M/s Rajesh Exports Limited , Bangalore V. The Principal Commissioner of Income tax (Central) , Bangalore

ITA 1058/BANG/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1473 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 15-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BHAVNA C YASHOY
• Assessee Lawyers: A SHANKAR
• Keywords: Business income; Opportunity of being heard; Audit objection; Principle of natural justice; Corroborative evidences
• Section: 143(3); 142(1); 10AA; 153A; 10B; 263; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER ITA NO S . 1034, 1058, 1059 & 1056 /BANG/201 7 ASSESSMENT YEAR S : 20 0 8 - 0 9 TO 2011 - 12 M/S. RAJESH EXPORTS LTD., NO.4, BATAVIA CHAMBERS, KUMARA PART (EAST), BENGALURU-560001. PAN : AA AC R 8642 N VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX, (CENTRAL), CENTRAL REVENUE BUILDING, QUEENS ROAD, BENGALURU - 560001. APPELLANT RESPONDENT ASSESSEE BY : SHRI. A. SHANKAR, ADVOCATE REVENUE BY : S MT. BHAVNA C. YASHOY , CIT DR DATE OF HEARING : 2 6 . 0 9 .201 8 DATE OF PRONOUNCEMENT : 27 . 1 1 .201 8 O R D E R PER BENCH : THESE APPEALS ARE PREFERRED BY THE ASSESSEE AGAINS T THE RESPECTIVE ORDERS OF THE CIT PASSED UNDER SECTION 263 OF THE I T ACT (HEREINAFTER CALLED AS AN ACT), SETTING ASIDE THE ASSESSMENT ORDERS ON COMM ON GROUNDS. THEREFORE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DIS POSED OF THROUGH THIS CONSOLIDATED ORDER. IN THESE APPEALS, GROUNDS ON W HICH THE ORDERS OF THE CIT ARE ASSAILED ARE ALMOST SAME EXCEPT THE DIFFERENCE IN Q UANTUM. THE MAIN ISSUES ON WHICH ASSESSMENT ORDERS ARE REVISED BY THE CIT ARE ONLY 2. FIRST IS WITH REGARD TO THE PURCHASE OF GOLD BAR IN THE NAME OF BASMA JE WELLERS, SHARJAH AND THE OTHER IS WITH REGARD TO THE ALLOCATION OF EXPENSES AMONGST THE MAIN UNIT, EXPORT UNIT AND SEZ UNIT. FOR THE SAKE OF REFERENCE, WE E XTRACT THE GROUNDS RAISED IN ITA NO. 1056/BANG/2017: 1. THE ORDER OF THE LEARNED PRINCIPAL COMMISSIONER OF INCOME-TAX (PCIT) (CENTRAL), BANGALORE PASSED UNDER SECTION 26 3 OF THE ACT IN SO FAR AS IT IS AGAINST THE APPELLANT IS OPP OSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES AND THE F ACTS AND CIRCUMSTANCES IN THE APPELLANT'S CASE. 2. THE LEARNED PCIT WAS NOT JUSTIFIED IN LAW AND FACTS TO SET ASIDE THE ASSESSMENT ORDER DATED 31/3/2016 AND DIRECT THE ASSESSING OFFICER TO MAKE A DE NOVO ASSESSMENT ON T HE FACTS AND CIRCUMSTANCE OF THE CASE. 3. THE LEARNED PCIT WAS NOT JUSTIFIED IN PASSING AN OR DER UNDER SECTION 263 OF THE ACT, AS THE ORDER PASSED UNDER S ECTION ITA NOS.1034, 1058, 1059 & 1056/BANG/2017 PAGE 2 OF 12 143(3)R.W.S 153A OF THE ACT, WAS PURSUANT TO PROPER ENQUIRY ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE ORDER OF REVISION HAS BEEN PASSED IN VIOLATION OF THE PRINCIPLES OF NATURA1 JUSTICE, AS THE ORDER HAS BEE N PASSED WITHOUT GIVING ADEQUATE OPPORTUNITY OF BEING HEARD AND THUS THE ORDER IS REQUIRED TO BE SET ASIDE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE ORDER OF REVISION PASSED BY THE LEARNED PCIT IS ALSO IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AS THE D ETAILS REQUESTED BY THE APPELLANT HAVE NOT BEEN GIVEN TO THE APPELLA NT AND THUS RELIANCE ON CERTAIN MATERIAL BY THE PCIT WITHOUT PU TTING THE SAME TO THE APPELLANT IS ALSO VIOLATION OF THE PRIN CIPLES OF THE PRINCIPLES OF NATURAL JUSTICE AND ON THIS COUNT ALS O THE ORDER IS REQUIRED TO BE CANCELLED ON THE FACTS AND CIRCUMSTA NCE OF THE CASE. 6. THE LEARNED PCIT HAS PASSED AN UNSUSTAINABLE ORDER WHICH IS BASED PURELY ON ASSUMPTIONS AND PRESUMPTIONS. THE O RDER IS ABSOLUTELY ARBITRARY AND FULL OF SURMISES, WITHOUT CONSIDERING THE RELEVANT MATERIAL AND ASSUMING IRRELEVANT MATER IAL. CONSEQUENTLY THE ORDER PASSED IS A PERVERSE ORDER O N THE FACTS AND CIRCUMSTANCE OF THE CASE. 7. THE LEARNED PCIT HAS GROSSLY ERRED IN REVISING THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER WITHOUT APPRECIATING THAT THERE IS NO ERROR, MUCH LESS PREJ UDICIAL TO THE INTERESTS OF THE REVENUE TO WARRANT A REVISION AND THEREFORE THE ORDER PASSED BY THE LEARNED PCIT IS U LTRA VIRES TO THE SCOPE OF SECTION 263 AND REQUIRES TO BE CANCELL ED UNDER THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE . THE DIRECTION TO MAKE THOROUGH VERIFICATION AMOUNTS TO ORDERING FISHING AND ROVING ENQUIRES WITHOUT ANY MATERIAL IN SUPPORT THEREOF AND CONSEQUENTLY THE IMPUGNED ORDER PASSED IS BAD IN LAW AND IS LIABLE TO BE CANCELLED. 8. THE LEARNED PCIT FAILED TO APPRECIATE THAT THE ASSE SSING OFFICER BEFORE COMPLETING THE ASSESSMENT ORDER UNDER SECTIO N L43(3)R.W.SL53A OF THE ACT ON 31.01.2016 HAD MADE D ETAILED ENQUIRIES AND HENCE ON THE VERY SAME ISSUE NO ACTIO N CAN BE TAKEN UNDER SECTION 263 OF THE ACT AS THE ACTION OF THE ASSESSING OFFICER IS IN ACCORDANCE WITH LAW. 9. GROUNDS ON ACCOUNT OF TYPOGRAPHICAL ERROR IN THE NA ME OF THE PARTY: A) THE LEARNED PCIT FAILED TO APPRECIATE THAT THE L EARNED ASSESSING OFFICER HAD INDEED VERIFIED THE DETAILS A ND AFTER BEING FULLY SATISFIED BY THE SAID EXPLANATION AND A FTER APPLICATION OF MIND ACCEPTED THE ISSUE IN THE APPEL LATE PROCEEDINGS AND THUS THERE IS NO ERROR ON THIS ISSUE ON THE FACTS AND CIRCUMSTANCES OF THE CASE. B) THE LEARNED PCIT FAILED TO APPRECIATE THAT IN ACCORDANCE WITH EXPLANATION B TO 263(1) THE MEANING OF WORD 'RECORD' IS RECORDS AVAILABLE AT THE TIME OF EXAMIN ATION BY THE ITA NOS.1034, 1058, 1059 & 1056/BANG/2017 PAGE 3 OF 12 REVISIONAL AUTHORITY. C) THE LEARNED PCIT FAILED TO APPRECIATE THAT ALL D ETAILS INCLUDING SUPPORTING EVIDENCES FROM SEVERAL GOVERNMENT AGENCI ES WERE PART OF RECORD WHICH OUGHT TO HAVE BEEN CONSIDERED BY THE LEARNED PCIT BEFORE INVOKING THE JURISDICTION UNDER SECTION 263 OF THE ACT ON THE FACTS AND CIRCUMSTANCE OF THE CAS E. D) THE LEARNED PCIT, FAILED TO APPRECIATE THAT THE INFORMATION WAS VERIFIED BY MULTIPLE GOVERNMENTAL AGENCIES AND A MERE TYPOGRAPHICAL ERROR WHILE COLLATING THE DETAILS IN A CHART CANNOT LEAD TO AN INFERENCE THAT THE ORDER IS ERRON EOUS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 10. GROUNDS REGARDING VERIFICATION OF GROSS LOSSES: A) THE LEARNED PCIT ERRED IN HOLDING THAT THERE HAS BEEN GROSS LOSS IN THE MAIN UNIT WHICH IS CONTRARY TO TH E MATERIAL ON RECORD AS THERE IS NO GROSS LOSS IN THE MAIN UNI T AND CONSEQUENTLY PASSED A PERVERSE ORDER ON THE FACTS A ND CIRCUMSTANCE OF THE CASE. WITHOUT PREJUDICE THE CON TENTION OF THE LEARNED PCIT IS ARITHMETICALLY INCORRECT AND CO NSEQUENTLY THE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE. B) THE LEARNED PCIT HAS ERRONEOUSLY ARRIVED AT THE GROSS LOSSES BY CONVENIENTLY IGNORING CERTAIN OPERATIONAL INCOME AND NOT CONSIDERING ALL THE MATERIAL ON RECORD AND THUS THE VERY SUBSTRATUM OF THE NUMBERS ADOPTED BY HER ARE TOTALL Y ERRONEOUS AND CONSEQUENTLY THE ORDER OF THE LEARNED PCIT IS LIABLE TO BE SET ASIDE ON THE FACTS AND CIRCUMSTANC E OF THE CASE. C) THE LEARNED PCIT FAILED TO APPRECIATE THAT WHEN THE ENTIRE OPERATIONAL INCOME IS TAKEN INTO CONSIDERATION THER E IS NO GROSS LOSS IN THE MAIN UNIT OF THE APPELLANT AND HENCE WH EN THERE IS NO GROSS LOSS ITSELF THERE WOULD NOT ARISE A NEED V ERIFY THE GROSS LOSS LEADING TO A CLEAR INFERENCE THAT THE AS SUMPTION OF JURISDICTION UNDER SECTION 263 IS ERRONEOUS THE FAC TS AND CIRCUMSTANCE OF THE CASE. D) THE GROSS LOSS NUMBERS ARRIVED AT BY THE LEARNED PCIT ARE CONTRARY TO THE FACTS AND MATERIAL AVAILABLE ON RE CORD. HENCE IT IS CLEAR THAT THE IMPUGNED ORDER PASSED BY THE LEAR NED PCIT IS WITHOUT ANY FOUNDATION AND THE ENTIRE ORDER IS ON P RESUMPTION AND ASSUMPTION AND FULL OF SURMISES AND IS RESTING ON MISCALCULATIONS AND CONSEQUENTLY THE ORDER REQUIRES TO BE TO BE SET ASIDE ON THE FACTS AND CIRCUMSTANCE OF THE CASE . E) THE LEARNED PCIT ERRED IN CALCULATION AND THUS I S NOT CORRECT IN HOLDING THAT THERE HAS BEEN A GROSS LOSS OF 6.07% AND 9.48% IN THE MAIN AND THE SEZ UNITS ON THE FACT S AND CIRCUMSTANCE OF THE CASE. F) WITHOUT PREJUDICE THE PCIT FAILED TO APPRECIATE THAT THERE IS A GROSS PROFIT OF 1.60% IN THE MAIN UNIT AND A G ROSS LOSS OF 1.0 1% IN THE SEZ UNIT. G) THE LEARNED PCIT HAS FAILED TO APPRECIATE IT IS NOT PRUDENT FOR ANY BUSINESS MAN TO INCREASE THE INCOME IN THE TAXABLE DIVISION AND CLAIM LOSS IN THE EXEMPTED SEG MENT ITA NOS.1034, 1058, 1059 & 1056/BANG/2017 PAGE 4 OF 12 AND CONSEQUENTLY THE VERY BASIC ASSUMPTION OF THE L EARNED PCIT IS FATAL AND FURTHER THE LEARNED PCIT FAILED T O APPRECIATE THAT PRESENTING ACCOUNTS INDICATING GROS S LOSS IN THE MAIN UNIT AND A GROSS PROFIT IN THE SEZ UNIT WO ULD HAVE BENEFITTED THE APPELLANT AS THE MAIN UNIT IS LIABLE TO INCOME TAX WHEREAS THE SEZ UNIT IS EXEMPTED FROM INCOME TA X ON THE FACTS AND CIRCUMSTANCE OF THE CASE. H) THE LEARNED PCIT FAILED TO APPRECIATE THAT THE A PPELLANT HAS NOT PRESENTED ACCOUNTS WHICH WOULD BE BENEFICIA L TO IT BUT HAS TRANSPARENTLY PRESENTED ACCOUNTS AS THEY HA VE OCCURRED EVEN IF IT MEANT THAT HAVING PROFIT IN THE TAXABLE SEGMENT AND LOSS IN THE EXEMPTED SEGMENT ON THE FAC TS OF THE CASE. I) THE LEARNED PCIT, FAILED TO APPRECIATE THAT DET AILED INDIVIDUAL PROFIT AND LOSS ACCOUNTS OF EACH OF THE UNITS HAVE BEEN FILED BEFORE THE ASSESSING OFFICER AND THAT TH ERE HAS BEEN NO DISPUTE IN THE FIGURES, WHICH HAVE BEEN ACC EPTED AFTER THOROUGHLY CROSS VERIFYING THE DATA. THE OBSE RVATION OF THE LEARNED PCIT, THAT THERE HAS BEEN NO ENQUIRY IS TOTALLY ERRONEOUS ON THE FACTS AND CIRCUMSTANCES OF THE CASE. J) THE LEARNED PCIT HAS LOST TRACK OF THE DETAILED QUESTIONNAIRE ISSUED DURING THE ASSESSMENT AND THAT THE DETAILS FURNISHED BY THE APPELLANT ARE ALL PART OF THE ASSESSMENT ORDER AND THUS THE JURISDICTION TO INVOK E SECTION 263 DOES NOT ARISE ON THE FACTS OF THE CASE . K) THE LEARNED PCIT FAILED TO APPRECIATE THAT THE VARIOUS DIVISIONS OF THE COMPANY HAVE DIFFERENT METHODS OF BUSINESS TRANSACTIONS AND CONSEQUENTLY THE GROSS PR OFITS WOULD BE DIFFERENT. L) THE LEARNED PCIT FAILED TO APPRECIATE THAT THE ASSESSMENT HAS BEEN COMPLETED AFTER THOROUGHLY EXAMINING ALL THE DETAILS MORE THAN 5 YEARS BACK VI DE ORDER DATED 30/12/2011 WHICH WAS FURTHER EXAMINED IN DETA IL WHILE PASSING THE 143(3) ORDER READ WITH 153A AND CONSEQUENTLY ON THE SAME POINT THERE CANNOT BE PROCEEDINGS UNDER SECTION 263. M) WITHOUT PREJUDICE THE ISSUE OF GROSS LOSS DOES N OT ARISE OUT OF ANY SEIZED MATERIAL AND CONSEQUENTLY IS BEYO ND THE SCOPE OF ASSESSMENT UNDER SECTION 153A READ WITH 14 3(3) OF THE ACT. N) THE LEARNED PCIT IS NOT JUSTIFIED IN INDIRECTLY ATTEMPTING TO REOPEN THE ASSESSMENT ORDER UNDER SECTION 143(3) DATED 30.12.2011 AFTER A LAPSE OF MORE THAN 5 YEARS WHICH IS IMPERMISSIBLE IN LAW AND BARRED BY LIMITATION ON TH E FACTS AND CIRCUMSTANCES OF THE CASE. O) THE LEARNED PCIT IS NOT JUSTIFIED IN NOT APPRECI ATING THAT ALL THE DETAILS OF THE PURCHASES, SALES AND SEVERAL OTHER VOLUMINOUS DETAILS WERE PROVIDED DURING THE COURSE OF THE ORIGINAL ASSESSMENT PROCEEDINGS AND CONSEQUENTLY TH ERE ITA NOS.1034, 1058, 1059 & 1056/BANG/2017 PAGE 5 OF 12 HAS BEEN NO FAILURE ON THE PART OF THE ASSESSING OF FICER TO VERIFY SUCH DETAILS AND HENCE THE ORDER UNDER SECTI ON 263 IS WITHOUT JURISDICTION ON THE FACTS AND