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TMI Blog2015 (1) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that necessary enquiries were not made by the AO. 3. For that the Ld. CIT(A) erred in cancelling the order because such enquiries should have been made in the manner the Ld. CIT wanted to make when the issues were duly examined by the Ld. AO and, assessment was completed after making enquiries and examining the books and other relevant details and issuing summons wherever considered necessary. 4. For that the Ld. CIT(A) erred in presuming that nothing was mentioned regarding the method for valuation in 3CD report and further presuming that the closing stock was undervalued, himself making the valuation on average rates method when it was clearly mentioned in 3CD report that stock register was maintained, the stock was properly valued at cost or market price whichever was less, such day to day stock register was produced and verified by the AO, the details of which were also filed before the Ld. CIT. 5. For that the Ld. CIT(A) erred in holding the view that the AO did not examine the stock details with regard to the secured loans when the stock details filed before the bank were produced before the AO which tallied with the stock register and the copy of the same was als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as taken secured loan against hypothecation of stock from the Oriental Bank of Commerce. The amount of outstanding loan as per B/Sheet was Rs. 4,78,41,728/- out of maximum credit limit of Rs. 5.90 crores. This issue apparently not investigated/enquired y the AO which should be undertaken in view of valuation of closing stock at a rate much lower than average cost of purchase as discussed in para-1. iii) Commission: The assessee credited not commission of Rs. 2,23,40,638/- in the P & L A/c. No break up regarding commission received and paid was available. It appears from the computation that only Rs. 63,601/- was claimed as TDS on commission receipt. Why there has been such low amount of TDS when the assessee apparently received commission which runs into crores. As per statement of TDS made by the assessee u/s 194H the amount of commission paid was stated to be Rs. 6,44,17,568/-. It is also noted that the assessee has separately debited Rs. 1,76,14,211/- under the head commission on sales, which was broadly categorized under administrative and selling expenses"(Sch-8) P & L A/c. Now if for the sake of argument, it is considered that this commission of Rs. 1,74,14,211/- is part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but CIT was not convinced with the reply of the assessee and revision u/s 263 of the Act was carried out for the assessment framed u/s. 143(3) of the Act being erroneous and prejudicial to the interest of revenue and directed the AO to make fresh investigation on the above two issues and passed a fresh assessment order as per the provisions of the Act. Aggrieved, assessee came in appeal before tribunal. 4. Before us, Ld. Counsel for the assessee Shri S. M. Surana, Advocate, first of all took us to the 1st issue of understatement of closing stock and inter connected issue of secured loan. According to CIT, there is possible understatement of closing stock at Rs. 6,11,57,746/-. For this, the CIT has gone to Form No. 3CD of the audit report as filed and maintained by assessee, which reads as under: Sl. No. Item (Bearing) Quantity as per cl.28(a) of F. No. 3CD Value as per P&L A/c. Average rate per pc. 1. Opening Stock 10926 5,21,07,745/- 4760/- 2. Purchase 21558 20,50,42,101/- 9507/- 3. Total (O/S + Purchase) 32494 25,71,49,846/- 7913/- 4. Less: Sales 12448 21,43,60,625/- 17,220/- 5. Balance (closing stock) 20046 9,74,66,752/- 4862/- The CIT applying average rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge of stock or how value declared by assessee is less in term of value as well in term of quantity. Even Ld. CIT could not throw light on the aspect, whether, these details were not available before AO or not, during the course of original assessment proceedings. 7. The second issue of this revision proceeding is that the assessee has received commission from foreign parties at Rs. 7,39,01,248/- and also paid commission of Rs. 6,44,17,568/-. According to CIT, the assessee has not credited commission to the extent of Rs. 2,23,40,638/- and no break-up of the same was available in the records. According to him, TDS was deducted on total commission paid to the extent of Rs. 6,44,17,568/-. He also noted that the assessee has separately debited a sum of Rs. 1,76,14,211/- under the head commission on sales. According to CIT, the commission apparently received by assessee is at Rs. 6,91,43,993/-, which is Rs. 4,68,03,357/- + Rs. 2,23,42,638/- (but this was not credited in trading account). According to CIT, the AO ought to have enquired into such huge receipt of commission against which apparently very less tax was deducted by the payer i.e. the total tax deducted to the extent of Rs. 63, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to TDS and on each and every transaction TDS has been deducted and the summary of the same is at pages 35 to 41 of assessee's paper book and the details of commission paid are as under: "Commission on Sales Rs. 1,76,14,211/- (Debited under Administrative & Selling Expenses) Commission Paid Rs. 5,18,29,131/- (Netted with Commission Receipt) Rs. 6,94,43,342/-" Ld. Counsel for the assessee stated that the AO during the course of assessment proceedings made enquiries and verification was carried out by issuing notices u/s. 133(6) to 17 parties covering payment of commission for an amount of Rs. 5,53,54,513/-, which covers almost 80% of commission paid. Ld. Counsel for the assessee also stated that complete facts regarding services rendered by these parties were duly explained to the AO during the scrutiny assessment proceedings and even during revision proceedings which are as under: "Procurement of Orders, Follow up for payments, Submission of Tender documents, Introducing new customers etc." Ld. Counsel for the assessee stated that these parties to whom commission paid is responded and filed complete details in response to notices issued u/s. 133(6) of the Act, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven the quantity is also matching. It means that the stock statement submitted to bank and stock as per stock register is exactly matching in term of quality and quantity and rate. Once this is the position, how the CIT can propose a possible understatement and can give a finding that "likewise the AO accepted the closing stock declared by the assessee without calling any detail of making the required verification thereof". In view of the above facts on this issue, we find no reason for revising the assessment completed after making due inquiry. It was also argued by assessee that complete details of closing stock i.e. stock statement as submitted to the bank and stock as per books of account were submitted before the AO. During the course of hearing the Ld. Counsel for the assessee drew our attention to statement of particulars furnished before the AO u/s. 44AB of the act in the Audit report and relevant Sl. No. 9, 10 and 11 reads as under:- 9.(a) (b) (c) 10. 11.(a) (b) Whether books of account are prescribed under section 44AA, if yes, list of books so prescribed. Books of account maintained (in case of accounts are maintained in a computer system, mention the books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 61/-, which was deducted from the following incomes: Nature of income TDS claimed "Commission Income Rs. 30,428/- Interest Income Rs. 33,233/- Total Rs. 63,661/-" 12. We find that the AO has carried out verification of commission paid by issuing notices u/s. 133(6) of the Act to 17 parties, who admitted to have received the commission from the assessee in its communication in response to notices u/s. 133(6) of the Act. The assessee covered almost 80% of commission paid at Rs. 5,53,54,513/- out of the total commission paid at Rs. 6,94,43,342/-. The assessee has also explained the nature of services rendered by these parties to whom commission is paid during the course of assessment proceedings and even during revision proceedings u/s. 263 of the Act. The AO has also verified the sundry creditors on account of commission payable outstanding as on 31.03.2009, which was paid in the subsequent financial year 2009-10 relevant to AY 2010-11 and the details were also filed before CIT during revision proceedings and even now before Tribunal in its paper book. The simple reason for carrying out revision proceedings u/s. 263 of the Act by CIT was that, 'Mere confirmation of transaction b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of "lack of enquiry" that such a course of action would be open and while holding so their Lordships have considered the earlier decision of the Hon'ble Delhi High Court in the case of Gee Vee Enterprises vs. Addl. CIT (supra). Thus, applying the ratio laid down by the Hon'ble High Court in the case of CIT vs. Sunbeam Auto Ltd. (supra), the order of the CIT under s. 263 cannot be held valid as present case is not a case of "lack of enquiry". 14. From the observations made by CIT in his revision order in para 5, which are very general in nature and seems to be more of academic in nature, hence, we cannot adjudicate on the same. However, the CIT has raised the issues i.e. the issue of understatement of closing stock as well as commission only on the basis of his opinion that proper enquiry is not made by AO during the course of assessment proceedings. But the facts, as narrated above, speak otherwise. In view of the above factual situation and legal position, we are of the view that the CIT himself was not sure, whether the order of the AO is erroneous or prejudicial to the interest of revenue so as to invoke the provision of section 263 of the Act. We are of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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