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2016 (12) TMI 1072 - ITAT VISAKHAPATNAM

2016 (12) TMI 1072 - ITAT VISAKHAPATNAM - TMI - Revision u/s 263 - Held that:- On perusal of the details available on record, we find that the A.O. has conducted detailed enquiry and also examined all the issues pointed out by the CIT in the show cause notice. The assessee has explained each and every issues with necessary evidences. Therefore, we are of the view that, the CIT cannot assume jurisdiction to revise the assessment order, once assessee explained that it had filed all the details bef .....

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order passed by the A.O. u/s 143(3) of the Act dated 9.12.2009 is not erroneous in so far as it is prejudicial to the interest of the revenue. -Decided in favour of assessee - I.T.A. No. 277/Vizag/2012 - Dated:- 25-11-2016 - Shri V. Durga Rao, Judicial Member And Shri G. Manjunatha, Accountant Member Appellant by : Shri G.V.N. Hari, AR Respondent by : Shri M. Bhupal Reddy, DR ORDER Per G. Manjunatha, Accountant Member This appeal filed by the assessee is directed against order of the CIT, Rajahm .....

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onse to notices, the authorized representative of the assessee appeared from time to time and furnished books of accounts and other information called for. The assessment was completed u/s 143(3) of the Act on 9.12.2009 determining total income of ₹ 47,51,057/- by making additions of ₹ 5,65,570/- towards disallowance of certain expenditures for failure to produce proper bills & vouchers and also by invoking provisions of section 40(a)(ia) of the Act for non-deduction of tax at so .....

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n so far as it is prejudicial to the interest of the revenue in terms of section 263 of the Act. The CIT, in the said show cause notice, observed that the A.O. completed assessment without verifying the issues mentioned in the show cause notice. The CIT, further, observed that the A.O. has completed assessment by making adhoc disallowance of expenditure, however, failed to examine the core issues such as packing and forwarding expenditure claimed by the assessee with reference to necessity of in .....

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s from farmers with reference to relevant evidences in the form of confirmation letter from sundry creditors and farmers. The A.O., without examining these issues, simply completed assessment by making certain adhoc disallowances under few heads of expenditure, which rendered the assessment order erroneous in so far as it is prejudicial to the interest of the revenue. With these observations, issued a show cause notice and asked to explain why the assessment order shall not be revised under the .....

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nd vouchers and other relevant information at the time of assessment proceedings, in response to a show cause notice issued by the assessing officer on various occasions. The A.O. has issued various show cause notices and called for specific details about the expenditure debited to P&L account, confirmation letter from sundry creditors and deposit from farmers and also examined the issue of net profit admitted by the assessee. It was further submitted that the A.O. has sought each and every .....

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ld to customers. The packing material has been purchased for the purpose of packing poultry eggs in various sizes which requires huge packing materials so as to pack the materials. The A.O. after examining the details of packing materials purchased with reference to bills and vouchers has chosen to accept the expenditure claimed by the assessee. 5. In so far as low net profit is concerned, the assessee has furnished details of expenditure debited to profit & loss account and also explained t .....

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ee. Similarly, in respect of deposits from farmers, it is the common practice in this line of business that the traders will keep 2 to 3 days sales as deposit from farmers which fact was explained to the assessing officer by filing necessary evidences. The A.O. after satisfied with the explanations furnished by the assessee has accepted the deposit from farmers. As regards investments in M/s. Sanjay Craft Papers Pvt. Ltd., the assessee has filed a confirmation from the party to prove the investm .....

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voke the provisions of section 263 of the Act. 6. The CIT after considering submissions of the assessee, held that the assessment order passed by the A.O. u/s 143(3) of the Act, dated 9.12.2009 is erroneous in so far as it is prejudicial to the interest of the revenue, as the A.O. has failed to examine the issue pointed out in the show cause notice with reference to supporting evidences. The CIT, further, observed that the A.O. has completed assessment by making adhoc disallowance of expenditure .....

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diture claimed by the assessee. The CIT, further, observed that on perusal of the assessment records, it was noticed that there is no iota of evidence in the records to show that the A.O. has called for confirmation letter from sundry creditors and from farmers to examine the sundry creditors and deposit from farmers claimed by the assessee. The A.O. also failed to examine the net profit declared by the assessee, even though the assessee has declared a meager 0.39% net profit on a huge turnover .....

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ating officer as well as assessing authority and therefore, he is required to verify the details and obtain cogent evidences on record before finalizing the assessment. It is trite law that failure on the part of the A.O. to make enquiry on relevant points would make the assessment order erroneous and prejudicial to the interest of the revenue. It is well established that the assessing officer did not examine the issues properly and completed the assessment without appreciating the facts. With t .....

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assessee, submitted that the assessment order passed by the A.O. u/s 143(3) of the Act dated 9.12.2009 is not erroneous in so far as it is prejudicial to the interest of the revenue, as the A.O. has examined all the issues pointed out by the CIT, in the show cause notice. The A.R. further submitted that the CIT was not correct in directing the A.O. to conduct further enquiries with regard to the issues which were already examined by the A.O. at the time of assessment. The A.R., referring to the .....

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y the assessee has chosen to make certain adhoc disallowance for want of proper bills and vouchers in respect of certain expenditure. From this, it is abundantly clear that the A.O. has examined each and every item before completion of assessment, therefore, the CIT was not correct in holding that the A.O. has not conducted proper enquiry before completion of assessment. The Ld. A.R. further submitted that the CIT cannot take up revision on the issues which were already examined by the A.O. by h .....

