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2015 (11) TMI 272

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..... oneous or prejudicial to the interest of the Revenue or have been passed without application of mind only because in the assessment order the ld.AO has not made elaborate discussion in that regard. It is evident that the ld.CIT has set aside the order of the ld.AO only on the ground that the view taken by the ld.AO was not agreeable to him. In our considered opinion, it cannot be said that the ld.AO has not applied his mind at the time of assessment. The view taken by the ld.AO was a possible view and that the condition precedent for invoking jurisdiction under section 263 by the Commissioner of Income-tax did not exist in the facts of the present case. See Commissioner Of Income-Tax Versus Gabriel India Limited [1993 (4) TMI 55 - BOMBAY High Court] - Decided in favour of assessee. - I.T.A .No. 2080/Del/2013 - - - Dated:- 30-9-2015 - SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER For The Appellant : Sh. Deepak Kapoor, Adv. For The Respondent : Sh. Ravi Jain, CIT DR ORDER PER BEENA PILLAI, JUDICIAL MEMBER: This is an appeal filed by the assessee against the order of the Commissioner of Income Tax, Meerut u/s 263 of the Incom .....

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..... ised during the year in the personal set. These documents were filed during the assessment proceedings u/s 143(3) and also during revision proceedings u/s 263. The assessee had duly explained the identity/genuineness/creditworthiness of all the unsecured loans received during the year and had fully discharged the onus as required u/s 68 of the Act. The ld. CIT has made addition u/s 68 for total loans outstanding as on 31.03.2008 which includes loan of ₹ 37,02,605/- taken by the assessee in earlier years. The addition of ₹ 48,23,008/- is therefore, illegal, unjustified and deserves to be deleted in full. 6. BECAUSE on the facts and in law and on grounds taken and basis adopted, the addition of ₹ 35,93,265/- u/s 68 on account of entire unsecured loan as per the business set of the assessee (including opening balance of ₹ 21,91,271/-) is unjustified and illegal. The assessee filed the documents/proof (Confirmation Certificates, ITR, Bank A/c etc.) for the loan of ₹ 18,74,000/- raised during the year in the business set. These documents were filed during the assessment proceedings u/s 143(3) and also during revision proceedings u/s 263. T .....

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..... revious year. The ld. AO raised queries in respect of sundry creditors, unsecured loan and increase in the capital by the assessee. The assessment order was passed u/s 143(3) and the ld. AO observed as under: The assessee company is engaged in the business of printing and publication of books for competitive examinations. The results declared by the assessee have been examined and verified on test check basis from the books of accounts and bank statements and various other details and documents submitted by the assessee from time to time . 4. The Ld. AO made addition, in respect of vehicle running and maintenance expenses which was claimed as business expenses by the assessee as well as addition u/s.43B was made in respect of the unpaid service tax liability. 5. Subsequently the ld. CIT, Meerut initiated proceedings u/s 263 of the Income Tax Act vide notice dated 12/02/2013. By the said notice, the ld. CIT raised certain queries. The ld. CIT on examination of assessment records had opined that the assessment order has been passed without proper enquiry in view of the following points: a) From the perusal of balance sheet and its annexure, it appears that during the .....

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..... 377; 53,696/- ₹ 2,62,424/- respectively on different dated, but TDS has not been deducted on the same. Therefore, the same amount should be disallowed u/s 40(a)(ia). Vide para 7 of the impugned order the ld. CIT directed the AO to verify. After verification, the ld. AO made no addition vide order u/s 143(3)/263 dated 24.02.2014. d. During the year, the assessee has paid freight to M/s Delhi M.P. Road Carrier to ₹ 55,971/- but TDS has not been deducted on the same amount. Therefore, the same shall be disallowed u/s 40(a)(ia). Vide para 7 of the Impugned order the ld. CIT directed the AO to verify. After verification, the ld. AO made no addition vide order u/s 143(3)/263 dated 24.02.2014. e. Sundry Creditors and Unsecured Loans have not been confirmed by the AO by issue of notice u/s 133(6). AO simply accepted the confirmation filed by the assessee. Vide para 8 of the Impugned order the ld. CIT herself added entire Unsecured Loan in business set ₹ 35.93 lacs (including opening balances of ₹ 21.91 lac) Sundry Creditor ₹ 5.90 crore ( .....

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..... the Act, on the facts and circumstances of this case. The assessment year involved 2008-09. 11. Subsequent to the finalization of the assessment u/s.143(3), the Ld.CIT sought to revise the subject assessment. In the assessment has been sought to be revised on the ground that the assessment order has been passed without proper enquiry on the points raised in paragraph 6 above. 12. The Ld. AR submitted that in respect of addition of loan liability amounting to ₹ 48.23 lacs, unsecured loan amounting to ₹ 38.23 lacs and sundry creditors amounting to ₹ 5.9crs, as per the order passed by the Ld. CIT u/s.263 of the Act is bad in law in as much as the assessment order passed u/s.143(3), dated 10.12.2010 was not erroneous and prejudicial to the interest of the Revenue. The ld. AR submitted that the details regarding the loan and the confirmations were filed before the Ld.AO and it was verified by the Ld.AO. 13. The ld.AR pointed out that in the assessment order passed on 21.02.2014, passed in pursuance to the order u/s.263 of the Act, the ld.AO has not made any additions on any of the points at b, c and d mentioned in para 6 above. The ld. AR further pointed out .....

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..... nt of the Act, prior to invoking the provision of Sec. 145(3). The CIT rejected books of accounts by pointing out that the business results could not be ascertained or verified in the absence stock register and other relevant records to support the same. The deficiencies as noted by the CIT cannot be held inclusive until and unless the assessee is provided due opportunity of being heard to explain her stand. Further it is noticed that the show cause notice issued u/s.263 of the Act does not contain these ground relating to rejection of books of accounts and lower net profit. The Ld.CIT has travelled beyond the issues raised in the notice issued u/s.263 of the Act. Hence, on the basis of foregoing discussions we are inclined to hold that the Ld.CIT rejected books of accounts of the assessee in a unjustified manner is not only against the scheme of the Act but also violative to the principles of natural justice. On careful consideration, we note that the CIT invoked section 145(3) with following observation and conclusion, The regular books of account, as such are not properly maintained, provisions of section 145(3) of the I.T.Act, 1961 are thus invoked rejecting the same since .....

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..... loan of ₹ 4,66,275/- has been shown whose total income below taxable limit showing tax payable as nil Page 81 GTI of Parul is 2.63 lac. Total Income 1.64 lac Tax Paid 3498 Source of loan of ₹ 5 lac is clearly bank overdraft 4. Para 8 page 9 of order: In case of Payal Jain the total sum advanced to the assessee is 947660/- . Facts are totally wrong. See para 83-86 : Loan of ₹ 4 lac received from Payal. ₹ 3 lac was taken and repaid. 5. Para 8 page 10 of order: Despite repeated requests being given to furnish and produce the books of accounts, no books of accounts were produced At page 11 para 3 of the Impugned order: The ld. CIT observes the books of the assessee had been thoroughly verified during the course of the proceedings u/s 263 6. Para 8 page 10 of impugned order: Neither during the course of the proceedings before the AO nor in the proceedings u/s 263 the assessee has furnished any confirmation from sundry creditors. See para 14 and 27 of written su .....

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..... evenue. The CIT has to be satisfied of twin conditions, namely : (a) The order of the AO sought to be revised is erroneous, and (b) It is prejudicial to the interests of the Revenue. If one of them is absent if the order of the ITO is erroneous, but is not prejudicial to the Revenue or if it is not erroneous, but is prejudicial to the Revenue recourse cannot be had to section 263(1) of the Act. It was further held that the provisions of section 263 cannot be invoked to correct each and every type of mistake or error committed by the AO. (b) CIT Vs Max India Ltd [2007] 295 ITR 282 (SC) : 213 CTR 266 (SC) It was held in this case that where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order, prejudicial to the interests of the Revenue. (c) Gupta International Vs ITO [2010] 2 ITR (Trib) 428 (Del) It was, inter alia, held in this case that when an issue had been raised and a proper reply to it was given, then it could not be presumed that the issue had been dealt with in haste or without making any enquiry. (d) CIT Vs. Development Credit Bank Ltd. [2010] 323 ITR 206 (Bom .....

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..... he Assessing Officer was a possible view and therefore, it could not be concluded that the order of the Assessing Officer was erroneous and was prejudicial to the interest of the Revenue and that the condition precedent for invoking jurisdiction under section 263 of the Act did not exist. On further appeal to the High Court, dismissing the appeal, held that it could not be said that the Assessing Officer had not applied his mind while granting deduction under section 80HHC of the Act as regards the net profit earned by the assessee pertaining to its export business. The Tribunal was right in holding that the view taken by the Assessing Officer was a possible view and that the condition precedent for invoking jurisdiction under section 263 by the Commissioner did not exist. The Tribunal was justified in upsetting the order passed by the Commissioner under section 263 of the Act. (f) CIT Vs. Smt.Minalben S. Parikh [1995] 215 ITR 81 (Guj.) It was held in this case that two conditions are required to be satisfied before the CIT can exercise powers under section 263 of the Act, viz : (a) The order of the AO must be found to be erroneous, and (b) The order of the AO mus .....

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..... essee before the AO, during the course of the assessment proceedings and hence it had to be accepted that the AO had applied his mind on all these issues. It was further held that even if such enquiry was inadequate in the opinion of the CIT, this did not give power to the CIT to pass order under section 263, merely because he had a different opinion on the matter. It was, accordingly, held that order of the CIT under section 263 was not sustainable. (i) Jamnadas T. Mehta Vs. ITO [2002] 257 ITR (AT) 90 (Pune) (TM). It was held in this case that the ambit of interference under section 263 is not to set aside merely unfavorable orders and bring to tax some more money to the treasury. The section is not enacted to get a sheer escapement of revenue which is taken care of in other provisions of the Act. Prejudice that is contemplated under section 263 is the prejudice to the income tax administration as a whole. Section 263 is to be invoked not as a jurisdictional corrective or as a review of a subordinate s order in exercise of the supervisory power, but it is to be invoked and employed only for setting right distortions and prejudices to the revenue, which is a unique .....

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..... ion does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer, who passed the order, unless the decision is held to be erroneous. Cases may be visualised where the Income-tax Officer 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 estimates himself. The Commissioner, 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 the Commissioner he would have estimated the income at a higher figure than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. This is because the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissi .....

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