M/s. Arsh Vision C/o- M/s. Mahendra Gargieya & Associates, Advocates & Tax Consultants, 537-539, 5th Floor, Mahima's Trinity, Near Jyoti Rao Phule College, New Sanganer Road, Jaipur, Jaipur V. DCIT Circle-1, Ajmer, Circle-1, Ajmer

ITA 592/JPR/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5076 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2020
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 26-04-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: HEMANG GARGIEYA
• Keywords: Business income; Revision of order; Depreciation; Initiation of penalty proceedings; Wrong claim; Difference of opinion; Assessment record; Change of opinion; Set aside
• Section: 263; 271(1)(c); 143(3); 40(b); 201; 113; 13; 22

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HES, B 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. 592/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2015-16 M/S ARSH VISION RAS BHAWAN, NAYA BAZAR, AJMER CUKE VS. THE DCIT, CIRCLE-01, AJMER LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAMFA6227B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SH. HEMANG GARGIEYA (ADV.) & SH. M AHENDRA GARGIEYA (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SH. B. K. GUPTA (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 30/09/2020 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 12/10/2020 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY LD. PR. CIT, AJMER U/S 263 DATED 27.03.2019 FOR A.Y 201 5-16. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 28.09.2015 DECLARING TOTAL INCO ME OF RS. 25,49,070/-. THE MATTER WAS TAKEN UP FOR COMPLETE SCRUTINY UNDER CASS AND THEREAFTER, THE ASSESSMENT ORDER WAS PASSED U/S 143(3) ON 29.12 .2017 ASSESSING TOTAL INCOME AT RS. 27,14,560/-. SUBSEQUENTLY, ASSESSMENT RECORDS WERE EXAMINED BY THE LD. PR. CIT, AJMER AND A SHOW CAUSE U/S 263 DATED 05.03.2019 WAS ISSUED TO THE ASSESSEE. IN RESPONSE , THE ASSESSEE FILED ITS SUBMISSIONS AND THEREAFTER, CONSIDERING THE SUBMISS ION OF THE ASSESSEE BUT NOT FOUND THE SAME ACCEPTABLE, THE ASSESSMENT ORDER SO PASSED BY THE AO ITA NO. 592/JP/2019 M/S ARSH VISION VS. DCIT, AJMER 2 WAS HELD BY THE LD PR. CIT AS ERRONEOUS AND PREJUDI CIAL TO THE INTEREST TO THE REVENUE AND WAS SET ASIDE TO FILE OF THE AO TO THE LIMITED EXTENT AS STATED IN THE REVISION ORDER FOR MAKING A FRESH INQUIRY AND D ECIDING THE SAME AFRESH. AGAINST THE SAID ORDER AND DIRECTIONS PASSED BY THE LD PR. CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 3. DURING THE COURSE OF HEARING, THE LD. AR SUBMITT ED THAT IT IS A CASE OF CHANGE OF OPINION IN AS MUCH AS THE ASSESSING OFFIC ER HAS ALREADY APPLIED HIS MIND AND FORMED AN OPINION. IT WAS SUBMITTED THAT T HE ASSESSMENT WAS COMPLETED U/S 143(3) AFTER MAKING VARIOUS ENQUIRIES AND DETAILED INVESTIGATION, THE AO RAISED DETAILED QUERIES ARISI NG FROM THE DISCUSSION THROUGH QUERY LETTER DATED 02.08.2017 AND IN RESPON SE, THE ASSESSEE ALSO FILED SUBMISSION DATED 22.08.2017. IT WAS SUBMITTED THAT THE AO HAD EVIDENTLY MADE REASONABLY DETAILED ENQUIRIES AND CO LLECTED RELEVANT INFORMATION. THUS, IT IS A CASE OF CHANGE OF OPINIO N IN AS MUCH AS THE AO AFTER MAKING DUE INVESTIGATION AND APPLICATION OF M IND COMPLETED THE ASSESSMENT AND NOW THE LD. PR. CIT HAS SUBSTITUTED THE AOS OPINION WHICH IS NOT PERMISSIBLE WITHIN SCOPE OF SECTION 263. IN SUP PORT, THE RELIANCE WAS PLACED ON THE HONBLE RAJASTHAN HIGH COURT DECISION IN CASE OF CIT VS. GANPAT RAM BISHNOI (2005) 198 CTR (RAJ) 546. 4. COMING TO THE EACH OF THE MATTERS RAISED BY THE LD. PR. CIT IN HIS SHOW CAUSE NOTICE, FIRSTLY, REGARDING THE CLAIM OF DEPRE CIATION ON THE RESIDENTIAL PROPERTIES, THE LD. AR SUBMITTED THAT, THE SUBJECTE D PROPERTY IS BEING USED BY THE ASSESSEE FIRM FOR THE PURPOSE OF BUSINESS PURPO SE I.E. FOR GODOWN AND OFFICE WHICH FACT WAS BROUGHT BEFORE THE AO ALSO AN D AFTER NECESSARY VERIFICATION, HE HAS ACCEPTED THE SAME. IN SUPPORT, THE REFERENCE WAS DRAWN TO THE QUESTION NO. 2 OF THE QUESTIONNAIRE DATED 02 .08.2017 ISSUED BY THE AO AND THE REPLY FILED BY THE ASSESSEE. IT WAS SUBM ITTED THAT THE AO WAS ITA NO. 592/JP/2019 M/S ARSH VISION VS. DCIT, AJMER 3 AWARE OF THE FACT OF THE SAID BUILDING, THOUGH DESC RIBED AS RESIDENTIAL, AFTER DISCUSSION WITH THE AR, HE WAS SATISFIED THAT THE S AID PROPERTY IS BEING USED FOR BUSINESS PURPOSE ONLY. IT WAS SUBMITTED THAT BE FORE THE PR. CIT ALSO, THE ASSESSEE FIRM, IN SUPPORT HAS PRODUCED PHOTOGRAPHER S OF THE SUBJECT PROPERTY WHEREIN THE OFFICE SETUP AND GOODS STORED IN SUCH PREMISES CAN BE CLEARLY SEEN. IT WAS FURTHER SUBMITTED THAT THE STA TUS OF A PARTICULAR PROPERTY I.E. WHETHER IT IS RESIDENTIAL OR COMMERCIAL, IS OF NO RELEVANCE WHILE CLAIMING DEPRECIATION UNDER THE INCOME TAX ACT. FOR CLAIMING DEPRECIATION UNDER THE ACT, ALL THAT IT REQUIRED IS THAT THE PROPERTY MUST BE USED FOR BUSINESS PURPOSE AND IT WAS ACCORDINGLY SUBMITTED THAT THE S TATUS OF THE PROPERTY AS PER MUNICIPALITY RECORDS I.E. BEING RESIDENTIAL OR COMMERCIAL IS OF NO RELEVANCE. HENCE, THIS GROUND FOR REVISION DESERVES TO BE DISMISSED. 5. REGARDING THE CLAIM OF DEPRECIATION ON SCOOTER W HICH WAS PURCHASED IN THE NAME OF PARTNER OF THE ASSESSEE FIRM, IT WAS SU BMITTED BY THE LD AR THAT THE SAID SCOOTER WAS PURCHASED FOR AND ON BEHALF OF THE FIRM, IN THE NAME OF THE PARTNER SHRI ASHISH DEEDWANIA. THE PAYMENT AGAI NST THE SAME WAS MADE BY THE ASSESSEE FIRM ONLY. A PERUSAL OF THE BA NK STATEMENT SHOWS PAYMENT MADE TO RAJ MOTOR OF RS. 56,000/-. ADMITTED LY, THE SCOOTER APPEARS IN THE BALANCE SHEET OF THE ASSESSEE FIRM. IN SUPPO RT, THE RELIANCE WAS PLACED ON THE CO-ORDINATE BENCH DECISION IN CASE OF JAIN T RANSPORT CO. VS. ITO (1985) 22 TTJ (JP) 457 AND SHRI MANGAL SINGH PALSAN IA VS. ACIT (IN ITA NO. 53/JP/2014 VIDE ORDER DATED 31.03.2016). 6. REGARDING THE MATTER RELATING TO INTEREST ON FDR OF RS. 3,36,620/- NOT INCLUDED WHILE CALCULATING ALLOWABLE REMUNERATION T O PARTNERS U/S 40(B), IT WAS SUBMITTED THAT THE ASSESSEE DURING THE REVISION ARY PROCEEDING HAS STATED THAT THE SAID FDRS WERE GIVEN AS GUARANTEE T O SONY INDIA PVT. LTD AND CANON LTD. WHO ARE SUPPLIER OF PRINTERS AND THUS TH E INTEREST ON FDRS BEING ITA NO. 592/JP/2019 M/S ARSH VISION VS. DCIT, AJMER 4 BUSINESS INCOME SHOULD BE INCLUDED FOR CALCULATING ALLOWABLE REMUNERATION U/S 40(B) OF THE ACT. THIS FACT IS EVIDENT FROM AN AGREEMENT ENTERED BETWEEN THE ASSESSEE AND M/S CANON INDIA PRIVATE LTD AND M/ S SONY INDIA PVT. LTD. IT WAS SUBMITTED THAT THE LD. PR. CIT HAS WRONGLY STAT ED THAT NO EVIDENCE WAS