2022 (6) TMI 1321 - AT - Income Tax

Revision u/s 263 - as per CIT AO did not make any prudent enquiry in respect of the difference in the valuation of current assets and current liabilities shown in the balance sheet as on 31.3.2008 vis- -vis the same shown in the cash flow statement filed before the Assessing Officer - whether assessment as validly reopened by the AO? - As per assessee what the AO could not do u/s.147 of the Act could not be done in the guise of revision proceedings u/s.263 - HELD THAT - When the details were before the AO and the AO has not adjudicated on the issue when such glaring difference are there especially when he has made valid reopening it cannot be said that the AO did not have power to go into the said issue as pointed out by ld CIT DR. A reading of section 147 of the Act shows that the word used in section 147 or any other allowance or deduction for such assessment year . It also used the words assess or reassess such income or recompute the loss or the depreciation allowance . In the present case the difference between the cash flow statement and balance sheet was very much available to the AO to be processed in the reopened assessment. Failure on the part of the AO to examine the same and form an opinion on the issue established that when the difference was so glaring has clearly made the order erroneous and consequently prejudicial to the interest of the revenue. This being so as the AO has not applied his mind to the information that has been supplied by the assessee nor he has considered such information nor formed an opinion in respect of such information the ld CIT Bhubaneswar was right in invoking his powers u/s.263 of the Act in revising the assessment order passed u/s.143(3)/147 of the Act dated 30.3.2013 in the case of the assessee. A query was raised to ld AR as to what happened to the consequential order passed in pursuance to order u/s.263 of the Act to which ld AR submitted that consequential order has been passed and the appeal had been filed to the ld CIT(A). The ld CIT(A) has dismissed the same exparte. Further appeal had been filed to the Tribunal and the Tribunal had also exparte restored the issue back to the file of ld CIT(A). A very interesting fact on this issue established that even before the CIT(A) the appeal was dismissed for non-compliance. The Tribunal in the interest of natural justice had restored the issue to the file of the ld CIT(A) so that the assessee could be granted the opportunity to substantiate its case. This clearly shows that the assessee is not interested in showing the reconciliation but is attempting to use technical reasons to avoid the responsibility. Appeal of the assessee stands dismissed.

Summary

Issues:
1. Jurisdiction of the Tribunal to hear the appeal in light of Section 255(7,8 & 9) of the Income Tax Act.
2. Validity of the order passed under Section 263 of the Income Tax Act by the Commissioner.

Jurisdiction Issue:
The appeal questioned the Tribunal's jurisdiction due to the insertion of Section 255(7,8 & 9) of the Income Tax Act. The assessee requested an adjournment until the notification was issued by the Central Government. The Tribunal considered the issue, noting that it did not arise from the CIT's order. The Tribunal clarified that the activation of Section 255(7,8 & 9) was solely the legislature's prerogative. It concluded that the Tribunal had jurisdiction to hear the appeal and rejected the application.

Validity of Section 263 Order:
The dispute revolved around an order passed under Section 263 by the CIT, challenging the assessment order for the year 2008-09. The CIT contended that the AO's failure to address discrepancies between the balance sheet and cash flow statement constituted an erroneous order. The assessee argued that the AO had considered all details, and no additions were made during the assessment. However, the CIT maintained that the AO's oversight was prejudicial to revenue interests. Citing a Bombay High Court decision, the CIT emphasized the necessity for the AO to apply his mind to the information provided by the assessee.

Analysis and Conclusion:
The Tribunal agreed with the CIT, highlighting that the AO's failure to address significant discrepancies rendered the assessment order erroneous and prejudicial to revenue interests. It noted that the AO's lack of scrutiny on the issue despite valid reopening justified the CIT's invocation of Section 263 powers. The Tribunal also mentioned a subsequent appeal process where the issue was restored due to non-compliance, indicating the assessee's reluctance to provide reconciliation. Consequently, the Tribunal dismissed the assessee's appeal, affirming the validity of the CIT's Section 263 order.