2017 (1) TMI 1010 - HC - Income Tax

High Court emphasizes verification in revenue matters, overturns ITAT decision

The High Court set aside the ITAT's decision and affirmed the CIT's order, emphasizing the necessity of proper verification to protect the revenue's ... Revision u/s 263 - ITAT held that the CIT's order directing the AO to obtain the addresses of sundry creditors and verify them is not according to the parameters and principles governing the exercise of powers by the Commissioner under the provisions of section 263 - Held that:- The tribunal while upsetting the finding recorded by the CIT with regard to the verification of the sundry creditors, does not record anywhere in his order that the details as provided by the assessee of the sundry creditors were ever subjected to any kind of the verification. This contention is correct. The order of the tribunal does not record that even though material was there before it, whether the genuineness of the document was ever subjected to any kind of the examination, especially in relation to the sundry creditors whose amounts amounted to almost ₹ 2 crores. In the absence of any findings being recorded with regard to the verification of the details, no doubt prejudice would be caused to the interest of revenue if without examining the details any order was passed. The order of the tribunal is set aside. The order of the CIT is affirmed. - Decided in favour of the department. Issues:1. Whether the ITAT erred in law in holding that the CIT's order directing the AO to obtain the addresses of sundry creditors and verify them is not according to the parameters and principles governing the exercise of powers by the Commissioner under section 263 of the Act.2. Whether the ITAT is justified in law in setting aside the order of the CIT on the issue of verification of sundry creditors and in cancelling the part of the order on the issue of the sale of land and valuation of the stock at low rates.Analysis:Issue 1: The primary issue in this case revolves around the correctness of the ITAT's decision regarding the CIT's order for verifying the addresses of sundry creditors. The ITAT had set aside the CIT's order, arguing that it did not specifically mention any verification of the details provided by the assessee, especially concerning substantial amounts. However, the learned counsel for the department contended that the lack of verification could prejudice the revenue's interests. The High Court, after considering the arguments, concluded that without proper examination and verification of the details, passing an order would indeed be prejudicial to the revenue. Therefore, the tribunal's decision was set aside, and the CIT's order was affirmed, favoring the department.Issue 2: The second issue pertains to the ITAT's decision to cancel the part of the CIT's order related to the sale of land and the valuation of stock at low rates. The ITAT had overturned the CIT's findings on these matters. However, the High Court focused its analysis on the verification aspect, as discussed in the first issue. Since the tribunal's decision was set aside based on the lack of proper verification, the specific details related to the sale of land and stock valuation were not extensively addressed in the judgment. The High Court's ruling primarily emphasized the importance of thorough verification to safeguard the revenue's interests, leading to the affirmation of the CIT's order and the allowance of the appeal by the department.