Arvind Prakashan Pvt. Ltd, Meerut V. CIT, Meerut

ITA 3351/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6821 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 27-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAVI JAIN
• Assessee Lawyers: O P SAPRA
• Keywords: Business income; Revision of order; Depreciation; Opportunity of being heard; Principle of natural justice; Bad and doubtful debts; Corroborative evidences
• Section: 143(3); 142(1); 234B; 263

Judgement Text

ITA NO. 3351/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER I.T.A. N O. 3351 /DEL/2013 A.Y. : 2008 - 09 M/S ARVIND PRAKASHAN PVT. LTD., C/O M/S S.S. GUPTA & CO., 239, ASAURA HOUSE, WESTERN KUTTCHERY ROAD, MEERUT 250001 (PAN:- AABCA1788K) VS. COMMISSIONER OF INCOME TAX, MEERUT (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. SANDEEP SAPRA, ADV. & SH. O.P. SAPRA, ADV. DEPARTMENT BY : SH. RAVI JAIN, CIT(DR) DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : DATE OF HEARING : 14 1414 14- -- -01 0101 01- -- -201 201 201 2016 66 6 DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : DATE OF ORDER : 1 11 16 66 6- -- -02 0202 02- -- -201 201 201 2016 66 6 ORDER ORDER ORDER ORDER PER PER PER PER H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU : : : : J JJ JM MM M THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX, MEERUT DATED 08.3.201 3 PASSED U/S. 263 OF THE I.T. ACT PERTAINING TO ASSESSMENT YEAR 2008-09 ON THE FOLLOWING GROUNDS:- 1. THAT THE ORDER ULS 263 DATED 8 TH MARCH 2013 AS PASSED BY LEARNED COMMISSIONER OF INCOME TAX, MEERUT BY PARTL Y REVIEWING THE ASSTT. ORDER DATED 30/11/2010 OF ASST T. COMMISSIONER OF INCOME TAX, CIRCLE-I, MEERUT AND PA RTLY SETTING ITA NO. 3351/DEL/2013 2 ASIDE THE SAME WITH HER DIRECTION IS ARBITRARY, UNJ UST AND ILLEGAL, ON VARIOUS FACTUAL AND LEGAL GROUNDS INCLUDING THE FOLLOWING : A) THE ASSTT. ORDER DATED 30 NOVEMBER 2010 PASSED B Y ASSTT. ORDER WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. B) THE LEARNED A.O. HAVING PASSED THE ASSTT. ORDER DATED SO 30 TH NOVEMBER 2010 BY PROPER APPLICATION OF MIND COULD NOT LEGALLY BE INTERFERED WITH BY THE LD. COMMISSIONER OF INCOME TAX. C) VARIOUS OBSERVATION MADE PARTICULARLY IN PARA 7 AT PAGES 7-16 OF THE IMPUGNED ORDER U/S 263 ARE EITHER INCORRECT OR LEGALLY UNTENABLE. D) THE LD. COMMISSIONER OF INCOME TAX HAD EXCEEDED HER JURISDICTION TO INVOKE SECTION 263 IN THE FACT S AND CIRCUMSTANCES OF THIS CASE THERE BY IGNORING THE SUBMISSION MADE AND DOCUMENTARY EVIDENCE FILED BY THE APPELLANT BEFORE THE A.O. IN THE COURSE OF ASSESSMENT PROCEEDINGS AND AGAIN BEFORE HER BY THE APPELLANT. E) PROVISION OF SEC. 145(3) ARE NOT APPLICABLE TO T HE FACTS OF APPLICANT CASE AND THE LD. COMMISSIONER OF INCOM E TAX HAS INVOKE THEM WITHOUT ANY PROPER JUSTIFICATIO N. 2. THAT IMPUGNED ORDER U/S 263 DESERVES TO BE CANCE LLED. ITA NO. 3351/DEL/2013 3 3. THAT WITHOUT PREJUDICE TO THE ABOVE GROUND THE A DDITION OF RS. 2,95,58,101 AS MADE BY LD. COMMISSIONER OF INCO ME TAX IS ARBITRARY UNJUST ILLEGAL AT ANY RATE WITHOUT PREJUD ICE, THE ADDITION IS MADE VERY EXCESSIVE. 4. DIRECTION ISSUED BY LD. COMMISSIONER OF INCOME T AX VIDE PAGES 14 AND 15 OF THE IMPUGNED ORDER WITH REGARD T O FRESH UNSECURED LOANS AND SUNDRY CREDITORS AND ALSO FIXED ASSETS OFRS. 49,57,110 ARE ALSO ARBITRARY UNJUST AND ILLEGAL. 5. SIMILARLY OBSERVATION MADE WITH REGARD TO BALANC E OF RS. 34,13,193 AS CERTIFIED BY THE BANKERS AS AT 3L. 3.2008 AT PAGE 16 OF THE IMPUGNED ORDER IS ALSO ARBITRARY UNJUST AND ILLEGAL. 2. THE BRIEFLY STATED FACTS ARE THAT THE ASSESSEE COMPANY FILED ITS E-RETURN ON 18.9.2008 DECLARING TOTAL INCOME OF RS.7,37,800/- W HICH WAS PROCESSED U/S. 143(1) OF THE I.T. ACT. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND STATUTORY NOTICE U/S. 143(2) WAS ISSUED ON 22.9.200 9, WHICH WAS DULY SERVED UPON THE ASSESSEE. IN RESPONSE TO THE NOTICES ISSU ED U/S. 142(1) AND 143(2) COUNSEL OF THE ASSESSEE ATTENDED THE PROCEEDINGS FR OM TIME TO TIME AND FURNISHED REQUIRED DETAILS AND INFORMATION. THE ASS ESSEE IS ENGAGED IN THE BUSINESS OF PUBLICATION OF BOOKS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN GP RATE AND NP RATE OF 23.69% AN D 0.35% RESPECTIVELY WHICH IS SLIGHTLY HIGHER THAN THE GP AND NP RATES O F IMMEDIATE PRECEDING YEAR. TRADING RESULTS DECLARED INCLUDING EXPENSES DEBITED BY THE ASSESSEE HAVE BEEN EXAMINED AND VERIFIED ON TEST CHECK BASIS FROM THE BOOKS OF ACCOUNTS, BILLS AND VOUCHERS PRODUCED AND BANK STATEMENTS AND VARIOUS O THER DETAILS AND DOCUMENTS SUBMITTED BY THE ASSESSEE FROM TIME TO TI ME. THEREAFTER, THE INCOME DECLARED BY THE ASSESSEE IS ACCEPTED AND ASSESSMENT WAS, ACCORDINGLY, ITA NO. 3351/DEL/2013 4 COMPLETED ON TOTAL INCOME OF RS. 7,37,800/- VIDE OR DER DATED 30.11.2010 PASSED U/S. 143(3) OF THE I.T. ACT, 1961. 3. HOWEVER, THE LD. CIT HAS PASSED THE IMPUGNED O RDER U/S. 263 OF THE I.T. ACT DATED 08.03.2013 BY HOLDING THAT THE ASSESSMENT ORDER WAS FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE R EVENUE AND HAS MADE THE ADDITION OF RS. 2,95,58,101/- ON ACCOUNT OF ALLEGED SUPPRESSED. 4. AGAINST THE ORDER OF THE LD. CIT DATED 08.3. 2013 PASSED U/S. 263 OF THE I.T. ACT, THE ASSESSEE APPEALED BEFORE THE TRIB UNAL. 5. LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORIG INAL ASSESSMENT ORDER DATED 30.11.2010 PASSED U/S. 143(3) OF THE I.T. ACT IN THE CASE OF THE ASSESSEE AS WELL AS THE DOCUMENTARY EVIDENCES FILED BY HIM IN T HE SHAPE OF SYNOPSIS/ ADDITIONAL SYNOPSIS ALONGWITH VARIOUS CASE LAWS AN D PAPER BOOK. 5.1 THE SYNOPSIS FILED BY THE ASSEESSEES COUNSEL A RE REPRODUCED HEREUNDER:- 1) AS ALSO MENTIONED BY THE LD. CIT IN THE IMPUGNE D ORDER PASSED U/S 263, ASSESSMENT ORDER WAS PASSED U/S 143(3) DATED 3 0/1112010 BY ACIT, CIRCLE 1, MEERUT COPY PLACED AT PAGE 54 OF THE PAPE R BOOK. 2) THE LD. CIT, MEERUT ISSUED A NOTICE DATED 12/02/ 2013, COPY PLACED AT PAGES 55 - 57 OF THE PAPER BOOK TO WHICH ASSESSEE HAD FILED A REPLY DATED 25/02/2013 ALONGWITH THE ANNEXURES MENT IONED THEREIN COPIES PLACED AT PAGES 58 - 128 OF THE PAPER BOOK. 3) HOWEVER, THE LD. CLT HAS PASSED THE IMPUGNED ORD ER ON 08/03/2013 BY HOLDING THAT THE ASSESSMENT ORDER WAS FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E AND HAS MADE AN ITA NO. 3351/DEL/2013 5 ADDITION OF RS.2,95,58,101/- ON ACCOUNT OF ALLEGED SUPPRESSED INCOME AS UNDER:- A. ADDITION ON ACCOUNT OF INFLATED CONSUMPTION OF P APER VIDE VIDE PAGE-13 OF IMPUGNED SEC. 263 ORDER. RS. 3,00 ,00,000 B) LESS: IRTCOME SHOWN RS. 7,37,800 NET ADDITION MADE RS. 2,92,62,200 ADD: OTHER INCOME (INTEREST AS SHOWN IN P & LA/C): RS. 3,35,901 TOTAL INCOME COMPUTED RS. 2,95,58,101 AGAINST THE ABOVE ORDER, THE APPELLANT RELIES ON TH E FOLLOWING DOCUMENTS/SUBMISSIONS: 1. THE ASSESSEE IS ACTUALLY ENGAGED IN PUBLICATION OF BOOKS FOR SMALL CHILDREN OF MONTESSORY SECTION I.E. FROM NURSERY TO CLASS V. MOST OF THE BOOKS HAVE COLOURED PHOTOGRAPHS OF IT AND NO BO OK IS MORE THAN 70 PAGES. SALE PRICE VARIES BETWEEN RS. 7/- TO RS.115/- BUT MAXIMUM-BOOKS ARE PRICED AT BELOW RS.50/-. ASSESSEE ALLOWED DISCOUNT UPTO 40% ON THE SALE OF BOOKS HAVING MORE THAN 70 PAGES EACH: 2. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE FD. AO HAD MADE AS MANY AS 26 QUERIES VIDE HIS LETTER DATED 29/07/2010 , COPY PLACED AT PAGES 36 - 38 OF THE PAPER BOOK. 3. TO THE ABOVE LETTER, ASSESSEE FILED REPLY DATED 20/08/2010 BEFORE THE AO ALONGWITH VARIOUS DETAILS CALLED FOR BY HIM , COPIES AT PAGES 39 - 42 WITH ANNEXURES AT PAGES 43 - 50 OF THE PAPE R BOOK. ITA NO. 3351/DEL/2013 6 4. FURTHER QUERIES HAVING BEEN MADE BY THE AO, THE APPELLANT FILED - 4T' LETTER DATED 19/11/2010 ALONGWITH ANNEXURES MEN TIONED THEREIN, COPY PLACED AT PAGES 51 - 52 OF THE PAPER BOOK. 5. THE ABOVE REPLIES/DOCUMENTS AS FILED BY THE APPE LLANT BEFORE THE AO CLEARLY PROVES THAT THE ID. AO HAD PASSED THE AS SESSMENT ORDER DATED 30/11/2010 U/S 143(3), COPY PLACED AT PAGES 5 3 - 54 AFTER PROPER APPLICATION OF MIND BY OBSERVING-AS UNDER:- 'IN RESPONSE TO NOTICES ISSUED ULS 142(1) AND 143(2 ), COUNSEL OF THE ASSESSEE SHRI PANKAJ GUPTA, CA ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FURNISHED REQUIRE D DETAILS AND INFORMATION AND THE CASE WAS DISCUSSED. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PUBLICAT ION OF BOOKS. DURING THE YEAR UNDER CONSIDERATION, THE ASS ESSEE HAS SHOWN GP RATE AND NP RATE OF 23.69% AND 0.35% RESPECTIVELY WHICH IS SLIGHTLY HIGHER THAN THE GP R ATES OF IMMEDIATE PRECEDING YEAR. TRADING RESULTS DECLARED INCLUDING EXPENSES DEBITED BY THE ASSESSEE HAVE BEEN EXAMINED AND VERIFIED ON TEST CHECK BASIS FROM THE BOOKS OF ACCO UNTS, BILLS AND VOUCHERS PRODUCED AND BANK STATEMENTS AND VARIO US OTHER DETAILS AND DOCUMENTS SUBMITTED BY THE ASSESS EE FROM TIME TO TIME. HENCE NO ADVERSE INFERENCE IS BEING D RAWN. AFTER DISCUSSION AND CONSIDERING ALL THE MATERIAL O N RECORD INCOME DECLARED BY THE ASSESSEE IS ACCEPTED AND ASSESSMENT, ACCORDINGLY, COMPLETED ON TOTAL INCOME OF RS.7,37,800/-'. ITA NO. 3351/DEL/2013 7 FROM THE ABOVE OBSERVATIONS, IT IS EVIDENT THAT THE ID. AO HAD PASSED THE ASSESSMENT ORDER DATED 30/11/2010 AFTER PROPER APPL ICATION OF MIND. 6. IT IS BY NOW WELL SETTLED THAT IF AN ASSESSMENT ORDER WAS PASSED BY PROPER APPLICATION OF MIND, THE LD. CIT COULD NOT I NVOKE SECTION 263 OF THE I.T. ACT. THE APPELLANT RELIES ON THE FOLLOWING CAS E LAWS:- A) 263 ITR 437, HARI IRON TRADING CO. VE. CIT (P & H HIGH COURT) B) 259ITR 502, CIT VS. ARVIND JEWELLERS (GUJARAT H. C.) C) 203 ITR 108 C1T VS. GABRIEL INDIA LTD., (BOMBAY H.C.). D) 243 ITR 83, MALABAR INDUSTRIAL CO. LTD. VS. CIT, (SUPREME COURT) E) 323 ITR 206, CIT VS. DEVELOPMENT CREDIT BANK LTD . (BOMBAY H.C.), F} 323 ITR 632, CIT VS. DESIGN AND AUTOMATION ENGIN EERS (BOMBAY) P. LTD. (BOMBAY H.C.). G) 320 ITR 674, CIT VS. ASHISH RAJPAL (DELHI H.C.). H) 171 ITR 141, CIT VS. RATLAM COAL ASH CO. (M.P. H IGH COURT I) 111 ITR 326 J.P. SRIVASTAVA & SONS VS. CIT, (JUR ISDICTIONAL ALLHD. H.C.) J) 343 ITR 329, CIT VS. D.G. HOUSING PROJECTS LTD . (DELHI H.C.). K) 344 ITR 554, CIT VS. INTERNATIONAL TRAVEL HOUSE LTD. (DELHI H.C.). THEREFORE, SECTION 263 ORDER DESERVES TO BE CANCEL LED BECAUSE AS DEMONSTRATED ABOVE, ASSESSMENT ORDER OF THE AO DATE D 30/11/2010 ULS 143(3) WAS PASSED BY PROPER APPLICATION OF MIND AND THEREFORE SECTION 263 IN TERMS HAD NO APPLICATION TO THE FACTS OF THI S CASE. ITA NO. 3351/DEL/2013 8 7. THERE IS YET ANOTHER ASPECT OF THE MATTER. EVEN BEFORE THE LD. CIT, THE APPELLANT HAVING FILED ALL THE DETAILS BEFORE H ER AND THE LD. CIT HAVING NOT HERSELF REJECTED THE SAME, THE IMPUGNED ORDER A S PASSED BY HER ULS 263 IS ILLEGAL AND UNTENABLE. THE APPELLANT RELIES ON JURISDICTIONAL ALLAHABAD HIGH COURT JUDGMENT IN 111 ITR 326, J.P. SRIVASTAVA & SONS VS. CIT, RELEVANT EXTRACTS ARE AT PAGES 9-10 OF THE CAS E LAWS ATTACHED AS ANNEXURE I OF THESE SYNOPSIS. 8. VARIOUS CASE LAWS RELIED UPON BY THE ID. CIT IN PARA 5 TO 5.5 HAD ABSOLUTELY NO APPLICATION TO THE FACTS OF APPELLANT 'S CASE AS DEMONSTRATED VIDE ANNEXURE II AT PAGES 11-13 OF THESE SYNOPSIS. 9. RELIANCE OF THE LD. CIT ON ITAT DELHI BENCH ORDE R IN THE CASE OF SH. VIRENDRA KUMAR GUPTA VS. CIT IN ITAT NO. 2595/DELL 2009 DATED 2110112011 VIDE PARA 5.6 IS ALSO ILLEGAL AND UNCAL LED FOR BECAUSE COPY OF SUCH ORDER HAD NOT BEEN SUPPLIED TO THE ASSESSEE I N THE COURSE OF SECTION 263 PROCEEDINGS THEREBY VIOLATING THE PRINCIPLES OF NATURAL JUSTICE AND SPECIFIC PROVISIONS OF THE INCOME TAX ACT TILL DATE , ASSESSEE HAD NOT BEEN SUPPLIED COPY OF SUCH TRIBUNAL ORDER AND THEREFORE, THE SAME HAS TO BE IGNORED/KEPT ASIDE. 