TMI Blog2009 (4) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... the respndent. Judgment: Dipak Misra J .- The present appeal preferred under section 260A of the Income-tax Act, 1961 (for brevity "the Act"), was admitted on the following substantial question of law: "Whether in the obtaining factual matrix, the Income-tax Appellate Tribunal is justified in holding that the action taken by the Commissioner of Income-tax under section 263 of the Act is not justified despite the fact that a finding had been recorded by the said authority as regards the suppression of work-in-progress for a sum of Rs. 18,41,35,526?" 2. The facts which are necessary to be adumbrated for adjudication of this appeal are, that a search and seizure operation was carried out under section 132(1) of the Act in the premises of the respondent-assessee and the said operation commenced on February 21, 2002, and was concluded on March 13, 2002. The Assessing Officer framed the block assessment order under section 158BC on September 17, 2004, and made several additions against the assessee. 3. Being dissatisfied with the aforesaid order the assessee preferred an appeal before the Commissioner of Income-tax (Appeals)-II, Bhopal, who, vide order dated October 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act and directed the Assessing Officer to frame the assessment de novo after carrying out proper inquiries and investigation after affording an opportunity of hearing to the assessee. 4. Being aggrieved by the aforesaid order the assessee preferred an appeal before the Tribunal and the Tribunal allowed the appeal and set aside the order of the Commissioner of Income-tax and restored that of the Assessing Officer. The Tribunal referred to the decisions rendered in CIT v. K. L. Rajput [1987] 164 ITR 197 (MP) [FB]; CIT v. Simplex Metalica [1987] 164 ITR 202 (MP) [FB], Gill Pack Ltd., Indore v. CIT 4 TTJ 326, CIT v. Bharath Earth Movers Ltd. [1998] 234 ITR 535 (Karn), CIT v. Jaykumar B. Patil [1999] 236 ITR 469 (SC), Straw Products Ltd. v. Asst. CIT [2001] 252 ITR 444 (Cal), CIT v. Shri Arbuda Mills Ltd. [1998] 231 ITR 50 (SC), Sujata Grover v. Deputy CIT [2002] 74 TTJ (Delhi) 347, Remex Constructions/Remex Electricals v. ITO (First) [1987] 166 ITR 18 (Bom), Oil India Ltd. v. CIT [1982] 138 ITR 836 (Cal), CIT v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom), CIT v. Kanda Rice Mills [1989] 178 ITR 446 (P H), CIT v. Shiv Hari Madhu Sudan [1998] 233 ITR 649 (Raj) and CIT v. G. K. K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Section 263 of the Act reads as under: "263. Revision of orders prejudicial to Revenue.-(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation.-For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,- (a) an order passed on or before or after the 1st day of June, 1988, by the Assessing Officer shall include- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The amended definition of section 158BB clearly suggests that some evidence is to be found as result of search operation and it is only thereafter the remaining part of the provision come into play. The ` work-in-progress' is a part of trading item and in the case of the assessee could also be treated as stock-in-trade. No specific evidence or material is found during the course of search to show that the assessee shown under valuation of the stock. The details filed by the learned Departmental representative in the paper book are the calculation of the Assessing Officer. It is settled accounting position that closing stock could be shown in the accounts/balance-sheet at the end of the accounting year. No evidence is brought on record that the assessee could not show the details of ` work-in-progress' /closing stock in the balance-sheet and the regular returns. Learned counsel for the assessee vehemently submitted that no physical verification of ` work-in-progress' was done on the date of the search. This contention of the learned counsel for the assessee is not in dispute by the Revenue. The Assessing Officer considering the reply of the assessee and explanation on the ` work-in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view taken by the Assessing Officer is unsustainable in law. The Income-tax Appellate Tribunal, Mumbai Bench in the case of Mrs. Khatiza S. Oomerbhoy v. ITO [2006] 100 ITD 173, took the same view and held that every loss of the Revenue cannot be treated as prejudicial and if the Assessing Officer has adopted one of the courses permissible under the law of where two views are possible and the Assessing Officer has taken the one to which the Commissioner of Income-tax does not agree the order cannot be treated as erroneous. Considering the finding in the impugned order, we find that even the learned Commissioner of Income-tax did not mention that the view adopted by the Assessing Officer was not possible or sustainable in law. The similar issue is considered by the learned Commissioner of Income-tax (Appeals) in the order dated October 5, 2005. Therefore, on the principle of merger, the learned Commissioner of Income-tax was also not justified in invoking the jurisdiction under section 263 of the Income-tax Act." 9. As regards payment of salary to the directors the Tribunal in paragraph 8.3 has expressed the view as under: "8.3 The learned Commissioner of Income-tax in paragr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax in paragraph 5 also noted that protective assessment is to be made in the case of the assessee being unexplained deposits in the case of Jhameshwar Nagrik Sahkari Bank Ltd., the Assessing Officer made addition of Rs. 85 lakhs on this issue in the block assessment order being unexplained deposit in Jharneshwar Nagrik Sahkari Bank Ltd. The learned Commissioner of Income-tax (Appeals) deleted the addition, vide order dated October 5, 2005. Even as per the learned Commissioner of Income-tax the deposits were in the names of various account holders and, therefore, directed that this issue ought to have been considered in the assessment of the present assessee. The block assessment order in the case of the assessee was made on September 17, 2004, whereas block assessment order in the case of Jhameshwar Nagrik Sahkari was passed on February 7, 2005, therefore, there is no question of the same being considered in the case of the assessee-company because on the date of the block assessment order, the assessment order of the bank did not exist. Since this issue is considered in detail by the Assessing Officer as well as by the learned Commissioner of Income-tax (Appeals), therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch foundation exercise of a suo motu power is impermissible. It should not be presumed that initiation of power under suo motu revision is merely an administrative act. It is an act of a quasi-judicial authority and based on formation of an opinion with regard to existence of adequate material to satisfy that the decision taken by the Assessing Officer is erroneous as well as prejudicial to the interests of the Revenue. The concept of `prejudicial to the interests of the Revenue' has to be correctly and soundly understood. It precisely means an order which has not been passed in consonance with the principles of law which has in ultimate eventuality affected realisation of lawful revenue either by the State has not been realised or it has gone beyond realisation. These two basic ingredients have to be satisfied as sine qua non for exercise of such power. On a perusal of the material brought on record and the order passed by the Commissioner it is perceptible that the said authority has not kept in view the requirement of section 263 of the Act inasmuch as the order does not reflect any kind of satisfaction. As is manifest the said authority has been governed by a singular factor t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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