Swami Gauraksha Nand Gaushala, Julana V. CIT( Exemption), Chandigarh

ITA 32/CHANDI/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5080 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 08-04-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revision of order; Opportunity of being heard; Principle of natural justice; Difference of opinion; Assessment record; Change of opinion; Set aside
• Section: 263; 40A(3); 143(3); 12AA; 143(1); 13

Judgement Text

This is an appeal filed by the assessee against the order passed by the Commissioner of Income Tax (Exemptions), Chandigarh, dated 11.02.2021 pertaining to assessment year 2015-16, wherein the assessee has taken the following grounds of appeal: “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT has exceeded legislative jurisdiction under Section 263 of the Act thus order passed is bad in law. 2. That the Ld. CIT has erred in passing order under Section 263 in the absence of any erroneous position prejudicial to the interest of revenue in the original Assessment order passed by Ld. ITO under Section 143(3) of the Act. 3. That the Ld. CIT has erred in substituting an alternative view as against the firm view adopted by the Ld. AO at the time of original assessment under section 143(3). 4. That the Ld. CIT has erred in concluding proceedings under Section 263 of the Act without proper perusal of the Assessment record.” , ‘ब ’ , । IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH: CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.32/Chd/2021 र /Assessment Year: 2015-16 Swami Gauraksha Nand Gaushala, VPO: Julana, Jind-126 102, Haryana. v. The Commissioner of Income Tax (Exemption), Chandigarh. [PAN: AAFTS 1336 Q] ( /Appellant) (!" /Respondent) # $ %/ Appellant by : Mr.Nikhil Goyal, Adv. & Mr.Ashok Goyal, CA !" # $ % /Respondent by : Mr.Rohit Sharma, CIT/DR ु नव ई # ( )/Date of Hearing : 04.07.2022 घोषण # ( ) /Date of Pronouncement : 21.07.2022 आ द%श / O R D E R PER VIKRAM SINGH YADAV, ACCOUNTANT MEMBER: ITA No.32/Chd/2021 :: 2 :: 2. Briefly, the facts of the case are that the assessee filed its return of income declaring income at Rs.NIL, which was processed u/s 143(1) of the Act, which was later selected for scrutiny and thereafter, after issuance of notice calling for the information/documentation, the assessment was completed u/s 143(3) of the Act. During the course of assessment proceedings, on perusal of the income and expenditure account of the assessee’s society, the Assessing officer observed that the assessee has debited a sum of Rs. 5,17,760/- on account of kitchen expenses, a sum of Rs.8,55,750/- on account of vehicle running expenses and a sum of Rs.3,50,490/- on account of building repair expenses. The assessee was asked to produce bills/vouchers in support of these expenses and in response, the assessee’s society produced self-made vouchers, which as per the Assessing officer could not relied upon and thereafter, the Assessing officer disallowed 15% of the kitchen expenses and 20% each of vehicle running and building repair expenses besides surplus of Rs.1,35,034/- was also brought to tax and accordingly, the assessment was completed determining taxable income at Rs. 4,53,946/- as against the returned income of Rs.NIL. 3. The assessment records were subsequently called for and examined by the ld.CIT(Exemptions) and a show-cause u/s 263 of the Act was issued as to why the assessment order framed u/s 143(3) of the Act, should not be set aside. In the show cause notice, the ld.CIT(Exemptions) has stated that the assessee has incurred fuel ITA No.32/Chd/2021 :: 3 :: expenses of Rs.8,74,864/-, vehicle running expenses of Rs.8,55,750/- and kitchen expenses of Rs.5,17,760/- and out of all these expenses totaling to Rs.22,48,374/-, a sum total of Rs.11,70,515/- has been paid in cash exceeding Rs.20,000/- in a day which needs to be disallowed being in contravention of provisions of Sec.40A(3) of the Act. It was held that since the AO has passed the assessment order without making enquiries and verification which should have been made, the assessment order framed u/s.143(3) of the Act is erroneous in so far as prejudicial to the interest of the Revenue, in terms of provisions of Sec.263 of the Act r.w. Explanation-2(a) thereto. 4. In response to the show-cause, the assessee submitted that it is running a Goshala where the sole object is to provide fodder and medical assistance to sick and abandoned cows. It was further submitted that it is a charitable society registered under the Societies Registration Act, 1860, with the District Registrar, Jind and the sources of receipt is donation from general public by way of voluntary contributions and grants provided by the Government of Haryana. It was submitted that the receipts are applied towards purchase of dry fodder, medicines and maintenance of kitchen expenses, which are necessary for providing shelter to sick and abandoned cows, proper records of all expenses and receipts have been maintained by the assessee’s society and all the transactions duly accounted for in the books of accounts. It