M/s Pagadala Ravindra Kumar & Others, Kakinada V. THE ITO, WARD-2, Kakinada

ITA 355/VIZ/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2096 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G GURUSWAMY
• Assessee Lawyers: P PRABHAKARA MURTHYAR
• Keywords: Assessment record
• Section: 143(3); 263

Judgement Text

ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , ' BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.355/VIZAG/2013 ( / ASSESSMENT YEAR : 2008-09) M/S. PAGADALA RAVINDRA KUMAR & OTHERS KAKINADA VS. ITO, WARD-2, KAKINADA [ PAN: AANFM 3259N] ( / APPELLANT) ( / RESPONDENT ) / APPELLANT BY : SHRI P. PRABHAKARA MURTHY,AR #$ / RESPONDENT BY : SHRI G. GURUSWAMY, DR / DATE OF HEARING 27.01.2016 ( / DATE OF PRONOUNCEMENT : 05.02.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT, RAJAHMUNDRY DATED 28.2.2013 PASSED U/S 263 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT) AND IT PERTAINS TO THE ASSESSMENT YEAR 2008-09. ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 2 2. THE BRIEF FACTS OF THE CASE, ARE THAT THE ASSESS EE IS A PARTNERSHIP FIRM WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN IMFL FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 23.9.2 008 DECLARING TOTAL INCOME OF RS.11,450/-. THE RETURN OF INCOME WAS P ROCESSED U/S 143(1) OF THE ACT AND REFUND OF RS.42,150/- WAS ISSUED TO THE ASSESSEE. SUBSEQUENTLY, THE CASE HAS BEEN SELECTED FOR SCRUTI NY AND ACCORDINGLY, NOTICE U/S 143(2) OF THE ACT WAS ISSUED. IN RESPON SE TO NOTICE, AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED AND PRODUCED BOOKS OF ACCOUNTS AND RELEVANT DETAILS. THE A.O. COMPLET ED THE ASSESSMENT U/S 143(3) OF THE ACT ON 20.9.2010 AND ACCEPTED THE RETURNED INCOME. 3. THE CIT, RAJAHMUNDRY ISSUED A SHOW CAUSE NOTICE U/S 263 OF THE ACT DATED 21.11.2012 AND PROPOSED TO REVISE THE ASS ESSMENT ORDER. THE CIT, PROPOSED TO REVISE THE ASSESSMENT ORDER FO R THE REASON THAT ON EXAMINATION OF THE ASSESSMENT RECORDS, IT WAS NOTIC ED THAT THE A.O. HAS NOT EXAMINED CERTAIN ISSUES, WHICH RENDER THE ASSES SMENT ORDER ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE IN TERMS OF SECTION 263 OF THE ACT. THE CIT HAS OBSER VED THAT THE A.O. HAS ACCEPTED THE INCOME RETURNED BY THE ASSESSEE WITHOU T EXAMINING THE LOW PROFIT DECLARED BY THE ASSESSEE AND ALSO NOT AP PLIED THE RATIOS OF THE JUDGEMENT OF HONBLE ITAT VISAKHAPATNAM, IN THE CAS E OF ACIT VS. M/S. ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 3 M VEERA BHADRA RAO AND OTHERS IN ITA NO.345 & 346/V IZAG/1998, WHEREIN THE ITAT HAS DIRECTED TO ESTIMATE THE SALES AT 8 TIMES OF THE PURCHASE AND THEN ESTIMATE THE NET PROFIT AT 1% OF SUCH ESTIMATED SALES OR DECLARED SALES WHICHEVER IS MORE CLEAR OF ALL DE DUCTIONS AND ALLOWANCES. THE CIT FURTHER WAS OF THE OPINION THA T SUBSEQUENTLY THE HONBLE A.P. HIGH COURT IN THE CASE OF CIT VS. V. R AMULU, KAKINADA IN ITA NO.197/VIZAG/2000 DATED 21.6.2011 DIRECTED TO E STIMATE THE NET PROFIT AT 2% OF THE ESTIMATED SALES OR 16% OF THE P URCHASE VALUE WHICHEVER IS HIGHER CLEAR OF ALL DEDUCTIONS AND ALL OWANCES. HOWEVER, IN THE INSTANT CASE, THE PURCHASES SHOWN WERE AT RS.37 ,20,391/-. THE SALES ESTIMATED AT 8 