TaxTMI 
TaxTMI 
2014 (2) TMI 1291
X X X X Extracts X X X X
X X X X Extracts X X X X
....terest has been charged on farmer debtors of Rs. 16,40,083/- and assessee is paying interest to creditors. (b) No interest has been charged on the advance of Rs. 11.00 Lac given to Sh. Namokar as advance for property purchased. (c) No interest has been charged on trade debtors of Rs. 2,52,000/- of M/s Falodi Earth Movers. (d) No details obtained regarding Rs. 40,800/- of sales tax demand. (e) No deduction regarding house hold expenses and not made any addition in this account. (f) The assessee has claimed shortage in dhania @ 3.75% which is on higher side and is not genuine in this line of business. (g) Weight of Bardana has not been accounted for in the weight of goods purchased by the assessee. Which is contrary to the facts and such a finding being perverse, the impugned action is bad in law without jurisdiction and being void ab initio, the impugned order u/s 263 of the Act kindly be quashed. 3. That the Ld. CIT is erred in law as well as on the facts of the case in setting aside the assessment to be made afresh with the direction to re-examine the issue in the light of his observation. The same is being purely cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al 'status but the AO has not discussed this issue nor was made any addition under this head. (vi) The assessee has claimed shortage in dhania @ 3.75% (approx) which is on higher side and is not genuine in this line of business but the Assessing Officer did not examine this issue properly. (vii) As per details copies of trading accounts and details of, dhania & sarson account on monthly basis in terms of quantity and amount filed by the assessee, it is found that bardana in number 44029 has been consumed by the assessee in packing of the goods purchased, sold & remained in closing stock. But as per the quantitative month wise details, it appears that the weight of bardana has not been accounted for in the weight of goods purchased by the assessee during the year which resulted either the weight equal to bardana i.e. 44029 kg. which includes all the items of agriculture produce dealt in by the assessee during the year were sold out of books or remained with the assessee as closing stock for which the value has not been shown by the assessee. This issue has not been examined by the AO nor any such information is available on record from assessee's side". ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e this issue properly." SUBMISSION (i) "As per balance sheet, you have shown farmer debtors of Rs. 1640083/- on which no interest has been charged from the farmer debtors whereas you were paying heavy interest to the creditors. The AO has not examined this issue." The business of assessee is trading in food grain & commission agent. The Commission Agent means Kachcha Adatiya" getting Adat commission from farmers on goods sold by them at Krishi Upaj Mandi Samiti Yard. The rite of Adat commission is fixed by Krishi upaj Mandi samiti. During the year under consideration assessee has earned Adat commission of Rs. 1589512/-, which is credited in Trading A/c. In general system of Adat business, Kachcha Adatiya gives Advance to farmers at cropping time for purchasing seeds, diesel, khad fertilizers etc. The farmer who is getting advance from Kachcha Adatiya sales his crop goods in the Adat of Kachcha Adatiya. Kachcha Adatiya gets Adat commission on crop sold by farmer on the sale consideration. The Kachcha Adatiya adjusts his old dues (advance taken by farmer on crop) and makes balance payment to farmer. It is the regular process of business to lend adv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....een paid by assessee in the subsequent year i.e. in next financial year. The question regarding non charging of interest, it is submitted that if anyone purchases property and seller allows the period for final payment & possession, then how interest is to be charged on advance amount paid by buyer? In fact, it is mercy of seller that he does not charge the interest on remaining payment from buyer 'for giving the period for making final payment. Generally, neither interest is to be paid by buyer nor recovered by seller on balance payment. This is also the system of such transactions. Assessee has advanced Rs. 11.00 lacs to one Shri Namokar Mal Jain, the capital balance of assessee is Rs. 21.31 Lacs as on 31/03/2010 and the amount paid Rs. 11.00 lac is covered from capital balance of assessee. There is no interest bearing funds have been used in advance given for property. (iii) "In the debtors list, you have shown M/s Falodi Earth Movers as trade debtors and no interest has been charged on the amount of Rs. 252000/-. The said firm appears to be your sister concern. The AO has not examined the debtors nor has taken any documentary evidence or ledger ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on. He has withdrawal Rs. 58138/- and her wife Smt. Rajni Gupta is also assessed to tax at ward 1(1), Kota and her PAN no. is AIKPG3937C and she has also withdrawn Rs. 48000/- for domestic expenses i.e. total withdrawal for the domestic purpose is Rs. 106138/-. The assessee is living in the house of his father. According to the living standard and size of family, withdrawals are reasonable and sufficient. The photocopy copy of the acknowledgement of the I.T. Return and photocopy of the statement of affairs and capital A/c of wife Smt. Rajni Gupta is enclosed. "(Page 13 to 14) On the perusal of query raised "by AO and reply filed by assessee on particular query of H/H expenses, your goodself would find that proper enquiry has been made by AO on this issue. This is not a case of lack of enquiry or no enquiry from AO side. The assessee has replied for household exp. with complete documentary evidence which is lying in the assessment records. Reference has been made to the decision of Hon'ble Allahabad High Court in the case of Anil Bulk Carriers (P) Ltd. vs. CIT (2005) 194 CTR (All.) 226 : (2OO5) 276 ITR 625 (All). The quantum of amount of H/H expenses i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f assessment and which has been narrated in the assessment order also. The range of shortage is between 1 to 5% and in the case of assessee, it is within the range. The reliance is placed on decision of Rajasthan High Court ,In the case of Commissioner of Wealth tax vs. Girdhari lal 258 ITR 331 It is held:- "When the Assessing officer after going through the material on record and after considering the explanation of the assessee, made some additions and rejected the books of accounts, it could not be said that he had not applied his mind. It is not necessary that the every assessee in the line of business should have the same rate of profit." When the assessing officer had considered all the relevant material on record, it was basically a question of facts and it could not be interfered with unless the finding of the Tribunal was found perverse. Considering the material on record, it could not be said that finding of the Tribunal was perverse. Therefore, the Tribunal was correct in cancelling the order under section 263." It is submitted that department can assume jurisdiction under section 263 of Income tax Act if twin conditions of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssary. It is only on fulfillment of these twin conditions that the CIT may pass an order exercising his power of revision. Minutely examined, the provisions of the section envisage that the CIT may call for the records and if he prima facie considers that any order passed therein by the AO is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. The twin requirements of the section are manifestly for a purpose. Merely because the CIT considers on examination of the record that the order has been erroneously passed so as to prejudice the interest of the Revenue will not suffice. The assessee must be called, his explanation sought for and examined by the CIT and thereafter if the CIT still feels that the order is erroneous and prejudicial to the interest of the Revenue, the CIT may pass revisional orders. If, on the other hand, the CIT is satisfied, after hearing the assessee, that the orders are not erroneous and prejudicial to the interest of the Revenue, he may ch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t had not been able to point out defects conclusively in the material for arriving at a conclusion that particular income had escaped assessment on account of non-application of mind by the AO. The Tribunal was right and the order of revision was not valid." The reliance is also placed in the order of the Hon'ble ITAT Agra Bench in the case of Rishi Kumar Gupta v. Commissioner of Income Tax [2004} 90 TTJ (Agra) 645 has held that CIT was not justified in setting aside the assessment on the ground that AO had failed to make "Proper enquiry"'. It is for the AO and not for the CIT to decide upto what extent enquiry is to be made. It wilt be useful to reproduce the held portion of the case: "that when the AO proceeded to make the assessment order, he was fully aware of those documents, which were found during the course of survey and for his satisfaction he required the assessee to produce books of account, bills, vouchers, details of the students and other explanations. It is not a case of no enquiry, but a case of no proper enquiry. According to CIT's notice as well as order under s. 263, the AO has conducted enquiries, but he failed to conduct proper enquiri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....applicable to instant case and Commissioner was justified in setting aside assessment order - Held, no Looking to the facts and circumstances mentioned above it is prayed that proceeding initiated under section 263 of IT Act may very kindly be dropped." Therefore, please consider above facts in revision of assessment order u/s 263 of I.T. Act and please the proceedings of notice and obliged." 5. The learned CIT after considering the submissions of the assessee, observed as under:- "5. The explanation offered by the assessee now before me is not found to be tenable on facts and law. Examinations of the assessment records reveal that the AO completed the assessment in a routine manner. I find that it is not only the lack of verification but also mistaken view of law which has made the order erroneous and prejudicial to the interest of revenue." Ld. CIT set aside the assessment with a direction to the Assessing Officer to frame it denovo after making proper enquiry and verification of the books of accounts and other records/documents. Now the assessee is in appeal. 6. Learned counsel for the assessee submitted that in the present case, assessment wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble Trust 164 ITR 129 (Raj) 7. In his rival submissions, learned D.R. strongly supported the order passed by the Ld. CIT and further submitted that the Assessing Officer did not make proper enquiries while passing the assessment order. Therefore, the assessment order was not only erroneous but also prejudicial to the interest of the revenue. 8. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it is abundantly clear from para 2 of the impugned order that the ITO, Ward-1(2), Kota vide letter No. 14 dated 01/04/2011 proposed action under section 263 of the Act and it was not the Ld. CIT, who himself called record and examined the same for any proceeding under section 263 of the Act. Therefore, it can be said that the Ld. CIT had not applied his mind but the matter was referred by the Assessing Officer for initiating the proceeding under section 263 of the Act. In the present case, from para 3 of the impugned order, it is noticed that the notice dated 11/01/2013 under section 263 of the Act was issued only on receipt of the proposal under section 263 of the Act from the ITO, Ward-1(2), Kota an....