2018 (8) TMI 1546 - AT - Income Tax

Tax tribunal upholds Commissioner's order for reassessment, emphasizing thorough verifications.

Shri Dinesh Kumar Versus Pr. CIT, Central-2, New Delhi

The tribunal upheld the Principal Commissioner of Income Tax's order under Section 263, directing the Assessing Officer to re-examine the 'Suspense ... Revision u/s 263 - case of “no enquiry” - non verification of amount shown under “suspense account” - Held that:- CIT has rightly invoked the provisions of section 263 of the Act as Ld.AO failed to make proper enquiry, examination and verifications as warranted for the proper completion of the assessment, with respect to monies shown under the head ‘suspense account’. It is correctly pointed out by Ld.CIT-DR, section 263 has been enacted to empower CIT to exercise power of revision and revise any order passed by Assessing Officer if two cumulative conditions are satisfied, where the order sought to be revised should be erroneous and it should be prejudicial to the interest of revenue. In the facts of the present case, admittedly Assessing Officer at assessment stage has not verified amount shown under “suspense account”. It is very apparent that Assessing Officer has not verified its sources and mode of deposit. In our view this is clear case of “no enquiry” and therefore, Ld.CIT was right in initiating proceedings under section 263 of the Act. Further, it is observed that, Ld.CIT has specifically directed Assessing Officer to restrict examination of transactions in suspense account and taking such examination to its logical conclusion as per law. We therefore do not find any infirmity in order passed by Ld. CIT under section 263 of the Act as there is no injustice that is caused to assessee. - Decided against assessee. Issues Involved:1. Jurisdiction of the Principal Commissioner of Income Tax (Pr. CIT) under Section 263 of the Income Tax Act, 1961.2. Erroneous nature of the assessment order passed under Section 153A/143(3) of the Income Tax Act.3. Examination and verification of the 'Suspense Account' in the assessee's balance sheet.4. Applicability of the decision of the Hon’ble Delhi High Court in CIT vs. Kabul Chawla.Issue-wise Detailed Analysis:1. Jurisdiction of the Pr. CIT under Section 263:The assessee contended that the order passed by the Pr. CIT was 'bad in law and without jurisdiction.' The Pr. CIT initiated proceedings under Section 263, asserting that the assessment orders for the relevant years were erroneous and prejudicial to the interest of revenue due to the lack of examination of the 'Suspense Account' by the Assessing Officer (AO). The tribunal upheld the Pr. CIT's jurisdiction, referencing the Supreme Court's judgment in Malabar Industrial Co. Ltd. v. CIT, which states that non-enquiry by the AO renders the order erroneous and prejudicial to revenue interests.2. Erroneous Nature of the Assessment Order:The Pr. CIT observed that the AO completed the assessments without proper examination/verification of the balance sheet and profit and loss account filed by the assessee. Specifically, the AO failed to verify the 'Suspense Account' amounting to Rs. 18,28,660/-. The tribunal agreed with the Pr. CIT, noting that the AO's failure to make necessary enquiries or verifications rendered the assessment order erroneous and prejudicial to the revenue.3. Examination and Verification of the 'Suspense Account':The Pr. CIT issued a show-cause notice to the assessee, highlighting the AO's failure to verify the 'Suspense Account.' The assessee argued that the AO had verified all details, including bank statements, during the assessment proceedings. However, the Pr. CIT found no evidence of such verification in the assessment records. The tribunal supported the Pr. CIT's directive to the AO to re-examine the 'Suspense Account' and conduct proper enquiries, as the initial assessment lacked due diligence.4. Applicability of the Decision in CIT vs. Kabul Chawla:The assessee relied on the Delhi High Court's decision in CIT vs. Kabul Chawla, arguing that income already assessed cannot be disturbed in the absence of incriminating material found during the search. The tribunal, however, distinguished this case, noting that the assessment under Section 153A was triggered by unaccounted cash deposits found during the search. The tribunal emphasized that the AO is empowered to reassess total income, including undisclosed income, under Section 153A, and the Pr. CIT's initiation of Section 263 proceedings was justified even in the absence of incriminating material.Conclusion:The tribunal upheld the Pr. CIT's order under Section 263, directing the AO to re-examine the 'Suspense Account' and conduct necessary verifications. The appeals filed by the assessee for all assessment years were dismissed, affirming the Pr. CIT's jurisdiction and the erroneous nature of the original assessment orders. The tribunal emphasized the AO's duty to conduct thorough enquiries and verifications to ensure accurate assessments.