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TMI Blog2017 (10) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO did not discuss these details in the assessment order does not mean that he has not applied his mind. Therefore, considering the factual position, we are of the view that the order passed by the AO u/s.143(3) is neither erroneous nor prejudicial to the interest of revenue. Therefore, we quash the order passed by the CIT u/s.263 of the Act. - Decided in favour of assessee. - ITA No.783/Kol/2013 - - - Dated:- 7-8-2017 - SHRI A . T . VARKEY, JM And DR . A . L . SAINI, AM For The Assessee : Shri Sunil Surana, FCA For The Revenue : Shri Niraj Kumar CIT -( DR ) ORDER Per Dr . Arjun Lal Saini, AM : The captioned appeal filed by the assessee, pertaining to assessment year 2008-2009, is directed against the order passed by the ld. Commissioner of Income Tax, Kolkata, u/s.263 of the Income Tax Act 1961, (hereinafter referred to as the Act ), dated 13.03.2013. 2. Brief facts of the case qua the assessee are that the assessee filed its return of income for A.Y.2008-09 on 19.9.2008 declaring total income of ₹ 21,28,141/-. The assessee is engaged in the business of trading in scientific rubber/chemicals and plastic. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and loss account for trading in synthetic rubber/chemicals and trading in plastic has not been filed by the assessee. In this connection, it was submitted by the assessee that details of purchases and sales, quality wise opening stock and closing stock of synthetic rubber/chemicals was filed and examined in the course of the assessment proceedings. The copy of the details of purchase and sales as well as the quantity wise and quality wise details as filed before the AO were submitted by the assessee before the CIT. Moreover, transactions of trading in plastics was less than 2% of the volume of transactions made in synthetic rubber in chemicals. There was gross profit of more than 13% in case of plastic trading and the GP was more than 18% in the case of trading in synthetic rubber / chemicals. The combined GP was 18.34 % during the year as compared to 13.52% shown in the immediately preceding year. Therefore, there was substantial increase of more than 35 %, in the rate of gross profit during the year as compared to the immediately preceding year. The assessment for the preceding assessment year was also scrutinized under sec. 143(3) of the IT. Act, 1961 and the trading results h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion was made to an active partner or not. The copy of the partnership deed was filed in the year in which it was executed and thereafter in the course of assessment of an earlier assessment year which was duly scrutinized under sec. 143(3) of the l.T. Act and remuneration was duly allowed. There was no change in the partnership deed nor there is any thing on record to suggest that there was any change in the partnership Deed. The assessee also submitted the copy of the partnership deed before CIT. Moreover the partner had also paid the tax on the same rate on such salary received from the partnership. Therefore, the order of the AO is neither prejudicial nor erroneous on this count. 3.4. The Fourth issue raised by CIT was that the assessee had received loans from M/s. Aishan Electronics Pvt Ltd and M/s. Sebok International Pvt Ltd. The CIT had presumed that the Companies being related to the assessee, the aspect of deemed dividend in the hands of the firm have not been examined by the AO. In this connection it was submitted that the assessee duly paid interest on the loans taken from the said parties. The same can be verified from the details of interest already filed before AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the CIT was that the Ld. AO had not verified the high volume of sundry debtors. In this connection it was submitted by the assessee that when the sales had been accepted with reference to the bills, vouchers and the books of accounts, the high % of sundry debtors would have no impact on the Profit and Loss Account or the income declared by the assessee in the return of income. Therefore, the assessee submitted before the CIT that this cannot render the order prejudicial to the interest of Revenue. 4. However, the ld. CIT had ignored the reply filed by the assessee, as explained above, and concluded that the assessment order passed by the AO does not show any application of mind on the part of the AO. The Ld. CIT(A) also observed that the AO simply accepted the claim of the assessee with regard to the various issues considered by the CIT u/s.263, this is a case where the AO categorically accepted what the assessee wanted him to accept without any application of mind or enquiry. The evidence available on record is not only to hold that the return of the assessee was examined or considered by the AO. The assessment order, therefore, is clearly erroneous as it was passed withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noring the copy of account of the said party on record wherein all the figures of the transactions were recorded, the Ld CIT missed to look into the same and assumed that the said account was not verified . 5 . The ld CIT erred in treating the order as erroneous and prejudicial to the interest of revenue on the ground that the AO erred in treating the order as erroneous and prejudicial to the interest of revenue on the ground that the AO did not examine the feasibility of involving the provisions of section 2 ( 22 ) ( e ) when the assessee firm was never a shareholder in any of the companies and it paid interest on loan taken from the companies and therefore, the provisions of section 2 ( 22 ) ( e ) were not applicable . 6 For that the ld CIT erred in treating the order as erroneous and prejudicial to the interest of revenue on the ground that huge sundry debtors were not verified when the sales were backed by the sales bills the payment were received by account payee cheque, and even otherwise the outstanding sundry debtors can not make the order prejudicial to the interest of revenue . 7 . For that on facts and circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aper book page no. 54 to 73. The order cannot be said to be erroneous and prejudicial to the interests of revenue on account of deemed dividend as interest was duly paid on the loans taken from companies and once interest has been charged, there is no question of deemed dividend as per the Calcutta High Court Judgement in the case of Pradip Kumar Malhotra reported in 338 ITR 538 which has been followed by Kolkata ITAT in the case of Pratap Singh Kothari in ITA No. 1699/Kol/2012. Further it should be noted that on debatable issues, the revisionary powers u/s 263 cannot be exercised.[ Malabar Industrial Co Ltd v CIT,( 243 ITR 83) ] .The CIT has alleged that one account of Simplex Polymers was not verified. In this regard the assessee has submitted that the AO has already completed the setITA aside assessment u/s 143(3)/263 which is on paper book page 84 wherein the contention of the assessee has been accepted. The CIT has alleged that huge sundry debtors have not been verified. In this regard, the assessee submitted that the AO has already completed the set-aside assessment u/s 143(3)/ 263 which is on paper book page 85 wherein the contention of the assessee has been accepted. The ld ..... X X X X Extracts X X X X X X X X Extracts X X X X
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