M /s Mani Enterprises, Meerut V. CIT, Meerut

ITA 3783/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8207 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 04-01-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 07-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: JAYANT MISHRA
• Assessee Lawyers: O P SAPRA
• Keywords: Sale consideration of property below Jantri Value; Principle of natural justice; Assessment record
• Section: 40A(3); 143(3); 50C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI B.P. JAIN, ACCOUNTANT MEMBER ITA NO.3783 /DEL/2009 ASSESSMENT YEAR : 2005-06 MANI ENTERPRISES A-229, DEFENCE COLONY, DELHI ROAD, MEERUT. VS. COMMISSIONER OF INCOME TAX AAYKAR BHAWAN, MEERUT (APPELLANT) (RESPONDENT) PAN : AALFM 4033 A APPELLANT BY : SHRI O.P. SAPRA , ADVOCATE RESPONDENT BY : SHRI JAYANT MISHRA, CIT (DR) O R D E R PER: C.L. SETHI, J.M. THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30.06.2009, PASSED BY THE LD. CIT U/S. 263 OF THE INCOME TAX ACT, 1961 (THE ACT), IN CONNECTION WITH THE ASSESSMENT ORDER MADE BY THE AO U/S. 143(3) ON 14.12.2007 PERTAINING TO THE A.Y. 2005-06. 2. GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER:- THAT THE IMPUGNED ORDER AS PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX U/S. 263 OF THE I.T. ACT, 1961, IS ARBITRARY, UNJUST AND ILLEGAL ON VARI OUS FACTUAL AND LEGAL GROUNDS INCLUDING THE FOLLOWINGS: - A) THE ASSESSMENT ORDER U/S. 143(3) DATED 14.12.2007 AS PASSED BY THE LD. AO WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENU E. ITA NO.3783 /DEL/2009 PAGE 2 OF 24 B) THE LEARNED COMMISSIONER OF INCOME TAX HAD NO JURISDICTION TO INVOKE SEC. 263 OF THE I.T.A CT, 1961. C) THE LD. AO HAD PASSED ORDER U/S. 143(3) DATED 14.12.2007 AFTER PROPER APPLICATION OF MIND. D) VARIOUS OBSERVATIONS MADE BY THE LEARNED COMMISSIONER OF INCOME TAX ARE UNTENABLE. THAT WITHOUT PREJUDICE TO THE ABOVE THE LD. CIT HAS ERRED ON THE FACTS OF THE CASE BY DIRECTING LD. AO TO MAKE AN ADDITION DISALLOWANCES OF RS. 3,54,539/- U/S. 40 A(3) OF THE I.T. ACT, 1961, AND MODIFY THE ASSESSMENT ORDER ACCORDINGLY. THAT THE LD. CIT HAS ERRED BY SETTING ASIDE THE ASSESSMENT ORDER ON OTHER ISSUES FOR FURTHER VERIFI CATION OF THE LD. AO ON THE ISSUES OF SUNDRY CREDITORS & APPLICABILITY OF SEC. 50C ALLEGED MDA RATES AND VALUATION OF CLOSING STOCK ON RATES ALLEGEDLY FIXED BY THE MEERUT DEVELOPMENT AUTHORITY. THAT THE IMPUGNED ORDER OF THE LEARNED CIT U/S. 263 DESERVES TO BE CANCELLED AND ANNULLED. 3. IN THIS CASE, THE ASSESSEE FILED ITS RETURN OF I NCOME DISCLOSING TOTAL INCOME AT RS. 53,90,710/-. THEREAFTER, THE AO MADE THE ASSESSMENT U/S. 143(3) ON 14.12.2007 DETERMINING THE ASSESSEES TOT AL INCOME AT RS. 54,56,710/-. THEREAFTER, THE CIT, MEERUT, EXAMINED THE ASSESSMENT RECORD AND FOUND THAT:- I. AS PER COLUMN 17(H) OF THE TAX AUDIT REPORT CASH PAYMENTS OF RS. 17,72,693/- WERE MADE IN VIOLATION OF THE PR OVISIONS OF SECTION 40A(3). AS PER THE AUDIT REPORT AN ADDI TIONAL DISALLOWANCE OF RS. 3,54,539/- SHOULD HAVE BEEN MAD E, BUT NO SUCH DISALLOWANCE WAS MADE BY THE AO. THIS INCL UDED A ITA NO.3783 /DEL/2009 PAGE 3 OF 24 SUM OF RS. 5 LAKHS WHICH WAS PAID IN CASH FOR LAND PURCHASE ON WHICH ALSO DISALLOWANCE U/S. 40A(3) WAS NOT MADE . II. THE CASE WAS SELECTED TO VERIFY SUNDRY CREDITOR S OF RS. 53.44 BUT NO SUCH VERIFICATION WAS CARRIED OUT. III. THE ASSESSEE HAD SOLD LANDS AT A MUCH LESSER RATES THAN MEERUT DEVELOPMENT AUTHORITY BUT SALE INSTANCES HAV E NOT BEEN SCRUTINIZED. IV. CLOSING STOCK OF LAND WAS ALSO VALUED AT LOWER THAN MDA RATES WHILE THE COST OF PROJECTS HAS BEEN ESTIMATED AT MDA RATES. 4. IN THE LIGHT OF THE AFORESAID POINTES NOTICED BY THE CIT, THE CIT HAD ISSUED SHOW-CAUSE NOTICE U/S. 263 ON 30.03.2009 TO THE ASSESSEE, IN RESPONSE TO WHICH THE ASSESSEES AUTHORIZED REPRESE NTATIVE, SHRI RAVINDRA AGGARWAL, CA ATTENDED PROCEEDINGS, AND THE MATTER WAS DISCUSSED BY THE CIT WITH HIM. 5. WITH REGARD TO THE PAYMENTS STATED TO BE MADE IN CONTRAVENTION OF SECTION 40A(3), THE CIT OBSERVED THAT THE PAYMENT A GGREGATING TO RS. 18,37,745/- WERE MADE IN CONTRAVENTIONS OF SECTION 40A(3) OF THE ACT, THE DETAILS OF WHICH ARE AS UNDER:- ITA NO.3783 /DEL/2009 PAGE 4 OF 24 I. PAID TO VARIOUS INDIVIDUALS ON ACCOUNT OF LAND PURCHASE RS.5,00,000 II. PAID FOR STAMPS (USED FOR REGISTRATION