FURNISHED. IN SUPPORT, THE RELIANCE WAS PLACED ON THE CO-ORDINATE BENCH DECISION IN CASE OF M/S S.P. EQUIPMENT & SERVICES C IT (2010) 33 DTR 265 (JP). IT WAS SUBMITTED THAT THE ASSESSEE FIRM WAS R EQUIRED TO SUBMIT PERFORMANCE BANK GUARANTEE TO CANNON AND SONY AND I T COULD NOT HAVE PROCEEDED FURTHER TO TAKE DEALERSHIP OF THE COMPANY TO SELL ITS PRODUCTS IN ABSENCE OF THE SAME. THIS WAY, IT WAS AN OPERATIONA L AND COMPELLING NECESSITY ON THE PART OF THE ASSESSEE TO GET THE FD RS PREPARED AND PLEDGED WITH THE CONCERNED BANKS. IN SUPPORT, THE RELIANCE WAS PLACED ON THE CO-ORDINATE BENCH DECISION IN CASE OF ITO VS. MAYA CONSTRUCTION (ITA NO. 510 & 43/JU/2013). 7. LASTLY, REGARDING THE DIRECTION GIVEN BY THE LD. PR. CIT TO THE AO TO INITIATE PENALTY PROCEEDINGS U/S 271(1)(C) IN RESPE CT OF AD-HOC DISALLOWANCES OF EXPENSES MADE IN THE ASSESSMENT ORDER, IT WAS SU BMITTED THAT NO PENALTY CAN BE LEVIED ON MERE DISALLOWANCE OF EXPENSES AND ON MERE ESTIMATION. IT WAS FURTHER SUBMITTED THAT , THE LD. PR. CIT CANNOT BE INVOKED REVISIONARY JURISDICTION U/S 263 TO DIRECT AO TO INITIATE THE P ENALTY PROCEEDING AND IN SUPPORT, RELIANCE WAS PLACED ON THE HONBLE RAJASTH AN HIGH COURT DECISION IN CASE OF CIT VS. KESHRIMAL PARASMAL (1986) 27 TAXMAN 447 (RAJ). IT WAS SUBMITTED THAT ARRIVING AT A SATISFACTION IS THE FO UNDATION OF INITIATION OF PROCEEDINGS U/S 271(1)(C) AND SUCH SATISFACTION HAS TO BE RECORDED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND IN THE INSTANT CASE, NON-INITIATION OF PENALTY PROCEEDINGS SHOWS THAT TH E AO OF THE VIEW THAT IT IS NOT A FIT CASE FOR INITIATION OF PENALTY AND HENCE HE DID NOT INITIATE THE PENALTY. THEREFORE, NON-INITIATION OF PENALTY PROCE EDINGS WOULD NOT BE LEAD ITA NO. 592/JP/2019 M/S ARSH VISION VS. DCIT, AJMER 5 TO A CONCLUSION THAT THE ORDER OF THE AO IS ERRONEO US IN ANY MANNER. IT WAS ACCORDINGLY SUBMITTED THAT THE ORDER SO PASSED BY P R. CIT IS BEYOND THE SCOPE OF SECTION 263 AND THE SAME NEEDS TO BE QUASH ED. 8. PER CONTRA, THE LD. DR TAKEN US THROUGH THE FIN DING OF THE LD. CIT(A) AND REGARDING CLAIM OF DEPRECIATION ON RESIDENTIAL PROPERTY, IT WAS SUBMITTED THAT ON PERUSAL ON THE SALE DEED, IT IS CLEAR THAT THE SAID PROPERTY IS A RESIDENTIAL PROPERTY AND CAN BE USED FOR RESIDENTIA L PURPOSE ONLY. THE ASSESSEE HAS NOT FURNISHED ANY DOCUMENTARY EVIDENCE WHICH CAN PROVE THAT THE USE OF PROPERTY HAS BEEN CONVERTED FROM RESIDEN TIAL TO COMMERCIAL. REGARDING THE PHOTOGRAPH OF A ROOM WITH TWO TABLES AND SOME CHAIRS WHERE A PERSON IS SHOWN TO HAVE BEEN WORKING ON LAPTOP AN D THE OTHER PHOTOGRAPH WHERE SOME BOXES OF SYMPHONY WINTER AIR COOLER HAVE BEEN SHOWN, IT WAS SUBMITTED THAT ON PERUSAL OF SAID PHOTOGRAPHS, IT C ANNOT BE SAID THAT THE ASSESSEE HAS USED THE PROPERTY FOR ITS BUSINESS PUR POSES. THERE IS NO SIGN BOARD OR OTHER INDICATION IN BOTH THE PHOTOGRAPHS, WHICH CAN SUBSTANTIATE THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE IS USIN G THE PROPERTY FOR ITS BUSINESS PURPOSE. FURTHER, REFERRING TO THE PHOTOGR APH OF THE HOUSE AND SITE PLAN OF THE PROPERTY SHOWING BED ROOMS, TOILETS, KI TCHENS, BATHROOM, KITCHEN STORE ROOM, LOUNGE ETC, THE AO FAILED TO ENQUIRE IN TO EACH OF SUCH PLACES I.E. ROOMS ETC. TO SEE THE USE THEREOF AND THEREFORE, IT IS CLEAR THAT AN ERRONEOUS AND PREJUDICIAL ORDER HAS BEEN PASSED BY THE ASSESS ING OFFICER ON ACCOUNT OF LACK OF ENQUIRY. FURTHER, THE ASSESSEE HAS FURNISHE D FEE RECEIPT ISSUED BY THE SUB-REGISTRAR ALONG WITH SALE DEED HOWEVER, ON GOIN G THROUGH THE SAME, THE EVALUATED VALUE TAKEN BY THE SUB-REGISTRAR IS AGAIN NOT CLEARLY SHOWN THEREIN. 9. REGARDING CLAIM OF DEPRECIATION ON SCOOTER, IT W AS SUBMITTED THAT THE SAME IS IN THE NAME OF PARTNER OF THE ASSESSEE FIRM , AND THE FIRM HAD NO ITA NO. 592/JP/2019 M/S ARSH VISION VS. DCIT, AJMER 6 RIGHT OVER IT AND ACCORDINGLY, DEPRECIATION CANNOT BE ALLOWED TO THE ASSESSEE FIRM. FURTHER, THE DECISION IN CASE OF MYSORE MINER ALS VS. CIT 239 ITR 775 (1999) IS DISTINGUISHABLE OF FACTS AND DOES NOT SUP PORT THE CASE OF THE ASSESSEE. 10. REGARDING PLACING OF FDRS AND CONSIDERING THE INTEREST ON SAID FDRS FOR THE PURPOSE OF COMPUTATION OF PARTNERS REMUNER ATION U/S 40(B), IT WAS SUBMITTED THAT THE ASSESSEE HAS MERELY RAISED ITS C ONTENTIONS THAT SAID FDRS WERE PLACED FOR BUSINESS PURPOSES. HOWEVER, IT HAS NOT FURNISHED ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE ITS CLAIM. NO DOCUMENTS IN THE FORM ANY LETTER OR CONTRACT AGREEMENT HAS BEEN FURNISHED WHICH PROVE THAT THE ASSESSEE HAS MADE THE FDR FOR GIVING GUARANTEE TO T HE CANON INDIA PVT. LTD. AND SONY INDIA LTD. 11. HE ACCORDINGLY SUPPORTED THE ORDER PASSED BY TH E LD. PR. CIT. FURTHER, IN SUPPORT OF HIS CONTENTIONS, HE HAS RELIED ON THE FOLLOWING DECISIONS: DANIEL MERCHANTS P. LTD AND OTHERS VS. ITO (SLP NO. 23976/2017 DATED 29.11.2017) VIRBHADRA SINGH [HUF] VS. PR. COMMISSIONER OF INCOM E-TAX [2017] 86 TAXMANN.COM 113 (HP) COMMISSIONER OF INCOME-TAX VS. BALLARPUR INDUSTRIES LTD. [2017] 85 TAXMANN.COM 10 (BOMBAY) COMMISSIONER OF INCOME-TAX VS. BHAWAL SYNTHETICS (I NDIA), UDAIPUR [2017] 81 TAXMANN.COM 478 (RAJ.) MALABAR INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INC OME-TAX [2000] 109 TAXMAN 66 (SC) 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IT IS A CASE WHER E THE RETURN OF INCOME FILED ITA NO. 592/JP/2019 M/S ARSH VISION VS. DCIT, AJMER 7 BY THE ASSESSEE WAS SELECTED FOR COMPLETE SCRUTINY UNDER CASS AND THE LD PR CIT ON EXAMINATION OF ASSESSMENT RECORDS HAS NOTED CERTAIN MATTERS AND IN RESPECT OF WHICH, AS PER THE OPINION OF THE LD PR. CIT AND AS CONTENDED BY THE LD CIT D/R, THERE IS LACK OF ENQUIRY ON PART OF THE ASSESSING OFFICER AND HENCE, THE ORDER SO PASSED BY THE ASSESSING OFFICER HAS BEEN HELD AS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. ON THE OTHER HAND, THE CASE OF THE ASSESSEE AS CONTENDED BY THE LD A/R IS THAT EACH OF THE MATTERS RAISED BY THE LD PR CIT HAVE BEEN DULY EXAM INED BY THE ASSESSING OFFICER AND THEREFORE, IT IS NOT A CASE OF LACK OF ENQUIRY ON PART OF THE ASSESSING OFFICER AND ONCE, THE ASSESSING OFFICER, HAVING EXAMINED THE MATTER, HAS FORMED AN OPINION, EVEN THOUGH NOT SPEC IFICALLY STATED IN THE ASSESSMENT ORDER, THE VIEW SO FORMED BY THE ASSESSI NG OFFICER CANNOT BE SUBSTITUTED FOR ANOTHER VIEW BY THE LD PR CIT. 13. IN ORDER TO EXAMINE THE RIVAL CONTENTIONS, WE T HEREFORE REFER TO EACH OF THE MATTERS RAISED BY THE LD PR CIT IN HIS SHOW-CAU SE NOTICE AND THE CONTENTS OF THE SHOW-CAUSE READS AS UNDER: 2. ON EXAMINATION OF ASSESSMENT RECORD, IT IS