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2015 (11) TMI 537 - ITAT DELHI

2015 (11) TMI 537 - ITAT DELHI - TMI - Revision u/s 263 - Lower Gross and net profit shown by assessee - Held that:- Past history of the assessee shows that in none of the years books of accounts were rejected in absence of stock register. In AY 2007-08, the gross profit ratio of assessee was 11.51 % and in the current year it is 12.09% respectively therefore there is increase in the gross profit rate further the letter dated 19.07.2010 of the assessee also showed number of transformers repaired .....

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he order of assessing officer on this count.

Verification of sundry creditors on unsecured loan - Held that:- Assessee has furnished required details called for along with explanations in writing as well as all confirmations of the sundry creditors as well as lenders stating their name, address and PAN and also contra accounts along with the balance sheet and income tax returns of lenders. In case of TDS credit given to assessee AO has made inquiries from third parties. Further ld. C .....

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shant Maharishi, AM: 01. This appeal, by the assessee, is directed against the order dated 25/03/2013 u/s 263 of the Income-tax Act, 1961, passed by the Commissioner of Income Tax ,Meerut for A.Y. 2008-09. 02. Brief facts of the case is that Assessee Company is engaged in the business of repairs of transformers and also sale of spare parts. Assessee filed its e- return of income on 30-9- 2008 declaring income of ₹ 4970/- for AY 2008-09. AO completed the assessment u/s 143(3) after examinin .....

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10565133/- have not been inquired properly by AO iv. Total Interest was disallowable as no TDs has been made by assessee, AO has not inquired in these aspect. v. Based on the TDS, gross receipts shown by assessee is lower than what it should have been. 03. On 11/3/2013 assessee submitted its reply in response to above notice stating that all the details with respect to above issues were submitted before AO and same were examined properly and after that assessment order is passed. It was further .....

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rate @ 20 % i.e. ₹ 350335/-. Therefore making addition on this account of ₹ 1320978/- ii. Sundry creditors of ₹ 1423436/- have not been inquired properly by AO iii. Unsecured loan of ₹ 10565133/- have not been inquired properly by AO iv. To verify whether TDS is made on interest payments of ₹ 469432/-. v. Based on the TDS deducted the gross receipts shown by the assessee is lower than what it should have been, addition of ₹ 391600/- was made. 05. Against the a .....

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raised in original appeal memo, in the interest of justice same is admitted. Further additional ground raised covers the main issue, only that ground is adjudicated. 06. Now we proceed to examine each of the issues raised in order u/s 263 and contention of rival parties. i. Lower Gross and net profit shown by assessee On this Ld. AR submitted that during the course of assessment proceedings u/s 143(3), AO issued notice dated 10th May, 2010 wherein AO raised query vide para no. 8 for gross profi .....

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(3) of the Act. According to the chart, the gross profit ratio has increased to 12.09% compared to 11.51% in preceding previous year. During the assessment proceedings the books of accounts, bills and vouchers were produced before the assessing officer. In subsequent communication explanation for decrease in net profit was also explained with quantity details of number of transformers repaired. Ld. AR further submitted that the letter dated 19.07.2010 submitted before the assessing officer has m .....

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23,436/- Ld. CIT has stated that AO has not verified the sundry creditors of ₹ 1423436/- properly. Regarding this AR of appellant submitted that during the course of assessment proceedings vide para no. 5 of the notice dated 10th May, 2010, AO has asked for the confirmation of sundry creditors along with their PAN etc. In respect of to this vide letter dated 20th May, 2010, assessee has submitted complete details of sundry creditors and submitting their ledger accounts for the nine credito .....

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owing the name, address and Permanent Account No. along with copy of Income Tax Return as well as balance sheet of the lenders for new loans. This submission was made in response to para no. 7 of notice dated 10th May, 2010 of AO which was complied with by letter dated 20th May, 2010 vide para no. 7. As per chart it was also mentioned that most of the loans are old loans and carried over from earlier years. Hence, contention of Ld. CIT that these creditors remain unconfirmed is incorrect. Furthe .....

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f tax deduction at source of ₹ 48,249/- on interest payment made on 28th May, 2008. Therefore, the issue of deduction tax at source on interest payment is examined by AO. v. Estimation of Turnover based on TDS deducted of assesseee In this regard AR of the appellant submitted that AOhas written a letter to almost all the parties who has deducted taxes at source on payments made to the appellant and No discrepancy was noticed. Therefore, there cannot be any reason for saying that AO has not .....

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ell as prejudicial to the interest of Revenue Several Decision of coordinate bench were cited wherein the above view has been considered. 08. In response to this Ld. DR submitted that details were not thoroughly examined by assessing officer but he has just taken the details on record and did not conduct any verification of those details. He further submitted that order also does not show fact of inquiry conducted. He submitted that even a single error found in the order of assessing officer CIT .....

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y powers u/s 263 of the Act for calling for and examination of such records in order to find out that whether the order passed by the assessing officer is erroneous and prejudicial to the interest of revenue. However, Ld. CIT before stating so must have some material to hold a prima facie opinion about the error in the order and thereby making that order prejudicial to the interest of revenue. However, if AO has made inquiries during the course of assessment proceedings on the issues covered u/s .....

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hat AO had not made proper inquiry but from the order of Ld. CIT it is not mentioned that what inquiry other than already made by AO is required to be made. Facts relating to each of the above issues and our findings thereon is discussed hereunder :- (a) Net profit working of the assessee - AO has raised a query during the course of assessment proceedings about the gross profit working as well as the net profit working of the assessee with respect to early arrears and reasons if there is a decre .....

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absence of stock register. In AY 2007-08, the gross profit ratio of assessee was 11.51 % and in the current year it is 12.09% respectively therefore there is increase in the gross profit rate further the letter dated 19.07.2010 of the assessee also showed number of transformers repaired by the assessee. The letter also clearly explains the fall in the net profit ratio is because of payment of higher interest. The Ld. CIT has presumed net profit ratio of 8% on sales as well as 20% on job working .....

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ngs AO has asked for the confirmation of sundry creditors of ₹ 14,23,436/-. This issued was inquired by AO vide letter dated 28th May, 2010. The creditors were duly confirmed by the assessee during the course of assessment proceedings further when the bills and vouchers of such purchases are produced before AO, We are of the view that such bills are contemporaneous confirmation given by the sundry creditors. When copies of accounts of such creditors from their books stating permanent accou .....

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assessee has submitted chart wherein details of eight lenders were tabulated stating their name, address, permanent account number; the rate of interest, period since when this loans are outstanding etc. During the year most of the loan accounts are carried over from earlier years except in case of Shri Rakesh Mohan Gupta and Smt. Umang Gupta. For these new loans assessee has submitted confirmation of the parties stating their name, address & permanent account number as well as the copy of .....

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e has submitted the TDS returns filed by the assessee along with the copies of the challans. Therefore, these details have already been verified on payment of interest of ₹ 4,69,432/-. The CIT does not speak about what further inquiry is to be made and what inquiry AO has failed to make. In absence of any such direction it cannot be said that AO has made even in proper inquiries on this count, therefore, the order of the AO cannot be found to be erroneous on this count. (d) Gross receipt b .....

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en estimated the turnover of assessee and compared it with the book turnover and difference is added to the income of assessee.. We cannot approve of such a thumb rule approach adopted by Ld. CIT. The detail submitted during the course of assessment proceedings shows various TDS certificates issued by various government agencies. Further when third party confirmations are obtained by AO for TDS and on verification of them AO did nto find any infirmity in this certificates, We are of the view tha .....

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this case is not the case of lack of inquiry. Ld. CIT has also not mentioned that in the facts and circumstances of the case what further inquiries AO should have made. In the case of CIT v. Sunbeam Auto Ltd. [2011] 332 ITR 167 (Delhi), the Delhi High Court was considering this aspect, when there is no proper or full verification, and it was held as under (page 179) : "We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issu .....

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entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment 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 question as r .....

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India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113): ' . . . From a reading of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is "erroneous in so far as it is prejudicial to the interests of the Revenue". It is not an ar .....

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he very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner 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 induce repose in and set at rest judicial and .....

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more elaborately. This section 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 estimate himself. The Commissio .....

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d arrived at a conclusion and such a conclusion cannot be formed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion . . . There must be some prima 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 . . . We may now examine the facts of the present case in the light of the p .....

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because in his order he did not make an elaborate discussion in that regard.'" Now examining the facts of the present case before us, Assessee has furnished required details called for along with explanations in writing as well as all confirmations of the sundry creditors as well as lenders stating their name, address and PAN and also contra accounts along with the balance sheet and income tax returns of lenders. In case of TDS credit given to assessee AO has made inquiries from third p .....

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