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2015 (4) TMI 221 - ITAT DELHI

2015 (4) TMI 221 - ITAT DELHI - TMI - Validity of revision u/s 263 - CIT rejected the books of accounts - Assessee has taken new unsecured loan and AO has obtained confirmation only Bank A/c of lender has not been obtained to examine the creditworthiness - Assessee has paid designing charges and it is not enquired as to whether TDS was made on these payments - A.O. has not taken any details nor made any enquiry on a/c of fire loss claimed - Duty draw back is set off totally & negligible profit i .....

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ight while finished goods in nos. and size of finished goods is also not given. The deficiencies as noted by the CIT cannot held inclusive until and unless the assessee is provided due opportunity of being heard to explain his stand which has not been granted by the CIT. Thus the CIT rejected books of accounts of the assessee in a unjustified manner and rejection of books and estimation of net profit in pursuant to it and enhancing the assessment without affording due opportunity of hearing to t .....

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en preferred by the assessee against the order of the Commissioner of Income Tax (Appeals), Meerut dated 28/03/2013 passed u/s 263 of the Income Tax Act, 1961 (for short Act) for A.Y. 2008 - 09. 2. The assessee has raised following revised grounds of appeal :- 1. On the facts and circumstances of the case and in law the order dt. 28.03.2013 passed by the learned Commissioner of Income Tax, Meerut (CIT) u/s 263 of the Income Tax Act, 1961 (the Act) is wrong and bad in alw in as much as the assess .....

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n the facts and circumstances of the case and in law the learned Commissioner of Income Tax, Meerut has erred in invoking the provisions of section 145(3) and holding that the net profit be assessed at 5% of gross turnover at ₹ 24542252/-. 4. WITHOUT PREJUDICE to other grounds of appeal, on the facts and circumstances of the case and in law the learned Commissioner of Income Tax, Meerut has erred in invoking the provisions of section 145(3) and holding that all other additions and disallow .....

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st return income of ₹ 18,65,096/-. Subsequently, the CIT, Meerut picked up the case and issued notice u/s 263 of the Act on 15.02.2013 pointing out four issues for proposed inquiry. The relevant part of notice u/s 263 of the Act reads as under :- i) Assessee has taken new unsecured loan from M/s Kabir Oldtex for ₹ 37,50,000/-. The AO has obtained confirmation only Bank A/c of lender has not been obtained to examine the creditworthiness. ii) Assessee has paid designing charges at S .....

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ell as prejudicial to the interest of revenue for the reasons stated therein. Finally the CIT(A), Meerut directed the AO to properly examine afresh the issues considering all the four points as stated therein in the notice and also directed the AO to examine entire amount of sundry creditors of ₹ 10,81,49,561/- including amount of ₹ 57,80,000/- M/s Kabir Oldtex and also directed the AO to enhance the net profit by the amount of 2,45,42,252 being 5% of total turnover after considering .....

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he AO u/s 143(3) of the act was not erroneous and prejudicial to the interest of Revenue. The Ld. AR, further, contended that the impugned order is not only wrong but also bad in law as the CIT did not give reasonable opportunity to the assessee to represent the case and the CIT, Meerut completed proceedings ex-partly violating principles and natural justice and assuming invalid jurisdiction for passing impugned order. The Ld. AR filed copy of the assessment order dated 17.2.2014 passed in pursu .....

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ing 5% of total turnover and second addition on account of sundry creditors amounting to ₹ 41,12,950/- in regard to sundry creditors namely M/s Nagin Fabrics and M/s Ramesh Enterprises & and both these issues were not pointed out and disputed in the notice u/s 263 of the Act. 6. Placing reliance on the recent decision of ITAT, Delhi Bench A in the case of B.S.Sangwan Vs. ITO (2015) 53 taxmann. Com 402 (Delhi-Tribunal) to which one of us ( C.M.Garg, J.M) was co-author, submitted that a .....

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ed that where show cause notice issued u/s 263 of the Act is on one ground and revisional order is passed on an entirely different ground, then the order cannot be sustained in law. 7. The Ld. DR supported the orders of the authorities below and submitted that where the Assessing Officer has not raised any quiry and has not verified an examine certain important points which resulted into Revenue loss to the department then in the case of no inquiry the order would certainly be not only erroneous .....

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aw back was specifically questioned by CIT(A), Meerut. From part 6 of the impugned order. We note that the CIT also issued reminder dated 28.2.2013 and passed ex parte order on 28.03.2013. From operative part of para 7 of the impugned order, we note that in para 7 the CIT has directed the AO to examine entire amount of sundry creditors of ₹ 10, 81,49,561/- including an unsecured loan from M/s Kabir Oldtax; from para 10 of the impugned order we also note that the CIT(A) has directed the AO .....

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er has not made any addition on any of the four issues raised by the CIT(A), Meerut in the notice u/s 263 of the act. At the same time, we note that the Assessing Officer has made addition of ₹ 2,45,48,043/- in pursuance to the direction to the CIT in the impugned order and another addition of ₹ 41,12,950/- on account of sundry creditors namely M/s Nagin Fabrics and M/s Ramesh Enterprises which were also not part of the notice u/s 263 of the Act. 10. Turning to the ratio of the decis .....

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case in which in the show cause notice, learned Commissioner held that the loss brought forward could not be set off against profits of the current year, but when the Commissioner was to pass the final revision order, he simply held that the matter is required to be examined afresh in accordance with the law. As to whether such a shift in the stand was permissible, the coordinate bench, speaking through one of us and following the esteemed views of Delhi F bench of this Tribunal in the case of .....

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g stand of the CIT so far as reasons for subjecting the assessment order to revision proceedings. At p. 1, in fifth sentence of the impugned revision order, learned CIT notes that that "on perusal of assessment record, it was noticed that assessment order was erroneous in as much as it was prejudicial to the interest of the Revenue as the details of purchase and sale of share transactions in futures were not verified as to whether the profit or loss from the futures trading amounts to specu .....

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gains of another speculation business", and, "thereforeyou (the assessee) are not allowed to adjust the speculation loss". The showcause notice, therefore, clearly refers to declining what the CIT perceives as a set off of speculation loss against business profits. That is a categorical entitlement of set off. In the final conclusions in the impugned revision order, however, the CIT once again deviates from the stand so taken and concludes as follows: "In view of the foregoi .....

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unity to the assessee before passing the assessment order." 5. It is thus clear that there has been shift in the stand of the CIT on whether it was a fit case for revision on the ground that the assessee was not eligible for set off of losses on speculative transactions or whether it was a case for revision on the ground that the AO did not make necessary verifications about the transactions. The reason given in the show-cause notice is former, while the reason for which revision powers are .....

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5) 125 CTR (AP) 55 : (1995) 211 ITR 336 (AP) the Andhra Pradesh High Court was dealing with an application seeking reference under s. 256(2), inter alia of the following question : Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the CIT lacks initial jurisdiction, particularly when the conclusion made by the CIT in the order under s. 263 was on the basis of the information furnished in response to the initial notice ? While declining to refer .....

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. (Emphasis, italicsed in print, supplied) In the case before the High Court, the showcause notice referred to two issues to which the assessee had given satisfactory replies. No action was taken under s. 263 in respect of these two issues. However, in the said order the CIT mentioned the hire charges as the ground for revising the assessment. This point had not been mentioned as a ground in the show-cause notice. The High Court held that in as much as the CIT had not chosen to show these two po .....

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of the order passed under the section, for the simple reason that the assessee would have had no opportunity to meet the point. …………… 11. In view of above, we are of the considered opinion that the views so express by the coordinate bench of the Tribunal in the case of B.S. Sangwan (Supra) are squarely applicable to the present case. We further proceed to examine the facts of the instant case in the light of legal position set out by the coordinate bench of the .....

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lack of proper inquiries which the assessing officer ought to have conducted on the facts of the case altogether different reason from inadmissibility of the claim of deduction or an income which to have been brought to tax. We are of the considered view of that the impugned revision order is contrary to the scheme of law as stipulated u/s 263 of the Act because the CIT proceeded to issue notice by pointing out any four issues as reproduces hereinabove. At the same time we notice in the impugned .....

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of four points raised by the CIT in the notice u/s 263 of the Act. Per contra the assessing officer made two additions viz. first addition on account of estimation of profit at the rate of 5% of gross turnover and second on account of sundry creditors in regard to the M/s Nagin Fabrics and M/s. Ramesh Enterprises which were not also part of notice u/s 263 of the Act as we have already noted above. 14. The Ld. AR strenuously contended that the CIT rejected the books of accounts at the assessee u .....

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it was found not property maintained, therefore the CIT was justified in rejecting books of accounts of the assessee. The Ld. AR, on this point, placed a rejoinder and submitted that the CIT was working with a predetermined and in a unjustified manner as the CIT estimated the net profit @ 5% at total turnover and at the same time he directed the AO make other additions on four points stated in the notice u/s 263 of the Act which is not permissible. On careful consideration at above rival submiss .....

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ascertained or verified in the absence of bills, vouchers and other relevant records and documents to support the same. The stock details as per para 28 of Form 3CD are also not verifiable as Raw Materials are given in weight while finished goods in nos. And even the size of finished goods is not given though stated that the same are of different sizes. Inventories of stocks have also not been furnished by the assessee. In order to perview the tax as reasonable and to bring the income in terms .....

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8377; 49,08,45,042/- Net profit @ 5% = ₹ 2,45,42,252/- Add (other Income, Interest received_ = ₹ 5791/- 15. In view of above conclusion of the CIT we are unable to see wheathe the CIT provided opportunity of being heard to the assessee which is paramount and mendatory requirement of the Act prior to invoke provision of Sec. 145(3). The CIT rejected books of accounts by pointing out that the business results could not be ascertained or verified in the absence of bills, vouchers and ot .....

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ks of accounts of the assessee in a unjustified manner and rejection of books and estimation of net profit in pursuant To it and enhancing the assessment without affording due opportunity of hearing to the assessee is not only against the scheme of the Act but also violative to the principles of natural justice and hence, conclusion of CIT is not sustainable cannot be held as valid in this regard. 16. Under these clear facts and circumstances of the present case we hold that the issue is covered .....

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