2015 (9) TMI 171 - AT - Income Tax

Revision u/s 263 - Held that - For bank charges paid of ₹ 8363/-. The amount is nominal and ld. AO has examined the details of bank reconciliation with bank charges. Therefore, on this point, we do not find the order of AO erroneous and prejudicial to the interests of the revenue. But commission payment, quantitative details and interest issue had not been examined by the AO after calling the partial details and there is no application of mind before allowing the same. It is fact that assessee is a commission agent and wholesale general merchant of grains. However, the commission claimed to be paid to M/s. Rajesh Pipe Centre, Madurai who is dealing in MS, GI and PVC pipes. Further, in quantitative details, there was a discrepancy in assessment record which has not been verified by the AO during the assessment proceedings which is also lack of application of mind. Similarly, no interest has been charged by the assessee on loans given to Shri Jagdish Meena but the AO has collected the information from the assessee and simply put on record which also shows that AO had not applied his mind on it. Malabar Industrial Co. Ltd. case(2000 (2) TMI 10 - SUPREME Court) squarely applies wherein held that the scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income-tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue. The phrase prejudicial to the interests of the Revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law. The ld. CIT had set aside the order of the AO on certain issues for making proper enquiry and allow the adequate opportunity of being heard to the assessee on issues set right in the order itself. Accordingly we allow the assessee s appeal partly as discussed in the paras above. - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Invocation of Section 263 of the IT Act.
2. Assumption of jurisdiction under Section 263.
3. Ignoring facts, submissions, and evidence.
4. Specific issues in the assessment order:
- Payment of commission to M/s. Pipes Centre, Madurai.
- Quantitative details of stock.
- Advance given to Shri Jagdish Meena.
- Bank charges.

Detailed Analysis:

1. Invocation of Section 263 of the IT Act:
The assessee contended that the CIT, Alwar erred in invoking Section 263, which allows the revision of an assessment order if it is erroneous and prejudicial to the interests of the revenue. The CIT issued a show cause notice under Section 263, treating the assessment order as erroneous and prejudicial to the interests of the revenue. The CIT observed discrepancies in the payment of commission, quantitative details of stock, advance given, and bank charges, concluding that the AO did not conduct proper enquiries or apply his mind.

2. Assumption of Jurisdiction under Section 263:
The assessee argued that the CIT wrongly assumed jurisdiction under Section 263 by holding that the assessment order was passed without proper enquiries. The CIT noted that the AO allowed the commission payment without verifying the genuineness of the expenses and did not obtain evidence to support the claim. The CIT also pointed out discrepancies in the quantitative details of stock and the lack of verification regarding the advance given to Shri Jagdish Meena.

3. Ignoring Facts, Submissions, and Evidence:
The assessee claimed that the CIT ignored various facts, submissions, and evidence submitted before the AO and the CIT. The CIT observed that the AO did not verify the purpose or business expediency of the interest-free loan given to Shri Jagdish Meena and did not examine the penal nature of the bank charges.

4. Specific Issues in the Assessment Order:

(i) Payment of Commission to M/s. Pipes Centre, Madurai:
The CIT observed that the AO allowed the commission payment without verifying whether M/s. Pipes Centre rendered any service for which the commission was paid. The CIT noted that the AO did not obtain evidence to support the claim and that the confirmation provided was on a different letterhead and with different signatures.

(ii) Quantitative Details of Stock:
The CIT found discrepancies in the quantitative details of stock, noting that the purchase weight was shown less by 24,637.14 quintals and the sales weight was shown differently after totaling month-wise. The CIT concluded that the AO did not consider these discrepancies and thus did not apply his mind while passing the assessment order.

(iii) Advance Given to Shri Jagdish Meena:
The CIT noted that the AO did not verify the purpose or business expediency of the interest-free loan given to Shri Jagdish Meena and that the assessee paid interest on borrowed money from the market and relatives. The AO failed to enquire about this issue, making the assessment order erroneous.

(iv) Bank Charges:
The CIT observed that the AO did not examine the penal nature of the bank charges paid by the assessee. However, the amount involved was nominal, and the AO had examined the details of bank reconciliation with bank charges.

Conclusion:
The Tribunal concluded that the AO's order was erroneous and prejudicial to the interests of the revenue regarding the commission payment, quantitative details, and interest issue, as the AO did not apply his mind and failed to conduct proper enquiries. The Tribunal partially allowed the assessee's appeal, agreeing with the CIT's decision to set aside the assessment order for proper examination of these issues. The Tribunal did not find the AO's order erroneous regarding the nominal bank charges. The appeal was allowed partly, and the order was pronounced in the open court on 11/8/2015.