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2013 (4) TMI 844 - AT - Income TaxRectification of order of revision passed by CIT u/s 263 - Assessee moved the rectification application u/s. 154 before the CIT. CIT forwarded the rectification application u/s. 154 to the A.O. - Jurisdiction of CIT to delegate the power to rectify the order to AO - HELD THAT - It is well settled law that rectification application shall have to be considered and disposed of as per law by the same authority who has passed the order, on which rectification application has been filed. The ld. Commissioner was, therefore, having no power to delegate his authority to decide the application u/s. 154 to the A.O. Since the order u/s. 263 has been passed by the ld. Commissioner, therefore, rectification application u/s. 154 should not have been forwarded to the Assessing Officer for reconsideration. Decision in the case of, MALABAR INDUSTRIAL CO. LTD. VERSUS COMMISSIONER OF INCOME-TAX 2000 (2) TMI 10 - SUPREME COURT , and COMMISSIONER OF INCOME-TAX VERSUS SMT. RG. UMARANEE. 2002 (11) TMI 49 - MADRAS HIGH COURT , relied upon.
Issues Involved:
1. Legitimacy of the cash deposits in various bank accounts. 2. Verification of total sales and deposits. 3. Applicability of compulsory audit under Section 44AB. 4. Verification of the annual license fee for liquor. 5. Treatment of net profit and deductions under Chapter VI-A. 6. Adequacy of the Assessing Officer's inquiry and investigation. Issue-wise Detailed Analysis: 1. Legitimacy of the Cash Deposits in Various Bank Accounts: The case was selected for scrutiny based on AIR information about cash deposits of Rs. 1,01,35,000/- in the assessee's savings account. The Assessing Officer (AO) issued a detailed notice under Section 142(1) and summoned the assessee under Section 131 to explain the deposits. The assessee clarified that the correct amount of deposit was approximately Rs. 60,00,000/-, not Rs. 1,01,35,000/-. The AO accepted the explanation that the deposits were sourced from withdrawals and sales, supported by bank statements and ledger accounts. The Commissioner, however, found the AO's acceptance of these explanations without further verification to be erroneous and prejudicial to the revenue. 2. Verification of Total Sales and Deposits: The total sales were shown as Rs. 29,30,110/-, whereas deposits amounted to Rs. 2,81,92,963/-. The AO estimated the turnover at Rs. 36,00,000/- after rejecting the books of account. The Commissioner noted that the AO did not provide reasons for arriving at this figure and failed to verify the deposits adequately. The assessee argued that the AO's estimation was reasonable and based on detailed inquiries, which included verifying sales and deposits through various bank accounts. 3. Applicability of Compulsory Audit under Section 44AB: The Commissioner held that the total turnover exceeded Rs. 40,00,000/-, necessitating an audit under Section 44AB. The assessee contended that the turnover and gross receipts, not bank deposits, should be considered for compulsory audit. The AO did not examine this aspect, which the Commissioner found to be an oversight. 4. Verification of the Annual License Fee for Liquor: The Commissioner noted that the AO did not verify the annual license fee of Rs. 17,47,200/- claimed by the assessee. The assessee argued that this issue was not raised in the notice under Section 263 and that the fee was correctly shown in the balance sheet. The Commissioner's consideration of this issue was deemed outside his jurisdiction as it was not part of the original notice. 5. Treatment of Net Profit and Deductions under Chapter VI-A: The Commissioner found discrepancies in the net profit shown and the deductions claimed under Chapter VI-A. The assessee argued that the net profit was correctly credited to the capital account and that deductions were covered by drawings. The Commissioner did not issue notice on this point under Section 263, making his order on this issue invalid. 6. Adequacy of the Assessing Officer's Inquiry and Investigation: The Commissioner criticized the AO for passing the order in a hurried manner without proper inquiries. The assessee provided detailed replies and evidence during the assessment, which the AO considered. The Tribunal found that the AO conducted a thorough investigation and that the Commissioner's order was based on incorrect figures and a misinterpretation of facts. The Tribunal noted that the AO's view was one of the possible views and could not be substituted by the Commissioner under Section 263. Conclusion: The Tribunal set aside the Commissioner's order under Section 263, finding it unjustified and based on incorrect figures. The AO had conducted a detailed inquiry, and the assessment order was neither erroneous nor prejudicial to the revenue. The Tribunal restored the original assessment order dated 24.12.2011, allowing the appeal of the assessee.
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