TaxTMI 
TaxTMI 
TaxTMI 
2024 (1) TMI 908
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....12.2016 at the total income of Rs. 15,85,950/- as against return income of Rs. 14,35,950/-. Thereafter on going through assessment records the Pr. CIT found that certain points those were mentioned for selection of the case for scrutiny under CASS were not taken into consideration by the AO while passing the assessment order. The Pr. CIT initiated proceedings u/s 263 by issuing notice dated 06.08.2018 which is extracted in the impugned order as under: "Please refer to the assessment order dated 22.12.2016 for A. Y. 2014-15 in your case. On perusal of case record in your case for the A.Y. 2014-15 it is noted that you have furnished your return of income declaring total income at Rs. 14,35,950/- & agricultural income at Rs. 75,500/- on 29.09.2014. Assessment in your case u/s 143(3) of IT. Act 1961 was completed by the ITO, Khargone vide order dated 22.12.2016 assessing total income at Rs. 15,85,950/-& agricultural income at Rs. 75,500/-. 2. The entire records were gone through by me and on perusal and examination of records it appears that the order dated 22.12.2016 for A. Y. 2014-15 is erroneous as also prejudicial to the interest of revenue on account of passing of the orde....
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....) and second on the issue of claim of cast purchase of cotton of Rs. 14,90,73,159/- which was allowed by the AO despite absence of bills, vouchers, transportation receipts, weighment slips etc. Thus, the Pr. CIT observed that AO has not examined these two issues while passing assessment order. In reply to the show cause notice the assessee accepted the non-allowability of the claim of outstanding CST being not allowable as per the provisions of section 43B of the Act. On the issue of cash purchase of cotton the assessee contended that he produced books of account, bills and vouchers before the AO and the same were verified on text check basis. The Pr. CIT was not impressed with the reply of assessee on both the issues. Accordingly the Pr. CIT has set aside the assessment order being erroneous so far as prejudicial to the interest of revenue as the AO has not made requisite inquiry and allowed these two claims without conducting a proper inquiry. Since on the issue of non-payment of CST was not disputed by the assessee and therefore, to that extent there was no dispute that the said claim is not allowable as per the provisions of section 43B of the Act. On the second issue the Pr. C....
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.... the AO has taken a possible view by making ad hoc disallowance then the Pr. CIT is not permitted to invoke the provisions of section 263 merely because he does not agree with the view of the AO. He has relied upon the following decisions: 1.CIT vs. Max India Ltd. 295 ITR 282 2. Ranka Jewellers vs. Addl. CIT 395 ITR 148 (Bom) 3. Attar Singh Gurmukh Singh vs. ITO 191 ITR 667 (SC) 4. ITO vs. Jitendra Kumar Mandlecha 23 ITJ 644 5. Malabar Industrial Co. Ltd. 243 ITR 83 6. CIT vs. Nirav Modi 390 ITR 292 (Bombay HC) 7. CIT vs. Gabriel India Ltd. 203 ITR 108 (Bombay HC) 8. Jeevanlal Ltd. vs. ACIT 208 ITR 407 5. On the other hand, Ld. DR has submitted that the assessee has not disputed the issue of outstanding CST to be disallowed u/s 43B of the Act. Therefore, the order of the AO is erroneous being contrary to the provisions of the Act. He has further submitted that the AO has also not considered survey report and material sent by the investigation wing Khargone while passing assessment order. No inquiry was conducted by the AO in the light of the survey report and therefore, the order of the AO is erroneous as there was no inquiry on the part of the AO in the li....
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....owever, it is manifest from the record and particularly from the assessment record and order sheet entries that the AO has not even taken up the issue of disallowance u/s 40A(3) of the Act. There is no dispute that the assessee has made huge cash purchase of more than Rs. 14.90 crore and therefore, prima facie it is clear contravention of the provisions of section 40A(3) of the Act. The assessee can claim that his case falls under the exception provided in Rule 6DD however, same is subjected to the verification of the necessary facts and records. Once the assessee has not produced proper bills and vouchers then it is also difficult to accept the contention of the assessee that his case falls under the exception as per Rule 6DD of the Income Tax Rules. In any case when the AO has not taken up this issue of disallowance u/s 40A(3) then there is no material or explanation on behalf of the assessee in respect of this issue as well as the exceptions provided under Rule 6DD of the Act. Ld. AR has referred to survey report as well as the proposal send by the AO to raise an objection against initiation of the proceeding u/s 263 on the basis of borrowed satisfaction. At the outset, we note ....