LORDS CHLORO ALKALI LTD., Jaipur V. PRINCIPAL CIT, Alwar

ITA 565/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4831 (ITAT-JAIPUR)
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 27-05-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: NASIR ALI CIT DHK
• Keywords: Revision of order; Depreciation; Retrospective amendment; Bad and doubtful debts; Accommodation entries; Assessment record; Unabsorbed depreciation
• Section: 143(3); 54; 263; 63; 154; 2

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH HKKXPAN] YS[KK LNL; ,OA JH DQY HKKJR ] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHARAT, JM VK;DJ VIHY LA-@ ITA NO. 565/JP/2016 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12 M/S LORDS CHLORO ALKALI LTD., SPA-460, MATSYA INDUSTRIAL AREA, ALWAR. CUKE VS. PRINCIPAL CIT, ALWAR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCM 3981 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL, (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI NASIR ALI (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 16/12/2016 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 26/12/2016 VKNS'K@ ORDER PER: KUL BHARAT, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30/03/2016 PASSED BY THE LD. PR. COMMISSIONER OF IN COME TAX, ALWAR FOR THE A.Y. 2011-12 U/S 263 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT). THE GROUNDS TAKEN BY THE ASSES SEE IN APPEAL ARE AS UNDER:- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 2 U/S 263 IS ILLEGAL & BAD IN LAW AND THE SAME BE QUASHED. 2. THE LD. COMMISSIONER OF INCOME TAX HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE ORDER PASSED BY AO ON FOUR ISSUES IS DEEMED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AS IN HIS OP INION THE SAME IS PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE IGNORING THAT SUCH ENQUIRY/VERIFICATION IS MADE BY THE AO OR ON SUCH ISSUES THERE IS NO PREJUDICE CAUSED TO THE REVENUE IN AS MUCH AS (A) IN RESPECT OF UNSECURED LOAN TAKEN FROM SH. RAKESH AHUJA, DIRECTOR, CONFIRMATION IS FILED, TAX AT SOURCE IS DEDUCTED ON THE INTEREST PAYABLE TO HIM AND THE AO AFTER CONSIDERING THE SAME ACCEPTED THE LOAN. (B) IN RESPECT OF TRANSACTION WITH M/S MAXWORTH PROJECTS & DEVELOPERS PVT. LTD., AO MADE NECESSARY ENQUIRY/VERIFICATION AS PER NOTE SHEET ENTRY DT. 24.03.2014 AFTER CONSIDERING THE ENQUIRY REPORT OF INVESTIGATION WING, JAIPUR DT. 04.06.2013 AND THEREAFTER ACCEPTED THE TRANSACTIONS. (C) IN RESPECT OF REVERSAL OF PROVISION FOR DOUBTFU L DEBTS AND OLD STORES, NO ADDITION U/S 41(1) IS REQUIRED IN AS MUCH AS SUCH PROVISION WAS NOT CLAIMED AS DEDUCTION IN THE YEARS WHEN PROVISIONS WAS MADE. ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 3 (D) IN RESPECT OF INCORRECT SET OFF OF UNABSORBED DEPRECIATION/LOSS AND ITS CARRY FORWARD, IF ANY, THE SAME IS RECTIFIABLE U/S 154. 