Suseela Devi Bothra Jain, Rajahmundry V. THE ITO, WARD - 1, Rajahmundry

ITA 279/VIZ/2014

• Counselvise Citation: 27925314 RSA 2014
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 21-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K V N CHARYA
• Keywords: Revision of order; Question of law; Revenue expenditure; Capital expenditure
• Section: 40A(3); 80C; 143(3); 194C; 6; 263

Judgement Text

1 I.T.A. NO.279/VIZ/2014 ASSESSMENT YEAR: 2009-2010 IN THE INCOME TAX APPELLATE TRIBUNAL, VISHAKHAPATNA M BEFORE S/SHRI D.MANMOHAN (VP) & J.SUDHAKAR REDDY (A M) I.T.A. NO.279/VIZ/2014 ASSESSMENT YEAR: 2009-2010 SMT. SUSHEELA DAVI BOTHRA JAIN, SHREE CARRYING CORPORATION, D.NO.32-1-117, DRS COMPLEX, 1 ST FLOOR, KVR SWAMY ROAD, RAJAHMUNDRY VS. ITO WARD - 1, RAJAHMUNDRY. PAN/GIR NO. : AJJPB 5526 E ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI G.V.N. HARI RESPONDENT BY : SHRI K.V.N. CHARYA DATE OF HEARING : 02/12/2014 DATE OF PRONOUNCEMENT : 05/12/2014 O R D E R PER J.SUDHAKAR REDDY, AM THIS IS AN APPEAL FILED BY ASSESSEE AND DIRECTED A GAINST THE ORDER OF THE LD. CIT DATED 24/03/2014, PASSED U/S.263 OF THE I.T.ACT, 1961. 2. THE FACTS, AS BROUGHT OUT FROM THE ORDER OF THE CIT IN PARA 1 OF HIS ORDER, ARE EXTRACTED AS BELOW FOR READY REFERENCE: THE ASSESSEE IN AN INDIVIDUAL CARRYING ON BUSINESS AS TRANSPORT CONTRACTOR, FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 29/09/2009 ADMITTING TOTAL INCOME 2 I.T.A. NO.279/VIZ/2014 ASSESSMENT YEAR: 2009-2010 AT RS.9,18,970/-. SUBSEQUENTLY, THE CASE WAS CONVER TED INTO SCRUTINY AND THE ASSESSING OFFICER PASSED ORDER U/S. 143(3) AND THE TOTAL INCO ME WAS DETERMINED AT RS,9,99,233/- RAISING TAX DEMAND OF RS.28,230/-. 3. THE LD. CIT ISSUED A NOTICE DATED 07/01/2013 TO THE ASSESSEE PROPOSING TO REVISE THE ASSESSMENT ORDER PASSED U/S.143(3) ON 09/09/2011 FO R THE SOLE REASON THAT THE AO HAS NOT APPLIED THE PROVISIONS OF SECTION 40A(3) OF ACT, TH OUGH THE ASSESSEE HAS MADE PAYMENT IN EXCESS OF RS.20,000/- BY BIFURCATING IT INTO TWO AM OUNTS, ONE NAMED AS CASH AND OTHER TO THE LORRY ACCOUNT, BOTH OF WHICH HAVE BEEN DONE ON THE SAME DAY. FURTHER, DEDUCTION U/S.80C WITH REFERENCE TO THE LIC PREMIUM PAID WAS ALSO FOUND FA ULT WITH. CERTAIN DISCREPANCY WAS ALSO NOTICED ON THE TDS CREDIT. THE ASSESSEE GAVE A DETA ILED REPLY, COPY OF WHICH IS AT PAGES 50 & 51 OF PAPER BOOK. EVIDENCES WERE PRODUCED BEFORE TH E LD. CIT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT CONCLUDED THAT THE PAYMENTS WERE MADE TO VARIOUS LORRY OWNERS AND WHEREVER THE TOTAL PAYMENT EXCEEDE D RS.20,000/- PER TRIP, THE AMOUNTS WERE SPLIT INTO TWO PARTS, ONE WAS TAKEN AS ADVANCE GIVE N TO THE LORRY OWNERS AND OTHER ONE PAID SUBSEQUENTLY BY WAY OF CASH. HE RECORDS THAT THE TA X WAS DEDUCTED AT SOURCE BY THE ASSESSEE. THEREAFTER, AT PAGE 7, HE RECORDS AS FOLLOWS: AS ALREADY MENTIONED, ENQUIRIES WERE CONDUCTED WIT H LORRY OWNERS BY THE ASSESSING OFFICER DURING THE COURSE OF THESE PROCEEDINGS. LOR RY OWNERS DID NOT APPEAR BEFORE THE ASSESSING OFFICER AND ONLY ONE PERSON APPEARED I.E. MOHD. KAREEM, NATIONAL LORRY TRANSPORT WHO IS A BROKER AND NOT A LORRY OWNER AND HE DID NOT REMEMBER THE NAMES OF THE OWNERS OF THE LORRIES SUPPLIED BY HIM DURING T HE RELEVANT PERIOD. THEREFORE, THE DETAILS FILED BY THE ASSESSEE ARE FACTUALLY INCORRE CT. IT IS SEEN THAT THE ENQUIRIES WERE CONDUCTED WITH ONLY FEW LORRY OWNERS AND THERE ARE SEVERAL OTHER PAYMENTS FALLING IN THIS CATEGORY. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE GENUINENESS OF THE PAYMENTS MADE AND ALSO MODE OF PAYMENT AN CONSI DER THESE AMOUNTS FOR DISALLOWANCE U/S.40A(3) OF THE I.T.ACT WHILE GIVING EFFECT TO THIS ORDER. 4. ON THE DEDUCTION OF U/S. 80C THE LD. CIT DIRECTE D THE AO TO EXAMINE THE SUBMISSION OF THE ASSESSEE WITH REFERENCE TO THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10 AND CAME TO A LOGICAL CONCLUSION AS TO THE YEAR IN WHICH DEDUCTION IS ALLOWED. 3 I.T.A. NO.279/VIZ/2014 ASSESSMENT YEAR: 2009-2010 5. AS REGARDS TDS CERTIFICATES ISSUED ON 19/06/0200 9, 20/06/2009 AND 30/06/2009 BY M/S. BHASKAR PRAKASHAN PVT. LTD., THE LD. CIT DIRECTED T HE AO TO VERIFY WHETHER THE RECEIPTS WERE PROPERLY ACCOUNTED FOR BY THE ASSESSEE DURING THE Y EAR. 6. THEREAFTER, HE CONCLUDED AT PARA 4 AT PAGE 8 AS FOLLOWS. THE ASSESSING OFFICER IS DIRECTED TO VERIFY/EXAMIN E ALL THE ISSUES MENTIONED IN THE SHOW- CAUSE NOTICE DATED 07/01/2013 AND 14/03/2014. LATE R AT PAGE 10 HE RECORDED THAT THE AO HAS FAILED TO MAKE PROPER ENQUIRY AND THIS IS TH E REASON FOR INVOKING POWERS U/S.263 OF THE ACT. 7. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BE FORE US. 8. THE LD. COUNSEL FOR ASSESSEE MR.G.V.N HARI SUBMI TS THAT THE LD. CIT HAS NOT CORRECTLY APPRECIATED THE ENTRIES MADE BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AND AS A RESULT OF NOT UNDERSTANDING THE ACCOUNTING TRANSACTION, MIS-APPRE CIATED THE FACTS AND CAME TO A WRONG CONCLUSION RESULTING IN INVOKING OF PROVISIONS OF S ECTION 263 OF THE ACT. HE FILED A PAPER BOOK RUNNING INTO 388 PAGES AND DREW THE ATTENTION OF TH E BENCH TO THE REPLY FURNISH BEFORE THE LD. CIT AS WELL AS THE JOURNAL ENTRIES PASSED BY THE AS SESSEE TO EXPLAIN THE MODUS-OPERANDI. HE POINTED OUT THAT THE ASSESSEE MAKES PART PAYMENT IN CASH AS ADVANCE TOWARDS LORRY CHARGES, WHICH TRANSPORT THE GOODS AND BALANCE TRANSFERRED T O A PAYABLE ACCOUNT. IT IS SUBMITTED THAT EACH LORRY HAS A SEPARATE ACCOUNT OPENED UNDER ITS REGISTRATION NUMBER AND THEN BALANCE PAYABLE AMOUNT IS TRANSFERRED TO THAT ACCOUNT AND O NLY WHEN TRANSPORTATION IS COMPLETED, THE BALANCE AMOUNT IN QUESTION IS PAID TO LORRY OWNERS OR DRIVERS, AS THE CASE MAY BE. HE REFERRED TO THE ORDER OF THE LD. CIT, WHEREIN, AT PAGE 5, IT IS ACKNOWLEDGED BY THE CIT THAT THE PAYMENTS ARE SPLIT INTO TWO PARTS AND MADE AT TWO D IFFERENT POINTS OF TIME. ON A QUERY FROM THE BENCH, HE PRODUCED LEDGER ACCOUNT COPIES OF ALL THE LORRIES TO DEMONSTRATE THAT THE PAYMENTS HAVE BEEN MADE AT DIFFERENT POINTS OF TIME AND THAT TDS HAS BEEN COLLECTED. HE VEHEMENTLY CONTENDED THAT ALL THE BOOKS OF ACCOUNT, TDS COLLEC TION, JOURNAL ENTRIES, VOUCHERS ETC. WERE EXAMINED BY THE AO DURING THE COURSE OF SCRUTINY AS SESSMENT AND ORDER HAS BEEN PASSED U/S.143(3) AFTER COMING TO A CONCLUSION THAT THERE IS NO VIOLATION OF SECTION 40A(3) AND, UNDER SUCH CIRCUMSTANCES, THE LD. CIT CANNOT INVOKE HIS POWERS U/S.263 OF THE ACT. HE FURTHER SUBMITTED THAT THE LIST OF 21 CASES WAS GIVEN AS SA MPLE TO THE LD. CIT AND THE ENTIRE MODUS- OPERANDI WAS EXPLAINED TO HIM AND THE LD. CIT DID N OT FIND ANY ERROR THEREIN. HE ALSO POINTED 4 I.T.A. NO.279/VIZ/2014 ASSESSMENT YEAR: 2009-2010 OUT THAT THE CONFIRMATION LETTER IN EVIDENCE OF THE FACT RECORDED WAS FILED BEFORE THE LD. CIT AND COPY OF THE SAME IS AT PAGES 65 & 69 OF THE PAP ER BOOK. REGARDING