TMI Blog1996 (10) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... th audited statement of accounts. The Assessing Officer completed assessment under section 143(3) on31-3-1994at Rs. 7,57,52,500. On a perusal of relevant record, the Commissioner of Income-tax was of the view that the order of assessment was prima facie erroneous insofar as it is prejudicial to the interests of revenue, inasmuch as (i) the assessee did not furnish true and complete particulars in respect of payments made towards procurement of rice-husk to the tune of Rs. 3.02 crores, in particular payments exceeding Rs. 10,000 which are hit by the provisions of section 40A(3). The Commissioner of Income-tax also took note of addition made on this account by the Assessing Officer in the following assessment year in the case of the assessee. The CIT further noted that the assessee had claimed expenses for remittances towards its London Office @ 17,000 pounds per month, which are not allowable under section 37(1) being personal in nature and not connected with assessee's business. He also noted that in the following assessment year a sum of Rs. 74.87 lacs was added by the Assessing Officer on this count. The CIT, therefore, issued a show-cause notice to the assessee on23-5-1995to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssumed jurisdiction under section 263 of the Act, the order of assessment being neither erroneous nor prejudicial to the interests of revenue. Taking us through his paper book, Shri Sapra vehemently argued that in the Tax Audit Report (TAR) filed along with the return itself the Auditors had duly indicated number of payments made in cash (2389) for freight and (1009) for others---Rs. 3,03,75,809 and Rs. 1,20,40,991 respectively. He submitted that the assessee had also filed vide letter dated 11-3-1994 (Paper Book pages 33 and 34) details of rice-husk consumed at 64,875 tons (Rs. 3,02,15,986) as against 77,587 tons (Rs. 3,94,32,027) of last year. He also invited our attention to another letter dated 22-3-1994 with a note on cash payment exceeding Rs. 40,000 each, as discussed in TAR, was filed before the Assessing Officer (Paper book pages 35-37). He submitted that both the letters and the note read together clearly show that the Assessing Officer was duly explained about purchase of husk, which is a regular feature with the assessee being an item of fuel required for its boiler and, therefore, there was material on record itself to establish that the assessee, in fact, had furnishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Shri Sapra submitted that in the relevant assessment year payments exceeding Rs. 10,000 each for purchase of husk and freight amount only to Rs. 2,76,037 out of total purchases of over Rs. 2.10 crore. 3.1 As regards London office expenses, Shri Sapra drew our attention to order-sheet entry dated 24-1-1994 and 17-3-1994 whereby the Assessing Officer had specifically called for details of London expenses and Reserve Bank of India permission regarding expenditure to be incurred on London Office, to which reply dated 22-3-1994 was filed (paper book pages 35-36), along with details of remittances for expenses at London office and copies of blanket permits issued by the RBI, as filed before the Assessing Officer (Paper book pages 165 to 175 and 357 to 385). Shri Sapra submitted that all the relevant facts and details, i.e., permission granted by the Reserve Bank of India on 11-2-1988 to open a non-trading office in London and Company Law Board's approval dated 14-8-1988, 28-9-1989 and 20-8-1990 for payment of salary to Shri A. P. Jaiswal, Director as resident representative in London, were placed before the Assessing Officer as specifically demanded and having satisfied himself with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Convention for Avoidance of Double Taxation between India and Great Britain, no T. D. S. was required to be deducted in India since Shri Jaiswal was paying his taxes in U. K. as also filing his returns there, being N. R. I. Shri Sapra also referred to order of the learned Commissioner of Income-tax (Appeals) for assessment years 1992-93 and 1993-94, when additions made on this account, obviously based in view of order of the Commissioner of Income-tax under appeal, were deleted. 3.3 Dealing with the ratio of Hon'ble Delhi High Court in the case of Gee Vee Enterprises, Shri Sapra submitted that this is misapplied by the learned Commissioner of Income-tax in the case of the assessee being out of context. He submitted that the judgment was delivered on a Writ. He submitted that the Assessing Officer having made full and proper enquiries on the issues, the Commissioner of Income-tax could not justifiably take the help of ratio in the case of Gee Vee Enterprises just to support his view that there was lack of enquiry or a hurried assessment was made. Shri Sapra relying on Supreme Court judgment in the case of CIT v. Sun Engg. Works (P.) Ltd. [1992] 198 ITR 297 and the observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of invoking provisions under section 263. He submitted that voucher-wise details given by the assessee (Pages 53 to 158 of the paper book) while gave relevant details, such as number, date, payee amount, truck No., etc., but did not show that such payments were for rice-husk purchase/freight. He submitted that no harm had been caused to the assessee when the learned CIT merely cancelled the assessment directing the Assessing Officer to make fresh assessment. He relied on Nandlal Bhandari Sons v. CIT [1984] 147 ITR 710 (MP). 5. Shri Sapra, in reply, submitted that in para 10 of the order of the Commissioner of Income-tax, he had referred to cash purchases of rice-husk which, according to the CIT himself amounted to Rs. 2,10,65,787 and the details given at pages 53 to 158 of the paper book are also pertaining to the same amount. He also pointed out that at pages 40 to 52 of the paper book, the assessee had even furnished month-wise and day-wise purchases of husk, as supported by vouchers, cash book, stock register which were duly and admittedly examined by the Assessing Officer, as per order-sheet entry dated22-3-1994. In Appendix 10 of the TAR the word " freight " against cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de no disallowances. There has, obviously, been no failure on the part of the Assessing Officer in making " proper enquiries " in the " right direction ". The fact that cash payments exceeding Rs. 10,000 in respect of rice-husk purchases/freight amounted to Rs. 2,67,035 only, the rest being below Rs. 10,000, is borne out from record and is not either contested before us by the learned Departmental Representative. Neither the genuineness of such purchases or consumption thereof stand doubted by the revenue, nor the fact that there are no banking facilities at Hamira where rice-husk is delivered by truck drivers. Therefore, such payments aggregating to Rs. 2,67,035 out of total amount of Rs. 2,10,65,787 stood covered by the exceptions provided in Rule 6DD(j) read with Circular No. 220 dated 31-5-1977 of the Central Board of Direct Taxes. We also agree with Shri Sapra that before framing the assessment the Assessing Officer had duly applied his mind to the cash payments exceeding Rs. 10,000, as is evident from the queries made and assessee's reply thereto supported with auditor's report and books of accounts, vouchers, stock register, etc., produced in the course of assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not fairly indicate the ground used by the Commissioner of Income-tax in his order under section 263, it was held that the assessee was deprived of a fair opportunity to show-cause against proposed action. In such a case the revisionary order of the Commissioner of Income-tax cannot be sustained. " Still we find that facts on record indicated that it was in the business interest of the assessee that Shri Jaiswal should use the office premises as also his residence. We have also gone through the London Office expenses at page 164 of the paper book and find that similar expenditure incurred in the preceding assessment year stands allowed, as per details at page 338 of the P. B. 6.2 As regards applicability of the provisions of section 40(a)(iii), here again we observe that no indication was given by the learned Commissioner of Income-tax in his notice while adverse comments have been made in his order, which again renders the order on this point without lawful jurisdiction. Still we find ourselves in agreement with the submissions made by Shri Sapra as detailed above on this issue. Further, the Assessing Officer had called for and examined the details of the claim before allowin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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