TaxTMI 
TaxTMI 
2018 (3) TMI 310
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....ed in the manufacture and sale of automobile lamps, liquid electronic diodes, display units, two wheeler panel displays and railway signal lamps, apart from carrying on the business of amusement park as well as construction. A search and seizure operation was conducted against this group of Companies under Section 132 of the Income Tax Act, 1961 (for short 'the Act'), on 24-10-1997. At the time of search, the assessee admitted an undisclosed income of Rs. 135 lakhs under Section 132(4) of the Act. Subsequently, he has enhanced it to Rs. 1,43,21,000/-, which was later scaled down to Rs. 1,41,02,000/- for the entire group. The Assessing Officer (AO), in the block assessment proceedings for the block period 01-04-1987 to 24-10-1997, accepted the returns filed by the assessee. Subsequently, the internal Audit Wing of the Department raised certain audit objections on the completed assessments. Based on those objections, the Commissioner of Income Tax - 3 and the Commissioner of Income Tax - 4 issued show cause notices to three of this group Companies under Section 263 of the Act. The AO has accepted the returns of the assessee in general and also in respect of the unrecorded sales and ....
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....f the learned Counsel for the parties with reference to the record. The law on the scope of jurisdiction of the Commissioner under Section 263 of the Act is well crystallized. In Malabar Industrial Co. Ltd., ( supra), the Supreme Court held as under: "There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind." This Court, speaking through one of us (CVNR, J), has discussed the relevant case law in Commissioner of Income Tax, Visakhapatnam, vs. M/s.V.Dhana Reddy & Co., Visakhapatnam Referred Case No.18 of 2001, Dated: 22-12-2017 and held as under: "11.The scope of Section 263 of the Act is the subject matter of a slew of judicial pronouncements. In Malabar Industrial Co. Ltd. (2 supra), the Supreme Court held that while exercising jurisdiction suo motu under Section 263 of....
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....not visualize the substitution of the judgment of the Commissioner for that of the Income Tax Officer, who passed the order unless the decision is not in accordance with law. 14.In C.I.T. v. Sunbeam Auto Ltd. [2011] 332 ITR 167 (Delhi) the Delhi High Court held that if there was an enquiry, even if it is inadequate that would not by itself give occasion to the Commissioner to pass orders under Section 263 merely because he has a different opinion in the matte, that it is only in cases of lack of inquiry that such a course of action would be open. 15.In C.I.T. v. Gabriel India Ltd. [1993] 203 ITR 108 (Bom.) the Bombay High Court held that the conclusion of the Commissioner that an order is erroneous must be based on material on record of the proceedings called for by him and that if there is no such material on record, it can be said that the very initiation of proceedings by him would be illegal and without jurisdiction. It has further held that the Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already concluded and that the Department cannot be permitted to begin fresh litigation because of new views....
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....he interests of the Revenue, will not suffice; that the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the Income Tax Officer was not only erroneous but was prejudicial to the interests of the Revenue. Thus, while the Income Tax Officer is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suo motu revisional powers unless supported by adequate reasons for doing so; that if a query is raised during the course of the scrutiny by the Assessing Officer, which was answered to the satisfaction of the Assessing Officer, but neither the query nor the answer were reflected in the assessment order, this would not by itself lead to the conclusion that the order of the Assessing Officer called for interference and revision. e) The Commissioner cannot initiate proceedings with a view to start fishing and roving inquiries in matters or orders which are already c....
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.... course of which certain material was found and also seized, which clearly indicated that the assessee had made undisclosed transactions outside the books of account. From the order of assessment, it is very clear that the assessing officer has not made further enquiries into the search material gathered and the documents seized from the assesee. Although the Assessing Officer has estimated the income at 10% of Rs. 40 lakhs, it is not clear as to how the figure of Rs. 40 lakhs has been arrived at and on what basis the income was estimated at 10% of the unaccounted turnover. In fact the order does not even explain the basis for allowing Rs. 36 lakhs as expenditure out of the unaccounted sales taken at Rs. 40 lakhs, thereby taxing the balance of Rs. 4 lakhs only. On the other hand, the assessee on 24-10-1997 had admitted unaccounted income of Rs. 25 lakhs out of the unaccounted sales, which has also not been taken into account while framing the block assessment. Enquiries have also not been conducted regarding sale of molybdenum outside the books by verification of consignments sent by Insured parcels by writing to the postal department. There was also material available with the Ass....
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....disclosed turn over and on what basis, income was estimated at 10% thereof. He has further observed that the order does not even explain the basis for allowing Rs. 36 lakhs as expenditure out of the unaccounted sales of Rs. 40 lakhs thereby taxing the balance of Rs. 4 lakhs only. He has further commented that enquiries have also not been conducted regarding the sale of molybdenum outside the books by verification of consignments sent by insured parcels by writing to the Postal Department. As held by the Supreme Court in Malabar Industrial Co. Ltd., ( supra), an order would be termed as erroneous, if the same is based on an incorrect assumption of facts or an incorrect application of law. In our opinion, had the Commissioner considered any material available on record, which would have improbablised the claim of the assessee that out of the turnover of Rs. 40 lakhs, he has incurred an expenditure of Rs. 36 lakhs, it would have been permissible for him to interfere with the assessment order, for, in such a case, acceptance of the claim of the assessee by the AO could have been termed as based on an incorrect assumption of facts contrary to the record. The Commissioner has not pointe....