M/s Venus Woollen Mills, Ludhiana V. CIT III, Ludhiana

ITA 407/CHANDI/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80900 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 15-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Search and seizure; Question of law; Assessment record; Revenue expenditure; Capital expenditure
• Section: 143(3); 80HHC; 133A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.407/CHD/2013 ASSESSMENT YEAR: 2008-09 M/S VENUS WOOLLEN MILLS, VS. THE CIT-III, LUDHIANA LUDHIANA PAN NO. AAAFV8368E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SMT. JYOTI KUMARI DATE OF HEARING : 12.08.2014 DATE OF PRONOUNCEMENT : 17.09.2014 ORDER PER T.R.SOOD, A.M. THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 28.03.2013 OF CIT-III, LUDHIANA. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS:- 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX-III, LUD HIANA HAS ERRED IN ASSUMING JURISDICTION AND ISSUING NOTI CE U/S 263 OF THE INCOME TAX ACT, 1961. 2. THAT THE WORTHY CIT-III HAS ERRED IN GIVING HIS FIN DING THAT THE ASSESSMENT FRAMED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 3. THAT THE WORTHY CIT-III HAS ERRED IN NOT CONSIDERIN G THE FACTS THAT ASSESSEE MAINTAINED PROPER BOOKS OF ACCO UNTS 2 WHICH WERE THOROUGHLY CHECKED BY THE ASSESSING OFFI CER DURING THE COURSE OF HEARING AND ASSESSMENT WAS FRA MED AFTER THOROUGH AND DETAILED INVESTIGATION AND WITH DUE APPLICATION OF MIND. 4. THAT THE CIT-III HAS ERRED IN REJECTING THE BOOKS O F ACCOUNTS AS NO SPECIFIC DEFECTS WERE FOUND IN THE B OOKS OF ACCOUNT BY HIM AND ALSO BY THE ASSESSING OFFICER DU RING THE COURSE OF HEARING WHICH WERE PROPERLY MAINTAINED. 5. NOTWITHSTANDING THE ABOVE FACTS, THE CIT-III HAS ER RED IN MAKING ADDITION OF RS. 1,83,80,208/- IN THE INCOME ALREADY ASSESSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 BY APPLYING THE GROSS PROFIT RATE OF 17.23% ON THE BASIS OF G.P. RATE SHOWN IN ASSESSMENT YEAR 2007-08 ON GUESS WORK AND ASSUMPTION BY REJECTING THE BOOKS OF ACCOUNTS WITHOUT FINDING ANY SPECIFIC DEFECTS. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SURVEY WA S CONDUCTED IN THE PREMISES OF ASSESSEE ON 28.2.2008 AND CERTAIN DISCR EPANCIES IN RESPECT OF STOCK, CASH AND INVESTMENT IN THE BUILDING WERE FOU ND. THE ASSESSEE SURRENDERED AN A SUM OF RS. 2,15,00,000/- AS AN ADD ITIONAL INCOME. LATER ON, ASSESSEE FILED RETURN OF INCOME ON 27.09.2008 DECLA RING TOTAL INCOME OF RS. 1,35,36,300/-. THE ASSESSMENT WAS COMPLETED U/S 14 3(3) OF THE ACT AT RS. 1,35,52,050/-. 4. ON EXAMINATION OF THE ASSESSMENT RECORDS, THE LD . COMMISSIONER WAS OF THE VIEW THAT ASSESSEE HAS NOT DECLARED PROPER I NCOME BECAUSE DESPITE A SURRENDER OF RS. 2.15 CRORES THE INCOME RETURNED W AS ONLY RS. 1,35,52,050/-. IT WAS FURTHER NOTICED THAT IN THE IMMEDIATE PRECED ING ASSESSMENT YEAR THE GP DECLARED BY THE ASSESSEE WAS 17.23% IN COMPARISON T O 11.48% DURING THE 3 CURRENT YEAR. ACCORDING TO THE COMMISSIONER, THE A SSESSING OFFICER HAS FAILED TO MAKE PROPER VERIFICATION IN RESPECT OF TH ESE ASPECTS AND, THEREFORE, ASSESSMENT COMPLETED U/S 143(3) WAS WITHOUT NECESS ARY VERIFICATION AND WAS THUS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF R EVENUE. 5. IN RESPONSE TO THE SHOW CAUSE NOTICE IT WAS MAIN LY CONTENDED BEFORE LD. COMMISSIONER THAT BOOKS OF ACCOUNT OF THE ASSES SEE WERE AUDITED AND THE BOOKS WERE PRODUCED ALONG WITH STOCK REGISTER ETC. BEFORE THE ASSESSING OFFICER. VARIOUS PURCHASES AND SALE BILLS WERE ALSO PRODUCED BEFORE THE ASSESSING OFFICER. CONFIRMATION OF DEBTORS AND CRE DITORS WERE ALSO FILED. DETAILS OF THE EXPENSES WERE ALSO FILED. DETAILS OF THE EXPENSES WERE ALSO FURNISHED, THEREFORE, ASSESSING OFFICER HAS EXAMINE D ALL THE DETAILS AND COULD NOT FIND OUT ANY DEFECTS. IT WAS FURTHER PLEADED T HAT ON THE DATE OF SURVEY ITSELF, A TRADING ACCOUNT WAS PREPARED WHICH CLEARL Y DEPICTED THAT THERE WAS A LOSS OF RS. 71,25,651/-. THE SURVEY WAS CONDUCTED AT THE FAG END OF THE YEAR I.E. ON 28.2.2008 AND ASSESSEE COULD NOT RECOVER FR OM SUCH LOSSES AND ULTIMATELY THERE WAS A TOTAL LOSS OF RS. 78,63,699/ - EXCLUDING THE SURRENDERED AMOUNT. THE MAIN REASON FOR THE LOSS WAS INCREASE I N THE BANK INTEREST EXPENSES FROM RS. 61,00,000/- TO RS. 1.32 CRORES. W ITH REGARD TO THE FALL IN THE GP RATE IT WAS MAINLY SUBMITTED THAT THIS POINT WAS EXPLAINED BEFORE THE ACIT ALSO AND IT WAS POINTED OUT THAT POSITION OF G P AND NP RATE FOR THE LAST THREE YEARS WAS AS UNDER:- ASSESSMENT YEAR GROSS PROFIT RATE NET PROFIT RATE 2008-09 11.49% 4.23% 2007-08 17.23% 9.32% 2006-07 11.76% 5.88% 4 IT WAS POINTED OUT THAT IF GP FOR THE PRESENT YEAR IS COMPARED OVER A PERIOD OF TIME, THEN THERE IS NO DIFFERENCE. IN 2007-08, W HEN THE GP RATE WAS HIGHER THE SAME WAS BECAUSE PRICES OF YARN HAD INCREASED S UDDENLY WHEREAS IN THE CURRENT YEAR THE SELLING PRICES OF YARN AGAIN FELL TO THE NORMAL RATE. ALL THESE ISSUES WERE EXPLAINED TO THE ASSESSING OFFICER IN D ETAIL. 6. THE LD. COMMISSIONER EXAMINED THESE SUBMISSIONS AND DID NOT AGREE WITH THE SAME. HE OBSERVED THAT ASSESSEE WAS SPECIF ICALLY ASKED THAT WHY BOOKS OF ACCOUNT SHOULD NOT BE REJECTED BECAUSE THE SAME WERE NOT RELIABLE IN VIEW OF THE SURRENDER MADE BY THE ASSESSEE, HOWEVER , NO SPECIFIC REPLY WAS GIVEN BY THE ASSESSEE. HE FURTHER OBSERVED THAT ASS ESSEE HAS ADOPTED CERTAIN METHODS TO REDUCE INCOME AFTER MAKING SURRENDER OF RS. 2.15 CRORES AND ASSESSEE HAS NOT GIVEN ANY EVIDENCE REGARDING VOLAT ILITY IN THE MARKET. HE THEN REFERRED TO THE STATEMENT OF SHRI SANJAY GUPTA WHICH WAS RECORDED DURING THE SURVEY, THROUGH WHICH EACH DISCREPANCY I N RESPECT OF INVENTORY, CASH AND INVESTMENT IN THE BUILDING WAS EXPLAINED A ND SHRI SANJAY GUPTA HAD SURRENDERED RS. 70 LAKHS ON ACCOUNT OF INVENTORY, R S. 4.0 LAKHS ON ACCOUNT OF CASH AND RS. 1.31 CRORES ON ACCOUNT OF MONEY SPENT ON CONSTRUCTION OF THE FACTORY BUILDING. HE FURTHER NOTED THAT GP DECLARE D IN THE CURRENT YEAR WAS 11.48% IN COMPARISON TO 17.23% IN THE IMMEDIATE PRE VIOUS YEAR. THEREAFTER HE RELIED ON THE FOLLOWING CASE LAWS FOR REJECTION OF BOOKS OF ACCOUNT:- A) NATIONAL LEGGUARD WORKS V CIT(A) AND ANOTHER 28 8 ITR 18 (P&H) B) SURINDER KUMAR CHARANJIT KUMAR V CIT 282 ITR 78 (P&H) C) M/S BASSI TUBES PVT LTD V ITO IN ITA NO. 45/CHD /2009 OF ITAT, CHANDIGARH. 