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2006 (5) TMI 114 - ITAT MUMBAIRevision u/s 263 - reasons given in the order for holding the assessment order as erroneous and prejudicial are different from the reasons given in the show-cause notice issued - whether there was lack of enquiry and non-application of mind on the part of Assessing Officer vis-a-vis the issue relating to unsecured loans and excessive allowance of expenditure vis-a-vis section 40A(2) - HELD THAT:- In the present case, the reason given in the show-cause notice was that duty drawback received by the assessee could not be considered as profit derived from export in view of the Supreme Court judgment in the case of Sterling Foods and, therefore, the said amount did not qualify for deduction u/s 80HHC. However, the order u/s 263 held the assessment order as erroneous on different grounds namely (i) the Assessing Officer should have excluded the export incentives of Rs. 18,99,015 instead of Rs. 18,58,350, (ii) Central Excise refund and Sales Tax set-off should have been excluded from the business profits under clause (baa) of Explanation to section 80HHC, and (iii) Central Excise refund and Sales Tax set-off should have been included in the total turnover. However, there is no mention of the basis mentioned in the show-cause notice. This clearly shows that there was no nexus between the reasons given in the show cause and the reasons given in the impugned order for holding the order of Assessing Officer as erroneous qua deduction u/s 80HHC. Therefore, we quash the order of the Learned CIT (A) to the extent mentioned above. Assessing Officer did not make any enquiry regarding prevalent market price of the goods purchased by the assessee from the sister concern. In the absence of such enquiry on the part of Assessing Officer, in our opinion, the assessment order became erroneous. Therefore, the order of the Learned CIT (A) has to be held to be valid in this regard. Regarding the issue of unsecured loans, No doubt, the payments were by cheques but that by itself does not prove the creditworthiness of the assessee. Neither the Bank statement of cash creditors nor their Balance Sheet were examined. Even the Assessing Officer had not made any enquiry from the concerned Assessing Officers with whom they were assessed. Therefore, in our opinion, the Assessing Officer failed to make proper enquiries before accepting explanation of assessee. Thus, there was lack of proper enquiry on the part of the Assessing Officer. No evidence was furnished regarding the creditworthiness of the parties. Even otherwise, in such situation, the Assessing Officer should have made enquiries in this regard before accepting the explanation of the assessee. Therefore, in our opinion, there was lack of enquiry on the part of Assessing Officer and the same rendered the assessment order to be erroneous and prejudicial to the interest of Revenue. The order of the Learned CIT(A) is, therefore, sustained on this issue. Thus, the order of the Learned CIT u/s 263 is partly quashed. Consequently, the appeal of the assessee is partly allowed.
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