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TMI Blog2015 (4) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... e is provided due opportunity of being heard to explain his stand which has not been granted by the CIT. Thus the CIT rejected books of accounts of the assessee in a unjustified manner and rejection of books and estimation of net profit in pursuant to it and enhancing the assessment without affording due opportunity of hearing to the assessee is not only against the scheme of the Act but also violative to the principles of natural justice and hence, conclusion of CIT is not sustainable cannot be held as valid in this regard. See B.S.Sangwan (2015 (1) TMI 1011 - ITAT DELHI) - Decided in favour of assessee. - ITA No. 3376/DEL/2013 - - - Dated:- 30-3-2015 - Shri R. S. Syal And Shri C. M. Garg,JJ. For the Petitioner : Sh. Sunil Jain, CA For the Respondent : Sh. R.I.S., DR ORDER Per C. M. Garg, Judicial Member : This appeal has been preferred by the assessee against the order of the Commissioner of Income Tax (Appeals), Meerut dated 28/03/2013 passed u/s 263 of the Income Tax Act, 1961 (for short Act) for A.Y. 2008 - 09. 2. The assessee has raised following revised grounds of appeal :- 1. On the facts and circumstances of the case and in law the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny details in this regard nor made any enquiry. iv) Duty draw back ₹ 6 crores is set off totally negligible profit is shown which is accepted as such without any enquiry. 4. The CIT(A), Meerut passed impugned order by holding that the assessment order Dated 5.10.2010 is erroneous as well as prejudicial to the interest of revenue for the reasons stated therein. Finally the CIT(A), Meerut directed the AO to properly examine afresh the issues considering all the four points as stated therein in the notice and also directed the AO to examine entire amount of sundry creditors of ₹ 10,81,49,561/- including amount of ₹ 57,80,000/- M/s Kabir Oldtex and also directed the AO to enhance the net profit by the amount of 2,45,42,252 being 5% of total turnover after considering all evidence and affording reasonable opportunity of hearing to the assessee. Being aggrieved by the above order passed u/s 263 of the Act, the assessee is before this Tribunal with the grounds as reproduced hereinabove. 5. Ground No. 1 2 of the Assessee :- Apropos ground no. 1 2, the Ld. Assessee s Representative (AR) submitted that the impugned order passed by the CIT(A), Meerut u/s 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised any quiry and has not verified an examine certain important points which resulted into Revenue loss to the department then in the case of no inquiry the order would certainly be not only erroneous but prejudicial to the interest of revenue. 8. On careful consideration on above submissions, we note that CIT(A), Meerut pointed out four issues in the notice dated 15.2.2013 issued u/s 263 of the Act (as reproduced hereinabove in para 3 of this order), wherein the issue of unsecured loan from M/s Kabir Oldtax for ₹ 37,50,000/-, payment of designing charges of ₹ 13,05,900/- in view of TDS, amount of 62,58,623/- on account of fire loss and set off of ₹ 6 crores towards duty draw back was specifically questioned by CIT(A), Meerut. From part 6 of the impugned order. We note that the CIT also issued reminder dated 28.2.2013 and passed ex parte order on 28.03.2013. From operative part of para 7 of the impugned order, we note that in para 7 the CIT has directed the AO to examine entire amount of sundry creditors of ₹ 10, 81,49,561/- including an unsecured loan from M/s Kabir Oldtax; from para 10 of the impugned order we also note that the CIT(A) has directed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice-extracts from which are set out in the revision order itself. It is important to note the shifting stand of the CIT so far as reasons for subjecting the assessment order to revision proceedings. At p. 1, in fifth sentence of the impugned revision order, learned CIT notes that that on perusal of assessment record, it was noticed that assessment order was erroneous in as much as it was prejudicial to the interest of the Revenue as the details of purchase and sale of share transactions in futures were not verified as to whether the profit or loss from the futures trading amounts to speculation gain or loss . The extracts from show-cause notice, which have been reproduced in the impugned revision order at pp. 1 and 2, do not, however, even remotely support that stand. The stand taken in the show-cause notice is that, on merits, set off is not permissible in as much as show-cause notice states that as per the provisions of s. 73 of the IT Act, any loss computed in respect of speculation business carried on by the assessee shall not be set off except against profits and gains of another speculation business , and, thereforeyou (the assessee) are not allowed to adjust the specul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 339- 340) : The necessary implication in the expression after giving opportunity of being heard relates to the point on which the CIT considers the order to be erroneous and judicial to the interests of the Revenue. In other words, it is necessary for the Commissioner to point out the exact error in the order which he proposes to revise so that the assessee would have an adequate opportunity of meeting the error before the final order is made. (Emphasis, italicsed in print, supplied) In the case before the High Court, the showcause notice referred to two issues to which the assessee had given satisfactory replies. No action was taken under s. 263 in respect of these two issues. However, in the said order the CIT mentioned the hire charges as the ground for revising the assessment. This point had not been mentioned as a ground in the show-cause notice. The High Court held that in as much as the CIT had not chosen to show these two points as the errors in making the final order and the final order under s. 263 refers only to the inference of hire charges being exigible to tax which was not mentioned at all in the show-cause, obviously the assessee had no opportunity to meet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the rate of 5% of gross turnover and second on account of sundry creditors in regard to the M/s Nagin Fabrics and M/s. Ramesh Enterprises which were not also part of notice u/s 263 of the Act as we have already noted above. 14. The Ld. AR strenuously contended that the CIT rejected the books of accounts at the assessee u/s 145(3) of the Act without affording due opportunity of hearing for the assessee and directed the AO to estimate net profit @ 5% of the total turnover without comparing results of the assessee for earlier and succeeding assessment years and also without considering any other suitable and proper comparable similar to the assessees business to above contentions of the assessee. The Ld. DR replied that the AO did not verify books of accounts of the assessee when it was considered by the CIT then it was found not property maintained, therefore the CIT was justified in rejecting books of accounts of the assessee. The Ld. AR, on this point, placed a rejoinder and submitted that the CIT was working with a predetermined and in a unjustified manner as the CIT estimated the net profit @ 5% at total turnover and at the same time he directed the AO make other addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT cannot held inclusive until and unless the assessee is provided due opportunity of being heard to explain his stand which has not been granted by the CIT. Hence, on the basis of foregoing discussions we are inclined to hold true the CIT rejected books of accounts of the assessee in a unjustified manner and rejection of books and estimation of net profit in pursuant To it and enhancing the assessment without affording due opportunity of hearing to the assessee is not only against the scheme of the Act but also violative to the principles of natural justice and hence, conclusion of CIT is not sustainable cannot be held as valid in this regard. 16. Under these clear facts and circumstances of the present case we hold that the issue is covered on all four corners in favour of assessee by decision of the coordinate bench of in the case of B.S.Sangwan (supra) and we are inclined to hold that the revision u/s 263 of the Act can only be passed on the ground on which assessee has been given reasonable opportunity of being heard in the notice u/s 263 of the Act and it is not allowable and open to the CIT to set out one reason for revising the assessment order but actually revising the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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