M/s Nishi Egg Poultry Product PVT Ltd, Tanuku V. THE CIT, RAJAHMUNDRY., Rajahmundry

ITA 277/VIZ/2012

• Counselvise Citation: [2016] 130 COUNSELVISE.COM (IT) 9702 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 26-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M BHUPAL REDDY
• Keywords: Opportunity of being heard; Question of law; Non-deduction of tax; Assessment record; Revenue expenditure; Capital expenditure
• Section: 143(3); 142(1); 263

Judgement Text

ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 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.277/VIZAG/2012 ( / ASSESSMENT YEAR: 2007-08) NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU VS. CIT, RAJAHMUNDRY [PAN: AACCN1657P ] ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI M. BHUPAL REDDY, DR / DATE OF HEARING : 02.11.2016 / DATE OF PRONOUNCEMENT : 25.11.2016 / 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 2007-0 8. ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF TRADING IN POULTRY EGGS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 31.7.2007 DECLARING TOTAL INCOME OF ` 41,85,542/-. THE CASE HAS BEEN SELECTED FOR SCRUTINY UNDER CASS AND ACCORDINGLY, NOTICE U/S 143 (2) & 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTICES, THE AUTHO RIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURN ISHED BOOKS OF ACCOUNTS AND OTHER INFORMATION CALLED FOR. THE ASS ESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 9.12.2009 DETERM INING TOTAL INCOME OF ` 47,51,057/- BY MAKING ADDITIONS OF ` 5,65,570/- TOWARDS DISALLOWANCE OF CERTAIN EXPENDITURES FOR FAILURE TO PRODUCE PROPER BILLS & VOUCHERS AND ALSO BY INVOKING PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TAX AT SOURCE UNDER RESPECTIVE PROVISIONS OF THE ACT. 3. THE CIT, RAJAHMUNDRY ISSUED A SHOW CAUSE NOTICE DATED 10.1.2012 AND ASKED TO EXPLAIN WHY THE ASSESSMENT O RDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE ACT, DATED 9.12 .2009 SHALL NOT BE REVISED UNDER THE PROVISIONS OF SECTION 263 OF THE ACT. THE CIT, PROPOSED TO REVISE THE ASSESSMENT ORDER FOR THE REA SON THAT ON EXAMINATION OF ASSESSMENT RECORDS, CERTAIN OMISSION S AND COMMISSIONS ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 3 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 THE SAID SHOW CAUSE NOTICE , OBSERVED THAT THE A.O. COMPLETED ASSESSMENT WITHOUT VERIFYING THE ISS UES MENTIONED IN THE SHOW CAUSE NOTICE. THE CIT, FURTHER, OBSERVED THAT THE A.O. HAS COMPLETED ASSESSMENT BY MAKING ADHOC DISALLOWANCE O F EXPENDITURE, HOWEVER, FAILED TO EXAMINE THE CORE ISSUES SUCH AS PACKING AND FORWARDING EXPENDITURE CLAIMED BY THE ASSESSEE WITH REFERENCE TO NECESSITY OF INCURRING SUCH EXPENDITURE, GENUINENES S OF THE EXPENDITURE AND REASONABLENESS OF SUCH MAGNITUDE OF EXPENDITURE AND APPLICABILITY OF PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. THE CIT, FURTHER, OBSERVED THAT THE ASSESSEE HAS DECLARED NET PROFIT OF ` 41,85,552/- AGAINST THE TURNOVER OF ` 107.34 CRORES, WHICH WORKS OUT TO MERE 0.39% ON TH E TOTAL TURNOVER. THE A.O. FAILED TO EXAMINE SUNDRY CREDITORS, ADVANCES GIVEN TO DIRECTORS, INVESTMENT IN M/S. SANJAY CRAFT PAPERS PVT. LTD. AND DEPOSITS FROM FARMERS WITH REFERENCE TO RELEVANT EV IDENCES IN THE FORM OF CONFIRMATION LETTER FROM SUNDRY CREDITORS AND FA RMERS. THE A.O., WITHOUT EXAMINING THESE ISSUES, SIMPLY COMPLETED AS SESSMENT BY MAKING CERTAIN ADHOC DISALLOWANCES UNDER FEW HEADS OF EXPENDITURE, WHICH RENDERED THE ASSESSMENT ORDER ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. WITH TH ESE OBSERVATIONS, ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 4 ISSUED A SHOW CAUSE NOTICE AND ASKED TO EXPLAIN WHY THE ASSESSMENT ORDER SHALL NOT BE REVISED UNDER THE PROVISIONS OF SECTION 263 OF THE ACT. 4. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE V IDE HIS LETTER DATED 27.1.2012 SUBMITTED THAT THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT DATED 9.12.2009 IS NOT E RRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, A S THE A.O. HAS EXAMINED ALL THE ISSUES POINTED OUT IN THE SHOW CAUSE NOTICE AT THE TIME OF COMPLETION OF ASSESSMENT. THE ASSESSEE FURTHER SUB MITTED THAT IT HAS FURNISHED BOOKS OF ACCOUNTS ALONG WITH BILLS AND VO UCHERS AND OTHER RELEVANT INFORMATION AT THE TIME OF ASSESSMENT PROC EEDINGS, IN RESPONSE TO A SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFI CER ON VARIOUS OCCASIONS. THE A.O. HAS ISSUED VARIOUS SHOW CAUSE NOTICES AND CALLED FOR SPECIFIC DETAILS ABOUT THE EXPENDITURE DEBITED TO P&L ACCOUNT, CONFIRMATION LETTER FROM SUNDRY CREDITORS AND DEPOS IT FROM FARMERS AND ALSO EXAMINED THE ISSUE OF NET PROFIT ADMITTED BY T HE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE A.O. HAS SOUGHT EACH AND EVERY DETAILS IN RESPECT OF EXPENDITURES AND ALSO EXAMINED THE REASO NABLENESS OF EXPENDITURE CLAIMED UNDER THE HEAD PACKING AND FORW ARDING. THE ASSESSEE HAS FURNISHED BILLS AND VOUCHERS IN SUPPOR T OF PACKING MATERIALS AND EXPLAINED THE NECESSITY OF PURCHASING THE PACKING ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 5 MATERIALS. IT WAS FURTHER SUBMITTED THAT IT IS IN THE BUSINESS OF TRADING IN POULTRY EGGS FROM FARMERS AND THE FARMERS WOULD SUP PLY EGGS WITHOUT ANY PACKING AND THE ASSESSEE HAS TO PURCHASE PACKIN G MATERIALS ON ITS OWN BEFORE BEING SOLD TO CUSTOMERS. THE PACKING MA TERIAL HAS BEEN PURCHASED FOR THE PURPOSE OF PACKING POULTRY EGGS I N VARIOUS SIZES WHICH REQUIRES HUGE PACKING MATERIALS SO AS TO PACK THE M ATERIALS. THE A.O. AFTER EXAMINING THE DETAILS OF PACKING MATERIALS PU RCHASED WITH REFERENCE TO BILLS AND VOUCHERS HAS CHOSEN TO ACCEP T THE EXPENDITURE CLAIMED BY THE ASSESSEE. 5. IN SO FAR AS LOW NET PROFIT IS CONCERNED, THE AS SESSEE HAS FURNISHED DETAILS OF EXPENDITURE DEBITED TO PROFIT & LOSS ACC OUNT AND ALSO EXPLAINED THE NET PROFIT DECLARED WITH NECESSARY BOOKS OF ACC OUNTS. AS REGARDS OTHER ISSUES BEING CONFIRMATION FROM SUNDRY CREDITO RS AND DEPOSIT FROM FARMERS, THE A.O. DURING THE COURSE OF ASSESSMENT P ROCEEDINGS HAS CALLED FOR CONFIRMATION FROM SUNDRY CREDITORS WHERE VER THE CREDITORS BALANCE EXCEEDS ` 1 LAKH. THE ASSESSEE HAS FILED CONFIRMATION LETTE RS FROM THE PARTIES. THE A.O. AFTER EXAMINING THE SUN DRY CREDITORS WITH REFERENCE TO THE CONFIRMATION LETTERS HAS ACCEPTED THE EXPLANATIONS OF THE ASSESSEE. SIMILARLY, IN RESPECT OF DEPOSITS FR OM FARMERS, IT IS THE COMMON PRACTICE IN THIS LINE OF BUSINESS THAT THE T RADERS WILL KEEP 2 TO 3 ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 6 DAYS SALES AS DEPOSIT FROM FARMERS WHICH FACT WAS E XPLAINED TO THE ASSESSING OFFICER BY FILING NECESSARY EVIDENCES. T HE A.O. AFTER SATISFIED WITH THE EXPLANATIONS FURNISHED BY THE ASSESSEE HAS ACCEPTED THE DEPOSIT FROM FARMERS. AS REGARDS INVESTMENTS IN M/ S. SANJAY CRAFT PAPERS PVT. LTD., THE ASSESSEE HAS FILED A CONFIRMA TION FROM THE PARTY TO PROVE THE INVESTMENTS. THE ADVANCE PAID TO M/S. GA NESH PACKAGES WAS ADJUSTED AGAINST INVESTMENTS MADE BY THE ASSESSEE I N M/S. SANJAY CRAFT PAPERS PVT. LTD. THE REASONS FOR PAYING ADVANCE TO M/S. GANESH PACKAGES HAVE BEEN EXPLAINED BEFORE THE A.O. THE A .O. AFTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE, ACCEPTED THE EXPLANATIONS AND COMPLETED ASSESSMENT. THEREFORE, THE ASSESSMENT ORDER PASSED BY THE A.O. CANNOT BE CONSIDERED AS ER RONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE TO INVOKE THE PROVISIONS OF SECTION 263 OF THE ACT. 6. THE CIT AFTER CONSIDERING SUBMISSIONS OF THE ASS ESSEE, HELD THAT THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT, DATED 9.12.2009 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICI AL TO THE INTEREST OF THE REVENUE, AS THE A.O. HAS FAILED TO EXAMINE THE ISSU E POINTED OUT IN THE SHOW CAUSE NOTICE WITH REFERENCE TO SUPPORTING EVID ENCES. THE CIT, FURTHER, OBSERVED THAT THE A.O. HAS COMPLETED ASSES SMENT BY MAKING ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 7 ADHOC DISALLOWANCE OF EXPENDITURE WITHOUT EXAMINING THE SPECIFIC ISSUES REFERRED TO IN THE SHOW CAUSE NOTICE, SUCH AS PACKI NG MATERIAL EXPENDITURE, SUNDRY CREDITORS, ADVANCE FROM FARMERS , INVESTMENTS IN SISTER CONCERN AND LOW NET PROFIT DECLARED BY THE A SSESSEE. THE CIT FURTHER OBSERVED THAT THE ASSESSEE HAS FAILED TO EX PLAIN THE NECESSITY AND REASONABLENESS OF INCURRING SUCH A MAGNITUDE OF EXPENDITURE, HOWEVER, THE A.O. WITHOUT EXAMINING THE APPLICABILI TY OF PROVISIONS OF SECTION 40A(2)(B) OF THE ACT, SIMPLY ACCEPTED THE E XPENDITURE CLAIMED BY THE ASSESSEE. THE CIT, FURTHER, OBSERVED THAT O N PERUSAL OF THE ASSESSMENT RECORDS, IT WAS NOTICED THAT THERE IS NO IOTA OF EVIDENCE IN THE RECORDS TO SHOW THAT THE A.O. HAS CALLED FOR CO NFIRMATION LETTER FROM SUNDRY CREDITORS AND FROM FARMERS TO EXAMINE THE SU NDRY CREDITORS AND DEPOSIT FROM FARMERS CLAIMED BY THE ASSESSEE. THE A.O. ALSO FAILED TO EXAMINE THE NET PROFIT DECLARED BY THE ASSESSEE, EV EN THOUGH THE ASSESSEE HAS DECLARED A MEAGER 0.39% NET PROFIT ON A HUGE TURNOVER OF MORE THAN ` 100 CRORES. THE A.O. FAILED TO GATHER REQUIRED IN FORMATION BEFORE COMPLETION OF ASSESSMENT. THEREFORE, THE AS SESSMENT ORDER PASSED BY THE A.O. IS CERTAINLY ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 8 7. THE CIT, FURTHER, OBSERVED THAT THE A.O. NOT ONL Y FAILED TO EXAMINE THE ISSUES POINTED OUT IN THE SHOW CAUSE NOTICE, BU T ALSO FAILED TO APPLY HIS MIND BEFORE COMPLETION OF ASSESSMENT. AS PER T HE INCOME TAX ACT, THE