Universal Woollen Mills, Ludhiana V. CIT III, Ludhiana

ITA 616/CHANDI/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8411 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 03-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 29-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ MISHRACIT
• Keywords: Gross profit estimation; Depreciation
• Section: 143(3); 133A; 263; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 616/CHD/2013 (ASSESSMENT YEAR : 2008-09) UNIVERSAL WOOLLEN MILLS, VS. THE C.I.T-III, 242, INDUSTRIAL AREA A, AYAKAR BHAWAN, RISHI NAGAR, LUDHIANA. LUDHIANA. PAN: AAAFU2837M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUDHIR SEHGAL RESPONDENT BY : SHRI MANOJ MISHRA,CIT DR DATE OF HEARING : 16.02.2016 DATE OF PRONOUNCEMENT : 08.03.2016 O R D E R PER BHAVNESH SAINI, J.M. : THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX-III, LUDHIANA DATED 28.3.2013 FOR ASSESSMENT YEAR 2008-0 9, CHALLENGING THE ORDER UNDER SECTION 263 OF THE INCO ME TAX ACT, 1961 (IN SHORT THE ACT) AND ADDITION OF RS.1 ,48,74,860/- BY ENHANCING GROSS PROFIT RATE. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE LEA RNED COMMISSIONER OF INCOME TAX ON EXAMINATION OF ASSESS MENT RECORDS FOUND THAT THE ASSESSING OFFICER FAILED TO MAKE INQUIRIES IN RESPECT OF CERTAIN MATTERS. THE SHOW CAUSE 2 NOTICE UNDER SECTION 263 OF THE ACT WAS ISSUED ON 1 4.3.2013 AND THE ASSESSEE WAS ASKED TO FURNISH REPLY TO THE SAME. THE CONTENTS OF THE NOTICE ARE REPRODUCED IN THE IM PUGNED ORDER, IN WHICH IT IS BRIEFLY STATED THE ASSESSEE FURNISHED RETURN OF INCOME ON 30.9.2008 SHOWING TOTAL INCOME AT RS.1,04,94,240/- AND ASSESSMENT WAS COMPLETED ON 26.11.2010 AT INCOME OF RS.1,04,94,240/-. A SURVEY UNDER SECTION 133A OF THE ACT WAS CONDUCTED IN THE BUSINE SS PREMISES OF THE ASSESSEE ON 28.2.2008. DURING THE COURSE OF SURVEY, THE ASSESSEE SURRENDERED A SUM OF RS.1.05 C RORES AS AN ADDITIONAL INCOME I.E. INCOME OTHER THAN NORMAL INCOME AS UNDER : I) RS.9 LACS ON ACCOUNT OF EXCESS CASH. II) RS.96 LACS ON ACCOUNT OF SUNDRY RECEIVABLE. 3. THE ASSESSEE FILED RETURN OF INCOME DECLARING T OTAL INCOME AT RS.1,04,94,240/-, WHICH IS LOWER THAN THE ADDITIONAL INCOME DECLARED DURING THE SURVEY. THE NET PROFIT DECLARED BY THE ASSESSEE WAS AFTER DECLARING ADDITI ONAL INCOME. IF THE INCOME OF RS.1.05 CRORES DISCLOSED DURING THE COURSE OF SURVEY IS TAKEN OUT, THE ASSESSEE HAS SHO WN LOSS OF RS.5,760/- AGAINST THE PROFIT OF ABOUT RS.1,79,200/ - SHOWN IN THE PRECEDING ASSESSMENT YEAR. THE ASSESSEE HAS DONE THIS TO SET OFF THE TAX LIABILITY ON THE ADDITIONAL INCOME DECLARED DURING THE SURVEY UNDER SECTION 133A OF TH E ACT. THE GP DECLARED BY THE ASSESSEE HAS FALLEN TO 1.82% AGAINST 4.19% OF THE LAST. YEAR. THIS ASPECT HAS NOT BE EN PROPERLY 3 ENQUIRED DURING THE ASSESSMENT PROCEEDINGS. DURING THE SURVEY, TRADING ACCOUNT WAS PREPARED ON THE BASIS O F DETAILS OF PURCHASE AND SALES AVAILABLE ADOPTING THE GP RAT E OF 4.18% AS PER EARLIER YEAR AND STOCK WAS ACCORDINGLY , WORKED OUT TO