CIRCUMSTAN CES OF THE CASE 11. THE LEARNED PCIT IS NOT CORRECT IN INVOKING THE JUR ISDICTION UNDER SECTION 263 WHEN THE ENTIRE ASSESSMENT WAS SU BJECT MATTER OF APPEAL BEFORE THE CIT(A) AS TO ITS VALIDI TY AND THE ORDER IS BEYOND THE SCOPE OF THE REVISIONAL AUTHORI TY IN ACCORDANCE WITH EXPLANATION (C) TO SECTION 263(1) O F THE ACT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 12. THE ORDER OF REVISION UNDER SECTION 263 IS BAD IN L AW AS THE NOTICE HAS BEEN ISSUED FOR REVIEW AND ORDER HAS BEE N PASSED FOR REVISION WHICH IS IMPERMISSIBLE IN LAW. 13. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE OR SUBSTITUTE ANY OF THE GROUNDS URGED ABOVE. IN THE VIEW OF THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF THE HEARING OF THE APPEAL, THE APPELLAN T PRAYS THAT THE APPEAL MAY BE ALLOWED IN THE INTEREST OF JUSTICE AN D EQUITY. 2. THE FACTS IN BRIEF BORNE OUT FROM THE RECORD ARE THAT THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) IN IT A NOS.1034 AND 1056/BANG/2017 RELATING TO ASSESSMENT YEAR 2008-09 AND 2009-10 ON 30.12.2010 AND 30.12.2011 RESPECTIVELY. SIMILARLY FOR THE ASSESSMENT YEAR 2010-11, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT AND THE ISSUES OF ALLOCATION OF EXPENSES IN MAIN UNIT, EOU DIVISION, SEZ DIVISION WERE EXAMINED AND DISCUSSED BY THE AO IN HIS ORDER. SIM ILARLY FOR THE ASSESSMENT YEAR 2011-12, THE ASSESSEE FILED RETURN OF INCOME U /S 139 (1) ON 29.09.2011 DECLARING NIL INCOME. THE ASSESSEE WAS SUBJECTED TO SEARCH ON 17.12.2013. THEREAFTER, NOTICE U/S 153A WAS ISSUED BY THE AO ON 04.07.2014 AND ON 19.09.2014, THE ASSESSEE FILED A LETTER BEFORE THE AO AND INTIMATED THE AO THAT THE RETURN FILED U/S 139 (1) MAY BE TREATED AS RETU RN FILED U/S 153A. ON 31.03.2016, THE AO PASSED ORDER U/S 153A R.W.S. 143 (3) AND INCOME WAS ASSESSED AT RS. 3571,84,31,323/-. IN FACT, AFTER SE ARCH CONDUCTED UPON THE ASSESSEE ON 17.12.2013, THE ASSESSMENT WAS COMPLET ED UNDER SECTION 153A R.W.S. 143(3) IN ALL THESE ASSESSMENT YEARS ON 31.0 3.2016 AFTER MAKING NECESSARY VERIFICATIONS ON DIFFERENT ISSUES. IN ALL THESE YEARS, THE AO MADE CERTAIN ADDITIONS AGAINST WHICH APPEALS WERE FILED BY THE ASSESSEE BEFORE THE CIT (A). AFT ER COMPLETION OF THE ASSESSMENT, THE AO RECEIVED A COMMUNICATION FROM FO REX TAX AUTHORITIES VIDE ITA NOS.1034, 1058, 1059 & 1056/BANG/2017 PAGE 6 OF 12 ITS LETTER DATED 18.04.2016 WITH REGARD TO BASMA JE WELLERS, UAE FROM WHOM ASSESSEE CLAIMED TO HAVE MADE PURCHASES OF GOLD BAR S. AS PER THE CLAIM OF THE ASSESSEE, IT HAD IMPORTED GOLD BARS FROM BASMA JEWE LLERS FROM ASSESSMENT YEAR 2007-08 TO 2013-14 WHEREAS AS PER THE INFORMATION R ECEIVED FROM BASMA JEWELLERS, IT WAS INCORPORATED ONLY IN FINANCIAL YE AR 2010-11. THEREFORE, CLAIM OF THE ASSESSEE NEEDS VERIFICATION. THE AO FORWARDED THIS LETTER TO THE CIT (A) BEFORE WHOM THE APPEALS WERE PENDING AND CIT(A) HAS CONFRONTED THIS COMMUNICATION TO THE ASSESSEE AND SOUGHT HIS COMMEN TS. 3. ASSESSEE SUBMITTED ITS DETAILED REPLY STATING TH EREIN THAT THE INFORMATION SUBMITTED BY IT DURING ASSESSMENT PROCEEDINGS CONTA INED A TYPOGRAPHICAL ERROR WHERE THE NAMES OF THE PARTIES FROM WHOM IMPORT WAS DONE WERE WRONGLY TYPED INADVERTENTLY. HE SUBMITTED VARIOUS DOCUMENTS IN S UPPORT OF THIS CONTENTION. THE COPY OF THE REPLY RECEIVED FROM THE ASSESSEE/AP PELLANT WAS FORWARDED TO THE AO VIDE LETTER DATED 2.1.2016 CALLING FOR ITS COMME NTS. THE AO REVERTED BACK TO THE CIT(A) VIDE ITS LETTER DATED 10.01.2017 STATING THEREIN THAT SINCE INFORMATION WAS NOT AVAILABLE AT THE TIME OF ASSESSMENT, NECESS ARY ENQUIRIES TO EXAMINE THE GENUINENESS OF THE ASSESSEES IMPORT COULD NOT BE C ARRIED OUT, RENDERING THE ASSESSMENT ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF THE REVENUE. THE AO ACCORDINGLY SENT THE PROPOSAL FOR REVISION OF THE A SSESSMENT TO THE PR.CIT, CENTRAL, BENGALURU. BEFORE THE CIT(A), ASSESSEE HA S GIVEN A DETAILED SUBMISSION AND FURNISHED IMPORT INVOICE, AIRWAYS BI LLS, BILLS OF ENTRIES, DUTY PAID CHALLANS FOR PAYMENTS MADE IN RESPECT OF IMPORTS ET C. BUT IT WAS NOT VERIFIED EITHER BY THE CIT(A) OR THE AO DURING THE REMAND PR OCEEDINGS. HE SIMPLY SAID THAT ALL THESE FACTS CAN BE VERIFIED IN SET ASIDE P ROCEEDING WHEN THE ASSESSMENT ORDER ON THIS ISSUE IS SET ASIDE. THE LETTER OF TH E AO WAS DULY ENDORSED BY THE JCIT. ON RECEIPT OF THIS REPLY FROM THE AO, THE CI T(A) DISPOSED OFF THE APPEALS WITHOUT ADJUDICATING THE ISSUE OF IMPORT FROM BASMA JEWELLERS ON MERIT. FROM THIS ACTION OF THE REVENUE, IT APPEARS THAT CIT HAS INITIATED ACTION UNDER SECTION 263 OF THE ACT ON THE BASIS OF THE REPORT OF THE AO AND ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE FOR ALL THE 4 YEARS ON 27.01 .2017 PROPOSING A REVISION OF ASSESSMENT ORDERS FRAMED UNDER SECTION 143(3) R.W.S . 153A MAINLY ON TWO ISSUES, ONE IS WITH REGARD TO CORRECTNESS OF GROSS LOSSES CLAIMED BY THE ASSESSEE ITA NOS.1034, 1058, 1059 & 1056/BANG/2017 PAGE 7 OF 12 AND THE OTHER IS WITH REGARD TO PURCHASE OF GOLD BARS FROM BASMA JEWELLERS. IN RESPONSE TO SHOW CAUSE NOTICES, ASSESSEE HAS FURNISHED DETAILED REPLY BEFORE THE CIT WITH THE SUBMISSIONS THAT BOTH THE ISSUES WERE DULY EXAMINED BY THE AO AS WELL AS CIT(A). THEREFORE ACTION UNDER SECTION 263 IS NOT POSSIBLE. 4. BEING NOT CONVINCED WITH THE EXPLANATIONS FURNIS HED BY THE ASSESSEE, THE CIT SET ASIDE THE ORDER OF THE AO PASSED UNDER SECT ION 143(3) R.W.S. 153A DATED 31.03.2016 HAVING HELD THAT ASSESSMENT IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 5. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE TRIBUNAL WITH THE SUBMISSIONS THAT THE ISSUE WITH REGARD TO CORRECTNE SS OF LOSSES CLAIMED BY THE ASSESSEE OR THE ALLOCATION OF EXPENDITURE ETC., WER E EXAMINED BY THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS FRAMED UNDER SECTIO N 143(3) OF THE ACT. IN SUPPORT OF THIS CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE VARIOUS NOTICES ISSUED BY THE AO A ND THE EVIDENCES FILED BY THE ASSESSEE DURING THE COURSE OF ORIGINAL ASSESSMENT P ROCEEDINGS. 6. HAVING EXAMINED THE DETAILS FURNISHED BY THE ASS ESSEE IN THE ORIGINAL ASSESSMENT PROCEEDINGS, THE AO HAS ACCEPTED THE CLA IM OF THE ASSESSEE. THEREFORE, IT CANNOT BE SAID THAT THE AO HAS NOT AP PLIED HIS MIND TO THE FACTS OF THE CASE OR THE CONTROVERSIES RAISED BEFORE IT. IN SUPPORT OF THIS CONTENTION, THE LEARNED COUNSEL FOR THE ASSESSEE HAS INVITED OUR AT TENTION TO THE ORDER OF THE AO WHEREIN THE AO HAS DISCUSSED THE ISSUE IN DETAIL BE FORE ACCEPTING THE CLAIM. 7. SO FAR AS PURCHASE FROM BASMA JEWELLERS IS CONCE RNED, THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT ASSESSE E HAS MADE THE PURCHASES FROM AJR MATHEY BUT UNFORTUNATELY, ON ACCOUNT OF TY POGRAPHICAL ERROR, THE NAME OF BASMA JEWELLERS WAS MENTIONED. HE HAS FILED A RE CONCILIATION STATEMENT BEFORE THE CIT (A), BUT CIT(A), INSTEAD OF GETTING IT VERIFIED BY HIMSELF OR THROUGH AO, DISPOSED OFF THE APPEAL WITHOUT ADJUDICATING TH E ISSUE OF IMPORT FROM BASMA JEWELLERS ON THE BASIS OF THE PROPOSAL OF THE AO FO R SETTING ASIDE THE ASSESSMENT ORDERS ON THE GROUND THAT THE ASSESSMENT ORDER IS E RRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE LEARNED COUNSEL FO R THE ASSESSEE FURTHER CONTENDED THAT PROVISIONS OF SECTION 263 CAN ONLY B E INVOKED WHEN THE CIT HIMSELF COMES TO THE CONCLUSION THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. HE CANN OT ACT ON THE ADVICE OF THE AO. ITA NOS.1034, 1058, 1059 & 1056/BANG/2017 PAGE 8 OF 12 THE DECISION WITH REGARD TO THE NATURE OF ASSESSMEN T ORDER IS TO BE TAKEN BY THE CIT HIMSELF. IN THE INSTANT CASE, IT APPEARS THAT C IT HAS ACTED ON THE PROPOSAL OF THE AO WHEREAS THE AO COULD HAVE MADE ALL NECESSARY ENQUIRIES WITH REGARD TO THE GENUINENESS OF THE PURCHASES MADE BY THE ASSESS EE FROM BASMA JEWELLERS. 8. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CON TENDED THAT FOR INITIATING ACTION UNDER SECTION 263 OF THE ACT, THE CIT SHOULD HAVE BEEN SATISFIED THAT THE ASSESSMENT ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE SATISFACTION IS INDIVIDUAL SAT ISFACTION AND NOT ON THE ADVICE OF THE SUBORDINATES. IN THE INSTANT CASE, THE ISSU E WAS SUBJUDICE BEFORE THE CIT (A) AND WHEN THE CIT (A) CALLED FOR A REMAND REPORT FROM THE AO, THE AO INSTEAD OF SUBMITTING THE REMAND REPORT AFTER MAKING A DETA ILED ENQUIRY, SENT A PROPOSAL TO THE CIT TO INITIATE ACTION UNDER SECTION 263 OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER CONTENDED THAT ONE ISSUE WAS E XAMINED IN ORIGINAL ASSESSMENT PROCEEDINGS AND THE SECOND ISSUE COULD H AVE BEEN EXAMINED DURING THE REMAND PROCEEDINGS BUT THE AO DID NOT DO THE SA ME AND MADE A REFERENCE FOR INITIATING ACTION UNDER SECTION 263 OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE UPON THE JUDGMENT OF HONB LE DELHI HIGH COURT IN THE CASE OF ITO VS. D.G. HOUSING PROJECT LTD. (2012)343 ITR 329 IN SUPPORT OF THIS CONTENTION, THE RIVISIONAL JURISDICTION UNDER SECTI ON 263 OF THE ACT CAN ONLY BE EXERCISED WHERE THE ASSESSMENT ORDER IS ERRONEOUS A ND PREJUDICIAL TO THE INTEREST OF THE REVENUE. BESIDES, RELIANCE WAS ALSO PLACED UPON THE JUDGMENT IN THE CASE OF CIT VS. ANIL KUMAR SHARMA 335 ITR 83 AND TH E ORDER OF THE TRIBUNAL IN THE CASE OF MODERN MINERALS VS. ACIT REPORTED AT 59 TTJ 733 AND THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF JEEVANLAL (1929) LTD., VS. ACIT 108 ITR 407 IN SUPPORT OF THIS CONTENTION THAT ON THE BASIS OF THE AUDIT OBJECTION, REVISION UNDER SECTION 263 IS NOT POSSIBLE. THE LE ARNED COUNSEL FOR THE ASSESSEE HAS ALSO INVITED OUR ATTENTION TO THE FACT THAT DUR ING THE COURSE OF SEARCH, NO INCRIMINATING MATERIAL WAS FOUND EITHER WITH REGARD TO CARRY FORWARD OF BROUGHT FORWARD LOSSES/PROFITS OF DIFFERENT UNITS OF THE AS SESSEE. THEREFORE, THERE WAS NO OCCASION WITH THE AO TO READJUDICATE THE ISSUES AGA IN IN THE PROCEEDINGS UNDER SECTION 153A R.W.S. 143(3) OF THE ACT. HE HOWEVER EXAMINED THE CLAIM OF DEDUCTIONS UNDER SECTION 10B OF THE ACT. WHEN THE AO WAS NOT UNDER THE OBLIGATION TO READJUDICATE, THE ISSUE OF PROFIT AND LOSS OF DIFFERENT UNITS AS NO ITA NOS.1034, 1058, 1059 & 1056/BANG/2017 PAGE 9 OF 12 INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH, THE ORDER PASSED BY HIM CANNOT BE CALLED TO BE ERRONEOUS AND PREJUDICIA L TO THE INTEREST OF THE REVENUE. 9. THE LEARNED DR, ON THE OTHER HAND HAS PLACED REL IANCE UPON THE ORDER OF THE CIT. 10. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOW ER AUTHORITIES IN THE LIGHT OF RIVAL SUBMISSIONS, WE FIND THAT THE CIT HAS SET ASI DE THE ORDER HAVING INVOKED THE JURISDICTION UNDER SECTION 263 OF THE ACT MAINLY ON TWO ISSUES, ONE IS WITH REGARD TO CORRECTNESS OF GROSS LOSSES CLAIMED AND THE OTHE R IS WITH REGARD TO DISCREPANCIES IN PURCHASES MADE FROM BASMA JEWELLER S. THE ORIGINAL ASSESSMENT RELATING TO ASSESSMENT YEARS 2008-09 AND 2009-10 WERE FRAMED ON 30.12.2010 AND 30.12.2011 RESPECTIVELY. SIMILARLY, THE ORIGINAL ASSESSMENT FOR ASSESSMENT YEAR 2010-11 WAS ALSO FRAMED. DURING TH E COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE AO HAS ISSUED VARIOUS N OTICES SEEKING INFORMATION FROM THE ASSESSEE WITH REGARD TO THE ADDRESSES OF T HE PREMISES AND NATURE OF PRODUCT MANUFACTURED IN MAIN UNIT, EOU UNIT AND SEZ UNIT. HE HAS ALSO SOUGHT INFORMATION WITH REGARD TO INCOME AND LOSSES FROM T HESE UNITS. THE QUERY LETTER DATED 5.10.2010 IS AVAILABLE AT PAGE NOS. 1-3 OF TH E COMPILATION. THIS QUERY WAS DULY REPLIED BY THE ASSESSEE VIDE ITS LETTER DATED 03.11.2010. THE SAME IS ALSO AVAILABLE AT PAGE NOS. 4-9 OF THE COMPILATION. ALO NG WITH THIS REPLY, ASSESSEE HAS ALSO FILED THE ANNEXURES. AGAIN NOTICE UNDER S ECTION 142(1) FOR THE ASSESSMENT YEAR 2008-09 WAS ISSUED ON 09.12.2014 AF TER THE SEARCH, IN THE ASSESSMENT PROCEEDINGS CONDUCTED SUBSEQUENT TO THE SEARCH. IN THAT NOTICE ALSO, THE AO HAS ASKED THE ASSESSEE TO FILE THE ENT IRE SET OF RETURN OF INCOME AND COMPLETE DETAILS. THE NOTICE DATED 09.12.2014 IS A VAILABLE AT PAGE NOS.95-97 OF THE COMPILATION. AGAIN, THEREAFTER ONE MORE NOTICE DATED 02.12.2016 UNDER SECTION 142(1) WAS ISSUED ASKING THE ASSESSEE TO ST ATE THE ITEMS MANUFACTURED BY THE MAIN UNIT, SID UNIT, EOU UNIT AND SEZ UNIT A ND ALSO EXPLAIN THE STEP BY STEP PROCEDURE INVOLVED IN MANUFACTURING OF THE ITE MS. HE HAS ALSO SOUGHT INFORMATION WITH REGARD TO CLAIM OF DEDUCTIONS UNDE R SECTION 10B OF THE ACT. FINANCIALS AND DETAILS OF EXPENDITURE RELATING TO T HESE UNITS WERE ALSO CALLED FOR BY THE AO THROUGH THESE NOTICES. COPIES OF THE NOTI CES ARE AVAILABLE AT PAGE 95- 104 OF THE COMPILATION. THIS NOTICES WERE DULY REP LIED BY THE ASSESSEE VIDE ITS ITA NOS.1034, 1058, 1059 & 1056/BANG/2017 PAGE 10 OF 12 LETTER DATED 25.01.2016 FURNISHING THE ENTIRE DETAI LS WITH REGARD TO ACTIVITIES OF ALL THESE UNITS AND THE INCOME AND LOSSES OF THESE UNIT S. REPLY IS ALSO AVAILABLE AT PAGE 106-108 OF THE COMPILATION. IN THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 153A, THE AO HAS AGAIN EXAMINED YEAR WISE AND UNIT WISE DETAILS OF THE EXPORTS WHILE DEALING WITH THE CLAIM OF DEDUCTI ON UNDER SECTION 10B OF THE ACT. THE BUSINESS INCOME OF THESE UNITS WERE ALSO EXAMINED BY THE AO WHILE DEALING WITH THE ISSUE OF SETOFF OF BROUGHT FORWAR D LOSSES BEFORE COMPUTING THE INCOME UNDER SECTION 10AA OF THE ACT. IN THE ORIGI NAL ASSESSMENT ORDER PASSED ON 30.12.2010 AND 30.12.2011, THE AO HAS DISCUSSED THE ISSUE IN DETAIL WITH REGARD TO INCOME AND LOSSES OF DIFFERENT UNITS AFTE R OBTAINING INFORMATION FROM THE ASSESSEE. SINCE THE ISSUE OF INCOME AND LOSSES OF DIFFERENT UNITS WERE THOROUGHLY EXAMINED BY THE AO IN THE ORIGINAL ASSES SMENT PROCEEDINGS, THERE WAS NO NEED TO READJUDICATE OR TO RE-EXAMINE ALL TH ESE EVIDENCES IN SUBSEQUENT PROCEEDINGS. THEREFORE, THE AO HAS NOT DISCUSSED T HESE ISSUES IN DETAIL IN SUBSEQUENT PROCEEDINGS FRAMED CONSEQUENT TO THE SEA RCH. 11. WE HAVE ALSO EXAMINED THE CONTENTIONS RAISED BY THE ASSESSEE THAT THE AO WAS UNDER NO OBLIGATION TO EXAMINE THE ISSUE OF DEDUCTION OR THE LOSSES SUFFERED BY THE NON ELIGIBLE UNIT AS NO INCRIMINATI NG MATERIAL WAS FOUND DURING THE COURSE OF SEARCH, AS THESE ISSUES WERE ALREADY ADJU DICATED BY THE AO IN THE ORIGINAL ASSESSMENT FRAMED BEFORE THE SEARCH. IN T HIS REGARD, IT HAS BEEN REPEATEDLY HELD BY THE TRIBUNAL AND THE HONBLE JUR ISDICTIONAL HIGH COURT PARTICULARLY IN THE CASE OF CIT VS. LANCY CONSTRUCTIONS (237 TAXMAN 728) AND THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA (234 TAXMAN 300) IN WHICH DIFFERENT JUDGMENTS OF DIFFERENT HIGH COU RTS WERE EXAMINED AND HELD THAT IF NO INCRIMINATING MATERIAL IS FOUND DURING THE COURSE OF SEARCH, THE CONCLUDED ASSESSMENT CANNOT BE REOPENED . IN THE LIGHT OF THESE FACTS, WE ARE OF THE VIEW THAT SINCE THE AO HAS EXA MINED THE ISSUE OF DEDUCTION UNDER SECTION 10B WITH REGARD TO ELIGIBLE UNITS AND PROFIT AND LOSS OF DIFFERENT UNITS IN DETAIL IN THE ORIGINAL ASSESSMENT ORDERS AND ALS O IN THE SUBSEQUENT ORDERS, THE ISSUE CANNOT BE EXAMINED IN POST SEARCH ASSESSMENT PROCEEDINGS. THEREFORE, IT CANNOT BE SAID THAT AO HAS NOT APPLIED HIS MIND TO THE FACTS OF THE CASE WHILE ADJUDICATING THE ISSUE. THE CIT MAY NOT AGREE WITH THE CONCLUSION OF THE AO BUT IF THE AO HAS APPLIED HIS MIND AND ADJUDICATED THE ISSUE IN THE LIGHT OF LEGAL ITA NOS.1034, 1058, 1059 & 1056/BANG/2017 PAGE 11 OF 12 PROVISIONS, THE CIT CANNOT SET ASIDE THE ORDER OF T HE AO SIMPLY BY HOLDING THAT THE ORDER OF THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT HAS BEEN REPEATEDLY HELD THAT FOR SETTING ASIDE THE ORDER UNDER SECTION 263 OF THE ACT, THE CIT IS REQUIRED TO ESTABLISH THAT THE ASSE SSMENT ORDER IS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF T HE REVENUE. IN THE INSTANT CASE, WHEN THE AO HAS EXAMINED THE ISSUE IN DETAIL AFTER CALLING ALL REQUISITE INFORMATION FROM THE ASSESSEE, THE ASSESSMENT FRAME D CANNOT BE CALLED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. WE ARE THEREFORE, OF THE VIEW THAT THE REVISION ORDER PASSED BY THE CIT ON T HIS ISSUE IS WITHOUT ASSUMING THE PROPER JURISDICTION AND WE ACCORDINGLY SET ASID E HIS ORDER ON THIS ISSUE. 12. SO FAR AS THE OTHER ISSUE REGARDING IMPORT MADE FROM BASMA JEWELLERS IS CONCERNED, WE FIND THAT THIS ISSUE WAS NOT EXAMINED EITHER BY THE AO OR BY THE CIT(A). THE ASSESSEE HAS RAISED THE CLAIM TO HAVE PURCHASED THE GOLD BAR FROM BASMA JEWELLERS AND AO INTENDED TO MAKE VERIFICATIO N BUT COULD NOT GET THE REPORT FROM THE CONCERNED AUTHORITIES BEFORE THE CO NCLUSION OF THE ASSESSMENT. THE REPORT CAME AFTER THE CONCLUSION OF THE ASSESSM ENT AND THE SAME WAS GIVEN TO THE CIT(A) WHO WAS ALREADY SEIZED WITH THE MATTE R ON ACCOUNT OF FILING THE APPEAL BY THE ASSESSEE. THE CIT(A) HAS CALLED FOR THE COMMENTS ON THE INFORMATION RECEIVED FROM THE AO WHICH WERE DULY RE PLIED BY THE ASSESSEE STATING THEREIN THAT IT WAS ONLY A TYPOGRAPHICAL ERROR AND IN SUPPORT OF THAT, HE HAS FILED THE DETAILED EVIDENCE. THE CIT(A) CALLED THE REMAN D REPORT FROM THE AO BUT THE AO INSTEAD OF GIVING A REMAND REPORT AFTER MAKING V ERIFICATION, HAS RECOMMENDED THE CASE TO THE CIT FOR REVISION UNDER SECTION 263 OF THE ACT. THESE FACTS WERE BROUGHT TO THE NOTICE OF THE CIT(A) ON THE BASIS OF WHICH THE CIT(A) DID NOT ADJUDICATE THE ISSUE AND DISPOSED OFF THE APPEAL. ACCORDING TO US, THE RIGHT COURSE WOULD HAVE BEEN FOR THE AO TO MAKE A NECESSA RY VERIFICATION OF THE DETAILED EVIDENCES FILED AND THEREAFTER TO ADJUDICA TE THE ISSUE AND SUBMIT THE REPORT TO THE CIT(A) AND THEN CIT(A) SHOULD HAVE AD JUDICATED THE ISSUE BY PASSING A DETAILED ORDER. BUT UNFORTUNATELY, THE A O HAS NOT DISCHARGED HIS DUTIES AND RECOMMENDED THE MATTER FOR REVISION UNDER SECTI ON 263 TO THE CIT (ADMINISTRATION). IN ANY CASE, THOUGH THE ACTION O F THE AO MAY NOT BE PROPER BUT FOR THIS REASON, THE ORDER OF CIT PASSED UNDER SECT ION 263 ON THIS ISSUE CANNOT BE SUSTAINED AS THE ISSUE WAS NEVER EXAMINED EITHER BY THE AO OR THE CIT(A). ITA NOS.1034, 1058, 1059 & 1056/BANG/2017 PAGE 12 OF 12 THEREFORE, WE ARE OF THE VIEW THAT THIS ISSUE REQUI RES A PROPER ADJUDICATION BY THE AO. ACCORDINGLY, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT IN THIS REGARD. ACCORDINGLY, WE CONFIRM HIS ORDER. NOW THE AO IS R EQUIRED TO ADJUDICATE ONLY ONE ISSUE I.E., WITH REGARD TO PURCHASE OF GOLD BARS MA DE FROM BASMA JEWELLERS. ACCORDINGLY, THESE APPEALS OF THE ASSESSEE ARE DISP OSED OFF. 13. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- ( SUNIL KUMAR YADAV) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE DATED, THE 27 TH NOVEMBER, 2018. MS* COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.