TaxTMI 
TaxTMI 
2021 (7) TMI 733
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....T ought not to have accepted the closing stock rate for the yarn sold to arrive at the sale value. 5. The Ld. PCIT ought to have considered the fact that yarn and cloth prices depend on market fluctuations. 6. The Ld. PCIT ought to have considered the fact that quantity of Yarn specified in Form 3CD is inclusive of Yarn supplied for conversion division. 7. The Ld. PCIT erred in arriving at the sale quantity without considering the production capacity of the unit. 8. The Ld. PRINCIPAL CIT ought to have considered that the assessing officer has verified every aspect and passed the final order. 9. The Ld. PCIT ought not to have been guided by the other evidences such as Audit objection etc. for invoking The section 263 of the Income Tax Act, 1961." 3. Brief facts of the case are that the assesse company is engaged in the business of manufacture of cotton yarn, cloth and dealing in textile testing instruments filed its return of income for assessment year 2015-16 on 31.10.2015 declaring loss of Rs. 5,70,831/-. The assessment for impugned assessment year has been completed u/s.143(3) of the Act, on 28.09.2017 and determined total loss at Rs. 3,30,488/- by making certain addit....
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....anufactured and sold for the year under consideration. The Principal CIT further observed that on perusal of assessment records, it appears that although the assessee was called upon to furnish month-wise details of sale of finished goods, but the assessee conveniently failed to submit month-wise sales details and thus, point of suspicion of the very same issue of this present proceedings is under-reporting of sales figures vis-à-vis profit & loss account and Form 3CD has not been properly verified by the Assessing Officer during the course of assessment proceedings. Although, the AR for the assessee tried to explain that yarn transferred to clothing division is included in sales reported in Form 3CD, but the AR has failed to produce necessary clinching evidence to show that sales reported in profit & loss account and value in Form 3CD have been accurate so as to enable this proceedings to be null & void. Therefore, he opined that assessment order passed by the Assessing Officer is erroneous, insofar as it is pre-judicial to the interests of revenue and hence, set aside assessment order passed by the Assessing Officer dated 28.09.2017 and direct him to redo assessment in acc....
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....as passed order which is erroneous and prejudicial to the interests of revenue. Unless the Principal CIT proves that order passed by the Assessing Officer is erroneous or which is not passed in accordance with law in right perspective of facts, the Principal CIT cannot revise assessment order passed by the Assessing Officer. Further, to invoke jurisdiction u/s.263 of the Act, twin conditions embedded u/s.263 of the Act must co-exist. In other words, if the assessment order passed by the Assessing Officer is erroneous, but it is not prejudicial to the interests of revenue, or vice-versa, then the Principal CIT does not have any power to revise the assessment order passed by the Assessing Officer. This legal proposition is supported by plethora of judicial decisions including the decision of Hon'ble Supreme Court in the case of M/s.Malabar Industries Co.Ltd. Vs. CIT (2000) 243 ITR 83(SC). 9. In this legal background, if you examine facts of the present case one has to understand as to whether the assessment order passed by the Assessing Officer is erroneous, insofar as prejudicial to the interests of the revenue in respect of the issue questioned by the Principal CIT in his show-ca....
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....rn transferred to clothing division, then sales quantity of yarn declared in Form 3CD and value of sales declared in books of account does not have any difference. This fact has been explained before the Principal CIT by filing reconciliation of quantitative details of goods produced and sales declared in books of account. The Principal CIT, ignoring all evidences filed by the assessee has simply arrived at difference in sales purely by estimating sales figure without pointing out how sales declared in books of account is incorrect. Therefore, we are of the considered view that the Principal CIT has erred in revision of assessment order by making certain general observations based on suspicion and wrong working of sales and without specifying errors which are prejudicial to the interests of revenue, contrary to the settled principles of law that assessment order cannot be revised merely on suspicious and surmises grounds. 10. Coming back to case laws relied upon by the assessee. The assessee has relied upon decision of Kokata Bench of the ITAT in the case of Nitson & Amitsu Pvt.Ltd. Vs. ACIT in ITA No.160/Kol/2019, where under identical set of facts, the Tribunal has quashed rev....