TMI Blog2019 (12) TMI 771X X X X Extracts X X X X X X X X Extracts X X X X ..... cond point in the impugned notice u/s.263 was to the direction that addition of peak credit 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 the same was not related to the individual but belonged to the partnership firm, in which the said individual is a partner, deleted the addition and the same was directed to be considered in the case of the assessment of the partnership firm. Evident that the addition of peak credit in the guise of undisclosed income was made for not disclosing the Axis Bank Account in the ROI, but when the said Bank Account admittedly stood declared in the ROI of the partnership firm for the impugned assessment year and accounted for in the audited books of account, the addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 be quashed. 6) That, the Ld. Pr. C.I.T. further erred in having assumed that the A.O. should have estimated the G.P. at 4.68% in spite of the fact that the opening stock, purchases, sales and closing stock are independent variables and the GP is the resultant balancing figure or dependent variable and having once accepted the books, the AO was precluded from making any estimate of income/G.P. 7) That, the Ld. Pr. CIT wrongly interpreted that as per order of Hon. Tribunal, the peak credit of ₹ 10,60,742/- has not been considered in the reassessment order in spite of the fact that addition of the said peak credit was made in the individual hands for not disclosing the Axis Bank A/c which stood disclosed in ROI and accounts of the appellant-firm. 8) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over 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 for arriving at the net profit from the assessee`s partnership business. However, the A.O failed to do so. Therefore, ld PCIT was of the view that A.O. hadpassed the order without making enquiries or verifications with regard to the correctness of the purchases and sales as claimed by the assessee, which should have been made in the case of M/s. Jabibur Rahaman- partnership firm. This had rendered the order erroneous in so far as it is prejudicial to the interest of revenue. 4. The Ld PCIT also noticed that that an addition of ₹ 18,02,087/- was made in the case of Jabibur Rahaman on account of peak credit in respect of the deposits and withdrawals of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 6,32,874/-, resulting in addition to the income of ₹ 3,81,383/-. On the basis of the said Axis Bank account, the A.O. also added peak credits in April, 2007 of ₹ 18,02,087/- to arrive at the total income of ₹ 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 ₹ 3,81,383/-, but restricted the addition on account of peak credits to ₹ 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 ₹ 3,81,383/- by holding that the sales of ₹ 81,55,443/- found recorded in the C.C. Account with Axis Bank Account should not be considered in the individual hands of the appellant and if law permits, the same should be considered in the hands of the partnership firm. Similar was the direction of the Hon ble Tribunal in respect of addition of peak credit of₹ 10,60,742/-. 2.Thereafter, in view of the said observation/finding of the Hon ble Tribunal, the A.O. initiated reassessment proceeding in the case of the partnership firm M/s. Jabibur Rahaman and issued notice u/s.148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Commissioner or Commissioner, a) the order is passed without making inquiries or verification which should have been made; b) the order is passed allowing any relief without inquiring into the claim; c) the order has not been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 81,55,443/- as against purchase of ₹ 78,68,555/- and considering closing stock and other charges, G.P. stood at ₹ 78,410/-. Thereafter adjusting business expenditure under various heads, net loss stood at ₹ 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. Furthermore, there was no dispute about recording the purchases, sales and other incidental expenses in the books of account andrelevant bank account. Its accounts are duly audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 with law.The assessing officer issued notice under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly been examined and verified by AO during the assessment proceedings. 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the 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 Los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e @0.96% and the loss reflected in assessee firm are outcome of the audited books of accounts and the Assessing Officer have given the clear findings that he has examined each and every detail of the assessee during the reassessment proceedings. The findings of the assessing officer, ( to the extent relevant 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as no dispute about recording the purchases, sales and other incidental expenses in the books of account and relevant bank account. Books of accounts of Partnership firm (Assessee) are duly audited u/s.44AB of the Act. In response to notices u/s. 143(2) and 142(1) of the Act and on verbal queries during the assessment proceeding, all the required details/evidences were filed and the assessee also explained the reason, as stated 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 ₹ 4,900/- vide the impugned order u/s. 147/143(3) of the Act dated 27.01.2016.Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry before assessment and gives immense power to the A.O. for conducting enquiry. Therefore, the A.O. u/s 142(l)(ii) (iii) can ask the assessee almost any information which he thinks necessary for passing assessment and information can be asked in a proforma and questionnaire. Further, as per Sec. 142(1) (2) of the Act, it is within the province of the Ld. A.O. to decide which points he wants to take up for enquiry and to what extent and, as such, the Ld. PCIT cannot 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the conclusion that the order of the Assessing officer called for interference and revision. We are of the view that it is a settled position in law that provisions of section 263 of the Act do not permit substituting one opinion by another opinion. Therefore, the order of the Ld. PCIT cannot be sustained on the principle of 'erroneous' nature of the order of the A.O., as it is not erroneous. Further, in the instant case, to reiterate, there was no allegation by the Ld. Assessing officer that the evidences produced were fictitious or 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 impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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