TaxTMI 
TaxTMI 
2004 (3) TMI 383
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.... seeds and agricultural equipment. For the assessment year under consideration, the assessee filed its return on 26-10-1995 declaring income of Rs. 26,485. However, the Assessing Officer determined the income of the assessee at Rs. 40,470 vide order passed under section 143(3) dated 10-12-1996. Later on, the CIT, Nashik called for and examined the case records of the assessee firm and formed an opinion that the assessment order passed on 10-12-1996 for the assessment year 1995-96 was erroneous, insofar as, it was prejudicial to the interests of revenue for the following reasons. The CIT found that there was a considerable increase in salary, and account writing fee. According to the CIT, the Assessing Officer had not enquired into this aspect at all. The CIT found that in salary expenses, there was an increase of about 98% and similarly expenses relating to account writing were increased by about 140%, whereas sales were increased just by 58% as compared to the immediately preceding year. The CIT opined that the Assessing Officer had not made any enquiries of such abnormal increase in respect of the above expenses and, therefore, it could not be said that the expenses were commensu....
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....f the creditors, creditworthiness and genuineness of the transactions. In view of the above, the CIT formed the opinion that the assessment order dated 10-12-1996 was erroneous as well as prejudicial to the interests of revenue. 4. The CIT issued a notice to the assessee under section 263 of the Act on 13-7-1998 requiring the assessee to show-cause as to why the assessment framed by the Assessing Officer for the assessment year under consideration should not be held erroneous as well as prejudicial to the interests of revenue. The assessee filed written submissions on 7-8-1998, stating as under: "Sir, Ref: Your notices under section 263 of IT Act for assessment year 1995-96 dated 13-7-1998- Sub: Written submission- Please refer to above. We have to state that we have received above mentioned notice on 24-7-1998. We have to state as under on the issues raised in the said notice. At the outset, it is submitted that the assessment has been framed by Assessing Officer on 10-12-1996 after due enquiry and verification of books and information called for from time to time. The assessment framed is not erroneous and no prejudice has been done to the interest of revenue. Now w....
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....onfirmatory letters from the payees and this fact is also proved from the contains of your notice. The only grievance appears to be that Assessing Officer has failed to record his satisfaction or failed to give office note. But it cannot be denied that Assessing Officer has not made any enquiry about cash payments. We have submitted confirmatory letters, identification of the parties of payees to the satisfaction of Assessing Officer. The lapse if any on the part of Assessing Officer appears to be that he has not left any office note or commented in the assessment order. We bring to your kind notice that it is nowhere mentioned or made compulsory for the Assessing Officer to record his satisfaction either in the section 40A(3) or in the rule 6DD(j). From the submission made by us the Assessing Officer was satisfied and hence he has not made any disallowance under section 40A(3). As such the order is not erroneous one and no prejudice has been done to the revenue on this ground. 4. Verification in respect of creditors: It is submitted that Assessing Officer has not made any addition and accepted the unsecured loan of Rs. 20,000 each from Shaikh Kallu, Shaikh Latif and Chindhas....
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....ted that regarding increase in salary and accounting writing fee, all the relevant details were furnished before the Assessing Officer and the Assessing Officer was fully satisfied with the explanation given by the assessee in this regard. It was also brought to our notice that these payments were made on monthly basis and no entries were made at the end of the year to decrease the profit and as such, there was no possibility of inflating the expenses. As regards bad debts, it was contended by the ld. Counsel for the assessee that the Assessing Officer was required to see whether provisions laid down in section 36(2) were fulfilled by the assessee or not. According to the Id. Counsel for the assessee, it is not required to show that debts have become bad. Reliance was placed on the decision of this Bench of the Tribunal dated 18-9-2003 in the case of Asstt. CIT v. Suresh kumar B. Kalantri [ITA No. 1498/Pune of 1996] relating to assessment year 1993-94, wherein it has been held that by denying the deduction in the year of write off, the assessee would be denied deduction under section 36(1)(vii) for ever. It was also held by the Tribunal that by not allowing deduction in the year of....
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....ed to make necessary enquiry before accepting the explanation of the assessee which was not supported by cogent evidence. The Assessing Officer was also required to see the conditions to be fulfilled by the assessee regarding the provisions of section 36(2) as well as section 40A(3) of the Act. She has also submitted that there was an abnormal increase in salary account and account writing fee, as compared to the immediate preceding year. The Assessing Officer was bound to enquire in the matter. She further submitted that the CIT has only set aside the order of the Assessing Officer for making fresh assessment and no specific directions have been given to the Assessing Officer to make additions. The CIT has also directed the Assessing Officer to give an opportunity of being heard to the assessee in the matter. She therefore submitted that no prejudice has been caused to the assessee and the assessee is at liberty to substantiate its claim before the Assessing Officer. In that view of the matter also, the CIT was fully justified in his action. In view of the above, the ld. DR submitted that the order of the CIT may not be disturbed since he has given strong reasons while setting a....
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....rm No. 3CD is accompanied along with return of income. The assessee firm has maintained full quantity details. Therefore, books result are accepted. On perusal P & L account it is seen that the assessee has debited motor car expenses of Rs. 30738, 1/3 of same Rs. 10,246 and depreciation thereon Rs. 3,739 are disallowed being for the personal use of the partner. Subject to the above, total income of the assessee firm is computed as under: Computation of income: Total income declared Rs. 26,485 Add: As discussed above Rs. 10,246 (ii) depreciation on car is disallowed Rs. 3,739 Rs. 13,985 Total income: Rs. 40,470 Assessed under section 143(3). Issue DN and challan. Sd/- (M.N. Chitgopekar) ITO, Wd-2(6), Jalgaon 8. It is noticed that the CIT has summoned the records and after examining the same found that the Assessing Officer has not made proper enquiry as regards the issues mentioned in the notice under section 263 dated 13-7-1998. It is also observed here that after giving a due and reasonable opportunity of being heard to the assessee, the CIT set aside the assessment order for making a de novo assess....