RS.2.50 CRORES, ALTHOUGH NO STOCK REGISTER W AS MAINTAINED. THE DIFFERENCE IN STOCK WAS FOUND TO T HE EXTENT OF RS.98,861/-, WHICH WAS NOT EXPLAINED BY THE ASSE SSEE. THE REASON FOR FALL IN GP AND NP RATE HAS NEITHER BEEN EXPLAINED BY THE ASSESSEE, NOR EXAMINED BY THE ASSE SSING OFFICER. THOUGH THE ASSESSING OFFICER CALLED FOR T HE EXPLANATION OF THE COMPREHENSIVE CHART OF GP/NP AND MANUFACTURING EXPENSES FOR THREE YEARS INCLUDING TH E YEAR UNDER CONSIDERATION BUT NO REPLY HAS BEEN FILED. T HE ASSESSING OFFICER HAS NOT EXAMINED MONTH-WISE PURCH ASES, CONSUMPTION, SALES, ETC. PER UNIT CONSUMPTION OF FUEL/ELECTRICITY. THERE IS SUBSTANTIAL FALL IN GP. THE ASSESSING OFFICER HAS NOT ENQUIRED INTO THIS ASPECT . SINCE NO STOCK REGISTER IS MAINTAINED, THEREFORE, THE BOOKS OF THE ASSESSEE ARE NOT RELIABLE AND THE DECISION OF THE I .T.A.T., CHANDIGARH BENCH WAS REFERRED TO IN THE CASE OF M/ S BASSI TUBES PVT. LTD. VS. ITO, ITA NO.45/CHD/2009, DATED 24.9.2009. THE LEARNED COMMISSIONER OF INCOME TAX WAS, THEREFORE, OF THE VIEW THAT THE ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE ACT IS ERRONEOU S IN-SO-FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENU E. 4 4. THE ASSESSEE FILED DETAILED REPLY BEFORE THE LEARNED COMMISSIONER OF INCOME TAX, WHICH IS QUOTED IN THE IMPUGNED ORDER, IN WHICH THE ASSESSEE EXPLAINED THA T THE ASSESSEE FIRM HAS MAINTAINED COMPLETE STOCK RECORDS AND CLOSING STOCK HAS BEEN CALCULATED ON THE BASIS OF T HESE STOCK FIGURES. THEREFORE, NO ARBITRARY, HYPOTHETIC AL AND ASSUMPTIVE GP RATE HAVE NEVER BEEN ADOPTED BY THE F IRM. FURTHER, THESE STOCK RECORDS HAVE BEEN SUBMITTED BE FORE THE ASSESSING OFFICER AT ASSESSMENT PROCEEDINGS. THERE CANNOT BE A COMPARISON OF NET PROFIT FROM THE EARLIER YEAR S. THERE ARE EXPENDITURE WHICH ARE PROPERLY EXPLAINED IN THE PROFIT & LOSS ACCOUNT. THERE WERE OTHER DEDUCTIONS RELATED TO DEPRECIATION AND APPROPRIATION UNDER SECTION 40(B) OF THE ACT. THESE STATUTORY DEDUCTIONS HAVE NEVER BEEN DE CLINED AND DISPUTED. THE CCOMPREHENSIVE CHART OF GP AND N P WAS FILED BEFORE THE ASSESSING OFFICER AS WELL AS FILED IN THE PROCEEDINGS UNDER SECTION 263 OF THE ACT. THE MONT H-WISE PURCHASES AND SALES WITH CONSUMPTION DATA HAS BEEN FILED WITH REFERENCE TO PER UNIT CONSUMPTION OF FUEL AND ELECTRICITY, WHICH CLEARLY SHOWS THAT THE BOOKS OF ACCOUNT HAVE BEEN PROPERLY MAINTAINED. THERE IS NO INTERP OLATION, CUTTING AND MANIPULATION IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, WHICH ARE AUDITED AND SUPPORTED BY STOCK RECORDS. THE ASSESSING OFFICER HAS NOT POINTED OUT ANY MISTA KE OR IRREGULARITY OR DEFECT IN THE BOOKS OF ACCOUNT MAIN TAINED BY THE ASSESSEE. THE DECISION OF I.T.A.T., CHANDIGAR H BENCH 5 IN THE CASE OF M/S BASSI TUBES PVT. LTD. (SUPRA) I S NOT APPLICABLE IN THIS CASE BECAUSE THE FACTS IN THIS C ASE ARE COMPLETELY DIFFERENT. IN THIS CASE, THIS COMPANY DID NOT HAVE ANY STOCK RECORDS, WHEREAS IN THE CASE OF THE ASSESSEE, COMPLETE STOCK RECORDS HAVE BEEN MAINTAINED, WHICH WERE PRODUCED BEFORE THE ASSESSING OFFICER. 