2.1 THE LD. CIT HAS ERRED ON FACTS AND IN LAW IN CANCE LLING THE ASSESSMENT ORDER PASSED BY THE AO ON THE GROUND THAT HE HAS NOT MADE ENQUIRIES OR VERIFICATI ON WHICH SHOULD HAVE BEEN MADE WITHOUT SPECIFYING THE NATURE OF ENQUIRY/VERIFICATION WHICH OUGHT TO HAVE BEEN MADE. 3. THE LD. CIT HAS ERRED ON FACTS AND IN LAW IN DIREC TING THE AO TO CONSIDER OTHER ISSUES ALSO WHICH MAY SUBSEQUENTLY COME TO HIS NOTICE DURING THE FRESH ASSESSMENT PROCEEDINGS U/S 143(3)/263 OF THE IT ACT. SUCH DIRECTION ARE AGAINST LAW AND BE DIRECTED TO BE QUASHED. 4. THE ASSESSEE CRAVES TO AMEND, ALTER AND MODIFY AN Y OF THE GROUNDS OF APPEAL. 5. THE APPROPRIATE COST BE AWARDED TO THE ASSESSEE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT IN THI S CASE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED VIDE ORDER DATED 31/3/2014. SUBSEQUENTLY, THE LD. PR.CIT FOUND THAT THE ASSESSME NT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THEREFORE, HE ISSUED A NOTICE U/S 263 OF THE ACT CALLING UPON THE ASSESSEE AS TO WHY THE ASSESSMENT BE NOT REVISED. IN RESPONSE TO THE N OTICE U/S 263 OF THE ACT, THE ASSESSEE FILED ITS REPLY. HOWEVER, THE LD. PR.CIT DID NOT ACCEPT ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 4 THE EXPLANATION OF THE ASSESSEE AND REVISED THE ASS ESSMENT ORDER, THEREBY HE CANCELLED THE ASSESSMENT ORDER DATED 31/ 3/2014 AND DIRECTED THE ASSESSING OFFICER TO PASS ASSESSMENT O RDER AFRESH. 3. BEING AGGRIEVED BY THE ORDER OF THE PR. CIT, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD AR OF THE ASSESSEE HAS REIT ERATED THE SUBMISSIONS AS MADE IN THE WRITTEN SUBMISSIONS. HE S UBMITTED THAT THERE ARE THREE REASONS STATED BY THE PR.CIT FOR REV ISING THE ORDER. HE SUBMITTED THAT THE FIRST ISSUE IS WITH REGARD TO THE INTEREST ON UNSECURED LOAN OF RS. 24.41 LACS TO SHRI RAKESH AHUJA, DIRECT OR OF THE COMPANY COVERED U/S 40A(2)(B) OF THE ACT. THE ALLEGATION OF LD. PR.CIT IS THAT THE ASSESSING OFFICER PASSED ASSESSMENT ORDER AS WITHOUT PROPERLY EXAMINING THE ISSUE REGARDING THE ACTUAL PAYMENT OF UNSECURED LOAN TO SHRI RAKESH AHUJA, DIRECTOR OF THE COMPANY. SECONDL Y, IT IS OBSERVED BY THE LD PR.CIT THAT AS PER INFORMATION PROVIDED BY T HE INVESTIGATION WING, ADIT(INV)-II, JAIPUR, IT WAS NOTICED THAT THE ASSESS EE COMPANY HAD OBTAINED BILLS FOR BOGUS EXPENSES FROM THE COMPANY M/S TUTICORIN TREXIM (P) LTD. (NEW NAME M/S MAKESWORTH PROJECTS & DE VELOPERS (P) LTD) AMOUNTING TO RS. 10,04,796/-. IT WAS OBSERVED BY THE LD. PR.CIT THAT THE ASSESSING OFFICER HAD ACCEPTED THE SUBMISS ION MADE BY THE ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 5 ASSESSEE COMPANY THAT THE AMOUNT OF RS. 4,75,00,000 /- WAS RECEIVED BY WAY OF UNSECURED LOANS OF RS. 2,00,00,000/- AND A SSIGNMENT DEBTS OF RS. 3,02,14,574.36/-. IN THIS REGARD, THE ASSESSING OFFICER HAS NOT EXAMINED THE GENUINENESS OF THE ASSIGNMENT OF DEBTS OF RS. 3,02,14,574.36 AND THAT OF THE UNSECURED LOANS OF R S. 2.00 CRORES PROPERLY BY WAY OF CALLING OF CONFIRMATION FROM THE