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TMI Blog2015 (1) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... en the exact facts are before him. The stock statement submitted to bank and stock as per stock register is exactly matching in term of quality and quantity and rate. Once this is the position, how the CIT can propose a possible understatement and can give a finding that “likewise the AO accepted the closing stock declared by the assessee without calling any detail of making the required verification thereof. As find that the AO has carried out verification of commission paid by issuing notices u/s. 133(6) of the Act to 17 parties, who admitted to have received the commission from the assessee in its communication in response to notices u/s. 133(6) of the Act. The assessee covered almost 80% of commission paid at ₹ 5,53,54,513/- out of the total commission paid at ₹ 6,94,43,342/-. The assessee has also explained the nature of services rendered by these parties to whom commission is paid during the course of assessment proceedings and even during revision proceedings u/s. 263 of the Act. The AO has also verified the sundry creditors on account of commission payable outstanding as on 31.03.2009, which was paid in the subsequent financial year 2009-10 relevant to AY 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which were also filed before the Ld. CIT. 5. For that the Ld. CIT(A) erred in holding the view that the AO did not examine the stock details with regard to the secured loans when the stock details filed before the bank were produced before the AO which tallied with the stock register and the copy of the same was also filed before the Ld. CIT. 6. For that the Ld. CIT concluding that the payment of commission was not examined by the AO when admittedly the Ld. AO issued notices u/s. 133(6) duly applied his mind to the issue involved and therefore the order was not erroneous and prejudicial to the interest of revenue. 3. Briefly stated facts are that the assessee is engaged in trading of ball bearing as well as sale and purchase of ball bearing on commission basis from foreign parties. In the relevant assessment year 2009-10 assessment was framed u/s. 143(3) of the Act by ACIT, Circle-34, Kolkata vide order dated 23.09.2011. Subsequently, the CIT-XII, Kolkata issued show-cause notice u/s. 263 of the Act vide no. CIT-XII/263/Tech./Kol/2013-14/2018 dated 29.11.2013 and the relevant show-cause notice reads as under: From the assessment order, record and information receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that only ₹ 63,601/- was claimed as TDS on commission receipt. Why there has been such low amount of TDS when the assessee apparently received commission which runs into crores. As per statement of TDS made by the assessee u/s 194H the amount of commission paid was stated to be ₹ 6,44,17,568/-. It is also noted that the assessee has separately debited ₹ 1,76,14,211/- under the head commission on sales, which was broadly categorized under administrative and selling expenses (Sch-8) P L A/c. Now if for the sake of argument, it is considered that this commission of ₹ 1,74,14,211/- is part of commission paid amounting ₹ 6,44,17,568/- as per TDS (made by the assessee) statement, there remains an amount of ₹ 4,68,03,357/- which appears to be netted with commission received. Thus the amount of commission apparently received by the assessee may be ₹ 4,68,03,357/- + ₹ 2,23,42,638/- (net count) Further it is noted that the amount of current liabilities has jumped to ₹ 6,97,64,141/- in the AY 2009-10 from ₹ 3,45,45,313/- in AY 2008-09 though the quantum of purchase did not rise that much. On examination of Sch-7 of B/Sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal. 4. Before us, Ld. Counsel for the assessee Shri S. M. Surana, Advocate, first of all took us to the 1st issue of understatement of closing stock and inter connected issue of secured loan. According to CIT, there is possible understatement of closing stock at ₹ 6,11,57,746/-. For this, the CIT has gone to Form No. 3CD of the audit report as filed and maintained by assessee, which reads as under: Sl. No. Item (Bearing) Quantity as per cl.28(a) of F. No. 3CD Value as per P L A/c. Average rate per pc. 1. Opening Stock 10926 5,21,07,745/- 4760/- 2. Purchase 21558 20,50,42,101/- 9507/- 3. Total (O/S + Purchase) 32494 25,71,49,846/- 7913/- 4. Less: Sales 12448 21,43,60,625/- 17,220/- 5. Balance (closing stock) 20046 9,74,66,752/- 4862/- The CIT applying average rate calculated in column no. 3 @ ₹ 7913/- per piece estimated the closing stock at ₹ 15,86,23,998/- and reduced the same from value of closing stock disclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aspect, whether, these details were not available before AO or not, during the course of original assessment proceedings. 