TIMES OF THE PURCHASE AT RS.2, 97,63,128/- AND 1% OF PROFIT OF SUCH ESTIMATED SALES WORKED OUT TO RS. 2,97,631/-. THE CIT FURTHER OBSERVED THAT IF THE NET PROFIT IS TAKEN AS PER THE DIRECTIONS OF HONBLE HIGH COURT OF ANDHRA PRADESH IN THE AFORESA ID CASE, THE SAME WORKED OUT TO RS.5,95,262/-. THE A.O. COMPLETED TH E ASSESSMENT CONTRARY TO THE DECISIONS GIVEN BY THE JURISDICTION AL HONBLE HIGH COURT AND ALSO ITAT, WHICH RENDER THE ASSESSMENT ORDER TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REV ENUE IN TERMS OF SECTION 263 OF THE ACT. WITH THESE OBSERVATIONS, THE CIT(A ) PROPOSED TO REVISE THE ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT. ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 4 4. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE H AS FILED ITS WRITTEN SUBMISSIONS DATED 15.1.2013 AND CONTENDED T HAT THE ORDER PASSED BY THE A.O. WAS NOT ERRONEOUS IN SO FAR AS I T IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, AS THE A.O. HAS VERIFIED T HE DETAILS WITH REGARD TO THE ESTIMATION OF NET PROFIT FROM THE BUSINESS. THE ASSESSEE FURTHER SUBMITTED THAT THE CASES LAWS RELIED UPON BY YOU AR E RENDERED BY THE ITAT AND H.C. UNDER DIFFERENT FACTS, WHICH CANNOT B E COMPARED. THE ASSESSEES STATED THAT IT IS IN THE BUSINESS OF DEAL ING IN IMFL, WHEREAS THE CASE LAWS RELIED UPON BY THE CIT ARE DEALING WI TH ARRACK. THERE IS A DIFFERENCE BETWEEN BUSINESS ACTIVITY AND ALSO PROFI T MARGINS IN TWO BUSINESSES, WHICH CANNOT BE COMPARABLE. THE ASSESS EE FURTHER SUBMITTED THAT IT IS ENGAGED IN THE BUSINESS OF TRA DING IN IMFL SUPPLIED BY M/S. ANDHRA PRADESH BEVERAGES CORPORATION LIMITE D (APBCL) TO BE SOLD AT MRP, WHICH WERE FIXED BY THE APBCL IN CONSU LTATION WITH STATE EXCISE AUTHORITIES. THE ASSESSEE FURTHER SUBMITTED THAT IT CANNOT SELL THE GOODS OVER AND ABOVE THE MRP FIXED BY THE AUTHORITI ES. THEREFORE, ITS CASE CANNOT BE COMPARED WITH THE CASE LAWS DEALT WI TH BY THE ITAT AND ALSO HONBLE A.P. HIGH COURT. THE ASSESSEE FURTHER SUBMITTED THAT IN THE CASE OF IMFL BUSINESS MAXIMUM RETAIL PRICE IS FIXED BY THE APBCL WITH MARGIN OF 20% & 30% ON PURCHASE PRICE ON HIGH AND C HEAP BRAND IMFL. THE LICENSEE HAS TO MAKE GOOD ALL HIS EXPEND ITURES, INCLUDING ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 5 LICENSE FEES AND ADMINISTRATIVE EXPENSES OUT OF THE MARGIN FIXED BY THE APBCL, THEREFORE, NATURALLY THE ELEMENT OF PROFIT I N THE LINE OF BUSINESS IS VERY LESS. THE ASSESSEE FURTHER SUBMITTED THAT T HE HONBLE ITAT, VISAKHAPATNAM BENCH IN THE CASE OF ERRADA SUMATI, E LURU AND OTHERS IN ITA NOS.142, 144 & 145 OF 2011 HAS DECIDED THE ISSU E, WHEREIN THE ITAT UPHELD THE PROFIT MARGIN OF 4 TO 5% IN THE CAS E OF DEALERS DEALING IN IMFL. THE A.R. FURTHER SUBMITTED THAT THE ISSUE OF ESTIMATION OF NET PROFIT IS HIGHLY DEBATABLE ISSUE AND ALWAYS TWO VIE WS ARE POSSIBLE. THE A.O. HAS CHOSEN TO ADOPT ONE OF THE POSSIBLE VIEW, THEREFORE, HIS ORDER CANNOT BE TERMED AS ERRONEOUS SO AS TO ASSUME JURIS DICTION U/S 263 OF THE ACT. 5. HOWEVER, THE CIT, AFTER CONSIDERING THE EXPLANAT IONS OFFERED BY THE ASSESSEE HELD THAT THE A.O. DID NOT VERIFY THE ABOVE ISSUES AT THE TIME OF COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT. THEREFORE, THE