PARTIES. THE ASSESSING OFFICER HAS NOT CONFRONTED THE STATEMENT OF SHRI PRAVEEN AGARWAL AND SUCH INFORMATION REGARDING BOGUS BILLS A ND ACCOMMODATION ENTRIES AS PROVIDED BY THE INVESTIGATION WING, JAIP UR. THIRDLY, IT WAS OBSERVED BY THE LD. PR.CIT THAT IN POINT NO. 20 OF THE AUDIT REPORT, IT WAS FOUND THAT DURING THE YEAR, ASSESSEE COMPANY HAS RE VERSED THE PROVISION OF DOUBTFUL DEBTS RS. 300.57 LACS AND OLD STORES RS. 192.27 LACS WHICH IS CHARGEABLE TO TAX U/S 41 AND COMPUTATI ON THEREOF. LD. COUNSEL SUBMITTED THAT THE REASONS OF THE LD. PR.CI T ARE UNFOUNDED. HE SUBMITTED THAT IN RESPECT OF INTEREST PAYMENT ON UN SECURED LOAN TO SHRI RAKESH AHUJA, DIRECTOR, THE AO VIDE LETTER DATED 25 .02.2014 IN POINT NO. 20 REQUIRED THE ASSESSEE TO FURNISH COPY OF UNSECURED LOAN ACCOUNT ALONG WITH CONFIRMATION AND PAN. IN SUPPORT OF THIS CONTENTION, THE LD AR DREW OUR ATTENTION TO PAGE NO. 10 OF THE PAPER BO OK. HE ALSO SUBMITTED THAT, THEREAFTER, AO FURTHER RAISED ISSUE IN RESPECT OF ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 6 JUSTIFICATION OF PAYMENT MADE TO PERSONS SPECIFIED U/S 40A(2)(B). HE SUBMITTED THAT THE ASSESSEE IN ITS REPLY DATED 20.0 3.2014 EXPLAINED THAT INTEREST OF RS. 24.41 LAKHS IS PAID TO SHRI RAKESH AHUJA AFTER DEDUCTING TAX AT SOURCE AND THAT THE RATE AT WHICH INTEREST I S PAID IS REASONABLE. THE CONFIRMATION OF LOAN WAS FILED VIDE LETTER DATED 24.03.2014. HE FURTHER SUBMITTED THAT THE AO AFTER VERIFICATION OF THE SAME AND THE BOOKS OF ACCOUNT PRODUCED BEFORE HIM ACCEPTED THE S AME. HE SUBMITTED THAT DURING THE PROCEEDINGS U/S 263, THE ASSESSEE E XPLAINED THAT THE INTEREST ON THE LOAN WAS CREDITED IN A SEPARATE ACCO UNT NAMED INTEREST ON UNSECURED LOAN TO SHRI RAKESH AHUJA ON WHICH TAX IS DEDUCTED AT SOURCE. THUS, WHEN AO HAS EXAMINED THE REASONABLENESS OF THE INTEREST PAID ON UNSECURED LOAN RECEIVED FROM SHRI RAKESH AH UJA, THE ORDER OF THE AO ON THIS ISSUE CANNOT BE HELD TO BE ERRONEOUS . 3.1 HE HAS FURTHER SUBMITTED THAT IN RESPECT OF TRA NSACTION WITH M/S MAKESWORTH PROJECTS & DEVELOPERS PVT. LTD., THE INFO RMATION PROVIDED BY THE INVESTIGATION WING, JAIPUR WAS AVAILABLE WITH THE AO INASMUCH AS THE REPORT OF THE INVESTIGATION WING IS DATED 04.06 .2013 WHICH IS AVAILABLE IN THE ASSESSMENT RECORD WHEREAS THE ASSES SMENT ORDER WAS PASSED ON 31.03.2014. ON THE BASIS OF THIS REPORT O NLY, THE AO MADE ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 7 THE ENQUIRIES AND THE ASSESSEE EXPLAINED THAT THERE IS NO TRANSACTION OF EXPENSES WITH THIS COMPANY RATHER THE TRANSACTION IS IN RESPECT OF LOAN RECEIVED OF RS. 2 CRORES ON WHICH INTEREST PAID IS R S. 8,44,521/- AND THE ENTIRE LOAN AND INTEREST WAS PAID DURING THE YEAR. F URTHER, RS.2,75,00,000/- WAS RECEIVED AGAINST ASSIGNMENT OF DEBTORS OF RS. 3,02,14,574/- AS PER AGREEMENT DATED 14.09.2010 AND THE BALANCE AMOUNT OF RS. 27,14,574/- WAS RECEIVED IN AY 2012-13 . THE AO AFTER CONSIDERING