIDE THE ISSUE IN DISPUT E TO THE FILE OF THE AO TO EXAMINE THE SAME AFRESH WHETHER THE TRANSACTION WITH RELATE D PARTIES ARE HIT BY THE PROVISIONS CONTAINED IN SECTION 40A(2)(B) OF THE I. T. ACT, 1961, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ORDER OF THE LD. CIT ON THIS ISSUE. 9.1 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, WE ARE OF THE VIEW THAT THE AO WAS FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE SINCE AT THE TIME OF THE ASSESSMENT THE AO WAS DUTY BOUND TO CALL FOR SUCH DETAILS AND EXAMINE THEM. WE ALSO FIND THAT I N THE CASE OF M/S MALABAR INDUSTRIES, THE HONBLE APEX COURT HAS HELD THAT IN CORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW WILL SATISFY THE REQU IREMENT OF THE ORDER BEING ERRONEOUS. WE FURTHER NOTE THAT IN THE SAME CATEGOR Y FALL ORDER PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHO UT APPLICATION OF MIND. WE ARE OF THE VIEW THAT IT IS INCUMBENT ON THE OFFICER TO INVESTIGATE THE FACTS STATED IN THE RETURN, WHEN CIRCUMSTANCES WOULD MAKE SUCH AN ENQUI RY PRUDENT AND THE WORD ERRONEOUS IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN INQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT B EEN MADE AND NOT ITA NO. 2639/DEL/2015 12 BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THERE ARE ASSUMED TO BE CORRECT. IN VIEW OF THE FOREGOING OBS ERVATIONS AND THE PRECEDENTS, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. WE ALSO FIND THAT THE CASE LAWS CITED BY THE LD. C OUNSEL OF THE ASSESSEE ARE DISTINGUISHABLE TO THE FACTS AND CIRCUMSTANCES OF T HE CASE. ACCORDINGLY, WE ARE OF THE VIEW THAT LD. CIT HAS PASSED A WELL REASONED REVISIONAL ORDER U/S. 263 WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME AND DISMISS THE APPEAL OF THE ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/04/2016. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [N.K. SAINI N.K. SAINI N.K. SAINI N.K. SAINI] ]] ] [ [[ [H.S. H.S. H.S. H.S. SIDHU SIDHU SIDHU SIDHU] ]] ] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE 11/04/2016 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES