Income Tax Appellate Tribunal - Chandigarh
Sh. Surinder Mahendru, Ludhiana vs Pr. Cit-1, Ludhiana on 20 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH 'B', CHANDIGARH
BEFORE MS.DIVA SINGH, JUDICIAL MEMBER
AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.774/Chd/2017
(Assessment Year : 2012-13)
Sh.Surinder Mahendru, Vs. The Pr. CIT-I.,
C/o M/s Nicks (India) Tools, Ludhiana.
E-163, Phase-IV, Focal Point,
Ludhiana.
PAN: ACHPM4704G
(Appellant) (Respondent)
Appellant by : Shri Vipin Gupta, CA
Respondent by : Shri Ashish Abrol, CIT DR
Date of hearing : 23.01.2018
Date of Pronouncement : 20.04.2018
ORDER
PER ANNAPURNA GUPTA, A.M.:
Th i s a p p e a l h a s b e e n p r e f er r e d by t h e a s s es s e e ag a i n st t h e o r d er o f Ld . P r i n c i pa l C o mm i s s i o n e r o f I n co m e Ta x -I , Ludhiana ( h e re i n a f t e r r e f e rr e d to as ( ' L d . P r .C I T' ) dated 2 8 . 3 . 2 0 1 7 pa s s ed u / s 2 6 3 o f t he I n co m e Ta x A c t , 1 9 6 1 ( i n short 'the A c t' ) relating to as s e s s m e n t ye a r 2012-13, h o l d i n g t h e o r d er p a s s ed b y t h e A O u / s 1 4 3 ( 3) o f t h e A c t to b e e r r o n e o u s a nd p r e j u d i c i a l t o th e i n t e r e s t o f t he R e v e n u e , t h u s s e tt i n g i t a s i d e a nd d i r ect i n g h i m t o ma k e f r e sh a s s e s s m e nt d e - no v o .
2. Briefly s t a te d , the a s s e s se e d e r i v es i nc o me from m a n u f a c t ur i n g of a u t o pa r t s an d f o r g i n gs . R et ur n f o r th e impugned y e ar was filed d e c l a r i ng income of R s . 5 , 3 6 , 29 , 3 1 0 /- w h i c h w a s a s s es s e d u / s 1 4 3 ( 3 ) o f t h e A c t a t R s . 5 , 39 , 7 1 , 6 76 / - a f t e r m a k i ng d i s a l l o w a n c e o f i n t e r est 2 u/s 36(1)(iii) of the Act a m ou n t i n g to R s . 3, 4 2 , 3 6 6 / -. Th e r e a f t e r t h e Ld . P r . CI T, o n p er u s a l o f t h e r ec or d s o f t he a s s e s s e e , f o u n d t h a t p r o pe r & su f f i c i e nt e n q u i r i e s h a d n ot been made on certain issues which had rendered t he a s s e s s m e nt o r d er e r r o n e o u s i n so f a r a s b e i n g p re j u d i c i a l to t h e i n t e r e s t o f t he R e v e n u e . Th e r e f o r e , n o t i c e u /s 2 6 3 o f t he A c t w a s i s s u e d to t h e a s se s s e e on a c c o u n t o f t he f o l l o w i ng :
1) N o n e x a m i n a t i o n o f m a j or e x p e nse s .
2) N o n v e r i f i c a t i o n o f v a l u a ti o n o f s to c k .
3) N o n v e r i f i ca t i o n o f c r e d i b i l i t y a nd g e n u i n e n e ss o f
the creditors.
3. D u e r e p l i es w e r e f i l e d b y t he a s s es s e e a f t e r c o n s i de r i ng a n d d i s c u s s i ng w h i c h t h e L d . P r . CI T h e l d t h a t t h e A s s e s s i n g O f f i c e r h a d f ai l ed t o e x am i n e the a b o v e i s s u e s i n d e p t h as w a s r e q ui r e d to b e d o n e. R ef er r i n g t o E x p l ana t i o n - 2 t o s e c t i o n 2 6 3 ( 1 ) o f t h e A c t , a c c o r d i n g t o w h i c h o r d er s p a s s e d b y t h e A ss e s s i ng O f f i c er a r e de e m e d t o b e e rr o n e o u s & p r e j u d i c i a l t o t he i n t e r es t o f t h e R e v e n u e , i f i n th e o p i n i o n o f t h e P r . CI T o r C o m m i s s i o n e r th e o r d e r i s p a s se d w i t h o ut m a k i n g an y e nqu i r y o r v e r i f i c a t i o n w h i c h s h o ul d h a v e be e n d o n e , t h e L d . P r. CI T h e l d t h a t t h e A s s e s s i n g O ffi c e r h a v i n g n o t m a d e n e c es sa r y e n q u i r i e s t o k n o w t h e e x a ct de t a i l s a n d n a t u r e o f v a r i o us t r a n s a c t i on s , th e o r d e r o f t h e A s s e s s i n g Officer was e rr o n e o u s . He, th e r e f o r e , set aside t he a s s e s s m e nt m a de b y t h e A s s e s s i n g O f f i c e r w i t h di r e c t i o n s to m a k e f r e s h a s se s s m e n t d e - no v o a f t e r p r o p e r l y e x a m i n i n g t h e f a c t s o f t h e c a s e a n d r e l e va n t l e g a l p r o p os i t i o n a nd c o n d u c t i ng p r o pe r e n q u i r y .
3
4. A g g r i e v e d b y t he s a m e , t he a s se s s e e h a s co m e u p i n a p p e a l b e f or e us c h a l l e n g i n g t he a b o v e a c t i on o f t h e L d . P r . CI T b y r a i si n g f o l l o w i n g g r ou nd s :
"1. That the initiation of proceedings u/s 263 by the Learned Pr. CIT-I, Ludhiana are against the facts and bad in law.
2. That the Learned Pr. CIT-l, Ludhiana has erred in initiating the proceedings & in passing the order u/s 263 of the IT Act, 1961 and directing the AO to make fresh assessment after properly examining the facts of the case.
3. That the Learned Pr. CIT-l, Ludhiana has erred in finding that assessment already framed was erroneous & prejudicial to the interest of revenue and the same even thorough set aside to make fresh assessment.
4. That the Learned Pr. CIT-l, Ludhiana has erred in not considering that assessment was framed by the AO after thorough investigation & proper application of mind.
5. That the Learned Pr. CIT-l, Ludhiana has failed to point out how the order passed by the DCIT is erroneous in as much as prejudicial to the interest of the revenue when the same has been passed after due application of mind.
6. That in any case the order of the Learned Pr. CIT-l passed u/s 263 is against the law and deserves to be quashed.
7. That the Appellant craves leave for permission to add, amend or alter any ground of appeal at the time of hearing."
5. D u r i n g t h e co u r se o f he a r i n g b e f or e u s t h e Ld . c ou n s el f o r a s s e ss e e f i rs t t o o k u s t hr o u g h t h e c o n t en t s o f t h e n o t i ce i s s u e d by t h e L d. P r . CI T u / s 2 6 3 o f t h e A c t . Th e s a m e ar e r e p r o d u c ed h e r eu n d e r :
Issue 1: Non examination of major expenses:
T he assessee has sho wn to tal sal es of Rs.69,21,35,154/- and Rs.83,09,72,836/- in the F.Y. 2010-11 and 2011-12 relevant to A.Y. 2011-12 & 2012-13 respectively and has claimed various expenses including the following:-
Particulars As on 31.03.2011 As on 31.03.2012
Purchase Components 32243770.00 37167911.76
Job Work 43489656.00 45881428.87
Consumable Stores 45020791.00 62980249.92
Wages and Allowances 91885985.00 113517759.00
Oils & Lubricants 37081809.00 51989540.29
4
Electricity Expenses 25337289.00 33366409.00
Salary & Allowances 12865853.00 15231667.00
Staff & Labour Welfare 3934662.40 5448442.20
Building Repair 2443604.27 3438750.92
Machinery Repair 15717548.47' 17496454.91
15717548.47
Interest 8794623.55 11092993.21
Cash Discount on Bills 2666260.19 3563765.04
Receivable
Freight Outward 6930444.10 7342344. 75
It is seen from the above that while sales have been increased by about 20% some of the expenses have gone up substantially and disproportionately high to the increase in the sales e.g. consumable stores has increased by 40% in the current year over the last year. Similarly, wages & allowances, oil & lubricants and electricity expenses have also gone up substantially. Assessee has claimed machinery repair of Rs.l,74,96,454/-. In the questionnaire dated 08.05.2014 (vide question No.8) the assessee was asked to provide the justification of major expenses debited to Profit & Loss Account vis-a-vis business/ commercial expediency In response to the above query, assessee vide his reply dated 16.06.2014 made a general statement and stated that all major expenses like insurance telephone traveling personal expenses, repair, and maintenance etc. etc have been incurred for the business purposes only. Subsequently, details of some expenses have also been filed. Later' vide reply dated 15.09.2014, details of labour & staff welfare with bills expenses above Rs.50,000/-, travelling expenses, machinery repairs with bills -above Rs.50,000/-, fee & taxes, festival expenses etc. were shown to have been enclosed, which after test check seem to have been returned to the assessee. AO was required to make proper enquiries in this regard, which has not been done.
Though some of the expenses seem to have been test checked, but major expenses which are substantial in the P&L account need to be examined at depth. Apart from examination of the correctness and genuineness of these expenses from bills/vouchers etc. scrap generated out of such machinery repair was required to be examined, which has not been done.
Issue 2: Basis of vataation of closing stock:
As apparent from assessment record, the assesses has shown closing stock under various heads including rejection/dead stock, steel scrap, store & spares, child parts etc. However, no basis of valuation of aforesaid stocks has been given. Similarly, material under rectification has been shown in the closing stock at Rs. 19,00,719/- as on 31,03.2012 without any basis.
Since, it is not evident as to on what basis the valuation has been done by the assessee, the AO was required to examine deeply, which has not been done.
Issue 3: Abnormally high Sundry creditor The assessee has shown sundry creditors of Rs. 8,15,97,926/- which appear to be abnormally high. The names, addresses alongwith amounts of some of the creditors are placed on record, but the credibility of the creditors and genuineness of the transactions was required to be examined closely."5
6. R e f e r r i n g t o t h e a b o v e , t he L d . c o u n s e l fo r a ss e s s ee p o i n t e d o u t t h a t t h e i s s u e s r a i se d i n t h e n o t i ce r e l a t ed t o n o n e x a m i na t i on o f e x p e n se s , t h e b a s i s o f va l u a t i o n of c l o s i n g s t o c k a nd v e r i fi c a t i on o f s u n d r y cr e d i t or s. Th e L d . c o u n s e l fo r a s ses s e e p o i nt e d o ut t h a t it was evident from t h e n o t i c e i t s e l f t h a t t h e a s su m pt i o n o f j u ri s d i c tio n b y t h e L d . P r . CI T u / s 2 63 t o e x er c i s e r e vi s i o n a r y p o w e r s w a s b a s e d only on g e n er al o b s e r v a ti o n s which was n ot s u f f i c i e nt e n o u g h t o a r r i v e a t t h e b e l i e f t h a t t h e o r d e r p a ss e d b y t h e A s s e s s i n g O f f i ce r w a s e r r o ne o u s so a s t o c a us e p re j u d i c e to the Revenue. Drawing our attention to th e n o t i c e, L d . C o u n s el f o r th e a s s e s s e e p o i nt e d o u t t h a t , t h e L d . P r . CI T h a d r a i se d t he i s s u e o f n o n e x am i n a t i o n o f ma jo r e x p e ns e s b y m a k i n g g e n e ra l o b s e r va t i o n s to t h e e ff e c t th a t w h i l e th e s a l e s h ad i n cr e as e d b y 2 0 % on l y, s o m e o f t he e xp e n s e s ha d g o n e u p s u b s t an t i a l l y a n d di s pr o p o r t i o na t e l y . L d . C o u n s el f o r t h e a s s e s s ee p o i n t e d o u t t ha t e x c e p t f o r c on s u m a b l e s t o r e s , n o o t h e r e x p e n s e w as sp e c i f i c al l y p o i nte d o u t t o h a v e i n c r ea s e d di s p r o p o r ti o n a t el y t o s a l e s . Th e Ld . c o u n s e l for a s s e s s ee f ur t h e r p o i n te d out that it w as further a d m i t t e d i n t h e n o t i c e i t s e l f by t h e L d . Pr . CI T, t h a t t h e a s s e s s e e h a d f i l e d d u e r e p l y j u st i f y i n g t h e m a j or e x p e ns es d e b i t i n g to t h e P r o f i t & L o ss Ac c o u n t d u r i n g as s e s s m e n t p r o c e e d i ng s b u t t h e L d . Pr . CI T ha d s t a t e d t h a t t he r e s p o n se o f t h e a s s e s se e w a s g e n e r a l . E v e n v i s - à - vi s t h e c r e d i t o r s, t h e L d . co u n s e l f o r a s s es s e e po i n t e d o ut f r o m t h e n o t i ce t h a t w h i l e st a t i ng t h a t t h e i s su e o f c r e d i t o rs h ad n o t b e e n 6 e x a m i n e d , i t w as a t t h e sa m e t i m e m e n ti o n e d t h a t t he d e t a i l s of s o m e of t h e c re d i t o r s ha d b e e n pl a c e d on r e c o r d .
7. Th e L d . C o u n s e l f o r t h e a ss e s s e e t h e r e a f te r c o n te n d ed that t h e o r d er p a s s e d b y t h e AO w a s n o t e r r one o u s s i n ce n e c e s s a r y i n q u i ri e s v i s -a - v i s a l l t h e i s su e s r ai se d b y t h e L d . P r . CI T, h a d b e e n m a d e d u r i n g a s s e s s m e nt p r o c e e d i ngs a n d t h e re a f t e r o rd e r u / s 1 4 3 ( 3 ) wa s p a s s ed b y t h e A O . Th e Ld. counsel for assessee took us through t h e q u e r i es r a i s e d d u ri n g as s e s s m e n t p r o c ee d i n g s v i de q ue s t i o n n a i r e i s s u e d t o t h e a ss e s s e e d a t e d 8 . 5. 2 0 1 4 , c o p y o f w h i c h w a s p l a c e d b e fo r e us a t P a p e r B o ok p a g e N o s . 10 t o 1 5 a nd p o i n t e d o u t th a t t h e a s s e s s ee w a s a s k e d t o f i l e th e f o l l o w i n g i n f o r m a ti o n r e l a ti n g t o t he a b o ve i s s u e s :
"1. A comparison of Balance Sheet, Trading and P&L A/c for the assessment year 2011-12 &2012-2013.
2. Comprehensive Chart of GP & NP for the last three years.
7. Produce Books of Accounts
8. Justification of major expenses debited to P&L A/c.
10. Detail of ESI & EPF.
13. Pl. produce Salary, Wages & Attendance Registers.
14. Month-wise Purchase, Consumption & Sales.
15. Details of purchases & sales made from/to above Rs.20.00 Lac.
16. Details of opening & closing stock and how has the valuation of stock been done.
18. Detail of sundry creditors above Rs.10.00 Lac giving his name, address & PAN."
8. Th e Ld. c o u n s el for as s e s s ee t h e r e a f t er drew our a t t e n t i o n t o t h e r e p l y f i l ed i n r es p o n s e t o t he ab o v e q u e r y p l a c e d at P a p er B o o k p a g e N o s .16 t o 1 8 , a n d po i n t e d o ut that all the q ue r i e s ra i s e d by the AO h ad been d ul y addressed b y fi l i n g t h e f o l l o w i n g d e t a i l s v i de t h e r e p l y filed:
a) A comparison of Balance Sheet, Trading and P&L A/c was filed.
b) Comprehensive Chart of GP & NP was filed.
c) Books of Account were produced.7
d) Justification of major expenses was given during the course of hearing alongwith production of books of account.
e) Detail of ESI & EPF was furnished.
f) Salary, Wages & Attendance Registers were produced during the course of assessment proceedings.
g) Details of purchase, consumption & sales were filed,
h) Party-wise purchase & sale was also filed.
i) Details of opening & closing stock along with method of valuation were filed.
j) Detail of sundry creditors above Rs.10.00 giving name, address & PAN was also filed.
h) Justification of major expenses"
9. Th e L d . c o u n s e l f o r a s s e s s e e t he re a f t e r s t a t ed t h at t h e i s s u e , p o i n t e d ou t b y t h e L d . Pr .C I T i n h i s n ot i c e u / s 2 6 3 o f t h e A c t , r e l at i n g t o n o n e x a mi n at i o n o f m a j o r e xp e n s e s ha d b e e n t h u s r ai s e d a n d d u e r e p l y fi l e d b y t h e a s se ss e e d u r i n g a s s e s s m e nt p r o ce e d i n g s w h i c h w a s a l s o e x a m i n e d b y t he A s s e s s i n g O f f i c er w h o w a s d u l y sat i s f i e d w i t h t h e sa m e a l s o . Th e L d . c o u n s e l f o r a s s e s s e e s t a t e d t h a t t hi s f a c t w a s brought to the notice of the P r . CI T in the written s u b m i s s i on s f i l ed b e f o r e h i m a n d p l a c e d a t pa p e r b o o k p a ge N o s . 1 t o 8 . L d . Co u n s e l f o r a s s ess e e d r e w o u r a tt e n t i o n t o t h e s a m e a n d p o i n t e d o u t t h a t t h e i n q u i r y d on e b y t h e A s s e s s i n g O f f i cer v i s - a - vi s t h e m a j o r e x pe n s e s w a s a l s o t a b u l a t e d i n a ch a r t , p l a c ed a t pa p e r b o o k p a ge N o s . 2 t o 4 , m e n t i o n i ng t h e qu e r y r a i s e d by th e A s s e ss i n g O f fi c e r v i s- a - v i s t h e m a j o r e x pe n s e s a s u n d e r :
a) Non-examination of major expenses Particulars Query of AO (Details is given point wise as per questionnaire) Purchases 1. A comparison of Balance Sheet, Trading and P&L A/c for the assessment year 2011-12& 2012-2013.
2.Comprehensive Chart of GP & NP for the last three years.
7. Produce Books of Accounts
14. Month-wise Purchase, Consumption & Sales. 15, Details of purchases & sales made from/to above Rs.20.00 Lac,
18. Detail of sundry creditors above Rs.10.00 Lac giving 8 his name, address &~PAN.
Job Work 1. A comparison of Balance Sheet, Trading and P&L A/c for the assessment year 2011-12 & 2012-2013.
2.Comprehensive Chart of GP & NP for the last three years.
7. Produce Books of Accounts
14.Month-wise Purchase, Consumption & Sales.
15.Details of purchases & sales made from to above Rs.20.00 Lac.
18. Detail of sundry creditors above Rs.10.00 Lac giving his name, address & PAN.
Consumption 1. A comparison of Balance Sheet, Trading and P&L A/c for the Stores assessment year 2011-12 & 2012-2013.
2.Comprehensive Chart of GP & NP for the last three years.
7. Produce Books of Accounts
14.Month-wise Purchase, Consumption & Sales.
15.Details of purchases & sales made from/to above Rs.20.00 Lac.
18. Detail of sundry creditors above Rs.10.00 Lac giving his name, address & PAN.
Wages & 1. A comparison of Balance Sheet, Trading and P&L A/c for Allowances the assessment year 2011-12 & 2012-2013.
7. Produce Books of Accounts
10. Detail of ESI &EPF.
13. PL produce Salary, Wages & Attendance Registers Oil & Lubricants 1. A comparison of Balance Sheet, Trading and P&L A/c for the assessment year 2011-12 & 2012-2013.
2.Comprehensive Chart of GP & NP for the last three years.
7. Produce Books of Accounts
14.Month-wise Purchase, Consumption & Sales.
15.Details of purchases & sales made from/to above Rs.20.00 Lac.
18. Detail of sundry creditors above Rs.10.00 Lac giving his name, address & PAN.
Electricity 1 „ A comparison of Balance Sheet, Trading and P&L A/c for Expenses the assessment year 2011-12 & 2012-2013.
2.Comprehensive Chart of GP & NP for the last three years. 7, Produce Books of Accounts Salary & 1. A comparison of Balance Sheet, Trading and P&L A/c for Allowances the assessment year 2011-12 & 2012-2013.
7. Produce Books of Accounts
10. Detail of ESI & EPF.
13. Pl. produce Salary, Wages & Attendance Registers. Staff & 1. A comparison of Balance Sheet, Trading and P&L A/c for the Labour Welfare assessment year 2011-12 & 2012-2013.
2.Comprehensive Chart of GP & NP for the last three years.
7.Produce Books of Accounts
8.Justification of major expenses debited to P&L A/c. Bills above Rs 50000/- were produced and these were verified and returned 9 Building Repair 1.A comparison of Balance Sheet, Trading and P&L A/c for the assessment year 2011-12 & 2012-2013.
2,Comprehensive Chart of GP & NP for the last three years.
7.Produce Books of Accounts
8.Justification of major expenses debited to P&L A/c. Machinery Repair 1. A comparison of Balance Sheet, Trading and P&L A/c for the assessment year 2011-12 & 2012-2013.
2.Comprehensive Chart of GP & NP for the last three years.
7.Produce Books of Accounts
8.Justification of major expenses debited to P&L A/c. Bills above Rs 50000/- were produced and these were verified and returned.
Interest 1. A comparison of Balance Sheet, Trading and P&L A/c for the assessment year 2011-12 & 2012-2013.
2.Comprehensive Chart of GP & NP for the last three years.
7.Produce Books of Accounts
8.Justification of major expenses debited to P&L A/c. Cash on Discount 1. A comparison of Balance Sheet, Trading and P&L A/c for bills receivable the assessment year 2011-12 & 2012-2013.
2.Comprehensive Chart of GP & NP for the last three years.
7.Produce Books of Accounts
8.Justification of major expenses debited to P&L A/c. Freight 1. A comparison of Balance Sheet, Trading and P&L A/c for the assessment year 2011-12 & 2012-2013.
2.Comprehensive Chart of GP & NP for the last three years.
7. Produce Books of Accounts
8. Justification of major expenses debited to P&L A/c.
10. L d . C o u n s el f o r th e a s s e s s ee t h e re f o r e c o n te n d e d t h a t i t w a s m o r e t h a n e v i d e n t f r o m th e a b o v e th a t th e A s s e s s i n g O f f i c e r h a d mad e a d e q u at e i nqu i r i e s vi s - a - vi s t h e m a j or e x p e n s e s i n c u r re d b y t h e a s s e ss e e . R e f er r i n g to t h e r e pl y filed by th e as s e s s e e d ur i n g a s s e s s m e nt pr o c e e d i n gs , L d . C o u n s el f o r th e a s s e s s ee s t a te d t h a t a l l q u e r i e s r a i s e d by t h e A s s e s si n g O ff i c e r w a s du l y a dd r e s s e d d u ri n g as s e s s m e n t p r o c e e d i ng s . R e fe r r i n g t o t h e sub m i s s i o n s ma d e b e f o r e t h e L d . P r . CI T, t he L d . c o u ns e l f o r a s s e s s ee s ta t ed t h a t t h e v o u c h e r s a bo v e R s . 5 0 , 0 0 0/ - w e re v e r i f i e d a n d r e tu r n e d b a c k 10 a f t e r v er i f i c at i o n a n d i t w a s al s o p o i n t e d o u t t ha t t h e r e w as n o f a l l i n G P / NP , w h i c h w a s i n f a c t o n t h e h i gh e r s i d e as c o m p a r e d t o e arl i e r y e a r s . Ou r a t t e n t i o n wa s d ra w n t o t h e a b o v e s u b m i ss i on s m a d e b e f o r e t h e L d . P r . CI T, p l a c e d a t P a p e r B o ok p a g e 9 a s u n d er :
"1. Regarding non-examination of major expenses It is submitted that majority of the expenses have been verified by the Ld. AO during the assessment proceedings. Vouchers above Rs.50,000/- were verified & then returned back after verification. Further, there is no fall in GP & NP, it is on the higher side as compared to earlier years. The chart is given as under:-
Asst. Year Turnover GP NP GP Ratio NP Ratio
2010-2011 516059804 104407784 29234890 20.23% 5.67%
2011-2012 692135155 152631543 39089800 22.05% 5.65%
2012-2013 830972836 183283633 51726759 22.06% 6.22%
11. V i s - à - v i s t h e n on e x a m i n a ti o n of t h e b a s i s o f st o c k v a l u a t i o n, t h e Ld . c o u n s el f o r as s e s s e e su b m i t ted t h a t th e d e t a i l s o f o p e n i ng a n d c l o s i n g s to c k , i n c l u d i ng t h e i r b r e a k u p a s r a w m a t er i a l , s to r e s an d s p a r e s , w o r k i n p r o g r e ss , scrap and finished g o o d s, alongwith t he i r method of v a l u a t i o n a n d t he f a c t t h a t t h e r e w a s n o f a l l i n G P h a d b e e n f u r n i s h e d an d su b m i t t e d d u ri ng a s s e s s m e nt p ro c e e d i n g s.
Th e Ld.Counsel for the a s s ess e e stated th a t all these aspects were ve r i f i e d by the A s s e s si n g Officer d u ri n g a s s e s s m e nt p ro ce e d i n g s . O u r a tt e n t i o n w a s d r a w n t o t h e s u b m i s s i on s m ad e b e f o r e t h e Ld . P r . CI T i n t h i s r e g a r d a s under:
b) Stock Valuation The details of opening stock and closing stock were furnished along with the method of valuation. The details of stock valuation includes break up stock i.e. raw material, stores and spares, Work in progress, scrap and finished goods. The Break up and method of valuation is enclosed herewith. Your honour will find that the details are self explaining nothing more explanation is required. Further there is no fall in GP. This aspect was verified by the Ld AO during the 11 assessment proceedings. Assessment proceedings are inquiry based proceedings. But it is not possible for the A.O. to make 100% enquiries in respect of all the aspects. There is some element of randomness in conducting the assessment proceedings. It is an absurdity to say that 100% of every transaction be examined by the A.O.
12. Th e L d . c o u n se l f o r as s e s s ee f ur t h e r r e f e rr i n g t o t he s u b m i s s i on s m ad e b e f o r e t h e P r.C I T p o i n t e d o ut t h a t i t w a s a l s o s u b mi t t e d th a t s t o c k w a s va l u e d a t l o w e r o f c o s t o r s e l l i n g p ri c e a n d t h a t t h e v a l u a t i o n w a s t e s t ch e ck e d d u r i n g a s s e s s m e nt p r o ce e d i n g s an d f u r th e r t h a t t h e a s se s s e e u n it was excisable unit and p r o p er records of r ec e i p t s a nd consumption h ad been ma i n t a i n e d . L d .C o u n s el for t he a s s e s s e e c o n t e nd e d t h a t i t w as a l s o p o i nt e d o ut t o t h e L d .
P r . CI T t h a t t h e r e w a s n o f a l l i n GP d u r i n g t he y e ar a n d a l so that the a ss es s e e had b een s u b j e c t ed to scrutiny a s s e s s m e nt f o r as s e s s m e n t y e a r s 2 0 1 3 - 1 4 an d 2 01 4 - 1 5 a n d n o a d v e r s e v i e w h a d b e e n ta k e n. O u r a t t en t i o n w a s d r a w n t o t h e f o l l o w i n g s u b m i s si o n s ma d e b e f or e th e L d . P r .CI T p l a c e d a t P a p e r B o o k p a g e 9 a s un d e r :
"2. Regarding non-examination of valuation of closing stock It is submitted that the stock is valued at lower of cost or selling price. The valuation was test checked during the assessment proceedings. Further, ours is an excisable unit. Proper records of receipt & consumption are maintained. It is also submitted that there is no fall in GP as stated in the above chart.
It is also brought into your kind attention that the cases of the assessee are subject to scrutiny for the assessment year 2013-2014 & 2014-2015 and no adverse view has been taken.
13. V i s - à - v i s n on - v e ri f i c a t i on o f c r e d i t o r s i t w a s s u b mi t t e d t h a t t h e d e ta i l s o f c r e d i t or s h a d b e e n f u r n i sh e d an d i t w a s also submitted that no m a jor c r e d i t o rs w e re old and m a j o r i t y of c r ed i t o r s w e re r e pu t e d a n d r e g i s te r e d u n d e r excise. L d. C o u ns e l for t he a s se s s e e s u b mi t t e d that t he A s s e s s i n g O f f i c e r h a d c h ec k e d the d e t a i l s a n d v ou c h e r s a nd 12 h a d t h us c on d uc t e d a p r o pe r en q u i r y i n th i s re g a r d . Th e r e l e v a n t s u b m i ss i o n s ma d e be f or e t h e L d . P r . CI T i n t h i s r e g a r d an d r e fe rr e d t o b ef o r e us a r e r e p r od u c e d he r e u n d e r :
c) Non-verification of creditors Regarding non verification of creditors, it is submitted that details of creditors were furnished. There were no major creditors which are old. Further majority of creditors are reputed and registered under excise. So the Ld AO checked the details and vouchers. Assessment proceedings are inquiry based proceedings. But it is not possible for the A.O. to make 100% enquiries in respect of all the aspects. There is some element of randomness in conducting the assessment proceedings. It is an absurdity to say that 100% of every transaction be examined by the A.O. It is submitted that the AO examined all the relevant documents and had conducted a proper inquiry. Since the A.O. had made proper enquiries in respect of all aspects, the order of the A.O. is neither erroneous nor prejudicial to the interest of the revenue. Therefore, it is clear that all the points have been duly verified during the assessment proceedings & no adverse view is required."
14. Th e L d . c o u ns e l f o r a s s e s se e f ur t h e r po i n t e d o ut t h at c o n f i r m a ti o n o f m a j o r i t y c r e d i t o rs w e r e al s o p l a ce d b e f o r e t h e L d . P r . CI T a n d i t w a s a l s o s u b m i t t e d t ha t th e s e w e r e v e r i f i e d i n t h e s u c c e e d i ng a s s es s m e n t y e a r a l so a n d n o a d v e r s e vi e w had b e e n ta k e n . O u r a t t en t i o n wa s d r a w n t o t h e s u b m i ss i o n s m a d e b y t h e a s se s s e e b e f or e t h e L d . P r . CI T a t p a g e 9 o f t he P a p e r B o ok a s un d e r :
"3. Regarding non-verification of high creditors It is submitted that the confirmations of majority of the creditors are placed on your honour's file. Your honour may verify them through independent investigation. These were also verified in the succeeding assessment years & no adverse view was taken."
15. Th e L d . c o u n s el f o r a s s es s e e s u bm i t t e d , t h e r e fo r e, t h a t i t i s c l e a r l y e v i de n t t h a t a l l i s s ue s r a i s ed b y th e L d . P r . CI T i n h i s n o ti c e i . e. r e l a t i ng t o m a jo r e x p e n s es , c l os i n g s t o ck and sundry c re d i t o r s , had be e n enquired into d u r i ng a s s e s s m e nt p r o ce e d i n g s a n d t h at d u e r e p l y w i t h r e g a r d t o 13 t h e s a m e h ad b e e n f i l e d b y th e a s s e s s ee , a nd t h a t t h e A s s e s s i n g O ff i c er h a d a p p l i e d hi s m i n d t o t h e s a m e a n d verified the i n fo r m a t i o n also and a f t er v er i f i c a t i o n was s a t i s f i e d an d d ec i d e d n o t t o t a ke a n y a d v e r s e v i e w e x c e pt d i s a l l o w an c e o f i n t e r e s t u/ s 3 6 ( 1 ) ( i i i ) o f t h e Ac t .
16. Th e L d . c o u n s e l f o r a s s e s s e e t he re a f t e r s t a t ed t h at t h e o b s e r v a t i o n s an d f i n d i ng s o f t h e Ld . P r . CI T w hi c h le d h i m t o t h e c o nc l u s i on th a t a d eq u a t e e nq u i r i e s i n t h e p re s e n t ca s e had not been conducted by th e Assessing Of f i c e r w e re w i t h o u t a n y b a si s a n d m e r i t e d n o c o n si d e r a ti o n i n vi e w of t h e b a c k dr o p o f t h e f a c t s o f t h e c a s e a s p oi n t e d o u t a b o v e. R e f e r r i n g t o t h e f i n d i n g s o f t h e L d . P r . C I T v i s -à - v i s t h e f a i l u r e o f t h e A ss e s s i n g O ff i c e r to e x a m i n e m a j o r e x p e n s es w h i c h r e ad a s und e r :
"4.3 Having considered the submissions of the assessee, it is seen that during assessment proceedings, the A.O. has not examined the issue of wastage, the input-output ratio over the preceding years' results. In the event there is an adverse finding on the input output ratio, increased expenses would point to greater output and sales not reflected in books. As stated in the show cause notice, scrap generated was required to be examined, which has not been done. As major expenses had gone up substantially, consumable stores for instance having gone up by 40%, it was incumbent upon the A.O. to have conducted in depth examination of the expenses. Reply with regard to specific query regarding machinery repair expense has also not been given, in specifics, nor examined by the A.O. Issues relating to the operational income vis-a-vis profits were required to be examined. Thus the A.O. has failed to examine the above, in depth, as was required to be done."
17. Th e L d . c o u n s e l f o r a s s e ss e e p oi n t e d o u t t h a t th e L d. P r . CI T had stated that the Assessing O f fi c e r had not e x a m i n e d th e i ss u e o f w a st a g e , i n p u t o u t pu t r a t i o o v er preceding y e ar s ' results. Th e Ld. counsel for assessee 14 p o i n t e d o ut t h a t t h e L d . P r .CI T h a d r a k e d u p ne w i s s u e s which as per him n e e d ed to be enquired into by t he A s s e s s i n g O ff i c er w i t h o u t e v e n p o i n t i n g o u t t he r e a s o n f o r l o o k i n g i n t o t h os e i s s u es . Th e L d . co u n s e l f or a s s e s se e p o i n t e d o u t th a t t h e L d. P r .CI T h a d m e r el y s ta te d t h a t i n t h e e v e n t u al i t y t h a t a n a d v er s e f i n d i n g i s th e re o n s u c h i s s u e , i t w o u l d ma k e t h e o r de r e rr o n e o u s . Fu r t h er , Th e L d . c o u n s e l f o r a s s es s e e , p o i nt e d o ut t h a t t h e L d . Pr . CI T h a d only m e n ti o n e d t h a t the i s s u es of e x p e ns e s r e l a t i n g t o c o n s u m a b l e s t o re s w h i c h h a d g on e u p b y 4 0 % , machinery repair a nd of o p e r a t i o na l i n c om e were r eq u i re d to be e x a m i n e d i n d ep t h , w i th o u t p oi n t i n g ou t t he r e a s o n fo r s t a t i n g s o d e s pi t e t h e f a c t t h a t a l l n e c e s s a r y de t a i l s a n d i n f o r m a ti o n had been filed by the assessee before the A s s e s s i n g O f fi c er a n d h a d b e e n p o i n t e d o u t t o t h e L d . P r . CI T a l s o an d L d . P r . CI T h a d fa i l e d t o p o i nt o ut a n y t h i n g f r o m t h o s e d e t ai l s w h i c h c o u l d l e a d h i m t o b e l i e v e t h a t m o r e e n q u i r y n ee d e d t o b e c on du c t e d o n t h es e i s s u e s . Th e L d . c o u n s e l f o r a s s e s s e e p o i nt e d o u t t h a t h a v i ng f i l e d a l l d e t a i l s of e x p e ns e s a n d e v en a c o m p a r a t i v e c ha r t o f t h e expenses v i s- à -v i s previous ye a r and f u r t he r having p r o d u c e d al l t h e b o o k s o f a cc o un t a n d a l s o s u bm i t t i n g to t h e f a c t t h a t t h er e w a s n o s u b s ta n t i a l c h a n ge i n G P / N P i n p r e v i o u s y e ar s , th e r e w a s n o o c c as i o n a t a l l t o h o ld t h a t t h e e n q u i r y c o n d u c te d b y t he A s s es si n g O f f i c e r wa s i n a d e q u a t e a n d c o u l d n o t h a v e l e d t o h i s s a t i s f ac t i o n v i s- à - v i s sa i d expenses.
15
18. Th e r e a f t e r r e f e rr i n g to the o b se r v a t i o n s of t he Ld. P r . CI T o n t h e i s su e o f s t oc k v a l u at i o n a t pa r a 4 .3 a s u n d e r :
"While basis of stock valuation is given in the Audit Report filed with the return, there has been no effort to examine the correctness of the same. The assessee's reply in these proceedings is silent with regard to material under Rectification, pointed out in the show cause notice. There has been no attempt to Obtain stock statement furnished to the bank, (which would have been submitted on a regular basis, since the assessee enjoys a cash credit limit), and compare the same with the stock details provided, albeit provided for only the beginning and end of the year. The assessee has relied upon the aspect that its products are excisable in support of the correctnessr5f~valuation of stock. However, the Audit Report mentions specifically that an Excise Audit was conducted during the year, however, the A.O. has not obtained the Excise Audit Report to check if any discrepancies/shortcomings affecting the manufacturing results, income etc., were pointed out in such Excise Audit."
19. Th e L d . c o u n s e l f o r a s s e ss e e p oi n t e d o u t t h a t th e L d. P r . CI T h a d a g a i n o n t h i s i s s u e r ak e d u p u n n e c e s sa r y i s s u e s of A s s e s si n g Officer not obtaining stock s t a t e m e nt furnished to th e bank and th e A s s e s si n g Of f i c e r not o b t a i n i n g Ex c i s e A u d i t r e p o r t t o c h e c k a n y d i s cr e p a n c y i n t h e m a n u fa c t u r i n g r e s u l t, w h e n t h e f a c t w a s t ha t a l l d e t ai l s v i s - à - v i s t h e s t oc k v a l u at i o n , t he i r b a s i s , h a d be e n f i l ed t o t h e A s s e s s i ng O f f i c e r w h o h a d te s t c h e c k e d a n d e x a m i n ed t h e s a m e a l s o an d n o a dv e r s e re m a r k i n t h e e xc i s e r e po r t h a d b e e n p o i n t ed o u t b y t he a udi t o r s al s o . Th e Ld . c o u ns e l f o r a s s e s s e e s ta te d t h a t t h e L d . P r . CI T h a s n o t p o i n t e d o u t anything in t he details f u r n i sh e d before the Assessing O f f i c e r w h i c h c ou l d h a ve p r om p te d t h e A s s e ss i n g O f f i c er t o d i s b e l i e ve t h e c on t e n t i o n m a d e be f o r e h i m l e a d i ng t o f u r th e r e n q u i r y on t h e i ss u e a s p oi n t e d ou t b y t h e L d . Pr .C I T. 16
20. V i s - à - v i s f i n d i ngs o f t h e L d . P r . CI T o n s u n d r y c r ed i t o r s as under:
"As regards verification of Sundry Creditors, as pointed out in the show cause notice, while the A.O. obtained a list of Sundry Creditors, with their names, address and PAN, no attempt was made to verify the credibility and genuineness of these creditors. In AY 2014-15, confirmation of balances from some sundry creditors are on record, but not for all creditors which appear in the record for A.Y. 2012-13. Hence the fact remains that the credibility and genuineness of these creditors remained unverified."
21. Th e L d . c o u n s e l f o r a s s e ss e e p oi n t e d o u t t h a t th e L d. P r . CI T h a s a d m i t t e d t h a t t h e c o n fi r m a t i o n o f s o m e c r e d i t o rs h a d b e e n p l a ce d o n r e c o rd b u t n ot f o r a l l cr e d i t ors , a n d h a d on this b as i s held the en q u i r y made by the A s s e s s i ng O f f i c e r i n th i s reg a r d t o b e i n a d eq u a t e . Th e L d. co u n s e l fo r a s s e s s e e s t a t e d th a t c o n s i d e r i n g t h e f a c t t h a t th e d e t a i l s o f a l l s u n d r y c r e d i t o r s h a d b ee n f i l e d a n d t h at i t w a s s t a t e d t h a t n o n e o f t he c r e d i t or s w e re o l d , t ha t t h e y w e r e a ll reputed p a r ti e s and c o n s i d e ri n g the fact that the c o n f i r m a ti o n o f s o m e o f t h e c r e di t o r s h a d b e e n f i l e d b e f o r e the Ld. P r . CI T, the findings of the Ld. Pr .C I T that i n v e s t i g at i o n mad e i n t hi s r e ga rd b y t h e A s s e s si n g O f f i ce r w a s i n a d eq u a t e , w a s i n c o rr e c t .
22. Th e L d . c o u n s e l f o r a s s e s s e e, t h er e f o r e , c o nt e n d ed t h a t t h e o r d e r o f t h e L d . P r . CI T, s e tt i n g a s i de t h e as s e s s m e nt m a d e b y t h e A s se s s i n g O ff i c e r wa s b a d i n l a w an d a g a i n s t t h e f a c t s a n d ci rc u m s t a n c es o f the c a s e .
