Sh. Jaswinder Singh Prop., Chandigarh V. CIT-II, Chandigarh

ITA 690/CHANDI/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57701 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-12-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 24-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: TEJ MOHAN SINGH
• Keywords: Presumptive income; Business income; Audit objection; Principle of natural justice; Initiation of penalty proceedings; Non-deduction of tax; Assessment record; Prejudicial to interest
• Section: 148; 6; 263; 144; 44AD; 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B, CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO.690/CHD/2010 (ASSESSMENT YEAR : 2005-06) SH.JASWINDER SINGH, PROP. VS. THE C.I.T-II, LONGIA ROAD CARRIERS, CHANDIGARH. H.NO.2068, SECTOR 44-C, CHANDIGARH. PAN: AKBPS7876H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SINGH RESPONDENT BY : SHRI S.K.MITTAL, DR DATE OF HEARING : 19.12.2011 DATE OF PRONOUNCEMENT : 09.03.2012 O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME-TAX-II, CHANDIGARH DATED 30. 3.2010 RELATING TO ASSESSMENT YEAR 2005-06 AGAINST THE ORDER PASSED UN DER SECTION 263 OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 2. THAT THE ORDER OF THE COMMISSIONER OF INCOME TA X- II, CHANDIGARH SETTING ASIDE THE BEST JUDGMENT ASSESSMENT UNDER SECTION 144 OF THE INCOME TAX ACT, 1961 BY ACIT CIRCLE 5(1), CHANDIGARH AND DIRECTING THE SUCCEEDING ASSESSING AUTHORITY TO MAKE ANOTHER BEST JUDGMENT IS ABSOLUTELY WRONG. 3. THAT THE ORDER OF ACIT CIRCLE 5(1), CHANDIGARH W AS NOT ERRONEOUS NOR IT WAS PREJUDICIAL TO INTEREST OF REVENUE CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW. 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS I N RELATION TO THE ORDER PASSED UNDER SECTION 263 OF THE INCOME TAX AC T BY THE COMMISSIONER OF INCOME TAX. 2 4. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME FURNISHED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION WA S PICKED UP FOR SCRUTINY AND ASSESSMENT IN THE CASE WAS COMPLETED U NDER SECTION 144A READ WITH SECTION 143(3) OF THE ACT. AS THE ASSESS EE HAD FAILED TO PRODUCE BOOKS OF ACCOUNT, THE INCOME FROM BUSINESS BOTH FROM OWN TRUCKS AND HIRED TRUCKS WAS ESTIMATED IN THE HANDS OF THE ASSESSEE, AS IS CLEAR FROM THE ORDER OF THE ASSESSMENT PASSED BY TH E ASSESSING OFFICER ON 11.12.2007. THE COMMISSIONER OF INCOME TAX FROM THE PERUSAL OF THE ASSESSMENT RECORD NOTED THAT THE ASSESSEE HAD CLAIM ED CERTAIN EXPENSES ON WHICH TAX AT SOURCE WAS NOT DEDUCTED. THE TAX A UDIT REPORT ANNEXED TO THE RETURN OF INCOME CONFIRMED THAT THE ASSESSEE HAD NOT DEDUCTED TAX AT SOURCE OUT OF PAYMENT MADE ON ACCOUNT OF FREIGHT CHARGES, LOADING & UNLOADING AND HIRING CHARGES. THE COMMISSIONER OF INCOME TAX WAS OF THE VIEW THAT THE PROVISIONS OF SECTION 40A(IA) OF THE ACT WERE ATTRACTED. FURTHER THE ASSESSEE HAD GIVEN A LOAN OF RS.4,77,50 0/- TO M/S LUCKY ROAD CARRIERS ON WHICH NO INTEREST INCOME WAS DECLA RED AND THE ASSESSING OFFICER HAD FAILED TO MAKE ANY ENQUIRY IN RESPECT THEREOF. THE COMMISSIONER OF INCOME TAX ACCORDINGLY ISSUED S HOW CAUSE NOTICE TO THE ASSESSEE, IN RESPONSE TO WHICH THOUGH THE AS SESSEE APPEARED ON VARIOUS DATES BUT NO BOOKS OF ACCOUNT WERE PRODUCED . THE EXPLANATION OF THE ASSESSEE IN RESPECT OF LOADING AND UNLOADING CHARGES WAS THAT THE SAME WERE DIRECTLY PAID TO THE LABOURERS AND NO LAB OUR CONTRACTOR WAS INVOLVED. FURTHER, NO PAYMENT WAS MADE EXCEEDING R S.20,000/- /RS.50,000/- DURING THE FINANCIAL YEAR IN RESPECT O F HIRING CHARGES. THE COMMISSIONER OF INCOME TAX WAS OF THE VIEW THAT THE CONTENTION OF THE LEARNED A.R. FOR THE ASSESSEE WAS NOT ACCEPTABLE AS THE SAME WAS NOT SUPPORTED WITH BOOKS OF ACCOUNT WHICH WERE NEITHER PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS OR PROCEEDINGS UND ER SECTION 263 OF THE ACT. AS THE ASSESSEE HAD FAILED TO DEDUCT THE TAX AT SOURCE OUT OF THE 3 AFORESAID PAYMENTS AND TOTAL OF THE EXPENSES WAS TO THE TUNE OF RS.2.45 CRORES, THE ADDITION OF RS.3.20 LACS MADE BY THE AS SESSING OFFICER WAS HELD TO BE ON LOWER SIDE. THE COMMISSIONER OF INCO ME TAX WAS OF THE VIEW THAT IT WOULD BE JUST AND FAIR IF ATLEAST 10% OF THE EXPENSES ARE DISALLOWED. THE ASSESSING OFFICER WAS THUS DIRECTE D TO EXAMINE THE ISSUE OF NON-MAINTENANCE/MAINTENANCE/AUDIT OF BOOKS OF ACCOUNT AND INITIATION OF PENALTY PROCEEDINGS. IN VIEW THEREOF , THE COMMISSIONER OF INCOME TAX WAS OF THE VIEW THAT THE ASSESSMENT ORDE R PASSED BY THE ASSESSING OFFICER WAS WITHOUT APPLICATION OF MIND A ND WITHOUT MAKING REQUISITE ENQUIRIES AND VERIFICATION. CONSEQUENTLY , THE SAID ASSESSMENT WAS CANCELLED BY THE COMMISSIONER OF INCOME TAX UND ER SECTION 263 OF THE ACT AND THE ASSESSING OFFICER WAS DIRECTED TO R EFRAME THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION. 5. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF T HE COMMISSIONER OF INCOME TAX PASSED UNDER SECTION 263 OF THE ACT. TH E LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT AFTER COMPLETION OF O RIGINAL ASSESSMENT ON 11.12.2007, NOTICE UNDER SECTION 154/155 OF THE INC OME TAX ACT WAS ISSUED ON 25.1.2009, COPY OF WHICH IS PLACED AT PAG ES 29 AND 30 OF THE PAPER BOOK. THE LEARNED A.R. FOR THE ASSESSEE FURT HER POINTED OUT THAT CONSEQUENT THERETO, NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 4.9.2009, COPY OF WHICH IS PLACED AT PAGE 31 OF THE PAPER BOOK. THEREAFTER SHOW CAUSE NOTICE UNDER SECTION 263 OF T HE ACT WAS ISSUED ON 19.2.2010. THE RETURN OF INCOME WAS FILED IN RESPO NSE TO NOTICE UNDER SECTION 148 ON 21.10.2009. THE FATE OF PROCEEDINGS UNDER SECTION 148 WAS NOT KNOWN. THE LEARNED A.R. FOR THE ASSESSEE F URTHER POINTED OUT THAT THE SHOW CAUSE NOTICE ISSUED UNDER SECTION 263 OF THE ACT AND OTHER PROCEEDINGS INITIATED AGAINST THE ASSESSEE UNDER SE CTIONS 148 AND 154 OF THE ACT WERE BASED ON AUDIT OBJECTION AND THERE IS NO INDEPENDENT 4 APPLICATION OF MIND BY THE COMMISSIONER OF INCOME T AX. THE LEARNED A.R. FOR THE ASSESSEE FURTHER POINTED OUT THAT THE AUDIT OBJECTION CANNOT BE SAID TO BE PART OF RECORD AS HELD BY VARIOUS HIG H COURTS. 6. RELIANCE WAS PLACED BY THE LEARNED A.R. FOR THE ASSESSEE ON THE FOLLOWING DECISIONS: I) CIT VS. SOHANA WOOLLEN MILLS [296 ITR 238 (P&H)] II) B & A PLANTATION & INDUSTRIES LTD. & ANOTHER [290 ITR 395 (GUA)] III) JEEWAN LAL (1929) LTD. VS. ADDL.CIT & OTHERS [108 ITR 407 (CAL)] IV) DWARKA DASS & CO. VS. ITO [16 TTJ 304 (CAL)] V) CIT VS. SAT PAL AGGARWAL [293 ITR 90 (P&H)] 7. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT TH AT PURSUANT TO THE AUDIT OBJECTION RAISED BY THE AUDIT PARTY, FIRST TH E ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 154, THEREAFTER UNDER S ECTION 148 AND LATER COMMISSIONER OF INCOME TAX ISSUED SHOW CAUSE NOTICE UNDER SECTION 263 OF THE ACT AND IN ALL THE CASES THE REASONS WERE ID ENTICAL. OUR ATTENTION WAS DRAWN TO THE REPLY FURNISHED BEFORE THE COMMISS IONER OF INCOME TAX DURING THE PROCEEDINGS UNDER SECTION 263 OF THE ACT AND IT WAS POINTED OUT THAT THE COMMISSIONER OF INCOME TAX HAS NOT ADD RESSED THE ISSUE RAISED BY THE ASSESSEE AS PER SUBMISSION PLACED AT PAGE 8 OF THE PAPER BOOK. IN RESPECT OF THE MERITS OF THE CASE, IT WAS POINTED OUT THAT AS THE ASSESSEE HAD NOT PRODUCED THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER WITH APPLICATION OF HIS MIND HAD COMPLETED THE ASSE SSMENT UNDER SECTION 144 READ WITH SECTION 143(3) OF THE ACT AND COMPUTE D THE INCOME IN VIEW OF THE PROVISIONS OF SECTION 44AE OF THE