Pr. Commissioner of Income-tax-17 v. Motiwala & Sons
[Citation -2019-LL-0722-92]

Citation 2019-LL-0722-92
Appellant Name Pr. Commissioner of Income-tax-17
Respondent Name Motiwala & Sons
Court HIGH COURT OF DELHI AT NEW DELHI
Relevant Act Income-tax
Date of Order 22/07/2019
Assessment Year 2013-14
Judgment View Judgment
Keyword Tags substantial question of law • assumption of jurisdiction • original assessment order • reconciliation statement • assessment proceedings • valuation of stock • partnership firm • survey operation • lack of inquiry • value of stock • excess stock • audit report • prejudicial to the interest of revenue • adequate inquiries
Bot Summary: The facts in brief are that the Assessee which is a partnership firm engaged in the business of retail trade of golden and diamond jewellery was subjected to a survey operation under Section 133A of the Act on 15th February, 2013. Thereafter on 29th September, 2013 it filed its return of income for the AY in question which was subsequently picked up for scrutiny, and notice under Section 143(2) was duly served upon the Assessee. After considering the replies of the Assessee, the assessment order was passed on 30th March, 2016 assessing the income of the Assessee at Rs.6,34,66,350/-. The CIT decided to invoke the power under Section 263 of the Act and issued a show cause notice to the Assessee on 11th July, 2016 where the focus was on valuation of the stock with the Assessee. In the order dated 27th March, 2018 passed under 263 of the Act, ITA 677/2019 Page 2 of 4 the CIT came to the conclusion that the AO had without looking into the audit report of the Assessee accepted the valuation, and further held that on account of the lack of inquiry the assessment order was erroneous and prejudicial to the interest of the Revenue. The above order was assailed by the Assessee before the ITAT. In the impugned order, while agreeing with the Assessee that the exercise of jurisdiction under Section 263 of the Act by the CIT was erroneous, the ITAT noted the detailed correspondence between the AO and the Assessee beginning with the notice dated 1st February, 2016 and the reply thereto of the Assessee followed by another notice dated 19th February, 2016, which again was replied to by the Assessee in detail. The ITAT concluded that the AO had during the course of Assessment proceedings after making detailed and specific inquiries in relation to the Assessee s stock, accepted the reconciliation report with respect to the variation of value of stock, having again examined the impugned order of the CIT in the light of the original assessment order of the AO. The ITAT was not persuaded to accept the plea of the Revenue that there had been a failure on the part of the AO to conduct a proper inquiry into the question of difference in the valuation of the stock and that the case fell within the parameters for interjection under Section 263 of the Act as expressed by the Supreme Court in CIT v. Amitabh Bachhan 11 SCC 748.


IN HIGH COURT OF DELHI AT NEW DELHI ITA 677/2019 PR. COMMISSIONER.OF INCOME TAX-17 .Appellant Through: Mr. Zoheb Hossain Senior Standing Counsel and Mr. Deepak Anand Junior Standing Counsel for Revneue. versus M/s. MOTIWALA & SONS ..... Respondents Through: Mr. Kislaya Parashar, Mrs. Mekhala Benny and Miss Umang Luthra Advocates. CORAM: JUSTICE S. MURALIDHAR JUSTICE TALWANT SINGH ORDER 22.07.2019 C.M.No.32666/2019 (Delay) 1. For reasons explained in application, delay of 10 days in re- filing appeal is condoned. application is allowed. ITA No.677/2019 2. This is appeal filed by Revenue against order dated 29th November, 2018 passed by Income Tax Appellate Tribunal (ITAT) in ITA No. 2756/Del/2018 for Assessment Year ( AY ) 2013-14. 3. short question sought to be urged by Revenue is whether ITAT erred in setting aside order passed by Commissioner of Income ITA 677/2019 Page 1 of 4 Tax ( CIT ) under Section 263 of Income Tax Act, 1961 ( Act ) directing Assessing Officer (AO) to undertake afresh exercise of assessment for AY in question. 4. facts in brief are that Assessee which is partnership firm engaged in business of retail trade of golden and diamond jewellery was subjected to survey operation under Section 133A of Act on 15th February, 2013. Thereafter on 29th September, 2013 it filed its return of income for AY in question which was subsequently picked up for scrutiny, and notice under Section 143(2) was duly served upon Assessee. On 9th July, 2015, AO issued notice under Section 143(1) of Act enclosing therewith questionnaire. After considering replies of Assessee, assessment order was passed on 30th March, 2016 assessing income of Assessee at Rs.6,34,66,350/-. 5. CIT decided to invoke power under Section 263 of Act and issued show cause notice ( SCN ) to Assessee on 11th July, 2016 where focus was on valuation of stock with Assessee. It was noted by CIT that as per inventory, total stock was valued at Rs.33,48,49,952/- and excess stock was valued at Rs.15,95,72,922/-. According to CIT, AO failed to properly investigate issue concerning excess un-accounted stock of Rs.9,95,72,922/-. Further, with regard to difference of Rs.55,37,754/- for diamond jewellery, AO had simply accepted reply of Assessee that valuer had valued artificial stones at rate of diamonds and this had caused difference in valuation. In order dated 27th March, 2018 passed under 263 of Act, ITA 677/2019 Page 2 of 4 CIT came to conclusion that AO had without looking into audit report of Assessee accepted valuation, and further held that on account of lack of inquiry assessment order was erroneous and prejudicial to interest of Revenue. 6. above order was assailed by Assessee before ITAT. In impugned order, while agreeing with Assessee that exercise of jurisdiction under Section 263 of Act by CIT was erroneous, ITAT noted detailed correspondence between AO and Assessee beginning with notice dated 1st February, 2016 and reply thereto of Assessee followed by another notice dated 19th February, 2016, which again was replied to by Assessee in detail. It was further noted by ITAT that exhibits 136 and 137 filed by Assessee before AO contained complete details of stock of diamond on date of survey i.e. 15th February 2013. reconciliation statement was also filed. 7. ITAT concluded that AO had during course of Assessment proceedings after making detailed and specific inquiries in relation to Assessee s stock, accepted reconciliation report with respect to variation of value of stock, having again examined impugned order of CIT in light of original assessment order of AO. ITAT was not persuaded to accept plea of Revenue that there had been failure on part of AO to conduct proper inquiry into question of difference in valuation of stock and that case fell within parameters for interjection under Section 263 of Act as expressed by Supreme Court in CIT v. Amitabh Bachhan (2016) 11 SCC 748. ITA 677/2019 Page 3 of 4 8. Having heard learned counsel for Revenue, and having examined orders discussed hereinbefore, this Court is not persuaded to conclude that impugned order of ITAT suffers from any legal infirmity. In particular, this Court concurs with view of ITAT that in present case AO had indeed undertaken detailed inquiry into aspect of valuation of stock and that, therefore, requirements for assumption of jurisdiction by CIT under Section 263 of Act were not fulfilled. 9. Court does not find any substantial question of law arising from impugned order of ITAT. appeal is accordingly dismissed. S. MURALIDHAR, J. JULY 22, 2019/mr TALWANT SINGH, J. ITA 677/2019 Page 4 of 4 Pr. Commissioner of Income-tax-17 v. Motiwala & Son
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