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2015 (10) TMI 318 - ITAT HYDERABAD

2015 (10) TMI 318 - ITAT HYDERABAD - TMI - Revision u/s 263 - Held that:- It is observed from the notice issued by the Ld. CIT under section 263 and the detailed reply filed by the assessee to the said notice that most of the issues raised by the Ld. CIT were not only enquired by the A.O. but the claim of the assessee was accepted by him by applying his mind to the relevant facts of the case as well as the material placed on record. In my opinion, the assessment order passed by the A.O. therefor .....

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al to the interests of the Revenue due to inadequacy of enquiry. After having perused the impugned order of the Ld. CIT in the light of the facts and material on record and detailed submissions made by the assessee, find that the directions of the Ld. CIT on various issues are in the nature of starting roving and fishing enquiry which is not permissible under section 263 as held inter alia in the case of CIT vs. Gabriel India Ltd., [1993 (4) TMI 55 - BOMBAY High Court ].

CIT has no m .....

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committed by the A.O. there is loss to the revenue. Thus no errors in the order of the A.O. passed under section 143(3) as alleged by the Ld. CIT calling for any revision under section 263. - Decided in favour of assessee. - ITA.No.1080/Hyd/2014 - Dated:- 4-9-2015 - SHRI P.M. JAGTAP, ACCOUNTANT MEMBER For The Assessee : Mr. M. Chandramouleswara Rao For The Revenue : Smt. S. Narasamma ORDER This appeal filed by the assessee is directed against the Order of Ld. CIT, Vijayawada dated 28.03.2014 pa .....

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at ₹ 1,67,846 after making addition of ₹ 1,26,136 on account of disallowance of expenses claimed by the assessee to the extent of 20%. The record of the said assessment came to be examined by the Ld. CIT and on such examination, he was of the opinion that the assessment order passed by the A.O. without making enquiries on various issues was erroneous as well as prejudicial to the interests of the Revenue. He therefore, issued a notice under section 263 pointing out such issues and re .....

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involved in the case of the assessee as pointed out by him in the notice issued under section 263 had not been looked into or enquired by the A.O. while completing the assessment under section 143(3) and such non-consideration of these issues made the assessment order passed by the A.O. under section 143(3) erroneous as well as prejudicial to the interests of the Revenue. Accordingly, he passed an order under section 263 setting aside the order passed by the A.O. under section 143(3) with a dire .....

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ery issue raised by the Ld. CIT in the notice issued under section 263. He also prepared and furnished a tabular statement giving the details of explanation offered by the assessee in respect of each and every issue raised by the Ld. CIT in the notice issued under section 263 as under : Issues raised by the Ld. CIT in his Section 263 proceedings. Submissions and explanations furnished by the Assessee. Issue No.1 : As per the balance sheet as on as on 31.03.2008, the fixed assets are shown at  .....

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d examined and accepted them without verification". ASSESSEE S REPLY : The Assessee has filed a fixed assets schedule and depreciation statement and also the tax audit report along with the IT Return. Further, the Assessee also furnished the same documents before the CIT and clarified that, the details of fixed assets, opening and closing balances, additions to and deletions there from are also part of the records and submitted that, there is no error in the assessment order nor in the acco .....

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e Paper Book. ISSUE NO.2: "6.1 As per P & L a/c, the gross profit for the A.Y. 2008-09 is at ₹ 37,08,700/- on a turnover of ₹ 3,16,47,667/- which works out to 11.72%. whereas the gross profit for the A.Y. 2009-10 is at ₹ 36,54,504/- on a turnover of ₹ 3,38,03,515/- (i.e., @ 10.80%). The A.O. without calling for the reasons for the decrease in the gross profit by way of debit notes worth ₹ 3,31,974/- and credit notes of ₹ 1,30,619/- and due examination .....

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shed before the Ld. CIT, the copies of the debit notes and credit notes and also copy of the submissions made, before the Assessing Officer, regarding the marginal fall in the profits and issue of debit notes by M/s. Nirma as one of the reasons for the fall in the profit. The Assessee, firm is a distributor for the "Nirma Products", The copy of the submissions made in this regard before the AO during the assessment proceedings is place, at Page No.105 - 1- 106 of the paper book. The le .....

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nt payment details and the scope of application of provisions of Sec.269T to such payments, if any." ASSESSEE'S REPLY: The Assessee submitted both before the Assessing Officer during the Assessment proceedings and also to the Ld, CIT, during his Sec.263 proceedings, that the unsecured loan credits to the extent of the amount outstanding in the name of M/s. Syam Sudar Rice Depot, which is a partnership firm and which partners are also partners in the present Assessee firm, has been trans .....

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, there is reduction in the amounts of unsecured loans as well as in the "loans and advances" on both the side of the balance of the Assessee firm. It was also submitted that, since the unsecured loans was transferred by way of book entries and repayments were not paid in cash, the question of invoking of Sec.269T does not arise. Documentary evidences were furnished to the AO and also to the CIT for their perusal and records. The Ld. CIT without paying any attention to the submissions .....

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led with the assessee s account copy in the books of the said creditor. ASSESSEE'S REPLY: The Assessee has explained to the Ld. CIT that, there is no requirement for preparing reconciliation statement in the case of M/s. Nirma Limited, has the account of Nirma in the books of accounts of the Assessee firm and the ledger account of the assessee firm in the books of M/s. Nirma Limited are showing the same figure and there is no difference between the two sets of accounts. Ledger extracts are f .....

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secured loans were at ₹ 14,75,676/- whereas as per the balance as on 31.03.2009, the same were at ₹ 16,14,455/-. Further, on verification of the details, a sum of ₹ 2,12,845/- was repaid to Kotak Mahindra Bank Ltd., Vijayawada. The A.O. did not call and obtained the relevant details and did not examine the same. ASSESSEE S REPLY : The assessee has explained to the Ld. CIT that, the issue of secured loans has been examined by the A.O. and has called for the account copies of the .....

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he AO has verified the same with the relevant information. No deficiency in this matter. Hence, the order cannot be considered as erroneous on this point. The Ld. Commissioner of Income Tax simply brushed aside the above facts and explanation offered by the Assessee and stated that, the above reply did not covered the deficiencies pointed out in this respect. Except stating this, he has not brought out any deficiency/errors with respect to this issue either in the show cause notice or in the Sec .....

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such withdrawals. Further, the AO has also not obtained the details and examined the relevant details for cash withdrawal of ₹ 4,50,000/- by way of cash or Yourself on various dates from the Assessee's current account with Axis Bank Ltd., Khammam. ASSESSEE S REPLY The provisions of Sec.14A are applicable when the expenditure incurred does not relate to the income earned. When there is no nexus between income earned and expenditure incurred, the provisions of Sec.14A are applicable. Si .....

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and ordered revision of the Assessment order on sheer suspicion and surmise. He could not pin point the error except stating that, the AO did not call for and examined the reasons for the cash withdrawals. He could not even state in his Revision Order the events of misappropriation of cash or erroneous claims of expenses in the accounts. ISSUE NO.7 : The AO did not call for and examined the details of rent paid of Rs.l,20,000/- for shop & Godown as to whether or not such payment attracts th .....

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ed this issue and found that, the provisions of sec.194-I are not applicable. There is no error in the assessment order on this issue. The Ld. CIT could not controvert this fact. However, he passed the Revision Order on this issue without any merit in his arguments. He has not examined the facts available on record and simply issued order u/s. 263 in gross violation of his authority. 4. The Ld. Counsel for the assessee submitted that the detailed reply filed by the assessee to the notice issued .....

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ply filed to the notice issued under section 263 and even whatever objections raised by the Ld. CIT were also met by clarifying each and every point raised by him. He contended that the Ld. CIT however completely ignored the explanation offered by the assessee and revised the assessment made by the A.O. under section 143(3) by exercising the powers conferred upon him under section 263 without even controverting the facts and figures furnished by the assessee in his reply. He contended that the L .....

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cision of Hon ble Delhi High Court in the case of CIT vs. Hindustan Marketing and Advertising Co. Ltd., 341 ITR 180 wherein it was held that the Income Tax Officer having made reasonably a detailed enquiry, collected relevant material and discussed various facts of the case with the assessee s representative before making the assessment, there was no valid basis for the Commissioner to exercise jurisdiction under section 263 and to direct the A.O. to make fresh assessment by going deeper into th .....

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gly relied on the impugned order of the Ld. CIT passed under section 263 in support of Revenue s case that the assessment order passed by the A.O. under section 263 being erroneous and prejudicial to the interests of the Revenue as pointed out by the Ld. CIT, the same has been rightly set aside/revised by exercising the powers conferred under section 263. 6. I have considered the rival submissions and also perused the relevant material on record. It is observed from the notice issued by the Ld. .....

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in his impugned order passed under section 263. The Hon ble jurisdictional High Court in the case of Spectra Shares & Scrips P. Ltd., vs. CIT 354 ITR 35, while examining the CIT s power under section 263 of the Act, has analysed various decisions of the Hon ble Supreme Court as well as different High Courts and culled out the principles for exercising the jurisdiction under section 263 of the Act as under : (a) The Commissioner has to be satisfied of twin conditions, namely, (i) the order of .....

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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 Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income Tax Officer is unsustainable in law. (c) To invoke suo motu revisional powers to reopen a concluded assessment under Sec.263, th .....

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ut 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 respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suo motu revisional powers unless supported by adequate reasons for doing so; that if a query is raised during the course of the scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing O .....

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esent 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 would have no end except when legal ingenuity is exhausted (e) Whether there was application of mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because he has a different opinion .....

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nterpretation, a lesser tax than what was just, has been imposed. (f) The power of the Commissioner under Sec.263 (1) is not limited only to the material which was available before the Assessing Officer and, in order to protect the interests of the Revenue, the Commissioner is entitled to examine any other records which are available at the time of examination by him and to take into consideration even those events which arose subsequent to the order of assessment. 6.1. If the aforesaid principl .....

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nquiry should have been made by the A.O. The power under section 263 cannot be extended to hold an order passed by the A.O. as erroneous and prejudicial to the interests of the Revenue due to inadequacy of enquiry. After having perused the impugned order of the Ld. CIT in the light of the facts and material on record and detailed submissions made by the assessee, I find that the directions of the Ld. CIT on various issues are in the nature of starting roving and fishing enquiry which is not perm .....

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