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TMI Blog2016 (12) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... ted u/s 143(3) of the Act on 2.12.2009, determining the total income at Rs. 18,00,210/- by estimating income at 5% on gross contract receipts. 3. The CIT, Vijayawada issued a show cause notice dated 18.5.2010 and asked to explain why the assessment order passed by the A.O. u/s 143(3) of the Act, dated 2.12.2009 shall not be revised under the provisions of section 263 of the Act. The CIT, proposed to revise the assessment order for the reason that on verification of assessment records, it is found that the order passed by the A.O. u/s 143(3) of the Act, appears to be erroneous in so far as it is prejudicial to the interest of the revenue in terms of section 263 of the Act. The CIT, in the said show cause notice, observed that the A.O. has not verified the increase in capital account of the assessee, additions made to fixed assets, applicability of TDS provisions and consequent disallowance u/s 40(a)(ia) of the Act towards financial charges, genuineness of trade creditors shown in the balance sheet and also correctness of net profit admitted by the assessee. The CIT, further, observed that the A.O. has completed assessment by rejection of books of accounts and estimation of net prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record that no query at all was raised, nor any clarification was sought on these issues during the assessment proceedings. The record does not indicate that the A.O. had applied his mind to facts and materials on record through a process of enquiry and investigation and formed a view on the issues before rejection of books of accounts and estimation of net profit of 5% on gross turnover. Thus, the assessment order passed by the A.O. without making any enquiries is considered to be erroneous and prejudicial to the interest of the revenue. With these observations, revised the assessment order passed u/s 143(3) of the Act, dated 2.12.2009 and directed the A.O. to re-do the assessment after carefully examining all the details and after giving the assessee a reasonable opportunity of being heard. Aggrieved by the CIT order the assessee is in appeal before us. 6. The Ld. A.R. for the assessee submitted that the Ld. CIT erred in holding that the assessment order passed by the A.O. u/s 143(3) of the Act dated 2.12.2009 is erroneous in so far as it is prejudicial to the interest of the revenue. The A.R. further submitted that the CIT ought to have observed that the assessing officer rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions to capital account, fixed assets, sundry creditors, applicability of the provisions of section 40(a)(ia) of the Act and analysis of net profit declared by the assessee. The CIT, further, was of the opinion that the A.O., without examining the above issues, simply completed assessment and estimated net profit without any comparable cases of similar nature, therefore, the assessment order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of the revenue. 9. It is the contention of the assessee that the A.O. has examined all the issues pointed out by the CIT and after satisfied with the explanation of the assessee chosen to reject books of accounts and estimated net profit, therefore, the CIT was incorrect in holding that the A.O. was erred in estimating net profit of 5% on gross contract receipts. The assessee further contended that once the books of accounts have been rejected under provisions of section 145(3) of the Act, there is no need to go into the same books of accounts to look into other issues. When the books of accounts are rejected and profit is estimated, the A.O. cannot make any additions to other issues and accordingly, the A.O. has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT after giving assessee reasonable opportunity of being heard. Consequent to CIT order u/s 263 of the Act, the A.O. passed assessment order u/s 144 r.w.s. 263 of the Act and determined total income of Rs. 87,20,758/- and Rs. 39,52,420/- for the A.Y. 2007-08 & 2008-09 respectively. 13. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). The CIT(A) after considering the explanations furnished by the assessee, held that on verification of the assessment order, it was found that the assessing officer has made additions based on the direction of the CIT u/s 263 of the Act. Since, the CIT and the CIT(A) are holding equal positions, the appeal against the assessment completed as per the directions of the CIT u/s 263 of the Act, could not be decided by the CIT(A), accordingly, dismissed the appeal filed by the assessee. Aggrieved by the CIT(A) order, the assessee is in appeal before us. 14. The Ld. A.R. for the assessee submitted that the CIT(A) is erred in not adjudicating the appeal filed by the assessee on merits. The A.R. further submitted that the CIT(A) is not correct in dismissing the appeal summarily, despite the fact that the assessee could no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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