5 D) M/S BASSI TUBES PVT LTD V CIT IN ITA NO. 751 OF 2010 DATE OF DECISION 9.5.2011 (P&H) E) M/S KIM PHARMA (P) LTD V CIT PANCHKULA AND ANOT HER IN ITA NO. 106 OF 2011 (O&M) F) M/S SHREE GANPATI EMBRIODERY PRIVASTE LIMITED V CIT IN ITA NO. 510 OF 008 (P&H) G) CIT-1, LUDHIANA V M/S ABHISHEK INDUSTRIES LIMIT ED IN ITA NO. 312 OF 2911 (P&H) H) MALABAR INDUSTRIAL CO. LTD V CIT (2000) 243 ITR 83 (SC). I) M/S SAVERA SOAP MILLS V ITO IN ITA NO. 202/CHD/ 2011 OF ITAT, CHANDIGARH. THE LD. COMMISSIONER ALSO MADE THE FOLLOWING OBSERV ATION IN PARA 14 (AT PAGE 12):- 14. THE AO FAILED TO TAKE INTO ACCOUNT THE DECISIO N OF THE HONBLE JURISDICTION HIGH COURT AS WELL AS JURISDIC TION TRIBUNAL THAT IN THESE CIRCUMSTANCES NO COGNIZANCE CAN BE TA KEN OF THE BOOKS OF ACCOUNTS PRODUCED BY THE ASSESSEE AND ALSO SURRENDERED AMOUNT CANNOT BE TREATED AS BUSINESS IN COME IN THE ABSENCE OF ANY EVIDENCE. THE BOOKS OF ACCOUNTS OF T HE ASSESSEE ARE REJECTED. KEEPING IN VIEW THE RATIO OF THE DECI SION OF THE HONBLE JURISDICTION HIGH COURT AS WELL AS HONBLE JURISDICTION TRIBUNAL, THE GP RATE OF A.Y. 2007-08 IS APPLIED AN D THE INCOME IS ENHANCED TO THAT EXTENT WHICH IS COMPUTED AS UND ER:- I) TOTAL TURNOVER OF THE CURRENT YEAR: RS. 32,01, 01,795/- II) G.P. SHOWN: RS. 3,67,73,331/- III) RATE OF G.P. SHOWN: RS. 11.48% IV) RATE OF G.P. IN A.Y. 2007-08 RS. 17.23% V) G.P. WORKED OUT ADOPTING G.P. RATE @ 17.23% : RS . 5,51,53,539/- VI) DIFFERENCE IN G.P.: RS. 1,83,80,208/- INCOME TO BE ENHANCED BY RS. 1,83,80,208/- 6 BASED ON THE ABOVE DISCUSSION, I AM ALSO SATISFIED THAT THE ASSESSEE HAS CONCEALED INCOME OR FURNISHED INACCURA TE PARTICULARS OF INCOME. 8. IN THE LIGHT OF THE ABOVE DISCUSSION, THE LD. CO MMISSIONER HELD THAT ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF REVENUE AND THE INCOME WAS ENHANCED VIDE PARA 17 OF THE ORD ER WHICH IS AS UNDER:- 17. I AM OF THE CONSIDERED OPINION THAT THE ORDER PASSED BY THE AO IS ERRONEOUS IN SO FAR AS IT IS PREJUDICI AL TO THE INTERESTS OF REVENUE. THE INCOME IS ENHANCED AS EXP LAINED IN PARA 14 OF ORDER I.E. RS. 1,83,80,208/-. PENALTY PROCEEDINGS U/S 271(1)(C) READ WITH EXPLANATION 1 A RE INITIATED SEPARATELY. 9. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NOWHERE IN THE SHOW CAUSE NOTICE THE COMMISSIONER HAS POINTED OUT THAT BOOKS OF ACCOUNT ARE PROPOSED TO BE REJECTED. WITHOUT SUCH MENTION I N THE SHOW CAUSE NOTICE HE HAS NO RIGHT TO REJECT THE BOOKS. IT IS A WELL S ETTLED THAT IF A GROUND IS NOT PROPOSED IN THE SHOW CAUSE NOTICE, THEN ACTION CANN OT BE TAKEN ON SUCH A GROUND. IN THIS REGARD HE RELIED ON THE FOLLOWING D ECISIONS:- A) MAXPAK INVESTMENTS LIMITED V/S ASSISTANT COMMISSION ER OF INCOME TAX 108TTJ (DEL-TRIB) 881 B) COMMISSIONER OF INCOME TAX V/S CONTIMETERS ELECTRIC ALS (P) LTD. 317 ITR 249 (DEL) C) GPSK CAPITAL PVT. LTD. V/S COMMISSIONER OF INCOME T AX ITA NO. 353/KOL/2012, ITAT KOLKATA TRIBUNAL D) COLORCRAFT V/S INCOME TAX OFFICER 10. THE LD. COUNSEL FURTHER REFERRED TO VARIOUS DOC UMENTS IN THE PAPER BOOK AND POINTED OUT THAT ASSESSING OFFICER HAS RAI SED VARIOUS QUERIES AND 7 SUITABLE REPLIES WERE GIVEN ACCORDINGLY. IT WAS POI NTED OUT THAT THERE WERE NO DISCREPANCIES WITH REGARD TO THE EXCISE AND CUSTOMS DUTY RECORDS AND VALUATION OF STOCK. QUANTITATIVE DETAILS OF THE ST OCK ETC. WERE PROVIDED TO THE ASSESSING OFFICER BUT NO DEFECT WAS POINTED OUT. S PECIFIC POINTES RELATING TO THE GROSS PROFITS, SALES / PURCHASES AND STOCK OF T HE ASSESSEE WERE RAISED IN THE QUESTIONNAIRE AND REPLIES WERE GIVEN. ACCORDING LY, DETAILS OF MONTH WISE SALES AND PURCHASES WERE GIVEN, PARTY WISE PURCHASE AND SALES WAS ALSO GIVEN. COMPLETE DETAILS OF VARIOUS EXPENSES WERE GI VEN. EVEN REASONS FOR FALL IN THE GP RATE WERE ENQUIRED AND PROPER REPLY WAS G IVEN. AFTER EXAMINING THESE POINTS THE ASSESSING OFFICER DID NOT POINT OU T ANY DEFECT IN THE REPLIES. THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORD ER AFTER CONSIDERING THE REPLIES AND, THEREFORE, IT CANNOT BE SAID THAT ASSE SSING OFFICER HAS NOT APPLIED HER MIND. 11. EVEN BEFORE THE COMMISSIONER, DETAILS OF THE RE PLIES FILED BEFORE THE ASSESSING OFFICER WERE FURNISHED AND IT WAS SPECIFI CALLY POINTED OUT TO HIM THAT EVEN AT THE TIME OF SURVEY I.E ON 28.2.2008, T HERE WAS A LOSS IN THE BUSINESS OF THE ASSESSEE AS PER THE TRADING ACCOUNT PREPARED ON THE DATE OF SURVEY. THE LOSS ON THAT DATE WAS RS. 71,25,651/- AND THE COPY OF SUCH TRADING ACCOUNT IS AVAILABLE AT PAGES 187 AND 188 O F THE PAPER BOOK. THIS WOULD ITSELF EXPLAIN WHY THE RETURN WAS LESS THAN T HE SURRENDERED AMOUNT BECAUSE AT THE COMPLETION OF THE 11 MONTHS OF THE F INANCIAL YEAR, THERE WAS A HUGE LOSS OF RS. 71,25,651/-. IN THE DETAILED REPL Y DATED 15.3.2013, COPY OF WHICH IS AVAILABLE AT PAGES 184 TO 186, THE REASON FOR FALL IT THE GP AND COMPARATIVE GP CHART ETC. WERE ALSO FILED. DESPITE OF THIS INFORMATION THE COMMISSIONER OBSERVED THAT THE ASSESSEE ADOPTED SOME METHODS TO OFFSET 8 THE INCOME SURRENDERED. OTHERWISE INCOME SHOULD NOT HAVE COME BELOW THE INCOME SURRENDERED BY THE ASSESSEE PLUS A NORMAL IN COME DECLARED IN THE LAST YEAR. THIS OBSERVATION IS TOTALLY VAGUE AND IF COMMISSIO NER WANTS TO HOLD ASSESSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE THEN HE IS REQUIRED TO POINT OUT SOME ERROR IN THE ASSESSMENT ORDER AND GENERAL OBSERVATION