Shri Kartick Chandra Dhar, Paschim Medinipur V. CIT, Kol - XIX, Kolkata, Midnapore

ITA 775/KOL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 54647 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 07-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 19-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S M SURANA
• Keywords: Rejection of books of accounts; Business income; Depreciation; Difference of opinion; Change of opinion
• Section: 44AD; 40A(3); 143(3); 142(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND , ! . '# . ) [BEFORE SRI MAHAVIR SINGH, JM & SHRI C. D. RAO, AM] $ $ $ $ / I.T.A NO. 775/KOL/2010 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR : 2005-06 SRI KARTICK CHANDRA DHAR VS. COMMI SSIONER OF INCOME-TAX-XIX, KOL (PAN : ACPPD 7849 H) (*+ /APPELLANT ) (,-*+/ RESPONDENT ) DATE OF HEARING: 28.10.2011 DATE OF PRONOUNCEMENT: 11.11.2011 FOR THE APPELLANT : SHRI S. M. SURANA FOR THE RESPONDENT: SHRI A. K. SINGH . / ORDER PER MAHAVIR SINGH, JM ( , , , , ) THIS APPEAL BY ASSESSEE IS ARISING OUT OF REVISION ORDER OF CITL-XIX, KOLKATA IN NO CIT-XIX/KOL/REV/U/S.263/07-08/16/4663-65 DATED 11/1 5.03.2010. ASSESSMENT WAS FRAMED BY JCIT, RANGE-1, MIDNAPORE U/S. 143(3) OF T HE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2005- 06 VIDE DATED 18.12.2007. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE REVISION ORDER PASSED BY CIT U/S. 263 OF THE ACT. FOR THIS, ASSESSEE HAS RA ISED FOLLOWING EFFECTIVE GROUND NOS. 2 TO 6: 2. FOR THAT THE LD. C.I.T ERRED IN SETTING ASIDE T HE ASSESSMENT ON THE GROUND OF ALLOWANCE OF 80% OF TOTAL OUTSTANDING LIABILITIES OF THE ASSESSEE WHEN THE LD. AO HAD HIMSELF APPLIED HIS MIND BY DISALLOWING 20% OF THE SAME AS UNEXPLAINED OUTSTANDING LIABILITIES AND IT IS MERE CHANGE OF OP INION AND REAPPRAISAL OF FACTS ALREADY ON RECORD. 3. FOR THAT THE LD. C.I.T ERRED IN SETTING ASIDE TH E ASSESSMENT ON THE GROUND OF ALLOWANCE OF 90% OF TOTAL EXPENSES ON ACCOUNT OF PU RCHASE, CARRYING CHARGES , WAGES AND SALARY OF THE ASSESSEE WHEN THE LD. AO HAD HIMS ELF APPLIED HIS MIND BY DISALLOWING 10% OF THE SAME AS UNVERIFIABLE AND IT IS MERE CHANGE OF OPINION AND REAPPRAISAL OF FACTS ALREADY ON RECORD. 4. FOR THAT THE LD. C.I.T HAD NO JURISDICTION TO IN VOKE SECTION 263 WHEN THE ISSUE OF ALLOWABILITY OF EXPENSES HAD BEEN CONSIDERED BY THE LD. C.I.T(A) WHO HAD DIRECTED TO AO TO REJECT THE BOOKS AND ESTIMATE THE NET PROFIT AT 5% OF THE GROSS RECEIPTS, HENCE THE ASSESSMENT ORDER HAD MERGED INTO THE ORDER OF T HE AO. 5. FOR THAT THE LD. C.I.T HAD NO JURISDICTION TO IN VOKE SECTION 263 WHEN THE NET PROFIT OF 5% DETERMINED BY THE C.I.T(A) WAS REASONABLE AND ALL EXPENSES ARE TAKEN INTO 2 ITA 775/K/2010 SRI KARTICK CH. DHAR, A.Y.2005-06 CONSIDERATION WHILE DETERMINING THE SAME AND NO SEC OND APPEAL WAS FILED BY THE DEPARTMENT AGAINST THE ORDER OF THE LD. C.I.T(A). 