10. THE OBSERVATIONS MADE BY THE ID. CIT IN PARA 7 ARE ALSO INCORRECT AND UNTENABLE. SHE WAS WRONG IN SAYING THAT THE NET PROFIT RATE OF 0.679% WAS NEGLIGIBLE NP RATE AND THAT THE ASSESSMENT RECO RDS SHOW THAT DESPITE THERE BEING A LARGE NUMBER OF DISCREPANCIES AND DES PITE THEY BEING INCORRECT, INCOMPLETE AND SUFFERING FROM A NUMBER O F DISCREPANCIES, PROVISIONS OF SECTION 145(3) HAVE NOT BEEN INVOKED AND BOOK RESULTS HAVE BEEN ACCEPTED AS SUCH. ITA NO. 3351/DEL/2013 9 THE ID. CIT HAS NOT POINTED OUT ANY ITEM OF UNVOUCH ED OR INADMISSIBLE NATURE EITHER OUT OF PURCHASES, SALES OR EXPENSES D ECLARED/CLAIMED BY THE APPELLANT THE APPELLANT HAD MAINTAINED ACCOUNT BOOK S IN THE FORM OF CASH BOOK, LEDGER, PURCHASE VOUCHERS, SALES BILLS, BANK STATEMENTS ETC. SINCE THE INCEPTION OF ITS BUSINESS FOR THE LAST MORE THA N 20 YEARS AND THE ACCOUNT BOOKS FOR THIS YEAR HAD ALSO BEEN MAINTAINE D IN THE SAME MANNER AND FASHION AS IN THE PAST. NO ADDITION/DISALLOWANC E WHATSOEVER HAD BEEN MADE IN THE PAST IN ASSESSEE'S CASE. 11. THE LD. CIT OVERLOOKED TO APPRECIATE THAT THE A PPELLANT HAD DECLARED BETTER GP AND NP RATES DURING THE YEAR AS COMPARED TO THE PRECEDING ASSESSMENT YEARS VIZ. 2005- 06, 2006-07 A ND 2007-08 - KINDLY SEE PAGE 60 OF THE PAPER BOOK. THE GP AND NP RATE DECLARED DURING THE YEAR WERE 23.69% AND 0.68% RESPECTIVELY AS COMPARED TO GP RATES OF 20.47%, 22.20% AND 23.01 % AND NP RATES OF 0.28%, 0.25% AND 0.4% IN THE ASSESSMENT YEARS 2005-06, 2006-07 A ND 2007-08 RESPECTIVELY WHICH HAD BEEN ACCEPTED BY THE REVENUE BY PASSING ASSESSMENT ORDERS ULS 143(3). 12. NO JUSTIFICATION SUBSISTED ON THE PART OF THE LD. CIT TO INVOKE SECTION 145(3) OF THE I.T. ACT. SHE IS ALSO WRONG IN SAYING IN LAST PARA AT PAGE 9 OF THE IMPUGNED ORDER THAT THE PURCHASES AND EXPENSES DEBITED TO THE P & L ALC WERE HIGHLY INFLATED WITHOUT BRINGING ANY EVIDE NCE ON THE RECORD OF SUCH ALLEGED INFLATION. 13. AS REGARDS NON SHOWING OF ANY OPENING OR DOSING STOCK OF PAPER, THE LD. CIT IS FACTUALLY INCORRECT BECAUSE THE ASSE SSEE HAD DULY SHOWN OPENING STOCKS AS UNDER: ITA NO. 3351/DEL/2013 10 BOOKS : RS.34,36,337 PAPER .: RS.11 ,68,450 SEMI FINISHED : RS. 5,30,478 TOTAL :RS.51,35,265 FOR DETAILS FILED BEFORE THE AUTHORITIES BELOW, KIN DLY SEE PAGES 47 - 48 OF THE PAPER BOOK. SIMILARLY DETAILS OF CLOSING STOCK HAD ALSO BEEN DU LY FILED BY THE ASSESSEE VIDE DETAILS AT PAGES 49-50 OF THE PAPER BOOK AS PE R SUMMARY GIVEN BELOW: BOOKS : : RS.13,48,344 PAPER : RS. 9,21,150 SEMI FINISHED : RS. 2,48,644 TOTAL :RS25,68,138 SUCH OPENING AND CLOSING STOCKS DULY APPEAR IN THE AUDITED P & LAIC, COPY PLACED AT PAGE 10 OF THE PAPER BOOK. THESE FAC TS DEARLY SHOW THAT THE OBSERVATIONS OF THE LD. CLT ARE FACTUALLY INCOR RECT. THE ID CIT HAS ALSO DRAWN A WRONG PRESUMPTION THAT THE RATIO OF PAPER CONSUMED AT 74.70% WAS EXTREMELY INFLATED WITHOUT P ROVING ANY INFLATION MADE BY THE ASSESSEE AND IN THE ABSENCE OF SPECIFIC MENTION OF IT IN SECTION 263 NOTICE. ITA NO. 3351/DEL/2013 11 14. AT PAGE 11, THE LD GFT HAS REFERRED TO RATES OF PAPER ALLEGEDLY PREVAILING DURING THIS YEAR FROM OUTSIDE VENDORS BU T THE SAME HAVING NOT BEEN CONFRONTED TO THE APPELLANT IN THE COURSE OF 2 63 PROCEEDINGS, THE SAME WAS NOT ADMISSIBLE IN EVIDENCE AS HELD IN . TH E FOLLOWING CASE LAWS: A) 152 ITR 507, SONA ELECTRIC CO. VS. CIT (DELHI HI GH COURT), IN WHICH IT WAS HELD AS UNDER: 'THE STATEMENT OF SL, IN THE ABSENCE OF THE ASSESSE E, HAD TO BE EXCLUDED FROM CONSIDERATION.' B) 125ITR PAGE 713 KISHAN CHAND CHELFARAM VS. CFT ( SUPREME COURT) IN WHICH IT WAS HELD AS UNDER: 'IT IS TRUE THAT THE PROCEEDINGS UNDER THE INCOME T AX LAW ARE NOT GOVERNED BY THE STRICT RULES OF EVIDENCE AND, THERE FORE, IT MIGHT BE SAID THAT EVEN WITHOUT CALLING THE MANAGER OF THE B ANK IN EVIDENCE TO PROVE THIS LETTER, IT COULD BE TAKEN INTO ACCOUN T AS EVIDENCE. BUT BEFORE THE IT AUTHORITIES COULD RELY UPON IT, THEY WERE BOUND TO PRODUCE IT BEFORE THE ASSESSEE SO THAT THE ASSESSEE COULD CONTROVERT THE STATEMENTS CONTAINED IN IT BY ASKING FOR AN OPP ORTUNITY TO CROSS EXAMINE THE MANAGER OF THE BANK WITH REFERENCE TO T HE STATEMENTS MADE BY HIM. 15. MOREOVER, THE ID CIT HAS ALSO NOT DEMONSTRATED AS TO SUCH OUTSIDE VENDORS WERE SUPPLYING SAME TYPE OF PAPER AS WAS US ED BY THE ASSESSEE AND ALSO 'HAS NOT MENTIONED THE NAMES AND ADDRESSES OF SUCH PUBLISHERS. THEREFORE, THE PRESUMPTION OF THE LD. CIT VIDE PAGE 12 OF HER IMPUGNED ORDER THAT THE CLAIM OF CONSUMPTION OF PAPER CAN BE JUDGED WHEREBY THE PURCHASES AND CONSEQUENT CONSUMPTION IN CASE OF TH E ASSESSEE COULD AT ITA NO. 3351/DEL/2013 12 BEST BE NOT MORE THAN RS.1.5 CRORE AS AGAINST THE C ONSUMPTION' OF PAPER SHOWN BY THE ASSESSEE AT RS.5,92,52,253/- ARE FACTU ALLY INCORRECT AND ARE BASED ON HERE MERE IPXI DIXIT. SIMILARLY, FURTH ER OBSERVATIONS MADE BY THE LD. CIT REGARDING THE PRINTING OF BOOKS IN WHIC H A GRADE PAPER WAS CONSIDERED TO HAVE BEEN USED ARE ALSO FACTUALLY INC ORRECT. SUCH OBSERVATIONS ARE NOTHING BUT BALD STATEMENT MADE BY THE LD. CIT WITHOUT BRINGING ANY SUPPORTING EVIDENCE ON THE RECORD AND WITHOUT CONFRONTING THE SAME TO THE ASSESSEE IN THE COURSE OF SECTION 2 63 PROCEEDINGS. 16. FURTHER OBSERVATIONS MADE BY THE ID CIT AT PAGE 13 THAT IT IS ALSO NOT CLEAR IF 'SALES' ARE CREDITED AT 'SELLING PRICE' OR AT 'DISCOUNTED' RATE' WHICH IS A NORMAL FEATURE OF THIS TRADE AND IN THE ABSENC E OF CATEGORICAL ANSWER TO THIS AND EVEN AFTER GIVING THE ASSESSEE MAXIMUM MARGIN OF SHOWING SALES AT DISCOUNTED RATE OF 2/3 OF THE 'SELLING' PR ICE' THE INFLATION OF PAPER PURCHASES COME TO RS.3 CRORES (RS. 4.5 CRORES MINUS 1/3 OF THIS) MANIFOLD ON ACCOUNT OF GROSS SUPPRESSION OF TURNOVER AND SAL ES BASED UPON CONSUMPTION OF PAPER SHOWN AS CONSUMED IN THE PUBLI SHING OF BOOKS ARE ALSO BASED ON NO EVIDENCE BROUGHT ON RECORD BY HER AND THE SAME ARE BASED ON MERE PRESUMPTION. . THEN SHE HERSELF HAS NOT RELIED UPON HER OWN VIEW B Y MAKING THE FOL1OWING OBSERVATIONS IN LAST 140E OF PARA 1 AT PA GE 13 OF HER IMPUGNED ORDER: 'HOWEVER, NO SUCH VIEW IS BEING DRAWN'. ON MERITS, SUCH OBSERVATIONS ARE UNTENABLE BECAUSE BEFORE DRAWING ADVERSE INFERENCES, THE LD. CIT HAD NOT CONFRONTED THE ASSESSEE WITH THE SAME NOR SHE HAD BROUGHT ANY EVIDENCE ON RECORD TO PROVE HER INFERENCE. ITA NO. 3351/DEL/2013 13 17. AS REGARDS THE OBSERVATIONS THAT ALL WAGES WER E NOT DULY VOUCHED OR SUPPORTED BY ANY MATERIAL EVIDENCE AND NOTHING HAS BEEN BROUGHT ON RECORD SO AS TO ASCERTAIN THE CORRECTNESS OF THE SA ME ARE ALSO FACTUALLY INCORRECT FIRSTLY BECAUSE THIS ISSUE WAS NOT MENTIO NED IN THE SNOW CAUSE NOTICE AND SECONDLY BECAUSE THIS ISSUE WAS NEVER DI SCUSSED IN F E COURSE OF 263 PROCEEDINGS FOR WHICH ON Y ONE EARNING 'WAS GIVEN AND EVEN ON THAT DATE SHE SIMPLY KEPT ASSESSEE) REPLY ON HER FI LE AND; TOLD THE COUNSEL SHRI PANKAJ GUPTA, CA THAT SHE WILL CONSIDER IT BEF ORE PASSING THE ORDER U/S 263. THE LD. CIT IS WHOLLY UNJUSTIFIED IN ASSUMING INFLA TED CONSUMPTION OF PAPER AT RS.3 CRORES AND THE ADDITION OF RS.2,95,58,101/- AS MADE BY THE LD. CIT TOWARDS THE ASSESSABLE INCOME OF THE APPELLANT IS WHOLLY UNJUSTIFIED, ILLEGAL AND UNCALLED FOR ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE AND SO IS THE INITIATION OF PENALTY NOTICE U/S 271 (1 )(C) OF THE I.T. ACT. THE LD. CIT HAD NOT GIVEN ANY NOTICE ON THE ISSUE TO TH E ASSESSEE. 18. AS REGARDS FRESH UNSECURED LOANS TO THE TUNE O F RS.12 06,69,799/- AND ALLEGED ABNORMAL SUNDRY CREDITORS S TO THE TUNE OF RS. 3,80,20,903/- THE ID. CIT IS WRONG IN ISSUING THE FOLLOWING DIREC TIONS TO THE AO WITH REGARD TO FRESH UNSECURED LOANS, SUNDRY CREDITORS, ENTRIES IN THE FIXED ASSETS RS.49,57,110/- AND RS.34,13,194/- BEING THE BALANCE CERTIFIED BY THE BANKERS AS 'ON 31/03/2008 AN NO SHOWN IN THE BA LANCE SHEET AND NOT REFLECTED IN THE RESPECTIVE ACCOUNTS AT THE ASS ESSEE: 'THE SAME ARE ALSO LIABLE TO BE ADDED IN THE INCOME TO THE INCOME OF THE ASSESSEE FOR WHICH THE AO MAY PROVIDE THE AS SESSEE REASONABLE OPPORTUNITY OF BEING HEARD AND RECONCILE THE DIFFERENCE WITH SUPPORTING EVIDENCE, IF ANY. ' ITA NO. 3351/DEL/2013 14 THE ABOVE ISSUE WAS NOT MENTIONED BY THE LD. CIT IN HER SECTION 263 NOTICE AS IS EVIDENT FROM PARA 3 AT PAGE 1 - 3 OF T HE IMPUGNED SECTION 263 ORDER. IT IS BY NOW SETTLED LAW THAT UNLESS SPECIFI C NOTICE IS ISSUED U/S 263 ON A PARTICULAR ISSUE, THE SAME CANNOT BE DISCUSSED OR DECIDED IN SECTION 263 ORDER. THE APPELLANT RELIES ON DELHI HIGH COURT JUDGMENT IN 317 ITR 249 CLT VS. COUNTIMETERS ELECTRICALS PVT LTD IN WHI CH IT WAS HELD AS UNDER: 'THE TRIBUNAL WAS ALSO RIGHT IN HOLDING THAT THE CO MMISSIONER DID NOT EVEN CALL FOR ANY EXPLANATION OF THE ASSESSEE A ND THE ISSUE OF FULFILLMENT OF THE CONDITIONS OF SECTION 80-IA HAD NOT BEEN PART OF THE SHOW CAUSE NOTICE. THEREFORE, IT COULD NOT FORM THE BASIS FOR REVISION OF ASSESSMENT ORDER UNDER SECTION 263'. 19. MOREOVER, IN RESPONSE TO SECTION 263 NOTICE, TH E APPELLANT HAD FILED A REPLY DATED 25/02/2013 COPY PLACED AT PAGES 58-59 ALONGWITH THE FOLLOWING: A) COMPARATIVE CHART OF TRADING RESULTS PAGE 60. B) DETAILS OF UNSECURED LOANS AS ON 31/03/2008 AT P AGE 61 ALONGWITH CONFIRMED COPIES OF THEIR ACCOUNTS FROM PAGES 62 - 77 C) DETAILS OF SUNDRY CREDITORS AT PAGE 78 ALONGWITH THEIR COMPLETE CONFIRMED COPIES OF ACCOUNTS AT PAGES 79 - 128. THE LD. CIT HAD NEITHER CONTROVERTED NOR DISPROVED THE ABOVE DOCUMENTARY EVIDENCE. CONSEQUENTLY, THE IMPUGNED ORDER AS PASSED U/S 263 DESERVES TO BE CANCELLED. ITA NO. 3351/DEL/2013 15 5.2 THE ADDITIONAL SYNOPSIS FILED BY THE ASSEESSEE S COUNSEL ARE REPRODUCED HEREUNDER:- IN CONTINUATION OF OUR SYNOPSIS AS ALREADY FILED O N 19/03/2015, RELIANCE IS ALSO PLACED ON THE FOLLOWING PROPOSITION OF LAW AS LAID DOWN IN THE FOLLOWING CASE LAWS: 1. REVISIONAL JURISDICTIONAL JURISDICTION U/S 263 O F I.T. ACT CANNOT BE EXERCISED WHERE ENQUIRY AS MADE BY AO IS CONSIDERED AS INADEQUATE ENQUIRY IN THE OPINION OF CIT:- A) 335 ITR 83, CIT VS. ANIL KUMAR SHARMA (DELHI H.C .), IN WHICH IT WAS HELD AS UNDER: 'THERE IS A DISTINCTION BETWEEN 'LACK OF INQUIRY' A ND 'INADEQUATE INQUIRY'. IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961, MERELY BEC AUSE HE HAS A DIFFERENT OPINION IN THE MATTER. HELD, DISMISSING THE APPEAL, THAT THE PRESENT CASE WOULD NOT BE ONE OF 'LACK OF INQUIRY' EVEN IF THE INQUIRY WAS TE RMED INADEQUATE. THE TRIBUNAL FOUND THAT COMPLETE DETAILS WERE FILED BEFORE THE ASSESSING OFFICER AND THAT HE APPLIED HIS MIND TO T HE RELEVANT MATERIAL AND FACTS, ALTHOUGH SUCH APPLICATION OF M IND WAS NOT DISCERNIBLE FROM THE ASSESSMENT ORDER. THE TRIBUNAL HELD THAT THE COMMISSIONER IN PROCEEDINGS UNDER SECTION 263 ALSO HAD AIL THESE DETAILS AND MATERIAL AVAILABLE BEFORE HIM, BUT HAD NOT BEEN ABLE TO POINT OUT DEFECTS CONCLUSIVELY IN THE MATERIAL, FOR ARRIVING AT A CONCLUSION THAT PARTICULAR INCOME HAD ESCAPED ASSES SMENT ON ITA NO. 3351/DEL/2013 16 ACCOUNT OF NON-APPLICATION OF MIND: BY THE ASSESSIN G OFFICER. THE TRIBUNAL WAS RIGHT AND THE ORDER OF REVISION WAS NO T VALID. B) 332 ITR 167, CIT VS. SUNBEAM AUTO LTD. (DELHI HI GH COURT), IN WHICH AT PAGE 168, IT WAS HELD AS UNDER: 'THE ASSESSING OFFICER IN THE ASSESSMENT ORDER IS N OT REQUIRED' TO GIVE A DETAILED REASON IN RESPECT OF EACH AND EVERY ITEM OF DEDUCTION. ETC. WHETHER THERE WAS APPLICATION OF MI ND BEFORE AILOWING THE EXPENDITURE IN QUESTION HAS TO BE SEEN . IF THERE WAS ANY INQUIRY, EVEN INADEQUATE THAT WOULD NOT BY ITSE LF GIVE OCCASION TO THE COMMISSIONER TO PASS ORDERS UNDER SECTION 26 3 OF THE INCOME-TAX ACT, 1961, MERELY BECAUSE HE HAS A DIFFE RENT OPINION IN THE MATTER. IT IS ONLY IN CASES OF LACK OF INQUIRY THAT SUCH A COURSE OF ACTION WOULD BE OPEN'. C) 137 TT J 67, RAMAKANT SINGH VS. CIT (LTAT PATNA ), RELEVANT PORTION FROM PAGE 68 IS REPRODUCED BELOW: ~ . 