Ram Kumar, Govt. Contrators, Sangrur V. Pr. CIT, Patiala

ITA 497/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4555 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-11-2018
• Assessment Year: 2013-2014
• Appeal Filed On: 20-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Set aside
• Section: 40A(3); 133(6); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH B, CHANDIGARH , ! . .., # $, %& BEFORE: SH.SANJAY GARG, JM & DR. B.R.R. KUMAR, AM ./ ITA NO. 497/CHD/2018 ( !) / ASSESSMENT YEAR : 2013-14 RAM KUMAR, GOVT. CONTRACTORS C/O ASHOK BANSAL, ADVOCATE CHAUDHARY BRIJ LAL STREET CLUB ROAD, SANGRUR PUNJAB PR. CIT AAYAKAR BHAWAN PATIALA, PUNJAB ./ PAN NO: AAEFR7094R / APPELLANT / RESPONDENT / ASSESSEE BY : SHRI ASHWANI KUMAR, CA ( PROXY COUNSEL FOR SHRI. SUDHIR SEHGAL, ADVOCAT E) / REVENUE BY : SHRI. G.S. PHANI KISHORE ! ' # / DATE OF HEARING : 27/05/2019 $%&'() # / DATE OF PRONOUNCEMENT : 30/05/2019 %*/ ORDER PER DR. B.R.R. KUMAR, A.M: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. PR. CIT(A), PATIALA DT. 08/03/2018. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FO LLOWING GROUNDS: 1. THAT THE LD.PR. CIT, PATIALA HAS ERRED IN HOLDING T HAT THE ASSESSMENT AS FRAMED BY THE ASSESSING OFFICER FOR ASSTT. YEAR 201 3-14 VIDE ORDER, DATED 31.12.2015 IS ERRONEOUS AND PREJUDICIAL TO THE INTE REST OF REVENUE AND, THEREBY, SETTING ASIDE THE ASSESSMENT SO COMPLETED TO THE FI LE OF THE ASSESSING OFFICER TO FRAME THE FRESH ASSESSMENT DENOVO. 2. THAT LD. PR.CIT, PATIALA HAS FAILED TO APPRECIATE T HAT THE ORIGINAL ASSESSMENT HAS ALREADY FRAMED VIDE ORDER, DATED 31. 12.2015 BY THE ASSESSING OFFICER AFTER DUE APPLICATION OF MIND AND BY CALLIN G NUMEROUS DETAILS AND EXPLANATION ON VARIOUS ISSUES. 3. THAT THE LD.PR. CIT, PATIALA HAS FAILED TO APPRECIA TE THAT THE ASSESSING OFFICER HAD REJECTED THE BOOKS OF ACCOUNTS U/S 145( 3) AND HAD APPLIED THE NET PROFIT RATE ON THE GROSS RECEIPTS AND, THUS, THE OB SERVATION OF THE PR. CIT ON THE ISSUE OF NON-VERIFICATION OF SUNDRY CREDITORS AND P AYMENT EXCEEDING RS. 20,000/- ARE NOT SUSTAINABLE SINCE ONCE THE BOOKS OF ACCOUNT S HAVE BEEN REJECTED AND NET PROFIT RATE HAS BEEN APPLIED, IT TAKES INTO CON SIDERATION EACH AND EVERYTHING. 4. THAT THE PR. CIT, PATIALA HAS OTHERWISE ALSO FAILED TO APPRECIATE THE REPLY FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS B EFORE HER IN SUMMARY MANNER AND HAS SET ASIDE THE ASSESSMENT BOTH ON MERITS AND ON LEGAL ISSUE AND WHICH IS NOT PROPER. 2 5. THAT THE PR. CIT, PATIALA HAS FAILED TO CONSIDER TH E VARIOUS JUDGMENTS AS QUOTED BEFORE HER ON THE LEGAL ISSUES. 