SHRI VIKRAM SINGH SHEKHAWAT, JAIPUR V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE, SIKAR

ITA 484/JPR/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7825 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 08-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C GUPTA
• Keywords: Rejection of books of accounts; Business income; Depreciation; Business expenditure; Rectification of order; Opportunity of being heard; Principle of natural justice; Additional depreciation; Retrospective amendment; Question of law; Non-deduction of tax; Bad and doubtful debts; Unabsorbed depreciation; Revenue expenditure; TDS; Set aside
• Section: 40A(3); 143(3); 80HHC; 234B; 115JB; 40(a)(ia); 32(1)(iia); 37(1); 201(1); 201; 274; 113; 43; 48; 72; 13; 54; 37; 154

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, A JAIPUR JH LAANHI XKSLKBZ] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA- @ ITA NO. 484 & 485/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2013-14 & 2014-15 SHRI VIKRAM SINGH SHEKHAWAT M/S. V.S. STONE, E-172/A, UTTAM TOWER RAMESH MARG, C-SCHEME, JAIPUR CUKE VS. THE DCIT CIRCLE SIKAR SIKAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AQVPS 7734 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI SHRAWAN KUMAR GUPTA, ADVOCATE JKTLO DH VKSJ LS @ REVENUE BY: SHRI K.C. GUPTA, JCIT DR LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 21/01/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 23 /01/2020 VKNS'K@ ORDER PER SANDEEP GOSAIN, J.M. BOTH THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST SEPARATE ORDERS OF CIT(A) -4, JAIPUR DATED 30-01-2019 AND 3 1-01-2019 FOR THE ASSESSMENT YEAR 2013-14 & 2014-15 RESPECTIVELY. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN RESPECTIV E APPEALS. ITA NO. 484/JP/2019 A.Y. 2013-14 1. THE IMPUGNED RECTIFICATION ASSESSMENT ORDER U/S 154 R.W.S. 143(3) DATED 19-03-2018 AS WELL AS THE A CTION TAKEN BY THE AO U/S 154 AND CONFIRMED BY THE LD. CI T(A) IS ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 2 BAD IN LAW AND ON FACTS OF THE CASE FOR WANT OF JUR ISDICTION, BEING DEBATABLE ISSUE AND VARIOUS OTHER REASONS AND HENCE THE SAME MAY KINDLY BE QUASHED. 2. RS.46,14,664/-: THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE OF RS. 46,14,664/- CLAIMED ON ACCO UNT OF ADDITIONAL DEPRECIATION ON NEW MACHINERY PURCHASED DURING THE YEAR. HENCE, THE DISALLOWANCE SO MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) IS BEING TOTALLY CONTRA RY TO THE PROVISIONS OF LAW AND FACTS ON RECORD AND HENCE THE SAME MAY KINDLY BE DELETED IN FULL. 3. THE AO HAS GROSSLY ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CHARGING INTEREST U/S 234 A.B.C. THE APPELLANT TOTALLY DENIES IT LIABILITY OF CHARGING O F ANY SUCH INTEREST. THE INTEREST SO CHARGED, BEING CONTRARY T O THE PROVISIONS OF LAW AND FACTS, MAY KINDLY BE DELETED IN FULL. ITA NO. 485/JP/2019 A.Y. 2014-15 1.1 THE IMPUGNED RECTIFICATION ASSESSMENT ORDER U/S 154 R.W.S. 143(3) DATED 26-12-2016 IS BAD IN LAW AN D ON FACTS OF THE CASE FOR WANT OF JURISDICTION, BEING D EBATABLE ISSUE AND VARIOUS OTHER REASONS AND HENCE THE SAME MAY KINDLY BE QUASHED. 2.1 RS.2,00,000/-: THE LD. CIT(A) HAS GROSSLY ERR ED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN INVOK ING THE PROVISION OF SECTION145(3).THE PROVISION SO INVOKED BY THE AO AND CONFIRMED BY THE LD. CIT(A) IS TOTALLY CONTR ARY TO THE PROVISIONS OF LAW AND FACTS ON RECORD AND HENCE THE SAME MAY KINDLY BE QUASHED. 3.1 ALTERNATIVELY AND WITHOUT PREJUDICE THE AO FURTHER ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN PARTLY SUSTAINING LUMPSUM TRADING ADDITION OF RS. 2 .00 LACS ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 3 OUT OF RS. 5.00 LACS MADE BY THE AO. HENCE THE ADDI TION SO MADE BY THE AO AND PARTLY SUSTAINED BY THE LD. CIT( A) IS BEING TOTALLY CONTRARY TO THE PROVISIONS OF LAW AND FACTS ON RECORD AND HENCE THE PENALTY MAY KINDLY BE DELETED IN FULL. 3. RS.1,48,229/-: THE LD. CIT(A) HAS GROSSLY ERRE D IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFI RMING THE DISALLOWANCE OF RS. 1,48,229/- CLAIMED ON ACCOUNT O F INTEREST PAYMENT ON DELAYED DEPOSIT OF TDS CLAIMED IN THE P& L ACCOUNT. HENCE, THE DISALLOWANCE SO MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) IS BEING TOTALLY CONTR ARY TO THE PROVISIONS OF LAW AND FACTS ON RECORD AND HENCE THE SAME MAY KINDLY BE DELETED IN FULL. 4. RS.15,97,572/-: THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE OF RS. 15,97,572/- ON ACCOUNT OF N ON- DEDUCTION OF TDS ON INTEREST PAYMENT OF RS. 15,97,5 72/- BY IGNORING THE FACTS, SETTLED LEGAL POSITION ETC. HE NCE, THE DISALLOWANCE SO MADE BY THE AO AND CONFIRMED BY TH E LD. CIT(A) IS BEING TOTALLY CONTRARY TO THE PROVISIONS OF LAW AND FACTS ON RECORD AND HENCE THE SAME MAY KINDLY BE DE LETED IN FULL. 5. THE AO HAS GROSSLY ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CHARGING INTEREST U/S 234 A.B.C. THE APPELLANT TOTALLY DENIES IT LIABILITY OF CHARGING O F ANY SUCH INTEREST. THE INTEREST SO CHARGED, BEING CONTRARY T O THE PROVISIONS OF LAW AND FACTS, MAY KINDLY BE DELETED IN FULL. 2.1 FIRST OF ALL, WE TAKE UP THE APPEAL OF THE ASSE SSEE IN ITA NO.484/JP/2019 FOR THE ASSESSMENT YEAR 2013-14 FOR ADJUDICATION. 3.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S ENGAGED IN THE BUSINESS OF MINE CONTRACTOR, MANUFACTURING AND TRAD ING OF MARBLE BLOCK. ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 4 THE ASSESSEE HAS FILED HIS RETURN OF INCOME DECLARI NG THE TOTAL INCOME OF RS.1,70,88,620/- ON DATED. 30.03.2015 AND THE ASSES SMENT WAS COMPLETED U/S 143(3) ON DATED 29.02.2016 AT THE TOTAL INCOME OF RS.2,32,35,180/- AGAINST WHICH THE ASSESSEE HAS ALSO FILED THE APPEA L BEFORE THE LD. CIT(A)- 3, JAIPUR. DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS THE ASSESSEE HAS FILED ALL THE DETAILS AND REPLY. THERE AFTER THE AO HAS COMPLETED THE ASSESSMENT AFTER MAKING THE TRADING A DDITION, DISALLOWANCE U/S 40(A)(IA) AND VAT. HOWEVER THEREAFTER THE AO H AS ISSUED THE NOTICE U/S 154 OF THE ACT DATED 29.01.2018 ON THE GROUND THAT ADDITIONAL DEPRECIATION @20% OF RS.46,14,664/- CLAIMED AS PER PROVISION OF SEC. 32(1)(IIA) OF THE ACT ON ADDITION OF RS.2,30,73,318 /- IN PLANT AND MACHINERY AND AS PER DECISION OF SUPREME COURT IN T HE CASE OF CIT V/S LUCKY MINERALS PVT. LTD 2001 THE BUSINESS OF MININ G & TRADING OF MARBLE BLOCK DOES NOT COVER UNDER THE BUSINESS OF M ANUFACTURE AND PRODUCTION OF ANY ARTICLE OR THINGS, THEREFORE THE ADD. DEPRECIATION @20% OF RS.46,14,664/- IS NOT ALLOWABLE AND REQUIRED TO BE ADDED IN THE TOTAL INCOME. IN RESPONSE THERETO, THE ASSESSEE HAS OBJEC TED THE SAME AND FILLED THE DETAILED REPLY DATED 19-12-2018 (PB12-14) AND ALSO REPRODUCED AT ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 5 PAGE NO. 1-3 OF THE IMPUGNED ORDER. HOWEVER THE LD. AO DID NOT FEEL SATISFIED WITH THE REPLY AND MADE DISALLOWANCE OF RS. 46,14,664/-. 3.2 AGAINST THE ORDER OF THE AO, THE ASSESSEE HAS FILED THE APPEAL BEFORE THE LD. CIT(A) AND FILED THE DETAILED WRITTE N SUBMISSION (PB1-11) AND LEGAL POSITION OF LAW. THE WRITTEN SUBMISSION I S ALSO REPRODUCED AT PAGE 3-12 OF CIT(A)S ORDER. THE ASSESSEE HAS SUBMI TTED THAT THE ISSUE IS A DEBATABLE AND NO ACTION U/S 154 CAN BE TAKEN ON T HE DEBATABLE ISSUE AND THE ASSESSEE IS A MANUFACTURER. IN SUPPORT THE AASS ESSEE FURNISHED VARIOUS DECISION OF HON'BLE HIGH COURTS AND SUPREME COURTS ON THE DEBATABLE ISSUE. HOWEVER THE LD. CIT(A) DID NOT FEEL SATISFIE D AND CONFIRMED THE ACTION OF THE AO BY OBSERVING AS UNDER: 6.2I AM OF THE VIEW THAT AO HAS CORRECTLY INVO KED AND APPLIED PROVISIONS OF SEC. 154 OF THE ACT AS J UDGMENT OF THE HONBLE APEX COURT DELIVERED ON 03.08.2000 WAS LAW OF LAND AND OVERLOOKED WHILE FRAMING THE ASSESSMENT. FURTHER AR GUMENT THAT THE CIT(A) HAS PASSED AN ORDER AND HENCE RECTIFICAT ION CANNOT BE CARRIED OUT HAS NO MERITS AS ISSUE OF DEPRECIATION OR ADDITIONAL DEPRECIATION WAS NEVER SUBJECT MATTER BEFORE THE CI T(A). I AM CONSTRAINT TO OBSERVE THAT THE DISALLOWANCE IS LEGA LLY AND FACTUALLY CORRECT AND SUBMISSIONS ARE MADE TO OPPOSE THE ACTI ON OF AO ON TECHNICAL GROUNDS, THOUGH FUTILE. THAT BEING THE C ASE AND ON THE FACTS AND IN THE CIRCUMSTANCES THE ACTION OF THE AO IS UPHELD. APPELLANTS GROUND NO. 1 IS DISMISSED. ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 6 3.3 AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE A SSESSEE HAS PREFERRED THIS APPEAL BEFORE US ON THE GROUNDS MENT IONED HEREINABOVE. 4.1 THE GROUND NO. 1 AND 2 OF THE ASSESSEE ARE INTE RRELATED AND INTERCONNECTED AND RELATES TO CHALLENGING THE ORDER OF THE LD. CIT(A) IN CONFIRMING THE ORDER PASSED BY THE AO U/S 154 R.W.S . 143(3) OF THE ACT. 4.2 AT THE OUTSET OF THE HEARING, THE LD.AR APPEARI NG ON BEHALF OF THE ASSESSEE REITERATED THE SAME ARGUMENTS AS WERE RAIS ED BY HIM BEFORE THE LD. CIT(A) AND THE SAME ARE CONTAINED IN PARA 5 OF THE LD. CIT(A)S ORDER WHICH IS REPRODUCED AS UNDER:- 1. INVALID ACTION U/S 154: AT THE VERY OUTSET IT IS SUBMITTED THAT THE ACTION TAKEN BY THE LD. AO U/S 1 54 IS INVALID AND ILLEGAL BECAUSE OF FOLLOWING REASONS:- 1.1 DEBATABLE ISSUE CANNOT BE RECTIFIED U/S 154: AT THE VERY OUTSET IT IS SUBMITTED THAT SECTION 154 ALLOWS THE AO TO RECTIFY MISTAKES WHICH ARE APPARENT FROM RECORD AND THEREFO RE ONLY GLARING AND OBVIOUS MISTAKES WHICH ARE SELF EVIDENT AND DOE S NOT REQUIRE EITHER A PROCESS OF ARGUMENT OR INVESTIGATION. THE MISTAKES WHICH ARE NOT APPARENT BUT HAS TO BE DISCOVERED AFTER INT ERPRETATION OF A CERTAIN SECTION AND INVESTIGATION OF CERTAIN FACTS CANNOT BE RECTIFIED U/S 154 OF THE ACT. IN THE PRESENT MATTER THE LD. AO DISALLOWED THE ADD ITIONAL DEPRECIATION CHARGED @ 20% ON THE MACHINERY PURCHAS ED DURING THE YEAR U/S 154 OF THE ACT. THE PURCHASE OF THE MA CHINERY IS NOT DISPUTED. THE MATTER WAS VERY WELL ASSESSED U/S 143 (3) OF THE ACT. NO ADDITION WAS MADE IN THE ASSESSMENT ON THAT ACCO UNT IT MEANS THAT THE SAID ADDITIONAL DEPRECIATION WAS NOT DISPU TED AT THE TIME OF ASSESSMENT U/S 143(3) OF THE ACT. BUT LATER ON THE LD. AO DISCOVERED THAT ADDITIONAL DEPRECIATION IS NOT ALLO WED SINCE THE ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 7 ASSESSEE IS INTO MINING INDUSTRY AND NOT MANUFACTUR ING ANYTHING AND APPLIED THE DECISION OF THE HONBLE SUPREME COU RT IN THE MATTER OF LUCKY MINERALS PVT. LTD. WE HAD ALSO SUBM ITTED THAT THE ASSESSEE IS PRODUCING THINGS AND SINCE THE PRODUCTI ON IS A BIGGER TERM AND INCLUDES MANUFACTURE ALSO. WE HAD ALSO REF ERRED SOME DECISIONS OF VARIOUS HIGH COURTS AND SUPREME COURTS ALSO. NOW WE WANT TO SUBMIT THAT THE MATTER IS DEBATABLE THAT WHETHER THE MINING OF MARBLE BLOCK IS MANUFACTURING OR NOT AND THEREFORE IT CANNOT BE RECTIFIED U/S 154 OF THE ACT . THE ASSESSEE INTIMATED THE LD. AO, THE FOLLOWING MO DUS- OPERENDI IN SUPPORT OF HIS CLAIM TO BE COVERED UNDE R MINING AND MANUFACTURING ACTIVITY: WITH REGARD TO THE ADMISSIBILITY OF ADDITIONAL DEP RECIATION ON THE PURCHASE OF LOADER WE WISH TO SUBMIT AS UNDE R: 1. THAT SECTION 32(IIA) PROVIDES AS (IIA) IN THE CASE OF ANY NEW MACHINERY OR PLANT (OT HER THAN SHIPS AND AIRCRAFT), WHICH HAS BEEN ACQUIRED AND IN STALLED AFTER THE 31 ST DAY OF MARCH, 2005, BE AN ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ANY ARTICLE OR THING O R IN THE BUSINESS OF GENERATION, TRANSMISSION, OR DISTRIBUTI ON OF POWER, A FURTHER SUM EQUAL TO TWENTY PERCENT OF THE ACTUAL C OST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UN DER CLAUSE (II) 2. PLEASE NOTE THAT THE ABOVE DEFINITION COVERS BOT H THE ACTIVITIES OF MANUFACTURE AND PRODUCTION OF ANY ART ICLE OR THING. 