ZUBERI ENGINEERING COMPANY, Jaipur V. DCIT, Jaipur

ITA 977/JPR/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9478 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 20-08-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA DHK
• Keywords: Rule of consistency; Source of fund; Question of law; Cost of acquisition; Tangible material; Non compliance; Competent authority; Capital expenditure
• Section: 43B; 40A(3); 143(3); 40(a)(ia); 37(1); 194C; 147; 246; 145; 148; 263; 28; 139

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S A, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 977/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2012-13 ZUBERI ENGINEERING COMPANY, C/O- KAPIL GOEL ADV., F-26/124 SECTOR 7 ROHINI, DELHI-110085 CUKE VS. D.C.I.T., CIRCLE-2, JAIPUR. PAN NO.: AAAFZ 2103 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 1122/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2012-13 A.C.I.T., CIRCLE-2, JAIPUR. CUKE VS. M/S ZUBERI ENGINEERING COMPANY, 2835, TIBA JOGIAN, PHUTA KHURRA, JAIPUR. PAN NO.: AAAFZ 2103 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 978/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2013-14 ZUBERI ENGINEERING COMPANY, C/O- KAPIL GOEL ADV., F-26/124 SECTOR 7 ROHINI, DELHI-110085 CUKE VS. D.C.I.T., CIRCLE-2, JAIPUR. PAN NO.: AAAFZ 2103 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT VK;DJ VIHY LA-@ ITA NO. 979/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2014-15 ZUBERI ENGINEERING COMPANY, C/O- KAPIL GOEL ADV., F-26/124 SECTOR 7 ROHINI, DELHI-110085 CUKE VS. D.C.I.T., CIRCLE-2, JAIPUR. PAN NO.: AAAFZ 2103 K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 2 FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI KAPIL GOEL (ADV) JKTLO DH VKSJ LS@ REVENUE BY : SHRI VARINDER MEHTA (CIT-DR) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 25/10/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 21/12/2018 VKNS'K@ ORDER PER: BENCH THESE ARE THREE APPEALS BY THE ASSESSEE FOR THE A.Y . 2012-13 TO 2014-15 AND A CROSS APPEAL BY THE REVENUE FOR THE A .Y. 2012-13 ARE DIRECTED AGAINST THE COMPOSITE ORDER OF THE LD. CIT (A)-I, JAIPUR DATED 31/07/2018. 2. SINCE COMMON ISSUES ARE RAISED IN THESE APPEALS, THEREFORE, FOR THE SAKE OF CONVENIENCE, THESE APPEALS ARE HEARD TOGETH ER AND ARE BEING DISPOSED OF BY THIS COMPOSITE ORDER. FOR THE PURPOS E OF RECORDING THE FACTS, THE APPEAL FOR THE A.Y. 2012-13 IS TAKEN AS LEAD CASE. 3. THE ASSESSEE IS A PARTNERSHIP FIRM AND A CONTRACT OR ENGAGED IN ERECTION AND FABRICATION WORK. THE ASSESSEE FILED IT S RETURN OF INCOME FOR THE A.Y. 2012-13 ON 25/09/2012 DECLARING TOTAL INCO ME OF RS. 16,42,27,060/-. THE ASSESSMENT WAS COMPLETED U/S 143 (3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) BY THE ASSESSING OF FICER ON 30/3/2015 AT A TOTAL INCOME OF RS. 19,15,23,899/-. THE ASSESSING OF FICER MADE VARIOUS DISALLOWANCES WHILE PASSING THE ASSESSMENT ORDER. IDE NTICAL DISALLOWANCES ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 3 WERE ALSO MADE BY THE ASSESSING OFFICER FOR THE A.Y. 2013-14 AND 2014- 15. 4. THE ASSESSEE CHALLENGED THE ORDERS OF THE ASSESSI NG OFFICER MAKING DISALLOWANCES BEFORE THE LD. CIT(A). THE LD. CIT(A) WHIL E PASSING THE IMPUGNED ORDER HAS ENHANCED THE ASSESSMENT FOR ALL THE THREE ASSESSMENT YEARS BY REJECTING THE BOOKS OF ACCOUNT AND ESTIMAT ED THE INCOME OF THE ASSESSEE BY APPLYING THE N.P. RATE OF 8.5%, 9.5% AN D 10% FOR THE A.Y. 2012-13 TO 2014-15 RESPECTIVELY. FOR THE A.Y. 2012- 13, PART RELIEF WAS GRANTED BY THE LD. CIT(A) ON THE ISSUE OF DISALLOWANC E MADE U/S 40(A)(IA) OF THE ACT AGAINST WHICH THE REVENUE HAS FILED THE CROSS APPEAL. FOR THE A.Y. 2012-13 THE ASSESSEE HAS RAISED FOLLOWING GROUN DS OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE BY SUM OF RS 7,38,35,804 ACTING ULTRA VIRES TO STATUTO RY LIMITATION OF ENHANCEMENT POWERS U/S 251 WHICH IS AB INITIO VOID AND FUNDAMENTALLY FLAWED ACTION. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE BY SUM OF RS 7,38,35,804 IN PERFUNCTORY MANNER ON PREP OSTEROUS BASIS OF EARLIER HISTORY OF BOOKS REJECTION AND SOME ORDE RS OF HIGHER AUTHORITIES WITHOUT APPLYING BASIC UNDERSTANDING TH AT IT IS NOWHERE STATED IN THE INCOME TAX LAW THAT ONCE ASSESSEES B OOKS ARE REJECTED AND PROFIT IS ESTIMATED THEN FOR ALL YEARS IN PERPE TUITY ACCORDING TO LD CIT-A BOOKS WOULD BE REJECTED IPSO FACTO AND PROFIT WOULD BE ESTIMATED WHICH IS ABSOLUTELY AGAINST THE BASIC SCH EME OF INCOME TAX LAW SPECIALLY WHEN ID CIT-A HAS NOT ESTABLISHED EVE N REMOTELY THAT FACTS OF EARLIER YEARS ARE HOMOGENOUS TO EXTANT PER IOD; ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 4 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE BY SUM OF RS 7,38,35,804 BY WRONGLY INVOKING SECTION 1 45(3) WITHOUT APPRECIATING THAT ASSESSEES DEFECT FREE AUDITED BO OK RESULT CANNOT BE ASSAULTED LIGHT HEARTEDLY AND IN CASUAL MANNER A S DONE IN EXTANT CASE; 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE BY SUM OF RS 7,38,35,804 BY APPLYING ARBITRARY AND IMA GINARY PROFIT RATE OF 8.5% WHICH IS EGREGIOUS AND SHOCKING AND GROSSLY LACKS ANY RATIONAL/SOUND LEGAL BASIS AND IS BASED ON MERE IPS E-DIXIT OF LD CIT-A AS IT IS SETTLED LAW THAT MERE BOOKS REJECTION BY I TSELF DOES NOT GIVE A CARTE-BLANCHE TO THE OFFICER TO ESTIMATE ANY ADDITI ONAL INCOME OVER AND ABOVE RETURNED INCOME WITHOUT BRINGING ANY INCR IMINATING MATERIAL ON RECORDS. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE BY NOT ISSUING VALID SHOW CAUSE NOTICE AS MANDATED AND PRESCRIBED IN CBDT INSTRUCTIONS AND UNDER THE LAW, AND MERE CRYPT IC ORDER SHEET ENTRY IS TREATED AS EQUIVALENT TO VALID AND LAWFUL SHOW CAUSE NOTICE WHICH OMISSION VITIATES THE ENTIRE ACTION. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE WITHOUT APPRECIATING THAT ENTIRE ENHANCEMENT IS BAS ED ON PURELY HYPOTHETICAL AND ARTIFICIAL INCOME WHICH IS NEVER E ARNED BY ASSESSEE AND IS NEVER CORROBORATED EVEN SYMBOLICALLY BY ANY IOTA OF TRADING OUTSIDE THE BOOKS . OTHER GROUNDS RELATING TO ADDITIONS MADE BY LD AO W HICH ARE NOT DELETED BY LD CIT-A 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A ERRED IN NOT DELETING THE SUSTAINED DISALLOWA NCE OF RS 34,64,780 (RS 594,412 AND RS 28,70,368) U/S 40(A)(I A) WHICH DOES NOT COVER DIRECT COSTS ALLOWABLE U/S 28 AND FOR THOSE A MOUNTS ASSESSEES EXPLANATION HAS NOT BEEN OBJECTIVELY APPRECIATED AN D EVEN FOR THOSE AMOUNTS IN WORST CASE SCENARIO ONLY 30% OF THE EXPE NSE CAN BE CONSIDERED FOR DISALLOWANCE IN VIEW OF RETROSPECTIV E AMENDMENT IN ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 5 SECTION 40(A(IA). WE REQUEST FOR TOTAL DELETION OF SAID DISALLOWANCE FIRST AND ALTERNATIVELY WE PRAY FOR 30% DISALLOWANC E WITHOUT PREJUDICE TO OUR MAIN CONTENTION. 8. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A ERRED IN NOT DELETING THE SUSTAINED DISALLOWA NCE OF RS 108,73,483/- PERTAINING TO GENUINE AND ACTUAL DEDUC TIONS MADE BY THE CLIENTS WHICH IS PLAINLY AGAINST REAL INCOME TH EORY BY MERELY AND SOLELY HARPING ON FORM 26AS WHICH IS BASED ON TENTA TIVE PROCESS OF TDS AND CANNOT CREATE AUTOMATIC AND CONCLUSIVE CHAR GE OF INCOME IN HANDS OF RECIPIENT UNLESS CONCRETE MATERIAL IS BROU GHT ON RECORDS BY LD AO/REVENUE TO SAY THAT ASSESSEE CONCERNED HAS OB TAINED SAID SUM IN ITS COFFERS WHICH CANT BE LEFT IN LURCH AS DONE IN EXTANT CASE . 8.1 SOLEMN DUTY OF MAKING OF INDEPENDENT AND MEANI NGFUL ENQUIRY U/S 133/6)/131 IN ASSESSMENT OF RECIPIENT BY ITS AO TO VERIFY VERACITY OF 26AS DATA DOES NOT DEPEND ON ASSESSEES FILING OF C ONFIRMATION AS HELD BY CIT-A WHICH REASONING IS NOT AS PER SCHEME OF INCOME TAX LAW. 8.2 JUST BECAUSE CLIENTS HAVE SHOWN CERTAIN AMOUNT IN A PARTICULAR WAV IN UNILATERAL MANNER CANNOT OVERRULE ASSESSEES FAC TUAL VERSION THAT ASSESSEE HAS NOT REED, SPECIFIED AMOUNT CLAIMED AS DEDUCTIONS IN ITS COFFERS .WHICH EXPLANATION IS NOT OBJECTIVELY CONSI DERED. 9. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A ERRED IN NOT DELETING THE DISALLOWANCE OF RS 190,325 U/S 36(1)(VA)/ SECTION 2(24)(X) OF THE ACT WITHOUT APPR ECIATING THAT SAID ISSUE IS COVERED IN ASSESSEES FAVOR BY JURISDICTIO NAL HIGH COURT DECISIONS. INVALID ISSUANCE OF NOTICE U/S 143(2) ON BASIS OF C ASS 10. THAT LD AO WHILE ISSUING NOTICE U/S 143(2) ON M ERE BASIS OF CASS HAS NOT APPLIED ITS OWN MIND WHICH IS MANDATED U/S 143( 2) AS EVIDENT FROM WORDS USED LIKE CONSIDERED NECESSARY ETC AND A S EXPLAINED/DILATED IN VARIOUS APEX COURT RULINGS, AC CORDINGLY THE ORDERS PASSED BY LD AO AND LD CIT-A ARE BAD IN LAW AND DESERVES TO BE QUASHED ON THIS SHORT COUNT ITSELF. ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 6 THAT THE APPELLANT CRAVES LEAVE TO ADD ADD/ALTER A NY/ALL GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPE AL. 5. GROUNDS NO. 1 TO 6 OF THE ASSESSEES APPEAL ARE INTERLINKED AND ARE REGARDING THE ENHANCEMENT OF THE ASSESSMENT. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT AS PER THE PROVISIONS OF SECTION 251 OF THE ACT, THE LD. CIT(A) IS NOT GIVEN PLENARY AND UNBRIDLED POWER OF EN HANCEMENT IN EVERY CASE AND THAT TOO FOR MAKING AN ENHANCEMENT BASED O N HYPOTHETICAL INCOME, WHICH WAS NEVER EARNED BY THE ASSESSEE. ONCE THE ASSESSING OFFICER DID NOT RAISE ANY QUESTION ABOUT THE CORREC TNESS OF THE BOOKS OF ACCOUNT THEN THE LD. CIT(A) CANNOT INVOKE THE EXTRAO RDINARY POWER OF ENHANCEMENT TO REJECT THE BOOKS OF ACCOUNT U/S 145( 3) OF THE ACT IN MOST PERFUNCTORY AND PREPOSTEROUS MANNER AND FURTHER APP LYING CERTAIN SELF SUITING PRESUMPTIVE AND ASSUMPTIVE PROFIT RATE WITHO UT ANY INCRIMINATING MATERIAL. THUS, THE ACTION OF THE LD. CIT(A) ENHANCING THE ASSESSEE HAS RESULTED INVALID AND UNLAWFUL DEMAND OF TAX AS WELL AS PENALTY PROCEEDINGS U/S 271 OF THE ACT. THE LD AR HA S CONTENDED THAT THE ADDITION MADE BY THE LD. CIT(A) ARE EX-FACIE UNSUST AINABLE IN LAW. THE LD AR HAS THEN CONTENDED THAT SECTION 251 OF THE ACT LIMITS POWER OF ENHANCEMENT OF LD. CIT(A) TO THE ASPECTS CONSIDERED BY THE ASSESSING OFFICER AND NOT TO PICKUP ANY NEW SOURCE O F INCOME OR ISSUE WHICH WAS NOT EVEN PICKED UP BY THE ASSESSING OFFICER IN THE SCRUTINY ASSESSMENT. THE SOLE BASIS OF ENHANCEMENT B Y THE LD. CIT(A) ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 7 IS THE PAST HISTORY OF BOOKS REJECTION AND PROFIT E STIMATION WITHOUT ANY FACTUAL FINDING OF DEFECTS IN THE BOOKS OF ACCOUNT, THEREFORE, THE REJECTION OF BOOKS OF ACCOUNT U/S 145(3) OF THE ACT AND CONSE QUENTIAL ENHANCEMENT IS WITHOUT CONSIDERING AND SATISFYING THE STIPULATED CONDITIONS OF LAW PROVIDED U/S 145(3) OF THE ACT. THE LD AR HAS FURTH ER SUBMITTED THAT EVEN AFTER REJECTION OF BOOKS OF ACCOUNT AND HIGHER PROF IT IS APPLIED BY THE LD. CIT(A) PURELY BASED ON IMAGINARY GROUND AND WITHOUT A NY REQUISITE MATERIAL TO SHOW SUCH ADDITIONS TO THE INCOME. HE HA S FURTHER CONTENDED THAT NO VALID SHOW CAUSE NOTICE WAS ISSUED BY THE LD . CIT(A) BEFORE INVOKING THE EXTRAORDINARY JURISDICTION OF ENHANCEM ENT. THE ENHANCEMENT MADE BY THE LD. CIT(A) IS HYPOTHETICAL AND ARTIFICIA L AND THE SAME IS NOT CORROBORATED BY ANY RECORD OR MATERIAL TO PROVE THA T ANY TRADING OUTSIDE THE BOOKS. IN SUPPORT OF HIS CONTENTION, HE HAS REL IED UPON THE DECISION OF HONBLE KERALA HIGH COURT DATED 24/10/2017 IN THE C ASE OF CIT VS. B.P. SHERAFUDIN, [2017] 87 TAXMANN.COM 330 (KERALA) ARISING THEREOF OR MATERIAL ARISING OUT OF THE PROCEEDINGS. THE LD. CIT( A) CANNOT MAKE THE ENHANCEMENT BY INTRODUCING A NEW SOURCE OF INCOME. H E HAS ALSO RELIED UPON THE FOLLOWING DECISIONS: (I) STATE OF KERALA VS C. VELUKUTTY 60 ITR 239 (SC) . (II) ORDER DATED 26/08/2015 OF MUMBAI BENCHES OF TH E TRIBUNAL IN THE CASE OF MALABAR HILL CLUB VS ACIT IN ITA NOS. 517 & ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 8 518/MUM/2010M 1560/MUM/2012, 803/MUM/2010, 808/MUM/ 2010 AND 4274/MUM/2012. (III) DECISION OF MUMBAI BENCHES OF THE TRIBUNAL D ATED 27/04/2016 IN THE CASE OF DCIT VS M/S FREE INDIA ASSURANCE SERVIC ES LTD. IN ITA NO. 5588/MUM/2014 AND 5934/MUM/2014. (IV) DECISION OF THIS TRIBUNAL DATED 25/05/2018 IN THE CASE OF SH. JAGDISH NARAYAN SHARMA VS ITO IN ITA NO. 751 TO 753 /JP/2015. 6. ON THE OTHER HAND, THE LD CIT-DR HAS SUBMITTED T HAT THE LD. CIT(A) HAS ENHANCED THE INCOME OF THE ASSESSEE FROM BUSINE SS ACTIVITY AND THEREFORE, THERE IS NO NEW SOURCE OF INCOME WAS INTRO DUCED BY THE LD. CIT(A) WHILE EXERCISING THE POWER OF ENHANCEMENT U/S 2 51(1) OF THE ACT. THE LD. CIT-DR HAS SUBMITTED THAT ACCEPTANCE AND REJ ECTION OF BOOKS OF ACCOUNT WAS VERY MUCH SUBJECT MATTER OF ASSESSMENT A ND THEREFORE, THE LD. CIT(A) HAS THE POWER TO REJECT THE BOOKS OF ACCOU NT U/S 145(3) OF THE ACT AND THEREBY ENHANCED THE INCOME BY ADOPTING THE G.P. RATE WHICH IS FOUND TO BE PROPER AND REASONABLE. ONCE THE LD. CIT( A) HAS GIVEN COGENT REASONS FOR REJECTION OF BOOKS OF ACCOUNT THEN THE SAID DECISION AND EXERCISE OF POWER BY THE LD. CIT(A) IS WITHIN THE FOUR CORNERS OF THE PROVISIONS OF SECTION 251(1) OF THE ACT. HE HAS REL IED UPON THE ORDER OF THE LD. CIT(A). 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO QUARREL ON THE POIN T THAT THE LD. CIT(A) CAN EXERCISE ITS POWER TO ENHANCE THE INCOME U/S 251 OF THE ACT ON THE ISSUE ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 9 WHICH IS SUBJECT MATTER OF THE ASSESSMENT. HOWEVER, T HE SAID POWER OF ENHANCEMENT OF LD. CIT(A) CANNOT BE EXERCISED IN RE SPECT OF THE ISSUE WHICH IS NOT THE SUBJECT MATTER OF THE ASSESSMENT AN D THEREFORE, THERE IS A RESTRICTION ON EXERCISE OF POWER OF ENHANCEMENT NOT TO TAKE UP AN ALTOGETHER NEW SOURCE OF INCOME. THE QUESTION ARISES WHAT IS SUBJECT MATTER OF ASSESSMENT AND IN OUR CONSIDERED OPINION IT DEPENDS ON THE SCOPE OF THE ENQUIRY BY THE ASSESSING OFFICER DURIN G THE SCRUTINY ASSESSMENT PROCEEDINGS. THEREFORE, IF THE ASSESSING OFFICER HAS TAKEN UP AN ISSUE OR MATTER FOR SCRUTINY DURING THE ASSESSME NT PROCEEDINGS AND AFTER CONSIDERING THE EXPLANATION/REPLY OF THE ASSE SSEE HAS ACCEPTED THE CLAIM THEN THOUGH THE ASSESSING OFFICER HAS NOT MAD E ANY ADDITION ON THAT PARTICULAR ITEM OR SOURCE OF INCOME BUT THE SAID WOU LD BE VERY MUCH SUBJECT MATTER OF THE ASSESSMENT. CONSEQUENTLY THE LD. CIT(A) CAN EXERCISE ITS POWER ON SUCH POINT OR SUBJECT MATTER B Y SCRUTINIZING THE SAME AGAIN AND IN CASE IT IS FOUND THAT THE ASSESSING OF FICER HAS ALLOWED THE CLAIM WHICH IS NOT ALLOWABLE THEN THE LD. CIT(A) IN IT S POWER U/S 251 OF THE ACT CAN ENHANCE THE ASSESSMENT BY DISALLOWING OR MAK ING AN ADDITION ON SUCH ISSUE OR SUBJECT MATTER. IT IS SETTLED PROPOSI TION OF LAW AS HELD IN THE SERIES OF DECISIONS, SOME OF WHICH HAS BEEN RELIED U PON BY THE LD AR OF THE ASSESSEE AND CITED (SUPRA) THAT THE LD. CIT(A) WHILE EXERCISING ITS POWER FOR ENHANCEMENT U/S 251 OF THE ACT CANNOT BRING A N EW SOURCE OF INCOME ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 10 WHICH WAS NOT SUBJECT MATTER OF ASSESSMENT. THERE IS A DISTINCTION BETWEEN THE SUBJECT MATTER OF ASSESSMENT AND SCOPE O F ASSESSMENT. THE SUBJECT MATTER OF ASSESSMENT IS CONFINED ONLY ON TH E ISSUE AND SUBJECT WHICH ARE TAKEN UP FOR SCRUTINY BY THE ASSESSING OFF ICER WHEREAS THE SCOPE OF ASSESSMENT IS VERY WIDE WHICH INCLUDES EVEN AN ENQ UIRY OF ANY ISSUE AND CLAIM BUT MIGHT NOT HAVE BEEN TAKEN UP BY THE A SSESSING OFFICER DURING THE SCRUTINY ASSESSMENT. THUS, THE SUBJECT MA TTER OF ASSESSMENT IS THE MATTERS WHICH WERE TAKEN UP BY THE ASSESSING OFF ICER DURING THE SCRUTINY ASSESSMENT ARE VERY MUCH SUBJECT MATTER OF APPEAL SO FAR AS THE POWER OF THE LD. CIT(A) EXERCISING ENHANCEMENT OF IN COME. WHEREAS THE ISSUE AND SUBJECT MATTER WHICH WERE FALLING UNDER THE SCOPE OF THE ASSESSMENT BUT WERE NOT TAKEN UP FOR SCRUTINY WOULD F ALL IN THE AMBIT OF PROVISIONS OF SECTION 263 AND THE COMMISSIONER IN I TS REVISIONARY POWER CAN TAKE UP THOSE MATTERS FOR REVISION OF ASSESSMEN T ORDER. THEREFORE, THERE IS SEGREGATION OF JURISDICTION U/S 263 AND SE CTION 251 OF THE ACT. IN CASE OF COMPLETE LACK OF ENQUIRY ON THE PART OF THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER, THE SAME IS SUBJECT M ATTER OF REVISION U/S 263 OF THE ACT WHEREAS IF THE ASSESSING OFFICER HAS TAKEN UP A PARTICULAR ISSUE OR MATTER FOR ENQUIRY BUT ACCEPTED THE CLAIM THEN THE SAID MATTER CAN BE TAKEN UP EITHER BY THE LD. CIT(A) UNDER THE P ROVISIONS OF ENHANCEMENT OF INCOME OR BY THE COMMISSIONER U/S 26 3 OF THE ACT IF IT ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 11 SATISFIES THE CONDITIONS PROVIDED U/S 263 OF THE AC T. THEREFORE, THE OVERLAPPING OF JURISDICTION ON SUCH ISSUE CANNOT BE RULED OUT. BUT IN CASE OF COMPLETE LACK OF ENQUIRY WHERE THE ASSESSING OFFI CER HAS NOT AT ALL TAKEN UP A MATTER FOR ENQUIRY OR SCRUTINY THEN THE JURISDICTION OVER SUCH MATER IS EXCLUSIVELY UNDER THE PROVISIONS OF SECTIO N 263 OF THE ACT AND NOT U/S 251 OF THE ACT FOR ENHANCEMENT OF ASSESSMENT. T HE LD. CIT(A), THEREFORE, THOUGH, VESTED WITH VERY WIDE POWERS U/S 25 1(1) OF THE ACT SO FAR AS THE SUBJECT MATTER AND ASPECTS OF THE ASSESS MENT ABOUT WHICH THE ASSESSEE MAKES A GRIEVANCE AS WELL AS REGARDING ANY OTHER MATTER CONSIDERED BY THE ASSESSING OFFICER AND DETERMINED IN THE ASSESSMENT. THEREFORE, IT IS NOT OPEN TO THE LD. CIT(A) TO INTRO DUCE IN THE ASSESSMENT A NEW SOURCE OF INCOME AND THE ASSESSMENT MUST BE CONF INED TO THOSE ITEMS OF INCOME WHICH WERE SUBJECT MATTER OF ORIGINAL ASSESSMENT WHICH MEANS THE ITEMS OF INCOME AND THE ASPECTS ON WHICH T HE ASSESSING OFFICER HAS TAKEN UP FOR SCRUTINY. THIS TRIBUNAL IN THE CASE OF SH. JAGDISH NARAYAN SHARMA VS ITO (SUPRA) WHILE CONSIDERING AN IDENTICAL ISSUE HAS DISCUSSED THIS QUESTION OF JURISDICTION OF THE LD. CIT(A) TO ENHANCE THE ASSESSMENT IN PARA 44 TO 51 AS UNDER: 44. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE ISSUE WHICH ARISE FOR CONSIDERATION IS WHETHER THE LD CIT(A) WAS JUSTIFIED IN BRINGING TO TAX LONG TERM CAPITAL GAINS, ON SALE OF LAND BY THE ASSESSEE TO HIS TWO DAUGHTER-IN-LAWS, BY WAY OF ENHANCEMENT OF ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 12 INCOME IN TERMS OF PROVISIONS OF SECTION 251(1)(A) OF THE ACT WHICH READS AS UNDER: 251(1) IN DISPOSING OF AN APPEAL, THE COMMISSION ER(APPEALS) SHALL HAVE THE FOLLOWING POWERS: (A) IN AN APPEAL AGAINST AN ORDER OF ASSESSMENT, H E MAY CONFIRM, REDUCE, ENHANCE OR ANNUAL THE ASSESSMENT. 45. REGARDING THE POWERS OF THE LD CIT(A) BY WAY O F ENHANCEMENT OF INCOME IN HANDS OF THE ASSESSEE, THE MATTER HAD COME UP FO R THE CONSIDERATION BEFORE THE HONBLE SUPREME COURT IN CASE OF CIT VS SHAPOORJI PALLONJI MISTRY REPORTED IN 44 ITR 891 WHEREIN THE QUESTION FRAMED FOR CONSIDERATION WAS WHETHER IN AN APPEAL FILED BY AN ASSESSEE, THE APPELLATE ASSISTANT COMMISSIONER CAN FIND A NEW SOU RCE OF INCOME NOT CONSIDERED BY THE INCOME-TAX OFFICER AND ASSESS IT UNDER HIS POWERS GRANTED BY SECTION 31 OF THE INCOME-TAX ACT ? 46. THE LEGAL PROPOSITION LAID DOWN BY THE HONBLE SUPREME COURT READS AS UNDER: THERE IS NO DOUBT THAT THE APPELLATE ASSISTANT CO MMISSIONER CAN 'ENHANCE THE ASSESSMENT'. IT IS ADMITTED ALSO BY TH E ASSESSEE THAT WITHIN THE FOUR CORNERS OF THE SOURCES PROCESSED BY THE IN COME-TAX OFFICER, THE APPELLATE ASSISTANT COMMISSIONER CAN ENHANCE THE AS SESSMENT. THIS POWER MUST, AT LEAST, FALL WITHIN THE WORDS 'ENHANC E THE ASSESSMENT', IF THEY ARE NOT TO BE RENDERED WHOLLY NUGATORY. THE CO NTROVERSY IN THIS CASE IS ABOUT HIS DISCOVERING NEW SOURCES, NOT MENTIONED IN THE RETURN AND NOT CONSIDERED BY THE INCOME-TAX OFFICER. THE HIGH COUR T HELD FOLLOWING ITS EARLIER VIEW IN NARRONDAS MANORDASS V. COMMISSIONER OF INCOME-TAX [1957] 31 ITR 909, THAT THE APPELLATE ASSISTANT COM MISSIONER HAS REVISIONAL POWERS, BUT THAT THEY ARE CONFINED TO WH AT WAS BEFORE THE INCOME-TAX OFFICER AND CONSIDERED BY THE LATTER. TH E CORRECTNESS OF THIS ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 13 VIEW IS CHALLENGED IN THIS APPEAL BY THE COMMISSION ER OF INCOME-TAX, BOMBAY. THE EARLIEST CASE, WHICH CONSIDERED THE MEANING OF SECTION 31(3), WAS JAGARNATH THERANI V. COMMISSIONER OF INCOME-TAX AIR 1925 PAT. 408 DECIDED BY THE PATNA HIGH COURT. IN THAT CASE, THE ASSESSEE HAD THREE BUSINESSES AT PURNEA, JALPAIGURI AND CALCUTTA. HIS INCOME FROM PURNEA ONLY WAS ASSESSED BY THE INCOME-TAX OFFICER. ON APP EAL BY THE ASSESSEE, THE APPELLATE ASSISTANT COMMISSIONER ASSESSED HIM W ITH REGARD TO THE INCOME FROM THE OTHER TWO BUSINESSES. THE HEAD OF I NCOME WAS THE SAME WITHIN SECTION 6 OF THE INCOME TAX ACT, BUT THE SOU RCES OF INCOME WERE DIFFERENT. THE PATNA HIGH COURT OBSERVED : 'NOW THIS SECTION RELATING TO APPEALS IS ENACTED F OR THE BENEFIT OF THE SUBJECT AND ALSO, TO THE LIMITED EXTENT THEREIN STA TED, FOR THE BENEFIT OF THE CROWN. BUT THE SUBJECT-MATTER OF THE APPEAL IS THE ASSESSMENT AND THE SCOPE OF THE APPEAL MUST IN MY OPINION BE LIMITED B Y THE SUBJECT-MATTER. THE APPELLATE AUTHORITY HAS NO POWER TO TRAVEL BEYO ND THE SUBJECT-MATTER OF THE ASSESSMENT AND, FOR ALL THE REASONS ADVANCED BY THE APPELLANT, IS IN MY OPINION NOT ENTITLED TO ASSESS NEW SOURCES OF IN COME.' THE VIEW OF THE PATNA HIGH COURT RECEIVES SUPPORT FROM A DECISION OF THE MADRAS HIGH COURT IN GAJALAKSHMI GINNING FACTORY V. COMMISSIONER OF INCOME-TAX [1952] 22 ITR 502 WHERE, AT PAGE 510, TH E DIVISIONAL BENCH OBSERVED AS FOLLOWS: 'OF COURSE, IT WOULD NOT BE OPEN TO THE APPELLATE ASSISTANT COMMISSIONER TO INTRODUCE INTO THE ASSESSMENT NEW SOURCES, AS HI S POWER OF ENHANCEMENT SHOULD BE RESTRICTED ONLY TO THE INCOME WHICH WAS THE SUBJECT-MATTER OF CONSIDERATION FOR PURPOSES OF ASS ESSMENT BY THE INCOME-TAX OFFICER.' ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 14 IN BISHWANATH PRASAD BHAGWAT PRASAD V. COMMISSIONE R OF INCOME-TAX [1956] 29 ITR 748, THE APPELLATE ASSISTANT COMMISSI ONER HAD ACTUALLY REMANDED THE CASE, BUT WHILE CONSIDERING THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER, THE DIVISIONAL BENCH APPEAR S TO HAVE APPROVED OF THE ABOVEQUOTED PASSAGE FROM THE MADRAS CASE. TH E OBSERVATIONS IN THAT CASE MAY BE TREATED AS OBITER. IN NARRONDAS MA NORDASS V. COMMISSIONER OF INCOME-TAX [1957] 31 ITR 909 IS TO BE FOUND THE EARLIER CASE OF THE BOMBAY HIGH COURT, WHICH WAS FOLLOWED I N THE JUDGMENT UNDER APPEAL. IN THAT CASE, THE ASSESSEE WAS CARRYI NG ON BUSINESS IN BOMBAY AND ALSO IN RAJKOT. THE PROFITS FROM THE RAJ KOT BUSINESS WERE ASSESSED BY THE INCOME-TAX OFFICER AT RS. 1,17,643. THE INCOME-TAX OFFICER ALSO FOUND REMITTANCES TO THE EXTENT OF RS. 4 LAKHS FROM RAJKOT TO BOMBAY, BUT DID NOT INCLUDE THAT AMOUNT IN THE ASSE SSMENT IN VIEW OF THE CONCESSION ALLOWED BY THE PART B STATES TAXATION CO NCESSION ORDER. THE ASSESSEE APPEALED WITH RESPECT TO THE SUM OF RS. 1, 17,643, CONTENDING THAT THE RAJKOT BUSINESS HAD NO PROFITS BUT ONLY LO SS. THE APPELLATE ASSISTANT COMMISSIONER ACCEPTED THIS CONTENTION, BU T SET ASIDE THE ASSESSMENT AND REMANDED THE CASE TO THE INCOME-TAX OFFICER FOR REASSESSMENT WITH A VIEW TO ASSESSING THE SUM OF RS . 4 LAKHS. IN DEALING WITH THE CASE, THE HIGH COURT HELD THAT THE POWERS OF REMAND WERE EXTREMELY WIDE, BUT IT QUOTED WITH APPROVAL THE DEC ISION OF THE PATNA HIGH COURT IN JAGARNATH THERANI V. COMMISSIONER OF INCOME-TAX AIR 1925 PAT. 408 AND ALSO THE ABOVE OBSERVATION OF THE MADR AS HIGH COURT. THE LEARNED CHIEF JUSTICE ON THAT OCCASION ADDED THAT T HERE WAS A DISTINCTION BETWEEN THE SUBJECT-MATTER OF THE APPEAL AND THE SU BJECT-MATTER OF THE ASSESSMENT, AND THAT THE APPELLATE ASSISTANT COMMIS SIONER'S POWERS UNDER SECTION 31 WERE NOT CONFINED TO THE SUBJECT-M ATTER OF THE APPEAL BUT EXTENDED TO THE SUBJECT-MATTER OF THE ASSESSMEN T. THOSE POWERS INCLUDED A POWER OF REMAND TO INCLUDE IN THE ASSESS MENT SOMETHING WHICH OUGHT TO HAVE BEEN SO INCLUDED BY THE INCOMET AX OFFICER, AND A REMAND IN THAT CASE WAS, THEREFORE, PROPER. THE MATTER ALSO CAME BEFORE THIS COURT IN COMMISS IONER OF INCOME-TAX V. MCMILLAN & CO. [1958] 33 ITR 182 (SC); BUT THE QUES TION, WITH WHICH WE ARE CONCERNED, WAS LEFT OPEN. THERE IS, HOWEVER, A PASSAGE IN THE JUDGMENT, APPROVING OF THE OBSERVATIONS OF CHAGLA, C.J., IN NARRONDAS MANORDASS V. COMMISSIONER OF INCOME-TAX [1957] 31 I TR 909 TO THE FOLLOWING EFFECT: ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 15 'IT IS CLEAR THAT THE APPELLATE ASSISTANT COMMISSI ONER HAS BEEN CONSTITUTED A REVISING AUTHORITY AGAINST THE DECISI ONS OF THE INCOME-TAX OFFICER; A REVISING AUTHORITY NOT IN THE NARROW SEN SE OF REVISING WHAT IS THE SUBJECT-MATTER OF THE APPEAL, NOT IN THE SENSE OF R EVISING THOSE MATTERS ABOUT WHICH THE ASSESSEE MAKES A GRIEVANCE, BUT A R EVISING AUTHORITY IN THE SENSE THAT ONCE THE APPEAL IS BEFORE HIM HE CAN REVISE NOT ONLY THE ULTIMATE COMPUTATION ARRIVED AT BY THE INCOME-TAX O FFICER BUT HE CAN REVISE EVERY PROCESS WHICH LED TO THE ULTIMATE COMP UTATION OR ASSESSMENT. IN OTHER WORDS, WHAT HE CAN REVISE IS N OT MERELY THE ULTIMATE AMOUNT WHICH IS LIABLE TO TAX, BUT HE IS ENTITLED T O REVISE THE VARIOUS DECISIONS GIVEN BY THE INCOME-TAX OFFICER IN THE CO URSE OF THE ASSESSMENT AND ALSO THE VARIOUS INCOMES OR DEDUCTIONS WHICH CA ME IN FOR CONSIDERATION OF THE INCOME-TAX OFFICER.' THE LEARNED CHIEF JUSTICE IN THE JUDGMENT UNDER AP PEAL CONSIDERS THAT THIS COURT HAS THUS GIVEN APPROVAL TO HIS VIEW AND ALSO THE VIEW OF THE PATNA HIGH COURT IN THE EARLIER CASE. IN OUR OPINION, THIS COURT MUST BE HELD NOT TO HAV E EXPRESSED ITS FINAL OPINION ON THE POINT ARISING HERE, IN VIEW OF WHAT WAS STATED AT PAGES 709 AND 710 OF THE REPORT. THIS COURT, HOWEVER, GAVE AP PROVAL TO THE OPINION OF THE LEARNED CHIEF JUSTICE OF THE BOMBAY HIGH COU RT THAT SECTION 31 OF THE INCOME-TAX ACT CONFERS NOT ONLY APPELLATE POWER S UPON THE APPELLATE ASSISTANT COMMISSIONER IN SO FAR AS HE IS MOVED BY AN ASSESSEE BUT ALSO A REVISIONAL JURISDICTION TO REVISE THE ASSESSMENT WI TH A POWER TO ENHANCE THE ASSESSMENT. SO MUCH, OF COURSE, FOLLOWS FROM TH E LANGUAGE OF THE SECTION ITSELF. THE ONLY QUESTION IS WHETHER IN ENH ANCING THE ASSESSMENT FOR ANY YEAR HE CAN TRAVEL OUTSIDE THE RECORD THAT IS TO SAY, THE RETURN MADE BY THE ASSESSEE AND THE ASSESSMENT ORDER PASSE D BY THE INCOME-TAX OFFICER WITH A VIEW TO FINDING OUT NEW SOURCES OF I NCOME NOT DISCLOSED IN EITHER. IT IS CONTENDED BY THE COMMISSIONER OF INCO ME-TAX THAT THE WORD 'ASSESSMENT' HERE MEANS THE ULTIMATE AMOUNT WHICH A N ASSESSEE MUST PAY, REGARD BEING HAD TO THE CHARGING SECTION AND H IS TOTAL INCOME. IN THIS VIEW, IT IS SAID THAT THE WORDS 'ENHANCE THE ASSESS MENT' ARE NOT CONFINED TO THE ASSESSMENT REACHED THROUGH A PARTICULAR PROC ESS BUT THE AMOUNT WHICH OUGHT TO HAVE BEEN COMPUTED IF THE TRUE TOTAL INCOME HAD BEEN FOUND. THERE IS NO DOUBT THAT THIS VIEW IS ALSO POS SIBLE. ON THE OTHER HAND, IT MUST NOT BE OVER LOOKED THAT THERE ARE OTHER PRO VISIONS LIKE SECTIONS 34 AND 33B, WHICH ENABLE ESCAPED INCOME FROM NEW SOURC ES TO BE BROUGHT ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 16 TO TAX AFTER FOLLOWING A SPECIAL PROCEDURE. THE ASS ESSEE CONTENDS THAT THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER EXTE ND TO MATTERS CONSIDERED BY THE INCOME-TAX OFFICER, AND IF A NEW SOURCE IS TO BE CONSIDERED, THEN THE POWER OF REMAND SHOULD BE EXER CISED. BY THE EXERCISE OF THE POWER TO ASSESS FRESH SOURCES OF IN COME, THE ASSESSEE IS DEPRIVED OF A FINDING BY TWO TRIBUNALS AND ONE RIGH T OF APPEAL. THE QUESTION IS WHETHER WE SHOULD ACCEPT THE INTERPRETA TION SUGGESTED BY THE COMMISSIONER IN PREFERENCE TO THE ONE, WHICH HAS HE LD THE FIELD FOR NEARLY 37 YEARS. IN VIEW OF THE PROVISIONS OF SECTIONS 34 AND 33B BY WHICH ESCAPED INCOME CAN BE BROUGHT TO TAX, THERE IS REAS ON TO THINK THAT THE VIEW EXPRESSED UNIFORMLY ABOUT THE LIMITS OF THE PO WERS OF THE APPELLATE ASSISTANT COMMISSIONER TO ENHANCE THE ASS ESSMENT HAS BEEN ACCEPTED BY THE LEGISLATURE AS THE TRUE EXPOSITION OF THE WORDS OF THE SECTION. IF IT WERE NOT, ONE WOULD EXPECT THAT THE LEGISLATURE WOULD HAVE AMENDED SECTION 31 AND SPECIFIED THE OTHER INTENTIO N IN EXPRESS WORDS. THE INCOME-TAX ACT WAS AMENDED SEVERAL TIMES IN THE LAST 37 YEARS, BUT NO AMENDMENT OF SECTION 31(3) WAS UNDERTAKEN TO NUL LIFY THE RULINGS, TO WHICH WE HAVE REFERRED. IN VIEW OF THIS, WE DO NOT THINK THAT WE SHOULD INTERPRET SECTION 31 DIFFERENTLY FROM WHAT HAS BEEN ACCEPTED IN INDIA AS ITS TRUE IMPORT, PARTICULARLY AS THAT VIEW IS ALSO REASONABLY POSSIBLE. 47. THE HONBLE RAJASTHAN HIGH COURT IN CASE OF CO MMISSIONER OF INCOME-TAX VS. ASSOCIATED GARMENTS MAKERS REPORTED IN 64 TAXMA N 215, FOLLOWING THE ABOVE DECISION OF THE HONBLE SUPREME HAS HELD AS UNDER: 7. APPEALS ARE PROVIDED UNDER SECTION 246 OF THE ACT BEFORE THE AAC AND THE COMMISSIONER (APPEALS). THESE APPEALS ARE BY TH E ASSESSEE AGGRIEVED BY THE ORDERS MENTIONED THEREIN. ANY ORDER MADE UND ER SECTION 143(3) IS APPEALABLE AND THE POWERS OF THE APPELLATE COURT AR E PROVIDED IN SECTION 251 OF THE ACT WHEREIN APPELLATE AUTHORITY HAS POWE R TO CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT OR HE MAY SET ASIDE THE ASSESSMENT AND REFER THE CASE BACK TO THE ITO FOR MAKING FRESH ASS ESSMENT IN ACCORDANCE WITH DIRECTIONS GIVEN IN APPEAL AND AFTER MAKING SU CH FURTHER ENQUIRY AS MAY BE NECESSARY. THESE POWERS ARE, INTER ALIA, MEN TIONED IN THE OTHER POWERS. ACCORDING TO SUBSECTION (2) OF SECTION 251, THE AAC HAS NO POWER TO ENHANCE ASSESSMENT OR A PENALTY, OR REDUCE THE A MOUNT OR REFUND UNLESS THE APPELLANT HAS A REASONABLE OPPORTUNITY F OR SHOWING CAUSE AGAINST SUCH ENHANCEMENT OR REDUCTION. AN EXPLANATI ON HAS BEEN ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 17 PROVIDED ACCORDING TO WHICH THE AAC MAY CONSIDER AN D DECIDE ANY MATTER ARISING OUT OF THE PROCEEDINGS IN WHICH THE ORDER A PPEALED AGAINST WAS PASSED, NOTWITHSTANDING THE FACT THAT SUCH MATTER W AS NOT RAISED BEFORE HIM. A PERUSAL OF SECTIONS 246 TO 251 OF THE ACT MAKES I T CLEAR THAT ANY QUESTIONS ARISING OUT OF THE ASSESSMENT ORDERS IN A N APPEAL BY THE ASSESSEE CAN BE POSSIBLE AND WIDE POWERS ARE GIVEN TO THE APPELLATE AUTHORITY, BUT THESE POWERS ARE CIRCUMSCRIBED BY TH E ASSESSMENT ORDER IN THE MATTERS ARISING THEREOF OR A MATTER ARISING OUT OF THE PROCEEDINGS. EVEN THE APPELLATE AUTHORITY HAS SUO MOTU POWER TO CONSIDER THE QUESTIONS ARISING THEREOF BUT THERE IS NO PROVISION TO GO BEYOND THE MATTER ARISING OUT OF THE PROCEEDINGS BEFORE THE AS SESSING AUTHORITY, MORE PARTICULARLY AS SEPARATE PROVISIONS FOR THAT A RE MADE IN THE ACT. THE TRIBUNAL HAS ELABORATELY DISCUSSED THE PROVISIO NS OF THE ACT AND THE CASE LAW ON THE SUBJECT AND HAS RIGHTLY COME TO THE CONCLUSION THAT NEW SOURCES NOT MENTIONED IN THE RETURN OR CONSIDERED B Y THE ITO ARE BEYOND THE SCOPE OF POWERS OF THE AAC. THE CASE RELIED ON BY THE LEARNED COUNSEL FOR THE PETITIONER ABOUT THE POWER OF SETTI NG ASIDE THE ASSESSMENT ORDER REMANDING THE CASE FOR RE-CONSIDER ATION OF THE WHOLE MATTER INCLUDING THE EVASION BY THE ASSESSEE, IS NO T APPLICABLE TO THE FACTS OF THE PRESENT CASE BECAUSE THE MATTER ARISING IN T HAT CASE WAS ONE WHICH AROSE OUT OF THE PROCEEDINGS BEFORE THE ITO. THE QU ESTION WAS NOT ABOUT NEW AND FRESH MATERIAL FOR THE PURPOSES OF ENHANCEM ENT. ON THE CONTRARY, THE CASE IS CLEARLY COVERED BY THE DECISI ONS OF THE SUPREME COURT IN CIT V. SHAPOORJI PALLONJI MISTRY'S CASE (SUPRA) WHEREIN IT HAS BEEN HELD THAT, 'IN AN APPEAL FILED BY THE ASSESSEE THE APPEL LATE ASSISTANT COMMISSIONER HAS NO POWER TO ENHANCE THE ASSESSMENT BY DISCOVERING NEW SOURCES OF INCOME NOT MENTIONED IN THE RETURN O F THE ASSESSEE OR CONSIDERED BY THE INCOME-TAX OFFICER IN THE ORDER A PPEALED AGAINST', AND IN THE CASE OF RAI BAHADUR HARDUTROY MOTILAL CHAMAR IA (SUPRA) WHEREIN IT HAS BEEN HELD THAT, 'IT IS NOT THEREFORE OPEN TO TH E APPELLATE ASSISTANT COMMISSIONER TO TRAVEL OUTSIDE THE RECORD, I.E., TH E RETURN MADE BY THE ASSESSEE OR THE ASSESSMENT ORDER OF THE INCOME-TAX OFFICER, WITH A VIEW TO FINDING OUT NEW SOURCES OF INCOME AND THE POWER OF ENHANCEMENT UNDER SECTION 31(3) IS RESTRICTED TO THE SOURCES OF INCOM E WHICH HAVE BEEN THE SUBJECT-MATTER OF CONSIDERATION BY THE INCOME-TAX O FFICER FROM THE POINT OF VIEW OF TAXABILITY'. THEIR LORDSHIPS CONSIDERED THE MEANING OF THE WORD 'CONSIDERATION' AND HELD THAT, ' 'CONSIDERATION' DO ES NOT MEAN 'INCIDENTAL' OR 'COLLATERAL' EXAMINATION OF ANY MATTER BY THE IN COME-TAX OFFICER IN THE PROCESS OF ASSESSMENT. THERE MUST BE SOMETHING IN T HE ASSESSMENT ORDER ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 18 TO SHOW THAT THE INCOME-TAX OFFICER APPLIED HIS MIN D TO THE PARTICULAR SUBJECT-MATTER OR THE PARTICULAR SOURCE OF INCOME W ITH A VIEW TO ITS TAXABILITY OR TO ITS NONTAXABILITY AND NOT TO ANY I NCIDENTAL CONNECTION'. IN THE INSTANT CASE, THE AAC HAD HIMSELF, AFTER ISSUIN G NOTICE, CONSIDERED THE NEW MATERIAL AND HAD GONE INTO NEW SOURCES OF INCOM E FOR THE CONSIDERATION OF WHICH HE HAD NO JURISDICTION. 8. IN FACT, WE FAIL TO UNDERSTAND AS TO WHY WHEN T HE ORDER WAS BROUGHT TO THE NOTICE OF THE COMMISSIONER HE PROCEEDED INTO WR ONG DIRECTION WHEN HE HAD AMPLE POWERS UNDER OTHER PROVISIONS OF THIS ACT. THERE ARE VARIOUS OTHER PROVISIONS UNDER THE ACT WHICH CAN BE INVOKED IN CASES OF ESCAPED INCOME OR SUCH SITUATION WHERE THE NEW SOURCES HAD BEEN LEFT TO BE CONSIDERED, BUT THAT WOULD NOT GIVE POWERS TO THE A AC TO TRANSGRESS HIS JURISDICTION. 