AI Drafter 
TaxTMI 
TaxTMI 
2016 (9) TMI 998
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.... the Act, dated 29.11.2011 shall not be revised under the provisions of section 263 of the Act. The CIT, proposed to revise the assessment order for the reason that on examination of assessment records, certain omissions and commissions were noticed which rendered 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, in said show cause notice, observed that the A.O. has not verified the issues mentioned in the show cause notice at the time of completion of assessment. The CIT, further, observed that the A.O. has completed assessment without examining issues, such as Excise duty payments, expenditure incurred under the head 'building maintenance', interest and finance charges, pre-paid expenses and others, details of sales commission, advances against purchase of material, bank reconciliation statement, payments made to specified persons u/s 40A(2)(b) of the Act, re-payment of loan creditors, remarks made in annexure to form 3CD, squared up loans, purchase of raw materials and difference in analysis of raw materials consumed. The A.O. without examining above issues, simply completed assessment by ma....
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....d persons and repayment of loans and furnished necessary evidences before the A.O. The A.O. after considering the details furnished by the assessee accepted explanations of the assessee and completed the assessment, therefore, the assessment order passed by the A.O. is not erroneous in so far as it is prejudicial to the interest of the revenue. 5. The CIT, after considering the submissions of the assessee held that the assessment order passed by the A.O. u/s 143(3) of the Act, dated 29.11.2011 is erroneous in so far as it is prejudicial to the interest of the revenue, as the assessing officer has failed to examine the issues pointed out in the show cause notice with reference to books of accounts and relevant details. The CIT, further, observed that the A.O. has completed assessment by making few adhoc disallowance of expenditure without examining the specific points referred to in the show cause notice with regard to payment of excise duty, building maintenance, interest and finance charges, pre-paid expenses, sales commission, payment made to specified persons u/s 40A(2)(b) of the Act and also failed to examine the advances paid against purchase of raw materials. The CIT, furt....
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....dy examined by the A.O. at the time of completion of assessment. The A.R. further submitted that the A.O. has examined all the issues pointed out by the CIT, at the time of assessment by way of specific questionnaire on various occasions. The assessee has submitted all the details before the A.O., on various occasions which was considered by the A.O. before completion of assessment. Therefore, the CIT was not correct in coming to the conclusion that the assessment order passed by the A.O. is erroneous in so far as it is prejudicial to the interest of the revenue. The Ld. A.R. further submitted that the CIT cannot take up revision on the issues which were already examined by the A.O., by holding that the issues were not examined by the A.O. according to the satisfaction of CIT. The assessee has submitted all the information before the A.O. and the A.O. has verified all the issues and applied his mind before completion of assessment, therefore, the CIT cannot come to the conclusion that there is a lack of enquiry on the part of the A.O. in examining the issues pointed out by the CIT. The A.R. further submitted that the assessee has submitted all the issues before the CIT and explaine....
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....d that all the issues pointed out by the CIT have been examined by the A.O. at the time of assessment by way of specific questionnaire on various occasions. The assessee has filed all details before the A.O., on various dates, i.e. on 2.9.2011, 24.10.2011, 25.10.2011, 14.11.2011 & 24.11.2011 and the A.O., after considering the details furnished by the assessee chosen to accept the explanations of the assessee with regard to various issues which cannot be termed erroneous or lack of enquiry by the CIT. The assessee further contended that it has furnished excise returns before the A.O. and also explained the analysis of consumption of raw materials with necessary quantitative details. It is further submitted that it has furnished bank reconciliation statement and also explained the difference between balances shown in the books of accounts to the balance appeared in the bank statement. It is further submitted that the other issues pointed out by the CIT i.e. correctness of building maintenance expenditure, interest and finance charges, pre-paid expenses, sales commission, re-payment of loans, advance against purchase of raw materials and payments made to specified persons u/s 40A(2)(....
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....ower to revise the assessment order u/s 263 of the Act, but to invoke the provisions of section 263 of the Act, the twin conditions must be satisfied, i.e.(1) the order of the A.O. is erroneous (2) further it must be prejudicial to the interest of the revenue. Unless both the conditions are satisfied, the CIT cannot assume jurisdiction u/s 263 of the Act. It is not necessary that every order which is erroneous must be prejudicial to the interest of the revenue or vice-versa. In some cases, the order passed by the A.O. may be erroneous, but it may not be prejudicial to the interest of revenue or vice-versa. Unless the order passed by the A.O.is erroneous and prejudicial to the interest of the revenue, the CIT cannot assume jurisdiction to revise the assessment order, this is because the twin conditions i.e. the order is erroneous and the same is prejudicial to the interest of the revenue are co-exist. In the present case on hand, on perusal of the facts available on record, we find that the A.O. has conducted detailed enquiry and also examined all the issues pointed out by the CIT in this show cause notice. The assessee has explained each and every issue pointed out by the CIT with ....
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....iry on the same issues, because he has a different opinion on the issues. In ITAT considered opinion, the issue of net profit and TDS on rent and hire charges has been examined by the A.O. at the time of assessment, therefore, the CIT was not correct in coming to the conclusion that the A.O. has not examined the issues". 12. The assessee relied upon the decision of Hon'ble High Court of Delhi, in the case of CIT Vs. Sunbeam Auto Ltd. (2011) 332 ITR 167. The Hon'ble High Court of Delhi, under similar circumstances held that once the A.O. has examined a particular issue which is the subject matter of revision u/s 263 of the Act, the CIT cannot assume jurisdiction u/s 263 of the Act by holding that the order passed by the A.O. is lack of enquiry and also the A.O. has not applied his mind before completion of assessment. The relevant portion of the order is reproduced hereunder: "The submission of the counsel for the Revenue was that while passing the assessment order, the AD did not consider the 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 rea....
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....bstance, accounting practice of the assessee is questioned. However, that basis of the order vanishes in thin air when this very accounting practice, followed for number of years, had the approval of the IT authorities. Interestingly, even for future assessment years, the same very accounting practice is accepted. The assessee is a manufacturer of car parts. In the manufacturing process, dyes are fitted in machines by which the car parts are manufactured. These dyes are thus the components of the machines. These dyes need constant replacement, as their life is not more than a year. The assessee had also explained that since these parts are manufactured for the automobile industry, which have to work on complete accuracy at high speed for a longer period, replacement of these parts at short intervals becomes imperative to retain accuracy. Because of these reasons, these tools and dyes have a very short span of life and it could produce maximum one lakh permissible shorts. Thereafter, they have to be replaced. With the replacement of such tools and dyes, which are the components of a machine, no new asset comes into existence, nor is there benefit of enduring nature. It does not even....