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TMI Blog2020 (3) TMI 1020X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act on the alleged ground of A.O's failure to examine the entire trading of goods in absence of bills/challans for purchases and sales in spite of the fact that the A.O. after proper scrutiny rejected the audited books of account, treated the entire transaction as paper transaction and took a plausible view in reducing the gross loss of Rs. 8,74,38,653/- declared by the appellant to Nil. 3. That, the Ld. Pr. CIT grossly erred on facts and in law in invoking jurisdiction u/s. 263 of the Act and referring the case back to the A.O. for fresh examination of estimating the NP at 1% on the turnover declared by the appellant simply by differing with the plausible view taken by the A.O., even though the disallowance of loss made in 143(3) assessment is already a subject matter of appeal before the Ld. CIT(A) and the matter is thus debatable. 4. That, the Ld. Pr. CIT further erred in not appreciating that the judicial and official acts have been regularly performed by the A.O. while taking a possible view in the matter and furthermore without application of mind the questions/queries raised in the notice u/s. 142(1) of the Act could not have been formulated and hence jurisdiction i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the A.O. has to be followed in succeeding year unless there is significant change. Although no scenario has changed, the department computed the business income on estimate basis at the rate 1% of total sales i.e. of Rs. 7,68,30,34,008/- which comes to Rs. 7,68,30,340/-. In resulting underassessment of income of Rs. 7,68,30,008/ - and under charge of tax of Rs. 2,29,27,604/-." Based on the above grounds the Jurisdictional Principal Commissioner of Income Tax (PCIT) was satisfied that it was a case of erroneous assessment insofar as it was prejudicial to the interests of the revenue. Therefore, ld PCIT issued a show cause notice u/s 263 of the Act to the assessee. 4. In response to the show notice of ld. PCIT u/s 263 of the Act, the assessee submitted written submission before him which is reproduced below: "The assessee company is engaged in the business of trading of iron & steels. For the relevant assessment year, return of income was filed by the assessee company on 30/09/2013 at a total income of Nil and carried forward loss of Rs. 5,65,64,157/-. Subsequently, the case was selected for scrutiny under CASS and accordingly notices u/s. 143(2) & u/s. 142(1) were served ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Hon'ble High Court, and in accordance with the amendment made in Section 263 of the Act with effect from 01.06.2015, I hold that the impugned assessment order dated 09.02.2016 passed by the A.O. is erroneous in so far as it is prejudicial to the interests of the revenue. I further hold, after giving the assessee an opportunity of being heard, that the impugned assessment order dated 09.02.2016 is liable to set-aside. Therefore, I set aside the said assessment order directing the A.O. to frame the assessment afresh after considering the aforesaid observations, Hon'ble Supreme Court and Hon'ble High Court decisions and as per law. 12. In the result, the assessment order u/s 143(3) dated 09.02.2016 for A.Y. 2013-14 is set-aside to the file of the Assessing Officer with a direction to pass a fresh assessment order after considering the aforesaid observations, as per law and after giving an opportunity of being heard to the assessee." 6. Aggrieved by the order of ld. PCIT, the assessee is in appeal before us. 7. The ld. Counsel, Shri Ravi Tulsiyan, begins by pointing out that after conducting proper enquiry and taking note of the details submitted by the assessee, the A.O. had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to theinterest of the revenue'' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of bills for purchases and sales as well, and assessee could not produce any documents in support of other payments, challans etc., however for the A.Y. 2011-12 business income was computed on estimated basis @ 1% of total sales whereas for the A.Y. 2013-14 business income was computed as NIL. It was thus alleged that since there is no change in scenario between A.Y. 2011-12 and A.Y. 2013-14, therefore in theassessee's case for the A.Y. 2013-14, the AO should have computed business income @ 1% of sales amounting to Rs. 768,30,34,008/- which comes to Rs. 7,68,30,340/-. On the basis of the above alleged reasoning, the Ld. PCIT passed the impugned order u/s 263(1) of the Income Tax Act, 1961 on 26.03.2018, setting aside the assessment order passed in the assessee's case for the relevant A.Y. on 09.02.2016 for a fresh assessment by observing that the AO has failed to make any enquiry in the assessee's case with regard to rejection of books of accounts and treatment of business income in line with the Assessment Order passed for the A.Y. 2011-12 rendering the Assessment Order passed u/s 143(3) of the Income Tax Act, 1961 on 09.02.2016 as erroneous and prejudicial to the interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Accounts it is dear that no actual purchase & sale was made but accommodation entry with aforesaid two group was made on paper only and with other two parties. The assessee even failed to furnish any challan for transportation of Iron & Metal product and Armed Cable to assessee godown destination and from assessee godown. The assessee company not deployed any staff, labour, nor claimed any electricity charges, Telephone charges, Travelling & Conveyance etc.. which clearly signifies that assessee company not engaged in any actual trading activity............................. ................................. The entire trading result of assessee company disclosed has been rejected and the loss claimed from business activities of assessee company has been disallowed and thereby Business income of assessee company from trading activity computed as NIL." The above finding of the assessing officer establishes beyond doubt that the Ld. AO had conducted detailed enquiries and investigations before passing the Assessment Order u/s 143(3) of the Income Tax Act, 1961 on 09.02.2016 in the assessee's case for the relevant Assessment Year and that too in light of the Assessment Order passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 263 of the Income-tax Act, 1961, merely because he has a different opinion in the matter. It is only in cases of lack of inquiry that such a course of action would be open.An order cannot be termed erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, it cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. Section 263 does not visualise a case of substitution of the judgment of the Commissioner for that of the Income-tax Officer who passed the order unless the decision is held to be erroneous. Where the Income-tax Officer has exercised the quasi-judicial power vested in him in accordance with law and arrived at a conclusion such a conclusion cannot be found to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. " On the i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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