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TMI Blog2015 (11) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 of the Act. We therefore reject the submission of the Revenue that the order of the Ld.AO is erroneous or prejudicial to the interest of the Revenue or have been passed without application of mind only because in the assessment order the ld.AO has not made elaborate discussion in that regard. It is evident that the ld.CIT has set aside the order of the ld.AO only on the ground that the view taken by the ld.AO was not agreeable to him. In our considered opinion, it cannot be said that the ld.AO has not applied his mind at the time of assessment. The view taken by the ld.AO was a possible view and that the condition precedent for invoking jurisdiction under section 263 by the Commissioner of Income-tax did not exist in the facts of the present case. See Commissioner Of Income-Tax Versus Gabriel India Limited [1993 (4) TMI 55 - BOMBAY High Court] - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the year in the personal set. These documents were filed during the assessment proceedings u/s 143(3) and also during revision proceedings u/s 263. The assessee had duly explained the identity/genuineness/creditworthiness of all the unsecured loans received during the year and had fully discharged the onus as required u/s 68 of the Act. The ld. CIT has made addition u/s 68 for total loans outstanding as on 31.03.2008 which includes loan of ₹ 37,02,605/- taken by the assessee in earlier years. The addition of ₹ 48,23,008/- is therefore, illegal, unjustified and deserves to be deleted in full. 6. BECAUSE on the facts and in law and on grounds taken and basis adopted, the addition of ₹ 35,93,265/- u/s 68 on account of entire unsecured loan as per the business set of the assessee (including opening balance of ₹ 21,91,271/-) is unjustified and illegal. The assessee filed the documents/proof (Confirmation Certificates, ITR, Bank A/c etc.) for the loan of ₹ 18,74,000/- raised during the year in the business set. These documents were filed during the assessment proceedings u/s 143(3) and also during revision proceedings u/s 263. The assessee had duly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of sundry creditors, unsecured loan and increase in the capital by the assessee. The assessment order was passed u/s 143(3) and the ld. AO observed as under: "The assessee company is engaged in the business of printing and publication of books for competitive examinations. The results declared by the assessee have been examined and verified on test check basis from the books of accounts and bank statements and various other details and documents submitted by the assessee from time to time". 4. The Ld. AO made addition, in respect of vehicle running and maintenance expenses which was claimed as business expenses by the assessee as well as addition u/s.43B was made in respect of the unpaid service tax liability. 5. Subsequently the ld. CIT, Meerut initiated proceedings u/s 263 of the Income Tax Act vide notice dated 12/02/2013. By the said notice, the ld. CIT raised certain queries. The ld. CIT on examination of assessment records had opined that the assessment order has been passed without proper enquiry in view of the following points: a) From the perusal of balance sheet and its annexure, it appears that during the year the assessee has introduced new capital of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verification, the ld. AO made no addition vide order u/s 143(3)/263 dated 24.02.2014. d. During the year, the assessee has paid freight to M/s Delhi M.P. Road Carrier to ₹ 55,971/- but TDS has not been deducted on the same amount. Therefore, the same shall be disallowed u/s 40(a)(ia). Vide para 7 of the Impugned order the ld. CIT directed the AO to verify. After verification, the ld. AO made no addition vide order u/s 143(3)/263 dated 24.02.2014. e. Sundry Creditors and Unsecured Loans have not been confirmed by the AO by issue of notice u/s 133(6). AO simply accepted the confirmation filed by the assessee. Vide para 8 of the Impugned order the ld. CIT herself added entire Unsecured Loan in business set ₹ 35.93 lacs (including opening balances of ₹ 21.91 lac) & Sundry Creditor ₹ 5.90 crore (including opening balances) without conducting any enquiry u/s 133(6) and without affording any opportunity to the assessee whatsoever. 7. The Ld.CIT passed the order u/s.263 by holding that the order passed by the ld.AO is erroneous as well as prejudicial to the interest of the Revenue for the purpose of sec.263. 8. Accordingly, the ld. AO passed an order on 21/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and prejudicial to the interest of the Revenue. The ld. AR submitted that the details regarding the loan and the confirmations were filed before the Ld.AO and it was verified by the Ld.AO. 13. The ld.AR pointed out that in the assessment order passed on 21.02.2014, passed in pursuance to the order u/s.263 of the Act, the ld.AO has not made any additions on any of the points at 'b, c and d' mentioned in para 6 above. The ld. AR further pointed out that the ld. AO while passing the assessment order in pursuance to order u/s.263 of the Act, has made only those additions which has been made by the Ld.CIT vide order dated 25.03.2013. 14. The Ld. AR strenuously contended that the ld.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. It is contended by the ld.AR that no show cause was issued to the assessee in this respect. The ld.AR submitted that ld.AO had accepted the books of accounts. 15. The Ld. DR supports the orders of the authorities below. 16. We have perused the assessment records and the orders passed by the authorities below. On careful consideration of the submissions, we note that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed books of accounts of the assessee in a unjustified manner is not only against the scheme of the Act but also violative to the principles of natural justice. On careful consideration, we note that the CIT invoked section 145(3) with following observation and conclusion, "The regular books of account, as such are not properly maintained, provisions of section 145(3) of the I.T.Act, 1961 are thus invoked rejecting the same since accounts are not properly maintained and are not verifiable." 