6. FOR THAT THE LD. C.I.T ERRED IN CONSIDERING THE ISSUES WHICH WERE NOT THE SUBJECT MATTER OF THE SHOW CAUSE NOTICE U/S.263. OUT OF ABOVE FIVE GROUNDS TWO ISSUES ARE EMERGING V IZ., FIRST ISSUE IS THAT CIT ERRED IN SETTING ASIDE THE ASSESSMENT ON THE GROUND THAT THE RE CANNOT BE 80% OUTSTANDING LIABILITIES PARTICULARLY WHEN ASSESSING OFFICER HIMSELF APPLIED HIS MIND FOR MAKING DISALLOWANCE OF 20% OF UNEXPLAINED OUTSTANDING LIABILITIES AND, THE REFORE, IT IS ONLY A CHANGE OF OPINION IN THE GIVEN FACTS. THE SECOND ISSUE IS THAT CIT(A) W HO HAS REJECTED BOOKS OF ACCOUNT AND ESTIMATED NET PROFIT AT 5% OF THE GROSS RECEIPT, FO R ALL PRACTICAL PURPOSES THE ASSESSMENT ORDER HAS MERGED INTO THE ORDER OF CIT(A) AND HENCE , ACTION OF CIT(A) IS WITHOUT THE SANCTION OF LAW. 3. THE BRIEF FACTS ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 31.10.2005 AND ASSESSMENT WAS FRAMED BY ISSUING NOTICES U/S. 143(2 ) AND 142(1) OF THE ACT AND ASSESSMENT ORDER WAS PASSED U/S. 143(3) OF THE ACT VIDE ORDER DATED 18.12.2007. THE ASSESSEE IS A CONTRACTOR AND ENGAGED IN THE CONSTRU CTION OF BUILDING AND THERE WAS NO CLOSING STOCK OR WORK-IN-PROGRESS SHOWN BY ASSESSEE IN HIS P&L ACCOUNT. THE ASSESSEE HAS DISCLOSED ONLY THE AMOUNT COVERED BY TDS CERTIF ICATE AND HE WAS ASKED TO FURNISH THE DETAILS. THE ASSESSEE FILED DETAILS AND PRODUCED B OOKS OF ACCOUNT WHICH WERE INCOMPLETE AND THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER N OTED THAT NO CASH BOOK WAS PRODUCED AND IN THE ABSENCE OF THE SAME PAYMENTS COULD NOT B E VERIFIED. EVEN THERE WAS NO PARTY LEDGER TO SUBSTANTIATE THE TRANSACTIONS CLAIMED BY ASSESSEE. IN VIEW OF THIS BACKGROUND, ASSESSING OFFICER FINALLY MADE A DISALLOWANCE OF OU TSTANDING LIABILITIES AT 20% AND ALSO ADDED ADVANCES TO SHRI ASISH DHAR AND SMT. MITA DHA R AT RS.40 LACS APART FROM CERTAIN OTHER DISALLOWANCES. AGGRIEVED AGAINST THE ASSESSM ENT ORDER, ASSESSEE PREFERRED APPEAL BEFORE CIT(A), WHO VIDE ITS ORDER DATED 25.03209 RE STRICTED AND ESTIMATED THE ASSESSEES PROFIT AT 5% OF GROSS RECEIPTS BY REJECTING THE BOO KS OF ACCOUNT BY GIVING FOLLOWING FINDING: THE A.O. EXAMINED THE BOOKS OF ACCOUNT AND OTHER D ETAILS FILED BY THE APPELLANT. THE A.O. COMPUTED THE BUSINESS INCOME BY MAKING VAR IOUS DISALLOWANCES. THE AO COMPUTED THE WORK IN PROGRESS BASED UPON THE EXPENS ES INCURRED BY THE APPELLANT DURING THE LAST PERIOD OF THE ACCOUNTING PERIOD. TH E AO QUANTIFIED THE WORK IN PROGRESS AND MADE ADDITION OF RS. 38,72,523/-. THE APPELLANT SUBMITS THAT BILLS ARE RAISED ON PARTIAL COMPLETION OF THE WORK AND WORK