TaxTMI 
TaxTMI 
2024 (2) TMI 865
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....me at Rs. 2,53,12,550/- only which was processed u/s 143(1) of the Act. Thereafter, the case of the assessee was selected for scrutiny and therefore a notice vide letter dated 10/12/2013, was issued upon the assessee u/s 143(2) of the Act. During the assessment, the gross profit was estimated at Rs. 2,86,52,160/- being 3.40% of the net receipt Rs. 1,39,15,04,986/- only which resulted in an addition of Rs. 33,39,612/- to the total income of the assessee vide order dated 23/02/2015 passed u/s 143(3) of the Act. 3.1 Subsequently, the proceedings u/s 147 of the Act were initiated on account of escapement of income by issuing notice u/s 148 of the Act, dated 27/03/2019. The proceedings u/s 147 of the Act were initiated on account of mismatch in the advance freight charges paid by the assessee vis-a-vis such advance freight charges shown under the balance sheet. However, the AO after necessary verification accepted the income of the assessee computed by the AO in the assessment framed u/s 143(3) of the Act at Rs.2,86,52,160/- vide order dated 18/12/2019. Later, the Ld. PCIT on verification of the assessment records observed certain defects in the income escaping assessment order dated 1....
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....lignite, CFL advance inspite the fact that there was huge difference in the ledger account. Similarly, the AO has not examined the transactions shown by the assessee in the books of accounts to wards cash payments above Rs. 35,000/- in respect of various freight accounts violating the provisions of section 40A(3) of IT Act as discussed in the preceding paras. Further, the AO has also failed to consider the enquiry report received in the case that the assessee has shown less profit to the tune of Rs. 19,23,12,137/- based upon the information of 16% share of one of the partners namely Shri Ravin bhai D Solanki in the firm. This shows that the assessee firm had the total profits of Rs. 21, 75,89,563/- while it has declared the profit of Rs. 2,52,77,426/- in the return of income. Similarly, the AO has also not examined the genuineness of the sundry creditors shown outstanding as on 31-03-2012 which appeared to be doubtful. 12. In view of the above discussion, it is apparent that AO has not properly examined the facts of the case and ignored the verifications as desired on the facts of the case in view of the aforesaid issues. This has rendered the order erroneous as well as prejudic....
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....uiries or verification as outlined above and simply accepted the assessee's submission. In this manner the assessee's case is also covered under para 'a' of Explanation 2, of section 263(1) of I. T. Act Therefore the order passed by the AO is erroneous and prejudicial to the interest of revenue to that extent. 20. Keeping in view these facts, I am of the considered view that this is a fit case for invoking section 263 of I.T. Act as the twin conditions namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (li) it is prejudicial to the interests of the revenue are satisfied. The AO is directed to make fresh assessment keeping in view the observations made above, after conducting necessary verifications and inquiries and after providing proper opportunity of being heard. 4. Being aggrieved by the order of the Ld. PCIT, the assessee is in appeal before us. 5. The Ld. AR before us filed a paper book running from pages 1 to 269 and submitted that all the ledger copies representing the advance freight charges paid were furnished during the assessment proceedings which are place on pages 19 to 226. As per the Ld. AR the advances given u....
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....ssary verification as per the provisions of law. The Ld. DR further submitted that there is no damage/harm to the assessee to explain the facts of the case as pointed out by him before the ITAT. The Ld. DR vehemently supported the order of the authorities below. 10. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the assessment framed by the AO u/s 147 r.w.s. 143(3) of the Act has been held as erroneous in so far prejudicial to the interest of Revenue on account of various counts but to the extent of non-verification/non-application of mind by the AO. All the necessary details have been elaborated in the preceding paragraph and therefore we are not inclined to repeat the same for the sake of convenience and brevity. 10.1 As regards to the non-verification/ mismatching in the amount of freight advances vis-a-vis freight charges shown in the balance sheet as on 31/03/2012, we note that the AO has verified the necessary details during the income escaping proceedings and reached to the conclusion that there is no mismatch in the amount of freight advances shown in the ledger vis-a-vis s....
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.... if he were acting as an appellate authority. 10.3 On merit of the case, we have perused the copy of the ledger under the head Cement Freight paid advance placed on pages 58 to 65 of the paper book and note that the entire amount of such advance was adjusted against the cement freight expenses and therefore, no closing balance shown against such cement freight paid advance in the balance sheet. As such, what we find is this that the Ld. PCIT has referred to the cement freight paid advances ledger showing under the debit column after ignoring credit shown under such advance ledger. As such, the Ld. PCIT after ignoring the credit entries in such ledger has wrongly assumed that the advances shown under the debit column should match with the advances shown in the balance sheet as on 31/03/2012. However, we find that the approach adopted by the Ld. PCIT was erroneous as he cannot pick and choose only debit side of ledger after ignoring credit entries shown in such ledger account. In view of the above, we dis-agree with the findings of the Ld. PCIT. 10.4 Coming to the remaining defects as pointed out by the Ld. PCIT, in this regard we observe that the provision of section 147 of the Ac....
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....hwas the basis of the formation of the season to believe is not assessed or reassessed, itwould not be open to the Assessing Officer to independently assess only that incomewhich comes to his notice subsequently in the course of the proceedings under thesectionas having escaped assessment. If upon the issuance of a notice under section 148(2), theAssessing Officer accepts the objections of the assessee and does not assess or reassessthe income which was the basis of the notice, it would not be open to himtoassessincome under some other issue independently. Parliament when it enacted the provisions of section 147 with effect from 1-4-1989 clearly stipulated that the Assessing Officer has to assess or reassess the income which he had reason to believe had escaped assessment and also any other income chargeable to tax which came to his notice during the proceedings. In the absence of the assessment or reassessment of the former, he cannot independently assess the latter. 10.5 At this juncture, we are inclined to refer the provision of section 147 of the Act, which reads as under: 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped asses....
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....resaid provision, notwithstanding that such issue does not form part of reasons recorded for reopening of assessment. Thus, on a holistic reading of section 147 of the Act it becomes very much clear that along with escaped income for which the assessment was reopened, the assessing officer can assess other escaped income which subsequently comes to his notice in course of re-assessment proceedings. In the facts of the present case, undisputedly, the issues raised by learned PCIT neither were the subject matter of re opening as per reasons recorded, nor did such matter come to the notice of the assessing officer in course of re-assessment proceedings. 10. The reopening of assessment as contemplated under section 147 of the Act is for the specific purpose of assessing the escaped income. Therefore, in a reassessment proceeding, the assessing officer can only assess that income which has escaped assessment. The income which is subject matter of assessment in the original assessment proceedings or which was in the domain of the assessing officer in course of original assessment proceedings certainly cannot be considered in the re-assessment proceedings. In our view, if at all, any o....