DISCREPANCIES POINTED OUT BY THE LD. CIT, HE SUBMITTED THAT SAME WAS EXPL AINED BY POINTING OUT THAT THE VERSION OF THE LORRY DRIVERS RESULTED IN CERTAIN DISTORTION. H E ARGUED THAT THIS IS NOT A CASE OF NO ENQUIRY AND THAT, IF THE CIT WAS OF THE VIEW THAT THE AO SH OULD HAVE CONDUCTED FURTHER ENQUIRIES, THEN HE CANNOT REMAND THE MATTER TO THE FILE OF THE AO F OR FURTHER ENQUIRY, WITHOUT CONDUCTING NECESSARY ENQUIRIES AND COMING TO A CONCLUSION THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. FOR TH IS PROPOSITION HE RELIED ON FOLLOWING CASE LAWS. 1) ITO V. DG HOUSING PROJECTS [2012] 343 ITR 329 (DELH I) (HC) 2) DIT VS. JYOTI FOUNDATION, 357 ITR 388 IDEL) 9. ON THE DIRECTION OF THE LD. CIT TO EXAMINE THE G ENUINENESS OF PAYMENTS, THE LD. COUNSEL ARGUED THAT LD. CIT TRAVELLED BEYOND THE PO INTS AND ISSUES FRAMED BY HIM IN HIS SHOW- CAUSE NOTICE ISSUED U/S.263 OF THE ACT. HE ARGUED THAT THE LD. CIT CANNOT EXPAND THE SCOPE OF ENQUIRY IN THE MANNER SOUGHT TO BE DONE. THUS, HE ARGUED THAT THE BASIS ON WHICH THE REVISIONARY POWERS U/S.263 SOUGHT TO BE INVOKED, IS BAD IN LAW. 10. ON THE DIRECTION TO VERIFY IN WHICH YEAR THE LI C PREMIUM IS ALLOWABLE U/S.80C, HE SUBMITTED THAT THERE ARE TWO VIEWS POSSIBLE AND THE AO HAS TAKEN A POSSIBLE VIEW AND THE ORDER U/S.263 DOES NOT SURVIVE. THE ISSUE IS WHETHER THE CLAIM SHOULD BE MADE ON THE DATE ON WHICH CHEQUE IS ISSUED OR ON THE DATE OF THE REALIZATION, HE SUBMITS THAT THE AMOUNT WAS NOT CLAIMED IN THE EARLIER YEAR AND, UNDER SUCH CIRCUMSTANCES, THE DIRECTION TO VERIFY THE CLAIM, WITHOUT POINTING OUT HOW THE ORDER IS ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF THE REVENUE, IS BAD IN LAW. 11. ON THE LAST OF ISSUE OF INSURANCE COMMISSION, H E SUBMITTED THAT THE ASSESSEE HAS NEVER RECEIVED ANY INSURANCE COMMISSION AND IT WAS THE MI STAKE OF THE PARTY WHO HAS ISSUED TDS CERTIFICATE BY MENTIONING SECTION 194D INSTEAD OF 194C. HE SUBMITTED THAT THIS IS A SIMPLE MISTAKE AND THE PARTY M/. BHASKAR PRAKASHAN PVT. LT D., WHO HAD ISSUED TDS CERTIFICATE HAVE CLARIFIED THE ISSUE BY GIVING CONFIRMATION LETTER. HE SUBMITTED THAT THE ISSUE SHOULD HAVE BEEN DROPPED ON SUCH CONFIRMATION AND DIRECTING THE AO O NCE AGAIN TO VERIFY THE SAME IS BAD IN LAW. HE RELIED ON MANY OTHER CASES WHICH WE WILL BE DISC USSING DURING THE COURSE OF OUR DECISION. 5 I.T.A. NO.279/VIZ/2014 ASSESSMENT YEAR: 2009-2010 12. ON THE OTHER HAND, LD. DR, SHRI K.V.N. CHARYA O PPOSED THE CONTENTION OF THE ASSESSEE AND SUBMITTED THAT THE CIT HAS MERELY DIRECTED THE AO TO EXAMINE THE FACTS OF THE CASE AND THE ASSESSEE SHOULD NOT HAVE ANY GRIEVANCE FOR THE SAME . HE POINTED OUT THAT THERE ARE NUMBER OF DISCREPANCIES IN THE PAPER BOOK FILED BY THE ASSESS EE. FOR EXAMPLE, HE REFERRED TO PAGE 84 READ WITH PAGE 340 AND SUBMITTED THAT VOUCHER NUMBER FOR THE SAME TRANSACTION IS DIFFERENT. SIMILARLY, HE POINTED OUT THAT MANY OTHER VOUCHERS, WHICH WERE MENTIONED AGAINST THE SAME LORRY WERE AT VARIANCE AND ARGUED THAT THIS SHOWS T HAT PROPER VERIFICATION HAS NOT BEEN DONE. HE TOOK US THROUGH JOURNAL ENTRIES AND POINTED OUT THAT THERE ARE CERTAIN AMOUNTS, WHEREIN THE PAYMENT HAS EXCEEDED AMOUNT OF RS.20,000/- IN CASH ON THE SAME DAY AND ARGUED THAT THE AO HAS NOT CONDUCTED ANY ENQUIRY NOR HAS HE APPLIED HIS MIND SPECIFICALLY WITH REFERENCE TO THE DISALLOWANCE MADE U/S.40A(3). 