3. BRIEF FACTS TAKEN FROM THE RECORD ARE THAT THE L D. PCIT HAS SET ASIDE THE ORDER OF THE ASSESSING OFFICER TO MAKE FRESH ASSESS MENT ON TWO ISSUES VIZ. PAYMENTS IN CONTRAVENTION TO THE PROVISION OF SECTI ON 40A(3) AND FOR INDEPENDENT VERIFICATION OF SUNDRY CREDITORS. 4. PROVISIONS OF SECTION 263 ARE AS UNDER: (1) THE COMMISSIONER MAY CALL FOR AND EXAMINE THE R ECORD OF ANY PROCEEDING UNDER THIS ACT, AND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE [ASSESSING] OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPOR TUNITY OF BEING HEARD AND AFTER MAKING OR CAUSING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THEREON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLIN G THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. EXPLANATION 1 (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTIO N AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF ANY APPEAL F ILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988], THE POWERS OF THE COMMISSIO NER UNDER THIS SUB-SECTION SHALL EXTEND [AND SHALL BE DEEMED ALWAYS TO HAVE EX TENDED TO SUCH MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL. EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, IT IS HEREBY DECLARED THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEM ED TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENU E, IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER, (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VER IFICATION WHICH SHOULD HAVE BEEN MADE; (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQ UIRING INTO THE CLAIM; (2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) AF TER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORD ER SOUGHT TO BE REVISED WAS PASSED. 5. THE LD. PCIT RELIED ON THE FOLLOWING CASE LAWS: I) JAI COMMERCIAL CO. LTD. V. JOINT CIT (2000) 66 T TJ (DEL-TRIB) 731, FOR THE PROPOSITION THAT SECTION 263 CAN BE INVOKED FOR TH E PURPOSE OF SETTING RIGHT DISTORTIONS AND PREJUDICE TO THE INTEREST OF THE RE VENUE. II) EXPRESS NEWSPAPERS (P) LTD. V. CIT (2002) 255 I TR 137 (MAD), WHEREIN IT WAS HELD THAT THE COMMISSIONER'S POWER UNDER SECTION 26 3 IS NOT TO BE REGARDED ARBITRARY IF SUBSTANTIAL PREJUDICE TO THE REVENUE I S INVOLVED IN VIEW OF DETECTION OF CONCEALED INCOME IN RESPECT OF CAPITAL GAIN. III) DESAI BROTHERS LTD. V. DY. CIT (1998) 66 ITD 2 03 (PUNE- TRIB.) WHEREIN IT WAS HELD THAT IT IS WELL ESTABLISHED THAT WHERE THE A.O . FAILS TO MAKE THE NECESSARY 3 ENQUIRIES WHICH HE IS LEGALLY REQUIRED TO MAKE AND DECIDE THE ISSUE WITHOUT MAKING SUCH INQUIRIES, THEN THE ORDER OF THE A.O. W OULD BE ERRONEOUS IN LAW. IV) GEE VEE ENTERPRISES V. ADDL. CIT & ORS. (1975) 99 ITR 375 (DEL.) WHEREIN IT WAS HELD THAT AN ORDER CAN BE REGARDED AS ERRONEOUS WHEN