TMI Blog2015 (4) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... h for the AO to reject books of account and estimate the income. When assessee has failed to furnish informations/evidences to support the entries made in the books of account, there is no other course left open to AO, but, to compute the income of assessee on estimate basis. Once, AO rejected the books of account there is no need to again refer to the very same books of account for deciding the individual issues of expenditure/deduction claimed. Therefore, in our view, CIT was not justified to invoke power u/s 263 of the Act by holding the assessment order as erroneous and prejudicial to the interests of revenue. Further, CIT though raised certain issues, which according to him were not examined by AO during assessment proceeding, but, he has not established or substantiated with facts and materials that non-consideration of those issues has adversely affected the interests and revenue or has made the assessment order erroneous. While conducting assessment proceeding, AO is the best judge of the situation and has to proceed for completing assessment according to his own wisdom. Unless there are material to indicate to that effect, assessment order cannot be held to be erron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder consideration, assessee filed its return of income on 30/09/09 declaring total income of ₹ 3,40,140. In course of scrutiny assessment proceeding, as it appears from the assessment order, AO after examining the books of account and informations called for during the assessment proceeding, noticed that the bills and vouchers towards lorry hire charges were not supported by proper vouchers. Most of the expenditure were supported by self-made vouchers only, which are not verifiable. AO was of the view that as the major part of the expenditure is not supported by proper bills and vouchers and thereby not verifiable, the genuineness and quantum of expenditure claimed and authenticity of books of account maintained by assessee are also suspect. In these circumstances, AO formed an opinion that in view of the deficiencies in the books of account, they cannot be relied upon thereby invoking provisions of section 145(3) of the Act, rejected the books of account and proceeded to estimate the income. AO noted, on the reported gross receipts of ₹ 1,07,33,505, the income declared by assessee works out to 8.32%, which according to AO was on the lower side. He, therefore, estimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be said that the assessment order passed is without proper enquiry or non-application of mind. Replying to each individual issue raised in the show cause notice, assessee submitted that all those issues were examined by AO at the time of assessment proceeding and since he proceeded to estimate the income after rejecting the books of account, there is no question of making addition on individual issues in view of the ratio laid down by the Hon ble AP High Court in case of Indwell Constructions Vs. CIT, 232 ITR 776. The CIT, however, rejecting the submissions made by assessee, held that as AO has not examined the issues as mentioned in the show cause notice by making proper enquiry, assessment order passed is erroneous and prejudicial to the interests of revenue. Accordingly, the CIT set aside the order of assessment with the following directions: 6. For the purposes of invoking the jurisdiction u/s 263, it is settled law that the revisional authority should apply the tests as to whether such an order contains some apparent error of reasoning or of law or of the fact on the face of it and also whether it is an order wherein the AO simply accepted what the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definite finding or conclusion on the basis of any enquiry conducted by him to establish that non-consideration of those issues actually rendered the order is erroneous or any prejudice was caused to revenue. It was thus submitted by learned R, CIT was not correct in exercising power u/s 263, of the Act. 5. Learned DR, on the other hand, submitted that perusal of assessment order reveals AO has not given any attention to the issues pointed out by CIT in the show cause notice as well as revision order while completing the assessment u/s 143(3). In this context, learned DR specifically referred the observations in para 5.8 of CIT. Learned DR submitted as the assessment order does not reveal any enquiry by AO with regard to specific issues pointed by CIT, assessment order is erroneous and prejudicial to the interests of revenue thereby necessitating action u/s 263 of the Act. 6. We have considered the submissions of the parties and perused the orders of revenue authorities as well as other materials on record. We have also applied our mind to decisions relied upon by learned AR. As is evident from record, AO in course of assessment proceeding, after examining the books of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit has to be estimated after rejecting the books of account. It is not understood how such view of AO can be held to be erroneous. It is well settled that CIT can exercise power u/s 263 of the Act on satisfaction of two conditions cumulatively, which are, the order passed must be erroneous and it must be prejudicial to the interests of revenue. Therefore, before revising the order u/s 263, CIT must establish that assessment order passed is not only erroneous, but, has also caused prejudice to the interests of revenue. In the present case, on perusal of revision order, it appears that CIT himself is neither sure nor certain or has enough evidence before him to establish that the issues on which he has sought to revise assessment order would otherwise have resulted in assessment of income at the hands of assessee. That being the case, the provisions contained u/s 263 cannot be used as a tool to start roving and fishing enquiry. CIT must have strong material/evidence before him, which could indicate that non-consideration of those issues has not only made the assessment order erroneous, but, has also caused prejudice to the interests of revenue. Unless there are material to indic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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