New User   Login      
Tax Management India .com TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (2) TMI 702 - ITAT KOLKATA

2016 (2) TMI 702 - ITAT KOLKATA - TMI - Revision u/s 263 - unrecorded purchases - distinction between "lack of enquiry" and "inadequate enquiry" - Held that:- AO failed to make proper enquiry which he ought to have made before completing the assessment. There is a distinction between "lack of enquiry" and "inadequate enquiry". If there is an enquiry, even inadequate, that would not by itself give occasion to the CIT to pass order under s. 263, merely because he has a different opinion in the mat .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

explanation. Thus, it cannot be said that it is a case of 'lack of enquiry'. Further, even the CIT is not clear as to whether entire purchases has to be added or peak purchases has to be added or the entire sales has to be added as income. Therefore, the view taken by the AO was one of the possible views and the assessment order passed by the AO could not be held to be prejudicial to the Revenue. Even the CIT conceded the position that the AO made the inquiries, elicited replies on Gross Profit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

stand taken by the Assessee in this regard.

Thus we are of the view that the jurisdiction u/s.263 of the Act was not properly exercised by the CIT as the condition precedent for invoking the same viz., that the order of the AO is erroneous and prejudicial to the interest of the revenue is not shown to be present in the present case. We therefore quash the order u/s.263 of the Act and allow the appeal by the Assessee. - ITA No.2299/Kol/2013 - Dated:- 15-1-2016 - Shri N.V.Vasudevan, JM .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

1.10.2006 declaring total income of ₹ 2,28,726/-. The return of income was processed u/s.143(1) of the Act on 28.9.2007. 3. There was a survey conducted by the revenue u/s.133A of the Income Tax Act, 1961 (Act) in the business premises of the Assessee on 25.1.2008. Based on the material found in the course of survey, proceedings u/s.147 of the Act were initiated by issue of a notice u/s.148 of the Act on 27.11.2009. 4. In the course of survey the material found by the Revenue was that the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

actions of sale were not recorded in the regular books of accounts maintained by the Assessee. The Assessee submitted before the AO that it was usual practice in the trade that mechanic or garage owners take automobile parts from the shop and it is only when the parts suit their needs they purchase automobile parts. They may return the goods if the automobile parts do not suit their purpose. The sale transaction in such case is not recorded in the books of accounts and only on customer s approva .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

herefore concluded that the Assessee had in fact done transaction of sale of auto parts and such transactions were not recorded in the books of accounts maintained by the Assessee. 6. The next question before the AO was how to compute income from such transactions of sale which are not recorded in the books of accounts of the Assessee. The AO found that the Gross profit declared by the Assessee on sales recorded in the books of accounts was 7.53%. However in the statement recorded at the time of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l to the interest of the revenue. The main point of dispute which is subject matter in this appeal as raised by the CIT in the proceedings u/s.263 of the Act was as that the AO should not have stopped by just adding Gross Profit on unrecorded sales. According to CIT the entire sale should have been added as income of the Assessee. Alternatively, the purchases or peak purchase, related to the unrecorded sales, ought to have also been added as income of the Assessee. 8. In reply to the proposal of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ot exercise of his powers u/s.263 of the Act, just because he does not feel satisfied with the conclusions reached by the AO. In other words it was submitted that jurisdiction u/s.263 of the Act cannot be invoked to substitute the view of the AO with that of the CIT. It was submitted that the jurisdiction can be invoked only when two conditions viz., the order in question being erroneous and prejudicial to the interest of the revenue are established. The Assessee placed reliance on the decision .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. The Assessee placed reliance on the decision of the Hon ble Gujarat High Court in the case of President Industries Ltd. 258 ITR 654 (Guj.) and the ITAT Delhi in the case of India Seed House Vs. ACIT (2001) 69 TTJ (Delhi) 241 for the proposition that only gross profit on unrecorded sales have to be treated as income and not the entire undisclosed sale. 9. The CIT however did not deal with any of the aforesaid submissions but nevertheless concluded that the Gross Profit adopted by the AO for mak .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rder of the AO is erroneous and prejudicial to the interest of the revenue. The CIT accordingly passed order u/s.263 of the Act setting aside the assessment order dated 30.12.2010 with a direction to pass a fresh assessment order after examining the evidence and documents in respect of various issues raised after giving opportunity to the Assessee and in accordance with law. 10. Aggrieved by the order of the CIT, the Assessee is in appeal before the Tribunal. 11. At the time of hearing it was br .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd this Tribunal by its order dated 16.5.2013 was please to quash the order of the CIT u/s.263 of the Act. The said order of the Tribunal has however been reversed by the Hon ble Calcutta High Court in G.A.No.3284 of 2013 dated 4.4.2014. The Assessee preferred SLP before the Hon ble Supreme Court against the order of the Hon ble Calcutta High Court and the Hon ble Supreme Court in Civil Appeal No.3113 of 2015 by its judgment dated 23.3.2015. The Hon ble Supreme Court set aside the order of the H .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

R relied on the order of the CIT. 13. We have given a careful consideration to the rival submissions. It is seen from the order of the AO that the AO rejected the claim of the Assessee that the unrecorded sales were goods given to customers and the customers may approve or may return such goods. It is only on approval sales are recorded in the books of accounts. Therefore, there were no suppressed sales, whatsoever. This was rejected by the AO and he made an addition on account of gross profit o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat he had taken due cognizance of all debit items in the profit and loss account, the tax audit report, the impounded documents, statement recorded during Survey and during assessment proceedings, books and accounts and other documents, bills, vouchers etc. 15. The CIT has exercised jurisdiction u/s.263 of the Act on the ground that the AO failed to make proper enquiry which he ought to have made before completing the assessment. There is a distinction between "lack of enquiry" and &q .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version