NOTI CED THAT YOU HAVE PURCHASED RESIDENTIAL PROPERTY SITUATED AT A.M .C. NO. 536- A/(1)/1, GALI NO. 2, SHANTI PURA, CHRISTIAN GANJ, A JMER OF RS. 44,21,000/+ REGISTRY & OTHER CHARGES OF RS. 2,71,60 0/- (AGGREGATING TO RS. 46,92,600/-) ON 15.12.2014. THE SAID PROPERTY HAS BEEN SHOWN AS RESIDENTIAL IN THE SALE DEED, BUT YOU MADE INADMISSIBLE CLAIM OF DEPRECIATION OF RS. 2,34,630/ -. HOWEVER, THE AO FAILED TO CONDUCT ENQUIRY WITH REFERENCE TO INAD MISSIBLE DEPRECIATION ON RESIDENCE THEREBY MAKING THE ASSESS MENT ORDER ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. ITA NO. 592/JP/2019 M/S ARSH VISION VS. DCIT, AJMER 8 ON EXAMINATION OF FEE RECEIPT ISSUED BY THE SUB-RE GISTRAR, IT IS NOTICED THAT THE EVALUATED VALUE TAKEN BY THE SU B-REGISTRAR IS NOT CLEARLY SHOWN THEREIN. MOREOVER, THE EVALUATED VALUE AS TAKEN BY THE SUB-REGISTRAR APPEARS TO BE DIFFERENT FROM T HE VALUE SO ADOPTED BY YOU FOR REGISTRATION PURPOSE. HOWEVER, A O FAILED TO CONDUCT ANY ENQUIRY THEREINTO. 3. ON EXAMINATION OF DETAILS OF FIXED ASSETS AVAILA BLE ON ASSESSMENT RECORD, IT IS NOTICED THAT THE SCOOTER O F RS. 48,455/- WAS PURCHASED FROM M/S RAJ MOTORS ON 06.06.2014 IN THE NAME OF SHRI ASHISH DEEDWANIA AND NOT IN THE NAME OF ASSESS EE FIRM. BUT THE AO FAILED TO ENQUIRE INTO THE ADMISSIBILITY OF DEPRECIATION THEREON. 4. AS PER PARTNERSHIP DEED, THE REMUNERATION OF RS. 40,48,607/- WAS ALLOWED TO PARTNERS ON BOOK PROFIT OF RS. 65,97 ,679/-. THIS BOOK PROFIT INCLUDED INTEREST ON FDR OF RS. 3,36,620/- W HICH IS NOT THE INCOME OF BUSINESS AS IT IS EARNED ON INTEREST ON F DR AND PERTAINS TO THE HEAD OF INCOME FROM OTHER SOURCES. HENCE, THE I NTEREST ON FDR OF RS. 3,36,620/- WAS WRONGLY CONSIDERED BY YOU FOR RE MUNERATION PURPOSE AND THE AO FAILED TO ENQUIRE INTO IT ABOUT THE EXCESS ALLOWANCE. 5. YOU HAVE CLAIMED EXPENSES OF RS. 5,55,789/- AND RS. 5,43,296/- WHICH INCLUDES INADMISSIBLE EXPENSES THEREBY MAKING FALSE CLAIM BUT AO FAILED TO ENQUIRE AND IDE NTIFY WHOLE OF THESE EXPENSES AND FAILED TO INVOKE SECTION 271(1)( C) SPECIALLY WHEN FALSE CLAIM TO THE EXTENT TO RS. 1,11,158/- AN D RS. 54,330/- WERE ADMITTED BY YOU, MAKING THE ASSESSMENT ORDER E RRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENU E. ITA NO. 592/JP/2019 M/S ARSH VISION VS. DCIT, AJMER 9 14. FIRSTLY, REGARDING CLAIM OF DEPRECIATION ON TH E RESIDENTIAL PROPERTY AND WHETHER THE SAME IS USED BY THE ASSESSEE FIRM FOR B USINESS PURPOSES, THE LD A/R HAS REFERRED TO QUESTIONNAIRE DATED 2.08.2017 I SSUED BY THE ASSESSING OFFICER AND THE RESPONSE FILED BY THE ASSESSEE VIDE SUBMISSION DATED 22.08.2017. ON PERUSAL OF THE SAME, WE FIND THAT T HE QUESTION WHICH HAS BEEN RAISED BY THE ASSESSING OFFICER RELATES TO ADD ITION TO FIXED ASSETS BY WAY OF CONSTRUCTION OF A BUILDING WORTH RS 46,92,600/- WHEREIN HE HAS ASKED FOR DOCUMENTARY EVIDENCE, DETAILED CONSTRUCTION ACCOUNT OF NEW BUILDING AND WHETHER THE COST OF CONSTRUCTION INCLUDES COST OF L AND AND WHETHER ANY VALUATION HAS BEEN DONE FROM A REGISTERED VALUER. IN RESPONSE TO THE SAME, THE ASSESSEE HAS SUBMITTED THAT THEY HAVE NOT CONST RUCTED ANY PROPERTY BUT PURCHASE ONE PROPERTY FOR WHICH COPY OF REGISTRY WA S ALSO SUBMITTED. THERE IS NO FINDING OF THE ASSESSING OFFICER IN TERMS OF WHETHER HE HAS EXAMINED THE