M/s AB (Wines) Stores, Kolkata V. PCIT, KOLKATA-14, Kolkata

ITA 901/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1585 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 28-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S BISWAS
• Assessee Lawyers: S K TULSIYAN
• Keywords: Gift; Revision of order; Depreciation; Search and seizure; Corroborative evidences; Assessment record; Prejudicial to interest
• Section: 40A(3); 143(3); 142(1); 133(6); 68; 263; 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SRI A.T.VARKEY, JM & SHRI M.BALAG ANESH, AM ] I.T.A NO.901/KOL/2016 ASSESSMENT YEAR : 2011-1 2 M/S. AB (WINES) STORES -VS.- PR. C.I.T. , KOLKATA-14 KOLKATA KOLKATA [PAN : AAJFA 6312 L] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI S.K.TULSIYAN, ADVOCATE FOR THE RESPONDENT : SHRI R.S.BISWAS, CIT DATE OF HEARING : 15.06.2017. DATE OF PRONOUNCEMENT : 07.07.2017 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE OR DER OF THE LEARNED PR.COMMISSIONER OF INCOME TAX (APPEALS) -14 , KOLKATA [ IN SHORT THE L D CIT] IN NO. PR.CIT- 14/KOL/AB(WINE)/SEC.263/2015-16/6748-6750 DATED 11. 03.2016 PASSED U/S 263 OF THE ACT AGAINST THE ORDER PASSED BY THE JT.CIT, RANGE-3 7, KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (H EREINAFTER REFERRED TO AS THE ACT ] DATED 04.03.2014 FOR THE ASST YEAR 2011-12. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL OF T HE ASSESSEE IS AS TO WHETHER THE LD CIT WAS JUSTIFIED IN INVOKING REVISIONARY JURISDICTION U/S 263 OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF RETAIL TRADING OF INDIAN MADE FOREIGN L IQUOR. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASST YEAR 2011-12 DECLARING TOTAL INCOME OF RS 15,14,564/-. THE CASE WAS SELECTED FOR SCRUTINY. IN THE COURSE OF ASSESS MENT PROCEEDINGS, THE ASSESSEE 2 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 2 FURNISHED COPIES OF CASH BOOK AND PARTY LEDGERS BEF ORE THE LD AO WHICH WERE DULY EXAMINED BY THE LD AO. THE ASSESSEE PRODUCED DETA ILS OF CREDITORS IN SUPPORT OF ITS CLAIM OF PURCHASES AND THE LD AO ISSUED NOTICES U/S 133(6) OF THE ACT IN ORDER TO VERIFY THE CLAIM OF THE ASSESSEE. THE LD AO OBSERVED THA T THE ASSESSEE HAD MADE CASH PAYMENTS EXCEEDING RS 20,000/- ON A SINGLE DAY IN C ONTRAVENTION OF PROVISIONS OF SECTION 40A(3) OF THE ACT AND DISALLOWED A SUM OF R S 1,44,52,154/- IN THE ASSESSMENT, IGNORING THE SUBMISSIONS OF THE ASSESSEE EXPLAINING THE CIRCUMSTANCES UNDER WHICH SUCH CASH PAYMENTS WERE MADE. THE SAID ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 4.3.2014. THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE LD CITA AGAINST THIS ORDER OF ASSESSMENT AND THE SAME IS STATED TO BE PENDING. 4. WHILE THIS WAS SO, THE LD ADMINISTRATIVE CIT SOU GHT TO REVISE THE ASSESSMENT U/S 263 OF THE ACT BY TREATING THE SAME AS ERRONEOUS IN AS MUCH AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THE LD CIT ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE VIDE LETTER DATED 7 / 13.1.2016 ON THE GROUND THAT THE LD AO HA D FAILED TO MAKE COMPLETE AND FULL ENQUIRIES AND ALSO PASSED THE ORDER WITHOUT CONSIDE RING & EXAMINING THE FACTS AND INFORMATION ON RECORD. THE LD CIT OBSERVED IN HIS SHOW CAUSE NOTICE THAT THE LD AO HAD NOT EXAMINED THE SAID TRANSACTIONS AT THE MICRO LEV EL AND THIS LACK OF ENQUIRY WARRANTS FURTHER EXAMINATION WITHOUT WHICH THE PROVISIONS OF SECTION 40A(3) OF THE ACT CANT BE APPLIED ON THE FACTS OF THIS CASE. ACCORDINGLY, HE DIRECTED THE ASSESSEE TO PRODUCE THE ORIGINAL BOOKS OF ACCOUNTS VIZ CASH BOOK, LEDGER TO SUSTAIN THAT PAYMENT BEYOND RS 1,44,52,174/- WAS MADE WITHIN THE PURVIEW OF SECTIO N 40A(3) OF THE ACT. THE LD CIT ALSO OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD AO ISSUED NOTICE U/S 133(6) OF THE ACT TO THE FOLLOWING PARTIES FOR PURCHASES MADE FROM THEM:- SL.NO NAME OF THE PURCHASE PARTY 1. M/S. B DEBOO & CO.PVT. LTD. 2. M/S BBM ENTERPRISE 3. M/S MOHAN BROTHER (DRINKS)PVT. LTD. 4. M/S. N C SHAW & CO. 5. M/S S P SHAW & BROS. 3 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 3 6. M/ SHREE RIDDHI SIDDHI 7. M/S SUM O SON EXPORTS PVT.. LTD. 8. M/S VICTORIA WINES PVT. LTD. 4.1. THE LD CIT OBSERVED THAT THE LD AO HAD OVERLOO KED THE REPLIES RECEIVED IN RESPONSE TO NOTICE U/S 133(6) OF THE ACT. HE OBSERVED THAT IN RESPECT OF 5 CASES TO WHOM NOTICE U/S 133(6) OF THE ACT WAS ISSUED, NO REPLY WAS RECE IVED FROM THEM. IN RESPECT OF 3 CASES WHERE REPLY HAS BEEN RECEIVED, THERE IS A DIFFERENC E IN CLOSING BALANCE IN PARTY ACCOUNT DUE TO DIFFERENCE IN THE OPENING BALANCE IN THE SAI D PARTY ACCOUNT. THE ASSESSEE WAS ASKED TO FURNISH THE RECONCILIATION OF ABOVE DISCRE PANCIES OF PURCHASES WITH SUPPORTING EVIDENCES LIKE PARTY LEDGER, CASH BOOK, PURCHASE BI LL ETC. 4.2. THE LD CIT OBSERVED THAT THE FIGURES OF PURCHA SES ARE DIFFERENT AS PER THE PROFIT AND LOSS ACCOUNT (RS 4,66,29,230/-) AND AS PER PURCHASE PARTIES LIST (RS 4,73,29,301/-) PROVIDED BY THE ASSESSEE. HE FURTHER OBSERVED THA T THE TCS CERTIFICATE ISSUED BY RAJA RAM YADAV STATES THAT THERE IS A PURCHASE OF RS 40, 38,080/- WAS MADE BY THE ASSESSEE WHICH WAS NOT REFLECTED IN THE PARTIES LIST PROVIDE D BY THE ASSESSEE TO THE TUNE OF RS 4,73,29,301/-. ACCORDINGLY HE CONCLUDED THAT THE T OTAL PURCHASES OF THE ASSESSEE TO BE RS 5,13,67,381/- ( 4,73,29,301 + 40,38,080) AND WHE REAS THE PURCHASES SHOWN IN THE PROFIT AND LOSS ACCOUNT WAS RS 4,66,29,230/- ONLY, FOR WHICH RECONCILIATION WAS SOUGHT FOR BY THE LD CIT. 5. THE ASSESSEE EXPLAINED THAT THE DIFFERENCE IN PU RCHASES BETWEEN PURCHASE PARTIES LIST AND THAT SHOWN IN THE PROFIT AND LOSS ACCOUNT WAS D UE TO TCS AMOUNT OF RS 4,68,521/- AND CREDIT NOTE GIVEN BY THE PARTY