TMI Blog1998 (6) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the facts of the case are that the assessee is a registered partnership firm, regularly assessed to tax. The AO completed its assessment under s. 143(3) of the Act vide his order dt. 25th Oct., 1990. While examining the case records of the assessee firm for the year under consideration, the CIT found that the assessment passed by the AO was erroneous and prejudicial to the interests of Revenue. While exercising revisional jurisdiction under s. 263 of the Act, the CIT issued a show-cause notice to the assessee to the following effect: "On verification of case records and the assessment finalised under s. 143(3) dt. 25th Oct., 1990 for asst. yr. 1989-90, it is seen that the AO had given detailed reasonings in holding that the cloth rese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the AO was concerned, there was no error in the order of the AO. The assessee also filed a detailed written submission vide its letter dt. 28th Jan., 1993 before the CIT. 5. After considering the arguments advanced on behalf of the assessee, the CIT was of the view that the assessment order dt. 25th Oct., 1990 was erroneous and prejudicial to the interest of Revenue. He observed that the assessee-firm and another firm namely Vikas Industries are sister concerns. The assessee-firm claimed that it had done cloth resetting work for Vikas Industries on hired machineries and the assessee had paid hire charges on these machines amounting to Rs. 10,99,691 to Vitta Mazda Ltd. The assessee firm had received Rs. 7,64,850 as cloth resetting majur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether the entire claim of expenditure of Rs. 10,99,691 was required to be disallowed. 6. Before us, R.N. Vepari, the learned authorised representative of the assessee vehemently argued that in the facts and circumstances of the case, the CIT was not correct while exercising his revisional jurisdiction under s. 263 of the Act, particularly, when the assessment order passed by the AO was neither erroneous nor prejudicial to the interest of Revenue. He further pointed out that the basis of initiating proceedings under s. 263 of the Act was totally wrong. According to him it is not the case of the AO that cloth resetting business in respect of which the loss of Rs. 3,34,841 was incurred, was not at all done by the assessee and that his busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion obtained on lease from Vitta Mazda Ltd. has been installed in their factory at Begampura, Nirvan Akhada, Surat. On enquiry it is further found that factory of both the assessee-firm i.e. Nirvan Prints and Vikas Industries are located in the same campus and same factory building at Begampura, Nirvan Akhada, Vikas Industries is doing the job work on majuri basis for 3rd parties and send the cloth to Nirvan Prints for cloth resetting work and the remaining process i.e. dyeing printing and finishing is done by Vikas Industries itself on their own plant. Thus, it appears that on papers only, a part of the entire process i.e. cloth resetting work has been given to Nirvan Prints whereas factory of both the firms are located in the same buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work for Vikas Industries. In other words, Vikas Industries has done the job work for Vikas Industries only and it has not done any such job work for any other 3rd parties. (iv) It is further to be seen that the said cloth resetting has got no relation with the assessee firm's main business of manufacture and resale of beam pipes. Actually, the said cloth resetting work has been shown to be done by the assessee-firm on papers only, to help Vikas Industries as admitted by the partner of the assessee-firm in his statement under s. 131 of the Act." The AO vide para 9 of his order has also observed as under: "9. From the abovementioned facts and circumstances of the case, it may be seen that the assessee-firm had adopted colourable dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iries and investigation, such failure on the part of the AO will result in prejudice to the interest of Revenue and initiation of action under s. 263 by the CIT under such circumstances will perfectly be valid and justified. 11. In the case of Swarup Vegetable Products Industries Ltd. vs. CIT (1990) 90 CTR (All) 113 : (1991) 187 ITR 412 (All), it has been held that it is beyond dispute that, under s. 263 of the IT Act, 1961, the CIT has power to set aside the assessment order and send the matter for fresh assessment if he is satisfied that further enquiry is necessary and that the order of AO is prejudicial to the interests of Revenue. 12. In the instant case, we find that the CIT has given the reasons in support of his conclusion tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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