M/s Sethia Finance Trading Co, Kolkata V. A.C.I.T Cir - 45,kolkata, Kolkata

ITA 783/KOL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1753 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 11-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Keywords: Business expenditure; Deemed dividend
• Section: 143(3); 142(1); 263

Judgement Text

, ' , IN THE INCOME TAX APPELLATE TRIBUNAL B, BENCH KOLKAT-A BEFORE SHRI A.T.VARKEY, JM & DR. A.L.SAINI, AM . . , . , ITA NO.783/KOL/2013 ( / ASSESSMENT YEAR : 2008-2009) M/S SETHIA FINANCE TRADING CO., 143, COTTON STREET, KOLKATA VS. ACIT, CIRCLE-45, KOLKATA ./ ./PAN/GIR NO.: AAMFS 3067 R ( /APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI SUNIL SURANA, FCA /REVENUE BY : SHRI NIRAJ KUMAR CIT-( DR) / DATE OF HEARING : 11/05/2017 /DATE OF PRONOUNCEMENT 07/08/2017 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEAR 2008-2009, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX, KOLKATA, U/S.263 OF THE INCOME TAX ACT 1961, (HEREINAFTER REFERRED TO AS THE ACT), DATED 13.03.2013. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y.2008-09 ON 19.9.2008 DECLARING TOTAL INCOME OF RS.21,28,141/-. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN SCIENTIFIC RUBBER/CHEMICALS AND PLASTIC. THE ASSESSMENT WAS FRAMED U/S.143(3) OF THE I.T.ACT, 1961 ON 17.12.2010, WHEREIN ASSESSEES INCOME WAS ASSESSED AT RS.21,28,141/-. LATER ON, THE CIT HAS EXERCISED HIS JURISDICTION U/S.263 OF THE ACT AND HE FOUND THAT THE ORDER PASSED BY THE AO U/S.143(3) DATED 17.12.2010 WAS ERRONEOUS AND PREJUDICIAL TO THE ITA NO.783/13 M/S SETHIA FINANCE & TRADING CO. 2 INTEREST OF REVENUE. THE CIT OBSERVED THAT ORDER PASSED BY THE AO U/S.143(3) WAS PRIMA FACIE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON ACCOUNT OF FOLLOWINGS :- I) THE AO HAS NOT VERIFIED THE TRADING RESULTS OF THE ASSESSEE; II) THE AO DID NOT VERIFY THE ACCOUNT OF M/S SIMPLEX POLYMERS, NEW DELHI, IN VIEW OF THE UNUSUAL TRANSACTIONS; III) REMUNERATION TO PARTNERS HAVE BEEN ALLOWED WITHOUT CALLING FOR PARTNERSHIP DEED ; IV) PROVISIONS OF SECTION 2(22)(E) HAVE NOT BEEN VERIFIED BY THE AO IN THE CONTEXT OF THE BENEFICIAL SHARE HOLDING ; V) THE PAYMENT TO M/S HARI OM UDYOG AND M/S ELPARTS ELECTRONICS WITHOUT ANY PURCHASE OR SALE AND INTEREST BEARING LOANS USED IN UNREASONABLY HIGH DEBT FUNDING; VI) SUNDRY DEBTORS OF THE ASSESSEE HAVE NOT BEEN VERIFIED BY THE AO. BECAUSE OF THESE IRREGULARITIES IN THE ASSESSMENT ORDER, THE CIT ISSUED A SHOW CAUSE NOTICE U/S.263(1) TO THE ASSESSEE CONFRONTING HIM ON ALL THE ABOVE ISSUES. DURING THE PROCEEDINGS U/S.263 THE ASSESSEE HAS OBJECTED THAT IN THE CASE OF ASSESSEE UNDER CONSIDERATION THE CIT DOES NOT HAVE POWER U/S.263 TO EXAMINE THE RECORDS AND BOOKS OF ACCOUNTS OF THE ASSESSEE WITHOUT ISSUING THE SHOW CAUSE NOTICE TO THE ASSESSEE, HOWEVER, LD. CIT EXPLAINED TO THE LD. COUNSEL OF THE ASSESSEE THAT THE REQUIREMENT IS TO GIVE AN OPPORTUNITY TO THE ASSESSEE OF BEING HEARD AND THERE IS NO REQUIREMENT U/S. 263(1) TO ISSUE THE SHOW CAUSE NOTICE TO THE ASSESSEE. 