THE SAME AND MAKING THE NOTE SHEET ENTR Y DATED 24.03.2014 ACCEPTED THE SAME. ALL THESE FACTS WERE AGAIN STATED BEFORE THE LD. CIT VIDE LETTER DATED 16.11.2015 AND REPROD UCED AT PAGE 9 OF THE ORDER. THEREFORE, THE LD. PR.CIT WAS NOT CORRECT T O HOLD THAT THE AO HAS NOT CARRIED OUT ANY INQUIRY / VERIFICATION IN R ESPECT OF ABOVE TRANSACTION. HENCE ON THIS ISSUE ALSO, ORDER OF THE AO CANNOT BE HELD TO BE ERRONEOUS / PREJUDICIAL TO THE INTEREST OF THE R EVENUE. 3.2 HE FURTHER SUBMITTED THAT IN RESPECT OF PROVISI ON OF DOUBTFUL DEBTS AND OLD STORES REVERSED DURING THE YEAR, THE AUDITO R IN THE TAX AUDIT REPORT IN FORM 3CD IN POINT NO. 20 HAS STATED THAT DURING THE YEAR, COMPANY HAS REVERSED THE PROVISION OF DOUBTFUL DEBT S OF RS. 300.57 LAKHS AND OLD STORES OF RS. 192.27 LAKHS. IN ABSENC E OF COMPLETE DETAILS, ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 8 COMPUTATION IS NOT AVAILABLE . THIS REVERSAL FORMS PART OF THE INCOME OF THE ASSESSEE AND IS GROUPED IN SALES. IN THE COMPUT ATION OF TOTAL INCOME THIS AMOUNT IS NOT EXCLUDED. THUS, THE ABOVE AMOUNT IS CONSIDERED BY THE ASSESSEE HIMSELF IN THE INCOME WHEREAS IN THE YE AR OF CREATING THE PROVISION, THE AMOUNT WAS ADDED BACK AND THEREFORE, IT WAS REQUIRED TO BE EXCLUDED IN COMPUTING THE TOTAL INCOME IN THE YE AR OF REVERSAL. THESE FACTS WERE EXPLAINED TO THE CIT VIDE LETTER DATED 20. 01.2016. THUS ON THIS ISSUE, NO PREJUDICE IS CAUSED TO THE REVENUE, RATHER THE ASSESSEE HAS OFFERED HIGHER INCOME FOR TAX. THUS, ON THIS ISS UE, THE ORDER OF THE AO IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTE REST OF THE REVENUE. IN RESPECT OF SET OFF OF UNABSORBED DEPRECIATION, THE ISSUE OF DOUBLE SET OFF IS A MISTAKE APPARENT ON RECORD WHICH IS RECTIFIABLE U/S 154 AND IS NOT A MATTER WHICH FALLS UNDER THE PURVIEW OF SECTION 263. FURTHER HE PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COU RT IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. 332 ITR 167 (DEL.), DECISION O F HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES CO. LTD. VS . CIT 243 ITR 83 (SC) AND THE DECISION OF HONBLE MUMBAI HIGH COURT IN TH E CASE OF GABRIL INDIA LTD. 203 ITR 108 (BOM.). ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 9 3.3 LD. COUNSEL FURTHER SUBMITTED THAT IN THE IMPUG NED ORDER, THE LD. PR.CIT HAS ALSO PLACED RELIANCE ON THE AMENDMENT MAD E BY FINANCE ACT, 2015 W.E.F. 01.06.2015 WHERE IT IS PROVIDED BY WAY OF EXPLANATION 2 THAT AN ORDER PASSED BY THE AO WOULD BE DEEMED TO B E ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE IF THE S AME IS PASSED WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE B EEN MADE. IN THIS CONNECTION IT IS SUBMITTED THAT THE AMENDMENT IS MA DE EFFECTIVE FROM 1 ST DAY OF JUNE, 2015 AND THEREFORE, NOT APPLICABLE FO R EARLIER ASSESSMENT YEARS. FURTHER THE EXPLANATION WOULD APPL Y ONLY WHEN NO ENQUIRY OR VERIFICATION WAS MADE AS THE STATUTE DOES PUT ANY EMBARGO ON