TMI Blog2016 (5) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 263 of the Act, merely because he has a different opinion. Therefore, we are of the opinion that in the present case on hand, there is no reason for the commissioner to revise the assessment order, as the A.O. has verified the issue and estimated the net profit.. In this case, there cannot be any dispute that A.O. has not discussed the issue at the time of completion of the assessment. The net profit adopted by the A.O. is correct or not is a debatable question. The Ld. CIT has not pointed out any mistakes in such estimation to say that it is erroneous and prejudicial to the interest of the revenue. Therefore, we are of the opinion that the assessment order passed by the A.O., in respect of estimation of net profit is not erroneous, in so far as prejudicial to the interest of the revenue. On examination of the assessment order and CIT order, we find that the issue of unsecured loans and capital introduction by the assessee were not examined by the A.O. at the time of completion of assessment. Therefore, we are of the opinion that the assessment order passed by the A.O., in respect of unsecured loans and capital introduction is erroneous in so far as it is prejudicial to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases without considering the ratios of the judgement of Hon ble ITAT Visakhapatnam in the case of ACIT Vs. M/s. M. Veerabhadra Rao Others in ITA Nos.345 346/Vizag/1999, wherein the ITAT has directed to estimate the sales at 8 times of the purchase and then estimate the net profit at 1% on such estimated sales or declared sales whichever is more clear of all deductions and allowances. The A.O. without considering the decision of the jurisdictional ITAT, has estimated the net profit of 4% on net purchase which is contrary to the decision of jurisdictional ITAT. Therefore, the assessment order passed by the A.O. is erroneous, in so far as it is prejudicial to the interest of the revenue. The CIT further observed that the assessee has shown unsecured loans and introduced fresh capital during the year. However, the A.O. has failed to examine the crucial and essential ingredients i.e. identity of the creditors, genuineness of the transaction and creditworthiness of the creditors and also not examined sources for capital introduction. Similarly, the CIT observed that the A.O. has failed to analyse the reasons for declaration of low net profit. Further, the A.O. has failed to veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O. did not verify the above issues at the time of completing the assessment u/s 143(3) of the Act. Therefore, the assessments order dated 4.8.2009 needs to be revised, as it is erroneous, in so far as it is prejudicial to the interest of the revenue. With these observations, the CIT set aside the assessment order passed by the A.O. u/s 143(3) of the Act on 4.8.2009 and directed the A.O. to compute the net profit in the light of the decision of Hon ble High Court in the case of CIT Vs. M/s. V. Ramulu, Kakinada in ITA No.197/Vizag/2003 dated 21.6.2009, by adopting the method of estimating net profit @ 2% of the estimated sales of 16% of the purchase value, whichever is higher clear of all deductions and allowances. If the net profit estimated is less than the profit declared by the assessee, then the profit so declared should be accepted. The A.O. is directed to go through the order of the Hon ble A.P. High Court thoroughly and complete the assessment afresh within the stipulated time and compute the net profit in accordance with the order of the Hon ble A.P. High Court. The CIT further directed the A.O. to examine the unsecured loan accepted by the assessee. The assessing officer sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umed jurisdiction to revise the assessment order for the reason that the A.O. has not conducted proper enquiry while completing the assessment u/s 143(3) of the Act. Therefore, the assessment orders dated 4.8.2009 is erroneous, in so far as it is prejudicial to the interest of the revenue. The CIT assumed jurisdiction for the reason that the A.O. has not considered the ITAT and jurisdictional High Court judgements, while estimating the net profit from the business. The CIT was of the opinion that ITAT and Hon ble A.P. High Court has held that sales should be estimated at 8 times of the purchase price and then estimates the net profit at 1% of such estimated sales. The A.O., without considering the ratios of the jurisdictional High Court and ITAT, simply estimated 4% net profit on net purchases, which render the assessment order erroneous, in so far as it is prejudicial to the interest of the revenue. On perusal of the show cause notice issued by the CIT, we find that the issue of estimation of net profit questioned by the CIT was already examined by the A.O. at the time of assessment proceedings, which is evident from the assessment order. The A.O. at the time of completion of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Once, the A.O. allowed the claim of the assessee after being satisfied with the explanations, then, the CIT cannot revise the assessment order for same reason with a different opinion. It is not a case of CIT that the A.O. has not examined the very issue at the time of assessment. In the present case on hand, the A.O. has examined the books of accounts and after considering the books of accounts and other relevant information furnished by the assessee, rejected the books of accounts and resorted to estimation of net profit, which cannot be termed as erroneous and prejudicial to the interest of the revenue. Therefore, we are of the opinion that there is no reason of whatsoever for the CIT to revise the assessment order for estimation of higher profit. 9. The CIT u/s 263 of the Act has power to revise the assessment order. But, to invoke the provisions of section 263 of the Act, the twin conditions must be satisfied. (1) The order of the A.O. is erroneous and (2) further it must be prejudicial to the interest of the revenue. Unless both the conditions are satisfied, the CIT cannot assume the jurisdiction u/s 263 of the Act. It is not necessary that every order which is erroneous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of the revenue. 10. During the course of hearing, both the counsels submitted that the other issues raised by the CIT with regard to the verification of unsecured loans and capital account of the assessee, the A.O. has not verified the issues at the time of completion of assessment. Therefore, the assessment order passed by the A.O. in respect of these two issues is erroneous, in so far as it is prejudicial to the interest of the revenue. Therefore, requested to modify the CIT directions. On examination of the assessment order and CIT order, we find that the issue of unsecured loans and capital introduction by the assessee were not examined by the A.O. at the time of completion of assessment. Therefore, we are of the opinion that the assessment order passed by the A.O., in respect of unsecured loans and capital introduction is erroneous in so far as it is prejudicial to the interest of the revenue. Accordingly, we uphold the CIT order and set aside the assessment order passed by the A.O. u/s 143(3) of the Act, in respect of unsecured loans and capital account. Accordingly, the order passed by the CIT u/s 263 of the Act is modified, so as to reject the CIT order in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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