TaxTMI 
TaxTMI 
2017 (8) TMI 174
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.... the assessment order did not verify all the creditors amounting to Rs. 4,77,66,341/- shown outstanding at the end of the F.Y as against the total sales of Rs. 5,29,09,042/-. Similarly, in the capital account of assessee in the books of M/s Balaji Enterprises, an amount of Rs. 4,50,000/- has been shown in the debit and credit side of M/s Kundan Tent House [another proprietary concern of the assessee] while in the capital account of the assessee in the books of account of M/s Kundan Tent House, this amount did not figure. This shows that the books of accounts are not maintained properly. The ld. CIT, therefore, issued a show cause notice dated 20.12.2012 asking the assessee to explain as to why the order passed u/s 143(3) of the Act should not be revised u/s 263 of the Act. 3. The assessee, in response to the said notice, replied that it deals in sale and purchase of iron scrap and the goods were purchased on receipt of orders from the debtors. During the year under consideration, the assessee received bulk order for supply of iron scrap more than Rs. Two crores in comparison to turnover of last F.Y. from Himgiri Ispat Pvt. Ltd, Uttaranchal. It was further submitted that the asse....
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....ed for by the A.O, proper verification has not been done. He gave two instances, such as M/s Prayan Enterprises, Najibababd and M/s Aggarwal Brothers, Najibabad. Further, the assessee has shown cash payment below Rs. 20,000/- to the above parties totaling to Rs. 25,10,790/- and Rs. 6,57,250/- respectively and violation of provisions of section 40A(3) of the Act has not been verified by the A.O. In view of the above, the ld. CIT(A) held that the A.O has failed to examine/investigate every aspect of the case during the course of assessment proceedings. Therefore, the assessment order passed by the A.O dated 05.05.2011 for the impugned A.Y is prima facie erroneous and prejudicial to the interest of the Revenue. Therefore, cancelling the order passed by the A.O u/s 263 of the Act, he directed him to examine all the above issues thoroughly and pass the assessment de novo. 7. Aggrieved with such order of the ld. CIT, the assessee is in appeal before us with the following grounds: "1. That having regard to facts & circumstances of the case, Ld. CIT has erred in law and on facts in passing the impugned order u/s 263 which is barred by limitation, illegal, without jurisdiction a....
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....1,12,17,19,20 and 21, total amount of which comes to Rs. 3.09 crores which is more than 60% of the total creditors. Referring to copy of the tax audit report, which is placed at pages 1A to 20 of the assessee's paper book, the ld. AR drew the attention of the Bench to clause 8A which gives the nature of the business carried on by the assessee and 9(b) which gives the details of accounts maintained. Referring to page 9 of the assessee's paper book, he drew the attention of the Bench to the g.p. ratio and n.p. ratio and stock turnover ratio. Referring to page 14 of the paper book, he drew the attention of the Bench to the balance sheet which gives current liability as per Schedule D at Rs. 4.81 crores. Referring to page 15 of the paper book, he drew the attention of the Bench to the profit and loss account which shows sales at Rs. 5.29 crores. Referring to page 17 of the assessee's paper book, he drew the attention of the bench to the details of current liabilities under which sundry creditors have been shown at Rs. 47,766,341.12. Referring to page 18 of the assessee's paper book, he drew the attention of the Bench to the list of sundry creditors and advances which shows details of R....
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....sion has held that under the provisions of section 263 of the Act, opportunity of hearing must be given to the assessee. Where the notice referred to four issues and the order on revision referred to 9 issues, the principles of natural justice was violated. Accordingly, order of revision was held as not valid. He submitted that there was no such mention in the notice on the issue of section 40A(3) violation whereas in the order of the ld. CIT this issue has been raised as one of the grounds for invoking provisions of section 263 of the Act. Therefore, in the absence of any opportunity of being heard to the assessee, principles of natural justice has been violated for which the revision order passed by the ld. CIT has to be held as invalid. He also referred to various other decisions for the above proposition. 10. So far as the issue relating to no proper enquiry is concerned, he submitted that only absence of enquiry can empower jurisdiction to the CIT to invoke revisional power u/s 263 of the Act and in case of improper enquiry, the ld. CIT has no power to invoke jurisdiction u/s 263 of the Act. 11. Referring to the following decisions, he submitted that merely because there....
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....ot conducted the enquiry in a manner whereby enough material is placed on record to reach the satisfaction which a rational person being informed of nuances of tax laws would reach after due appreciation of such material. Referring to the reply given by the assessee to the notice issued u/s 263 of the Act, he submitted that this is a general reply given by the assessee and after considering the relevant material on record and after giving due opportunity of being heard to the assessee, the ld. CIT came to the logical conclusion that the issue of sundry creditors was not properly examined by the A.O. He also referred to the provisions of section 114 of the Indian Evidence Act, 1872 and the Explanation 2 to section 263 as inserted by the Finance Act, 2015 w.e.f 1st June, 2015. Referring to the decision of the Mumbai Bench of the Tribunal in the case of M/s Crompton Greaves Ltd Vs. CIT reported in (2016)-TIOL-816-ITAT-MUM he submitted that the Tribunal has held that the Explanation 2 being clarificatory in nature, is applicable restrospectively. He accordingly submitted that the order of the ld. CIT be upheld and the appeal of the assessee should be dismissed. He also relied on the fo....
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....o considered the various decisions relied upon by both the sides. We find the A.O, in the instant case has passed an order u/s 143(3) dated 05.05.2011 determining the total income at Rs. 4,87,390/-. We find the ld. CIT observing that the A.O has not verified the genuineness of the sundry creditors and there is discrepancy in the capital account of the assessee in the books of M/s Shree Balaji Enterprises, issued notice u/s 263 of the Act asking the assessee to explain as to why the order passed u/s 143(3) of the Act should not be held as erroneous and prejudicial to the interests of the Revenue. We find the assessee filed various details substantiating that it has filed the various details of sundry creditors and the A.O after examining the same, has accepted such sundry creditors as genuine. Similarly, the assessee also filed details of capital account of assessee in the books of M/s Shree Balaji Enterprises and M/s Kundan Tent House. The order of the ld. CIT is silent on this issue which otherwise implies that he has accepted the submission of the assessee. Therefore, we are not concerned with this issue regarding discrepancy in the capital account of the assessee in the books of....
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.... these circumstances, it is to be seen as to whether the order passed u/s 143(3) of the Act by the A.O is erroneous and prejudicial to the interests of the Revenue or not. Different courts have held that there is a difference between no enquiry and inadequate enquiry. The ld. CIT can assume jurisdiction u/s 263 of the Act in a case when there is absolutely no enquiry on any issue. However, when there is some enquiry and the ld. CIT does not agree with the extent of enquiry conducted by the A.O as sufficient, he cannot invoke jurisdiction u/s 263 of the Act. 20. The Hon'ble Delhi High Court in the case of CIT Vs. Hindustan Marketing and Advertising Co. reported at 341 ITR 180 has held as under [at page 196]: "From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately This section does not visualise a case of substitution of the judgment of the Commissioner for that of the In....
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.... into account the assessee's submissions and documents furnished by him and no material whatsoever has been brought on record by the Commissioner which showed that there was any discrepancy or falsity in evidence furnished by the assessee, the order of the Assessing Officer cannot be set aside for making deep inquiry only on the presumption and assumption that something new may come out. For making a valid order under section 263 it is essential that the Commissioner has to record an express finding to the effect that the order passed by the Assessing Officer is erroneous which has caused loss to the Revenue. Furthermore, where acting in accordance with law the Assessing Officer frames certain assessment order, the same cannot be branded as erroneous simply because, according to the Commissioner, the order should be written more elaborately. All these principles are highlighted in the judgments noted hereinafter." 22. The various other decisions relied on by the ld. Counsel of the assessee also support the above view. So far as the issue relating to violation of provisions of section 40A(3) of the Act is concerned, it is an admitted fact that notice u/s 263 of the A....