19. It is also pertinent to note that while passing order u/s 263 read with section 143(3) of the Act on 21.02.2014, the ld.AO has not made any addition in regard to any of the points raised by the CIT in the notice u/s 263 of the Act. Per contra the assessing officer made two additions viz. first addition on account of unsecured loans and sundry creditors. We are of the considered view of that the impugned revision order is contrary to the scheme of law as stipulated u/s 263 of the Act because the CIT proceeded to issue notice by pointing out five issues as reproduced hereinabove. However we notice in the impugned order passed u/s 263 of the Act, the CIT directed the ld.AO to make inquiry not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any confirmation from sundry creditors. See para 14 and 27 of written submissions during assessment proceedings. The list as well as confirmed copy of account were filed. See para 2.8 page 55 of paper book filed in appeal reply of notice u/s 263. Both list and confirmations were filed in 263 proceedings also. [para 2(e) of notice u/s 263] 7. Para 8 page 11 of order: The assessee has shown turnover of ₹ 20,39,25,524 on which it has declared NP of ₹ 33,40,720/- Page 454 of PB filed in appeal: The turnover is ₹ 17.05 cores Last year Net Profit ₹ 21.72 lac Current Year Net Profit ₹ 33.40 lac 8. Para 8 page 11 of order • observations regarding stock register, lower NP etc. • Rejection of books u/s 145(3) • no such query regarding stock, lower NP in notice u/s 263 • no show cause for rejection of books • the AO accepted books of accounts 9. Para 2(e) of notice u/s 263 Sundry creditors and unsecured loans have not been confirmed by the AO by issue of notice u/s 133(6). AO has simply accepted the confirmation filed by the assessee • At para 8 page 10 of order the ld. CIT observes that no confirmation from any credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO and directing de novo enquiry on two issues. The Tribunal noted that all the details had been considered by the AO while passing the assessment order under section 143(3) of the Act. The Tribunal held that the CIT was not justified in exercising the suo motu power of revision under section 263. On further appeal, the High Court, dismissing the appeal, held that there was no basis or justification for the CIT to invoke the provisions of section 263. The AO after making an enquiry and eliciting a response from the assessee, came to the conclusion that the assessee was entitled to depreciation on the value of securities held on the trade account. The CIT should not have treated this finding to be erroneous or prejudicial to the interests of the Revenue. The observation of the CIT that the AO had arrived at a finding without conducting an enquiry was erroneous, since an enquiry was specifically held with reference to which a disclosure of details was called for by the AO and furnished by the asseseee. The Tribunal was, therefore, justified in holding that recourse to the powers under section 263 was not warranted in the facts and circumstances of the case. (e) CIT Vs. Design a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction to pass an order under section 263, revising the assessment order. It is not necessary that every order which is found to be erroneous is also prejudicial to the interests of the Revenue. It was also held that the CIT had not considered whether the order of the AO was prejudicial to the interests of the Revenue. The Tribunal was right in coming to the conclusion that if the order of the CIT was allowed to stand, it would result in double taxation which was contrary to the scheme of the Act and was not the purpose of exercise of powers under section 263 of the Act. Therefore, the Tribunal was right in law in setting aside the order of the CIT, under section 263 of the Act. (g) CIT Vs. Arvind Jewellers [2003] 259 ITR 502 (Guj) : [2002] 124 Taxman 615 (Guj.) It was held in this case that the provisions of section 263 cannot be invoked to correct each and every type of mistake or error committed by the AO. In the instant case, it was the finding of fact given by the Tribunal that the assessee had produced relevant material and offered explanation in pursuance of the notices under section 142(1), as well as section 143(2) and after considering those materials and explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the AO has taken one view, with which the CIT does not agree, it cannot be treated as an erroneous order, prejudicial to the interests of the Revenue, unless the view taken by the AO is unsustainable in law. 22. It is evident from the order of the Assessing Officer that he has considered all detailed particulars filed before him. The same is verifiable from the questionnaire issued by the ld. AO at the time of assessment. The Ld.AO has dealt with and verified all the details in respect of the issues raised in the notice issued by the ld.CIT u/s.263 of the Act. We therefore reject the submission of the Revenue that the order of the Ld.AO is erroneous or prejudicial to the interest of the Revenue or have been passed without application of mind only because in the assessment order the ld.AO has not made elaborate discussion in that regard. It is evident that the ld.CIT has set aside the order of the ld.AO only on the ground that the view taken by the ld.AO was not agreeable to him. In our considered opinion, it cannot be said that the ld.AO has not applied his mind at the time of assessment. The view taken by the ld.AO was a possible view and that the condition precedent for invok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion because the first requirement, namely, that the order is erroneous, is absent. Similarly if an order is erroneous but not prejudicial to the interests of the Revenue, then the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute, on an incorrect or incomplete interpretation, a lesser tax than what was just has been imposed. When exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the court it would be open to the courts to examine whether the relevant objective factors were available from the records called for and examined by such authority." 23. In view of the above reasoning and findings, we are inclined to follow the decision of CIT v. Gabriel India Ltd. [1993] 203 ITR 108, we are of the considered opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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