M/s Raju Vegesna Infotech Industries (P) Ltd., Visakhapatnam V. The Addl. CIT, Range-4, Visakhapatnam

ITA 73/VIZ/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50168 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 23-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SASMAL
• Keywords: Assessment record; Commercial expediency
• Section: 263

Judgement Text

ITA NO73/V/2011 RAJU VEGESNA INFOTECH INDS P LTD, V SKP. 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 73 /VIZAG/ 20 11 ASSESSMENT YEAR : 2006 - 07 M/S. RAJU VEGESNA I NFOTECH INDUSTRIES (P) LTD. VISAKHAPATNAM VS. ADDL. CIT, RANGE - 4 VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO.AACCR 6263K APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI B. SASMAL, SR. DR ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT PASSED U/S 263 OF THE INCOME TAX ACT (HEREINAFTER C ALLED AS `ACT) SETTING ASIDE THE ASSESSMENT ORDER WITH A DIRECTION TO REVI EW THE ASSESSMENT DENOVO AFTER HOLDING THAT THE ASSESSMENT ORDER IS ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THIS APPEAL CAME UP FOR H EARING ON 12.4.2011. THIS APPEAL IS REQUIRED TO BE ARGUED BY THE CIT(DR) BUT THE CIT(DR) WAS NOT PRESENT AS HE WAS ON STUDY TOUR. CIT (INCHARGE) OF THE TRIBUNAL MR. I. SURESH BABU DOES NOT APPEAR IN PERSON TO PRESENT TH IS CASE FOR THE REASONS BEST KNOWN TO HIM. HE HOWEVER, FILED THE WRITTEN S UBMISSIONS THROUGH SENIOR D.R. MR. B. SASMAL AND THE SAME ARE TAKEN ON RECORD . THEREFORE, NO ORAL ARGUMENT WAS RAISED ON BEHALF OF THE REVENUE. ACCO RDINGLY, THE APPEAL WAS HEARD. 2. THE ASSESSEE HAS ASSAILED THE ORDER OF CIT ON VA RIOUS GROUNDS BUT THEY ALL RELATE TO THE ACTION OF THE CIT INITIATED U/S 263 OF THE ACT WITHOUT APPRECIATING THE FACT THAT ISSUE OF COMPUTATION OF CAPITAL GAIN HAS ALREADY BEEN ADJUDICATED BY THE CIT(A) AND THE TRIBUNAL. T HEREFORE, HE HAS NO JURISDICTION TO SET ASIDE OR REVISE THE ORDER OF TH E A.O. ITA NO73/V/2011 RAJU VEGESNA INFOTECH INDS P LTD, V SKP. 2 3. THE BRIEF FACTS BORNE OUT FROM THE ORDER OF THE LOWER AUTHORITIES ARE THAT ON VERIFICATION OF THE ASSESSMENT RECORD, THE CIT HAS OBSERVED THAT THE ASSESSEE COMPANY BOOKED A LOSS OF RS.23.65 CRORES O N THE ALLEGED SALE OF SHARES OF M/S. BIRIJA FERRO ALLOYS PVT. LTD. AND M/ S. BRAHMINI FERRO ALLOYS PVT. LTD. THE SHARES WERE ORIGINALLY ACQUIRED BY THE AS SESSEE IN PURSUANCE OF MOU WITH SHRI CVSSR RAJU OF SRINIVASA GROUP. IN PU RSUANCE TO ANOTHER AGREEMENT DATED 28.12.2005, THE ASSESSEE TRANSFERRE D BACK THE SHARES TO THE SAME GROUP FOR A CONSIDERATION OF RS.30 LAKHS ONLY