TaxTMI 
TaxTMI 
2018 (7) TMI 1615
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....ucted on 21.09.2011 and during the course of survey several documents were impounded which included undisclosed sales of Rs. 38,25,90,618/- for the FY 2011-12. It was further noticed that, during the assessment proceedings, the assessee suo motto had disclosed Rs. 38,75,90,617/- as its undisclosed sales and after applying GP rate of 2.5%, the assessee increased its income by Rs. 96,90,000/- while filing the Return of Income. Subsequently, while computing the assessed income the assessing officer applied the method of GP @3.5% to the undisclosed sale of Rs. 38,75,90,617/- and increased the profit by Rs. 1,37,40,672/-. As the assessee itself added back Rs. 96,90,000/-, the final addition stood up to Rs. 40,50,672/ -. Further, the ld. Pr. CIT observed from the documents submitted by the assessee that the entire sale and purchase, which were not recorded in the regular books of accounts, were submitted in course of assessment proceedings. The assessee has furnished the undisclosed purchases to the tune of Rs. 6,03,98,611/-. According to ld. Pr.CIT when the assessee itself had furnished all the related documents regarding undisclosed sales and purchase, the difference between the und....
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....ime of filing Return of Income at Rs. 96,90,000/-. I have carefully considered the submission of the assessee and have also noted the gross profit ratio shown by the assessee for last three years. I consider it fit to apply GP rate of 3.5% to the undisclosed sales of Rs. 38,75,90,618/- and add it to the income of the assessee. I further estimate a turnover of Rs. 50,00,000/* on adhoc basis to plug any leakage and apply GP Rate of 3.5% to it. 3.5% ofundisc1osed income of Rs. 38,75,90,618/* = Rs.1,35,65,672/* 3.5% of Rs. 50,00,0001 (on adhoc basis). = Rs. 1.75.000/* Total Income = Rs.l,37,40,672/* Less: Income already added back by the assessee = Rs. 96,90,00/* Balance = Rs. 40,50,672/* The assessee has already added Rs. 96,90,000/- in its total income, hence the balance amount of Rs. 40,50,672/- is added to the total income of the assessee. " 5. The aforesaid action of AO has been found fault by the Pr. CIT who has recorded his finding as under:- "9. The Assessing Officer failed to make relevant enquiry in this case. He has failed to examine the books of a/cs maintained by the assessee if any. In fact it is the cas....
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....es amounting to Rs. 33,36,84,250/- and thereby AO had duly accepted the revised return filed by the assessee pursuant to notice u/s 148 of the Act. In the said order a note of the AO is kept at page 17 of paper book which reads as under :- "Note:- Not for the assessee. During the survey u/s 133A on the assessee's business premises on 21.09.2011, a sum Rs. 83,42,000/- was declared as extra income by way of undisclosed sales of' Rs, 33,36,84.520/- on which 2".5% G.P. was calculated as given in the tax audit report filled with the original ITR. The revised return in response to 148 notice had been filed by adding up the extra income declared during the survey. The source and cost of purchase in relation to the undisclosed sale was disclosed at the time of survey and accordingly noted in the reasons for reopening u/s 147 as opening capital undisclosed Rs. 1,21,00,000/- in the A.Y. 2010-11. "(emphasis given by us) 7. So from a perusal of the note prepared by the AO in assessee's case though for A.Y.2011-12 (previous A.Y.) it is clear that source and cost of purchase in relation to the good for undisclosed sale was disclosed at the time of survey and accordin....
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....s (i) if the Assessing Officer's order was passed on incorrect assumption of fact; or (ii) incorrect assumption of law; or (iii)Assessing Officer's order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue'' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has result....
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....DG HOUSING PROJECTS LTD343 ITR 329 (Delhi) Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. S. 263 has been enacted to empower the CIT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should be erroneous and secondly, it should be prejudicial to the interest of the Revenue. The expression "prejudicial to the interest of the Revenue" is of wide import and is not confined to merely loss of tax. The term "erroneous" means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Ass....
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.... that the order of the Assessing Officer, who had conducted enquiries and had acted as an investigator, is erroneous, without CIT conducting verification/inquiry. The order of the Assessing Officer may be or may not be wrong. CIT cannot direct reconsideration on this ground but only when the order is erroneous. An order of remit cannot be passed by the CIT to ask the Assessing Officer to decide whether the order was erroneous. This is not permissible. An order is not erroneous, unless the CIT hold and records reasons why it is erroneous. An order will not become erroneous because on remit, the Assessing Officer may decide that the order is erroneous. Therefore CIT must after recording reasons hold that the order is erroneous. The jurisdictional precondition stipulated is that the CIT must come to the conclusion that the order is erroneous and is unsustainable in law. It may be noticed that the material which the CIT can rely includes not only the record as it stands at the time when the order in question was passed by the Assessing Officer but also the record as it stands at the time of examination by the CIT. Nothing bars/prohibits the CIT from collecting and relying upon new/addi....
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....see nor was any civil right of the assessee prejudiced. He was as such under no obligation in law to give reasons. The fact, that all requisite papers were summoned and thereafter the matter was heard from time to time coupled with the fact that the view taken by him is not shown by the revenue to be erroneous and was also considered both by the Tribunal as also by us to be a possible view, strengthens the presumption under Clause (e) of Section 114 of the Evidence Act. A prima facie evidence, on the basis of the aforesaid presumption, is thus converted into a conclusive proof of the fact that the order was passed by the assessing officer after due application of mind. Meerut Roller Flour Mills Pvt. Ltd. vs. C.I.T., ITA No. 116 /Coch/ 2012; CIT vs. Infosys Technologies Ltd., 341 ITR 293 (Karnataka); S.N. Mukherjee vs. Union of India, AIR 1990 SC 1984; A. A. Doshi vs. JCIT, 256 ITR 685; Hindusthan Tin Works Ltd. Vs. CIT, 275 ITR 43 (Del), distinguished. 12. We note that the AO has not accepted the return of income which was filed by the assessee showing gross profit rate of 2.5% on the undisclosed sales. We note that the AO had called for the explanation of the assessee as to why....
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....of 3.5% should not be applied and thereafter considering the reply as stated above and taking into consideration all the materials on record, the AO has taken a decision to apply gross profit rate of 3.5% by making additional ad hoc estimation of undisclosed sales of Rs. 50,00,000/-. Thus in this factual background we again say that AO has carried out inquiry and it is not a case of lack of enquiry (no enquiry) as held by the Ld. Pr. CIT. The ld. AR has brought to our notice that the view taken by the AO is in line with the ratio of the order of the Gujarat High Court in the case of President Industries Ltd. 258 ITR 654 b(Guj) and Delhi Tribunal in the case of India Seed House vs ACIT [2001] 69 TTJ Delhi 241 for the proposition that only gross profit on unrecorded sales need to be treated as income and not the entire undisclosed sale. So according to the ld. Counsel, the view taken by the AO in the facts and circumstances of the case is a plausible view and not a view which is unsustainable in law and therefore the ld. Pr.CIT could not have exercised his revisional jurisdiction to interfere with the order passed by the AO. We find considerable merit in the submission of the ld. Cou....
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....acts and circumstances of the case. It is to be kept in mind that the amount of sales by itself cannot represent the income of the assessee. The sale only represented the price received by the seller of the goods of the acquisition on which it had already incurred the cost. It is the realization of excess cost over the cost incurred that only forms part of the profit included in the consideration of sales. It is not the case of the ld. Pr. CIT that investment by way of incurring the cost in acquiring the goods which has been sold has been made by the assessee and that has not been disclosed (in the factual background which we discussed earlier in respect of A.Y.2010-11 the assessee had offered Rs. 1.2 cr. as undisclosed investment). Since the undisclosed investment to make the undisclosed purchases have been disclosed by the assessee during survey, the AO has estimated the gross profit taking into consideration the earlier three years' performance of the assessee company which is a plausible view and at any rate cannot be termed as an impossible view in the facts and circumstances of the case. It has to be kept in mind that the undisclosed income that shall form part of the total i....