3. THE ASSESSEE, AGAINST THE SHOW CAUSE NOTICE ISSUED TO HIM U/S.263, HAS REPLIED ISSUE- WISE. IT WAS SUBMITTED BY THE ASSESSEE THAT THE ITA NO.783/13 M/S SETHIA FINANCE & TRADING CO. 3 ASSESSMENT WAS COMPLETED AFTER DUE ENQUIRY AND EXAMINATION OF THE COMPLETE SET OF BOOKS OF ACCOUNTS. ALL THE SUPPORTING MATERIALS WERE DULY SUBMITTED IN THE COURSE OF HEARING. THE BOOKS OF ACCOUNTS ARE OTHERWISE AUDITED AND TAX AUDIT REPORT WAS DULY FILED. THERE IS NO PRIMA FACIE CASE FOR INVOKING THE PROVISIONS OF SECTION 263. 3.1 THE FIRST ISSUE RAISED BY THE CIT, DURING PROCEEDINGS U/S 263, WAS THAT TRADING RESULTS WERE NOT VERIFIED BY THE CIT. THE CIT OBSERVED THAT THE SEPARATE TRADING AND PROFIT AND LOSS ACCOUNT FOR TRADING IN SYNTHETIC RUBBER/CHEMICALS AND TRADING IN PLASTIC HAS NOT BEEN FILED BY THE ASSESSEE. IN THIS CONNECTION, IT WAS SUBMITTED BY THE ASSESSEE THAT DETAILS OF PURCHASES AND SALES, QUALITY WISE OPENING STOCK AND CLOSING STOCK OF SYNTHETIC RUBBER/CHEMICALS WAS FILED AND EXAMINED IN THE COURSE OF THE ASSESSMENT PROCEEDINGS. THE COPY OF THE DETAILS OF PURCHASE AND SALES AS WELL AS THE QUANTITY WISE AND QUALITY WISE DETAILS AS FILED BEFORE THE AO WERE SUBMITTED BY THE ASSESSEE BEFORE THE CIT. MOREOVER, TRANSACTIONS OF TRADING IN PLASTICS WAS LESS THAN 2% OF THE VOLUME OF TRANSACTIONS MADE IN SYNTHETIC RUBBER IN CHEMICALS. THERE WAS GROSS PROFIT OF MORE THAN 13% IN CASE OF PLASTIC TRADING AND THE GP WAS MORE THAN 18% IN THE CASE OF TRADING IN SYNTHETIC RUBBER / CHEMICALS. THE COMBINED GP WAS 18.34 % DURING THE YEAR AS COMPARED TO 13.52% SHOWN IN THE IMMEDIATELY PRECEDING YEAR. THEREFORE, THERE WAS SUBSTANTIAL INCREASE OF MORE THAN 35 %, IN THE RATE OF GROSS PROFIT DURING THE YEAR AS COMPARED TO THE IMMEDIATELY PRECEDING YEAR. THE ASSESSMENT FOR THE PRECEDING ASSESSMENT YEAR WAS ALSO SCRUTINIZED UNDER SEC. 143(3) OF THE IT. ACT, 1961 AND THE TRADING RESULTS HAD BEEN ACCEPTED. HENCE, IT IS SUBMITTED THAT THE ORDER CANNOT BE PREJUDICIAL TO THE INTEREST OF REVENUE. THE FACT THAT THE STOCK REGISTER HAS BEEN MAINTAINED BY THE ASSESEE, WHICH IS DULY MENTIONED IN THE TAX AUDIT REPORT, PROVES THE QUANTITY DETAILS SUBMITTED BY THE ASSESSEE. THE SAME HAS ALSO BEEN CONFIRMED BY THE AO IN THE ASSESSMENT ORDER AS WELL. IT IS, THEREFORE, SUBMITTED THAT THE VIEW OF NON MAINTENANCE OF STOCK REGISTER IS NOT CORRECT. ABOUT THE AVERAGE VALUE PER KG OF OPENING STOCK, PURCHASE, SALES AND CLOSING STOCK, THE ASSESSEE SUBMITTED THAT THE METHOD OF VALUATION OF STOCK IS AT COST OR NET REALIZABLE ITA NO.783/13 M/S SETHIA FINANCE & TRADING CO. 4 VALUE WHICHEVER IS LOWER AS IS EVIDENT FROM THE TAX AUDIT REPORT. ITEM- WISE COMPLETE DETAILS OF MOVEMENT OF STOCK WITH QUANTITY AND VALUE INCLUDING OPENING BALANCE, INWARD, OUTWARD AND CLOSING