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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH, AHMEDABAD
Per Pramod Kumar, Vice President :
This appeal is directed against the order dated 9th March 2016 passed by the 1. learned Commissioner under section 263 r.w.s. 143(3) of the Income-tax Act 1961, for the assessment year 2011-12. 2. Grievances raised by the appellant are as follows:- “1. On the facts and circumstances of the case and in law, the learned Principal Commissioner of Income-tax-2 (hereinafter referred to as the “PCIT” has erred in completing assessment u/s 263 of the Income-tax Act. 2. On the facts and circumstances of the case and in law, the learned PCIT has erred in directing the Assessing Officer to reframe assessment proceedings completed u/s 143(3) of the Act. 3. The order under appeal is not only bad in law and invalid, but also against the natural law of equity and justice.”
To adjudicate on this appeal, only a few material facts need to be taken note of. The assessment under section 143(3), in this case, was completed on 27.03.2014 determining total income at Rs. 4,31,84,957/-. Subsequently, however, this order was subjected to the revision proceedings under section 263. The short
ITA No. 1113/Ahd/2016 Morkhia Metals & Alloys Pvt Ltd Vs. Pr CIT Assessment Year : 2011-12 Page 2 of 3 issue on which the revision proceedings were done and the assessment order was set aside, was lack of inquiry with respect to valuation of stock in the context of requirements under section 145A. It is evident from the following observations in the impugned order:- “4. I have perused the records of the case and found that the assessing officer has passed the order without making enquiries or verification which should have been done. As against the assessees contention that finished goods are valued with cenvat credit loaded and Semi-finished gods without it, a perusal of Schedule 16 to the P&L account shows Classification of Stock as Semi-finished goods (Manufacturing), Finished goods & semi-finished goods (Job Work). The Accounting policies appearing at Schedule 23 does not reveal the cenvat valuation differentiation claimed as per the submissions cited above. The Notes on accounts also forming part of Schedule 23 at item 17 further shows that closing stock has six components as under, as against the two overall heads highlighted in the written submission and the three major heads appearing in Schedule 16: (1) Raw materials; (2) Semi-Finished; (3) Finished; (4) Trading Stock; (5) Consumables stores; and (6) Job work(Semi Finished) It is also clear from the records that the assessing officer has not looked into the issue of valuation of stock in respect of all the above items in the context of requirement u/s. 145A.”
The CIT was of the view that this lack of appropriate inquiries rendered the assessment order erroneous and prejudicial to the interests of the revenue. He accordingly set aside the assessment order and directed the Assessing Officer to “reframe the assessment after conducting necessary inquiry and after granting sufficient opportunity of hearing to the assessee”. The assessee is aggrieved and is in appeal before us.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 6. We find that the assessee has, during the revision proceedings, pointed out that “the assessee has already included excise duty element in valuation of inventory” and duly furnished the working of closing stock. The assessee has also filed elaborate submissions on merits, as duly reproduced in paragraph 3 of the impugned order. Admittedly, however, all these aspects were not at all examined at the assessment stage. It is this lack of inquiries which has rendered the assessment order erroneous and prejudicial to the interests of the revenue. As regards learned counsel’s reliance on Hon’ble Delhi High Court’s judgment in the case of ITO vs. D. G. Housing Projects Ltd. [(2012) 343 ITR 329 (Del)] in support of the proposition that Commissioner cannot direct reconsideration on the ground that the order may be erroneous, it may be mentioned that in the present case “there was total absence of
ITA No. 1113/Ahd/2016 Morkhia Metals & Alloys Pvt Ltd Vs. Pr CIT Assessment Year : 2011-12 Page 3 of 3 enquiry or verification”, and for this reason alone, in the light of observations made by their Lordships in paragraph No. 14, this judicial precedent cannot come to the rescue of the assessee. As observed by Their Lordships in this very judgment when an Assessing Officer fails to conduct the investigation where facts are required to be examined and verified, “the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits”. In the case of Gee Vee Enterprises vs. ACIT [(1975) 99 ITR 375 (Del)], it is observed that “the Income Tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further enquiry... The order becomes erroneous because such an enquiry has not been made and not because anything is wrong with the order if all the facts stated therein are assumed to be correct”. Quite clearly, therefore, an assessment order can be subjected to revision proceedings only because no enquiries have been made though the facts emerging in the assessment warranted such enquiries. That precisely is the case before us. In view of these discussions, and bearing in mind entirety of the case, we deem it fit and proper to decline to interfere in the matter.
In the result, the appeal is dismissed. Pronounced in the open court today on the 24th April, 2019.
Sd/- Sd/-
Ms. Madhumita Roy Pramod Kumar (Judicial Member) (Vice President) Ahmedabad, the 24th day of April, 2019 *bt Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad 1. Date of dictation: …Order prepared as per 3 pages manuscripts of Hon’ble VP……24.04.2019………….. 2. Date on which the typed draft is placed before the Dictating Member: ... 24.04.2019........ 3. Date on which the approved draft comes to the Sr. P.S./P.S.: ....... 24.04.2019......... 4. Date on which the fair order is placed before the Dictating Member for Pronouncement:.... 24.04.2019. 5. Date on which the file goes to the Bench Clerk : ...... 24.04.2019............... 6. Date on which the file goes to the Head Clerk : ……………………………. 7. The date on which the file goes to the Assistant Registrar for signature on the order: ……… 8. Date of Despatch of the Order: ………………......