ASSESSMENTS ORDER DATED 20.9.2010 NEEDS TO BE REVIS ED, AS IT IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE. WITH THESE OBSERVATIONS, THE CIT SET ASIDE THE ASSES SMENT ORDER PASSED BY THE AO U/S 143(3) OF THE ACT WITH A DIRECTION TO COMPUTE THE NET PROFIT IN THE LIGHT OF THE DECISION OF HONBLE A.P. HIGH COURT IN THE CASE OF CIT VS. M/S. V. RAMULU, KAKINADA IN ITA NO.197/V IZAG/2003 DATED ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 6 21.6.2011 BY ADOPTING THE METHOD OF ESTIMATING THE NET PROFIT AT 2% OF THE ESTIMATED SALES OF 16% OF THE PURCHASE VALUE, W HICHEVER IS HIGHER CLEAR OF ALL DEDUCTIONS AND ALLOWANCES. IF THE PRO FIT ESTIMATED IS LESS THAN THE PROFIT DECLARED BY THE ASSESSEE, THEN THE PROFIT SO DECLARED SHOULD BE ACCEPTED. THE A.O. IS DIRECTED TO GO THR OUGH THE ORDER OF THE HONBLE A.P. HIGH COURT THOROUGHLY AND COMPLETE THE ASSESSMENT AFRESH WITHIN THE STIPULATED TIME FRAME AND COMPUTE THE NE T PROFIT IN ACCORDANCE WITH THE ORDER OF THE HONBLE A.P. HIGH COURT. AGGRIEVED BY THE CIT ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT THE CIT WAS ERRED IN REVISING THE ASSESSMENT ORDER U/S 263 OF THE ACT, A S THE A.O. HAS VERIFIED THE ISSUES POINTED OUT BY THE CIT IN THE R EVISION PROCEEDINGS. THE A.R. FURTHER SUBMITTED THAT THE A.O. HAS VERIFI ED THE ISSUE OF NET PROFIT AND CHOSE TO ACCEPT THE NET PROFIT DECLARED BY THE ASSESSEE, CONSIDERING THE EXPLANATIONS OFFERED BY THE ASSESSE E. THE A.R. FURTHER SUBMITTED THAT THE JUDGMENTS RELIED UPON BY THE CIT FOR INITIATING REVISION PROCEEDINGS U/S 263 OF THE ACT ARE IN RESP ECT OF TRADING IN ARRACK, THE FACTS AND CONTEXT OF WHICH ARE DIFFEREN T FROM THE TRADE OF IMFL AND HENCE, CANNOT BE APPLIED TO THIS LINE OF B USINESS. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE IS DEALING IN I MFL, WHEREIN THE MRP ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 7 OF THE GOODS WAS FIXED BY THE APBCL IN CONSULTATION WITH THE STATE EXCISE DEPARTMENT AND ASSESSEE CANNOT SELL THE GOOD S OVER AND ABOVE THE MRP. THE A.R. FURTHER SUBMITTED THAT THE MRP O F THE GOODS WAS FIXED AFTER ALLOWING 20 & 30% MARGIN IN RESPECT OF HIGH END AND CHEAP LIQUORS ON PURCHASE PRICE. THE ASSESSEE HAS SOLD T HE GOODS ON MRP WITH AN AVERAGE GROSS PROFIT MARGIN OF 20 TO 25%, O UT OF WHICH IT HAS TO INCUR ALL EXPENSES INCLUDING LICENSE FEES AND ALSO ADMINISTRATIVE EXPENSES, THEREFORE, NATURALLY THE NET PROFIT IS QU ITE LESS IN THIS LINE OF BUSINESS. THE A.R. FURTHER SUBMITTED THAT ESTIMATI NG SALES ON 8 TIMES OF PURCHASE PRICE IS ARBITRARY, AS BEING THE MODUS OPE RANDI OF THIS LINE OF BUSINESS IS ENTIRELY DIFFERENT. THERE IS NO ERROR OR MISTAKE IN THE BOOKS OF ACCOUNTS AND THE CIT HAS NOT POINTED OUT ANY MIS TAKES IN THE BOOKS OF ACCOUNTS. WHEN THERE IS NO MISTAKE IN THE BOOKS O F ACCOUNTS, THE CIT CANNOT ASSUME JURISDICTION FOR ESTIMATION OF NET PR OFIT, THAT TOO BASED UPON THE JUDGEMENT OF A HIGHER COURT. THEREFORE, R EQUESTED TO QUASH THE ORDER PASSED BY THE CIT U/S 263 OF THE ACT. ON THE OTHER HAND, THE LD. D.R. STRONGLY SUPPORTED THE CIT ORDER. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE CIT ASSUMED JURISDICTION TO REVISE THE ASSESSMENT O RDER FOR THE REASON ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 8 THAT THE A.O. HAS NOT CONDUCTED PROPER ENQUIRY, WHI LE COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT. THEREFORE, THE A SSESSMENT ORDER DATED 20.9.2010 IS ERRONEOUS IN SO FAR AS IT IS PRE JUDICIAL TO THE INTEREST OF THE REVENUE. THE CIT ASSUMED JURISDICTION FOR T HE SOLE REASON THAT THE A.O. HAS NOT CONSIDERED THE ITAT AND ALSO HIGH COURTS JUDGEMENT FOR ESTIMATING THE NET PROFIT FROM THE BUSINESS. T HE CIT WAS OF THE OPINION THAT THE ITAT, AS WELL AS HONBLE A.P. HIGH COURT HAS HELD THAT SALES SHOULD BE ESTIMATED AT 8 TIMES OF THE PURCHAS E PRICE AND THEN ESTIMATE NET PROFIT AT 1% OF SUCH ESTIMATED SALES, WHEREAS, THE A.O. HAS SIMPLY ACCEPTED THE NET PROFIT RETURNED BY THE ASSE SSEE, WITHOUT CONSIDERING THE JUDGEMENTS RENDERED BY THE JURISDIC TIONAL HIGH COURT. THEREFORE, THE ASSESSMENT ORDER ERRONEOUS IN SO FAR IS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE. ON PERUSAL OF THE SHOW C AUSE NOTICE ISSUED BY THE CIT, THE ASSESSMENT ORDER AND PAPER BOOK FILED BY THE ASSESSEE, WE FIND THAT THE ISSUE OF ESTIMATION OF NET PROFIT QUE STIONED BY THE CIT WAS ALREADY EXAMINED BY THE A.O. AT THE TIME OF ASSESSM ENT PROCEEDINGS, WHICH IS EVIDENT FROM THE SHOW CAUSE NOTICE ISSUED DATED 24.6.2010 AND 18.8.2010, WHEREIN THE A.O. HAS CALLED FOR ALL THE DETAILS INCLUDING BOOKS OF ACCOUNTS AND BILLS & VOUCHERS IN SUPPORT OF THE EXPENDITURE CLAIMED IN THE PROFIT & LOSS ACCOUNT. THEREFORE, THE CIT WAS NOT CORRECT IN ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 9 OBSERVING THAT THE A.O. DID NOT CONDUCT PROPER ENQU IRY OF THE ISSUES BEFORE COMPLETION OF ASSESSMENT. 8. THE CIT ASSUMED THE JURISDICTION TO REVISE THE A SSESSMENT ORDER ON THE SOLE GROUND THAT THERE WAS A LACK OF ENQUIRY ON THE PART OF THE A.O. FOR ESTIMATING THE NET PROFIT CONSIDERING THE JURISDICTIONAL ITAT AND HIGH COURT DECISION. AS POINTED OUT BY THE A.R., T HE A.O. HAS EXAMINED THE ISSUE OF NET PROFIT, WHICH IS SUBJECT MATTER OF REVISIONAL PROCEEDINGS. ONCE THE A.O. HAS VERIFIED THE DETAILS AND CHOSE TO ACCEPT THE NET PROFIT DECLARED BY THE ASSESSEE, THEN THE CIT CANNOT ASSUM E THE JURISDICTION TO REVISE ASSESSMENT ORDER FOR THE SAME REASONS BY STE PPING INTO THE SHOES OF THE ASSESSING OFFICER. THE A.O. HAS VERIF IED THE BOOKS OF ACCOUNT AND AFTER SATISFIED WITH THE EXPLANATIONS, ACCEPTED THE NET PROFIT DECLARED BY THE ASSESSEE. THE CIT WAS OF THE OPINIO N THAT THE A.O. FAILED TO APPLY THE RATIOS OF JURISDICTIONAL COURTS FOR ESTIMATING THE NET PROFIT WITHOUT POINTING OUT ANY MISTAKES IN THE BOO KS OF ACCOUNTS. THEREFORE, WE ARE OF THE OPINION THAT THE CIT WAS N OT CORRECT IN ASSUMING THE JURISDICTION FOR ESTIMATING THE NET PR OFIT FROM THE BUSINESS. 