TaxTMI 
TaxTMI 
2016 (12) TMI 1072
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....ct on 9.12.2009 determining total income of Rs. 47,51,057/- by making additions of Rs. 5,65,570/- towards disallowance of certain expenditures for failure to produce proper bills & vouchers and also by invoking provisions of section 40(a)(ia) of the Act for non-deduction of tax at source under respective provisions of the Act. 3. The CIT, Rajahmundry issued a show cause notice dated 10.1.2012 and asked to explain why the assessment order passed by the assessing officer u/s 143(3) of the Act, dated 9.12.2009 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 the said show cause notice, observed that the A.O. completed assessment without verifying the issues mentioned in the show cause notice. The CIT, further, observed that the A.O. has completed assessment by making adhoc disallowance of expenditure, however, failed to examine the core issues such as packing....
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....ss of trading in poultry eggs from farmers and the farmers would supply eggs without any packing and the assessee has to purchase packing materials on its own before being sold to customers. The packing material has been purchased for the purpose of packing poultry eggs in various sizes which requires huge packing materials so as to pack the materials. The A.O. after examining the details of packing materials purchased with reference to bills and vouchers has chosen to accept the expenditure claimed by the assessee. 5. In so far as low net profit is concerned, the assessee has furnished details of expenditure debited to profit & loss account and also explained the net profit declared with necessary books of accounts. As regards other issues being confirmation from sundry creditors and deposit from farmers, the A.O. during the course of assessment proceedings has called for confirmation from sundry creditors wherever the creditors balance exceeds Rs. 1 lakh. The assessee has filed confirmation letters from the parties. The A.O. after examining the sundry creditors with reference to the confirmation letters has accepted the explanations of the assessee. Similarly, in respect of depo....
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.... assessee has declared a meager 0.39% net profit on a huge turnover of more than Rs. 100 crores. The A.O. failed to gather required information before completion of assessment. Therefore, the assessment order passed by the A.O. is certainly erroneous in so far as it is prejudicial to the interest of the revenue. 7. The CIT, further, observed that the A.O. not only failed to examine the issues pointed out in the show cause notice, but also failed to apply his mind before completion of assessment. As per the Income Tax Act, the assessing officer is an investigating officer as well as assessing authority and therefore, he is required to verify the details and obtain cogent evidences on record before finalizing the assessment. It is trite law that failure on the part of the A.O. to make enquiry on relevant points would make the assessment order erroneous and prejudicial to the interest of the revenue. It is well established that the assessing officer did not examine the issues properly and completed the assessment without appreciating the facts. With these observations held that the assessment order passed by the A.O. u/s 143(3) of the Act dated 9.12.2009 is erroneous in so far as it ....
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....erials 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 on certain issues before completion of assessment, thereby the assessment order passed by the A.O. u/s 143(3) of the Act dated 9.12.2009 is erroneous in so far as it is prejudicial to the interest of the revenue. The CIT, revised the assessment order for the reason that the A.O. has completed assessment without examining various issues which caused prejudice to the interest of the revenue. The CIT, further, was of the opinion that the A.O. has completed assessment by making adhoc disallowance of certain expenditure without examining the core issues such as huge expenditure debited by the assessee under the head packing materials and also sundry creditors and deposit from farmers without calling for any details from the creditors. The CIT further observed that the assessee has declared a meager net profit of 0.39% on a huge turnover of Rs. 107.34 crores, however, the A.O. without analyzing the net profit declared by the assessee, simply completed assessment by making certain adhoc d....
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....ed necessary details before the A.O. Therefore, we are of the view that 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. 12. The CIT, assumed jurisdiction to revise the assessment order on the ground that there is a lack of enquiry on the part of the A.O. in examining the issues referred to in the show cause notice. The CIT questioned the issues right from verification of packing materials expenditure to examination of advances given to Directors. The assessee has filed a paper book which contains the details furnished before the A.O. at the time of assessment. On perusal of the paper book filed by the assessee, we find that the assessee listed out the issues pointed out by the CIT and the details filed by the assessee before the assessing officer. On further verification of the details filed by the assessee, we find that the assessee has submitted all the details with regard to each and every issue pointed out by the CIT in the show cause notice. The A.O. after satisfied with the explanation furnished by the assessee has completed assessment by making certai....
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....t, once the assessee has filed details called for by the A.O. But, the CIT cannot presume that the enquiry conducted by the A.O. is insufficient and also the A.O. has not applied his mind, unless the CIT proves that the assessment order passed by the A.O. is erroneous. Therefore, we are of the view that the assessment order passed by the A.O. u/s 143(3) of the Act dated 9.12.2009 is not erroneous in so far as it is prejudicial to the interest of the revenue. 14. Now it is pertinent to discuss the case laws relied upon by the assessee. The assessee relied upon the decision of coordinate bench of Visakhapatnam Tribunal, in the case of Nutech Engineers Vs. CIT in ITA No.570/Vizag/2013 dated 10.6.2016. The coordinate bench of this Tribunal under similar circumstances held that once the A.O. examined the issues on which the CIT wants further verification, the CIT cannot assume jurisdiction on the same issues which were already examined by the A.O. at the time of assessment by stating that the A.O. has conducted inadequate enquiry or there is a lack of enquiry. The relevant portion of the order is reproduced hereunder: "CIT(A) assumed jurisdiction to revise the assessment order on the....
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.... deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. The counsel for the assessee is right in his submission that one has to keep in mind the distinction between 'lack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders under s. 263, merely because he has different opinion in the matter. It is only in cases of 'lack of inquiry" that such a course of action would be open. The AD had called for explanation on this very item from the assessee and the assessee had furnished his explanation vide letter dt. 26th Sept., 2002. This fact is even taken note of by the CIT himself in para 3 of his order. This clearly shows that the AD had undertaken the exercise of examining as to whether the expenditure incurred by the assessee in the replacement of dyes and tools is to be treated as revenue expenditure or not. It appears that since the AD was satisfied with the aforesaid explanation, he accepted the same. The CIT in his impugned order even accepts this. Thus, even the CIT conc....