48. IN CASE OF CIT V. SARDARI LAL & CO . [2001] 251 ITR 864 (DELHI) (FB), THE MATTER AGAIN CAME UP FOR CONSIDERATION BEFORE THE FULL BENCH OF THE HONBLE DELHI HIGH COURT REGARDING THE FIRST APPELLATE AUTHORITY'S POWER TO TAKE INTO ACCOUNT A NEW SOURCE OF INCOME AND TO CONSIDER THE CORRECTNESS OF THE VIEW EXPRESSED EARLIER IN CASE O F CIT V. UNION TYRES [1999] 240 ITR 556, AND THE FULL BENCH OF THE HONB LE DELHI HIGH COURT HAS HELD THAT THE VIEW EXPRESSED IN SHAPOORJI PALLO NJI MISTRY'S CASE (SUPRA) STILL HOLDS THE FEET AND IT WAS FURTHER HELD AS UND ER: 8. LOOKING FROM THE AFORESAID ANGLES, THE INEVITA BLE CONCLUSION IS THAT WHENEVER THE QUESTION OF TAXABILITY OF INCOME FROM A NEW SOURCE OF INCOME IS CONCERNED, WHICH HAD NOT BEEN CONSIDERED BY THE ASSESSING OFFICER, THE JURISDICTION TO DEAL WITH THE SAME IN APPROPRIATE CASES MAY BE DEALT WITH UNDER SECTION 147/148 AND SECTION 263, I F REQUISITE CONDITIONS ARE FULFILLED. IT IS INCONCEIVABLE THAT IN THE PRES ENCE OF SUCH SPECIFIC PROVISIONS, A SIMILAR POWER IS AVAILABLE TO THE FIR ST APPELLATE AUTHORITY. THAT BEING THE POSITION, DECISION IN UNION TYRES' C ASE (SUPRA) OF THIS COURT EXPRESSES THE CORRECT VIEW AND DOES NOT NEED RE-CON SIDERATION. THIS REFERENCE IS ACCORDINGLY DISPOSED OF. 49. WE HAVE ALSO LOOK AT THE RECENT DECISIONS ON T HE SUBJECT AND FIND THAT THE HONBLE HIGH COURT OF KERALA IN CASE OF COMMISSIONER OF INCOME TAX, ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 19 THRISSUR V. B.P. SHERAFUDIN REPORTED IN [2017] 87 TAXMANN.COM 330 (KERALA) HAD AN OCCASION TO EXAMINE A SIMILAR ISSUE AS TO WHETHER THE APPELLATE AUTHORITY HAS THE POWER UNDER SECTION 251 OF THE ACT TO ADD INCOME NOT AT ALL CONSIDERED BY THE AO? REFERRING T O THE CATENA OF DECISIONS INCLUDING THE DECISIONS OF HONBLE SUPREM E COURT IN CASE OF CIT VS SHAPOORJI PALLONJI MISTRY (SUPRA) AND IN CASE OF CIT V. RAI BAHADUR HARDUTORY MOTILAL CHAMARIA [1967] 66 ITR 443 (SC), THE DECISION OF THE FULL BENCH OF THE HONBLE DELHI HIGH COURT IN CASE OF CIT V. SARDARI LAL & CO. [2001] 251 ITR 864 (DELHI) (FB), BESIDES VARIOU S OTHER DECISIONS, IT HELD THAT THE POWERS UNDER SECTION 251 ARE, INDEED, VERY WIDE; BUT, WIDE AS THEY ARE, THEY DO NOT GO TO THE EXTENT OF DISPLACIN G POWERS UNDER, SAY, SECTIONS 147, 148 AND 263. WE DEEM IT APPROPRIATE T O REPRODUCE THE DISCUSSIONS AND THE RELEVANT FINDINGS OF THE HONBL E HIGH COURT AS UNDER: THE AMBIT OF APPELLATE POWER: 37. TO BEGIN WITH, LET US EXAMINE SECTION 251 OF T HE ACT. AS THE ASSESSMENT YEAR WAS 1995-96, WE WILL EXAMINE THE PR OVISION AS STOOD THEN. BEFORE THE AMENDMENT BY ACT 18 OF 2008, SECTI ON 251 READ AS: 251. POWERS OF THE [* * *] COMMISSIONER (APPEALS). (1) IN DISPOSING OF AN APPEAL, THE [* * *] COMMISS IONER (APPEALS) SHALL HAVE THE FOLLOWING POWERS (A) IN AN APPEAL AGAINST AN ORDER OF ASSESSMENT H E MAY CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT; [* * *] (B) IN AN APPEAL AGAINST AN ORDER IMPOSING A PENAL TY, HE MAY CONFIRM OR CANCEL SUCH ORDER OR VARY IT SO AS EITHER TO ENHANC E OR TO REDUCE THE PENALTY; (C) IN ANY OTHER CASE, HE MAY PASS SUCH ORDERS IN THE APPEAL AS HE THINKS FIT. (2) THE [* * *] COMMISSIONER (APPEALS) SHALL NOT E NHANCE AN ASSESSMENT OR A PENALTY OR REDUCE THE AMOUNT OF REFUND UNLESS THE APPELLANT HAS HAD ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 20 A REASONABLE OPPORTUNITY OF SHOWING CAUSE AGAINST S UCH ENHANCEMENT OR REDUCTION. EXPLANATION.IN DISPOSING OF AN APPEAL, THE [* * *] COMMISSIONER (APPEALS) MAY CONSIDER AND DECIDE ANY MATTER ARISIN G OUT OF PROCEEDINGS IN WHICH THE ORDER APPEALED AGAINST WAS PASSED, NOT WITHSTANDING THAT SUCH MATTER WAS NOT RAISED BEFORE THE [* * *] COMMI SSIONER (APPEALS) BY THE APPELLANT. 38. THE PROVISION CLARIFIES THAT IN AN APPEAL AGAI NST AN ORDER OF ASSESSMENT, THE APPELLATE AUTHORITY MAY CONFIRM, RE DUCE, ENHANCE, OR ANNUL THE ASSESSMENT. IN AN APPEAL AGAINST AN ORDER IMPOSING A PENALTY, HE MAY CONFIRM OR CANCEL SUCH ORDER OR VARY IT SO A S EITHER TO ENHANCE OR TO REDUCE THE PENALTY. THE EXPLANATION TO THE PROVI SION FURTHER EMPHASIZES THAT THE APPELLATE AUTHORITY MAY CONSIDE R AND DECIDE ANY MATTER ARISING OUT OF PROCEEDINGS IN WHICH THE ORDE R APPEALED AGAINST WAS PASSED, THOUGH SUCH MATTER WAS NOT RAISED BEFOR E HIM BY THE APPELLANT. PRECEDENTIAL POSITION: 39. A FULL BENCH OF THIS COURT IN THE CIT V. BEST WOOD INDUSTRIES & SAW MILLS [2011] 33 ITR 63/11 TAXMANN.COM 278 HAS EXAMI NED THE POWERS OF THE AO, BUT NOT THE APPELLATE AUTHORITY. IT HAS HEL D THAT ONCE THE ASSESSMENT IS REOPENED FOR ANY VALID REASON RECORDE D UNDER SECTION 148(2), THEN THE ENTIRE ASSESSMENT IS OPEN FOR THE AO TO BRING TO TAX ANY ITEM OF ESCAPED INCOME WHICH COMES TO HIS NOTICE IN SUCH REASSESSMENT. 40. UNDER THE OLD INCOME TAX ACT, THE CORRESPONDIN G PROVISION IS SECTION 31. INTERPRETING THAT PROVISION, THE SUPREME COURT IN CIT V. KANPUR COAL SYNDICATE [1964] 53 ITR 225 HAS HELD THAT UNDER SEC TION 31(3)(A), IN DISPOSING OF AN APPEAL, THE APPELLATE AUTHORITY MAY CONFIRM, REDUCE, ENHANCE OR ANNUL THE ASSESSMENT; UNDER CLAUSE (B), HE MAY SET ASIDE THE ASSESSMENT AND DIRECT THE INCOME-TAX OFFICER [NOW A O] TO MAKE A FRESH ASSESSMENT. THE APPELLATE AUTHORITY HAS, THEREFORE, PLENARY POWERS IN DISPOSING OF AN APPEAL. 'THE SCOPE OF HIS POWER IS CONTERMINOUS WITH THAT OF THE INCOME-TAX OFFICER. HE CAN DO WHAT THE INCOM E-TAX OFFICER CAN DO AND ALSO DIRECT HIM TO DO WHAT HE HAS FAILED TO DO. ' ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 21 41. AS WE CAN SEE, CIT V. P. MOHANAKALA [2007] 291 ITR 278/161 TAXMAN 169 (SC) DEALS WITH THE POWERS OF HIGH COURT IN INT ERFERING WITH THE FINDINGS OF FACT AND CONCURRENT FINDINGS, AT THAT BY RE-APPRECIATING THE EVIDENCE. THE SUPREME COURT HAS HELD IN THE NEGATIV E. THE SUPREME COURT IN JUTE CORPN. OF INDIA LTD. V. CIT [1991] 187 ITR 688/[1990] 53 TAXMAN 85 HAS STATED THAT THE DECLARATION OF LAW IS CLEAR THA T THE POWER OF THE APPELLATE AUTHORITY IS CO-TERMINUS WITH THAT OF THE INCOME TAX OFFICER, AND IF THAT IS SO, THERE APPEARS TO BE NO REASON WH Y THE APPELLATE AUTHORITY CANNOT MODIFY THE ASSESSMENT ORDER ON AN ADDITIONAL GROUND EVEN IF NOT RAISED BEFORE THE INCOME TAX OFFICER. N O EXCEPTION COULD BE TAKEN, HELD THE SUPREME COURT IN CIT V. NIRBHERAM D ELURAM [1997] 224 ITR 610/91 TAXMAN 181 TO THIS VIEW AS THE ACT PLACE S NO RESTRICTION OR LIMITATION ON EXERCISING APPELLATE POWER. EVEN OTHE RWISE, AN APPELLATE AUTHORITY WHILE HEARING THE APPEAL AGAINST THE ORDE R OF A SUBORDINATE AUTHORITY, HAS ALL THE POWERS WHICH THE ORIGINAL AU THORITY MAY HAVE IN DECIDING THE QUESTION BEFORE IT SUBJECT TO THE REST RICTIONS OR LIMITATION, IF ANY, PRESCRIBED BY THE STATUTORY PROVISIONS. ABSENT ANY STATUTORY PROVISION, THE APPELLATE AUTHORITY IS VESTED WITH A LL THE PLENARY POWERS WHICH THE SUBORDINATE AUTHORITY MAY HAVE. 42. IN CIT V. SHAPOORJI PALLONJI MISTRY [1962] 44 ITR 891 (SC) THE ASSESSMENT YEAR WAS 1947-1948, AND THE CASE WAS FIN ALLY DECIDED IN 14.02.1962. SO THE ACT CONSIDERED WAS PRE-INDEPENDE NCE ENACTMENT. EXAMINING SECTION 31 OF THE OLD ACT, THE SUPREME CO URT HAS HELD THAT THERE IS NO DOUBT THAT THE APPELLATE AUTHORITY CAN 'ENHANCE THE ASSESSMENT'. THIS POWER MUST, AT LEAST, FALL WITHIN THE WORDS 'ENHANCE THE ASSESSMENT', IF THEY ARE NOT TO BE RENDERED WHO LLY NUGATORY. 43. NOW, WE MAY EXAMINE THE AUTHORITIES THAT ALSO HAVE DEALT WITH THE POWERS OF THE APPELLATE AUTHORITY BUT SEEM TO HAVE TAKEN A DIVERGENT PATH. 44. IN CIT V. RAI BAHADUR HARDUTROY MOTILAL CHAMA RIA,[1967] 66 ITR 443 (SC) A THREE-JUDGE BENCH OF THE SUPREME COURT HAS O BSERVED THAT IT IS ONLY THE ASSESSEE WHO HAS A RIGHT CONFERRED UNDER SECTIO N 31 TO PREFER AN APPEAL AGAINST THE ORDER OF ASSESSMENT MADE BY THE INCOME-TAX OFFICER. IF THE ASSESSEE DOES NOT APPEAL THE ORDER OF ASSESSMEN T BECOMES FINAL SUBJECT TO ANY POWER OF REVISION THAT THE COMMISSIO NER MAY HAVE UNDER SECTION 33B OF THE ACT. THEREFORE, IT WOULD BE WHOL LY ERRONEOUS TO ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 22 COMPARE THE POWERS OF THE APPELLATE AUTHORITY WITH THE POWERS POSSESSED BY A COURT OF APPEAL, UNDER THE CIVIL PROCEDURE COD E. THE APPELLATE ASSISTANT COMMISSIONER IS NOT AN ORDINARY COURT OF APPEAL. IT IS IMPOSSIBLE TO TALK OF A COURT OF APPEAL WHEN ONLY ONE PARTY TO THE ORIGINAL DECISION IS ENTITLED TO APPEAL AND NOT THE OTHER PARTY, AND BEC AUSE OF THIS PECULIAR POSITION THE STATUTE HAS CONFERRED VERY WIDE POWERS UPON THE APPELLATE AUTHORITY ONCE AN APPEAL IS PREFERRED TO HIM BY THE ASSESSEE. 45. CHAMARIA GOES ON TO HOLD THAT THE APPELLATE AU THORITY HAS NO JURISDICTION UNDER SECTION 31(3) OF THE ACT TO ASSE SS A SOURCE OF INCOME NOT PROCESSED BY THE INCOME-TAX OFFICER 'AND WHICH IS N OT DISCLOSED EITHER IN THE RETURNS FILED BY THE ASSESSEE OR IN THE ASSESSM ENT ORDER,' AND THEREFORE THE APPELLATE AUTHORITY CANNOT TRAVEL BEY OND THE SUBJECT-MATTER OF THE ASSESSMENT. IN OTHER WORDS, THE POWER OF ENH ANCEMENT UNDER SECTION 31(3) OF THE ACT IS RESTRICTED TO THE SUBJE CT-MATTER OF ASSESSMENT OR THE SOURCES OF INCOME CONSIDERED EXPRESSLY OR BY CLEAR IMPLICATION BY THE INCOME-TAX OFFICER FROM THE VIEWPOINT OF THE TA XABILITY OF THE ASSESSEE. 46. A QUESTION REGARDING POWERS OF THE FIRST APPEL LATE AUTHORITY CAME UP FOR CONSIDERATION BEFORE THE SUPREME COURT RECENTLY IN NIRBHERAM DALURAM (SUPRA). FOLLOWING THE EARLIER DECISIONS IN KANPUR COAL SYNDICATE AND JUTE CORPORATION OF INDIA, THE SUPREME COURT RE ITERATED THAT THE APPELLATE POWERS CONFERRED ON THE APPELLATE COMMISS IONER UNDER SECTION 251 COULD NOT BE CONFINED TO THE MATTER CONSIDERED BY THE ITO, AS THE APPELLATE COMMISSIONER IS VESTED WITH ALL THE PLENA RY POWERS WHICH THE INCOME TAX OFFICER MAY HAVE WHILE MAKING THE ASSESS MENT. 47. INDEED, EXAMINING DALURAM'S HOLDING, A DIVISIO N BENCH OF THE DELHI HIGH COURT IN CIT V. UNION TYRES [1999] 240 ITR 556 /107 TAXMAN 447, HAS OBSERVED THAT DALURAM DID NOT COMMENT WHETHER THESE WIDE POWERS ALSO INCLUDE THE POWER TO DISCOVER A NEW SOURCE OF INCOM E. SO, UNION TYRES CONCLUDES THAT THE PRINCIPLE OF LAW LAID DOWN IN SH APOORJI AND CHAMARIA STILL HOLDS THE FIELD. 48. THE PRINCIPLE EMERGING FROM VARIOUS PRONOUNCEM ENTS OF THE SUPREME COURT, UNION TYRES OBSERVES, IS THAT THE FIRST APPE LLATE AUTHORITY IS INVESTED WITH VERY WIDE POWERS UNDER SECTION 251(1) (A) OF THE ACT AND ONCE AN ASSESSMENT ORDER IS BROUGHT BEFORE THE AUTH ORITY, HIS COMPETENCE IS NOT RESTRICTED TO EXAMINING ONLY THOSE ASPECTS O F THE ASSESSMENT ABOUT ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 23 WHICH THE ASSESSEE MAKES A GRIEVANCE AND RANGES OVE R THE WHOLE ASSESSMENT TO CORRECT THE ASSESSING OFFICER NOT ONL Y REGARDING A MATTER RAISED BY THE ASSESSEE IN APPEAL BUT ALSO REGARDING ANY OTHER MATTER CONSIDERED BY THE ASSESSING OFFICER AND DETERMINED IN ASSESSMENT. 49. THERE IS A SOLITARY BUT SIGNIFICANT LIMITATION , ACCORDING TO UNION TYRES, TO THE POWER OF REVISION: IT IS NOT OPEN TO THE APP ELLATE COMMISSIONER TO INTRODUCE IN THE ASSESSMENT A NEW SOURCE OF INCOME AND THE ASSESSMENT MUST BE CONFINED TO THOSE ITEMS OF INCOME WHICH WER E THE SUBJECT-MATTER OF THE ORIGINAL ASSESSMENT. 50. IN COURSE OF TIME, UNION TYRES WAS DOUBTED. I N. SARDARI LAL & CO.,(SUPRA) THE SAME ISSUEWHETHER THE APPELLATE AU THORITY HAS THE POWER UNDER SECTION 251 TO DISCOVER A NEW SOURCE OF INCOMEWAS REFERRED TO A FULL BENCH. AFTER EXAMINING THE AUTHO RITIES HOLDING THE FIELDING ON THAT ISSUE, THE LEARNED FULL BENCH HAS HELD THAT THE INEVITABLE CONCLUSION IS THAT WHENEVER THE QUESTION OF TAXABIL ITY OF INCOME FROM A NEW SOURCE OF INCOME IS CONCERNED, WHICH HAD NOT BE EN CONSIDERED BY THE ASSESSING OFFICER, THE JURISDICTION TO DEAL WITH TH E SAME IN APPROPRIATE CASES MAY BE DEALT WITH UNDER SECTION 147, OR SECTI ON 148, OR EVEN SECTION 263 OF THE ACT IF REQUISITE CONDITIONS ARE FULFILLE D. IT IS INCONCEIVABLE, ACCORDING TO SARDARI LAL, THAT IN THE PRESENCE OF S UCH SPECIFIC PROVISIONS, A SIMILAR POWER IS AVAILABLE TO THE FIRST APPELLATE A UTHORITY. EVENTUALLY, SARDARI LAL UPHELD THE DECISION IN UNION TYRES. 51. UNDENIABLY, THE PRECEDENTIAL POSITION ON THE PO WERS OF THE FIRST APPELLATE AUTHORITY UNDER SECTION 251 UNDULATES. TH ERE ARE SEEMING CONTRADICTIONS. BUT, AS HELD BY UNION TYRES, AND AS AFFIRMED ON REFERENCE BY SARDARI LAL, THERE IS A CONSISTENT JUD ICIAL ASSERTION THAT THE POWERS UNDER SECTION 251 ARE, INDEED, VERY WIDE; BU T, WIDE AS THEY ARE, THEY DO NOT GO TO THE EXTENT OF DISPLACING POWERS U NDER, SAY, SECTIONS 147, 148, AND 263 OF THE ACT. 52. THEREFORE, WE ARE IN RESPECTFUL AGREEMENT WITH THE VIEW TAKEN BY THE FULL BENCH OF THE HIGH COURT OF DELHI IN SARDAR I LAL. AS A COROLLARY, WE HOLD THAT THE TRIBUNAL'S DELETING THE ENHANCEMENT O F RS. 22,15,116/- AND CANCELING THE ORDER OF THE CIT (A) ON THAT ISSUE CA LL FOR NO INTERFERENCE. 50. THE ISSUE WHICH IS BEING DISPUTED BEFORE US HA S TO BE CONSIDERED AND DECIDED IN LIGHT OF FACTS ON RECORD AND THE LEGAL P ROPOSITION WHICH ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 24 EMERGES FROM THE ABOVE REFERRED DECISIONS. IN THE I NSTANT CASE, THE ENHANCEMENT OF INCOME BY THE LD CIT(A) RELATES TO L ONG TERM CAPITAL GAINS ON SALE TRANSACTIONS EXECUTED THROUGH THE REGISTERE D SALE DEEDS OF EVEN DATE I.E, 11.01.2007 WHEREBY THE ASSESSEE HAS SOLD CERTAIN PLOTS OF LAND AT VILLAGE GONER, TEHSIL SANGANER, JAIPUR TO HIS TWO D AUGHTERS-IN-LAW NAMELY NARANGI DEVI W/O CHHAJU LAL AND JAMNA DEVI W/O KALU RAM FOR A TOTAL CONSIDERATION OF RS 1,62,72,000. NOW, IF WE LOOK AT THE RETURN OF INCOME FILED BY THE ASSESSEE, IT IS NOTED THAT PURSUANT TO ISSUANCE OF NOTICE U/S 148, THE ASSESSEE HAD FILED HIS RETURN OF INCOME DI SCLOSING AGRICULTURAL INCOME OF RS. 1,10,000/- AND PRIOR TO THAT, NO RETU RN OF INCOME WAS FILED BY THE ASSESSEE. THE NOTICE ISSUED UNDER SECTION 14 8 DATED 15.03.2013 TALKS ABOUT AN AMOUNT OF RS 16,50,000 DEPOSITED IN ASSESSEES BANK ACCOUNT MAINTAINED WITH PNB, THE SOURCE OF WHICH HA S NOT BEEN EXPLAINED AND THE SAME HAS THUS ESCAPED ASSESSMENT. ON PERUSA L OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT, IT IS NOTED THAT THE SAID DEPOSITS IN ASSESSEES BANK HAS BEEN EXAMINED HOWEVER, THERE IS NO LINKAGE WITH THE IMPUGNED SALE TRANSACTIONS WHICH ARE THE SUBJECT MATTER OF ENHANCEMENT BY THE LD CIT (A). FURTHER, THERE IS A SALE TRANSACTION WHICH IS THE SUBJECT MATTER OF ASS ESSMENT WHICH RELATES TO SALE OF ANCESTRAL LAND SITUATED AT THE SAME VILL AGE GONER, VILLAGE GONER, TEHSIL SANGANER, JAIPUR VIDE SALE DEED DATED 26.12.2006 TO M/S FINE TECH MACRO DEVELOPERS PVT. LTD FOR A CONSIDERA TION OF RS 13,20,000 AND WHICH HAS BEEN VALUED BY THE STAMP DUTY AUTHORI TIES AT RS 14,88,000. THE SAID TRANSACTION HAS BEEN BROUGHT TO TAX BY THE ASSESSING OFFICER AFTER PROVIDING THE INDEX COST OF ACQUISITION. WE THUS FI ND THAT THE IMPUGNED SALE TRANSACTIONS RELATING TO SALE OF LAND BY THE A SSESSEE TO HIS TWO DAUGHTERS-IN-LAW FOR A TOTAL CONSIDERATION OF RS 1, 62,72,000 WAS NEITHER THE SUBJECT MATTER OF NOTICE ISSUED UNDER SECTION 1 48 AND THE SUBSEQUENT RETURN FILED BY THE ASSESSEE NOR THE SUBJECT MATTER OF ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. IT IS CLEARLY A NE W SOURCE OF INCOME WHICH ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 25 HAS BEEN DISCOVERED BY THE LD CIT(A) WHILE ADJUDICA TING THE MATTER AND NOT A MATTER ARISING OUT OF THE ASSESSMENT PROCEEDI NGS. OUR VIEW IS FORTIFIED BY THE FACT THAT THE IMPUGNED SALE TRANSA CTIONS RELATING TO SALE OF LAND BY THE ASSESSEE TO HIS TWO DAUGHTERS-INLAW FOR A TOTAL CONSIDERATION OF RS 1,62,72,000 WAS THE SUBJECT MATTER OF REOPENI NG OF ASSESSMENT FOR PRECEDING A.Y. 2006-07 WHEREBY THESE TRANSACTIONS W ERE IDENTIFIED WITH SPECIFIC PARTICULARS IN THE REASONS RECORDED BEFORE ISSUANCE OF NOTICE UNDER SECTION 148 FOR THE SAID ASSESSMENT YEAR. SUB SEQUENTLY, THE AO WHILE PASSING THE ASSESSMENT ORDER FOR A.Y. 2006-07 HAS DISCUSSED THE TAXABILITY OF SUCH TRANSACTION IN THE BODY OF THE A SSESSMENT ORDER AND HAS BROUGHT THE SAME TO TAX. IT IS THEREFORE A CASE WHE RE THE IMPUNGED TRANSACTIONS ARE SUBJECT MATTER OF ASSESSMENT AND A RISING OUT OF THE ASSESSMENT ORDER FOR A.Y 2006-07 AND NOT THAT OF A. Y 2007-08. IT IS NOT A CASE THAT THE ADDITIONS IN RESPECT OF THE SAID TRAN SACTIONS ARE MADE ON SUBSTANTIVE BASIS IN A.Y 2006-07 AND ON PROTECTIVE BASIS IN A.Y 2007-08. THE LD CIT(A) WHILE ADJUDICATING THE MATTER FOR A.Y . 