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TMI Blog2014 (2) TMI 1291X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 263 of the Act may call for and examine the records of any proceedings and thereafter if he considers that any order passed therein is erroneous insofar as it is prejudicial to the interest of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justified. Therefore, before taking any action, Ld. CIT himself shall apply his mind after examining the record of any proceedings and his satisfaction is must. However, in the present case, the satisfaction was of the ITO (Tech.) who proposed action under section 263 of the Act, but not of the Ld. CIT. Therefore, issuance of notice under section 263 of the Act on the basis of the proposal made by the ITO was void ab initio. We, therefore, set aside the same. - Decided in favour of assessee - ITA No. 426/JP/2013 - - - Dated:- 28-2-2014 - Hari Om Maratha (Judicial Member) And N. K. Saini (Accountant Member) For the Assessee : Shrawan Kumar Gupta For the Department : Subhash Chandra ORDER N. K. Saini (Accountant Member) This is an appeal by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Facts of the case in brief are that the assessee filed return of income on 24/09/2008 declaring an income of ₹ 4,87,472/- which was processed under section 143(1) of the I.T. Act, 1961 (hereinafter referred to as the Act in short). Later on case was selected for scrutiny and the assessment was framed at an income of ₹ 6,37,478/- by making trading addition of ₹ 1,00,000/- in Dhaniya account and disallowance of ₹ 50,000/- was made out of loss claimed in Sarso account. Thereafter, ITO, Ward-1(2), Kota vide letter dated 01/04/2011 has proposed action under section 263 of the Act on the following points decided and considered it as erroneous and prejudicial to the interest of the revenue:- (i) As per balance sheet, the assessee have shown farmer debtors of ₹ 1640083/- on which no interest has been charged from the farmer debtors whereas the assessee was paying heavy interest to the creditors. The AO has not examined this issue. (ii) The assessee has advanced ₹ 11.00 lakhs to Shri Namokar Mal Jain as advance for property. No interest has been charged on the amount by the assessee. The AO has not called for documentary evidence regarding thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 487478/- on dated 24.09.2008. The books of accounts of the assessee was audited under section 44AB of I.T. Act. The case of assessee has been Selected for scrutiny and finally case has been completed under section 143(3) of the I.T. Act, in which following additions have been made: (1) Trading addition in Dhania A/c: 100000/- (2) Disallowance out of loss claimed in Sarsoon A/c: 50000/- Now show cause notice under section 263 of I.T. Act has been issued on following 6 grounds: i) As per balance sheet, you have shown farmer debtors of ₹ 1640083/- on which no interest has been charged from the farmer debtors whereas you were paying heavy interest to the creditors. The AO has not examined this issue. ii) You have advanced ₹ 11.00 lacs to Shri Namokar Mal Jain as advance for property. No interest has been charged on this amount The Assessing Officer has not called for documentary evidence regarding this transaction. iii) In the debtors list, you have shown M/s Falodi Earth Movers as trade debtors and no interest has been charged on the amount of ₹ 252000/-. The said firm appears to be your sister concern. The AO has not exami ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey given to farmers. During the year under consideration, outstanding advance to farmers was ₹ 1640083/- only and other side, assessee has earned Adat commission of ₹ 1589512/-. In the every case of various assessees of Krishi Upaj Mandi Samiti dealers, there is no system of charging interest on advances to farmers . The allegation that it is not examined by AO, in this regard. it is submitted that assessee has furnished all the details of farmers advances of ₹ 1640083/- in Schedule -X of relevant audit report, which clearly shows name wise list of advances made. The same has been verified by AO from the books of accounts produced before the learned AO. We have produced complete books of accounts, before the learned. AO and the same have been mentioned in the assessment orders as page no. 1 that Books of accounts consisting cash book, ledger, stock register, relevant purchase sale bills and vouchers for expenses, are produced., which were examined on test check basis and case was discussed with him. It is submitted that when all the details submitted by assessee and AO framed the asstt order thereon, reliance is placed on a case of High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to AO also and he himself was satisfied. Thereby no inference has been made by AO. (iv) You have debited ₹ 40800/- in the P L account as sales tax demand. The AO has not obtained any details regarding the year to which demand relates and nature of demand of sale tax. The amount paid for various outstanding of sale tax in the year under consideration which is correctly debited in the current year expenses. This demand related to the interest and Sales tax of various years, which have been paid during the year under consideration. The sale tax interest liability is allowable in the year of payment only. We are enclosing herewith the copies of all the challans deposited for above referred amount alongwith the demand notice and sales tax assessment order with account copy for your ready reference. (Page 1 to 10) (v) You and your wife have contributed ₹ 102000/- which is very low looking to your business and social status but the AO has not discussed this issue nor was made any addition under this head. The query letter dated 22/06/2010 issued by AO is enclosed herewith. On the point no. 13 of query letter dated 22.06.2010, it is clearly asked by AO a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d