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TMI Blog2016 (6) TMI 940X X X X Extracts X X X X X X X X Extracts X X X X ..... diction to invoke the provisions of section 263 of the Income Tax Act, 1961 under the facts and circumstances of the case. d. The various observations made by the Ld. CIT in her order u/s 263 are either factually incorrect or are untenable in Law and the various case laws relied upon by her are not applicable to the facts of the case of the appellant. 2. That without prejudice to the ground 1 above, the Ld. CIT grossly erred in law and on facts in rejecting the books of accounts of the appellant u/s 145(3) of the IT Act, 1961 and estimating the income of the appellant by applying a net profit rate of 5% to the Gross turnover including other income aggregating Rs. 19,37,55,643/- and arriving at and making an addition of Rs. 80,46,447/- to the income of the appellant. In view of the material on record, the rejection of the books of accounts u/s 145(3) of the Income Tax Act ,1961, estimate of net profit @5% of the turnover and receipts and addition of Rs. 80,46,447/- to the income of the appellant are most arbitrary, without any basis whatsoever and uncalled for in the facts and circumstances of the case. 3. That without prejudice to the above, the ld. CIT had no jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted without any reason or justification; (ii) Applicability of the TDS on the rent payment of Rs. 5,55,400/- was not verified by the Assessing Officer; (iii) The expenses incurred by the assessee and lower profit rate was not examined by the Assessing Officer. 3. As regard to first point of 263 proceedings, the learned CIT observed that the assessee had shown a very small amount of net profit of Rs. 6,41,335/-on the turnover of the 18.76 crore. According to ld. CIT, the Assessing Officer did not make an enquiry as how the commission of Rs. 52,51,858/- and other income of Rs. 8,77,137/- was set off against the several expenses in the profit and loss account. He further observed that no vouchers, bills or supporting evidence were produced before the Assessing Officer. In her view, the ad-hoc addition of Rs. 10 lakh made was negligible looking to the high turnover and despite being the other income/commission income of Rs. 61,28,995/-. She also noticed that no books of accounts were produced before her. She, therefore, rejected the books of accounts under section 145(3) of the Act and applying net profit rate of 5% on the total turnover including the other income computed the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income Tax (2000) 243 ITR 83 (SC). The learned CIT (DR) also relied on the decisions of the Tribunal Delhi bench in the case of Kavadi Narsimha Vs. Commissioner of Income Tax, Central-II, New Delhi in ITA number 953 to 958 & 960/Del/ 2011 and Sh. Virender Kumar Gupta versus CIT, Meerut in ITA No. 2595/Del/2009. 6. We have heard the rival submission and perused the relevant material on record. We find that ratios of the various judicial decisions on the issue in dispute including the decisions cited by the ld. CIT (DR) have been summarized by the Tribunal in the case of Sunil Arora (supra) and the relevant part of the decision is reproduced as under: "4. We have heard the rival submissions and perused the relevant material on record. We want to clarify that the mandate of section 263 is attracted only when the assessment order is found to be erroneous and prejudicial to the interest of the Revenue. These twin conditions have to be cumulatively satisfied for obtaining a valid jurisdiction under this section. Merely because an assessment order is prejudicial to the interest of the revenue is not enough, unless it is shown that the same is erroneous too. An assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s discussed whether any enquiry was conducted by the Assessing Officer or not and after considering the material on record, the Tribunal in the above case held as under: "5. Coming to the facts of the instant case, we find the first objection of the Id. CIT about non-production of books of account, etc. before the AO and the resultant rejection of such books and the consequential computation of business income at Rs. 65.84 lac, as unsustainable. We have perused a copy of the order sheet entry of the AO, which is available on pages 368 to 370 of the paper book. It is manifest that the first notice was issued by the AO to the assessee on 26.8.2009. On 4.8.2010, the assessee appeared and was called upon to furnish various details listed at sr. nos. a) to o), inter alia, of sundry creditors, various expenses including discounts, commission, etc. On 17.8.2010, the assessee appeared and filed part reply. Again on 20.10.2010, the assessee's representative appeared and filed part reply. On 25.10.2010, the assessee's representative appeared and filed part reply. At this stage, the assessee was called upon to produce the books of account on the next date of hearing, namely, 9.11.2010. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Rs. l lac made by the AO out of expenses is paltry, cannot be a ground to hold the assessment order erroneous. It cannot be characterized as a patent mistake committed by the AO. At the most, it may be a debatable issue as to what amount of expenses should be disallowed. The AO may consider a particular amount as reasonably disallowable, while the CIT may consider another amount. Going by any standard, it is a debatable issue as to the reasonableness of the amount disallowable and as such, the CIT cannot substitute his opinion of the disallowable amount with that of the AO in exercising power u/s 263 of the Act. 8. As the AO did carry out investigation on all the relevant aspects of the matter, which is evident from the order sheet entry, and the reply of the assessee giving details on several occasions, the assessment order cannot be termed as erroneous. We, therefore, set aside the action of the learned Commissioner of Income Tax in making addition of Rs. 65.84 lac by applying an ad-hoc net profit rate." 8. Once we advert to the facts of the case in hand, we find that the issues raised by the CIT in the case in hand are identical to the issue raised in the case of Sunil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT about non-production of books of accounts and non-examination of low profit and other expenses claimed are, therefore, not tenable. In our opinion, it is not a case where no enquiry has been conducted by the Assessing Officer on the issue involved, whereas we find that the Assessing Officer has even examined the bills and vouchers and asked for the explanation of the assessee and after considering the ratio of the expenses and profits as compared to the preceding years, he accepted the disallowance of Rs. 10 lakh. As observed by the Tribunal in the case of Sh. Sunil Arora (supra), we also don't find any justification in the case in hand for applying the net profit rate of 5% on the total turnover including other income, without substantiated with any cogent reason. The Assessing Officer has observed that some of the vouchers of expenses were self-made and the ld. AR contended that those were small payments on account of freight, carriage etc. paid to rickshawalas etc. for which there could have been no external evidence. We find that the Assessing Officer after considering the material available before him and explanation of the assessee, made an ad-hoc addition of Rs. 10 lakh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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