N.K. Proteins Ltd., Ahmedabad V. The Pr.CIT-III, Ahmedabad

ITA 699/AHD/2015

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1125 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 09-10-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 27-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Depreciation; Principle of natural justice; Additional depreciation; Question of law; Assessment record; TDS; Liquidation
• Section: 143(3); 142(1); 80HH; 143(2); 13; 263

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ITA NO.699/AHD/2015 ( / ASSESSMENT YEAR : 2010-11) N.K. PROTEINS LTD. 7 TH FLOOR, POPULAR HOUSE ASHRAM ROAD AHMEDABAD 380 009 / VS. THE PR.CIT-III AHMEDABAD-380 015 ./ ./ PAN/GIR NO. : AAACN 9377 N ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S.N. SOPARKAR, AR / RESPONDENT BY : SHRI O.P. SHARMA, CIT-DR / DATE OF HEARING 09/10/2019 !'# / DATE OF PRONOUNCEMENT 12 /12/2019 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE PR. COMMISSIONER OF INCOME TAX3, AHMEDABAD [PR.CIT IN SHORT] DATED 25/02/2015 ARISING IN THE A SSESSMENT ORDER PASSED UNDER S. 143(3) OF THE INCOME TAX ACT, 1961(HEREINA FTER REFERRED TO AS 'THE ACT') DATED 26/03/2013 RELEVANT TO ASSESSMENT YEAR (AY) 2010-11. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. LD. CIT ERRED IN LAW AND ON FACTS IN INVOKING PROVI SIONS OF SECTION 263 OF THE ACT SEEKING TO REVISE SCRUTINY ASSESSMENT U/S.143(3) OF THE ACT HOLDING IT AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THE ORDER OF CIT DIRECTING AO TO REVISE ORDER THAT IS NEITHER ERRONEOUS NOR PR EJUDICIAL TO THE INTEREST OF ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 2 - REVENUE IS UNJUST, UNTENABLE AND AGAINST PRINCIPLES OF NATURAL JUSTICE THAT DESERVES TO BE QUASHED. 2. LD. CIT ERRED IN LAW AND ON FACTS IN HOLDING THAT R EVISIONARY PROCEEDINGS ON ISSUES ALREADY EXAMINED BY AO DURING ASSESSMENT IS PERMISSIBLE UNDER LAW IN CASE OF INADEQUATE INQUIRY. LD. CIT ERRED IN NOT A PPRECIATING THAT IN FACT THE ENQUIRY WAS NOT INADEQUATE AND ALLEGED INADEQUATE I NQUIRY IS NOT A GROUND TO HOLD ASSESSMENT ORDER AS ERRONEOUS OR PREJUDICIAL T O THE INTEREST OF REVENUE. 3. LD. CIT ERRED IN LAW AND ON FACTS TO HOLD THAT THE RE WAS NO APPLICATION OF MIND BY AO IN ABSENCE OF PROPER INQUIRY ON SUBMISSIONS BY THE APPELLANT. LD. CIT OUGHT TO HAVE APPRECIATED THAT AO FRAMED ASSESSMEN T AFTER DUE VERIFICATION OF ALL DETAILS PRODUCED IN RESPONSE TO QUESTIONNAIRE A LONG WITH AUDITED ANNUAL REPORT, BOOKS OF ACCOUNTS & VOUCHERS NOW ON RECORD. THE ORDER OF LD. CIT DESERVES TO BE QUASHED. 4. LD. CIT ERRED IN LAW AND ON FACTS IN SETTING ASIDE SCRUTINY ASSESSMENT ORDER HOLDING IT ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF REVENUE DIRECTING AO TO FRAME DE NOVO ASSESSMENT ON THE BASIS OF PRESUMPTIO N, CONJUCTURE AND SURMISES IGNORING DETAILED EXPLANATION ALONG WITH DOCUMENTAR Y EVIDENCE SUBMITTED TO AO AS WELL IN IMPUGNED PROCEEDINGS ON FOLLOWING ISSUES (I) VERIFY CORRECTNESS OF CLAIM OF DEPRECIATION VIS A VIS EXISTENCE OF ASSETS (II) VERIFY DETAILS OF ENTIRE INTEREST EXPENDITURE VIS A VIS REVENUE IMPACT OF MARGIN MONEY PAID TO NSE AND OF FOREIGN CURRENCY RE CEIVABLE. (III) VERIFY VALUATION OF CLOSING STOCK VIS A VIS COST OF THE PRODUCT. (IV) VERIFY IMPACT OF LIQUIDATION OF VISNAGAR BANK VIS A VIS OUTSTANDING LOAN WITH RESPECT TO PROVISIONS OF SECTION 41(1) OF THE ACT. (V) VERIFY TRANSACTIONS VIS A VIS VIOLATION OF SECTION 40(A)(3). (VI) VERIFY