5. THE LEARNED COMMISSIONER OF INCOME TAX NOTED T HAT THE ASSESSEE HAS MANIPULATED ITS ACCOUNTS AFTER THE DATE OF SURVEY SO AS TO SHOW LOW GP. THE STATEMENT OF THE ASSESSEE WAS RECORDED ON 28.2.2008 WAS REFERRED TO, IN WHICH THE ASSESSEE ACCEPTED THAT NO STOCK REGISTER IS KEPT AS NO EXCISE DUTY IS PAYABLE AND LIABLE TO THEIR MANUFACTURING U NIT. NO STOCK REGISTER HAS BEEN KEPT FOR INCOME TAX PURPOSE S. THE ASSESSEE VOLUNTARILY SURRENDERED RS.1.05 CRORES AS ADDITIONAL INCOME DURING THE SURVEY. THE LEARNED COMMISSIONER OF INCOME TAX AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE NOTED THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE SHO ULD BE REJECTED AND THE LEARNED COUNSEL FOR THE ASSESSEE W AS DIRECTED TO EXPLAIN WHY THE BOOKS OF ACCOUNT OF THE ASSESSEE BE NOT REJECTED AS THE SAME ARE NOT RELIABLE ON ACCOUNT OF SURRENDER OF ADDITIONAL INCOME DURING SURVEY. THE LEARNED CO MMISSIONER OF INCOME TAX ALSO NOTED THAT THE PLEA OF THE ASSE SSEE THAT THE STOCK REGISTER HAS BEEN MAINTAINED, IS NOT CORRECT AS DURING THE COURSE OF RECORDING OF STATEMENT, THE ASSESSEE ADMITTED THAT NO STOCK REGISTER HAS BEEN MAINTAINED. SINCE THE A SSESSEE ACCEPTED THE DISCREPANCY DURING THE COURSE OF SURVE Y AND EXCESS CASH WAS FOUND, THEREFORE, THE BOOKS OF ACCO UNT OF THE 6 ASSESSEE WERE LIABLE TO BE REJECTED. THE ASSESSING OFFICER HAS FAILED TO APPLY MIND TO THE FACTS OF THE CASE. THE ASSESSEE TRIED TO OFFSET THE INCOME SURRENDERED DURING THE C OURSE OF SURVEY. THE LEARNED COMMISSIONER OF INCOME TAX, TH EREFORE, DIRECTED TO APPLY PROFIT RATE OF 4.19% OF PRECEDING ASSESSMENT YEAR 2007-08 AND ENHANCED THE INCOME OF THE ASSESSE E BY RS.1,48,74,860/-. THE LEARNED COMMISSIONER OF INCO ME TAX REFERRED TO CERTAIN DECISIONS IN SUPPORT OF HIS FIN DINGS FOR ENHANCING THE INCOME OF THE ASSESSEE AND ACCORDINGL Y, HELD THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. 6. THE ASSESSEE IS IN APPEAL CHALLENGING THE IMPUG NED ORDER UNDER SECTION 263 OF THE ACT AND ADDITION MAD E BY THE LEARNED COMMISSIONER OF INCOME TAX BY ENHANCING TH E INCOME TO RS.1.48 CRORES. 7. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE HAS REFERRED TO PAPER BOOK PAGE NO.61, WHICH IS NOTICE UNDER SECTION 263 OF THE ACT DATED 14.3.2013. PAPER BOO K PAGE NOS.3 TO 29 ARE AUDIT REPORT, BALANCE SHEET, PROFIT & LOSS ACCOUNT WITH RELEVANT ANNEXURES FOR ASSESSMENT YEAR UNDER APPEAL, IN WHICH IT IS SPECIFICALLY MENTIONED BY TH E AUDITORS THAT THE ASSESSEE MAINTAINED CASH BOOK, LEDGER, PUR CHASE BOOK, SALE BOOK AND STOCK REGISTER PAPER BOOK PAGE NO.21 IS THE QUANTITATIVE DETAILS OF CLOSING STOCK. PAPER B OOK PAGE NO.23 IS TRADING AND PROFIT & LOSS ACCOUNT DECLARIN G ADDITIONAL INCOME TO RS.1.05 CRORES AND THE EXPENSE S CLAIMED 7 IN THE TRADING ACCOUNT AND PROFIT & LOSS ACCOUNT AN D SUBMITTED THAT THE EXPENSES HAVE NOT BEEN DISPUTED BY THE LEARNED COMMISSIONER OF INCOME TAX, WHICH WAS MAJOR REASON FOR FALL IN GP AND RELIED ON THE ORDER OF I.T.A.T., CHANDIGARH BENCH IN