9911796707
TMI Blog2016 (2) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order. (2) That the assessment order U/S 143(3) dated 16-12-2010 as passed by the L'd Assessing Officer is neither erroneous nor prejudicial to the interest of the revenue. (3) Observations made, inferences drawn and findings recorded by the Worthy Commissioner of Income Tax in her order passed U/S 263 are incorrect, unreasonable or are untenable in law. (4) Directions issued in section 263 order to restore back/ set aside the issue of four sundry creditors to the file of the L'd Assessing Officer for verification is unjust, uncalled for and illegal. (5) The Worthy Commissioner of Income Tax has made a departure from the accepted past history of the issue of purchases account, which is akin to the specific nature of the trade and resorted to applying percentage on the turnover and thereby, making an addition of Rs. 7,98.553/-, which is illegal and at any rate is highly excessive . 2. That the impugned order U/S 263 of the Worthy Commissioner of Income Tax being illegal deserves to be cancelled / annulled." 3. The assessee company is engaged in the business of processing and trading of buffalo meat. The return of income was filed on 27.09.2008 declaring nil i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of revenue since at the time of the assessment, according to CIT the AO was duty bound to call for such details and examine them. For this proposition, the CIT relied on various judicial pronouncements which, for the sake of clarity, are reproduced as under :- "4. .........In the case of M/s. Malabar Industries, the Hon'ble Apex court has held that incorrect assumption of facts or incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall order passed without applying the principles of natural justice or without application of mind. 5. The fundamental principles emerged from the Hon'ble Apex Court judgement in Malabar Ind Co. Ltd Vs. CIT (2000) 243 ITR 83 (SC) include as follows: i. An incorrect assumption of facts or incorrect application of law will suffice the requirement of the order being erroneous. ii. If the order is passed without application of mind, such order will fall under the category of erroneous order. 5.1. Further, it has been held in CIT vs. V.N.M.A. Rathinasabapathy Nadar, (1995) 215 ITR 309, 315 (Mad.), that if an order is passed in ignorance without taking into consideration of the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case, ITO should have made further inquiries before accepting the statements made by the assessee in his return and it was observed that reason is obvious. The position and functions of the ITO are very different from that of civil court. 5.3. On the facts of the present case, it is evident that the AO accepted the version of the assessee without making any inquiry or verification, whereas it is very well settled that mere failure to make inquiries makes an order erroneous. In order that the Commissioner may consider an order to be "erroneous" for the purposes of section 263, the error of law may not be apparent on the fact of the order. The Commissioner may consider an order of the AO to be erroneous not only if it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereotyped order which simply accepts what the assessee has stated in his return an fails to make enquiries which are called for in the circumstances of the case [Rampyari Devi Saraogi vs. CIT (1968) 67 ITR 84 (SC) and Tara Devi Aggarwal vs. CIT, (1973), 88 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction dismissing the appeal filed by the assessee. 5.7. In view of the foregoing, it is evident that the order passed by the AO is erroneous as well as prejudicial to the interests of revenue for the reasons as stated above. Further, the CIT, after going through the written submissions filed by the ld. AR for the assessee, observed/held as under :- "As regards grounds against 263 proceedings, a detailed discussion as already being made in proceeding paras which makes it abundantly clear that the order passed by the A.O was erroneous and prejudicial to the interest to the revenue the same is not being repeated here for the sake of brevity. 8. As regards the issue relating to sundry creditors, the contentions of the ld. counsel are reproduced above, which are not being repeated here for the sake of brevity. I have considered the contention of the ld. counsel that there were running accounts of the creditors from whom purchases were being made on regular basis. Further contention of the ld. counsel that the payments during the year made at Rs. 2.57 crores against the creditors which far exceeded the purchases during the year which were to the magnitude of Rs.l.83 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to issue fresh demand notice and challan." 5. The ld. AR reiterated the submissions made before the ld. CIT (A) and for the sake of clarity, the same are reproduced below :- "7. That for the year under consideration, the assessee has filed a return of income on 07-10-2008 declaring an income of Rs.Nil and the said return was picked up for scrutiny by the ACIT, Circle 1, Meerut. That however, various queries were raised on several dates and after submission of various replies in compliance of the AO's continued queries, she considered all the documents called for evidences supplied by the assessee and after due consideration of the same and after having applied her mind to the issues involved she took a possible view and thereby passed the impugned assessment order dated 16-12-2010. That now the assessee is in receipt of notice U/S 263 dated 12-02-2013 and several issues have been raised on the basis of which your honour believes that the assessment is erroneous and prejudicial to the interest of the revenue. The submissions of the assessee on each of the issues raised are as under:- AO has accepted confirmations from the alleged sundry creditors without any enquiry o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been examined on test check basis from the books of accounts produced and other details and documents furnished by the assessee." It may be seen that she has given a clear finding about having accepted the trading results after test checking the books of accounts and considering other documents and evidences produced. The issue of purchases therefore, stands covered and hence it wrong to assume that no finding in this regards has been given. That thus, it would be seen that in respect of each of the issues referred to by your honour, the Assessing Officer has called for full details, and once they were submitted, has either verified them from the books of accounts or through making external enquiries and then formed an opinion and took a possible view, in terms of the latest legal position and thereby accepted the trading results of the assessee. For the proposition that the power of the commissioner U/S 263 have to be exercised on the basis of the material available to him when he exercises the power, Reliance in this regard is placed on: CIT Vs G.M Mittal Stainless Steel Pvt Ltd 263 ITR 255 ( SC) Further, as such the impugned order cannot be termed erroneous since on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it is only when an order is erroneous, than the said section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice for the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to the interest of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view which the CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under the law. (vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the CIT, while exercising his power under Section 263 of the Act, is not permitted to substitute his estimate of income in place of the income estimated by the AO. (vii) The AO exercises quasi-judicial power vested in him and if he ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
