2002 (11) TMI 256 - AT - Income Tax

Summary

Issues Involved:
1. Justification of CIT's resort to provisions of s. 263.
2. Evidence of assessment being done in haste.
3. Allegation of suppression of sales by the assessee.

Summary:

Issue 1: Justification of CIT's resort to provisions of s. 263
The assessee challenged the CIT's orders u/s 263, arguing that the CIT was not justified in cancelling the assessments framed u/s 143(3). The CIT had issued a show-cause notice and subsequently cancelled the assessments, stating that the AO had failed to conduct proper enquiries regarding the cost analysis of raw materials and sale prices. The Tribunal held that the CIT must provide a proper and valid reason for assuming jurisdiction u/s 263 and that the CIT had not come to a definite conclusion on how the AO's orders were erroneous and prejudicial to the interest of the Revenue. The Tribunal concluded that the CIT's approach was faulty and cryptic, and thus, the orders passed by the CIT were cancelled.

Issue 2: Evidence of assessment being done in haste
The CIT argued that the assessments were completed in undue haste without proper enquiries. However, the Tribunal noted that the AO had conducted a detailed verification of the audited books of accounts, vouchers, and other relevant documents. The assessments were framed under the Selective Scrutiny Scheme of the CBDT, and the AO had compared the GP rate with previous years. The Tribunal held that the CIT cannot substitute his subjective view for the AO's findings and that the CIT had not provided sufficient grounds for cancelling the assessments based on alleged haste.

Issue 3: Allegation of suppression of sales by the assessee
The CIT alleged that the assessee had suppressed sales, but the Tribunal found no evidence to support this claim. The AO had accepted the sales, purchases, and book results for the relevant years, and no additions were made. The Tribunal emphasized that the CIT must state the reason for intervention and come to a firm conclusion that the AO's order was erroneous and prejudicial to the interests of the Revenue. The Tribunal concluded that the CIT had not met this requirement and thus, the orders were cancelled.

Conclusion:
The Tribunal allowed the appeals filed by the assessee, cancelling the CIT's orders u/s 263 for the assessment years 1992-93 and 1993-94. The Tribunal emphasized that the CIT must provide a proper and valid reason for assuming jurisdiction u/s 263 and that the CIT had not come to a definite conclusion on how the AO's orders were erroneous and prejudicial to the interest of the Revenue.