TaxTMI 
TaxTMI 
TaxTMI 
2013 (9) TMI 271
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....ailed to appreciate that the original assessment order is neither erroneous nor prejudicial to the interest of revenue with regard to all the three issues raised in the show cause notice u/s. 263 of the Income-tax Act, 1961. Consequently, he erred in giving directions for making various additions to the assessed income, which are either tax neutral or actually prejudicial to the interest of revenue. 3) The learned Commissioner of Income-tax erred in directing the Assessing Officer to charge to tax a sum of Rs. 16,64,423/- as difference in export sales as he failed to appreciate the error committed in the assessment order under APGST/CST despite the reconciliation of the figures presented before him. 4) a) The learned Commissioner of Income-tax erred in directing addition of Rs. 13,52,100/- as CST collected and not paid despite the fact that there was no short fall in the collection and payment of CST as evidenced in Annexure-3 to the impugned order u/s. 263 of Income-tax Act, 1961. b) The learned Commissioner of Income-tax failed to appreciate that payment of CST in respect of the ....
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....nbsp; b) The learned CIT failed to appreciate that once duty paid were added in the valuation of finished goods appearing both in opening and closing stock of financial year 2005-06 it would be a negative figure of Rs. 3,36,020/-. Consequently, the addition directed is prejudicial to the interest of the revenue. 8) For the above grounds and such other grounds that may be urged at the time of hearing, the appellant prays that the appeal be allowed. 9) The appellant craves leave to add to, amend or modify the above grounds of appeal either before or at the time of hearing of the appeal, if it is considered necessary. 3. Brief facts of the issue are that the assessee returned income for A.Y. 2006-07 at Rs. 18,78,87,350. Assessment was completed u/s. 143(3) of the Income-tax Act, 1961 on 5.12.208 at Rs. 18,98,98,840 by disallowing claim of depreciation, commission on export sales and professional charges u/s. 40(a)(ia). The CIT on examination of record found that the order of the Assessing Officer contains certain errors which are prejudicial to the interest of revenue. He had issued a notice calling for explanation from the as....
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.... assessment order and furnished particulars of VAT sales, CST sales, export sales, VAT collected and paid, excise duty collected and paid, CST collected and paid etc. Comparing the furnished details with the relevant CST assessment order (vide copy of relevant CST final assessment order for the year 2005-06 dated 22.02.2009 under Annexure-I) discrepancy is noticed with regard to export sales. In the P&L account, under schedule-13 (which schedule relates to break up of sales) the assessee has credited Rs. 13.35 crores by way of export sales. This figure is the net of excise duty. According to the assessee (vide annexure -2) excise duty on exports is Rs. 3,40,735/- + Cess Rs. 6,816/- = Rs. 3,47,551/-. Hence the total export sales figure according to the assessee i.e., inclusive of excise duty etc., is Rs. 13.35 crores. But in the CST assessment order, the total export sales has been stated at Rs. 13,51,70,978. In the course of hearings before the CIT, the assessee was asked to explain the difference. But it could not explain the same. The difference works out to Rs. 16,64,423/-. This is evident understatement of export sales. The CIT directed the Assessing Officer to bring this amoun....
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....aggregate amount of statutory dues paid before filing of return has been stated at Rs. 46,73,223/-. But this is substantially less than the figure reflected in the balance sheet i.e., Rs. 83,15,121/-. It is the case of the assessee that the difference of Rs. 36,41,898/- represents the aggregate of TDS made by the assessee from salaries and other payments i.e., Rs. 27.16 lakh + CST Rs. 6.79 lakh + provision for Income Tax Rs. 2.16 lakhs and some small amounts relating to works contract tax. As regards CST, it has already been demonstrated in the preceding para by cogent evidence that the assessee's default in payment of collected CST is of the order of Rs. 13,52,100/-. As regards the alleged TDS liability of Rs. 27.16 lakhs, the assessee has not produced the relevant evidence. He directed the Assessing Officer to thoroughly examine this point and in case, the assessee fails to substantiate its claim relating to TDS i.e., Rs. 27.16 lakhs, he should bring the extent of unsubstantiated claim of liability to tax. 8. The last issue is regarding under valuation of closing stock on account of not taking excise duty into account for the purposes of evaluating closing stock. This matter had....
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....ment of the Hon'ble Supreme Court in the case of British Paints India Ltd. (supra) clearly lays down that the excise duty is an inevitable ingredient in the valuation of stock. If the assessee has consistently followed the method of excluding excise duty from the valuation of stock on the opening date and closing date of the previous year, the assessee by this devise can shift its actual tax liability from one to another year. The method followed by the assessee must result in a proper and fair picture of income not lop sided view of it. The method followed by the assessee is contrary to section 145A as well as the law laid down by the Hon'ble Supreme Court in the case of British Paints. 10. Further Accounting Standard-2 requires excise duty to be included in the valuation of finished goods. Paragraphs 18-20 of the Guidance Note on Accounting Treatment for Excise Duty issued by ICAI states as under: "Since the liability for excise duty arises when the manufacture of the goods is completed, it is necessary to create a provision for liability of unpaid excise duty on stocks lying in factory or bonded warehouse. The estimate of such liability can be made at ....
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....s decision and according to the Assessing Officer there is no question of making any addition on the issues raised by the CIT. He drew our attention to the assessment order which shows that the Assessing Officer examined the various information produced by the assessee and then passed the assessment order. If the order of the Assessing Officer is not in the style as expected by the CIT it cannot be faulted with and the jurisdiction of section 263 cannot be invoked. Further he relied on the judgement of Delhi High Court in the case of CIT v. Mahavir Aluminium Ltd.[2008] 297 ITR 77 for the proposition that whatever adjustment is made in the valuation of inventory, this will affect both the opening as well as closing stocks. If any adjustment was required to be made by a statute, effect should be given to it irrespective of any consequences on the computation of income for tax purposes. He relied on the assessment order and submitted that the CIT is making 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 reactiva....
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....radical changes in recent years. It deserves to be noted that the present assessment was made under Section 143(3) of the Income-tax Act. In other words, the Assessing Officer was statutorily required to make the assessment under Section 143(3) after scrutiny and not in a summary manner as contemplated by Sub-section (1) of Section 143. Bulk of the returns filed by the assessees across the country is accepted by the Department under Section 143(1) without any scrutiny. Only a few cases are picked up for scrutiny. The Assessing Officer is therefore, required to act fairly while accepting or rejecting the claim of the assessee in cases of scrutiny assessments. He should be fair not only to the assessee but also to the Public Exchequer. The Assessing Officer has got to protect, on one hand, the interest of the assessee in the sense that he is not subjected to any amount of tax in excess of what is legitimately due from him, and on the other hand, he has a duty to protect the interests of the revenue and to see that no one dodged the revenue and escaped without paying the legitimate tax. The Assessing Officer is not expected to put blinkers on his eyes and mechanically accept what the ....
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....al jurisdiction of the Commissioner under Section 263. Arbitrariness in decision-making causing prejudice to either party cannot therefore be allowed to stand and stare at the legal system. It is difficult to countenance such arbitrariness in the actions of the Assessing Officer. It is the duty of the Assessing Officer to adequately protect the interest of both the parties, namely, the assessee as well as the State. If he fails to discharge his duties fairly, his arbitrary actions culminating in erroneous orders can always be corrected either at the instance of the assessee, if the assessee is prejudiced or at the instance of the Commissioner, if the revenue is prejudiced. While making an assessment, the ITO has a varied role to play. He is the investigator, prosecutor as well as adjudicator. As an adjudicator he is an arbitrator between the revenue and the taxpayer and he has to be fair to both. His duty to act fairly requires that when he enquires into a substantial matter like the present one, he must record a finding on the relevant issue giving, howsoever briefly, his reasons therefor. 20. In S.N. Mukherjee v. Union of India AIR 1990 SC 1984, it has been observed by the Hon'b....
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....s and prejudicial to the interests of the revenue. If the Assessing Officers are allowed to make assessments in an arbitrary manner, as has been done in the case before us, the administration of revenue is bound to suffer. If without discussing the nature of the transaction and materials on record, the Assessing Officer had made certain addition to the income of the assessee, the same would have been considered erroneous by any appellate authority as being violative of the principles of natural justice which require that the authority must indicate the reasons for an adverse order. We find no reason why the same view should not be taken when an order is against the interests of the revenue. As a matter of fact such orders are prejudicial to the interests of both the parties, because even the assessee is deprived of the benefit of a positive finding in his favour, though he may have sufficiently established his case. 22. In view of the foregoing, it can safely be said that an order passed by the Assessing Officer becomes erroneous and prejudicial to the interests of the Revenue under Section 263 in the following cases: (i) The order sought to be revised co....
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....ng Officer had taken a possible view in accepting the return of the assessee with reference to expenditure and hence, the Commissioner was not justified in assuming the revisional jurisdiction under Section 263. We have given our thoughtful consideration to the aforesaid submissions. As already stated earlier, an order becomes erroneous because inquiries, which ought to have been made on the facts of the case, were not made and not because there is anything wrong with the order if all the facts stated or the claims made in the return are assumed to be correct. Thus, it is mere failure on the part of the Assessing Officer to make the necessary inquiries or to examine the claim made by the assessee in accordance with law, which renders the resultant order erroneous and prejudicial to the interest of the revenue. Nothing more is required to be established in such a case. One would not know as to what would have happened if the Assessing Officer had made the requisite inquiries or examined the claim of the assessee in accordance with law. He could have accepted the assessee's claim. Equally, he could have also rejected the assessee's claim depending upon the results of his enquiry or e....