2020 (2) TMI 988 - AT - Income Tax

Tax Tribunal Upholds Revisional Jurisdiction Decision

Synthesis Developers Pvt. Ltd. Versus Principal Commissioner of Income Tax-4 (PCIT), Ahmedabad

The Tribunal upheld the Principal Commissioner of Income Tax's invocation of revisional jurisdiction under Section 263 of the Income Tax Act, setting ... Revision u/s 263 - AO simply accepted the income returned at ₹ 3,73,08,493/- as assessed income without any adjustment whatsoever by a brief and a non-descript order - HELD THAT:- Having regard to the sweeping conduct of the AO in finalizing the assessment without making requisite enquiry on the abnormal character of outstanding expenses having direct bearing on the assessed income, there appears to be an apparent plausibility in the action of the Pr.CIT by resorting to powers under s.263 of the Act which are of wide amplitude. As narrated, the circumstances clearly existed which demanded enquiry which was not done by the AO while discharging its statutory function. Thus, armed with fairly extensive powers, the Pr.CIT, in our view, has taken action compatible with circumstances. While holding so, we alive to the plea on behalf of the assessee that reasonable details were placed with regard to the pending expenses. We are not impressed by such line of argument when tested on the touchstone of Section 263 of the Act. The record clearly speaks of indifferent conduct by the AO accepting the book results. Therefore, the cause of action did exist for invocation of Section 263 of the Act. Hence, the Pr.CIT was fully justified in invoking its power under s.263 of the Act to set aside the assessment framed without any application of mind on the crucial aspect which is self-revealing in the context of the case. In order to invoke Section 263 of the Act, the competent authority is required to find that order sought to be revised is erroneous and caused prejudice to the Revenue. A lack of inquiry on a pertinent point which demonstrates possible revenue leakage of staggering amount would definitely tantamount to the order being both erroneous as well as prejudicial to the interest of the Revenue. Consequent upon the action of Pr.CIT, the assessment order is merely cancelled and set aside to the file of the AO for making relevant inquiries as specified for which objective material is available at the threshold. The assessee has not estopped in any manner from dealing with the inquiry as specified to the AO and to rebut the perception on error in the original order. The assessee is not prevented from supporting its case in any manner before the AO in the proceedings pursuant to Section 263 of the Act. We thus do not see any justifiable reason to interfere with the revisional action of the Pr.CIT. - Decided against assessee. Issues Involved:1. Whether the Principal Commissioner of Income Tax (Pr.CIT) was justified in invoking revisional jurisdiction under Section 263 of the Income Tax Act, 1961.2. Whether the assessment order passed by the Assessing Officer (AO) under Section 143(3) was erroneous and prejudicial to the interest of the Revenue due to lack of proper enquiry.Detailed Analysis:Issue 1: Justification of Revisional Jurisdiction under Section 263The assessee challenged the revisional jurisdiction of the Pr.CIT invoked under Section 263 of the Income Tax Act, 1961, which set aside the AO's order for fresh assessment due to lack of enquiry into certain vital aspects. The Pr.CIT alleged that the AO's order was erroneous and prejudicial to the interest of the Revenue, primarily because the AO had not examined the staggering amount of pending expenses of Rs. 4,94,83,747/- as at the end of FY 2013-14. The Pr.CIT observed that such large and disproportionate expenses claimed to remain outstanding warranted a thorough enquiry to ascertain their bonafides.The Tribunal noted that the Pr.CIT is empowered to review records of any proceedings and order passed therein by the AO under Section 263. The revisional powers are wide in amplitude to address revenue risks objectively justifiable. The Tribunal found that the Pr.CIT had demonstrated definite cause for enquiry, which the AO failed to conduct. The assessment records showed that the AO had completed the assessment in a perfunctory manner without looking into crucial aspects, thus justifying the Pr.CIT's action under Section 263.Issue 2: Erroneous and Prejudicial Assessment OrderThe Pr.CIT observed that the AO had accepted the income returned by the assessee without any adjustment, despite the pending expenses being abnormally high. The Pr.CIT noted that the AO did not verify the bonafides of such large expenses, which were nearly 36% of the total direct expenses, in a project that was largely completed and sold. The Pr.CIT also pointed out that the AO did not verify whether TDS had been deducted on such expenses as per the provisions of law.The Tribunal agreed with the Pr.CIT's observations, stating that the AO's conduct did not accord with the normal conduct of a responsible statutory functionary. The assessment order was found to be cryptic and non-descript, with no indication of any enquiry carried out on the details filed by the assessee. The Tribunal held that the Pr.CIT was justified in invoking Section 263, as the AO's failure to make requisite enquiries on abnormal outstanding expenses had a direct bearing on the assessed income.The Tribunal also addressed the assessee's objection that the Pr.CIT had added the issue of TDS deduction on pending expenses without giving an opportunity to the assessee. The Tribunal observed that this aspect was integrally connected to the bonafides of the claim of pending expenses and declined to entertain the objection.In conclusion, the Tribunal found no justifiable reason to interfere with the revisional action of the Pr.CIT. The appeal filed by the assessee was dismissed, and the Pr.CIT's order setting aside the assessment for fresh enquiry was upheld.Judgment:The appeal filed by the assessee is dismissed. The Pr.CIT's invocation of Section 263 and the setting aside of the assessment order for fresh enquiry is upheld.