TMI Blog2014 (11) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... Ram Narain Goel – [1996 (11) TMI 59 - PUNJAB AND HARYANA High Court] – the observation of the CIT that the AO during the course of assessment proceedings failed to inquire into the correctness of gross receipts, claim of expenses, the total contract work to be executed as per the work orders and the discrepancies therein, total receipts of the assessee as per Form 26AS vis-à-vis the receipts returned in the Profit & Loss account and did not raise a finger on the unverifiable nature of accounts maintained by the assessee was unjustified - this observation is factually incorrect - The assessee filed detailed chart giving details of work contracts, TDS amount, work contract tax amount, bill number with dates etc. - the total work contracts were three in the current year and one in previous year - The copy of contracts was enclosed - The assessee has also enclosed copy of bills and payment schedule of the company - These facts clearly show that observation of the CIT in this regard was completely against the factual position and, therefore, these observations were factually incorrect – the order of the CIT is set aside – Decided in favour of assessee. - ITA No. 2982/Del./2013 - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has paid development expenses of ₹ 7,16,62,142/- but he Assessing Officer has not obtained the details. He has failed to enquire into such many expenses. As per CIT, the Assessing Officer has also not examined whether any TDS was made on these land development expenses amounting to ₹ 7,16,62,142/- and as per section 40(a)(ia) of the Act, expenses without TDS were to be disallowed. It was also noted that receipts were of ₹ 7,86,08,182/- but N.P. is shown just at ₹ 15,98,210/- which is only 2% of the total receipts and also include agricultural income of ₹ 1,29,600/-. Thus, in fact, N.P. was below 2%. Assessing Officer has accepted the same without verification. The CIT also observed that sundry debtors shown in the books of account of ₹ 3,69,88,112/- were not examined and whether these were included in gross receipts as assessee was following mercantile system. On these basis, she has initiated the proceedings u/s 263 of the Act by holding the order of the Assessing Officer as erroneous and prejudicial to the interest of revenue. She has also relied on the decision of Hon'ble Supreme Court in the case of Malabar Industries Co. Ltd. vs. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income is against the principles of law. 3. That on the facts and circumstances of the case the learned Commissioner of Income tax, Meerut erred in law by not giving proper opportunity to the assessee and passed the order u/s 263 hurriedly and without taking in consideration the submissions so made makes the order u/s 263 IT Act,1961 against the principles of natural justice. 4. That on the facts and circumstances of the case the learned Commissioner of Income tax, Meerut erred in law by clubbing the work contracts executed by the assessee company in different years to a single year (01-04-2007 to 31-03-2008.) and ignoring the facts for substitution letter for the work order dated 01-04-2007 in lieu of work order dated 02-05-2007. 5. That on the facts and circumstances of the case the learned Commissioner of Income tax, Meerut erred in law by clubbing the debtors of ₹ 3,69,96,112/- which have already been taken in the running bills for ₹ 7,86,08,182/- . 6. That on the facts and circumstances of the case the learned Commissioner of Income tax, Meerut erred in law by taking hypothetical figures for working out profits from work orders, which even were not sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 1,20,000/- was made by holding that the development expenses shown of ₹ 7,16,62,142/- in the profit loss account appears to be excessive. Ld. AR also draw our attention to the copy of notice issued u/s 142(1) of the Act with the questionnaire dated 13.05.2010 which are placed at pages 5 to 7 of the paper book for which the assessee has replied on 07.07.2010. The reply is placed at page 8 of the paper book. The ld. AR also draws our attention to the assessee s letter dated 05.10.2010 filed before the Assessing Officer along with the annexures mentioned therein which is placed at pages 9 10 of the paper book. The assessee also draws our attention towards submission made on 21.10.2010 filed before the Assessing Officer placed at page 11 of the paper book. Ld. AR also draws our attention to the documents filed before the Assessing Officer during the course of assessment proceedings. The details of documents include copy of computation of income filed along with return of income along with details of TDS at pages 19 20 of the paper book, copy of balance sheet, trading and P L account along with details of schedules mentioned therein at pages 23 to 28 of the paper b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th M/s. Era Infrastructure India Pvt. Ltd. at Meerut. The case was selected for scrutiny. Notices u/s 143(2) and 142 (1) were issued along with the questionnaire which is evident from the papers filed in the paper book. The Assessing Officer has considered and made a disallowance from the development expenses of ₹ 7,16,62,142/-. Thus, it is clear that the Assessing Officer has considered the development expenses and found excessive and accordingly, disallowed ₹ 1,20,000/- out of this. As per Assessing Officer s recording, the books of accounts were produced which have been examined. The Assessing Officer has also reported that the ld. AR of the assessee attended the proceedings from time to time and furnished the replies to the various queries raised by him. This fact shows that Assessing Officer has applied his mind and gone through the books of accounts, considered the replies of the assessee and also taken cognizance of the development expenses and found them excessive and after applying his own mind, he disallowed ₹ 1,20,000/- treating the same as excessive. Thus, it is very clear that the Assessing Officer has applied his mind, made investigations and reached ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number with dates etc. which is placed at page 63 of the paper book. In para 2 of the assessee s reply placed at page 9 of the paper book, it has been clearly mentioned that the total work contracts were three in the current year and one in previous year. The copy of contracts was enclosed. The assessee has also enclosed copy of bills and payment schedule of the company. These facts clearly show that observation of the CIT in this regard was completely against the factual position and, therefore, these observations were factually incorrect. The various case laws relied upon by the assessee also fortify the view taken by us in this regard :- 1. 263 ITR 437, Hari Iron Trading Co. Vs. CIT (Punjab Haryana High Court) in which it was held as under: Held, that, while framing the assessment under section 143(3), the fact that the assessee had not included the surrendered amount had been noticed by the Assessing Officer and was raised by him in the various notices issued to the Assessee. The assessee had no control over the way the assessment order was drafted. The assessee had explained and produced necessary evidence that there was no discrepancy either in cash or in the stock . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Revenue. If one of them is absent - if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue - recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. The phrase Prejudicial to the interests of the Revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law. 5. 323 ITR 206, CIT vs. Development Credit Bank Ltd. (Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated March 24, 2005. At least four letters dated April 27, 2004, February 22, 2005, February 28, 2005 and March 18, 2005 were addressed by the assessee to the Assessing Officer giving details, documents and information pertaining to various queries raised by the Assessing Officer. These have been examined by the Tribunal. We have no reason to believe that examination was less than exacting. Therefore, the conclusion of the Commissioner that there was lack of proper verification is unsustainable . 8. 171 ITR 141, CIT vs. Ratlarn Coal Ash Co. (M.P. High Court), in which it was held as under: An order of assessment was revised by the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961,on the ground that the Incometax Officer had not made proper enquiries. The order of revision was set aside and the Income-lax Officer's order was restored by the Tribunal because it found that the assessee had furnished the requisite information and the Income-tax Officer had completed the assessment after considering all the facts. On a reference: Held, that, on the facts and in the circumstances of the case, the Tribunal was justified in law in reversing the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder: Held, dismissing the appeal, that as was evident from the order of the Tribunal, no addition to the income of the assessee could be made merely because of the difference in the accounting treatment of the commission in the books of account of the assessee as both accounting systems were acceptable. The Assessing Officer had duly applied this mind and was satisfied with the explanation offered by the assessee and did not make any addition in that, regard. The Assessing Officer had not incorporated the facts in detail in the order but that would not mean that there had been no application of mind. The Tribunal noted the fact that the details of tax deducted at source during the financial year had been shown and the income that was shown as commission income was reflected in detail in the show cause and in the books of account. The Assessing Officer had already examined this aspect but the Commissioner had directed a re-inquiry for merely a change of opinion which was impermissible under section 263 of the Act. He was required to arrive at a definite conclusion but he had not done so. There was no reason to interfere with the order of the Tribunal . 12. 343 ITR 342, CIT v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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