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2016 (4) TMI 996 - ITAT DELHI

2016 (4) TMI 996 - ITAT DELHI - TMI - Revision u.s 263 - Held that:- On two issues, one on the verification of the trade creditors and second on the issue of allowability of expenditure u/s 40a (ia) of the Act It is apparent that subsequent orders passed by the AO dated 28.02.2014 has accepted that all loan creditors are correct and there is a minor difference in case of only three trade creditors amounting to ₹ 36756 only which has arisen only on account of difference in accounts of those .....

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ese two aspects as expected by ld CIT. However even if that be the case, it does not give any power to ld. CIT to revise the assessment by invoking 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 t .....

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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 .....

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ion of section 145 ( 3) of the act and making addition to the declared book result of the assessee. Therefore it is apparent that the original order u/s 143(3) of the act did not contain any error in accepting the book results declared by the assessee as the profitability disclosed by the assessee was in tune with past and subsequent assessment history of the assessee duly accepted by revenue after conducting scrutiny assessments. It was not a case of “no” inquiry but specific and pointed enquir .....

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Dwivedy, CIT DR Sh. Sheodan Singh Bhaddoria, Sr. DR ORDER PER PRASHANT MAHARISHI, A. M. ITA No. 3350/Del./2013 (A. Y. :2008-09) Against order u/s 263 1. This appeal is filed by the assessee against the order dated 22.03.2013 passed by the ld CIT, Meerut u/s 263 of the Act. The ground raised in the appeal of the assessee are as under:- 1. That the Ld CIT has erred in revising U/s 263 the assessment order passed U/s 143(3) by the AO. The revision order passed U/s 263 dt 22-03-2013 being untenable .....

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ed/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 .....

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a case of regular assessment, penal interest U/s 234-B and 234-C are not livable. 6. That the impugned revision order U/s 263 has been passed on incorrect facts and assumptions and by ignoring/overlooking assessee's substantive contentions, explanations and evidence, such as:- A. Contentions and Evidence ignored/overlooked by Ld CIT a) Assessee's written submissions dt25-02-2013 and enclosed documentary evidence filed by assesse to prove that al! the issues for which revision was propose .....

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y quantitative stock records for raw material and finished products (which were also produced before the Ld CIT). (iii) That trading result of this year compare favourably and were better in relation to other assessment year, (iv) That trading result have been accepted in all other years, even by the Ld CIT herself in course of revision proceedings for the preceding year i.e A.Y :2007-08. (v) That there was no shortage/wastage during production process and the quantity of output obtained was 100 .....

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shortage/wastage of 5.65% during the production process. c) Inferences/assumptions drawn on the basis of Mandi Samiti's rulesfwhicn have not even provided to the assesse despite it's request). 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 .....

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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 valid. To demonstrate his point that the assessee submitted what are the queries raised by the AO during the assessment proceedings and ho .....

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the assessment order speaks about the authenticity of gross profit disclosed by the assessee. For reasonableness of the profit despite being show cause notice issued u/s 263 of the act for earlier year i.e. A.Y. 2007-08 , it was dropped and book results were accepted. The assessee further submitted complete details along with audited accounts including quantitative stock records and month-wise details of purchase and sales was submitted before AO and therefore it is not the case of absence of i .....

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submitted before the AO and therefore it is not the case of absence of enquiry conducted by the AO and hence the order is neither erroneous and nor being prejudicial to the interest of the revenue. The ld CIT rejected submission of the assessee . According to the ld CIT the assessee has not drawn manufacturing account properly hence she estimated the sale of ₹ 60 crores against the sales shown by the assessee of ₹ 59,54,20,216/- and estimated net profit of ₹ 2% thereon. However .....

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sallowance 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 w .....

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nses are completely verifiable and vouched therefore trading results should be accepted. He further stated that trading results of this year are better in comparison to earlier years where assessments u/s 143(3) of the Act are framed accepting the books results. For this he relied on a compilation filed by the assessee containing assessment orders from Assessment Year 2006-07 to Assessment Year 2012-13 passed u/s 143(3) of the Act. He further referred to order u/s 263 dated 09.02.2012 for A.Y. 2 .....

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iew of this ld. CIT is not right in setting aside the order u/s 263 of the Act to the file of AO for fresh verification. Regarding the verification of tax deduction at source on various expenses he submitted that the assessee submitted before the AO complete details of quarterly tax deduction at source returns and thereafter he has passed the assessment order u/s 143(3) after examining the same. To show this that there is no error by the AO while framing the assessment order u/s 143(3) originall .....

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ade on this count proves that order to that extent is not erroneous. Further regarding the small addition made by the AO of ₹ 36756/- being difference in account of the trade creditors, it was contended that this addition has been made after receiving confirmation of the various parties u/s 133(6) of the Act. In view of this he submitted that impugned order 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 .....

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d 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 t .....

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owers of Commissioner shall only be restricted to the matters which are not considered and decided in such appeal order. In a nutshell if an issue has been considered and decided by appellate authority then to that extent the power do not vest with CIT for revision. In light of the above provisions it is require to be verified whether the ld CIT has properly exercised her powers vested in terms of section 263 of the Act or not. On two issues, one on the verification of the trade creditors and se .....

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the original order made by the AO. Secondly during the original assessment proceedings on both these issues the AO has raised specific queries and they have been replied by the assessee therefore it may be a case of inadequate enquiry but it cannot be said to be a case of lack of enquiry . It may be possible that AO has not made an enquiry on these two aspects as expected by ld CIT. However even if that be the case, it does not give any power to ld. CIT to revise the assessment by invoking the .....

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clared 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 2008-0 .....

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ese 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 CIT cannot be accepted in view of the past and subsequent years accepted assessment history of the assessee. Further on the merits of the addition of ₹ 15779481/- made by the ld CIT cannot be sustained for the following reasons:- a. No defects have been pointed out in the books of account of the assessee. Books of assessee are audited and .....

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t profit without giving any basis or without any reason whereas past records of assessee shows that it has earned net profit ratio between 0.40% to 0.62%. Therefore adoption of such a high net profit ratio without citing any comparable cases cannot be accepted. e. Ld. CIT further discarded the actual recorded turnover of the assessee and has estimated the turnover of the assessee at ₹ 60 crores however while making an addition she has further enhanced the turnover to 60.54 crs. There is no .....

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ed by the assessee was in tune with past and subsequent assessment history of the assessee duly accepted by revenue after conducting scrutiny assessments. The power under section 263 of the Income-tax Act, 1961, cannot be invoked to correct a mere error of an Assessing Officer, based upon an incorrect assumption of fact. There has to be something more to hold that the determination is both erroneous and prejudicial to the interests of the Revenue. That it was also clear from the order passed by .....

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ers 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 p .....

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In cases where there is inadequate enquiry but not lack of enquiry, the Commissioner must record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the Commissioner and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsustainable in law. Here CIT has passed an order of remit to ask the Assessing Officer to decide whether the order was erroneous and on such examination in assessm .....

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