I N PROGRESS IS NOT DISCLOSED IN THE ACCOUNT CONSISTENTLY DURING THE EARLIER YEARS. HENC E, THE APPELLANT PRAYED THAT THIS ADDITION BE DELETED. THE AO MADE ESTIMATED DISALLOW ANCES OF 20% OUT OF OUTSTANDING LIABILITIES AND 10% OF THE EXPENSES SIN CE BOOKS OF ACCOUNT ARE NOT PROPERLY MAINTAINED. FURTHER, THE AO ALSO MADE DISA LLOWANCE U/S. 40A(3) FOR CASH PAYMENT. THE AO DISALLOWED THE INTEREST PAID TO LIC IN THE ABSENCE OF EVIDENCE. THE AMOUNT ADVANCED BY THE APPELLANT TO SRI ASHIS DHAR AND SMT. MITA DHAR IS HELD BY 3 ITA 775/K/2010 SRI KARTICK CH. DHAR, A.Y.2005-06 THE AO AS NOT PROPERLY DISCLOSED IN THE BALANCE SHE ET. IN VIEW OF THESE OBSERVATIONS AND THE NON-MAINTENANCE OF BOOKS OF ACCOUNT IN THE PROPER MANNER, THE APPELLANTS INCOME CANNOT BE DETERMINED ON THE BASIS OF BOOKS O F ACCOUNT PRESENTED. FURTHER, SINCE THE ADVANCES MADE ARE NOT CONSIDERED IN THE B ALANCE SHEET AND THE PARTY LEDGER IS NOT PRODUCED TO VERIFY THE OUTSTANDING BA LANCES AND THE EXPENSES, THE ACCOUNTS ARE NOT RELIABLE FOR ARRIVING AT THE CORRE CT INCOME OF THE APPELLANT. IN VIEW OF THE VARIOUS OBSERVATIONS MADE BY THE AO REGARDIN G THE DEFECTS IN THE BOOKS OF ACCOUNT OF THE APPELLANT, THIS IS A FIT CASE FOR RE JECTING THE BOOKS OF ACCOUNT U/S. 145(3) OF THE IT ACT. THE AO IS DIRECTED TO REJECT THE BOOKS OF ACCOUNT OF THE APPELLANT. IT IS SEEN THAT THE AO IN THE ASSESSMENT YEAR 2006-07 HAS REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED THE APPELLANS PROFI T AT 5% OF THE GROSS RECEIPTS. CONSIDERING THIS, THE AO IS DIRECTED TO REJECT THE BOOKS OF ACCOUNT OF THE APPELLANT AND ESTIMATE THE INCOME OF THE APPELLANT AT 5% OF T HE GROSS RECEIPTS. DETERMINING INCOME ON THIS BASIS WOULD MEET THE ENDS OF JUSTICE . SINCE INCOME OF THE APPELLANT IS ESTIMATED AT 5% OF THE GROSS RECEIPTS, THESE SEPARA TE ADDITIONS MADE BY THE AO ARE NOT NECESSARY. 4. WE FIND THAT THE CIT(A) HAS DELETED THE SEPARATE ADDITION MADE BY ASSESSING OFFICER BY ESTIMATING INCOME OF THE ASSESSEE AT 5% OF GROSS RECEIPT BY REJECTING THE BOOKS OF ACCOUNT. AGGRIEVED AGAINST THE ORDER OF CIT(A), BOTH REVENUE AND ASSESSEE PREFERRED APPEAL BEFORE TRIBUNAL AND TRIBUNAL VIDE ITA NO.10 95/K/2009 ORDER DATED 25.06.2010 ALLOWED THE DEPARTMENTAL APPEAL PARTLY, WHEREBY CER TAIN DISALLOWANCES WERE CONFIRMED I.E. HOUSEHOLD WITHDRAWALS ETC BUT ASSESSEES APPEAL WAS DISMISSED. IN THE DEPARTMENTAL APPEAL, GROUND NO. 3 HAD TAKEN AGAINST THE DELETION OF DISALLOWANCE ON ESTIMATE AT 20% OF OUTSTANDING LIABILITIES AS UNDER: 3. THE CIT(A) HAS ERRED ON FACTS AND LAW IN DELETI NG THE DISALLOWANCE OF RS.1434938 ESTIMATED @ 20% OUT OF TOTAL AMOUNT OF R S.7174693/- OUTSTANDING LIABILITIES REFLECTED IN THE BALANCE SHEET IN VIEW OF THE ASSESSEES