was further submitted that the assessee’s society is not doing any business and is ITA No.32/Chd/2021 :: 4 :: engaged in charitable activities and the objects and motives of the assessee’s society are not for the purpose of earning profit, therefore, provisions of Sec.40A(3) of the Act are not applicable in the instant case. It was further submitted that the assessee’s society is assessed under the head ‘income from other sources’ instead of income under the head ‘business and profession’ and on this ground as well, the provisions of Sec 40A(3) of the Act are not applicable. Coming specific to the kitchen expenses, it was submitted that the assessee’s society has purchased woods for cooking the food for labour and feed for cows and the wood comes under the forest produce, which falls u/r.6DD exceptions of Income Tax Rules, 1962, and thereafter, provisions of Sec.40A(3) of the Act, are not applicable. Regarding fuel expenses, it was submitted that the assessee’s society has 11 vehicles, out of which, 5 are tractors, 2 ambulances, 2 tempos and 2 motor cycles for transportation for dry fodder and green fodder feeds and transportation of sick and abandoned cows, which are also used as ambulance from time to time. It was submitted that the assessee has given standing instructions to petrol pump dealers to give diesel and petrol to vehicle drivers and take the signatures and given that the petrol and diesel is purchased in small quantities from time to time, the petrol pump dealers make a composite bill mentioning day wise sale of petrol and diesel and as a result of composite bill, the same has exceeded Rs.20,000/- per day. However, given that the purchases have been made on daily basis, the provisions of ITA No.32/Chd/2021 :: 5 :: Sec.40A(3) of the Act, are not applicable. Similarly, contentions were raised regarding the standing instructions given to mechanics to repair the vehicles who also issue a composite bill bearing day wise expenses. It was further submitted that provisions of Sec.40A(3) of the Act, has been made applicable to charitable trust w.e.f. AY 2019-2020 and the same cannot be applied retrospectively to the assessee’s society for the impugned assessment year i.e. AY 2015-16. It was finally submitted that the AO has already disallowed a sum of Rs.77,664/- on account of kitchen expenses, Rs.1,71,150/- on account of vehicle running expenses and a sum of Rs.70,098/- on account of building repair expenses and where further expenses are disallowed, it will create financial hardship to the assessee’s society, which is not running the activities on profit motive. 5. The submissions so made by the assessee were considered but not found acceptable to the ld.CIT(Exemptions). The ld. CIT(Exemptions) stated in his order that during the course of assessment proceedings, the ld. AR of the assessee’s society has been asked to produce the necessary registration certification u/s.12AA of the Act which the ld. AR of the assessee’s society failed to produce and he himself stated that the assessee’s society is not registered u/s.12AA of the Act. It was accordingly held by the ld. CIT(Exemptions) that for applicability of Sec.11 of the Act, the assessee’s society should have been registered u/s.12AA of the Act. It was further held by the ld. CIT(Exemptions) that the definition of term “business” in Sec.2(13) of the Act, is not exhaustive ITA No.32/Chd/2021 :: 6 :: and it has very broad meaning and the same should not be restricted to the activities of trade, commerce or manufacture, and even activities of rendering services to others fall within the four corners of the expression “business”. Though, the profit motive is one of the primary requisite of the business, it is not essential ingredient of the business and has given examples of mutual concerns and the societies which carry on business but seldom have profit motive. It was further held by ld. CIT(Exemptions) that the Finance Act, 2018 has amended the provisions from AY 2019-20 and the amended provisions provides that for the purpose of determining application of income u/s.11(1) of the Act, the provisions of Sec.40A(3) of the Act, shall apply as if they apply in computing income under the head ‘profits and gains of business of profession’. It was further held by the ld.CIT(Exemptions) that the intention of the legislature introducing provisions of Sec.40A(3) of the Act, is manifestly clear and which is to curb the chances and opportunities to use or create black money and to ascertain whether the payment were genuine or whether the same is out of the income from disclosed sources. The applicability of section 40A(3) has been extended to the domain of charitable activities by the Finance Act 2018. It was further held by the ld.CIT(Exemptions) that by virtue of the provisions of Sec.58(2) of the Act, provisions of Sec.40A(3) of the Act are equally applicable even where the assessee’s income is assessed under the head ‘income from other sources’ instead of income under the head ‘business and profession’. It ITA No.32/Chd/2021 :: 7 :: was further held by the