2021 (9) TMI 502 - AT - Income Tax

Revision u/s 263 - purchases made from Satyanarayan certain payments as made in cash - Wooden expenses addition as violation of section 40A - AO has not examined this issue and therefore the same is erroneous - Share Capital addition - Verification of creditors being not done - whether the on various issues the order can be said to be prejudicial to the interest of revenue or is erroneous? - HELD THAT - Various observations are made which indicates only suspicion and no specific finding had been given. We also find that various issues explanation was submitted during the course of assessment proceedings which were duly examined. The power of revision of orders passed by the AO under S. 263 of the Act is in the nature of supervisory jurisdiction which is permissible to be exercised only when the twin conditions are satisfied that the order passed by the AO is erroneous and further on account of order being erroneous, prejudice has been caused to the interest of revenue. In the instant case, while recording the conclusion that the order passed by the AO is erroneous and prejudicial to the interest of the Revenue, apparently the record of the assessment proceedings was not examined by the Principal CIT in its entirety and objectivity. In relation to purchases from agriculturists due evidence was submitted which cannot be rebutted and that purchases are made from the auction at Krishi Mandi. Similarly the share capital contribution from the existing shareholder and other contribution of share capital are duly accepted from the same shareholder. The purchases had increased, the turnover had increased, in such volume the creditors are bound to increase. The main creditor was a related party for which confirmation of account was submitted and nothing has been pointed out in relation to the said confirmation. Simply because the quantum had increased this cannot be any basis to submit the same is erroneously accepted. In relation to various other expenses also due reply had been submitted. In light of above discussion we hold that the order u/s. 263 cannot be sustained - Decided in favour of assessee.

Summary

Issues:
1. Validity of order passed u/s. 263 of the Income Tax Act, 1961.
2. Examination of various issues raised by the ld. CIT Bikaner regarding the original assessment for A.Y. 2012-13.

Analysis:
The appellant challenged the order passed by the ld. CIT Bikaner u/s. 263, claiming it to be bad in law and factually incorrect. The grounds raised included errors in the original assessment under section 143(3), vague jurisdiction of the order u/s. 263, and lack of firm conclusions on alleged discrepancies. The ld. CIT Bikaner questioned purchases, wooden expenses, share capital contributions, creditors, expenses, and stock valuation. The appellant argued that issues were duly examined during the original assessment, providing evidence and explanations. The Tribunal emphasized that the power of revision under section 263 requires a finding of both error and prejudice to revenue. It noted that evidence was submitted for purchases from agriculturists and related parties, share capital contributions, increased creditors, and expenses, all of which were found to be valid. The Tribunal concluded that the original assessment was not erroneous or prejudicial to revenue, hence quashing the order u/s. 263.

This detailed analysis of the judgment highlights the meticulous consideration given to each issue raised by the ld. CIT Bikaner and the thorough examination of evidence and explanations provided by the appellant during the original assessment. The Tribunal's emphasis on the necessity of finding both error and prejudice to revenue for invoking section 263 showcases a strict adherence to legal principles and precedents. The judgment ultimately upholds the appellant's contentions, emphasizing the importance of proper examination and substantiation of claims during assessment proceedings to avoid erroneous conclusions and subsequent challenges.