BLACK GOLD HOLDING P.LTD,MUMBAI vs. PR CIT -5, MUMBAI

On the other hand, it was argued by ld. CIT DR that no enquiry has been made by the AO, which is clear from the assessment order. As per ld. DR the assessee did not produce any such agreement to show as to how the above assignment of scrap was done by its Promoter/Director from his individual capacity to the company. Reliance was placed on the decision of Hon’ble Madras High Court in the case of Amalgamations 238 ITR 963 in support of the proposition that an incorrect assumptions of facts by the AO renders an assessment order as erroneous. Reliance was also placed on the decision of Hon’ble Supreme Court in the case of Malabar Industrial Co Ltd., 243 ITR 83 in support of the proposition that non-application of mind on the part of AO on the facts so collected by him also satisfy the requirement of the order being erroneous.

We have considered rival contentions, gone through the orders of authorities below and also deliberated on the judicial pronouncements cited by ld. AR and DR during the course of hearing before us. From the record we found that the AO evidently did not apply his mind to the admitted fact, which came to the notice of the CIT, that there was no written agreement of assignment of scrap by the Promoter/Director to the assessing company. The AO completely omitted the issue in question from consideration that assignment of scrap in favor of the assessee Company without any valid written agreement, which led him to frame the assessment order in an arbitrary manner. The erroneous nature of the Assessment Order led to the assessment of the sale proceeds of the scrap in the hands of the assessee company, whereas the said property belonged to its Promoter/Director Shri Anand Agarwal. Such a view of the AO is unsustainable in law. Thus, it is clear from the above that the AO has framed the assessment without application of mind and without making any enquiry with regard to the fact that any prudent business man would dispose of scrap worth of Rs.84,00,000/- for Rs.1/- only. The AO has also not tried to find out for such insignificant value of scrap, security deposit of Rs.6.75 crores was given. It was also not enquired as to why the assessee received advance sale consideration which was three times the value of the assets. Merely framing assessment without making any enquiry and without application of mind renders the order of AO as erroneous as well as prejudicial to the interest of revenue. Accordingly, we do not find any reason to interfere in the order of CIT setting aside the assessment order for framing afresh after making necessary inquiries.

In the result, appeal of the assessee is dismissed. Order pronounced in the open court on this 22/07/2016.