TaxTMI 
TaxTMI 
2017 (4) TMI 393
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....tiny proceedings have been issued. In response to the notices, the authorised representative of the assessee appeared from time to time and furnished books of account and other information called for. The assessment was completed under section 143(3) of the Act, on March 26, 2013 determining the total income at Rs. 13,01,420 by estimating the net profit of 12.5 per cent. on the gross receipts before allowing remuneration and interest on the partner's capital account under section 40(b) of the Act, by following the judgment of K. N. R. Constructions. 3. The Commissioner of Income-tax, Vijayawada issued a show-cause notice dated December 19, 2014 and asked to explain as to why the assessment order passed by the Assessing Officer under section 143(3) of the Act, dated March 26, 2013 shall not be revised under the provisions of section 263 of the Act. The Commissioner of Income-tax proposed to revise the assessment order for the reason that on examination of the assessment records, certain omissions and commissions were noticed which rendered the assessment order erroneous in so far as it is prejudicial to the interests of the Revenue in terms of section 263 of the Act. The Comm....
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....ent. on the gross contract receipts before allowing deduction towards interest on capital and remuneration to the partners. The assessee further submitted that the Assessing Officer has issued a detailed show-cause notice calling for each and every details of project executed and it has furnished the books of account and other details called for by the Assessing Officer at the time of assessment. The Assessing Officer after considering the books of account and other details came to the conclusion that the true profit from the business cannot be computed from the books of account maintained by the assessee and hence, ignored books of account and estimated the net profit of 12.5 per cent. on the gross contract receipts subject to further deductions towards remuneration and interest on capital to the partners under section 40(b) of the Act. 5. It was further submitted that the estimation of net profit from the business in one of the accepted methods of assessment of income from business and the Assessing Officer after considering the facts and circumstances of the case had taken conscious decision and acted in accordance with law and made the assessment, therefore the same could no....
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.... various persons and the applicability of the provisions of section 40A(3) of the Act. The Commissioner of Income-tax further observed that the Assessing Officer 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, which is evident from the fact that the Assessing Officer has misconstrued the nature of business carried out by the assessee. The assessee is into the business of development of properties and undertaking the construction of apartments, flats, etc., whereas the Assessing Officer has observed that the assessee is into the business of civil constructions thereby applied the ratio laid down by the Income-tax Appellate Tribunal in K. N. R. Constructions to estimate the net profit from the business. 7. The Commissioner of Income-tax further observed that for the purpose of invoking the jurisdiction under section 263 of the Act, it is settled law that the revisional authority should apply the test as to whether such an order should be considered as erroneous not only for the reason that it contains some apparent error of reasoning of law or of the fact on the face of it, but also for ....
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....e. The authorised representative further submitted that the rejection of books of account and the estimation of net profit is one of the permissible methods of assessment of income from business. The Assessing Officer had taken one of the permissible methods to determine the total income of the assessee and hence the view taken by the Assessing Officer cannot be branded as erroneous by the Commissioner, simply because the net profit has been estimated by rejecting the books of account. The authorised representative further submitted that even though the Assessing Officer has not rejected the books of account, once resorted to the estimation of net profit it is presumed that the books of account are rejected ; therefore the Commissioner of Income-tax was incorrect in stating that the Assessing Officer has not rejected the books of account. Since, the books of account are rejected and the income is estimated, the Commissioner of Income-tax erred in referring to the same books of account to direct the Assessing Officer to cause further enquiries in connection with the issues which are already a subject matter of assessment proceedings. 9. The learned Departmental representative on ....
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....of K. N. R. Constructions, which was rendered under different set of facts. The Commissioner of Income-tax further observed that the Assessing Officer failed to examine various issues such as low net profit admitted by the assessee, deductions towards interest on capital and remuneration to the partners under section 40(b) of the Act, recognition of work-in-progress, loan from the partners, advance to various persons and huge withdrawal of self-cheque and the applicability of the provisions of section 40A(3) of the Act. According to the Commissioner of Income-tax, the Assessing Officer not only failed to examine the issues, but also failed to apply his mind before completion of assessment, which caused prejudice to the interests of the Revenue. 11. It is the contention of the assessee that the Assessing Officer has examined the issues pointed out by the Commissioner of Income-tax, in the show-cause notice before completion of assessment, which is evident from the fact that he had issued a notice, wherein he had called for each and every details of issues pointed out by the Commissioner of Income-tax. The Assessing Officer issued a show-cause notice dated November 7, 2012. The as....
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....tructions and estimated the net profit of 12.5 per cent. on the gross contract receipts. We further observed that the estimation of the net profit is one of the permissible methods of assessment of income from business. The Assessing Officer had taken a conscious decision of estimating the net profit from business after considering the nature and complexity of the books of account maintained by the assessee. Once the Assessing Officer had taken a conscious decision and acted in accordance with law and made the assessment, the same could not be branded as erroneous by the Commissioner, simply because according to him, the Assessing Officer should have made further enquiries with regard to the issues pointed out in the show-cause notice, without pointing out specific instances of erroneous decision taken by the Assessing Officer while completing the assessment. 13. The provisions of section 263 of the Act did not visualise the case of substantial judgment of the Commissioner for that of the Income-tax Officer, who passed the order, unless the decision taken by the Assessing Officer was held to be erroneous. The Assessing Officer, while making the assessment examined the account, m....
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.... higher judiciary, wherein under a similar set of facts, the net profit from the business has been estimated at 12.5 per cent. on the gross receipts. 15. In the present case, the Assessing Officer has ignored the books of account and resorted to the estimation of the net profit. The moment, the Assessing Officer has estimated the net profit, even though he had not specifically mentioned that the books of account are rejected, it is presumed that the Assessing Officer has rejected the books of account before estimating the net profit from the business. Once, the books of account are rejected and the profit is estimated, then the Commissioner of Income-tax was erred in referring to the same books of account to direct the Assessing Officer to conduct further enquiries on a few issues is not justified. Therefore, we are of the view that once the issues which were a subject matter of revision under section 263 of the Act, have been examined by the Assessing Officer at the time of assessment, then the Commissioner of Income-tax has no jurisdiction to entertain fresh enquiry on the same issues because he had a different opinion on the issues. In our considered view, the issues pointed ....
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.... Without pointing out any defects in the assessment order, simply directing the Assessing Officer to cause further enquiries on the presumption that the enquiries conducted by the Assessing Officer are insufficient is not permissible under the provisions of section 263 of the Act. Therefore, we are of the view that the assessment order passed by the Assessing Officer under section 143(3) of the Act dated March 26, 2013 is not erroneous in so far as it is prejudicial to the interests of the Revenue. 17. Now, it is pertinent to discuss the case law relied upon by the assessee. The assessee relied upon the decision of co-ordinate Bench of the Visakhapatnam Tribunal, in the case of Nu-Tech Engineers v. CIT (I. T. A. No. 570/Vizag/2013 dated June 10, 2016). The co-ordinate Bench of this Tribunal, under similar circumstances held that once the Assessing Officer examined the issues on which the Commissioner of Income-tax wants further verification, the Commissioner of Income-tax cannot assume the jurisdiction on the same issues which was already examined by the Assessing Officer at the time of assessment by stating that the Assessing Officer has conducted inadequate enquiry or there is....