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2015 (9) TMI 443 - ITAT HYDERABAD

2015 (9) TMI 443 - ITAT HYDERABAD - TMI - Revision u/s 263 - disallowance u/s. 40(a)(ia) and u/s. 40A(3) made by AO - Held that:- As from the material on record, it is clear that the AO made enquiries on the very same issues during the course of assessment proceedings and merely because, the returned income is lower, the assessment order cannot be termed as erroneous. It is only after the examination of detailed information filed during the course of assessment proceedings that assessment order .....

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e enquiry. The Ld.CIT cannot transgress the jurisdiction u/s. 263 of the Act by mentioning that no proper enquiry was made. See Rishi Kumar Gupta Vs. CIT [2004 (2) TMI 270 - ITAT AGRA ]

The fact that the AO issued the questionnaire on several issues and the assessee had responded to the same by filing the information and on consideration of replies from the assessee, the AO held that an amount of ₹ 23,137/- u/s. 40(a)(ia) and an amount of ₹ 1,42,650/- u/s. 40A(3) of the A .....

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is is an appeal filed by the assessee-appellant against the order of the Ld. Commissioner of Income Tax, Vijayawada, dated 26-03-2014 for the AY. 2009-10 passed exercising powers u/s. 263 of the Income Tax Act, 1961 [Act] raising the following grounds of appeal: "1. The order of Commissioner of Income Tax is erroneous both on facts and in law." 2. The learned Commissioner of Income Tax erred in holding that there is a mistake in the order passed by the Assessing Officer which is prejud .....

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mine provisions of Sec. 40A(3) and sec 14A of the I.T. Act. 6. Any other ground that may be urged at the time of hearing". 2. The brief facts of the case are that the assessee is a partnership firm engaged in the business of whole sale trader in fast moving consumer goods. The appellant had filed the return of income for the assessment year under consideration on 26-09-2009 declaring total income of ₹ 45,418/-. After processing the said return under the provisions of Section 143(1) of .....

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ow cause notice on 29th October, 2012 u/s. 263 of the Act calling upon the assessee to furnish the reasons as to why the order of assessment should not be revised u/s. 263 of the Act on account of failure of AO to : i) Examine the reason for fall in the gross profit compared to the AY. 2008-09; ii) verify the opening stock in respect of OST Toor Dal A/c; iii) verify the Freight Charges of ₹ 7,02,060/- with reference to the provisions of Section 40(a)(ia) of the Act; iv) verify whether the .....

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Act.. 1961, - Scrutinv Assessment order Passed U/s 143(3) of I.T. Act, 1961, Dated 31/05/2001- A.Y.2009-2010 Reply to Show cause notice - Reg. Ref: - Your letter dated 29/10/2012. With reference to the above we submit the following Para wise remarks. 1. GROSS PROFIT VARIANCE:- The Gross Profit for the A.Y 2008 .. 2009 was 6.1 % on o turnover of ₹ 1,99,11,667/- at ₹ 12,41,485/- while the Gross Profit reported for the AY 2007- 2010 works at 5.87% on a turnover of 2,53,61,201/- which w .....

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r every year. Comparison of GP rotes is not prescribed under any provisions of the IT Act. As such the oction of the Assessing Officer is not comparing the GP rates cannot be said to be erroneous. As such on this issue U/s 263 is not legally correct. 2. OST TOOR DAL A/C:- It was pointed out that as per the Trading Account for the A.Y 2008-2009 no closing stock was shown under the head OST TOOR DAL Account. While for the A.Y. 2009-2010 opening stock was brought down at ₹ 3,16,882/- and that .....

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the closing stock was overvalued by about ₹ 1,00,000/- as on 31/03/2008 by the accountant, keeping in view of the market prices. The same occurred in the case of A.P.WHEAT Account. Though there is no increase in valuation. 3. FRIEGHT CHARGES ₹ 7,02,060/-, APPLICABILlTY OF SECTION 40a (ia) :- This expenditure pertains to mainly local dispatches on cyclerikshawa, bullock carts and human drawn carts only, a few expenditure pertain to lorry transports. In any case the expenditure were n .....

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TNERSHIP DEED: - Copy of partnership deed is enclosed herewith. 6. The assessee has withdrawn amount of ₹ 18,80,200/- from SBH, Kothagudem in aggregate throughout the year 10 meet the day to day expenses of the business in cash and some payments were made by barer cheques up to permissible limits U/s 40A(3). The assessee does not have any other activity, the incomes of which are exempt. The assessee has not diverted any amounts to any other activity. The amounts of each withdrawals being v .....

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at ₹ 3,16,882/- in the fy 2008-09. The assessee has stated that it has shown OST Toor Dal closlnq stock at ₹ 2,16,857/- on 31/03/2007. It was also shown in Trading a/c and balance sheet for the ay 2008-09. The assessee further states as there were no purchases or no losses, the closing stock was valued at enhanced price at ₹ 3,16,882/- on 31/03/2008 and shown the same in the balance sheet. The reply given by the assessee is vague and not inaccordance with the accounting princip .....

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7; 7,02,060/- under the head "Freight" and the AD has not examined with reference to the provisions of section 40(a)(ia) of the Act. 5.1. Assessee's reply is extracted as under This expenditure pertains to mainly local dispatches on cyclerikshaws, bullock carts and human drawn carts only, a few expenditure pertain to lorry transports. In any case the expenditure were neither in excess of ₹ 20,000/- at a time not exceeding ₹ 50,000/- in aggregate. As such the provisions .....

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ue is extracted as under; Further, it is observed that the unsecured loans with the confirmation letter from Hemanth Sarada, Bindu Sarada and Nikitha Sarada to the assessee firm does not specify whether the loans were given by way of' cash or 'through account payee cheques etc. The AD has not examined with material evidence and also the applicability of provisions of section 269SS of the IT Act. 6.1. Assessee's reply is extracted as under; The depositors are the Son and Daughters of .....

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tc. The AD failed to examine these details and also the applicability of Sec.269SS of the Act. 6.3. It is further stated that all the creditors are students studying 1st year Intermediate, 2nd year Degree and 3rd year Degree. The sources in the hands of the creditors were not verified at the time of assessment. The assessee has replied that the depositors are Son and Daughters of the assessee and these amounts represent gifts received from relatives on different occasions. As a parent he had saf .....

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bearer cheques 14A of the IT Act.nsecured loans with the confirmation letter from Hemanth Sarada, Bindu Sarada and Nikitha Sarada to the assessee firm does not specify whether the loans were given by way of' cash or 'through account payee cheques etc. The AD has not examined with material evidence and also the applicability of provisions of section 269SS of the As per the cc a/c copy of the assessee maintained with SBH, it is noticed that huge amounts were withdrawn by way of cash to th .....

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any amounts to any other activity. The amounts of each withdrawals being very small, this aspect need not be doubted. 7.2. The assessee has withdrawn ₹ 18,80,200/- during the fy relevant to the ay under consideration from SBH, Kothaqudem. But, the AO has not verified the purpose for such huge withdrawals and also the applicability of Sec.14A, if any". Finally concluded that, AO had not conducted the due enquiry or examined the above issues and hence the assessment order passed by the .....

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erefore, he argued that the CIT fell in error in exercising the jurisdiction u/s. 263. 6. On the other hand, the Pr. CIT-DR vehemently supported the order of CIT u/s. 263. She further argued that since the AO has failed to conduct proper enquiry on the issues raised in show cause notice, the order is liable to be set aside u/s. 263. 7. We heard the rival parties and perused the material on record. On perusal of page No. 9 to 16 of the Paper Book, we find that the issues raised by the Ld.CIT in h .....

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ment, on the issues raised in the show cause notice. The sum and substance of the order of the CIT is that the AO failed to conduct enquiry on issues raised. But from the material on record, it is clear that the AO made enquiries on the very same issues during the course of assessment proceedings and merely because, the returned income is lower, the assessment order cannot be termed as erroneous. It is only after the examination of detailed information filed during the course of assessment proce .....

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d.AO to decide when to end the enquiry. The Ld.CIT cannot transgress the jurisdiction u/s. 263 of the Act by mentioning that no proper enquiry was made. Reliance in this regard, we rely on the decision of Hon'ble Agra Bench of ITAT in the case of Rishi Kumar Gupta Vs. CIT [90 TTJ 645]. In this connection, it is apt to extract the observation of the following: i. Hon'ble Delhi High Court in the case of CIT Vs. Sunbeam Auto Ltd., [332 ITR 167] held that: "We have considered the rival .....

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oes not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the AO had not applied his mind on the issue. There are judgments galore laying down the principle that the AO in the assessing 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 .....

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al India Ltd. (supra), law on this aspect was discussed in the following manner : "........From a reading of sub-s. (1) of section, it is clear that the power of suo motu revision can be exercised by the CIT only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the ITO is 'erroneous insofar as it is prejudicial to the interests of the Revenue'. It is not an arbitrary or unchartered power. It can be exercised only on f .....

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he CIT cannot initiate proceedings with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted 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 induces repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. [see Parashuram .....

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nt of the CIT for that of the ITO, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the ITO 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 CIT, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to .....

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rima facie material on record to show that 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". ii. Bombay High Court in the case of CIT Vs. Fine Jewellery [372 ITR 303] followed the same ratio. iii.the Hon'ble Bombay High Court held that, "if a query is raised during the assessment proceedings and responded to by the assessee, the mere .....

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