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Raghunath Exporters Versus Principal CIT, Kolkata

2017 (11) TMI 797 - ITAT KOLKATA

Revision u/s 263 - CIT has exercised his jurisdiction merely on the basis of audit objection - Held that:- CIT before holding the order of AO as erroneous in so far as prejudicial to the interest of revenue has to find out error after examination of the records. The mere finding of Ld. Pr CIT is that no documentary evidences are available on record does not render the order of the AO as erroneous and prejudicial to the interest of Revenue. In our considered view it was the duty under the Act tha .....

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Shri G. Mallikarjuna, CIT-DR ORDER PER Waseem Ahmed, Accountant Member:- The appeal filed by the assessee is against the order of Commissioner of Income Tax-11, Kolkata dated 23.11.2016 relating to assessment year 2012-13 against the order passed u/s 263 of the Income Tax Act, 1961. Shri K.M. Roy, Ld. Authorized Representative appeared on behalf of assessee and Shri G.Mallikarjuna, Ld. Departmental Representative appeared on behalf of Revenue. 2. The assessee has raised the following grounds of .....

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uring hearing. 3. Solitary issue raised by assessee in this appeal is that Ld. CIT erred in holding the order of Assessing Officer passed u/s 143(3) of the Act as erroneous in so far prejudicial to the interest of revenue u/s 263 of the Act. 4. Briefly, the facts of the case are that assessee is a private limited company and engaged in trading business of tea. The assessee for the year under consideration filed its return income declaring total income of ₹5,90,950/- on 25.09.2012. The retu .....

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venue on the following observations:- (1) The assessee in its profit and loss account has shown the expenses on the purchase of tea for ₹16,32,03,915/- whereas the total purchases were shown by it during assessment proceedings at ₹16,58,28,272/- only. Thus a difference of ₹26,24,357/- (16,58,28,272 - 16,32,03,915) was observed which was not taxed under the provision of law; (2) The assessee in column 20 of Tax Audit Report in Form 3CD has shown the details of opening stock, pur .....

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that the closing stock has been valued at ₹230 per kg for its quantity lying at the yearend i.e. 98776.410 kg. Thus, the total value of closing stock was shown at ₹2,27,18,574 (98776.510 x 230/-) whereas the purchase during the year was shown at ₹298.10 per kg. The Ld. Pr CIT further observed that in case assessee is following FIFO method then the closing stock has been undervalued by ₹67,17,784/- [98776.410 x 68.10 (298.10 - 230)]. It is because the opening stock of the .....

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The closing stock in the instant case has been valued at cost on year-to-year basis consistently. The valuation of closing stock representing the actual cost incurred on the purchase of tea. c) The method of valuation adopted by the assessee has been accepted in the earlier and subsequent years by the Revenue. d) Even the valuation of closing stock is enhanced then the value of opening stock of the subsequent year would be increased accordingly and therefore the enhancement in the valuation of c .....

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ce arising in the amount of purchase shown by the assessee in its profit and loss account vis-a-vis details of purchase submitted during the year. However, Ld. Pr CIT disregarded the contention of assessee by observing as under:- 1) With regard to purchase there is no material available on record suggesting that the difference is arising on account of input and out-put VAT liability. 2) With regard to valuation of closing stock there is no material available on record to specify qualitative and .....

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regard the point of valuation of stock, there is also nothing on record to specify qualitative and quantitative stock statement to arrive at a logical conclusion. The contention of the assessee that even of the closing stock of FY 2012-13 does not hold good as the valuation of stock must confirm to the accounting principles irrespective of the fact whether it is a revenue neutral exercise or not and secondly, if the closing stock is found to be undervalued, it would automatically entail that th .....

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oceedings and carry out necessary enquiries / verification and thereafter a fresh assessment order is to be passed in accordance with the relevant provisions of law. Aggrieved by this, the assessee has come up in appeal before us. 6. Ld. AR for the assessee before us submitted that the proceedings u/s. 263 of the Act was initiated on the basis of audit objection and there was no application of mind of Ld. Pr CIT in ariving at the conclusion that the order of AO is erroneous in so far as prejudic .....

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nder section 263 could not be sustained. The said notice, therefore, was to be quashed and set aside. Similarly, Ld. AR also relied on the judgment of Punjab & Haryana High Court in the case of CIT vs. Sohana Woollen Mills 296 ITR 238 (P&H), wherein it was held as under:- Mere audit objection and merely because a different view could be taken, are not enough to say that the order of the Assessing Officer was erroneous or prejudicial to the interest of the revenue. The jurisdiction could .....

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The ld. DR further submitted that the commissioner is assisted by many officers, and for his administrative function he takes help and assistance of assistance. These officers include DCIT / ITO HQ, Inspector, Tax Assistant, Auditor etc. The report of audit party are also relevant in discharge of its functions. Thus, the commissioner can be assisted by his team and also by the Assessing Officer about any matter concerning erroneous order having been passed. 6.1 The ld. DR also submitted that as .....

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n of u/s 263 of the Act. Thus, any action taken by Ld. CIT u/s. 263 of the Act merely on audit objection and without applying his own mind is not sustainable in the eyes of law but in the case of on hand Ld. CIT has applied his mind as he has not made any reference in his order to the audit objection raised by the Audit Wing of the Income Tax Department. Thus, Ld. CIT after verifying independently has invoked the provision of Section 263 of the Act. 6.2 Certain differences were observed form the .....

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nd that Ld. Pr CIT has given categorically finding which reads as under:- 2. The assessment record of the assessee was called for and on the basis of the verification of the materials available on record, it was found that the order of assessment was erroneous in so far as it is prejudicial to the interest of revenue on the following grounds: From the above, we hold that the proceedings u/s. 263 of the Act has not been initiated on the basis of audit objection. Thus, the case laws relied by Ld. .....

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