13. HE AGREED THAT THE GENUINENESS WAS THE ISSUE TH AT WAS NOT RAISED IN THE SHOW CAUSE NOTICE BUT ARGUED THAT THE LD CIT HAS COME TO A CON CLUSION THAT THE GENUINENESS SHOULD ALSO BE VERIFIED BY THE AO. ON THE REMAINING TWO ISSUES, T HE LD DR SUBMITTED THAT THIS IS A CASE WHERE THE AO HAS NOT CONDUCTED ANY ENQUIRIES AND HENCE, T HE REVISION U/S.263 HAS TO BE UPHELD. HE RELIED ON THE FOLLOWING CASE LAW: I) GEE VEE ENTERPRISE VS ADDITIONAL COMMISSIONER OF INCO ME TAX, 99 ITR 375 (DEL) II) CIT VS. SOUTH INDIA SHIPPING CORPORATION LTD. 233 ITR 546 (MAD) 14. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERA TION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, AND ON PERUSAL OF THE PAPERS ON RECORD AND OR DERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAWS CITED, WE HOLD AS FOLLOWS: 14.1 WE HAVE PERUSED THE JOURNAL ENTRIES PASSED BY THE ASSESSEE, COPY OF WHICH IS PLACED FROM PAGES 79 TO 189 AT PAPER BOOK. PERUSAL OF THE SAME REVEALS THAT THE COPIES OF THE LEDGER ACCOUNT OF THE LORRIES DEMONSTRATE THAT THE PAYMENT IN QUESTION HAS BEEN MADE IN DIFFERENT POINTS OF TIME. THE ADVANCE HAS BEEN PAID TO THE LO RRY AT THE FIRST INSTANCE AND, THEREAFTER WHEN THE DELIVERY OF THE GOODS HAS BEEN MADE, THE BALANC E AMOUNT HAS BEEN PAID. THIS FACT IS REFLECTED BY WAY OF PASSING OF JOURNAL ENTRIES, WHE REIN, THE LORRIES HAVE BEEN CREDITED WITH THE BALANCE PAYABLE ON THE DAY OF PAYMENT OF ADVANCE AN D IT WAS ON SUBSEQUENT DATE THAT THE BALANCE HAS BEEN PAID AFTER DEDUCTING TDS. THIS JOU RNAL ENTRY HAS NOT BEEN PROPERLY UNDERSTOOD BY THE LD CIT. THIS IS CLEAR FROM THE S HOW-CAUSE NOTICE, WHERE IT STATES THAT THE AMOUNT HAS BEEN SPLIT INTO TWO PARTS SO AS TO AVOID THE ATTRACTION OF PROVISIONS SECTION 40A(3). 6 I.T.A. NO.279/VIZ/2014 ASSESSMENT YEAR: 2009-2010 THIS IS FACTUALLY INCORRECT. AFTER THE ASSESSEE HAS DEMONSTRATED BEFORE THE LD CIT THAT THE MANNER IN WHICH THE ENTRIES IN THE BOOKS HAVE BEEN PASSED, HE AT PAGE 5 ACKNOWLEDGED THAT THE AMOUNTS WERE SPLIT INTO TWO PARTS AND ONE WAS T AKEN AS ADVANCE AND WAS GIVEN TO LORRY OWNERS AND THE BALANCE WAS PAID SUBSEQUENTLY BY WAY OF CASH. THIS MEANS THE LD CIT ADMITS AFTER ENQUIRY THAT THE VERSION OF THE ASSESSEE IS C ORRECT. WHILE SO, WE DONT FIND ANY JUSTIFICATION IN THE LD CIT DIRECTING THE AO TO VERIFY THE DETAIL S FILED BY THE ASSESSEE AND DETERMINED WHETHER THEY ARE FACTUALLY CORRECT. WHEN THE ENQUIRIES COND UCTED BY THE LD CIT HAVE NOT THROWN UP ANY MATERIAL TO DEMONSTRATE THAT THE ORDER OF THE AO WA S ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE LD CIT SHOULD HAVE DROPPED THE PROCEEDING U/S.263. THE LD CIT ACKNOWLEDGED THAT THE ENQUIRY WAS CONDUCTED BY THE AO WITH LORRY OWNERS DURING THE COURSE OF ASSESSMENT PROCEEDINGS. WHILE RECORDING SO, HE DIRE CTS THE AO TO VERIFY THE GENUINENESS OF PAYMENT, WHICH ISSUE WAS NEVER IN THE SHOW-CAUSE NO TICE. THE REVISIONARY POWERS CANNOT BE USED TO DIRECT THE AO TO MAKE RE-VERIFICATION IN TH IS MANNER TO DETERMINE THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE AO HAS IN THIS CASE APPLIED HIS MIND AFTER DETAILED VERIFICATION AND AFTER CONDUCTI NG ALL ENQUIRIES HAS TO COME TO CERTAIN CONCLUSION, WHICH ARE POSSIBLE VIEWS AND THE LD CIT CANNOT SUBSTITUTE HIS VIEW WITH THE POSSIBLE VIEW TAKEN BY THE AO. THE LD CIT ALSO CANNOT WITHOU T HIMSELF CONDUCTING ENQUIRIES AND COMING TO A CONCLUSION ON THE BASIS OF MATERIAL FOUND AS A RESULT OF ENQUIRY, GIVE DIRECTION TO THE AO TO CONDUCT FRESH VERIFICATION. THE ASSESSEE HAS SATIS FACTORILY EXPLAINED THE ISSUES RAISED BY THE LD CIT AND IN SUCH CIRCUMSTANCES, IT CANNOT BE SAID TH AT THE ORDER OF THE AO IS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 14.2 COMING TO DEDUCTION U/S.80C OF THE ACT, IT IS NOT THE CASE OF THE LD CIT THAT THE AO HAS NOT VERIFIED THE CLAIM OF THE ASSESSEE. IN FACT, TH E ASSESSEE HAS SUBMITTED THE DETAILS TO THE LD CIT AND LD CIT, ON EXAMINATION OF SUCH DETAILS, HAS NOT RECORDED ANY ADVERSE CONCLUSION. A SIMPLE DIRECTION IS GIVEN TO AO TO VERIFY THE CLAIM OF THE ASSESSEE. SUCH A DIRECTION IS ERRONEOUS FOR THE REASON THAT THE LD CIT HAS NOT RECORDED THA T ANY PREJUDICE IS CAUSED TO THE REVENUE. 14.3 ON THE ISSUE OF ALLEGED INSURANCE COMMISSION E ARNED BY THE ASSESSEE, M/S. BHASKAR PRAKASHAN PVT. LTD. HAS CLEARLY EXPLAINED THAT A MI STAKE HAS OCCURRED WHILE MENTIONING THE SECTION 194D INSTEAD OF 194C AND THE COMMISSION WAS NEVER RECEIVED BY THE ASSESSEE. DESPITE OF SUCH CATEGORICAL CONFIRMATION, THE LD CIT DIRECT ED THE AO TO VERIFY THIS CLAIM OF THE ASSESSEE WITHOUT RECORDING A FINDING THAT THE ORDER OF THE A O ON THIS ISSUE IS EITHER ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN OUR VIEW, WHEN PROPER MATERIAL HAS BEEN 7 I.T.A. NO.279/VIZ/2014 ASSESSMENT YEAR: 2009-2010 FURNISHED BEFORE THE LD CIT AND THE LD CIT HAS EXAM INED THE SAME, HE CANNOT WITHOUT RECORDING SPECIFIC FINDING THAT THE ORDER IS ERRONEOUS AND PR EJUDICIAL TO THE INTERESTS OF THE REVENUE ON CERTAIN SPECIFIC ASPECTS INVOKED HIS POWER U/S.263. 15. THE HONBLE DELHI HIGH COURT IN THE CASE OF DIR ECTOR OF INCOME TAX VS JYOTI FOUNDATION(2013) 357 ITR 388 (DEL) HELD AS FOLLOWS: IT WAS HELD THAT REVISIONARY POWER U/S.263 IS CONF ERRED ON THE COMMISSIONER/DIRECTOR OF INCOME TAX WHEN AN ORDER P ASSED BY THE LOWER AUTHORITY IS ERRONEOUS AND PREJUDICIAL TO THE INTER EST OF THE REVENUE. ORDERS WHICH ARE PASSED WITHOUT INQUIRY OR INVESTIG ATION ARE TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE, BUT ORDERS WHICH ARE PASSED AFTER INQUIRY/INVESTIGATION ON THE QUEST ION/ISSUE ARE NOT PER SE OR NORMALLY TREATED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE BECAUSE THE REVISIONARY AUTHORITY FEELS AND OPINES THAT FURTHER INQUIRY/INVESTIGATION WAS REQUIRED OR DEEPER OR FUR THER SCRUTINY SHOULD BE UNDERTAKEN. IN THE CASE OF INCOME TAX OFFICER VS. D G HOUSING PROJECTS LIMITED, (2012) 343 ITR, 329 (DELHI) IT WAS HELD TH AT IN CASES OF WRONG OPINION OR FINDING ON MERITS, THE CIT HAS TO COME T O THE CONCLUSION AND HIMSELF DECIDE THAT THE ORDER IS ERRONEOUS, BY COND UCTING NECESSARY ENQUIRY, IF REQUIRED AND NECESSARY, BEFORE THE ORDE R U/S 263 IS PASSED. IN SUCH CASES, THE ORDER OF THE AO WILL BE ERRONEOUS B ECAUSE THE ORDER PASSED IS NOT SUSTAINABLE IN LAW AND THE SAID FINDI NG MUST BE RECORDED. CIT CANNOT REMAND THE MATTER TO THE AO TO DECIDE WH ETHER THE FINDINGS RECORDED ARE ERRONEOUS. IN CASES WHERE THERE IS INA DEQUATE ENQUIRY BUT NOT LACK OF ENQUIRY, AGAIN THE CIT MUST GIVE AND RE CORD A FINDING THAT THE ORDER/INQUIRY MADE IS ERRONEOUS. THIS CAN HAPPEN IF AN ENQUIRY AND VERIFICATION IS CONDUCTED BY THE CIT AND HE IS ABLE TO ESTABLISH AND SHOW THE ERROR OR MISTAKE MADE BY THE AO, MAKING THE ORD ER UNSUSTAINABLE IN LAW. IN SOME CASES POSSIBLY THOUGH RARELY, THE CIT CAN ALSO SHOW AND ESTABLISH THAT THE FACTS ON RECORD OR INFERENCES DR AWN FROM FACTS ON RECORD PER SE JUSTIFIED AND MANDATED FURTHER ENQUIR Y OR INVESTIGATION BUT THE AO HAD ERRONEOUSLY NOT UNDERTAKEN THE SAME. HOW EVER, THE SAID FINDING MUST BE CLEAR, UNAMBIGUOUS AND NOT DEBATABL E. THE MATTER CANNOT BE REMITTED FOR A FRESH DECISION TO THE AO T O CONDUCT FURTHER ENQUIRIES WITHOUT A FINDING THAT THE ORDER IS ERRON EOUS. FINDING THAT THE ORDER IS ERRONEOUS IS A CONDITION OR REQUIREMENT WH ICH MUST BE SATISFIED FOR EXERCISE OF JURISDICTION U/S 263. IN SUCH MATTE RS, TO REMAND THE ISSUE TO THE AO WOULD IMPLY , THE CIT HAS NOT EXAMINED AN D DECIDED WHETHER OR NOT THE ORDER IS ERRONEOUS BUT HAS DIRECTED THE AO TO DECIDE THE ASPECT/QUESTION. AN ORDER OF REMIT CANNOT BE PASSED BY THE CIT TO ASK THE AO TO DECIDE WHETHER THE ORDER WAS ERRONEOUS. T HIS IS NOT PERMISSIBLE. AN ORDER IS NOT ERRONEOUS, UNLESS THE CIT HOLD AND RECORDS REASONS WHY IT IS ERRONEOUS. THEREFORE JURISDICTION AL PRECONDITION STIPULATED IS THAT THE CIT MUST COME TO THE CONCLUS ION THAT THE ORDER IS ERRONEOUS AND IS UNSUSTAINABLE IN LAW. THE MATERIAL WHICH THE CIT CAN 8 I.T.A. NO.279/VIZ/2014 ASSESSMENT YEAR: 2009-2010 RELY INCLUDES NOT ONLY THE RECORD AS IT STANDS AT T HE TIME WHEN THE ORDER IN QUESTION WAS PASSED BY THE AO BUT ALSO THE RECOR D AS IT STANDS AT THE TIME OF EXAMINATION BY THE CIT. IN THE PRESENT CASE, INQUIRIES WERE CERTAINLY CONDU CTED BY THE AO. IT IS NOT A CASE OF NO INQUIRY. THE ORDER U/S 263 ITSELF RECORD S THAT THE DIRECTOR FELT THAT THE INQUIRIES WERE NOT SUFFICIENT AND FURTHER INQUIRIES OR DETAILS SHOULD HAVE BEEN CALLED. HOWEVER, IN SUCH CASES, AS OBSERVED IN THE CASE OF DG HOUSING PROJECTS LIMITED, THE INQUIRY SHOULD HAVE BEEN CONDUCTED BY THE COMMISSIONER OR DIRECTOR HIMSELF TO RECORD THE FINDING THAT THE ASS ESSMENT ORDER WAS ERRONEOUS. HE SHOULD NOT HAVE SET ASIDE THE ORDER AND DIRECTED THE AO TO CONDUCT THE SAID INQUIRY. REVENUE'S APPEAL DISMISSED. 16. IN THE CASE OF CIT VS. SUNBEAM AUTO LTD., (2011 ) 332 ITR 167 (DEL), THE HONBLE HIGH COURT HELD AS FOLLOWS: THE SUBMISSION OF THE COUNSEL FOR THE REVENUE WAS THAT WHILE PASSING THE ASSESSMENT ORDER, THE AO 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 NO GIVE ANY REASONS WHILE ALLOWING THE ENTIRE EXPENDITURE AS REVENUE EXPENDITURE. HOWEVER, THAT BY ITSELF 'WOULD NOT BE INDICATIVE OF THE FACT THAT THE AO HAD NOT APPLIED HIS MIND ON TH E ISSUE. THE AO 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 ITSELF 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 INQUIRY' THAT SUCH A COURSE OF ACTION WOULD BE OPEN. THE AO HAD CALLED F OR EXPLANATION ON THIS VERY ITEM FROM THE ASSESSEE AND THE ASSESSEE H AD FURNISHED HIS EXPLANATION VIDE LETTER DT. 26TH SEPT., 2002, THIS FACT IS EVEN TAKEN NOTE OF BY THE CIT HIMSELF IN PARA 3 OF HIS ORDER. THIS CLEARLY SHOWS THAT THE AO HAD UNDERTAKEN THE EXERCISE OF EXAMINING AS TO W HETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IN THE REPLACE MENT OF DYES AND TOOLS IS TO BE TREATED AS REVENUE EXPENDITURE OR NO T. IT APPEARS THAT SINCE THE AO WAS SATISFIED WITH THE AFORESAID EXPLANATION , HE ACCEPTED THE SAME. THE CIT IN HIS IMPUGNED ORDER EVEN ACCEPTS TH IS. THUS, EVEN THE CIT CONCEDED THE POSITION THAT THE AO MADE THE INQU IRIES, ELICITED REPLIES AND THEREAFTER PASSED THE ASSESSMENT ORDER. THE GRI EVANCE OF THE CIT WAS THAT THE AO SHOULD HAVE MADE FURTHER INQUIRIES RATHER THAN ACCEPTING THE EXPLANATION. THEREFORE, IT CANNOT BE SAID THAT IT IS A CASE OF 'LACK OF INQUIRY.-CIT VS. GABRIAL INDIA LTD. (1993) 114 CTR (BORN) 81 : (1993) 203 ITR 108 (BORN) RELIED ON. 9 I.T.A. NO.279/VIZ/2014 ASSESSMENT YEAR: 2009-2010 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 F IN CERTAIN CASES, IT MAY NOT BE POSSIBLE TO COME T O 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 ASSESSMENT YEARS, THE SAME VERY ACCOUNTING PRACTICE IS ACCEPTED. THE ASSE SSEE IS A MANUFACTURER OF CAR PARTS. IN THE MANUFACTURING PRO CESS, DYES ARE FITTED IN MACHINES BY WHICH THE CAR PARTS ARE MANUFACTURED . THESE DYES ARE THUS THE COMPONENTS OF THE MACHINES. THESE DYES NEE D CONSTANT REPLACEMENT, AS THEIR LIFE IS NOT MORE THAN A YEAR. THE ASSESSEE HAD ALSO EXPLAINED THAT SINCE THESE PARTS ARE MANUFACTURED F OR THE AUTOMOBILE INDUSTRY, WHICH HAVE TO WORK ON COMPLETE ACCURACY A T HIGH SPEED FOR A LONGER PERIOD, REPLACEMENT OF THESE PARTS AT SHORT INTERVALS BECOMES IMPERATIVE TO RETAIN ACCURACY. BECAUSE OF THESE REA SONS, THESE TOOLS AND DYES HAVE A VERY SHORT SPAN OF LIFE AND IT COULD PR ODUCE MAXIMUM ONE LAKH PERMISSIBLE SHORTS. THEREAFTER, THEY HAVE TO B E 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 PRODU CTION 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 AS SESSMENT ORDER PASSED BY THE AO COULD NOT BE HELD TO BE PREJUDICIA L TO THE REVENUE. THUS, FROM WHATEVER ANGLE THE MATTER IS TO BE LOOKE D INTO, THE CONCLUSION WOULD BE THAT THE ORDER OF THE TRIBUNAL DOES NOT CA LL FOR ANY INTERFERENCE AS THE QUESTION OF LAW HAS RIGHTLY BEEN DECIDED,-SU NBEAM AUTO LTD. VS. CIT (2006) 100 TT3 (DEL) 209 AFFIRMED; CIT VS. SARAVANA SPINNING MILLS (P) LTD. (2007) 211 CTR (SC) 281 : (2007) 293 ITR 2 01 (SC) DISTINGUISHED. 17. IN THE CASE OF SPECTRA SHARES AND SCRIPS PVT LT D., (2013) 354 ITR 35 (AP), THE HONBLE HIGH COURT CULLED OUT THE PRINCIPLES LAID DOWN BY H ONBLE SUPREME COURT AND VARIOUS HIGH COURTS ON THE ISSUE OF EXERCISE OF JURISDICTION BY THE LD COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT. IT READS AS FOLLOWS: (A) THE COMMISSIONER HAS TO BE SATISFIED OF TWIN C ONDITIONS, NAMELY, (I) THE ORDER OF THE ASSESSING OFFICER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENTIF THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS BUT IS NOT P REJUDICIAL TO THE REVENUE OR IF 10 I.T.A. NO.279/VIZ/2014 ASSESSMENT YEAR: 2009-2010 IT IS NOT ERRONEOUS BUT IT IS PREJUDICIAL TO THE RE VENUERECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. (B) EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN OR DER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE. FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURS ES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE : OR WHERE TWO VIEW S ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH TH E COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER P REJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME-TA X OFFICER IS UNSUSTAINABLE IN LAW. (C) TO INVOKE THE SUO MOTU REVISIONAL POWERS TO REO PEN A CONCLUDED ASSESSMENT UNDER SECTION 263, THE COMMISSIONER MUST GIVE REASO NS ; THAT A BARE REITERATION BY HIM THAT THE ORDER OF THE INCOME-TAX OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, WILL N OT SUFFICE ; THAT THE REASONS MUST BE SUCH AS TO SHOW THAT THE ENHANCEMENT OR MOD IFICATION OF THE ASSESSMENT OR CANCELLATION OF THE ASSESSMENT OR DIR ECTIONS ISSUED FOR A FRESH ASSESSMENT WERE CALLED FOR, AND MUST IRRESISTIBLY L EAD TO THE CONCLUSION THAT THE ORDER OF THE INCOME-TAX OFFICER WAS NOT ONLY ERRONE OUS BUT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THUS, WHILE THE INCOME-TA X OFFICER IS NOT CALLED UPON TO WRITE AN ELABORATE JUDGMENT GIVING DETAILED REAS ONS IN RESPECT OF EACH AND EVERY DISALLOWANCE, DEDUCTION, ETC., IT IS INCUMBEN T UPON THE COMMISSIONER NOT TO EXERCISE HIS SUO MOTU REVISIONAL POWERS UNLESS S UPPORTED BY ADEQUATE REASONS FOR DOING SO ; THAT IF A QUERY IS RAISED DURING THE COURSE OF THE SCRUTINY BY THE ASSESSING OFFICER, WHICH WAS ANSWERED TO THE SATISF ACTION OF THE ASSESSING OFFICER, BUT NEITHER THE QUERY NOR THE ANSWER WERE REFLECTED IN THE ASSESSMENT ORDER, THIS WOULD NOT BY ITSELF LEAD TO THE CONCLUS ION THAT THE ORDER OF THE ASSESSING OFFICER CALLED FOR INTERFERENCE AND REVIS ION. (E) THE COMMISSIONER CANNOT INITIATE PROCEEDINGS WI TH A VIEW TO START FISHING AND ROVING INQUIRIES IN MATTERS OR ORDERS WHICH ARE ALR EADY CONCLUDED ; THAT THE DEPARTMENT CANNOT BE PERMITTED TO BEGIN FRESH LITIG ATION BECAUSE OF NEW VIEWS THEY ENTERTAIN ON FACTS OR NEW VERSIONS WHICH THEY PRESENT AS TO WHAT SHOULD BE THE INFERENCE OR PROPER INFERENCE EITHER OF THE FAC TS DISCLOSED OR THE WEIGHT OF THE CIRCUMSTANCE ; THAT IF THIS IS PERMITTED, LITIG ATION WOULD HAVE NO END EXCEPT WHEN LEGAL INGENUITY IS EXHAUSTED. (F) WHETHER THERE WAS APPLICATION OF MIND BEFORE AL LOWING THE EXPENDITURE IN QUESTION HAS TO BE SEEN ; THAT IF THERE WAS AN INQU IRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSION ER TO PASS ORDERS UNDER SECTION 263 MERELY BECAUSE HE HAS A DIFFERENT OPINI ON IN THE MATTER; THAT IT IS ONLY IN CASES OF LACK OF INQUIRY THAT SUCH A COURSE OF ACTION WOULD BE OPEN ; THAT AN ASSESSMENT ORDER MADE BY THE INCOME-TAX OFFICER CANNOT BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCOR DING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY ; THERE M UST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT THE TAX WHICH WAS L AWFULLY EXIGIBLE HAS NOT BEEN 11 I.T.A. NO.279/VIZ/2014 ASSESSMENT YEAR: 2009-2010 IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION, A LESSER TAX THAN WHAT W AS JUST, HAS BEEN IMPOSED. (G) THE POWER OF THE COMMISSIONER UNDER SECTION 263 (1) IS NOT LIMITED ONLY TO THE MATERIAL WHICH WAS AVAILABLE BEFORE THE AO AND, IN ORDER TO PROTECT THE INTERESTS OF THE REVENUE, THE COMMISSIONER IS ENTIT LED TO EXAMINE ANY OTHER RECORD WHICH ARE AVAILABLE AT THE TIME OF EXAMINATI ON BY HIM AND TO TAKE INTO CONSIDERATION EVEN THOSE EVENTS WHICH AROSE SUBSEQU ENT TO THE ORDER OF ASSESSMENT. 18. APPLYING THE PROPOSITION LAID DOWN IN THOSE CASE LA WS TO THE FACTS OF THIS CASE, WE HAVE TO NECESSARILY COME TO A CONCLUSION THAT THE ORDER U/S.263 PASSED BY THE LD CIT HAS TO BE QUASHED. ACCORDINGLY, WE QUASH THE ORDER U/S.263 P ASSED BY THE LD CIT AND ALLOW THE APPEAL OF THE ASSESSEE. ORDER PRONOUNCED IN THE OPEN COURT ON 05/12/201 4 SD/- SD/- (D.MANMOHAN ) (J.SUDHAKAR REDDY) VICE PRESIDENT ACCOUNTANT MEMBER VISAKHAPATNAM DATED 05/12/2014 PARIDA , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE : SMT. SUSHEELA DAVI BOTHRA JAIN, SHREE CARRYING CORPORATION, D.NO.32-1-117, DRS COMPLEX, 1 ST FLOOR, KVR SWAMY ROAD, RAJAHMUNDRY 2. THE RESPONDENT. : ITO WARD - 1, RAJAHMUNDRY 3. THE CIT(A) - RAJAHMUNDRY 4. CIT , RAJMAHNDURY 5. DR, ITAT, VISHAKHAPATNAM 6. GUARD FILE. BY ORDER SR.PS, ITAT, VISHAKHAPATNAM //TRUE COPY//