shortage in Dhania @ 3.75% (approx) which is on higher side and is not genuine in this line of business but the AO did not examine this issue properly (the correct shortage claimed by the assessee is 2.51% instead of the 3.75%). On the perusal of Page 2 of Assessment order passed by AO your good self would find that a complete one and half page has been written by AO on this Dhaniya issue. (Page 15 to 18) In the last Para of this issue AO has specifically mentioned the following: As the books of accounts of the assessee/Dhania Grain are suffering from specific defects, G.P. rate is not verifiable from purchase sale bills. The books of accounts of the assessee are rejected. Invoking the provisions of section 145(3) of the Income Tax Act, 1961, I make a lump-sum trading addition of ₹ 1 lacs and same is added in the total income of the assessee. Finally in conclusion addition of ₹ 1 Lacs has been made on this issue. When AO has properly examined the record, discussed the issue and matter in detail, rejected the books of accounts and applied provisions of section 145 (3) of IT Act, addition of ₹ 1 lacs has been made, than the question of rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of enquiry. In the instant case, the enquiry has been made, though the enquiry may not be sufficient in the opinion of the learned CIT. The reliance is placed upon the decision of Hon'ble Delhi High Court in the case of CIT v. Hindustan Marketing Advertising Co. Ltd. [2010] 46 DTP (Del.) 109. The attention is drawn towards the decision of Hon'ble jurisdictional High Court in the case of CIT v. Trustees Anupam Charitable Trust [1987] 65 CTR (Raj.) 30 : [1987] 167 ITR 129 (Raj.) Thus it is clear that Assessing Officer has made enquiry but sufficiency of enquiry can be depend upon from person to person. The AO cannot remain passive in the face of a return which is apparently in order but calls for further enquiry. It is the duty of the AO to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an enquiry. The word 'erroneous' includes the failure to make enquiry. It is submitted that the AO made the enquiry and it is not a case of lack of enquiry. The Hon'ble Delhi High Court in the case of CIT v. Vikas Polymers [2010] 236 CTR (Del.) 476 : [2010] 47 DTR (Del.) 348 had an occasion to consider the pas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion arrived at by the CIT that the AO had shirked his responsibility of examining and investigating the case. More so, in view of the fact that the assessee explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the respective assessments of the partners who were income-tax assessees and the unsecured loan taken from SC (P) Ltd. was duly reflected in the assessment order of the said chit fund which was also an assessee. Merely on the basis that the AO has not examined the cash credits of the partners or deposits from SC (P) Ltd., CIT was not Justified in invoking his suo motu powers, especially -where the assessee had explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the respective assessments of the partners and the unsecured loan taken from the SC (P) Ltd. was duly reflected in the assessment order of the said person. The reliance is placed in the order of the Hon'ble Delhi High Court in the case of CIT v. Anil Kumar Sharma [2010] 38 DTR (Delhi) 305 : [2011] 335 TTR 83 (Delhi) has held that jurisdiction under s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransgress the jurisdiction under s. 263 is cancelled. Relied on Hindustan Marketing Advertising Co. Ltd. vs. ITO (1989) 28 ITD 231 (Del), Ashok Kumar Parasramka vs. Asstt. CIT (1998) 61 TTJ (Cal) 156: (1998) 65 ITD 1 (Cal) and Progressive Services Ltd. Vs. ITO (1991) 40 TTJ (cal) 595. The reliance is also placed in the order of the Hon'ble High Court of Bombay in the case of CIT v. Gabrial India Ltd. [1993] 71 TAXMAN 585 (BOM.). It will be useful to reproduce the held portion of the case: Section 263 of the Income-tax Act, 1961 - Revision - Of orders prejudicial to interests of revenue - Assessment year 1973-74 - Assessee claimed a sum of ₹ 99,326 described 'as plant relay out expenses' as revenue expenditure and ITO, after making enquiries in regard to nature of said expenditure and considering explanation furnished by assessee in that regard, allowed assessee's claim - Subsequently, Commissioner, exercising powers under section 263, cancelled order of the ITO observing that order of ITO did not contain discussion in regard to allowability of claim for deduction which indicated non-application of mind and that claim of assessee required examinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rroneous and prejudicial to the interest of the revenue. It was emphasized that the condition precedent for issuance of notice under section 263 of the Act is that the Commissioner of Income Tax is to call record for examination of any proceedings under this Act before framing his opinion that the order passed by the Assessing Officer was erroneous so far as it was prejudicial to the interest of the revenue. However, in the present case, as evident from para 2 3 of the impugned order, the Ld. CIT initiated the proceedings under section 263 of the Act by not calling and examining the records but only on the proposal moved by the Assessing Officer vide letter No. 14 dated 01/04/2011, to revise the order dated 30/08/2010 passed under section 143(3) of the Act, which was against the plain language of section 263 of the Act because the suggestion of the Assessing Officer cannot be a basis for revision of the assessment order. Reliance was placed on the following case laws:- 1) Rajiv Arora Vs. CIT 135 TTJ 01 (Jp.) (Trib.) 2) Jheendu Ram Vs. CIT 130 TTJ 82 (Lucknow) (Trib.) 3) Smt. Leela Choudhary Vs. CIT 289 ITR 226 (Gau.) 4) Saw Pipes Ltd. Vs. ACIT 94 TTJ 1036 (Del) 5) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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