THE CASE OF M/S VENUS WOOLLEN MILLS VS. C IT DATED 17.9.2014, COPY OF WHICH IS FILED. PAPER BOOK PAGE NO.35 IS NOTICE DATED 31.5.2010 ISSUED BY THE ASSESSING OFFI CER SEEKING SEVERAL INFORMATION FROM THE ASSESSEE, WHIC H INCLUDES THE COMPARATIVE CHART OF GP, NP AND MANUFACTURING E XPENSES OF LAST THREE YEARS, MONTH-WISE PURCHASES, CONSUMPT ION, PRODUCTION AND SALES, PER UNIT CONSUMPTION OF FUEL/ ELECTRICITY AND COMPARISON WITH LAST YEAR, UNITS OF ELECTRICITY CONSUMPTION TO PRODUCTION, DETAILS OF OPENING AND C LOSING STOCK AND HOW THE VALUATION OF STOCK HAS BEEN DONE, ETC. PAPER BOOK PAGE NOS.38 TO 42 IS THE REPLY OF THE AS SESSEE BEFORE THE ASSESSING OFFICER ON ALL THE QUESTIONNAI RES RAISED BY THE ASSESSEE, IN WHICH COMPLETE DETAILS OF MANUF ACTURING, SALES, PURCHASES, PER UNIT CONSUMPTION OF FUEL/ELEC TRICITY, WASTAGE WERE FILED. THE DETAILS OF OPENING AND CLO SING STOCK HAVE BEEN EXPLAINED BEFORE THE ASSESSING OFFICER. IT WAS ALSO EXPLAINED THAT ALL THE DETAILS ARE SUPPORTED BY THE DOCUMENTS. PAPER BOOK PAGE NO.217 IS TRIAL BALANCE AS DRAWN DU RING THE COURSE OF SURVEY BY THE DEPARTMENT. PAPER BOOK PAG E NO.223 IS THE TRADING ACCOUNT SHOWING GP OF 4.19% AS PER L AST YEAR. PAPER BOOK PAGE NO.253 IS ASSESSMENT ORDER PASSED U NDER SECTION 143(3), DATED 24.12.2009 FOR PRECEDING ASSE SSMENT YEAR 2007-08. THE ASSESSING OFFICER IN THE QUESTIO NNAIRE, PAPER BOOK PAGE NO. 255 FOR ASSESSMENT YEAR 2007-08 , NOTED 8 THAT THE ASSESSEE MAINTAINED STOCK REGISTER, ETC. PAPER BOOK PAGE NO.257 IS REPLY IN ASSESSMENT YEAR 2007-08 GIV ING COMPLETE DETAILS AS WERE ALSO CALLED FOR IN ASSESSM ENT YEAR UNDER APPEAL AS WELL WITH COMPARATIVE CHART OF GP/N P. PAPER BOOK PAGE NO.72 IS SURRENDER LETTER. THE ASSESSEE MAINTAINED COMPLETE STOCK RECORDS WITH QUANTITATIVE DETAILS, T HE COPIES OF WHICH ARE FILED AT PAPER BOOK PAGE NO.73 TO 211, WH ICH WERE ALSO BEFORE THE LEARNED COMMISSIONER OF INCOME TAX. THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMIT TED THAT THE ASSESSEE MAINTAINED STOCK RECORDS AND QUANTITAT IVE DETAILS, WHICH WERE FILED BEFORE THE ASSESSING OFFI CER BUT IN THE STATEMENT RECORDED DURING THE SURVEY, WRONGLY S TATED THAT NO STOCK REGISTER IS MAINTAINED. THE ASSESSING OFF ICER CONSIDERED THE ENTIRE FACTS AND CIRCUMSTANCES AND R ECORDS OF THE ASSESSEE AND APPLIED HIS MIND TO THE FACTS. TH EREFORE, THE ORDER OF THE ASSESSING OFFICER SHOULD NOT BE REVISE D UNDER SECTION 263 OF THE ACT. THE LEARNED COMMISSIONER O F INCOME TAX IN THE SHOW CAUSE NOTICE HAS MENTIONED THE EXP ENSES BUT IN THE ORDER UNDER SECTION 263 OF THE ACT, THE LEAR NED COMMISSIONER OF INCOME TAX DID NOT MENTION ANYTHIN G HOW THE EXPENSES ARE NOT ALLOWABLE. THE SURVEY WAS CON DUCTED AT THE FAG END OF THE FINANCIAL YEAR AND THE LEARNED COMMISSIONER OF INCOME TAX WITHOUT ANY REASON ENHA NCED THE GP/NP OF THE ASSESSEE. THE GP SHOULD BE BASED ON THE FACTS AND CIRCUMSTANCES AND THE HISTORY OF THE ASSE SSEE. THE ASSESSING OFFICER HAS CONDUCTED PROPER ENQUIRY AT A SSESSMENT STAGE. THEREFORE, THE