KWALITY STEEL SUPPLIERS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) In this appeal the following two substantial questions of law arising from the order of the Income Tax Appellate Tribunal (the Tribunal) have been framed at the time of admission of the appeal :

(2.) The appellant filed return of income on 30/10/1993 showing total income at Rs.16,41,760.00 for assessment year 1993-94. The relevant previous year is financial year 1992-93. The assessment was finalized on a total income of Rs.20,52,210.00 on 24/2/1995 under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act').

(3.) On 27/2/1997 the respondent issued notice under Section 263 of the Act, as according to him the assessing officer had erred while passing assessment order for assessment year 1993-94. According to the respondent during the accounting year, the firm was dissolved and therefore, the closing stock should have been valued at market rate in view of the decision of the Hon'ble Supreme Court in the case of A.L.A.Firm Vs.Commissioner of Income-Tax (1991) 189 ITR 285.Applying the gross profit rate at around 15% on closing stock of Rs.12 crores approximate an addition of Rs.1.82 crores for undervaluation of closing stock was proposed. The appellant submitted its written reply but the respondent passed an order under Section 263 of the Act on 20/3/1997 setting aside the assessment order with a direction that fresh order be made in accordance with the direction given in his order after giving assessee an opportunity of being heard.