TaxTMI 
TaxTMI 
2022 (11) TMI 381
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.... make full and proper inquiry and apply the provisions of law properly while making fresh assessment denovo. 2. The Grounds of appeal raised by assessee in ITA no. 11/Alld./2019 for ay: 2016-17 in memo of appeal filed with Income Tax Appellate Tribunal, Allahabad(hereinafter called "the tribunal"), reads as under: "1-That in any view of the matter order passed u/s 263 of the Act dated 13/11/2018 is bad both on the fact and in law and the Pr. Commissioner of Income Tax, Allahabad passed the order without examination the assessment record and order sheet specially when assessing officer examined the books hence the order u/s 263 of the Act is liable to be cancelled. 2-That in any view of the matter the Pr. Commissioner of Income Tax, Allahabad is highly unjustified in saying that the assessment order passed by the assessing officer is erroneous in so for as prejudicial to the interest of revenue when required examination was done by assessing officer. 3-That in any view of the matter finding and observation of the Pr. Commissioner of Income Tax, Allahabad in his order are incorrect illegal and unjustified especially when scrutiny was done. 4-Tha....
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....he AO was required to make intensive inquiry and to cause effective investigation as to whether income from the liquor business was correctly shown by the assessee in his return of income filed with Revenue. The ld. PCIT observed from the records that the AO has not made full and proper inquiry ,and has proceeded to complete the assessment in haste, and in the manner which is prejudicial to the interest of the revenue. The ld. PCIT also observed from the records that the assessment order passed by AO is erroneous and in so far as prejudicial to the interest of revenue. The Learned Pr. CIT in exercise of its revisionary powers under Section 263 issued show cause notice to the assessee,on 26th July, 2018 fixing the date of compliance for 31st July, 2018, which is reproduced herein below: "During the course of examination of the assessment records in your case of A.Y. 2016-17, it is found that AO has passed the assessment order u/s 143(3) dated 22.02.2018 without making any inquiry regarding low income from TCS receipts being the reason for selection of the case for full scrutiny. When this case was selected for scrutiny, it was the responsibility of the AO to make intensive ....
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....whereas copy of order and demand notice was served on 20.03.2018 after superannuation of the assessing officer on 28.02.2018. Obviously, there is a visible discrepancy in the proceeding, preparation of assessment order and service thereof. (iii) It is found from the assessment records that AO has taken on record the very cryptic reply and copy of challan form 43A, copy of cheques and copy of some of the vouchers, ITR, copy of bank statements but has not obtained any information from the seller of liquor and has not made investigation about the initial cash deposits which are in lakhs and about their Sources. (iv) In assessment order AO has disallowed Rs. 10,000/ from the labour charges of Rs. 55,610/- and Rs. 5,000/- from travelling expense of Rs 47,864/- and Rs. 5,000/- from head office expenses of Rs. 13,580/-on the ground that such expenses are remained unverifiable because of lack of supporting evidence. Obviously, such lump sum disallowances is nottenable in the eye of law because AO has failed to specify as to which expenditure is not having supporting evidence. If there is no supporting evidence of labour charges, travelling expenses and office expenses, th....
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....om other sources has only been shown in computation of total income. This fact proves that books of accounts are not being properly maintained as per the actual transaction that is why commission income and interest from saving bank account have not been shown in profit and loss account. AO has never pointed out this discrepancy to the assessee nor has verified this fact from the respective angle. (viii) While making lump sum disallowance, AO has failed to reject the books of accounts and velocity of accounting system and has proceed to lump sum disallowances which proves the fact that neither assessment proceeding is as per the procedure laid down by the department nor is investigation made as expected in scrutiny assessment, hence it is very much visible that assessment has been completed without application of mind, without proper inquiry and without the consequential investigation in the business transactions. It is also very apparent from the assessment record that AO has not made any apparent inquiry about assets and investments whereas this case was selected for full inquiry and scrutiny. It is also visible from the assessment records that AO has not examin....
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.... no discrepancies found in books and the AO after proper application of mind and proper verification framed assessment order , and it cannot be said that the assessment order as framed by AO is erroneous and prejudicial to interest of revenue. The assessee submitted that the AO has taken a plausible view and it cannot be said to be erroneous order in the eyes of law. 4c. The Ld. Pr. CIT after considering the contentions of the assessee and the assessment record held that the assessment order passed by the AO under Section 143(3) dated 22nd February, 2018 is erroneous in so far as prejudicial to the interest of the revenue and ld. PCIT set aside assessment order dated 22.02.2018 passed by AO u/s 143(3) , by invoking its revisionary powers u/s 263 of the 1961 Act vide revisionary orders dated 13.11.2018, and direction were issued by Ld. Pr. CIT to AO to make full and proper inquiries and apply the provisions of the law while make fresh assessment denovo in light of observations made by Ld. Pr. CIT in its revisionary order dated 13.11.2018 under Section 263 of the Act, by holding as under: "I have considered the assessment proceedings of the assessing officer, it is found ....