IN THE SUM OF RS 2,31,550/- WHICH HAS BEEN REDUCED IN THE PROFIT AND LOSS ACCOUNT TOWARDS PURCHASES AC COUNT. HENCE THERE IS NO UNDER REPORTING OF PURCHASES IN THE PROFIT AND LOSS ACCOU NT. IT WAS ALSO EXPLAINED THAT THERE WAS NO PURCHASE OF RS 40,38,080/- FROM RAJA RAM YAD AV AS STATED BY THE LD CIT IN HIS SHOW CAUSE NOTICE DURING THE ASST YEAR 2011-12. IT WAS FURTHER STATED THAT THE ISSUE OF 4 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 4 DISALLOWANCE U/S 40A(3) OF THE ACT HAD BEEN THE SUB JECT MATTER OF APPEAL BEFORE THE LD CITA AND THE SAME IS PENDING AND HENCE THE VERY SAM E ISSUE OF SECTION 40A(3) OF THE ACT COULD NOT BE THE SUBJECT MATTER OF DISCUSSION I N REVISION PROCEEDINGS U/S 263 OF THE ACT. 6. THE ASSESSEE FURTHER EXPLAINED THAT THE ENTIRE ISSUE OF PURCHASES WERE DULY EXAMINED BY THE LD AO IN THE COURSE OF ASSESSMENT PROCEEDING S BY ISSUING NOTICE U/S 142(1) OF THE ACT DATED 4.10.2013 TOGETHER WITH A QUESTIONNAIRE T HEREON BY ASKING THE FOLLOWING QUESTIONS RELATED TO PURCHASES :- 4. NAMES & CURRENT ADDRESS OF THE PERSONS / PARTIES FROM WHOM GOODS WERE PURCHASED STATING CATEGORICALLY IN EACH CASE, THE O PENING BALANCE AS ON 01.04.2010, PURCHASE DURING THE YEAR, AMOUNT PAID D URING THE YEAR & AMOUNT DUE TO BE PAID AS ON 31.03.2011. (LEDGER COPY OF TH E PARTIES TO BE FURNISHED). 5. COPIES OF TCS CERTIFICATES. 6.1. THE ASSESSEE EXPLAINED VIDE ITS REPLY LETTER D ATED 9.10.2013, AMONG OTHER DETAILS, BEFORE THE LD AO AND THE RELEVANT PORTIONS OF THE S AID LETTER ARE REPRODUCED BELOW:- 5. THE FIRM IS HAVING A LEGAL DISPUTE WITH FEDERAL BANK AND THE MATTER IS LYING IN DEBT RECOVERY TRIBUNAL. HENCE THE FIRM IS NOT IN A POSITION TO CARRYOUT NORMAL BANKING TRANSACTION. TRANSACTION ARE MADE IN CASH O NLY. 6. A STATEMENT OF SUNDRY CREDITORS SHOWING OP.BALAN CE, PURCHASE DURING THE YEAR, PAYMENT DURING THE YEAR AND CLOSING BALANCE F OR BOTH THE ASSESSMENT YEAR 2010-11 AND 2011-12. 8. COPIES OF TCS CERTIFICATE OF BOTH THE PERIOD I.E A.Y. 2010-11 & 2011-12 ARE ENCLOSED. 6.2. THE ASSESSEE ALSO FURNISHED THE PARTY WISE REC ONCILIATION IN A TABULAR FORM BEFORE THE LD CIT EXPLAINING THE DISCREPANCY IN PURCHASES DUE TO CREDIT NOTE ISSUED BY VARIOUS 5 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 5 PARTIES TO THE TUNE OF RS 2,31,550/- WHICH IS ENCLO SED IN PAGE 13 OF THE PAPER BOOK FILED BEFORE US. 7. THE ASSESSEE BASED ON THE AFORESAID SUBMISSIONS STATED THAT THE LD AO HAD ALREADY MADE THOROUGH ENQUIRIES ON THE SUBJECT MENTIONED IS SUE OF PURCHASES AND THE SUNDRY CREDITORS THEREON AND HENCE THE SAME CANNOT BE CONS TRUED AS LACK OF ENQUIRY WARRANTING INITIATION OF REVISION PROCEEDINGS U/S 263 OF THE A CT. IT WAS ARGUED THAT THE LD AO ON GOING THROUGH THE DETAILS FILED BY THE ASSESSEE AND AFTER DECIDING TO DISALLOW A SUM OF RS 1,44,52,154/- U/S 40A(3) OF THE ACT, HAD TAKEN O NE OF THE POSSIBLE VIEWS ON THE ISSUE AND HENCE THE ORDER PASSED BY HIM THEREON CANNOT BE CONSTRUED AS ERRONEOUS AND IN THE ABSENCE OF SATISFACTION OF TWIN CONDITIONS I.E ORDE R SHOULD BE ERRONEOUS AND IT SHOULD BE PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE SA ME CANNOT BE REVISED U/S 263 OF THE ACT. THE LD CIT HOWEVER, DID NOT ACCEPT TO THESE CONTENT IONS OF THE ASSESSEE AND FINALLY HELD IN HIS ORDER DATED 11.3.2016 AS UNDER:- 6 (I)REGARDING ISSUE OF APPLICABILITY OF PROVISION OF SECTION 40A(3) OF THE INCOME TAX ACT, 1961 ON THE CASH PAYMENT HAVING AMOUNT EXC EEDING RS. 20,000/- PER PAYMENT/ENTRY TO PURCHASE PARTIES, AUTHORISED REPRE SENTATIVE OF THE ASSESSEE STATED IN HIS SUBMISSION THAT 'REGARDING VIOLATION OF SEC 40A(3), THE MATTER IS AT APPEAL STAGE'. NO FURTHER CLARIFICATION/EXPLANATION WAS FU RNISHED BY THE ASSESSEE DURING THE PROCEEDING U/S 263 ALONG WITH ORIGINAL CASH BOO K, PARTY LEDGER TO SUSTAIN THAT PAYMENT BEYOND RS. 1,44,52,174 WAS MADE WITHIN THE PURVIEW OF SEC. 40A(3) OF THE IT ACT 1961. THEREFORE, THE TYPE AND NUMBER OF VIOL ATIONS, AMOUNT PAID AND DISALIOWABLE THEREON COULD NOT DETERMINED. IT IS A FACT THAT THE ENTIRE PURCHASE OF TH E ASSESSEE WAS ADMITTEDLY MADE IN CASH, NOT ROUTED THROUGH BANK. IN VIEW OF THIS FACT THE SAID TRANSACTION IN CONNECTION WITH PURCHASE NEEDS TO BE RE-EXAMINED AT THE MICRO LEVEL TO CHECK WHETHER THE OTHER TRANSACTION OVER AND ABOVE THE DI SALLOWANCES OF RS. 1,44,52,174 PASS THE TEST OF PROVISIONS U/S 40A(3) OF THE IT AC T, 1961. 6(II) THE ASSESSING OFFICER IS DIRECTED TO RE-EXAMI NE THE ISSUE OF CASH PAYMENT EXCEEDING RS. 20,000/- AT THE MICRO LEVEL WHICH ATT RACT PROVISION OF SECTION 40A(3) OF THE INCOME TAX ACT. 6(III) REGARDING THE ISSUE OF DISCREPANCY IN REPLIE S U/S. 133(6) RECEIVED FROM PARTIES AS STATED IN FOREGOING PARAGRAPH NO. 2(11), THE REPLY OF THE ASSESSEE DURING PROCEEDING U/S 263 WAS ' AS PER OUR RECORD, THERE W AS NO TRANSACTION WITH M/S BBM ENTERPRISE DURING THE ASSESSMENT 2011-12.' IN R ESPECT OF OTHER PARTIES, 6 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 6 EXPLANATION/CLARIFICATION/RECONCILIATION WAS FURNIS HED BY THE ASSESSEE. THEREFORE, THE DISCREPANCY IN REPLIES U/S 133(6) COULD NOT BE VERIFIED. THE ASSESSING OFFICER FAILED TO CONDUCT E NQUIRIES AND INVESTIGATIONS IN THE CASES OF SUNDRY CREDITORS AND THE DISCREPANCIES FOU ND IN THE OPENING AND CLOSING BALANCES OF THE THREE CREDITORS NAMELY, M/S BBM ENT ERPRISES, M/S N.C. SHAW & CO AND M/S. VICTORIA WINES PVT. LTD. FURTHER, IT IS OB SERVED FROM THE ASSESSMENT RECORD THAT THE ASSESSEE FIRM HAS GIVEN AN ADVANCE OR RS. 1,46,06,233/- TO ITS PARTNERS WITHOUT CHARGING ANY INTEREST. WHEREAS ON PERUSAL OF THE BALANCE SHEET, IT IS SEEN THAT CAPITAL OF THE PARTNERS IN THE FIRM IS MERELY OF (RS. 96,347/- PLUS RS. 1.02.375/-) RS. 1,98,722/-. MEANING THEREBY, THE AS SESSEE FIRM HAS NO OTHER SOURCE TO FINANCE THE INTEREST FREE ADVANCE TO ITS PARTNER S EXCEPT THE LIABILITY SHOWN IN THE NAME OF SUNDRY CREDITORS FOR GOODS. THEREFORE, IT C AN BE SEEN THAT IF THE SUNDRY CREDITORS WOULD HAVE BEEN GENUINE AND EXISTING, THE N IN THAT CASE, THE ASSESSEE MIGHT HAVE PAID THEM BACK AS MOST OF THE CREDITORS ARE SHOWN TO HAVE COMING AS OPENING BALANCES. BUT CONTRARY TO THIS, THE ASSESSE E FIRM HAS SHIPHONED OFF THE FUND BY FINANCING INTEREST FREE ADVANCE TO PARTNERS. THE DOCTRINE OF BUSINESS PRUDENCE CLEARLY DEMANDS THAT THE NATURE AND CHARACTER OF TR ANSACTION SHOWN IN THE NAME OF SUNDRY CREDITORS MUST BE THOROUGHLY EXAMINED TO ASC ERTAIN THEIR GENUINENESS AND EXISTENCE. 