TaxTMI 
TaxTMI 
2023 (1) TMI 1496
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....s well as on the facts of the case in taking the action u/s 263 of the Act on the allegations that: (a). There is fall in G.P. during the year A.Y. 2007-08 as compared to preceding years. (b). That the correctness of the valuation of raw materials, semi-finished goods and finished goods have not been verified by the AO at the time of assessment proceedings. In absence of proper verification of stock the assessment order u/s 143(3) passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue. (c). That It is seen that genuineness and reasonableness of payments made by the assessee company to the persons covered u/s 40A(2)(b) of the I.T. Act have not been verified by the AO. Similarly, the assessee company has made purchases of raw material, intermediaries and finished goods from the companies which are under controlled of the Directors of the assessee company. The genuineness and reasonableness of thesetransactions are also not verified by the AO. (d). That the assessee company has claimed some major expenses in the profit and loss account and the A.R. has filed copy of ledger accounts in respect of some of the expenses ....
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.... during the year A.Y. 2017-18 which is 18.87% as compared to preceding years as in A.Y. 2016-17 at 19.12% and in A.Y. 2015-16 at 19.34%. (ii). The correctness of the valuation of raw materials, semi-finished goods and finished goods have not been verified by the AO at the time of assessment proceedings. In absence of proper verification of stock the assessment order u/s 143(3) passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue. (iii). It is seen that genuineness and reasonableness of payments made by the assessee company to the persons covered u/s 40A(2)(b) of the I.T. Act have not been verified by the AO. Similarly, the assessee company has made purchases of raw material, intermediaries and finished goods from the companies which are under control of the Directors of the assessee company. The genuineness and reasonableness of these transactions are also not verified by the AO. (iv). The assessee company has claimed some major expenses in the profit and loss account and the A.R. has filed copy of ledger accounts in respect of some of the expenses and it is seen that some major expenses are not verified by the AO by cal....
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....l are the part of trading results. The ld. A/R also stated that the AO has taken a possible view after considering all the material, details and application of mind and passed assessment order. The ld A/R has also stated that the ld. AO has only see the G.P rate and expenses and other side the ld. Pr. CIT has ignored the N.P rate of 2.85% declared by the assessee for the years which is very higher side in comparison to earlier years which was only 1.15% whereas the fall in G.P. rate was only 0.25%. The ld. AR has also stated mainly followings 3. Only G.P. rate and expenses issue seen by the Pr. CIT not N.P. rate: The ld. Pr. CIT has alleged regarding the lower G.P. rate, expenses etc. and according to him the assessee has concealed the income and the income should be more than to the declared. In this regard it is submitted that the ld. Pr. CIT has only see the G.P. rate. However Pr. CIT has ignored the very vital facts that the N.P. rate is very higher side in comparison to last year. The Fall in the G.P. only 0.25% and at the same time the N.P. rate is increased by 1.70% as the assessee has declared 2.85% N.P. rate as against 1.15% in the previous years. The assessee has decla....
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....e enquiries may be sufficient (here AO), however, the same may be insufficient for the other (here Pr. CIT). There is no definition of proper inquiry in the act. There is no straight jacket formula or parameter to make inquiry in the assessment proceedings. What is required is that the AO should frame the assessment in accordance with the provisions of the Act, as interpreted and in the light of the relevant judicial pronouncements, as available on the date of framing the assessment or material available before him. The AO being a quasi-judicial authority can also take support from one set of the decisions, if there, in case is a diversions of opinion. He can't be directed to make an assessment in a particular manner, as specifically prohibited by S. 119. 8.1 No requirement of deep investigation: Thus, on the perusal of the order of the Pr. CIT it is very clear that he was of the view that the AO must have made deep investigation or inquiry and in the case of Arvind Bhartiya Vidhyalaya Samiti v/s ITO 94 TTJ 614(Jp). Where in held that Deep investigation is outside of the preview of assessment procedure". And also held there is no case laws which say for deep investigations Becau....
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....T ITA No. 156/Jodh/2018 19th March, 2020 15. Nokha Agro Sevices vs. Pr. CIT ITA No. 171/Jodh/2018 20th March, 202 16. Smt. Leela Choudhary v/s PR. CIT 289 ITR 226(Gau.) also refer, Saw Pipes Ltd v/s Add. PR. CIT 94 TTJ 1036(Del) 17. Malabar Industrial Co. Ltd. v/s PR. CIT 159 CTR(1)(SC), PR. CIT v/s Rayn Silk Mills 221 ITR 155(Guj.) 18. CIT v/s Paras Cotton Co. 288 ITR 211(Raj.) 19. Gaberial India Ltd. 203 ITR 108 (Bom) 20. CIT v/s Ganpat Ram Bishnoi 296 ITR 292(Raj.) 2.3 On the other hand, the ld. DR has supported the order of the ld. Pr. CIT and stated that the AO has not done proper and detailed inquiry, verification and examination which was necessary and there is lack of inquiry. 2.4 After going through the assessment details, replies, written submission, paper book filed by the assesse and arguments of the ld. DR, we found that in the present case the Assessing Officer has issued notice u/s 142(1) on 19.03.2019 available at PB 1-2, wherein he raised 16 queries as under 1. Brief description about nature of business. 2. Furnish GP and NP chart of current and preceding two year. Your explanation for an....
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....s already made examination and verification of the details and documents on the issues raised by the Pr. CIT and all the issues raised by the ld. Pr. CIT are already covered by the Assessing Officer in the query letter dt.19.03.2019 and queries raised by him and some of query may be connected to in one another. Thus after proper examination, verification and application of mind the Assessing Officer has passed the assessment order by taking a plausible view. Further on perusal of the issue raised by the ld. Pr. CIT it is also observed that all the issue are related to the addition and disallowance on various accounts, which may result in the trading additions, net income and in net profit. When the ld. Pr. CIT has already raised the issue regarding the fall in G.P. rate and if G.P. rate, if any, is applied, then in the trading result all the other issues are covered i.e closing stock or valuation of closing stock, purchases, trading result etc also include or Net profit rate is applied if any after rejecting the books of accounts, then there is no requirement of making various separate disallowances and additions is also the settled law. Further as the G.P. rate slightly down by 0.....
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....as stated nothing. Hence, if all the above conditions are absent then it cannot be termed that the order of the Assessing Officer is as erroneous and Prejudicial in the interest of revenue., It may be case of the insufficient inquiry in the opinion of the ld. Pr. CIT but it can be the case of sufficient inquiry in the opinion of . AO who has made the assessment after going through the details, replies filed by the assessee and past history of the assessee. Thus View taken by the AO is one of the possible views and the order of the AO cannot be termed as erroneous. There are various judicial pronouncements wherein it has been held that if the AO has taken one of the possible views then it cannot be said that the order of the AO as erroneous and Prejudicial in the interest of revenue. To this effect, the decision in the case of Dorabji Tata Trust vs. DCIT (EXEMPTION) ITA No. 3909/Mum/2019 28th December, 2020 (2021) 209 TTJ 0409 (Mumbai) delivered by the honble President and vice president held as under: "20. Undoubtedly, the expression used in Explanation 2 to Section 263 is "when Commissioner is of the view," but that does not mean that the view so formed by the Co....
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.... the detriment of anyone, unless circumstances so justify or warrant. What essentially follows is that unless the Assessing Officer does not conduct, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant- that an Assessing Officer is expected to be, Commissioner cannot legitimately form the view that "the order is passed without making inquiries or verification which should have been made". The true test for finding out whether Explanation 2(a) has been rightly invoked or not is, therefore, not simply existence of the view, as professed by the Commissioner, about the lack of necessary inquiries and verifications, but an objective finding that the Assessing Officer has not conducted, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant that the Assessing Officer is expected to be. 21. That brings us to our next question, and that is what a prudent....
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....r, as was said, to approach his work with suspicion or with a foregone conclusion that there is something wrong. He is a watch-dog, but not a bloodhound.". Of course, an Assessing Officer cannot remain passive on the facts which, in his fair opinion, need to be probed further, but then an Assessing Officer, unless he has specific reasons to do so after a look at the details, is not required to prove to the hilt everything coming to his notice in the course of the assessment proceedings. When the facts as emerging out of the scrutiny are apparently in order, and no further inquiry is warranted in his bonafide opinion, he need not conduct further inquiries just because it is lawful to make further inquiries in the matter. A degree of reasonable faith in the assessee and not doubting everything coming to the Assessing Officer's notice in the assessment proceedings cannot be said to be lacking bonafide, and as long as the path adopted by the Assessing Officer is taken bonafide and he has adopted a course permissible in law, he cannot be faulted- which is a sine qua non for invoking the powers under section 263. In the case of Malabar Industrial Co Ltd Vs CIT [(2000) 243 ITR 83 (SC)], H....
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.... claimed out or not. It does not authorise or give unfettered powers to the Ld Pr. CIT to revise each and every order, if in his opinion, the same has been passed without making enquiries or verification which should have been made." Further in the case of CIT v/s Ganpat Ram Bishnoi 296 ITR 292 the Honble Raj. High Court held ''that the record of proceedings clearly shows that the AO has framed his assessment after due application of mind and holding enquiries into all areas, which, according to the CIT have not been at all enquired into and the AO has acted merely on furnishing evidence on one single date. The Tribunal noticed that as per the record of the proceedings, the AO required the assessee to produce documents or material in relation to 10 different items, which included the details of capital contributed by partners, details of purchases made in excess of Rs. 20,000 with evidence, confirmation of unsecured loans, amongst other matters, which the AO desired to enquire into. The assessee has produced desired information. The AO studied the sundry creditors, unsecured loans and desired to furnish affidavits of unsecured loans and details of interest paid. The AO aga....