AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2020 (9) TMI 1126
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Assessing Officer to reexamine the valuation of stock recorded in the books of account of the assessee which has reported to the bank. 4. That learned AO after due verification of each and every points of Balance Sheet had completed the assessment and now directing the Assessing Officer to redo the assessment and start roving enquiries and therefore, the order u/s. 263 is not justified under law. 5. That other grounds if any will be urged at the time of hearing of appeal. 2. Out of the above five grounds, ground No.5 is residuary ground and rest of the grounds are effective to be decided in the following paragraphs. 3. Brief facts of the case are that the assessee filed his return of income for the assessment year 2010-2011 on 30.09.2010 disclosing total income of Rs. 1,92,052/-. The assessee is an individual derives income from sale of Zuari Furniture earning under name and style of M/s Parivartan. The assessee was completed u/s.143(3) of the Act on 19.12.2012 by the ITO Ward-2(1), Cuttack determining the total income at Rs. 9,96,780/-. Later on by virtue of power vested u/s.263(1) of the Act, the Pr.CIT called the assessment records and after verification....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e because an incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. Reference is made to the rulings given by the Hon'ble Supreme Court in the case of Ramapyari Devi Sarogi Vrs. CIT (1968) 67 ITR 84 (SC) and Smt. Tara Devi Aggarwal Vrs. CIT reported in 88 ITR 323 (SC) (1973) in which the Hon'ble Apex Court has held that lack of enquiry or verification at the relevant time by the Assessing Officer would constitute prejudice to the interest of revenue and would involve error of facts and law. It was held by the jurisdictional High Court in the case of Umash'ankar Rice Mills Vs. CIT reported in 187 ITR 638(Ori)that, where the Commissioner felt that proper enquiry was not made by the AO during assessment proceedings, he was justified in invoking provisions of Section 263 in respect of the order passed by the AO. Similarly, in the case of Gee Vee Enterprises Vs. Addl. CIT report in 99 ITR 375(Del), the Hon'ble Court has held that the Commissioner can regard the order of the AO as erroneous on the ground that, in the * circumstances of the case, the AO should have made further enquiries before a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urts in this issue particularly the Apex Court has contended the above unhealthy practice followed by the business man. As per decision of the Hon'ble Madras High Court in the case of Coimbatore Spinning and Weaving Co ltd CIT[1974] 95 ITR 375 held that no such practice of declaring larger socks to the banks for the purpose of getting higher loan was recognized by the Court and no judicial notice can be taken of such sub-standard morality on the part of the assessee so as to enable them to go back on their own sworn statement given to the bank as to the stock held and hypothecated to the bank. While disposing off the SLP in the case of Dhansiram Agrawal Vrs. CIT SLP Civil No:9244 of 1995, the Apex Court has supported the above views of the High Court and admitted that - assesse had overvalued the stock for the purpose of obtaining a larger credit from the Bank Therefore, AO has not properly examined the valuation of stock during the course of scrutiny proceedings apparently not considered the difference of stock valuation as unaccounted sales of the assessee which was not recorded in the books of the assessee for the financial year:2009-10. In view of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t with the Books of accounts maintained and proper books of accounts have been kept. That even though in course of assessment proceeding the assessee was represented by Sri Amiya Ku Sahoo, Advocate appeared from time to time and even though he filed the audited report in Form-3CD & 3CB along with ledger copy of Bank account, but he has not been able to produce the cash book and ledger maintained in Tally system. The auditor has certified that the assessee maintains Cash Book, ledger, stock register, purchase and sales register etc which were duly verified by the auditor. That the copy of cash book maintained in Tally system and ledger maintained by the assessee is very much available and can be produced if required. The relevant Assessment Year-2010-11 (year ending on 31.03.2010). and the survey operation was conducted u/s.133A on 09.03.2010 which Is almost towards the fag end of the assessment year. Because it was a case of survey operation, therefore the AO has meticulously and carefully gone through the case and passed order u/s. 143(3) of the IT. Act, 1961 on 19.12.2012 in accordance with law. In the balance sheet as on 31.03.2010 assessee has shown S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....decided by Hon'ble Supreme Court in the case of Malbar Industries Vs. CIT, 243 ITR 83 (SC) that the provision in section 263 cannot be invoked to correct each and every type of mistakes committed by the AO and every loss of revenue as a consequence of the order of the AO cannot be treated as a prejudicial to the interest of the revenue. Further, when two views are possible and the ITO has taken one view which the CIT does not agree. It cannot be treated as an erroneous order, for invoking the provision u/s. 263. The same thing has happened in this case. Therefore the order of CIT u/s.263 is not sustainable in law and is liable to be quashed. PRAYER In view of the above facts and circumstances of the case, the order u/s.263 may kindly be quashed and for this act of your kindness the assessee as in duty bound shall ever pray. Ld. AR further submitted that the books of accounts was got audited by the qualified chartered accountant, according to him the assessee has maintained cash book, ledger stock books etc. which were verified by him, thereafter, he has issued audited report in prescribed form No.3CB & 3CD which has not been disregarded by the AO during ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee did not produce the books of accounts. In the audit report how the auditor had certified that the cash book, stock ledger etc. was maintained. As per the ordersheet the AO gave many opportunities to the AO, in spite of that, he did not produce the books of accounts. The AO completed the assessments only on the basis of financial statements and copy of ledger accounts available before him, which cannot be considered properly that the complete documents were produced for completing the scrutiny assessments. He referred to the list of the creditors placed in the paper book. The assessee should have been given complete name with address of the details of the creditors so that the AO can verify the genuineness of the creditors shown at the year end. Merely providing name, PAN and amount , is not sufficient and the complete address was not provided before the AO. He also submitted that the AO did not observe to the records which were gathered during the course of survey proceedings u/s.133 of the Act as well as the documents produced before him. The stock statements were submitted to the Punjab National Bank for availing cash credit loan. He should have worked out the stock amount s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... his powers as per Section 263(1) of the Act on the other plausible view in respect of stock difference found on the date of survey. In support of his arguments, he relied on the judgment of the Honb'e Supreme Court in case of Malabar Industrial Co. Ltd. Vs. CIT (2000) 243 ITR 83 (SC). 9. After hearing both the sides and perusing the entire material available on record and the orders of authorities below, we find that the AO completed the assessment on the basis of audit report and copy of ledger, bank statements etc. but the assessee did not produce any books of accounts which has been categorically mentioned by the AO in his order and he had also issued show cause notice in this regard but the assessee did not comply the same, therefore, the AO completed the assessment and disallowed the difference of stock found during the course of survey u/s.133A of the Act. The ld.Pr.CIT on the basis of record he observed that the order of the AO was erroneous and prejudicial to the interest of revenue. Accordingly, he issued show cause notice on 15.01.2015. We observe that in respect of stock the AO had taken a plausible view and added the difference found during the course of survey proc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dicator, he is also an investigator before coming to any conclusion with regard to the genuineness of the transactions done by the assessee, which is lack in this case. In this regard, we would like to reproduce the provisions of Section 263(1) of the Act, which read as under :- Revision of orders prejudicial to revenue. 263. (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation 1.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer shall include- (i) an order of....