2019 (6) TMI 1694 - AT - Income Tax

Tribunal overturns IT Commissioner's order under section 263, ruling in favor of assessee

The Tribunal set aside the Pr. Commissioner's order under section 263 of the IT Act, favoring the assessee. The Tribunal found the Pr. Commissioner's ... Revision u/s 263 - expenses incurred under the head hiring charges of machinery - HELD THAT:- We find that the AO in the assessment order after disallowing has allowed deduction in respect of expenses incurred under the head hiring charges for machinery. No material has been brought on record by Commissioner of Income Tax to show that the view taken by the AO in the assessment order is unsustainable. We find that similar order u/s 263 was also passed in respect of expenses under this head in the case of assessee itself for assessment years 2010-11 and 2011-12 which was set aside by the Tribunal vide its order. Capital contribution by partners - CIT admitted that documents in support of capital contribution made by partners were asked by the Assessing Officer during the assessment proceedings and the same were also furnished by the assessee. However, in his opinion the same was not enough and the AO ought to have made further inquiries in respect of this issue. Thus, we find that it is not the case of lack of inquiry by the AO - CIT could not point out any error in the conclusion of the Assessing Officer which was arrived at by the AO. In our considered view, order u/s 263 could not have been validly passed in respect of this issue. Low withdrawal by partners - CIT observed that partners, namely, Shri. Bheem Sain, Shri. Bharat Bhushan and Jiwan Kumar has withdrawn Rs.60,000/- each during the year which was considered as low. It is observed that the other partners Shri. Dharam Pal and Shri. Jivan Singla has withdrawn Rs.14,50,000/- and Rs.5,00,000/-. We find that exactly in respect of the very same issue order u/s 263 of the Act passed in the case of the assessee for assessment years 2010-11 and 2011-12 was cancelled by the Tribunal [2016 (6) TMI 1450 - ITAT AMRITSAR]. We, therefore, following the same hold that order passed u/s 263 of the Act in respect of this issue is also unsustainable. Cash deposit in HDFC Bank, Sardulgarh Branch and other bank - According to the Ld. Pr. CIT, the source of aforesaid cash deposit in bank was not enquired into by the AO. We find that it is not in dispute that the related bank accounts and cash deposit made therein were duly recorded in the books of account of the assessee. These books of account were not rejected by any authority. The books of account of the assessee itself shows the source of the said deposit in the bank account in absence of any error being pointed out in the books of account or in absence of any finding that the cash deposit in question were not recorded in the books of account. In our considered view, no interfere with the order of the AO was warranted on this issue by invoking power u/s 263 of the Act. Thus, the order passed u/s 263 of the Act in respect of this issue is also not sustainable. Therefore, we set aside the impugned order passed u/s 263 of the Act and allow the appeal of the assessee. Issues Involved:1. Jurisdiction of Pr. Commissioner u/s 263 of IT Act2. Expenses under hiring charges of machinery3. Capital contribution by partners4. Low withdrawal by partners5. Cash deposits in bank accountsJurisdiction of Pr. Commissioner u/s 263 of IT Act:The appeal filed by the assessee challenges the order of the Pr. Commissioner of Income Tax, Bathinda, invoking section 263 of the Income Tax Act, 1961. The assessee contests the cancellation of the order passed by the Assessing Officer under section 143(3) without proper hearing. The crux of the issue revolves around the Pr. Commissioner's authority to revise the assessment order, alleging errors prejudicial to the revenue's interest. The Pr. Commissioner's notice under section 263 raised concerns over various aspects of the assessment, prompting a review of the initial order.Expenses under Hiring Charges of Machinery:One of the key issues in the appeal pertains to expenses claimed by the assessee under hiring charges of machinery. The Assessing Officer disallowed a portion of these expenses, which the Pr. Commissioner found insufficient. However, the Tribunal noted that the Assessing Officer had allowed a significant deduction for these expenses after disallowing a specific amount. The Tribunal found no unsustainable basis for the Assessing Officer's decision and referred to past instances where similar orders under section 263 were set aside, indicating inconsistency in the Pr. Commissioner's actions. Consequently, the Tribunal deemed the Pr. Commissioner's order on this issue unsustainable.Capital Contribution by Partners:Another issue raised was the capital contribution by partners, specifically concerning deposits in their accounts. The Pr. Commissioner questioned the adequacy of inquiries made by the Assessing Officer in this regard. However, the Tribunal determined that the Assessing Officer's conclusions were sound, and the Pr. Commissioner failed to identify any errors in the assessment process. Given the lack of substantial grounds for revision, the Tribunal deemed the Pr. Commissioner's order invalid concerning this issue.Low Withdrawal by Partners:The Pr. Commissioner also highlighted the low withdrawals by certain partners, suggesting potential discrepancies. However, the Tribunal noted that similar issues were raised in previous assessments of the same assessee, where the Tribunal had annulled orders under section 263. Drawing parallels, the Tribunal found the Pr. Commissioner's decision on this matter unsustainable, as no substantial grounds justified the revision.Cash Deposits in Bank Accounts:Lastly, the Pr. Commissioner raised concerns about cash deposits in bank accounts without thorough inquiry by the Assessing Officer. The Tribunal observed that these deposits were duly recorded in the assessee's books of account, indicating transparency. With no evidence of errors or discrepancies in the records, the Tribunal deemed the Pr. Commissioner's order on this issue unsustainable. Consequently, the Tribunal set aside the order passed under section 263, allowing the appeal of the assessee.In conclusion, the Tribunal's detailed analysis of the issues raised in the appeal against the Pr. Commissioner's order under section 263 of the IT Act showcases a consistent pattern of setting aside the revision orders due to lack of substantial grounds and unsustainable reasoning, ultimately favoring the assessee in this case.