2012 (7) TMI 928 - AT - Income Tax

Assessment order set aside due to stock discrepancies found in police raid: ITAT decision

Shri Jitendra K. Desai Prop : of M/s Sapna Fire Works, Versus The Commissioner of Income Tax- Ahmedabad-VI, Ahmedabad

The ITAT upheld the CIT's order under section 263, setting aside the assessment order due to discrepancies in stock found during a police raid at the ... Revision u/s 263 - Held that:- A.O. had not given any finding in assessment order for stock found by the police department in its raid. Further, the appellant has not able to show any evidence that this issue has been considered by the A.O. by any query letter from the A.O. Ld. A.O. did not consider this aspect before completing the assessment u/s 143(3) of the IT Act. Therefore, we upheld the order of the CIT dated 18.02.2010. Assessee’s appeal dismissed. Issues:Appeal against order u/s 263 of the I.T. Act for assessment year 2005-06.Detailed Analysis:1. The appeal was filed by the Assessee against the order of CIT-VI, Ahmedabad, under section 263 of the Income Tax Act for the assessment year 2005-06. The only ground of appeal was related to the passing of the order under section 263.2. The CIT-VI issued a show cause notice based on a raid conducted by the City Police, Bhavnagar, where excess stock of explosive items was found at the Assessee's premises. The AO did not obtain complete details of the stock found during the raid, and there was a discrepancy between physical stock and stock in the books of accounts. The AO made a lump sum addition without proper verification, leading to the CIT setting aside the assessment order and directing a fresh assessment.3. The Assessee contended that a survey was conducted by the IT authority, and detailed stock inventory was prepared before the assessment under section 143(3) was passed. The Assessee argued that the order under section 263 should be set aside based on this.4. The Department argued in favor of the CIT's order under section 263, citing detailed reasoning. Various case laws were relied upon by both sides to support their arguments.5. The ITAT upheld the order of the CIT, noting that the AO did not provide any finding on the stock found during the police raid in the assessment order. The Assessee failed to demonstrate that this issue was considered by the AO, and as a result, the order under section 263 was affirmed.6. Consequently, the Assessee's appeal was dismissed by the ITAT based on the findings and arguments presented during the proceedings.This detailed analysis covers the issues raised in the appeal against the order under section 263 of the Income Tax Act for the assessment year 2005-06, providing a comprehensive understanding of the judgment and the arguments put forth by both parties.