2016 (12) TMI 1072 - AT - Income Tax

Revision u/s 263 - Held that - On perusal of the details available on record, we find that the A.O. has conducted detailed enquiry and also examined all the issues pointed out by the CIT in the show cause notice. The assessee has explained each and every issues with necessary evidences. Therefore, we are of the view that, the CIT cannot assume jurisdiction to revise the assessment order, once assessee explained that it had filed all the details before the A.O. on the issues on which CIT wants further verification. It is the general presumption of law that the A.O. has considered all the details before completion of assessment, once the assessee has filed details called for by the A.O. But, the CIT cannot presume that the enquiry conducted by the A.O. is insufficient and also the A.O. has not applied his mind, unless the CIT proves that the assessment order passed by the A.O. is erroneous. Therefore, we are of the view that the assessment order passed by the A.O. u/s 143(3) of the Act dated 9.12.2009 is not erroneous in so far as it is prejudicial to the interest of the revenue. -Decided in favour of assessee

Issues Involved:
1. Validity of the assessment order under section 143(3) of the Income Tax Act, 1961.
2. Examination of specific expenditures and their reasonableness.
3. Verification of sundry creditors and deposits from farmers.
4. Assessment of low net profit declared by the assessee.
5. Jurisdiction of the CIT under section 263 of the Act to revise the assessment order.

Detailed Analysis:

1. Validity of the assessment order under section 143(3):
The assessee, a private limited company involved in trading poultry eggs, filed its return of income for the assessment year 2007-08. The assessment was completed under section 143(3) on 9.12.2009, determining a total income of ?47,51,057/- after making certain additions. The CIT issued a show cause notice proposing to revise the assessment order, claiming it was erroneous and prejudicial to the interest of the revenue.

2. Examination of specific expenditures and their reasonableness:
The CIT observed that the AO failed to verify the necessity, genuineness, and reasonableness of the packing and forwarding expenditures. The assessee argued that detailed explanations and supporting documents were provided during the assessment, justifying the expenditures as necessary for their business operations. The AO had accepted these expenditures after due examination.

3. Verification of sundry creditors and deposits from farmers:
The CIT noted that the AO did not adequately verify the sundry creditors and deposits from farmers. The assessee countered that confirmation letters from sundry creditors and details of deposits from farmers were submitted during the assessment. The AO had reviewed these documents and found them satisfactory.

4. Assessment of low net profit declared by the assessee:
The CIT pointed out that the AO did not scrutinize the low net profit of 0.39% on a turnover of ?107.34 crores. The assessee provided detailed accounts and explanations for the low net profit, which the AO had considered and accepted.

5. Jurisdiction of the CIT under section 263:
The CIT assumed jurisdiction under section 263, stating that the AO's failure to conduct a thorough inquiry rendered the assessment order erroneous and prejudicial to the revenue. However, the assessee argued that the AO had conducted a detailed inquiry and examined all relevant issues. The tribunal found that the AO had indeed scrutinized the issues and that the CIT's assumption of jurisdiction was based on a different opinion rather than a lack of inquiry.

Conclusion:
The tribunal concluded that the assessment order passed by the AO was not erroneous or prejudicial to the interest of the revenue. The AO had conducted a detailed inquiry and examined all issues raised by the CIT. The tribunal quashed the CIT's order under section 263 and restored the original assessment order. The appeal filed by the assessee was allowed.

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