COMPLIANCE OF TDS PROVISION VIS A VIS ALLOWA BILITY OF EXPENSES. (VII) VERIFY TRANSACTIONS WITH NSEL VIS A VIS NATURE OF L OSS WHETHER BOGUS OR GENUINE OR SPECULATIVE. (VIII) VERIFY REVENUE IMPACT VIS A VIS PROCEEDS FROM DEPOS ITS, TRANSACTIONS COVERED U/S.40A(2)(B), CASH CREDITS, CURRENT LIABIL ITIES ETC. 5. LD. CIT OUGHT TO HAVE APPRECIATED THAT SILENCE ON ISSUES ACCEPTED BY AO AFTER PROPER SCRUTINY NEED NOT MEAN ORDER AS ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER, ED IT, DELETE, MODIFY OR CHANGE ALL OR ANY OF THE GROUNDS OF APPEAL AT THE TIME OF OR BEFO RE THE HEARING OF THE APPEAL. THE ISSUE RAISED BY THE ASSESSEE IS THAT THE LEARNE D PR. CIT ERRED IN HOLDING THE ASSESSMENT FRAMED UNDER SECTION 143(3) OF THE ACT AS ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 3 - ERRONEOUS INSOFAR PREJUDICIAL TO THE INTEREST OF RE VENUE UNDER THE PROVISIONS OF SECTION 263 OF THE ACT. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURIN G AND SALE OF EDIBLE AND NON-EDIBLE OIL PRODUCTS/BYPRODUCTS. THE ASSESSE E HAS ALSO SHOWN THE INCOME DRAWN FROM THE ACTIVITY OF HIRING THE VEHICL ES. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION FILED ITS RETURN OF IN COME DATED 29 TH SEPTEMBER 2010 DECLARING TOTAL INCOME OF 15,31,24,189 ONLY. HOWEVER, THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF T HE ACT FOR THE YEAR UNDER CONSIDERATION AT THE TOTAL INCOME OF 15,47,54,611 AFTER MAKING THE ADDITION/DISALLOWANCES OF CERTAIN ITEMS VIDE ORDER DATED 25 TH MARCH, 2013. 3.1. SUBSEQUENTLY, THE LEARNED PR.CIT CONSIDERE D THE ORDER PASSED BY THE AO AS ERRONEOUS INSOFAR PREJUDICIAL TO THE INTE REST OF REVENUE ON ACCOUNT OF CERTAIN IRREGULARITIES/LAPSES OBSERVED F ROM THE ASSESSMENT RECORDS. THESE IRREGULARITIES/LAPSES OBSERVED BY TH E LEARNED PR.CIT WERE ON ACCOUNT OF 7 ITEMS WHICH HAS BEEN DETAILED IN HI S ORDER DATED 25-02-2015. BUT AT THE TIME OF HEARING BEFORE US TH E LEARNED AR FOR THE ASSESSEE AGREED WITH THE FINDING OF THE LEARNED PR. CIT IN ALL THE ITEMS WHERE THE IRREGULARITIES /LAPSES WERE OBSERVED BY T HE LEARNED PR.CIT EXCEPT THE FOLLOWING: I. NON-VERIFICATION OF THE FIXED ASSETS AND DEPRECIATI ON THEREON. II. NON-VERIFICATION OF THE ITEMS AS DETAILED UNDER: ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 4 - A. PROCEEDS FROM DEPOSITS B. TRANSACTIONS COVERED UNDER SECTION 40A(2)(B) OF THE ACT C. CASH CREDITS D. CURRENT LIABILITIES. 4. THE LEARNED DR DID NOT RAISE ANY OBJECTION O N THE ARGUMENT ADVANCED BY THE LEARNED AR FOR THE ASSESSEE AS DISC USSED ABOVE. IN VIEW OF THE ABOVE, WE LIMIT OUR FINDING ON THE ITEMS/ISS UES AS DISCUSSED ABOVE. NOW WE PROCEED TO ADJUDICATE THE ISSUE IN THE LIGHT OF THE ABOVE STATED DISCUSSION. 5. THE LEARNED PR.CIT DURING THE PROCEEDINGS OB SERVED CERTAIN DEFECTS IN THE ASSESSMENT FRAMED UNDER SECTION 143(3) OF TH E ACT DATED 26/03/2013 AS DETAILED UNDER. NON-VERIFICATION OF THE FIXED ASSETS AND DEPRECIATI ON THEREON THE AUDITOR OF THE COMPANY IN HIS REPORT HAS CATEGO RICALLY MENTIONED THAT THE MANAGEMENT OF THE COMPANY HAS NOT CARRIED OUT A NY PHYSICAL VERIFICATION OF THE FIXED ASSETS. THUS THE AUDITOR WAS NOT IN A POSITION TO FIND OUT/COMMENT ON THE DISCREPANCIES IF ANY WITH R EGARD TO THE FIXED ASSETS SHOWN IN THE FINANCIAL STATEMENTS. HOWEVER, THIS FACT WAS NOT VERIFIED BY THE AO DURING THE ASSESSMENT PROCEEDING S DESPITE THE FACT THAT THERE WAS THE REMARK BY THE AUDITOR OF THE COM PANY IN HIS AUDIT REPORT. ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 5 - THERE WAS NO VERIFICATION CARRIED OUT WITH RESPECT TO THE FOLLOWING ITEMS: SL.NO. HEAD OF TRANSACTION AMOUNT ( ) 1. PROCEEDS FROM DEPOSITS 2046.48 LACS 2. PAYMENT WITH RELATED PARTIES COVERED U/S.40A(2)(B), INCLUDING JOB WORK CHARGES, PURCHASE OF SERVICES, ETC. THE AMOUNT RUNS IN HUNDRED OF CRORES OF RUPEES 3. INTRODUCTION OF CASH CREDITS IN THE BOOKS OF ACCOUNTS WITHOUT PAN OF THE RESPECTIVE LENDERS 6,29,76,901 4. CURRENT LIABILITIES 1,84,26,09,426 6. THE LEARNED PR.CIT IN VIEW OF THE ABOVE ISSU ED SHOW CAUSE NOTICES UNDER SECTION 263 OF THE ACT DATED 3 RD SEPTEMBER 2014 AND 3 RD FEBRUARY, 2015 PROPOSING THE ORDER OF THE AO AS ERRONEOUS INS OFAR PREJUDICIAL TO THE INTEREST OF REVENUE. 6.1. IN COMPLIANCE TO THE ABOVE SHOW CAUSE NOTI CES, THE ASSESSEE MADE ITS REPLY VIDE LETTER DATED 10 TH OCTOBER 2014 AND 5 TH NOVEMBER 2014 BY SUBMITTING THAT THE AUDITOR HAS ALSO COMMENTED IN H IS REPORT THAT CONSIDERING THE SIZE AND NATURE OF THE FIXED ASSETS , PHYSICAL VERIFICATION OF SUCH FIXED ASSETS ONCE IN 3 YEARS IS REASONABLE. 6.2. THE ASSESSEE ALSO SUBMITTED THAT NON-VERIF ICATION OF THE FIXED ASSETS DOES NOT HAVE ANY IMPACT ON THE INCOME CHARG EABLE TO TAX. ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 6 - 6.3. THE ASSESSEE REGARDING THE PROCEEDS FROM DEPOSITS, TRANSACTIONS COVERED UNDER SECTION 40A(2)(B) OF THE ACT, CASH CR EDITS AND CURRENT LIABILITIES CLAIMED THAT ALL THESE ITEMS WERE DULY VERIFIED DURING THE ASSESSMENT PROCEEDINGS. ACCORDINGLY, THE ASSESSEE C LAIMED THAT THERE CANNOT BE ANY ERROR CAUSING PREJUDICE TO THE INTERE ST OF REVENUE ON ACCOUNT OF NON-VERIFICATION. 6.4. IN VIEW OF THE ABOVE, THE ASSESSEE CLAIMED THAT THERE IS NO ERROR INSOFAR PREJUDICIAL TO THE INTEREST OF REVENUE IN T HE ORDER OF THE AO WITH RESPECT TO THE AFORESAID ITEMS. 6.5. HOWEVER, THE LEARNED PR.CIT DISAGREED WITH T HE CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE IS ENTITLED FOR THE DEPRECIATION ON THE FIXED ASSETS IN ITS PROFIT AND LOSS ACCOUNT IF THESE ASSETS ARE USED FOR THE PURPOSE OF THE BUSINESS. THEREFORE, IT BECOMES IMPERATIVE TO VERIFY CERTAIN FACTS SUCH AS EXISTENCE OF THE FIXED ASSETS , SALE, PURCHASE OF THE FIXED ASSETS, THEFT IF ANY OF FIXED ASSETS. BUT THE AO HAS NOT DONE SUCH VERIFICATION DURING THE ASSESSMENT PROCEEDINGS. 6.6. THE LEARNED PR.CIT REGARDING THE PROCEEDS FR OM DEPOSITS, TRANSACTIONS COVERED UNDER SECTION 40A(2)(B) OF THE ACT, CASH CREDITS AND CURRENT LIABILITIES OBSERVED THAT THE ASSESSEE HAS JUST FILED THE DETAILS DURING THE ASSESSMENT PROCEEDINGS WHICH WAS ACCEPTE D BY THE AO WITHOUT ADEQUATE VERIFICATION. ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 7 - 6.7. IN VIEW OF THE ABOVE, THE LEARNED PR.CIT HE LD THE ORDER PASSED BY THE AO UNDER SECTION 143 (3) OF THE ACT AS ERRONEOU S INSOFAR PREJUDICIAL TO THE INTEREST OF REVENUE. BEING AGGRIEVED BY THE ORDER OF THE LEARNED PR.CIT, THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LEARNED AR BEFORE US FILED A PAPER BOOK R UNNING FROM PAGES 1 TO 671 AND SUBMITTED THAT ALL THE NECESSARY DETAILS RE GARDING THE FIXED ASSETS I.E. DESCRIPTION OF ASSETS, DATE AND VALUE OF THE A SSETS WERE DULY DISCLOSED IN THE ANNEXURE 3A TO THE TAX AUDITOR REPORT UNDER FORM 3 CD. THE LEARNED AR FURTHER SUBMITTED THAT THERE WAS AN ENQU IRY BY THE AO ABOUT THE DETAILS OF THE FIXED ASSETS DURING THE ASSESSME NT PROCEEDINGS IN THE NOTICE DATED 22-10- 2012. THE LEARNED AR IN SUPPORT OF HIS CONTE NTION DREW OUR ATTENTION ON PAGES 141 TO 149 WHERE THE DE TAILS OF THE FIXED ASSETS WERE FURNISHED. 