CANNOT LEAD TO THE CONCLUSION T HAT ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. FOR EXAMPLE IN PARA 6, THE COMMISSIONER HAS OBSERVED THAT PURCHASES AND S ALES CANNOT BE BELIEVED BUT HE HAS NOT POINTED OUT EVEN A SINGLE INSTANCE H OW SUCH PURCHASE OR SALES ARE NOT PROPER. SIMPLY BECAUSE ASSESSEE HAS FURNISH ED THE RETURN BELOW THE SURRENDERED INCOME CANNOT BE A REASON FOR HOLDING T HAT ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. IN RESPECT OF THIS CONTENTION LD. COUNSEL RELIED ON THE VARIOUS DECISI ONS OF THE CHANDIGARH BENCH OF THE TRIBUNAL WHICH HAVE BEEN FILED IN THE PAPER BOOK CONTAINING JUDGMENTS AND PARTICULARLY RELIED ON THE DECISION O F HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF HARI IRON TRADING COMPANY V CIT 263 ITR 437. WHILE CONCLUDING HIS ARGUMENT HE ALSO REFERRE D TO THE VARIOUS DECISIONS RELIED ON BY THE LD. COMMISSIONER AND POINTED OUT T HE DISTINGUISHING FEATURES OF THOSE JUDGMENTS AND HOW THE SAME WERE N OT APPLICABLE TO THE PRESENT CASE. 12. ON THE OTHER HAND, LD. DR SUBMITTED THAT PERUS AL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT PRACTICALLY NO ENQUIRIES H AVE BEEN MADE BY THE ASSESSING OFFICER. THIS CASE WAS OF SURVEY AND, TH EREFORE, ASSESSING OFFICER SHOULD HAVE MADE DETAILED ENQUIRIES. DURING THE SU RVEY, THE ASSESSEE HAS DECLARED A SUM OF RS. 2.15 CRORES WHEREAS RETURN WA S FILED FOR RS. 9 1,35,52,050/- AND ASSESSING OFFICER SHOULD HAVE AT LEAST RAISED SPECIFIC ENQUIRES WHY THE PROFIT DECLARED WAS LOW. NO SUCH ENQUIRES HAVE BEEN CONDUCTED BY THE ASSESSING OFFICER AND ONCE PROPER ENQUIRY IS NOT CONDUCTED, ASSESSMENT ORDER BECOMES ERRONEOUS AND IN THIS REGA RD SHE RELIED ON THE FOLLOWING DECISIONS:- 1) SMT. TARA DEVI AGGARWAL VS. CIT 88 ITR 323 (SC) 2) RAMPYARI DEVI SAROGI V CIT & ORS 67 ITR 84 (SC) 3) GEE VEE ENTERPRISES VS. ADDL CIT 99 ITR 375 13. SHE FURTHER SUBMITTED THAT IN THE ABSENCE OF AN Y DISCUSSION IN THE ASSESSMENT ORDER THE SAME IS TO BE TREATED ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF REVENUE AND IN THIS REGARD HE RELIED ON THE DECISION OF HON'BLE KARNATKA HIGH COURT IN THE CASE OF CIT & ANR. VS. INFOSYS TECHNOLOGIES LTD 247 CTR (KAR) 410 AND CIT & ANR. VS NAMDHARI S EEDS 203 TAXMAN 421 (COPIES OF THESE DECISIONS WERE FURNISHED). SHE SU BMITTED THAT EVEN IF IT IS ASSUMED THAT VARIOUS DETAILS WERE FILED ON BEHALF O F THE ASSESSEE BUT THEN ASSESSMENT ORDER DOES NOT SHOW WHETHER THE SAME WER E EXAMINED BY THE ASSESSING OFFICER WHICH SHOWS LACK OF APPLICATION O F MIND AND, THEREFORE, ASSESSMENT ORDER BECOMES ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 14. THE LD. DR FURTHER SUBMITTED THAT WHERE A SURVE Y HAS BEEN CONDUCTED AND PARTICULARLY WHEN THE RETURN FILED IS LESS THEN THE RETURNED INCOME THEN THE ASSESSING OFFICER SHOULD HAVE REJECTED THE BOOK S OF ACCOUNT BECAUSE THE SAME WERE WARRANTED BY FACTS OF THE CASE. IN THIS REGARD SHE RELIED ON THE FOLLOWING DECISIONS:- 10 I) ACTION ELECTRICALS V DCIT 258 ITR 188 II) AXIM ENGINEERING WORKS V CIT 292 ITR 577(P&H) SHE ALSO REFERRED TO THE DECISION RELIED ON BY THE LD. COMMI SSIONER IN HIS ORDER PASSED U/S 263 OF THE ACT. 15. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. THE SHOW CAUSE NOTICE ISSUED BY THE LD. COMMISSIONER WHICH HAS BEE N INCORPORATED BY HIM IN THE ORDER PASSED U/S 263 READS AS UNDER;- THIS IS WITH REFERENCE TO YOUR ASSESSMENT ORDER CO MPLETED U/S 143(3) OF THE ACT ON 08.12.2010 AT AN INCOME OF RS. 1,35,52,050/- AS AGAINST RETURNED INCOME OF RS. 1,3 5,36,300/-. A SURVEY U/S 133A WAS CONDUCTED AT YOUR BUSINESS PREM ISES ON 28.02.2008. DURING THE COURSE OF SURVEY A SUM OF RS . 2,15,00,000/- AS AN ADDITIONAL INCOME OTHER THAN NO RMAL INCOME WAS SURRENDERED BY YOU WHICH IS AS UNDER:- A) RS. 70,00,000/- WAS ON ACCOUNT OF EXCESS STOCK. B) RS. 4,00,000/- WAS ON ACCOUNT OF EXCESS CASH C) RS. 1,31,00,000/- ON ACCOUNT OF UNEXPLAINED INVESTM ENT IN THE BUILDING D) RS. 10,00,000/- ON ACCOUNT OF OTHER DISCREPANCIES 2. YOU HAVE FILED RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 1,35,36,300/- WHICH IS EVEN LOWER THAN THE ADDI TIONAL INCOME DECLARED BY YOU DURING THE SURVEY. A SUMMARY OF YOU R TRADING AND P&L ACCOUNT IS AS UNDER: OPENING STOCK RS. 3,93,90,498 SALES RS. 32,01,01,795 PURCHASE RS. 29,73,74,541 (INCLUDING JOB WORK) C. STOCK RS. 7,75,85,779/- MANUFACTURING RS. 2,41,49,204 11 EXP. G.P. RS. 3,67,73,331 RS. 39,76,87,574 RS. 39,76,87,574/- EXPENSES RS. 4,62,29,685 G.P. RS. 3,67,73,331/- INTT. RECD. RS. 2,25,597 RENT RS. 2,40,000 NET PROFIT RS. 1,35,36,301 CUSTOM DRAWBACK RS. 10,27,058 SURRENDERED RS. 2,15,00,000 TOTAL RS. 5,97,65,986 TOTAL RS. 5,97,65,986 THEREFORE, THE NET PROFIT DECLARED BY YOU IS RS. 1, 35,36,301/- ONLY WHICH IS AFTER TAKING INTO CONSIDERATION AN INCOME OF RS. 2,15,00,000/- DISCLOSED BY YOU DURING THE COURSE OF SURVEY. IN OTHER WORDS IF THE INCOME OF RS. 2.15 CRS. DISCLOSE D DURING THE SURVEY IS TAKEN OUT, THE LOSS DECLARED BY YOU COMES TO RS. 79,63,699/- AGAINST THE PROFIT OF ABOUT RS. 27 LACS SHOWN BY YOU IN THE PRECEDING F.Y. IT IS FURTHER SEEN THAT THE G .P. RATE FOR THE A.Y. UNDER CONSIDERATION COMES TO 11.48% AGAINST TH AT OF 17.23% SHOWN IN THE IMMEDIATELY PROCEEDING YEAR. ALSO IN T HE A.Y. 2007- 08 THE NET PROFIT SHOWN WAS 9.23% WHERE AS IN THIS YEAR YOU HAVE RATHER SHOWN NET LOSS OF RS. 79,63,699/-. YOUR TRAD ING RESULTS THEREFORE WERE REQUIRED TO BE VERIFIED AND CROSS CH ECKED. 