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2018 (4) TMI 635

ld order without bringing out any error whatsoever let alone an error which can be said to be prejudicial to the interests of the revenue. - On going through the Explanation 2 to section 263 of the act which has been inserted w.e.f. 01/06/2015 held that explanation cannot be said to have overridden the law as interpreted by various High courts and the High courts have consistently held that before reaching the conclusion that the order of the AO is erroneous and prejudicial to the interests of the revenue the Commissioner himself has to undertake some enquiry to establish that the assessment order is erroneous and prejudicial to the interests of the revenue. In the facts of the present case we find that no such exercise has been done. - Decided in favour of assessee. - ITA No. 771/Chd/2017 - 9-4-2018 - MS. DIVA SINGH, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER For The Assessee : Shri Tej Mohan Singh For The Revenue : Dr . Gul shan Raj ORDER PER DIVA SINGH, J.M. The present appeal has been filed by the assessee assailing the correctness of the order dated 29/03/2017 of Pr.CIT, Patiala pertaining to 2012 - 13 assessment year on the following grounds: 1. That the .....

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quashed. Reliance was placed upon the decision of the Supreme Court in the case of Malabar Industries Co. Ltd. Vs. CIT [243 ITR 831. Reliance was also placed upon the decision of Hon ble Bombay High Court in case of CIT Vs. Fine Jewellery (India) Ltd. [372 ITR 303]. Attention was also invited to the decision of the Hon ble Delhi High Court in the case of DIT Vs. Jyoti Foundation 357 ITR 388 for the proposition that in case the Reviewing Authority is of the view that there is inadequate enquiry then the Reviewing Authority must make enquiry and show that the assessment order is erroneous. Reviewing Authority it was submitted has no authority to remand. The scope of revision it was submitted was subject to the Pr.CIT demonstrating that the enquiry was inadequate. The Pr.CIT it was submitted was bound to give his own finding which has not been done. Similar proposition of law it was submitted has been laid down by the Delhi High Court in yet another case i.e; in the case of CIT Vs. Sunbeam Auto Ltd. 332 ITR 167. Accordingly it was his submission that the assessment order passed is neither erroneous nor prejudicial to the interests of the revenue. 2.1 Inviting attention to the paper b .....

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nner and has proceeded to reconsider the same facts without pointing to any error. It was submitted that apart from the reliance placed upon the decisions cited earlier and the facts argued reliance would also being placed upon the decision of the Hon ble Delhi High Court in the case of Pr. CIT Vs. Delhi Airport Metro Express Pvt. Ltd. copy of this decision dated 05/09/2017 in ITA 705/2017(Del) it was submitted is placed in case law paper book pages 1 to 5. Reliance was also been placed upon the decision of the Delhi Bench of the ITAT in the case of M/s Amira Pure Foods Pvt. Ltd. Vs. Pr. CIT dt. 29/11/2017 copy placed at paper book pages 6 to 42 of the paper book. Reliance was also placed in para 11 & 12 of the said decisions in the background of the claim that facts were identical. Paragraph 10 of the said decisions was specifically referred to. Attention was also invited to the specific finding in para 28 so as to highlight that it is not the case of the Pr.CIT that the relevant books of accounts alongwith supporting facts and evidences were not perused by the assessing officer thus in the circumstances it could not be held by him that it was a case of no enquiry. Reliance wa .....

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to examine/verify the large sundry creditors. The AO has not properly verified and no independent enquiry has been made. From the perusal of the assessment record, it appears that in most of the cases, copies of accounts have been furnished by you yourself. The AO made the addition by increasing the GP rate that too without rejecting the books of accounts. (ii) From the perusal of the assessment record, it has been noticed that the you sold two properties amounting to ₹ 18 lacs and ₹ 74.50 lacs and purchased a house for ₹ 1.84 crores, however, no independent enquiry appears to have been made about these transactions.. (iii) From the perusal of the assessment record, it has been noticed that the you sold 57050 unlisted shares amounting to ₹ 22,82,000/- showing long term capital gain of ₹ 13,97,948/- in a buy back scheme of company namely M/s Shivam Telecom. The genuineness of this transaction was required to be verified because you had substantial interest in the said company and which is a non listed company. Subsequently you claimed exemption u/s 54F(1) on purchase of residential property amounting to ₹ 1,84,68,500/-. The AO has not verified the .....

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ircle, Patiala in the case of assessee. The reasons for proposed action are also given in the aforesaid notice. At the outset, we respectfully submit that all the observations in the notice are incorrect, not supported by any material on record, wholly conjectural and result of failure to correctly appreciate the things in their proper perspective. However, we are extremely thankful for the respect shown to the principles of natural justice and granting us this opportunity to explain. The undersigned has been authorized to submit as under:- 1.1 The assessee is running business of Civil Contractor in proprietor capacity under the trade name of M/s A.S. Enterprises since 2007. The main area of business is construction of commercial buildings and trading in firewood. 1.2 In the course of assessment proceedings, the assessee produced his books of account and all other information s /documents as called for by the Assessing Officer from time to time. The assessee has not only explained queries raised by the Assessing Officer, but has also substantiated them with necessary documentary evidence. 1.3 After verifying the informations submitted by the assessee, the Assessing Officer complete .....

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umbly submitted that there is no case for invoking sec 145(3)as A.O. has categorically stated in his order that requisite information/details as called for from time to time have been furnished which have been examined and placed on record. It is undisputed that the assessee is subject to tax audit u/s 44A B of the Income Tax Act, 1961. Vide order sheet entry dt. 31.10.2014, A.O asked assessee to justify valuation of closing stock and WIP with documentary evidence. The assessee duly furnished list of closing stock (qty. & amount) as on 1 31.03.2012 along with documentary evidence to substantiate the value of closing stock vide letter dt. 16.03.2015 under page 11-20. The assessee also furnished stock records in respect of materials purchased and consumed vide letter dt. 16.03.2015 under page 1-12 annexed therein. Was also placed on record vide letter of even date. No defect has been pointed out in the books of account of the assessee by assessing officer. We are enclosing herewith relevant details/ information for your kind reference as per page no 2-35. ii) & iii) As regards sale and purchase of properties and claim of deduction u/s 54F, vide order sheet entry dt. 10.10.201 .....

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round that verification of accounts was needed. d) Narain Singla v.Pr CIT 62 Taxmann.com 255(CHD Trib). e) CITv. Sunbeam Auto Ltd [2011] 332 ITR 167 (Del). f) CIT v. Mehrotra Brothers 270ITR 157(MP). 4.2 The relevant finding arrived at by the sensible CIT on which heavy reliance was placed upon by the CITDR which is assailed by the assessee in the present proceedings by the Ld. AR is also extracted hereunder for the sake of completeness: 4. I have carefully considered assessee's submissions which are not acceptable on the issue that AO has failed to independently verify the genuineness of sundry creditors as in most of the cases, copies of accounts have been furnished by the assessee himself and AO made the addition by increasing the GP rate without rejecting the books of accounts. The AO accepted the identity and genuineness of the sundry creditors without any application of mind. It is clear from the above that the AO has also failed to verify/enquire about the transactions made with regard to the sale of two properties amounting to ₹ 18 lakhs and ₹ 74.50 lakhs and purchase of house for ₹ 1.84 crores. AO has also not verified the exemption claimed u/s 54F of .....

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ith law in respect of the issue discussed above regarding verification of genuineness of sundry creditors and also raised in show cause notice u/s 263(1) of the Act, after giving sufficient opportunity of hearing to the assessee. 4.3 Accordingly in the light of these facts and submissions we find that in the peculiar facts and circumstances of the present case the Pr. CIT has failed to meet the statutory requirements of either pointing out the error or how in the absence of error being pointed out the order passed by the assessing officer can be said to be prejudicial to the interests of the revenue. We have already extracted from the record the show cause notice issued by the Pr. CIT in the earlier part of this order. On a reading therefrom it is seen that five specific reasons were set out by Pr. CIT which were confronted to the assessee to justify why on the specific grounds addressed the assessment order under section 143(3) should not be considered to be erroneous as well as prejudicial to the interests of the revenue. We have gone through the explanation of the assessee offered before the Pr. CIT vide its reply dated 27/03/2017. A perusal of which shows that the assessee vehe .....

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dated 31/10/2014 to justify the valuation of closing stock and WIP with documentary evidence and submitted that consequently no defects in assessee s books of accounts were found by the assessing officer. It is further seen that qua the issues raised in the show cause notice in (ii) and (iii) the assessee relied upon the replies to the queries raised by the assessing officer vide order sheet entry dated 10/10/2014 stating that the assessee had capital gains from sale of properties as well as on account of buyback of unlisted equity shares reflected in the computation of income supported by documentary evidence made available to the AO which was also filed before the Pr. CIT at pages 23 to 58 calculation sheets of capital gains and allowable claim of deduction under section 54F made before the assessing officer was also filed before the PCI T alongwith evidence in the form of returns etc. filed with the Registrar of Companies evidencing transfer of unlisted shares in the specific firm. We note that the evidences filed have not been upset nor any further enquiry to upset them was carried out by the PCI T. Addressing the issue raised in (iv) by the Pr. CIT it is seen as per submissio .....

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mind. 4.4 In the facts of the present case we find that the Pr. CIT has failed to point out the error committed by the assessing officer let alone such an error which can be considered to be prejudicial to the interests of the Revenue. The law does not permit the authority the exercise of revisionary powers to initiate fishing and roving enquiries. The assessing officer in the facts of the present case we note has passed an order after conducting detailed enquiries on all the issues the Pr. CIT has flagged various issues and on going through the record we note that he has failed to give any finding as to how and in what manner the order of the assessing officer on the various issues noted by him can be said to be erroneous let alone prejudicial to the interests of the Revenue. We note that no enquiry has been made by the Pr. CIT at his own instance and he has merely directed the assessing officer to pass an order in accordance with law. The law envisages that first the Ld. Pr.CIT is to point out how the order can be said to be erroneous without such an exercise the direction to pass the order in accordance with law becomes meaningless. The responsibility to do so cannot be shunned .....

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