TaxTMI 
TaxTMI 
2016 (2) TMI 402
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.... facts of the case and thereby passed the impugned assessment order. (2) That the assessment order U/S 143(3) dated 16-12-2010 as passed by the L'd Assessing Officer is neither erroneous nor prejudicial to the interest of the revenue. (3) Observations made, inferences drawn and findings recorded by the Worthy Commissioner of Income Tax in her order passed U/S 263 are incorrect, unreasonable or are untenable in law. (4) Directions issued in section 263 order to restore back/ set aside the issue of four sundry creditors to the file of the L'd Assessing Officer for verification is unjust, uncalled for and illegal. (5) The Worthy Commissioner of Income Tax has made a departure from the accepted past history of the issue of purchases account, which is akin to the specific nature of the trade and resorted to applying percentage on the turnover and thereby, making an addition of Rs. 7,98.553/-, which is illegal and at any rate is highly excessive . 2. That the impugned order U/S 263 of the Worthy Commissioner of Income Tax being illegal deserves to be cancelled / annulled." 3. The assessee company is engaged in the business of proces....
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....disallowance. The CIT, in view of the above, found the order passed by the AO to be erroneous and prejudicial to the interest of revenue since at the time of the assessment, according to CIT the AO was duty bound to call for such details and examine them. For this proposition, the CIT relied on various judicial pronouncements which, for the sake of clarity, are reproduced as under :- "4. .........In the case of M/s. Malabar Industries, the Hon'ble Apex court has held that incorrect assumption of facts or incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall order passed without applying the principles of natural justice or without application of mind. 5. The fundamental principles emerged from the Hon'ble Apex Court judgement in Malabar Ind Co. Ltd Vs. CIT (2000) 243 ITR 83 (SC) include as follows: i. An incorrect assumption of facts or incorrect application of law will suffice the requirement of the order being erroneous. ii. If the order is passed without application of mind, such order will fall under the category of erroneous order. 5.1. Further, it has been held ....
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....order of CITC for setting aside the assessment and directing the AO to make an order of assessment. ii. Gee Vee Enterprises vs. Addl.CIT, 99 ITR 375 (Del.) in which it is held that the Commissioner can regard the order as erroneous on the ground that in the circumstances of the case, ITO should have made further inquiries before accepting the statements made by the assessee in his return and it was observed that reason is obvious. The position and functions of the ITO are very different from that of civil court. 5.3. On the facts of the present case, it is evident that the AO accepted the version of the assessee without making any inquiry or verification, whereas it is very well settled that mere failure to make inquiries makes an order erroneous. In order that the Commissioner may consider an order to be "erroneous" for the purposes of section 263, the error of law may not be apparent on the fact of the order. The Commissioner may consider an order of the AO to be erroneous not only if it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereotyped order which simply accepts what the assessee has stated in ....
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.... ITA No.2595/D/2009 dated 21/01/2011 relying upon aforesaid judgments has held that the facts of the case were in pari-materia with above judgments. Further, on consideration of these cases the Hon'ble IT AT viewed that the ld. CIT was right in exercising the revisionary jurisdiction dismissing the appeal filed by the assessee. 5.7. In view of the foregoing, it is evident that the order passed by the AO is erroneous as well as prejudicial to the interests of revenue for the reasons as stated above. Further, the CIT, after going through the written submissions filed by the ld. AR for the assessee, observed/held as under :- "As regards grounds against 263 proceedings, a detailed discussion as already being made in proceeding paras which makes it abundantly clear that the order passed by the A.O was erroneous and prejudicial to the interest to the revenue the same is not being repeated here for the sake of brevity. 8. As regards the issue relating to sundry creditors, the contentions of the ld. counsel are reproduced above, which are not being repeated here for the sake of brevity. I have considered the contention of the ld. counsel that there were ru....
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....ncome is determined as follows: A.Y. G.P.% N.P.% 2005-06 11.630 0.090 2006-07 -- Loss 2007-08 6.425 0.099 Avg. GP 9.02% Less GP shown -7.04% 1.98% Applying this rate on turnover 40330989 X 1.98% = Rs. 7,98,553/- This will mean an addition of Rs. 7,989,553/-. A.O. is directed to issue fresh demand notice and challan." 5. The ld. AR reiterated the submissions made before the ld. CIT (A) and for the sake of clarity, the same are reproduced below :- "7. That for the year under consideration, the assessee has filed a return of income on 07-10-2008 declaring an income of Rs.Nil and the said return was picked up for scrutiny by the ACIT, Circle 1, Meerut. That however, various queries were raised on several dates and after submission of various replies in compliance of the AO's continued queries, she considered all the documents called for evidences supplied by the assessee and after due consideration of the same and after having applied her mind to the issues involved she took a possible view and thereby passed the impugned assessment order dated 16-....
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....sub-judice. The AO has not given a finding in respect of accepting the purchases made in cash That in para 2 of the assessment order, the AO has given a finding as under:- "The assessee company is engaged in the business of processing and trading of buffalo meat. From the details of trading results for the last three years it is seen that there is decrease in turnover during the year but there is slight improvement in GP and NP rate. The trading results have been examined on test check basis from the books of accounts produced and other details and documents furnished by the assessee." It may be seen that she has given a clear finding about having accepted the trading results after test checking the books of accounts and considering other documents and evidences produced. The issue of purchases therefore, stands covered and hence it wrong to assume that no finding in this regards has been given. That thus, it would be seen that in respect of each of the issues referred to by your honour, the Assessing Officer has called for full details, and once they were submitted, has either verified them from the books of accounts or through making e....
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.... Reliance in this regard is placed on Malabar Industrial Company Ltd. VS CIT 243 ITR 83 ( SC)" 6. Ld. DR relied on the order of the Commissioner of Income-tax. 7. We have heard both the parties and perused the material on record. The fundamental principles which emerge from the several cases regarding the powers of the CIT u/s 263 of the Act has been summarized by the Coordinate Bench 'C' of the ITAT, Delhi in ITA No.2494/Del/2013 order dated 10.07.2015 as under :- "(i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interests of the Revenue. Both the conditions must be fulfilled. (ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it is only when an order is erroneous, than the said section will be attracted. (iii) An incorrect assumption of facts or an incorrect application of law will suffice for the requirement of order being erroneous. (iv) If the order is passed without application of mind, such order will fall under the category of erroneous order. (v) Every loss of revenue cannot be treated as prejudicial to....