ld.CIT(Exemptions) that on perusal of the assessment records, it is noted that various ledger accounts were placed in the assessment folder and it is observed that the assessee has made cash payments under various heads exceeding Rs.20,000/- per day, which is in contravention of provisions of Sec.40A(3) of the Act. It was further noted by the ld.CIT(Exemptions) that the AO vide order sheet entry dated 11.07.2017 has asked the ld. AR to file books of accounts along with complete bills/vouchers. In response, the assessee’s society submitted bills/vouchers, which are simply placed on record by the AO and he went on framing the assessment by making estimated disallowances under the heads ‘kitchen expenses’, ‘vehicle running expenses’ and ‘building repair expenses’, on the plea that the society has just produced self-made vouchers, which could not be relied upon in toto. It was further held by the ld.CIT(Exemptions) that the AO had failed to make necessary enquiries at the time of assessment regarding the cash payments exceeding Rs.20,000/- per day and had necessary and proper verification being carried out, these payments would have been tested as per the provisions of Sec.40A(3) of the Act and therefore, on account of non-verification and lack of enquiry on the part of the AO, it has led to passing of erroneous order and under- assessment of income in the hands of the assessee as far as the expenses under the heads ‘kitchen expenses’, ‘vehicle running expenses’ and ‘fuel expenses’ are concerned. Thereafter, the ld.CIT(Exemptions) referred to the contentions of the ITA No.32/Chd/2021 :: 8 :: assessee regarding the payment falling under exemption u/r.6DD r.w.s.40A(3) of the Act and held that the said exemption is available only where payments are made to the cultivator/grower/producers and in this case, the assessee’s society has not just procured wood but also incurred other expenses and even the wood has been procured from different traders and not from the producers or growers of forest produce. Further, contention regarding fuel and vehicle running & maintenance expenses were also discussed at Para Nos.4.4.2 of the impugned order and not found acceptable by the ld. CIT(Exemptions). Finally, the ld.CIT(Exemptions) has drawn support from the decision of the Hon’ble Supreme Court in case of Malabar Industrial Co Ltd and given his concluding findings which read as under: “4.5. The Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd V/s CIT in 243 ITR 83(SC) has held that a bare reading of section 263 of the Act makes it clear that the pre- requisite to exercise of jurisdiction by the CIT suo motto under it is that the order of the ITO is erroneous in so far as it is prejudicial to the interest of revenue. The CIT has to be satisfied of twin conditions, namely, (i) the order of AO sought to be revised is erroneous and (ii) it is prejudicial to the interest of revenue. If one of them is absent i.e. if the order of the ITO is erroneous but is not prejudicial to the interest of the revenue or if it is not erroneous but is prejudicial to the interest of revenue, recourse cannot be taken u/s 263 of the Act. It has also held that there can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the AO; it is only when an order is erroneous that trie section shall be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. It has also held that the phrase "prejudicial to the interest of revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the revenue. If due to an erroneous order of the ITO, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase ‘prejudicial to the interest of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopts one of the course permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by the Supreme Court that where a sum not earned by a persona is assessed as income in his hands on his so ITA No.32/Chd/2021 :: 9 :: offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue. 4.5.1. On perusal of relevant record, it is observed that the AO has failed to take cognizance of applicability of provisions of section 40A(3) of the Act when he has treated the Society as AOP in the absence of registration of the said society u/s 12AA of the Act. There is incorrect assumption of facts, as well as an incorrect application of law that too without application of mind clearly satisfies the requirement of the order being erroneous. In the light of these facts, the revenue is losing tax lawfully payable by a person, hence the AO's order certainly falls in the mischief of being prejudicial to the interest of the revenue. 4.6 Similarly, the Hon'ble Supreme Court in the case of Rampyari Devi Sarogi vs. C1T 67 1TR 84 (SC) has held that an assessment order passed by the AO "in undue haste without making any enquiry" would be rendered as an assessment order erroneous and prejudicial to the interest of revenue. Similar view again is held by the Hon'ble Apex Court in the case of Smt. Tara Devi Aggarwal vs. CIT, reported in 88 ITR 323 (SC). 