TaxTMI 
TaxTMI 
2015 (9) TMI 443
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....ommissioner of Income Tax erred in applying the provisions of Sec. 263, directing the Assessing Officer examine and apply the provisions of 68 and 269SS of I.T. Act. 5. The learned Commissioner of Income Tax erred in directing the Assessing Officer to examine provisions of Sec. 40A(3) and sec 14A of the I.T. Act. 6. Any other ground that may be urged at the time of hearing". 2. The brief facts of the case are that the assessee is a partnership firm engaged in the business of whole sale trader in fast moving consumer goods. The appellant had filed the return of income for the assessment year under consideration on 26-09-2009 declaring total income of Rs. 45,418/-. After processing the said return under the provisions of Section 143(1) of the Act, the case was selected for scrutiny assessment by issuing notice u/s. 143(2) of the Act and finally, the assessment came to be completed u/s. 143(3) vide order dt. 31-05-2011 by the Income Tax Officer, Ward-I, Kothagudem at a total income of Rs. 2,11,207/- after making disallowance of Rs. 1,42,650/- u/s. 40A(3) and Rs. 23,137/- u/s. 40(a)(ia) of the Act. The assessment order was not agitated before the CIT(Appeals). Whil....
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....as pointed out that as per the Trading Account for the A.Y 2008-2009 no closing stock was shown under the head OST TOOR DAL Account. While for the A.Y. 2009-2010 opening stock was brought down at Rs. 3,16,882/- and that similar was the case of A.P. WHEAT Account. It is submitted that OST TOOR DAL closing stock was Rs. 2, 16,857/- on 31/03/2007. It was shown in Trading Account and Balance Sheet. For the A.Y. 2008-2009 there were no purchases or sales. Yet the closing stock was valued at enhanced market price of Rs. 3,16,882/- as on 31/03/2008 and shown in the Balance Sheet. The same was shown as opening stock for the A.Y. 2009-2010. As such there is no accounting error or omission on this count. In fact the closing stock was overvalued by about Rs. 1,00,000/- as on 31/03/2008 by the accountant, keeping in view of the market prices. The same occurred in the case of A.P.WHEAT Account. Though there is no increase in valuation. 3. FRIEGHT CHARGES Rs. 7,02,060/-, APPLICABILlTY OF SECTION 40a (ia) :- This expenditure pertains to mainly local dispatches on cyclerikshawa, bullock carts and human drawn carts only, a few expenditure pertain to lorry transports. In a....
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....rests of revenue and hence it is set aside. 5. The next issue is extracted as under; As per the P&L, it is noticed that the assessee firm has debited an amount of Rs. 7,02,060/- under the head "Freight" and the AD has not examined with reference to the provisions of section 40(a)(ia) of the Act. 5.1. Assessee's reply is extracted as under This expenditure pertains to mainly local dispatches on cyclerikshaws, bullock carts and human drawn carts only, a few expenditure pertain to lorry transports. In any case the expenditure were neither in excess of Rs. 20,000/- at a time not exceeding Rs. 50,000/- in aggregate. As such the provisions of section 40(a)(ia) do not apply. 5.2. During the course of hearing, the assessee was asked to furnish the details of this expenditure. In response to that, the assessee has furnished copies of vouchers which do not contain details of the recipients so their genuineness can't be verified. Thus, as per the information available on record, the AD has not verified this claim. The assessee has failed to furnish relevant particulars about the freight charges paid by the assessee. 6. The next iss....
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....visions of section 269SS of the As per the cc a/c copy of the assessee maintained with SBH, it is noticed that huge amounts were withdrawn by way of cash to the extent of Rs. 18,80,200/- on various dates means of bearer cheques 14A of the IT Act. 7.1. Assessee's reply is extracted as under; The assessee has withdrawn amount of Rs. 18,80,2000/- from SBH, Kothagudem in aggregate throughout the year to meet the day to day expenses of the business in cash and some payments were made by barer cheques upto permissible limits u/s 40A(3). The assessee does not have any other activity, the incomes of which are exempt. The. assessee has not diverted any amounts to any other activity. The amounts of each withdrawals being very small, this aspect need not be doubted. 7.2. The assessee has withdrawn Rs. 18,80,200/- during the fy relevant to the ay under consideration from SBH, Kothaqudem. But, the AO has not verified the purpose for such huge withdrawals and also the applicability of Sec.14A, if any". Finally concluded that, AO had not conducted the due enquiry or examined the above issues and hence the assessment order passed by the AO was held to be erroneous....
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....not to make any further enquiry. Endless enquiry is not possible and it is for the Ld.AO to decide when to end the enquiry. The Ld.CIT cannot transgress the jurisdiction u/s. 263 of the Act by mentioning that no proper enquiry was made. Reliance in this regard, we rely on the decision of Hon'ble Agra Bench of ITAT in the case of Rishi Kumar Gupta Vs. CIT [90 TTJ 645]. In this connection, it is apt to extract the observation of the following: i. Hon'ble Delhi High Court in the case of CIT Vs. Sunbeam Auto Ltd., [332 ITR 167] held that: "We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the CIT under s. 263 of the IT Act. As noted above, the submission of learned counsel for the Revenue was that while passing the assessment order, the AO did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by it....
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....977 CTR (SC) 32 : (1977) 106 ITR 1 (SC) at p. 10]. ............... From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an ITO acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the CIT simply because, according to him, the order should have been written more elaborately This section does not visualise a case of substitution of the judgment of the CIT for that of the ITO, who passed the order unless the decision is held to be erroneous. Cases may be visualised where the ITO while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The CIT, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the CIT he would have estimated the income at a figure higher than the one determined by the ITO. That would not vest the CIT with power to re-examine the accounts and determine the income himself at a higher figure. It is....