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TaxTMI 
TaxTMI 
TaxTMI 
2021 (12) TMI 975
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....us mark up basis. 3. For AY 2014-15 the Assessee filed return of income on 29.11.2014 declaring total income of Rs. 94,50,38,640. The AO issued notice u/s.143(2) of the Act dated 28.8.2015 and a notice dated 25.7.2017 u/s.142(1) of the Act. In the notice dated 25.7.2017, the AO had called for details of transactions entered into by the Assessee with its related party. The Assessee in reply to the notice dated 25.7.2017 by its letter dated 16.10.2017 provided the details of revenue by submitting the details of invoices raised during the year and reconciling the same with profit and loss account by reporting aggregate amount of audit adjustments (given as annexure to this order). As we have already seen, the Assessee works on cost plus model, wherein the invoices are raised based on an estimated cost after adding the agreed percentage of mark-up on the same on a monthly basis. However, at the year-end, the actual costs would be lesser or more than the estimated cost and therefore the excess or short amount invoiced had to be reversed on account of audit adjustments. Such audit adjustment is made to reverse the excess or less revenue, to the extent understated/overstated. A reconcili....
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....14 under section 142(1) of the Act calling for reconciliation of the revenue reported in the service tax return filed by the assessee with the revenue reported in the return of income. Durin the course of assessment proceedings for Assessment Year 2013-14, the AO had asked for reconciliation of revenue as per the invoices raised vis-à-vis revenue as per P&L A/c. The assessee had filed a detailed submission providing a reconciliation along with the reasons for the difference which pertains to the audit adjustment entries vide its submission dated 13 December, 2016. The AO, upon verifying the information and submission shared by the assessee, formed an opinion that the difference in revenue as per invoices raised by the company vis-à-vis revenue as per financial statements should not be considered as addition to income. Hence, did not make any adjustment to the total income of the Company while issuing the final assessment order for AY 2013-14. It was thus submitted that the AO had examined the revenue recognition and revenue reconciliation in detail during the course of assessment proceedings for AY 2013-14 including audit adjustment entries. Based on the examination, ....
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.... Galani (2018) 95 taxmann.com 261 (Guj.). He pointed out that SLP against the said decision of Hon'ble Gujarat High Court was dismissed by the Hon'ble Supreme Court reported in (2019) 110 taxmann.com 213 (SC). The sum and substance of the aforesaid decisions are that once the AO has carried out enquiries and applied his mind, then it cannot be said that the order is erreoneous and prejudicial to the interest of the revenue. The learned counsel submitted that the enquiries made by the very same AO in AY 2013-14 will hold good for his conclusion in AY 2014- 15 also and therefore the impugned order should be quashed. The learned DR relied on the order of the Pr.CIT. 8. The law is well settled that if there is a failure on the part of AO to make an enquiry on the issue which calls for an enquiry, that by itself will render the order of assessment erroneous and prejudicial to the interests of the revenue. It has been so held by the Hon'ble Delhi High Court in the case of Gee Vee Enterprises Vs. DCIT 99 ITR 375 & 386(Delhi). The following passage from the said decision would explain clearly the legal position in this regard: "(13) Shri G.C. Sharma argued that the orders passed by Inco....
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....pparent on the face of record" which is a wellknown ground for the review of a quasijudicial order by this Court under Article 226. We are unable to agree with this interpretation. The intention of the legislature was to give a wide power to the Commissioner. He may consider the order of the Income Tax Officer as erroneous not only because it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo-typed order which simply accepts what the assessed has stated in his return and fails to make inquiries which are called for in the circumstances of the case. Shri Sharma's contention that this would give the Commissioner the power to revise the order of the Income Tax Officer merely on the ground of suspicion is. untenable in view of the following two Supreme Court decisions which have already construed the old section 33B. contrary to Shri Sharma's contention. In Rampyari Devi Saraogi v. Commissioner of Income Tax, (1968)67 I.T.R. 84, the Income Tax Officer accepted the return of the assessed in respect of the initial capital, the gift received and the sale of jewellery, the income from business, etc., without any inquiry ....
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.... the order of assessment was erroneous insofar as it was prejudicial to the interests of the Revenue. Shri Sharma tried to distinguish this decision on the ground that the address of the assessed in that case was given incorrectly. The decision of the High Court and that of the Supreme Court were not, however, based on that ground at all. On the contrary, the Supreme Court followed their previous decision in Rampyari Devi's (12) case and upheld the decision of the High Court precisely on the same grounds. These two decisions show that it is not necessary for the Commissioner to make further inquiries before cancelling the assessment order of the Income Tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income Tax Officer should have made further inquiries before accepting the statements made by the assessed in his return. (14) The reason is obvious. The position and function of the Income Tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may he accepted by a civil court in the absence of any rebuttal. The civil court is neutr....
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.... the Board under section 119; or (d) the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person." We are of the view that we need not examine the arguments of the learned counsel for the Assessee in this regard because Explnation-2 is only a deeming provision and if on facts it is found that the AO did not make any enquiries before concluding the assessment there is no need to take recourse to the deeming provisions. 11. We however find that the Tribunal in (2021) 125 Taxmann.com 224 (Bangalore-Trib.) IT (TP) A No.322, 323 and 417 & 418/Bang/2018 for AY 2010- 11 & 2011-12 order dated 23.12.2020 decided identical issue by observing as follows: 43. After hearing the rival submissions, we are of the view that the issue has to be remanded to the AO for fresh consideration. The assessee works on a cost + mark-up as its margin. The revenue that the assessee shows in the financial statements is dependent on cost and if due to an incorrect estimation of cost or other reasons as submitted by the learned counsel for the Assessee before us....