'HENCE, IT CANNOT BE SAID THAT NO ENQUIRY WAS MADE BY THE AO IN THIS REGARD. AT THE WORST, IT CAN BE A CASE OF INAD EQUATE ENQUIRY BUT IT IS NOT A CASE OF NO ENQUIRY AS ALLEGED BY THE RE VENUE. IN THE CASE OF INADEQUATE ENQUIRY. BY THE AO, ACTION UNDER S. 2 63 IS NOT PERMITTED'. 2. THERE IS PRESUMPTION OF APPLICATION OF MIND BY A O WHERE ORIGINAL/REGULAR ASSESSMENT HAS BEEN MADE U/S 143(3 ) OF I.T. ACT AND ,SUCH PRESUMPTION IS REBUTTABLE ONLY ON THE BAS IS OF SOME MATERIAL:- ITA NO. 3351/DEL/2013 17 A) 333 ITR 547, CIT VS. HONDA SIEL POWER PRODUCTS L TD. (DELHI H.C), IN WHICH IT WAS HELD AS UNDER: 'WHEN A REGULAR ASSESSMENT IS MADE UNDER SECTION 14 3(3), A PRESUMPTION CAN BE RAISED THAT THE ORDER HAS BEEN P ASSED UPON AN APPLICATION OF MIND. NO DOUBT, THIS PRESUMPTION IS REBUTTABLE, BUT THERE MUST BE SOME MATERIAL TO INDICATE THAT THE AS SESSING OFFICER HAD NOT APPLIED HIS MIND'. B) 297 ITR 99, CIT VS. MAHENDRA KUMAR BANSAL (JURIS DICTIONAL ALLAHABAD H.C.), IN WHICH AT PAGE 100, IT WAS HELD AS UNDER: 'THAT FOR THE ASSESSMENT YEAR 1983-84, THE ASSESSME NT HAD BEEN MADE UNDER SECTION 143(3)/148 OF THE ACT. THE DATE FIXED BY THE ASSESSING AUTHORITY WAS JULY 18,1986, AND ON THAT V ERY DATE THE ASSESSEE'S COUNSEL HAD FILED CERTAIN DETAILS AND EV IDENCE AND AFTER DISCUSSION THE ASSESSMENT WAS FRAMED. EVEN THOUGH I N THE ASSESSMENT ORDER THERE WAS NO MENTION THAT DETAILED ENQUIRY HAD BEEN MADE NOR ANY EVIDENCE HAD BEEN DISCUSSED YET T HE RETURNED INCOME WAS ACCEPTED. THE ORDER WAS NOT ERRONEOUS AN D COULD NOT BE REVISED'. REVISIONAL POWER U/S 263 CANNOT BE JUSTIFIED ON MER E SUSPICION: A) 258 ITR 331, CIT VS. GIRDHARI LAL (RAJASTHAN H.C .), IN WHICH IT WAS HELD AS UNDER: 'IT IS NOT ALWAYS NECESSARY THAT EVERY ASSESSEE IN THE LINE OF THE BUSINESS SHOULD HAVE THE SAME RATE OF PROFIT. THE T RIBUNAL WAS CORRECT IN CANCELLING THE ORDERS UNDER SECTION 263 OF THE INCOME-TAX ACT FOR THE ASSESSMENT YEARS 1977-78, 1979-80 TO 19 81-82'. ITA NO. 3351/DEL/2013 18 B) 230 ITR 695, CIT VS. AMT. D. VALLIAMMAL, IN WHIC H IT WAS HELD AS UNDER: 'HELD THAT THE COMMISSIONER OF INCOME-TAX SET ASIDE THE ORDER PASSED BY THE INCOME-TAX OFFICER ON THE GROUND THAT VERIFICATION OF ACCOUNT WAS NEEDED. THIS WOULD NOT BE A GROUND FOR INVOKING JURISDICTIO N UNDER SECTION 263'. C) 250 ITR 747, CIT VS. GEORGE WILLIAMSON (ASSAM) L TD. IN WHICH IT WAS HELD AS UNDER: 'HELD, THAT THE ASSESSING OFFICER ACCEPTED THE RETU RN FILED BY THE ASSESSEE WHEREBY DEDUCTION OF THE LEASE RENT WAS AC CEPTED. IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX, IT WAS NOW HERE MENTIONED AS TO WHAT THE MATERIAL WAS WITH HIM TO O RDER ENQUIRY INTO THE MATTER. THEREFORE, NO PROCEEDINGS COULD B E TAKEN UNDER SECTION 263 ON ASSESSMENT ORDER COMPLETED UNDER SEC TION 143(1). THE TRIBUNAL WAS JUSTIFIED IN QUASHING THE ORDER PA SSED BY THE COMMISSIONER OF INCOME-TAX UNDER SECTION 263.' 4. EVEN IF INFERENCE MADE BY THE AO BASED ON THE MA TERIAL TAKEN ON RECORD IS DEBATABLE OR DIFFERENT FROM THE OPINION OF CIT, SECTION 263 CANNOT BE INVOKED:- A) 350 ITR 555, CIT VS. DLF LTD. (DELHI H.C.) IN WH ICH IT WAS HELD AS UNDER: 'IT IS NOT MERE PREJUDICE TO THE REVENUE, OR A MERE ERRONEOUS VIEW WHICH CAN BE REVISED, UNDER SECTION 263 OF THE INCO ME-TAX ACT, ITA NO. 3351/DEL/2013 19 1961. THERE SHOULD BE THE ADDED ELEMENT OF 'UNSUSTA INABILITY' IN THE ORDER OF THE ASSESSING OFFICER, WHICH CLOTHES THE C OMMISSIONER WITH JURISDICTION TO ISSUE NOTICE, AND PROCEED TO MAKE A PPROPRIATE ORDERS'. B) 313 ITR 65, CIT VS. K.K. CONSTRUCTION CO. (GUJAR AT H.C.), IN WHICH HIT WAS HELD AS UNDER: 'HELD, DISMISSING THE APPEAL, THAT SINCE ALL THE NE CESSARY DETAILS WERE FURNISHED TO THE ASSESSING OFFICER, THERE WAS NO REASON FOR THE COMMISSIONER TO INVOKE THE REVISIONAL JURISDICTION UNDER SECTION 263 OF THE ACT. THE ASSESSING OFFICER HAD TAKEN A PARTI CULAR VIEW ON THE BASIS OF THE EVIDENCE PRODUCED BEFORE HIM. ON THE B ASIS OF THE EVIDENCE BEFORE THE ASSESSING OFFICER AND MATERIALS WHICH WERE COLLECTED BY THE COMMISSIONER IN REVISIONAL PROCEED INGS, THE COMMISSIONER HAD TAKEN A DIFFERENT VIEW. HOWEVER, I N THE REVISIONAL PROCEEDINGS UNDER SECTION 263, IT WAS NO T OPEN FOR THE COMMISSIONER TO TAKE SUCH A DIFFERENT VIEW. THERE W AS NOTHING ON RECORD TO SUGGEST THAT THE VIEW TAKEN BY THE ASSESS ING OFFICER WAS UNSUSTAINABLE IN LAW. [THE SUPREME COURT HAS DISMISSED THE SPECIAL LEAVE PETITION FILED BY THE DEPARTMENT AGAINST THIS DECISION: SEE 313 ITR ( ST.)5- ED.]'. 5. IF NO DEFECTS HAD BEEN POINTED OUT IN THE ACCOU NT BOOKS, THE SAME COULD NOT BE REJECTED AND NO ADDITION COULD BE MADE TO THE INCOME OF THE ASSESSEE:- ITA NO. 3351/DEL/2013 20 A) 76 ITR 365, ST. TERASA'S OIL MIL VS. CIT (KERALA H.C.), IN WHICH IT WAS HELD AS UNDER: 'ACCOUNTS REGULARLY MAINTAINED IN THE COURSE OF BUS INESS HAVE TO BE TAKEN AS CORRECT UNLESS THERE ARE STRONG AND SUFFIC IENT REASONS TO INDICATE THAT, THEY ARE UNRELIABLE. THE DEPARTMENT HAS TO PROVE SATISFACTORILY THAT THE ACCOUNT BOOKS ARE UNRELIABL E, INCORRECT OR INCOMPLETE BEFORE IT CAN REJECT THE ACCOUNTS. REJEC TION OF ACCOUNTS SHOULD NOT BE DONE LIGHTHEARTEDLY. THOUGH IT MAY NO T BE POSSIBLE TO LAY DOWN THE EXACT CIRCUMSTANCES IN WHICH THE ACCOU NTS SHOULD BE REJECTED AS UNRELIABLE OR INCORRECT, THE ACCOUNTS M AY BE REJECTED AS UNRELIABLE IF IMPORTANT TRANSACTIONS ARE OMITTED TH EREFROM OR IF PROPER PARTICULARS AND VOUCHERS ARE NOT FORTHCOMING OR IF THEY DO NOT INCLUDE ENTRIES RELATING TO A PARTICULAR CLASS OF BUSINESS. THE ASSESSEE SHOULD BE GIVEN REASONABLE OPPORTUNITY FOR OFFERING EXPLANATIONS REGARDING THE DEFECTS IN ACCOUNTS AND, ON HIS FAILURE TO SATISFACTORILY THE DEFECTS, THE DEPARTMENT WOULD BE JUSTIFIED IN REJECTING THE ACCOUNTS. THE REJECTION OF ACCOUNTS A ND ASSESSMENT TO THE BEST OF JUDGMENT ARE TWO DISTINCT AND SEPARATE PROCESS. THE MERE FACT THAT THERE WAS WIDE DISPARITY IN THE CONSUMPTION OF ELECTRICITY WOULD NOT JUSTIFY THE REJECTION OF THE ACCOUNTS WITHOUT ANY OTHER SUPPORTING CIRCUMSTANCES, BECAUSE SUCH VARIAT ION COULD BE DUE TO VARIOUS FACTORS OUTSIDE THE CONTROL OF THE A SSESSEE'. B) 95 ITR 401, MOTIPUR SUGAR FACTORY (P) LTD. VS. C IT, (PATNA H.C.). AT PAGE 407 SUPREME COURT JUDGMENT IN THE CA SE OF AVADH SUGAR MILLS LTD. VS. UNION OF INDIA (UNREPORTED) HA D BEEN REFERRED TO FROM WHICH FOLLOWING OBSERVATIONS HAD BEEN REPRODUC ED: ITA NO. 3351/DEL/2013 21 'IT HAS TO BE BORNE IN MIND THAT THE RECOVERY OF SU GAR MUST NECESSARILY DEPEND UPON THE MILLING PERFORMANCE. IT CANNOT BE ASSUMED THAT EVEN IN AN ORDINARILY WELL RUN FACTORY THE PERFORMANCE WOULD BE UNIFORMLY GOOD OR UNIFORMLY THE SAME.' C) 291 ITR 214, PYARELAL MITTAL VS. ACIT, (GAUHATI H.C.), IN WHICH IT WAS HELD AS UNDER: 'INCOME HAS TO BE DEDUCED FROM THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS FURNISHED AND THERE IS NO SCOPE FOR ANY C ONJECTURES AND SURMISES. IF THE METHOD OF ACCOUNTING IS NOT FAULTY AND THERE IS NO SUPPRESSION OF MATERIAL FACTS, THE AUTHORITY CANNOT EMBARK UPON A SPECULATIVE ASSESSMENT OF NOTIONAL PROFITS. D) 371 ITR 164, CIT VS. NUCHEM LTD. (P & H H.C.), I N WHICH AT PAGE 166, IT WAS HELD AS UNDER: 'THAT IN DELETING THE ADDITION BY REJECTING THE ACC OUNT, THE COMMISSIONER (APPEALS) AND THE TRIBUNAL HAD FOLLOWE D THE EARLIER DECISION IN THE CASE OF THE ASSESSEE FOR THE ASSESS MENT YEAR 1993- 94 WHICH WAS NOT SHOWN TO HAVE BEEN UPSET BY ANY HI GHER COURT. THE DELETION OF THE ADDITION WAS JUSTIFIED'. E) 75 ITR 207, RB. BANSI LAL ABIR CHAND SPINNING & WEAVING MILLS VS. CIT (BOMBAY H.C.) F) 73 ITR 224, N. RAJA PULLAIAH VS. DEPUTY COMMERCI AL TAX OFFICER, AP. HIGH COURT. G) 74 ITR 279, VIJAYA TRADERS VS. CIT, (MYSORE H.C. ) ITA NO. 3351/DEL/2013 22 IN APPELLANT'S CASE, MERE HIGHER CONSUMPTION OF PAP ER AS ALLEGED BY THE LD. CIT WAS NO GROUND TO REJECT THE ACCOUNTS PARTICULARLY WHEN BOTH THE GROSS PROFIT RATE AND NET PROFIT RATE WHEN COMPARED WITH EARLIER YEARS WAS BETTER. MOREOVER, THIS ISSUE WAS NOT MENTIONED BY THE LD. CIT IN HER SECTION 263 NOTICE AND THEREFORE THE SAME CANNOT BE MADE THE BASIS FOR ADDITION OF RS. 3,00,00,000/- ON ACCOUNT OF INFLATED CONSUMPTION OF PAPERS FOR W HICH RELIANCE IS PLACED ON DELHI HIGH COURT JUDGMENT IN CIT VS. ASHI SH RAJPA 320 ITR 674 AND CIT VS. CONTIMETERES ELECTRICAL PVT. LT D. 317 ITR 249. 6. NON MAINTENANCE OR INCOMPLETE STOCK RECORDS DO NOT ENTITLE THE AO TO REJECT THE ACCOUNT BOOKS : A) 74 ITR 279, VIJAYA TRADERS VS. CIT, (MYSORE H.C. ) B) 26 ITR 159, PANDIT BROTHER VS. CIT (PUNJAB) IN APPELLANT'S CASE, DAY TO DAY STOCK REGISTER MAY NOT BE MAINTAINED DUE TO THE NATURE OF ITS BUSINESS BUT OP ENING AND CLOSING STOCK TALLY WITH QUANTITATIVE DETAILS WERE DULY MAI NTAINED AS REFLECTED AT PAGES 47-50 OF THE PAPER BOOK. MOREOVE R, SUCH METHOD OF ACCOUNTING INCLUDING STOCK ACCOUNTING HAS BEEN ACCEPTED BY THE DEPT. IN PREVIOUS YEARS AND THERE I S NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE DURING THE YEAR UNDER CONSIDERATION. COPIES OF FOLLOWING ASSESSMENT ORDER S AS PASSED ULS 143(3) IN APPELLANT'S CASE IN PREVIOUS YEARS ACCEPT ING THE TRADING RESULTS AS DECLARED ARE ENCLOSED: (I) ASSESSMENT YEAR 2005-06 ATTACHED AS ANNEXURE A. (II) ASSESSMENT YEAR 2006-07 ATTACHED AS ANNEXURE B. ITA NO. 3351/DEL/2013 23 COMPARATIVE CHART SHOWING GP AND NP RATE OF EARLIER YEARS IS PLACED AT PAGE 60 OF THE PAPER BOOK. 7. SECTION 263 CANNOT BE INVOKED BY IGNORING THE PR INCIPLE OF CONSISTENCY: ~ 338 ITR 435, CIT VS. ESCORTS LTD. (DELHI H.C.), I N WHICH IT WAS HELD AS UNDER: 'WHERE A FUNDAMENTAL ASPECT OF A TRANSACTION IS FOU ND TO HAVE PERMEATED THROUGH DIFFERENT ASSESSMENT YEARS AND TH IS FUNDAMENTAL ASPECT HAS STOOD UNCONTESTED THEN THE REVENUE CANNO T BE ALLOWED TO CHANGE ITS VIEW TAKEN IN EARLIER ASSESSMENT YEAR S UNLESS IT IS ABLE TO DEMONSTRATE A CHANGE IN CIRCUMSTANCES. HELD, THAT THE COMMISSIONER'S ORDER DID NOT CONTAIN A. FINDING TO THE EFFECT THAT THE STAND TAKEN BY THE ASSESSEE THAT TH E UNITS PURCHASED FROM THE UNIT TRUST OF INDIA HAD ACTUALLY BEEN PHYS ICALLY DELIVERED ALONG WITH EXECUTED TRANSFER DEEDS WAS FALSE. WITHO UT SUCH A FINDING THE ALLEGATION THAT THE TRANSACTIONS WERE S PECULATIVE COULD NOT BE SUSTAINED. THE FUNDAMENTAL NATURE OF THE TRA NSACTIONS WAS EXAMINED YEAR AFTER YEAR MORE IMPORTANTLY IN THE AS SESSMENT YEAR 1986-87 IT WAS SPECIFICALLY CONSIDERED BY THE COMMI SSIONER (APPEALS) AND IT REMAINED THE SAME. GIVEN THE FACT THAT THE ASSESSEE HAD BEEN ENGAGED IN THESE TRANSACTIONS IN THE PRECEDING ASSESSMENT YEARS, THE COMMISSIONER COULD HAVE HAD N O OCCASION TO HAVE RECOURSE TO THE REVISIONAL POWERS UNDER SECTIO N 263 OF THE ACT ON THE FUNDAMENTAL ASPECTS OF THE TRANSACTIONS IN I SSUE ON WHICH IN VIEW HAD BEEN TAKEN AND NOT SHOWN TO HAVE BEEN CHAL LENGED'. ITA NO. 3351/DEL/2013 24 8. AS REGARDS INCREASE IN FIXED ASSETS MADE DURING THE YEAR UNDER CONSIDERATION, THE SAME STANDS AUDITED AND CE RTIFIED ALONGWITH DEPRECIATION AS PER INCOME-TAX ACT BY THE TAX AUDITOR (REFER TO PAGE 26 OF THE PAPER BOOK) AND ALSO STAND S VERIFIED BY THE AO FROM THE BOOKS OF ACCOUNTS AND BILLS OF ADDITION S AS PRODUCED BEFORE HIM DURING THE COURSE OF ASSESSMENT PROCEEDI NGS AND PLACED AT PAGES 115 TO 126 OF THE PAPER BOOK. VIDE SR. 22 OF AO'S LETTER DATED 29/07/2010, COPY PLACED AT PAGES 36-38 , SUCH DETAILS OF FIXED ASSETS WERE SPECIFICALLY SOUGHT FO R BY THE AO AND THE SAME WERE FILED BEFORE VIDE LETTER DATED 20/08/ 2010 KINDLY SEE SR. NO. 22 AT PAGE 42 OF THE PAPER BOOK. 9. REGARDING BALANCE OF RS.34,13,194/- WITH PNB AS ON 31/03/2008, THE SAME STANDS INCLUDED AND REFLECTED IN THE AUDITED BALANCE SHEET AMOUNT OF RS.37,16,410/- (KIN DLY REFER TO PAGE 5 OF THE PAPER BOOK) AS ALSO EXPLAINED BEFORE THE AO VIDE LETTER DATED 20/08/201 0 (KINDLY SEE PAGE 39 OF THE PAPER BOOK). THE SAME WAS AGAIN EXPLAINED BEFORE THE LD. CIT VID E REPLY TO SECTION 263 NOTICE DATED 25/02/2013, COPY PLACED AT PAGES 58- 59 OF THE PAPER BOOK . 