6.(IV)THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE TRANSACTION WITH ALL THE CREDITORS AS MENTIONED IN POINT 2(II) ABOVE AS WELL .AS ANOTHER CREDITORS AS SHOWN BY ASSESSEE DURING ASSESSMENT U/S 143(3) BY COLLECT ING INFORMATION U/S 133(6). WHERE THERE 'WAS NO TRANSACTION WITH ANY PARTY DURI NG A.Y. 2011-12 & THERE WAS DISCREPANCY IN THE OPENING BALANCE AND CLOSING BALA NCE BETWEEN THE ASSESSEE AND RESPECTIVE PARTY, THE ASSESSING OFFICER IS DIRECTED TO INITIATE PROCEEDING FOR THE RELEVANT YEAR AS PER PROVISIONS OF THE IT ACT TO EX AMINE THE GENUINENESS OF THE CLAIM OF ASSESSEE. 6.(V)REGARDING DISCREPANCY IN PURCHASE AMOUNT AS ME NTIONED IN FOREGOING PARAGRAPH NO 2(111), ASSESSEE SUBMITTED DURING PROC EEDING U/S 263 THAT THE DIFFERENCE IS DUE TO A) T.C.S AMOUNT OF RS.468521/- B) CREDIT NOTE OF RS. 231550/- '.BUT NO CORROBORATIVE EVIDENCE IN SUPPORT OF T.C.S . MISMATCH OR BILLS, LEDGER OR ANY RECONCILIATION STATEMENT OF PARTIES WAS PRODUCE D DURING PROCEEDING U/S 263. THEREFORE, THE DISCREPANCY IN PURCHASE COULD NOT BE VERIFIED. 6.(VI) THE ASSESSING OFFICER IS DIRECTED TO RE-EXAM INE THE ABOVE DISCREPANCY IN PURCHASE WITH SUPPORTING BILLS, PARTY LEDGER, RECON CILIATION STATEMENT AND OTHER RELEVANT DOCUMENTS. 7. IT IS A SETTLED POSITION OF LAW THAT THE FAILURE TO MAKE ENQUIRIES WHICH ARE CALLED FOR ON THE FACTS OF THE CASE WOULD ITSELF MAKE THE ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. FINALLY THE LD CIT OBSERVED IN HIS ORDER AS UNDER:- 7 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 7 8. IN VIEW OF FACTS AS STATED ABOVE, IT IS HEREBY H ELD THAT ASSESSMENT ORDER U/S 143(3) OF INCOME TAX ACT, 1961 DATED 04-03-2014 PAS SED IN THIS CASE FOR ASSESSMENT YEAR 2011-12 IS ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF REVENUE. CONSEQUENTLY, IN EXERCISE OF THE POWER CONFERRED AS PER THE PROVISIONS OF SEC. 263 OF THE INCOME TAX ACT, 1961, THE ASSESSMENT ORDER P ASSED BY THE JCIT ERSTWHILE RANGE-37, KOLKATA (NOW RANGE-40, KOLKATA) U/S 143(3 ) OF THE INCOME TAX ACT,1961 DATED 04-03-2014 IS SET-ASIDE ON THE AFORE SAID SPECIFIC ISSUES AND TO THE EXTENT INDICATED IN THE FOREGOING PARAGRAPHS. THE A SSESSING OFFICER IS DIRECTED TO PASS A FRESH ASSESSMENT ORDER AND RE-COMPUTE THE AS SESSEE'S INCOME AFTER MAKING FURTHER ENQUIRIES AS DIRECTED IN THE FOREGOING PARA GRAPHS AND AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE & PERUSING THE NECESSAR Y EVIDENCE. 8. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US O N THE FOLLOWING GROUNDS:- 1. THAT THE LD. PRINCIPAL CIT, KOLKATA-14 ON THE F ACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW ERRED IN ASSUMING JURISDICTION U/S. 263 OF THE ACT IN ORDER TO IMPOSE HIS OWN VIEWS ON THE AO. ON THE SAME SET OF FACTS & EVIDENCES CONSIDERED BY THE A.O., BY HOLDING THAT THE ORDER PASSED BY TH E AO. U/S. 143(3) OF THE ACT ON 04.03.2014 WAS ERRONEOUS INASMUCH AS IT WAS PREJUDI CIAL TO THE INTEREST OF REVENUE. 2. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. PR. CIT ERRED IN ASSUMING JURISDICTION U/S. 263 OF THE ACT ON THE AL LEGED GROUND OF ABSENCE OF THOROUGH AND PROPER INQUIRY BY THE A.O. AND THUS HO LDING THE ASSESSMENT ORDER PASSED U/S.L43(3) OF THE ACT TO BE ERRONEOUS AND PR EJUDICIAL TO THE INTEREST OF REVENUE SIMPLY BY DIFFERING WITH THE PLAUSIBLE VIEW TAKEN BY THE A.O. 3. THAT, THE LD. PRINCIPAL CIT GROSSLY ERRED ON FAC TS AND IN LAW IN INVOKING JURISDICTION U/S. 263 OF THE ACT AND REFERRING THE CASE BACK TO THE A.O. FOR FRESH EXAMINATION OF DISALLOWANCE U/S. 40A(3) OF THE ACT EVEN THOUGH THE DISALLOWANCE MADE IN THE IMPUGNED ASSESSMENT ORDER ON THE SAID I SSUE IS ALREADY A SUBJECT MATTER OF APPEAL BEFORE THE LD. CIT(A) AND THE MATT ER IS THUS DEBATABLE. 4. THAT, THE LD. PR. CIT ERRED IN NOT APPRECIATING THE CIRCUMSTANCES UNDER WHICH THE PAYMENT IN THE MANNER PRESCRIBED IN SEC. 4OA(3) WAS NOT PRACTICABLE OR WOULD HAVE CAUSED GENUINE PROBLEM TO RUN THE BUSINESS SMO OTHLY, INASMUCH AS THE ASSESSEE WAS PREVENTED FROM TRANSACTING THROUGH BAN KING CHANNEL DUE TO LITIGATION WITH ITS BANK WHICH ULTIMATELY WENT TO DEBT TRIBUNA L. 5. THAT, THE LD. PR. CIT ERRED IN ALLEGING THAT THE AO. FAILED TO CONDUCT ENQUIRIES OF SOME OF THE SUNDRY CREDITORS AGAINST PURCHASES IN S PITE OF THE FACT THAT AFTER THOROUGH SCRUTINY OF THE DETAILS OF PURCHASES, SUPP ORTING BILLS, PARTY LEDGER, BOOKS OF ACCOUNTS AND AFTER APPLICATION OF MIND, THE AO. ACCEPTED THE PURCHASES AND MOREOVER THE ALLEGED DISCREPANCIES POINTED OUT BY T HE LD. PR. CIT WERE ALSO DULY EXPLAINED DURING 263 PROCEEDING, WARRANTING THUS AN Y SCOPE OF DISCREPANCY IN PURCHASE ACCOUNT. 8 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 8 6. THAT AS THE ORDER OF LD. PRINCIPAL CIT ON THE AB OVE ISSUES SUFFERS FROM ILLEGALITY AND IS DEVOID OF ANY MERIT, THE SAME SHOULD BE QUAS HED AND YOUR APPELLANT BE GIVEN SUCH RELIEF(S) AS PRAYED FOR. 7. THAT THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, MODIFY, SUBSTITUTE, ADD TO, ABRIDGE AND/ OR RESCIND ANY OR ALL OF THE ABOVE GRO UNDS. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE LD CIT HAD SET ASIDE THE ORDER OF THE LD AO BY TREATING IT AS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. T HE SHORT POINT THAT ARISES FOR OUR CONSIDERATION IS AS TO WHETHER THE ORDER OF THE LD AO COULD BE CONSTRUED AS ERRONEOUS IN THE FACTS AND CIRCUMSTANCES OF THE CASE. IT IS NO T IN DISPUTE THAT THE LD AO HAD MADE VERIFICATION OF THE PURCHASES TOGETHER WITH ITS SUN DRY CREDITORS IN THE ORIGINAL ASSESSMENT PROCEEDINGS BY ISSUING A SPECIFIC QUESTIONNAIRE TOG ETHER WITH SECTION 142(1) NOTICE THEREON. IT IS NOT IN DISPUTE THAT THE ASSESSEE HA D DULY REPLIED FOR THE SAME IN THE ASSESSMENT PROCEEDINGS. NOW THE PERTINENT POINT WO ULD BE WHETHER THE LD AO HAD MADE EXAMINATION OF THE SAME OR THE DETAILS SUBMITT ED BY THE ASSESSEE WARRANTS FURTHER VERIFICATION ON THE PART OF THE LD AO AND WHETHER H E HAD CARRIED OUT THE REQUISITE ENQUIRIES ON THE SAID ISSUE. IN THIS REGARD, WE F IND THAT THE LD AO ISSUED NOTICES U/S 133(6) OF THE ACT TO THE SUNDRY CREDITORS AND FOUND THAT IN 5 CASES, THE SAME WERE NOT REPLIED BY THE SAID PARTIES. IN 3 CASES, THE REPLI ES GIVEN DID NOT MATCH WITH THE CLOSING BALANCES REFLECTED BY THE ASSESSEE AND THIS WAS EXP LAINED BY THE ASSESSEE THAT DIFFERENCES AROSE IN THE OPENING BALANCE. IT IS WEL L SETTLED THAT THE DIFFERENCE IN OPENING BALANCE CANNOT BE ADDED IN THE YEAR IN WHICH IT WAS FOUND OUT. IF AT ALL ANY ADDITION IS WARRANTED ON THAT COUNT, THEN THE LD AO SHOULD ONLY REFER TO THE RELEVANT ASSESSMENT YEAR AND MAKE AN ADDITION IN THAT YEAR IN THE MANNE R PERMISSIBLE IN LAW. HENCE THE LD AO KNOWING THIS FULLY WELL HAD NOT CHOSEN TO MAKE A NY ADDITION TOWARDS THE DIFFERENCE IN CLOSING BALANCES OF SUNDRY CREDITORS. MOREOVER, ON VERIFICATION OF THE CASH BOOK AND LEDGERS OF THE ASSESSEE, THE LD AO HAD DISALLOWED A SUM OF RS 1,44,52,154/- U/S 40A(3) OF THE ACT FOR MAKING PAYMENTS EXCEEDING RS 20,000/ - OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE OR ACCOUNT PAYEE BANK DRAFT. THIS HA S BEEN DONE BY THE LD AO AFTER 9 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 9 VERIFYING THE TRANSACTIONS IN ALL THE PARTIES ACCOU NT AS COULD BE EVIDENT FROM THE LIST FURNISHED IN THE ASSESSMENT ORDER BY HIM. HENCE TH E ENTIRE ASPECT OF PURCHASES HAD BEEN DULY VERIFIED BY THE LD AO FROM ALL ANGLES AND THE LD AO HAD TAKEN ONE OF THE PLAUSIBLE VIEWS ON THE SAID ISSUE. ADMITTEDLY, THE ASSESSEE HAD CHALLENGED THE SAID DISALLOWANCE U/S 40A(3) OF THE ACT BEFORE THE LD CI TA WHICH IS PENDING. WE HOLD THAT THE VERY SAME ISSUE CANNOT BE THE SUBJECT MATTER OF REVISION PROCEEDINGS U/S 263 OF THE ACT LOOKING THE SAME FROM DIFFERENT PERSPECTIVE . T HIS IN OUR CONSIDERED OPINION, ONLY TANTAMOUNTS TO LD CIT TRYING TO SUBSTITUTE HIS OWN OPINION, IN THE OPINION ALREADY FRAMED BY THE LD AO, WHICH IS NOT PERMISSIBLE U/S 2 63 OF THE ACT. MOREOVER, WE FIND THAT THE LD CIT HAD NOT BROUGHT ON RECORD HOW THE O RDER PASSED BY THE LD AO WAS ERRONEOUS. HE HAD ONLY DIRECTED THE LD AO TO MAKE FURTHER ENQUIRIES BY EXPANDING ITS SCOPE, TO FIND OUT WHETHER ERROR HAD CREPT IN IN TH E EARLIER ORDER. THIS, IN OUR CONSIDERED OPINION, IS NOT PERMISSIBLE IN THE REVISIONARY PROC EEDINGS U/S 263 OF THE ACT BY THE LD CIT. RELIANCE IN THIS REGARD IS PLACED ON THE DE CISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS NIRAV MODI REPORTED IN (2016) 71 TAXMANN.COM 272 (BOM) DATED 16.6.2016 WHEREIN IT WAS HELD THAT :- 7. FIRSTLY, THE REVENUE CONTENDS THAT THE EXERCISE OF POWERS UNDER SECTION 263 OF THE ACT IS JUSTIFIED AS IN THIS CASE, AS NO INQUIRY IN RESPECT OF THE GIFTS RECEIVED DURING THE SUBJECT YEARS WAS DONE BY THE ASSESSING OFFICER FOR THE ASSESSMENT ORDERS FOR ASSESSMENT YEARS 2007-08 AND 2008-09. THIS ACCORDIN G TO THE REVENUE IS EVIDENT FROM THE ASSESSMENT ORDERS DATED 31ST DECEMBER, 2009 AND 30TH DECEMBER, 2010 WHICH DOES NOT EVEN MAKE A MENTION OF THE GIFTS RECEIVED MUCH LESS DISCUSS AND/OR DEAL WITH THE SAME. THIS ISSUE IS NO LONGER RES INTEGRA AS TH IS COURT IN IDEA CELLULAR LTD. V. DY. CIT [2008] 301 ITR 407 (BOM) HAS HELD THAT IF DURIN G ASSESSMENT PROCEEDINGS QUERIES WERE RAISED AND THE ASSESSEE RESPONDED TO THE SAME, THEN EVEN IF AN ASSESSMENT ORDER DOES NOT MENTION THE SAME, IT DOES NOT MEAN THAT TH E ASSESSING OFFICER HAS NOT APPLIED HIS MIND TO THE ISSUES. IT WOULD BE WELL-NIGH IMPOS SIBLE FOR AN ASSESSING OFFICER TO COMPLETE ALL ASSESSMENTS ASSIGNED TO HIM UNDER SECT ION 143(3) OF THE ACT IF HE IS REQUIRED TO DEAL WITH ALL ISSUES WHICH AROSE DURING THE ASSESSMENT PROCEEDINGS. THUS, THE ASSESSMENT ORDER PRIMARILY DEAL WITH ONLY THOSE ISSUES IN RESPECT OF WHICH THE ASSESSEE HAS NOT BEEN ABLE TO SATISFY HIM AND GIVE REASONS FOR HIS CONCLUSION. THIS WOULD ENABLE THE ASSESSEE TO CHALLENGE THE SAME, IF AGGRIEVED. IN FACT THE GUJARAT HIGH COURT IN CIT V. NIRMA CHEMICAL WORKS LTD.[2009] 309 ITR 67 (GUJ) HAS OBSERVED THAT IF AN ASSESSMENT ORDER WERE TO INCORPORATE THE REAS ONS FOR UPHOLDING THE CLAIM MADE BY AN ASSESSEE, THE RESULT WOULD BE AN EPITOME AND NOT AN ASSESSMENT ORDER. IN THIS CASE, DURING THE ASSESSMENT PROCEEDINGS FOR BOTH THE ASSE SSMENT YEARS, THE ASSESSING OFFICER 10 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 10 ISSUED A QUERY MEMOS TO THE ASSESSEE, CALLING UPON HIM TO JUSTIFY THE GENUINENESS OF THE GIFTS. THE RESPONDENT-ASSESSEE RESPONDED TO THE SAM E BY GIVING EVIDENCE OF THE COMMUNICATIONS RECEIVED FROM HIS FATHER AND HIS SIS TER I.E. THE DONORS OF THE GIFTS ALONG WITH THE STATEMENT OF THEIR BANK ACCOUNTS. ON PERUS AL, THE ASSESSING OFFICER WAS SATISFIED ABOUT THE IDENTITIES OF THE DONORS, THE S OURCE FROM WHERE THESE FUNDS HAVE COME AND ALSO THE CREDITWORTHINESS/CAPACITY OF THE DONOR. ONCE THE ASSESSING OFFICER WAS SATISFIED WITH REGARD TO THE SAME, THERE WAS NO FURTHER REQUIREMENT ON THE PART OF THE ASSESSING OFFICER TO DISCLOSE HIS SATISFACTION IN THE ASSESSMENT ORDER PASSED THEREON. THUS, THIS OBJECTION ON THE PART OF THE RE VENUE, CANNOT BE ACCEPTED. 8. IT IS NEXT SUBMITTED THAT THE DONOR HAD NOT BEEN EX AMINED BY THE ASSESSING OFFICER. IT IS NOT IN EVERY CASE THAT EVERY EVIDENCE PRODUCED H AS TO BE TESTED BY CROSS EXAMINATION OF THE PERSON GIVING THE EVIDENCE. IT IS ONLY IN CA SES WHERE THE EVIDENCE PRODUCED GIVES RISE TO SUSPICION ABOUT ITS VERACITY THAT FURTHER S CRUTINY IS CALLED FOR. IF THERE IS NOTHING ON RECORD TO INDICATE THAT THE EVIDENCE PRODUCED IS NOT RELIABLE AND THE ASSESSING OFFICER WAS SATISFIED WITH THE SAME, THEN IT IS NOT OPEN TO THE CIT TO EXERCISE HIS POWERS OF REVISION WITHOUT THE CIT RECORDING HOW AND WHY T HE ORDER IS ERRONEOUS DUE TO NOT EXAMINING THE DONORS. THUS, THIS OBJECTION TO THE I MPUGNED ORDER BY THE REVENUE IS ALSO NOT SUSTAINABLE. 9. IT WAS NEXT SUBMITTED THAT NO ENQUIRY WAS DONE BY T HE ASSESSING OFFICER TO FIND OUT WHETHER THE DONOR MR DEEPAK MODI (FATHER) HAD RECEI VED MONEY FROM M/S. CHANG JIANG AS CLAIMED. NOR ANY INQUIRY WAS DONE TO FIND OUT WHETHER THE SISTER HAD IN FACT EARNED AMOUNTS ON ACCOUNT OF FOREIGN EXCHANGE TRANS ACTIONS AS CLAIMED BY HER. WE FIND THAT THIS ENQUIRY OF A SOURCE OF SOURCE IS NOT THE REQUIREMENT OF LAW. ONCE THE ASSESSING OFFICER IS SATISFIED WITH THE EXPLANATION OFFERED ON INQUIRY, IT IS NOT OPEN TO THE CIT IN EXERCISE OF HIS REVSIONAL POWERS DIRECT THAT FURTHER ENQUIRY HAS TO BE DONE. AT THE VERY HIGHEST, THE CASE OF THE REVENUE IS THAT T HIS IS A CASE OF INADEQUATE INQUIRY AND NOT OF 'NO ENQUIRY.' IT IS WELL SETTLED THAT THE JU RISDICTION UNDER SECTION 263 OF THE ACT CAN BE EXERCISED BY THE CIT ONLY WHEN IT IS A CASE OF LACK OF ENQUIRY AND NOT ONE OF INADEQUATE ENQUIRY. THIS VIEW HAS BEEN TAKEN BY THI S COURT IN THE MATTER OF CIT V. SHREEPATI HOLDINGS & FINANCE (P.) LTD. [ITA 1879 OF 2013 DATED 5TH OCTOBER, 2013], BY THE DELHI HIGH COURT IN CIT V. VIKAS POLYMERS [2 012] 341 ITR 537 AND IN D.G. HOUSING PROJECTS (SUPRA). IN FACT THE DELHI HIGH CO URT IN D.G. HOUSING PROJECTS (SUPRA) WHILE SO HOLDING PLACED RELIANCE UPON THE D ECISION OF THIS COURT IN GABRIEL (INDIA) LTD. (SUPRA). IT IS VERY IMPORTANT TO NOTE THAT THE CIT IN HIS ORDER UNDER SECTION 263 OF THE ACT HAS RECORDED THE FACT THAT THERE HAS BEEN NO ADEQUATE INQUIRY. THUS, THIS IS NOT A CASE OF NO INQUIRY, WARRANTING ORDER UNDER SECTION 263 OF THE ACT. THUS, THIS OBJECTION ON THE PART OF THE REVENUE, IS ALSO NOT S USTAINABLE. 10. THE REVENUE PLACED RELIANCE UPON THE DECISION OF TH E DELHI HIGH COURT IN D.G. HOUSING PROJECTS LTD., (SUPRA) THAT AS THE ASSESSIN G OFFICER HAD NOT ENQUIRED INTO THE SOURCE OF THE SOURCE OF THE GIFTS RECEIVED BY THE A SSESSEE, THE ASSESSMENT ORDER IS ERRONEOUS. THE AFORESAID DECISION HOLDS THAT THE PO WER OF REVISION UNDER SECTION 263 OF THE ACT WOULD NORMALLY BE EXERCISED IN CASE OF NO E NQUIRY AND NOT IN CASES OF INADEQUATE ENQUIRY. HOWEVER, EVEN IN CASE OF INADEQ UATE ENQUIRY BY THE ASSESSING OFFICER, THE ORDER OF THE ASSESSING OFFICER COULD B E ERRONEOUS IN TWO CLASSES OF 11 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 11 SITUATION. THE FIRST CLASS WOULD BE WHERE ORDERS PA SSED BY THE ASSESSING OFFICER ARE EX FACIE ERRONEOUS I.E. A DECISION RENDERED IGNORING A BINDING DECISION IN FAVOUR OF THE REVENUE OR WHERE ENQUIRY IS PER SE MANDATED ON THE BASIS OF THE RECORD AVAILABLE BEFORE THE ASSESSING OFFICER AND THAT IS NOT DONE. IN THE SECOND CLASS OF CASES, WHERE THE ORDER IS NOT EX FACIE ERRONEOUS, THEN THE CIT MUST HIMSELF CONDUCT AN ENQUIRY AND DETERMINE IT TO BE SO. THE COURT HELD THAT IT IS NO T PERMISSIBLE TO THE CIT WHILE EXERCISING POWER UNDER SECTION 263 OF THE ACT TO RE MIT THE ISSUE TO THE ASSESSING OFFICER TO RE-EXAMINE THE SAME AND FIND OUT WHETHER EARLIER ORDER OF ASSESSMENT IS ERRONEOUS. IT IS THE CIT WHO MUST HOLD THAT THE ORDER IS ERRON EOUS, DULY SUPPORTED BY REASONS. IN THE PRESENT FACTS, THE CIT IN EXERCISE OF ITS POWER S UNDER SECTION 263 OF THE ACT HAS MERELY RESTORED THE ASSESSMENT TO THE ASSESSING OFF ICER TO DECIDE WHETHER THE GIFTS WERE GENUINE AND, IF NOT, THEN THE ASSESSMENT COULD BE C OMPLETED ON APPLICATION OF SECTION 68 OF THE ACT. IN THIS CASE, THE ORDER PASSED BY TH E ASSESSING OFFICER IS NOT PER SE ERRONEOUS AND FURTHER THE CIT HAS NOT GIVEN ANY REA SONS TO CONCLUDE THAT THE ORDER IS ERRONEOUS. IN FACT, HE DIRECTS THE ASSESSING OFFICE R TO FIND OUT WHETHER THE ORDER IS ERRONEOUS BY MAKING FURTHER ENQUIRY. THIS THE DECIS ION OF THE DELHI HIGH COURT IN D.G. HOUSING PROJECTS LTD. (SUPRA), CLEARLY NEGATES. IN THE ABOVE VIEW, THE DECISION OF DELHI HIGH CURT IN D.G. HOUSING PROJECTS LTD. (SUPRA) WOU LD NOT ASSIST THE REVENUE IN THE PRESENT FACTS. IN THE INSTANT CASE, THE LD CIT HIMSELF CONCEDES IN HIS ORDER THAT THE LD AO HAD NOT MADE COMPLETE AND FULL ENQUIRY ON THE ISSUE OF PURCHASES . 9.1. WE FIND THAT THE LD CIT NOWHERE IN HIS ORDER H AD DEFINITELY HELD THAT THE EXPENDITURE OVER AND ABOVE THE SUM OF RS 1,44,52,15 4/- FALLS WITHIN THE PURVIEW OF SECTION 40A(3) OF THE ACT OR THAT THE RECORDS SHOW THAT THE PURCHASE CLAIM MADE OR THEIR CREDITORS ARE BOGUS. HE IS ONLY RAISING A SUSPICI ON THAT THERE MIGHT BE SOME MORE PAYMENTS FALLING WITHIN THE AMBIT OF SECTION 40A(3) OF THE ACT OR THE RELATED PURCHASES / CREDITORS COULD BE BOGUS. MOREOVER, WE FIND THAT THE LD CIT HAD DIRECTED THE LD AO TO FIND OUT, BASING ON FURTHER ENQUIRIES TO BE CONDUC TED BY THE LD AO, WHETHER THE EARLIER ORDER PASSED BY HIM WAS ERRONEOUS OR NOT. IF HE H AS GOT SOME DOUBT, THEN THE LD CIT HIMSELF SHOULD CONDUCT THE NECESSARY ENQUIRIES / VE RIFICATION AND BRING OUT THE ERROR COMMITTED BY THE LD AO IN HIS ORDER. 