4.6.1 The AO has called for books of accounts along with vouchers vide order sheet entry dated 11.07.2017. The AR asked for more time, the AO fixed the case for 21.08.2017. The AR of the assessee appeared on 21.08.2017 and submitted bills/vouchers and without examining and verification of these bills and vouchers the AO has passed assessment order on same day i.e. 21.08.2017. It is apparent that, the AO was in undue haste to pass assessment order without making any enquiry. 5. In view of the aforesaid discussion, it is evident that the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue. Accordingly, the assessment order passed u/s 143(3) of the Act dated 21.08.2017 for the A.Y. 2015-16, is cancelled with the direction to pass an order afresh in accordance of law keeping in the view above observation and by conducting necessary inquires on the aforesaid issues and needless to say after affording reasonable opportunity of being heard to the assessee.” 6. In light of aforesaid findings, the ld CIT(E) has held that the order passed by the AO is erroneous in so far as prejudicial to the interest of the revenue and the assessment order so passed was cancelled with a direction to pass an order afresh in accordance with law keeping in view the above observations in the impugned order by conducting necessary verification and affording reasonable opportunity to the assessee. 7. Against the said findings/directions of the ld. CIT(Exemptions), the assessee is in appeal before us. 8. During the course of hearing, the ld. AR submitted that the ld. CIT(Exemptions) is not correct in holding that the AO has not made ITA No.32/Chd/2021 :: 10 :: necessary enquiries in the matter of verification of various expenses claimed by the assessee’s society. It was submitted that the ld. CIT(Exemptions) has failed to appreciate that the AO has passed the order after thorough examination of documents. During the course of assessment proceedings, it was submitted that the AO has specifically asked for certain ledgers after test check of Profit & Loss A/c and has disallowed certain expenses on the basis that self-made vouchers could not be relied upon and additions were made in the hands of the assessee’s society regarding kitchen expenses, vehicle running expenses and building repair expenses. It was submitted that it is not a case of non-perusal of records or a case where proper enquiries have not been made by the AO, rather it is a case of change of opinion by the ld. CIT(Exemptions), wherein, as against the additions made by the AO, the ld.CIT(Exemptions) has opined about applicability of provisions of Sec.40A(3) of the Act. It was submitted that the ld. CIT(Exemptions) has completely ignored the assessment records and has taken a view, which has already been adjudicated upon by the AO. In this regard, our reference drawn to the decision of the Co-ordinate Jodhpur Benches in case of J.K. Construction Co. v. ITO reported in [2007] 162 taxmann 46 (Jodhpur-Trib.), wherein, it was held that when the gross profit @ 5% was applied by rejecting books of accounts, the AO became powerless to again go through the books of accounts and make separate addition u/s 40A(3) of the Act. In that case, it was held that the AO had taken a ITA No.32/Chd/2021 :: 11 :: reasonable view which could not be disturbed by the ld.CIT by invoking provisions of Sec 263 of the Act. It was submitted that it is a settled law that jurisdiction u/s 263 of the Act cannot be invoked on the basis of change of opinion by reappraising the evidence with a view that enquiries conducted by the AO were inadequate and the AO should have made further enquiries or investigation which he has not done. In support, reliance was placed on the decision of the Hon’ble Punjab & Haryana High Court in case of CIT v. Deepak Mittal reported in [2010] 324 ITR 411 (Punjab & Haryana) and the decision of the Coordinate Chandigarh Benches in case of Narain Singla v. PCIT reported in 62 taxmann.com 255 (Chandigarh-Trib.). It was further submitted that in response to notice dated 08.08.2016, reply was submitted by the assessee during the course of assessment proceedings. In response to notice dated 11.07.2017, wherein, the assessee was asked to produce the Audited Report along with Balance Sheet, Income & Expenditure account and books of accounts along with complete bills/vouchers, the books of accounts were produced. Thereafter, reply was filed on 01.08.2017 and some more information was called for verification of facts which were filed on 21.08.2017. Thereafter, after examination of documents and discussion with the ld. AR of the assessee and due application of mind, the AO made certain disallowances on the basis of review of the documents and concluded the assessment proceedings. It was accordingly submitted that the findings of the ld.CIT(Exemptions) that the AO has passed the order in undue haste ITA No.32/Chd/2021 :: 12 :: without making any enquiry is not correct as the proceedings were in process for a very long time as well as the evidences have been presented on 21.08.2017 which were duly taken into consideration and after thorough examination and discussion, the assessment order has been passed by the AO. It was accordingly submitted that the revision of the order in the assessee’ case is not justified and the order so passed by the ld.CIT(Exemptions) may be set aside. 