TaxTMI 
TaxTMI 
2017 (1) TMI 1097
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....ce dated 21.08.2013 initiated proceedings u/s. 263 of the Act, the said notice reads as under:- No. BRD/CIT-III/HQ/263/KSL/2013-14 Date: 21.08.2013 To, The Principal Officer, Kothi Steel Ltd., Vill: Chikodra, Tal: Godhra Sir, Sub; Proceedings under section 263 of the Income Tax Act, 1961- Assessment for A.Y, 2009-10- Notice under section 263 (1) of I.T. Act - regarding. Assessment for A.Y, 2009-10 in your case had been completed u/s 143(3} on 23.11.2011 by the Assistant Commissioner of Income Tax, Panchmahal Circle, Godhra. On examination of records, it is found that the assessment order in question was erroneous in so far as it was prejudicial to the interest of revenue for the reasons mentioned below: 1) The Balance Sheet as on 31.3.2009 indicates addition to unsecured loans during the year of Rs. 42,16,500/- , Details filed in the course of-scrutiny indicate the same to be deposits received from Directors, namely Shri Sulernan A Kothi of Rs. 19,64,000/- and Shri Mohammad Firdos A Kothi of Rs. 22,52,500/-. Both these persons not assessed to tax, and the only source of Income by way of agricultural income. Fro....
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.... 2. You are hereby given an opportunity of being heard and to show cause as to why the aforesaid assessment made by the Assessing Officer for the A.Y. 2009-10, be not modified or cancelled under section 263 of the Act with directions to frame it afresh. For this purpose, you may appear before the undersigned in person or through an authorized representative on 27th August,2013 at 11.30 A.M. Yours faithfully [Rajat Bansal] Commissioner of Income-tax-III Baroda 3. We will consider each issue raised by the ld. Commissioner in his aforementioned notice one by one with the queries raised during the assessment proceedings and the relevant reply of the assessee along with the related documentary evidences. 4. (i) The first issue relates to the unsecured loans of Rs. 42,16,500/-. The ld. Commissioner is of the view that the A.O. has not done any verification regarding the genuineness of agricultural income of such huge magnitude shown by the cash creditor. 5. We find that the assessee has shown deposits from Shri Suleman A. Kothi Rs. 19,64,000/- and from Shri Mohammad Firdos A Kothi Rs. 22,52,000/-. We also find that confirmation from these two parties were filed ....
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....ssued on premium to the share holders. The premium amount has been credited to reserve account. 17. Share Application Money : There was an opening balance of Rs. 1,44,49,7057- in share application account at the beginning of the year. During the relevant previous year shares including premium amounting to Rs. 1,07,50000/- were issued to applicants. The balance in share application account thus remained to Rs. 36,99,705/-. No addition to this account was there in the relevant previous year. 10. We find that from exhibit 174 to exhibit 306, the assessee has filed related documentary evidences/copies of ledger account/copies of I.T. returns of the applicants along with their respective copies of Bank statements. 11. Thus, it cannot be said that the assessee did not responded to the specific query raised by the A.O. during the course of the scrutiny assessment proceedings. The ratios laid down by the Hon'ble Bombay High Court in the case of Gabriel India Ltd. (supra) squarely apply to the facts in issue. The summary of exhibit 174 to 306 can be more appreciated by the following chart:- Sr No. Party PAN Evidences submitted P/B Page 1 Slow & Sound Elec....
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....egistration • Acknowledgment of Return • Bank Statement 226-231 10 Echolac Vinimay Pvt. Ltd. AAACE 5809 N • Board Resolution • PAN Card Copy • Certificate of Incorporation • Certificate of Registration • Acknowledgment of Return • Bank Statement 232-237 11 Nilmani Barter Pvt. Ltd. AACCN 4445 R • Board Resolution • PAN Card Copy • Certificate of Incorporation • Acknowledgment of Return • Bank Statement 238-243 12 Bakra Pratisthan Ltd. AABCB 3350 L • Board Resolution • PAN Card Copy • Certificate of Commencement of Business • Acknowledgment of Return • Bank Statement 244 - 248 13 Oleander Manufacturers & Credit Pvt. Ltd. AAACO 3452 D • Board Resolution • PAN Card Copy • Certificate of Incorporation • Certificate of Registration • Acknowledgment of Return • Bank Statement 249-255 14 Achi Finance & Management Consulatancy P....
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....rification regarding the nature of related party transaction was carried out. We find from exhibit 307 and 308 of the paper book, the assessee had filed the copy of ledger account of Kothi Traders during the course of the assessment proceedings. 13.(iv)The fourth issue relates to the expenses debited by the assessee relating to interest on service tax, interest on electricity bill etc. The ld. Commissioner was of the view that the A.O. has not verified the nature of these expenses. A perusal of the assessment order shows that the A.O. has made addition of Rs. 9,04,853/- being disallowances of claim of interest on service tax and electricity duty. This shows the non application of mind by the ld. Commissioner in issuing the notice u/s. 263. Since the A.O. has made the disallowances in respect of the impugned expenses, we do not find any merit in the observations of the ld. Commissioner. 14.(v) The fifth issue relates to the gross loss incurred in manufacturing activity by the company which was explained to be on account of rise in cost of raw material in third quarter of the previous year. The ld. Commissioner is of the view that such explanation required further verification ....
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....recession in steel industry. The prices of the steel were sharply declined from the third quarter of the relevant previous year. The cost of raw material in stock was at very high rate and even the reduced prices of finished goods could not cover the cost of raw material. The average rate of raw material purchased in the month of September -2008 was Rs. 33,600/- and stock at the end of the month was 3337.620 MT. The manufacturing cost comes near about Rs. 7,000/- per MT. In this way the cost of production including material for the September month was Rs. 40,6007- where as drastic fall in the sale price of finished goods made it compulsory for the unit to sale its finished goods at the average rate of Rs. 23,2057- per MT which resulted huge loss in that quarter of the year. There was also a sock of ingot ( Finished Goods ) to the tune of 168.244 M.T. which also added to the total loss of the company. Apart from above during the relevant previous year unit had expanded its production capacity by installing new machinery and due to this depreciation for the relevant previous year was more by Rs. 30,10,4317- in compare with earlier year. In this way the interest on t....
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....x Appeal No.178 of 2016, wherein the Hon'ble jurisdictional High Court was seized with the following substantial question of law:- "Whether the Tribunal is right in law and on facts in upholding the order passed by the CIT under section 263 of the Act on merits and still storing the issue of allowability of deduction under section 54 of the Act to the file of Assessing Officer even though the working of allowability of deduction under section 54F is available in the order under section 263 which is not disputed by the assessee before ITAT." 19. And the Hon'ble High Court, after considering the facts, held as under:- "6. It can thus be seen that though final order of assessment was silent on this aspect, the Assessing Officer had carried out inquiries about the nature of sale of land and about the validity of the assessee's claim of deduction under section 54F of the Act. Learned counsel for the Revenue however submitted that these inquiries were confined to the claim of deduction under section 54F of the Act in the context of fulfilling conditions contained therein and may possibly have no relevance to the question whether the sale of land gave rise....
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....has also filed all these related documentary evidences. 22. At the cost of repetition, we would once again like to reiterate what the Hon'ble Bombay High Court in the case of Gabriel India Ltd. 203 ITR 108 has held "the decision of the ITO cannot be held to be erroneous simply because in his order he did not make an elaborate discussion in that regard...." 23. The two decisions of the Co-ordinate Bench relied upon by the ld. D.R. i.e. M/s. Kushara Real Estate in ITA No. 4247/Del/2009 and M/s Zars Trading Private Ltd. in ITA No. 3284/Del/2009. We find that both the decisions relate to the regular assessment order made u/s. 143(3) of the Act whereas the case in hand relates to the assumption of jurisdiction by the ld. Commissioner u/s. 263 of the Act. Therefore, these two decisions are not relevant for the case in hand. 24. The Hon'ble High Court of Gujarat in CIT vs. Nirma Chemical Works Ltd. 309 ITR 67 has observed that if assessment order were to incorporate the reasons for upholding the claim made by an assessee, the result would be an epitome and not an assessment order. In this case, during the assessment proceedings for both the Assessment Years, the Assessing Officer....
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....er. In any case, as held by Hon'ble jurisdictional High Court, in the case of CIT Vs Amit Corp [(2012) 21 taxmann.64 (Guj)], "When, during the course of framing of the assessment, the Assessing Officer had access to all the records of the assessee, after pursuing such record the Assessing Officer framed the assessment, such assessment could not have been reopened in exercise of revision power under Section 263 of the Act for making further inquiries". That precisely is the situation before us. As regards the decision of the coordinate bench relied upon by the learned Departmental Representative, i.e. in the case of Crompton Greaves Ltd Vs CIT [ITA Nos. 1994/Mum/13 and 2836/Mum/14; order dated 1st February 2016], wherein it is held that the amendments to Section 263, by insertion of Explanation 2, by the Finance Act 2015 are retrospective in effect, we may point out that the Explanation 2 to Section 263, which provides that even when an order is passed without making inquiries and verifications which should have been, in the opinion of revisional authority, will be "deemed to be erroneous in so far as prejudicial to the interest of the revenue", is specifically stated to be effe....