TaxTMI 
TaxTMI 
2015 (11) TMI 1449
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....dly has been stated in the condonation petition. It was submitted in its affidavit that the assessee was under the bonafide impression that the order under section 263 is not required to be appealed as the Ld. CIT has set aside the assessment to re-do the assessment as per the directions of the Ld. CIT. 3. Subsequently, assessee came to know through the new auditor that the order under section 263 is appellable and therefore, assessee has preferred the appeals with a petition for condonation of delay. 4. In the course of appellate proceedings, the Ld. Counsel submitted that assessee company was promoted by two groups and there were disputes between the groups matters of which went up to High Court. Therefore, assessee was not maintaining books of accounts and has not filed proper documents earlier before the department. There was series of proceedings and also series of Counsels to the assessee at various stages of proceedings. Therefore, assessee was not properly advised and accordingly orders under section 263 were not preferred at the relevant point of time as the Ld. CIT set aside the orders of the A.O. and therefore, it is prayed that the delay be condoned in the interest of....
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....dings under section 263 by issuing show cause notice in which he has considered two 'grievous errors' as under : (i) "Allowing set-off of freshly worked-out loss of Rs. 13,74,631/- when there was no valid return filed by the assessee as per law. The IT Act permits set-off of loss only where the return is filed in time. (ii) Telescoping the un-reconciled creditors partly into the estimated income of Rs. 29,42,079/-which is not permissible u/s.68 of the IT Act, 1961. The estimated income of Rs. 29,42,079/-had been determined at the lowest possible profit rate of 8% on the turnover of Rs. 3.67 crores." 8.1. In the proceedings, assessee has explained that all the issues which the Ld. CIT has raised have been examined by the A.O. and after giving due explanation of the various amounts, the total incomes are determined, therefore, the proceedings under section 263 does not arise. Ld. CIT however, did not agree and after considering the various objections and asking for details of account copies with invoices gave directions to A.O. to adopt the assessment figure at the earlier assessed income and add to that un-reconciled creditors and further amounts as specified in various paras and....
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....mount is truly offered as income and this was included in the total income computed in concluding the final assessment. We here under furnish you the computation of Total Income Statement submitted to the department during the assessment proceedings. Computation Total Income Amount in Rs. Profit as per Profit & Loss Account 1,72,516 Add: Depreciation as per P & L (Companies Act) 36,71,001 Total 38,43,517 Less: Depreciation as per IT Act 52,18,148 Balance (-) 13,74,631 Add: Un reconciled Creditors Creditors for expenses 39,65,500 Other un-reconciled creditors 27,68,550 67,34,050 Total 53,59,419 In the 6th page of the assessment order dated 31.12.2009 the above said amount of Rs. 53,59,419 is taken into consideration which was reproduced hereunder for your verification. 6th page of the assessment order dated 31.12.2009 for A.Y. 2002-03 reads as follows. Income as per order u/s.143(3) r.w.s. 147 dt.5.5.2005 as modified by consequential order dt.4.5.07 and modification order dt.17.7.07 29,42,070 Add: Additional Income determined 24,17,340 53,59,419 Add: Interest Income 22,97,203 Total Income 76,56,622 The above two sta....
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....is of profit and loss accounts, taxable incomes for the assessment years 2002-03 to 2004-05 works out to Rs. 53,59,419/-, Rs. 53,32,140/- and Rs. 27,65,766/- respectively. On comparing these incomes to the turnovers, they work out to 13.29%, 13.32% and 10.29% respectively for the assessment years 2002-03 to 2004-05. However since the profit of margin for the assessment year 2004-05 is considerably less than those of earlier years, the assessee was asked to substantiate the same. The assessee claimed that in view of the differences between the groups, the turnover also drastically reduced effecting the performance. However, in order to avoid any protracted litigation, the assessee has agreed the same level of profits for the A.Y. 2004-05 also, which works out to Rs. 7,50,000/-. In view of the fact that most of the clients and Government Agencies and the fact that the designs are supplied by those organizations and advances are paid, the profit margin now admitted appears to be 1 reasonable and fair. As it is not possible to reconcile all the creditors with the evidences as the company failed to maintain the books of account properly, the substantial portion of the creditors are no....
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....ssessed income on the same turnover. In fact, the proceedings under section 148 resulted in assessing the assessee's profit in business on estimation basis, having rejected the books of accounts and also making additions on the basis of books of accounts. Thus the orders passed by the A.O. are in fact is not prejudicial to the interest of the Revenue. 11.3. Moreover, one of the item which Ld. CIT has directed in his order under section 263 is also on interest income. As seen from the assessment order, the A.O. has given a clear observation that interest income offered by the assessee in the P & L Account was only Rs. 1,93,703. It was explained that the balance of the amounts reported to the bank pertains to sale of scrap. It was wrongly classified as interest income. However, A.O. did not accept with that contention and the entire amount of Rs. 22,97,203 which is sale of scrap according to assessee was also added as interest income. Thus, the computation for A.Y. 2002-2003 indicates the original income as per the consequential order dated 17.07.2007 at Rs. 29,42,079 + Additional Income offered as per the P & L Account at Rs. 24,17,340 + Interest Income that too from the same P & L....
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....essed by the Addl. CIT after examining the contentions of the assessee when the revised assessment proceedings were pending. How the Ld. CIT can substitute his opinion to the opinion of the A.O. in the proceedings under section 263 is not explained. Therefore, this part of the directions can only be considered as substitution of the opinion of the Ld. CIT over the opinion of the A.O., in fact, of that of the Addl. CIT in the present proceedings, which is not permissible under Law. Looking at any angle, we are not in a position to uphold the orders of the Ld. CIT and accordingly the order under section 263 in both the assessment years 2002-03 and 2003-04 are set aside and we restore the orders of the A.O. dated 31.12.2009 which is subject matter of proceedings under section 147, on which present proceedings are initiated. ITA.No.346/Hyd/2014 & ITA.No.347/Hyd/2014 : 12. These appeals for AY 2002-03 and 2003-04 being on consequential orders consequent to the orders under section 263, these does not survive, in view of the cancellation of the orders under section 263 in the above appeals. Therefore, we vacate the orders of both A.O. and Ld. CIT, which are consequential in nature to t....