ORDER UNDER SECTION 263 IS N OT JUSTIFIED. PAPER BOOK PAGE NO.232 IS THE AUDIT REPORT FOR ASSE SSMENT 9 YEAR 2007-08 IN WHICH ALSO THE ASSESSEE EXPLAINED T HAT THE STOCK REGISTER HAS BEEN MAINTAINED BY THE ASSESSEE. THE STATEMENT RECORDED DURING THE SURVEY IS NOT ADMISSI BLE. THE STATEMENT WAS INCORRECT AS IT WAS AGAINST THE RECOR D MAINTAINED BY THE ASSESSEE. THE LEARNED COUNSEL FO R THE ASSESSEE RELIED ON THE DECISION OF I.T.A.T., CHANDI GARH BENCH IN THE CASE OF SANJEEV KUMAR VS. ITO, 31 ITR (TRIB ) 680, IN WHICH THE TRIBUNAL FOLLOWING THE DECISION OF THE HO N'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. KHADER KH AN SON, 300 ITR 157 CONFIRMED BY THE HON'BLE SUPREME COURT IN 352 ITR 480 HELD THAT THE STATEMENT RECORDED DURING THE SURVEY UNDER SECTION 133A OF THE ACT DOES NOT HAVE EVIDENT IARY VALUE. THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SU BMITTED THAT THE LEARNED COMMISSIONER OF INCOME TAX WAS NO T JUSTIFIED IN SETTING ASIDE THE ASSESSMENT ORDER. T HE CALCULATION OF STOCK ON THE DATE OF SURVEY WAS MADE BY APPLYING GP AT 4.19% INSTEAD OF IN THOUSANDS SHOWN IN THE NOTICE BECAUSE DIFFERENCE IN THE STOCK FOUND AS PER SHOW CAUSE NOTICE WAS RS.98,861/- ONLY. THE LEARNED COU NSEL FOR THE ASSESSEE, THEREFORE, SUBMITTED THAT THE ORDER U NDER SECTION 263 OF THE ACT MAY BE QUASHED AND ENTIRE AD DITION MAY BE DELETED. 8. ON THE OTHER HAND, THE LEARNED D.R. RELIED ON T HE IMPUGNED ORDER AND SUBMITTED THAT THE GP CHART SHOU LD BE FILED BEFORE THE ASSESSING OFFICER. DEFECTS WERE P OINTED OUT DURING THE SURVEY ITSELF. THE PROFIT DECREASED IN LAST ONE MONTH ONLY. IN SURVEY THE ASSESSEE STATED IN THE S TATEMENT THAT NO STOCK REGISTER HAS BEEN MAINTAINED. THE LE ARNED 10 COMMISSIONER OF INCOME TAX PREPARED TRADING ACCOUN T FOR LAST ONE MONTH TO SHOW THAT THERE WAS A LOSS IN MAR CH, 2008 ONLY. THERE IS NON-APPLICATION OF MIND BY THE ASSE SSING OFFICER AND THE DECISION IN THE CASE OF M/S BASSI TUBES PVT. LTD. (SUPRA) REFERRED TO IN NOTICE UNDER SECTION 26 3 IS APPLICABLE BECAUSE THE ASSESSEE DID NOT MAINTAIN ST OCK REGISTER. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE ASSESSEE FILED RETURN OF INCOME DECLARING INCOME OF RS.1.04,94,240/-, WHICH IS SUPPORTED BY AUDIT RECOR DS, TRADING, PROFIT & LOSS ACCOUNT, BALANCE SHEET AND S UPPORTING DOCUMENTS. THE AUDIT REPORT IS FILED IN THE PAPER BOOK, IN WHICH THE AUDITORS HAS SPECIFICALLY MENTIONED THAT THE ASSESSEE HAS MAINTAINED BOOKS OF ACCOUNT WHICH HAVE BEEN EXAMINED. THE SAME ARE CASH BOOK, LEDGER, PURCHASE & SALE BOOKS AND STOCK REGISTER. IN THE PROFIT & LOSS ACC OUNT, THE ASSESSEE HAS SURRENDERED RS.1.05 CRORES AS SURRENDE RED INCOME AS PER MISCELLANEOUS INCOME. THE ASSESSEE MAINTAINED DETAILS OF CLOSING STOCK QUANTITY-WISE A ND VALUE- WISE. THE LEARNED COMMISSIONER OF INCOME TAX IN T HE SHOW CAUSE NOTICE HAS MENTIONED THE DIFFERENCE IN THE ST OCK FOUND DURING THE SURVEY ONLY TO THE EXTENT TO RS.98,861/- . AS PER NOTICE UNDER SECTION 263 OF THE ACT, THE DIFFERENCE IN THE RETURNED