TMI Blog2013 (6) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... was old balance of earlier years, no enquiry could have been validly undertaken by the AO regarding these credits. Further, with regard to the question of disallowance to be made under section 40A(2)(b) the Tribunal has held that CIT has not given any definite finding of error on this point in the order of AO and for this reason the order of AO also could not have been set aside under section 263 of the Act. - Decided against the revenue and in favor of assessee. - M.A.I.T. Appeal No.81/2004 - - - Dated:- 24-4-2012 - SHRI AJIT SINGH AND SHRI R. S. JHA JJ. For the appellant: Shri Sanjay Lal, Advocate. For the respondent: Shri G. N. Purohit, Senior Advocate, with Shri Abhishek Oswal, Advocate. ORDER The following orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etary business is M/s Star Line Automobiles. He is also a partner in the partnership firm named as M/s Star Automobiles. For the assessment year 1997-1998 he filed his return of income declaring total income of Rs.13,02,090/- along with audit certificate under section 44AB of the Income Tax Act (in short the Act ). The Assessing Officer (in short, AO ) selected the case of respondent for scrutiny and issued notice under section 143(2) to him. In response to the notice, respondent explained the facts of the case to the AO through his counsel and accountant. The books of accounts produced by the respondent were examined by test check and during the course of proceedings he filed written reply along with other details. The AO in his assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cost to the dealer and likewise the manufacturer generally pay all the expenses that are incurred in transporting vehicles from the place of manufacture to the sales-offices of the dealer. According to the CIT valuation of closing stock of stores and spare parts and tax paid goods were based on respondent s estimate after applying a pre-determined gross profit at his whims and fancies and that the account of expenses claimed at Satna and Jabalpur offices ought to have scrutinized by the AO especially the labour charges incurred in respect of these two establishments. The CIT has even referred to some excessive expenses which the respondent claimed to have incurred at Satna office when there was no business transaction there. As regard to un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 005 followed the above decision of the Bombay High Court and held that it is clear as crystal that before exercise of powers under section 263 of the Act two requisites are imperative to be present. In the absence of such foundation exercise of a suo motu power is impermissible. It should not be presumed that initiation of power under suo motu revision is merely an administrative act. It is an act of a quasi-judicial authority and based on formation of an opinion with regard to existence of adequate material to satisfy that the decision taken by the Assessing Officer is erroneous as well as prejudicial to the interest of the Revenue. The concept of prejudicial to the interest of revenue has to be correctly and soundly understood. It p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered the information furnished by the respondent mechanically in the assessment proceedings. In this regard the Tribunal has held that the AO, in fact, had applied his mind to the various items of expenditure claimed by the respondent in his profit and loss account and, therefore, the AO found the expenses claimed were excessive and he accordingly added lump sum of Rs.25,000/- to the total income to cover up possible leakages. The Tribunal has also held that the AO in his order has clearly observed that he had scrutinized the books of accounts of the respondent on a test check basis and this observation by him cannot be brushed aside. According to the CIT, the enquiries made by the AO were not adequate. But this was not a case where the enq ..... X X X X Extracts X X X X X X X X Extracts X X X X
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