BALANCE HAD BEEN EXPLAINED. THE CLOSING STOCK IS CORRECTLY ENCLOSED. THE CLOSING STOCK IS CORRECTLY VALUED, AND WHEN PARTICULAR DETAILS ARE AVAILABLE AND ARE MAINTAINED THERE IS NO LOGIC TO TAKE AVERAGE VALUE OF THE ITEMS DEALT WITH. FURTHER PURCHASES AND SALES ARE FULLY VOUCHED AND VERIFIABLE AND THE BILLS AND VOUCHERS WERE EXAMINED WITH REFERENCE TO THE BOOKS OF ACCOUNTS BY THE AO IN THE COURSE OF ASSESSMENT PROCEEDINGS. THE BOOKS OF ACCOUNTS HAVE BEEN ACCEPTED BY THE AO AFTER DUE APPLICATION OF MIND. NOT ONLY THAT THE PURCHASE AND SALES WERE ALSO EXAMINED BY ISSUE OF NOTICE U/S 133(6). THEREFORE, ASSESSEE SUBMITTED THAT THERE IS NO ERROR IN THE ORDER OF THE ASSESSING OFFICER ON THIS COUNT AND THEREFORE, REVISIONARY JURISDICTION U/S. 263 CANNOT BE EXERCISED. 3.2 IN THE SECOND REASON FOR INVOKING THE PROVISIONS OF SECTION 263, THE CIT HAD STATED THAT THE ASSESSEE HAD PURCHASED GOODS WORTH 5.68 IAKHS AND SOLD GOODS WORTH RS.34.73 LAKHS TO ONE M/ S. SIMPLEX POLYMERS OF NEW DELHI. HOWEVER, SINCE THE ASSESSEE HAD MADE PAYMENT OF RS. 14.5 LAKHS TO THE SAID PARTY, THE TRANSACTION WAS UNUSUAL ACCORDING TO CIT. IN THIS CONNECTION IT WAS SUBMITTED BY THE ASSESSEE THAT THE LEDGER ACCOUNT OF SYMPLEX POLYMERS WAS DULY PRODUCED IN THE COURSE OF ASSESSMENT PROCEEDINGS AND WAS ALSO FILED BEFORE CIT, FROM WHICH ALL THE TRANSACTIONS CAN BE SEEN. ALL THE TRANSACTIONS HAD BEEN VERIFIED BY AO . 3.3 THE THIRD ISSUE RAISED BY THE CIT WAS THAT REMUNERATION HAD BEEN ALLOWED TO PARTNERS WITHOUT CALLING FOR THE PARTNERSHIP DEED AND WITHOUT CHECKING WHETHER THE REMUNERATION WAS MADE TO AN ACTIVE PARTNER OR NOT. THE COPY OF THE PARTNERSHIP DEED WAS FILED IN THE YEAR IN WHICH IT WAS EXECUTED AND THEREAFTER IN THE COURSE OF ASSESSMENT OF AN EARLIER ASSESSMENT YEAR WHICH WAS DULY SCRUTINIZED UNDER SEC. 143(3) OF THE L.T. ACT AND REMUNERATION WAS DULY ALLOWED. THERE WAS NO CHANGE IN THE PARTNERSHIP DEED NOR THERE IS ANY THING ON RECORD TO SUGGEST THAT THERE WAS ANY CHANGE IN THE PARTNERSHIP DEED. THE ASSESSEE ALSO SUBMITTED ITA NO.783/13 M/S SETHIA FINANCE & TRADING CO. 5 THE COPY OF THE PARTNERSHIP DEED BEFORE CIT. MOREOVER THE PARTNER HAD ALSO PAID THE TAX ON THE SAME RATE ON SUCH SALARY RECEIVED FROM THE PARTNERSHIP. THEREFORE, THE ORDER OF THE AO IS NEITHER PREJUDICIAL NOR ERRONEOUS ON THIS COUNT. 3.4. THE FOURTH ISSUE RAISED BY CIT WAS THAT THE ASSESSEE HAD RECEIVED LOANS FROM M/S. AISHAN ELECTRONICS PVT LTD AND M/S. SEBOK INTERNATIONAL PVT LTD. THE CIT HAD PRESUMED THAT THE COMPANIES BEING RELATED TO THE ASSESSEE, THE ASPECT OF DEEMED DIVIDEND IN THE HANDS OF THE FIRM HAVE NOT BEEN EXAMINED BY THE AO. IN THIS CONNECTION IT WAS SUBMITTED THAT THE ASSESSEE DULY PAID INTEREST ON THE LOANS TAKEN FROM THE SAID PARTIES. THE SAME CAN BE VERIFIED FROM THE DETAILS OF INTEREST ALREADY FILED BEFORE AO. THE FUNDS WERE UTILIZED IN THE BUSINESS OF THE COMPANY AND HAVE BEEN ALLOWED AS BUSINESS