TaxTMI 
TaxTMI 
2020 (3) TMI 206
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.... against principles of Natural Justice that deserves to be quashed. 2. Ld. CIT erred in law and on facts in holding that revisionary proceedings on issues already examined by AO during assessment is permissible under law in case of inadequate inquiry. Ld. CIT erred in not appreciating that in fact the enquiry was not inadequate and alleged inadequate inquiry is not a ground to hold assessment order as erroneous or prejudicial to the interest of revenue. 3. Ld. CIT erred in law and on facts to hold that there was no application of mind by AO in absence of proper inquiry on submissions by the appellant. Ld. CIT ought to have appreciated that AO framed assessment after due verification of all details produced in response to questionnaire along with audited annual report, books of accounts & vouchers now on record. The order of ld. CIT deserves to be quashed. 4. Ld. CIT erred in law and on facts in setting aside scrutiny assessment order holding it erroneous and prejudicial to the interest of revenue directing AO to frame de novo assessment on the basis of presumption, conjucture and surmises ignoring detailed explanation along with documentary evidence submitted to AO as well....
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....e on account of 7 items which has been detailed in his order dated 25-02-2015. But at the time of hearing before us the learned AR for the assessee agreed with the finding of the learned Pr.CIT in all the items where the irregularities /lapses were observed by the learned Pr.CIT except the following: i. Non-verification of the fixed assets and depreciation thereon. ii. Non-verification of the items as detailed under: a. Proceeds from deposits b. Transactions covered under section 40A(2)(b) of the Act c. Cash credits d. Current liabilities. 4. The learned DR did not raise any objection on the argument advanced by the learned AR for the assessee as discussed above. In view of the above, we limit our finding on the items/issues as discussed above. Now we proceed to adjudicate the issue in the light of the above stated discussion. 5. The learned Pr.CIT during the proceedings observed certain defects in the assessment framed under section 143(3) of the Act dated 26/03/2013 as detailed under. Non-verification of the fixed assets and depreciation thereon The auditor of the company in his report has categorically mentioned that the management of the company has not carried....
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....s imperative to verify certain facts such as existence of the fixed assets, sale, purchase of the fixed assets, theft if any of fixed assets. But the AO has not done such verification during the assessment proceedings. 6.6. The learned Pr.CIT regarding the proceeds from deposits, transactions covered under section 40A(2)(b) of the Act, cash credits and current liabilities observed that the assessee has just filed the details during the assessment proceedings which was accepted by the AO without adequate verification. 6.7. In view of the above, the learned Pr.CIT held the order passed by the AO under section 143 (3) of the Act as erroneous insofar prejudicial to the interest of revenue. Being aggrieved by the order of the learned Pr.CIT, the assessee is in appeal before us. 7. The learned AR before us filed a paper book running from pages 1 to 671 and submitted that all the necessary details regarding the fixed assets i.e. description of assets, date and value of the assets were duly disclosed in the annexure 3A to the tax auditor report under form 3 CD. The learned AR further submitted that there was an enquiry by the AO about the details of the fixed assets during the assessme....
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....id that the order of the AO is erroneous insofar prejudicial to the interest of Revenue on account of non-verification. 8. On the other hand, the learned DR submitted that the proper inquiries were not conducted during the assessment proceedings by the AO. The learned DR vehemently supported the order of the learned Pr.CIT. 9. We have heard the rival contentions of both the parties and perused the materials available on record. In the instant case, the Ld. Pr.CIT has held that the order of the AO as erroneous insofar prejudicial to the interest of Revenue on account of non-verification of the items as discussed above. 9.1. However, we note that the AO during the assessment proceedings has required the assessee to furnish the details of the fixed assets in the notice issued under section 142(1) of the Act dated 22-10-2012. The relevant extract of the notice is reproduced as under: "11. Regarding additions to fixed assets, furnish the copies of major bills of additions to Fixed Assets. Give details in the following Proforma: Fixed Asset Asset Block Date of Purchase Date of putting to use Installation expenses, freight expenses, insurance expenses incurred if any Whet....
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....The details of secured loans along with the details of security furnished relevant to AY 2010-11 is enclosed. 8. The details of unsecured loans in the required format relevant to AY 2010- 11 is enclosed." 9.4. We also find that the assessee in response to the above notice has filed the details of the unsecured loan which are placed on pages 137 to 140 of the paper book as well as confirmations which are placed on 178 to 199 of the Paper book. 9.5. Similarly, we note, regarding the transactions covered under section 40A(2)(b) of the Act assessee in response to the queries raised in the course of hearing has submitted vide letter dated 06/03/2013 that the transactions were carried out with the related parties at the prevailing market rate. "In the course of hearing certain queries are raised. They are explained as under: 1. As regards Section 40A(2)(b) the assessee has made purchases from NKIL, N.K. Roadways P.Ltd. and Tirupati Proteins P.Ltd. They are all at prevailing market rate. This may be verified from the purchase invoices from the said parties and thir parties produced for your verification. Therefore the question of applicability of Section 40A92)(b) does not aris....
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....on'ble Courts as detailed under: 9.11. Hon'ble Supreme court in the case of Malabar Industrial Co Ltd Vs. CIT reported in 109 Taxman 66, wherein it was held as under: "In the instant case, 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 the case in all perspective and the order passed by him was erroneous. It appeared that the resolution passed by the board of the appellant-company was not placed before the Assessing Officer. Thus, there was no material to support the claim of the appellant that the said amount represented compensation for loss of agricultural income. He accepted the entry in the statement of the account filed by the appellant in the absence of any supporting material and without making any inquiry. On these facts the conclusion that the order of the ITO was erroneous was irresistible. Therefore, the High Court had rightly held that the exercise of the jurisdiction by the Commissioner under section 263(1) was justified." 9.12. Hon'ble Gujarat High Court in the case of CIT Vs. Kamal Galani reported in 95 taxmann.com 261, where....
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....lar view was taken, the mere fact that different view could be taken, should not be the basis for an action under section 263 and it could not be held to be justified. In view of this and following the principles laid down by the Supreme Court in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83/109 Taxman 66, the Tribunal was justified in setting aside the order passed by the Commissioner under section 263." 9.1.4 Hon'ble Gujarat High Court in the case of CIT Vs. Mehsana District Co-op. Milk Producers Union Ltd. 130 Taxman 235, wherein it was held as under: "It is well-settled that the provisions of section 263(1) cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, and it is only when the order is erroneous that the section will be attracted. When two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law. It was not shown how the method followed by the assessee to divide the expenses for the purpose of claiming ....