7. The second issue of this revision proceeding is that the assessee has received commission from foreign parties at ₹ 7,39,01,248/- and also paid commission of ₹ 6,44,17,568/-. According to CIT, the assessee has not credited commission to the extent of ₹ 2,23,40,638/- and no break-up of the same was available in the records. According to him, TDS was deducted on total commission paid to the extent of ₹ 6,44,17,568/-. He also noted that the assessee has separately debited a sum of ₹ 1,76,14,211/- under the head commission on sales. According to CIT, the commission apparently received by assessee is at ₹ 6,91,43,993/-, which is ₹ 4,68,03,357/- + ₹ 2,23,42,638/- (but this was not credited in trading account). According to CIT, the AO ought to have enquired into such huge receipt of commission against which apparently very less tax was deducted by the payer i.e. the total tax deducted to the extent of ₹ 63,601/-. The CIT finally noted that necessary verification of commission paid was examined by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d every transaction TDS has been deducted and the summary of the same is at pages 35 to 41 of assessee s paper book and the details of commission paid are as under: Commission on Sales ₹ 1,76,14,211/- (Debited under Administrative Selling Expenses) Commission Paid ₹ 5,18,29,131/- (Netted with Commission Receipt) ₹ 6,94,43,342/- Ld. Counsel for the assessee stated that the AO during the course of assessment proceedings made enquiries and verification was carried out by issuing notices u/s. 133(6) to 17 parties covering payment of commission for an amount of ₹ 5,53,54,513/-, which covers almost 80% of commission paid. Ld. Counsel for the assessee also stated that complete facts regarding services rendered by these parties were duly explained to the AO during the scrutiny assessment proceedings and even during revision proceedings which are as under: Procurement of Orders, Follow up for payments, Submission of Tender documents, Introducing new customers etc. Ld. Counsel for the assessee stated that these parties to whom commission paid is responded and filed complete details in response to notices issued u/s. 133(6) of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tical i.e. ₹ 974.67 lacs. Even the quantity is also matching. It means that the stock statement submitted to bank and stock as per stock register is exactly matching in term of quality and quantity and rate. Once this is the position, how the CIT can propose a possible understatement and can give a finding that likewise the AO accepted the closing stock declared by the assessee without calling any detail of making the required verification thereof . In view of the above facts on this issue, we find no reason for revising the assessment completed after making due inquiry. It was also argued by assessee that complete details of closing stock i.e. stock statement as submitted to the bank and stock as per books of account were submitted before the AO. During the course of hearing the Ld. Counsel for the assessee drew our attention to statement of particulars furnished before the AO u/s. 44AB of the act in the Audit report and relevant Sl. No. 9, 10 and 11 reads as under:- 9.(a) (b) 10. 11.(a) (b) Whether books of account are prescribed under section 44AA, if yes, list of books so prescribed. Books of account maintained (in case of accounts ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. 194H of the Act the assessee has paid total commission at ₹ 6,44,17,568/-. The assessee has claimed credit for TDS at ₹ 63,661/-, which was deducted from the following incomes: Nature of income TDS claimed Commission Income ₹ 30,428/- Interest Income ₹ 33,233/- Total ₹ 63,661/- 12. We find that the AO has carried out verification of commission paid by issuing notices u/s. 133(6) of the Act to 17 parties, who admitted to have received the commission from the assessee in its communication in response to notices u/s. 133(6) of the Act. The assessee covered almost 80% of commission paid at ₹ 5,53,54,513/- out of the total commission paid at ₹ 6,94,43,342/-. The assessee has also explained the nature of services rendered by these parties to whom commission is paid during the course of assessment proceedings and even during revision proceedings u/s. 263 of the Act. The AO has also verified the sundry creditors on account of commission payable outstanding as on 31.03.2009, which was paid in the subsequent financial year 2009-10 relevant to AY 2010-11 and the details were also filed before CIT during revision proceedings and ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not by itself give an occasion to the CIT to pass orders under s. 263 of the Act merely because he has different opinion in the matter. It is further observed that it is only, in the case of lack of enquiry that such a course of action would be open and while holding so their Lordships have considered the earlier decision of the Hon ble Delhi High Court in the case of Gee Vee Enterprises vs. Addl. CIT (supra). Thus, applying the ratio laid down by the Hon ble High Court in the case of CIT vs. Sunbeam Auto Ltd. (supra), the order of the CIT under s. 263 cannot be held valid as present case is not a case of lack of enquiry . 14. From the observations made by CIT in his revision order in para 5, which are very general in nature and seems to be more of academic in nature, hence, we cannot adjudicate on the same. However, the CIT has raised the issues i.e. the issue of understatement of closing stock as well as commission only on the basis of his opinion that proper enquiry is not made by AO during the course of assessment proceedings. But the facts, as narrated above, speak otherwise. In view of the above factual situation and legal position, we are of the view that the CIT hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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