AI Drafter 
TaxTMI 
TaxTMI 
2016 (6) TMI 1450
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....r. 2. At the outset, the ld. AR invited our attention to the fact that the assessment in these two assessment years was completed by the AO under section 143(3) of the Act, after examination of complete books of account and the assessee during the course of assessment proceedings had filed replies to all queries raised by the AO and books of account along with bills and vouchers were produced before the AO and in support of his contention, our attention was invited to the Ist paragraph of the assessment order where the AO had mentioned the fact of having examined books of account, bills and vouchers and, therefore, it was submitted that the action of the ld. Pri. CIT was not justified, as the AO had passed the order after complete scrutiny. Inviting our attention to the objections raised by the ld. Pri. CIT, our attention was invited to the show cause notice placed at PB 1 to 3 for assessment year 2010-11 and at PB 1-2 for assessment year 2011-12. 3. The ld. AR filed brief synopsis rebutting therein, all the objections raised by the ld. Pri. CIT. Taking first assessment year 2010-11, the ld. AR submitted that the first objection raised by the ld. Prin. CIT is regarding the ex....
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....ation of the books and other supporting documents and after application of mind did not draw any adverse inference on the issue of expenses claimed for hire charges of machinery and the assessee cannot be penalised, if the AO, had failed to record his findings in the assessment order because it is his prerogative as to how he writes an assessment order. 5. Reliance in this respect was placed on the judgment of the Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar Sharma (2011) 335 ITR 83 (Delhi), for the proposition that where it was not discernible from the assessment order as to whether the AO had applied his mind or not, by not recording certain findings, the assessee could not be penalized as it is the prerogative of the AO to draft his order. 6. Taking us to the second objection of the Pri. CIT, the ld. AR submitted that the allegation of the ld. Pri. CIT is that the AO had not examined the expenses booked under the head 'Labour Expenses' and in this respect our attention was invited to para-2 on page 2 of the assessment order, wherein the AO had specifically mentioned about the fact of examining labour expenses and wherein after recording his findings he had ma....
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....e the assessee had mentioned the fact that the loan from the two parties were new and rest were old balances. The ld. AR also took us to Paper Book pages 57 to 65 where confirmed copies of accounts of unsecured loans were placed. 8. Further, ld. AR took us to the objection of the ld. Pri. CIT that the AO had not examined the household expenses of various partners and their families viz-a-viz drawings made by them from the assessee firm and in this respect the ld. AR submitted that complete balance sheet along with Capital Accounts of the Partners was available with the A.O. Our specific attention was invited to PB 81 & 81 where query raised by the AO with respect to partners capital account alongwith its reply was placed. The ld. AR submitted that out of five partners only two partners made withdrawals of Rs.60,000/- and rest of three partners did make substantial withdrawals and therefore, the AO had not made additions keeping in view the entire facts. 9. Regarding last objection of the ld. CIT, the ld. AR submitted that the objection of the ld. Pri. CIT that the AO has not examined whether TDS has been deducted, while making payments to sub-contractor, namely, Aggarwal A....
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....as in respect of labour expenses he made an addition of Rs.1,50,000/- and therefore, it cannot be said that A.O. had not applied his mind. 13. The ld. AR also took us to paper book page 27 where comprehensive chart showing gross receipts and percentage of expenses including hire charges and labour charges was placed and submitted that A.O. had examined the various ratios of expenses and finding the same to be comparable with earlier year did not make addition. We were also taken to PB-28 where a chart showing gross profit earned by the assessee in three years was placed. Ld. AR submitted that finding an increase in G.P. rate and N.P. rate over the earlier years, the AO was satisfied with the genuineness of expenses and moreover every year such expenditure was being incurred. 14. As regards the unsecured loans of Rs.53.95 lacs, the ld. AR submitted that A.O. did make enquiry in this respect and our attention was invited to query no.12 placed at PB-31 & in reply the assessee filed and submitted details and in this respect our attention was invited to PB-34 where a copy of reply was placed. Our attention was also invited to and paper book 39-55 where copies of confirmed copies o....
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....8,16,000/- for Head Office and Rs. 6,27,800/- for Ratlam Branch. Perusal of the details placed on assessment records reveals that all the payments are stated to be made to some persons without specific addresses and other identifiable/verifiable particulars and all said payments have been made in cash below the ceiling of Rs. 20,000/- each. The AO has not examined the details of these expenses as to whom these payments have been made and the nature of services rendered and the extent of any machinery supplied by such parties. 3.1 From the above facts, it is clear that you have maintained accounts in such a manner so that no verification can be made with respect to the persons to whom such payments have allegedly been made. The AO has made no attempt during the course of assessment proceedings to get the complete details of the claim of such expenses and to verify the genuineness of any such payments. the AO has even not enquired as to what kind of machinery had been supplied by such persons to whom the said payments have allegedly been made. In other words, the entire claim of cash payments to the tune of about Rs. 1.14 crores under this head has been accepted by the AO wi....
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....examination from the assessment record and details filed by the assessee with regard to its expenses, he had formed a belief that the genuineness of the expenses was not verified. Furthermore, we find that the AO in his first page of the order has clearly made a finding of fact that the books of account alongwith vouchers were produced before him and he had test checked the vouchers with books of account. The AO while framing the assessment order, when did not find anything wrong in the claim of hire charges, did not specifically write in the assessment order, whereas in respect of labour expenses, he found certain defects in the vouchers and therefore, made the addition accordingly and also mentioned the fact of such addition in the assessment order. The non-mentioning of examination of hire charges in assessment year cannot lead to the conclusion that the AO had not examined this aspect. The Hon'ble Delhi High Court in the case of CIT vs. Anil Kumar Sharma, reported at 335 ITR 083 has held as under: "5. The Tribunal after examining the facts of the case observed that although it is not discernible from the assessment order whether the AO had applied his mind or not....
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....ly whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order, which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the AO had not applied his mind on the issue. The AO in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. The counsel for the assessee is right in his submission that one has to keep in mind the distinction between "lack of Inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate that would not by itself give occasion to the CIT to pass orders under s. 263, merely because he has different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. The AO had called for explanation on this very item from the assessee and the assessee had furnished his explanation vide letter dt. 26th Sept., 2002. This fact is eve....
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..... From the reply to query no.12, we find that the assessee had duly filed confirmation from the unsecured loans. We further find that the copies of confirmed copies of accounts of unsecured loans is found placed at PB 39 to 55. The copies of account filed during the assessment proceedings indicate that the assessee had credited interest to these unsecured loans and had deducted TDS wherever it was required. Therefore, the allegation of the ld. CIT with respect to unsecured loans is not justified specifically keeping in view the fact that the assessee had provided necessary details during assessment proceedings and most of unsecured loans were old outstanding balances. Therefore, on this account also the assumption of jurisdiction u/s 263 was not justified. 24. As regards low withdrawals of the partners, we find that the assessee during the assessment proceedings filed complete set of balance sheet alongwith complete annexures which is placed at PB 29 to 54 for the assessment year 2010-11 and PB 78 to 100 in respect of assessment year 2011-12. The detail of partners capital account is placed at PB 45 to 46 and 93 to 94 in respect of these two years. From the withdrawals made in t....
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....tax deducted at source. Pages 76 to 79 are copies of counterfoils for deposit of TDS by assessee on account of tax deducted by him on contract payments. These all documents were filed before the A.O., therefore, allegation of ld. CIT that the issue of TDS has not been examined is not correct. 27. From the above facts and circumstances of the case, we find that the AO had duly carried out investigation in respect of these three issues and therefore, ld. CIT's action for assuming power under section 263 is not justified. 28. Once the Assessing Officer has examined a particular issue and has completed the assessment after taking a plausible view, the ld. CIT is not permitted to assume powers u/s 263 simply because he does not agree with the view taken by the A.O. 29. The Hon'ble Bomay High Court in the case of CIT vs. Gabriel India Ltd., reported at 71 Taxman 585 (Bom.), has held as under: "The power of suo motu revision under sub-section (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to execise power of revisions under this sub-s....
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....issioner the order in question is prejudicial to the interests of the revenue. But that by itself will not be enough to vest the Commissioner with the erroneous but not prejudicial to the interests of the revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. Therefore, in order to exercise power under section 263(1) there must be material before the Commissioner to consider that the order passed by the ITO was erroneous in so far as it is prejudicial to the interests of the revenue and that it must be an order which is not in accordance with the law or which has been passed by the ITO without making any enquiry in undue haste. An order can be said to be prejudicial to the interests of the revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to ....