2018 (11) TMI 1713 - AT - Income Tax

Tribunal quashes order under Income Tax Act, rules in favor of assessee. Detailed inquiry by AO considered.

The Tribunal quashed the order passed under section 263 of the Income Tax Act, 1961, and allowed the appeal of the assessee. The Tribunal found that the ... Revision u/s 263 - order under section 143 (3) of the Act was passed by the assessing officer in haste, without proper enquiries and verification and without examination of books of accounts & other records - HELD THAT:- After hearing and discussing the matters with the A.R. on several dates and receiving requisite information/evidences in response to notices u/s.142( 1) of the Act, on as many as 18 issues, the Ld. A.O. was satisfied on his own perceptions about the correctness or otherwise of the return of income filed by the assessee. The issues on which he was dissatisfied, additions were made on those accounts. Therefore, the exercise aimed at ascertaining the correct income of the assessee has been fulfilled by the Ld. A.O. by exercising his quasi-judicial functions vis-a-vis passing the assessment order u/s. 143(3) of the Act. Therefore, certainly it is not a case wherein adequate enquiries at the assessment stage were not carried out or assessment was made in haste. However, what is an opinion formed as a result of these enquiries and verification of the materials is something which is in exclusive domain of the Assessing officer, and even if Commissioner does not agree with the results of such enquiries, the resultant order cannot be subjected to revision proceedings. From the above allegation which was the basis for initiating proceeding u/s. 263 of the Act, it is evident that the Ld. C.I.T. himself has not denied enquiry conducted by the A.O., rather he suspected that not much investigation which should have been done by the A.O. Therefore, the requisite enquiries conducted by the Ld. A.O. (details of which have been given in Table above in para No. 18 of this order) would not definitely go to establish the baseless allegation of the C.I.T. that the assessment order has been found to be passed without proper enquiry and in haste, more so as would be evident from the order sheet entries, the scrutiny proceeding continued during in the span of 1.5 years ( one year & five months) and there were 13 occasions when the assessee was called for submission of details/documents and hearings were conducted accordingly. Thereafter, after thorough examinations of the details and documents and explanations submitted by the Ld. A.R. of the assessee as per requisitions sought by the A.O. and as deemed fit for computing the true taxable income, the assessment was completed u/s. 143(3) of the Act on 26.02.2013. We are of the view that it is a settled position in law that provisions of section 263 of the Act do not permit substituting one opinion by another opinion. Therefore, the order of the Ld. C.I.T. cannot be sustained on the principle of 'erroneous' nature of the order of the A.O., as it is not erroneous. Further, in the instant case, to reiterate, there was no allegation by the Ld. revenue authorities that the evidences produced were fictitious or invented, thus accepted the authenticity of the same. Such an order cannot be called erroneous and prejudicial to interests of revenue. Hence, we are of the view that that revisionary jurisdiction exercised by the Ld. C.I.T. u/s. 263 of the Act was not in tune with the facts and evidences on record duly explained to the A.O. and verified by him in detail, that being so the order passed u/s. 263 of the Act on such erroneous stand is liable to be quashed. We accordingly quash the order u/s 263 of the Act and allow the appeal of the assessee. Issues Involved:1. Condonation of delay in filing the appeal.2. Validity of the order passed under section 263 of the Income Tax Act, 1961.3. Adequacy of scrutiny and verification conducted by the Assessing Officer (AO) under section 143(3) of the Act.Detailed Analysis:1. Condonation of Delay in Filing the Appeal:The appeal filed by the assessee for the Assessment Year 2010-11 was barred by limitation by 409 days. The assessee moved a petition requesting the Bench to condone the delay, citing bona fide reasons such as reliance on incorrect advice from their legal advisor, Sri Syed M. Azam, who did not file an appeal against the order under section 263. The Tribunal found the reasons convincing and noted that the delay was not deliberate but due to unavoidable reasons. It was emphasized that there was no mala fide intention behind the delay, and the assessee would face serious stress if the delay was not condoned. The Tribunal, relying on the decision of the Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji (1987) 167 ITR 471 (SC), decided to condone the delay and admit the appeal for hearing.2. Validity of the Order Passed Under Section 263 of the Income Tax Act, 1961:The assessee challenged the correctness of the order dated 30.03.2015, passed by the Commissioner of Income Tax (CIT)-14, Kolkata, under section 263 of the Act. The grievances raised included:- The CIT erred in initiating and passing the order under section 263.- The CIT failed to apply his mind properly and erred in setting aside the order passed under section 143(3).- The CIT erroneously directed the AO to re-examine various expenses such as Transportation Charges, Labour Charges, Machinery Hire Charges, employer's contribution to EPF, and cash deposits.The Tribunal noted that the CIT exercised his jurisdiction under section 263 on the grounds that the assessment order under section 143(3) was erroneous and prejudicial to the interests of revenue due to inadequate scrutiny and verification. However, the Tribunal found that the AO had conducted a detailed inquiry and examination during the assessment proceedings, as evidenced by multiple notices issued under section 142(1) and the detailed scrutiny of various expenses.3. Adequacy of Scrutiny and Verification Conducted by the Assessing Officer (AO) Under Section 143(3) of the Act:The Tribunal examined the detailed scrutiny conducted by the AO, which included thirteen hearings and multiple notices under section 142(1) demanding various documents, explanations, and evidences. The AO had made specific inquiries about expenses such as Transportation Charges, Labour Charges, Machinery Hire Charges, and employer's contribution to EPF, among others. The AO also verified the details of cash deposits and other expenses claimed by the assessee.The Tribunal found that the AO had conducted a thorough examination of the assessee's books of accounts, documents, and evidences, and there was no lack of inquiry or improper inquiry on the part of the AO. The Tribunal emphasized that the AO's order was neither erroneous nor prejudicial to the interests of revenue, as the AO had exercised his quasi-judicial functions appropriately.The Tribunal relied on various judicial precedents, including the decisions in CIT vs. J.L. Morrison (India) Ltd. (2014) 366 ITR 593 (Cal) and CIT vs. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del), to support its conclusion that the CIT's order under section 263 was not justified. The Tribunal held that the CIT's expectation of a fishing and roving inquiry was not warranted, and the AO's detailed scrutiny and verification were adequate.Conclusion:The Tribunal quashed the order passed under section 263 of the Income Tax Act, 1961, and allowed the appeal of the assessee. The Tribunal found that the AO had conducted a detailed and adequate inquiry during the assessment proceedings, and the CIT's order was not justified. The delay in filing the appeal was condoned, and the appeal was admitted for hearing.