TaxTMI 
TaxTMI 
2014 (12) TMI 352
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....dered by the AO after due application of mind in the original order passed u/s 143(3) of the I.T.Act, 1961 and therefore the assessment order passed by the AO cannot be said to be erroneous and prejudicial to the interest of revenue. 3. In this case the ld. CIT observed that order passed u/s 143(3) by the AO is apparently erroneous and prejudicial to the interest of revenue for the following reason :- "On perusal of the assessment order, records, accounts etc. it is found that during the F.Y. 2008-09, the assessee paid Freight charges totaling Rs. 96,15,109/- (Reliance Industries Ltd. Rs. 3,61,839/- + Nirma Ltd. Rs. 89,92,420/- + Saurashtra Chemicals Ltd. Rs. 2,60,850/-) without deduction of tax at source u/s 194C. The assessee was under ....
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....es Ltd., M/s. Nirma Limited and M/s.Saurashtra Chemicals Ltd. Who delivered the goods directly to the godowns of the assessee. The freight charges were recovered by them from the assessee. All the bills were produced before the AO and as required by the AO copies of a few purchase invoices from the above stated parties were also filed before the AO and are again enclosed for your ready reference. It is clearly mentioned in all the purchase bills that the freight has directly been paid by the suppliers on behalf of purchase bills that the freight has directly been paid by the suppliers on behalf of customers (the assessee) and was being recovered by them. There was no agreement or contract between the assessee and the transporters who were p....
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....dustries Ltd. For Rs. 3,61,839/-) on which no TDS was deducted because as per the assessee's submission the same has been included in the purchase. Ld.CIT further observed that during assessment proceedings, vide submission dated 31-10-2011 the AR admits proportionate under valuation of Closing Stock as per Accounts Standard AS-7. That it is not clear whether purchase debited in the Profit & Loss Account includes such purchases and if so then why it is again claimed as Freight. That if purchases do not include such freight then why did the AR admit undervaluation of Closing Stock and why TDS is not deductible. That the A.O. during the course of assessment apparently failed to examine these issues. 3.3. In the above circumstances the ld. CI....
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....s. The freight payments were reimbursed to them since they dispatched the goods after payment of the freight to the carriers. In this regard the ld. Counsel referred to the invoice of the parties submitted in the paper book and submitted that the assessee had no contract with any of the transport carriers. There was no contract between the asessee and the transporter who were paid by the suppliers directly. He submitted that the said payment was only reimbursement of the expenditure incurred by the suppliers on behalf of the assessee on which there was no requirement to deduct tax at source. The ld. Counsel further referred to page 13 of the paper book wherein the assessee has submitted detail explanation to the AO vide letter dated 31.10.2....
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....ent, or cancelling the assessment and directing a fresh assessment. From the above it is evident that the ld. CIT can exercise his jurisdiction u/s 263 if the order passed by the AO is erroneous in so far as prejudicial to the interest of the Revenue. 4.2. The Hon'ble Apex Court had the occasion of expounding of section 263 in the case of Malabar Industries vs CIT 243 ITR 83. It has been held that the C.I.T has to satisfy twin conditions namely (i) the order of the AO sought to be revised is erroneous and (ii) it is prejudicial to the interests of the Revenue. If any one of them is absent CIT cannot exercise jurisdiction u/s 263(1). The Hon'ble Apex Court further expounded that every loss of revenue as a consequence of an order of the AO c....