TMI Blog2016 (2) TMI 1281X X X X Extracts X X X X X X X X Extracts X X X X ..... irmation and address filed during the course of original assessment. Regarding the CIT order with regard to the advances from debtors/creditors, there was no such showcause notice in reference to this finding. In view of the above, the order passed by the CIT u/s 263 is prejudicial to the interest of assessee, more particularly, when CIT has given contradictory finding in the order passed in comparison to the show-cause notice issued. Various evidences and seized materials have not been relied upon in the show-cause notice. In such situation, action u/s 263 is not justified. The enquiry has been made by the Assessing Officer at the relevant point of time. It is not the case of no enquiry but it is a case of insufficient enquiry. In the absence of any adverse material, except a statement recorded under s. 133A(3)(iii) the view taken by the Assessing Officer could not be said to be a view impermissible in law and hence, it could not also be said that the order passed by the Assessing Officer was prejudicial to the interest of the Revenue. All details with regard to the purchases were filed before the lower authorities, as held by the Hon ble Delhi High Court in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso erred in passing the order u/s.263 even after perusing the detailed reply filed by the appellant and, therefore, the revision order is devoid of material to sustain such an action. 2.3 In not appreciating facts that the order u/s. 143(3) passed on 30.03.2013 and the survey U/S.133A made on 11.07.2011 and, therefore, there is no such new material and/or 'Record' available before the CIT and as such the order passed is bad in law and void. 2.3.1 In not appreciating the facts that, the documents mentioned by the CIT as per his order para 5, where already on the record of AO at the time of passing the order, therefore, the power u/s.263 is bad in law and liable to be quashed. 2.4 In not appreciating the facts that, when the AO has made inquiry by issuing various notices including u/s. 133(6), he have already on record survey report and seized material etc. and, therefore, the present order u/s.263 is change of opinion. 2.5 In not appreciating the facts that, the jurisdiction u/s.263 can be invoked for lack of inquiry but not for insufficient inquiry and, therefore, the present order passed is liable to be quashed. 3. The CIT has also erred in giving finding i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neous in so far as it was prejudicial to the interest of revenue. For the same of convenience, the said proposal is reproduced as under:- 2. A proposal u/s.263 dated 16.07.2014 was received in this office from ACIT, Circle-4, Surat through the Jt.CIT, Range-4, Surat vide letter No.SRT/CIT/Range- 4/263/2014-15 dated 18.07.2014. The A.O. in the proposal has submitted that various issues remained to be verified during the course of assessment proceedings which had made the order erroneous in so far as it was prejudicial to the interest of revenue. 2.1 On receipt of above proposal, the relevant assessment records were requisitioned from the office of the DCIT, Circle- 2(3), Surat and after perusal of the same, following show cause was issued to the assessee:- On going through the records of the Income-tax assessment proceedings in your case for the assessment year 2010-11, it is noticed that during the year you had shown to have made purchase from the following related parties. Sr.No. Name of the assessee Amount (Rs) 1 Dhavni Organisation 3,04,25,288/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This has resulted in the assessment order to be erroneous and prejudicial to the interest of revenue. 5. The company has given loan to Murli F. Sawlani and Harish F. Sawlani who have 10% share holding in the assessee company. The A.O. has not examined whether the provisions of section 2(22)(e) of the I. T. Act are attracted on this transaction. 6. I, therefore, propose to pass an order u/s. 263 of the Act so as to set-aside the assessment order passed by the Assessing Officer for the A.Y.2010-11 as it is erroneous and prejudicial to the interest of revenue. 7. In case, you have any objection to the proposed action, you are requested to appeal before me either personally or through your authorized representative on 28/01/2015 at 11.15 A.M. at my office at 227, Aayakr Bhavan, Majura Gate, Surat and to show cause as to why such order should not be passed. In case of non compliance on your part, the matter will be decided on merits. 2.2 In response to the above show cause notice, the Authorized Representative for the assessee attended and made a written submission before the CIT(A) on 09.02.2015 which reads as under:- 1. In this case, the assessment has been finalized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be permitted. 7. It is said that, all the parties from whom the assessee has made purchases are assessed to tax and their books arc also audited. 8. That, as alleged in your notice para 2, you have stated that the notice u/s. 133(6) has been returned unserved in reference to party number 1,4,6,8. This issue has already been raised by the AO in his notice dated 18.03.2013, para (iv) and the query has already been compiled by the assessee vide submission dated 22.03.2013 and, therefore, the issue raises now by your honour in para 2 has been taken care by the AO by raising specific query. 9. In para 3, you have stated that the .said parties has made transactions only with the assessee. In this connection we say that first of all, the assessee has entered in to the oral agreement with the all the parties whereby which our seller is not required to search the business and, therefore, we also will be benefited by making purchase with this parties at reasonable rate in compare to the market rate. Therefore, it is in a benefit of both the parties to make such arrangement. In any case the order cannot be erroneous and prejudicial to be interest of the Revenue. Since we have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found that Shri Murli, F. Savlani is having 9.77% shareholding and Harsh F. Savlani is having 9.94% and, therefore, the provision of sec. 2(22) (e) not applicable. A copy of the account of above both shareholder along with the shareholding list is enclosed herewith . 2.3 On perusal of the written submission, the CIT observed that a survey u/s. 133A of the Act was conducted on the assessee company on 11.07.2011 and during the course of survey, certain loose papers were found, inventorised and impounded. From the copy of impounded documents marked SEL-I to XIV, it was seen that during the F.Y. 2009-10 pertaining to A.Y. 2010-11 the company has made purchases from eight parties as mentioned above. The total purchases made from these parties amount to ₹ 23.38 Cr. From the Survey Report, impounded documents, bank A/c., statement recorded, the CIT observed that all these parties were found to be the family concerns of Shri Shailesh Damor, an employee of the assessee company. These concerns had all given the same address which was 56, Poonam Nagar Society, Bhatar, Surat and (iii) inquiries revealed that no business activities were being carried out from that premises. During th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these concerns have shown any opening or closing stock in their statement of account filed with their return of income for A.Y.- 2010-11. None of these concerns have disclosed any bank A/c. in their Return of Income. Very negligible expenses have been debited by these concerns and whatever little has been debited is on account of salaries and wages/conveyance expense/audit fee/other expenses. All these concerns have opened their bank A/c. on same date i.e. 04.04.2011 in the same bank, Bank of Baroda, introduced by the same person. 2.5 According to CIT, the Assessing Officer has not made any enquiry with Sales Tax authorities whether these concerns were registered with them or obtained copy of their Sales Tax Returns to verify the transactions shown therein. This was important especially as impounded file marked SEL-XIV pages 170 to 172 contain letters written by the assessee company to Commercial Tax Officials that two concerns from whom they had made transactions are bogus concerns and they paid taxes and penalty accordingly. During the course of survey u/s. 133A on 11.07.2011, statements u/s. 131 of the Act of Shri Rohit Vinodrai Rawal, Marketing Executive and of Shri Murli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties or assessee to establish the genuineness of these transaction, has resulted the assessment order passed u/s 143(3) on 30.03.2013 erroneous in so far as it is prejudicial to the interest of revenue. 2.6 Considering the narrated facts and circumstances, the assessment order passed u/s. 143(3) on 30.03.2013 by the Assessing Officer was found to be erroneous in so far as it is prejudicial to the interest of Revenue. Accordingly, the assessment order was set aside by the CIT vide his order u/s 263 dated 30.03.2015 with the direction to the Assessing Officer to frame the assessment afresh denovo. 3. Aggrieved by the aforesaid order of the Commissioner of Income-tax-2, Surat, the assessee is in appeal before us, inter alia, submitting that the CIT has erred in invoking the revisionary powers merely for roving inquiry based on the opinion of the Assessing Officer that the order passed by his predecessors was erroneous as admitted by CIT in the order u/s 263. The Authorized Representative for the assessee further submitted that the CIT erred in not appreciating the facts that the Assessing Officer has completed the assessment only after satisfying himself on the points raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny and to no other party. The total sales shown by these parties are the purchases shown by the assessee from these concerns. In other words these concerns have sold goods only to the assessee company in A.Y. 2010-11, 2011-12 2012-13. These concerns have debited negligible VAT/Sales Tax compared to the sales shown in their return of income. The Departmental Representative submitted that in Gujarat VAT/ST is 4% and the amount of VAT/ST shown to be debited in their profit and loss account by the concerns casts doubt about the genuineness of the transactions undertaken by these concerns. Moreover, these concerns have not shown any transportation/octroi/delivery expenses. In these background, the Departmental Representative submitted that the CIT was justified in observing that the Assessing Officer did not make any independent verification to establish the genuineness of the purchase transaction of the assessee-company with these concerns amounting to ₹ 23.38 cr, which resulted the order of Assessing Officer being erroneous in so far as it is prejudicial to the interest of Revenue and therefore, the order of CIT be upheld. The Departmental Representative relied upon the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at proposal for initiation of revision proceedings must be initiated by the CIT. It is the CIT who has to call for and examine the records; but in the instant case the proposal came from the Assessing Officer and on receipt of the proposal, the CIT initiated revision proceedings, which is not justified as held by the Mumbai A Bench of ITAT in the case of Ashok Kumar Shivpuri (supra). For the sake of convenience, the relevant portion in the case of Ashok Kumar Shivpuri (supra) is reproduced as under: 16. We further find that the proposal was received by the CIT from the AO, which clearly means that there has been no independent application of mind by the CIT, because section 263(1) clearly says, The Commissioner may call for and examine the records of any proceedings under this Act, and if he considers , which means that proposal for initiation of revision proceedings must be initiated by the CIT, because, it is the CIT who has to call for and examine the records. But in the instant case the proposal came from the AO and on receipt of the proposal, the CIT initiated revision proceedings. Therefore, in our opinion, the proceeding gets flagged at the threshold. 17. Since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found in place in the show-cause notice issued to him. The Assessing Officer has completed the assessment only after satisfying himself on the points raised before him during the assessment proceedings and after considering the detailed reply filed by the assessee before him and therefore, the CIT has no jurisdiction to invoke the revisionary powers u/s 263 of the IT Act, 1961. The Assessing Officer has duly applied his mind after raising specific query and questionnaires as stated above and argued before the CIT in 263 proceedings. For this the Authorized Representative for the assessee took us through the questionnaire dated 16.05.2012, which is placed at Page 74 to 77 as well as various annexures/papers filed in response to the same. Further questionnaire dated 18.03.2013 and its reply was filed on 22.03.2013. The CIT has stated that in survey, the revenue authorities impounded document, bank account, statement recorded and all the parties from whom the purchase was made were family concern from Sri Shailesh Damor, an employee of the assessee company, same address given. During the survey proceedings, the purchase bills were impounded as per file no. SEL-I to SEL-XIV on 11.07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the concerned Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The CIT may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. It shows that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue . It is not an arbitrary or unchartered power. It can be exercised only on fulfillment of the requirement laid down in sub-section(1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion is prejudicial to the interest of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, namely, the order is erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interest of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to establish that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. In this background, CIT was not justified in revising the order of the Assessing Officer passed by him after application of his mind to the facts of the case. 5.5 Without prejudice to the above, the so-called bogus purchase in show-cause notice was as per para 1, 2 and 3, wherein there was no such finding/show cause notice in reference to the seized material found and survey taken place as well as various finding given by the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s prejudicial to interests of Revenue and assessment order passed by Assessing Officer was set aside. In appeal, the Tribunal held that the entries in bank account of assessee maintained with IndusInd Bank were not only considered by the Assessing Officer, but source of deposits found to be made in said bank account as explained by assessee as the money received by him from his son and daughter in law in USA through proper banking channel was accepted by the Assessing Officer, after applying his mind. In this regard, it could not be said that source of deposits found to be made in the bank account of the assessee with IndusInd Bank were not verified by the Assessing Officer and there was an error in order of the Assessing Officer. If Commissioner contemplated that the Assessing Officer should have enquired into the source of funds in the hands of the son and daughter-in-law of assessee, same, would amount to verifying the source of source, which is not permissible. Thus, the Tribunal held that there was no error in assessment made by the Assessing Officer and the order passed by CIT(A) in exercise of jurisdiction u/s 263 was set aside. Even in the case before us, the enquiry has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inquiries were made u/s 133(6), but no original bill was found. In fact, bills were seized during the course of survey proceedings as per submission dated 22.03.2013. Both the parties are assessed to income-tax. So absence of original bills, which were lying with revenue at the relevant point of time, cannot be the sound basis for invoking provisions of Section 263 of the Act. Ahmedabad C Bench of the Tribunal in the case of Hitendra A. Nanavati vs. CIT, reported in [2011] 135 TTJ 17, held that where the Assessing Officer was satisfied with the explanation of assessee regarding genuineness of credits on basis of confirmations filed by the assessee, a change of opinion or view would not enable Commissioner to exercise jurisdiction u/s 263. The ratio of this decision supports the contention of the ld. Authorized Representative. 6. Regarding the reliance placed by the ld. Departmental Representative in the case of CIT vs. Infosys Technologies Ltd, reported in 17 taxmann.com 203, wherein the question was whether every conclusion and finding by assessing authority should be supported by reasons, however, in a situation where it is only a question of computation in accordance with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated therein are assumed to be correct. In the case before us, it is not the case of no enquiry, but may be the case of inadequate inquiry, which is not sound basis of invoking provisions of Section 263 of the Act. The other decision relied upon by the Departmental Representative is the judgment of Hon ble Gujarat High Court in the case of Adani Agro (P) Ltd vs. DCIT, 32 taxamnn.com 356 (Guj.), wherein the assessee claimed set off of certain gain on sale of shares against unabsorbed speculation loss. The Assessing Officer allowed such claim. Subsequently, the Commissioner having found that the Assessing Officer had allowed assessee s claim without proper enquiry took revisional proceedings under section 263 and remanded the proceedings to Assessing Officer for verification of certain details before accepting assessee s claim. Tribunal dismissed the appeal of the assessee on plea that Commissioner s order was not erroneous. In this case, it was held that CIT after recording cogent reasons found that the order passed by the Assessing Officer was erroneous and also prejudicial to the interest of the Reveue; therefore, he was entitled to exercise revisional powers u/s 263. While doing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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