TaxTMI 
TaxTMI 
2017 (1) TMI 1097
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..... 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. From the documents filed in support of agricultural income of Shri Sulernan Kothi, it is seen that there....
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....g 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 during the course of the assessment proceedings and the same are exhibited at pages 93 and 140 of the paper book. We also find that from pages 94 to....
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.... 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 Electronics Pvt. Ltd. AADCS 8092 A * Board Resolution * PAN Card Copy * Certificate of Incorporation * Certificate of Registration Acknowledgment of Return * Bank Statement 177-182....
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....rtificate of Registration * Acknowledgment of Return * Bank Statement 249-255 14 Achi Finance & Management Consulatancy Pvt. Ltd. AACCA9158Q * Board Resolution * PAN Card Copy * Certificate of Incorporation * Certificate of Registration * Acknowledgment of Return * Bank Statement 256-261 15 S. K. Stock Dealers Pvt. Ltd. AADCS 7365 Q * Board Resolution * PAN Card Copy * Certificate of Incorporation * Certificate of Registration * Acknowledgment of Return * Bank Statement 262-269 16 Radiant Merchandise Pvt. Ltd. AABCR 3792 C * Board Resolution * PAN Card Copy * Certificate of Incorporation * Certificate of Registration * Acknowledgment of Return * Bank Statement 270-275 17 Galore Suppliers Pvt. Ltd. AAACG 9662 P * Board Resolution * PAN Card Copy * Certificate of Incorporation * Certificate of Registration * Acknowledgment of Return * Bank Statement 276-281 18 MSV Fiscal Services Pvt. Ltd. AACCM 1628B * Board Resolution * PAN Card Copy * Certificate of Incorporation * Certificate of Registration * Acknowledgment of Return * Bank Statement 282-287 19 Shubh Suppliers Pvt. Ltd. AAECS8192C * Board R....
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....- 2,08,73,374/- 2.72 2008-09- 1,03,80,18,802/- -4,11,55,664/- -- As can be seen from the above figures the GP has drastically gone down in negative form. The main reason for the drastic fall was the overall international recession in steel industry. The prices of the steel were sharply declined from the third quarter of the relevant previous year. The stock of raw material 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 2395.105 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. 40,500/-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. 23,205/- per MT which resulted huge loss in that quarter of the year. Please refer annexure - XXVII page no. 152 to 157 for the production statement of Sep.2008 and October-2008 which shows the groom position of trade of the company in that pa....
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....September-2008 and Sales bills of October-2008 clearly show the reasons of huge loss incurred by the company. The drastic fall in the prices of Ingots put company in the position of huge losses. Please also refer annexure - V page no. 155 to 266 for the complete raw material purchases account for the relevant previous year. Hope above details would be sufficient for finalization of my assessment. Please do the needful. 17. Having discussed the factual matrix qua the assessment proceedings, let us now see the judicial decisions on the point under consideration. 18. It is a settled position of law that powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, i.e., the assessment order should be erroneous and prejudicial to the interest of the Revenue. By 'erroneous' is meant contrary to law. Thus, this power cannot be exercised unless the Commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. Thus, where there are two possible views and the Assessing Officer has taken one of the possible views, no action to exercise powers of revision can arise, nor ....
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....derations of such claim. 7. No question of law arises. Tax Appeals are dismissed." 20. The Hon'ble Supreme Court in Malabar Industrial Co. Ltd., 243 ITR 83, has laid down the following ratio:- "A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent-if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue- recourse cannot be had to section 263(1) of the Act. The provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requir....
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.... Assessing Officer to disclose his satisfaction in the Assessment Order passed thereon. Thus, this objection on the part of the Revenue cannot be accepted. 25. Considering the facts in totality, in the light of the judicial decisions discussed hereinabove, in our understanding of the law, the Assessment Order is neither erroneous nor prejudicial to the interest of the revenue. We, therefore, set aside the impugned order passed by the ld. Commissioner u/s. 263 and restore that of the Assessing Officer passed u/s. 143(3) of the Act. 26. Before parting, the ld. D.R. vide a letter dated 02.01.2017 brought to the notice of the Bench that he has made an application for reference to Special Bench in ITA No. 1517/Ahd/2015 vide an application dated 09.09.2016 and in ITA No. 3419/Ahd/2014 vide an application dated 04.11.2016 stating that there are contrasting views of the Co-ordinate Benches of the Tribunal insofar as the applicability of the explanation added to Section 263 by Finance Act of 2015. 27. The Explanation 2 was inserted by Finance Act, 2015 with effect from 01.06.2015. This issue has been earlier considered by the Tribunal Ahmedabad Bench in the case of Jayant Murthy in ITA N....