2019 (12) TMI 518 - AT - Income Tax

Tribunal overturns PCIT's order under Income Tax Act, finding lack of valid grounds

The Tribunal allowed the appeal, quashing the order passed under section 263 of the Income Tax Act for the assessment year 2015-16. The Principal ... Reopening/revision of assessment - various expenses incurred/claimed by the assessee to arrive at net figure not correctly examined by AO - case of assessee is that the observations made by learned PCIT is of general nature without revealing any specific instance of lapse or non–enquiry by the Assessing Officer, and, the order passed under section 263 of the Act deserves to be quashed. HELD THAT:- On a perusal of the impugned assessment order, it is seen that the Assessing Officer has specifically stated that the requisite details called for as per the questionnaire were not only placed on record but were duly verified by him. He has also referred to assessee’s explanation and reconciliation of the AIR information/Form no.26A. Thus, as could be seen from the facts on record, the Assessing Officer in the course of assessment proceedings, has examined and enquired into the income shown by the assessee in the Profit & Loss Account and has also verified the details of expenditures claimed. The allegation of learned PCIT that the Assessing Officer has not made any enquiry on the issues referred to by him is without any basis and contrary to the facts and materials on record - Also, on a perusal of the impugned order of learned PCIT, it is noticed that he has not pointed out even a single defect or deficiency in the evidences filed by the assessee. Even, he has not dealt with a single item of expenditure, which according to him, is either non genuine or unreasonable - Thus, prima facie, it appears that learned PCIT has exercised his power under section 263 of the Act to initiate a roving and fishing enquiry without pointing out any specific error in the assessment order which made it erroneous and prejudicial to the interests of Revenue. The basic conditions of section 263 of the Act in the present case are not fulfilled - the order passed under section 263 of the Act is quashed - appeal allowed. Issues:Assessment order challenged under section 263 of the Income Tax Act, 1961 for the assessment year 2015-16.Analysis:The appeal was filed by the assessee against the order passed by the Principal Commissioner of Income Tax (PCIT) under section 263 of the Act. The PCIT observed discrepancies in the Profit & Loss Account, where the net revenue was shown instead of gross revenue received from clearing & forwarding and agency charges. The PCIT found that the Assessing Officer failed to examine various expenses incurred by the assessee to arrive at the net revenue figure. The PCIT issued a notice to the assessee, questioning the assessment order's validity. The assessee argued that the Assessing Officer had conducted due enquiry and verification, but the PCIT disagreed. The PCIT set aside the assessment order, directing the Assessing Officer to verify and allow the claimed expenditures.During the assessment proceedings, the Assessing Officer had issued a notice under section 142(1) along with a questionnaire to the assessee. The assessee provided detailed replies and reconciliation statements, explaining the revenue recognition policy and the nature of expenses incurred on behalf of customers. The Assessing Officer had examined and verified the expenditures claimed by the assessee before completing the assessment. The PCIT's contention that the Assessing Officer did not conduct proper enquiry was unfounded, as all necessary information and supporting evidence were submitted by the assessee.The Tribunal found that the PCIT had not identified any specific defects in the evidence filed by the assessee or pointed out any non-genuine expenses. The PCIT's order lacked specific errors in the assessment order, and the direction to allow expenditures after verification seemed redundant. The Tribunal concluded that the PCIT's exercise of power under section 263 appeared to be a fishing enquiry without valid grounds. Therefore, the Tribunal quashed the order passed under section 263 and restored the Assessing Officer's order. The appeal was allowed, and the original assessment order was upheld.