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2006 (4) TMI 241 - ITAT PATNAChallenged the assumption of jurisdiction - Order passed by CIT u/s 263 - Non issuance of notice - change in opinion - erroneous nor prejudicial - adverse observation with regard to order u/s 154 - whether the Tribunal is empowered to admit new/additional ground raised for the first time before it - HELD THAT:- While deciding a tax appeal, the appellate authority - first appellate authority - as also Appellate Tribunal- had jurisdiction to permit additional grounds raised before them, even though those grounds may not have been raised before either the Assessing Officer or the first appellate authority, so long as the points for decision arise from the proceedings which were the subject-matter of the assessment before the assessing authority. It appears that the Assessing Officer had adopted the report of the Government Valuer in good faith and in a bona fide manner as the true and correct report of a superior and technical expert in the line of the work more so, when the documentary evidence under reference had been obtained by no less an authority than the Additional Director of Income-tax (Investigation), Patna, and when such a report had been passed on to the Assessing Officer. He was bound to adopt the same. There may be a mistake in the valuer's report and consequently loss to revenue but then the action of the Assessing Officer cannot be levelled as erroneous and order may be prejudicial to the interest of the revenue but if it is not erroneous the same cannot be cancelled by the ld. CIT while exercising jurisdiction u/s 263. Even if, there was an error in the Government Valuer's report this was the error committed by the Government Valuation Officer but not by the Assessing Officer and if due to mistake in the report of the valuer some obvious mistake has occurred, remedies in section 154 and not u/s 263. So far, the Assessing Officer is concerned, he has acted in good faith and in a bona fide manner. Thus, the provision of section 263 is contemplated to cover within its ambit & scope, the error which is committed by the Assessing Officer, and not those errors which are committed by any other authority. Thus, the assumption of jurisdiction by ld. CIT u/s 263 is also invalid and illegal on this score. We find that the decision of ld. CIT, in setting aside the order that too without any specific direction, is also not sustainable. On perusal of entire facts on record it is apparent that the Assessing Officer has made necessary enquiries, and has also confronted the assessee on alleged excess stock and on being satisfied with the evidences adduced, has not drawn any adverse inference. Thus in our view, the issue of alleged excess stock was fully adjudicated upon. Vide reply, it was brought to the notice of Assessing Officer that the inventory prepared at the time of survey suffers from various defects which were discussed in detail vide petition filed before CIT. Excess stock in any business could be generated by adopting two methodologies, one by suppressing GP from year to year and the other by undertaking transaction (purchase and sale) outside the books of account. No finding to this effect has beep recorded by ld. CIT nor any such material has been found in course of survey. Rather, to the contrary, the Assessing Officer has recorded a categorical finding that "nothing incriminating relating to purchase and sale of ornaments (gold, silver, etc.) outside the books of account have been found in course of survey u/s 133A. No defect in the books of account has been detected. Hence, the trading result has been accepted". Thus, the assumption of the ld. CIT regarding possession of excess stock is based merely on suspicion and surmises and, therefore, the ld. CIT has restrained himself from giving any specific direction while exercising extraordinary power u/s 263. Therefore, on merit also, we find that the Ld. CIT was not justified in treating the order of the Assessing Officer as erroneous and prejudicial to the interest of the revenue. Therefore, on merit also, the order of the Ld. CIT is not sustainable. As a result, order of the Ld. CIT u/s 263 is not legally and factually sustainable, hence the same is quashed.
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