7.1. REGARDING THE PROCEEDS FROM THE DEPOSITS, TH E LEARNED AR FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FURNISHED THE REQUISITE DETAILS ABOUT THE UNSECURED LOAN TAKEN FROM THE VARIOUS PAR TIES INCLUDING THE CONFIRMATION FROM THEM. THE LEARNED AR IN SUPPORT O F HIS CONTENTION DREW OUR ATTENTION ON PAGES 8, 9, 135 AND 178 TO 19 9 WHERE THE DETAILS OF THE UNSECURED LOAN WERE PLACED. THE LEARNED AR ALSO CLAIMED THAT IF THE ASSESSEE HAS NOT COMPLIED WITH THE PROVISIONS OF SE CTION 58A OF THE COMPANIES ACT 1956 OR THE DIRECTIVE ISSUED BY THE R ESERVE BANK OF INDIA ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 8 - THEN IT DOES NOT MEAN THAT THERE IS AN ERROR IN THE ORDER OF THE AO CAUSING PREJUDICE TO THE INTEREST OF REVENUE UNDER THE INCO ME TAX ACT. 7.2. REGARDING THE TRANSACTIONS COVERED UNDER SE CTION 40A(2) OF THE ACT THE LEARNED AR CLAIMED THAT THE ASSESSEE HAS CA RRIED OUT THE TRANSACTIONS WITH THE RELATED PARTIES AT THE PREVAI LING MARKET RATE. THE LEARNED AR FURTHER CLAIMED THAT ALL THE DETAILS WER E FURNISHED TO THE AO DURING THE ASSESSMENT PROCEEDINGS AND FURTHER DRAWN OUR ATTENTION ON PAGES 295 TO 671 WHERE THE DETAILS OF THE TRANSACTI ONS WITH THE RELATED PARTIES WERE PLACED. THE LEARNED AR FURTHER CLAIMED THAT THIS FACT WAS DULY VERIFIED BY THE AO DURING THE ASSESSMENT PROCE EDINGS. 7.3. REGARDING THE UNSECURED LOAN TAKEN FROM VAR IOUS PARTIES, THE LEARNED AR CLAIMED THAT ALL THE CONFIRMATIONS FROM THE PARTIES WERE DULY FURNISHED DURING THE ASSESSMENT PROCEEDINGS. THE LE ARNED AR IN SUPPORT OF HIS CLAIM DREW OUR ATTENTION ON PAGES 178 TO 199 OF THE PAPER BOOK WHERE THE CONFIRMATIONS FROM THE PARTIES WERE PLACE D. 7.4. REGARDING THE CURRENT LIABILITIES, THE LEAR NED AR CLAIMED THAT THE DETAILS OF ALL THE PROVISIONS MADE IN THE YEAR UNDE R CONSIDERATION AND THE LIST OF SUNDRY CREDITORS OUTSTANDING AS ON 31 ST 2009 AND 2010 WERE DULY FURNISHED TO THE AO DURING THE ASSESSMENT PROCEEDIN GS. THE LEARNED AR IN SUPPORT OF HIS CONTENTION DREW OUR ATTENTION ON PAGES 150 TO 167 OF THE PAPER BOOK WHERE THE DETAILS OF THE CURRENT LIABILI TIES WERE PLACED. ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 9 - 7.5. IN VIEW OF THE ABOVE, THE LEARNED AR CLAIME D THAT THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE ACT AFTER DU E APPLICATION OF THE MIND OF THE AO AND ACCORDINGLY IT CANNOT BE SAID TH AT THE ORDER OF THE AO IS ERRONEOUS INSOFAR PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF NON-VERIFICATION. 8. ON THE OTHER HAND, THE LEARNED DR SUBMITTED T HAT THE PROPER INQUIRIES WERE NOT CONDUCTED DURING THE ASSESSMENT PROCEEDING S BY THE AO. THE LEARNED DR VEHEMENTLY SUPPORTED THE ORDER OF THE LE ARNED PR.CIT. 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH T HE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT C ASE, THE LD. PR.CIT HAS HELD THAT THE ORDER OF THE AO AS ERRONEOUS INSOFAR PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF NON-VERIFICATION OF THE ITEMS AS DISCUSSED ABOVE. 