OF DOCUMENTS) RS.1,39,200 III. PAID TO MDA FOR VARIOUS PURPOSES RS.11,33,493 IV. PAID FOR OTHER DEVELOPMENT EXPENSES RS.65,052 TOTAL RS.18,37,745/- 6. CIT THEN WORKED OUT THE INADMISSIBLE AMOUNT TO B E OF RS. 3,67,549/- AGAINST WHICH THE ASSESSEE ONLY ADDED BA CK SUM OF RS. 13,010/- BY GIVING FOLLOWING REMARK:- NO DISALLOWANCE U/S. 40A(3), AS MENTIONED IN TAX AUDIT REPORT AT PARA 17 TH OF RS. 3,54,539/- HAS BEEN MADE IN VIEW OF THE FACT THAT THE GENUINENESS OF LAND PAYMENT, STAMP PURCHASE AND PAYMENTS TO MDA ARE FUL LY VERIFIABLE AND THEREFORE, NO DISALLOWANCE BE MADE I N VIEW OF THE BASIC LEGISLATIVE INTENTION FOR INTRODU CTION OF SECTION 40A(3) IN THE INCOME TAX ACT, 1961. 7. THE CIT FURTHER OBSERVED THAT IN THE COURSE OF A SSESSMENT PROCEEDINGS, NO OTHER CLARIFICATION HAVE BEEN OBTAI NED BY THE AO. 8. IN THE COURSE OF PROCEEDINGS U/S. 263 OF THE ACT , THE ASSESSEE CONTENDED BEFORE THE CIT AS UNDER:- (I) IN ALL THE ABOVE CASES PAYMENTS WERE FULLY VERIFIABLE AND GENUINE AND, HENCE, NOT ASSESSABLE T O DISALLOWANCE U/S. 40A(3). (II) PAYMENT FOR PURCHASE OF LAND WAS MADE BEFORE THE SUB-REGISTRAR, HENCE, THE TRANSACTION SHOULD NO T BE DOUBTED. ITA NO.3783 /DEL/2009 PAGE 5 OF 24 (III) STAMP PAPERS WERE PURCHASED FROM STAMP VENDORS WHO DO NOT ACCEPT CHEQUES OR DRAFT. SINCE STAMP PAPERS WERE ACTUALLY USED, THIS EXPENDITURE CANNOT BE SAID TO BOGUS. (IV) PROVISION OF S. 40A(3) SHOULD NOT BE APPLIED I N RESPECT OF PAYMENTS TO MDA, SINCE MDA IS A GOVERNMENT BODY. 9. THE ASSESSEE ALSO PLACED RELIANCE UPON THE DECIS ION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. KKSK LEATH ER PROCESSOR (P) LTD. REPORTED IN 292 ITR 669 (MAD.). 10. AFTER CONSIDERING THE ASSESSEES EXPLANATION AN D THE AOS ORDER, THE CIT HELD THAT PROVISIONS OF RULE 6DD DOES NOT M ENTION OF GENUINENESS OR PROOF OF IDENTITY OF THE PAYEE AS AN EXCEPTIONAL CIRCUMSTANCES SO AS TO TREAT THE SAME IS COVERED BY RULE 6DD OF THE INCOME TAX RULES. THE CITS OBSERVATION IN THIS RESPECT IS AS UNDER:- 4.3 WITH GREAT RESPECT, I AM UNABLE TO SUBSCRIBE TO THE ABOVE VIEW BECAUSE THE PROVISIONS OF RULE 6D D, AS IT EXISTED AT THAT TIME, ADMITTED A NUMBER OF EXCEP TIONS. AT THE PRESENT MOMENT, THE SAID RULE DOES NOT MENTI ON OF GENUINENESS OR PROOF OF IDENTITY OF THE PAYEE AS AN AMELIORATING CIRCUMSTANCE. MOREOVER, IF THE PAYME NT IS DEMONSTRABLY NON GENUINE IT WOULD NOT BE ALLOWABLE AT ALL. THE ENTITIES TO WHICH PAYMENT IN CASH IS ALLO WED IN FULL ARE ENUMERATED IN RULE 6DD(A). SIGNIFICANTLY, MDA IS NOT MENTIONED IN THIS SUB-RULE. RULE 6DD(B) EXE MPTS THOSE PAYMENTS MADE TO GOVERNMENT WHICH ARE REQUIRE D TO BE MADE IN LEGAL TENDER. IN THE INSTANT CASE, T HERE WAS NO SUCH REQUIREMENT. THUS, HERE ALSO THE ASSESSEE S CASE FAILS. THE AO IS, THEREFORE, DIRECTED TO MAKE A FU RTHER ADDITION OF RS. 3,54,539/- AND MODIFY THE ASSESSMEN T ORDER ACCORDINGLY. ITA NO.3783 /DEL/2009 PAGE 6 OF 24 5.1 ALONGWITH THE RETURN OF INCOME THE ASSESSEE SUBMITTED NAMES OF SUNDRY CREDITORS AND SUPPLIERS (RS53,44,404 AS PER SCHEDULE IVA) NAMES OF SUNDRY PAYABLE (RS.1,87,88,548 AS PER SCHEDULE IVB). THE CASE WAS SELECTED SOLELY TO VERIFY THE ABOVE. HOWEVER, FROM THE RECORDS, IT APPEARS THAT NO SUCH VERIFICATION W AS CARRIED OUT SO MUCH SO THAT ONLY THE COPIES OF ACCO UNTS OF SUPPLIERS WEE OBTAINED. ADDRESSES WERE AVAILABLE O NLY IN SOME CASES. IN NO CASE PAN WAS OBTAINED. 11. WITH REGARD TO THE ISSUE ABOUT THE VERIFICATION OF SUNDRY CREDITORS AND SUPPLIERS (RS. 53,44,404/- AS PER SCHEDULE IVA) AND SUNDRY PAYABLE (RS. 1,87,88,548/- AS PER SCHEDULE IVB), CIT OBSERV ED THAT THE AO SELECTED THE CASE TO VERIFY THESE ITEMS, BUT, FROM THE RECORDS IT APPEARED TO HIM THAT NO SUCH VERIFICATION WAS CARRIED OUT EX CEPT COPIES OF ACCOUNTS OF SUPPLIERS WAS OBTAINED. THE CIT FURTHER OBSERVE D THAT ADDRESSES OF THE PARTIES WERE AVAILABLE ONLY IN SOME CASES, AND IN NO CASE PAN WAS OBTAINED. IN THIS RESPECT, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE THE CIT IN THE COURSE PROCEEDINGS U/S. 263 T HAT THE COMPLETE DETAILS CONTAINING NAMES AND ADDRESSES OF ALL SUNDR Y CREDITORS, THE NATURE OF TRANSACTIONS ENTERED INTO WITH THEM, TOTAL AMOUN T OF PURCHASES MADE DURING THE YEAR AND THE TOTAL AMOUNT OUTSTANDING AS AT THE END WERE DULY FILED DURING THE ASSESSMENT PROCEEDINGS ALONGWITH L ETTER DATED 05.11.2007. THE ASSESSEE FURTHER SUBMITTED BEFORE T HE CIT THAT COPIES OF ACCOUNTS OF ALL SUNDRY CREDITORS WERE ALSO FILED BE FORE AO ALONGWITH ITA NO.3783 /DEL/2009 PAGE 7 OF 24 LETTER DATED 16.08.2007, AND THE AMOUNTS DUE TO CRE DITORS WERE OUTSTANDING ON ACCOUNTS OF PURCHASES MADE FROM THEM IN DUE COURSE OF BUSINESS. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THE AO BEING SATISFIED REGARDING GENUINENESS OF THE TRANSACTION, HAD NOT TAKEN ANY ADVERSE VIEW, AND, THEREFORE, THE ASSESSMENT ORDER IN QUESTION COULD NOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF THE REVENUE. 12. THE CIT CONSIDERED THE ASSESSEES EXPLANATION A ND THEN OBSERVED THAT THE ASSESSEES COUNSEL STATEMENT IS PARTIALLY INCORRECT BECAUSE ONLY SOME ADDRESSES WERE GIVEN AND NO VERIFICATION WAS C ARRIED OUT. IN THE LIGHT OF THIS VIEW TAKEN BY THE CIT, THE CIT SET AS IDE ASSESSMENT ORDER THIS POINT AND DIRECT THE AO TO OBTAIN THE ADDRESSE S OF SUNDRY CREDITORS AND VERIFY THEM. 13. WITH REGARD TO THE ISSUE ABOUT THE RATE AT WHIC H THE SALES WERE SOLD AND STOCK WAS VALUED, THE ASSESSEE SUBMITTED BEFORE CIT AS UNDER: I. THAT THE SALES WERE RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE ON ACTUAL AMOUNT OF THE TRANSACTIONS ENTERED INTO BY IT. THE RATES FIXED B Y THE DISTRICT AUTHORITIES AS CIRCLE RATES ARE NOT RELEVANT IN THE CASE OF THE PERSONS CARRYING ON THE BUSINESS. THERE RE NO MDA RATES AS ARE REFERRED TO IN PARA (V) OF NOTICE BY OUR GOODSELF. II. CONCLUSION SEC. 50C IS APPLICABLE ONLY FOR THE PURPOSE OF DETERMINING THE SALE CONSIDERATION FOR COMPUTATION OF CAPITAL GAINS AND IT CAN NOT BE APPLIED FOR DETERMINING THE INCOME UNDER OTHER HEADS. ITA NO.3783 /DEL/2009 PAGE 8 OF 24 III. THE EVALUATION OF CLOSING STOCK HAS BEEN MADE AT COST I.E. ON THE BASIS NORMALLY ACCEPTED BY ALL ASSESSEES FOR VALUING OF CLOSING STOCK I.E. OR MARK ET VALUE WHICHEVER IS LOWER LAND THE CLOSING STOCK UNDER ANY CIRCUMSTANCES CAN NOT BE ASSESSED AT MARKET VALUE THEREOF OR THE RATE FIXED BY ANY AUTHORITY. THE METHOD OF VALUATION OF STOCK AND DETAILS OF COSTING THEREOF HAS DULY BEEN GIVEN IN THE SCHEDULES FORMING PART OF THE BALANCE-SHEET ON RECORD AND NO DEFICIENCY THEREIN IS POINTED OUT BY THE LD. AO. THERE IS NO PROVISION UNDER INCOME- TAX ACT TO VALUE THE CLOSING STOCK ON THE RATES FIX ED BY ANY AUTHORITY. IT IS HOWEVER SUBMITTED THAT NO RATES WHATSOEVER ARE FIXED BY MDA AS ALSO SATED HEREIN ABOVE. THE COST OF PROJECT IS ALSO NOT ESTIMATED BY MDA. 14. HOWEVER, THE CIT IN HIS ORDER U/S. 263 HAS PASS ED THE ORDER DIRECTING THE AO TO VERIFY THIS ASPECT IN THE ASSES SMENT TO BE MADE BY HIM. 15. BEING AGGRIEVED WITH THE CITS ORDER PASSED U/S . 263, THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 16. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ORDER PASSED BY THE AO U/S. 143(3) IS NOT ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF THE REVENUE IN RESPECT OF THE ISSUE REFERRED TO THE CIT IN HIS ORDER PASSED U/S. 263 OF THE ACT IN AS MUCH AS COPIES OF AUDITED BALANCE SHEET, INCOME & EXPENDITURE ACCOUNT ETC., AND, TAX AUDIT REPORT W ERE DULY FILED BY THE ASSESSEE ALONGWITH THE RETURN OF INCOME AND ALL T HE DETAILS REQUIRED BY THE AO WITH REGARD TO THE SUNDRY CREDITORS AND SUPP LIERS, SUNDRY AMOUNTS ITA NO.3783 /DEL/2009 PAGE 9 OF 24 PAYABLE, MATTER WITH REGARD TO THE DISALLOWANCE OF PAYMENT U/S. 40A(3) AND ABOUT THE RATE AT WHICH LAND WAS SOLD AND STOCK WAS VALUED WERE DULY FURNISHED BEFORE THE AO VIDE ASSESSEES LETTER DATE D 16.08.2007 AND 05.11.2007. THE LD. COUNSEL FOR THE ASSESSEE FURTH ER CONTENDED THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAS ISSUED ENQUIRY VIDE LETTER DATED 24.07.2007 (COPY OF WHICH IS PLACED AT PAGE 8 0-81 OF THE PAPER- BOOK FILED BEFORE US), IN REPLY THERE TO THE ASSESS EE VIDE LETTER DATED 16.08.2007 AND FURTHER LETTER DATED 05.11.2007, FIL ED ALL THE DETAILS AS REQUIRED BY THE AO AND ALSO PRODUCED BOOKS OF ACCOU NTS AND VOUCHERS FOR AOS VERIFICATION. HE FURTHER POINTED OUT THAT IN SO FAR AS AMOUNTS OF CREDITORS REMAINING OUTSTANDING AT THE END OF THE C URRENT YEAR IS CONCERNED, THE OUTSTANDING AMOUNT HAS BEEN PAID TO ALL THE CREDITORS IN THE NEXT YEAR WHICH HAS BEEN ACCEPTED BY THE DEPART MENT. THE LD. COUNSEL FOR THE ASSESSEE MADE A REFERENCE TO THE DI SCUSSIONS MADE BY THE AO IN THE ASSESSMENT ORDER DATED 14.12.2007, WHERE THE AO HAS MENTIONED THAT ASSESSEE HAD FILED THE NECESSARY DET AILS AND SUBMISSIONS AND THE BOOKS OF ACCOUNTS WERE PRODUCED, BUT WERE N OT ACCOMPANIED WITH SUPPORTING VOUCHERS AS RESULT THERE OF HE MADE AN ADDITION OF RS. 75,000/- TO THE INCOME RETURNED BY THE ASSESSEE TO COVER UP ALL POSSIBLE LEAKAGE IN THE RESULT DECLARED BY THE ASSESSEE DUR ING THE YEAR. ITA NO.3783 /DEL/2009 PAGE 10 OF 24 17. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIAN CE UPON THE FOLLOWING DECISIONS, WHICH ARE AS UNDER:- I. CIT VS. SUN BEN AUTO LTD. (2009) 217 CTR (DELHI) 133 II. CIT VS. KKSK LEATHER PROCESSOR (P) LTD. 292 ITR 669 III. CIT VS. CHAUDHARY & CO. 217 ITR 431 (ALL.) IV. CIT VS. MATA PRASAD & BROS. 188 ITR 669 (ALL.) V. ATTAR SINGH GURMUKH SINGH VS. ITO 191 ITR 667 (S C) VI. CIT VS. KANDA RICE MILLS 178 ITR 446 (P&H) VII. J.P. SRIVASTAVA & SONS VS. CIT 111 ITR 326 (AL L.) VIII. CIT VS. GOYAL PRIVATE FAMILY SPECIFIC TRUST 1 71 ITR 698 (ALL.) IX. RAYON SILK MILLS VS. CIT 221 ITR 155 (GUJ.) X. MALABAR INDUSTRIAL CO. LTD. VS. CIT 243 ITR 83 ( SC) XI. CIT VS. J.P. GOYAL (HUF) 247 ITR 555 (CAL.) XII. HARI IRON TRADING CO. VS. CIT 263 ITR 437 (P&H ) XIII. CIT VS. MEHROTRA BROTHERS 270 ITR 157 (MP) XIV. CIT VS. GABRIEL INDIA LTD. 203 ITR 108 (BOM.) XV. CIT VS. MAX INDIA LTD. 268 ITR 128 (P&H) XVI. CIT VS. SMT. D. VILLAMMAL 230 ITR 695 (MAD.) 18. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE OR DER OF THE CIT AND CONTENDED THAT THE AO FAILED TO APPLY HIS MIND TO T HE VARIOUS ISSUES ITA NO.3783 /DEL/2009 PAGE 11 OF 24 REFERRED TO IN THE ORDER OF THE CIT PASSED U/S. 263 AND AS SUCH, ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE FURTHER SUBMITTED THAT THE AO HAS FAILED TO MAKE ENQUIRIES AS TO THE DISALLOWANCE OF PAYMENT U/ S. 40A(3) AND AS WELL WITH REGARD TO THE VERACITY AND GENUINENESS OF THE SUNDRY CREDITORS AND SUNDRY AMOUNT PAYABLE AND AS ALSO WITH REGARD TO TH E RATE AT WHICH LANDS WERE SOLD AND THE STOCK WAS VALUED. HE FURTHER SUB MITTED THAT THE AO HAS MERELY ACCEPTED THE DETAILS FILED BY THE ASSESS EE AT THEIR FACE VALUE WITHOUT EXAMINING AND VERIFYING AND WITHOUT MAKING ANY FURTHER ENQUIRY AND APPLYING HIS MIND AS TO THE GENUINENESS AND VER ACITY OF THE SUNDRY CREDITORS AND THE SUNDRY AMOUNT PAYABLE. HE, THERE FORE, SUBMITTED THAT THE CIT WAS VERY MUCH JUSTIFIED IN EXERCISING HIS P OWERS U/S. 263 OF THE ACT, AND THEN RESTORING THE MATTER BACK TO THE FILE OF THE AO TO MAKE FURTHER VERIFICATION AND REDO ASSESSMENT. 19. RIVAL CONTENTIONS OF BOTH THE PARTIES HAVE BEEN CONSIDERED. WE HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AS WELL AS IMPUGNED ORDER U/S. 263 PASSED BY THE CIT. WE HAVE ALSO GONE THRO UGH THE VARIOUS DOCUMENTS AND PAPERS PLACED IN THE PAPER-BOOK FILED BY THE ASSESSEE. WE HAVE DELIBERATED UPON THE PROVISIONS OF LAW CONT AINED IN THAT BEHALF AND VARIOUS DECISIONS CITED AT THE BAR. ITA NO.3783 /DEL/2009 PAGE 12 OF 24 20. BEFORE WE PROCEED TO DEAL WITH THE VARIOUS ISSU ES IN RESPECT OF WHICH THE CIT HAS EXERCISED HIS POWERS U/S. 263 OF THE ACT, WE FIND IT FIT TO HAVE A LOOK TO THE VARIOUS PARAMETERS AND PRINCI PLES WHICH GOVERNED THE EXERCISE OF POWER BY THE COMMISSIONER UNDER THE PROVISIONS OF SECTION 263 OF THE ACT. 21. THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. ASHISH RAJPAL (2009) 180 TAXMAN 623 (DELHI), AFTER ANALYZI NG AND CONSIDERING THE DECISION OF HONBLE SUPREME COURT IN THE CASE O F MALABAR INDUSTRIAL COMPANY VS. CIT (SUPRA), CIT VS. MAX INDIA LTD. (20 07) 295 ITR 282 AND RAM PYARI DEVI SAROGI VS. CIT (1968) 67 ITR 84 (SC) AND THE DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF GEE VEE ENTERPRISES VS. ACIT (1975) 99 ITR 375 (DELHI AND T HE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GA BRIEL INDIA LTD. (SUPRA) HAS LAID DOWN THE PARAMETERS AND PRINCIPLES WHICH GOVERN THE EXERCISE OF POWER BY THE COMMISSIONER UNDER THE PRO VISION OF SECTION 263 OF THE ACT AS UNDER:- (I) THE POWER UNDER SECTION 263 IS SUPERVISORY IN N ATURE, WHEREBY THE COMMISSIONER CAN CALL FOR AND EXAMINE T HE ASSESSMENT RECORDS. (II) THE COMMISSIONER CAN REVISE THE ASSESSMENT ORD ER IF THE TWIN CONDITIONS PROVIDED IN THE ACT ARE FULFILLED, I.E., THE ASSESSMENT ORDER IS NOT ONLY ERRONEOUS BUT IS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE FU