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Sri Chava Srinivasa Rao Versus Income Tax Officer, Ward 2, Kothagudem

2015 (8) TMI 1039 - ITAT HYDERABAD

Revision u/s 263 by CIT(A) - earning of agricultural income from sale of bamboo sticks and and contribution to chits - Held that:- AO has not only conducted inquiry on the agricultural income as well as contribution to chits, but has also applied his mind to the information submitted by assessee. In these circumstances, assessment order cannot held to be erroneous and prejudicial to the interests of the Revenue, only because the CIT was of the opinion that some more inquiries should have been ma .....

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ores at the time of survey - Held that:- Exercise of power u/s 263 on this issue is valid. There is no dispute that in the statement recorded at the time of survey on 19.03.2010, assessee had offered to pay an amount of ₹ 30.00 lakhs as advance tax for A.Y under consideration. Further in the statement recorded u/s 131 of the Act on 23.03.2010, assessee again stated that he will offer additional income of ₹ 1.00crore and pay advance tax of ₹ 30.00 lakhs for A.Y under considerati .....

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ry by the AO. He should have made an effort to find out what are the reasons behind not declaring an amount of ₹ 20.00 lakhs out of the total amount of ₹ 1.00 crore declared at the time of survey. The AO could have accepted the income declared in the return after satisfying himself with the reasonableness of assessee’s explanation. There is nothing in record to show that the AO made any inquiry to find out why the assessee did not offer the amount declared at the time of survey as in .....

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el India Ltd (1993 (4) TMI 55 - BOMBAY High Court ). In our view, ld CIT has no material before him to consider the assessment order to be erroneous and prejudicial to the interests of the Revenue on these issues. On perusal of the discussions made by the ld CIT, it appears that his actions are more like an AO in session of an assessment proceeding rather than a Revisional Authority exercising powers u/s 263. Power u/s 263 is to be exercised sparingly and in genuine cases where due to error comm .....

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Manikya Prasad For The Revenue : Shri P. Somasekhar Reddy, DR ORDER Per Saktijit Dey, J.M. Instant appeal of the assessee is against the order dated 26.03.2014 of the ld CIT, Vijayawada passed u/s 263 of the Act for the A.Y 2010-11. 2. Briefly, the facts are, assessee an individual is the proprietor of M/s Swapana Restaurant & Bar. For the A.Y under consideration, assessee filed his return of income on 15.10.2010 declaring total income of ₹ 97,72,119, besides agricultural income of &# .....

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made some other disallowances out of the expenditure claimed by the assessee as a result of which the total income was determined at ₹ 1,02,13,350 as per the assessment order passed u/s 143(3) of the Act on 11.5.2011. 3. Ld CIT in exercise of powers u/s 263 of the Act, called for assessment records of the assessee for the year under consideration and after examining the same was of the view that the AO has failed to examine/consider various issues, which according to the ld CIT has made t .....

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ions of the assessee. As far as the declaration of agricultural income of ₹ 16.00 lakhs from sale of Bamboo Sticks is concerned, ld CIT was of the opinion that assessee s claim is not acceptable because assessee did not have adquate agricultural land to grow bamboo trees which could generate income of ₹ 16.00 lakhs. He observed that bamboo trees takes about 5 years to grow. Therefore, considering the fact that assessee has acquired 24.22 acres of land on 08.06.2004, it could not have .....

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er inquiry or examined all these aspects, assessment order is erroneous and prejudicial to the interests of the Revenue. Accordingly, he directed the AO to examine the issue afresh. 4. He further noticed that assessee is contributing to three chits of Margadarshi Chits and out of which two chits were bidded for an amount of ₹ 31,52,110 which was invested in purchase of assets. Accrued chit contributions to Margadarsi were to the tune of ₹ 17,86,015, the source of which have not been .....

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dered assessment order to be erroneous and prejudicial to the interests of the Revenue is during the survey proceeding, assessee offered to declare additional income of ₹ 1.00 crore for the A.Y 2010-11 and promised to pay advance tax of ₹ 30.00 lakhs, whereas in the return of income filed for the said A.Y, assessee offered income of ₹ 80.00 lakhs. He, therefore, was of the view that as the assessee did not declare the balance amount of ₹ 20.00 lakhs, AO should have added .....

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grounds raised before us, assessee is basically challenging the jurisdiction of the ld CIT in exercising power u/s 263 of the Act. Ld AR submitted before us, AO having examined all the issues on which ld CIT proposed to revise the assessment order and completed assessment after necessary inquiry on those issues, the assessment order cannot be held to be erroneous and prejudicial to the interests of the Revenue. Ld AR referring to the discussions made in the assessment order as well as the repli .....

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onductd some more inquiries or the inquiry conducted by the AO is inadequate. Thus it was submitted by the ld AR that exercise of power u/s 263 of the Act is not valid. 7. Ld DR submitted before us that though the AO in course of the assessment proceeding has raised certain issues with regard to the agricultural income and the contribution of chits, but after submission of information by the assessee AO has simply accepted assessee s claim without verifying information submitted by the assessee .....

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ing any expenditure. As far as contribution to chits are concerned, ld DR submitted source from which investment was made was never inquired by the AO. Ld DR submitted, AO also failed to examine why assessee did not offer the amount of ₹ 20.00 lakhs in the return of income out of the additional income declared at the time of survey operations. Thus, the ld DR submitted that the AO having not conducted proper inquiry on the issues on which ld CIT invoked his jurisdiction u/s 263, the order .....

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concerned, there cannot be any dispute with regard to the same as the assessee cannot sell them on his own without taking permission of the Forest Authorities. It was submitted that from the time of cutting of bamboo trees to its despatch to the final destination, everything has to be monitored by the Forest authorities, hence there cannot be any dispute with regard to the sale of the bamboo sticks as it is regulated commodity. As far as investment in chits are concerned, ld AR submitted that t .....

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ncome from sale of Bamboo Sticks • Contributions made to the Chits • Additional income offered at the time of survey at ₹ 1.00 crore was reduced to ₹ 80.00 lakhs in the return filed. 10. As far as the first issue relating to earning of agricultural income from sale of bamboo sticks is considered, as could be seen from the material on record, assessee in the agricultural income shown in the return has included an amount of ₹ 16.00 lakhs towards sale of bamboo trees. In .....

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of bamboo sticks, but assessee has also submitted evidence in support of its claim of sale of bamboo sticks. Therefore, upon consideration of facts and facterials on record, it is clearly established that not only the AO has made inquiries with regard to the agricultural income, but has also applied his mind to the facts and materials on record. The same is the case with regard to the contribution to the chits. Though, it may be a fact that the AO has not made any reference to the contribution t .....

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eting the assessment, the assessment order cannot be held to be erroneous and prejudicial to the interests of the Revenue on these two issues. The Hon ble Supreme Court in the case of Malabar Industrial Co. Ltd vs. CIT (243 ITR 83) held as under: 9. The phrase prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial .....

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ds on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC). 11. The jurisdictional High Court in case of Spectra Shares and Scrips Pvt. Ltd vs. CIT (354 ITR 35) while examining the CIT s power u/s 263 of the Act analysed number of decisions of the Hon ble Supreme Court as well as differ .....

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ome Tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but it is prejudicial to the Revenue - recourse cannot be had to Section 263 (1) of the Act. (b) Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income Tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue: or where two views are possible and the In .....

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the Revenue, will not suffice; that the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer is not called upon to write an elaborate judgment giving detailed reasons in resp .....

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icer called for interference and revision. (e) The Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded; that the department cannot be permitted to begin fresh litigation because of new views they entertain on facts or new versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of the circumstance; that if this is permitted, litigation woul .....

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e branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately; there must be some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed. (g) The power of the Commissioner under Sec.263 (1) is not limited only to the material which was avai .....

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ion to chits, but has also applied his mind to the information submitted by assessee. In these circumstances, assessment order cannot held to be erroneous and prejudicial to the interests of the Revenue, only because the CIT was of the opinion that some more inquiries should have been made by the AO. As held by the judicial authorities, the power u/s 263 cannot be extended to hold an order passed by the AO as erroneous and prejudicial to the interests of the Revenue due to inadequacy of inquiry. .....

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f survey on 19.03.2010, assessee had offered to pay an amount of ₹ 30.00 lakhs as advance tax for A.Y under consideration. Further in the statement recorded u/s 131 of the Act on 23.03.2010, assessee again stated that he will offer additional income of ₹ 1.00crore and pay advance tax of ₹ 30.00 lakhs for A.Y under consideration. Thus, from the aforesaid statements, it is clear that the assessee consistently took the stand that he will offer an amount of ₹ 1.00 crore as hi .....

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of ₹ 1.00 crore declared at the time of survey. The AO could have accepted the income declared in the return after satisfying himself with the reasonableness of assessee s explanation. There is nothing in record to show that the AO made any inquiry to find out why the assessee did not offer the amount declared at the time of survey as income in the return filed. That being the case, we do not find any infirmity in the order of the ld CIT in holding the assessment order to be erroneous and .....

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y High Court in CIT vs.Gabriel India Ltd (203 ITR 108 at page 114). In our view, ld CIT has no material before him to consider the assessment order to be erroneous and prejudicial to the interests of the Revenue on these issues. On perusal of the discussions made by the ld CIT, it appears that his actions are more like an AO in session of an assessment proceeding rather than a Revisional Authority exercising powers u/s 263. Power u/s 263 is to be exercised sparingly and in genuine cases where du .....

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