3. THE ASSESSING OFFICER HOWEVER HAS FAILED TO MAKE PROPER VERIFICATION WITH RESPECT TO THE ABOVE ASPECTS AND THE ASSESSMENT WAS COMPLETED IN YOUR CASE U/S 143(3) OF THE I.T. A CT, ON 08.12.2010 WITHOUT NECESSARY VERIFICATION. THE ASSE SSMENT MADE VIDE ORDER DATED 08.12.2010 IS THUS ERRONEOUS AND P REJUDICIAL TO THE INTERESTS OF REVENUE. IN THE INSTANT CASE, TWIN STATUTORY CONDITIONS PRECEDENT NAMELY I) THE IMPUGNED ASSESSM ENT ORDER OF THE A.O. IS ERRONEOUS AND II) IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE, STAND CUMULATIVELY SATISFIED, AS CONTEMPLA TED U/S 263 OF THE ACT. CONSEQUENTLY, DUE TO THE SAID ERRONEOUS OR DER OF THE A.O., THE REVENUE HAS LOST TAX REVENUE LAWFULLY, PA YABLE BY THE 12 ASSESSEE. YOU ARE, THEREFORE, REQUESTED TO SHOW CAU SE AS TO WHY THE ASSESSMENT COMPLETED IN YOUR CASE ON 08.12.2010 MAY NOT BE ENHANCED / MODIFIED / CANCELLED OR REFRAMED U/S 263 OF THE I.T. ACT. 4. FOR THE PURPOSE, YOU ARE REQUESTED TO ATTEND THI S OFFICE ON 21.03.2013 AT 11.30 A.M. AT MY OFFICE AAYAKAR BHAWA N RISHI NAGAR, LUDHIANA. IN CASE YOU DO NOT WISH TO ATTEND PERSONALLY, YOU MAY FILE WRITTEN SUBMISSIONS WITH REGARD TO THE SAME ON OR BEFORE THE STIPULATED DATE OF HEARING. 16. THE PERUSAL OF THE ABOVE VERY CLEARLY SHOWS THA T NOWHERE THE LD. COMMISSIONER REFERRED TO THE ISSUE OF REJECTION OF BOOKS OR HE INTENDS TO REJECT THE BOOKS OF ACCOUNT. THEREFORE, THERE IS M ERIT IN THE CONTENTION OF LD. COUNSEL FOR THE ASSESSEE THAT UNLESS A PARTICULAR G ROUND IS MENTIONED IN THE SHOW CAUSE NOTICE WHICH IS SUPPOSED TO BE EXERCISED , THEN SUCH GROUND CANNOT BE LATER ON TAKEN FOR THE PURPOSE OF REVISIN G THE PARTICULAR ASSESSMENT ORDER. IN THIS REGARD A REFERENCE WAS MADE TO THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V CONTIMETERS ELECTRI CALS (P) LTD 317 ITR 249. IN THAT DECISION AT PARA 10, AN OBSERVATION HAS BEE N MADE ON THE BASIS OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF C OMMISSIONER OF CUSTOMS V TOYO ENGINEERING INDIA LTD (2006) 7 (SCC) 592 W HEREIN IT WAS OBSERVED BY THE COURT THAT DEPARTMENT CANNOT TRAVEL BEYOND T HE SHOW CAUSE NOTICE. THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF MAXP ACK INVESTMENT LIMITED VS. ACIT 108 TTJ 881 HELD THAT REVISION ON A GROUND DIFFERENT FROM THE ONE STATED IN THE NOTICE IS NOT POSSIBLE. SIMILAR OBSE RVATIONS HAVE BEEN MADE BY THE CALCUTTA BENCH OF THE TRIBUNAL IN ITA N0. 353/K OL/2012 IN THE CASE OF GPSK CAPITAL PRIVATE LIMITED V CIT AND COLORCRAFT V S ITO IN 105 ITD 599 (MUMBAI). IN THE CASE OF LAST MENTIONED CASE, THE H EAD NOTE READS AS UNDER:- 13 REVISION VALIDITY REVISIONAL ORDER BASED ON REASONS NOT SPECIFIED IN SHOW-CAUSE NOTICE- IS INVA LID- SEC.263 PROVIDES AN OPPORTUNITY TO THE ASSESSEE TO SHOW CAUSE AGAINST REASONS MENTIONED IN NOTICE ON WHICH ASSESSMENT IS SOUGHT TO BE REVISED, HENCE, IF THE C IT INTENDS TO DEVIATE FROM THE REASONS MENTIONED IN SH OW- CAUSE NOTICE, HE MUST CONFRONT THE ASSESSEE WITH FR ESH REASONS AND ALLOW ASSESSEE A FRESH OPPORTUNITY RE ASON GIVEN BY THE CIT IN SHOW-CAUSE NOTICE BEING THAT DU TY- DRAWBACK COULD NOT BE CONSIDERED AS PROFIT DERIVED FROM EXPORTS FOR PURPOSES OF DEDUCTION UNDER S. 80 HON'B LE HIGH COURT , REVISIONAL ORDER PASSED BY CIT ON THE BASIS OF ALLEGED WRONG TREATMENT OF EXPORT INCENTIVES, CE NTRAL EXCISE REFUND AND SALES-TAX SET OFF COULD NOT BE SUSTAINED. 17. THUS, FROM THE ABOVE IT BECOMES CLEAR THAT AN O RDER WHICH IS FOUND TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REV ENUE CANNOT BE REVISED ON THE BASIS OF REASONS OTHER THAN THE REASONS MENTION ED IN THE SHOW CAUSE NOTICE. IN THE CASE BEFORE US, ULTIMATELY THE LD. COMMISSIONER HAS REJECTED THE BOOKS OF ACCOUNT AND APPLIED THE GP RATE BUT NO WHERE HE HAS WHISPERED IN THE SHOW CAUSE NOTICE ABOUT HIS INTENTION OF REJ ECTING THE BOOKS OF ACCOUNT. THE LD. COUNSEL HAD ALSO REFERRED TO PAGE 4 OF THE PAPER BOOK WHICH IS PART OF THE FORM 3CB FURNISHED BEFORE THE ASSESSING OFFICER SHOWING THE METHOD OF VALUATION OF CLOSING STOCK A ND THE AUDITOR HAS NOT REPORTED ANY DISCREPANCY. FROM PAGES 20 TO 23 THE QUANTITATIVE DETAILS OF STOCK TALLY WERE FURNISHED BEFORE THE ASSESSING OFF ICER AND ASSESSING OFFICER DID NOT POINT OUT ANY ERROR. THEN HE REFERRED TO P AGES 51 TO 53, WHICH IS THE COPY OF QUESTIONNAIRE ISSUED BY THE ASSESSING OFFIC ER RAISING DETAILS ENQUIRES. HE PARTICULARLY INVITED OUR ATTENTION WHE REIN DETAILS OF THE GP AND 14 NP FOR TWO YEARS ALONG WITH THE REASONS FOR FALL IN THE SAME WERE ASKED. DETAILS OF MONTH WISE PURCHASES, OPENING AND CLOSIN G STOCK, SALES AND PURCHASES OF SISTER CONCERN, NATURE OF BUSINESS, NA MES OF THE PARTNERS AND THEIR SHARES, DETAILS OF BANK, DETAILS OF UNSECURED LOANS, DETAILS OF SQUARED UP LOANS, DETAILS OF SUNDRY CREDITORS ABOVE RUPEES THR EE LAKHS, DETAIL OF SUNDRY DEBTORS, DETAILED EXPENSES ETC. WERE RAISED THROUGH THIS QUESTIONNAIRE WHICH WAS DULY REPLIED AND IN THIS REGARD VARIOUS DOCUMEN TS WERE BROUGHT TO OUR ATTENTION. ALL THOSE DOCUMENTS HAVE BEEN FILED BEFO RE THE LD. COMMISSIONER ALSO . EVEN IF ASSUMING THAT ASSESSING OFFICER HAS NOT APP LIED HER MIND TO THOSE DOCUMENTS EVEN THEN LD. COMMISSIONER HAD ALSO NOT POINTED OUT EVEN A SINGLE DEFECT IN THESE DOCUMENTS. WITHOUT ANY SUCH DEFECT, WE ARE AFRAID IT CANNOT BE ALLEGED THAT ASSESSING OFFICER HAS NOT AP PLIED HER MIND. THE LD. COMMISSIONER FROM PAGES 1 TO 3 HAS REPRODUCED THE S HOW CAUSE NOTICE THEREAFTER UPTO PAGE 8, HE HAS REFERRED TO THE REP LY GIVEN BY THE ASSESSEE AND MADE SOME OBSERVATIONS AT PARAS 5 & 6. THEREAFTER, HE HAS REFERRED TO THE CONTENTS OF THE STATEMENTS RECORDED DURING SURVEY, THROUGH WHICH SURRENDER WAS MADE AND THEN SOME MORE OBSERVATIONS HAVE BEEN MADE AT PARAS 12 & 13 & 14. THEREAFTER, LD. COMMISSIONER HAS SIMPLY DIS CUSSED THE CASE LAWS. TO UNDERSTAND THIS, WE WOULD LIKE TO REPRODUCED PARAS 5, 6, 8, 12, 13 & 14, WHICH ARE AS UNDER:- 5. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE ASSESSEE. THE ASSESSEE WAS SPECIFICALLY ASKED AS WH Y THE BOOKS OF ACCOUNTS BE NOT REJECTED AS THE BOOKS OF ACCOUNT S ARE NOT RELIABLE IN VIEW OF THE SURRENDERED MADE BY THE ASS ESSEE ON VARIOUS HEADS. THE ASSESSEE DID NOT GIVE ANY SPECIF IC REPLY AND SIMPLY STATED THAT THE AO DID NOT POINT OUT ANY SPE CIFIC DEFECTS IN THE BOOKS OF ACCOUNTS. WHAT GREATER PROOF IS REQ UIRED THEN THE 15 OWN ADMISSION OF THE ASSESSEE THAT THERE ARE DISCRE PANCIES IN THE BOOKS OF ACCOUNTS AND OFFER A HUGE SUM OF RS. 2 .15 CRORES. NO ACCOUNTANCY PRINCIPLE JUSTIFIES THAT SUCH BOOKS OF ACCOUNTS ARE RELIABLE. THE ASSESSING OFFICER FAILED TO REJEC T THE BOOKS OF ACCOUNTS, RATHER WITHOUT MAKING ANY PROPER INQUIRY ACCEPTED THE BOOKS OF ACCOUNTS AS TRUE. 6. IT IS ALSO SEEN THAT THE ASSESSEE ADOPTED CERTAIN M ETHODS TO REDUCE THE INCOME AFTER MAKING SURRENDER OF RS. 2.15 CRORES . THE ASSESSEE HAS TAKEN A PLEA THAT THERE WAS VOLATI LITY IN THE MARKET. THE ASSESSEE FAILED TO GIVE ANY EVIDENCE TH AT THERE WAS VOLATILITY IN THE MARKET. THE PURCHASE / SALE BILL S CAN NOT BE BELIEVED IN VIEW OF THE FACT THAT SUCH BOOKS OF ACC OUNTS ARE RELIABLE TO BE REJECTED. 8. THE ABOVE STATEMENT ITSELF SHOWS THAT THE ASSESS EES BOOKS OF ACCOUNTS CAN NOT BE RELIED UPON IN VIEW OF THE D ETAILS OF DISCREPANCIES FOUND DURING COURSE OF SURVEY AND THE ASSESSEE HAS ALSO ADMITTED SUCH DISCREPANCIES. IF EXCESS STO CK/EXCESS CASH IS FOUND, IT IS INCONCEIVABLE THAT SUCH BOOKS OF AC COUNTS ARE RELIABLE. THE ASSESSEE IS UNNECESSARILY PUTTING AN EMPHASIS THAT THE ASSESSING OFFICER HAS VERIFIED ALL THE RECORDS. IN FACT, THE ASSESSING OFFICER FAILED TO APPLY HIS MIND THAT UND ER SUCH CIRCUMSTANCES SUCH BOOKS OF ACCOUNTS CAN NOT BE REL IED UPON. 12. THE AO FAILED TO APPLY HIS MIND AND SIMPLY ACCE PTED THE EXPLANATIONS OF THE ASSESSEE. ONCE THERE ARE DISCRE PANCIES IN THE BOOKS OF ACCOUNTS AND ALSO SURRENDER IS MADE, T HE AO DID NOT COME TO A LOGICAL CONCLUSION THAT THE VERY BOOK S OF ACCOUNTS WHICH ARE UNRELIABLE HAVE BEEN RELIED UPON WHILE AC CEPTING THE EXPLANATIONS OF THE ASSESSEE. IN PARA OF THE REPLY DATED 15.03.2013 THE ASSESSEE HAS SUBMITTED THAT THERE IS NOT MUCH DIFFERENCE IN THE GP RATES AS RETURNED BY THE ASSES SEE IF THE PREVIOUS YEARS RATE IS TAKEN OUT OF THE PICTURE. T HE ASSESSEE HAS BEEN EARNING PROFITS AND THE ASSESSEE HAS FAILED TO GIVE ANY 16 COGENT EVIDENCE FOR THE DRASTIC FALL IN THE GP RATE AS COMPARE TO EARLIER YEARS. A GENERAL STATEMENT THAT THERE WAS F LUCTUATION IN THE RATES IS NOT ACCEPTABLE. MOREOVER, THE BOOKS OF ACCOUNTS OF THE ASSESSEE ARE NOT RELIABLE. 13. ONE MORE ASPECT ON THE PECULIAR FACTS OF CASE IS RE QUIRED TO BE SEEN. THE ASSESSEE ADOPTED SOME METHODS TO OF FSET THE INCOME SURRENDERED. OTHERWISE THE INCOME SHOULD NOT HAVE COME BELOW THE INCOME SURRENDERED BY THE ASSESSEE P LUS A NORMAL INCOME DECLARED IN THE LAST YEAR. IT WAS A C ONSCIOUS ATTEMPT ON THE PART OF THE ASSESSEE TO OFFSET THE I NCOME DECLARED DURING COURSE OF SURVEY. EVEN THE NET PROF IT RATE HAS BEEN BROUGHT DOWN FROM 9.32% TO 4.32%. THIS FURTHER INDICATES THAT THE ASSESSEE HAS ADOPTED A METHOD TO OFFSET TH E AMOUNT SURRENDERED. 14. THE AO FAILED TO TAKE INTO ACCOUNT THE DECISION OF THE HONBLE JURISDICTION HIGH COURT AS WELL AS JURISDIC TION TRIBUNAL THAT IN THESE CIRCUMSTANCES NO COGNIZANCE CAN BE TA KEN OF THE BOOKS OF ACCOUNTS PRODUCED BY THE ASSESSEE AND ALSO SURRENDERED AMOUNT CANNOT BE TREATED AS BUSINESS IN COME IN THE ABSENCE OF ANY EVIDENCE. THE BOOKS OF ACCOUNTS OF T HE ASSESSEE ARE REJECTED. KEEPING IN VIEW THE RATIO OF THE DECI SION OF THE HONBLE JURISDICTION HIGH COURT AS WELL AS HONBLE JURISDICTION TRIBUNAL, THE GP RATE OF A.Y. 2007-08 IS APPLIED AN D THE INCOME IS ENHANCED TO THAT EXTENT WHICH IS COMPUTED AS UND ER:- I) TOTAL TURNOVER OF THE CURRENT YEAR: RS. 32,01, 01,795/- II) G.P. SHOWN: RS. 3,67,73,331/- III) RATE OF G.P. SHOWN: RS. 11.48% IV) RATE OF G.P. IN A.Y. 2007-08 RS. 17.23% V) G.P. WORKED OUT ADOPTING G.P. RATE @ 17.23% : RS . 5,51,53,539/- VI) DIFFERENCE IN G.P.: RS. 1,83,80,208/- INCOME TO BE ENHANCED BY RS. 1,83,80,208/- 17 BASED ON THE ABOVE DISCUSSION, I AM ALSO SATISFIED THAT THE ASSESSEE HAS CONCEALED INCOME OR FURNISHED INACCURA TE PARTICULARS OF INCOME. 18. THE ABOVE PARA CLEARLY SHOWS THAT BASICALLY THE LD. COMMISSIONER WAS SURPRISED THAT HOW THE ASSESSEE COULD DECLARED AN I NCOME FOR LESS THAN THE AMOUNT SURRENDERED DURING THE SURVEY THAT IS WHY HE WENT WITH THE PRESUMPTION THAT ASSESSMENT ORDER IS WRONG BUT IN S UCH A SITUATION THE LD. COMMISSIONER WAS DUTY BOUND TO POINT OUT FEW DEFECT S IN THE DETAILS FILED BEFORE HIM. PERUSAL OF THE HIGHLIGHTED PARAS SHOWS THAT HE HAS SIMPLY STATED AS MENTIONED IN PARA 6 IT IS ALSO SEEN THAT THE ASSESSEE ADOPTED CERTAIN METHODS TO REDUCE THE INCOME AFTER MAKING SURRENDER OF RS. 2.15 CRORES , IN OUR OPINION WOULD NOT PROVE THAT ASSESSMENT ORDER I S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. SIMILARLY OBSERVATIONS AT PARA 13 ARE NOT SUFFICIENT TO SHOW HOW ASSESSMENT ORDER IS ERRO NEOUS. THE COMMISSIONER IS ATLEAST EXPECTED TO POINT OUT WHICH METHOD THE A SSESSEE HAS ADOPTED TO REDUCE THE PROFIT. 19. IT IS PERTINENT TO MENTION HERE THAT IT WAS EXP LAINED BEFORE US THAT DURING SURVEY A TRADING ACCOUNT WAS DRAWN AS ON 28. 2.2008, THE COPY OF WHICH IS AVAILABLE AT PAGES 187 & 188 OF THE PAPER BOOK WHICH SHOWS THAT THERE WAS A LOSS OF RS. 71,25,651/- WHICH MEANS THA T ASSESSEE HAS SUFFERED A LOSS OF RS. 71,25,651/- UP TO 28.2.2008. THIS IS A MAJOR REASON FOR FILING THE RETURN FOR LESS THAN THE SURRENDERED AMOUNT. THE LD . COMMISSIONER COULD EASILY CALLED FOR THE SURVEY FOLDER AND FIND OUT WH ETHER THIS TRADING ACCOUNT WAS CORRECT OR NOT AND WHETHER THERE WAS ANY DEFECT IN THIS TRADING ACCOUNT OR OTHERWISE BUT THE LD. COMMISSIONER HAS NOT BOTHERED TO DO THIS EXERCISE AND 18 SIMPLY OBSERVED THAT ASSESSEE HAS ADOPTED SOME METH OD TO REDUCE THE SURRENDERED INCOME AND, THEREFORE, ASSESSMENT ORDER IS ERRONEOUS. THIS IS NOT POSSIBLE WITHOUT POINTING OUT AN ERROR. OBVIOUSLY IF THE ASSESSEE HAS SUFFERED LOSS IN THE DAY TO DAY RUNNING OF THE BUSINESS AND EVEN IF THREE DISCREPANCIES HAVE BEEN FOUND IN THIS CASE FOR WHICH SURRENDER WA S MADE, THE ASSESSEE HAS THE RIGHT TO REDUCE THE BUSINESS LOSS OF THE CURREN T YEAR AGAINST THE SURRENDERED AMOUNT. 20. THE LD. DR REFERRED TO THE DECISION OF THE GEE VEE ENTERPRISES V ADDL CIT (DELHI) (SUPRA). RAM PYARIPYARI DEVI SAROGI V CIT (SC) (SUPRA) AND SMT. TARA DEVI AGGARWAL VS CIT (SUPRA). NO DOUBT I N ALL THESE CASES IT HAS BEEN CLEARLY HELD THAT IF ASSESSING OFFICER FAILS TO MAKE ENQUIRIES THEN THE ASSESSMENT ORDER CAN BE HELD TO BE ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF REVENUE. BUT IN THE CASE BEFORE US IT CANNOT BE SAI D WITHOUT PINPOINTING WHICH ENQUIRY HAS NOT BEEN MADE AND THAT SUCH ORDER IS ERRONEOUS. IN THIS REGARD WE FIND FORCE IN THE SUBMISSIONS OF LD. COUN SEL OF ASSESSEE ON THE OBSERVATIONS MADE IN THE CASE OF CIT VS. GEBRIEL IN DIA LTD 203 ITR 108. IN THAT CASE FOLLOWING OBSERVATION WAS MADE;- THE POWER OF SUO MOTU REVISION UNDER SUB-SECTION ( 1) OF SECTION 263 OF THE INCOME-TAX ACT, 1961, IS IN THE NATURE OF SUPERVISORY JURISDICTION AND CAN BE EXERCISED ONLY IF THE CIRCUMSTANCES SPECIFIED THEREIN EXIST. TWO CIRCUMST ANCES MUST EXIST TO ENABLE THE COMMISSIONER TO EXERCISE THE PO WER OF REVISION UNDER THIS SUB-SECTION, VIZ.,(I) THE ORDER SHOULD BE ERRONEOUS; AND (II) BY VIRTUE OF THE ORDER BEING ER RONEOUS PREJUDICE MUST HAVE BEEN CAUSED TO THE INTERESTS OF THE REVENUE. AN ORDER CANNOT BE TERMED AS ERRONEOUS UNL ESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN INCOME-TAX OFFICE R ACTING IN ACCORDANCE WITH LAW MAKES CERTAIN ASSESSMENT, THE S AME CANNOT 19 BE BRANDED AS ERRONEOUS BY THE COMMISSIONER SIMPLY BECAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTE N MORE ELABORATELY. THIS SECTION DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FO R THAT OF THE INCOME-TAX OFFICER, WHO PASSED THE ORDER, UNLESS TH E DECISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALIZED WHERE THE INCOME TAX OFFICER WHILE MAKING AN ASSESSMENT EXAMI NES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMATES HIMSELF. THE COMMISSIONER, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION THAT THE ESTIMATE MADE BY THE OFFICER CONCE RNED WAS ON THE LOWER SIDE AND LEFT TO THE COMMISSIONER HE WOUL D HAVE ESTIMATED THE INCOME AT A HIGHER FIGURE THAN THE ON E DETERMINED BY THE INCOME-TAX OFFICER. THAT WOULD NOT VEST THE COMMISSIONER WITH POWER TO RE-EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSELF AT A HIGHER FIGURE. TH IS IS BECAUSE THE INCOME-TAX OFFICER HAS EXERCISED THE QUASI-JUDI CIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT A CONCLUSION AND SUCH A CONCLUSION CANNOT BE TERMED T O BE ERRONEOUS SIMPLY BECAUSE THE COMMISSIONER DOES NOT FEEL SATISFIED WITH THE CONCLUSION. IT MAY BE SAID IN SU CH A CASE THAT IN THE INTEREST OF THE REVENUE. BUT THAT BY ITSELF WOULD NOT BE ENOUGH TO VEST THE COMMISSIONER WITH THE POWER OF S UO MOTU REVISION BECAUSE THE FIRST REQUIREMENT, NAMELY, THA T THE ORDER IS ERRONEOUS, IS ABSENT. SIMILARLY IF AN ORDER IS ERRO NEOUS BUT NO PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THEN T HE POWER OF SUO MOTU REVISION CANNOT BE EXERCISED. ANY AND EVER Y ERRONEOUS ORDER CANNOT BE THE SUBJECT-MATTER OF REVISION BECA USE THE SECOND REQUIREMENT MUST BE FULFILLED. THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED OR THAT BY THE APPLIC ATION OF THE RELEVANT STATUTE, ON AN INCORRECT OR INCOMPLETE INT ERPRETATION, A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. WHE N EXERCISE OF STATUTORY POWER IS DEPENDENT UPON THE EXISTENCE OF CERTAIN 20 OBJECTIVE FACTS, THE AUTHORITY BEFORE EXERCISING SU CH POWER MUST HAVE MATERIALS ON RECORD TO SATISFY IT IN THAT REGA RD. IF THE ACTION OF THE AUTHORITY IS CHALLENGED BEFORE THE CO URT IT WOULD BE OPEN TO THE COURTS TO EXAMINE WHETHER THE RELEVA NT OBJECTIVE FACTORS WERE AVAILABLE FROM THE RECORDS CALLED FOR AN EXAMINED BY SUCH AUTHORITY. 21. FURTHER, IT WAS HELD AS UNDER:- HELD, THAT THE INCOME-TAX OFFICER IN THIS CASE HAD MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITUR E INCURRED BY THE ASSESSEE. THE ASSESSEE HAD GIVEN A DETAILED EXP LANATION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE WERE PART OF THE RECORD OF THE CASE. EVIDENTLY, THE CLAIM WAS ALLOWE D BY THE INCOME-TAX OFFICER ON BEING SATISFIED WITH THE EXPL ANATION OF THE ASSESSEE. THIS DECISION OF THE INCOME TAX OFFI CER COULD NOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HIS ORD ER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. MO REOVER, IN THE INSTANT CASE, THE COMMISSIONER HIMSELF, EVEN AF TER INITIATING PROCEEDINGS FOR REVISION AND HEARING THE ASSESSEE, COULD NOT SAY THAT THE ALLOWANCE OF THE CLAIM OF THE ASSESSEE WAS ERRONEOUS AND THAT THE EXPENDITURE WAS NOT REVENUE EXPENDITURE BUT AN EXPENDITURE OF CAPITAL NATURE. HE SIMPLY ASK ED THE INCOME-TAX OFFICER TO RE-EXAMINE THE MATTER. THAT W AS NOT PERMISSIBLE. THE TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX UNDE R SECTION 263. THUS, IT IS VERY CLEAR FROM THE ABOVE THAT THERE MA Y BE A CASE WHERE ENQUIRES COULD HAVE BEEN MADE AND WHICH MAY NOT BE RECORDED IN THE ASSESSMENT ORDER BUT IN SUCH CASES WITHOUT FURTHER PINPOINTING ANY E RROR THE ORDER WOULD NOT BECOME ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. FURTHER, LD. DR HAS RELIED ON THE DECISIONS RELIED ON BY THE LD. COMMISSIONER AND, THEREFORE, WE WOULD EXAMINE THOSE DECISIONS ALSO. THE FIRST DECISION RELIED 21 BY HIM IS THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF NATIONAL LEGGUARD WORKS VS. CIT(A) & ANOTHER (SU PRA). IN THIS CASE FOLLOWING QUESTIONS WERE RAISED:- (I) WHETHER, ON THE FACTS AND CIRCUMSTANCES OF TH E PRESENT CASE, THE ACTION OF THE AUTHORITIES BELOW IN RESTRI CTING THE DEDUCTION UNDER SECTION 80HHC OF THE INCOME-TAX ACT , 1961, ON ITS OWN PRESUMPTION IS LEGALLY SUSTAINABLE IN THE E YES OF LAW ?. (II) WHETHER THE ACTION OF THE TRIBUNAL IN CONFIRM ING THAT STOCK SURRENDERED UNDER SURVEY IS INCOME FROM OTHER SOURCES AND NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80 HON'BLE HIGH COURT CLAIMED BY THE APPELLANT / ASSESSEE WITHOUT APPRECI ATING THE RATIO OF THE JUDGMENTS LAID DOWN BY THE APPELLANT / ASSESSEE IN ITS CORRECT PERSPECTIVE, IS LEGALLY SUSTAINABLE IN THE EYES OF LAW ? READING OF THE QUESTIONS ITSELF SHOWS THAT THE MAIN QUESTION WHETHER SURRENDERED INCOME DURING THE SURVEY CAN BE SAID T O HAVE BEEN DERIVED FROM BUSINESS AND WHETHER THE SAME WAS ELIGIBLE FOR DEDU CTION UNDER CHAPTER VI- A. THEREFORE, THIS DECISION HAS NOTHING TO DO IN W HAT CIRCUMSTANCES THE BOOKS NEEDS TO BE REJECTED. 