Rajive Bhalla, J. - (1.) THE revenue is before us challenging order dated 03.04.2012 passed by the Income Tax Appellate Tribunal (hereinafter referred to as the 'Tribunal'), Amritsar Bench, Amritsar allowing an appeal filed by the assessee and as a consequence, setting -aside order dated 29.03.2010 passed by the Commissioner of Income Tax -II, Amritsar.
(2.) COUNSEL for the revenue submits that findings recorded by the Tribunal are not only perverse and arbitrary but devoid of any reasons much less did the Tribunal have jurisdiction to appraise facts and record an opinion that the Commissioner could not have assumed jurisdiction under Section 263 of the Income Tax Act (hereinafter referred to as 'the Act'). Counsel for the revenue further submits that a perusal of the record reveals that even if it is accepted that the Commissioner of Income Tax committed an error in tabulating the number of blankets, the huge difference in valuation detected by the CIT is sufficient to infer prejudice to the revenue and as a consequence an erroneous consideration by the Assessing Officer, conferring jurisdiction on the Commissioner of Income Tax to pass an order under Section 263 of the Income Tax Act. Counsel for the revenue also submits that the Tribunal has set -aside the order passed by the Commissioner of Income Tax (Appeals) by referring to certain documents produced by the assessee without affording any opportunity to the revenue to rebut these documents or to furnish an explanation for the alleged error, pointed out by the Tribunal and, therefore, the following substantial question of law arises for consideration: "Whether on the basis of facts and circumstances of the case, the ITAT was right in law in cancelling the order of CIT u/s. 263 of the Income Tax Act, 1961 inspite of the fact that the A.O's order was incorrect and prejudicial to the interest of revenue as the A.O. had erroneously made an estimated addition of Rs. 29,80,453/ - by adopting G.P. rate of 23% instead of making an addition of Rs. 56,29,470/ - which was to be made on the basis of survey record and production Records/document available with the Department - Counsel for the assessee submits that admittedly, the Assessing Officer, rejected account books, applied a gross profit rate of 23% and on the basis of the record pertaining to finished, unfinished goods (different types of blankets) and raw material added Rs. 29,80,453/ - to the income of the assessee. The assessee filed an appeal against this order but in the meanwhile, the Commissioner of Income Tax served a show cause notice upon the assessee proposing to revise the assessment by referring to facts that are not inferable from any document on record much less the assessee's documents and made an addition of Rs. 56,29,470/ - to the income of the assessee. The Tribunal has after referring to the inventory as on 22.12.2004 which includes finished and unfinished goods as well as raw material, held that as these documents were already before the Assessing Officer who after examining the documents added Rs. 29,80,453/ - to the income of the assessee, the case of the revenue at its best was a case of under assessment or under valuation of goods and not a case that would require exercise of jurisdiction under Section 263 of the Act. The Tribunal has also held as a matter of fact that the finished blankets tabulated by the CIT are incorrect.
(3.) WE have heard counsel for the parties and perused the impugned order as well as order passed by the Commissioner of Income Tax -II, Amritsar.;