EITHER IT DOES NOT DECIDE A POINT AND RECORD A FINDING ON AN ISSUE WHI CH OUGHT TO HAVE BEEN DONE OR DECIDES IT WRONGLY. V) CIT V. PUSHPA DEVI (1987) 164 ITR 639 (PAT), WHE REIN IT WAS HELD THAT IF THE PROCEDURE ADOPTED BY THE A.O. BRINGS IN LESSER REVE NUE THAN SOME OTHER PROCEDURE, THE ORDER WOULD BE PREJUDICIAL TO THE RE VENUE. VI) LAJJA WATI SINGHAL, SMT. V. CIT (1997) 226 ITR 527 (ALL) WHEREIN IT WAS HELD THAT ON FAILURE OF A.O. TO MAKE ENQUIRY AS EXPECTED , COMMISSIONER WAS JUSTIFIED IN INVOKING PROVISIONS OF SECTION 263 BECAUSE ORDER PASSED AS SUCH BY A.O. WAS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. VII) AMBIKA AGRO SUPPLIERS V. ITO (2005) 95 ITD 326 (PUNE-TRIB.) WHEREIN IT WAS HELD THAT ACCEPTANCE OF EXPLANATION OF ASSESSEE ON CERTAIN POINTS WITHOUT MAKING RELEVANT ENQUIRY RENDERS THE ASSESSMENT ORDE R PASSED BY THE A.O. AN ERRONEOUS AND PREJUDICIAL. THE LD. PCIT REFERRED TO OTHER JUDGMENTS WHICH HAVE BEEN DULY PERUSED CAREFULLY. 6. ON THE ISSUE OF 40A(3) DISALLOWANCE LD. PCIT HEL D THAT: A) THERE WAS NOTHING ON RECORD TO SHOW WHETHER ASS ESSING OFFICER DID EXAMINE THE VOUCHERS ARE VERIFIED IF THE ASSERTION OF THE ASSESSEE THAT THERE WAS NO CONTRAVENTION TO THE PROVISIONS OF SECTION 40A(3 ) OF THE ACT. B) THERE WAS NOTHING ON RECORD TO SHOW THAT PAYMEN TS MADE IN CASH FELL WITHIN ANY OF THE EXCEPTIONS MENTIONED IN THE RULE 6DD OF THE INCOME TAX RULES 1962, (REFER PARA 4.1 OF THE ORDER OF THE PCIT) 7. DURING THE HEARING BEFORE US, THE LD. AR BROUGHT TO OUR NOTICE THE ENQUIRIES AND THE INVESTIGATIONS UNDERTAKEN BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT WHICH ARE OUTLINED AS UND ER: QUESTIONNAIRE DATED 07/11/2014 OF THE DCIT, SANGRUR QUESTION NO. 29 INTIMATE AS TO WHETHER WE HAVE MADE PAYMENT EXCEED ING RS. 20,000/- IN 4 CONTRAVENTION OF PROVISION OF SECTION 40A(3) OF THE INCOME TAX ACT,1961, IF SO, DETAILS OF SUCH PAYMENTS. 8. THE ASSESSEE HAS REPLIED VIDE LETTER DT. NIL AT POINT NO. 29 THAT NO PAYMENT EXCEEDING RS. 20,000/- IN CONTRAVENTION OF PROVISIO N OF SECTION 40A(3) OF THE INCOME TAX ACT,1961, WAS MADE. 8.1 FURTHER, THE ASSESSING OFFICER ISSUED A LETTER DT. 15/12/2015 PROPOSING FOR REJECTION OF BOOKS OF ACCOUNTS UNDER SECTION 145(3) WHEREIN IT WAS MENTIONED A PERUSAL OF RECORD REVEALS THAT AN AMOUNT OF RS. 2 9,10,242/- UNDER THE EARTH FILLING AND DIGGING HAS BEEN CLAIMED BY YOU PAID IN CASH ON DIFFERENT DATES AT PANIPAT AND BATHINDA. NO NAMES AND ADDRESS OF THE P ERSONS TO WHOM THE PAYMENTS WERE MADE WERE FURNISHED BY YOU. IN THE AB SENCE OF THE SAME, AMOUNT SO INCURRED REMAINS UNVERIFIABLE. FOR THE A BOVE QUERY OF THE ASSESSING OFFICER THE ASSESSEE REPLIED VIDE LETTER DT. 22/12/ 2015 IN PARA 6 AS REGARDS EXPENSES OF RS. 29,10,242/- ON ACCOUNT OF EARTH FIL LING AND DIGGING IT IS SUBMITTED THAT HE PAYMENT IS MADE ON DAILY BASIS BY THE SITE MUNSHI TO THE TRACTOR DRIVERS. PROPER VOUCHERS OF THE SAME HAVE BEEN MAINTAINED BY THE SITE MUNSHI WHICH ARE PRODUCED HEREWITH FOR YOUR KIND PERUSAL. 