2018 (9) TMI 1175 - HC - Income Tax

Revision u/s 263 - Commissioner found that the extent of loss of gold in a financial year of 72 kg that was worth in excess of ₹ 10.87 crore required a closer scrutiny - Appellate Tribunal found that the loss of gold of similar extent had been allowed in previous financial years and in at least one subsequent financial year - Held that - Appellate Tribunal referred to the extent of loss that is claimed by the industry as a whole and discovered that about five per cent loss per year was par for the course. Though the figure in this case was on the higher side of 72 kg, yet such amount was a little over five per cent of the quantity of gold obtained by the assessee during the relevant financial year. As to the other grounds indicated in the show-cause notice, including the perceived excess depreciation, the Appellate Tribunal went into the facts and rendered an opinion on the facts that the assessment order had been correctly made. Commissioner required the assessment to be reopened and even directed the assessing officer to proceed in a particular manner. Some of the directions issued by the Commissioner indicated that the fresh assessment to be undertaken by the assessing officer was to only be a facile exercise as the quantum of addition in several cases were dictated to the assessing officer by the Commissioner in his relevant order dated October 21, 2014. Since the matters of fact that were referred to in the Commissioner s order have been appropriately dealt with the Appellate Tribunal and the Appellate Tribunal was satisfied that the order under Section 263 of the Act issued by the Commissioner was without basis, the Appellate Tribunal s order does not warrant any interference, particularly as no substantial question of law arises in the circumstances.

Issues:
1. Propriety of the Appellate Tribunal reversing an order under Section 263 of the Income Tax Act.
2. Alleged loss of gold and anomalies in business transactions.
3. Specific directions issued by the Commissioner in the order dated October 21, 2014.
4. Applicability of the directions issued by the Commissioner.
5. Assessment of the tax payable based on the Commissioner's order.
6. Appellate Tribunal's findings on loss of gold and excess depreciation.
7. Commissioner's requirement for a fresh assessment and directions to the assessing officer.
8. Satisfaction of the Appellate Tribunal with the Commissioner's order.
9. Absence of substantial question of law in the case.

Analysis:
1. The primary issue in this case is the challenge by the Revenue regarding the Appellate Tribunal's decision to reverse an order under Section 263 of the Income Tax Act. The Revenue contends that the tribunal should not have interfered with the order as it required a fresh assessment to be conducted based on sufficient grounds provided in the original order.

2. The Revenue highlights the alleged loss of more than 72 kg of gold valued at over ?10 crore in a single financial year, which was allowed as a deduction by the assessing officer. Additionally, the Revenue points out anomalies in the assessee's transactions with sister concerns, emphasizing the need for a reevaluation of the business transactions and income for the relevant assessment year.

3. The Commissioner's order under Section 263 of the Act included specific directions for the assessing officer to make additions to the income and assess the tax payable. Notably, the directions issued on October 21, 2014, required additions related to excess manufacturing costs and depreciation allowance claimed by the assessee.

4. The Appellate Tribunal examined the Commissioner's directions and found that the loss of gold claimed by the assessee was consistent with industry standards, despite being on the higher side. The Tribunal also scrutinized other grounds raised in the show-cause notice, ultimately concluding that the assessment order was appropriately made based on the facts presented.

5. The Tribunal determined that the Commissioner's order necessitating a fresh assessment did not raise any substantial legal questions, especially considering that some directions implied a predetermined outcome for the assessing officer, minimizing the assessment exercise's substantive nature.

6. Given that the Tribunal addressed the factual aspects referred to in the Commissioner's order and found the latter to be unfounded, the Tribunal's decision to dismiss ITAT No. 325 of 2016 and GA No. 3368 of 2016 was upheld, with no costs awarded in the case.

7. In summary, the judgment revolves around the dispute over the reversal of the Section 263 order, the assessment of alleged losses and anomalies, the specific directions provided by the Commissioner, and the Tribunal's satisfaction with the assessment process and findings, ultimately concluding that no significant legal issues warranted interference in the case.

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