AND THUS BOOKED THE LOSS OF RS.23.65 CRORES. THE CIT FURTHER NOTED THAT AS ON THE DATE OF INITIAL AGREEMENT ENTERED INTO BY THE ASSESSEE BOTH THE MAN UFACTURING COMPANIES IN WHICH INVESTMENTS WERE MADE BY THE ABOVE MENTION ED COMPANIES WERE ADMITTEDLY SICK COMPANIES AND WERE NOT EVEN OPERATI ONAL. THESE TRANSACTIONS APPEARED TO BE TAILOR MADE TO CREATE L OSS THAT COULD BE SET OFF AGAINST THE PROFIT EARNED ON THE SALE OF SHARES OF M/S. RAMANAND INFOTECH PVT. LTD. THE A.O. HAS ALSO FAILED TO EXAMINE THE ASPECT THAT THE SHARES VALUE AT FACE VALUE OF RS.10/- WERE SOLD AT AN EXHO RBITANT PRICE OF RS.300/- PER SHARE. THE ASSESSEE ALSO INVESTED AN AMOUNT OF RS.12.51 CRORES ON 12.3.2005 BY WHICH TIME THERE WAS NO PROSPECT OF RE VIVAL OF THESE COMPANIES. CONVERSELY, THE ASSESSEE HAS SOLD THE S HARES AT A RIDICULOUSLY LOW PRICE AT RS.4/- PER SHARE TO THE SAME GROUP. 4. THE CIT FURTHER NOTED THAT THE ASSESSEE HAD ADMI TTED CAPITAL GAINS OF RS.29,49,92,040/-. THE DETAILS OF THE DATE OF SALE OF ASSETS, LIST OF TRANSFEREES OF THE SHARES OF THE TWO STEEL/FERRO AL LOYS COMPANIES WERE NOT VERIFIED BY THE A.O. IN ADDITION TO THE ABOVE, THE ASSESSEE ADMITTED SHORT TERM AND LONG TERM CAPITAL GAIN OF WHICH DETAILS WE RE NOT PLACED ON RECORD BY THE A.O. 5. IT WAS ALSO NOTED BY THE CIT THAT ASSESSEE COMPA NY ACQUIRED 9998 SHARES OF M/S. RAMANAND INFOTECH PVT. LTD. ON 28.8. 2004 FROM ITS DIRECTORS, SRI VEGESNA ANANDA RAJU AND SRI V. RAGHURAMA RAJU. THESE SHARES WERE ALLOTTED TO THEM AT A PRICE OF RS.10 PER SHARE ON 2 8.8.2004. ON THE SAME DAY, THE COMPANY WAS ALLOTTED 26,66,670 SHARES OF R S.10/- EACH AT A PREMIUM OF RS.290/- PER SHARE DIRECTLY FROM THE COM PANY BY WAY OF FRESH ITA NO73/V/2011 RAJU VEGESNA INFOTECH INDS P LTD, V SKP. 3 ALLOTMENT AT PREMIUM. THE BALANCE SHEET SHOWS THE COST OF THE HOLDINGS OF THE SHARE AT RS.80,01,09,400/- WHICH GIVES A VALUE OF RS.300/- PER SHARE. THIS MEANS THAT SHRI VEGESNA ANANDA RAJU AND SHRI V . RAGHURAMA RAJU WERE ALLOTTED 9998 SHARES AT PAR ON 28.8.2004 AND ON THE SAME DATE THEY SOLD THESE SHARES TO THE ASSESSEES AT A PROFIT OF RS.290 /- PER SHARE. THE ABOVE TRANSACTIONS WERE ALSO NOT VERIFIED BY THE A.O. 6. ACCORDINGLY, SHOW CAUSE NOTICE U/S 263 OF THE AC T WAS ISSUED, CALLING FOR THE EXPLANATIONS OF THE ASSESSEE AND IN RESPONS E THERETO, THE ASSESSEE FURNISHED THE DETAILED EXPLANATIONS AND QUESTIONED THE VALIDITY OF THE PROCEEDINGS U/S 263 OF THE ACT. IT WAS STATED BEFO RE THE CIT THAT THE ASSESSING OFFICER HAS MADE A DETAILED ENQUIRY OR IN VESTIGATION ON THIS ISSUE AND HAS TREATED THE PROFIT EARNED BY THE ASSESSEES ON SALE OF SHARES RELATED TO RAMANAND INFOTECH PVT. LTD., BIRIJA FERRO ALLOYS PVT. LTD. AND BRAHMINI FERRO ALLOYS LIMITED AS ASSESSABLE UNDER THE HEAD PROFITS FROM BUSINESS. 7. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) AND FURNISHED ALL RELEVANT INFORMATIONS WITH REGARD TO THE PURCHASE A ND SALE OF ALL THESE SHARES. SINCE THE MATTER WAS SUBJIDICE BEFORE THE CIT(A) ON THE SAME ISSUE, THE CIT HAS NO JURISDICTION U/S 263 OF THE ACT TO R EVISE THE ORDER OF THE A.O. THE DETAILED REPLY OF THE ASSESSEE IN RESPONSE TO S HOW CAUSE NOTICE IS EXTRACTED IN THE ORDER OF THE CIT FROM PAGE NO.6 TO 10 ON 6 POINTS. 8. THE CIT WAS NOT CONVINCED WITH THE EXPLANATIONS OF THE ASSESSEES AND HELD THAT THE WHOLE TRANSACTION OF PURCHASING SHARE S OF LOSS MAKING COMPANIES FOR A PREMIUM OF RS.290/- PER SHARE AND T RANSFERRING BACK THE SHARES TO THE SAME GROUP FOR RS.4/- PER SHARE IS ON LY AN AFTER THOUGHT OF THE ASSESSEE TO REDUCE ITS INCOME ARISEN OUT OF THE SAL E OF SHARES OF M/S. RAMANAND INFOTECH PVT. LTD. THE CIT FURTHER OBSERV ED THAT IT MAY BE TRUE THAT SHARES WERE PURCHASED BY THE ASSESSEE AND TRAN SFERRED BACK TO THE SAME GROUP OF COMPANIES BUT THE SURROUNDING CIRCUMS TANCES AND THE HUMAN PROBABILITIES CLEARLY SHOWS THAT THE WHOLE TRANSACT IONS IS NOT A REAL TRANSACTION BUT A SAME TRANSACTION. HE ACCORDINGLY SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE A.O. TO REDO THE ASSESSMENT DENOVO. ITA NO73/V/2011 RAJU VEGESNA INFOTECH INDS P LTD, V SKP. 4 9. NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT THE NATURE OF INVESTMENT IN SHARES WERE DULY EXAMINED BY THE ASSESSING OFFICER IN HIS ORDER IN DETAIL. THE ASSESSEE HAS CLAIMED THE PROFIT EARNED ON THESE SHARES AS A CAPITAL GAIN BUT IT WAS NOT ACCEPTED BY THE A.O. AND HE FINALLY HELD THAT THE PROFIT EARNED ON THESE TRANSACTIONS OF SHARES RELATED TO RAMANAND INFOTECH PVT. LTD., BIRIJA FERR O ALLOYS LTD. & BRAHMINI FERRO ALLOYS LTD. ARE ASSESSABLE UNDER THE HEAD PR OFIT FROM BUSINESS. AGAINST THE ASSESSMENT ORDER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND THEN TRIBUNAL WITH THE SUBMISSION THAT T HIS ISSUE WAS DULY EXAMINED BY THE ASSESSING OFFICER, CIT(A) AND THE T RIBUNAL IN FIRST ROUND OF APPEAL. THE NATURE OF TRANSACTIONS AS WELL AS THE NATURE OF PROFIT EARNED BY THE ASSESSEE ON TRANSACTIONS OF THESE SHARES WERE E XPLAINED AND EXAMINED IN FIRST ROUND OF APPEAL BY THE CIT(A) AND THE ASSESSI NG OFFICER ALSO. BEFORE THE ASSESSING OFFICER COMPLETE DETAILS OF PURCHASE AND SALES WERE FURNISHED AND AFTER HAVING IT EXAMINED