Appeal details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 97057 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 3 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
14-08-2015
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
F
Next Hearing Date
01-07-2015
Assessment Year
2008-2009
Appeal Filed On
08-05-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F , NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND BEFORE SHRI C.M.GARG, JUDICIAL MEMBER I.T.A.NO. 2836 /DEL/2013 A.Y. 200 8 - 09 PRAGATI PRAKASHAN 240, W.K.ROAD MEERUT PAN: AAFFP 7627 K VS. CIT, MEERUT (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. S.KRISHNAN, ADV. DEPARTMENT BY : SH. VIKRAM SAHAY, SR.DR ORDER PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER U/S 263 OF THE ACT DT. 28.3.2013 PASSED BY THE LD.CIT, MEERUT. 2. FACTS IN BRIEF : - THE ASSESSEE IS A PARTNERSHIP FIRM CARRYING ON BUSINESS OF MANUFACTURING AND SALE OF EDUCATIONAL BOOKS . IT FILED ITS RETURN OF INCOME ON 30.9.2008 DECLARING TOTAL INCOME OF RS.14,08,083/ - . NATURE OF THE ASSESSEE S BUSINESS IS PRINTING, MANUFACTURING AND SALE OF ONLY EDUCATIONAL BOOKS TO VARIOUS INSTITUTIONS , UNIVERSITIES , SHOPS , WHOLESALERS ETC. IT GETS BOOKS WRITTEN BY VARIOUS AUTHORS FOR WHICH THEY ARE GIVEN ROYALTY ACCORDING TO THE SALE OF BOOKS. 2.1. THE RETURN OF INCOME WAS PROCESSED U/S 143(1 ) OF THE ACT ON 13.3.2010 AND LATER ON ORDER U/S 143(3) DT. 22.12.2010 WAS PASSED DETERMINING THE TOTAL INCOME AT RS.15,35,620/ - . THE LD.CIT, MEERUT ISSUED A NOTICE U/S 263 OF THE ACT ON 12.2.2013 ON THE GROUND THAT THE A.O. PASSED AN ORDER WITHOUT PROP ER ENQUIRY AND THUS THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND EXAMINATION OF RECORDS, THE LD.CIT, MEERUT ITA 2836/DEL/2013 A.Y. 2008 - 09 PRAGATI PRAKASHAN, MEERUT 2 CAME TO THE CONCLUSION THAT THE ASSESSMENT WAS DONE WITHOUT PROPER ENQUIRY AND THUS THE ORDER PASSED BY THE AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. SH E HELD THAT : (A) ON THE FACTS OF THE PRESENT CASE, IT IS EVIDENT THAT THE A.O. ACCEPTED THE VERSION OF THE ASSESSEE WITHOUT MAKING PROPER VERIFICATION. (B) IT IS NOT NECESSARY FOR THE CIT TO MAKE FURTHER ENQUIRIES BEFORE CANCELLING THE ASSESSMENT ORDER OF THE AO AND THE CIT CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT , IN THE CIRCUMSTANCES OF THE CASE THE AO SHOULD HAVE MADE FURTHER ENQUIRIES BEFORE ACCEPTING THE STATEMENT MADE BY THE ASSESSEE IN HIS RETURN. C) THE NET PROFIT DECLARED BY THE ASSESSEE IS VERY LOW. D) THE ACCOUNTS , AS MAINTAINED BY THE ASSESSEE , ARE SUCH THAT TRUE INCOME AND PROFIT COULD NOT BE DEDUCED OR ASCERTAIN ED AND HENCE THE SAME WERE LIABLE TO BE REJECTED BY THE AO UNDER THE PROVISIONS OF S.145(3) OF THE ACT AND A REASONABLE PROFIT , CONSIDERING ALL MATERIAL FACTS RELEVANT FOR ESTIMATING THE TURNOVER AS WELL AS PROFITS EARNED SHOULD BE BROUGHT TO TAX. (E) IN THE TAX AUDIT REPORT IT IS STATED AS FOLLOWS: IT HAS BEEN TOLD BY THE ASSESSEE DUE TO COMPLEXITY OF TRADE, IT IS NOT POSS IBLE FOR US TO MAINTAIN STOCK REGISTER AND THAT IN THE COLUMN SEEKING FOR CALCULATI ON OF THE ACCOUNTING RATIO S , AND INFORMATION IN SUB - PARA (D) , OF MATERIAL CONSUME D / FINISHED GOODS PRODUCED, IT HAS BEEN STATED AS NOT APPLICABLE . (F) THAT F ROM THE AB OVE IT IS VERY CLEAR THAT NEITHER THE TURNOVER OF