The Commissioner of Income Tax v. M/s. G.M.G. Industries, Yamuna Nagar

law cited by the assessee. We find that in this case, original assessment was framed by the AO after considering details and evidence submitted by the assessee in respect of purchase/ sale and the reason for the difference in stock and other documents found at the time of survey and has passed an order u/s 143(3), whereas the CIT presumed while invoking section 263 that the AO did not apply his mind in right perspective and took the view that the same has resulted in understatement of correct income and, therefore, the assessment order is prejudicial to the interests of the revenue. The admitted facts in this case are that during the course of survey conducted on 11/12.3.1999, the survey party found certain discrepancies and detected a g.p. of Rs. 13,13,958/-. To cover up the discrepancies, the Income Tax Appeal No. 239 of 2006 6 partner of the assessee-firm surrendered an additional income of Rs.

14 lacs. However, the assessee in its return has declared an income of Rs. 3,81,400/- only. During the course of assessment proceedings, the assessee produced the details, documents and evidence before the AO, duly reconciling the difference earlier found at the time of survey conducted on 11/12.3.1999. Now, we find from the record that the AO completed the assessment u/s 143(3) after only verifying the details, i.e. relevant documents, trading account furnished by the assessee and thereafter formed an opinion that the results shown were justified. Therefore, the assumption of jurisdiction u/s 263 by the CIT on the reasoning that such view of the AO was erroneous and prejudicial to the interests of the revenue, on the basis of recast trading account, tantamounts to the second view by recasting the trading result of the assessee for the same period, which had already been considered by the AO while completing the assessment u/s 143(3) and such order of the AO cannot be held prejudicial to the interests of the revenue, as held by the apex court in the case of Malabar Industrial Co.

Ltd. (supra). While coming to such conclusion, we draw support from the latest decision of the Tribunal in the case of Nahar Exports Ltd. Vs. ACIT, reported in 92 ITD 484 (Chd), wherein it was held that if the AO had taken one of the possible views the Commissioner will have no jurisdiction to interfere with the view taken by Income Tax Appeal No. 239 of 2006 7 the AO by exercising his power u/s 263. We, therefore, keeping in view the above facts of the present case and the decisions (supra), are of the considered opinion that the order of the CIT passed u/s 263 is contrary to law and facts and cancel the same by accepting the grounds raised in the assessee’s appeal.” The assessee had surrendered a sum of Rs. 14,00,000/- as additional income during the course of survey on 11/12.3.1999 subject to no penalty and no prosecution. However, while filing the return of income, a sum of Rs. 3,81,400/- only had been surrendered and disclosed as its income.

No plausible explanation had been furnished by the assessee for retraction from its earlier statement made during survey. In the absence thereof, there was, prima facie, no justification for accepting the surrendered income of Rs. 3,81,400/- instead of Rs.14,00,000/-. A perusal of the aforesaid order of the Tribunal shows that the Tribunal had not discussed the material produced by the assessee during the assessment proceedings and also had failed to record any firm finding based thereon. Further, no cogent reasons have been assigned for accepting the retraction of the assessee from the earlier surrender of income of Rs. 14,00,000/- made by it during the survey conducted on 11/12.3.1999. Thus, the Tribunal erred in nullifying the order passed by the CIT under Section 263 of the Act. In view of the above, the substantial question of law is answered accordingly, the order of the Tribunal is set aside and the matter is remanded to the Tribunal to take a fresh decision in Income Tax Appeal No. 239 of 2006 8 accordance with law on the issue under discussion. The appeal stands disposed of. (AJAY KUMAR MITTAL) JUDGE December 1, 2010 *rkmalik* (ADARSH KUMAR GOEL) JUDGE