TMI Blog2014 (11) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... legal remedy throughout the period and it was a case of pursuing the wrong remedy on mistaken advise – delay condoned and appeal admitted. Revision by CIT u/s 263 - Doctrine of merger - The AO in his order u/s 143(3) considered the issue of stock difference and rejected the contentions of the assessee - it cannot be said that there is non application of mind by the AO nor that the AO was negligent - the AO has applied his mind and after carefully considering the facts and circumstances of the case took a possible view - the order passed by the CIT (Central) u/s 263 is bad in law - For the proposition that the revision u/s 263 is bad in law, when the AO duly applied his mind – relying upon CIT vs. Bharat Aluminium Co.Ltd. [2007 (5) TMI 228 - DELHI HIGH COURT] - even otherwise, the issue of stock difference and the taxability of income was subject matter of appeal before the CIT(A), Ludhiana - The CIT(A) Ludhiana up held the order of the AO - Hence there is merger of the order of the AO with that of the order of the CIT(A) – thus, CIT(Central), Gurgaon does not have jurisdiction to invoke revisionary powers u/s 263 – thus, the order passed u/s 263 by the CIT(Central), Gurgaon is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the delay cannot be condoned. He further argued that the assesee is assisted by a professional charted accountant and the claim of ignorance of law is not factually correct. For the proposition that when the assesee is guided by a CA he cannot claim ignorance of law. He relied on the following case laws. (a) J K Small Scale Industries Development Corporation Ltd. vs. ACIT reported in 317 ITR 458 (Madras) (b) Madhu Dadha vs. ACIT (Madras) reported in 316 ITR 58. (c) RamLal Mothilal and Chotilal vs. Rewa Cola Fields Ltd. (1962) AIR 361 4. The Ld. Counsel for the assessee in his reply submitted that the case laws cited by the revenue are based on their peculiar set of facts and the test to be applied for condonation of delay is whether the assesee has sufficient cause. He drew the attention of the bench to the judgment of Hon`ble Supreme Court in the case of Collector, Land Acquisition Vs. MST Katiji and others(supra) wherein it was held as follows: 5. Making a justice oriented approach from this perspective, there was sufficient cause for condoning the delay in the institution of the appeal. The fact that it was the State which was seeking condonation and not a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings, consequent to the said original assessment order. It was only when they did not find any success before the Ld.CIT(A), the instructing Counsel contacted Dr. Rakesh Gupta who specialized in arguing the matters before the High Court and the Supreme Court and when the case was discussed in the conference, Dr. Rakesh Gupta brought to the notice that a mistake occurred in not filing any appeal against out the order of Ld.CIT U/s.263. It was advised that in addition to the appeal filed against the order passed by the Ld.CIT(A) Central Gurgaon in the order dated 11.09.2013, this appeal was to be filed along with the petition for condonation of delay. It can be noticed that the CIT(A) Central Gurgaon passed his order on 11th September,2013 and it is on 7th Nov.2013 that the assesee filed an appeal challenging not only the order passed by CIT(A) Gurgaon on 11.09.2013 but also the order passed by CIT, Central Gurgaon U/s. 263 on 19.02.2012. In our considered view the asssese has explained the delay as it was under a bonafide belief that the remedy lies in filing an appeal against the order of the AO passed u/s 143 r.w.s.263. It is a case of pursuing the remedy in a wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at too at the threshold; (iii) Unless malafides are writ large on the conduct of the party, generally as a normal rule, delay should be condoned. In the legal arena, an attempt should always be made to allow the matter to be contested on merits rather than to throw it on such technicalities. Apart from the above, the appellant would not have gained in any manner whatsoever, by not filing the appeal within the period of limitation, It is also worth noticing that delay was also not that huge, which could not have been condoned, without putting the respondents to harm or prejudice. It is the duty of the Courts to see to it that justice should be done between the parties; (iv) Also observed that as the auction purchaser had been put to inconvenience and harassment and had not got any fruits for the sale proceeds paid in 1992, it should be paid costs of ₹ 50,000/-. 5.1.1. In our view the propositions laid down in this case law applies to the facts of this case. 5.2. Coming to the numerous decisions relied upon by the revenue, we find that each one of them are based on the peculiar set of facts of that case and these are distinguishable. i. In the case of Madhu Dadh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the appeal was actually filed. In fact the assessee was pursuing the legal remedy throughout the period and it was a case of pursuing the wrong remedy on mistaken advise. In the result we condone the delay in question and admit the appeal. 5.4. We now take up the appeal on merits. 6. The order of the Ld.CIT, Central Gurgaon dt. 15.12.2012 passed u/s 263 of the Act is challenged by the assessee on the following grounds. 1. That having regard to facts circumstances of the case, the Ld.CIT has erred in law and on facts in passing the impugned order u/s 263 which is barred by limitation, illegal, without jurisdiction and contrary to law and facts and deserves to be quashed. 2. That having regard to facts circumstances of the case, the Ld.CIT has erred in law and on facts in assuming jurisdiction u/s 263 and has further erred in directing the Assessing Officer to reframe the assessment order after adding a sum of ₹ 53,04,111/- to the income of the assessee and more so when assessee was forced to surrender of ₹ 10 crores during the course of assessment. 3. That having regard to facts circumstances of the case, the Ld.CIT has erred in law and on facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shortage of stock and addition was made. The undisclosed income to the tune of ₹ 1,49,80,000/- was added back. He was of the view that the addition should have been ₹ 2,02,84,111/- instead of ₹ 1,49,80,000/- and hence there is an under assessment of ₹ 53,04,111/-. A notice was issued to the assesee on 1.02.2012 proposing to invoke the revisionary powers U/s.263. The assessee replied that it was forced to surrender ₹ 10 crores as stock shortage through coercion and threat and that actually there was no stock shortage. The assessee pleaded with the Ld. CIT that the AO should be directed to assess the correct income vis- -vis stock difference only on the basis of proven facts and not otherwise. 6.5. After considering his reply the Ld.CIT recalled that the assessee has not disputed the facts on earlier occasions and that the argument that the surrender was done under coercion was made for the first time after issue of notice u/s 263. He directed the AO to reframe the assessment order by adding an amount of ₹ 53,04,111/- 6.6. Aggrieved the assessee is in appeal before us. 7. The Ld. Counsel for the assessee Dr. Rakesh Gupta argued that: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the premises of assessee (without taking into account the stock lying with other concerns as found during the search/survey and stated to be belonging to Sheena Exports at the time of search/survey itself which comes to ₹ 5,79,19,195/-. On the basis of above total physical stock found which related to assessee comes to ₹ 28,96,43,006/-. However, details of closing stock furnished by the assessee at the year end as per accounts were as under. Raw material ₹ 9,99,62,02,020.00 WIP and finished goods ₹ 28,33,46,700.00 Dyes and chemicals ₹ 85,22,650.00 Packing material and others ₹ 26,12,200.00 Label and misc. consumables ₹ 27,84,615.00 Goods in transit ₹ 9,55,72,600.00 Stock of waste, scrap etc. ₹ 6,08,200.00 Stock at Bikaner branch ₹ 584,62,500.00 Assessing Officer also collected stock statements given by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g decisions. a) CIT vs. Bharat Aluminium Co.Ltd. (2008) 303 ITR 256 (Del) b) CIT vs. Design and Automation Engineers (Bombay) Pvt.Ltd. 13 DTR 145 (Bom) c) Raj Shyama Construction (P) Ltd. vs. ACIT, 135 TTJ 33 (Del) d) CIT vs. Hero Auto Ltd. 343 ITR 342 (Del.) (2012) (ii) Even otherwise, the issue of stock difference and the taxability of income thereon, was subject matter of appeal before the Ld.CIT(A), Ludhiana. The Ld.CIT(A) Ludhiana up held the order of the AO. Hence there is merger of the order of the AO with that of the order of the Ld.Commissioner of Income Tax (Appeals) on this issue. Under such circumstances the Ld.CIT(Central), Gurgaon does not have jurisdiction to invoke revisionary powers u/s 263. For this proposition we rely on the following case laws. a) Ranka Jewellers vs. ACIT, 328 ITR 148 (Bom) b) CIT vs. Nirma Chemical Works P.Ltd., 309 ITR 67 (Guj.)(2009) 10.4. In view of the above discussion and by following the propositions in the case laws cited above, we quash the order of the ld. CIT(Central), Gurgaon passed u/s 263 on 05-02-2012 as bad in law. 10.5. In the result the appeal of the assessee is allowed. 11. ITA no.6002/Del/2013 is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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