EXPENSES BY THE AO. MOREOVER, THE ASSESSEE FIRM WAS NOT HOLDING ANY SHARES IN THE SAID CONCERNS NOR THERE IS ANY THING ON RECORD TO SUGGEST SUCH PRESUMPTION RAISED BY CIT. THE SHARE HOLDING PATTERN OF THE TWO COMPANIES WERE SUBMITTED BY THE ASSESSEE. THE ASSESSEE ALSO QUOTED THE JUDGMENT OF HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF CIT-VS- HOTEL HILLTOP REPORTED IN 313 ITR 116 AND AS HELD BY THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF ACLT -VS- BHAUMIK COLOUR (P) LTD. 118 LTD 1 (MUM.) WHEREIN IT WAS HELD THAT THE DEEMED DIVIDEND UNDER SECTION 2(22)(E) CAN ONLY BE ASSESSED IN THE HANDS OF A PERSON BEING A SHAREHOLDER IN THE LENDER COMPANY AND SINCE THE ASSESSEE WAS NOT A SHAREHOLDER IN THE COMPANY FROM WHOM LOAN WAS TAKEN, TAXABILITY UNDER SECTION 2(22)(E) COULD NOT BE ATTRACTED. HENCE, THERE IS NEITHER ANY ERROR NOR ANY PREJUDICE CAUSED TO THE REVENUE ON THIS COUNT. 3.5. THE FIFTH ISSUE RAISED BY THE CIT WAS THAT THE ASSESSEE HAD RECEIVED AND MADE PAYMENTS TO M/S. HARIOM UDYOG AND M/S. ELPARTS ELECTRONICS AND THERE WERE NEITHER ANY LOAN TRANSACTIONS OR NOR ANY TRADING TRANSACTIONS WITH THE SAID PARTIES. THE PARTY M/S HARIOM UDYOG WAS A SUNDRY DEBTOR WHOSE OPENING BALANCE WAS RS. 10,51,708/- AND THERE WAS NO OTHER SALE MADE TO IT DURING THE YEAR. THE COPY OF THE LEDGER ACCOUNT OF M/S HARI OM UDYOG WAS SUBMITTED BY THE ASSESSEE BEFORE THE CIT. THERE ITA NO.783/13 M/S SETHIA FINANCE & TRADING CO. 6 WERE ONLY TWO AMOUNTS OF RS.5 LAKS AND 3 LAKS RECEIVED FROM THE SAID PARTY THROUGH BANKING CHANNELS WHICH WAS REALIZED FROM SUNDRY DEBTORS. THEREFORE, THE ASSESSEE SUBMITTED THAT THE PRESUMPTION MADE BY THE CIT WAS NOT CORRECT. AGAIN IN THE CASE OF M/ S. ELPART ELECTRONICS, A LOAN OF RS. 5,00,000/- WAS GIVEN TO THE SAID PARTY BY ACCOUNT PAYEE CHEQUE AND ON WHICH INTEREST OF RS. 46,850/- WAS DULY RECEIVED. THE TAX AT SOURCE WAS ALSO DEDUCTED BY THE PARTY AND THE CLOSING BALANCE WAS SHOWN UNDER THE HEAD LOANS AND ADVANCES IN THE BALANCE SHEET. THE COPY OF THE LEDGER ACCOUNT OF THE PARTY DULY FILED BEFORE THE AO WAS ALSO SUBMITTED BEFORE THE CIT AND THE INTEREST RECEIVED HAD ALSO BEEN DULY DISCLOSED IN THE PROFIT &.LOSS ACCOUNT AND THE DETAILS OF INTEREST FLED BEFORE THE AO. THEREFORE, ON THIS COUNT, THE ORDER OF THE ASSESSING OFFICER WAS NEITHER PREJUDICIAL NOR ERRONEOUS. 3.6 SIXTH ISSUE RAISED BY THE CIT WAS THAT THE LD. AO HAD NOT VERIFIED THE HIGH VOLUME OF SUNDRY DEBTORS. IN THIS CONNECTION IT WAS SUBMITTED BY THE ASSESSEE THAT WHEN THE SALES HAD BEEN ACCEPTED WITH REFERENCE TO THE BILLS, VOUCHERS AND THE BOOKS OF ACCOUNTS, THE HIGH % OF SUNDRY DEBTORS WOULD HAVE NO IMPACT ON THE PROFIT AND LOSS ACCOUNT OR THE INCOME DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME. THEREFORE, THE ASSESSEE SUBMITTED BEFORE THE CIT THAT THIS CANNOT RENDER THE ORDER PREJUDICIAL TO THE INTEREST OF REVENUE. 