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2017 (3) TMI 1465 - AT - Income TaxRevision u/s 263 - decline in GP rate from 5.19% in AY 2010-11 to 3.17% in the impugned assessment year - Held that:- AO has made relevant enquiries and after being satisfied has accepted the the fall in the GP rate and trading results. The reasons for the fall in GP rate has been explained by the assessee and duly considered by the AO in terms of increase of prices of the raw material. Once the necessary enquiries have been made and the explanation furnished by the assessee explaining its position, it is the discretion of the AO to accept the explanation of the assessee or where he is not satisfied with the assessee’s explanation, to carry out further enquiries in the matter. In the instant case, the necessary enquiries have been made by the AO and accordingly we do not see a reason for the ld. CIT to exercise his revisionary powers u/s 263 of the IT Act. Accretion/addition to Partners capital account - Held that:- Merely raising a query is not sufficient enough to dislodge the revisionary jurisdiction under section 263 of the Act. What is essential is that relevant questions are asked and enquiries are made to examine about a particular transaction, explanation of the assessee is sought and then a final view is formed by the AO taking into consideration all the relevant facts and circumstances of the case. Now given that the assessee has furnished its explanation regarding the source of deposits in the partner’s capital account and having considered the said explanation, the ld. CIT is correct in remanding the matter back to the AO to examine the said explanation of the asessee. Had the assessee furnished the said explanation before the AO, the ld. CIT may not have the occasion to exercise his revisionary powers u/s 263 of the Act. In our view, these are the basic and the relevant enquiries in terms of examining the source of accretion to the capital account which the AO should have been made at the first place and the AO having been failed to do, the ld. CIT was correct in exercising his revisionary powers u/s 263 of the Act. Unsecured loans - Held that:- In the instant case, though the AO has raised the initial enquiry about this test but while concluding the assessment, there is nothing on record to suggest that he has carried out the necessary investigation to test these basic requirements. This clearly shows nonapplication of mind by AO, blindly accepting what is being part- submitted by the assessee, without conducting the necessary enquiry and investigation which are bare minimum to examine the transactions in respect of unsecured loans. As we have stated earlier, merely raising a query is not sufficient enough to dislodge the revisionary jurisdiction under section 263 of the Act. What is essential is that relevant questions are asked and enquiries are made to examine about a particular transaction, explanation of the assessee is sought and then a final view is formed by the AO taking into consideration all the relevant facts and circumstances of the case. We therefore do not see any justifiable reason to interfere with the order of ld CIT in this regard. Appeal decided partly in favour of assessee
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