INABILITY TO EXPLAIN THE SAME. AS A MATTER OF CORRECT DECISION THE ENTI RE AMOUNT IS LIABLE TO BE ASSESSED IN THE HANDS OF THE ASSESSEE. THE ESTIMATION BY CIT(A) OF NET PROFIT @ 5% WAS CON FIRMED BY TRIBUNAL BY DISMISSING THIS ISSUE OF ASSESSEES APPEAL VIDE PARA 17 OF ITS ORDER, WHICH IS AS UNDER: 17. NOW THE QUESTION COMES AS TO WHETHER OUT OF TH E GROSS PROFIT SO ESTIMATED @ 5%, FURTHER DEDUCTION ON ACCOUNT OF DEP RECIATION AND INTEREST ARE TO BE ALLOWED. DURING THE COURSE OF HEARING, T HE LD. A.R. OF THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THE ITAT, JODHPU R BENCH IN THE CASE OF ACIT VS. PADAM CHAND BHANSALI (2004) 85 TTJ(JD.) 21 THAT WHILE APPLYING NET PROFIT RATE OF 5%, IT IS SUBJECT TO DEDUCTION O F DEPRECIATION AND INTEREST. WE ARE OF THE CONSIDERED VIEW THAT WHEN THE NET PRO FIT RATE IS APPLIED , IT IS APPLIED BY CONSIDERING THE FACTS OF THE CASE OF THE PARTICULAR ASSESSEE. IN CASE THE INCOME IS ESTIMATED OUT OF WHICH ANY DEDUC TION IS TO BE GIVEN ON ACCOUNT OF DEPRECIATION AND INTEREST ETC., IT DEPEN DS UPON THE FACTS OF THE CASE. WE ARE OF THE CONSIDERED VIEW THAT IN THE CA SE BEFORE US, WHEN NET PROFIT @ 5% OF THE GROSS RECEIPTS IS CONSIDERED, NO FURTHER DEDUCTION ON ACCOUNT OF DEPRECIATION AND INTEREST IS TO BE GIVEN AND THIS 5% GROSS PROFIT IS THE RATE OF NET PROFIT OF THE GROSS RECEIPTS OF THE ASSESSEE. IN THIS RESPECT, WE ARE SUPPORTED BY SECTION 44AD OF THE INCOME-TAX ACT, 1961 ACCORDING TO WHICH WHEN THE GP RATE OF 8% OF THE GROSS RECEIPTS IS APPLIED IT IS STATED THAT IT WILL TAKE CARE OF ALL THE DEDUCTION ALLOWAB LE U/S. 30 TO 37 OF THE ACT 4 ITA 775/K/2010 SRI KARTICK CH. DHAR, A.Y.2005-06 AND NO FURTHER DEDUCTION ON ACCOUNT OF DEPRECIATION IS TO BE ALLOWED. FURTHER, AS MENTIONED HEREINABOVE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT 5% NET PRO FIT OF THE GROSS RECEIPTS OF THE ASSESSEE IS JUSTIFIED AND REASONABLE AD THER EFORE, WE HOLD THAT NO FURTHER DEDUCTION ON ACCOUNT OF DEPRECIATION AND IN TEREST AS CONTENDED BY THE LEARNED AR OF THE ASSESSEE OF THE ASSESSEE IS W ARRANTED. 5. IMMEDIATELY AFTER PASSING OF THE ORDER OF CIT(A) VIDE DATED 25.03.2009, CIT-XIX, KOLKATA ISSUED SHOW CAUSE NOTICE VIDE NO. CIT-XIX/2 63/7/2009-10/4710 DATED 13.01.2010 REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ASSESSMENT ORDER FRAMED U/S. 143(3) OF THE ACT SHOULD NOT BE ENHANCED/MODIFIED OR FRESH AS SESSMENT BE DIRECTED. THE CIT EXAMINED THE RECORDS AND ISSUE SHOW CAUSE NOTICE ON THE FOLLOWING TWO COUNTS: I) IN COURSE OF EXAMINATION OF THE RECORDS, IT IS NOTE D THAT THE ASSESSEE COULD NOT EXPLAIN OUTSTANDING LIABILITIES FOR MATER IALS, CARRYING CHARGES AND LABOUR CHARGES. CONSEQUENT TO WHICH THE A.O. DISAL LOWED RS.14,34,938/- BEING 