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2014 (1) TMI 318

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....2013 filed by another assessee namely, M/s Standard Conduits Pvt. Ltd. for assessment years 2004-05, 2005- 06,2006-07, 2007-08, respectively. 4. In appeals of assessee, M/s Turakhia Ferromet Pvt. Ltd., the impugned order is dated 28-3-2013, which has been passed by the CIT under Section 263, wherein the CIT has invoked his jurisdiction for assessment years 2004-05, 2005-06,2006-07, 2007-08 & 2008-09, respectively, by passing a consolidated order, which is under consideration before us. 5. The CIT(A) was of the firm belief that the assessment order under Section 143(3) read with Section 153A of the Act passed on 27- 12-2010, was erroneous inasmuch as it was prejudicial to the interest of the revenue. The entire issue revolves around the share application money received by the assessee for the years under consideration. The CIT was also of the belief that the trading results shown by the assessee are not proper and the assessee has shown bogus trading loss. The CIT in his notice under Section 263 of the Act, inter alia, observed as under :-                8. Therefore, it was necessary to examine the transactio....

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....rs. On the contrary, the AO has simply asked the assessee to prove the genuineness of the transaction with regard to the share application money and to produce the parties for verification without confronting the assessee with incriminating materials/submissions pointed out that such investors companies were merely entry givers only. The CIT finally concluded at para 28.1 of his order as under :-            "28.1 In view of the detailed discussion and findings given in the preceding para, I hold that the order of the AO is erroneous as it was made without making any enquiries and without application of mind and without examining the reason for high premium and other related circumstances. As the order is set aside on the issue of share capital, it is also set aside on the issue of the defects in the books of accounts and seized material. The AO is directed to reframe the order denovo after conducting necessary enquiry and verifying all the details". Being aggrieved with the order of the CIT, the assessee is in appeals here before us. 7. Learned counsel for the assessee drew our attention to the various notices issued by the AO du....

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....r Books, the AO sought details from the assessee as under :- a) Please furnish the details of share capital and share premium received during the year along with name and address of investors; b) Please furnish the details of unsecured loan with name and full address with PAN No. and confirmation of the same. Further, in respect of trading activity, following questions were raised :- 10. Please explain as to why your books of accounts should not be rejected as per provisions of section 145(3) of I.T. Act 1961 for the followings reasons :- i) Assessee follows FIFO method of Stock Valuation. Physical stock verification is not being made and valuation of closing stock is improper. For example, it is seen from stork summary-item register for cold sheets/coils that as on 31.3.2004 stock of the items left is 154.058 tons. This stock has been valued at Rs.25193.40 per ton but the last purchases which comprise this stock have been made at prices varying from Rs.27250.40 to Rs.30800/- per ton. The average value of closing stock on FIFO method works out to Rs.30,228/- per ton. ii) it is not possible from the records maintained to link a sale to a particulars purchase. Due to this defect....

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.... para 7.5 at page 12 of his order, which are as under :-            "6.6. After considering the assessee's reply and looking to the facts of the case and verification made in this regard with reference to seized documents and books of accounts / books of accounts and supporting vouchers produced, any addition in respect of these transactions is not being made." x x x x x x x x x " 7.5 After considering the assessee's reply and looking to the facts of the case and verification made in this regard any addition in respect of share application money is not being made." These above observations of the AO, after considering the relevant material evidences brought on record, show that the AO has applied his mind before accepting the submissions of the assessee in its replies. It cannot be said that the AO has not made any enquiry as alleged by the CIT. The order of the AO may be brief and cryptic, but that by itself is not sufficient reason to brand the assessment order as erroneous and prejudicial to the interests of the revenue. The scope of interference under Section 263 is not to set aside merely unfavourable orders and bring to tax....