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2016 (3) TMI 1287 - AT - Income TaxRevision u/s 263 - scope of revision orders - rejection of books of accounts - profit estimation by AO - Held that - Provisions of section 263 cannot be invoked to correct each and every type of mistake or error committed by the AO. It is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the case of Malabar Industial Co. Ltd. vs. CIT 2000 (2) TMI 10 - SUPREME Court has also made clear that the phrase prejudicial to the interests of the Revenue has to be read in conjunction with an erroneous order passed by the AO. Every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interest of the Revenue. Stated that when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law. In the present case, we find that AO offered various opportunities to the assessee the various opportunities listed in the assessment order are dated 6.6.2012, 11.09.2012 and 19.03.2013, however, the assessee did not submit the full details required by AO and further the documents submitted by assessee were unconfirmed copies of accounts of the parties from whom purchase were made, therefore, AO had no option but to reject the books of accounts of assessee and to estimate the income of assessee by applying net profit rate. We do not find the order of Assessing Officer to be erroneous and prejudicial to the interest of Revenue - Decided in favour of assessee.
Issues:
1. Jurisdiction of CIT to set aside the order passed by AO under section 144 without proper hearing. 2. Whether the CIT erred in invoking section 263 to set aside the order passed by AO under section 144. 3. Application of section 40A(3) by the CIT in setting aside the AO's order. 4. Whether the order passed by the AO was erroneous and prejudicial to the interest of Revenue. Analysis: 1. The appeal was filed against the order of the CIT dated 30.03.2015 passed under section 263 for the assessment year 2010-11. The appellant contended that the CIT erred in setting aside the AO's order under section 144 without providing a proper opportunity of hearing. The appellant argued that all issues examined during assessment proceedings were detailed, and the AO's order was passed after due application of mind. The brief facts noted in the assessment order stated that the assessee, engaged in liquor wholesale business, did not cooperate during scrutiny, leading to completion of assessment under section 144 by the AO. 2. The CIT(A) restricted the addition to 0.5% of turnover instead of 5% determined by the AO. The Revenue appealed to ITAT, which dismissed the appeal. Subsequently, the CIT issued a notice under section 263, setting aside the AO's order and directing to consider the violation of section 40A(3). The appellant argued that once books of accounts are rejected, the provisions of section 40A(3) need not be applied. The appellant cited precedents from Punjab & Haryana High Court and Supreme Court to support this argument. 3. During the hearing, the appellant emphasized that the CIT cannot substitute his opinion for that of the AO, as held in various court judgments. The appellant contended that the order passed by the CIT was not justified and should be quashed. On the other hand, the DR relied on the CIT's order. The ITAT observed that the matter had attained finality with the Tribunal's order, and the CIT should have considered this before issuing the notice under section 263. 4. The ITAT held that the order of the AO was not erroneous and prejudicial to the interest of Revenue. The AO had offered opportunities to the assessee, who failed to provide the required details, leading to the rejection of books of accounts and estimation of income by applying a net profit rate. The ITAT considered judicial precedents cited by the assessee and allowed the appeal, stating that the order of the AO was not erroneous.
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