9. THE ASSESSEE HAS SUBMITTED THE LEDGER COPY OF TH E PAYMENTS DONE AT ROB PANIPAT AND ROB BHATINDA GIVING DETAILS OF THE PAYMENTS MADE TO TRACTORS AS PER REGISTER DATE WISE. THE TOTAL AMOUNT PAID ON ACCOUNT OF ROB PANIPAT WAS 19,27,856/- CONSISTING OF PAYMENTS MADE ON 115 DAYS OUT OF WHICH 25 PAYMENTS WERE IN THE RANGE OF 20,130/- TO 25,520/- SIMILARLY FOR THE WORKS AT ROB BHATINDA THE TOTAL PAYMENT MADE WAS RS. 9,82,366/- CONSISTIN G OF PAYMENTS MADE ON 42 DAYS OUT OF WHICH 36 PAYMENTS WERE IN THE RANGE OF 20,880/- TO 29,790/-. THE ASSESSING OFFICER AFTER EXAMINING THE ENTIRE ISSUE AND SINCE THE EXPENSES REMAINS UNVERIFIABLE HAS INVOKED PROVISIONS OF 145( 3) AND HELD THAT THE BOOKS OF ACCOUNTS DO NOT DEPICT A CORRECT AND COMPLETE PICTU RE OF THE PROFITS AND ESTIMATED THE NET PROFIT @ 10% ON THE TOTAL RECEIPT S. THIS NET PROFIT DETERMINED BY THE ASSESSING OFFICER HAS BEEN REDUCED BY THE LD . CIT(A) TO 7% VIDE ORDER DT. 06/10/2016. 10. THE LD. PCIT HAS RELIED ON THE JUDGMENT OF HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF SAI METAL WORKS IN ITA NO. 125 OF 2004 REGARDING THE APPLICABILITY OF SECTION 40A(3) EVEN WHEN THE ASSES SMENT WAS COMPLETED BY THE WAY OF ESTIMATE ON THE BASIS OF GP RATE. 11. ON THE ISSUE OF VERIFICATION OF SUNDRY CREDITOR S LD. PCIT HELD THAT : 5 A) NO VERIFICATION HAS TAKEN PLACE THROUGH THE INSPECT OR OR BY RESORTING TO SECTION 133(6) OF THE INCOME TAX ACT, 1961. B) THE ISSUE COMPLETELY REMIND UNATTENDED BY THE ASSES SING OFFICER WITHOUT REQUISITE ENQUIRIES AND WITHOUT APPLICATION OF THE MIND BY THE ASSESSING OFFICER. 12. DURING THE HEARING BEFORE US, THE LD. AR BROUGH T TO OUR NOTICE THE ENQUIRIES AND THE INVESTIGATIONS UNDERTAKEN BY THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT WHICH ARE OUTLINED AS UND ER: QUESTIONNAIRE DATED 07/11/2014 OF THE DCIT, SANGRUR VIDE QUESTION NO. 8 SOUGHT THE DETAILS OF THE SUNDRY CREDITORS ABOVE RS. 1,00, 000/- IN THE FORMAT OF NAME, ADDRESS, AMOUNT AND PAN. AGAINST THE SAID QUERY THE ASSESSEE HAS SUBMITTED T HE DETAILS OF SUNDRY CREDITORS ABOVE RS. 1,00,000/- HE HAS ALSO SUBMITTED LEDGER C OPY OF A FEW PARTIES. REGARDING THE SUNDRY CREDITORS THE ASSESSEE VIDE LE TTER DT. 22/12/2015 WHICH WAS SUBMITTED IN RESPONSE TO THE NOTICE ISSUE ON 15/12/ 2015 (REF. PARA 1.II AND 1.III) EXPLAINED THAT THE ASSESSEE CONSTRUCTED BRIDGES AT VARIOUS SITES