TMI Blog2010 (10) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... rusal of the assessment records for the assessment year 2006- 07, wherein the assessment was completed vide order dated 18.06.2007 u/s. 143(3) of the Income-Tax Act, 1961, it is noticed that no disallowance u/s. 40(a) of the Income-Tax Act, 1961 has been made on the amount of ₹ 1,00,00,000/- paid to Nilakandan Brothers Constructions on 28.09.2005, even when no evidence of deduction of tax at source for the aforesaid amount is available on records nor any enquiry seems to have been made by the Assessing Officer. It is further noticed that the Assessing Officer did not make any enquiry nor cared to obtain details of major items of expenditure including purchases while no work in progress is being reflected in the balance sheet. 2.2 In response to the show cause notice, the assessee made submissions which were incorporated by the ld. CIT in para 3.1 to 3.5 of his order as under: 3.1 Regarding payment of contract amount totaling to ₹ 99,16,000/- to M/s. Nilakandan Brothers Constructions (P) Ltd., Chennai, the assessee has deducted total TDS amounting to ₹ 1,12,200/- and the same has been deposited into the Government Account. A Xerox copy of Form No. 16A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the order of the assessment to be erroneous and prejudicial to the interest of the Revenue, which came to be set aside by giving two directions and relevant paras from 5 to 7 of the ld. CIT s order are reproduced hereunder: 5. It is seen from the assessment records that the Assessing Officer has not verified the details regarding expenses, purchases and work in progress. The Assessing Officer has also not obtained the details regarding payment made to M/s. Nilakandan Brothers Constructions (P) Ltd., Chennai. It is also seen that the Assessing Officer has not called for the details during scrutiny proceedings. In the course of current proceedings also, copy of ledger account of M/s. Neelakandan Brothers Constructions (P) Ltd. and original Form No. 16A could not be produced. The assertion of the assessee that workin- progress is consistently not being admitted will result in wrong computation of income year after year. It is evident that the Assessing Officer ought to have made proper enquiries which he failed to do. 6. It has been held in the case of Jagdish Kumar Gulati vs. CIT reported in (2004) 269 ITR 71 (All) that the Assessing Officer fails to make proper e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... system of accounting has been accepted by the department in prior and later years. The assessee has relied upon the judicial pronouncements in the case of Malabar Industrial Co. vs. CIT [243 ITR 83] and CIT vs. Gabriel India Ltd. [203 ITR 108] to support the grounds taken in the appeal. The assessee has also relied upon the decision of Hon ble Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd. 227 CTR 133, wherein distinction was made between lack of enquiry and inadequate enquiry . It has been further held that if there is an enquiry, even inadequate, that would not by itself give occasion to the Commissioner of Income Tax to pass order under section 263 and prayed that the order under section 263 by the ld. CIT may kindly be cancelled and justice rendered. Further, the ld. Counsel of the assessee while arguing the appeal has pleaded for quashing the order of the ld. CIT and he placed reliance on the decisions in 324 ITR 67 (Mad), 323 ITR 632 (Bom) at Pg. 635 and 314 ITR 81 (SC). 4. The ld. DR while relying upon the order of the ld. CIT has contended that since the Assessing Officer has not even raised any query with regard to the points for which the show cause no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g or while passing assessment order and the Hon ble Supreme Court in the case of Malabar Industries Co. Ltd. vs. CIT 243 ITR 43 has opined as under: . He accepted the entry in the statement of account filed by the appellant in the absence of any supporting material and without making any inquiry. On these facts the conclusion that the order of the Income-tax Officer was erroneous was irresistible. The High court had rightly held that the exercise of jurisdiction by the Commissioner under section 263(2) was justified. 5.1 Useful reference in this regard can further be made to the Hon ble Madras High Court s decision in the case of Express Newspapers Pvt. Ltd. vs. CIT 255 ITR 137 has held as under: The Commissioner has the discretion to set aside the assessment in while or in part. The exercise of that discretion is not to be ordinarily interfered with unless the facts show that the exercise of the discretion itself is required to be characterized as arbitrary. 5.2 Similarly, in the case of CIT vs. Kohinoor Tobacco Products P. Ltd. reported in 234 ITR 557, the Hon ble Madhya Pradesh High Court has held as under: . This failure on the part of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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