TMI Blog2008 (1) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... omit or substitute any of the above ground at the time of hearing of the appeal." 3. Subsequently, the assessee submitted an application dt. 14th March, 2007 requesting for permission to admit an additional ground as under : "In the facts and circumstances of the case and in law, and in the absence of the conditions precedent for invoking the revisional jurisdiction under s. 263 of the IT Act 1961, the impugned order passed by the learned CIT being patently illegal, arbitrary and without jurisdiction the same may please be vacated." 4. After hearing both the parties, the additional ground was admitted for adjudication. 5. The assessee was engaged in construction business. A survey was conducted under s. 133A of the Act on 21st Jan., 1999. In his statement recorded under s. 131 of the Act during the survey, one of the partners of the assessee firm declared and offered for tax Rs. 41 lacs, representing excess stock detected during the survey. The return for asst. yr. 1999- 2000 was filed on 31st Dec, 1999 showing total income only at Rs. 17,86,750. In the assessment order passed under s. 143(3) on 25th Feb., 2002, the total income was assessed at Rs. 26,50,000 as under : In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the value of closing WIP is on the higher side due to wrong presentation of balance sheet and that the portion of deemed sale for the asst. yrs. 1995-96 and 1996-97 could not be deducted due to oversight and hence it's request to waive the proposed action under s. 263 for asst. yr. 1999-2000 is neither tenable and nor acceptable. No such facts were brought forward and stated during the course of survey and the assessee's contention is contrary to what was conspired during the course of survey. In fact, the assessee has declared additional income of Rs. 41 lacs in the form of investment representing unexplained difference in the WIP, as per the books of account and what was actually found which indicates that unaccounted money to this extent was invested in the construction of building/flats. Hence, unaccounted income invested in construction business and admitted by assessee needs to be taxed by the AO. Besides, assessee has shown sale of flats for Rs. 1,01,21,382 and profit on this sale should have been taxed by the AO. The aggregate of this income is more than what has been assessed by the AO. The Act provides for an estimation of 8 per cent as net profit if the books of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance was placed on the decisions in the following cases : (i) Paul Mathews Sons v. CIT [2003] 181 CTR (Ker) 207 : [2003] 263 ITR 101 (Ker); (ii) Malabar Industrial Co. Ltd. v. CIT [2000] 159 CTR (SC) 1 : [2000] 243 ITR 83 (SC); (iii) CIT v. Gobrial India Ltd. [1993] 114 CTR (Bom) 81 : [1993] 203 ITR 108 (Bom); (iv) CIT v. Arvind Jewellers [2002] 177 CTR (Guj) 546 : [2003] 259 ITR 502 (Guj). 9. Shri Pradeep Sharma, the learned Departmental Representative supported the order of the CIT passed under s. 263. He vehemently argued saying that the order of the CIT passed under s. 263 needed to be upheld. He placed reliance on the decision in the case of CWT v. N.T. Rama Rao [2003] 182 CTR (AP) 625 : [2003] 261 ITR 611 (AP). 10. We have considered the rival submissions in the light of material on record and the precedents cited. Before proceeding further we consider it necessary to examine and discuss the legal position laid down by the Courts in the cases relied upon by both the parties. 11. In the case of CIT v. Gabrial India Ltd., it was held by the Bombay High Court that an order could not be termed as erroneous unless it was not in accordance with law, that if the AO a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here were some omissions on its part, offered certain amounts as additional income for the years in question and gave a written offer to the Addl. CIT, that it was after verifying the account books and various materials gathered in the survey and after considering the offer made by the assessee that the AO had exercised a judicial discretion in the matter while completing the assessment, that in the light of the voluntary disclosure in the letter given in writing by the assessee the facts given by it had been verified with the books of account and it was only after consideration of the various aspects of the matter and related facts that the AO accepted the offer made by the assessee, that in such circumstances, the view taken by the AO could not be said to be prejudicial to the Revenue nor could it be said to be erroneous. 14. In the case of Malabar Industrial Co. Ltd. v. CIT, the Supreme Court held that the phrase "prejudicial to the interests of the Revenue" had to be read in conjunction with an erroneous order passed by the AO, that every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the Revenue, for example, when ..... X X X X Extracts X X X X X X X X Extracts X X X X
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