NARENDRA KUMAR SAHOO,DHENKANAL vs. PRINCIPAL CIT-2, BHUBANESWAR

Shri P.K.Mishra, ld AR appeared for the assessee and Shri Shri P.K.Mishra, ld AR appeared for the assessee and Shri Shri P.K.Mishra, ld AR appeared for the assessee and Shri M.K.Gautam, ld Pr. CIT (OSD) appeared for the revenue. M.K.Gautam, ld Pr. CIT (OSD) appeared for the revenue. M.K.Gautam, ld Pr. CIT (OSD) appeared for the revenue.

It was submitted by ld AR that in this case there is a delay of 19 days It was submitted by ld AR that in this case there is a delay of 19 days It was submitted by ld AR that in this case there is a delay of 19 days in filing the appeal, in filing the appeal, for which, an affidavit has been filed explaining the for which, an affidavit has been filed explaining the P a g e 1 | 6 reasons as being the illness of the counsel of the assessee. The affidavit filed by the assessee has not been found to be false. Consequently, the delay in filing the appeal is condoned and the appeal is being disposed of on merits.

It was submitted by ld AR that the original assessment in the case of the assessee came to be completed u/s.143(3) on 30.12.2016. It was the submission that the assessment was a ‘Limited Scrutiny assessment’ as has been specifically mentioned in page 2 para 2 of the assessment order. It was the submission that the assessee is a dealer in retail sale of IMFL and scrap business. During the relevant assessment year, the assessee had sold scrap in the form of empty bottle, empty cartoons and other scrap materials to an extent of Rs.27,85,785/-. It was the submission that the total turnover of the assessee was shown at Rs.5.03 crores whereas the sales of the assessee was only Rs.4.75 crores. It was the submission that it was on account of the cash deposits in the saving bank account being more than the turnover, the limited scrutiny had been invoked. It was the submission that the amount of Rs.27,85,785/- being the difference between the total turnover and the sales disclosed was the receipts from the sale of scraps. It was the submission that the assessee had in the course of assessment intimated the Assessing Officer that the assessee had purchased scrap of Rs.26,03,287/- and had sold the same at Rs.27,85,785/- and the transaction was not routed through the regular books of account maintain

In reply, ld Pr. CIT (OSD) submitted that the purchase and sale of the scrap materials has not been recorded in the trading account of the assessee. It was the submission that the ‘Limited Scrutiny’, admittedly was in respect of the deposit in the bank account to an extent of Rs.5.03 crores whereas the sale shown as per the audited accounts of Rs.4.75 crores. It was the submission that the sale of scrap to an extent of Rs.27,85,785/- would include a portion of capital expenditure which must have been outside the books. Ld Pr. CIT (OSD) relied upon the decision of the Hon’ble P&H High Court in the case of Surjit Motors vs ITO, (2007) 165 TAXMAN 228 (P&H) to submit that when purchase and sales are made outside the books, the Assessing Officer was right in making the addition in respect of unexplained and unaccounted purchases also. He placed reliance on the decision of the Co-ordinate Bench of this Tribunal in the case of ACIT vs Shubham Construction (2002) 77 TTJ 520 (Nagpur) to support his arguments that when it is an admitted fact that the purchases were not recorded in the regular books of account the source of investment in these purchases also remained unexplained. It was the submission that the order passed u/s.263 is liable to be upheld.

We have considered the rival submissions. A perusal of the order passed u/s.263 of the Act clearly shows that the Ld CIT in page 3 of his order mentions that after carefully going through the records, it is found that the issue has not been verified properly by the Assessing Officer. Consequently, he has invoked his powers u/s.263 of the Act on account of lack of proper enquiry and verification of the issues. Admittedly, the assessment is a Limited Scrutiny assessment. The assessment has been done for a very specific purpose that the deposits in the bank account exceeded the sales. The Assessing Officer has taken a possible view in regard to the difference between what has been recorded in the books and in respect of deposits in the bank account. Where the view has been consciously taken by the Assessing Officer unless it is shown that the view is erroneous and prejudicial to the interest of the revenue, the powers u/s.263 of the Act cannot be invoked. In the present case, the Assessing Officer was very well aware that the actual profit from transaction was only Rs.1,82,498/- but the Assessing Officer has consciously taken an estimation of the income from the sale of scrap. Once the estimation is done, in effect, it wipes out the possibility of all other additions in relation to such estimation. In these circumstances, as it is noticed that the Pr. CIT (OSD) has not been able to point out any specific error in the view as arrived at by the Assessing Officer, the order u/s.263 is unsustainable and consequently, same stands quashed.

In the result, appeal of the assessee stands allowed.