IN DETAIL, THE ASSESSING O FFICER CAME TO THE CONCLUSION THAT NET PROFIT EARNED BY THE ASSESSEE O N TRANSACTION OF THE SHARES IS A PROFIT FROM BUSINESS, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE CIT(A) WHO CONFIRMED THE ORDER OF THE A.O. AFTER HAVING EX AMINED THE DETAILS AND NATURE OF SHARES. IN SUPPORT OF THESE CONTENTIONS, HE HAS INVITED OUR ATTENTION TO THE OBSERVATIONS OF THE CIT(A) AT ITS PAGE NO.6 OF ITS ORDER IN WHICH THE CIT(A) HAS EXAMINED THE NATURE OF TRANSAC TIONS. 10. HE HAS ALSO INVITED OUR ATTENTION TO THE WRITTE N SUBMISSIONS FILED BEFORE THE CIT IN PROCEEDINGS U/S 263 OF THE ACT AN D POINTED OUT THAT ALL DETAILS OF SHARES WERE FURNISHED BEFORE THE ASSESSI NG OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON THE BASIS OF W HICH, THE ASSESSING OFFICER HAS PASSED ITS DETAILED ORDER ON THIS ISSUE CONCLUDING THAT THE TRANSACTION IN SHARES IS A BUSINESS TRANSACTION AND THE PROFIT EARNED IN ALL SHARE TRANSACTIONS IS ASSESSABLE UNDER THE HEAD PR OFIT ON BUSINESS. THE NATURE OF TRANSACTIONS ARE ALSO EXAMINED BY THE TRI BUNAL IN THE FIRST ROUND OF APPEAL. THEREFORE, IT IS NOT PROPER TO SAY BY THE REVENUE THAT THE NATURE OF TRANSACTIONS WERE NOT EXAMINED BY THE A.O. AND ASSE SSEE HAS BOOKED A ITA NO73/V/2011 RAJU VEGESNA INFOTECH INDS P LTD, V SKP. 5 BOGUS LOSS OF RS.23.6 CRORES TO SET OFF THE INCOME EARNED ON SALE OF SHARES OF M/S. RAMANAND INFOTECH PVT. LTD. 11. THROUGH ITS WRITTEN SUBMISSIONS, THE LD. CIT HA S CONTENDED THAT CIT HAS RIGHTLY OBSERVED THAT THE WHOLE TRANSACTION WIT H REGARD TO THE SALE AND PURCHASE OF SHARES TO THE SAME GROUP OF COMPANIES I S THE SAME TRANSACTION FOR THE REASON THAT TRANSACTIONS WERE DONE ONLY TO SET OFF FICTITIOUS LOSS AGAINST THE INCOME ON SALE OF SHARES OF M/S. RAMANA ND INFOTECH PVT. LTD. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS PLACED ON RE CORD. FROM A CAREFUL PERUSAL OF THE ASSESSMENT ORDER, WE FIND THAT THE I SSUE OF PROFIT ON SALE OF SHARES WAS EXAMINED BY THE ASSESSING OFFICER IN DET AIL IN THE LIGHT OF CBDT CIRCULARS AND VARIOUS JUDICIAL PRONOUNCEMENTS RUNNI NG INTO 15 PAGES FROM PAGE 3 TO PAGE 18. THEREFORE, IT CANNOT BE SAID TH AT THE ISSUE OF PURCHASE AND SALE OF SHARES WERE NOT EXAMINED BY THE ASSESSI NG OFFICER IN THE ASSESSMENT ORDER. IT IS ALSO EVIDENT FROM THE ORDE RS OF THE A.O. THAT COMPLETE DETAILS OF THESE SHARES WERE ALSO PLACED B EFORE THE A.O. WHICH WERE DULY EXAMINED BY HIM BEFORE COMING TO A CONCLUSION THAT THE SALE PURCHASE OF SHARES AMOUNTS TO BUSINESS TRANSACTIONS AND THE PROFIT EARNED THERE OF IS ASSESSABLE UNDER THE HEAD PROFIT ON BUSINESS. THOU GH THE ASSESSEE HAS CLAIMED THAT THESE SHARES WERE KEPT AS INVESTMENT A ND THE PROFITS EARNED IN TRANSACTION IN SHARES IS A CAPITAL GAIN BUT IT WAS NOT ACCEPTED BY THE REVENUE. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND THE CIT(A) HAS ALSO RE-EXAMINED THIS ISSUE IN DETAIL IN THE LIGHT OF AS SESSEES CONTENTIONS. THIS ISSUE WAS THE MAIN ISSUE BEFORE THE CIT(A) AND WHIL E ADJUDICATING THE SAME THE CIT(A) ALSO EXAMINED THE NATURE OF THE TRANSACT IONS IN SHARES. THE NATURE OF TRANSACTIONS WAS EXAMINED BY THE CIT(A) A T PAGE 6 OF HIS ORDER AND THE RELEVANT PORTION OF HIS OBSERVATIONS IS EXTRACT ED HEREUNDER: THE CONTENTION THAT THE SHARES ACQUIRED BY THE APPE LLANT COMPANY WERE UNLISTED AND HENCE NOT FREELY MARKETAB LE IS OF NO CONSEQUENCE AS IT WAS THE PRUDENT DECISION OF THE A PPELLANT COMPANY TO ACQUIRE THOSE SHARES WITH THE INTENTION OF MAKING PROFITS BY DISPOSING THEM AT THE APPROPRIATE TIME. THEREFORE, WHETHER THEY ARE FREELY MARKETABLE OR NOT, IT WAS A CONSCIOUS DECISION OF THE APPELLANT COMPANY TO ACQUIRE THE SA ME. THE ITA NO73/V/2011 RAJU VEGESNA INFOTECH INDS P LTD, V SKP. 6 PRUDENCE OF THE APPELLANT COMPANY CANNOT BE QUESTIO NED IN AS MUCH AS THAT THE SHARES OF M/S. BIRAJA FERRO ALLOYS LTD., AND M/S. BRAHMANI FERRO ALLOYS LTD., WHICH WERE ACQUIRED @ R S.300/- PER SHARE WAS SOLD FOR RS.4/- PER SHARE AS THE ASSESSIN G OFFICER HAS NEITHER THE EXPERIENCE OF RUNNING THE BUSINESS NOR HAS ANY SPECIALIZATION TO SIT IN JUDGEMENT OVER THE APPELLA NT COMPANY AS TO WHETHER SUCH ACTION OF THE APPELLANT COMPANY IS PRU DENT OR NOT? THEREFORE, THE COMMERCIAL EXPEDIENCY ON THE BASIS O F WHICH THE APPELLANT COMPANY ACQUIRED THE UNLISTED SHARES IS N OT A CONSIDERATION FOR DECIDING WHETHER THE SAID SHARE H OLDING IS TO BE TREATED AS STOCK IN TRADE OR INVESTMENT. 13. WE HAVE ALSO EXAMINED THE CLARIFICATIONS OR THE REPLY FURNISHED BY THE ASSESSEE BEFORE THE ADDL. CIT IN THE ORIGINAL A SSESSMENT PROCEEDINGS AND WE FIND THAT VIDE LETTER DATED 29.12.2008 THE A SSESSEE HAS FURNISHED THE COMPLETE DETAILS OF SHAREHOLDINGS AND ITS PURCH ASE AND SALES. THIS WAS THE MAIN ISSUE BEFORE THE ASSESSING OFFICER FOR ADJUDICATION. THE REPLY IS AVAILABLE AT PG.NOS.85 TO 89 OF THE COMPIL ATION OF THE ASSESSEES. WE HAVE ALSO CAREFULLY EXAMINED THE WRITTEN SUBMISS IONS FURNISHED BEFORE THE CIT(A) GIVING THE DETAILS OF THE INFORMATION FU RNISHED BEFORE THE ASSESSING OFFICER WHILE ADJUDICATING THE ISSUE OF N ATURE OF TRANSACTIONS AND THE NATURE OF PROFIT EARNED ON SALE OF SHARES. FRO M A CAREFUL