INCOME AND SURRENDERED INCOME IS ONLY RS.5 760/-. THE LEARNED COMMISSIONER OF INCOME TAX IN THE SHOW CAUSE NOTICE ITSELF HAS REPRODUCED THE TRADING AND PROFIT & LOSS ACCOUNT AND HAS MENTIONED THAT IN THE PROFIT & LOSS ACCOUNT, 11 THE ASSESSEE HAS MADE CLAIM OF EXPENDITURE IN A SUM OF RS.1.19 CRORES. THE LEARNED COMMISSIONER OF INCOME TAX DID NOT DISBELIEVE THE EXPENSES DEBITED TO THE TRADING AND PROFIT & LOSS ACCOUNT AND DID NOT MENTION ANY THING THAT ANY EXPENDITURE CLAIMED BY THE ASSESSEE IN TRADING AND PROFIT & LOSS ACCOUNT WERE NOT ALLOWABLE EXPENDITURE. THIS WAS MAJOR REASON FOR FALL IN PROFIT AND IGNORED BY THE LEARNE D COMMISSIONER OF INCOME TAX WITHOUT ANY REASON. THE DEFECTS IN BOOKS OF ACCOUNT HAVE ALSO NOT BEEN DOUBTED. PR IOR TO THE PROFIT & LOSS ACCOUNT, THE ASSESSEE IN THE TRADING ACCOUNT HAS SHOWN GROSS PROFIT OF RS.1.14 CRORES. THEREFORE, I T IS CLEAR THAT WHEN THE ASSESSEE MADE SURRENDER OF MISCELLANE OUS INCOME OF RS.1.05 CRORES IN THE PROFIT & LOSS ACCOU NT, BECAUSE OF THE EXPENSES DEBITED TO THE PROFIT & LOS S ACCOUNT, THE NET PROFIT DECLARED WAS OF RS.1,10,26,725/- (PA PER BOOK- 23). THEREFORE, THERE COULD NOT BE THE SAME STATIC PROFIT DECLARED BY THE ASSESSEE IN COMPARISON TO THE EARLI ER YEARS. THE ASSESSEE CLAIMED IN THE AUDIT REPORT THAT PROPE R STOCK RECORDS HAVE BEEN MAINTAINED AND STOCK RECORDS WERE ALSO PRODUCED BEFORE THE ASSESSING OFFICER AT ASSESSMENT STAGE. HOWEVER, THE EXPLANATION OF THE ASSESSEE WAS REJECT ED BECAUSE THE ASSESSEE IN THE STATEMENT MADE DURING THE COURS E OF SURVEY STATED THAT NO STOCK REGISTER HAS BEEN MAINT AINED. IT IS WELL SETTLED LAW THAT THE STATEMENT MADE DURING THE COURSE OF SURVEY WOULD NOT BE ADMISSIBLE AS ASSESSEE IS AB LE TO EXPLAIN THE ISSUE AND THE LEARNED COUNSEL FOR THE A SSESSEE RELIED ON THE DECISION OF THE I.T.A.T., CHANDIGARH BENCH IN THE CASE OF SANJEEV KUMAR (SUPRA) IN SUPPORT OF THE SA ME, IN 12 WHICH THE TRIBUNAL FOLLOWED THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF KHADER KHAN SON (SUPRA) CONFIRMED BY THE HON'BLE SUPREME COURT. THE ASSESSEE IN THE PRECEDING ASSESSMENT YEAR 2007-08 ALSO FILED AUDIT REPORT, WH ICH CONTAINED THE FACT THAT THE ASSESSEE MAINTAINED STO CK RECORDS AND QUANTITATIVE DETAILS AND EVEN THE SAME WAS CONS IDERED BY THE ASSESSING OFFICER IN THE REGULAR ASSESSMENT ORD ER PASSED UNDER SECTION 143(3) OF THE ACT. THE ASSESSEE ALSO FILED COPY OF THE COMPLETE STOCK RECORDS IN THE PAPER BOOK, WH ICH WAS FILED BEFORE THE ASSESSING OFFICER AS WELL AS BEFOR E THE LEARNED COMMISSIONER OF INCOME TAX IN THE PROCEEDINGS UNDE R SECTION 263 OF THE ACT. THUS, THE ASSESSEE HAS BEEN ABLE T O PROVE THAT THE ASSESSEE MAINTAINED PROPER STOCK REGISTER AND QUANTITATIVE DETAILS OF THE STOCK. THEREFORE, THE FINDINGS OF THE LEARNED COMMISSIONER OF INCOME TAX ARE WHOLLY UNJUSTIFIED TO HOLD THAT THE ASSESSEE HAS NOT MAINT AINED PROPER STOCK RECORDS. IT IS ADMITTED FACT THAT THE SURVEY WAS CONDUCTED AT THE FAG END AND EARLIER DETAILS NOTED IN THE BOOKS OF ACCOUNT HAVE NOT BEEN