IN HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO.16 of 2016 Principal Commissioner of Income Tax, Having office at Aayakar Bhavan, Patto Plaza, Panaji Goa. .. Appellant Versus Mr. Ramchandra Naidu Prop. M/s. Shakti Sales Corporation Belgaum Bypass Road, Ponda, Goa, PAN : ADAPN4702F ...Respondent. Ms. A. Razaq, Advocate for appellant. Shri D. E. Robinson, Advocate for respondent. Coram:- F. M. REIS & NUTAN D. SARDESSAI, JJ. Date :- 24th July,2017. ORAL JUDGMENT: (per F.M. REIS,J.) Heard Ms. A. Razaq, learned advocate for appellant and Shri D. E. Robinson, learned advocate for respondent. 2. above appeal challenges Order dated 28/11/2014 passed by Income Tax Appellate Tribunal, Panaji (ITAT, for short) in Income Tax Appeal no.47/PNJ/2013 for Assessment Year 2 TXA 16/16 2009-10 whereby appeal preferred by assessee came to be allowed. 3. Briefly, case of appellant was that respondents filed return of income for Assessment Year 2009-2010 declaring total income of 1,08,24,020/-. Assessing Officer by order dated 25/11/2011 completed assessment by making addition under various heads such as vehicle expenses, deprecation of motor car etc. and adjusted refund towards arrears for Assessment Year 2005-06. Thereafter, on 17/12/2012, exercising powers under Section 263 of Income Tax Act, 1961 (The Act, for short) Commissioner of Income Tax found that order passed by Assessing Officer was erroneous and prejudicial to interest of Revenue and, as such, set aside assessment order by restoring matter to file of Assessing Officer afresh for passing fresh assessment order. ITAT by order dated 28/11/2014 allowed appeal holding that Commissioner of Income Tax had no jurisdiction to take action under Section 263 of Act taking view that order passed by Assessing Officer is not erroneous or prejudicial to interest of Revenue and against said order above appeal came to be filed. 3 TXA 16/16 4. learned Counsel for appellant submitted that learned Tribunal was not justified in setting aside order passed by Commissioner of Income Tax under Section 263 of Act when twin conditions for invoking power under Section 263 of Act had been fully satisfied. learned Counsel further points out that assessee filed its return of income on 18/01/2010 for year 2009-10 which case was selected for scrutiny and Assessing Officer by order dated 28/11/2014 concluded assessment. learned Counsel further points out that Commissioner of Income Tax has jurisdiction to take action under Section 263 of Act as order of Assessing Officer was erroneous and prejudicial to Revenue. learned Counsel further submits that Assessing Officer during scrutiny has erroneously accepted figures submitted by assessee which entitled Commissioner to exercise powers under Section 263 of Act. In support of submissions, learned Counsel relied upon Judgment of Apex Court reported in 1968 67 ITR 84 SC in case of Rampyari Devi Saraogi v/s. Commissioner of Income Tax and another judgment of Apex Court in case of M/s. Malabar Industrial Co. V/s. Commissioner of Income Tax passed on 10/02/2000. 5. On other hand, learned Counsel for respondent 4 TXA 16/16 has supported impugned order passed by learned tribunal. It is further pointed out that at time of scrutiny, there was physical verification of stock which led to original assessment. It is also pointed out that as such question of appreciating value of stocks as intended by Commissioner for year is misplaced and not known manner of accounting. It is further submitted that any error by Assessing Officer does not by itself be pre-judicial to interest of revenue to invoke such powers under Section 263 of Act. There is no basis for Commissioner to exercise powers under Section 263 of Act, and as such there are no substantial questions of law which arise in present appeal considering well-reasoned order of learned Tribunal. 6. We have considered submissions of learned Counsel and we have also gone through records. On perusal of order passed, learned Tribunal noted that in order to exercise powers under Section 263 of Act, both conditions namely that order passed by Assessing Officer is erroneous and that it is prejudiced to interest of Revenue must be satisfied and if one of them is absent, it may be held that provisions of Section 263 of Act are not lawfully invoked. learned Tribunal further noted that Assessing Officer had clearly 5 TXA 16/16 discussed inquiry carried out during time of scrutiny to which assessee have replied all queries raised by them. Relying upon judgment of this Court in case of CIT V/s Gabriel India reported in 114 CTR 81 (Bom), it is found that if inquiry was conducted and explanation was accepted by Assessing Officer who was satisfied by same, it did not make order erroneous simply because Assessing Officer did not make elaborate discussion with that regard. learned Tribunal also noted that Commissioner of Income Tax also did not find that view taken by Assessing Officer was erroneous. learned Tribunal also noted that physical stock was taken by Assessing Officer on 20/02/2009 and during course of survey proceeding quantity of stock from both books as well as physical verification was available to Assessing Officer. learned Tribunal further found that assessment under Section 143 was completed accepting both books result. learned Tribunal further noted that there was no fault with Assessing Officer's order for not having restored to estimate and order under Section 143 cannot be termed as erroneous. learned Tribunal noted judgment reported in (2009)319 ITR 339 in case of Commissioner of Income Tax v/s. Utkal Alloys Ltd. wherein it is held that in course of search, search party did not find any incriminating document or duplicate books of 6 TXA 16/16 accounts involving respondent assessee in any clandestine business activity and department could not find out any omission of important purchaser / sale from assessee's books of account or any entry in books of account were not supported by voucher. addition has been made on basis of estimate of stock worked out on basis of said purchases. learned Tribunal further found that in case of wrong opinion or finding on merits, Commissioner of Income Tax has to come to conclusion and himself decide that order is erroneous, by conducting necessary enquiry, if required before Order under Section 263 of Act is passed. After examining different judgments of Court learned Tribunal came to opinion that in order to exercise powers under sub-Section 1 of Section 263 of Act, there must be material before Commissioner to consider that order passed by Income-tax Officer was erroneous in so far as it is prejudicial to interest of Revenue. learned Tribunal also noted that order can not be said to be prejudicial to interest of Revenue if it is not in accordance with law in consequence whereof lawful Revenue dues to State have not been realised. learned Tribunal also noted judgment of Apex Court reported in (2000) 243 ITR 83 SC in case of Malbar Industrial Co.Ltd. V/s. Commissioner of Income-tax where it has been observed that every loss of Revenue 7 TXA 16/16 as consequence of order of Assessing Officer cannot be treated as prejudicial to interests of revenue. learned Tribunal as such found that order passed by Assessing Officer was not erroneous or prejudicial to interest of Revenue or to take action under Section 263 of Act. 7. In present case, as already observed herein above Assessing Officer had raised queries to respondents which were duly replied by respondents. reply / clarification submitted by assessee were accepted by Assessing Officer and assessment order was passed accordingly. statement of stock submitted was brought to notice of authorities and upon appreciation of material on record, learned Tribunal came to conclusion that assessment order passed by Assessing Officer was under due scrutiny and clarification sought from assessee which cannot be said to be erroneous. 8. Considering that learned Appellate Tribunal has found that conditions specified under Section 263 of Act have not been satisfied, question of invoking such powers would not arise. Admittedly, in present case earlier survey action was carried out on respondents on 20/02/2009 and thereafter regular assessment was made under Section 143(3) on 25/11/2011. It is 8 TXA 16/16 also admitted that physical stock as on 20/02/2009 was taken by Assessing Officer, which is available on record. It is also contented that paper books in respect of stock from 20/02/2009 to 31/03/2009 is available which meant that Assessing Officer accepted value of stocks as per accounts of Assessee and without making any assessment. When such physical verification of stocks was carried out during period of regular assessment question of now valuing stock and adding 10% for every annum is not at all justified. manner of such estimate of stock on basis of last year G.P. of 10% as again books which were accepted by Assessing Officer earlier cannot be accepted. learned Tribunal as such rightly found that question of taking impugned action in terms of Section 263 of said Act would not at all be justified. manner of assessing respondents in regular assessment has not been shown to be erroneous. learned Tribunal has minutely examined material on record to come to conclusion that impugned action is unsustainable and there is no perversity in findings of learned Tribunal. learned Counsel appearing for appellant was unable to point out in what manner assessment by Assessing Officer was erroneous. judgment of Apex Court relied upon by learned Counsel for appellant is not applicable to facts of present case. As observed 9 TXA 16/16 therein loss of revenue as consequence of order of Assessing Officer cannot be treated as prejudicial to interest of revenue. When Assessing Officer has proceeded in particular manner and Assessing Officer has followed one of permissible processes in law which has resulted in loss of revenue, it cannot be said to be prejudiced to revenue and as such, we find there is no substantial question of law which arises in present appeal. In circumstances, considering order of learned Tribunal examining all material on record, we are of opinion that there are no substantial question of law in above appeal which is stands dismissed, accordingly. NUTAN D. SARDESSAI, J. F. M. REIS, J. mv Principal Commissioner of Income-tax, Panaji v. Ramchandra Naidu