IN PUNJAB & HARYANA DURING THE YEAR UNDER CONSIDERATION AND ALL THE PURCHASES WAS MADE FROM THE LOCAL DEALERS WHERE THE BRIDGES WERE BEING CONSTRUCTED AND HENCE IT WAS NOT POSSIBLE TO MAINTAIN PURCHASE REGISTER. AS REGARDS THE ISSUE REGISTER IT IS SUBMITTED THAT ALL THE PURCHASES WERE MADE ON DAILY BASIS AND THE SAME WERE CONSUMED IN A DAY OR TWO AND AT THE SAME SITE, HENC E THERE WAS NO NECESSITY TO MAINTAIN ISSUE REGISTER. THE NECESSITY OF ISSUE REG ISTER ARISES IF THE MATERIAL IS ISSUE TO DIFFERENT SITES BUT IN THE CASE OF THE ASSESSEE AS STATED ABOVE ALL THE MATERIAL AS PURCHASED FROM THE LOCAL DEALERS WHERE THE WORK WAS BEING EXECUTED. 13. IN THE LIGHT OF THE FACTS MENTIONED ABOVE, IT I S TO BE ADJUDICATED AS TO A) WHETHER THE ASSESSING OFFICER HAS PASSED THE ORDER ON DUE APPLICATION OF MIND ? B) WHETHER THE ORDER IS PASSED WITHOUT MAKING ENQUIRIE S OR VERIFICATION WHICH SHOULD HAVE BEEN MADE C) WHETHER THE ORDER OF THE ASSESSING OFFICER IS ERRON EOUS SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE ? D) WHETHER THE LD. PCIT HAS PROVED OR BROUGHT ON RECOR D ANY LEAKAGE OF REVENUE? 14. THE LD. DR ARGUED THAT THE ASSESSING OFFICER HA S NOT EXAMINED THE ENTIRE BUSINESS AFFAIRS IN A DETAILED MANNER AND HENCE THE ORDER OF THE PCIT NEEDS TO BE UPHELD. 15. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. REGARDING THE PAYMENT MADE TO T RACTOR OWNERS ON ACCOUNT OF EARTH FILLING AND DIGGING EXPENSES WE FI ND THAT THE ASSESSING OFFICER HAS DULY EXAMINED THE MATTER. THE DETAILS HAVE BEEN OBTAINED AND A CONSCIOUS DECISION HAS BEEN TAKEN BY THE ASSESSING OFFICER TO ESTIMATE THE GROSS PROFIT TAKING INTO CONSIDERATION THE EXPENSES CLAIMED AND ALSO THE PURCHASES MADE. 6 ONCE THE ASSESSING OFFICER HAS RESORTED TO DETERMIN ATION OF THE GROSS PROFITS UNDER SECTION 145(3) ON REJECTION OF THE BOOKS OF A CCOUNTS, THAT VERY DECISION IN THE ABSENCE OF ANY OTHER MATERIAL BROUGHT ON RECORD BY THE PCIT CANNOT BE SAID TO BE ERRONEOUS SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. 16. REGARDING THE LD. PCIT CONTENTION THAT PROVISIO N OF SECTION 40A(3) ARE APPLICABLE EVEN IN THE CASES WHERE THE PROFIT HAS B EEN ESTIMATED UNDER SECTION 145(3), WE HAVE GONE THROUGH THE JUDGMENT IN THE CA SE OF SAI METAL WORKS (SUPRA). THE HONBLE HIGH COURT IN THAT CASE HAS HE LD AS UNDER: AS REGARDS THE SAID PROVISION NOT BEING TAKEN INTO ACCOUNT WHERE ASSESSMENT IS BY ESTIMATION BASIS ON GP RATE, THE PRINCIPLE INVOK ED IN THE JUDGMENTS RELIED UPON IS NOT OF UNIVERSAL APPLICATION. IF THE ESTIMATED I NCOME IMPLIEDLY TAKES INTO CONSIDERATION THE EXPENDITURE INCURRED, THE SAID PR INCIPLE MAY APPLY. IF THE EXPENDITURES WHICH ARE LEGALLY NOT PERMISSIBLE HAS BEEN TAKEN INTO ACCOUNT, THE SAME CAN CERTAINLY BE DISALLOWED. THE JUDGMENTS REL IED UPON ON BEHALF OF THE ASSESSEE DID NOT DISCUSS THE ISSUE OF IMPERMISSIBLE EXPENDITURE. 