2023 (9) TMI 255 - AT - Income Tax

Assessment order deemed erroneous for inadequate inquiries, appeal dismissed.

The Tribunal upheld the Principal Commissioner of Income Tax's order, finding that the Assessing Officer had not conducted adequate inquiries during the ... Revision u/s 263 - cash deposit in Bank account during demonetization period - HELD THAT:- Assessee has failed to establish that the Assessing Officer has made necessary enquiries and that the assessee has filed necessary materials on this point. Moreover, we have already observed that there is no doubt about applicability of Explanation (2) to section 263(1) of the IT Act, assessment year being 2017-18 the assessment order as well as the impugned revisionary order having been passed after aforesaid date of 01/06/2015. we take guidance from the well settled position, as enunciated in the case of CIT vs. Amitabh Bachhan [2016 (5) TMI 493 - SUPREME COURT] held that there is nothing in section 263 to make the Commissioner confine himself to the terms of show cause notice, and further that power of revision u/s 263 of the IT Act is not contingent on giving of a show cause notice. In view of foregoing, we come to the conclusion that the case laws, on which the assessee has placed reliance, fail to advance the case of the assessee either because of amendment to section 263 of the IT Act with effect from 01/06/2015 through insertion of Explanation (2) to section 263(1) of the ITAT; or because of clearly distinguishable facts, or because of well settled position of law as established by decision of Hon'ble Supreme Court in the case of CIT vs. Amitabh Bachhan [supra] We take guidance from order of Pr. CIT vs. Venus Woollen Mills [2019 (2) TMI 292 - PUNJAB AND HARYANA HIGH COURT] in which it was held by Hon'ble High Court that where Assessing Officer did not apply mind to correctness of books of account, except to note that books of account were produced and test checked, impugned revisionary order passed u/s 263 was to be upheld. Decided against assessee. Issues Involved:1. Legality of the Pr. CIT's revision order under Section 263.2. Adequacy of the Assessing Officer's inquiries during the assessment.3. Validity of the Pr. CIT's actions beyond the show cause notice.4. Applicability of relevant case laws and legal precedents.Summary:Issue 1: Legality of the Pr. CIT's Revision Order under Section 263The appeal was filed by the assessee against the impugned order dated 22/02/2022 by the Pr. CIT, Bareilly, which set aside the assessment order dated 24/12/2019 and directed a de novo assessment. The Pr. CIT observed that the Assessing Officer (AO) passed the assessment order without proper inquiries on specific issues, thereby making the order 'erroneous in so far as it is prejudicial to the interests of revenue' under Explanation 2(a) to Section 263 of the Income Tax Act, 1961.Issue 2: Adequacy of the Assessing Officer's Inquiries During the AssessmentThe Pr. CIT identified five points where the AO failed to make necessary inquiries:1. Genuineness of the source of cash deposits during the demonetization period.2. Details of the license issued for trading liquor.3. Verification of the source, genuineness, and creditworthiness of the partners' capital contributions.4. Examination of major expenses like purchases, processing fees, and carriage onwards.5. Verification of the source of a significant security deposit paid during the year.The assessee argued that the AO had made adequate inquiries and provided necessary documentation. However, the Tribunal found that the assessee failed to substantiate these claims with sufficient evidence. The AO's order was deemed to have been passed without making the required inquiries, making it erroneous and prejudicial to the interests of the revenue.Issue 3: Validity of the Pr. CIT's Actions Beyond the Show Cause NoticeThe assessee contended that the Pr. CIT made fresh allegations in his order that were not raised in the initial show cause notice, violating the principle of natural justice. However, the Tribunal referred to the Supreme Court's decision in CIT vs. Amitabh Bachchan, which held that the Commissioner is not confined to the terms of the show cause notice and can make necessary inquiries deemed fit.Issue 4: Applicability of Relevant Case Laws and Legal PrecedentsThe assessee relied on various case laws to argue against the Pr. CIT's order. However, the Tribunal noted that many of these cases were decided before the insertion of Explanation 2 to Section 263(1) of the IT Act, which became effective from 01/06/2015. The Tribunal found that the cases cited by the Pr. CIT, such as Meerut Roller Flour Mills Ltd. vs. CIT and Tara Devi Agarwal v. CIT, were more applicable to the present case.Conclusion:The Tribunal upheld the Pr. CIT's order, concluding that the AO had not made the necessary inquiries, thereby making the assessment order erroneous and prejudicial to the interests of the revenue. All grounds of appeal were dismissed, and the appeal was rejected. The Tribunal directed the office to forward a copy of the order to the Registry of the Hon'ble Lucknow Bench of Allahabad High Court, referencing the related Writ Petition.