TaxTMI 
TaxTMI 
2013 (8) TMI 437
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....nue as there was lack of enquiry and verification regarding the compliance of excise duty provisions and also copies of supporting bills and evidence for the purchase of additions as made to machinery on which depreciation claimed has not been obtained and verified. (b) That the learned Commissioner of Income-tax-III has erred to consider that both points as per paragraph 3 above have already been discussed during the application and documents were enclosed and finally assessment was framed after due application of mind by the Assessing Officer on the above issue. 4. That the learned Commissioner of Income-tax-III has further failed to consider that besides our submission as per paragraph 3(a), (b), above that paragraph-wise reply was filed in response to the objection of the Commissioner of Income-tax as stated in paragraph 3 to his full satisfaction, giving complete detail of excise duty and value added tax, gross and net purchase and sales, copy of audit report under section 44 authorities below along with balance-sheet, annexure-II of the audit report in which details of adjustment made under section 145A, along with photo copies of bills of machinery, copy of account of ....
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....ee in respect of the provisions of section 145A of the Act dated March 28, 2011 reads as under : "With regards to the captioned subject, we hereby submit the reply to your goodself's query on the last date of hearing, as under : (1) That, the manufacturing and profit and loss account as per section 145A of the Income-tax Act, 1961 is enclosed herewith. There is no impact on the profit after taking the excise duty. (2) That, valuation of closing stock has been taken exclusive of excise duty. The details of closing stock has already been filed during the course of assessment proceedings. However, copy of closing stock is also enclosed herewith. (3) We hope your goodself will find the above details in order and the same may please be placed on record and oblige. Your goodself is also requested to please drop the proceedings initiated under section 263 of the Income-tax Act, 1961." After considering the reply of the assessee that the purchases and sales shown in the trading account were net of excise duty, the Commissioner of Income-tax observed that the Assessing Officer had failed to consider the impact of section 145A of the Act and in particular, the valuation o....
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....cation. (b) The assessee has shown addition to machinery account at Rs.31,55,026 on which depreciation of Rs. 5,61,677 have been claimed. The Assessing Officer has failed to obtain copies of supporting bills and evidence for the purchase of machinery and of having put the machinery to use. The Assessing Officer has failed to obtain documentary evidence in this regard before allowing the claim of depreciation by the assessee. There is lack of verification and there is failure to obtain necessary evidence. 2. Therefore, in view of the above, the order of the Assessing Officer passed under section 143(3) of the Income-tax Act is erroneous as well as prejudicial to the interests of the Revenue. You are given an opportunity of being heard and to show cause as to why the impugned order be not enchanced/modified/cancelled or set-aside for fresh assessment under section 263 of the Income-tax Act, in this office on March 23, 2011 at 11.30 a.m. at Aayakar Bhawan, Rishi Nagar, Ludhiana." In respect of the first objection of the Commissioner of Income-tax visa-vis the provisions of section 145A of the Act, the assessee had furnished Annexure-2 to the audit report placed at page 13 of ....
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....ons to fixed assets, as required by your goodself is enclosed herewith for your honour's kind reference. 21. That the details of payments made under section 43B of the Income-tax Act, 1961 has already been filed along with return of income filed by the assessee. However, the details of the same are being enclosed herewith for your honour's kind reference." In the totality of the facts and circumstances of the case we find that the Assessing Officer had not raised any query in respect of the provisions of section 145A of the Act. After the amendment to the said section 145A of the Act certain adjustments on account of excise duty to opening stock, purchases, sales and closing stock have to be made. The claim of the assessee is that in view of Annexure-II to the audit report, the details in the account of Modvat were filed and the effect is nil. The powers under section 263 of the Act are to be invoked on satisfaction of twin conditions of the order being both erroneous or prejudicial to the interests of the Revenue. Where the tax effect because of an order passed by the Assessing Officer is nil, such order even if erroneous being not prejudicial to the interests of the Re....