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2013 (9) TMI 271 - AT - Income TaxRevision u/s 263 - Options when cryptic and arbitrary order passed by the Assessing officer Held that - Arbitrariness in decision-making would always need correction regardless of whether it causes prejudice to an assessee or to the State Exchequer. The Legislature has taken ample care to provide for the mechanism to have such prejudice removed. While an assessee can have it corrected through revisional jurisdiction of the Commissioner under Section 264 or through appeals and other means of judicial review, the prejudice caused to the State Exchequer can also be corrected by invoking revisional jurisdiction of the Commissioner under Section 263. - 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 his reasons therefor. Reliance has been placed upon the various judgment in the case of S.N. Mukherjee v. Union of India 1990 (8) TMI 345 - SUPREME COURT , wherein it has been held that what is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consideration to the points in controversy In the present case, it has been held Assessing Officer is cryptic in nature and there is no discussion. No proper enquiry on the part of the Assessing Officer. The Assessing Officer absolutely closed his eyes and completed the assessment without raising any objection on the impugned issues. Being so, the issues in dispute are required to be examined thoroughly by the Assessing Officer. The CIT is not justified himself giving direction to make addition - At all fairness, the issues to go back to the Assessing Officer for fresh consideration. Accordingly, the entire issues are remitted back to the Assessing Officer for fresh consideration. - Decided partly in favor of assessee.
Issues Involved:
1. Erroneous and prejudicial assessment order by the Assessing Officer (AO). 2. Discrepancy in sales figures between VAT returns and Profit & Loss (P&L) account. 3. Discrepancy in statutory dues payable and paid. 4. Understatement of export sales. 5. Collection and non-payment of Central Sales Tax (CST). 6. Sales returns and their impact on sales figures. 7. Under-valuation of closing stock due to exclusion of excise duty. 8. Application of Section 263 by the Commissioner of Income-tax (CIT). Issue-wise Detailed Analysis: 1. Erroneous and Prejudicial Assessment Order: The CIT found the original assessment order dated 5-12-2008 passed under section 143(3) by the AO to be erroneous and prejudicial to the interest of revenue. The AO failed to make necessary inquiries or examine the genuineness of the claims made by the assessee, rendering the assessment order both erroneous and prejudicial to the revenue. 2. Discrepancy in Sales Figures: The CIT observed a discrepancy between the sales figures as per VAT returns (Rs. 135.99 crores) and the P&L account (Rs. 127.86 crores), with a shortfall of Rs. 8,12,78,358. The CIT directed the AO to bring this shortfall to tax, noting that the sales in the P&L account were net of excise duty, sales tax, freight, and insurance. 3. Discrepancy in Statutory Dues Payable and Paid: The CIT noted that statutory dues payable were Rs. 83,15,121, but only Rs. 46,73,223 had been paid before the due date for filing the return of income. The balance of Rs. 36,41,898 was not paid before the due date and should have been disallowed under section 43B. The CIT directed the AO to examine this discrepancy and bring any unsubstantiated claims to tax. 4. Understatement of Export Sales: The CIT found a difference of Rs. 16,64,423 between the export sales figure in the P&L account and the CST assessment order. The assessee could not explain this difference, leading the CIT to direct the AO to bring this amount to tax. 5. Collection and Non-Payment of CST: The CIT observed that the total CST collected was Rs. 1,27,28,381, but only Rs. 1,13,76,281 had been paid. The difference of Rs. 13,52,100 was not reflected in the turnover shown in the P&L account, indicating suppression of turnover. The CIT directed the AO to bring this amount to tax. 6. Sales Returns and Their Impact on Sales Figures: The CIT noted that the assessee had accounted for sales returns of Rs. 33,71,997, which were claimed to relate to sales of the preceding previous year. However, the assessee could not provide cogent evidence to support this claim. The CIT directed the AO to treat this amount as suppressed sales and bring it to tax. 7. Under-Valuation of Closing Stock: The CIT found that the assessee had not included excise duty in the valuation of closing stock, contrary to the decision of the Supreme Court in CIT v. British Paints India Ltd. and section 145A. The CIT noted an evident under-valuation of stock by Rs. 13,53,882 and directed the AO to bring this amount to tax. 8. Application of Section 263 by the CIT: The CIT invoked section 263, noting that the AO had not made necessary inquiries or examined the issues in question. The CIT set aside the assessment order and directed the AO to redo the assessment, considering the discrepancies and issues raised. The Tribunal upheld the CIT's invocation of section 263, emphasizing the AO's duty to protect both the assessee's and the revenue's interests by making necessary inquiries and examining claims judiciously. Conclusion: The Tribunal found that the AO's assessment order was erroneous and prejudicial to the revenue due to a lack of proper inquiry and examination of the assessee's claims. The CIT's invocation of section 263 was justified, and the issues were remitted back to the AO for fresh consideration and decision in accordance with the law. The appeal of the assessee was partly allowed.
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