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TMI Blog2008 (12) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is found that a survey under s. 133A of the IT Act was conducted in the assessee's business premises on 27th Dec., 2002 during the course of which certain books of accounts, stock and cash were found and inventorised. From the assessment order, the learned CIT observed that the AO has examined those books of accounts and returned the same to the assessee. No discussions have been made in the order regarding the nature of books and the contents thereof. In course of survey, two cash books were inventorised with ID mark Nos. GC-1 and GC-2 and physical cash found was of Rs. 2,28,250. In the assessment order the AO has not mentioned anything about the cash found and the cash balance available with the cash books. He further observed that in course of survey, physical stock found was of Rs. 5,07,324. It has also been mentioned in the survey report that the purchases and sales from 1st April, 2002 to 27th Dec., 2002 were Rs. 45,75,795 and Rs. 50,39,780 respectively. Opening stock as on 1st Feb., 2002 was Rs. 14,08,407. With the help of the above figures. the AO could have drawn a trading account as on 27th Dec., 2002 and could have verified the genuineness of the sales and stock. Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t No. 93, Posta Branch (inoperative) and United Bank of India (UBI) No. C/D 100079, Posta Branch were made out by the survey team and were duly examined and verified by the AO. The AO after being fully satisfied as to the genuineness and correctness of the said accounts returned the statements of the same back to the assessee. Further, the AO also requisitioned the bank statements from the said banks and after verifying the same, the assessment order was passed by him. This fact has been stated by the AO at para 4, p. 1 of his order. (iii) Some of the parties from whom purchases were made by the assessee were examined and information under s. 133(6) of the Act was gathered in detail. Direct confirmation was obtained from the parties by the AO in coming to the conclusion that there was no overstatement of purchases by the assessee. Thorough examination of the purchases of the assessee firm however revealed that certain payments in cash were made by the assessee in excess of Rs. 20,000. This was detailed out by the AO and as per s. 40A(3) of the Act, 20 per cent of the excess amounting to Rs. 33,517 was duly added back to the total income of the assessee. The list was produced by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show-cause notice. The CIT also alleged that the AO had passed a stereotyped order in which the assessee's submission was accepted without any meaningful investigation regarding the claim of the assessee. Thus, it was alleged that the AO had failed to make the necessary enquiries which were called for in the circumstances. He also stated that the learned CIT has in his order relied upon the following judgments in arriving at the conclusion that the order of the AO is erroneous: (v) Rampyari Devi Saraogi vs. CIT (1968) 67 ITR 84 (SC). In the said case it was an accepted fact that that the ITO had made the assessments in undue haste, without any evidence or inquiry. It is not so in the case of the assessee. (vi) Smt. Tara Devi Aggarwal vs. CIT 1973 CTR (SC) 107 : (1973) 88 ITR 323 (SC). In the said case, meaning of 'prejudicial to interests of Revenue' has been discussed. In the case of the assessee it is challenged that full enquiry was conducted by the AO in his assessment proceedings and the order thus could not be considered erroneous. (vii) The learned CIT has placed reliance on the case of Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1 : (2000) 243 ITR 83 (SC), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied. The regular books of accounts maintained by the assessee were all duly verified and reconciled with the findings of the survey. The bank accounts of the assessee were examined and verified with the bank statements from the respective banks. Examination under s. 133(6) was carried out wherein the purchasers were examined and their transactions confirmed. As such thorough examination and verification process was followed by the AO in the assessment proceedings of the assessee under s. 143(3) and they are mostly all detailed in the assessment order itself. He further submitted that the learned CIT in arriving at his conclusion. has primarily relied upon the show-cause notice issued to the assessee. He has alleged that the assessee was not able to meet the points raised in the show-cause notice and that the AO had failed to consider the material discovered in the course of survey. With regard to the show-cause notice issued on the assessee and the points raised therein, it is submitted by the learned Authorised Representative of the assessee that the assessee had fully explained each and every point raised in the show-cause notice and the AO had examined and investigated each and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO has not made any discussions as to whether there was any discrepancy or not of the cash balance as per the books of accounts found during survey with the physical cash balance found during the survey. It is submitted by the learned Authorised Representative of the assessee that the AO had duly verified the cash books which were marked as GC-1 and GC-2 (General Cash 1 and 2). This has been duly stated by the AO in his order. It is again reiterated here that no mention of the cash found and the cash as per the books was made by the AO since no discrepancy was found by the AO. This fact that the cash balance of Rs. 2,28,250 was well verified and reconciled with the cash balance as per books has been explained by the assessee in its reply to the show-cause notice to the CIT. The CIT has conveniently chosen to overlook all the explanations put forth by the assessee in its reply to the show-cause notice and has totally with a preset, prejudiced mind stated at para 7, p. 5 of his order that "the points raised in the show-cause notice could not be refuted in the submission of the assessee". (c) He further submitted that from the above it is seen that the CIT has, in cancelling the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected a notional loss of Rs. 4,37,098 for the 9 month period of 1st April, 2002 to 27th Dec., 2002. (v) The AO on examination of other businesses of the similar nature found that the usual GP of such business was around 4 per cent. (vi) The assessee also in the past disclosed for the previous year 2002-03 a GP, on an average of 4.5 per cent. which was well accepted and assessed as such. (vii) The AO thus following the average of 4.5 per cent gross profit, drew up a trading account for the remaining period from 28th Dec., 2002 to 31st March, 2003 which revealed a super profit of 75.69 per cent for the said 3 month period. (viii) This figure of profit for a period of 3 months in comparison to a loss for the previous 9 months was totally absurd and unreliable. It also defied all laws relating to equity whereby notional loss of the 9 month period was converted into annual average GP of 4.5 per cent resulting into a super profit margin of 75.69 per cent for the balance 3 month period. All laws of statistical average would stand defeated. (ix) In view of all the above, the AO rejected the trading account as prepared by him and adopted the average GP rate of 4.5 per cent. being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the AO is unsustainable in law". Further it was held in the case of Malabar Industrial Co. Ltd. vs. CIT by the Supreme Court that "when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the ITO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the ITO is unsustainable in law". The fourth and the last point raised by the CIT in his show-cause notice is with regard to certain alleged inflation of purchases by the assessee to the tune of Rs. 31,692. In this regard it was submitted by the assessee in its submission before the CIT that in fact certain purchases were by mistake omitted by the AO amounting to a total of Rs. 35,175. Also a purchase return of Rs. 3,483 was omitted by the AO, quoted by the CIT in his order at para 1, p. 5. Thus it was not a case of inflation of purchases but a petty mistake on the part of the AO. The AO had in fact obtained direct confirma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be a clear finding that the absolute necessary enquiries required for the justified computation of income have been omitted by the AO. The error in making the enquiries has to be grave in nature and unsustainable in law. He also placed reliance in this regard on the case of CIT vs. Ganpat Ram Bishnoi in which the Rajasthan High Court held that 'The jurisdiction under s. 263 of the IT Act, 1961, is wide and is meant to ensure that due revenue reaches the public treasury. If it does not on account of some mistake of law or fact committed by the AO, the CIT can cancel that order and require the concerned AO to pass a fresh order in accordance with law after holding a detailed enquiry. Jurisdiction under s. 263 cannot be invoked for making short enquiries or to go into the process of assessment again and again merely on the basis that more enquiry ought to have been conducted to find something". He also placed reliance on the case of Infosys Technologies Ltd. vs. Jt. CIT; it was held by the Tribunal, Bangalore that "Powers not to be exercised for purpose of directing AO to hold another investigation when order of AO not found to be erroneous. The power of revision is not meant to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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