DOUBTED BY THE ASSES SING OFFICER AS WELL AS BY THE LEARNED COMMISSIONER OF I NCOME TAX. HENCE THE CRUX OF THE FINDINGS WOULD BE THAT THE AS SESSING OFFICER EXAMINED RECORDS AFTER ISSUING QUESTIONNAIR E TO THE ASSESSEE. THE ASSESSEE MAINTAINED PROPER STOCK REC ORDS AND GP/NP CHART WAS ALSO FILED BEFORE THE ASSESSING OFF ICER IN THE PROCEEDINGS FOR ASSESSMENT YEAR 2007-08. IT APPEAR S THAT THE LEARNED COMMISSIONER OF INCOME TAX PASSED THE ORDE R UNDER SECTION 263 OF THE ACT AND ENHANCED THE INCOME MERE LY BECAUSE THERE WAS LOW PROFIT SHOWN IN THE PERIOD SU BSEQUENT 13 TO THE SURVEY. THE LEARNED COMMISSIONER OF INCOME TAX, HOWEVER, DID NOT GIVE ANY FACTS AS TO HOW THE EXPEN DITURE CLAIMED IN THE PROFIT & LOSS ACCOUNT WERE NOT RELIA BLE AND ADMISSIBLE TO THE ASSESSEE. MERE FACT THAT THE PRO FITS WERE LOW AS COMPARED TO THE EARLIER YEAR, BY ITSELF IS N O GROUND TO MAKE ADDITION AGAINST THE ASSESSEE. THE HON'BLE PU NJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. K.S. BHA TIA, 269 ITR 577 HELD AS UNDER : THE MERE FACT THAT THE PROFITS WERE LOW COMPARED T O THE EARLIER YEAR WAS NOT A CIRCUMSTANCE OR MATERIAL WHICH COULD JUSTIFY AN ESTIMATE IN THE CIRCUMSTANCE S OF THE CASE. 10. THE HON'BLE MADRAS HIGH COURT IN THE CASE OF R.V.S. & SONS DAIRY FARM VS. CIT, 257 ITR 764 HELD AS UNDER: HELD, THAT THE TRIBUNAL WAS NOT JUSTIFIED IN HOLDI NG THAT A UNIFORM RATE OF INCOME AT 15 PER CENT, WAS EARNED BY THE ASSESSEE FROM THE BUSINESS OF DAIRY FARMING F OR THE ASSESSMENT YEARS 1977-78 TO 1980-81 BASED ON THE RESULTS DISCLOSED BY THE ASSESSEE HIMSELF. THE TRIB UNAL, HAVING ACCEPTED THAT THE INCOME RETURNED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 1976-77 WAS PROPE R, SHOULD NOT FIX THE SAME YIELD FOR THE SUBSEQUENT ASSESSMENT YEARS BASED ON THE MATERIAL AND FACTUAL CIRCUMSTANCES WHICH WERE PRESENT FOR THE ASSESSMENT YEAR 1976-77. THE TRIBUNAL HAD POWER TO SUBSTITUTE A DIFFERENT RATE BUT THAT DETERMINATION WOULD HAVE TO BE IN ACCORDANCE WITH LAW AND WITH REFERENCE TO THE RRELE VANT DATA FOR EACH ASSESSMENT YEAR. 14 11. THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE O F CIT VS. GOTAN LIME KHANIJ UDHYOG, 256 ITR 243 HELD AS UNDER: HELD, THAT THE TRIBUNAL HAD REACHED THE FINDING ON THE GROUND THAT, IN THE ABSENCE OF ANY FINDING RECORDED BY THE COMMISSIONER (APPEALS) THAT THE EXPENSES INCURRED ON ANY ACCOUNT APPEARED TO BE UNREASONABLE OR EXCESSIVE, THE ADDITIONS SUSTAINED MERELY ON SUSPICION OF PILFERAGE OR LEAKAGE WERE NO T JUSTIFIED. THIS CONCLUSION WAS A FINDING OF FACT KEEPING IN VIEW THAT THE ADDITIONS IN THE PROFITS AND GAINS RETURNED BY THE ASSESSEE WERE NOT A NECESSARY CONCOMITANT OF AN ORDER MADE UNDER SECTION 145(1) O R 145(2). THEREFORE, THERE WAS NO ERROR IN THE ORDER OF THE TRIBUNAL DELETING THE ENTIRE ADDITIONS TO THE TRADING RESULTS AFTER HOLDING THAT THE PROVISO TO SECTION 145(1) WAS APPLICABLE. 