2022 (11) TMI 381 - AT - Income Tax
Revision u/s 263 by CIT - disallowances of expenses were on adhoc basis - HELD THAT:- The purpose of framing scrutiny assessment u/s 143(3) inter-alia, to see that the Assessee is maintaining proper records, books of accounts etc. and compliance of various applicable provisions of the 1961 Act are made, to finally arrive at income chargeable to tax and compute tax liability of the tax-payer within the mandate of the provisions of the 1961 Act.
In case of non compliances of various applicable provisions of the 1961 Act, consequential penal provisions are prescribed in the 1961 Act itself which will get attracted and which has direct bearing on computing income chargeable to tax. Thus, there is a complete non application of mind by the AO as the AO merely accepted the contentions of the assessee by accepting the replies filed by the assessee, without any verification .
Interestingly, the AO who framed assessment for ay: 2014-15 is the same who framed the assessment for ay: 2016-17(year under consideration), and exactly similar additions under the same head of disallowance of expenses ( Labour Charges, Travelling Expenses and Office Expenses) were made in both the years, albeit in ay: 2014-15, the additions for aggregate of disallowance of expenses were to the tune of Rs. 45,000/-, while in the year under consideration the aggregate of disallowance of expenses under the same heads were to the tune of Rs. 20,000/- . In both these years, the aforesaid disallowances of expenses were on adhoc basis, without pinpointing the particular expenses which could not be verified by the AO.
Thus, it appears that there is complete non application of mind by AO while framing assessment u/s 143(3) and the replies filed by the assessee were merely accepted by AO without making any enquiry / verification whatsoever to arrive at the income chargeable to tax.
PCIT has rightly invoked provisions of Section 263 and rightly set aside the assessment order passed by AO , and directions were rightly issued by ld. PCIT for denovo assessment. Assessee in the proceedings before ld. PCIT u/s 263 of the 1961 Act gave general replies, but could not repel that the assessment order dated 22.02.2018 passed by the AO u/s 143(3) was suffering from complete non application of mind , and that merely contentions of the assessee were accepted by AO without any verification whatsoever.
We hold that the clause (a) to Explanation 2 to Section 263(1) is clearly applicable, as the AO has passed an assessment order u/s 143(3) , dated 22.02.2018, without making inquiries and verifications which should have been made, and the replies filed by the assessee were simply accepted by AO without any application of mind whatsoever and without making any verifications .Thus, the assessment order passed by AO was clearly erroneous so far as prejudicial to the interest of Revenue and was rightly set aside by PCIT by invoking his revisionary powers u/s 263 and we uphold the revisionary order passed by ld. PCIT u/s 263. Appeal filed by assessee stands dismissed.