2006-07 HAD DETERMINED THAT THE SAID TRANSACTION PERTAINS TO A. Y 2007-08 AND NOT TO A.Y 2006-07 AND HAS DELETED THE ADDITIONS IN A.Y. 2 006-07 AND BROUGHT THE SAME TO TAX IN THE IMPUGNED A.Y 2007-08 BY WAY OF EXERCISING HER ENHANCEMENT POWERS UNDER SECTION 251(1)(A) OF THE A CT WHICH IS CLEARLY BEYOND HER POWERS. IN LIGHT OF THE LEGAL PROPOSITIO NS SO LAID DOWN BY THE HONBLE SUPREME COURT AND OTHER HIGH COURTS REFERRE D SUPRA, THE POWERS OF THE LD CIT(A) ARE CIRCUMSCRIBED BY THE ASSESSMEN T ORDER IN THE MATTERS ARISING THEREOF OR A MATTER ARISING OUT OF THE PROC EEDINGS. AS HELD BY THE COURTS, EVEN THOUGH, THE LD CIT(A) HAS SUO MOTU POW ER TO CONSIDER THE QUESTIONS ARISING THEREOF BUT THERE IS NO PROVISION TO GO BEYOND THE MATTER ARISING OUT OF THE PROCEEDINGS BEFORE THE AS SESSING OFFICER, MORE PARTICULARLY AS SEPARATE PROVISIONS FOR SUCH EVENTU ALITY ARE PROVIDED IN THE ACT. IN LIGHT OF THE SAME, THE ENHANCEMENT SO DONE BY THE LD CIT(A) WHEREBY THE IMPUGNED SALE TRANSACTIONS ARE BROUGHT TO TAX IN THE YEAR ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 26 UNDER CONSIDERATION ARE BEYOND THE SCOPE OF HER POW ERS ENVISAGED UNDER SECTION 251(1)(A) AND THE SAME THUS CANNOT BE ACCEP TED. HOWEVER, THE AO SHALL BE FREE TO TAKE ACTION AS PER LAW. 51. IN LIGHT OF THE ABOVE DISCUSSIONS, HAVING DECI DED AGAINST THE EXERCISE OF POWERS OF THE LD CIT(A) IN BRINGING TO TAX THE SUBJ ECT TRANSACTION, WE DO NOT DEEM IT APPROPRIATE TO EXAMINE AND THE ADDRESS THE ARGUMENTS AND CONTENTIONS SO RAISED BY BOTH THE PARTIES ON MERITS OF THE TAXABILITY OF THE SUBJECT TRANSACTION. IN THE CASE IN HAND, THE ASSESSING OFFICER MADE CER TAIN DISALLOWANCES OF EXPENSES WHILE COMPLETING THE ASSESSMENT U/S 143(3) OF THE ACT WHEREAS THE LD. CIT(A) INVOKED THE POWERS TO ENHANCE THE ASSE SSMENT BY REJECTING THE BOOKS OF ACCOUNT AND CONSEQUENTLY THE INCOME OF THE ASSESSEE WAS ENHANCED BY APPLYING THE G.P. RATE TO ESTIMATE THE INCOME OF THE ASSESSEE. THEREFORE, IT IS CLEAR THAT THE SAID ISSU E AND ASPECT OF NOT ACCEPTING THE BOOK RESULTS OF THE ASSESSEE WAS NEVER TAKEN UP BY THE ASSESSING OFFICER IN THE SCRUTINY ASSESSMENTS OF TH E ASSESSEE. EVEN IF THE ASSESSING OFFICER OUGHT TO HAVE CONSIDERED THE SAID POINT OF CORRECTNESS OF THE BOOKS OF ACCOUNT AND REJECTION OF SAME U/S 145( 3) OF THE ACT IF THE SAID MATTER WAS NOT TAKEN UP FOR SCRUTINY AND ENQUIR Y THEN IT IS A SUBJECT MATTER FALLING IN THE AMBIT OF REVISIONARY POWER U/S 263 OF THE ACT DUE TO THE REASON THAT THERE WAS A COMPLETE LACK OF ENQUIRY ON THE PART OF THE ASSESSING OFFICER TO EXAMINE THE CORRECTNESS OF BOO KS OF ACCOUNT. SINCE THIS WAS NOT AT ALL SUBJECT MATTER OF THE ASSESSMENT , THEREFORE, IT CANNOT ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 27 BE A SUBJECT MATTER OF ENHANCEMENT OF INCOME U/S 25 1 OF THE ACT. ACCORDINGLY FOLLOWING THE VARIOUS DECISIONS AS RELIE D UPON BY THE ASSESSEE AS WELL AS THE DECISION OF THIS TRIBUNAL IN THE CASE OF JAGDISH NARAYAN SHARMA VS ITO (SUPRA) WE SET ASIDE THE ORDER OF THE L D. CIT(A) QUA THIS ISSUE BEING BEYOND THE JURISDICTION OF THE LD. CIT(A ). 8. ON THE MERITS OF THE REJECTION OF BOOKS OF ACCOU NT, THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE LD. CIT(A) HAS REJEC TED THE BOOKS OF ACCOUNT WITHOUT BRINGING ANY MATERIAL OR FACT ON REC ORD TO SHOW THAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE NOT REFLECTING TRUE AND CORRECT STATE OF AFFAIRS OF THE ASSESSEE AS WELL AS TRADING RESULT S. THE ONLY REASON AS ASSIGNED BY THE LD. CIT(A) FOR REJECTING THE BOOKS O F ACCOUNT IS THAT THE ASSESSEE HAS NOT MAINTAINED DAY TO DAY CONSUMPTION AND MOMENT OF EACH AND EVERY STOCK MATERIAL. THE LD AR HAS POINTED OUT THAT THE ASSESSEE PRODUCED BOOKS OF ACCOUNT AS WELL AS STOCK REGISTER TO SHOW THE ENTRIES OF INWARDS OR OUTWARDS MOMENT OF THE STOCK USED IN ITS P ROJECTS. HOWEVER, HAVING REGARDING TO THE NATURE OF BUSINESS OF THE A SSESSEE, IT IS NOT POSSIBLE TO MAINTAIN DAY TO DAY CONSUMPTION AND MOM ENT OF THE STOCK. ONCE, THERE IS NO DEFECT ABOUT ANY QUANTITY OF THE STOCK AS MAINTAINED IN THE STOCK REGISTER OR VALUATION OF THE STOCK THEN M ERELY BECAUSE THE DAY TO DAY MOMENT IS PRACTICALLY NOT POSSIBLE DUE TO THE V OLUMINOUS AND MATERIAL USED AT VARIOUS PROJECTS CANNOT BE RECORDED AT ONE PLACE ON DAILY BASIS, ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 28 THE BOOKS OF ACCOUNT CANNOT BE REJECTED. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF HONBLE JURISDICTIO NAL HIGH COURT DATED 30/07/2015 IN THE CASE OF PR.CIT VS M/S HUES INDIA P VT. LTD. IN D.B. INCOME TAX APPEAL NO. 56/2015 AND SUBMITTED THAT IN ABSENCE OF ANY FINDING THAT THE ASSESSEE HAS MADE ANY EXCESS CLAIM AND ALL THE DETAILS AND ENTRIES ARE RECORDED IN THE BOOKS OF ACCOUNT, N OT FOUND TO BE INCORRECT THEN MERELY BECAUSE DAY TO DAY CONSUMPTIO N DETAILS ARE NOT RECORDED IN THE STOCK REGISTER, CANNOT BE A REASON FOR REJECTION OF BOOKS OF ACCOUNT. HE HAS ALSO RELIED UPON THE DECISION OF S PECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF M/S GTC INDUSTRIES VS. ACIT 1 64 ITD 1. 9. ON THE OTHER HAND, THE LD DR HAS RELIED UPON THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE HAS EXPRESSED THE INABILITY TO MAINTAIN THE STOCK REGISTER SHOWING DAY TO DAY CONSU MPTION CLEARLY ESTABLISHED THAT THE ASSESSEE HAS NOT MAINTAINING P ROPER BOOKS OF ACCOUNT AND THEREFORE, THE BOOK RESULTS ARE NOT GIVING CORR ECT PICTURE AND LIABLE TO BE REJECTED. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE LD CIT(A) HAS REJECTED THE BO OKS OF ACCOUNT ON THE GROUND THAT THE ASSESSEE HAS NOT MAINTAINED ANY REC ORD TO VERIFY THE MOMENT OF ITEMS OF ITS STOCK FOR ITS PROJECTS. THE A SSESSEE HAS EXPLAINED ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 29 THAT DAY TO DAY MOMENT OF THE MATERIAL IS NOT POSSI BLE TO MAINTAIN IN THE STOCK REGISTER AS THE MATERIAL IS THE CONSUMED AT V ARIOUS PROJECTS AT DIFFERENT SITES. HOWEVER, THE LD. CIT(A) HAS REJECTED THE BOOK RESULTS ON THE GROUND THAT IN THE PRECEDING YEARS, THE BOOKS O F ACCOUNT WERE REJECTED BY THE ASSESSING OFFICER U/S 145(3) OF THE ACT WHICH HAS BEEN SUSTAINED BY THE LD. CIT(A) AS WELL AS BY THE TRIBUNAL . THUS, THE SOLE REASON OF REJECTION OF BOOKS OF ACCOUNT IS NOT MAIN TAINING DAY TO DAY CONSUMPTION AND MOMENT OF MATERIAL IN THE STOCK REG ISTER AND FURTHER THE BOOK RESULTS OF THE ASSESSEE WERE REJECTED FOR THE P RECEDING YEARS. IT IS PERTINENT TO NOTE THAT THE ASSESSEE IS IN THE ACTIV ITY OF MANUFACTURING AND TRADING AND THEREFORE DAY TO DAY MOMENT OF THE MATE RIAL IN THE STOCK REGISTER IS NOT POSSIBLE DUE TO THE REASON THAT THE PROJECTS ARE BEING ERECTED AND EXECUTED AT DIFFERENT SITES ON THE BASI S OF THE WORK CONTRACT. THEREFORE, THE PURCHASE OF MATERIAL, CONSUMPTION, OP ENING STOCK AND CLOSING STOCK ALONGWITH WORK IN PROGRESS ARE TO BE MA INTAINED IN THE REGULAR BOOKS OF ACCOUNT ONLY WHEN THE FACTUAL DETA ILS ARE COLLECTED FROM THE PROJECT SITES ABOUT THE CONSUMPTION OF THE MATE RIAL ON REGULAR INTERVALS. THE WORK EXECUTED FOR OTHER PARTIES IS ALWA YS SUBJECT TO SUPERVISION AND CERTIFICATION AND APPROVAL OF THE R UNNING BILLS IS BASED ON THE COMPLETION OF THE WORK EXECUTED BY THE ASSESSEE, THEREFORE, THE REVENUE OF THE ASSESSEE IS ENTIRELY DEPENDING ON TH E SATISFACTION OF THE ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 30 PARTY FOR WHOM THE WORK IS EXECUTED. THE RUNNING BILL S ARE BASED ON THE STATUS OF THE WORK COMPLETED AND THEREFORE ONCE THE PAYMENT IS APPROVED AND RELEASED BY THE PARTY THEN THE WORK EXECUTED AND COST INCURRED BY THE ASSESSEE IS ALSO SUBJECTED TO THE VERIFICATION AND CERTIFICATION OF THE OTHER PARTY FOR WHOM THE WORK IS EXECUTED. IN THIS LINE OF BUSINESS, IT IS NOT POSSIBLE TO MAINTAIN DAY TO DAY RECORD OF CONSUMPTI ON OF THE MATERIAL AND STOCK BUT THE PRIMARY REQUIREMENT IS TO MAINTAIN OP ENING, PURCHASES, CONSUMPTION AND CLOSING STOCK WITH WORK IN PROGRESS F OR THE PURPOSE OF MAINTAINING BOOKS OF ACCOUNT. HENCE, WHEN THE BOOKS OF ACCOUNT ARE PREPARED AS PER THE ACCOUNTING STANDARDS AND DULY A UDITED THEN THE AUDIT TAX REPORT POINTING OUT OF NOT MAINTAINING THE DAY TO DAY MOMENT OF STOCK CANNOT BE A REASON FOR REJECTION OF BOOKS OF ACCOUN T IN ABSENCE OF ANY OTHER DEFECT EITHER IN THE QUANTITY OF OPENING STOC K, PURCHASE, CONSUMPTION, WORK IN PROGRESS AND CLOSING STOCK IS F OUND BY THE AUTHORITIES BELOW. FURTHER THE ASSESSEE HAS PRODUCED THE STOCK REGISTER BEFORE THE AUTHORITIES BELOW WHICH CONTAINS ALL DETAI LS OF OPENING STOCK, PURCHASES, CLOSING STOCK AND WORK IN PROGRESS THEN I N ABSENCE OF ANY DEFECT WHATSOEVER IN THE QUANTITY AND VALUATION OF THE STOCK, MERE DAY TO DAY MOMENT OF THE MATERIAL AND STOCK WHICH IS NOT PO SSIBLE DUE TO VERY NATURE OF THE BUSINESS ACTIVITY OF THE ASSESSEE, CA NNOT BE A GROUND FOR REJECTION OF BOOKS OF ACCOUNT. FURTHER THE DOCTRINE OF RESJUDICATA IS NOT ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 31 APPLICABLE IN THE TAX MATTER AND PARTICULARLY WHEN T HE BOOKS OF ACCOUNT FOR EACH YEARS ARE MAINTAINED INDEPENDENTLY HAVING NO O VERLAPPING EXCEPT THE CLOSING AND OPENING STOCK. THEREFORE, THE REJECTION OF BOOKS OF ACCOUNT IN THE PRECEDING YEAR CANNOT BE A REASON FOR REJECTION OF BOOKS OF ACCOUNT FOR THE YEAR UNDER CONSIDERATION WHEN NO DEFECT IS FOUND IN THE BOOKS OF ACCOUNT EITHER BY THE ASSESSING OFFICER OR BY THE L D. CIT(A) EXCEPT THE DAY TO DAY MOMENT OF THE MATERIAL AND STOCK MAINTAINED IN THE STOCK REGISTER. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PR.CIT VS M/S HUES INDIA PVT. LTD. (SUPRA) WHILE CONSIDERING THE ISSUE OF REJECTION OF BOOKS OF ACCOUNT AND G.P. ADDITION HAS HELD IN PARA 7 TO 9 A S UNDER: 7. WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY TH E COUNSEL FOR THE REVENUE AND HAVE PERUSED THE IMPUGNED ORDER AS ALSO THE OTHER ORDERS. IN OUR VIEW THE CIT(A) AS WELL AS THE TRIBUNAL, AFTER APPRECIATION OF EVIDENCE ON RECORD AND CONSIDERING THE FACTS HAVE COME TO A DEFINITE FINDING OF FACT THAT THE TRADING RESULTS WERE NOT REQUIRED TO BE IN TERFERED WITH MERELY BECAUSE G.P. RATE HAD DECREASED TO AN EXTENT. THE A SSESSEE HAS PIN- POINTEDLY PLACED MATERIAL ON RECORD THAT THE TURN O VER STOOD INCREASED FROM ABOUT 2 CRORE IN THE ASSESSMENT YEAR 2002-03 T O 3.74 CRORE IN THE ASSESSMENT YEAR 2003-2004, AND APART FROM THIS FACT THE ASSESSING OFFICER HAS NOT CONTROVERTED OR OBSERVED CONTRARY TO THE CL AIM OF THE ASSESSEE THAT COST HAD INCREASED, WHEN SPECIFIC MATERIAL WAS PLACED, BEFORE THE ASSESSING OFFICER. THOUGH THE BOOKS OF ACCOUNT HAVE BEEN REJECTED, AND PROPER ESTIMATION CAN CERTAINLY BE MADE BUT IT IS N O GROUND TO MAKE AN ADDITION IN A CASE WHERE THE ASSESSING OFFICER WAS NOT ABLE TO COME TO FURTHER MATERIAL OR CONTROVERT THE FACTS NARRATED B Y THE ASSESSEE DURING ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 32 THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER WAS UNABLE TO PINPOINT AS TO ANY SPECIFIC DEFECT NOTICED DURING C OURSE OF THE PROCEEDINGS EXCEPT THAT THE BOOKS OF ACCOUNT WERE REJECTED ON C ERTAIN DISCREPANCIES. IT WAS FOR THE ASSESSING OFFICER TO COME OUT CLEARLY A S TO THE BASIS FOR REJECTION OF THE BOOK OF ACCOUNTS. THOUGH BOTH THE APPELLATE AUTHORITIES HAVE CONCURRED WITH THE FINDING OF THE ASSESSING OF FICER THAT REJECTION OF BOOKS OF ACCOUNT UNDER SECTION 145(3) OF THE ACT IS FOUND JUSTIFIABLE BUT WHETHER IN EACH AND EVERY CASE WHERE BOOKS OF ACCOU NT ARE REJECTED, DOES IT ENTITLE THE ASSESSING OFFICER TO MAKE AN ADDITIO N TO THE TRADING RESULTS? THIS COURT HAS TAKEN INTO CONSIDERATION SIMILAR ISS UE IN THE CASE OF CIT V. GOTAN LIME KHANIJ UDYOG (SUPRA) WHICH HAS BEEN CONS IDERED BY THE TRIBUNAL WHEREIN IT HAS BEEN HELD AD INFRA :- THE ASSESSING OFFICER HAD FOUND THAT THE TRADING A CCOUNTS OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1986-87 WERE NOT BACKED UP WITH THE QUANTITATIVE AND QUALITATIVE STOCK DETAILS AND THAT THERE WAS A CONSIDERABLE FALL IN THE GROSS PROFIT RATE AND INVOKED THE PROVISIONS OF SEC TION 145 (1) OF THE ACT. THE ASSESSING OFFICER WAS NOT CONVINCED BY THE REASON G IVEN BY THE ASSESSEE THAT THE ASSESSEE HAD EMPLOYED A METHOD OF ACCOUNTING RE GULARLY WHICH WAS ACCEPTED BY THE DEPARTMENT AND MADE AN ADDITION OF RS.3,34,960 BY INCREASING THE GROSS PROFIT RATE. THE COMMISSIONER (APPEALS) WHILE SUBSTANTIALLY ACCEPTING THE EXPLANATION OF THE ASSE SSEE FOR REDUCTION IN GROSS PROFIT RATE WAS OF THE VIEW THAT THE ADDITION WAS O N THE HIGHER SIDE AND SUSTAINED AN ADDITION OF RS.34,000 ONLY TO COVER UP THE POSSIBLE LEAKAGE IN THE BOOKS OF ACCOUNT. THE TRIBUNAL UPHELD THE INVOC ATION OF THE PROVISIONS OF SECTION 145(1) BUT DID NOT SUSTAIN THE ADDITIONS RE TAINED BY THE COMMISSIONER (APPEALS). ON A REFERENCE : HELD, THAT THE TRIBUNAL HAD REACHED THE FINDING O N THE GROUND THAT, IN THE ABSENCE OF ANY FINDING RECORDED BY THE COMMISSI ONER (APPEALS) THAT THE EXPENSES INCURRED ON ANY ACCOUNT APPEARED TO BE UNREASONABLE OR EXCESSIVE, THE ADDITIONS SUSTAINED MERELY ON SUSPICION OF PILFERAGE OR LEAKAGE WERE NOT JUSTIFIED. THIS CO NCLUSION WAS A FINDING OF FACT KEEPING IN VIEW THAT THE ADDITIONS IN THE P ROFITS AND GAINS RETURNED BY THE ASSESSEE WERE NOT A NECESSARY CONCO MITANT OF AN ORDER MADE UNDER SECTIONS 145(1) OR 145(2). THEREFORE, TH ERE WAS NO ERROR IN THE ORDER OF THE TRIBUNAL DELETING THE ENTIRE ADDIT IONS TO THE TRADING RESULTS AFTER HOLDING THAT THE PROVISO TO SECTION 1 45(1) WAS APPLICABLE. ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 33 8. THIS COURT, IN THE CASE OF MALANI RAMJIVAN JAGA NNATH V. ASSISTANT COMMISSIONER OF INCOME TAX 2007 (207) CTR 19, HAS H ELD AS UNDER:- MERE DEVIATION IN GP RATE CANNOT BE A GROUND FOR R EJECTING BOOKS OF ACCOUNT AND ENTERING REALM OF ESTIMATE AND GUESSWOR K. LOWER GP RATE SHOWN IN THE BOOKS OF ACCOUNT DURING CURRENT YEAR A ND FALL IN GP RATE WAS JUSTIFIED AND ALSO ADMITTED BY THE AO AS WELL AS CI T(A) AS WELL AS THE TRIBUNAL. THEREFORE, FALL IN GP RATE LOST ITS SIGNI FICANCE. HAVING ACCEPTED THE REASON FOR FALL IN GP RATE, NAMELY, STIFF COMPETITI ON IN MARKET AND ALSO THAT HUGE LOSS CAUSED IN PARTICULAR TRANSACTION, NEITHER THE REJECTION OF BOOKS OF ACCOUNT WAS JUSTIFIED NOR RESORT TO SUBSTITUTION OF ESTIMATED GP BY RULE OF THUMB MERELY FOR MAKING CERTAIN ADDITIONS. WE ARE, THEREFORE, OF THE OPINION THAT THE FINDINGS ARRIVED AT BY THE TRIBUNA L SUFFERS FROM BASIC DEFECT OF NOT APPLYING ITS MIND TO THE EXISTING MATERIAL W HICH WERE RELEVANT AND WENT TO THE ROOT OF THE MATTER. WHEN ALL THE DATA A ND ENTRIES MADE IN THE TRADING ACCOUNT WERE NOT FOUND TO BE INCORRECT IN A NY MANNER, THERE COULD NOT HAVE BEEN ANY OTHER RESULT EXCEPT WHAT HAS BEEN SHOWN BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. WE ARE, THEREFORE , UNABLE TO SUSTAIN THE ORDER OF THE TRIBUNAL. 9. IN THE INSTANT CASE AS WELL WE NOTICE THAT EVEN THE ASSESSING OFFICER APPLIED THE G.P. RATE OF 25% AS AGAINST 28.14% IN T HE PRECEDING YEAR. THEREFORE, THE ASSESSING OFFICER ALSO RESORTED TO E STIMATION. ACCORDINGLY IN VIEW OF WHAT WE HAVE OBSERVED HEREINABOVE IS BASICA LLY A FINDING OF FACT BASED ON THE APPRECIATION OF EVIDENCE AND THIS BEIN G ESSENTIALLY A FINDING OF FACT NO SUBSTANTIAL QUESTION CAN BE SAID TO ARIS E OUT OF THE ORDER OF TRIBUNAL. ACCORDINGLY, THE INSTANT APPEAL IS DISMIS SED IN LIMINE. THEREFORE, ONCE THERE IS NO MATERIAL DEFECT IS FOUND IN THE BOOKS OF ACCOUNT THEN THE SAME CANNOT BE REJECTED ON THE REA SON THAT THE ASSESSEE HAS DECLARED LESS G.P. FOR THE YEAR UNDER CONSIDERA TION OR DAY TO DAY MOMENT OF MATERIAL IS NOT REFLECTED IN THE STOCK RE GISTER. THE SPECIAL BENCH OF MUMBAI TRIBUNAL IN THE CASE OF M/S GTC INDUS TRIES LTD. VS ACIT (SUPRA) HAS ALSO CONSIDERED THIS ISSUE IN PARA 50 A ND 51 AS UNDER: ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 34 50. NOW COMING TO THE ISSUE OF REJECTION OF BOOKS OF ACCOUNT AS WELL AS THE ESTIMATION OF INCOME BY MULTIPLYING THE VOLUME OF S ALES OF LOWER PRICE BRAND WITH THE DIFFERENTIAL PRICE OF HIGHER PRICE B RAND ON ACCOUNT OF THEORY OF 'TWIN BRANDING MECHANISM' AND THEREBY GIVING AN ADHOC REDUCTION OF 10% ON THE GROUND THAT SOME OF THE SHARE IN PREMIUM MONEY BELONGED TO THE WHOLESALE BUYERS. FIRST OF ALL, IT IS NOTICED T HAT, THE BASIS OF REJECTION OF BOOKS OF ACCOUNT BY THE ASSESSING OFFICER U/S 145(2 ) IS THAT, FIRSTLY, ASSESSEE HAS MAINTAINED BANK ACCOUNTS IN FICTITIOUS NAMES OUTSIDE THE BOOKS AND HAS OTHERWISE INCURRED EXPENS ES WHICH ARE NOT REFLECTED IN BOOKS OF ACCOUNT; AND SECONDLY, ASSESSEE HAS BEEN MAINTAINING CASH IN BANK ACCOUNTS OUTSIDE THE BOOKS. LEARNED CI T (A) HAS FURTHER ADDED ONE MORE GROUND THAT, BANK ACCOUNTS APPEARING TO BE CHANNEL FOR CIRCULATING SUCH PREMIUM OR ASSESSEE IS BOUND TO HA VE A LARGE SHARE IN SUCH SECRET MONEY AND ITS CIRCULATION. FIRST OF ALL THE FIRST ALLEGATION OF THE AO THAT IT IS PROVED BEYOND DOUBT THAT ASSESSEE HAS MAINTAINED BANK ACCOUNTS IN FICTITIOUS NAMES OUTSIDE THE BOOKS, THE SAME IS NOT TENABLE BECAUSE AS ALREADY HELD ABOVE, IT HAS NOT BEEN PROV ED THROUGH ANY DIRECT OR INDIRECT MATERIAL OR EVIDENCE THAT BANK ACCOUNTS BELONG TO THE ASSESSEE- COMPANY. THOUGH THE PREMIUM WAS COLLECTED BY THE WH OLESALE BUYERS WHICH WERE DEPOSITED IN THE FICTITIOUS BANK ACCOUNT S FROM WHERE CERTAIN ADVERTISEMENT EXPENSES AND OTHER EXPENSES WERE INCU RRED, BUT AS DISCUSSED IN DETAIL IN THE FOREGOING PARAGRAPHS, TH ERE IS NO MATERIAL AS SUCH OR ANY STATEMENT IMPLICATING THE ASSESSEE THAT THES E BANK ACCOUNTS HAVE BEEN EITHER MAINTAINED BY THE ASSESSEE OR WAS UNDER THE CONTROL OF THE ASSESSEE OR WAS BENAMI OF THE ASSESSEE. IF THAT IS SO, THEN THE ENTIRE PREMISE FOR REJECTING THE BOOKS OF ACCOUNT GETS VIT IATED. ONCE WE HOLD THAT THERE IS NO MATERIAL TO IMPLICATE THE ASSESSEE THEN THE PRESUMPTION THAT ASSESSEE IS MAINTAINING CASH IN BANK ACCOUNT OUTSID E THE BOOKS ALSO FAILS BECAUSE THIS ALLEGATION TOO IS NOT FLOWING FROM THE FIRST PREMISE OF THE AO. THE ADDITIONAL REASON CITED BY THE LD. CIT (A) FALL S WITHIN THE REALM OF SUSPICION AND SURMISES AND BASED ON SUCH SUSPICION AND SURMISE SANS ANY DIRECT MATERIAL, THE SAME CANNOT BE UPHELD. AS STAT ED SEVERAL TIMES HEREIN ABOVE, THERE IS NO FINDING OR ANY COGENT MATERIAL T O ESTABLISH THAT EXTRA AMOUNT COLLECTED IN CASH BY SHOPKEEPERS/RETAILERS H AVE BEEN PASSED ON FURTHER FROM WHOLESALE BUYERS/ SUPER BUYERS TO THE MANUFACTURER, I.E., ASSESSEE; AND ONCE THAT IS SO, THE PRESUMPTION OF I NDIRECT FLOW BACK CANNOT BE MADE THE BASIS FOR SUCH ADDITION OR ESTIMATION O F INCOME. VARIOUS CASE LAWS HAVE BEEN REFERRED BY THE LEARNED COUNSEL BEFO RE US ON THIS POINT; HOWEVER, WE ARE NOT REFERRING TO THESE DECISIONS BE CAUSE, WE HAVE ARRIVED AT OUR CONCLUSION ON THE BASIS OF MATERIAL FACTS BR OUGHT ON RECORD AND AS REFERRED TO BEFORE US. ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 35 51. EVEN THOUGH WE HAVE HELD THAT AO & CIT(A) WERE NOT CORRECT IN LAW AND ON FACTS TO REJECT THE BOOKS OF ACCOUNT, HOWEVER FO R THE SAKE OF COMPLETENESS, WE DEEM FIT TO DEAL WITH ISSUE OF EST IMATION AS HAS BEEN MADE BY A.O. IN BRIEF. THE ESTIMATION MADE BY THE A O FOR ASSESSING THE INCOME IS VERY FAULTY BECAUSE, IT IS BASED ON HIGH DEGREE OF PRESUMPTION AND HYPOTHESIS THAT ON EACH AND EVERY SALE OF LOWER BRAND CIGARETTE ALL ACROSS THE COUNTRY MADE TO MILLIONS OF CONSUMERS TH ROUGH MILLIONS OF RETAILERS, THERE HAS BEEN COLLECTION OF EXTRA MONEY EQUIVALENT TO THE PRICE OF HIGH BRAND VALUE CIGARETTES AND THEN SUCH COLLEC TION OF MONEY HAS CENT PER CENT FLOWN BACK TO THE ASSESSEE DIRECTLY; AND O UT OF THAT PREMIUM MONEY SOME MINOR SHARE PERTAINS TO THE WHOLESALE BU YERS. SUCH A WILD SPECULATION OR BASIS FOR ESTIMATION ON THE FACTS OF THE PRESENT CASE IS VERY FAR-FETCHED AND IMPLAUSIBLE. THE BEST JUDGMENT DOES NOT ENTAIL WILD GUESSWORK OR HUGE ADDITIONS SHOULD BE RESORTED TO, ALBEIT IT LAYS DOWN THE DETERMINATION OF INCOME BASED ON FAIR AND REASONABL E ANALYSIS BASED ON SOME TANGIBLE MATERIAL. THE FRAMING OF THE BEST JUD GMENT THOUGH ENTAILS SOME KIND OF FAIR AND HONEST ESTIMATION BUT AT THE SAME TIME IT SHOULD BE BASED ON MATERIAL AND INFORMATION ON RECORD. THE BE ST JUDGMENT IS NOT A PROVISION TO PENALIZE THE ASSESSEE AND RESORT TO WI LD ESTIMATE BUT IT IS A MACHINERY PROVISION WHICH IS TO BE BASED ON ASSESSI NG THE CORRECT INCOME AND THAT TOO BASED ON MATERIAL AND EVIDENCE HAVING LIVE LINK NEXUS WITH THE INCOME WHICH IS TO BE ASSESSED. THUS, ON THIS C OUNT ALSO, WE ARE UNABLE TO UPHOLD THE KIND OF ESTIMATION OR ADDITION WHICH HAS BEEN MADE BY THE AO AND SUSTAINED BY THE LD. CIT (A) AND ACCORDINGLY , WE DIRECT THE AO TO DELETE THE ENTIRE ADDITION. IN THE RESULT ASSESSEE' S APPEAL IS ALLOWED. ACCORDINGLY, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE REJECTION OF BOOKS OF ACCOUNT BY THE LD. C IT(A) IS NOT VALID AS NOT BASED ON ANY MATERIAL DEFECT POINTED OUT BY THE LD. CIT(A), HENCE, THE SAME IS SET ASIDE. 11. SINCE WE HAVE SET ASIDE THE ORDER OF THE LD. CIT( A) REJECTING THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT, THEREFORE, THE CONSEQUENTIAL ADDITION MADE BY THE LD. CIT(A) ALSO STOOD DELETED A ND THE GROUNDS RAISED ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 36 BY THE ASSESSEE IN RESPECT OF THE TRADING ADDITION IN GROUNDS NO. 4 AND 5 STAND ALLOWED. 12. GROUND NO. 7 OF THE ASSESSEES APPEAL IS REGARD ING DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT. THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS MADE PAYMENTS OF TRANSPORTATION TO VAR IOUS CONTRACTORS WITHOUT DEDUCTION OF TDS WHEREAS THE PAYMENTS WERE REQ UIRED TO BE MADE SUBJECT TO TDS U/S 194C OF THE ACT. ACCORDINGL Y, THE ASSESSING OFFICER MADE DISALLOWANCE OF RS. 1,62,33,061/- U/S 4 0(A)(IA) OF THE ACT. 13. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESS ING OFFICER BEFORE THE LD. CIT(A) AND CONTENDED THAT THE PROVISIONS OF SECTION 194C(6) OF THE ACT DOES NOT REQUIRE DEDUCTION OF TAX AT SOURCE WHEN THE PAYMENT IS MADE TO A CONTRACTOR WHO IS ENGAGED IN THE BUSINESS OF P LYING/HIRING/LEASING GOODS CARRIER ON FURNISHING HIS PAN TO THE PERSON M AKING THE PAYMENT. THE LD. CIT(A) ACCEPTED THE CONTENTION OF THE ASSESSE E AND PARTLY DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 4 0(A)(IA) OF THE ACT. AS REGARDS THE OTHER PAYMENTS MADE TO THE INDIVIDUAL T RANSPORTERS, THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A) THAT THE PA YMENTS IN THE SINGLE TRANSACTION DO NOT EXCEED THE LIMITS PROVIDED UNDER THE PROVISIONS, HOWEVER, THE LD. CIT(A) DID NOT ACCEPT THIS CONTENTI ON AND SUSTAINED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 37 14. BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMIT TED THAT THE LD. CIT(A) HAS DELETED THE ADDITION MADE BY THE ASSESSI NG OFFICER TO THE EXTENT OF RS. 1,27,68,281/- OUT OF THE TOTAL ADDITI ON OF RS. 1,62,33,061/-. ONCE THE ASSESSEE HAS PRODUCED THE CHALLANS HAVING PAN NUMBER OF THE RECIPIENTS PAYEE TRANSPORTERS THEN THE DEDUCTION OF TAX U/S 194C IS NOT REQUIRED AND CONSEQUENTLY NO DISALLOWANCE IS CALLED FOR U/S 40(A)(IA) OF THE ACT. ALTERNATIVELY THE LD AR HAS SUBMITTED THAT IN VIEW OF THE AMENDMENT IN SECTION 40(A)(IA) OF THE ACT WHEREBY TH E DISALLOWANCE SUSTAINED BY THE LD. CIT(A) MAY BE RESTRICTED TO 30% . IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF DELH I BENCHES OF THE TRIBUNAL DATED 01/8/2018 IN THE CASE OF CHOPRA INDUS TRIES VS. ADDL.CIT IN ITA NO. 3099/DEL/2015. 15. ON THE OTHER HAND, THE LD CIT-DR HAS SUBMITTED THAT MERE PRODUCTION OF INVOICE OF VOUCHERS HAVING PAN OF THE TRANSPORTER IS NOT A COMPLIANCE OF SECTION 194C(6)&(7) OF THE ACT WHEN TH E ASSESSEE HAS NOT PRODUCED THE DETAILS IN THE PRESCRIBED PROFORMA BEF ORE THE COMPETENT AUTHORITY. HE HAS RELIED UPON THE ORDER OF THE ASSE SSING OFFICER. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THIS ISSUE IS COMMON IN BOTH THE APPEALS OF THE ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 38 ASSESSEE AS WELL AS THE REVENUE. THE REVENUE HAS RAI SED GROUND FOR THE A.Y. 2012-13 ON THIS ISSUE AS UNDER: 1. WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON OF RS. 1,27,68,281/- WHEN THE ASSESSEE FAILED TO FURNISH T HE INFORMATION TO PRESCRIBED AUTHORITY IN PRESCRIBED FORM AS ENVISAGE D IN SECTION 194C(7) OF THE ACT? 2. WHETHER IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITI ON OF RS. 1,27,68,281/- WHEN IT CANNOT BE ASCERTAINED AS TO WHEN THE ASSESSEE OBTAINED THESE PAN NOS. FROM THE TRANSPORTERS? THE ASSESSING OFFICER MADE TOTAL DISALLOWANCE OF RS. 1,62,33,061/- BY INVOKING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT BECAUSE THE ASSESSEE HAS NOT DEDUCTED TDS IN RESPECT OF THESE PA YMENTS MADE TO VARIOUS TRANSPORTERS AS WELL AS CONTRACT TRANSPORTER S. THE LD. CIT(A) AFTER CONSIDERING THE FACT THAT THE ASSESSEE PRODUCED INF ORMATION AS REQUIRED U/S 194C(7) OF THE ACT IN THE SHAPE OF CHALLAN/BUIL TIES/GR/INVOICE PRINTING PAN OF THE RECIPIENTS, THEREFORE, TO THE EXTENT OF THE PAYMENT MADE TO THESE CONTRACTORS, THE ASSESSEE WAS HELD NOT LIABLE TO DEDUCT TAX, ONCE THE ASSESSEE HAS PRODUCED REQUISITE INFORMATION WHICH WAS SUBJECT TO VERIFICATION IN SOME OF THE CASES. THE RELEVANT FIND ING OF THE LD. CIT(A) IN THE CONCLUDING PART AT PAGES 10 TO 21 OF THE ORDER IS AS UNDER: (V) I HAVE DULY CONSIDERED THE SUBMISSIONS THE APP ELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD AND I DO NOT FIND ANY MERIT IN THE CONTENTION OF THE APPELLANT. THE CONTENTION THAT TH E PAYMENTS WERE ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 39 MADE BY ITS EMPLOYEE AT KANOTA AND EACH PAYMENT WAS BELOW RS. 30,000/- AND AGGREGATE PAYMENT TO A PARTICULAR PART Y DID NOT EXCEED RS. 75,000/- IS DEVOID OF ANY MERIT AS IT IS NOT SUPPOR TED BY ANY DOCUMENTARY EVIDENCE. THE CONTENTION OF THE APPELLANT THAT THE PROVISIONS OF SECTION 40(A) (IA) OF THE ACT ARE APPLICABLE WHERE THE AMOU NT REMAINED PAYABLE ON THE CLOSE OF THE FINANCIAL YEAR WHEREAS IN THE I NSTANT CASE UNDER CONSIDERATION, THE ENTIRE PAYMENT WAS PAID AND NOTH ING REMAINED PAYABLE, IS ALSO DEVOID OF ANY MERIT. IT MAY BE MEN TIONED THAT THE ISSUE IS NO MORE RES INTEGRA AS IT WAS HELD BY THE HONBLE A PEX COURT IN THE CASE OF PALAM GAS SERVICES CIT [2017] 81 FAXMANN.COM 43 (SC) THAT: SECTION 40(A) (IA) OF THE INCOME-TAX ACT, 1961 - BUSINESS DISALLOWANCE INTEREST ETC. PAID TO A RESIDENT WITHOUT DEDUCTION OF TAX AT SOURCE (SCOPE OF) - WHETHER WORD 'PAYABLE' OCCURRING IN SECTION 4 0(A) (IA) NOT ONLY COVERS CASES WHERE AMOUNT IS YET TO BE PAID BUT ALSO THOSE CASES WHERE AMOUNT HAS ACTUALLY BEEN PAID - HELD, YES [PARA 15] [IN FA VOUR OF REVENUE] (HEAD NOTE)' (VI) THE CONTENTION OF THE APPELLANT THAT THE PAYM ENT OF RS. 45,000 WAS GENUINE AND CANNOT BE DISALLOWED UNDER SECTION 40A( 3) OF THE ACT IS ALSO DEVOID OF MERIT AS THE APPELLANT HAS NOT BROUGHT ON RECORD, THE CIRCUMSTANCES IN WHICH THE SAID PAYMENT WAS MADE IN CASH IN VIOLATION OF THE EXPRESS PROVISIONS OF SECTION 40A(3) OF THE ACT . THE APPELLANT COULD NOT INDICATE UNDER WHICH CLAUSE OF RULE 6D OF THE I T RULES, IT COULD TAKE SHELTER TO AVOID THE RIGOURS OF PROVISIONS OF SECTI ON 40A(3) OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD THAT THE A O WAS JUSTIFIED IN MAKING DISALLOWANCE OF RS. 5,94,412/- U/S 40(A) (IA) OF TH E ACT INCLUDING RS. 45,000/- U/S 40(A)(IA)/40A(3))AND THUS, THE SAME IS HEREBY SUSTAINED. DISALLOWANCE OF RS. 1,56,38,649/- (VII) THE AO HAS DISALLOWED THE SUM OF RS. 1,56,38 ,649/- BY OBSERVING THAT THE APPELLANT HAS NOT COMPLIED WITH THE PROVISIONS OF S ECTION 1940(7) OF THE ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 40 ACT AND 1940(6) AND 1940(7) ARE INTERLINKED. IT WAS ALSO OBSERVED BY THE AO THAT IT CANNOT BE ASCERTAINED AS TO WHEN THE PAN S WERE OBTAINED BY THE APPELLANT, WHETHER THESE WERE OBTAINED PRIOR TO MAKING PAYMENT TO TRANSPORTERS OR AT THE TIME OF FURNISHING THE REPLY TO QUERY RAISED BY THE AO. IT WAS ALSO STATED BY THE AO THAT THE LEEWAY GI VEN IN SECTION 1940(6) OF THE ACT WAS ACTUALLY MEANT TO BE FOR THE BENEFIT OF SMALL AND MEDIUM TRANSPORTERS, WHO HAD TO PROVIDE DECLARATION TO THE DEDUCTOR (INSTEAD OF PAN) PRIOR TO 01/10/2009, I.E. BEFORE AMENDMENT TO THE PROVISION OF SECTION 194C OF THE ACT. HENCE, IN VIEW OF THE PROV ISIONS OF SECTION 194C(7) OF THE ACT, THE ONUS WAS UPON THE APPELLANT TO FURNISH INFORMATION, IT WAS ENTRUSTED TO COLLECT ON BEHALF OF THE INCOME TAX DEPARTMENT FROM THE TRANSPORTERS, TO REMAIN FREE FR OM THE CLUTCHES OF PROVISIONS OF SECTION 40(A) (IA) OF THE ACT. (VIII) DURING THE APPELLATE PROCEEDINGS, IT WAS SUB MITTED BY THE APPELLANT THAT AS PROVIDED U/S 194C(6) OF THE ACT, IT WAS NOT REQU IRED TO DEDUCT ANY TAX AT SOURCE WHERE THE PAYMENT IS MADE TO A CONTRACTOR WHO IS ENGAGED IN THE BUSINESS OF PLYING, HIRING OR LEASING GOODS CAR RIAGES ON FURNISHING OF HIS PAN TO THE PERSON MAKING THE PAYMENT. IT HAS MA DE THE PAYMENTS TO RESPECTIVE PARTIES AFTER OBTAINING THEIR PAN AND VI DE LETTER DATED 23.03.2015 FURNISHED THE SAME BEFORE THE AO. IT WAS FURTHER SUBMITTED THAT THE PAN OF THE RESPECTIVE PARTIES WERE LYING P RINTED/WRITTEN ON THE GR/CHALLAN/BILTY/BILL ISSUED BY THEM, THEREFORE, TH E AO HAS NO JUSTIFICATION IN HOLDING THAT IT CANNOT BE ASCERTAI NED WHETHER THE APPELLANT HAS OBTAINED THE PAN PRIOR TO MAKING PAYM ENTS TO TRANSPORTERS OR AT THE TIME OF FURNISHING THE REPLY TO HIS QUERY . IT WAS FURTHER SUBMITTED THAT THE INCOME TAX AUTHORITY PARTICULARS, FORM AND TIME AS PROVIDED U/S 1940(7) OF THE ACT WERE NOT PRESCRIBED DURING THE P RECEDING F.Y. 2010-11, HOWEVER THE CBDT AT THE END OF THE SAME, VIDE NOTIF ICATION NO. 16/2011 DATED 29.03.2011 PROVIDED U/R 31 A(4) (VI) OF IT RU LES TO INCLUDE SUCH ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 41 PARTICULARS IN RESPECTIVE QUARTERLY STATEMENTS OF T DS. IT WAS THE CONTENTION OF THE APPELLANT THAT SINCE THE RELEVANT PREVIOUS YEAR WAS THE FIRST YEAR, WHEN THE ABOVE SAID NOTIFICATION BECAME APPLICABLE, THEREFORE, IT COULD NOT NOTICED THE SAME AND CONSEQUENTLY, UND ER A BONAFIDE ERROR COULD NOT MADE COMPLIANCE OF THE SAME. (IX) IT WAS THE CONTENTION OF THE APPELLANT THAT TH E PROVISIONS OF SECTION 194C (6) OF THE ACT OVERRIDE THE GENERAL PROVISIONS OF S ECTION 194C( 1) AND SINCE, IT HAS OBTAINED PAN OF THE TRANSPORTERS, THE RE IS NO REQUIREMENT OF DEDUCTION OF TAX AT SOURCE AS PROVIDED U/S 194C(6) OF THE ACT AS IT PROVIDES EXEMPTION FROM THE APPLICATION OF SECTION 194C( 1) SUBJECT TO THE CONDITION OF OBTAINING PAN FROM THE TRANSPORTERS. I T WAS FURTHER STATED THAT THE PROVISIONS OF SECTION 194C(6) OF THE ACT A RE INDEPENDENT AND SUBJECT TO COMPLIANCE OF SECTION 194C(7) OF THE ACT , THEREFORE, THE LIABILITY TO DEDUCT TAX AT SOURCE CEASES AT THE MOMENT, WHEN IT OBTAINED THE PAN OF THE TRANSPORTER AND THAT LIABILITY CANNOT BE CON SIDERED TO HAVE BEEN AGAIN RESTORED DUE TO NON COMPLIANCE OF SECTION 194 C(7). IN SUPPORT OF ITS SUBMISSIONS, THE APPELLANT HAS RELIED UPON THE ORDE R DATED 13.02.2015 OF HON'BLE HYDERABAD BENCH OF ITAT IN THE CASE OF ACIT V. MOHAMMAD SUHAIL IN ITA NO.L536/HYD./2014. (X) I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE A PPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. IT IS NOTED FROM THE MATERIAL PLACED ON RECORD THAT THE PAN OF THE RESPECTIVE PARTIES WERE PRINTED ON THE GR/CHALLAN/BILTY/BILL ISSUED BY THE PARTIES TO WHOM MAJOR PAYMENTS WERE MADE AND ONLY IN FEW CASES, IT WAS HAND WRITTEN. TH EREFORE, AT LEAST IN RESPECT OF THOSE PARTIES, WHERE PAN WAS PRINTED ON VARIOUS DOCUMENTS, I FIND MERIT IN THE CONTENTION OF THE APPELLANT THAT THE AO HAS NO JUSTIFICATION IN HOLDING THAT IT CANNOT BE ASCERTAI NED WHETHER THE APPELLANT HAS OBTAINED PAN PRIOR TO MAKING PAYMENTS TO TRANSPORTERS OR AT THE TIME OF FURNISHING THE REPLY TO HIS QUERY. ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 42 (XI) BEFORE PROCEEDING FURTHER, IT WOULD BE APPROPR IATE TO REPRODUCE THE RELEVANT PROVISIONS OF SECTION 194C OF THE ACT AS U NDER: 194C. (1) ANY PERSON RESPONSIBLE FOR PAYING ANY S UM TO ANY RESIDENT (HEREAFTER IN THIS SECTION REFERRED TO AS THE CONTR ACTOR) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABOUR FOR CARRYING O UT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND A SPECIFIED PERSON SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACC OUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO (I) ONE PER CENT WHERE THE PAYMENT IS BEING MADE OR CREDIT IS BEING GIVEN TO AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY; (II) TWO PER CENT WHERE THE PAYMENT IS BEING MADE O R CREDIT IS BEING GIVEN TO A PERSON OTHER THAN AN INDIVIDUAL OR A HIN DU UNDIVIDED FAMILY, OF SUCH SUM AS INCOME-TAX ON INCOME COMPRIS ED THEREIN. ************* (6) NO DEDUCTION SHALL BE MADE FROM ANY SUM CREDITE D OR PAID OR LIKELY TO BE CREDITED OR PAID DURING THE PREVIOUS YEAR TO THE ACCOUNT OF A CONTRACTOR DURING THE COURSE OF BUSINESS OF PLYING, HIRING OR LEASING GOODS CARRIAGES, ON FURNISHING OF HIS PERMANENT ACC OUNT NUMBER, TO THE PERSON PAYING OR CREDITING SUCH SUM. (7) THE PERSON RESPONSIBLE FOR PAYING OR CREDITING ANY SUM TO THE PERSON REFERRED TO IN SUB-SECTION (6) SHALL FURNISH, TO TH E PRESCRIBED INCOME- TAX AUTHORITY OR THE PERSON AUTHORISED BY IT, SUCH PARTICULARS, IN SUCH FORM AND WITHIN SUCH TIME AS MAY BE PRESCRIBED.' (XII) THUS, IT IS EVIDENT THAT ON RECEIPT OF THE PA N OF THE PAYEE, THE PAYER IS NOT REQUIRED TO DEDUCT TAX AT SOURCE IN VIEW OF THE PRO VISIONS OF SECTION 194C(6) OF THE ACT, HOWEVER, IN ORDER TO KEEP A TRA CK OF SUCH PAYMENTS TO CONTRACTORS WITHOUT DEDUCTING OF TAX AT SOURCE, THE DETAILS WERE TO BE FURNISHED TO THE INCOME TAX DEPARTMENT IN THE PRESC RIBED FORM AND TO THE PRESCRIBED AUTHORITY. THE AO HAS OBSERVED THAT THE PROVISIONS OF SECTION 1940(6) AND 194C(7) OF THE ACT ARE INTERRELATED AND SINCE THE APPELLANT ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 43 DID NOT COMPLY WITH THE PROVISIONS OF SECTION 194C( 7) OF THE ACT, THE AMOUNT PAID TO THE CONTACTORS IS LIABLE FOR DISALLO WANCE U/S 40(A) (IA) OF THE ACT. (XIII) IN THE CASE OF ACIT VS M/S MOHAMMED SUHAIL I N ITA NO. 1536/HYD/2014 FOR THE AY 2010-11, IT WAS HELD BY THE HONBLE ITAT , HYDERABAD BENCH THAT: 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PE RUSING THE SUBMISSIONS AND NOTIFICATIONS ISSUED IN THIS REGARD, WE ARE OF THE OPINION THAT THERE IS NO NEED TO DEVIATE FROM THE ORDER OF LD. C IT(A). EVEN THOUGH NEW PROVISIONS WERE INTRODUCED AND ASSESSEES WERE M ADE LIABLE TO DEDUCT TAX ON THE PAYMENTS MADE TO TRANSPORTERS, PR OVISIONS OF SECTION 194C(6) GIVES EXEMPTION TO THE PERSONS NOT TO DEDUCT THE AMOUNT, IN CASE THEY OBTAIN/FURNISH THE PAN. ASSESS EE HAS COMPLIED WITH THESE PROVISIONS. THEREFORE, THERE IS NO NEED TO DEDUCT ANY TAX AND DISALLOWANCE UNDER SECTION 40(A) (IA) DOES NOT ARISE. EVEN THOUGH IT WAS STATED IN SUB SECTION (7) THAT PERSON RESPON SIBLE FOR PAYING OR CREDITING ANY SUM TO THE PERSON REFERRED TO IN SUB- SECTION (6) SHALL FURNISH, TO THE PRESCRIBED INCOME TAX AUTHORITY OR THE PERSON AUTHORISED BY IT, SUCH PARTICULARS IN SUCH FORM WIT HIN SUCH TIME AS MAY BE PRESCRIBED, THIS PROVISION WAS NOT MADE APPL ICABLE FOR THE IMPUGNED ASSESSMENT YEAR AS THE RELEVANT NOTIFICATI ON WAS NOT ISSUED IMMEDIATELY. IN FACT, THE BOARD HAS GIVEN NO TIFICATION ON 15.10.2010, WHICH WAS MADE EFFECTIVE FOR THE FORTHC OMING SECOND QUARTER STATEMENT DUE ON 15TH OCTOBER, 2010. SINCE CBDT ITSELF HAS ISSUED NOTIFICATION IN A LATER YEAR, ASSESSEE'S CON TENTION THAT IN THE IMPUGNED ASSESSMENT YEAR, NO SUCH PRESCRIBED AUTHOR ITY WAS STATED HAS TO BE ACCEPTED. EVEN OTHERWISE, AS RIGHTLY POIN TED OUT BY THE LD. CIT(A) PROVISIONS OF SECTION 1940(6) ARE INDEPENDEN T OF SECTION 1940(7). JUST BECAUSE THERE IS VIOLATION OF PROVISI ONS OF SECTION 1940(7), DISALLOWANCE UNDER SECTION 40(A) (IA) DOES NOT ARISE, IF ASSESSEE COMPLIES WITH THE PROVISIONS OF SECTION 19 40(6). IN VIEW OF THIS, WE DO NOT FIND ANY MERIT IN REVENUE APPEAL.' (XIV) IT MAY BE MENTIONED THAT IN THE CASE OF SOMA RANI GHOSH VS DCIT [2016] 74 TAXMANN.COM 90 (KOLKATA - TRIB.), IT WAS HELD BY THE HONBLE TRIBUNAL THAT: ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 44 '31. A COORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 86/VIZ/2013 IN THE CASE OF ITO V. KOLLI BROS, DATED 11.12.2013 FOLLOWE D THE DECISION OF THE HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF VA LIBHAI KHANBHAI MANKAD (SUPRA). IN THE CASE OF MAHALAXMI CARGO MOVE RS V. ITO [IT APPEAL NO. 6191 (MUM) OF 2013, DATED 09.12.2015], A NOTHER COORDINATE BENCH OF THIS TRIBUNAL REACHED THE SAME CONCLUSION WHILE FOLLOWING THE DECISION OF THE COORDINATE BENCH IN T HE CASE OF VALIBHAI KHANBHAI MANKAD (SUPRA) AND SRI MARIKAMBA TRANSPORT CO. (SUPRA). 32. IT IS WORTH NOTICING THAT IN ACIT V. MOHAMMED S UHAIL, KURNOOL [IT APPEAL NO. 1536 (HYD.) OF 2014, DATED 13.02.2015], THE COORDINATE BENCH OF THIS TRIBUNAL SPECIFICALLY HELD THAT THE P ROVISIONS OF SECTION 194C(6) ARE INDEPENDENT OF SECTION 194C(7), AND JUS T BECAUSE THERE IS VIOLATION OF PROVISIONS OF SECTION 194C(7), DISALLO WANCE UNDER SECTION 40(A) (IA) DOES NOT ARISE IF THE ASSESSEE COMPLIES WITH THE PROVISIONS OF SECTION 194C(6). 33. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE JUDICIAL REASONING DELINEATED IN THE ABOVE JUDGMENTS, WE FIND THAT IF THE ASSESSEE COMPLIES WITH THE PROVISIONS OF SECTION 194C(6), DI SALLOWANCE UNDER SECTION 40(A) (IA) DOES NOT ARISE JUST BECAUSE THER E IS VIOLATION OF PROVISIONS OF SECTION 194C(7) OF THE ACT. 34. FROM OUR ABOVE DISCUSSION IT FOLLOWS THAT , (I) IN THE CONTEXT OF SECTION 194C(1), PERSON UNDERTAK ING TO DO THE WORK IS THE CONTRACTOR AND THE PERSON SO ENGAGING THE CO NTRACTOR IS THE CONTRACTEE; (II) THAT BY VIRTUE OF THE AMENDMENT INTRODUCED BY FINANCE ACT (NO.2) 2009, THE DISTINCTION BETWEEN A CONTRACTOR AND A SU BCONTRACTOR HAS BEEN DONE AWAY WITH AND CL. (HI) OF EXPLANATION UND ER 194C(7) NOW CLARIFIES THAT 'CONTRACT' SHALL INCLUDE SUBCONTRACT ; (III) SUBJECT TO COMPLIANCE WITH THE PROVISIONS OF SECTION 194C(6), IMMUNITY FROM TDS UNDER SEC. 194C(1) IN RELATION TO PAYMENTS TO TRANSPORTERS, APPLIES TRANSPORTER AND NON-TRANSPORT ER CONTRACTEES ALIKE; (IV) UNDER SEC. 194C(6), AS IT STOOD PRIOR TO THE A MENDMENT IN 2015, IN ORDER TO GET IMMUNITY FROM THE OBLIGATION OF TDS, F ILING OF PAN OF THE ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 45 PAYEE-TRANSPORTER ALONE IS SUFFICIENT AND NO CONFIR MATION LETTER AS REQUIRED BY THE LEARNED CIT IS REQUIRED; (V) SECTIONS I94C(6) AND SECTION I94C(7) ARE INDEPE NDENT OF EACH OTHER, AND CANNOT BE READ TOGETHER TO ATTRACT DISALLOWANCE U/S 40(A) (IA) READ WITH SECTION I94C OF THE ACT; AND (VI) IF THE ASSESSEE COMPLIES WITH THE PROVISIONS O F SECTION 194C(6), NO DISALLOWANCE U/S 40(A) (IA) OF THE ACT IS PERMISSIB LE, EVEN THERE IS VIOLATION OF THE PROVISIONS OF SECTION 194C(7) OF T HE ACT. 35. CONSEQUENT TO OUR FINDINGS IN THE PRECEDING PAR AGRAPHS, WE REACH A CONCLUSION THAT THE AUTHORITIES BELOW ARE NOT JUSTI FIED IN TREATING THE EXPENSE INCURRED BY THE ASSESSEE FOR CARRIAGE INWAR D AND CARRIAGE OUTWARD AS DISALLOWABLE UNDER SECTION 40(A) (IA) OF THE ACT, AND ADDING BACK RS. 1,63,78,648/- CLAIMED AS EXPENSE TO WARDS CARRIAGE INWARD AND RS. 1,13,00,980/- CLAIMED AS EXPENSE TOW ARDS CARRIAGE OUTWARD, AND SUCH ADDITIONS SHALL STAND DELETED.' (XV) IT MAY BE MENTIONED THAT FOLLOWING THE ABOVE R EFERRED ORDER IN THE CASE OF SOMA RANI GHOSH VS. DCIT, THE HONBLE ITAT, KOLK ATTA IN THE CASE OF CASE OF KALI KINKAR ROY VS ITO IN ITA NO. 1676/KOL/ 2016, VIDE ITS ORDER DATED 31.01.2017 HAS HELD THAT: 8. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERI AL AVAILABLE ON RECORD. IT IS AN ADMITTED FACT THAT SINCE ALL THE P AYEES SUBMITTED THEIR PERMANENT ACCOUNT NUMBERS IN THE ASSESSMENT P ROCEEDINGS. THE PROVISION CONTEMPLATED IN SEC 194C(6) PERMITS N O DEDUCTION OF TDS SHALL BE MADE U/S. I94C(I) IF THE PAYEE FURNISH ES PAN TO THE PAYER. WE FIND THAT THE REQUIREMENT OF SECTION 194C (6) OF THE ACT SUBMISSION OF PERMANENT ACCOUNT NUMBER WHICH ENABLE THE PAYER FROM NO DEDUCTION OF TDS. THE FINDING OF THE AO WAS THAT THE PERMANENT ACCOUNT NUMBERS FURNISHED CANNOT BE ACCEP TED AS IT WAS NOT FILED WITH THE APPROPRIATE AUTHORITY AS REQ UIRED U/S. J94C(7) OF THE ACT AND WHETHER SUCH FAILURE ATTRACTS AND IN VOKES THE JURISDICTION UNDER SECTION 40(A) (IA) OF THE ACT. A T THIS JUNCTURE, WE MAY REFER THE ORDER OF COORDINATE BENCH OF THIS TRI BUNAL WHICH HELD THAT PROVISIONS OF SECTION 194C(6) AND SECTION 194C (7) ARE INDEPENDENT TO EACH OTHER AND CAN JOIN TOGETHER NOT BE READ ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 46 TOGETHER TO ATTRACT THE DISALLOWANCE U/SECTION40(A) (IA) OF THE ACT. THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREUND ER: V) SECTIONS 194C(6) AND SECTION 194C(7) ARE INDEPEN DENT OF EACH OTHER, AND CANNOT BE READ TOGETHER TO ATTRACT DISALLOWANCE U/S. 40(A) (IA) READ WITH SECTION I94C OF THE ACT ; AND VI) IF THE ASSESSEE COMPLIES WITH THE PROVISIONS OF SECTION 194C(6), NO DISALLOWANCE U/S.40(A) (IA) OF THE ACT IS PERMISSIB LE, EVEN THERE IS VIOLATION OF THE PROVISIONS OF SECTION 194C(7) OF T HE ACT. 9. IN THE PRESENT ISSUE AS DISCUSSED THE FACT REMAINS ADMITTED THE PAYEES FURNISHED PANS TO THE ASSESSEE, BUT, THE ASSESSEE C OULD NOT FURNISH THE SAME TO THE PRESCRIBED AUTHORITY WITHIN TIME AN D WHETHER SUCH FAILURE ATTRACTS THE ADDITION AND DISALLOWANCE UNDE R SECTION 40(A) (IA)OF THE ACT, IN OUR OPINION THERE IS VIOLATION O F SECTION 194C(7) AND DISALLOWANCE UNDER SECTION 40(A) (IA) DOES NOT ARIS E AS HELD BY THE COORDINATE BENCH SUPRA, ACCORDINGLY, THE IMPUGNED A DDITION MADE THEREON SHALL GO AND THUS, GROUND NO'S 2 AND 3 RAIS ED BY THE ASSESSEE ARE ALLOWED.' (XVI) IN VIEW OF THE ABOVE DISCUSSION AND THE JUDIC IAL PRONOUNCEMENTS, IT IS HELD THAT THE AO WAS NOT JUSTIFIED IN MAKING DISALLOWANC E U/S 40(A) (IA) OF THE ACT, IN RESPECT OF PERSONS WHOSE PAN HAVE BEEN OBTA INED AS IN VIEW OF THE PROVISION OF SECTION 194C(6) OF THE ACT, IT WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE. FURTHER, NON FURNISHING OF INFORMATION U /S 1940(7) OF THE ACT, DID NOT RESULT IN VIOLATION OF PROVISIONS OF SECTIO N 40(A) (IA) OF THE ACT AS THE PROVISIONS OF SECTION 1940(7) DOES NOT OVERRIDE THE PROVISIONS OF SECTION 194C(6) OF THE ACT. HOWEVER, IT IS NOTED TH AT IN SOME OF THE CASES, PAN WERE NOT PRINTED BUT HAND WRITTEN ON CHALLANS/B UILTIES/GR/LNVOICE ETC. AND AS THE APPELLANT HAS FAILED TO DEMONSTRATE THAT THESE WERE OBTAINED PRIOR TO MAKING PAYMENTS TO THESE PARTIES, THE SAME ARE TO DISALLOWED U/S 1940(6) OF THE ACT. THE NAME OF SUCH PARTIES ARE PRAKASH TRANSPORT, SAHU GOODS, JAI PRAKASH TAK ETC (TOTAL A MOUNTING TO RS. ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 47 28,70,368/- SUBJECT TO VERIFICATION). THEREFORE, OU T OF THE DISALLOWANCE OF RS. 1,56,38,649/-, A SUM OF RS. 28,70,368/- IS HERE BY SUSTAINED. THUS, OUT OF TOTAL DISALLOWANCE OF RS. 1,62,33,061/-, A SUM O F RS. 34,64,780/- (5,94,412 + 28,70,368) IS HEREBY SUSTAINED AND THE REMAINING AMOUNT OF RS. 1,27,68,281/- IS HEREBY DELETED. THUS, IT IS CLEAR THAT THE LD. CIT(A) HAS CONSIDERED THE FACT OF PRODUCTION OF RELEVANT INFORMATION AS PRINTED ON CHALLAN/BUILTIES ISSUED BY THE RECIPIENTS IN RESPECT OF THE PAYMENT ON ACCOUNT OF TRANSPORTAT ION OF GOODS UNDER CONTRACT AND TO THAT EXTENT THE LD. CIT(A) HAS DELE TED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THE REVENUE HAS CHALL ENGED THE ORDER OF THE LD. CIT(A),HOWEVER, IT IS NOT DISPUTED BY THE REV ENUE THAT THE RECORD PRODUCED BY THE ASSESSEE CONTAINS THE REQUISITE INF ORMATION AS REQUIRED U/S 194C(6) OF THE ACT. HENCE, IN VIEW OF THE VARIOU S DECISIONS AS RELIED UPON BY THE ASSESSEE AND FOLLOWED BY THE LD. CIT(A), WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) SO FAR AS THE DISALLOWANCE MADE U/S 40(A)(IA) OF THE ACT IS DELETE D. 16.1 AS REGARDS THE DISALLOWANCE SUSTAINED BY THE LD . CIT(A), WE FIND MERITS IN THE ALTERNATIVE PLEA OF THE LD AR THAT TH E AMENDMENT BROUGHT INTO THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT BY THE FINANCE ACT, 2015 HAS BEEN HELD AS REMEDIAL IN NATURE AND RETROSPECTI VE IN APPLICABILITY. IN THE CASE OF CHOPRA INDUSTRIES VS ADDL.CIT(SUPRA), TH E DELHI BENCHES OF THE TRIBUNAL AFTER CONSIDERING A SERIES OF DECISIONS INCLUDING THE DECISION ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 48 OF THE COORDINATE BENCHES OF THIS TRIBUNAL HAS CONSI DERED THIS ISSUE IN PARA 5 TO 8 AS UNDER: 5. THE LD. COUNSEL FOR THE ASSESSEE MADE TWO-FOLD SUBM ISSIONS. HE SUBMITTED THAT IN VIEW OF THE AMENDMENT TO THE PROVISIONS OF SECTION 4O(A)(IA) WHICH HAS BEEN HELD TO BE RETROSPECTIVE BY VARIOUS DECISI ONS, ONLY 30% OF THE ITA NO.3099/DEL/20I5 AMOUNT ON WHICH TAX HAS NOT BEEN D EDUCTED SHOULD BE DISALLOWED AND NOT THE ENTIRE AMOUNT. HE FURTHER SU BMITTED THAT THE ASSESSING OFFICER MAY BE DIRECTED TO ALLOW SUCH DIS ALLOWANCE, WHICH HAS BEEN MADE IN THIS YEAR, SUBJECT TO VERIFICATION IN THE SUBSEQUENT YEAR. HE ALSO RELIED ON THE FOLLOWING DECISIONS (I) SHRI RAJENDRA YADAV VS. ITO, ITAN0.895/JP/2012 DT. 29.01.2016. (II) SMT. KANTA YADAV VS. ITO, NA.N0.6312/DEL/2016 DT. 12.05.2017. (III) ACITVS. GIRDHARI LAI BARGOTI, ITAN0.757/JP/2 012 DT. 10.04.2015. (IV) SMT. SONU KHANDELWAL VS. ITO, ITAN0.597/JP/20 13 DT. 13.05.2016. (V) SHRI ARIDAMAN SINGH VS. ITO, ITAN0.391/JP/2014 DT. 09.10.2015. 6. THE LD. DR ON THE OTHER HAND STRONGLY RELIED ON THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT SINCE THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 4O(A)(IA), THEREFORE, 100% DISALLOWANCE SHO ULD BE MADE. 7. AFTER HEARING BOTH THE SIDES, WE FIND THE ONLY ISSU E TO BE DECIDED IN THE GROUNDS OF APPEAL IS REGARDING THE RESTRICTION OF T HE DISALLOWANCE TO 30% OF THE ADDITION. WE FIND AN IDENTICAL ISSUE HAD COM E UP BEFORE THE CO- ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SMT. KANTA YADAV VS. ITO. WE FIND THE TRIBUNAL IN ITA NO.6312/DEL/2016 ORDER DATED 12.05.2017 FOR ASSESSMENT YEAR 2012-13 HAS DECIDED THE IDENTICAL I SSUE AND HAS OBSERVED AS UNDER :- '6. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND FIND THAT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF ITAT JAIPUR B ENCH IN THE CASE OF SHRI RAJENDRA YADAV VS. ITO AND SMT. SONU KHANDELWA L VS. ITO. IN ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 49 THESE ORDERS IT WAS HELD THAT THE DISALLOWANCE U/S 4O(A)(IA) TO BE RESTRICTED TO 30% OF THE ADDITION. IN THESE ORDERS THE TRIBUNAL HAS CONSIDERED THE AMENDED PROVISIONS OF SECTION 4O(A)( IA) OF I.T. ACT. IN THESE ORDERS THE ASSESSMENT YEAR'S INVOLVE WAS 2007 -08 AND 2008- 09. IN THE PRESENT APPEAL THE ASSESSMENT YEAR IS 20 12-13. THEREFORE FACTS ARE IDENTICAL. IN THIS VIEW OF THE MATTER AND FOLLOWING THE ABOVE DECISIONS OF JAIPUR BENCH, WE SET ASIDE AND M ODIFY THE ORDERS OF THE AUTHORITIES BELOW AND DIRECT THE ASSESSING O FFICER TO RESTRICT THE ADDITION TO 30% OF THE TOTAL ADDITION MADE ON A CCOUNT OF DEDUCTION OF TDS U/S 40(A)(IA) OF THE ACT.' ITA NO.3099/DEL/20L5 8. RESPECTFULLY FOLLOWING THE DECISION OF THE CO-O RDINATE BENCH OF THE TRIBUNAL, WE HOLD THAT THE DISALLOWANCE U/S 40(A)(I A) SHOULD BE RESTRICTED TO 30% OF THE TOTAL ADDITION ON ACCOUNT OF NON-DEDU CTION OF TDS. SO FAR AS THE ARGUMENT OF THE ID. COUNSEL FOR THE ASSESSEE TH AT DIRECTION MAY BE GIVEN TO THE ASSESSING OFFICER TO ALLOW SUCH DISALL OWANCE MADE IN THIS YEAR IN THE ORDER OF THE SUBSEQUENT YEARS, WE HOLD THAT THE ASSESSEE MAY MOVE APPROPRIATE APPLICATION BEFORE THE ASSESSING O FFICER WHO SHALL DECIDE THE ISSUE AS PER FACT AND LAW. WE HOLD AND D IRECT ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY PART LY ALLOWED. IN ABSENCE OF ANY CONTRARY PRECEDENT, WE FOLLOW THE D ECISIONS OF THIS TRIBUNAL ON THIS ISSUE WHEREBY THE AMENDMENT BROUGHT INTO SECTION 40(A)(IA) OF THE ACT HAS BEEN CONSIDERED AT RETROSP ECTIVE IN NATURE. ACCORDINGLY, THE DISALLOWANCE SUSTAINED BY THE LD. C IT(A) IS RESTRICTED TO 30% OF THE AMOUNT. THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTED THE DISALLOWANCE OF 30% OF THE SUM PAID WITHOUT TDS WHICH WAS SUSTAINED BY THE LD. CIT(A). ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 50 17. GROUND NO. 9 OF THE APPEAL IS REGARDING THE DIS ALLOWANCE OF EMPLOYEES CONTRIBUTION TO PF AND ESI U/S 43B OF THE ACT. 18. WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL AS THE LD. CIT-DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THIS ISSUE IS COVERED BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF CIT VS. JVVNL 265 CTR 62 (RAJ) AS UNDER: 6. WE HAVE CONSIDERED THE ARGUMENTS ADVANCED BY THE LEARNED COUNSEL FOR THE REVENUE AND HAVE ALSO GONE THROUGH THE IMPUGNED ORD ERS. IN OUR VIEW NO SUBSTANTIAL QUESTION OF LAW ARISES OUT OF THE ORDER S OF THE TRIBUNAL AS IT IS AN ADMITTED FACT THAT THE ENTIRE AMOUNT WAS DEPOSITED BY THE RESPONDENT- ASSESSEE AT LEAST ON OR BEFORE THE DUE DATE OF FILI NG OF THE RETURNS UNDER S. 139 OF THE IT ACT AND BEING A CONCURRENT FINDING OF FACT BY THE RESPECTIVE AUTHORITIES AND IN THE LIGHT OF THE JUDGMENTS RENDE RED BY THIS COURT IN THE CASE OF CIT V. STATE BANK OF BIKANER & JAIPUR/ JAIP UR VIDYUT VITRAN NIGAM LTD. [2014] 363 ITR 70/43 TAXMANN.COM 411 OF EVEN DATE WHEREIN IT HAS BEEN HELD THAT IF THE AMOUNT HAS BEEN DEPOSITED ON OR BEFORE THE DUE DATE OF FILING THE RETURN UNDER S. 139 AND ADMITTEDLY IT WAS DEPOSITED ON OR BEFORE THE DUE DATE THEN THE AMOUNT CANNOT BE DISAL LOWED UNDER S. 43B OF THE IT ACT OR UNDER S. 36(1)(VA) OF THE ACT. IN FAC T IN THE ABOVE MATTERS ONE OF THE PARTIES IS SAME AS IN THE PRESENT APPEALS, T HEREFORE, THE ISSUE IS NO MORE RES INTEGRA IN THE LIGHT OF JUDGMENTS OF THIS COURT REFERRED TO SUPRA AND, IN OUR VIEW, NO SUBSTANTIAL QUESTION OF LAW AR ISES OUT OF THE IMPUGNED ORDERS OF THE TRIBUNAL, WHICH MAY REQUIRE ATTENTION OF THIS COURT. SIMILARLY IN THE CASE OF CIT VS. SBBJ 363 ITR 70 (R AJ), THE HONBLE JURISDICTIONAL HIGH COURT HAS HELD AS UNDER: 21. A CONJOINT READING OF THE PROVISO TO SECTION 43-B WHICH WAS INSERTED BY THE FINANCE ACT, 1987 MADE EFFECTIVE FROM 01/04/198 8, THE WORDS NUMBERED AS CLAUSE (A), (C), (D), (E) AND (F), ARE OMITTED FROM THE ABOVE PROVISO AND, FURTHERMORE SECOND PROVISO WAS REMOVED BY FINANCE ACT, 2003 THEREFORE, THE DEDUCTION TOWARDS THE EMPLOYER' S CONTRIBUTION, IF PAID, PRIOR TO DUE DATE OF FILING OF RETURN CAN BE CLAIME D BY THE ASSESSEE. IN OUR VIEW, THE EXPLANATION APPENDED TO SECTION 36(1)(VA) OF THE ACT FURTHER ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 51 ENVISAGE THAT THE AMOUNT ACTUALLY PAID BY THE ASSES SEE ON OR BEFORE THE DUE DATE ADMISSIBLE AT THE TIME OF SUBMITTING RETURN OF THE INCOME UNDER SECTION 139 OF THE ACT IN RESPECT OF THE PREVIOUS Y EAR CAN BE CLAIMED BY THE ASSESSEE FOR DEDUCTION OUT OF THEIR GROSS TOTAL INCOME. IT IS ALSO CLEAR THAT SEC.43B STARTS WITH A NOTWITHSTANDING CLAUSE & WOULD THUS OVERRIDE SEC.36(1) (VA) AND IF READ IN ISOLATION SEC. 43B WO ULD BECOME OBSOLETE. ACCORDINGLY, CONTENTION OF COUNSEL FOR THE REVENUE IS NOT TENABLE FOR THE REASON AFORESAID THAT DEDUCTIONS OUT OF THE GROSS I NCOME FOR PAYMENT OF TAX AT THE TIME OF SUBMISSION OF RETURN UNDER SECTI ON 139 IS PERMISSIBLE ONLY IF THE STATUTORY LIABILITY OF PAYMENT OF PF OR OTHER CONTRIBUTION REFERRED TO IN CLAUSE (B) ARE PAID WITHIN THE DUE D ATE UNDER THE RESPECTIVE ENACTMENTS BY THE ASSESSEES AND NOT UNDER THE DUE D ATE OF FILING OF RETURN. 22. WE HAVE ALREADY OBSERVED THAT TILL THIS PROVISION WAS BROUGHT IN AS THE DUE AMOUNTS ON ONE PRETEXT OR THE OTHER WERE NOT BEING DEPOSITED BY THE ASSESSEES THOUGH SUBSTANTIAL BENEFITS HAD BEEN OBTA INED BY THEM IN THE SHAPE OF THE AMOUNT HAVING BEEN CLAIMED AS A DEDUCT ION BUT THE SAID AMOUNTS WERE NOT DEPOSITED. IT IS PERTINENT TO NOTE THAT THE RESPECTIVE ACT SUCH AS PF ETC. ALSO PROVIDES THAT THE AMOUNTS CAN BE PAID LATER ON SUBJECT TO PAYMENT OF INTEREST AND OTHER CONSEQUENCES AND T O GET BENEFIT UNDER THE INCOME TAX ACT, AN ASSESSEE OUGHT TO HAVE ACTUALLY DEPOSITED THE ENTIRE AMOUNT AS ALSO TO ADDUCE EVIDENCE REGARDING SUCH DE POSIT ON OR BEFORE THE RETURN OF INCOME UNDER SUB-SECTION (1) OF SECTION 1 39 OF THE IT ACT. 23 . THUS, WE ARE OF THE VIEW THAT WHERE THE PF AND/O R EPF, CPF, GPF ETC., IF PAID AFTER THE DUE DATE UNDER RESPECTIVE ACT BUT BE FORE FILING OF THE RETURN OF INCOME UNDER SECTION 139(1), CANNOT BE DISALLOWE D UNDER SECTION 43B OR UNDER SECTION 36(1)(VA) OF THE IT ACT. ACCORDINGLY IN VIEW OF THE BINDING PRECEDENT OF THE HONBLE JURISDICTIONAL HIGH COURT, THE DISALLOWANCE MADE BY THE ASSESSING O FFICER AND CONFIRMED BY THE LD. CIT(A) IS DELETED. 19. GROUND NO. 10 OF THE APPEAL IS REGARDING THE VA LIDITY OF NOTICE ISSUED U/S 143(2) OF THE ACT. AT THE TIME OF HEARING, NEIT HER ANY ARGUMENT WAS ADVANCED BY THE LD. AR OF THE ASSESSEE NOR ANY SPEC IFIC DEFECT IS POINTED OUT IN THE NOTICE ISSUED U/S 143(2) OF THE ACT, THE REFORE THIS GROUND OF ASSESSEES APPEAL IS DISMISSED BEING NOT PRESSED. ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 52 20. IN THE APPEAL FOR THE A.Y. 2013-14, THE ASSESSE E HAS RAISED FOLLOWING GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE BY SUM OF RS. 2,91,29,333/- ACTING ULTRA VIRES TO STAT UTORY LIMITATION OF ENHANCEMENT POWERS U/S 251 WHICH IS AB INITIO VOID AND FUNDAMENTALLY FLAWED ACTION. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE BY SUM OF RS. 2,91,29,333/- IN PERFUNCTORY MANNER ON P REPOSTEROUS BASIS OF EARLIER HISTORY OF BOOKS REJECTION AND SOM E ORDERS OF HIGHER AUTHORITIES WITHOUT APPLYING BASIC UNDERSTANDING TH AT IT IS NOWHERE STATED IN THE INCOME TAX LAW THAT ONCE ASSESSEES B OOKS ARE REJECTED AND PROFIT IS ESTIMATED THEN FOR ALL YEARS IN PERPE TUITY ACCORDING TO LD CIT-A BOOKS WOULD BE REJECTED IPSO FACTO AND PROFIT WOULD BE ESTIMATED WHICH IS ABSOLUTELY AGAINST THE BASIC SCH EME OF INCOME TAX LAW SPECIALLY WHEN ID CIT-A HAS NOT ESTABLISHED EVE N REMOTELY THAT FACTS OF EARLIER YEARS ARE HOMOGENOUS TO EXTANT PER IOD; 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE BY SUM OF RS. 2,91,29,333/- BY WRONGLY INVOKING SECTIO N 145(3) WITHOUT APPRECIATING THAT ASSESSEES DEFECT FREE AUDITED BO OK RESULT CANNOT BE ASSAULTED LIGHT HEARTEDLY AND IN CASUAL MANNER A S DONE IN EXTANT CASE; 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE BY SUM OF RS. 2,91,29,333/- BY APPLYING ARBITRARY AND IMAGINARY PROFIT RATE OF 9.5% WHICH IS EGREGIOUS AND SHOCKING AND GR OSSLY LACKS ANY RATIONAL/SOUND LEGAL BASIS AND IS BASED ON MERE IPS E-DIXIT OF LD CIT-A AS IT IS SETTLED LAW THAT MERE BOOKS REJECTION BY I TSELF DOES NOT GIVE A CARTE-BLANCHE TO THE OFFICER TO ESTIMATE ANY ADDITI ONAL INCOME OVER AND ABOVE RETURNED INCOME WITHOUT BRINGING ANY INCR IMINATING MATERIAL ON RECORDS. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE BY ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 53 NOT ISSUING VALID SHOW CAUSE NOTICE AS MANDATED AND PRESCRIBED IN CBDT INSTRUCTIONS AND UNDER THE LAW, AND MERE CRYPT IC ORDER SHEET ENTRY IS TREATED AS EQUIVALENT TO VALID AND LAWFUL SHOW CAUSE NOTICE WHICH OMISSION VITIATES THE ENTIRE ACTION. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE WITHOUT APPRECIATING THAT ENTIRE ENHANCEMENT IS BAS ED ON PURELY HYPOTHETICAL AND ARTIFICIAL INCOME WHICH IS NEVER E ARNED BY ASSESSEE AND IS NEVER CORROBORATED EVEN SYMBOLICALLY BY ANY IOTA OF TRADING OUTSIDE THE BOOKS . OTHER GROUNDS RELATING TO ADDITIONS MADE BY LD AO W HICH ARE NOT DELETED BY LD CIT-A 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A ERRED IN NOT DELETING THE SUSTAINED DISALLOWA NCE OF RS 34,79,396/- PERTAINING TO SERVICE TAX AMOUNT WHICH IS CORRECTLY CLAIMED IN THIS PERIOD AND OTHERWISE ALSO WHEN ONLY CONFLICT IS FOR THE YEAR OF ALLOWABILITY AND OTHERWISE THE CLAIM IS ALL OWABLE UNDER THE LAW, IT IS REVENUE NEUTRAL TO DISTURB ASSESSEES CL AIM AND ACCORDINGLY DISALLOWANCE SUSTAINED IS PLAINLY INCORRECT. ALTERN ATIVELY SICE A.Y. 2012-13 WAS ALSO VERY MUCH BEFORE CIT-A HE COULD HA VE VERY WELL HELD IT SHOULD BE GIVEN IN THAT YEAR BUT IT SEEMS L D. CIT-A WAS NOT WILLING TO ADVANCE JUSTICE TO ASSESSEE. 8. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A ERRED IN NOT DELETING THE SUSTAINED DISALLOWA NCE OF RS. 41,48,656/- PERTAINING TO SERVICE TAX AMOUNT WHICH IS CORRECTLY CLAIMED IN THIS PERIOD AND OTHERWISE ALSO WHEN ONLY CONFLICT IS FOR THE YEAR OF ALLOWABILITY AND OTHERWISE THE CLAIM IS ALL OWABLE UNDER THE LAW, IT IS REVENUE NEUTRAL TO DISTURB ASSESSEES CL AIM AND ACCORDINGLY DISALLOWANCE SUSTAINED IS PLAINLY INCORRECT. ALTERN ATIVELY SINCE A.Y. 2014-15 WAS ALSO VERY MUCH BEFORE CIT-A HE COULD HA VE VERY WELL HELD IT SHOULD BE GIVEN IN THAT YEAR BUT IT SEEMS L D. CIT-A WAS NOT WILLING TO ADVANCE JUSTICE TO ASSESSEE. 9. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A ERRED IN NOT DELETING THE DISALLOWANCE OF RS 13,63,011/- PERTAINING TO GENUINE AND ACTUAL DEDUCTIONS MADE BY THE CLIENTS WHICH IS PLAINLY AGAINST REAL INCOME THEORY. ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 54 10. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) ERRED IN NOT DELETING THE DISALLOWANCE O F RS. 3,39,791/- U/S 36(1)(VA)/SECTION 2(24)(X) OF THE ACT WITHOUT APPRE CIATING THAT SAID ISSUE IS COVERED IN ASSESSEES FAVOUR BY JURISDICTI ONAL HIGH COURT. 21. GROUNDS NO. 1 TO 6 OF THE APPEAL ARE REGARDING REJECTION OF BOOKS OF ACCOUNT AND ENHANCEMENT OF INCOME BY APPLYING G.P. RATE BY THE LD. CIT(A). THESE GROUNDS ARE COMMON TO THE GROUND TAKEN IN THE APPEAL FOR A.Y. 2012-13 AND THE LD. CIT(A) HAS ALSO GIVEN A COM MON FINDING. WE HAVE ALREADY CONSIDERED AND DECIDED THIS ISSUE FOR THE A.Y. 2012-13, ACCORDINGLY IN VIEW OF THE OUR FINDING ON THIS ISSUE , GROUNDS NO. 1 TO 6 OF THE APPEAL STAND ALLOWED AND ENHANCEMENT MADE BY THE LD. CIT(A) IS DELETED. 22. GROUND NO. 7 OF THE APPEAL IS REGARDING THE DIS ALLOWANCE OF SERVICE TAX. THE ASSESSEE HAS CLAIMED EXPENDITURE ON ACCOUNT OF SERVICE TAX DEMAND OF RS. 76,28,052/-. THE ASSESSING OFFICER NO TED THAT OUT OF THIS TOTAL DEMAND OF RS. 76,28,052/-, A SUM OF RS. 34,79 ,396/- IS THE SERVICE TAX PAYABLE AS ON 31/1/2013 AND THE ASSESSEE PAID T HE SAID AMOUNT DURING THE F.Y. 2012-13. HOWEVER, THE ASSESSEE HAS N OT BOOKED THE SAID AMOUNT IN THE P&L ACCOUNT. THE ASSESSING OFFICER FUR THER NOTED THAT THE DEMAND ARISING DUE TO THE ORDER DATED 05/10/2011 OF COMMISSIONER OF CENTRAL EXCISE, JAIPUR, WHICH IS RELEVANT FOR THE A. Y. 2012-13 AND THEREFORE, THE CLAIM OF EXPENDITURE IN RESPECT OF T HE SERVICE TAX ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 55 DEMAND OF RS. 34,79,396/- IS NOT ADMISSIBLE. THE AS SESSING OFFICER ACCORDINGLY DISALLOWED THE SAID AMOUNT. FURTHER BAL ANCE AMOUNT OF RS. 41,48,658/- WAS ALSO CONSIDERED AS A DEMAND ON ACCOU NT ON OMISSION OF THE ASSESSEE AND THE ASSESSING OFFICER DISALLOWED TH E SAID AMOUNT U/S 37(1) OF THE ACT BEING THE PENALTY AS PER THE EXPLA NATION TO SECTION 37(1) OF THE ACT. 23. ON APPEAL, THE ASSESSEE SUBMITTED THAT THE DEMA ND WAS RAISED BY THE SERVICE TAX DEPARTMENT IN PURSUANCE TO THE AUDIT CONDUCTED DURING THE RELEVANT PREVIOUS YEAR. THE ASSESSEE REFERRED AU DIT REPORT DATED 23/4/2013 OF THE SERVICE TAX DEPARTMENT AND SUBMITTE D THAT THE DEMAND OF SERVICE TAX HAS BEEN CRYSTALLIZED IN THE YEAR UN DER CONSIDERATION AND THEREFORE, THE SAME IS AN ALLOWABLE CLAIM. THE LD. CI T(A) HAS NOT ACCEPTED THE CONTENTION OF THE ASSESSEE AND SUSTAINED THE DI SALLOWANCE MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE SAID L IABILITY PERTAINS TO THE ASSESSMENT YEAR 2012-13 AND NOT FOR THE A.Y. 2013-1 4. 24. BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMIT TED THAT WHEN BOTH THE APPEALS WERE BEFORE THE LD. CIT(A) AND DECIDED BY A COMPOSITE ORDER THEN IF THE SAID DEMAND OF SERVICE TAX WAS FOUND FO R THE A.Y. 2012-13 AND NOT FOR THE A.Y. 2013-14 THE CLAIM OF THE ASSESSEE WAS REQUIRED TO BE ALLOWED. HE HAS THUS PLEADED THAT THE CLAIM ON ACCOU NT OF SERVICE TAX MAY ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 56 BE ALLOWED FOR THE A.Y. 2013-14. EVEN OTHERWISE AS PE R THE PROVISIONS OF SECTION 43B OF THE ACT, THE SAID SUM IS ALLOWED ON A CTUAL PAYMENT AND NOT ON ACCRUAL BASIS. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF DELHI BENCHES OF THE TRIBUNAL DATED 09/1 1/2017 IN THE CASE OF DHARAMPAL SATYAPAL SONS (P) LTD. VS DCIT IN ITA NO. 5919/DEL/2014 AND SUBMITTED THAT ONCE THE PAYMENT WAS MADE BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME THEN THE AMOUNT IS ALLOWABLE IN THE RELEVANT ASSESSMENT YEAR. 25. ON THE OTHER HAND, THE LD CIT-DR HAS RELIED UPO N THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE LD. CIT(A) HAS GIVEN THE FINDING THAT THIS LIABILITY TO PAY THE SERVICE TAX PERTAINS TO THE A.Y. 2012-13 AND THEREFORE, THE SAME IS NOT ALLOWABLE FOR THE YEAR UN DER CONSIDERATION. 26. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THIS WAS A CLAIM REGARDING SERVIC E TAX LIABILITY OF RS. 34,79,396/- WHICH WAS DENIED BY THE AUTHORITIES ON T HE GROUND THAT THIS SERVICE TAX LIABILITY PERTAINS TO THE A.Y. 2012-13 AND NOT FOR THE A.Y. 2013- 14. THERE IS NO DISPUTE THAT THE PAYMENT OF TAX IS A LLOWED ONLY ON ACTUAL PAYMENT AS PER SECTION 43B OF THE ACT AND NOT ON TH E BASIS OF ACCRUAL OF THE LIABILITY. THE DELHI BENCHES OF THE TRIBUNAL IN T HE CASE OF DHARAMPAL ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 57 SATYAPAL SONS (P) LTD. VS DCIT (SUPRA) HAS CONSIDERE D THIS ISSUE IN PARA 4 AND 5 AS UNDER: 4. NOW COMING TO THE SECOND GROUND, IT IS THE CONT ENTION OF THE ASSESSEE THAT UNLIKE THE CASES RELIED UPON BY THE AO IN THIS MATTER, THE LIABILITY WAS DEFINITE AND THE PROVISION WAS CREATED DURING THE R ELEVANT FY TO THE TUNE OF RS. 8,37,69,394/- OUT OF WHICH ONLY A SUM OF RS. 95,90,000/- WAS PAID BEFORE THE DUE DATE FOR FILING THE RETURN. ACCORDIN G TO THE ASSESSEE, IN VIEW OF THE FACT THAT THE PROVISION WAS VERY MUCH A VAILABLE DURING THE FY, THE LIABILITY WAS CRYSTALLIZED BEFORE THE CLUE DATE FOR FILING THE INCOME TAX RETURNS, THE PAYMENT OF RS.95,90,000/- TOWARDS THE EXCISE DUTY IS AN ALLOWABLE EXPENDITURE FOR THE AY 2011-12. FACTUALLY , THERE IS NO DISPUTE THAT THERE WAS A DEMAND UNDER CHALLENGE IN RESPECT OF RS. 16,91,79,394/- TOWARDS EXCISE DEMAND, CREATION OF PROVISION TO A T UNE OF RS. 8,37,69,394/- DURING THE FY 2010-11 AND PAYMENT OF EXCISE DUTY TO THE TUNE OF RS. 95,90,000/ PURSUANT TO THE ORDER DATED 27.04.2011. FURTHER, THERE IS NO DISPUTE THAT THE TAX RATES ARE SIMILAR FOR THE AYS 2011-12 & 2012-13. RELIANCE IS PLACED ON THE DECISION OF THE HONBLE HIGH COURT, DELHI IN THE CASE OF CIT VS. TRIVENI ENGINEERING & INDUSTRIES LTD. IN ITA NO. 346 OF 2009 VIDE PARA 11 FOR THE PRINCIPLE THAT. 11. '.. HOWEVER, IN THE PROJECTED SCENARIO OF THIS CASE AFT ER TAKING STOCK OF THE ENTIRE SITUATION , WE ARE 'OF THE OPINION THAT IT IS NOT NECESSARY TO CONCLUSIVELY ANSWER THE AFOR ESAID QUESTIONS FORMULATED. IT IS BECAUSE OF THE REASON T HAT WE FIND THAT THE ENTIRE EXERCISE, IS REVENUE NEUTRAL IT MAY BE POINTED THAT, IT IS A MATTER OF RECORD THAT AGAINST THE PRO VISION OF RS. 139 LACS, I.E., MORE THAN THE PROVISION MADE. IT IS UNDISPUTED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON TH E PROJECT IS ADMISSIBLE DEDUCTION. THE ONLY DISPUTE THAT THE REV ENUE SEEKS TO RAISE IS REGARDING THE YEAR OF ALLOWABILITY OF E XPENDITURE. CONSIDERING THAT THE ASSESSEE IS A COMPANY ASSESSED , AT UNIFORM RATE OF TAX, THE ENTIRE EXERCISE, OF SEEKIN G TO DISTURB ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 58 THE YEAR OF ALLOWABILITY OF EXPENDITURE IS IN ANY C ASE, REVENUE NEUTRAL. 5. IN THE CASE ON HAND ALSO AS AGAINST THE PROVISIO N, THE ASSESSEE MADE PAYMENT OF RS. 95,90,000/- AND THE TAX RATES ARE UN IFORM FOR THE RELEVANT AND SUBSEQUENT ASSESSMENT YEARS, AS SUCH IN A TAX N EUTRAL SCENARIO, IT IS FAIR TO ALLOW THE EXPENDITURE FOR THIS ASSESSMENT Y EAR. WE, THEREFORE, ALLOW THIS GROUND OF APPEAL AND DIRECT THE AO TO DE LETE THE ADDITION ON THIS COUNT. THUS, THE TRIBUNAL HAS ALLOWED THE CLAIM WHEN IT WAS FOU ND THAT THE PAYMENT WAS MADE BEFORE DUE DATE OF FILING OF RETURN OF INCOME U/S 139 OF THE ACT. IT IS MATTER OF FACT THAT THE LIABILITY IS NOT IN DISPUTE AND THE DISALLOWANCE IS MADE ONLY ON ACCOUNT OF YEAR OF ALLO WABILITY OF CLAIM. IT IS PERTINENT TO NOTE THAT WHEN BOTH THE YEARS WERE BEFOR E THE LD. CIT(A) AND DECIDED BY THE COMPOSITE ORDER THEN IF THE CLAIM OF ASSESSEE REGARDING ACTUAL LIABILITY OF SERVICE TAX WAS ALLOWABLE IN THE ASSESSMENT YEAR 2012-13 THEN INSTEAD OF SUSTAINING THE DISALLOWANCE FOR THE A.Y. 2013-14, THE LD. CIT(A) OUGHT TO HAVE ALLOWED THE CLAIM OF THE ASSESSE E IN TERMS OF THE PROVISIONS OF SECTION 43B OR AT THE BEST FOR THE A. Y. 2012-13. HENCE, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF T HE ASSESSEE FOR THE A.Y. 2012-13. 27. GROUND NO. 8 OF THE APPEAL IS REGARDING THE DIS ALLOWANCE OF SERVICE TAX OF RS. 41,48,656/-. THE ASSESSING OFFICER AND T HE LD. CIT(A) HAS DISALLOWED THIS CLAIM ON THE GROUND THAT THIS DEMAND WAS CRYSTALLIZED IN ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 59 THE F.Y. 2013-14, WHICH IS RELEVANT TO THE ASSESSME NT YEAR 2014-15 AND NOT FOR THE A.Y. 2013-14. AN IDENTICAL ISSUE HAS BE EN CONSIDERED BY US WHILE DECIDING GROUND NO. 7 OF THIS APPEAL. ACCORDIN GLY, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM FOR THE A.Y. 2014-15 WHICH IS ALSO DECIDED BY THE LD. CIT(A) BY COMPOSITE ORDER AND IS BEING DECIDED BY US IN THIS ORDER. 28. GROUND NO. 9 OF THE APPEAL IS REGARDING THE DIS ALLOWANCE OF RS. 13,63,011/-. THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS. 41,70,655/- TOWARDS VARIOUS DEDUCTIONS MADE BY THE AWARDERS OF TH E CONTRACT/CLIENTS WHICH INCLUDES A SUM OF RS. 35,76,107/- TOWARDS THE L OSS AND DAMAGES. THE ASSESSING OFFICER HELD THAT THE ALLEGED DEDUCTIO N ARE NOT SUPPORTED BY DOCUMENTARY EVIDENCE, ACCORDINGLY, THE ASSESSING OF FICER HAS MADE DISALLOWANCE OF RS. 35,76,107/-. 29. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESS ING OFFICER BEFORE THE LD. CIT(A) AND SUBMITTED THAT THE DETAILS OF DE DUCTION ALONGWITH COPY OF RELEVANT LEDGER ACCOUNT AND CERTIFICATE OF M/S D B POWER LIMITED SHOWING THE DEDUCTION OF RS. 22,12,096/- WAS SUBMITTE D BEFORE THE ASSESSING OFFICER. THE LD. CIT(A) AFTER CONSIDERING T HE SAID RECORD HAS ALLOWED THE CLAIM TO THE EXTENT OF RS. 22,12,096/- F OR WHICH THE ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 60 DOCUMENTARY EVIDENCE WAS PRODUCED BY THE ASSESSEE. A CCORDINGLY, THE BALANCE DISALLOWANCE OF RS. 13,63,011/- WAS SUSTAINE D. 30. BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE HAS SHOWN THE AMOUNT RECEIVABLE FROM THE PA RTIES AFTER RELEVANT DEDUCTIONS WHICH HAS BEEN ALREADY RECEIVED OR RECEI VABLES FROM THE RESPECTIVE PARTIES. THE DEDUCTIONS HAVE BEEN TAKEN I N ACCOUNT EITHER ON THE BASIS OF MUTUAL/ORAL DISCUSSIONS OR SETTLEMENT ARRIVED BETWEEN THE PARTIES. THE BILLS/VOUCHERS OF THE EXPENSES ARE LYIN G IN THE POSSESSION OF THE AWARDERS/CLIENTS AND THE SAME HAS NOT BEEN SUPPL IED TO THE ASSESSEE. SUCH TYPES OF DEDUCTIONS ARE OF ROUTINE AND GENERAL IN NATURE IN CASE OF CONTRACTORS AND THEREFORE, PART AND PARCEL OF THE B USINESS. THE ASSESSEE BY PRODUCING THE BOOKS OF ACCOUNT AND COPY OF THE R ELEVANT LEDGERS HAS ESTABLISHED THE GENUINENESS OF THE CLAIM THAT THE A SSESSEE RECEIVED THE PAYMENT AFTER THE DEDUCTIONS MADE BY THE AWARDERS OF THE CONTRACTS/CLIENTS. 31. ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT WHEN THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE IN SUPPOR T OF SUCH DEDUCTION THEN THE DISALLOWANCE SUSTAINED BY THE LD. CIT(A) IS JUSTIFIED. ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 61 32. WE HAVE CONSIDERED THE RELEVANT MATERIAL ON REC ORD. THE LD. CIT(A) HAS CONSIDERED THIS ISSUE AT PAGE 51 AND 52 OF THE IMPUGNED ORDER AS UNDER: (III) I HAVE DULY CONSIDERED THE SUBMISSIONS OF TH E APPELLANT, ASSESSMENT ORDER AND THE MATERIAL PLACED ON RECORD. IT IS NOTED THAT THE APPELLANT COULD NOT FILE ANY DOCUMENTARY EVIDENCE IN SUPPORT OF ITS CLA IM OF DEDUCTIONS MADE BY ITS CLIENTS ON ACCOUNT OF LOSS AND DAMAGES EXCEPT I N THE CASE OF M/S DB POWER LTD. THE AO DID NOT ALLOW ANY DEDUCTION EVEN IN THE CASE OF DB POWER LTD BY OBSERVING THAT THE CERTIFICATE ISSUED BY THE SAID COMPANY WAS NOT PRODUCED IN ORIGINAL AND IT WAS NOT ISSUED BY T HE AUTHORISED SIGNATORY. DURING THE APPELLATE PROCEEDINGS, THE AO WAS DIRECT ED TO MAKE ENQUIRIES FROM M/S DB POWER LTD TO VERIFY THE DEDUCTIONS CLAI MED BY THE APPELLANT. VIDE ITS LETTER DATED 16/10/2017, IN ITS REMAND REP ORT IT WAS SUBMITTED BY THE AO THAT: IN CONNECTION TO THE ABOVE, IT IS SUBMITTED THAT AS DIRECTED BY YOUR GOODSELF A LETTER WAS WRITTEN TO M/S DB POWER LIMIT ED, MUMBAI. IN COMPLIANCE THERETO, THE COMPANY STATED THAT THE AM OUNT PAID REPRESENTS CAPITAL EXPENSES AND THE AMOUNT DEDUCTED IS REDUCED FROM CAPITAL EXPENDITURE. ALSO NO FURTHER PAYMENTS OUT O F AMOUNT DEDUCTED WERE MADE TO THE ABOVE CONTRACTOR.' FURTHER CERTIFI ED COPIES OF LETTERS DATED 16.02.2016 AND 31.08.2016 WERE ALSO SUBMITTED THROUGH LETTER DATED 07.10.2017 OF THE COMPANY (COPY ENCLOSED). TH E RELEVANT DOCUMENTS WERE EXAMINED AND PRIMA FACIE APPEARS TO BE IN ORDER.' (IV) THEREFORE, IN VIEW OF THE ABOVE DISCUSSION, REMAND REPORT OF THE AO AND THE CERTIFICATE OF M/S DB POWER LTD., THE AO IS HER EBY DIRECTED TO ALLOW DEDUCTION OF RS. 22,12,096/- MADE BY M/S DB POWER L TD. FURTHER, THE APPELLANT COULD NOT ESTABLISH THE REMAINING DEDUCTI ON AMOUNTING TO RS. 13,63,011/- (35,75,107 - 22,12,096) WITH ANY DOCUME NTARY EVIDENCE EVEN DURING THE APPELLATE PROCEEDINGS, THEREFORE, I DO N OT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE AO AS RECORDED I N THE ASSESSMENT ORDER; ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 62 AND THUS, IT IS HELD THAT THE AO WAS JUSTIFIED IN N OT ALLOWING THE DEDUCTION AMOUNTING TO RS. 13,63,011 /- AND HENCE, THE SAME I S HEREBY SUSTAINED. THUS, THERE IS NO DISPUTE THAT THE ASSESSEE HAS PROD UCED DOCUMENTARY EVIDENCE IN SUPPORT OF THE CLAIM OF DEDUCTION MADE BY THE CLIENTS ONLY TO THE EXTENT OF RS. 22,12,096/-. AS REGARDS THE REMAI NING DEDUCTIONS, THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE, HOWEVER, THE ASSESSEE HAS CLAIMED THAT THESE DEDUCTIONS WERE MADE BY THE AWARDERS OF THE CONTRACT ON ACCOUNT OF DAMAGES AND LOSSES. SINC E THE CLAIM IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE, HOWEVER, THE FACTS REMAINS THAT THE ASSESSEE HAS NOT RECEIVED THE AMOUNT TO THE EXT ENT OF THE DEDUCTION STATED TO HAVE BEEN MADE BY THE PARTIES FOR WHOM THE ASSESSEE HAS EXECUTED THE WORK. THEREFORE, IT IS PURE MATTER OF FA CT AND REQUIRES A VERIFICATION AND CONFIRMATION ON BEHALF OF THE PART IES. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE INTE REST OF JUSTICE, WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFF ICER TO VERIFY THE CORRECTNESS OF THE CLAIM EITHER BY CALLING THE INFO RMATION FROM THE CONCERNED PARTIES OR THE ASSESSEE SHALL FURNISH THE CONFIRMATION FROM THESE PARTIES. NEEDLESS TO SAY THAT THE ASSESSEE BE GIVEN APPROPRIATE OPPORTUNITY OF HEARING. 33. GROUND NO. 10 OF THE APPEAL IS REGARDING DISALL OWANCE MADE ACCOUNT OF EMPLOYEES CONTRIBUTION TO ESI AND PF. ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 63 34. WE HAVE HEARD THE LD AR AS WELL AS THE LD. CIT-D R AND CONSIDERED THE RELEVANT MATERIAL OF RECORD. THIS ISSUE IS IDENT ICAL TO THE ISSUE RAISED IN GROUND NO. 9 OF THE APPEAL FOR THE A.Y. 2012-13. IN VIEW OF OUR FINDING ON THIS ISSUE FOR THE A.Y. 2012-13, THIS GROUND OF APP EAL IS ALLOWED AND THE DISALLOWANCE CONFIRMED BY THE LD. CIT(A) IS DELETED. 35. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR THE A.Y. 2014-15. IN THE APPEAL, THE ASSESSEE HAS RAISED FOLLOWING GROUND S OF APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE BY SUM OF RS. 1,08,71,471/- ACTING ULTRA VIRES TO STAT UTORY LIMITATION OF ENHANCEMENT POWERS U/S 251 WHICH IS AB INITIO VOID AND FUNDAMENTALLY FLAWED ACTION SPECIALLY WHEN CASE WAS UNDER LIMITED SCRUTINY ONLY. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE BY SUM OF RS. 1,08,71,471/- IN PERFUNCTORY MANNER ON P REPOSTEROUS BASIS OF EARLIER HISTORY OF BOOKS REJECTION AND SOM E ORDERS OF HIGHER AUTHORITIES WITHOUT APPLYING BASIC UNDERSTANDING TH AT IT IS NOWHERE STATED IN THE INCOME TAX LAW THAT ONCE ASSESSEES B OOKS ARE REJECTED AND PROFIT IS ESTIMATED THEN FOR ALL YEARS IN PERPE TUITY ACCORDING TO LD CIT-A BOOKS WOULD BE REJECTED IPSO FACTO AND PROFIT WOULD BE ESTIMATED WHICH IS ABSOLUTELY AGAINST THE BASIC SCH EME OF INCOME TAX LAW SPECIALLY WHEN ID CIT-A HAS NOT ESTABLISHED EVE N REMOTELY THAT FACTS OF EARLIER YEARS ARE HOMOGENOUS TO EXTANT PER IOD; 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE BY SUM OF RS. 1,08,71,471/- BY WRONGLY INVOKING SECTIO N 145(3) WITHOUT APPRECIATING THAT ASSESSEES DEFECT FREE AUDITED BO OK RESULT CANNOT BE ASSAULTED LIGHT HEARTEDLY AND IN CASUAL MANNER A S DONE IN EXTANT CASE; ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 64 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE BY SUM OF RS. 1,08,71,471/- BY APPLYING ARBITRARY AND IMAGINARY PROFIT RATE OF 10% WHICH IS EGREGIOUS AND SHOCKING AND GRO SSLY LACKS ANY RATIONAL/SOUND LEGAL BASIS AND IS BASED ON MERE IPS E-DIXIT OF LD CIT-A AS IT IS SETTLED LAW THAT MERE BOOKS REJECTION BY I TSELF DOES NOT GIVE A CARTE-BLANCHE TO THE OFFICER TO ESTIMATE ANY ADDITI ONAL INCOME OVER AND ABOVE RETURNED INCOME WITHOUT BRINGING ANY INCR IMINATING MATERIAL ON RECORDS. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE BY NOT ISSUING VALID SHOW CAUSE NOTICE AS MANDATED AND PRESCRIBED IN CBDT INSTRUCTIONS AND UNDER THE LAW, AND MERE CRYPT IC ORDER SHEET ENTRY IS TREATED AS EQUIVALENT TO VALID AND LAWFUL SHOW CAUSE NOTICE WHICH OMISSION VITIATES THE ENTIRE ACTION. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A GROSSLY ERRED IN ENHANCING THE INCOME OF APPE LLANT ASSESSEE WITHOUT APPRECIATING THAT ENTIRE ENHANCEMENT IS BAS ED ON PURELY HYPOTHETICAL AND ARTIFICIAL INCOME WHICH IS NEVER E ARNED BY ASSESSEE AND IS NEVER CORROBORATED EVEN SYMBOLICALLY BY ANY IOTA OF TRADING OUTSIDE THE BOOKS . OTHER GROUNDS RELATING TO ADDITIONS MADE BY LD AO W HICH ARE NOT DELETED BY LD CIT-A 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A ERRED IN NOT DELETING THE SUSTAINED DISALLOWA NCE OF RS 2,53,993/- PERTAINING TO GENUINE AND ACTUAL DEDUCTI ONS MADE BY THE CLIENTS WHICH IS PLAINLY AGAINST REAL INCOME THEORY . 8. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A ERRED IN NOT DELETING THE SUSTAINED DISALLOWA NCE OF RS. 58330/- U/S 36(1)(VA)/SECTION 2(24)(X) OF THE ACT WITHOUT A PPRECIATING THAT SAID ISSUE IS COVERED IN ASSESSEES FAVOUR BY THE J URISDICTIONAL HIGH COURT DECISIONS. 9. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, ID CIT-A ERRED IN NOT COMPLETELY DELETING THE DISALLOW ANCE OF RS. 26,19,088/- AND WRONGLY UPHOLDING LD. A.O.S VERSIO N THAT THE ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 65 ASSESSEE HAS DIVERTED INTEREST BEARING LOANS TOWARD S INTEREST FROM ADVANCES WHICH IS FACTUALLY AND LEGALLY INCORRECT W HERE BOTH THE LOWER AUTHORITIES HAVE NEVER DISCHARGED THEIR BURDE N U/S 36(1)(III) AND MOREOVER HAVE NEVER OBJECTIVELY OVERRULED ASSES SEES IMPREGNABLE EXPLANATION. INVALID ISSUANCE OF NOTICE U/S 143(2) ON BASIS OF C ASS 10. THAT LD AO WHILE ISSUING NOTICE U/S 143(2) ON M ERE BASIS OF CASS HAS NOT APPLIED ITS OWN MIND WHICH IS MANDATED U/S 143( 2) AS EVIDENT FROM WORDS USED LIKE CONSIDERED NECESSARY ETC AND A S EXPLAINED/DILATED IN VARIOUS APEX COURT RULINGS, AC CORDINGLY THE ORDERS PASSED BY LD AO AND LD CIT-A ARE BAD IN LAW AND DESERVES TO BE QUASHED ON THIS SHORT COUNT ITSELF. THAT THE APPELLANT CRAVES LEAVE TO ADD ADD/ALTER A NY/ALL GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF THE APPE AL. 36. GROUNDS NO. 1 TO 6 OF THE APPEAL ARE REGARDING REJECTION OF BOOKS OF ACCOUNT AND ENHANCEMENT OF INCOME BY APPLYING G.P. RATE BY THE LD. CIT(A). THESE GROUNDS ARE COMMON TO THE GROUND TAKEN IN THE CASE FOR A.Y. 2012-13 AND THE LD. CIT(A) HAS ALSO GIVEN A COM MON FINDING. WE HAVE ALREADY CONSIDERED THE DECIDED THIS ISSUE FOR THE A.Y. 2012-13, ACCORDINGLY IN VIEW OF THE OUR FINDING ON THIS ISSUE , GROUNDS NO. 1 TO 6 OF THE APPEAL STAND ALLOWED AND ENHANCEMENT MADE BY THE LD. CIT(A) IS DELETED. 37. GROUND NO. 7 OF THE APPEAL IS REGARDING THE DED UCTIONS MADE BY THE CLIENTS/CONTRACT AWARDERS WAS DISALLOWED. ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 66 38. THIS GROUND IS ALSO COMMON AS IN THE A.Y. 2013-1 4, THEREFORE, TO THE EXTENT OF THE CLAIM OF DEDUCTION MADE BY THE CLIENT S/CONTRACT AWARDERS, THE ASSESSEE DID NOT PRODUCE THE SUPPORTING EVIDENC E. THE ACTUAL FACT OF SAID DEDUCTION MADE BY THESE CLIENTS CAN BE VERIFIE D FROM THE CONCERNED PARTIES. ACCORDINGLY, IN VIEW OF OUR FINDING IN THE A.Y. 2013-14 THIS GROUND IS SET ASIDE TO THE ASSESSING OFFICER ON SIMILAR TE RMS AND DIRECTIONS. 39. GROUND NO. 8 OF THE APPEAL IS REGARDING DISALLO WANCE MADE ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO ESI AND PF. 40. WE HAVE HEARD THE LD AR AS WELL AS THE LD. CIT-D R AND CONSIDERED THE RELEVANT MATERIAL OF RECORD. THIS ISSUE IS IDENT ICAL TO THE ISSUE RAISED IN GROUND NO. 9 OF THE APPEAL FOR THE A.Y. 2012-13. IN VIEW OF OUR FINDING ON THIS ISSUE FOR THE A.Y. 2012-13, THIS GROUND OF APP EAL IS ALLOWED AND THE DISALLOWANCE CONFIRMED BY THE LD. CIT(A) IS DELETED. 41. GROUND NO. 9 OF THE APPEAL IS REGARDING THE DIS ALLOWANCE OF INTEREST OF RS. 26,19,088/- ON ACCOUNT OF INTEREST FREE ADVA NCES GIVEN. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS SHOWN IN TEREST INCOME OF RS. 1,15,02,306/- AND INTEREST PAYMENT OF RS. 2,50,40,6 08/-. THE ASSESSING OFFICER HAS OBSERVED THAT THE INTEREST PAID TO VARI OUS PARTIES AND BANKS IS RANGING FROM 9% TO 12% WHEREAS THE ASSESSEE HAS MADE INTEREST FREE LOANS AND ADVANCES TO ITS GROUP CONCERNS WHICH ARE C OVERED U/S 40A(2)(B) ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 67 OF THE ACT. THE ASSESSEE CONTENDED THAT THE INTEREST FREE LOANS WERE GIVEN BY THE ASSESSEE OUT OF ITS INTEREST FREE LOANS TAKE N FROM THE GROUP CONCERNS AND THEREFORE NO DISALLOWANCE OF INTEREST IS CALLED FOR ON ACCOUNT OF INTEREST FREE ADVANCES GIVEN TO THE GROUP CONCER NED. THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESS EE AND MADE A PROPORTIONATE DISALLOWANCE OF INTEREST OF RS. 26,19, 088/-. 42. THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THOUGH THE AMOUNT OF INTEREST BAS ED ON THE DURATION FOR WHICH THE LOAN WAS GIVEN TO THE GROUP CONCERN DURING THE YEAR UNDER CONSIDERATION WAS CONSIDERED BY THE LD. CIT(A) AND TH E ASSESSING OFFICER WAS ACCORDINGLY DIRECTED TO MODIFY THE AMOUNT. 43. BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMIT TED THAT OUT OF TOTAL AMOUNT OF RS. 16.00 CRORES GIVEN TO THE THREE GROUP CONCERNS, THE AMOUNT OF RS. 13.94 CRORES WERE GIVEN ONLY FOR A PERIOD OF THREE DAYS DURING THE YEAR UNDER CONSIDERATION AND ONLY AN AMOUNT OF RS. 2,06,64,063/- WAS GIVEN FOR THE ENTIRE YEAR BUT THIS AMOUNT WAS ALSO N OT A FRESH LOAN GIVEN DURING THE YEAR BUT THIS WAS GIVEN IN THE EARLIER YE AR AND NO DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER FOR THE A.Y. 2013- 14. THEREFORE, WHEN THIS LOAN WAS NOT GIVEN DURING THE YEAR UNDER CONSID ERATION AND IT IS ONLY A CARRY FORWARD BALANCE FROM THE EARLIER YEAR THEN NO DISALLOWANCE CAN BE ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 68 MADE ON ACCOUNT OF INTEREST. IN SUPPORT OF HIS CONT ENTION, HE HAS RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN T HE CASE OF HERO CYCLES P LTD. VS CIT 379 ITR 347. THUS, THE LD AR HAS SUBMITT ED THAT WHEN NO NEW LOAN OR ADVANCE WAS GIVEN DURING THE YEAR UNDER C ONSIDERATION EXCEPT FOR THREE DAYS THEN THE DISALLOWANCE MADE BY THE ASS ESSING OFFICER IS NOT JUSTIFIED. HE HAS FURTHER POINTED OUT THAT THE ASSE SSEE HAS ALSO EXPLAINED THAT THE ASSESSEE IS HAVING INTEREST FREE LOAN OF R S. 16.5 CRORES TAKEN FROM M/S KSK MAHANANDI POWER CO. LTD., WHICH IS SUFFICIEN T FOR GIVING THE LOAN/ADVANCE IN QUESTION TO THE GROUP CONCERN, THER EFORE, WITHOUT PREJUDICE TO THE CONTENTIONS AS RAISED EVEN THE ASS ESSEE WAS HAVING INTEREST FREE FUNDS TO GIVEN THESE ADVANCES. 44. ON THE OTHER HAND, THE LD CIT-DR HAS RELIED UPO N THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSING O FFICER HAS POINTED OUT THE FACT THAT THE ASSESSEE IS HAVING CAPITAL OF RS. 13.79 CRORES WHEREAS THE TOTAL INTEREST FREE LOAN HAS BEEN TAKEN TO THE TUNE OF RS. 22.59 CRORES. FURTHER THE ASSESSEE HAS ALSO TAKEN LOAN OF RS. 46. 87 CRORES, THEREFORE, THESE FACTS CLEARLY SHOWS THAT THE ASSESSEE WAS NOT H AVING NON-INTEREST BEARING SUFFICIENT FUNDS. 45. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE T HE DISALLOWANCE OF ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 69 RS. 26,19,088/- ON ACCOUNT OF INTEREST IN RESPECT O F INTEREST FREE ADVANCES GIVEN BY THE ASSESSEE TO THREE GROUP CONCERNS AS UN DER: S. NO. NAME OF THE PERSONS TO WHOM INTEREST FREE LOANS AND ADVANCE GIVEN AMOUNT (RS.) RATE OF INTEREST CHARGED PERIOD DISALLOWANCE OF INTEREST (RS.) 1. M/S ZUBERI INFRA PVT. LTD. 13,00,00,000/ - 12.00% 3 DAYS 1,30,000/ - ` 2. M/S ZUBER I SOLAR POWER P LTD. 94,00,000/ - 12.00% 3 DAYS 9,400/ - 3. ZUBERI ENGINEERING CO. LTD. 2,06,64,063/ - 12.00% 12 MONTHS 24,79,668/ - TOTAL 26,19,088/ - THUS, IT IS CLEAR THAT THE FIRST TWO AMOUNTS OF ADVAN CES OF RS. 13.00 CRORES AND RS. 94.00 LACS RESPECTIVELY WERE GIVEN ONLY FOR THE THREE DAYS DURING THE YEAR UNDER CONSIDERATION AND THE ASSESSING OFFI CER HAS ALSO MADE THE DISALLOWANCE OF INTEREST ONLY FOR THE THREE DAYS. THE BALANCE AMOUNT OF RS. 2,06,64,063/- WAS UNDISPUTEDLY NOT GIVEN DURING THE YEAR UNDER CONSIDERATION BUT IT WAS GIVEN IN THE EARLIER YEAR A ND THE ASSESSING OFFICER HAS NOT MADE ANY DISALLOWANCE ON ACCOUNT OF INTEREST . THEREFORE, ONCE THE SAID AMOUNT OF RS. 2,06,64,063/- WAS NOT GIVEN DURIN G THE YEAR UNDER CONSIDERATION AND NO DISALLOWANCE WAS MADE BY THE ASS ESSING OFFICER IN THE EARLIER YEAR THEN HAVING REGARD TO THE RULE OF CONSISTENCY, NO DISALLOWANCE CAN BE MADE IN RESPECT OF THE SAID ADVA NCE GIVEN BY THE ASSESSEE IN THE EARLIER YEAR. IT IS PERTINENT TO NO TE THAT WHEN THIS AMOUNT WAS GIVEN IN THE EARLIER YEAR THEN THE AVAILABILITY OF INTEREST FREE FUNDS HAS TO BE SEEN IN THE EARLIER YEAR AND NOT DURING THE Y EAR UNDER CONSIDERATION. ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 70 FURTHER IT IS ALSO NOT DISPUTED BY THE REVENUE THAT THE ASSESSEE HAS SHOWN AN INTEREST FREE LOAN OF RS. 16.5 CRORES FROM M/S K SK MAHANANDI POWER CO. LTD.. CONSIDERING THE SAID AMOUNT OF INTEREST F REE LOAN OF RS. 16.5 CRORES, THE LOAN GIVEN BY THE ASSESSEE IS OTHERWISE COVERED BY THE SAID INTEREST FREE LOAN. HENCE, THE ASSESSEE HAS EXPLAIN ED THE AVAILABILITIES OF INTEREST FREE FUNDS FOR THE INTEREST FREE ADVANCE T O THE GROUP CONCERN THEN NO DISALLOWANCE ON ACCOUNT OF INTEREST IS CALLED FOR . THE ASSESSING OFFICER HAS ALSO NOT CONSIDERED THE ASPECT OF COMMERCIAL EX PEDIENCY FOR GIVING THE ADVANCE TO THE GROUP CONCERNS. ACCORDINGLY, IN VIEW OF THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE THAT THE DISALL OWANCE MADE BY THE ASSESSING OFFICER IN RESPECT OF RS. 2,06,64,063/- WH ICH WAS NOT GIVEN DURING THE YEAR UNDER CONSIDERATION AND NO DISALLOWA NCE WAS MADE IN THE EARLIER YEAR FURTHER THE ASSESSEE WAS HAVING SUFFICI ENT INTEREST FREE FUNDS TO GIVE THE ADVANCES THEN THE DISALLOWANCE MADE BY T HE ASSESSING OFFICER ON THIS ACCOUNT IS NOT JUSTIFIED AND THE SAME IS CA LLED FOR AND IS DELETED. 46. GROUND NO. 10 OF THE APPEAL IS REGARDING THE VA LIDITY OF NOTICE ISSUED U/S 143(2) OF THE ACT. AT THE TIME OF HEARING, NEIT HER ANY ARGUMENT WAS ADVANCED BY THE LD. AR OF THE ASSESSEE NOR ANY SPEC IFIC DEFECT IS POINTED OUT IN THE NOTICE ISSUED U/S 143(2) OF THE ACT, THE N THIS GROUND OF ASSESSEES APPEAL IS DISMISSED BEING NOT PRESSED. ITA 977 TO 979/JP/2018 & 1122/JP/2018_ ZUBERI ENGINEERING VS DCIT. 71 47. IN THE RESULT, ALL THE THREE APPEALS OF THE ASS ESSEE ARE PARTLY ALLOWED AND THAT OF REVENUES CROSS APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/12/2018. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 21 ST DECEMBER, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- (I)THE ZUBERI ENGINEERING COMPANY, NEW DELHI. (II) M/S ZUBERI ENGINEERING COMPANY, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE D.C.I.T./ ACIT, CIRCLE-2, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 977 TO 979/JP/2018 & ITA 1122/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR