Anand Food Products, Hyderabad v. ITO, Hyderabad

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A HYDERABAD BEFORE SHRI G.C.GUPTA VICE-PRESIDENT AND SHRI AKBER BASHA ACCOUNTANT MEMBER ITA NO.598/HYD/09 : ASSTT. YEA R 2004- 05 ANAND FOOD PRODUCTS HYDERABAD. (PAN - AAEFA 2069B) VS INCOME-TAX OFFICER WARD- 9(3) HYDERABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI SAI PRASAD RESPONDENT BY : SHRI .A. PATRA O R D E R PER AKBER BASHA ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF THE CIT HYDERABAD DATED 26-3-2009 FOR ASSESSMENT YEAR 2 004-05. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE A PARTNER SHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURE OF BISCUITS ON JOB WORK BASIS FOR 'PARLE PRODUCTS' WITH MATERIAL SUPPLIED BY 'PARLE' FIL ED ON 1-11-2004 ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2004-05 DECLARING AN INCOME OF RS.60 193. IN THE ASSESSMENT UNDER SECTION 143(3) THE ASSESSI NG OFFICER MADE AN ADDITION OF RS.67 44 387 FOR THE REASO N THAT SOME OF THE JOB WORK CHARGES MENTIONED IN THE TDS CERTIFICATES ARE N OT TAKEN INTO GROSS RECEIPTS AND ADDITIONS WERE MADE ON THIS ACCOUNT AF TER DISALLOWING CERTAIN EXPENDITURE DETERMINED THE TAXAB LE INCOME OF THE ASSESSEE AT RS.71 90 634. 2 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) AND THE CIT(A) DIRECTED THE ASSESSEE TO FILE A DETAILED RECONCILIATION STATEMENT REGARDING THE AMO UNTS MENTIONED IN THE TDS CERTIFICATES AND THE AMOUNTS CREDIT TO PROFIT & LOSS A/C AND IN THE ORDER PASSED BY THE CIT(A) IT WAS OBSERVED THAT TH E TOTAL AMOUNTS INCLUDING THE REIMBURSEMENTS RECEIVED FROM 'PARLE' THE AMOUNTS SUBJECTED TO TDS THE AMOUNTS OFFERED TO TAX BY THE A SSESSEE AS PER THE INVOICES RAISED AND THE VARIOUS INCENTIVES GRANTED BY PA RLE WERE DISCUSSED AT LENGTH AND FINALLY THE ADDITION TO THE EXT ENT OF RS.4 93 462 WAS SUSTAINED TOWARDS JOB WORK CHARGES UNDER STATEMENT AS A GAINST RS.67 44 387 ADDITION MADE BY THE ASSESSING OFFICER AND OTHER ADDITIONS MADE BY THE ASSESSING OFFICER WERE UPHELD BY THE CIT(A) . 5. AGGRIEVED BY THE ORDER OF THE CIT (A) THE REVEN UE FILED AN APPEAL BEFORE THE ITAT IN ITA NO.1245/HYD/07. SUBSEQUENTLY THE CIT-VI ASSUMING JURISDICTION U/S 263 ISSUED A SHOW CAUSE NOTICE DATE D 18-2- 2009 INDICATING THE ASSESSEE THAT THE ORDER UNDER SECTION 143(3) DATED 29-12-2006 IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL T O THE INTEREST OF REVENUE ON CERTAIN ISSUES MENTIONED IN THE SAID SHOW CAUSE NOTICE. THE ASSESSEE VIDE ITS LETTERS FILED ON 13-3-09 AND 23-3-2009 EXPLAINED IN DETAIL ALL THE ISSUES AND IN NUT SHELL THE ASSESSEE STATED THAT ALL THE ISSUES WERE EXAMINED IN DETAIL BY THE ASSESSING OFFICER AND THAT FULL INFORMATION WAS ALREADY AVAILABLE ON RECORD AND IT WA S FURTHER STATED BY THE ASSESSEE THAT SOME OF THE ISSUES LIKE ADVANCES GIVEN BY THE ASSESSEE WERE BROUGHT DOWN BALANCES FROM EARLIER YEARS A ND THAT THE ASSESSMENTS FOR ALL EARLIER YEARS WERE COMPLETED U/S 143(3 ) OF THE ACT. THE CIT AFTER CONSIDERING THE ABOVE EXPLANATION OF TH E ASSESSEE HELD THAT THE ASSESSMENT COMPLETED BY THE ASSESSING OFFICER IS UNSUST AINABLE IN LAW BEING BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HE SET ASIDE THE SAID ASSESSMENT ORDER WITH A DIRECTION TO 3 THE ASSESSING OFFICER TO REDO THE SAME IN THE LIGHT OF TH E HIS FINDINGS OBSERVATIONS AND DIRECTIONS GIVEN THERE UNDER. 6. AGGRIEVED BY THE FINDINGS AND DIRECTIONS OF THE CIT HYDERABAD THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7. THE FIRST ISSUE ARISING IN THE APPEAL IS WITH REGARD TO DISALLOWANCE OF PACKING MATERIAL. THE CIT OBSERVED THAT AS PER TH E AGREEMENT WITH PARLE PRODUCT PVT. LTD THE ENTIRE PACKING MATERIAL H AS TO BE SUPPLIED BY PARLE PRODUCT PVT. LTD AND THEREFORE THE ASSESSEE IS NOT CORRECT IN DEBITING THE EXPENDITURE TO PROFIT AND LOSS ACCOUNT. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHAT WAS DEBITED TO PROFIT AND LOSS ACCOUNT IS NOT THE PACKING MATERIAL BUT THE CRAFT P APER USED TO STORE THE BISCUITS IN THE TRAYS TO KEEP THEM PROTECTED FROM LOSS OF MOISTURE AND AWAY FROM DUST AND MOSQUITOES AND IT WAS A LSO SUBMITTED THAT SINE THE PACKING WAS DONE THROUGH HUMAN LABOUR THE SPEED AT WHICH BISCUITS ARE MANUFACTURED IS MUCH HIGHER THAN THE SPEED AT WHICH THEY WERE PACKED BY LABOUR. SINCE THERE IS A POSSIBILIT Y FOR THE BISCUITS PRODUCED TO GET DRIED UP THE ASSESSEE PURCHASED CRAFT PAP ER ON ITS OWN AND USED IT IN THE PROCESS AND NOT IN THE PACKING AND TH E CRAFT PAPER PURCHASED WAS DESTROYED AFTER REPEATED USAGE. THE ASSESSEE PRODUCED INVOICES OF THE BILLS FOR THE PURCHASE OF CRAFT PAPER BEF ORE THE ASSESSING OFFICER AND BEFORE THE CIT. THE CIT AFTER CONSIDERIN G THE FACTS AND THE CIRCUMSTANCES OF THE CASE HELD THAT THERE IS NO SCOPE FOR THE ASSESSEE TO CLAIM FOR SUCH EXPENDITURE AND HENCE THE HE DIRECTED T HE ASSESSING OFFICER TO BRING TO TAX AN AMOUNT OF RS.24 43 365. 8. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUB MISSIONS BEFORE US WHICH WERE MADE BEFORE THE CIT AND FURTHER SUBMITTED THAT THE CIT DID NOT CONSIDER THE DIFFERENCE BETWEEN PACKING MATERIAL AND THE PROCESS MATERIAL AND WHAT IS USED IS CRAFT PAPER FOR STORAGE OF 4 BISCUITS IN THE PROCESS OF PACKING AND THIS CRAFT PAPER WA S NOT SUPPLIED BY PARLE PRODUCT PVT. LTD AND COPIES OF THE BILLS IN THE NAME OF THE ASSESSEE PRODUCED BEFORE THE ASSESSING OFFICER AND FILED BEFO RE CIT WHICH ARE PLACED AT PAGES 2 TO 13 OF THE PAPER BOOK. IT WAS FURTHER SUBMITTED THAT AFTER VERIFYING THESE INVOICES ONLY THE ASSESSING OFFICER ALLOWED THE CLAIM OF THE ASSESSEE U/S 143(3) OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ORDE R PASSED BY THE ASSESSING OFFICER IS NOT ERRONEOUS IN SO FAR AS IT IS PREJUD ICIAL TO THE INTEREST OF REVENUE AND THEREFORE THE ORDER UNDER SECT ION 263 IS TO BE CANCELLED. 9. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPR ESENTATIVE OPPOSED THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSE E AND SUBMITTED THAT THE CIT IS PERFECTLY JUSTIFIED IN DIRECTI NG THE ASSESSING OFFICER TO BRING TO TAX AN AMOUNT OF RS.24 43 365 ON THIS ACCOUNT. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE ASSESSE E HAS FILED ALL THE COPIES OF PURCHASE BILLS OF PACKING MATERIAL BEFORE THE A SSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCEEDINGS WHICH WAS EVIDENCED BY THE COPY OF THE LETTER PLACED AT PAGE-1 OF THE PAPER BOOK ADDRESSED TO THE ASSESSING OFFICER BY THE ASSESSEE ON 17-11-2006. WE ALSO FIND THAT THE ASSESSING OFFICER MADE SEVERAL OBSERVATIONS IN HIS ORDER U/S 143(3) OF THE ACT STATING THAT HE HAS VERIFIED THE BOOKS OF ACCOUNT WITH REFERENCE TO THE BILLS ETC. HENCE THE ABOVE OBSERVATIONS MADE BY THE ASSESSING OFFICER CLEARLY SHOW THAT THE ASSESSING OFFICER EXAMINED AL L THE BILLS BOOKS OF ACCOUNT INVOICE PAYMENTS ETC. IN SOME CASES HE MA DE DISALLOWANCES WHEREVER HE WAS NOT SATISFIED WITH THE EVID ENCE FURNISHED BY THE ASSESSEE. HENCE IN OUR CONSIDERED VIEW THE CIT WHI LE EXERCISING HIS POWERS UNDER SECTION 263 OF THE ACT IS NOT PERMITTED TO SUBSTITUTE HIS ESTIMATE OF INCOME OR VIEW IN PLACE OF INCOME DETERM INED OR 5 ASSESSED BY THE ASSESSING OFFICER. MOREOVER THE LETTER FIL ED BY THE ASSESSEE FOR THE INFORMATION SUBMITTED BEFORE THE ASSESSING OFFICER SHOWS THAT THE ASSESSING OFFICER IN FACT MADE ENQUIRIES DU RING THE ASSESSMENT PROCEEDINGS ON THE ISSUE UNDER CONSIDERATION AND THE ASSESSEE HAD GIVEN A DETAILED EXPLANATION BY A LETTER F URNISHING THE RELEVANT DATA. IN SUCH CIRCUMSTANCES THE DECISION OF TH E ASSESSING OFFICER CANNOT BE HELD TO BE ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF THE REVENUE SIMPLY BECAUSE HIS ORDER DOES NOT MAKE DETA ILED DISCUSSION IN THIS REGARD. OUR VIEW IS FORTIFIED BY THE DECISION OF THE AGRA BENCH OF ITAT IN THE CASE OF RAJESH GOEL AND SONS VS. CIT REPORTE D IN 29 SOT 253 AND THE DECISION OF MUMBAI BENCH IN THE CASE OF MRS.K ATIZA SOOMERBHOY VS. ITO REPORTED IN 100 ITD 173. 11. THE SECOND ISSUE ARISING IN THIS APPEAL IS WITH REGAR D TO DISALLOWANCE OF BONUS ESI AND PF U/S 43B OF THE INCOME- TAX ACT. SINCE THE LEARNED COUNSEL OF THE ASSESSEE FAIRLY CONCEDED BEFORE THE CIT THAT AN AMOUNT OF RS.54 377/- UNDER ESI AND RS.3 67 169/- UNDER PF DESERVE TO BE ASSESSED TO TAX BY WAY OF SECTION 43B OF TH E ACT. ACCORDINGLY THE CIT IS RIGHT IN DIRECTING TO ASSESSING OF FICER TO BRING THESE TWO AMOUNTS TO TAX. 12. THE THIRD ISSUE ARISING IN THIS APPEAL IS WITH REG ARD TO DISCREPANCY IN THE GROSS RECEIPTS. THE ASSESSEE SUBMITTED A DETAILED ST ATEMENT CULLED OUT FROM TDS CERTIFICATES AND A COPY OF THE RECONCI LIATION STATEMENT FILED BEFORE THE CIT (A) AND IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT THE MATTER IN QUESTION WAS SUBJECT MATTER OF THE APPEAL BY THE REVENUE BEFORE THE ITAT AGAINST THE ORDER PASSE D BY THE CIT (A). COPY OF THE GROUNDS OF APPEAL FILED BY THE REVENUE B EFORE THE ITAT WAS ALSO SUBMITTED AND THE ASSESSEE CLAIMED THAT THE ADVANCE OF RS.66 69 000 IS ENTIRELY DIFFERENT FROM THE ADVANCES RE FERRED TO IN THE BALANCE SHEET AND THE FIRST AMOUNT IS THE ADVANCE AGAI NST THE PENDING 6 BILLS AND ADJUSTED IN THE FINAL BILLS AS RIGHTLY OBSERVE D BY THE ASSESSING OFFICER IN PARA 3 OF HIS ORDER AND THE ADVANCES REFLECT ED IN THE BALANCE SHEET AND REFERRED TO IN THE SHOW CAUSE NOTICE ARE THE A DVANCES GENERALLY GIVEN BY PARLE PRODUCT PVT. LIMITED TO THE ASSESSEE NOT CONNECTED WITH THE GROSS RECEIPTS. IT WAS FURTHER SUBMITTE D BY THE ASSESSEE A DETAILED NOTE ON THE STATEMENT FILED BEFORE T HE ASSESSING OFFICER WITH REGARD TO THE GROSS RECEIPTS AND THE RELEVA NT COPIES OF INVOICES RAISED AND THE SETTLEMENT SHEETS WERE ALSO FILED BEFORE THE CIT. THE CIT OBSERVED THAT THE GROSS RECEIPTS FROM PARLE PROD UCT PVT. LIMITED ADDED UP TO RS.3 80 34 354 AS AGAINST THE AMOUNT DISCLOS ED IN THE P & L A/C AT RS.3 14 35 876 AND FURTHER THE ADVANCE OF RS. 66 69 000 FROM PARLE PRODUCT PVT. LIMITED WHICH WAS CLAIMED AS PART OF GROSS RECEIPTS IS NOT MATCHING WITH ADVANCES SHOWN IN THE BALANCE SHEET. T HE CIT FURTHER HELD THAT IT IS THE CASE OF THE ASSESSEE THAT THE GROSS AMOUNTS OF JOB WORK RECEIVED INCLUDED THE AMOUNT FOR EXCISE DUTY A ND OTHER EXPENSES LIKE STATIONERY XEROX ETC. NEITHER DURING THE ASSESSMENT PROCEEDINGS NOR DURING PRESENT PROCEEDINGS THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE RELATING TO THE ACTUAL PAYMENT OF EXCISE DUTY AND THIS ASPECT HAD BEEN OVER LOOKED IN THE ASSESSMENT PROCEED INGS AND HE DIRECTED THE ASSESSING OFFICER TO DO IN DEPTH SCRUTINY IN THIS ISSUE AND EXAMINE THE EVIDENCE WITH REGARD TO EXCESS PAYMENT. 13. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE OBSERVATIONS OF THE CIT ARE NOT CORRECT AS THE ASSESSING OF FICER IN HIS ORDER UNDER SECTION 143(3) AT PAGE 3 GAVE A CATEGORICAL FINDING THAT THE ASSESSEE HAD PRODUCED THE PROOF OF PAYMENT TO CENTRAL EX CISE AND HE HAD ALSO OBSERVED THAT THE SAME IS NOT DEBITED TO P & L A/C. FURTHER THE ENTIRE ISSUE BEFORE THE CIT (A) WAS WITH REGARD TO THE AMOUNTS MENTIONED IN THE TDS CERTIFICATES AND THE JOB WORK RECE IPTS AS PER THE INVOICES REIMBURSEMENT OF EXPENSES AND THE INCENTIVES RECEI VED FROM PARLE PRODUCT PVT. LIMITED AND THE CIT(A) IN HIS DETA ILED ORDER EXAMINED 7 EACH AND EVERY ISSUE AND THE DEPARTMENT NOT SATISFIED WI TH THE ORDER OF THE CIT(A) AND FILED AN APPEAL BEFORE THE ITAT IN I TA NO.1245/HYD/07 AND THE WHOLE OF THE DISCUSSION IN THE ORDER U/S 263 AND THE FIGURES DISCUSSED THEREIN ARE PART OF THE GROUNDS OF THE APPEAL BEFORE THE ITAT AND THEREFORE IT IS SUBMITTED THAT SINCE THE MATTER WAS ALREADY DISCUSSED BY THE CIT(A) THIS ISSUE IS OUTSIDE THE SCOPE OF THE PROVISIONS OF SECTION 263 AND THE RELEVANT COPIES TO THIS ISSUE ARE PLACED IN THE PAPER BOOK AT PAGES 26 TO 31 37 TO 66 AND 74 TO 75. 14. ON THE OTHER HAND THE LEARNED DR WHILE SUPPORTI NG THE FINDINGS OF THE CIT OPPOSED THE SUBMISSIONS OF THE LEARNED COUNSEL FO R THE ASSESSEE. HE RELIED ON THE DECISION OF THE APEX COURT IN THE CASE OF MALABAR INDUSTRIAL COMPANY LTD. VS. CIT REPORTED I N 243 ITR 83. 15. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE W HOLE OF THE DISCUSSION IN THE ORDER OF THE CIT U/S 263 AND FIGURES D ISCUSSED THEREIN ARE PART OF THE GROUNDS RAISED IN THE APPEAL BEFORE T HE ITAT AGAINST THE ORDER OF THE CIT (A). SINCE THE CIT (A) ALREADY DISCU SSED THE MATTER IN HIS ORDER AND DECIDED THE ISSUE THIS ISSUE IS OUTSIDE THE SCO PE OF THE PROVISIONS OF SECTION 263. HENCE THE CIT IS NOT JUSTIFIED I N ASSUMING HIS JURISDICTION UNDER S. 263 OF THE ACT ON THIS ISSUE. 16. THE FOURTH ISSUE ARISING IN THIS APPEAL IS WITH REG ARD TO LOANS UNDER SECTION 269SS OF THE ACT. IT WAS SUBMITTED THAT ALONG WITH AUDIT REPORT IN 3CD WAS FURNISHED INDICATING THE MODE OF ACCEPTANCE OF THE LOAN AND AS PER THE STATEMENT ALL THE LOANS ARE THROUGH BANKING CHANNELS AND THE BOOKS WERE EXAMINED IN DETAILS BY THE ASSESSING OFFICER. THE CIT (A) WAS OF THE OPINION THAT THE PARTICULARS HAVE NOT BEEN EXAMINED BY THE ASSESSING OFFICER FROM THE ANGLE OF VIOLATION OF PROVIS IONS OF SECTION 269SS OF THE ACT. IT WAS SUBMITTED THAT ALONG WITH AU DIT REPORT IN 3CD 8 WAS FURNISHED INDICATING THE MODE OF ACCEPTANCE OF THE L OAN AND AS PER THE STATEMENT ALL THE LOANS ARE THROUGH BANKING CHANN ELS AND THE BOOKS WERE EXAMINED IN DETAIL BY THE ASSESSING OFFICER. THE C IT HELD THAT THE ASSESSING OFFICER TOTALLY IGNORED THIS ASPECT AND NON APPL ICATION OF MIND AND NON CONSIDERATION OF THE STATUTORY PROVISIONS IS ERR ONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. IT IS FURTH ER SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT ALL THE DETAILS WERE INCORPORATED IN THE AUDIT CERTIFICATE PLACED AT PAGE-24 OF THE PAPER BOOK. SINCE THE ASSESSING OFFICER HAS VERIFIED THE BOOKS OF ACCOUNTS CIT IS N OT JUSTIFIED IN HOLDING THAT THE ASSESSING OFFICER HAD IGNORED THIS ASP ECT. ON THE OTHER HAND THE LEARNED DR RELIED ON THE ORDERS OF C IT. 17. WE HAVE CONSIDERED THE SUBMISSIONS OF THE RIVAL PART IES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND TH AT AS PER ANNEXURE TO THE FORM NO. 3CD IN THE AUDIT REPORT ALL THE DE TAILS WERE INCORPORATED IN THE CERTIFICATE VIZ. NAME OF THE LENDER AMOUNT O F THE LOAN PAYMENT DETAILS LIKE DD NUMBERS ETC. THE OBSERVATION OF THE CIT THAT THE AUDITOR HAD NOT CERTIFIED AS TO WHETHER THE LOANS/DEPOSITS IN Q UESTION WERE ACCEPTED BY WAY OF CROSSED CHEQUES/DD IS VERY MUCH CONTRAR Y TO THE FACT THAT THE AUDITOR HAD CERTIFIED IN HIS AUDIT REPO RT IN FORM 3CD THAT THE LOANS/DEPOSITS IN QUESTION WERE ACCEPTED BY WAY OF DD ONLY. HENCE THE CIT IS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICE R TO CALL FOR THE PARTICULARS AS TO WHETHER THE DDS/CHEQUES WERE CROSSED OR N OT. 18. FIFTH ISSUE ARISING IN THIS APPEAL IS WITH REGARD T O THE AMOUNTS GIVEN TO JAGDISH AGARWAL ALIBIN MOHDBIN SHAIKH. IN THIS REGARD THE ASSESSEE SUBMITTED THAT THE COVERING LETTER FILED BEFORE THE ASSESSING OFFICER THIS ISSUE WAS EXAMINED BY THE ASSESSING OFFICER AND THE ADVANCE TO JAGDISH AGARWAL IS BROUGHT FORWARD BALANCE O F THE ADVANCE GIVEN IN THE EARLIER YEARS WHEREIN THE ASSESSMENT WAS CO MPLETED U/S 143(3) OF THE ACT. THIS WAS AN ADVANCE GIVEN FOR PURCHA SE OF THE 9 PROPERTY AND SINCE THERE WAS SOME DISPUTE TO THE TITLE T HE AMOUNT WAS RECEIVED BACK IN FINANCIAL YEAR 2004-05 AND THE ASSESSEE F ILED A COPY OF THE ACCOUNT OF THE JAGDISH AGARWAL FOR THE ASSESSMENT YEAR 2004-05. SIMILARLY THE AMOUNT ADVANCED TO ALI BIN SHEIK IS ON 28-12-2002 AND A COPY OF THE AGREEMENT WAS ALREADY PRODUCED BEFORE THE ASSESSING OFFICER AS PER HIS DIRECTIONS AND THIS AMOUNT WAS ALSO GIVE N FOR PURCHASE OF THE PROPERTY AND A COPY OF THE AGREEMENT WAS ALSO P LACED IN THE PAPER BOOK. IT WAS SUBMITTED BY THE LEARNED COUNSEL FO R THE ASSESSEE BEFORE US THAT THE COPIES OF THE ACCOUNTS OF JADISH AGA RWAL IN THE BOOKS OF THE ASSESSEE IS PLACED AT PAGE 20 OF THE PAPER BOOK A ND COPY OF HE AGREEMENT WITH ALIBIN SHAIK FILED BEFORE THE ASSESSING OFFICER IS PLACED AT PAGE 18 OF THE PAPER BOOK AND ALL THE BALANCES ARE BROUGHT FORWARD FROM EARLIER YEARS AND ARE THE ADVANCES MADE BY THE ASSE SSEE AND NOT RECEIVED BY THE ASSESSEE. SINCE THE ASSESSING OFFICER AFTER CA LLING FOR THE DETAILS IS SATISFIED AND THE CIT ASSUMING JURISDICTI ON U/S 263 CANNOT DIRECT THE ASSESSING OFFICER TO MAKE ROVING ENQUIRIES SIMPL Y BECAUSE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSIONS OF THE ASSESSING OFFICER. COPY OF THE AGREEMENT WITH JAGDISH AGARWAL WAS ALSO FI LED BEFORE THE CIT. 19. THE LEARNED DR SUBMITTED THAT THE CIT ONLY DIRECT ED TO MAKE PROPER ENQUIRIES TO ASCERTAIN THE CORRECTNESS OF THE SUBMI SSIONS MADE BY THE ASSESSEE DUE TO LACK OF ENQUIRY BY THE ASSESSING OFFI CER AND THE ASSESSEE SHOULD NOT HAVE ANY GRIEVANCE IN THIS REGARD. 20. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND FROM THE COPIES OF THE ACCOUNTS OF MR. JAGDISH AGRAWAL AND ALWIN SHAIK IN THE BOOKS OF THE ASSESSEE WHICH ARE PLACED AT PAGES NOS. 18 TO 20 OF THE PAP ER BOOK ALL THE BALANCES ARE BROUGHT FORWARD FROM THE EARLIER YEA RS. THE ADVANCES UNDER DISCUSSION ARE MADE BY THE ASSESSEE COMPANY AND NOT R ECEIVED 10 BY THE ASSESSEE. MOREOVER ALL THE ASSESSMENTS IN THE EARL IER YEARS WERE COMPLETED UNDER SECTION 143(3) OF THE ACT. IT AP PEARS THAT THE ASSESSEE COMPANY RECEIVED BACK THE SAID ADVANCES SUBSEQUENTLY. IN VIEW OF THE ABOVE THE CIT BY ASSUMING JURISDICTION UND ER S.263 OF THE ACT CANNOT DIRECT THE ASSESSING OFFICER TO MAKE ROVING ENQU IRY SINCE THE CIT DOES NOT FEEL SATISFIED WITH THE CONCLUSION OF THE A SSESSING OFFICER. 21. THE NEXT ISSUE ARISING IN THIS OF APPEAL IS WITH REG ARD TO EXPENDITURE UNDER THE HEAD 'LDO AND CHIT LOSS'. IT WA S CONTENDED THAT THE ASSESSEE INCURRED EXPENDITURE ON LDO FOR BACKING AND HE PURCHASED OIL FROM IOL BHARAT PETROLEUM. ALL THE BILLS ALONG WITH THE BOOKS WERE PRODUCED BEFORE THE ASSESSING OFFICER WHO EXAMINED THE EX PENDITURE UNDER DIFFERENT HEADS AND ADDITIONS MADE WHEREVER HE WAS NOT SATISFIED WITH THE EVIDENCES FURNISHED AND ALL THE BILLS WERE ONCE AGAIN PRODUCED BEFORE THE CIT AS PER HIS DIRECTIONS AND WERE EXAMINED BY THE CIT. THE CIT HELD THAT THIS CLAIM FOR EXPENSES WAS ALLOWED BY TH E ASSESSING OFFICER WITHOUT APPLYING HIS MIND AND HE DIRECTED THE ASSESSING OFFICER TO EXAMINE IN DEPTH. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT AS INDICATED IN THE COVERING LETTER PLA CED AT PAGE 1 OF PAPER BOOK AND ALL THE DETAILS OF CHIT FUND ACCOUNTS W ERE PRODUCED BEFORE THE ASSESSING OFFICER AND ALL THE BILLS WERE PROD UCED BEFORE THE ASSESSING OFFICER AS INDICATED IN THE ASSESSMENT ORDER. IT WA S CONTENDED FURTHER BY THE LEARNED COUNSEL THAT THE CIT OBSERVATIONS ARE NOT FACTUALLY CORRECT AND HENCE CIT IS NOT JUSTIFIED IN D IRECTING THE ASSESSING OFFICER TO CONDUCT ROVING ENQUIRIES IN THIS REGARD . ON THE OTHER HAND THE LEARNED DR RELIED ON THE ORDER OF THE CIT . 22. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES A ND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT TH IS ISSUE IS ALSO SIMILAR TO THE FIRST ISSUE WHEREIN THE ASSESSING OFFICER CALLED DE TAILED INFORMATION FROM THE ASSESSEE WHICH WAS EVIDENCED IN THE COVERING LETTE R PLACED AT 11 PAGE-1 OF THE PAPER BOOK AND HENCE THE OBSERVATIONS OF THE CIT ARE NOT FACTUALLY CORRECT ON THIS ISSUE. 23. THE LAST ISSUE ARISING IN THIS OF APPEAL IS WITH REGA RD TO DISALLOWANCE OF COMPENSATION TO GOMEZ. IT WAS SUBMITTED BEFORE THE CIT THAT AS PER THE MOU ENTERED INTO WITH GOMEZ WHO PROVIDED THE SECURITY FOR THE LOAN OBTAINED BY THE ASSESSEE HE WAS PAI D COMPENSATION @ RS.19 000 PER MONTH AND THE AGREEMENT I S IN EXISTENCE SINCE 1998 AND WAS EXAMINED IN THE ASSESSMENTS COMPL ETED UNDER SECTION 143(3) EVEN IN THE EARLIER YEARS. EVEN IN THE COURSE OF PRESENT ASSESSMENT PROCEEDINGS ALL THE DETAILS WERE FILED BY THE ASSESSEE AS PER THE DIRECTIONS OF THE ASSESSING OFFICER AND FUR THER THE ASSESSEE SUBMITTED THAT AS AND WHEN THE LOAN GOT REDUCED THE COMPENSATION WAS ALSO REDUCED FROM RS.19 000 PER MONTH AN D FINALLY IN THE ASSESSMENT YEAR UNDER CONSIDERATION THE TOTAL COMPENSAT ION PAID IS ONLY RS.45 000 AND IN THE COURSE OF PROCEEDINGS U/S 263 THE CONFIRMATION LETTER FROM LASLE GOMEZ WAS ALSO FILED. IT IS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US THAT THE CO MPENSATION PAID TO GOMEZ IS AS PER THE MOU ENTERED INTO IN THE Y EAR 1998 AND COPY OF THE MOU IS PLACED AT PAGE 21 TO 23 OF THE PAPER BO OK AND CONFIRMATION LETTER OBTAINED FROM L GOMEZ IS PLACED AT PAGE 67 OF THE PAPER BOOK AND THIS CONFIRMATION LETTER WAS FILED BEFO RE THE CIT AS PER HIS DIRECTIONS. FURTHER THE COMPENSATION PAID BY THE ASSE SSEE TO GOMEZ FOR THE ASSESSMENT YEAR 2004-05 IS RS.45 000 ONLY AND IN THE LIGHT OF THE MOU AND THE CONFIRMATION LETTER IT CAN NOT BE SAI D THAT THE ASSESSING OFFICER HAD MECHANICALLY ALLOWED THE CLAIM OF THE ASSESSEE AND FURTHER SUBMITTED THAT THE ASSESSING OFFICER CANNOT BE DIRECTED TO MAKE FURTHER ROVING ENQUIRIES WITHOUT ANY ADVERSE MATERIAL IN POSSESSI ON BY THE CIT. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPRESEN TATIVE RELIED ON THE ORDER OF THE CIT. 12 24. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CIT SIMPLY DIRE CTED THE ASSESSING OFFICER TO MAKE ENQUIRIES ABOUT THE COMPENSATION PAID T O SRI K.GOMEZ ON THE GROUND THAT THE MONTHLY AMOUNT OF COMPENSATION APPEARS TO BE ON HIGHER SIDE WITHOUT ANY ADVERSE MATERIAL BROUGHT O N RECORD. WE FIND THAT THE AGREEMENT FOR PAYMENT OF COMPENSATION IS IN EXISTENCE SINCE 1998 AND ALL THE ASSESSMENTS FOR THE EARLIER YEARS WERE COMPLETED U/S 143(3) OF THE ACT. NOW THE ASSESSMENT UNDER CONSIDERATIO N IS 2004-05. FURTHER WE FIND MERIT IN THE ASSESSEE'S SUBMISSION THAT TH E COMPENSATION PAYMENT GET REDUCED FROM RS.19 000 PER MON TH TO RS.45 000 FOR THE ENTIRE YEAR FOR THE ASSESSMENT YEAR UN DER CONSIDERATION. IN VIEW OF OUR AFORESAID OBSERVATIONS AND FINDINGS WE HOLD THAT THE ORDER PASSED BY THE ASSESSING OFFICER IS NEIT HER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE IN SO FAR AS ALL THE ISSUES RAISED BY THE CIT EXCEPT THE ISSUE OF DISALLOWANCE UNDER S. 43B OF THE ACT. ACCORDINGLY WE MODIFY HIS ORDER AS INDICATED ABOVE . 25. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS P ARTLY ALLOWED ORDER WAS PRONOUNCED IN THE COURT ON 23-04-2010. SD/- G.C.GUPTA SD/- AKBER BASHA VICE PRESIDENT ACCOUNTANT MEMBER. DT/- 23RD APRIL 2010 COPY FORWARDED TO: 1. C/O CH. PARTHASARATHY & CO. 1-1-298/2/B/3 1ST FLOOR SOWBHAGYA AVENUE STREET NO.1 ASHOKNAGAR HYDERABAD. 2. ITO WARD-9(3) HYDERABAD. 3. 4. CIT(A) HYDERABAD. CIT AP HYDERABAD. 13 5. THE DEPARTMENTAL REPRESENTATIVE ITAT HYDERABAD. JMR