Failure to Verify Loan & Depreciation Leads to Upheld Assessment Order

The ITAT upheld the decision of the Pr. CIT, finding that the AO's failure to conduct essential verifications on outstanding unsecured loans and depreciation on railway siding resulted in an erroneous assessment order prejudicial to revenue. The appeal by the assessee was dismissed.

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Issues Involved:
1. Error in setting aside the assessment order by AO.
2. Erroneous assessment order prejudicial to the interest of revenue.
3. Violation of principles of natural justice.
4. Violation of CBDT instructions.
5. Order passed on different grounds than the show cause notice.
6. No enquiry made on security deposits.
7. No enquiry made on depreciation on Railway Siding.

Summary:

1. Error in Setting Aside the Assessment Order by AO:
The assessee company contended that the Pr. Commissioner of Income Tax-2, Raipur (Pr. CIT) erred in setting aside the assessment order passed by the AO. The Pr. CIT observed that the AO failed to apply his mind and carry out proper enquiries, thus rendering the assessment order erroneous and prejudicial to the interest of the revenue.

2. Erroneous Assessment Order Prejudicial to the Interest of Revenue:
The Pr. CIT held that the assessment order dated 04/03/2014 was erroneous as it was prejudicial to the interest of revenue. The AO had summarily accepted the issues without carrying out any verification or enquiry, particularly regarding the outstanding unsecured loan of Rs. 21,53,64,890 and the claim for depreciation on railway siding of Rs. 16,66,76,552.

3. Violation of Principles of Natural Justice:
The assessee argued that the order passed by the Pr. CIT violated the principles of natural justice as the submissions of the appellant were not considered, a speaking order was not passed, irrelevant considerations were relied upon, and a proper opportunity of hearing was not provided.

4. Violation of CBDT Instructions:
The assessee claimed that the order passed by the Pr. CIT violated the binding instructions of CBDT issued vide Instruction No. 7/2014 dated 26.09.2014.

5. Order Passed on Different Grounds Than the Show Cause Notice:
The Pr. CIT passed the order on different grounds than those given in the show cause notice, particularly in relation to security deposits, without confronting the same to the appellant.

6. No Enquiry Made on Security Deposits:
The Pr. CIT observed that the AO had not made any enquiry regarding the security deposits, even though no such enquiry was warranted or required to be made on the facts of the case.

7. No Enquiry Made on Depreciation on Railway Siding:
The Pr. CIT held that the AO did not make any enquiry to find out whether the railway track was laid inside or outside the factory premises, thus rendering the order erroneous.

Conclusion:
The ITAT upheld the order of the Pr. CIT, agreeing that the AO's failure to carry out necessary verifications on the issues of outstanding unsecured loans and depreciation on railway siding rendered the assessment order erroneous and prejudicial to the interest of the revenue. The appeal of the assessee was dismissed.

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