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TMI Blog2015 (11) TMI 859X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) in respect of investment in land and mixing plant. c) Disallowance of depreciation in respect of the mixing plant d) Disallowance of deduction on account of interest and salary paid to the partners. 3. Briefly stated the facts of the case are than on an examination of the assessment record of the assessee for the assessment year under consideration, the CIT observed that the assessment order dated 20.01.2013 passed in this case u/s 143(3) of the Act was erroneous and in as much as it was prejudicial to the interest of Revenue. The Ld. Commissioner issued a notice to the assessee u/s 263 of the Act listing eight issues in respect to which it was found that the assessment order was erroneous and prejudicial to the interest of Revenue. In response to the aforesaid notice, the assessee contended that all the queries raised in the show cause notice had been looked into by the Assessing officer while framing the assessment order and the Assessing officer was fully satisfied with the record produced before him and the contention put forth before him by the assessee with regard to the points raised by the Ld. Commissioner. The next contention of the assessee was that it is the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that since the material was purchased on the last date but could not have become part of the work-in- progress of the assessee as that would have been physically impossible. The Ld. CIT observed that no query was raised by the Assessing officer about the purchases made on the last day of the year figuring in the closing stock of the assessee. The Ld. CIT held that the assessee has understated its closing stock on account of payments to M/s Jay Building Material Supplier and Rakesh Yadav to the extent of Rs. 5,95,970/- (Rs. 6,95,970/- - Rs. 1,00,000 shown). The Ld. Commissioner took the view that the order of the Assessing officer is erroneous since he did not examine the value of the closing stock with reference to the purchases made at the end of the year and is prejudicial to the interest of Revenue because non verification has led to understatement of the closing stock as well as income to the extent of Rs. 5,95,970/-. In this regard, the reply of the assessee dated 16.2.2015 was as under:- "4.1 In response to the aforesaid query, the Ld. Counsel has submitted its reply dated 16.03.2015, which is reproduced as under:- "Our suppliers of Diesel, Dust, Rori, Bricks & Reta/S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint No. 7 of your questionnaire: There was Opening Stock of Rs. 10 Lacs as on 1.4.2009. This Opening Stock mainly consists of Material lying at sites, Work done but not certified by the concern department. Detail of Closing Stock /Work- In - Progress as on 31.3.2010 was as follows: 1) Cement 2714 Bags (Bill dt. 30.3.2010 of Adiya Cement, Chittorgargh enclosed for your record) Rs. 5,86,224.00 2) Rori / Dust / Reta Rs. 1,00,000.00 3) Work done but not yet certified by the department as on 31.3.2010 Rs. 22,00,000.00 4) Other Material (Inc. Misc. Items) Rs. 1,34,606.00 Total Rs. 30,20,830.00 7. It is also observed that the Assessing officer vide his questionnaire dated 8.11.2012 (para 5) required the assessee to furnish the details of month wise purchase and sales of each item separately. The Assessing officer also required the assessee to submit the list of the purchaser / seller exceeding to Rs. 20,000/- alongwith complete postal address. The assessee along with its reply dated 3.12.2012 submitted the copy of the account of all purchases made during the assessment year 2010-11. In our opinion, the Ld. Commissioner has wrongly presumed that the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer cannot be held to be erroneous and prejudicial to the interest of Revenue simply because in his order he did not make any elaborate discussion in that regard. In the case of CIT v Sunbeam Auto Ltd. (2011) 332 ITR 167(Delhi), the Hon'ble High Court held that where the Assessing officer allowed the claim on being satisfied with the explanation of the assessee, such decision of the Assessing officer could not be held to be erroneous simply because in his orders he did not make an elaborate discussion in that regard. 8. The Ld. CIT also directed the Assessing officer to pass a fresh assessment order after making disallowance of interest u/s 36(1)(iii) in respect of land and mixing plant and also depreciation on mixing plant. The Ld. Commissioner observed that assessee purchased land of Rs. 66 lakhs and machinery of Rs. 20 lakhs during the relevant previous year. According to him, the purchase of land by the assessee was not shown to be for business purpose and proportionate interest expenditure should have been considered for disallowance. The Ld. CIT also observed that alternatively since the asset was not used for business purpose during the year, interest expenditure should ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant. 9. Shri Ashwani Kumar, Ld. Counsel for the assessee submitted that the above points / queries raised by Ld. CIT have been duly looked into by the Assessing officer during the assessment proceedings. He reiterated that the Assessing officer was very much satisfied with the record produced before him and the explanation given to him by the assessee with regard to the above said points. The Assessing officer issued questionnaire dated 8.11.2012 and 10.12.2012. Vide Para 4 of the questionnaire dated 8.11.2012, the Assessing officer asked the assessee to file the details of list of items mentioned under the head fixed assets alongwith the source of investment in acquisition of the same. Similarly, vide para 9 of the questionnaire dated 10.12.2012, the Assessing officer required the assessee to furnish copies of the bills with respect to the addition to fixed assets. In response to the said query, the assessee submitted a detailed reply on 3.12.2012 and 17.12.2012 along with copy of the accounts of fixed assets supported by vouchers / evidence of addition in the fixed assets during the assessment year 2010-11. From the records, it is clear that the Assessing officer has made the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of assessment proceedings. The original copy of the deed at the time of filing of photocopy of the deed was shown to the Assessing officer. Accordingly, it was submitted that the assessee has fully complied with terms and conditions of furnishing the partnership deed dated 1.4.2009. Interest & salary paid to the partners as per the clause of the partnership deed. The Assessing officer vide questionnaire dated 10.12.2012 (para 13) required the assessee to furnish the copy of the partnership deed duly certified by the partners. In response to the said query, the assessee submitted its reply on 17.12.2012 together with copy of the partnership deed. Shri Ashwani Kumar, Ld. Counsel for the assessee submitted that the Assessing officer was satisfied with the copy of the partnership deed dated 1.4.2009 produced before him. It was also contended that original partnership deed dated 1.4.2009 was shown to the Assessing officer. The Assessing officer was satisfied with the documents produced before him and he has allowed interest and salary paid to the partners as per the clause of the partnership deed dated 1.4.2009. Similarly, profits have also been distributed amongst the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in such return of income, assessment, etc. shall not be invalid or shall not be deemed to be invalid. The Hon'ble Kerala High Court has held in the case of CIT -vs- Masoneilan (India) Ltd. [242 ITR 569] that section 292B provides that no return of income shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income if it is in substance and effect in conformity with or according to the intent and purpose of the Act. It is further observed that section 139 also throws some light on the question, if there is any defect, the A.O. is required to give an opportunity to the assessee to rectify the defect within a stipulated time. We are of the considered view that the purpose of filing the copy of the changes in the partnership deed before the A.O. is to enable the A.O. to examine as to whether there is a genuine partnership in existence and the remuneration being paid to the partners is properly distributed and paid in accordance with the partnership deed. Furnishing of certified copy of the revised instrument of partnership deed as per section 184(4) of the Act is procedural in nature though the word "shall" is stated b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e partners. She contended that the learned Tribunal erred in taking a view which is plainly contrary to the section namely Section 185. We have not been impressed by such submission. We are of the opinion that the view taken by the learned Tribunal is the correct view. We may add further reasons why the view taken by the learned Tribunal is unimpeachable. The assessee is required to file return under sub- section 1 of Section 139 within the time prescribed therein. What is the time prescribed has been dealt with in Explanation 2 appended to sub-section 1 of section 139. This requirement of law has to be held subject to the provision of sub-section 4 which permits an assessee to file a return at any time before the expiry of one year from the end of relevant assessment year or even before the completion of the assessment whichever is earlier. The Apex Court in the case of CIT, Punjab v. Kulu Valley Transport Co.P.Ltd., reported in 77 ITR 518 held that sub-section 3 of section 22 is to be read as a proviso to sub- section 1 of section 22. Sub-section 1 of section 22 is in pari materia with sub-section 1 of section 139. The relevant portion of the said judgement reads as follows : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of seciton 184(2) and 184(4), the assessee is required to submit a certified copy of the partnership deed. According to him, the assessee has not complied with the provisions of section 184(2) and 184(4) of the Act and therefore, assessment order was erroneous in as much as prejudicial to the interest of Revenue. The Ld. CIT presumed that the above provisions of the Act are mandatory. This observation of the Ld. CIT is contrary to the decision of the Hon'ble Calcutta Hon'ble High Court (supra), wherein the Hon'ble High Court has categorically held that Section 185 read with Section 184, although worded in emphatic terms, is not intended to be a mandatory provisions. 14. In the instant case the Revenue has accepted the return filed by the assessee as perfectly valid and, therefore, there is no occasion to held that the return was in derogation to sub section (4) of section 184 of the Act. In view of the decision of Hon'ble Calcutta High Court referred to above, we find that order of the CIT on this issue is not tenable and accordingly we hold that the assessment order cannot be held erroneous in as much as prejudicial to the interest of Revenue on this issue. 15. In view of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the present case the CIT has not left any scope for the Assessing officer to redo the assessment or pass a fresh assessment order. It is also observed that Ld. CIT has directed the Assessing officer to give an opportunity of being heard to the assessee before passing the fresh assessment order. In our view, giving opportunity of being heard to the assessee by the Assessing officer is also meaningless, particularly when the Ld. CIT himself has reframed the assessment order. The directions given by the Ld. CIT in para 7 of the impugned order are also contrary to the settled position of law. When the Ld. CIT directs the Assessing officer to pass a fresh assessment order, the only proper course for the Commissioner was not to express any final opinion as regards to the controversial points. While taking such a view, we are fortified by the decision of Hon'ble Gujrat Hon'ble High Court in the case of Addl. CIT v Mukur Corporation (1978) 111 ITR 312 (Gujarat). It is also observed that in the concluding part of the order of the Commissioner he has issued a direction to the Assessing officer to pass a fresh assessment order then he was not required to express any final verdict as r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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