2017 (4) TMI 1028 - AT - Income Tax

Commissioner's Order Set Aside, Assessee's Appeal Allowed, Tribunal Upholds Assessment Diligence

Small Wonder Industries Versus CIT-24, Mumbai

Small Wonder Industries Versus CIT-24, Mumbai - TMI Issues Involved:1. Invocation of revisional jurisdiction under Section 263 of the Income Tax Act, 1961.2. Determination of whether the original assessment order was erroneous and prejudicial to the interest of the Revenue.3. Examination of the adequacy of enquiry conducted by the Assessing Officer.4. Justification of commission payments and their treatment in the assessment.Issue-Wise Detailed Analysis:1. Invocation of Revisional Jurisdiction under Section 263 of the Income Tax Act, 1961:The assessee challenged the order dated 19/02/2013 by the Commissioner of Income Tax, Mumbai, invoking revisional jurisdiction under Section 263 of the Income Tax Act, 1961. The Commissioner held that the original assessment made under Section 143(3) was erroneous and prejudicial to the interest of the Revenue. The assessee argued that the assessment was framed after due consideration of all relevant details and was neither erroneous nor prejudicial to the Revenue.2. Determination of Whether the Original Assessment Order was Erroneous and Prejudicial to the Interest of the Revenue:The Tribunal considered the submissions and material on record. The facts revealed that the assessee, engaged in manufacturing feeding bottles and accessories, showed a total turnover of Rs. 2,40,72,048 and offered a gross profit of Rs. 99,20,394. The assessee claimed a deduction under Section 80IB at 25% of the total profit after reducing brought forward losses. The case was selected for scrutiny, and notices under Sections 143(2) and 142(1) were issued. After examining the details, the Assessing Officer made certain disallowances and framed the assessment under Section 143(3). The Tribunal found that the assessment order was neither erroneous nor prejudicial to the interest of the Revenue, as it was framed after due application of mind and consideration of the factual matrix.3. Examination of the Adequacy of Enquiry Conducted by the Assessing Officer:The Tribunal emphasized the distinction between 'lack of enquiry' and 'inadequate enquiry.' It noted that the Assessing Officer collected necessary details, examined them, and then framed the assessment. The Tribunal referred to several judicial precedents, including the Hon'ble Delhi High Court's decision in CIT vs. Anil Kumar Sharma, which held that even if the enquiry was inadequate, it would not constitute 'lack of enquiry.' The Tribunal concluded that the Assessing Officer had indeed examined the details and applied his mind, thus, it was not a case of lack of enquiry.4. Justification of Commission Payments and Their Treatment in the Assessment:The Commissioner invoked revisional jurisdiction concerning the commission of Rs. 2,12,136 paid to Rajendra Jain and Kiran Jain, noting that no such commission was paid in the previous year for similar sales. The assessee explained that the commission was for handling logistics issues. The Tribunal found that the assessee had provided detailed explanations and documentary evidence, including party-wise details, agreements, and credit notes. The assessment was framed after due enquiry and examination of these documents. The Tribunal held that invoking revisional jurisdiction under Section 263 was not justified in this context.Conclusion:The Tribunal set aside the order of the Commissioner, concluding that the original assessment order was not erroneous or prejudicial to the interest of the Revenue. The appeal of the assessee was allowed, and the Tribunal pronounced the order in the open court on 23/02/2017.