2020 (3) TMI 1253 - AT - Income Tax

Tribunal affirms Income Tax order for reassessment, emphasizing thorough inquiries and Commissioner's authority.

Maa Tarini Industries Ltd. Versus Pr. CIT, Sambalpur

The Tribunal upheld the Principal Commissioner of Income Tax's order under section 263, directing the Assessing Officer to reframe the assessment after ... Revision u/s 263 - assessment under limited scrutiny - as argued CIT proceeded to invoke revisional power u/s.263 only on the basis of audit objection - HELD THAT:- From the copy of the notice by the AO u/s. 142(1) it is ample clear that the case of the assessee was selected for Limited Scrutiny only on two issues i.e. higher turnover report in service tax return compared to ITR and mismatch in amount paid to related persons u/s.40A(2)(b) reported in audit report and ITR. Violation of principles of natural justice - We are not in agreement with the contention of ld A.R. that the assessee was not given due opportunity of hearing by ld. Pr. CIT as the assessee was allowed to file his replies twice personally or electronically alongwith relevant documents and explanation to the issues agitated by Pr. CIT in the notice u/.s.263 - Merely because during the intervening period, some public holidays are falling, it cannot be alleged that Ld. Pr. CIT has violated principles of natural justice. Assessee has been given due opportunity of hearing by the revisional authority. Therefore, we decline to accept the contention of assessee was not allowed due opportunity of hearing to explain his case before ld. Pr. CIT. Ante dated order - Merely because the AO received the copy of the order on 1.5.2019 and the assessee received the copy of order through its AR on 6.5.2019, it cannot be safely presumed that the order has been passed ante dated and same was not passed on 29.3.2019 i.e. on the date of mentioning in the impugned order. We are unable to see any evidence except service of notice in the second week of May, 2019, which could show and satisfy us that Pr. CIT has passed ante dated order. Therefore, we decline to accept this contention of ld A.R. that the order has been passed ante dated and thus, both the contentions and grounds agitated by the assessee are hereby dismissed. Sufficiency and adequacy of enquiry on the issues of ‘ Limited Scrutiny’ - AO issued notice u/s.143(2) and u/s.142(1) of the Act which were replied by the assessee - AO makes some inquiry on the issues picked up by him by way of issuing notices and taking on record replies, explanation and relevant documents submitted by the assessee in compliance to the said notice. Unable to find any deliberation in the assessment order regarding these issues which could show and satisfy us that the AO not only made sufficient and adequate enquiries on the issues for which the case was selected for limited scrutiny but also made deliberation by application of mind and thereafter adjudicated the issues by way of inserting deliberation in the assessment order. From a careful reading of the impugned order passed as observed that the assessee company had shown gross turnover /revenue from operation of ₹ 63,97,71,157/- for financial year 2013-14 but as per statement in 26AS, the assessee had shown ₹ 16,91,82,966/- from works contract bit it had disclosed its gross receipts in the profit and loss account only ₹ 15,69,31,397/- resulting that the gross receipts is understated by ₹ 1,22,51,569/- which should have been verified by the AO during scrutiny proceedings. AO by way of notice u/s.142(1) initiated enquiry on this issue but after filing reply of the assessee in compliance to the said notice, the AO as an adjudicator and investigator did not bother to deliberate this issue in the assessment order and in our humble opinion,until and unless inquiry started by the AO is terminated to a logical and plausible end, such kind of enquiry has to be held as inadequate and insufficient inquiry on the issues, which makes the assessment order as erroneous and prejudicial to the interest of the revenue. Referring to service tax return income credited to P&L account was understated to the tune of ₹ 16,91,91,234/- which were not enquired by the AO. Issue of brought forward unabsorbed depreciation and MAT credit was not under Limited Scrutiny, hence, the AO has not enquired into the matter while passing the assessment order. When the circumstances of the case are such so as to provoke an enquiry, it is his duty to make proper enquiry. Failure to make enquiry in such circumstances would make the assessment order erroneous and prejudicial to the interest of the revenue. we concur with the submissions of Ld. CIT-DR that it was a case of lack of inquiry and there was no application of mind by AO on the issues which formed subject matter of revisional jurisdiction u/s 263. Therefore, we do not find any illegality in the action of Ld. Pr. CIT in exercising the said jurisdiction. - Decided against assessee. Issues Involved:1. Initiation of revision proceedings under section 263 of the Act.2. Order dated 29.03.2019 under section 263 was passed without following rules of natural justice and without application of mind.3. Order dated 29.03.2019 passed under section 263 was barred by limitation.4. Maintainability/Validity of Revisionary Proceedings towards addition on account of services provided.5. Maintainability/Validity of Revisionary Proceedings towards disallowance of adjustment on account of unabsorbed depreciation.Issue-wise Detailed Analysis:1. Initiation of Revision Proceedings under Section 263 of the Act:The assessee contended that the Principal Commissioner of Income Tax (Pr. CIT) erred in holding the assessment order as erroneous and prejudicial to the interests of revenue. The assessee argued that the Assessing Officer (AO) had passed the assessment order after proper scrutiny and application of mind, adhering to the CBDT Instructions for limited scrutiny. The Pr. CIT was criticized for not ensuring the conversion of limited scrutiny into comprehensive scrutiny and for basing the conclusion on irrelevant considerations. The Tribunal observed that the AO had issued notices and received replies but found no deliberation in the assessment order, indicating inadequate and insufficient inquiry, thus justifying the Pr. CIT's initiation of revision proceedings.2. Order Dated 29.03.2019 under Section 263 Passed Without Following Rules of Natural Justice and Without Application of Mind:The assessee argued that the order was passed without following the principles of natural justice, citing insufficient time to respond to the show-cause notices. The Tribunal, however, found that the assessee was given due opportunity to file replies and relevant documents both personally and electronically. The Tribunal concluded that the principles of natural justice were not violated, as the assessee had sufficient opportunity to present its case.3. Order Dated 29.03.2019 Passed under Section 263 was Barred by Limitation:The assessee alleged that the order was antedated, arguing that it was actually passed after the limitation period. The Tribunal dismissed this contention, stating that there was no cogent evidence to support the claim of an antedated order. The receipt of the order by the AO and the assessee after the stated date did not suffice to prove the allegation.4. Maintainability/Validity of Revisionary Proceedings towards Addition on Account of Services Provided:The Pr. CIT observed discrepancies in the gross receipts reported in the profit and loss account and the 26AS statement, indicating an understatement of Rs. 1,22,51,569/-. Additionally, the Pr. CIT noted that Rs. 8,45,95,617/- was not accounted for in the income, which was grouped under 'cost of materials consumed.' The Tribunal found that the AO had not conducted sufficient inquiry into these discrepancies, justifying the Pr. CIT's revisionary proceedings.5. Maintainability/Validity of Revisionary Proceedings towards Disallowance of Adjustment on Account of Unabsorbed Depreciation:The Pr. CIT noted that the brought forward unabsorbed depreciation and MAT credit were allowed without proper verification. The Tribunal agreed that these issues were not part of the limited scrutiny but emphasized that the Pr. CIT has the authority to direct the AO to conduct necessary inquiries if the assessment order is found to be erroneous and prejudicial to the interests of revenue.Conclusion:The Tribunal upheld the Pr. CIT's order under section 263, directing the AO to reframe the assessment after conducting proper inquiry. The appeal of the assessee was dismissed, affirming the Pr. CIT's revisionary proceedings as justified and within the legal framework. The Tribunal emphasized the AO's duty to conduct thorough inquiries and the Pr. CIT's authority to intervene when the assessment is found lacking.