9.1. HOWEVER, WE NOTE THAT THE AO DURING THE AS SESSMENT PROCEEDINGS HAS REQUIRED THE ASSESSEE TO FURNISH THE DETAILS OF THE FIXED ASSETS IN THE NOTICE ISSUED UNDER SECTION 142(1) OF THE ACT DATED 22-10-2012. THE RELEVANT EXTRACT OF THE NOTICE IS REPRODUCED AS UND ER: ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 10 - 11. REGARDING ADDITIONS TO FIXED ASSETS, FURNISH THE COPIES OF MAJOR BILLS OF ADDITIONS TO FIXED ASSETS. GIVE DET AILS IN THE FOLLOWING PROFORMA: FIXED ASSET ASSET BLOCK DATE OF PURCHASE DATE OF PUTTING TO USE INSTALLATION EXPENSES, FREIGHT EXPENSES, INSURANCE EXPENSES INCURRED IF ANY WHETHER ANY LOAN TAKEN FOR PURCHASE OF THIS ASSET IF LOAN TAKEN, DATE OF SANCTION OF LOAN AND DATE OF FIRST PAYMENT OF INTEREST DEPRECIATION CLAIMED WHETHER ADDITIONAL DEPRECIATION U/S.32(IIA) CLAIMED IF ANY EXTRA CHARGES LIKE INSURANCE, CARRIAGE, INTE REST ETC. HAVE BEEN INCURRED FOR THE PURCHASE OF THESE ASSETS, PLE ASE PROVIDE BILLS. THE ASSESSEE IS RESPONSE TO SUCH NOTICE FILED THE R EPLY VIDE LETTER DATED 5 TH NOVEMBER 2012. THE RELEVANT EXTRACT OF THE LETTER I S REPRODUCED AS UNDER: 9. THE DETAILS OF ADDITION TO FIXED ASSETS I.E. DESCRIPTION OF ASSET, DATE PUT TO USE AND VALUE OF THE ASSET IS ALREADY GIVEN IN ANNE XURE-3A TO THE AUDIT REPORT UNDER FORM 3CD. 9.2. WE ALSO FIND THAT THE ASSESSEE IN RESPONSE TO THE ABOVE NOTICE HAS ALSO FILED THE DETAILS OF THE ASSETS FOR EACH BLOCK OF ASSETS WHICH ARE PLACED ON PAGES 141 TO 149 OF THE PAPER BOOK. THUS AFTER PERUSAL OF THE DETAILS OF THE FIXED ASSETS WHICH WERE AVAILABLE BE FORE THE AO DURING THE ASSESSMENT PROCEEDINGS, WE FIND THAT THE AO AFTER D UE APPLICATION OF MIND FRAMED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT. ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 11 - 9.3. SIMILARLY, WE NOTE REGARDING THE PROCEEDS FROM DEPOSITS AND CASH CREDIT I.E. UNSECURED LOANS, THAT THE AO DURING THE ASSESSMENT PROCEEDINGS HAS REQUIRED THE ASSESSEE TO FURNISH TH E DETAILS IN THE NOTICE ISSUED UNDER SECTION 142(1) OF THE ACT DATED 22-10- 2012. THE RELEVANT EXTRACT OF THE NOTICE IS REPRODUCED AS UNDER: 8. DETAILS OF THE SECURED LOANS TAKEN FROM BANK S ALONGWITH THE NAME AND ADDRESS OF THE BRANCH AND TYPE OF LOAN AND THE AMOUNT OF LOAN TAKEN. ALSO STATE THE SECURITY HYPOTHECATE D/MORTGAGED. 9. PLEASE PROVIDE DETAILS OF UNSECURED LOANS IN TH E FOLLOWING PROFORMA: NAME OF UNSECURED CREDITOR ADDRESS PAN OPENING BALANCE CLOSING BALANCE WHETHER SQUARED UP DURING THE YEAR RATE OF INTEREST PAID 10. IN RESPECT OF ANY NEW UNSECURED LOANS TAKEN AN D CONCERNING ANY SQUARED UP LOANS, GIVE CONFIRMATIONS OF THE PER SONS AND ALSO PROVIDE THE ITRS SHOWING RETURNED INCOME OF THE LEN DERS. . 19. DETAILS OF DEPOSITS ALONG WITH THE NAME & ADDR ESS OF THE PERSON AND AMOUNT. THE ASSESSEE IS RESPONSE TO SUCH NOTICE FILED THE R EPLY VIDE LETTER DATED 5 TH NOVEMBER 2012. THE RELEVANT EXTRACT OF THE LETTER I S REPRODUCED AS UNDER: ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 12 - 7. THE DETAILS OF SECURED LOANS ALONG WITH THE D ETAILS OF SECURITY FURNISHED RELEVANT TO AY 2010-11 IS ENCLOSED. 8. THE DETAILS OF UNSECURED LOANS IN THE REQUIRED FORMAT RELEVANT TO AY 2010- 11 IS ENCLOSED. 9.4. WE ALSO FIND THAT THE ASSESSEE IN RESPONSE T O THE ABOVE NOTICE HAS FILED THE DETAILS OF THE UNSECURED LOAN WHICH ARE P LACED ON PAGES 137 TO 140 OF THE PAPER BOOK AS WELL AS CONFIRMATIONS WHIC H ARE PLACED ON 178 TO 199 OF THE PAPER BOOK. 9.5. SIMILARLY, WE NOTE, REGARDING THE TRANSAC TIONS COVERED UNDER SECTION 40A(2)(B) OF THE ACT ASSESSEE IN RESPONSE T O THE QUERIES RAISED IN THE COURSE OF HEARING HAS SUBMITTED VIDE LETTER DAT ED 06/03/2013 THAT THE TRANSACTIONS WERE CARRIED OUT WITH THE RELATED PART IES AT THE PREVAILING MARKET RATE. IN THE COURSE OF HEARING CERTAIN QUERIES ARE RAISE D. THEY ARE EXPLAINED AS UNDER: 1. AS REGARDS SECTION 40A(2)(B) THE ASSESSEE HAS MADE PURCHASES FROM NKIL, N.K. ROADWAYS P.LTD. AND TIRUPATI PROTEINS P. LTD. THEY ARE ALL AT PREVAILING MARKET RATE. THIS MAY BE VERIFIED FROM THE PURCHASE INVOICES FROM THE SAID PARTIES AND THIR PARTIES PRODUCED FOR YOUR VERIFICATION. THEREFORE THE QUESTION OF APPLICABILITY OF SECTION 40A92)(B) DOES NOT ARISE. 