TMI Blog2006 (12) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2002-03 in case of the assessee was made by the A.O. u/s 143(3) on 29.1.2004. Subsequently, the CIT examined the assessment records and issued a show cause notice dated 3.3.2006 as to why the assessment should not be modified being erroneous and prejudicial to the revenue on the following grounds: i) From your assessment records, it was noticed that you purchased shares of Tehri Pulp and Paper Mills for ₹ 29,20,000/- and shown as sold these shares at ₹ 7,30,000/-claiming a loss of ₹ 21,90,000/ . It is also seen from the records that Tehri Pulp and Paper Mills is your sister concern and shares of this company are not quoted in the stock exchange, which shows that the transaction is a shady. ii) In the ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g expenses of ₹ 21,39,45,807/- besides other administrative and financial expenses. Against these manufacturing expenses of ₹ 21,39,45,807/-, you have shown sales of ₹ 20,80,48,093/-. Thus the manufacturing result of your company is in negative. It is very strange that a prudent business man will sell its goods at a price lower than the cost. This aspect has also been left to be examined by the A.O. while completing the assessment. vi) Under the head 'income from other sources', you have shown commission receipt of ₹ 65,50,133/- and profit on sale of shares at ₹ 84,02,672/-, Source of such commission has not been examined by the A.O. while completing the assessment. 2.1 The assessee expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d accordingly cancelled the same to be made afresh. Aggrieved by the said decision, the assessee is in appeal before the tribunal. 2.3 Before us, the Ld. A. R. for the assessee argued that CIT had not applied his mind independently and had only acted on the advice of the A.O. in cancelling the assessment. CIT was required to examine the submissions made by the assessee and to give his own independent finding before holding that the assessment was erroneous and prejudicial to the interest of the revenue which had not been done. The order of CIT therefore, could not be sustained. He relied on several judgements of High Courts as mentioned below: i) 178 ITR 446 (P and H) in case of Kandla Rice Mills ii) 111 ITR 326 (Alld.) in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h had been given. The order of the A.O. could not be said to be erroneous simply because the A.O. did not make an elaborate discussion in the matter. The ld AR relied on the judgement of Hon'ble High Court of Bombay in case of Gabriel India Ltd. (203 ITR 108) for this proposition. It was thus urged that the order of CIT be set aside. CIT had cancelled the assessment without controverting the submissions made before him and without independent application of mind and the order therefore, should be set aside. 2.5 The Id CIT DR on the other hand strongly defended the order of CIT. It was argued that an assessment order is erroneous and prejudicial to the interest of revenue in case the A.O. failed to make inquiries which were required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment to be made afresh on the ground that certain aspects relating to assessment as mentioned in para 2 earlier had not been examined by the A.O. CIT had however, not given a detailed reason for rejecting the explanation given by the assessee. We have therefore to examine the material available on record to find out if the points raised by CIT really needed inquiry in the facts of the case and such inquiries were not made by the A.O. before completing the assessment. An order is erroneous not only because there is an apparent error of reasoning or of law but also because it is a stereotyped order which accepts whatever has been submitted by the assessee without conducting inquiry which are called for on the facts of the case, as hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s rendered. Similar is the position in relation to selling of goods at gross loss and commission income. The profit and loss account on face of it shows that there is gross profit but a careful perusal shows that profit was only because of commission and other income and after excluding the same, there is gross loss. In such a situation, there is strong possibility of showing commission as adjustment entry to help others to reduce their income because the assessee has no tax liability in view of loss. It was therefore, required to be examined whether it was a genuine commission income or only an accommodation entry. But we find that the assessee had only stated before the A.O. that the commission had been earned on procuring contracts / sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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