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TMI Blog2019 (12) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... of revenue simply by differing with the plausible view taken by the A.O., specifically accepting the audited books of account after appropriate inquiry. 3) That, the Ld. Pr. CIT wrongly assumed jurisdiction u/s.263 of the Act inasmuch as Explanation to sec.263 inserted by Finance Act, 2015 w.e.f. 01.06.2015 provides that the order passed without making enquiries/verification would be a ground for the Pr. CIT to invoke jurisdiction u/s.263 subsequent to 01.06.2015 and not relating to A.Y. 2008-09 under consideration. 4) That, the Ld. Pr. C.I.T. further erred in observing that the A.O. did not make enquiries on low G.P. declared by the appellant at 0.96% in comparison to 4.68% on same line of business in individual assessment although the A.O. accepted the same after thorough scrutiny of audited books of account. 5) That, there was nothing for the Ld. Pr. CIT to assume that the G.P. declared by the appellant was low when he himself could not bring on record any specific discrepancy in purchase, sales, stock and expenses shown in the audited accounts vis-a-vis G.P. earned and hence the impugned order passed u/s.263 of the Act is erroneous, without any valid reason and liable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2008-09, order dated 13.02.2014 in assessee`s individual case (Jabibur Rahaman), held that action in respect of sales of Rs. 8l,55,443/- should be taken in the hands of the firm, M/s. Jabibur Rahaman, i.e., the assessee in the present case.On perusal of the assessment records of the assessee, it was noticed by ld PCIT that while in the case of Jabibur Rahaman, Individual, who was running identical business ( business of human hair), the gross profit(G.P) rate was disclosed by him was at 4.68%, whereas in the case of the assessee partnership firm-M/s. Jabibur Rahaman, the G.P. rate declared was only 0.96 % on sales. The amount of turnover in the case of the assessee was earlier added to the turnover of Jabibur Rahaman. Since G.P. @ 4.68% was declared by the said Jabibur Rahaman himself and was also applied by the Assessing Officer in theassessment order, while assessing the case of M/s. Jabibur Rahaman, i.e. the assessee in the present case, therefore, it was incumbent on the part of the A.O. to have enquired into the reasons as to why such abysmally low G.P. rate of 0.96% was declared by the assessee partnership firm. Prima facie, G.P. of at least 4.68% should have been applied f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the partners, namely, .Sri Jabibu rRahaman and Sri Ajmail Sk having ratio of profit & loss, 'including loss of capital, of 60% and 40% respectively. In his individual ROI for A. Y. 2008- 09, Sri Jabibur Rahaman disclosed sales to the tune of Rs. 53,67,500/- and G.P. @ 4.68% of Rs. 2,51,490/-. The Ld. A.O. observing that the assessee had not disclosed sales of Rs. 81,55,443/- found in the bank account maintained with Axis Bank and had only disclosed the sales as per Bank Account with S.B.I., took the total sales at the figure of Rs. 1,35,22,943/- and computed the profit @4.68% at Rs. 6,32,874/-, resulting in addition to the income of Rs. 3,81,383/-. On the basis of the said Axis Bank account, the A.O. also added peak credits in April, 2007 of Rs. 18,02,087/- to arrive at the total income of Rs. 27,48,380/- vide order u/s 143(3) dated 23.12.2010. On appeal, the Ld. C.I.T.(A) upheld the addition of Rs. 3,81,383/-, but restricted the addition on account of peak credits to Rs. 10,60,742/-. On further appeal by the assessee, the Hon'ble Tribunal considering the submission made by the assessee with relevant documents deleted the addition of Rs. 3,81,383/- by holding that the sales o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, alleging that the assessment order passed in the case of the assessee-firm u/s 147/143(3) dated 27.01.2016 by the Ld. AO for A.Y. 2008-09 was erroneous and prejudicial to the interests the revenue. As per provisions of Sec. 263 of the Act, the Ld. Commissioner has to be /satisfied of the following twin conditions in order to exercise his powers of revision: (i).the order of the Assessing Officer sought to be revised,is erroneous ;and (ii).the order of the Assessing Officer sought to be revised, is prejudicial to the interests of the Revenue. Therefore, recourse to Sec. 263 of the Act cannot be taken if either of the above two conditions are not satisfied, i.e. if the impugned assessment order is erroneous but not prejudicial to the interest of the revenue; or if the impugned assessment order is prejudicial to the interest of the revenue but not erroneous. Having stated the above, the assessee would like to submit that vide Finance Act, 2015 'Explanation 2' was inserted to sec. 263 of the Act w.e.f. 01-06-2015, which reads as follows: Explanation 2.