4. HOWEVER, THE LD. CIT HAD IGNORED THE REPLY FILED BY THE ASSESSEE, AS EXPLAINED ABOVE, AND CONCLUDED THAT THE ASSESSMENT ORDER PASSED BY THE AO DOES NOT SHOW ANY APPLICATION OF MIND ON THE PART OF THE AO. THE LD. CIT(A) ALSO OBSERVED THAT THE AO SIMPLY ACCEPTED THE CLAIM OF THE ASSESSEE WITH REGARD TO THE VARIOUS ISSUES CONSIDERED BY THE CIT U/S.263, THIS IS A CASE WHERE THE AO CATEGORICALLY ACCEPTED WHAT THE ASSESSEE WANTED HIM TO ACCEPT WITHOUT ANY APPLICATION OF MIND OR ENQUIRY. THE EVIDENCE AVAILABLE ON RECORD IS NOT ONLY TO HOLD THAT THE RETURN OF THE ITA NO.783/13 M/S SETHIA FINANCE & TRADING CO. 7 ASSESSEE WAS EXAMINED OR CONSIDERED BY THE AO. THE ASSESSMENT ORDER, THEREFORE, IS CLEARLY ERRONEOUS AS IT WAS PASSED WITHOUT PROPER EXAMINATION OR ENQUIRY OR VERIFICATION OR POSITIVE CONSIDERATION OF THE CLAIM RAISED BY THE ASSESSEE. THE LD. CIT ALSO OBSERVED THAT IT IS WELL SETTLED LAW THAT THE AO BEING A QUASI JUDICIAL AUTHORITY CANNOT GIVE EITHER AGAINST OR IN FAVOUR OF THE ASSESSEE OR REVENUE WITHOUT MAKING PROPER ENQUIRY AND WITHOUT PROPER EXAMINATION OF CLAIM MADE BY THE ASSESSEE IN THE LIGHT OF THE APPLICABLE LAW. THIS WAY, THE CIT EXERCISED HIS JURISDICTION U/S.263 OF THE ACT, AND SET ASIDE THE ORDER OF THE AO AND HE DIRECTED THE AO TO PASS A FRESH ASSESSMENT ORDER AND RECOMPUTED THE ASSESSEES INCOME AFTER MAKING FURTHER ENQUIRIES ON THE OBSERVATIONS DISCUSSED ABOVE. 5. AGGRIEVED BY THE ORDER OF THE CIT, THE ASSESSEE IS IN APPEAL BEFORE US AND HAS TAKEN THE FOLLOWING GROUNDS OF APPEALS: 1 FOR THAT THE ORDER OF THE LD COMMISSIONER OF INCOME TAX IS ARBITARY, PERVERSE, AND BAD IN LAW SINCE THAT INITIAL THE SHOW CAUSE NOTICE OF ASSUMPTION OF JURISDICTION UNDER SECTION 263 WAS ISSUED BY THE ITO ( TECHNICAL) FOR AND ON BEHALF OF THE CIT. 2.FOR THAT THE LD COMMISSIONERS OF INCOME TAX ERRED IN IGNORING THE DETAILS AND EVIDENCES ON RECORD WHILE INITIATING THE PROCEEDINGS UNDER SECTION 263, THEREAFTER COPIES OF THE SAME WERE ALSO FILED BEFORE HIM AND FURTHER IGNORING THE FACT THAT THE AO EXAMINED THE ALL ISSUES POINTED BY THE LD CIT AS NOT EXAMINED BY THE AO WHICH ACCORDING TO HIM MADE THE ORDER ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE WHEN ALL THESE DETAILS WERE DULY EXAMINED BY THE ASSESSING OFFICER IN ACCORDANCE WITH THE LAW. 3.FOR THAT THE LD CIT ERRED IN HOLDING THE VIEW THAT THE TRADING RESULTS WERE NOT PROPERLY EXAMINED NOR THE PURCHASE AND SALES, THE GP AND NP RATE AND THE STOCK REGISTER AND THE RATE OF CLOSING STOCK VALUATION WHEN ALL PURCHASES AND SALES WERE FULLY VOUCHED AND VERIFIED WITH REFERENCE TO THE BOOKS OF ACCOUNTS PRODUCED, THE PAYMENTS WERE ALL RECEIVED AND PAID BY ACCOUNT PAYEE CHEQUE, DAY TO DAY QUALITY AND QUANTITY REGISTER WAS MAINTAINED DETAILS WERE CALLED FOR AND FILED BEFORE THE AO, THE VALUATION DETAILS OF CLOSING STOCK WERE FILED WITH REFERENCE TO THE COST OF THE QUALITY OF THE MATERIAL IN STOCK. ITA NO.783/13 M/S SETHIA FINANCE & TRADING CO. 8 4. FOR THAT THE LD CIT ERRED IN HOLDING THE VIEW THAT THE ACCOUNT OF THE SIMPLEX POLYMERS WASNT EXAMINED AND THERE WAS APPARENT ANOMALY IN THE SAID ACCOUNT IGNORING THE COPY OF ACCOUNT OF THE SAID PARTY ON RECORD WHEREIN ALL THE FIGURES OF THE TRANSACTIONS WERE RECORDED, THE LD CIT MISSED TO LOOK INTO THE SAME AND ASSUMED THAT THE SAID ACCOUNT WAS NOT VERIFIED. 