PERUSAL OF ALL THESE DETAILS, WE ARE OF THE VIEW THAT IN ORIGINAL ASSESSMENT PROCEEDINGS AND THE APPELLATE PROCEEDINGS, THE NATURE OF TRANSA CTIONS OF IMPUGNED SHARES AND ALSO THE NATURE OF PROFIT ARISEN OUT OF IT WERE DULY EXAMINED. THEREFORE, IT CANNOT BE SAID THAT ASSESSING OFFICER HAS NOT MADE A PROPER ENQUIRY OR INVESTIGATION WITH REGARD TO THE NATURE OF PURCHASE AND SALE OF SHARES OF M/S. BIRIJA FERRO ALLOYS LTD. AND M/S. BR AHMINI FERRO ALLOYS LTD. 14. WE HAVE BEEN CARRIED THROUGH THE RECENT JUDGEME NT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. M/S. VIKAS POLYME RS 194 TAXMAN 57 IN WHICH IT HAS BEEN HELD THAT IF A QUERY IS RAISED DU RING THE COURSE OF SCRUTINY BY A.O. WHICH WAS ANSWERED TO THE SATISFAC TION OF THE A.O. BUT NEITHER THE QUERY NOR THE ANSWER WAS REFLECTED IN T HE ASSESSMENT ORDER, THIS WOULD NOT BY ITSELF LEAD TO CONCLUSION THAT TH E ORDER OF THE A.O. CALLED FOR INTERFERENCE IN REVISION. IT WAS ALSO OBSERVED BY THEIR LORDSHIP THAT IT IS ALSO A TRITE THAT THERE IS A FINE THOUGH SUBTLE DISTINCTION BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY. IT IS ONLY A CA SE OF LACK OF INQUIRY ITA NO73/V/2011 RAJU VEGESNA INFOTECH INDS P LTD, V SKP. 7 THAT THE CIT IS EMPOWERED TO EXERCISE HIS REVISIONA L POWERS BY CALLING FOR AND EXAMINING THE RECORDS OF ANY PROCEEDINGS UNDER THE ACT AND PASSING ORDERS THEREON. THEY HAVE ALSO OBSERVED THAT WHILE ITO IS NOT CALLED UPON TO WRITE ELABORATE JUDGEMENT GIVING DETAILED R EASONS IN RESPECT OF EACH AND EVERY DISALLOWANCE, DEDUCTIONS ETC. ITS IN CUMBENT UPON THE CIT NOT TO EXERCISE HIS SUO MOTU REVISIONAL POWERS UNLE SS SUPPORTED BY REASONS FOR DOING SO. THE RELEVANT OBSERVATIONS OF THEIR LORDSHIP ARE EXTRACTED HEREUNDER: IT IS ALSO TRITE THAT THERE IS A FINE THOUGH SUBTLE DISTINCTION BETWEEN LACK OF INQUIRY AND INADEQUATE INQUIRY. IT IS ONLY IN CASES OF LACK OF INQUIRY THAT THE CIT IS EMPOWERED TO EXERCISE HIS REVISIONAL POWERS BY CALLING FOR AND EXAMINING THE RECORDS OF ANY PROCEE DINGS UNDER THE ACT AND PASSING ORDERS THEREON. IN GABRIAL INDIA LTD. (SUPRA), IT WAS EXPRESSLY OBSERVED: THE CIT CANNOT INITIATE PROCEEDINGS WITH A VIEW T O STARTING FISHING AND ROVING ENQUIRIES IN MATTERS OR ORDERS WHICH ARE ALREADY CONCLUDED. SUCH ACTION WILL BE AGAINST THE WELL-ACCEPTED POLIC Y OF LAW THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROCEEDINGS, TH AT STALE ISSUES SHOULD NOT BE REACTIVATED BEYOND A PARTICULAR STAGE AND THAT L APSE OF TIME MUST INDUCE, REPOSE IN AND SET AT REST JUDICIAL AND QUAS I JUDICIAL CONTROVERSIES AS IT MUST IN OTHER