2009 (4) TMI 406 - HC - Income Tax

Revision- A search was conducted in the assessee s group and a block assessment was passed with additions against the assessee. The Commissioner (Appeals) allowed the appeal of the assessee in part. The assessee and the department preferred appeals which were pending disposal before the Tribunal. Meanwhile, the Commissioner u/s 263 of the income tax revised the order of Assessing Officer. The Tribunal held that action of the Commissioner was not justified. Held that- the Tribunal had adverted to the factual position in a detailed manner, had appreciated those issues that had been taken by the Commissioner while exercising jurisdiction under section 263 and held that the facets had been dealt with by the Commissioner (Appeals) and, therefore, by virtue of clause (c) of section 263(1) the Commissioner was not competent to assume jurisdiction and direct reassessment. The order of Tribunal was justified.

Issues Involved:
1. Justification of the Income-tax Appellate Tribunal's decision regarding the Commissioner's action under section 263 of the Income-tax Act.
2. Alleged suppression of work-in-progress.
3. Payment of salary and perquisites to directors.
4. Unexplained deposits in the case of M/s. Jherneshwar Nagrik Sahkari Bank Ltd.

Detailed Analysis:

1. Justification of the Income-tax Appellate Tribunal's Decision:
The core issue was whether the Tribunal was justified in holding that the Commissioner's action under section 263 of the Income-tax Act was not justified despite findings of suppression of work-in-progress. The Tribunal concluded that the Assessing Officer had taken one of the possible views and had examined all seized records and issues, thus the order could not be deemed erroneous and prejudicial to the Revenue's interest. The Tribunal relied on several precedents to support its conclusion, emphasizing that the Commissioner did not legally assume jurisdiction under section 263.

2. Alleged Suppression of Work-in-progress:
The Commissioner observed that the work-in-progress as per seized documents was Rs. 26,83,97,827, contrary to the assessee's figure of Rs. 8,42,62,301, resulting in an undervaluation of Rs. 18.41 crores. The Tribunal noted that no specific evidence was found during the search to show under-valuation of stock. The Assessing Officer had applied a net profit rate of 15% on consolidated sales, which the Tribunal deemed a permissible view. The Tribunal cited the principle that if two views are possible and the Assessing Officer adopts one, it cannot be treated as erroneous unless unsustainable in law.

3. Payment of Salary and Perquisites to Directors:
The Commissioner noted that one director admitted to receiving unrecorded salary/perquisites, raising doubts about other directors. The Tribunal found this presumption insufficient for invoking section 263. The Tribunal highlighted that similar additions in individual cases were deleted by the Commissioner of Income-tax (Appeals), and the Assessing Officer had already made additions for one director. The Tribunal reiterated that the statement of a third person cannot be used as evidence unless confronted to the concerned party.

4. Unexplained Deposits in M/s. Jherneshwar Nagrik Sahkari Bank Ltd.:
The Commissioner noted unexplained deposits of Rs. 79,40,246 in the bank, suggesting protective addition in the assessee's case. The Tribunal found that the block assessment order for the bank was passed after the assessee's block assessment order, making it impractical to consider the same in the assessee's case. The Tribunal emphasized that the issue had already been dealt with by the Commissioner of Income-tax (Appeals), invoking the principle of merger, thus invalidating the Commissioner's jurisdiction under section 263.

Conclusion:
The Tribunal's decision was upheld, emphasizing that the Commissioner of Income-tax (Appeals) had already dealt with the issues, and the Tribunal had analyzed them properly. The Tribunal's findings did not express an opinion on the merits of the case but focused on the procedural correctness. The High Court concluded that no substantial question of law arose, leading to the dismissal of the appeal.

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