THE AO AS TO THE MANNER IN WHICH HE SHOULD MAKE T HE ENQUIRIES / VERIFICATION. HE SUBMITTED THAT THE LAW IS WELL SETT LED THAT LEGISLATIONS WHICH MODIFY ACCRUED RIGHTS OR WHICH IMPOSE OBLIGATI ONS OR IMPOSE NEW DUTIES OR ATTACH A NEW DISABILITY HAVE TO BE TREATED AS PROSPECTIVE UNLESS THE LEGISLATIVE INTENT IS CLEARLY TO GIVE TH E ENACTMENT A RETROSPECTIVE EFFECT. HE SUBMITTED THAT THE HONBL E ITAT, MUMBAI BENCH IN CASE OF ANUJ JAYENDRA SHAH VS. PCIT (2016) 67 TAXMANN.COM HAS HELD THAT EXPLANATION 2 TO SECTION 263, MEMORA NDUM TO FINANCE BILL, 2015 AND NOTES ON CLAUSES TO FINANCE BILL, 20 15 HELD THAT THE EXPLANATION 2 TO SECTION 263 BEING DECLARATIVE IN N ATURE AND IS INSERTED ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 10 TO PROVIDE CLARITY ON THE ISSUE AS TO WHICH ORDERS P ASSED BY THE AO SHALL CONSTITUTE ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF REVENUE CONCLUDED THAT IT WOULD BE APPLICABLE EVEN IN CASES WHERE ORDER U/S 263 IS PASSED BEFORE 01.06.2015. AT THE SAME TIME IT ALSO HELD TH AT EXPLANATION 2 TO SECTION 263 IS NOT FOR MAKING FISHING OR ROVING ENQ UIRIES IN THE MATTER WHICH ARE CONCLUDED BUT WOULD APPLY WHERE AO HAS MERE LY ACCEPTED THE SUBMISSION MADE BY THE ASSESSEE WITHOUT ANY ENQUIRY OR VERIFICATION. THEREFORE, THE RATIO LAID DOWN IN THIS CASE HAS TO BE APPLIED ON CASE TO CASE BASIS TO ASCERTAIN WHETHER OR NOT THE ORDER PAS SED BY AO IS WITHOUT MAKING ENQUIRIES OR VERIFICATION WHICH SHOULD HAVE B EEN MADE. HE SUBMITTED THAT THE STATUE DOES NOT PROVIDE AS TO WHA T ENQUIRIES OR VERIFICATION THE AO SHOULD MADE BEFORE PASSING AN A SSESSMENT ORDER. THEREFORE, IT IS LEFT TO THE WISDOM OF AO TO MAKE NEC ESSARY ENQUIRY OR VERIFICATION BEFORE HE PASSES AN ASSESSMENT ORDER. THEREFORE, HE PRAYED THAT IN THE LIGHT OF THE ABOVE CASE LAWS RELIED, IMP UGNED ORDER MAY BE SET ASIDE AND THE ORIGINAL ASSESSMENT ORDER DATED 3 1/3/2014 BE RESTORED. 4. ON THE CONTRARY, THE LD. CIT DR HAS OPPOSED THE SUBMISSIONS OF THE LD. AR OF THE ASSESSEE AND SUBMITTED THAT THERE IS NO DISPUTE WITH ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 11 REGARD TO THE FACT THAT THE POWERS CONFERRED ON PR. CIT U/S 263 CAN BE INVOKED IN A CASE WHERE THE PR.CIT FINDS THAT THE ASS ESSMENT ORDER AS PASSED BY THE ASSESSING OFFICER IS ERRONEOUS INASMU CH AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE SUBMITTED THAT T HE LAW IS WELL SETTLED THAT EVERY ERRONEOUS ORDER CANNOT BE STATED TO BE P REJUDICIAL TO THE INTEREST OF REVENUE BUT IN A CASE WHERE THE ERRONEO US ORDER IS PREJUDICIAL TO THE INTEREST OF REVENUE. THE LD. CIT(A ) HAS POWER TO REVISE IT AND BY DOING SO HE CAN CANCEL OR MODIFY THE ASSE SSMENT ORDER. HE SUBMITTED THAT NON-EXAMINATION OF THE MATERIAL PLAC ED BEFORE ASSESSING OFFICER IN THE LIGHT OF THE PROVISIONS OF SECTION 2 63 OF THE ACT IS NECESSARILY ERRONEOUS, IF BY SUCH NON-EXAMINATION O R NON-VERIFICATION OR NON-CONDUCTING OF ENQUIRY OF