SPHERES OF HUMAN ACTIVITY [SEE PARASHURAM POTTERY WORKS CO. LTD. VS. ITO 1977 CTR (SC) 32: (1977) 106 ITR 1 (SC)]. IT WAS FURTHER OBSERVED AS UNDER: FROM THE AFORESAID DEFINITIONS AS IT IS CLEAR THA T AN ORDER CANNOT BE TERMED AS ERRONEOUS UNLESS IT IS NOT IN ACCORDANCE WITH LAW. IF AN ITO ACTING IN ACCORDANCE WITH LAW MAKES A CERTAIN ASSES SMENT, THE SAME CANNOT BE BRANDED AS ERRONEOUS BY THE CIT SIMPLY BE CAUSE, ACCORDING TO HIM, THE ORDER SHOULD HAVE BEEN WRITTEN MORE ELABOR ATELY. THIS SECTION DOES NOT VISUALIZE A CASE OF SUBSTITUTION OF THE JU DGEMENT OF THE CIT FOR THAT OF THE ITO, WHO PASSED THE ORDER UNLESS THE DE CISION IS HELD TO BE ERRONEOUS. CASES MAY BE VISUALIZED WHERE THE ITO W HILE MAKING AN ASSESSMENT EXAMINES THE ACCOUNTS, MAKES ENQUIRIES, APPLIES HIS MIND TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND DETERMI NES THE INCOME EITHER BY ACCEPTING THE ACCOUNTS OR BY MAKING SOME ESTIMAT E HIMSELF. THE CIT, ON PERUSAL OF THE RECORDS, MAY BE OF THE OPINION TH AT THE ESTIMATE MADE BY THE OFFICER CONCERNED WAS ON THE LOWER SIDE AND LEFT TO THE CIT HE WOULD HAVE ESTIMATED THE INCOME AT A FIGURE HIGHER THAN THE ONE DETERMINED BY THE ITO. THAT WOULD NOT VEST THE CIT WITH POWER TO RE- EXAMINE THE ACCOUNTS AND DETERMINE THE INCOME HIMSE LF AT A HIGHER FIGURE. IT IS BECAUSE THE ITO HAS EXERCISED THE QU ASI JUDICIAL POWER VESTED IN HIM IN ACCORDANCE WITH LAW AND ARRIVED AT CONCLUSION AND SUCH A CONCLUSION CANNOT BE TERMED TO BE ERRONEOUS SIMPLY BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION. ITA NO73/V/2011 RAJU VEGESNA INFOTECH INDS P LTD, V SKP. 8 X X X X THERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD T O SHOW THAT TAX WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSE D OR THAT BY THE APPLICATION OF THE RELEVANT STATUTE ON AN INCORRECT OR INCOMPLETE INTERPRETATION A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. X X X X WE MAY NOW EXAMINE THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE POWERS OF THE CIT SET OUT ABOVE. THE ITO IN TH IS CASE HAD MADE ENQUIRIES IN REGARD TO THE NATURE OF THE EXPENDITUR E INCURRED BY THE ASSESSEE. THE ASSESSEE HAD GIVEN DETAILED EXPLANAT ION IN THAT REGARD BY A LETTER IN WRITING. ALL THESE ARE PART OF THE REC ORD OF THE CASE. EVIDENTLY, THE CLAIM WAS ALLOWED BY THE ITO ON BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. SUCH DECISION OF THE ITO CANNOT B E HELD TO BE `ERRONEOUS SIMPLY BECAUSE IN HIS ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION IN THAT REGARD. FROM THE ABOVE, IN OUR CONSIDERED OPINION, IT