LFILLMENT OF BOTH THE CONDITIONS IS AN ESSENTIAL PREREQUISITE. ITA NO.3783 /DEL/2009 PAGE 13 OF 24 (III) AN ORDER IS ERRONEOUS WHEN IT IS CONTRARY TO LAW OR PROCEEDS ON AN INCORRECT ASSUMPTION OF FACTS OR IS IN BREACH OF PRINCIPLES OF NATURAL JUSTICE OR IS PASSE D WITHOUT APPLICATION OF MIND, THAT IS, IS STEREO-TYPED INASM UCH AS THE ASSESSING OFFICER ACCEPTS WHAT IS STATED IN THE RET URN OF THE ASSESSEE WITHOUT MAKING ANY ENQUIRY CALLED FOR IN T HE CIRCUMSTANCES OF THE CASE, I.E., PROCEEDS WITH UND UE HASTE. (IV) THE EXPRESSION PREJUDICIAL TO THE INTEREST OF THE REVENUE WHILE NOT TO BE CONFUSED WITH THE LOSS OF TAX WILL CERTAINLY INCLUDE AN ERRONEOUS ORDER WHICH RESULTS IN A PERSO N NOT PAYING TAX WHICH IS LAWFULLY PAYABLE TO THE REVENUE . (V) EVERY LOSS OF TAX TO THE REVENUE CANNOT BE TREA TED AS BEING PREJUDICIAL TO THE INTEREST OF THE REVENUE. FOR EXAMPLE, WHEN THE ASSESSING OFFICER TAKES RECOURSE TO ONE OF THE TWO COURSES POSSIBLE, IN LAW, OR WHERE THERE ARE TWO VI EWS POSSIBLE AND THE COMMISSIONER DOES NOT AGREE WITH T HE VIEW TAKEN BY THE ASSESSING OFFICER WHICH HAS RESUL TED IN A LOSS. (VI) THERE IS NO REQUIREMENT OF ISSUANCE OF A NOTIC E BEFORE COMMENCING PROCEEDINGS UNDER SECTION 263. WHAT IS REQUIRED IS ADHERENCE TO THE PRINCIPLES OF NATURAL JUSTICE BY GRANTING TO THE ASSESSEE AN OPPORTUNITY OF BEING HE ARD BEFORE PASSING AN ORDER UNDER SACTION 263. (VII) IF THE ASSESSING OFFICER ACTS IN ACCORDANCE W ITH LAW, HIS ORDER CANNOT BE TERMED AS ERRONEOUS BY THE COMMISSI ONER, SIMPLY BECAUSE ACCORDING TO HIM, THE ORDER SHOULD H AVE BEEN WRITTEN MORE ELABORATELY. RECOURSE CANNOT B E TAKEN TO SECTION 263 TO SUBSTITUTE THE VIEW OF THE ASSESS ING OFFICER WITH THAT OF THE COMMISSIONER. (VIII) THE EXERCISE OF STATUTORY POWER UNDER SECTION 263 I S DEPENDENT ON EXISTENCE OF OBJECTIVE FACTS ASCERTAIN ED FROM PRIMA FACIE MATERIAL ON RECORD. THE EVALUATION OF SUCH MATERIAL SHOULD SHOW THAT TAX WHICH WAS LAWFULLY EX IGIBLE WAS NOT IMPOSED. 22. WE SHALL FIRST DEAL WITH THE ISSUE ABOUT THE DI SALLOWANCE OF PAYMENT UNDER THE PROVISIONS SECTION 40A(3) OF THE ACT. IN THE TAX ITA NO.3783 /DEL/2009 PAGE 14 OF 24 AUDIT REPORT UNDER CLAUSE H OF ITEM 16, RELATING TO THE AMOUNT INADMISSIBLE U/S. 40A(3) READ WITH RULE 6DD, THE AU DITOR HAS STATED AS UNDER:- H AMOUNT INADMISSIBLE UNDER SECTION 40A(3) READ WITH RULE 6DD AND COMPUTATION THEREOF (1) RS. 13010/- @ 20% ON 65052/-BEING DEVELOPMENT EXPENSES IS EXCESS OF RS.20000/- IN CASH. (2) RS. 3,54,539/- @ 20% IF RS. 17,72,693/- BEING CASH PAYMENTS U/S. 40A(3) IN EXCESS OF RS. 20000/- EACH AS PER ANNEXURE (B) ATTACHED 23. ANNEXURE B RELATING TO THIS MATTER ATTACHED TO THE AUDIT REPORT GIVING DETAILS OF PAYMENTS COVERED U/S. 40A(3) OF T HE ACT READS AS UNDER: ANNEXURE B A. LAND PURCHASE DATE NAME OF PAYEE AMOUNT 16.11.2004 SMT. VEDWATI 160,000.00 13.12.2004 SH. MAIRAJUDDIN 300,000.00 18.03.2005 SH. AKBAR 40,000.00 500,000.00 B. STAMP PURCHASED IN CASH FOR REGISTRATION OF LAND PURCHASE FROM 11.10.2004 SH. MIRAJUDDIN KH. NO. 297 29,100.00 19.11.2004 SH. JAIPRAKASH KH. NO. 178 73,400.00 10.02.2005 SH. JAIPRAKASH KH. NO. 178 36,700.00 139,200.00 C. PAYMENTS TO M.D.A. FOR SUSPERVISION CHARGES EXTERNAL DEVELOPMENT & LAYOUT SANCTION FEE ETC. 20.05.2004 M.D.A. SUPERVISION CHARGES 35,638.00 ITA NO.3783 /DEL/2009 PAGE 15 OF 24 22.05.2004 M.D.A. EXTERNAL DEVELOPMENT CHARGES 20,323.00 22.05.2004 M.D.A. EXTERNAL DEVELOPMENT CHARGES 84,331.00 22.05.2004 M.D.A. EXTERNAL DEVELOPMENT CHARGES 74,900.00 22.05.2004 M.D.A. EXTERNAL DEVELOPMENT CHARGES 164,655.00 22.05.2004 M.D.A. EXTERNAL DEVELOPMENT CHARGES 37,162.00 22.05.2004 M.D.A. EXTERNAL DEVELOPMENT CHARGES 37,450.00 22.05.2004 M.D.A. EXTERNAL DEVELOPMENT CHARGES 26,215.00 22.05.2004 M.D.A. EXTERNAL DEVELOPMENT CHARGES 20.323.00 22.05.2004 M.D.A. EXTERNAL DEVELOPMENT CHARGES 153,413.00 03.07.2004 M.D.A. LAY OUT FEE 22,000.00 16.11.2004 M.D.A. FEE PLAN SANCTION FEE 361,184.00 17.11.2004 M.D.A. EXTERNAL DEVELOPMENT CHARGES 95,899.00 1,133,493.00 1,772,693.00 INADMISSIBLE AMOUNT U/S. 40A(3) @ 20% OTHER DEVELOPMENT EXPENSES: 13.08.2004 STEEL FABRICATION 32,963.00 10.12.2004 G.I. SHEET PURCHASE 32,089.00 65,052.00 24. FROM THE SAID REPORT IT IS, THUS, CLEAR THAT TH E AUDITOR QUANTIFIED THE AMOUNT OF RS. 13,010/- AND RS. 3,54,539/- BEING 20% OF THE TOTAL PAYMENTS