9. Per contra, the ld. CIT/DR has vehemently argued the matter and took us through the order of the ld.CIT(Exemptions), and the concluding findings at Para Nos. 4.5.1, 4.6, 4.6.1 and 5 of the impugned order, which we have already taken note of and therefore, the same are not reproduced for the sake of brevity. It was submitted that the ld.CIT(Exemptions) has rightly held that on review of the ledger accounts placed in the assessment folder, it is very much apparent that the expenses totaling Rs.11,70,515/- have been paid in cash exceeding Rs.20,000/- per day, which are clearly in contravention of provisions of Sec.40A(3) of the Act. It was submitted that it is a clear case of non- application of mind on the part of the AO, when it is clearly on the face of the ledger accounts that the payments have been made in cash. It was accordingly submitted that it is not a case of change of opinion by the ld.CIT(Exemptions), rather it is a case where the AO has failed to appreciate the facts which are apparent on record and thereafter, has failed to apply correct provisions of law. In support, reliance was placed ITA No.32/Chd/2021 :: 13 :: on the decisions of the Hon’ble Supreme Court in case of Malabar Industrial Co. Ltd. v. CIT reported in 243 ITR 83 (SC), Rampyari Devi Sarogi v. CIT reported in 67 ITR 84 (SC) and Smt.Tara Devi Aggarwal v. CIT reported 88 ITR 323 (SC). The CIT/DR accordingly supported the order and findings of the ld.CIT(Exemptions) and submitted that the appeal filed by the assessee deserves to be dismissed. 10. We have heard the rival contentions and purused the material available on record. The undisputed facts which are emerging from the records are that the assessee society has been assessed in the status of an AOP and its taxable income has been determined under the head “Income from other sources” under normal provisions of the Act. During the financial year relevant to the impugned assessment year, it has incurred fuel expenses of Rs. 8,74,864/, vehicle running expenses of Rs.8,55,750/- and kitchen expenses of Rs.5,17,760/- totaling to Rs 22,48,374/- and out of which, a sum total of Rs.11,70,515/- which makes up almost 52% of these three expenses have been paid/incurred in cash. These facts as emerging from the ledger accounts and books of accounts were very much part of the assessment records and there is no dispute regarding the same and has not been challenged by the assessee either before the ld CIT(E) or before us. The question that arises for consideration is whether the AO took note of these undisputed facts and what action he has taken in this regard in terms of ITA No.32/Chd/2021 :: 14 :: examination/verification of these expenses and application of relevant provisions of the Act. 11. In this regard, we find that the AO has recorded a finding in the assessment order that in respect of kitchen, vehicle running and building repair expenses, the AR of the assessee has produced self made vouchers and which could not be relied upon in toto and thereafter, he has estimated and disallowed 15% of kitchen expenses and 20% of vehicle running and building repair expenses. However, no finding has been recorded by the AO regarding fuel expenses. Further, there is nothing on record that fuel expenses have been examined by the AO and any information/documentation called for and responded by the assessee during the course of assessment proceedings. As per the ld CIT(E), where more than 50% of these expenses i.e, kitchen expenses, vehicle expenses and fuel expenses have been incurred in cash exceeding Rs 20,000/- per day, the provisions of section 40A(3) are clearly attracted in the instant case and which the AO has failed to examine during the course of assessment proceedings. 12. In our view, where on perusal of the ledger accounts, it is apparent and crystal clear that the expenses have been incurred in cash exceeding Rs 20,000/- per day throughout the financial year, the Assessing officer is expected to verify these expenses not just applying the test of genuineness and whether the expense have been incurred for the purposes of assessee’s activities as so claimed and purposes for which it ITA No.32/Chd/2021 :: 15 :: is claimed to be incurred but also the necessity of payment been made in cash on a recurring basis and applicability of provisions of section 40A(3) of the Act. The Assessing officer would be failing in his duties where he examines the matter applying the test of genuineness and commercial expediency and at the same time, ignoring the provisions of section 40A(3) of the Act. It would be relevant to refer to Section 40A(1) which provides that the provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provisions of this Act relating to the computation of income under the head “Profits and gains of business or profession.” And by virtue of section 58(2), the provisions of section 40A shall, so