9.6. WE ALSO NOTE THAT THE ASSESSEE HAS FILED T HE COMPLETE COPIES OF THE LEDGERS OF THE TRANSACTIONS CARRIED OUT WITH THE RE LATED PARTIES WHICH ARE PLACED ON PAGES 295 TO 671 OF THE PAPER BOOK. ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 13 - 9.7. SIMILARLY, WE NOTE, REGARDING THE CURRENT LIABILITIES THAT THE AO DURING THE ASSESSMENT PROCEEDINGS HAS REQUIRED THE ASSESSEE TO FURNISH THE DETAILS IN THE NOTICE ISSUED UNDER SECTION 142( 1) OF THE ACT DATED 22- 10-2012. THE RELEVANT EXTRACT OF THE NOTICE IS REPR ODUCED AS UNDER: 15. GIVE DETAILS OF OUTSTANDING PROVISIONS IN TH E FOLLOWING PROFORMA: PROVISION MADE FOR AMOUNT IF PAYMENT MADE SUBSEQUENTLY, DATE OF DISCHARGE OF LIABILITY 16. PROVIDE A COMPLETE LIST OF ALL YOUR SUNDRY CRE DITORS FOR AY 2010-11 IN THE FOLLOWING PROFORMA: NAME NATURE OF THE CREDITOR (GOODS, OTHER ETC.) OUTSTANDING BALANCE AS ON 31-03- 2010 OUTSTANDING BALANCE AS ON 31-03- 2009, IF ANY (PUT - IF THERE WAS NO O/S.BLANCE) OUTSTANDING BALANCE AS ON 31-03- 2008 (PUT - IF THERE WAS NO O/S BALANCE) OUTSTANDING BALANCE AS ON TODAY (IF NO OUTSTANDING BALANCE, THEN STATE THE DATE OF WRITING OFF THE LIABILITY OR DATE OF PAYMENT FOR CLEARING THE DUES). THE ASSESSEE IS RESPONSE TO SUCH NOTICE FILED THE R EPLY VIDE LETTER DATED 5 TH NOVEMBER 2012. THE RELEVANT EXTRACT OF THE LETTER I S REPRODUCED AS UNDER: ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 14 - 7. THE DETAILS OF SECURED LOANS ALONG WITH THE D ETAILS OF SECURITY FURNISHED RELEVANT TO AY 2010-11 IS ENCLOSED. 8. THE DETAILS OF UNSECURED LOANS IN THE REQUIRED FORMAT RELEVANT TO AY 2010- 11 IS ENCLOSED. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 13. THE DETAILS OF PROVISION MADE RELEVANT TO AY 2010-11 IS ENCLOSED. 14. THE LIST OF CREDITORS OUTSTANDING AS ON 31/03/ 2009 AND 31/03/2010 ARE ENCLOSED. 9.8. WE ALSO NOTE THAT THE ASSESSEE HAS FILED TH E COMPLETE DETAILS OF THE PARTIES AND THE ACCOUNTS OF THE PROVISIONS WHICH AR E PLACED ON PAGES 150 TO 167 OF THE PAPER BOOK. 9.9. IN VIEW OF THE ABOVE, WE HOLD THAT THE ASS ESSMENT ORDER WAS FRAMED UNDER SECTION 143(3) OF THE ACT AFTER DUE VE RIFICATION BY THE AO. ACCORDINGLY, WE ARE OF THE VIEW THAT THE ORDER OF T HE AO CANNOT BE HELD AS ERRONEOUS INSOFAR PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF NON-VERIFICATION OF THE FACTS AS STATED ABOVE. 9.10. IN HOLDING SO, WE DRAW SUPPORT AND GUIDANC E FROM THE JUDGMENTS OF THE HONBLE COURTS AS DETAILED UNDER: 9.11. HONBLE SUPREME COURT IN THE CASE OF MALA BAR INDUSTRIAL CO LTD VS. CIT REPORTED IN 109 TAXMAN 66, WHEREIN IT WAS HELD AS UNDER: IN THE INSTANT CASE, THE COMMISSIONER NOTED THAT T HE ITO PASSED THE ORDER OF NIL ASSESSMENT WITHOUT APPLICATION OF MIND. INDEED, THE HIGH COURT RECORDED THE FINDING THAT THE ITO FAILED TO APPLY HIS MIND T O THE CASE IN ALL PERSPECTIVE AND THE ORDER PASSED BY HIM WAS ERRONEOUS. IT APPEA RED THAT THE RESOLUTION PASSED BY THE BOARD OF THE APPELLANT-COMPANY WAS NO T PLACED BEFORE THE ASSESSING OFFICER. THUS, THERE WAS NO MATERIAL TO S