5. THE LD CIT ERRED IN TREATING THE ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THE GROUND THAT THE AO ERRED IN TREATING THE ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THE GROUND THAT THE AO DID NOT EXAMINE THE FEASIBILITY OF INVOLVING THE PROVISIONS OF SECTION 2(22) (E) WHEN THE ASSESSEE FIRM WAS NEVER A SHAREHOLDER IN ANY OF THE COMPANIES AND IT PAID INTEREST ON LOAN TAKEN FROM THE COMPANIES AND THEREFORE, THE PROVISIONS OF SECTION 2(22) (E) WERE NOT APPLICABLE. 6 FOR THAT THE LD CIT ERRED IN TREATING THE ORDER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THE GROUND THAT HUGE SUNDRY DEBTORS WERE NOT VERIFIED WHEN THE SALES WERE BACKED BY THE SALES BILLS THE PAYMENT WERE RECEIVED BY ACCOUNT PAYEE CHEQUE, AND EVEN OTHERWISE THE OUTSTANDING SUNDRY DEBTORS CAN NOT MAKE THE ORDER PREJUDICIAL TO THE INTEREST OF REVENUE. 7. FOR THAT ON FACTS AND CIRCUMSTANCES, THE LD CIT CANNOT TAKE ADVERSE VIEW SIMPLY BECAUSE THE BOOKS WERE NOT PRODUCED BEFORE HIM FOR EXAMINATION AS BECAUSE THE REVISION POWERS ARE CONFERRED UPON HIM ONLY WHEN ON EXAMINATION OF THE RECORDS IT IS FOUND THAT THE ORDER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND NOT BECAUSE THE BOOKS WERE NOT PRODUCED BEFORE HIM FOR FURTHER EXAMINATION TO BE RE- EXAMINED IN THE MANNER OF THE LD CIT WANTED EVEN IF THE LD AO EXAMINED THE SAME AND TOOK THE DECISION IN HIS OWN MANNER BUT IN ACCORDANCE WITH LAW. 8. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER PASSED UNDER SECTION 263 ON VARIOUS ISSUES IS NOT IN ACCORDANCE WITH LAW. 9. FOR THAT THE ORDER OF THE LD CIT BE CANCELLED AND THE APPELLANT BE GIVEN RELIEF PRAYED FOR. 6. LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT DURING THE ASSESSMENT PROCEEDINGS U/S.143(3), THE AO HAS ISSUED NOTICE U/S.142(1) CALLING ACCOUNTS, DOCUMENTS AND DETAILS (PAPER BOOK PAGE 52). THE AO REQUIRED EIGHT DETAILS AND ENTIRE DETAILS REQUIRED BY THE AO HAD BEEN SUBMITTED BY THE ASSESSEE VIDE LETTER DATED 22.11.2010 ( PAPER BOOK PAGE NO.53). THE LD. COUNSEL SUBMITTED THAT WHATEVER THE DETAILS, THE AO ASKED, THE SAME HAVE BEEN SUBMITTED BEFORE THE AO. EVEN DETAIL ITA NO.783/13 M/S SETHIA FINANCE & TRADING CO. 9 DOCUMENTS AND BOOKS OF ACCOUNTS WERE ALSO AVAILABLE ON THE RECORD OF THE AO. MERELY BECAUSE HE DID NOT BRING THESE RECORDS AND EVIDENCE IN THE ASSESSMENT ORDER, DOES MEAN THAT HE HAS NOT APPLIED HIS MIND. THE CIT ALLEGES THAT SEPARATE TRADING ACCOUNT SHOULD BE FILED INSTEAD OF COMBINED TRADING ACCOUNT. ASSESSEE HAS ALWAYS FILED A COMBINED TRADING ACCOUNT SINCE LAST