CONTENTS OF THE SAID REGISTRY. FURTHER, THERE IS NOTHING ON RECORD WHICH SUGGESTS THAT THE AO HAS RAISED ANY QUERY TO THE AS SESSEE REGARDING THE ACTUAL USAGE OF SUCH PROPERTY FOR BUSINESS PURPOSES ESPECIALLY GIVEN THE DESCRIPTION AND SITE PLAN OF THE PROPERTY AND ELIGI BILITY OF THE ASSESSEE TO CLAIM DEPRECIATION THEREON. WE FIND THAT THERE IS NO SUCH FINDING ON FACE OF THE ASSESSMENT ORDER AND FURTHER, NOTHING HAS BEEN BROUGHT TO OUR NOTICE EITHER IN TERMS OF ANY FURTHER QUERIES BY THE AO AN D SUBMISSIONS FILED BY THE ASSESSEE OR ANY ENTRY IN THIS REGARD RECORDED BY TH E AO IN THE ORDER SHEET. THE LD. PR CIT HAS EXAMINED THE CONTENTS OF THE REG ISTRY AND HAS STATED THAT THE DESCRIPTION OF THE PROPERTY IN TERMS OF SITE PL AN AND INTERNAL CONSTRUCTION SHOWS THAT IT WAS A RESIDENTIAL PROPERTY AND NOT A COMMERCIAL PROPERTY AND THE PHOTOGRAPHS SO SUBMITTED BY THE ASSESSEE DURING THE REVISIONARY PROCEEDINGS DOESNT SUPPORT THE CLAIM OF THE ASSESS EE THAT THE PROPERTY HAS BEEN USED FOR BUSINESS PURPOSES. WE ARE THEREFORE OF THE VIEW THAT HAD THE AO CARRIED OUT EVEN PRELIMINARY VERIFICATION AND EX AMINED THE CONTENTS OF THE REGISTRY, THE AO WOULD HAVE NOTED THE SIMILAR D ESCRIPTION OF THE PROPERTY ITA NO. 592/JP/2019 M/S ARSH VISION VS. DCIT, AJMER 10 WHICH IS CLEARLY DISCERNABLE FROM THE READING OF TH E CONTENTS OF THE REGISTRY AND WOULD HAVE RAISED SIMILAR QUESTIONS REGARDING C ONVERSION AND MORE IMPORTANTLY, THE USAGE OF SUCH PROPERTY FOR BUSINES S PURPOSES IN ORDER TO EXAMINE THE ASSESSEES ELIGIBILITY TO CLAIM DEPRECI ATION. HOWEVER, WE DONT FIND ANY SUCH BASIC ENQUIRIES AND INVESTIGATION BEI NG CARRIED OUT BY THE AO. WE THEREFORE FIND THAT IT IS CASE OF COMPLETE LACK OF ENQUIRY ON PART OF THE AO TO EXAMINE THE DESCRIPTION OF THE PROPERTY AND A LSO WHETHER THE SAME IS USED FOR BUSINESS PURPOSES IN ORDER TO EXAMINE THE ELIGIBILITY OF THE ASSESSEE TO CLAIM DEPRECIATION WHERE ONE OF THE CARDINAL RUL E IS THE PROPERTY SHOULD BE USED FOR PURPOSES OF BUSINESS. A REFERENCE CAN BE DRAWN TO OBSERVATIONS OF THE COORDINATE BENCH IN CASE OF SUBHLAKSHMI VANIJYA (P.) LTD. VS COMMISSIONER OF INCOME-TAX-I, KOLKATA, REPORTED IN 60 TAXMANN.COM 60 (KOLKATA - TRIB.) WHEREIN IT WAS HELD UNDER: IT IS IMPERATIVE FOR THE ASSESSING OFFICER TO COND UCT ENQUIRY TO SATISFY HIMSELF ABOUT THE GENUINENESS OF TRANSACTIONS. SCOP E OF THE TERM 'ENQUIRY' CAN BE DIVERSE IN DIFFERENT CIRCUMSTANCES . THERE CANNOT BE STRAIGHT JACKET FORMULA TO POSITIVELY CONCLUDE AS T O CONDUCTING OR NON- CONDUCTING OF 'ENQUIRY' BY THE ASSESSING OFFICER. I T DEPENDS ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. WHERE THE FAC TS ARE JUST ORDINARY AND PRIMA FACIE THERE IS NOTHING UNTOWARD THE RECORDED TRANSACTION, IN SUCH CIRCUMSTANCES, THE OBTAINING O F THE DOCUMENTS AND THE APPLICATION OF MIND THEREON, WITHOUT A FURT HER OUTSIDE ENQUIRY, MAY MEAN THAT THE ASSESSING OFFICER DID CONDUCT ENQ UIRY, LEAVING THE QUESTION OPEN AS TO WHETHER IT WAS A PROPER OR AN I MPROPER ENQUIRY. BUT, WHERE THE FACTUAL SCENARIO OF A CASE PRIMA FACIE IN DICATES ABNORMALITIES AND CRY FOR LOOKING DEEP INTO IT, THE N A MERE COLLECTION OF DOCUMENTS CANNOT BE HELD AS CONDUCTIN G ENQUIRY, LEAVE ASIDE, ADEQUATE OR INADEQUATE. IN SUCH LATER CASES, ONLY WHEN THE ASSESSING