far as may be, apply in computing the income under the head “income from other sources” as they apply in computing the income chargeable under the head “Profits and gains of business or profession.” Thus, the provisions of section 40A(3) are equally applicable where the income is assessed and brought to tax under the head “Income from other sources” as in the instant case as rightly held by the ld CIT(E). The provisions of section 40A(3) mandates examination of expenditure on touchstone of conditions specified therein including exceptions so provided under Rule 6DD where the expenditure otherwise qualify as an allowable expenditure. The AO cannot pick and choose one test and related provisions for the other rather he is expected to apply the test and related provisions jointly and in an holistic manner. And where the AO does a pick and choose, he ITA No.32/Chd/2021 :: 16 :: would be applying the law partly and in that sense, it would be incorrect application of complete law as applicable. In the instant case, we find that more than 50% of these expenses have been incurred in cash exceeding Rs 20,000/- per day, therefore, these are cash transactions spreading throughout the financial year and it is not a case of certain sporadic cash transactions which could have escaped the attention of the Assessing officer and have been noticed subsequently by the ld CIT(E). We therefore find that it is a case where the Assessing officer has completely failed to examine the provisions of section 40A(3) and applicability thereof in the facts of the instant case. We therefore find force in the contentions advanced by the ld CIT/DR that it is a clear case of non-application of mind on the part of the AO and failure to apply provisions of section 40A(3), when it is clearly on the face of the ledger accounts that the payments have been made in cash exceeding Rs 20,000/- per day. The AO is expected to examine the provisions of section 40A(3) vis-à-vis respective transactions and determine which all these transactions are covered by the provisions of section 40A(3) and which all transactions fall under the exception as so provided in the Rule 6DD and decide accordingly. Only where the AO has examined the transactions from the perspective of section 40A(3) read with exceptions thereto and the ld CIT(E) arrives at a different finding, the question of change of opinion arises. Where there is no examination and no formation of opinion at first place, the question of change of opinion as so ITA No.32/Chd/2021 :: 17 :: contended by the ld AR doesn’t arise. Further, it has been contended that jurisdiction under section 263 has been invoked by the ld CIT(E) by reappraising the evidence with a view that enquiries conducted by the AO were inadequate and the AO should have made further enquiries or investigation which he has not done. We are unable to accede to the said contention of the ld AR for the simple reason that where the provisions of section 40A(3) are applicable in the facts of the case and which the AO has failed to examine and invoke at first place and the ld CIT(E) subsequently noticed and thereafter, records his findings as to how the said provisions are applicable in the facts of the case, it is no doubt a case of reappraisal of the facts but with a view to highlight the applicability of correct law which the AO has failed to apply which is very much within the domain and jurisdiction of the ld CIT(E) and in the process of applying the correct law, where the AO is directed to carry out further verification of individual transactions, the same is clearly permissible and necessary guidance can be drawn from the decision of the Hon’ble Supreme Court in case of Malabar Industrial Company Ltd (supra). 13. Further, it is not a case of rejection of books of accounts and application of certain gross profit rate by the Assessing officer, rather a case where the Assessing officer has made certain adhoc disallowances of expenses without considering the provisions of section 40A(3) of the Act, therefore the decision of the Coordinate Jodhpur Benches in case of J.K ITA No.32/Chd/2021 :: 18 :: Construction (supra) is distinguishable on facts and doesn’t support the case of the assessee. 14. In light of aforesaid discussions and in the entirety of facts and circumstances of the case, we don’t find any infirminity in the order of the ld CIT(E) in exercising his jurisdiction under section 263 of the Act and in directing the Assessing officer to examine the matter afresh in accordance with law after providing reasonable opportunity to the assessee. 15. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open Court on the 21 st day of July, 2022. Sd/- (DIVA SINGH) द. /JUDICIAL MEMBER Sd/- (VIKRAM SINGH YADAV) %) द. /ACCOUNTANT MEMBER /Chandigarh, /दन /Dated: 21 st July, 2022. TLN, Sr.PS आ द%श # ! (0 1 2%1ष(/Copy of the order forwarded to: 1. / The Appellant 2. !" / The Respondent 3. आ आ ु 3(/ CIT 4. आ आ ु 3( ( )/ The CIT(A) 5. 1व4 ! ( न , आ आ ण, / DR, ITAT, Chandigarh 6. 5 ई / Guard File आदेशान ु सार/ By Order सहायक पंजीकार/ Assistant Registrar