TMI Blog1992 (1) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... ear. According to original agreement with the principal - M/s. Lion Pencils (P.) Ltd.,Bombay, filed during the course of assessment proceedings for the assessment year 1981-82. The expenses on advertisement and publicity were reimburseable to the assessee by the principal. Now during the account year relevant to the assessment year 1983-84 the clause of reimburseable of said has been withdrawn by the principal vide copy of their letter dated4-7-1980filed by the assessee. The assessee has charged expenses of Rs. 70,122.60 to the profit and loss account on account of advertisement and publicity which have been found to be properly vouched. In view of assessee's contention that by incurring the above expenses the sales have increased and gross profit has also been increased over the last year by about I %, the expenses on advertisement will be allowed. Necessary details of expenses have been placed on records." 3. On11-9-1985the Commissioner of Income-tax issued show-cause notice on following basis stated in the notice:--- "On a scrutiny of your assessment record for assessment year 1983-84 it has been found that during the accounting period relevant to the assessment year 1983-84 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee nothing was mentioned regarding the source of information, but only in the final order the Commissioner of Income-tax made mention of it and this is against the principle of natural justice. Only during the appellate proceedings for assessment year 1984-85 the Commissioner of Income-tax (Appeals) asked for the comparative details in respect of the variation in certain data and that the necessary details in respect of the lower realisation on account of damaged goods in both the years were furnished for the purpose of comparison. Such information could only be called outside the records examined by the Assessing Officer for which reliance was placed on Ganga Properties v. ITO [1979] 118 ITR 447 (Cal.). All the requisites of the assessment were complied with and, therefore, no revision would take place for which reliance was placed on CIT v. Ratlam Coal Ash Co. [1988] 171 ITR 141 (MP). No doubt to sustain a revision there should be an error of fact or of law but the same could not be sustained on the basis of guess work as observed in CIT v. Trustees Anupam Charitable Trust [1987] 167 ITR 129 (Raj.). Again no prejudice was caused to the revenue because in assessment year 1984-85 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain sales the assessee realised less margin of gross profit or even incurred losses. There is no question of any separate claim required to be made by the assessee, as stated in the direction by the Commissioner of Income-tax that claim in respect of the damaged goods should be examined. In fact there is no such claim made by the assessee. Again we fail to appreciate what information is required to be given by the assessee suo motu as contended by the Departmental Representative. There is no requirement of law in respect of details to be furnished in the return of income describing such information to be separately indicated by the assessee. Therefore, it cannot be said that the Assessing Officer has failed to make inquiries in respect of certain claims made by the assessee. Again we find that the grievance is justifiably raised by the assessee that no mention of the appellate order for assessment year 1984-85 is made by the Commissioner of Income-tax while passing the order in spite of the fact that the appellate order was accepted by the CIT. Then what useful purpose would be served by making such inquiries even if it is directed to be made. The decision in the case of Gee Vee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after verification, may frame correct assessment order. I hold accordingly. 3. The appeal is dismissed in the result. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT Consequent upon difference of opinion having occurred between us, the file is being placed before the worthy President for proceeding in the matter in accordance with law. The point of difference is as under:---- "Whether on the facts and in the circumstances of the case order under section 263 of the Act is required to be quashed or maintained?" THIRD MEMBER ORDER Ch. G. Krishnamurthy, President --- The short point on which the difference of opinion arose between the learned members ofDelhi Bench 'D', who heard this appeal is: "Whether on the facts and in the circumstances of the case order under section 263 of the Act is required to be quashed or maintained?" While the learned Accountant Member held the view that the Commissioner of Income-tax had not properly and justifiably acquired the jurisdiction under section 263 to set aside the order passed by the Assessing Officer as erroneous and prejudicial to the interests of the revenue, the learned Judicial Member held to the contrary but witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produce the relevant evidence. The Assessing Officer examined all the copies of the agreements with the principals also. The assessee at the same time furnished to the Commissioner of Income-tax proof to demonstrate that some of the ball point pens and Refills, in which the assessee was dealing got damaged in the year of account and its efforts to get reimbursement from the principals for the damage had not been fruitful. 3. But the Commissioner of Income-tax was not convinced with the explanation offered by the assessee. He observed that the assessee had shown in the closing stock damaged goods amounting to Rs. 4,774 but they happened to be the same damaged goods as appeared in the closing stock for the assessment year 1982-83 and that there was nothing on record to indicate that any goods relating to the year under appeal had got damaged and had been sold on prices, which were below cost price. He observed that the Assessing Officer had failed to make enquiries regarding this aspect. To quote precisely, the following are the observations made by the Commissioner of Income-tax in this behalf: "It is thus clear that although the details of the goods damaged during the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the goods, that the assessee had been trading in, was a normal incident of business. It was also pointed out to him that in the assessment year 1984-85 when a similar addition was made by the Inspecting Asstt. Commissioner (Assessment), the same was examined in depth by the Commissioner (A) and the entire addition was deleted. A copy of the order of the Commissioner (A) was also given to the Commissioner of Income-tax. Even though this evidence was before the Commissioner of Income-tax, he still held, as seen from the order, that the assessee had not produced any proof to show that there was any damage to the goods in the accounting year under reference. This is factually an incorrect statement made in disregard of the evidence produced before him. When the Assessing Officer observed in his order that he has examined the books of account and examined the stock particulars and when the stock particulars showed the damaged goods, it must be held that the Assessing Officer had examined all the aspects and did not leave any aspect untouched or unexamined. 5. Another important aspect is that the rate of gross profit this year was far more higher than the rate of gross profit shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the jurisdiction is acquired or assumed by the Commissioner of Income-tax, the further safeguards provided in section 263 are very crucial and important and are based upon the principles of natural justice, namely, providing the assessee an opportunity of being heard and secondly making enquiriese it her by himself or causing them to be made by his subordinates into the facts of the case. When in the course of that enquiry the Commissioner of Income-tax finds that there was no prejudice caused to the interests of the Revenue although an error had been committed in the sense in which the error had been explained by the Delhi High Court, it is still open to him to drop the proceedings. The Delhi High Court explained the expression "erroneous" as an enquiry to be made into the claims made by the assessee or the facts of the case and if an assessment was made without making a proper enquiry, it would be called erroneous. If in a case the assessment was made without any enquiry as is required to be made or expected to he made, then the order could be said to be erroneous giving jurisdiction to the Commissioner of Income-Tax to invoke the provisions of section 263. Now after assuming ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
