TaxTMI 
TaxTMI 
TaxTMI 
2018 (7) TMI 1485
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....uring survey). For AY 2012-13, the return disclosed income of Rs. 25,36,38,801/-. The returns were selected for scrutiny and notice issued to the assessee. The Assessing Officer (AO) added some amounts to the declared income of the assessee on the basis of disallowance of 10% non-business expenditure; likewise, 10% of the amount claimed towards vehicle expenditure was disallowed. On 01.10.2015, the Commissioner (CIT) issued a Show Cause Notice under Section 263 of the Income Tax Act, 1961 [hereafter "the Act"] to the assessee observing that the AO failed to make any enquiry as regards, inter alia, the, incurring of trading loss amounting to Rs. 38,62,38,61/- amongst other issues. 3. The revision orders under Section 263 of the Act enhanced the assessee's income, holding that the AO's original order was erroneous and prejudicial to the interest of Revenue; reliance was placed on Commissioner of Income Tax v Gotzee India Limited, 361 ITR 505 (HC); Commissioner of Income Tax v Nagesh Knitwears Pvt. Ltd. 345 ITR 135 and Gee Yee Enterprises v Additional Commissioner of Income Tax 99 ITR 375 which held that the AO's role also involves investigation and that an order is erroneous when su....
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....Section 14A of the Act and the AO's failure to investigate into the matter was also stated in the CIT's order. On account of all these reasons, the CIT held that the assessment order was erroneous and prejudicial to the Revenue's interest. 4. Similar findings were rendered for AY 2012-13 in regard to the issue of trading loss. As regards purchases (it was observed that only 37 out of 114 parties had responded to the notices, and therefore, the genuineness of the purchases could not be verified). It was held that the assessee has been in the business for years, and it is highly unlikely that persons who have made sales in crores of rupees would not respond to notices issued by the department. 5. On further appeal, the Income Tax Appellate Tribunal (ITAT) set aside the orders of the CIT; it was held that the assessee had declared undisclosed income of Rs. 21.58 crores in his return of income which included Rs. 18.25 crores declared during survey proceedings on account of excess stock (for AY 2011-12). As regard the issue of loss, to the tune of Rs. 38 crores, the ITAT held that the assessee had placed on record its audited profit & loss account, balance sheet, statement of affairs ....
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....awing inferences and further investigation does not arise. Merely conducting of an enquiry on Sahdev Gupta by DRI, does not confer powers upon CIT to act under Section 263. It was held that the CIT proceeded on the basis of surmises, and, therefore, it is not a case of lack of enquiry. 7. The Revenue argues that the ITAT fell into error in quashing the CIT's order under Section 263 of the Act. It was urged that the CIT not only recorded satisfaction but also examined the materials placed before him thoroughly. Learned counsel highlighted that the assessee's statement during the survey proceedings disclosed that he dealt with diamonds for which there was no separate trading account or profit & loss account as was urged during the course of proceedings before the ITAT. Therefore, the AO ought to have conducted enquiry to ascertain the expenditure actually incurred and, therefore, ought to have sought clarifications on the trading loss incurred to the tune of Rs. 38.62 crores. Consequently, the CIT's order that the assessment order was erroneous in law and prejudicial to the interests of the Revenue was justified. Reliance was also placed upon the judgment of the Punjab and Haryana H....
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....14A was concerned, the decision in CIT v. Aman Khera 387 ITR 33 squarely applied. 9. It was argued that the invocation of powers under Section 263 had to be for cogent reasons and on valid grounds. Given that the AO had conducted a thorough investigation into all the circumstances, the fact that CIT(A)'s disagreement was based on surmises rather than on an appropriate appreciation of the record. It was submitted that not every error, real or cogent that can result in a lawful revision, learned counsel submitted that it is only such errors that are prejudicial to the interests of Revenue that can authorize invocation of CIT's powers under Section 263, learned counsel relied upon the judgment of the Supreme Court in Malabar Industrial Company Ltd. v. CIT 2000 (243) ITR. Analysis and Conclusions 10. Malabar Industrial Company (supra) is a seminal authority upon the question of the circumstances that can trigger a justified recourse to Section 263. The Supreme Court pertinently observed as follows: "The Commissioner noted that the ITO passed the order of nil assessment without application of mind. Indeed, the High Court recorded the finding that the ITO failed to apply his mind to ....
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....uineness of the transactions because on the face of it these appears to be non-genuine particularly these persons are riot showing very high return of income. 16. It may be noted that the assessee has filed bank statement of Sh. Jai Dev Gupta who is having transactions with the assessee (copy enclosed). The perusal of the bank statement shows that there are certain credits from certain entities like Mangal Traders, Yogmaya Traders. From the newspaper reports, it is learnt that these concerns i.e. Mangal Traders and Yogmaya Traders are also involved in bogus kind of exports. The assessee has received loans from Sh. Jai Dev Gupta. Similarly there are various credit in their bank accounts of persons like Kapil Dev, Maya Gupta. It appears that these persons are receiving funds from some non-genuine persons and in tum give loans to the assessee. Therefore genuineness of these transactions need to be examined. The AO at the time of assessment did not make these inquiries. The assessee has not discharge his onus to prove the genuineness of these transaction. Particularly now the other authorities are investigating these cases. This also becomes part of record as per the definition of ....
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.... rejecting any argument. In this case, the mere fact that out of 80 debtors, particulars of 22 were furnished and that PAN particulars of most of them were not provided (for AY, cannot lead to the conclusion that the doubting of genuineness of those transactions was unwarranted, under Section 263). 15. For AY 2012-13, the CIT, pertinently observed - with regard to expenditure claimed towards purchases, as follows: "It was informed to the assessee that a number of parties have not responded to the notices. The assessee has admitted that only 37 parties out of 114 have responded to the notices. Other parties out of 114 have not even responded to the notices. Therefore the genuineness of these documents i.e. purchases could not be verified. At least the matter needed further examination." Again, the ITAT did not say how this observation was unwarranted. On the other hand, the AO's order made originally is silent about this aspect altogether. 16. The first issue is with respect to interest; on this the Revenue relied on Abhishek Industries (supra), which held as follows: "If in the process of examination of genuineness of such a deduction, it transpires that the assessee had advanc....