2015 (8) TMI 1039

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... to the extent of Rs. 21,90,000 while treating the amount of Rs. 3,10,000 as income from other sources. AO also made some other disallowances out of the expenditure claimed by the assessee as a result of which the total income was determined at Rs. 1,02,13,350 as per the assessment order passed u/s 143(3) of the Act on 11.5.2011. 3. Ld CIT in exercise of powers u/s 263 of the Act, called for assessment records of the assessee for the year under consideration and after examining the same was of the view that the AO has failed to examine/consider various issues, which according to the ld CIT has made the assessment order erroneous and prejudicial to the interests of the Revenue. Accordingly, he issued a show cause notice to the assessee on 24.01.2014. Subsequently, after change in incumbency, another show cause notice u/s 263 of the Act was issued on 11.03.2013 by the successor CIT raising some other new issues. Though, assessee in its reply submitted in response to the show cause notice, objected to the initiation of proceedings u/s 263 of the Act, but ld CIT did not find merit in the objections of the assessee. As far as the declaration of agricultural income of Rs. 16.00 lakhs ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e income returned. Accordingly, he directed AO to examine the issue afresh. Ld CIT also considered the assessment order to be erroneous and prejudicial to the interests of the Revenue on various other issues. On the basis of the reasons sated in the order passed u/s 263, ld CIT ultimately set aside the assessment order and directed AO to re do the assessment de novo. Being aggrieved of the order passed by ld CIT, assessee preferred the present appeal. 6. As could be seen from the grounds raised before us, assessee is basically challenging the jurisdiction of the ld CIT in exercising power u/s 263 of the Act. Ld AR submitted before us, AO having examined all the issues on which ld CIT proposed to revise the assessment order and completed assessment after necessary inquiry on those issues, the assessment order cannot be held to be erroneous and prejudicial to the interests of the Revenue. Ld AR referring to the discussions made in the assessment order as well as the replies submitted by the assessee from time to time in course of the assessment proceedings submitted before us, not only the AO has made adequate inquiry, but assessee has also submitted all the informations and neces....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... taking permission of the Forest Authorities. It was submitted that from the time of cutting of bamboo trees to its despatch to the final destination, everything has to be monitored by the Forest authorities, hence there cannot be any dispute with regard to the sale of the bamboo sticks as it is regulated commodity. As far as investment in chits are concerned, ld AR submitted that the entire investment has been reflected in the books of accounts hence, there cannot be any dispute with regard to the source of the deposits. Thus, it was submitted that the ld CIT has invoked his jurisdiction invalidly. 9. We have considered the submissions of the parties and perused the materials on the record. As could be seen there are three major issues on which ld CIT has held the assessment order to be erroneous and prejudicial to the interests of the Revenue. They are as under: * Income from sale of Bamboo Sticks * Contributions made to the Chits * Additional income offered at the time of survey at Rs. 1.00 crore was reduced to Rs. 80.00 lakhs in the return filed. 10. As far as the first issue relating to earning of agricultural income from sale of bamboo sticks is considered, as ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC). 11. The jurisdictional High Court in case of Spectra Shares and Scrips Pvt. Ltd vs. CIT (354 ITR 35) while examining the CIT's power u/s 263 of the Act analysed number of decisions of the Hon'ble Supreme Court as well as different High Court and culled out the principles for exercise of jurisdiction u/s 263 of the Act as under: "31. From the above decisions, the following principles as to exercise of jurisdiction by the Commissioner u/s.263 of the Act can be culled out: (a) The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejud....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... or new versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of the circumstance; that if this is permitted, litigation would have no end except when legal ingenuity is exhausted (f) Whether there was application of mind before allowing the expenditure in question has to be seen; that if there was an inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under Sec.263 merely because he has a different opinion in the matter; that it is only in cases of lack of inquiry that such a course of action would be open; that an assessment order made by the Income Tax Officer cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately; there must be some prima facie material on record to show that the tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation, a lesser tax than what was just, has been imposed. (g) The power of the Commissioner under Sec.263 (1) is not limited only to the material which was ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....behind not declaring an amount of Rs. 20.00 lakhs out of the total amount of Rs. 1.00 crore declared at the time of survey. The AO could have accepted the income declared in the return after satisfying himself with the reasonableness of assessee's explanation. There is nothing in record to show that the AO made any inquiry to find out why the assessee did not offer the amount declared at the time of survey as income in the return filed. That being the case, we do not find any infirmity in the order of the ld CIT in holding the assessment order to be erroneous and prejudicial to the interests of the Revenue on this issue. 14. As far as the other issues considered by the ld CIT for setting aside the assessment order as erroneous and prejudicial to the interests of the Revenue are concerned, after perusing the reasoning of the CIT in the context of facts and materials on record, we are of the firm view that the direction of the ld CIT on these issues are in the nature of starting a roving and fishing inquiry which is not permissible as held by Hon'ble Bombay High Court in CIT vs.Gabriel India Ltd (203 ITR 108 at page 114). In our view, ld CIT has no material before him to consider ....