TMI Blog2016 (4) TMI 996X X X X Extracts X X X X X X X X Extracts X X X X ..... voking the provision of section 263 of the Act. On the issue of verification of gross profit and net profit disclosed by the assessee it is apparent that in the first two paragraph of assessment order itself it is mentioned by AO that he has made query on this issue. Further the gross profit chart and net profit chart produced by the assessee itself shows that the gross profit of the assessee in Assessment Year 2007-08 was 4.72%, whereas in Assessment Year 2008-09 it is 4.86%. Therefore the gross profit declared by the assessee is better than earlier year. It is also to be noted that earlier years assessment for Assessment Year 2007-08 was passed u/s 143(3) of the Act and later on the ld CIT attempted to revise by invoking provision of section 263 of the Act however later on the gross profit of the assessee was accepted. It is also noted that for Assessment Year 2009-10 the assessee has shows gross profit of 4.73% which is less than gross profit declared by the assessee for Assessment Year 2008-09 of 4.86%. Similarly gross profit for Assessment Year 2010-11 shown by the assessee is 4.16% which is less than gross profit disclosed by the assessee of 4.86% for Assessment Year 2008-09. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y enhanced towards alleged low profits shown by the assesse and has been partly set-aside for verification of loan creditors, trade creditors and deductibility of expenses with reference to section 40(a) (ia) is untenable being beyond the ambit of the provisions of section 263 which be kindly cancelled/quashed. 3. That without prejudice to ground no 1 2 above, the Ld CIT has erred in holding that the books of accounts of the assesse are liable to be rejected under section 145(3). 4. That without prejudice to other grounds, the enhancement of assessment by making an addition of ₹ 1,57,79,481/- towards trading results by rejecting accounts U/s 145(3) and determining the taxable income by applying a N.P rate on estimated turnover is erroneous and untenable in law and under the facts and circumstances of the case. Even the working of net income is incorrect. The addition of ₹ 1,57,79,481/- being erroneous, unwarranted and arbitrary be kindly deleted. 5. That the notice of demand U/sl56 referred to in the revision order has not been received by the appellant till date. However tax demand as created and penal interest U/s 234-B and 234-C determined/levied as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quest). d) That no separate trading account has been drawn and hence G.P rate is not verifiable. 2. The first ground of appeal is against the order passed u/s 263 by the ld CIT being untenable in law. The brief facts are that the assessee was assessed u/s 143(3) of the Act for Assessment Year 2008-09 vide order dated 14.12.2010 passed by the ACIT, Range-I, Meerut. Subsequently, notice u/s 263 dated 12.02.2013 was issued stating that i. Ground on which the case was selected for scrutiny have not been examined ii. the profit margin declared by the assessee is very low and AO has accepted the same without any enquiry or examination iii. trade creditors and loan creditors has been accepted without any enquiry or verifiable iv. Certain expenses have been allowed without any finding that whether these expenses are allowable as per provisions of section 40(a)(ia) of the Act. 3. In response to that show cause notice the assessee filed its reply dated 25.02.2013 submitting that the assessee has furnished requisite details before the AO and who after making inquiry has passed assessment order u/s 143(3) of the act and therefore notice u/s 263 of the act is not vali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors and loan creditors of the assessee she set aside the issue for verification to the file of AO holding that unsecured loan and sundry creditors appear to be totally unexplained and liable to be added u/s 68 of the Act. Regarding disallowance of expenses she set aside the issue with a direction to AO to examine and consider and disallow those expanses where provision of section 40a(ia) are applicable on account of non deduction of TDS. Against this order the assessee is in appeal before us. 4. It was the contention of the ld AR that at the initial stage the AO has made complete enquiry and therefore it is not the case of lack of enquiry and on this ground the order passed u/s 263 of the Act is not sustainable. Further it was also argued that on the date of revision u/s 263 the assessment order made u/s 143(3) dated 14.12.2010 was in appeal before ld CIT(A) , Meerut and therefore the order cannot be revised u/s 263 of the Act. For this he took us to the order dated 28th June 2013 passed by ld CIT(A) , Meerut. On the merit he stated that In absence of any latent, patent and glaring defect in the books of accounts the provisions of section 145(3) of the act were wrongly invoked b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er u/s 263 of the Act is not sustainable. For this he relied upon a plethora of decision including the decision of Hon ble Supreme Court in the case of Malabar Industrial Company Ltd Vs. CIT 243 ITR 83. His main contention was that original assessment order was passed after enquiry and therefore there is no reason to hold that no enquiry has been made by the AO. 5. Against this the ld DR relied upon the order of ld CIT and submitted that original order which is subject of revision u/s 263 has been passed by the AO without conducting proper enquiry which he should have conducted and therefore order u/s 263 has been correctly passed as it is erroneous and prejudicial to the interest of revenue. 6. We have carefully considered the rival contentions. We have also considered the Paper Book filed by the assessee and written synopsis placed before us which was relied by him. We also perused the gist of various case laws which have been relied upon by the assessee before us. The provision of section 263 of the Act provides that CIT on examination of record of any proceedings under this act if he considers that order passed by the AO is erroneous and it is prejudicial to the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -09 it is 4.86%. Therefore the gross profit declared by the assessee is better than earlier year. It is also to be noted that earlier years assessment for Assessment Year 2007-08 was passed u/s 143(3) of the Act and later on the ld CIT attempted to revise by invoking provision of section 263 of the Act however later on the gross profit of the assessee was accepted. It is also noted that for Assessment Year 2009-10 the assessee has shows gross profit of 4.73% which is less than gross profit declared by the assessee for Assessment Year 2008-09 of 4.86%. Similarly gross profit for Assessment Year 2010-11 shown by the assessee is 4.16% which is less than gross profit disclosed by the assessee of 4.86% for Assessment Year 2008-09. It is interesting to note that for all Assessment Years 2007-08 to 2010-11 assessment orders have been passed u/s 143(3) of the Act after conducting enquiries on the adequacy of profitability of the assessee and it is interesting to note that assessment year 2008-09 as shown higher gross profit rate in all these four years even then Assessment Year 2008-09 is subjected to revision by ld CIT and addition of ₹ 15779481 has been made. This action of the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the issue relating to appropriateness of profitability, veracity of trade and loan creditors, allowability of expenditure had been specifically gone into and examined by the Assessing Officer, who was fully satisfied with the correctness of claim of the assessee. Thus, it was not a case of no inquiry but specific and pointed enquiries were made by the Assessing Officer. Therefore merely the statement of ld. CIT that order is erroneous does not give the powers to CIT to set aside the matter to the file of AO for fresh verification. In fact The Commissioner should have examined and gone into the question of verification of trade creditors and loan creditors and allowability of expenses as she has gone to made an addition to the book results of the assessee. Revisionary power under section 263 of the Income-tax Act, 1961, is conferred by the Act on the Commissioner/Director of Income-tax when an order passed by the lower authority is erroneous and prejudicial to the interests of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interests of the Revenue, but orders which are passed after inquiry/investigation on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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