12. THE HON'BLE SUPREME COURT IN THE CASE OF MALAB AR INDUSTRIAL CO. LTD. VS. CIT, 243 ITR 83 HELD AS UND ER : EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AN D THE INCOME-TAX OFFICER HAS TAKEN ON VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF THE REVENUE UNLESS THE VIEW TAKEN BY T HE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. 15 13. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. AMIT CORPORATION, 21 TAXMANN.COM, 64 (GUJ) HELD THAT WHERE THE ASSESSING OFFICER AFTER DETAILED VERIFICA TION OF RECORD AND MAKING ENQUIRIES HAD FRAMED ASSESSMENT, THE COMMISSIONER OF INCOME TAX CANNOT REVISE UNDER SECT ION 263 OF THE ACT. THE HON'BLE ALLAHABAD HIGH COURT IN TH E CASE OF KRISHNA CAPBOX (P). LTD., 372 ITR 310 HELD THAT WHE RE THE ASSESSING OFFICER CALLED FOR DETAILS AND THE ASSESS EE RESPONDED, THE ASSESSING OFFICER, HOWEVER, DID NOT DISCUSS OR MENTION IN THE ORDER, NO ORDER UNDER SECTION 263 OF THE ACT SHOULD BE PASSED. 14. THE ENHANCEMENT OF INCOME BY THE COMMISSIONER OF INCOME TAX IS WHOLLY UNJUSTIFIED BECAUSE IT IS NOT POINTED OUT IN THE IMPUGNED ORDER AS TO WHAT IS THE BASIS FOR E NHANCING THE INCOME AND WHAT MORE MATERIAL WAS FOUND DURING THE COURSE OF SURVEY AGAINST THE ASSESSEE OVER AND ABOV E THE SURRENDERED INCOME OF RS.1.05 CRORES, WHICH WOULD A LSO SHOW THAT THE COMMISSIONER OF INCOME TAX HAS DISBELIEVED THE ENTIRE SURVEY PROCEEDINGS CONDUCTED AGAINST THE ASS ESSEE. THE ASSESSING OFFICER TOOK POSSIBLE VIEW ON EXAMINA TION OF RECORD WITH WHICH THE LEARNED COMMISSIONER OF INCOM E TAX DID NOT AGREE, IT CANNOT BE TREATED THAT ASSESSMENT ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE. 15. CONSIDERING THE ABOVE DISCUSSION, IT IS CLEAR THAT THE ASSESSING OFFICER EXAMINED THE DETAILS AT ASSES SMENT STAGE AFTER CALLING FOR DETAILS FROM THE ASSESSEE T HROUGH 16 QUESTIONNAIRE TIME TO TIME. THE ASSESSING OFFICER VERIFIED ALL THE FACTS AT ASSESSMENT STAGE AND COMPLETED THE ASS ESSMENT IN ACCORDANCE WITH LAW AFTER APPLYING HIS MIND. ME RE FALL IN GP/NP IS NO GROUND TO MAKE ADDITION AGAINST THE ASS ESSEE. EVEN IF THE BOOKS OF ACCOUNT ARE REJECTED, IT IS NO T ALWAYS NECESSARY TO MAKE ADDITION AGAINST THE ASSESSEE. T HEREFORE, THE ASSESSMENT ORDER COULD NOT BE TREATED AS ERRONE OUS IN-SO- FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE RE VENUE. THE LEARNED COMMISSIONER OF INCOME TAX WAS, THEREFORE, NOT JUSTIFIED IN INITIATING THE PROCEEDINGS UNDER SECTI ON 263 OF THE ACT AND WAS ALSO NOT JUSTIFIED IN ENHANCING THE INC OME TO RS.1,48,74,860/-. THE SAME IS, THEREFORE, LIABLE T O BE DELETED. THE DECISION RELIED UPON BY THE LEARNED D.R. WOULD NOT SUPPORT THE CASE OF THE REVENUE. 16. IN THIS VIEW OF THE MATTER, WE SET ASIDE THE IMPUGNED ORDER PASSED UNDER SECTION 263 OF THE ACT AND QUASH THE SAME AND RESTORE THE ASSESSMENT ORDER PAS SED UNDER SECTION 143(3) OF THE ACT, DATED 26.11.2010 A ND ALSO DELETE THE ADDITION OF RS.1,48,74,860/-. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF MARCH, 2016. SD/- SD/- (RANO JAIN) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 8 TH MARCH, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH 17