10. REGARDING LD. CIT'S ALLEGATION THAT REGARDING N P RATE OF 0.679% AS SHOWN BY THE APPELLANT, INTEREST INCOME T O THE TUNE OF RS.3,35,901/- BEING INCOME FROM OTHER SOURCES SHOUL D HAVE BEEN EXCLUDED FROM SUCH NP RATE CALCULATION. IF SUCH INT EREST INCOME IS TO BE EXCLUDED FROM NET PROFIT, THE REVISED NET PROFIT WOULD BECOME RS.3,69,889/- AND THE REVISED NET PROFIT RATE WOULD BECOME 0.36% WHICH IS STILL HIGHER THAN THE NET PROFIT RAT E OF LAST THREE YEARS ITA NO. 3351/DEL/2013 25 SHOWN AT PAGE 60 OF THE PAPER BOOK. HENCE, THE AO'S CATEGORICAL FINDING THAT BOTH GP RATE AS WELL AS NP RATE DURING THE YEAR UNDER CONSIDERATION WAS HIGHER THAN THE RESPECTIVE RATES IN PRECEDING YEARS CONTINUES TO BE CORRECT. 11. WITH REGARD TO UNSECURED LOANS AS TAKEN DURING THE YEAR UNDER CONSIDERATION, COMPLETE DETAILS WITH RESPECT TO THE SAME ALONGWITH THE PARTIES PAN DETAILS AND CONFIRMATIONS WERE DULY FILED BEFORE AO VIDE LETTER DATED 19/11/2010, COPY PLACE D AT PAGES 51-52. DETAILS OF THE SAME AS FILED BEFORE THE AO A RE PLACED AT PAGES 61-77 OF THE PAPER BOOK. HENCE, SUCH VERIFICA TION OF UNSECURED LOANS WAS DULY CARRIED OUT BY THE AO DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS. 12. WITH REGARD TO CREDITORS AS AT 3110312008, COMP LETE DETAILS WITH RESPECT TO SAME ALONGWITH THE PARTIES PAN DETA ILS AND CONFIRMATIONS WERE DULY FILED BEFORE AO VIDE LETT ER DATED 19/11/2010, COPY PLACED AT PAGES 51-52. DETAILS OF THE SAME AS FILED BEFORE THE AO ARE PLACED AT PAGES 78-113 OF T HE PAPER BOOK. HENCE, SUCH VERIFICATION OF CREDITORS WAS DULY CARR IED OUT BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. . CONSEQUENTLY, THE IMPUGNED ORDER ULS 263 OF I.T. AC T DESERVES TO BE QUASHED/CANCELLED. 6. ON THE CONTRARY, LD. DR RELIED UPON THE ORDER PASSED BY THE LD. CIT DATED 08.3.2013 PASSED UNDER SECTION 263 OF THE I.T. ACT AND REQUESTED THAT THE SAME MAY BE UPHELD. ITA NO. 3351/DEL/2013 26 7. FOR THE SAKE OF CONVENIENCE THE CONTENTS OF THE ORDER DATED 08.3.2013 PASSED U/S. 263 OF THE I.T. ACT PASSED BY THE LD. C IT ARE REPRODUCED HEREUNDER:- 2. ON EXAMINATION OF RECORDS, IT WAS FOUND THAT T HE ASSESSMENT WAS DONE WITHOUT PROPER ENQUIRY IN SO FAR AS DISCUSSED IN SUBSEQUENT PARAS. 3. ACCORDINGLY, NOTICE UNDER SECTION 263 OF THE IN COME-TAX ACT, 1961 WAS ISSUED POINTING OUT AS FOLLOWS:- A) THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PUBLI SHING BOOKS ETC. AGAINST THE GROSS ~ RECEIPTS OF RS.10,39,27,634/-, PROFIT OF RS.7,05,7901- HAS BEEN DECLARED YIELDING NP RATE OF 0.679%. THIS WAS ONE OF THE REASONS FOR SELECTING THE CASE FOR SCRUT INY. HOWEVER, THE AO APPEARS TO HAVE ACCEPTED THE SAME WITHOUT PROPER EX AMINATION OR INQUIRY. C) FURTHER, THE ASSESSEE HAS CREDITED INTEREST TO T HE TUNE OF RS.335,901/- IN THE P&L ALC WHICH IS INCOME FROM OT HER SOURCES TO BE ASSESSED SEPARATELY. AFTER EXCLUDING THE SAME FROM THE BUSINESS INCOME, THE NET PROFIT FURTHER COMES DOWN FROM THE MARGINAL FIGURE TO A STILL LOW FIGURE WHEREAS AS PER THE ASSESSMENT ORDER. C) GP AND NP RATE SLIGHTLY HIGHER THAN THE OP AND N P RATES OF IMMEDIATE PRECEDING YEAR. THIS IS APPARENTLY CONTRADICTORY TO THE FACTS ON THE RECORDS. FRESH UNSECURED LOANS TO THE TUNE OF RS.1, 20,69,799/-, ABNORMAL SUNDRY CREDITORS TO THE TUNE OFRS.3,80,20, 903/- HAVE BEEN SHOWN WHICH WERE ALSO THE REASON FOR SELECTION OF C ASES FOR SCRUTINY. THE AO APPEARS TO HAVE ACCEPTED THE SAME WITHOUT PROPER INQUIRY. ITA NO. 3351/DEL/2013 27 D) INCREASE IN FIXED ASSETS TO THE TUNE OF RS.49,57 ,1 10/-- HAVE BEEN SHOWN WHICH WAS ALSO TO BE LOOKED INTO FROM DIFFERE NT ANGLES INCLUDING THE ACTUAL INVESTMENT, DATE OF ACTUAL USE, ADMISSIBILIT Y OF DEPRECIATION ETC. THE RECORDS, HOWEVER, APPEAR TO BE SILENT ON THE SAME. E) THE ASSESSEE HAD MAINTAINED CURRENT BANK A/C. NO . 2159001800000105 IN PUNJAB NATIONAL BANK, SPORTS GO ODS COMPLEX, DELHI ROAD, MEERUT. THE ASSESSEE HAD MADE FIXED DEP OSITS OF RS. 30,80,000/-- BY WAY OF AUTO SWEEP TRANSACTIONS FROM THE SAME BANK ACCOUNT. BUT, THE ASSESSEE HAD NOT SHOWN ANY FIXED DEPOSITS MADE DURING THE YEAR IN BALANCE SHEET AS ON 31.03.2008. THE CLOSING BALANCE OF BANK ACCOUNT SHOWED RS. 3,33,194.47. THE ASSESSE E HAD FILED A HAND WRITTEN BANK STATEMENT AND OTHER DETAILS SHOWN AT P AGE NO. 353, 354, 355 & 356. AS PER BANK STATEMENT PAGE NO. 356 FIXED DEPOSIT SH OWN NIL. AS PER BANK STATEMENT PAGE NO. 355 FIXED DEPOSIT MA DE RS. 30,80,000/-. BY WAY OF AUTO SWEEP TRANSACTIONS FROM THE AFORESAI D BANK ACCOUNT. AS PER PAGE NO. 354 CLOSING BANK BALANCE AS ON 31.03.2008 SHOWN RS. 3,33,194.47. TOTAL RS. 34, 13,194.47 AS PER PAGE NO. 353, THE MANAGER, PUNJAB NATIONAL B ANK, SPORTS COMPLEX, DELHI ROAD, MEERUT HAD CERTIFIED VIDE HIS LETTER DA TED 16/06/2008 ADDRESSED TO THE ASSESSEE, STATING THEREIN THAT : ITA NO. 3351/DEL/2013 28 'THIS TO CERTIFIED THAT THE BALANCE STANDING TO YOU R DEBIT I CREDIT IN THE ABOVE BANK ALC AT THE CLOSE OF BUSINESS ON 31.03.2008 WAS RS. 34,13,194.47 ONLY.' G) AS PER PAGE NO. 354, CLOSING BANK BALANCE SHOWED AS ON 31.3.2008 RS. 3,33,194.47 BUT, AS PER THE CERTIFICATE GIVEN B Y THE BANK MANAGER, AT PAGE NO. 353, CLOSING BALANCE AS ON 31.3.2008 RS. 34,13, 194.47. THERE IS CONTRADICTORY DIFFERENCE IN STATEMENTS AS GIVEN BY THE ASSESSEE AND AS GIVEN BY THE BANK MANAGER. IT IS CLEARLY SHOWS THAT THE ASSE SSEE HAS MADE FIXED DEPOSITS BY WAY OF AUTO SWEEP TRANSACTIONS AMOUNTING TO RS. 30,80,000/- FROM ITS CURRENT BANK ACCOUNT. THE ASSESSEE HAD PAID EXCESS INTEREST TO THE BANK. THE FIXED DEPOSITS OF RS. 30,80,000/- NOT REFLECTED IN LEDGER ACCOUNT OF BANK STATEMENT OF PUNJAB NATIONAL BANK (01.04.2007 TO 31 .03.2008) MAINTAINED BY THE ASSESSEE. HENCE, FIXED DEPOSITS RS. 30, 80,000/- MADE BY WAY OF AUTO SWEEP TRANSACTIONS IS TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE ULS 68 OF THE I.T. ACT. INCOME COMPUTED AS UNDER: NET INCOME AS PER ASSESSMENT ORDER RS. 7, 37,8 00 ADD: RS. 3, 35,901 INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES ADD: RS. 30, 80,000 FIXED DEPOSITS MADE BY WAY OF AUTO SWEEP TRANSACTIONS AS DISCUSSED ABOVE. ITA NO. 3351/DEL/2013 29 4. IN VIEW OF ABOVE, THE ORDER PASSED BY THE AO WAS FOUND TO BE ERRONEOUS AND JUDICIAL TO THE INTEREST OF REVENUE SINCE AT. T HE TIME OF THE ASSESSMENT THE AO WAS DUTY BOUND TO CALL FOR SUCH DETAILS AND EXAMINE THEM. IN THE CASE OF M/S. MALABAR INDUSTRIES, THE HON'BLE APEX COURT HAS HEL D THAT INCORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW WILL SATIS FY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN THE SAME CATEGORY FALL ORDER PA SSED WITHOUT APPLYING, THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APPLICATIO N OF MIND. 5. THE FUNDAMENTAL PRINCIPLES EMERGED FROM THE HO N'BLE APEX COURT JUDGEMENT IN MALABAR IND. CO. LTD VS. CIT (2000) 24 3 ITR 83 (SC) INCLUDE AS FOLLOWS: 1. AN INCORRECT ASSUMPTION OF FACTS OR INCORRECT AP PLICATION OF LAW WILL SUFFICE THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. 2. IF THE ORDER IS PASSED WITHOUT APPLICATION OF MI ND, SUCH ORDER WILL FALL UNDER THE CATEGORY OF ERRONEOUS ORDER. 5.1. FURTHER, IT HAS BEEN HELD IN CIT VS. V.N.M.A. RATHINASABAPATHY NADAR, (1995) 215 ITR 309, 315 (MAD.), THAT IF AN ORDER IS PASSED IN IGNORANCE WITHOUT TAKING INTO CONSIDERATION OF THE RELEVANT FACTS OR IS AFFECTED BY THE PRESENCE OF ANY IRRELEVANT FACT INTO CONSIDERATION, THE SAME IS ERRONEOUS. 5.2. IT IS BEYOND DISPUTE THAT, UNDER SECTION 263, THE COMMISSIONER DOES HAVE THE POWER TO SET ASIDE THE ASSESSMENT ORDER AND SEN D THE MATTER FOR A FRESH ASSESSMENT IF HE IS SATISFIED THAT FURTHER ENQUIRY IS NECESSARY, AND THAT THE ORDER OF THE AO IS PREJUDICIAL TO THE INTEREST OF THE REVENU E (SWARUP VEGETABLE PRODUCTS INDUSTRIES LTD. VS. CIT, (1991) 187 ITR 412, 415-41 6(ALI.)]. IN THAT CASE, REFUND OF EXCISE DUTY WAS RECEIVED BY THE ASSESSEE AND THE SA ME WAS PLACED IN THE SUSPENSE ACCOUNT AND NOT IN THE P&L ALC. SUCH AMOUN T OF REFUND WAS CLAIMED NOT ITA NO. 3351/DEL/2013 30 TO BE INCLUDED IN THE INCOME OF THE ASSESSEE BECAUS E, APART FROM THE ABOVE FACT, A LARGE PART OF THAT AMOUNT WAS CLAIMED BY A THIRD PARTY BY FILING A SUIT AND ALSO A WRIT PETITION AND THE SAME WERE PENDING. THE OFFI CER ACCEPTED THE CLAIM OF THE ASSESSEE AND DID NOT INCLUDE ANY PART OF THE AMOUNT SO REFUNDED IN THE ME OF THE ASSESSEE. IN EXERCISE OF ITS POWER UNDER SECTION 26 3, THE COMMISSIONER SET ASIDE THE ASSESSMENT ORDER AS THE SAME WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE BECAUSE THE CLAIM OF THE ASSESSEE WA S ACCEPTED WITHOUT PROPER ENQUIRIES. THE ACTION OF THE COMMISSIONER WAS UPHEL D BY THE HIGH COURT. IN THE FACTS OF UMASHANKAR RICE MILL VS. CIT (1991) 187 IT R 638-39 (ORI), THE TRIBUNAL WAS HELD JUSTIFIED IN UPHOLDING THE REVISIONAL ORDE R OF THE COMMISSIONER WHICH WAS PASSED BY THE COMMISSIONER WHO FELT THAT THERE SHOULD BE A FURTHER ENQUIRY. RELIANCE IS FURTHER PLACED ON THE FOLLOWING: I. JAGDISH KUMAR GULATI VS. CIT, 269 ITR 71 [ALL.) IN WHICH IT IS HELD THAT WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3), IT IS EXPECTED, FROM THE AO THAT HE WILL MAKE A DETAILED INQUIRY TO FIND OUT CORRECT IN COME OF THE ASSESSEE AND NOT TO FACTS PLACED BY THE ASSESSEE ON THEIR FACE VALUE. W HERE THE AO COMPLETE THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) AND ADM ITTED THAT HE COULD NOT MAKE PROPER INQUIRIES AS ASSESSMENT WAS BECOMING TI ME BARRED, THERE WAS VALID ASSUMPTION OF JURISDICTION UNDER SECTION 263 BY COM MISSIONER AND THE TRIBUNAL, IN SUCH A SITUATION, DID NOT COMMIT ANY ERROR IN LA W IN CONFIRMING THE ORDER OF CIT(A) FOR SETTING ASIDE THE ASSESSMENT AND DIRECTI NG THE AO TO MAKE AN ORDER OF ASSESSMENT. II. GEE VEE ENTERPRISES VS. ADDL.CIT, 99 ITR 375 (D EL.) IN WHICH IT IS HELD THAT THE COMMISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUMSTANCES OF THE CASE, ITO SHOULD HAVE MADE FUR THER INQUIRIES BEFORE ACCEPTING THE STATEMENTS MADE BY THE ASSESSEE IN HI S RETURN AND IT WAS OBSERVED ITA NO. 3351/DEL/2013 31 THAT REASON IS OBVIOUS. THE POSITION AND FUNCTIONS OF THE ITO ARE VERY DIFFERENT FROM THAT OF CIVIL COURT. 5.3. ON THE FACTS OF THE PRESENT CASE, IT IS EVIDE NT THAT THE AO ACCEPTED THE VERSION OF THE ASSESSEE WITHOUT MAKING ANY INQUIRY OR VERIFICATION, WHEREAS IT IS VERY WELL SETTLED THAT MERE FAILURE TO MAKE INQUIR IES MAKES AN ORDER ERRONEOUS. IN ORDER THAT THE COMMISSIONER MAY CONSIDER AN ORDE R TO BE 'ERRONEOUS' FOR THE PURPOSES OF SECTION 263, ERROR OF LAW MAY NOT BE AP PARENT ON THE FACT OF THE ORDER. THE COMMISSIONER MAY CONSIDER AN ORDER OF TH E AO TO BE ERRONEOUS NOT ONLY IF IT CONTAINS SOME APPARENT ERROR OF REASONIN G OR OF LAW OR OF FACT ON THE FACE OF IT BUT ALSO BECAUSE IT IS A STEREO-TYPED OR DER WHICH SIMPLY ACCEPTS WHAT THE ASSESSEE HAS STATED IN HIS RETURN AND FAILS TO MAKE ENQUIRIES WHICH ARE CALLED FOR IN THE CIRCUMSTANCES OF THE CASE [RAMPYARI DEVI SARAOGI VS. CIT (1968) 67 ITR 84 (SC) AND TARA DEVI AGGARWAL VS. CIT, (1973), 88 ITR 323 (SC). 