9. HAVING SAID THAT LET US EXAMINE, WHETHER THE ORD ER PASSED BY THE A.O. IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. ESTIMATION OF NET PROFIT IS A DEBATABLE I SSUE AND ALWAYS TWO ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 10 VIEWS ARE POSSIBLE. THE A.O. HAS TAKEN ONE OF THE POSSIBLE VIEW, THEREFORE, IT CANNOT BE HELD THAT THE ORDER PASSED BY THE A.O. IS ERRONEOUS AND ALSO IT IS PREJUDICIAL TO THE INTERES T OF THE REVENUE. THE ASSESSMENT ORDER PASSED BY THE A.O. IS ALSO NOT PRE JUDICIAL TO THE INTEREST OF THE REVENUE, AS THERE IS NO LOSS OF REV ENUE, BECAUSE OF THE ACTION OF THE A.O. AS THE A.O. HAS CHOSE TO ADOPT N ET PROFIT WHICH IS ALMOST IN LINE WITH THE BUSINESS ACTIVITY OF THE AS SESSEE. THE ASSESSEE HAS CONSISTENTLY DECLARED A NET PROFIT OF 3 TO 4% F ROM HIS BUSINESS FOR PREVIOUS PERIODS WHICH WAS ACCEPTED BY THE DEPARTME NT IN THE EARLIER YEARS. ONCE, THE A.O. ALLOWED THE CLAIM OF THE ASSE SSEE AFTER BEING SATISFIED WITH THE EXPLANATIONS, THEN, THE CIT CANN OT REVISE THE ASSESSMENT ORDER FOR THE SAME REASONS WITH A DIFFER ENT OPINION. IT IS NOT A CASE OF CIT THAT THERE IS AN ERROR OR MISTAKE IN THE BOOKS OF ACCOUNTS. THE CIT HAS NOT POINTED OUT ANY ERRORS I N THE BOOKS OF ACCOUNTS TO SAY THAT THE A.O. HAS ACCEPTED THE NET PROFIT DECLARED BY THE ASSESSEE WITHOUT REJECTING THE BOOKS OF ACCOUNTS AN D RESORTING TO ESTIMATION OF NET PROFIT. UNLESS THE CIT POINTS OU T ERRORS IN THE BOOKS OF ACCOUNTS, HE CANNOT DIRECT THE A.O. TO REJECT THE B OOKS OF ACCOUNTS AND ESTIMATE THE NET PROFIT. MOREOVER, IN OUR CONSIDERE D VIEW, THE CIT CANNOT REVISE THE ASSESSMENT ORDER FOR ESTIMATION O F NET PROFIT, AS THE NET PROFIT IS VARIES FROM BUSINESS TO BUSINESS, DEP ENDING UPON THE ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 11 NATURE OF BUSINESS AND PLACE OF BUSINESS. IN THE PR ESENT CASE ON HAND, THE ASSESSEE IS DEALER OF IMFL, WHERE THE MRP OF TH E PRODUCTS WAS CONTROLLED AND FIXED BY THE STATE GOVT. THROUGH APB CL. THE BUSINESS WAS CLOSELY MONITORED BY THE STATE GOVT. UNDER STRI CT VIGIL OF STATE EXCISE DEPARTMENT, THEREFORE, THERE IS NO SCOPE FOR THE ASSESSEE TO SELL THE PRODUCTS OVER AND ABOVE THE MRP. THE ASSESSEE H AS FILED A PAPER BOOK CONTAINING FINANCIAL STATEMENTS. ON PERUSAL OF THE FINANCIAL STATEMENTS, WE FIND THAT THE ASSESSEE HAS REPORTED A GROSS PROFIT OF 30% WHICH IS EQUIVALENT TO PROFIT MARGIN ALLOWED BY THE GOVT. WHILE FIXING THE MRP OF THE PRODUCTS. ON FURTHER VERIFICA TION OF THE FINANCIAL STATEMENTS, WE FIND THAT THE ASSESSEE HAS INCURRED MAJOR EXPENDITURE FOR PAYMENT OF LICENSE FEES TO THE GOVT. AND INCURR ED MEAGER AMOUNT FOR ADMINISTRATIVE EXPENDITURES. THEREFORE, THERE I S NO REASON OF WHATSOEVER FOR THE CIT TO DOUBT THE NET PROFIT DECL ARED BY THE ASSESSEE. 10. THE CIT, U/S 263 OF THE ACT, HAS POWER TO REVIS E THE ASSESSMENT ORDER. BUT, TO INVOKE THE PROVISIONS OF SECTION 26 3 OF THE ACT, THE TWIN CONDITIONS MUST BE SATISFIED I.E. (1) THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS (2) FURTHER IT MUST BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. UNLESS BOTH THE CONDITIONS ARE SATISFIED, THE CIT CANNOT ASSUME JURISDICTION U/S 263 OF THE ACT. IT IS NOT N ECESSARY THAT EVERY ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 12 ORDER WHICH IS ERRONEOUS MAY NOT BE PREJUDICIAL TO THE INTEREST OF THE REVENUE OR VICE VERSA. UNLESS THE A.O.S ORDER IS ERRONEOUS, NO ACTION CAN BE TAKEN BY THE CIT U/S 263 OF THE ACT. THIS I S BECAUSE THE TWIN CONDITIONS, I.E. THE ORDER IS ERRONEOUS AND THE SAM E IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE ARE