23. Th e L d . D R , o n th e o t h er h a nd , re l i e d up o n f i n d i n g s of the Ld. P r . CI T as r ep r o d u ced above that i n a d e q u a te i n q u i r i e s ha d b ee n c o n d u c t e d by t h e A s s e s s i n g O f f i c e r o n t h e i m p u gn e d i ssu e s .
17
24. W e h a v e h e a r d c o n t e n t i on s o f b o t h t h e p a r t i es a n d h a v e g o n e t h ro ug h t h e o r d e r o f th e L d . P r . CI T a nd a l s o t h e d o c u m e n t s r e f e r re d t o b e f o re u s . Th e s o l e r e a s o n fo r h o l d i n g t h e o r d e r p a s s ed b y t h e As s e s s i ng O f f i c er t o be e rr o n e o u s so as to cause p re j u d i c e to the Revenue, we find, is the i n a d e q u a c y o f i n q u i r y c o n d u ct ed b y t h e A s s e s si n g O f f i c e r v i s - a - v i s th e v e ri f i c a t i on o f m a jo r e x p e n s e s , c red i b i l i t y o f c r e d i t o r s a n d v al u a t i o n of s t o ck. W e a r e u n a b l e t o a g r e e with this f i nd i n g of th e L d.P r . CI T. On t he contrary, c o n s i d e r i n g t h e f a c t s o n r e c o rd , w e a r e c o n vi n c e d t h at a d e q u a t e en q u i ri e s v i s - à -v i s t h e i m p u g n e d i s s ue o f m a j or e x p e n s e s , st o c k v a l u a t i o n an d v er i f i c a t i o n o f c r ed i t o r s h a d b e e n m a d e d u r i ng a s s e s s me n t p roc e e d i n g s .
25. Admittedly, d ur i n g a s se s s m e nt p r o c e ed i n g s , t he A s s e s s i n g O f fi c er h a d r a i s ed q ue r i e s on a b r o ad p l a t fo rm e n c o m p a s si n g t he m a j o r e x p e n s es i n c u r r e d b y t he a s s e s s e e, by a s k i ng d et a i l s re g a r d i n g m o n t h wi s e purchase, c o n s u m p t i o n a nd s a l e s , d e t a i l s o f p u r c h as e a n d s a l e s m a de from or to a b ov e R s . 20 l a cs , details of E SI and PF , j u s t i f i ca t i o n o f m a j o r e x p en s e s d e b i t e d t o P r of i t & L o ss Account a sk i n g the a s s e s se e to produce its books of account, s a l ar y , wages a nd attendance registers, c o m p a r a t i v e c h ar t o f G P a n d N P f o r t h e l a s t t h r e e y e a r s a n d c o m p a r i s on o f i ts B a l a n ce S h e et a n d t r ad i n g and P r o f i t & L o s s A c c ou n t f or a s s e s s m en t y e ar 2 0 1 1 - 1 2 a n d 2 01 2 - 1 3 . 2 6 . Th e a s s e s s e e h a d u n d i sp u t e dl y a d d r e ss e d a l l t h e a b o v e q u e r i e s ra i s e d b y f i l i n g m o n t h - wi se d e t a i l s o f p ur ch a s e s a n d 18 s a l e s a n d de t a i l s o f p u r c h as e s a n d s a l e s ma d e f r o m o r t o p a r t i e s a b ov e R s. 2 0 l a c s d u r i ng th e y e a r , p r o d uc i n g books o f a c c o u n t a n d v o u c h e r s b e f or e t h e A s s e s s i n g O f f i c e r f or v e r i f i c at i o n , f i l i ng c o m p a ra t i v e Ba l a n c e Sh e e t , Tr a d i n g a nd P r o f i t & L o s s Ac c o u n t fo r a ss es s m e n t ye a r s 20 1 1 - 1 2 an d 2 0 1 2 - 1 3 a n d a co m p r e h e n si v e d et a i l o f G P / N P f or t h e l a s t t h r e e y e a r s s h o wi n g n o f a l l i n t h e s a m e b u t r a t h e r r e f l e c t i n g i n c r e a s e a s c o m pa r e d t o e a r l i e r ye a r s . V o u c h e rs o f e x p e n s es a b o v e R s . 5 0 , 00 0/ - h a d a l s o b e e n f i l e d t o t h e A s s e s s i n g O f f i c e r w h o h a d v e r i f i e d th e s am e a n d r e t u rn e d b a c k a f t e r v e r i f i c at i o n . F urt h e r d e t a i l s o f cr e d i t o r s an d d e bt o r s a b o v e R s . 1 0 l a c s h a d b e e n f i l e d. S a l a r y a n d w a g e s r e gi s t e r s h a d a l s o b ee n fi l e d a n d a j u s t i f i c a t i o n g i v en a l s o of t h e m a j o r e x p e n s e s i n c ur re d s t a t i n g t h a t t h e y h a d a l l b e en i n c u r r e d f o r t h e bu s i n e ss p u r p o s e s o n l y .
27. W i t h r e g a r ds t o t h e v a l u a t i on of o p e n i n g a n d clo s i n g s t o c k w e f i n d th e a s s e s s e e w as a s k e d t o f i l e d e t a i l s of o p e n i n g a n d c l os i n g s t o c k a n d t h e i r m e t h o d o f v a l u a t i o n, w h i c h a l s o w a s d u l y f i l e d b y t he a s s e s s e e g i v i n g a l l d e t a i l s a l o n g w i t h b r ea k u p of t he s to ck a l s o . Th e v a l u a t i o n w a s a l s o t e s t c h e c ke d d u r i n g pr o c e e di n g s .
28. A s r e g a r ds t h e cr e d i t o r s , d e t ai l s o f m a j o r c r e d i t o rs w a s a s k e d f o r d ur i n g a s s e s s m e nt p r oc e e d i n g s , w h i c h a g a i n w e r e duly filed by the assessee.
29. Further i t wa s c l e a r l y b r o u g h t to t h e n ot i c e of th e A O t h a t t h e r e w a s n o f a l l i n G P or N P , w h i ch i n f a c t h a d i n c r e a s e d du r i n g t h e y e a r . I t i s a l s o a f a c t o n re c o r d t h a t 19 the unit o f t h e a s s e s s e e w a s an e x c i s a bl e u n i t m a i n t a i n i n g a l l r e c or d s o f r e ce i p t a n d c o n s u mp t i o n o f s t o c k .
