TaxTMI 
TaxTMI 
2021 (7) TMI 204
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....of income for AY 2014- 15 on 30.11.2014 showing total income at Rs. 11,50,200/-. The AO noted that the return was duly processed u/s 143(1) of the Act. Thereafter, the case was selected for scrutiny and notice u/s 143(2) and 143(1) were issued to the assessee to produce/submit certain details/documents to substantiate her return of income. The AO noted that the Ld. A.R of the assessee appeared and submitted the explanation, details and documents as called for by him and thereafter he made disallowance of Rs. 18,726/- in respect of travelling expenses claimed and made an addition to the tune of Rs. 54,000/- on account of income from oil tanker lorry and framed assessment order dated 30.09.2016. Thereafter, the Ld. PCIT-9, Kolkata proposed to exercise his revisional jurisdiction u/s 263 of the Act by taking note that the case of the assessee was selected for limited scrutiny under CASS due to mismatch of sales turnover reported in audit report and ITR. Further, according to Ld. PCIT on examination of assessment records, he found fault with the AO in not enquiring into three issues even though the fact was that the case of the assessee was selected for scrutiny only for one purpose i.....
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....T is erroneous as well as prejudicial to the interest of the Revenue. For that, let us take the guidance of judicial precedence laid down by the Hon'ble Apex Court in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer's order was passed on incorrect assumption of fact; or (ii) incorrect application 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;[ because AO has to discharge dual role of an investigator as well as that of an adjudicator ]then in aforesaid any event the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is requir....
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....onding: Name & Address of Vendor Opening balance, if any Total Bill received Total payment made Closing balance 8. For the aforesaid query, the assessee had replied vide letter dated 29.06.2016 wherein the assessee had replied at page 4 of PB as under: "4. During the said period assessee disclosed turnover of sales Rs. 15,03,96,582.13 in her return of income which tally with the tax audit report so there is no requirement of any further justification." 9. On this issue the Ld. A.R drew our attention to page 22 of PB which shows that the total turnover of the assessee is Rs. 15,03,96,582/- which is evident from the Form No. 3CD. Thereafter, he drew our attention to the profit and loss account placed at Page 24 of PB wherein the sales turnover is Rs. 15,03,96,582/-. So, we note that there was no mismatch and the amount in the tax audit report and ITR is the same. Therefore, the AO being satisfied on this issue did not draw any adverse view against the assessee; and further, the AO had made the addition of Rs. 54,000/- as income from the tanker lorry and also made disallowance in respect of travelling expe....
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....trative Pr. CIT/CIT/Pr. DIT/DIT. 2. In order to ensure that maximum objectivity is maintained in converting a case falling under 'Limited Scrutiny' into a 'Complete Scrutiny' case, the matter has been further examined and in partial modification to Para 3(d) of the earlier order dated 29.12.2015. Board hereby lays down that while proposing to take up 'Complete Scrutiny' in a case which was originally earmarked for 'Limited Scrutiny', the AO shall be required to form a reasonable view that there is possibility of under assessment of income if the case is not examined under 'Complete Scrutiny'. In this regard, the monetary limits and requirement of administrative approval from Pr. CIT/CIT/Pr. DIT/DIT, as prescribed in Para 3(d) of earlier instruction dated 29.12.2015, shall continue to remain applicable. 3. Furhter, while forming the reasonable view, the Ao would ensure that: a. there exists credible material or information available on record for forming such view; b. this reasonable view should not be based on mere suspicion, conjecture or unreliable source; and c. there must be a direct nexus between the available material and formation....
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....tiny], the CBDT has narrowed down the discretion/scope/power of AO to do so and it has spelled out the condition precedent before the AO seeks approval in this regard by observing that in order to ensure maximum objectivity in converting the case falling under the Limited Scrutiny to Complete Scrutiny, the AO can take up the case only if he can form a reasonable view that there is possibility of under assessment of income, if the case is not examined under "Complete Scrutiny". Further, for forming the reasonable view, the AO has to ensure that - a. there exists credible material or information available on record for forming such view; b. this reasonable view should not be based on mere suspicion, conjecture or unreliable source; and c. there must be a direct nexus between the available material and formation of such view. From a perusal of the aforesaid conditions/parameters laid down by the CBDT it can be discerned that before the AO proposes to the competent authority for approval for enlarging the scope of scrutiny from Limited Scrutiny, he should first of all form a reasonable view that in case if the assessment of the assessee is not scrutinized ....
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....n of the Hon'ble Punjab and Haryana High Court in the case of Pandit Brothers 26 ITR 159 (Punj), has held that books of account cannot be rejected merely due to low GP the relevant finding is reproduced here: "6.7. We may draw support for our views from the decisions relied upon by Mr. Khaitan. In Pandit Bros. v. CIT (supra), the Punjab High Court in a Division Bench held that in order to reject the accounts, the ITO must either hold that there was no method of accounting or that the method employed was such that it did not disclose the true profit and loss of the firm. In that case, the accounts maintained were accepted as correct, but only in the absence of stock register, the accounts were rejected. The learned Court held that the absence of stock register was not such a serious defect in the method of accounting employed by the assessee that the ITO could not determine the correct statement of profits and losses. This decision was dealing with Section 13 of the IT Act, 1922, which is pari materia the same as Section 145 stood at the relevant point of time viz., before the amendment. In the said decision, it was further held that there must be material before t....
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....the AO could not have done so, because for doing so he should have credible material or information from the records before him for forming such a reasonable view that there is a possibility of under assessment of income. Since there was no such credible material or information available on record and being satisfied by the books of account of the assessee, the AO might have made a conscious decision not to take up the case for complete scrutiny as stipulated in CBDT circular which inference we draw because the Ld. PCIT has not mentioned about any such credible material or information available on record to take the opposite view. So when there is no such material or information available on records, the AO could not have formed a reasonable view of under assessment of income on the issue of drop in G.P. Therefore since there is no credible information or material available on record to form a reasonable view that there is a possibility of under assessment, the Ld. PCIT's allegation on this issue is noted to have been based on surmises and conjectures, so we are to the opinion that AO ought not to have taken up this issue (drop in G.P) for expanding the scope of limited scrutiny as....
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.... case of the Ld. PCIT that despite there was credible information or material to suggest that the assessee's tanker lorry was used for transport business of plying/running of tanker lorry, then also the AO failed to take up the issue for scrutiny by seeking approval as envisaged in the CBDT circular. Therefore, in the absence of any such material, the AO could not have taken up the case for enlarging the scope of scrutiny and further the decision of AO to apply presumptive tax rate u/s 44AD is in line with judicial precedent as given below: 1. CIT-XII Vs. Subodh Gupta, 54 taxmann.com 343 (Delhi) [2015] 2. CIT-XIII Vs. Lovish Oberoi, 54 taxmann.com 23 (Delhi) [2015] 3. Ecoasfalt SA Vs. Addl. DIT, International Taxation,Range-3, New Delhi, 24 taxmann.com 349 (Delhi) [2012] 4. Allied Engineers Vs. CIT, Karnal, 180 Taxman 70 (Delhi) (MAG) [2009] 5. ClT Vs. Jain Construction Co., 34 taxmann.com 84 (Rajasthan) [2013] 6. Eastern Construction Company Vs. ITO, 59 ITJ 723 (Delhi) [1997] 7. ITO Vs. D.G. Housing Projects Ltd., 20 taxmann.com 58-7 (Delhi) [2012] Therefore, the Ld. PCIT erred in finding fault on this issue. 15.....