TaxTMI 
TaxTMI 
2010 (2) TMI 913
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....r sec.143(2) of the Act on 10.10.2005 which was duly served upon the assessee. In response to this notice, the tax consultant of the assessee appeared before the Assessing Officer and submitted the details asked for, from time to time. Assessing Officer has passed the assessment order on 29.11.2006 under sec. 143(3) of the Act. He determined the taxable income at Rs.5,74,58,752. In the assessment, Assessing Officer has added three amounts i.e. disallowance out of repair, disallowance under sec.40(a) (i) and disallowance out of foreign travel expenses. 3. Learned Commissioner on perusal of the assessment record formed an opinion that Assessing Officer failed to conduct proper inquiry on certain issues and, therefore, his order is erroneous and prejudicial to the interest of the revenue in several aspects. He took cognizance under sec. 263 of the Act and issued a show-cause notice to the assessee inviting its explanation as to why assessment order be not set aside being erroneous and prejudicial to the interest of the revenue. In brief, the reasons assigned in the show-cause notice read as under: "From an examination of the income-tax assessment records for A.Y. 2004-....
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....re the Learned First Appellate Authority. The learned counsel for the assessee drew our attention towards clause (c) of Explanation to sec. 263(1) of the Act. The next issue taken by the Learned Commissioner is in respect of general expenses. Assessing Officer has verified these expenses and only thereafter accepted. The next reason assigned by the Learned Commissioner is in respect of commission on sales claimed at Rs.16,96,845. He pointed out that the details of this payment were submitted before the Assessing Officer vide letter dated 25.8.2006. The assessee was required to pay commission @ 5% of net sales realization as per agreement dated 23rd September, 2002. Apart from this commission, assessee was bearing the cost of maintenance etc. because it is reimbursing electrical charges, water charges incurred by the agent. According to the Learned Commissioner, if all these expenses are added to the amount of commission paid, the rate of commission would work out to be very substantial and not 5% as mentioned in the agreement. Learned counsel for the assessee submitted that the Learned Commissioner failed to construe the true import of the transaction. The premises where agent is c....
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....d out that there is no whisper in the assessment order in respect of commission paid to the agent and the general expenses. He was unable to give his comments about the issue of brokerage which was agitated before the learned CIT(Appeals). Learned DR further relied upon the judgment of Hon'ble Supreme Court in the case of Malabar Industries reported in 243 ITR 83. 8. We have duly considered the rival contentions and gone through the record carefully. The ITAT in the case of Mrs. Khatiza S. Oomerbhoy vs. ITO,Mumbai, 101 TTJ 1095, analyzed in detail various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industries 243 ITR 83 as well as Hon'ble Bombay High Court rendered in the case of Gabriel India Ltd. and has propounded the following broader principle to judge the action of CIT taken under section 263. "The fundamental principle which emerge from the above cases may be summarized below" (i) The CIT must record satisfaction that the order of the A.O is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every t....
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....tiny assessment proceeding Assessing Officer must have gone through the records relevant to all these issues. In Test Nos. 6 and 7 extracted supra, it has been expounded if the Assessing Officer examines the accounts makes inquiry applies his mind then Learned Commissioner would not be justified to substitute his estimate of income in place the income estimated by the Assessing Officer. The application of mind at the end of the Assessing Officer can be ascertained either from the discussion available in the assessment order or from the questionnaire issued by him on the specific issues and replies submitted by the assessee. The explanation submitted by the assessee should be plausible one and in consonance with the query of the Assessing Officer. No such thing are evident from the record in the present case. The first argument of the learned counsel for the assessee that inquiry, in international transaction with associate concerns for the purpose of transfer pricing the value of international transaction should be more than Rs.5 crores is concerned, Learned DR has rightly demonstrated that it is in respect of a reference to the TPO otherwise Assessing Officer can take cognizance u....
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.... to the Assessing Officer on a prima facie satisfaction that no inquiry was conducted by the Assessing Officer while framing the assessment order. This action of learned CIT(A) is directed in the line of Hon'ble High Court's decision in the case of V.G. Enterprises. The case laws relied upon by the are not applicable on the facts of the case in hands. The first decision relied upon by the learned counsel for the assessee is in the case of Daulat Ram Rawatmal. In that case, the issue before Hon'ble Court was that if a fact finding authority basis its decision partly on conjecture, surmises and suspicion and partly on evidence in such situation, it would not be a finding of fact and an issue of law would arise. This case law was cited by the learned counsel for the assessee for demonstrating the order of the Learned Commissioner as unsustainable on the ground that he has not taken into consideration the agreement between the assessee and the agent on the issue of commission payment. In our opinion, precisely i.e. not the issue. Learned Commissioner has examined the aspect whether a proper inquiry was conducted by the Assessing Officer or not while accepting the claim of commission by....