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2022 (5) TMI 895 - AT - Income TaxRevision u/s 263 - Reliance on audit objection raised by the Audit Wing of the Department - As per CIT no due enquiry and due application of mind by the AO - ‘increase in the valuation of stock’ as on the date of survey - HELD THAT:- As gone through the paper book filed by the assessee wherein the assessee has sought to demonstrate with evidence that the AO had already made requisite enquiries on the issues raised by the Ld. PCIT during the course of assessment proceedings and also the assessee had duly complied with the enquiries made made by the AO by replying in details and by furnishing various documents and evidences in support of its claim. We have also gone through the surrender letter, as submitted by the assessee during the course of survey conducted on it on 13.11.2014 and 14.11.2014. We have also gone through the reply dated 29.11.2019 given by the assessee with respect to the audit objection. We find it difficult to accept the finding of the PCIT that the AO had not applied his mind to the issue of ‘increase in the stock valuation’ of Rs. 2.45 crore which had not been reflected while filing the return of income. It is also worth our observation that the AO was conscious of the fact that non-declaration of Rs. 2.45 crore would result in the fall in the gross profit/net profit and the same was enquired into by the AO by requiring the assessee to explain the reason for the fall in gross profit/net profit. Apparently, based on the submissions made by the assessee in this regard, the AO agreed with the claim of the assessee that the offer of increase in the valuation of stock made on 14.11.2014 got subsumed while preparing the financial result for the year ending 31.03.2015. Although, the AO might not have recorded his satisfaction in as many words but looking into the record before us, we can safely conclude that the AO had given a thoughtful consideration to the issue and had accepted the assessee’s contention only after adequate enquiry and due application of mind. Also gone through the ‘audit objection’, copy of which was furnished before us and for which there is a reply furnished by the assessee on 29.11.2019 and it has been rightly contended by the Ld. AR that the same has to be considered for the purposes of the record as per clause (b) to Explanation 1 of Section 263. AO made the requisite enquiries, therefore, it is not a case of no enquiry and if the Ld. Pr. CIT was not satisfied with the enquiries made by the AO, he should have conducted the enquiries himself to record the findings that the assessment order was erroneous and he should not have simply set aside the order passed by the AO directing him to conduct the further enquiries. Thus no hesitation in holding that the assumption of jurisdiction u/s 263 of the Act on the ground that there was no enquiry by the AO and on the ground of non-application of mind by the AO is bad in law and cannot be upheld - PCIT was not justified in exercising his power to invoke the provision of Section 263 of the Act on the basis of audit objection raised by the Audit Wing of the Department.- Decided in favour of assessee.
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