MATERIAL PLACED BEFORE THE ASSESSING OFFICER IS SUCH THAT AN INCOME WHICH, THEREFORE, REQ UIRED TO BE TAXED IS ESCAPED TAXATION AND/OR ANY BENEFIT, WHICH WAS NOT RE QUIRED TO BE GIVEN UNDER THE LAW WAS GIVEN TO THE ASSESSEE. IN THAT EVEN T, THE LD. PR. CIT WOULD BE WITHIN HIS POWER TO REVISE THE ORDER. HE SUBM ITTED THAT, NOW COMING TO THE FACTS OF THE PRESENT CASE, THE LD PR. CIT IN THE NOTICE ITSELF HAS PROVIDED THE DETAILS WHERE THE ASSESSING OFFICER FAULTED IN MAKING VERIFICATION AND EXAMINING OF THE MATERIAL PROPERLY . HE SUBMITTED THAT THE FIRST ISSUE IS WITH REGARD TO INTEREST PAYMENT T O THE DIRECTOR OF THE ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 12 COMPANY. THE ASSESSING OFFICER VIDE QUERY LETTER DAT ED 25/2/2014 REQUESTED THE ASSESSEE TO FURNISH COPY OF UNSECURED LOAN ACCOUNTS, IN WHICH ADDITION OF LOAN MADE OR LOAN ACCEPTED AFRESH . IN RESPONSE TO THAT, THE ASSESSEE VIDE LETTER DATED 20/3/2014 STAT ED THAT INTEREST HAS BEEN PAID TO MR. ASHOK KUMAR RS. 3.41 LACS, MR. RAK ESH AHUJA RS./ 24.41 LACS, M/S OPUS REALITY DEVELOPMENT LTD. RS. 0 .14 LACS AND ARISTON INFRASTRUCTURE PVT. LTD. RS. 0.17 LACS FOR THE LOAN PROVIDED BY THEM TO THE COMPANY. THE RATE OF INTEREST BELOW 15% WHICH WAS PAID AFTER DEDUCTION OF TDS AND HENCE THE EXPENSES IS JUSTIFIED . THE LD. PR.CIT FOUND THAT THE ASSESSING OFFICER HAS PASSED ASSESSM ENT ORDER WITHOUT PROPERLY EXAMINING THE ISSUE REGARDING THE ACTUAL P AYMENT OF INTEREST ON UNSECURED LOAN TO SHRI RAKESH AHUJA, DIRECTOR OF THE COMPANY. FROM THE AFORESAID OBSERVATION OF LD. PR. CIT, IT CAN BE DEDUCED THAT THE ASSESSING OFFICER FAILED TO EXAMINE THE ACTUAL PAYM ENT OF INTEREST APART FROM JUSTIFICATION OF SUCH PAYMENT. LD. CIT DR HAS S UBMITTED THAT IT WAS THE PRECONDITION FOR THE ASSESSING OFFICER TO FIND OUT AS TO WHETHER THE PAYMENT OF INTEREST IS MADE OR NOT. FAILURE BY EXAM INE THIS FACT WOULD NATURALLY CONSTITUTE THE ORDER BEING ERRONEOUS. THER EFORE, ON THIS ISSUE, THERE IS NO INFIRMITY IN THE ORDER OF THE LD. PR.CI T AS THE LD. PR.CIT HAS MERELY DIRECTED THE ASSESSING OFFICER TO MAKE ASSES SMENT AFRESH AND ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 13 EXAMINE WHETHER THE PAYMENT OF INTEREST IS MADE OR WH AT IS THE JUSTIFICATION OF SUCH PAYMENT OF INTEREST AT THE RA TE HIGHER THAN THE BANK RATE. 4.1 THE LD. CIT DR FURTHER SUBMITTED THAT THE LD. PR. CIT IN ITS ORDER HAS OBSERVED THAT THE ASSESSING OFFICER MERELY ACCE PTED THE CONTENTION OF THE ASSESSEE WITHOUT MAKING ENQUIRIES WITH REGARD TO ASSIGNMENT OF DEBTS AND THE AMOUNT RECEIVED BY WAY OF UNSECURED LO ANS. HE SUBMITTED THAT IN THE ASSESSMENT ORDER, THERE IS NO WHISPER OF THE INVESTIGATION REPORT RATHER THERE IS NO OBSERVATION MADE BY THE ASSESSING OFFICER WITH REGARD TO THE LOAN TRANSACTIO NS WITH M/S MAKESWORTH PROJECTS & DEVELOPERS (P) LTD. STARTED W.E .F. 02/7/2010 AND CONTINUED THEREAFTER AND THE AMOUNT INVOLVED DURING THE YEAR WAS RS. 4.75 CRORES AND RS. 27,14,575/-. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ISSUE TO BE DETERMINED WHE THER THE LD PR. CIT HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 263 O F THE ACT UNDER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. THERE I S NO DISPUTE WITH REGARD TO THE FACT THAT THE POWERS U/S 263 OF THE AC T CAN BE EXERCISED IF ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 14 THE LD. PR.CIT FINDS THAT THE ASSESSMENT ORDER PASSE D U/S 143(3) OF THE ACT IS ERRONEOUS IN SO FAR AS IT SHOULD BE PREJUDIC IAL TO THE INTEREST OF THE REVENUE. THEREFORE, TWIN CONDITIONS ARE TO BE SATISF IED FIRSTLY THE ORDER SO PASSED IS ERRONEOUS AND SECONDLY IT IS PREJUDICI AL TO THE INTEREST OF THE REVENUE. IN THE CASE IN HAND, THE BASIS FOR INV OKING THE PROVISIONS BY THE LD. PR.CIT IS THAT THE ASSESSING OFFICER FAIL ED TO EXAMINE THE ISSUE REGARDING ACTUAL PAYMENT OF INTEREST ON UNSECURED L OAN TO SHRI RAKESH AHUJA, DIRECTOR OF THE COMPANY AND IN RESPECT OF TH E BILLS FOR EXPENSES FROM M/S TUTICORIN TREXIM (P) LTD. (NEW NAME M/S MAKES WORTH PROJECTS & DEVELOPERS (P) LTD). THE ASSESSING OFFICER ACCEPTE D THE SUBMISSIONS OF THE ASSESSEE COMPANY WITHOUT EXAMINING THE ISSUE OF ASSIGNMENT OF DEBT AND UNSECURED LOAN. FURTHER IT WAS NOTICED THAT THE ASSESSEE HAD REVERSED THE PROVISION OF DOUBTFUL DEBTS. THE ASSESS ING OFFICER HAS NOT RAISED ANY QUERY OR SOUGHT INFORMATION FROM THE ASS ESSEE COMPANY. THE LD. PR.CIT WAS OF THE VIEW THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND ON THE FACTS AND THE MATERIAL PLACED BEFORE HI M, WHICH HAS RESULTED INTO THE ORDER BEING ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF REVENUE. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED T HAT THE ASSESSING OFFICER VIDE QUERY LETTER DATED 25/2/2014 AND CLAU SES AT PAGE 9 TO 11 OF THE PAPER BOOK HAD IN FACT SOUGHT THE EXPLANATIO N ON ALL THE ISSUES AS ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 15 RAISED BY THE LD. PR.CIT. IN RESPONSE THERETO, THE A SSESSEE FURNISHED REQUISITE DETAILS AND EXPLANATION VIDE LETTER DATED 10/3/2014 AND 20/3/2014. THE CONTENTION OF THE ASSESSEE IS THAT AF TER APPLYING THE MIND, THE ASSESSING OFFICER ACCEPTED THE EXPLANATIO N, THEREFORE, IT CANNOT BE INFERRED THAT THE ASSESSING OFFICER FAILE D TO MAKE ENQUIRY. IT SUBMITTED THAT EVEN BEFORE THE LD. PR.CIT, ALL DETAI LS WERE FURNISHED, THEREFORE, IT CANNOT BE CONSTRUED THAT THE ORDER IS PREJUDICIAL TO THE INTEREST OF REVENUE. WE FIND THAT ONE OF THE ISSUE IS WITH REGARD TO THE SET OF UNOBSERVED DEPRECIATION, THE CONTENTION OF T HE LD. AR OF THE ASSESSEE IS THAT IT COULD HAVE BEEN RECTIFIED U/S 1 54 OF THE ACT. IT IS CONTENDED THAT IT IS NOT A CASE THAT THE ASSESSING OFFICER HAS NOT MADE ANY ENQUIRY ON THE ISSUES. HE SUBMITTED THAT THERE IS DISTINCTION BETWEEN INADEQUACY OF ENQUIRY AND LACK OF ENQUIRY FA LLS U/S 263 OF THE ACT, CANNOT BE EXERCISED BY THE