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TMI Blog2014 (2) TMI 1291X X X X Extracts X X X X X X X X Extracts X X X X ..... see is paying interest to creditors. (b) No interest has been charged on the advance of Rs. 11.00 Lac given to Sh. Namokar as advance for property purchased. (c) No interest has been charged on trade debtors of Rs. 2,52,000/- of M/s Falodi Earth Movers. (d) No details obtained regarding Rs. 40,800/- of sales tax demand. (e) No deduction regarding house hold expenses and not made any addition in this account. (f) The assessee has claimed shortage in dhania @ 3.75% which is on higher side and is not genuine in this line of business. (g) Weight of Bardana has not been accounted for in the weight of goods purchased by the assessee. Which is contrary to the facts and such a finding being perverse, the impugned action is bad in law without jurisdiction and being void ab initio, the impugned order u/s 263 of the Act kindly be quashed. 3. That the Ld. CIT is erred in law as well as on the facts of the case in setting aside the assessment to be made afresh with the direction to re-examine the issue in the light of his observation. The same is being purely contrary to the provisions of law, therefore, the impugned order u/s 263 of the Act kindly be quashed. 4. The appellant p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is on higher side and is not genuine in this line of business but the Assessing Officer did not examine this issue properly. (vii) As per details copies of trading accounts and details of, dhania & sarson account on monthly basis in terms of quantity and amount filed by the assessee, it is found that bardana in number 44029 has been consumed by the assessee in packing of the goods purchased, sold & remained in closing stock. But as per the quantitative month wise details, it appears that the weight of bardana has not been accounted for in the weight of goods purchased by the assessee during the year which resulted either the weight equal to bardana i.e. 44029 kg. which includes all the items of agriculture produce dealt in by the assessee during the year were sold out of books or remained with the assessee as closing stock for which the value has not been shown by the assessee. This issue has not been examined by the AO nor any such information is available on record from assessee's side". 4. On receipt of proposal under section 263 of the Act from the ITO, Ward-1(2), Kota, a show-cause notice under section 263 of the Act dated 11/01/2013 was issued. The assessee file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is issue." The business of assessee is trading in food grain & commission agent. The Commission Agent means Kachcha Adatiya" getting Adat commission from farmers on goods sold by them at Krishi Upaj Mandi Samiti Yard. The rite of Adat commission is fixed by Krishi upaj Mandi samiti. During the year under consideration assessee has earned Adat commission of Rs. 1589512/-, which is credited in Trading A/c. In general system of Adat business, Kachcha Adatiya gives Advance to farmers at cropping time for purchasing seeds, diesel, khad fertilizers etc. The farmer who is getting advance from Kachcha Adatiya sales his crop goods in the Adat of Kachcha Adatiya. Kachcha Adatiya gets Adat commission on crop sold by farmer on the sale consideration. The Kachcha Adatiya adjusts his old dues (advance taken by farmer on crop) and makes balance payment to farmer. It is the regular process of business to lend advance money to farmers on crop time and farmers sale their crop with the help of Kachcha Adatiya for getting good price of their crop, for which Adatiya gets commission. The advance given to farmers without interest is part of this business and has to be given to bound the farmers for b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eller that he does not charge the interest on remaining payment from buyer 'for giving the period for making final payment. Generally, neither interest is to be paid by buyer nor recovered by seller on balance payment. This is also the system of such transactions. Assessee has advanced Rs. 11.00 lacs to one Shri Namokar Mal Jain, the capital balance of assessee is Rs. 21.31 Lacs as on 31/03/2010 and the amount paid Rs. 11.00 lac is covered from capital balance of assessee. There is no interest bearing funds have been used in advance given for property. (iii) "In the debtors list, you have shown M/s Falodi Earth Movers as trade debtors and no interest has been charged on the amount of Rs. 252000/-. The said firm appears to be your sister concern. The AO has not examined the debtors nor has taken any documentary evidence or ledger account to justify why interest has not been charged on the above sum." The amount has been paid to M/s Falodi Earth Movers Rs. 2.52 Lacs and it is subsequently recovered from party. The question regarding charging of interest on amount paid Rs. 2.52 lacs does not arise because the assessee is having sufficient capital balance of Rs. 21.31 Lacs in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... photocopy copy of the acknowledgement of the I.T. Return and photocopy of the statement of affairs and capital A/c of wife Smt. Rajni Gupta is enclosed. "(Page 13 to 14) On the perusal of query raised "by AO and reply filed by assessee on particular query of H/H expenses, your goodself would find that proper enquiry has been made by AO on this issue. This is not a case of lack of enquiry or no enquiry from AO side. The assessee has replied for household exp. with complete documentary evidence which is lying in the assessment records. Reference has been made to the decision of Hon'ble Allahabad High Court in the case of Anil Bulk Carriers (P) Ltd. vs. CIT (2005) 194 CTR (All.) 226 : (2OO5) 276 ITR 625 (All). The quantum of amount of H/H expenses is depend upon person to person and it could not be said that addition should be made on each and every transaction/issue of assessee. It is further submitted that on the perusal of Assessment Order your good self would find that there is an addition of Rs. 1.50 lacs has been made in the income of assessee and assessee has not preferred any appeal for that addition. AO has not made separate addition in H/H exp it does not mean h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts, it could not be said that he had not applied his mind. It is not necessary that the every assessee in the line of business should have the same rate of profit." When the assessing officer had considered all the relevant material on record, it was basically a question of facts and it could not be interfered with unless the finding of the Tribunal was found perverse. Considering the material on record, it could not be said that finding of the Tribunal was perverse. Therefore, the Tribunal was correct in cancelling the order under section 263." It is submitted that department can assume jurisdiction under section 263 of Income tax Act if twin conditions of the order being erroneous and prejudicial to the interest of the revenue are satisfied. If the view taken by the A.O. is one of the possible views then learned CIT cannot assume jurisdiction. For this purpose reliance has been placed on the followings decisions: 1. Malabar Industrial Co. Ltd. v. CIT [2000] 243ITR 83 (SC) 2. CIT VS MAX INDIA LTD.(2007)213 CTR 266(SC) It is further submitted that proceedings under s. 263 cannot be taken on the ground that the AO has not made sufficient enquiry. The learned CIT can as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may choose not to exercise his power of revision. This is for the reason that if a query is raised during the course of scrutiny by the AO, which was answered to the satisfaction of the AO, but neither the query nor the answer was reflected in the assessment order, this would not by itself lead to the conclusion that the order of the AO called for interference and revision. In the instant case, for example, the CIT has observed in the order passed by him that the assessee has not filed certain documents on the record at the time of assessment, assuming it to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not for the CIT to decide upto what extent enquiry is to be made. It wilt be useful to reproduce the held portion of the case: "that when the AO proceeded to make the assessment order, he was fully aware of those documents, which were found during the course of survey and for his satisfaction he required the assessee to produce books of account, bills, vouchers, details of the students and other explanations. It is not a case of no enquiry, but a case of no proper enquiry. According to CIT's notice as well as order under s. 263, the AO has conducted enquiries, but he failed to conduct proper enquiries. The use of word 'proper enquiries' is a matter of subjectivity. It is for the AO to decide what enquiry and upto what extent he would like to conduct the enquiry and not the CIT. It is not the CIT to decide that upto what extent, enquiry is to be made, but in fact, it is the AO to decide the matter and to draw inferences. Once the AO has drawn inference after making enquiry, the CIT does not have any jurisdiction under s. 263 to cancel the assessment order. Endless enquiry is not possible and the enquiry has to be closed at some stage. It is for the AO to decide to end the enq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nations of the assessment records reveal that the AO completed the assessment in a routine manner. I find that it is not only the lack of verification but also mistaken view of law which has made the order erroneous and prejudicial to the interest of revenue." Ld. CIT set aside the assessment with a direction to the Assessing Officer to frame it denovo after making proper enquiry and verification of the books of accounts and other records/documents. Now the assessee is in appeal. 6. Learned counsel for the assessee submitted that in the present case, assessment was framed under section 143(3) of the Act. Thereafter, Assessing Officer moved a proposal under section 263 of the Act dated 01/04/2011 to the Ld. CIT for revision of the assessment order and a show cause notice dated 11/01/2013 was then issued by the ITO (Tech.) to the assessee reference was made to the 3rd para of the impugned order. It was further stated that consequently, the Ld. CIT passed the order under section 263 of the Act holding that the assessment order passed by the Assessing Officer under section 143(3) of the Act was without due and proper enquiry and was mistaken view of law which had made the order erron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame for any proceeding under section 263 of the Act. Therefore, it can be said that the Ld. CIT had not applied his mind but the matter was referred by the Assessing Officer for initiating the proceeding under section 263 of the Act. In the present case, from para 3 of the impugned order, it is noticed that the notice dated 11/01/2013 under section 263 of the Act was issued only on receipt of the proposal under section 263 of the Act from the ITO, Ward-1(2), Kota and the assessee explained, vide written submission which has been reproduced in para 4 of the impugned order, each and every objection raised by the ITO, Ward-1(2), Kota. It is well settled that the Ld. CIT while exercising the revisionary powers under section 263 of the Act may call for and examine the records of any proceedings and thereafter if he considers that any order passed therein is erroneous insofar as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justified. Therefore, before taking any action, Ld. CIT himself shal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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