2022 (11) TMI 200 - AT - Income Tax

Appeal Dismissed, Revision Valid, COVID-19 Delay Condoned

Karabi Dealers Pvt. Ltd. Versus Pr. Commissioner of Income-tax-2 Kolkata

The Tribunal upheld the Principal Commissioner of Income-tax's order under section 263, dismissing the appeal. It found that the Commissioner had validly ... Revision u/s 263 - case was selected for limited scrutiny - Low income in comparison to very high investments and Large increase in investment in unlisted equities during the year - HELD THAT:- There is no entry in the order sheet of the assessment proceedings of the submission wherein assessee has claimed to produce bills, vouchers and books of accounts for verification at the time of hearing. The last entry is on 19.09.2017 wherein it is recorded that the case was discussed and heard under the signatures of both, the ld. AO and the Authorized Representative of the assessee. These facts evidently demonstrate that Ld. AO has failed to conduct required verification and examination and has not applied his mind before passing the assessment order and accepting the returned income as assessed income. Pr. CIT on his own examination of the assessment records has carefully and elaborately surfaced out the discrepancies in the assessment proceedings as evident from the order sheet entries and has called for the required explanations from the assessee in the revisionary proceedings. In the revisionary proceedings also, assessee asserted to have made all the submissions before the ld. AO on the issues raised by the ld. Pr. CIT vide its submissions dated 11.09.2017 and 21.09.2017. Considering the facts on record and the submissions made by both the parties as elaborately discussed above, we have no hesitation in upholding the revisionary order passed by the ld. Pr. CIT u/s. 263 of the Act. Accordingly, grounds taken by the assessee are dismissed. Issues Involved:1. Validity of the order passed under section 263 of the Income-tax Act, 1961.2. Delay in filing the appeal.3. Examination of the issues for which the case was selected for limited scrutiny.4. Application of mind by the Principal Commissioner of Income-tax (Pr. CIT) in initiating revisionary proceedings.5. Jurisdiction of the Pr. CIT in invoking section 263 based on proposals from the Assessing Officer (AO).Detailed Analysis:1. Validity of the Order Passed Under Section 263 of the Income-tax Act, 1961:The assessee contested the validity of the order passed by the Pr. CIT under section 263, arguing that it was ab initio void and bad in law. The Tribunal examined the Pr. CIT's observations and found that the AO had not conducted proper verification on the issues for which the case was selected for limited scrutiny. The Pr. CIT noted discrepancies in the assessment records and concluded that the AO's order was erroneous and prejudicial to the interest of the revenue. The Tribunal upheld the Pr. CIT's order, emphasizing that the Pr. CIT had applied his mind independently and conducted a thorough examination of the records before initiating revisionary proceedings.2. Delay in Filing the Appeal:The appeal was filed with a delay of 430 days. The Tribunal considered the Supreme Court's order in Suo moto Writ Petition (C) No. 3 of 2020, which excluded the period from 15.03.2020 to 28.02.2022 for the purpose of limitation due to the COVID-19 pandemic. Consequently, the delay was condoned, and the appeal was admitted for adjudication.3. Examination of the Issues for Which the Case Was Selected for Limited Scrutiny:The case was selected for limited scrutiny based on two parameters: large increase in investment in unlisted equities and low income in comparison to high investment. The Pr. CIT observed that the AO had not properly verified these issues. Specifically, there was no net increase in investment in unlisted equities, but the assessee's investment stood at Rs. 46.78 Cr. Additionally, the AO did not call for details on the gross loss on saree/other garments and the loss from F&O transactions, which were crucial given the low income parameter. The Tribunal agreed with the Pr. CIT's observations and found that the AO had failed to conduct the necessary verification.4. Application of Mind by the Pr. CIT in Initiating Revisionary Proceedings:The Tribunal emphasized the importance of the Pr. CIT applying his mind independently when initiating revisionary proceedings under section 263. The Pr. CIT's actions were found to be in line with the requirements, as he had thoroughly examined the assessment records and identified discrepancies before issuing the notice under section 263. The Tribunal referred to the Delhi High Court's judgment in DG Housing Finance Co. Ltd., which highlighted that the CIT must conduct necessary enquiries and record clear findings that the AO's order is erroneous and unsustainable in law.5. Jurisdiction of the Pr. CIT in Invoking Section 263 Based on Proposals from the AO:The assessee argued that the Pr. CIT had invoked section 263 based on a proposal from the AO, which was improper. However, the Tribunal clarified that the proposal from the AO serves as a 'stimuli' or 'suggestive' source, prompting the Pr. CIT to examine the records independently. The Tribunal found that the Pr. CIT had indeed applied his mind independently and conducted a detailed examination of the records, which justified the invocation of section 263. The Tribunal distinguished this case from others where the Pr. CIT had not exercised independent judgment.Conclusion:The Tribunal upheld the Pr. CIT's order under section 263, dismissing the assessee's appeal. The Tribunal found that the Pr. CIT had properly exercised his jurisdiction, conducted a thorough examination of the records, and identified significant discrepancies that justified the revisionary proceedings. The delay in filing the appeal was condoned due to the COVID-19 pandemic, allowing the appeal to be admitted for adjudication.