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TMI Blog2006 (7) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... ration (APSRTC) and Gujarat State Road Transport Corporation (GSRTC). 3. The learned CIT found that the Assessing Officer selected the case for scrutiny assessment under section 143(3) on the following points : (a) The details of job work expenses amounting to Rs. 18,16,836 is required to be verified. (b) Salary paid to partners is found to be excessive. (c) Credit in the account of partners is required to be examined. (d) Loans received from friends and relatives, genuineness of cash credit and applicability of section 269SS/269T is required to be verified. (e) Sales-tax of Rs. 2,59,522 shown as recoverable under the head 'loans and advances' requires verification. (f) Valuation of closing stock is required to be checked in view of provisions of section 145A. (g) The justification of withdrawal by the partner is required to be seen. 3.1 Learned CIT found that in respect of job charges of Rs. 18,16,836, the Assessing Officer has not made any enquiry from the persons to whom job charges are paid. The addresses of the persons had not been obtained and the genuineness of the payment has not been looked into. The enquiry regarding nature of work done has not been enquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT also held that the Assessing Officer has not examined the genuineness of loan received from Smt. Sapna Khurana, Smt. Meenakshi Jain, Smt. Kailash Kumari and Shri Manoj Kumar. The documentary evidence regarding source of advance of Smt. Sapna Khurana has not been enquired into. The evidence of source of deposit into the bank account of the depositor has not been enquired into. Similarly, in respect of amount received of Rs. 2,70,000 from Smt. Meenakshi Jain, the source of deposit is not proved by the creditor. In respect of loan received of Rs. 65,000 from Shri Manoj Kumar, husband of Smt. Meenakshi Jain, the Assessing Officer has neither enquired into the proof regarding source from which the amount is advanced nor verified genuineness thereof. Similarly, in respect of amount received from Smt. Kailash Kumari, the Assessing Officer failed to look into supporting evidence regarding cash deposit prior to issue of cheque. Accordingly, learned CIT held that the Assessing Officer failed to make relevant enquiries regarding deposit in bank account, creditworthiness and genuineness of loan received from these creditors. 3.5 The learned CIT found that the assessee has purchased alum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained the details of all the job work charges paid including the name and address of the persons, the amount paid, the permanent account number of such payee etc. This form was also filed earlier with the TDS section on 30th June, 2000. The vouchers for job work were also produced. The wages register was also produced. 6. The details of commission paid to Sanjay R. Shah was filed. The document filed along with return of income also shows debit note from Sanjay R. Shah, HUF for commission payment. Thus, this evidence regarding payment of commission was not only filed during filing return but also during assessment proceedings. The genuineness of the commission paid was also demonstrated. 7. Another letter by the Assessing Officer was issued on 27-1-2003 asking for confirmation from Sanjay R. Shah to whom commission was paid and the confirmation from whom the assessee firm has received loans on interest along with the source of deposit. The assessee filed the reply dated 27-2-2003 to the complete satisfaction to the queries raised by letter dated 27-1-2003. 8. The copy of account of Shri Sanjay Shah for payment of commission, the authority letter from appellant to GSRTC for deali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but is prejudicial to the Revenue - recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, 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 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 same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase "prejudicial to the interests of the Revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. 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 interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility to produce all the job workers. The vouchers for job charges show identical pattern which are typed at the office of assessee itself. These vouchers do not contain the address of such workers. 15. Regarding the commission paid, enquiry was neither made directly with Sanjay R. Shah or he was examined. 16. Similarly, for cash credits, the Assessing Officer has not carried the enquiry by enquiring it into the source of such persons. She also relied upon decision of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra) wherein it was held that an incorrect assumption of fact or "an incorrect application of law will satisfy the requirement of the order being erroneous". In the same category falls order passed without application of mind. She also relied upon the decision of Andhra Pradesh High Court in CWT v. N.T. Rama Rao [2003] 261 ITR 611 for the proposition that an order is said to be erroneous not only when erroneous in point of law but erroneous in any sense/causes prejudice to the interest of revenue. She also relied upon the decision of Delhi High Court in Duggal & Co. v. CIT [1996] 220 ITR 456 for the proposition that it is incumbent upon the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , deviation from the law. The "erroneous assessment" is defined as an assessment that deviates from the law and is, therefore, invalid and is a defect that is jurisdictional in its nature. "Erroneous judgment" is defined as one rendered according to the course and practice of court but contrary to law, by the mistaken view of law or by the erroneous application of legal principles. Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. (supra) held that the phrase "prejudicial to the interest of revenue" in its ordinary meaning will include an incorrect assumption of facts or an incorrect application of law". It also held that "the order of Assessing Officer cannot be treated as prejudicial to the interest of revenue when the Assessing Officer adopted one of the courses permissible in law and it had resulted in loss of revenue or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree". 18.2 From the aforesaid definition and the ratio laid down by Hon'ble Supreme Court, it can be held that an order cannot be termed as "erroneous" unless it is not in accordance with law. If an Assessing Officer is acting in acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment order records a finding that the books of account were produced and test checked. As per the letter of assessee, it is clear that the vouchers in regard to the purchases and expenses were produced and verified. The Assessing Officer after verification of such details, was satisfied and hence, no addition/disallowances have been made. Though such verification is not reflected in the assessment order, the record and even the order of CIT leads to the conclusion that the details were filed and the same were examined. Thus, it is not a case that the Assessing Officer has failed to make the enquiries which are called for in the circumstances. 19. The job work charges are fully vouched mentioning the details regarding the chassis number in respect of which the body was built by the appellant. The vouchers coupled with the annual return of TDS in respect of such job work charges contains the details like the name, the complete address etc. There is nothing on record to doubt the genuineness of such payments when majority of such payments was made by account payee cheques. The ledger account of each such party were also filed which shows that except the small amounts, majori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant details like confirmation, letter, permanent account number and the mode of receipt i.e. by cheque along with copy of pass book etc. It is the contention of CIT that there is some cash deposit prior to issue of cheque. Such thing should have been enquired into. It is settled law that the assessee is not supposed to prove the source of the source or the origin of the origin. Thus, the Assessing Officer cannot make any further addition under section 68 of the Act once the creditor has confirmed the transaction along with his permanent account number and the copy of relevant material is produced which establishes the identity of the creditor, the genuineness and the creditworthiness. Thus, the Assessing Officer's action in accepting the cash credit as genuine cannot be branded as erroneous order. 23. In respect of purchase of aluminium of Rs. 127 lacs, the Assessing Officer has obtained the copies of account of two parties showing purchase of aluminium of Rs. 90 lacs. Thus, almost 70% of purchases has been examined and is confirmed. Even in respect of total purchases, the assessee has filed complete quantitative details and consumption thereon. The assessee has also filed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law that an assessment has to attain a finality and unless the same falls within the power either under section 147 or 263, the assessment as made by the Assessing Officer is to be treated as final. The power under section 263 can be invoked only when either an error in factual appreciation or an error of law has been demonstrated. To make a roving and endless enquiry is not the spirit of section 263, as in such cases, re-assessment/revision will not come to an end so long as there is no dearth in intellectual opinion. It is also settled law that in an assessment, CIT cannot direct the Assessing Officer to adopt a view with which he do not agree unless the view adopted by the Assessing Officer is found to be erroneous insofar as it is prejudicial to the interest of revenue. Hon'ble Bombay High Court in the case of CIT v. Garbirel India Ltd. held thus: "That the ITO in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given a detailed explanation in that regard by a letter in writing. All these were part of the record of the case. Evidently, the claim was allowed by the ITO on being satisfied with the explanation of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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