22. THE NEXT DECISION RELIED ON BY HIM IS THE CASE OF M/S KIM PHARMA (P) LTD V CIT AND ANOTHER (SUPRA). IN THAT CASE, DURIN G ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE ASSESSING OFFICER THAT ASSESS EE WAS NOT MAINTAINING QUANTITATIVE TALLY AND DETAILS OF VARIOUS ITEMS AND SOME DISCREPANCIES WERE NOTICED IN THE STOCK FOUND AT THE TIME OF SURVEY CO NDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE. FURTHER, THE ASSESSEE HA S SHOWN GP RATE OF 27.48% AS AGAINST 30.43% AND THEREFORE, HE ESTIMATED THE G P RATE AT 28%. ON THESE 22 FACTS, THE HON'BLE HIGH COURT EXTRACTED THE OBSERVA TIONS OF THE TRIBUNAL AT PARA 4, WHICH ARE AS UNDER:- 4. WE HAVE ALSO CONSIDERED THE ALTERNATIVE PLEA OF THE ASSESSEE THAT THE SURRENDER OF RS. 2 LAKHS SHOULD C OVER AGAINST THE ADDITION OF GROSS PROFIT. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT SINCE THE ASSESSEE HAS HIMSELF SHOWN A HIGHER GROSS PROFIT RATE IN THE PRECEDING YEARS, THE ESTIMATE OF GROSS PROFIT AT THE RATE OF 28 PER CENT. ADOPTED BY THE ASSESSING OFFIC ER BY INVOKING THE PROVISIONS OF SECTION 145(2) WAS JUSTI FIED. WE ARE ALSO OF THE OPINION THAT THE SURRENDER OF RS. 2 LAKHS DURING SURVEY WOULD NOT COVER AGAINST THE ADDITION ON ACCOUNT OF GROSS PROFIT AS THE SAME WAS MADE AGAINS T SPECIFIC ITEMS DETECTED AT THE TIME OF SURVEY UNDER SECTION 133 A. THEREFORE, WE DO NOT FIND ANY FORCE IN THE ARGUMENT S OF THE ASSESSEE IN RESPECT OF THE SURRENDER OF RS. 2 LAKHS . ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND UPHOLD THE SAME. THE GROUND RAISED BY THE ASSESSEE STANDS REJECTED A ND THE APPEAL DISMISSED. THEREAFTER, IT WAS OBSERVED AT PARA 5 & 6 AS UNDER: - 5. WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS RE CORDED BY ALL THE AUTHORITIES BELOW WHILE REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. 6. AS IS FOUND FROM THE FACTS ON RECORD, THE ESTIMA TION DONE BY THE ASSESSING OFFICER AFTER REJECTION OF TH E BOOKS OF ACCOUNT WAS UPHELD UP TO THE TRIBUNAL. THE CONTENTI ON OF THE ASSESSEE THAT THIS COURT SHOULD MAKE ITS OWN ASSESS MENT OF THE PERCENTAGE OF GROSS PROFIT OF THE APPELLANT, IS NOT ACCEPTABLE TO US AS THE SAME DOES NOT FALL WITHIN THE DOMAIN O F GUIDING PRINCIPLES TO DETERMINE AS TO WHAT AMOUNTS TO A SUB STANTIAL QUESTION OF LAW. 23 23. FROM THE ABOVE IT BECOMES CLEAR THAT FIRST OF A LL NO RATIO HAS BEEN LAID DOWN AND EVEN THE HON'BLE HIGH COURT REFUSED TO AC CEPT THAT THERE WAS SOME SUBSTANTIAL QUESTION OF LAW INVOLVED AND SIMPL Y CONFIRMED THE FINDINGS OF THE TRIBUNAL. THE DECISION OF THE SUPERIOR COUR T NEED TO BE TAKEN AS PRECEDENT ONLY WHEN SOME RATIO HAS BEEN LAID DOWN. SECONDLY, IN THIS CASE CERTAIN DISCREPANCIES WERE FOUND DURING THE SURVEY AND ASSESSING OFFICER FURTHER NOTICED THAT ASSESSEE HAD DECLARED GP RATE OF 27.48% AGAINST THE PREVIOUS RATE OF GP I.E. 30.43% AND MADE A NOMINAL ADDITION OF HALF PERCENT BY ESTIMATING A PROFIT AT 28%. NO WHERE IT IS LAI D DOWN IN THIS CASE THAT IN THE CASE OF SURVEY BOOKS NEEDS TO BE REJECTED UNIVE RSALLY. IN FACT THIS SITUATION BECOMES MORE CLEAR FROM THE DECISION REFE RRED TO BY THE LD. CIT- DR BY HON'BLE DELHI HIGH COURT IN THE CASE OF ACTIO N ELECTRICALS V DCIT (SUPRA). IN THAT CASE THE SEARCH WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE AND A SUM OF RS. 5 LAKHS WAS SURRENDERED ON ACCOUNT OF CASH, VARIOUS OUTSTANDING FROM PARITIES AND VARIOUS GADGETS LIKE VCR, TV ETC. FOUND DURING THE SEARCH. DURING THE ASSESSMENT PROCEEDINGS, ASS ESSING OFFICER REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE SALES AT RS . 40 LAKHS AGAINST THE SALES DECLARED BY THE ASSESSEE AT RS. 38,76,081/- AND APP LIED THE GP RATE 13.36% DECLARED BY THE ASSESSEE. THE TRIBUNAL CONFIRMED TH E MAJOR ADDITION MADE BY THE ASSESSING OFFICER. IT WAS CONTENDED BEFORE THE HON'BLE HIGH COURT THAT TRIBUNAL HAS FAILED TO APPRECIATE THAT EXCEPT FOR T HE SURRENDER MADE BY THE ASSESSEE AT THE TIME OF SEARCH THERE WAS NOT OTHER MATERIAL BEFORE THE ASSESSING OFFICER TO COME TO THE CONCLUSION THAT BO OKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE NOT CORRECT. ON THESE FACTS AND CONTENTIONS THE HON'BLE HIGH COURT ADJUDICATED THE ISSUE AS UNDER:- 24 WE ARE UNABLE TO PERSUADE OURSELVES TO AGREE WITH LEARNED COUNSEL FOR THE ASSESSEE. SECTION 145(2) OF THE ACT EMPOWERS THE ASSESSING OFFICER TO MAKE A BEST JUDGMENT ASSES SMENT WHEN HE IS NOT SATISFIED ABOUT THE CORRECTNESS OR COMPLE TENESS OF THE ACCOUNTS OF THE ASSESSEE. IT IS NOT POSSIBLE TO CATEGORIZE VARIOUS TYPES OF DEFECTS WHICH MAY RENDER REJECTION OF BOOKS OF ACCOUNT OF AN ASSESSEE ON THE GROUND THAT THE AC COUNTS ARE NOT COMPLETE OR CORRECT. EACH CASE HAS TO BE CONSID ERED ON ITS OWN PECULIAR FACTS, HAVING REGARD TO THE NATURE OF BUSINESS. THOUGH IT IS TRUE THAT THE ABSENCE OF STOCK REGISTE R, IN A GIVEN SITUATION, MAY NOT PER SE LEAD TO AN INFERENCE THAT THE ACCOUNTS ARE INCOMPLETE OR FALSE THE ABSENCE OF SUC H A REGISTER, COUPLED WITH OTHER FACTOR, LIKE FALL IN P