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M/s Cosmos Forgings Ltd Versus Commissioner of Income-Tax II, Hyderabad

2015 (6) TMI 554 - ITAT HYDERABAD

Revision u/s 263 - CIT(A) upheld the rejection of books of account, however, reduced the estimation of gross income of assessee from 1% to 0.7% of the turnover - Held that:- The directions of ITAT make it clear that the entire issue is open before AO as he has been directed to make a fresh assessment. In these circumstances, when the assessment order has been restored back by ITAT to the file of AO with a direction to make a fresh assessment after examining the books of account, the impugned ord .....

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. CIT-II, Hyderabad for the AY 2009-10. 2. Briefly the facts are, assessee a company is engaged in the business of trading in steel products. For the AY under consideration, it filed its return of income on 31/03/2010 declaring income of ₹ 11,87,302. Subsequently, assessee filed a revised return on 26/08/2010 declaring total income of ₹ 11,87,302. In course of assessment proceeding, AO after verifying the books of account and other informations available on record alleged discrepancy .....

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30/12/2011. Being aggrieved of the assessment order so passed, assessee preferred appeal before ld. CIT(A). 3. As it appears from record, before ld. CIT(A), assessee specifically challenged rejection of books of account and estimation of gross profit at 1%. Ld. CIT(A) after considering the submissions of assessee, though, upheld the rejection of books of account, however, reduced the estimation of gross income of assessee from 1% to 0.7% of the turnover. Still aggrieved with the order of ld. CI .....

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the following errors: "3. On verification of asst. record, it is seen that while completing the assessment, the books of account were rejected on the ground that there were some discrepancies and the income was estimated @ 1% on the gross sales of ₹ 648,80,66,096 and the total income was determined at ₹ 3,83,36,064 after allowing preliminary expenses, selling and administrative expenses and salaries to employees and depreciation amounting to ₹ 2,73,30,336. However, in the .....

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s not in order." In response to the show cause notice, assessee appeared before ld. CIT and made elaborate submissions challenging not only the jurisdiction invoked u/s 263, but, also the issue on merit. The specific plea taken by assessee before ld. CIT was assessment order passed having merged with the order of ld. CIT(A) and in further appeal before ITAT, exercise of power u/s 263 is invalid. The other contention of assessee was since AO has taken a view on the issue of estimation of inc .....

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an issue before ld. CIT(A) invoking of jurisdiction u/s 263 is in accordance with law. He further observed that once books of account are rejected and income is estimated, AO cannot rely on the same books of account for allowing expenses from the estimated income. For coming to such conclusion, he relied upon certain judicial precedents. On the aforesaid reasoning, ld. CIT finally concluded that assessment order passed being erroneous and prejudicial to the interests of revenue has to be set as .....

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and having been considered and decided by ld. CIT(A), exercise of jurisdiction u/s 263 is contrary to the statutory mandate as provided in Explanation (c) to section 263(1) of the Act. Ld. AR submitted, in fact, while considering the appeals preferred by assessee as well as revenue against the order of ld. CIT(A), ITAT has remitted the matter back to the file of AO with a direction to examine assessee s books of account and other documents and thereafter decide the issue. Thus, it was submitted .....

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e due to the fact that once income is estimated no further allowance of expenditure can be given. 7. Having considered the submissions of the parties, we are unable to accept the contention of ld. DR. It is manifest from the facts and materials on record, AO after rejecting the books of account estimated the gross income of assessee from steel trading business and from such estimated gross income allowed certain expenditure. Assessee preferred appeal against the said assessment order before ld. .....

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