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TMI Blog2013 (9) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... it has been held that what is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consideration to the points in controversy – In the present case, it has been held Assessing Officer is cryptic in nature and there is no discussion. No proper enquiry on the part of the Assessing Officer. The Assessing Officer absolutely closed his eyes and completed the assessment without raising any objection on the impugned issues. Being so, the issues in dispute are required to be examined thoroughly by the Assessing Officer. The CIT is not justified himself giving direction to make addition - At all fairness, the issues to go back to the Assessing Officer for fresh consideration. Accordingly, the entire issues are remitted back to the Assessing Officer for fresh consideration. - Decided partly in favor of assessee. - IT Appeal No. 1089 (Hyd.) OF 2011 - - - Dated:- 22-2-2013 - CHANDRA POOJAR AND ASHA VIJAYARAGHAVAN, JJ. For the Appellant : Dr. C.P. Ramaswami For the Respondent : D. Sudhakar Rao. ORDER:- PER : Chandra Poojari This appeal by the assessee is directed against the different order of the CIT-IV, Hyderabad d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner of Income-tax failed to appreciate that in terms of Excise Laws sales returns have to be accounted for on actual basis whenever they are received. Consequently, he erred in suspecting even the actual figures of sales returns and assumed the same as suppressed sales. c) The learned Commissioner of Income-tax failed to appreciate that sales returns out of sales of earlier months would normally be in the succeeding months and consequently such returns cannot be reduced from the original dates of sale. He failed to appreciate ~e reconciliation statement filed before him. 6) a) The learned Commissioner of Income-tax erred in directing to tax an assumed figure of TDS as outstanding out of current liabilities. He failed to appreciate that payment of TDS to the credit of the Government is not governed by Section 438 but Section 201. The fact that no action was taken under section 201 shows that there was no short fall in the TDS collected and paid as per return u/s. 203. b) The learned Commissioner of Income-tax failed to appreciate that column 21 in the 3CD report does not deal with TDS unpaid and failed to read column 27 depicting 'nil' TDS. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Y. 2006-07, should have been considered for disallowance u/s. 43B of the IT Act. (iii) It is observed from Schedule-20 - " Notes on Accounts" that sales shown were net of Excise Duty, Sales Tax, Freight and Insurance. It was seen that the closing stock was valued net of excise duty which is contrary to the decision of Supreme Court in the case of CIT v. British Paints India Ltd.[1991] 188 ITR 44 as well as section 145. 4. On the above issues, the CIT further observed as follows: 5. The first issue is regarding the discrepancy between the figure of sales as per VAT returns i.e., Rs. 135.99 crores and the figure of sales shown in the P L account i.e. Rs. 127.86 crores. It is seen from the 13th Annual Report which is relevant for the assessment year under consideration (vide schedule 20 i.e. significant accounting policies and notes on accounts) that the sales are net of excise duty, sales tax, freight and insurance (vide Sl. No. 6 under Accounting Policies under schedule 20). Sales reflected in the VAT returns are, of course, inclusive of excise duty. The total amount of excise duty paid by way of CENVAT credit as well as by cash payment put together is of the order of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee i.e. attempts to reconcile the sales figure in the P L account i.e. Rs 127.28 crores with the sales figure as per VAT returns i.e. Rs. 135.96 crores. It can be seen therefrom that the assessee has taken into account sales returns of Rs. 33,71,997/ -. In the course of hearings, the assessee has explained the sales returns as relating to sales of preceding previous year and not relating to the assessment year 2006-07 which is under consideration. The assessee was called upon to establish this with cogent evidence. But it could not establish the same. In the absence of cogent evidence, this amount has to be treated as sales i.e. suppressed sales. He directed the Assessing Officer to bring this amount i.e. Rs. 33,71,997/ - to tax. 7. The second issue is regarding statutory dues of Rs. 83,15,121/- shown in the balance sheet as at 31.03.2006 under schedule -12 headed 'Current Liabilities' Annexure -4, is a copy of 3CD form (i.e. statutory audit report u/s. 44AB filed along with the return of income). Against Col. No. 21, which requires an assessee to state sums referred to in clause (a), (b), (c), (d), (e) or (f) of section 43B i.e., the liability which was incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of stocks at cost or market value whichever is lower. Therefore, there is no escapement of any income on account of the method of valuation followed by the company warranting the provisions of section 263 of the Income Tax Act. As said we have submitted manufacturing account by including excise duties in opening stock, closing stocks, purchases and sales as directed by you. It is submitted that non inclusion of duties does not impact the profit of the company. As regards the application of the decision of the apex court in the case of British Paints India Limited it is submitted that he decision only laid down that despite following the consistent method of accounting if the Assessing Officer finds that there is suppression of income he can discard the consistent method. As explained above in our case because of following the exclusive method of accounting by excluding the duty component from the closing stock and by not debiting the same in the Profit and Loss account there is no impact on the profit worked out by the Company. Therefore, it is submitted that the said decision may not be any assistance to cancel the assessment" 9. It is the case of the assessee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi High Court in the case of Gee Vee Enterprises v. Addl. CIT[1975] 99 ITR 375 as well as in the light of the decision of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT[2000] 109 Taxman 66. It is in place to extract the relevant portion of the land mark judgment of Hon'ble Apex Court as under: "An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. xxxxxxxxxxxxx The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order of the Income Tax Officer, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the Revenue." 