Income Tax Appellate Tribunal - Jaipur
Harish Sejwani, Kota vs Assessee on 28 January, 2014
IN THE INCOME TAX APPELALTE TRIBUNAL : JAIPUR BENCH : JAIPUR
BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND
SHRI N.K. SAINI, ACCOUNTANT MEMBER.
ITA No. 521/JP/2013
(A.Y. 2008-09)
Shri Harish Sejwani, Vs. The ACIT, Circle-1,
627, Dadabari, Kota (Rajasthan).
Kota (Rajasthan).
PAN No. AJYPK 1708 K
(Appellant) (Respondent)
Assessee by : Shri N.M. Ranka &
Shri N. K. Jain
Department By : Shri S.K. Khendelwal - D.R.
Date of hearing : 28/01/2014.
Date of pronouncement : 26/02/2014.
ORDER
PER HARI OM MARATHA, J.M
This appeal of the assessee for A.Y. 2008-09 is directed against the order of Ld. CIT (Admn.), Kota dated 07/03/2013 passed under section 263 of the I.T. Act, 1961 (hereinafter referred to as 'the Act' in short). 2 Briefly stated, the facts of the case are that regular assessment in this case was completed under section 143(3) of the Act on 31/08/2010 at 2 total income of Rs. 24,01,454/- as against returned income of Rs. 6,18,230/-.
3. The Assistant Commissioner of Income Tax, Kota who had passed this assessment order, proposed on revision of his order under section 263 of the Act vide letter No. 348 dated 30/05/2011 to the Ld. CIT, Kota, in respect of the following points:-
(1) During the assessment, Gross profit was estimated @19.7%o of total receipts and. this amounts to Rs. 5820828/-. Thereafter, additions, to be made, were calculated by subtracting gross profit declared by the assessee i.e.Rs. 4114040/--. Therefore, additions of Rs. 1706788/ -
(582O828 - 4114040) were made during the assessment. However, during the review it was found that gross profit declared by the assessee is Rs.2043798/- instead of Rs.4114040/-. Therefore additions required to be made is Rs.3777030/ - instead of Rs.1706788/- (2) The assessee debited Rs.156000/- as shop rend expenses. However no agreement of hiring is available in verification of the expenses claimed.
(3) The assessee has shown unsecured loans of Rs.8l 55283/- from six persons. However, confirmations were available in only two cases. In these cases also name, address & PAN is not available. Therefore, these loans are not verified.
(4) In the case of unsecured loans, account of Smt. Jyoti Jhamnani shows opening balance of Rs.2219451/- as on 01/04/2007 and credited Rs. 63000/- on 04/08/2007. In the name of Smt. Shalatntkt Devi, Jaipur, it shows that account pertains to Smt. Jyoti Jhamnani and amount credited in the name of Smt. Shakuntla Devi. No verification was made in this regard.
3(5) The assessee has shown interest free unsecured loans of Rs.8155283/-
from various parties. The relation between the assessee and these persons are not enquired justifying these interest free loans. Further creditworthiness of the persons giving interest free loans in not enquired during the assessment proceedings.
(6) The assessee has made withdrawal of Rs.1225000/- during the year.
Its utility was not enquired during the assessment proceedings.
4. On receipt of this proposal made under section 263 of the Act, a show-cause notice under section 263 of the Act vide letter dated 02/01/2013, was issued through registered post, fixing the date of hearing as 17/01/2013 and inviting assessee's objections, if any. In response thereto written submission was filed on 06/02/2013 from the side of the assessee which read as under:-
"In this reference it is humbly submitted that the assessment was completed u/ s 143(3) of the income tax act by the ld. Income tax officer by taking due care of the provision of the act.
Against the order of ld. assessing officer the Assessee preferred an appeal before the Hon'ble Commissioner of income tax (Appeals), Kota on the subject matter of addition in gross profit rate and the honourable commissioner of income tax kota has given substantial relief and accepted the contents of the assessee and allowed gross profit rate @16.68% of selling price after due consideration of recasted trading a/ c submitted before assessment proceeding as well on before the appellate authority.
However we humbly submit the detailed explanation and submission on the ground taken by your good self
1) Trading addition:- the recasted trading a/ c have been submitted during assessment proceeding keeping in mind the norms of excise policy as 4 well general trend in this tine of business. We draw your attention to the following facts:
a) The assessee was bound to purchase the IMFL and beer only from the Rajasthan state beverages corporations limited where there was no chance of negotiation in purchase price.
b) The retails trade price of the above products was also fixed.
c) as per the term no. 5.13 page no. 32 of the excise liquor policy the maximum retail sales price for the IMFL and beer was also fixed be the state excise department which in any could not exceed by 20% of margin/ profit but retailer was free to sale it at lower price.
d) The GP of the assessee in retail trade could not exceed by 16% (20/120*100).
e) The sale being of the excisable goods was subjected to frequent check by the inspectors and officers of the state excise department. Monthly statement with regard to purchase and sale of liquor were prepared and submitted to the excise department.
As refer above there is direct provision that the appellant can maximum charge 20% of the cost price which effectively comes to16% on sales price. Hence the appellant is bound by the law and cannot charge any extra amount over the pre determined price. Looking to the nature of trade the appellant has to offer discount to the various customer which will directly effect on the gross profit rate of the appellant Based on these facts all the expenses including direct and indirect are chargeable to profit and loss account nor to trading account as the assessee can realize maximum of 16.680/o of the selling price which is fixed by RSBCL. Therefore there is no scope assuming or presuming higher rate of gross profit or transfer of expenses from trading to profit and loss a/c or vice versa. To make the figures comparable with the previous year i.e. 2006-07 and 2OO7-OB the recasted trading a/ c was submitted to the assessing officer 5 and the same was accepted by him after due considering the provision of excise as well as previous track record of the assessee. Therefore there is no under asse3sment of gross profit by Rs. 2070242/- nor the assessment in prejudice to the interest of the revenue on the ground. You are humbly requested to reconsider these facts and pass the necessary order.
2) During the gear under consideration assessee has paid the rent of Rs. 156000/-for two shops i.e no 23 and 27 amounting Rs 66000/- and Rs. 90000/- respectively. The liability for deducting tax at source arrives only when Rent paid exceeds Rs 12000O Per annum to individual person. Hence there was no need to deduct tax at source.
3) During the year under consideration there was unsecured loan outstanding in the balance sheet of six persons. Confirmations for two persons were filed during the proceedings and rests were not produced because all the balances were carried forward from the previous year. However all the confirmations are enclosed with this letter for your kind verification."
The assessee has also filed copy of Rent agreement, copy of confirmation of accounts for verification also."
However, Ld. CIT after considering the above submission of the assessee and examination of the assessment record found that the Assessing Officer has completed his order in haste and in a routine manner. He also found lack of verification on Assessing Officer' part. According to him, the Assessing Officer has taken incorrect view of law which amounts to an error being prejudicial to the interest of the Revenue. After referring to certain decisions/ case laws has agreed with 6 the proposed action of the Assessing Officer and has found the assessment order dated 31/08/2010 as erroneous and prejudicial to the interest of the Revenue. Therefore, he has set aside the assessment order with a direction that denovo assessment order be made after making proper verification and conducting appropriate enquiries. Against this order, the assessee/appellant has come in appeal before the Tribunal by raising the following grounds:-
1. That on the facts, in totality of circumstances and in view of the issue relating to gross profit/trading addition having travelled in appeal and decided by the Hon'ble commissioner of Income-tax (Appeals), Ajmer in Appeal No. 103/2010-11 by order dated 30th November, 2012, the ld. Commissioner of Income-tax grossly erred in setting aside the said issue and restoring to the ld. Assessing officer, which is in contravention of Explanation (c) to sub-sec.(l) of sec.263 of the Act, is un-authorized, without jurisdiction and unsustainable on facts and in law.
2. That the issue with regard to shop rent of Rs.1,56,000/- set aside and restored to the ld. Assessing officer is bad as the rent so paid is similar to that of the immediate past assessment year of Rs.1,74,000/- and was supported by agreements filed. Such payment has been allowed in the past and there being no change on facts, the set aside and restoration is bad and un-sustainable on facts and in law.