20% OF THE TOTAL OUTSTANDING LIABILITIES OF RS.71,74,693/- AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSES SING OFFICER, HOWEVER, ALLOWED THE BALANCE AMOUNT (RS.71,74,693 RS.14,34 ,398/- I.E.. RS.57,39,755/- WHICH ALSO CONSTITUTED PART OF UNEXP LAINED OUTSTANDING LIABILITIES TILL EXPLAINED, AND AS SUCH THE A.O. ER RONEOUSLY ALLOWED THE AMOUNT OF RS.5,76,39,755/- AS OUTSTANDING LIABILITIES. THE ASSESSMENT ORDER PASSED BY HIM IS HENCE PREJUDICIAL TO THE INTEREST OF REVENUE . II) IT IS FURTHER OBSERVED THAT AN AMOUNT OF RS.3, 15,58,119/- HAD BEEN CLAIMED BY THE ASSESSEE ON ACCOUNT OF PURCHASES, CA RRYING CHARGES, WAGES AND SALARY. THE A.O. DISALLOWED 10% OF THE SAID EXPENSE S ON THE GROUND THAT THE ASSESSEE FAILED TO FURNISH DETAILS OF THESE EXPENSE S AND THAT NO PROPER LEDGER ACCOUNT HAD BEEN MAINTAINED. THE AO HOWEVER ALLOWED THE BALANCE AMOUNT OF RS.2,84,02,307/- (RS.3,15,58,119 RS.31,55,812) WH ICH ALSO CONSTITUTED UNEXPLAINED EXPENSES TILL DULY EXPLAINED AND HENCE THE ASSESSMENT ORDER PASSED BY THE A.O. IS ERRONEOUS IN SO FAR AS II IS PREJUDICIAL TO THE INTEREST OF REVENUE. THE ASSESSEE BEFORE CIT ARGUED THAT THE ASSESSING O FFICER HAS EXAMINED THIS ISSUE AND APPLIED HIS MIND AND FURTHER ASSESSING OFFICERS OR DER GETS MERGED INTO THE ORDER OF CIT(A) AND PROCEEDINGS U/S. 263 OF THE ACT CANNOT B E INVOKED. BUT, CIT AFTER GOING THROUGH THE SUBMISSION AND JUDICIAL PRONOUNCEMENT S TATED THAT THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE AND THE DOCTRINE OF MERG ER OF ASSESSMENT ORDER INTO THE APPELLATE ORDER IS NOT COMPLETELY RIGID AND OF UNIVERSAL APPL ICATION AND FURTHER IT HAS TO BE DECIDED ON THE FACTS OF EACH CASE, WHETHER ASSESSMENT ORDER STANDS MERGED INTO APPELLATE ORDER OR NOT. THE CIT NOTED THAT IN THE INSTANT CASE CIT(A) HAS REJECTED THE BOOKS OF ACCOUNT AND ESTIMATED NET PROFIT @ 5% OF GROSS CONTRACT RECEIPT WITHOUT ADJUDICATING ON THE INDIVIDUAL ADDITIONS MADE ON ACCOUNT OF UNEXPLAINED OUTSTANDIN G LIABILITIES, EXPENSES ON ACCOUNT OF PURCHASES, CARRYING CHARGES, SALARY AND WAGES AND U NEXPLAINED ADVANCES GIVEN TO SHRI ASISH DHAR AND SMT. MITA DHAR. ACCORDINGLY, CIT-XI X, KOLKATA DIRECTED THE ASSESSING OFFICER TO MAKE FRESH ASSESSMENT AND SET ASIDE THE ASSESSMENT FRAMED BY HIM. THE 5 ITA 775/K/2010 SRI KARTICK CH. DHAR, A.Y.2005-06 ASSESSING OFFICER ALSO DIRECTED TO MAKE NECESSARY E NQUIRY AND VERIFICATION WITH RESPECT TO THE ISSUE DISCUSSED BY HIM. 6. WE HAVE HEARD RIVAL SUBMISSIONS ON THE ABOVE ISS UE AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE ABOVE THAT ASSESSING OFFICER HAS NOT REJECTED THE BOOKS OF ACCOUNT DESPITE THE FACT THAT COMPLETE BOOKS OF ACCOUNT WERE NOT PRODUCED BEFORE HIM AND HE HAS MADE ADDITIONS ON