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2013 (8) TMI 696 - AT - Income TaxRevisional order u/s 263 - Held that - Counsel for the appellant filed three paper books in this case which includes the copy of computation of income, copy of Audit Report, A.O s. query letter dated 12.08.2009, reply of the assessee dated 02.09.2009, 11.09.2009, 18.11.2009 & 18.12.2009. The appellant had not filed any reply against the query raised by the AO on fall of G.P. Further confirmation in case of M/s. Umiya Finlease Pvt. Ltd., Somabhai Narayandas Patel & Soma Bhai Narayandas Patel HUF filed before CIT not before the A.O. The bank account in case of Bhagwati (Pvt.) Ltd., Moti Polymers (Pvt.) Ltd., Ambica Marbles Store Suppliers, Bhavna Sales Agency and Motidas Jivandas Patel had not been examined by the A.O. The order of the A.O. to that extent is erroneous and prejudicial of interest of Revenue. However, on other issues the ld. CIT had passed order under Section 263 of the I.T. Act without specific observations. The remarks of CIT are general. The Assessee had filed the confirmation in case of cash creditors, copy of return & copy of bank accounts. The Ld. A.O. had satisfied himself with evidences filed before him. Appellant filed three paper books in this case which includes the copy of computation of income, copy of Audit Report, A.O s. query letter dated 12.08.2009, reply of the assessee dated 02.09.2009, 11.09.2009, 18.11.2009 & 18.12.2009. The appellant had not filed any reply against the query raised by the AO on fall of G.P. Further confirmation in case of M/s. Umiya Finlease Pvt. Ltd., Somabhai Narayandas Patel & Soma Bhai Narayandas Patel HUF filed before CIT not before the A.O. The bank account in case of Bhagwati (Pvt.) Ltd., Moti Polymers (Pvt.) Ltd., Ambica Marbles Store Suppliers, Bhavna Sales Agency and Motidas Jivandas Patel had not been examined by the A.O. The order of the A.O. to that extent is erroneous and prejudicial of interest of Revenue. However, on other issues the ld. CIT had passed order under Section 263 of the I.T. Act without specific observations. The remarks of CIT are general. The Assessee had filed the confirmation in case of cash creditors, copy of return & copy of bank accounts. The Ld. A.O. had satisfied himself with evidences filed before him - Decided partly in favour of assessee.
Issues Involved:
1. Validity of the order passed under Section 263 by the CIT. 2. Verification of closing stock details. 3. Reconciliation of stock discrepancies. 4. Verification of cash credits and their genuineness. 5. Examination of the fall in Gross Profit (GP). Detailed Analysis: 1. Validity of the Order Passed Under Section 263 by the CIT: The appeal was filed by the assessee against the order of the CIT, Gandhinagar, dated 16.03.2012 for A.Y. 2007-08. The primary issue was the CIT's decision to set aside the order passed by the A.O. dated 24.12.2009 under Section 263 of the IT Act. The CIT issued a show cause notice dated 25.11.2010 under Section 263(1) of the IT Act, highlighting various discrepancies and lack of proper verification by the A.O. The CIT held that the A.O.'s order was erroneous and prejudicial to the interest of the Revenue, necessitating a de novo assessment. 2. Verification of Closing Stock Details: The CIT noted that during the assessment proceedings, the A.O. had called for detailed information regarding the closing stock of raw materials, work in process, and finished goods as on 15-02-2007 and 31-03-2007, but these details were not furnished by the assessee. The CIT observed that the physical stock found during the survey was significantly higher than the stock recorded in the books, leading to an undisclosed income of Rs. 59,97,884/-. 3. Reconciliation of Stock Discrepancies: The CIT pointed out the lack of reconciliation between the stock as per books and the physical stock found during the survey. No reconciliation statement was provided to verify the stock as on 15-02-2007 and the closing stock at the end of the year on 31-03-2007. The CIT emphasized that the A.O. did not properly examine the books of account and accepted the book results without verification. 4. Verification of Cash Credits and Their Genuineness: The CIT identified several cash credits that were not verified by the A.O. These included transactions with entities such as Umiya Finlease Pvt. Ltd., Somabhai Narayandas Patel, and others. The CIT noted that the A.O. did not verify the genuineness of these transactions or the creditworthiness of the creditors. The CIT directed the A.O. to obtain and examine bank accounts and other necessary details to verify these transactions. The CIT relied on various judicial precedents to support the need for thorough verification by the A.O. 5. Examination of the Fall in Gross Profit (GP): The CIT also addressed the issue of the fall in GP, noting that the A.O. did not make any inquiry into this matter. The reasons provided by the assessee for the fall in GP were deemed general and unsupported by documentary evidence. The CIT highlighted that the A.O. failed to investigate the reasons for the fall in GP and accepted the book results without proper verification. Conclusion: The Tribunal confirmed the CIT's order under Section 263 for the limited purpose of verifying the discrepancies in the closing stock, reconciliation of stock, and verification of cash credits. However, the Tribunal noted that the CIT's remarks on other issues were general and lacked specific observations. The Tribunal allowed the assessee's appeal partly, directing the A.O. to conduct a detailed and proper verification of the facts as per the CIT's order. Outcome: The assessee's appeal was allowed partly, with the Tribunal confirming the CIT's order for limited verification purposes and directing a de novo assessment after proper verification. The order was pronounced in open Court on 17/5/2013.
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