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TMI Blog2018 (2) TMI 870X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer (A.O.) was erroneous and prejudicial to the interest of the revenue due to following reasons: (i) There were current liabilities to the extent of Rs. 6.06 crores and Reserves & Surplus of Rs. 4.38 lakhs which were not examined by the A.O. (ii) The claim of the assessee of Rs. 1.01 crores interest was not examined by the A.O. (iii) There was no proof of examination of claims and liabilities and no cross verification was made by the A.O. with corresponding parties. (iv) As per the audit report, the unsecured loans, vouchers for expenditure, etc. were subject to verification. An amount of Rs. 15.66 lakhs was shown in the balance sheet as unsecured loans and Rs. 5.6 crores of expenses were claimed in the P&L account under various heads leaving meager net profit of Rs. 4.74 lakhs. (v)The A.O. has not verified the addition to fixed assets for which the assessee has claimed the depreciation. (vi)There was a current asset in the name of T. Neelima and the A.O. has not obtained any information in respect of the above asset. (vii) There was an introduction of capital in the capital accounts. The A.O. has not examined the source for increase in capital. (viii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f accounts, which were duly verified by the A.O. In respect of Smt. Neelima, the debtor, which was appearing as an asset, the Ld. A.R. submitted that she is a partner in the firm and at the time of assessment, the assessee had produced the books of accounts, which was verified by the A.O. She has over drawn the amounts, hence it was shown as an asset and interest was also charged. With regard to the increase in capital account, there was introduction of capital in the case of one of the partners Mr. T.Venkata Reddy, whose source was explained to the A.O. and also furnished the PAN Number of the partner and stated that Mr. T.Venkata Reddy was also assessed to tax. With regard to the remarks in the audit report in form No.3CD, the remarks made by the accountant were of routine nature and the same were verified from the books of accounts at the time of assessment. The Ld. A.R. referred our attention to page No.25 of the paper book, wherein the A.O. has issued the questionnaire on various issues including the details of current assets and provisions, details of reserves, details with regard to deposits exceeding Rs. 20,000/-, various expenses, copies of bank accounts, etc. and submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuttings, HPCL expenses, low profit, additions to assets, introduction of fresh capital, qualified remarks of the audit report, sales tax, current liabilities and current assets etc.. The Ld. PCIT also observed that the no evidence has been placed on record by the AO. The Ld A.R. submitted that the details called for by the AO were furnished at the time of assessment and the same were verified by the AO before completing the assessment. On verification of the assessment order, it is observed that the assessee had produced the books of accounts, which was verified by the assessing officer. With regard to the net profit, the expenses incurred, addition to fixed assets and loans given to the partner, nature of current liabilities, reserves and surplus, all these issues and the remarks made by the accountant required to be verified from the books of accounts and there is no dispute that the assessee had produced the books of accounts, before the A.O. and verified the same. This fact is evidenced by the assessment order. Whether the A.O. has placed any evidences in the assessment record or not is discretion of the AO and is not the case for revision u/s 263 of the Act. With regard to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue or if it is not erroneous but is prejudicial to the interests of Revenue-recourse cannot be had to section 263(1) of the Act. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the Revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The phrase 'prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an ITO adopted one of the courses permissible in law and it has resulted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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