2019 (7) TMI 1193 - HC - Income Tax

Revision u/s 263 - CIT directing the AO to undertake afresh the exercise of assessment for the AY in question - ITAT concluded that the AO had during the course of Assessment proceedings after making detailed and specific inquiries in relation to the Assessee s stock, accepted the reconciliation report with respect to the variation of value of stock, having again examined the impugned order of the CIT in the light of the original assessment order of the AO - HELD THAT - This Court is not persuaded to conclude that the impugned order of the ITAT suffers from any legal infirmity. In particular, this Court concurs with the view of the ITAT that in the present case the AO had indeed undertaken a detailed inquiry into the aspect of valuation of stock and that, therefore, the requirements for assumption of jurisdiction by the CIT under Section 263 of the Act were not fulfilled. The Court does not find any substantial question of law arising from the impugned order of the ITAT. The appeal is accordingly dismissed.

Issues:
1. Condoning delay in re-filing the appeal.
2. Appeal against ITAT order for AY 2013-14.
3. Validity of CIT's order under Section 263 of the Income Tax Act.
4. Assessee's stock valuation and CIT's scrutiny.
5. ITAT's decision on CIT's order.
6. Jurisdiction under Section 263 of the Act.
7. Legal infirmity in ITAT's order.
8. Assessment of valuation of stock by AO.

Analysis:

1. The Court first addressed the delay in re-filing the appeal and condoned the delay of 10 days, allowing the application.

2. The appeal was filed by the Revenue against an ITAT order for the Assessment Year 2013-14, questioning whether the ITAT erred in setting aside the CIT's order under Section 263 of the Income Tax Act.

3. The CIT invoked its power under Section 263 and issued a show cause notice to the Assessee regarding the valuation of stock, particularly focusing on excess unaccounted stock and differences in valuation of diamond jewellery. The CIT found the AO's assessment order erroneous and prejudicial to the Revenue's interest.

4. The Assessee challenged the CIT's order before the ITAT, arguing that the CIT's jurisdiction under Section 263 was erroneous. The ITAT reviewed the correspondence between the AO and the Assessee, noting detailed inquiries and reconciliation reports submitted by the Assessee.

5. The ITAT concluded that the AO had conducted a detailed inquiry into the stock valuation and accepted the reconciliation report, rejecting the Revenue's claim of inadequate inquiry. The ITAT referenced the Supreme Court's decision in CIT v. Amitabh Bachhan to support its decision.

6. The Court, after examining the orders and arguments, agreed with the ITAT's decision. It concurred that the AO had sufficiently investigated the stock valuation, meeting the requirements for jurisdiction under Section 263, and dismissed the appeal.

7. The Court found no substantial question of law in the ITAT's order and dismissed the appeal, affirming the ITAT's decision on the valuation of stock by the AO.

This detailed analysis highlights the key issues addressed in the judgment, focusing on the legal aspects of the case and the reasoning behind the decisions made by the authorities and the Court.

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