5.4. IT IS NOT NECESSARY FOR THE COMMISSIONER TO MA KE FURTHER ENQUIRIES BEFORE CANCELLING THE ASSESSMENT ORDERS OF THE AO. THE COM MISSIONER CAN REGARD THE ORDER AS ERRONEOUS ON THE GROUND THAT IN THE CIRCUM STANCES OF THE CASE THE AO SHOULD HAVE MADE FURTHER INQUIRIES BEFORE ACCEPTING THE STATEMENTS MADE BY THE ASSESSEE IN HIS RETURN. THE REASON IS OBVIOUS. UNLI KE THE CIVIL COURT WHICH IS NEUTRAL TO GIVE DECISION ON THE BASIS OF EVIDENCE P RODUCED BEFORE IT, AN AO IS NOT ONLY AN ADJUDICATOR BUT IS ALSO AN INVESTIGATOR . HE CANNOT REMAIN PASSIVE IN THE FACE OF A RETURN WHICH IS APPARENTLY IN ORDER B UT CALLS FOR FURTHER INQUIRY. IT IS HIS DUTY TO ASCERTAIN THE TRUTH OF THE FACTS STATED IN THE RETURN WHEN THE CIRCUMSTANCES OF THE CASE ARE SUCH AS TO PROVOKE IN QUIRY. THE MEANING TO BE GIVEN TO THE WORD 'ERRONEOUS' IN SECTION 263 OF THE ACT EMERGES OUT OF THIS CONTEXT. THE WORD 'ERRONEOUS' IN THAT SECTION INCLU DES CASES WHERE THERE HAS ITA NO. 3351/DEL/2013 32 BEEN A FAILURE TO MAKE THE NECESSARY INQUIRIES [GEE VEE ENTERPRISES VS. ADDL.CIT, (1975) 99 ITR 375, 386 (DEL.)]. 5.5. IT IS INCUMBENT ON THE OFFICER TO INVESTIGATE THE FACTS STATED IN THE RETURN, WHEN CIRCUMSTANCES WOULD MAKE SUCH AN ENQUIRY PRUDE NT AND THE WORD 'ERRONEOUS' IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN INQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT B EEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF A LL THE FACTS STATED THEREIN ARE ASSUMED TO BE CORRECT. [DUGGAL & CO. VS. CIT, (1996) 220 ITR456, 459 (DEL. )] CIT VS. PUSHPA DEVI, (1987) 164 ITR 639 (PAT); CIT VS. SMT. RAMBHA DEVI, (1987) 164 ITR 658 (PAT); CIT VS. BELAL NISA, (1988) 171 ITR 643 (PAT); CIT VS. SMT. KAUSHALYA DEVI, (1988) 171 ITR 686 (PA T); CIT VS.BIBI KHODAIJA KHATOON, (1988) 171 ITR (SB.N. ) II (PAT); CIT VS. SMT. CHANDRAWATI DEVI, (1988) 171 ITR (SB.N .) III (PAT); CIT VS. SMT. DEVI, (1987) 59 CTR (PAT) 3; CIT VS. BHAGWANT KAUR, (1987) 63 CTR (PAT) 326; CIT VS. PUSHPA DEVI, (1988) 173 ITR 445 (PAT). 5.6. THE HON'BLE JURISDICTIONAL ITAT DELHI BENCH IN THE CASE OF SHRI VIRENDRA KUMAR GUPTA VS CIT IN ITA NO2595/D/2009 DATED 21/01 12011 RELYING UPON AFORESAID JUDGMENTS HAS HELD THAT THE FACTS OF THE CASE WERE IN PARI-MATERIA WITH ABOVE JUDGMENTS. FURTHER, ON CONSIDERATION OF THESE CASES THE HON'BLE ITAT ITA NO. 3351/DEL/2013 33 VIEWED THAT THE LD. CIT WAS RIGHT IN EXERCISING THE REVISIONARY JURISDICTION DISMISSING THE APPEAL FILED BY THE ASSESSEE. 5.7. IN VIEW OF THE FOREGOING, IT IS EVIDENT THAT THE ORDER PASSED BY THE AO IS ERRONEOUS ~ AS WELL AS PREJUDICIAL TO THE INTERESTS OF REVENUE FOR THE REASONS AS STATE~ ABOVE. 6. IN THE COURSE OF PROCEEDINGS U/S 263 SHRI PANKA J GUPTA, FCA & COUNSEL OF THE ASSESSEE ATTENDED AND FILED WRITTEN SUBMISS IONS AND THE CASE WAS DISCUSSED WITH HIM. 7. AS REGARDS POINT (A) AND (B) THE ASSESSEE IS A P UBLISHER OF BOOKS. AGAINST THE GROSS RECEIPTS OF RS.I03927634/- IT HAS RETURNED AN NP OF MERELY RS.705790/- YIELDING THE NP RATE 0.679% ONE OF THE MAIN REASONS FOR WHICH THE CASE WAS SELECTED FOR SCRUTINY WAS NEGLIGIBLE NP RATE. HOWEV ER THE ASST. RECORD SHOW THAT DESPITE THERE BEING A LARGE NO. OF DISCREPANCIES AN D DESPITE THEIR BEING THE BOOKS OF ALE INCORRECT, INCOMPLETE AND SUFFERING FR OM A NO. OF DISCREPANCIES PROVISIONS OF S.145(3) HAVE NOT BEEN INVOKED AND BO OK RESULTS HAVE BEEN ACCEPTED AS SUCH. FOLLOWING IS THE BRIEF DESCRIPTION WHEREBY THE TAX AUDITORS HAVE CATEGORICALLY STATED THAT BOOKS ARE NOT MAINTAINED IN THE MANNER SO AS TO GIVE A TRUE AND FAIR VIEW IN CONFORMITY WITH THE ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDIA. THE TAX AUDITORS IN ITS REPORT AT PARA VI HAVE CAT EGORICALLY STATED AS FOLLOWS:- 'IN OUR OPINION AND TO THE BEST OF OUR INFORMATION AND ACCORDING TO THE STATED THAT BOOKS ARE NOT MAINTAINED IN THE MANNER SO AS TO GIVE A TRUE AND FAIR VIEW IN CONFORMITY WITH THE ACCOUNTING PRI NCIPLES GENERALLY ACCEPTED IN INDIA. THE TAX AUDITORS IN ITS REPORT A T PARA VI HAVE CATEGORICALLY STATED AS FOLLOWS: EXPLANATIONS GIVEN TO US, THE ACCOUNTS: ITA NO. 3351/DEL/2013 34 READ WITH AND SUBJECT TO THE REMARKS THAT THE COMPA NY HAS NOT MAINTAINED QUANTITATIVE RECORDS AS MENTIONED IN NOT E NO. 2.2: CONFIRMATION OF PARTIES APPEARING UNDER THE HEAD, U NSECURED LOANS, RE CURRENT LIABILITIES, SUNDRY CREDITORS, SUNDRY DEBTO RS ETC NOT SHOWN TO 'AUDITORS AS MENTIONED IN NOTE 2.4 AND NON CREATION OF DEFERRED TAX ASSETS LIABILITIES AS MENTIONED IN NOTE NO. 2.6 OF THE NOTES READ WITH OTHER NOTES TO ACCOUNTS, IN THE MANNER SO REQUIRED AND GIVE A TRUE AND FAIR VIEW IN CONFORMITY WITH THE APPEARING THEREO N: GIVE THE INFORMATION REQUIRED BY THE COMPANIES ACT, 1956, ACCOUNTING PRI NCIPLES GENERALLY ACCEPTED IN INDIA:' IN THE NOTES OF ACCOUNT ON THE SIGNIFICANT ACCOUNTI NG POLICY THE AUDITORS HAVE FURTHER CATEGORICALLY STATED AS FOLLOWS: 'THE COMPANY HAS NOT MAINTAINED THE QUANTITATIVE RE CORDS OF RAW MATERIALS AND FINISHED GOODS AND AS SUCH INFORMATIO N AS REQUIRED IN PARA 3 AND 4C AND 4D OF PART II OF SCHEDULE VI TO THE COMPANIE S ACT, 1956 HAVE NOT BEEN DISCLOSED. ' FURTHER, AS PER PARA 2.3 THE COMPANY DID NOT DISCLO SE THE NAMES ON SMALL SCALE UNDERTAKINGS TO WHOM IT OWED EXISTING RS.L LAKH OUT STANDING MORE THAN 30 DAYS. MOREOVER, AS PER PARA 2.4 'THE CONFIRMATION OF BALA NCES OF PARTIES APPEARING UNDER THE HEADS UNSECURED LOAN, CURRENT LIABILITIES , SUNDRY DEBTORS AND LOANS AND ADVANCES WERE ALSO NOT OBTAINED BY THE ASSESSEE AND NOT SHOWN TO THE AUDITORS'. THE BUSINESS RESULTS AS SHOWN BY THE ASSESSEE IN IT S P&L ALC ARE NOT AT ALL ~ ASCERTAINABLE, VERIFIABLE OR ACCEPTABLE ESPECIALLY IN VIEW OF THE FACTS THAT NO QUANTITATIVE DETAILS HAVE' BEEN MAINTAINED OR FURNI SHED WHICH IS A MANDATORY ITA NO. 3351/DEL/2013 35 REQUIREMENT NOT ONLY UNDER THE COMPANY LAW BUT ALSO UNDER IT ACT AND THE SAME RENDERS ENTIRE BOOKS OF ACCOUNTS LIABLE FOR REJECTI ON UNDER SECTION 145(3) OF THE IT ACT AS THE BOOK RESULTS ARE NOT AT ALL VERIFIABLE O R ASCERTAINABLE OR CAN BE DEDUCTED FROM THE SAME. AS THE FINAL RESULTS AND BOOKS OF ACCOUNTS ARE REJE CTED UNDER SECTION 145(3) OF THE IT ACT, 1961 ON THE GROUNDS AS DISCUSSED ABOVE ARE ALSO NOT ACCEPTABLE ON THEIR FACTS WHEREBY A NEGLIGIBLE PROFIT HAS BEEN SHOWN WH EREAS THE PURCHASES AND EXPENSES DEBITED TO THE P&L ALC ARE HIGHLY INFLATED . THE TOTAL SALES SHOWN BY ASSESSEE ARE TO THE TUNE OF RS.103927633/- (QUANTIT ATIVE DETAILS NOT MAINTAINED AS DISCUSSED ABOVE). AGAINST THE SAME THE ASSESSEE HAS CLAIMED PURCHASES AS UNDER: FROM P&L ALC PURCHASES RS. 5,92,52,253/- ASSESSEE HAS SHOWN OPENING AS WELL AS CLOSING BALAN CE OF FINISHED AND SEMI FINISHED GOODS OFRS.51,35,265/- AND 2568138/- RESPE CTIVELY. IT HAS NOT SHOWN ANY OPENING OR CLOSING STOCK OF PA PERS. NOR IS THERE ANY SCHEDULE FOR PURCHASES AND HENCE ENTIRE PURCHASES A RE APPARENTLY SHOWN AS CONSUMPTION AND CONVERTING THE SAME TO AT LEAST SEM I FINISHED STAGE WHICH AGAIN DOES NOT APPEAR TO BE CORRECT. IN ANY CASE, EVEN WH ILE THE PURCHASES ARE TAKEN AS CONSUMPTION OF PAPER SUCH CONSUMPTION IS EVEN MO RE THAN THE PURCHASES AS THE CLOSING STOCK IS ABOUT HALF OF OPENING STOCK WH ICH COMPRISED OF FINISHED AND SEMI FINISHED GOODS. TOTAL SALES RS. 10,39,27,633/- ITA NO. 3351/DEL/2013 36 LESS: G.P. RS. 2,46,15,652/- COST OF SALE RS: 7,93,11,981/- CONSUMPTION OF PAPER RS. 5,92,52,253/- RATIO OF PAPER CONSUMED 74.70% AS PER THIS PERCENTAGE OF PAPER CONSUMPTION, THE CO NSUMPTION OF PAPER COMES TO AS HIGH AS 74.70 % WHICH IS EXTREMELY INFLATED. SINCE THE BOOKS OF THE ASSESSEE ARE UNRELIABLE FROM WHICH PROFIT COULD NOT BE ASCERTAINED, THE RATES OF PAPER PREVAILING DURING T HE YEAR UNDER CONSIDERATION WERE OBTAINED FROM OUTSIDE VENDORS WHICH SHOWED THE FOLLOWING PICTURE: F.Y. SIZE & WEIGHT OF PAPER PER APPROXIMATE RATE S OF PAPERS REAM OF 500 SHEETS A GRADE B GRADE 2007-08 20' X 30' , 11.2 KGS. RS. 40/- PER KG . RS. 37/- PER KG 2007-08 23' X 36', 15.4 KGS. RS. 40/- PER KG. RS . 37/- PER KG THE WEIGHT OF 500 SHEETS OF 23'X36' COMES TO 15.41 KG, ONE SHEET OF 23X36 MAKES 16 BOOK PAGES OF NORMAL BOOK SIZE AND 8 BIG PAGES OF A4 SIZE (32 AND 16 PAGES IN A BOOK WRITTEN ON BOTH THE SIDES OF A PAGE). WHILE WORKING AT THIS RATE, IN A 80 PAGE BOOK THE COST OF PAPER COME S TO MERELY RS.5/- OR AT BEST AT RS.7/- IF THE BEST QUALITY PAPER IS USED AND IF THE PAPER IS TAKEN AT THE MARKET RATE AND NOT AT A DISCOUNTED RATE. IN THIS WAY WHIL E WORKING OUT PAPER CONSUMPTION IN A BOOK OF 400 - 5OO PAGES, IT IS MAD E FROM THE COST OF PAPER ITA NO. 3351/DEL/2013 37 COMING TO THE PUBLISHER AT MERELY RS.30/- APPROX. W HEREAS THE SELLING COST OF A BOOK CONTAINING 400-S00 PAGES IS SHOWN AT RS.5OO- R S.800. IN CASE OF THE BOOK HAVING LESSER PAGES AND LESSER COST OR THE SEL LING PRICE, THE CORRESPONDING COST OF PAPER IS PROPORTIONATELY LOW WHICH CAN BE W ORKED OUT ON THIS IN THE LIGHT OF THE ABOVE, THE CLAIM OF CONSUMPTION OF PAPER CAN BE JUDGED WHEREBY THE PURCHASES AND CONSEQUENT CONSUMPTION IN CASE OF THE ASSESSEE COULD AT BEST BE NOT MORE THAN FOR RS.L.5 CRORE AS AGAINST WHICH IT HAS SHOWN THE CONSUMPTION OF PAPER AS FOLLOWS: UP RS. 39,418,379.51 EX UP RS. 65,76,393.00 TOTAL RS. 5,92,52,253/- THIS CONCLUSION WHICH IS BASED UPON THE MARKET RATE S OF PAPER AND THE CONSUMPTION THEREOF BASED UPON THE SIZE OF SHEET WH ICH ARE USED FOR PRINTING OF BOOKS, THE RATES THEREOF DURING THE YEAR UNDER CONS IDERATION FOR 'A' GRADE PAPER WHICH IS CONSIDERED TO BE THE BEST QUALITY PAPER FO R PUBLISHING OF BOOKS SHOWS THAT THE ASSESSEE HAS INFLATED ITS PURCHASES AND EX PENSES AT LEAST TO THE TUNE AND MAGNITUDE OF RS. 4.5CRORES MERELY ON THE BASIS OF P APER STATED TO HAVE BEEN CONSUMED VIS A VIS THE PAPER WHICH IS ACTUALLY CONS UMED FOR THE PRODUCTION OF BOOKS AS SHOWN IN THE BOOKS OF ACCOUNT. THIS INFLATION OF EXPENSES AND THEREBY THE SUPPRESS ION OF PROFIT BY RS.4.5 CRORES IS MERELY ON ACCOUNT OF INFLATED PAPER CONSUMPTION ON ACCOUNT OF BOGUS OR INFLATED PURCHASES. IN THE EVENT OF WORKING OUT THE TURNOVER OF THE ASSESSEE ON THE BASIS OF SUCH PURCHASE OF PAPER, THE SUPPRESSION WORKED O UT AT RS.4.5 CRORES WILL INCREASE SINCE THE BOOKS OF ALC OF THE ASSESSEE AR E NOT RELIABLE AND REJECTED AS ITA NO. 3351/DEL/2013 38 ABOVE, IT IS ALSO NOT CLEAR IF 'SALES' ARE CREDITED AT 'SELLING PRICE' OR AT 'DISCOUNTED RATE' WHICH IS A NORMAL FEATURE OF THIS TRADE. IN T HE ABSENCE OF A CATEGORICAL ANSWER TO THIS AND EVEN AFTER GIVING THE ASSESSEE M AXIMUM MARGIN OF SHOWING SALES AT DISCOUNTED RATE OF 2/3 OF THE 'SELLING PRI CE', THE INFLATION OF PAPER PURCHASES COME TO RS. 3 CRORES (RS. 4.5 CRORES - 1/ 3 OF THIS) MANIFOLD ON ACCOUNT OF GROSS SUPPRESSION OF TURNOVER AND SALES BASED UP ON CONSUMPTION OF PAPER SHOWN AS CONSUMED IN THE PUBLISHING OF BOOKS. HOWEV ER, NO SUCH VIEW IS BEING DRAWN. SINCE THE ASSESSEE HAS DEBITED A NUMBER OF O THER EXPENSES AS ALSO WAGES ALL OF WHICH ARE ALSO NOT DULY VOUCHED OR SUP PORTED BY ANY MATERIAL EVIDENCE AND NOTHING HAS BEEN BROUGHT ON RECORD SO AS TO ASCERTAIN THE CORRECTNESS OF THE SAME, THE ACTUAL PROFIT EARNED B Y THE ASSESSEE WILL FURTHER INCREASE BY SUBSTANTIAL AMOUNT THAN RS. 3 CRORES TA KEN BY CONSERVATIVE ESTIMATE OF PROFITS BASES UPON INFLATED PURCHASES ONLY. IN V IEW OF ABOVE AFTER REJECTING BOOKS OF ACCOUNTS U/S. 145(3) THE IT ACT 1961 AS DI SCUSSED ABOVE, THE SUPPRESSED INCOME OF THE ASSESSEE IS COMPUTED AS UN DER: ADDITION ON ACCOUNT OF INFLATED CONSUMPTION OF PAPE R RS. 3,00,00,000/- LESS: INCOME SHOWN RS. 7,37,800/- ADDITION ON ACCOUNT OF INFLATED CONSUMPTION OF PAPE R RS. 3,00,00,000/- TOTAL TOTAL TOTAL TOTAL RS. 2,92,62,200/ RS. 2,92,62,200/ RS. 2,92,62,200/ RS. 2,92,62,200/- -- - ADD: OTHER INCOME (INTEREST AS SHOWN IN P & L A/C) : RS. 3,35,901/- TOTAL TOTAL TOTAL TOTAL RS. 2,95,58,101 RS. 2,95,58,101 RS. 2,95,58,101 RS. 2,95,58,101/ // /- -- - THIS WILL MEAN AN ADDITION OF RS. 2,95,58,101/- WITH IN ITIATION OF PENALTY ULS 271(1)(C) OF THE I.T. ACT 1961 AS THE ASSESSEE HAS CONCEALED THE INCOME. THE A.O. IS DIRECTED TO ISSUE A FRESH DEMAND NOTICE AND CHAL LAN. ITA NO. 3351/DEL/2013 39 AS REGARDS SECOND PART OF POINT NO. (B), THERE ARE FRESH UNSECURED LOANS TO THE TUNE OF RS.12069799/- AND ABNORMAL SUNDRY CREDITORS TO THE TUNE OF RS.38020903/- WHICH WERE ALSO THE REASON FOR SELECT ION OF THE CASE FOR SCRUTINY ON THE ONE HAND WHILE AS SUCH THE ASSESSEE IS DUTY BOUND AND HEAVY ONUS LIES ON HIM TO EXPLAIN THE CREDIT ENTRIES INCLUDING THE LIA BILITIES APPEARING IN ITS BOOKS OF ACCOUNT BY ESTABLISHING IDENTITY, GENUINENESS AND C REDITWORTHINESS OF THE ALLEGED PARTIES. RELIANCE 'IN THIS CASE IS PLACED ON THE FO LLOWING CASE LAWS: (I) CIT VS. LA MEDICA (2001) 250 ITR -575 (DELHI) (II) SRI GANESH RICE MILLS VS. CIT (2007) 294 ITR 316 (A LLD.) (III) CIT VS. UNITED COMMERCIAL AND INDUSTRIAL CO.