ACCOUNT OF WORK-IN-PROGRESS, DISALLOWANCE OF 20% OF OUTSTANDING LIABILITIES, EXPENSES NOT VERIFI ABLE, ADDITION U/S. 40A(3) OF THE ACT APART FROM ADDITIONS OF ADVANCES TO SHRI ASISH DHAR AND SMT. MITA DHAR. APART FROM ABOVE, SMALLER ADDITIONS WERE MADE WHICH ARE OF NO CONSEQUENCE. WE FIND THAT THE CIT(A) HAS TAKEN INTO CONSIDERATION IN ENTIRETY FAC TS OF THE CASE AND AFTER THAT REJECTING BOOKS OF ACCOUNT ESTIMATED ASSESSEES NP @ 5% OF TH E GROSS CONTRACT RECEIPTS. THE CIT(A) EXAMINED THE OUTSTANDING LIABILITIES, EXPENS ES, ADVANCES MADE TO SHRI ASHISH DHAR AND SMT. MITA DHAR AND ALSO WORK IN PROGRESS EXPENS ES NOT VERIFIABLE ETC., AS CAN BE VERIFIED FROM THE ABOVE REPRODUCED ORDER OF CIT(A). FURTHER, WE FIND THAT THE CIT-XIX, KOLKATA HAS ISSUED SHOW CAUSE NOTICE QUA THE EXPENS ES OF PURCHASES, CARRYING CHARGES, WAGES AND SALARY AND ALSO OUTSTANDING LIABILITIES F OR MATERIALS, CARRYING CHARGES AND LABOUR CHARGES. FIRST OF ALL, WE ARE OF THE VIEW, IN VIEW OF THE ABOVE FACTS THAT THE ASSESSING OFFICER HAS FORMED AN OPINION IN THE GIVEN FACTS AN D CIRCUMSTANCES AND MADE ADDITION ON ALL THE ISSUES AFTER DUE VERIFICATION AS IS EVIDENT FROM ASSESSMENT ORDER. EVEN THE ASSESSEE HAS FILED COMPLETE DETAILS BEFORE HIM IN RESPECT OF THESE EXPENSES AND AS COMPLETE BOOKS OF ACCOUNT WERE NOT PRODUCED BEFORE HIM, THE CIT(A) FIRST OF ALL REJECTED THE BOOKS OF ACCOUNTS AND AFTER CONSIDERING ALL ADDITIONS TOOK ACCOUNT OF OUTSTANDING LIABILITIES FOR MATERIAL, WAGES AND SALARY, EXPENSES FOR PURCHASES , CARRYING CHARGES ETC. AND REJECTED BOOKS OF ACCOUNTS AND ESTIMATED NET PROFIT @ 5%, WH ICH WAS SUBSEQUENTLY UPHELD BY TRIBUNAL BY DISMISSING ASSESSEES APPEAL. WE FIND T HAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S. 142(1) AND 143(2) OF TH E ACT REQUIRED THE ASSESSEE TO PRODUCE COMPLETE BOOKS OF ACCOUNTS AND ASSESSEE FAILED TO P RODUCE THE SAME AND IN VIEW OF THIS POSITION, THE CIT(A) ESTIMATED NET PROFIT @ 5% OF G ROSS RECEIPTS BY REJECTING THE BOOKS OF ACCOUNT U/S. 145(3) OF THE ACT. THE CIT(A) RELIED ON THE OBSERVATIONS MADE BY AO REGARDING DEFECTS IN BOOKS OF ACCOUNT OF ASSESSEE A ND DIRECTLY ACCORDINGLY FOR REJECTION OF BOOKS OF ACCOUNT U/S. 145(3) OF THE ACT. WE FIND T HAT EVEN BEFORE TRIBUNAL THE ASSESSEE HAS RAISED A SPECIFIC GROUND REGARDING DELETION OF DISALLOWANCE OF ESTIMATION OF 20% OF OUTSTANDING LIABILITIES IN THE BALANCE SHEET AND EX PENSES ON ACCOUNT OF PURCHASES, CARRYING CHARGES, WAGES AND SALARY. WE FIND THAT THE CIT WH ILE EXERCISING REVISIONARY PROCEEDINGS U/S. 263 OF THE ACT HAVE GONE INTO THESE TWO ISSUES , WHICH WERE THE SUBJECT MATTER BEFORE 6 ITA 775/K/2010 SRI KARTICK CH. DHAR, A.Y.2005-06 CIT(A) AND EVEN BEFORE TRIBUNAL. WE FURTHER FIND T HAT