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2015 (11) TMI 533

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..... s, filed return of income, for the assessment year 2008-09 declaring total income of ₹ 1,65,150/-. The return of income was processed u/s 143(1) on 06-07-2009. The case was selected for scrutiny, a notice u/s 143(2) and 142(1) along with a letter issued on 01-09-2009. In response to call notice, the assessee authorized representative Sri. J.N.V. Ranga Rao, advocate and I.T.P. present from time to time and furnished the information called for and also produced books of accounts, bills and vouchers etc. The Assessing Officer, after examining the books of accounts and other information, completed the assessment u/s 143(3) after making additions of ₹ 66,825/- being difference in partner s capital account and also round some disallowance of ₹ 1,00,000/- towards unverifiable expenditures. 3. The CIT, Rajahmundry has issued a show-cause notice u/s 263 of the Act dated 19.09.2011 proposing to revise the assessment order passed by the assessing officer u/s 143(3) dated 30.10.2009. The CIT, proposed to revise the assessment order, for the following reasons. (a) The A.O. has passed the assessment order without conducting proper enquiry with regard to allowability of ex .....

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..... venue. The CIT after considering the relevant submissions made by the assessee, set aside the assessment order and directed the assessing officer to redo the assessment after giving reasonable opportunity of hearing. Aggrieved by the CIT s order, the assessee is in appeal before us. 4. The Authorised representative of the assessee submitted that the assessment order is not erroneous and also not prejudicial to the interest of the revenue. The A.R. further submits that during the course of assessment, the assessee has furnished all the details sought by the A.O. and after carefully examined the details filed, the A.O. passed the assessment order which is evident from the assessment order. The A.R. submitted that, the CIT is not correct in stating that the A.O. did not verified the bills and vouchers, and without conducting proper enquiry the assessment is completed. The A.R. further submitted that as for as self-made vouchers is concerned, the A.O. has called for books of accounts and vouchers which were verified by the A.O. as indicated in his assessment order. The A.R. further submitted that the assessee executes works contracts which is more labour oriented job hence, the asse .....

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..... ified the partnership deed and the partnership deed provides for remuneration to all working partners, accordingly, allowed the deduction towards remuneration. Reconstitution of partnership does not have any bearing on the total income of the firm and as such there is no prejudice caused to the revenue in this regard. He further argued that it is quite common in civil contractors that the work is obtained in the name of partners and executed by a firm of partners. Further, there is clear stipulation in the partnership deed that the contract works are treated as property of the firm. The very fact that the entire contract receipts have been offered in the hands of firm which was verified by the A.O., and allowed the claim of credit of TDS standing in the name of the partners to the firm account, which is clearly shows that the A.O. has considered the issue before passing the assessment order. 7. The AR further, submitted that the assessing officer has examined the relevant aspects in the course of assessment proceedings. An element of judgment and discretion are involved in this matter and the assessing officer being quasi-judicial authority shall have the authority to exercise t .....

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..... ade vouchers. The CIT was of the opinion that the A.O., has not conducted proper enquiry before completion of assessment with regard to the above expenditures, instead made round some disallowances of ₹ 1,00,000/-, which is a clear case of lack of enquiry and non-application of mind. The CIT further observed that there is difference in partner s capital accounts, which are clearly shows that the books of accounts are not proper. The A.O., without rejecting the books of accounts just completed the assessment, which is again a case of non- application of mind. According to the CIT, the A.O., allowed the remuneration to partner s without considering the services rendered by them. The CIT was of the opinion that the profit declared by the assessee is very low, thereby, the A.O., should have rejected the books of accounts and estimated the net profit. The CIT has given elaborate discussion on the issues in his order and justified the revision of assessment order under section 263. While doing so, he has relied upon various case laws as indicated in his order. 10. To invoke the provisions of section 263 of the Act, the twin conditions must be satisfied i.e. the order of the asse .....

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..... ishing and revolving enquiry in the matters which are already examined by the A.O. The Department cannot do fresh assessment in the guise of revision on the matters which are examined and concluded by the A.O. The A.O. being a Quasi Judicial authority, shall have the authority to exercise right judgement and discretion on the basis of information available before him. In the present case on hand, the Assessing Officer after considering vouchers, made an round some addition of ₹ 1,00,000/- which is one of the possible view available for him, which the CIT shall not term it as lack of enquiry or non application of mind. Thus, it cannot be said that it is a case of lack of enquiry or non application of mind. 11. Now, it is relevant to consider the case laws relied on by the parties. The assessee relied on the Hon ble Delhi High Court decision in the case of Director of Income Tax Vs. Jyoti Foundation, (2013) 357 ITR 388 (Delhi), wherein, the Hon ble court observed as under. It was held that revisionary power u/s 263 is conferred on the Commissioner/Director of Income Tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Revenu .....

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..... Therefore jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. The material which the CIT can rely includes not only the record as i t stands at the time when the order in quest ion was passed by the AG but also the record as i t stands at the time of examination by the CIT. (para 4) In the present case, inquiries were certainly conducted by the AO. It is not a case of no inquiry. The order u/s 263 i tself records that the Director felt that the inquiries were not suff icient and further inquiries or details should have been called. However, in such cases, as observed in the case of DG Housing Projects Limited, the inquiry should have been conducted by the Commissioner or Director himself to record the finding that the assessment order was erroneous. He should not have set aside the order and di rected the AO to conduct the said inqui ry. Revenue's appeal dismissed. 12. The assessee relied on co-ordinate bench decision in the case of Smt. Susheela Devi Bothra Jain vs. ITO, ward -1, Rajahmundry, ITA. No. 279/Viz/2014, wherein the Hon ble Tribunal after considering the Delhi .....

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..... ce; 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 Incometax 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 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 Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer 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 .....

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..... enue. [Para 11] In the instant case, a perusal of the order of the Assessing Officer would show that the return of income filed by the assessee was accepted and the tax was finalized. From the order of the Assessing Officer, one cannot deduce whether the errors pointed out by the Commissioner were considered by the Assessing Officer or not. The commissioner not only pointed out the errors, but also had shown the effect of the same on the revenue. It is not known how the Tribunal has come to the conclusion that the errors have no effect on the revenue. The, Tribunal ought not to have taken into consideration the explanation submitted by the assessee before the Commissioner for coming to the conclusion that the errors pointed out by the Commissioner have no effect on the revenue. Ultimately, it is for the Assessing Officer, at the time of de novo enquiry, to consider whether, the explanation offered by the assessee to the points raised by the Commissioner is proper or not. When once the Commissioner has got power to point out the errors which had the effect on the revenue, the Tribunal cannot sit as an appellate authority on the order of the Commissioner passed under sect .....

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