ACT. THE COMMISSIONER OF INCOME TAX VIDE PARA 4 HAD SENT BACK THE MATTER TO THE ASSESSING OFFICER AND SUCH ACTION OF COMMISSIONER OF INCOME TAX WAS S UBSTITUTION OF VIEW OF THE ASSESSING OFFICER AS THE COMMISSIONER OF INC OME TAX AGAINST PROFIT RATE APPLIED BY THE ASSESSING OFFICER @ 2.53 % HAD DIRECTED THE 5 ASSESSING OFFICER TO APPLY HIGHER RATE AND THEN DIS ALLOW 10% OF THE EXPENSES. RELIANCE WAS PLACED IN THE CASE OF CIT V S. GABRIEL INDIA LTD. [203 ITR 108 (BOM)] AND IN THE CASE OF SHRI RAJESH KUMAR VS. CIT-II, ITA NO.521/CHANDI/2010FOR THE PROPOSITION THAT WHER E ONE RATE WAS APPLIED BY THE ASSESSING OFFICER AND THE COMMISSION ER OF INCOME TAX WAS OF THE VIEW THAT AN ENHANCED RATE IS TO BE APPL IED IN THE CASE THEN SUCH VIEW IS NOT OPEN FOR REVISION UNDER SECTION 26 3 OF THE ACT. 8. THE LEARNED D.R. FOR THE REVENUE POINTED OUT THA T EVEN WHERE AUDIT OBJECTION IS THERE AND FURTHER THERE IS INDEPENDENT APPLICATION OF MIND BY THE CIT (APPEALS), THEN INVOKING OF PROVISIONS O F SECTION 263 OF THE ACT ARE VALID. IT WAS FURTHER POINTED OUT THAT THE SOURCE OF INFORMATION CAN BE FROM ANY WHERE AND THE COMMISSIONER OF INCOM E TAX IS EMPOWERED TO BASE HIS MIND ON ANY SOURCE. THE LEAR NED D.R. FOR THE REVENUE STRESSED THAT THE PROVISIONS OF SECTION 263 OF THE ACT WERE APPLICABLE BECAUSE OF NON-APPLICATION OF MIND BY TH E ASSESSING OFFICER. IT WAS FURTHER POINTED OUT BY THE LEARNED D.R. FOR THE REVENUE THAT THERE WAS NO DIRECTION BY COMMISSIONER OF INCOME TAX TO A SSESSING OFFICER TO APPLY ANY NET PROFIT RATE OR TO DISALLOW ANY EXPEND ITURE. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE HAD FURNISHED THE RETURN OF INCOME ON 20.1 0.2005 DECLARING TOTAL INCOME AT RS.3,98,625/- FROM THE BUSINESS INC OME AND RS.5,68,931/- UNDER THE HEAD INCOME FROM OTHER SOU RCES. THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH COMP LETE BOOKS OF ACCOUNT AND VOUCHERS. DESPITE SEVERAL OPPORTUNITIE S PROVIDED TO THE ASSESSEE, NO BOOKS OF ACCOUNT WERE PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSEE WAS THEREAFTE R SHOW CAUSED AS TO WHY THE ASSESSMENT BE NOT COMPLETED IN VIEW OF THE PROVISIONS OF SECTION 6 144 OF THE ACT. THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SECTION 144(1)(B) OF THE ACT COMPLETED THE ASSESSME NT IN TURN ESTIMATING THE INCOME OF THE ASSESSEE FROM TRUCKS IN ACCORDANC E WITH THE PROVISIONS OF SECTION 44 AE OF THE ACT. THE ASSESSEE WAS CARR YING ON THE BUSINESS OF TRANSPORTATION BY USING HIS OWN TRUCKS AND ALSO TRUCKS HIRED BY HIM. THE INCOME OF SELF OWNED TRUCKS WAS COMPUTED AS PER THE PROVISIONS OF SECTION 44AE OF THE ACT AND THE RECEIPTS WERE PROPO RTIONATELY REDUCED TO WORK OUT THE INCOME FROM HIRED TRUCKS. THE ASSESSE E HAD DEBITED SUM OF RS.1,27,10,486/- AS HIRING CHARGES WHICH WORKED OUT TO 42.2% OF THE TOTAL TRANSPORTATION CHARGES. AS THE ASSESSEE HAD FAILED TO PRODUCE THE BOOKS OF ACCOUNT, THE LOADING CHARGING AND FREIGHT CHARGES OF THE TRUCKS HIRED BY THE ASSESSEE WERE WORKED OUT ON PROPORTION ATE BASIS AND THE TOTAL ESTIMATED EXPENSES OF HIRED TRUCKS WERE DETER MINED AT RS.1,77,14,170/-. THE GROSS RECEIPTS ON ACCOUNT OF HIRED TRANSPORTATION WERE WORKED OUT BY APPLYING NET PROFIT RATE OF 1.32 % OF THE TOTAL EXPENSES OF HIRED TRUCKS AND THE SAME WERE WORKED O UT AT RS.1,79,51,125/-. THE ASSESSING OFFICER FURTHER NO TED THAT IF OUT OF THE TOTAL BUSINESS INCOME DECLARED BY THE ASSESSEE AT R S.3,98,625/- THE INCOME FROM SELF OWNED TRUCKS WORKED OUT AT RS.2,76 ,500/- WAS EXCLUDED, THE INCOME FROM HIRED TRUCKS WORKED OUT T O RS.1,22,125/-, WHICH GIVES A NET PROFIT RATE OF 0.68% ONLY. ANOTH ER CONCERN M/S CHANDIGARH ROAD LINES HAD DECLARED NET PROFIT RATE OF 3.5% IN ASSESSMENT YEAR 2005-06 AND 1.96% IN ASSESSMENT YEA R 2004-05, AVERAGE OF WHICH CAME TO 2.53%. THE INCOME OF THE ASSESSEE FROM THE BUSINESS OF HIRED TRUCKS WAS THUS WORKED OUT @ 2.53% OF THE RECEIPTS OF RS.1,79,51,125/- I.E. RS.4,54,163/-. ACCORDINGLY, THE INCOME FROM BUSINESS WAS DETERMINED IN THE HANDS OF THE ASSESSE E AT RS.2,76,500/- PLUS RS.4,54,163/-. THE ASSESSING OFFICER COMPLETED THE ORIGINAL 7 ASSESSMENT PROCEEDINGS UNDER SECTION 144 OF THE ACT BY ESTIMATING THE INCOME IN THE HANDS OF ASSESSEE. 