2022 (2) TMI 213 - AT - Income Tax

Tribunal quashes Pr. CIT's order for lacking jurisdiction under Income-tax Act Section 143(3)

Vishal Kumar Mansinghka Versus The Principal CIT Allahabad

The Tribunal found that the Principal Commissioner of Income Tax (Pr. CIT) lacked jurisdiction to set aside the assessment under Section 143(3) of the ... Revision u/s 263 by CIT - doubt on account of sales - HELD THAT:- Assessing Officer conducted enquiry and passed the assessment order after considering the reply filed on behalf of the assessee.In the present case, no case of insufficient stock has been made against the assessee and that being so, the doubt on account of sales is unsustainable. Regarding the observations of the ld. CIT, doubting the cash sales made by the assessee it has not been disputed, when contended that the Diwali festival for the year under consideration fell on 30.10.2016 and the Diwali season ended with Chhath Puja on 6/7.11.2016. It has also not been challenged that the sale of silver is higher during this period - doubt entertained by the ld. CIT is based on merely surmises and conjectures. It again does not stand disputed that a month-wise chart of quantity and value of stock was duly submitted by the assessee before the Assessing Officer in the assessment proceedings. This is an annexure to the trading account and monthly salaries of silver ornaments and silver for the period from 1.4.2016 to 31.3.2017. Non-deposit of cash from sales made from 1.11.2016 to 8.11.2016, it is trite that this is the prerogative of the assessee and the Department cannot step into the shoes of the businessman to determine such a matter as the time of deposit of money in the bank. Assessing Officer did not verify the sales trend from VAT returns and from the books of account of the preceding year, the assessee had submitted financial statements of the year under consideration before the Assessing Officer. These financial statements contained the figures of sales of the preceding years also. This also points to the fact that it was not a case of no enquiry. Rather, the view of the CIT is that adequate enquiry was not carried out by the Assessing Officer. This, to reiterate, is not the purpose or purport of proceedings under section 263 of the Act. The Assessing Officer, obviously, had verified the sales from the financial statements and the books of account and, as such, it cannot be said that proper enquiry had not been made by the Assessing Officer. The assessee’s VAT assessment order for the year under consideration - Decided in favour of assessee. Issues Involved:1. Jurisdiction and validity of the order passed under Section 263 of the Income-tax Act.2. Satisfaction of pre-requisite twin conditions for invoking Section 263.3. Adequacy of enquiries made by the Assessing Officer (AO) during the original assessment.4. Legality of setting aside the assessment for de-novo assessment.5. Nature and reasoning of the impugned order passed by the Principal Commissioner of Income Tax (Pr. CIT).Detailed Analysis:1. Jurisdiction and Validity of the Order Passed Under Section 263:The appellant challenged the jurisdiction of the Pr. CIT in setting aside the assessment framed under Section 143(3) of the Income-tax Act, 1961, arguing that the order was 'without jurisdiction, bad in law and void ab-initio.' The Tribunal examined whether the Pr. CIT had the authority to invoke Section 263, which allows revision of an assessment order if it is erroneous and prejudicial to the interests of the revenue.2. Satisfaction of Pre-requisite Twin Conditions for Invoking Section 263:The appellant contended that the Pr. CIT did not satisfy the twin conditions necessary for invoking Section 263. The Tribunal noted that the Pr. CIT considered the assessment order erroneous due to the AO's failure to verify certain aspects, such as cash deposits during the demonetization period and the nature of cash sales. The Tribunal emphasized that both conditions—error in the assessment and prejudice to the revenue—must be met for Section 263 to be invoked.3. Adequacy of Enquiries Made by the Assessing Officer (AO) During the Original Assessment:The appellant argued that the AO had made due and specific enquiries, including issuing a detailed questionnaire and verifying the assessee's submissions, financial statements, and books of account. The Tribunal found that the AO had indeed conducted a thorough enquiry and that the Pr. CIT's opinion of inadequate enquiry did not justify a revision under Section 263. The Tribunal cited various judgments, including 'Narayan Tatu Rane vs. ITO' and 'PCIT vs. Mere Baba Reality Association Pvt. Ltd.', to support the distinction between lack of enquiry and inadequate enquiry.4. Legality of Setting Aside the Assessment for De-novo Assessment:The appellant argued that the Pr. CIT's direction for a de-novo assessment was unsustainable, as it was based merely on the Pr. CIT's belief that more enquiry was needed. The Tribunal agreed, stating that the AO had conducted adequate enquiry and that the Pr. CIT's direction was based on surmises and conjectures. The Tribunal reiterated that the Pr. CIT cannot revise an assessment order simply because he holds a different opinion on the scope of enquiries.5. Nature and Reasoning of the Impugned Order Passed by the Pr. CIT:The appellant claimed that the impugned order was vague, non-speaking, and unreasoned, failing to address the submissions and judicial pronouncements relied upon by the assessee. The Tribunal found merit in this argument, noting that the Pr. CIT did not provide specific reasons for his conclusions and did not address the detailed submissions and evidence provided by the assessee.Conclusion:The Tribunal concluded that the AO had conducted a proper and detailed enquiry, and the Pr. CIT's order under Section 263 was based on inadequate grounds. The Tribunal quashed the impugned order and allowed the appeal, emphasizing that the Pr. CIT cannot substitute his subjective view for the AO's findings when the AO has conducted due enquiry. The Tribunal's decision was pronounced in the open court on 01/09/2021.