M/s Hanuman Jewellers, V. Commiossioner of Income Tax-II,

ITA 88/JAB/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87491 (ITAT-JABALPUR)
• 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: Business income; Loose papers; Opportunity of being heard; Right to appeal
• Section: 143(3); 142(1); 133A; 32; 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. 88/JAB./2014 ASSESSMENT YEAR : 2009-10 M/S. HANUMAN JEWELLERS, VS. COMMISSIONER OF A/3, SHILPI PLAZA, KOTHI ROAD, INCOME-TAX-II, J ABALPUR. (PAN: AAEFH 6466K) (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 10 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.28,26,650/ - IN RESPECT OF ADDITIONS IN GOLD ACCOUNT, SILVER ACCOUNT AND DIAMOND ACCOUNT AN D THE ASSESSMENT WAS 2 ITA NO. 88/JAB./2014 COMPLETED TAKING INTO ACCOUNT THIS SURRENDER. IT IS SO EVIDENT FROM THE FOLLOWING 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 HANUMAN JEWELER S, REWA DURING THE YEAR AS IN THE PAST. AS MENTIONED SUPRA, SURVEY U/S. 133 A WAS CONDUCTED IN THIS CASE ON 05/02/2009 AND CERTAIN BOOKS OF ACCOUNT ETC. WER E IMPOUNDED AS PER ANNEXURE A TO THE ORDER U/S. 133A(1)(3)(IA) DATED 05/09/2009 PASSED BY THE ITO WARD (1), REWA. DURING SURVEY PROCEEDINGS, STAT EMENTS (PRELIMINARY AS WELL AS FINAL) OF SHRI RAHUL KHANDELWAL, PARTNER WERE RE CORDED BY THE ITO ON 05/02/2009. FURTHER, THE INVENTORIES OF CASH AND ST OCK FOUND (DULY VALUED BY THE GOVERNMENT APPROVED VALUER) WERE ALSO PREPARED AFTE R PHYSICAL VERIFICATION, WHICH ARE 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. 14) 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.21,46,000/- (IN RESPECT OF GOLD ACCOUNT), RS.2,80,650/- (IN RESPECT OF SILVER ACCOUNT), RS.1,00,000/- (RESPECT OF DIAMOND ACCOUNT) AND RS.3,00,000/- (MISCELLANEOUS INCOME IN RESPECT OF LOOSE PAPERS ET C.) TOTALING TO RS.28,26,650/- 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.25,93,880/- 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 : ..REGARDING QUERY NO. 14, THE ASSESSEE SUBMITS THAT DURING THE COURSE OF SURVEY THE ASSESSEE HAS OFFERED TO PAY TA X ON THE FOLLOWING ACCOUNTS AS BELOW. GOLD ACCOUNT RS.21,46,000 SILVER ACCOUNT RS. 2,80,650 MISC SURRENDER RS. 3,00,000 DIAMOND RS. 1,00,000 3 ITA NO. 88/JAB./2014 RS. 28,26,650 THE ASSESSEE HAS HONOURED THAT COMMITMENT, OFFERED THE ABOVE AMOUNT FOR 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.47,04,619. 