UPPORT THE CLAIM OF THE ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 15 - APPELLANT THAT THE SAID AMOUNT REPRESENTED COMPENSA TION FOR LOSS OF AGRICULTURAL INCOME. HE ACCEPTED THE ENTRY IN THE S TATEMENT OF THE ACCOUNT FILED BY THE APPELLANT IN THE ABSENCE OF ANY SUPPOR TING MATERIAL AND WITHOUT MAKING ANY INQUIRY. ON THESE FACTS THE CONCLUSION T HAT THE ORDER OF THE ITO WAS ERRONEOUS WAS IRRESISTIBLE. THEREFORE, THE HIGH COURT HAD RIGHTLY HELD THAT THE EXERCISE OF THE JURISDICTION BY THE COMMIS SIONER UNDER SECTION 263(1) WAS JUSTIFIED. 9.12. HONBLE GUJARAT HIGH COURT IN THE CASE OF C IT VS. KAMAL GALANI REPORTED IN 95 TAXMANN.COM 261, WHEREIN IT WAS HELD AS UNDER: 21. THE ASSESSING OFFICER HAVING CARRIED OUT SUCH DETA ILED INQUIRIES, IT WAS NOT OPEN FOR THE COMMISSIONER TO THEREAFTER REOPEN THE ISSUES ON MERE APPREHENSION AND SURMISES. HIS TWO FUNDAMENTAL OBJE CTIONS WERE THAT THE ASSESSING OFFICER DID NOT VERIFY WHETHER THE REMITT ANCES WERE FROM THE OWN INCOME OR SOURCES OF THE ASSESSEE AND HIS BROTHER O R WERE MERELY BY WAY OF HAWALA TRANSACTIONS. IN THE PROCESS, HE WAS ALSO CR ITICAL OF THE ASSESSING OFFICER NOT INSISTING ON COLLECTING THE DETAILS OF THE ACCOUNTS FROM WHICH THE FOREIGN REMITTANCES WERE MADE TO THE INDIAN ACCOUNT OF THE SAID TWO PERSONS. WITHOUT ANY MATERIAL WITHOUT ANY BASIS, THE CIT COU LD NOT HAVE REMANDED THE PROCEEDINGS TO THE ASSESSING OFFICER TO CARRY OUT F URTHER INQUIRIES IN ORDER TO ASCERTAIN WHETHER THE REMITTANCES WERE GENUINE OR W ERE IN THE NATURE OF HAWALA TRANSACTIONS. IN THE ENTIRE ORDER OF THE COM MISSIONER, WE DO NOT FIND ANY BASIS FOR HIM TO CARRY SUCH APPREHENSION. HIS P RINCIPLE THRUST WAS TO THE EFFECT THAT ASSESSEE DID NOT PRODUCE THE PRECISE BA NK DETAILS OF THE FOREIGN REMITTANCES EVEN BEFORE HIM. THERE IS NOTHING ON TH E RECORD TO SUGGEST THAT HE CALLED UPON THE ASSESSEE TO DO SO AND THE ASSESSEE FAILED OR REFUSED TO DO SO. 9.13. HONBLE GUJARAT HIGH COURT IN THE CASE OF C IT VS. ARVIND JEWELLERS 124 TAXMAN 615, WHEREIN IT WAS HELD AS UN DER: IT IS CLEAR THAT THE PROVISIONS OF SECTION 263 CAN NOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED B Y THE ASSESSING OFFICER, IT IS ONLY WHEN AN ORDER IS ERRONEOUS, THAT SECTION WI LL BE ATTRACTED AND INCORRECT ASSUMPTION OF FACTS OR AN INCORRECT APPLI CATION OF LAW WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. IN TH E INSTANT CASE, IT WAS THE FINDING OF FACT GIVEN BY THE TRIBUNAL THAT THE ASSE SSEE HAD PRODUCED RELEVANT MATERIAL AND OFFERED EXPLANATION IN PURSUANCE OF TH E NOTICES ISSUED UNDER SECTION 142(1) AS WELL AS SECTION 143(2) AND AFTER CONSIDERING THOSE MATERIALS AND EXPLANATION, THE ITO HAD COME TO A DEFINITE CON CLUSION. THE ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 16 - COMMISSIONER DID NOT AGREE WITH THE CONCLUSION REAC HED BY THE ITO. SECTION 263 DID NOT EMPOWER HIM TO TAKE ACTION ON THESE FAC TS TO ARRIVE AT THE CONCLUSION THAT THE ORDER PASSED BY THE ITO WAS ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. SINCE THE MATERIAL WAS THERE ON RECORD AND THE SAID MATERIAL WAS CONSIDERED BY THE ITO AND A PARTI CULAR VIEW WAS TAKEN, THE MERE FACT THAT DIFFERENT VIEW COULD BE TAKEN, SHOUL D NOT BE THE BASIS FOR AN ACTION UNDER SECTION 263 AND IT COULD NOT BE HELD T O BE JUSTIFIED. IN VIEW OF THIS AND FOLLOWING THE PRINCIPLES LAID D OWN BY THE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83/109 TAXMAN 66 , THE TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE THE ORDER P ASSED BY THE COMMISSIONER UNDER SECTION 263. 9.1.4 HONBLE GUJARAT HIGH COURT IN THE CASE OF C IT VS. MEHSANA DISTRICT CO-OP. MILK PRODUCERS UNION LTD. 130 TAXMA N 235, WHEREIN IT WAS HELD AS UNDER: IT IS WELL-SETTLED THAT THE PROVISIONS OF SECTION 263(1) CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COM MITTED BY THE ASSESSING OFFICER, AND IT IS ONLY WHEN THE ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. WHEN TWO VIEWS ARE POSSIBLE AND THE ASSE SSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE , IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTEREST OF T HE REVENUE UNLESS THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE IN LAW. IT WAS NOT SHOWN HOW THE METHOD FOLLOWED BY THE ASSESSEE TO DIVIDE THE E XPENSES FOR THE PURPOSE OF CLAIMING RELIEF UNDER SECTION 80HH WAS IMPROPER OR UNACCEPTABLE. THE ASSESSING OFFICER AS WELL AS THE TRIBUNAL HAD FOUND THAT THE EXPENSES WERE APPORTIONED ON A RATIONAL BASIS AND IT WOULD NOT BE OPEN FOR THE COURT TO GO BEYOND THAT FINDING WHICH APPEARED TO HAVE BEEN REA CHED ON THE BASIS OF THE MATERIAL ON RECORD WHICH SHOWED THAT IN THE EARLIER YEARS THE SAME PROPORTION FOR DIVIDING THE EXPENSES WAS CONSISTENT LY FOLLOWED. THE DEPARTMENT HAD NOT BEEN ABLE TO SHOW THAT FOR THOSE EARLIER TWO YEARS ANY OBJECTION WAS RAISED AGAINST SUCH APPORTIONMENT. 9.15. HONBLE GUJARAT HIGH COURT IN THE CASE OF C IT VS. AMIT CORPORATION 213 TAXMAN 19, WHEREIN IT WAS HELD AS U NDER: ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 17 - 5. WE ARE OF THE OPINION THAT THE TRIBUNAL COMMITTED NO ERROR. WHEN, DURING THE COURSE OF FRAMING OF THE ASSESSMENT, THE ASSESS ING OFFICER HAD ACCESS TO ALL THE RECORDS OF THE ASSESSEE, AFTER PURSUING SUC H RECORD THE ASSESSING OFFICER FRAMED THE ASSESSMENT, SUCH ASSESSMENT COUL D NOT HAVE BEEN RE- OPENED IN EXERCISE OF REVISION POWER UNDER SECTION 263 OF THE ACT FOR MAKING FURTHER INQUIRIES. IN THE FACTS OF THE CASE, IN OUR OPINION, TRIBUNAL RIGHTLY INTERFERED WITH SUCH ORDER. NO QUESTION OF LAW ARIS ES. TAX APPEAL IS, THEREFORE, DISMISSED. 9.16. AFTER CONSIDERING THE FACTS IN TOTALITY AS DISCUSSED ABOVE, WE CONCLUDE THAT THE ASSESSMENT WAS FRAMED BY THE AO A FTER CONSIDERING THE VARIOUS DETAILS FILED BY THE ASSESSEE. THEREFORE, W E ARE NOT INCLINED TO UPHOLD THE FINDING OF THE LEARNED LD. PR.CIT WITH R ESPECT TO THE ITEMS AS DISCUSSED ABOVE. ACCORDINGLY, WE QUASH THE ORDER PA SSED BY THE LD. PR.CIT UNDER SECTION 263 OF THE ACT TO THE EXTENT O F THE ITEMS AS DISCUSSED ABOVE. HENCE, THE GROUNDS OF APPEAL OF TH E ASSESSEE ARE PARTLY ALLOWED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 12 /12/2019 SD/- SD/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 12/12/2019 &.., .(.. / T.C. NAIR, SR. PS ITA NO.699/AHD/2015 N. K. PROTEINS LTD. VS. PR.CIT-III ASS T.YEAR 2010-11 - 18 - !'#' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. )*+ , / CONCERNED CIT 4. , ( ) / THE PR.CIT-3, AHMEDABAD 5. /01 ((*+ , *+# , ) / DR, ITAT, AHMEDABAD 6. 145 6 / GUARD FILE. / BY ORDER, / ( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION 30.11.2019 ( WORD PROCESSED BY HONBLE AM IN HIS COMPUTER BY DRA GON ) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 30.11.2019/12.12.19 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.12.12.19 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 12.12.19 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER