TaxTMI 
TaxTMI 
TaxTMI 
2018 (12) TMI 568
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee. Accordingly, return for the year was selected for scrutiny assessment and returned income of Rs. 6.34 crores was accepted by the Assessing Officer vide order dated 30.03.2016 framed u/s 143(3) of the act. 5. Invoking the provisions of section 263 of the Act, the PCIT issued a show cause notice to the assessee, as the PCIT was of the firm belief that the assessment framed u/s 143(3) of the Act is not only erroneous but also prejudicial to the interest of the Revenue. 6. It is a settled position of law that the powers u/s 263 of the Act can be exercised by the Commissioner on satisfaction of twin conditions, namely, (i) the assessment order should be erroneous and prejudicial to the interest of the Revenue. By erroneous, is meant contrary to law. Thus, this power cannot be exercised unless the commissioner is able to establish that the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. 7. Hon'ble Supreme Court in Malabar Industrial Co. Ltd., 243 ITR 83, has laid down the following ratio:- "A bare reading of section 263 of the Income-tax Act, 1961, makes it clear that the prerequisite for the exercise of jurisdiction by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uineness This was necessary to. accept the assessee's contention. The Assessi-n-i Officer did nothing as far as enquiry and verification of excess stock no disclosed by the assessee firm in its return of income is concerned. In view of the facts stated above, the assessment order passed by the Assessing Officer is liable to be cancelled. You are, therefore, requested to show cause as to why assessment order dated 30,3-2016 passed by the AC should not be cancelled and the AO is directed to pass a fresh order after making proper enquiry and verification." 10. Let us now see whether the Assessing Officer has made sufficient enquiry before framing the assessment order. 11. Exhibit 72 is the notice dated 01.02.2016 served by the Assessing Officer and the same reads as under: "Dated : 01/02/2016 M/s- Motiwala & Sons 2633, Bank Street. Karo! Bagh, New Delhi Sir/Madam, During the course of assessment proceedings In your ease for the A Y 2013-14, it has found that T your premise on 15.02.2013. In this connection, youare required to furnish the following information produced before me at my office at the above mentioned office address on or before 08.02.2016 at 11.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rchases were made of Rs. 10, 15, 29,411 /- out of which Diamonds were purchased of 8, 61, 48,411/- and gold purchased of Rs. 1, 53, 81,000/'-. The assessee valued the stock of Diamond at cost and at FIFO Method. The Major purchase of the month was of diamond and the Balance was of Gold. The method of valuation of stock of Gold on weighted Average is fully justified as the assessee is adopting the uniform method of valuation of stock for years together. I hope the above information is sufficient to your satisfaction. Your's truly For M.S. Kathuria Associates Chartered Accountants CA. M.S. Kathuria (FCA)" 13. Not satisfied with the reply of the assessee, the Assessing Officer issued further notice dated 19.02.2016 which is at page 74 of the paper book and the relevant part reads as under: OFFICE OF THE ASSTT. COMMISSIONER OF INCOME TAX CiRCLE-51 (1;RO0M NO 1504. 15fH FLOOR E-2 BLOCK, PRATYAKSH KAR BHAWAN, DR SHAYMA PRASAD MUKHARJEE, CIVIC CENTRE, J.L.NEHRU MARG, NEW DELHI Dated: 19/02/2015 Mls Motiwala & Sons 2633. Bank Street, Karol Bagh New Delhi-110 005 Sir/Madam During the course of assessment proceedings in your case fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d not 21,390.380 gms. The market value of 17,448.953 gms comes to (17,448.953 gms. X Rs. 2805/-) 4,89,44,313/- This means that there was excess surrender of Rs. l,10,55,687/-(6,00,00,000/- - 4,89,44,313/-). The_ above calculation resulted in excess tax charged To the tune cf Rs. 34,16,207/-. Which should be refunded to the client . Moreover the stock of 17,448.953 gms. Should have been valued at the weighted average cost i.e Rs. 1770.26 per grm. and not at market value i.e. Rs, 2805/- per grm. Which is resulted into excess valuation of Rs. 1,80,55,130/- (17448.953 gms. X Rs. 1034.74 [2805.00-1770.26]). The above resulted in excess payment of tax to the tune of Rs. 55,79,035/-. So the excess amount of tax charged by the department i.e. Rs. 89,95,242/-(Rs. 34,16,207/- + 55,79,035/-) should be refunded to the client. I hope the above information is sufficient to your satisfaction. ' Yours Truly For M.S. Kathuria Associates" 15. Exhibits 77 to 127 are details of Form No. 2A and 2B giving details of purchases and sales tax paid thereon. Exhibit 128 is the proforma of the purchases as asked by the Assessing Officer. Exhibit 129 and 130 are details of closing stock as on 31....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt order were to incorporate reasons for upholding the claim made by an assessee, result would be an epitome and not an assessment order. 21. The Bombay High Court in the case of CIT Vs. Gabriel India Ltd 203 ITR 108 has held that the decision of the ITO cannot be held to be erroneous simply because in his order he did not make an elaborate discussion in this regard. 22. In the light of the aforementioned ratio, we have no hesitation to hold that the Assessing Officer during the course of assessment proceedings made detail and specific enquiries in relation to stock and after making detailed enquiries, accepted reconciliation in the variation in the value of stock. Therefore, it cannot be said that the Assessing Officer did not make any enquiry while framing the assessment order. The PCIT has grossly erred in observing that the Assessing Officer should have made a complete enquiry for the amount of excess stock at Rs. 9,95,72,922/- called for documentary evidence for purchase of gold and diamond and verified the genuineness. As mentioned elsewhere, the assessee had filed complete documentary evidences of purchase of gold and diamond and the Assessing Officer has verified the same....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on (1) of section 263, it is clear that the power of suo motu revision can be exercised by the Commissioner only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Income-tax Officer is „erroneous in so far as it is prejudicial to the interests of the Revenue‟ . It is not an arbitrary or unchartered power, it can be exercised only on fulfilment of the requirements laid down in sub-section (1). The consideration of the Commissioner as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that the Commissioner acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. The Commissioner cannot initiate proceedings with a view to starting fishing and 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 lega....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... writing. All these are part of the record of the case. Evidently, the claim was allowed by the Income-tax Officer on being satisfied with the explanation of the assessee. Such decision of the Income-tax Officer cannot be held to be „ erroneous‟ simply because in his order he did not make an elaborate discussion in that regard."" 16. Thus, in cases of wrong opinion or finding on merits, the CIT has to come to the conclusion and himself decide that the order is erroneous, by conducting necessary enquiry, if required and necessary, before the order under Section 263 is passed. In such cases, the order of the Assessing Officer will be erroneous because the order passed is not sustainable in law and the said finding must be recorded. CIT cannot remand the matter to the Assessing Officer to decide whether the findings recorded are erroneous. In cases where there is inadequate enquiry but not lack of enquiry, again the CIT must give and record a finding that the order/inquiry made is erroneous. This can happen if an enquiry and verification is conducted by the CIT and he is able to establish and show the error or mistake made by the Assessing Officer, making the order unsu....