Case Law Details
SBS Clothing (P) Ltd. Vs. DCIT (ITAT Mumbai) – In this case, there was 5-fold increase on account of payment of salary when there was no substantial increase in the turnover. The AO vide note dated 25.10.2007 had asked for reasons for exorbitant rise in salary to which assessee filed letter dated 19.11.2003 replied that the same was because of payment made to job workers in the earlier years whereas in the current year job workers had been taken on salary basis and salary had been paid to them.
The order of assessment shows that the AO accepted the said claim of the assessee without any further enquiry or examination. Once, the assessee makes a particular claim, it is required to be examined and in case AO accepts the claim without any examination or enquiry, the order will be erroneous and prejudicial to the interests of the revenue. Therefore, on the facts of the case we are of the view that the CIT had jurisdiction under section 263 of the IT Act which has been rightly exercised by him. CIT is not bound by the report of AO. He has to pass the order after necessary application of mind, which has been followed in this case. The ld. AR has relied upon the decision in the case of Synergy Entrepreneur Solutions P. Ltd. (supra), which in our view is distinguishable. In that case the Tribunal noted that the CIT had held the assessment order to be erroneous and prejudicial on a ground different from the ground taken in the show cause notice which was not permissible under law. Moreover, the Tribunal also noted that even on merit, the issue of set off of speculation loss against business profit was covered in favour of the assessee by the Jurisdictional High Court in the case of CIT vs. Lokmat Newspaper (322 ITR 43) It was under these circumstances that the order of CIT was held to be devoid of any merit. The case is obviously distinguishable and not applicable to the facts of the present case.
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH ‘J’: MUMBAI
ITA No. 3541/Mum/2010
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