AS INADMISSIBLE AMOUNT U/S. 40A(3) OF THE ACT. HOWEVER, IN THE RETURN OF INCOME, THE ASSESSEE HAS ONLY ADDED B ACK THE SUM OF RS. 13,010/- IN THE TOTAL INCOME AND HAS NOT ADDED BACK THE AMOUNT OF RS. 3,54,539/- BY GIVING RIDER AS UNDER:- ITA NO.3783 /DEL/2009 PAGE 16 OF 24 NO DISALLOWANCE U/S 40A(3), AS MENTIONED IN TAX AUDIT REPORT AT PARA 17 TH OF RS. 3,54,539/- HAS BEEN MADE IN VIEW OF THE FACT THAT THE GENUINENESS OF LA ND PAYMENT, STAMP PURCHASE AND PAYMENTS TO MDA ARE FULLY VERIFIABLE AND THEREFORE, NO DISALLOWANCE BE MADE IN VIEW OF THE BASIC LEGISLATIVE INTENTION FOR INTR ODUCTION OF SECTION 40A(3) IN THE INCOME TAX ACT, 1961. 25. THE CASE WAS SELECTED FOR SCRUTINY, AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO ISSUED CERTAIN QUESTI ONNAIRE AND REQUIRED THE ASSESSEE TO FURNISH CERTAIN INFORMATION AND DET AILS VIDE HIS LETTER DATED 24.07.2007, CONTAINING ABOUT 16 ITEMS. BUT, NO DET AILS OR EXPLANATION WITH REGARD TO THE QUESTION AS TO WHY THE SUM OF RS . 3,67,549/- AS WORKED OUT BY THE AUDITOR IN HIS AUDIT REPORT SHOULD NOT B E DISALLOWED U/S. 40A(3) OF THE ACT. IN THE ASSESSEES NOTE FILED ALONGWITH RETURN OF INCOME, THE ASSESSEE HAS GIVEN A GENERAL EXPLANATION THAT NO DI SALLOWANCE U/S. 40A(3), AS MENTIONED IN TAX AUDIT REPORT OF RS. 3,5 4,539/-, IS TO BE MADE IN VIEW OF THE FACT THAT THE GENUINENESS OF TH E LAND PAYMENTS, STAMP PURCHASE AND PAYMENTS TO MDA ARE FULLY VERIFIABLE. NOTHING HAS BEEN STATED AS TO WHY THE PAYMENT MADE TOWARDS PURCHASE OF LAND, WHICH WAS PURCHASED AS STOCK IN TRADE IS NOT COVERED BY SECTI ON 40A(3) OF THE ACT, WHEN THE PAYMENT WAS ADMITTEDLY MADE IN CASH IN EXC ESS OF RS. 20,000/. THE ASSESSEE HAS ALSO NOT EXPLAINED AS TO WHY THE P AYMENT MADE TO MDA FOR SUPERVISION CHARGES, EXTERNAL DEVELOPMENT AND L AY-OUT SANCTION SHOULD ALSO NOT BE DISALLOWED U/S. 40A(3) OF THE AC T. SIMILARLY, NO ITA NO.3783 /DEL/2009 PAGE 17 OF 24 DETAILS HAS BEEN GIVEN ABOUT STAMP PURCHASES SO AS TO EXCLUDE THE SAME FROM THE PURVIEW OF SECTION 40A(3) OF THE ACT. THE AO HAS ALSO NOT MADE ANY ENQUIRY AS TO THE DISALLOWANCE OF RS. 3,54 ,539/- THOUGH IN THE TAX AUDIT REPORT IT WAS CATEGORICALLY AND SPECIFICA LLY MENTIONED THAT SUM OF RS. 3,54,539/- IS AN INADMISSIBLE AMOUNT U/S . 40A(3) OF THE ACT. IT IS ALSO PERTINENT TO NOTE THAT NOTHING HAS BEEN EXPLAINED BEFORE THE AO AS TO HOW AND WHY THESE PAYMENTS ARE TO BE EXCLUDED FROM THE PURVIEW OF THE SECTION 40A(3) OR ARE OTHERWISE COVERED BY T HE EXCEPTION PROVIDED IN RULE 6DD OF INCOME TAX RULE. THIS IS THE CASE W HERE THE AO FAILED TO APPLY HIS MIND AND HAS ACCEPTED THE ASSESSEES EXPL ANATION ON THE FACE OF IT, WHICH UNDOUBTEDLY RENDERS THE AOS ORDER AS ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE IN SO FA R AS THIS ASPECT OF THE MATTER IS CONCERNED. WE, THEREFORE, UPHELD THE ORD ER OF THE CIT ON THIS ISSUE AND DIRECT THE AO TO EXAMINE AND VERIFY THIS ASPECT OF THE MATTER IN THE LIGHT OF THE PROVISIONS CONTAINED IN SECTION 40 A(3) READ WITH RULE 6DD AS APPLICABLE IN THE ASSESSMENT YEAR UNDER CONS IDERATION. THE AO SHALL EXAMINE THIS ISSUE IN THE LIGHT OF THE PROVIS IONS AS AMENDED BY THE FINANCE ACT, 1995, AND IN THE LIGHT OF AMENDED RULE 6DD OF INCOME TAX RULES AS APPLICABLE ON OR AFTER 01.07.1995, WHEREBY THE CLAUSE (J) OF RULE 6DD HAS BEEN OMITTED FROM 01.07.1995. THE VARIOUS DECISIONS CITED BY THE LD. COUNSEL FOR THE ASSESSEE ARE TO BE CONSIDE RED ONLY IN THE LIGHT OF ITA NO.3783 /DEL/2009 PAGE 18 OF 24 THE PROVISIONS OF SECTION 40A(3) READ WITH RULE 6DD AS IN FORCE IN THE RELEVANT ASSESSMENT YEAR, AND NOT IN THE LIGHT OF T HE PROVISIONS OF SECTION 40A(3) READ WITH RULE 6DD AS THEY STOOD BEFORE 01.0 7.1995. WE ORDER ACCORDINGLY. 