IS C LEAR THAT IN THE ULTIMATE ANALYSIS IT IS A PRE-REQUISITE THAT THE CI T MUST GIVE REASONS TO JUSTIFY THE EXERCISE OF SUO MOTU REVISIONAL POWERS BY HIM TO REOPEN A CONCLUDED ASSESSMENT. A BARE REITERATION BY HIM TH AT THE ORDER OF THE ITO IS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO TH E INTEREST OF THE REVENUE, WILL NOT SUFFICE. THE EXERCISE OF THE POWER BEING QUASI JUDICIAL IN NATURE, THE REASONS MUST BE SUCH AS TO SHOW THAT THE ENHANC EMENT OR MODIFICATION OF THE ASSESSMENT OR CANCELLATION OF T HE ASSESSMENT OR DIRECTIONS ISSUED FOR A FRESH ASSESSMENT WERE CALLE D FOR, AND MUST IRRESISTIBLY LEAD TO THE CONCLUSION THAT THE ORDER OF THE ITO WAS NOT ONLY ERRONEOUS BUT WAS PREJUDICIAL TO THE INTEREST OF TH E REVENUE. THUS, WHILE THE ITO IS NOT CALLED UPON TO WRITE AN ELABORATE JU DGEMENT GIVING DETAILED REASONS IN RESPECT OF EACH AND EVERY DISALLOWANCE, DEDUCTION, ETC., IT IS INCUMBENT UPON THE CIT NOT TO EXERCISE HIS SUO MOTU REVISIONAL POWERS UNLESS SUPPORTED BY ADEQUATE REASONS FOR DOING SO. 15. WE HAVE CAREFULLY OBSERVED IN THAT ORDER OF THE CIT PASSED U/S 263 OF THE ACT AND WE FIND THAT CIT HIMSELF HAS OBSERVE D THAT THE SURROUNDING CIRCUMSTANCES AND HUMAN PROBABILITIES CLEARLY SHOWS THE WHOLE TRANSACTIONS IS NOT REAL TRANSACTION BUT A SAME TRA NSANCTION. MEANING THEREBY THE CIT DOES NOT HAVE ANY CONCLUSIVE EVIDEN CE ON THE BASIS OF WHICH HE CAN DRAW AN INFERENCE THAT ASSESSEE HAS BO OKED A BOGUS LOSS. HE HAS SIMPLY DRAWN A PRESUMPTION ON THE BASIS OF S URROUNDING CIRCUMSTANCES AND HUMAN PROBABILITIES. THEREFORE T HE ORDER OF THE ASSESSING OFFICER CANNOT BE REVISED U/S 263 OF THE ACT. THE JURISDICTION U/S 263 CAN ONLY BE EXERCISED WHERE THE CIT HAS BRO UGHT SOMETHING ON ITA NO73/V/2011 RAJU VEGESNA INFOTECH INDS P LTD, V SKP. 9 RECORD TO DEMONSTRATE THAT A PARTICULAR ISSUE WAS N OT EXAMINED BY THE ASSESSING OFFICER OR IT WAS ADJUDICATED AGAINST ALL PRINCIPLES OF LAW RESULTING INTO A LOSS TO THE REVENUE. BUT IN THE I NSTANT CASE, NOTHING HAS BEEN BROUGHT TO ESTABLISH THAT THE ORDER OF THE A.O . IS ERRONEOUS AND PREJUDICIAL TO THE REVENUE. THEREFORE, WE DO NOT F IND ANY MERIT THEREIN AND WE SET ASIDE THE SAME. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 11.5.2011 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 11 TH MAY, 2011 COPY TO 1 M/S. RAJU VEGESNA INFOTECH INDUSTRIES (P) LTD., D.N O.10 - 27 - 2/4, FACOR LAYOUT, WALTAIR UPLANDS, VISAKHAPATNAM 2 ADDL. CIT, RANGE - 4, VISAKHAPATNAM 3 THE CI T, VISAKHAPATNAM 4 THE CIT (A) , VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM