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2016 (7) TMI 614 - ITAT KOLKATA

2016 (7) TMI 614 - ITAT KOLKATA - TMI - Revision u/s 263 - Held that:- CIT did not make any specific observation as to how the order of the AO is erroneous and prejudicial to the interest of Revenue as it is a condition precedent to invoke the jurisdiction under section 263 of the Act. Therefore, in the absence of such observation, the impugned order before us is not in accordance with law. - Decided in favour of assessee - ITA No.2300/Kol/2013 - Dated:- 8-7-2016 - Shri M. Balaganesh, A.M. & .....

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me on 29.09.2008 declaring total income of ₹ 2,77,976/-. The return of income was processed u/s.143(1) of the Act on 31.03.2010. 3. There was a survey conducted by the revenue u/s.133A of the Income Tax Act, 1961 (Act) in the business premises of the Assessee on 25.1.2008. In the course of survey the material found by the Revenue was that the Assessee recorded sales of ₹ 2,46,23,315/-. But in the P/L account it was shown only at ₹ 2,07,65,620/- and the sale transactions not rec .....

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only when the parts suit their needs they purchase automobile parts. They may return the goods if the automobile parts do not suit their purpose. The sale transaction in such case is not recorded in the books of accounts and only on customer s approval the sale is recorded in the books of accounts. Therefore there was no transaction of sale which is not recorded in the books of accounts. 4. This plea of the Assessee was not accepted by the AO in the course of assessment. He held that the Assesse .....

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les recorded in the books of accounts was 7.53%. However in the statement recorded at the time of Survey the Assessee had in answer to question no.2 stated that the Gross Profit in his business would vary between 15.5% and 53%. The AO therefore applied 17% Gross profit on unrecorded sales of ₹ 6,55,808/- and made an addition to the total income of the Assessee. The AO passed the order u/s.143(3) of the Act on 22-12-2010. 6. The CIT in exercise of his powers u/s.263 of the Act, was of the v .....

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een added as income of the Assessee. 7. In reply to the proposal of the CIT stated above, the Assessee submitted that the AO was in possession of the entire documents, records and books of accounts found at the time of survey and only on examination of all those documents the AO has come to a conclusion that an addition of Gross Profit on sales not recorded in the books of accounts could be added as income. The Assessee pointed out that when the AO in exercise of his powers after due enquiry had .....

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enue are established. The Assessee placed reliance on the decision of the Hon ble Bombay High Court in the case of CIT Vs. Gabriel India Ltd. 203 ITR 108 (Bom.) for the above proposition. The Assessee also pointed out that since unrecorded sales are made throughout the year, unrecorded purchases were also made throughout the year. The profit margin on sale and the realization from sale would be sufficient source of funds out of which the Assessee would have made purchases and hence no separate a .....

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ertheless concluded that the Gross Profit adopted by the AO for making addition on account of income from unrecorded sales was proper. He went on further to add that the element of unaccounted purchase ought to have been added by the AO and the order of the AO without going into this aspect has resulted in underassessment of income. The CIT further held that if purchases and sales recorded in the books of accounts are correlated then gross profit rate can be applied and income from unrecorded sa .....

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n appeal before the Tribunal. 10. The ld. Counsel for the assessee relied on the order dated 15.01.2016 passed by this Tribunal in ITA No.2299/Kol/13 and the ld. D.R. relied on the order of the C.I.T. 11. Heard the rival submissions and perused the material on record. We find that the aforesaid order as relied on by the assessee and the issue therein is identical to the facts of the case on hand. We also find that the addition made was consequent to the survey dated 25.01.2008. Äs rightly p .....

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on unrecorded sales. That order was revised by the CIT in exercise of his powers u/s.263 of the Act by an order dated 23.3.2012. In the said order the CIT gave similar directions as was done in AY 2006- 07. The said order was challenged by the Assessee before the ITAT in ITA No. 1245/Kol/12 and this Tribunal by its order dated 16.5.2013 was please to quash the order of the CIT u/s.263 of the Act. The said order of the Tribunal has however been reversed by the Hon ble Calcutta High Court in G.A. .....

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for consideration in this appeal is as to whether the CIT rightly invoked jurisdiction u/s.263 of the Act. We have heard the submissions of the learned counsel for the Assessee and the learned DR. The learned counsel for the Assessee reiterated submissions made before the CIT and the learned DR relied on the order of the CIT. 13. We have given a careful consideration to the rival submissions. It is seen from the order of the AO that the AO rejected the claim of the Assessee that the unrecorded s .....

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ted @ 17%. And the same is added back to the total income of the assessee. No further expenses are allowed as assessee has already debited huge expenses (Addition ₹ 38,470/-) 14. It is clear from the above observations of the AO and the observations in para-3 of the order of assessment that he had taken due cognizance of all debit items in the profit and loss account, the tax audit report, the impounded documents, statement recorded during Survey and during assessment proceedings, books an .....

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Such a course of action is open only in cases of "lack of enquiry". Although apparently the assessment does not give any reasons why purchased were not being added as income, that by itself would not be indicative of the fact that the AO has not applied his mind to the issue. AO is not required to give detailed reason in respect of each and every item of deduction in the assessment order. AO had called for explanation regarding suppressed sales and the assessee had furnished his explan .....

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