CIT(A) AS WELL AS TRIBUNAL HAS DEALT WITH THE ISSUES OF OUTSTANDING LIABILITIES, E XPENSES ON ACCOUNT OF PURCHASES, CARRYING CHARGES, WAGES, SALARY AND ALSO ADDITIONS ON ACCOUN T OF ADVANCES TO ASHISH DHAR AND SMT. MITA DHAR, WHICH ARE MADE SUBJECT MATTER FOR REVISI ON U/S. 263 OF THE ACT. WHETHER CIT CAN MAKE THESE ISSUES FOR REVISION U/S. 263 OF THE ACT AND WHETHER DOCTRINE OF MERGER WILL OPERATE IN THESE MATTERS, WHICH WERE THE SUBJECT MA TTER OF DECISION BY THE FIRST APPELLATE AUTHORITY. WE ARE OF THE VIEW, THAT AFTER AMENDMEN T BY FINANCE ACT, 1989 AND RETROSPECTIVELY AMENDING SECTION 263 EXPLANATION (C ) W.E.F. 01.06.1988, AS A RESULT OF CLAUSE (C) OF NEWLY SUBSTITUTED EXPLANATION TO SECT ION 263(1) BY THE FINANCE ACT, 1988 AND SUBSEQUENTLY AMENDED BY THE FINANCE ACT, 1989, WHER E ANY ORDER PASSED BY AO, WHICH MAY BE AMENABLE TO REVISIONAL JURISDICTION U/S. 263 (1) OF THE ACT HAD BEEN THE SUBJECT MATTER OF ANY APPEAL, THE POWERS OF THE CIT ARE EXT ENDED AND MATTERS NOT CONSIDERED BY THE CIT(A) CAN BE AMENABLE TO THE REVISIONAL JURISDICTI ON U/S. 263 OF THE ACT BUT MATTERS WHICH ARE CONSIDERED BY CIT(A) CANNOT BE SUBJECT MATTER O F REVISION. IN THIS REGARD, IT IS PERTINENT TO NOTE THAT WHERE IT IS NOT CLEAR FROM T HE STATEMENT OF FACTS AS TO WHETHER THE SUBJECT MATTER IN APPEAL BEFORE CIT(A) WAS OTHER TH AN WHAT HAS BEEN CONSIDERED BY CIT WHILE EXERCISING REVISIONAL POWERS U/S. 263 OF THE ACT AND IT IS FOR THE REVENUE TO CONTEND BEFORE TRIBUNAL AND BRING ON RECORD THE FACT THAT S UBJECT MATTER FOR CONSIDERATION BEFORE CIT U/S. 263(1) OF THE ACT WAS OTHER THAN WHAT HAS BEEN CONSIDERED CIT(A), WHILE DECIDING THE APPEAL. IN THE PRESENT CASE BEFORE US , ALL THE ISSUES WERE SUBJECT MATTER BEFORE CIT(A) AS IS CLEAR FROM CASE RECORDS I.E. THE ORDER OF CIT(A), ASSESSMENT ORDER AND THE ORDER OF TRIBUNAL AND REVENUE COULD NOT ESTABLISH T HAT THESE SUBJECT MATTERS WERE NEVER CONSIDERED BY CIT(A). IN VIEW OF THESE FACTS AND CI RCUMSTANCES, WE QUASH THE REVISION ORDER PASSED U/S. 263 OF THE ACT. APPEAL OF ASSESS EE IS ALLOWED. 7. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 8. ORDER PRONOUNCED IN OPEN COURT ON 11.11.11. SD/- SD/- . '# '#'# '# . ! , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( #! #! #! #!) )) ) DATED : 11TH NOVEMBER, 2011 /0 %12 3 JD.(SR.P.S.) 7 ITA 775/K/2010 SRI KARTICK CH. DHAR, A.Y.2005-06 . 4 ,5 6 5'7- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT SHRI KARTICK CHANDRA DHAR, AUROBINDANAG AR, POST MIDNAPORE, DIST. PASCHIM MIDNAPUR, WEST BENGAL. 2 ,-*+ / RESPONDENT, CIT-XIX, KOLKATA. 3 . .% ( )/ THE CIT(A), KOLKATA 4. .% / CIT, KOLKATA 5 . >? ,% / DR, KOLKATA BENCHES, KOLKATA -5 ,/ TRUE COPY, .%@/ BY ORDER, 2 /ASSTT. REGISTRAR .