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TMI Blog2024 (2) TMI 865X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the head Cement Freight paid advance the entire amount of such advance was adjusted against the cement freight expenses and therefore, no closing balance shown against such cement freight paid advance in the balance sheet. As such, what we find is this that the Ld. PCIT has referred to the cement freight paid advances ledger showing under the debit column after ignoring credit shown under such advance ledger. PCIT after ignoring the credit entries in such ledger has wrongly assumed that the advances shown under the debit column should match with the advances shown in the balance sheet as on 31/03/2012. However, we find that the approach adopted by the PCIT was erroneous as he cannot pick and choose only debit side of ledger after ignoring credit entries shown in such ledger account. In view of the above, we dis-agree with the findings of the Ld. PCIT. Who will acquire the satisfaction as provided under the provision of 147? - It is the satisfaction of the AO who can touch the issues which came to his/her notice during the proceeding u/s 147 of the Act but same was not subject matter of reopening of the assessment u/s 147 of the Act. PCIT cannot go to touch those issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see vis-a-vis such advance freight charges shown under the balance sheet. However, the AO after necessary verification accepted the income of the assessee computed by the AO in the assessment framed u/s 143(3) of the Act at Rs.2,86,52,160/- vide order dated 18/12/2019. Later, the Ld. PCIT on verification of the assessment records observed certain defects in the income escaping assessment order dated 18/12/2019 which are enumerated as under: I. Based on the different ledgers of freight advances, it was noticed that the total freight advances stand at Rs. 3,03,89,600/- as on 31/03/2012, whereas in the financial statement as on 31/03/2012, such advances were shown at Rs. 20,45,967/- only. However, such a mismatch in the amount of freight advances was not examined by the AO during the assessment proceedings. II. There were certain payments made in cash in contravention to the provision of section 40A(3) of the Act, which were required to disallowed but the AO failed to do so in the assessment framed u/s 147 r.w.s 143(3) of the Act. III. One of the partners, namely Shri Ravibhai Dipsinh Solanki holding 16% shares in the profit has shown his share of profit in the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome. Similarly, the AO has also not examined the genuineness of the sundry creditors shown outstanding as on 31-03-2012 which appeared to be doubtful. 12. In view of the above discussion, it is apparent that AO has not properly examined the facts of the case and ignored the verifications as desired on the facts of the case in view of the aforesaid issues. This has rendered the order erroneous as well as prejudicial to the interest of the revenue. It may be mentioned that two essentials condition for invoking the provisions of section 263 of I.T. Act are that the order passed by the AO is erroneous and prejudicial to the interest of revenue. 13. In view of the above discussion it is apparent that such cases where the assessment has been completed without conducting any inquiries/ verification or incorrect application of law tantamount to erroneous orders as also order prejudicial to the interest of Revenue. ************************************************************************* 17. It is the bounden duty of the Assessing Officer to collect and appreciate the facts collected and proper application of law is to be made while making the assessment. There is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary verifications and inquiries and after providing proper opportunity of being heard. 4. Being aggrieved by the order of the Ld. PCIT, the assessee is in appeal before us. 5. The Ld. AR before us filed a paper book running from pages 1 to 269 and submitted that all the ledger copies representing the advance freight charges paid were furnished during the assessment proceedings which are place on pages 19 to 226. As per the Ld. AR the advances given under the head freight advances were adjusted by making accounting entries which can be verified from the ledger account placed on record and therefore the only balance amount left as on the balance sheet date i.e. 31/12/2012, was only reflected in the balance sheet which was matching with the corresponding ledger. However, the Ld. PCIT without referring to the credit entries appearing in the freight advances ledger has drawn conclusion that the assessee has shown freight advance at the lower in the balance sheet as on 31/03/2012. As per the AR these advances shown under the head freight advance cannot match with the financial statement as on 31.03.2012, for the reason that such advance has been adjusted against the actual freight ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ph and therefore we are not inclined to repeat the same for the sake of convenience and brevity. 10.1 As regards to the non-verification/ mismatching in the amount of freight advances vis-a-vis freight charges shown in the balance sheet as on 31/03/2012, we note that the AO has verified the necessary details during the income escaping proceedings and reached to the conclusion that there is no mismatch in the amount of freight advances shown in the ledger vis-a-vis shown in the balance sheet requiring any addition. The relevant extract of the assessment order framed u/s.147 r.w.s. 143(3) of the Act, dated 18/12/2019 which read as under: Later on, department came to notice that during the relevant previous year that cement Freight Paid and Advances and Flyas Silika Lignight CFL advance are not reflected in assessee s balance sheet/books of accounts and hence the same is unexplained. In view of these facts, the case was reopened u/s. 147 of the I.T Act after recording the reasons and obtaining the requisite approval of the Pr. Commissioner of Income-tax-3, Rajkot. 2. E-Notice u/s.148 of the I.T Act dated 27.03.2019 was issued and duly served upon the assessee. In response ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debit column should match with the advances shown in the balance sheet as on 31/03/2012. However, we find that the approach adopted by the Ld. PCIT was erroneous as he cannot pick and choose only debit side of ledger after ignoring credit entries shown in such ledger account. In view of the above, we dis-agree with the findings of the Ld. PCIT. 10.4 Coming to the remaining defects as pointed out by the Ld. PCIT, in this regard we observe that the provision of section 147 of the Act provides, as applicable to the year under consideration, that the proceedings u/s 147 of the Act, can be initiated if the AO has reason to believe that any income chargeable to tax has escaped assessment and he may also take into consideration any other income chargeable to tax but escaped assessment during the proceedings. This can be better understood through an example, assuming the AO has reason to believe that the assessee has claimed bogus purchases in the return of income, thus he can reopen the case limited to the extent of bogus purchase. However, if during the course of assessment proceedings, he comes to know about other expenses for example travelling expenses i.e. the assessee has claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eassess the income which he had reason to believe had escaped assessment and also any other income chargeable to tax which came to his notice during the proceedings. In the absence of the assessment or reassessment of the former, he cannot independently assess the latter. 10.5 At this juncture, we are inclined to refer the provision of section 147 of the Act, which reads as under: 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : 10.6 An analysis of the above provision reveals that the AO certainly can touch other issues/income chargeable to tax which has escaped assessment other than those income/ issues ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contemplated under section 147 of the Act is for the specific purpose of assessing the escaped income. Therefore, in a reassessment proceeding, the assessing officer can only assess that income which has escaped assessment. The income which is subject matter of assessment in the original assessment proceedings or which was in the domain of the assessing officer in course of original assessment proceedings certainly cannot be considered in the re-assessment proceedings. In our view, if at all, any order which can be considered to be erroneous and prejudicial to the interest of revenue for non consideration of the issues raised by learned PCIT, certainly, it has to be the original assessment order passed under section 143(3) of the Act and not the re-assessment order passed under section 143(3) r.w.s. 147 of the Act. Therefore, learned PCIT could have exercised her powers under section 263 of the Act only in respect of the original assessment order passed under section 143(3) of the Act. At this stage, we may refer to the following observations of the Hon ble Supreme Court in case of CIT vs Alagendran Finance Ltd (supra): **** 12. The other decisions cited by learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X
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