THE ASSESSEE NOR THE PURCHASES AND MATERIAL CONSUME D WAS VERIFIABLE OR ASCERTAINABLE, SPECIFICALLY IN THE ABSENCE OF QUANTITATIVE DETAILS . H ENCE THE BOOKS ARE REJECTED U/S 145(3) OF THE ACT. (G) THAT THE PERCENTAGE OF PAPER CONSUMPTION OR THE RATIO OF PAPER CONSUMED WORKS OUT TO BE 55.71%, WHICH IS EXTREMELY INFLATED , FOR THE REASONS GIVEN IN PAGES 7 AND 8 OF THE ORDER , THE ADDITION ON ACCOUNT OF ITA 2836/DEL/2013 A.Y. 2008 - 09 PRAGATI PRAKASHAN, MEERUT 3 INFLATION IN CONSUMPTION OF PAPER WAS ESTIMATED AT RS.75,00,000/ - . INCOME DECLARED WAS REDUCED FROM THIS FIGURE AND ADDITION WAS QUANTIFIED AT RS.6 0,91, 920/ - . THE ASSESSMENT WAS REVISED TO THIS EXTENT BY THE LD.CIT. (H) INTEREST RECEIVED BY THE ASSESSEE HAS NOT BEEN CREDITED TO PROFIT AND LOSS A/C A ND THIS IS ASSESSABLE UNDER THE H EAD INCOME FROM OTHER SOURCES AND HENCE THERE IS AN ERROR PREJUDICIAL TO THE INTEREST OF REVENUE. (I) THAT A CCRUED INTEREST ON FDR WAS SHOWN AT RS.8,26,924/ - , FOR ACCOUNTS ARE MAIN TAINED AS PER MERCANTILE SYSTEM, BUT THE SAME IS NOT OFFERED TO TAX. 2.2 . THE LD.CIT(A) PARTLY REVISED AND PARTLY SET ASIDE THE ORDER PASSED BY THE AO U/S 143(3) OF THE ACT ON 22.12.2010, WITH A DIRECTION TO PASS A FRESH ORDER. 3. AGGRIEVED THE ASSESSEE IS BEFORE US ON THE FOLLOWING GROUNDS. L. THAT THE WORTHY COMMISSIONER OF INCOME TAX HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE, IN INVOKING PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT, 1961 AND THE ORDER U/S 263 AS PASSED IS ARBITRARY, UNJUST AND ILLEGAL ON VARIOUS LEGAL AND FACTUAL GROUNDS INCLUDING THE FOLLOWING : - (1) THE LD . ASSESSING OFFICER HAS DULY APPLIED HIS MIND TO ALL THE ISSUES, RAISED IN THE NOTICE U/S 263 AND AFTER HAVING BEEN SATISFIED ON THE SAME, TOOK A POSSIBLE VIEW BASED ON THE FACTS OF THE CASE AND THEREBY, PASSED THE IMPUGNED ASSESSMENT ORDER. (2) THAT THE ASSESSMENT ORDER U/S 143(3) DATED 22 .12.2010 AS PASSED BY THE L D. ASSESSING OFFICER IS NE ITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. (3) OBSERVATIONS MADE, INFERENCES DRAWN AND FINDINGS RECORDED BY THE WORTHY COMMISSIONER OF INCOME TAX IN HER ORDER PASSED U/S 263 ARE INCORRECT, UNREASONABLE OR ARE UNTENABLE IN LAW. (4) TH AT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE WORTHY COMMISSIONER O F I NCOME TAX HAS ERRED IN REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE. (5) THE SYSTEM OF ACCOUNTING HAS BEEN CONSISTENTLY FOLLOWED BY THE ASSESSEE YEAR AFTER YEAR IN THE SAME MANN ER AS IN THE IMPUGNED YEAR BUT THE WORTHY CIT HAS MADE A HUGE DEPARTURE IN REJECTING THE BOOKS OF ACCOUNTS AND HAS THEREBY VIOLATED THE PRINCIPLE OF CONSISTENCY AS WELL. ITA 2836/DEL/2013 A.Y. 2008 - 09 PRAGATI PRAKASHAN, MEERUT 4 (6) THE WORTHY COMMISSIONER OF I NCOME TAX HAS RELIED ON UNSUBSTANTIATED APPROXIMATE RATES OF PAPER SHEETS AND WITHOUT CONTROVERTING THE SAME TO THE ASSESSEE, HAS MADE AN ADDITION OF ALLEGED INFLATED CONSUMPTION OF PAPER OF RS 75,00,000 / - (7) THE WORTHY COMMISSIONER OF INCOME TAX HAS TAKEN AN INCORRECT VIEW OF THE INTEREST ON FDRS AND HAS THEREBY, MADE AN ADDITION OF RS 9,32,783 / - TO THE INCOME OF THE ASSESSEE WHICH IS AGAINST THE FACTS AND IS ILLEGAL. (8) THE WORTHY COMMISSIONER OF INCOME TAX HAS TAKEN AN INCORRECT VIEW OF THE INTEREST ON F D RS AND HAS THEREBY MADE AN ADDITION OF RS 8,26, 924/ - TO THE INCOME OF THE ASSESSEE WHICH IS AGAINST THE FACTS AND IS ILLEGAL. 