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2009 (7) TMI 1254 - AT - Income TaxAppeal filed against the order of the CIT - order passed by the CIT u/s. 263 is arbitrary, without proper reasons, invalid and bad in law - The return was processed u/s. 143(1). The case was selected for scrutiny and notice u/s. 143(2) was issued on 12th Jan., 2005. AO has investigated the issues thoroughly and after examination he has made certain disallowances. assessee filed appeal against this order of the AO before the CIT(A), The CIT(A) partially allowed the relief from disallowance from carrying charges paid to C.S. Bohra where TDS was deducted. The AO disallowed ₹ 71,339 and the CIT(A) sustained only ₹ 26,399. This order of the CIT(A) has been asserted by the Department as well as by the assessee. Hence, this appeal. HELD THAT:- The CIT has mentioned in his order that the AO has passed an order in haste without making any inquiry on the issues. In this connection, we hold that the case was selected on a scrutiny on 12th Jan., 2005 fixing the hearing on 20th Jan., 2005. The order was passed on 13th Dec., 2006. Thus there was a time of two years for investigation of the case. The details on the order sheet are placed in the paper book at pp. 8 to 17. We find that the questionnaire has been issued and that too under the direction of the Addl. CIT which is evident from p. 9 of the paper book which is a note sheet dt. 19th Jan., 2005. The various notings in the note sheets show that the assessee has produced the books of account, bills and vouchers which have been verified by the AO. The questionnaires issued to the assessee calling details are also evident from pp. 18, 19, 20, 21, 53, 54 and 55 of the paper book. Thus these facts show that the AO has issued the details of questionnaires on the various issues which had been replied by the assessee which is evident from pp. 56 and 57 of the paper book. Sundry creditors - we find that the AO has himself verified these sundry creditors by calling information u/s. 133(6) and they have replied to the AO by confirming the transaction. Thus after inquiry the AO has reached to the conclusion not to make addition on this issue. Thus the AO has adopted one course of two courses permissible in law. The AO had taken one view where two views are plausible and such view cannot make the order erroneous and prejudicial to the interest of the Revenue. The CIT's view cannot be invoked to substitute the view of the AO. The assessment also does not become erroneous where queries raised during the assessment proceedings are not recorded in the final assessment order. The queries were raised during the assessment proceedings which have been answered by the assessee and the AO has taken a view and on that the order passed by the AO does not become ipso facto erroneous and prejudicial to the interest of the Revenue. regarding the payments made in cash - we find that the AO has made specific queries in respect of the land and building expenditure which is capital in nature of ₹ 8,93,337 in his questionnaire dt. 11th Jan., 2005 which is evident from page No. 18 of the paper book. Thus the necessary inquiry in this regard appears to have been made by the AO and after examination he has not made any addition on this account. Similarly the expenses debited under the head "Travelling and conveyance expenses" we find that necessary details were submitted which is evident from p. 60 of the paper book and after verification the AO did not make any addition on this account. Similarly in the case of carrying charges the AO asked the details which is evident from p. 12 of the paper book. The assessee furnished the information and details in this regard during the assessment proceedings which are evident from pp. 60 and 62 of the paper book and after the examination the AO arrived at a conclusion and made the addition @ 1 per cent of the total expenses at ₹ 71,339 against which the assessee filed an appeal before the CIT(A) and after verification the addition has been reduced to ₹ 26,399. Thus this issue has not only been examined by the AO but also by the CIT(A) and after the verification the CIT(A) granted partial relief to the assessee. Thus this issue cannot be made a basis for invoking the revisionary power by the CIT. Similarly in respect of the labour expenses, after verification, the AO made certain additions and in the appeal the CIT(A) had deleted the addition after verification. As far as the site Peditar expenses are concerned, we find that the AO made a specific query in his questionnaire dt. 19th Oct., 2006 which is evident from page No. 53 of the paper book. After the verification the AO made same addition and this issue cannot be made a basis to invoke the revisionary powers u/s. 263. regarding the genuineness of the sub-contracts - we find that the amount was paid and the AO in his questionnaire dt. 19th Oct., 2006 has specifically made a query in this regard which is evident from page No. 54 of the paper book and the assessee submitted details and information in this regard. Audited accounts also show that the sub-contract made to the sister concern M/s M.K. Agarwal & Co. was made on the prevailing market price. As far as TDS on this account is concerned, the assessee has submitted TDS return which was also verified by the AO which is evident from page No. 55 of the paper book. Regarding the payments made to the persons as specified in s. 40A(2)(b), we find that there was no deviation from the policy followed by the assessee in the past years. Thus from the above facts we are of the view that the invoking of the provisions of s. 263 by the CIT is not justified. In holding so, we also get the strength and support from the following decisions : CIT vs. Max India Ltd [2007 (11) TMI 12 - SUPREME COURT]. "The phrase 'prejudicial to the interests of the Revenue' in s. 263 of the IT Act, 1961, has to be read in conjunction with the expression 'erroneous' order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the Revenue. For example, when the AO adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the AO is unsustainable in law." The issue that has been raised is that, since the assessment order adverted to only MN property and was silent with respect to the properties located at GE and DC: on this short ground alone the revisional order of CIT ought to be sustained. We, therefore, set aside the order of the CIT and the appeal of the assessee is accordingly allowed.
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