2017 (11) TMI 1077 - AT - Income Tax

Tribunal overturns Commissioner's decision under section 263, reinstates original assessment

The Tribunal overturned the Principal Commissioner of Income Tax's decision to initiate proceedings under section 263, ruling that the Assessing Officer ... Revision u/s 263 - proof of adequate reasons - Held that:- Commissioner must give reasons to justify the exercise of suo moto revisional powers by him to re-open a concluded assessment. A bare reiteration by him that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interest of the revenue, will not suffice. The exercise of the power being quasi-judicial in nature, the reasons must be such as to show that the enhancement or modification of the assessment or cancellation of the assessment or directions issued for a fresh assessment were called for, and must irresistibly lead to the conclusion that the order of the Income- tax Officer was not only erroneous but was prejudicial to the interest of the revenue. Thus, while the AO is not called upon to write an elaborate judgment giving detailed reasons in respect of each and every disallowance, deduction, etc., it is incumbent upon the Commissioner not to exercise his suo moto revisional powers unless supported by adequate reasons for doing so. In the instant appeal before us, it is not the Department’s case that no information regarding the various issues as enumerated by the Ld. Pr. CIT was called for by the AO. That relevant details and documents were furnished by the assessee during the assessment proceedings is evident from the documents on record. Hence, no inference can be drawn that the AO has not examined the issues although he has not expressed it in as many terms as may be considered appropriate by his superior authority and even if the same is found to be inadequate the same cannot be a ground for revision. As in the case of Infosys Technologies Vs. JCIT (Asst) [2005 (6) TMI 211 - ITAT BANGALORE-B] the Bangalore Bench of the ITAT held that where the A.O has examined and considered and issue, though not mentioned in the assessment order, it cannot be said that the order passed was erroneous. Thus revision order dismissed - Decided in favour of assessee. Issues Involved:1. Verification and confirmation of sundry debtors and creditors.2. Examination of low rate of net profit.3. Verification of cash deposits.Issue-wise Detailed Analysis:1. Verification and Confirmation of Sundry Debtors and Creditors:The assessee argued that the Assessing Officer (AO) had raised a query regarding the verification and confirmation of sundry debtors and creditors in the notice issued under section 142(1) of the Income Tax Act, 1961, and the assessee had duly responded with relevant documents. The Principal Commissioner of Income Tax (Pr. CIT) held that the AO failed to carry out a proper inquiry on this issue, rendering the assessment order erroneous and prejudicial to the interest of the revenue. However, the Tribunal found that the AO had indeed made inquiries and the assessee had responded, thus rejecting the Pr. CIT's view that no inquiry was made.2. Examination of Low Rate of Net Profit:The Pr. CIT objected to the low rate of net profit, claiming that the AO did not examine this issue adequately. The assessee contended that the AO had raised a query during the scrutiny proceedings, and the assessee had provided a satisfactory explanation. The Tribunal noted that the AO had made inquiries about the low net profit rate and had accepted the assessee's explanation. Therefore, the Tribunal concluded that the AO's order was not erroneous or prejudicial to the revenue's interest.3. Verification of Cash Deposits:The Pr. CIT raised concerns about the verification of cash deposits, noting that the AO did not verify cash deposits of Rs. 50,000 each on 198 occasions in various bank accounts. The assessee argued that the books of accounts, relevant vouchers, and bank statements were produced before the AO, who did not make any negative comments. The Tribunal found that the AO had examined the issue and accepted the explanation provided by the assessee. Consequently, the Tribunal held that the AO's order was not erroneous or prejudicial to the revenue.Legal Precedents and Analysis:The Tribunal referred to several judicial precedents to support its decision. It cited the case of CIT vs. Sunbeam Auto Ltd., where the Delhi High Court held that an order cannot be deemed erroneous if the AO conducted inquiries and accepted the assessee's explanations, even if the AO did not provide detailed reasons in the assessment order. Similarly, the Tribunal referred to CIT vs. Vikas Polymers and CIT vs. Fine Jewellery (India) Ltd., which held that if inquiries were made and responded to during assessment proceedings, the mere absence of detailed discussions in the assessment order does not justify revision under section 263.The Tribunal emphasized that the power of revision under section 263 is not arbitrary and must be based on material evidence showing that the AO's order was erroneous and prejudicial to the revenue. The Tribunal concluded that the Pr. CIT's initiation of proceedings under section 263 was not justified, as the AO had conducted inquiries and accepted the assessee's explanations.Conclusion:The Tribunal quashed the order passed under section 263 of the Act by the Pr. CIT and restored the original assessment order framed by the AO. The appeal preferred by the assessee was allowed, and the Tribunal pronounced the order in the open court on 16/11/2017.