PR.CIT FOR INADEQUA CY OF ENQUIRY FOR WHICH HE PLACED RELIANCE ON THE DECISION IN THE CASE OF CIT VS SUNBEAM AUTO LTD. 332 ITR 167 (DEL.) MALABAR INDUSTRIES CO. LTD. VS. CIT 243 ITR 83 (SC). HOWEVER, THE ASSESSEE CONCEDED THE FACT THA T THE AMENDMENT HAS BROUGHT INTO THE PROVISIONS OF SECTION 263 OF T HE ACT. THE COORDINATE BENCH OF MUMBAI ITAT IN THE CASE OF ANUJ JAYENDRA SHAH VS PCIT (2016) 67 TAXMANN.COM HAS HELD THAT THE EXPLANAT ION 2 TO SECTION ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 16 263 BEING DECLARATIVE IN NATURE AND IS INSERTED TO PROVIDE CLARITY OH THE ISSUE AS TO WHICH ORDERS PASSED BY THE ASSESSING OFF ICER SHALL CONSTITUTE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. WE FIND THAT THE ASSESSING OFFICER IN RESPECT OF THE UNSECURED LOAN IN THE QUERY LETTER HAD SOUGHT EXPLANATION. FURTHER IT IS NOTICED THAT THE ASSESSING OFFICER ACCEPTED THE CONTENTION WITHOUT VERIFYING THE VERACI TY OF THE TRANSACTION. WE DO NOT FIND ANY MERIT INTO THE CONTENTION THAT A N EXPLANATION IS FURNISHED THAT WOULD BE SUFFICIENT TO COME TO THE CO NCLUSION THAT THE EXPLANATION SO GIVEN IS DULY VERIFIED. THE PURPOSE O F MAKING ENQUIRY IS NECESSARILY TO ASCERTAIN THE TRUTH OF THE MATERIAL PLACED BEFORE THE ASSESSING OFFICER. IN THE PRESENT CASE, NO ENDEAVOU R HAS BEEN MADE BY THE ASSESSING OFFICER AS CAN BE SEEN FROM THE ASSES SMENT ORDER, THEREFORE, THE CONTENTION OF THE LD AR OF THE ASSES SEE THAT IT IS CASE OF INADEQUACY OF ENQUIRY HAS NO MERIT. IN RESPECT OF T HE ASSIGNMENT OF DEBT IN THE CASE OF M/S MAKESWORTH PROJECTS & DEVELO PERS (P) LTD. ON THE RECORDS, IT IS TRANSPIRED THAT THE INVESTIGATIO N WING HAD FURNISHED CERTAIN INFORMATION TO THE ASSESSING OFFICER. THE AS SESSING OFFICER HAS NOT MADE ENQUIRY IN RESPECT OF THE INFORMATION SUPP LIED TO HIM. IT IS A CLEAR CASE OF LACK OF ENQUIRY, HENCE ON THIS ISSUE ALSO, THE ORDER OF THE LD. PR.CIT IS UPHELD. IN RESPECT OF POINT NO. 20 OF AUDIT REPORT, WE FIND ITA 565/JP/2016_ M/S LORDS CHLORO ALKALI LTD. VS PR.CIT 17 MERIT INTO THE OBSERVATION OF THE LD. PR.CIT AS THE ASSESSING OFFICER HAS NOT RAISED ANY ENQUIRY TO THE ASSESSEE IN THIS BEHA LF. THE ASSESSING OFFICER HAS SIMPLY ACCEPTED THE CONTENTION OF THE A SSESSEE IN RESPECT OF UNSECURED LOANS WITHOUT MAKING INDEPENDENT ENQUIRY. IN THE LIGHT OF THE ABOVE, WE DO NOT SEE ANY REASON TO INTERVENE INTO TH E ORDER OF THE LD. PR.CIT AND THE SAME IS HEREBY UPHELD. GROUNDS RAISED IN THE APPEAL ARE REJECTED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DECEMBER, 2016. SD/- SD/- HKKXPAN DQY HKKJR (BHAGCHAND) (KUL BHARAT) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 26 TH DECEMBER, 2016 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S LORDS CHLORO ALKALI LTD., ALWAR. 2. IZR;FKHZ @ THE RESPONDENT- THE PRINCIPAL CIT, ALWAR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 565/JP/2016) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR