TMI Blog2015 (11) TMI 1449X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounts. Thus the orders passed by the A.O. are in fact is not prejudicial to the interest of the Revenue. One of the item which Ld. CIT has directed in his order under section 263 is also on interest income. The computation for A.Y. 2002-2003 indicates the original income as per the consequential order dated 17.07.2007 at ₹ 29,42,079 + Additional Income offered as per the P & L Account at ₹ 24,17,340 + Interest Income that too from the same P & L Account of ₹ 22,97,203 hereby determining the total income of ₹ 76,56,622. We are unable to find any error or mistake committed by the A.O. in assessing the higher figure than what was required under the Law. Similar is the case for A.Y. 2003-04 wherein the income as determined consequent to the order dated 04.05.2007 at ₹ 29,18,047 was taken and addition as per P & L Account filed subsequently at ₹ 24,14,094 was also added along with the interest income of ₹ 16,52,200 which according to the assessee is sale of scrap already considered in the P & L Account. Thus the revised income was determined at ₹ 69,84,340. As seen from the reasons recorded for reopening the assessment for A.Y. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier before the department. There was series of proceedings and also series of Counsels to the assessee at various stages of proceedings. Therefore, assessee was not properly advised and accordingly orders under section 263 were not preferred at the relevant point of time as the Ld. CIT set aside the orders of the A.O. and therefore, it is prayed that the delay be condoned in the interest of justice. 5. After considering the objections of the Ld. D.R. we are of the opinion that assessee was prevented by sufficient cause in not preferring appeal in time. Accordingly, the delay in preferring the appeals is condoned in both the assessment years. The appeal memos are treated as maintainable. 6. We have heard the Ld. Counsel and Ld. D.R. in detail. 7. Briefly stated, assessee had filed returns of income for impugned assessment years 2002-03 and 2003-04 belatedly on 10.03.2006 declaring total income by estimating the net profit at 5% on total turnover. In both the years the turnover was around ₹ 3.6 crores and assessee estimated income at 5% on the turnover. Since the return was filed beyond the permissible statutory time limit they were treated as non-est. Further, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after giving due explanation of the various amounts, the total incomes are determined, therefore, the proceedings under section 263 does not arise. Ld. CIT however, did not agree and after considering the various objections and asking for details of account copies with invoices gave directions to A.O. to adopt the assessment figure at the earlier assessed income and add to that un-reconciled creditors and further amounts as specified in various paras and further add any amounts AO finds from directed enquiries to be assessable. 9. Against these orders, assessee is aggrieved. After hearing rival contentions and perusing the various proceedings and paper book placed on record, we are of the opinion that the Ld. CIT has not exercised jurisdiction properly. As far as the first issue is for issuing show cause notice, we are unable to understand how the loss worked out during the year could not be set off to the other income. The provisions of section 71 of Act provides the set off of loss from one head against the income from another as applicable and nowhere it is prescribed under the said section that loss arising in that year cannot be set off to other incomes, just because return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Add: Un reconciled Creditors Creditors for expenses 39,65,500 Other un-reconciled creditors 27,68,550 67,34,050 Total 53,59,419 In the 6th page of the assessment order dated 31.12.2009 the above said amount of ₹ 53,59,419 is taken into consideration which was reproduced hereunder for your verification. 6th page of the assessment order dated 31.12.2009 for A.Y. 2002-03 reads as follows. Income as per order u/s.143(3) r.w.s. 147 dt.5.5.2005 as modified by consequential order dt.4.5.07 and modification order dt.17.7.07 29,42,070 Add: Additional Income determined 24,17,340 53,59,419 Add: Interest Income 22,97,203 Total Income 76,56,622 The above two statements reveals it clearly that the amount of ₹ 67,37,050 is considered in arriving at the total income in the final assessment order. Hence we request you to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,59,419/-, ₹ 53,32,140/- and ₹ 27,65,766/- respectively. On comparing these incomes to the turnovers, they work out to 13.29%, 13.32% and 10.29% respectively for the assessment years 2002-03 to 2004-05. However since the profit of margin for the assessment year 2004-05 is considerably less than those of earlier years, the assessee was asked to substantiate the same. The assessee claimed that in view of the differences between the groups, the turnover also drastically reduced effecting the performance. However, in order to avoid any protracted litigation, the assessee has agreed the same level of profits for the A.Y. 2004-05 also, which works out to ₹ 7,50,000/-. In view of the fact that most of the clients and Government Agencies and the fact that the designs are supplied by those organizations and advances are paid, the profit margin now admitted appears to be 1 reasonable and fair. As it is not possible to reconcile all the creditors with the evidences as the company failed to maintain the books of account properly, the substantial portion of the creditors are now being treated as income itself. In order to buy peace with the Department and to end protract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings. Consequently, the opinion of the Ld. CIT that A.O. has telescoped the incomes is not correct. What the Addl. CIT has directed is the net income as per the P L Account to be added to the already assessed income on the same turnover. In fact, the proceedings under section 148 resulted in assessing the assessee s profit in business on estimation basis, having rejected the books of accounts and also making additions on the basis of books of accounts. Thus the orders passed by the A.O. are in fact is not prejudicial to the interest of the Revenue. 11.3. Moreover, one of the item which Ld. CIT has directed in his order under section 263 is also on interest income. As seen from the assessment order, the A.O. has given a clear observation that interest income offered by the assessee in the P L Account was only ₹ 1,93,703. It was explained that the balance of the amounts reported to the bank pertains to sale of scrap. It was wrongly classified as interest income. However, A.O. did not accept with that contention and the entire amount of ₹ 22,97,203 which is sale of scrap according to assessee was also added as interest income. Thus, the computation for A.Y. 2002- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the present management group was not having control over the books of accounts and bills, that it would be futile to accede to furnish all the evidence in respect of the balance sheet and P L Account prepared subsequently. Even this opinion was expressed by the Addl. CIT after examining the contentions of the assessee when the revised assessment proceedings were pending. How the Ld. CIT can substitute his opinion to the opinion of the A.O. in the proceedings under section 263 is not explained. Therefore, this part of the directions can only be considered as substitution of the opinion of the Ld. CIT over the opinion of the A.O., in fact, of that of the Addl. CIT in the present proceedings, which is not permissible under Law. Looking at any angle, we are not in a position to uphold the orders of the Ld. CIT and accordingly the order under section 263 in both the assessment years 2002-03 and 2003-04 are set aside and we restore the orders of the A.O. dated 31.12.2009 which is subject matter of proceedings under section 147, on which present proceedings are initiated. ITA.No.346/Hyd/2014 ITA.No.347/Hyd/2014 : 12. These appeals for AY 2002-03 and 2003-04 being on c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver after depreciation. These contentions are supported by the case law relied on ground No.4. However, the facts in this case are little peculiar in the sense that assessee has accepted additions in A.Ys. 2002-03, 2003-04 and 2004-05 before the Addl. CIT, not only for estimation of income on the turnover but also addition on the basis of books of accounts subsequently prepared and submitted to banks. This issue was elaborately discussed for A.Ys. 2002-03 and 2003-04 above. Therefore, addition of ₹ 28,10,010 now directed to be added by the Ld. CIT is in fact already considered by the Addl. CIT while determining the addition to be done. We have already held that order of the A.O. is not erroneous and prejudicial to the interests of the Revenue in A.Ys. 2002-03 and 2003-04, since assessee has challenged the orders under 263. For the reasons best known to the assessee, the orders of Ld. CIT have not been challenged in this assessment year. Consequently, the direction of the Ld. CIT stands as such. The A.O. has simply followed the direction of Ld. CIT to make further addition on this issue. Since assessee has not challenged the order under section 263, we cannot give any directio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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