10. THE ISSUE RAISED IN THE PRESENT APPEAL IS WHETH ER IN SUCH BACK DROP, THE COMMISSIONER OF INCOME TAX IS EMPOWERED T O EXERCISE HIS JURISDICTION UNDER SECTION 263 OF THE ACT. IN THE SHOW CAUSE NOTICE ISSUED TO THE ASSESSEE, THE COMMISSIONER OF INCOME TAX HAD RAISED THE ISSUE OF NON-DEDUCTION OF TAX AT SOURCE OUT OF LOAD ING AND UNLOADING EXPENSES AND INVOKING OF PROVISIONS OF SECTION 40A( IA) OF THE ACT. AFTER CONSIDERING THE FACTS OF THE CASE OF THE ASSESSEE A ND EXPLANATION OF THE ASSESSEE REGARDING NON-DEDUCTION OF TAX AT SOURCE A S EACH PAYMENT WAS LESS THAN RS.20,000/- AND NO PAYMENTS TO ONE PERSON WERE MADE ABOVE RS.50,000/-, THE COMMISSIONER OF INCOME TAX NOTED T HAT THE ASSESSEE HAD NOT PRODUCED THE BOOKS OF ACCOUNT DURING THE AS SESSMENT PROCEEDINGS OR DURING THE COURSE OF PROCEEDINGS UND ER SECTION 263 OF THE ACT. THE COMMISSIONER OF INCOME TAX IN THIS REGARD OBSERVED AS UNDER: THE CONTENTION OF THE LD AUDIT REPORT OF THE ASSES SEE IS NOT ACCEPTABLE AS HIS SUBMISSIONS ARE NOT SUPPOR TED WITH BOOKS OF A/CS WHICH HE NEITHER PRODUCED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE THE AO NOR DURING THE COURSE OF PROCEEDING U/S 263 . AS ALREADY STATED ABOVE THE ASSESSEE HAS MADE PAYMENTS ON A/C OF FREIGHT CHARGES, LOADING AND UNLOADING CHARGES AND HIGHER CHARGES BUT HAS NOT DEDUCTED TAX AT SOURCE WHILE MAKING THESE PAYMENTS. THIS FACT ALSO STAND CONFIRMED FROM COL.27 OF THE T AX AUDIT REPOR T ANNEXED TO THE RETURN FILED BY THE ASSESSEE. THERE FORE, THE ABOVE EXPENSES REQUIRED TO BE DISALLOWED UNDER SECTION 40(IA) OF INCOME TAX ACT, 1961. HERE IT MAY BE MENTIONED THAT ONLY AN ADDITION OF RS.3.20 LACS HAS BEEN MADE BY THE AO WHEREAS THE UNVERIFIED EXPENSES UNDER THE THREE HEADS ALONE ARE TO THE TUNE OF RS.2.45 CRORES. CONSIDERING THAT BOOKS OF A/CS HAVE NOT BEEN PRODUCED BY THE ASSESSEE DESPITE REPEATED OPPORTUNITIES AND DUE TO NON-VERIFICATION OF THESE EXPENSES EVEN ON TEST BASIS, IT WOULD BE VERY FARE & JUST IF ONLY 10% OF THESE EXPENSES ARE DISALLOWED (I.E. 90% ALLOWED). THE 10% DISALLOWANCE WOULD MEA N AN ADDITION OF 24.5 LACS EVEN IF ONLY THREE CLAIMS OF EXPENDITURE ARE CONSIDERED WHEREAS THERE ARE MANY 8 OTHER CLAIMS OF EXPENDITURE ALSO WHICH TOO HAVE REMAINED UNVERIFIED. 11. THEREAFTER THE ASSESSING OFFICER WAS DIRECTED T O EXAMINE THE ISSUE OF NON-MAINTENANCE/MAINTENANCE/AUDIT OF BOOKS OF AC COUNT AND INITIATE PENALTY ACCORDINGLY. 12. THE ASSESSEE HAS PLACED ON RECORD COPY OF ASSES SMENT ORDER PASSED UNDER SECTION 144 R.W.S. 143(3) OF THE ACT. THE PE RUSAL OF THE SAME REFLECTS THAT IN THE ABSENCE OF THE BOOKS OF ACCOUN T NOT BEING PRODUCED BY THE ASSESSEE, THE ASSESSING OFFICER COMPUTED THE INCOME OF THE ASSESSEE IN VIEW OF THE PROVISIONS OF SECTION 144 O F THE ACT. FURTHER THE ASSESSING OFFICER AT THE CONCLUSION OF THE ORDER OB SERVED AS UNDER: THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT AND VOUCHERS. THE INCOME THEREBY, HAS BEEN CONCEALED BY THE ASSESSEE AND THE ATUAL INCOME HAS BEEN WORKED OUT IN THE BODY OF THE ASSESSMENT ORDER . PENALTY PROCEEDINGS U/S 271(1)(C) OF THE INCOME TAX ACT ARE ALSO BEING INITIATED SEPARATELY FOR CONCEALING THE ACTUAL PARTICULARS OF INCOME. ASSESSED. ISSUE REQUISITE DOCUMENTS. CHARGE INTER EST U/S 234A, 234B AND 234C OF THE ACT. ISSUE PENALTY NOTICE UNDER