ASSESSING OFFICER IS AN INVESTIGATING OFFICER A S WELL AS ASSESSING AUTHORITY AND THEREFORE, HE IS REQUIRED TO VERIFY T HE DETAILS AND OBTAIN COGENT EVIDENCES ON RECORD BEFORE FINALIZING THE AS SESSMENT. IT IS TRITE LAW THAT FAILURE ON THE PART OF THE A.O. TO MAKE EN QUIRY ON RELEVANT POINTS WOULD MAKE THE ASSESSMENT ORDER ERRONEOUS AN D PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT IS WELL ESTABLISHE D THAT THE ASSESSING OFFICER DID NOT EXAMINE THE ISSUES PROPERLY AND COM PLETED THE ASSESSMENT WITHOUT APPRECIATING THE FACTS. WITH THE SE OBSERVATIONS HELD THAT THE ASSESSMENT ORDER PASSED BY THE A.O. U /S 143(3) OF THE ACT DATED 9.12.2009 IS ERRONEOUS IN SO FAR AS IT IS PRE JUDICIAL TO THE INTEREST OF THE REVENUE AND AS SUCH NEEDS TO BE REVISED ON T HE LINES DISCUSSED HEREIN ABOVE. ACCORDINGLY, SET ASIDE THE ASSESSMEN T ORDER AND DIRECTED THE A.O. TO PASS CONSEQUENTIAL ORDER AFTER VERIFYIN G THE DETAILS FILED/TO BE FILED AS INDICATED ABOVE AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. THE LD. A.R. FOR THE ASSESSEE, SUBMITTED THAT TH E ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT DATE D 9.12.2009 IS NOT ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 9 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 WIT H REGARD TO THE ISSUES WHICH WERE ALREADY EXAMINED BY THE A.O. AT THE TIME OF ASSESSMENT. THE A.R., REFERRING TO THE ASSESSMENT ORDER, SUBMIT TED THAT THE ASSESSING OFFICER HAS CALLED FOR EACH AND EVERY DET AILS WITH REGARD TO THE ISSUES RAISED BY THE CIT. THE ASSESSEE HAS SUBMITT ED ALL THE DETAILS IN RESPONSE TO A SPECIFIC QUESTIONNAIRE ISSUED BY THE A.O. TO SUBSTANTIATE THE EXPENDITURE CLAIMED UNDER THE HEAD PACKING MATE RIALS AND ALSO IN RESPECT OF SUNDRY CREDITORS AND DEPOSIT FROM FARMER S. THE ASSESSEE ALSO EXPLAINED THE REASONS FOR ADMITTING LOW NET PROFIT. THE A.O. AFTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE H AS CHOSEN TO MAKE CERTAIN ADHOC DISALLOWANCE FOR WANT OF PROPER BILLS AND VOUCHERS IN RESPECT OF CERTAIN EXPENDITURE. FROM THIS, IT IS A BUNDANTLY CLEAR THAT THE A.O. HAS EXAMINED EACH AND EVERY ITEM BEFORE COMPLE TION OF ASSESSMENT, THEREFORE, THE CIT WAS NOT CORRECT IN H OLDING THAT THE A.O. HAS NOT CONDUCTED PROPER ENQUIRY BEFORE COMPLETION OF ASSESSMENT. THE LD. A.R. FURTHER SUBMITTED THAT THE CIT CANNOT TAKE UP REVISION ON THE ISSUES WHICH WERE ALREADY EXAMINED BY THE A.O. BY HOLDING THAT THE ISSUES WERE NOT EXAMINED BY THE A.O. TO THE SATISFA CTION OF THE CIT. ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 10 THE ASSESSEE HAS SUBMITTED ALL THE INFORMATION BEFO RE THE A.O. AND THE A.O. HAS VERIFIED THE ISSUES POINTED OUT BY THE CIT AND APPLIED HIS MIND BEFORE COMPLETION OF ASSESSMENT. THEREFORE, THE CI T CANNOT COME TO THE CONCLUSION THAT THERE IS A LACK OF ENQUIRY ON T HE PART OF THE A.O. IN EXAMINING THE ISSUES POINTED OUT BY THE CIT. THE D .R. ON THE OTHER HAND, STRONGLY SUPPORTED ORDER OF THE CIT(A). 9. 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, ASSUMED JURISDICTION TO REVISE THE ASSESSMENT ORDER FOR THE REASON THAT THE A.O. HAS NOT CONDUCTED PROPER ENQUIRY ON C ERTAIN ISSUES BEFORE COMPLETION OF ASSESSMENT, THEREBY THE ASSESSMENT OR DER PASSED BY THE A.O. U/S 143(3) OF THE ACT DATED 9.12.2009 IS ERRON EOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE CI T, REVISED THE ASSESSMENT ORDER FOR THE REASON THAT THE A.O. HAS C OMPLETED ASSESSMENT WITHOUT EXAMINING VARIOUS ISSUES WHICH C AUSED PREJUDICE TO THE INTEREST OF THE REVENUE. THE CIT, FURTHER, WAS OF THE OPINION THAT THE A.O. HAS COMPLETED ASSESSMENT BY MAKING ADHOC D ISALLOWANCE OF CERTAIN EXPENDITURE WITHOUT EXAMINING THE CORE ISSU ES SUCH AS HUGE EXPENDITURE DEBITED BY THE ASSESSEE UNDER THE HEAD PACKING MATERIALS AND ALSO SUNDRY CREDITORS AND DEPOSIT FROM FARMERS WITHOUT CALLING FOR ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 11 ANY DETAILS FROM THE CREDITORS. THE CIT FURTHER OB SERVED THAT THE ASSESSEE HAS DECLARED A MEAGER NET PROFIT OF 0.39% ON A HUGE TURNOVER OF ` 107.34 CRORES, HOWEVER, THE A.O. WITHOUT ANALYZING THE NET PROFIT DECLARED BY THE ASSESSEE, SIMPLY COMPLETED ASSESSME NT BY MAKING CERTAIN ADHOC DISALLOWANCES. THE A.O. NOT ONLY FAI LED TO EXAMINE THE ISSUES, BUT ALSO FAILED TO APPLY HIS MIND ON VARIOU S ISSUES WHICH RENDERED THE ASSESSMENT ORDER ERRONEOUS IN SO FAR A S IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 10. 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 BY WAY OF SPECIFIC QUESTIONNAIRE. THE ASSESSEE HAS SUBMITTED EACH AND EVERY DETAIL IN RESPECT OF EXPENDITURE DEBITED IN THE PRO FIT & LOSS ACCOUNT AND ALSO OTHER ISSUES POINTED OUT BY THE CIT SUCH AS CO NFIRMATION FROM SUNDRY CREDITORS AND DEPOSIT FROM FARMERS, ANALYSIS OF NET PROFIT, INVESTMENTS IN GROUP CONCERNS M/S. SANJAY CRAFT PAP ERS PVT. LTD. THE ASSESSEE FURTHER CONTENDED THAT, ON VARIOUS DATES, IT HAD FILED ALL THE DETAILS AS INDICATED BY THE ASSESSING OFFICER IN HI S ORDER AND THE A.O. AFTER CONSIDERING THE DETAILS FURNISHED BY THE ASSE SSEE CHOSEN TO ACCEPT THE EXPLANATIONS OF THE ASSESSEE WITH REGARD TO THE ISSUES POINTED OUT BY THE CIT, THEREFORE, THE CIT, CANNOT CONSIDER ASS ESSMENT ORDER PASSED ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 12 BY THE A.O. IS ERRONEOUS IN SO FAR AS IT IS PREJUDI CIAL TO THE INTEREST OF THE REVENUE. THE ASSESSEE FURTHER SUBMITTED THAT IT HA S EXPLAINED THE NECESSITY AND REASONABLENESS OF PACKING MATERIALS E XPENDITURE. IT ALSO EXPLAINED THE REASONS FOR LOW NET PROFIT FOR THE PE RIOD. THE A.O. AFTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE C OMPLETED ASSESSMENT, WHICH CANNOT BE TERMED AS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 11. HAVING HEARD BOTH THE PARTIES AND CONSIDERED MA TERIALS ON RECORD, WE FIND FORCE IN THE ARGUMENTS 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 TIME OF COMPLETION OF ASSESSMENT. WE FURTHER OBSERVED THAT THE A.O. HAS ISSUED SHOW CAUSE NOTICE, WHEREIN HE HAD SPECIFICALLY CALLED FOR DETAILS ABOUT EXPENDITURE AND OTHER ISSU ES POINTED OUT BY THE CIT. THE ASSESSEE HAS FURNISHED BILLS AND VOUCHERS IN RESPECT OF EXPENDITURE DEBITED IN THE PROFIT & LOSS ACCOUNT AN D ALSO FURNISHED CONFIRMATION LETTER FROM SUNDRY CREDITORS WHEREVER THE CREDITORS BALANCE EXCEEDS ` 1 LAKH. THE ASSESSEE ALSO FURNISHED DETAILS OF DE POSIT FROM FARMERS AND EXPLAINED THAT IT IS THE COMMON PRACTIC E IN THIS LINE OF BUSINESS THAT THE TRADERS WILL KEEP 2 TO 3 DAYS SAL ES AS DEPOSIT FROM FARMERS AND TO THIS EFFECT FURNISHED NECESSARY DETA ILS BEFORE THE A.O. ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 13 THEREFORE, WE ARE OF THE VIEW THAT THE CIT WAS NOT CORRECT IN COMING TO THE CONCLUSION THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE. 12. THE CIT, ASSUMED JURISDICTION TO REVISE THE ASS ESSMENT ORDER ON THE GROUND THAT THERE IS A LACK OF ENQUIRY ON THE P ART OF THE A.O. IN EXAMINING THE ISSUES REFERRED TO IN THE SHOW CAUSE NOTICE. THE CIT QUESTIONED THE ISSUES RIGHT FROM VERIFICATION OF PA CKING MATERIALS EXPENDITURE TO EXAMINATION OF ADVANCES GIVEN TO DIR ECTORS. THE ASSESSEE HAS FILED A PAPER BOOK WHICH CONTAINS THE DETAILS FURNISHED BEFORE THE A.O. AT THE TIME OF ASSESSMENT. ON PERU SAL OF THE PAPER BOOK FILED BY THE ASSESSEE, WE FIND THAT THE ASSESS EE LISTED OUT THE ISSUES POINTED OUT BY THE CIT AND THE DETAILS FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. ON FURTHER VERIFICAT ION OF THE DETAILS FILED BY THE ASSESSEE, WE FIND THAT THE ASSESSEE HAS SUBM ITTED ALL THE DETAILS WITH REGARD TO EACH AND EVERY ISSUE POINTED OUT BY THE CIT IN THE SHOW CAUSE NOTICE. THE A.O. AFTER SATISFIED WITH THE EX PLANATION FURNISHED BY THE ASSESSEE HAS COMPLETED ASSESSMENT BY MAKING CER TAIN ADHOC DISALLOWANCES TOWARDS EXPENDITURE FOR FAILURE TO FU RNISH PROPER BILLS AND VOUCHERS AND ALSO MADE CERTAIN ADDITIONS UNDER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT FOR FAILURE TO DEDUCT TDS UNDE R RESPECTIVE PROVISIONS ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 14 OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT ONC E THE ISSUES WHICH WERE SUBJECT MATTER OF REVISION 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 THE SAME ISSUES, BECAUSE HE HAD A DIFFERENT OPINION ON THE ISSUES. IN OUR CONSIDERED VIEW, THE ISSUES POINTED OUT BY THE CIT HAVE BEEN THOROUGHLY EXAMINED BY THE A.O. AT THE TIME OF ASSESSMENT, THEREFORE, THE CIT WAS NOT CORRECT IN C OMING TO THE CONCLUSION THAT THE A.O. HAS NOT EXAMINED THE ISSUE S BEFORE COMPLETION OF ASSESSMENT AND HIS ORDER IS LACKING ENQUIRY. 13. THE CIT HAS POWER TO REVISE ASSESSMENT ORDER 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 (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 MAY BE PREJUDICIAL TO THE INTEREST OF THE REVENUE O R VICE VERSA. IN SOME CASES THE ORDER PASSED BY THE A.O. MAY BE ERRONEOUS , BUT IT MAY NOT BE PREJUDICIAL TO THE INTEREST OF THE REVENUE OR VICE VERSA. UNLESS THE ORDER PASSED BY THE A.O. IS ERRONEOUS AND ALSO PREJUDICIA L TO THE INTEREST OF THE REVENUE, THE CIT CANNOT ASSUME JURISDICTION TO REVISE THE ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 15 ASSESSMENT ORDER, THIS IS BECAUSE THE TWIN CONDITIO NS I.E. THE ORDER IS ERRONEOUS AND THE SAME IS PREJUDICIAL TO THE INTERE ST OF THE REVENUE ARE CO-EXIST. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE DETAILS AVAILABLE ON RECORD, WE FIND THAT THE A.O. HAS CONDUCTED DETA ILED ENQUIRY AND ALSO EXAMINED ALL THE ISSUES POINTED OUT BY THE CIT IN T HE SHOW CAUSE NOTICE. THE ASSESSEE HAS EXPLAINED EACH AND EVERY ISSUES WI TH NECESSARY EVIDENCES. THEREFORE, WE ARE OF THE VIEW THAT, THE CIT CANNOT ASSUME JURISDICTION TO REVISE THE ASSESSMENT ORDER, ONCE A SSESSEE 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 PRES UMPTION OF LAW THAT THE A.O. HAS CONSIDERED ALL THE DETAILS BEFORE COMPLETI ON OF ASSESSMENT, ONCE THE ASSESSEE HAS FILED DETAILS CALLED FOR BY T HE A.O. BUT, THE CIT CANNOT PRESUME THAT THE ENQUIRY CONDUCTED BY THE A. O. IS INSUFFICIENT AND ALSO THE A.O. HAS NOT APPLIED HIS MIND, UNLESS THE CIT PROVES THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOU S. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT DATED 9.12.2009 IS NOT ERRONEOUS IN SO F AR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 14. NOW IT IS PERTINENT TO DISCUSS THE CASE LAWS RE LIED UPON BY THE ASSESSEE. THE ASSESSEE RELIED UPON THE DECISION OF COORDINATE BENCH OF VISAKHAPATNAM TRIBUNAL, IN THE CASE OF NUTECH ENGIN EERS VS. CIT IN ITA ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 16 NO.570/VIZAG/2013 DATED 10.6.2016. THE COORDINATE BENCH OF THIS TRIBUNAL UNDER SIMILAR CIRCUMSTANCES HELD THAT ONCE THE A.O. EXAMINED THE ISSUES ON WHICH THE CIT WANTS FURTHER VERIFICAT ION, THE CIT CANNOT ASSUME JURISDICTION ON THE SAME ISSUES WHICH WERE A LREADY 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 ASSESSM ENT 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 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. 15. THE ASSESSEE RELIED UPON THE DECISION OF HONBL E HIGH COURT OF DELHI IN THE CASE OF CIT VS. SUNBEAM AUTO LIMITED ( 2011) 332 ITR 167. THE HONBLE DELHI HIGH COURT, UNDER SIMILAR CI RCUMSTANCES 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 CANNOT ASSUME ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 17 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 A PPLIED HIS MIND BEFORE COMPLETION OF ASSESSMENT. THE RELEVANT PORT ION OF THE ORDER IS REPRODUCED 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 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 ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 18 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. 16. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO RESPECTFULLY FOLLOWING 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 THE ACT DATED 9.12.2009 IS NOT ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, WE QUAS HED THE ORDER PASSED BY THE CIT U/S 263 OF THE ACT AND RESTORE TH E ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT. ITA NO.277/VIZAG/2012 NISHI ENGG POULTRY PRODUCT PVT. LTD., TANUKU 19 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 25 TH NOV16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 25.11.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT NISHI ENGG POULTRY PRODUCT PVT. LTD., NEAR Y-JUNCTION, BY-PASS ROAD, PYDIPARRU, TANUKU-534 211. 2. / THE RESPONDENT THE DCIT, CIRCLE-1, RAJAHMUNDRY 3. + / THE CIT, RAJAHMUNDRY 4. + ( ) / THE CIT (A), RAJAHMUNDRY 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM