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2016 (3) TMI 677 - ITAT DELHI

2016 (3) TMI 677 - ITAT DELHI - TMI - Revision u/s 263 - Held that:- We observe that since the assessee has debited a number of other expenses as also wages all of which are also not duly vouched or supported by any material evidence and nothing has been brought on record so as to ascertain the correctness of the same, the actual profit earned by the assessee will further increase by substantial amount then ₹ 3 crores taken by conservative estimate of profits basis upon inflated purchases .....

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while as such the assessee is duty bound and heavy onus lies on him to explain the credit entries including the liabilities appearing in its books of account by establishing identity, genuineness and creditworthiness of the alleged parties. In our considered opinion, this conclusion of the Ld. CIT does not need any interference, hence, we uphold the same.

As regards third part we note that Ld. CIT has noted that the entries in the fixed assets ₹ 4957110/- was to be looked into f .....

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same are also liable to be added in the income to the income of assessee for which the AO may provide the assessee reasonable opportunity of being heard and reconcile the difference with supporting evidence, if any. In our considered opinion, this conclusion of the Ld. CIT also does not need any interference on our part, hence, we uphold the same.

Thus we are of the view that the AO was found to be erroneous and prejudicial to the interest of revenue since at the time of the assessmen .....

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r u/s. 263 which does not need any interference on our part, hence, we uphold the same and dismiss the Appeal of the Assessee. - Decided against assessee - I.T.A. No. 3351/DEL/2013 - Dated:- 16-2-2016 - SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Assessee : Sh. Sandeep Sapra, Adv.& Sh. O.P. Sapra, Adv. For The Department : Sh. Ravi Jain, CIT(DR) ORDER PER H.S. SIDHU : JM This appeal by the Assessee is directed against the Order of the Ld. Commissioner of In .....

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sstt. Order dated 30 November 2010 passed by Asstt. Order was neither erroneous nor prejudicial to the interest of the revenue. b) The Learned A.O. having passed the Asstt. Order dated so 30th November 2010 by proper application of mind could not legally be interfered with by the Ld. Commissioner of Income Tax. c) Various observation made particularly in Para 7 at Pages 7-16 of the impugned order u/s 263 are either incorrect or legally untenable. d) The Ld. Commissioner of Income Tax had exceede .....

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thout prejudice to the above ground the addition of ₹ 2,95,58,101 as made by Ld. Commissioner of Income Tax is arbitrary unjust illegal at any rate without prejudice, the addition is made very excessive. 4. Direction issued by Ld. Commissioner of Income Tax vide pages 14 and 15 of the impugned order with regard to fresh unsecured loans and Sundry Creditors and also fixed assets ofRs. 49,57,110 are also arbitrary unjust and illegal. 5. Similarly observation made with regard to balance of &# .....

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142(1) and 143(2) Counsel of the assessee attended the proceedings from time to time and furnished required details and information. The assessee is engaged in the business of publication of books. During the year under consideration the assessee has shown GP rate and NP rate of 23.69% and 0.35% respectively which is slightly higher than the GP and NP rates of immediate preceding year. Trading results declared including expenses debited by the assessee have been examined and verified on test ch .....

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sessment order was found to be erroneous and prejudicial to the interest of the Revenue and has made the addition of ₹ 2,95,58,101/- on account of alleged suppressed. 4. Against the Order of the Ld. CIT dated 08.3.2013 passed u/s. 263 of the I.T. Act, the assessee appealed before the Tribunal. 5. Ld. Counsel of the assessee relied upon the original assessment order dated 30.11.2010 passed u/s. 143(3) of the I.T. Act in the case of the assessee as well as the documentary evidences filed by .....

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a reply dated 25/02/2013 alongwith the annexures mentioned therein copies placed at pages 58 - 128 of the paper book. 3) However, the Ld. ClT has passed the impugned order on 08/03/2013 by holding that the assessment order was found to be erroneous and prejudicial to the interest of Revenue and has made an addition of ₹ 2,95,58,101/- on account of alleged suppressed income as under:- a. Addition on account of inflated consumption of paper vide vide page-13 of impugned sec. 263 order. S .....

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70 pages. Sale price varies between ₹ 7/- to ₹ 115/- but maximum-books are priced at below ₹ 50/-. Assessee allowed discount upto 40% on the sale of books having more than 70 pages each: 2. In the course of assessment proceedings, the fd. AO had made as many as 26 queries vide his letter dated 29/07/2010, copy placed at pages 36 - 38 of the paper book. 3. To the above letter, Assessee filed reply dated 20/08/2010 before the AO alongwith various details called for by him, copies .....

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der:- "In response to notices issued uls 142(1) and 143(2), counsel of the assessee Shri Pankaj Gupta, CA attended the proceedings from time to time and furnished required details and information and the case was discussed. The assessee is engaged in the business of publication of books. During the year under consideration, the assessee has shown GP rate and NP rate of 23.69% and 0.35% respectively which is slightly higher than the GP rates of immediate preceding year. Trading results decla .....

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above observations, it is evident that the Id. AO had passed the assessment order dated 30/11/2010 after proper application of mind. 6. It is by now well settled that if an assessment order was passed by proper application of mind, the Ld. CIT could not invoke section 263 of the I.T. Act. The Appellant relies on the following case laws:- a) 263 ITR 437, Hari Iron Trading Co. ve. CIT (P & H High Court) b) 259ITR 502, CIT vs. Arvind Jewellers (Gujarat H.C.) c) 203 ITR 108 C1T Vs. Gabriel India .....

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.). k) 344 ITR 554, CIT vs. International Travel House Ltd. (Delhi H.C.). Therefore, section 263 order deserves to be cancelled because as demonstrated above, assessment order of the AO dated 30/11/2010 uls 143(3) was passed by proper application of mind and therefore section 263 in terms had no application to the facts of this case. 7. There is yet another aspect of the matter. Even before the Ld. CIT, the appellant having filed all the details before her and the ld. CIT having not herself reje .....

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9. Reliance of the Ld. CIT on ITAT Delhi Bench order in the case of Sh. Virendra Kumar Gupta vs. CIT in ITAT No. 2595/Dell2009 dated 2110112011 vide para 5.6 is also illegal and uncalled for because copy of such order had not been supplied to the Assessee in the course of section 263 proceedings thereby violating the principles of natural justice and specific provisions of the Income Tax Act Till date, Assessee had not been supplied copy of such Tribunal order and therefore, the same has to be i .....

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ny item of unvouched or inadmissible nature either out of purchases, sales or expenses declared/claimed by the appellant The appellant had maintained account books in the form of cash book, ledger, purchase vouchers, sales bills, bank statements etc. since the inception of its business for the last more than 20 years and the account books for this year had also been maintained in the same manner and fashion as in the past. No addition/disallowance whatsoever had been made in the past in Assessee .....

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cepted by the Revenue by passing assessment orders uls 143(3). 12. No justification subsisted on the part of the ld. CIT to invoke section 145(3) of the I.T. Act. She is also wrong in saying in last para at page 9 of the impugned order that the purchases and expenses debited to the P & L Alc were highly inflated without bringing any evidence on the record of such alleged inflation. 13. As regards non showing of any opening or dosing stock of paper, the Ld. CIT is factually incorrect because .....

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pening and closing stocks duly appear in the audited P & LAIc, copy placed at page 10 of the paper book. These facts dearly show that the observations of the Ld. ClT are factually incorrect. The Id CIT has also drawn a wrong presumption that the ratio of paper consumed at 74.70% was extremely inflated without proving any inflation made by the Assessee and in the absence of specific mention of it in section 263 notice. 14. At page 11, the ld GfT has referred to rates of paper allegedly prevai .....

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nder: "It is true that the proceedings under the income tax law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the IT authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the ma .....

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not more than ₹ 1.5 crore as against the consumption' of paper shown by the Assessee at ₹ 5,92,52,253/- are factually incorrect and are based on here mere ipxi dixit. Similarly, further observations made by the ld. CIT regarding the printing of books in which A grade paper was considered to have been used are also factually incorrect. Such observations are nothing but bald statement made by the Ld. CIT without bringing any supporting evidence on the record and without confronting .....

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to ₹ 3 crores (Rs. 4.5 crores minus 1/3 of this) manifold on account of gross suppression of turnover and sales based upon consumption of paper shown as consumed in the publishing of books are also based on no evidence brought on record by her and the same are based on mere presumption. . Then she herself has not relied upon her own view by making the fol1owing observations in last 140e of para 1 at page 13 of her impugned order: "However, no such view is being drawn". On merits .....

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condly because this issue was never discussed In f e course of 263 proceedings for which on y one earning 'was given and even on that date she simply kept Assessee) reply on her file and; told the Counsel Shri Pankaj Gupta, CA that she will consider it before passing the order u/s 263. The ld. CIT is wholly unjustified in assuming inflated consumption of paper at ₹ 3 crores and the addition of ₹ 2,95,58,101/- as made by the Ld. CIT towards the assessable income of the appellant i .....

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dry creditors, entries in the fixed assets ₹ 49,57,110/- and ₹ 34,13,194/- being the balance certified by the bankers as "on 31/03/2008 an no shown in the balance sheet and not reflected in the respective accounts at the assessee: 'The same are also liable to be added in the income to the income of the assessee for which the AO may provide the assessee reasonable opportunity of being heard and reconcile the difference with supporting evidence, if any. " The above issue .....

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t even call for any explanation of the assessee and the issue of fulfillment of the conditions of section 80-IA had not been part of the show cause notice. Therefore, it could not form the basis for revision of assessment order under section 263". 19. Moreover, in response to section 263 notice, the appellant had filed a reply dated 25/02/2013 copy placed at pages 58-59 alongwith the following: a) Comparative chart of trading results page 60. b) Details of unsecured loans as on 31/03/2008 a .....

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reliance is also placed on the following proposition of law as laid down in the following case laws: 1. Revisional jurisdictional jurisdiction u/s 263 of I.T. Act cannot be exercised where enquiry as made by AO is considered as inadequate enquiry in the opinion of CIT:- a) 335 ITR 83, CIT VS. Anil Kumar Sharma (Delhi H.C.), in which it was held as under: "There is a distinction between "lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate .....

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was not discernible from the assessment order. The Tribunal held that the Commissioner in proceedings under section 263 also had aIl these details and material available before him, but had not been able to point out defects conclusively in the material, for arriving at a conclusion that particular income had escaped assessment on account of non-application of mind: by the Assessing Officer. The Tribunal was right and the order of revision was not valid. b) 332 ITR 167, CIT VS. Sunbeam Auto Ltd .....

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a different opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open". c) 137 TT J 67, Ramakant Singh vs. CIT (lTAT Patna), relevant portion from page 68 is reproduced below: . "Hence, it cannot be said that no enquiry was made by the AO in this regard. At the worst, it can be a case of inadequate enquiry but it is not a case of no enquiry as alleged by the Revenue. In the case of inadequate enquiry. by the AO, action under s. 263 is not .....

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able, but there must be some material to indicate that the Assessing Officer had not applied his mind". b) 297 ITR 99, CIT VS. Mahendra Kumar Bansal (Jurisdictional Allahabad H.C.), in which at page 100, it was held as under: "That for the assessment year 1983-84, the assessment had been made under section 143(3)/148 of the Act. The date fixed by the assessing authority was July 18,1986, and on that very date the assessee's counsel had filed certain details and evidence and after d .....

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d have the same rate of profit. The Tribunal was correct in cancelling the orders under section 263 of the Income-tax Act for the assessment years 1977-78, 1979-80 to 1981-82". b) 230 ITR 695, CIT VS. Amt. D. Valliammal, in which it was held as under: "Held that the Commissioner of Income-tax set aside the order passed by the Income-tax Officer on the ground that verification of account was needed. This would not be a ground for invoking jurisdiction under section 263". c) 250 ITR .....

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the order passed by the Commissioner of Income-tax under section 263." 4. Even if inference made by the AO based on the material taken on record is debatable or different from the opinion of CIT, section 263 cannot be invoked:- a) 350 ITR 555, CIT vs. DLF Ltd. (Delhi H.C.) in which it was held as under: "It is not mere prejudice to the Revenue, or a mere erroneous view which can be revised, under section 263 of the Income-tax Act, 1961. There should be the added element of "unsus .....

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ficer had taken a particular view on the basis of the evidence produced before him. On the basis of the evidence before the Assessing Officer and materials which were collected by the Commissioner in revisional proceedings, the Commissioner had taken a different view. However, in the revisional proceedings under section 263, it was not open for the Commissioner to take such a different view. There was nothing on record to suggest that the view taken by the Assessing Officer was unsustainable in .....

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rong and sufficient reasons to indicate that, they are unreliable. The department has to prove satisfactorily that the account books are unreliable, incorrect or incomplete before it can reject the accounts. Rejection of accounts should not be done lightheartedly. Though it may not be possible to lay down the exact circumstances in which the accounts should be rejected as unreliable or incorrect, the accounts may be rejected as unreliable if important transactions are omitted therefrom or if pro .....

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n the consumption of electricity would not justify the rejection of the accounts without any other supporting circumstances, because such variation could be due to various factors outside the control of the assessee". b) 95 ITR 401, Motipur Sugar Factory (P) Ltd. Vs. CIT, (Patna H.C.). At page 407 Supreme Court judgment in the case of Avadh Sugar Mills Ltd. Vs. Union of India (unreported) had been referred to from which following observations had been reproduced: "It has to be borne in .....

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here is no suppression of material facts, the authority cannot embark upon a speculative assessment of notional profits. d) 371 ITR 164, CIT vs. Nuchem Ltd. (P & H H.C.), in which at page 166, it was held as under: "That in deleting the addition by rejecting the account, the Commissioner (Appeals) and the Tribunal had followed the earlier decision in the case of the assessee for the assessment year 1993- 94 which was not shown to have been upset by any higher court. The deletion of the .....

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is issue was not mentioned by the Ld. CIT in her section 263 notice and therefore the same cannot be made the basis for addition of ₹ 3,00,00,000/- on account of inflated consumption of papers for which reliance is placed on Delhi High Court judgment in CIT vs. Ashish Rajpa 320 ITR 674 and CIT vs. Contimeteres Electrical Pvt. Ltd. 317 ITR 249. 6. Non maintenance or incomplete stock records do not entitle the AO to reject the account books : a) 74 ITR 279, Vijaya Traders Vs. CIT, (Mysore H. .....

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n. Copies of following assessment orders as passed uls 143(3) in Appellant's case in previous years accepting the trading results as declared are enclosed: (i) Assessment Year 2005-06 attached as Annexure A. (ii) Assessment Year 2006-07 attached as Annexure B. Comparative Chart showing GP and NP rate of earlier years is placed at page 60 of the paper book. 7. Section 263 cannot be invoked by ignoring the principle of consistency: - 338 ITR 435, CIT vs. Escorts Ltd. (Delhi H.C.), in which it .....

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had actually been physically delivered along with executed transfer deeds was false. Without such a finding the allegation that the transactions were speculative could not be sustained. The fundamental nature of the transactions was examined year after year more importantly in the assessment year 1986-87 it was specifically considered by the Commissioner (Appeals) and it remained the same. Given the fact that the assessee had been engaged in these transactions in the preceding assessment years, .....

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AO from the books of accounts and bills of additions as produced before him during the course of assessment proceedings and placed at pages 115 to 126 of the paper book. Vide Sr. 22 of AO's letter dated 29/07/2010, copy placed at pages 36-38, such details of fixed assets were specifically sought for by the AO and the same were filed before vide letter dated 20/08/2010 kindly see Sr. No. 22 at page 42 of the paper book. 9. Regarding balance of ₹ 34,13,194/- with PNB as on 31/03/2008, t .....

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ome to the tune of ₹ 3,35,901/- being income from other sources should have been excluded from such NP rate calculation. If such interest income is to be excluded from net profit, the revised net profit would become ₹ 3,69,889/- and the revised net profit rate would become 0.36% which is still higher than the net profit rate of last three years shown at page 60 of the paper book. Hence, the AO's categorical finding that both GP rate as well as NP rate during the year under consid .....

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by the AO during the course of assessment proceedings. 12. With regard to creditors as at 3110312008, complete details with respect to same alongwith the parties PAN details and confirmations were duly filed before AO vide letter dated 19/11/2010, copy placed at pages 51-52. Details of the same as filed before the AO are placed at pages 78-113 of the paper book. Hence, such verification of creditors was duly carried out by the AO during the course of assessment proceedings. . Consequently, the .....

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s discussed in subsequent paras. 3. Accordingly, notice under section 263 of the Income-tax Act, 1961 was issued pointing out as follows:- a) The assessee is engaged in the business of publishing books etc. Against the gross receipts of ₹ 10,39,27,634/-, profit of ₹ 7,05,7901- has been declared yielding NP rate of 0.679%. This was one of the reasons for selecting the case for scrutiny. However, the AO appears to have accepted the same without proper examination or inquiry. c) Further .....

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une of ₹ 1,20,69,799/-, abnormal sundry creditors to the tune ofRs.3,80,20,903/- have been shown which were also the reason for selection of cases for scrutiny. The AO appears to have accepted the same without proper inquiry. d) Increase in fixed assets to the tune of ₹ 49,57,1 10/- have been shown which was also to be looked into from different angles including the actual investment, date of actual use, admissibility of depreciation etc. the records, however, appear to be silent on .....

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er details shown at Page No. 353, 354, 355 & 356. As per Bank Statement Page No. 356 Fixed Deposit shown NIL. As per Bank Statement Page No. 355 Fixed Deposit made ₹ 30,80,000/-. By way of Auto Sweep transactions from the aforesaid Bank Account. As per Page No. 354 Closing Bank Balance as on 31.03.2008 shown ₹ 3,33,194.47. Total ₹ 34, 13,194.47 As per Page No. 353, The Manager, Punjab National Bank, Sports Complex, Delhi Road, Meerut had Certified vide his letter dated 16/0 .....

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y the assessee and as given by the Bank Manager. It is clearly shows that the assessee has made Fixed Deposits by way of Auto Sweep transactions amounting to ₹ 30,80,000/- from its Current Bank Account. The assessee had paid excess interest to the Bank. The Fixed Deposits of ₹ 30,80,000/- not reflected in Ledger Account of Bank Statement of Punjab National Bank (01.04.2007 to 31.03.2008) maintained by the assessee. Hence, Fixed Deposits ₹ 30, 80,000/- made by way of Auto sweep .....

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AO was duty bound to call for such details and examine them. In the case of M/s. Malabar Industries, the Hon'ble Apex court has held that incorrect assumption of facts or incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall order passed without applying, the principles of natural justice or without application of mind. 5. The fundamental principles emerged from the Hon'ble Apex Court judgement in Malabar Ind. Co. Ltd Vs. CIT (2 .....

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by the presence of any irrelevant fact into consideration, the same is erroneous. 5.2. It is beyond dispute that, under section 263, the Commissioner does have the power to set aside the assessment order and send the matter for a fresh assessment if he is satisfied that further enquiry is necessary, and that the order of the AO is prejudicial to the interest of the Revenue (Swarup Vegetable Products Industries Ltd. vs. CIT, (1991) 187 ITR 412, 415-416(AlI.)]. In that case, refund of excise duty .....

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ower under section 263, the Commissioner set aside the assessment order as the same was erroneous and prejudicial to the interests of the revenue because the claim of the assessee was accepted without proper enquiries. The action of the Commissioner was upheld by the High Court. In the facts of Umashankar Rice Mill vs. CIT (1991) 187 ITR 638-39 (Ori), the Tribunal was held justified in upholding the revisional order of the Commissioner which was passed by the Commissioner who felt that there sho .....

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ent was becoming time barred, there was valid assumption of jurisdiction under section 263 by Commissioner and the Tribunal, in such a situation, did not commit any error in law in confirming the order of CIT(A) for setting aside the assessment and directing the AO to make an order of assessment. ii. Gee Vee Enterprises vs. Addl.CIT, 99 ITR 375 (Del.) in which it is held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case, ITO should have m .....

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an order to be "erroneous" for the purposes of section 263, error of law may not be apparent on the fact of the order. The Commissioner may consider an order of the AO to be erroneous not only if it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo-typed order which simply accepts what the assessee has stated in his return and fails to make enquiries which are called for in the circumstances of the case [Rampyari Devi Sarao .....

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ision on the basis of evidence produced before it, an AO is not only an adjudicator but is also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke inquiry. The meaning to be given to the word "erroneous" in section 263 of the Act emerges out of this context. The word "erroneous&q .....

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wrong with the order if all the facts stated therein are assumed to be correct. [Duggal & Co. vs. CIT, (1996) 220 ITR456, 459 (Del.)] CIT vs. Pushpa Devi, (1987) 164 ITR 639 (Pat); CIT vs. Smt. Rambha Devi, (1987) 164 ITR 658 (Pat); CIT vs. Belal Nisa, (1988) 171 ITR 643 (Pat); CIT vs. Smt. Kaushalya Devi, (1988) 171 ITR 686 (Pat); CIT vs.Bibi Khodaija Khatoon, (1988) 171 ITR (Sb.N.) ii (Pat); CIT vs. Smt. Chandrawati Devi, (1988) 171 ITR (Sb.N.) III (Pat); CIT vs. Smt. Devi, (1987) 59 CTR .....

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sing the appeal filed by the assessee. 5.7. In view of the foregoing, it is evident that the order passed by the AO is erroneous as well as prejudicial to the interests of revenue for the reasons as state above. 6. In the course of proceedings U/S 263 Shri Pankaj Gupta, FCA & counsel of the assessee attended and filed written submissions and the case was discussed with him. 7. As regards point (a) and (b) the assessee is a publisher of books. Against the gross receipts of Rs.I03927634/- it h .....

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tors have categorically stated that books are not maintained in the manner so as to give a true and fair view in conformity with the accounting principles generally accepted in India. The tax auditors in its report at para VI have categorically stated as follows:- "In our opinion and to the best of our information and according to the stated that books are not maintained in the manner so as to give a true and fair view in conformity with the accounting principles generally accepted in India .....

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o. 2.6 of the Notes read with other Notes to Accounts, in the manner so required and give a true and fair view in conformity with the appearing thereon: give the information required by the Companies Act, 1956, accounting principles generally accepted in India:" In the notes of account on the significant accounting policy the auditors have further categorically stated as follows: "The Company has not maintained the quantitative records of Raw Materials and Finished Goods and as such in .....

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and not shown to the auditors'. The business results as shown by the assessee in its P&L Alc are not at all ascertainable, verifiable or acceptable especially in view of the facts that no quantitative details have' been maintained or furnished which is a mandatory requirement not only under the Company law but also under IT Act and the same renders entire books of accounts liable for rejection under section 145(3) of the IT Act as the book results are not at all verifiable or ascerta .....

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s claimed purchases as under: From P&L Alc Purchases ₹ 5,92,52,253/- Assessee has shown opening as well as closing balance of finished and semi finished goods ofRs.51,35,265/- and 2568138/- respectively. It has not shown any opening or closing stock of papers. Nor is there any schedule for purchases and hence entire purchases are apparently shown as consumption and converting the same to at least semi finished stage which again does not appear to be correct. In any case, even while the .....

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ince the books of the assessee are unreliable from which profit could not be ascertained, the rates of paper prevailing during the year under consideration were obtained from outside vendors which showed the following picture: F.Y. Size & weight of paper per ream of 500 Sheets Approximate Rates of Papers A Grade B Grade 2007-08 20" X 30" , 11.2 Kgs. ₹ 40/- Per Kg . ₹ 37/- Per Kg 2007-08 23" X 36", 15.4 Kgs. ₹ 40/- Per Kg. ₹ 37/- Per Kg The weight o .....

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O pages, it is made from the cost of paper coming to the publisher at merely ₹ 30/- approx. whereas the selling cost of a book containing 400-S00 pages is shown at ₹ 5OO- ₹ 800. In case of the book having lesser pages and lesser cost or the selling price, the corresponding cost of paper is proportionately low which can be worked out on this In the light of the above, the claim of consumption of paper can be judged whereby the purchases and consequent consumption in case of the .....

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ishing of books shows that the assessee has inflated its purchases and expenses at least to the tune and magnitude of ₹ 4.5crores merely on the basis of paper stated to have been consumed vis a vis the paper which is actually consumed for the production of books as shown in the books of account. This inflation of expenses and thereby the suppression of profit by ₹ 4.5 crores is merely on account of inflated paper consumption on account of bogus or inflated purchases. In the event of .....

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ted rate of 2/3 of the 'selling price', the inflation of paper purchases come to ₹ 3 crores (Rs. 4.5 crores - 1/3 of this) manifold on account of gross suppression of turnover and sales based upon consumption of paper shown as consumed in the publishing of books. However, no such view is being drawn. Since the assessee has debited a number of other expenses as also wages all of which are also not duly vouched or supported by any material evidence and nothing has been brought on rec .....

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37,800/- Addition on account of inflated consumption of paper ₹ 3,00,00,000/- Total ₹ 2,92,62,200/- Add: Other Income (Interest as shown in P & L a/c): ₹ 3,35,901/- TOTAL ₹ 2,95,58,101/- This will mean an addition of ₹ 2,95,58,101/- with initiation of penalty uls 271(1)(c) of the I.T. Act 1961 as the assessee has concealed the income. The A.O. is directed to issue a fresh Demand notice and challan. As regards second part of point no. (b), there are fresh unsecur .....

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IT Vs. La Medica (2001) 250 ITR -575 (Delhi) (ii) Sri Ganesh Rice Mills Vs. CIT (2007) 294 ITR 316 (Alld.) (iii) CIT Vs. United Commercial and Industrial Co.(199) 187 ITR 596 Cal. (iv) C.T Vs Precision Finance Pvt. Ltd. (Cal) 208 ITR 465 (v) CIT vIs Korlay Trading Co. Ltd. (Cal.) 232 ITR 820. (vi) Krishna Kumar Jbanb vIs ITO and Anr (Punjab & Haryana) 17 DTR 249 vii) M/s Sejai International Ltd vIs Cl'I' Meerut (All.) Appeal No.306 of2010. viii) CIT Vs Durga Prasad More, 82 ITR 540 ( .....

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) 120 IR 294 D.C.Auddy & Bros. vs. CIT Cal) 28 ITR 713 S. Kumaraswamy Reddiar vs. CIT (Ker) 40 ITR 590 Grover Fabrics (India) P. Ltd. Vs. CIT (P&H) 332 ITR 312 As regards (c) the entries in the fixed assets ₹ 4957110/- was to be looked into from different angles including actual investment, date of actual use, if any, admissibility of depreciation etc. and the AO is directed to enquire the same now. As regards (d) the balance of ₹ 34,13,194/- certified by the bankers as on is .....

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all the points stated above, as also after considering all evidences and affording reasonable opportunity to the assessee, be passed by the AO expeditiously. 8. We have heard both the parties and perused the orders of the Revenue authorities alongwith documentary evidence filed by the Ld. Counsel of the assessee in the shape of Paper Book containing pages 1 to 128 in which he has attached the various documents evidence which the assessee has produced before the AO as well as before the Ld. CIT. .....

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urnish reply to all the questions. if some questions are not applicable, please state so and reasons thereof. 2. Your replies should b1e in the same order and should bear the same number as in the questions. - 3. Please send all the replies together and not in piecemeal. 4. If there are annexure to the replies, please properly number them and link them properly to the reply. 5. Please state the facts and avoid evasive replies. 6. Singular reference well also include plural. In connection with yo .....

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percentage shareholding & their PAN & WardlCircle where they are assessed to tax. 3. Name & addresses oflall concerns, Firms, Companies etc, wherein the co. or any of its directors are interested! having substantial interest giving details of such interest, if any. 4. Give information in respect of assessed/returned income for the two preceding years alongwith photocopies of Balance Sheet and P & L A/c for A. Y. 2007-08 and also file a copy of last scrutiny assessment order. . .....

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s including sq. Up accounts alongwith their completer-addresses & their asstt. Particulars. Please also furnish confirmed copies of Alcs therefrom. Please also furnish evidences regarding identity, genuineness and creditworthiness of new loan creditors and sources of loans given by them. 9. Details of share application money/share capital raised during the year giving complete addresses & asstt. Particulars of the persons concerned. Please also furnish confirmed copies of A/cs there from .....

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ies of accounts. 11. Details of all loan and advances given by the co. where provisions of Section 2(22) (e) of the I.T. Act are attracted. 12. Inventory of opening and closing stock (both quantitatively as well as qualitatively). Also give basis of valuation of stock alongwith supporting / documentary evidences and prove the authenticity of stock declared. 13. Monthwise details of sales/receipts and purchases (both quantitatively as well as qualitatively). Also give details of parties (indicati .....

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sh details of secured loan taken by you. 18. Give details of source of unsecured loan, creditors, with details of interest paid to them (if any), rate of interest, TDS on the same. 19. Sales monthwise - partywise details. 20. Details of valuation of closing stock and closing stock-method of valuation authenticity of stock declared. 21. Material purchased-partywise details, item, amount. 22. Furnish bills for additions made to fixed assets and when the assets were put use for purpose of business. .....

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20.8.2010 at 4.30 PM. Formal notice U/s 142(1) of the I.T. Act is enclosed herewith. 9. In response to the aforesaid letter/questionnaire dated 29.7.2010 assessee filed its reply dated 20.8.2010. For the sake of convenience, the contents of the reply are reproduced as under:- Reply to your honour's Querries raised vide Notice u/s 143(2)/142(1) dated 29th July 2010 : Respected Madam, In response to your Honour's Notice dated 29th July 2010, the assessee begs to submit as under: I. Busine .....

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Page No. 375 to Page No. 387. The copy of Balance Sheet as at 31.3.2007 is at Page No. 362 to Page No. 374 The copy of Last Scrutiny Order for Asstt. Year 2006-07 along with Order of C.IT. (Appeals) are at Page No. 353 to Page No. 361. 5. Comparative Figures for Last Three Years: The List is at Page No. 357 6. Bank Accounts: The complete details of Bank Accounts in assessee's Ledger; copy of Bank Statements for the whole year from 1.4.2007 to 31.3.2008, Bank Reconciliation Statement as at 3 .....

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Pass Book Bank Statements and copy of their Income Tax Return for Asstt. Year 2008-2009 will be produced on the next hearing. 9. Share Application Money/Increase in Share Capital: There has been no increase in Share Capital during the year. It was ₹ 26 Lacs on 31.3.2007 as well as on 31.3.2008. No Share Application Money was received during the year ended 31 st March 2008 . 10. Loans and Advances (Dr.) : There are no Loans and Advances except for business purposes. No interest has been ch .....

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Page No. 81 to Page No. 83 13. Monthwise details of Sales and Purchases: The Monthwise details of Sales are at Page No 80 to Page No . The Partywise details of Sales over ₹ 10 Lacs during the year are at Page No. 79 to Page No. - The Monthwise Details of Purchases are at Page No. 78 to Page No. - The Party wise Details of Purchases Over ₹ 10 Lacs during the year are at Page No .. 77 to Page No. -. 14. Expenses Claimed: The zerox copy of Ledger Print-out of Expenditure claimed (in exc .....

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………….. Travelling Expenses Page No. 47 to Page no. ………….. Advertisement Page No. 46 to Page no. ………….. Interest to Directors Page No. 45 to Page no. ………….. Interest to Others Page No. 44 to Page no. ………….. Commission on Sales Page No. 43 to Page no. ………….. Carriage Outward Expenses Page No. 37 to Page no. 42. Packing Expenses Pag .....

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1.3.2008 Authorised ₹ 3,000,000 ₹ 3,000,000 Issued and Subscribed ₹ 2,600,000 ₹ 2,600,000 Thus the question of any expenditure incurred thereon does not apply to the assessee's case during the year under consideration. 17. Secured Loans: There has been NO Secured Loans with the assessee. 18. Interest Paid: . The details of Interest Paid are at Page No. 30. 19. Sales Monthwise - of Partywise : The details of Sale. - Monthwise - are at Page No :. to Page No The details .....

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aid; which is much more than 15% of the Income. . 24. Directors Salary : The details of Directors Salary during the year as well as in the last year are at Page No 2. There has been no increase in the Salary of Directors. 25. Sundry Creditors : These will be proceeded before your honour on the next date of hearing. 26. Challans for Prepaid Taxes: , The challans are at Page No 1. to Page No - 10. After going through the aforesaid questionnaire / letter dated 29.7.2010 issued by the AO u/s. 142(1) .....

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the queries and its replies, we are of the view that AO has accepted the contention of the assessee and completed the assessment without making any attempt of enquiry and accepted the version of the assessee without applying his mind. In order to support our view, we note that AO has issued notice u/s. 142(1) of the I.T. Act dated 29.7.2010 to the assessee for calling various information from the assessee and fixed the date of hearing on 20.8.2010 at 4.30 PM, but the assessee in response to the .....

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he next date of hearing; with regard to query no. 15 the Assessee mentioned that books of accounts alongwith all vouchers will be produced before the AO for verification as and when desired; with regard to query no. 25 is concerned, the assessee has stated that these will be produced before your honour on the next date of hearing. From these unanswered replies, it is crystal clear that assessee has not fully answered the queries alongwith the documentary evidences. The AO has accepted the versio .....

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he IT. Act. The case was selected for scrutiny through CASS and statutory notice uls 143(2) was issued on 22-09-2009, which was duly served upon the assessee. In response to the notices issued u/s 142(1) and 143(2) counsel of the assessee Shri Pankaj Gupta, CA attended the proceedings from time to time and furnished required details and information and the case was discussed. 2. The assessee is engaged in the business of publication of books. During the year under consideration the assessee has .....

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ering all the material available on record income derived by the assessee is accepted and assessment is, accordingly, completed on total income of ₹ 737800/-. Charge interest uls 234B and 234C of the LT. Act, 1961. Give credit of prepaid taxes. Issue notice of demand and challan. 12. After perusing the aforesaid assessment order, Ld. CIT issued notice u/s. 263 of the I.T. Act to the assessee by pointing out the following:- (a) The assessee is engaged in the business of publishing books etc .....

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e Net Profit further comes down from the marginal figure to a still low figure whereas as per the, assessment order, the AO has noted the GP and NP rate slightly higher than the OP and NP rates of immediate preceding year. This is apparently contradictory to the facts on the records. Fresh unsecured loans to the tune of ₹ 1,20,69,799/-, abnormal sundry creditors to the tune ofRs.3,80,20,903/- have been shown which were also the reason for selection of cases for scrutiny. The AO appears to .....

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7; 30,80,000/- by way of Auto Sweep transactions from the same Bank Account. But, the assessee had not shown any Fixed Deposits made during the year in Balance Sheet as on 31.03.2008. The Closing Balance of Bank Account showed ₹ 3,33,194.47. The assessee had filed a hand written .Bank statement and other details shown at Page No. 353, 354, 355 & 356. As per Bank Statement Page No. 356 Fixed Deposit shown NIL As per Bank Statement Page No. 355 Fixed Deposit made ₹ 30, 80,000/- By .....

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s ₹ 34,13,194.47 only." f) As per Page No. 354, Closing Bank Balance showed as on 31.3.2008 ₹ 33,194.47. But, as per the certificate given by the Bank Manager, at page No. 353 Closing Balance as on 31.3.2008 ₹ 34,13,194.47. There is contradictory difference in statements as given by the assessee and as given by the Bank Manager. It is clearly shows that the assessee had made Fixed Deposits by way of Auto Sweep transactions amounting to ₹ 30, 80,000/- from its Current .....

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the head ₹ 3,35,901/- Income from Other Sources Add: Fixed Deposits made by way of Auto Sweep ₹ 30,80,000/- Transactions as discussed above. 13. In response to the aforesaid notice of the Ld. CIT, assessee filed its reply and made similar reply as made before the AO which has already been discussed hereinabove. After perusing the reply of the Assessee, Ld. CIT passed the impugned order 08.03.2013 by discussing in detail the each and every query and its reply and lastly adjudicated an .....

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tions referred by the Ld. Counsel are concerned, in our view, the same does pertain to the issue in dispute because the same are not identical to the facts of the present case. However, in the present case the AO has not even made any attempt to make any enquiry before accepting the claim of the assessee and accepted the claim in a hurry manner without applying mind, but in the citation given by the Ld. Counsel of the assessee, the AO has made enquiry may be sufficient or may be insufficient, wh .....

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te. However the asstt. record show that despite there being a large number of discrepancies and despite their being the books of alc incorrect, incomplete and suffering from a number of discrepancies provisions of s.145(3) have not been invoked and book results have been accepted as such. We further find that the tax auditors have categorically stated that books are not maintained in the manner so as to give a true and fair view in conformity with the accounting principles generally accepted in .....

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ings to whom it owed existing Rs.l lakh outstanding more than 30 days. Moreover, as per para 2.4 'the confirmation of balances of parties appearing under the heads unsecured loan, current liabilities, sundry debtors and loans and advances were also not obtained by the assessee and not shown to the auditors'. 14.3 We further find that the business results as shown by the assessee in its P&L Alc are not at all ascertainable, verifiable or acceptable especially in view of the facts that .....

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their facts whereby a negligible profit has been shown whereas the purchases and expenses debited to the P&L Alc are highly inflated. The total sales shown by assessee are to the tune of ₹ 103927633/-. Against the same the assessee has claimed purchases as under: From P&L Alc Purchases ₹ 5,92,52,253/- Assessee has shown opening as well as closing balance of finished and semi finished goods ofRs.51,35,265/- and 2568138/- respectively. It has not shown any opening or closing st .....

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ion of paper comes to as high as 74.70 % which is extremely inflated. Since the books of the assessee are unreliable from which profit could not be ascertained, the rates of paper prevailing during the year under consideration were obtained from outside vendors. 14.5 We further find that the inflation of expenses and thereby the suppression of profit of ₹ 4.5 crores is merely on account of inflated paper consumption on account of bogus or inflated purchases. We also observed that since the .....

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. CIT has rightly made the addition of ₹ 2,95,58,101/- which does not need any interference on our part, hence, we uphold the same. 15. As regards second part of point no. (b), is concerned, we find that Ld. CIT has observed that there are fresh unsecured loans to the tune of ₹ 12069799/- and abnormal sundry creditors to the tune of ₹ 38020903/- which were also the reason for selection of the case for scrutiny on the one hand while as such the assessee is duty bound and heavy o .....

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te of actual use, if any, admissibility of depreciation etc. and the AO has directed to enquire the same now. In our view the same also do not need any interference on our part, hence, we uphold the same. 17. As regards (d) is concerned, we find that Ld. CIT has observed that the balance of ₹ 34,13,194/- certified by the bankers as on is not shown in the Balance sheet' and are not reflected in the respective accounts of the assessee. The same are also liable to be added in the income t .....

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