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.28,26,650 HAS BEEN CRED ITED THERE. THE RETURN INCOME IS A LITTLE LESS S PERMISSIBLE DEDUCTION UND ER SECTION 32 AND UNDER SECTION 40 HAS BEEN MADE THEREAFTER TO ARRIVE AT TOTAL INCO ME. THE ASSESSEE IS PRODUCING HEREWITH BOOKS OF ACCOUNT/DOCUMENTS, BANK STATEMENT AND OTHER NECESSARY 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.28,26,650/- AS MENTIONED ABOVE) AMO UNTED TO RS.47,04,619/- FROM WHICH INTEREST (RS.2,93,990) AND REMUNERATION (RS.18,16,751) PAID TO THE PARTNERS WERE DEDUCTED TO COMPUTE THE TOTAL INCOME AT RS.25,93,880/- WHICH HAS BEEN DULY SHOWN IN THE RETURN. THE INTEREST AND REM UNERATION 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 CONSUM ABLE GOODS FOR RS.2,78,819/- AND SHOP EXPENSES FOR RS.14,060/- DURING THE YEAR. ON VERIFICATION OF ACCOUNTS IN THIS REGARD, IT IS HOWEVER SEEN THAT COMPLETE VERIF IABILITY OF SUCH EXPENSES CANNOT BE MADE DUE TO PARTIAL NON VOUCHING / NOT PROPER VO UCHING OF SUCH EXPENSES. FURTHER, NO QUANTITATIVE RECORD IS AVAILABLE FOR VE RIFICATION IN RESPECT OF THE CONSUMABLE GOODS. AS SUCH, AN ESTIMATED DISALLOWANC E OF RS.60,000/- IS MADE OUT OF THE AFORESAID EXPENSES AND ADDED BACK IN COM PUTATION OF TOTAL INCOME HEREUNDER. THE ASSESSEE HAS ALSO DEBITED TELEPHONE EXPENSES FOR RS.17,892/-. SINCE POSSIBILITY OF PARTIAL PERSONAL USE/NON BUSIN ESS OF THE TELEPHONE CANNOT BE RULED OUT, PARTIAL DISALLOWANCE OF RS.4,000/- OUT O F THE TELEPHONE EXPENSES IS ALSO MADE AND ADDED BACK IN COMPUTATION OF TOTAL INCOME HEREUNDER. 4 ITA NO. 88/JAB./2014 3. THE ASSESSMENT WAS THUS COMPLETED ON 11.11.2011. THE MATTER, HOWEVER, DID NOT REST THERE. 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 THE AVERAGE RATE OF OPENING STOCK AND PURCHAS E COMES AT RS.5994/- PER 10 GRAMS { (1092500+9590056) /(8741.1 1+9081.318)} AND ON THIS AVERAGE RATE THE VALUE OF CLOSING STOCK COMES AT RS.91,03,621/- (5994X1518.789) WHICH IS MUCH HIGHER THAN THE VALUE OF CLOSING STOCK OF RS.32,59,404/ - AS SHOWN BY YOU IN THE TRADING ACCOUNT. 2. THAT THERE IS ANOTHER ASPECT REGARDING VALUATIO N OF CLOSING STOCK. AS PER STATEMENT OF SHRI RAHUL KHANDELWAL, THE BUSINES S WAS STARTED ONLY TWO YEARS BACK I.E IN THE F. Y 2006-07 ONLY RELEVAN T TO A. Y 2007-08. THIS MEANS THAT THE PURCHASE BY THE ASSESSEE FIRM S TARTED FROM F. Y. 2006-07 ONLY AND NOT BEFORE THAT. THEREFORE THE RAT E OF CLOSING STOCK CANNOT BE LESS THAN THE AVERAGE RATE OF GOLD IN THE F.Y. 2006-07 OR THE AVERAGE RATE OF PAST TWO YEARS I.E 2006-07 & 2007-0 8. THIS AVERAGE RATE IS APPROXIMATELY RS.8500/ -PER GRAMS WHICH IS ALSO MUCH-MUCH HIGHER THAN THE RATE OF CLOSING STOCK OF RS.2146/ - PER GRAMS AS DISCLOSED BY YOU. 3. THAT ON THE BASIS OF ABOVE, IT IS CLEAR THAT TH E CLOSING STOCK HAS BEEN UNDERVALUED BY THE ASSESSEE RESULTING INTO SUBSTANT IAL LOSS OF REVENUE; AND THIS ISSUE OF UNDERVALUATION OF CLOSING STOCK H AS NOT AT ALL BEEN EXAMINED BY THE ASSESSING OFFICER. THUS THE ASSESSM ENT ORDER IS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 4. THAT DURING THE COURSE OF SURVEY, 6427 GRAMS OF EXCESS UNACCOUNTED GOLD STOCK WAS FOUND FOR WHICH ASSESSEE COULD NOT F URNISH ANY EXPLANATION. FURTHER AS PER STATEMENT, THE ASSESSEE OFFERED RS.21,46,000/- FOR TAXATION AS UNDISCLOSED INVESTME NT AGAINST THE EXCESS STOCK, WHICH APPEARS IN THE TRADING ACCOUNT. IN THE ABSENCE OF 5 ITA NO. 88/JAB./2014 ANY EXPLANATION AND EVIDENCE WITH REGARD TO YEAR OF PURCHASE OF EXCESS UNACCOUNTED STOCK, THE VALUE OF UNDISCLOSED INVESTMENT IN RESPECT OF EXCESS STOCK SHOULD HAVE BEEN TAKEN AT T HE RATE OF PURCHASE DURING THE YEAR I.E. RS.10560/ - PER 10 GRAMS. THUS THE TOTAL UNDISCLOSED INVESTMENT IN EXCESS STOCK WORKS OUT TO BE RS. 67,86,912/- (6427X10560) AND THEREFORE FURTHER ADDITION OF RS.4 6,40,912/ - (67,86,912-21,46,000) SHOULD HAVE BEEN MADE TO YOUR INCOME. 5. THAT THE VALUE OF UNDISCLOSED INVESTMENT IN RES PECT OF EXCESS UNACCOUNTED SILVER STOCK SHOULD HAVE BEEN TAKEN AT THE RATE OF PURCHASE DURING THE YEAR, I.E. RS.17117/- KG (89287 0/52.162) AND THE TOTAL UNDISCLOSED INVESTMENT IN EXCESS SILVER STOCK SHOULD HAVE BEEN TAKEN TO BE RS.10,37,461/ -. THEREFORE FURTHER ADDI TION OF RS.7,56,811/- (10,37,461-2,80,650) SHOULD HAVE BEEN MADE TO YOUR INCOME. 6 . THAT ON THE BASIS OF ABOVE, IT IS CLEAR THAT TH E SURRENDER AGAINST EXCESS UNACCOUNTED STOCK OF GOLD AND SILVER IS QUITE LOW A S COMPARED TO ACTUAL VALUE OF THE EXCESS STOCK. THIS ISSUE OF UND ERVALUATION OF EXCESS UNACCOUNTED STOCK HAS ALSO NOT BEEN EXAMINED BY THE AO RESULTING INTO SUBSTANTIAL LOSS OF REVENUE. THE ASSESSMENT ORDER I S THEREFORE BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. 7. 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 THRO UGH AN AUTHORIZED REPRESENTATIVE OR THROUGH WRITTEN SUBMISSIONS. THE HEARING IS FIXED FOR 24.01.2014 AT 12.30 P.M. IN CASE NO REPRESENTATION IS MADE ON THAT DATE THE MATTER SHALL BE DECIDED ON MERITS AS PER T HE MATERIALS/ EVIDENCE AVAILABLE 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 :- 3. I HAVE CONSIDERED THE WRITTEN SUBMISSIONS FURNI SHED BY THE ASSESSEE DURING THE COURSE OF REVIEW PROCEEDINGS AND HAVE GONE THRO UGH THE FACTS OF THE CASE. IT IS A FACT THAT THE AO HAS NOT MADE ANY ENQUIRY ABOU T THE VALUATION OF CLOSING STOCK OF GOLD ORNAMENTS AND SILVER ORNAMENTS. THE V ALUE OF OPENING STOCK FOR 8741.11 GRAMS OF GOLD ORNAMENTS ADOPTED BY THE ASSE SSEE WAS RS.939416/- 6 ITA NO. 88/JAB./2014 WHICH IS 1250/- PER 10 GRAMS AND VALUE OF CLOSING S TOCK FOR 15,187.89 GRAMS OF GOLD WAS SHOWN AT RS.32,59,404/- WHICH IS 2146 PER 10 GRAMS. DURING THE COURSE OF SURVEY THE APPROVED VALUER HAS VALUED @ RS.11732 /- PER 10 GRAMS FOR GOLD. THE ASSESSEES BUSINESS COMMENCED YEARS BACK. HENCE , THE VALUE OF OPENING STOCK OF GOLD ORNAMENTS SHOULD HAVE BEEN ADOPTED AT THE AVERAGE RATE. THE AVERAGE RATE OF OPENING STOCK AND PURCHASE COMES AT RS.5994 PER 10 GRAMS FOR GOLD. HENCE THE CLOSING STOCK SHOULD HAVE BEEN AT R S.91,03,621/- AS AGAINST VALUE OF CLOSING STOCK SHOWN BY THE ASSESSEE AT RS. 32,59,404/-. 3.1 THE ASSESSEE HAS MENTIONED IN THE WRITTEN SUBMI SSION, THAT THE EXCESS STOCK WAS VALUED BY THE APPROVED VALUER DURING THE COURSE OF SURVEY WHICH WAS SURRENDERED AND HENCE NO ADDITION IS CALLED FOR. DU RING THE COURSE OF SURVEY 6427 GRAMS OF EXCESS UNACCOUNTED GOLD STOCK WAS FOU ND FOR WHICH ASSESSEE COULD NOT FURNISH ANY EXPLANATION. FURTHER AS PER STATEME NT, THE ASSESSEE OFFERED RS.21,46,000/- FOR TAXATION AS UNDISCLOSED INVESTME NT AGAINST THE EXCESS STOCK, WHICH APPEARS IN THE TRADING ACCOUNT. IN THE ABSENC E OF ANY EXPLANATION AND EVIDENCE WITH REGARD TO YEAR OF PURCHASE OF EXCESS UNACCOUNTED STOCK, THE VALUE OF UNDISCLOSED INVESTMENT IN RESPECT OF EXCESS STOC K SHOULD HAVE BEEN TAKEN AT THE RATE OF PURCHASE DURING THE YEAR I.E. RS.10560/- PE R 10 GRAMS OF GOLD. THUS THE TOTAL UNDISCLOSED INVESTMENT IN EXCESS STOCK WORKS OUT TO BE RS. 67,86,912/- (6427XL0560) AND THEREFORE FURTHER ADDITION OF RS.4 6,40,912/- (67,86,912 - 21,46,000) SHOULD HAVE BEEN MADE BY THE A.O. BUT TH E A.O. DID NOT EXAMINE THIS ISSUE, WHICH RENDERED THE ASSESSMENT ERRONEOUS. 3.2 SIMILAR IS THE POSITION OF VALUATION OF SILVER ORNAMENTS. THE VALUE OF UNDISCLOSED INVESTMENT IN RESPECT OF EXCESS UNACCOU NTED SILVER STOCK SHOULD HAVE BEEN TAKEN AT THE RATE OF PURCHASE DURING THE YEAR, I.E. RS.17117/- KG (892870/52.162) AND THE TOTAL UNDISCLOSED INVESTMEN T IN EXCESS SILVER STOCK SHOULD HAVE BEEN TAKEN TO BE RS.10,37,461/-. THEREF ORE, FURTHER ADDITION OF RS.7,56,811/-(10,37,461-2,80,650) SHOULD HAVE BEEN MADE BY THE A.O. BUT THE A.O. DID NOT EXAMINE THIS ISSUE, WHICH RENDERED THE ASSESSMENT ERRONEOUS. 3.3. IT IS CLEAR THAT THE CLOSING STOCK HAS BEEN U NDER VALUED BY THE ASSESSEE RESULTING INTO SUBSTANTIAL LOSS OF REVENUE, AND THI S ISSUE OF UNDERVALUATION OF CLOSING STOCK HAS NOT AT ALL BEEN EXAMINED BY THE A SSESSING OFFICER. THUS, THE ASSESSMENT ORDER IS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. 6. THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFOR E US. 7 ITA NO. 88/JAB./2014 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 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 ? 8 ITA NO. 88/JAB./2014 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 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 9 ITA NO. 88/JAB./2014 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 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 10 ITA NO. 88/JAB./2014 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 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 11 ITA NO. 88/JAB./2014 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. 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 O RDER, ASSTT. REGISTRAR ITAT, JABALPUR BENCH, JABALPUR