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2015 (11) TMI 533 - ITAT VISAKHAPATNAM

2015 (11) TMI 533 - ITAT VISAKHAPATNAM - TMI - Revision u/s 263 - Held that:- The A.O. examined the issues on which the CIT assumed jurisdiction. The CIT assumes jurisdiction and revised the assessment order u/s 263 of the Act without pointing out any mistakes in the A.Oís order with a different opinion, which itself is not a ground for assuming jurisdiction u/s 263 of the Act. Therefore, we quash the CITís order u/s 263 and restore the assessment order passed by the assessing officer. - Decided .....

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of the case, are that the assessee is a partnership firm, which is engaged in the business of Civil Work contracts, 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. p .....

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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 expenditure under the head wages and centering charges, as these expenditures are supported by self-made vouchers as indicated by the assessing officer in his order and endorsed by the tax audit .....

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rrectly allowed the claim of TDS standing in the name of the partners to the Firm. Therefore, the CIT was of the view that the assessment order passed u/s 143(3) dated 30.10.2009 is erroneous on the aforementioned counts in so far as it is prejudicial to the interest of the revenue in terms of the provisions of section 263 of the Act. The CIT, further observed that the assessee has claimed huge expenditure under the head wages and centering charges and these expenses are supported by self-made v .....

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e assessment, which is again a case of nonapplication 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. Hence, a show cause notice is issued to the assessee, to explain why the assessment order passed by the A.O. shall not be set aside. In response .....

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sentative 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 vouche .....

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f-made vouchers, these fact was brought to the notice of A.O. and the A.O., after verified the vouchers, came to the conclusion that the round some disallowance of ₹ 1,00,000/- would suffice to meet the ends of justice. Therefore, it is not a case of lack of enquiry or non-application of mind by the A.O. 5. The Authorised representative, further submitted that as for as capital accounts of the partner s is concerned, confirmation letters have been filed in respect of all the credits in the .....

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e another ground on which the assessment is proposed to revised is that the profit declared by the assessee is low and the books of accounts are not proper, therefore, the CIT directed the A.O. to explore the possibility of rejecting the books of accounts and estimate the net profit. The A.R. argued that the profit declared by the assessee is 6.42% on the gross turnover which is in line with the nature of business carried on by the assessee. He further, submitted that the assessee executes Govt. .....

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ssment on the basis of books results are two options available to the A.O., when it comes to mere defects in maintenance of vouchers and his action of having chosen one of the two courses available to him, cannot be termed as erroneous. 6. The AR further, submitted that the A.O., verified 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 .....

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owed 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 the right discretion .....

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ntal Representative strongly supported the order of the CIT. He further, argued that if you go through the profit & loss account filed by the assessee, wages and centering charges constituted the major expenditures and these are supported by self-made vouchers have not been properly verified by the A.O., The D.R., further submitted that the assessment order is erroneous in so far as it is prejudicial to the interest of revenue, as the assessing officer passed the order without conducting pro .....

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the CIT rightly assumed the jurisdiction by invoking provisions of section 263 and his order should be upheld. The DR, placed reliance on the judgment of Hon ble High Court of Andhra Pradesh, in the case of CIT vs Varanasi Kantha Rao, I.T.T.A. No. 36 of 2004, dated March, 31 2015 and also CIT vs. Maithan International (2015) 375 ITR 123 (Cal-HC). 9. We have heard both the parties and perused the materials available on record. We also considered the case laws cited by either of the parties. The .....

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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 remune .....

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of the Act, the twin conditions must be satisfied i.e. the order of the assessing officer is erroneous and further it must be prejudicial to the interest of the revenue. Unless both conditions are satisfied, the CIT cannot assume jurisdiction to pass order u/s 263 of the Act. It is not necessary that every order which is prejudicial to the interest of revenue is also erroneous. Unless the A.O s order is not erroneous, no action can be taken by the CIT u/s 263 of the Act, this is because the twin .....

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clearly evident from the assessment order. The contention of the CIT was that the A.O. has not conducted proper enquiry and also not applied his mind before allowing the deduction. But, we do not agree with the CIT for the reason that there is a distinction between lack of enquiry and inadequate enquiry. If there is an inadequate enquiry that would not by itself give occasion to the CIT to assume jurisdiction u/s 263 of the Act, merely because he has a different opinion in the matter. The CIT c .....

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hed its explanation. But, the CIT was of the opinion that the assessing officer could have do well to explore the possibility of rejecting the books of accounts and estimate the profit. According to CIT, the assessing officer has conducted enquiry but, in adequate, therefore he wanted further enquiry on the issue on which he assumed jurisdiction. This fact had not been disputed by the revenue. The Commissioner cannot initiate revision proceedings, with a view to conduct fishing and revolving enq .....

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ible 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 pow .....

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ionary author i ty feels and opines that fur ther inquiry/investigation was required or deeper or further scrutiny should be undertaken. In the case of Income Tax Officer vs. DG Housing Projects Limited, (2012) 343 ITR 329 (Delhi) it was held that in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order u/s 263 is passed. In such cases, the ord .....

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e made by the AG, making the order unsustainable in Law. In some cases possibly though rarely, the CIT can also show and establ ish that the facts on record or inferences drawn f rom facts on record per se justified and mandated further enquiry or investigation but the AO had erroneously not undertaken the same. However, the said f inding must be clear, unambiguous and not debatable. The matter cannot be remitted for a fresh decision to the AG to conduct further enquiries without a finding that .....

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nless the CIT hold and records reasons why it is erroneous. 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. I .....

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venue'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 High Court decision in the case of Director of Income tax vs. Jyoti Foundation (Supra), CIT, Sunbeam Auto Ltd (2011) 332 ITR 167 (Del) and Hon ble Andhra Pradesh High Court decision in the case of Spectra Shares and Scrips Pvt Ltd vs. CIT, (2013) 354 ITR 35(A .....

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n order after due application of mind. 14. In the case of Spectra Shares and Scrips Pvt. Ltd., (2013) 354 ITR 35, the Hon ble A.P. High Court has culled out principles laid down by the Hon ble Supreme Court and also various High Courts on the issue of exercise of jurisdiction by the CIT u/s 263 of the Act. It reads as follows: '(a) The Commissioner has to be satisfied of twin conditions, namely, (I) the order of the Assessing Officer sought to be revised is erroneous; and (ii) It is prejudic .....

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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 the suo motu revisional powers to reopen a concluded assessment under section 263, the Commissioner must give reasons; that a bare reiteration by him that the order .....

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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 .....

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cts disclosed or the weight of the circumstance; that if this is permitted, litigation would have no end except when legal ingenuity is exhausted. (f) 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 section 263 merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such a .....

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power of the Commissioner under section 263 (1) is not limited only to the mater/al which was available before the AO and, in order to protect the interests of the revenue, the Commissioner is entitled to examine any other record 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." -. 15. We also, considered the judgment of Hon ble High Court of Andhra Pradesh, in the case of CIT vs Varana .....

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rest of the revenue. The vesting of such power in the hands of the Commissioner under section 263 is to see that the Assessing Officer does not commit any error affecting the interests of the revenue. [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 consid .....

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s 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 section 263 of the Act. If the power exists in the Commissioner and is exercised by him after satisfying himself on the f .....

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er. [Para 16] In the facts and circumstances of the case, it is opined that the order passed by the Commissioner is proper and as per powers conferred on him under section 263. Accordingly, the order of the Tribunal is set aside. [Para 17] 16. The Hon ble Calcutta High Court, in the case of CIT vs. Maithan International (2015) 375 ITR 123 (Cal-HC), wherein the court held as under. The AO was required to make proper investigation to determine whether the money was really lent by the third party o .....

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