13. Thus he set aside the assessment order and gave direction to the AO to redo the assessment. Against this finding of the CIT the assessee is in appeal before us. 14. The learned AR submitted that the Assessing Officer while completing the assessment u/s. 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the revenue by the erroneous order passed by the Assessing Officer. It empowers the Commissioner to initiate suo moto proceedings either where the Assessing Officer takes a wrong decision without considering the materials available on record or he takes a decision without making an enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner will be well within his powers to regard an order as erroneous on the ground that in the circumstances of the case, the Assessing Officer should have made further inquiries before accepting the claim made by the assessee in his return. The reason is obvious. Unlike the Civil Court which is neutral in giving a decision on the basis of evidence produced before it, the role of an Assessing Officer under the Income-tax Act is not only that of an adjudicator but also of an investigator. He cannot remain passive in the face of a return, which is apparently in order but calls for further enquiry. He must discharge both the roles effectively. In other words, he must carry out investigation where the facts of the case so require and also decide the matter judiciously on the basis of materials collected by him as also th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the Hon'ble Supreme Court in Rampyari Devi Saraogi v. CIT[1968] 67 ITR 84, Smt. Tara Devi Aggarwal v. CIT[1973] 88 ITR 323 (SC), and Malabar Industrial Co. Ltd. case (supra). 18. In Malabar Industrial Co. Ltd. case (supra) the Hon'ble Court has held as under: "There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall the orders passed without applying the principles of natural justice or without application of mind. 19. In our humble view, arbitrariness in decision-making would always need correction regardless of whether it causes prejudice to an assessee or to the State Exchequer. The Legislature has taken ample care to provide for the mechanism to have such prejudice removed. While an assessee can have it corrected through revisional jurisdiction of the Commissioner under Section 264 or through appeals and other means of judicial review, the prejudice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as in the decision of a court of law. The extent and nature of the reasons would depend on particular facts and circumstances. What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consideration to the points in controversy. The need for recording of reasons is greater in a case where the order is passed at the original stage. The appellate or revisional authority, if it affirms such an order, need not give separate reasons if the appellate or revisional authority agrees with the reasons contained in the order under challenge." 21. Similar view was earlier taken by the Hon'ble Supreme Court in Siemens Engg. Mfg. Co. Ltd. v. Union of India [AIR 1976 SC 1785]. It is settled law that while making assessment on assessee, the ITO acts in a quasi-judicial capacity. An assessment order is amenable to appeal by the assessee and to revision by the Commissioner under Sections 263 and 264. Therefore, a reasoned order on a substantial issue is legally necessary. The judgments on which reliance was placed by the learned Counsel for the assessee also points to the same direction. They have held that orders, which are subversive of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the return of the assessee was objectively examined or considered by the Assessing Officer. It is because of such non-consideration of the issues on the part of the Assessing Officer that the return filed by the assessee stood automatically accepted without any proper scrutiny. The assessment order placed before us is clearly erroneous as it was passed without proper examination or enquiry or verification or objective consideration of the claim made by the assessee. The Assessing Officer has completely omitted to examine the issues in question from consideration and made the assessment in an arbitrary manner. His order is a completely non-speaking order with reference to the impugned issues. In our view, it was a fit case for the learned Commissioner to exercise his revisional jurisdiction under section 263 which he rightly exercised by cancelling the assessment order and directing the Assessing Officer to pass a fresh order considering the issues raised by the CIT. In our view, the assessee should have no grievance in the action of learned Commissioner in exercising the jurisdiction u/s. 263 of the IT Act. 24. It was however contended by the learned Counsel that the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous view and hence will be amenable to revisional jurisdiction under Section 263. Second reason is that it is not taking of any view on the issues involved that will take the matter under the scope of Section 263. The view taken by the Assessing Officer should not be a mere view in vacuum but a judicial view. It is well established that the Assessing Officer being a quasi-judicial authority cannot take a view, either against or in favour of the assessee / revenue, without making proper inquiries and without proper examination of the claim made by the assessee in the light of the applicable law. As already stated earlier, we are not able to appreciate on what material was placed before the Assessing Officer at the assessment stage to take such a view. The assessee has also not been able to lead enough evidence to show to us that any inquiry was made by the Assessing Officer in this regard. Therefore mere allegation that the Assessing Officer has taken a view in the matter will not put the matter beyond the purview of Section 263 unless the view so taken by the Assessing Officer is a judicial view consciously based upon proper inquiries and appreciation of all the relevant fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
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