SECTION 271A AND 271(1)(B) AND 271(1)( C) OF THE ACT. 13. IN THE PRESENT SET OF FACTS BEFORE US THE COMMI SSIONER OF INCOME TAX VIDE HIS ORDER PASSED UNDER SECTION 263 OF THE ACT HAS DIRECTED THE ASSESSING OFFICER TO RECOMPUTE THE INCOME BY OBSERV ING THAT THE DISALLOWANCE OF THE EXPENSES SHOULD BE AROUND 10%, WHICH WOULD BE VERY FAIR AND JUST. IN NUTSHELL, THE ASSESSING OFF ICER IN THE PRESENT SET OF FACTS AND CIRCUMSTANCES WHERE THE ASSESSEE HAD N OT PRODUCED THE BOOKS OF ACCOUNT, HAD APPLIED CERTAIN PERCENTAGE TO COMPUTE THE INCOME OF CAPTIONED ASSESSMENT YEAR AND THE COMMISSIONER O F INCOME TAX VIDE HIS ORDER PASSED UNDER SECTION 263 OF THE ACT HAS D IRECTED THE ASSESSING OFFICER TO RECOMPUTE THE AFORESAID INCOME AS IN HIS OPINION THE INCOME COMPUTED BY THE ASSESSING OFFICER WITHOUT THE BOOKS OF ACCOUNT WAS ON 9 THE LOWER SIDE. REFERENCE ARE MADE TO THE OBSERVAT IONS OF THE COMMISSIONER OF INCOME TAX AS REPRODUCED BY US IN P ARA HEREINABOVE, WHEREIN THE COMMISSIONER OF INCOME TAX HAD OBSERVED THAT 10% OF THE DISALLOWANCE OF THE TOTAL EXPENSES WOULD MEAN AN AD DITION OF RS.24.5 LACS. 14. THE JURISDICTION UNDER SECTION 263 OF THE INCOM E TAX ACT CAN BE INVOKED BY THE COMMISSIONER OF INCOME TAX WHERE THE ORDER PASSED BY THE ASSESSING OFFICER IS BOTH ERRONEOUS AND PREJUDI CIAL TO THE INTEREST OF THE REVENUE. NON-APPLICATION OF MIND BY THE ASSESS ING OFFICER IS ONE SUCH CAUSE WHERE THE ORDER CAN BE SAID TO BE ERRONE OUS AND IF THE SAME IS RESULTED IN LOSS TO REVENUE, SUCH ORDER IS PREJUDIC IAL TO THE INTEREST OF REVENUE. WHERE THE ASSESSING OFFICER AFTER GOING T HROUGH THE RECORDS AVAILABLE BEFORE HIM HAD ADJUDICATED THE ISSUE AND COMPUTED THE INCOME IN THE HANDS OF THE ASSESSEE BY APPLYING CERTAIN PE RCENTAGE IN THE ABSENCE OF BOOKS OF ACCOUNT AND THE DIRECTIONS OF C OMMISSIONER OF INCOME TAX TO SUBSTITUTE THE PERCENTAGE DETERMINING THE INCOME IN THE HANDS OF THE ASSESSEE AMOUNTS TO SUBSTITUTION OF TH E OPINION OF ASSESSING OFFICER. THE ORDER OF THE ASSESSMENT IN THE PRESEN T CASE CANNOT BE SAID TO BE ERRONEOUS MERELY BECAUSE IN THE OPINION OF TH E COMMISSIONER OF INCOME TAX THE PERCENTAGE ADOPTED BY THE ASSESSING OFFICER WAS ON THE LOWER SIDE AND CONSEQUENTLY THE INCOME ASSESSED IN THE HANDS OF THE ASSESSEE BY APPLYING SUCH LOWER RATE OF PROFIT WAS DETERMINED AT A LESSER FIGURE. SUCH EXERCISE OF POWER BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT IS UNJUSTIFIED AND AGA INST THE SETTLED PRINCIPLES OF LAW ON THE ISSUE. 15. WE FIND SUPPORT FROM THE RATIO LAID DOWN BY THE CHANDIGARH BENCH OF TRIBUNAL IN RAJESH KUMAR VS. CIT-II IN ITA NO.52 1/CHANDI/2010, ORDER DATED 21.10.2010, WHEREIN VIDE PARA 9 IT WAS HELD AS UNDER: 10 9. AS PER THE HONBLE HIGH COURT WHERE AN ASSESSI NG OFFICER WHILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMINES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKIN G AN ESTIMATE HIMSELF, THE SAME CANNOT BE CONSIDERED AS ERRONEOUS MERELY BECAUSE IN THE OPINION OF THE COMMISSIONER THE ESTIMATE MADE BY THE ASSESSING OFFICER WAS ON THE LOWER SIDE. IT HAS BEEN EXPLAINE D THAT SECTION 263 DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JUDGMENT OF THE COMMISSIONER FO R THAT OF THE ASSESSING OFFICER UNLESS THE ORDER OF T HE ASSESSING OFFICER IS SHOWN TO BE ERRONEOUS. IN THE INSTANT CASE, MERELY BECAUSE AS PER THE COMMISSIONE R A HIGHER RATE OF ESTIMATE COULD HAVE BEEN RESORTED TO , WOULD NOT RENDER THE ASSESSMENT ORDER AS ERRONEOUS UNDER SECTION 263 OF THE ACT. MOREOVER, A REFERENCE TO THE JUDGMENT OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S PRABHAT KUMAR (SUPRA) TO JUSTIFY APPLICATION OF A HIGHER RATE OF PROFIT, IS NOT RELEVANT TO TREAT THE ASSESSMENT ORDER AS ERRONEOUS . IT QUITE WELL UNDERSTOOD THAT