3. THE WORD PRODUCE IS DEFINED IN WEBSTER NEW INTERNATIONAL DICTIONARY TO MEAN SOMETHING WHICH IS BROUGHT FORTH OR YIELDED EITHER NATURALLY OR AS A RESULT OF EFFORT AND WORK. IN SHORTER OXFORD DICTIONARY, THE MEANING GIVEN IS TO BRING FORWARD, BRING FORTH OR OUT; TO BRING INTO BEING OR EXISTENCE. IN BLACKS LAW DICTIONARY, THE EXPRESSION PRODUCE IS TO BRING FORWARD; TO SHOW OR EXHIBIT; TO BRING INTO VIEW OR NOTICE; TO BRING TO SURFACE. 4. THE DEFINITION INCLUDES ANYTHING WHICH IS YIELDE D EITHER NATURALLY OR AS A RESULT OF EFFORT OR WORK U NDER PRODUCTION. ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 8 PLEASE NOTE THAT MINING IS ALSO A RESULT OF WORK FO R YIELDING MARBLE OR ANY OTHER THING FROM EARTH. FOR THE EXCAVATION O F MARBLE FOLLOWING PROCESS ARE FOLLOWED : WHITE GOLD LOCATING A POTENTIAL QUARRYING SITE IS THE FIRST ST EP IN THE MINING PROCESS. AN OUTCROP OF EXPOSED MARBLE IS THE SUREST WAY FOR A GEOLOGIST TO LOCATE A POTENTIAL VEIN. ONCE MARBLE HAS BEEN LOCATED, DIAMOND-TIPPED DRILL BITS TAKE CORE SAMPLE S TO DETERMINE THE BEST LOCATION FOR DIGGING THE QUARRY, AS WELL A S THE EXPECTED QUALITY AND PURITY OF THE MARBLE. NEXT, A MINING CO MPANY NEEDS TO APPLY FOR ALL OF THE REQUIRED LICENSES FORM THE LOC AL, STATE, AND CENTRAL GOVERNMENT, A PROCESS THAT CAN TAKE MONTHS TO YEARS. HITTING AND MOTHERLOAD ONCE MINING HAS BEGUN, THERE MAY BE SEVERAL MONTHS OF DIGGING BEFORE ANY MARBLE IS EXTRACTED FROM THE QUA RRY, OVERBURDEN, OR DIRT ON TOP OF THE DESIRABLE ORE, NE EDS TO BE EXTRACTED BEFORE BLOCKS OF MARBLE CAN BE REMOVED. I N ADDITION, ESTABLISHING ROADS OR TUNNELS FOR VEHICLE ACCESS IS CRITICAL TO THE PROFITABILITY AND EFFICIENCY OF THE MINE. A QUARRY MANAGER NEEDS TO OVERSEE EACH CUT MADE FROM THE QUARRY; MARBLE MINED ALONG THE VEIN OF THE DEPOSIT WILL HAVE A VERY DIFFERENT LO OK THAN MARBLE THAT IS CROSS-CUT ACROSS THE VEIN. FORMING THE BENCH MINING MARBLE BLOCKS FROM THE WALL OF THE QUARRY ST ARTS WITH A BENCH WALL. THE BENCH WALL IS A LARGE SECTION O F MARBLE ALONG A VERTICAL WALL THAT IS CUT WITH DIAMOND CABLES, DR ILLS, AND TORCHES. IT LOOSENS THE BENCH WALL FROM THE SIDE OF THE QUAR RY, AND THE SEPARATED WALL CAN THEN BE PROCESSED AND CUT INTO I NDIVIDUAL, UNIFORM BLOCKS. A MARBLE BLOCK USUALLY WEIGHS BETWE EN 15,000 AND 25,000 POUNDS. PROCESSING THE STONE AFTER THE BLOCKS ARE EXTRACTED FROM THE QUARRY, THE YLL GO THROUGH FURTHER PROCESSING TO MATCH THEIR INTENDED PURPOSE. FOR TITLES, THE MARBLE IS CUT INTO STONE BILLETS AND PO LISHED TO A SMOOTH ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 9 SHEEN. MARBLE SLABS FOR CONSTRUCTION OR SCULPTURE A RE CUT USING DIAMOND WIRES OR A GANG SAW, WHICH USES MULTIPLE DI AMOND-TIPPED BLADES TO SLICE A MARBLE BLOCK INTO MORE MANAGEABLE SLABS. OFTEN, A RESIN APPLIED TO FILL IN CRACKS IN THE MARBLES S URFACE. AFTER POLISHING, ONLY 1 PERCENT OF THE SURFACE WILL BE CO ATED IN RESIN, MAINTAINING THE PURITY AND BEAUTY OF THE FINISHED S TONE. IT IS FURTHER SUBMITTED THAT THE ISSUE WAS ASSESSED U/S 143(3) OF THE ACT AND WHEREIN THE LD. AO DID NOT OBJECTED THE SAME BUT THE SAME WAS RECTIFIED U/S 154 OF THE ACT LATERON. FROM THE ABOVE IT IS VERY CLEAR THAT THE ASSESSEE H AS NOT SOLD THE ARTICLE IN THE SAME POSITION IE. AS PURCHASE AN D SALE OF THE SAME THING WITHOUT ANY ADDITION AND WORKING . THE ASSESS EE HAS TO PERFORM SO MANY ACTIVITIES AS MENTIONED ABOVE HENCE IT CANNOT BE SAID THAT THE ASSESSEE ONLY DO THE TRADING ACTIVITY . FURTHER THE ISSUE IS DEBATABLE AS TO WHETHER THE AS SESSEE IS MANUFACTURING OR NOT AND FOR PURPOSE FIRSTLY IT SHO ULD BE DECIDED THAT WHETHER MINING OF MARBLE BLOCK IS MANUFACTURIN G OR NOT AND WHEN THE INTERPRETATION OF MANUFACTURING IS NOT BEE N DECIDED IN THE CASE OF THE ASSESSEE, THEN HOW IT CAN BE SAID THAT THE ASSESSEE IS NOT A MANUFACTURER. FROM THE VARIOUS FACTS IT IS ON REC ORD OF THE AO THAT THE ISSUE IS DEBATABLE. AND THE ISSUE WHICH HA S BEEN RECTIFIED BY THE LD. AO U/S 154 IS HIGHLY DEBATABLE AND IT IS THE SETTLED LEGAL PREPOSITION AND LAW THAT A DEBATABLE ISSUE CANNOT B E RECTIFIED U/S 154 AND CANNOT BE SAID MISTAKE APPARENT ON RECORD. OUR VIEW IS SUPPORTED BY THE ORDER OF HONBLE ITAT LUCKNOW IN THE MATTER OF DY. COMMISSIONER OF INCOME TAX-6, KANPUR VS. M/S JK CEMENT, KAMLA TOWER IN [45 ITR 50 ] WHEREIN IT WAS HELD THAT WHERE ADDITIONAL DEPRECIAT ION WAS GRANTED ON PLANT AND MACHINERY USED FOR GENERATION AND DISTRIBUTION OF POWER IN ORIGINAL ASSESSMENT, SAME COULD NOT BE DISALLOWED BY INVOKING PROVISIONS OF SECTION 154. OUR VIEW IS FURTHER SUPPORTED BY THE ORDER OF HONB LE CHANDIGARH ITAT IN THE MATTER OF S.R. INDUSTRIES LT D. VS. ACIT CIRCLE-3(1) CHANDIGARH IN 156 ITD 125 WHEREIN THE R ELIANCE WAS PLACED ON THE DECISION OF CALCUTTA HIGH COURT IN 20 06 284 ITR 42 ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 10 IN WHICH IT WAS STATED THAT IT IS SETTLED LAW THAT RECTIFICATION PROCEEDINGS U/S 154 CAN BE RESORTED TO, ONLY TO COR RECT GLARING AND OBVIOUS MISTAKES OF FACT AND LAW. IF ALL FACTS ARE ON RECORD AND NO FURTHER CALCULATION OR ASCERTAINMENT IS NECE SSARY AND IF ON THESE FACTS IT IS CLEAR THAT AN ERROR OF LAW OR FACTS HAS BEEN MADE, THAT ERROR CAN BE RECTIFIED U/S 154. CONVERSE LY MISTAKES WHICH CAN BE DISCOVERED ONLY BY A COMPLICATED PROCE SS OF INVESTIGATION, ARGUMENT, ELUCIDATION OR DEBATE CANN OT BE SAID TO BE APPARENT MISTAKES AND IN SUCH CASES 154 CANNOT BE RESORTED TO. 2.1 IN THE CASE OF VOLKART BROS. & ORS . VS. ITO (1 967) 65 ITR 0179(SC) THE HONBLE SUPREME COURT HAS HELD THAT RECTIFICATIONMISTAKE APPARENTAN ERROR WHICH IS NO T OBVIOUS AND PATENT AND CAN ONLY BE DISCOVERED AS A RESULT O F AN ARGUMENT, CANNOT QUALIFY AS AN ERROR APPARENT FROM THE RECORD ASSESSEE A REGISTERED NON-RESIDENT FIRM AND ASSESSED ON THE SL AB RATES APPLICABLE TO REGISTERED FIRMS IN THE RESPECTIVE FI NANCE ACTS RECTIFICATION SOUGHT ON THE GROUND OF NON-APPLICATI ON OF THE PROVISION OF S. 17(1) OF THE 1922 ACT OR CORRESPOND ING PROVISIONS OF S. 113 OF THE 1961 ACTNOT PERMISSIBLEAPPLICABI LITY OR OTHERWISE OF S. 17(1) OF 1922 ACT OR S. 133 OF 1961 ACT TO NON- RESIDENT REGISTERED FIRMS WAS CAPABLE OF DECISION O NLY AFTER ELABORATE ARGUMENTS AND HENCE WAS NOT AN ERROR APPA RENT ON RECORDORDERS OF RECTIFICATION PASSED BY THE ITO AR E, THEREFORE, WITHOUT JURISDICTION 2.2 IN THE CASE OF D.S. SRINIVAS VS. ITO & ANR. 262 ITR 0209 : (2003) KARHC RECTIFICATIONMISTAKE APPAR ENT DEPRECIATIONALLOWING OF DEPRECIATION AFTER VERIFIC ATION OF BOOKS OF ACCOUNTS CANNOT BE EQUATED TO A 'MISTAKE' IN TER MS OF S. 154IN THE GUISE OF A MISTAKE THE AUTHORITIES ARE TRYING T O SET ASIDE ONE VIEW OF THE ASSESSING AUTHORITYSEC. 154 WAS NOT AV AILABLE TO THE AUTHORITIESIMPUGNED ORDERS SET ASIDE ITO VS. VOLKART BROS. (1971) 82 ITR 50 (SC), CIT VS. SOUTH INDIA BANK (2001) 166 CTR (SC) 216 : (2001) 249 ITR 304 (SC) AND M.D. NAR AYAN VS. AGRL. ITO (1974) 95 ITR 452 (MYS) RELIED ON. ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 11 2.3 IN THE CASE OF PR. CIT VS. RAIGUNJ CENTRAL CO- OPERATIVE BANK LTD. (2017) 98 CCH 0078 KOLHC HELD BUSINESS EXPENDITUREPROVISION FOR BAD AND DOUBTFUL DEBTS IN RESPECT OF RURAL ADVANCES OF CERTAIN BANKSRECTIFIC ATIONIN COMPUTATION OF INCOME IN ASSESSMENT ORDER DISALLOWA NCES WAS TAKEN TWICETHESE SUMS INCLUDED SUM OF RS.67,33,445 COMPUTATION ALSO PROVIDED FOR A DEDUCTION U/S 36(1) (VIIA) OF SAID SUM OF RS.2,91,93,886 AS ADMISSIBLEASSESSEE APPLIE D FOR RECTIFICATION U/S 154RECTIFICATION REGARDING AMOUN T OF RS.2,91,93,886 TAKEN TWICE WAS MADE AS SOUGHT FOR I N SAID APPLICATION HOWEVER FURTHER RECTIFICATION, NOT AP PLIED FOR, WAS MADE BY DELETING SUM OF RS.67,33,445 FROM SUM OF RS .2,91,93,886 ALLOWED AS A DEDUCTION U/S 36(1)(VIIA)ON APPEAL CI T(A) OBSERVED THAT SAID TWO PROVISIONS WERE NOT ALLOWABL E AS PER ACT TRIBUNAL, HELD THAT IF INTEREST WAS DEBITED TO BORR OWED ACCOUNT BUT FOR ANY REASON INTEREST HAD NOT ACTUALLY REALIZED, ACCOUNT WAS TO BE TREATED AS NPA AS PER GUIDELINES ISSUED BY RBIIN THAT EVENTUALITY, AMOUNT WAS UNREALIZED, UNREALIZED INTE REST SO TAKEN TO INCOME SHOULD BE REVERSED BY DEBITING TO P & L ACCO UNT AND CREDITING TO OVERDUE INTEREST RESERVE ACCOUNTIT WA S CLAIM OF ASSESSEE THAT DURING YEAR UNREALIZED INTEREST TAKEN TO INCOME HAD BEEN REVERSED BY DEBITING P & L ACCOUNT AND CREDIT ING TO PROVISION FOR OVERDUE INTEREST ACCOUNT FOLLOWING G UIDELINES ISSUED BY RBI TRIBUNAL FOUND THAT THIS ISSUE WAS HIGHLY DEBATABLE AND IT COULD NOT BE ADJUDICATED WHILE ACTING U/S 154AO SHOULD HAVE MADE DISALLOWANCE ONLY WHILE FRAMING REGULAR ASSESS MENT OR REASSESSMENT, WHICH WAS MADE PRIOR TO RESORTING TO THIS RECTIFICATIONTHIS DISALLOWANCE COULD NOT BE MADE W HILE ACTING U/S 154 REASON BEING THIS WAS NOT PRIMA FACIE MIST AKE IT WAS A HIGHLY DEBATABLE ISSUE HELD, IT WAS CLEAR FROM ABOVE THAT DELETION OF RS.67,33,445 ALLOWED AS DEDUCTION U/S 36(1)(VIIA ) COULD NOT BE SAID TO HAVE BEEN MADE IN RECTIFICATION OF AN ERROR APPARENT IN ASSESSMENT ORDERCOURT HAD NO REASON TO INTERFERE W ITH IMPUGNED ORDER AND, THEREFORE, DID NOT FIND THAT ANY SUBSTAN TIAL QUESTION OF LAW WAS INVOLVED IN THIS CASEAPPLICATION AND APPEA L DISMISSED 2.4 IN THE CASE OF HARBANS LAL MALHOTRA & SONS (P) LTD. VS. ITO & ANR. (1972) 83 ITR 0848 KOLHC HELD THAT ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 12 RECTIFICATIONDEBATABLE ISSUERATE OF DEPRECIATION MISTAKE THAT IS PROPOSED TO BE RECTIFIED IS DEPENDENT ON TH E QUESTION WHETHER THE MACHINERY USED FOR PRODUCTION OF SAFETY RAZOR BLADES CAN BE SAID TO BE PART OF 'IRON & STEEL INDUSTRY' A ND CAN COME WITHIN CATEGORY (B) MENTIONED HEREINAFTERTHIS REQU IRES INTERPRETATION OF THE EXPRESSION 'OTHER MACHINERY A ND PLANT'THIS IS SURELY A QUESTION WHICH REQUIRES, FIRSTLY, AN IN TERPRETATION OF THE EXPRESSION 'OTHER MACHINERY AND PLANT' AND, SECONDL Y, THE NATURE OF THE MACHINERY AND PLANT USED BY THE PETITIONER-COMP ANY AND WHETHER THEY COME WITHIN THE EXPRESSION 'OTHER MACH INERY AND PLANT' OR AS WELL AS UNDER THE ITEMS MENTIONED WITH IN THE BRACKETSTHIS WILL REQUIRE INVESTIGATION, BOTH OF F ACTS AS