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both the parties, perused the materials available on record and gone through the orders of the authorities below. The CIT, assumed jurisdiction to revise the assessment order for the reason that the A.O. has not conducted proper enquiry on certain issues before completion of assessment, thereby the assessment order passed by the A.O. u/s 143(3) of the Act dated 9.12.2009 is erroneous in so far as it is prejudicial to the interest of the revenue. The CIT, revised the assessment order for the reas .....

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d that the assessee has declared a meager net profit of 0.39% on a huge turnover of ₹ 107.34 crores, however, the A.O. without analyzing the net profit declared by the assessee, simply completed assessment by making certain adhoc disallowances. The A.O. not only failed to examine the issues, but also failed to apply his mind on various issues which rendered the assessment order erroneous in so far as it is prejudicial to the interest of the revenue. 10. It is the contention of the assessee .....

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d filed all the details as indicated by the assessing officer in his order and the A.O. after considering the details furnished by the assessee chosen to accept the explanations of the assessee with regard to the issues pointed out by the CIT, therefore, the CIT, cannot consider assessment order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of the revenue. The assessee further submitted that it has explained the necessity and reasonableness of packing materials e .....

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pletion of assessment. We further observed that the A.O. has issued show cause notice, wherein he had specifically called for details about expenditure and other issues pointed out by the CIT. The assessee has furnished bills and vouchers in respect of expenditure debited in the profit & loss account and also furnished confirmation letter from sundry creditors wherever the creditors balance exceeds ₹ 1 lakh. The assessee also furnished details of deposit from farmers and explained that .....

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ry on the part of the A.O. in examining the issues referred to in the show cause notice. The CIT questioned the issues right from verification of packing materials expenditure to examination of advances given to Directors. The assessee has filed a paper book which contains the details furnished before the A.O. at the time of assessment. On perusal of the paper book filed by the assessee, we find that the assessee listed out the issues pointed out by the CIT and the details filed by the assessee .....

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40(a)(ia) of the Act for failure to deduct TDS under respective provisions of the Act. Therefore, we are of the view that once the issues which were subject matter of revision u/s 263 of the Act, have been examined by the A.O. at the time of assessment, the CIT has no jurisdiction to entertain fresh enquiry on the same issues, because he had a different opinion on the issues. In our considered view, the issues pointed out by the CIT have been thoroughly examined by the A.O. at the time of asses .....

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CIT cannot assume jurisdiction u/s 263 of the Act. It is not necessary that every order which is erroneous may be prejudicial to the interest of the revenue or vice versa. In some cases the order passed by the A.O. may be erroneous, but it may not be prejudicial to the interest of the revenue or vice versa. Unless the order passed by the A.O. is erroneous and also prejudicial to the interest of the revenue, the CIT cannot assume jurisdiction to revise the assessment order, this is because the tw .....

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er, once assessee explained that it had filed all the details before the A.O. on the issues on which CIT wants further verification. It is the general presumption of law that the A.O. has considered all the details before completion of assessment, once the assessee has filed details called for by the A.O. But, the CIT cannot presume that the enquiry conducted by the A.O. is insufficient and also the A.O. has not applied his mind, unless the CIT proves that the assessment order passed by the A.O. .....

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ilar circumstances held that once the A.O. examined the issues on which the CIT wants further verification, the CIT cannot assume jurisdiction on the same issues which were already examined by the A.O. at the time of assessment by stating that the A.O. has conducted inadequate enquiry or there is a lack of enquiry. The relevant portion of the order is reproduced hereunder: CIT(A) assumed jurisdiction to revise the assessment order on the sole ground that there is a lack of enquiry on the part of .....

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S in respect of rent and hire charges. The A.O. after satisfied with the explanations furnished by the assessee has accepted the income returned. Therefore, ITAT are of the view that once the issues which are subject matter of revision u/s 263 of the Act, have been examined by the A.O. at the time of assessment, the CIT has no jurisdiction to entertain fresh enquiry on the same issues, because he has a different opinion on the issues. In ITAT considered opinion, the issue of net profit and TDS o .....

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the CIT cannot assume jurisdiction u/s 263 of the Act by holding that the order passed by the A.O. is lack of enquiry and also the A.O. has not applied his mind before completion of assessment. The relevant portion of the order is reproduced hereunder: The submission of the counsel for the Revenue was that while passing the assessment order, the AD did not consider the aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the asse .....

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iture. The counsel for the assessee is right in his submission that one has to keep in mind the distinction between 'lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders under s. 263, merely because he has different opinion in the matter. It is only in cases of 'lack of inquiry" that such a course of action would be open. The AD had called for explanation on this very item .....

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mpugned order even accepts this. Thus, even the CIT conceded the position that the AD made the inquiries, elicited replies and thereafter passed the assessment order. The grievance of the CIT was that the AD should have made further inquiries rather than accepting the explanation. Therefore, it cannot be said that it is a case of lack of inquiry'.-GT vs. Gabrial India Ltd. (1993) 114 (Bom) 81 (1993) 203 ITR 108 (Bom) relied on. Even the CIT in his order, passed under s. 263, is not clear as .....

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ssessee is questioned. However, that basis of the order vanishes in thin air when this very accounting practice, followed for number of years, had the approval of the IT authorities. Interestingly, even for future assessment years, the same very accounting practice is accepted. The assessee is a manufacturer of car parts. In the manufacturing process, dyes are fitted in machines by which the car parts are manufactured. These dyes are thus the components of the machines. These dyes need constant .....

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