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2022 (2) TMI 322 - AT - Income TaxRevision u/s 263 by CIT - Rejection of trading results - lack of enquiry" or "lack of investigation" - HELD THAT:- Assessing Officer had made detailed inquiries regarding the assessee's claim of purchases, sales, sundry debtors, sundry creditors and trading results declared by the assessee in the return of income. However, since on detailed enquiry, the AO rejected the trading results, he estimated the business profit of the assessee by applying the net profit rate declared in subsequent years. The Ld. Pr. CIT has neither disputed the rejection of books of accounts by the AO by invoking section 145 of the Act and nor has disputed the application of net profit rate declared in subsequent years. He has, however, held that based on the enquiries made, addition ought to have been made on account of creditors and disallowance of purchases claimed by the assessee. He has also directed the AO to conduct detailed inquiries regarding the purchases and sales made by the assessee by conducting third party verifications, examination of the creditors, etc. and after inquiries necessary additions to be made as per law. The order of the Ld. Pr. CIT on this count is, thus, cryptic, vague and contradictory. No effort has been made to spell out as to in what manner there was lack of enquiry by the AO in the order of assessment vis-à-vis the trading results declared by the assessee. Assessing Officer had made adequate inquiries as is evident from the order of assessment as well as from the replies furnished - Thus, in view of the documentary evidences, as called for and examined by the Assessing Officer, it is very much evident that the Assessing Officer had duly applied his mind to the issue of trading results and it was only thereafter that he had estimated income of the assessee. As far as the issue of investment in construction of house is concerned, the same is apparently misconceived, as it is not arising from assessment records. As far addition on account of fixed assets is concerned, the same stands separately added as part of the income declared during the course of survey by the assessee. Therefore, we can safely conclude that proper inquiries had been made by the Assessing Officer while accepting the claim of the assessee and, therefore, the contention of the Ld. Pr. CIT that no inquiry was made by the Assessing Officer vis-à-vis trading results or addition in fixed assets is factually incorrect. CIT has merely remitted the matter back to the Assessing Officer without making any inquiry himself. It is apparent that no independent inquiries have been made by the Ld. Pr. CIT although it was incumbent upon him to make such inquiry so as to reach the impugned conclusion that the order of the Assessing Officer was erroneous and prejudicial to the interest of the revenue. Rejection of trading results and application of net profit rate by the Assessing Officer is a possible view and, not an unsustainable view and, therefore, even otherwise, invocation of section 263 is not in accordance with law - no hesitation in holding that the Ld. Pr. CIT has wrongly invoked the revisionary powers u/s. 263 of the Act vis-à-vis the trading results declared by assessee and we have no option but to hold the same as being bad in law. Unsecured loans were unexplained cash credits u/s. 68 - Loans raised from Shri Mohit Mehta and Smt. Satya Devi - We are in complete agreement with the conclusion of Ld. Pr. CIT that the Assessing officer had conducted no enquiry on this issue and the order was, thus, erroneous and prejudicial to interest of revenue. Thus, we concur with the stand of the Ld. Pr. CIT on the issue of unsecured loans and, therefore, uphold the 263 proceedings in respect of loans raised from Shri Mohit Mehta and Smt. Satya Devi and direct the AO to pass an order afresh on the said issue in accordance with law after affording reasonable opportunity of being heard to the assessee. Accordingly, the impugned order in in the case of M/s. Pardeep Ispat (P) Ltd. stands modified in terms of our observations above and the 263 proceedings are partly upheld and partly quashed. It is so ordered accordingly. Grounds 1 to 9, thus, stand partly allowed.
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