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....rther, found from the assessment records that AO has taken on record the very cryptic reply and copy of challan form 43A, copy of cheques and copy of some of the vouchers, ITR, copy of bank statements but has not obtained any information from the seller of liquor and has not made investigation about the initial cash deposits which are in lakhs and about their sources. In assessment order AO has disallowed Rs. 10,000/- from the labour charges of Rs. 55,610/- and Rs. 5,000/- from travelling expense of Rs. 47,864/- and Rs. 5,000/- from head office expenses of Rs. 13,580/ on the ground that such expenses are remained unverifiable because of lack of supporting evidence. Obviously, such lump sum disallowances is not tenable in the eye of law because AO has failed so specify as to which expenditure is not having supporting evidence. If there is no supporting evidence of labour charges, travelling expenses and office expenses, then entire expense was to be disallowed and not of some lump sum expenses like 10,000/-, 5,000/- and 5,000/-. This reveals the fact that AO has made the disallowances without application of mind, disrespecting the various decisions of the Hon'b....
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....n in profit and loss account. AO has never pointed out this discrepancy to the assessee nor has verified this fact from the respective angle. It is also very apparent from the assessment record that AO has not made any apparent inquiry about assets and investments whereas this case was selected for full inquiry and scrutiny. It is also visible from the assessment records that AO has not examined the source of cash deposits and utilization of cash correctly in the accounts. While making lump sum disallowance, AO has failed to reject the books of accounts and verocity of accounting system and has proceed to lump sum disallowances which proves the fact that neither assessment proceeding is as per the procedure laid down by the department nor is investigation made as expected in scrutiny assessment, hence it is very much visible that assessment has been completed without application of mind, without proper inquiry and without the consequential investigation in the business transactions. Thus, obviously the assessment order passed by the AO u/s. 143(3) of the I.T. Act dated 22.02.2018 is erroneous in so far as prejudicial of the interest of the revenue. ....
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....45,000/- to the returned income while framing assessment for ay: 2014-15, Rs. 10,000/- under the head Labour Charges, Rs. 20,000/- under the head Travelling Expenses and Rs. 15,000/- under the head Office Expenses, on the grounds that these expense remained unverifiable . The ld. Counsel for the assessee relied upon judgment and order of Hon'ble Allahabad High Court in the case of Commissioner of Income Tax & Ors. v. Metro and Metro , reported in (2018) 404 ITR 304(All.). The ld. Counsel for the assessee also relied upon the order of ITAT, Amritsar Bench in the case of Dharam Pal v. Pr. Commissioner of Income Tax, Bhatinda reported in (2017) 82 taxmann.com 83 (Amritsar-Trib.). The ld. Counsel for the assessee also relied upon the order of ITAT, Amritsar Bench in the case of Jiwan Kumar v. PCIT, Bhatinda, reported in (2017) 82 taxmann.com 221(Amritsar-tribunal). It was submitted that Section 263 was amended and an Explanation-2 was inserted by the Finance Act, 2015. Our attention was also drawn to the order of Delhi-tribunal in the case of Vodafone Essar South Ltd. v. CIT, New Delhi , reported in (2011) 12 taxmann.com 233 (Delhi). The ld. Counsel for the assessee also relied upon fo....
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....the details were never produced by the assessee. The ld. CIT-DR submitted that the AO did not verify the details of low profits shown by the assessee vis-à-vis TCS. It was submitted that the purchase and sales have not been verified by AO during assessment proceedings. It was submitted that the AO did not verify cash deposits in the bank, and the AO did not verify whether cash deposit in the bank are from cash sales only. It was also submitted by ld. CIT-DR that reasons for declaring low/insufficient profits by the assessee required proper scrutiny/verification which was not done by AO . The ld. PCIT would make prayers that revisionary order passed by ld. Pr. CIT be upheld. 5c. The ld. Counsel for the assessee in rejoinder drew our attention to page 23 of paper book and submitted that prices of liquor are fixed by Government, and both purchase as well sale price cannot be changed . The ld. Counsel for the assessee made prayers for quashing of the revisionary order dated 13.11.2018 passed by ld. PCIT u/s 263. 6. We have carefully considered rival contentions and perused the material on record including cited case laws. The short question which has arisen in this appeal ....
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....is licensed , and the base of his business(Liquor) is license. The assessee also claimed that his GP and NP is better than preceding years. The assessee also claimed to have enclosed ledger account of expenses. The assessee also claimed to have enclosed the copies of challans for payment of license fee. It transpires from the ledger account of license fee that the assessee has claimed to have paid Rs. 27,38,000/- towards license fee for Financial year 2015-16, which were all claimed to have been paid in cash, from 04.02.2016 to 11.03.2016 (paper book page 24). The assessee enclosed challans paid during the period January-March 2015, aggregating to Rs. 23,99,000/- which is stated to be for financial year 2015-16, although paid in financial year 2014-15. The aforesaid challans for Rs. 27,38,000/- which were claimed to have been paid in the previous year 2015-16 (ay: 2016-17) as per ledger account filed by the assessee(challans were not enclosed by the assessee ) apparently relates to the assessment year 2017-18(previous year 2016-17), and the AO never asked for the paid challans to satisfy whether the expenses towards License Fee of Rs. 27,38,000/- as claimed were actually incurred o....
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....the tax-audit report reveals that the sale and purchase of Liquor was 24,555 carats, while as per ledger account of purchases, the purchase of liquor was 34,175 pcs during the year under consideration , but the AO never called for the reconciliation of stock in carats v. pieces to ensure that all the sales and purchases are properly accounted for and tallied, and that no income has escaped assessment as well the entire Liquor stock is duly accounted for and tallied in the books of accounts, and consequentially entire income thereof is brought to tax. The assessee has shown a meager Net Profit rate of 1.3% of the turnover, and TCS to the tune of Rs. 3,28,309/- was claimed as refund as against total TCS of Rs. 3,80,726/. This was also the reason for putting the case under scrutiny, but the AO never looked into this aspect of declaration of meager profits by the assessee as the income chargeable to tax. This was happening year after year, and the AO was under duty to investigate the affairs of the assessee by making deeper probe to unravel truth, which AO failed to do so and merely replies of the assessee were accepted by AO. The reason for scrutiny assessment was the low income shown....
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....oth the years, albeit in ay: 2014-15, the additions for aggregate of disallowance of expenses were to the tune of Rs. 45,000/-, while in the year under consideration the aggregate of disallowance of expenses under the same heads were to the tune of Rs. 20,000/- . In both these years, the aforesaid disallowances of expenses were on adhoc basis, without pinpointing the particular expenses which could not be verified by the AO. Thus, it appears that there is complete non application of mind by AO while framing assessment u/s 143(3) vide assessment order dated 22.02.2018, and the replies filed by the assessee were merely accepted by AO without making any enquiry / verification whatsoever to arrive at the income chargeable to tax. In our considered view, the ld. PCIT has rightly invoked provisions of Section 263 of the 1961 Act , and rightly set aside the assessment order passed by AO , and directions were rightly issued by ld. PCIT for denovo assessment. The assessee in the proceedings before ld. PCIT u/s 263 of the 1961 Act gave general replies, but could not repel that the assessment order dated 22.02.2018 passed by the AO u/s 143(3) was suffering from complete non application of min....
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....superannuation of the assessing officer on 28.02.2018. The AO has not obtained any information from sell of liquor, Obviously, there is a visible discrepancy in the proceeding, preparation of assessment order and service thereof. These are additional facts prove as to how assessment proceedings and order are prejudicial to the interest of revenue. It is further, found from the assessment records that AO has taken on record the very cryptic reply and copy of challan form 43A, copy of cheques and copy of some of the vouchers, ITR, copy of bank statements but has not obtained any information from the seller of liquor and has not made investigation about the initial cash deposits which are in lakhs and about their sources. In assessment order AO has disallowed Rs. 10,000/- from the labour charges of Rs. 55,610/- and Rs. 5,000/- from travelling expense of Rs. 47,864/- and Rs. 5,000/- from head office expenses of Rs. 13,580/ on the ground that such expenses are remained unverifiable because of lack of supporting evidence. Obviously, such lump sum disallowances is not tenable in the eye of law because AO has failed so specify as to which expenditure is not having support....
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....ereas assessee claims to have maintained books of account on mercantile system of accounting. Such income from other sources has only been shown in computation of total income. This fact proves that books of accounts are not being properly maintained as per the actual transaction that is why commission income and interest from saving bank account have not been shown in profit and loss account. AO has never pointed out this discrepancy to the assessee nor has verified this fact from the respective angle. It is also very apparent from the assessment record that AO has not made any apparent inquiry about assets and investments whereas this case was selected for full inquiry and scrutiny. It is also visible from the assessment records that AO has not examined the source of cash deposits and utilization of cash correctly in the accounts. While making lump sum disallowance, AO has failed to reject the books of accounts and verocity of accounting system and has proceed to lump sum disallowances which proves the fact that neither assessment proceeding is as per the procedure laid down by the department nor is investigation made as expected in scrutiny assessment, hence it....