TMI Blog2016 (6) TMI 940X X X X Extracts X X X X X X X X Extracts X X X X ..... , not liable for TDS. Therefore, the findings of the learned CIT on the issue was without proper appreciation of the facts available on record. - Decided in favour of assessee - ITA No. 3414/Del/2013 - - - Dated:- 22-6-2016 - Sh. H. S. Sidhu, Judicial Member And Sh. O. P. Kant, Accountant Member For the Appellant : Ms. Rashmi Chopra Sh. Ruchesh Sinha, Advocates For the Respondent : Ms. Sulekha Verma, CIT ( DR ) ORDER Per O. P. Kant, A. M. This appeal by the assessee is directed against the order dated 25/03/2013 passed by the learner Commissioner of Income-tax, Meerut, under section 263 of the Income- tax Act,1961 (in short the Act ) in relation to assessment year 2008-09 raising following grounds: 1. The impugned order dated 25.03.2013 as passed by the Ld. CIT u/s 263 of the Income Tax Act, 1961 is arbitrary, unjust and illegal on various factual and legal grounds including the following a. The assessment order dated 22.12.2010 passed by the Ld.Assessing Officer was neither erroneous nor prejudicial to the interest of revenue. b. The Ld. Assessing Officer had passed the order dated 22.12.2010 u/s 143 (3) after proper inquiry and after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts. 5. That impugned order of the learned Commissioner of Income Tax u/. 263 of the Income Tax Act, 1961 deserves to be cancelled/annulled. 6. That appellant craves leave to modify/add/or delete any ground(s) of appeal before or at the time of hearing of the appeal. 2. The facts in brief of the case are that the assessee, a partnership firm, during the relevant year was a distributor of M/s Haldiram Manufacturing Co. Private Limited for the state of Uttaranchal as well as engaged in normal trading activity of different food items. Original assessment in the case was completed under section 143(3) of the Act on 22/12/2010 on total income of ₹ 16,41,336/- after making addition of ₹ 10 lakh on lump sum basis towards disallowance against travelling, labour expenses, freight expenses etc. over and above the income declared by the assessee. The learned Commissioner of Income Tax (in short the CIT ) considered following points for exercising her jurisdiction under section 263 of the Act: (i) The net profit shown by the assessee on turnover of ₹ 18,76,26,647.72/- was very less and the commission/other income was grossly set off against the expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 142(1) of the Act by the Assessing Officer in the course of scrutiny proceedings. Further, she also submitted that the proceedings under 263 of the Act were initiated in the case of Sh. Sunil Arora for assessment year 2008-09, who is relative of the partners of the firm and was engaged in the similar activity of distributor of M/s. Haldiram Manufacturing Co. Ltd. and the learned CIT also observed issues identical to the issues raised in the case of the assessee, however the Tribunal in order dated 08/04/2015 in ITA No. 3415/Del/2013 set aside the order of the learned CIT, accordingly she requested for setting aside of the impugned order. 5. On the other hand, the learned CIT(DR) relying on the order of the CIT submitted that the Assessing Officer should have rejected the books of accounts of the assessee in view of the observations in the tax audit report. She further submitted that no enquiries were conducted by the Assessing Officer to examine the low profit rate of the assessee. In support of her contention, she relied on the judgments of the Hon ble Delhi High Court in the case of Gee Vee Enterprises Vs. Additional Commissioner of Income Tax (1975) 99 ITR 375 (Delhi) and D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re fact that the AO chooses not to incorporate certain issues in the assessment order on which he gets satisfied during the course of hearing after proper examination, cannot be lead to the passing of an erroneous assessment order. If material on record suggests that the AO did embark upon the investigation and got satisfied and further there is nothing to prompt further investigation, then the assessment order cannot be characterized as erroneous simply because there is no discussion in the assessment order on such aspects. If a view is taken that non-discussion of an issue in the assessment order on which the AO is satisfied, means the absence of application of mind by the AO, then probably all the assessment orders would become erroneous. It is so for the reason that the AO cannot be expected to discuss each and every, significant or insignificant aspect of assessment, in his order. The essence of the matter is that on the non-discussed relevant issues in the assessment order, so long as there is material to suggest that the AO conducted inquiry and the assessee did file reply on them, the assessment order cannot be held as erroneous, until it is shown that the circumstances req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ad hoc net profit rate, unsubstantiated with any cogent reason. 6. The Id. AR has drawn our attention towards elaborate detail of all the expenses, etc., which were called for and submitted before the AO, whose copies have been made available to us as well. It can be seen from the order sheet entry of the AO dated 4.8.2010 that the AO did ask for details of Discount on sales and Commission etc., along with all other expenses, which were duly filed. Simply because such expenses account for a higher amount, cannot in itself be a reason to hold that the assessment order, allowing deduction for such expenses, is rendered erroneous and prejudicial to the interest of the Revenue. 7. It is vivid from the assessment order itself that some of the expenses claimed as deduction were on the basis of self-made vouchers. The Id. AR contended that these were petty payments on account of freight, carriage, etc. made to rickshawalaas etc., for which there could have been no external evidence. We find that the AO, on appreciation of entire material available before him, made an ad hoc addition of ₹ 1 lac to cover up possible leakage of revenue on account of self-made voucher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed details of commission receivable, documentary proof for the expenses claimed on wages, salary, staff welfare and labour charges, justification for expenses claimed on conveyance and travelling, freight charges along with other details. Again on 12/11/2010 certain queries were raised. The order sheet entries dated 30/11/2010 divulges that representative of the assessee appeared and produce books of account, which were checked on test check basis and specific observation was made that most of the vouchers were handmade in respect of travelling, labour and freight expenses and the assessee was asked to explain the same. Again on 10/12/2010, the representative of the assessee appeared and filed reply to show cause issued by the Assessing Officer. Thus, the order sheet entries and the query letters issued by the Assessing Officer sufficiently demonstrated that the assessee was called upon to produce books of accounts and which were produced and test checked by the Assessing Officer. The Assessing Officer also has examined the various expenses particularly travelling, labour and freight expenses and after taking into consideration the explanation of the assessee dated 10/12/ 2010, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Revenue on the issue of low net profit shown by the assessee. We, therefore, set aside the action of the learned CIT in making an addition of ₹ 90,46,447/- by applying net profit rate of 5% in ad-hoc manner. 10. As regard to the point that whether the TDS applicability on the rent payment of ₹ 5,55,400/- in profit and loss account was not verified by the Assessing Officer in the scrutiny proceedings, we find that the details in respect of rent account was filed by the assessee in its reply dated 07/09/2010, which are available on page 34 to 36 of the paper book. We find that each rent payment made is less than the statutory limit provided in the provisions of the Act related to the TDS. This fact has also been verified by the Assessing Officer in proceedings consequent to 263 proceedings, and amount of the rent paid to single person was below ₹ 1,20,000/- and, therefore, not liable for TDS. Therefore, the findings of the learned CIT on the issue was without proper appreciation of the facts available on record. In our view, there is no error on the part of the Assessing Officer on this issue. 11. In the case of Kavadi Narshimha (supra) cited by the learned ..... 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