TaxTMI 
TaxTMI 
2017 (8) TMI 1188
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....tion towards interest received from HDFC Bank of Rs. 11,413. 3. Subsequently, the CIT-15, Mumbai issued a show cause notice dated 27- 01-2014 and asked the assessee as to why assessment order passed by the AO u/s 143(3) of the Act, dated 29-12-2011 shall not be revised under the provisions of section 263 of the Act. The CIT proposed to revise the assessment order on the ground that the AO has not verified the issue of unsecured loans borrowed by the assessee and interest paid on such loans corresponding with loans and advances given to others and interest charged on such loans. The CIT proposed to revise the assessment order on the issue of purchases made by the assessee from certain parties and corresponding sundry creditors. The CIT observed that the assessee has borrowed unsecured loans and on the same interest has been paid, whereas no interest has been charged on loans and advances given to others. The CIT further observed that the assessee has shown sundry creditors of Rs. 8.89 crores on total purchases of Rs. 16.86 crores which is more than the prevailing trend in the industry which aspect has not been examined by the AO. It was further observed that large number of parties....
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....ssment records it is evident that the AO called for certain details with regard to the loans and advances and sundry creditors. It is a fact that the AO has not carried out necessary enquiries which caused prejudice to the interest of the revenue. The CIT further observed that for the purpose of invoking jurisdiction u/s 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 the reason whether it is an order wherein the AO simply accepted what assessee has stated in his written submission or other particulars furnished by him and failed to make the enquiries which were called for on the facts and circumstances of the case. Applied the above test, it would be clear from the above discussion that the AO has not examined the above issues which were called for, on the facts and circumstances and hence, the impugned assessment order is held as erroneous insofar as it is prejudicial to the interest of the revenue. With these observations and also relying upon the decisio....
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..... Malabar Industrial Co Ltd vs CIT 243 ITR 83 (SC) 3. K.N. Agrawal vs CIT 189 ITR 769 (All) 4. CIT vs Kanda Rice Mills 178 ITR 446 (P&H) CIT vs Deepak Pearl Estate 367 ITR 377 (Raj) 6. CIT vs Nirma Chemical Works P Ltd 309 ITR 67 (Guj) 7. CIT vs Gabriel India Ltd 203 ITR 108 (Bom) 7. On the other hand, the Ld. DR submitted that the CIT has rightly assumed jurisdiction to revise the assessment order u/s 263 of the Act as the assessment order passed by the AO is erroneous insofar as it is prejudicial to the interest of the revenue which is evident from the fact that the assessment order passed by the AO is brief and cryptic which does not show any light on the aspect of verification of two issues pointed out by the CIT. The Ld. DR further submitted that the CIT has rightly pointed out that the assessee has borrowed unsecured loan and paid interest on such loans whereas not charged any interest on loans and advances given to others. The AO not only failed to examine the issue of loans and advances and also failed to apply his mind whether the assessee has diverted interest bearing funds to give loans and advances to others which caused prejudices to the interest of the reve....
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.... has replied on various dates by filing details of loans and advances and also names and addresses of the persons from whom the purchases were made and also list of sundry creditors having a balance of more than Rs. 1 lakh. The AO has satisfied with the details filed by the assessee as he chose to accept the issues. Therefore, we are of the view that once the AO has conducted necessary enquiries on the issues on which the CIT wants further verification, the CIT cannot assume jurisdiction under the guise of insufficient or inadequate enquiries. 10. The assessee has filed a paper book containing various details filed before the AO. The assessee also filed a copy of instruction No.7/2004 issued by CBDT explaining the scope of enquiry in cases selected for scrutiny on the basis of AIR / CID / 26AS mismatch. On perusal of the paper book filed by the assessee, we find that the AO has issued various show cause notices calling for the details of unsecured loan, loans and advances, details of quantitative details of items dealt, confirmation from loan creditors and sundry creditors. The assessee has filed all the details vide letter dated 16-06-2011, 01-12-2011, 05-12-2011 and 09-12-2011 w....
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....ny light on the verification of two issues, but the facts remain that the AO has cast necessary enquiries and the assessee has furnished necessary details which fact is not disputed by the CIT. The CIT's only point is that enquiries conducted by the AO are inadequate. No doubt, in the opinion of the CIT, the AO ought to have conducted further enquiries. But that itself is not a ground for revision of assessment order u/s 263 because once the issues on which the CIT wants further verification was already examined by the AO, then there is no scope for the CIT to conduct further enquiries by holding that the enquiries conducted by the AO are inadequate. 12. Now it is pertinent to discuss the case laws relied upon by the assessee. The assessee has relied upon the decision of Hon'ble Bombay High Court in the case of CIT vs Fine Jewellery (India) Ltd (supra). The Hon'ble Bombay High Court, under similar set of facts has observed that once the AO has called for certain details to which the assessee has responded, that itself would be an indication of application of mind by the AO while passing the assessment order. The fact that the assessment order did not contain any discussion with re....