AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 48
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....t was issued. In response to notice, the authorized representative of the assessee appeared from time to time and produced books of accounts and other relevant details. The A.O. after duly considering the books of accounts and other details, completed assessment u/s 143(3) of the Act on 4.8.2009 and estimated the income at 4% on net purchases. 3. The CIT, Rajahmundry issued a show-cause notice u/s 263 of the Act dated 1.8.2011 and proposed to revise the assessment order. The CIT, proposed to revise the assessment order for the reason that on examination of assessment record, it was noticed that the A.O. has not examined certain issues, which render the assessment order erroneous, in so far as it is prejudicial to the interest of the revenue in terms of section 263 of the Act. The CIT observed that the A.O. has estimated the net profit of 4% on net purchases without considering the ratios of the judgement of Hon'ble ITAT Visakhapatnam in the case of ACIT Vs. M/s. M. Veerabhadra Rao & Others in ITA Nos.345 & 346/Vizag/1999, wherein the ITAT has directed to estimate the sales at 8 times of the purchase and then estimate the net profit at 1% on such estimated sales or declared sales w....
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....cided to adopt a net profit of 4% on net purchases, therefore, the order of the A.O. cannot be termed as erroneous, in so far as prejudicial to the interest of the revenue. As regards the other issues raised by the CIT(A), the assessee submitted that it has furnished the details of unsecured loans and also filed name and address of the persons from whom the loans has been taken before the A.O. In respect of capital introduced, it was submitted that the assessee has furnished sources for capital introduction and on verification of the details filed by the assessee the A.O. has chosen to estimate the net profit. Therefore, the assessment order passed u/s 143(3) of the Act is not erroneous, in so far as it is prejudicial to the interest of the revenue. 5. However, the CIT after considering the explanations offered by the assessee, held that the A.O. did not verify the above issues at the time of completing the assessment u/s 143(3) of the Act. Therefore, the assessments order dated 4.8.2009 needs to be revised, as it is erroneous, in so far as it is prejudicial to the interest of the revenue. With these observations, the CIT set aside the assessment order passed by the A.O. u/s 143(3....
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....ressed the other issues raised by the CIT, such as unsecured loans and introduction of fresh capital, therefore requested to modify the order to the extent of estimation of net profit. On the other hand, the Ld. D.R. submitted that the issue of net profit estimated by the A.O. is not a subject matter of revision, as the A.O. has already considered the issue of estimation of net profit at the time of assessment. However, the other two issues raised by the CIT with regard to the unsecured loan and introduction of capital, the A.O. has not verified the issues at the time of completion of assessment, therefore, the CIT(A) rightly assumed the jurisdiction u/s 263 of the Act and his order should be upheld. 7. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The CIT assumed jurisdiction to revise the assessment order for the reason that the A.O. has not conducted proper enquiry while completing the assessment u/s 143(3) of the Act. Therefore, the assessment orders dated 4.8.2009 is erroneous, in so far as it is prejudicial to the interest of the revenue. The CIT assumed jurisdiction for the reason that the A.O....
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....without considering whether the ratio laid down by the ITAT and Hon'ble A.P. High Court are applicable to the facts of the case. Therefore, we are of the opinion that the CIT was not correct in considering the jurisdictional High Court and ITAT, judgments for estimation of net profit from the business. The issue of estimation of net profit is a debatable issue and always two views are possible. The A.O. has taken one of the possible view, therefore, it cannot be held that the order passed by the A.O. is erroneous and also it is prejudicial to the interest of the revenue. The assessment order passed by the A.O. is also not prejudicial to the interest of the revenue, as there is no loss of revenue because of the action of the A.O, as the A.O. has chosen to adopt 4% net profit, which is almost in line of the business activity of the assessee. Once, the A.O. allowed the claim of the assessee after being satisfied with the explanations, then, the CIT cannot revise the assessment order for same reason with a different opinion. It is not a case of CIT that the A.O. has not examined the very issue at the time of assessment. In the present case on hand, the A.O. has examined the books of ac....
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.... debatable question. The Ld. CIT has not pointed out any mistakes in such estimation to say that it is erroneous and prejudicial to the interest of the revenue. The question whether the decision of ITAT in the case of M. Veerabhadra Rao and Others (supra) and also the Hon'ble A.P. High Court in the case of M/s. V. Ramulu, Kakinada in ITA No.197/2003 dated 21.6.2011, both are rendered in the context of arrack business, shall be applied to the IMFL business or not. Therefore, we are of the opinion that the CIT was erred in considering the case laws rendered by the A.P. High Court and ITAT in the context of arrack business to the business of the assessee i.e. trading in IMFL. Therefore, we are of the opinion that the assessment order passed by the A.O., in respect of estimation of net profit is not erroneous, in so far as prejudicial to the interest of the revenue. 10. During the course of hearing, both the counsels submitted that the other issues raised by the CIT with regard to the verification of unsecured loans and capital account of the assessee, the A.O. has not verified the issues at the time of completion of assessment. Therefore, the assessment order passed by the A.O. in re....