30. C o n s i d e r ed i n th e a b o v e b a c kd ro p , w e h o l d t h at t h e queries r a i s e d a n d t h e r e p l i e s f i l e d by t h e a s se s s e e we re s u f f i c i e nt f o r t he s a t i s f a c t i o n v i s - à - v i s c o r re c t ne s s o f t h e c l a i m o f t he a s s es s e e w i t h re g a r d t o t h e e x p en s e s , s t o c k a nd c r e d i t o r s. A l l ba s i c i n f o r m at i o n r e l a t i n g t o t h e i m p u g n e d i s s u e s h av i n g b ee n c a l l e d f o r a nd f i l e d b y t h e a ss e s s e e , no infirmity being found in the sa m e and c o n si de r i n g th e o v e r a l l p o si t i v e r e s u l t s r e fl e c t e d b y t h e a s s e s s e e b y w a y o f higher Ne t a nd Gross p r o f i ts in the i m p u g ned year as c o m p a r e d t o t he p r e v i o us y e a r, a n y o r d i n a r y m a n w o u l d h a v e b e e n s u f f i ci e n t l y s at i s f i e d w i t h t h e c o r r e ctn e s s o f th e c l a i m o f t h e as s es s e e a n d w o ul d h a v e s t o p p ed i t s i n q u i r y a t t h i s , a s r i g h tl y do n e b y t he A s s ess i n g O f fi c e r al s o .
31. E v e n t h e L d . P r .C I T, w e f i n d , ha s n o t p o i n t e d o u t w h a t h a s p r o m p t e d hi m t o h o l d t h a t t h e e n q u i r i e s ma d e i n t h e p r e s e n t c a s e w er e i n a d e q u a t e. W e f a i l t o u n d e r s t a n d t h at w h e n t h e i n f o r ma t i o n c o l l e c t e d by t h e A s s es s i n g O f f i c e r wa s s u f f i c i e nt f o r b ei n g s a t i s fi e d w i th t h e c o r r e ct n es s o f t he r e s u l t s s ho w n by t h e a s s e ss e e , w h y w a s t he r e an y n e e d t o l o o k i n t o i s s u es o f i n p u t- o u t p ut r a t i o , w a s t a ge o r f o r th a t m a t t e r s p e c i f i c e x p e n s e s , m or e p a r t i c u l ar l y w h en e v e n a s p e r t h e P r . CI T t h e r e w a s n o a ppa r e n t a n o m al y i n t h e s a m e b u t c o u l d h a v e re v e a l e d s o m et h i n g i f d e l v e d i n t o d e e p e r . S o a l s o v i s - a - v i s s to c k a n d c r ed i t or s w i t h r e sp e c t t o wh i ch s a t i s f a c to r y r e p l i e s w e re f i l e d by t h e as s e s s ee a nd w e no t e 20 that it was a l so p o i n t ed out to the P r . CI T th a t s t o ck v a l u a t i o n h a d be e n e x a m i n e d a n d c o n f i r m a ti on s o f s o m e c r e d i t o r s f i l e d i n s u c c e e d i ng y e a rs a s s e s s m en t p ro c e e d i n g s, w h i c h fa c t ha s b e e n a c kn o w l e dg e d b y t h e L d . Pr . CI T a l s o. Th e f a c t t h a t a l l c r e d i t o r s w e r e ol d a n d r e p ut e d pa r t i e s a n d t h a t t h e a s s e s se e w a s a n e x c i s a b l e u n i t m a i nt a i n i n g al l records of g o od s p r o du c e d an d c o n su m e d was a l so s u b m i t t e d to t he P r . CI T. W h y t h e n s h o u l d t h e A s s e s s i ng Officer be i n qu i r i n g f u rt h e r about stock s t a t e m e n ts s u b m i t t e d t o b an k o r r e p o r t s o f a u d i t o f e x c i s e r e c o r d s i s b e y o n d ou r u nde r s t a n d i ng . S i mp l y b e c au s e i n th e v i e w o f t h e L d . P r. CI T c e r t a i n ot h e r as p e c t s a l s o n e ed e d t o be looked into, w hi c h could have brought to l i gh t c e r t ai n d i s c r e p a nc i e s , do e s n o t m a k e As s e s s i n g Of f i c e r's e n q u i r y i n a d e q u a te . I f th e e n q u i r y c o nd u c t e d d u r i ng a s s e s s m e nt a n d t h e d e t a i l s a r e s u f f i c i e n t e no u g h t o l e a d a n o r d i n a r y m a n t o b e s at i s f i e d w i t h t h e c o r re c t n e s s o f t he c l a i m o f t he a s s e s s e e a nd t h er e i s n o t h i ng s u sp i c i o u s o r ou t o f place in t h e d e t a i l s or su b m i s s i o ns t o pr o m p t f u r t he r en q u i r y i n t o t h e i s s u e, w e se e n o r e a so n wh y t h e A s se s s i ng O f f i c e r s h o u l d ha v e en qu i r e d f ur t h e r o n t h e i ss u e s . A f te r a l l t h e e x e r c i s e o f as s e ss m e n t e n v i sa g e d i n t h e A c t i s l og i c a l l y f or t h e s a t i s f a c t i o n v i s - a - vi s t h e co r r e c t n e ss o f t he i n c o m es r e t u r n e d t o t a x a n d c o n s e q u e nt l y v a r i o u s c l a i ms m a d e b y a s s e s s e e s. Th e r e c a n n o t l o g i c a l l y b e a n y m a n d a te , n o r h a s t h e s a m e b e en sh o w n t o u s , re qu i r i n g 1 0 0% c h ec k i n g o f a l l aspects during a s s e s s m e nt s . Th e same is not humanly p o s s i b l e . Th e e xe r c i s e d o n e b y th e A s s e ss i n g O f fi c e r i n t he 21 present case by broadly e x a mi n i n g the results of the a s s e s s e e an d b e i n g s u f f i ci e n t l y sa t i s f i e d w i t h t he s a m e , w e s e e n o r e a s on wh y t h e A s s e ss i ng O f f i c e r sh o u l d h a v e g o n e i n t o t h e s p e c i f i cs a n d d e l v e d a n d i n q u i r e d d e e pe r i n t o o t h e r i s s u e s . A t t h i s ra t e t h e e x er c i s e o f a s s es s m e n ts becomes a never e n d i ng on e and all a s se s s m e n t s w ou l d be held e r r o n e o u s s i n ce i t i s h u m a n l y no t p o s si b l e t o ma k e 1 0 0 % e n q u i r y on a l l i ss u e s i n as s e s s men t p r o c e ed i n g s .
32. I n vi e w o f th e a bo v e , w e h o l d t h at t h e p r e s en t i s n o t a c a s e o f i n s u f f i ci en c y o f e n q u i r y co n d u c t e d b y t h e A s s e s s i n g Officer a n d, t he r e f o r e , t he o r de r cannot be sa i d to be e r r o n e o u s s o a s t o c a u s e p r e j u di c e t o t h e R e v e nue .
Th e a c t i o n of th e L d . P r . CI T u/ s 2 6 3 o f th e Ac t i s, t h e r e f o r e, s e t a s i d e .
33. I n t h e re s u l t , t he a p p e a l o f t he a s s e s s e e i s , th e re f o r e , allowed.
O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
(DIVA SINGH) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 20 t h April, 2018
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(pA)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh