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2014 (7) TMI 382 - AT - Income TaxOrder passed u/s 263 of the Act – NP rate already dealt - CIT was of the view that the AO has not properly verified the GP and NP rates of the assessee which were abnormally low - Held that:- The AO did notice that the profit disclosed by the assessee was much lower than the profit disclosed by M/s Milestone Fab which is engaged in the similar business - the assessee referred the matter u/s 144A to the ACIT - the assessee explained the reason for low net profit - The assessee also explained that the assessee’s case cannot be compared with M/s Milestone Fab because they are manufacturing and selling transformers apart from electrical poles whereas the assessee company is not manufacturing transformers - the assessee’s sales were mainly to the electricity board on the basis of tender and during the period, the tender was opened and material was supplied, there was a hike in the price of raw material - while passing the order u/s 263, the CIT cannot go beyond the reasons given in the notice issued u/s 263 - The only ground given in the notice under Section 263 was lack of enquiry into the low profit rate disclosed by the assessee - This reason is found to be factually incorrect - Adequate enquiry into the low profit rate was made by the AO as well as ACIT - the order passed by the CIT u/s 263 is not valid and is liable to set aside – Decided in favour of Assessee.
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