- For the purposes of this section, it is hereby declared that an order passed by the AO shall be deemed to be erroneous i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order in the case of the partnership firm, passed on the observation/finding of Hon'ble Tribunal in the case of Sri Jabibur Rahaman (Individual), erroneous and prejudicial to the interest of the revenue on the alleged ground that G.P. shown at 4.68% on sales made in individual capacity should have been considered for G.P. in the case of the firm also. As per audited Trading and Profit & Loss A/c. for the year ended on 31.03.2008, sales were to the tune of Rs. 81,55,443/- as against purchase of Rs. 78,68,555/- and considering closing stock and other charges, G.P. stood at Rs. 78,410/-. Thereafter adjusting business expenditure under various heads, net loss stood at Rs. 4,897/-. As stated above there is no dispute to the fact that the assessee partnership firm came into existence w.e.f. 23.03.2007 vide Partnership Deed dated 30.03.2007. Therefore, the firm started functioning from F.Y. 2007-08 relevant to impugned A,Y. 2008- 09. Therefore, comparison of rate of G.P. of the individual business of Sri Jabibur Rahman with that of the partnership firm is premature, inasmuch as individual business has been carrying on since long past and goodwill/reputation in the market is settled. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the audited books of account, the addition on the basis of earlier stand of undisclosed income does not survive on facts and in law. Moreover, the Ld. A.O. during reassessment proceeding has thoroughly verified the deposits and withdrawals found in the statement of Axis Bank for the relevant period and found all the transactions in the bank recorded in the books and thus rightly did not make any addition." 6. However, the ld. PCIT rejected the contention of the assessee and held that the assessment order u/s. 147/143(3) dated 27/01/2016 for the assessment year 2008- 09 is considered to be erroneous in so far as it is prejudicial to the interest of the revenue. The ld PCIT, therefore directed the AO to examine and verify the issue relating to the low G.P disclosed by the assessee and to examine the issue relating to the addition on account of peak credit in respect of the deposit made in the Axis Bank account of the assessee. 7. Aggrieved by the order of ld PCIT under section 263 of the Act, the assessee is in appeal before us. 8. Shri S.K. Tulsiyan, the ld. Counsel for the assessee, begins by pointing out that the very basis for issuance of notice u/s 263 is not in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. Counsel submitted that the bank statement of(A/C no. 163010100102292), Axis Bank, Berhampore Branch is getting reflected in the books of accounts of assessee`s partnership firm. The ld. Counsel also submitted that the transaction of Rs. 81,55,443/- which was considered in the hand of Jabibur Rahaman Individual is reflected in the accounts of the Firm M/s Jabibur Rahaman. Therefore, the assessee has submitted every kind of details asked by the Assessing Officer in respect of assessee firm and the Assessing Officer having examined each and every aspect passed the reassessment order u/s 147 / 143(3) of the Act. Therefore, the order passed by the Assessing Officer is neither erroneous nor prejudicial to the interest of the revenue. 9. On the other hand, ld. DR for the Revenue has primarily reiterated the stand taken by the ld. PCIT which we have already noted in our earlier para and the same is not being repeated for the sake of brevity. 10. We heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer is unsustainable in law". 11.Taking note of the aforesaid dictum of law laid down by the Hon'ble Apex Court, let us examine whether order passed by the assessing officer under section 147/143(3),of the Act, dated 27/01/2016 is erroneous and prejudicial to the interest of Revenue. Mr. Jabibur Rahaman runs two identical businesses, first in the name and style of Jabibur Rahaman-Individual and second in the name and style of M/s Jabibur Rahaman-Partnership firm. The ld PCIT exercised his jurisdiction under section 263 of the Act in the case of M/s Jabibur Rahaman- Partnership firm. The assessee firm (M/s Jabibur Rahaman-Partnership firm), submitted before us following documents, evidences and details which is enumerated below as follows: (1)The copy of partnership deed dated 30.03.2007 (vide PB-1 to 6). (2)The copy of income tax return of firm for A.Y. 2008-09 (vide PB-7). (3)The copy of audited accounts along with Tax audit report, balance sheet, Profit and Loss account of the partnership firm for the F.Y. 2007-08 relevant to A.Y. 2008-09 (vide PB-8 to 23). (4)The copy of notices u/s 148, u/s 142(1) and u/s 143(2) of the Act issued by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant for our discussion) is given below: "The assessee firm in its letter dated 12.12.2014, stated that the return filed vide Ack No. 121237450310310 dated 31.03.2010, may be treated as return of income in compliance to notice u/s 148 of the IT Act, 1961. Accordingly, a notice u/s 143(2) of the IT Act, 1961 was duly served on the assessee firm. Subsequently, a notice u/s 142(1)of theIT Act, 1961 dated 26.06.2015 was duly served on the assessee firm on 13.07.2015. Shri S.N. Roy, A/R of the assessee firm appeared from time to time with books of A/c and other relevant documents and explained the return of income. The books of A/cs have duly been test checked and verified from time to time. On perusal of the books of A/cs, balance sheet as well as bank statement of A/C no. 163010100102292, Axis Bank, Berhampore branch is reflected in the hand of the firm. It was also noticed that the transaction of Rs. 81,55,443/- which was considered in the hand of Jabibur Rahaman, Individual is reflected in the A/cs of the Firm M/s Jabibur Rahaman. The case was discussed with the A/R of the assessee in details and heard to him. On the basis of the above discussion and hearings assessed at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated above, for low yield of G.P., which has been duly acknowledged in the assessment order stating that "Shri S.N. Roy, A/R of the assessee firm appeared from time to time with books of A/Cs and other relevant documents and explained the return of income. The books of A/Cs have duly been test checked and verified from time to time." Therefore, after conducting enquiries and investigations, as warranted for the impugned assessment proceeding and deemed fit and after being satisfied with the replies of the queries vis-a-vis low G.P. and verifying the audited books of account, bank statement and other relevant details, the Ld. A.O. assessed the loss of the assessee-firm at Rs. 4,900/- vide the impugned order u/s. 147/143(3) of the Act dated 27.01.2016.Hence, after thorough examinations of the details and documents and explanations submitted by the Ld. A.R. of the assessee as per requisitions sought by the A.O. u/s 142(1) and as deemed fit for computing the true taxable income, the assessment was completed u/s. 147/143(3) of the Act on 27.01.2016. Therefore, we are of the view that AO has examined all the necessary evidences, and documents and reached on a logical conclusion. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t interfere with the same and even, if Ld. PCIT does not agree with the results of enquiries, the resultant order cannot be subjected to revision proceeding. It is also a settled position that what is an opinion formed as a result of these enquiries and verification of the materials is something which is in exclusive domain of the Assessing Officer, and even if Ld. Commissioner does not agree with the results of such enquiries, the resultant order cannot be subjected to revision proceedings. For this we rely on the judgment of the Coordinate Bench of I.T.A.T., Kolkata in the case of Smt. Juthika Kar vs. ITO, I.T.A. No.1128/Kol/ 2009, dated 16.5.2012wherein it has been held as under :- "8 ............ . The fine point, however, one must bear in mind is the distinction between adequate enquiries not having been conducted and the result of such enquiries not having been dealt with by way of a speaking order or not having resulted in the conclusion that could be, in the wisdom of a person other than the Assessing Officer, more appropriate. Here is a case in which sufficient enquiries were conducted. As learned brother has rightly noted, the Assessing Officer called for specific detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invented, thus accepted the authenticity of the same. Such an order cannot be called erroneous and prejudicial to the interests of revenue. Hence, we are of the view that revisionary jurisdiction exercised by the Ld. PCIT u/s. 263 of the Act was not in tune with the facts and evidences on record duly explained to the A.O. and verified by him in detail, that being so the order passed u/s. 263 of the Act on such erroneous stand is liable to be quashed. We accordingly quash the order u/s 263 of the Act and allow the appeal of the assessee. 13. The second point in the impugned notice u/s.263 was to the direction that addition of peak credit of Rs. 10,60,742/- on the basis of the bank account has not been considered in the impugned reassessment order. As stated above, the said peak credit was assumed on the basis of deposits in April,2007 in Axis Bank maintained by the assessee-firm. It is pertinent to note that the said peak credit was originally added in the individual assessment of Sri Jabibur Rahaman for the impugned assessment year solely on the ground that the Bank account with Axis Bank had not been disclosed in his ROI. The Hon'ble Tribunal on the basis of the finding that t ..... 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