TaxTMI 
TaxTMI 
2020 (1) TMI 783
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....d by the Assessing Officer at Rs. 3,04,27,082/- after making disallowance of Rs. 77,369/- and Rs. 17,000/- under section 14A and Wealth Tax respectively. The records of the said assessment came to be examined by the concerned ld. Principal CIT and on such examination, he was of the view that the order passed by the Assessing Officer under section 143(3) suffered from the following errors, which were prejudicial to the interest of the Revenue:- "(i) From Note-18 annexed to the balance sheet for the year ended 31.03.2013 that the assessee was having a VAT refund receivable amounting to Rs. 5,94,33,275/- as on 31.03.2013 which was only Rs. 4,27,17,261/- as on 31.03.2012. Thus, there was an increase in amount on account of VAT refund receivable by Rs. 1,67,16,017/-, Thus, although the assessee was allowed a deduction of Rs. 1,36,96.051/, outside the book of accounts on account of claims for VAT refund ( not yet admitted and assessable in the year it is admitted by the competent authority] during computation of income for the A.Y. 2013*14 whereas the increase in amount on account of VAT refund receivable in the balance sheet during the A.Y. 2013-14 was Rs. 1,67,16,014/-. This r....
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....tter was also examined by the assessing officer during the course of the assessment proceedings pursuant to the enquiry made by him u/s. 142(1) of the Income-Tax Act Vide letter dated 6th July, 2015 ( copy enclosed: Annexure: B). The copy of the explanation given to the assessing officer by our clients vide their letter dated 10th July, 2015 together with the copy of the relevant details furnished to him in this regard is attached herewith for your kind verification(copy enclosed: Annexure: C) The amount shown under the head VAT Refund Receivable is comprised of VAT Refunds claimed as well as the unutilized Input VAT. Out of the increase of Rs. 1,67,16,014/ - during the year in the amount of V.A.T Refund Receivable appearing in the Balance Sheet, the VAT Refund claimed by our clients for the year under reference amounted to Rs. 13696501/- only. Since the amount debited to VAT Refund Receivable a/c is actually an item of expenditure not charged to the profit & loss a/c of our clients for being recoverable as refund/adjustable with Output VAT incurred on domestic sales and not any income earned by them, the question of any under assessment of income on this account ....
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.... aside the order passed by the Assessing Officer under section 143(3) dated 15.07.2015 with a direction to him to reframe the assessment for the following reasons given in paragraph no. 5 to 11 of his impugned order:- "5. I have considered the facts and circumstances of the case. It was contended that both the issues (i) & (ii) are basically the same as no income are involved in either case. It was explained that the amount involved are expenses subsequently recoverable by way of refunds/ adjustment with VAT payable on domestic sales. It was submitted that this was the method of accounting followed in past years in accordance with accepted accounting principles and that where refunds/adjustments on certain item are not allowed, the irrecoverable amounts only are charged to P&L A/c in the year of assessment, It was submitted that this observation has been raised by Department for the first time, which assessee iterates, is a non-understanding of the actual facts and that no escapement of income is involved. Be that as it may, the task of a taxing authority is to marshal all facts and come to a clean finding so that proper and correct income is brought to tax. In th....
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..... If the A.O. has accepted the claim of the assessee without any enquiries then such assessment order passed by the A.O. was held to be erroneous. 9. In this regard it is mentioned that mere non enquiry would also render a particular order passed by lower authority as erroneous and prejudicial to the interests of Revenue. This position has been clearly confirmed by Honble Supreme Court in the case of Rampyari Devi Saraogi -vs. - CIT (1968] 67 ITR 84 & Smt. Tara Devi Aggurwal-Vs.-. CIT [1973] 88 ITR 323 (SC). The reasoning for this proposition has been explained by Hon'bIe Delhi High Court in the case of Gee Vee Enterprise v. Addl. CIT [1975] 99 ITR 375 in the following para ;- "It is not necessary, for the Commissioner to make further inquiries before cancelling the assessment order of the Income Tax Officer. The Commissioner can regard the order as erroneous on the ground that in the circumstances of the case the Income Tax Officer should have made further inquiries before accepting the statements made by the assessee in his return. The reason is obvious. The position and function of the Income-tax Officer is very different from that of civil court. ....
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....ore, I set aside the said assessment order directing the present A.O. to re-frame the assessment after considering the aforesaid observations, Hon'ble Supreme Court and Hon'ble High Court decisions and as per law". Aggrieved by the order of the ld. Principal CIT passed under section 263, the assessee has preferred this appeal before the Tribunal. 5. The ld. Counsel for the assessee submitted that the assessment order passed by the Assessing Officer under section 143(3) is finally set aside by the ld. Principal CIT vide his impugned order passed under section 263 allegedly on the ground that the two issues relating to VAT Refund and Terminal Excise Duty Refund were not properly inquired into by the Assessing Officer. In this regard, he invited our attention to the copy of letter dated 06.07.2015 issued by the Assessing Officer during the course of assessment proceedings placed at page no. 6 of the paper book to point out that a specific query was raised by the Assessing Officer in respect of claim of VAT Refund as made by the assessee in the computation of total income. He also invited our attention to the explanation offered by the assessee-company in this regard vide let....
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....on this issue but the fact remains to be seen is that no inquiry whatsoever was made by the Assessing Officer while accepting the claim of the assessee on account of Terminal Excise Duty Refund and this lack of inquiry by the Assessing Officer made the order passed by him under section 143(3) erroneous as well as prejudicial to the interest of the Revenue. 7. We have considered the rival submissions and also perused the relevant material available on record. It is observed that the assessment order passed by the Assessing Officer under section 143(3) has been held to be erroneous as well as prejudicial to the interest of the Revenue by the ld. Principal CIT vide his impugned order on the ground that the claim of the assessee on two issues relating to VAT Refund and Terminal Excise Duty Refund was accepted by him without making any inquiry. As demonstrated by the ld. Counsel for the assessee at the time of hearing before us on the basis of the letter issued by the Assessing Officer and the reply filed by the assessee during the course of assessment proceedings, the inquiry on the issue of VAT Refund was specifically made by the Assessing Officer and after having satisfied himself....
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....d to such a case. It is pertinent to note here that the prejudice to the Revenue in this case was inferred by the Hon'ble Supreme Court not from any finding that there is a loss of revenue but from the mere fact that procedure employed was defective. To the similar effect is the another decision of the Hon'ble Supreme Court in the case of Tara Devi Aggarwal -vs.- CIT (supra), wherein it was held that the ld. CIT can regard the order of the Assessing Officer as erroneous insofar as it is prejudicial to the interest of the revenue on the ground that in the circumstances of the case, ITO should have made further inquiries before accepting the statements made by the assessee in his return. 9. While explaining the proposition propounded by the Hon'ble Supreme Court in the case of Rampyari Devi Saraogi (supra) and Tara Devi Aggarwal (supra), it was observed by the Hon'ble Delhi High Court in the case of Gee Vee Enterprise -vs.- Addl. CIT (supra) that the ITO is not only an adjudicator but also an investigator and cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts stated in the ret....