12 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 12 9.2. EVEN WITH REGARD TO VERIFICATION OF PURCHASES AND ITS TRADE CREDITORS, THE DETAILS WERE FURNISHED BY THE ASSESSEE BEFORE THE LD AO WHO IN TURN , ISSUED NOTICES U/S 133(6) OF THE ACT TO THEM AND THE LD AO OBSERVED THAT THER E WERE SOME MISMATCH IN CLOSING BALANCES WITH REGARD TO CERTAIN CREDITORS AND CERTA IN PARTIES DID NOT RESPOND TO THE SAID NOTICES U/S 133(6) OF THE ACT. IT WAS SUBMITTED B Y THE ASSESSEE THAT THERE WERE NO TRANSACTION WITH M/S BBM ENTERPRISE, M/S S.P.SHAW & BROS., M/S SUMO SON EXPORTS PVT LTD AND M/S VICTORIA WINES P LTD. HENCE THE FA CT THAT THE PARTIES DID NOT RESPOND TO NOTICES ISSUED U/S 133(6) OF THE ACT OR THAT THEIR BALANCES DID NOT MATCH WITH THAT OF THE ASSESSEE IS TOTALLY IRRELEVANT AS NO CLAIM OF PURC HASES FROM THE SAID PARTIES WAS MADE IN THE YEAR UNDER APPEAL BY THE ASSESSEE. SIMILARLY IN RESPECT OF THE OBSERVATION THAT NO REPLY WAS RECEIVED FROM M/S MOHAN BROTHER (DRINKS) PVT LTD AND M/S B DEBOO & CO, IT WAS SUBMITTED THAT THEY ARE OLD SUPPLIERS AND PU RCHASES HAVE BEEN MADE FROM THEM IN EARLIER FINANCIAL YEARS ALSO. IT WAS SUBMITTED BY THE LD AR THAT IN THE ASSESSMENT FOR THE ASST YEAR 2007-08, THE LD AO HAD VERIFIED THE PURCH ASES MADE FROM THEM WHO IN TURN HAD RESPONDED TO NOTICE ISSUED U/S 133(6) OF THE AC T . WE HOLD THAT JUST BECAUSE THE SAID PARTY HAD NOT RESPONDED TO 133(6) NOTICE IN TH IS YEAR, IT CANNOT LEAD TO AN INFERENCE THAT PURCHASES FROM THEM ARE BOGUS ESPECIALLY WHEN NO MATERIAL TO THIS EFFECT HAD BEEN BROUGHT ON RECORD BY THE LD CIT. WITH RESPECT TO PURCHASES FROM SHREE RIDDHI SIDDHI AND N.C.SHAW & CO, IT WAS SUBMITTED THAT THE LD CIT HAD NOT RECORDED A FINDING TO THE EFFECT THAT THE SAID PARTIES DOES NOT EXIST OR THAT THERE WAS A MISMATCH OF PURCHASES RECORDED BY THE ASSESSEE AND THAT RECORDED BY N.C.S HAW & CO. OR THAT THE PURCHASES RECORDED BY THE ASSESSEE IS MORE THAN THAT SHOWN BY THE PARTY. THESE FACTORS WOULD NOT RESULT IN ORDER OF LD AO BECOMING ERRONEOUS WHE N DUE ENQUIRIES IN THIS REGARD WERE INDEED MADE BY THE LD AO IN THE ASSESSMENT PROCEEDI NGS. 9.3. WE FIND THAT THE LD CIT IN HIS ORDER HAD OBSER VED THAT INTEREST FREE ADVANCES OF RS 1,46,06,233/- TO THE PARTNERS HAD BEEN FINANCED FRO M THE SUNDRY CREDITORS SHOWN IN THE BALANCE SHEET. IT WAS FURTHER CONTENDED THAT IF TH E CREDITORS WOULD HAVE BEEN GENUINE 13 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 13 THEN THE ASSESSEE WOULD HAVE REPAID THE CREDITORS I NSTEAD OF MAKING ADVANCES TO PARTNERS SINCE MOST OF THE CREDITORS REPRESENTED BA LANCES BROUGHT FORWARD FROM EARLIER YEARS. HERE THE LD CIT CONCEDES THAT THE DIFFERENC E IN CLOSING BALANCES IN CREDITORS ACCOUNT DID NOT OCCUR DUE TO PURCHASES MADE DURING THE YEAR UNDER APPEAL AND THAT THE SAID DIFFERENCE AROSE ONLY IN THE OPENING BALANCE. HENCE IN ANY CASE, THERE CANNOT BE ANY ADDITION TOWARDS OPENING BALANCE OF SUNDRY CRED ITORS IN THIS YEAR UNDER APPEAL UNDER ANY PROVISIONS OF THE ACT. HENCE THERE CANNO T BE ANY ERROR THAT COULD BE ATTRIBUTED IN THE ORDER OF THE LD AO IN THIS REGARD . 9.4. AS FAR AS THE DISCREPANCY IN THE PURCHASES FIG URE, THE ASSESSEE HAD FILED A PARTY WISE RECONCILIATION STATEMENT BEFORE THE LD CIT ENCLOSED IN PAGE 13 OF THE PAPER BOOK WHICH CONTAINED CREDIT NOTES ISSUED BY SEVERAL PARTIES TO THE TUNE OF RS 2,31,550/- CONTRIBUTING TO THE DIFFERENCE IN PURCHASES. WE FIND THAT THE LD CIT HAD MERELY DIRECTED THE LD AO TO RECONSIDER THE MATTER WITHOUT POINTING OUT ANY SPEC IFIC ERROR IN THE ASSESSMENT CONCLUDED BY THE LD AO IN THIS REGARD. FURTHER RS 4,68,521/- WAS ON ACCOUNT OF TAX COLLECTED AT SOURCE (TCS) BY THE CREDITOR NOT CONSI DERED BY THE ASSESSEE IN ITS BOOKS. HOWEVER, SUCH NON-CONSIDERATION OF PURCHASES HAS NO T RESULTED IN ANY LOSS OF TAX TO THE REVENUE AND HENCE THE SAME CANNOT BE SAID TO BE PRE JUDICIAL TO THE INTEREST OF THE REVENUE. INFACT IT HAD ONLY RESULTED IN LOWER CLAI M OF PURCHASES IN THE RETURN. HENCE THE CONDITIONS PRECEDENT BY SATISFYING TWIN CONDITIONS [I.E (I) ORDER TO BE ERRONEOUS AND (II) ORDER SHOULD BE PREJUDICIAL TO INTEREST OF REVENUE ] FOR INVOKING REVISIONARY JURISDICTION FAILS HERE. 9.5. IN VIEW OF OUR AFORESAID FINDINGS IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND RESPECTFULLY FOLLOWING THE JUDICIAL PRECEDENT RELIE D UPON HEREINABOVE, WE HOLD THAT THE LD CIT ERRED IN INVOKING REVISIONARY JURISDICTION U /S 263 OF THE ACT ON THE GROUND OF LACK OF ENQUIRY WHEN ADEQUATE ENQUIRIES WERE ALRE ADY MADE BY THE LD AO IN THE ASSESSMENT PROCEEDINGS. HENCE THE ACTION OF THE LD CIT IN INVOKING REVISIONARY 14 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 14 JURISDICTION U/S 263 OF THE ACT IN THESE FACTS AND CIRCUMSTANCES OF THE CASE IS NOT IN ACCORDANCE WITH LAW AND IS HEREBY QUASHED. 10. WE FIND THAT THE LD AO BY ALREADY MAKING THE D ISALLOWANCE U/S 40A(3) OF THE ACT IN THE SUM OF RS 1,44,52,154/- HAD CAUSED GREATER PREJ UDICE TO THE ASSESSEE IN THE ASSESSMENT. MOREOVER, THE SAID ASSESSMENT IS CHAL LENGED BEFORE THE LD CITA AND THE SAME IS PENDING. WHILE THIS IS SO, WE ARE AFRAID W HETHER THE SAME ISSUE COULD BE THE SUBJECT MATTER OF REVISION PROCEEDINGS U/S 263 OF T HE ACT BY SEEKING TO LOOK INTO THE VERY SAME ISSUE FROM DIFFERENT PERSPECTIVE. WE FIN D THAT THE ACTION OF THE LD CIT WAS IN COMPLETE DISREGARD TO THE SPECIFIC PROVISIONS OF CL AUSE (C ) OF EXPLANATION TO SECTION 263(1) OF THE ACT, WHICH PLACES A CLEAR EMBARGO ON THE LD CIT WITH RESPECT TO EXERCISE OF REVISIONARY JURISDICTION ON ASSESSMENTS WHICH HA VE BEEN SUBJECT MATTER OF APPEAL. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION O F THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF OIL INDIA LTD VS CIT REPORTED IN 138 IT R 836 (CAL) WHEREIN, THE HONBLE COURT INTERPRETING THE SCOPE OF POWERS OF THE COMMI SSIONER U/S 263 OF THE ACT HELD THAT WHERE AN APPEAL IS PREFERRED BEFORE THE APPELLATE A SSISTANT COMMISSIONER (AAC) AND A SUBJECT IS PARTICULARLY RAISED, THE COMMISSIONER CA NNOT REVISE SUCH AN ORDER TAKING INTO ACCOUNT AN ASPECT NOT DEALT BY THE AAC. 10.1. WE FIND THAT THE FOLLOWING DECISIONS ALSO WOU LD BE RELEVANT ON THE THEORY OF MERGER :- A) CIT VS SUBARNA PLANTATION AND TRADING CO. LTD RE PORTED IN 238 ITR 319 (CAL) B) CIT VS VIPPY SOLVEX PRODUCTS (P) LTD REPORTED IN 228 ITR 587 (MP) C) CIT VS SASHI THEATRE PVT LTD REPORTED IN 248 ITR 126 (GUJ) D) CIT VS RAM KISHORE RAJ KISHORE REPORTED IN 135 T AXMAN 511 (ALL) E) CIT VS K SERA SERA PRODUCTIONS LTD REPORTED IN 3 74 ITR 503 (BOM) F) CIT VS PALGHAD SHADI MAHAL TRUST REPORTED IN 212 ITR 287 (KER) G) CIT VS SARAFF BANDHU P LTD REPORTED IN 216 ITR 8 33 (BOM) 15 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 15 10.2. WE HOLD THAT THE LD CITA HAVING CONFERRED WIT H THE CO-TERMINUS POWERS WITH THAT OF THE LD AO HAS GOT EVERY RIGHT TO EVEN ENHANCE TH E ASSESSMENT IF CIRCUMSTANCES SO WARRANT. JUST BECAUSE THE LD CITA HAD NOT EXERCI SED HIS ENHANCEMENT POWERS IN THE INSTANT CASE, EVEN IF IT IS TO BE DONE, THAT WOULD NOT CONFER AUTOMATIC REVISIONARY POWER U/S 263 OF THE ACT FOR THE LD CIT. IN THIS REGARD , THE RELIANCE PLACED BY THE LD AR ON THE OBSERVATIONS OF THE HONBLE SUPREME COURT IN THE CASE OF JUTE CORPORATI ON OF INDIA LTD VS CIT AND ANOTHER REPORTED IN 187 ITR 688 (SC) IS VERY WELL FOUNDED , WHEREIN IT WAS HELD THAT :- 5. IN CIT V. KANPUR COAL SYNDICATE [1964] 53 ITR 225, A THREE-JUDGE BENCH OF THIS COURT DISCUSSED THE SCOPE OF SECTION 31(3)(A ) OF THE 192 2 ACT, WHICH IS ALMOST IDENTICAL TO SECTION 251(1)(A) OF THE 1961 ACT. THE COURT HELD A S UNDER: '...IF AN APPEAL LIES, SECTION 31 OF THE ACT DESCRI BES THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER IN SUCH AN APPEAL. UNDER SEC TION 31(3)(A) IN DISPOSING OF SUCH AN APPEAL THE APPELLATE ASSISTANT COMMISSIONER MAY, IN THE CASE OF AN ORDER OF ASSESSMENT, CONFIRM, REDUCE, ENHANCE OR ANNUL THE A SSESSMENT; UNDER CLAUSE (B) THEREOF HE MAY SET ASIDE THE ASSESSMENT AND DIRECT THE INCOME-TAX OFFICER TO MAKE A FRESH ASSESSMENT. THE APPELLATE ASSISTANT COMMISSIO NER HAS, THEREFORE, PLENARY POWERS IN DISPOSING OF AN APPEAL. THE SCOPE OF HIS POWER IS CO-TERMINOUS WITH THAT OF THE INCOME-TAX OFFICER. HE CAN DO WHAT THE INCOME-T AX OFFICER CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO ' [EMPHASIS SUPPLIED] (P. 229) THE ABOVE OBSERVATIONS ARE SQUARELY APPLICABLE TO T HE INTERPRETATION OF SECTION 251(1)(A). THE DECLARATION OF LAW IS CLEAR THAT THE POWER OF T HE AAC IS CO-TERMINOUS WITH THAT OF THE ITO, IF THAT BE SO, THERE APPEARS TO BE NO REASON A S TO WHY THE APPELLATE AUTHORITY CANNOT MODIFY THE ASSESSMENT ORDER ON AN ADDITIONAL GROUND EVEN IF NOT RAISED BEFORE THE ITO. NO EXCEPTION COULD BE TAKEN TO THIS VIEW AS THE ACT DO ES NOT PLACE ANY RESTRICTION OR LIMITATION ON THE EXERCISE OF APPELLATE POWER. EVEN OTHERWISE AN APPELLATE AUTHORITY WHILE HEARING APPEAL AGAINST THE ORDER OF A SUBORDINATE AUTHORITY HAS ALL THE POWERS WHICH THE ORIGINAL AUTHORITY MAY HAVE IN DECIDING THE QUESTION BEFORE IT SUBJECT TO THE RESTRICTIONS OR LIMITATIONS, IF ANY, PRESCRIBED BY THE STATUTORY PR OVISIONS. IN THE ABSENCE OF ANY STATUTORY PROVISION THE APPELLATE AUTHORITY IS VESTED WITH AL L THE PLENARY POWERS WHICH THE SUBORDINATE AUTHORITY MAY HAVE IN THE MATTER. THERE APPEARS TO BE NO GOOD REASON AND NONE WAS PLACED BEFORE US TO JUSTIFY CURTAILMENT OF THE POWER OF THE AAC IN ENTERTAINING AN ADDITIONAL GROUND RAISED BY THE ASSESSEE IN SEEKING MODIFICATION OF THE ORDER OF ASSESSMENT PASSED BY THE ITO. 16 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 16 10.3. WE FIND THAT THE CLAUSE (C ) OF EXPLANATION 1 TO SECTION 263(1) OF THE ACT CLEARLY PROHIBITS THE ACTION OF THE LD CIT FOR INVOKING REV ISIONARY JURISDICTION BY THE LD CIT . FOR THE SAKE OF CONVENIENCE, THE RELEVANT PROVISION S ARE REPRODUCED BELOW:- SECTION 263 - REVISION OF ORDERS PREJUDICIAL TO REV ENUE (1) EXPLANATION 1 FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT , FOR THE PURPOSES OF THIS SUB-SECTION , - (C ) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTIO N AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF ANY APPEAL [ FILED ON OR BEFORE OR AFTER THE 1 ST DAY OF JUNE 1988], THE POWERS OF THE [PRINCIPAL CO MMISSIONER OR] COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEND [A ND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED] TO SUCH MATTERS AS HAD NOT BEEN C ONSIDERED AND DECIDED IN SUCH APPEAL. HENCE THE EMPHASIS IS TO BE GIVEN ON THE EXPRESSION MATTERS AS HAD NOT BEEN CONSIDERED AND DECIDED IN SUCH APPEAL IN CLAUSE (C ) OF EXPLA NATION 1 TO SECTION 263(1) OF THE ACT. HENCE EVEN IF THE ISSUES RAISED BY THE LD CIT IN TH E REVISION PROCEEDINGS U/S 263 OF THE ACT ARE FOUND TO BE CORRECT, THE SAME COULD VERY WE LL BE DONE BY THE LD CITA IN THE FIRST APPELLATE PROCEEDINGS, IF HE SO DESIRES, IN VIEW OF ENHANCEMENT POWERS PROVIDED TO HIM IN THE STATUTE. IT WOULD BE RELEVANT TO LOOK INTO THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF OIL INDIA LTD VS CIT REPO RTED IN 138 ITR 836 (CAL) IN THIS