SEVERAL YEARS AND ASSESSMENTS OF WHICH HAVE BEEN COMPLETED U/S 143(3). THE CIT ALLEGES THAT G.P RATES HAVE NOT BEEN VERIFIED WHEREAS FROM PAGE 51 OF PAPER BOOK, IT WOULD BE APPARENT FROM THE COMPARATIVE CHART THAT GP RATE WAS THE HIGHEST DURING THE YEAR AS COMPARED TO THE PRECEDING ASSESSMENT YEAR. THE CIT HAS DRAWN CONCLUSION FROM AVERAGE VALUES OF ENTIRE STOCK INSTEAD OF PIN POINTING SPECIFIC DEFECTS. THE CIT HAS ALLEGED THAT PURCHASES AND SALES HAVE NOT BEEN VERIFIED WHEREAS FROM PAGE 51 OF PAPER BOOK WHICH IS THE REQUISITIONS MADE U/S 142(1) HE SPECIFICALLY CALLED FOR EXHAUSTIVE DETAILS OF PURCHASES AND SALES. REPLY DULY FILED VIDE PAGE 53 ALONG WITH QUANTITY AND VALUE WISE DETAILS WITH NAMES AND ADDRESSES OF THE PARTIES AS PER PAPER BOOK PAGE NO. 54 TO 73. THE ORDER CANNOT BE SAID TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE ON ACCOUNT OF DEEMED DIVIDEND AS INTEREST WAS DULY PAID ON THE LOANS TAKEN FROM COMPANIES AND ONCE INTEREST HAS BEEN CHARGED, THERE IS NO QUESTION OF DEEMED DIVIDEND AS PER THE CALCUTTA HIGH COURT JUDGEMENT IN THE CASE OF PRADIP KUMAR MALHOTRA REPORTED IN 338 ITR 538 WHICH HAS BEEN FOLLOWED BY KOLKATA ITAT IN THE CASE OF PRATAP SINGH KOTHARI IN ITA NO. 1699/KOL/2012. FURTHER IT SHOULD BE NOTED THAT ON DEBATABLE ISSUES, THE REVISIONARY POWERS U/S 263 CANNOT BE EXERCISED.[ MALABAR INDUSTRIAL CO LTD V CIT,( 243 ITR 83) ] .THE CIT HAS ALLEGED THAT ONE ACCOUNT OF SIMPLEX POLYMERS WAS NOT VERIFIED. IN THIS REGARD THE ASSESSEE HAS SUBMITTED THAT THE AO HAS ALREADY COMPLETED THE SET- ITA NO.783/13 M/S SETHIA FINANCE & TRADING CO. 10 ASIDE ASSESSMENT U/S 143(3)/263 WHICH IS ON PAPER BOOK PAGE 84 WHEREIN THE CONTENTION OF THE ASSESSEE HAS BEEN ACCEPTED. THE CIT HAS ALLEGED THAT HUGE SUNDRY DEBTORS HAVE NOT BEEN VERIFIED. IN THIS REGARD, THE ASSESSEE SUBMITTED THAT THE AO HAS ALREADY COMPLETED THE SET-ASIDE ASSESSMENT U/S 143(3)/ 263 WHICH IS ON PAPER BOOK PAGE 85 WHEREIN THE CONTENTION OF THE ASSESSEE HAS BEEN ACCEPTED. THE LD COUNSEL SUBMITTED THAT IT IS NOT THE CASE OF LACK OF ENQUIRY. SIMPLY BECAUSE THE ORDER IS NOT A SPEAKING ONE DOES NOT MEAN THAT THE AO HAS NOT APPLIED HIS MIND. REFERENCE IS INVITED TO RECENT CALCUTTA HIGH COURT IN THE CASE OF J.L. MORRISON( INDIA) LTD REPORTED IN 366 ITR PAGE 593. IT HAS RELIED ON BOMBAY HIGH COURT IN THE CASE OF CIT V GABRIEL INDIA LTD REPORTED IN 203 ITR 108. THE HON`BLE KOLKATA ITAT IN THE CASE OF RITESH KUMAR BOYED, IN ITA NO. 2299/KOL/2013 PRONOUNCED ON 15/01/2016 HAS HELD THAT THERE IS DISTINCTION BETWEEN LACK OF ENQUIRY AND INADEQUATE ENQUIRY. 