3. That the third and fifth issue in relation to unsecured loans of Rs.81,55,283/- has been wrongly set aside and restored when the issue was examined in the course of the assessment proceedings, two confirmations of (i) Shri Bharat Jhamnani; and (ii) Jyoti Jhamnani were filed and both are assessees; balance creditors were old and no fresh amount was received during the previous year in question. The set aside and restoration is unsustainable on facts and in law.7
4. That restoration of the issue No.4 in respect of unsecured loans of Jyoti Jhamnani & Shakuntala Devi has been wrongly set aside and restored when copy of both the accounts were filed and were explained.
4.1 That the confirmations in respect of Smt. Jyoti Jhamnanr and Smt. Shakuntla Devi having been filed, the restoration is bad.
5. That copy of account having been filed and the withdrawals of Rs.
12,25,000/- having been explained with no tax effect, the restoration is unsustainable on facts and in law.
6. That the ld. Commissioner of Income -tax grossly erred in observing that the scrutiny assessment framed by the Assistant commissioner on 31.8.2010 is without due and proper enquiries, when all due necessary and requisite enquiries were made in the course of the assessment proceedings and order was made after scrutiny, verification, examination and satisfaction.
7. That the impugned order is without jurisdiction as it does not satisfy the twin conditions of being erroneous and prejudicial to the interests of the Revenue.
7.1. That the impugned is vague, evasive and unsustainable because of different view possible to be taken by ld. Commissioner of Income-tax.
8. That the learned Commissioner grossly erred in mechanically accepting the proposal of the Assistant Commissioner and making the order without appreciating material on record and without application of mind.
9. That the impugned order dated 07/03/2013 is without jurisdiction and misuse of authority in law.
5. Before us, it was argued by learned senior Advocate Shri N.M. Ranka that the order of Learned Commissioner Income Tax is not tenable in the 8 eyes of law because as per the provisions of section 263 of the Act the Ld. Commissioner has to satisfy himself by applying his mind to the assessment records after hearing the other party i.e. the assessee has to come to a conclusion that assessment order is not only erroneous but is also prejudicial to the interest of the Revenue to that extent, and thereafter he can revise it in the manner prescribed. It was argued that the Assessing Officer (Asstt. Commissioner of Income-tax, Circle-1, Kota) has proposed revision of his order and the Ld. CIT even without applying his own mind has followed it ditto. It was argued that this fact is evident from para 3 of the appellate order that he has not applied his mind at all before issuing the show-cause notice. Thus, he has contravened and ignored the important step which is necessary assuming jurisdiction under section 263 of the Act. The other contention learned senior Advocate is that the Commissioner has not even applied his mind to the reply given in respect of the show-cause notice by the assessee. It was stated that before the date of initiation of action under section 263 of the Act, the assessee had already filed appeal against the assessment order and the Ld. CIT(A), Kota had considered and disposed of the issue regarding addition made on account of gross profit rate and that had already merged with that order. Learned Senior Advocate argued that in law 9 Learned Commissioner is not empowered to revise any such item of income which has already been considered by the higher authorities. Thus, according to him the assumption of jurisdiction to that extent is illegal as per Explanation (1) appended to section 263 of the Act.
The Ld. Senior Advocate has filed a detailed written submission in support of the grounds raised in his appeal which are being extracted verbatim, as under:-
1. The assessee is an individual and is proprietor of M/s. Harish Kumar and Party, Kota. He is retail trading in IMFL & Beer for the last several years. He maintains regular and proper books of account supported by supporting record. The accounts for the accounting year ended on 31.3.2008 stands audited by Pawan Kumar Lalpuria, chartered Accountants, Kota on 11.9.2008. Return of income of Rs.6,18,230/- was filed on 30th September 2008 which was processed u/s.143(1) on 26.5.2009. Audit Report along with audited accounts was submitted. Copy of Audit report dated 1 1.9.2008 and audited accounts is (PB 1 to 14).
2. The case was selected for scrutiny. Notice u/s. 143(2) was issued by the Assistant commissioner of Income-tax, circle 1, Kota on 29h september,2009 which was complied with. Notice u/s.142(1) along with detailed query letter was issued on 31.3.2010. Shri Vinod Gupta, chartered Accountant and A.R. along with Shri Arpit Jain, CA and Shri Ashish Sharma, CA attended on various dates and filed replies, explanations, clarifications, confirmations etc. Books of account and other documents were produced which were examined, scrutinized, verified and after complete scrutiny, verification, examination and satisfaction, an assessment u/s.143(3) was made on 31.8.2010 computing total income at Rs.24,O1,454/- against returned income of Rs.6,18,230/-. Thus an addition of Rs. 17,83,224/- was made.10
3. Being aggrieved from rejecting of books of account, application of section 145(3) of the Act, estimating gross profit and making trading addition, an appeal was preferred before the Commissioner of Income-tax (Appeals), Ajmer, which was registered as appeal No.103/2010-11. The Department was duly informed but none appeared before the CIT (A). The ld.
Commissioner of Income-tax (Appeals) after detailed discussion and referring to the order of the Hon'ble ITAT for the immediate past assessment year 2OO7-08 considered the trading addition in extenso after dealing in para 4.3 of its order dated 30.11 .2012. The Assessing Officer was directed to adopt the G.P. rate of 16.680/0 as in the last year. Balance addition was deleted. It appears the order being in accord with the earlier orders of the Hon'ble Tribunal was accepted by the Revenue and no second appeal was preferred. Effect to the appellate order was given and trading addition was reduced. The order of the CIT (A) became final and the order of the Assessing Officer merged in the order of the CIT (A). Copy of order of learned CIT (A) dated 30th November, 2Ol2 is (PB 15 to 20).
4. To the utter surprise of the assessee, the assessee received a notice No. CIT/ITO(T)KTA/2OlI-12 dated 20.I.2Ol2 by registered post on 2B.I.2Ol2 for appearing and showing cause as to why the power be not exercised uls.263 in respect of the following three points:-
(i) There is under assessment of Rs. 20,70,242/- in making trading addition;
(ii) Shop rent of Rs. 1,56,O00/ - has agreement produced;
(iii) In respect of unsecured loans, only two confirmations were available out of six persons. Copy of the notice dated 20/01/2013 is PB 21.
4.I It appears the ld. commissioner received a proposal from the Assistant Commissioner of Income-tax, Circle 11, Kota vide letter No.348 dated 30.5.2011 proposing action u/s.263 of the Act. The notice dated 20.1.2O12 as aforesaid was issued finding the other issues as non-existent and not covered u/s.263. It is apparent. However, it appears on change of opinion, the ld. Commissioner claims in para 3 of the impugned order as to a show 11 cause notice dated 2.L,2OL3 issued through Registered A.D. for hearing on L7.L.2OL3, though not received by the assessee.
5. Reply to the show cause notice was submitted on 6.2.2013 objecting to the proposed (i) trading addition; (ii) rental for two shops; and the unsecured loans. Subsequently, further objections dated 13.2.2O13 and 26.2.2O13 were submitted along with copy of rent agreements, confirmations and other material supporting the original assessment. Copy of written submissions dated 6.2.2013, 13.2.2OI3 and 26.2.2013 along with supporting material submitted before the Ld. CIT are PB 22 to 38.
6. However, the ld. commissioner misconstruing different decisions restored all the six issues without un-reasoned finding, holding the assessment order to be erroneous in-so-far as it is prejudicial to the interest of the Revenue. He erred in holding that it is clear that the Assessing officer had passed order without due and proper enquiries whereas due and proper enquiries have been duly conducted by the ld. Assessing Officer in the scrutiny assessment. He restored the matter back for further enquiry and to frame assessment. The impugned order is without jurisdiction and bad on facts and in law. Hence appeal.
Ground No.1 - Gross Profit / Trading addition.
The issue with regard to the gross profit / trading addition was in challenge in appeal before the ld. CIT (A). The ld. CIT (A) following order of the Hon'ble Tribunal for the assessment year 2006-07 dated 29/08/2008 allowed appeal in part and reduced The trading addition. Hence, the restoration to the ld. Assessing Officer and its consideration by the ld. Commissioner is in Contravention of Explanation(c) to sub-section l of sec.263of the Act. The action is without jurisdiction. CIT v. Jain Construction Co. (2013) 257 CTR 336 (R) Para 24. Otherwise also it laws fully explained to the learned CIT .
Ground NO.2 - Shop rent of Rs. 1,56,000/-
Two shops were tenanted, for which, in the immediate past assessment year rental of Rs. 1,74,000/- was paid and allowed.
12The rent was paid to the followings:-
Rs.66,000/- Shri Bharat Jhamnani Last year Rs.78,000/-.
Rs.90,00O/- Smt. Jyoti Jhamnani Last year rent of Rs. 96,000/- was paid to Shri Parshuram Jhamnani.
Two agreements for rent were submitted. Both the owners are tax payers (PB 26 to 31).
No valid reason to restore. Set aside is bad.
Ground No.3 - Unsecured Loans of Rs. 81,85,283/-
In the course of original assessment two conformations of (i) Shri Bharat Jhamnani and (ii) Smt. Jyoti Jhamnani, both assessees, were filed being fresh credits (PB 37 to 38) Other creditors were old and no fresh amount was received during the Previous year in question. Hence, no fresh conformation was demanded, nor required and was not filed.
Shri K.C. shah Rs.5.00 lacs (Since assessment year 2006-07) (PB 36) Smt. Shakuntla Devi Chaturvedi - Rs.7,12,978 (Since assessment Year 2006-
07) (PB 35) Chambal Brew. & Dist. Ltd. - 40,29,200/- (Since assessment Year 2006-07) (PB 33) Rajasthan Telematics Limited - Rs.3,26,000/- (Since assessment Year 2006-
07) (PB 32).
The set aside is unjustified and without jurisdiction. Ground No.4 - unsecured loans of Jyoti Jhamnani & Smt. Shakuntala Devi. 13
Fresh confirmation of (i) Smt. Jyoti Jhamnani and (ii) Smt. Shakuntala Devi were submitted before the ld. CIT (PB 38 - 35). Smt. Shakuntala Devi had opening balance of Rs.7.00 lacs. Only interest was credited and allowed. She gave her PAN number.
The set aside is without jurisdiction.
Ground No.5 - Withdrawals of Rs. 12,25,000/-
Copy of accounts and supporting material was filed and was explained before the ld. CIT (A).
Restoration is bad.
Ground Nos. 6-9 As is apparent on records relevant and necessary material was before the ld. Assessing Officer. All necessary and requisite enquiries were duly made by the ld. Assessing officer. The ld. commissioner has not given any reason and valid reason for restoration. The impugned order is vague, unreasoned, without application of mind and ignoring the material on record at the assessment stage and before the ld. CIT. The order of the ld. Assessing officer is not erroneous and prejudicial to the interests of the Revenue. The restoration is arbitrary, capricious, without material, contrary to the material on record and without any definite direction. It is misuse of Power conferred, u/s.263. The entire action is without jurisdiction and the impugned order deserves to be quashed. Appeal deserves to be allowed with costs.
We request accordingly."
6. Per contra, the Ld. CIT D.R. Shri A.K. Khandelwal has supported the order of the Commissioner passed under section 263 of the Act. Further, he invited our attention towards paragraph 9, at page 6, of the appellate order. He openly read this entire para in which the finding given by Ld. 14 Commissioner in respect of all the grounds taken in the show-cause notice has been given in this Para 9 of the appellate order which is being extracted, verbatim hereinunder:-
"9. The jurisdiction u/s 263 of the IT Act 1961 has been conferred to the Commissioner of Income Tax to revise the order of Assessing Officer which he finds to be erroneous and prejudicial to the interest of revenue, only because there is no appeal filed by the Department against the order of Assessing Officer. So the primary objectives of the provisions of this section are to vest some corrective powers in the hands of the Commissioner of Income Tax to modify or cancel any order by Assessing Officer if it is found to be erroneous in so far as it is prejudicial to the interests of revenue. It is clear from the facts apparent from records that the Assessing Officer had passed an order u/s 143(3) without due and proper enquiries which he is expected to make as an investigator as he cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. I, therefore, in the facts and circumstances as discussed above and respectfully following the above referred judgments, consider it fit to set aside the assessment with a direction to the Assessing Officer to frame it denovo after making proper enquiry and verification of books of accounts and other record/ documents & after following the directions given above.
7. Before we consider the rival contentions, we would like to discuss the scheme of revisionary powers provided under section 263 of the Act as under:-
"The subject of 'revision under section 263' has been vastly examined and analyzed by various Courts including that of Hon'ble Apex Court. The revisional power conferred on the CIT vide section 263 is of vide amplitude. It enables the CIT to call for and examine the records of any proceeding under the Act. It empowers the CIT to make or cause to be made such an enquiry as he deems necessary in order to find out if any order passed by Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue. The only limitation on his 15 powers is that he must have some material(s) which would enable him to form a prima facie opinion that the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue. Once he comes to the above conclusion on the basis of the 'material' that the order of the Assessing Officer is erroneous and also prejudicial to the interests of the Revenue, the CIT is empowered to pass an order as the circumstances of the case may warrant. He may pass an order enhancing the assessment or he may modify the assessment. He is also empowered to cancel the assessment and direct to frame a fresh assessment. He is empowered to take recourse to any of the three courses indicated in section 263. So, it is clear that the CIT does not have unfettered and unchequred discretion to revise an order. The CIT is required to exercise revisional power within the bounds of the law and has to satisfy the need of fairness in administrative action and fair play with due respect to the principle of audi alteram partem as envisaged in the Constitution of India as well as in section 263. An order can be treated as 'erroneous' if it was passed in utter ignorance or in violation of any law; or passed without taking into consideration all the relevant facts or by taking into consideration irrelevant facts. The 'prejudice' that is contemplated under section 263 is the prejudice to the Income Tax administration as a whole. The revision has to be done for the purpose of setting right distortions and prejudices caused to the Revenue in the above context. The fundamental principles which emerge from the several cases regarding the powers of the CIT under section 263 may be summarized below:
(i) The CIT must record satisfaction that the order of the Assessing Officer is erroneous and prejudicial to the interests of the revenue. Both the conditions must be fulfilled.
(ii) Section 263 cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer and it is only when an order is erroneous, that the section will be attracted.16
(iii) An incorrect assumption of facts or an incorrect application of law will suffice for the requirement or order being erroneous.
(iv) If the order is passed without application of mind, such order will fall under the category of erroneous order.
(v) Every loss of revenue cannot be treated as prejudicial to the interest of the revenue and if the Assessing Officer has adopted one of the courses permissible under law or where two views are possible and the Assessing Officer has taken one view under with which the CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the Assessing Officer is unsustainable under the law.
(vi) If while making the assessment, the Assessing Officer examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income, the CIT, while exercising his power under section 263, is not permitted to substitute his estimate of income in place of the income estimated by the Assessing Officer.
(vii) The Assessing Officer exercise quasi-judicial power vested in him and if he exercise such power in 17 accordance with law and arrives as a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not feel satisfied with the conclusion.
(viii) The CIT, before exercising his jurisdiction under section 263, must have material on record to arrive at a satisfaction.
(ix) If the Assessing Officer has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation be a letter in writing and the Assessing Officer allowed the claim on being satisfied with the explanation of the assessee, the decision of the Assessing Officer cannot be held to be erroneous simply because in his order he does not make an elaborate discussion in that regard.
Adverting to the facts and grounds of the appeal under reference, we have found that the Learned Commissioner has simply show-caused the assessee on the basis of proposed grounds referred to him for revision by the Assessing Officer. The procedure, which has been followed by the Learned Commissioner, seems to be unknown to law envisaged under section 263(1) of the Act. The Commissioner as we have discussed above, may call for and examine the record of any proceeding undertaken under this Act and if he considers that any order passed by the Assessing Officer 18 is erroneous insofar as it is prejudicial to the interest of the Revenue, he may after giving an opportunity of being heard to the assessee and after making or causing to be made such enquiry as he deems necessary, may pass such an order as the circumstances of the case may justify. The term 'record' used in this section includes all records relating to any proceedings under this Act available at the time of examination by the Commissioner. As per Explanation (c) of section 263(1) of the Act if any appeal has been filed against the assessment order and the appellate Commissioner has considered and decided the issue that 'issue' cannot be considered and revised by the Commissioner under section 263 of the Act. In this case, neither Commissioner has called for the record of the assessment order in question nor has examined the record stipulated in the Act but he has simply acted as 'post office' and has show-caused all on the grounds which were proposed by the Assessing Officer for the reasons best known to him, for revising his own. The macrospic perusal of the appellate order clearly establishes that without giving any finding on these grounds and without discussing about the reply given by the assessee, he has discussed the powers invested in the Commissioner under section 263 of the Act and has set aside the assessment order by holding the assessment order as erroneous and prejudicial to the interest 19 of the Revenue. Had he considered the reply of the assessee he would have definitely found that one of the grounds raised in the proposed action which is regarding estimated trading addition, has already merged with the order of Ld. CIT(A) and as it has gone out of the purview of his powers to revise the same. Therefore, we are of the considered opinion that the assumption of jurisdiction by the Ld. CIT is invalid. Any action taken in contravention of the provisions of the Act and without application of mind and acting as a post office, cannot justify even the initiation of revisionary proceedings under section 263 of the Act. In fact the appellate order is an apt example of non-application of mind by Commissioner himself he has not even considered any found any error in the order himself which can be stated to be prejudicial to the interest of the Revenue and has rather acted on the 'proposed grounds' referred to him by the Assessing Officer, who passed the assessment order. Moreover, the Learned Commissioner has not even examined the grounds raised in the show-cause notice and he has not even discussed the reply of the assessee given with regard thereto. He has not even discussed the reasons for his conclusion that the assessment order in question is both erroneous and prejudicial to the interest of the Revenue. Thus, the order 20 of the Learned Commissioner himself suffers from the vice of non-application of mind.
8. Having held as above, we would also like to discuss the merits of the grounds on the basis of submissions made before us vis-à-vis the assessment order and the appellate order, in order to settle the issues for good with a view to ward of multiplicity of proceedings.
9. We have found that the assessee as an individual and as proprietor of M/s. Harish Kumar Party, Kota, has been trading in IMFL & Beer as a retailer for the last several years. He maintained proper books of accounts regularly during the course of business. The accounts, for the accounting year ending on 31/03/2008, are audited by the Chartered Accountant vide report dated 11/09/2008. The assessee filed his return of income on 30/09/2008 disclosing total income of Rs. 6,18,230/- along with audited report and audited accounts. The regular assessment was completed under section 143(3) of the Act at a total income of Rs. 24,01,454/- as against returned at Rs. 6,18,230/- on 31/08/2010, resulting into an addition of Rs. 17,83,224/-.
10. Being aggrieved against the rejection of books of accounts and application of section 145(3) of the Act the assessee has filed appeal 21 before the Ld. CIT(A), Ajmer which was registered as Appeal No. 103/2010-11 who passed his order. After relying on the Tribunal's order passed assessee's own case for the A.Y. 2007-08 has directed the Assessing Officer to adopt gross profit rate of 16.68% under section 145(b) as against estimated @ 19.7% by the Assessing Officer, and the balance addition has been deleted. Copy of the order passed by the Ld. CIT(A) dated 30/11/2012 is enclosed at P.B. 1 to 20. Therefore, the issue regarding trading addition cannot be a subject matter of revision in view of section 263(1) Explanation (c) of the Act, as it has already merged with that order of Ld. CIT(A).
11. The second issue is regarding rent receipt of Rs. 1,56,000/- regarding which it has been mentioned that the Assessing Officer has accepted the same without examining the agreement between the parties. The assessee has received a rent from two persons namely:- (1) from Shri Bharat Jhamnani of Rs. 66,000/- as against received Rs. 78,000/- in the last year, and (2) from Smt. Jyoti Jhamnani of Rs. 90,000/- as against last year rent of Rs. 96,000/-. The assessee produced copies of rent agreements. Both the parties are taxpayers. This fact is fortified by evidence enclosed at pb 26-31. In this regard, we have not found any reason for the Commissioner in treating it as non-application of 22 mind by the Assessing Officer. The Assessing Officer had examined all documents and had allowed such rent receipts in the last years. The Ld. Commissioner has simply revised this issue whereas the Assessing Officer has followed his own action taken in past year. In these facts we are unable to find any reason with the Commissioner to revise his order. Such a cursory action cannot be approved by us.
12. The third ground is regarding unsecured loans. After hearing both sides it is found that during the course of original assessment proceedings the assessee filed confirmations with regard to Shri Bharat Jhamnani & Smt. Jyoti Jhamnani, both assessed to tax and were fresh creditors. Copies are these are available at pb 37 to 38. The other creditors were old and no fresh amount has been received during the previous year in question. It is found that the Assessing Officer did not demand fresh confirmation from the assessee. Shri K.C. Shan is an old creditor since assessment year 2006-07. Copy of proof is enclosed at P.B. 35. Smt. Shakuntla Devi Chaturvedi is old creditor since assessment year 2006-07, likewise Chambal Brew & District. Ltd. is also an old creditor since 2006- 07, proofs copy enclosed at pb 33. The Rajasthan Telematics Ltd. is also an old creditor copy of proof enclosed at pb 32. Thus, in our considered opinion on merits also, no case has been made out that the order is both 23 erroneous and prejudicial to the interest of the Revenue. The Assessing Officer examined and found all the creditors as explained. When the Assessing Officer has taken one view after examining these issues the Learned Commissioner cannot substitute his own view.
13. Ground No. 4 is regarding unsecured loan of Jyoti Jhamnani & Smt. Shakuntala Devi. Before Assessing Officer, the assessee submitted fresh confirmations in regard to both these and were also submitted before the CIT P.B. 38-35 Smt. Shakuntala Devihad's opening balance is of Rs. 7 Lac. the assessee credited interest which has been allowed. She has also given her PAN number. Thus, this ground is also not appropriate and the assessment order cannot be revised on this ground either.
14. Ground No.5 of the show-cause notice is regarding withdrawals of Rs. 12,25,000/-. It is noticed by us that before the Assessing Officer copies of accounts and supporting material were filed and were explained. Before Ld. Commissioner also this fact was explained but without recording any reason he has set aside this ground. The Hon'ble Rajasthan High Court in the case of CIT Vs. Jai Mewar Wine Contractors (2001) 251 ITR 785 (Raj) has held that without taking an objective view that the order is erroneous and prejudicial to the interest of the 24 Revenue, cannot revise an order. We have discussed above that the satisfaction of the Commissioner has to be based on objectively justifiable and cannot be mere ipse dixit of the Commissioner. The Hon'ble Supreme Court long back held while deciding the case of CIT VS. G.M. Mittal Stainless Steel Pvt. Ltd. reported in (2003) 263 ITR, that the jurisdiction under section 263 of the Act can be exercised only when twin conditions are satisfied. In view of the foregoing discussion, we are of the considered opinion that this is not a fit case for revision and on both counts, the appellate order has to be turned down. In support of our above view, we draw support from the decision of the case of Jeewanram Choudhary Vs. CIT (2013) 153 TTJ 195 of the Jodhpur bench, who has taken a similar view regarding merger of the ground in appellate authority and application of mind for assumption of jurisdiction. The held portion of this order reads as under:-
"AO having rejected assessee's books of account after discovering certain defects and determined the income by applying net profit rate of 9.5 per cent having regard to the past history of the case as against 8.5 percent declared by the assessee, it cannot be said that the AO did not apply his mind while framing the assessment and therefore, the order passed by the AO cannot be held to be erroneous or prejudicial to the interests of the Revenue; order under section 263 passed by the CIT on the ground that the AO ought to have applied profit rate of 10 per cent instead of 9.5 per cent and made separate additions for the said defects is not sustainable.25
15. Accordingly from all parameters, we have found that the appellate order cannot be sustained in the eyes of law and deserves to be set aside. Therefore, we set aside the appellate order passed by the Learned Commissioner Income Tax, on 07/03/2013 and restore the assessment order dated 31/08/2010.
16. In the result, appeal of the assessee stands allowed.
(Order Pronounced in the Court on 26 t h February, 2014).
Sd/- sd/-
(N.K.SAINI) (HARI OM MARATHA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 26 t h February, 2014.
vr/-
Copy to:
1. The Appellant
2. The Respondent
3. The ld.CIT
4. The CIT(A)
5. The D.R
Assistant Registrar,
ITAT, Jaipur.