26. NOW, WE SHALL DEAL WITH THE LD. CIT(A)S ORDER DIRECTING THE A.O. TO REDO THE ASSESSMENT AFTER OBTAINING THE ADDRESS OF SUNDRY CREDITORS AND AFTER VERIFYING THEM. IN THIS CONNECTION, WE FIND T HAT THE A.O. VIDE HIS LETTER DATED 24.07.2007 ASKED THE ASSESSEE TO FURNI SH THE FOLLOWING INFORMATION AND DETAILS:- 5. FURNISH THE DETAILS IN RESPECT OF CREDITORS/ DE BTORS IN WHOSE NAME SUM EXCEEDING RS. 1 LAKH IS OUTSTANDING. S. NO. NAME AND ADDRESS OF THE PERSON NATURE OF TRANSACTIONS TOTAL AMOUNT INVOLVED AMOUNT OUTSTANDING AT THE YEAR END WHETHER PERSON COVERED U/S 40A(2)(B) 6. DETAILS OF UNSECURED LOANS IN THE FOLLOWING FORM AT, ALONGWITH CONFIRMATIONS. NAME AND ADDRESS PAN BANK A/C NO. WHETHER RELATED PARTY RATE OF INTEREST CHARGEABLE ****** ****** ****** 8. FURNISH NAME, ADDRESS AND COPY OF ACCOUNTS OF AL L PARTIES FROM WHOM PURCHASES EXCEEDING RS. 1 LAKH HAVE BEEN MADE DURING THE PERIOD UNDER CONSIDERATION. ******* ******* ****** ITA NO.3783 /DEL/2009 PAGE 19 OF 24 12. FURNISH DETAILS OF SUNDRY PAYABLE WITH NAME, AD DRESS, PAN, AMOUNT, PURPOSE, DATE. 27. IN RESPONSE TO THE SAID LETTER, THE ASSESSEE VI DE ITS LETTER DATED 16.08.2007 AND 05.11.2007 SUBMITTED THE DETAILS OF SUPPLIERS FROM WHOM PURCHASES EXCEEDING RS. 1,00,000/- WERE MADE DURING THE YEAR ALONGWITH THE PHOTOCOPIES OF THEIR ACCOUNTS IN THE BOOKS OF T HE ASSESSEE, DETAILS OF SUNDRY CREDITORS OUTSTANDING EXCEEDING RS. 1,00,000 /- ON 31.03.2005. THE ASSESSEES AVERMENT IN THIS REGARD IN ITS REPLY DATED 16.08.2007 AND 05.11.2007 ARE AS UNDER:- 2. DETAILS CONTAINING THE COMPLETE ADDRESS OF SUND RY CREDITORS HAVING OUTSTANDING BALANCES EXCEEDING RUP EES ONE LAC ARE ENCLOSED AT SL. NO. 2. THE DETAILS AS ENCLOSED ALSO CONTAIN THE TOTAL AMOUNT OF PURCHASES MADE DURING THE YEAR AND THE AMOUNT OUTSTANDING AS ON 31.03.2005. ***** ******* ****** 7. THE BOOKS OF ACCOUNTS AND THE VOUCHERS ARE BEING PRODUCED FOR NECESSARY VERIFICATION. ****** ****** ****** 5. THERE WERE NO DEBTORS AS ON 31.03.2005. THE DET AILS OF CREDITORS OF AN AMOUNT EXCEEDING 1 LAC AS ON 31.03. 2005 ARE ENCLOSED IN THE REQUISITE PERFORMA. 6. DETAILS OF UNSECURED LOANS IN THE REQUISITE PERF ORMA ARE ENCLOSED HEREWITH. THE DETAIL ATTACHED CONTAINS TH E AMOUNT OF FRESH AMOUNT RAISED FROM THE PARTIES CONCERNED DURI NG THE YEAR. CONFIRMATIONS FROM THE UNSECURED DEPOSITORS ARE ALS O ENCLOSED HEREWITH. ***** ***** ****** ITA NO.3783 /DEL/2009 PAGE 20 OF 24 12. SUNDRY PAYABLES ARE NOT AS SUCH PAYABLE TO ANY INDIVIDUAL PARTY AND THEREFORE, NAMES, ADDRESS AND PAN OF THE PAYEES CANNOT BE GIVEN. THE DETAILS OF SUNDRY PAYABLE ARE GIVEN AT ANNEXURE IV B TO THE BALANCE SHEET ON RECORD. ******* ****** ****** 28. THE NECESSARY DETAILS CONTAINING COMPLETE ADDRE SS OF SUNDRY CREDITORS HAVING OUTSTANDING BALANCES EXCEEDING RS. ONE LAC, THE DETAILS OF TOTAL AMOUNT OF PURCHASES AND DETAILS OF UNSECUR ED LOANS AND AMOUNT PAYABLE HAS ALSO BEEN PRODUCED BEFORE US. WE FIND THAT IN THE DETAILS OF UNSECURED LOANS AS ON 31.03.2005, THE ASSESSEE HAS GIVEN THE NAME AND ADDRESS OF THE PERSON CONCERN ALONGWITH THEIR PAN. IN THE DETAILS OF SUNDRY CREDITORS OUTSTANDING EXCEEDING RS. ONE LAC AS ON 31.03.2005, WE FIND THAT THE ASSESSEE HAS GIVEN ALL THE DETAILS AS PER PERFORMA GIVEN BY THE AO. NAME & ADDRESS OF EACH SUNDRY CREDITORS RE MAINING OUTSTANDING WITH AN AMOUNT EXCEEDING RS. ONE LAC HAS ALSO BEEN DULY MENTIONED AND THE NATURE OF THE TRANSACTION HAS ALSO BEEN FURNISH ED. THE AMOUNT OUTSTANDING UNDER THE HEAD SUNDRY CREDITORS IS ON ACCOUNT OF PURCHASES OF GOODS MADE BY THE ASSESSEE ON CREDIT AND IN SOME OF THE CASES THE AMOUNT OF TOTAL PURCHASE MADE DURING THE YEAR HAS B EEN PARTLY PAID LEAVING ONLY THE PART AMOUNT AS OUTSTANDING AT THE END OF THE YEAR. THESE PERSONS ARE ALSO NOT COVERED BY SECTION 40A(2)(B) A S SO STATED IN THE DETAILS FILED BEFORE THE AO. THE ASSESSEE HAS ALSO GIVEN THE DETAILS OF ITA NO.3783 /DEL/2009 PAGE 21 OF 24 SUPPLIERS FROM WHOM PURCHASES EXCEEDING RS. ONE LAC WERE MADE AND THE COPY OF THEIR ACCOUNT AS APPEARING IN THE ASSES SEES BOOKS OF ACCOUNTS WERE ALSO FURNISHED. IN THE COPY OF ACCOUNTS, THE NATURE OF TRANSACTION AND THE NATURE OF THE PAYMENT ARE DULY GIVEN WITH R ESPECTIVE NARRATION MADE IN THE JOURNAL OR CASHBOOK. IN THE AUDITED BA LANCE SHEET AND OTHER DETAILS FILED ALONGWITH RETURN OF INCOME, THE DETA ILS OF SECURED LOANS, UNSECURED LOANS, SUNDRY CREDITORS AND SUNDRY CREDIT ORS PAYABLE HAS BEEN GIVEN. THESE FACTS WERE DULY POINTED OUT BY THE AS SESSEE TO LD. CIT IN THE COURSE OF PROCEEDINGS U/S. 263 OF THE ACT. HOW EVER, THE CIT IN HIS ORDER U/S 263 HAS OBSERVED AS UNDER:- THE COUNSELS STATEMENT IS PARTLY INCORRECT BECAUSE SOME ADDRESSES WERE GIVEN AND NO VERIFICATI ON WAS CARRIED OUT. THE ASSESSMENT ORDER IS, THEREFOR E, SET ASIDE ON THIS POINT. THE AO WILL NOW OBTAIN THE ADDRESSES OF SUNDRY CREDITORS AND VERIFY THEM. 29. IN AFORESAID OBSERVATION MADE BY THE CIT, THE C IT HAS FAILED TO POINT