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2016 (7) TMI 820 - AT - Income TaxRevision u/s 263 - whether the purchases relatable to the unreconciled sales have been recorded or not? - Held that:- In the instant case, no discrepancies were noticed on the quantitative particulars filed by the assessee either by the ld AO or by the ld CIT. We find that the ld CIT had directed the ld AO to verify whether the purchases relatable to the unreconciled sales have been recorded or have not been recorded in the books already by the assessee. This only tantamount to ld CIT trying to direct the ld AO to make fishing and roving enquiry in this aspect to justify his suspicion. We find that the ld CIT is not sure about the aspect as to whether the order of the ld AO is erroneous or not. Hence it could be safely concluded that the ld CIT had not given any categorical finding in his order that the order of the ld AO is erroneous. Hence the basic assumption of revisionary jurisdiction u/s 263 of the Act fails The purchases, sales and manufacturing expenses disclosed by the assessee are not disturbed by the revenue. Hence it could be safely concluded that the alleged unreconciled sales could have emanated only out of alleged undisclosed purchases. In such an event, the only recourse to tax the income is by applying the gross profit percentage thereon, which is what has been ultimately done by the ld AO in the assessment by making an addition of ₹ 89,779/- . Hence the order passed by the ld AO cannot be considered as erroneous in nature and prejudicial to the interest of the revenue. In fact the order in the given set of facts and circumstances could only be viewed as prejudicial to the interests of the assessee and not for the revenue. In any case, we are in complete agreement with the arguments advanced by the ld AR that the profit for the whole year has to be determined by the ld AO and by the ld CIT. We find that the ld AO had only arrived at an arithmetical figure of closing stock as on 25.1.2008 as a balancing figure at ₹ 15,08,380/-. It is pertinent to note that the said figure would automatically become the opening stock as on 26.1.2008 thereby making it revenue neutral. Ultimately no discrepancies were noticed by the ld AO and by the ld CIT in the final audited accounts of the assessee and the books of accounts produced by the assessee from where the profits of the assessee could be reasonably deduced therefrom. The books of accounts and the audited figures of the assessee were not rejected by the ld AO or by the ld CIT. Under these circumstances, the order passed by the ld AO cannot be construed as prejudicial to the interest of the revenue. - Decided in favour of assessee
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