ESTIMATION OF INCOME BY APPLYING A FLAT RATE INHERENTLY INVOLVES AN ELEMENT OF SUBJECTIVITY AND EACH CASE HAS TO BE CONSIDERED IN ITS OWN PECULIAR FACTS AND CIRCUMSTANCES. AS THE LD. COUNSEL HAS POINTED OUT BY REFERRING TO OTHER PRECEDENTS, VARYING RATES HAVE BEEN APPLIED FOR ESTIMATION OF INCOME IN DIFFERENT CASES. NO UNIFORM RATE CAN BE EVOLVED TO ESTIMATE INCOME. MOREOVER, IN THE PRESENT CASE 8% RATE ADOPTED BY THE ASSESSING OFFIC ER CAN NEITHER BE TERMED AS UNREASONABLE AND NOR ARBITRARY SINCE SECTION 44AD OF THE ACT PRESCRIBING PRESUMPTIVE TAXATION IN CASES OF CIVIL CONTRACTORS, ALSO PROVIDES FOR A RATE OF 8% TO ESTIMATE INCOME. THEREFORE, THE ASSESSMENT COMPLETED BY THE ASSESSIN G OFFICER IN ESTIMATING INCOME BY APPLYING FLAT RATE OF 8% IN THE FACTS AND CIRCUMSTANCES OF THE CASE IS REASONABLE AND JUST. EVIDENTLY, IN THIS CASE, THE ASSESSING OFFICER HAS TAKEN A POSSIBLE AND PLAUSIBL E VIEW AND CANNOT BE TERMED AS UNSUSTAINABLE IN THE E YES OF LAW SO AS TO INVITE THE INVOKING OF SECTION 263 OF THE ACT. THE COMMISSIONER, IN OUR VIEW, ERRED IN INVOKI NG HIS REVISIONARY POWERS CONTAINED IN SECTION 263 OF THE ACT. THEREFORE, THE IMPUGNED ORDER IS SET-ASIDE AND THE APPEAL OF THE ASSESSEE IS ALLOWED. 16. FURTHER WE FIND THAT THE OBJECTION RAISED BY TH E COMMISSIONER OF INCOME TAX IN THE SHOW CAUSE NOTICE ISSUED UNDER SE CTION 263 OF THE ACT WAS IN RELATION TO NON-DEDUCTION OF TAX AT SOURCE O UT OF CERTAIN PAYMENTS MADE BY THE ASSESSEE AND THE INVOKING OF P ROVISIONS OF SECTION 40A(IA) OF THE ACT. HOWEVER,IN THE ULTIMATE ANALYS IS, THE COMMISSIONER OF INCOME TAX HAS DIRECTED THE ASSESSING OFFICE R TO RECOMPUTE THE 11 INCOME IN THE HANDS OF THE ASSESSEE BY APPLYING SUI TABLE NET PROFIT RATE. SUCH DIRECTION OF THE COMMISSIONER OF INCOME TAX IN EXERCISE OF POWER UNDER SECTION 263 OF THE ACT IS NOT WARRANTED AND T HE SAME ARE SET ASIDE. THE SECOND DIRECTION OF THE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT FOR INITIATION OF PENALTY PROCEEDING S IS UNWARRANTED AS THE ASSESSING OFFICER IN THE ORDER PASSED UNDER SECTION 144 R.W.S.143(3) OF THE ACT HAD ALREADY INITIATED PENALTY PROCEEDINGS U NDER VARIOUS PROVISIONS OF THE ACT FOR NON-MAINTENANCE OF BOOKS OF ACCOUNT, NON- APPEARANCE DURING THE ASSESSMENT PROCEEDINGS AND AL SO FOR CONCEALMENT OF PARTICULARS OF INCOME. THE AFORESAID DIRECTION OF THE COMMISSIONER OF INCOME TAX IN THE PRESENT CIRCUMSTANCES IS ALSO UNWARRANTED. ON THIS ISSUE ITSELF WE FIND NO MERIT IN THE EXERCISE OF JU RISDICTION BY THE CIT (APPEALS) UNDER THE PROVISIONS OF SECTION 263 OF TH E ACT AND THE SAME ARE SET ASIDE. 17. THE SECOND ASPECT OF THE ISSUE ARISING BEFORE U S IS THE BASIS ON WHICH THE PRESENT PROCEEDINGS UNDER SECTION 263 OF THE ACT HAVE BEEN INITIATED IN THE PRESENT CASE. FROM THE PERUSAL O F THE RECORD WE FIND THAT PURSUANT TO THE ASSESSMENT ORDER PASSED IN THE CASE ON 11.12.2007, NOTICE UNDER SECTION 154 OF THE ACT WAS ISSUED ON 2 5.1.2009, COPY OF WHICH IS PLACED AT PAGES 29 AND 30 OF THE PAPER BOO K. THE PARTICULAR OF THE MISTAKE PROPOSED TO BE RECTIFIED WAS THE EXPENS ES ALLOWED WHILE COMPUTING THE INCOME UNDER SECTION 44AE OF THE ACT AND NON-DEDUCTION OF TAX AT SOURCE OUT OF FREIGHT CHARGES, LOADING AN D UN-LOADING CHARGES AND HIRING CHARGES. THEREAFTER THE ASSESSING OFFIC ER ISSUED NOTICE UNDER SECTION 148 OF THE ACT DATED 4.9.2009, COPY OF WHIC H IS PLACED AT PAGE 31 OF THE PAPER BOOK. THE ASSESSEE FURNISHED RETUR N OF INCOME IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT ON 21.10.2009. NO PROCEEDINGS WERE THEREAFTER INITIATED IN RESPECT OF THE RE-ASSESSMENT 12 PROCEEDINGS STARTED UNDER SECTION 147/148 OF THE AC T. HOWEVER, SHOW CAUSE NOTICE WAS ISSUED BY THE COMMISSIONER OF INCO ME TAX UNDER SECTION 263 OF THE ACT ON 19.2.2010 IN WHICH THE FI RST CONTENTION WAS THE NON-DEDUCTION OF TDS OUT OF FREIGHT CHARGES, LOADIN G, UNLOADING AND HIRING CHARGES. THE COPY OF SHOW CAUSE NOTICE ISSU ED BY THE COMMISSIONER OF INCOME TAX IS PLACED AT PAGES 35 AN D 36 OF THE PAPER BOOK. THE BASIS OF THE AFORESAID NOTICE UNDER SECT ION 154, THEREAFTER NOTICE UNDER SECTION 148 AND SHOW CAUSE NOTICE UNDE R SECTION 263 OF THE ACT IS THE AUDIT OBJECTION RAISED BY THE AUDIT PART Y IN THE PRESENT CASE. 18. THE LEARNED D.R. FOR THE REVENUE HAD PRODUCED A SSESSMENT RECORDS DURING THE COURSE OF HEARING AND FROM THE PERUSAL O F THE RECORD, IT WAS POINTED OUT THAT NO ORDER UNDER SECTION 154 OF THE ACT HAD BEEN PASSED. FURTHER IT WAS VERIFIED FROM THE RECORDS AND WAS IN TIMATED TO US BY THE LEARNED D.R. FOR THE REVENUE THAT THE PROCEEDINGS U NDER SECTION 148 OF THE ACT WERE FILED ON 31.3.2010 I.E. AFTER THE ORDE R UNDER SECTION 263 OF THE ACT WAS PASSED ON 30.3.2010. 19. OUR ATTENTION WAS DRAWN BY THE LEARNED A.R. FOR THE ASSESSEE TO THE AUDIT OBJECTION RAISED IN THE PRESENT CASE AND THE MAIN CONTENTION OF THE ASSESSEE WAS THAT THERE WAS NO INDEPENDENT APPLICAT ION OF MIND BY THE COMMISSIONER OF INCOME TAX. SECOND PLEA OF THE ASS ESSEE IN THIS REGARD WAS THAT THE AUDIT OBJECTIONS WERE NOT RECORD FOR INVOKING JURISDICTION UNDER SECTION 263 OF THE ACT. THE COMMISSIONER OF INCOME TAX WHILE EXERCISING HIS JURISDICTION UNDER SECTION 263 OF TH E ACT IS EMPOWERED TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDINGS UNDER THE ACT AND WHERE HE THINKS THAT THE ORDER PASSED BY THE ASSESS ING OFFICER WAS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E, HE MAY AFTER GIVING AN OPPORTUNITY OF HEARING TO THE ASSESSEE AND AFTER MAKING ENQUIRIES, PASS SUCH ORDERS, WHICH DEEM NECESSARY IN THE CIRC UMSTANCES OF THE 13 CASE. IN THE PRESENT SET OF FACTS AND CIRCUMSTANCE S, THE COMMISSIONER OF INCOME TAX HAS ISSUED THE SHOW CAUSE NOTICE UNDER S ECTION 263 OF THE ACT ON ACCOUNT OF THE AUDIT OBJECTION RAISED IN THE PRESENT CASE. 20. WE FIND THAT SIMILAR ISSUE OF EXERCISE OF REVIS IONARY POWERS BY THE COMMISSIONER OF INCOME TAX ON THE BASIS OF AUDIT OB JECTIONS AROSE BEFORE THE HON'BLE PUNJAB & HARYANA HIGH COURT IN C IT VS. SOHANA WOOLLEN MILLS (SUPRA) AND IT WAS HELD THAT MERE AUD IT OBJECTION AND THE FACT THAT A DIFFERENT VIEW COULD BE TAKEN, WERE NOT ENOUGH TO SAY THAT THE ORDER OF ASSESSING OFFICER WAS ERRONEOUS OR PREJUDI CIAL TO THE INTERESTS OF REVENUE. THE HON'BLE COURT FURTHER HELD THAT WHETHER SATISFACTION OF THE COMMISSIONER FOR EXERCISING JURISDICTION WAS CALLED FOR OR NOT, HAS TO BE DECIDED HAVING REGARD TO THE GIVEN FACT S ITUATION . 21. THE HON'BLE GAUHATI HIGH COURT IN B & A PLANTAT ION & INDUSTRIES LTD. & ANOTHER VS. CIT & OTHERS (SUPRA) HAS LAID DO WN THE DIFFERENCE BETWEEN REVISIONARY, RECTIFICATION AND RE-ASSESSMEN T PROCEEDINGS. THE FACT SITUATION BEFORE THE HON'BLE GUAHATI HIGH COUR T THAT RECTIFICATION PROCEEDINGS WERE INITIATED ON THE BASIS OF AUDIT OB JECTIONS, WHICH WERE DROPPED SUBSEQUENTLY AND NOTICE UNDER SECTION 263 O F THE ACT WAS ISSUED BY THE COMMISSIONER OF INCOME TAX ON THE BASIS OF S AME AUDIT OBJECTIONS AND THE HON'BLE COURT HELD THAT THERE WA S NO INDEPENDENT APPLICATION OF MIND BY THE COMMISSIONER OF INCOME T AX AND THE REVISION PROCEEDINGS WERE HELD TO BE NOT VALID. THE HON'BLE GAUHATI HIGH COURT OBSERVED AS UNDER: IN THE CASE AT HAND, THE ORDER, INITIATING RECTIFI CATION PROCEEDINGS UNDER SECTION 154, AS WELL AS THE ORDER REVISING THE ASSESSMENT UNDER SECTION 263, WERE PASSED ON THE BA SIS OF ONE AND THE SAME AUDIT OBJECTION. WHILE EXERCISING REVISIONAL J URISDICTION, THE REVISIONAL AUTHORITY MUST BEAR IN MIND THAT THE PRI NCIPLES OF NATURAL JUSTICE DO NOT PERMIT THE DECISION OF A QUASI-JUDIC IAL AUTHORITY, SUCH AS A COMMISSIONER OF INCOME-TAX, TO BE INFLUENCED BY ANY OTHER AUTHORITY. THUS, THE COMMISSIONER, IN THE PRESENT CASE, COULD NOT HAVE INITIATED A SUO MOTU REVISIONAL PROCEEDING ON THE BASIS OF THE SAID AUDIT REPORT. 14 HAD, ON THE BASIS OF THE AUDIT REPORT, THE COMMISSI ONER CAME TO HIS OWN FINDING THAT THE ASSESSING AUTHORITY, WHILE MAKING THE ASSESSMENT, OR THE AUTHORITY EMPOWERED TO RECTIFY A TURNOVER, WHICH HA D ESCAPED ASSESSMENT, HAS ACTED WITHOUT JURISDICTION, REVISIO NAL JURISDICTION COULD HAVE BEEN EXERCISED. EMPHASISED THE SUPREME COURT, IN THE CASE OF SIRPUR PAPER MILL LTD. V. CWT [1970] 77 ITR 6 , THAT WHILE EXERCISING POWER, THE COMMISSIONER MUST HAVE AN UNBIASED MIND AND DECIDE THE DISPUTE ACCORDING TO THE PROCEDURE WHICH IS CONSIST ENT WITH THE PRINCIPLES OF NATURAL JUSTICE AND CANNOT PERMIT HIS MIND TO BE INFLUENCED BY THE DICTATION OF ANOTHER AUTHORITY. THE RELEVANT OBSERVATIONS MADE BY A THREE-JUDGE BENCH OF THE SUPREME COURT, IN THE CA SE OF SIRPUR PAPER MILL LTD. [1970] 77 ITR 6, READ AS FOLLOWS (PAGE 7) : 'IN EXERCISE OF THE POWER THE COMMISSIONER MUST BRI NG TO BEAR AND UNBIASED MIND, CONSIDER IMPARTIALLY THE OBJECTI ONS RAISED BY THE AGGRIEVED PARTY, AND DECIDE THE DISPUTE ACCORDING T O PROCEDURE CONSISTENT WITH THE PRINCIPLES OF NATURAL JUSTICE ; HE CANNOT PERMIT HIS JUDGMENT TO BE INFLUENCED BY MATTERS NOT DISCLOSED TO THE ASSESSEE, NOR BY DICTATION OF ANOTHER AUTHORITY.' 22. SIMILAR VIEW HAS BEEN TAKEN BY THE CALCUTTA HIG H COURT IN JEEWAN LAL (1929) LTD. VS. ADDL.CIT & OTHERS (SUPRA) THAT NOTICE ISSUED BY THE COMMISSIONER OF INCOME TAX AT THE SUGGESTION OF THE AUDIT DEPARTMENT WITHOUT APPLYING HIS MIND COULD NOT BE SUSTAINED IN LAW. 23. IN THE BACK DROP OF THE ABOVESAID SETTLED LEGAL PRECEDENTS, WE FIND THAT THE COMMISSIONER OF INCOME TAX IN THE PRESENT CASE HAD ALSO INITIATED THE PROCEEDINGS UNDER SECTION 263 OF THE ACT ON THE BASIS OF THE AUDIT OBJECTIONS. SHOW CAUSE NOTICE WAS ISSUED IN THE PRESENT CASE FOR NON-DEDUCTION OF TAX AT SOURCE, OUT OF CERTAIN EXP ENSES INCURRED BY THE ASSESSEE AND ORDER PASSED BY THE COMMISSIONER OF IN COME TAX UNDER SECTION 263 OF THE ACT DIRECTING THE ASSESSING OFFI CER TO RE-DETERMINE THE INCOME OF THE ASSESSEE BY APPLYING A RATE OTHER THAN THE RATE APPLIED BY THE ASSESSING OFFICER, BEING WITHOUT JURISDICTIO N, IS NOT TENABLE IN LAW. WE FIND NO MERIT IN THE PLEA OF THE LEARNED D .R. FOR THE REVENUE THAT THE SOURCE OF INFORMATION IN THE PRESENT CASE WAS AUDIT OBJECTION, BUT THERE WAS INDEPENDENT APPLICATION OF MIND BY TH E COMMISSIONER OF INCOME TAX. THE PROVISIONS OF SECTION 263 OF THE A CT ARE CLEAR AND ABSOLUTE THAT THE POWER IS TO BE EXERCISED BY THE COMMISSIONER OF 15 INCOME TAX FROM THE EXAMINATION OF THE RECORDS OF T HE PROCEEDINGS UNDER THE ACT. THE EXPLANATION UNDER SECTION 263 O F THE ACT DEFINES RECORDS AS ALL RECORDS RELATING TO ANY PROCEEDING S UNDER THE ACT AVAILABLE AT THE TIME OF EXAMINATION BY THE COMMISS IONER. THE AUDIT OBJECTIONS UNDER NO CIRCUMSTANCES CAN BE CALLED AS RECORD EMPOWERING THE COMMISSIONER OF INCOME TAX TO EXERCISE JURISDIC TION UNDER SECTION 263 OF THE ACT. FURTHER IT IS APPARENT THAT THE COMMISSIONER OF INCOME TAX HAS INITIATED THE REVISION PROCEEDINGS O NLY ON THE BASIS OF AUDIT OBJECTION. SUCH EXERCISE OF POWER UNDER SECT ION 263 OF THE ACT IS NOT TENABLE IN LAW. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 263 OF THE ACT. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS ALLOWED. 24. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH DAY OF MARCH, 2012. SD/- SD/- (MEHAR SINGH) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 9 TH MARCH, 2012 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH 16