TMI Blog2019 (4) TMI 1044X X X X Extracts X X X X X X X X Extracts X X X X ..... that the order of the AO on these issues was erroneous and prejudicial to the interest of the revenue. This again was not in compliance with the mandate of Section 263 of the Act. As pointed out by the Assessee, without being contradicted by the Revenue, that from AY 2011-12 onwards, no addition was made on account of discrepancy in closing stock. There is merit in the contention therefore of the Assessee that since the issue in the previous and subsequent years stands adjudicated in its favour by the ITAT and this Court, it would be futile to reopen the issue only for three AYs in between viz., 1999-2000 to 2001-02. It is no longer a live issue . The Court cannot be unmindful of the fact that for a number of AYs from 1997-1998 till 2014-15, barring the three AYs in question, the issues have been decided ultimately in favour of the Assessee. In each of these AYs it was a scrutiny assessment under Section 143 (3) of the Act. Surely, the rule of consistency would apply in such a scenario. Accordingly, the Court sees no reason why only for the three AYs in question, the matter should be reopened. - Decided . in favour of the Assessee and against the Revenue. - ITA 757/2005, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment orders for the two AYs 1999-2000 and 2000-2001 and issued necessary directions in relation to the assessment order for AY 2001-02. Show Cause Notices 6. The Commissioner of Income Tax ( CIT ) invoked the revisional jurisdiction under Section 263 of the Act and issued a show cause notice (SCN) dated 8th March 2004 to the Assessee as regards AYs 1999-2000. For AY 2000-2001 a separate SCN dated 16th February 2004 was issued. In the said SCNs the following issues were referred to: given the average rate of ₹ 2887 per quintal of rice, the figures of the closing stock of rice as end of the previous financial year (FY) relevant to the AY in question would be much more than the figure arrived at in terms of the actual sales of rice. This indicated a suppression of sales. This got further confirmed by the packing expenses which were much more than the claim for the preceding year by 83%. The corresponding increase in the sales as compared to the immediately previous AYs was only 33%. The AO had failed to take note of the serious discrepancies and rushed to complete the assessment. 7. Another issue raised by the CIT was that the AO had failed to examine th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee was unable to reconcile the sale of different qualities of rice vis-avis the availability of the respective quality of rice. 11. The CIT noted that there was no explanation for the inventory being taken only once a year and that too close to the end of the year. These contained predominantly high quality higher priced products whereas sales made throughout the year were of medium or low price rice. Referring to the decision of the Supreme Court in Rampyari Devi Saraogi v. Commissioner of Income Tax 67 ITR 84 and Tara Devi Aggarwal v. Commissioner of Income Tax 88 ITR 323 the CIT concluded that: the Assessing Officer's failure to make the inquiries which were called for in the circumstances of the case make the assessment order erroneous in as much as it is prejudicial to the interests of the revenue. 12. Reference was also made to the decision in Malabar Industrial Co. Ltd. v. CIT 243 ITR 83, Duggal Co. v. CIT 220 ITR 456 and Gee Vee Enterprises v. Addl. CIT 99 ITR 375. The decision of the Guwahati High Court in Tarajan Tea Co. Pvt. Ltd. v. CIT 205 ITR 45 was also referred to. The matter was remanded to the AO to consider the issues afre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. There is also no finding that any sales made were found not having been account ted for. There is also no basis to even suspect that what was sold as superior quality was sold at the rate of inferior quality, since all the sales are verifiable. In fact as stated above no record either of production of superior quality or sale thereof is being maintained. 17. It was held that if a uniform rate of closing stock of rice was applied it would give a misleading result since rice is of different qualities and on different rates have been sold to parties and it is bound, therefore, to give a misleading result. The ITAT then enquired into the merits of the claims and held that the order of the AO cannot be held to be erroneous. 18. This Court has heard the submissions of Mr Asheesh Jain, learned Senior Standing Counsel for the Revenue and Mr. Salil Kapoor and Sumit Lanchandwani, learned counsel for the Assessee. Analysis and reasons 19. The scope of the power of the CIT under Section 263 of the Act has been explained in several decisions. Two essential requirements are that the CIT must find the order of the AO to be both erroneous and prejudicial to the interests o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee is engaged in the production of agro based products and as such the production percentage cannot remain uniform from year to year or month to month, more particularly because the production of Rice depends upon the supplies received of paddy and the variety and quality of production of rice achieved from such paddy. Thus, if the quality of supplies of paddy is superior, production percentage of fine quality i.e. wand goes up. However, in case the quality supplied of paddy is inferior, the fine quality of production percentage goes down. The supplies received of paddy, depends upon nature and in case the rains in a particular paddy season is excessive or less, the quality of paddy cultivation deteriorates and as such the production percentage of superior quality of Rice cannot remain uniform. The assessee in fact does not maintain quality wise any separate record of production, as it is neither possible nor was statutorily required. 21. It cannot therefore be said that this was a case of no inquiry by the AO. Added to this is the fact that the CIT has himself not undertaken any independent inquiry to contradict the conclusions reached by the AO and to demonstr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent dated 11th December, 2009 for the following reasons: We feel that the Writ Petitions have to succeed because the contentions as raised on behalf of the counsel for the petitioner are well founded. The only reason which has been given seeking re-opening of the assessment for the years 1997-98 and 1998-99 is that suppression of sales have taken place on account of the fact that when average price of the closing stock is multiplied with the quantity of the sales in the year then the value of the sales would be at a higher figure than that as declared by the assessee. Clearly, there is no new material which is alleged to have come to the notice of the Assessing Officer which has caused him to seek re-opening of the assessment. Admittedly, the reasons given for seeking re-opening of the assessment contains the expression perusal of the case record reveals clearly showing that it is on the basis of the same assessment record as was filed by the assessee, during the relevant assessment years and also scrutinized by the Assessing Officer before passing the orders under Section 143(3) is the basis for seeking re-opening of the assessment. ....Not only this, the rationale/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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