7. ON THE OTHER HAND, LD. DR FOR THE REVENUE HAS REITERATED THE STAND TAKEN BY THE CIT U/S.263 WHICH WE HAVE ALREADY NOTED IN OUR EARLIER PARA AND IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 8. HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORDS, WE ARE OF THE VIEW THAT THE ISSUE UNDER CONSIDERATION IS NOT A CASE OF LACK OF ENQUIRY. SIMPLY BECAUSE THE ORDER IS NOT A SPEAKING ORDER DOES NOT MEAN THAT THE AO HAS NOT APPLIED HIS MIND. THE HONBLE KOLKATA HIGH COURT IN THE CASE OF J.L.MORRISON (INDIA) LTD. REPORTED IN 366 ITR 593, WHEREIN IT HAS BEEN HELD THAT IF THE ASSESSEE HAS SUBMITTED THE ENTIRE DETAILS AND DOCUMENTS AS REQUIRED BY THE AO AND BECAUSE THE AO ITA NO.783/13 M/S SETHIA FINANCE & TRADING CO. 11 DOES NOT BRING EACH AND EVERY DOCUMENT IN THE ASSESSMENT ORDER, DOES NOT MEAN THAT THERE IS A LACK OF ENQUIRY. THE ASSESSEE HAD SUBMITTED THE DETAILS ASKED BY THE AO DURING THE ASSESSMENT PROCEEDINGS. THE AO ISSUED NOTICE U/S.142(1), CALLING DETAILS FROM THE ASSESSEE, LIKE DETAILS OF PURCHASES, DETAILS OF SALES, EVIDENCE OF SECURED LOAN, LOAN CONFIRMATIONS FROM LOAN CREDITORS, DETAILS OF INTEREST PAID WITH EVIDENCE, DETAILS OF CUSTOM DUTY PAID, BANK STATEMENT OF ALL THE BANKS AND ENTIRE BOOKS OF ACCOUNTS, AND THE ASSESSEE SUBMITTED THESE ENTIRE DETAILS/DOCUMENTS BEFORE THE AO. THEREFORE, EVERY KIND OF DETAIL AND DOCUMENTS WERE SUBMITTED BY THE ASSESSEE, DURING THE ASSESSMENT PROCEEDINGS, BEFORE THE AO, THEREFORE, IT CAN BE SAFELY ASSUMED THAT THE AO HAS ACCEPTED THE CLAIM MADE BY THE ASSESSEE AFTER GOING THROUGH THE EXPLANATION AND MATERIALS SUBMITTED BY THE ASSESSEE, PURSUANT TO THE STATUTORY NOTICES ISSUED BY HIM. SO, THE AO HAS DISCHARGED THE ROLE OF INVESTIGATOR BY SEEKING DETAILS AND QUERIES IN RESPECT TO THE ISSUES RAISED BY THE LD. CIT AND AFTER GOING THROUGH THE REPLIES AND DOCUMENTS SUBMITTED TO SUBSTANTIATE THE CLAIM BY THE ASSESSEE, THE AO HAS CONSCIOUSLY AFTER APPLYING HIS MIND AS AN ADJUDICATOR HAS TAKEN A PLAUSIBLE VIEW ON THE ISSUES WHICH CANNOT BE TERMED AS UNSUSTAINABLE IN LAW. MOREOVER, THE ASSESSEE CANNOT DICTATE TO THE AO HOW TO WRITE THE ASSESSMENT ORDER, THEREFORE, IT IS NOT A MISTAKE ON THE PART OF THE ASSESSEE, THEREFORE, THE ASSESSEE SHOULD NOT BE HARASSED. MERELY BECAUSE THAT THE AO DID NOT DISCUSS THESE DETAILS IN THE ASSESSMENT ORDER DOES NOT MEAN THAT HE HAS NOT APPLIED HIS MIND. THEREFORE, CONSIDERING THE FACTUAL POSITION, WE ARE OF ITA NO.783/13 M/S SETHIA FINANCE & TRADING CO. 12 THE VIEW THAT THE ORDER PASSED BY THE AO U/S.143(3) IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE, WE QUASH THE ORDER PASSED BY THE CIT U/S.263 OF THE ACT. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE, IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 07/08/2017. SD/ - (A.T.VARKEY) ( . . ) SD/ - (DR. A.L.SAINI) ( . ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; DATED 07/08/2017 /PRAKASH MISHRA , SR.PS. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, SENIOR PRIVATE SECRETARY HEAD OF OFFICE/D.D.O, I.T.A.T., KOLKATA BENCHES, KOLKATA 1. / THE APPELLANT-M/S SETHIA FINANCE TRADING CO. 2. / THE RESPONDENT.-ACIT, CIRLCE-45, KOLKATA 3. ( ) / THE CIT(A), KOLKATA. 4. / CIT 5. , , / DR, ITAT, KOLKATA 6. / GUARD FILE. //TRUE COPY//