OFFICER, AFTER COLLECTION OF THE INITIAL ITA NO. 592/JP/2019 M/S ARSH VISION VS. DCIT, AJMER 11 DOCUMENTS, EMBARKS UPON FURTHER INVESTIGATION, THAT IT CAN BE SAID THAT HE INITIATED ENQUIRY. WHERE THE FACTS OF A PARTICULAR TRANSACTION CRY HOARSE ABOUT ITS NON-GENUINENESS AN D EVEN A CASUAL LOOK AT SUCH FACTS, PRIMA FACIE, DIVULGES FOUL PLAY , THEN THE ALARM BELL MUST RING IN THE MIND OF THE ASSESSING OFFICER FOR MAKING FURTHER EXAMINATION. COLLECTION OF PAPERS ON RECORD IN SUCH CIRCUMSTANCES CANNOT BE CONSTRUED AS CONDUCTING A PROPER ENQUIRY. IF IN SUCH CIRCUMSTANCES, THE ASSESSING OFFICER SIMPLY GATHERS DOCUMENTS AND KEEPS THEM ON RECORD, THEN SUCH NOMINAL ENQUIRY FAL LS WITHIN THE OVERALL CATEGORY OF 'NO ENQUIRY' BECAUSE OF THE INA CTION ON THE PART OF THE ASSESSING OFFICER TO READ A WRITING ON THE WALL . 15. IN THE INSTANT CASE, WHERE THE MATTER WAS SELEC TED FOR COMPLETE SCRUTINY AND THERE ARE ADDITION TO THE FIXED ASSETS DURING THE YEAR, IT IS ORDINARILY EXPECTED THAT THE ASSESSING OFFICER EXAM INES THESE TRANSACTIONS THOROUGHLY FROM THE PERSPECTIVE OF SATISFYING THE T WIN TEST OF OWNERSHIP AND USAGE FOR PURPOSES OF BUSINESS RATHER THAN MERELY R ELYING ON THE INFORMATION SUBMITTED BY THE ASSESSEE COMPANY. IT IS NOT A QUE STION OF KIND AND EXTENT OF ENQUIRY AND HENCE, A DIFFERENCE OF APPROACH AND METHODOLOGY OF EXAMINATION OF A PARTICULAR TRANSACTION AS DONE BY THE AO AND AS SUGGESTED BY THE LD PR CIT. NO DOUBT EVERY ASSESSING OFFICER HAS HIS UNIQUE STYLE OF FUNCTIONING AND NO HARD AND FAST RULE CAN BE LAID D OWN AS TO HOW HE SHOULD CONDUCT THE ENQUIRY IN DISCHARGE OF HIS STATUTORY F UNCTIONS. HOWEVER, WHERE THE FACTUAL SCENARIO OF A CASE PRIMA FACIE SHOWS TH E DESCRIPTION OF PROPERTY AS RESIDENTIAL AND CRY FOR LOOKING DEEP INTO IT IN TERMS OF ACUAL USAGE FOR THE PURPOSES OF BUSINESS, THEN A MERE COLLECTION OF REG ISTRY DOCUMENT AND KEEPING THAT ON RECORD CANNOT BE HELD AS CONDUCTING AN ENQUIRY. IN OUR CONSIDERED VIEW, IT IS A CLEAR CASE OF LACK OF ENQU IRY ON PART OF THE ASSESSING OFFICER AND THE ORDER THUS PASSED IS CLEARLY ERRONE OUS AND PREJUDICIAL TO THE ITA NO. 592/JP/2019 M/S ARSH VISION VS. DCIT, AJMER 12 INTEREST OF THE REVENUE. THEREFORE, THE FINDING OF THE LD PR CIT THAT THE ORDER SO PASSED BY THE AO IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE IS UPHELD. 16. IN RESPECT OF CLAIM OF DEPRECIATION ON SCOOTE R, WE FIND THAT IT IS AGAIN A CASE OF LACK OF ENQUIRY ON PART OF THE ASSESSING OF FICER. NO QUERIES WERE RAISED, NO DOCUMENTS WERE FURNISHED AND THEREFORE, THERE IS NO QUESTION OF ANY EXAMINATION BEING CARRIED OUT BY THE AO. AS WE HAVE HELD ABOVE, THE AO HAS TO SATISFY HIMSELF ABOUT THE OWNERSHIP AND U SAGE OF THE PROPERTY. IN THE INSTANT CASE, THE SCOOTER IS REGISTERED IN THE NAME OF ONE OF THE PARTNERS OF THE FIRM AND THEREFORE, IT WAS INCUMBENT ON PART OF THE AO TO EXAMINE THE REASON AS TO HOW THE SAME WAS REFLECTED IN THE BALA NCE SHEET OF THE FIRM AND WHETHER ANY PAYMENTS WERE MADE BY THE FIRM OR N OT AND WHETHER THE ASSESSEE FIRM CAN STILL CLAIM DEPRECIATION ON SUCH SCOOTER EVEN THOUGH THE SCOOTER WAS NOT REGISTERED IN THE NAME OF THE FIRM. HOWEVER, NO SUCH ENQUIRY WAS CONDUCTED AND MATTER WAS THUS NOT EXAMI NED AT ALL. SIMILARLY, NO ENQUIRY WAS CONDUCTED REGARDING USAGE OF SCOOTER FOR BUSINESS PURPOSES. THEREFORE, IT IS AGAIN A CASE OF LACK OF ENQUIRY ON PART OF THE ASSESSING OFFICER AND THE FINDING OF THE LD PR CIT THAT THE O RDER SO PASSED BY THE AO IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE IS UPHELD. 