M/s Sukhdeo Prasad Narendra Lal, V. Commissioner of Income tax-II,

ITA 87/JAB/2014

• Counselvise Citation: 8722914 RSA 2014
• Duration Of Justice: 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 07-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHISHEK SHUKLA
• Assessee Lawyers: AP SRIVASTAVA
• Keywords: Gross profit estimation; Business income; Depreciation; Opportunity of being heard; Right to appeal
• Section: 143(3); 142(1); 133A; 69; 263

Judgement Text

INCOME TAX APPELLATE TRIBUNAL, JABALPUR BENCH, JABALPUR BEFORE : SHRI I. C. SUDHIR, JUDICIAL MEMBER A ND SHRI PRAMOD KUMAR, ACCOUNTA NT MEMBER ITA NO. 87/JAB./2014 ASSESSMENT YEAR : 2009-10 M/S. SUKHDEO PRASAD NARENDRA LAL VS. COMMISSIONE R OF SARRAF, FORT ROAD, SARAFA BAZAR, INCOME-TAX-II, JABALPUR. REWA. (PAN: AAZFS 9784 L) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. A.P. SRIVASTAVA, ADVOCATE & SH. SAPAN USRETHE, ADVOCATE RESPONDENT BY : SH. ABHISHEK SHUKLA, D.R. DATE OF HEARING : 11.02.2015 DATE OF PRONOUNCEMENT : 27 .03.2015 ORDER PER PRAMOD KUMAR, A.M.: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S CHALLENGED CORRECTNESS OF THE ORDER DATED 20 TH MARCH, 2014 PASSED UNDER SECTION 263 R.W.S. 143(3) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2009-1 0. 2. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIA L FACTS NEED TO BE TAKEN NOTE OF. THE ASSESSEE BEFORE US IS A JEWELLER BASED IN R EWA. THE ASSESSEE WAS SUBJECTED TO SURVEY PROCEEDINGS UNDER SECTION 133A ON 5 TH FEBRUARY, 2009. IT APPEARS THAT THE ASSESSEE HAD SURRENDERED AN INCOME OF RS.30,89,500/ - IN RESPECT OF ADDITIONS IN GOLD ACCOUNT, SILVER ACCOUNT AND MISCELLANEOUS ACCO UNT AND THE ASSESSMENT WAS COMPLETED TAKING INTO ACCOUNT THIS SURRENDER. IT IS SO EVIDENT FROM THE FOLLOWING 2 ITA NO. 88/JAB./2014 EXTRACTS FROM ASSESSMENT ORDER : 4. IT IS SEEN THAT ASSESSEE FIRM CARRIED ON THE BU SINESS OF TRADING OF ORNAMENTS UNDER THE NAME & STYLE OF M/S. SUKHDEO PR ASAD NARENDRA LAL SARAF, REWA DURING THE YEAR AS IN THE PAST. AS MENTIONED S UPRA, SURVEY U/S. 133A WAS CONDUCTED IN THIS CASE ON 05/02/2009 AND CERTAIN BO OKS OF ACCOUNT ETC. WERE IMPOUNDED AS PER ANNEXURE A TO THE ORDER U/S. 133 A(1)(3)(IA) DATED 05/09/2009 PASSED BY THE ITO WARD (1), REWA. DURING SURVEY PROCEEDINGS, STATEMENTS OF SHRI HANUMAN PRASAD KHANDELWAL, PARTN ER WAS RECORDED BY THE ITO ON 05/02/2009. FURTHER, THE INVENTORIES OF CASH AND STOCK FOUND (DULY VALUED BY THE GOVERNMENT APPROVED VALUER) WERE ALSO PREPAR ED AFTER PHYSICAL VERIFICATION, WHICH ARE AVAILABLE ON RECORD. SUBSEQ UENTLY, FURTHER STATEMENT OF SHRI HANUMAN PRASAD KHANDELWAL, PARTNER WAS ALSO RE CORDED BY THE ITO ON 03.03.2009, WHICH IS ALSO AVAILABLE ON RECORD. 5. ACCORDINGLY, DURING THE INSTANT ASSESSMENT PROCE EDINGS, VIDE NOTICE U/S. 142(1) / QUESTIONNAIRE DATED 13/07/2011, FOLLOWING QUERY (VIDE QUESTION NO. 13) WAS MADE : YOUR ATTENTION IS INVITED TO THE STATEMENT RE CORDED DURING SURVEY PROCEEDINGS U/S. 133A CONDUCTED IN YOUR CASE ON 05/02/2009 WHEREIN YOU HAD ADMITTED AND SURRENDERED ADDITIONAL INCOMES FRO M UNDISCLOSED SOURCES OF RS.24,50,000/- (IN RESPECT OF GOLD ACCOUNT), RS.2,14,500/- (IN RESPECT OF SILVER ACCOUNT), RS.4,25,000/- (MISCELLANEOUS INCOME IN RESPECT OF LOOSE PAPER ET C.) TOTALING TO RS.30,89,500/- FOR TAXATION FOR A.Y. 2009-10 . IN VIEW OF THE ABOVE SURRENDERED INCOMES AS ALSO IN COMPARISON TO THE RETURNED INCOME IN THE IMMEDIATELY PRECEDING A.Y. 2 008-09, HOW DO YOU JUSTIFY THE RETURNED TOTAL INCOME AT RS.23,67,300/- FOR A.Y . 2009-10. 6. IN RESPONSE TO THE ABOVE QUERY THE ASSESSEES WR ITTEN REPLY FURNISHED ON 24.08.2011 WAS AS UNDER : ..THE ASSESSEE SUBMITS THAT DURING THE COURSE O F SURVEY THE ASSESSEE HAS OFFERED TO PAY TAX ON THE FOLLOWING ACCOUNTS AS BELOW. LOW GP GOLD ACCOUNT AND GOLD INVESTMENT RS.24,50,000 SILVER ACCOUNT RS. 2,14,500 MISC. SURRENDER RS. 4,25,000 RS.30,89,500 THE ASSESSEE HAS HONOURED THAT COMMITMENT, OFFERED THE ABOVE AMOUNT FOR 3 ITA NO. 88/JAB./2014 TAX AND PAID THE TAX ALSO. IN ADDITION TO SURRENDER ED AMOUNT THE ASSESSEE HAS ALSO OFFERED HIS REGULAR INCOME. THUS TOTAL INCOME HAS BEEN OFFERED AT RS.42,53,926. NOW DEPARTMENT ALSO IN HIS TURN SHOUL D HONOUR THAT AND ACCEPT THE INCOME AS RETURNED. YOUR GOOD SELF HAS ASKED THE AS SESSEE TO EXPLAIN WHY INCOME HAS BEEN RETURNED AT A LOWER FIGURE. YOUR GOOD SELF MAY KINDLY PURSUE PROFIT AND LOSS ACCOUNT. THE SUM OF RS.30,89,5000 HAS BEEN CRE DITED THERE. THE RETURN INCOME IS A LITTLE LESS AS PERMISSIBLE DEDUCTION U NDER SECTION 40 HAS BEEN MADE THEREAFTER TO ARRIVE AT TOTAL INCOME. THE ASSESSEE IS PRODUCING HEREWITH BOOKS OF ACCOUNT/DOCUMENTS, BANK STATEMENT AND OTHER NECESSA RY DETAILS FOR YOUR KIND PERUSAL. IN VIEW OF ABOVE FACTS, IT IS REQUESTED THAT ASSESS MENT MAY BE COMPLETED BY ACCEPTING THE INCOME AS RETURNED. 7. BESIDES ABOVE WRITTEN REPLY, DURING THE HEARING ON 08/11/2011, IT WAS SUBMITTED BY THE AR THAT THE NET PROFIT AS PER AUDI TED P&L ACCOUNT (INCLUDING SURRENDER OF RS.30,89,500/- AS MENTIONED ABOVE) AMO UNTED TO RS.42,53,926/- FROM WHICH INTEREST (RS.2,20,927) AND REMUNERATION (RS.16,65,700) PAID TO THE PARTNERS WERE DEDUCTED TO COMPUTE THE TOTAL INCOME AT RS.23,67,300/- WHICH HAS BEEN DULY SHOWN IN THE RETURN. THE INTEREST AND REMUNERATION PAYABLE TO THE PARTNERS AS PER THE PARTNERSHIP DEED ARE STATUTORIL Y ALLOWABLE DEDUCTIONS AND ACCORDINGLY THE SAME HAVE BEEN DEDUCTED. FURTHER, I T WAS ALSO CONTENDED BY THE ARS THAT THE INTEREST / REMUNERATION PAID TO THE PA RTNERS BY THE ASSESSEE FIRM SANDS ALREADY INCLUDED IN THEIR RESPECTIVE INCOMES FOR TAXATION AS BUSINESS INCOME FOR A.Y. 2009-10. THAT AS SUCH THE RETURNED INCOME BY THE A FIRM IS IN ACCORDANCE WITH THE DECLARED INCOME DURING SURVEY. 8. THE AFORESAID CONTENTIONS OF THE ASSESSEE HAVE B EEN CAREFULLY GONE THROUGH, EXAMINED AND CONSIDERED. HOWEVER, SCRUTINY OF THE P&L ACCOUNTS REVEALS THAT THE A HAS DEBITED EXPENSES ON TELEPH ONE FOR RS.11,836/- AND CAR PATROL EXPENSES FOR RS.19,820/- AND DEPRECIATION ON CAR FOR RS.80,035/- DURING THE YEAR. DESPITE THE ASSESSEES CONTENTION THAT TE LEPHONE AND CAR WERE EXCLUSIVELY USED FOR BUSINESS PURPOSES, POSSIBILITY OF PARTIAL PERSONAL USE/NON- BUSINESS OF THE TELEPHONE / CAR CANNOT BE RULED OU T. AS SUCH, PARTIAL DISALLOWANCE OF RS.25,000/- OUT OF THE TELEPHONE/CAR EXPENSES AND DEPRECIATION THEREON IS MADE AND ADDED BACK IN COMPUTATION OF TOTAL INCOME HEREUNDER. 3. THE ASSESSMENT WAS THUS COMPLETED ON 11.11.2011. THE MATTER, HOWEVER, DID NOT REST THERE. 4 ITA NO. 88/JAB./2014 4. ON 7 TH JANUARY 2014, LEARNED COMMISSIONER REQUIRED THE AS SESSEE TO SHOW CAUSE AS TO WHY THE ASSESSMENT ORDER DATED 11.11.20 11 NOT BE SUBJECTED TO THE REVISION PROCEEDINGS UNDER SECTION 263 FOR THE FOLL OWING REASONS :- 1. 'THAT AS PER TRADING ACCOUNT AND TAX AUDIT REPOR T SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE METHOD OF VAL UATION OF CLOSING STOCK HAS BEEN STATED TO BE AT COST OR MARKET VALUE, WHIC HEVER IS LOWER. THE CLOSING STOCK OF GOLD IS 19136.05 GRAMS WHICH HAS BEEN VALU ED AT RS. 35,37,112/-. THUS WE SEE THAT THE RATE OF CLOSING STOCK OF GOLD ITEMS COMES AT RS. 1848.40/- PER GRAMS (35,37,112/19136.05). NEXT THE RATE OF OPENING STOCK IS RS. 1737.70/- PER 10 GRAMS (3166555/18233) AND THE RATE OF PURCHASE DURING THE YEAR IS RS. 9702.81/- PER 10 GRAMS (7890996/813 2. 692). 2. THAT, A SURVEY U/ S 133A WAS CONDUCTED ON 05.02. 2009. TOTAL STOCK OF GOLD FOUND AT THE TIME OF SURVEY WAS 13231.05 GRAMS WHICH WAS VALUED AT RS. 1,50,81.190/-@ RS. 11397/- PER 10 GRAMS BY THE REGI STERED VALUER. DURING THE COURSE OF SURVEY VARIOUS ANOMALIES WERE NOTICED . ONE IMPORTANT ISSUE WAS REGARDING MAINTENANCE OF STOCK REGISTER, PURCHA SE & SALE DETAILS AND VALUATION OF STOCK. THE STATEMENT OF ONE PARTNER 8H RI HANUMAN PRASAD KHANDELWAL WAS RECORDED DURING SURVEY PROCEEDINGS. THE FOLLOWING IMPORTANT FACTS EMERGE OUT OF THE STATEMENT: (I) ON THE QUESTION OF PURCHASES THE ASSESSEE HAS REPLIED THAT ALL THE PURCHASES ARE OF OLD JEWELLERY WHICH AFTER MELT ING IS USED FOR MANUFACTURING OF NEW JEWELLERY. NO BULLION (GOLD OR SILVER) IS PURCHASED FROM ANY DEALER. ( XZKGD LS UGH [KJHNH TKRH GS ) (PAGE (4 OF THE STATEMENT) (II). ON THE QUESTION OF BASIS OF VALUATION OF STOC K, THE ASSESSEE HAS REPLIED THAT THE STOCK IS VALUED ON THE LAST DAY OF THE YEAR ON THE BASIS OF AVERAGE COST PRICE ( ( YKXR EQY; DS VKSLR VK/KKJ ) ( PAGE 12-13 OF THE STATEMENT). (III) ON THE QUESTION OF PURCHASES VERIFICATION, T HE ASSESSEE HAS REPLIED THAT THE FIRM HAS NOT ISSUED BILLS FOR ALL PURCHASES. ONLY VERY FEW PURCHASE BILLS HAVE BEEN ISSUED ( ( IWJH [KJHNH DKVS X;S GSA ) (PAGE 14 OF THE STATEMENT). (IV) ON THE QUESTION OF MAINTENANCE OF STOCK REGIS TER, THE ASSESSEE HAS REPLIED THAT NEITHER ANY STOCK REGISTER NOR ANY OTHER REGISTER REGARDING STOCK IS MAINTAINED ( ( GEKJS )KJK J[KK X;K 5 ITA NO. 88/JAB./2014 GSA ) ( PAGE 15 OF THE STATEMENT). (V). ON THE QUESTION OF DISCREPANCIES IN BOOK OF AC COUNT, THE ASSESSEE ADMITTED THAT THE BOOKS OF ACCOUNT HAVE NO T BEEN MAINTAINED PROPERLY AND SALES AND PURCHASE HAVE NOT BEEN FULLY ENTERED IN THE BOOKS OF ACCOUNT AND BECAUSE OF THESE DISCREPANCIES THE ASSESSEE ALSO SURRENDERED THE INCOME OF RS. 30,89,500/- (PAGE 16- 17 OF THE STATEMENT). 3. THAT IF WE LOOK AT THE EXTRACTS OF STATEMENT OF THE ASSESSEE RECORDED AT THE TIME OF SURVEY, THE BOOKS OF ACCOUNT HAVE NOT B EEN PROPERLY MAINTAINED. FURTHER THE ASSESSEE DOES NOT MAINTAIN ANY STOCK RE GISTER OR PURCHASE REGISTER. THIS SHOWS THAT ITEMS OF SALES AND CLOSIN G STOCK CANNOT BE LINKED TO SPECIFIC ITEMS OF PURCHASE. UNDER THESE CIRCUMSTANC ES, THE ITEM WISE VALUE OF CLOSING STOCK AT COST PRICE CANNOT BE DETERMINED AN D THE AVERAGE RATE OF OPENING STOCK AND PURCHASES DURING THE YEAR CAN BE THE ONLY BASIS OF VALUATION OF CLOSING STOCK AT COST PRICE. FURTHER T HE ASSESSEE HAS HIMSELF GIVEN STATEMENT THAT THE CLOSING STOCK IS VALUED ON THE LAST DAY OF THE YEAR ON THE BASIS OF AVERAGE COST PRICE. 4. THAT THE AVERAGE RATE OF OPENING STOCK AND PURCH ASES COMES AT RS. 4193.92/- PER 10 GRAMS {(31,66,555+78,90,996)/ (182 33+8132.692)} AND ON THIS AVERAGE RATE THE VALUE OF CLOSING STOCK COMES AT RS. 80,25,506/-WHICH IS MUCH HIGHER THAN THE VALUE OF CLOSING STOCK OF RS. 35,37,112/-VALUED @ RS. 1848.40/- PER 10 GRAMS BY THE ASSESSEE AS PER ITS T RADING ACCOUNT. 5. THAT THE RATE OF GOLD AT RS. 1848.40/- PER 10 GR AMS PERTAINS TO YEAR 1985 AND 1986 APPROXIMATELY. THIS SUGGESTS THAT THE STOCK MANUFACTURED OUT OF PURCHASES PRIOR TO YEAR 1990 REMAINED UNSOLD FOR ALMOST 20 YEARS UPTO 31.03.2009 AND STOCK MANUFACTURED OUT OF PURCHASES DURING THE RECENT YEARS HAS BEEN COMPLETELY SOLD OFF. THIS IS TOTALLY IMPRO BABLE AND UNBELIEVABLE, IT IS, THEREFORE, CLEAR THAT THE CLOSING STOCK HAS BEE N DELIBERATELY UNDERVALUED TO A LARGE EXTENT. 6. THAT WITHOUT PREJUDICE TO THE ABOVE, LET US IMA GINE AN EXTREME SITUATION PRESUMING THAT TOTAL OPENING STOCK(18233 GRAMS) REMAINED UNSOLD AND IS INCLUDED IN THE CLOSING STOCK IN TOTO. THE R EMAINING 903.05 GRAMS (19136.05-18233) OF CLOSING STOCK IS AT LEAST OUT O F PURCHASE OF CURRENT YEAR. UNDER THIS EXTREME IMAGINARY SITUATION ALSO VALUE O F CLOSING STOCK SHOULD BE AS UNDER: QUANTITY VALUE(RS.) 18233.00 GRAMS 31,66,555/ - 6 ITA NO. 88/JAB./2014 903.05 GRAMS 8,76,212/ - (903.05X 78,90,996/ 8132.692) TOTAL: 1913.05 GRAMS 40,42,767/- THUS THE MINIMUM VALUE OF CLOSING STOCK SHOULD BE R S. 40,42,767/- WHICH IS ALSO RS. 5,05,655/-(40,42,767-35,37,112) M ORE THAN THE VALUE OF CLOSING STOCK AS SHOWN BY THE ASSESSEE. 7. THAT ON THE BASIS OF ABOVE, IT IS CLEAR THAT THE CLOSING STOCK HAS BEEN UNDERVALUED BY THE ASSESSEE RESULTING INTO SUBSTANT IAL LOSS OF REVENUE, AND THIS ISSUE OF UNDERVALUATION OF CLOSING STOCK HAS N OT AT ALL BEEN EXAMINED BY THE ASSESSING OFFICER. THUS THE ASSESSMENT ORDER IS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 8. I, ACCORDINGLY PROPOSE TO REVISE THE ABOVE SAID ORDER IN ACCORDANCE WITH SECTION 263 OF THE IT ACT. YOU ARE HEREBY GIVE N AN OPPORTUNITY OF BEING HEARD ON THIS ISSUE EITHER PERSONALLY OR THROUGH AN AUTHORIZED REPRESENTATIVE OR THROUGH WRITTEN SUBMISSIONS. THE HEARING IS FIXE D FOR 24.01.2014 AT 12.40 P.M. IN CASE NO REPRESENTATION IS MADE ON THAT DATE THE MATTER SHALL BE DECIDED ON MERITS AS PER THE MATERIALS/EVIDENCE AVA ILABLE ON RECORD. ' 5. THE SUBMISSIONS MADE IN RESPONSE TO THE ABOVE SH OW CAUSE NOTICE DID NOT IMPRESS THE LEARNED COMMISSIONER. SHE PROCEEDED TO SET ASIDE THE ASSESSMENT ORDER IN EXERCISE OF HER POWERS UNDER SECTION 263, BY OBS ERVING AS FOLLOWS: 4. AS MENTIONED IN THE NOTICE U/S 263 SUPRA, AS PE R TRADING ACCOUNT AND TAX AUDIT REPORT SUBMITTED DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, THE METHOD OF VALUATION OF CLOSING STOCK HAS BEEN STATED TO BE AT COST OR MARKET VALUE, WHIC HEVER IS LOWER. THE CLOSING STOCK OF GOLD WAS 19136.05 GRAMS WHICH HAS BEEN VALUED AT RS.35,37,112/- I.E. @RS.1848.40 PER 10 GR AMS. THE RATE OF OPENING STOCK WAS RS.1737.70 PER 10 GRAMS AND TH E RATE OF PURCHASE DURING THE YEAR WAS RS.9702.81 PER 10 GRAM S. THE VALUATION OF GOLD AND SILVER ORNAMENTS WAS MADE BY THE APPROVED VALUER DURING THE COURSE OF SURVEY. THE RATE ADOPTE D BY THE VALUER FOR GOLD ORNAMENTS WAS RS.11,732 PER 10 GRAMS. IF T HE CLOSING STOCK IS VALUED @ RS.11397/- THE VALUE SHOULD HAVE BEEN AT RS.2,18,09,356/- AS AGAINST RS.35,37,112/-. IF THE VALUE OF GOLD IS ADOPTED AS PER THE AVERAGE RATE OF OPENING STOCK AN D PURCHASE, THE 7 ITA NO. 88/JAB./2014 AVERAGE RATE WOULD COME AT RS.5720.25 (1737.70 + 9702.81/2) PER 10 GRAMS. THUS, THE AO SHOULD HAVE ADOPTED THE AVERAGE RATE TO WORK OUT THE CLOSING STOCK WHICH COMES TO RS.1,09,4 6,299/- (19136.05 X 5720.25) AS AGAINST RS.35,37,112/- SHOW N BY THE ASSESSEE. THUS, THERE WILL BE A DIFFERENCE OF RS. 7 4,09,187 /-. THE ASSESSEE DURING THE COURSE OF SURVEY PROCEEDING S HAS ADMITTED IN HIS STATEMENT ON PAGE 16-17 THAT THE BOOKS OF AC COUNTS HAVE NOT BEEN MAINTAINED PROPERLY AND SALES AND PURCHASES HA VE NOT BEEN FULLY ENTERED IN THE BOOKS OF ACCOUNT. IT IS BECAUS E OF THESE DISCREPANCIES THE ASSESSEE SURRENDERED THE INCOME O F RS.30,89,500/-. HOWEVER, THE POINT REGARDING VALUAT ION OF OPENING AND CLOSING STOCK WAS NOT EXAMINED OR VERIFIED BY T HE ASSESSING OFFICER EITHER DURING THE COURSE OF SURVEYOR DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHICH RENDERED THE ASSESSME NT ERRONEOUS. 6. WITHOUT PREJUDICE TO THE ABOVE, FOR EXAMPLE - AN EXTREME SITUATION PRESUMING THAT TOTAL OPENING STOCK OF GOL D WAS SHOWN AT 18233 GRAMS REMAINED UNSOLD AND IS INCLUDED IN THE CLOSING STOCK IN TOTO. THE REMAINING 903.05 GRAMS (19136.05 - 182 33) OF CLOSING STOCK IS AT LEAST OUT OF PURCHASE OF CURRENT YEAR. UNDER THIS SITUATION ALSO THE VALUE OF CLOSING STOCK SHOULD HA VE BEEN MUCH MORE WHAT WAS STATED BY THE ASSESSEE. THIS POINT HA S ALSO NOT BEEN EXAMINED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS, WHICH RENDERED THE ASSESSMENT ERRONEOUS. 7. THE ASSESSEES ARGUMENT THAT NO ADDITION CAN BE MADE U/S 69 IN RESPECT OF UNRECORDED INVESTMENT OR WHERE THE ST OCK FOUND IS MORE THAN THE STOCK RECORDED IN THE BOOKS OF ACCOUN TS IS NOT ACCEPTABLE AS THE ASSESSEE ITSELF HAD ADMITTED THAT THE PURCHASE AND SALES WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS. I T WAS EVEN ADMITTED THAT NO BOOKS OF ACCOUNTS AND STOCK REGIST ER WERE MAINTAINED PROPERLY. UNDER THESE CIRCUMSTANCES THE VALUATION MADE BY THE ASSESSEE CANNOT BE ACCEPTED. SINCE THE ASSESSEE IS NOT MAINTAINING ANY STOCK REGISTER THE AO SHOULD HAVE R EJECTED THE BOOKS OF ACCOUNTS BY INVOKING PROVISION OF SECTION 145(2) OF I.T. ACT, BUT THE AO DID NOT REJECT THE BOOKS RESULTS AN D MADE THE ASSESSMENT, WHICH RENDERED THE ASSESSMENT ERRONEOUS . 6. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFOR E US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 8. WE HAVE NOTED THAT THE SHOW CAUSE NOTICE FOR THE IMPUGNED REVISION 8 ITA NO. 88/JAB./2014 PROCEEDINGS HAS BEEN ISSUED ON THE GROUND THAT THE SURRENDER AGAINST EXCESS UNACCOUNTED STOCK OF GOLD AND SILVER IS QUITE LOW A S COMPARED TO ACTUAL VALUE OF EXCESS STOCK AND THAT THE ISSUE OF UNDERVALUATION OF EXCESS UNACCOUNTED STOCK HAS ALSO NOT BEEN EXAMINED BY THE AO, RESULTING IN SUBS TANTIAL LOSS OF REVENUE. THERE WAS NO MENTION ABOUT ALLEGED UNDERVALUATION OF CLOS ING STOCK, IN THE SHOW CAUSE NOTICE. IN THE IMPUGNED REVISION ORDER, HOWEVER, LE ARNED COMMISSIONER HAS PICKED UP THE ISSUE OF UNDERVALUATION OF CLOSING STOCK AS WELL. SUCH AN ENLARGEMENT OF SCOPE OF REVISION PROCEEDINGS AFTER THE ISSUANCE OF SHOW CAUSE NOTICE, IN OUR HUMBLE UNDERSTANDING, IS NOT PERMISSIBLE IN LAW. IN SUPPORT OF THIS PROPOSITION, WE FIND SUPPORT FROM, AND ADOPT THE FOLLOWING OBSERVAT IONS FROM A CO-ORDINATE BENCH DECISION IN THE CASE OF MAXPACK INVESTMENTS LTD. VS ACIT (13 SOT 67) WHICH, INTER ALIA OBSERVES AS FOLLOWS : .IN CIT V. G.K. KABRA [1995] 211 ITR 336 THE ANDHRA PRADESH HIGH COURT WAS DEALING WITH AN APPLICATION SEEKING REFER ENCE UNDER SECTION 256(2), INTER ALIA, OF THE FOLLOWING QUESTION : WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME-TAX APPELLATE TRIBUNAL WAS CORRECT IN HOLDIN G THAT THE COMMISSIONER OF INCOME-TAX LACKS INITIAL JURISDICTI ON, PARTICULARLY WHEN THE CONCLUSION MADE BY THE COMMISSIONER OF INC OME-TAX IN THE ORDER UNDER SECTION 263 WAS ON THE BASIS OF THE INF ORMATION FURNISHED IN RESPONSE TO THE INITIAL NOTICE ? WHILE DECLINING TO REFER THE ABOVE QUESTION, THE HI GH COURT HELD AS UNDER (PAGES 339-340) : THE NECESSARY IMPLICATION IN THE EXPRESSION AFTER GIVING OPPORTUNITY OF BEING HEARD RELATES TO THE POINT ON WHICH THE C OMMISSIONER CONSIDERS THE ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE. IN OTHER WORDS, IT IS NECESSARY FOR TH E COMMISSION TO POINT OUT THE EXACT ERROR IN THE ORDER WHICH HE PROPOSES TO REVISE SO THAT THE 9 ITA NO. 88/JAB./2014 ASSESSEE WOULD HAVE AN ADEQUATE OPPORTUNITY OF MEET ING THE ERROR BEFORE THE FINAL ORDER IS MADE. [EMPHASIS SUPPLIED ] IN THE CASE BEFORE THE HIGH COURT, THE SHOW-CAUSE N OTICE REFERRED TO TWO ISSUES TO WHICH THE ASSESSEE HAD GIVEN SATISFACTORY REPLIES. NO ACTION WAS TAKEN UNDER SECTION 263 IN RESPECT OF THESE TWO ISSUES. HOWEVER , IN THE SAID ORDER THE CIT MENTIONED THE HIRE CHARGES AS THE GROUND FOR REVISI NG THE ASSESSMENT. THIS POINT HAD NOT BEEN MENTIONED AS A GROUND IN THE SHOW-CAUS E NOTICE. THE HIGH COURT HELD THAT INASMUCH AS THE COMMISSIONER HAD NOT CHO SEN TO SHOW THESE TWO POINTS AS THE ERRORS IN MAKING THE FINAL ORDER AND THE FINAL ORDER UNDER SECTION 263 REFERS ONLY TO THE INFERENCE OF HIRE CHARGES BE ING EXIGIBLE TO TAX WHICH WAS NOT MENTIONED AT ALL IN THE SHOW CAUSE, OBVIOUSLY T HE ASSESSEE HAD NO OPPORTUNITY TO MEET THAT POINT. [EMPHASIS SUPPLIED] 10. THE RATIO OF THE DECISION, CLEAR FROM THE ABOVE OBSERVATIONS, IS THAT IF A GROUND OF REVISION IS NOT MENTIONED IN THE SHOW-CAU SE NOTICE ISSUED UNDER SECTION 263, THAT GROUND CANNOT BE MADE THE BASIS OF THE OR DER PASSED UNDER THE SECTION, FOR THE SIMPLE REASON THAT THE ASSESSEE WOULD HAVE HAD NO OPPORTUNITY TO MEET THE POINT. . 11. THE OTHER JUDGMENT WHICH SUPPORTS THE CASE OF T HE ASSESSEE IS THAT OF THE PUNJAB AND HARYANA HIGH COURT IN CIT V. JAGADHRI EL ECTRIC SUPPLY AND INDUSTRIAL CO. LTD. [1983] 140 ITR 490 THE NATURE O F THE JURISDICTION OF THE CIT UNDER SECTION 263 AND THE POWERS OF THE TRIBUNAL WH ILE DEALING WITH AN APPEAL AGAINST THE ORDER PASSED UNDER THAT SECTION WERE EX PLAINED IN THAT DECISION. THE CIT HAD FOUND THE ORDER OF THE ASSESSING OFFICER AL LOWING CONTINUATION OF REGISTRATION TO THE ASSESSEE-FIRM TO BE ERRONEOUS O N THE GROUND THAT THE ACTUAL DISTRIBUTION OF THE PROFITS WAS DIFFERENT FROM THE RATIO MENTIONED IN THE DEED OF PARTNERSHIP. THE TRIBUNAL SET ASIDE THE ORDER OF TH E CIT BUT WHILE DOING SO OBSERVED THAT THERE WAS A CHANGE IN THE NUMBER OF P ARTNERS FROM 10 TO 11 WHICH FACT HAD NOT BEEN TAKEN INTO ACCOUNT BY THE ASSESSI NG OFFICER WHEN HE GRANTED REGISTRATION FOR THE FIRM FOR THE ASSESSMENT YEAR 1 966-67 AND THUS THE GRANT OF REGISTRATION WAS ERRONEOUS. ON THE BASIS OF THIS OB SERVATION IT WAS ARGUED BEFORE THE HIGH COURT ON BEHALF OF THE REVENUE THAT THE TR IBUNAL OUGHT TO HAVE SUSTAINED THE ORDER OF THE CIT ON THAT GROUND. REPE LLING THE CONTENTION, IT WAS HELD BY THE HIGH COURT AS UNDER (PAGES 502-3) : THE JURISDICTION VESTED IN THE COMMISSIONER UNDER SECTION 263(1) OF THE ACT IS OF A SPECIAL NATURE OR, IN OTHER WORDS, THE COMMISSIONER HAS THE EXCLUSIVE JURISDICTION UNDER THE ACT TO REVISE THE ORDER OF THE ITO IF HE CONSIDERS THAT ANY ORDER PASSED BY HIM WAS ERRON EOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. BE FORE GOING SO, HE IS ALSO REQUIRED TO GIVE AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IF 10 ITA NO. 88/JAB./2014 AFTER HEARING THE ASSESSEE IN PURSUANCE OF THE NOTI CE ISSUED BY HIM UNDER SECTION 263(1) OF THE ACT, HE IS NOT SATISFIE D, HE MAY PASS THE NECESSARY ORDERS. OF COURSE, THE ORDER THUS PASSED WILL CONTAIN THE GROUNDS FOR HOLDING THE ORDER OF THE ITO TO BE ERRO NEOUS, AS CONTEMPLATED UNDER SECTION 263(1) OF THE ACT. . . . THE TRIBUNAL CANNOT UPHOLD THE ORDER OF THE COMMISSIONER ON ANY OTHER G ROUND WHICH, IN ITS OPINION, WAS AVAILABLE TO THE COMMISSIONER AS W ELL. IF THE TRIBUNAL IS ALLOWED TO FIND OUT THE GROUND AVAILABLE TO THE COMMISSIONER TO PASS AN ORDER UNDER SECTION 263(1) OF THE ACT, THEN IT W ILL AMOUNT TO A SHARING OF THE EXCLUSIVE JURISDICTION VESTED IN THE COMMISSIONER, WHICH IS NOT WARRANTED UNDER THE ACT. IT IS ALL THE MORE SO, BECAUSE THE REVENUE HAS NOT BEEN GIVEN ANY RIGHT OF APPEAL UNDE R THE ACT AGAINST AN ORDER OF THE COMMISSIONER UNDER SECTION 263(1) O F THE ACT. . . . UNDER SECTION 263 OF THE ACT IT IS ONLY THE COMMISS IONER WHO HAS BEEN AUTHORIZED TO PROCEED IN THE MATTER AND, THEREFORE, IT IS HIS SATISFACTION ACCORDING TO WHICH HE MAY PASS NECESSARY ORDERS THE REUNDER IN ACCORDANCE WITH LAW. IF THE GROUNDS WHICH WERE AVAI LABLE TO HIM AT THE TIME OF THE PASSING OF THE ORDER DO NOT FIND A MENT ION IN HIS ORDER APPEALED AGAINST, THEN IT WILL BE DEEMED THAT HE RE JECTED THOSE GROUNDS FOR THE PURPOSE OF ANY ACTION UNDER SECTION 263(1) OF THE ACT. IN THIS SITUATION, THE TRIBUNAL, WHILE HEARING AN APPEAL FI LED BY THE ASSESSEE, CANNOT SUBSTITUTE THE GROUNDS WHICH THE COMMISSIONE R HIMSELF DID NOT THINK PROPER TO FORM THE BASIS OF HIS ORDER. WE RE SPECTFULLY UNDERSTAND THIS JUDGMENT AS HOLDING, BY NECESSARY I MPLICATION, THAT IF THE CIT HAS NOT MENTIONED THE GROUND ON WHICH ACTIO N IS PROPOSED TO BE TAKEN UNDER SECTION 263 IN THE SHOW-CAUSE NOTICE , IT IS DEEMED THAT HE WAS NOT SATISFIED THAT IT WAS A FIT GROUND FOR T AKING ACTION UNDER THE SECTION, WITH THE RESULT THAT THE FINAL ORDER, IF B ASED ON THE GROUND WHICH HE HAD EARLIER CONSIDERED NOT FIT FOR TAKING ACTION UNDER THE SECTION, WILL HAVE TO BE SET ASIDE AS NOT BASED ON ANY GROUND WHICH MAY JUSTIFY HIS BELIEF THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS INSOFAR AS IT IS PREJUDICIAL TO THE I NTERESTS OF THE REVENUE. . 9. IT IS THUS CLEAR THAT SO FAR AS LEARNED COMMISSI ONERS ORDER ON THE ISSUE OF UNDERVALUATION OF CLOSING STOCK WAS CONCERNED, IT W AS BEYOND THE SCOPE OF HER LEGALLY PERMISSIBLE POWERS SINCE NO SHOW CAUSE NOTI CE WAS SERVED ON THAT ASPECT OF THE MATTER. AS REGARDS THE VALUATION OF UNACCOUNTED STOCK, IT IS TO BE NOTED THAT THE 11 ITA NO. 88/JAB./2014 ADDITION IS MADE ON THE BASIS OF STATEMENT RECORDED DURING SURVEY AND NOT ON THE BASIS OF ANY INDEPENDENT FINDINGS ABOUT SUPPRESSION OF UNACCOUNTED STOCK. AS EVIDENT FROM THE STATEMENT RECORDED (RELEVANT PORTI ON AT PAGE 54 OF THE PAPER BOOK), THE ASSESSEE HAD STATED THAT IT IS TRUE THAT THE B OOKS OF ACCOUNTS HAVE NOT BEEN PROPERLY KEPT AND THAT THE STOCK REGISTER HAS NOT B EEN MAINTAINED, AND, AS SUCH (THE ASSESSEE) IS UNABLE TO EXPLAIN THE DISCREPANCY IN P HYSICAL STOCK VIS--VIS STOCK AS PER BOOKS OF ACCOUNTS. IT WAS IN THIS BACKDROP THA T THE SURRENDER MADE BY THE ASSESSEE WAS ACCEPTED. IN ANY CASE, THERE WAS NOTHI NG ON THE RECORD TO SHOW OR EVEN SUGGEST THAT ENTIRE UNACCOUNTED STOCK WAS ACQUIRED DURING THE CURRENT YEAR ITSELF. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE SEE NO INFIRMITY IN THE ASSESSING OFFICERS ACCEPTING THE SURRENDER MADE BY THE ASSESSEE AND MAKING ADDITIONS ON THAT BASIS. IT IS ALSO WELL SETTLED IN LAW THAT WHEN AS ASSESSING OFFICER ADOPTS A PARTICULAR VIEW OF THE M ATTER, WHICH IS ONE OF THE FAIRLY POSSIBLE VIEWS, LEARNED COMMISSIONER CANNOT INVOKE HIS POWERS UNDER SECTION 263 TO IMPOSE OTHER POSSIBLE VIEW OF THE MATTER JUST BE CAUSE SUCH OTHER VIEW WILL BE MORE FAVOURABLE TO THE REVENUE. IT IS SO HELD BY T HE HONBLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIAL CO. LTD. VS. CIT (243 IT R 83). 10. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING I N MIND ENTIRETY OF THE CASE, WE SEE NO LEGALLY SUSTAINABLE MERITS IN THE IMPUGNED O RDER PASSED BY THE LEARNED CIT. WE, ACCORDINGLY, VACATE THE SAME. 11. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 27 TH MARCH, 2015. 12 ITA NO. 88/JAB./2014 SD/- SD/- (I.C. SUDHIR) (PRAMOD K UMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 27 TH MARCH, 2015 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED 4. CIT, CONCERNED 5. DR ITAT, JABALPUR BENCH 6. GUARD FILE //TRUE COPY// BY ORDER, ASSTT. REGISTRAR ITAT, JABALPUR BENCH, JABALPUR