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2019 (2) TMI 1463 - AT - Income TaxRevision u/s 263 - lack of enquiry - HELD THAT:-Difference of opinion-there is no lack of enquiry and the AO made the enquiries and completed the assessment, substitution of the Commissioner’s view and the suspicion of the Pr.CIT cannot be a case for revision u/s 263 of the Act. The revision u/s 263 cannot be taken up for difference of opinion. Therefore, we hold that there is no error in the order passed by the AO which requires revision u/s 263. Section 41(1) - Cessation or remission of liability - trade creditors transferred to capital accounts of the partners of the firm - Entries made in the books of accounts unilaterally - HELD THAT:- AO examined the purchases and sales and accepted the purchases and sales. From the scrutiny of the partners capital accounts, trade creditors account, we understand that the assessee has unilaterally transferred the sums to the partners capital accounts and there was no cessation or remission of the liability. The same fact is established as per the account copies placed in the paper book in page no.47 to 49 of the paper book - tax the trade creditors balances u/s 41(1), the cessation or remission of the liability has to be allowed by the trade creditor but not by the beneficiary assessee and the entries made in the books of accounts are immaterial. There must be consent form the creditor to waive the liability. This view is upheld by the Hon’ble Apex court in the case of Commissioner of Income tax Vs Sugauli Sugar Works (P.) Ltd [1999 (2) TMI 5 - SUPREME COURT]. In the instant case, the assessee has transferred the trade credit balances to the capital accounts without any confirmation from the trade creditor for cessation or remission of liability, hence, it is incorrect to hold that the said sum required to be brought to tax u/s 41(1) of the Act. As per the material placed before us by the assessee and discussed in the preceding paragraphs clearly establish that the AO has made reasonable and sufficient enquiries during the course of assessment proceedings. Thus, there is no error in the order passed by the AO and the Ld.Pr.CIT has incorrectly invoked the jurisdiction u/s 263 of the Act. Suspicion- Mismatch of signatures of the trade creditors in the confirmation letters for the impugned A.Y. as well as in the subsequent A.Y. - HELD THAT:- Merely on the suspicion it is unjustified to hold that the credit is not bonafide. Since the issue was verified by the AO at the time of assessment, the purchases and sales were accepted and the payments were made through bank cheques, which the AO has verified all the facts during the course of assessment, we find no error in the assessment order which caused prejudice to the department. Therefore, we hold that there is no case for jurisdiction u/s 263 on this issue. Accordingly, we set aside the order of the Pr.CIT and allow the appeal of the assessee. Section 36(1)(iii)- Interest on borrowed capital- Interest free funds- Disallowance of interest on borrowed capital for construction of building at Vijayarai Village and Koppal Karnataka - HELD THAT:- There is no doubt that the assessee is having interest free funds in the form of partners capital accounts, trade creditors, reserves and surpluses and the assessee has utilized the non-interest bearing funds efficiently and charged the interest reasonably and the issue was verified by the AO. Therefore, we find no error in the assessment order which caused prejudice to the interest of the revenue. Accordingly, we set aside the order of the Ld.Pr.CIT and allow the appeal of the assessee. Depreciation of land on residential apartment - HELD THAT:- AO called for the details of the additions to fixed assets along with the original bills and also called for the details of the depreciation which was furnished by the assessee. As per the original sale bill, there is no allocation of cost to the land and super structure separately. The assessee got undivided share of land in apartment complex. The sale consideration consists of land cost as well as the cost of construction. Normally in apartments, the sale of apartment is fixed on the basis of plinth area - verification of the sale deed, the AO allowed the depreciation on the apartment on composite cost without separately allocating the cost of land and cost of building. Since the AO examined the issue and allowed the depreciation though it is prejudicial to the extent of the depreciation on land, having verified the issue at the time of assessment, there is no error in the assessment order made by the AO, thus, the case is beyond jurisdiction u/s 263. Valuation of the closing stock - HELD THAT:- The assessee collects the human hair domestically as well as from the temples and grades the same according to the quality. The assessee submitted before the AO, the closing stock and its valuation, grade wise. The price of the human hair ranges from ₹ 14 to ₹ 4640/- per kg. The price of each grade is different depending on the quality. The assessee has valued the closing stock at ₹ 4,854/- per kg and the waste was valued at ₹ 14 per kg and the average price came to ₹ 553/- per kg. Except making observation that the AO has not verified the closing stock, the Pr.CIT did not make out a case that there is an error in the assessment order which caused prejudice to the department. Since the issue has been examined by the AO and satisfied regarding the valuation closing stock at the time of assessment we find no error in the assessment order which calls for revision u/s 263 of the Act. - Assessee appeal allowed.
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