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TMI Blog2017 (4) TMI 393X X X X Extracts X X X X X X X X Extracts X X X X ..... annot presume that enquiries conducted by the Assessing Officer is insufficient and also the Assessing Officer has not applied his mind, unless the Commissioner of Income-tax proves that the assessment order passed by the Assessing Officer is erroneous. In this case, the Commissioner of Income-tax never pointed out any specific instance of erroneous decision taken by the Assessing Officer before completion of assessment. Without pointing out any defects in the assessment order, simply directing the Assessing Officer to cause further enquiries on the presumption that the enquiries conducted by the Assessing Officer are insufficient is not permissible under the provisions of section 263 of the Act. Therefore, we are of the view that the assessment order passed by the Assessing Officer under section 143(3) of the Act dated March 26, 2013 is not erroneous in so far as it is prejudicial to the interests of the Revenue. - Decided in favour of assessee - I. T. A. No. 221/Vizag/2015 - - - Dated:- 20-1-2017 - V. Durga Rao (Judicial Member) And G. Manjunatha (Accountant Member) For the Appellant : S. Rama Rao, Authorised Representative For the Respondent : K. Hari Prasada Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , payment of interest on the partner's capital account as well as the current account, loans borrowed from the partner's account and its genuineness and also the creditworthiness of the partners to advance loan to the firm, advances given to various persons and recovery of interest on such advances, discharging of liabilities appeared in the balance-sheet and applicability of disallowance of expenditure incurred in cash in excess of the threshold limit prescribed under section 40A(3) of the Act. The Assessing Officer, without examining the above issues, simply completed the assessment by resorting to the estimation of income without verifying the nature of business carried on by the assessee by following the decision of the Income-tax Appellate Tribunal, Hyderabad in the case of K. N. R. Constructions, which was rendered in a different set of facts, which rendered the assessment order erroneous in so far as it is prejudicial to the interests of the Revenue. The Assessing Officer not only examined the issues, but also failed to apply his mind before completion of assessment which caused prejudice to the interests of the Revenue, therefore, opined that the assessment order pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the net profit is estimated, the assessee is eligible to claim deductions towards interest on the partner's capital account and remuneration to the partners as per the provisions of section 40(b) of the Act, therefore, there is no reason for suspecting the interest payment to the partner's capital account. In so far as the other issues raised by the Commissioner of Income-tax with regard to the recognition of work-in-progress, loan from the partners and advance given to various individuals, discharging of liabilities, the Assessing Officer has called for necessary evidences and after satisfied with the details filed by the assessee, chosen to complete the assessment by estimating the net profit from the gross receipts. In so far as the applicability of the provisions of section 40A(3) of the Act, once the books of account are ignored for the purpose of determination of income from business, referring to the same books of account to find out the violations referred to in section 40A(3) of the Act cannot be justified. Therefore, the assessment order passed by the Assessing Officer cannot be termed as erroneous in so far as it is prejudicial to the interests of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances narrated and hence, the impugned assessment order is held as erroneous and prejudicial to the interests of the Revenue. Therefore, the assessment order dated March 26, 2013 is set aside and the Assessing Officer is directed to re-do the assessment de novo in accordance with law and established procedure and after affording the assessee a reasonable opportunity of being heard. Aggrieved by the Commissioner of Income-tax order, the assessee is in appeal before us. 8. The learned authorised representative for the assessee, submitted that the assessment order passed by the Assessing Officer under section 143(3) of the Act, dated March 26, 2013 is not erroneous in so far as it is prejudicial to the interests of the Revenue, as the Assessing Officer has examined all the issues pointed out by the Commissioner of Income-tax in the show-cause notice. The authorised representative further submitted that the Commissioner of Income-tax was not correct in directing the Assessing Officer to conduct further enquiries with regard to the issues which were already examined by the Assessing Officer at the time of assessment. The Assessing Officer has called for all the detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l representative further submitted that the Commissioner of Income-tax has rightly pointed out various inconsistencies in the assessment proceedings completed by the Assessing Officer which caused prejudice to the interests of the Revenue in terms of section 263 of the Act. The Commissioner of Income-tax for the detailed reasons recorded in his order gave a categorical finding that the Assessing Officer not only failed to examine the core issues, but also failed to apply his mind before completion of assessment, therefore, the order passed by the Commissioner of Income-tax should be upheld. 10. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The Commissioner of Income-tax assumed jurisdiction to revise the assessment order for the reason that the Assessing Officer has not conducted proper enquiry before completion of assessment, thereby the assessment order passed by the Assessing Officer under section 143(3) of the Act, dated March 26, 2013 is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner of Income-tax revised the assessment order for the reason that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urces. The assessee has furnished complete details in response to the show-cause notice and also furnished books of account. The Assessing Officer after satisfied with the details furnished by the assessee and also considering the veracity of the books of account, chosen to ignore the books of account and estimation of net profit which cannot be termed as erroneous in so far as it is prejudicial to the interests of the Revenue. 12. Having heard both the sides and considered materials on record, we find that the Assessing Officer has issued a detailed notice dated November 7, 2012, wherein he had called for each and every detail in respect of issues raised by the Commissioner of Income-tax in the proceedings under section 263 of the Act. On a perusal of the notice issued by the Assessing Officer, we find that the Assessing Officer has sought details in respect of valuation of work-in-progress, interest on the partner's capital account, sources of the partners capital account, details of loans and advances appeared in the balance-sheet and other details in respect of the project executed by the assessee. In response to the notice, the assessee has furnished all the details, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, the Commissioner of Income-tax would not have vested with the power to re-examine the account and determined the income at a higher figure, that was because the Assessing Officer has exercised the quasi-judicial power vested in accordance with law in arriving at a conclusion and such a conclusion would not be termed as erroneous, simply because the Commissioner did not feel satisfied with the conclusion. It might be said in such a case that in the opinion of the Commissioner of Income-tax, the order in question was prejudicial to the interests of the Revenue, but that by itself would not be enough to vest the Commissioner with the power of revision because the first requirement that the order was erroneous was absent. Similarly, if an order is erroneous but not prejudicial to the interests of the Revenue, then the power of revision cannot be exercised. 14. The Commissioner of Income-tax assumed jurisdiction to revise the assessment order on the sole ground that there is a lack of enquiry on the part of the Assessing Officer on the issues referred to in the show-cause notice. The Commissioner of Income-tax questioned the issues right from examination of low net profit d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, the twin conditions must be satisfied i.e. (1) the order of the Assessing Officer is erroneous, (2) further it must be prejudicial to the interests of the Revenue. Unless both the conditions are satisfied, the Commissioner of Income-tax cannot assume the jurisdiction under section 263 of the Act. It is not necessary that every order which is erroneous may be prejudicial to the interests of the Revenue or vice versa. In some cases the order passed by the Assessing Officer may be erroneous but it may not be prejudicial to the interests of the Revenue or vice versa. Unless the order passed by the Assessing Officer is erroneous and also prejudicial to the interests of the Revenue, the Commissioner of Income-tax cannot assume the jurisdiction to revise the assessment order, this is because the twin conditions i.e. the order is erroneous and the same is prejudicial to the interests of the Revenue are co-exist. In the present case, the order passed by the Assessing Officer neither erroneous nor prejudicial to the interests of the Revenue as the Assessing Officer has considered all the issues and after considering the details furnished by the assessee rejected the books of account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been considered by the Assessing Officer at the time of completion of assessment. The assesses filed a paper book which contains the details furnished before the Assessing Officer at the time of assess ment. On perusal of the paper book filed by the assessee, Income-tax Appellate Tribunal find that the Assessing Officer has issued a detailed questionnaire in respect of net profit and also TDS in respect of rent and hire charges. The Assessing Officer after satisfied with the explanations furnished by the assessee has accepted the income returned. Therefore, the Income-tax Appellate Tribunal are of the view that once the issues which are a subject matter of revision under section 263 of the Act, have been examined by the Assessing Officer at the time of assessment, the Commissioner of Income-tax has no jurisdiction to entertain a fresh enquiry on the same issues, because he has a different opinion on the issues. In Income-tax Appellate Tribunal considered opinion, the issue of net profit and TDS on rent and hire charges has been examined by the Assessing Officer at the time of assessment, therefore, the Commissioner of Income-tax was not correct in coming to the conclusion that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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