(199) 1 87 ITR 596 CAL. (IV) C.T VS PRECISION FINANCE PVT. LTD. (CAL) 208 ITR 465 (V) CIT VIS KORLAY TRADING CO. LTD. (CAL.) 232 ITR 820. (VI) KRISHNA KUMAR JBANB VIS ITO AND ANR (PUNJAB & HARYANA) 17 DTR 249 VII) M/S SEJAI INTERNATIONAL LTD VIS CL'I' MEERUT ( ALL.) APPEAL NO.306 OF2010. VIII) CIT VS DURGA PRASAD MORE, 82 ITR 540 (SC) IX) CLT VS P. MOBNAKALA, 291 ITR 278 (SC) X) CIT VS SUMATI DAYAL, 214, ITR 801 (SC) XI) ITO VS DIZA HOLDINGS PVT. LTD. 255 ITR 573 (KE RLA) (XII) CIT VS NOVA PROMOTERS AND FINLEASE PVT. LTD . 18 TAXMANN 217 (XIII) V.I.S P. (P) LTD. VS. CIT (MP), 265 ITR 202 FURTHER RELIANCE IS PLACED ON THE FOLLOWING CASE LA WS:- CIT VS. DEVI PRASAD VISWANATH PRASAD (SC) 72 ITR 19 4 ITA NO. 3351/DEL/2013 40 KALE KHAN MOHAMMED HANIF VS. CIT (SC) 50 ITR 1 RATANCBAND DIPCHAND VS. CIT(MP) 38 ITR 188 , CIT VS. MADURI RAJAIAHGARI KISTAIAH (AP) 120 IR 294 D.C.AUDDY & BROS. VS. CIT CAL) 28 ITR 713 S. KUMARASWAMY REDDIAR VS. CIT (KER) 40 ITR 590 GROVER FABRICS (INDIA) P. LTD. VS. CIT (P&H) 332 IT R 312 AS REGARDS (C) THE ENTRIES IN THE FIXED ASSETS RS. 4957110/- WAS TO BE LOOKED INTO FROM DIFFERENT ANGLES INCLUDING ACTUAL INVESTMENT, DATE OF ACTUAL USE, IF ANY, ADMISSIBILITY OF DEPRECIATION ETC. AND THE AO IS DI RECTED TO ENQUIRE THE SAME NOW. AS REGARDS (D) THE BALANCE OF RS.34,13,194/- CERTI FIED BY THE BANKERS AS ON IS NOT SHOWN IN THE BALANCE SHEET' AND ARE NOT REFLECT ED IN THE RESPECTIVE OF THE ASSESSEE. THE SAME ARE ALSO LIABLE TO BE ADDED IN T HE INCOME TO THE INCOME OF ASSESSEE FOR WHICH THE AO MAY PROVIDE THE ASSESSEE REASONABLE OPPORTUNITY OF BEING HEARD AND RECONCILE THE DIFFERENCE WITH SUPP ORTING EVIDENCE, IF ANY. 8. IN THE RESULT, THE ASSESSMENT ORDER PASSED BY TH E AO IS PARTLY REVISED AND PARTLY SET ASIDE WITH THE DIRECTION THAT A FRESH OR DER, AFTER EXAMINING THE ISSUES PROPERLY AND CONSIDERING ALL THE POINTS STATED ABOV E, AS ALSO AFTER CONSIDERING ALL EVIDENCES AND AFFORDING REASONABLE OPPORTUNITY TO THE ASSESSEE, BE PASSED BY THE AO EXPEDITIOUSLY. ITA NO. 3351/DEL/2013 41 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES ALONGWITH DOCUMENTARY EVIDENCE FILED BY THE LD. COUNSEL OF THE ASSESSEE IN THE SHAPE OF PAPER BOOK CONTAINING PAGE S 1 TO 128 IN WHICH HE HAS ATTACHED THE VARIOUS DOCUMENTS EVIDENCE WHICH THE A SSESSEE HAS PRODUCED BEFORE THE AO AS WELL AS BEFORE THE LD. CIT. AFTER CONSIDERING THE DOCUMENTS EVIDENCE FILED B THE LD. COUNSEL OF THE ASSESSEE A LONGWITH FINDING GIVEN BY THE LD. CIT AS WELL AS AO IN THEIR RESPECTIVE ORDERS . WE FEEL VERY MUCH RELEVANT TO REPRODUCE THE QUESTIONNAIRE / LETTER DATED 29.7.201 0 ISSUED BY THE AO TO THE ASSESSEE U/S. 142(1) OF THE I.T. ACT, 1961 REQUIRIN G INFORMATION FROM THE ASSESSEE AS UNDER:- SUB: INFORMATION REQUIRED VIS 142(1) OF THE I.T. A CT. 1961 FOR ASSTT. PROCEEDINGS FOR THE A. Y. 2008-09 - REG. - INSTRUCTIONS: 1. PLEASE FURNISH REPLY TO ALL THE QUESTIONS. IF SO ME QUESTIONS ARE NOT APPLICABLE, PLEASE STATE SO AND REASONS THEREOF. 2. YOUR REPLIES SHOULD B1E IN THE SAME ORDER AND SH OULD BEAR THE SAME NUMBER AS IN THE QUESTIONS. - 3. PLEASE SEND ALL THE REPLIES TOGETHER AND NOT IN PIECEMEAL. 4. IF THERE ARE ANNEXURE TO THE REPLIES, PLEASE PRO PERLY NUMBER THEM AND LINK THEM PROPERLY TO THE REPLY. 5. PLEASE STATE THE FACTS AND AVOID EVASIVE REPLIES . 6. SINGULAR REFERENCE WELL ALSO INCLUDE PLURAL. ITA NO. 3351/DEL/2013 42 IN CONNECTION WITH YOUR ASSESSMENT FOR A.Y. 2008-09 , YOU ARE REQUESTED TO SUBMIT / PRODUCE THE FOLLOWING DETAILS BEFORE THE U NDERSIGNED AT THE DATE FIXED FOR HEARING, WHICH IS INDICATED TOWARDS THE END OF THIS LETTER: 1. A DETAILED NOTE ON BUSINESS ACTIVITIES AND HISTO RY OF THE CASE ALONGWITH COMPLETE ADDRESSES OF ALL OFFICES INCLUDING BRANCH OFFICES AND SISTER CONCERNS OF THE COMPANY. PLEASE ALSO FURNISH A COPY OF MEMORAND UM & ARTICLE OF ASSOCIATION. 2. DETAILS OF MAJOR SHAREHOLDERS OF THE COMPANY GIV ING THEIR PERCENTAGE SHAREHOLDING & THEIR PAN & WARDLCIRCLE WHERE THEY A RE ASSESSED TO TAX. 3. NAME & ADDRESSES OFLALL CONCERNS, FIRMS, COMPANI ES ETC, WHEREIN THE CO. OR ANY OF ITS DIRECTORS ARE INTERESTED! HAVING SUBS TANTIAL INTEREST GIVING DETAILS OF SUCH INTEREST, IF ANY. 4. GIVE INFORMATION IN RESPECT OF ASSESSED/RETURNED INCOME FOR THE TWO PRECEDING YEARS ALONGWITH PHOTOCOPIES OF BALANCE SH EET AND P & L A/C FOR A. Y. 2007-08 AND ALSO FILE A COPY OF LAST SCRUTINY ASSE SSMENT ORDER. .' 5. PLEASE GIVE COMPARATIVE FIGURES OF TURNOVER, GR OSS PROFIT, NET PROFIT, G .P. RATE & N. P. RATE FOR THE LAST 3 YEARS ALONGWITH JU STIFICATION THEREOF. 6. DETAILS OF THE BANK ACCOUNTS/ FDS (WITH DETAILS OF INTEREST INCOME) ALONGWITH COPIES OF BANK STATEMENTS & RECONCILIATION, IF ANY. 7. A COPY OF AUDIT REPORT ALONGWITH ITS ANNEXURES. 8. DETAILS CHART (GIVING OP. BALANCE, ADDITION. IN TT. PAYABLE SPECIFYING RATE OF INTT. REPAYMENT & CLOSING BALANCE) OF UNSECURED LOA NS, CASH CREDITORS INCLUDING SQ. UP ACCOUNTS ALONGWITH THEIR COMPLETER-ADDRESSES & THEIR ASSTT. PARTICULARS. PLEASE ALSO FURNISH CONFIRMED COPIES OF ALCS THEREF ROM. PLEASE ALSO FURNISH ITA NO. 3351/DEL/2013 43 EVIDENCES REGARDING IDENTITY, GENUINENESS AND CREDI TWORTHINESS OF NEW LOAN CREDITORS AND SOURCES OF LOANS GIVEN BY THEM. 9. DETAILS OF SHARE APPLICATION MONEY/SHARE CAPITAL RAISED DURING THE YEAR GIVING COMPLETE ADDRESSES & ASSTT. PARTICULARS OF T HE PERSONS CONCERNED. PLEASE ALSO FURNISH CONFIRMED COPIES OF A/CS THERE FROM. A LSO GIVE DETAILS OF SHARES ALLOTTED, IF ANY. PLEASE ALSO FURNISH EVIDENCES REG ARDING IDENTITY, GENUINENESS AND CREDITWORTHINESS OF NEW SHARE APPLICATION CREDI TORS AND SOURCES OF AMOUNTS GIVEN BY THEM. 10. DETAILS OF LOANS/ADVANCES GIVEN TO THE PARTIES ' ALONGWITH THEIR COMPLETE ADDRESSES & THEIR ASSTT. PARTICULARS. PLEASE ALSO G IVE DETAIL OF INTEREST CHARGED THEREUPON, IF ANY SPECIFYING RATE OF INTEREST. ALSO , SPECIFY THE PURPOSE OF ADVANCES GIVEN ALONGWITH COPIES OF AGREEMENTS AND C OPIES OF ACCOUNTS. 11. DETAILS OF ALL LOAN AND ADVANCES GIVEN BY THE CO. WHERE PROVISIONS OF SECTION 2(22) (E) OF THE I.T. ACT ARE ATTRACTED. 12. INVENTORY OF OPENING AND CLOSING STOCK (BOTH Q UANTITATIVELY AS WELL AS QUALITATIVELY). ALSO GIVE BASIS OF VALUATION OF STO CK ALONGWITH SUPPORTING / DOCUMENTARY EVIDENCES AND PROVE THE AUTHENTICITY OF STOCK DECLARED. 13. MONTHWISE DETAILS OF SALES/RECEIPTS AND PURCHAS ES (BOTH QUANTITATIVELY AS WELL AS QUALITATIVELY). ALSO GIVE DETAILS OF PARTIE S (INDICATING AMOUNT OF PURCHASE OF SALE) THEIR COMPLETE ADDRESSES FROM L TO PURCHAS ES/SALES DURING THE YEAR HAS BEEN MADE. 14. SUBMIT DETAILS OF EXPENSES CLAIMED BY YOU. PLEA SE ALSO ESTABLISH BUSINESS EXPEDIENCY OF THESE EXPENSES AND PRODUCE BILLS/VOUC HERS. PLEASE ALSO GIVE DETAILS OF EXPENSES ON WHICH TDS HAS BEEN DEDUCTED. ITA NO. 3351/DEL/2013 44 15. PRODUCE BOOKS OF ACCOUNTS FOR VERIFICATION. 16. GIVE DETAILS OF EXPENSES INCURRED FOR INCREASIN G PAID UP SHARE CAPITAL AND TREATMENT OF THE SAME IN YOUR BOOKS OF A/CS. - 17. FURNISH DETAILS OF SECURED LOAN TAKEN BY YOU. 18. GIVE DETAILS OF SOURCE OF UNSECURED LOAN, CRED ITORS, WITH DETAILS OF INTEREST PAID TO THEM (IF ANY), RATE OF INTEREST, TDS ON THE SAME. 19. SALES MONTHWISE - PARTYWISE DETAILS. 20. DETAILS OF VALUATION OF CLOSING STOCK AND CLOS ING STOCK-METHOD OF VALUATION AUTHENTICITY OF STOCK DECLARED. 21. MATERIAL PURCHASED-PARTYWISE DETAILS, ITEM, AM OUNT. 22. FURNISH BILLS FOR ADDITIONS MADE TO FIXED ASSET S AND WHEN THE ASSETS WERE PUT USE FOR PURPOSE OF BUSINESS. 23. CALCULATION OF MAT LIABILITY AS PER S. 115JB. 24. JUSTIFY ALLOWABILITY OF PAYMENT TO PERSONS SPE CIFIED U/S 40A (2)(B). 25. COMPLETE DETAILS OF THE CURRENT LIABILITIES. GI VE DETAILS OF NAMES & ADDRESSES OF SUNDRY CREDITORS WITH COPY OF CONFIRMED NOS. OF PARTIES WITH O/S BALANCE EXCEEDING RS. 1,00,000/-. ALSO NAMES & ADDRESS OF P ARTIES WHO HAVE MADE ADVANCE AGAINST SALE, DATE OF SALE. 26. FURNISH COPY OF CHALLAN FOR PREPAID TAXES PAID BY YOU. YOUR CASE IS FIXED FOR HEARING ON DATE 20.8.2010 A T 4.30 PM. FORMAL NOTICE U/S 142(1) OF THE I.T. ACT IS ENCLOSED HEREW ITH. ITA NO. 3351/DEL/2013 45 9. IN RESPONSE TO THE AFORESAID LETTER/QUESTIONNAIR E DATED 29.7.2010 ASSESSEE FILED ITS REPLY DATED 20.8.2010. FOR THE SAKE OF CONVENIENCE, THE CONTENTS OF THE REPLY ARE REPRODUCED AS UNDER:- REPLY TO YOUR HONOUR'S QUERRIES RAISED VIDE NOTICE U/S 143(2)/142(1) DATED 29TH JULY 2010 : RESPECTED MADAM, IN RESPONSE TO YOUR HONOUR'S NOTICE DATED 29TH JULY 2010, THE ASSESSEE BEGS TO SUBMIT AS UNDER: I. BUSINESS ETC. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PUBLICAT IONS OF BOOKS. THE DETAILS ARE AT PAGE NO. 416. THE COPY OF MEMORANDUM AND ARTICLE S OF ASSOCIATION ARE AT PAGE NO. 404 TO PAGE NO. 415. 2. SHAREHOLDERS: THE DETAILS ARE AT PAGE NO. 403 3. DIRECTORS: THE DETAILS ARE AT PAGE NO. 402 4. ASSESSED/RETURNED INCOME FOR LAST TWO YEARS ETC .: THE DETAILS ARE AT PAGE NO. 401 THE COPY OF BALANCE SHEET AS AT 31.3.2005 IS AT PAG E NO.388.~ TO PAGE NO. 400. ITA NO. 3351/DEL/2013 46 THE COPY OF BALANCE SHEET AS AT 31.3.2006 IS AT PAG E NO. 375 TO PAGE NO. 387. THE COPY OF BALANCE SHEET AS AT 31.3.2007 IS AT PAG E NO. 362 TO PAGE NO. 374 THE COPY OF LAST SCRUTINY ORDER FOR ASSTT. YEAR 200 6-07 ALONG WITH ORDER OF C.IT. (APPEALS) ARE AT PAGE NO. 353 TO PAGE NO. 361. 5. COMPARATIVE FIGURES FOR LAST THREE YEARS: THE LIST IS AT PAGE NO. 357 6. BANK ACCOUNTS: THE COMPLETE DETAILS OF BANK ACCOUNTS IN ASSESSEE'S LEDGER; COPY OF BANK STATEMENTS FOR THE WHOLE YEAR FROM 1.4.2007 TO 31.3 .2008, BANK RECONCILIATION STATEMENT AS AT 31.3.2008 ARE AT PAG E NO. 120 TO PAGE NO. 356 7. AUDIT REPORT: F.Y. 2007-08 L: A COPY OF AUDITED ANNUAL ACCOUNTS FOR THE YEAR ENDE D 31.3.2008 IS AT PAGE NO . 107 TO PAGE NO. 119. A COPY OF TAX AUDIT REPORT FOR ASSTT. YEAR 2008-09 IS AT PAGE NO. 87 TO PAGE 106. A COPY OF STATEMENT OF INCOME FOR ASSTT. YEAR 2008- 09 IS AT PAGE NO 88 8. UNSECURED LOANS: THE COMPLETE DETAILS IN THE TABULAR FORM IS AT PAGE NO .. 85 TO PAGE NO. - ITA NO. 3351/DEL/2013 47 THE CONFIRMATION OF FRESH DEPOSITS DURING THE YEAR ALONG WITH COPY OF BANK PASS BOOK BANK STATEMENTS AND COPY OF THEIR INCOME TAX R ETURN FOR ASSTT. YEAR 2008-2009 WILL BE PRODUCED ON THE NEXT HEARING. 9. SHARE APPLICATION MONEY/INCREASE IN SHARE CAPIT AL: THERE HAS BEEN NO INCREASE IN SHARE CAPITAL DURING THE YEAR. IT WAS RS. 26 LACS ON 31.3.2007 AS WELL AS ON 31.3.2008. NO SHARE APPL ICATION MONEY WAS RECEIVED DURING THE YEAR ENDED 31 ST MARCH 2008 . 10. LOANS AND ADVANCES (DR.) : THERE ARE NO LOANS AND ADVANCES EXCEPT FOR BUSINESS PURPOSES. NO INTEREST HAS BEEN CHARGED. THE DETAILS OF ADVANCES TO SUPPLIES AND ADVANCES TO STAFF WILL BE PLACED ON THE NEXT DATE OF HEARING. 1 1. PROVISIONS OF SECTION 2 (22)(E) : NO AMOUNTS HAVE BEEN ADVANCED TO DIRECTORS OR TO CO NCERNS IN WHICH THE DIRECTORS ARE INTERESTED, SO THE PROVISIONS OF SECT ION 2(22)(E) OF THE INCOME TAX ACT, 1961, DO NOT APPLY TO THE FACTS OF THE CASE. 12. INVENTORIES: THE DETAILED LIST OF INVENTORIES AS AT 31.3.2007 IS AT PAGE NO.