2 . THAT THE IMPUGNED ORDER U/S 263 OF THE WORTHY COMMISSIONER OF INCOME TAX BEING ILLEGAL DESERVES TO BE CANCELLED / ANNULLED . 3. THAT THE WORTHY COMMISSIONER OF INCOME TAX HAS ERRED IN FACTS AND IN LAW IN INITIATING PENALTY U/S 271 (1)(C) ON ALLEGED CONCEALMENT OF INCOME, WHILE MAKING AN ADDITION OF RS . 60,91 , 920 / - . 4. THAT THE WORTHY COMMISSIONER OF INCOME TAX HAS ERRED IN FACTS AND IN LAW IN INITIATING PENALTY U/S 271 (1)(C) ON ALLEGED CONCEALMENT OF INCOME, WHILE MAKING AN ADDITION OF RS . 9,32,783/ - . 5. THAT THE WORTHY COMMISSIONER OF INCOME TAX HAS ERRED IN FACTS AND IN LAW IN INITIATING PENALTY U/S 271(1)(C) ON ALLEGED CONCEALMENT OF INCOME, WHILE MAKING AN ADDITIO N OF RS 8,26,924/ - . 4. THE LD.COUNSEL FOR THE ASSESSEE MR. S.KRISHNAN, SUBMITTED THAT THE ORDER PASSED BY THE LD.CIT(A) IS ILLEGAL, WITHOUT JURISDICTION AND AGAINST THE PROPOSITIONS LAID DOWN BY VARIOUS COURTS ON THE JURISDICTIONAL P OWERS OF THE LD.CIT. 4.1. HE SUBMITTED THAT : (I) THE LD.CIT NEEDS TO DEMONSTRATE /EXPLAIN THE WORDS ERRO R AND PREJUDIC E A ND THE TERM APPEAR S TO HAVE BEEN USED IN THE IMPUGNED ORDER U/S 263 BY THE LD.CIT SHOWS THAT THIS IS NOT A CHARGE, BUT IS A MERE SPECULATION. THE LD.CIT NEEDS TO DEMONSTRATE THAT THERE WAS NO ENQUIRY OR WHEN SHE REQUIRES FURTHER ENQUIRY SHE HAS TO DEMONSTRATE THE ERROR THAT HAS ITA 2836/DEL/2013 A.Y. 2008 - 09 PRAGATI PRAKASHAN, MEERUT 5 RESULTED FROM NOT ENQUIRING FURTHER. SHE HAS SIMPLY SUBST ITUTED HER CONJECTURES , FOR THE AO S ACTION. (II). ON THE ISSUE OF PROFITABILITY OF THE ASSESSEE, THE A.O. HAD MADE ENQUIRIES AND TAKEN A POSSIBLE VIEW AND HENCE THE ALLEGATION OF NOT ENQUIRING INTO THIS ASPECT IS NOT CORRECT. (III). ON THE OTHER TWO ISSUES I.E. REGARDING TAXABILITY OF IN TEREST INCOME, THE LD.CIT HAS NOT POINTED OUT ANY ERROR. THE LD.CIT S ORDER IS A STEREO TYPE D ORDER, WHEREIN 21 JUDGEMENTS HAVE BEEN CITED, WHILE NOT POINTING OUT ANY ER ROR IN THE ORDER OF THE LD.A.O. (IV). THE OBSERVATION OF THE LD.CIT , THAT SHE NEED NOT MAKE FURTHER ENQUIRIES , IS AGAINST THE PROPOSITIONS LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF DIT VS. JYOTHI FOUNDATION (2013) 357 ITR 388 AND IN THE CASE OF CIT VS. SUN BEAM AUTO LTD. (2011) 332 ITR 167 (DELHI). (V). THE A.O. MADE ENQ UIRIES BY SCRUTINISING THE OPERATIVE EXPENSES AND RAISING SPECIFIC QUERY IN ASSESSME NT PROCEEDINGS ON PROFITABILITY AND HENCE THE FINDING OF THE LD.CIT ON THIS ISSUE IS INCORRECT. (VI). THAT NET PROFIT RATE IS NO INDEX OF PROFITABILITY AND IT IS ONLY TH E GROSS PROFIT RATE WHICH IS THE CORRECT INDEX. HE GAVE AN EXAMPLE THAT IN CASE OF IDENTICAL OPERATION OF TWO BUSINESS ES , ONE WORKING WITH OWN CAPITAL AND ANOTHER WITH BORROWED CAPITAL, AND SUBMITTED THAT IN SUCH SITUATION, THE GROSS PROFIT WILL BE THE SAME BUT THE NET PROFIT WILL VARY. TH AT THE LD.CIT GAVE NO BASIS WHATSOEVER FOR HOLDING THAT THE PROFIT IS LOW. (VII) THERE IS NO BASIS OR METHOD ADDUCED BY THE LD.CIT FOR COMING TO A CONCLUSION THAT THE PAPER COST IS 5 5 . 