OUT CATEGORICALLY AS TO IN WHICH CASES, THE A SSESSEE HAS NOT FURNISHED ADDRESSES OF SUNDRY CREDITORS. THE CIT HAS MADE A GENERAL REMARK WITHOUT POINTING THE SPECIFIC NAME OF THE SUNDRY CR EDITOR IN RESPECT OF WHICH NO DETAILS OF ADDRESSES WERE FURNISHED BY THE ASSESSEE. NOTHING HAS BEEN BROUGHT TO OUR NOTICE TO POINT OUT THAT IN CERTAIN CASES OF ADDRESSES OF CREDITORS WERE NOT FURNISHED BY THE AS SESSEE. IN THE LIGHT OF THE AFORESAID GENERAL OBSERVATION BY THE CIT, WE AR E OF THE CONSIDERED ITA NO.3783 /DEL/2009 PAGE 22 OF 24 VIEW THAT CIT HAS FAILED TO APPLY HIS MIND TO ALL T HE DETAILS FURNISHED BY THE ASSESSEE BEFORE THE AO, AND MERELY FOR THE SAKE OF SETTING ASIDE THE MATTER TO THE AO, THE CIT HAS MADE THIS OBSERVATION AND DIRECTED THE AO TO OBTAIN THE ADDRESSES OF SUNDRY CREDITORS. GENER ALLY, ISSUES WHICH ARE ACCEPTED BY THE AO DO NOT FIND MENTION IN THE ASSES SMENT ORDER AND ONLY SUCH POINTS ARE TAKEN NOTE OF ON WHICH THE ASSESSEE S EXPLANATION ARE REJECTED AND ADDITIONS/DISALLOWANCES ARE MADE. THE REFORE, IN THE LIGHT OF THESE DETAILS FILED BY THE ASSESSEE, THE AO WAS SAT ISFIED WITH THE EXPLANATION OF THE ASSESSEE AND HE DID NOT FIND IT NECESSARY TO MAKE ANY FURTHER ENQUIRY, WHICH ITSELF DOES NOT RENDERS HIS ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE SO AS TO GIVE A POWER TO CIT TO INVOKE SECTION 263 OF THE ACT AND THEN SET ASIDE TH E ASSESSMENT FOR REDOING. THE CIT SHOULD HAVE POINTRD OUT CATEGORIC AL DEFECTS IN THE DETAILS FILED BY THE ASSESSEE BEFORE THE AO EXCEPT BY MAKING A GENERAL REMARK THAT ASSESSEES STATEMENT IS PARTIALLY INCOR RECT BECAUSE ONLY SOME ADDRESSES WERE GIVEN AND NO VERIFICATION WAS CARRIE D OUT. IT IS WELL SETTLED THAT AOS ORDER CANNOT BE TERMED AS ERRONEO US BY THE COMMISSIONER SIMPLY BECAUSE ACCORDING TO HIM THE OR DER SHOULD HAVE BEEN WRITTEN MORE ELABORATELY OR ACCORDING TO HIM T HE ENQUIRY SHOULD HAVE BEEN CONDUCTED IN SUCH A MANNER AS SUGGESTED B Y HIM. IT IS ALSO WELL SETTLED THAT RECOURSE CANNOT BE TAKEN TO SECTI ON 263 OF THE ACT TO ITA NO.3783 /DEL/2009 PAGE 23 OF 24 SUBSTITUTE THE VIEW OF THE AO WITH THAT OF THE COMM ISSIONER. IT IS ALSO WILL SETTLED THAT THE EXERCISE OF POWERS U/S. 263 O F THE ACT IS DEPENDENT ON EXISTENCE OF OBJECTIVE FACTS ASCERTAINED FROM PRIMA FACIE MATERIAL ON RECORD, AND THE EVALUATION OF SUCH MATERIAL SHOULD SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE WAS NOT IMPOSED. IN THIS VIE W OF THE MATTER, WE, THEREFORE, HOLD THAT THE CITS ORDER DIRECTING THE AO TO OBTAIN THE ADDRESSES OF SUNDRY CREDITORS AND VERIFY THEM IS NO T ACCORDING TO THE PARAMETERS AND PRINCIPLES GOVERNING THE EXERCISE OF POWERS BY THE COMMISSIONER UNDER THE PROVISIONS OF SECTION 263 OF THE ACT. WE, THEREFORE, SET ASIDE THE CITS THIS PART OF ORDER R ELATING TO THE ISSUE ABOUT VERIFICATION OF SUNDRY CREDITORS. WE ORDER ACCORDI NGLY. 30. AS REGARDS THE ISSUE ABOUT THE SALE OF LAND AND VALUATION OF STOCK AT ALLEGED LOW RATES, WE FIND THAT CIT AFTER REPRODUCI NG THE ASSESSEES SUBMISSION IN PARA 6 OF HIS ORDER HAS MERELY STAT ED ONE LINE STATING THAT THE AO WILL VERIFY THESE ASPECTS IN THE ASSESSMENT TO BE MADE BY HIM. WHILE DOING SO HE HAS NOT GIVEN ANY REASON AS TO WH Y THESE ASPECTS ARE TO BE FRESHLY EXAMINED BY THE AO IN THE FRESH ASSESSME NT TO BE MADE BY HIM. THE CIT HAS NOT POINTED OUT ANY IRREGULARITY OR ILLEGALITY IN THE AOS ORIGINAL ASSESSMENT MADE U/S. 143(3) IN SO FAR AS THE AFORESAID ISSUE IS CONCERNED. THE ORDER OF CIT, DIRECTING THE AO T O VERIFY THESE ASPECTS SEEMS TO BE PASSES VERY CASUALLY WITHOUT GIVING ANY FINDING AS TO HOW ITA NO.3783 /DEL/2009 PAGE 24 OF 24 AND IN WHAT MANNER THE AOS ASSESSMENT ORDER U/S. 1 43(3) COULD BE RENDERED ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, THIS PART OF THE CITS ORDER IS ALSO CAN CELLED. 31. IN THE RESULT, THE CITS ORDER IS UPHELD ONLY T O THE EXTENT OF THE ISSUE ABOUT THE DISALLOWANCE OF PAYMENT U/S. 40A(3) OF THE ACT, AND REST PART OF HIS ORDER IS CANCELLED. WE ORDER ACCORDING LY. 32. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 33. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 5 TH FEBRUARY, 2010. SD/- (B.P. JAIN ) ACCOUNTANT MEMBER SD/- (C.L. SETHI) JUDICIAL MEM,,BER DATED: 5 TH FEBRUARY, 2010 *NITASHA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. BY ORDER DEPUTY REGISTRAR