CO-EXISTED. IN THE PRESENT CASE ON HAND, THE A.O. HAS CONDUCTED DETAILED ENQUIRY AND ALSO EX AMINED THE NET PROFIT DECLARED BY THE ASSESSEE AT THE TIME OF ASSE SSMENT. THE ASSESSING OFFICER AFTER VERIFICATION OF BOOKS OF AC COUNTS AND RELEVANT DETAILS, HAS ACCEPTED THE NET PROFIT DECLARED BY TH E ASSESSEE WHICH CANNOT BE TERMED AS ERRONEOUS. THE CONTENTION OF T HE CIT WAS THAT THE A.O. HAS NOT APPLIED JURISDICTIONAL JUDGEMENT OF IT AT AND HIGH COURT WHILE ESTIMATING THE NET PROFIT, THEREFORE, THE ORD ER PASSED BY THE A.O. IS WITHOUT APPLICATION OF MIND. WE DO NOT SEE ANY MERITS IN THE OPINION OF THE CIT, FOR THE REASON THAT THERE IS A DISTINCT ION BETWEEN LACK OF ENQUIRY AND INADEQUATE ENQUIRY. IF THERE IS AN INA DEQUATE ENQUIRY THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE CIT TO ASS UME JURISDICTION U/S 263 OF THE ACT, MERELY BECAUSE HE HAS A DIFFERENT O PINION ON THE ISSUES. THEREFORE, WE ARE OF THE OPINION THAT IN THE PRESEN T CASE ON HAND, THERE IS NO REASON OF WHATSOEVER FOR THE COMMISSIONER TO REVISE THE ASSESSMENT ORDER, AS ON BOTH COUNTS, I.E. THE ORDER IS NOT ERRONEOUS AS THE A.O. HAS VERIFIED THE ISSUES AND ACCEPTED THE N ET PROFIT RETURNED BY ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 13 THE ASSESSEE AND ALSO THE ORDER IS NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE, AS THE ASSESSEE HAS DECLARED 3 TO 4% NET P ROFIT FOR PAST SEVERAL YEARS. IN THIS CASE, THERE CANNOT BE ANY D ISPUTE THAT THE A.O. HAS DISCUSSED THE ISSUE AT THE TIME OF COMPLETION O F THE ASSESSMENT. THE NET PROFIT ADOPTED BY THE A.O. IS CORRECT OR NO T IS A DEBATABLE QUESTION. THE LD. CIT HAS NOT POINTED OUT ANY MISTA KES IN THE SAID ESTIMATION, TO SAY THAT WHICH IS ERRONEOUS AND PREJ UDICIAL TO THE INTEREST OF THE REVENUE. THE QUESTION WHETHER THE DECISION OF ITAT IN THE CASE OF M. VEERA BHADRA RAO AND OTHERS (SUPRA) AND ALSO THE HONBLE A.P. HIGH COURT IN THE CASE OF M/S. V. RAMULU, KAKINADA IN ITA NO.197/VIZAG/2003 DATED 21.6.2011, BOTH ARE RENDERE D IN THE CONTEXT OF ARRACK BUSINESS SHALL BE APPLIED TO THE IMFL BUSINE SS OR NOT. THEREFORE, CONSIDERING THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE CIT WAS ERRED IN CONSIDERING T HE CASE LAWS RENDERED BY THE ITAT AND HONBLE A.P. HIGH COURT IN THE CONT EXT OF ARRACK BUSINESS TO THE BUSINESS OF THE ASSESSEE, WHICH IS ENTIRELY DIFFERENT. 11. NOW IT IS PERTINENT TO MENTION HERE THE CASE LA W RELIED BY THE ASSESSEE. THE ASSESSEE RELIED UPON THE COORDINATE BENCH DECISION OF VISAKHAPATNAM ITAT, IN THE CASE OF ERRADA SUMATI, E LURU VS. CIT RAJAHMUNDRY IN ITA NO.142/VIZAG/2011. THE COORDINA TE BENCH OF THIS ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 14 TRIBUNAL, WHILE DEALING WITH SIMILAR ISSUE SET ASID E THE ORDER PASSED BY THE CIT U/S 263 OF THE ACT. THE RELEVANT PORTION O F THE ORDER IS REPRODUCED HEREUNDER: WE HAVE CONSIDERED RIVAL CONTENTIONS. THE ISSUE UN DER CONSIDERATION IS THE QUESTION OF ESTIMATION OF PROFIT. AS SEEN FROM THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS ADOPTED A PARTICULAR METH OD OF ESTIMATION IN ORDER TO ARRIVE AT THE PROFIT FROM THE IMFL BUSINESS CARRIED ON BY THESE ASSESSEES. IT IS A SETTLED POSITION OF LAW THAT