7 1% AND THAT THE CONSUMPTION IS EXTREMELY INFLATED. THE OPINION OF THE LD.CIT ON PRINTING TECHNIQUE IS NOT BASED ON ANY EXPERT OPINION. HER SAMPLES PICKED UP ARE MUCH SMALLER IN THE SIZE, WHEN COMPARED TO SAMPLE BILLS WHICH ARE AT PAGES 16 TO 19 OF THE PAPER BOOK. (VIII) THE PRESUMP TION OF THE LD.CIT ON THE SIZE OF PAPER TO BE GIVEN BY THE ASSESSEE TO THE PRINTERS IS FACTUALLY WRONG AND HER CALCULATION ARE ITA 2836/DEL/2013 A.Y. 2008 - 09 PRAGATI PRAKASHAN, MEERUT 6 FACTUALLY INCORRECT AND FAIL BECAUSE, SHE DECIDE S NOTIONALLY AS TO HOW MUCH PAPER CREATES HOW MANY BOOKS ETC. WITHOUT EVIDE NCE . SAMPLE PRINT ING BILLS AND RECONCILIATION STATEMENTS ARE FILED TO SHOW DETAILS OF PAPER PURCHASED AND TO DEMONSTRATE THAT THE LD.CIT WAS IN ERROR IN HER ASSUMPTIONS. (IX) BANK ACCOUNT STATEMENTS HAVE BEEN FILED AND ACCOUNTS WERE PRODUCED BEFORE THE A.O. THE CIT HAS NOT ASKED ANY SPECIFIC QUERY AND HAS ALSO NOT IDENTIFIED ANY ERROR IN THE BOOKS OF ACCOUNTS. (X) THE ASSESSEE GETS PRINTING DONE BY THIRD PARTIES BY SUPPLYING THEM PAPER. THE THIRD PARTIES DULY MAINTAIN ACCOUNTS OF THE PAPER, HENCE THERE IS NO REQUIREMENT TO MAINTAIN THE INVENTORY OF PAPER. THUS THERE CAN BE NO ADVERSE INFERENCE ON NON - MAINTENANCE OF STOCK REGISTER. THAT THE HON BLE P&H HIGH COURT A ND THE HON BLE DELHI HIGH COURT H ELD THAT THERE IS NO NEED FOR THE ASSE SSEE TO MAINTAIN STOCK REGISTER IN CERTAIN CASES. (XI) INTEREST RECEIVED BY THE ASSESSEE HAS BEEN DULY OFFERED TO TAX AND THE LD.CIT HAS NO BASIS TO HOLD THAT THIS INTEREST IS TO BE ASSESSED UNDER THE HEAD OTHER SOURCES . THE LD.CIT HAS NOT IDENTIFIED ANY INTER EST EXPENDITURE, WHICH IS NOT ALLOWABLE AND HENCE THERE IS NO LOSS OF REVENUE , AS ASSESSMENT OF INTEREST INCOME EITHER UNDER THE HEAD BUSINESS OR UNDER THE HEAD INCOME FROM OTHER SOURCES ARE TAXED AT THE SAME RATE. INTEREST ACCRUED ON FDRS RS.8,26, 924/ - HAVE BEEN OFFERED TO INCOME BY THE ASSESSEE . HENCE THERE IS NO PREJUDICE TO THE INTEREST OF REVENUE NOR AN ERROR IN THE ASSESSMENT ORDER . HE RELIED ON THE FOLLOWING CASE LAWS IN SUPPORT OF HIS ARGUMENTS. A . MALABAR INDUSTRIAL CO.LTD. VS. CIT (2000) 243 ITR 83(SC); B . CIT VS. NEW DELHI TELEVISION LTD. (2014) 360 ITR 44 (DEL.); C . DIT VS. JYOTI FOUDNATION (2013) 357 ITR 388 (DEL.); D . HARI IRON TRADING CO. VS. CIT (2003) 263 ITR 437 (P&H) AND E . CIT VS. SUNBEAM AUTO LTD. (2011) 332 ITR 167 (DEL.) ITA 2836/DEL/2013 A.Y. 2008 - 09 PRAGATI PRAKASHAN, MEERUT 7 5. THE LD. SR. D.R. SHRI VIKRAM SAHAY, ON THE OTHER HAND SUPPORTED THE ORDER OF THE LD.CIT. HE SUBMITTED THAT THE A.O. PARTLY DISALLOWED THE EXPENSES FOR THE REASON THAT THE ENTIRE VOUCHERS WERE NOT PRODUCED BEFORE HIM AND THE ASSESSEE HAS ACCEPTED THE ORDER OF THE AO AND THAT THIS SHOWS THAT THE ENTIRE VOUCHERS WERE NOT AVAILABLE WITH THE ASSESSEE. HE REFERRED TO PAPER BOOK PAGES 6 AND 7, WHERE INFORMATION WAS CALLED FOR U/S 142(1) OF THE ACT AND SPECIFICALLY TO QUESTION NO.8, WHEREIN THE GROSS PROFIT AND THE NET PR OFIT RATE FOR THE LAST 3 YEARS WAS ASKED AND TO THE FACT THAT A QUERY WAS RAISED AS TO THE GROSS PROFIT RATE AND TO THE REPLY GIVEN BY THE ASSESSEE AND SUBMITTED THAT NO FURTHER ENQUIRY WAS MADE BY THE A.O. , NOR THE DATA FURNISHED BY THE ASSESSEE WAS PROPERLY INTERPRETED. HE SUBMITTED THAT THE AO ACCEPTED WHATEVER STATEMENT WAS GIVEN BY THE ASSESSE AT FACE VALUE WITHOUT ENQUIRY AND HENCE IT IS A CASE OF NO ENQUIRY . HE POINTED OUT THAT THE ASSESSEE DID NOT MAINTAIN ANY STOCK RECORDS AND THE ARGUMENT T HAT THE PRINTING IS DONE BY JOB WORK AND HENCE NO STOCK REGISTER IS REQUIRE D IS INCORRECT AND THIS CANNOT BE A JUSTIFICATION FOR NOT MAINTAINING STOCK REGISTER. HE SUBMITTED THAT STOCK REGISTERS ARE ALSO REQUIRED FOR FINISHED STOCK OF BOOKS. 