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2015 (4) TMI 865 - ITAT HYDERABAD

2015 (4) TMI 865 - ITAT HYDERABAD - TMI - Revision of assessment order - CIT noticed huge amount of withdrawals/ payments by the party - Provisions contained u/s 263 cannot be used as a tool to start roving and fishing enquiry - Held that:- As submitted by the learned counsel for the assessee, similar issue had arisen before the Division Bench of this Tribunal in the case of Shanti Transport [2015 (4) TMI 825 - ITAT HYDERABAD] for assessment year 2009-10), wherein the order of the Assessing Offi .....

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nt order passed by the Assessing Officer under S.143(3).

A perusal of the relevant portion of the Tribunal order dated 10.10.2014 reproduced above, clearly shows that the issue involved in the present case as well as all the material facts relevant thereto are similar to the case of M/s. Shanti Transport decided by the Division Bench of this Tribunal, and this position is not disputed even by the Learned Departmental Representative. I therefore, respectfully follow the order of the Tr .....

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earned Commissioner of Income-tax, Vijayawada dated 27.3.2104 passed under S.263 of the Income Tax Act,1961. 2. The assessee in the present case is a partnership firm which is engaged in the business of transport contractor. The return of income for the year under consideration was filed by it on 20.9.2009 declaring total income of ₹ 1,53,890. During the course of assessment proceedings, the books of account and other supporting documents maintained by the assessee were verified by the Ass .....

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g a net profit rate of 10% to the gross receipts of ₹ 56,75,546 subject to the deductions towards remuneration to partners and interest on partners capital. Accordingly, the total income of the assessee was determined by the Assessing Officer at ₹ 3,14,340 in the assessment completed under S.143(3) vide order dated 31.5.2011. 3. The record of the assessment subsequently came to be examined by the learned Commissioner of Income-tax and on such examination, he found that huge amounts w .....

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h. The learned Commissioner therefore, issued cause notice under S.263 requiring the assessee to show cause as to why such order should not be considered as erroneous and prejudicial to the interests of the Revenue and revised under S.263. In reply, the relevant details were furnished by the assessee before the learned Commissioner which according to the latter, reveal that there were following two more issues which the Assessing Officer had failed to examine- (a) Partners withdrawals are insuff .....

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happened to be the couple and the aggregate drawings made by them amounted to ₹ 25,OOOI-. They got only one son. As per the confirmation letter filed by him his wife undertakes tailoring and earns about ₹ 80,OOO pa. In the circumstances, it is requested that the domestic drawings may be treated as reasonable. In relation to the other partner viz., Sri Abdul Azad Kalam, it is reported by Sri T.Md.Rafi that Azad Kalam is his own brother and that he earns a monthly salary of ₹ 10, .....

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rist, holding about 2 Acres of agricultural land hence his drawings may kindly be treated as adequate. . ; Further, it may be pertinent to point out that against the returned income of Rs.l,53,8901-, the Id. AD determined the total income of assessee in the order u/s 143(3) dated 3110512011 at ₹ 3, 14,3401- and the above asst. order reached the stage of finality. Thus, if still it is left that the drawings are inadequate, it is earnestly prayed that taking note of the assessee income, the .....

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hicles. The payments referred to by the Ld.CIT represent freight charges paid and it is submitted that as a measure of convenience, the assessee used to identify the freights payable to the lorry owners on each occasion and he records the details of payments in the bill book. To analyze the freights payable to each owner are recorded in the above book. But, however, the cheques are given to a particular owner who approached him covering the amounts payable to him and also tu the other owners who .....

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e taken outside the ambit of section 263 of the Act as such payments did not belong to a single owner but belongs to a group of persons and this pattern of disbursements is adopted as a matter of convenience." 5. The above explanation offered by the assessee was not found acceptable by the learned Commissioner. According to him, the drawings shown by the partners of the assessee firm were not commensurate with the volume of the business carried on by the assessee as well as the cost of livi .....

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rinivasa Rao, Vidyasagar, Sudhakar, Naveen etc. that the same constituted lorry freight charges made to group of persons in the transport business, the learned Commissioner of Income-tax did not accept the same in the absence of the relevant details filed by the assessee to support and substantiate it. He held that both these issues were not properly examined by the Assessing Officer by making proper and sufficient enquiries and this lack of enquiry made the order passed by the Assessing Officer .....

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bunal. 6. I have heard the arguments of both the sides and also perused the relevant material on record. As submitted by the learned counsel for the assessee, similar issue had arisen before the Division Bench of this Tribunal in the case of Shanti Transport V/s. ITO (ITA No.995/Hyd.2014 for assessment year 2009-10), wherein the order of the Assessing Officer passed under S.143(3) rejecting the books of account of the assessee and estimating the income by applying higher rate net profit rate was .....

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aragraph 6 are reproduced hereunder- 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 account and other informations available before him was of the view that expenditure incurred are not fully verifiable, which also raised suspicion with regard t .....

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books of account were found to be not reliable and rejected by AO and he invoked the provisions of section 145(3), it is not understood how and why AO M/s Shanti Transport, Kotha gude m should have gone into the specific issues on the basis of books of account. Further, CIT himself has observed in para 5.6 of the order that though AO has called upon assessee in his letter dated 06/01/11 to furnish various information but assessee did not comply to the same. In our view, that itself is reason en .....

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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 be .....

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f 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 M/s Shanti Transport, Kotha gude m is neither sure nor certain or has enough evidence before him to establish t .....

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aterial to indicate to that effect, assessment order cannot be held to be erroneous and prejudicial to the interests of revenue empowering CIT to revise it u/s 263. In this context, a reference can be made to the judgment of the Hon'ble Delhi High Court in case of Director of Income-tax Vs. Jyothi Foundations, 357 ITR 388 wherein the Hon'ble Delhi High Court after analyzing several other decisions held that if the revising authority feels that AO has not conducted proper/adequate enquiry .....

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