17. THE HONBLE COURT HAS OPINED THAT THE PROVISION S ARE INVOKED ONLY WHEN THE PAYMENTS ARE NOT PERMISSIBLE. HOWEVER IN THE IN STANT CASE, THE PAYMENTS MADE TO THE CONTRACTORS CANNOT BE SAID TO BE NOT LE GALLY PERMISSIBLE PAYMENTS. HENCE, THE LD. PCITS OBSERVATION THAT THERE WAS LO SS OF REVENUE DUE TO NON INVOCATION OF PROVISIONS OF SECTION 40A(3) IN SPITE OF DETERMINING THE PROFIT UNDER SECTION 145(3) CANNOT BE UPHELD. FURTHER, WHEN THE BOOKS OF ACCOUNTS HAVE BEEN REJECTED BY THE ASSESSING OFFICER AND RESORTED TO ESTIMATION IMPLIES THAT THE ASSESSING OFFICER HAS FINALIZED THE ACCOUNTS OF THE ASSESSEE AND DETERMINING THE PROFIT OF THE ASSESSEE. AND THOSE PROFITS CANNO T BE ALTERED BY ANY OTHER MEANS EXCEPT BY BRINGING ANY COGENT MATERIAL ON REC ORD WHICH IS ABSENT IN THIS CASE. NO OTHER ADDITION CAN BE MADE BY THE REVENUE WHEN THE REVENUE ITSELF HAS PRESUME A SPECIFIC RATE OF NET PROFIT AND ADDED THAT AMOUNT TO THE INCOME OF THE ASSESSEE. RELIANCE IS PLACED IN THIS REGARD ON THE FOLLOWING JUDGMENTS: A) CIT VS. GOBIND RAM (P&H HC) 48 TAXMANN.COM 14 B) CIT VS. DULLA RAM, LABOUR CONTRACTOR, (P&H HC) TAXM ANN.COM 349 C) CIT VS. SANTOSH JAIN (P&H HC), 296 ITR 324 D) CIT VS. AGGARWAL ENGG. CO. (P&H HC) 302 ITR 246 E) CIT VS. GK CONTRACTOR (RAJ HC), 19 DTR 304 F) CIT VS. DHIRAJ R RUNGTA (GUJ HC), 40 TAXMANN.COM 28 4 18. THE LD. PCIT, HAVING HEARD THE MATTER AND EXAMI NE, THE ISSUE DID NOT BRING ON RECORD AS TO WHAT ARE THE PAYMENTS MADE ON 67 OCCASIONS WHICH 7 HAVE BEEN IN EXCESS OF RS. 20,000/-. INSTEAD DIRECT ED TO EXAMINE THE MATTER AFRESH. THE REVISIONARY PROCEEDINGS CANNOT BE USED TO FILL IN THE GAPS WITHOUT DETERMINING THE QUANTUM OF REVENUE LOSS OR DEFAULT ON THE PART OF ASSESSING OFFICER TO EXAMINE THE ISSUES. IN THIS CASE THE ASS ESSING OFFICER IS FOUND TO HAVE EXAMINE THE ISSUE AND THE LD.PCIT DID NOT DETERMINE THE REVENUE LOSS. 19. REGARDING THE EXAMINATION OF SUNDRY CREDITORS, WE FIND THAT THE ASSESSING OFFICER HAS MADE DUE ENQUIRIES AND ACCEPTED THE SUB MISSIONS OF THE ASSESSEE. THE SUNDRY CREDITORS PERTAIN TO THE PURCHASE OF MAT ERIAL DURING THE YEAR. ANY ASSESSMENT ON THE OPENING BALANCE OF THE SUNDRY CRE DITOR COULD NOT BE A SUBJECTION MATTER OF ASSESSMENT IN THE CURRENT ASS ESSMENT YEAR. THE ASSESSING OFFICER HAS TAKEN INTO CONSIDERATION THE FACTUM OF PURCHASE WHILE DETERMINING THE NET PROFIT FOR THE YEAR. 20. LD. PCIT HELD THAT THE ASSESSING OFFICER HAS NO T ISSUED NOTICE UNDER SECTION 133(6) NOR DEPUTED INSPECTOR TO VERIFY THE SUNDRY C REDITORS. THE REVISIONARY POWERS CANNOT BE USED TO DIRECT TO WHAT EXTENT AND TO AND IN WHAT MODE THE ENQUIRIES NEEDS TO BE CONDUCTED. THIS IS NOT A CASE WHERE THE ASSESSING OFFICER HAS TOTALLY IGNORED THE ISSUE OF SUNDRY CREDITORS. THE ASSESSING OFFICER HAS CALLED FOR THE DETAILS, THE ASSESSEE HAS GIVEN EXPLANATION , THE ASSESSING OFFICER HAS APPLIED HIS MIND ON THE ISSUE OF PURCHASES (SUNDRY CREDITORS) WHILE DETERMINING THE NET PROFIT AND ACCORDINGLY ISSUED THE NOTICE AN D THEN ONLY DETERMINED THE TAXABLE INCOME. TO THIS EXTENT THE ASSESSING OFFICE R HAS NOT COMMITTED ANY ERROR AND ENQUIRIES HAVE TO BE CEASED AT SOME STAGE. AND THE LD. PCIT CANNOT TRANSGRESS THE JURISDICTION UNDER SECTION 263 BY ME NTIONING THAT NO PROPER INQUIRY HAS BEEN MADE AND CANNOT TRY TO SUBSTITUTE HIS/HER MODE OF ENQUIRY WITH THAT OF THE ASSESSING OFFICER. 21. ANOTHER IMPORTANT FACT ON RECORD IS THAT THE AS SESSMENT ORDER WAS PASSED ON 31/12/2015. THE LD. CIT(A) PASSED THE ORDER ON 0 6/10/2016. THE INITIATION PROCEEDINGS BY THE LD. PCIT BY THE ISSUE OF NOTICE STARTED ON 17/11/2017 AND THE ORDER UNDER SECTION 263 HAS BEEN PASSED ON 08/03/20 18 ON THE ISSUE OF DISALLOWANCE SECTION 40A(3) AND ON THE ISSUE OF EX AMINATION OF SUNDRY CREDITORS. THE ORDER OF THE LD. CIT(A) DEALT WITH D ETERMINATION OF THE NET TAXABLE PROFITS BY ESTIMATION OF THE NET PROFIT. SINCE THE ISSUES RAISED BY THE LD. PCIT ARE INTRICATELY ASSOCIATED WITH THE ISSUES BEFORE THE L D. CIT(A), IN VIEW OF THE EXPLANATION 1(C) OF SECTION 263 THE ORDER OF THE LD . PCIT CANNOT BE HELD TO BE VALID. FURTHER, THE EXPLANATION -2(A) CANNOT BE SAI D TO BE IN FORCE AS THE ASSESSING OFFICER HAS MADE RELEVANT ENQUIRIES ON BO TH THE ISSUES WHICH WAS THE SUBJECT MATTER OF THE ORDER UNDER SECTION 263. 8 22. HENCE, KEEPING IN VIEW THE FACT THAT THE EARTH FILLING EXPENSES AND THE SUNDRY CREDITORS HAVE BEEN EXAMINED, TAKEN INTO CON SIDERATION WHILE DETERMINING THE PROFIT UNDER SECTION 145(3), TAKING INTO CONSIDERATION THAT THE PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE TO THE INSTANT CASE, THE LD. PCIT HAS NOT BROUGHT THE LOSS OF REVENUE EXCEPT DIRECTIN G THE ASSESSING OFFICER TO CONDUCT A SECOND INVESTIGATION, AND KEEPING IN VIEW THE FACT THAT THE ISSUE IS THE SUBJECT MATTER OF THE PROCEEDINGS BEFORE LD. CI T(A), WE HEREBY QUASH THE ORDER OF THE LD. PCIT PASSED UNDER SECTION 263. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- . .., # $, (SANJAY GARG ) ( DR. B.R.R. KUM AR) / JUDICIAL MEMBER %& / ACCOUNTANT MEMBER AG DATE: 30/05/2019 *% + ,- . -(/ COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2 THE RESPONDENT , 3. CIT, 4. THE CIT(A), 5. DR, ITAT, CHANDIGARH, 6. GUARD FILE