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TMI Blog2016 (3) TMI 1378X X X X Extracts X X X X X X X X Extracts X X X X ..... from the assessee through questionnaire time to time. AO verified all the facts at assessment stage and completed the assessment in accordance with law after applying his mind. Mere fall in GP/NP is no ground to make addition against the assessee. Even if the books of account are rejected, it is not always necessary to make addition against the assessee. Therefore, the assessment order could not be treated as erroneous in-so-far as it is prejudicial to the interests of the Revenue - Decided in favour of assessee. - ITA No. 616/Chd/2013 - - - Dated:- 8-3-2016 - Shri Bhavnesh Saini, Judicial Member And ms. Rano Jain, Accountant Member Appellant by: Shri Sudhir Sehgal Respondent by: Shri Manoj Mishra,CIT DR ORDER Bhavnesh Saini, J.M.: This appeal by the assessee has been directed against the order of learned Commissioner of Income Tax-III, Ludhiana dated 28.3.2013 for assessment year 2008-09, challenging the order under section 263 of the Income Tax Act, 1961 (in short the Act ) and addition of ₹ 1,48,74,860/- by enhancing gross profit rate. 2. Briefly, the facts of the case are that the learned Commissioner of Income Tax on examination of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , consumption, sales, etc. per unit consumption of fuel/electricity. There is substantial fall in GP. The Assessing Officer has not enquired into this aspect. Since no stock register is maintained, therefore, the books of the assessee are not reliable and the decision of the I.T.A.T., Chandigarh Bench was referred to in the case of M/s Bassi Tubes Pvt. Ltd. Vs. ITO, ITA No.45/Chd/2009, dated 24.9.2009. The learned Commissioner of Income Tax was, therefore, of the view that the order passed by the Assessing Officer under section 143(3) of the Act is erroneous in-so-far as it is prejudicial to the interests of the Revenue. 4. The assessee filed detailed reply before the learned Commissioner of Income Tax, which is quoted in the impugned order, in which the assessee explained that the assessee firm has maintained complete stock records and closing stock has been calculated on the basis of these stock figures. Therefore, no arbitrary, hypothetical and assumptive GP rate have never been adopted by the firm. Further, these stock records have been submitted before the Assessing Officer at assessment proceedings. There cannot be a comparison of net profit from the earlier years. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discrepancy during the course of survey and excess cash was found, therefore, the books of account of the assessee were liable to be rejected. The Assessing Officer has failed to apply mind to the facts of the case. The assessee tried to offset the income surrendered during the course of survey. The learned Commissioner of Income Tax, therefore, directed to apply profit rate of 4.19% of preceding assessment year 2007-08 and enhanced the income of the assessee by ₹ 1,48,74,860/-. The learned Commissioner of Income Tax referred to certain decisions in support of his findings for enhancing the income of the assessee and accordingly, held that the order passed by the Assessing Officer was erroneous in so far as it is prejudicial to the interests of the Revenue. 6. The assessee is in appeal challenging the impugned order under section 263 of the Act and addition made by the learned Commissioner of Income Tax by enhancing the income to ₹ 1.48 crores. 7. The learned counsel for the assessee reiterated the submissions made before the authorities below. He has referred to Paper Book page No.61, which is notice under section 263 of the Act dated 14.3.2013. Paper Book page N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee maintained complete stock records with quantitative details, the copies of which are filed at Paper Book page No.73 to 211, which were also before the learned Commissioner of Income Tax. The learned counsel for the assessee, therefore, submitted that the assessee maintained stock records and quantitative details, which were filed before the Assessing Officer but in the statement recorded during the survey, wrongly stated that no stock register is maintained. The Assessing Officer considered the entire facts and circumstances and records of the assessee and applied his mind to the facts. Therefore, the order of the Assessing Officer should not be revised under section 263 of the Act. The learned Commissioner of Income Tax in the show cause notice has mentioned the expenses but in the order under section 263 of the Act, the learned Commissioner of Income Tax did not mention anything how the expenses are not allowable. The survey was conducted at the fag end of the financial year and the learned Commissioner of Income Tax without any reason enhanced the GP/NP of the assessee. The GP should be based on the facts and circumstances and the history of the assessee. The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the auditors has specifically mentioned that the assessee has maintained books of account which have been examined. The same are cash book, ledger, purchase sale books and stock register. In the Profit Loss Account, the assessee has surrendered ₹ 1.05 crores as surrendered income as per miscellaneous income. The assessee maintained details of closing stock quantity-wise and valuewise. The learned Commissioner of Income Tax in the show cause notice has mentioned the difference in the stock found during the survey only to the extent to ₹ 98,861/-. As per notice under section 263 of the Act, the difference in the returned income and surrendered income is only ₹ 5760/-. The learned Commissioner of Income Tax in the show cause notice itself has reproduced the trading and Profit Loss Account and has mentioned that in the Profit Loss Account, the assessee has made claim of expenditure in a sum of ₹ 1.19 crores. The learned Commissioner of Income Tax did not disbelieve the expenses debited to the trading and Profit Loss Account and did not mention any thing that any expenditure claimed by the assessee in trading and Profit Loss Account were not allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details noted in the books of account have not been doubted by the Assessing Officer as well as by the learned Commissioner of Income Tax. Hence the crux of the findings would be that the Assessing Officer examined records after issuing questionnaire to the assessee. The assessee maintained proper stock records and GP/NP chart was also filed before the Assessing Officer in the proceedings for assessment year 2007-08. It appears that the learned Commissioner of Income Tax passed the order under section 263 of the Act and enhanced the income merely because there was low profit shown in the period subsequent to the survey. The learned Commissioner of Income Tax, however, did not give any facts as to how the expenditure claimed in the Profit Loss Account were not reliable and admissible to the assessee. Mere fact that the profits were low as compared to the earlier year, by itself is no ground to make addition against the assessee. The Hon'ble Punjab Haryana High Court in the case of CIT Vs. K.S. Bhatia, 269 ITR 577 held as under : The mere fact that the profits were low compared to the earlier year was not a circumstance or material which could justify an estimate in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in the case of CIT Vs. Amit Corporation, 21 Taxmann.com, 64 (Guj) held that where the Assessing Officer after detailed verification of record and making enquiries had framed assessment, the Commissioner of Income Tax cannot revise under section 263 of the Act. The Hon'ble Allahabad High Court in the case of Krishna Capbox (P). Ltd., 372 ITR 310 held that where the Assessing Officer called for details and the assessee responded, the Assessing Officer, however, did not discuss or mention in the order, no order under section 263 of the Act should be passed. 14. The enhancement of income by the Commissioner of Income Tax is wholly unjustified because it is not pointed out in the impugned order as to what is the basis for enhancing the income and what more material was found during the course of survey against the assessee over and above the surrendered income of ₹ 1.05 crores, which would also show that the Commissioner of Income Tax has disbelieved the entire survey proceedings conducted against the assessee. The Assessing Officer took possible view on examination of record with which the learned Commissioner of Income Tax did not agree, it cannot be treated that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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