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2016 (11) TMI 1310 - ITAT HYDERABAD

2016 (11) TMI 1310 - ITAT HYDERABAD - TMI - Valadity of Revision orders u/s 263 - Held that:- The revisional authority ought to have made proper investigation and recorded appropriate conclusion to buttress his view that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue; He ought to have pointed out what more investigation is warranted in the facts and circumstances of the case. It may not be out of place to mention that the Pr. CIT passed a l .....

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estments into the shares of a sister concern are colourable the Ld. Commissioner, in our humble opinion, is not justified in holding that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. - We hold that the order passed by the Commissioner is bad in law and therefore, we quash and set aside the order passed by the Commissioner and allow the appeal filed by the assessee company. - ITA. No. 723/Hyd/2015 - Dated:- 21-10-2016 - Shri D. Manmoh .....

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ufacture and trading of MS Bars, MS Angles and MS Channels. For the year under consideration, it declared NIL income which was processed accordingly on 27.10.2011. Thereafter, the case was taken-up for scrutiny and a notice was issued under section 143(2) of the Act. A questionnaire was also issued to the assessee calling for various details. As noticed from the paper book, a notice under section 142(1) dated 27.12.2012 was issued calling-upon the assesseecompany to furnish complete details of t .....

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to furnish brief note on the nature of the business carried on during the previous year and all other financial statements along with annexures. In response thereto, the assessee furnished the following details : 1. Books of accounts of the company for the A.Y. 2010-2011 in printed format. 2. Confirmation of investment into the shareholding of the company by M/s. Starline Holdings Inc. and M/s. Sujana Metal Products Limited. 3. Ledger copy of share premium account. 4. Bank reconciliation stateme .....

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Officer further observed that the assessee leased-out its factory premises to M/s. Sujana Metal Products. It was further noticed that the assessee availed term loan for setting-up of factory and claimed an amount of ₹ 49,50,000 towards interest paid to APSFC. Since the assessee received a meager amount of ₹ 9 lakhs in the form of lease rental, the Assessing Officer observed that the interest paid to APSFC is not commensurate with the investment and thus treated the same as not conne .....

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well as prejudicial to the interests of the Revenue. The errors pointed-out in the notice were reproduced for immediate reference : (i) No enquiries were conducted into the alleged trading activity, which would be in the nature of round tripping because the entities with whom the activities are conducted are of the same group companies; (ii) The investment of $ 32,49,877/- by M/s. Starline Holdings Inc, 60 Market Square, PO Box No.374, Belize City, Belize @ ₹ 250/- per share (at a premium .....

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mere change of opinion. To substantiate the contention of the assessee-company he learned Representative adverted the attention of the Principal Commissioner to the questionnaire issued by the Assessing Officer wherein the assessee was called-upon to furnish gross profit/net profit margins shown with corresponding turnover for the current and past two years and the Assessing Officer had also directed the assessee to furnish the copies of the VAT returns and after considering all the details fil .....

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cer had not made any enquiries into the alleged trading activity and in particular the nature of round-tripping, which is based on the assumption that the entities with whom the activities are conducted are of the same group companies. In the reply furnished before the Pr.CIT it was contended that except the assumption of the Pr.CIT he had not specifically found anything regarding nature of round-tripping of the trading activity; Therefore, the revisional proceedings are bad in law. At best it c .....

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#8377; 250 per share etc. Before taking another view on the matter the Commissioner should point-out as to what further investigation would have been made by the Assessing Officer. It was thus, strongly submitted that the view taken by the Assessing Officer is one of the possible views on the matter and therefore, not amenable to the jurisdiction of the revisional authority. 5.1. The Ld. Pr. CIT agreed in principle that when there are two views possible and if Assessing Officer takes one of the .....

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order erroneous. Proceeding further, the Pr. CIT observed that the Assessing Officer failed to cause enquiries regarding the alleged trading activity pertaining to the entities with whom the activities are conducted. Further, investments by Sterling Inc., Belize City was not investigated by the Assessing Officer and documents were accepted at face value. He therefore, concluded that the matter requires re-examination by the Assessing Officer properly and accordingly, set aside the assessment ord .....

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rely carried-out trading activity in this year. Since he has called for all the details with regard to the investments made by the assessee, merely because the Commissioner holds a different view it cannot be alleged that the activity was in the nature of round-tripping. In fact, the Ld. Commissioner had not specifically mentioned as to how the activity can be considered as round-tripping activity and even he could not point-out as to how the investment into shareholding of Star Line Holdings et .....

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the order passed by the Assessing Officer is unsustainable and as a necessary consequence the assessment order cannot be considered to be erroneous and prejudicial to the interests of the Revenue. In this regard, the Learned Counsel for the assessee, strongly relied upon the decision of the Apex Court in the case of Malabar Industrial Co., Ltd, 243 ITR 83 wherein the Court observed that in order to invoke the provisions of section 263 of the Act, the CIT has to be satisfied with twin conditions .....

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r, is not required to give detailed reasons while accepting the plea of the assessee and what is required to be verified is, whether there was application of mind by an enquiry; once there is a proper enquiry it cannot be called as erroneous merely because the Commissioner entertains a different opinion on the matter. Learned Counsel for the assessee thus strongly submitted that the order passed by the CIT is bad in law inasmuch as there was no material on record to suggest that the order passed .....

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ents without application of mind the Commisisoner can invoke revisionary powers. 2. Rampyari Devi Saraogi vs. CIT (1968) 67 ITR 84 (SC) (A short stereo-typed assessment order, despite not producing evidence in respect of money lending business done and interest income shown to have been received by the assessee would be sufficient to come to the conclusion that the order passed by the Assessing Officer is erroneous.) 3. CIT vs. Infosys Technologies Ltd., 341 ITR 293 (Karnataka) (HC) (If the asse .....

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nterest paid to APSFC, and thus merely because the CIT holds a different opinion the order passed by the Assessing Officer cannot be said to be erroneous. He also relied upon the decision of Hon ble Delhi High Court in the case of D.G. Housing Project Ltd., 20 taxman 587 in support of his contention that the CIT cannot direct the Assessing Officer to conduct further enquiry to verify as to whether first order passed by the Assessing Officer is erroneous or not. In the said case the assessee sold .....

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he decides a question or aspect which is palpably wrong/unsustainable in law, it can be corrected by the Commissioner in exercise of revisional powers but in order to hold that the view taken by the Assessing Officer is wrong the Commissioner has to conduct necessary enquiry before passing an order under section 263; the Court further remarked that in cases where there is inadequate enquiry but not lack of enquiry, the Commissioner must give a finding that the enquiry is insufficient and in orde .....

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in the nature of round-tripping activity. The revisional authority jumped to the conclusion merely because the activity was within the same group of companies and such surmises should not be the basis for concluding that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. He also relied upon the decision of the Hon ble Mumbai High Court in the case of CIT vs. Credit Bank 196 taxman 329 wherein the Court observed that Assessing Officer having m .....

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ot specifically found anything before jumping to the conclusion, except on surmises, with regard to nature of round-tripping activity, and no further investigation was made by the Commissioner before holding that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the Revenue. 8. We have carefully considered the rival submissions and perused the record and we have also carefully gone through the case law relied upon by both the parties. There is no dispute .....

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