5.1. HE POINTED OUT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NO QUESTION WAS RAISED AS TO THE ACCRUAL OF INTEREST ON FDRS ETC ., AND HENCE THIS IS A CASE OF CLEAR LACK OF ENQUIRY. HE SUBMITTED THAT THE LD.CIT HAS SET ASIDE THE ISSUE TO THE FILE OF THE A O FOR THE REASON OF NON ENQUIRY AND NON APPLICATION OF MIND ON THE ISSUE OF TAXABILITY OF INTEREST ON FDR AND THE ISSUE OF NET PROFIT BY THE A.O. AND HENCE THERE IS NO ILLEGALITY IN THE ORDER. HE DISTINGUISHED THE VARIOUS CASE LAWS CITED BY THE ASSESSEE AND SUBMITTED THAT THE ORDER OF THE FIRST APPELLATE AUTHORITY HAS TO BE UPHELD. 6. RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW , AS WELL AS CA SE LAWS CITED WE HOLD AS FOLLOWS. 7. THE LD.CIT HELD THAT THE AO ACCEPTED THE VERSION OF THE ASSESSEE WITHOUT MAKING ANY ENQUIRY OR VERIFICATION. AT PAGE 6 AND 7 OF THE PAPER ITA 2836/DEL/2013 A.Y. 2008 - 09 PRAGATI PRAKASHAN, MEERUT 8 BOOK THE QUESTIONNAIRE GIVEN BY THE AO U/S 142(1) DURING THE COURSE OF PROCEEDI NGS U/S 143(3) IS GIVEN. QUESTION NO.8 OF THE SAID QUESTIONNAIRE READS AS FOLLOWS. THE G.P./N.P. RATE FOR THE LAST 3 YEARS AND PLEASE EXPLAIN THE DECREASE, IF ANY. TO THE ABOVE QUESTION NO.8 , THE ASSESSEE REPLIED ON 2.11.2010 AS FOLLOWS. (9) THE GP R ATE AND NP RATE FOR THE 3 YEARS ARE AS UNDER: GROSS SALES RS. GROSS PROFIT RS. NET PROFIT RS. G.P.RATE N.P.RATE A.Y. 2007 - 08 3,19,45,585.00 70,91,920.00 16,78,914.00 22.20% 5.25% A.Y. 2006 - 07 2,78,42,433.00 61,53,152.00 14,84,065.00 22.09% 5.33% A.Y. 2008 - 09 3,63,46,382.00 80,89,834.00 22,24,082.00 22.25% 6.11% BOTH THE GP RATE & NP RATE ARE PROGRESSIVE IN COMPARISON TO THE LAST YEAR 7.1. THEREAFTER THE AO MADE CERTAIN DISALLOWANCES AFTER EXAMINING THE BOOKS OF ACCOUNTS. HE HELD THAT THE VOUCHERS REGARDING EXPENSES OF PRINTING, DESIGNING, BOOK BINDING, WAGES , PACKING AND OTHER MATERIAL CANNOT BE FULLY AND PROPERLY VOUCHED. HE MAD E A LUMPSUM DISALLOWANCE OF RS.1 LAKH. A PERUSAL OF THE ENTIRE QUESTIONNAIRE AND THE REPLIES DOES NOT SUPPORT THE CON CLUSION OF THE LD.CIT THAT THERE IS LACK OF ENQUIRY. THE LD.CIT HAS REJECTED THE BOOKS OF ACCOUNTS AND ESTIMATED THE ADDITION ON ACCOUNT OF INFLATED CONSUMPTION OF PAPER THOUGH THE A.O. HAD ACCEPTED THE BOOKS OF ACCOUNTS AS CORRECT . NO OTHER EXPENSES HAS BE EN COMMENTED UPON BY THE LD.CIT, NOR ANY DISALLOWANCE MADE. IT IS NOT A CASE OF NON APPLICATION OF MIND BY THE LD.A.O. INSUFFICIENT ENQUIRY IS NO GROUND FOR REVISION. THE HON BLE DELHI HIGH COURT IN THE CASE REPORTED IN 360 ITR 044(DEL.) AND 357 ITR 388(DEL.) HAVE LAID DOWN THESE PROPOSITIONS. 7.2. IN OUR VIEW THE AO HAS CONSIDERED THE GROSS PROFIT RATIOS DECLARED BY THE ASSESSEE AND HAS TAKEN A POSSIBLE VIEW. HE EXAMINED THE BOOKS OF ACCOUNTS AND AFTER ENQUIRY AND VERIFICATION PASSED THE ORDER U/S 1 43(3). ON THE OTHER HAND THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED BY THE LD.CIT ITA 2836/DEL/2013 A.Y. 2008 - 09 PRAGATI PRAKASHAN, MEERUT 9 WITHOUT POINTING OUT ANY ERROR OR DEFECT IN THE BOOKS OF ACCOUNT. THE G.P. RATE SHOWN BY THE ASSESSEE IS NOT LOW AND EVEN IF IT IS LOW, IT CANNOT BE A GROUND FOR REJECTING OF BOOKS OF ACCOUNTS. T HE ONLY GROUND SHOWN BY THE LD.CIT , IS THAT THE