2017 (12) TMI 1694 - AT - Income Tax

Revision u/s 263 by CIT - As per CIT no enquiries were conducted by AO in respect of sundry creditors - Whether no enquiry was undertaken by the Pr. CIT to come to the conclusion that the original assessment order was erroneous and prejudicial to the interest of revenue? - HELD THAT - On perusal of the order of the ld CIT it is noticed that it has not stated how the order of the AO is erroneous as complete income including the job work income was shown. It was also not stated that how the survey of the premises of the father of the assessee has made the order erroneous. CIT has stated that why the tax has not been deducted at source on payments to ABC Enterprise. However in the same order the CIT himself has stated that assessee was the proprietor of ABC Enterprise and M/s. Shiva International. As the payment is made from one proprietary concern to another proprietary concern of the same assessee DR could not show any provision of tax deduction at source applicable. Furthermore the ld CIT has not carried out any enquiry to show that order passed by the ld Assessing Officer is erroneous. In view of this Hon ble Delhi High Court in Pr.CIT Vs. Delhi Airport Metro Pvt. Ltd 2017 (9) TMI 529 - DELHI HIGH COURT has held that when no enquiry was undertaken by the Pr. CIT to come to the conclusion that the original assessment order was erroneous and prejudicial to the interest of revenue it cannot be sustained. When the ld CIT has sent the entire matter back to the file of Assessing Officer for fresh assessment can also be done only after he undertakes an enquiry. Apparently same is missing in this case. - Decided in favour of assessee.

Summary

Issues:
- Jurisdiction under section 263 of the Income Tax Act.

Analysis:
1. The appeal pertains to the order passed under section 263 of the Income Tax Act for the assessment year 2009-10. The main issue in the appeal is whether the Commissioner of Income Tax (CIT) was justified in invoking the jurisdiction under section 263.

2. The CIT invoked jurisdiction under section 263 due to a survey operation revealing discrepancies in the assessee's income declaration. The CIT found that the assessing officer did not properly inquire into the genuineness of sundry creditors, a significant fall in gross profit, and the adequacy of household expenditure. The CIT issued a show cause notice, and upon examination of the explanation provided by the assessee, deemed the assessment order to be erroneous and prejudicial to revenue's interest.

3. The authorized representative of the assessee argued that during assessment proceedings, the assessing officer conducted a thorough inquiry into various aspects, including details of sundry creditors, gross profit comparison, household expenditure, and commission expenses. The representative highlighted that all necessary details and confirmations were submitted to the assessing officer, and previous assessment years did not face similar challenges. Referring to a relevant High Court decision, the representative contended that the assessing officer's inquiries were sufficient, and the CIT failed to conduct any independent inquiry to establish the alleged errors.

4. The Departmental Representative supported the CIT's order, emphasizing the lack of proper inquiry by the assessing officer into sundry creditors, commission expenses, and household expenditure. The Departmental Representative argued that the CIT correctly assumed jurisdiction under section 263 due to the clear lack of inquiry by the assessing officer.

5. Upon careful consideration of the contentions and perusal of relevant documents, the Tribunal observed that the assessing officer had indeed conducted detailed inquiries into sundry creditors, gross profit, household expenditure, and other financial aspects. The Tribunal noted that the assessing officer thoroughly examined the business transactions and financial records of the assessee. Additionally, the Tribunal found that the CIT's order lacked clarity on how the assessing officer's actions were erroneous, especially regarding the survey operation and tax deductions. Citing a High Court decision, the Tribunal concluded that the CIT's order under section 263 could not be sustained due to the absence of an independent inquiry and the adequacy of the assessing officer's examination.

6. Consequently, the Tribunal allowed the appeal of the assessee, quashing the CIT's order under section 263 of the Income Tax Act. The decision was based on the complete inquiry conducted by the assessing officer and the lack of substantial evidence to support the CIT's findings of errors in the assessment order.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the Tribunal's decision based on the arguments presented by the parties involved.