WELL AS INTERPRETATION OF LAW IT IS A MISTAKE WHICH HAS TO BE DISCOVERED AFTER INTERPRETATION OF A CERTAIN SECTION AND INVES TIGATION OF CERTAIN FACTSIN THE PREMISES THERE CANNOT BE ANY J URISDICTION FOR THE ITO TO TAKE PROCEEDINGS UNDER S. 154 IN VIE W OF THE FACTS DISCLOSED THE SHORT QUESTION IS WHETHER THE MISTAKE PROPOSED TO BE RECTIFIED COMES WITHIN THE PURVIEW OF S. 154 OF THE IT ACT, 1961. APPENDIX I OF THE IT RULES, PART I, PROVIDES THE ST ATEMENT AT WHICH DEPRECIATION IS ALLOWED. ITEM III IS IN THE FOLLOWI NG TERMS 'MACHINERY AND PLANT' AND THE GENERAL RATE ALLOWED AS MENTIONED IS 7 PER CENT. IN CL. (II) OF ITEM III CERTAIN ITEMS H AVE BEEN MENTIONED WHERE SPECIAL RATES ARE TO BE APPLIED TO THE WHOLE OF THE MACHINERY AND PLANT USED IN CERTAIN NAMED CONCERNS AND UNDER THE HEADING 'I' COMES THE 'IRON & STEEL INDUSTRY' WHICH HAS THREE S UB-CLAUSES. THE IRON & STEEL INDUSTRY IS DIVIDED INTO TWO HEADSONE IS ROLLING MILL ROLLS WHICH IS CATEGORY (A) WHERE THE DEPRECIATION IS NIL AND THE OTHER IS CATEGORY (B) WHICH IS 'OTHER MACHINERY AND PLANT (BLAST FURNACE PLANT, STEEL MAKING PLANT, STEEL ROLLING PL ANT, FORGES, GENERATORS, BOILERS AND SHEET MILLS)'. THESE ARE AL LOWED DEPRECIATION AT 10 PER CENT. FROM THE PETITION AND THE AVERMENTS MADE THEREIN AND THE STATEMENTS MADE IN THE AFFIDAV IT-IN-OPPOSITION IT IS APPARENT THAT THE MISTAKE THAT IS PROPOSED TO BE RECTIFIED IS DEPENDENT ON THE QUESTION WHETHER THE MACHINERY USE D FOR PRODUCTION OF SAFETY RAZOR BLADES CAN BE SAID TO BE PART OF 'IRON & STEEL INDUSTRY' AND CAN COME WITHIN CATEGORY (B) ME NTIONED HEREINAFTER. THIS REQUIRES INTERPRETATION OF THE EX PRESSION 'OTHER ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 13 MACHINERY AND PLANT'. IT WAS CONTENDED THAT OTHER M ACHINERY AND PLANT WAS INTENDED TO COVER ALL MACHINERY USED IN I RON & STEEL INDUSTRY APART FROM THE ROLLING MILL ROLLS. IT WAS URGED THAT OTHERWISE THERE WAS NO PURPOSE OF USING THE EXPRESS ION 'OTHER'. IT WAS FURTHER URGED THAT IN RESPECT OF THIS MACHINE-R OLLING MILL ROLL ONLY NIL DEPRECIATION WAS ALLOWED FOR SPECIAL REASO NS MENTIONED IN THE COLUMN OF REMARKS. ON THE OTHER HAND IT WAS URG ED ON BEHALF OF THE RESPONDENT THAT THE PARTICULAR ITEMS MENTIONED WITHIN THE BRACKETS IN III(I)(1)(3)(B) OF APPENDIX I MENTIONED HEREINBEFORE WERE EXHAUSTIVE OF THE OTHER MACHINERY AND PLANT IN CLUDED IN THE HEADING 'IRON & STEEL INDUSTRY'. THIS IS SURELY A Q UESTION WHICH REQUIRES, FIRSTLY, AN INTERPRETATION OF THE EXPRESS ION 'OTHER MACHINERY AND PLANT' AND, SECONDLY, THE NATURE OF T HE MACHINERY AND PLANT USED BY THE PETITIONER-COMPANY AND WHETHE R THEY COME WITHIN THE EXPRESSION 'OTHER MACHINERY AND PLANT' O R AS WELL AS UNDER THE ITEMS MENTIONED WITHIN THE BRACKETS. THIS WILL REQUIRE INVESTIGATION, BOTH OF FACTS AS WELL AS INTERPRETAT ION OF LAW. IT IS NOT NECESSARY TO DECIDE THE QUESTION WHETHER THE PETITI ONER'S PLANT AND MACHINERY USED FOR SAFETY RAZOR BLADES MERIT DEPREC IATION UNDER THIS HEAD OR COME UNDER THE GENERAL HEAD OF PLANT A ND MACHINERY. BUT IN VIEW OF THE LANGUAGE USED IT APPEARS THAT IT CANNOT BE SAID THAT IT IS AN OBVIOUS AND APPARENT MISTAKE WHICH IS SELF-EVIDENT AND DOES NOT REQUIRE EITHER A PROCESS OF ARGUMENT O R INVESTIGATION. IF THAT IS THE POSITION IN LAW THEN, PROCEEDINGS UNDER S. 154 CANNOT BE INITIATED. THE MISTAKE, IF A NY, IN THIS CASE IS ONE WHICH CANNOT BE CALLED EITHER OBVIOUS OR GLA RING OR SELF- EVIDENT. IT IS A MISTAKE WHICH APPEARS FROM THE REC ORD, BUT IT IS NOT APPARENT. IT IS A MISTAKE WHICH HAS TO BE DISCO VERED AFTER INTERPRETATION OF A CERTAIN SECTION AND INVESTIGATI ON OF CERTAIN FACTS. IN THE PREMISES THERE CANNOT BE ANY JURISDIC TION FOR THE ITO TO TAKE PROCEEDINGS UNDER S. 154 IN VIEW OF THE FAC TS DISCLOSED. MAHARANA MILLS (P) LTD. VS. ITO (1959) 36 ITR 350 (SC) : TC53R.275, NATIONAL RAYON CORPORATION LTD. VS. G.R. BAHMANI, ITO (1965) 56 ITR 114 (BOM) : TC53R.145, VOLKART BROS. VS. ITO (1967) 65 ITR 179 (BOM) : TC53R.168 AND P.M. BHARUC HA & CO. VS. G.S. VENKATESAN, ITO (1969) 74 ITR 513 (GUJ) : TC33R.480 RELIED ON. ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 14 2.5 IN THE CASE COATES OF INDIA LTD. VS. DCIT & ORS (1995) 214 ITR 0498 (KOL. HC) ASSESSMENTRECTIFICATION OF INTIMATION UNDER S. 143(1)(A)WHERE ORDER UNDER S. 143(1)(A) IS FOLLOWED BY A REGULAR ASSESSMENT UNDER S. 143(3), O RDER UNDER S. 143(1)(A), IN SO FAR AS IT IS CONTRARY TO REGULAR A SSESSMENT, CEASES TO BE EXECUTABLE AND BECOMES INEFFECTIVETHAT CANNOT B E RECTIFIED UNDER S. 154FURTHER, ASSESSING OFFICER COULD NOT D ECIDE ANY DEBATABLE ISSUE UNDER S. 143(1)(A)BY THE IMPUGNED NOTICE UNDER S. 154, ASSESSING OFFICER SEEKING TO CORRECT INTIMA TION UNDER S. 143(1)(A) ON A DEBATABLE ISSUE IMPUGNED NOTICE SET ASIDE 2.6 IN THE CASE OF CIT VS. R.T.C.L. LTD. (2012) 348 ITR 0120 (DEL.) HELD THAT RECTIFICATIONBOOK PROFITSRECTIFICATIO N OF MISTAKE APPARENT FROM RECORDDEBATABLE ISSUE OUT SIDE THE PURVIEW OF SECTION 154ASSESSEE WAS FOLLOWING STRAI GHT LINE METHOD OF DEPRECIATION PRIOR TO THE AY 2002-03IN T HE YEAR IN QUESTION, IT CHANGED THE METHOD TO WRITTEN DOWN VAL UE METHOD DIFFERENCE DUE TO CHANGE IN METHOD OF DEPRECIATION WAS SHOWN IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD 'EXPENDI TURE DEPRECIATION'DUE TO THIS CHANGE, BOOK PROFITS GOT REDUCED TO RS. 13,14,552/-ISSUE IS WHETHER AO CAN EXAMINE AND GO INTO THE ASPECT OF ADJUSTMENT OF PRIOR PERIOD EXPENSES AGAIN ST BOOK PROFITS FOR CALCULATING TAX U/S 115JB OF THE ACT WHILE EXER CISING JURISDICTION U/S 154 HELD, THERE WAS CONSIDERABLE CONTROVERSY ON ASPECT OF ADJUSTMENT OF PRIOR PERIOD EXPENSES AGAIN ST BOOK PROFITS FOR CALCULATING TAX U/S 115JBJURISDICTION U/S 154 IS CONFINED TO RECTIFICATION OF ERRORS APPARENT FROM THE RECORDAO CANNOT GO INTO A DEBATABLE ISSUE ON WHICH TWO OR MORE VIEWS A RE POSSIBLE AND PASS AN ORDER ON MERITSAPPEAL DISMISSED 2.7 IN THE CASE OF CIT VS. CELLO WRITING INSTRUMENT S & CONTAINERS (P) LTD.(2009) 319 ITR 0063 MUMHC HELD THAT RECTIFICATION OF MISTAKEMISTAKE APPARENT FROM RECO RD COMPUTATION OF DEDUCTION UNDER S. 80-IBDEDUCTION O F DEPRECIATION FROM ELIGIBLE PROFITSON THIS ISSUE, T HE DIVISION BENCH OF THE JURISDICTIONAL HIGH COURT HAD REFERRED THE MATTER TO A LARGER BENCHFACT THAT THE COURT ITSELF IS DIVIDED ON THE ISSUE, WHATEVER BE THE MERITS OF THE MATTER, THE AO AT LEA ST HAD NO JURISDICTION TO EXERCISE HIS JURISDICTION UNDER S. 154AS AND WHEN ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 15 THERE IS CONFLICT OF OPINION AMONGST THE BENCHES TH E SAME CANNOT AMOUNT TO AN ERROR APPARENT ON THE FACE OF THE RECO RDEXERCISE OF JURISDICTION BY THE AO UNDER S. 154 WAS WITHOUT JUR ISDICTION 2.8 IN THE CASE OF CIT VS. TTK PHARMA LTD. 2008) 300 ITR 0346 CHEN HC HELD THAT RECTIFICATIONDEBATA BLE ISSUE CARRY FORWARD OF LOSS VIS-A-VIS ASSESSMENT UNDER S. 115J ASSUMPTION OF JURISDICTION UNDER S. 154 IS PERMISSI BLE ONLY TO CORRECT AN ERROR WHICH IS APPARENT AND NOT WHERE A DEBATABLE ISSUE IS INVOLVEDVIEWS OF DIFFERENT HIGH COURTS WERE NOT UNIFORM ON THE ISSUE INVOLVED IN THE INSTANT CASE AT THE TIME WHEN THE RECTIFICATION PROCEEDINGS WERE TAKENISSUE WAS SETT LED BY THE SUPREME COURT LONG THEREAFTERHENCE, THE PROCEEDING S ARE UNSUSTAINABLE 2.9 IN THE CASE OF ROYAL CUSHION VINYAL VS. CIT (2009) 227 CTR 0663 (MUM. HC) HELD THAT RECTIFICATIONDEBATABLE ISSUEDEDUCTION UNDER S. 80HHCISSUE REGARDING DEDU CTION OF UNABSORBED DEPRECIATION AND UNABSORBED LOSSES FROM THE PROFITS AND GAINS OF BUSINESS OR PROFESSION WHILE COMPUTING DEDUCTION UNDER S. 80HHC WAS A DEBATABLE ISSUETHEREFORE, DY. CIT HAD NO JURISDICTION TO PASS THE IMPUGNED ORDER UNDER S. 15 4 HOLDING THAT THE ASSESSEE-COMPANY IS ENTITLED TO DEDUCTION UNDER S. 80HHC AT NIL AS THERE IS NO POSITIVE INCOME AFTER SETTING OF F THE UNABSORBED DEPRECIATION AND UNABSORBED BUSINESS LOSSES OF THE EARLIER YEARS 2.10 IN THE CASE OF CIT VS. NONMAG WIRES (P) LTD. H ELD THAT (2007) 292 ITR 0557 CHEN HC RECTIFICATIONDEBATAB LE ISSUECOMPUTATION OF BOOK PROFIT UNDER S. 115JRECT IFICATION MADE TO RESTRICT THE SET OFF OF UNABSORBED BUSINESS LOSS TO THE EXTENT OF BUSINESS INCOME ONLYNOT JUSTIFIEDTHERE WERE CO NFLICTING OPINIONS ON THE QUESTION OF WORKING OF BOOK PROFIT UNDER S. 115J ON THE DATE WHEN THE PROCEEDINGS WERE TAKEN UNDER S. 1 54MATTER WAS CONSIDERED AND SETTLED BY THE APEX COURT LONG A FTER THE AO INVOKED JURISDICTION UNDER S. 154DEBATABLE ISSUE, INCLUDING A POINT OF LAW, IS NOT A MISTAKE APPARENT FROM THE RE CORDPLEA OF THE REVENUE TO SUSTAIN THE ORDER OF ASSESSMENT UNDER AN Y OTHER PROVISION OF THE ACT CANNOT BE ACCEPTED ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 16 2.11 IN THE CASE OF CIT VS. INVESTMENT TRUST OF IN DIA LTD. (2009) 77 CCH 0725 PHHC IT HAS BEEN HELD THAT RECTIFICATIONMISTAKE APPARENT FROM RECORDDEPRECIA TION DEPRECIATION GRANTED IN ORIGINAL ASSESSMENTIN THE EARLIER YEAR, DEPRECIATION WAS DISALLOWED ON THE GROUND THAT THE ASSET DID NOT EXISTIN THE RECTIFICATION PROCEEDINGS OF CURRENT Y EAR, DEPRECIATION ORIGINALLY GRANTED, WITHDRAWN ON THE SAME GROUNDIS SUE OF DISALLOWANCE OF DEPRECIATION WAS A DEBATABLE ONECA NNOT BE THE SUBJECT MATTER OF DEPRECIATIONWITHDRAWAL OF DEPREC IATION IN RECTIFICATION PROCEEDINGS IS NOT PROPER ADDL. CIT VS. KANTA BEHAN (1982) 27 CTR (DEL) 40 : (1983) 140 ITR 187 ( DEL) DISTINGUISHED IN THE CASE OF CIT VS. SHIV NARAIN KARMENDRA NARAIN 1124 ALL HC 280 ITR 0355 RECTIFICATIONDEBATABLE I SSUERATE OF DEPRECIATION ON GENERATORQUESTION AS TO WHETHER THE GENERATOR IS ELECTRICAL INSTALLATION AND DEPRECIATION AT THE RATE OF 20 PER CENT IS ALLOWABLE THEREON OR NOT IS A QUESTION OF DEBATEIN FACT TRIBUNAL HAS ALLOWED DEPRECIATION ON GENERATOR @ 20 PER CENT TO THE ASSESSEE IN THE SUBSEQUENT ASSESSMENT YEARTHEREFOR E, DEPRECIATION @ 20 PER CENT ALLOWED IN THE ORIGINAL ASSESSMENT COULD NOT BE REDUCED TO 10 PER CENT AS IT WAS NOT A MISTAKE WHICH COULD BE RECTIFIED BY INVOKING S. 154 3. ON PERUSAL OF ALL ABOVE SUPREME COURTS AND HIGH COURT ORDERS IT IS NOW VERY SETTLED AND LEGAL POSIT ION WHEN THERE IS ANY ISSUE IN HAND IS DEBATABLE THEN THE SA ME CANNOT RECTIFIED 4. HENCE IN VIEW OF THE ABOVE FACTS, CIRCUMSTANCES, SUBMISSIONS AND LEGAL POSITION THE ACTION TAKEN U/S 154 THE IMPUGNED ORDER MAY KINDLY BE QUASHED. 5. FURTHER THE LD. AO WITHOUT EXAMINATION THE FACTS, NATURE OF THE BUSINESS OF THE ASSESSEE AND WITHOUT BRING A NY MATERIAL IN SUPPORT TO ESTABLISH THAT THE ASSESSEE IS NOT MANUF ACTURE HAS DISALLOWED THE CLAIM OF THE ASSESSEE. WHICH IS AGAI NST THE PRINCIPLE OF LAW. ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 17 6. CONTRADICTORY APPROACH OF THE LD. AO: FURTHER WHEN THE LD. AO HAS DISALLOWED THE ADDITIONAL DEPRECIATI ON IN THIS YEAR, DESPITE THIS HE HAS NOT GIVEN ANY CREDIT OF THIS AD DITIONAL DEPRECIATION IN NEXT YEAR YEARS BY RECTIFYING THE S AME FOR WHICH THE ASSESSEE IS ELIGIBLE AS PER LAW. IT SHOWS THE CONTR ADICTORY APPROACH OF THE LD. AO AND THE SAME RESULTANT DOUBLE DISALLO WANCE AND TAXATION OF SAME INCOME, WHICH IS NOT PERMISSIBLE I N LAW. IT ALSO PROVES THAT AS PER THE ACTION OF THE LD. AO ITSELF PROVED THAT THE ASSESSEE HAS RIGHTLY CLAIM THE ADDITIONAL DEPRECIAT ION, OTHERWISE HE COULD HAVE GIVEN THE EFFECT OF THIS DISALLOWANCE IN THE SUBSEQUENT YEARS. 7. ALTERNATIVELY AND WITHOUT PREJUDICE TO THE ABOVE THE LD. AO MAY KINDLY BE DIRECTED TO ALLOW THIS CLAIM I N SUBSEQUENT YEARS AND GRANT THE REFUND IN NEXT YEAR BY GIVING T HIS EFFECTS. 8. ORDER OF THE LD. AO MERGED IN THE ORDER OF CIT(A): FURTHER THE ASSESSEE HAD FILED THE APPEAL AGAINST T HE ORIGINAL ASSESSMENT ORDER BEFORE THE LD. CIT(A) WHO DECIDED THE APPEAL ON DT. 01.08.2018. WHEN THE ORDER OF THE AO HAS MERGED BEFORE THE LD. CIT(A) NO ORDER OF RECTIFICATION CAN BE DONE. 9. BOOKS OF ACCOUNT REJECTED NO OTHER DISALLOWANCE CAN BE MADE: FURTHER IT IS ALSO SETTLED WHEN BOOKS HAS BEEN REJECTED BY INVOKING PROVISION OF SE.C145(3) AND PROFIT HAS BEEN ESTIMATED NO ADDITION CAN BE MADE UNDER ANY OTHER HEADS OF FOR O THER DISALLOWANCE KINDLY REFER ACIT CIRCLE 1 UDAIPUR V/S MAHENDRA SINGH CHUDHARY IN ITA NO. 285/JD/2013 DT.09.06.2014 SIMILARLY, THE SIMILAR AND IDENTICAL ISSUE HAS BEEN DECIDED BY THE HONBLE ITAT, JAIPUR BENCH, JAIPUR VIDE THEIR ORDER DATED 28/11/2014 IN THE CASE OF SHRI BHAGCHAND CHOUDHARY V/S ACIT IN APPEAL NO.ITA NO. 506/JP/2012 . IN BOTH THE ABOVE CASES IT HAS BEEN HELD THAT ON THE BASIS OF NUMEROUS DISCREPANCI ES POINTED OUT BY THE LD. AO IN THE ASSESSMENT ORDER SUGGEST THE I MPLIED OR DEEMED INVOCATION OF SECTION 145(3) OF THE ACT AND ALSO HELD THAT NORMALLY ADDITIONS UNDER SECTION 143(3) SHOULD BE L IMITED TO THE ESTIMATION OF GROSS PROFIT RATE OR NET PROFIT RATE ONLY, BASED ON THE RELEVANT PAST HISTORY OF THE ASSESSEE AND THERE IS NO FURTHER SCOPE FOR MAKING SEPARATE ADDITIONS ON DIFFERENT RELATED GROUNDS. THE ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 18 ABOVE DECISIONS WERE BASED ON THE RATIO OF JUDGMENT OF HONBLE ITAT, JAIPUR BENCH, JAIPUR IN THE CASE OF M/S. CHOU DHARY AND BROTHERS IN ITA NO. 1177/JP/2010 DATED 1/5/2011 WHERE IN THE HONBLE TRIBUNAL HAD DISAPPROVED THE MULTIPLE ADDIT IONS AND HAD VIEWED THAT A COMPOSITE ADDITION TO THE GP/NP RATIO WOULD BE SUFFICIENT TO TAKE CARE OF ALL SUCH DISCREPANCIES. THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE TOTALLY SIMIL AR AND IDENTICAL OF THE ABOVE SAID CASES AND HENCE THE RATIO OF JUDGMEN T IS FULLY APPLICABLE IN THIS CASE ALSO. THEREFORE IN VIEW OF THE ABOVE FACTS AND CIRCUMSTAN CES THE DISALLOWANCE SO MADE MAY KINDLY BE DELETED IN FULL AND OBLIGE. 4.3 ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS PASSED BY THE LOWER AUTHORITIES. 4.4 WE HAVE HEARD THE LD. COUNSEL OF BOTH THE PARTI ES, PERUSED THE MATERIALS PLACED ON RECORD, ORDERS PASSED BY THE RE VENUE AUTHORITIES AND THE JUDGEMENT CITED BY THE RESPECTIVE PARTIES. AS P ER PRESENT FACTS OF THE CASE THE AO DISALLOWED THE ADDITIONAL DEPRECIATION CHARGED @ 20% ON THE MACHINERY PURCHASED DURING THE YEAR U/S 154 OF THE ACT. THE PURCHASE OF THE MACHINERY AND USED IN THE BUSINESS IS NOT DI SPUTED. THE MATTER WAS ASSESSED U/S 143(3) OF THE ACT AND DURING THE COURS E ASSESSEE HAS FILED THE AUDITED ACCOUNTS AND ALL THE BOOKS OF ACCOUNTS VIDE PAGE 1-2 OF THE ASSESSMENT ORDER (PB19-20) AND DULY EXAMINED BY THE AO AND THE AO MADE THE TRADING ADDITIONS. BUT NO DISALLOWANCE OR ADDITION WAS MADE IN ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 19 THE ASSESSMENT ON THAT ACCOUNT OF CLAIM OF ADDITION AL DEPRECIATION WHICH MEAN THAT THE SAID ADDITIONAL DEPRECIATION WAS NOT DISPUTED AT THE TIME OF ASSESSMENT U/S 143(3) OF THE ACT. HOWEVER, LATER O N THE AO DISCOVERED THAT ADDITIONAL DEPRECIATION IS NOT ALLOWED SINCE T HE ASSESSEE IS INVOLVED INTO MINING INDUSTRY AND NOT MANUFACTURING ANYTHING AND APPLIED THE DECISION OF THE HONBLE SUPREME COURT IN THE MATTER OF LUCKY MINERALS PVT. LTD. (SUPRA). IN OUR VIEW THE PROVISIONS OF SE CTION 154 OF THE ACT ALLOWS THE AO TO RECTIFY THE MISTAKES WHICH ARE APP ARENT FROM RECORD AND THUS ONLY THE GLARING AND OBVIOUS MISTAKES WHICH AR E APPARENT WHICH ARE SELF EVIDENT AND DOES NOT REQUIRE EITHER A PROCESS OF ARGUMENT OF INVESTIGATION. THE MISTAKES WHICH ARE NOT APPARENT BUT HAS TO BE DISCOVERED AFTER INTERPRETATION OF A CERTAIN SECTIO N AND INVESTIGATION OF CERTAIN FACTS CANNOT BE RECTIFIED U/S 154 OF THE AC T. AS PER THE ASSESSEE, HE HAS NOT SOLD THE ARTICLE IN THE SAME POSITION I.E. AS PURCHASE AND SALE OF THE SAME THING WITHOUT ANY ADDITION AND WORKING. AC CORDING TO THE ASSESSEE, HE HAS TO PERFORM SO MANY ACTIVITIES SUCH AS LOCATING A POTENTIAL QUARRYING SITE IN THE FIRST STEP IN THE MINING PROC ESS, HITTING AND MOTHER LOAD, FORMING THE BENCH, PROCESSING THE STONE ETC. HENCE, IT CANNOT BE SAID THAT THE ASSESSEE IS ONLY DOING THE TRADING AC TIVITY. WE HAVE ALSO ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 20 NOTICED THAT ACCORDING TO THE ASSESSEE, HE IS PRODU CING THINGS AND SICNE THE PRODUCTION IS A BIGGER TERM AND INCLUDES MANUFA CTURE ALSO. IN THIS RESPECT THE ASSESSEE HAD REFERRED TO SOME DECISIONS OF VARIOUS HON'BLE HIGH COURTS AND HON'BLE SUPREME COURTS ALSO. THEREF ORE, THE MATTER RAISED BEFORE US IS DEBATABLE AS TO WHETHER THE MIN ING OF MARBLE BLOCK IS MANUFACTURING OR NOT AND ASSESSEE HAD ALSO INTIMATE D THE AO. THEREFORE, THE MODUS OPERANDI IN SUPPORT OF THE CLAIM IS TO BE COV ERED UNDER THE MINING AND MANUFACTURING ACTIVITY. THEREFORE, THE M ATTER BEING DEBATABLE CANNOT BE RECTIFIED U/S 154 OF THE ACT. WE FURTHER NOTICED THAT SINCE THE ISSUE IS DEBATABLE AS TO WHETHER THE ASSESSEE IS MA NUFACTURING OR NOT AND FOR PURPOSE FIRSTLY IT SHOULD BE DECIDED THAT WHETH ER MINING OF MARBLE BLOCK IS MANUFACTURING OR NOT AND WHEN THE INTERPRE TATION OF MANUFACTURING HAS NOT BEEN DECIDED IN THE CASE OF T HE ASSESSEE, THEN AS TO HOW IT CAN BE SAID THAT THE ASSESSEE IS NOT A MANUF ACTURER. FROM THE VARIOUS FACTS, IT IS ON RECORD OF THE AO THAT THE I SSUE IS DEBATABLE AND THE ISSUE WHICH HAS BEEN RECTIFIED BY THE AO U/S 154 I S HIGHLY DEBATABLE AND IT IS THE SETTLED LEGAL PREPOSITION OF LAW THAT A D EBATABLE ISSUE CANNOT BE RECTIFIED U/S 154 AND CANNOT BE SAID MISTAKE APPARE NT ON RECORD. OUR VIEW IS SUPPORTED BY FOLLOWING CASE LAWS. ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 21 (I) HONBLE ITAT LUCKNOW IN THE MATTER OF DCIT-6, KANPU R VS. M/S JK CEMENT, KAMLA TOWER IN [ 45 ITR 50] WHEREIN IT WAS HELD THAT WHERE ADDITIONAL DEPRECIATION WAS GRANTED ON PLANT AND MA CHINERY USED FOR GENERATION AND DISTRIBUTION OF POWER IN ORIGINAL AS SESSMENT, SAME COULD NOT BE DISALLOWED BY INVOKING PROVISIONS OF SECTION 154. (II) HONBLE CHANDIGARH ITAT IN THE MATTER OF S.R. INDUSTRIES LTD. VS. ACIT CIRCLE-3(1) CHANDIGARH IN 156 ITD 125 WHER EIN THE RELIANCE WAS PLACED ON THE DECISION OF CALCUTTA HIGH COURT IN 20 06 284 ITR 42 IN WHICH IT WAS STATED THAT IT IS SETTLED LAW THAT RECTIFICATI ON PROCEEDINGS U/S 154 CAN BE RESORTED TO, ONLY TO CORRECT GLARING AND OBVIOUS MI STAKES OF FACT AND LAW. IF ALL FACTS ARE ON RECORD AND NO FURTHER CALCULATION OR A SCERTAINMENT IS NECESSARY AND IF ON THESE FACTS IT IS CLEAR THAT AN ERROR OF LAW OR FACTS HAS BEEN MADE, THAT ERROR CAN BE RECTIFIED U/S 154. CONVERSELY MISTAKES WHICH CAN BE DISCOVERED ONLY BY A COMPLICATED PROCESS OF INVESTIGATION, ARG UMENT, ELUCIDATION OR DEBATE CANNOT BE SAID TO BE APPARENT MISTAKES AND IN SUCH CASES 154 CANNOT BE RESORTED TO. (III) IN THE CASE OF VOLKART BROS. & ORS . VS. IT O (1967) 65 ITR 0179(SC) THE HONBLE SUPREME COURT HAS HELD THAT RE CTIFICATIONMISTAKE APPARENTAN ERROR WHICH IS NOT OBVIOUS AND PATENT A ND CAN ONLY BE DISCOVERED AS A RESULT OF AN ARGUMENT, CANNOT QUALI FY AS AN ERROR APPARENT FROM THE RECORDASSESSEE A REGISTERED NON-RESIDENT FIRM AND ASSESSED ON THE SLAB RATES APPLICABLE TO REGISTERED FIRMS IN THE RESPECT IVE FINANCE ACTS RECTIFICATION SOUGHT ON THE GROUND OF NON-APPLICATI ON OF THE PROVISION OF S. 17(1) OF THE 1922 ACT OR CORRESPONDING PROVISIONS O F S. 113 OF THE 1961 ACT NOT PERMISSIBLEAPPLICABILITY OR OTHERWISE OF S. 17 (1) OF 1922 ACT OR S. 133 OF 1961 ACT TO NON-RESIDENT REGISTERED FIRMS WAS CA PABLE OF DECISION ONLY AFTER ELABORATE ARGUMENTS AND HENCE WAS NOT AN ERROR APPA RENT ON RECORDORDERS OF RECTIFICATION PASSED BY THE ITO ARE, THEREFORE, WIT HOUT JURISDICTION (IV) IN THE CASE OF D.S. SRINIVAS VS. ITO & ANR. 262 ITR 0209 : (2003) KAR HC RECTIFICATIONMISTAKE APPARENT DEPRECIATION ALLOWING OF DEPRECIATION AFTER VERIFICATION OF BOOK S OF ACCOUNTS CANNOT BE EQUATED TO A 'MISTAKE' IN TERMS OF S. 154IN THE GU ISE OF A MISTAKE THE AUTHORITIES ARE TRYING TO SET ASIDE ONE VIEW OF THE ASSESSING AUTHORITYSEC. 154 WAS NOT AVAILABLE TO THE AUTHORITIESIMPUGNED O RDERS SET ASIDE ITO VS. VOLKART BROS. (1971) 82 ITR 50 (SC), CIT VS. SOUTH INDIA BANK (2001) 166 CTR (SC) 216 : (2001) 249 ITR 304 (SC) AND M.D. NAR AYAN VS. AGRL. ITO (1974) 95 ITR 452 (MYS) RELIED ON. IN THE PRESENT CASE THE BOOKS OF ACCOUNT HAS ALSO B EEN EXAMINED BY THE LD. AO DURING THE COURSE OF ORIGINAL ASSESSMENT. HENCE THE SAME POSITION IS HERE. (V) 2.3 IN THE CASE OF PR. CIT VS. RAIGUNJ CENTRAL CO-OPERATIVE BANK LTD. (2017) 98 CCH 0078 KOLHC HELD BUSINESS EXPENDITURE ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 22 PROVISION FOR BAD AND DOUBTFUL DEBTS IN RESPECT OF RURAL ADVANCES OF CERTAIN BANKSRECTIFICATIONIN COMPUTATION OF INCOM E IN ASSESSMENT ORDER DISALLOWANCES WAS TAKEN TWICETHESE SUMS INCLUDED S UM OF RS.67,33,445 COMPUTATION ALSO PROVIDED FOR A DEDUCTION U/S 36(1) (VIIA) OF SAID SUM OF RS.2,91,93,886 AS ADMISSIBLEASSESSEE APPLIED FOR R ECTIFICATION U/S 154 RECTIFICATION REGARDING AMOUNT OF RS.2,91,93,886 TA KEN TWICE WAS MADE AS SOUGHT FOR IN SAID APPLICATION HOWEVER FURTHER RE CTIFICATION, NOT APPLIED FOR, WAS MADE BY DELETING SUM OF RS.67,33,445 FROM SUM O F RS.2,91,93,886 ALLOWED AS A DEDUCTION U/S 36(1)(VIIA)ON APPEAL CI T(A) OBSERVED THAT SAID TWO PROVISIONS WERE NOT ALLOWABLE AS PER ACTTRIBUN AL, HELD THAT IF INTEREST WAS DEBITED TO BORROWED ACCOUNT BUT FOR ANY REASON INTEREST HAD NOT ACTUALLY REALIZED, ACCOUNT WAS TO BE TREATED AS NPA AS PER GUIDELINES ISSUED BY RBI IN THAT EVENTUALITY, AMOUNT WAS UNREALIZED, UNREALI ZED INTEREST SO TAKEN TO INCOME SHOULD BE REVERSED BY DEBITING TO P & L ACCO UNT AND CREDITING TO OVERDUE INTEREST RESERVE ACCOUNTIT WAS CLAIM OF ASSESSEE THAT DURING YEAR UNREALIZED INTEREST TAKEN TO INCOME HAD BEEN REVERS ED BY DEBITING P & L ACCOUNT AND CREDITING TO PROVISION FOR OVERDUE INTE REST ACCOUNT FOLLOWING GUIDELINES ISSUED BY RBITRIBUNAL FOUND THAT THIS ISSUE WAS HIGHLY DEBA TABLE AND IT COULD NOT BE ADJUDICATED WHILE ACTING U/S 15 4AO SHOULD HAVE MADE DISALLOWANCE ONLY WHILE FRAMING REGULAR ASSESSMENT OR REASSESSMENT, WHICH WAS MADE PRIOR TO RESORTING TO THIS RECTIFICATIONT HIS DISALLOWANCE COULD NOT BE MADE WHILE ACTING U/S 154 REASON BEING THIS WAS NOT PRIMA FACIE MISTAKE IT WAS A HIGHLY DEBATABLE ISSUE HELD, IT WAS CLEAR FROM ABOVE THAT DELETION OF RS.67,33,445 ALLOWED AS DEDUCTION U/S 36(1)(VIIA) C OULD NOT BE SAID TO HAVE BEEN MADE IN RECTIFICATION OF AN ERROR APPARENT IN ASSESSMENT ORDERCOURT HAD NO REASON TO INTERFERE WITH IMPUGNED ORDER AND, THE REFORE, DID NOT FIND THAT ANY SUBSTANTIAL QUESTION OF LAW WAS INVOLVED IN THIS CA SEAPPLICATION AND APPEAL DISMISSED (VI) IN THE CASE OF HARBANS LAL MALHOTRA & SONS (P ) LTD. VS. ITO & ANR. (1972) 83 ITR 0848 KOLHC HELD THAT RECTIFICAT IONDEBATABLE ISSUE RATE OF DEPRECIATIONMISTAKE THAT IS PROPOSED TO BE RECTIFIED IS DEPENDENT ON THE QUESTION WHETHER THE MACHINERY USED FOR PRODUCT ION OF SAFETY RAZOR BLADES CAN BE SAID TO BE PART OF 'IRON & STEEL INDUSTRY' A ND CAN COME WITHIN CATEGORY (B) MENTIONED HEREINAFTERTHIS REQUIRES INTERPRETAT ION OF THE EXPRESSION 'OTHER MACHINERY AND PLANT'THIS IS SURELY A QUESTI ON WHICH REQUIRES, FIRSTLY, AN INTERPRETATION OF THE EXPRESSION 'OTHER MACHINER Y AND PLANT' AND, SECONDLY, THE NATURE OF THE MACHINERY AND PLANT USED BY THE P ETITIONER-COMPANY AND WHETHER THEY COME WITHIN THE EXPRESSION 'OTHER MACH INERY AND PLANT' OR AS WELL AS UNDER THE ITEMS MENTIONED WITHIN THE BRACKE TSTHIS WILL REQUIRE INVESTIGATION, BOTH OF FACTS AS WELL AS INTERPRETAT ION OF LAW IT IS A MISTAKE WHICH HAS TO BE DISCOVERED AFTER INTERPRETATION OF A CERTAIN SECTION AND INVESTIGATION OF CERTAIN FACTSIN THE PREMISES THER E CANNOT BE ANY JURISDICTION FOR THE ITO TO TAKE PROCEEDINGS UNDER S. 154 IN VIE W OF THE FACTS DISCLOSED. ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 23 IN VIEW OF OUR DISCUSSIONS THAT THE ISSUE IN HAND I S DEBATABLE, THUS THE SAME CANNOT BE RECTIFIED BY INVOKING THE PROVISIONS OF SECTION154 OF THE ACT BY THE AO AND THE AO WITHOUT EXAMINING THE FACT S, NATURE OF THE BUSINESS OF THE ASSESSEE AND WITHOUT BRINGING ANY M ATERIAL IN HIS SUPPORT TO ESTABLISH THAT THE ASSESSEE WAS NOT MANUFACTURER , HAD DISALLOWED THE CLAIM OF THE ASSESSEE WHICH IS AGAINST THE PRINCIPL ES OF LAW. WE THEREFORE, ALLOW THESE GROUNDS RAISED BY THE ASSESSEE AND QUA SH THE DECISIONS OF THE LOWER AUTHORITIES ON THIS ISSUE. 5.1 THE GROUND NO. 3 OF THE ASSESSEE IS REGARDING C HARGING OF INTEREST U/S 234A, 234B AND 234C. SINCE WE HAVE QUASHED GROU ND NO. 1, THEREFORE, THIS GROUND BEING CONSEQUENTIAL IN NATUR E HAS BECOME INFRUCTUOUS. THUS THE APPEAL OF THE ASSESSEE IN ITA NO484/JP/20 19 IS ALLOWED. 6.1 NOW WE TAKE UP THE APPEAL OF THE ASSESSEE IN IT A NO. 485/JP/2019 FOR THE ASSESSMENT YEAR 2014-15 FOR ADJUDICATION. 7.1 THE GROUND NO. 1 OF THE ASSESSEE IS GENERAL IN NATURE WHICH DOES NOT REQUIRE ANY ADJUDICATION. ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 24 8.1 THE GROUND NO. 2 OF THE ASSESSEE IS REGARDING I NVOKING THE PROVISIONS OF SECTION 145(3) AND CONFIRMING THE TRA DING ADDITION OF RS. 2.00 LACS. 8.2 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MINING OF SAND STONE AND EXPORT THE PRO DUCTION OF THE MINES IN THE NAME OF M/S V.S. STONES AND ALSO MANUFACTURI NG AND TRADING OF MARBLE BLOCK. THE ASSESSEE HAS FILED HIS RETURN OF INCOME DECLARING THE TOTAL INCOME RS. 1,21,52,190/- ON 19.09.2015. DURI NG THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS DECLARED GROSS PROF IT OF RS.3,55,23,467/- GIVING G.P. RATE OF 33.35% ON THE TURNOVER OF RS.10 ,65,32,579/- AND NET PROFIT OF RS. 1,18,24,765/-GIVING THE NP RATE OF 11 .09% AS AGAINST GROSS PROFIT OF RS.5,29,08,115/- GIVING G.P. RATE OF 33.0 6% ON THE TURNOVER OF RS.16,00,18,539/- AND NET PROFIT AT RS. 1,69,16,388 /- GIVING NP RATE OF 10.57% IN LAST YEAR. THE AO ALLEGED THAT THE AUDIT OR IN AUDIT REPORT HAS MENTIONED THAT THE ASSESSEE HAS NOT MAINTAINED THE DAY TO DAY STOCK REGISTER. THE AO HAS FURTHER NOTED THAT ASSESSEE DI D NOT MAINTAIN QUANTITATIVE AND QUALITATIVE DETAILS OF STOCK. HENC E THE AO HAS ASKED TO THE ASSESSEE AS TO WHY THE BOOKS OF ACCOUNTANT MAY NOT BE REJECTED BY INVOKING THE PROVISIONS OF SEC. 145(3). IN RESPONSE THERETO, THE ASSESSEE ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 25 SUBMITTED THAT ITS PURCHASES AND SALES ARE FULLY V OUCHED AND ITS TOTAL PRODUCTION IS EXPORTED OUT OF INDIA. THE PRODUCTION IS DONE ON THE BASIS OF EXPORT ORDER. HOWEVER THE AO DID NOT FEEL SATIS FIED WITH THE REPLY AND INVOKED THE PROVISIONS OF SEC. 145(3) OF THE ACT AN D MADE THE LUMP SUM TRADING ADDITION OF RS.5,00,000/- 8.3 IN FIRST APPEAL THE LD. CIT(A) HAS CONFIRMED TH E REJECTION OF BOOKS OF ACCOUNTS MADE BY THE AO U/S 145(3). THE LD. CIT( A) HAS HELD THAT EVEN IN PAST REJECTION BOOKS WAS MADE BY THE AO U/S 145(3) AND WAS UPHELD BY CIT(A), THOUGH THE QUANTUM OF ESTIMATION WAS REDUCED. FACTS BEING SAME, REJECTION OF BOOKS OF ACCOUNT U/S 145( 3) OF THE ACT IS SUSTAINABLE AND ADDITION OF RS.5.00 IS REDUCED TO R S.2.00 LAKHS. 8.4 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE SUBMITTED THAT THE GROUND RAISED BY THE ASSESSEE IS SQUARELY COVERED BY THE DECISION HON'BLE JURISDICTIONAL HIGH COURT WHEREIN THE HON'B LE HIGH COURT IN THE CASE OF SHRI KISHAN KUMAR SARAIWALAVS CIT IN DBIT NO. 325 AND 338/2011 DATED 28-08-2017 HAS TAKEN A VIEW THAT AV ERAGE G.P./N.P. RATE OF 5 YEARS SHOULD BE TAKEN IN THE CASE OF BUSINESS. ACCORDINGLY, AS PER FACTS OF THE PRESENT CASE THE AVERAGE G.P./N.P. RAT E OF LAST FIVE YEARS COMES TO 8.97%. IN THIS RESPECT, THE COMPARATIVE CH ART OF N.P. RATE OF LAST ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 26 FIVE YEARS HAS ALREADY BEEN FILED BY THE ASSESSEE I N HIS WRITTEN SUBMISSION. IT WAS FURTHER SUBMITTED THAT DURING TH E YEAR UNDER CONSIDERATION THE ASSESSEE HAS ALREADY DECLARED VER Y HIGH N.P. RATE OF 11.09% AS AGAINST AVERAGE N.P. RATE OF 8.97% BUT TH E LD. CIT(A) HAS IGNORED THE SAID FACTS, ALTHOUGH THE SAME CHART WAS ALSO FURNISHED BEFORE HIM. IT WAS FURTHER SUBMITTED THAT EVEN THE COORDIN ATE BENCH OF ITAT, JAIPUR IN THE CASE OF ITO, BUNDI VS RAMESHWAR MEENA IN ITA NO.420/JP/2017 DATED 30-04-2019 HAD FOLLOWED THE AB OVE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT. THEREFORE, IN SU CH CIRCUMSTANCES, NO ADDITION IS REQUIRED TO BE MADE AND THE ENTIRE ADDI TION IS LIABLE TO BE DELETED. IT WAS FURTHER SUBMITTED THAT DURING THE A SSESSMENT PROCEEDING[ THE AUDITED BALANCE SHEET, PROFIT AND LOSS ACCOUNT, TRADING ACCOUNT ALONGWITH ALL THE ANNEXURE, AUDIT REPORT AND REPORT IN FORM 3CD, QUANTITY DETAILS WERE FILED BEFORE THE AO AND COMPLETE BOOK S OF ACCOUNT NAMELY CASH VOUCHERS, JOURNAL, VOUCHERS AND BILLS ETC. THE LD.AR FURTHER SUBMITTED THAT BANK STATEMENTS WERE FILED FROM TIME TO TIME. IT WAS SUBMITTED THAT SINCE COMPLETE DETAILS WERE FILED AN D THE SAME WERE REGULARLY MAINTAINED BY THE ASSESSEE AND THERE IS N O CHANGE IN THE METHOD OF ACCOUNTING AND EVEN NO DEFECT WAS FOUND BY THE A O. THUS, IT WAS ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 27 SUBMITTED THAT NO DISALLOWANCE SHOULD HAVE BEEN SUS TAINED BY REJECTING THE BOOKS OF ACCOUNT OF THE ASSESSEE. 8.5 ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF THE LOWER AUTHORITIES. 8.6 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE NOTICED THAT THE COORDINATE BENCH IN ITA NO. 420/JP/2017 (VIDE ORDER DATED 30-04-2019)FOR THE AS SESSMENT YEAR 2012-13 IN THE CASE OF ITO VS SHRI RAMESHWAR MEENA HAS ALREADY DEALT WITH THE IDENTICAL ISSUE IN PARA 8 OF ITS ORDER WHI CH IS REPRODUCED AS UNDER:- 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE VIEW THAT THE BOOKS OF ACCOUNT HAVE BEEN RIGHTLY REJECT ED BY THE ASSESSING OFFICER AS THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF ACCOUNT FOR VERIFICATION AND IN ABSENCE THEREOF, IT IS DIFFICULT FOR THE ASSESSING OFFICER TO DETERMINE WH ETHER THE TRADING RESULTS SO DECLARED BY THE ASSESSEE ARE TRU E AND CORRECT. REGARDING ESTIMATION OF PROFITS, WE FIND T HAT THE ASSESSEE HAS DECLARED BETTER NET PROFIT RATE AS COM PARED TO EARLIER YEARS AND THEREFORE, EVEN WHERE THE BOOKS O F ACCOUNT ARE REJECTED, GIVEN BETTER RESULTS DECLARED BY THE ASSESSEE AS COMPARED TO AVERAGE OF LAST FIVE YEARS, THE TRADING ADDITION SO MADE IS DIRECTED TO BE DELETED. IN THE RESULT, T HE GROUND NO. 1 OF THE REVENUES APPEAL IS ALLOWED AND THE GR OUND NO. 2 IS DISMISSED. ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 28 IN THIS CASE THE BOOKS OF ACCOUNT OF THE ASSESSEE A RE REJECTED IN SPITE OF DECLARING BETTER N.P. RATE OF LAST 05 YEARS AS COMP ARED TO AVERAGE OF LAST YEARS. WE ARE OF THE VIEW THAT NO TRADING ADDITION IS SUSTAINABLE. THEREFORE, KEEPING IN VIEW THE PRINCIPLE AS LAID DO WN BY THE ITAT COORDINATE BENCH IN ITA NO. 420/JP/2017 (SUPRA) WHI CH IN TURN HAS BASED ITS FINDINGS BY THE DECISION OF HON'BLE JURIS DICTIONAL HIGH COURT IN THECASE OF SHRI KISHAN KUMAR SARAIWALAVS CIT(SUPRA ). HENCE, WE RESTORE THE MATTER BACK TO THE FILE OF THE AO TO VE RIFY THE RESULTS DECLARED AND ATTAINED FINALITY BY THE ASSESSEE BY COMPARING THE AVERAGE RESULTS OF LAST 05 YEARS AND IN CASE IT IS FOUND BY THE AO TH AT THE ASSESSEE HAS DECLARED BETTER N.P. RATE AS COMPARED TO EARLIER YE ARS THEN IN THAT EVENTUALITY NO TRADING ADDITIONIS CALLED FOR. IT IS NEEDLESS TO MENTION THAT BEFORE PASSING THE AFRESH ORDER ON THIS ISSUE BY TH E AO, THE ASSESSEE WILL BE PROVIDED ADEQUATE OPPORTUNITY OF HEARING BY THE AO AND THE ASSESSEE WILL SUBMIT THE NECESSARY DETAILS BEFORE HIM. THUS THIS GROUND NO. 2 OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9.1 THE GROUND NO. 3 OF THE ASSESSEE IS REGARDING D ISALLOWANCE OF RS. 1,48,229/- TOWARDS INTEREST ON TDS. ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 29 9.2 BRIEF FACTS OF THIS GROUND IS THAT THE AO DURIN G THE COURSE OF ASSESSMENT PROCEEDING NOTED THAT ASSESSEE HAD DEBIT ED A SUM OF RS.1,48,229/- TOWARD THE INTEREST ON TDS WHICH IS N OT ALLOWABLE AS REVENUE EXPENDITURE.. IN FIRST APPEAL,, THE LD. C IT(A) HELD THAT THE INTEREST PAYMENT FOR DELAYED DEPOSIT OF TDS IS A NA TURE OF PENALTY AND THUS THE SAME IS NOT ALLOWABLE. 9.3 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE REITERATED THE SAME ARGUMENTS AS WERE RAISED BY HIM BEFORE THE LD. CIT(A) WHICH IS CONTAINED IN PARA 14 OF THE LD. CIT(A)S ORDER AND THE SAME IS REPRODUCED AS UNDER:- 1. THE LD. AO HAS NOTED THAT ASSESSEE HAS DEBITED A SU M OF RS.1,48,229/- TOWARD THE INTEREST ON TDS, WHICH IS NOT ALLOWABLE AS REVENUE EXPENDITURE AND THE LD. AO HAS DISALLOWED THE SAME WITHOUT GIVING ANY SHOW CAUSE NOTICE. 2. NO SHOW CAUSE GIVEN: AT THE VERY OUT SET WE MAY SUBMIT THAT THE AO MADE THE DISALLOWANCE WITHOUT PROVIDING ANY OPPORTUNITY OF BEING HEARD TO THE ASSESSEE NOR HE I SSUED ANY SHOW CAUSE NOTICE BEFORE MAKING THE DISALLOWANCE. DURING THE COURSE OF ASSESSMENT PROCEEDING THE LD. AO ONLY REQUIRED THE ASSESSEE TO FILE THE DETAILS AND REASONS OF SHORTAGE. IN RESPONSE TH ERETO THE ASSESSEE FILED DETAILS AND REASONS OF THE SAME. AFTER RECEIV ING DETAILS AND REASONS OF SHORTAGE HE DID NOT ASK THE ASSESSEE THA T THE SHORTAGE CLAIMED BY YOU IS EXCESSIVE AND WHY NOT THE SAME SH OULD BE RESTRICTED TO .25%. THE AO MUST HAVE ISSUED SHOW CA USE NOTICE IN THE INTEREST OF NATURAL JUSTICE BUT HE DID NOT DO S O AND MADE A HUGE DISALLOWANCE. IT IS VERY SETTLED LEGAL POSITION THA T A PERSON(ASSESSEE) IS ENTITLED TO OPPORTUNITY TO SHOW CAUSE AS TO WHY ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 30 NOT THE INCOME OF THE ASSESSEE IS DETERMINED IN THE MANNER AS PROPOSED BY THE ASSESSEEING OFFICER BUT IN THE INST ANT CASE NO SUCH TYPE OF OPPORTUNITY HAD BEEN PROVIDED HENCE THE ADD ITION SO MADE MAY KINDLY BE DELETED IN FULL KINDLY REFER SANGHI B ROTHERS (INDORE)LIMITED V/S INSPECTING ACIT 122 CTR 19(MP), MALIK PACKAGING V/S CIT 284 ITR (ALL), T.C.N. MENON V/S I TO 96 ITR 148(KER). SIR, THE APPELLANT HAD COMPLIED WITH ALL OF THE PRO VISIONS RELATED TO DEDUCTION AND DEPOSIT OF TDS AND FILING OF RETURNS ETC. EXCEPT IN SOME CASES, WHERE THERE WAS DELAY IN DEPO SIT OF TDS AND HE DULY DEPOSITED THE INTEREST ON SUCH DELAYS. THE LD AO DID NOT ACCEPTED THE INTEREST ON ACCOUNT OF DELAYED DEPOSIT OF TDS AND MADE ADDITION OF RS. 148229. HERE WE WISH TO STATE THAT THE INTEREST FOR THE DEL AY IN MAKING THE PAYMENT OF TDS IS COMPENSATORY IN NATURE . AS SUCH THE INTEREST ON DELAYED PAYMENT IS NOT IN THE NATURE OF PENALTY IN THE INSTANT CASE ON HAND. THE ISSUE OF DELAY IN THE PAYMENT OF SERVICE TAX IS DIRECTLY COVERED BY THE JUDGMENT OF HONBLE APEX COURT IN TH E CASE OF LACHMANDAS MATHURA VS. CIT REPORTED IN 254 ITR 799 IN FAVOUR OF ASSESSEE. THE RELEVANT EXTRACT OF THE JUDGMENT IS R EPRODUCED BELOW : THE HIGH COURT HAS PROCEEDED ON THE BASIS THAT THE INTEREST ON ARREARS OF SALES TAX IS PENAL IN NATURE AND HAS REJECTED THE CONTENTION OF THE ASSESSEE THAT IT IS COMPENSATORY IN NATURE. IN TAKING THE SAID VIEW THE HIGH COURT HAS PLACED RELI ANCE ON ITS FULL BENCH'S DECISION IN SARAYA SUGAR MILLS (P.) LTD. V. CIT [1979] 116 ITR 387 (ALL.) THE LEARNED COUNSEL APPEARING FOR TH E APPELLANT- ASSESSEE STATES THAT THE SAID JUDGMENT OF THE FULL BENCH HAS BEEN REVERSED BY THE LARGER BENCH OF THE HIGH COURT IN T RIVENI ENGG. WORKS LTD. V. CIT [1983] 144 ITR 732 (ALL.) (FB), W HEREIN IT HAS BEEN HELD THAT INTEREST ON ARREARS OF TAX IS COMPEN SATORY IN NATURE AND NOT PENAL. THIS QUESTION HAS ALSO BEEN CONSIDER ED BY THIS COURT IN CIVIL APPEAL NO. 830 OF 1979 TITLED SARAYA SUGAR MILLS (P.) LTD. V. CIT DECIDED ON 29-2-1996. IN THAT VIEW OF THE MA TTER, THE APPEAL ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 31 IS ALLOWED AND QUESTION NOS. 1 AND 2 ARE ANSWERED I N FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN VIEW OF THE ABOVE JUDGMENT, THERE REMAINS NO DOU BT THAT THE INTEREST EXPENSE ON THE DELAYED PAYMENT OF SERV ICE TAX IS ALLOWABLE DEDUCTION. THE ABOVE PRINCIPLES CAN BE APPLIED TO THE INTEREST EXPENSES LEVIED ON ACCOUNT OF DELAYED PAYMENT OF TDS AS IT R ELATES TO THE EXPENSES CLAIMED BY THE ASSESSEE WHICH ARE SUBJECT TO THE TDS PROVISIONS. THE ASSESSEE CLAIMS THE SPECIFIED EXPEN SES OF CERTAIN AMOUNT IN ITS PROFIT & LOSS ACCOUNT AND THEREAFTER THE ASSESSEE FROM THE PAYMENT TO THE PARTY DEDUCTS CERTAIN PERCENTAGE AS SPECIFIED UNDER THE ACT AS TDS AND PAYS TO THE GOVERNMENT EXC HEQUER. THE AMOUNT OF TDS REPRESENTS THE AMOUNT OF INCOME TAX O F THE PARTY ON WHOSE BEHALF THE PAYMENT WAS DEDUCTED & PAID TO THE GOVERNMENT EXCHEQUER. THUS THE TDS AMOUNT DOES NOT REPRESENT T HE TAX OF THE ASSESSEE BUT IT IS THE TAX OF THE PARTY WHICH HAS B EEN PAID BY THE ASSESSEE. THUS ANY DELAY IN THE PAYMENT OF TDS BY T HE ASSESSEE CANNOT BE LINKED TO THE INCOME TAX OF THE ASSESSEE. IT WAS HELD IN THE MATTER OF DCIT VS NARAYANI ISPAT PVT LTD. BY ITAT KOLKATA IN ITA NO. 2127/KOL/2014 THAT WE H OLD THAT THE ASSESSING OFFICER IN THE INSTANT CASE HAS WRONGLY A PPLIED THE PRINCIPLE LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF BHARAT COMMERCE INDUSTRIES LTD.(SUPRA). WE ALSO FIN D THAT THE HON'BLE SUPREME COURT IN THE CASE OF LACHMANDAS MAT HURA (SUPRA) HAS ALLOWED THE DEDUCTION ON ACCOUNT OF INT EREST ON LATE DEPOSIT OF SALES TAX U/S 37(1) OF THE ACT. IN VIEW OF THE ABOVE, WE CONCLUDE THAT THE INTEREST EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF DELAYED DEPOSIT OF SERVICE TAX AS WELL A S TDS LIABILITY ARE ALLOWABLE EXPENSES U/S 37(1) OF THE ACT. IN THI S VIEW OF THE MATTER, WE FIND NO REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) AND WE UPHOLD THE SAME. HENCE, THIS GROUND OF REVEN UE IS DISMISSED. IN VIEW OF THE ABOVE, WE REQUEST YOUR HONOUR TO ALL OW THE PAYMENT OF INTEREST ON DELAYED DEPOSIT OF TDS TO TH E TUNE OF RS. 148229/-. ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 32 9.4 ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF THE LOWER AUTHORITIES. 9.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE ARE OF THE VIEW THAT THE IN TEREST PAYMENT FOR DELAYED DEPOSIT OF TDS IS IN FACT IN THE NATURE OF PENALTY AND THE SAME IS NOT FOUND ALLOWABLE. THE LEGISLATURE EXPECTS FROM T HE ASSESSEE TO ADHERE THE VARIOUS LAWS OF LAND AND IN CASE OF ANY VIOLATI ON OF SAME AND FINANCIAL CONSEQUENCES THEREOF CANNOT BE ALLOWED IN THE AMBIT OF SECTION 37 OF THE ACT. THE CASE LAWS CITED BY THE LD.AR OF THE ASSESS EE ARE NOT APPLICABLE IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE OF THE ASSESSEE. IT IS AN ADMITTED FACT THAT DISALLOWANCE/ ADDITION MADE BY T HE AO ON ACCOUNT OF PAYMENT OF INTEREST ON DELAYED DEPOSIT OF TDS IS PE NAL IN NATURE. THE LD.AR OF THE ASSESSEE RELIED ON THE DECISION OF HON 'BLE SUPREME COURT IN THE CASE OF BHARAT COMMERCE INDUSTRIES LTD. VS CIT (1998) 230 ITR 733 WHICH DOES NOT FIND FORCE IN THIS GROUND OF THE ASS ESSEE. HENCE, THE GROUND NO. 3 OF THE ASSESSEE IS DISMISSED. ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 33 10.1 THE GROUND NO. 4 OF THE ASSESSEE IS REGARDING DISALLOWANCE OF RS15,97,572/- U/S 40(A)(IA) OF THE ACT. 10.2 IN THIS CASE, THE AO NOTED THAT THE ASSESSEE P AID INTEREST OF RS. 15,75,572/- TO M/S. SREI EQUIPMENT FINANCE LTD. AD RS. 21,944/- TO M/S. AU FINANCE ON WHICH NO TDS WAS DEDUCTED. FOR WANT O F JUSTIFICATION BY THE ASSESSEE, THE DISALLOWANCE WAS MADE BY THE AO O N ACCOUNT OF NON- DEDUCTION OF TDS ON TOTAL AMOUNT OF INTEREST PAID O F RS. 15,97,572/- WHICH WAS CONFIRMED BY THE LD. CIT(A) IN FIRST APPE AL BEFORE HIM. 10.3 DURING THE COURSE OF HEARING, THE LD.AR OF THE ASSESSEE REITERATED THE SAME ARGUMENTS AS WERE RAISED BEFORE THE LD. CI T(A) WHICH IS CONTAINED IN PARA 17 AND THE SAME IS REPRODUCED AS UNDER:- 1. PAYEE ALREADY PAID TAX ON PAYMENT MADE BY ASSESSEE: IT IS FURTHER SUBMITTED THAT THE LD. AO HAS NOT DISPUTED THAT THE PAYEES HAD ALREADY CONSIDERED AN D TAKEN INTO ACCOUNT THE INTEREST INCOME CHARGED FROM THE A SSESSEE. THE PAYEE HAS DULY INCLUDED THE SAME IN ITS INCOME AND ALSO PAID TAX THEREUPON. KINDLY REF. CERTIFICATES RECEIV ED FROM THEM ATTACHED HEREWITH. ONCE THE ENTIRE TAX PAYABLE ON SUCH INCOME (SUBJECTED TO TDS), HAS ALREADY BEEN ADMITTE DLY PAID, EVEN IF THERE IS NO TDS MADE BY THE APPELLANT PAYER, THERE CANNOT BE ANY DISALLOWANCE U/S 40(A)(IA). AND IN THE ACT ALSO THERE IS AN AMENDMENT OF SEC. 40(A)(IA) AND U/S 201(1) IN THE FINANCE ACT 2012 WH ICH PROVIDES SECOND PROVISO TO SECTION 40 (A)( IA ), INTRODUCED WITH EFFECT FROM 1ST APRIL 2013, PROVIDES, THAT ' W HERE AN ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 34 ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF T HE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEF AULT UNDER THE FIRST PROVISO TO SUB-SECTION (1) OF SECTI ON 201, THEN, FOR THE PURPOSE OF THIS SUB-CLAUSE, IT SHALL BE DEE MED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESID ENT PAYEE REFERRED TO IN THE SA ID PROVISO'. A ND AFTER THIS AMENDMENT THE HONBLE IATA AGRA BENCH IN THE CASE OF RAJEEV KUMAR AGRAWAL V/S ADD. CIT 165 TTJ 228(AGRA) HELD THAT SECOND PROVISO TO SECTION 40 (A)( IA ), INTRODUCED WITH EFFECT FROM 1ST APRIL 2013, PROVIDES, THAT ' WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVI SIONS OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB- SECTION (1) OF SECTION 201, THEN, FOR THE PURPOSE OF THIS SUB-C LAUSE, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYEE REFERRED TO IN THE SA ID PROV ISO'. IN OTHER WORDS, AS LONG AS THE ASSESSEE CANNOT BE TREA TED AS AN ASSESSEE IN DEFAULT, THE DISALLOWANCE UNDER SECTION 40 (A)( IA ) CANNOT COME INTO PLAY EITHER. TO UNDERSTAND THE EFF ECT OF THIS PROVISO, IT IS USEFUL TO REFER TO FIRST PROVISO TO SECTION 201(1), WHICH IS ALSO INTRODUCED BY THE FINANCE ACT 2012AND EFFECTIVE1ST JULY 2012, AND WHICH PROVIDES THAT 'AN Y PERSON, INCLUDING THE PRINCIPAL OFFICER OF A COMPANY, WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDAN CE WITH THE PROVISIONS OF THIS CHAPTER ON THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT O F SUCH TAX IF SUCH RESIDENT-(I)HAS FURNISHED HIS RETURN OF INC OME UNDER SECTION 139; (II) HAS TAKEN INTO ACCOUNT SUCH SUM F OR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND(III) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN S UCH RETURN OF INCOME, AND THE PERSON FURNISHES A CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN SUCH FORM AS MAY BE PRESCRIBED.' THE UNAMBIGUOUS UNDERLYING PRINCIPLE S EEMS TO ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 35 BE THAT IN THE SITUATIONS IN WHICH THE ASSESSEES T AX WITHHOLDING LAPSE HAVE NOT RESULTED IN ANY LOSS TO THE EXCHEQUER, AND THIS FACT CAN BE REASONABLY DEMONSTR ATED, THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAUL T. THE BIGGER PICTURE AS IT EMERGES AFTER INSERTION OF SECOND PROVISO TO SECTION 40 (A)( IA ), IT IS BEYOND DOUBT THAT THE UNDERLYING OBJECTIVE OF SECTION 40 (A)( IA ) WAS TO DISALLOWDEDUCTION IN RESPECT OF EXPENDITURE IN A SITUATION IN WHICH THE INCOME EMBEDDED IN RELATED PAYMENTS REMAI NS UNTAXED DUE TO NON-DEDUCTION OF TAX AT SOURCE BY TH E ASSESSEE. IN OTHER WORDS, DEDUCTIBILITY OF EXPENDIT URE IS MADE CONTINGENT UPON THE INCOME, IF ANY, EMBEDDED I N SUCH EXPENDITURE BEING BROUGHT TO TAX, IF APPLICABLE. SECTION 40 (A)( IA ) CANNOT BE SEEN AS INTENDED TO BE A PENAL PROVISION TO PUNISH THE LAPSES OF NON-DEDUCTI ON OF TAX AT SOURCE FROM PAYMENTS FOR EXPENDITURE- PARTICULAR LY WHEN THE RECIPIENTS HAVE TAKEN INTO ACCOUNT INCOME EMBED DED IN THESE PAYMENTS, PAID DUE TAXES THEREON AND FILED IN COME TAX RETURNS IN ACCORDANCE WITH THE LAW. ON A CONCEPTUAL NOTE, PRIMARY JUSTIFICATION FOR SUCH A DISALLOWANCE IS THAT SUCH A DENIAL OF DEDUCTION IS TO COMPENSATE FOR THE LOSS OF REVENUE BY CORRESPONDING INCOME NOT BEING TAKEN INTO ACCOUNT IN COMPUTATION OF TAXA BLE INCOME IN THE HANDS OF THE RECIPIENTS OF THE PAYMEN TS. SUCH A POLICY MOTIVATED DEDUCTION RESTRICTIONS SHOULD, THE REFORE, NOT COME INTO PLAY WHEN AN ASSESSEE IS ABLE TO ESTABLIS H THAT THERE IS NO ACTUAL LOSS OF REVENUE. THIS DISALLOWAN CE DOES DEINCENTIVIZE NOT DEDUCTING TAX AT SOURCE, WHEN SUC H TAX DEDUCTIONS ARE DUE, BUT, SO FAR AS THE LEGAL FRAMEW ORK IS CONCERNED, THIS PROVISION IS NOT FOR THE PURPOSE OF PENALIZING FOR THE TAX DEDUCTION AT SOURCE LAPSES. THE SCHEME OF SECTION 40 (A)( IA ), AS ITAT SEE IT, IS AIMED AT ENSURING THAT AN EXPENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION IN T HE HANDS OF AN ASSESSEE IN A SITUATION IN WHICH INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAINED UNTAXED DUE TO TAX WITHHOLDING LAPSES BY THE ASSESSEE. IT IS NOT, IN I TATS ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 36 CONSIDERED VIEW, A PENALTY FOR TAX WITHHOLDING LAPSE BUT IT IS A SORT OF COMPENSATORY DEDUCTION RESTRICTION FOR AN INCOME GOING UNTAXED DUE TO TAX WITHHOLDING LAPSE. THE PEN ALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEPARATELY PROVIDED FOR IN SECTION 271 C, AND, SECTION 40 (A)( IA ) DOES NOT ADD TO THE SAME. ACCORDINGLY, ITAT HOLD THAT THE INSERTION OF SECOND PROVISO TO SECTION 40 (A)( IA ) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM 1ST APR IL, 2005, BEING THE DATE FROM WHICH SUB CLAUSE ( IA ) OF SECTION 40 (A) WAS INSERTED BY THE FINANCE (NO. 2) ACT, 2004. FIT AND PROPER TO REMIT THE MATTER TO THE FILE OF T HE AO FOR FRESH ADJUDICATION IN THE LIGHT OF ITATS ABOVE OBSERVATIONS AND AFTER CARRYING OUT NECESSARY VERIF ICATIONS REGARDING RELATED PAYMENTS HAVING BEEN TAKEN INTO A CCOUNT BY THE RECIPIENTS IN THE ABOVE CASE HAS BEEN AFFIRMED BY THE HONBLE DELH I HIGH COURT IN THE CASE OF CIT V/S ANSAL LAND MARK TOWENSHIP (P) LTD DT. 279 CTR 384(DEL) 28.08.2015 COPY IS ENCLOSED. HENCE THE ISSUE NOW TILL IS SETTLED. IN THE PRESENT CASE THE ASSESSEE HAD SUBMITTED THE CERTIFICATE FROM THE PAYEE AND THE LD. AO HAS NOT D ISPUTED THE SAME. 1.2 IT IS SUBMITTED THAT THE UNDERLYING IDEA AND BASIC CONCEPT OF TDS WAS TO ENSURE AN EARLY AND FAST RECO VERY OF THE TAXES. IT IS DESIGNED SO THAT THE PAYER ITSELF SHOULD MAKE A DEDUCTION OF TAX AT SOURCE ON THE INCOME OF THE PAY EE. THUS, IT WAS AN ADVANCE COLLECTION AND RECOVERY OF THE TA X FOR ON AND BEHALF OF THE PAYEE, IN WHOSE HAND, AFTER INCLU DING THE SUBJECTED AMOUNT OF INCOME, THERE IS GOING TO BE A LIABILITY OF TAX THEREUPON. IF EITHER THERE IS NO LIABILITY T O PAY TAX OR BECAUSE OF THE TAX ALREADY STOOD PAID BY THE PAYEE, THERE IS NO FURTHER LIABILITY OF THE PAYER. THE VERY PURPOSE OF MAKING DEDUCTION OF TAX AT SOURCE AND DEPOSITING WITH THE GOVT., STANDS FULFILLED. IT IS UNDER THIS BACKGROUND, THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN COCA COLA ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 37 BEVERAGE PVT. LTD. V/S CIT 293 ITR 226 FOLLOWED IN CHILDRENS EDUCATION SOCIETY V/S DCIT & ANR 34 DTR 145(KER)- HAS HELD THAT NO PENALTY U/S 271C OR INTEREST U/S 201 CAN BE CHARGED IN SUCH CASES. THE PRINCIPLE SO PROPOUNDED EQUALLY AND SQUARELY APPLIES ON THE FACT S OF THE PRESENT CASE ALSO. HENCE THE ENTIRE DISALLOWANCE BE DELETED IN FULL. ALSO REFER CIT V/S INTEL TECH INDIA(P) LTD 55 DTR 173(KAR) CIT V/S SONY INDIA PVT LTD 17 TAXMAN .COM 126 (KAR). AND IN SEC. 201 AN AMENDMENT HAS ALSO BEEN MADE BY THE FINANCE ACT. 2012 ON THE BASIS OF DECISION OF HINDUSTAN COCA COLA BEVERAGE PVT. LTD. V/S CIT(SUPRA), WHEREIN IT HAS BEEN PROVIDED THAT THE ASSESSEE SHALL NOT BE D EEMED TO BE DEFAULT IN RESPECT OF SUCH TAX IF SUCH PERSON (I )HAS FURNISHED HIS RETURN OF INCOME U/S 139, (II) HAS TA KEN INTO ACCOUNT SUCH SUM FOR COMPUTING INCOME IN SUCH RETUR N OF INCOME AND, (III) HAS PAID TAX DUE ON THE INCOME DE CLARED BY HIM IN SUCH RETURN OF INCOME. THE ABOVE MATTER IS ALSO DIRECTLY COVERED BY THE DECISION OF THIS HONBLE TRIBUNAL IN THE CASE OF SH. RAHUL SETHI V/S ITO IN ITA NO. 175/JODH/2012 DT. 07.06.20 13 AND FOLLOWED IN THE CASE OF ACIT V/S SH. RAVINDRA KUMAR YADAV ITA NO. 341/JODH/12 DT. 10.01.2014, WHEREIN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL A ND SAME 2. IT MAY ALSO BE POINTED OUT THAT SECOND PROVISO TO SECTION 40(A)(IA) INSERTED BY FA, 2012 W.E.F.01.04. 2013 HAS PROVIDED THAT WHERE AN ASSESSEE FAILS TO DEDUCT TAX ON THE SUM PAID TO THE RESIDENT BUT SUCH RESIDENT PAYEE HA S FURNISHED THE RETURN, TAKEN INTO ACCOUNT SUCH SUM F OR COMPUTING INCOME AND HAS PAID THE TAX DUE ON THE IN COME DECLARED BY HIM THEN IT WILL BE DEEMED THAT ASSESSE E HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE O F FURNISHING OF RETURN BY THE RESIDENT PAYEE. ALL THE FINANCE COMPANIES TO WHICH ASSESSEE HAVE PAID INTEREST ARE LARGE COMPANY AND ASSESSED TO TAX. THEREFORE, THE PRESUMP TION IS THAT THESE COMPANIES HAVE INCLUDED THE INTEREST PAI D BY THE ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 38 ASSESSEE TO THEM IN THEIR INCOME AND PAID TAX THERE ON. THE DELHI HIGH COURT IN CASE OF CIT VS. TRANS BHARAT AVIATION PVT. LTD. 320 ITR 671 HAS HELD THAT SINCE DEDUCTEE IS A GOVERNMENT UNDERTAKING, THE TAXES MAY BE PRESUMED TO HAVE BEEN PAID LASTLY BY THE DUE DATE O F FILING OF THE RETURN OF INCOME AND, THEREFORE, THE LIABILITY OF THE ASSESSEE TO PAY INTEREST ON THE AMOUNT WHICH WAS TO BE DEDUCTED AS TDS ENDS WITH THE DUE DATE OF FILING OF THE RETURN BY THE DEDUCTEE. THEREFORE, CONSIDERING THE ABOVE AMENDMENT WHICH IS INTRODUCED TO REMOVE UNINTENDED HARDSHIP, THE DEPARTMENT MAY BE DIRECTED TO VERIFY THIS FACT AND WHERE FINANCE COMPANIES HAS PAID TAX ON SUCH IN TEREST, NO DISALLOWANCE U/S 40 (A)(IA) BE MADE IN THE HANDS OF THE ASSESSEE. IT IS A SETTLED LAW THAT SECOND PROVISO T O SECTION 40 (A)(IA) INSERTED W.E.F.01.04.2013 HAS RETROSPECTIVE EFFECT AS HELD IN BANGALORE BENCH IN CASE OF SH. G. SHANKAR VS. ACIT IN ITA NO. 1832/BANG/2013 DT. 10.10.2014, AGRA BENCH IN CASE OF RAJEEV KUMAR AGARWAL VS. ACIT (2014) 34 ITR (TRIB.) 479, DELHI BENCH IN CASE OF I TO VS. DR. JAIDEEP KUMAR SHARMA (2014) 34 ITR (TRIB.) 565, BANGALORE BENCH IN CASE OF DCIT VS. ANANDA MARAKALA (2014) 150 ITD 323 AS THE AMENDMENT WAS MADE TO REMOVE THE UNDUE HARDSHIP. 3. BOOKS REJECTED NO DISALLOWANCE U/S 40(A)(IA): FURTHER SEC. 145(3) HAS ALREADY BEEN INVOKED AND TR ADING ADDITION HAS ALREADY BEEN MADE HENCE NO FURTHER DISALLOWANCE CAN BE MADE U/S 40(A)(IA). FURTHER ALTERNATIVELY IT IS SUBMITTED THAT AS IN TH E ABOVE CASES THE BOOKS OF ACCOUNTS HAS BEEN REJECTED BY THE LD. AO BY INVOKING THE PROVISIONS OF SEC. 145(3) AN D AFTER REJECTION OF BOOKS OF ACCOUNTS HE HAS ESTIMATED THE TRADING INCOME DUE TO DEFECTS FOUNDS IN THE BOOKS OF ACCOUN TS. WHEN THE BOOKS OF ACCOUNTS HAS BEEN REJECTED AND PROVISIONS OF S. 145(3) OF THE ACT ARE INVOKED, NO SUCH SEPARATE ADDITIONS CAN BE MADE IN RESPECTS OF DISA LLOWANCE OF INTEREST EXPENSES, UNSECURED LOANS OR CREDITORS , TRADE CREDITORS ON ACCOUNT OF EXP. ETC. AND THE BEST COUR SE OF IS TO ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 39 ESTIMATE THE FAIR PROFIT BY TAKING INTO CONSIDERATI ON VARIOUS FACTORS. IN ITO V/S NARDEV KUMAR GUPTA 35 CCH 203(JP)(2013) IT HAS BEEN HELD THAT WHEN INCOME OF THE ASSESSEE WAS COMPUTED BY APPLYING THE GROSS PROFIT RATE, THERE WAS NO NEED TO LOOK INTO THE PROVISION OF SEC TION 40A(3) OF THE ACT. THE CIT(A) HAD RIGHTLY DELETED S EPARATE ADDITION MADE BY THE AO U/S 40A(3) OF THE ACT. CIT VS. G.K. CONTRACTOR,19 DTR 305; CIT VS. PRAVINAND CO. 274 ITR 534; CHOUDHARY BROS IN ITA NO. 1177/JP/2010 VIDE ORDER DATED 31-05-2010; CIT VS. BANWARILAL BANSHIDHAR, 229 ITR 229(RAJ.), RELIED ON. IN THE CASE OF ITO V/S SADHWANI BROTHERS HELD THAT AO HAVING REJECTED THE BOOKS OF ACCOUNT AND APPLIED THE NET PROFIT RATE FOR THE PURPOSE COMPUTING THE INCOME, N O DISALLOWANCE CAN BE MADE U/S 40A(3). IN THE CASE OF ITO V/S MR. NARESH H. SHAH ITA NO. 3187/M/2010 DT. 15.07.2011 IN THIS CASE THE AO AFTER REJECTING THE BOOKS OF ACCOUNTS HE ESTIMATED THE PR OFIT BY APPLYING THE N.P. RATE, THERE APART HE HAS ALSO MAD E ADDITION INTER ALIA ON ACCOUNT OF UNSECURED LOANS U/S 68, ON ACCOUNT OF NON-DEDUCTION OF TDS U/S 40(A)(IA) AND ON ACCOUNT O F DISALLOWANCE OF DEPRECIATION AND STAMP DUTY ALSO REDUCED THE CLOSING WORK-IN-PROGRESS, WHILE DECIDING THE AP PEAL THE LD. CIT(A) AND THE HONBLE ITAT HELD THAT WHEN THE B OOKS OF ACCOUNTS ARE REJECTED THE BY THE AO AND THE INCOME OF THE ASSESSEE IS DETERMINED ON ESTIMATED BASIS NO FURTHE R ADDITION CAN BE MADE TO THE INCOME SO ESTIMATED BY RELYING O N THE SAME REJECTED BOOKS OF ACCOUNTS. ALSO REFER CIT V/S PURSHOTTAMLAL TAMRAKAR UCHEHRA 270 ITR 314/84(MP). THUS WHEN THE BOOKS OF ACCOUNTS HAS BEEN REJECTED AND PROVISIONS OF S. 145(3) OF THE ACT ARE INVOKED, NO SUCH SEPARATE ADDITIONS CAN BE MADE IN RESPECTS OF DEPOS ITS IN BANKS U/S 68/69, DISALLOWANCE OF INTEREST EXPENSES, UNSECURED LOANS OR CREDITORS, TRADE CREDITORS ON AC COUNT OF ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 40 EXP. ETC. AND THE BEST COURSE OF IS TO ESTIMATE THE FAIR PROFIT BY TAKING INTO CONSIDERATION VARIOUS FACTORS. ALTERNATIVELY, WITHOUT PREJUDICE TO THE ABOVE SUBMISSION WE HAVE TO FURTHER SUBMIT IN THIS RESPECT THAT, WHERE INCOME IS ASSESSED AT N.P. RATE BY REJECTING THE BOOKS OF THE ASSESSEE U/S 145(3) PROVISO, NO DISALLOWANCE AND ADDITION CAN BE MADE SEPARATELY FOR DETERMINATION O F INCOME. KINDLY REFER CIT V/S BANWARILAL BANSIDHAR 229 ITR 229 (ALL) , GUPTA CONSTRUCTION CO. V/S ACIT 84 TTJ (ALL) 46 , ACIT VS. KPS CONSTRUCTION ITA NO. 657/JU/2007 ITAT, JODHPUR . WE FURTHER RELY ON THE JUDGMENT IN THE CASE OF TEJA CONSTRUCTION V/S ACIT (2010)36 DTR 220 (ITAT), HYDERABAD A BENCH , WHERE IN IT IS HELD THAT THE BOOKS OF ACCOUNTS OF THE APP ELLANT WAS NOT RELIED, AND REJECTED BY THE AO. BASED ON THE RE LIANCE ON THE SAME BOOKS, FOR THE PURPOSE OF INVOKING THE PRO VISION S OF SECTION 40(A)(IA) IS IMPROPER. THE ESTIMATION O F INCOME TAKES CARE OF THE IRREGULARITIES COMMITTED BY THE A PPELLANT. FURTHER ADDITION BY INVOKING SECTION 40(A)(IA) AMOU NTS TO PUNISHING THE APPELLANT FOR A SAME OFFENCE ON DOUBL E OCCASIONS, WHICH IS NOT PERMITTED BY LAW, AS STIPUL ATED IN THE DECISION GIVEN IN THE CASE OF DEVI PRASAD VISHWANATH PRASAD (1969) 72 ITR 194(SC) . FURTHER, RECENTLY IN THE CASE OF ACIT V/S M/S. CHOUDHARY & BROTHERS, JAIPUR IN ITA NO.879/JP/2011 THE TRIBUNAL HAS OBSERVED THAT BY IMPLICATION, BOOKS OF ACCOUNTS WERE REJECTED BY THE AO AND UPHELD BY THE CIT(A). RELYING ON THE JUDGMENT IN TH E CASE OF BANWARILAL BANSIDHAR REPORTED AT (1998) 229 ITR 229 IT HAS BEEN HELD THAT IF THE PROFIT OF THE ASSESSEE HAS BEEN ESTIMATED BY APPLYING NET PROFIT RATE THAN NO SPATE DISALLOWANCE CAN BE MADE ON ACCOUNT OF ANY EXPENDIT URE CLAIMED UNDER PROFIT AND LOSS ACCOUNT. AFTER REJEC TION OF BOOKS OF ACCOUNTS UNDER SECTION 145(3) OF THE ACT, THE ONLY OPTION LEFT WITH THE AO WAS TO FRAME BEST JUDGMENT UNDER SECTION 144 OF THE ACT. IT IS FURTHER HELD THAT WH ERE INCOME OF APPELLANT WAS COMPUTED WHILE APPLYING THE GROSS PROFIT RATE THERE WAS NO NEED TO LOOK INTO THE OTHER PROVI SIONS RELATED TO ALLOWABILITY OF EXPENSES. HENCE, CONSIDE RING THE ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 41 IMPLICATION OF REJECTION OF BOOKS, WE REQUEST YOUR GOOD SELF TO PLEASE DELETE THE SAME IN THE INTEREST OF EQUITY AND JUSTICE. HENCE IN VIEW OF THE ABOVE FACTS SUBMISSIONS AND LEGAL POSITION THE DISALLOWANCE SO MADE MAY KINDLY BE DELETED IN FULL. 10.4 ON THE OTHER HAND, THE LD. DR SUPPORTED THE OR DERS OF THE LOWER AUTHORITIES. 10.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. FROM THE RECORDS, WE NOTICED T HAT THE ADDITION U/S 40(A)(IA) OF THE ACT WAS UPHELD BY THE LD. CIT(A) B Y HOLDING THAT ALTHOUGH THE ASSESSEE HAD SUBMITTED THE CERTIFICATE FORM AUDITOR WHICH INDICATED A PAYMENT OF RS. 16,05,842/- ON WHICH TDS WAS TO BE DEDUCTED YET NO DEDUCTED. HOWEVER, IT WAS FOUND BY THE LD. C IT(A) THAT THERE IS A MISMATCH AS ACCORDING TO THE LD.AR THE PAYMENT OF R S. 15,75,572/- WAS MADE BY THE ASSESSEE WHILE THE AUDITORS CERTIFICAT E INDICATES THAT A PAYMENT OF RS. 16,05,842/- WAS MADE. HOWEVER, AFTER SCRUTINIZING THE RECORDS, WE FOUND THAT BECAUSE OF MEAGER DIFFERENCE THE ENTIRE CLAIM OF THE ASSESSEE COULD NOT HAVE BEEN DENIED. WE NOTICED THAT THE RECIPIENT HAS SHOWN MORE INCOME THAN PAID BY THE ASSESSEE. THUS I N THIS WAY, THERE ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 42 WAS NO LOSS TO THE REVENUE AND SIMULTANEOUSLY IT IS ALSO NOT IN DISPUTE THAT PAYEE HAS PAID THE TAX ON THE ENTIRE INCOME. A S PER THE LD.AR, THE PAYEE HAS DULY INCLUDED THE INTEREST INCOME IN ITS INCOME AND ALSO PAID TAX THEREON. IN THIS RESPECT, THE LD.AR OF THE ASSE SSEE HAS DRAWN OUR ATTENTION TO THE CERTIFICATE IN ORDER TO DEMONSTRAT E THAT ONCE ENTIRE TAX PAYABLE ON SUCH INCOME (SUBJECT TO TDS) HAS ALREADY BEEN PAID, EVEN IF THERE IS NO TDS MADE BY THE ASSESSEE AND THUS THERE CANNOT BE ANY DISALLOWANCE U/S 40(A)(IA) OF THE ACT. WE HAVE ALSO GONE THROUGH THE AMENDMENT OF SECTION 40(A)(IA) AND U/S 201(1) IN FI NANCNE ACT, 2012 WHICH PROVIDES SECOND PROVISO TO SECTION 40(A)(IA) OF THE ACT, INTRODUCED W.E.F. IST APRIL 2013 WHICH PROVIDES THA T ' WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B ON ANY SUCH SUM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO S UB-SECTION (1) OF SECTION 201, THEN, FOR THE PURPOSE OF THIS SUB-CLAUSE, IT S HALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE RESIDENT PAYE E REFERRED TO IN THE SAID PROVISO'. WE HAVE ALSO NOTICED THAT AFTER THIS AME NDMENT THE ITAT,AGRA BENCH IN THE CASE OF RAJEEV KUMAR AGARWAL VS ADDL. CIT , 165 TTH ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 43 228( AGRA) HELD THAT THAT SECOND PROVISO TO SECTI ON 40 (A)( IA ), INTRODUCED WITH EFFECT FROM 1ST APRIL 2013, PROVIDE S, THAT ' WHERE AN ASSESSEE FAILS TO DEDUCT THE WHOLE OR ANY PART OF T HE TAX IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-B ON ANY SUCH S UM BUT IS NOT DEEMED TO BE AN ASSESSEE IN DEFAULT UNDER THE FIRST PROVISO TO SUB-SECTION (1) OF SECTION 201, THEN, FOR THE PURPOSE OF THIS S UB-CLAUSE, IT SHALL BE DEEMED THAT THE ASSESSEE HAS DEDUCTED AND PAID THE TAX ON SUCH SUM ON THE DATE OF FURNISHING OF RETURN OF INCOME BY THE R ESIDENT PAYEE REFERRED TO IN THE SA ID PROVISO'. IN OTHER WORDS, AS LONG A S THE ASSESSEE CANNOT BE TREATED AS AN ASSESSEE IN DEFAULT, THE DISALLOWANCE UNDER SECTION 40 (A)( IA ) CANNOT COME INTO PLAY EITHER. TO UNDERSTAND THE EFF ECT OF THIS PROVISO, IT IS USEFUL TO REFER TO FIRST PROVISO TO SECTION 201(1), WHICH IS ALSO INTRODUCED BY THE FINANCE ACT 2012AND EFFECTIVE1ST JULY 2012, AND WHICH PROVIDES THAT 'ANY PERSON, INCLUDING THE PRINCIPAL OFFICER O F A COMPANY, WHO FAILS TO DEDUCT THE WHOLE OR ANY PART OF THE TAX IN ACCOR DANCE WITH THE PROVISIONS OF THIS CHAPTER ON THE SUM PAID TO A RESIDENT OR ON THE SUM CREDITED TO THE ACCOUNT OF A RESIDENT SHALL NOT BE DEEMED TO BE AN ASSESSEE IN DEFAULT IN RESPECT OF SUCH TAX IF SUCH RESIDENT-(I)HAS FURNISHED HIS RETURN OF INCOME UNDER SECTION 139; (II) HAS TA KEN INTO ACCOUNT SUCH ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 44 SUM FOR COMPUTING INCOME IN SUCH RETURN OF INCOME; AND(III) HAS PAID THE TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETUR N OF INCOME, AND THE PERSON FURNISHES A CERTIFICATE TO THIS EFFECT FROM AN ACCOUNTANT IN S UCH FORM AS MAY BE PRESCRIBED.' THE UNAMBIGUOUS UNDERLY ING PRINCIPLE SEEMS TO BE THAT IN THE SITUATIONS IN WHICH THE ASS ESSEES TAX WITHHOLDING LAPSE HAVE NOT RESULTED IN ANY LOSS TO THE EXCHEQUE R, AND THIS FACT CAN BE REASONABLY DEMONSTRATED, THE ASSESSEE CANNOT BE TRE ATED AS AN ASSESSEE IN DEFAULT.THE BIGGER PICTURE AS IT EMERGES AFTER I NSERTION OF SECOND PROVISO TO SECTION 40 (A)( IA ), IT IS BEYOND DOUBT THAT THE UNDERLYING OBJECTIVE OF SECTION 40 (A)( IA ) WAS TO DISALLOWDEDUCTION IN RESPECT OF EXPENDITURE IN A SITUATION IN WHICH THE INCOME EMBEDDED IN RELATED PAYMENTS REMAINS UNTAXED DUE TO NON-DEDUCTION OF TA X AT SOURCE BY THE ASSESSEE. IN OTHER WORDS, DEDUCTIBILITY OF EXPENDIT URE IS MADE CONTINGENT UPON THE INCOME, IF ANY, EMBEDDED IN SUCH EXPENDITU RE BEING BROUGHT TO TAX, IF APPLICABLE.SECTION 40 (A)( IA ) CANNOT BE SEEN AS INTENDED TO BE A PENAL PROVISION TO PUNISH THE LAPSES OF NON-DEDUCTI ON OF TAX AT SOURCE FROM PAYMENTS FOR EXPENDITURE- PARTICULARLY WHEN TH E RECIPIENTS HAVE TAKEN INTO ACCOUNT INCOME EMBEDDED IN THESE PAYMENT S, PAID DUE TAXES THEREON AND FILED INCOME TAX RETURNS IN ACCORDANCE WITH THE LAW.ON A ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 45 CONCEPTUAL NOTE, PRIMARY JUSTIFICATION FOR SUCH A DISALLOWANCE IS THAT SUCH A DENIAL OF DEDUCTION IS TO COMPENSATE FOR THE LOSS OF REVENUE BY CORRESPONDING INCOME NOT BEING TAKEN INTO ACCOUNT I N COMPUTATION OF TAXABLE INCOME IN THE HANDS OF THE RECIPIENTS OF TH E PAYMENTS. SUCH A POLICY MOTIVATED DEDUCTION RESTRICTIONS SHOULD, THE REFORE, NOT COME INTO PLAY WHEN AN ASSESSEE IS ABLE TO ESTABLISH THAT THE RE IS NO ACTUAL LOSS OF REVENUE. THIS DISALLOWANCE DOES DEINCENTIVIZE NOT D EDUCTING TAX AT SOURCE, WHEN SUCH TAX DEDUCTIONS ARE DUE, BUT, SO F AR AS THE LEGAL FRAMEWORK IS CONCERNED, THIS PROVISION IS NOT FOR T HE PURPOSE OF PENALIZING FOR THE TAX DEDUCTION AT SOURCE LAPSES. THE SCHEME OF SECTION 40 (A)( IA ), AS ITAT SEE IT, IS AIMED AT ENSURING THAT AN EXP ENDITURE SHOULD NOT BE ALLOWED AS DEDUCTION IN THE HANDS OF AN ASSE SSEE IN A SITUATION IN WHICH INCOME EMBEDDED IN SUCH EXPENDITURE HAS REMAI NED UNTAXED DUE TO TAX WITHHOLDING LAPSES BY THE ASSESSEE. IT IS NO T, IN ITATS CONSIDERED VIEW, A PENALTY FOR TAX WITHHOLDING LAPSE BUT IT IS A SORT OF COMPENSATORY DEDUCTION RESTRICTION FOR AN INCOME GOING UNTAXED D UE TO TAX WITHHOLDING LAPSE. THE PENALTY FOR TAX WITHHOLDING LAPSE PER SE IS SEPARATELY PROVIDED FOR IN SECTION 271 C, AND, SECTION 40 (A)( IA ) DOES NOT ADD TO THE SAME. ACCORDINGLY, ITAT HOLD THAT THE INSERTION OF SECOND PROVISO TO SECTION ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 46 40 (A)( IA ) IS DECLARATORY AND CURATIVE IN NATURE AND IT HAS RETROSPECTIVE EFFECT FROM 1ST APRIL, 2005, BEING THE DATE FROM WH ICH SUB CLAUSE ( IA ) OF SECTION 40 (A) WAS INSERTED BY THE FINANCE (NO. 2) ACT, 2004.F IT AND PROPER TO REMIT THE MATTER TO THE FILE OF THE AO FO R FRESH ADJUDICATION IN THE LIGHT OF ITATS ABOVE OBSERVATIONS AND AFTER CA RRYING OUT NECESSARY VERIFICATIONS REGARDING RELATED PAYMENTS HAVING BEE N TAKEN INTO ACCOUNT BY THE RECIPIENTS. 10.5.1 KEEPING IN VIEW OUR ABOVE DISCUSSIONS AND A LSO KEEPING IN VIEW THE FACTS THAT THE ASSESSEE HAD SUBMITTED THE CERTI FICATE FROM THE PAYEES AND THE AO HAS NOT DISPUTED THE SAME. EVEN OTHERWIS E THE UNDERLYING IDEA AND BASIC CONCEPT OF TDS WAS TO ENSURE AN EARL Y AND FAST RECOVERY OF THE TAXES. IT IS DESIGNED SO THAT THE PAYER ITSELF SHOULD MAKE A DEDUCTION OF TAX AT SOURCE ON THE INCOME OF THE PAYEE. THUS, IT WAS AN ADVANCE COLLECTION AND RECOVERY OF THE TAX FOR ON AND BEHAL F OF THE PAYEE, IN WHOSE HAND, AFTER INCLUDING THE SUBJECTED AMOUNT OF INCOME, THERE IS GOING TO BE A LIABILITY OF TAX THEREUPON. IF EITHER THERE IS NO LIABILITY TO PAY TAX OR BECAUSE OF THE TAX ALREADY STOOD PAID BY THE PAYEE, THERE IS NO FURTHER LIABILITY OF THE PAYER. THE VERY PURPOSE OF MAKING DEDUCTION OF TAX AT SOURCE AND DEPOSITING WITH THE GOVT., STANDS FUL FILLED. IT IS UNDER THIS ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 47 BACKGROUND, THE HONBLE SUPREME COURT IN THE CASE O F HINDUSTAN COCA COLA BEVERAGE PVT. LTD. V/S CIT 293 ITR 226 FOLLOWE D IN CHILDRENS EDUCATION SOCIETY V/S DCIT & ANR 34 DTR 145(KER)- HAS HELD THAT NO PENALTY U/S 271C OR INTEREST U/S 201 CAN BE CHARGED IN SUCH CASES. THE PRINCIPLE SO PROPOUNDED EQUALLY AND SQUARELY APPLIE S ON THE FACTS OF THE PRESENT CASE ALSO. HENCE THE ENTIRE DISALLOWANCE BE DELETED IN FULL. ALSO REFER CIT V/S INTEL TECH INDIA(P) LTD 55 DTR 173(K AR) CIT V/S SONY INDIA PVT LTD 17 TAXMAN .COM 126 (KAR). IN SEC. 201 AN AMENDMENT HAS ALSO BEEN MADE BY THE FINANCE ACT. 2012 ON THE BASI S OF DECISION OF HINDUSTAN COCA COLA BEVERAGE PVT. LTD. V/S CIT(SUPR A), WHEREIN IT HAS BEEN PROVIDED THAT THE ASSESSEE SHALL NOT BE DEEME D TO BE DEFAULT IN RESPECT OF SUCH TAX IF SUCH PERSON (I)HAS FURNISHED HIS RETURN OF INCOME U/S 139, (II) HAS TAKEN INTO ACCOUNT SUCH SUM FOR COMPU TING INCOME IN SUCH RETURN OF INCOME AND, (III) HAS PAID TAX DUE ON THE INCOME DECLARED BY HIM IN SUCH RETURN OF INCOME. THE ABOVE MATTER IS ALSO DIRECTLY COVERED BY THE DECISION OF THIS HONBLE TRIBUNAL IN THE CASE OF SH. RAHUL SETHI V/S ITO IN ITA NO. 175/JODH/2012 DT. 07.06.2013 AND FOL LOWED IN THE CASE OF ACIT V/S SH. RAVINDRA KUMAR YADAV ITA NO. 341/JODH/ 12 DATED 10.01.2014 WHEREIN THE FACTS AND CIRCUMSTANCES ARE IDENTICAL AND SAME. IN ITA NO. 484/JP/2019 SHRI VIKRAM SINGH SHEKHAWAT VS DCIT CIRCLE SIKAR 48 VIEW OF THE ABOVE DELIBERATIONS, THE ADDITION MADE BY THE AO IS DELETED. THUS GROUND NO. 4 OF THE ASSESSEE IS ALLOWED. 11. IN THE RESULT, THE APPEALS FILED BY THE ASSESSE E IN ITA NO. 484/JP/2019 IS ALLOWED AND ITA NO.485/JP/2019 IS PA RTLY ALLOWED FOR WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 23 /01/20 20. SD/- SD/- FOE FLAG ;KNO LANHI XKSLKBZ (VIKRAM SINGH YADAV) (SANDEEP GOSAIN) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 23/01/2020. *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI VIKRAM SINGH SHEKHAWAT, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- DCIT, CIRCLE SIKAR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 4. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR . 5. XKMZ QKBZY@ GUARD FILE {ITA NO. 484/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSTT. REGISTRAR