ASSESSEE IS NO T MAINTAINING STOCK REGISTERS , FOR REJECTION OF BOOKS OF ACCOUNTS. NON MAINTENANCE OF QUANTITATIVE DETAILS, WERE HELD AS SUFFICIENT CAUSE FOR REJECTION OF BOOKS OF ACCOUNTS. THE ASSESSEE SUBMITS THAT HIS ENTIRE PRINTING JOB IS OUTSOURCED, AND HE SUPPLIES PAPER TO THEM AS PER THE REQUIREMENT AND THEY MAINTAIN QUANTITATI VE DETAILS AND OTHER RECORDS AND UNDER SUCH CIRCUMSTANCES, HE NEED NOT MAINTAIN STOCK REGISTERS. THIS EXPLANATION IN OUR VIEW IS NOT ACCEPTABLE . W HEN PAPER IS SUPPLIED, THE QUANTITATIVE DETAILS HAVE TO BE MAINTAINED AS TO THE PURCHASES, THE PERSONS TO WH OM IT IS SUPPLIED ETC. SIMILARLY WHEN PRINTED BOOKS ARE RECEIVED, STOCK REGISTERS HAVE TO BE MAINTAINED. BUT IN EVERY CASE OF NON MAINTENANCE OF STOCK REGISTERS OR QUANTITATIVE DETAILS DO NOT NECESSARILY MEAN THAT BOOKS OF ACCOUNTS ARE TO BE REJECTED AS NOT RELIABLE. COURTS HAVE HELD THAT THE SITUATION HAS TO BE EVALUATED ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. 7.3. WHILE HOLDING SO, WE ARE UNABLE TO UPHOLD THE FINDING OF THE LD.CIT THAT A N ADDITION ON ACCOUNT OF INFLATED CONSUMPTION OF PAPER HAD TO BE MADE . THE ENTIRE ADDITION IN THIS CASE HAS BEEN MADE BY THE LD.CIT , ON PRESUMPTIONS , CONJECTURES AND SURMISES. SHE HAS ASSUMED, THE SIZE AND WEIGHT OF PAPER PER REAM OF 500 SHEETS AS WELL AS THE RATE AND QUALITY OF THE PAPER. THERE IS NO BASIS FOR THE CONCLUSIONS THAT ONE SHEET OF 23 X 36 PAPER MAKE S 16 BOOK PAGES OF NORMAL SIZE ETC. SHE BASED HER CONCLUSION ON THE MARKET RATES OF PAPER AND ESTIMATED THE CONSUMPTION OF PAPER BASED ON THE SIZE OF THE SHEET OF PAPER, WHICH IS USED FOR PRINTING OF BOOKS. SHE ALSO EXPRESSED HER DOUBT AS TO WHETHER SALES ARE CREDITED AT SELLING PRICE OR AT DISCOUNTED RATE WHICH AS PER HER IS A NORMAL FEATURE OF THIS TRADE. SUCH DOUBTS AND SUSPICION CANNOT BE A BASIS FOR MAKING ADDITIONS TO INCOME. WHILE ESTIMATING THE ADDITION ON ACCOUNT OF INFLATED CONSUMPTION OF PAPER AT RS.75 LAKHS, THE LD.CIT REDUCED THE INCOME DECLARED BY THE ASSESSEE INSTEAD OF ADDING THE SAME. THIS MEANS THAT THE LD.CIT ESTIMATED THE ITA 2836/DEL/2013 A.Y. 2008 - 09 PRAGATI PRAKASHAN, MEERUT 10 INCOME OF THE ASSESSEE ATY RS.75 LAKHS, WHICH IS GUESS WORK . WE ARE UNABLE TO APPRECIATE THESE WORKINGS AND ESTIMATIONS IN THE ABSENCE OF ANY DETAILS OR EVIDENCES BASED ON WHICH THE CONCLUSIONS ARE ARRIVED AT. INCOME OF THE ASSESSEE CANNOT BE DETERMINED IN SUCH A MANNER. THUS THIS REVISION MADE BY THE LD. CIT HAS TO FAIL AND THE ADDITION OF RS.60,91,970/ - IS TO BE DELETED. 7.4 . COMING TO THE ISSUE OF FDR INTEREST, THERE IS NO ENQUIRY MADE BY THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS, NEVERTHELESS NOWHERE IN THE ORDER OF THE LD.CIT THERE IS AN ALLEGAT ION THAT THERE IS PREJUDICE CAUSED TO THE REVENUE. N ON APPLICATION OF MIND AND LACK OF ENQUIRY LEADS TO A CONCLUSION THAT THE ORDER IS ERRONEOUS. BUT WHEN IT IS DEMONSTRATED BEFORE THE LD.CIT THAT THE INCOME IN QUESTION WAS OFFERED TO TAX, THEN THE QUESTION OF PREJUDICE TO REVENUE DOES NOT ARISE , UNLESS THE LD.CIT CONCLUDES THAT THE INTEREST HAS NOT BEEN OFFERED TO TAX. THUS THERE IS NO PREJUDICE CAUSED TO REVENUE. 7.5 . THE HON BLE A.P. HIGH COURT WHILE DECIDING THE CASE OF SPECTRA SHARES AND SCRIPS PVT.LTD. VS. CIT (2013) REPORTED IN 354 ITR 35 (AP), HAS CON SIDERED THE FOLLOWING CASE LAWS ON TH E POWERS OF THE CIT U/S 263 OF THE INCOME TAX ACT, 1961 AND CULLED OUT THE PRINCIPLES LAID DOWN THEREIN. ARVEE INTERNATIONAL VS. ACIT (2007) 290 ITR (AT) 8 (MUM); CIT VS. ASSOCIATED INDUSTRIAL DEV.CO.P.LTD.(1971) 82 ITR 586(SC): CIT VS. ESCORTS LTD.(2011) 338 ITR 435(DEL); CIT VS. DARIUS PANDOLE (2011) 330 ITR 485 (BOM); CIT VS. GABRIEL INDIA LTD. (1993) 203 ITR 108 (BOM); CIT VS. GOPAL PUROHIT (2011) 336 ITR 287(BOM); CIT VS. HOLCK LARSEN (H) (1986) 160 ITR 67 (SC); CIT VS. HOWRAH FLOUR MILLS LTD. (1999) 2 36 ITR 156 (CAL); CIT VS. JAGADHRI ELECTRIC SUPPLY AND INDUSTRIAL CO. (1983) 140 ITR 490 (P&H); CIT VS. MAX INDIA LTD. (2007) 295 ITR 282 (SC); CIT VS. SUNBEAM AUTO LTD. (2011) 332 ITR 167 (DEL); CIT VS. VIKAS POLYMERS (2012) 341 ITR 537 (DEL); CIT VS. WALFORT SHARE AND STOCK BROKERS P.LTD. (2010) 326 ITR 1 (SC); DALHOUSIE INVESTMENT TRUST CO.LTD. VS CIT (1968) 68 ITR 486 (SC); ITA 2836/DEL/2013 A.Y. 2008 - 09 PRAGATI PRAKASHAN, MEERUT 11 FIDELITY NORTHSTAR FUND, IN RE (2007) 288 ITR 641 (AAR); G.VENKATASWAMI NAIDU AND CO. VS. CIT (1959) 35 ITR 594 (SC); GEE VEE EN TERPRISES VS. ACIT (1975) 99 ITR 375 (DEL); LALCHAND BHAGAT AMBICA RAM VS. CIT (1959) 37 ITR 288 (SC); MALABAR INDUSTRIAL CO.LTD. VS CIT (2000) 243 ITR 83 (SC); MCDOWELL AND CO.LTD. VS. CTO (1985) 154 ITR 148 (SC); NEW JEHANGIR VAKIL MILLS CO.LTD. VS. CIT (1963) 49 ITR (SC) 137; OMAR SALAY MOHAMMED SAIT VS. CIT (1959) 37 ITR 151 (SC); RADHASOAMI SATSAND VS. CIT (1992) 193 ITR 321 (SC); RAJA BAHADUR VISHWESWARA SINGH VS. CIT (1961) 41 ITR 685 (SC); RAJALAKSHMI MILLS LTD. VS. IYO (2009) 313 ITR (AT) 182 (CH. )(FB); RAMPYARI DEVI SARAOGI VS. CIT (1968) 67 ITR 84 (SC); RAJU MS VS. DCIT (2008) 298 ITR 373 (AP); RAJU PVS VS. ACIT (2012) 340 ITR 75 (AP); SRM SYSTEMS AND SOFTWARE P.LTD. VS. ACIT (2010) TIOL 646 HC(MAD); SWARUP VEGETALBE PRODUCTS INDUSTRIES LTD. (NO. 1) VS. CIT (1991) 187 ITR 412 (ALL.); TARA DEVI AGGARWAL SMT. VS. CIT (1973) 88 ITR 323 (SC); UOI VS. ABADI BACHAO ANDOLAN (2003) 263 ITR 706 (SC). 7.6. T HE HON BLE AP HIGH COURT SUMMARISED THE PROPOSITIONS AS UNDER. FROM THE ABOVE DECISIONS, THE FOLLOWING PRINCIPLES AS TO EXERCISE OF JURISDICTION BY THE COMMISSIONER UNDER SECTION 263 OF THE ACT CAN BE CULLED OUT: (A) THE COMMISSIONER HAS TO BE SATISFIED OF TWIN CONDITIONS NAMELY : (I) THE ORDER OF THE ASSESSING OFFI CER SOUGHT TO BE REVISED IS ERRONEOUS; AND (II) ) IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IF ONE OF THEM IS ABSENT - IF THE ORDER OF THE INCOME - TAX OFFICER IS ERRONEOUS BUT IS NOT PREJUDICIAL TO THE REVENUE OR IF IT IS NOT ERRONEOUS BUT IT IS PRE JUDICIAL TO THE REVENUE - RECOURSE CANNOT BE HAD TO SECTION 263(1) OF THE ACT. (B) EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR EXAMPLE, WHEN AN INCOME - TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE: OR WHERE TWO VIEWS ARE POSSIBLE ITA 2836/DEL/2013 A.Y. 2008 - 09 PRAGATI PRAKASHAN, MEERUT 12 AND THE INCOME - TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS ERRONEOUS OR DER PREJUDICIAL TO THE INTERESTS OF THE REVENUE, UNLESS THE VIEW TAKEN BY THE INCOME - TAX OFFICER IS UNSUSTAINABLE IN LAW. (C) TO INVOKE THE SUO MOTU REVISION POWERS TO REOPEN A CONCLUDED ASSESSMENT UNDER SECTION 263, THE COMMISSIONER MUST GIVE REASONS; THAT A BARE REITERATION BY HIM THAT THE ORDER OF THE - INCOME - TA X OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, WILL NOT SUFFICE; THAT THE REASONS MUST BE SUCH AS TO SHOW THAT THE ENHANCEMENT OR MODIFICATION OF THE A SSESSMENT OR CANCELLATION OF THE ASSESSMENT OR DIRECTIONS ISSUED FOR A FRESH ASSESSMENT WERE CALLED FOR, AND MUST IRRESISTIBLY LEAD TO THE CONCLUSION THAT THE ORDER OF THE INCOME - TAX OFFICER WAS NOT ONLY ERRONEOUS BUT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THUS, WHILE THE INCOME - TAX OFFICER IS NOT CALLED UPON TO WRITE AN ELABORATE JUDGEMENT GIVING DETAILED REASONS IN RESPECT OF EACH AND EVERY DISALLOWANCE, DEDUCTION, ETC., IT IS INCUMBENT UPON THE COMMISSIONER NOT TO EXERCISE HIS SUO MOT U REVISIONAL POWERS UNLESS SUPPORTED BY ADEQUATE REASONS FOR DOING SO ; THAT IF A QUERY IS RAISED DURING THE COURSE OF THE SCRUTINY BY THE ASSESSING OFFICER, WHICH WAS WAS ANSWERED TO THE SATISFACTION OF THE ASSESSING OFFICER, BUT NEITHER THE QUERY NO R THE ANSWER WERE REFLECTED IN THE ASSESSMENT ORDER, THIS WOULD NOT BY ITSELF LEAD TO THE CONCLUSION THAT THE ORDER OF THE ASSESSING OFFICER CALLED FOR INTERFERENCE AND REVISION. (E) THE COMMISSIONER CANNOT INITIATE PROCEEDINGS WITH A VIEW TO START FI SHING AND ROVING INQUIRIES IN MATTERS OR ORDERS WHICH ARE ALREADY CONCLUDED; THAT THE DEPARTMENT CANNOT BE PERMITTED TO BEGIN FRESH LITIGATION BECAUSE OF NEW VIEWS THEY ENTERTAIN ON FACTS OR NEW VERSIONS WHICH THEY PRESENT AS TO WHAT SHOULD BE THE INFER ENCE OR PROPER INFERENCE EITHER OF THE FACTS DISCLOSED OR THE WEIGHT OF THE CIRCUMSTANCE; THAT IF THIS IS PERMITTED, LITIGATION WOULD HAVE NO END EXCEPT WHEN LEGAL INGENUITY IS EXHAUSTED. (F) WHETHER THERE WAS APPLICATION OF MIND BEFORE ALLOWING THE EXPEND ITURE IN QUESTION HAS TO BE SEEN; THAT IF THERE WAS AN INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS U/S 263 MERELY BECAUSE HE HAS A DIFFERENT OPINION 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, ACCORDING 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 LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION, A LESSER TAX THAN WHAT WAS JUST, HAS BEEN IM POSED. ITA 2836/DEL/2013 A.Y. 2008 - 09 PRAGATI PRAKASHAN, MEERUT 13 (G) THE POWER OF THE COMMISSIONER U/S 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 ENTITLED TO EXAMINE ANY OTHER RECORDS WHICH ARE AVAILABLE AT THE TIME OF EXAMINATION BY HIM AND TO TAKE INTO CONSIDERATION EVEN THOSE EVENTS WHICH AROSE SUBSEQUENT TO THE ORDER OF ASSESSMENT. 7.7 . APPLYING THE ABOVE PROPOSITIONS TO THE FACTS OF THIS CASE, WE HAVE TO HOLD THAT THE LD.CIT HAS NOT CORRECTLY EXERCI SED HER JURISDICTION U/S 263 OF THE ACT FOR THE REASON THAT: (A) THE ORDER TO THE EXTENT REVISED WAS WRONG ON FACTS AND THE ADDITION MADE UN SUSTAI NABLE. (B) THE ORDER TO THE EXTENT IT IS SET ASIDE IS ON AN ISSUE I.E. INTEREST INCOME TAXABILITY, IS BAD IN L AW AS THERE IS NO PREJUDICE TO REVENUE. THUS, IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT THIS ORDER OF THE LD.CIT U/S 263 OF THE ACT IS BAD IN LAW. IN THE RESULT THIS APPEAL IS ALLOWED. 8 . IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH AUGUST, 2015. SD/ - SD/ - [ C.M. GARG ] [J. SUDHAKAR REDDY] JUDICIAL MEMBER ACCOUNTANT MEMBER DT. THE 14 TH AUGUST , 2015 MANGA ITA 2836/DEL/2013 A.Y. 2008 - 09 PRAGATI PRAKASHAN, MEERUT 14 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES
