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2015 (4) TMI 825 - AT - Income TaxRevision of assessment order - CIT observed huge amount of withdrawn transfers & receipts from different accounts - CIT must have strong material/evidence before him which could indicate that non-consideration of those issues has not only made the assessment order erroneous but has also caused prejudice to the interests of revenue - Held that - On a perusal of revision order we find that CIT in specific terms has not disapproved the rejection of books of account by AO. The CIT has pointed out various issues which according to him was not examined by AO in course of assessment proceeding. However when the books of account were found to be not reliable and rejected by AO and he invoked the provisions of section 145(3) it is not understood how and why AO should have gone into the specific issues on the basis of books of account. Further CIT himself has observed in para 5.6 of the order that though AO has called upon assessee in his letter dated 06/01/11 to furnish various information but assessee did not comply to the same. In our view that itself is reason enough for the AO to reject books of account and estimate the income. When assessee has failed to furnish informations/evidences to support the entries made in the books of account there is no other course left open to AO but to compute the income of assessee on estimate basis. Once AO rejected the books of account there is no need to again refer to the very same books of account for deciding the individual issues of expenditure/deduction claimed. Therefore in our view CIT was not justified to invoke power u/s 263 of the Act by holding the assessment order as erroneous and prejudicial to the interests of revenue. Further CIT though raised certain issues which according to him were not examined by AO during assessment proceeding but he has not established or substantiated with facts and materials that non-consideration of those issues has adversely affected the interests and revenue or has made the assessment order erroneous. While conducting assessment proceeding AO is the best judge of the situation and has to proceed for completing assessment according to his own wisdom. Unless there are material to indicate to that effect assessment order cannot be held to be erroneous and prejudicial to the interests of revenue empowering CIT to revise it u/s 263. In this context a reference can be made to the judgment of the Hon ble Delhi High Court in case of Jyothi Foundations 2013 (7) TMI 483 - DELHI HIGH COURT wherein the Hon ble Delhi High Court after analyzing several other decisions held that if the revising authority feels that AO has not conducted proper/adequate enquiry then he himself should have conducted enquiry to record a finding that the assessment order was erroneous. He should not have set aside the order and directed the AO to do the said enquiry. In the facts of the present case there is no doubt that AO after examining the books of account and other materials on record has come to a definite conclusion that books of account are not reliable hence after rejecting the same has estimated the profit. In fact the CIT himself observed that AO vide letter dated 06/01/11 had called upon assessee to produce evidences and to clarify certain issues. That being the case it cannot be said that AO has not conducted any enquiry and there is non-application of mind by AO. Further CIT while setting aside the assessment order has also not given any specific direction but has simply directed the AO to re-do the assessment denovo after examining the issues. This in our considered view is nothing but in the nature of roving and fishing enquiry. Further one more aspect needs to be mentioned as rightly pointed out by learned AR CIT in para 5.1 of the order has considered the P&L account and figures relating to assessment year 2008-09 whereas he is in session of revision proceeding for AY 2009- 10. This itself shows non-application of mind by learned CIT. For this reason alone revision order becomes vulnerable and can be held to be invalid. - Decided in favour of assessee.
Issues Involved:
1. Examination of Proclainer Private Works Receipts 2. Verification of Bank Account Transactions 3. Payment to Partner and Impact on Interest Calculation 4. Interest Paid to Non-Partners and Applicability of Section 40(a)(ia) 5. Non-Deduction of TDS on Lorry Hire Charges Issue-wise Detailed Analysis: 1. Examination of Proclainer Private Works Receipts: The CIT observed that the AO did not examine whether the proclainers were given for rent/lease and if any agreement existed. The assessee argued that the AO had already scrutinized the books and rejected them, estimating the income based on gross receipts. The tribunal found that once the books are rejected, the AO need not delve into individual issues like proclainer receipts. 2. Verification of Bank Account Transactions: The CIT noted that the AO failed to verify significant transactions in the assessee's SBH bank account, which could attract provisions of section 40A(3). The assessee countered that the AO had examined the books and rejected them due to unverifiable expenditures. The tribunal agreed with the assessee, stating that post-rejection of books, individual transactions need not be scrutinized. 3. Payment to Partner and Impact on Interest Calculation: The CIT pointed out that the AO did not examine a payment of Rs. 1,30,000 to a partner and its effect on interest calculation on capital. The assessee maintained that the AO had already rejected the books and estimated income, making individual scrutiny unnecessary. The tribunal upheld this view, emphasizing that once books are rejected, detailed examination of such payments is redundant. 4. Interest Paid to Non-Partners and Applicability of Section 40(a)(ia): The CIT highlighted that the AO did not verify an interest payment of Rs. 2,91,564 to non-partners concerning section 40(a)(ia). The assessee argued that the AO's rejection of books and subsequent income estimation rendered such verification moot. The tribunal concurred, noting that post-rejection, the AO is not required to examine specific expenses. 5. Non-Deduction of TDS on Lorry Hire Charges: The CIT criticized the AO for not verifying the non-deduction of TDS on lorry hire charges as per the 3CD report. The assessee reiterated that the AO had rejected the books and estimated income, thus bypassing individual issues. The tribunal supported this stance, affirming that the AO's rejection of the books negates the need for further scrutiny on TDS matters. Conclusion: The tribunal concluded that the CIT was not justified in invoking section 263, as the AO had already rejected the books of account and estimated the income. It emphasized that the CIT did not provide substantial evidence to prove the AO's order was erroneous and prejudicial to revenue interests. The tribunal quashed the CIT's order and restored the AO's assessment, allowing the assessee's appeal.
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