17. SIMILARLY, WE FIND THAT THERE IS NO ENQUIRY AN D INVESTIGATION CARRIED OUT BY THE AO REGARDING THE PURPOSE FOR WHICH THE FDRS WERE CREATED AND PLACED AS GUARANTEE AS SO CLAIMED BY THE ASSESSEE F OR BUSINESS PURPOSES. CONSEQUENTLY, THERE IS NO EXAMINATION AND FINDING A S TO HOW THE INTEREST ON SUCH FDRS CAN BE INCLUDED FOR THE PURPOSES OF COMPU TING THE PARTNERS REMUNERATION U/S 40(B). THEREFORE, IT IS AGAIN A C ASE OF LACK OF ENQUIRY ON PART OF THE ASSESSING OFFICER AND THE FINDING OF TH E LD PR CIT TO THIS EXTENT ITA NO. 592/JP/2019 M/S ARSH VISION VS. DCIT, AJMER 13 THAT THE ORDER SO PASSED BY THE AO IS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE IS UPHELD. 18. REGARDING EXPENSES OF RS 5,55,789/- AND RS 5,43 ,296/- CLAIMED BY THE ASSESSEE, WE HAVE GONE THROUGH THE FINDINGS OF THE LD PR CIT AND FIND THAT THOUGH THERE IS A MENTION IN THE SHOW-CAUSE NOTICE, THERE IS NO DIRECTION GIVEN BY THE LD PR CIT TO THE AO TO INITIATE PENALT Y PROCEEDINGS U/S 271(1)(C) AND THEREFORE, CONTENTION SO ADVANCED BY THE LD AR NEED NOT BE EXAMINED AND THUS CANNOT BE ACCEPTED WHERE HE SAYS THAT SUCH A DIRECTION IS BEYOND THE SCOPE OF REVISIONARY POWER U/S 263 OF THE ACT A S THE SAME IS NOT BORNE OUT OF RECORDS. ALL THE LD PR CIT HAS STATED IS TH AT THESE EXPENSES SO CLAIMED BY THE ASSESSEE INCLUDE INADMISSIBLE EXPENSES AND T HE AO FAILED TO MAKE THE ENQUIRY AND IDENTIFY SUCH EXPENSES AND THEREFORE, T HE ORDER SO PASSED BY THE AO IS ERRONEOUS IN ABSENCE OF MAKING ENQUIRY/IN VESTIGATION AND WE THEREFORE, DONT SEE ANY INFIRMITY IN THE SAID FIND INGS OF THE LD PR CIT. 19. IN LIGHT OF ABOVE DISCUSSIONS AND IN THE ENTIRE TY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THERE IS NO INFIRMITY OR ILLEGALITY IN ACTION OF THE LD PR CIT IN EXERCISING HIS REVISIONARY JURISDICTION U/S 263 OF THE ACT AND THE ORDER SO PA SSED AND THE DIRECTIONS SO ISSUED WHERE THE MATTER IS SET-ASIDE TO THE FILE OF THE AO FOR MAKING FRESH ENQUIRY AND INVESTIGATION, IN RESPECT OF MATTERS DI SCUSSED SUPRA AND THUS, LIMITED TO THAT EXTENT, AFTER PROVIDING REASONABLE OPPORTUNITY TO THE ASSESSEE IS HEREBY UPHELD AND THE GROUNDS OF APPEAL NO. 3 AN D 4 SO TAKEN BY THE ASSESSEE ARE HEREBY DISMISSED. 20. NO ARGUMENTS/CONTENTIONS WERE ADVANCED IN RESPE CT OF GROUND NO.1 AND HENCE, THE SAME IS DISMISSED AND GROUND NO. 2 I S GENERAL IN NATURE WHICH DOESNT REQUIRE ANY SEPARATE ADJUDICATION. ITA NO. 592/JP/2019 M/S ARSH VISION VS. DCIT, AJMER 14 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISPOS ED OFF WITH ABOVE DIRECTIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 12/10/2020. SD/- SD/- LANHI XKSLKBZ FOE FLAG ;KNO ( SANDEEP GOSAIN ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 12/10/2020 * GANESH KR. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S ARSH VISION, AJMER 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT, CIRCLE-01, AJMER 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 592/JP/2019} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR