2003 (10) TMI 288 - AT - Income Tax

Summary

Issues:
Assessment year 1993-94 - Revision under section 263 of the IT Act, 1961 - Sales suppression - Consideration of seized materials for assessment.

Analysis:
The appeal was filed against the CIT's order under section 263 of the IT Act for the assessment year 1993-94. The original assessment completed by the AO determined the total income at Rs. 61,300, with disallowance towards deficiency in drawings. However, the CIT found that the AO did not properly assess the materials collected during a search conducted under section 132. The seized documents revealed unaccounted sales and suppression of sales, which the assessee admitted. The CIT directed the AO to consider the unaccounted sales amounting to Rs. 81,92,659 for assessment, as it was not included in the original assessment for the year 1993-94. The Revenue (assessee) appealed this decision before the Tribunal.

During the hearing, the appellant's representative argued that the original assessment considered all suppressed income for the succeeding assessment year 1994-95, so there was no basis to repeat the same materials for the year 1993-94. On the other hand, the Departmental Representative contended that the AO should have considered the suppressed sales details for both years, as evident from the seized materials. The failure to consider these materials for the assessment year 1993-94 was a fatal omission leading to an erroneous assessment and revenue loss.

The Tribunal observed that the seized materials indicated sales suppression by the assessee using an arithmetic code. The AO's failure to mention or consider these materials for the assessment year 1993-94 was a critical omission. The Tribunal agreed with the CIT that the assessment order was erroneous and prejudicial to revenue interests. It was crucial to assess the seized materials for both years to determine the extent of sales suppression accurately. Therefore, the Tribunal upheld the CIT's decision to set aside the assessment order under section 263 of the IT Act, concluding that the appeal by the assessee was liable to be dismissed.