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Nallamilli Satyanarayana Reddy And Others Versus DCIT, Circle-1, Kakinada

2018 (2) TMI 870 - ITAT VISAKHAPATNAM

Revision u/s 263 - how order passed by the AO was erroneous and prejudicial to the interests of the Revenue ? - Held that:- In the instant case, the assessee has provided the entire information to A.O. at the time of assessment, which was being verified by the A.O. before completing assessment. This is evidenced by the questionnaire issued by the A.O. as well as the information furnished by the assessee at the time of assessment. - In the consequential order passed u/s 143(3) r.w.s 263 of t .....

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de the order of Ld. Principal Commissioner of Income Tax. - Decided in favour of assessee - I.T.A.No.33/Vizag/2016 - Dated:- 9-2-2018 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Shri G.V.N. Hari, AR For The Respondent : Shri Deba Kumar Sonowal, DR ORDER PER D.S. SUNDER SINGH, Accountant Member: This appeal filed by the assessee against order of the Principal Commissioner of Income Tax-2 (PCIT), Visakhapatnam vide F.No.Pr.CIT- 2/VSP/263/1 .....

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mmissioner of Income Tax has taken up the case for revision and found that the order passed by the Assessing 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 ₹ 6.06 crores and Reserves & Surplus of ₹ 4.38 lakhs which were not examined by the A.O. (ii) The claim of the assessee of ₹ 1.01 crores interest was not examined by the A.O. (iii) There was no proof of examination .....

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ich 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)The A.O. has not verified the payments made in violation of section 40A(3) of the Act even though audit report was given with a remark of subject to verification. (ix) The assessee had .....

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by the order of the Ld. PCIT, the assessee is in appeal before this Tribunal. During the appeal hearing, the Ld. Counsel of the assessee argued that the Ld. Principal Commissioner of Income Tax has taken up the case for revision and set aside the assessment order for insufficiency of enquiry but not for lack of enquiry and argued that the Ld. PCIT is not permitted to invoke the jurisdiction under section 263 for inadequate enquiry. In the assessee s case, it is submitted by the Ld. A.R. that th .....

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iabilities the A.O. has verified with the books of accounts and vouchers during the assessment proceedings. The same books of accounts were also produced before the Ld. Principal Commissioner of Income Tax at the time of revision proceedings and no defect was found by the revenue. With regard to the lorries, tanker and tractor, it was explained by the Ld. A.R. that the lorries, tanker and tractor were used by the assessee for it s business purpose, hence there were no receipts and the same was e .....

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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 n .....

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he course of assessment. The Ld. A.R. also invited our attention to page Nos.130 to 139 of the paper book referring various details filed by the assessee before the A.O. The Ld. A.R. further submitted that the A.O. has passed the consequential order u/s 143(3) r.w.s. 263 of the Act giving effect to the order of the Ld. Principal Commissioner of Income Tax u/s 263 of the Act, and the A.O. has not made any specific addition in respect of the issues raised by the Ld. PCIT, except estimated addition .....

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nquiries. It is a case of the Ld. Principal Commissioner of Income Tax that the A.O. has made inadequate enquiries and not placed the necessary copies of evidences furnished during the assessment. The Ld. A.R. further argued that the Ld. Principal Commissioner of Income Tax is not permitted to make revision u/s 263 of the Act unless the assessment made by the A.O. is found to be erroneous and prejudicial to the interest of the revenue. In this case, the Ld. Principal Commissioner of Income Tax h .....

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chase and sale of paddy rice and it s by products. The Ld. Principal Commissioner of Income Tax has taken up the case for revision u/s 263 of the Act for not conducting enquiries and investigations in respect of the expenses as per para 3.1 of the show cause notice with regard to rice cutting, salaries, bank interest, FCI cuttings, HPCL expenses, low profit, additions to assets, introduction of fresh capital, qualified remarks of the audit report, sales tax, current liabilities and current asset .....

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nd 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 th .....

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ed by the A.O., hence no case for revision and no violation. The Ld. Principal Commissioner of Income Tax is empowered to take up the revision u/s 263 of the Act, if the A.O. has not made any enquiries but not for inadequate enquiries. Inadequate enquiry cannot be a reason for revision u/s 263 of the Act. In the instant case the Ld. PCIT is of the view that the AO has not conducted the enquiries as per his expectations. For revision of the assessment order, the assessment order passed by the A.O .....

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of or inadequate enquiry. This view is supported by the decision of ITAT, Kolkata B Bench in the case of Vinod Aggarwal Vs. Principal CIT (Central) Kolkata (2018) 80 Taxmann.com 171. For ready reference and clarity we extract the relevant parts of the Hon ble ITAT s order supra which reads as under: 27. As pointed out by the Supreme Court in Malabar Industrial Co.'s case (supra), the prerequisite to the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the .....

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rse 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 app .....

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e interests of the Revenue. For example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law. 28. The Hon'ble Bombay High Court in the case of Gabriel India Ltd. (supra .....

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an order can be said to be erroneous. An order cannot be termed as erroneous unless it is not in accordance with law. If an ITO acting in accordance with law makes certain assessment, the same cannot be branded as erroneous by the Commissioner simply because according to him the order should have been written more elaborately. This section does not visualise a case of substitution of judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be errone .....

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