TMI Blog2016 (7) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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. In fact the order in the given set of facts and circumstances could only be viewed as prejudicial to the interests of the assessee and not for the revenue. In any case, we are in complete agreement with the arguments advanced by the ld AR that the profit for the whole year has to be determined by the ld AO and by the ld CIT. We find that the ld AO had only arrived at an arithmetical figure of closing stock as on 25.1.2008 as a 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 produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee except stating that the survey team did not include the stock of diesel of ₹ 1,60,634/- and stock of packing materials to the tune of ₹ 3,38,863/-. The ld AO observed that in the course of assessment proceedings, books of accounts along with requisite details and supporting documents including the books inventorised on the date of survey were produced and the same were examined on test check basis. He observed that as the books of accounts as on the date of survey were not updated, the survey team could not determine the income concealment etc. Later in the course of scrutiny proceedings, the books of accounts of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the correct rate of GP is, and if relatable purchase are reflected in the books, apply the correct profit percentage. 5. Aggrieved, the assessee is in appeal before us on the following grounds:- 1. The order of the Ld. CIT passed u/s. 263 is bad in law and on facts and is liable to be quashed. 2. That the CIT's order u/s. 263 is void ab initio in the absence of proper notice inasmuch as it does not specify any reasons for the exercise of revisionary jurisdiction 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, the show cause notice issued by the ld CIT did not state how the order passed by the ld AO is erroneous and prejudicial to the interest of the revenue. He argued that the ld AO had prepared a trading acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 examined by the ld AO in the scrutiny assessment proceedings pursuant to the survey conducted on 25.1.2008 and pursuant to the report of survey team in this regard. Hence this cannot be the case falling under the category of lack of enquiry by the ld AO warranting revisionary jurisdiction u/s 263 of the Act. He placed reliance on the decision of the Hon ble Delhi High Court in the case of CIT vs Sunbeam Auto Ltd reported in (2009) 332 ITR 167 (Del) . 7. In response to this, the ld DR supported the 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 sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of ₹ 99,326. While doing so, he asked for an explanation from the assessee in regard to the nature thereof. The assessee furnished a detailed explanation, vide his letter dated September 19, 1975. It was on a consideration of the said explanation and on being satisfied that it was a revenue expenditure 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 and hearing the assessee, he could not come to any conclusion that the expenditure was not revenue expenditure but expenditure of capital nature. He referred the matter back to the Income-tax Officer to examine the same and to decide afresh. The Tribunal did not approve such action of the Commissioner. Therefore, the question that arises for consideration is whether the Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 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 ). 10. As observed in Sirpur Paper Mills Ltd. v. ITO by Raghuveer J. (as his Lordship then was), the Department cannot be permitted to begin fresh litigation because of new views they entertain on facts or new versions which they present as to what should be the inference or proper inference either of the facts disclosed or the weight of the circumstances. If this is permitted, litigation would have no end, except when legal ingenuity is exhausted . To do so, is . . . to divide one 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 Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al to the interests of the Revenue. But that by 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 that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. 13. As observed in Dawjee Dadabhoy and Co. v. S. P. Jain [1957] 31 ITR 872 (Cal), at page 881, the words 'prejudicial to the interests of the Revenue' have not been defined, but it must mean that the orders of assessment challenged are such as are not in accordance with law, in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. It can mean nothing else . The aforesaid observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin its scope and ambit. So far as calling for the records and examining the same is concerned, undoubtedly, it is an administrative act, but on examination to consider or in other words, to form an opinion that the particular order is erroneous in so tar as it is prejudicial to the interests of the Revenue, is a quasijudicial act because on this consideration or opinion the whole machinery of re-examination and reconsideration 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 regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, 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. In fact the order in the given set of facts and circumstances could only be viewed as prejudicial to the interests of the assessee and not for the revenue. 8.2. In any case, we are in complete agreement with the arguments advanced by the ld AR that the profit for the whole year has to be determined by the ld AO and by the ld CIT. We find that the ld AO had only arrived at an arithmetical figure of closing stock as on 25.1.2008 as a 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 therefro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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