TH E LEARNED CIT CANNOT SIT OVER JUDGMENT OF THE ASSESSING OFFICER, IF HE HAS A DJUDICATED THE ISSUE IN DETAIL BY PASSING A SPEAKING ORDER. IN THIS CASE, THERE CANNOT BE ANY DISPUTE THAT THE ASSESSING OFFICER HAS DISCUSSED IN DETAIL ABOUT THE REASONS FOR REJECTION OF BOOKS OF ACCOUNT AND HE HA S ADOPTED A PARTICULAR RATE FOR ESTIMATION OF THE PROFIT. THE RATE OF PRO FIT ADOPTED BY THE ASSESSING OFFICER FOR ESTIMATION OF PROFIT IS CORRE CT OR NOT IS A DEBATABLE QUESTION. OTHERWISE, THE LEARNED CIT HAS NOT POINT ED OUT ANY MISTAKE IN THE SAID ESTIMATION WHICH IS ERRONEOUS AND PREJUDIC IAL TO THE INTERESTS OF THE REVENUE. THE QUESTION, WHETHER THE DECISION OF THE ITAT IN THE CASE OF M/S. M. VEERABHADARA RAO AND OTHERS CITED (SUPRA ), WHICH WAS RENDERED IN THE CASE OF ARRACK BUSINESS, SHALL APPL Y TO THE IMFL BUSINESS OR NOT IS ALSO DEBATABLE QUESTION. HENCE ON A TOTA LITY OF FACTS, WE ARE OF THE CONSIDE4RED VIEW THAT THE ESTIMATE OF PROFIT MA DE BY THE ASSESSING OFFICER CANNOT BE CONSIDERED AS ERRONEOUS AND PREJU DICIAL TO THE INTERESTS OF THE REVENUE. WE ACCORDINGLY SET ASIDE THE ORDER OF LEARNED CIT ON THIS ISSUE. 12. THE ASSESSEE RELIED UPON THE COORDINATE BENCH DECIS ION OF THIS TRIBUNAL, IN THE CASE OF SRI SAI CONTRACTORS VS. IT O IN ITA NO.109/VIZAG/2012, WHEREIN THE TRIBUNAL, AFTER CONS IDERING THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF SPECTRA SHARES AND SCRIPS PVT. LTD. VS. CIT (2013) 354 ITR 35 AND HONBLE DELHI HIGH COURT DECISION IN THE CASE OF CI T VS. SUN BEAM AUTO LIMITED (2011) 332 ITR 167, HELD THAT ONCE THE A.O. EXAMINED THE ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 15 ISSUES, THE CIT CANNOT ASSUME JURISDICTION ON THE S AME ISSUES WHICH IS ALREADY CONSIDERED BY THE A.O., BY STATING THAT THE A.O. HAS CONDUCTED INADEQUATE ENQUIRY OR THERE IS A LACK OF ENQUIRY. THE RELEVANT PORTION IS REPRODUCED AS UNDER: 10. TO INVOKE THE PROVISIONS OF SECTION 263 OF THE ACT, THE TWIN CONDITIONS MUST BE SATISFIED I.E. THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND FURTHER IT MUST BE PREJUDICIAL TO THE INTEREST OF THE REVENUE. UNLESS BOTH CONDITIONS ARE SATISFIED, THE CIT CANNO T ASSUME JURISDICTION TO PASS ORDER U/S 263 OF THE ACT. IT IS NOT NECESSARY THAT EVERY ORDER WHICH IS PREJUDICIAL TO THE INTEREST OF REVENUE IS ALSO E RRONEOUS. UNLESS THE A.OS ORDER IS NOT ERRONEOUS, NO ACTION CAN BE TAKEN BY T HE CIT U/S 263 OF THE ACT, THIS IS BECAUSE THE TWIN CONDITIONS I.E. (1) T HE ORDER IS ERRONEOUS AND (2) THE SAME IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE ARE NOT CO- EXISTS. IN THE PRESENT CASE, THE A.O. HAS CONDUCTE D ENQUIRY BEFORE ALLOWING DEDUCTION TOWARDS WAGES AND CENTERING EXPE NSES AND ALSO EXAMINED THE POINTS ON WHICH THE CIT WANTS FURTHER VERIFICATION. THE ASSESSING OFFICER AFTER CAREFULLY EXAMINED THE BOOK S OF ACCOUNTS AND RELEVANT VOUCHERS FURNISHED BY THE ASSESSEE PASSED THE ASSESSMENT ORDER AS INDICATED IN HIS ORDER, WHICH IS CLEARLY EVIDENT FROM THE ASSESSMENT ORDER. THE CONTENTION OF THE CIT WAS THAT THE A.O. HAS NOT CONDUCTED PROPER ENQUIRY AND ALSO NOT APPLIED HIS MIND BEFORE ALLOWING THE DEDUCTION. BUT, WE DO NOT AGREE WITH THE CIT FOR T HE REASON THAT THERE IS A DISTINCTION BETWEEN LACK OF ENQUIRY AND INADEQUAT E ENQUIRY. IF THERE IS AN INADEQUATE ENQUIRY THAT WOULD NOT BY ITSELF GIVE OCCASION TO THE CIT TO ASSUME JURISDICTION U/S 263 OF THE ACT, MERELY BECA USE HE HAS A DIFFERENT OPINION IN THE MATTER. THE CIT CAN DO THIS ONLY, W HEN THERE IS A LACK OF ENQUIRY BY THE ASSESSING OFFICER. IN THE PRESENT CA SE, THE ASSESSMENT ORDER IS DETAILED ONE AND ALSO, THE A.O. HAS PASSED A REMARKS IN THE ASSESSMENT ORDER ON TWO ISSUES, ON WHICH THE CIT AS SUMED JURISDICTION, I.E. DISALLOWANCE OF ROUND SOME EXPENDITURE OF RS. 1,00,000/- UNDER THE HEAD WAGES AND CENTERING CHARGES AND ALSO PARTNERS CAPITAL ACCOUNTS, WHERE THE ADDITION WAS RS. 66,825/-.THE A.O. HAD CA LLED FOR EXPLANATION AND THE ASSESSEE HAS FURNISHED ITS EXPLANATION. BU T, THE CIT WAS OF THE OPINION THAT THE ASSESSING OFFICER COULD HAVE DO WE LL TO EXPLORE THE POSSIBILITY OF REJECTING THE BOOKS OF ACCOUNTS AND ESTIMATE THE PROFIT. ACCORDING TO CIT, THE ASSESSING OFFICER HAS CONDUCT ED ENQUIRY BUT, IN ADEQUATE, THEREFORE HE WANTED FURTHER ENQUIRY ON TH E ISSUE ON WHICH HE ASSUMED JURISDICTION. THIS FACT HAD NOT BEEN DISPUT ED BY THE REVENUE. THE COMMISSIONER CANNOT INITIATE REVISION PROCEEDINGS, WITH A VIEW TO CONDUCT FISHING AND REVOLVING ENQUIRY IN THE MATTERS WHICH ARE ALREADY EXAMINED BY THE A.O. THE DEPARTMENT CANNOT DO FRESH ASSESSME NT IN THE GUISE OF REVISION ON THE MATTERS WHICH ARE EXAMINED AND CONC LUDED BY THE A.O. ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 16 THE A.O. BEING A QUASI JUDICIAL AUTHORITY, SHALL HA VE THE AUTHORITY TO EXERCISE RIGHT JUDGEMENT AND DISCRETION ON THE BASI S OF INFORMATION AVAILABLE BEFORE HIM. IN THE PRESENT CASE ON HAND, THE ASSESSING OFFICER AFTER CONSIDERING VOUCHERS, MADE AN ROUND SOME ADDI TION OF RS.1,00,000/- WHICH IS ONE OF THE POSSIBLE VIEW AVAILABLE FOR HIM , WHICH THE CIT SHALL NOT TERM IT AS LACK OF ENQUIRY OR NON APPLICATION OF MI ND. THUS, IT CANNOT BE SAID THAT IT IS A CASE OF LACK OF ENQUIRY OR NON AP PLICATION OF MIND. 13. IN THIS VIEW OF THE MATTER AND ALSO APPLYING TH E RATIO OF THE COORDINATE BENCH DECISIONS, WE ARE OF THE OPINION T HAT ASSESSMENT ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT, IS NOT ERRONEOUS, IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, WE QUASHED THE ORDER PASSED BY THE CIT U/S 263 OF T HE ACT AND RESTORE THE ASSESSMENT ORDER. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 5 TH FEB16. SD/- SD/- (. ) ( . ) ( V. DURGA RAO ) ( G. MANJUNATHA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER * /VISAKHAPATNAM: . / DATED : 5.2.2016 VG/SPS # 0* 1*/ COPY OF THE ORDER FORWARDED TO :- 1. / THE APPELLANT PAGADALA RAVINDRA KUMAR, D.NO.17-11-4, REVENUE COLONY, SAMBAMURTHY NAGAR, KAKINADA-533 001, EAST G ODAVARI DISTRICT, A.P. 2. #$ / THE RESPONDENT ITO WARD-2, KAKINADA, EAST GODAVARI DISTRICT ITA NO.355/VIZAG/2013 M/S. PAGADALA RAVINDRA KUMAR & OTHERS, KAKINADA 17 3. THE PRINCIPAL CIT-2, VISAKHAPATNAM 4. 4 / THE CIT, RAJAHMUNDRY 5. 4 () / THE CIT (A), RAJAHMUNDRY 6. * # 9, ( 9 , * / DR, ITAT, VISAKHAPATNAM 7 . / GUARD FILE / BY ORDER // TRUE COPY // >? 9 ( SR.PRIVATE SECRETARY ) ( 9 , * / ITAT, VISAKHAPATNAM