~ 83 TO PAGE 84 THE DETAILS LIST OF INVENTORIES AS AT 31.3.2008 IS AT PAGE NO. 81 TO PAGE NO. 83 13. MONTHWISE DETAILS OF SALES AND PURCHASES: THE MONTHWISE DETAILS OF SALES ARE AT PAGE NO 80 TO PAGE NO . ITA NO. 3351/DEL/2013 48 THE PARTYWISE DETAILS OF SALES OVER RS. 10 LACS DUR ING THE YEAR ARE AT PAGE NO. 79 TO PAGE NO. - THE MONTHWISE DETAILS OF PURCHASES ARE AT PAGE NO. 78 TO PAGE NO. - THE PARTY WISE DETAILS OF PURCHASES OVER RS. 10 LAC S DURING THE YEAR ARE AT PAGE NO .. 77 TO PAGE NO. -. 14. EXPENSES CLAIMED: THE ZEROX COPY OF LEDGER PRINT-OUT OF EXPENDITURE C LAIMED (IN EXCESS OF RS. 5 LACS IN THE YEAR) ARE ENCLOSED AS UNDER: CARRIAGE INWARD PAGE NO. 64 TO PAGE NO. 76 PRINTING EXPENSES PAGE NO. 64 TO PAGE NO.68. BINDING EXPENSES PAGE NO. 59 TO PAGE NO. 63 LAMINATION PAGE NO. 58 TO PAGE NO. .. WAGES PAGE NO. 57 TO PAGE NO. .. SALARY PAGE NO. 56 TO PAGE NO. .. DIRECTOR'S SALARY PAGE NO. 55 TO PAGE NO. .. RENT PAGE NO. 53 TO PAGE NO. .. TRAVELLING EXPENSES PAGE NO. 47 TO PAGE NO. . . ADVERTISEMENT PAGE NO. 46 TO PAGE NO. .. INTEREST TO DIRECTORS PAGE NO. 45 TO PAGE NO. .. INTEREST TO OTHERS PAGE NO. 44 TO PAGE NO. . . ITA NO. 3351/DEL/2013 49 COMMISSION ON SALES PAGE NO. 43 TO PAGE NO. . . CARRIAGE OUTWARD EXPENSES PAGE NO. 37 TO PAGE NO. 42. PACKING EXPENSES PAGE NO. 33 TO PAGE NO. 36. BAD DEBTS PAGE NO. 32 TO PAGE NO. .. DEPRECIATION PAGE NO. 31 TO PAGE NO. .. 15. BOOKS OF ACCOUNTS: THE BOOKS OF ACCOUNTS ALONG WITH ALL THE VOUCHERS W ILL BE PRODUCED BEFORE YOUR HONOUR FOR YOUR HONOUR'S VERIFICATION AS AND WHEN D ESIRED. 16. INCREASE IN SHARE CAPITAL AND EXPENSES INCURRED THEREON: THERE HAS BEEN NO INCREASE IN SHARE CAPITAL DURING THE YEAR; AS PER DETAILS BELOW: SHARE CAPITAL 31.3.2007 31.3.2008 AUTHORISED RS. 3,000,000 RS. 3,000,000 ISSUED AND SUBSCRIBED RS. 2,600,000 RS. 2,600,0 00 THUS THE QUESTION OF ANY EXPENDITURE INCURRED THERE ON DOES NOT APPLY TO THE ASSESSEE'S CASE DURING THE YEAR UNDER CONSIDERATION . 17. SECURED LOANS: THERE HAS BEEN NO SECURED LOANS WITH THE ASSESSEE. 18. INTEREST PAID: . THE DETAILS OF INTEREST PAID ARE AT PAGE NO. 30. ITA NO. 3351/DEL/2013 50 19. SALES MONTHWISE OF PARTYWISE : THE DETAILS OF SALE. - MONTHWISE -- ARE AT PAGE NO :. TO PAGE NO THE DETAILS OF SALE - PARTYWISE - ARE AT PAGE NO TO PAGE NO . 20. VALUATION OF OPENING AND CLOSING STOCK . THIS WILL BE PRODUCED ON THE NEXT DATE OF HEARING. 21. DETAILS OF PURCHASES - PARTYWISE : . THE DETAILS OF PURCHASES PARTYWISE ARE AT PAGE NO TO PAGE NO . 22. ADDITIONS TO FIXED ASSETS : THE DETAILS OF ADDITIONS TO FIXED ASSETS ALONG WITH ZEROX COPY OF BILLS/SUPPORTS OF OVER RS. 50,000 ARE AT PAGE NO 3 TO PAGE NO 29 23 . MAT LIABILITY: MAT LIABILITY IS NO THERE, AS THE REGULAR INCOME TA X IS BEING PAID; WHICH IS MUCH MORE THAN 15% OF THE INCOME. . 24. DIRECTORS SALARY : THE DETAILS OF DIRECTORS SALARY DURING THE YEAR AS WELL AS IN THE LAST YEAR ARE AT PAGE NO 2. THERE HAS BEEN NO INCREASE IN THE SALARY OF DIRECTO RS. 25. SUNDRY CREDITORS : THESE WILL BE PROCEEDED BEFORE YOUR HONOUR ON THE NEXT DATE OF HEARING. 26. CHALLANS FOR PREPAID TAXES: , ITA NO. 3351/DEL/2013 51 THE CHALLANS ARE AT PAGE NO 1. TO PAGE NO 10. AFTER GOING THROUGH THE AFORESAID QUESTIONNAIRE / LETTER DATED 29.7.2010 ISSUED BY THE AO U/S. 142(1) AND THE REPLY DATED 20 .8.2010 FILED BY THE ASSESSEE, WE ARE OF THE VIEW THAT THE AO HAS CALLED VARIOUS DETAILS/DOCUMENTARY EVIDENCE FROM THE ASSESSEE TO S UBSTANTIATE ITS CLAIM MENTIONED IN THE RETURN OF INCOME. NO DOUBT THAT A O HAS DIRECTED THE ASSESSEE TO FURNISH 26 QUERIES, HOWEVER, THE MAIN/EFFECTIVE QUERIES WERE AT SERIAL NO. 8, 14, 15, 18 & 25. THE MAIN/EFFECTIVE QUERIES ASKED B Y THE AO AND REPLY FURNISHED THERETO ARE DISCUSSED HEREUNDER IN THE TABULATION FORM:- QUERY NO. QUERY NO. QUERY NO. QUERY NO. DETAILS OF QUERIES ASKED BY THE DETAILS OF QUERIES ASKED BY THE DETAILS OF QUERIES ASKED BY THE DETAILS OF QUERIES ASKED BY THE AO AO AO AO REPLY OF THE ASSESSEE REPLY OF THE ASSESSEE REPLY OF THE ASSESSEE REPLY OF THE ASSESSEE 8 DETAILS CHART (GIVING OP. BALANCE, ADDITION. INTT. PAYABLE SPECIFYING RATE OF INTT. REPAYMENT & CLOSING BALANCE) OF UNSECURED LOANS, CASH CREDITORS INCLUDING SQ. UP ACCOUNTS ALONGWITH THEIR COMPLETER-ADDRESSES & THEIR ASSTT. PARTICULARS. PLEASE ALSO FURNISH CONFIRMED COPIES OF ALCS THEREFROM. PLEASE ALSO FURNISH EVIDENCES REGARDING IDENTITY, GENUINENESS AND CREDITWORTHINESS OF NEW LOAN CREDITORS AND SOURCES OF LOANS GIVEN BY THEM. UNSECURED LOANS: THE COMPLETE DETAILS IN THE TABULAR FORM IS AT PAGE NO .. 85 TO PAGE NO. - THE CONFIRMATION OF FRESH DEPOSITS DURING THE YEAR ALONG WITH COPY OF BANK PASS BOOK BANK STATEMENTS AND COPY OF THEIR INCOME TAX RETURN FOR ASSTT. YEAR 2008-2009 WILL BE PRODUCED ON THE NEXT HEARING. 14 SUBMIT DETAILS OF EXPENSES CLAIMED BY YOU. PLEASE ALSO ESTABLISH BUSINESS EXPEDIENCY OF THESE EXPENSES AND PRODUCE BILLS/VOUCHERS. PLEASE ALSO GIVE DETAILS OF EXPENSES ON WHICH TDS HAS BEEN DEDUCTED. 14. EXPENSES CLAIMED: THE ZEROX COPY OF LEDGER PRINT- OUT OF EXPENDITURE CLAIMED (IN EXCESS OF RS. 5 ITA NO. 3351/DEL/2013 52 LACS IN THE YEAR) ARE ENCLOSED AS UNDER: CARRIAGE INWARD PAGE NO. 64 TO PAGE NO. 76 PRINTING EXPENSES PAGE NO. 64 TO PAGE NO.68. BINDING EXPENSES PAGE NO. 59 TO PAGE NO. 63 LAMINATION PAGE NO. 58 TO PAGE NO. .. WAGES PAGE NO. 57 TO PAGE NO. .. SALARY PAGE NO. 56 TO PAGE NO. .. DIRECTOR'S SALARY PAGE NO. 55 TO PAGE NO. .. RENT PAGE NO. 53 TO PAGE NO. .. TRAVELLING EXPENSES PAGE NO. 47 TO PAGE NO. .. ADVERTISEMENT ITA NO. 3351/DEL/2013 53 PAGE NO. 46 TO PAGE NO. .. INTEREST TO DIRECTORS PAGE NO. 45 TO PAGE NO. .. INTEREST TO OTHERS PAGE NO. 44 TO PAGE NO. .. COMMISSION ON SALES PAGE NO. 43 TO PAGE NO. .. CARRIAGE OUTWARD EXPENSES PAGE NO. 37 TO PAGE NO. 42. PACKING EXPENSES PAGE NO. 33 TO PAGE NO. 36. BAD DEBTS PAGE NO. 32 TO PAGE NO. .. DEPRECIATION PAGE NO. 31 TO PAGE NO. .. 15 PRODUCE BOOKS OF ACCOUNTS FOR VERIFICATION. BOOKS OF ACCOUNTS: THE BOOKS OF ACCOUNTS ALONG WITH ALL THE VOUCHERS WILL BE PRODUCED BEFORE YOUR HONOUR FOR YOUR HONOUR'S VERIFICATION AS AND WHEN ITA NO. 3351/DEL/2013 54 DESIRED. 18 GIVE DETAILS OF SOURCE OF UNSECURED LOAN, CREDITORS, WITH DETAILS OF INTEREST PAID TO THEM (IF ANY), RATE OF INTEREST, TDS ON THE SAME. INTEREST PAID: THE DETAILS OF INTERESET PAID ARE AT PAGE NO. 30. 25 COMPLETE DETAILS OF THE CURRENT LIABILITIES. GIVE DETAILS OF NAMES & ADDRESSES OF SUNDRY CREDITORS WITH COPY OF CONFIRMED NCS OF PARTIES WITH O/S BALANCE EXCEEDING RS. 1,00,000/-. ALSO NAMES & ADDRESS OF PARTIES WHO HAVE MADE ADVANCE AGAINST SALE, DATE OF SALE. SUNDRY CREDITORS THESE WILL BE PRODUCED BEFORE YOUR HONOUR ON THE NEXT DATE OF HEARING. 11. KEEPING IN VIEW OF THE QUERIES AND ITS REPLIES, WE ARE OF THE VIEW THAT AO HAS ACCEPTED THE CONTENTION OF THE ASSESSEE AND CO MPLETED THE ASSESSMENT WITHOUT MAKING ANY ATTEMPT OF ENQUIRY AND ACCEPTED THE VERSION OF THE ASSESSEE WITHOUT APPLYING HIS MIND. IN ORDER TO SUPPORT OU R VIEW, WE NOTE THAT AO HAS ISSUED NOTICE U/S. 142(1) OF THE I.T. ACT DATED 29. 7.2010 TO THE ASSESSEE FOR CALLING VARIOUS INFORMATION FROM THE ASSESSEE AND F IXED THE DATE OF HEARING ON 20.8.2010 AT 4.30 PM, BUT THE ASSESSEE IN RESPONSE TO THE SAME HAS FILED ITS REPLY ON THE DATE OF HEARING I.E. ON 20.8.2010. AF TER PERUSING THE REPLY FILED BY THE ASSESSEE, WE FIND THAT MOST OF THE QUESTIONS/Q UERIES NOT FULLY ANSWERED WITH DOCUMENTARY EVIDENCE. ON PERUSING THE TABLE AS AF ORESAID, WE FIND THAT THESE QUERIES MENTIONED AT SERIAL NO. 8, 14, 15, 18, & 25 OF THE QUESTIONNAIRE HAVE ALSO REMAINED UNANSWERED. AS REGARDS THE REPLY TO THE QUERY NO. 8 IS CONCERNED, THE ASSESEE HAS ONLY STATED THAT THE D OCUMENTARY EVIDENCE WILL BE ITA NO. 3351/DEL/2013 55 PRODUCED ON THE NEXT DATE OF HEARING; WITH REGARD TO QUERY NO. 15 THE ASSESSEE MENTIONED THAT BOOKS OF ACCOUNTS ALONGWITH ALL VOUC HERS WILL BE PRODUCED BEFORE THE AO FOR VERIFICATION AS AND WHEN DESIRED; WITH REGARD TO QUERY NO. 25 IS CONCERNED, THE ASSESSEE HAS STATED THAT THESE WILL BE PRODUCED BEFORE YOUR HONOUR ON THE NEXT DATE OF HEARING. FROM THESE UN ANSWERED REPLIES, IT IS CRYSTAL CLEAR THAT ASSESSEE HAS NOT FULLY ANSWERED THE QUER IES ALONGWITH THE DOCUMENTARY EVIDENCES. THE AO HAS ACCEPTED THE VER SION OF THE ASSESSEE IN A CASUAL MANNER WITHOUT VERIFYING THE DOCUMENTARY EV IDENCE FILED BY THE ASSESSEE AND WITHOUT MAKING ANY ENQUIRY WHICH IS VERY MUCH E SSENTIAL BEFORE ACCEPTING THE CLAIM OF THE ASSESSEE AND COMPLETED THE ASSESSM ENT IN A HURRY MANNER ON 30.11.2010 PASSED U/S. 143(3) OF THE I.T. ACT BY PA SSING A NON-SPEAKING ORDER WHICH IS REPRODUCED AS UNDER:- IN THIS CASE RETURN OF INCOME WAS E- FILED ON. 18. 09.2008 DECLARING TOTAL INCOME OF RS.737800/- WHICH WAS PROCESSED ULS 143(1) OF THE IT. ACT. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND STATUTORY NOTICE ULS 143(2) WAS ISSUED ON 22-09-200 9, WHICH WAS DULY SERVED UPON THE ASSESSEE. IN RESPONSE TO THE N OTICES ISSUED U/S 142(1) AND 143(2) COUNSEL OF THE ASSESSEE SHRI PANK AJ GUPTA, CA ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FURN ISHED REQUIRED DETAILS AND INFORMATION AND THE CASE WAS DISCUSSED. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PUBLI CATION OF BOOKS. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HA S SHOWN G.P. RATE AND N.P. RATE OF 23.69% AND 0.35% RESPECTIVELY WHICH IS SLIGHTLY HIGHER THAN THE G.P. AND N.P. RATES OF IMM EDIATE PRECEDING YEAR. TRADING RESULTS DECLARED INCLUDING EXPENSES D EBITED BY THE ASSESSEE HAVE BEEN EXAMINED AND VERIFIED ON TEST CH ECK BASIS FROM ITA NO. 3351/DEL/2013 56 THE BOOKS OF ACCOUNTS, BILLS AND VOUCHERS PRODUCED AND BANK STATEMENTS AND VARIOUS OTHER DETAILS AND DOCUMENTS SUBMITTED BY THE ASSESSEE FROM TIME TO TIME. HENCE NO ADVERSE IN FERENCE IS BEING DRAWN. 3. AFTER DISCUSSION AND CONSIDERING ALL THE MATERIA L AVAILABLE ON RECORD INCOME DERIVED BY THE ASSESSEE IS ACCEPTED A ND ASSESSMENT IS, ACCORDINGLY, COMPLETED ON TOTAL INCOME OF RS.73 7800/-. CHARGE INTEREST ULS 234B AND 234C OF THE LT. ACT, 1 961. GIVE CREDIT OF PREPAID TAXES. ISSUE NOTICE OF DEMAND AND CHALLAN. 12. AFTER PERUSING THE AFORESAID ASSESSMENT ORDER, LD. CIT ISSUED NOTICE U/S. 263 OF THE I.T. ACT TO THE ASSESSEE BY POINTING OUT THE FOLLOWING:- (A) THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PUBLISH ING BOOKS ETC. AGAINST THE GROSS RECEIPTS OF RS.10,39,27,634/-, PROFIT OF RS.7,05,790/- HAS BEEN DECLARED YIELDING NP RATE OF 0.679%. THIS WAS ONE OF THE REASONS FOR SELECTING THE CASE FOR SCRUTINY. HOWEVER, THE A O APPEARS TO HAVE ACCEPTED THE SAME WITHOUT PROPER EXAMINATION OR INQ UIRY. (B) FURTHER, THE ASSESSEE HAS CREDITED INTEREST TO THE TUNE OF RS.335,901/- IN THE P&L ALC WHICH IS INCOME FROM OTHER SOURCES TO B E ASSESSED SEPARATELY. AFTER EXCLUDING THE SAME FROM THE BUSINESS INCOME, THE NET PROFIT FURTHER COMES DOWN FROM THE MARGINAL FIGURE TO A STILL LOW FIGURE WHEREAS AS PER THE, ASSESSMENT ORDER, THE AO HAS NOTED THE GP AND NP RATE SLIGHTLY HIGHER THAN THE OP AND NP RATES OF IMMEDIATE PRECED ING YEAR. THIS IS APPARENTLY CONTRADICTORY TO THE FACTS ON THE RECORD S. FRESH UNSECURED LOANS TO THE TUNE OF RS.1,20,69,799/-, ABNORMAL SUN DRY CREDITORS TO THE TUNE OFRS.3,80,20,903/- HAVE BEEN SHOWN WHICH WERE ALSO THE REASON ITA NO. 3351/DEL/2013 57 FOR SELECTION OF CASES FOR SCRUTINY. THE AO APPEARS TO HAVE ACCEPTED THE SAME WITHOUT PROPER INQUIRY. C) INCREASE IN FIXED ASSETS TO THE TUNE OFRS. 49,57,110/- HAVE BEEN SHOWN WHICH WAS ALSO TO BE LOOKED INTO FROM DIFFERENT ANG LES INCLUDING THE ACTUAL INVESTMENT, DATE OF ACTUAL USE, ADMISSIBILITY OF DE PRECIATION ETC. THE RECORDS, HOWEVER, APPEAR TO BE SILENT ON THE SAME. D) THE ASSESSEE HAD MAINTAINED CURRENT BANK A/ C. NO. 2159001800000105 IN PUNJAB NATIONAL BANK, SPORTS GOODS COMPLEX, DEL HI ROAD, MEERUT. THE ASSESSEE HAD MADE FIXED DEPOSITS OF RS. 30,80,0 00/-- BY WAY OF AUTO SWEEP TRANSACTIONS FROM THE SAME BANK ACCOUNT. BUT, THE ASSESSEE HAD NOT SHOWN ANY FIXED DEPOSITS MADE DURING THE YE AR IN BALANCE SHEET AS ON 31.03.2008. THE CLOSING BALANCE OF BANK ACCOU NT SHOWED RS. 3,33,194.47. THE ASSESSEE HAD FILED A HAND WRITTEN .BANK STATEMENT AND OTHER DETAILS SHOWN AT PAGE NO. 353, 354, 355 & 356 . AS PER BANK STATEMENT PAGE NO. 356 FIXED DEPOSIT S HOWN NIL AS PER BANK STATEMENT PAGE NO. 355 FIXED DEPOSIT MADE RS. 30, 80,000/- BY WAY OF AUTO SWEEP TRANSACTIONS FROM THE AFORESAI D BANK ACCOUNT AS PER PAGE NO. 354 CLOSING BANK BALANCE AS ON 31.03.2008 SHOWN RS. 3,33,194.47 TOTAL RS. 3,33,194.47 TOTAL RS. 3,33,194.47 TOTAL RS. 3,33,194.47 TOTAL RS. 3,33,194.47 ITA NO. 3351/DEL/2013 58 E) AS PER PAGE NO. 353, THE MANAGER, PUNJAB NATIONA LBANK, SPORTS COMPLEX, DELHI ROAD, MEERUT HAD CERTIFIED VIDE HIS LETTER DATED 16/06/2008 ADDRESSED TO THE ASSESSEE, STATING THERE IN THAT : 'THIS TO CERTIFIED THAT THE BALANCE STANDING TO YOU R DEBIT / CREDIT IN THE ABOVE BANK ALC AT THE, CLOSE OF BUSINESS ON 31. 03.2008 WAS RS. 34,13,194.47 ONLY.' F) AS PER PAGE NO. 354, CLOSING BANK BALANCE SHOWE D AS ON 31.3.2008 RS. 33,194.47. BUT, AS PER THE CERTIFICATE GIVEN BY THE BANK MANAGER, AT PAGE NO. 353 CLOSING BALANCE AS ON 31.3.2008 RS.34, 13,194.47. THERE IS CONTRADICTORY DIFFERENCE IN STATEMENTS AS GIVEN BY THE ASSESSEE AND AS GIVEN BY THE BANK MANAGER. IT IS CLEARLY SHOWS THAT THE ASSESSEE HAD MADE FIXED DEPOSITS BY WAY OF AUTO SWEEP TRANSACTIO NS AMOUNTING TO RS. 30, 80,000/- FROM ITS CURRENT BANK ACCOUNT. THE ASS ESSEE HAD PAID EXCESS INTEREST TO THE BANK. THE FIXED DEPOSITS OF RS. 30,80,000/- NOT REFLECTED IN LEDGER ACCOUNT OF BANK STATEMENT OF PU NJAB NATIONAL BANK (01.04.2007 TO 31.03.2008) MAINTAINED BY THE ASSESS EE. HENCE, FIXED DEPOSITS RS. 30,80,000/- MADE BY WAY O F AUTO SWEEP TRANSACTIONS IS TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE I.T. ACT. INCOME COMPUTED AS UNDER: NET INCOME AS PER ASSESSMENT ORDER RS. 7,37,800/ - ADD: INTEREST INCOME UNDER THE HEAD RS. 3,35,901/- INCOME FROM OTHER SOURCES ADD: FIXED DEPOSITS MADE BY WAY OF AUTO SWEEP RS. 30,8 0,000/- ITA NO. 3351/DEL/2013 59 TRANSACTIONS AS DISCUSSED ABOVE. 13. IN RESPONSE TO THE AFORESAID NOTICE OF THE LD. CIT, ASSESSEE FILED ITS REPLY AND MADE SIMILAR REPLY AS MADE BEFORE THE AO WHICH HAS ALREADY BEEN DISCUSSED HEREINABOVE. AFTER PERUSING THE REPLY OF THE ASSES SEE, LD. CIT PASSED THE IMPUGNED ORDER 08.03.2013 BY DISCUSSING IN DETAIL T HE EACH AND EVERY QUERY AND ITS REPLY AND LASTLY ADJUDICATED AND DECIDED T HE ISSUE IN DISPUTE BY PARTLY REVISING AND PARTLY SETTING ASIDE THE ASSESSMENT ORDER DIRECTING THE AO TO PASS A FRESH ORDER, AFTER EXAMINING THE ISSUES PROPERLY AND CONSIDERING ALL THE POINTS, AS ALSO AFTER CONSIDERING ALL EVIDENCES AND AFFORDI NG REASONABLE OPPORTUNITY TO THE ASSESSEE. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND CONSI DERED THE SYNOPSIS, ADDITIONAL SYNOPSIS, PAPER BOOK ALONGWITH VARIOUS CASE LAWS FILED BY THE ASSESSEE AND ORDERS OF THE AUTHORITIES BELOW. AS F AR AS CITATIONS REFERRED BY THE LD. COUNSEL ARE CONCERNED, IN OUR VIEW, THE SAME D OES PERTAIN TO THE ISSUE IN DISPUTE BECAUSE THE SAME ARE NOT IDENTICAL TO THE F ACTS OF THE PRESENT CASE. HOWEVER, IN THE PRESENT CASE THE AO HAS NOT EVEN MA DE ANY ATTEMPT TO MAKE ANY ENQUIRY BEFORE ACCEPTING THE CLAIM OF THE ASSE SSEE AND ACCEPTED THE CLAIM IN A HURRY MANNER WITHOUT APPLYING MIND, BUT IN TH E CITATION GIVEN BY THE LD. COUNSEL OF THE ASSESSEE, THE AO HAS MADE ENQUIRY MA Y BE SUFFICIENT OR MAY BE INSUFFICIENT, WHICH IS NOT THE QUESTION BEFORE US. THE PRESENT CASE IS NOT A CASE OF INSUFFICIENT/ INADEQUATE ENQUIRY, BUT HERE THE AO H AS ACCEPTED THE CLAIM OF THE ASSESSEE WITHOUT ANY ENQUIRY. 14.1 WITH REGARD TO QUERIES RAISED IN THE NOTICE U/S. 263 RAISED VIDE PARA NO. (A) IS CONCERNED, WE FIND THAT AGAINST THE GROSS RECEIPTS OF RS.I03927634/- IT HAS RETURNED AN NP OF MERELY RS.705790/- YIELDING T HE NP RATE 0.679% ONE OF ITA NO. 3351/DEL/2013 60 THE MAIN REASONS FOR WHICH THE CASE WAS SELECTED FO R SCRUTINY WAS NEGLIGIBLE NP RATE. HOWEVER THE ASSTT. RECORD SHOW THAT DESPITE T HERE BEING A LARGE NUMBER OF DISCREPANCIES AND DESPITE THEIR BEING THE BOOKS OF ALC INCORRECT, INCOMPLETE AND SUFFERING FROM A NUMBER OF DISCREPANCIES PROVISIONS OF S.145(3) HAVE NOT BEEN INVOKED AND BOOK RESULTS HAVE BEEN ACCEPTED AS SUCH . WE FURTHER FIND THAT THE TAX AUDITORS HAVE CATEGORICALLY STATED THAT BOOKS A RE NOT MAINTAINED IN THE MANNER SO AS TO GIVE A TRUE AND FAIR VIEW IN CONF ORMITY WITH THE ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN INDIA. WE FURTHER NOTE THAT IN THE NOTES OF ACCOUNT ON THE SIGNIFICANT ACCOUNTING POLICY THE AU DITORS HAVE FURTHER CATEGORICALLY STATED AS FOLLOWS: 'THE COMPANY HAS NOT MAINTAINED THE QUANTITATIVE RE CORDS OF RAW MATERIALS AND FINISHED GOODS AND AS SUCH INFORMATIO N AS REQUIRED IN PARA 3 AND 4C AND 4D OF PART II OF SCHEDULE VI T O THE COMPANIES ACT, 1956 HAVE NOT BEEN DISCLOSED. ' 14.2 IT WAS FURTHER NOTED THAT AS PER PARA 2.3 THE COMPANY DID NOT DISCLOSE THE NAMES ON SMALL SCALE UNDERTAKINGS TO WHOM IT OWED E XISTING RS.L LAKH OUTSTANDING MORE THAN 30 DAYS. MOREOVER, AS PER PAR A 2.4 'THE CONFIRMATION OF BALANCES OF PARTIES APPEARING UNDER THE HEADS UNSEC URED LOAN, CURRENT LIABILITIES, SUNDRY DEBTORS AND LOANS AND ADVANCES WERE ALSO NOT OBTAINED BY THE ASSESSEE AND NOT SHOWN TO THE AUDITORS'. 14.3 WE FURTHER FIND THAT THE BUSINESS RESULTS AS SHOWN BY THE ASSESSEE IN ITS P&L ALC ARE NOT AT ALL ~ ASCERTAINABLE, VERIFIABLE OR ACCEPTABLE ESPECIALLY IN VIEW OF THE FACTS THAT NO QUANTITATIVE DETAILS HAVE' BEE N MAINTAINED OR FURNISHED WHICH IS A MANDATORY REQUIREMENT NOT ONLY UNDER THE COMPA NY LAW BUT ALSO UNDER IT ACT AND THE SAME RENDERS ENTIRE BOOKS OF ACCOUNTS L IABLE FOR REJECTION UNDER ITA NO. 3351/DEL/2013 61 SECTION 145(3) OF THE IT ACT AS THE BOOK RESULTS AR E NOT AT ALL VERIFIABLE OR ASCERTAINABLE OR CAN BE DEDUCTED FROM THE SAME. 14.4 BOOKS OF ACCOUNTS ARE RIGHTLY BEEN REJECTED UN DER SECTION 145(3) OF THE IT ACT, 1961 ON THE GROUNDS AS DISCUSSED ABOVE ARE ALS O NOT ACCEPTABLE ON THEIR FACTS WHEREBY A NEGLIGIBLE PROFIT HAS BEEN SHOWN WH EREAS THE PURCHASES AND EXPENSES DEBITED TO THE P&L ALC ARE HIGHLY INFLATED . THE TOTAL SALES SHOWN BY ASSESSEE ARE TO THE TUNE OF RS.103927633/-. AGAINST THE SAME THE ASSESSEE HAS CLAIMED PURCHASES AS UNDER: FROM P&L ALC PURCHASES RS. 5,92,52,253/- ASSESSEE HAS SHOWN OPENING AS WELL AS CLOSING BALAN CE OF FINISHED AND SEMI FINISHED GOODS OFRS.51,35,265/- AND 2568138/- RESPECTIVELY. IT HAS NOT SHOWN ANY OPENING OR CLOSING STOCK OF PAPERS. NOR I S THERE ANY SCHEDULE FOR PURCHASES AND HENCE ENTIRE PURCHASES ARE APPARENTLY SHOWN AS CONSUMPTION AND CONVERTING THE SAME TO AT LEAST SEMI FINISHED S TAGE WHICH AGAIN DOES NOT APPEAR TO BE CORRECT. IN ANY CASE, EVEN WHILE THE P URCHASES ARE TAKEN AS CONSUMPTION OF PAPER SUCH CONSUMPTION IS EVEN MORE THAN THE PURCHASES AS THE CLOSING STOCK IS ABOUT HALF OF OPENING STOCK WHICH COMPRISED OF FINISHED AND SEMI FINISHED GOODS. AS PER THIS PERCENTAGE OF PAPER CON SUMPTION, THE CONSUMPTION OF PAPER COMES TO AS HIGH AS 74.70 % WHICH IS EXTRE MELY INFLATED. SINCE THE BOOKS OF THE ASSESSEE ARE UNRELIABLE FROM WHICH PRO FIT COULD NOT BE ASCERTAINED, THE RATES OF PAPER PREVAILING DURING THE YEAR UNDER CONSIDERATION WERE OBTAINED FROM OUTSIDE VENDORS. 14.5 WE FURTHER FIND THAT THE INFLATION OF EXPENSE S AND THEREBY THE SUPPRESSION OF PROFIT OF RS. 4.5 CRORES IS MERELY ON ACCOUNT OF INFLATED PAPER CONSUMPTION ON ITA NO. 3351/DEL/2013 62 ACCOUNT OF BOGUS OR INFLATED PURCHASES. WE ALSO OBS ERVED THAT SINCE THE ASSESSEE HAS DEBITED A NUMBER OF OTHER EXPENSES AS ALSO WAGES ALL OF WHICH ARE ALSO NOT DULY VOUCHED OR SUPPORTED BY ANY MATERIAL EVIDENCE AND NOTHING HAS BEEN BROUGHT ON RECORD SO AS TO ASCERTAIN THE CORR ECTNESS OF THE SAME, THE ACTUAL PROFIT EARNED BY THE ASSESSEE WILL FURTHER I NCREASE BY SUBSTANTIAL AMOUNT THEN RS. 3 CRORES TAKEN BY CONSERVATIVE ESTIMATE OF PROFITS BASIS UPON INFLATED PURCHASES ONLY. IN THE BACKGROUND OF THE AFORESAI D DISCUSSIONS, WE ARE OF THE CONSIDERED OPINION THAT LD. CIT HAS RIGHTLY MADE TH E ADDITION OF RS. 2,95,58,101/- WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME. 15. AS REGARDS SECOND PART OF POINT NO. (B), IS CON CERNED, WE FIND THAT LD. CIT HAS OBSERVED THAT THERE ARE FRESH UNSECURED LOANS T O THE TUNE OF RS.12069799/- AND ABNORMAL SUNDRY CREDITORS TO THE TUNE OF RS.380 20903/- WHICH WERE ALSO THE REASON FOR SELECTION OF THE CASE FOR SCRUTINY O N THE ONE HAND WHILE AS SUCH THE ASSESSEE IS DUTY BOUND AND HEAVY ONUS LIES ON HIM T O EXPLAIN THE CREDIT ENTRIES INCLUDING THE LIABILITIES APPEARING IN ITS BOOKS OF ACCOUNT BY ESTABLISHING IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE ALLEGED PAR TIES. IN OUR CONSIDERED OPINION, THIS CONCLUSION OF THE LD. CIT DOES NOT NE ED ANY INTERFERENCE, HENCE, WE UPHOLD THE SAME. 16. AS REGARDS (C) IS CONCERNED, WE NOTE THAT LD. C IT HAS NOTED THAT THE ENTRIES IN THE FIXED ASSETS RS. 4957110/- WAS TO BE LOOKED INTO FROM DIFFERENT ANGLES INCLUDING ACTUAL INVESTMENT, DATE OF ACTUAL USE, IF ANY, ADMISSIBILITY OF DEPRECIATION ETC. AND THE AO HAS DIRECTED TO ENQUIR E THE SAME NOW. IN OUR VIEW THE SAME ALSO DO NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME. ITA NO. 3351/DEL/2013 63 17. AS REGARDS (D) IS CONCERNED, WE FIND THAT LD. CIT HAS OBSERVED THAT THE BALANCE OF RS.34,13,194/- CERTIFIED BY THE BANKERS AS ON IS NOT SHOWN IN THE BALANCE SHEET' AND ARE NOT REFLECTED IN THE RESPECT IVE ACCOUNTS OF THE ASSESSEE. THE SAME ARE ALSO LIABLE TO BE ADDED IN THE INCOME TO THE INCOME OF ASSESSEE FOR WHICH THE AO MAY PROVIDE THE ASSESSEE REASONABL E OPPORTUNITY OF BEING HEARD AND RECONCILE THE DIFFERENCE WITH SUPPORTING EVIDENCE, IF ANY. IN OUR CONSIDERED OPINION, THIS CONCLUSION OF THE LD. CIT ALSO DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME . 18. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND PRECEDENTS, WE ARE OF THE VIEW THAT THE AO WAS FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE SINCE AT THE TIME OF THE ASSESSMENT THE AO WAS DUTY BOUND TO CALL FOR SUCH DETAILS AND EXAMINE THEM. WE ALSO FIND THAT I N THE CASE OF M/S MALABAR INDUSTRIES, THE HONBLE APEX COURT HAS HELD THAT IN CORRECT ASSUMPTION OF FACTS OR INCORRECT APPLICATION OF LAW WILL SATISFY THE REQU IREMENT OF THE ORDER BEING ERRONEOUS. WE FURTHER NOTE THAT IN THE SAME CATEGOR Y FALL ORDER PASSED WITHOUT APPLYING THE PRINCIPLES OF NATURAL JUSTICE OR WITHO UT APPLICATION OF MIND. WE ARE OF THE VIEW THAT IT IS INCUMBENT ON THE OFFICER TO INVESTIGATE THE FACTS STATED IN THE RETURN, WHEN CIRCUMSTANCES WOULD MAKE SUCH AN ENQUI RY PRUDENT AND THE WORD ERRONEOUS IN SECTION 263 INCLUDES THE FAILURE TO MAKE SUCH AN INQUIRY. THE ORDER BECOMES ERRONEOUS BECAUSE SUCH AN INQUIRY HAS NOT B EEN MADE AND NOT BECAUSE THERE IS ANYTHING WRONG WITH THE ORDER IF ALL THE FACTS STATED THERE ARE ASSUMED TO BE CORRECT. IN VIEW OF THE FOREGOING OBS ERVATIONS AND THE ITA NO. 3351/DEL/2013 64 PRECEDENTS, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE. ACCORDINGLY, LD. CIT HAS PASSED A WELL REASONED RE VISIONAL ORDER U/S. 263 WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE SAME AND DISMISS THE APPEAL OF THE ASSESSEE. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16/02/2016. SD/- SD/- [ [[ [L.P. SAHU L.P. SAHU L.P. SAHU L.P. SAHU] ]] ] [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER DATE 16/02/2016 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES