TMI Blog2012 (6) TMI 543X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation under section 263 of the Act defines 'records' as all records relating to any proceedings under the Act available at the time of examination by the Commissioner and the audit objections under no circumstances can be called as record empowering the CIT to exercise jurisdiction under section 263 - set aside the order passed by the CIT - decided in favour of assessee. - ITA No.690/Chd/2010 - - - Dated:- 9-3-2012 - Sushma Chowla, Mehar SIngh, JJ. For Appellant: Shri Tej Mohan Singh For Respondent: Shri S K Mittal, DR ORDER Per: Sushma Chowla: The appeal filed by the assessee is against the order of the Commissioner of Income-tax-II, Chandigarh dated 30.3.2010 relating to assessment year 2005-06 against the order passed under section 263 of the Income Tax Act, 1961. 2. The assessee has raised the following grounds of appeal : "2. That the order of The Commissioner of Income Tax-II, Chandigarh setting aside the best judgment assessment under section 144 of the Income Tax Act, 1961 by ACIT Circle 5(1), Chandigarh and directing the succeeding Assessing Authority to make another best judgment is absolutely wrong. 3. That the order of ACIT Circle 5(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition of Rs.3.20 lacs made by the Assessing Officer was held to be on lower side. The Commissioner of Income Tax was of the view that it would be just and fair if atleast 10% of the expenses are disallowed. The Assessing Officer was thus directed to examine the issue of non-maintenance/maintenance/audit of books of account and initiation of penalty proceedings. In view thereof, the Commissioner of Income Tax was of the view that the assessment order passed by the Assessing Officer was without application of mind and without making requisite enquiries and verification. Consequently, the said assessment was cancelled by the Commissioner of Income Tax under section 263 of the Act and the Assessing Officer was directed to reframe the assessment for the year under consideration. 5. The assessee is in appeal against the order of the Commissioner of Income Tax passed under section 263 of the Act. The learned A.R. for the assessee pointed out that after completion of original assessment on 11.12.2007, notice under section 154/155 of the Income Tax Act was issued on 25.1.2009, copy of which is placed at pages 29 and 30 of the Paper Book. The learned A.R. for the assessee further p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer as the Commissioner of Income Tax against profit rate applied by the Assessing Officer @ 2.53% had directed the Assessing Officer to apply higher rate and then disallow 10% of the expenses. Reliance was placed in the case of CIT Vs. Gabriel India Ltd. [203 ITR 108 (Bom)] and in the case of Shri Rajesh Kumar Vs. CIT-II, ITA No.521/Chandi/2010 for the proposition that where one rate was applied by the Assessing Officer and the Commissioner of Income Tax was of the view that an enhanced rate is to be applied in the case then such view is not open for revision under section 263 of the Act. 8. The learned D.R. for the Revenue pointed out that even where audit objection is there and further there is independent application of mind by the CIT (Appeals), then invoking of provisions of section 263 of the Act are valid. It was further pointed out that the source of information can be from any where and the Commissioner of Income Tax is empowered to base his mind on any source. The learned D.R. for the Revenue stressed that the provisions of section 263 of the Act were applicable because of non-application of mind by the Assessing Officer. It was further pointed out by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 04-05, average of which came to 2.53%. The income of the assessee from the business of hired trucks was thus worked out @ 2.53% of the receipts of Rs.1,79,51,125/- i.e. Rs.4,54,163/-. Accordingly, the income from business was determined in the hands of the assessee at Rs.2,76,500/-plus Rs.4,54,163/-. The Assessing Officer completed the original assessment proceedings under section 144 of the Act by estimating the income in the hands of assessee. 10. The issue raised in the present appeal is whether in such back drop, the Commissioner of Income Tax is empowered to exercise his jurisdiction under section 263 of the Act. In the show cause notice issued to the assessee, the Commissioner of Income Tax had raised the issue of non-deduction of tax at source out of loading and unloading expenses and invoking of provisions of section 40a(ia) of the Act. After considering the facts of the case of the assessee and explanation of the assessee regarding non-deduction of tax at source as each payment was less than Rs.20,000/- and no payments to one person were made above Rs.50,000/-, the Commissioner of Income Tax noted that the assessee had not produced the books of account during the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Assessed. Issue requisite documents. Charge interest u/s 234A, 234B and 234C of the Act. Issue penalty notice under section 271A and 271 (1)(b) and 271 (1)(c) of the Act." 13. In the present set of facts before us the Commissioner of Income Tax vide his order passed under section 263 of the Act has directed the Assessing Officer to recompute the income by observing that the disallowance of the expenses should be around 10%, which would be very fair and just. In nutshell, the Assessing Officer in the present set of facts and circumstances where the assessee had not produced the books of account, had applied certain percentage to compute the income of captioned assessment year and the Commissioner of Income Tax vide his order passed under section 263 of the Act has directed the Assessing Officer to recompute the aforesaid income as in his opinion the income computed by the Assessing Officer without the books of account was on the lower side. Reference are made to the observations of the Commissioner of Income Tax as reproduced by us in para hereinabove, wherein the Commissioner of Income Tax had observed that 10% of the disallowance of the total expenses would mean an addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order as erroneous under section 263 of the Act. Moreover, a reference to the judgment of the Hon'ble Punjab Haryana High Court in the case of M/s Prabhat Kumar (supra) to justify application of a higher rate of profit, is not relevant to treat the assessment order as erroneous. It quite well understood that estimation of income by applying a flat rate inherently involves an element of subjectivity and each case has to be considered in its own peculiar facts and circumstances. As the Ld. Counsel has pointed out by referring to other precedents, varying rates have been applied for estimation of income in different cases. No uniform rate can be evolved to estimate income. Moreover, in the present case 8% rate adopted by the Assessing Officer can neither be termed as unreasonable and nor arbitrary since section 44AD of the Act prescribing presumptive taxation in cases of civil contractors, also provides for a rate of 8% to estimate income. Therefore, the assessment completed by the Assessing Officer in estimating income by applying flat rate of 8% in the facts and circumstances of the case is reasonable and just. Evidently, in this case, the Assessing Officer has taken a possible an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act dated 4.9.2009, copy of which is placed at page 31 of the Paper Book. The assessee furnished return of income in response to notice under section 148 of the Act on 21.10.2009. No proceedings were thereafter initiated in respect of the re-assessment proceedings started under section 147/148 of the Act. However, show cause notice was issued by the Commissioner of Income Tax under section 263 of the Act on 19.2.2010 in which the first contention was the non-deduction of TDS out of freight charges, loading, unloading and hiring charges. The copy of show cause notice issued by the Commissioner of Income Tax is placed at pages 35 and 36 of the Paper Book. The basis of the aforesaid notice under section 154, thereafter notice under section 148 and show cause notice under section 263 of the Act is the audit objection raised by the audit party in the present case. 18. The learned D.R. for the Revenue had produced assessment records during the course of hearing and from the perusal of the record, it was pointed out that no order under section 154 of the Act had been passed. Further it was verified from the records and was intimated to us by the learned D.R. for the Revenue that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of mind by the Commissioner of Income Tax and the revision proceedings were held to be not valid. The Hon'ble Gauhati High Court observed as under: "In the case at hand, the order, initiating rectification proceedings under section 154, as well as the order revising the assessment under section 263, were passed on the basis of one and the same audit objection. While exercising revisional jurisdiction, the revisional authority must bear in mind that the principles of natural justice do not permit the decision of a quasi-judicial authority, such as a Commissioner of Income-tax, to be influenced by any other authority. Thus, the Commissioner, in the present case, could not have initiated a suo motu revisional proceeding on the basis of the said audit report. Had, on the basis of the audit report, the Commissioner came to his own finding that the assessing authority, while making the assessment, or the authority empowered to rectify a turnover, which had escaped assessment, has acted without jurisdiction, revisional jurisdiction could have been exercised. Emphasised the Supreme Court, in the case of Sirpur Paper Mill Ltd. v. CWT [1970] 77 ITR 6, that while exercising power, the Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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