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TMI Blog2012 (12) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... rify the assuming of estimating of gross profit rate which could neither be an error or loss to the Revenue being prejudicial to the interest of Revenue, thus this issue could not be dealt with by the CIT u/s.263. Unexplained investment in construction of factory building - Held that:- Valuation here again on assumption or presumption was predominantly in the mind of the learned CIT. After verifying or observing the error, the learned CIT deleted the issue for reconsideration rightly noted that the revisionary power cannot be extended to the issue - no direction to the Assessing Officer by holding a different view alone on which revisionary power can be extended to. Disallowance of expenses - Held that:- Unable to satisfy with the contention of the CIT-DR that details of various accounts were to be called for when the details of unsecured loans, sundry debtors, purchases etc., which are grossly interconnected to the extent that the CIT himself does not know as to what would be done on calling the details thereof. The CIT was to assume jurisdiction u/s.263 when on the basis of assessment record he has found errors committed by the Assessing Officer prejudicial to the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be the basis of assuming jurisdiction u/s.263 as per the provisions of sub-clause (c) of sub-section (1) of Section 263. To facilitate the application of the provisions, the learned Counsel submitted that the show-cause notice resulted in considering the issue by the learned CIT with a direction to the Assessing Officer on three issues formulated by the learned CIT in his order, which is reproduced as under : Issue No.1 Though at the time of survey on 17.01.2008 the value of stock shortage was determined at Rs. 31,81,200, the same was reduced to Rs.25,85,2001- on the basis of some unverifiable explanation furnished in the course of assessment proceedings. Similarly though at the time of survey the undisclosed income arising out of stock shortage was calculated by applying G.P. rate of 8% at Rs.2,50,000, the same was reduced to Rs. 1,24,896 calculated by applying G.P. rate of 4.8%. The A.O. did not give any reason for adopting such reduced G.P. rate when in the immediately 2 proceeding assessment years i.e. 2006-07 and 2007-08, the G.P. rates were 7.44% and 8.32% respectively. No doubt CIT(A) vide his order dt. 11.10.2011 (supra) have confirmed the addition of Rs. 1,24,896, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermine the real income and not because for having assuming jurisdiction on the facts and circumstances as found by the learned CIT could not again be probed by the Assessing Officer in the light of the direction of the learned CIT. 3. The learned CIT-DR opposed the contention of the learned Counsel for the assessee meaning thereby that the purchase of paddy, purchase of gunny bags, paddy receipt expenditures , unsecured loans, repayment of secured loans, addition to assets and sundry debtors had not been adjudicated upon by the Assessing Officer cannot be a ground which again goes against the spirit of the provisions of the I.T.Act sub-clause (c) of sub-section (1) of Section 263 which the learned Counsel for the assessee has relied upon. The merger theory is only applicable to the issues on which no specific finding has been given either by the Assessing Officer or by the learned CIT(A). She prayed that the order passed u/s.263 may kindly be upheld. 4. Confining ourselves to the appeal being ITA No.142/CTK/2012 in view of the fact that the submissions of the rival parties percolate to the issues already dealt with by the learned CIT(A) which appeal we will address later, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details of unsecured loans, sundry debtors, purchases etc., which are grossly interconnected to the extent that the learned CIT himself does not know as to what would be done on calling the details thereof. The learned CIT was to assume jurisdiction u/s.263 when on the basis of assessment record he has found errors committed by the Assessing Officer prejudicial to the interest of Revenue. He cannot ask the Assessing Officer for roving enquiry based on a view which has also not been specified by him in his order. 4.3. In view of the above, we have no hesitation in quashing the impugned order u/s.263. We quash the same by allowing the appeal of the assessee. 5. Now coming to ITA No.141/CTK/2012 which appeal by the assessee raises the following specific grounds in relation to the order u/s.143(3) which was sought to be revised by the learned CIT as decided in ITA No.142/CTK/2012 (supra). 1. That on the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals) is not justified in confirming the addition of 1,24,896 made by the Assessing Officer alleging stock discrepancy without appreciating the facts that the stock taking had been made on eye estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, it was not the case of the Assessing Officer to assume jurisdiction of FCI or the Government authority who would require the physical quantities as per the billing and as per the value. In other words, it is nobody s case to establish the GP rate to be strictly adhered to on the basis of entries or the missing entries on the date of survey. Stock is always valued at cost or market value whichever is lower as on 31st March being the end of the financial year cannot be tinkered with unless otherwise on a specific finding that purchases were sold without entering in the books. The diminution in the value of opening stock is also to be considered with the closing stock which value will not appear in the books of account but will definitely disturb the gross profit rate. The assessee maintain account regularly and files returns on the basis such accounts, which are duly audited as per the provisions of law. The surveyed stock in which the discrepancy was pointed out had been taken care of by the assessee when it filed its return along with the financial statements for the year closing on 31.3.2008. On perusal of the orders of the authorities below, we are of the considered view th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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