REGARD, WHEREIN IT WAS HELD THAT :- UPON THIS THE THREE QUESTIONS AS MENTIONED HEREINBE FORE HAVE BEEN REFERRED TO THIS COURT. THE FIRST QUESTION IS DIRECTED TO THE ASPECT WHETHER AFTER THE APPELLATE ORDER WAS PASSED BY THE AAC OR AN APPEAL HAD BEEN PREFERRED, THE COMMISSIONER HAD JURISDICTION IN THE FACTS AND CIRCUMSTANCES OF THIS CASE UNDER S ECTION 263 OF THE ACT. NOW, IT IS WELL SETTLED THAT BEFORE AN APPEAL BEFORE THE AAC CERTAI N ORDERS ARE APPEALABLE. IT IS ALSO WELL SETTLED THAT IN AN APPEAL PREFERRED BEFORE THE AAC THE WHOLE ASSESSMENT IS OPEN FOR REVIEW BY THE AAC. HE IS BOTH THE APPELLATE AS WELL AS THE ADJUDICATING AUTHORITY. BUT HIS JURISDICTION IS LIMITED TO THE APPEAL PREFERRED BEFORE HIM. THERE ARE CERTAIN ORDERS WHICH ARE NOT APPEALABLE BEFORE THE AAC BUT CERTAIN TYPES OF ALLEGATIONS CAN BE TAKEN UP IN AN APPEAL BY SEPARATE APPEALS. APART FROM THO SE TWO CASES IF AN ASSESSMENT IS THE SUBJECT-MATTER OF APPEAL THEN ANY GROUND WHICH WAS HELD IN FAVOUR OF THE ASSESSEE CAN ALSO BE HELD AGAINST HIM THOUGH THE APPEAL WAS PREF ERRED BY THE ASSESSEE. THIS JURISDICTION OF THE AAC IS INDISPUTABLE. IN THIS CA SE THE QUESTION IS WHETHER THE QUANTUM OF ALLOWANCE OR DISALLOWANCE OR DEPRECIATION WAS TH E SUBJECT-MATTER OF APPEAL OR NOT. IT 17 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 17 IS TRUE THAT WHETHER DEPRECIATION SHOULD BE CALCULA TED ON THE BASIS OF 12 MONTHS OR IT SHOULD BE CALCULATED ON THE BASIS OF 11 MONTHS WAS NOT A SPECIFIC ASPECT WHICH WAS AGITATED BEFORE THE AAC NOR DID HE GIVE ANY DIRECTI ON ON THIS ASPECT OF THE MATTER BUT HE HAD THIS ASPECT KEPT OPEN FOR ADJUDICATION BY HIM E VEN THOUGH NOT TAKEN BY THE ASSESSEE. THEN, ON THAT, HE COULD HAVE ALLOWED 5% OR 2% DEPR ECIATION AND SHOULD HAVE DIRECTED THE ITO TO COMPUTE THE SAME ON SUCH BASIS AS HE CONSIDERED FIT AND PROPER, NAMELY, 11 MONTHS OR 12 MONTHS ON THE VIEW THAT THE EMPLOYEE OF THE ASSESSEE WAS ON LEAVE FOR ONE MONTH AND AS SUCH COULD NOT BE SAID T O BE ENTITLED TO THIS ACCOMMODATION. IF THAT IS THE POSITION, THEN, IN OUR OPINION, ONCE THE APPEAL HAS BEEN PREFERRED BEFORE THE AAC ON ANY ASPECT OF THE QUANTUM OF DEPRECIATIO N, THE COMMISSIONER CANNOT ASSUME JURISDICTION, OTHERWISE AN ANOMALOUS POSITIO N WOULD ARISE. THE ITO HAS BEEN DIRECTED BY THE AAC TO FIX DEPRECIATION AT A CERTAI N PERCENTAGE, INDICATED BY THE AAC, WITHOUT ANY FURTHER DIRECTION THAT IT SHOULD BE CON FINED TO 11 MONTHS OR 12 MONTHS. BUT, NOW, IF FURTHER CONSIDERATION IS SUPERIMPOSED BY TH E COMMISSIONER BY RECTIFICATION MADE BY THE ITO AS A RESULT OF THE ORDER PASSED BY THE COMMISSIONER UNDER SECTION 263 THEN THAT WOULD BE IN CONFLICT WITH THE DIRECTION G IVEN BY THE AAC IN HIS APPELLATE ORDER . THEREFORE, WHERE AN APPEAL IS PREFERRED AND THE SUB JECT-MATTER OF APPEAL, PARTICULARLY RAISED, IS THE SUBJECT-MATTER BEFORE THE AAC, THEN THAT ORDER, IN OUR OPINION, CANNOT BE THE SUBJECT-MATTER OF AN ORDER OF REVISION BY THE C OMMISSIONER. THIS PRINCIPLE, HOWEVER, COMES WHERE THE APPEAL DOES NOT LIE FROM T HE ORDER OF THE ITO AND BEFORE THE AAC WHERE DIFFERENT KINDS OF APPEAL ARE PROVIDED FO R IN THE SCHEME OF THE INCOME-TAX ACT. THIS PRINCIPLE WAS ENUNCIATED BY THE SUPREME C OURT IN THE CASE OF CIT V. AMRITLAL BHOGILAL & CO. [1958] 34 ITR 130 (SC). THIS WAS ALSO REITERATED IN THE DECISION IN T HE CASE OF JEEWANLAL (1929) LTD. V. ADDL. CIT [1977] 108 ITR 407 (CAL) AND THE DECISION IN THE CASE OF PREMCHAND SITANATH ROY V. ADDL. CIT [1977] 109 ITR 751 (CAL). THE ALLAHABAD HIGH COURT REITERATED THE SAME PRINCIPLE IN THE CASE OF J.K. SYNTHETICS LTD. V. ADDL. CIT [1976] 105 ITR 344 (ALL). THEREFORE, IT APPEARS TO US THAT AS THE QUANTUM OF DEPRECIATION WAS THE SUBJECT-MATTER OF A PPEAL THE COMMISSIONER HAD NO JURISDICTION, IN THE FACTS AND CIRCUMSTANCES OF THI S CASE, TO ISSUE THE NOTICE UNDER SECTION 263 AND TO PASS ANY ORDER ON THIS ASPECT OF THE MAT TER. QUESTION NO. 1 THEREFORE, IN OUR OPINION, MUST BE ANSWERED IN THE NEGATIVE AND IN FA VOUR OF THE ASSESSEE . 10.4. WE FIND THAT SIMILAR VIEWS WERE EXPRESSED IN THE FOLLOWING DECISIONS :- A) HONBLE KARNATAKA HIGH COURT IN THE CASE OF DCIT VS VERMA INDUSTRIES LTD REPORTED IN 117 TAXMAN 512 (KAR) B) HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS FAR IDA PRIME TANNERY REPORTED IN 135 TAXMAN 70 (MAD) C) HONBLE SUPREME COURT IN THE CASE OF CIT VS SRI ARB UDA MILLS LTD REPORTED IN 231 ITR 50 (SC) . 18 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 18 D) DECISION OF CO-ORDINATE BENCH OF DELHI TRIBUNAL IN THE CASE OF SUJATA GROVER VS ACIT REPORTED IN 74 TTJ 347 . 10.5. RESPECTFULLY FOLLOWING THE AFORESAID DECISION S , WE HOLD THAT AN ISSUE OF DISALLOWANCE OF PURCHASES U/S 40A(3) OF THE ACT IS ALREADY THE SUBJECT MATTER OF APPELLATE PROCEEDINGS BEFORE THE LD CITA AND HENCE THE SAME CANNOT BE THE SUBJECT MATTER OF RE-VERIFICATION AND RE-ADJUDICATION FROM DIFFERENT PERSPECTIVE BY THE LD CIT UNDER REVISIONARY JURISDICTION U/S 263 OF THE ACT. HENCE THE ACTION OF THE LD CIT IN INVOKING REVISIONARY JURISDICTION U/S 263 OF THE AC T DESERVES TO BE QUASHED ON THIS COUNT ALSO. 11. HENCE WE HOLD THAT THE ACTION OF THE LD CIT IN INVOKING REVISIONARY JURISDICTION U/S 263 OF THE ACT IS NOT IN ACCORDANCE WITH LAW AND IS HEREBY QUASHED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE COURT ON 07.07.2017 SD/- SD/- [A.T.VARKEY] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 07.07.2017 [RG PS] COPY OF THE ORDER FORWARDED TO: 1. M/S AB (WINES) STORES, 8/7A, MAHATMA GANDHI ROAD , KOLKATA-700009. 2. PRINCIPAL C.I.T.-14, KOLKATA. 3.. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S 19 ITA NO.901/KOL/2016 M/S. AB (WINES) STORES A.YR.2011-12 19