ROFITS, ETC., MAY LEAD TO AN INFERENCE THAT THE ACCOUNTS ARE NOT CORRECT. AS NOTICED ABOVE, IN THE INSTANT CASE, NON MAINTENANCE OF STOCK REGISTER, COUPLED WITH THE FACT THAT UNACCOUNTED SA LES WERE DETECTED DURING THE COURSE OF SEARCH, IN OUR OPINIO N, IS A RELEVANT FACTOR TO SUSTAIN THE VIEW OF THE ASSESSIN G OFFICER. WE DO NOT FIND ANY LEGAL INFIRMITY IN THE VIEW TAKEN B Y THE TRIBUNAL THAT THE DISCLOSURES / SURRENDER OF RS. 5 LAKHS BY THE ASSESSEE AT THE TIME OF SEARCH, AS ITS UNACCOUNTED SALES, CO NSTITUTES SUFFICIENT MATERIAL FOR THE ASSESSING OFFICER TO BA SE HIS SATISFACTION THAT THE BOOKS OF ACCOUNT OF THE ASSES SEE ARE NOT CORRECT AND COMPLETE. IN SO FAR AS THE ESTIMATION O F THE SALES / GROSS PROFIT RATE IS CONCERNED, IT BEING A BEST JUD GMENT ASSESSMENT, BASED ON PAST YEARS RESULTS CANNOT BE S AID TO BE ARBITRARY 24. FROM THE ABOVE IT BECOMES CLEAR THAT NO UNIVERS AL PRINCIPALS WERE LAID DOWN IN WHAT SITUATION THE BOOKS CAN BE REJECTED AN D THE COURT VERY CLEARLY OBSERVED THAT EACH CASE HAS TO BE CONSIDERED ON ITS OWN PECULIAR FACT HAVING REGARD TO THE NATURE OF BUSINESS. IN THAT CASE REJE CTION WAS UPHELD BECAUSE ASSESSEE HAS NOT MAINTAINED STOCK REGISTER, COUPLED WITH THE FACTS THAT SOME 25 UNACCOUNTED SALES WERE DETECTED DURING THE SEARCH A ND SURRENDER OF RS. 5 LAKHS WAS MADE 25. IN THE CASE BEFORE US, DURING THE SURVEY, INVEN TORY WAS FOUND TO BE EXCESSIVE TO THE EXTENT OF RS. 66,22,665/- AGAINST WHICH THE ASSESSEE SURRENDERED A SUM OF RS. 70 LAKHS. PHYSICAL CASH W AS FOUND AT RS. 4,63,570/- WHEREAS AS PER THE BOOKS THE CASH WAS RS . 75,802/- AND ASSESSEE SURRENDERED A SUM OF RS. 4 LAKHS. LASTLY, A SLIP W AS FOUND ACCORDING TO WHICH ASSESSEE HAS INVESTED A SUM OF RS. 1,31,00,00 0/- IN THE CONSTRUCTION OF BUILDING AND THIS AMOUNT WAS ALSO SURRENDERED. THER EFORE, CLEARLY NO UNRECORDED PURCHASES OR SALES OR ANY OTHER DISCREPA NCY WAS FOUND. THE ASSESSEE IS MAINTAINING PROPER QUANTITATIVE DETAILS . FURTHER, THE REASON FOR FALL IN GP RATE WAS EXPLAINED. DETAILS FOR VERIFIC ATION IN THE GP RATES OF VARIOUS YEARS HAVE BEEN FILED AT PAGES 152 TO180 O F THE PAPER BOOK. IN FACT SUMMARY OF VARIATION OF RATES HAVE BEEN FILED AT PA GE 152 WHICH READS AS UNDER:- M/S VENUS WOOLEN MILLS COMPARISION OF PURCHASES ACCTT. YEAR 2006/07 ACCTT. YEAR 2007/08 SL.NO . ITEM BILL NO/ DATE RATE (IN RS.) BILL NO./DATE RAT E 1 ACRYLIC TOW 3193/09.02.0 7 PASUPATI ACRYLON LTD 99/- 2884/15.12.0 7 PASUPATI ACRYLON LTD. 108/- 2 ACRYLIC TOW 3525/05.03.0 7 PASUPATI ACRYLON LTD 99/- & 101/- 1900/18.12.0 7 INDIAN ACRYLIC S LTD. 110/- 1 ACRYLIC FIBRE 923/28.12.06 ARFAT PETROCHEMICAL S PVT. LTD. 103.5 7 2520/17.11.0 7 PASUPATI ACRYLON LTD. 108/- 2898/15.12.0 7 PASUPATI ACRYLON LTD. 108/- 1 POLYSTE R YARN 38/06.12.06 GAGAN & COMPANY 86.83 379/21.11.07 JUNEJA WOOLLE N MILLS 125/- 478/20.12.07 JUNEJA 122/- 26 WOOLEN MILLS THIS SHOWS THAT RATES OF CERTAIN ITEMS HAVE ALL OF A SUDDEN INCREASED IN ASSESSMENT YEAR 2007-08 I.E. WHY THERE WAS VERIFICA TION IN THE GP RATE. OTHERWISE ALSO FROM THE GP CHART FOR THE LAST THREE YEARS IT BECOMES CLEAR THAT GP WAS 11.76% IN ASSESSMENT YEAR 2006-07 WHICH INCREASED IN 2007-08 TO 17,23% AND AGAIN HAS GONE BACK TO 11.49% IN ASSE SSMENT YEAR 2008-09. THESE FACTORS HAVE TO BE SEEN FURTHER IN THE LIGHT OF THE COPY OF THE TRADING ACCOUNT WHICH IS AVAILABLE AT PAGE 151 WHICH SHOWS THAT THIS GP RATE AND COPY OF PROFIT AND LOSS ACCOUNT WHICH IS AVAILABLE AT PAGES 187 & 188 WHERE THE NET RESULT IS LOSS AND LOSS ON 28.2.2008 WAS RS . 71,25,651/-. OBVIOUSLY, THIS MEANS THAT THERE WERE SOME EXTRA EXPENSES DURI NG THE YEAR AND ASSESSEE HAS DULY FILED THE DETAILS OF EXPENSES BEFORE ASSES SING OFFICER AS WELL AS COMMISSIONER BUT NEITHER THE ASSESSING OFFICER NOR THE LD. COMMISSIONER HAS POINTED OUT THAT SUCH EXPENSES HAVE BEEN INFLAT ED OR ARE NOT CORRECT. THEREFORE, IN OUR OPINION IN THE LIGHT OF THESE FAC TS IT CANNOT BE SAID THAT ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO TH E INTEREST OF REVENUE. THE LD. COMMISSIONER HAS DISCUSSED MANY OTHER CASE LAWS IN RESPECT OF REJECTION OF BOOKS OF ACCOUNT AND WE HAVE PERUSED THE SAME BU T COULD NOT FIND EVEN A SINGLE CASE LAW LAYING DOWN A PRINCIPLE THAT BOOKS SHOULD COMPULSORILY BE REJECTED WHEREVER A SURVEY IS CONDUCTED. OTHERWISE ALSO, IF THIS PRINCIPLE IS ACCEPTED THEN THERE WOULD NOT BE ANY MEANING ATTACH ED TO THE CONCEPT OF SURRENDER BECAUSE IN ANY CASE BOOKS HAVE TO BE REJE CTED. 26. BEFORE PARTING, WE WOULD LIKE TO OBSERVE THAT A SSESSING OFFICER MAY HAVE CALLED FOR CERTAIN DETAILS WHICH HAVE BEEN FIL ED BUT NO DISCUSSION AT ALL HAS BEEN MADE IN THE ASSESSMENT ORDER AND IN OUR OP INION THE ASSESSING 27 OFFICER IN GENERAL SHOULD BE MORE CAUTIOUS AND VIGI LANT AND DISCUSS THE VARIOUS ASPECTS OF THE CASE AT LEAST BRIEFLY IN THE BODY OF THE ASSESSMENT ORDER. HOWEVER, WE ARE QUASHING THE ORDER OF REVIS ION NOT BECAUSE OF THIS REASON ITSELF BUT BECAUSE THE LD. COMMISSIONER HI MSELF HAS NOT BEEN ABLE TO SHOW ANY ERROR IN HIS REVISIONARY ORDER. THE LD. CO UNSEL ALSO RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MA LABAR INDUSTRIAL CO LTD VS. CIT (SUPRA). THIS DECISION WAS REFERRED TO BY LD. COUNSEL FOR THE ASSESSEE AS WELL AS CIT-DR ALSO. IN THIS CASE THE H ON'BLE SUPREME COURT REJECTED THE CONTENTION OF THE COUNSEL WHICH WAS BA SED ON THE OBSERVATION OF MADRAS HIGH COURT IN THE CASE OF VENKATAKRISHNA RI CE CO. V CIT {1987) 163 ITR 129 (MAD). THIS IS RECORDED AT PAGE 88 OF THE REPORT. 27. THEREFORE, IN VIEW OF THE ABOVE DETAILED DISCUS SION, WE QUASH THE ORDER PASSED BY LD. COMMISSIONER. RESULTANTLY, THE APPE AL OF THE ASSESSEE IS ALLOWED. 28. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.09.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 17 TH SEPT, 2014 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR