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Ashok Handloom Factory P. Ltd. Versus Commissioner of Income Tax, Meerut

2015 (9) TMI 63 - ITAT DELHI

Revision u/s 263 - no proper inquiry was made by AO - Held that:- It is very clear that if there is an inquiry even inadequate that would not by itself gives power to the Commissioner to pass order under Section 263 of the Act merely because he had a different opinion in the matter. It is only in the cases of total lack of inquiry that the revision under section 263 would be justified.

The assessment canít be set aside to the file of the Assessing Officer for the purposes of further i .....

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ssessment order in a particular manner. In these circumstances, we have no hesitation to quash the order passed under Section 263 of the Act by the CIT - Decided in favour of assessee. - ITA No. 2495/Del/2013 - Dated:- 21-8-2015 - SHRI I.C. SUDHIR AND SHRI INTURI RAMA RAO, JJ. For The Appellant : S/sh. K. Sampath & Raja Kumar, Advocates For The Respondent : Sh. Ravi Jain, CIT-DR ORDER PER INTURI RAMA RAO, A.M.: This is an appeal filed by the assessee company for the assessment year 2008-09 .....

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er enquiry for assessment and passed without indicating any error or prejudice in the assessment order dated 27.12.2010 is ab initio illegal and void and so must be quashed; iii. That further, without prejudice to the foregoing, the finding of the Ld. CIT that the book results for the trading activity were unreliable and were no amenable to verification and that the rest of the assessment had to be set aside is fallacious, capricious and untenable and must be quashed with direction for abiding b .....

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in the business of printing, processing and sale of handloom. The return of income for the assessment year 2008-09 was filed on 23.09.2008, declaring income of ₹ 3,19,970/-. Against the said return of income, the assessment was completed under Section 143(3) of the Income-tax Act, 1961 (for short the Act ) vide order dated 27.12.2010 at a total income of ₹ 3,61,080/-. Subsequently, a notice under Section 263 of the Act was issued by the CIT(A), Meerut, dated 15.02.2013 proposing the .....

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743/-, but source of investment have not been verified by the A.O. and he has not obtained the bills/vouchers of the same. d) A.O. has not obtained the copy of bank statements and not verified the genuineness of share holders. e) The assessee company is engaged in the business of printing, processing and sale of hand looms in which turnover of Rs. l6,39,30,613/- is shown. However, the N.P. is shown at merely ₹ 8,73,333/- which is negligible. As per tax audit report, the assessee has not ma .....

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d 5th March, 2013 wherein it was submitted that in respect of those items, the Assessing Officer had caused the necessary inquiries and drawn attention towards the questionnaire dated 29th July, 2010 issued by the Assessing Officer on those items. However, the CIT not appreciated the explanation and set aside the assessment vide his order dated 25th March, 2013, exercising the powers vested with him under the provisions of Section 263 of the Act on the ground that prior no proper inquiry was con .....

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e assessee company that no assessment can be set aside in exercise of the power under Section 263 of the Act on the ground that no proper inquiry was made. He has drawn our attention to the questionnaire issued by the Assessing Officer placed at page no. 1 of the paper book and also filed replies of the assessee before the Assessing Officer in response to the questionnaire issued by him at page 4 to 259 of the paper book. He further submitted that it was not a case of non-inquiry when a valid ju .....

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relied on the order of CIT passed under Section 263 of the Act. 6. We have heard the rival submissions and perused the material on record. In this appeal, we are required to adjudicate whether the CIT is justified in exercising the jurisdiction under Section 263 of the Act in the facts and circumstances of the case. The ld. CIT issued show cause notice on the ground that the Assessing Officer at the time of framing the assessment under Section 143(3) had not made proper inquiries on the followin .....

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same. d) A.O. has not obtained the copy of bank statements and not verified the genuineness of share holders. e) The assessee company is engaged in the business of printing, processing and sale of hand looms in which turnover of Rs. l6,39,30,613/- is shown. However, the N.P. is shown at merely ₹ 8,73,333/- which is negligible. As per tax audit report, the assessee has not maintained stock register for trading actual raw material as well as finished goods. Moreover, the audit report clearl .....

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the Assessing Officer passed the assessment order. This facts have not been disputed by the learned CIT-DR but only ground on which the assessment had been set aside by the CIT under Section 263 is that no proper inquiry has been made by the Assessing Officer on those items. The Commissioner of Income Tax agreed to the extent that the Assessing Officer made some inquiries but not proper inquiry. Now, the law is fairly settled to the extent that the Commissioner of Income Tax can exercise his ju .....

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that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between lack of inquiry and inadequate inquiry . If there was any inquiry, even inadequate that .....

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on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue . It is not an arbitrary or unchartered power, it can be exercised only on fulfillment on the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based o .....

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pted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasijudicial controversies as it must in other spheres of human activity. (See Parashuram Pottery Works Co. Ltd. Vs. ITO [1977] 106 ITR 1 (SC) at page 10)…… From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is .....

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cer while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the Officer concerned was on the power side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. Tha .....

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has not be 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. 8. It is very clear that if there is an inquiry even inadequate that would not by itself gives power to the Commissioner to pass order under Section 263 of the Act merely because he had a different opinion in the matter. It is only in the cases of total lack of inquiry that the revision under section 263 would be justified. Further, .....

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and the said finding must be recorded. The Commissioner of Income-tax cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the Commissioner of Income-tax must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner of Income-tax and he is able to establish and show the error or mi .....

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sessing Officer to conduct further enquiries without a finding that the order is erroneous. Finding that the order is erroneous is a condition or requirement which must be satisfied for exercise of jurisdiction under Section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the Commissioner of Income-tax has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question. 9 .....

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se of Director of Income Tax Vs. Jyoti Foundation, (2013) 357 ITR 388 (Del.) as follows: The Delhi High Court in Gee Vee Enterprises V. Addl. CIT [1975] 99 ITR 375 (Delhi), has observed as under (page 386) The reason is obvious. The position and function of the Income-tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It si .....

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. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word erroneous in section 263 includes the failure to make such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct In the said judgment, the Delhi High Court had referred to earlier decisions of the Supreme Court in Rampyari Devi Sara .....

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