GST Helpdesk   Subscription   Demo   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (7) TMI 820 - ITAT KOLKATA

2016 (7) TMI 820 - ITAT KOLKATA - TMI - Revision u/s 263 - whether the purchases relatable to the unreconciled sales have been recorded or not? - Held that:- In the instant case, no discrepancies were noticed on the quantitative particulars filed by the assessee either by the ld AO or by the ld CIT. We find that the ld CIT had directed the ld AO to verify whether the purchases relatable to the unreconciled sales have been recorded or have not been recorded in the books already by the assessee. T .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

anufacturing expenses disclosed by the assessee are not disturbed by the revenue. Hence it could be safely concluded that the alleged unreconciled sales could have emanated only out of alleged undisclosed purchases. In such an event, the only recourse to tax the income is by applying the gross profit percentage thereon, which is what has been ultimately done by the ld AO in the assessment by making an addition of ₹ 89,779/- . Hence the order passed by the ld AO cannot be considered as erro .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

balancing figure at ₹ 15,08,380/-. It is pertinent to note that the said figure would automatically become the opening stock as on 26.1.2008 thereby making it revenue neutral. Ultimately no discrepancies were noticed by the ld AO and by the ld CIT in the final audited accounts of the assessee and the books of accounts produced by the assessee from where the profits of the assessee could be reasonably deduced therefrom. The books of accounts and the audited figures of the assessee were not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l-II, Kolkata vide M. CIT-II/Kol/U/s. 263/2012-13/10114-17 dated 25.03.2013. Assessment was framed by ITO, Wd-4(1), Kolkata u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the Act ) for AY 2008-09 vide his order dated 15.09.2010. 2. The only issue to be decided in this appeal is as to whether the ld CIT is justified in invoking revisionary jurisdiction u/s 263 of the Act in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee is a pri .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

8310 Sugar K.G. 3152 Vegetable Oil K.G. 476 Chemicals & Flavors (80Kg.), Milkmaid (80 Kg.) (Approx.) K.G. 160 2 Factory Stores (Approx. ₹ 5000/-) 3 Work in Progress Tit Bit (150 gm.) & others (Approx.) Cartoons 180 Mixtures about (200 Kg.) (Approx.) Rejected Biscuits (30 Kg) (Approx.) 4 Finished goods (As per Annexure-1) Cartoons 3101 The aforesaid stocks were valued by the survey team at ₹ 7,32,417/-. There was no discrepancy on the said valuation as was admitted by the asse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed, the survey team could not determine the income concealment etc. Later in the course of scrutiny proceedings, the books of accounts of the assessee were updated with the help of bills / vouchers produced and the figures of purchases, sales, manufacturing expenses as on the date of survey were determined which were duly vouched and accepted by the assessee. Based on this, the ld AO prepared a recasted trading account of the assessee on the date of survey (i.e upto 25.1.2008) by having the figu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed by him as a balancing figure and that arrived at the time of survey amounting to ₹ 7,32,417/- could not be reconciled by the assessee. He concluded that the difference represents sales made outside the books. He applied gross profit rate of 11.57% on the said difference of ₹ 7,75,963/- and made an addition of ₹ 89,779/- . The assessee accepted for this addition in the assessment and did not prefer any appeal against the assessment order and the taxes due thereon were recover .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ng unreconciled closing stock as above constitutes profit or there should be a method of adoption of the net income, as has been done by the Assessing Officer by applying the G.P. rate of 11.57%. In this case it is clear that the unreconciled sales is out of books. The Assessing Officer is directed to verify whether or not the relatable purchase have been debited in the books of accounts. If it is, then the entire sales proceeds of ₹ 7,75,963/- and not merely the profit earned has to be ad .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

risdiction u/s. 263. 3. For that the Ld. CIT erred in exercising the power of revision for the purpose of directing the A.O. to hold another investigation when the order of the A.O. was neither erroneous nor prejudicial to the interest of the revenue. 4. That the Ld. CIT erred in preferring to take a different view as a basis for an action u/s.263 when the A.O. had taken a particular view after considering the material on record and after due investigation. 6. The ld AR argued that at the outset .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

here the purchase and selling prices are fixed and would remain so for a longer period of time. This assumption is factually incorrect in as much as the prices of raw material (i.e maida) required for manufacturing biscuits (i.e finished goods) fluctuate almost on a daily basis , whereas the selling price of biscuits would remain constant for a considerable period of time. This market situation has to be studied and maintained by the assessee to stay in the business continuously. Hence in this s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

hat the same would become automatically the opening stock as on 26.1.2008 and the profit position of the year has to be determined after taking into account the transactions from 26.1.2008 to 31.3.2008. He further argued that absolutely no quantity differences were noticed by the survey team at the time of survey or by the ld AO while completing the assessment proceedings. The assessee had duly submitted all the records including the subsidiary records duly updated at the time of assessment proc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ee did not contest the addition by way of preferring an appeal before the ld CITA. That decision was taken in view of the smallness of the addition made and since there was no tax outflow to the assessee pursuant to the said addition as the taxes were collected out of refunds due to assessee. This does not in any way could be construed as acquiescence on the part of the assessee. Moreover, the ld CIT failed to understand that the issue of alleged difference in closing stock has been thoroughly e .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ld CIT s order u/s 263 of the Act by stating that the ld CIT had merely directed the ld AO to make enquiry to verify the relatable purchases attributable to the undisclosed sales of ₹ 7,75,963/- have been debited in the books by the assessee so as to decide whether the entire undisclosed sales is to be added or only the profit derived therefrom is to be added. The assessee cannot have any grievance on this aspect as it is a mere guidance to make an enquiry in a particular manner. He furth .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

40 of paper book) and details of closing stock of each products with complete quantitative details month wise movements with values thereon (pages 41 to 56 of paper book). The condition precedent for invoking revisionary jurisdiction u/s 263 of the Act is that the ld CIT should prove that the order passed by the ld AO is erroneous and prejudicial to the interest of the revenue. In the instant case, no discrepancies were noticed on the quantitative particulars filed by the assessee either by the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed that the ld CIT had not given any categorical finding in his order that the order of the ld AO is erroneous. Hence the basic assumption of revisionary jurisdiction u/s 263 of the Act fails. We place heavy reliance on the decision of the Hon ble Bombay High Court in the case of CIT vs Gabriel India Ltd reported in (1993) 203 ITR 108 (Bom) wherein it was held that :- 7. We have heard learned counsel for the parties and carefully perused the orders of the Incometax Officer, the Commissioner and .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

penditure that the Income-tax Officer allowed the claim for deduction. It is, however, correct that in his order, he did not make any discussion in regard to the query made by him and the explanation submitted by the assessee thereto. 8. According to the commissioner of Income-tax, the order of the Income-tax Officer did not disclose any application of mind. He issued the notice as he felt that the expenditure in question might be a capital expenditure. But despite examining the matter at length .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f power under section 263 of the Act. It may be expedient at this stage to set out section 263 of the Act. Section 263, so far as relevant, runs as follows : "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 Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an oppor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

reading of sub-section (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is "erroneous in so far as it is prejudicial to the interests of the Revenue". It is not an arbitrary or unchartered power. It can be exercised only on fulfilment of the requirements laid down in sub-section (1). The co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

gs with a view to starting fishing and roving enquiries in matters or orders which are already concluded. Such action will be against the well-accepted policy of law that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. (See Parashuram Pottery Works Co. Ltd. v. ITO ). .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

argument into two and to multiply the litigation". 11. The power of suo motu revision under subsection (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this sub-section, viz., (i) the order is erroneous; (ii) by virtue of the order being erroneous prejudice has been caused to the interests of the Revenue. It has, theref .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, "erroneous judgment" means "one rendered according to course and practice of court, but contrary to law, upon mistaken view of law; or upon erroneous application of legal principles". 12. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income-tax O .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income-tax Officer. That would not vest the Commissioner with power to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, viz., that the order is erroneous, is absent. Similarly, if an order is erroneous but not prejudicial to the interests of the Revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sequence whereof the lawful revenue due to the State has not been realised or cannot be realised. It can mean nothing else". The aforesaid observations were also applied by the Gujarat High Court in Addl. CIT v. Mukur Corporation [1978] 111 ITR 312. We are of the opinion that the aforesaid interpretation given by the Calcutta High Court to the expression "prejudicial to the interests of the Revenue" is the correct interpretation. 14. We, therefore, hold that in order to exercise p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Revenue. An order can be said to be prejudicial to the interests of the Revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumst .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d conclusion gets full support from a decision of Sabyasachi Mukharji J. (as his Lordship then was) in Russell Properties Pvt. Ltd. v. A. Chowdhury, Addl. CIT. In our opinion, any other view in the matter will amount to giving unbridled and arbitrary power to the revising authority to initiate proceedings for revision in every case and start re-examination and fresh enquiries in matters which have already been concluded under the law. As already stated it is a quasi judicial power hedged in with .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ration of an order of assessment, which has already been concluded and controversy which has been set at rest, is set again in motion. It is an important decision and the same cannot be based on the whims or caprice of the revising authority. There must be materials available from the records called for by the Commissioner. 15. We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t case, the Commissioner himself, even after initiating proceedings for revision and hearing the assessee, could not say that the allowance of the claim of the assessee was erroneous and that the expenditure was not revenue expenditure but an expenditure of capital nature. He simply asked the Income-tax Officer to re-examine the matter. That, in our opinion, is not permissible. Further inquiry and/or fresh determination can be directed by the Commissioner only after coming to the conclusion that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at is, in favour of the assessee and against the Revenue. 8.1. We find that the ld AO had treated a sum of ₹ 7,75,963/- as unrecorded sales while completing the assessment. We find that he had not found any discrepancies in the books of accounts produced before him. It is not in dispute that the survey team also did not find any discrepancies in the books of accounts in the form of undisclosed sales or undisclosed purchases or any other incriminating materials in the form of undisclosed in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

by the revenue. Hence it could be safely concluded that the alleged unreconciled sales could have emanated only out of alleged undisclosed purchases. In such an event, the only recourse to tax the income is by applying the gross profit percentage thereon, which is what has been ultimately done by the ld AO in the assessment by making an addition of ₹ 89,779/- . Hence the order passed by the ld AO cannot be considered as erroneous in nature and prejudicial to the interest of the revenue. I .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

that the said figure would automatically become the opening stock as on 26.1.2008 thereby making it revenue neutral. Ultimately no discrepancies were noticed by the ld AO and by the ld CIT in the final audited accounts of the assessee and the books of accounts produced by the assessee from where the profits of the assessee could be reasonably deduced therefrom. The books of accounts and the audited figures of the assessee were not rejected by the ld AO or by the ld CIT. Under these circumstances .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ble Apex Court in the case of Malabar Industries Co Ltd vs CIT reported in 243 ITR 83 (SC). 8.4. We also find that the aspect of this closing stock valuation has been the subject matter of verification both by the survey team and by the ld AO in the assessment proceedings and hence the same cannot be construed as lack of enquiry. We hold that this issue having been extensively verified would not fall under the ambit of lack of enquiry by the ld AO and hence the same cannot be revised u/s 263 of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version