TaxTMI 
TaxTMI 
2018 (12) TMI 568
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.... the Act was carried out at the premises of the 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 th....
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....a documentary evidence for purchase of gold and diamond and verified the genuineness 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 ....
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....'- & issue resulted tax refund of Rs. 68,39,241/- 3. The stock register is already maintained by the assessee. It is evident from the Tax Audit report i.e. form 3CD. In the month of January 2013 the purchases 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, PRATYAKS....
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....ith. 2 While preparing Stock valuation reconciliation it is observed that as per the stock of gold (converted in to 22 ct) counted by the valuers was 60,161.109 grms. While the survey team forced the assessee to surrender 6 crores value "of gold at market value on the date of the survey, i.e. Rs. 2805 x 21,390.380 = 6,00,00,000/-. It is observed that the surrendered quantity should have been 17,448.953 gms (60,161.109gms - 42712.156gms.). And 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,....
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....!.S. Kathuria the authorized representative is Submitting the following information. 17. Exhibits 136 and 137 filed before the Assessing Officer contain complete details of stock of diamond as on 15.02.2013 i.e. date of survey. Quantity has been shown at 13965.31 carats amounting to Rs. 9,92,66,223/-. 18. A reconciliation statement was also filed reconciling the difference in value which is exhibited at page 140 of the paper book. 19. After examining these details, the Assessing Officer was convinced with the returned income of the assessee and accepted the same as such while framing the assessment order u/s 143(3) of the Act. 20. The Hon'ble Gujarat High Court in the case of Nirma Chemical Works 309 ITR 67 has observed that if the assessment 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 h....
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....em of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between " lack of inquiry" and " inadequate inquiry" . If there was any inquiry, even inadequate that would not by itself give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has a different opinion in the matter. It is only in cases of "lack of inquiry" that such a course of action would be open. In Gabriel India Ltd. [1993] 203 ITR 108 (Bom), law on this aspect was discussed in the following manner (page 113): " . . . From a rending of sub-section (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....
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....l power vested in him in accordance with law and arrived at a conclusion and such a conclusion cannot be formed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion . . . There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed . . . We may now examine the facts of the present case in the light of the powers of the Commissioner set out above. The Income-tax Officer in this case had made enquiries in regard to the nature of the expenditure incurred by the assessee. The assessee had given detailed explanation in that regard by a letter in 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 ....